EXHIBIT 10.3
INSURANCE AND INDEMNITY AGREEMENT
by and among
FINANCIAL SECURITY ASSURANCE INC.,
INDYMAC BANK, F.S.B.,
INDYMAC ABS, INC.
and
INDYMAC HOME EQUITY MORTGAGE LOAN ASSET-BACKED
TRUST,
SERIES 2007-H1
March 23, 2007
INDYMAC HOME EQUITY MORTGAGE LOAN ASSET-BACKED
TRUST, SERIES 2007-H1
$650,071,000 IndyMac Home Equity Mortgage Loan
Asset-Backed Notes, Series 2007-H1
TABLE OF CONTENTS
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Page
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INTRODUCTORY
STATEMENTS
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1
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ARTICLE I DEFINITIONS; LIMITED
RECOURSE
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1
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Section 1.01.
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Definitions
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1
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Section 1.02.
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Limited Recourse
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1
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ARTICLE II REPRESENTATIONS,
WARRANTIES AND COVENANTS
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2
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Section 2.01.
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Representations and Warranties of
the Company and the Depositor
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2
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Section 2.02.
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Representations and Warranties of
the Trust
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9
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Section 2.03.
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Affirmative Covenants of the
Company and the Depositor
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12
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Section 2.04.
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Affirmative Covenants of the
Trust
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20
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Section 2.05.
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Negative Covenants of the Company
and the Depositor
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22
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Section 2.06.
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Negative Covenants of the
Trust
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23
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ARTICLE III THE POLICY;
REIMBURSEMENT; INDEMNIFICATION
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25
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Section 3.01.
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Issuance of the Policy
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25
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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 and Additional
Payment 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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Subrogation
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30
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Section 3.06.
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Assignment and Other
Rights
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30
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ARTICLE IV FURTHER
AGREEMENTS
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30
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Section 4.01.
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Effective Date; Term of
Agreement
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30
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Section 4.02.
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Obligations Absolute
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31
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Section 4.03.
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Assignments; Reinsurance;
Third-Party Rights
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32
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Section 4.04.
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Liability of FSA
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32
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ARTICLE V EVENTS OF DEFAULT;
REMEDIES
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34
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Section 5.01.
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Events of Default
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34
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Section 5.02.
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Remedies; Waivers
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35
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ARTICLE VI
MISCELLANEOUS
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36
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Section 6.01.
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Amendments
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36
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Section 6.02.
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Notices
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36
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Section 6.03.
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Payment Procedure
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38
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Section 6.04.
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Severability
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38
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Section 6.05.
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Governing Law
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38
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Section 6.06.
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Consent to
Jurisdiction
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38
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Section 6.07.
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Consent of FSA
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39
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Section 6.08.
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Counterparts
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39
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Section 6.09.
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Trial by Jury Waived
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40
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Section 6.10.
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Limited Liability
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40
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Section 6.11.
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Entire Agreement
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40
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Section 6.12.
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Owner Trustee
Liability
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40
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Appendix I—Definitions
Annex I—Form of Policy
Appendix A—Conditions Precedent to Issuance of the
Policy
i
INSURANCE AND INDEMNITY AGREEMENT
INSURANCE
AND INDEMNITY AGREEMENT, dated as of March 23, 2007, among
FINANCIAL SECURITY ASSURANCE INC. (“FSA”), INDYMAC
BANK, F.S.B. (the “Company”), INDYMAC ABS, INC. (the
“Depositor”) and INDYMAC HOME EQUITY MORTGAGE LOAN
ASSET-BACKED TRUST, SERIES 2007-H1 (the
“Trust”).
INTRODUCTORY STATEMENTS
Pursuant
to an Indenture dated as of March 23, 2007, made by and between the
Trust and the Indenture Trustee, $650,071,000 of IndyMac Home
Equity Mortgage Loan Asset-Backed Notes, Series 2007-H1 (the
“Securities”) are being issued.
The
Company has requested that FSA issue a financial guaranty insurance
policy guaranteeing certain payments of principal of and interest
on the Securities upon the terms and subject to the conditions
provided herein.
The
parties hereto desire to specify the conditions precedent to the
issuance of the Policy by FSA, the payment of premium in respect of
the Policy, the indemnity and reimbursement to be provided to FSA
in respect of amounts paid by FSA under the Policy or otherwise and
certain other matters.
In
consideration of the premises and of the agreements herein
contained, FSA, the Company, the Depositor and the Trust hereby
agree as follows:
ARTICLE I
DEFINITIONS; LIMITED RECOURSE
Section
1.01. Definitions . Capitalized terms used herein shall have
the meanings provided in Appendix I hereto or, if not defined in
Appendix I, shall have the meanings provided in the Indenture or
the Sale and Servicing Agreement, as applicable.
Section
1.02. Limited Recourse . Notwithstanding any provision of
this Agreement to the contrary, the respective payment obligations
of each of the Company, the Depositor and the Trust set forth
herein (other than those set forth in Sections 3.02(a), (b), (c)
and (d)(i), Section 3.03(b), Section 3.03(c)(ii), Section 3.03(d)
and Section 3.04) shall be non-recourse obligations and shall be
payable only from monies available for such payment in accordance
with the provisions of the Indenture (except to the extent that any
such payment obligation arises from a failure to perform or default
of the Company or the Depositor (except as provided in Section
3.04) respectively, or any affiliate thereof in accordance with the
Indenture or any other Transaction Document or by reason of
negligence, willful misconduct or bad faith on the part of the
Company or the Depositor, respectively, in the performance of its
duties and obligations thereunder or reckless disregard by the
Company or the Depositor of its duties and obligations
thereunder).
