-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B8tQc9RX1x+Z2dyGvAGjljh+CZYfgpKUcn92GhNt0Qw+OKvrIAtDiDbtY/BiYF2o NGdQn42jP4DSum4tCHDrRQ== 0000889812-97-000298.txt : 19970225 0000889812-97-000298.hdr.sgml : 19970225 ACCESSION NUMBER: 0000889812-97-000298 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19961122 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970204 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1996-A CENTRAL INDEX KEY: 0001027266 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-99510-04 FILM NUMBER: 97517419 BUSINESS ADDRESS: STREET 1: C/O ADVANTA MORTGAGE CONDULT SERVICES IN STREET 2: 16875 WEST BERNARDO DRIVE CITY: SAN DIEGO STATE: CA ZIP: 92127 MAIL ADDRESS: STREET 1: C/O ADVANTA MORTGAGE CONDULT SERVICES IN STREET 2: 16875 WEST BERNARDO DRIVE CITY: SAN DIEGO STATE: CA ZIP: 92127 8-K 1 CURRENT REPORT - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) November 22, 1996 Advanta Revolving Home Equity Loan Trust 1996-A ------------------------------------------------------ (Exact name of registrant as specified in its charter) New York 33-99510 Application Pending - ---------------------------- ------------ ------------------- (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.) c/o Advanta Mortgage Conduit 92127 Services, Inc. ---------- Attention: Milton Riseman (Zip Code) 16875 West Bernardo Drive San Diego, California (Address of Principal Executive Offices) Registrant's telephone number, including area code (619) 674-1800 No Change - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) - -------------------------------------------------------------------------------- Item 2. Acquisition or Disposition of Assets Description of the Certificates and the Mortgage Loans Advanta Mortgage Conduit Services, Inc. registered issuances of up to $1,100,000,000 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 Statements on Form S-3 (Registration File No. 33-99510 (as amended, the "Registration Statement"). Pursuant to the Registration Statement, Advanta Revolving Home Equity Loan Trust 1996-A (the "Registrant" or the "Trust") issued approximately $50,000,000 in aggregate principal amount of its Revolving Home Equity Loan Asset-Backed Certificates, Series 1996-A (the "Certificates"), on November 22, 1996. This Current Report on Form 8-K is being filed to satisfy an undertaking to file copies of certain agreements executed in connection with the issuance of the Certificates, the forms of which were filed as Exhibits to the Registration Statements. The Certificates were issued pursuant to a Pooling and Servicing Agreement (the "Pooling and Servicing Agreement") attached hereto as Exhibit 4.1, dated as of November 1, 1996, among Advanta Mortgage Conduit Services, Inc. (the "Company"), Advanta Mortgage Corp. USA, in its capacity as master servicer (the "Master Servicer"), Advanta National Bank USA as Originator (the "Originator") and Bankers Trust Company of California, N.A., in its capacity as Trustee (the "Trustee"). The Certificates consist of one registered class, the Class A Certificates. The Certificates represent undivided beneficial ownership interests in the Trust. The Originator will also retain an uncertificated interest in the Trust. The assets of the Trust initially will include a pool of revolving home equity loans (the "Mortgage Loans") secured by mortgages or deeds of trust (the "Mortgages") on one-to-four family residential properties. Interest distributions on the Class A Certificates are based on the Certificate Principal Balance thereof and the then applicable Class A Interest Rate thereof. The Class A Interest Rate is a variable rate for the Certificates. The Certificates have an aggregate principal amount of $50,000,000. As of the Closing Date, the Mortgage Loans possessed the characteristics described in the Prospectus dated September 6, 1996 and the Prospectus Supplement dated 2 November 15, 1996 filed pursuant to Rule 424(b)(5) of the Act on November 20, 1996. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Not applicable (b) Not applicable (c) Exhibits: 1.1 Underwriting Agreement, dated November 15, 1996 between Advanta Mortgage Conduit Services, Inc., Advanta National Bank USA and Lehman Brothers, Inc. 4.1 Pooling and Servicing Agreement, dated as of November 1, 1996, between Advanta Mortgage Conduit Services, Inc., as sponsor, Advanta Mortgage Corp. USA, as master servicer, Advanta National Bank USA, as originator, and Bankers Trust Company of California, N.A., as trustee. 4.2 Advanta Mortgage Holding Company Guaranty. 4.3 Certificate Insurance Policy. 99.1 Indemnification Agreement dated as of November 22, 1996, between Advanta National Bank USA, Lehman Brothers, Inc. and MBIA Insurance Corporation in connection with the Underwriting Agreement. 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1996-A By: Advanta Mortgage Conduit Services, Inc., as Sponsor By: /s/ Mark T. Dunsheath ----------------------- Name: Mark T. Dunsheath Title: Vice President Dated: December 6, 1996 EXHIBIT INDEX Exhibit No. Description Page No. 1.1 Underwriting Agreement, dated November 15, 1996 between Advanta Mortgage Conduit Services, Inc., Advanta National Bank USA and Morgan Stanley & Co. Incorporated. 7 4.1 Pooling and Servicing Agreement, dated as of December 1, 1996, between Advanta Mortgage Conduit Services, Inc., as sponsor, Advanta National Bank USA, as Originator, Advanta Mortgage Corp. USA, as master servicer, and Bankers Trust Company of California, N.A., as Trustee. 50 4.2 Advanta Mortgage Holding Company Guaranty. 184 99.1 Indemnification Agreement dated as of November 23, 1996, between Advanta National Bank USA, Lehman Brothers, Inc. and MBIA Insurance Corporation in connection with the Underwriting Agreement. 190 EX-1.1 2 UNDERWRITING AGREEMENT ADVANTA MORTGAGE CONDUIT SERVICES, INC. ADVANTA NATIONAL BANK USA Advanta Revolving Home Equity Loan Asset-Backed Certificates, Series 1996-A, Class A Certificates UNDERWRITING AGREEMENT November 15, 1996 Lehman Brothers Inc. Three World Financial Center New York, New York 10285 Ladies and Gentlemen: Advanta National Bank USA as Originator (the "Originator") has authorized the issuance and sale of Revolving Home Equity Loan Asset-Backed Certificates, Series 1996-A Class A (the "Certificates"), consisting of variable rate pass-through Class A Certificates. The Certificates will be issued by the Advanta Revolving Home Equity Loan Trust 1996-A (the "Trust"), whose assets will include a pool of adjustable rate home equity revolving credit line loans, made or to be made in the future (the "Mortgage Loans") under certain home equity revolving credit line loan agreements, and certain related property. The Certificates represent undivided interests issued by the Trust. The Originator will retain, initially, the remaining undivided interest in the trust assets (the "Originator Interest") which may be sold or pledged at anytime, subject to certain conditions specified in the Pooling and Servicing Agreement. The Class A Principal Balance of the Certificates as of the opening of business on November 22, 1996 (the "Closing Date"), shall be $50,000,000. The Certificates are to be issued under a pooling and servicing agreement, to be dated as of November 1, 1996 (the "Pooling and Servicing Agreement"), among Advanta Mortgage Conduit Services, Inc., as sponsor (the "Sponsor"), Advanta Mortgage Corp. USA, as master servicer (the "Master Servicer"), the Originator and Bankers Trust Company of California, N.A., as trustee (the "Trustee"). On or prior to the date of issuance of the Certificates, the Company will obtain a guaranty insurance policy (the "Policy") issued by MBIA Insurance Corporation (the "Certificate Insurer") which will unconditionally and irrevocably guarantee to the Trustee for the benefit of the Owners of the Certificates on any Payment Date, the amount by which the (i) Class A Principal Balance exceeds the (ii) Trust Collateral Value minus the Non-Subordinated Originator's Interest, and (iii) any accrued and unpaid interest due on the Certificates. The Certificates and the Originator's Interest are more fully described in a Registration Statement which the Company has furnished to Lehman Brothers (the "Underwriter"). Capitalized terms used but not defined herein shall have the meanings given to them in the Pooling and Servicing Agreement. The Company will also enter into an Insurance Agreement dated as of November 22, 1996 (the "Insurance Agreement"), with the Originator, the Master Servicer, the Trustee and the Certificate Insurer, governing the liability of the several parties with respect to the losses resulting from material misstatements or omissions contained in the Prospectus Supplement. The Originator will also enter into an Indemnification Agreement dated as of November 22, 1996 (the "Indemnification Agreement"), with the Underwriter, and the Certificate Insurer, governing the liability of the several parties with respect to the losses resulting from material misstatements or omissions contained in the Prospectus Supplement. SECTION I. Representations and Warranties of the Company and the Originator. The Company and the Originator each represent and warrant to, and agree with the Underwriter that: A. Registration Statements on Form S-3, as amended by Post-Effective Amendments thereto, have (i) been prepared by the Company and the Originator in conformity with the requirements of the Securities Act of 1933 (the "Securities Act") and the rules and regulations (the "Rules and Regulations") of the United States Securities and Exchange Commission (the "Commission") thereunder, (ii) been filed with the Commission under the Securities Act and (iii) become effective under the Securities Act. Copies of such Registration Statements have been delivered by the Company to the Underwriter. As used in this Agreement, "Effective Time" means the date and the time as of which such Registration Statements, or the most recent post-effective amendment thereto, if any, was declared effective by the Commission; "Effective Date" means the date of the Effective Time; "Preliminary Prospectus" means each prospectus included in such Registration Statements, or amendments thereof, including a preliminary prospectus supplement which, as completed, is proposed to be used in connection 2 with the sale of the Certificates and any prospectus filed with the Commission by the Company with the consent of the Underwriter pursuant to Rule 424(a) of the Rules and Regulations; "Registration Statement" means such registration statements, as amended by all Post-Effective Amendments thereto heretofore filed with the Commission, at the Effective Time, including any documents incorporated by reference therein at such time; and "Prospectus" means such final prospectus, as first supplemented by a prospectus supplement (the "Prospectus Supplement") relating to the Certificates, as first filed with the Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Rules and Regulations. Reference made herein to any Preliminary Prospectus or to the Prospectus shall be deemed to refer to and include any documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Securities Act, as of the date of such Preliminary Prospectus or the Prospectus, as the case may be, and any reference to any amendment or supplement to any Preliminary Prospectus or the Prospectus shall be deemed to refer to and include any document filed under the Securities Exchange Act of 1934 (the "Exchange Act") after the date of such Preliminary Prospectus or the Prospectus, as the case may be, and incorporated by reference in such Preliminary Prospectus or the Prospectus, as the case may be; and any reference to any amendment to the Registration Statement shall be deemed to include any report of the Company filed with the Commission pursuant to Section 13(a) or 15(d) of the Exchange Act after the Effective Time that is incorporated by reference in the Registration Statement. The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus. There are no contracts or documents of the Company which are required to be filed as exhibits to the Registration Statement pursuant to the Securities Act or the Rules and Regulations which have not been so filed or incorporated by reference therein on or prior to the Effective Date of the Registration Statements. The conditions for use of Form S-3, as set forth in the General Instructions thereto, have been satisfied. To the extent that the Underwriter (i) has provided to the Company Collateral term sheets (as hereinafter defined) that the Underwriter has provided to a prospective investor, the Company has filed such Collateral term sheets as an exhibit to a report on Form 8-K within two business days of 3 its receipt thereof, or (ii) has provided to the Company Structural term sheets or Computational Materials (each as defined below) that the Underwriter has provided to a prospective investor, the Company will file or cause to be filed with the Commission a report on Form 8-K containing such Structural term sheet and Computational Materials, as soon as reasonably practicable after the date of this Agreement, but in any event, not later than the date on which the Prospectus is filed with the Commission pursuant to Rule 424 of the Rules and Regulations. B. The Registration Statement conforms, and the Prospectus and any further amendments or supplements to the Registration Statement or the Prospectus will, when they become effective or are filed with the Commission, as the case may be, conform in all respects to the requirements of the Securities Act and the Rules and Regulations. The Registration Statement, as of the Effective Date thereof and of any amendment thereto, did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus as of its date, and as amended or supplemented as of the Closing Date (as hereinafter defined) does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Registration Statement or the Prospectus in reliance upon and in conformity with written information furnished to the Company in writing by the Underwriter expressly for use therein. C. The documents incorporated by reference in the Prospectus, when they became effective or were filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and any further documents so filed and incorporated by reference in the Prospectus, when such documents 4 become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. D. Since the respective dates as of which information is given in the Prospectus, there has not been any material adverse change in the general affairs, management, financial condition, or results of operations of the Company or the Originator, otherwise than as set forth or contemplated in the Prospectus as supplemented or amended as of the Closing Date. E. Each of the Company and the Originator has been duly incorporated and is validly existing as a corporation or national banking association, as the case may be, in good standing under the laws of its jurisdiction of incorporation, is duly qualified to do business and is in good standing as a foreign corporation or national banking association in each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification, and has all power and authority necessary to own or hold its properties, to conduct the business in which it is engaged and to enter into and perform its obligations under this Agreement, the Pooling and Servicing Agreement, the Insurance Agreement and, in the case of the Originator, the Indemnification Agreement, and to cause the Certificates to be issued. F. There are no actions, proceedings or investigations pending before or threatened by any court, administrative agency or other tribunal to which the Company or the Originator is a party or of which any of its properties is the subject (a) which if determined adversely to the Company or the Originator would have a material adverse effect on the business or financial condition of the Company or the Originator, (b) which asserts the invalidity of this Agreement, the Pooling and Servicing Agreement, the Indemnification Agreement, the Insurance Agreement, or the Certificates, (c) which seeks to prevent the issuance of the Certificates or the consummation by the Company or the Originator of any of the transactions contemplated by the Pooling and Servicing 5 Agreement, the Insurance Agreement, the Indemnification Agreement or this Agreement, as the case may be, or (d) which might materially and adversely affect the performance by the Company or the Originator of its obligations under, or the validity or enforceability of, the Pooling and Servicing Agreement, the Insurance Agreement, this Agreement, the Indemnification Agreement, or the Certificates. G. This Agreement has been, and the Pooling and Servicing Agreement, the Indemnification Agreement and the Insurance Agreement when executed and delivered as contemplated hereby and thereby will have been, duly authorized, executed and delivered by the Company and the Originator, and this Agreement constitutes, and the Pooling and Servicing Agreement, the Indemnification Agreement and the Insurance Agreement, when executed and delivered as contemplated herein, will constitute, legal, valid and binding instruments enforceable against the Company and the Originator in accordance with their respective terms, subject as to enforceability to (x) applicable bankruptcy, reorganization, insolvency, moratorium or other similar laws affecting creditors' rights generally, (y) general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law), and (z) with respect to rights of indemnity under this Agreement, the Indemnification Agreement and the Insurance Agreement, limitations of public policy under applicable securities laws. H. The execution, delivery and performance of this Agreement, the Pooling and Servicing Agreement, the Indemnification Agreement and the Insurance Agreement by the Company and the Originator and the consummation of the transactions contemplated hereby and thereby, and the issuance and delivery of the Certificates do not and will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or the Originator is a party, by which the Company or the Originator is bound or to which any of the property or assets of the Company, the Originator or any of their subsidiaries are subject, nor will such actions result in any violation of the provisions of the articles of incorporation or by-laws of the Company or of the Originator or any statute or any 6 order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or the Originator or any of their properties or assets. I. Arthur Andersen LLP are independent public accountants with respect to the Company and Originator as required by the Securities Act and the Rules and Regulations. J. The direction by the Originator to the Trustee to execute, authenticate, issue and deliver the Certificates has been duly authorized by the Originator, and assuming the Trustee has been duly authorized to do so, when executed, authenticated, issued and delivered by the Trustee in accordance with the Pooling and Servicing Agreement, the Certificates will be validly issued and outstanding and will be entitled to the benefits provided by the Pooling and Servicing Agreement. K. No consent, approval, authorization, order, registration or qualification of or with any court or governmental agency or body of the United States is required for the issuance of the Certificates and the sale of the Certificates to the Underwriter, or the consummation by the Company or the Originator of the other transactions contemplated by this Agreement, the Pooling and Servicing Agreement, the Indemnification Agreement and the Insurance Agreement, except such consents, approvals, authorizations, registrations or qualifications as may be required under State securities or Blue Sky laws in connection with the purchase and distribution of the Certificates by the Underwriter or as have been obtained. L. The Originator possesses all material licenses, certificates, authorities or permits issued by the appropriate State, Federal or foreign regulatory agencies or bodies necessary to conduct the business now conducted by it and as described in the Prospectus, and the Originator has not received notice of any proceedings relating to the revocation or modification of any such license, certificate, authority or permit which if decided adversely to the Originator would, singly or in the aggregate, materially and adversely affect the conduct of its business, operations or financial condition. M. At the time of execution and delivery of the Pooling and Servicing Agreement, the Originator 7 will: (i) have good title to the interest in the Mortgage Loans conveyed by the Originator, free and clear of any lien, mortgage, pledge, charge, encumbrance, adverse claim or other security interest (collectively, "Liens"); (ii) not have assigned to any person any of its right, title or interest in the Mortgage Loans, in the Pooling and Servicing Agreement or in the Certificates being issued pursuant thereto; and (iii) have the power and authority to sell its interest in the Mortgage Loans to the Trustee and to sell the Certificates to the Underwriter. Upon execution and delivery of the Pooling and Servicing Agreement by the Trustee, the Trustee will have acquired beneficial ownership of all of the Originator's right, title and interest in and to the Mortgage Loans. Upon delivery to the Underwriter of the Certificates, the Underwriter will have good title to the Certificates, free of any Liens. N. As of the Cut-0ff Date, each of the Mortgage Loans will meet the eligibility criteria described in the Prospectus and will conform to the descriptions thereof contained in the Prospectus. O. None of the Sponsor, the Originator or the Trust created by the Pooling and Servicing Agreement is an "investment company" within the meaning of such term under the Investment Company Act of 1940 (the "1940 Act") and the rules and regulations of the Commission thereunder. P. At the Closing Date, the Certificates and the Pooling and Servicing Agreement will conform in all material respects to the descriptions thereof contained in the Prospectus. Q. At the Closing Date, the Certificates shall have been rated in the highest rating category by at least two nationally recognized rating agencies. R. Any taxes, fees and other governmental charges in connection with the execution, delivery and issuance of this Agreement, the Pooling and Servicing Agreement, the Insurance Agreement, the Indemnification Agreement and the Certificates have been paid or will be paid at or prior to the Closing Date. S. At the Closing Date, each of the representations and warranties of the Company and the Originator set forth in the Pooling and 8 Servicing Agreement, the Insurance Agreement and, in the case of the Originator, the Indemnification Agreement will be true and correct in all material respects. Any certificate signed by an officer of the Company or the Originator and delivered to the Underwriter or counsel for the Underwriter in connection with an offering of the Certificates shall be deemed, and shall state that it is, a representation and warranty as to the matters covered thereby to each person to whom the representations and warranties in this Section I are made. SECTION II. Purchase and Sale. The commitment of the Underwriter to purchase the Certificates pursuant to this Agreement shall be deemed to have been made on the basis of the representations and warranties herein contained and shall be subject to the terms and conditions herein set forth. The Originator agrees to instruct the Trustee to issue and agrees to sell to the Underwriter, and the Underwriter agrees (except as provided in Sections X and XI hereof) to purchase from the Originator the aggregate initial principal amount of the Certificates set forth on Schedule A, at the purchase price or prices set forth in Schedule A. SECTION III. Delivery and Payment. Delivery of and payment for the Certificates to be purchased by the Underwriter shall be made at the offices of Dewey Ballantine, 1301 Sixth Avenue, New York, New York 10019, or at such other place as shall be agreed upon by the Underwriter, the Company and the Originator 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 Company and the Originator. Payment shall be made to the Originator by wire transfer of same day funds payable to the account of the Originator. Delivery of the Certificates shall be made to the Underwriter against payment of the purchase price thereof. The Certificates shall be in such denominations and registered in such names as the Underwriter may request in writing at least two business days prior to the Closing Date. The Certificates will be made available for examination by the Underwriter no later than 2:00 p.m. New York City time on the first business day prior to the Closing Date. SECTION IV. Offering by the Underwriter. It is understood that, subject to the terms and conditions hereof, the Underwriter proposes to offer the Certificates for sale to the public as set forth in the Prospectus. SECTION V. Covenants of the Company. The Company and the Originator agree as follows: 9 A. To prepare the Prospectus in a form approved by the Underwriter and to file such Prospectus pursuant to Rule 424(b) under the Securities Act not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement; to make no further amendment or any supplement to the Registration Statement or to the Prospectus prior to the Closing Date except as permitted herein; to advise the 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 Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the Prospectus and, for so long as the delivery of a prospectus is required in connection with the offering or sale of the Certificates, to promptly advise the Underwriter of its receipt of notice of the issuance by the Commission of any stop order or of: (i) any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus; (ii) the suspension of the qualification of the Certificates for offering or sale in any jurisdiction; (iii) the initiation of or threat of any proceeding for any such purpose; (iv) any request by the Commission for the amending or supplementing of the Registration Statement or the Prospectus or for additional information. In the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus or suspending any such qualification, the Company promptly shall use its best efforts to obtain the withdrawal of such order or suspension. B. To furnish promptly to the 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 10 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 Certificates, and if at such time any events shall have occurred as a result of which the Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made when such Prospectus is delivered, not misleading, or, if for any other reason it shall be necessary during such same period to amend or supplement the Prospectus or to file under the Exchange Act any document incorporated by reference in the Prospectus in order to comply with the Securities Act or the Exchange Act, the Company shall notify the Underwriter and, upon the Underwriter's request, shall file such document and prepare and furnish without charge to the 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 Certificates at any time nine months or more after the Effective Time, upon the request of the Underwriter but at the expense of the Underwriter, the Company shall prepare and deliver to the Underwriter as many copies as the Underwriter may reasonably request of an amended or supplemented Prospectus complying with Section 10(a)(3) of the Securities Act. D. To file promptly with the Commission any amendment to the Registration Statement or the Prospectus or any supplement to the Prospectus that may, in the judgment of the Company or the Underwriter, be required by the Securities Act or requested by the Commission. E. Prior to filing with the Commission any (i) Preliminary Prospectus, (ii) amendment to the Registration Statement or supplement to the Prospectus, or document incorporated by reference in the Prospectus, or (iii) Prospectus pursuant to Rule 424 of the Rules and Regulations, to furnish a 11 copy thereof to the Underwriter and counsel for the Underwriter and obtain the consent of the Underwriter to the filing. F. To make generally available to holders of the Certificates as soon as practicable, but in any event not later than 90 days after the close of the period covered thereby, a statement of earnings of the Trust (which need not be audited) complying with Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158) and covering a period of at least twelve consecutive months beginning not later than the first day of the first fiscal quarter following the Closing Date. G. To use their best efforts, in cooperation with the Underwriter, to qualify the Certificates for offering and sale under the applicable securities laws of such states and other jurisdictions of the United States as the Underwriter may designate, and maintain or cause to be maintained such qualifications in effect for as long as may be required for the distribution of the Certificates. The Company and the Originator will file or cause the filing of such statements and reports as may be required by the laws of each jurisdiction in which the Certificates have been so qualified. H. Not, without the Underwriter's prior written consent, to publicly offer or sell or contract to sell any mortgage pass-through securities, collateralized mortgage obligations or other similar securities representing interests in or secured by other mortgage-related assets originated or owned by the Company for a period of 5 business days following the commencement of the offering of the Certificates to the public. I. So long as the Certificates shall be outstanding, to deliver to the Underwriter as soon as such statements are furnished to the Trustee: (i) the annual statement as to compliance delivered to the Trustee pursuant to Section 8.16 of the Pooling and Servicing Agreement; (ii) the annual statement of a firm of independent public accountants furnished to the Trustee pursuant to Section 8.17 of the Pooling and Servicing Agreement; and (iii) the Monthly Statement furnished to the Certificateholders pursuant to Section 7.8 of the Pooling and Servicing Agreement. 12 J. To apply the net proceeds from the sale of the Certificates in the manner set forth in the Prospectus. SECTION VI. Conditions to the Underwriter's Obligation. The obligation of the Underwriter to purchase the Certificates pursuant to this Agreement are subject to: (i) the accuracy on and as of the Closing Date of the representations and warranties on the part of the Company and the Originator herein contained; (ii) the performance by the Company and the Originator of all of their respective obligations hereunder; and (iii) the following conditions as of the Closing Date: A. The Underwriter shall have received confirmation of the effectiveness of the Registration Statement. No stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission. Any request of the Commission for inclusion of additional information in the Registration Statement or the Prospectus shall have been complied with. B. The Underwriter shall not have discovered and disclosed to the Company on or prior to the Closing Date that the Registration Statement or the Prospectus or any amendment or supplement thereto contains an untrue statement of a fact or omits to state a fact which, in the opinion of Dewey Ballantine, counsel for the Underwriter, is material and is required to be stated therein or is necessary to make the statements therein not misleading. C. All corporate proceedings and other legal matters relating to the authorization, form and validity of this Agreement, the Pooling and Servicing Agreement, the Certificates, the Indemnification Agreement, the Registration Statement and the Prospectus, and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be satisfactory in all respects to counsel for the Underwriter, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters. D. The Underwriter shall have received the favorable opinion of Dewey Ballantine, special 13 counsel to the Company and the Originator with respect to the following items, dated the Closing Date, to the effect that: 1. The Company and the Originator has each 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 the State of Delaware, 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 Pooling and Servicing Agreement. Each of the Company and the Originator has the requisite power and authority to execute and deliver, engage in the transactions contemplated by, and perform and observe the conditions of, this Agreement, the Pooling and Servicing Agreement, the Insurance Agreement and, in the case of the Originator, the Indemnification Agreement. 2. This Agreement, the Certificates, the Pooling and Servicing Agreement and the Insurance Agreement have been duly and validly authorized, executed and delivered by the Company and the Originator, and the Originator has duly and validly authorized the Indemnification Agreement, all requisite corporate action having been taken with respect thereto, each (other than the Certificates and the Indemnification Agreement) constitutes the valid, legal and binding agreement of the Company, and each constitutes the valid, legal and binding agreement of the Originator. 3. Neither the transfer of the Mortgage Loans to the Trust, the issuance or sale of the Certificates nor the execution, delivery or performance by the Company or the Originator of the Pooling and Servicing Agreement, this Agreement, the Insurance Agreement or, in the case of the Originator, the Indemnification Agreement (A) conflicts or will conflict with or results or will result in a breach of, or constitutes or will constitute a default under, (i) any term or provision of the certificate of incorporation or bylaws of the Company or the Originator; (ii) any term or provision of any material agreement, contract, instrument or indenture, to which the Company or the Originator is a party or is bound and known to such counsel; or (iii) any order, judgment, writ, injunction or decree of any court or governmental agency or body or other tribunal having jurisdiction over the Company or the Originator and known to such counsel; or 14 (B) results in, or will result in the creation or imposition of any lien, charge or encumbrance upon any of the Trust's assets or upon the Certificates, except as otherwise contemplated by the Pooling and Servicing Agreement. 4. The endorsement and delivery of each Credit Line Agreement, and the preparation, delivery and recording of an Assignment with respect to each Mortgage is sufficient to fully transfer to the Trustee for the benefit of the Owners all right, title and interest of the Originator in the Credit Line Agreement and Mortgage, as noteholder and mortgagee or assignee thereof, subject to any exceptions set forth in such opinion, and will be sufficient to permit the Trustee to avail itself of all protection available under applicable law against the claims of any present or future creditors of the Originator and to prevent any other sale, transfer, assignment, pledge or other encumbrance of the Mortgage Loans by the Originator from being enforceable. 5. No consent, approval, authorization or order of, registration or filing with, or notice to, courts, governmental agency or body or other tribunal is required under the laws of the State of New York, for the execution, delivery and performance of the Pooling and Servicing Agreement, the Insurance Agreement, the Indemnification Agreement, this Agreement or the offer, issuance, sale or delivery of the Certificates or the consummation of any other transaction contemplated thereby by the Company and the Originator, except such which have been obtained. 6. There are no actions, proceedings or investigations, to such counsel's knowledge, pending or threatened against the Company or the Originator before any court, governmental agency or body or other tribunal (i) asserting the invalidity of the Pooling and Servicing Agreement, the Insurance Agreement, the Indemnification Agreement, this Agreement, or the Certificates, (ii) seeking to prevent the issuance of the Certificates or the consummation of any of the transactions contemplated by the Pooling and Servicing Agreement, the Insurance Agreement, the Indemnification Agreement or this Agreement or (iii) which would materially and adversely affect the performance by the Company or the Originator of obligations under, or the validity or enforceability of, the Pooling and Servicing 15 Agreement, the Indemnification Agreement, the Certificates, the Insurance Agreement, or this Agreement. 7. To the best of the knowledge of such counsel, the Commission has not issued any stop order suspending the effectiveness of the Registration Statement or any order directed to any prospectus relating to the Certificates (including the Prospectus), and has not initiated or threatened any proceeding for that purpose. 8. The Registration Statement and the Prospectus (other than the financial and statistical data included therein, as to which such counsel need express no opinion), including the Incorporated Documents, as of the date on which the Registration Statement was declared effective and as of the date hereof, comply as to form in all material respects with the requirements of the 1933 Act and the rules and regulations thereunder and the Exchange Act and the rules and regulations thereunder, and such counsel does not know of any amendment to the Registration Statement required to be filed, or of any contracts, indentures or other documents of a character required to be filed as an exhibit to the Registration Statement or required to be described in the Registration Statement which has not been filed or described as required. 9. Neither the qualification of the Pooling and Servicing Agreement under the Trust Indenture Act of 1939 nor the registration of the Trust created by such Agreement under the Investment Company Act of 1940 is presently required. 10. The statements in the Prospectus set forth under the captions "DESCRIPTION OF THE SECURITIES," "THE POOLING AND SERVICING AGREEMENT" and the statements in the Prospectus Supplement set forth under the caption "DESCRIPTION OF THE CLASS A CERTIFICATES," to the extent such statements purport to summarize certain provisions of the Certificates or of the Pooling and Servicing Agreement, are fair and accurate in all material respects. 11. The statements in the Prospectus and Prospectus Supplement set forth under the captions "ERISA CONSIDERATIONS," "CERTAIN FEDERAL INCOME TAX CONSEQUENCES," and the statements in the Prospectus set forth under the caption "CERTAIN LEGAL ASPECTS OF THE MORTGAGE LOANS AND RELATED MATTERS," to the 16 extent that they constitute matters of federal, New York or California law, or federal, New York or California legal conclusions provide a fair and accurate summary of such law or conclusions. 12. Such opinion shall also relate to comparable matters with respect to the Advanta Mortgage Holding Company. 13. 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. 14. Such other matters as the Underwriter may reasonably request. In rendering its opinions, the counsel described above may rely, as to matters of fact, on certificates of responsible officers of the Company and the Originator, the Trustee and public officials. Such opinions may also assume the due authorization, execution and delivery of the instruments and documents referred to therein by the parties thereto other than the Company and the Originator. E. The Underwriter shall have received letters, including bring-down letters, from Arthur Andersen LLP, dated on or before the Closing Date, in form and substance satisfactory to the Underwriter and counsel for the Underwriter, to the effect that they have performed certain specified procedures requested by the Underwriter with respect to the information set forth in the Prospectus and certain matters relating to the Originator. F. The Certificates 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 Certificates. Any such opinions shall be dated the Closing Date and addressed to the Underwriter or accompanied by reliance letters 17 to the Underwriter or shall state that the Underwriter may rely upon them. G. The Underwriter shall have received from the Company a certificate, signed by the president, a senior vice president or a vice president of the Company, dated the Closing Date, to the effect that the signer of such certificate has carefully examined the Registration Statement, the Pooling and Servicing Agreement, and this Agreement and that, to the best of his or her knowledge based upon reasonable investigation: 1. the representations and warranties of the Company, in this Agreement and as of the Closing Date, and in the Pooling 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 Company, has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date; 2. there are no actions, suits or proceedings pending, or to the best of such officer's knowledge, threatened against or affecting the Company which if adversely determined, individually or in the aggregate, would be reasonably likely to adversely affect the Company's obligations under the Pooling and Servicing Agreement, the Insurance Agreement or this Agreement in any material way; and no merger, liquidation, dissolution or bankruptcy of the Company is pending or contemplated; 3. the information contained in the Registration Statement and the Prospectus relating to the Originator, the Mortgage Loans or the servicing procedures of it or its affiliates or subservicer is true and accurate in all material respects and nothing has come to his or her attention that would lead such officer to believe that the Registration Statement or Prospectus includes any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading; 4. the information set forth in the Schedule of Mortgage Loans required to be furnished pursuant to the Pooling and Servicing Agreement is true and correct in all material respects; 18 5. there has been no amendment or other document filed affecting the certificate of incorporation or bylaws of the Company since September 30, 1996, and no such amendment has been authorized. No event has occurred since September 30, 1996, which has affected the good standing of the Company under the laws of the State of Delaware; 6. there has not occurred any material adverse change, or any development involving a prospective material adverse change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from September 30, 1996; 7. on or prior to the Closing Date, there has been no downgrading, nor has any notice been given of (A) any intended or potential downgrading or (B) any review or possible changes in rating the direction of which has not been indicated, in the rating, if any, accorded the Company or in any rating accorded any securities of the Company, if any, by any "nationally recognized statistical rating organization," as such term is defined for purposes of the 1933 Act; and 8. each person who, as an officer or representative of the Company or the Originator, signed or signs the Registration Statement, the Pooling and Servicing Agreement, this Agreement, the Insurance Agreement, or any other document delivered pursuant hereto, on the date of such execution, or on the Closing Date, as the case may be, in connection with the transactions described in the Pooling and Servicing Agreement, the Insurance Agreement, and this Agreement was, at the respective times of such signing and delivery, and is now, duly elected or appointed, qualified and acting as such officer or representative, and the signatures of such persons appearing on such documents are their genuine signatures. The Company shall attach to such certificate a true and correct copy of its certificate and bylaws which are in full force and effect on the date of such certificate and a certified true copy of the resolutions of its Board of Directors with respect to the transactions contemplated herein. H. The Underwriter shall have received a favorable opinion of counsel to the Trustee, dated 19 the Closing Date and in form and substance satisfactory to the Underwriter, to the effect that: 1. the Trustee is a national banking association duly organized, validly existing and in good standing under the laws of the United States and has the power and authority to enter into and to take all actions required of it under the Pooling and Servicing Agreement; 2. the Pooling and Servicing Agreement has been duly authorized, executed and delivered by the Trustee and the Pooling and Servicing Agreement constitutes the legal, valid and binding obligation of the Trustee, enforceable against the Trustee in accordance with its terms, except as enforceability thereof may be limited by (A) bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally, as such laws would apply in the event of a bankruptcy, insolvency or reorganization or similar occurrence affecting the Trustee, and (B) general principles of equity regardless of whether such enforcement is sought in a proceeding at law or in equity; 3. no consent, approval, authorization or other action by any governmental agency or body or other tribunal is required on the part of the Trustee in connection with its execution and delivery of the Pooling and Servicing Agreement or the performance of its obligations thereunder; 4. the Certificates have been duly executed, authenticated and delivered by the Trustee; and 5. the execution and delivery of, and performance by the Trustee of its obligations under, the Pooling and Servicing Agreement do not conflict with or result in a violation of any statute or regulation applicable to the Trustee, or the charter or bylaws of the Trustee, or to the best knowledge of such counsel, any governmental authority having jurisdiction over the Trustee or the terms of any indenture or other agreement or instrument to which the Trustee is a party or by which it is bound. In rendering such opinion, such counsel may rely, as to matters of fact, on certificates of responsible officers of the Company, the Trustee and public officials. Such opinion may also assume the due authorization, execution and delivery 20 of the instruments and documents referred to therein by the parties thereto other than the Trustee. I. The Underwriter shall have received from the Trustee a certificate, signed by the President, a senior vice president or a vice president of the Trustee, dated the Closing Date, to the effect that each person who, as an officer or representative of the Trustee, signed or signs the Certificates, the Pooling and Servicing Agreement or any other document delivered pursuant hereto, on the date hereof or on the Closing Date, in connection with the transactions described in the Pooling and Servicing Agreement was, at the respective times of such signing and delivery, and is now, duly elected or appointed, qualified and acting as such officer or representative, and the signatures of such persons appearing on such documents are their genuine signatures. J. The Policy relating to the Certificates shall have been duly executed and issued at or prior to the Closing Date and shall conform in all material respects to the description thereof in the Prospectus. K. The Underwriter shall have received a favorable opinion of in-house counsel to the Insurer, dated the Closing Date and in form and substance satisfactory to counsel for the Underwriter, to the effect that: 1. The Certificate Insurer is a stock insurance corporation, duly incorporated and validly existing under the laws of the State of New York. The Certificate Insurer is validly licensed and authorized to issue the Policy and perform its obligations under the Policy in accordance with the terms thereof, under the laws of the State of New York. 2. The execution and delivery by the Certificate Insurer of the Policy, the Insurance Agreement are within the corporate power of the Certificate Insurer and have been authorized by all necessary corporate action on the part of the Certificate Insurer; the Policy has been duly executed and is the valid and binding obligation of the Certificate Insurer enforceable in accordance with its terms except that the enforcement of the Policy may be limited by laws relating to bankruptcy, insolvency, reorganization, moratorium, receivership and other similar laws affecting 21 creditors' rights generally and by general principles of equity. 3. The Certificate 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 Certificate 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 Certificate Insurer, the lack of which would adversely affect the validity or enforceability of the Policy; to the extent required by applicable legal requirements that would adversely affect validity or enforceability of the Policy, the form of the Policy has been filed with, and approved by, all governmental authorities having jurisdiction over the Certificate Insurer in connection with the Policy. 5. The Policy is not required to be registered under the Securities Act. 6. The information set forth under the caption "THE CERTIFICATE INSURANCE POLICY" and "THE CERTIFICATE INSURER" in the Prospectus forming a part of the Registration Statement, insofar as such statements constitute a description of the Policy, accurately summarizes the Policy. In rendering this opinion, such counsel may rely, as to matters of fact, on certificates of responsible officers of the Company, the Originator, the Trustee, the Certificate 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 Certificate Insurer. L. On or prior to the Closing Date, there has been no downgrading, nor has any notice been given of (A) any intended or potential downgrading 22 or (B) any review or possible changes in rating the direction of which has not been indicated, in the rating, if any, accorded the Company or the Originator or in any rating accorded any securities of the Company, if any, by any "nationally recognized statistical rating organization," as such term is defined for purposes of the 1933 Act. 