Exhibit K-5
INSURANCE AND INDEMNITY AGREEMENT
between
AMBAC ASSURANCE CORPORATION
and
Special Value EXPANSION Fund, LLC
Dated as of November 17, 2004
SENIOR FACILITY
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS.......................................................2
1.1. General Definitions............................................2
1.2. Generic Terms..................................................8
ARTICLE II. REPRESENTATIONS, WARRANTIES AND COVENANTS........................8
2.1. Representations and Warranties of the Borrower.................8
2.2. Affirmative Covenants of the Borrower..........................8
2.3. Negative Covenants of the Borrower............................13
ARTICLE III. CONDITIONS TO ISSUANCE OF THE LOANS INSURANCE POLICY...........16
3.1. Issuance of the Loans Insurance Policy........................16
3.2. Payment of Fees...............................................16
3.3. Closing Documents.............................................16
3.4. Certified Documents and Resolutions...........................16
3.5. Incumbency Certificate........................................17
3.6. Representations and Warranties................................17
3.7. Opinions of Counsel...........................................17
3.8. Approvals, etc................................................17
3.9. No Litigation, etc............................................17
3.10. Legality ..................................................17
3.11. Shadow Ratings...............................................17
3.12. Filings and Recording........................................17
3.13. No Default ...................................................18
3.14. Additional Items.............................................18
ARTICLE IV. REIMBURSEMENT; INDEMNIFICATION..................................18
4.1. Policy Premium................................................18
4.2. Reimbursement and Additional Payment Obligation...............18
4.3. Indemnification by Borrower...................................19
4.4. Conduct of Actions or Proceedings.............................20
4.5. Contribution..................................................20
4.6. Payment Procedure.............................................21
ARTICLE V. FURTHER AGREEMENTS...............................................22
5.1. Effective Date; Term of Agreement.............................22
5.2. Obligations Absolute..........................................22
5.3. Assignments; Reinsurance; Third-Party Rights..................24
5.4. Liability of Ambac............................................25
ARTICLE VI. EVENTS OF DEFAULT; REMEDIES.....................................25
6.1. Events of Default.............................................25
6.2. Remedies; Waivers.............................................27
ARTICLE VII. MISCELLANEOUS..................................................28
7.1. Amendments, etc...............................................28
7.2. Restructuring of the Borrower.................................28
7.3. Notices ....................................................29
7.4. Severability..................................................29
7.5. Governing Law.................................................29
7.6. Consent to Jurisdiction.......................................29
7.7. Consent of Ambac..............................................30
7.8. Counterparts..................................................31
7.9. Headings ..................................................31
7.10. Trial by Jury Waived..........................................31
7.11. Limited Liability.............................................31
7.12. Entire Agreement..............................................31
7.13. Limited Recourse..............................................31
7.14. No Bankruptcy Petition........................................32
7.15. Location of Delivery, etc.....................................32
INSURANCE AND INDEMNITY AGREEMENT
INSURANCE AND INDEMNITY AGREEMENT, dated as of November 17, 2004 (as
may be amended, modified or supplemented from time to time, this "Agreement")
among Ambac Assurance Corporation, a Wisconsin-domiciled stock insurance
corporation ("Ambac"), Special Value Expansion Fund, LLC, a limited liability
company incorporated under the laws of Delaware (the "Borrower").
INTRODUCTORY STATEMENTS
The Borrower may incur up to $200,000,000 of Loans under Senior Secured
Revolving Notes and Senior Secured Swing-Line Notes (the "Lender Notes")
pursuant to the Credit Agreement (as amended, supplemented or modified from
time to time with the written consent of Ambac, the "Credit Agreement"), dated
as of November 17, 2004, among the Borrower, Union Bank of California, N.A., as
administrative agent (in such capacity, the "Administrative Agent") and IXIS
Financial Products Inc., as arranger, Ambac, as insurer, and various financial
institutions, which are, or may become, party thereto, as lenders (the
"Lenders"), as such Credit Agreement may be amended, supplemented and in
accordance with its terms, including with the consent of Ambac to the extent
required therein; provided that if the Credit Agreement is terminated prior to
the termination of this Agreement, then for all purposes of this Agreement,
references to the Credit Agreement shall me the Credit Agreement as in effect
immediately prior to its termination. The Borrower shall use the proceeds of
the Loans made under the Lender Notes for the uses described in Section 6.1.17
of the Credit Agreement.
The Borrower has requested that Ambac, subject to the terms and
conditions set forth herein and in the Loans Insurance Policy, issue its Loans
Insurance Policy (as defined herein) pursuant to which Ambac will insure
certain payments with respect to the Loans made under Lender Notes.
As consideration for Ambac issuing the Loans Insurance Policy, the
Borrower has agreed to pay Ambac a periodic premium, to reimburse Ambac for any
amounts paid by Ambac under the Loans Insurance Policy and to indemnify or
reimburse Ambac for certain liabilities, costs and expenses, all as more fully
set forth herein.
Accordingly, the parties hereto desire to specify the conditions
precedent to the issuance of the Loans Insurance Policy by Ambac and to provide
for the indemnification of Ambac and certain other matters.
AGREEMENTS
THEREFORE, in consideration of the premises set forth herein and in
the Credit Agreement, Ambac and the Borrower hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. General Definitions. Capitalized terms used but not otherwise
defined herein shall have the meanings specified in the Credit Agreement. In
addition, the following words and phrases shall have the following meanings:
"Accrued Liabilities" has the meaning specified in Section 4.2 hereof.
"Accrued Liabilities Interest Rate" means, as of any date of
calculation, the per annum rate of interest equal to the Federal Funds
Effective Rate plus 3% (which amount of interest shall be calculated by Ambac
and evidenced by a certificate of Ambac delivered to the Borrower). The Accrued
Liabilities Interest Rate shall be computed on the basis of a year of 365 days
and the actual number of days elapsed. In no event shall the Accrued
Liabilities Interest Rate exceed the maximum rate permissible under any
applicable law limiting interest rates.
"Adjusted Contributed Company Capital" has the meaning set forth in
the Credit Agreement.
"Advance Amount" has the meaning set forth in the Credit Agreement.
"Advance Amount Cushion" has the meaning specified in Section 2.3(m)
hereof.
"Ambac Required Reserve Amount" has the meaning set forth in the
Premium Letter.
"Board of Directors" means the Board of Directors of the Borrower or
any duly authorized designee thereof.
"Borrowing Request" has the meaning set forth in the Credit Agreement.
"Certificate of Formation" means the Certificate of Formation of the
Borrower, filed with the Secretary of State of the State of Delaware on August
12, 2004, and any and all amendments thereto and restatements thereof filed
with the Secretary of State of the State of Delaware.
"Closing Date" means November 17, 2004.
"Code" has the meaning set forth in the Credit Agreement.
"Collateral" has the meaning set forth in the Pledge and Intercreditor
Agreement.
