Exhibit 1.2
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
ABFS EQUIPMENT CONTRACT TRUST 1999-A
and
PRUDENTIAL SECURITIES INCORPORATED
Dated as of June 28, 1999
ABFS Equipment Contract Trust 1999-A
$15,000,000 5.3925% Equipment Contract-Backed Notes, Class A-1
$13,000,000 6.025% Equipment Contract-Backed Notes, Class A-2
$34,160,000 6.650% Equipment Contract-Backed Notes, Class A-3
$10,000,000 6.650% Equipment Contract-Backed Notes, Class A-4
TABLE OF CONTENTS
Page
Section 1. Definitions 1
Section 2. Representations, Warranties and Agreements of Financial Security 2
Section 3. Representations, Warranties and Agreements of the Underwriter 5
Section 4. Indemnification 5
Section 5. Indemnification Procedures 6
Section 6. Contribution 7
Section 7. Miscellaneous. 8
EXHIBIT
Exhibit A Opinion of General Counsel
-1-
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of June 28, 1999, among
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), ABFS EQUIPMENT
CONTRACT TRUST 1999-A (the "Issuer") and PRUDENTIAL SECURITIES INCORPORATED (the
"Underwriter"):
Section 1. Definitions. For purposes of this Agreement,
the following terms shall have the meanings provided below:
"Agreement" means this Indemnification Agreement, as amended
from time to time.
"Issuer Party" means any of the Issuer, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Financial Security Agreements" means this Agreement and the
Insurance Agreement.
"Financial Security Information" has the meaning provided in
Section 2(g) hereof.
"Financial Security Party" means any of Financial Security,
its parent, subsidiaries and affiliates, and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the Securities
Act) of any of the foregoing.
"Indemnified Party" means any party entitled to any
indemnification pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 4 hereof.
"Insurance Agreement" means the Insurance and Indemnity
Agreement, dated as of June 1, 1999, by and among Financial Security, American
Business Credit, Inc., American Business Leasing, Inc., ABFS Finance LLC 1999-A,
ABFS Residual LLC, 1999-A, ABFS Special Purpose Management, Inc. and the Issuer.
"Issuer" means ABFS Equipment Contract Trust 1999-A.
"Losses" means (a) any actual out-of-pocket damages incurred
by the party entitled to indemnification or contribution hereunder, (b) any
actual out-of-pocket costs or actual expenses reasonably incurred by such party,
including reasonable fees or expenses of its counsel and other expenses incurred
in connection with investigating or defending any claim, action or other
proceeding which entitle such party to be indemnified hereunder (subject to the
limitations set forth in Section 5 hereof), to the extent not paid, satisfied or
reimbursed from funds provided by any other Person other than an affiliate of
such party (provided that the foregoing shall not
-2-
create or imply any obligation to pursue recourse against any such other
Person), plus (c) interest on the amount paid by the party entitled to
indemnification or contribution from the date of such payment to the date of
payment by the party who is obligated to indemnify or contribute hereunder at
the statutory rate applicable to judgments for breach of contract.
"Offering Circular" means the Prospectus Supplement, dated
June 24, 1999, relating to the Securities.
"Offering Document" means the Offering Circular and any
amendments or supplements thereto and any other material or documents delivered
by the Underwriter to any Person in connection with the offer or sale of the
Securities.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization or other organization or entity
(whether governmental or private).
"Policy" means the financial guaranty insurance policy
delivered by Financial Security with respect to the Securities.
"Securities" means the Class A Notes issued pursuant to the
Indenture.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Underwriter" means Prudential Securities Incorporated.
"Underwriter Information" has the meaning provided in Section
3(c) hereof.
"Underwriter Party" means any of the Underwriter, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Underwriting Agreement" means the Underwriting Agreement
dated as of June 24, 1999, between the American Business Credit, Inc.,
American Business Leasing, Inc., ABFS Finance LLC 1999-A, ABFS Residual LLC
1999-A and the Underwriter in respect of the Notes.
