Exhibit 10.1
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
NOVASTAR MORTGAGE, INC.,
NOVASTAR MORTGAGE FUNDING CORPORATION II,
RESIDENTIAL ASSET FUNDING CORPORATION,
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 1999-1,
and
WHEAT FIRST SECURITIES, INC.,
acting through
FIRST UNION CAPITAL MARKETS,
a division of
WHEAT FIRST SECURITIES, INC.
Dated as of January 22, 1999
$160,000,000 of
NovaStar Home Equity Loan Asset-Backed Bonds
Series 1999-1, Class X-0, X-0, X-0 and A-4
TABLE OF CONTENTS
Page
Section 1. Definitions ........................................................ 3
Section 2. Representations, Warranties and Agreements of Financial Security.... 4
Section 3. Representations, Warranties and Agreements of the Underwriter....... 7
Section 4. Indemnification .................................................... 8
Section 5. Indemnification Procedures ....................................... 8
Section 6. Contribution ....................................................... 9
Section 7. Miscellaneous....................................................... 10
Section 8. Limitation of Liability of Owner Trustee............................ 12
EXHIBIT
Exhibit A Opinion of General Counsel
2
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT dated as of January 22, 1999 among FINANCIAL
SECURITY ASSURANCE INC. ("Financial Security"), NOVASTAR MORTGAGE, INC. (the
"Company"), NOVASTAR MORTGAGE FUNDING CORPORATION II (the "Transferor"),
RESIDENTIAL ASSET FUNDING CORPORATION (the "Depositor"), NOVASTAR MORTGAGE
FUNDING TRUST, SERIES 1999-1 (the "Issuer"), and WHEAT FIRST SECURITIES, INC.,
acting through FIRST UNION CAPITAL MARKETS, a division of WHEAT FIRST
SECURITIES, INC. (the "Underwriter"):
Section 1. Definitions. For purposes of this Agreement, the following
terms shall have the meanings provided below:
"Agreement" means this Indemnification Agreement, as amended from time
to time.
"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.
"Depositor Party" means any of the Depositor, its parent, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Financial Security Agreements" means this Agreement and the Insurance
Agreement.
"Financial Security Information" has the meaning provided in Section
2(g) hereof.
"Financial Security Party" means any of Financial Security, its parent,
subsidiaries and affiliates, and any shareholder, director, officer, employee,
agent or "controlling person" (as such term is used in the Securities Act) of
any of the foregoing.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide indemnification
pursuant to Section 4 hereof.
"Insurance Agreement" means the Insurance and Indemnity Agreement, dated
as of January 1, 1999, by and among Financial Security, the Company, the
Depositor, the Transferor, and the Issuer.
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"Losses" means the sum of (a) any actual out-of-pocket damages incurred
by the party entitled to indemnification or contribution hereunder, (b) any
actual out-of-pocket costs or actual expenses reasonably incurred by such party,
including reasonable fees or expenses of its counsel and other expenses incurred
in connection with investigating or defending any claim, action or other
proceeding which entitles 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), and (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 and any amendments or
supplements thereto and any other material or documents delivered by the
Underwriter to any Person in connection with the offer or sale of the
Securities.
"Person" means any individual, partnership, joint venture, corporation,
trust, unincorporated organization or other organization or entity (whether
governmental or private).
"Policy" means the financial guaranty insurance policy delivered by
Financial Security with respect to the Securities.
"Prospectus" means the Prospectus dated November 10, 1998 and the
Prospectus Supplement dated January 22, 1999 of the Depositor relating to the
Securities.
"Securities" means the Class A Bonds issued pursuant to an Indenture,
dated as of January 1, 1999 (the "Indenture"), by and among the Issuer, First
Union National Bank (the "Trust Administrator"), and The Chase Manhattan Bank
(the "Indenture Trustee").
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Underwriter Information" has the meaning provided in Section 3(c)
hereof.