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ARTICLE II
REPRESENTATIONS, WARRANTIES AND
COVENANTS
Section
2.01. Representations and Warranties of the Company and the
Depositor .
(a) The
Company represents, warrants and covenants, as of the date hereof,
as of the Date of Issuance and as of the date of the transfer of
Mortgage Loans to the Trust created by the Trust Agreement, as
follows:
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(i)
Due Organization and Qualification . The Company is a
federal savings bank, duly organized and validly existing under the
laws of the United States of America, and in good standing under
the laws of its jurisdiction of organization. The Company is duly
qualified to do business, is in good standing and has obtained all
licenses, permits, charters, registrations and approvals (together,
“Approvals”) necessary for the conduct of its business
as currently conducted and as described in the Offering Document
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 unenforceable in any material respect or
would have a material adverse effect upon the Transaction. The
Depositor is a Subsidiary of the Company.
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(ii)
Power and Authority . The Company has all necessary power
and authority to conduct its business as currently conducted and as
described in the Offering Document, to execute the Transaction
Documents to which it is a party, to deliver and perform its
obligations under such Transaction Documents and to consummate the
Transaction.
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(iii)
Due Authorization . The execution, delivery and performance
by the Company of the Transaction Documents to which it is a party
have been duly authorized by all necessary corporate action on the
part of the Company and do not require any additional approvals or
consents from, or other action by, or any notice to or filing with,
any Person, including, without limitation, any governmental entity
or the Company’s stockholders, except for such approvals and
consents as shall have been obtained or filed prior to the Closing
Date.
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(iv)
Noncontravention . Neither the execution and delivery by the
Company of the Transaction Documents to which it is a party, the
consummation of the transactions contemplated thereby nor the
satisfaction of the terms and conditions of such Transaction
Documents,
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(a) conflicts
with or results in any breach or violation of any provision of the
organizational documents of the Company or any law, rule,
regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to
the Company or any of their properties, including regulations
issued by any administrative agency or other governmental authority
having supervisory powers over the Company,
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(b) constitutes
a default by the Company under, results in the acceleration of any
obligation under, or constitutes a breach of any provision of any
loan agreement, mortgage, indenture or other agreement or
instrument to which the Company or any of its Subsidiaries is a
party or by which it or any of its or their properties is or may be
bound or affected which would have a material adverse effect on the
Transaction or on any material portion of the Mortgage Loans,
or
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(c) results
in or requires the creation of any Lien upon or in respect of any
of the Company’s assets except as otherwise expressly
contemplated by the Transaction Documents.
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(v)
Legal Proceedings . There is no action, proceeding or
investigation by or before any court, governmental or
administrative agency or arbitrator against or affecting the
Company or any properties or rights of the Company or, to the best
of the Company’s knowledge, any or all of the Mortgage Loans,
pending or, to the Company’s knowledge after reasonable
inquiry regarding threatened legal proceedings against or affecting
the Company or the properties or rights of the Company, threatened,
which, in any case, if decided adversely to the Company, would
result in a Material Adverse Change with respect to the Company or
any of the Mortgage Loans.
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(vi)
Valid and Binding Obligations . The Transaction Documents to
which the Company is a party, when executed and delivered by the
Company and assuming due authorization, execution and delivery by
the other parties thereto, will or do constitute the legal, valid
and binding obligations of the Company enforceable in accordance
with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors’ rights generally and
general equitable principles. The Securities, when executed,
authenticated and delivered in accordance with the Indenture will
be validly issued and outstanding and entitled to the benefits of
the Indenture.
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(vii)
Financial Statements . The Financial Statements of Bancorp,
copies of which have been made available to FSA, (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 Bancorp 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 such financial condition or results of
operations. Except as disclosed in the Financial Statements,
Bancorp is 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
Company.
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(viii)
ERISA . The Company is in compliance in all material
respects with ERISA and have not incurred and do not reasonably
expect to incur any liabilities to the PBGC (other than premiums
due to the PBGC) in connection with any Plan or
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Multiemployer Plan in any
capacity other than as a Commonly Controlled Entity with respect to
the Company, or to contribute now or in the future in respect of
any Plan or Multiemployer Plan.
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(ix)
Accuracy of Information . None of the Provided Documents
contain any statement of a material fact with respect to the
Company or the Transaction Documents or Mortgage Loans that was
untrue or misleading in any material respect when made. Since the
furnishing of the Provided Documents, there has been no change, nor
any development or event involving a prospective change known to
the Company, that would render any of the Provided Documents untrue
or misleading in any material respect. There is no fact known to
the Company (excluding general market conditions) which has a
material possibility of causing a Material Adverse Change with
respect to the Company or the Mortgage Loans.
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(x)
Compliance With Securities Laws . The offer and sale of the
Securities comply in all material respects with all requirements of
law, including requirements of applicable securities laws. Without
limitation of the foregoing, and except with respect to (A)
information provided in writing by FSA expressly for use in the
Offering Document (such information being limited to the
information included (i) under the caption “The Insurer and
the Policy – The Insurer” (including only the first
three paragraphs under the subcaption “Incorporation of
Certain Documents by Reference”), including the financial
statements incorporated by reference therein, and (ii) in the
penultimate paragraph under the caption “The Insurer and the
Policy – The Policy” (collectively, as revised from
time to time in accordance with the provisions hereof, the
“FSA Information”) and (B) the Underwriter Information,
the Offering Document does not contain any untrue statement of a
material fact and does not omit to state a material fact required
to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made,
not misleading. Neither the Trust nor the Company is required to be
registered as an “investment company” under the
Investment Company Act. The Indenture is qualified under the Trust
Indenture Act.
