EXHIBIT 1.2
AMBAC ASSURANCE CORPORATION
and
GREENWICH CAPITAL MARKETS, INC.
INDEMNIFICATION AGREEMENT
HEADLANDS HOME EQUITY LOAN TRUST 1998-A
Dated as of March 25, 1998
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and shall not
be deemed to be part of this Indemnity Agreement. All capitalized terms used in
this Indemnity Agreement and not otherwise defined shall have the meanings set
forth in Article I of this Indemnity Agreement.)
Page
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Section 1. Defined Terms.........................................1
Section 2. Other Definitional Provisions.........................1
Section 3. Representations and Warranties of the Underwriter.....2
Section 4. Representations and Warranties of the Insurer.........2
Section 5. Indemnification.......................................3
Section 6. Amendments, Etc.......................................5
Section 7. Notices...............................................5
Section 8. Severability..........................................6
Section 9. Governing Law.........................................6
Section 10. Counterparts.........................................6
Section 11. Headings.............................................6
INDEMNIFICATION AGREEMENT dated as of March 25, 1998 (the "Indemnity
Agreement"), by and among AMBAC ASSURANCE CORPORATION, as Insurer, and GREENWICH
CAPITAL MARKETS, INC. (the"Underwriter").
Section 1. Defined Terms. Unless the context clearly requires otherwise,
all capitalized terms used but not defined herein shall have the respective
meanings assigned to them in the Sale and Servicing Agreement, the Insurance
Agreement or the Policy. For purposes of this Indemnity Agreement, the following
terms shall have the following meanings:
"Insurance Agreement" means the Insurance and Indemnity Agreement (as may
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be amended, modified or supplemented from time to time) dated as of March 25,
1998 by and among the Headlands Mortgage Securities Inc., as Sponsor, Headlands
Mortgage Company, as Servicer, the Insurer, the Trust, as Issuer, and the
Indenture Trustee.
"Insurer" means Ambac Assurance Corporation, or any successor thereto, as
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issuer of the Policy.
"Insurer Information" has the meaning given such term in Section 4.
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"Offering Document" means the Prospectus Supplement, dated March 23, 1998,
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in respect of the Notes, and any amendment or supplement thereto, and any other
offering document in respect of the Notes that makes reference to the Policy.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
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dated as of March 16, 1998, relating to the Headlands Revolving Home Equity Loan
Asset-Backed Notes, Series 1998-A, by and among the Sponsor, the Servicer and
the Indenture Trustee (as may be amended, modified or supplemented from time to
time as set forth therein).
"Securities Act" means the Securities Act of 1933, including, unless the
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context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
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including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Underwriter" means Greenwich Capital Markets, Inc.
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"Underwriter's Information" has the meaning given such term in Section 3.
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Section 2. Other Definitional Provisions. The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Indemnity Agreement
shall refer to this Indemnity Agreement as a whole and not to any particular
provision of this Indemnity Agreement, and Section, subsection, Schedule and
Exhibit references are to this Indemnity Agreement unless otherwise specified.
The meanings given to terms defined herein shall be equally applicable to both
the singular and plural forms of such terms. The words "include" and "including"
shall be deemed to be followed by the phrase "without limitation."
Section 3. Representations and Warranties of the Underwriter. The
Underwriter represents and warrants as of the Closing Date as follows:
(a) Compliance With Laws. The Underwriter will comply in all material
respects with all legal requirements in connection with offers and sales of the
Notes and will make such offers and sales in the manner to be provided in the
Offering Document.
(b) Offering Document. The Underwriter will not use, or distribute to
other broker-dealers for use, any Offering Document in connection with the offer
and sale of the Notes unless such Offering Document includes such information
relating to the Insurer as has been furnished by the Insurer for inclusion
therein and has been approved by the Insurer.
(c) Underwriter' Information. All material provided by the Underwriter for
inclusion in the Offering Document (as revised from time to time), shall be true
and correct in all material respects, it being understood and agreed that the
only such information furnished by any Underwriter consists of the following
information (collectively, the "Underwriter's Information"): the information
contained under the heading "Underwriting" in the Offering Document.
Section 4. Representations and Warranties of the Insurer. The Insurer
represents and warrants to the Underwriter as follows:
(a) Organization and Licensing. The Insurer is a duly organized and
licensed and validly existing Wisconsin stock insurance company duly qualified
to conduct an insurance business in the State of New York.
