Exhibit 10.2
Execution Copy
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
LONG BEACH ACCEPTANCE RECEIVABLES CORP.,
GREENWICH CAPITAL MARKETS, INC.
and
CITIGROUP GLOBAL MARKETS INC.
Dated as of March 1, 2004
Long Beach Acceptance Auto Receivables Trust 2004-A
$208,000,000 1.503% Asset Backed Notes, Class A-1
$92,000,000 2.841% Asset Backed Notes, Class A-2
Section 1. Definitions........................................................1
Section 2. Representations, Warranties and Agreements of Financial Security...3
Section 3. Representations, Warranties and Agreements of the Underwriters.....6
Section 4. Indemnification....................................................6
Section 5. Indemnification Procedures.........................................7
Section 6. Contribution.......................................................8
Section 7. Miscellaneous......................................................9
EXHIBIT A - Opinion of Assistant General Counsel
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of March 1, 2004, among
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), LONG BEACH ACCEPTANCE
RECEIVABLES CORP. (the "Company"), GREENWICH CAPITAL MARKETS, INC. ("RBS GC")
and CITIGROUP GLOBAL MARKETS INC., ("Citigroup" and, together with RBS GC, the
"Underwriters"):
Section 1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings provided below:
"Agreement" means this Indemnification Agreement, as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.
"Commission" means the Securities and Exchange Commission.
"Company Party" means any of the Company, its parent,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Federal Securities Laws" means the Securities Act, the
Securities Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment
Company Act of 1940, the Investment Advisers Act of 1940 and the Public Utility
Holding Company Act of 1935, each as amended from time to time, and the rules
and regulations in effect from time to time under such Acts.
"Financial Security Agreements" means this Agreement, the
Spread Account Agreement and the Insurance Agreement.
"Financial Security Information" has the meaning provided in
Section 2(g) hereof.
"Financial Security Party" means any of Financial Security,
its parent, subsidiaries and affiliates, and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the Securities
Act) of any of the foregoing.
"Indemnified Party" means any party entitled to any
indemnification pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 4 hereof.
"Insurance Agreement" means the Insurance and Indemnity
Agreement, dated as of March 1, 2004, among Financial Security, the Company and
LBAC, and Long Beach Acceptance Auto Receivables Trust 2004-A as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof.
"LBAC" means Long Beach Acceptance Corp., a Delaware
Corporation.
"Losses" means (a) any actual out-of-pocket damages incurred
by the party entitled to indemnification or contribution hereunder, (b) any
actual out-of-pocket costs or expenses incurred by such party, including
reasonable fees or expenses of its counsel and other expenses incurred in
connection with investigating or defending any claim, action or other proceeding
which entitle such party to be indemnified hereunder (subject to the limitations
set forth in Section 5 hereof), to the extent not paid, satisfied or reimbursed
from funds provided by any other Person other than an affiliate of such party
(provided that the foregoing shall not create or imply any obligation to pursue
recourse against any such other Person), plus (c) interest on the amount paid by
the party entitled to indemnification or contribution from the date of such
payment to the date of payment by the party who is obligated to indemnify or
contribute hereunder at the statutory rate applicable to judgments for breach of
contract.
"Offering Document" means the Prospectus, Prospectus
Supplement and any other material or documents delivered by the Underwriters or
any Underwriter Party to any Person in connection with the offer or sale of the
Securities; provided, however, the Preliminary Computational Materials dated
February 24, 2004, in respect of the Securities shall not be included in this
definition of "Offering Document".
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, limited liability company,
limited liability partnership or other organization or entity (whether
governmental or private).
"Policy" means the financial guaranty insurance policy
delivered by Financial Security with respect to the Securities.
"Prospectus" means, collectively, the Prospectus relating to
the Securities dated March 16, 2004, and the Prospectus Supplement.
"Prospectus Supplement" means the Prospectus Supplement dated
March 16, 2004 relating to the Securities.
"Rating Agencies" has the meaning provided in the last
paragraph of Section 2 hereof.
"Representative" means Greenwich Capital Markets Inc. as
representative of the Underwriters.