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(xi)
Transaction Documents . Each of the representations and
warranties of the Company contained in the Transaction Documents is
true and correct in all material respects and the Company hereby
makes each such representation and warranty to, and for the benefit
of, FSA as if the same were set forth in full herein.
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(xii)
Good Title; Absence of Liens; Security Interest . The
Company, at the time of transfer of the Mortgage Loans to the
Depositor, was the owner of, and had good and marketable title to,
each Mortgage Loan free and clear of all Liens and Restrictions on
Transferability, and had full right, power and lawful authority to
assign, transfer and pledge the Mortgage Loans it owned. In the
event that, in contravention of the intention of the parties, the
transfer of Mortgage Loans by the Company to the Depositor or by
the Depositor to the Trust is characterized as other than a sale,
such transfer shall be characterized as a secured financing, and
the Trust shall, for the benefit of the Noteholders and FSA, have a
valid and perfected first priority security interest in the
Mortgage Loans free and clear of all Liens and Restrictions on
Transferability. The Indenture Trustee shall, for the benefit of
the Noteholders and FSA, have a valid and
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perfected first priority security
interest in the Mortgage Loans free and clear of all Liens and
Restrictions on Transferability.
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(xiii)
Taxes . The Company has filed all federal and state tax
returns which are required to be filed by it and paid all taxes
owed by it, including any assessments received by it, in each case,
which are not being contested in good faith and for which the
Company has made adequate reserves, to the extent that such taxes
have become due. Any taxes, fees and other governmental charges
payable by the Company in connection with the Transaction, the
execution and delivery of the Transaction Documents and the
issuance of the Securities have been paid or shall have been paid
at or prior to the Date of Issuance.
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(xiv)
Solvency; Fraudulent Conveyance . The Company is solvent and
will not be rendered insolvent by the transactions contemplated by
the Transaction Documents and, after giving effect to such
transactions, the Company will not be left with an unreasonably
small amount of capital with which to engage in its business. The
Company does not intend to incur, or believe they have incurred,
debts beyond their ability to pay such debts as they mature. The
Company does not contemplate the commencement of insolvency,
bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or
similar official in respect of the Company or any of their assets.
The amount of consideration received by the Company upon the sale
of the Mortgage Loans to the Depositor constitutes reasonably
equivalent value and fair consideration therefor. The Company did
not transfer the Mortgage Loans to the Depositor with any intent to
hinder, delay or defraud any of the Company’s
creditors.
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(xv)
Compliance With Law, Etc . No practice, procedure or policy
employed or proposed to be employed by the Company in the conduct
of its business violates any law, regulation, judgment, agreement,
order or decree applicable to the Company which, if enforced, would
result in a Material Adverse Change with respect to the Company or
the Mortgage Loans.
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(xvi)
Compliance With Anti-Money Laundering Laws . No practice,
procedure or policy employed or proposed to be employed by the
Company in the conduct of its business violates any anti-money
laundering law or regulation (including without limitation, the USA
PATRIOT Act, Public Law No. 107-56 (2001), and regulations
promulgated thereunder) applicable to the Company.
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(xvii)
Rating Agencies . The information supplied by the Company to
S&P and Moody’s in connection with obtaining their
respective ratings of the Securities did not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated in order to make such information not
misleading.
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(xviii)
Tax Characterization . Upon issuance and for so long as the
Securities shall be outstanding, for federal income tax purposes,
the Securities will be characterized as indebtedness, and the Trust
will not be classified as an association or publicly
traded
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partnership taxable as a
corporation or a taxable mortgage pool within the meaning of
Section 7701(i) of the Code.
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(b) The
Depositor represents, warrants and covenants, as of the date
hereof, as of the Date of Issuance and as of the date of the
transfer of Mortgage Loans to the Trust created by the Trust
Agreement, as follows:
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(i)
Due Organization and Qualification . The Depositor is a
corporation organized under the laws of the State of Delaware, duly
organized, validly existing and in good standing under the laws of
the State of Delaware. The Depositor is duly qualified to do
business, is in good standing and has obtained all licenses,
permits, charters, registrations and approvals (together,
“Approvals”) necessary for the conduct of its business
as currently conducted and as described in the Offering Document
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 unenforceable in any material respect or
would have a material adverse effect upon the Transaction. The
Depositor is a Subsidiary of the Company.
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(ii)
Power and Authority . The Company has all necessary power
and authority to conduct its business as currently conducted and as
described in the Offering Document, to execute the Transaction
Documents to which it is a party, to deliver and perform its
obligations under such Transaction Documents and to consummate the
Transaction.
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(iii)
Due Authorization . The execution, delivery and performance
by the Depositor of the Transaction Documents to which it is a
party have been duly authorized by all necessary corporate action
on the part of the Depositor and do not require any additional
approvals or consents from, or other action by, or any notice to or
filing with, any Person, including, without limitation, any
governmental entity or the stockholders, except for such approvals
and consents as shall have been obtained or filed prior to the
Closing Date.
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(iv)
Noncontravention . Neither the execution and delivery by the
Depositor of the Transaction Documents to which it is a party, the
consummation of the transactions contemplated thereby nor the
satisfaction of the terms and conditions of such Transaction
Documents,
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(a) conflicts
with or results in any breach or violation of any provision of the
organizational documents of the Depositor or any law, rule,
regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to
the Depositor or any of their properties, including regulations
issued by any administrative agency or other governmental authority
having supervisory powers over the Depositor,
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(b) constitutes
a default by the Depositor under, results in the acceleration of
any obligation under, or constitutes a breach of any provision
of
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any loan agreement, mortgage,
indenture or other agreement or instrument to which the Depositor
or any of its Subsidiaries is a party or by which it or any of its
or their properties is or may be bound or affected which would have
a material adverse effect on the Transaction or on any material
portion of the Mortgage Loans, or
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(c) results
in or requires the creation of any Lien upon or in respect of any
of the Depositor’s assets except as otherwise expressly
contemplated by the Transaction Documents.