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 Certificate Insurer's claims paying ability by any "nationally recognized statistical rating organization," as such term is defined for purposes of the 1933 Act. N. There has not occurred any change, or any development involving a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations, since September 30, 1996, of (A) the Company, the Originator and any subsidiaries or (B) the Certificate Insurer, that is in the Underwriter's judgment material and adverse and that makes it in the Underwriter's judgment impracticable to market the Certificates on the terms and in the manner contemplated in the Prospectus. O. The Underwriter shall have received from the Certificate Insurer a certificate, signed by the President, a senior vice president or a vice president of the Insurer, dated the Closing Date, to the effect that the signer of such certificate has carefully examined the Policy, the Insurance Agreement, the Indemnification Agreement and the related documents and that, to the best of his or her knowledge based on reasonable investigation: 1. there are no actions, suits or proceedings pending or threatened against or affecting the Certificate Insurer which, if adversely determined, individually or in the aggregate, would adversely affect the Certificate Insurer's performance under the Policy, the Indemnification Agreement or the Insurance Agreement; 2. each person who as an officer or representative of the Certificate Insurer, signed or signs the Policy, the Insurance Agreement, the 23 Indemnification Agreement or any other document delivered pursuant hereto, on the date thereof, or on the Closing Date, in connection with the transactions described in this Agreement was, at the respective times of such signing and delivery, and is now, duly elected or appointed, qualified and acting as such officer or representative, and the signatures of such persons appearing on such documents are their genuine signatures; 3. the information contained in the Prospectus under the captions "THE CERTIFICATE INSURANCE POLICY" and "THE CERTIFICATE INSURER" is true and correct in all material respects and does not omit to state a material fact with respect to the description of the Policy or the ability of the Insurer to meet its payment obligations under the Policy; 4. the tables regarding the Certificate Insurer's capitalization set forth under the heading "THE CERTIFICATE INSURANCE POLICY" and "THE CERTIFICATE INSURER" presents fairly the capitalization of the Insurer as of September 30, 1996; 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 Certificate Insurer by any "nationally recognized statistical rating organization," as such term is defined for purposes of the 1933 Act; 6. the audited balance sheet of the Certificate Insurer as of December 31, 1995 and the related statement of income and retained earnings for the fiscal year then ended, and the accompanying footnotes, together with opinion dated January 20, 1995 of Coopers and Lybrand, an independent certificated public accountant, which are incorporated by reference in the Prospectus, fairly present in all material respects the financial condition of the Certificate Insurer as of such date and for the period covered by such statements in accordance with generally accepted accounting principles consistently applied; the unaudited balance sheet of the Certificate Insurer as of September 30, 1996 and the related statement of income and retained earnings for the three-month period then ended, copies of which are included in 24 the Prospectus, fairly present in all material respects the financial condition of the Certificate Insurer as of such date and for the period covered by such statements in accordance with generally accepted accounting principles applied consistently with those principles applied in preparing the December 31, 1995 audited statements. 7. to the best knowledge of such officer, since September 30, 1996, no material adverse change has occurred in the financial position of the Certificate Insurer other than as set forth in the Prospectus. The officer of the Certificate Insurer certifying to items 5-7 shall be an officer in charge of a principal financial function. The Certificate Insurer shall attach to such certificate a true and correct copy of its certificate or articles of incorporation, as appropriate, and its bylaws, all of which are in full force and effect on the date of such certificate. P. The Underwriter shall have received from Dewey Ballantine, special counsel to the Company and the Originator, a survey in form and substance satisfactory to the Underwriter, indicating the requirements of applicable local law which must be complied with in order to transfer and service the Mortgage Loans pursuant to the Pooling and Servicing Agreement and the Originator shall have complied with all such requirements. Q. The Underwriter shall have received from Dewey Ballantine, special counsel to the Underwriters, such opinion or opinions, dated the Closing Date, with respect to the issuance and sale of the Certificates, the Prospectus and such other related matters as the Underwriter shall reasonably require. R. The Underwriter and counsel for the Underwriter shall have received copies of any opinions of counsel to the Company, the Originator or the Certificate Insurer supplied to the Trustee relating to matters with respect to the Certificates or the Policy. Any such opinions shall be dated the Closing Date and addressed to the Underwriter or accompanied by reliance letters to the Underwriter or shall state the Underwriter may rely thereon. 25 S. The Underwriter shall have received such further information, certificates and documents as the Underwriter may reasonably have requested not fewer than three (3) full business days prior to the Closing Date. T. There shall have been executed and delivered by Advanta Mortgage Holding Company, the corporate parent of the Company ("AMHC"), a letter agreement with the Trustee and the Certificate Insurer, pursuant to which AMHC agrees to become jointly and severally liable with the Company, the Originator and Advanta Mortgage Corp. USA for the payment of the Joint and Several Obligations (as defined in such letter agreement). U. There shall have been executed and delivered by AMHC, the corporate parent of the Company, a letter agreement with the Underwriter and the Certificate 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 Certificates as herein contemplated and related proceedings or in order to evidence the accuracy and completeness of any of the representations and warranties, or the fulfillment of any of the conditions, herein contained, and all proceedings taken by the Originator in connection with the issuance and sale of the Certificates as herein contemplated shall be satisfactory in form and substance to the Underwriter and counsel for the Underwriter. W. Subsequent to the execution and delivery of this Agreement none of the following shall have occurred: (i) trading in securities generally on the New York Stock Exchange, the American Stock Exchange or the over-the-counter market shall have been suspended or minimum prices shall have been established on either of such exchanges or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction; (ii) a banking moratorium shall have been declared by Federal or state authorities; (iii) the United States shall have become engaged in hostilities, there shall have been an escalation of hostilities involving the United States or there shall have been a declaration of a national emergency or war by the 26 United States; or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets of the United States shall be such) as to make it, in the judgment of the Underwriter, impractical or inadvisable to proceed with the public offering or delivery of the Certificates on the terms and in the manner contemplated in the Prospectus. If any condition specified in this Section VI shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Underwriter by notice to the Company and the Originator at any time at or prior to the Closing Date, and such termination shall be without liability of any party to any other party except as provided in Section VII. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriter. SECTION VII. Payment of Expenses. The Company and the Originator agree to pay: (a) the costs incident to the authorization, issuance, sale and delivery of the Certificates and any taxes payable in connection therewith; (b) the costs incident to the preparation, printing and filing under the Securities Act of the Registration Statement and any amendments and exhibits thereto; (c) the costs of distributing the Registration Statement as originally filed and each amendment thereto and any post-effective amendments thereof (including, in each case, exhibits), the Preliminary Prospectus, the Prospectus and any amendment or supplement to the Prospectus or any document incorporated by reference therein, all as provided in this Agreement; (d) the costs of reproducing and distributing this Agreement; (e) the fees and expenses of qualifying the Certificates under the securities laws of the several jurisdictions as provided in Section V(G) hereof and of preparing, printing and distributing a Blue Sky Memorandum and a Legal Investment Survey (including related fees and expenses of counsel to the Underwriter); (f) any fees charged by securities rating services for rating the Certificates; and (g) all other costs and expenses incident to the performance of the obligations of the Company and the Originator; provided that, except as provided in this Section VII, the Underwriter shall pay its own costs and expenses, including the costs and expenses of Dewey Ballantine, any transfer taxes on the Certificates which they may sell and the expenses of advertising any offering of the Certificates made by the Underwriter. 27 If this Agreement is terminated by the Underwriter, in accordance with the provisions of Section VI or Section X, the Company and the Originator shall reimburse the Underwriter for its respective reasonable out-of-pocket expenses, including fees and disbursements of Dewey Ballantine, counsel for the Underwriters. SECTION VIII. Indemnification and Contribution. A. The Company and the Originator agree to indemnify and hold harmless the Underwriter and each person, if any, who controls the Underwriter within the meaning of Section 15 of the Securities Act from and against any and all loss, claim, damage or liability, joint or several, or any action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of the Certificates), to which the Underwriter or any such controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) any untrue statement or alleged untrue statement of a material fact contained in the Prospectus or (iv) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and shall reimburse the Underwriter and each such controlling person promptly upon demand for any legal or other expenses reasonably incurred by the Underwriter or such controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that neither the Company nor the Originator shall be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made in any Preliminary Prospectus, the Prospectus or the Registration Statement in reliance upon and in conformity with written information (including any Derived Information) furnished to the Company by the Underwriter specifically for inclusion therein; and provided, further, that as to any Preliminary Prospectus this indemnity shall not inure to the benefit of the Underwriter or any controlling person on account of any loss, claim, damage, liability or action arising from the sale of the Certificates to any person by the Underwriter if the Underwriter failed to send or give a copy of the Prospectus, as amended or supplemented, to that person within the time required by the Securities Act, and the untrue statement or alleged untrue statement of a material fact or the omission or alleged 28 omission to state a material fact in the Preliminary Prospectus was corrected in the Prospectus, unless such failure resulted from non-compliance by the Company or the Originator with Section V(C). For purposes of the last proviso to the immediately preceding sentence, the term "Prospectus" shall not be deemed to include the documents incorporated therein by reference, and the Underwriter shall not be obligated to send or give any supplement or amendment to any document incorporated therein by reference to any person other than a person to whom the Underwriter had delivered such incorporated document or documents in response to a written request therefor. The foregoing indemnity agreement is in addition to any liability which the Company or the Originator may otherwise have to the Underwriter or any controlling person of the Underwriter. B. The Underwriter agrees to indemnify and hold harmless the Company, the Originator, each of their respective directors, each of their respective officers who signed the Registration Statement, and each person, if any, who controls the Company or the Originator within the meaning of Section 15 of the Securities Act against any and all loss, claim, damage or liability, or any action in respect thereof, to which the Company or the Originator or any such director, officer or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) any untrue statement or alleged untrue statement of a material fact contained in the Prospectus or (iv) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Underwriter specifically for inclusion therein, and shall reimburse the Company, the Originator and any such director, officer or controlling person for any legal or other expenses reasonably incurred by the Company or the Originator or any director, officer or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability or action as such expenses are incurred. The foregoing indemnity agreement is in addition to any liability which the Underwriter may otherwise have to the Company, the Originator or any such director, officer or controlling person. 29 C. Promptly after receipt by any indemnified party under this Section VIII of notice of any claim or the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party under this Section VIII, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify an indemnifying party shall not relieve it from any liability which it may have under this Section VIII except to the extent it has been materially prejudiced by such failure; and provided, further, that the failure to notify any indemnifying party shall not relieve it from any liability which it may have to any indemnified party otherwise than under this Section VIII. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section VIII for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation. Any indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless: (i) the employment thereof has been specifically authorized by the indemnifying party in writing; (ii) such indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party and in the reasonable judgment of such counsel it is advisable for such indemnified party to employ separate counsel; or (iii) the indemnifying party has failed to assume the defense of such action and employ counsel reasonably satisfactory to the indemnified party, in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party, it being understood, however, the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of 30 attorneys (in addition to local counsel) at any time for all such indemnified parties, which firm shall be designated in writing by the Underwriter, if the indemnified parties under this Section VIII consist of the Underwriter or any of its controlling persons, or by the Company or the Originator, as the case may be, if the indemnified parties under this Section VIII consist of the Company or the Originator, as the case may be, or any of the Company's directors, officers or controlling persons. Each indemnified party, as a condition of the indemnity agreements contained in Section VIII(A) and (B), shall use its best efforts to cooperate with the indemnifying party in the defense of any such action or claim. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemnified party in accordance with such request prior to the date of such settlement. D. The Underwriter agrees to deliver to the Company no later than the date on which the Prospectus Supplement is required to be filed pursuant to Rule 424 with a copy of its Derived Information (defined below) for filing with the Commission on Form 8-K. E. The Underwriter agrees, assuming all Company-Provided Information (defined below) is accurate and complete in all material respects, to severally and not jointly indemnify and hold harmless the Company, the Originator, each of the Company's and the Originator's respective officers and directors and each person who controls the Company or the Originator within the meaning of Section 15 of the Securities Act against any and all losses, claims, damages or liabilities to which they may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages 31 or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement of a material fact contained in the Derived Information provided by the Underwriter, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and agrees to reimburse each such indemnified party for any legal or other expenses reasonably incurred by him, her or it in connection with investigating or defending or preparing to defend any such loss, claim, damage, liability or action as such expenses are incurred. The obligations of the Underwriter under this Section VIII(E) shall be in addition to any liability which the Underwriter may otherwise have. The procedures set forth in Section VIII(C) shall be equally applicable to this Section VIII(E). F. For purposes of this Section VIII, the term "Derived Information" means such portion, if any, of the information delivered to the Company pursuant to Section VIII(D) for filing with the Commission on Form 8-K as: (i) is not contained in the Prospectus without taking into account information incorporated therein by reference; (ii) does not constitute Company-Provided Information; and (iii) is of the type of information defined as Collateral term sheets, Structural term sheets or Computational Materials (as such terms are interpreted in the No-Action Letters). "Company-Provided Information" means any computer tape furnished to the Underwriter by the Company and the Originator concerning the Mortgage Loans comprising the Trust. The terms "Collateral term sheet" and "Structural term sheet" shall have the respective meanings assigned to them in the February 13, 1995 letter (the "PSA Letter") of Cleary, Gottlieb, 32 Steen & Hamilton on behalf of the Public Securities Association (which letter, and the SEC staff's response thereto, were publicly available February 17, 1995). The term "Collateral term sheet" as used herein includes any subsequent Collateral term sheet that reflects a substantive change in the information presented. The term "Computational Materials" has the meaning assigned to it in the May 17, 1994 letter (the "Kidder letter" and together with the PSA Letter, the "No-Action Letters") of Brown & Wood on behalf of Kidder, Peabody & Co., Inc. (which letter, and the SEC staff's response thereto, were publicly available May 20, 1994). G. If the indemnification provided for in this Section VIII shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section VIII(A) or (B) in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company and the Originator on the one hand and the Underwriter on the other from the offering of the Certificates or (ii) if the allocation provided by clause (i) above is not permitted by applicable law or if the indemnified party failed to give the notice required under Section VIII(C), in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and the Originator on the one hand and the Underwriter on the other with respect to the statements or omissions which resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits of the Underwriter and the Company and the Originator shall be deemed to be in such proportion so that the Underwriter is responsible for that portion represented by the percentage that the underwriting discount appearing on the cover page of the Prospectus bears to the public offering price appearing on the cover page of the Prospectus. 33 The relative fault of the Underwriter and the Company and the Originator shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company and the Originator or by the Underwriter, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission and other equitable considerations. The Company, the Originator and the Underwriter agree that it would not be just and equitable if contributions pursuant to this Section VIII(G) were to be determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section VIII(G) shall be deemed to include, for purposes of this Section VIII(G), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. In no case shall the Underwriter be responsible for any amount in excess of the underwriting discount applicable to the Certificates purchased by the Underwriter hereunder. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. H. The Underwriter confirms that the information set forth (i) in the Prospectus Supplement relating to market making and (ii) in the third paragraph under the caption "Underwriting" in the Prospectus Supplement, together with the Derived Information, is correct and constitutes the only information furnished in writing to the Company and the Originator by or on behalf of the Underwriter specifically for inclusion in the Registration Statement and the Prospectus. SECTION IX. Representations, Warranties and Agreements to Survive Delivery. All representations, warranties and agreements contained in this Agreement or contained in certificates of officers of the Company or the Originator submitted pursuant hereto shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of the Underwriter or controlling persons thereof, or by or on behalf of the Company or the Originator and shall survive delivery of any Certificates to the Underwriter. 34 SECTION X. Termination of Agreement. The Underwriter may terminate this Agreement immediately upon notice to the Company and the Originator, at any time at or prior to the Closing Date if any of the events or conditions described in Section VI(Y) of this Agreement shall occur and be continuing. In the event of any such termination, the covenant set forth in Section V(G), the provisions of Section VII, the indemnity agreement set forth in Section VIII, and the provisions of Sections IX and XIII shall remain in effect. SECTION XI. Notices. All statements, requests, notices and agreements hereunder shall be in writing, and: A. if to the Underwriter, shall be delivered or sent by mail, telex or facsimile transmission to Lehman Brothers, 3 World Financial Center, New York, New York, 10285-1100, Attention: Syndicate Registration Department (Fax: 212-528-8822); B. if to the Company, shall be delivered or sent by mail, telex or facsimile transmission to Advanta Mortgage Conduit Services, Inc. 16875 West Bernardo Drive, San Diego, California 92127 Attention: General Counsel (Fax: 619-674-3592). C. if to the Originator, shall be delivered or sent by mail to Advanta National Bank USA Brandywine Corporate Center, 650 Naamans Road, Claymont, Delaware 19703 (Telephone: 302-791-4400). SECTION XII. Persons Entitled to the Benefit of this Agreement. This Agreement shall inure to the benefit of and be binding upon the Underwriter, the Company, the Originator and their respective successors. This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that the representations, warranties, indemnities and agreements contained in this Agreement shall also be deemed to be for the benefit of the person or persons, if any, who control the Underwriter within the meaning of Section 15 of the Securities Act, and for the benefit of directors of the Company or of the Originator, officers of the Company who have signed the Registration Statement and any person controlling the Company or the Originator within the meaning of Section 15 of the Securities Act. Nothing in this Agreement is intended or shall be construed to give any person, other than the persons referred to in this Section XII, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. SECTION XIII. Survival. The respective indemnities, representations, warranties and agreements of the 35 Company, the Originator and the Underwriter contained in this Agreement, or made by or on behalf of them, respectively, pursuant to this Agreement, shall survive the delivery of and payment for the Certificates and shall remain in full force and effect, regardless of any investigation made by or on behalf of any of them or any person controlling any of them. SECTION XIV. Definition of the Term "Business Day". For purposes of this Agreement, "Business Day" means any day on which the New York Stock Exchange, Inc. is open for trading. SECTION XV. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED IN ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME. SECTION XVI. Counterparts. This Agreement may be executed in counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original but all such counterparts shall together constitute one and the same instrument. SECTION XVII. Headings. The headings herein are inserted for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement. 36 If the foregoing correctly sets forth the agreement between the Company and the Underwriter, please indicate your acceptance in the space provided for that purpose below. Very truly yours, ADVANTA MORTGAGE CONDUIT SERVICES INC. By: ------------------------ Name: Mark T. Dunsheath Title: Vice President CONFIRMED AND ACCEPTED, as of the date first above written: LEHMAN BROTHERS INC. By: ------------------------ Name: Title: [Underwriting Agreement] CONFIRMED AND ACCEPTED, as of the date first above written: ADVANTA NATIONAL BANK USA By: ------------------------ Name: Mark T. Dunsheath Title: Vice President [Underwriting Agreement] 38 ================================================================================ SCHEDULE A - -------------------------------------------------------------------------------- Purchase Price Initial Principal Amount to Underwriter of Certificates Purchased disregarding Class by the Underwriter accrued interest - -------------------------------------------------------------------------------- Class A $50,000,000_ % ================================================================================ 39 EXHIBIT A As of _______, 1996 Lehman Brothers Inc. 3 World Financial Center New York, New York 10285 MBIA Insurance Corporation 113 King Street Armonk, New York 10504 Re: Underwriting Agreement dated November 15, 1996 (the "Underwriting Agreement") between Advanta Mortgage Conduit Services, Inc. (the "Sponsor"), Advanta National Bank USA (the "Originator") and Lehman Brothers Inc. (the "Underwriter"); Indem- nification Agreement dated November 22, 1996 (the "Indemnification Agreement") among the Ori- ginator, the Underwriter and the MBIA Insurance Corporation (the "Certificate Insurer") Insur- ance Agreement dated as of November 22, 1996 (the "Insurance Agreement") among the Certifi- cate Insurer, the Sponsor, the Trustee and the Underwriter Ladies and Gentlemen: Pursuant to the Underwriting Agreement, the Indemnification Agreement and the Insurance Agreement (together, the "Designated Agreements"), the Sponsor and the Originator have undertaken certain financial obligations with respect to the indemnification of the Underwriter and of the Certificate Insurer with respect to the Registration Statement, the Prospectus and the Prospectus Supplement described in the Designated Agreements. Any financial obligations of the Sponsor and the Originator under the Designated Agreements, whether or not specifically enumerated in this paragraph, are hereinafter referred to as the "Joint and Several Obligations"; provided, however, that "Joint and Several Obligations" shall mean only the financial obligations of the Sponsor and the Originator under the Designated Agreements (including the payment of money damages for a breach of any of the Sponsor's and the Originator's obligations under the Designated Agreements, whether financial or otherwise) but shall not include any obligations not relating to the payment of money. As a condition of their respective executions of the Designated Agreements, the Underwriter and the Certificate Insurer have required the undersigned, Advanta Mortgage Holding Company ("AMHC"), the parent corporation of the Sponsor and the Originator, to acknowledge its joint-and-several liability with the Sponsor and the Originator for the payment of the Joint and Several Obligations under the Designated Agreements. Now, therefore, the Underwriter, the Certificate Insurer and AMHC do hereby agree that: (i) AMHC hereby agrees to be absolutely and unconditionally jointly and severally liable with the Sponsor and the Originator to the Underwriter for the payment of the Joint and Several Obligations under the Underwriting Agreement. (ii) AMHC hereby agrees to be absolutely and unconditionally jointly and severally liable with the Sponsor to the Certificate Insurer for the payment of the Joint and Several Obligations and this Insurance Agreement. (iii) AMHC hereby agrees to be absolutely and unconditionally jointly and severally liable with the Originator to the Certificate Insurer for the payment of the Joint and Several Obligations under the Indemnification Agreement. (iv) 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 Certificate Insurer, as applicable, by the Sponsor or another affiliate of AMHC. 2 Capitalized terms used herein and not defined herein shall have their respective meanings as set forth in the Agreement. Very truly yours, ADVANTA MORTGAGE HOLDING COMPANY By: ------------------------ Authorized Signatory CONFIRMED AND ACCEPTED, as of the date first above written: MBIA INSURANCE CORPORATION By: -------------------------------- Authorized Signatory LEHMAN BROTHERS By: -------------------------------- Authorized Signatory 3 EX-4.1 3 POOLING AND SERVICING AGREEMENT EXECUTION COPY POOLING AND SERVICING AGREEMENT Relating to ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1996-A Among ADVANTA MORTGAGE CONDUIT SERVICES, INC., as Sponsor, ADVANTA MORTGAGE CORP. USA, as Master Servicer, ADVANTA NATIONAL BANK USA, as Originator, and BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as Trustee Dated as of November 1, 1996 TABLE OF CONTENTS (Not a Part of this Agreement) Page ---- Parties..................................................................... 1 Recitals.................................................................... 1 ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION........................ 2 1.1. Definitions.................................................. 2 Accepted Servicing Practices....................... 2 Accelerated Principal Payments..................... 2 Account............................................ 2 Addition Notice.................................... 2 Additional Balance................................. 2 Additional Mortgage Loans.......................... 2 Agreement.......................................... 2 Alternative Principal Payment...................... 3 AMHC............................................... 3 Amortization Period................................ 3 Amortized Overcollateralization Amount Requirement.................................... 3 Appraised Value.................................... 3 Assignment of Mortgage............................. 3 Authorized Officer................................. 3 Authorized Newspapers.............................. 3 Available Funds.................................... 3 Available Funds Shortfall.......................... 3 Available Subsequent Mortgage Loans................ 3 Billing Cycle...................................... 4 Business Day....................................... 4 Capitalized Interest Account....................... 4 Capitalized Interest Account Deposit............... 4 Capitalized Interest Amount........................ 4 Capitalized Interest Requirement................... 4 Capitalized Interest Revolving Period Amount......................................... 4 Certificate........................................ 4 Certificate Account................................ 4 Certificate Insurance Policy....................... 5 Certificate Insurer................................ 5 Civil Relief Act................................... 5 Class A Certificate................................ 5 Class A Principal Balance.......................... 5 Class A Formula Rate............................... 5 Class A Interest Distribution Amount............... 5 Class A Interest Rate.............................. 5 Closing Day........................................ 5 Code............................................... 5 Combined Loan-to-Value Ratio....................... 5 Credit Limit....................................... 6 i Page ---- Credit Limit Utilization Rate...................... 6 Credit Line Agreement.............................. 6 Cut-off Date....................................... 6 Cut-Off Date Pool Balance.......................... 6 Cut-Off Date Principal Balance..................... 6 Date-of-Payment Loans.............................. 6 Debt Service Reduction............................. 6 Defective Mortgage Loan............................ 6 Deficient Valuation................................ 7 Delinquent......................................... 7 Delivery Order..................................... 7 Depository......................................... 7 Designated Depository Institution.................. 7 Determination Date................................. 8 Direct Participant" or "DTC Participant............ 8 Document Delivery Requirements..................... 8 Draw............................................... 8 Draw Period........................................ 8 Eligible Investments............................... 8 Event of Default................................... 8 FDIC............................................... 8 FHLMC.............................................. 9 Final Scheduled Payment Date....................... 9 First Mortgage Loan................................ 9 Fixed Allocation Percentage........................ 9 Floating Allocation Percentage..................... 9 Foreclosure Profit................................. 9 FNMA............................................... 9 Highest Lawful Rate................................ 9 Increased Senior Lien Limitation................... 9 Indemnification Agreement.......................... 9 Indirect Participant............................... 9 Initial Mortgage Loans............................. 10 Initial Premium.................................... 10 Initial Specified Overcollateralization Amount......................................... 10 Insurance Agreement................................ 10 Insurance Policy................................... 10 Insurance Proceeds................................. 10 Insured Payment.................................... 10 Interest Accrual Period............................ 10 Interest Determination Date........................ 10 Interest Remittance Amount......................... 11 Invested Amount.................................... 11 Late Payment Rate.................................. 11 LIBOR.............................................. 11 LIBOR Business Day................................. 11 Lifetime Rate Cap.................................. 11 Liquidated Mortgage Loan........................... 11 Liquidation Expenses............................... 11 Liquidation Proceeds............................... 12 ii Page ---- Liquidation Report................................. 12 Loan Purchase Price................................ 12 Loan Rate.......................................... 12 Loan Rate Cap...................................... 12 London Business Day................................ 12 Managed Amortization Period........................ 12 Master Servicer.................................... 13 Master Servicer Affiliate.......................... 13 Master Servicer's Trust Receipt.................... 13 Maximum Principal Payment.......................... 13 Maximum Step-Down Amount........................... 13 Minimum Monthly Payment............................ 13 Minimum Originator's Interest...................... 13 Monthly Remittance Amount.......................... 13 Moody's............................................ 13 Mortgage........................................... 13 Mortgage Files..................................... 13 Mortgage Loan Schedule............................. 13 Mortgage Loans..................................... 14 Mortgaged Property................................. 14 Mortgagor.......................................... 14 Net Funds Cap Rate................................. 14 Net Funds Cap Carry-Forward Amount................. 14 Net Liquidation Proceeds........................... 14 Net Monthly Excess Cashflows....................... 15 Net Principal Collections.......................... 15 Nonrecoverable Advance............................. 15 Non-Subordinated Originator's Interest............. 15 O/C Mortgage Loans................................. 15 Officer's Certificate.............................. 15 Operative Documents................................ 15 Original Class A Principal Balance................. 15 Original Cut-Off Date Pool Balance................. 15 Original Pre-Funded Amount......................... 15 Original Principal Amount.......................... 15 Original Principal Balance......................... 16 Originator......................................... 16 Originator Certificate............................. 16 Originator's Current Amount........................ 16 Originator's Interest.............................. 16 Outstanding........................................ 16 Overcollateralization Amount....................... 17 Overcollateralization Release Amount............... 17 Overcollateralization Deficiency Amount............ 17 Overcollateralization Deficit...................... 17 Owner.............................................. 17 Payment Date....................................... 17 Percentage Interest................................ 17 Person............................................. 18 Pool Balance....................................... 18 Pool Certification................................. 18 iii Page ---- Pool Factor........................................ 18 Preference Amount.................................. 18 Pre-Funded Amount.................................. 18 Pre-Funded Mortgage Loans.......................... 18 Pre-Funding Account................................ 18 Pre-Funding Earnings............................... 18 Pre-Funding Period................................. 18 Pre-Funding Transfer Date.......................... 18 Premium Amount..................................... 19 Premium Percentage................................. 19 Prepaid Installment................................ 19 Prepayment......................................... 19 Prepayment Interest Shortfall...................... 19 Preservation Expenses.............................. 19 Prime.............................................. 19 Principal and Interest Account..................... 19 Principal Balance.................................. 20 Principal Collections.............................. 20 Principal Remittance Amount........................ 20 Projected Net Monthly Excess Cashflow.............. 20 Prospectus......................................... 20 Qualified Replacement Mortgage..................... 21 Rapid Amortization Commencement Date............... 21 Rapid Amortization Event........................... 21 Rapid Amortization Period.......................... 21 Realized Loss...................................... 22 Record Date........................................ 22 Reference Banks.................................... 22 Register........................................... 22 Registrar.......................................... 22 Registration Statement............................. 23 Reimbursement Amount............................... 23 Relief Act Shortfall............................... 23 REO Property....................................... 23 Remittance Date.................................... 23 Remittance Period.................................. 23 Replacement Cut-Off Date........................... 24 Representation Letter.............................. 24 Revolving Account.................................. 24 Revolving Period................................... 24 S&P ............................................... 24 Schedule of Mortgage Loans......................... 24 Scheduled Principal Distribution Amount............ 24 Second Mortgage Loan............................... 24 Securities Act..................................... 24 Senior Lien........................................ 24 Servicing Advance.................................. 25 Servicing Fee...................................... 25 Servicing Fee Rate................................. 25 Specified Overcollateralization Amount............. 25 Sponsor............................................ 25 iv Page ---- Step-Down Amount................................... 25 Subsequent Cut-Off Date............................ 25 Subsequent Mortgage Loans.......................... 25 Subsequent Transfer Agreement...................... 25 Subsequent Transfer Date........................... 25 Substitution Amount................................ 26 Sub-Servicer....................................... 26 Sub-Servicing Agreement............................ 26 Telerate Screen Page 3750.......................... 26 Termination Fees................................... 26 Transaction Documents.............................. 26 Transfer Date...................................... 26 Transfer Notice Date............................... 26 Trust.............................................. 26 Trust Collateral Value............................. 26 Trust Fund......................................... 27 Trustee............................................ 27 Trustee's Fee...................................... 27 Underwriter........................................ 27 1.2. Use of Words and Phrases..................................... 27 1.3. Captions; Table of Contents.................................. 27 1.4. Opinions ................................................... 28 ARTICLE II ESTABLISHMENT AND ORGANIZATION OF THE TRUST............... 28 2.1. Establishment of the Trust................................... 28 2.2. Office....................................................... 28 2.3. Purposes and Powers.......................................... 28 2.4. Appointment of the Trustee; Declaration of Trust.............................................. 29 2.5. Expenses of the Trust........................................ 29 2.6. Ownership of the Trust....................................... 29 2.7. Situs of the Trust........................................... 29 ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SPONSOR, THE ORIGINATOR AND THE MASTER SERVICER................................. 30 3.1. Representations and Warranties of the Sponsor and the Originator......................... 30 3.2. Representations and Warranties of the Master Servicer........................................... 33 3.3. Representations and Warranties of the Originator with Respect to the Mortgage Loans; Retransfer of Certain Mortgage Loans.............................................. 36 3.4. Covenants of Originator to Take Certain Actions with Respect to the Mortgage Loans In Certain Situations........................ 44 3.5. Conveyance of the Initial Mortgage Loans..................... 46 v Page ---- 3.6. Acceptance by Trustee; Certain Substitutions of Mortgage Loans; Certification by Trustee............................................ 50 3.7. Cooperation Procedures....................................... 54 3.8. Conveyance of the Subsequent Mortgage Loans.................. 54 3.9. Retransfers of Mortgage Loans at Election of Originator......................................... 58 ARTICLE IV ISSUANCE AND SALE OF CERTIFICATES......................... 59 4.1. Issuance of Certificates..................................... 59 4.2. Sale of Certificates......................................... 59 ARTICLE V CERTIFICATES AND TRANSFER OF INTERESTS.................... 60 5.1. Terms........................................................ 60 5.2. Forms........................................................ 60 5.3. Execution, Authentication and Delivery....................... 61 5.4. Registration and Transfer of Certificates.................... 61 5.5. Mutilated, Destroyed, Lost or Stolen Certificates....................................... 64 5.6. Persons Deemed Owners........................................ 65 5.7. Cancellation................................................. 65 5.8. Limitation on Transfer of Ownership Rights................... 65 5.9. Assignment of Rights......................................... 67 5.10. Liabilities................................................. 67 ARTICLE VI COVENANTS................................................. 68 6.1. Distributions................................................ 68 6.2. Money for Distributions to be Held in Trust; Withholding........................................ 68 6.3. Protection of Trust Fund..................................... 69 6.4. Performance of Obligations................................... 70 6.5. Negative Covenants........................................... 70 6.6. No Other Powers.............................................. 71 6.7. Limitation of Suits.......................................... 71 6.8. Unconditional Rights of Owners to Receive Distributions...................................... 72 6.9. Rights and Remedies Cumulative............................... 72 6.10. Delay or Omission Not Waiver................................ 73 6.11. Control by Owners........................................... 73 ARTICLE VII ACCOUNTS, DISBURSEMENTS AND RELEASES...................... 74 7.1. Collection of Money.......................................... 74 7.2. Establishment of Accounts.................................... 74 vi Page ---- 7.3. The Certificate Insurance Policy............................. 74 7.4. Pre-Funding Account and Capitalized Interest Account............................................ 75 7.5. Flow of Funds................................................ 76 7.6. Investment of Accounts....................................... 79 7.7. Eligible Investments......................................... 80 7.8. Reports by Trustee........................................... 81 7.9. Additional Reports by Trustee................................ 84 ARTICLE VIII SERVICING AND ADMINISTRATION OF MORTGAGE LOANS.............................................................. 85 8.1. Master Servicer and Sub-Servicers............................ 85 8.2. Collection of Certain Mortgage Loan Payments........................................... 90 8.3. Sub-Servicing Agreements Between Master Servicer and Sub-Servicers......................... 90 8.4. Successor Sub-Servicers...................................... 90 8.5. Liability of Master Servicer................................. 91 8.6. No Contractual Relationship Between Sub- Servicer and Trustee or the Owners................. 91 8.7. Assumption or Termination of Sub-Servicing Agreement by Trustee............................... 91 8.8. Principal and Interest Account............................... 92 8.9. Servicing Advances........................................... 94 8.10. Purchase of Mortgage Loans.................................. 94 8.11. Maintenance of Insurance.................................... 94 8.12. Due-on-Sale Clauses; Assumption and Substitution Agreements............................ 96 8.13. Realization Upon Defaulted Mortgage Loans................... 97 8.14. Trustee to Cooperate; Release of Mortgage Files.............................................. 98 8.15. Servicing Compensation......................................100 8.16. Annual Statement as to Compliance...........................100 8.17. Annual Independent Certified Public Accountants' Reports...............................101 8.18. Access to Certain Documentation and Information Regarding the Mortgage Loans...........101 8.19. Assignment of Agreement.....................................101 8.20. Removal of Master Servicer; Resignation of Master Servicer....................................102 8.21. Inspections by Certificate Insurer; Errors and Omissions Insurance............................106 8.22. Merger, Conversion, Consolidation or Succession to Business of Master Servicer...........................................107 8.23. Notices of Material Events..................................107 ARTICLE IX vii Page ---- TERMINATION OF TRUST......................................108 9.1. Termination of Trust.........................................108 9.2. Termination Upon Option of Master Servicer...................108 9.3. Tax Treatment................................................109 9.4. Rapid Amortization Events....................................109 9.5. Additional Rights Upon the Occurrence of Certain Events.....................................111 9.6. Disposition of Proceeds......................................113 9.7. Netting of Amounts...........................................113 ARTICLE X THE TRUSTEE...............................................113 10.1. Certain Duties and Responsibilities.........................113 10.2. Removal of Trustee for Cause................................115 10.3. Certain Rights of the Trustee...............................116 10.4. Not Responsible for Recitals or Issuance of Certificates.......................................118 10.5. May Hold Certificates.......................................118 10.6. Money Held in Trust.........................................118 10.7. No Lien for Fees............................................118 10.8. Corporate Trustee Required; Eligibility.....................118 10.9. Resignation and Removal; Appointment of Successor..........................................119 10.10. Acceptance of Appointment by Successor Trustee............................................120 10.11. Merger, Conversion, Consolidation or Succession to Business of the Trustee..............121 10.12. Reporting; Withholding.....................................121 10.13. Liability of the Trustee...................................122 10.14. Appointment of Co-Trustee or Separate Trustee............................................122 ARTICLE XI MISCELLANEOUS.............................................124 11.1. Compliance Certificates and Opinions........................124 11.2. Form of Documents Delivered to the Trustee..................125 11.3. Acts of Owners..............................................126 11.4. Notices, etc. to Trustee....................................126 11.5. Notices and Reports to Owners; Waiver of Notices............................................127 11.6. Rules by Trustee and Originator.............................127 11.7. Successors and Assigns......................................127 11.8. Severability................................................127 11.9. Benefits of Agreement.......................................128 11.10. Legal Holidays.............................................128 11.11. Governing Law..............................................128 11.12. Counterparts...............................................128 11.13. Usury ...................................................128 11.14. Amendment..................................................129 viii Page ---- 11.15. Acceptance of Obligations..................................130 11.16. The Certificate Insurer....................................130 11.17. Maintenance of Records.....................................130 11.18. Notices ...................................................130 SCHEDULE I -- Schedules of Mortgage Loans EXHIBIT A-1 -- Form of Class A Certificate EXHIBIT A-2 -- Form of Originator Certificate EXHIBIT B -- Contents of Advanta Mortgage Files EXHIBIT C -- Form of Credit Line Agreement EXHIBIT D -- Form of Certificate Re: Mortgage Loans Prepaid in full After the Initial Cut-Off Date EXHIBIT E -- Form of Trustee's Receipt EXHIBIT F -- Form of Pool Certification EXHIBIT G -- Form of Delivery Order EXHIBIT H -- Power of Attorney EXHIBIT I -- Form of Notice for Certificate Insurance Policy EXHIBIT J -- Form of Monthly Report EXHIBIT K -- Form of Master Servicer's Trust Receipt EXHIBIT L -- Subsequent Transfer Agreement EXHIBIT M -- Form of Liquidation Report EXHIBIT N -- Form of Addition Notice EXHIBIT O -- Assignment ix POOLING AND SERVICING AGREEMENT, relating to ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1996-A, dated as of November 1, 1996, by and among ADVANTA MORTGAGE CONDUIT SERVICES, INC., a Delaware corporation, in its capacity as Sponsor of the Trust (the "Sponsor"), ADVANTA MORTGAGE CORP. USA, a Delaware corporation, in its capacity as master servicer (the "Master Servicer"), ADVANTA NATIONAL BANK USA, in its capacity as Originator (the "Originator"), and BANKERS TRUST COMPANY OF CALIFORNIA, N.A., a national banking association, in its capacity as trustee (the "Trustee"). WHEREAS, the Sponsor wishes to establish a trust, which provides for the allocation and sale of the beneficial interests therein and the maintenance and distribution of the trust estate; WHEREAS, the Master Servicer has agreed to service the Mortgage Loans, which constitute the principal assets of the trust estate; WHEREAS, all things necessary to make the Certificates, when executed and authenticated by the Trustee valid instruments, and to make this Agreement a valid agreement, in accordance with their and its terms, have been done; WHEREAS, Bankers Trust Company of California, N.A. is willing to serve in the capacity of Trustee hereunder; and WHEREAS, MBIA Insurance Corporation, Inc. (the "Certificate Insurer") is intended to be a third party beneficiary of this Agreement and is hereby recognized by the parties hereto to be a third-party beneficiary of this Agreement. NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the Sponsor, the Master Servicer, the Originator and the Trustee hereby agree as follows: x ARTICLE I DEFINITIONS; RULES OF CONSTRUCTION Section 1.1. Definitions. For all purposes of this Agreement, the following terms shall have the meanings set forth below, unless the context clearly indicates otherwise: "Accepted Servicing Practices" shall mean the Master Servicer's normal servicing practices in servicing and administering mortgage loans for its own account, which in general will conform to the mortgage servicing practices of prudent mortgage lending institutions which service for their own account mortgage loans of the same type as the Mortgage Loans in the jurisdictions in which the related Mortgaged Properties are located and will give due consideration to the Certificate Insurer's and the Certificateholders' reliance on the Master Servicer. "Accelerated Principal Payments": With respect to any Payment Date, a payment of Excess Cashflow received as a payment of principal by the Owners of the Class A Certificates, for the purpose of increasing the Overcollateralization Amount to the Specified Overcollateralization Amount applicable to such Payment Date; during the Revolving Period such Accelerated Principal Payments shall only occur if the amount then on deposit in the Revolving Account is in excess of $3,000,000. "Account": Any account established in accordance with Section 7.2 or 8.8 hereof. "Addition Notice": With respect to the transfer of Subsequent Mortgage Loans to the Trust pursuant to Section 3.8(b) of this Agreement, notice, which shall be given not later than five Business Days prior to the related Subsequent Transfer Date, of the Originator's designation of Subsequent Mortgage Loans to be sold to the Trust and the aggregate Principal Balance of such Subsequent Mortgage Loans. "Additional Balance": As to any Mortgage Loan and day, the aggregate amount of all Draws conveyed to the Trust pursuant to Section 3.5. "Additional Mortgage Loans": Subsequent Mortgage Loans assigned to the Trust in consideration of amounts released to the Originator pursuant to Section 7.5(b)(vii) hereof. 