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EXHIBIT 10.1
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EXECUTION COPY
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MBIA INSURANCE CORPORATION,
as Certificate Insurer,
ADVANTA MORTGAGE CONDUIT SERVICES, INC.,
as Sponsor,
and
SALOMON SMITH BARNEY, INC.,
LEHMAN BROTHERS INC.,
J.P. MORGAN SECURITIES INC. and
PRUDENTIAL SECURITIES INCORPORATED
as Underwriters
INDEMNIFICATION AGREEMENT
Advanta Mortgage Loan Trust 1998-3,
Mortgage Loan Asset-Backed Certificates, Series 1998-3,
$500,000,000 Floating Rate Class A-1 Group I Certificates and
$500,000,000 Floating Rate Class A-2 Group II Certificates
Dated as of September 10, 1998
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INDEMNIFICATION AGREEMENT
Section 1. Definitions........................................................1
Section 2. Representations and Warranties of the Certificate Insurer..........2
Section 3. Agreements, Representations and Warranties of the Underwriters.....4
Section 4. Agreements, Representations and Warranties of the Sponsor..........4
Section 5. Indemnification....................................................5
Section 6. Notice To Be Given.................................................5
Section 7. Contribution.......................................................7
Section 8. Notices............................................................8
Section 9. Governing Law, Etc.................................................8
Section 10. Underwriting Agreement; Pooling and Servicing Agreements...........9
Section 11. Limitations........................................................9
Section 12. Counterparts.......................................................9
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INDEMNIFICATION AGREEMENT
This Agreement, dated as of September 10, 1998, is by and among MBIA
INSURANCE CORPORATION (the "Certificate Insurer"), as the Certificate Insurer
under the Certificate Guaranty Insurance Policy (the "Policy") issued in
connection with the Advanta Mortgage Loan Trust 1998-3, Mortgage Loan
Asset-Backed Certificates, Series 1998-3, $500,000,000 Floating Rate Class A-1
Group I Certificates and $500,000,000 Floating Rate Class A-2 Group II
Certificates, described below, ADVANTA MORTGAGE CONDUIT SERVICES, INC. (the
"Sponsor") and SALOMON SMITH BARNEY INC., LEHMAN BROTHERS INC., J.P. MORGAN
SECURITIES INC. AND PRUDENTIAL SECURITIES INCORPORATED, as the Underwriters
(together the "Underwriters").
Section 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the respective meanings stated herein, unless the context clearly
requires otherwise, in both singular and plural form, as appropriate.
Capitalized terms used in this Agreement but not otherwise defined herein will
have the meanings ascribed to such terms in the Pooling and Servicing Agreements
(as described below).
"Act" means the Securities Act of 1933, as amended, together with all
related rules and regulations.
"Agreement" means this Indemnification Agreement by and among the
Insurer, the Sponsor and the Underwriters.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 5 below, as the context requires.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 5 below, as the context requires.
"Insurance Agreement" means the Insurance Agreement, dated as of
September 1, 1998, by and among the Certificate Insurer, the Sponsor, the Master
Servicer, the Joint Obligor, and the Trustee.
"Insured Certificates" means the Class A-1 Group I Certificates and the
Class A-2 Group II Certificates.
"Insurer Party" means the Certificate Insurer and its respective
parents, subsidiaries and affiliates and any shareholder, director, officer,
employee, agent or any "controlling person" (as such term is used in the Act) of
any of the foregoing.
"Losses" means (i) any actual out-of-pocket loss paid by the party
entitled to indemnification or contribution hereunder and (ii) any actual
out-of-pocket costs and expenses paid by such party, including reasonable fees
and expenses of its counsel, to the extent not paid, satisfied or reimbursed
from funds provided by any other Person (provided that the foregoing shall not
create or imply any obligation to pursue recourse against any such other
Person).
"Master Servicer" means Advanta Mortgage Corp. USA, as Master Servicer.
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"Offered Certificates" means the Advanta Mortgage Loan Trust 1998-3,
Mortgage Loan Asset-Backed Certificates, Series 1998-3, $500,000,000 Floating
Rate Class A-1 Group I Certificates and $500,000,000 Floating Rate Class A-2
Group II Certificates issued pursuant to the Pooling and Servicing Agreement.
"Person" means any individual, partnership, joint venture, corporation,
trust or unincorporated organization or any government or agency or political
subdivision thereof.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement dated as of September 1, 1998 by and among the Sponsor, the Master
Servicer and the Trustee.