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(v)
Legal Proceedings . There is no action, proceeding or
investigation by or before any court, governmental or
administrative agency or arbitrator against or affecting the
Depositor or any properties or rights of the Depositor or, to the
best of the Depositor’s knowledge, any or all of the Mortgage
Loans, pending or, to the Depositor’s knowledge after
reasonable inquiry regarding threatened legal proceedings against
or affecting the Depositor or the properties or rights of the
Depositor, threatened, which, in any case, if decided adversely to
the Depositor, would result in a Material Adverse Change with
respect to the Company, the Depositor, or any of the Mortgage
Loans.
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(vi)
Valid and Binding Obligations . The Transaction Documents to
which the Depositor is a party, when executed and delivered by the
Depositor and assuming due authorization, execution and delivery by
the other parties thereto, will or do constitute the legal, valid
and binding obligations of the Depositor, enforceable in accordance
with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors’ rights generally and
general equitable principles. The Securities, when executed,
authenticated and delivered in accordance with the Indenture will
be validly issued and outstanding and entitled to the benefits of
the Indenture.
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(vii)
ERISA . The Depositor is in compliance in all material
respects with ERISA and have not incurred and do not reasonably
expect to incur any liabilities to the PBGC (other than premiums
due to the PBGC) in connection with any Plan or Multiemployer Plan
in any capacity other than as a Commonly Controlled Entity with
respect to the Company, or to contribute now or in the future in
respect of any Plan or Multiemployer Plan.
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(viii)
Accuracy of Information . None of the Provided Documents
contain any statement of a material fact with respect to the
Depositor or the Transaction Documents or Mortgage Loans that was
untrue or misleading in any material respect when made. Since the
furnishing of the Provided Documents, there has been no change, nor
any development or event involving a prospective change known to
the Depositor, that would render any of the Provided Documents
untrue or misleading in any material respect. There is no fact
known to the Depositor (excluding general market conditions) which
has a material possibility of causing a Material Adverse Change
with respect to the Depositor or the Mortgage Loans.
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(ix)
Compliance With Securities Laws . The offer and sale of the
Securities comply in all material respects with all requirements of
law, including requirements of applicable securities laws. Without
limitation of the foregoing, and except with respect to (A)
information provided in writing by FSA expressly for use in the
Offering Document (such information being limited to the
information included (i) under the caption “The Insurer and
the Policy – The Insurer” (including only the first
three paragraphs under the subcaption “Incorporation of
Certain Documents by Reference”), including the financial
statements incorporated by reference therein, and (ii) in the
penultimate paragraph under the caption “The Insurer and the
Policy – The Policy” (collectively, as revised from
time to time in accordance with the provisions hereof, the “
FSA Information ”) and (B) the Underwriter
Information, the Offering Document does not contain any untrue
statement of a material fact and does not omit to state a material
fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which
they were made, not misleading. The Depositor is not required to be
registered as an “investment company” under the
Investment Company Act. The Indenture is qualified under the Trust
Indenture Act.
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(x)
Transaction Documents . Each of the representations and
warranties of the Depositor contained in the Transaction Documents
is true and correct in all material respects and the Depositor
hereby makes each such representation and warranty to, and for the
benefit of, FSA as if the same were set forth in full
herein.
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(xi)
Good Title; Absence of Liens; Security Interest . The
Depositor, at the time of transfer of the Mortgage Loans to the
Trust, was the owner of, and had good and marketable title to, each
Mortgage Loan free and clear of all Liens and Restrictions on
Transferability, and had full right, power and lawful authority to
assign, transfer and pledge the Mortgage Loans it owned. The
Depositor transferred the Mortgage Loans it owned to the Trust free
and clear of all Liens and Restrictions on Transferability. In the
event that, in contravention of the intention of the parties, the
transfer of Mortgage Loans by the Company to the Depositor or by
the Depositor to the Trust is characterized as other than a sale,
such transfer shall be characterized as a secured financing, and
the Trust shall, for the benefit of the Noteholders and FSA, have a
valid and perfected first priority security interest in the
Mortgage Loans free and clear of all Liens and Restrictions on
Transferability. The Indenture Trustee shall, for the benefit of
the Noteholders and FSA, have a valid and perfected first priority
security interest in the Mortgage Loans free and clear of all Liens
and Restrictions on Transferability.
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(xii)
Taxes . The Depositor has filed all federal and state tax
returns which are required to be filed by it and paid all taxes
owed by it, including any assessments received by it, in each case,
which are not being contested in good faith and for which the
Depositor has made adequate reserves, to the extent that such taxes
have become due. Any taxes, fees and other governmental charges
payable by the Depositor in connection with the Transaction, the
execution and delivery of the Transaction Documents and the
issuance of the Securities have been paid or shall have been paid
at or prior to the Date of Issuance.
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(xiii)
Solvency; Fraudulent Conveyance . The Depositor is solvent
and will not be rendered insolvent by the transactions contemplated
by the Transaction Documents and, after giving effect to such
transactions, the Depositor will not be left with an unreasonably
small amount of capital with which to engage in its business. The
Depositor does not intend to incur, or believe they have incurred,
debts beyond their ability to pay such debts as they mature. The
Depositor does not contemplate the commencement of insolvency,
bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or
similar official in respect of the Depositor or any of its assets.
