EXECUTION VERSION
AMBAC ASSURANCE CORPORATION
as Insurer,
INDYMAC MBS, INC.
as Depositor,
INDYMAC BANK, F.S.B.
as Sponsor, Seller and Servicer,
INDYMAC HOME EQUITY MORTGAGE LOAN ASSET-BACKED
TRUST, SERIES
2006-H2
as Issuing Entity,
and
DEUTSCHE BANK NATIONAL TRUST COMPANY
as Indenture Trustee
INSURANCE AND INDEMNITY AGREEMENT
INDYMAC HOME EQUITY MORTGAGE LOAN ASSET-BACKED
NOTES,
SERIES 2006-H2, CLASS A
Dated as of June 27, 2006
TABLE OF CONTENTS
(This
Table of Contents is for convenience of reference only and shall
not be deemed to be part of this Agreement. All capitalized terms
used in this Agreement and not otherwise defined shall have the
meanings set forth in Article I of this Agreement.)
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Page
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ARTICLE I
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DEFINITIONS
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Section 1.01.
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Defined Terms
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1
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Section 1.02.
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Other Definitional
Provisions
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5
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ARTICLE II
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REPRESENTATIONS, WARRANTIES AND
COVENANTS
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Section 2.01.
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Representations and Warranties of
the Sponsor, the Seller, the Servicer and the Depositor
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5
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Section 2.02.
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Affirmative Covenants of the
Sponsor, the Seller, the Servicer and the Depositor
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9
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Section 2.03.
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Negative Covenants of the
Sponsor, the Seller, the Servicer and the Depositor
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14
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Section 2.04.
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[Reserved]
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15
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Section 2.05.
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[Reserved]
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15
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Section 2.06.
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Representations and Warranties of
the Issuing Entity
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15
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Section 2.07.
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Affirmative Covenants of the
Issuing Entity
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18
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Section 2.08.
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Negative Covenants of the Issuing
Entity
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20
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Section 2.09.
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Representations and Warranties of
the Insurer
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21
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ARTICLE III
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THE POLICY; REIMBURSEMENT
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Section 3.01.
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Issuance of the Policy
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23
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Section 3.02.
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Payment of Fees and
Premium
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25
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Section 3.03.
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Reimbursement
Obligation
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26
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Section 3.04.
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Indemnification
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27
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Section 3.05.
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Indemnification with respect to
the Issuing Entity
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30
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Section 3.06.
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Payment Procedure
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32
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ARTICLE IV
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FURTHER AGREEMENTS
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Section 4.01.
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Effective Date; Term of the
Insurance Agreement
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33
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Section 4.02.
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Further Assurances and Corrective
Instruments
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33
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(i)
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Section 4.03.
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Obligations Absolute
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33
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Section 4.04.
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Assignments; Reinsurance;
Third-Party Rights
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35
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Section 4.05.
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Liability of the
Insurer
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35
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Section 4.06.
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Annual Servicing Audit and
Certification
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36
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Section 4.07.
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Regulation AB Reports
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36
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ARTICLE V
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DEFAULTS AND REMEDIES
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Section 5.01.
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Defaults
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36
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Section 5.02.
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Remedies; No Remedy
Exclusive
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38
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Section 5.03.
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Waivers
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38
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ARTICLE VI
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MISCELLANEOUS
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Section 6.01.
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Amendments, Etc
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39
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Section 6.02.
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Notices
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39
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Section 6.03.
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Severability
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40
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Section 6.04.
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Governing Law
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40
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Section 6.05.
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Consent to
Jurisdiction
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40
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Section 6.06.
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Consent of the Insurer
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41
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Section 6.07.
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Counterparts
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41
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Section 6.08.
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Headings
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41
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Section 6.09.
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Trial by Jury Waived
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41
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Section 6.10.
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Limited Liability
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41
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Section 6.11.
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Entire Agreement
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42
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Section 6.12.
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Indenture Trustee
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42
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Section 6.13.
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No Petition
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(ii)
INSURANCE
AND INDEMNITY AGREEMENT (as may be amended, modified or
supplemented from time to time, this “ Insurance
Agreement ”), dated as of June 27, 2006, by and among
AMBAC ASSURANCE CORPORATION, as Insurer, INDYMAC MBS, INC., as
Depositor, INDYMAC BANK, F.S.B., as Sponsor, Seller and Servicer,
INDYMAC HOME EQUITY MORTGAGE LOAN ASSET-BACKED TRUST, SERIES
2006-H2, as Issuing Entity and DEUTSCHE BANK NATIONAL TRUST
COMPANY, as Indenture Trustee.
WHEREAS,
the Indenture, dated as of June 19, 2006, related to the IndyMac
Home Equity Mortgage Loan Asset-Backed Notes, Series 2006-H2 (as
amended, modified or supplemented from time to time the “
Indenture ”), between the Issuing Entity and the
Indenture Trustee provides for, among other things, the issuance of
Class A Notes by the Issuing Entity representing indebtedness of
the Trust Fund established thereby;
WHEREAS,
the Insurer has issued the Policy pursuant to which it has agreed
to pay to the Indenture Trustee for the benefit of the Noteholders
certain payments in respect of the Class A Notes;
WHEREAS,
the Insurer shall be paid a Premium with respect to the Policy as
set forth herein; and
WHEREAS,
the Sponsor, the Seller, the Servicer and the Depositor have
undertaken certain obligations in consideration for the
Insurer’s issuance of its Policy;
NOW,
THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
Section
1.01. 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 Indenture or the Policy described below.
For purposes of this Insurance Agreement, the following terms shall
have the following meanings:
“
Ambac Premium Letter ” means the letter agreement
between the Issuing Entity, the Indenture Trustee and the Insurer
dated June 27, 2006 setting forth the Premium with respect to the
Policy and the expenses of the Insurer.