"Prospectus" means the form of final Prospectus included in the
Registration Statement on each date that the Registration Statement and any post
effective amendment or amendments thereto became effective.
"Prospectus Supplement" means the form of final Prospectus Supplement
dated September 10, 1998.
"Registration Statement" means the registration statement on Form S-3
of the Sponsor relating to the Offered Certificates.
"Sponsor Party" means the Sponsor, each of its parents, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or any
"controlling person" (as such term is used in the Act) of any of the foregoing.
"State Securities Law" means any state, local or foreign statute, and
any rule or regulation thereunder, regulating (i) transactions and dealings in
securities, (ii) any Person or entity engaging in such transactions or advising
with respect to securities or (iii) investment companies.
"Trustee" means Bankers Trust Company of California, N.A., or any
successor thereto.
"Underwriter Party" means each Underwriter and each of its parents,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Act) of any of the
foregoing.
"Underwriters" means Salomon Smith Barney Inc., Lehman Brothers Inc.,
J.P. Morgan Securities Inc. and Prudential Securities Incorporated.
"Underwriting Agreements" means the Underwriting Agreements by and
between the Sponsor and the Underwriters, dated September 9, 1998.
Section 2. Representations and Warranties of the Certificate Insurer.
The Certificate Insurer represents and warrants to the Underwriters and the
Sponsor as follows:
(a) Organization and Licensing. The Certificate Insurer is a
duly incorporated and existing New York stock insurance company
licensed to do business in the State of New York.
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(b) Corporate Power. The Certificate Insurer has the corporate
power and authority to issue the Policies and to execute and deliver
this Agreement and the Insurance Agreement and to perform all of its
obligations hereunder and thereunder.
(c) Authorization; Approvals. The issuance of the Policies and
the execution, delivery and performance of this Agreement and the
Insurance Agreement have been duly authorized by all necessary
corporate proceedings. No further approvals or filings of any kind,
including, without limitation, any further approvals of or further
filings with any governmental agency or other governmental authority,
or any approval of the Insurer's board of directors or stockholders,
are necessary for the Policies, this Agreement and the Insurance
Agreement to constitute the legal, valid and binding obligations of the
Certificate Insurer.
(d) Enforceability. The Policies, when issued, and this
Agreement and the Insurance Agreement will each constitute a legal,
valid and binding obligation of the Certificate Insurer, enforceable in
accordance with its terms, subject to applicable laws affecting the
enforceability of creditors' rights generally.
(e) Financial Information. The consolidated financial
statements of the Certificate Insurer as of December 31, 1997 and
December 31, 1996 and for each of the three years ended December 31,
1997 incorporated by reference in the Prospectus Supplement (the
"Certificate Insurer Audited Financial Statements"), fairly present in
all material respects the financial condition of the Certificate
Insurer as of such date and for the period covered by such statements
in accordance with generally accepted accounting principles
consistently applied. The consolidated financial statements of the
Certificate Insurer and its subsidiaries for the six months ended June
30, 1998 incorporated by reference in the Prospectus Supplement (the
"Certificate Insurer Unaudited Financial Statements") fairly present in
all material respects the financial condition of the Certificate
Insurer as of such date and for the period covered by such statements
in accordance with generally accepted accounting principles applied in
a manner consistent with the accounting principles used in preparing
the Certificate Insurer Audited Financial Statements, and, since June
30, 1998, there has been no material change in such financial condition
of the Certificate Insurer which would materially and adversely affect
its ability to perform its obligations under the Policy.
(f) Certificate Insurer Information. The information in the
Prospectus Supplement as of the date hereof under the captions "THE
CERTIFICATE INSURER" and "THE CERTIFICATE INSURANCE POLICY" (the
"Insurer Information") is true and correct in all material respects and
does not contain any untrue statement of a fact that is material to the
Certificate Insurer's ability to perform its obligations under the
Policy.
(g) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Certificate Insurer's
knowledge, threatened against it at law or in equity or before or by
any court, governmental agency, board or commission or any arbitrator
which, if decided adversely, would materially and adversely affect its
condition (financial or otherwise) or operations or which would
materially and adversely affect its
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ability to perform its obligations under this Agreement, the Policy or
the Insurance Agreement.