"Securities" means the Long Beach Acceptance Auto Receivables
Trust 2004-A $208,000,000 1.503% Asset Backed Notes, Class A-1, $92,000,000
2.841% Asset Backed Notes, Class A-2, each as described in the Prospectus
Supplement and covered by the Policy.
2
"Securities Act" means the Securities Act of 1933, as amended
from time to time, and any rule or regulation in effect from time to time under
such Act.
"Spread Account Agreement" means the Master Spread Account
Agreement, dated as of March 1, 2004 among the Company, the Collateral Agent
specified therein, Financial Security and the Trustee specified therein, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
"Underwriters" means Greenwich Capital Markets, Inc. and
Citigroup Global Markets Inc.
"Underwriter Information" has the meaning provided in Section
3(c) hereof.
"Underwriter Party" means any of the Underwriters, its
respective parent, subsidiaries and affiliates and any shareholder, director,
officer, employee, or agent of the "controlling person" (as such item is used in
the Securities Act) of any of the foregoing.
"Underwriting Agreement" means the Underwriting Agreement
dated as of February 26, 2004 among the Company, LBAC and the Underwriters with
respect to the offer and sale of the Securities, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.
Section 2. Representations, Warranties and Agreements of
Financial Security. Financial Security represents, warrants and agrees with the
parties hereto as follows:
(a) Organization, Etc. Financial Security is a stock
insurance company duly organized, validly existing and
authorized to transact financial guaranty insurance business
under the laws of the State of New York.
(b) Authorization, Etc. The Policy and the Financial
Security Agreements have been duly authorized, executed and
delivered by Financial Security.
(c) Validity, Etc. The Policy and the Financial
Security Agreements constitute valid and binding obligations
of Financial Security, enforceable against Financial Security
in accordance with their terms, subject, as to the enforcement
of remedies, to bankruptcy, insolvency, reorganization,
rehabilitation, moratorium and other similar laws affecting
the enforceability of creditors' rights generally applicable
in the event of the bankruptcy or insolvency of Financial
Security and to the application of general principles of
equity and subject, in the case of this Agreement, to
principles of public policy limiting the right to enforce the
indemnification provisions contained herein.
3
(d) Exemption From Registration. The Policy is exempt
from registration under the Securities Act.
(e) No Conflicts. Neither the execution or delivery by
Financial Security of the Policy or the Financial Security
Agreements, nor the performance by Financial Security of its
obligations thereunder, will conflict with any provision of
the certificate of incorporation or the bylaws of Financial
Security nor result in a breach of, or constitute a default
under, any material agreement or other instrument to which
Financial Security is a party or by which any of its property
is bound nor violate any judgment, order or decree applicable
to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction
over Financial Security (except that, in the published opinion
of the Securities and Exchange Commission, the indemnification
provisions of this Agreement, insofar as they relate to
indemnification for liabilities arising under the Securities
Act, are against public policy as expressed in the Securities
Act and are therefore unenforceable).
(f) Financial Information. The consolidated balance
sheets of Financial Security as of December 31, 2002 and
December 31, 2001 and the related consolidated statements of
income, changes in shareholder's equity and cash flows for the
fiscal years then ended, and the interim consolidated balance
sheets for Financial Security as of March 31, 2003, June 30,
2003 and September 30, 2003, and the related statements of
income, changes in shareholders equity and cash flows for the
interim period then ended, furnished by Financial Security to
the Underwriters fairly present in all material respects the
financial condition of Financial Security as of such dates and
for such periods in accordance with generally accepted
accounting principles consistently applied (subject as to
interim statements to normal year-end adjustments) and since
the date of the most current interim consolidated balance
sheet referred to above there has been no change in the
financial condition of Financial Security which would
materially and adversely affect its ability to perform its
obligations under the Policy.