“
Class A Notes ” means the IndyMac Home Equity Mortgage
Loan Asset-Backed Notes, Series 2006-H2, Class A, substantially in
the form set forth in Exhibit A-1 to the Indenture.
“
Closing Date ” means June 27, 2006.
“
Commission ” means the Securities and Exchange
Commission.
“ Default ” means any event which results, or
which with the giving of notice or the lapse of time or both would
result, in an Event of Default.
“
Depositor ” means IndyMac MBS, Inc.
“
Documents ” has the meaning given such term in Section
2.01(j).
“
Event of Default ” means any Event of Default
specified in Section 5.01 of this Insurance Agreement.
“
Financial Statements ” means, with respect to each of
the Sponsor, the Seller, the Servicer and the Depositor, the
consolidated statements of financial condition as of December 31,
2005, 2004 and 2003 and as of the quarter ending March 31, 2006 and
the statements of operations, stockholders’ equity and cash
flows for each of the years in the three-year period ended December
31, 2005 and the period ended March 31, 2006 and the notes
thereto.
“
Holder ” has the meaning given such term in the
Policy.
“
Indemnification Agreement ” means the indemnification
agreement dated as of June 26, 2006 between the Insurer and the
Underwriters.
“
Indenture ” has the meaning given such term in the
first recital hereof.
“
Indenture Trustee ” means Deutsche Bank National Trust
Company, a national banking association existing under the laws of
the United States of America, as Indenture Trustee under the
Indenture, and any successor thereto under the
Indenture.
“
Insurance Agreement ” has the meaning given such term
in the initial paragraph hereof.
“
Insurer ” means Ambac Assurance Corporation, or any
successor thereto, as issuer of the Policy.
“
Insurer Information ” has the meaning given such term
in Section 3.04(b).
“
Investment Company Act ” means the Investment Company
Act of 1940, including, unless the context otherwise requires, the
rules and regulations thereunder, as amended from time to
time.
“
Issuing Entity Documents ” has the meaning given such
term in Section 2.06(i).
“
Issuing Entity ” means IndyMac Home Equity Mortgage
Loan Asset-Backed Trust, Series 2006-H2, a Delaware statutory
trust.
2
“
Late Payment Rate ” shall mean for any Payment Date,
the lesser of (a) the greater of (i) the per annum rate of interest
publicly announced from time to time by Citibank, N.A. at its
principal office in New York, New York as its prime lending 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% per
annum and (ii) the then applicable highest rate of interest on the
Class A Notes and (b) the maximum rate permissible under applicable
usury or similar law limiting interest rates, such maximum rate as
determined by the Insurer. The Late Payment Rate shall be computed
on the basis of the actual number of days elapsed over a year of
360 days.
“
Lien ” means, as applied to the property or assets (or
the income or profits therefrom) of any Person, in each case
whether the same is consensual or nonconsensual or arises by
contract, operation of law, legal process or otherwise: (a) any
mortgage, lien, pledge, attachment, charge, lease, conditional sale
or other title retention agreement, or other security interest or
encumbrance of any kind or (b) any arrangement, express or implied,
under which such property or assets are transferred, sequestered or
otherwise identified for the purpose of subjecting or making
available the same for the payment of debt or performance of any
other obligation in priority to the payment of the general,
unsecured creditors of such Person.
“
Material Adverse Change ” means, in respect of any
Person, a material adverse change in (i) the business, financial
condition, results of operations or properties of such Person on a
consolidated basis with its subsidiaries or (ii) the ability of
such Person to perform its obligations under any of the Transaction
Documents.
“
Moody’s ” means Moody’s Investors Service,
Inc., and any successor thereto.
“
Offered Notes ” means the IndyMac Home Equity Mortgage
Loan Asset-Backed Notes, Series 2006-H2, Class A.
“
Offering Documents ” means the Free Writing
Prospectus, dated June 23, 2006 and the Prospectus Supplement,
dated June 26, 2006 to the Prospectus dated June 14, 2006, in
respect of the Offered Notes, and any amendment or supplement
thereto.
“
Owner Trustee ” means Wilmington Trust Company as
trustee under the Trust Agreement, and any successor thereto under
the Trust Agreement.
“
Person ” means an individual, joint stock company,
trust, unincorporated association, joint venture, corporation,
business or owner trust, partnership or other organization or
entity (whether governmental or private).
“
Policy ” means the Financial Guaranty Insurance
Policy, No. AB1006BE, together with all endorsements thereto,
issued by the Insurer to the Indenture Trustee, for the benefit of
the Holders of the Class A Notes.
“
Premium ” means the premium payable in accordance with
the Policy and the Ambac Premium Letter.
3
“
Premium Percentage ” has the meaning set forth in the
Ambac Premium Letter.
“
Registration Statement ” means the registration
statement on Form S-3 (No. 333-132042), including the prospectus,
relating to the Offered Notes, at the time it became
effective.
“
Restrictions on Transferability ” means, as applied to
the property or assets (or income or profits therefrom) of any
Person, in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal
process or otherwise, any material condition to, or restriction on,
the ability of such Person or any transferee therefrom to sell,
assign, transfer or otherwise liquidate such property or assets in
a commercially reasonable time and manner or which would otherwise
materially deprive such Person or any transferee therefrom of the
benefits of ownership of such property or assets.
“
Sale and Servicing Agreement ” means the Sale and
Servicing Agreement, dated as of June 19, 2006, by and among the
Depositor, the Sponsor, the Seller, the Servicer, the Issuing
Entity and the Indenture Trustee, as amended, modified or
supplemented from time to time.
“
Securities Act ” means the Securities Act of 1933,
including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.
“
Securities Exchange Act ” means the Securities
Exchange Act of 1934, including, unless the context otherwise
requires, the rules and regulations thereunder, as amended from
time to time.