The amount of consideration received (i) by the Depositor upon the
sale of the Mortgage Loans to the Trust and (ii) by the Depositor
upon the sale of the Securities, each constitutes reasonably
equivalent value and fair consideration therefor. The Depositor did
not transfer the Mortgage Loans to the Trust with any intent to
hinder, delay or defraud any of the Depositor’s
creditors.
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(xiv)
Compliance With Law, Etc . No practice, procedure or policy
employed or proposed to be employed by the Depositor in the conduct
of its business violates any law, regulation, judgment, agreement,
order or decree applicable to the Depositor which, if enforced,
would result in a Material Adverse Change with respect to the
Depositor or the Mortgage Loans.
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(xv)
Compliance With Anti-Money Laundering Laws . No practice,
procedure or policy employed or proposed to be employed by the
Depositor in the conduct of its business violates any anti-money
laundering law or regulation (including without limitation, the USA
PATRIOT Act, Public Law No. 107-56 (2001), and regulations
promulgated thereunder) applicable to the Company or the
Depositor.
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(xvi)
Rating Agencies . The information supplied by the Depositor
to S&P and Moody’s in connection with obtaining their
respective ratings of the Securities did not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated in order to make such information not
misleading.
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(xvii)
Tax Characterization . Upon issuance and for so long as the
Securities shall be outstanding, for federal income tax purposes,
the Securities will be characterized as indebtedness, and the Trust
will not be classified as an association or publicly traded
partnership taxable as a corporation or a taxable mortgage pool
within the meaning of Section 7701(i) of the Code.
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Section
2.02. Representations and Warranties of the Trust . The
Trust represents, warrants and covenants, as of the date hereof and
as of the Date of Issuance, as follows:
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(a)
Due Organization and Qualification . The Trust is a
statutory trust, duly organized, validly existing and in good
standing under the laws of Delaware. The Trust is duly qualified to
do business, is in good standing and has obtained all Approvals
necessary to the conduct of its business as currently conducted and
as described in the Offering Document and the performance of its
obligations under the Transaction Documents to which it is a party,
in each jurisdiction in which failure to be so qualified
or
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to obtain such Approvals would
render any Transaction Document unenforceable in any respect or
would have a material adverse effect upon the
Transaction.
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(b)
Power and Authority . The Trust has all necessary power and
authority to conduct its business as currently conducted and as
described in the Offering Document, 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
by the Trust of the Transaction Documents to which it is a party
have been duly authorized by all necessary corporate action and do
not require any additional approvals or consents from, or other
action by or any notice to or filing with any Person, including,
without limitation, any governmental entity, except for such
approvals and consents as shall have been obtained or filed prior
to the Closing Date.
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(d)
Noncontravention . Neither the execution and delivery by the
Trust of the Transaction Documents to which it is a party, the
consummation of the transactions contemplated thereby nor the
satisfaction of the terms and conditions of the Transaction
Documents to which it is a party,
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(i) conflicts
with or results in any breach or violation of any provision of the
organizational or governing documents of the Trust or any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to
the Trust or any of its properties, including regulations issued by
any administrative agency or other governmental authority having
supervisory powers over the Trust,
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(ii) constitutes
a default by the Trust under, results in the acceleration of any
obligation under, or constitutes a breach of any provision of any
loan agreement, mortgage, indenture or other agreement or
instrument to which the Trust is a party or by which it or its
properties is or may be bound or affected, or
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(iii) results
in or requires the creation of any Lien upon or in respect of any
of the Trust’s assets 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 Trust,
or any properties or rights of the Trust, pending or, to the
Trust’s knowledge after reasonable inquiry, threatened,
which, in any case, if decided adversely to the Trust, would result
in a Material Adverse Change with respect to the Trust or the
Mortgage Loans.
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(f)
Valid and Binding Obligations . The Transaction Documents to
which it is a party, when executed and delivered by the Trust, will
constitute the legal, valid and binding obligations of the Trust,
enforceable in accordance with their respective terms, except as
such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors’ rights generally and general
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equitable principles. The
Securities, when executed, authenticated and delivered in
accordance with the Indenture, will be validly issued and
outstanding and entitled to the benefits of the
Indenture.
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(g)
Compliance With Securities Laws . The offer and sale of the
Securities comply in all material respects with all requirements of
law, including requirements of applicable securities laws. Without
limitation of the foregoing, and except with respect to the FSA
Information, the Offering Document does not contain any untrue
statement of a material fact and does not omit to state a material
fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which
they were made, not misleading. Neither the Trust nor the Trust
Fund is required to be registered as an “investment
company” under the Investment Company Act. The Indenture is
qualified under the Trust Indenture Act.
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(h)
Transaction Documents . Each of the representations and
warranties of the Trust contained in the Transaction Documents is
true and correct in all material respects and the Trust hereby
makes each such representation and warranty to, and for the benefit
of, FSA as if the same were set forth in full herein.
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(i)
Compliance With Law . No practice, procedure or policy
employed or proposed to be employed by the Trust in the conduct of
its business violates any law, regulation, judgment, agreement,
order or decree applicable to the Trust which, if enforced, would
result in a Material Adverse Change with respect to the
Trust.
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(j)
Compliance With Anti-Money Laundering Laws . No practice,
procedure or policy employed or proposed to be employed by the
Trust in the conduct of its business violates any anti-money
laundering law or regulation (including without limitation, the USA
PATRIOT Act, Public Law No. 107-56 (2001), and regulations
promulgated thereunder) applicable to the Trust.