Section 3. AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE
UNDERWRITERS. Each Underwriter represents and warrants to and agrees with the
Sponsor and the Insurer that the statements in the Prospectus Supplement made in
reliance upon and in conformity with written information relating to such
Underwriter furnished to the Sponsor specifically for use in the preparation of
the Prospectus Supplement, and acknowledged in writing as described in the
applicable Underwriting Agreement (referred to herein as the "Underwriter
Information"), are true and correct in all material respects. It is hereby
acknowledged that the Underwriter Information furnished by Lehman Brothers Inc.,
J.P. Morgan Securities Inc. and Prudential Securities Incorporated relates only
to the Group I Certificates.
Section 4. AGREEMENTS, REPRESENTATIONS AND WARRANTIES OF THE SPONSOR.
The Sponsor represents and warrants to and agrees with the Certificate Insurer
and the Underwriters as follows:
(a) Registration Statement. The information in the
Registration Statement, the Prospectus and the Prospectus Supplement,
other than the Insurer Information, and the Underwriter Information, is
true and correct in all material respects and does not contain any
untrue statement of a fact that is material or omit to state a fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) Organization. The Sponsor is duly incorporated and
existing under the laws of the State of Delaware and is in good
standing as a foreign corporation in each jurisdiction in which the
nature of its business, or the properties owned or leased by it, makes
such qualification necessary.
(c) Corporate Power. The Sponsor has the corporate power and
authority to execute and deliver this Agreement, the Underwriting
Agreement, the Pooling and Servicing Agreement, the Master Transfer
Agreements and the Insurance Agreement and to perform all of its
obligations hereunder and thereunder.
(d) Authorization; Approvals. The execution, delivery and
performance of this Agreement, the Underwriting Agreement, the Master
Transfer Agreements, the Pooling and Servicing Agreement and the
Insurance Agreement by the Sponsor have been duly authorized by all
necessary corporate proceedings. No further approvals or filings of any
kind, including, without limitation, any further approvals of or
further filing with any governmental agency or other governmental
authority, or any approval of the Sponsor's board of directors or
stockholders, are necessary for this Agreement, the Underwriting
Agreement, the Pooling and Servicing Agreement and the Insurance
Agreement to constitute the legal, valid and binding obligations of the
Sponsor.
(e) Enforceability. This Agreement, the Pooling and Servicing
Agreement, the Master Transfer Agreements, the Underwriting Agreement
and the Insurance Agreement will each constitute a legal, valid and
binding obligation of the Sponsor, each
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enforceable in accordance with its terms, subject, as to the
enforcement of remedies, to bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforceability of
creditors' rights generally applicable in the event of the bankruptcy,
insolvency or reorganization of the Sponsor and to general principles
of equity.
(f) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Sponsor's knowledge,
threatened against it at law or in equity or before any court,
governmental agency, board or commission or any arbitrator which, if
decided adversely, would materially and adversely affect its condition
(financial or otherwise) or operations of it or would materially and
adversely affect its ability to perform its obligations under this
Agreement, the Underwriting Agreement, the Master Transfer Agreements,
the Pooling and Servicing Agreement or the Insurance Agreement.
Section 5. INDEMNIFICATION. (a) The Certificate Insurer hereby agrees,
upon the terms and subject to the conditions of this Agreement, to indemnify,
defend and hold harmless each Sponsor Party and each Underwriter Party against
any and all Losses incurred by them with respect to the offer and sale of any of
the Offered Certificates and resulting from the Certificate Insurer's breach of
any of its representations and warranties set forth in Section 2 of this
Agreement.
(b) Each Underwriter hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Insurer Party against any and all Losses incurred by it with respect to the
offer and sale of any of the Offered Certificates and resulting from such
Underwriter's breach of any of its representations and warranties set forth in
Section 3 of this Agreement
(c) The Sponsor hereby agrees, upon the terms and subject to the
conditions of this Agreement, to indemnify, defend and hold harmless each
Insurer Party against any and all Losses incurred by it with respect to the
offer and sale of any of the Offered Certificates and resulting from the
Sponsor's breach of any of its representations and warranties set forth in
Section 4 of this Agreement.
(d) Upon the incurrence of any Losses entitled to indemnification
hereunder, the Indemnifying Party shall reimburse the Indemnified Party promptly
upon establishment by the Indemnified Party to the Indemnifying Party of the
Losses incurred.
Section 6. NOTICE TO BE GIVEN. (a) Except as provided in Section 7
below with respect to contribution, the indemnification provided herein by the
Indemnifying Party shall be the exclusive remedy of each Indemnified Party for
the Losses resulting from the Indemnifying Party's breach of a representation,
warranty or agreement hereunder; provided, however, that each Indemnified Party
shall be entitled to pursue any other remedy at law or in equity for any such
breach so long as the damages sought to be recovered shall not exceed the Losses
incurred thereby resulting from such breach.