“
S&P ” means Standard & Poor’s, a
division of The McGraw-Hill Companies, Inc. and any successor
thereto.
“
Transaction ” means the transactions contemplated by
the Transaction Documents, including the transactions described in
the Offering Documents.
“
Transaction Documents ” means this Insurance
Agreement, the Mortgage Loan Purchase Agreement, the Sale and
Servicing Agreement, the Trust Agreement, the Indenture, the
Administration Agreement and the Class A Notes.
“
Trust Agreement ” means the Trust Agreement, dated as
of June 13, 2006, between the Depositor and the Owner Trustee, as
amended and restated as of June 19, 2006, and as further amended,
modified or supplemented from time to time thereafter.
“
Trust Fund ” means the trust created pursuant to the
Trust Agreement.
“
Trust Indenture Act ” means the Trust Indenture Act of
1939, including, unless the context otherwise requires, the rules
and regulations thereunder, as amended from time to
time.
4
“
Underwriters ” means Lehman Brothers, Inc. Indymac
Securities Corporation, Bear, Stearns & Co. Inc. and UBS
Securities LLC.
“
Underwriter Information ” has the meaning given such
term in the Indemnification Agreement.
“
Underwriting Agreement ” means the Underwriting
Agreement dated June 26, 2006, between the Underwriters and the
Depositor with respect to the offer and sale of the Offered Notes,
as may be amended, modified or supplemented from time to
time.
Section
1.02. Other Definitional Provisions . The words
“hereof,” “herein” and
“hereunder” and words of similar import when used in
this Insurance Agreement shall refer to this Insurance Agreement as
a whole and not to any particular provision of this Insurance
Agreement, and Section, subsection, Schedule and Exhibit references
are to this Insurance 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.”
ARTICLE II
REPRESENTATIONS, WARRANTIES AND
COVENANTS
Section
2.01. Representations and Warranties of the Sponsor, the Seller,
the Servicer and the Depositor . Each of the Sponsor, the
Seller, the Servicer and the Depositor represent and warrant, as to
itself and as of the Closing Date as follows:
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(a)
Due Organization and Qualification . The Sponsor, the
Seller, the Servicer and the Depositor are entities, duly
organized, validly existing and in good standing under the laws of
the states of their respective organization. Each of the Sponsor,
the Seller, the Servicer and the Depositor is duly qualified to do
business, is in good standing and has obtained all necessary
licenses, permits, charters, registrations and approvals (together,
“ approvals ”) necessary for the conduct of its
business as currently conducted and as described in the Offering
Documents and the performance of its obligations under the
Transaction Documents to which it is party in each jurisdiction in
which the failure to be so qualified or to obtain such approvals
would render any Transaction Document to which it is party
unenforceable in any respect or would have a material adverse
effect upon the Transaction.
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(b)
Power and Authority . Each of the Sponsor, the Seller, the
Servicer and the Depositor has all necessary power and authority to
conduct its business as currently conducted and as described in the
Offering Documents, to execute, deliver and perform its obligations
under the Transaction Documents to which it is party and to
consummate the Transaction.
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(c)
Due Authorization . The execution, delivery and performance
of the Transaction Documents to which they are party by the
Sponsor, the Seller, the
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Servicer and the Depositor have been duly
authorized by all necessary action and do not require any
additional approvals or consents, or other action by or any notice
to or filing with any Person, including any governmental entity or
any of the stockholders of the Sponsor, the Seller, the Servicer or
the Depositor which have not previously been obtained or given by
the Sponsor, the Seller, the Servicer or the Depositor.
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(d)
Noncontravention . The execution and delivery by the
Sponsor, the Seller, the Servicer and the Depositor of the
Transaction Documents to which they are party, the consummation of
the Transaction and the satisfaction of the terms and conditions of
the Transaction Documents and the Premium Letter do not and will
not:
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(i) conflict with or result in any breach or violation of any
provision of the organizational documents of the Sponsor, the
Seller, the Servicer or the Depositor or any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award
currently in effect having applicability to the Sponsor, the
Seller, the Servicer and the Depositor or any of their respective
material properties, including regulations issued by any
administrative agency or other governmental authority having
supervisory powers over the Sponsor, the Seller, the Servicer or
the Depositor;
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(ii)
constitute a default by the Sponsor, the Seller, the Servicer or
the Depositor under, result in the acceleration of any obligation
under, or breach any provision of any loan agreement, mortgage,
indenture or other agreement or instrument to which either the
Sponsor, the Seller, the Servicer or the Depositor is a party or by
which any of their properties are or may be bound or affected;
or
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(iii)
result in or require the creation of any lien upon or in respect of
any assets of the Sponsor, the Seller, the Servicer or the
Depositor except as otherwise expressly contemplated by the
Transaction Documents.
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(e)
Legal Proceedings . There is no action, proceeding or
investigation by or before any court, governmental or
administrative agency or arbitrator against or affecting the
Sponsor, the Seller, the Servicer or the Depositor, any of their
subsidiaries, any properties or rights of either the Sponsor, the
Seller, the Servicer or the Depositor or any of their subsidiaries
or any of the Mortgage Loans pending or, to the Sponsor’s,
the Seller’s, the Servicer’s or the Depositor’s
knowledge after reasonable inquiry, threatened, which, in any case,
if decided adversely to the Sponsor, the Seller, the Servicer or
the Depositor or any such subsidiary could result in a Material
Adverse Change with respect to the Sponsor, the Seller, the
Servicer or the Depositor.