"Underwriter Party" means the Underwriter, its parent, subsidiaries and
affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Underwriting Agreement" means the underwriting agreement, dated January
22, 1999, between the Depositor and the Underwriter in respect of the
Securities.
Section 2. Representations, Warranties and Agreements of Financial
Security. Financial Security represents, warrants and agrees, as of the date
hereof and as of the Closing Date, as follows:
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(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.
(d) Exemption From Registration. The Policy is exempt from registration
under the Securities Act.
(e) No Conflicts. Neither the execution or delivery by Financial
Security of the Policy or the Financial Security Agreements, nor the performance
by Financial Security of its obligations thereunder, will conflict with any
provision of the certificate of incorporation or the bylaws of Financial
Security or result in a breach of, or constitute a default under, any material
agreement or other instrument to which Financial Security is a party or by which
any of its property is bound nor violate any judgment, order or decree
applicable to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over Financial
Security (except that, in the published opinion of the Securities and Exchange
Commission, the indemnification provisions of this Agreement, insofar as they
relate to indemnification for liabilities arising under the Securities Act, are
against public policy as expressed in the Securities Act and are therefore
unenforceable).
(f) Financial Information. The consolidated balance sheets of Financial
Security as of December 31, 1997 and the related consolidated statements of
income, changes in shareholder's equity and cash flows for the fiscal year then
ended and the interim consolidated balance sheet of Financial Security, as of
September 30, 1998, and the related statements of income, changes in
shareholder's equity and cash flows for the fiscal quarter then ended, furnished
by Financial Security for use in the Prospectus, 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.
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(g) Financial Security Information. The information in the Prospectus
Supplement set forth under the caption "The Bond Insurer" and the information
incorporated therein by reference (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 light of the
circumstances under which they were made, not misleading.
(h) Additional Information. Financial Security will furnish to the
Underwriters, the Company or the Depositor, upon request of the Underwriters,
the Company or the Depositor, 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);
provided, however, that, if the Underwriters, the Company or the Depositor shall
require a manually signed report or consent of Financial Security's auditors in
connection with such financial statements, such report or consent shall be at
the expense of the Underwriters, the Company or the Depositor, as the case may
be. 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
issue of the Prospectus in connection with the offering or sale of the
Securities, the Depositor or the Underwriters will notify Financial Security of
such requirement to deliver a Prospectus and Financial Security will promptly
provide the Underwriters and the Depositor with any revisions to the Financial
Security Information that are in the judgment of Financial Security necessary to
prepare an amended Prospectus or a supplement to the Prospectus which will
correct such statement or omission.
(i) Opinion of Counsel. Financial Security will furnish to the
Depositor, the Underwriters and the Company on the closing date for the sale of
the Securities an opinion of its General Counsel, to the effect set forth in
Exhibit A attached hereto, dated such closing date and addressed to the
Depositor, the Underwriters and the Company.
(j) Consents and Reports of Independent Accountants. Financial Security
will furnish to the Underwriters, the Company and the Depositor, 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 claims-paying
ability by Standard & Poor's, a division of The McGraw Hill Companies, Inc.,
Xxxxx'x Investors Service, Inc., Fitch, IBCA or
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any other rating agency (collectively, the "Rating Agencies"). The Rating
Agencies, in assigning such ratings, take into account facts and assumptions not
described in the Prospectus and the facts and assumptions which are considered
by the Rating Agencies, and the ratings issued thereby, are subject to change
over time.
Section 3. Representations, Warranties and Agreements of the
Underwriter. The Underwriter represents, warrants and agrees, as of the date
hereof and as of the Closing Date, as follows:
(a) Compliance With Laws. The Underwriter will comply in all material
respects with all legal requirements in connection with offers and sales of the
Securities and make such offers and sales in the manner provided in the
Prospectus.
(b) Offering Document. The Underwriter will not use, or distribute to
other broker-dealers for use, any Offering Document in connection with the offer
and sale of the Securities unless such Offering Document includes such
information as has been furnished by Financial Security for inclusion therein
and the information therein concerning Financial Security has been approved by
Financial Security in writing. Financial Security hereby consents to the
information in respect of Financial Security included in the Prospectus. 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 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 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 principals in making such determinations."