(g) Financial Security Information. The information in
the Prospectus Supplement set forth under the caption "THE
INSURER" (as revised from time to time in accordance with the
provisions hereof, the "Financial Security Information") is
limited and does not purport to provide the scope of
disclosure required to be included in a prospectus with
respect to a registrant in connection with the offer and sale
of securities of such registrant registered under the
Securities Act. Within such limited scope of disclosure,
however, as of the date of the Prospectus Supplement and as of
the date hereof, the Financial Security Information does not
contain any untrue statement of a material fact, or omit to
state a material fact necessary to make the statements
contained therein, in the light of the circumstances under
which they were made, not misleading.
4
(h) Additional Information. Financial Security will
furnish to the Underwriters or the Company, upon request of
the Underwriters or the Company, as the case may be, copies of
Financial Security's most recent financial statements (annual
or interim, as the case may be) which fairly present in all
material respects the financial condition of Financial
Security as of the dates and for the periods indicated, in
accordance with generally accepted accounting principles
consistently applied except as noted therein (subject, as to
interim statements, to normal year-end adjustments). In
addition, if the delivery of a Prospectus relating to the
Securities is required at any time prior to the expiration of
nine months after the time of issuance of the Prospectus in
connection with the offering or sale of the Securities, the
Company or the Underwriters will notify Financial Security of
such requirement to deliver a Prospectus and Financial
Security will promptly provide the Underwriters and the
Company with any revisions to the Financial Security
Information that are in the judgment of Financial Security
reasonably necessary to prepare a supplement to the
Prospectus.
(i) Opinion of Counsel. Financial Security will
furnish to the Underwriters and the Company, on the closing
date for the sale of the Securities, an opinion of its
Assistant General Counsel, to the effect set forth in Exhibit
A attached hereto, dated such closing date and addressed to
the Company and the Underwriters.
(j) Consents and Reports of Independent Accountants.
Financial Security will furnish to the Underwriters and the
Company, upon request, as comfort from its independent
accountants in respect of its financial condition (i) at the
expense of the Person specified in the Insurance Agreement, a
copy of the Prospectus, including either a manually signed
consent or a manually signed report of Financial Security's
independent accountants and (ii) the quarterly review letter
by Financial Security's independent accountants in respect of
the most recent interim financial statements of Financial
Security.
Nothing in this Agreement shall be construed as a representation or warranty by
Financial Security concerning the rating of its insurance financial strength by
Fitch Ratings, Xxxxx'x Investors Service, Inc., Standard & Poor's and Rating and
Investment Information, Inc. or any other rating assigned by a rating agency
(collectively, the "Rating Agencies"). The Rating Agencies, in assigning such
ratings, take into account facts and assumptions not described in the Prospectus
and the facts and assumptions which are considered by the Rating Agencies, and
the ratings issued thereby, are subject to change over time.
5
Section 3. Representations, Warranties and Agreements of the
Underwriters. Each of the Underwriters represents, warrants and agrees with the
parties hereto as follows:
(a) Compliance With Laws. Such Underwriter will comply
in all material respects with all legal requirements in
connection with offers and sales of the Securities and make
such offers and sales in the manner provided in any Offering
Document.
(b) Offering Document. Such Underwriter will not use,
or distribute to other broker-dealers for use, any Offering
Document in connection with the offer and sale of the
Securities unless such Offering Document includes such
information as has been furnished by Financial Security for
inclusion therein and the information therein concerning
Financial Security has been approved by Financial Security in
writing. Financial Security hereby consents to the information
in respect of Financial Security included in the Prospectus
Supplement. Each Offering Document will include the following
statement:
"The Policy is not covered by the property/casualty insurance security
fund specified in Article 76 of the New York Insurance Law".
Each Offering Document including financial information (other than
financial information included in the Financial Security Information) with
respect to Financial Security prepared in accordance with generally accepted
accounting principles will include the following statement immediately preceding
such financial information:
"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."
(c) Underwriter Information. With respect to any
Underwriter, all material provided by such Underwriter for
inclusion in any Offering Document (as revised from time to
time and certified by such Underwriter in writing to
constitute Underwriter Information, the "Underwriter
Information"), insofar as such information relates to such
Underwriter, is true and correct in all material respects. In
respect of the Prospectus Supplement, the Underwriter
Information with respect to such Underwriter is limited to the
information relating to such Underwriter set forth (i) in the
body of the Prospectus Supplement under the caption
"Underwriting" the first, second and last paragraph and (ii)
any other information certified in writing by such Underwriter
to be Underwriter Information.