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(f)
Valid and Binding Obligations . The Transaction Documents to
which they are party, when executed and delivered by the Sponsor,
the Seller, the Servicer and the Depositor will constitute the
legal, valid and binding obligations of the Sponsor, the Seller,
the Servicer and the Depositor, enforceable in accordance with
their respective terms, except as such enforceability may be
limited by insolvency, reorganization, moratorium or other similar
laws affecting creditors’ rights generally
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and
general equitable principles and public policy considerations as to
rights of indemnification for violations of federal securities
laws. The Class A Notes, when executed, authenticated and delivered
in accordance with the Indenture, will be validly issued and
outstanding and entitled to the benefits of the Indenture. The
Sponsor, the Seller, the Servicer and the Depositor will not at any
time in the future deny that the Transaction Documents to which
they are party, constitute the legal, valid and binding obligations
of the Sponsor, the Seller, the Servicer and the
Depositor.
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(g)
Financial Statements . The Financial Statements of the
Sponsor, the Seller and the Servicer, copies of which have been
furnished to the Insurer, (i) are, as of the dates and for the
periods referred to therein, complete and correct in all material
respects, (ii) present fairly the financial condition and results
of operations of the Sponsor, the Seller and the Servicer as of the
dates and for the periods indicated and (iii) have been prepared in
accordance with generally accepted accounting principles
consistently applied, except as noted therein (subject as to
interim statements to normal year-end adjustments). Since the date
of the most recent Financial Statements, there has been no Material
Adverse Change in respect of the Sponsor, the Seller or the
Servicer. Except as disclosed in the Financial Statements, the
Sponsor, the Seller and the Servicer are not subject to any
contingent liabilities or commitments that, individually or in the
aggregate, have a material possibility of causing a Material
Adverse Change in respect of the Sponsor, the Seller or the
Servicer.
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(h)
Compliance with Law, Etc . No practice, procedure or policy
employed, or proposed to be employed, by the Sponsor, the Seller,
the Servicer or the Depositor in the conduct of its business
violates any law, regulation, judgment, agreement, order or decree
applicable to the Sponsor, the Seller, the Servicer or the
Depositor that, if enforced, could result in a Material Adverse
Change with respect to the Sponsor, the Seller, the Servicer or the
Depositor. None of the Sponsor, the Seller, the Servicer or the
Depositor is in violation of any applicable law or administrative
regulation of its jurisdiction of incorporation, or any department,
division, agency, instrumentality thereof or of the United States
or any applicable judgment or decree or any note, resolution,
certificate, agreement or other instrument to which the Sponsor,
the Seller, the Servicer or the Depositor, as applicable, is a
party or is otherwise subject which, if enforced, would result in a
Material Adverse Change with respect to the Sponsor, the Seller,
the Servicer or the Depositor.
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(i)
Taxes . Each of the Sponsor, the Seller, the Servicer and
the Depositor has filed prior to the date hereof all federal and
state tax returns that are required to be filed and has paid all
taxes, including any assessments received by it that are not being
contested in good faith, to the extent that such taxes have become
due. Any taxes, fees and other governmental charges payable by the
Sponsor, the Seller, the Servicer or the Depositor in connection
with the Transaction, the execution and delivery of the Transaction
Documents and the Premium Letter and the issuance of the Class A
Notes have been paid or shall have been paid at or prior to the
Closing Date.
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(j)
Accuracy of Information . Neither the Transaction Documents
nor other information relating to the Mortgage Loans, the
operations of the Sponsor,
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the
Seller, the Servicer or the Depositor or the financial condition of
the Sponsor, the Seller, the Servicer or the Depositor
(collectively, the “ Documents ”), as amended,
supplemented or superseded, furnished to the Insurer by the
Sponsor, the Seller, the Servicer or the Depositor contains any
statement of a material fact which was untrue or misleading in any
material respect when made. Neither the Sponsor, the Seller, the
Servicer nor the Depositor have knowledge of any circumstances that
could reasonably be expected to cause a Material Adverse Change
with respect to the Sponsor, the Seller, the Servicer or the
Depositor. Since the furnishing of the Documents, there has been no
change nor any development or event involving a prospective change
known to the Sponsor, the Seller, the Servicer or the Depositor
that would render any of the Documents untrue or misleading in any
material respect.
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(k)
Compliance With Securities Laws . The offer and sale of the
Offered Notes comply in all material respects with all applicable
laws, including applicable securities laws. Without limiting the
foregoing, the Offering Documents does not contain any untrue
statement of a material fact and does not omit to state a material
fact necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading;
provided, however, that no representation is made with
respect to the Insurer Information, the representations of the
Insurer contained in Sections 2.08(g) and 2.08(k) or with respect
to the Underwriter Information. The Sale and Servicing Agreement is
not and the Indenture is required to be qualified under the Trust
Indenture Act and neither the Depositor nor the Trust Fund is
required to be registered as an “investment company”
under the Investment Company Act. The Sponsor, the Seller, the
Servicer and the Depositor will satisfy any applicable information
reporting requirements of the Securities Exchange Act arising out
of the Transaction to which they are subject.
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(l)
Transaction Documents . Each of the representations and
warranties of the Sponsor, the Seller, the Servicer and the
Depositor contained in the Transaction Documents and the
Underwriting Agreement is true and correct in all material respects
and the Sponsor, the Seller, the Servicer and the Depositor hereby
make each such representation and warranty to, and for the benefit
of, the Insurer as if the same were set forth in full herein,
provided that the remedy with respect to any defective Mortgage
Loans under Section 3.01 of the Mortgage Loan Purchase Agreement
and Section 2.04 of the Sale and Servicing Agreement shall be
limited to the remedies specified therein.