"Collateral Documents" has the meaning set forth in the Credit
Agreement.
"Collateral Valuation Schedule" has the meaning set forth in the
Credit Agreement.
"Common Shareholder" has the meaning set forth in the Credit
Agreement.
"Common Shareholders' Escrow Account" has the meaning set forth in the
Custodial Agreement.
"Company Equity" has the meaning set forth in the Credit Agreement.
"Company Tax Distribution" has the meaning set forth in the Credit
Agreement.
"Contributed Company Capital" has the meaning set forth in the
applicable Collateral Valuation Schedule.
"Controlling Class" has the meaning set forth in the Credit Agreement
or the Pledge and Intercreditor Agreement, as applicable.
"Credit Document" has the meaning set forth in the Credit Agreement.
"Custodial Agreement" has the meaning set forth in the Credit
Agreement.
"Custodian" has the meaning set forth in the Credit Agreement.
"Default" means any event which results, or which with the giving of
notice or the lapse of time or both would result, in an Event of Default.
"Distribution Agreement" means the Distribution Agreement, dated
November 16, 2004, between ▇▇▇▇▇▇ Brothers Inc., the Borrower and ▇▇▇▇▇▇▇▇▇▇
Capital Partners, LLC, as the same may be amended, supplemented, modified or
updated from time to time in accordance with its terms.
"Event of Default" has the meaning given that term in Section 6.1
hereof.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published for such day
(or, if such day is not a Business Day, for the preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Ambac from three Federal funds brokers of recognized
standing selected by Ambac.
"Fund Investments" has the meaning set forth in the applicable
Collateral Valuation Schedule.
"GAAP" has the meaning set forth in the Credit Agreement.
"Increase Endorsement" means an endorsement to the Preferred Shares
Insurance Policy in the form set forth as Exhibit B to the Preferred Shares
Insurance Policy.
"Indebtedness" means, with respect to any Person at any time: (a) any
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b) any
obligations of such Person as lessee under leases which should have been or
should be, in accordance with U.S. generally accepted accounting principles,
recorded as capital leases; (c) any obligations issued for or liabilities
incurred on the account of such Person; (d) any obligations or liabilities of
such Person arising under acceptance facilities; (e) any obligations of such
Person under any guarantees, endorsements (other than for collection or deposit
in the ordinary course of business) and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any Person
or otherwise to assure a creditor against loss; (f) any obligations of such
Person secured by any lien on property or assets of such Person; or (g) any
obligations of such Person under any interest rate or currency exchange
agreement.
"Insured Obligations" has the meaning set forth in the Loans Insurance
Policy.
"Investment Company Act" has the meaning set forth in the Credit
Agreement.
"Investment Holdings Subsidiary" has the meaning set forth in the
applicable Collateral Valuation Schedule.
"Investment Manager" has the meaning set forth in the Credit
Agreement.
"Investment Management Agreement" has the meaning set forth in the
Credit Agreement.
"Lien" has the meaning set forth in the Credit Agreement.
"Loans Insurance Policy" means the Financial Guaranty Insurance Policy
No. AB0822BE relating to the Loans under the Credit Agreement.
"Loan" has the meaning set forth in the Credit Agreement.
"Losses" means an amount equal to (a) any actual out-of-pocket damages
incurred by the party entitled to indemnification or contribution hereunder,
plus (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 4 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.
"Market Value" has the meaning set forth in the applicable Collateral
Valuation Schedule.
"Market Value Price" has the meaning set forth in the applicable
Collateral Valuation Schedule.
"Material Adverse Change" means, in respect of any Person, a material
adverse change in (i) the business, prospects, financial condition, results of
operations or properties of such Person and of its Subsidiaries taken as a
whole, or (ii) the ability of such Person to perform its obligations under the
Transaction Documents to which it is a party.
"▇▇▇▇▇'▇" has the meaning set forth in the Credit Agreement.
"▇▇▇▇▇'▇ Collateral Valuation Schedule" means the ▇▇▇▇▇'▇ Collateral
Valuation Schedule attached as Schedule 9 to the Credit Agreement, as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with the Credit Agreement and with the written consent of Ambac. If
the Credit Agreement shall for any reason terminate prior to the termination of
this Agreement, then the "▇▇▇▇▇'▇ Collateral Valuation Schedule" shall be the
▇▇▇▇▇'▇ Collateral Valuation Schedule in affect under the Credit Agreement
immediately prior to the termination thereof.
"Net Asset Value" has the meaning set forth in the Credit Agreement.
"Offering Document" means (i) with respect to the Preferred Shares,
the Confidential Private Placement Memorandum of the Borrower dated November
16, 2004 relating to the Preferred Shares, as such Confidential Private
Placement Memorandum may be amended, supplemented, modified or updated from
time to time in connection with the placement of additional series Preferred
Shares and (ii) with respect to the Common Shares, the Confidential Private
Placement Memorandum of the Borrower dated August 9, 2004 relating to the
Common Shares of the Borrower, in each case, as amended or supplemented through
the date hereof.
"Operating Agreement" has the meaning set forth in the Credit
Agreement.
"Organic Documents" has the meaning set forth in the Credit Agreement.
"Over-Collateralization Test" has the meaning set forth in the Credit
Agreement.
"Permitted Liens" has the meaning set forth in the Credit Agreement.
"Person" has the meaning set forth in the Credit Agreement.
"Pledge and Intercreditor Agreement" has the meaning set forth in the
Credit Agreement.
"Preferred Shares" means (i) the "Series A" money market cumulative
preferred shares issued pursuant to the Statement of Preferences on the Closing
Date and (ii) the money market cumulative preferred shares issued pursuant to
the Statement of Preferences and identified by series, Date of Original Issue
and amount in any Increase Endorsement to the Preferred Shares Insurance
Policy.
"Preferred Shares Auction Agency Agreement" has the meaning set forth
in the Credit Agreement.
"Preferred Shares Broker-Dealer Agreement" has the meaning set forth
in the Credit Agreement.
"Preferred Shares Insurance Agreement" means the Insurance and
Indemnity Agreement, dated as of the Closing Date, between Ambac and the
Borrower relating to the issuance of the Preferred Shares Insurance Policy.
"Preferred Shares Insurance Policy" means the Preferred Shares
Insurance Policy No. AB0823BE which guarantees the timely payment of dividends
on certain of the Borrower's Preferred Shares and the payment of the aggregate
liquidation preference on such preferred shares.
"Premium" has the meaning set forth in the Premium Letter.
"Premium Letter" means the Premium Letter, dated as of the Closing
Date, between Ambac and the Borrower.
"Proceeding" means the making of a trust, mortgage or assignment for
the benefit of creditors involving all or substantially all of the assets of
the Borrower (other than Permitted Liens); the voluntary or involuntary
dissolution, winding up, total or partial liquidation, reorganization,
bankruptcy, insolvency, receivership or marshalling of assets or liabilities of
the Borrower; or any other statutory, common law or contractual proceeding or
arrangement for the postponement or adjustment of all or a substantial part of
the liabilities of the Borrower.