Section 2. Representations, Warranties and Agreements
of Financial Security. Financial Security represents, warrants and agrees, as
of the date hereof and as of the Closing Date, as follows:
(a) Organization, Etc. Financial Security is a stock
insurance company duly organized, validly existing and authorized to transact
financial guaranty insurance business under the laws of the State of New York.
(b) Authorization, Etc. The Policy and the Financial
Security Agreements have been duly authorized, executed and delivered by
Financial Security.
(c) Validity, Etc. The Policy and the Financial Security
Agreements constitute valid and binding obligations of Financial Security,
enforceable against Financial Security in
-3-
accordance with their terms, subject, as to the enforcement of remedies, to
bankruptcy, insolvency, reorganization, rehabilitation, moratorium and other
similar laws affecting the enforceability of creditors' rights generally
applicable in the event of the bankruptcy or insolvency of Financial Security
and to the application of general principles of equity and subject, in the case
of this Agreement, to principles of public policy limiting the right to enforce
the indemnification provisions contained herein.
(d) Exemption From Registration. The Policy is exempt from
registration under the Securities Act.
(e) No Conflicts. Neither the execution or delivery by
Financial Security of the Policy or the Financial Security Agreements, nor the
performance by Financial Security of its obligations thereunder, will conflict
with any provision of the certificate of incorporation or the bylaws of
Financial Security or result in a breach of, or constitute a default under,
any material agreement or other instrument to which Financial Security is a
party or by which any of its property is bound nor violate any judgment, order
or decree applicable to Financial Security of any governmental or regulatory
body, administrative agency, court or arbitrator having jurisdiction over
Financial Security (except that, in the published opinion of the Securities
and Exchange Commission, the indemnification provisions of this Agreement,
insofar as they relate to indemnification for liabilities arising under the
Securities Act, are against public policy as expressed in the Securities Act
and are therefore unenforceable).
(f) Financial Information. The consolidated balance sheets
of Financial Security as of December 31, 1998 and December 31, 1997 and the
related consolidated statements of income, changes in shareholder's equity and
cash flows for the fiscal year then ended, furnished by Financial Security for
use in the Offering Circular, fairly present in all material respects the
financial condition of Financial Security as of such dates and for such
periods in accordance with generally accepted accounting principles
consistently applied (subject as to interim statements to normal year-end
adjustments) and since the date of the most current consolidated balance sheet
referred to above there has been no change in the financial condition of
Financial Security which would materially and adversely affect its ability to
perform its obligations under the Policy.
(g) Financial Security Information. The information in the
Offering Circular set forth under the caption "The Note Insurer" (as revised
from time to time in accordance with the provisions hereof, the "Financial
Security Information") is limited and does not purport to provide the scope of
disclosure required to be included in a prospectus with respect to a
registrant in connection with the offer and sale of securities of such
registrant registered under the Securities Act. Within such limited scope of
disclosure, however, as of the date of the Offering Circular and as of the
date hereof, the Financial Security Information does not contain any untrue
statement of a material fact, or omit to state a material fact necessary to
make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
(h) Additional Information. Financial Security will furnish
to the Underwriter or the Issuer, upon request of the Underwriter or the
Issuer, as the case may be, copies of Financial Security's most recent
financial statements (annual or interim, as the case may be) which fairly
present in all material respects the financial condition of Financial Security
as of the dates and for the periods indicated, in accordance with generally
accepted accounting principles
-4-
consistently applied except as noted therein (subject, as to interim statements,
to normal year-end adjustments); provided, however, that, if the Underwriter or
the Issuer shall require a manually signed report or consent of Financial
Security's auditors in connection with such financial statements, such report or
consent shall be at the expense of the Underwriter or the Issuer, as the case
may be. In addition, if the delivery of an Offering Circular relating to the
Securities is required at any time prior to the expiration of nine months after
the time of issue of the Offering Circular in connection with the offering or
sale of the Securities, the Underwriter or the Issuer will notify Financial
Security of such requirement to deliver an Offering Circular and Financial
Security will promptly provide the Underwriter and the Issuer with any revisions
to the Financial Security Information that are in the judgment of Financial
Security necessary to prepare an amended Offering Circular or a supplement to
the Offering Circular which will correct such statement or omission.