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(m)
Solvency; Fraudulent Conveyance . The Sponsor, the Seller,
the Servicer and the Depositor are solvent and will not be rendered
insolvent by the Transaction and, after giving effect to the
Transaction, the Sponsor, the Seller, the Servicer and the
Depositor will not be left with an unreasonably small amount of
capital with which to engage in its business. None of the Sponsor,
the Seller, the Servicer or the Depositor intends to incur, or
believe that it has incurred, debts beyond its ability to pay as
they mature. The Sponsor, the Seller, the Servicer and the
Depositor do not contemplate the commencement of insolvency,
liquidation or consolidation proceedings or the appointment of a
receiver, liquidator, conservator, trustee or similar official in
respect of the Sponsor, the Seller, the Servicer or the
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Depositor or any of their assets. The amount of
consideration being received by the Sponsor, the Seller and the
Depositor upon the sale of the Offered Notes constitutes reasonably
equivalent value and fair consideration for the interest in the
Mortgage Loans. The Seller did not transfer the Mortgage Loans to
the Depositor with any intent to hinder, delay or defraud any of
the Seller’s creditors.
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(n)
Principal Place of Business . The principal place of
business of the Sponsor, the Seller, the Servicer and the Depositor
is 155 N. Lake Avenue, Pasadena, California 91101.
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(o)
Good Title; Absence of Liens; Security Interest .
Immediately prior to the transfer to the Depositor, the Seller was
the owner of, and had good and marketable title to, the Mortgage
Loans free and clear of all Liens and Restrictions on
Transferability, and had full right, power and lawful authority to
assign, transfer and sell the Mortgage Loans.
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Section
2.02. Affirmative Covenants of the Sponsor, the Seller, the
Servicer and the Depositor . The Sponsor, the Seller, the
Servicer and the Depositor hereby agree that during the term of
this Insurance Agreement, unless the Insurer shall otherwise
expressly consent in writing:
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(a)
Compliance With Agreements and Applicable Laws . The
Sponsor, the Seller, the Servicer and the Depositor shall comply
with the terms and conditions of and perform its respective
obligations under the Transaction Documents to which they are party
in all cases in which failure to so comply or perform would result
in a default thereunder and shall comply with all material
requirements of any law, rule or regulation applicable to
them.
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(b)
Corporate Existence . The Sponsor, the Seller, the Servicer
and the Depositor and their respective successors and permitted
assigns shall each maintain its corporate existence and shall at
all times continue to be duly organized under the laws of the
United States and duly qualified and duly authorized (as described
in subsections 2.01(a), (b) and (c) hereof) and shall conduct its
business in accordance with the terms of its charter and
bylaws.
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(c)
Financial Statements; Accountants’ Reports; Other
Information . The Sponsor, the Seller, the Servicer and the
Depositor shall keep or cause to be kept in reasonable detail books
and records of account of its assets and business, including books
and records relating to the Transaction, and shall clearly reflect
therein that the Mortgage Loans have been legally isolated and such
assets are not available to satisfy claims of their general
creditors. The Sponsor, the Seller and the Servicer shall furnish
or cause to be furnished to the Insurer:
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(i)
Annual Financial Statements . As soon as available, and in
any event within 105 days after the close of each fiscal year of
the Sponsor, the Seller and the Servicer, the audited consolidated
statement of financial condition of the Sponsor, the Seller and the
Servicer and their subsidiaries as of the end of
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such
fiscal year and the related audited consolidated statements of
operations, stockholders’ equity and cash flows for such
fiscal year, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and period
in the preceding fiscal year, prepared in accordance with generally
accepted accounting principles, consistently applied, and
accompanied by the audit opinion of the Sponsor, the Seller and the
Servicer’s independent accountants (which shall be a
nationally recognized independent public accounting firm or
otherwise acceptable to the Insurer) and by the certificate
specified in Section 2.02(d).
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(ii)
Quarterly Financial Statements . (A) Upon the reasonable
request of the Insurer following any Material Adverse Change of the
Sponsor, the Seller or the Servicer or the reasonable belief of the
Insurer that a Material Adverse Change of the Sponsor, the Seller
or the Servicer has occurred, as soon as available, and (B) in any
event within 60 days after the close of each of the first three
quarters of each fiscal year of the Sponsor, the Seller and the
Servicer, the unaudited consolidated statement of financial
condition of the Sponsor, the Seller and the Servicer and their
subsidiaries as of the end of such quarter and the related
unaudited consolidated statements of operations,
stockholders’ equity and cash flows for the portion of the
fiscal year then ended, all in reasonable detail and stating in
comparative form the respective figures for the corresponding date
and period in the preceding fiscal year, prepared in accordance
with generally accepted accounting principles consistently applied
(subject to normal year-end adjustments), and accompanied by the
certificate specified in Section 2.02(d).
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(iii)
Initial Report . On or before the Closing Date, a copy of
the magnetic tape to be delivered to the Indenture Trustee on the
Closing Date setting forth as to each Mortgage Loan, the
information required in the definition of “Mortgage Loan
Schedule” in the Sale and Servicing Agreement.
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(iv)
Certain Information . Upon the reasonable request of the
Insurer, copies of any requested proxy statements, financial
statements, reports and registration statements that the Sponsor,
the Seller, the Servicer and the Depositor file with, or deliver
to, the Commission or any national securities exchange.
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(v)
Other Information . (A) Promptly upon receipt thereof,
copies of all schedules, financial statements or other similar
reports delivered to or by the Sponsor, the Seller, the Servicer
and the Depositor, pursuant to the terms of the Sale and Servicing
Agreement, (B) promptly upon request, such other data as the
Insurer may reasonably request and (C) all information required to
be furnished to the Indenture Trustee simultaneously with the
furnishing thereof to the Indenture Trustee.