"Rating Agency Condition" has the meaning set forth in the Credit
Agreement.
"Restricted Payment" means
(i) any payment or other distribution (including,
without limitation, dividends) to any Common Shareholder of the Borrower in
respect of Common Shares;
(ii) any payment or other distribution on account of the
purchase, redemption, retirement or acquisition of any Common Share or other
common equity interest in the Borrower; or
(iii) any payment in respect of any Subordinated Equity
Securities.
For the avoidance of doubt, payments on the Preferred Shares shall not
be treated as Restricted Payments under this Agreement and may be paid by the
Borrower at any time in accordance with the terms of the Operating Agreement.
"Secured Hedging Transaction" has the meaning assigned to such term in
the applicable Collateral Valuation Schedule.
"Secured Parties Representative" has the meaning set forth in the
Credit Agreement.
"Senior Indebtedness" means all Indebtedness and other payment
obligations (including, without limitation, interest that would accrue but for
the filing of a petition initiating a Proceeding, whether or not a claim for
such interest is allowed in the Proceeding) of the Borrower arising under or in
respect of the Credit Agreement, the Lender Notes or other Credit Documents,
the Secured Hedging Transactions, the Preferred Shares Insurance Agreement or
this Agreement, whether outstanding on the Closing Date or thereafter created
or incurred including obligations owing to the Custodian under the Custodial
Agreement, to the Administrative Agent under the Credit Agreement, to the
Secured Parties Representative under the Pledge and Intercreditor Agreement and
to Ambac under this Agreement and the Preferred Shares Insurance Agreement;
provided, however, that Senior Indebtedness shall not include any Indebtedness
or such other obligations incurred in violation of the Credit Agreement.
"S&P" has the meaning set forth in the Credit Agreement.
"S&P Collateral Valuation Schedule" means Schedule 10 to the Credit
Agreement, as the same may be amended, supplemented or otherwise modified from
time to time in accordance with the Credit Agreement and with the written
consent of Ambac. If the Credit Agreement shall for any reason terminate prior
to the termination of this Agreement, then the "S&P Collateral Valuation
Schedule" shall be the S&P Collateral Valuation Schedule in affect under the
Credit Agreement immediately prior to the termination thereof.
"Special Member" has the meaning set forth in the Credit Agreement.
"Statement of Preferences" means the Statement of Preferences of Money
Market Cumulative Preferred Shares of Special Value Expansion Fund, LLC, dated
November 16, 2004, as amended, modified or supplemented from time to time in
accordance with its terms.
"Structured Product Transaction" has the meaning assigned to such term
in the applicable Collateral Valuation Schedule.
"Subordinated Equity Securities" has the meaning set forth in the
Credit Agreement.
"Subsidiary" has the meaning set forth in the Credit Agreement.
"Term" has the meaning set forth in Section 5.1 of this Agreement.
"Transaction Documents" means the Credit Agreement, the Pledge and
Intercreditor Agreement, the Distribution Agreement, the Custodial Agreement,
the Investment Management Agreement, this Agreement, the Loans Insurance
Policy, the Preferred Shares Auction Agency Agreement, the Lender Notes, the
Certificate of Formation, the Operating Agreement, the Preferred Shares
Insurance Policy and the Statement of Preferences.
"Transactions" means the transactions contemplated by the Transaction
Documents.
"Valuation Date" has the meaning set forth in the Statement of
Preferences.
"Valuation Statement" has the meaning set forth in the Credit
Agreement.
1.2. Generic Terms. The term "hereof" or "herein" unless otherwise modified by
more specific reference, shall refer to this Agreement. Unless otherwise
specified, the term "Article" or "Section" shall refer to an Article or Section
of this Agreement.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. Representations and Warranties of the Borrower. The Borrower hereby
represents and warrants as follows as of the date hereof and as of each date
upon which any Loan is made under the Credit Agreement or, if earlier, as of
the date specified in the representation or warranty set forth below or
incorporated herein:
(a) Transaction Documents. The representations and warranties of the
Borrower set forth in the Transaction Documents are true and correct and are
incorporated herein for the benefit of Ambac as if set forth in full herein.
(b) Compliance with Laws. The Borrower has no notice nor any
reasonable basis to believe that any practice, procedure or policy employed or
proposed to be employed by it in the conduct of its business or which it
expects to employ in the conduct of its business violates any law, rule,
regulation, judgment or agreement applicable to it which, if enforced, would
(i) result in a Material Adverse Change with respect to it or impair the
security interest created by the Pledge and Intercreditor Agreement in the
Collateral or (ii) constitute grounds for the revocation of any license,
charter, permit or registration which could reasonably be expected to result in
a Material Adverse Change provided that this covenant set forth in this Section
2.1(b) shall not be deemed violated with respect the Borrower's failure to
comply with Section 18 of the Investment Company Act or any successor provision
thereto, or any applicable "asset coverage" requirement set forth therein, in
each case unless such failure shall have continued for ninety (90) days
following the Valuation Date upon which such failure to comply commenced.
2.2. Affirmative Covenants of the Borrower. Except as otherwise provided
below, the Borrower hereby agrees that while any amounts are owing under the
Credit Agreement or this Agreement, unless Ambac shall otherwise expressly
consent in writing:
(a) Corporate Existence. The Borrower shall (i) do or cause to be done
all things necessary to preserve and keep in full force and effect its valid
limited liability company existence under the laws of the jurisdiction of its
organization, (ii) continue to be duly qualified and duly authorized to do
business in each jurisdiction in which such qualification is necessary to the
conduct of its business or to protect the validity and enforceability of the
Transaction Documents and the security interest in the Collateral created in
favor of the Secured Parties Representative pursuant to the Pledge and
Intercreditor Agreement and (iii) conduct its business in accordance with the
terms of the Organic Documents and the representation contained in Section 5.17
of the Credit Agreement.
(b) Compliance With Applicable Laws. The Borrower shall comply with all
applicable statutes, rules, regulations, orders and restrictions of any
governmental authority, department, commission, board, regulatory authority,
bureau, agency and instrumentality, in each respect of the conduct of its
business and the ownership of its properties, except such as are being
contested in good faith and by appropriate proceedings in a manner such as not
to cause a Material Adverse Change, and except for such non-compliance as shall
not, individually or in the aggregate, cause a Material Adverse Change. Without
limiting the foregoing, the Borrower shall comply with Section 18 of the
Investment Company Act or any successor provision thereto, and any applicable
"asset coverage" requirement set forth therein; provided that this covenant set
forth in Section 2.2(b) shall not be deemed violated with respect the
Borrower's failure to comply with Section 18 of the Investment Company Act or
any successor provision thereto, or any applicable "asset coverage" requirement
set forth therein, in each case unless such failure shall have continued for
ninety (90) days following the Valuation Date upon which such failure to comply
commenced.