(b) In the event that any action or regulatory proceeding shall be
commenced or claim asserted which may entitle an Indemnified Party to be
indemnified under this Agreement, such
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party shall give the Indemnifying Party written or facsimile notice of such
action or claim reasonably promptly after receipt of written notice thereof.
(c) Upon request of the Indemnified Party, the Indemnifying Party shall
retain counsel reasonably satisfactory to the Indemnified Party to represent the
Indemnified Party and any others the Indemnifying Party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. The Indemnifying Party may, at its option, at any time upon
written notice to the Indemnified Party, assume the defense of any proceeding
and may designate counsel reasonably satisfactory to the Indemnified Party in
connection therewith provided that the counsel so designated would have no
actual or potential conflict of interest in connection with such representation.
Unless it shall assume the defense of any proceeding, the Indemnifying Party
shall not be liable for any settlement of any proceeding, effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Party agrees to indemnify the
Indemnified Party from and against any loss or liability by reason of such
settlement or judgment. The Indemnifying Party shall be entitled to participate
in the defense of any such action or claim in reasonable cooperation with, and
with the reasonable cooperation of, each Indemnified Party.
(d) The Indemnified Party will have the right to employ its own counsel
in any such action, but the fees and expenses of such counsel will be at the
expense of such Indemnified Party unless (1) the employment of counsel by the
Indemnified Party at the Indemnifying Party's expense has been authorized in
writing by the Indemnifying Party, (2) the Indemnifying Party has not in fact
employed counsel to assume the defense of such action within a reasonable time
after receiving notice of the commencement of the action or (3) the named
parties to any such action include the Indemnifying Party on the one hand and,
on the other hand, the Indemnified Party, and representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such action or proceeding on such Indemnified
Party's behalf), in each of which cases the reasonable fees and expenses of
counsel (including local counsel) will be at the expense of the Indemnifying
Party, and all such fees and expenses will be reimbursed promptly as they are
incurred. In the event that any expenses so paid by the Indemnifying Party are
subsequently determined to not be required to be borne by the Indemnifying Party
hereunder, the party which received such payment shall promptly refund to the
Indemnifying Party the amount so paid by such Indemnifying Party.
Notwithstanding the foregoing, in connection with any one action or separate but
substantially similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances, the Indemnifying Party shall not
be liable for the fees and expenses of more than one counsel for all Seller
Parties, more than one counsel for all Underwriter Parties and more than one
counsel for all Insurer Parties, as applicable.
(e) The Indemnified Parties shall cooperate with the Indemnifying
Parties in resolving any event which would give rise to an indemnity obligation
pursuant to Section 5 hereof in the most efficient manner.
(f) No settlement of any such claim or action shall be entered into
without the consent of each Indemnified Party who is subject to such claim or
action, on the one hand, and
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each Indemnifying Party who is subject to such claim or action, on the other
hand; provided, however, that the consent of such Indemnified Party shall not be
required if such settlement fully discharges, with prejudice against the
plaintiff, the claim or action against such Indemnified Party.
(g) Any failure by an Indemnified Party to comply with the provisions
of this Section shall relieve the Indemnifying Party of liability only if such
failure is materially prejudicial to any legal pleadings, grounds, defenses or
remedies in respect thereof or the Indemnifying Party's financial liability
hereunder, and then only to the extent of such prejudice.
Section 7. CONTRIBUTION. (a) To provide for just and equitable
contribution if the indemnification provided by the Certificate Insurer is
determined to be unavailable for any Underwriter Party or Sponsor Party (other
than pursuant to Section 5 or 6 of this Agreement), the Certificate Insurer
shall contribute to the aggregate costs of liabilities arising from any breach
of a representation or warranty set forth in this Agreement on the basis of the
relative fault of all Underwriter Parties, all Sponsor Parties and all Insurer
Parties, respectively.
(b) To provide for just and equitable contribution if the
indemnification provided by the Sponsor is determined to be unavailable for any
Insurer Party (other than pursuant to Section 5 or 6 of this Agreement), the
Sponsor shall contribute to the aggregate costs of liabilities arising from any
breach of a representation or warranty set forth in this Agreement on the basis
of the relative fault of all Underwriter Parties, all Sponsor Parties and all
Insurer Parties.