(i) Opinion of Counsel. Financial Security will furnish to
the Underwriter and the Issuer on the closing date for the sale of the
Securities an opinion of its General Counsel or Assistant General Counsel, to
the effect set forth in Exhibit A attached hereto, dated such closing date and
addressed to the Underwriter and the Issuer.
(j) Consents and Reports of Independent Accountants.
Financial Security will furnish to the Underwriter and the Issuer, upon request,
as comfort from its independent accountants in respect of its financial
condition, (i) at the expense of the Person specified in the Insurance
Agreement, a copy of the Offering Circular, including either a manually signed
consent or a manually signed report of Financial Security's independent
accountants and (ii) the quarterly review letter by Financial Security's
independent accountants in respect of the most recent interim financial
statements of Financial Security.
Nothing in this Agreement shall be construed as a
representation or warranty by Financial Security concerning the rating of its
claims-paying ability by Standard & Poor's Ratings Group or ▇▇▇▇▇'▇ Investors
Service, Inc. or any other rating agency (collectively, the "Rating
Agencies"). The Rating Agencies, in assigning such ratings, take into account
facts and assumptions not described in the Offering Circular and the facts and
assumptions which are considered by the Rating Agencies, and the ratings
issued thereby, are subject to change over time.
Section 3. Representations, Warranties and Agreements of
the Underwriter. The Underwriter represents, warrants and agrees, as of the
date hereof and 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 Securities and make such offers and sales in the manner provided in
the Offering Circular.
(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 Securities unless such Offering
Document includes such information as has been furnished by Financial Security
for inclusion therein and the information therein concerning Financial
Security has been approved by Financial Security in writing. Financial
Security hereby consents to the information in respect of Financial Security
included in the Offering Circular. Each
-5-
Offering Document will include the following statement: "The Policy is not
covered by the property/casualty insurance security fund specified in Article 76
of the New York Insurance Law".
(c) Underwriter Information. All material provided by the
Underwriter for inclusion in the Offering Circular (as revised from time to
time, the "Underwriter Information"), insofar as such information relates to
the Underwriter, is true and correct in all material respects. In respect of
the Offering Circular, the Underwriter Information is limited to the
information set forth under the caption "Underwriting" in the Offering
Circular.
Section 4. Indemnification. (a) Financial Security agrees,
upon the terms and subject to the conditions provided herein, to indemnify,
defend and hold harmless each Underwriter Party and each Issuer Party against
(i) any and all Losses incurred by them with respect to the offer and sale of
the Securities and resulting from Financial Security's breach of any of its
representations, warranties or agreements set forth in Section 2 hereof and
(ii) any and all Losses to which any Underwriter Party or Issuer Party may
become subject, under the Securities Act or otherwise, insofar as such Losses
arise out of or result from an untrue statement of a material fact contained
in any Offering Document or the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such
untrue statement or omission was made in the Financial Security Information
included therein in accordance with the provisions hereof.
(b) The Underwriter agrees, upon the terms and subject to
the conditions provided herein, to indemnify, defend and hold harmless each
Financial Security Party against (i) any and all Losses incurred by them with
respect to the offer and sale of the Securities and resulting from the
Underwriter's breach of any of its representations, warranties or agreements
set forth in Section 3 hereof and (ii) any and all Losses to which any
Financial Security Party may become subject, under the Securities Act or
otherwise, insofar as such Losses arise out of or result from an untrue
statement of a material fact contained in any Offering Document or the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or omission was
made in the Underwriter Information included therein.