1 "Agreement": This Pooling and Servicing Agreement, as it may be amended from time to time, and including the Exhibits hereto. "Alternative Principal Payment": As to any Payment Date, the amount (but not less than zero) equal to Net Principal Collections for such Payment Date. "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. "Amortization Period": The Rapid Amortization Period, together with the Managed Amortization Period. "Amortized Overcollateralization Amount Requirement": As defined in the Insurance Agreement. "Appraised Value": As to any Mortgaged Property, the value established by a drive by inspection or a full appraisal of such Mortgaged Property in order to establish compliance with the underwriting criteria then in effect in connection with the application for the Mortgage Loan secured by such Mortgaged Property. "Assignment of Mortgage": With respect to each Mortgage Loan, an assignment of the Mortgage, notice of transfer or equivalent instrument, in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the recordation of the sale of the Mortgage to the Trustee for the benefit of the Owners. "Authorized Officer": With respect to any Person, any person who is authorized to act for such Person in matters relating to this Agreement, and whose action is binding upon such Person and, with respect to the Trustee, the Originator, the Master Servicer and the Sponsor, initially including those individuals whose names appear on the lists of Authorized Officers delivered on the Closing Day. "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 Trustee in its judgment with respect to Section 9.5. "Available Funds": As defined in Section 7.3(a) hereof. "Available Funds Shortfall": As defined in Section 7.3(b) hereof. 2 "Available Subsequent Mortgage Loans": With respect to any Payment Date, all Mortgage Loans delivered to the Trustee on all Subsequent Transfer Dates occurring during the calendar month in which such Payment Date occurs which meet all requirements applicable to Subsequent Mortgage Loans. "Billing Cycle": With respect to any Mortgage Loan and Remittance Period, the billing period specified in the related Credit Line Agreement and with respect to which amounts billed are received during such Remittance Period. "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 Trustee is located, are authorized or obligated by law or executive order to be closed. "Capitalized Interest Account": The Capitalized Interest Account established in accordance with Section 7.2 hereof and maintained by the Trustee. "Capitalized Interest Account Deposit": $308,475.73. "Capitalized Interest Amount": With respect to any Determination Date, the amount on deposit in the Capitalized Interest Account. "Capitalized Interest Requirement": As to any Payment Date occurring during the Pre-Funding Period and the Revolving Period, the difference, if any, between (x) the interest due on the Class A Certificates plus the Premium Amount on such Payment Date and (y) the sum of (i) one month's interest on the aggregate Principal Balances of all Mortgage Loans as of the close of business on the last day of the immediately preceding Remittance Period, calculated at the Class A Interest Rate plus the Premium Amount as of such Payment Date and (ii) any Pre-Funding Earnings to be transferred to the Certificate Account on such Payment Date pursuant to Section 7.4(d) hereof. "Capitalized Interest Revolving Period Amount": With respect to any Distribution Date which occurs during the Revolving Period but after the end of the Pre-Funding Period, the product of (x) one-twelfth of the Class A Interest Rate applicable to the following Distribution Date, (y) $3,000,000 and (z) the maximum number of months remaining in the Revolving Period. "Certificate": A Class A Certificate. 3 "Certificate Account": The Certificate Account established in accordance with Section 7.2 hereof and maintained by the Trustee. "Certificate Insurance Policy": The certificate guaranty insurance policy dated November 22, 1996, issued by the Certificate Insurer to the Trustee for the benefit of the Owners of the Certificates. "Certificate Insurer": MBIA Insurance Corporation, Inc. or any successor thereto, as issuer of the Insurance Policy. "Civil Relief Act": The Soldiers' and Sailors' Civil Relief Act of 1940, as amended. "Class A Certificate": Any Certificate designated as a "Class A Certificate" on the face thereof, in the form of Exhibit A-1 hereto. The Class A Certificates shall be issued with an initial aggregate Class A Principal Balance equal to the Original Class A Principal Balance therefor. "Class A Principal Balance": As of any time of determination, the Original Class A Principal Balance of the Class A Certificates less any amounts actually distributed theretofore as principal thereon to the Owners of the Class A Certificates on all prior Payment Dates. "Class A Formula Rate": For any Interest Accrual Period, the sum of (i) LIBOR and (ii) 0.23%. "Class A Interest Distribution Amount": With respect to any Payment Date, the product of (x) one-twelfth of the Class A Pass-Through Rate applicable to such Payment Date and (y) the Class A Principal Balance immediately prior to such Payment Date (based on a 360-day year and the actual number of days in the prior calendar month). "Class A Interest Rate": As to any Payment Date, the lesser of (i) the Class A Formula Rate and (ii) the Net Funds Cap Rate. "Closing Day": November 22, 1996. "Code": The Internal Revenue Code of 1986, as amended and any successor statute. "Combined Loan-to-Value Ratio": With respect to any Mortgage Loan as of any date, the percentage equivalent of a fraction, the numerator of which is the sum of (i) the Credit Limit and (ii) the outstanding principal balance as of the date of execution of the related Credit Line Agreement (or 4 as of any subsequent date, if any, as of which such outstanding principal balance may be determined in connection with an increase in the Credit Limit for such Mortgage Loan) of any mortgage loan or mortgage loans that are senior in priority to the Mortgage Loan and which is secured by the same Mortgaged Property and the denominator of which is the lesser of (i) the Appraised Value of the related Mortgaged Property as set forth in the Mortgage File on such date of execution or on such subsequent date, if any, and (ii) in the case of a Mortgaged Property purchased within one year of such date of execution, the purchase price thereof. "Credit Limit": As to any Mortgage Loan, the maximum principal balance permitted under the terms of the related Credit Line Agreement. "Credit Limit Utilization Rate": As to any Mortgage Loan, the percentage equivalent of a fraction the numerator of which is the Principal Balance for such Mortgage Loan and the denominator of which is the related Credit Limit. "Credit Line Agreement": With respect to any Mortgage Loan, the related home equity line of credit agreement and promissory note executed by the related Mortgagor and any amendment or modification thereof. "Cut-off Date": With respect to each Initial Mortgage Loan, the Initial Cut-Off Date. With respect to any Subsequent Mortgage Loan, the Subsequent Cut-Off Date related to such Subsequent Mortgage Loan. With respect to each Qualified Replacement Mortgage, the Replacement Cut-off Date related to such Qualified Replacement Mortgage. "Cut-Off Date Pool Balance": The aggregate Principal Balances of all the Mortgage Loans as of the related Cut-Off Date; as of the Initial Cut-Off Date, $38,501,016.94. "Cut-Off Date Principal Balance": With respect to any Mortgage Loan, the unpaid principal balance thereof as of the related Cut-Off Date. "Date-of-Payment Loans": Any Mortgage Loan as to which, pursuant to the Credit Line Agreement relating thereto, interest is computed and charged to the Mortgagor at the rate on the outstanding principal balance of such Credit Line Agreement based on the number of days elapsed between receipt of the Mortgagor's last payment through receipt of the Mortgagor's most current payment. "Debt Service Reduction": With respect to any Mortgage Loan, a reduction by a court of competent jurisdiction of the Minimum Monthly Payment due on such Mortgage Loan. 5 "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. "Deficiency Amount": For any Payment Date, any shortfalls in amounts available in the Certificate Account to pay, in full on such Payment Date, (i) the Class A Interest Distribution Amount (excluding any Net Funds Cap Carry-Forward Amounts, any Prepayment Interest Shortfalls and any Relief Act Shortfalls) and (ii) the Overcollateralization Deficit, plus, on the Final Scheduled Payment Date, any shortfall in amounts available in the Certificate Account to pay outstanding Class A Principal Balance. "Delinquent": A Mortgage Loan is "delinquent" if any payment due thereon is not made by the close of business on the day such payment is scheduled to be due. A Mortgage Loan is "30 days delinquent" if such payment has not been received by the close of business on the corresponding day of the month immediately succeeding the month in which such payment was due, or, if there is no such corresponding day (e.g., as when a 30-day month follows a 31-day month in which a payment was due on the 31st day of such month) then on the last day of such immediately succeeding month. Similarly for "60 days delinquent," "90 days delinquent" and so on. "Delivery Order": The delivery order in the form set forth as Exhibit G hereto and delivered by the Originator to the Trustee on the Closing Day pursuant to Section 4.1 hereof. "Depository": The Depository Trust Company, 7 Hanover Square, New York, New York 10004 and any successor Depository hereafter named. "Designated Depository Institution": With respect to the Principal and Interest Account, an institution whose deposits are insured by the Bank Insurance Fund or the Savings Association Insurance Fund of the FDIC, the long-term deposits of which shall be rated (x) A or better by S&P and (y) A2 or better by Moody's and in one of the two highest short-term rating categories, unless otherwise approved in writing by the Certificate 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 6 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 Certificate Insurer, Moody's and S&P and, in each case acting or designated by the Master Servicer as the depository institution for the Principal and Interest Account; provided, however, that any such institution or association shall have combined capital, surplus and undivided profits of at least $100,000,000. Notwithstanding the foregoing, the Principal and Interest Account may be held by an institution otherwise meeting the preceding requirements except that the only applicable rating requirement shall be that the unsecured and uncollateralized debt obligations thereof shall be rated Baa3 or better by Moody's if such institution has trust powers and the Principal and Interest Account is held by such institution in its trust capacity and not in its commercial capacity. "Determination Date": As to each Payment Date, the third Business Day next preceding such Payment Date or such earlier day as shall be agreed by the Certificate Insurer and Trustee. "Direct Participant" or "DTC Participant": Any broker-dealer, bank or other financial institution for which the Depository holds the Class A Certificates from time to time as a securities depository. "Document Delivery Requirements": The Originator's obligations to deliver certain legal documents, to prepare and record certain Mortgage assignments or to deliver certain opinions relating to Mortgage assignments, in each case with respect to the Mortgage Loans upon certain conditions as set forth in Section 3.5 hereof. "Draw": With respect to any Mortgage Loan, an additional borrowing by the Mortgagor subsequent to the related Cut-Off Date in accordance with the related Credit Line Agreement. "Draw Period": With respect to any Mortgage Loan, the period of time specified in the related Credit Line Agreement whereby a Mortgagor may make a Draw under the related Credit Line Agreement, not to exceed three years unless extended pursuant to such Credit Line Agreement. "Eligible Investments": Those investments so designated pursuant to Section 7.7 hereof. "Event of Default": Any event described in clauses (a) or (b) of Section 8.20 hereof. 7 "FDIC": The Federal Deposit Insurance Corporation, or any successor thereto. "FHLMC": The Federal Home Loan Mortgage Corporation, a corporate instrumentality of the United States created pursuant to the Emergency Home Finance Act of 1970, as amended, or any successor thereof. "Final Scheduled Payment Date": The Payment Date in December, 2021 whereby the Owners of the Class A Certificates shall be entitled to receive a payment of principal in an amount equal to the outstanding Class A Principal Balance. The Final Scheduled Payment Date is the date which is one year after the date which is the latest possible maturity date of a Mortgage Loan which amortizes according to its terms. "First Mortgage Loan": A Mortgage Loan which constitutes a first priority mortgage lien with respect to any Mortgaged Property. "Fixed Allocation Percentage": 98%. "Floating Allocation Percentage": The percentage equivalent of a fraction, the numerator of which shall be the Invested Amount as of such Payment Date and the denominator of which is the Trust Collateral Value as of such Payment Date. "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. "Highest Lawful Rate": As defined in Section 11.13. "Increased Senior Lien Limitation": As defined in Section 3.6(c). "Indemnification Agreement": The Indemnification Agreement dated as of November 22, 1996 among the Originator, the Certificate Insurer and the Underwriter. 8 "Indirect Participant" shall mean any financial institution for whom any Direct Participant holds an interest in the Class A Certificates. "Initial Cut-Off Date": With respect to each Initial Mortgage Loans, the opening of business on November 1, 1996. "Initial Mortgage Loans": Mortgage Loans delivered by the Originator to the Trust on the Closing Day. "Initial Premium": The initial premium payable by the Originator on behalf of the Trust to the Certificate Insurer in consideration of the delivery to the Trustee of the Certificate Insurance Policy. "Initial Specified Overcollateralization Amount": As defined in the Insurance Agreement. "Insurance Agreement": The Insurance Agreement dated as of November 22, 1996 among the Sponsor, the Originator, the Master Servicer, the Trustee and the Certificate Insurer, as it may be amended from time to time. "Insurance Policy": Any hazard, title or primary mortgage insurance policy relating to a Mortgage Loan. "Insurance Proceeds": Proceeds paid by any insurer (other than the Certificate 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 8.11(b), or the penultimate sentence of Section 8.11(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. "Insured Payment": (i) As of any Payment Date, any Deficiency Amount and (ii) any Preference Amount. "Interest Accrual Period": With respect to the Class A Certificates, the period commencing on the prior Payment Date (or on the Closing Date with respect to the December 26, 1996 Payment Date) and ending on the day immediately preceding such Payment Date. "Interest Determination Date": With respect to any Interest Accrual Period for the Class A Certificates (other than the initial Interest Accrual Period), the second 9 London Business Day preceding such first day of such Interest Accrual Period. "Interest Remittance Amount": As of any Remittance Date, the sum, without duplication, of (i) all interest collected by the Master Servicer during the related Remittance Period with respect to the Mortgage Loans, except that with respect to Prepaid Installments, interest shall be remitted in the related Remittance Period. "Invested Amount": The excess of (x) the Trust Collateral Value over (y) the Non-Subordinated Originator's Interest. "Late Payment Rate": For any Payment Date, the rate of interest, as it is publicly announced by Citibank, N.A. at its principal office in New York, New York as its prime rate (any change in such prime rate of interest to be effective on the date such change is announced by Citibank, N.A.) plus 2%. The Late Payment Rate shall be computed on the basis of a year of 365 days calculating the actual number of days elapsed. In no event shall the Late Payment Rate exceed the maximum rate permissible under any applicable law limiting interest rates. "LIBOR": With respect to any Interest Accrual Period for the Class A Certificates, the rate determined by the 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 Trustee), the rate will be the Reference Bank Rate. "LIBOR Business Day": Any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the State of New York or in the city of London, England are required or authorized by law to be closed. "Lifetime Rate Cap": With respect to each Mortgage Loan with respect to which the related Credit Line Agreement provides for a lifetime rate cap, the maximum Loan Rate permitted over the life of such Mortgage Loan under the terms of the related Credit Line Agreement, as set forth on Exhibit C hereto. "Liquidated Mortgage Loan": As defined in Section 8.13(b) hereof. A Mortgage Loan which is purchased 10 from the Trust pursuant to Section 3.3, 3.4, 3.6(b) or 8.10 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 8.9 with respect to the related Mortgage Loan. "Liquidation Proceeds": With respect to any Liquidated Mortgage Loan, any amounts (including the proceeds of any Insurance Policy but excluding any amounts drawn on the Certificate Insurance 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 set forth in Exhibit M. "Loan Purchase Price": With respect to any Mortgage Loan purchased from the Trust on a Remittance Date pursuant to Section 3.3, 3.4, 3.6(b) or 8.10 hereof, an amount equal to the Principal Balance of such Mortgage Loan as of the date of purchase, plus one month's interest on the outstanding Principal Balance thereof as of the beginning of the preceding Remittance Period computed at the Loan Rate, if any, together with, without duplication, the aggregate amount of (i) all delinquent interest, all Servicing Advances theretofore made with respect to such Mortgage Loan and not subsequently recovered from the related Mortgage Loan and (ii) any Reimbursement Amount relating to such Mortgage Loan. "Loan Rate": With respect to any Mortgage Loan and as of any day, the per annum rate of interest applicable under the related Credit Line Agreement to the calculation of interest for such day on the Principal Balance of such Mortgage Loan. "Loan Rate Cap": With respect to each Mortgage Loan, the lesser of (i) the Lifetime Rate Cap, if any, or (ii) the applicable state usury ceiling, if any. "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 the Payment Date after which the Revolving Period ends, and ending on the earlier to occur of (x) the November, 1999 Payment Date and (y) the Payment Date which immediately precedes the occurrence of a Rapid Amortization Event. 11 "Margin": With respect to each Mortgage Loan with an adjustable rate, the fixed percentage amount set forth in the related Credit Line Agreement which amount is added to Prime in accordance with the terms of the related Credit Line Agreement to determine, on each Interest Determination Date, the Coupon Rate for such Mortgage Loan, subject to any maximum. "Master Servicer": Advanta Mortgage Corp. USA, a Delaware corporation, and its permitted successors and assigns. "Master Servicer Affiliate": A Person (i) controlling, controlled by or under common control with the Master Servicer and (ii) which is qualified to service residential mortgage loans. "Master Servicer's Trust Receipt": The Master Servicer's trust receipt in the form set forth as Exhibit K hereto. "Maximum Principal Payment": With respect to any Payment Date, the Fixed Allocation Percentage of the Principal Collections relating to such Payment Date. "Maximum Step-Down Amount": As of any Payment Date, the excess of (i) the aggregate, cumulative amount of Overcollateralization Release Amounts for such current, and all prior, Payment Dates over (ii) the aggregate, cumulative amount of all Step-Down Amounts for all prior Payment Dates. "Minimum Monthly Payment": With respect to any Mortgage Loan and any month, the minimum amount required to be paid by the related Mortgagor in that month. "Minimum Originator's Interest": With respect to any date, an amount equal to 2% of the Trust Collateral Value. "Monthly Remittance Amount": As of any Remittance Date, the sum of (i) the Interest Remittance Amount for such Remittance Date and (ii) the Principal Remittance Amount for such Remittance Date. "Moody's": Moody's Investors Service, Inc. "Mortgage": The mortgage, deed of trust or other instrument creating a first or junior lien on an estate in fee simple interest in real property securing a Credit Line Agreement. "Mortgage Files": For each Mortgage Loan, the items listed as (a), (b), (c), (d), (e) and (f) on Exhibit B hereto. 12 "Mortgage Loan Schedule": A schedule of Mortgage Loans transferred to the Trust, attached hereto as Schedule II, as it may be further supplemented in connection with subsequent transfers of Subsequent Mortgage Loans. "Mortgage Loans": Such of the mortgage loans transferred and assigned to the Trust pursuant to Section 3.5(a) hereof, together with any Qualified Replacement Mortgages substituted therefor in accordance with this Agreement, as from time to time are held as a part of the Trust Fund, the Mortgage Loans originally so held being identified in the Schedule of Mortgage Loans. The term "Mortgage Loan" includes the terms "First Mortgage Loan" and "Second Mortgage Loan". The term "Mortgage Loan" includes any Mortgage Loan which is Delinquent, which relates to a foreclosure or which relates to a Mortgaged Property which is REO Property prior to such Mortgaged Property's disposition by the Trust. Any mortgage loan which, although intended by the parties hereto to have been, and which purportedly was, transferred and assigned to the Trust by the Originator, in fact was not transferred and assigned to the Trust for any reason whatsoever shall nevertheless be considered a "Mortgage Loan" for all purposes of this Agreement. The term "Mortgage Loan" includes the terms "Initial Mortgage Loan," and "Subsequent Mortgage Loan". "Mortgaged Property": The underlying property securing a Mortgage Loan. "Mortgagor": The obligor on a Credit Line Agreement. "Net Funds Cap Rate": For any Interest Accrual Period, the fraction, expressed as an annual percentage rate, the numerator of which is twelve times the interest due on the Mortgage Loans during the prior Remittance Period, net of the amount of Prepayment Interest Shortfalls, Relief Act Shortfalls, Servicing Fee, Trustee's Fee and Premium Amount for the related Remittance Period and the denominator of which is the Trust Collateral Value immediately prior to the related Payment Date less, commencing on the thirteenth Payment Date, 0.50%. "Net Funds Cap Carry-Forward Amount": In the event that, on any Payment Date, the Net Funds Cap Rate is less than the Class A Formula Rate (i.e., the Class A Pass-Through Rate equals the Net Funds Cap Rate), the excess of the amount of interest due based on the Class A Formula Rate, over the interest due based on the Net Funds Cap Rate, together with interest thereon at the then-applicable Class A Formula Rate. 13 "Net Liquidation Proceeds": As to any Liquidated Mortgage Loan, Liquidation Proceeds net of, without duplication, Liquidation Expenses and unreimbursed Servicing Advances and accrued and unpaid Servicing Fees through the date of liquidation relating to such Liquidated Mortgage Loan. In no event shall Net Liquidation Proceeds with respect to any Liquidated Mortgage Loan be less than zero. "Net Monthly Excess Cashflows": With respect to any Payment Date, the amount of Available Funds remaining after the allocations described in clauses (i) through (ix) of Section 7.5(b). "Net Principal Collections": With respect to any Payment Date, the excess of (x) Principal Collections with respect to the related Remittance Period over (y) the aggregate principal amount of all Additional Balances arising during such related Remittance Period; provided that in no event will Net Principal Collections be less than zero with respect to any Payment Date. "Nonrecoverable Advance" shall mean, with respect to any Mortgage Loan, any Servicing Advance previously made and not reimbursed pursuant to Section 8.9 which, in the good faith business judgment of the Master Servicer, as evidenced by an Officer's Certificate delivered to the Certificate Insurer and the Trustee, would not be ultimately recoverable. "Non-Subordinated Originator's Interest": As of any date of determination, that portion of the Originator's Interest which is not represented by the Specified Overcollateralization Amount as of such date. "O/C Mortgage Loans": Subsequent Mortgage Loans assigned to the Trust in consideration of and (x) a corresponding increase in the Originator's Interest and (y) amounts released to the Originator pursuant to Section 7.5(b)(x) hereof . "Officer's Certificate": A certificate signed by any Authorized Officer of any Person delivering such certificate and delivered to the Trustee. "Operative Documents": Collectively, this Agreement, the Subsequent Transfer Agreements, the Certificate Insurance Policy, the Certificates, the Indemnification Agreement and the Insurance Agreement. "Original Class A Principal Balance": $50,000,000. "Original Cut-Off Date Pool Balance": The Pool Balance calculated as of the Initial Cut-Off Date. 14 "Original Pre-Funded Amount": The amount deposited in the Pre-Funding Account on the Closing Day, from the proceeds of the sale of the Class A Certificates, which amount is $12,519,391.22. "Original Principal Amount": With respect to any particular Class A Certificate, an amount equal to the product of (i) the Percentage Interest of such Class A Certificate and (ii) the Original Class A Principal Balance. "Original Principal Balance": With respect to each Credit Line Agreement, the principal amount of such Credit Line Agreement or the mortgage note relating to a Senior Lien, as the case may be, on the date of origination thereof. "Originator": Advanta National Bank, USA. "Originator Certificate": Any certificate designated as an "Originator Certificate" on the face thereof, in the form of Exhibit A-2 hereto. "Originator's Current Amount": On any Payment Date the sum of (I) the product of (x) 100% minus the Floating Allocation Percentage for such Payment Date; (y) Interest Collections for such Payment Date and (z) a fraction equal to the Non-Subordinated Originator's Interest divided by the Originator's Interest plus (II) the product of (x) the difference between (i) during the Managed Amortization Period, the Net Principal Collections on the Mortgage Loans received during the related Remittance Period, and during the Rapid Amortization Period, the Principal Collections on the Mortgage Loans received during the related Remittance Period, and (ii) during the Managed Amortization Period, the lesser of the Alternative Principal Payment and the Maximum Principal Payment for such Payment Date, and during the Rapid Amortization Period, the Maximum Principal Payment for such Payment Date and (y) a fraction, equal to the Non-Subordinated Originator's Interest divided by the Originator's Interest. "Originator's Interest": As of any Payment Date, is the excess, if any, of (x) the Trust Collateral Value as of such Payment Date over (y) the Class A Principal Balance as of such Payment Date (after taking into account reductions therein on such Payment Date). "Outstanding": With respect to all Certificates, as of any date of determination, all such Certificates theretofore executed and delivered hereunder except: (i) Certificates theretofore cancelled by the Trustee or delivered to the Trustee for cancellation; 15 (ii) Certificates or portions thereof for which full and final payment money in the necessary amount has been theretofore deposited with the Trustee in trust for the Owners of such Certificates; (iii) Certificates in exchange for or in lieu of which other Certificates have been executed and delivered pursuant to this Agreement, unless proof satisfactory to the Trustee is presented that any such Certificates are held by a bona fide purchaser; and (iv) Certificates alleged to have been destroyed, lost or stolen for which replacement Certificates have been issued as provided for in Section 5.5 hereof. "Overcollateralization Amount": As of any Payment Date, the lesser of (x) the Originator's Interest as of such date and (y) the Specified Overcollateralization Amount for such Payment Date. "Overcollateralization Release Amount": With respect to any Payment Date on which the Originator's Interest is greater than the Specified Overcollateralization Amount, if the Specified Overcollateralization Amount is reduced, the corresponding increase in the Non-Subordinated Originator's Interest which shall be equal to the reduction in the Specified Overcollateralization Amount. "Overcollateralization Deficiency Amount": With respect to any Payment Date, the difference, if any, between (i) the Specified Overcollateralization Amount applicable to such Payment Date and (ii) the Overcollateralization Amount applicable to such Payment Date. "Overcollateralization Deficit": With respect to any Payment Date, the amount, if any, by which (i) the aggregate Class A Principal Balance, after taking into account the payment to the Owners of the Class A Certificates of all principal from sources other than the Certificate Insurance Policy on such Payment Date, exceeds (ii) the excess of (x) the Trust Collateral Value as of such Payment Date over (y) the Non-Subordinated Originator's Interest as of such Payment Date. "Owner": The Person in whose name a Certificate is registered in the Register, to the extent described in Section 5.6 other than the Master Servicer or any affiliate thereof. "Payment Date": Any date on which the Trustee is required to make distributions to the Owners, which shall be the 25th day of each month, commencing in the month following 16 the Closing Day or, if such day is not a Business Day, then on the succeeding Business Day. "Percentage Interest": As to any Class A Certificate, that percentage, expressed as a fraction, the numerator of which is the Class A Principal Balance of such Certificate as of the related Cut-Off Date and the denominator of which is the Original Class A Principal Balance of all Class A Certificates of the same Class; and as to any Originator Certificate, that Percentage Interest set forth on such Originator Certificate. "Person": Any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. "Pool Balance": With respect to any date, the Principal Balances of the Mortgage Loans as of such date. "Pool Certification": As defined in Exhibit F attached hereto. "Pool Factor": A seven-digit decimal which the Trustee shall compute monthly expressing the Class A Principal Balance as of each Payment Date (after giving effect to any distribution of principal on such Payment Date) as a proportion of the Original Class A Principal Balance. On the Closing Date, the Pool Factor will be 1.0000000. Thereafter, the Pool Factor shall decline to reflect reductions in the related Class A Principal Balance resulting from distributions of principal to the Class A Certificates. "Preference Amount": As defined in the Certificate Insurance Policy. "Pre-Funded Amount": With respect to any Determination Date, the amount on deposit in the Pre-Funding Account. "Pre-Funded Mortgage Loans": Subsequent Mortgage Loans assigned to the Trust in consideration of amounts released to the Originator from the Pre-Funding Account. "Pre-Funding Account": The Pre-Funding Account established in accordance with Section 7.2 hereof and maintained by the Trustee. "Pre-Funding Earnings": With respect to any Payment Date, the actual investment earnings then on deposit in the Pre-Funding Account. 17 "Pre-Funding Period": The period commencing on the Closing Day and ending on the earliest to occur of (i) the date on which the amount on deposit in the Pre-Funding Account (exclusive of any investment earnings) is less than $100,000, (ii) the date on which a Rapid Amortization Event occurs and (iii) the February 1997 Payment Date. "Pre-Funding Transfer Date": Any Subsequent Transfer Date on which Pre-Funded Mortgage Loans are assigned to the Trust. "Premium Amount": As to any Payment Date, the product of (x) one-twelfth of the Premium Percentage and (y) the Class A Principal Balance on such Payment Date (before taking into account any distributions of the Scheduled Principal Distribution Amount to be made on such Payment Date). "Premium Percentage": As defined in the Insurance Agreement. "Prepaid Installment": With respect to any Mortgage Loan, any installment of principal thereof and interest thereon received prior to the scheduled due date for such installment, intended by the Mortgagor as an early payment thereof and not as a Prepayment with respect to such Mortgage Loan. "Prepayment": Any payment of principal of a Mortgage Loan which is received by the Master Servicer in advance of the scheduled due date for the payment of such principal (other than the principal portion of any Prepaid Installment), and the proceeds of any Insurance Policy which are to be applied as a payment of principal on the related Mortgage Loan shall be deemed to be Prepayments for all purposes of this Agreement. "Prepayment Interest Shortfall": With respect to any Remittance Period, for each Mortgage Loan that was the subject during the related Remittance Period of a Prepayment, an amount equal to the excess, if any, of (i) 30 days' interest on the Principal Balance of such Mortgage Loan as of the first day of such Remittance Period at a per annum rate equal to the Loan Rate (or at such lower rate as may be in effect for such Mortgage Loan pursuant to application of the Civil Relief Act, any Deficient Valuation and/or any Debt Service Reduction) minus the Servicing Fee over (ii) the amount of interest actually remitted by the Mortgagor in connection with such Prepayment less the Servicing Fee for such Mortgage Loan in such month. "Preservation Expenses": Expenditures made by the Master Servicer or any Sub-Servicer in connection with a 18 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 8.8(a) hereof, or pursuant to any Sub-Servicing Agreement. "Principal Balance": As to any Mortgage Loan, other than a Liquidated Mortgage Loan, and as of any date, the related Cut-Off Date Principal Balance, plus (i) any Additional Balance in respect of such Mortgage Loan, minus (ii) all collections credited as principal against the Principal Balance of any such Mortgage Loan in accordance with the related Credit Line Agreement prior to such day. For purposes of this definition, a Liquidated Mortgage Loan shall be deemed to have a Principal Balance of zero as of the first day of the Remittance Period following the Remittance Period in which such Mortgage Loan becomes a Liquidated Mortgage Loan and at all times thereafter. "Principal Collections": As to any Payment Date, the sum of all payments by or on behalf of Mortgagors and any other amounts constituting principal (including, but not limited to, any portion of Insurance Proceeds or Net Liquidation Proceeds allocable to principal of the applicable Mortgage Loan, but excluding Foreclosure Profits) collected by the Master Servicer under the Mortgage Loans during the related Remittance Period. The terms of the related Credit Line Agreement shall determine the portion of each payment in respect of a Mortgage Loan that constitutes principal or interest. "Principal Remittance Amount": As of any Remittance Date, the sum, without duplication, of (i) the principal actually collected by the Master Servicer with respect to Mortgage Loans during the related Remittance Period, (ii) the Principal Balance of each such Mortgage Loan that either was repurchased by the Originator or purchased by the Master Servicer on such Remittance Date, to the extent such Principal Balance was actually deposited in the Principal and Interest Account, (iii) any Substitution Amounts delivered by the Originator in connection with a substitution of a Mortgage Loan, to the extent such Substitution Amounts were actually deposited in the Principal and Interest Account on such Remittance Date, and (iv) all Net Liquidation Proceeds actually collected by the Master Servicer with respect to such 19 Mortgage Loans during the related Remittance Period (to the extent such Liquidation Proceeds related to principal). "Projected Net Monthly Excess Cashflow": As of any date of calculation, three times the Net Monthly Excess Cashflow as calculated on the Payment Date immediately preceding such date of calculation. "Prospectus": That certain Prospectus dated September 6, 1996, naming Advanta Mortgage Conduit Services, Inc. and Advanta Mortgage Corp. USA as registrants and describing certain mortgage loan asset-backed securities to be issued from time to time as described in related Prospectus Supplements. "Prospectus Supplement": That certain Prospectus Supplement dated November 15, 1996, describing the Class A Certificates issued by the Trust. "Qualified Replacement Mortgage": A Mortgage Loan substituted for another pursuant to Section 3.3, 3.4 or 3.6(b) hereof, which (i) bears a variable rate of interest, (ii) has a Loan Rate at least equal to the Loan Rate of the Mortgage Loan being replaced, (which shall mean a Mortgage Loan having the same interest rate index, a margin over such index and a maximum interest rate at least equal to those applicable to the Mortgage Loan being replaced), (iii) is of the same or better property type and the same or better occupancy status as the replaced Mortgage Loan, (iv) shall be of the same or better credit quality classification (determined in accordance with the Originators' credit underwriting guidelines) as the Mortgage Loan being replaced, (v) shall mature no later than the Payment Date occurring in December 2020, (vi) has a Combined Loan-to-Value Ratio as of the Initial Cut-Off Date or Subsequent Cut-Off Date, as applicable, no higher than the Combined Loan-to-Value Ratio of the replaced Mortgage Loan at such time, (vii) has a Principal Balance as of the related Replacement Cut-Off Date equal to or less than the Principal Balance of the replaced Mortgage Loan as of such Replacement Cut-Off Date, (viii) is in the same lien position or better. Except with respect to clause (vi) above, in the event that one or more mortgage loans are proposed to be substituted for one or more mortgage loans, the Certificate Insurer may allow the foregoing tests to be met on a weighted average basis or other aggregate basis acceptable to the Certificate Insurer, as evidenced by a written approval delivered to the Trustee by the Certificate Insurer. "Rapid Amortization Commencement Date": The earlier of (i) the Payment Date in December, 1999, and (ii) the Payment Date next succeeding the Remittance Period in which a Rapid Amortization Event is deemed to occur pursuant to Section 9.4. 20 "Rapid Amortization Event": As defined in Section 9.4. "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. If a Rapid Amortization Event occurs during the Revolving Period, the Rapid Amortization Period will commence immediately, and the Class A Certificates shall never have a Managed Amortization Period. "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. "Reference Banks": Bankers Trust Company, Barclay's Bank PLC, The Bank of Tokyo and National Westminster Bank PLC; provided that if any of the foregoing banks are not suitable to serve as a Reference Bank, then any leading banks selected by the Trustee which are engaged in transactions in Eurodollar deposits in the international Eurocurrency market (i) with an established place of business in London, (ii) not controlling, under the control of or under common control with the Originator or any affiliate thereof, (iii) whose quotations appear on the Reuters Screen LIBO Page on the relevant Interest Determination Date and (iv) which have been designated as such by the Trustee. "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 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 Certificates then outstanding. The 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 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 21 approximately equal to the principal amount of the Class A Certificates then outstanding. If no such quotations can be obtained, the rate will be LIBOR for the prior Payment Date. "Register": The register maintained by the Trustee in accordance with Section 5.4 hereof, in which the names of the Owners are set forth. "Registrar": The Trustee, acting in its capacity as Trustee appointed pursuant to Section 5.4 hereof, or any duly appointed and eligible successor thereto. "Registration Statement": The Registration Statement filed by the Sponsor with the Securities and Exchange Commission, including all amendments thereto and including the Prospectus and the Prospectus Supplement relating to the Class A Certificates constituting a part thereof. "Reimbursement Amount": As of any Payment Date, the sum of (x)(i) all payments made pursuant to the Certificate Insurance Policy previously received by the Trustee and all Preference Amounts previously paid to the Trustee by the Certificate Insurer and in each case not previously repaid to the Certificate Insurer pursuant to Section 7.5(b)(ix) hereof plus (ii) interest accrued on each such payment made pursuant to the Certificate Insurance Policy not previously repaid calculated at the Late Payment Rate from the date the Trustee received the related payment made pursuant to the Certificate Insurance Policy and (y)(i) any amounts then due and owing to the Certificate Insurer under the Insurance Agreement plus (ii) interest on such amounts at the Late Payment Rate. The Certificate Insurer shall notify the Trustee and the Originator of the amount of any Reimbursement Amount. "Relief Act Shortfall": With respect to any Remittance Period, for any Mortgage Loan as to which there has been a reduction in the amount of interest collectible thereon for the most recently ended Remittance Period as a result of the application of the Civil Relief Act, the amount, if any, by which (i) interest collectible on such Mortgage Loan during the most recently ended calendar month is less than (ii) the sum of (a) one month's interest on the Principal Balance of such Mortgage Loan at the rate equal to the sum of the Class A Interest Rate, the rate at which the Trustee's Fee is calculated and the Premium Percentage, plus (b) the aggregate Servicing Fee for such Mortgage Loan payable to the Master Servicer in such calendar month. "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. 22 "Remittance Date": Any date on which the Master Servicer is required to remit monies on deposit in the Principal and Interest Account to the Trustee, which shall be 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 Day occurs. "Remittance Period": As to any Payment Date, the calendar month preceding the month of such Payment Date. "Replacement Cut-Off Date": With respect to any Qualified Replacement Mortgage, the first day of the calendar month in which such Qualified Replacement Mortgage is conveyed to the Trust. "Representation Letter" shall mean letters to, or agreements with, the Depository to effectuate a book entry system with respect to the Class A Certificates registered in the Register under the nominee name of the Depository. "Revolving Account": The Revolving Account established in accordance with Section 7.2 hereof and maintained by the Trustee. "Revolving Period": The period commencing on the Closing Day and ending on the earliest to occur of (i) the Payment Date in November, 1997, (ii) the Payment Date prior to the commencement of the Rapid Amortization Period and (iii) the first Payment Date on which Additional Mortgage Loans having an aggregate, cumulative Principal Balance (calculated as of the related subsequent Transfer Dates) equal to $10,204,081.63 have been assigned to the Trust. "S&P": Standard & Poor's Rating Group, a division of The McGraw Hill Companies. "Schedule of Mortgage Loans": The Schedule of Mortgage Loans, attached hereto as Schedule II, as it may be further supplemented in connection with Subsequent Transfers. "Scheduled Principal Distribution Amount": On any Payment Date during the Managed Amortization Period, the excess (but in no event less than zero) of (x) the lesser of (i) the Maximum Principal Payment and (ii) the Alternative Principal Payment over (y) the Step-Down Amount, if any, with respect to such Payment Date. Beginning with the first Payment Date in the Rapid Amortization Period, the excess of (x) the Maximum Principal Payment over (y) the Step-Down Amount, if any, with respect to such Payment Date. "Second Mortgage Loan": A Mortgage Loan which constitutes a second priority mortgage lien with respect to the related Mortgaged Property. 23 "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; and with respect to any Third Mortgage Loan, the mortgage loans relating to the corresponding Mortgaged Property having first and second priority liens. "Servicing Advance": As defined in Section 8.9 and Section 8.13 hereof. "Servicing Fee": With respect to any Payment Date, the product of (i) one-twelfth of the Servicing Fee Rate and (ii) the aggregate Principal Balance of the Mortgage Loans on the first day of the Remittance Period preceding such Payment Date (or at the Cut-Off Date with respect to the first Payment Date). "Servicing Fee Rate": 0.50% per annum. "Specified Overcollateralization Amount": As defined in the Insurance Agreement. "Sponsor": Advanta Mortgage Conduit Services, Inc., a Delaware Corporation. "Step-Down Amount": As of any Payment Date, the lesser of (x) the Maximum Step-Down Amount for such Payment Date and (y) the Maximum Principal Payment or the Alternative Principal Payment, as applicable to such Payment Date; provided, that for any Payment Date on which the Specified Overcollateralization Amount exceeds the Overcollateralization Amount, the Step-Down Amount shall be reduced (but not below zero) by the amount of any such excess. "Subsequent Cut-Off Date": With respect to any Subsequent Mortgage Loan, the opening of business on the first day of the calendar month in which the related Subsequent Transfer Date occurs. "Subsequent Mortgage Loans": The Mortgage Loans assigned to the Trust pursuant to Section 3.8 of the Agreement, which shall be listed on the Schedule of Mortgage Loans attached to the Subsequent Transfer Agreement. The term "Subsequent Mortgage Loan" includes the terms "Pre-Funded Mortgage Loan", "Additional Mortgage Loan" and "O/C Mortgage Loan". "Subsequent Transfer Agreement": Each Subsequent Transfer Agreement dated as of a Subsequent Transfer Date executed by the Trustee and the Originator substantially in 24 the form of Exhibit L hereto, by which Subsequent Mortgage Loans are assigned to the Trust. "Subsequent Transfer Date": The date specified in each Subsequent Transfer Agreement, which must, with respect to any Payment Date, be a date occurring during the calendar month in which such Payment Date occurs, and on or prior to the Remittance Date occurring in such month. "Substitution Amount": In connection with the delivery of any Qualified Replacement Mortgage, if the outstanding principal amount of such Qualified Replacement Mortgage as of the applicable Replacement Cut-Off Date is less than the Principal Balance of the Mortgage Loan being replaced as of such Replacement Cut-Off Date, an amount equal to such difference together with accrued and unpaid interest on such amount calculated at the Loan Rate net of the Servicing Fee, if any, of the Mortgage Loan being replaced. "Sub-Servicer": Any Person with whom the Master Servicer has entered into a Sub-Servicing Agreement and who satisfies any requirements set forth in Section 8.3 hereof in respect of the qualification of a Sub-Servicer. "Sub-Servicing Agreement": The written contract between the Master Servicer and any Sub-Servicer relating to the servicing and/or administration of certain Mortgage Loans as permitted by Section 8.3. "Telerate Screen Page 3750": The display designated as page 3750 on the Telerate Service (or such other page as may replace page 3750 on that service for the purpose of displaying London interbank offered rates of major banks). "Termination Fees": With respect to Mortgage Loans which prepay in full or in part and are secured by Mortgaged Properties in certain jurisdictions, an account termination fee generally not exceeding $500 may be charged by the Master Servicer and retained as additional servicing compensation pursuant to Section 8.15. 