(c) Underwriter Information. The following information constitutes the
only information furnished by the Underwriter (the "Underwriter Information"):
(i) the statements set forth in the first two sentences of the last paragraph of
the front cover of the Prospectus Supplement; (ii) the statements set forth
under the heading "Method of Distribution"; and (iii) the statements set forth
in materials delivered by the Underwriter to the Depositor within the meaning of
the no-action letter dated May 20, 1994 issued by the Division of Corporation
Finance of the Securities Exchange Commission (the "Commission") to Xxxxxx,
Xxxxxxx Acceptance Corporation I, Xxxxxx, Peabody & Co. Incorporated and Xxxxxx
Structured Asset Corporation and the no-action letter dated May 27, 1994 issued
by the Division of Corporation Finance of the Commission to the Public
Securities Association and filed by the Depositor with the Commission in the
Current Report or Reports on Form 8-K (the "Form 8-K"), to the extent not
directly attributable to or arising out of untrue statements, errors or
omissions in the information with respect to the Mortgage Loans (as defined in
the Indenture) as provided by the Company. Within such limited scope of
disclosure, however, as of the date of the Prospectus
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and as of the date hereof, the Underwriter Information does not contain any
untrue statement of a material fact, or omit to state a material fact necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
Section 4. Indemnification.
(a) Financial Security agrees, upon the terms and subject to the
conditions provided herein, to indemnify, defend and hold harmless each
Depositor Party, 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 Depositor Party, 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) The Underwriter agrees, upon the terms and subject to the conditions
provided herein, to indemnify, defend and hold harmless each Financial Security
Party and each Company Party against (i) any and all Losses incurred by them
with respect to the offer and sale of the Securities and resulting from the
Underwriter's breach of any of its representations, warranties or agreements set
forth in Section 3 hereof and (ii) any and all Losses to which any Financial
Security Party or any Company Party may become subject, under the Securities Act
or otherwise, insofar as such Losses arise out of or result from an untrue
statement of a material fact contained in any Offering Document or the omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or omission was made in the
Underwriter Information included therein.
(c) Upon the incurrence of any Losses for which a party is entitled to
indemnification hereunder, the Indemnifying Party shall reimburse the
Indemnified Party promptly upon establishment by the Indemnified Party to the
Indemnifying Party of the Losses incurred.
Section 5. Indemnification Procedures. Except as provided below in
Section 6 with respect to contribution or in Section 7(e), the indemnification
provided herein by an Indemnifying Party shall be the exclusive remedy of any
and all Indemnified Parties for the breach of a representation, warranty or
agreement hereunder by an Indemnifying Party; provided, however, that each
Indemnified Party shall be entitled to pursue any other remedy at law or in
equity for any such breach so long as the damages sought to be recovered shall
not exceed the Losses incurred thereby resulting from such breach. In the event
that any action or regulatory proceeding shall be commenced or claim asserted
which may entitle an Indemnified Party to be indemnified under this Agreement,
such party shall give the Indemnifying Party written or
8
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 will
have the right to employ its own counsel in any such action in addition to the
counsel of the Indemnifying Party, but the fees and expenses of such counsel
will be at the expense of such Indemnified Party, unless (a) the employment of
counsel by the Indemnified Party at its expense has been authorized in writing
by the Indemnifying Party, (b) the Indemnifying Party has not in fact employed
counsel to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, or (c) the named parties to
any such action or proceeding (including any impleaded parties) include both
the Indemnifying Party and one or more Indemnified Parties, and the Indemnified
Parties shall have been advised by counsel that there may be one or more legal
defenses available to them which are different from or additional to those
available to the Indemnifying Party (it being understood, however, that the
Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys at any time for all Depositor Parties,
one such firm for all 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 Depositor in respect of
the Depositor Parties, by the Company in respect of the Company Parties, by the
Underwriter in respect of the Underwriter Parties and by Financial Security in
respect of the Financial Security Parties), in each of which cases the fees and
expenses of counsel will be at the expense of the Indemnifying Party and all
such fees and expenses will be reimbursed promptly as they are incurred. The
Indemnifying Party shall not be liable for any settlement of any such claim or
action unless the Indemnifying Party shall have consented thereto or be in
default in its obligations hereunder. Any failure by an Indemnified Party to
comply with the provisions of this Section shall relieve the Indemnifying Party
of liability only if such failure is prejudicial to the position of the
Indemnifying Party and then only to the extent of such prejudice.