6
Section 4. Indemnification.
(a) Financial Security agrees, upon the terms and
subject to the conditions provided herein, to indemnify,
defend and hold harmless each Company Party and each
Underwriter Party against (i) any and all Losses incurred by
them with respect to the offer and sale of the Securities and
resulting from Financial Security's breach of any of its
representations, warranties or agreements set forth in Section
2 hereof and (ii) any and all Losses to which any Company
Party or Underwriter Party may become subject, under the
Securities Act or otherwise, insofar as such Losses arise out
of or result from an untrue statement of a material fact
contained in any Offering Document or the omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such
untrue statement or omission was made in the Financial
Security Information included therein in accordance with the
provisions hereof.
(b) Each of the Underwriters agrees, severally and not
jointly, upon the terms and subject to the conditions provided
herein, to indemnify, defend and hold harmless each Financial
Security Party against (i) any and all Losses incurred by them
with respect to the offer and sale of the Securities and
resulting from such Underwriter's breach of any of its
representations, warranties or agreements set forth in Section
3 hereof and (ii) any and all Losses to which any Financial
Security Party may become subject, under the Securities Act or
otherwise, insofar as such Losses arise out of or result from
an untrue statement of a material fact contained in any
Offering Document or the omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent,
but only to the extent, that such untrue statement or omission
was made in the Underwriter Information with respect to such
Underwriter included therein.
(c) Upon the incurrence of any Losses for which a
party is entitled to indemnification hereunder, the
Indemnifying Party shall reimburse the Indemnified Party
promptly upon establishment by the Indemnified Party to the
Indemnifying Party of the Losses incurred.
7
Section 5. Indemnification Procedures. Except as
provided below in Section 6 with respect to contribution, the
indemnification provided herein by an Indemnifying Party shall
be the exclusive remedy of any and all Indemnified Parties for
the breach of a representation, warranty or agreement
hereunder by an Indemnifying Party; provided, however, that
each Indemnified Party shall be entitled to pursue any other
remedy at law or in equity for any such breach so long as the
damages sought to be recovered shall not exceed the Losses
incurred thereby resulting from such breach. In the event that
any action or regulatory proceeding shall be commenced or
claim asserted which may entitle an Indemnified Party to be
indemnified under this Agreement, such party shall give the
Indemnifying Party written or telegraphic notice of such
action or claim reasonably promptly after receipt of written
notice thereof. The Indemnifying Party shall be entitled to
participate in and, upon notice to the Indemnified Party,
assume the defense of any such action or claim in reasonable
cooperation with, and with the reasonable cooperation of, the
Indemnified Party. The Indemnified Party shall have the right
to employ separate counsel in any such action and to
participate in the defense thereof at the expense of the
Indemnified Party; provided, however, that the fees and
expenses of such separate counsel shall be at the expense of
the Indemnifying Party if (i) the Indemnifying Party has
agreed to pay such fees and expenses, (ii) the Indemnifying
Party shall have failed to assume the defense of such action
or proceeding and employ counsel satisfactory to the
Indemnified Party in any such action or proceeding or (iii)
the named parties to any such action or proceeding (including
any impleaded parties) include both the Indemnified Party and
the Indemnifying Party, and the Indemnified Party shall have
been advised by counsel that (A) there may be one or more
legal defenses available to it which are different from or
additional to those available to the Indemnifying Party and
(B) the representation of the Indemnifying Party and the
Indemnified Party by the same counsel would be inappropriate
or contrary to prudent practice, in which case, if the
Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of
the Indemnifying Party, the Indemnifying Party shall not have
the right to assume the defense of such action or proceeding
on behalf of such Indemnified Party, it being understood,
however, that the Indemnifying Party shall not, in connection
with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the
same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any
time for all the Company Parties, one such firm for all
Underwriter Parties and one such firm for all Financial
Security Parties, as the case may be, which firm shall be
designated in writing by the Company in respect of the Company
Parties, by the Representative in respect of the Underwriter
Parties and by Financial Security in respect of the Financial
Security Parties. The Indemnifying Party shall not be liable
for any settlement of any such claim or action unless the
Indemnifying Party shall have consented thereto or be in
default in its obligations hereunder. Any failure by an
Indemnified Party to comply with the provisions of this
Section shall relieve the Indemnifying Party of liability only
if such failure is prejudicial to the position of the
Indemnifying Party and then only to the extent of such
prejudice.