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(d)
Compliance Certificate . The Sponsor, the Seller, the
Servicer and the Depositor shall deliver to the Insurer, at the
time that the delivery of the financial statements of the Sponsor,
the Seller, the Servicer and the Depositor are
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required pursuant to subsection 2.02(c)(i) and
(ii) certificates of one (or more) of its officers stating
that:
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(i)
a review of the performance of the Sponsor, the Seller, the
Servicer or the Depositor, as applicable, under the Transaction
Documents to which it is a party during such period has been made
under such officer’s supervision;
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(ii)
to the best of such officer’s knowledge following reasonable
inquiry, no Default or Event of Default has occurred, or if a
Default or Event of Default has occurred, specifying the nature
thereof and, if the Sponsor, the Seller, the Servicer or the
Depositor has a right to cure pursuant to Section 5.01, stating in
reasonable detail (including, if applicable, any supporting
calculations) the steps, if any, being taken by the Sponsor, the
Seller, the Servicer or the Depositor to cure such Default or Event
of Default or to otherwise comply with the terms of the agreement
to which such Default or Event of Default relates; and
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(iii)
the attached financial statements submitted in accordance with
subsection 2.02(c)(i) or (ii), if applicable, are complete and
correct in all material respects and present fairly the financial
condition and results of operations of the Sponsor, the Seller and
the Servicer as of the dates and for the periods indicated, in
accordance with generally accepted accounting principles
consistently applied (subject as to interim statements to normal
year-end adjustments).
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(e)
Access to Records; Discussions with Officers and Accountants
. On an annual basis, or upon the occurrence of a Material Adverse
Change, the Sponsor, the Seller, the Servicer and the Depositor
shall, upon the reasonable request of the Insurer, permit the
Insurer or its authorized agents:
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(i)
to inspect the books and records of the Sponsor, the Seller, the
Servicer and the Depositor as they may relate to the Class A Notes,
the obligations of the Sponsor, the Seller, the Servicer and the
Depositor under the Transaction Documents and the
Transaction;
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(ii)
to discuss the affairs, finances and accounts of the Sponsor, the
Seller, the Servicer and the Depositor with the Chief Operating
Officer and the Chief Financial Officer of the Sponsor, the Seller,
the Servicer and the Depositor; and
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(iii)
with the Sponsor, the Seller, the Servicer and the
Depositor’s consent, to discuss the affairs, finances and
accounts of the Sponsor, the Seller, the Servicer and the Depositor
with the Sponsor, the Seller, the Servicer and the
Depositor’s independent accountants, provided that an officer
of the Sponsor, the Seller, the Servicer and the Depositor shall
have the right to be present during such discussions.
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Such
inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the business of
the Sponsor, the Seller, the Servicer or the Depositor.
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(f)
Notice of Material Events . The Sponsor, the Seller, the
Servicer and the Depositor shall be obligated promptly to inform
the Insurer in writing of the occurrence of any of the
following:
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(i)
the submission of any claim or the initiation or threat of any
legal process, litigation or administrative or judicial
investigation, or rule making or disciplinary proceeding by or
against the Sponsor, the Seller, the Servicer or the Depositor that
(A) could be required to be disclosed to the Commission or the
Sponsor, the Seller, the Servicer or the Depositor’s
shareholders or (B) would likely result in a Material Adverse
Change with respect to the Sponsor, the Seller, the Servicer and
the Depositor or, to their knowledge, the initiation of any
proceeding or the promulgation of any proposed or final rule which
would likely result in a Material Adverse Change with respect to
the Sponsor, the Seller, the Servicer or the Depositor;
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(ii) any change in (A) jurisdiction of organization or (B) its
legal name;
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(iii)
the occurrence of any Default or Event of Default involving the
Sponsor, the Seller, the Servicer or the Depositor or any Material
Adverse Change in respect of the Sponsor, the Seller, the Servicer
or the Depositor;
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(iv)
the commencement of any proceedings by or against the Sponsor, the
Seller, the Servicer or the Depositor under any applicable
reorganization, liquidation, rehabilitation, insolvency or other
similar law now or hereafter in effect or of any proceeding in
which a receiver, liquidator, conservator, trustee or similar
official shall have been appointed for the Sponsor, the Seller, the
Servicer or the Depositor or any of their assets; or
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(v)
the receipt of notice that (A) any license, permit, charter,
registration or approval necessary for the conduct of the Sponsor,
the Seller, the Servicer or the Depositor’s business are to
be suspended or revoked and such supervision or revocation would
result in a Material Adverse Change or (B) the Sponsor, the Seller,
the Servicer or the Depositor are to cease and desist any practice,
procedure or policy employed by the Sponsor, the Seller, the
Servicer or the Depositor in the conduct of its business, and such
cessation may result in a Material Adverse Change with respect to
the Sponsor, the Seller, the Servicer or the Depositor.
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(g)
Financing Statements and Further Assurances . The Sponsor,
the Seller, the Servicer and the Depositor will cause to be filed
all necessary financing statements or other instruments, and any
amendments or continuation statements relating thereto, necessary
to be kept and filed in such manner and in such places
as
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may be
required by law to preserve and protect fully the interest of (i)
the Indenture Trustee in the assets of the Trust (as defined in the
Sale and Servicing Agreement) and (ii) the Indenture Trustee in the
Collateral (as defined in the Indenture). In addition, the Sponsor,
the Seller, the Servicer and the Depositor agree to cooperate with
S&P and Moody’s in connection with any review of the
Transaction that may be undertaken by S&P and Moody’s
after the date hereof.
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(h)
Maintenance of Licenses . The Sponsor, the Seller, the
Servicer and the Depositor and any successors thereof shall
maintain all licenses, permits, charters and registrations, the
loss or suspension of which, or the failure to hold which, could
reasonably be expected to result in a Material Adverse
Change.
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(i)
Retirement of Class A Notes . The Servicer shall instruct
the Indenture Trustee, upon a retirement or other payment of all of
the Class A Notes, to surrender the Policy to the Insurer for
cancellation.
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(j)
[Reserved] .