(b) Corporate Power. The Insurer has the corporate power and authority to
issue the Policy and execute this Indemnity Agreement and to perform all of its
obligations hereunder and thereunder.
(c) Authorization; Approvals. Proceedings legally required for the
issuance of the Policy and the execution, delivery and performance of this
Indemnity Agreement have been taken and all material licenses, orders, consents
or other authorizations or approvals of any governmental boards or bodies
legally required for the enforceability of the Policy have been obtained; any
proceedings not taken and any licenses, authorizations or approvals not obtained
are not material to the enforceability of the Policy.
(d) Enforceability. The Policy, when issued, and this Indemnity Agreement
will each constitute a legal, valid and binding obligation of the Insurer,
enforceable in accordance with its terms, subject to insolvency, reorganization,
moratorium, receivership and other similar laws affecting creditors' rights
generally and by general principles of equity and subject to principles of
public policy limiting the right to enforce the indemnification provisions
contained therein and herein, insofar as such provisions relate to
indemnification for liabilities arising under federal securities laws.
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(e) Financial Information. The balance sheet of the Insurer as of December
31, 1996 and the related statements of income, stockholder's equity and cash
flows for the two fiscal years ended December 31, 1996, and the accompanying
footnotes, together with an opinion thereon dated January 30, 1997, of KPMG Peat
Marwick, independent certified public accountants, a copy of which is
incorporated by reference in the Offering Document, fairly present in all
material respects the financial condition of the Insurer as of such dates and
for the periods covered by such statements in accordance with generally accepted
accounting principles consistently applied. The balance sheets of the Insurer as
of September 30, 1996 and September 30, 1997 and the related statements of
income, stockholder's equity and cash flows for the nine-month periods ended
September 30, 1996 and September 30, 1997 and the accompanying footnotes, a copy
of which is incorporated by reference in the Offering Document, fairly present
in all material respects the financial condition of the Insurer as of such date
and for such nine-month periods in accordance with generally accepted accounting
principles consistently applied. Since September 30, 1997, there has been no
material change in such financial condition of the Insurer that would materially
and adversely affect its ability to perform its obligations under the Policy.
(f) Insurer Information. The information in the Offering Document as of
the date hereof under the caption "THE INSURER AND THE POLICY" (the "Insurer
Information") is true and correct in all material respects and does not contain
any untrue statement of a material fact.
(g) Rating. The Insurer is not aware of any facts that if disclosed to
Moody's or Standard & Poor's would be reasonably expected to result in a
downgrade of the rating of the claims paying ability of the Insurer by either of
such Rating Agencies.
(h) No Litigation. There are no actions, suits, proceedings or
investigations pending or, to the best of the Insurer's knowledge, threatened
against it at law or in equity or before or by any court, governmental agency,
board or commission or any arbitrator which, if decided adversely, would result
in a Material Adverse Change or would materially and adversely affect its
ability to perform its obligations under the Policy or this Insurance Agreement.
(i) 1933 Act Registration. The Policy is exempt from registration under
the Act.
Section 5. Indemnification.
(a) The Underwriter hereby agrees to pay, and to protect, indemnify and
hold harmless, the Insurer and its officers, directors, shareholders, employees,
agents and each Person, if any, who controls the Insurer within the meaning of
either Section 15 of the Securities Act or Section 20 of the Securities Exchange
Act from and against, any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or expenses
(including reasonable fees and expenses of attorneys, consultants and auditors
and reasonable costs of investigations) of any nature arising out of or by
reason of any untrue statement of a material fact or an omission to state a
material
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fact necessary in order to make the statements therein in light of the
circumstances in which they were made not misleading, contained in the
Underwriter's Information or a breach of any of the representations and
warranties of the Underwriter contained in Section 3.
(b) The Insurer agrees to pay, and to protect, indemnify and hold harmless,
the Underwriter and its respective officers, directors, shareholders, employees,
agents and each Person, if any, who controls such Underwriter within the meaning
of either Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act from and against, any and all claims, losses, liabilities
(including penalties), actions, suits, judgments, demands, damages, costs or
expenses (including reasonable fees and expenses of attorneys, consultants and
auditors and reasonable costs of investigations) of any nature arising out of or
by reason of any untrue statement of a material fact or an omission to state a
material fact necessary in order to make the statements therein in light of the
circumstances in which they were made not misleading, contained in the Insurer
Information or a breach of any of the representations and warranties of the
Insurer contained in Section 4.