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(k)
Taxes . The Trust is not delinquent in the filing of any
federal and state tax returns which are required to be filed and is
not delinquent in the payment of any taxes, including assessments
received by it, to the extent that such taxes have become due. Any
taxes, fees and other governmental charges payable by the Trust in
connection with the Transaction, the execution and delivery of the
Transaction Documents and the issuance of the Securities have been
paid or shall have been paid at or prior to the Date of
Issuance.
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(l)
Solvency; Fraudulent Conveyance . The Trust is solvent and
will not be rendered insolvent by the transactions contemplated by
the Transaction Documents and, after giving effect to such
transactions, the Trust will not be left with an unreasonably small
amount of capital with which to engage in its business. The Trust
does not intend to incur, or believe that it has incurred, debts
beyond its ability to pay such debts as they mature. The Trust does
not contemplate the commencement of insolvency, bankruptcy,
liquidation or consolidation proceedings or the appointment of a
receiver, liquidator, conservator, trustee or similar official in
respect of the Trust or any of its assets. The amount of
consideration being received by the Trust upon the sale of the
Securities to the
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Depositor constitutes reasonably
equivalent value and fair consideration for the Securities. The
Trust is not making a Grant of the Trust Fund to the Indenture
Trustee or selling the Securities to the Depositor, as provided in
the Transaction Documents, with any intent to hinder, delay or
defraud any of the Trust’s creditors.
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(m)
Rating Agencies . The information supplied by the Trust to
S&P and Moody’s in connection with obtaining their
respective ratings of the Securities, if any, did not contain any
untrue statement of a material fact or omit to state any material
fact required to be stated in order to make such information not
misleading.
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Section
2.03. Affirmative Covenants of the Company and the Depositor
.
(a) The
Company hereby agrees that during the Term of the Agreement, unless
FSA shall otherwise expressly consent in writing:
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(i)
Corporate Existence . The Company shall maintain its
corporate existence and shall at all times continue to be duly
organized under the laws of its jurisdiction of incorporation or
organization and duly qualified and duly authorized (as described
in Sections 2.01(a), (b) and (c) hereof) and shall conduct its
business in accordance with the terms of its organizational
documents.
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(ii)
Compliance With Agreements and Applicable Laws . The Company
shall perform each of its obligations under the Transaction
Documents and shall comply with all material requirements of, and
the Securities shall be offered and sold in accordance with, any
law, rule or regulation applicable to it or thereto, or that are
required in connection with its performance under any of the
Transaction Documents.
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(iii)
Financial Statements; Other Information . The Company shall
keep or cause to be kept in reasonable detail books and records of
account of the Company’s assets and business and shall
clearly reflect therein the transfer of the Mortgage Loans from the
Company to the Depositor as sale of the Company’s interest in
the Mortgage Loans. The Company shall treat the transfer of the
Mortgage Loans from the Company to the Depositor as a sale for
accounting purposes. The Company shall furnish or make available to
FSA:
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(a)
Annual Financial Statements . As soon as available, and in
any event within 120 days after the close of each fiscal year of
Bancorp, the audited balance sheets of Bancorp as of the end of
such fiscal year and the audited statements of income, changes in
shareholders’ equity and cash flows of Bancorp 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, if any, prepared in accordance with
generally accepted accounting principles, consistently applied, and
accompanied by the certificate of Bancorp’s independent
accountants (who shall be a nationally recognized firm or otherwise
acceptable to FSA) and by the certificate specified in Section
2.03(a)(iv) hereof.
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(b)
Quarterly Financial Statements . As soon as available, and
in any event within 45 days after the close of each of the first
three quarters of each
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fiscal year of Bancorp, the
unaudited balance sheets of Bancorp as of the end of such quarter
and the unaudited statements of income, changes in
shareholders’ equity and cash flows of Bancorp 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, if any,
prepared in accordance with generally accepted accounting
principles, consistently applied (subject to normal year-end
adjustments), and accompanied by the certificate specified in
Section 2.03(a)(iv) hereof if such certificate is required to be
provided pursuant to such Section.
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(c)
Other Information . Promptly upon receipt thereof, copies of
all reports, statements, certifications, schedules, or other
similar items delivered to or by the Company, the Trust and the
Indenture Trustee pursuant to the terms of the Transaction
Documents and, promptly upon request, such other data as FSA may
reasonably request; provided, however, that the Company shall not
be required to deliver any such items if provision by some other
party to FSA is required under the Transaction Documents unless
such other party wrongfully fails to deliver such item. The Company
shall, upon the request of FSA, permit FSA or its authorized
agents, no more than two times per year (so long as no Trigger
Event has occurred) or following the occurrence of a Trigger Event:
(A) to inspect the books and records of the Company as they may
relate to the Securities, the Mortgage Loans, the obligations of
the Company under the Transaction Documents, the Transaction and,
but only following the occurrence of a Trigger Event, the
Company’s business; (B) to discuss the affairs, finances and
accounts of the Company with the senior financial officer of the
Company, no more frequently than annually unless a Trigger Event
has occurred; and (C) upon the occurrence of a Trigger Event, to
discuss the affairs, finances and accounts of the Company with the
Company’s independent accountants, provided that an officer
of the Company shall have the right to be present during such
discussions. Such inspections and discussions shall be conducted
during normal business hours and shall not unreasonably disrupt the
business of the Company. In addition, the Company shall promptly
(but in no case more than 30 days following issuance or receipt by
the Commonly Controlled Entity) provide to FSA a copy of all
correspondence between a Commonly Controlled Entity and the PBGC,
IRS, Department of Labor or the administrators of a Multiemployer
Plan relating to any Reportable Event or the underfunded status,
termination or possible termination of a Plan or a Multiemployer
Plan.