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(k)
Disclosure Document . Each Offering Document delivered with
respect to the Class A Notes shall clearly disclose that in the
event that the Insurer were to become insolvent, any claims arising
under the Policy would be excluded from coverage by the California
Insurance Guaranty Association.
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(l)
Third-Party Beneficiary . The Sponsor, the Seller, the
Servicer and the Depositor agree that the Insurer shall have all
rights of a third-party beneficiary in respect of the Transaction
Documents to which they are party to and hereby incorporate and
restate their representations, warranties and covenants as set
forth therein for the benefit of the Insurer; provided, that the
remedy for a breach of the representations and warranties set forth
in Section 3.01 of the Mortgage Loan Purchase Agreement and Section
2.04 of the Sale and Servicing Agreement, so long as the breaching
party has performed its obligations in accordance with such
documents will be limited to the repurchase or replacement of the
related Mortgage Loans.
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(m)
Servicing of Mortgage Loans . All Mortgage Loans will be
serviced in all material respects in compliance with the Sale and
Servicing Agreement.
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(n)
Closing Documents . The Sponsor, the Seller, the Servicer
and the Depositor shall provide or cause to be provided to the
Insurer an executed original copy of each document executed in
connection with the Transaction within 60 Business Days after the
date of closing.
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(o)
Special Purpose Entity . In addition, the Depositor
shall:
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(i)
ensure that its capital is adequate for the business and
undertakings of the Depositor;
(ii)
other than activities in connection with the Transaction, be
restricted from undertaking any activities other than purchasing
financial assets and
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transferring the proceeds to
other special-purpose entities in connection with the issuance of
other asset backed securities and activities incidental to the
foregoing;
(iii)
have at least one director, manager or member that is a person who
is not, and will not be, a director, officer, employee or holder of
any equity securities of the Seller or any of its affiliates or
subsidiaries;
(iv)
not commingle its funds and assets with the funds of any other
person; and
(v)
maintain (A) correct and complete minute books and records of
account, and (B) minutes of the meetings and other proceedings of
its board of managers, as provided in its articles of
incorporation.
Section
2.03. Negative Covenants of the Sponsor, the Seller, the
Servicer and the Depositor . The Sponsor, the Seller, the
Servicer and the Depositor hereby agree that during the term of
this Insurance Agreement, unless the Insurer shall otherwise
expressly consent in writing:
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(a)
Impairment of Rights . The Sponsor, the Seller, the Servicer
and the Depositor shall not take any action, or fail to take any
action, if such action or failure to take action may result in a
Material Adverse Change specified in clause (ii) of the definition
of Material Adverse Change with respect to the Sponsor, the Seller,
the Servicer or the Depositor, respectively, or may not interfere
with the enforcement of any rights of the Insurer under or with
respect to any of the Transaction Documents. The Sponsor, the
Seller, the Servicer and the Depositor shall give the Insurer
written notice of any such action or failure to act on the earlier
of: (i) the date upon which any publicly available filing or
release is made with respect to such action or failure to act or
(ii) promptly prior to the date of consummation of such action or
failure to act. The Sponsor, the Seller, the Servicer and the
Depositor shall furnish to the Insurer all information requested by
it that is reasonably necessary to determine compliance with this
paragraph.
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(b)
Amendments, Etc . Unless otherwise provided in the
Transaction Documents, neither the Sponsor, the Seller, the
Servicer nor the Depositor shall modify or amend, or consent to any
modification or amendment of, any of the terms, provisions or
conditions of the Transaction Documents to which they are party,
without the prior written consent of the Insurer thereto, but
excluding any amendment to the Offering Documents required by law
and excluding any modifications or amendments to which
Insurer’s consent is not required.
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(c)
Limitation on Mergers, Etc . The Depositor shall not
consolidate with or merge with or into any Person or transfer all
or substantially all of its assets to any Person or liquidate or
dissolve except as provided in the Sale and Servicing Agreement or
as permitted hereby. The Depositor shall furnish to the Insurer all
information requested by it that is reasonably necessary to
determine compliance with this paragraph.
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(d)
Successors . Unless an Insurer Default has occurred and is
continuing, none of the Indenture Trustee, the Sponsor, the Seller,
the Servicer or the Depositor shall terminate or designate, or
consent to the termination or designation of, any successor to the
Servicer or the Indenture Trustee without the prior written
approval of the Insurer, which approval shall not be unreasonably
withheld, conditioned or delayed.
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Section
2.04. [Reserved] .
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Section
2.05. [Reserved] .
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Section
2.06. Representations and Warranties of the Issuing Entity .
The Issuing Entity represents and warrants as of the Closing Date
as follows:
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(a)
Due Organization and Qualification . The Issuing Entity is a
statutory trust, duly organized, validly existing and in good
standing under the laws of the State of Delaware. The Issuing
Entity is duly qualified to do business, is in good standing and
has obtained all necessary licenses, permits, charters,
registrations and approvals (together, “ approvals
”) necessary for the conduct of its business as currently
conducted and as described in the Offering Documents and the
performance of its obligations under the Transaction Documents to
which it is a party in each jurisdiction in which the failure to be
so qualified or to obtain such approvals would render any
Transaction Document to which it is a party unenforceable in any
respect or would have a material adverse effect upon the
Transaction.
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(b)
Power and Authority . The Issuing Entity has all necessary
power and authority to conduct its business as currently conducted
and as described in the Offering Documents to execute, deliver and
perform its obligations under the Transaction Documents to which it
is a party and to consummate the Transaction.
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(c)
Due Authorization . The execution, delivery and performance
of the Transaction Documents to which it is a party by the Issuing
Entity has been duly authorized by all necessary action and does
not require any additional approvals or consents, or other action
by or any notice to or filing with any Person, including any
governmental entity or any of the noteholders of the Issuing Entity
or the Owner Trustee, which have not previously been obtained or
given.