(c) Maintenance of Licenses. The Borrower shall maintain all
licenses, permits, charters and registrations which, if not maintained, could
reasonably be expected to result in a Material Adverse Change.
(d) Maintenance of Insurance. The Borrower shall maintain insurance
(including directors and officers insurance and errors and omissions insurance)
consistent with the type and amount of insurance carried by Persons engaging in
similarly situated businesses.
(e) Compliance with Transaction Documents. The Borrower shall comply
in all material respects with the terms and conditions of, and perform in all
material respects its obligations and enforce in all material respects its
rights under, the Investment Management Agreement, the Operating Agreement, the
Credit Agreement, the Statement of Preference, the Preferred Shares Insurance
Agreement and each other Transaction Document to which it is a party.
(f) Collateral Valuation. The rights of Ambac set forth in Section
6.1.1(e) of the Credit Agreement shall survive the termination of the Credit
Agreement and shall be deemed set forth herein in full.
(g) Notice of Material Events. The Borrower will, in addition to any
other notices, certificates or information provided pursuant to this Agreement,
inform Ambac in writing of the occurrence of any of the following, promptly
upon becoming aware thereof:
(i) the commencement or threat of any rule-making or disciplinary
proceeding or the promulgation of any proposed or final rule (other than a
rule or proceeding which has general applicability to Persons including
the Borrower) which could result in a Material Adverse Change with respect
to the Borrower or impair in any material respect the security interest
created by the Pledge and Intercreditor Agreement in the Collateral; and
(ii) the commencement of any proceedings by or against it in any court
of competent jurisdiction or before any governmental body or agency, or
before any arbitration board, or the threat of any such proceedings, which
either (i) involves an amount in dispute in excess of $11,000,000 (or,
during the 18 months following the date hereof, $6,500,000) with the
Borrower or (ii) if adversely determined, could result in a Material
Adverse Change with respect to the Borrower or impair in any material
respect the security interest created by the Pledge and Intercreditor
Agreement in the Collateral;
(iii) the receipt of notice from any agency or governmental body
having authority over the conduct of its business that (A) it is being
placed under regulatory supervision, (B) any license, permit, charter,
membership or registration material to the conduct of its business is to
be suspended or revoked, or (C) it is to cease and desist any practice,
procedure or policy employed by it in the conduct of its business, and
such cessation could result in a Material Adverse Change with respect to
the Borrower or impair in any material respect the security interest
created by the Pledge and Intercreditor Agreement in the Collateral;
(iv) any change in the location of Borrower's jurisdiction of
organization or any change in the location of the Borrower's books and
records;
(v) the occurrence of any Default or Event of Default;
(vi) the commencement of any proceedings by or against the Borrower
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 Borrower or any of its assets;
(vii) the annual renewal (with a copy) of, and any material change to,
the insurance maintained pursuant to Section 2.2(d) hereof; and
(viii) the receipt of notice of any claim or order by any taxing
authority that material taxes are owed by the Borrower.
(h) Disclosure Document. Each Offering Document, as of its respective
date, did not, and as of the Closing Date and each date it is delivered by or
on behalf of the Borrower to investors does not, contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided that the
Borrower makes no representation or warranty as to the information contained in
or omitted from the Offering Document in reliance upon and in conformity with
the written information relating to Ambac the Preferred Shares Insurance Policy
and the Loans Insurance Policy.
(i) Audits; Recordkeeping.
(i) The Borrower shall allow Ambac to conduct physical audits at the
Borrower's expense, using Ambac's own personnel and/or agents employed on
Ambac's behalf, of the assets of the Borrower as often as Ambac may reasonably
deem necessary or desirable; provided, that, at any time prior to the
occurrence of a Default, Ambac shall conduct not more than one physical audit
in any one fiscal year of the Borrower; and provided, further, that upon the
occurrence and during the continuance of a Default, Ambac may engage in any
number of physical audits which Ambac deems necessary or desirable.
(ii) The Borrower shall keep proper books and records reflecting all
of its business affairs and transactions in accordance with GAAP and permit
Ambac, on reasonable notice and at reasonable times and intervals during
ordinary business hours, to visit all of its offices and to discuss its
financial matters with officers of the Borrower and its independent public
accountants. The Borrower shall permit Ambac on reasonable notice and at
reasonable times and intervals during ordinary business hours, to examine and
make copies of any of the books or other records of the Borrower. In addition
to the foregoing, the Borrower shall pay any reasonable fees of any independent
public accountants or otherwise incurred in connection with the exercise by
Ambac of its rights pursuant to this Section 2.2(i).
(j) Further Assurances.
(i) The Borrower shall at its own expense promptly take, or cause to
be taken, such actions as may be necessary or desirable, in the reasonable
judgment and at the request of Ambac, (A) to create and maintain the Lien
of the Pledge and Intercreditor Agreement as a valid and perfected
security interest of first-priority covering the Collateral and (B) to
preserve and protect fully the perfected security interest of the Secured
Parties Representative in, and all rights of the Secured Parties
Representative with respect to, the Collateral, including, without
limitation, the execution and filing of all necessary instruments,
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 security
interest of the Secured Parties Representative with respect to the
Collateral.
(ii) The Borrower shall, upon the reasonable request of Ambac, from
time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, within a reasonable period of such request,
such amendments or supplements hereto or to the other Transaction
Documents, subject to the terms thereof, and such further instruments and
take such further action as (in each case) may be reasonably necessary to
effect the intention, performance and provisions of the Transaction
Documents or to protect the interest of the Secured Parties Representative
in the Collateral, free and clear of all Liens other than Permitted Liens.
(iii) The Borrower shall cooperate with S&P and Moody's in connection
with any review of the transactions contemplated by Transaction Documents
which may be undertaken by S&P and Moody's after the Closing Date, in each
case so long as Moody's or S&P, as applicable, is rating the credit risk
underlying the Loans Insurance Policy.
(iv) The Borrower will not use, or distribute to any Person for use,
or permit the use of any Offering Document in connection with the offer
and sale of the Preferred Shares unless such Offering Document includes or
incorporates by reference such information as has been expressly furnished
by Ambac for inclusion therein and the information therein or incorporated
by reference therein concerning Ambac has been approved by Ambac in
writing.
(k) Use of Proceeds. The Borrower shall apply its funds towards the
uses set forth in Section 6.1.17 of the Credit Agreement and towards the other
sums payable by it as required or contemplated by the Transaction Documents and
for no other purpose.