Section 6. Contribution.
(a) To provide for just and equitable contribution if the
indemnification provided by any Indemnifying Party is determined to be
unavailable for any Indemnified Party (other than due to application of this
Section), each Indemnifying Party shall contribute to the Losses arising from
any breach of any of its representations, warranties or agreements contained in
this Agreement 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
9
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, the Underwriter shall be
solely responsible for the Underwriter Information and that, as and to the
extent provided in the Insurance Agreement, the balance of the Offering Document
shall be the responsibility of the Company and the Depositor.
(d) Notwithstanding anything in this Section 6 to the contrary, the
Underwriter shall not be required to contribute an amount greater than the total
discount received by it from the Depositor in respect of the Securities
underwritten by the Underwriter.
(e) No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
(f) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to contribution
promptly upon establishment by the party entitled to contribution to the
contributor of the Losses incurred.
(g) The provisions relating to contribution set forth in this Section 6
do not limit the rights of any party to indemnification under Section 4.
Section 7. Miscellaneous.
(a) Notices. All notices and other communications provided for under
this Agreement shall be delivered to the address set forth below or to such
other address as shall be designated by the recipient in a written notice to the
other party or parties hereto.
If to Financial Security:
Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Surveillance Department
Re: NovaStar Home Equity Loan Asset-Backed Bonds, Series 1999-1,
Class X-0, X-0, X-0 and A-4
10
If to the Company:
NovaStar Mortgage, Inc.
0000 Xxxx 00xx Xxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Xxxxx X. Xxx
Telecopy No.: (000) 000-0000
Confirmation: (000) 000-0000
If to the Transferor:
NovaStar Mortgage Funding Corporation II
0000 Xxxx 00xx Xxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Xxxxx X. Xxx
Telecopy No.: (000) 000-0000
Confirmation: (000) 000-0000
If to the Depositor:
Residential Asset Funding Corporation
c/o Wheat First Securities, Inc.
acting through First Union Capital Markets,
a division of Wheat First Securities, Inc.
One First Union Center
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxxxxx
If to the Issuer:
NovaStar Mortgage Funding Trust, Series 1999-1
c/o Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Corporate Trust Administration
Telecopy No.: (000) 000-0000
11
If to the Underwriter:
Wheat First Securities, Inc.,
acting through
First Union Capital Markets,
a division of
Wheat First Securities, Inc.
-------------------------
(b) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to conflicts of
law principles thereof.
(c) Assignments. This Agreement may not be assigned by any party without
the express written consent of each other party. Any assignment made in
violation of this Agreement shall be null and void.
(d) Amendments. Amendments to this Agreement shall be in writing signed
by each party hereto.
(e) Survival, Etc. The indemnity and contribution agreements contained
in this Agreement shall remain operative and in full force and effect,
regardless of (i) any investigation made by or on behalf of any Indemnifying
Party, (ii) the issuance of the Securities or (iii) any termination of this
Agreement or the Policy. The indemnification provided in this Agreement will be
in addition to any liability which the parties may otherwise have and shall in
no way limit any obligations of the Company, the Depositor or the Underwriter
under the Underwriting Agreement or the Insurance Agreement, as applicable.
(f) Counterparts. This Agreement may be executed in counterparts by the
parties hereto, and all such counterparts shall constitute one and the same
instrument.