8
Section 6. Contribution.
(a) To provide for just and equitable contribution if
the indemnification provided by any Indemnifying Party is
determined to be unavailable for any Indemnified Party (other
than due to application of this Section), each Indemnifying
Party shall contribute to the Losses arising from any breach
of any of its representations, warranties or agreements
contained in this Agreement on the basis of the relative fault
of each of the parties as set forth in Section 6(b) below;
provided, however, that an Indemnifying Party shall in no
event be required to contribute to all Indemnified Parties an
aggregate amount in excess of the Losses incurred by such
Indemnified Parties resulting from the breach of
representations, warranties or agreements contained in this
Agreement.
(b) The relative fault of each Indemnifying Party, on
the one hand, and of each Indemnified Party, on the other,
shall be determined by reference to, among other things,
whether the breach of, or alleged breach of, any
representations, warranties or agreements contained in this
Agreement relates to information supplied by, or action within
the control of, the Indemnifying Party or the Indemnified
Party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such breach.
(c) The parties agree that Financial Security shall be
solely responsible for the Financial Security Information,
each Underwriter shall be solely responsible for the
Underwriter Information with respect to such Underwriter and
that the balance of each Offering Document shall be the
responsibility of LBAC and the Company.
(d) Notwithstanding anything in this Section 6 to the
contrary, no Underwriter shall be required to contribute an
amount in excess of the amount by which the total principal
balance of the Securities underwritten by such Underwriter
exceeds the amount of any damages that such Underwriter has
otherwise been required to pay in respect of any breach by
such Underwriter of its representations or warranties
contained in Section 3 hereof.
(e) No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
(f) Upon the incurrence of any Losses entitled to
contribution hereunder, the contributor shall reimburse the
party entitled to contribution promptly upon establishment by
the party entitled to contribution to the contributor of the
Losses incurred.
9
Section 7. Miscellaneous.
(a) Notices. All notices and other communications
provided for under this Agreement shall be delivered to the
address set forth below or to such other address as shall be
designated by the recipient in a written notice to the other
party or parties hereto:
If to Financial Security:
Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Senior Vice President--
Transaction Oversight
Department
(with a copy to the Attention of the
General Counsel)
Re: Long Beach Acceptance Auto
Receivables
Trust 2004-A Policy No. 51503-N
Confirmation: (000) 000-0000
Facsimile Nos.: (000) 000-0000,
(000) 000-0000 (in each case in
which notice or other communication
to Financial Security refers to an
Event of Default, a claim on the
Policy or with respect to which
failure on the part of Financial
Security to respond shall be deemed
to constitute consent or acceptance,
then a copy of such notice or other
communication should also be sent to
the attention of each of the General
Counsel and the Head-Financial
Guaranty Group and shall be marked
to indicate "URGENT MATERIAL
ENCLOSED.")
If to the Company:
Long Beach Acceptance Receivables
Corp.
Xxx Xxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
Confirmation: (000) 000-0000
If to the RBS GC:
Greenwich Capital Markets, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Asset-Backed Finance
Facsimile No: (000) 000-0000
Confirm No: (000) 000-0000
10
If to the Citigroup:
Citigroup Global Markets Inc.
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Asset Backed Finance
Facsimile No: (000) 000-0000
Confirm No: (000) 000-0000
Phone: (000) 000-0000
(b) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH, AND THIS AGREEMENT AND ALL MATTERS ARISING
OUT OF OR RELATING IN ANY WAY TO THIS AGREEMENT SHALL BE
GOVERNED BY, THE LAW OF THE STATE OF NEW YORK.