(l) Additional Information. In addition to the information required to
be delivered by the Borrower to Ambac pursuant to the terms of the Credit
Agreement, the Borrower shall (i) forward or cause to be forwarded to Ambac all
notices and reports which are required to be delivered to Moody's or S&P
pursuant to the Transaction Documents, (ii) furnish to Ambac any such
information that Ambac may reasonably request from time to time relating to the
Borrower's business or the Collateral and (iii) furnish to Ambac on a monthly
basis, or as otherwise set forth below, the following information with respect
to the Collateral:
(1) the identity of each Fund Investment by name and the method of
acquisition (i.e., originated or purchased in the secondary market);
provided that with respect to any Fund Investment in the process of being
accumulated by the Borrower, the Borrower may elect to provide a code name
for such Fund Investment and, upon request from Ambac, orally identify
such Fund Investment to Ambac by telephone;
(2) the Market Value Price of such Fund Investment;
(3) if applicable, the par value and number of units of such Fund
Investment; and
(4) the classification of such Fund Investment by Asset Category (as
defined in each Collateral Valuation Schedule) and by any classification
set forth as a Portfolio Limitation (as defined in the applicable
Collateral Valuation Schedule); provided that, at any time, if Moody's or
S&P is no longer rating the Preferred Shares or the credit risk of the
Preferred Shares Insurance Policy, then the Borrower shall no longer be
required to deliver any information set forth in this Section 2.2 above to
Moody's or S&P, as applicable.
2.3. Negative Covenants of the Borrower. The Borrower hereby agrees
that while any amounts are owing under the Credit Agreement or this Agreement,
unless Ambac shall otherwise expressly consent in writing:
(a) Preservation of Collateral. The Borrower shall not take any
action, or fail to take any action, if such action or failure to take action
could reasonably be expected to materially interfere with the enforcement of
any rights under the Transaction Documents, including (but not limited to) any
amendment of, or consent to any amendment of, the Investment Management
Agreement, the Credit Agreement, the Pledge and Intercreditor Agreement, the
Statement of Preferences or any consent to any waiver of rights or to any other
action under or in respect of the Collateral, that change, amend or modify the
rights, benefits or obligations of Ambac under any Transaction Document.
(b) Issuance of Shares. The Borrower shall not issue any shares or
rights, warrants or options in respect of capital shares or securities
convertible into or exchangeable for shares, other than as issued or committed
to be placed on the date hereof or, contemplated or expressly permitted by the
Transaction Documents.
(c) Impairment of Rights. The Borrower shall not permit the validity
or effectiveness of the Lender Notes, or any Transaction Document (or the
security interest created by the Pledge and Intercreditor Agreement) to be
impaired in any material respect.
(d) Limitation on Contractual Obligations.
(i) The Borrower shall not enter any Secured Hedging Transactions
unless the contracts governing such Secured Hedging Transactions provide
that Ambac shall have the explicit right to act on behalf of the Borrower
thereunder to the extent permitted by applicable law and as approved by
counsel for the Borrower regarding all terms and conditions pertaining to
any such Secured Hedging Transactions.
(ii) The Borrower shall not acquire any Structured Product
Transactions unless the contracts governing the acquisition of such
Structured Product Transactions provide that Ambac shall have the explicit
right to act on behalf of the Borrower thereunder to the extent permitted
by applicable law and as approved by counsel for the Borrower regarding
all terms and conditions pertaining to any such Structured Product
Transactions.
(e) Waivers or Amendments. Subject to Ambac's obligations set forth in
Section 7.2 hereof, the Borrower shall not, except as expressly consented to by
Ambac in writing or otherwise waive, modify or amend, or consent to any waiver,
modification or amendment of any provisions of the Transaction Documents, which
could reasonably be expected to be adverse in any material respect to the
interests of Ambac. The Borrower shall notify Ambac and Moody's (so long as
▇▇▇▇▇'▇ is rating the risk securing Ambac's obligations under the Loan
Insurance Policy and the Preferred Shares Insurance Policy) five (5) Business
Days prior to the effectiveness of any proposed amendment for which the consent
of Ambac has not been sought.
(f) Enforcement. Except as set forth in the Transaction Documents, the
Borrower shall not take any action, or fail to take any action, if such action
or inaction would materially interfere with the enforcement of any rights of
Ambac or the Secured Parties Representative under any of the Transaction
Documents.
(g) Taxes. The Borrower shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, all taxes, assessments or
other governmental charges levied or imposed upon the Borrower or upon any of
its income, profits or property; provided, that the Borrower shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment or charge, (i) the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings and for which disputed
amounts adequate reserves in accordance with generally accepted accounting
principles in the United States have been made or (ii) the failure of which to
pay or discharge could not result in a Material Adverse Change or a material
adverse effect on the Collateral.
(h) Limitation on Indebtedness. The Borrower shall not create, incur
or suffer to exist any Indebtedness other than as expressly permitted under
Section 6.2.2 of the Credit Agreement.
(i) Restriction on Business. The Borrower shall not engage in any
business or activity other than those described in Section 5.17 of the Credit
Agreement.
(j) Mergers. Subject to Ambac's obligations set forth in Section 7.2,
the Borrower shall not consolidate with or merge with or into any other Person
or entity or convey or transfer its properties and assets substantially as an
entirety to any Person or entity.
(k) Liquidation; Insolvency. The Borrower shall not, prior to the date
that is one year and one day after payment in full of all Senior Indebtedness
and Preferred Shares and any of its obligations to Ambac, institute proceedings
to be adjudicated a bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against it, or file a petition seeking or
consenting to reorganization or relief under any applicable law relating to
bankruptcy or insolvency, or consent to the appointment of a receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of it
or a substantial part of its property, or make any assignment for the benefit
of its creditors, or admit in writing its inability to pay its debts generally
as they become due, or take any corporate action in furtherance of any such or
any similar action; provided, that the foregoing shall not prohibit any
liquidation of the Borrower's assets in accordance with the terms of the
Operating Agreement or the Pledge and Intercreditor Agreement or which results
in (1) the payment in full of all Senior Indebtedness, the Preferred Shares and
all obligations due and owing to Ambac under the Insurance Agreements and (2)
the cancellation and surrender of the Insurance Policies.
(l) Compliance With Organic Documents. The Borrower shall abide by the
restrictions contained in its Organic Documents unless any failure could not
reasonably be expected to be adverse in any material respect to the interests
of Ambac.