(c) Upon the incurrence of any Losses for which a party is
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 5. Indemnification Procedures. Except as provided
below in Section 6 with respect to contribution or in Section 7(e), the
indemnification provided herein by an Indemnifying Party shall be the exclusive
remedy of any and all Indemnified Parties for the breach of a representation,
warranty or agreement hereunder by an Indemnifying Party; 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. 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 party shall give the Indemnifying Party written or telegraphic
notice of such action or claim reasonably promptly after receipt of written
notice thereof. The Indemnifying Party shall be entitled to participate in and,
upon notice to the
-6-
Indemnified Party, assume the defense of any such action or claim in reasonable
cooperation with, and with the reasonable cooperation of, the Indemnified Party.
The Indemnified Party will have the right to employ its own counsel in any such
action in addition to the counsel of the Indemnifying Party, but the fees and
expenses of such counsel will be at the expense of such Indemnified Party,
unless (a) the employment of counsel by the Indemnified Party at its expense has
been authorized in writing by the Indemnifying Party, (b) 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 (c)
the named parties to any such action or proceeding (including any impleaded
parties) include both the Indemnifying Party and one or more Indemnified
Parties, and the Indemnified Parties shall have been advised by counsel that
there may be one or more legal defenses available to them which are different
from or additional to those available to the Indemnifying 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 all Issuer
Parties and one such firm for all Underwriter Parties and one such firm for all
Financial Security Parties, as the case may be, which firm shall be designated
in writing by the Issuer in respect of the Issuer Parties, by the Underwriter in
respect of the Underwriter Parties and by Financial Security in respect of the
Financial Security Parties), in each of which cases the fees and expenses of
counsel will be at the expense of the Indemnifying Party and all such fees and
expenses will be reimbursed promptly as they are incurred. The Indemnifying
Party shall not be liable for any settlement of any such claim or action unless
the Indemnifying Party shall have consented thereto or be in default in its
obligations hereunder. 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 prejudicial to the position of the Indemnifying Party
and then only to the extent of such prejudice.
Section 6. Contribution. (a) To provide for just and
equitable contribution if the indemnification provided by any Indemnifying
Party is determined to be unavailable for any Indemnified Party (other than
due to application of this Section), each Indemnifying Party shall contribute
to the Losses arising from any breach of any of its representations,
warranties or agreements contained in this Agreement in such proportion as is
appropriate to reflect (i) the benefits received by such Indemnifying Party
relative to the benefits received by the Indemnified Party or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, 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
Indemnifying Party on the one hand and the Indemnified Party on the other in
connection with such Loss; provided, however, that an Indemnifying Party shall
in no event be required to contribute to all Indemnified Parties an aggregate
amount in excess of the Losses incurred by such Indemnified Parties resulting
from the breach of representations, warranties or agreements contained in this
Agreement.
(b) The relative fault of each Indemnifying Party, on the
one hand, and of each Indemnified Party, on the other, shall be determined by
reference to, among other things, whether the breach of, or alleged breach of,
any representations, warranties or agreements contained in 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.
-7-
(c) The parties agree that Financial Security shall be
solely responsible for the Financial Security Information, the Underwriter
shall be solely responsible for the Underwriter Information and that, as and
to the extent provided in the Insurance Agreement, the balance of the Offering
Document shall be the responsibility of the Issuer.
(d) Notwithstanding anything in this Section 6 to the
contrary, the Underwriter shall not be required to contribute an amount
greater than the amount of total discount received by the Underwriter from the
Issuer set forth in the Underwriting Agreement.
(e) 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.
(f) 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.
(g) The provisions relating to contribution set forth in
this Section 6 do not limit the rights of any party to indemnification under
Section 4.
Section 7. Miscellaneous.
(a) Notices. All notices and other communications provided
for under this Agreement shall be delivered to the address set forth below or
to such other address as shall be designated by the recipient in a written
notice to the other party or parties hereto.