Section 8. Limitation of Liability of Owner Trustee. Notwithstanding any
other provision herein or elsewhere, this Agreement has been executed and
delivered by Wilmington Trust Company, not in its individual capacity, but
solely in its capacity as Owner Trustee of the Trust. In no event shall
Wilmington Trust Company or the Owner Trustee have any liability with respect to
the representations, warranties, or obligations of the Trust hereunder, as to
all of which recourse shall be had solely to the assets of the Trust, and for
all purposes of this Agreement, the Owner Trustee and Wilmington Trust Company
shall be entitled to the benefits of the Trust Agreement
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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: /s/ Xxxxx Xxxxxxxx
---------------------
Name: Xxxxx Xxxxxxxx
-----------------
Title: Managing Director
--------------------
NOVASTAR MORTGAGE, INC. NOVASTAR MORTGAGE FUNDING TRUST
SERIES 1999-1
By: /s/ Xxxxx X. Xxx By: /s/ Xxxxxxxx X. Xxxxx
----------------- ---------------------
Title: Authorized Signer Title: Financial Services Officer
------------------- --------------------------
NOVASTAR MORTGAGE FUNDING WHEAT FIRST SECURITIES, INC.,
CORPORATION II acting through
FIRST UNION CAPITAL MARKETS, a division
By: /s/ Xxxxxx X. Xxxxxxxxx of WHEAT FIRST SECURITIES, INC.
-----------------------
Title: Vice President
----------------
By: /s/ Xxxxxxx Xxxxxxxx
----------------------
Title: Senior Vice President
-----------------------
RESIDENTIAL ASSET FUNDING CORPORATION
By: /s/ Xxxxxxx Xxxxxxxx
----------------------
Title: Authorized Signer
-------------------
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EXHIBIT A
OPINION OF 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 and the Agreements have been duly authorized, executed and
delivered by Financial Security.
3. The Policy and the Agreements constitute valid and binding
obligations of Financial Security, enforceable against Financial Security in
accordance with their terms, subject, as to the enforcement of remedies, to
bankruptcy, insolvency, reorganization, rehabilitation, moratorium and other
similar laws affecting the enforceability of creditors' rights generally
applicable in the event of the bankruptcy or insolvency of Financial Security
and to the application of general principles of equity and subject, in the case
of the Indemnification Agreement, to principles of public policy limiting the
right to enforce the indemnification provisions contained therein insofar as
they relate to indemnification for liabilities arising under applicable
securities laws.
4. The Policy is exempt from registration under the Securities Act of
1933, as amended (the "Act").
5. Neither the execution or delivery by Financial Security of the Policy
or the Agreements, nor the performance by Financial Security of its obligations
thereunder, will conflict with any provision of the certificate of incorporation
or the by-laws of Financial Security or, to the best of my knowledge, result in
a breach of, or constitute a default under, any agreement or other instrument to
which Financial Security is a party or by which it or any of its property is
bound or, to the best of my knowledge, violate any judgment, order or decree
applicable to Financial Security of any governmental or regulatory body,
administrative agency, court or arbitrator having jurisdiction over Financial
Security (except that in the published opinion of the Securities and Exchange
Commission the indemnification provisions of the Indemnification Agreement,
insofar as they relate to indemnification for liabilities arising under the Act,
are against public policy as expressed in the Act and are therefore
unenforceable).
In addition, please be advised that I have reviewed the description of
Financial Security under the caption "The Bond Insurer" in the Prospectus
Supplement dated January 22, 1999 (the "Prospectus Supplement") of the Depositor
with respect to the Securities. The information provided in the Prospectus
Supplement with respect to Financial Security is limited and does not purport to
provide the scope of disclosure required to be included in a prospectus
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with respect to a registrant under the Act in connection with a public
offering and sale of securities of such registrant. Within such limited scope
of disclosure, however, there has not come to my attention any information
which would cause me to believe that the description of Financial Security
referred to above, as of the date of the Prospectus Supplement or as of the
date of this opinion, contained or contains any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading (except that I express no opinion with respect to any
financial statements or other financial information contained or referred to
therein).
2