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(d)
Noncontravention . The execution and delivery by the Issuing
Entity of the Transaction Documents to which it is a party, the
consummation of the Transaction and the satisfaction of the terms
and conditions of the Transaction Documents do not and will
not:
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(i)
conflict with or result in any breach or violation of any provision
of the Trust Agreement of the Issuing Entity or any law, rule,
regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to
the Issuing Entity or any of its respective material properties,
including regulations issued by any administrative
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agency
or other governmental authority having supervisory powers over the
Issuing Entity;
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(ii)
constitute a default by the Issuing Entity under, result in the
acceleration of any obligation under, or breach any provision of
any loan agreement, mortgage, indenture or other agreement or
instrument to which the Issuing Entity either is a party or by
which any of its properties are or may be bound or affected;
or
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(iii)
result in or require the creation of any lien upon or in respect of
any assets of the Issuing Entity, except as otherwise expressly
contemplated by the Transaction Documents.
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(e)
Legal Proceedings . There is no action, proceeding or
investigation by or before any court, governmental or
administrative agency or arbitrator against or affecting the
Issuing Entity, any properties or rights of the Issuing Entity
pending or, to the Issuing Entity’s knowledge after
reasonable inquiry, threatened, which, in any case, if decided
adversely to the Issuing Entity or any such subsidiary could result
in a Material Adverse Change with respect to the Issuing
Entity.
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(f)
Valid and Binding Obligations . The Transaction Documents to
which it is a party, when executed and delivered by the Issuing
Entity, will constitute the legal, valid and binding obligations of
the Issuing Entity, enforceable in accordance with their respective
terms, except as such enforceability may be limited by insolvency,
reorganization, moratorium or other similar laws affecting
creditors` rights generally and general equitable principles and
public policy considerations as to rights of indemnification for
violations of federal securities laws. The Class A Notes, when
executed, authenticated and delivered in accordance with the
Indenture and the Sale and Servicing Agreement will be validly
issued and outstanding and entitled to the benefits of the
Indenture and the Sale and Servicing Agreement. The Issuing Entity
will not at any time in the future deny that the Transaction
Documents to which it is a party constitute the legal, valid and
binding obligations of the Issuing Entity.
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(g)
Compliance with Law, Etc . No practice, procedure or policy
employed, or proposed to be employed, by the Issuing Entity in the
conduct of its business violates any law, regulation, judgment,
agreement, order or decree applicable to the Issuing Entity that,
if enforced, could result in a Material Adverse Change with respect
to the Issuing Entity.
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(h)
Taxes . The Issuing Entity has filed prior to the date
hereof all federal and state tax returns that are required to be
filed and has paid all taxes, including any assessments received by
it that are not being contested in good faith, to the extent that
such taxes have become due. Any taxes, fees and other governmental
charges payable by the Issuing Entity in connection with the
Transaction, the execution and delivery of the Transaction
Documents and the issuance of the Class A Notes have been paid or
shall have been paid at or prior to the Closing Date.
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(i)
Accuracy of Information . Neither the Transaction Documents
to which it is a party nor other information relating to the
Mortgage Loans, the operations of the Issuing Entity or the
financial condition of the Issuing Entity (collectively, the
“ Issuing Entity Documents ”), as amended,
supplemented or superseded, furnished to the Insurer by the Issuing
Entity contains any statement of a material fact which was untrue
or misleading in any material respect when made. The Issuing Entity
has no knowledge of any circumstances that could reasonably be
expected to cause a Material Adverse Change with respect to the
Issuing Entity. Since the furnishing of the Issuing Entity
Documents, there has been no change nor any development or event
involving a prospective change is known to the Issuing Entity that
would render any of the Issuing Entity Documents untrue or
misleading in any material respect.
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(j)
Compliance With Securities Laws . The offer and sale of the
Offered Notes comply in all material respects with all requirements
of law, including all registration requirements of applicable
securities laws. Without limiting the foregoing, the Offering
Documents does not contain any untrue statement of a material fact
and does not omit to state a material fact necessary to make the
statements made therein, in light of the circumstances under which
they were made, not misleading; provided, however, that no
representation is made with respect to the Insurer Information or
with respect to the Underwriter Information. Neither the offer nor
sale of the Offered Notes by the Issuing Entity has been or will be
in violation of the Securities Act or any other federal or state
securities laws. The Indenture has been qualified under the TIA.
The Issuing Entity is not required to be registered as an
“investment company” under the Investment Company Act.
The Issuing Entity will satisfy any of the information reporting
requirements of the Securities Exchange Act arising out of the
Transaction to which it or the Trust Fund are subject.
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(k)
Transaction Documents . Each of the representations and
warranties of the Issuing Entity contained in the Transaction
Documents to which it is a party is true and correct in all
material respects and the Issuing Entity hereby makes each such
representation and warranty to, and for the benefit of, the Insurer
as if the same were set forth in full herein.
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(l)
Solvency; Fraudulent Conveyance . The Issuing Entity is
solvent and will not be rendered insolvent by the Transaction and,
after giving effect to the Transaction, the Issuing Entity will not
be left with an unreasonably small amount of capital with which to
engage in its business, and the Issuing Entity does not intend to
incur, or believe that it has incurred, debts beyond its ability to
pay as they mature. The Issuing Entity does not contemplate the
commencement of insolvency, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of the Issuing
Entity or any of their assets. The Issuing Entity is not pledging
the Mortgage Loans to the Indenture Trustee or selling the Offered
Notes, as provided in the Transaction Documents, with any intent to
hinder, delay or defraud any of the Issuing Entity’s
creditors.
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(m)
Principal Place of Business . The principal place of
business of the Issuing Entity is Wilmington, Delaware.
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17
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Section
2.07. Affirmative Covenants of the Issuing Ent
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