(m) Limitations on Restricted Payments. The Borrower shall not make
any Restricted Payment; provided, that the Borrower may, at any time, make
distributions (including dividends) to the Common Shareholders or repurchase,
or make payments or distributions on account of the purchase, redemption,
retirement or acquisition of, the Common Shares in the Borrower pursuant to and
in accordance with the Operating Agreement so long as, immediately after such
payments, distributions or repurchases (x) no Default, Event of Default,
violation of Section 6.1.18 of the Credit Agreement (without giving effect to
the grace periods provided for therein) or default or event of default under
the Credit Agreement shall have occurred and be continuing, (y) all
representations and warranties in Article II hereof are true and correct in all
material respects as of the date made, and (z) (1) Company Equity (after giving
effect to any Subordinated Equity Security) shall be equal to or greater than
Adjusted Contributed Company Capital, or (2) in the case of Company Tax
Distributions, the Advance Amount exceeds 105% of the sum of the aggregate
outstanding principal amount of Senior Indebtedness and the aggregate
outstanding liquidation preference of the Preferred Shares (such excess amount,
at any date of determination, the "Advance Amount Cushion"), provided that if,
within 30 days from the date of any such Company Tax Distribution, the Advance
Amount Cushion becomes less than zero following the acquisition by the Borrower
of any loan, bond or other investment that is of the same tranche as any loan,
bond or other investment sold by the Borrower within 30 days prior to such
Company Tax Distribution, the Borrower shall not make any Company Tax
Distribution under Section 6.2.5 of the Credit Agreement for a period of 180
days commencing from the date of such Company Tax Distribution; provided,
further that the Borrower may, in connection with the issuance of any
Subordinated Equity Securities, make distributions to its Common Shareholders
and the holders of Subordinated Equity Securities in an amount which does not
exceed the net proceeds to the Borrower of such issuance of Subordinated Equity
Securities. Distributions (including dividends) or other payments or
distributions on account of the purchase, redemption, retirement or acquisition
of any Subordinated Equity Security may be made at any time only so long as (x)
all representations and warranties in Article II hereof are true and correct in
all material respects as of the date made and (y) immediately after giving
effect thereto, no Default, Event of Default, violation of Section 6.1.18 of
the Credit Agreement (without giving effect to the grace periods provided for
therein) or default of event of default under the Credit Agreement shall have
occurred or be continuing under the Credit Agreement.
Notwithstanding the foregoing, in the event that any payment or other
distribution (including, without limitation, any dividend) in respect of the
Borrower's Common Shares would be required to be made in order to preserve the
U.S. federal income tax status of the Borrower as a regulated investment
company or to avoid the imposition of the excise tax under Section 4882 of the
Code (e.g., because the requisite consents from the Common Shareholders for a
"consent dividend" (as defined in Section 565 of the Code) for U.S. federal
income tax purposes have not been obtained by the Borrower in accordance with
the terms of the Operating Agreement), such payment or distribution may be
distributed for the benefit of the Common Shareholders and deposited into the
Common Shareholders' Escrow Account established pursuant to the Custodial
Agreement. Funds deposited in the Common Shareholders' Escrow Account shall not
be released to the Common Shareholders unless and until the Borrower complies
with the restrictions set forth in the preceding paragraph. If the requisite
consents from the Common Shareholders for a "consent dividend" have been
obtained, the Borrower shall be permitted to pay any U.S. withholding taxes
arising in respect of such "consent dividend".
(n) Investment Holding Subsidiary Documentation. The Borrower shall
provide Ambac prompt notice of the creation of an Investment Holding Subsidiary
and deliver with such notice a copy of the organizational documents of such
Investment Holding Subsidiary.
(o) Manager-Owned Securities.
(i) The Borrower shall not issue any Indebtedness or membership
interests to the Investment Manager and/or any affiliate of the Investment
Manager under any contract or agreement that would permit the Investment
Manager to vote or direct any action related to the removal or replacement
of the Investment Manager.
(ii) The Borrower shall not purchase any securities issued by issuers
of structured finance securities which are managed by the Investment
Manager.
ARTICLE III.
CONDITIONS TO ISSUANCE OF THE LOANS INSURANCE POLICY
3.1. Issuance of the Loans Insurance Policy. Ambac agrees to issue the
Loans Insurance Policy, (a) subject to the Credit Agreement being in effect on
the Closing Date and (b) further subject to satisfaction of the conditions
precedent set forth below in this Article III.
3.2. Payment of Fees. (a) The Borrower shall have paid or provided for
the payment of all fees and expenses incurred in connection with its formation
and maintenance in Delaware and (b) pursuant to the letter governing Ambac's
engagement and the Premium Letter, the Borrower shall have paid or shall have
arranged for the payment of (i) the fees of Ambac's counsel (plus
disbursements) in connection with the Transactions, (ii) all initial rating
agency fees of S&P and Moody's and (iii) Ambac's out-of-pocket expenses,
including, but not limited to, travel costs in the case of clauses (a) and (b)
through such date.
3.3. Closing Documents. (a) Ambac shall have confirmed to its
satisfaction that all conditions to be satisfied under each Transaction
Document have been satisfied on or prior to the Closing Date, and (b)
simultaneously herewith, Ambac shall have received an executed copy of each
Transaction Document, in form and substance reasonably satisfactory to Ambac.
3.4. Certified Documents and Resolutions. Ambac shall have received a
copy of (i) the Organic Documents (as amended in accordance with the terms
hereof and thereof through the date of delivery), and (ii) the resolutions of
the Borrower's Board of Directors authorizing the execution, delivery and
performance by the Borrower of each of the Transaction Documents (as amended in
accordance with the terms hereof and thereof through the date of delivery), and
the performance by the Borrower of the Transactions, certified by an authorized
representative of the Borrower (which certificate shall state that such Organic
Documents, resolutions and the Transaction Documents are in full force and
effect without modification on the Closing Date).
3.5. Incumbency Certificate. Ambac shall have received a certificate
of the Secretary or an Assistant Secretary or a Director of the Borrower
certifying the names and signatures of the authorized representatives of the
Borrower authorized to execute and deliver each Transaction Document to which
it is a party and certifying that shareholder consent to the execution and
delivery of such documents has been obtained or is not necessary.
3.6. Representations and Warranties. The representations and
warranties of the Borrower in this Agreement shall be true and correct in all
material respects as of the date hereof or, if earlier, such other date so
specified in such representation or warranty, and Ambac shall have received a
certificate of an Authorized Officer of the Borrower to that effect.
3.7. Opinions of Counsel. Ambac shall have received all opinions of
counsel addressed to Ambac in respect of the Borrower, the Collateral, the
Transaction Documents, certain corporate, security and securities law matters,
certain matters relating to the other parties to the Transaction Documents and
the Transactions, each addressing such matters as Ambac may reasonably request,
and all such legal opinions shall be in form and substance reasonably
satisfactory to Ambac.
3.8. Approvals, etc. Ambac shall have received true and correct copies
of all approvals, licenses and consents, if any, required to be obtained by the
Borrower in connection with the Transactions.
3.9. No Litigation, etc. There is no pending or, to the best knowledge
of the Borrower, threatened, litigation, action, proceeding, order,
investigation or claim, at law or in equity before any governmental authority
effecting the Borrower or the Investment Manager or any of their respective
properties, assets or revenues which could reasonably be expected to result in
Material Adverse Change to the Borrower.
3.10. Legality. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court which would make the Transactions or the
Transaction Documents illegal or otherwise prevent the consummation thereof.
3.11. Shadow Ratings. Ambac shall have received confirmation,
satisfactory to it, that the risk secured by the Loans Insurance Policy
constitutes an "AA" risk by S&P and the risk securing Ambac's obligations under
the Loans Insurance Policy and the Preferred Shares Insurance Policy,
collectively, constitutes an "Aa2" risk by Moody's.