(c) If any action or proceeding (including any governmental investigation)
shall be brought or asserted against any Person (individually, an "Indemnified
Party" and, collectively, the "Indemnified Parties") in respect of which the
indemnity provided in this Section 5(a) or (b) may be sought from any
Underwriter, on the one hand, or the Insurer, on the other (each, an
"Indemnifying Party") hereunder, each such Indemnified Party shall promptly
notify the Indemnifying Party in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel satisfactory to
the Indemnified Party and the payment of all expenses. The Indemnified Party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof at the expense of the Indemnified Party;
provided, however, that the fees and expenses of such separate counsel shall be
at the expense of the Indemnifying Party if (i) the Indemnifying Party has
agreed to pay such fees and expenses, (ii) the Indemnifying Party shall have
failed to assume the defense of such action or proceeding and employ counsel
reasonably satisfactory to the Indemnified Party in any such action or
proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnified Party and the
Indemnifying Party, and the Indemnified Party shall have been advised by counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the Indemnifying Party (in which case,
if the Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of such action
or proceeding on behalf of such Indemnified Party, it being understood, however,
that the Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for the Indemnified Parties, which
firm shall be designated in writing by the Indemnified Party). The Indemnifying
Party shall not be liable for any settlement of any such action or proceeding
effected without its written
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consent to the extent that any such settlement shall be prejudicial to the
Indemnifying Party, but, if settled with its written consent, or if there is a
final judgment for the plaintiff in any such action or proceeding with respect
to which the Indemnifying Party shall have received notice in accordance with
this subsection (c), the Indemnifying Party agrees to indemnify and hold the
Indemnified Parties harmless from and against any loss or liability by reason of
such settlement or judgment.
(d) To provide for just and equitable contribution if the indemnification
provided by the Indemnifying Party is determined to be unavailable or
insufficient to hold harmless any Indemnified Party (other than due to
application of this Section), each Indemnifying Party shall contribute to the
losses incurred by the Indemnified Party on the basis of the relative fault of
the Indemnifying Party, on the one hand, and the Indemnified Party, on the other
hand provided, that no Underwriter shall be liable for any amount in excess of
(i) the excess of the sales prices of the Offered Notes to the public over the
prices paid therefor by the Underwriter over (ii) the aggregate amount of any
damages which the Underwriter have otherwise been required to pay in respect of
the same or any substantially similar claim.
The relative fault of each Indemnifying Party, on the one hand, and each
Indemnified Party, on the other, shall be determined by reference to, among
other things, whether the breach of, or alleged breach of, any of its
representations and warranties set forth within the control of, the Indemnifying
Party or the Indemnified Party, and the parties relative intent, knowledge,
access to information and opportunity to correct or prevent such breach.
No person guilty of fraudulent misrepresentation (within the meaning of
Section (11)f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
Section 6. Amendments, Etc. This Indemnity Agreement may be amended,
modified, supplemented or terminated only by written instrument or written
instruments signed by the parties hereto.
Section 7. Notices. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by registered mail or personally delivered and
telecopied to the recipient as follows:
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(a) To the Insurer:
Ambac Indemnity Corporation
Xxx Xxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Structured Finance Department - MBS
Telecopy No.: 000-000-0000
Confirmation: 212-668-0340
(b) To any Underwriter:
Greenwich Capital Markets, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Attention: ________________
Telecopy No.:
Confirmation:
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 8. Severability. In the event that any provision of this Indemnity
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate or
render unenforceable any other provision hereof. The parties hereto further
agree that the holding by any court of competent jurisdiction that any remedy
pursued by any party hereto is unavailable or unenforceable shall not affect in
any way the ability of such party to pursue any other remedy available to it.
Section 9. Governing Law. This Indemnity Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
Section 10. Counterparts. The Indemnity Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
Section 11. Headings. The headings of Sections and the Table of Contents
contained in this Indemnity Agreement are provided for convenience only. They
form no part of this Indemnity Agreement and shall not affect its construction
or interpretation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement, all as of the day and year first above mentioned.
AMBAC ASSURANCE CORPORATION,
as Insurer
By:/s/ Xxxx X. Xxxxx
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Name: Xxxx X. Xxxxx
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Title: Vice President & Assistant General Counsel
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GREENWICH CAPITAL MARKETS, INC.
By:/s/ Xxxxx Xxxxxxx
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Name: Xxxxx Xxxxxxx
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Title: Senior Vice President
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