(c) Assignments. This Agreement may not be assigned by
any party without the express written consent of each other
party. Any assignment made in violation of this Agreement
shall be null and void.
(d) Amendments. Amendments of this Agreement shall be
in writing signed by each party hereto.
(e) Survival, Etc. The indemnity and contribution
agreements contained in this Agreement shall remain operative
and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Indemnifying Party,
(ii) the issuance of the Securities or (iii) any termination
of this Agreement or the Policy. The indemnification provided
in this Agreement will be in addition to any liability which
the parties may otherwise have and shall in no way limit any
obligations of LBAC or the Company under the Underwriting
Agreement or under the Insurance Agreement.
(f) Counterparts. This Agreement may be executed in
counterparts by the parties hereto, and all such counterparts
shall constitute one and the same instrument.
[Remainder of Page Intentionally Blank]
11
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered as of the date first above written.
FINANCIAL SECURITY ASSURANCE INC.
By:____________________________________
Name:
Title:
LONG BEACH ACCEPTANCE RECEIVABLES CORP.
By:____________________________________
Name:
Title:
GREENWICH CAPITAL MARKETS, INC.
By:____________________________________
Name:
Title:
CITIGROUP GLOBAL MARKETS INC.
By:____________________________________
Name:
Title:
12
EXHIBIT A
OPINION OF ASSISTANT GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a stock insurance company duly
organized, validly existing and authorized to transact financial guaranty
insurance business under the laws of the State of New York.
2. The Policy, the Insurance Agreement and the Indemnification
Agreement been duly authorized, executed and delivered by Financial Security.
3. The Policy, the Insurance Agreement and the Indemnification
Agreement constitute valid and binding obligations of Financial Security,
enforceable against Financial Security in accordance with their terms, subject,
as to the enforcement of remedies, to bankruptcy, insolvency, reorganization,
rehabilitation, moratorium and other similar laws affecting the enforceability
of creditors' rights generally applicable in the event of the bankruptcy or
insolvency of Financial Security and to the application of general principles of
equity and subject, in the case of the Indemnification Agreement, to principles
of public policy limiting the right to enforce the indemnification provisions
contained therein insofar as they relate to indemnification for liabilities
arising under applicable securities laws.
4. The Policy is exempt from registration under the Securities
Act of 1933, as amended (the "Act").
5. Neither the execution or delivery by Financial Security of
the Policy or the Insurance Agreement or the Indemnification Agreement, nor the
performance by Financial Security of its obligations thereunder, will conflict
with any provision of the certificate of incorporation or the bylaws of
Financial Security or, to the best of my knowledge, result in a breach of, or
constitute a default under, any agreement or other instrument to which Financial
Security is a party or by which it or any of its property is bound or, to the
best of my knowledge, violate any judgment, order or decree applicable to
Financial Security of any governmental or regulatory body, administrative
agency, court or arbitrator having jurisdiction over Financial Security (except
that in the published opinion of the Securities and Exchange Commission the
indemnification provisions of the Indemnification Agreement, insofar as they
relate to indemnification for liabilities arising under the Act, are against
public policy as expressed in the Act and are therefore unenforceable).
6. In addition, please be advised that I have reviewed the
description of Financial Security under the caption "THE INSURER" in the
Prospectus Supplement dated March 16, 2004, (the "Offering Document") of the
Company with respect to the Securities. The information provided in the Offering
Document with respect to Financial Security is limited and does not purport to
provide the scope of disclosure required to be included in a prospectus with
respect to a registrant under the Securities Act of 1933, as amended, in
connection with the public offer and sale of securities of such registrant.
Within such limited scope of disclosure, however, there has not come to my
attention any information which would cause me to believe that the description
of Financial Security referred to above, as of the date of the Prospectus
Supplement or the date hereof, contained any untrue statement of a material fact
or omitted to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading
(except that no opinion is rendered with respect to any financial statements or
other financial information contained or referred to therein).