If to Financial Security:
Financial Security Assurance Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Surveillance Department
Re: ABFS Equipment Contract Trust 1999-A
Equipment Contract Backed Notes, Class A-1, Class A-2,
Class A-3, Class A-4
If to the Issuer:
ABFS Equipment Contract Trust 1999-A
c/o First Union Trust Company, National Association
One ▇▇▇▇▇▇ Square
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
If to the Underwriter: Prudential Securities Incorporated
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
-▇-
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Managing Director, Asset-Backed Finance
Group
(b) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
(c) Assignments. This Agreement may not be assigned by any
party without the express written consent of each other party. Any assignment
made in violation of this Agreement shall be null and void.
(d) Amendments. Amendments to this Agreement shall be in
writing signed by each party hereto.
(e) Survival, Etc. 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 Indemnifying Party, (ii) the issuance of the Securities or (iii) any
termination of this Agreement or the Policy. The indemnification provided in
this Agreement will be in addition to any liability which the parties may
otherwise have and shall in no way limit any obligations of the Issuer or the
Underwriter under the Underwriting Agreement or the Insurance Agreement, as
applicable.
(f) Counterparts. This Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above written.
FINANCIAL SECURITY ASSURANCE INC.
By:
Name:
Title:
ABFS EQUIPMENT CONTRACT TRUST 1999-A
By: First Union Trust Company,
National Association, not
in its individual capacity
but solely as owner trustee
of ABFS Equipment Contract
Trust 1999-A
By:
Name:
Title:
PRUDENTIAL SECURITIES INCORPORATED
By
Name:
Title:
EXHIBIT A
OPINION OF COUNSEL
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a stock insurance company duly
organized, validly existing and authorized to transact financial guaranty
insurance business under the laws of the State of New York.
2. The Policy and the Agreements have been duly authorized,
executed and delivered by Financial Security.
3. The Policy and the Agreements constitute valid and binding
obligations of Financial Security, enforceable against Financial Security in
accordance with their terms, subject, as to the enforcement of remedies, to
bankruptcy, insolvency, reorganization, rehabilitation, moratorium and other
similar laws affecting the enforceability of creditors' rights generally
applicable in the event of the bankruptcy or insolvency of Financial Security
and to the application of general principles of equity and subject, in the
case of the Indemnification Agreement, to principles of public policy limiting
the right to enforce the indemnification provisions contained therein insofar
as they relate to indemnification for liabilities arising under applicable
securities laws.
4. The Policy is exempt from registration under the Securities
Act of 1933, as amended (the "Act").
5. Neither the execution or delivery by Financial Security of
the Policy or the Agreements, nor the performance by Financial Security of its
obligations thereunder, will conflict with any provision of the certificate of
incorporation or the by-laws of Financial Security or, to the best of my
knowledge, result in a breach of, or constitute a default under, any agreement
or other instrument to which Financial Security is a party or by which it or
any of its property is bound or, to the best of my knowledge, violate any
judgment, order or decree applicable to Financial Security of any governmental
or regulatory body, administrative agency, court or arbitrator having
jurisdiction over Financial Security (except that in the published opinion of
the Securities and Exchange Commission the indemnification provisions of the
Indemnification Agreement, insofar as they relate to indemnification for
liabilities arising under the Act, are against public policy as expressed in
the Act and are therefore unenforceable).
In addition, please be advised that I have reviewed the
description of Financial Security under the caption "The Note Insurer" in the
Prospectus Supplement dated June 24, 1999 (the "Offering Document") of the
Issuer with respect to the Securities. The information provided in the
Offering Document with respect to Financial Security is limited and does not
purport to provide the scope of disclosure required to be included in a
prospectus with respect to a registrant under the Act in connection with a
public offering and sale of securities of such registrant. Within such limited
scope of disclosure, however, there has not come to my attention any
information which would cause me to believe that the description of Financial
Security referred to above, as of the date of the Offering Document or as of
the date of this opinion, contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading (except that I express no opinion with respect to
any financial statements or other financial information contained or referred
to therein).