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. "Transaction Documents": Collectively this Agreement, the Insurance Agreement, the Indemnification Agreement, the Underwriting Agreement relating to the Class A Certificates, any Sub-Servicing Agreement, any Subsequent Transfer Agreement, the Registration Statement relating to the Class A Certificates. "Transfer Date": As defined in Section 3.9 herein. 25 "Transfer Notice Date": As defined in Section 3.9 herein. "Trust": Advanta Revolving Home Equity Loan Trust 1996-A, the trust created under this Agreement. "Trust Collateral Value": As of any Payment Date, the sum of (i) the Pool Balance at the end of the prior calendar month, (ii) the aggregate Principal Balances as of the related Cut-Off Dates of all Subsequent Mortgage Loans previously assigned to the Trust during the calendar month in which such Payment Date occurs and (iii) the amounts, if any, on deposit in the Pre-Funding Account and the Revolving Account at the close of business on such Payment Date. "Trust Fund": Collectively, all money, instruments and other property, to the extent such money, instruments and other property are subject or intended to be held in trust, and in the subtrusts, for the benefit of the Owners and the Certificate Insurer, including all proceeds thereof including, without limitation, (i) the Initial Mortgage Loans, Qualified Replacement Mortgages and Subsequent Mortgage Loans, (ii) such amounts, including Eligible Investments, as from time to time may be held in all Accounts (except as otherwise provided herein), (iii) any Mortgaged Property, the ownership of which has been effected on behalf of the Trust as a result of foreclosure or acceptance by the Master Servicer or any Sub-Servicer of a deed in lieu of foreclosure and that has not been withdrawn from the Trust, (iv) any Insurance Policies relating to the Mortgage Loans and any rights of the Trust and the Originator under any Insurance Policies, (v) Net Liquidation Proceeds with respect to any Liquidated Mortgage Loan, (vi) the Certificate Insurance Policy, (vii) such amounts held in the Capitalized Interest Account, and (viii) such amounts held in the Pre-Funding Account, the Principal and Interest Account, the Revolving Account, and the Certificate Account. "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 92714, not in its individual capacity but solely as Trustee under this Agreement, and any successor hereunder. "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. "Underwriter": Lehman Brothers Inc. Section 1.2. Use of Words and Phrases. "Herein", "hereby", "hereunder", "hereof", "hereinbefore", "hereinafter" 26 and other equivalent words refer to this Agreement as a whole and not solely to the particular section of this Agreement in which any such word is used. The definitions set forth in Section 1.1 hereof include both the singular and the plural. Whenever used in this Agreement, any pronoun shall be deemed to include both singular and plural and to cover all genders. Section 1.3. Captions; Table of Contents. The captions or headings in this Agreement and the Table of Contents are for convenience only and in no way define, limit or describe the scope and intent of any provisions of this Agreement. Section 1.4. Opinions. Each opinion with respect to the validity, binding nature and enforceability of documents or Certificates may be qualified to the extent that the same may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and by general principles of equity (whether considered in a proceeding or action in equity or at law) and may state that no opinion is expressed on the availability of the remedy of specific enforcement, injunctive relief or any other equitable remedy. Any opinion required to be furnished by any Person hereunder must be delivered by counsel upon whose opinion the addressee of such opinion may reasonably rely, and such opinion may state that it is given in reasonable reliance upon an opinion of another, a copy of which must be attached, concerning the laws of a foreign jurisdiction. ARTICLE II ESTABLISHMENT AND ORGANIZATION OF THE TRUST Section 2.1. Establishment of the Trust. The parties hereto do hereby create and establish, pursuant to the laws of the State of New York and this Agreement, the Trust, which, for convenience, shall be known as "Advanta Revolving Home Equity Loan Trust 1996-A". Section 2.2. Office. The office of the Trust shall be in care of the Trustee, addressed to Bankers Trust Company of California, N.A., 3 Park Plaza, 16th Floor, Irvine, California 92614, a national banking association, or at such other address as the Trustee may designate by notice to the Originator, the Master Servicer, the Sponsor, the Owners and to the Certificate Insurer. Section 2.3. Purposes and Powers. The purpose of the Trust is to engage in the following activities, and only such activities: (i) the issuance of the Certificates and the acquiring, owning and holding of Mortgage Loans and the Trust 27 Fund in connection therewith; (ii) activities that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith, including the investment of monies in accordance with this Agreement; and (iii) such other activities as may be required in connection with conservation of the Trust Fund and distributions to the Owners. Section 2.4. Appointment of the Trustee; Declaration of Trust. The Sponsor hereby appoints the Trustee as trustee of the Trust effective as of the Closing Day, to have all the rights, powers and duties set forth herein. The Trustee hereby acknowledges and accepts such appointment, represents and warrants its eligibility as of the Closing Day to serve as Trustee pursuant to Section 10.8 hereof and declares that it will hold the Trust Fund in trust upon and subject to the conditions set forth herein for the benefit of the Owners and the Certificate Insurer. Section 2.5. Expenses of the Trust. The expenses of the Trust, including the reasonable expenses of the Trustee, that have been reviewed and approved by the Sponsor (which approval shall not be unreasonably withheld), shall be paid by the Sponsor to the Trustee or to such other Person to whom such amounts may be due. Failure by the Sponsor to pay any such fees or expenses shall not relieve the Trustee of its obligations hereunder. The Trustee hereby covenants with the Owners that every material contract or other material agreement entered into by the Trustee on behalf of the Trust shall expressly state therein that no Owner shall be personally liable in connection with such contract or agreement. Section 2.6. Ownership of the Trust. On the Closing Day the ownership interests in the Trust and the subtrusts shall be transferred as set forth in Section 4.2 hereof, such transfer to be evidenced by sale of the Certificates as described therein. Thereafter, transfer of any ownership interest shall be governed by Sections 5.4 and 5.8 hereof. Section 2.7. Situs of the Trust. It is the intention of the parties hereto that the Trust constitute a trust under the laws of the State of New York. The Trust will be created in, and all Accounts maintained by the Trustee on behalf of the Trust will be located in, the State of New York. The Trust will not have any employees and will not have any real or personal property located in any state other than in the State of New York and payments will be received by the Trust only in the State of New York and payments from the Trust will be made only from the State of New York. The Trust's only office will be at the office of the Trustee as set forth in Section 2.2 hereof. 28 ARTICLE III REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SPONSOR, THE ORIGINATOR AND THE MASTER SERVICER Section 3.1. Representations and Warranties of the Sponsor and the Originator. The Sponsor and the Originator each hereby represents, warrants and covenants to the Trustee, the Master Servicer, the Certificate Insurer and to the Owners as of the Closing Day that: (a) The Sponsor and the Originator are corporations duly organized, validly existing and in good standing under the laws of the State of Delaware and are in good standing each 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 and the Originator have 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 and the Originator are a party by the Sponsor and the Originator 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 the Originator and will not violate the Sponsor's or the Originator's Articles of Incorporation or Bylaws or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any material contract, agreement or other instrument to which the Sponsor or the Originator is a party or by which the Sponsor or the Originator is bound, or violate any statute or any order, rule or regulation of any court, governmental agency or body or other tribunal having jurisdiction over the Sponsor or the Originator or any of its respective properties. (c) This Agreement and the other Operative Documents to which the Sponsor or the Originator is a party, assuming due authorization, execution and delivery by the other parties hereto and thereto, each constitutes a valid, legal and binding obligation of the Sponsor and the Originator, respectively, enforceable against it in 29 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 and the Originator are not in default with respect to any agreement, 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 the Originator or its respective 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 and the Originator's knowledge, threatened against the Sponsor or the Originator 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 the Originator or its respective 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 or the Originator contains any untrue statement of a material fact or omits to state any material fact necessary to make the certificate, statement or report not misleading. (g) The statements contained in the Registration Statement which describe the Sponsor, the Originator or matters or activities for which the Sponsor or the Originator is responsible in accordance with the Operative Documents or which are attributed to the Sponsor or the Originator 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 the Originator 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 or the Originator not misleading. To the best of the Sponsor's and the 30 Originator's knowledge and belief, the Registration Statement does not contain any untrue statement of a material fact required to be stated therein or omit to state any material fact required to be stated therein or necessary to make the statements contained therein not misleading. (h) All actions, approvals, consents, waivers, exemptions, variances, franchises, orders, permits, authorizations, rights and licenses required to be taken, given or obtained, as the case may be, by or from any federal, state or other governmental authority or agency (other than any such actions, approvals, etc. under any state securities laws, real estate syndication or "Blue Sky" statutes, as to which the Sponsor and the Originator make no such representation or warranty), that are necessary or advisable in connection with the purchase and sale of the Certificates and the execution and delivery by the Sponsor and the Originator 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 Originator and the performance by the Sponsor and the Originator of its respective obligations under this Agreement and such of the other Operative Documents to which it is a party. (i) The transactions contemplated by this Agreement are in the ordinary course of business of the Sponsor and the Originator. (j) The Originator received fair consideration and reasonably equivalent value in exchange for the sale of the interests in the Mortgage Loans evidenced by the Certificates. (k) The Originator did not sell any interest in any Mortgage Loan evidenced by the Certificates with any intent to hinder, delay or defraud any of its respective creditors. (l) The Originator is solvent and the Originator will not be rendered insolvent as a result of the sale of the Mortgage Loans to the Trust or the sale of the Certificates. 31 (m) Prior to May 20, 1996, the Originator conducted business under the name of Colonial National Bank USA. On May 20, 1996 the Originator changed its corporate name to Advanta National Bank USA and has operated under such name since such date. It is understood and agreed that the representations and warranties set forth in this Section 3.1 shall survive delivery of the Mortgage Loans to the Trustee. Section 3.2. Representations and Warranties of the Master Servicer. The Master Servicer hereby represents, warrants and covenants to the Trustee, the Sponsor, the Certificate Insurer and to the Owners as of the Closing Day that: (a) The Master Servicer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, is, and each Sub-Servicer is, in compliance with the laws of each state in which any 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 and each Sub-Servicer has all requisite corporate power and authority to own and operate its properties, to carry out its business as presently conducted and as proposed to be conducted and to enter into and discharge its obligations under this Agreement and the other Operative Documents to which it is a party. The Master Servicer has, on a consolidated basis with its parent, AMHC, equity of at least $5,000,000, as determined in accordance with generally accepted accounting principles. (b) The execution and delivery of this Agreement by the Master Servicer and its performance and compliance with the terms of this Agreement and the other Operative Documents to which it is a party have been duly authorized by all necessary corporate action on the part of the Master Servicer and will not violate the Master Servicer's Articles of Incorporation or Bylaws or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or result in the breach of, any material contract, agreement or other instrument to which the Master Servicer is a party or by which the Master Servicer is bound or violate any statute or any order, rule or regulation of any court, governmental agency or body or other tribunal having jurisdiction over the Master Servicer or any of its properties. 32 (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 material agreement, any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency, which might have consequences that would materially and adversely affect the condition (financial or other) or operations of the Master Servicer or its properties or might have consequences that would materially and adversely affect its performance hereunder and under the other Operative Documents to which the Master Servicer is a party. (e) No litigation is pending or, to the best of the Master Servicer's knowledge, threatened against the Master Servicer which litigation might have consequences that would prohibit its entering into this Agreement or any other Operative Document to which it is a party or that would materially and adversely affect the condition (financial or otherwise) or operations of the Master Servicer or its properties or might have consequences that would materially and adversely affect its performance hereunder and under the other Operative Documents to which the Master Servicer is a party. (f) No certificate of an officer, statement furnished in writing or report delivered pursuant to the terms hereof by the Master Servicer contains any untrue statement of a material fact or omits to state any material fact necessary to make the certificate, statement or report not misleading. (g) The statements contained in the Registration Statement which describe the Master Servicer or matters or activities for which the Master Servicer is responsible in accordance with the Operative Documents or which are attributed to the Master Servicer therein are true and correct in all material respects, and the Registration Statement does not contain any untrue statement of a material fact with respect to the Master Servicer or omit to state a material fact required to be 33 stated therein or necessary to make the statements contained therein with respect to the Master Servicer not misleading. To the best of the Master Servicer's knowledge and belief, the Registration Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements contained therein not misleading. (h) 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. (i) All actions, approvals, consents, waivers, exemptions, variances, franchises, orders, permits, authorizations, rights and licenses required to be taken, given or obtained, as the case may be, by or from any federal, state or other governmental authority or agency (other than any such actions, approvals, etc. under any state securities laws, real estate syndication or "Blue Sky" statutes, as to which the Master Servicer makes no such representation or warranty), that are necessary or advisable in connection with the execution and delivery by the Master Servicer of the Operative Documents to which it is a party, have been duly taken, given or obtained, as the case may be, are in full force and effect on the date hereof, are not subject to any pending proceedings or appeals (administrative, judicial or otherwise) and either the time within which any appeal therefrom may be taken or review thereof may be obtained has expired or no review thereof may be obtained or appeal therefrom taken, and are adequate to authorize the consummation of the transactions contemplated by this Agreement and the other Operative Documents on the part of the Master Servicer and the performance by the Master Servicer of its obligations under this Agreement and such of the other Operative Documents to which it is a party. (j) The collection practices used by the Master Servicer with respect to the Mortgage Loans directly serviced by it have been, in all material respects, legal, proper, prudent and customary in the mortgage loan servicing business. (k) The transactions contemplated by this Agreement are in the ordinary course of business of the Master Servicer. 34 (l) The terms of each existing Sub-Servicing Agreement and each designated Sub-Servicer are acceptable to the Master Servicer and any new Sub-Servicing Agreements or Sub-Servicers will comply with the provisions of Section 8.3. It is understood and agreed that the representations and warranties set forth in this Section 3.2 shall survive delivery of the Mortgage Loans to the Trustee. Upon discovery by any of the Originator, the Master Servicer, the Sponsor, any Sub-Servicer, the Certificate Insurer or the Trustee of a breach of any of the representations and warranties set forth in this Section 3.2 which materially and adversely affects the interests of the Owners or of the Certificate Insurer, the party discovering such breach shall give prompt written notice to the other parties. Within 30 days of its discovery or its receipt of notice of breach, the Master Servicer shall cure such breach in all material respects and, upon the Master Servicer's continued failure to cure such breach, may thereafter be removed by the Trustee or the Certificate Insurer pursuant to Section 8.20 hereof; provided, however, that if the Master Servicer can demonstrate to the reasonable satisfaction of the Certificate Insurer that it is diligently pursuing remedial action, then the cure period may be extended with the written approval of the Certificate Insurer. Section 3.3. Representations and Warranties of the Originator with Respect to the Mortgage Loans; Retransfer of Certain Mortgage Loans. (a) The Originator makes the following representations and warranties as to the Mortgage Loans on which the Trustee relies in accepting the Mortgage Loans in trust and executing and authenticating the Certificates and on which the Certificate Insurer relies in issuing the Certificate Insurance Policy. Such representations and warranties speak as of the Closing Day with respect to the Initial Mortgage Loans, and as of the related Subsequent Transfer Date with respect to any Subsequent Mortgage Loan (unless otherwise specified), but shall in each case survive the sale, transfer, and assignment of the Mortgage Loans to the Trustee: (i) All of the original or certified documentation set forth in Section 3.5 (including all material documents related thereto) with respect to each Initial Mortgage Loan has been or will be delivered to the Trustee on the Closing Day or, with respect to any Subsequent Mortgage Loans, on the related Subsequent Transfer Date, or as otherwise provided in Section 3.5. Each of the documents and instruments specified to be 35 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 Day with respect to the Initial Mortgage Loans and the related Subsequent Transfer Date with respect to any Subsequent Mortgage Loan (unless otherwise specified), and the applicable Transfer Date with respect to any Qualified Replacement Mortgage, this Agreement constitutes a valid transfer and assignment to the Trust of all right, title and interest of the Trust in and to the related Cut-Off Date Principal Balances with respect to the applicable Mortgage Loans, all monies due or to become due with respect thereto (excluding payments in respect of accrued interest due prior to the related Cut-Off Date), and all proceeds of such related Cut-Off Date Principal Balances with respect to the Mortgage Loans and such funds as are from time to time deposited in the Principal and Interest Account (excluding any investment earnings thereon) and all other property specified in the definition of "Mortgage Loan" as being part of the corpus of the Trust conveyed to the Trust by the Originator, and upon payment for the Additional Balances, will constitute a valid transfer and assignment to the Trustee of all right, title and interest of the Originator in and to the Additional Balances, all monies due or to become due with respect thereto, and all proceeds of such Additional Balances and all other property specified in the definition of "Mortgage Loan" relating to the Additional Balances. In addition, if this Agreement is not deemed to be a valid transfer and assignment to the 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 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 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; 36 (iv) As of the Closing Day with respect to the Initial Mortgage Loans, the related Subsequent Transfer Date with respect to any Subsequent Mortgage Loan (unless otherwise specified) and the applicable Transfer Date with respect to any Qualified Replacement Mortgage and as of the date any Additional Balance is created, the information set forth in the Mortgage Loan Schedule for such Mortgage Loans is true and correct in all material respects; (v) As of the Closing Day and any Subsequent Transfer Date, no more than 1.0% of the related Cut-Off Date Pool Balance of the Mortgage Loans is secured by Mortgaged Properties located within any single zip code area. None of the Mortgage Loans consists of Date-of-Payment Loans; (vi) Each Mortgage Loan conforms, and all such Mortgage Loans in the aggregate conform, in all material respects to the description thereof set forth in the Registration Statement; (vii) 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; (viii) The Mortgages and Credit Line Agreements have not been assigned or pledged, and the Originator is the sole owner and holder of the Mortgages and Credit Line Agreements free and clear of any and all liens, claims, encumbrances, participation interests, equities, pledges, charges or security interests of any nature, and has full right and authority, under all governmental and regulatory bodies having jurisdiction over the ownership of the applicable Mortgage Loan, to sell, assign or transfer the same; (ix) As of the Closing Day with respect to the Initial Mortgage Loans, the Subsequent Transfer Date with respect to the Subsequent Mortgage Loans and the applicable Transfer Date with respect to any Qualified Replacement Mortgage, there is no valid offset, defense or counterclaim of any obligor under any Credit Line Agreement or Mortgage. Neither the operation of any of the terms of each Credit Line Agreement and each Mortgage nor the exercise of any right thereunder will render either the Credit Line Agreement or the Mortgage unenforceable, in whole or in part, nor subject to any right of rescission, set-off, claim, counterclaim or defense, including, without limitation, the defense of usury and no such right of rescission, set-off, 37 counterclaim or defense has been asserted with respect thereto; (x) No Minimum Monthly Payment is more than 89 days delinquent (measured on a contractual basis); and with respect to the Initial Mortgage Loans no more than 1.27% (by Initial Cut-Off Date Pool Balance) were 30-59 days delinquent (measured on a contractual basis) and no more than 0.15% (by Initial Cut-Off Date Pool Balance) were 60-89 days delinquent (measured on a contractual basis). No Subsequent Mortgage Loan will be more than 30 days delinquent; (xi) As of the related Cut-Off Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Qualified Replacement Mortgage, each Credit Line Agreement and each Mortgage Loan is an enforceable obligation of the related Mortgagor, except as the enforceability thereof may be limited by the bankruptcy, insolvency or similar laws affecting creditors' rights generally; (xii) The definition of Prime in each Credit Line Agreement relating to a Mortgage Loan does not differ materially from the definition in the form of Credit Line Agreement in Exhibit C; (xiii) The weighted average remaining term to maturity of the Initial Mortgage Loans on a contractual basis as of the Initial Cut-Off Date for the Mortgage Loans is approximately 272 months. On each date that the Loan Rates have been adjusted, interest rate adjustments on the Mortgage Loans were made in compliance with the related Mortgage and Credit Line Agreement and applicable law. Over the term of each Initial Mortgage Loan, the Loan Rate may not exceed the related Loan Rate Cap, if any. The Loan Rate Caps for the Initial Mortgage Loans range between 17.25% and 24.00%. The Initial Mortgage Loans margins range between 1.00% and 8.00% and the weighted average margin is approximately 3.20% as of the related Cut-Off Date for the Initial Mortgage Loans. The Loan Rates on such Initial Mortgage Loans range between 7.25% and 16.25% and the weighted average Loan Rate is approximately 11.403%; and (xiv) The Credit Limits on the Initial Mortgage Loans range between $10,000 and $246,000 with an average of $31,743.55. As of the Initial Cut-Off Date for the Initial Mortgage Loans, no Initial Mortgage Loan had a principal balance in excess of approximately $245,000 and the average principal balance of the Initial Mortgage Loans is equal to approximately $30,035. 38 (xv) Each Mortgage Loan being transferred to the Trust is a Mortgage; (xvi) Each Subsequent Mortgage Loan complies with the requirements in Section 3.8 of this Agreement, including without limitation the conditions described in subsections (c) and (d) of such Section 3.8; (xvii) 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; (xviii) Except as previously disclosed in writing to the Trustee and the Certificate Insurer, with respect to each Mortgage Loan, there is only one originally executed Credit Line Agreement not stamped as a duplicate. (xix) No Mortgage Loan had a Combined Loan- to-Value Ratio in excess of 100%; (xx) As of the Closing Date with respect to the Initial Mortgage Loans and the applicable Transfer Date with respect to any Subsequent Mortgage Loans, each Mortgage is either a valid and subsisting first or second lien of record on the Mortgaged Property (subject in the case of any Second Mortgage Loan only to a Senior Lien on such Mortgaged Property) and subject in all cases to the exceptions to title set forth in the title insurance policy, with respect to the related Mortgage Loan, which exceptions are generally acceptable to banking institutions in connection with their regular mortgage lending activities, and except for liens for (i) real estate taxes and special assessments not yet delinquent, (ii) income taxes, (iii) any covenants, conditions and restrictions, rights of way, easements, and other matters of public record and such other exceptions to which similar properties are commonly subject and which do not individually, or in the aggregate, materially and adversely affect the benefits of the security intended to be provided by such Mortgage; (xxi) Immediately prior to the transfer and assignment herein contemplated, the Originator held good and indefeasible title to, and was the sole owner of, each Mortgage Loan conveyed by the Originator (including its Cut-Off Date Pool Balance), all monies due or to become due with respect thereto, and all proceeds of such Cut-Off Date Pool Balances with respect to the Mortgage Loans is subject to no liens, charges, mortgages, encumbrances or rights of others except liens which will be released simultaneously with such transfer and 39 assignment; and immediately upon the transfer and assignment herein contemplated, the Trustee will hold good and indefeasible title to, and be the sole owner of, each Mortgage Loan subject to no liens, charges, mortgages, encumbrances or rights of others except liens which will be released simultaneously with such transfer and assignment; (xxii) 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; (xxiii) To the best knowledge of the Originator, there is no mechanics' lien or claim for work, labor or material affecting any Mortgaged Property which is or may be a lien prior to, or equal with, the lien of the related Mortgage except liens which are fully insured by the title insurance policy. (xxiv) 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; (xxv) To the best knowledge of the Originator, a lender's title insurance policy, issued in standard California Land Title Association form or American Land Title Association form, or other form acceptable in a particular jurisdiction by a title insurance company authorized to transact business in the state in which the related Mortgaged Property is situated, was issued on the date of origination of the Mortgage Loan and as of the Cut-Off Date and each applicable Transfer Date with respect to the Subsequent Mortgage Loan, each such policy is valid and remains in full force and effect, or a title search or guaranty of title customary in the relevant jurisdiction was obtained with respect to a Mortgage Loan as to which no title insurance policy or binder was issued. (xxvi) As of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to any Subsequent Mortgage Loan, each Credit Line Agreement is the legal, valid, binding and enforceable obligation of the maker thereof and is enforceable in accordance with its terms, except only as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights 40 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; (xxvii) Within 90 days of the Closing Date, each original Mortgage required to be recorded 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 as against creditors of or purchasers from the Originator, subject to the provisions of Section 3.5(b) hereof (or are in the process of being recorded); (xxviii) The terms of each Credit Line Agreement and each Mortgage have not been impaired, altered or modified in any respect, except by a written instrument which has been recorded, if necessary, to protect the interest of the owners and which has been delivered to the Trustee. The substance of any such alteration or modification is reflected on the related Schedule of Mortgage Loans and has been approved by the primary mortgage guaranty insurer, if any; (xxix) Except as otherwise required by law or pursuant to the statute under which the related Mortgage Loan was made, the related Credit Line Agreement is not and has not been secured by any collateral, pledged account or other security except the lien of the corresponding Mortgage; (xxx) Each Mortgaged Property is located in the state identified in the Schedule of Mortgage Loans and consists of one or more parcels of real property with a residential dwelling erected thereon; (xxxi) 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; (xxxii) 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 41 has been obtained and is contained in the related Mortgage File; (xxxiii) 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 which materially interferes with the right to sell the related Mortgaged Property at a trustee's sale or the right to foreclose the related Mortgage; (xxxiv) As of the Closing Date with respect to the Mortgage Loans and the applicable Transfer Date with respect to the Subsequent Mortgage Loans, there is no default, breach, violation or event of acceleration existing under any Mortgage or the related Credit Line Agreement and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration; and the Originator has not waived any default, breach, violation or event of acceleration; (xxxv) The credit underwriting guidelines applicable to each Mortgage Loan conform in all material respects to the Originator's underwriting guidelines; (xxxvi) To the best knowledge of the Originator, all parties to the Credit Line Agreement and the Mortgage had legal capacity to execute the Credit Line Agreement and the Mortgage and each Credit Line Agreement and Mortgage have been duly and properly executed by such parties; and (xxxvii) No selection procedures reasonably believed by the Originator to be adverse to the interests of the Owners or the Certificate Insurer was utilized in selecting the Mortgage Loans. (xxxviii) Each Mortgage Loan shall have a three year interest only Draw Period with a twenty-year amortization schedule. (b) Upon the discovery by the Originator, the Master Servicer, the Sponsor, the Certificate Insurer or the 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 Owners or of the Certificate Insurer in such Mortgage Loan, the party discovering such breach shall give prompt written notice to 42 the other parties. The Master Servicer shall promptly notify the Originator of such breach and request that the Originator cure such breach or take the actions described in Section 3.4(b) hereof within the time periods required thereby, and the Originator 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 Originator shall be entitled to receive an instrument of assignment or transfer from the Trustee to the same extent as set forth in Section 3.6 with respect to the transfer of Mortgage Loans under that Section. It is understood and agreed that the obligation of the Originator 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 Originator respecting such breach available to Owners of the Class A Certificates, the Trustee on behalf of the Owners of the Class A Certificates and the Certificate Insurer, except as otherwise provided in the Insurance Agreement. Section 3.4. Covenants of Originator 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 the Originator, the Master Servicer, the Sponsor, the Certificate Insurer, any Sub-Servicer or the 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 Day (or the Subsequent Transfer Date, or the Transfer Date, as the case may be) and such breaches of the representations and warranties materially and adversely affect the interests of the Owners or of the Certificate Insurer, the party discovering such breach shall give prompt written notice to the other parties. The Originator 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 43 adversely affects the interests of the Owners or of the Certificate Insurer" in such Mortgage Loan. (b) Upon the earliest to occur of the Originator's discovery, its receipt of notice of breach from any one of the other parties hereto or from the Certificate Insurer or such time as a breach of any representation and warranty materially and adversely affects the interests of the Owners or of the Certificate Insurer as set forth above, the Originator 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 Originator to), subject to the further requirements of this paragraph, on the second Remittance Date next succeeding such discovery, receipt of notice or such other time (i) substitute in lieu of each Mortgage Loan which has given rise to the requirement for action by the Originator 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 Originator to cure the defect, or substitute for, or purchase any Mortgage Loan as to which a representation or warranty is untrue in any material respect and has not been remedied shall constitute the sole remedy available to the Owners, the Trustee or the Certificate Insurer, except as otherwise provided in the Insurance Agreement. (c) In the event that any Qualified Replacement Mortgage is delivered by an Originator or by an affiliate of the Originator, as the case may be, to the Trust pursuant to Section 3.3, Section 3.4 or Section 3.6 hereof, the Originator shall be obligated to take the actions described in Section 3.4(b) with respect to such Qualified Replacement Mortgage upon the discovery by any of the Owners, the Originator, the Master Servicer, the Sponsor, the Certificate Insurer, any Sub-Servicer or the Trustee that the representations and warranties set forth in Section 3.3 above are untrue in any material respect on the date such Qualified Replacement Mortgage is conveyed to the Trust such that the interests of the Owners or the Certificate Insurer in the related Qualified Replacement Mortgage are materially and adversely affected; provided, however, that for the purposes of this subsection (c) the representations and warranties set forth in Section 3.3 above referring to items "as of the Initial Cut-Off Date" or "as of the Subsequent Cut-Off Date" or "as of the related Cut-Off Date" or "as of the Closing Day" or "as of the Subsequent Transfer Date" shall be deemed to refer to such 44 items as of the date such Qualified Replacement Mortgage is conveyed to the Trust. (d) It is understood and agreed that the covenants set forth in this Section 3.4 shall survive delivery of the respective Mortgage Loans (including Qualified Replacement Mortgage Loans) to the Trustee. Section 3.5. Conveyance of the Initial Mortgage Loans. (a) The Originator, concurrently with the execution and delivery hereof, hereby transfers, assigns, sets over and otherwise conveys without recourse, to the Trustee, all right, title and interest of the Originator in and to (i) each Initial Mortgage Loan listed on the Schedule of Mortgage Loans, including its Principal Balance (including all Additional Balances) and all collections in respect thereof received on or after the Initial Cut-Off Date (excluding payments in respect of accrued interest due prior to the Initial Cut-Off Date; (ii) property that secured a Mortgage Loan that is acquired by foreclosure or deed in lieu of foreclosure; (iii) the Originator's rights under the hazard insurance policies; and (iv) all other assets included or to be included in the Trust for the benefit of Owners and the Certificate Insurer; provided, however, neither the Trustee nor the Trust assumes the obligation under any Credit Line Agreement that provides for the funding of future advances to the Mortgagor thereunder, and neither the Trust nor the Trustee shall be obligated or permitted to fund any such future advances. Additional Balances shall be part of the related Principal Balance and are hereby transferred to the Trust for application to the Originator's Interest only on the Closing Day pursuant to this Section 3.5, and therefor part of the Trust property. In addition, on or prior to the Closing Day, the Originator shall cause the Certificate Insurer to deliver the Certificate Insurance Policy to the Trustee for the benefit of the Owners of the Class A Certificates. The foregoing transfer, assignment, set-over and conveyance to the Trust shall be made to the Trustee, on behalf of the Trust, and each reference in this Agreement to such transfer, assignment, set-over and conveyance shall be construed accordingly. The Originator agrees to take or cause to be taken such actions and execute such documents (including, without limitation, the filing of all necessary continuation statements for the UCC-1 financing statements filed in the State of New York (which shall have been filed within 90 days of the Closing Day) describing the Mortgage Loans and naming the Originator as debtor and the Trustee as secured party and any amendments to UCC-1 financing statements required to reflect a change in the name or corporate structure of the Originator or the filing of any additional UCC-1 financing statements due to the change in the principal office of the 45 Originator (within 90 days of any event necessitating such filing)) as are necessary to perfect and protect the Certificateholders' and the Certificate Insurer's interests in each Mortgage Loan and the proceeds thereof. (b) In connection with the transfer and assignment of the Mortgage Loans, the Originator agrees to: (i) cause to be delivered, on the Closing Day with respect to the Initial Mortgage Loans or, on the Subsequent Transfer Date with respect to Subsequent Mortgage Loans, or, on the Transfer Date with respect to the Qualified Replacement Mortgage without recourse to the Trustee on the Closing Day with respect to each Initial Mortgage Loan or, on the Subsequent Transfer Date with respect to Subsequent Mortgage Loans, listed on the Schedule of Mortgage Loans, the items listed in the definition of "Mortgage Files"; and (ii) cause, within 75 Business Days following the Closing Day, 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 Originator to the Trustee; provided, however, that Assignments of Mortgage shall not be required to be submitted for recording with respect to any Mortgage Loan as to which the recordholder is the Originator (under either its current name, "Advanta National Bank USA" or its prior name, "Colonial National Bank USA"), unless (A) (x) otherwise directed in writing by the Certificate Insurer, (y) upon the occurrence of an Event of Default or (z) the long-term unsecured debt of the Originator is assigned ratings of less than BBB by Standard & Poor's or Baa2 by Moody's or the long-term unsecured debt of some other entity approved by the Certificate Insurer is assigned comparable ratings; or (B) the related Mortgaged Property is not located in a jurisdiction in which, as evidenced by an Opinion of Counsel delivered to the Trustee within 30 Business Days of the Closing Date, recordation of such Assignment is not necessary to perfect the lien of the Trustee in the related Mortgage Loan. All recording, if required pursuant to this Section 3.5, shall be accomplished at the expense of the Originator. Notwithstanding anything to the contrary contained in this Section 3.5, in those instances where the public recording 46 office retains the original Mortgage, the assignment of a Mortgage or the intervening assignments of the Mortgage after it has been recorded, the Originator shall be deemed to have satisfied its obligations hereunder upon delivery to the Trustee of a copy of such Mortgage, such assignment or assignments of Mortgage certified by the public recording office to be a true copy of the recorded original thereof. Copies of all Mortgage assignments and any Assignment of Mortgage in recordable form received by the Trustee shall be kept in the related Mortgage File. (c) In the case of Initial Mortgage Loans which have been prepaid in full on or after the Initial Cut-Off Date and prior to the Closing Day, or with respect to Subsequent Mortgage Loans which have been prepaid in full on or after the Subsequent Cut-Off Date and prior to the Subsequent Transfer Date, the Originator, in lieu of the foregoing, will deliver within 15 Business Days after the Closing Day, or Subsequent Transfer Date, as applicable, to the Trustee a certification of an Authorized Officer in the form set forth in Exhibit D. (d) The Originator shall transfer, assign, set over and otherwise convey without recourse, to the Trustee all right, title and interest of the Originator in and to any Qualified Replacement Mortgage delivered to the Trustee on behalf of the Trust by the Originator pursuant to Section 3.3, Section 3.4 or Section 3.6 hereof and all its right, title and interest to principal collected and interest accruing on such Qualified Replacement Mortgage on and after the applicable Replacement Cut-Off Date; provided, however, that the Originator shall reserve and retain all right, title and interest in and to payments of principal and interest due on such Qualified Replacement Mortgage prior to the applicable Replacement Cut-Off Date. (e) As to each Mortgage Loan released from the Trust in connection with the conveyance of a Qualified Replacement Mortgage therefor, the Trustee will transfer, assign, set over and otherwise convey without recourse, on the Originator's order, all of its right, title and interest in and to such released Mortgage Loan and all the Trust's right, title and interest to principal collected and interest accruing on such released Mortgage Loan on and after the applicable Replacement Cut-Off Date; provided, however, that the Trust shall reserve and retain all right, title and interest in and to payments of principal collected and interest accruing on such released Mortgage Loan prior to the applicable Replacement Cut-Off Date. (f) In connection with any transfer and assignment of a Qualified Replacement Mortgage to the Trustee on behalf of the Trust, the Originator agrees to cause to be delivered 47 to the Trustee the items described in Section 3.5(b) on the date of such transfer and assignment or, if a later delivery time is permitted by Section 3.5(b), then no later than such later delivery time. (g) As to each Mortgage Loan released from the Trust in connection with the conveyance of a Qualified Replacement Mortgage the Trustee shall deliver on the date of conveyance of such Qualified Replacement Mortgage and on the order of the Originator (i) the original Credit Line Agreement, or the certified copy, relating thereto, endorsed without recourse, to the Originator and (ii) such other documents as constituted the Advanta Mortgage File with respect thereto. (h) If a Mortgage assignment is lost during the process of recording, or is returned from the recorder's office unrecorded due to a defect therein, the Originator shall prepare a substitute assignment or cure such defect, as the case may be, and thereafter cause each such assignment to be duly recorded. (i) The Originator shall reflect on its records that the Mortgage Loans have been sold to the Trust. (j) If the Master Servicer's shareholders' equity (on a consolidated basis with AMHC) calculated pursuant to generally accepted accounting principles, as evidenced by the Financial Statements (as defined in the Insurance Agreement, and which the Master Servicer hereby agrees to provide to the Certificate Insurer on a quarterly basis promptly after the same are available), falls below $5,000,000, then the Originator shall promptly prepare and deliver to the Trustee the Mortgage assignments. Upon the direction of the Certificate Insurer, the Trustee shall submit such assignments for recording in the appropriate jurisdictions. The Master Servicer shall pay the anticipated recording costs to the Trustee on the date of delivery of the assignments to the Trustee, and if the Master Servicer fails to do so then the Trustee shall pay such costs and shall be entitled to reimbursement therefor from amounts otherwise distributable to the Owners of the Originator Certificates. (k) To the extent that the ratings, if any, then assigned to the unsecured debt of the Originator or of the Originator's ultimate corporate parent are satisfactory to the Certificate Insurer, Moody's and S&P, then any of the Document Delivery Requirements described above may be waived by an instrument signed by the Certificate Insurer, S&P and Moody's (or any documents theretofore delivered to the Trustee returned to the Originator) on such terms and subject to such conditions as the Certificate Insurer, Moody's and S&P may permit. 