3.12. Filings and Recording. Ambac shall have received evidence
reasonably satisfactory to it of the filing and/or recording in all necessary
jurisdictions (or such filing and/or recording having been provided for in a
manner reasonably satisfactory to Ambac) of all documents and such appropriate
instruments, in form and substance reasonably satisfactory to Ambac, as may be
necessary in the reasonable opinion of Ambac to perfect the security interests
created by the Pledge and Intercreditor Agreement, and all taxes, fees and
other charges payable in connection with such execution, delivery, recording
and filing shall have been paid. The Borrower shall be, as of the Closing Date,
in compliance with the terms of the Transaction Documents to which it is a
party.
3.13. No Default. No Default or Event of Default shall have occurred
hereunder (as defined herein) or "default" or "event of default" under any
Transaction Document (in each case, as defined therein) shall have occurred
thereunder.
3.14. Additional Items. Ambac shall have received such other
documents, instruments, approvals or opinions requested by Ambac as may be
reasonably necessary to effect the Transactions, including but not limited to
evidence satisfactory to Ambac that the conditions precedent, if any, in the
Transaction Documents have been satisfied or waived in writing.
ARTICLE IV
REIMBURSEMENT; INDEMNIFICATION
4.1. Policy Premium. The Borrower shall pay to Ambac the Premium
payable at the times and in the amounts specified in the Premium Letter.
4.2. Reimbursement and Additional Payment Obligation. (a) The Borrower
shall pay to or on behalf of Ambac (in accordance with the instructions of
Ambac, and subject to the terms of the Credit Agreement) the following
(together with amounts payable under Section 4.2(b) below, collectively, the
"Accrued Liabilities")
(i) all amounts paid by Ambac under the Loans Insurance Policy for the
benefit of the lenders under the Credit Agreement (unless such amounts
have previously been repaid to Ambac);
(ii) all amounts advanced or paid by Ambac (but not in the form of a
payment under the Loans Insurance Policy) under the Transaction Documents
or any substitute therefor; and
(iii) all reasonable out-of-pocket costs and expenses incurred in
connection with the Transactions by Ambac, including, but not limited to,
(A) rating agency fees and (B) attorneys' and accountants' fees and
expenses in connection with (i) any accounts established to facilitate
payments under the Loans Insurance Policy, this Agreement or the Credit
Agreement, (ii) the administration, enforcement, defense or preservation
of any rights in respect of the Transaction Documents or the Loans
Insurance Policy, (iii) the foreclosure against or sale or other
disposition of any Collateral or pursuit of any other remedies under any
of the Pledge and Intercreditor Agreement or the other Transaction
Documents (to the extent such costs and expenses are not recovered from
such foreclosure, sale or other disposition of the Collateral), or (iv)
any amendment, waiver or modification or consent with respect to or
related to the Credit Agreement or the other Transaction Documents, to the
extent not initiated by Ambac, whether or not executed or completed.
(b) The Borrower shall pay to or at the direction of Ambac, the
amounts owed under Section 4.2(a) above, together with interest accrued thereon
at the Accrued Liabilities Interest Rate for the period from, (A) in the case
of amounts due under Section 4.2(a)(i), the date Ambac paid or advanced such
amounts and (B) in the case of amounts due under any other provision of Section
4.2(a), three (3) Business Days after the earlier of (i) the date of Ambac's
delivery of notice to the Borrower that such amounts are payable and (ii) the
date the Issuer knew of such payment, until, in either case, the date such
amounts are paid in full. Such amounts shall be paid to or at the direction of
Ambac, on or prior to the third Business Day after the Borrower's receipt of
notice from Ambac that such amounts are payable, out of funds available under
the Pledge and Intercreditor Agreement.
4.3. Indemnification by Borrower. The Borrower agrees to pay, and to
protect, indemnify and save harmless, Ambac and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls Ambac
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act from and against all Losses incurred by reason of:
(i) any statement, omission or action (other than of or by Ambac) in
connection with the offering, issuance, sale or delivery of the Lender
Notes, the Preferred Shares or the Common Shares;
(ii) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer, employee, agent
or advisor of the Borrower in connection with any Transaction Document;
(iii) the violation by the Borrower of any domestic or foreign law,
rule or regulation, including, but not limited to, any securities or
banking law, rule or regulation in connection with any issuance, offer and
sale of the Lender Notes, the Preferred Shares or the Common Shares, or
any judgment, order or decree applicable to it;
(iv) the breach by the Borrower of any representation, warranty or
covenant under any of the Transaction Documents or any agreement,
certificate or instrument executed in connection therewith or any event of
default under any Transaction Document or any agreement, certificate or
instrument executed in connection therewith or any event which, with the
giving of notice or the lapse of time or both, would constitute an event
of default thereunder; or
(v) any untrue statement or alleged untrue statement of a material
fact contained in the Offering Document or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, except insofar as such claims
arise out of or are based upon any untrue statement or omission in
information included in the Offering Document furnished by Ambac expressly
for use therein (all such information so furnished being referred to
herein as "Ambac Information").
4.4. Conduct of Actions or Proceedings. In the event that any action
or regulatory proceeding shall be commenced or claim asserted which may entitle
Ambac, any officer, director, shareholder, employee or agent of Ambac or any
Person controlling Ambac (each, an "Indemnified Party" and, collectively, the
"Indemnified Parties") to be indemnified under this Agreement, such party shall
give the Borrower (the "Indemnifying Party") written or telegraphic notice of
such action or claim reasonably promptly after receipt of written notice
thereof; provided, however, that the failure to notify the Indemnifying Party
shall not relieve it from any liability it may have to an Indemnified Party
otherwise than under this Section 4.4. If any such action or claim shall be
brought against an Indemnified Party, and it shall notify the Indemnifying
Party thereof, the Indemnifying Party, upon the request of the Indemnified
Party, shall retain counsel reasonably satisfactory to the Indemnified Party to
represent the Indemnified Party and shall pay the reasonable fees and
disbursements of such counsel related to such proceeding. The Indemnified Party
shall have the right to employ its own counsel in any such action in addition
to the counsel retained by the Indemnifying Party for the benefit of the
Indemnified Party, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party, unless (a) the employment of counsel by the
Indemnified Party at the Indemnifying Party's expense has been authorized in
writing by the Indemnifying Party, (b) the Indemnifying Party has not in fact
employed counsel reasonably satisfactory to the Indemnified Party 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 representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them (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 in addition to local
counsel at any time for all Indemnified Parties), which firm shall be
designated in writing by the Indemnified Parties) in which cases the reasonable
fees and expenses of counsel shall be at the expense of the Indemnifying Party
and all such fees and expenses shall 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. The Indemnified Party may assume the defense of any such action or
claim in reasonable cooperation with, and with the reasonable cooperation of,
the Indemnifying Party.