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(e)
Closing Documents . The Company shall provide or cause to be
provided to FSA an executed original copy of each document executed
in connection with the Transaction within 60 days after the date of
closing.
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All financial statements
specified in clauses (a) and (b) above shall be furnished in
consolidated form for the Company and all Subsidiaries in the event
the Company shall consolidate its financial statements with its
Subsidiaries.
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(iv)
Compliance Certificate . The Company shall deliver to FSA
concurrently with the delivery of the financial statements required
pursuant to Section 2.03(a)(iii)(a) hereof (and concurrently with
the delivery of the financial statements required pursuant to
Section 2.03(a)(iii)(b) hereof, if a Trigger Event has occurred), a
certificate signed by the senior financial officer of the Company
stating that:
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(a) a
review of the Company’s and the Depositor’s performance
under the Transaction Documents during such period has been made
under such officer’s supervision;
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(b) to
the best of such individual’s knowledge following reasonable
inquiry, no Trigger Event, Default or Event of Default has
occurred, or if a Trigger Event, Default or Event of Default has
occurred, specifying the nature thereof and, if the Company or the
Depositor has a right to cure any such Default or Event of Default
pursuant to Section 5.01, stating in reasonable detail the steps,
if any, being taken by the Company 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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(c) the
financial reports made available in accordance with Section
2.03(a)(iii)(a) or (b) hereof, as applicable, are complete and
correct in all material respects and present fairly the financial
condition and results of operations of Bancorp 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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(v)
Notice of Material Events . The Company shall promptly
inform FSA in writing of the occurrence of any of the
following:
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(a) the
submission of any claim or the initiation or threat of any legal
process, litigation or administrative or judicial investigation (A)
with respect to a material portion of the Mortgage Loans or (B) in
which a request has been made for certification as a class action
(or equivalent relief) that would involve a material portion of the
Mortgage Loans;
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(b) any
change in the location of the Company’s principal office or
any change in the location of the Company’s books and
records;
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(c) the
occurrence of any Trigger Event, Default or Event of
Default;
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(d) unless
prohibited by law from making such disclosure, the commencement or
to its knowledge, the threat, of any disciplinary proceedings or
any proceedings instituted by or against the Company or the
Depositor in any federal, state or local court or before any
governmental body or agency, or before any arbitration board, or
the promulgation of any proceeding or any proposed or final rule
which, if adversely determined, would result in a Material Adverse
Change with respect to the Company or the Depositor, as
applicable;
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(e) the
commencement of any proceedings by or against the Company or the
Depositor under any applicable bankruptcy, 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, or may be, appointed or requested for the Company or the
Depositor or any of their assets;
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(f) the
receipt of notice that (A) the Company or the Depositor is being
placed under regulatory supervision, (B) any license, permit,
charter, registration or approval necessary for the conduct of the
Company’s or the Depositor’s business is to be, or may
be, suspended or revoked, or (C) the Company or the Depositor is to
cease and desist any practice, procedure or policy employed by the
Company or the Depositor in the conduct of its business, and such
cessation may reasonably be expected to result in a Material
Adverse Change with respect to the Company or the Depositor, as
applicable; or
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(g) any
other event, circumstance or condition that has resulted, or is
reasonably likely to result in a Material Adverse Change in respect
of the Company, the Depositor or the Mortgage Loans.
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(vi)
Further Assurances . The Company shall, upon the request of
FSA, from time to time, execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered, within thirty (30) days
of such request, such amendments hereto and such further
instruments and take such further action as may be reasonably
necessary to effectuate the intention, performance and provisions
of the Transaction Documents or to protect the interest of the
Indenture Trustee, for the benefit of the Noteholders and FSA, in
the Mortgage Loans, free and clear of all Liens and Restrictions on
Transferability except the Lien in favor of the Indenture Trustee,
for the benefit of the Noteholders and FSA, and the Restrictions on
Transferability imposed by the Indenture. In addition, the Company
agrees to cooperate with S&P and Moody’s in connection
with any review of the Transaction which may be undertaken by
S&P and Moody’s after the date hereof.
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(viii)
Third-Party Beneficiary . The Company agrees that FSA shall
have all rights of a third-party beneficiary in respect of the
Transaction Documents and hereby incorporate and restate their
representations, warranties and covenants as set forth therein for
the benefit of FSA, subject to the limitations as to remedies as
set forth in the Transaction Documents (so long as the Company is
in compliance with its repurchase obligation thereunder), as set
forth therein.
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(ix)
Maintenance of Grant . On or before each December 31st
beginning in 2008, so long as any of the Notes are outstanding, the
Company shall furnish to FSA an Opinion of Counsel either stating
that such action has been taken with respect to the recording,
filing, re-recording and re-filing of any financing statements and
continuation statements as is necessary to maintain the security
interest of the Indenture Trustee created by the Indenture with
respect to the Trust Fund and reciting the details of such action
or stating that no such action is necessary to maintain such
security interest. Such Opinion of Counsel shall also describe the
recording, filing, re-recording and re-filing of
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any financing statements and
continuation statements that will be required to maintain the
security interest of the Indenture Trustee in the Trust Fund until
the date such next officers’ certificate is due. The Company
shall, at its own expense, promptly take, or cause to be taken,
such actions as may be necessary or desirable, in the reasonable
judgment of FSA, (i) to create and maintain the grant under the
Indenture as a valid and perfected Lien covering the Mortgage
Loans, (ii) to fully preserve and protect the perfected first
priority security interest in the Indenture Trustee in, and all
rights of the Indenture Trustee with respect to, the Mortgage
Loans, including, without limitation, the execution and filing of
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 may be
required by law to preserve, protect and perfect fully the Lien and
security interest in and all rights of the Indenture Trustee with
respect to the Mortgage Loans.