48 Section 3.6. Acceptance by Trustee; Certain Substitutions of Mortgage Loans; Certification by Trustee. (a) The Trustee hereby acknowledges its receipt of the Certificate Insurance Policy and agrees to execute and deliver on the Closing Day and on each Subsequent Transfer Date and each Transfer Date an acknowledgment of receipt of the Credit Line Agreements delivered by the Originator in the form attached as Exhibit E hereto, and declares that it will hold such documents and any amendments, replacement or supplements thereto, as well as any other assets included in the definition of Trust Fund and delivered to the Trustee, as Trustee in trust upon and subject to the conditions set forth herein for the benefit of the Owners and the Certificate Insurer. The Trustee further agrees to review any other documents delivered by the Originator within 90 days after the Closing Day (or within 90 days with respect to any Subsequent Mortgage Loan or Qualified Replacement Mortgage after the assignment thereof) and to deliver to the Originator, the Master Servicer and the Certificate Insurer a Pool Certification in the form attached hereto as Exhibit F to the effect that, as to each Mortgage Loan listed in the Schedule of Mortgage Loans (other than any Mortgage Loan paid in full or any Mortgage Loan specifically identified in such Pool Certification as not covered by such Pool Certification), (i) all documents required to be delivered to it pursuant to this Agreement are in its possession, (ii) such documents have been reviewed by it and have not been mutilated, damaged, torn or otherwise physically altered and relate to such Mortgage Loan and (iii) based on its examination and only as to the foregoing documents, the information set forth on the Schedules of Mortgage Loans as to loan number and address, accurately reflects the information set forth in the Mortgage File; provided, however, that such Pool Certificate shall not be delivered prior to 90 days after the Closing Day with respect to the Initial Mortgage Loans and 90 days after the Pre-Funding Period with respect to the Pre-Funded Mortgage Loans and 90 days after the Revolving Period with respect to Additional Mortgage Loans and O/C Mortgage Loans. The Trustee shall be under no duty or obligation to inspect, review or examine any such documents, instruments, certificates or other papers to verify the validity, legality, enforceability, sufficiency, due authorization, recordability or genuineness of same or to determine that they are genuine, enforceable, or appropriate for the represented purpose or that they are other than what they purport to be on their face, nor shall the Trustee be under any duty to determine independently whether there are any intervening assignments or assumption or modification agreements with respect to any Mortgage Loan. (b) If the Trustee during such 90-day period finds any document constituting a part of a Mortgage File which is not properly executed, has not been received within the specified period, or is unrelated to the Mortgage Loans 49 identified in the Schedules of Mortgage Loans, or that any Mortgage Loan does not conform in a material respect to the description thereof as set forth in the Schedules of Mortgage Loans, the Trustee shall promptly so notify the Originator and the Certificate Insurer. In performing any such review, the Trustee may conclusively rely on the Originator as to the purported genuineness of any such document and any signature thereon. It is understood that the scope of the Trustee's review of the items delivered by the Originator pursuant to Section 3.5(b)(i) is limited solely to confirming that the documents listed in Section 3.5(b)(i) have been executed and received, relate to the Mortgage Files identified in the Schedules of Mortgage Loans and conform materially to the description thereof in the Schedule of Mortgage Loans. The Originator 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 Trustee. If, however, within 60 days after the Trustee's notice to it respecting such defect the Originator has not remedied or caused to be remedied the defect and the defect materially and adversely affects the interest in the related Mortgage Loan of the Owners or of the Certificate Insurer, the Originator 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 Trustee shall execute such documents and instruments of transfer presented by the Originator, in each case without recourse, representation or warranty, and take such other actions as shall reasonably be requested by the Originator 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 Originator to accept a transfer of a Defective Mortgage Loan and to either convey an 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 Owners, the Trustee and the Certificate Insurer against the Originator. The Originator, promptly following the transfer of a Defective Mortgage Loan from or to the Trust pursuant to this Section, shall deliver an amended Mortgage Loan Schedule to the Trustee and the Certificate Insurer and shall make appropriate entries in its general account records to reflect 50 such transfer. The Originator 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 Originator, promptly following such transfer, shall appropriately mark its electronic ledger and make appropriate entries in its general account records to reflect such transfer. (c) As to any Qualified Replacement Mortgage, the Originator shall, if required to deliver any such Qualified Replacement Mortgage, deliver to the Trustee with respect to such Qualified Replacement Mortgage such documents and agreements as are required to be held by the Trustee in accordance with Section 3.6. For any Remittance Period during which the Originator substitutes one or more Qualified Replacement Mortgages, the Master Servicer shall determine the Substitution Amount which amount shall be deposited by the Originator 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 Fund 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 Fund 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 Originator shall be deemed 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. The procedures applied by the Originator in selecting each Qualified Replacement Mortgage shall not be materially adverse to the interests of the Trustee, the Owners or the Certificate Insurer. The Originator may consent to the placing of a lien senior to that of any Mortgage on the related Mortgaged Property, provided that (x) such Mortgage succeeded to a first lien position after the related Mortgage Loan was conveyed to the Trust and, immediately following the placement of such senior lien, such Mortgage is in a second lien position and the outstanding principal amount of the mortgage loan secured by such subsequent senior lien is no greater than the outstanding principal amount of the senior mortgage loan secured by the Mortgaged Property as of the date the related Mortgage Loan was originated; or 51 (y) the Mortgage relating to such Mortgage Loan was in a second lien position as of the related Cut-Off Date and the new senior lien secures a mortgage loan that refinances an existing first mortgage loan and the outstanding principal amount and interest rate of the replacement first mortgage loan immediately following such refinancing is not greater than the outstanding principal amount and interest rate of such existing first mortgage loan at the date of origination of such Mortgage Loan; provided, further, that such senior lien does not secure a note that provides for negative amortization. Notwithstanding the foregoing, the Originator can consent to the placing of liens senior to that of a Mortgage on the related Mortgaged Property only if the Combined Loan-to-Value and second mortgage ratio is less than or equal to the original Combined Loan-to-Value and second mortgage ratio; provided, however, the Originator may consent to the placing of a senior lien on up to 3.7% of the Mortgage Loans if the Combined Loan-to-Value will not increase to greater than 80%; provided, further, that the Originator may only approve modifications if the related Mortgagor has used the Credit Line Agreement in the past twelve months and has made timely payments, the current characteristics of the related Mortgagor meet the Originator's underwriting guidelines used at the time of origination and the Originator receives verbal verification of employment of the related Mortgagor. The Originator may also, without prior approval from the Rating Agencies or the Certificate Insurer, increase the Credit Limits on Mortgage Loans provided that (i) new appraisals are obtained and the Combined Loan-to-Value Ratios of the Mortgage Loans after giving effect to such increase are less than or equal to the Combined Loan-to-Value Ratios of the Mortgage Loans as of the related Cut-Off Date, (ii) such increases are consistent with the Originator's underwriting policies, (iii) the related Mortgagor has used the Credit Line Agreement in the past twelve months and has made timely payments and (iv) the Originator receives verbal verification of employment of the related Mortgagor. In addition, the Originator may increase the Credit Limits on Mortgage Loans having aggregate balances of up to 5% of the Pool Balance, without obtaining new appraisals provided that (i) the increase in the Credit Limit does not cause the Combined Loan-to-Value Ratios of the Mortgage Loans to exceed 80%, (ii) the increase is consistent with the Originator's underwriting policies, (iii) the related Mortgagor has used the Credit Line Agreement in the past twelve months and has made timely payments and (iv) the Originator receives verbal verification of employment of the related Mortgagor. 52 Furthermore, the Originator may, without prior approval from the Rating Agencies and the Certificate Insurer solicit Mortgagors for a reduction in Loan Rates of no more than .50%; provided that the Originator can only reduce such Loan Rates on up to 5% of the Mortgage Loans by Pool Balance. Any such solicitations shall not result in a reduction in the weighted average Margin of the Mortgage Loans in the pool by more than 2.5 basis points taking into account any such prior reductions. Subject to the above limitations, the Originator or the Master Servicer, may agree to changes in the terms of a Mortgage Loan at the request of the Mortgagor; provided, that such changes (i) do not materially and adversely affect the interests of Owners or the Certificate Insurer and (ii) are consistent with Accepted Servicing Practices. Notwithstanding anything to the contrary, neither the Originator nor the Master Servicer shall agree to any changes or modifications in the terms of any Mortgage Loan that, after giving effect to such change or modifications, would cause any criteria set forth in Section 3.8 to be violated. Section 3.7. Cooperation Procedures. (a) The Originator shall, in connection with the delivery of each Qualified Replacement Mortgage to the Trustee, provide the Trustee with the information set forth in the Schedules of Mortgage Loans with respect to such Qualified Replacement Mortgage. (b) The Originator, the Master Servicer and the 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 3.8. Conveyance of the Subsequent Mortgage Loans. (a) The Originator may, on Subsequent Transfer Dates, deliver to the Trustee loans eligible to become Subsequent Mortgage Loans on the next following Payment Date, in exchange, on such Payment Date, for monies released to the Originator pursuant to Section 7.5 hereof, or a corresponding increase in the Originator's Interest. If, on any Payment Date, the Principal Balance as of the related Subsequent Cut-Off Date of all Available Subsequent Mortgage Loans is less than the sum of (x) the amount on deposit in the Pre-Funding Account (net of Pre-Funding Earnings) at the opening of business on such Payment Date, (y) the amount described in Section 7.5(b)(vii) and (z) 53 the amount which is the lessor of (a) the amount described in Section 7.5(b)(x)(A)(1)(a) and (b) the amount described in Section 7.5(b)(x)(A)(1)(b), then such Available Subsequent Mortgage Loans shall be allocated in the following order of priority: (i) first, as Pre-Funded Mortgage Loans, to the extent of the amount described in clause (x) above; (ii) second, as Additional Mortgage Loans, to the extent of the amount described in clause (y) above; and (iii) third, as O/C Mortgage Loans, to the extent of the amount of clause (z) above. Upon assignment of any Additional Mortgage Loan, the Trustee shall release to the Originator an amount equal to the lesser of (A) the sum of (i) Net Principal Collections for the related Remittance Period and (ii) the amount on deposit in the Revolving Account at the opening of business on such Payment Date and (B) the aggregate Principal Balance as of the related Subsequent Cut-Off Date of all Additional Mortgage Loans relating to such Payment Date pursuant to Section 7.5(b)(vii). Upon assignment of any Pre-Funded Mortgage Loan, the Trustee shall release to the Originator an amount equal to the Principal Balance thereof as of the related Subsequent Cut-Off Date from amounts then on deposit in the Pre-Funding Account. Upon assignment of any O/C Mortgage Loan, the Trustee shall release to the Originator an amount equal to the lesser of (a) the Overcollateralization Deficiency Amount for such Payment Date and (b) the aggregate Principal Balance thereof as of the related Subsequent Cut-Off Date of all such available O/C Mortgage Loans, pursuant to Section 7.5(b)(x). In addition, the Originator may assign O/C Mortgage Loans to the Trust in exchange for an increase in the Originator's Interest in lieu of, or in addition to, money. (b) The Originator shall transfer to the Trustee the Subsequent Mortgage Loans and the other property and rights related thereto described in paragraph (a) above only upon the satisfaction of each of the following conditions on or prior to the related Subsequent Transfer Date. (i) the Originator shall have provided the Trustee and the Certificate Insurer with a timely Addition Notice and shall have provided any information reasonably requested by any of the foregoing with respect to the Subsequent Mortgage Loans; 54 (ii) the Originator shall have delivered to the Trustee a duly executed written assignment (including an acceptance by the Trustee) in substantially the form of Exhibit L (the "Subsequent Transfer Agreement"), which shall include Schedules of Mortgage Loans, listing the Subsequent Mortgage Loans and any other exhibits listed thereon; (iii) the Master Servicer shall have deposited in the Principal and Interest Account all collections in respect of the Subsequent Mortgage Loans received on or after the related Subsequent Cut-Off Date; (iv) as of each Subsequent Transfer Date, none of the related Originator, the Master Servicer or the Sponsor was insolvent nor will any of them have been made insolvent by such transfer nor is any of them aware of any pending insolvency; (v) such addition will not result in a material adverse tax consequence to the Trust or the Owners of the Certificates; (vi) with respect to Subsequent Mortgage Loans which are Pre-Funded Mortgage Loans, the Pre-Funding Period shall not have terminated; and (vii) the Originator shall have delivered to the Trustee an Officer's Certificate confirming the satisfaction of each condition precedent specified in this paragraph (b) and in the related Subsequent Transfer Agreement; (c) The obligation of the Trust to accept the assignment of a Subsequent Mortgage Loan on any Subsequent Transfer Date is subject to the following requirements: (i) such Subsequent Mortgage Loan may not be 30 or more days contractually delinquent as of the related Subsequent Cut-Off Date. (d) The obligation of the Trust to accept the assignment of a Subsequent Mortgage Loan on any Subsequent Transfer Date is subject to the following additional requirements, any of which may be waived or modified in any respect by the Certificate Insurer by a written instrument executed by the Certificate Insurer: (1) (i) No such Subsequent Mortgage Loan may have a Combined Loan-to-Value Ratio greater than 100%; (ii) no Subsequent Mortgage Loan shall have a Credit Utilization Rate in excess of 100%; (iii) no Subsequent Mortgage Loan shall have a debt to income ratio in excess of 55%; (iv) no Subsequent Mortgage Loan shall have a 55 final maturity date later than the Payment Date in December 2020; (v) all Subsequent Mortgage Loans shall have a three year interest only, Draw Period with a 20 year amortization schedule. (2) After giving effect to the assignment to the Trust of any such Subsequent Mortgage Loan (i) the weighted average net Loan Rate of all Mortgage Loans shall be no less than 11.35%; (ii) the Mortgage Loans shall have weighted average Combined Loan-to-Value Ratio no greater than 74.8%; (iii) the Mortgage Loans shall have a weighted average single Loan-to-Value of not less than 28.1%; (iv) no more than 49.7% of Mortgage Loans shall have a Combined Loan-to-Value greater than 80%; (v) no more than 0.44% of the Mortgage Loans shall have a Combined Loan-to-Value greater than 85%; (vi) the ratio of First Mortgage Loans to Second Mortgage Loans shall not be less than 59%; (vii) the weighted average margin shall not be less than 3.20%; (viii) the percentage of A classified loans shall not be less than 68.75%; (ix) the percentage of B classified loans shall not be less than 22.0%; (x) the percentage of C classified loans shall not be greater than 8.38%; (xi) no less than 33.9% of the Mortgage Loans shall be First Mortgage Loans; (xii) no less than 99% of the Mortgage Loans shall be "Fully Documented" loans; (xiii) at least 96% of the Mortgage Loans shall be single family properties; (xiv) at least 98.7% of the Mortgage Loans shall be owner occupied properties. (e) In connection with the transfer and assignment of the Subsequent Mortgage Loans, the Originator agrees to satisfy the conditions set forth in Sections 3.5(b)-(j), 3.6 and 3.7. (f) In connection with the transfer of any Subsequent Mortgage Loans to the Trust the Originator, the Sponsor, the Master Servicer and the Trustee may, with the prior written consent of the Certificate Insurer, amend the definition of "Specified Overcollateralization Amount" for the purpose of changing the related Specified Overcollateralization Amount; provided, however, that any such amendment must comply with the provisions of Sections 11.14(b) and 11.14(d) hereof. (g) The Certificate Insurer, in its sole discretion and without consent by any Person, may modify the Specified Overcollateralization Amount to reflect (i) the characteristics of the Mortgage Loans following the Pre-Funding Period or at quarterly intervals during the Revolving Period and (ii) the results of the due diligence. 56 Section 3.9. Retransfers of Mortgage Loans at Election of Originator. Subject to the conditions set forth below, the holder of the Originator's Interest may, but shall not be obligated to (except the Originator shall be obligated upon a breach of a representation or warranty), accept the reassignment of Mortgage Loans from the Trust as of the close of business on a Payment Date (the "Transfer Date"). On the fifth Business Day (the "Transfer Notice Date") prior to the Transfer Date designated in such notice, the holder of the Originator's Interest shall give the Trustee, the Certificate Insurer and the Master Servicer a notice of the proposed reassignment that contains a list of the Mortgage Loans to be reassigned. Such reassignment of Mortgage Loans shall be permitted upon satisfaction of the following conditions: (i) No Rapid Amortization Event has occurred; (ii) On the Transfer Notice Date the Originator's Interest (after giving effect to the removal from the Trust of the Mortgage Loans proposed to be retransferred) is at least equal to the Specified Overcollateralization Amount; (iii) The transfer of any Mortgage Loans on any Transfer date during the Managed Amortization Period shall not, in the reasonable belief of the holder of the Originator's Interest, 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; (iv) On or before the Transfer Date, the Originator shall have delivered to the Trustee, the Certificate Insurer and the Rating Agencies a revised Mortgage Loan Schedule, reflecting the proposed transfer and the Transfer Date, and the Master Servicer shall have marked its servicing records to show that the Mortgage Loans reassigned to the holder of the Originator's Interest are no longer owned by the Trust; (v) The holder of the Originator's Interest shall represent and warrant that random selection procedures were used in selecting the Mortgage Loans and no other selection procedures were used which are adverse to the interests of the Owners of the Class A Certificates or the Certificate Insurer were utilized in selecting the Mortgage Loans to be removed from the Trust; (vi) The holder of the Originator's Interest shall have delivered to the Trustee and the Certificate Insurer an Officer's Certificate certifying that the items set forth in subparagraphs (i) through (vi), 57 inclusive, have been performed or are true and correct, as the case may be. The 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 owner of the Originator's Interest, 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 Trustee shall deliver, or cause to be delivered, to the owner of the Originator's Interest the Mortgage File for each Mortgage Loan being so reassigned, and the Trustee shall execute and deliver to the owner of the Originator's Interest such other documents prepared by the Originator as shall be reasonably necessary to reassign such Mortgage Loans to the owner of the Originator's Interest. Any such transfer of the Trust's right, title and interest in and to Mortgage Loans shall be without recourse, representation or warranty by or of the Trustee or the Trust to the owner of the Originator's Interest. ARTICLE IV ISSUANCE AND SALE OF CERTIFICATES Section 4.1. Issuance of Certificates. On the Closing Day, upon the Trustee's receipt from the Originator of an executed Delivery Order in the form set forth as Exhibit G hereto, the Trustee shall execute, authenticate and deliver the Certificates and the Originator Certificate on behalf of the Trust in accordance with the directions set forth in such Delivery Order. Section 4.2. Sale of Certificates. At 11 a.m. New York City time on the Closing Day, at the offices of Dewey Ballantine, 1301 Sixth Avenue, New York, New York, the Originator will sell and convey the Initial Mortgage Loans and the money, instruments and other property related thereto to the Trustee, and the Trustee will deliver to the Underwriter, the Class A Certificates with an aggregate Percentage Interest in each Class equal to 100%, registered in the name of Cede & Co. or in such other names as the Underwriter shall direct, against payment of the purchase price thereof by wire transfer of immediately available funds to the Trustee. Upon receipt of the proceeds of the sale of the Certificates, the Trustee shall, from the proceeds of the sale of the Certificates, (a) pay other fees and expenses identified by the Originator, (b) deposit an amount equal to the Original Pre-Funded Amount in the Pre-Funding Account and (c) deposit an amount equal to the Capitalized Interest Account Deposit in the Capitalized Interest Account, and (d) pay to the Originator the balance 58 after deducting such amounts. The Originator shall pay directly to the Certificate Insurer the Initial Premium. ARTICLE V CERTIFICATES AND TRANSFER OF INTERESTS Section 5.1. Terms. (a) The Certificates are pass-through securities having the rights described therein and herein. Notwithstanding references herein or therein with respect to the Certificates as to "principal" and "interest" no debt of any Person is represented thereby, nor are the Certificates or the underlying Credit Line Agreements guaranteed by any Person (except that the Credit Line Agreements may be recourse to the Mortgagors thereof to the extent permitted by law and except for the rights of the Trustee with respect to the Certificate Insurance Policy). Distributions on the Certificates are payable solely from payments received on or with respect to the Mortgage Loans (other than the Servicing Fees), monies in the Principal and Interest Account, the Revolving Account, the Certificate Account, the Capitalized Interest Account and the Pre-Funding Account, except as otherwise provided herein, from earnings on monies and the proceeds of property held as a part of the Trust Fund and, upon the occurrence of certain events, from payments made pursuant to the Certificate Insurance Policy. Each Certificate entitles the Owner thereof to receive monthly on each Payment Date, in order of priority of distributions with respect to such Class of Certificates, a specified portion of such payments with respect to the Mortgage Loans, certain payments made pursuant to the Certificate Insurance Policy, pro rata in accordance with such Owner's Percentage Interest and certain amounts payable from the Pre-Funding Account. (b) Each Owner is required, and hereby agrees, to return to the Trustee any Certificate with respect to which the Trustee has made the final distribution due thereon. Any such Certificate as to which the Trustee has made the final distribution thereon shall be deemed cancelled and shall no longer be Outstanding for any purpose of this Agreement, whether or not such Certificate is ever returned to the Trustee. Section 5.2. Forms. The Class A Certificates and the Originator Certificate shall be in substantially the forms set forth in Exhibits A-1 and A-2, hereof, respectively, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Agreement or as may in the Sponsor's judgment be necessary, appropriate or convenient to comply, or facilitate compliance, with applicable laws, and may have such letters, numbers or other marks of identification and such legends or endorsements 59 placed thereon as may be required to comply with the rules of any applicable securities laws or as may, consistently herewith, be determined by the Authorized Officer of the Sponsor executing such Certificates, as evidenced by his execution thereof. Section 5.3. Execution, Authentication and Delivery. Each Certificate and the Originator Certificate shall be executed on behalf of the Trust, by the manual signature of one of the Trustee's Authorized Officers and shall be authenticated by the manual signature of one of the Trustee's Authorized Officers. Certificates and the Originator Certificate bearing the manual signature of individuals who were at any time the proper officers of the Trustee shall, upon proper authentication by the Trustee, bind the Trust, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the execution and delivery of such Certificates or the Originator Certificate, as the case may be, or did not hold such offices at the date of authentication of such Certificates or the Originator Certificate, as the case may be. The initial Certificates and the Originator Certificate shall be dated as of the Closing Day and delivered at the Closing to the parties specified in Section 4.2 hereof. No Certificate shall be valid until executed and authenticated as set forth above. The Originator Certificate shall not be valid until executed and authenticated as set forth above. Section 5.4. Registration and Transfer of Certificates. (a) The Trustee, as registrar, shall cause to be kept a register (the "Register") in which, subject to such reasonable regulations as it may prescribe, the Trustee shall provide for the registration of Certificates and the Originator Certificate and the registration of transfer of Certificates and the Originator Certificate. The Trustee is hereby appointed registrar for the purpose of registering Certificates and the Originator Certificate and transfers of Certificates and the Originator Certificate as herein provided. The Owners and the holder of the Originator Certificate shall have the right to inspect the Register at all reasonable times and to obtain copies thereof. (b) Subject to the provisions of Section 5.8 hereof, upon surrender for registration of transfer of any Certificate or the Originator Certificate at the office designated as the location of the Register, the Trustee shall execute, authenticate and deliver, in the name of the designated transferee or transferees, one or more new 60 Certificates of a like Class and in the aggregate principal amount of the Certificate so surrendered or a new Originator Certificate. (c) At the option of any Owner, Certificates of any Class owned by such Owner may be exchanged for other Certificates authorized of like Class, tenor and a like aggregate original principal amount and bearing numbers not contemporaneously outstanding, upon surrender of the Certificates to be exchanged at the office designated as the location of the Register. Whenever any Certificate is so surrendered for exchange, the Trustee shall execute, authenticate and deliver the Certificate or Certificates which the Owner making the exchange is entitled to receive. (d) All Certificates issued upon any registration of transfer or exchange of Certificates or the Originator Certificate shall be valid evidence of the same ownership interests in the Trust and entitled to the same benefits under this Agreement as the Certificates or the Originator Certificate surrendered upon such registration of transfer or exchange. (e) Every Certificate and any Originator Certificate presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Trustee duly executed by, in the case of each Certificate, the Owner thereof, and, in the case of the Originator Certificate, the holder thereof or, in any case, his attorney duly authorized in writing. (f) No service charge shall be made to an Owner or to the holder of the Originator Certificate for any registration of transfer or exchange of Certificates or the Originator Certificate, but the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Certificates or the Originator Certificate; any other expenses in connection with such transfer or exchange shall be an expense of the Trust. (g) It is intended that the Class A Certificates be registered so as to participate in a global book-entry system with the Depository, as set forth herein. Each Class of Class A Certificates shall, except as otherwise provided in the next paragraph, be initially issued in the form of a single fully registered Class A Certificate with a denomination equal to the Initial Cut-Off Date Pool Balance. Upon initial issuance, the ownership of each such Class A Certificate shall be registered in the Register in the name of Cede & Co., or any successor thereto, as nominee for the Depository. 61 The Sponsor and the Trustee are hereby authorized to execute and deliver the Representation Letter with the Depository. With respect to Class A Certificates registered in the Register in the name of Cede & Co., as nominee of the Depository, the Originator, the Sponsor, the Master Servicer and the Trustee shall have no responsibility or obligation to Direct or Indirect Participants or beneficial owners for which the Depository holds Class A Certificates from time to time as a Depository. Without limiting the immediately preceding sentence, the Originator, the Sponsor, the Master Servicer and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of the Depository, Cede & Co., or any Direct or Indirect Participant with respect to the ownership interest in the Class A Certificates, (ii) the delivery to any Direct or Indirect Participant or any other Person, other than a registered Owner of a Class A Certificate as shown in the Register, of any notice with respect to the Class A Certificates or (iii) the payment to any Direct or Indirect Participant or any other Person, other than a registered Owner of a Class A Certificate as shown in the Register, of any amount with respect to any distribution of principal or interest on the Class A Certificates. No Person other than a registered Owner of a Class A Certificate as shown in the Register shall receive a certificate evidencing such Class A Certificate. Upon delivery by the Depository to the Trustee of written notice to the effect that the Depository has determined to substitute a new nominee in place of Cede & Co., and subject to the provisions hereof with respect to the payment of interest by the mailing of checks or drafts to the registered Owners of Class A Certificates appearing as registered Owners in the registration books maintained by the Trustee at the close of business on a Record Date, the name "Cede & Co." in this Agreement shall refer to such new nominee of the Depository. (h) In the event that (i) the Depository or the Sponsor advises the Trustee in writing that the Depository is no longer willing or able to discharge properly its responsibilities as nominee and depository with respect to the Class A Certificates and the Sponsor or the Trustee is unable to locate a qualified successor or (ii) the Sponsor at its sole option elects to terminate the book-entry system through the Depository, the Class A Certificates shall no longer be restricted to being registered in the Register in the name of Cede & Co. (or a successor nominee) as nominee of the Depository. At that time, the Sponsor may determine that the Class A Certificates shall be registered in the name of and deposited with a successor depository operating a global book-entry system, as may be acceptable to the Sponsor, or such 62 depository's agent or designee but, if the Sponsor does not select such alternative global book-entry system, then the Class A Certificates may be registered in whatever name or names registered Owners of Class A Certificates transferring Class A Certificates shall designate, in accordance with the provisions hereof. (i) Notwithstanding any other provision of this Agreement to the contrary, so long as any Class A Certificate is registered in the name of Cede & Co., as nominee of the Depository, all distributions of principal or interest on such Class A Certificates as the case may be and all notices with respect to such Class A Certificates as the case may be shall be made and given, respectively, in the manner provided in the Representation Letter. Section 5.5. Mutilated, Destroyed, Lost or Stolen Certificates. If (i) any mutilated Certificate is surrendered to the Trustee, or the Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Certificate or Originator's Certificate, and (ii) in the case of any mutilated Certificate or Originator's Certificate, such mutilated Certificate or Originator's Certificate shall first be surrendered to the Trustee, and in the case of any destroyed, lost or stolen Certificate or Originator's Certificate, there shall be first delivered to the Trustee such security or indemnity as may be reasonably required by it to hold the Trustee harmless (provided, that with respect to an Owner which is an insurance company, a letter of indemnity furnished by it shall be sufficient for this purpose), then, in the absence of notice to the Trustee that such Certificate or Originator's Certificate has been acquired by a bona fide purchaser, the Trustee shall execute, authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate or Originator's Certificate, a new Certificate of like Class, tenor and aggregate principal amount, bearing a number not contemporaneously outstanding or a new Originator's Certificate. Upon the issuance of any new Certificate or Originator's Certificate under this Section, the Trustee may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto; any other expenses in connection with such issuance shall be an expense of the Trust. Every new Certificate issued pursuant to this Section in exchange for or in lieu of any mutilated, destroyed, lost or stolen Certificate shall constitute evidence of a substitute interest in the Trust, and shall be entitled to all the benefits of this Agreement equally and proportionately with any and all other Certificates of the 63 same Class duly issued hereunder and such mutilated, destroyed, lost or stolen Certificate shall not be valid for any purpose. The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Certificates or Originator's Certificates. Section 5.6. Persons Deemed Owners. The Trustee and any agent of the Trustee may treat the Person in whose name any Certificate is registered as the Owner of such Certificate and as the owners of the Originator's Certificate, as the case may be, for the purpose of receiving distributions with respect to such Certificate or Originator's Certificate and for all other purposes whatsoever, and neither the Trustee nor any agent of the Trustee shall be affected by notice to the contrary. Section 5.7. Cancellation. All Certificates or Originator's Certificates surrendered for registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it. No Certificate or Originator's Certificate shall be authenticated in lieu of or in exchange for any Certificate or Originator's Certificate cancelled as provided in this Section, except as expressly permitted by this Agreement. All cancelled Certificates or Originator's Certificates may be held or destroyed by the Trustee in accordance with its standard policy. Section 5.8. Limitation on Transfer of Ownership Rights. (a) No sale or other transfer of any Class A Certificate shall be made to the Sponsor, the Originator or any of their respective affiliates. Except for the initial issuance of the Originator's Certificate to the Originator, no transfer of a Class A Certificate or an Originator's Certificate shall be made to an employee benefit plan subject to Section 406 of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), a plan subject to section 4975 of the Code or a Person using the assets of such an employee benefit plan or plan to acquire its interest in the Class A Certificate or Originator's Certificate. By its acceptance of a Class A Certificate or an Originator's Certificate, the transferee of such Certificate will be deemed to have represented and warranted that it is not subject to the foregoing restriction. (b) No sale or other transfer of record or beneficial ownership of the Originator's Interest shall be made unless such transfer is exempt from the registration requirements of the Securities Act of 1933, as amended, and 64 any applicable state securities laws or is made in accordance with said Act and laws. In the event such a transfer is to be made within three years from the Closing Day, (i) the Originator shall require a written opinion of counsel acceptable to and in form and substance satisfactory to the Originator that such transfer may be made pursuant to an exemption, describing the applicable exemption and the basis therefor, from said Act and laws or is being made pursuant to said Act and laws, which opinion of counsel shall not be an expense of the Trust, the Trustee, the Originator or the Sponsor, and (ii) the Trustee shall require the Transferee to execute an investment letter acceptable to and in form and substance satisfactory to the Sponsor, the Originator and the Trustee certifying to the Trustee, the Originator and the Sponsor the facts surrounding such transfer, which investment letter shall not be an expense of the Trust, the Trustee, the Originator or the Sponsor. The Owner of the Originator's Interest desiring to effect such transfer shall, and does hereby agree to, indemnify the Trustee, the Certificate Insurer, the Originator and the Sponsor against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws. (c) The holder of the Originator's Certificate may transfer all, but not less than all, of its interest in the Originator's Interest. The Originator's Interest shall not be transferred except upon satisfaction of the following conditions precedent: (i) the Person that acquires a Originator 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, and (B) expressly assume, by an agreement supplemental hereto, executed and delivered to the Trustee, the performance of every covenant and obligation of the Originator hereunder; (ii) the holder of the Originator's Interest shall deliver to the Trustee an Officer's Certificate stating that such transfer and such supplemental agreement comply with this Section 5.8 and that all conditions precedent provided by this subsection 5.8(c) have been complied with and an Opinion of Counsel stating that all conditions precedent provided by this subsection 5.8(c) have been complied with, and the 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 holder of the Originator's Interest shall deliver to the Trustee a letter from each Rating Agency confirming that its rating of the Class A Certificates, after giving effect to such transfer, will not be reduced or withdrawn without regard to the Policy; (iv) the transferee of the Originator's Interest shall deliver to the Trustee an Opinion of Counsel to the effect that (a) such transfer will not adversely affect the treatment of the Class A Certificates after such transfer as debt for federal and applicable state income tax purposes, (b) such transfer will not result in the 65 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 Certificateholder or any Certificate Owner and (d) such transfer will not result in the arrangement created by this Agreement or any "portion" of the Trust, being treated as a taxable mortgage pool as defined in Section 7701(i) of the Code; (v) all filings and other actions necessary to continue the perfection of the interest of the Trust in the Mortgage Loans and the other property conveyed hereunder shall have been taken or made. Notwithstanding the foregoing, the requirement set forth in subclause (i)(A) of this Section 5.8(c) shall not apply in the event the Trustee shall have received a letter from each Rating Agency confirming that its rating of the Class A Certificates, 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. Notwithstanding the foregoing, the requirements set forth in this paragraph (c) shall not apply to the initial issuance of the Originator's Interest to the Originator. Section 5.9. Assignment of Rights. An Owner may pledge, encumber, hypothecate or assign all or any part of its right to receive distributions hereunder, but such pledge, encumbrance, hypothecation or assignment shall not constitute a transfer of an ownership interest sufficient to render the transferee an Owner of the Trust without compliance with the provisions of Section 5.4 and Section 5.8 hereof. Section 5.10. Liabilities. The Holder of the Originator's Interest shall indemnify and hold harmless the Trust and the Trustee, its officer, directors, employees and agents from and against any reasonable loss, liability, expense, damage or injury suffered or sustained by reason of any acts, omissions or alleged acts or omissions arising out of or based upon the arrangement created by this Agreement or any Subsequent Transfer Agreement, as though this Agreement or such Subsequent Transfer Agreement created a partnership under the New York Uniform Partnership Law in which the Holder of the Originator's Interest is the general partner; provided, however, that the Holder of the Originator's Interest shall not indemnify the Trustee if such acts, omissions or alleged acts or omissions constitute or are caused by fraud, negligence, or willful misconduct by the Trustee; provided, further, that the Holder of the Originator's Interest shall not indemnify the Trust or the Owners of the Class A Certificates for any liabilities, costs or expenses of the Trust with respect to any action taken by the Trustee at the request of the Owners of the Class A Certificates; provided, further, that the Holder of the Originator's Interest shall not indemnify the Trust or the owners of the Class A Certificates as to any losses, claims or damages incurred by 66 any of them in their capacities as investors, including, without limitation, losses incurred as a result of Liquidated Mortgage Loans; and provided, further, that the Holder of the Originator's Interest shall not indemnify the Trust or the Owner of the Class A Certificates for any liabilities, costs or expenses of the Trust, the Trustee or the Owners of the Class A Certificates arising under any tax law relating to any Federal, state, local or foreign income or franchise taxes or any other tax imposed on or measured by income (or any interest or penalties with respect thereto or arising from a failure to comply therewith) required to be paid by the Trust or the Owners of the Class A Certificates in connection herewith to any taxing authority. Any such indemnification shall not be payable from the Trust Fund. The provisions of this indemnity shall run directly to and be enforceable by an injured party subject to the limitations hereof. ARTICLE VI COVENANTS Section 6.1. Distributions. The Trustee will duly and punctually pay distributions with respect to the Certificates in accordance with the terms of the Certificates and this Agreement. Such distributions shall be made (i) by check mailed on each Payment Date or (ii) if requested by any Owner, to such Owner by wire transfer to an account within the United States designated no later than five Business Days prior to the related Record Date, made on each Payment Date, in each case to each Owner of record on the immediately preceding Record Date; provided, however, that an Owner of a Class A Certificate shall only be entitled to payment by wire transfer if such Owner owns Class A Certificates in the aggregate denomination of at least $5,000,000. Section 6.2. Money for Distributions to be Held in Trust; Withholding. (a) All payments of amounts due and payable with respect to any Certificate that are to be made from amounts withdrawn from the Certificate Account pursuant to Section 7.5 hereof or from payments made pursuant to the Certificate Insurance Policy shall be made by and on behalf of the Trustee, and no amounts so withdrawn from the Certificate Account for payments of the Certificates and no payments made pursuant to the Certificate Insurance Policy shall be paid over to the Trustee except as provided in this Section. (b) The Trustee on behalf of the Trust shall comply with all requirements of the Code and applicable state and local law with respect to the withholding from any distributions made by it to any Owner of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith. 67 (c) Any money held by the Trustee in trust for the payment of any amount due with respect to any Class A Certificate and remaining unclaimed by the Owner of such Class A Certificate for the period then specified in the escheat laws of the State of New York after such amount has become due and payable shall be discharged from such trust and be paid first, to the Certificate Insurer on account of any Reimbursement Amounts, and second to the Owners of the Originator's Interest; and the Owner of such Class A Certificate shall thereafter, as an unsecured general creditor, look only to the Certificate Insurer or the Owners of the Originator's Interest for payment thereof (but only to the extent of the amounts so paid to the Certificate Insurer or the Owners of the Originator's Interest), and all liability of the Trustee with respect to such trust money shall thereupon cease; provided, however, that the Trustee, before being required to make any such payment, shall at the expense of the 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 Certificate Insurer or the Owners of the Originator's Interest. The 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 Owners whose right to or interest in monies due and payable but not claimed is determinable from the Register at the last address of record for each such Owner). Section 6.3. Protection of Trust Fund. (a) The Trustee will hold the Trust Fund in trust for the benefit of the Owners and, upon request of the Certificate Insurer, or, with the consent of the Certificate Insurer, at the request and expense of the Originator, will from time to time execute and deliver all such supplements and amendments hereto pursuant to Section 11.14 hereof and all instruments of further assurance and other instruments, and will take such other action upon such request as it deems reasonably necessary or advisable, to: (i) more effectively hold in trust all or any portion of the Trust Fund; (ii) perfect, publish notice of, or protect the validity of any grant made or to be made by this Agreement; (iii) enforce any of the Mortgage Loans; or 68 (iv) preserve and defend title to the Trust Fund and the rights of the Trustee, and the ownership interests of the Owners represented thereby, in such Trust Fund against the claims of all Persons and parties. The Trustee shall send copies of any request received from the Certificate Insurer or the Originator to take any action pursuant to this Section 6.3 to the other party. (b) The Trustee shall have the power to enforce, and shall enforce the obligations of the other parties to this Agreement and of the Certificate Insurer, by action, suit or proceeding at law or equity, and shall also have the power to enjoin, by action or suit in equity, any acts or occurrences which may be unlawful or in violation of the rights of the Owners; provided, however, that nothing in this Section shall require any action by the Trustee unless the Trustee shall first (i) have been furnished indemnity satisfactory to it and (ii) when required by this Agreement, have been requested to take such action by a majority of the Percentage Interests represented by the affected Class A Certificates then Outstanding or, if there are no longer any affected Class A Certificates then outstanding, by such majority of the Percentage Interests represented by the Originator's Interest. (c) The Trustee shall execute any instrument required pursuant to this Section so long as such instrument does not conflict with this Agreement or with the Trustee's fiduciary duties. Section 6.4. Performance of Obligations. The Trustee will not take any action that would release the Originator, the Sponsor or the Certificate Insurer from any of their respective covenants or obligations under any instrument or document relating to the Trust Fund or the Certificates or which would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or document, except as expressly provided in this Agreement or such other instrument or document. The Trustee may contract with other Persons to assist it in performing its duties hereunder. Section 6.5. Negative Covenants. The Trustee will not, to the extent within the control of the Trustee, take any of the following actions: (i) sell, transfer, exchange or otherwise dispose of any of the Trust Fund except as expressly permitted by this Agreement; 69 (ii) claim any credit on or make any deduction from the distributions payable in respect of, the Certificates (other than amounts properly withheld from such payments under the Code) or assert any claim against any present or former Owner by reason of the payment of any taxes levied or assessed upon any of the Trust Fund; (iii) incur, assume or guaranty on behalf of the Trust any indebtedness of any Person except pursuant to this Agreement; (iv) dissolve or liquidate the Trust Fund in whole or in part, except pursuant to Article IX hereof; or (v) (A) impair the validity or effectiveness of this Agreement, or release any Person from any covenants or obligations with respect to the Trust or to the Certificates under this Agreement, except as may be expressly permitted hereby or (B) create or extend any lien, charge, adverse claim, security interest, mortgage or other encumbrance to or upon the Trust Fund or any part thereof or any interest therein or the proceeds thereof. Section 6.6. No Other Powers. The Trustee will not, to the extent within the control of the Trustee, permit the Trust to engage in any business activity or transaction other than those activities permitted by Section 2.3 hereof. Section 6.7. Limitation of Suits. No Owner shall have any right to institute any proceeding, judicial or otherwise, with respect to this Agreement or the Certificate Insurance Policies or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (1) such Owner has previously given written notice to the Originator, the Sponsor and the Trustee of such Owner's intention to institute such proceeding; (2) the Owners of not less than 25% of the Percentage Interests represented by the affected Class or Classes of Certificates then Outstanding or, if there are no affected Classes of Class A Certificates then Outstanding, by such percentage of the Percentage Interests represented by the Originator's Interest, shall have made written request to the Trustee to institute such proceeding in respect of such Event of Default; 70 (3) such Owner or Owners have offered to the Trustee reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request; (4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute such proceeding; (5) as long as any Class A Certificates are Outstanding, the Certificate Insurer consented in writing thereto; and (6) no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Certificate Insurer or by the Owners of a majority of the Percentage Interests represented by the Class A Certificates or, if there are no Class A Certificates then Outstanding, by such majority of the Percentage Interests represented by the Originator's Interest; it being understood and intended that no one or more Owners shall have any right in any manner whatever by virtue of, or by availing themselves of, any provision of this Agreement to affect, disturb or prejudice the rights of any other Owner of the same Class or to obtain or to seek to obtain priority or preference over any other Owner of the same Class or to enforce any right under this Agreement, except in the manner herein provided and for the equal and ratable benefit of all the Owners of the same Class. In the event the Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Owners, each representing less than a majority of the applicable Class of Certificates, the Trustee in its sole discretion may determine what action, if any, shall be taken, notwithstanding any other provision of this Agreement. Section 6.8. Unconditional Rights of Owners to Receive Distributions. Notwithstanding any other provision in this Agreement, the Owner of any Certificate shall have the right, which is absolute and unconditional, to receive distributions to the extent provided herein and therein with respect to such Certificate or to institute suit for the enforcement of any such distribution, and such right shall not be impaired without the consent of such Owner. Section 6.9. Rights and Remedies Cumulative. Except as otherwise provided herein, no right or remedy herein conferred upon or reserved to the Trustee, the Certificate Insurer or to the Owners is intended to be exclusive of any 71 other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. Except as otherwise provided herein, the assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. Section 6.10. Delay or Omission Not Waiver. No delay of the Trustee, the Certificate Insurer or any Owner of any Certificate to exercise any right or remedy under this Agreement to any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article VI or by law to the Trustee, the Certificate Insurer or to the Owners may be exercised from time to time, and as often as may be deemed expedient, by the Trustee, the Certificate Insurer or by the Owners, as the case may be. Section 6.11. Control by Owners. The Certificate Insurer or the Owners of a majority of the Percentage Interests represented by the Class A Certificates then Outstanding, with the consent of the Certificate Insurer (which may not be unreasonably withheld) or, if there are no longer any Class A Certificates then Outstanding, by such majority of the Percentage Interests represented by the Originator's Interest then Outstanding, with the consent of the Certificate Insurer (which may not be unreasonably withheld) may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee with respect to the Certificates or exercising any trust or power conferred on the Trustee with respect to the Certificates or the Trust Fund, including, but not limited to, those powers set forth in Section 6.3 and Section 8.20 hereof; provided that: (1) such direction shall not be in conflict with any rule of law or with this Agreement; (2) the Trustee shall have been provided with indemnity satisfactory to it; and (3) the Trustee may take any other action deemed proper by the Trustee, which is not inconsistent with such direction; provided, however, that the Trustee need not take any action which it determines might involve it in liability or may be unjustly prejudicial to the Owners not so directing. 