Exhibit 1.2
Execution Copy
INDEMNITY AGREEMENT
Reference is made to the Prospectus Supplement dated March 5, 1998 (the
"Prospectus Supplement") relating to the Asset Backed Notes, Series 1998-1 (the
"Notes"), which Notes will be issued by Mortgage Lenders Network Home Equity
Loan Trust, Series 1998-1. Capitalized terms used but not defined herein shall
have the meanings assigned to them in the Prospectus Supplement.
Mortgage Lenders Network USA, Inc., a Delaware corporation (the
"Company"), hereby represents and warrants to Prudential Securities Secured
Financing Corporation ("PSSFC") and Prudential Securities Incorporated and First
Union Capital Markets, a division of Wheat First Securities Corp., (together
with Prudential Securities Incorporated, the "Underwriters") that (a) it
provided to PSSFC the information relating to the Company and the Mortgage Loans
set forth in the Prospectus Supplement under "Summary of Terms--The Mortgage
Loans," "Mortgage Lenders Network USA, Inc.," "Description of the Mortgage
Pool," "Servicing of the Mortgage Loans--General," "Servicing of the Mortgage
Loans--Customary Servicing Procedures," and "Servicing of the Mortgage
Loans--Historical Servicing Experience of the Servicer (collectively, the
"Company Information"), and (b) such Company Information does not contain an
untrue statement of material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The
Company acknowledges and understands that PSSFC is relying on the aforesaid
representation and warranty and is causing the issuance of the Notes in partial
reliance thereon and the Company agrees, in consideration for PSSFC facilitating
the financing of the Company's Mortgage Loans and in consideration of the
Underwriters' purchase of the Notes, to indemnify and hold harmless PSSFC, each
of PSSFC's directors, each of PSSFC's officers who signed the Registration
Statement and each person if any who controls PSSFC within the meaning of the
Securities Act of 1933, as amended, and the Underwriters and each person who
controls the Underwriters within the meaning of the Securities Act of 1933, as
amended, for any losses, claims, damages or liabilities joint or several it
incurs as a result of (i) a breach of such representation and warranty or (ii)
as a result of a Mortgage Pool Error from which any Computational or ABS Term
Sheets were derived, and will reimburse any legal or other expenses incurred by
PSSFC or any such director, officer or controlling person and the Underwriters
or any such controlling person in connection with investigating any such loss,
claim, damage, liability or action. "Computational Materials" shall mean those
materials delivered within the meaning of the no-action letter dated May 20,
1994 issued by the Division of Corporation Finance of the Commission to Xxxxxx,
Xxxxxxx Acceptance Corporation I, Xxxxxx, Peabody & Co., Incorporated, and
Xxxxxx Structured Asset Corporation and the no-action letter dated May 27, 1994
issued by the Division of Corporation Finance of the Commission to the Public
Securities Association for which the filing of such material is a condition of
the relief granted in such letters. "ABS Term Sheet" shall mean those materials
delivered in the form of "Structural Term Sheets" or "Collateral Term Sheets",
in each case within the meaning of
the no-action letter dated February 13, 1995 issued by the Division of
Corporation Finance of the Commission to the Public Securities Association for
which the filing of such material is a condition of the relief granted in such
letter. For purposes hereof, a "Mortgage Pool Error" shall mean an error in
information regarding the characteristics of the Mortgage Loans provided by the
Company to the Underwriters for the preparation of Computational Materials or
ABS Term Sheets.
Each obligation of the Company to indemnify PSSFC and the Underwriters
(each, an "Indemnified Party") is conditioned upon the following: the related
Indemnified Party shall promptly notify the Company in writing of the existence
of any fact or circumstance known to such Indemnified Party giving rise to the
Company's obligation of indemnity and in the case of any claim or litigation
which may give rise to such an obligation, the Indemnified Party shall promptly
notify the Company in writing of the making of such claim or the commencement of
such litigation when the same become known to such Indemnified Party. The
Company shall have the option of defending the Indemnified Party in connection
with any such claim or litigation using the Company's own counsel, which counsel
shall be reasonably satisfactory to the Indemnified Party: if the Company
exercises such option, the Company shall not be responsible for the Indemnified
Party's attorneys' fees incurred after the Indemnified Party receives
notification of the Company's exercise of such option and the Indemnified Party
has acknowledged its approval of the selected counsel. The Company shall have
the right to settle any such claim or litigation with the approval the
Indemnified Party, which approval shall not be unreasonably withheld. If the
Indemnified Party recovers from any third party any amount paid by the Company
to the Indemnified Party in satisfaction of the Company's obligations to
indemnify the Indemnified Party, the Indemnified Party shall promptly pay to the
Company the full amount so recovered. The Company shall have no obligation to
indemnify each Indemnified Party for any claims, liabilities, losses, costs,
damages, attorneys' fees, or other expenses which would have been avoided had
the Indemnified Party taken reasonable action to mitigate such claims,
liabilities, losses, costs, damages, attorneys' fees, or other expenses. The
Company shall have no obligation to indemnify each Indemnified Party from any
claim, liability, loss, cost, damage, attorneys' fees or other expenses arising
from the negligence or willful misconduct of such Indemnified Party or its
officers, employees, or agents.
The obligations of the Company hereunder shall be in addition to any
liability which the Company may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the related Indemnified
Party and to each person, if any, who controls such Indemnified Party within the
meaning of the Securities Act of 1933, as amended.
The agreement shall be construed in accordance with the substantive laws
of the State of New York (without regard to conflicts of laws principles).
2
IN WITNESS WHEREOF, the Company has executed this Indemnity Agreement as
of March 5, 1998.
MORTGAGE LENDERS NETWORK USA, INC.
BY: /s/ XXXXXXXX X. XXXXXXXXX
----------------------------
NAME: Xxxxxxxx X. Xxxxxxxxx
TITLE: President & CEO