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(xi)
Benefit Plan . The Company shall comply in all material
respects with the provisions of ERISA, the Code and all other
applicable laws, and the Plan and Multiemployer Plan regulations
and interpretations thereunder to the extent applicable, with
respect to each Plan or Multiemployer Plan.
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(xii)
Maintenance of Licenses . The Company shall maintain all
licenses, permits, charters and registrations which are material to
(i) the conduct of its business and the loss or suspension of which
could result in a Material Adverse Change or (ii) the performance
of its obligations under the Transaction Documents.
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(xiii)
Disclosure Document . Each Offering Document delivered with
respect to the Securities shall clearly disclose that the Policy is
not covered by the property/casualty insurance security fund
specified in Article 76 of the New York Insurance Law. In addition,
each Offering Document delivered with respect to the Securities
which includes (other than as incorporated by reference) financial
statements of Financial Security prepared in accordance with
generally accepted accounting principles shall include the
following statement immediately preceding such financial
statements: “The New York State Insurance Department
recognizes only statutory accounting practices for determining and
reporting the financial condition and results of operations of an
insurance company, for determining its solvency under the New York
Insurance Law, and for determining whether its financial condition
warrants the payment of a dividend to its stockholders. No
consideration is given by the New York State Insurance Department
to financial statements prepared in accordance with generally
accepted accounting principles in making such
determinations.”
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(b) The
Depositor hereby agrees that during the Term of the Agreement,
unless FSA shall otherwise expressly consent in writing:
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(i)
Corporate Existence . The Depositor shall maintain its
corporate existence and shall at all times continue to be duly
organized under the laws of its jurisdiction of incorporation or
organization and duly qualified and duly authorized (as described
in Sections 2.01(a), (b) and (c) hereof) and shall conduct its
business in accordance with the terms of its organizational
documents.
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(ii)
Compliance With Agreements and Applicable Laws . The
Depositor shall perform each of its obligations under the
Transaction Documents and shall comply with all material
requirements of, and the Securities shall be offered and sold in
accordance with, any law, rule or regulation applicable to it or
thereto, or that are required in connection with its performance
under any of the Transaction Documents.
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(iii)
Other Information . The Depositor shall keep or cause to be
kept in reasonable detail books and records of account of the
Depositor’s assets and business, respectively, and shall
clearly reflect therein the transfer of the Mortgage Loans from the
Depositor to the Trust as a sale of the Depositor’s interest
in the Mortgage Loans. The Depositor shall treat the transfer of
the Mortgage Loans from Depositor to the Trust as a sale for
accounting purposes. The Depositor shall furnish or cause to be
furnished to FSA promptly upon receipt thereof, copies of all
reports, statements, certifications, schedules, or other similar
items delivered to or by the Depositor and the Indenture Trustee
pursuant to the terms of the Transaction Documents and, promptly
upon request, such other data as FSA may reasonably request;
provided, however, that the Depositor shall not be required to
deliver any such items if provision by some other party to FSA is
required under the Transaction Documents unless such other party
wrongfully fails to deliver such item. The Depositor shall, upon
the request of FSA, permit FSA or its authorized agents, no more
than two times per year (so long as no Trigger Event has occurred)
or following the occurrence of a Trigger Event: (A) to inspect the
books and records of the Depositor as they may relate to the
Securities, the Mortgage Loans, the obligations of the Depositor
under the Transaction Documents, the Transaction and, but only
following the occurrence of a Trigger Event, the Depositor’s
business; (B) to discuss the affairs, finances and accounts of the
Depositor with the senior financial officer of the Depositor, no
more frequently than annually unless a Trigger Event has occurred;
and (C) upon the occurrence of a Trigger Event, to discuss the
affairs, finances and accounts of the Depositor with the
Depositor’s independent accountants, provided that an officer
of the Depositor shall have the right to be present during such
discussions. Such inspections and discussions shall be conducted
during normal business hours and shall not unreasonably disrupt the
business of the Depositor. In addition, the Depositor shall
promptly (but in no case more than 30 days following issuance or
receipt by the Commonly Controlled Entity) provide to FSA a copy of
all correspondence between a Commonly Controlled Entity and the
PBGC, IRS, Department of Labor or the administrators of a
Multiemployer Plan relating to any Reportable Event or the
underfunded status, termination or possible termination of a Plan
or a Multiemployer Plan.
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(v)
Notice of Material Events . The Depositor shall promptly
inform FSA in writing of the occurrence of any of the following
(and such obligations of the Depositor shall be satisfied if
performed by the Company):
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(a) the
submission of any claim or the initiation or threat of any legal
process, litigation or administrative or judicial investigation (A)
with respect to a material portion of the Mortgage Loans or (B) in
which a request has been made for certification as a class action
(or equivalent relief) that would involve a material portion of the
Mortgage Loans;
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(b) any
change in the location of the Depositor’s principal office or
any change in the location of the Depositor’s books and
records;
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(c) the
occurrence of any Trigger Event, Default or Event of
Default;
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(d) the
commencement or to its knowledge, the threat, of any disciplinary
proceedings or any proceedings instituted by or against the
Depositor in any federal, state or local court or before any
governmental body or agency, or before any arbitration board, or
the promulgation of any proceeding or any proposed or final rule
which, if adversely determined, would result in a Material Adverse
Change with respect to the Depositor;
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(e) the
commencement of any proceedings by or against the Depositor under
any applicable bankruptcy, 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, or may
be, appointed or requested for the Depositor or any of their
assets;
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(f)
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