72 ARTICLE VII ACCOUNTS, DISBURSEMENTS AND RELEASES Section 7.1. Collection of Money. Except as otherwise expressly provided herein, the Trustee may demand payment or delivery of all money and other property payable to or receivable by the Trustee pursuant to this Agreement, including (a) all payments due on the Mortgage Loans in accordance with the respective terms and conditions of such Mortgage Loans and required to be paid over to the Trustee by the Master Servicer or by any Sub-Servicer and (b) payments made pursuant to the Certificate Insurance Policy. The Trustee shall hold all such money and property received by it, other than pursuant to or as contemplated by Section 6.2(b) hereof, as part of the Trust Fund and shall apply it as provided in this Agreement. Section 7.2. Establishment of Accounts. The Originator shall cause to be established, and the Trustee shall maintain, at the corporate trust office of the Trustee, a Certificate Account, a Pre-Funding Account, a Revolving Account and a Capitalized Interest Account, each to be held by the Trustee in the name of the Trust for the benefit of the Owners of the Certificates and the Certificate Insurer, as their interests may appear. Section 7.3. The Certificate Insurance Policy. (a) (i) On each Determination Date the Trustee shall determine with respect to the immediately following Payment Date, the amount (the "Available Funds") to be on deposit in the Certificate Account on such Payment Date (excluding the amounts of any payments made pursuant to the Certificate Insurance Policy, the Trustee's Fee, the Servicing Fee and the Premium Amount) and equal to the sum of amounts described in Section 7.5(a) with respect to such immediately following Payment Date. (b) If (i) the Available Funds for such Payment Date are not sufficient to pay the Class A Interest Distribution Amount and/or (ii) following the application of all Available Funds, on Overcollateralization Deficit would exist (either such event being an "Available Funds Shortfall"), the Trustee shall complete a Notice in the form of Exhibit A to the Certificate Insurance Policy and submit such notice to the Certificate Insurer no later than 12:00 noon New York City time on the second Business Day preceding such Payment Date as a claim for a payment in an amount equal to the aggregate Available Funds Shortfall. (c) Upon receipt of payments made pursuant to the Certificate Insurance Policy from the Certificate Insurer 73 on behalf of Owners, the Trustee shall deposit such payments in the Certificate Account and shall distribute such payments, or the proceeds thereof, in accordance with Section 7.5 hereof to the Owners of the Class A Certificates of the related Class. (d) The Trustee shall (i) receive payments made pursuant to the Certificate Insurance Policy as attorney-in-fact of each Owner of the Class A Certificates receiving any Insured Payment from the Certificate Insurer and (ii) disburse such Insured Payment to the Owners of such Class A Certificates as set forth in Section 7.5 hereof. The Certificate Insurer shall be entitled to receive the related Reimbursement Amount pursuant to Section 7.5(b)(ix) hereof with respect to each Insured Payment made by the Certificate Insurer. The Trustee hereby agrees on behalf of each Owner of Class A Certificates and the Trust for the benefit of the Certificate Insurer that it recognizes that to the extent the Certificate Insurer makes payments made pursuant to the Certificate Insurance Policy, either directly or indirectly (as by paying through the Trustee), to the Owners of such Class A Certificates, the Certificate Insurer will be entitled to receive such related Reimbursement Amount. Section 7.4. Pre-Funding Account and Capitalized Interest Account. (a) On the Closing Day, the Trustee will deposit from the proceeds of the sale of the Class A Certificates, on behalf of the Owners of the Class A Certificates and the Certificate Insurer, in the Pre-Funding Account, the Original Pre-Funded Amount and in the Capitalized Interest Account, the Capitalized Interest Account Deposit. (b) On each Pre-Funding Transfer Date, the Originator shall instruct the Trustee to withdraw from the Pre-Funding Account and release to the Originator an amount equal to 100% of the Principal Balance of the Pre-Funded Mortgage Loans transferred to the Trust on such Pre-Funding Transfer Date upon satisfaction of the conditions set forth in Section 3.8 hereof with respect to such transfer. (c) On the Payment Dates occurring in December, 1996, January, 1997 and February, 1997, the Trustee shall transfer from the Pre-Funding Account to the Certificate Account the Pre-Funding Earnings, if any, applicable to each such Payment Date. (d) On each Payment Date occurring during the Pre-Funding Period and the Revolving Period, the Trustee shall transfer from the Capitalized Interest Account to the Certificate Account the Capitalized Interest Requirement, if any, for such Payment Dates. 74 (e) With respect to the Payment Dates in December 1996 and January 1997, if the Originator delivers a sufficient number of Subsequent Mortgage Loans to satisfy its obligations hereunder, any amount remaining in the Capitalized Interest Account in excess of the Capitalized Interest Revolving Period Amount shall be released to the Originator on such Payment Date. On the Payment Date which immediately follows the end of the Revolving Period, and following any withdrawals from the Capitalized Interest Account on such Payment Date, the Capitalized Interest Account shall be closed and any remaining amount on deposit therein shall be paid to the Owner of the Originator's Interest. Section 7.5. Flow of Funds. (a) The Trustee shall deposit to the Certificate Account, without duplication, upon receipt, (i) any payments made pursuant to the Certificate Insurance Policy, (ii) the proceeds of any liquidation of the assets of the Trust, the Monthly Remittance Amount remitted by the Master Servicer or any Sub-Servicer, together with any Substitution Amounts, and any Loan Purchase Price amounts received by the Trustee, (iii) on the Payment Dates occurring in December, 1996, January, 1997 and February 1997, the Pre-Funding Earnings transferred by the Trustee pursuant to Section 7.4(c) hereof, (iv) the Capitalized Interest Requirement to be transferred on such Payment Dates from the Capitalized Interest Account, pursuant to Section 7.4(d) hereof and (v) the portion of the amount, if any, to be transferred on such Payment Date from the Pre-Funding Account, pursuant to Section 7.5(b)(vi) hereof and (vi) the amounts, if any, transferred from the Revolving Account pursuant to Sections 7.5(b)(vi), (vii), (viii) and (x) hereof. (b) With respect to the Certificate Account, on each Payment Date, the 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 Trustee, the Trustee's Fee then due; (ii) second, to the Owner of the Originator's Interest, the Originator's Current Amount, if any, for such Payment Date; (iii) third, from amounts then on deposit in the Certificate Account, the Premium Amount for such Payment Date. 75 (iv) fourth, to the Owners of the Class A Certificates, the Class A Interest Distribution Amount for such Payment Date; (v) fifth, to the Owners of the Class A Certificates, as a distribution of principal, the Overcollateralization Deficit for such Payment Date; (vi) sixth, if such Payment Date is the first Payment Date following the end of the Pre-Funding Period, to the Owners of the Class A Certificates as a distribution of principal any amount remaining in the Pre-Funding Account (after taking into account all transfers of Subsequent Mortgage Loans on or prior to such Payment Date); provided, that if such remaining amount is less than $100,000, such amount shall be deposited in the Revolving Account and shall be deemed to be on deposit in the Revolving Account on such Payment Date; provided that, if the amount on deposit in the Revolving Account exceeds $3,000,000, the amount of such excess shall be distributed to the Owners of the Class A Certificates as a distribution of principal; (vii) seventh, for each Payment Date during the Revolving Period to the Owner of the Originator's Interest, in exchange for the Originator's transfer as of such Payment Date of the Additional Mortgage Loans, an amount equal to the lesser of (A) the sum of (i) Net Principal Collections for the related Remittance Period and (ii) the amount on deposit in the Revolving Account at the opening of business on such Payment Date and (B) the aggregate Principal Balance as of the related Subsequent Cut-Off Date of all Additional Mortgage Loans relating to such Payment Date; provided, that if the amount described in clause (A) exceeds the amount described in clause (B), an amount equal to such excess shall be deposited to (or retained in) the Revolving Account and shall be deemed to be on deposit in the Revolving Account on such Payment Date; provided that, if the amount on deposit in the Revolving Account exceeds $3,000,000, the amount of such excess shall be distributed to the Owners of the Class A Certificates as a distribution of principal; (viii) eighth, for each Payment Date during the Amortization Period, to the Owners of the Class A Certificates as a distribution of principal, 76 the Scheduled Principal Distribution Amount for such Payment Date; plus, if such Payment Date is the first Payment Date occurring during the Amortization Period, all amounts then on deposit in the Revolving Account, after taking into account any deposits thereto and any withdrawals therefrom on such Payment Date; (ix) ninth, to the Certificate Insurer, the Reimbursement Amount, if any, then due to it; (x) tenth, (A) during the Revolving Period, (1) to the Originator, in exchange for the Originator's assignment as of such Payment Date of the O/C Mortgage Loans, to the extent available, up to an amount equal to the lesser of (a) the Overcollateralization Deficiency Amount for such Payment Date; and (b) the Principal Balance as of the related Subsequent Cut-Off Date of all such available O/C Mortgage Loans, or (2) to the extent not released to the Originator in exchange for the Originator's assignment as of such Payment Date of the O/C Mortgages, to the Revolving Account up to an amount equal to the Overcollateralization Deficiency Amount, or (3) if, on such Payment Date, the amount on deposit in the Revolving Account (after taking into account any deposits thereto and any withdrawals therefrom on such Payment Date) exceeds $3,000,000, to the Owners of the Class A Certificates as a distribution of principal the amount of such excess. (B) During the Amortization Period, to the Owners of the Class A Certificates as a distribution of principal up to an amount 77 equal to the Overcollateralization Deficiency Amount (the "Accelerated Principal Payment"); (xi) eleventh, to the Master Servicer, reimbursement for Servicing Advances to the extent not previously reimbursed and reimbursement for Servicing Advances which have been deemed Nonrecoverable Advances; (xii) twelfth, to the Owners of the Class A Certificates, the amount of any Net Funds Cap Carry-Forward Amount then due; and (xiii) thirteenth, to the holder of the Originator's Certificate, any amount remaining on deposit in the Certificate Account. Section 7.6. Investment of Accounts. (a) So long as no event described in Sections 8.20(a) or (b) hereof shall have occurred and be continuing, and consistent with any requirements of the Code, all or a portion of the Accounts held by the Trustee shall be invested and reinvested by the Trustee in the name of the Trustee for the benefit of the Owners and the Certificate Insurer, as directed in writing by the Master Servicer, in one or more Eligible Investments bearing interest or sold at a discount. During the continuance of an event described in Sections 8.20(a) or (b) hereof and following any removal of the Master Servicer, the Certificate Insurer shall direct such investments. No investment in any Account shall mature later than the Business Day immediately preceding the next Payment Date. (b) If any amounts are needed for disbursement from any Account held by the Trustee and sufficient uninvested funds are not available to make such disbursement, the Trustee shall cause to be sold or otherwise converted to cash a sufficient amount of the investments in such Account. No investments will be liquidated prior to maturity unless the proceeds thereof are needed for disbursement. (c) Subject to Section 10.1 hereof, the Trustee shall not in any way be held liable by reason of any insufficiency in any Account held by the Trustee resulting from any loss on any Eligible Investment included therein (except to the extent that the bank serving as Trustee is the obligor thereon). (d) The Trustee shall hold funds in the Accounts held by the Trustee uninvested upon the occurrence of either of the following events: 78 (i) the Master Servicer or the Certificate Insurer, as the case may be, shall have failed to give investment directions to the Trustee within ten days after receipt of a written request for such directions from the Trustee; or (ii) the Master Servicer or the Certificate Insurer, as the case may be, shall have failed to give investment directions to the Trustee during the ten-day period described in clause (i) preceding, by 11:15 a.m. New York time (or such other time as may be agreed by the Master Servicer or the Certificate Insurer, as the case may be, and the Trustee) on any Business Day (any such investment by the Trustee pursuant to this clause (ii) to mature on the next Business Day after the date of such investment). (e) For purposes of investment, the Trustee shall aggregate all amounts on deposit in the Accounts. All income or other gain from investments in the Accounts shall be deposited, pro rata, in the Accounts immediately on receipt, and any loss resulting from such investments shall be charged, pro rata, to the Accounts. Section 7.7. Eligible Investments. The following are Eligible Investments: (a) Direct general obligations of the United States or the obligations of any agency or instrumentality of the United States fully and unconditionally guaranteed, the timely payment or the guarantee of which constitutes a full faith and credit obligation of the United States. (b) Federal Housing Administration debentures. (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. 79 (g) Investment agreements approved by the Certificate Insurer provided: 1. The agreement is with a bank or insurance company which has an unsecured, uninsured and unguaranteed obligation (or claims-paying ability) rated Aa2 or better by Moody's and AA or better by 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 Trustee and the Certificate Insurer receive an opinion of counsel that such agreement is an enforceable obligation of such insurance company or bank. (h) Commercial paper (having original maturities of not more than 365 days) rated A-1 or better by S&P and P-1 or better by Moody's. (i) Investments in money market funds rated AAAm or AAAm-G by S&P and AAA or P-1 by Moody's. (j) Investments approved in writing by the Certificate 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 7.8. Reports by Trustee. [Revise] (a) On each Payment Date the Trustee shall provide to each Owner, to the Master Servicer, to the Certificate Insurer, to 80 each Underwriter, to the Originator, to the Sponsor, to S&P and to Moody's a written report in substantially the form set forth as Exhibit J hereto, as such form may be revised by the Trustee, the Master Servicer, Moody's and S&P from time to time, but in every case setting forth the information requested on Exhibit J hereto and the following information: (i) the Class A Certificate Distribution Amount; (ii) the amount of such distributions allocable to principal; (iii) the amount of such distributions allocable to interest and the related Class A Certificate; (iv) the amount of any Unpaid Class A Certificate Interest Shortfall in such distribution; (v) the amount of any Insured Payment included in the amounts distributed Certificates on such Payment Date; (vi) information furnished by the Originator pursuant to Section 6049(d)(7)(C) of the Code and the regulations promulgated thereunder to assist the Owners in computing their market discount; (vii) the total of any Substitution Amounts and any Loan Purchase Price amounts included in such distribution; (viii) for Payment Dates during the Pre-Funding Period, the remaining Pre-Funded Amount; (ix) for the final Subsequent Transfer Date, the amount of any remaining Pre-Funded Amount that has not been used to fund the purchase of Subsequent Mortgage Loans and that will be distributed to the Owners of the related class of certificates as principal, if any, on the immediately following Payment Date; (x) the amounts, if any, of any Realized Losses for the related Remittance Period; and (xi) the amount, if any, of principal in such distribution, separately stating the components thereof; (xii) the Servicing Fee for such Payment Date; (xiii) the Class A Principal Balance and the Pool Factor, each after giving effect to such distribution; 81 (xiv) the Pool Balance as of the end of the preceding Remittance Period and the Pool Balance at the close of business on the last day of the related Remittance Period; (xv) the Insured Payment, if any; (xvi) the number and aggregate Principal Balances of Mortgage Loans as to which the Minimum Monthly Payment is delinquent for 30-59 days, 60-89 days and 90 or more days, respectively, as of the end of the preceding Remittance Period; (xvii) the book value (within the meaning of 12 C.F.R. ss. 571.13 or comparable provision) of any real estate acquired through foreclosure or grant of a deed in lieu of foreclosure; (xviii) the Class A Pass-Through Rate applicable to the distribution on the following Payment Date; (xix) the number and principal balances of any Mortgage Loans retransferred to the Originator pursuant to (a) Section 3.6 and (b) Section 3.9; (xx) the Overcollateralization Deficit; (xxi) the aggregate Principal Balance of the Subsequent Mortgage Loans for the related Remittance Period; (xxii) the amount of the Accelerated Principal Payment, if any, for the related Payment Date; (xxiii) the amount of any Net Funds Cap Carry-Forward Amount; (xxiv) the amount of any Step-Down Amount; (xxv) the amount of the Originator's Interest; and (xxvi) the amount of the Non-Subordinated Originator's Interest. Items (i) through (iii) above shall, with respect to each Class of Class A Certificates, be presented on the basis of a Certificate having a $1,000 denomination. In addition, by January 31 of each calendar year following any year during which the Certificates are outstanding, the Trustee shall furnish a report to each Owner of record at any time during each calendar year as to the aggregate of amounts reported pursuant to (i), (ii) and (iii) with respect to the Certificates for such calendar year. 82 (b) In addition, on each Payment Date the Trustee will distribute to each Owner, to the Certificate Insurer, to each Underwriter, to the Master Servicer, to the Originator, 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 Trustee for such purpose on or prior to the related Remittance Date: (i) the total number of Mortgage Loans and the Principal Balances thereof, together with the number, aggregate Principal Balances of such Mortgage Loans and the percentage (based on the aggregate Principal Balance of the Mortgage Loans) of the aggregate Principal Balance of such Mortgage Loans to the aggregate Principal Balance of all Mortgage Loans (a) 30-59 days Delinquent, (b) 60-89 days Delinquent and (c) 90 or more days Delinquent; (ii) the number, aggregate Principal Balances of all Mortgage Loans and percentage (based on the aggregate Principal Balance of the Mortgage Loans) of the aggregate Principal Balance of such Mortgage Loans to the aggregate Principal Balance of all Mortgage Loans in foreclosure proceedings (and whether any such Mortgage Loans are also included in any of the statistics described in the foregoing clause (i)); (iii) the number, aggregate Principal Balances of all Mortgage Loans and percentage (based on the aggregate Principal Balance of the Mortgage Loans) of the aggregate Principal Balance of such Mortgage Loans to the aggregate Principal Balance of all Mortgage Loans relating to Mortgagors in bankruptcy proceedings (and whether any such Mortgage Loans are also included in any of the statistics described in the foregoing clause (i)); (iv) the number, aggregate Principal Balances of all Mortgage Loans and percentage (based on the aggregate Principal Balance of the Mortgage Loans) of the aggregate Principal Balance of such Mortgage Loans to the aggregate Principal Balance of all Mortgage Loans relating to REO Properties (and whether any such Mortgage Loans are also included in any of the statistics described in the foregoing clause (i)); and (v) the book value of any REO Property. (c) The foregoing reports shall be sent be to an Owner only insofar as such Owner owns a Certificate. Section 7.9. Additional Reports by Trustee. (a) The Trustee shall report to the Originator, the Master 83 Servicer and the Certificate Insurer with respect to the amount then held in each Account (including investment earnings accrued or scheduled to accrue) held by the Trustee and the identity of the investments included therein, as the Originator, the Master Servicer or the Certificate Insurer may from time to time request. Without limiting the generality of the foregoing, the Trustee shall, at the request of the Originator, the Master Servicer or the Certificate Insurer, transmit promptly to the Originator, the Master Servicer and the Certificate Insurer copies of all accounting of aggregate receipts in respect of the Mortgage Loans furnished to it by the Master Servicer pursuant to Section 8.8(d)(ii) hereof and shall notify the Originator, the Master Servicer and the Certificate Insurer if any such receipts have not been received by the Trustee. (b) From time to time, at the request of the Certificate Insurer, the Trustee shall report to the Certificate 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) hereof. On the date that is eighteen months after the Closing Day, the Trustee shall provide the Certificate Insurer with a written report of all of such inaccuracies to such date of which it has actual knowledge, without independent investigation, and of the action taken by the Originators under Section 3.4(b) hereof with respect thereto. (c) On a quarterly basis during the Revolving Period, commencing on February 26, 1997 the Master Servicer shall deliver to the Certificate Insurer, Moody's and S&P a mortgage portfolio tape containing the characteristics of all Subsequent Mortgage Loans added to the Trust since the Closing Date. ARTICLE VIII SERVICING AND ADMINISTRATION OF MORTGAGE LOANS Section 8.1. 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 Trustee and the Certificate 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 84 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 Trustee to, execute and deliver, on behalf of itself, the Owners, the Certificate Insurer and the Trustee or any of them, any and all instruments of satisfaction or cancellation, or of 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 Trustee shall furnish the Master Servicer or its Sub-Servicers with any powers of attorney and such other documents as may be necessary or appropriate to enable the Master Servicer to carry out its servicing and administrative duties hereunder. In servicing and administering the Mortgage Loans, the Master Servicer shall employ procedures consistent with Accepted Servicing Practices and in a manner consistent with recovery under any insurance policy required to be maintained by the Master Servicer pursuant to this Agreement. Costs incurred by the Master Servicer in effectuating the timely payment of taxes and assessments on the property securing a Credit Line Agreement and foreclosure costs may be added by the Master Servicer to the amount owing under such Credit Line Agreement where the terms of such Credit Line Agreement so permit; provided, however, that the addition of any such cost shall not be taken into account for purposes of calculating the principal amount of the Credit Line Agreement and the Mortgage Loan secured by the Credit Line Agreement or distributions to be made to Owners. Such costs shall be recoverable by the Master Servicer pursuant to Section 8.9 and 8.13. (c) Without limiting the generality of the foregoing, the Master Servicer shall continue, and is hereby authorized and empowered by the Trustee, to execute and deliver, on behalf of itself, the Owners, the Certificate Insurer and the Trustee or any of them, any and all instruments of satisfaction or cancellation, or of partial or full release or discharge and all other comparable instruments, with respect to the Mortgage Loans and with respect to the related Properties, including consenting to the placement of a lien senior to that of any Mortgage on the related Mortgaged Property; provided, that, (x) such Mortgage succeeded to a first lien position after the related Mortgage Loan was conveyed to 85 the Trust and, immediately following the placement of such senior lien, such Mortgage is in a second lien position and the outstanding principal amount of the mortgage loan secured by such subsequent senior lien is no greater than the outstanding principal amount of the senior mortgage loan secured by the Mortgaged Property as of the date the related Mortgage Loan was originated; or (y) the Mortgage relating to such Mortgage Loan was in a second lien position as of the related Cut-Off Date and the new senior lien secures a mortgage loan that refinances an existing first mortgage loan and the outstanding principal amount and interest rate of the replacement first mortgage loan immediately following such refinancing is not greater than the outstanding principal amount and interest rate of such existing first mortgage loan at the date of origination of such Mortgage Loan; provided, further, that such senior lien does not secure a note that provides for negative amortization. Notwithstanding the foregoing, the Master Servicer can consent to the placing of liens senior to that of a Mortgage on the related Mortgaged Property only if the Combined Loan-to-Value and second mortgage ratio is less than or equal to the original Combined Loan-to-Value and second mortgage ratio; provided, however, the Master Servicer may consent to the placing of a senior lien on up to 3.7% of the Mortgage Loans if the Combined Loan-to-Value will not increase to greater than 80%; provided, further that the Master Servicer may only approve modifications if the related Mortgagor has used the Credit Line Agreement in the past twelve months and has made timely payments, the current characteristics of the related Mortgagor are consistent with the Accepted Servicing Practices and the Master Servicer receives verbal verification of employment of the related Mortgagor. At the written direction of the Originator, the Master Servicer may also, without prior approval from the Rating Agencies or the Certificate Insurer, increase the Credit Limits on Mortgage Loans provided that (i) new appraisals are obtained and the Combined Loan-to-Value Ratios of the Mortgage Loans after giving effect to such increase are less than or equal to the Combined Loan-to-Value Ratios or the Mortgage Loans as of the related Cut-Off Date, (ii) such increases are consistent with the Accepted Servicing Practices, (iii) the related Mortgagor has used the Credit Line Agreement in the past twelve months and has made timely payments and (iv) the Master Servicer receives verbal verification of employment of the related Mortgagor. In addition, the Master Servicer, at the written direction of the Originator may increase the 86 Credit Limits on Mortgage Loans having aggregate balances of up to 5% of the aggregate Cut-Off Date Pool Balance, without obtaining new appraisals provided that (i) the increase in the Credit Limit does not cause the Combined Loan-to-Value Ratios of the Mortgage Loans to exceed 80%, (ii) the increase is consistent with Accepted Servicing Practices, (iii) the related Mortgagor has used the Credit Line Agreement in the past twelve months and has made timely payments and (iv ) the Master Servicer receives verbal verification of employment of the related Mortgagor. Furthermore, the Master Servicer may, without prior approval from the Rating Agencies and the Certificate Insurer solicit Mortgagors for a reduction in Loan Rates of no more than .50%; provided that the Master Servicer can only reduce such Loan Rates on up to 5% of the Mortgage Loans by Pool Balance. Any such solicitations shall not result in a reduction in the weighted average Margin of the Mortgage Loans in the pool by more than 2.5 basis points taking into account any such prior reductions. Subject to the above limitations, the Master Servicer may agree to changes in the terms of a Mortgage Loan at the request of the Mortgagor; provided, that such changes (i) do not materially and adversely affect the interests of Owners or the Certificate Insurer and (ii) are consistent with Accepted Servicing Practices. In addition to the foregoing, the Master Servicer may solicit Mortgagors to change any other terms of the related Mortgage Loans; provided, that such changes (i) do not materially and adversely affect the interest of Owners or the Certificate Insurer and (ii) are consistent with Accepted Servicing Practices. Nothing herein shall limit the right of the Master Servicer to solicit Mortgagors with respect to new loans (including mortgage loans) that are not Mortgage Loans. The relationship of the Master Servicer (and of any successor to the Master Servicer as servicer under this Agreement) to the Trustee under this Agreement is intended by the parties to be that of an independent contractor and not that of a joint venturer, partner or agent. In the event that the rights, duties and obligations of the Master Servicer are terminated hereunder, any successor to the Master Servicer in its sole discretion may, to the extent permitted by applicable law, terminate the existing subservicer arrangements with any subservicer or assume the terminated Master Servicer's rights under such subservicing arrangements which termination or assumption will not violate the terms of such arrangements. 87 (d) The Master Servicer may consent to any modification of the terms of any Credit Line Agreement not expressly prohibited hereby if the effect of any such modification will not be to affect materially and adversely the security afforded by the related Mortgaged Property, the timing of receipt of any payments required hereby or the interests of the Certificate Insurer; (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 8.13 and 8.14, the Master Servicer in its own name or in the name of a Sub-Servicer may be authorized and empowered pursuant to a power of attorney executed and delivered by the Trustee to execute and deliver, and may be authorized and empowered by the Trustee, to execute and deliver, on behalf of itself, the Owners and the Trustee or any of them, (i) any and all instruments of satisfaction or cancellation or of partial or full release or discharge and all other comparable instruments with respect to the Mortgage Loans and with respect to the Properties, (ii) and to institute foreclosure proceedings or obtain a deed in lieu of foreclosure so as to effect ownership of any Mortgaged Property on behalf of the Trustee, and (iii) to hold title to any Mortgaged Property upon such foreclosure or deed in lieu of foreclosure on behalf of the Trustee; provided, however, that Section 8.14(a) shall constitute a power of attorney from the Trustee to the Master Servicer to execute an instrument of satisfaction (or assignment of mortgage without recourse) with respect to any Mortgage Loan paid in full (or with respect to which payment in full has been escrowed). Subject to Sections 8.13 and 8.14, the Trustee shall furnish the Master Servicer and any Sub-Servicer with any powers of attorney and other documents as the Master Servicer or such Sub-Servicer shall reasonably request to enable the Master Servicer and such Sub-Servicer to carry out their respective servicing and administrative duties hereunder. (g) The Master Servicer shall give prompt notice to the Trustee of any action, of which the Master Servicer has actual knowledge, to (i) assert a claim against the Trust or (ii) assert jurisdiction over the Trust. (h) Servicing Advances incurred by the Master Servicer or any Sub-Servicer in connection with the servicing 88 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 8.9 and in Section 7.5(b)(xi) hereof. Section 8.2. Collection of Certain Mortgage Loan Payments. (a) In accordance with Accepted Servicing Practices and subject to the limitations set forth in Section 8.1, 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 December 2020; or (iii) modify payments of monthly principal and interest on any Mortgage Loan becoming subject to the terms of the Civil Relief Act, as amended, in accordance with the Master Servicer's general policies of the comparable mortgage loans subject to such Act. (b) The Master Servicer shall hold in escrow on behalf of the related Mortgagor all Prepaid Installments received by it, and shall apply such Prepaid Installments as directed by such Mortgagor and as set forth in the related Credit Line Agreement. Section 8.3. Sub-Servicing Agreements Between Master Servicer and Sub-Servicers. The Master Servicer may enter into Sub-Servicing Agreements for any servicing and administration of Mortgage Loans with any institution which is acceptable to the Certificate 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 Certificate Insurer of the appointment of any Sub-Servicer and shall furnish to the Certificate Insurer a copy of the Subservicing Agreement. For purposes of this Agreement, the Master Servicer shall be deemed to have received payments on Mortgage Loans when any Sub-Servicer has received such payments. Any such Sub-Servicing Agreement shall be consistent with and not violate the provisions of this Agreement. Section 8.4. Successor Sub-Servicers. The Master Servicer may terminate any Sub-Servicing Agreement in accordance with the terms and conditions of such Sub-Servicing Agreement and to either directly service the related Mortgage 89 Loans itself or enter into a Sub-Servicing Agreement with a successor Sub-Servicer that qualifies under Section 8.3. Section 8.5. Liability of Master Servicer. The Master Servicer shall not be relieved of its obligations under this Agreement notwithstanding any Sub-Servicing Agreement or any of the provisions of this Agreement relating to agreements or arrangements between the Master Servicer and a Sub-Servicer or otherwise, and the Master Servicer shall be obligated to the same extent and under the same terms and conditions as if it alone were servicing and administering the Mortgage Loans. The Master Servicer shall be entitled to enter into any agreement with a Sub-Servicer for indemnification of the Master Servicer by such Sub-Servicer and nothing contained in such Sub-Servicing Agreement shall be deemed to limit or modify this Agreement. The Trust shall not indemnify the Master Servicer for any losses due to the Master Servicer's or any Sub-Servicer's negligence. Section 8.6. No Contractual Relationship Between Sub-Servicer and Trustee or the Owners. Any Sub-Servicing Agreement and any other transactions or services relating to the Mortgage Loans involving a Sub-Servicer shall be deemed to be between the Sub-Servicer and the Master Servicer alone and the Certificate Insurer, the Trustee and the Owners shall not be deemed parties thereto and shall have no claims, rights, obligations, duties or liabilities with respect to any Sub-Servicer except as set forth in Section 8.7. Section 8.7. Assumption or Termination of Sub-Servicing Agreement by Trustee. In connection with the assumption of the responsibilities, duties and liabilities and of the authority, power and rights of the Master Servicer hereunder by the Trustee pursuant to Section 8.20, it is understood and agreed that the Master Servicer's rights and obligations under any Sub-Servicing Agreement then in force between the Master Servicer and a Sub-Servicer may be assumed or terminated by the Trustee at its option. The Master Servicer shall, upon request of the Trustee, but at the expense of the Master Servicer, deliver to the assuming party documents and records relating to each Sub-Servicing Agreement and an accounting of amounts collected and held by it and otherwise use its best reasonable efforts to effect the orderly and efficient transfer of the Sub-Servicing Agreements to the assuming party. 90 Section 8.8. Principal and Interest Account. (a) The Master Servicer and/or each Sub-Servicer, as applicable, shall establish in the name of the Trust for the benefit of the Owners of the Certificates and the Certificate Insurer and maintain at one or more Designated Depository Institutions the Principal and Interest Account. Subject to Subsections (c) and (e) below, the Master Servicer and any Sub-Servicer shall deposit all receipts related to the Mortgage Loans to the Principal and Interest Account on a daily basis (but no later than the second Business Day after receipt). On the Closing Day, and on each Subsequent Transfer Date and each Transfer Date, the Originator shall cause the Master Servicer to deposit to the Principal and Interest Account all receipts related to the related Mortgage Loans received after the Initial Cut-Off Date or related Replacement Cut-Off Date or related Subsequent Cut-Off Date, as the case may be. (b) All funds in the Principal and Interest Account may only be held (i) uninvested, up to the limits insured by the FDIC or (ii) invested in Eligible Investments. The Principal and Interest Account shall be held in trust in the name of the Trust and for the benefit of the Owners of the Certificates and the Certificate Insurer. Any investment earnings on funds held in the Principal and Interest Account shall be for the account of the Master Servicer and may only be withdrawn from the Principal and Interest Account by the Master Servicer immediately following the remittance of the Monthly Remittance Amounts by the Master Servicer. Any references herein to amounts on deposit in the Principal and Interest Account shall refer to amounts net of such investment earnings. The Master Servicer shall deposit the amount of any investment losses immediately into the Principal and Interest Account as realized. (c) Subject to Subsection (e) below, the Master Servicer shall deposit to the Principal and Interest Account all principal and interest collections on the Mortgage Loans received on or after the Initial Cut-Off Date or related Subsequent Cut-Off Date, as the case may be, including any Prepayments and Net Liquidation Proceeds, all Loan Purchase Prices and Substitution Amounts received or paid by the Master Servicer with respect to the Mortgage Loans and other recoveries or amounts related to the Mortgage Loans received by the Master Servicer, together with any amounts which are reimbursable from the Principal and Interest Account, but net of (i) the Servicing Fee with respect to each Mortgage Loan and other servicing compensation to the Master Servicer as permitted by Section 8.15 hereof, (ii) principal (including 91 Prepayments) collected on the related Mortgage Loans prior to the Initial Cut-Off Date or related Subsequent Cut-Off Date, as the case may be, (iii) interest accruing on the related Mortgage Loans prior to the Initial Cut-Off Date or related Subsequent Cut-Off Date, as the case may be and (iv) Net Liquidation Proceeds to the extent such Net Liquidation Proceeds exceed the Principal Balance of the related Mortgage Loan. (d) (i) The Master Servicer may make withdrawals from the Principal and Interest Account only for the following purposes: (A) to effect the timely remittance to the Trustee of the Monthly Remittance Amounts due on the Remittance Date; (B) to pay to itself from any funds in the Principal and Interest Account any accrued and unpaid Servicing Fees and reimburse itself pursuant to Section 8.9(a) hereof for unreimbursed Servicing Advances and Servicing Advances which have been deemed Nonrecoverable Advances; (C) to withdraw investment earnings on amounts on deposit in the Principal and Interest Account; (D) to withdraw amounts that have been deposited to the Principal and Interest Account in error; and (E) to clear and terminate the Principal and Interest Account following the termination of the Trust Fund pursuant to Article X. (ii) On the tenth day of each month, the Master Servicer shall send to the Trustee a report, in the form of a computer tape, detailing the aggregate payments on the total Mortgage Loans during the prior Remittance Period. Such tape shall be in the form and have the specifications as may be agreed to between the Master Servicer and the Trustee from time to time. (iii) On each Remittance Date the Master Servicer shall remit to the Trustee by wire transfer, or otherwise make funds available in immediately available funds, the Interest Remittance Amount and the Principal Remittance Amount. (e) To the extent that the ratings, if any, then assigned to the unsecured debt of the Master Servicer or of the Master Servicer's ultimate corporate parent are satisfactory to the Certificate Insurer, Moody's and S&P, then 92 the requirement to maintain the Principal and Interest Account may be waived by an instrument signed by the Certificate Insurer, S&P and Moody's, and the Master Servicer may be allowed to co-mingle with its general funds the amounts otherwise required to be deposited to the Principal and Interest Account, on such terms and subject to such conditions as the Certificate Insurer, Moody's and S&P may permit. Section 8.9. Servicing Advances. The Master Servicer will pay all "out-of-pocket" costs and expenses incurred in the performance of its servicing obligations, including, but not limited to, the cost of (i) Preservation Expenses, (ii) any enforcement or judicial proceedings, including foreclosures, and (iii) the management and liquidation of REO Property, but is only required to pay such costs and expenses to the extent the Master Servicer reasonably believes such costs and expenses will increase Net Liquidation Proceeds on the related Mortgage Loan. Each such amount so paid will constitute a "Servicing Advance". The Master Servicer may recover Servicing Advances (x) from the Mortgagors to the extent permitted by the Mortgage Loans, from Liquidation Proceeds realized upon the liquidation of the related Mortgage Loan, from Insurance Proceeds, and (y) as provided in Section 7.5(b)(xi) hereof. Section 8.10. Purchase of Mortgage Loans. The Master Servicer may, but is not obligated to, purchase for its own account any Mortgage Loan which becomes Delinquent, in whole or in part, as to 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 8.13. Any such Loan so purchased shall be purchased by the Master Servicer on a Remittance Date at a purchase price equal to the Loan Purchase Price thereof, which purchase price shall be deposited in the Principal and Interest Account. Section 8.11. Maintenance of Insurance. (a) The Master Servicer shall cause to be maintained with respect to each Mortgage Loan a hazard insurance policy with a generally acceptable carrier that provides for fire and extended coverage, and which provides for a recovery by the Master Servicer on behalf of the Trust of insurance proceeds relating to such Mortgage Loan in an amount not less than the least of (i) the outstanding principal balance of the Mortgage Loan or (ii) the maximum insurable value of the Mortgaged Property. (b) If the Mortgage Loan at the time of origination relates to a Mortgaged Property in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, the Master Servicer will cause to be maintained with respect thereto a flood insurance policy in a form meeting the requirements of the current guidelines of the Federal Insurance Administration with a generally 93 acceptable carrier in an amount representing coverage, and which provides for a recovery by the Master Servicer on behalf of the Trust of insurance proceeds relating to such Mortgage Loan of not less than the least of (i) the outstanding Principal Balance of the Mortgage Loan or (ii) the maximum amount of insurance that is available under the Flood Disaster Protection Act of 1973. The Master Servicer shall indemnify the Trust and the Certificate Insurer out of the Master Servicer's own funds for any loss to the Trust and the Certificate Insurer resulting from the Master Servicer's failure to maintain the insurance required by this Section. It is understood and agreed that such insurance shall be with insurers approved by the Master Servicer and that no earthquake or other additional insurance is to be required of any Mortgagor or to be maintained on property acquired in respect of a defaulted loan, other than pursuant to such applicable laws and regulations as shall at any time be in force and as shall require such additional insurance. Any cost incurred by the Master Servicer in maintaining any such insurance shall be added to the amount owing under the Mortgage Loan where the terms of the Mortgage Loan so permit; provided, however, that the addition of any such cost shall not be taken into account for purposes of calculating the principal amount of the Credit Line Agreement or the distributions to be made to the Owners. Such costs shall be recoverable by the Servicer pursuant to Section 8.9. (c) In the event that the Master Servicer shall obtain and maintain a blanket policy insuring against fire, flood and hazards of extended coverage on all of the Mortgage Loans, then, to the extent such policy names the Master Servicer as loss payee and provides coverage in an amount equal to the aggregate unpaid principal balance on the Mortgage Loans without co-insurance, and otherwise complies with the requirements of this Section 8.11, the Master Servicer shall be deemed conclusively to have satisfied its obligations with respect to fire and hazard insurance coverage under this Section 8.11, it being understood and agreed that such blanket policy may contain a deductible clause, in which case the Master Servicer shall, in the event that there shall not have been maintained on the related Mortgaged Property a policy complying with the preceding paragraphs of this Section 8.11, and there shall have been a loss which would have been covered by such policy, deposit in the Principal and Interest Account from the Master Servicer's own funds the difference, if any, between the amount that would have been payable under a policy complying with the preceding paragraphs of this Section 8.11 and the amount paid under such blanket policy. Upon the request of the Trustee or the Certificate Insurer, the Master Servicer shall cause to be delivered to the Trustee or the Certificate Insurer, a certified true copy of such policy. 94 Section 8.12. Due-on-Sale Clauses; Assumption and Substitution Agreements. When a Mortgaged Property has been or is about to be conveyed by the Mortgagor, the Master Servicer shall, to the extent it has knowledge of such conveyance or prospective conveyance, exercise its rights to accelerate the maturity of the related Mortgage Loan under any "due-on-sale" clause contained in the related Mortgage or Credit Line Agreement; provided, however, that the Master Servicer shall not exercise any such right if (i) the "due-on-sale" clause, in the reasonable belief of the Master Servicer, is not enforceable under applicable law or (ii) the Master Servicer reasonably believes that to permit an assumption of the Mortgage Loan would not materially and adversely affect the interest of the Owners or of the Certificate Insurer. In such event, the Master Servicer shall enter into an assumption and modification agreement with the person to whom such property has been or is about to be conveyed, pursuant to which such person becomes liable under the Credit Line Agreement and, unless prohibited by applicable law or any of the agreements, guaranties or assignments relating to the Mortgage Loans contained in the Advanta 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 Certificate 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 Trustee that any such assumption or substitution agreement has been completed by forwarding to the Trustee the original copy of such assumption or substitution agreement, which copy shall be added by the Trustee to the related 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 95 paid to the Master Servicer as additional servicing compensation. Notwithstanding the foregoing paragraph or any other provision of this Agreement, the Master Servicer shall not be deemed to be in default, breach or any other violation of its obligations hereunder by reason of any assumption of a Mortgage Loan by operation of law or any assumption which the Master Servicer may be restricted by law from preventing, for any reason whatsoever. Section 8.13. Realization Upon Defaulted Mortgage Loans. (a) The Master Servicer shall foreclose upon or otherwise comparably effect the ownership on behalf of the Mortgaged Properties relating to defaulted Mortgage Loans as to which no satisfactory arrangements can be made for collection of Delinquent payments and which the Master Servicer has not purchased pursuant to Section 8.10. In connection with such foreclosure or other conversion, the Master Servicer shall exercise such of the rights and powers vested in it hereunder, and use the same degree of care and skill in their exercise or use, as prudent mortgage lenders would exercise or use under the circumstances in the conduct of their own affairs, including, but not limited to, advancing funds for the payment of taxes, amounts due with respect to Senior Liens, and insurance premiums. Any amounts so advanced shall constitute "Servicing Advances" within the meaning of Section 8.9 hereof. Notwithstanding the generality of the foregoing provisions, the Master Servicer shall manage, conserve, protect and operate each REO Property for the Owners solely for the purpose of its prompt disposition and sale. Pursuant to its efforts to sell such REO Property, the Master Servicer shall either itself or through an agent selected by the Master Servicer protect and conserve such REO Property in the same manner and to such extent as is customary in the locality where such REO Property is located and may, incident to its conservation and protection of the interests of the Owners, rent the same, or any part thereof, as the Master Servicer deems to be in the best interest of the Owners for the period prior to the sale of such REO Property. The Master Servicer shall take into account the existence of any hazardous substances, hazardous wastes or solid wastes, as such terms are defined in the Comprehensive Environmental Response Compensation and Liability Act, the Resource Conservation and Recovery Act of 1976, or other federal, state or local environmental legislation, on a Mortgaged Property in determining whether to foreclose upon or otherwise comparably convert the ownership of such Mortgaged Property. (b) The Master Servicer shall determine, with respect to each defaulted Mortgage Loan, when it has recovered, whether through trustee's sale, foreclosure sale or otherwise, all amounts it expects to recover from or on 96 account of such defaulted Mortgage Loan, whereupon such Mortgage Loan shall become a "Liquidated Mortgage Loan" and shall promptly deliver to the Certificate Insurer a related Liquidation Report with respect to such Mortgage Loan. Section 8.14. 