(c) To provide for just and equitable contribution if the
indemnification provided by each Underwriter is determined to be unavailable for
any Insurer Party (other than pursuant to Section 5 or 6 of this Agreement),
such Underwriter shall contribute to the aggregate costs of liabilities arising
from any breach of a representation or warranty set forth in this Agreement on
the basis of the relative fault of all Underwriter Parties, all Sponsor Parties
and all Insurer Parties. In no case shall any Underwriter be responsible for any
amount in excess of the Underwriting discount applicable to the Certificates
purchased by such Underwriter pursuant to the Underwriting Agreement.
(d) The relative fault of each Indemnifying Party, on the one hand, and
of each Indemnified Party, on the other hand, shall be determined by reference
to, among other things, whether the breach of, or alleged breach of, any of its
representations and warranties set forth in Section 2, 3 or 4 of this Agreement
relates to information supplied by, or action within the control of, the
Indemnifying Party or the Indemnified Party and the Parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
breach.
(e) The Parties agree that the Certificate Insurer shall be solely
responsible for the Insurer Information and for the Insurer Financial
Statements, that each Underwriter shall be solely responsible for the
Underwriter Information provided by such Underwriter in writing for use in the
Prospectus Supplement and that the Sponsor shall be responsible for all other
information in the Registration Statement and the Prospectus Supplement.
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(f) No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(g) The indemnity and contribution agreements contained in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of any Underwriter Party, any Sponsor
Party or any Insurer Party, (ii) the issuance of any Offered Certificates or the
Policy or (iii) any termination of this Agreement.
(h) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to contribution
promptly upon establishment by the party entitled to contribution to the
contributor of the Losses incurred.
Section 8. NOTICES. All notices and other communications provided for
under this Agreement shall be addressed to the address set forth below as to
each party or at such other address as shall be designated by a party in a
written notice to the other party.
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If to the Certificate Insurer: MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
Attention: Insured Portfolio Management
-- Structured Finance (IPM-SF)
If to the Sponsor: Advanta Mortgage Conduit Services, Inc.
16875 West Bernardo Drive
San Diego, CA 92127
Attention: General Counsel
If to the Underwriters: Salomon Smith Barney
7 World Trade Center
New York, NY 10048
Lehman Brothers
200 Vesey Street, 12th Floor
3 World Trade Center
New York, NY 10285
J.P. Morgan Securities
60 Wall Street
New York, NY 10004
Prudential Securities Incorporated
One New York Plaza
New York, NY 10292-2015
Section 9. GOVERNING LAW, ETC. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
ITS CONFLICTS OF LAWS PROVISIONS. This Agreement may not be assigned by any
party without the express written consent of each other party. Amendments of
this Agreement shall be in writing signed by each party. This Agreement shall
not be effective until executed by each of the Certificate Insurer, the Sponsor
and the Underwriters.
Section 10. UNDERWRITING AGREEMENT; POOLING AND SERVICING AGREEMENTS.
This Agreement in no way limits or otherwise affects the indemnification
obligations of the Sponsor under (a) the Underwriting Agreement or (b) the
Pooling and Servicing Agreement. Similarly this Agreement in no way limits or
otherwise affects the indemnification obligations of the Underwriters under the
related Underwriting Agreement.
Section 11. LIMITATIONS. Nothing in this Agreement shall be construed
as a representation or undertaking by the Certificate Insurer concerning
maintenance of the rating currently assigned to its claims-paying ability by
Moody's Investors Service, Inc. ("Moody's")
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and/or Standard & Poor's Ratings Services, a division of The McGraw-Hill
Companies, Inc. ("S&P") or any other rating agency (collectively, the "Rating
Agencies").
Section 12. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall together constitute but one and the same
instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized, all as of the date first above written.
MBIA INSURANCE CORPORATION,
as Certificate Insurer
By /s/ ILLEGIBLE
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Title Assistant Secretary
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ADVANTA MORTGAGE CONDUIT
SERVICES, INC., as Sponsor
By /s/ Mark T. Dunsheath
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Title
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SALOMON SMITH BARNEY INC.,
as Underwriter
By /s/ ILLEGIBLE
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Title Associate
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LEHMAN BROTHERS INC.,
as Underwriter
By
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Title
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J.P. MORGAN SECURITIES INC.,
as Underwriter
By
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Title
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Advanta Mortgage Loan Trust 1998-3
Indemnification Agreement Signature Page
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PRUDENTIAL SECURITIES INCORPORATED
as Underwriter
By
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Title
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Advanta Mortgage Loan Trust 1998-3
Indemnification Agreement Signature Page