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 Trustee a Master Servicer's Trust Receipt. Upon receipt of such Master Servicer's Trust Receipt, the 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 Trustee, in each case pending its release by the Master Servicer, such escrow agent or such employee, agent or attorney of the Trustee, as the case may be. Upon any such payment in full, or the receipt of such notification that such funds have been placed in escrow, the Master Servicer is authorized to give, as attorney-in-fact for the Trustee and the mortgagee under the Mortgage which secured the Credit Line Agreement, an instrument of satisfaction (or assignment of Mortgage without recourse) regarding the Mortgaged Property relating to such Mortgage, which instrument of satisfaction or assignment, as the case may be, shall be delivered to the Person or Persons entitled thereto against receipt therefor of payment in full, it being understood and agreed that no expense incurred in connection with such instrument of satisfaction or assignment, as the case may be, shall be chargeable to the Principal and Interest Account. In lieu of executing any such satisfaction or assignment, as the case may be, the Master Servicer may prepare and submit to the Trustee, a satisfaction (or assignment without recourse, if requested by the Person or Persons entitled thereto) in form for execution by the Trustee with all requisite information completed by the Master Servicer; in such event, the Trustee shall execute and acknowledge such satisfaction or assignment, as the case may be, and deliver the same with the related 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 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 Trustee), upon request of the Master Servicer and delivery to the Trustee of a Master Servicer's Trust Receipt, release the related Mortgage File to the Master Servicer and 97 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 10% of the entire number of Mortgage Files. The Trustee shall complete in the name of the Trustee any endorsement in blank on any Credit Line Agreement prior to releasing such Credit Line Agreement to the Master Servicer. Such receipt shall obligate the Master Servicer to return the Mortgage File to the 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 Trustee to the Master Servicer. (c) The Master Servicer shall have the right to approve applications of Mortgagors for consent to (i) partial releases of Mortgages, (ii) alterations to Mortgaged Properties and (iii) removal, demolition or division of Mortgaged Properties. No application for approval shall be considered by the Master Servicer unless: (x) the provisions of the related Credit Line Agreement and Mortgage have been complied with; (y) the Combined Loan-to-Value Ratio (which may, for this purpose, be determined at the time of any such action in a manner reasonably acceptable to the Certificate Insurer) and the Mortgagor's debt-to-income ratio after any release does not exceed the maximum Combined Loan-to-Value Ratio and debt-to-income ratio specified as the then-current maximum levels under the Originator's underwriting guidelines for a similar credit grade borrower and (z) the lien priority of the related Mortgage is not adversely affected. Upon receipt by the Trustee and the Certificate 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 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 8.14 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 Certificate Insurer, Moody's and S&P pursuant to Section 3.5(k) hereof. 98 (f) Each Master Servicer's Trust Receipt may be delivered to the Trustee (i) via mail or courier, (ii) via facsimile or (iii) by such other means, including, without limitation, electronic or computer readable medium, as the Master Servicer and the Trustee shall mutually agree. The Trustee shall promptly release the related Mortgage File(s) within five (5) to seven (7) business days of receipt of a properly completed Master Servicer's Trust Receipt pursuant to clauses (i), (ii) or (iii) above or such shorter period as may be agreed upon by the Master Servicer and the Trustee. Receipt of a Master Servicer's Trust Receipt pursuant to clauses (i), (ii) or (iii) above shall be authorization to the Trustee to release such Mortgage Files, provided the Trustee has determined that such Master Servicer's Trust Receipt has been executed, with respect to clauses (i) or (ii) above, or approved, with respect to clause (iii) above, by an Authorized Officer of the Master Servicer or any Sub-servicer, and so long as the Trustee complies with its duties and obligations under this Agreement. If the Trustee is unable to release the Mortgage Files within the time frames previously specified, the Trustee shall immediately notify the Master Servicer or any Sub-servicer indicating the reason for such delay, but in no event shall such notification be later than five business days after receipt of a Master Servicer's Trust Receipt. If the Master Servicer is required to pay penalties or damages due solely to the Trustee's negligent failure to release the related Mortgage File or the Trustee's negligent failure to execute and release documents in a timely manner, the Trustee shall be liable for such penalties or damages. On each day that the Master Servicer remits to the Trustee Master Servicer's Trust Receipts pursuant to clauses (ii) or (iii) above, the Master Servicer or any Sub-servicer shall also submit to the Trustee a summary of the total amount of such Master Servicer's Trust Receipts requested on such day by the same method as described in such clauses (ii) or (iii) above. Section 8.15. Servicing Compensation. As compensation for its activities hereunder, the Master Servicer shall be entitled to retain the amount of the Servicing Fee with respect to each Mortgage Loan. Additional servicing compensation in the form of prepayment charges, 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 8.8(c)(v) and similar items may, to the extent collected from Mortgagors, be retained by the Master Servicer. Section 8.16. Annual Statement as to Compliance. The Master Servicer, at its own expense, will deliver to the Trustee, Certificate Insurer, S&P and Moody's, on or before 99 the fifteenth of April of each year, commencing in 1997, an Officer's Certificate stating, as to each signer thereof, that (i) a review of the activities of the Master Servicer during such preceding calendar year and of performance under this Agreement has been made under such officers' supervision, and (ii) to the best of such officers' knowledge, based on such review, the Master Servicer has fulfilled all its obligations under this Agreement for such year, or, if there has been a default in the fulfillment of all such obligations, specifying each such default known to such officers and the nature and status thereof including the steps being taken by the Master Servicer to remedy such defaults. Section 8.17. Annual Independent Certified Public Accountants' Reports. On or before the fifteenth of April of each year, commencing in 1997, the Master Servicer, at its own expense, shall cause to be delivered to the Trustee, the Certificate Insurer, S&P and Moody's a letter or letters of a firm of independent, nationally recognized certified public accountants reasonably acceptable to the Certificate Insurer stating that such firm has, with respect to the Master Servicer's overall servicing operations (i) performed applicable tests in accordance substantially in compliance with the testing procedures as set forth in Appendix 3 of the Audit Guide for Audits of HUD Approved Nonsupervised Mortgagees or (ii) examined such operations substantially in compliance with the requirements of the Uniform Single Attestation Program for Mortgage Bankers, and in either case stating such firm's conclusions relating thereto. Section 8.18. Access to Certain Documentation and Information Regarding the Mortgage Loans. The Master Servicer shall provide to the Trustee, the Certificate Insurer, the FDIC and the supervisory agents and examiners of each of the foregoing access to the documentation regarding the Mortgage Loans required by applicable state and federal regulations, such access being afforded without charge but only upon reasonable request and during normal business hours at the offices of the Master Servicer designated by it. Upon any change in the format of the computer tape maintained by the Master Servicer in respect of the Mortgage Loans, the Master Servicer shall deliver a copy of such computer tape to the Trustee and in addition shall provide a copy of such computer tape to the Trustee and the Certificate Insurer at such other times as the Trustee or the Certificate Insurer may reasonably request. Section 8.19. Assignment of Agreement. The Master Servicer may not assign its obligations under this Agreement, in whole or in part, unless it shall have first obtained the written consent of the Trustee and Certificate Insurer, which such consent shall not be unreasonably withheld; provided, 100 however, that any assignee must meet the eligibility requirements set forth in Section 8.20(g) hereof for a successor servicer. Notice of any such assignment shall be given by the Master Servicer to the Trustee, the Certificate Insurer and Moody's. Section 8.20. Removal of Master Servicer; Resignation of Master Servicer. (a) The Trustee (or the Owners pursuant to Section 6.11 hereof), each with the consent of the Certificate Insurer, or the Certificate Insurer may remove the Master Servicer upon the occurrence of any of the following events: (i) The Master Servicer shall fail to deliver to the Trustee any proceeds or required payment, which failure continues unremedied for three Business Days following written notice to an Authorized Officer of the Master Servicer from the Trustee or from any Owner. (ii) The Master Servicer shall (I) apply for or consent to the appointment of a receiver, trustee, liquidator or custodian or similar entity with respect to itself or its property, (II) admit in writing its inability to pay its debts generally as they become due, (III) make a general assignment for the benefit of creditors, (IV) be adjudicated a bankrupt or insolvent, (V) commence a voluntary case under the federal bankruptcy laws of the United States of America or file a voluntary petition or answer seeking reorganization, an arrangement with creditors or an order for relief or seeking to take advantage of any insolvency law or file an answer admitting the material allegations of a petition filed against it in any bankruptcy, reorganization or insolvency proceeding or (VI) take corporate action for the purpose of effecting any of the foregoing; (iii) If without the application, approval or consent of the Master Servicer, a proceeding shall be instituted in any court of competent jurisdiction, under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking in respect of the Master Servicer an order for relief or an adjudication in bankruptcy, reorganization, dissolution, winding up, liquidation, a composition or arrangement with creditors, a readjustment of debts, the appointment of a trustee, receiver, liquidator or custodian or similar entity with respect to the Master Servicer or of all or any substantial part of its assets, or other like relief in respect thereof under any bankruptcy or insolvency law, and, if such proceeding is being contested by the Master Servicer in good faith, the same shall (A) result in the entry of an order for relief or 101 any such adjudication or appointment or (B) continue undismissed or pending and unstayed for any period of seventy-five (75) consecutive days; or (iv) The Master Servicer shall fail to perform any one or more of its obligations hereunder and shall continue in default thereof for a period of sixty (60) days after notice by the Trustee or the Certificate Insurer of said failure; provided, however, that if the Master Servicer can demonstrate to the reasonable satisfaction of the Certificate Insurer that it is diligently pursuing remedial action, then the cure period may be extended with the written approval of the Certificate Insurer; or (v) The Master Servicer shall fail to cure any breach of any of its representations and warranties set forth in Section 3.2 which materially and adversely affects the interests of the Owners or Certificate Insurer for a period of thirty (30) days after the Master Servicer's discovery or receipt of notice thereof; provided, however, that if the Master Servicer can demonstrate to the reasonable satisfaction of the Certificate Insurer that it is diligently pursuing remedial action, then the cure period may be extended with the written approval of the Certificate Insurer. (b) The Certificate Insurer may remove the Master Servicer upon the occurrence of any of the following events: (i) the failure by the Master Servicer to make any required Servicing Advance which failure continues for thirty (30) days or more after written notice from the Certificate Insurer; or (ii) the failure by the Master Servicer to perform any one or more of its material obligations hereunder, which failure continues for sixty (60) or more days after written notice from Certificate Insurer; (iii) failure on the part of the Master Servicer to make a payment or deposit required under this Agreement within three Business Days after the date such payment or deposit is required to be made; (iv) if on any Payment Date the net cumulative Realized Losses since the Closing Date equal or exceed 5% of the aggregate Principal Balance of the Mortgage Loans; (v) if the cumulative Realized Losses over any twelve-month period exceed 2% of the average aggregate Principal Balance of the Mortgage Loans as of the close 102 of Business on the last day of each of the twelve preceding Remittance Periods; or (vi) if the three month moving average of the 90-day delinquency rate exceeds 7%; provided, however, that prior to any removal of the Master Servicer by the Certificate Insurer pursuant to clauses (i) or (ii) of this Section 8.20(b), the Master Servicer shall first have been given by the Certificate Insurer and by registered or certified mail, notice of the occurrence of one or more of the events set forth in clauses (i) or (ii) above and the Master Servicer shall not have remedied, or shall not have taken actions satisfactory to the Certificate Insurer to remedy, such event or events within 30 days with respect to clause (i) (60 days with respect to clause (ii)) after the Master Servicer's receipt of such notice (provided, however, that if the Master Servicer can demonstrate to the reasonable satisfaction of the Certificate Insurer that it is diligently pursuing remedial action, then the cure period in each case may be extended with the written approval of the Certificate Insurer). (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 Certificate Insurer and the 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 Trustee and the Certificate Insurer. (d) No removal or resignation of the Master Servicer shall become effective until the Trustee or a successor servicer shall have assumed the Master Servicer's responsibilities and obligations in accordance with this Section. (e) Upon removal or resignation of the Master Servicer, the Master Servicer also shall promptly deliver or cause to be delivered to a successor servicer or the Trustee all the books and records (including, without limitation, records kept in electronic form) that the Master Servicer has maintained for the Mortgage Loans, including all tax bills, assessment notices, insurance premium notices and all other documents as well as all original documents then in the Master Servicer's possession. 103 (f) Any collections received by the Master Servicer after removal or resignation shall be endorsed by it to the Trustee and remitted directly and immediately to the Trustee or the successor Master Servicer. (g) Upon removal or resignation of the Master Servicer, the Trustee (x) may solicit bids for a successor servicer as described below, and (y) pending the appointment of a successor Master Servicer as a result of soliciting such bids, shall serve as Master Servicer. The Trustee shall, if it is unable to obtain a qualifying bid and is prevented by law from acting as Master Servicer, appoint, or petition a court of competent jurisdiction to appoint, any housing and home finance institution, bank or mortgage servicing institution which has shareholders' equity of not less than $5,000,000, as determined in accordance with generally accepted accounting principles, and acceptable to the Certificate Insurer as the successor to the Master Servicer hereunder in the assumption of all or any part of the responsibilities, duties or liabilities of the Master Servicer hereunder. The compensation of any successor servicer (including, without limitation, the Trustee) so appointed shall be the aggregate Servicing Fees, together with the other servicing compensation in the form of assumption fees, late payment charges or otherwise as provided in Sections 8.8 and 8.15; provided, however, that if the Trustee acts as successor Master Servicer then the Originator agrees to pay to the Trustee at such time that the Trustee becomes such successor Master Servicer a fee of twenty-five dollars ($25.00) for each Mortgage Loan then included in the Trust Fund. The Trustee shall be obligated to serve as successor Master Servicer whether or not the $25.00 fee described in the preceding sentence is paid by the Originator, but shall in any event be entitled to receive, and to enforce payment of, such fee from the Originator. (h) In the event the Trustee solicits bids as provided above, the Trustee shall solicit, by public announcement, bids from housing and home finance institutions, banks and mortgage servicing institutions meeting the qualifications set forth above. Such public announcement shall specify that the successor Master Servicer shall be entitled to the full amount of the aggregate Servicing Fees as servicing compensation, together with the other servicing compensation in the form of assumption fees, late payment charges or otherwise as provided in Sections 8.8 and 8.15. Within thirty days after any such public announcement, the Trustee shall negotiate and effect the sale, transfer and assignment of the servicing rights and responsibilities hereunder to the qualified party submitting the highest satisfactory bid. The Trustee shall deduct from any sum received by the Trustee from the successor to the Master Servicer in respect of such sale, transfer and assignment all 104 costs and expenses of any public announcement and of any sale, transfer and assignment of the servicing rights and responsibilities hereunder. After such deductions, the remainder of such sum shall be paid by the Trustee to the Master Servicer at the time of such sale, transfer and assignment to the Master Servicer's successor. (i) The Trustee and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession. The Master Servicer agrees to cooperate with the Trustee and any successor Master Servicer in effecting the termination of the Master Servicer's servicing responsibilities and rights hereunder and shall promptly provide the Trustee or such successor Master Servicer, as applicable, all documents and records reasonably requested by it to enable it to assume the Master Servicer's functions hereunder and shall promptly also transfer to the Trustee or such successor Master Servicer, as applicable, all amounts which then have been or should have been deposited in the Principal and Interest Account by the Master Servicer or which are thereafter received with respect to the Mortgage Loans. Neither the Trustee nor any other successor Master Servicer shall be held liable by reason of any failure to make, or any delay in making, any distribution hereunder or any portion thereof caused by (i) the failure of the Master Servicer to deliver, or any delay in delivering, cash, documents or records to it, or (ii) restrictions imposed by any regulatory authority having jurisdiction over the Master Servicer. (j) The 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 Trustee is acting as successor Master Servicer, the Trustee shall only be required to make Servicing Advances if, in the Trustee's reasonable good faith judgment, such Delinquency Advances will ultimately be recoverable from the related Mortgage Loans. (k) The Master Servicer which is being removed or is resigning shall give notice to the Mortgagors and to Moody's and S&P of the transfer of the servicing to the successor. (l) The Trustee shall give notice to the Certificate Insurer, Moody's and S&P and to the Owners of the occurrence of any event specified in Section 8.20(a) of which the Trustee has knowledge. Section 8.21. Inspections by Certificate Insurer; Errors and Omissions Insurance. (a) At any reasonable time and from time to time upon reasonable notice, the Certificate 105 Insurer, the Trustee, or any agents or representatives thereof may inspect the Master Servicer's servicing operations and discuss the servicing operations of the Master Servicer with any of its officers or directors. The reasonable costs and expenses incurred by the Master Servicer or its agents or representatives in connection with any such examinations or discussions shall be paid by the Master Servicer. (b) The Master Servicer agrees to maintain errors and omissions coverage and a fidelity bond, each at least to the extent generally maintained by prudent mortgage loan servicers having servicing portfolios of a similar size. Section 8.22. Merger, Conversion, Consolidation or Succession to Business of Master Servicer. Any corporation into which the Master Servicer may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Master Servicer shall be a party, or any corporation succeeding to all or substantially all of the business of the Master Servicer, shall be the successor of the Master Servicer hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto provided that such corporation meets the qualifications set forth in Section 8.20(g). Section 8.23. Notices of Material Events. The Master Servicer shall give prompt notice to the Certificate Insurer, the Trustee, Moody's and 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 Transaction Document or would constitute a material breach of a representation, warranty or covenant under any Transaction Document; (b) The submission of any claim or the initiation of any legal process, litigation or administrative or judicial investigation against the 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 the Originator's, Sponsor's, the Master Servicer's or AMHC's ability to perform its obligations under any Transaction Document; (c) The commencement of any proceedings by or against the Originator, the Sponsor, the Master Servicer or AMHC under any applicable bankruptcy, reorganization, 106 liquidation, insolvency or other similar law now or hereafter in effect or of any proceeding in which a receiver, liquidator, trustee or other similar official shall have been, or may be, appointed or requested for the 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 of the Originator's, the Sponsor's, the Master Servicer's or the AMHC's business that the Originator, Sponsor, the Master Servicer or AMHC is to cease and desist, or to undertake any practice, program, procedure or policy employed by the Originator, Sponsor, the Master Servicer or AMHC in the conduct of the business of any of them, and such cessation or undertaking will materially adversely affect the conduct of the Originator's, the Sponsor's, the Master Servicer's or AMHC's business or its ability to perform under the Transaction Documents or materially adversely affect the financial affairs of the Originator, Sponsor, the Master Servicer or AMHC. ARTICLE IX TERMINATION OF TRUST Section 9.1. Termination of Trust. The Trust created hereunder and all obligations created by this Agreement will terminate on the Payment Date following the later of (A) payment in full of all amounts owing to the Certificate Insurer and (B) the earliest of (i) the Payment Date on which the Class A Principal Balance shall have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan in the Trust, (iii) the optional transfer to the Originator of the Class A Certificates, as described in Section 9.2, and (iv) the Payment Date in December, 2021. In no event, however, will the Trust created by this Agreement continue beyond the expiration of twenty-one (21) years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of the United States to the United Kingdom, living on the date hereof. The Trustee shall give written notice of termination of the Agreement to each Owner in the manner set forth in Section 11.5. Section 9.2. Termination Upon Option of Master Servicer. (a) The Class A Certificates shall be subject to optional transfer to the Originator on any Payment Date after the Class A Principal Balance has been reduced to an amount less than or equal to $5,000,000 (10% of the Original Class A Principal Balance) and all amounts due and owing to the Certificate Insurer as the Reimbursement Amount have been paid. Such transfer shall only be permitted if the Originator 107 delivers to the Trustee an amount equal to the sum of the outstanding Class A Principal Balance and accrued and unpaid interest thereon at the Class A Interest Rate through the day preceding the final Payment Date plus all Reimbursement Amounts (such amount, the "Termination Price"). In connection with such purchase, the Master Servicer shall remit to the Trustee all amounts then on deposit in the Principal and Interest Account for deposit to the Certificate Account, which deposit shall be deemed to have occurred immediately preceding such purchase. (b) Promptly following any such purchase, the Trustee will release the Mortgage Files to the Master Servicer, or otherwise upon their order, in a manner similar to that described in Section 8.14 hereof. (c) Advanta National Bank USA may not participate in any purchase described in this Section 9.2, or fund any portion of the purchase price, unless the then-outstanding Principal Balances of the Mortgage Loans in the Trust Fund is less than or equal to five percent of the sum of the aggregate Loan Balances of all Mortgage Loans in the Trust Fund as of the Initial Cut-Off Date and the Original Pre-Funded Amount. Section 9.3. Tax Treatment. It is the intention of the Originator, the Sponsor and the Owners of the Class A Certificates that the Class A Certificates will be indebtedness of the Originator for federal, state and local income and franchise tax purposes and for purposes of any other tax imposed on or measured by income. The Originator, the Sponsor, the Trustee and each Owner of a Class A Certificate by acceptance of its Class A Certificate (by virtue of such Owner's acquisition of a beneficial interest therein) agrees to treat the Class A Certificates (or beneficial interest therein), for purposes of federal, state and local income or franchise taxes and any other tax imposed on or measured by income, as indebtedness of the Originator secured by the assets of the Trust and to report the transactions contemplated by this Agreement on all applicable tax returns in a manner consistent with such treatment. Each Class A Certificateholder agrees that it will cause any Certificate Owner acquiring an interest in a Class A Certificate through it to comply with this Agreement as to treatment of the Class A Certificates as indebtedness for federal, state and local income and franchise tax purposes and for purposes of any other tax imposed on or measured by income. The Trustee will prepare and file all tax reports required hereunder. Section 9.4. Rapid Amortization Events. If any one of the following events shall occur: 108 (a) failure on the part of the Originator (i) to make any payment or deposit required by the terms of this Agreement, on or before the date occurring three Business Days after the date such payment or deposit is required to be made herein, or (ii) duly to observe or perform in any material respect any other covenants or agreements of the Originator set forth in this Agreement, which failure, in the case of clause (ii), continues unremedied for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Originator by the Trustee, and the Trustee by the Certificate Insurer or the Holders of Class A Certificates evidencing Percentage Interests aggregating not less than 51%; (b) any representation or warranty made by the Originator in this Agreement shall prove to have been incorrect in any material respect when made, and which continues to be incorrect in any material respect for a period of 60 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Originator, by the Trustee, or to the Originator and the Trustee by either the Certificate Insurer or the Holders of Class A Certificates evidencing Percentage Interests aggregating not less than 51%; provided, however, that a Rapid Amortization Event pursuant to this subparagraph (b) shall not be deemed to have occurred hereunder if the Originator has purchased or made a substitution for the related Mortgage Loan or Mortgage Loans during such period (or such longer period (not to exceed an additional 60 days) with the consent of the Trustee and the Certificate Insurer) in accordance with the provisions hereof; (c) the Originator shall voluntarily go into liquidation, consent to the appointment of a conservator or receiver or liquidator or similar person in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Originator, or of or relating to all or substantially all of such Person's property, or a decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver, liquidator or similar person in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Originator and such decree or order shall have remained in force undischarged or unstayed for a period of 30 days; or the Originator shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; 109 (d) the Trust shall become subject to regulation as an "investment company" under the Investment Company Act of 1940, as amended; (e) a claim is made under the Certificate Insurance Policy, or (f) the removal of the Master Servicer following the occurrence of an event permitting removal of the Master Servicer pursuant to Section 8.20 thereof; then, in the case of any event described in subparagraph (a), (b) or (f) after the applicable grace period, if any, set forth in such subparagraphs, either the Trustee with the consent of the Certificate Insurer, the Certificate Insurer or the Holders of Class A Certificates with the consent of the Certificate Insurer evidencing Percentage Interests aggregating more than 51%, by notice given in writing to the Certificate Insurer, the Originator and the Master Servicer (and to the Trustee if given by either the Certificate Insurer or the Class A Certificateholders) may declare that an early amortization event (a "Rapid Amortization Event") has occurred as of the date of such notice, and in the case of any event described in subparagraph (c), (d) or (e), a Rapid Amortization Event shall occur without any notice or other action on the part of the Trustee, the Certificate Insurer or the Class A Certificateholders, immediately upon the occurrence of such event. Section 9.5. Additional Rights Upon the Occurrence of Certain Events. (a) If the Originator voluntarily goes into liquidation or consents to the appointment of a conservator or receiver or liquidator or similar person in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Originator or of or relating to all or substantially all its property, or a decree or order of a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator or receiver or liquidator or similar person in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Originator and such decree shall have remained in force undischarged or unstayed for a period of 30 days; or the Originator shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations (such voluntary liquidation, appointment, entering of such decree, admission, filing, making, suspension or violation or other 110 event described above, an "Insolvency Event"), the Originator shall on the day of such appointment, voluntary liquidation, entering of such decree, admission, filing, making, suspension or inability, as the case may be (the "Appointment Day"), promptly give notice to the Trustee, the Master Servicer and the Certificate Insurer of such Insolvency Event. Within 15 days of the receipt by the Trustee of the Originator notice of an Insolvency Event, the Trustee shall (i) publish a notice in Authorized Newspapers that an Insolvency Event has occurred and (ii) send written notice to the Class A Certificateholders describing the provisions of this Section 9.4, which notice shall inform Owners of the Class A Certificates that unless the Certificate Insurer or (with the consent of the Certificate Insurer) more than 50% of all Owners of the Class A Certificates advise the Trustee in writing that they wish the Trustee to instruct the Master Servicer not to sell, dispose of or otherwise liquidate the Mortgage Loans within 90 days from the day notice pursuant to clause (i) above is first published (the "Publication Date"), the Trustee shall instruct the Master Servicer to proceed to sell, dispose of, or otherwise liquidate the Mortgage Loans in a commercially reasonable manner and on commercially reasonable terms, which shall include the solicitation of competitive bids, and shall proceed to consummate the sale, liquidation or disposition of the Mortgage Loans as provided above with the highest bidder for the Mortgage Loans. The Originator shall be permitted to bid for the Mortgage Loans. The Trustee may obtain a prior determination from such conservator or receiver that the terms and manner of any proposed sale, disposition or liquidation are commercially reasonable. Any such sale, disposition or liquidation will be servicing retained by the Master Servicer. The provisions of Sections 9.3 and 9.4 shall not be deemed to be mutually exclusive. (b) The proceeds from the sale, disposition or liquidation of the Mortgage Loans pursuant to Section 9.4(a) above shall be treated as collections on the Mortgage Loans received during the Rapid Amortization Period; provided, however, that such proceeds will, based on amounts specified in writing by the Master Servicer to the Trustee, first be paid to the Certificate Insurer to reimburse the Certificate Insurer for previously unreimbursed Reimbursement Amounts and other amounts owing under the Insurance Agreement; and provided, further, that the Certificateholders' Floating Allocation Percentage of such remaining proceeds shall be paid to Class A Certificateholders in the following amounts and order of priority: (i) all accrued and unpaid interest on the Class A Principal Balance through the Interest Period immediately preceding the Payment Date on which such proceeds are distributed to the Class A Certificateholders; and 111 (ii) an amount of principal up to the Class A Principal Balance. The Policy shall cover any shortfall in the event such proceeds are insufficient to make payment of the Class A Principal Balance. On the day following the Payment Date on which such proceeds are distributed to the Class A Certificateholders, the Trust shall terminate. Section 9.6. Disposition of Proceeds. The Trustee shall, upon receipt thereof, deposit the proceeds of any liquidation of the Trust Fund pursuant to this Article IX to the Certificate Account; provided, however, that any amounts representing Servicing Fees, unreimbursed Servicing Advances theretofore funded by the Master Servicer from the Master Servicer's own funds shall be paid by the Trustee to the Master Servicer. Section 9.7. Netting of Amounts. If any Person paying the Termination Price would receive a portion of the amount so paid, such Person may net any such amount against the Termination Price otherwise payable. ARTICLE X THE TRUSTEE Section 10.1. Certain Duties and Responsibilities. (a) The Trustee (i) undertakes to perform such duties and only such duties as are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against the Trustee and (ii) in the absence of bad faith on its part, may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished pursuant to and conforming to the requirements of this Agreement; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Agreement. (b) Notwithstanding the appointment of the Master Servicer hereunder, the Trustee is hereby empowered to perform the duties of the Master Servicer hereunder whether following the failure of the Master Servicer to perform, pursuant to Section 8.20 hereof or otherwise. Specifically, and not in limitation of the foregoing, the Trustee shall have the power: (i) to collect Mortgagor payments; 112 (ii) to foreclose on defaulted Mortgage Loans; (iii) to enforce due-on-sale clauses and to enter into assumption and substitution agreements as permitted by Section 8.12 hereof; (iv) to deliver instruments of satisfaction pursuant to Section 8.14; (v) to make Servicing Advances, and (vi) to enforce the Mortgage Loans. (c) No provision of this Agreement shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that: (i) this subsection shall not be construed to limit the effect of subsection (a) of this Section; (ii) the Trustee shall not be liable for any error of judgment made in good faith by an Authorized Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts; and (iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Certificate Insurer or of the Owners of a majority in Percentage Interest of the Certificates of the affected Class or Classes and the Certificate Insurer relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Agreement relating to such Certificates. (d) Whether or not therein expressly so provided, every provision of this Agreement relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section. (e) No provision of this Agreement shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. 113 (f) The permissive right of the Trustee to take actions enumerated in this Agreement shall not be construed as a duty and the Trustee shall not be answerable for other than its own negligence or willful misconduct. (g) The Trustee shall be under no obligation to institute any suit, or to take any remedial proceeding under this Agreement, or to take any steps in the execution of the trusts hereby created or in the enforcement of any rights and powers hereunder until it shall be indemnified to its satisfaction against any and all costs and expenses, outlays and counsel fees and other reasonable disbursements and against all liability, except liability which is adjudicated to have resulted from its negligence or willful misconduct, in connection with any action so taken. The Trustee shall receive as compensation for its services hereunder such ordinary fees and reimbursement of expenses as are described in the fee quote letter, dated November 8, 1996 and executed by the Originator. Section 10.2. Removal of Trustee for Cause. (a) The Trustee may be removed pursuant to paragraph (b) hereof upon the occurrence of any of the following events (whatever the reason for such event and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (1) the Trustee shall fail to distribute to the Owners entitled thereto on any Payment Date amounts available for distribution in accordance with the terms hereof; or (2) the Trustee shall fail in the performance of, or breach, any covenant or agreement of the Trustee in this Agreement, or if any representation or warranty of the Trustee made in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall prove to be incorrect in any material respect as of the time when the same shall have been made, and such failure or breach shall continue or not be cured for a period of 30 days after there shall have been given, by registered or certified mail, to the Trustee by the Originator, the Certificate Insurer or by the Owners of at least 25% of the aggregate Percentage Interests represented by the Class A Certificates then Outstanding, or, if there are no Offered Certificates then Outstanding, by such Percentage Interests represented by the Originator's Interest, a written notice specifying 114 such failure or breach and requiring it to be remedied; or (3) a decree or order of a court or agency or supervisory authority having jurisdiction for the appointment of a conservator or receiver or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Trustee, and such decree or order shall have remained in force undischarged or unstayed for a period of 75 days; or (4) a conservator or receiver or liquidator or sequestrator or custodian of the property of the Trustee is appointed in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to the Trustee or relating to all or substantially all of its property; or (5) the Trustee shall become insolvent (however insolvency is evidenced), generally fail to pay its debts as they come due, file or consent to the filing of a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors, voluntarily suspend payment of its obligations, or take corporate action for the purpose of any of the foregoing. The Originator shall give to the Certificate Insurer, Moody's and S&P notice of the occurrence of any such event of which the Originator is aware. (b) If any event described in Paragraph (a) occurs and is continuing, then and in every such case (i) the Certificate Insurer or (ii) with the prior written consent (which shall not be unreasonably withheld) of the Certificate Insurer (x) the Originator or (y) the Owners of a majority of the Percentage Interests represented by the Class A Certificates, may, whether or not the Trustee resigns pursuant to Section 10.9 hereof, immediately, concurrently with the giving of notice to the Trustee, and without delaying the 30 days required for notice therein, appoint a successor Trustee pursuant to the terms of Section 10.9 hereof. Section 10.3. Certain Rights of the Trustee. Except as otherwise provided in Section 10.1 hereof: (a) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, 115 certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties; (b) any request or direction of the Originator, the Certificate Insurer or the Owners of any Class of Certificates mentioned herein shall be sufficiently evidenced in writing; (c) whenever in the administration of this Agreement the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, rely upon an Officer's Certificate; (d) the Trustee may consult with counsel, and the written advice of such counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reasonable reliance thereon; (e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement at the request or direction of any of the Owners pursuant to this Agreement, unless such Owners shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction; (f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, note or other paper or document, but the Trustee in its discretion may make such further inquiry or investigation into such facts or matters as it may see fit; (g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed and supervised with due care by it hereunder; and (h) the Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized by the Authorized Officer of any Person or within its rights or powers 116 under this Agreement other than as to validity and sufficiency of its authentication of the Certificates. Section 10.4. Not Responsible for Recitals or Issuance of Certificates. The recitals contained herein and in the Certificates, except any such recitals relating to the Trustee, shall be taken as the statements of the Originator and the Trustee assumes no responsibility for their correctness. The Trustee makes no representation as to the validity or sufficiency of this Agreement or of the Certificates other than as to validity and sufficiency of its authentication of the Certificates. Section 10.5. May Hold Certificates. The Trustee or any agent of the Trust, in its individual or any other capacity, may become an Owner or pledgee of Certificates and may otherwise deal with the Trust with the same rights it would have if it were not Trustee or such agent. Section 10.6. Money Held in Trust. Money held by the Trustee in trust hereunder need not be segregated from other trust funds except to the extent required herein or required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Originator and except to the extent of income or other gain on investments which are deposits in or certificates of deposit of the Trustee in its commercial capacity and income or other gain actually received by the Trustee on Eligible Investments. Section 10.7. No Lien for Fees. The Trustee shall have no lien on the Trust Fund for the payment of any fees and expenses. Section 10.8. Corporate Trustee Required; Eligibility. There shall at all times be a Trustee hereunder which shall be a corporation or association organized and doing business under the laws of the United States of America or of any State authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $100,000,000, subject to supervision or examination by the United States of America or any such State having a rating or ratings acceptable to the Certificate Insurer and having (x) long-term, unsecured debt rated at least Baa3 by Moody's (or such lower rating as may be acceptable to Moody's) and (y) a long-term deposit rating of at least BBB from S&P (or such lower rating as may be acceptable to S&P). If such Trustee publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation or association shall be deemed to be its combined capital and surplus as set forth 117 in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall, upon the request of the Originator with the consent of the Certificate Insurer (which consent shall not be unreasonably withheld) or of the Certificate Insurer, resign immediately in the manner and with the effect hereinafter specified in this Article X. Section 10.9. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Trustee and no appointment of a successor trustee pursuant to this Article X shall become effective until the acceptance of appointment by the successor trustee under Section 10.10 hereof. (b) The Trustee, or any trustee or trustees hereafter appointed, may resign at any time by giving written notice of resignation to the Originator and by mailing notice of resignation by first-class mail, postage prepaid, to the Certificate Insurer and the Owners at their addresses appearing on the Register. A copy of such notice shall be sent by the resigning Trustee to Moody's and S&P. Upon receiving notice of resignation, the Originator, with the prior written consent of the Certificate Insurer, shall promptly appoint a successor trustee or trustees by written instrument, in duplicate, executed on behalf of the Trust by an Authorized Officer of the Originator, one copy of which instrument shall be delivered to the Trustee so resigning and one copy to the successor trustee or trustees. If no successor trustee shall have been appointed and have accepted appointment within 30 days after the giving of such notice of resignation, the resigning trustee may petition any court of competent jurisdiction for the appointment of a successor trustee, or any Owner may, on behalf of himself and all others similarly situated, petition any such court for the appointment of a successor trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor trustee. (c) If at any time the Trustee shall cease to be eligible under Section 10.8 hereof and shall fail to resign after written request therefor by the Originator or by the Certificate Insurer, the Certificate Insurer or the Originator with the written consent of the Certificate Insurer may remove the Trustee and appoint a successor trustee by written instrument, in duplicate, executed on behalf of the Trust by an Authorized Officer of the Originator, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor trustee. (d) The Owners of a majority of the Percentage Interests represented by the Class A Certificates, or, if there are no Class A Certificates then Outstanding, by such 118 majority of the Percentage Interests represented by the Originator's Interest, may at any time, with the consent of the Certificate Insurer, remove the Trustee and appoint a successor trustee by delivering to the Trustee to be removed, to the successor trustee so appointed, to the Originator and to the Certificate Insurer, copies of the record of the act taken by the Owners, as provided for in Section 11.3 hereof. (e) If the Trustee fails to perform its duties in accordance with the terms of this Agreement or becomes ineligible to serve as Trustee, the Certificate Insurer may remove the Trustee and appoint a successor trustee by written instrument, in triplicate, signed by the Certificate Insurer duly authorized, one complete set of which instruments shall be delivered to the Originator, one complete set to the Trustee so removed and one complete set to the successor Trustee so appointed. (f) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Trustee for any cause, the Originator shall promptly appoint a successor Trustee. If within one year after such resignation, removal or incapability or the occurrence of such vacancy, a successor Trustee shall be appointed by act of the Owners of a majority of the Percentage Interests represented by the Class A Certificates then Outstanding or, if there are no Class A Certificates then Outstanding, by such majority of the Percentage Interest of the Originator's Interest delivered to the Originator and the retiring Trustee, the successor Trustee so appointed shall forthwith upon its acceptance of such appointment become the successor Trustee and supersede the successor Trustee appointed by the Originator. If no successor Trustee shall have been so appointed by the Originator or the Owners and shall have accepted appointment in the manner hereinafter provided, any Owner may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor Trustee. (g) The Originator shall give notice of any removal of the Trustee by mailing notice of such event by first-class mail, postage prepaid, to the Certificate Insurer and to the Owners as their names and addresses appear in the Register. Each notice shall include the name of the successor Trustee and the address of its corporate trust office. Section 10.10. Acceptance of Appointment by Successor Trustee. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Originator on behalf of the Trust and to its predecessor Trustee an instrument accepting such appointment hereunder and 119 stating its eligibility to serve as Trustee hereunder, and thereupon the resignation or removal of the predecessor Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts, duties and obligations of its predecessor hereunder; but, on request of the Originator or the successor Trustee, such predecessor Trustee shall, upon payment of its charges then unpaid, execute and deliver an instrument transferring to such successor Trustee all of the rights, powers and trusts of the Trustee so ceasing to act, and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such Trustee so ceasing to act hereunder. Upon request of any such successor Trustee, the Originator on behalf of the Trust shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts. Upon acceptance of appointment by a successor Trustee as provided in this Section, the Originator shall mail notice thereof by first-class mail, postage prepaid, to the Owners at their last addresses appearing upon the Register. The Originator shall send a copy of such notice to Moody's and S&P. If the Originator fails to mail such notice within ten days after acceptance of appointment by the successor Trustee, the successor Trustee shall cause such notice to be mailed at the expense of the Trust. No successor Trustee shall accept its appointment unless at the time of such acceptance such successor shall be qualified and eligible under this Article X. Section 10.11. Merger, Conversion, Consolidation or Succession to Business of the Trustee. Any corporation or association into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation or association resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation or association succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, however, that such corporation or association shall be otherwise qualified and eligible under this Article X. In case any Certificates have been executed, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such Trustee may adopt such execution and deliver the Certificates so executed with the same effect as if such successor Trustee had itself executed such Certificates. Section 10.12. Reporting; Withholding. The Trustee shall timely provide to the Owners the Internal Revenue 120 Service's Form 1099 and any other statement required by applicable Treasury regulations as determined by the Originator, and shall withhold, as required by applicable law, federal, state or local taxes, if any, applicable to distributions to the Owners, including but not limited to backup withholding under Section 3406 of the Code and the withholding tax on distributions to foreign investors under Sections 1441 and 1442 of the Code. Section 10.13. Liability of the Trustee. The Trustee shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by the Trustee herein. Neither the Trustee nor any of the directors, officers, employees or agents of the Trustee shall be under any liability on any Certificate or otherwise to any Account, the Originator, the Master Servicer or any Owner for any action taken or for refraining from the taking of any action in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Trustee or any such Person against any liability which would otherwise be imposed by reason of negligent action, negligent failure to act or bad faith in the performance of duties or by reason of reckless disregard of obligations and duties hereunder. Subject to the foregoing sentence, the Trustee shall not be liable for losses on investments of amounts in any Account (except for any losses on obligations on which the bank serving as Trustee is the obligor). In addition, the Originator and Master Servicer covenant and agree to indemnify the Trustee, and by the Originator when the Trustee is acting as Master Servicer, from, and hold it harmless against, any and all losses, liabilities, damages, claims or expenses (including legal fees and expenses) other than those resulting from the negligence or bad faith of the Trustee. The Trustee and any director, officer, employee or agent of the Trustee may rely and shall be protected in acting or refraining from acting in good faith on any certificate, notice or other document of any kind prima facie properly executed and submitted by the Authorized Officer of any Person respecting any matters arising hereunder. Such indemnification shall survive the removal or resignation of the Trustee hereunder. Section 10.14. Appointment of Co-Trustee or Separate Trustee. Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Trust Fund or Mortgaged Property may at the time be located, the Master Servicer and the Trustee acting jointly shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Trustee to act as co-Trustee or co-Trustees, jointly with the Trustee, of all or any part of the Trust Fund or separate Trustee or separate Trustees of any part of the Trust Fund, 121 and to vest in such Person or Persons, in such capacity and for the benefit of the Owners, such title to the Trust Fund, or any part thereof, and, subject to the other provisions of this Section 10.14, such powers, duties, obligations, rights and trusts as the Master Servicer and the Trustee may consider necessary or desirable. If the Master Servicer shall not have joined in such appointment within 15 days after the receipt by it of a request so to do, or in the case any event indicated in Sections 8.20(a) or 8.20(b) shall have occurred and be continuing, the Trustee alone shall have the power to make such appointment. No co-Trustee or separate Trustee hereunder shall be required to meet the terms of eligibility as a successor Trustee under Section 10.8 and no notice to Owner of the appointment of any co-Trustee or separate Trustee shall be required under Section 10.8. Every separate Trustee and co-Trustee shall, to the extent permitted, be appointed and act subject to the following provisions and conditions: (i) All rights, powers, duties and obligations conferred or imposed upon the Trustee shall be conferred or imposed upon and exercised or performed by the Trustee and such separate Trustee or co-Trustee jointly (it being understood that such separate Trustee or co-Trustee is not authorized to act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed (whether as Trustee hereunder or as successor to the Master Servicer hereunder), the Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Trust Fund or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate Trustee or co-Trustee, but solely at the direction of the Trustee; (ii) No co-Trustee hereunder shall be held personally liable by reason of any act or omission of any other co-Trustee hereunder; and (iii) The Master Servicer and the Trustee acting jointly may at any time accept the resignation of or remove any separate Trustee or co-Trustee. Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of the then separate Trustees and co-Trustees, as effectively as if given to each of them. Every instrument appointing any separate Trustee or co-Trustee shall refer to this Agreement and the conditions of this Section 10.14. Each separate Trustee and co-Trustee, upon its acceptance of the trusts conferred, shall 122 be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee and a copy thereof given to the Master Servicer. Any separate Trustee or co-Trustee may, at any time, constitute the Trustee, its agent or attorney-in-fact, with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate Trustee or co-Trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor Trustee. The Trustee shall give to Moody's and S&P, the Originator and the Certificate Insurer notice of the appointment of any Co-Trustee or separate Trustee. ARTICLE XI MISCELLANEOUS Section 11.1. Compliance Certificates and Opinions. Upon any application or request by the Originator, the Certificate Insurer or the Owners to the Trustee to take any action under any provision of this Agreement, the Originator, the Certificate Insurer or the Owners, as the case may be, shall furnish to the Trustee a certificate stating that all conditions precedent, if any, provided for in this Agreement relating to the proposed action have been complied with, except that in the case of any such application or request as to which the furnishing of any documents is specifically required by any provision of this Agreement relating to such particular application or request, no additional certificate need be furnished. Except as otherwise specifically provided herein, each certificate or opinion with respect to compliance with a condition or covenant provided for in this Agreement shall include: (a) a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto; 123 (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; and (c) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. Section 11.2. Form of Documents Delivered to the Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Any certificate of an Authorized Officer of the Trustee may be based, insofar as it relates to legal matters, upon an opinion of counsel, unless such Authorized Officer knows, or in the exercise of reasonable care should know, that the opinion is erroneous. Any such certificate of an Authorized Officer of the Trustee or any opinion of counsel may be based, insofar as it relates to factual matter upon a certificate or opinion of, or representations by, one or more Authorized Officers of the Originator or of the Master Servicer, stating that the information with respect to such factual matters is in the possession of the Originator or of the Master Servicer, unless such Authorized Officer or counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Any opinion of counsel may also be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an Authorized Officer of the Trustee, stating that the information with respect to such matters is in the possession of the Trustee, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Any opinion of counsel may be based on the written opinion of other counsel, in which event such opinion of counsel shall be accompanied by a copy of such other counsel's opinion and shall include a statement to the effect that such counsel believes that such counsel and the Trustee may reasonably rely upon the opinion of such other counsel. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under 124 this Agreement, they may, but need not, be consolidated and form one instrument. Section 11.3. Acts of Owners. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Agreement to be given or taken by the Owners may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Owners in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee, and, where it is hereby expressly required, to the Originator. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "act" of the Owners signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Agreement and conclusive in favor of the Trustee and the Trust, if made in the manner provided in this Section. (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Whenever such execution is by an officer of a corporation or a member of a partnership on behalf of such corporation or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority. (c) The ownership of Certificates shall be proved by the Register. (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Owner of any Certificate shall bind the Owner of every Certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Trust in reliance thereon, whether or not notation of such action is made upon such Certificates. Section 11.4. Notices, etc. to Trustee. Any request, demand, authorization, direction, notice, consent, waiver or act of the Owners or other documents provided or permitted by this Agreement to be made upon, given or furnished to, or filed with the Trustee by any Owner, the Certificate Insurer or by the Originator shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with and received by the Trustee at its corporate trust office as set forth in Section 2.2 hereof. 125 Section 11.5. Notices and Reports to Owners; Waiver of Notices. Where this Agreement provides for notice to Owners of any event or the mailing of any report to Owners, such notice or report shall be sufficiently given (unless otherwise herein expressly provided) if mailed, first-class postage prepaid, to each Owner affected by such event or to whom such report is required to be mailed, at the address of such Owner as it appears on the Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice or the mailing of such report. In any case where a notice or report to Owners is mailed in the manner provided above, neither the failure to mail such notice or report nor any defect in any notice or report so mailed to any particular Owner shall affect the sufficiency of such notice or report with respect to other Owners, and any notice or report which is mailed in the manner herein provided shall be conclusively presumed to have been duly given or provided. Where this Agreement provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Owners shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Owners when such notice is required to be given pursuant to any provision of this Agreement, then any manner of giving such notice as shall be satisfactory to the Trustee shall be deemed to be a sufficient giving of such notice. Where this Agreement provides for notice to any rating agency that rated any Certificates, failure to give such notice shall not affect any other rights or obligations created hereunder. Section 11.6. Rules by Trustee and Originator. The Trustee may make reasonable rules for any meeting of Owners. The Originator may make reasonable rules and set reasonable requirements for its functions. Section 11.7. Successors and Assigns. All covenants and agreements in this Agreement by any party hereto shall bind its successors and assigns, whether so expressed or not. Section 11.8. Severability. In case any provision in this Agreement or in the Certificates shall be invalid, illegal or unenforceable, the validity, legality and 126 enforceability of the remaining provisions shall not in any way be affected or impaired thereby. Section 11.9. Benefits of Agreement. Nothing in this Agreement or in the Certificates, expressed or implied, shall give to any Person, other than the Owners, the Certificate Insurer and the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy or claim under this Agreement. Section 11.10. Legal Holidays. In any case where the date of any Remittance Date, any Payment Date, any other date on which any distribution to any Owner is proposed to be paid, or any date on which a notice is required to be sent to any Person pursuant to the terms of this Agreement shall not be a Business Day, then (notwithstanding any other provision of the Certificates or this Agreement) payment or mailing need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made or mailed on the nominal date of any such Remittance Date, such Payment Date, or such other date for the payment of any distribution to any Owner or the mailing of such notice, as the case may be, and no interest shall accrue for the period from and after any such nominal date, provided such payment is made in full on such next succeeding Business Day. Section 11.11. Governing Law. In view of the fact that Owners are expected to reside in many states and outside the United States and the desire to establish with certainty that this Agreement will be governed by and construed and interpreted in accordance with the law of a state having a well-developed body of commercial and financial law relevant to transactions of the type contemplated herein, this Agreement and each Certificate shall be construed in accordance with and governed by the laws of the State of New York applicable to agreements made and to be performed therein. Section 11.12. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. Section 11.13. Usury. The amount of interest payable or paid on any Certificate under the terms of this Agreement shall be limited to an amount which shall not exceed the maximum nonusurious rate of interest allowed by the applicable laws of the State of New York or any applicable law of the United States permitting a higher maximum nonusurious rate that preempts such applicable New York laws, which could lawfully be contracted for, charged or received (the "Highest Lawful Rate"). In the event any payment of interest on any 127 Certificate exceeds the Highest Lawful Rate, the Trust stipulates that such excess amount will be deemed to have been paid to the Owner of such Certificate as a result of an error on the part of the Trustee acting on behalf of the Trust and the Owner receiving such excess payment shall promptly, upon discovery of such error or upon notice thereof from the Trustee on behalf of the Trust, refund the amount of such excess or, at the option of such Owner, apply the excess to the payment of principal of such Certificate, if any, remaining unpaid. In addition, all sums paid or agreed to be paid to the Trustee for the benefit of Owners of Certificates for the use, forbearance or detention of money shall, to the extent permitted by applicable law, be amortized, prorated, allocated and spread throughout the full term of such Certificates. Section 11.14. Amendment. (a) The Trustee, the Originator and the Master Servicer, may at any time and from time to time, with the prior approval of the Certificate Insurer but without the giving of notice to or the receipt of the consent of the Owners, amend this Agreement, and the Trustee shall consent to such amendment, for the purpose of (i) curing any ambiguity, or correcting or supplementing any provision hereof which may be inconsistent with any other provision hereof, or to add provisions hereto which are not inconsistent with the provisions hereof, 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 Trustee, materially and adversely affect the interests of any Owner (without its written consent). (b) The Trustee, the Originator and the Master Servicer may, at any time and from time to time, with the prior approval of the Certificate Insurer but without the giving of notice to or the receipt of the consent of the Owners, amend this Agreement, and the Trustee shall consent to such amendment, for the purpose of changing the definition of "Specified Overcollateralization Amount"; provided, however, that no such change shall affect the weighted average life of the related Class of Class A Certificates (assuming an appropriate prepayment speed as determined by the Underwriter) by more than five percent, as determined by the Underwriter. (c) This Agreement may also be amended by the Trustee, the Originator, and the Master Servicer at any time and from time to time, with the prior written approval of the Certificate Insurer and not less than a majority of the Percentage Interest represented by each affected Class of Certificates then Outstanding, for the purpose of adding any provisions or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Owners hereunder; provided, however, that no 128 such amendment shall (a) change in any manner the amount of, or change the timing of, payments which are required to be distributed to any Owner without the consent of the Owner of such Certificate or (b) reduce the aforesaid percentages of Percentage Interests which are required to consent to any such amendments, without the consent of the Owners of all Certificates of the Class or Classes affected then Outstanding. (d) The Certificate Insurer, the Owners, Moody's and S&P shall be provided with copies of any amendments to this Agreement, together with copies of any opinions or other documents or instruments executed in connection therewith. Section 11.15. Acceptance of Obligations. The Originator, by its acceptance of the Originator's Interest, agrees to be bound by and to perform all the duties of the Originator set forth in this Agreement. Section 11.16. The Certificate Insurer. The Certificate Insurer is a third-party beneficiary of this Agreement. Any right conferred to the Certificate Insurer shall be suspended during any period in which the Certificate Insurer is in default in its payment obligations under the Certificate Insurance Policy except with respect to amendments to this Agreement pursuant to Section 11.14. During any period of suspension the Certificate Insurer's rights hereunder shall vest in the Owners of the Class A Certificates and shall be exercisable by the Owners of at least a majority in Percentage Interest of the Class A Certificates then Outstanding. At such time as the Class A Certificates are no longer Outstanding hereunder and the Certificate Insurer has been reimbursed for all payments made pursuant to the Certificate Insurance Policy to which it is entitled hereunder, the Certificate Insurer's rights hereunder shall terminate. Section 11.17. Maintenance of Records. Each Originator and Owner of a Originator Certificate shall each continuously keep an original executed counterpart of this Agreement in its official records. Section 11.18. Notices. All notices hereunder shall be given as follows, until any superseding instructions are given to all other Persons listed below: 129 The Trustee: Bankers Trust Company c/o Bankers Trust Company of California, N.A. 3 Park Plaza Irvine, CA 92714 Attention: ADVANTA REVOLVING 1996-A Tel: (714) 253-7575 Fax: (714) 253-7577 The Sponsor: ADVANTA Mortgage Conduit Services, Inc. 16875 West Bernardo Drive San Diego, CA 92127 Attention: Vice President - Structured Finance Tel: (619) 674-3356 Fax: (619) 674-3666 with a copy addressed to the attention of the General Counsel at the same address. 130 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 Originator: Advanta National Bank USA Brandywine Corporate Center 650 Naamans Road Claymont, DE 19703 Tel: (302) 791-4400 The Certificate Insurer : MBIA Insurance Corporation 113 King Street Armonk, New York 10504 Attention: Surveillance Dept.: Structured Finance Group (Advanta REV HEL 96-A) Tel: (914) 765-3111 Fax: (914) 765-3919 Moody's: Moody's Investors Service 99 Church Street New York, New York 10007 Attention: The Home Equity Monitoring Department S&P: Standard & Poor's Corporation 26 Broadway 15th Floor New York, New York 10004 Attention: Surveillance Dept. Underwriter: Lehman Brothers, Inc. 131 IN WITNESS WHEREOF, the Sponsor, the Originator, the Master Servicer and the Trustee have caused this Agreement to be duly executed by their respective officers thereunto duly authorized, all as of the day and year first above written. ADVANTA MORTGAGE CONDUIT SERVICES, INC., as Sponsor By: -------------------------------------- Name: Mark T. Dunsheath Title: Vice President ADVANTA MORTGAGE CORP. USA, as Master Servicer By: -------------------------------------- Name: Mark T. Dunsheath Title: Vice President ADVANTA NATIONAL BANK USA, as Originator By: ------------------------------------- Name: Mark T. Dunsheath Title: Vice President BANKERS TRUST COMPANY OF CALIFORNIA, N.A., as Trustee By: ------------------------------------- Name: Erin L. Deegan Title: Assistant Vice President [Pooling and Servicing Agreement] STATE OF CALIFORNIA ) : ss.: COUNTY OF SAN DIEGO ) On the ______ day of November, 1996, before me personally came _______________, to me known, who, being by me duly sworn, did depose and say that his/her address is c/o ADVANTA Mortgage Conduit Services, Inc., 16875 West Bernardo Drive, San Diego, California 92127; that he/she is the _______________ of each of ADVANTA Mortgage Conduct Services Inc. and of ADVANTA Mortgage Corp. USA, which are described in and which executed the above instrument; and that he/she signed his/her name thereto by order of the respective Board of Directors of said corporations. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. [NOTARIAL SEAL] ----------------------------------- Notary Public 133 STATE OF CALIFORNIA ) : ss.: COUNTY OF ORANGE ) On the ____ day of November, 1996, before me personally came _______________ to me known, who, being by me duly sworn did depose and say that his/her office is located at Three Park Plaza, Irvine, California 92714; that he/she is an _______________ of Bankers Trust Company, the New York banking corporation described in and that executed the above instrument as Trustee; and that he/she signed his/her name thereto under authority granted by the Board of Directors of said New York banking corporation. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. [NOTARIAL SEAL] --------------------------- Notary Public 1 EX-4.2 4 ADVANTA MORTGAGE HOLDING COMPANY GUARANTY November 22, 1996 Lehman Brothers Inc. Three World Financial Center New York, New York 10285-1200 MBIA Insurance Corporation 113 King Street Armonk, New York 10504 Re: Underwriting Agreement dated November 15, 1996 (the "Underwriting Agreement") between Advanta Mortgage Conduit Services, Inc. (the "Sponsor"), Advanta National Bank USA (the "Originator") and Lehman Brothers Inc. (the "Underwriter"), the Indemnification Agreement dated November 22, 1996 (the "Indemnification Agreement") among the Originator, the Underwriter and the MBIA Insurance Corporation (the "Certificate Insurer") and the Insurance Agreement dated as of November 22, 1996 (the "Insurance Agreement") among the MBIA Insurance Corporation, as the Certificate Insurer, Advanta, and Advanta Mortgage Corp. USA (the "Master Servicer") Ladies and Gentlemen: Pursuant to the Underwriting Agreement, the Indemnification Agreement and the Insurance Agreement (together, the "Designated Agreements"), the Sponsor and the Originator have undertaken certain financial obligations with respect to the indemnification of the Underwriter and of the Certificate Insurer with respect to the Registration Statement, the Prospectus and the Prospectus Supplement described in the Designated Agreements. Any financial obligations of the Sponsor and the Originator under the Designated Agreements, whether or not specifically enumerated in this paragraph, are hereinafter referred to as the "Joint and Several Obligations"; provided, however, that "Joint and Several Obligations" shall mean only the financial obligations of the Sponsor and the Originator under the Designated Agreements (including the payment of money damages for a breach of any of the Sponsor's or Originator's obligations under the Designated Agreements, whether financial or otherwise) but shall not include any obligations not relating to the payment of money. As a condition of their respective executions of the Designated Agreements, the Underwriter and the Certificate Insurer have required the undersigned, Advanta Mortgage Holding Company ("AMHC"), the parent corporation of the Sponsor and the Originator, to acknowledge its joint-and-several liability with the Sponsor and the Originator for the payment of the Joint and Several Obligations under the Designated Agreements. Now, therefore, the Underwriter, the Certificate Insurer and AMHC do hereby agree that: (i) AMHC hereby agrees to be absolutely and unconditionally jointly and severally liable with the Sponsor and the Originator to the Underwriter for the payment of the Joint and Several Obligations under the Underwriting Agreement. (ii) AMHC hereby agrees to be absolutely and unconditionally jointly and severally liable with the Sponsor to the Certificate Insurer for the payment of the Joint and Several Obligations under the Insurance Agreement. (iii) AMHC hereby agrees to be absolutely and unconditional jointly and severally liable with the Originator to the Certificate Insurer for the payment of the Joint and Several Obligations under the Indemnification Agreement. (iv) 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 Certificate Insurer, as applicable, by the Sponsor or another affiliate of AMHC. Capitalized terms used herein and not defined herein shall have their respective meanings as set forth in the Agreement. [AMHC Guaranty to the Underwriter and MBIA] Very truly yours, ADVANTA MORTGAGE HOLDING COMPANY By: ----------------------------- Name: Title: CONFIRMED AND ACCEPTED, as of the date first above written: MBIA INSURANCE CORPORATION By: -------------------------------- Name: Title: LEHMAN BROTHERS INC. as Underwriter By: -------------------------------- Name: Martin P. Harding Title: Managing Director [AMHC Guaranty to the Underwriter and MBIA] EX-99.1 5 INDEMNIFICATION AGREEMENT MBIA INSURANCE CORPORATION, as Certificate Insurer ADVANTA NATIONAL BANK USA as Originator and LEHMAN BROTHERS INC., as Underwriter INDEMNIFICATION AGREEMENT ADVANTA REVOLVING HOME EQUITY LOAN TRUST 1996-A ADVANTA REVOLVING HOME EQUITY LOAN ASSET-BACKED CERTIFICATES SERIES 1996-A, CLASS A CERTIFICATES Dated as of November 22, 1996 TABLE OF CONTENTS Page Section 1. Definitions................................................... 1 Section 2. Representations and Warranties of the Certificate Insurer..... 3 Section 3. Agreements, Representations and Warranties of the Underwriter. 4 Section 4. Agreements, Representations and Warranties of the Originator.. 4 Section 5. Indemnification............................................... 5 Section 6. Certificate Insurer Undertaking............................... 6 Section 7. Notice To Be Given Certificate Insurer........................ 6 Section 8. Notice To Be Given to the Underwriter......................... 7 Section 9. Notice To Be Given the Originator............................. 8 Section 10. Contribution.................................................. 9 Section 11. Notices....................................................... 10 Section 12. Governing Law, Etc............................................ 10 Section 13. Insurance Agreement; Underwriting Agreement; Pooling and Servicing Agreement............................... 10 Section 14. Limitations................................................... 10 Section 15. Counterparts.................................................. 10 TESTIMONIUM .................................................... SIGNATURE PAGE SIGNATURES AND SEALS ........................................... SIGNATURE PAGE ......................................................INDEMNIFICATION AGREEMENT 2 This Agreement, dated as of November 22, 1996, is by and among MBIA Insurance Corporation (the "Certificate Insurer"), as the Certificate Insurer under the Certificate Guaranty Insurance Policy (the "Policy") issued in connection with the Class A Certificates described below, Advanta National Bank USA (the "Originator") and Lehman Brothers 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 Pooling and Servicing Agreement (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 Certificate Insurer, the Originator and the Underwriter. "Class A Certificates" means the Advanta Revolving Home Equity Loan Asset Backed Certificates, Series 1996-A, Class A Certificates issued pursuant to the Pooling and Servicing Agreement. "Indemnified Party" means any party entitled to any indemnification pursuant to Section_5 below, as the context requires. "Indemnifying Party" means any party required to provide indemnification pursuant to Section_5 below, as the context requires. "Insurance Agreement" means the Insurance Agreement, dated as of November 22, 1996, by and among the Originator, the Master Servicer, Advanta Mortgage Conduit Services, Inc., as Sponsor, Bankers Trust Company of California, N.A., as Trustee and the Certificate Insurer. "Certificate Insurer Party" means the Certificate Insurer and its respective parents, subsidiaries and affiliates and any shareholder, director, officer, employee, agent or any "controlling person" (as such term is used in the Act) of any of the foregoing. "Losses" means (i)_any actual out-of-pocket loss paid by the party entitled to indemnification or contribution hereunder and (ii)_any actual out-of-pocket costs and expenses paid by such party, including reasonable fees and expenses of its counsel, to the extent not paid, satisfied or reimbursed from funds provided by any other Person (provided that the foregoing shall not create or imply any obligation to pursue recourse against any such other Person). "Master Servicer" means Advanta Mortgage Corp. USA, as Master Servicer. 1 "Originator Party" means the Originator, 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. "Person" means any individual, partnership, joint venture, corporation, trust or unincorporated organization or any government or agency or political subdivision thereof. "Pooling and Servicing Agreement" means the Pooling and Servicing Agreement dated as of November 1, 1996 by and among the Originator, the Sponsor, the Master Servicer and the Trustee. "Prospectus" means the form of final Prospectus included in the Registration Statement on each date that the Registration Statement and any post effective amendment or amendments thereto became effective. "Prospectus Supplement" means the form of final Prospectus Supplement dated November 15, 1996. "Registration Statement" means the registration statement on Form_S-3 of the Sponsor relating to the Class A Certificates. "Trustee" means Bankers Trust Company of California, N.A., or any successor thereto. "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 Lehman Brothers Inc. "Underwriting Agreement" means the Underwriting Agreement by and between the Sponsor and the Underwriter, dated November 15, 1996. Section 2. Representations and Warranties of the Certificate Insurer. The Certificate Insurer represents and warrants to the Underwriter and the Originator as follows: (a) Organization and Licensing. The Certificate Insurer is a duly incorporated and existing New_York stock insurance company licensed to do business in the State of New_York. (b) Corporate Power. The Certificate Insurer has the corporate power and authority to issue the Policy 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 Policy and the execution, delivery and performance of this Agreement and the Insurance Agreement have been duly 2 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 Certificate Insurer's board of directors or stockholders, are necessary for the Policy, this Agreement and the Insurance Agreement to constitute the legal, valid and binding obligations of the Certificate Insurer. (d) Enforceability. The Policy, when issued, and this Agreement and the Insurance Agreement will each constitute a legal, valid and binding obligation of the Certificate Insurer, enforceable in accordance with its terms, subject to applicable laws affecting the enforceability of creditors' rights generally. (e) Financial Information. The consolidated financial statements of the Certificate Insurer as of December_31, 1995 and December_31, 1994 and for the three years ended December_31, 1995 incorporated by reference in the Prospectus Supplement (the "Certificate Insurer Audited Financial Statements"), fairly present in all material respects the financial condition of the Certificate Insurer as of such date and for the period covered by such statements in accordance with generally accepted accounting principles consistently applied. The consolidated financial statements of the Certificate Insurer and its subsidiaries for the nine months ended September 30, 1996 incorporated by reference in the Prospectus Supplement (the "Certificate Insurer Unaudited Financial Statements") present fairly in all material respects the financial condition of the Certificate Insurer as of such date and for the period covered by such statements in accordance with generally accepted accounting principles applied in a manner consistent with the accounting principles used in preparing the Certificate Insurer Audited Financial Statements, and, since September_30, 1996 there has been no material change in such financial condition of the Certificate Insurer which would materially and adversely affect its ability to perform its obligations under the Policy. (f) Certificate Insurer Information. The information in the Prospectus Supplement as of the date hereof under the caption "The Policy and The Certificate Insurer" (the "Certificate Insurer Information") is true and correct in all material respects and does not contain any untrue statement of a fact that is material to the Certificate Insurer's ability to perform its obligations under the Policy. (g) No Litigation. There are no actions, suits, proceedings or investigations pending or, to the best of the Certificate Insurer's knowledge, threatened against it at law or in equity or before or by any court, governmental agency, board or commission or any arbitrator which, if decided adversely, would materially and adversely affect its condition (financial or otherwise) or operations or which would materially and adversely affect its ability to perform its obligations under this Agreement, the Policy or the Insurance Agreement. Section 3. Agreements, Representations and Warranties of the Underwriter. The Underwriter represents and warrants to and agrees with the Originator and the Certificate Insurer that the statements in the Prospectus Supplement made in reliance upon and in conformity with 3 written information relating to the Underwriter furnished to the Originator 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 Originator. The Originator represents and warrants to and agrees with the Certificate Insurer and the Underwriter as follows: (a) Registration Statement. The information in the Registration Statement, the Prospectus and the Prospectus Supplement, other than the Certificate 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 Originator 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 Originator has the corporate power and authority to execute and deliver this Agreement, the Underwriting Agreement, the Pooling and Servicing Agreement, any Subsequent Transfer 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 Pooling and Servicing Agreement, any Subsequent Transfer Agreement and the Insurance Agreement by the Originator 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 Originator's board of directors or stockholders, are necessary for this Agreement, the Underwriting Agreement, the Pooling and Servicing Agreement, any Subsequent Transfer Agreement and the Insurance Agreement to constitute the legal, valid and binding obligations of the Originator. (e) Enforceability. This Agreement, the Pooling and Servicing Agreement, the Underwriting Agreement, any Subsequent Transfer Agreement and the Insurance Agreement will each constitute a legal, valid and binding obligation of the Originator, 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 Originator and to general principles of equity. (f) No Litigation. There are no actions, suits, proceedings or investigations pending or, to the best of the Originator's knowledge, threatened against it at law or in 4 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 Pooling and Servicing Agreement, any Subsequent Transfer Agreement or the Insurance Agreement. Section 5. Indemnification. (a)_The Certificate Insurer hereby agrees, upon the terms and subject to the conditions of this Agreement, to indemnify, defend and hold harmless each Originator 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 Certificates and resulting from the Certificate Insurer's breach of any of its representations and warranties set forth in Section_2 of this Agreement. (b) The Underwriter hereby agrees, upon the terms and subject to the conditions of this Agreement, to indemnify, defend and hold harmless each Certificate Insurer Party against any and all Losses incurred by it with respect to the offer and sale of any of the Class A Certificates and resulting from the Underwriter's breach of any of its representations and warranties set forth in Section_3 of this Agreement. (c) The Originator hereby agrees, upon the terms and subject to the conditions of this Agreement, to indemnify, defend and hold harmless each Certificate Insurer Party against any and all Losses incurred by it with respect to the offer and sale of any of the Class A Certificates and resulting from the Originator's breach of any of its representations and warranties set forth in Section_4 of this Agreement. (d) Upon the incurrence of any Losses entitled to indemnification hereunder, the Indemnifying Party shall reimburse the Indemnified Party promptly upon establishment by the Indemnified Party to the Indemnifying Party of the Losses incurred. Section 6. Certificate Insurer Undertaking. The Certificate 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 Certificates, the Certificate Insurer will furnish to the Underwriter or the Originator, or both, upon written request of such party or parties and at the expense of the Underwriter or the Originator, as the case may be, copies of the Certificate 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 7. Notice To Be Given Certificate Insurer. Except as provided in Section_10 below with respect to contribution, the indemnification provided herein by the Certificate Insurer shall be the exclusive remedy of each Underwriter Party or Originator Party for the Losses resulting from the Certificate Insurer's breach of a representation, warranty or agreement hereunder; provided, however, that each Underwriter 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. 5 In the event that any action or regulatory proceeding shall be commenced or claim asserted which may entitle each Underwriter Party or Originator Party to be indemnified under this Agreement, such party shall give the Certificate Insurer written or telegraphic notice of such action or claim reasonably promptly after receipt of written notice thereof. The Certificate 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 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 Certificate Insurer, but the fees and expenses of such counsel will be at the expense of such Indemnified Party unless (1) the employment of counsel by the Indemnified Party at its expense has been authorized in writing by the Certificate Insurer, (2) the Certificate 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 (3) the named parties to any such action include the Certificate 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 Certificate Insurer (in which case, if such Indemnified Party notifies the Certificate Insurer in writing that it elects to employ separate counsel at the expense of the Certificate Insurer, the Certificate 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 Certificate 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 Certificate Insurer shall not be liable for the fees and expenses of more than one counsel for all Originator Parties and more than one counsel for all Underwriter Parties. The Underwriter Parties and Originator Parties shall cooperate with the Certificate 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 of any such claim or action shall be entered into without the consent of each Originator Party or each Underwriter Party, as the case may be, who is subject to such claim or action, on the one hand, and each Certificate Insurer Party who is subject to such claim or action, on the other hand; provided, however, that the consent of such Originator 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 or Underwriter Party. Any failure by a Originator Party or Underwriter Party, as the case may be, to comply with the provisions of this Section shall relieve the Certificate Insurer of liability only if such failure is materially prejudicial to any legal pleadings, grounds, defenses or remedies in respect thereof or the Certificate Insurer's financial liability hereunder, and then only to the extent of such prejudice. Section 8. 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 Certificate Insurer Party for the Losses resulting from the Underwriter's breach of a representation, warranty or agreement hereunder; provided, however, that each Certificate 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 6 proceeding shall be commenced or claim asserted which may entitle a Certificate 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 Certificate 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 (1) the employment of counsel by the Indemnified Party at its expense has been authorized in writing by the Underwriter, (2) 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 (3) 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 Certificate Insurer Parties. The Certificate Insurer Party shall cooperate with each Underwriter 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 Certificate 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 Certificate Insurer Party shall not be required if such settlement fully discharges, with prejudice against the plaintiff, the claim or action against such Certificate Insurer Party. Any failure by a Certificate 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_9. Notice To Be Given the Originator. Except as provided below in Section 10 with respect to contribution, the indemnification provided herein by the Originator shall be the exclusive remedy of any Certificate Insurer Party for the Losses resulting from the Originator's breach of a representation, warranty or agreement hereunder; provided, however, that the Certificate 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 Certificate Insurer Party to be indemnified under this Agreement, such party shall give the Originator written or telegraphic notice of such action or claim reasonably promptly after receipt of written notice thereof. The Originator shall be entitled to participate in the defense of any such action or claim in reasonable cooperation 7 with, and with the reasonable cooperation of, the Certificate Insurer Party. The Indemnified Party will have the right to employ its own counsel in any such action in addition to counsel for the Originator, but the fees and expenses of such counsel will be at the expense of such Indemnified Party unless (1) the employment of counsel by the Indemnified Party at its expense has been authorized in writing by the Originator, (2) the Originator has not in fact employed counsel to assume the defense of such action within a reasonable time after receiving notice of the commencement of the action or (3) the named parties to any such action include the Originator, 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 Originator (in which case, if such Indemnified Party notifies the Originator in writing that it elects to employ separate counsel at the expense of the Originator, the Originator 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 Originator, 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 Originator shall not be liable for the fees and expenses of more than one counsel for all Certificate Insurer Parties. The Certificate Insurer Party shall cooperate with each Originator 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 Certificate 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 Certificate Insurer Party shall not be required if such settlement fully discharges, with prejudice against the plaintiff, the claim or action against such Certificate Insurer Party. Any failure by a Certificate 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. Section_10. Contribution. (a)_To provide for just and equitable contribution if the indemnification provided by the Certificate Insurer is determined to be unavailable for any Underwriter Party or Originator Party (other than pursuant to Section_5 or_7 of this Agreement), the Certificate Insurer shall contribute to the aggregate costs of liabilities arising from any breach of a representation or warranty set forth in this Agreement on the basis of the relative fault of all Underwriter Parties, all Originator Parties and all Certificate 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 Certificate Insurer Party (other than pursuant to Section_5 or_9 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 Originator Parties and all Certificate Insurer Parties. (c) To provide for just and equitable contribution if the indemnification provided by the Underwriter is determined to be unavailable for any Certificate Insurer Party (other than 8 pursuant to Section_5 or_8 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 and all Certificate Insurer Parties. (d) The relative fault of each Indemnifying Party, on the one hand, and of each Indemnified Party, on the other hand, shall be determined by reference to, among other things, whether the breach of, or alleged breach of, any of its representations and warranties set forth in Section_2, 3 or 4 of this Agreement relates to information supplied by, or action within the control of, the Indemnifying Party or the Indemnified Party and the Parties' relative intent, knowledge, access to information and opportunity to correct or prevent such breach. (e) The Parties agree that the Certificate Insurer shall be solely responsible for the Certificate Insurer Information and for the Certificate 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 Originator shall be responsible for all other information in the Registration Statement and the Prospectus Supplement. (f) No person guilty of fraudulent misrepresentation (within the meaning of Section_11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. (g) The indemnity and contribution agreements contained in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Underwriter Party, any Originator Party or any Certificate Insurer Party, (ii) the issuance of any Class A Certificates or the Policy or (iii) any termination of this Agreement. (h) Upon the incurrence of any Losses entitled to contribution hereunder, the contributor shall reimburse the party entitled to contribution promptly upon establishment by the party entitled to contribution to the contributor of the Losses incurred. Section_11. 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 Certificate Insurer: MBIA Insurance Corporation 113 King Street Armonk, NY 10504 Attention: General Counsel If to the Originator: Advanta National Bank USA. 16875 West Bernardo Drive San Diego, CA 92127 Attention: General Counsel If to the Underwriter: Lehman Brothers Inc. 9 Three World Financial Center New York, NY 10285-1200 Attention: General Counsel Section_12. Governing Law, Etc. This Agreement shall be deemed to be a contract under the laws of the State of New_York and shall be governed by and construed in accordance with the laws of the State of New_York without regard to its conflicts of laws provisions. This Agreement may not be assigned by any party without the express written consent of each other party. Amendments of this Agreement shall be in writing signed by each party. This Agreement shall not be effective until executed by each of the Certificate Insurer, the Originator and the Underwriter. Section_13. Insurance Agreement; Underwriting Agreement; Pooling and Servicing Agreement. This Agreement in no way limits or otherwise affects the indemnification obligations of the Originator under (a) the Insurance Agreement, (b) the Underwriting Agreement, (c) the Pooling and Servicing Agreement or (d) any Subsequent Transfer Agreement. Section 14. Limitations. Nothing in this Agreement shall be construed as a representation or undertaking by the Certificate Insurer concerning maintenance of the rating currently assigned to its claims-paying ability by Moody's Investors Service, Inc. ("Moody's") 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_15. 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 LEFT INTENTIONALLY BLANK] 10 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed and delivered by their respective officers thereunto duly authorized, all as of the date first above written. MBIA INSURANCE CORPORATION, as Certificate Insurer By ------------------------------------- Title ---------------------------------- ADVANTA NATIONAL BANK USA, as Originator By ------------------------------------- Title ---------------------------------- LEHMAN BROTHERS INC., as Underwriter By ------------------------------------- Title ---------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----