4.5. Contribution. (a) To provide for just and equitable contribution
if the indemnification provided by any Indemnifying Party is determined to be
unavailable or insufficient (other than due to the application of Section 4.4)
to hold harmless any Indemnified Party in respect of any Losses referred to in
this Article IV, such Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses (i) in such
proportion as shall be appropriate to reflect the relative fault of the
Indemnifying Party, on the one hand, and the Indemnified Party, on the other
hand, with respect to the matter that resulted in such Losses or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative fault
referred to in clause (i) above but also the relative benefits received by each
of such parties from the Transactions; 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 Opportunities to correct or prevent such breach. The
parties hereto agree that it would not be just and equitable if contributions
pursuant to this Section 4.5 were to be determined by pro rata allocation or by
any other method of allocation that does not take into account the equitable
considerations referred to herein.
(c) The parties agree that Ambac shall be solely responsible for the
Ambac Information included in any Offering Document and that the remainder of
each Offering Document shall be the responsibility of the Borrower and/or the
respective underwriter or placement agent.
(d) 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.
(e) 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.
4.6. Payment Procedure. All payments to be made to Ambac under this
Agreement shall be paid to Ambac in lawful currency of the United States of
America in immediately available funds on the date when due (in accordance with
the terms of the Pledge and Intercreditor Agreement) to the account specified
in the Premium Letter or as Ambac shall otherwise direct by written notice to
the other parties hereto. In the event that the date of any payment to Ambac or
the expiration of any time period hereunder occurs on a day which is not a
Business Day, then such payment or expiration of time period shall be made or
occur on the next succeeding Business Day with the same force and effect as if
such payment was made or time period expired on the scheduled date of payment
or expiration date.
ARTICLE V.
FURTHER AGREEMENTS
5.1. Effective Date; Term of Agreement.
(a) This Agreement shall be in effect for the period (the "Term") from
the Closing Date until the later of (i) such time as Ambac is no longer subject
to a claim under the Loans Insurance Policy and the Loans Insurance Policy
shall have been surrendered to Ambac for cancellation and (ii) such date as all
amounts payable to Ambac under this Agreement shall have been paid in full;
provided, however, that the provisions of Article IV hereof shall survive any
termination of this Agreement.
(b) The Borrower shall have the right, upon ten (10) Business Days'
notice to Ambac to pay any and all amounts due and payable to Ambac hereunder
in full or in part. Upon any such payment, Ambac shall, to the extent permitted
under the Loans Insurance Policy and applicable law, at the Borrower's expense
cooperate with the Borrower to seek the surrender and cancellation of the Loans
Shares Insurance Policy; provided that nothing set forth in this sentence shall
be deemed to, or construed in any manner to purport to, alter or modify the
Loans Insurance Policy in any respect.
5.2. Obligations Absolute. (a) The obligations of the Borrower
hereunder and under each Transaction Document to which it is a party (subject
to the limitations in each such Transaction Document) shall be absolute and
unconditional, and shall be paid or performed strictly in accordance with this
Agreement or the relevant Transaction Document, as applicable, irrespective of:
(i) (A) any lack of validity or enforceability of, or any amendment or
other modifications of, or waiver with respect to, any of the Transaction
Documents or (B) any amendment, endorsement or other modifications of, or
waiver with respect to, the Loans Insurance Policy;
(ii) any exchange or release of any obligations hereunder;
(iii) the existence of any claim, set-off, defense (other than the
defense of payment in full), reduction, abatement or other right which the
Borrower may have at any time against Ambac or any other Person;
(iv) any document presented in connection with the Loans Insurance
Policy proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect, provided that such document is reasonably believed by Ambac to be
genuine;
(v) any payment by Ambac under the Loans Insurance Policy against
presentation of a certificate or other document which does not strictly
comply with terms of the Loans Insurance Policy, provided that it complies
with the same in all material respects;
(vi) any failure of the Borrower to receive the proceeds from the
Loans and the issue of the Lender Notes;
(vii) any breach by the Borrower of any representation, warranty or
covenant contained in any Transaction Document to which it is a party; or
(viii) any other circumstances, other than payment in full, which
might otherwise constitute a defense available to, or discharge of, the
Borrower in respect of any Transaction Document.
(b) The Borrower agrees to the extent permitted by law to be bound by
this Agreement and:
(i) to the extent permitted by law, to waive and renounce any and all
redemption and exemption rights and the benefit of all valuation and
appraisement privileges in respect of indebtedness, obligations and
security evidenced by any Transaction Document or by any extension or
renewal thereof;
(ii) except as specifically provided for in the Transaction Documents,
to waive presentment and demand for payment, notices of nonpayment and
dishonor, protest of dishonor and notice of protest;
(iii) to waive all notices in connection with the delivery and
acceptance hereof and all other notices in connection with the
performance, default or enforcement of any payment hereunder except as
required by the Transaction Documents; provided that failure to provide a
notice does not reduce the duration of any cure period applicable
hereunder;
(iv) to waive all rights of abatement, diminution, postponement or
deduction, or to any defense other than payment, or to any right of
set-off or recoupment arising out of any breach under any of the
Transaction Documents, by any party thereto or any beneficiary thereof, or
out of any obligation at any time owing to the Borrower;
(v) that its liabilities hereunder shall be unconditional and without
regard to any set-off, counterclaim or the liability of any other Person
for the payment hereof;
(vi) that any consent, waiver or forbearance hereunder with respect to
an event shall operate only for such event and not for any subsequent
event;
(vii) to consent to any and all extensions of time that may be granted
by Ambac with respect to any payment hereunder or other provisions hereof
and to the release of any security at any time given for any payment
hereunder, or any part thereof, with or without substitution, and to the
release of any Person or entity liable for any such payment; and
(viii) to consent to the addition of any and all other makers,
endorsers, guarantors and other obligors for any payment hereunder, and to
the acceptance of any and all other security for any payment hereunder,
and agree that the addition of any such obligors or security shall not
affect the liability of the parties hereto for any payment hereunder.
(c) Nothing herein shall be construed as prohibiting the Borrower from
pursuing any rights or remedies it may have against any other Person in a
separate legal proceeding.
5.3. Assignments; Reinsurance; Third-Party Rights. (a) This Agreement
shall be a continuing obligation of the parties hereto and shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. The Borrower may not assign its rights under
this Agreement, or delegate any of its duties hereunder, without the prior
express written consent of Ambac, except to the extent provided in the
Transaction Documents. Any assignment of this Agreement by the Borrower without
the prior express written consent of Ambac shall be null and void.
(b) Ambac shall have the right to grant participations in its rights
under this Agreement and to enter into contracts of reinsurance with respect to
the Loans Insurance Policy upon such terms and conditions as Ambac may
determine in its sole discretion; provided, however, that no such participation
or reinsurance agreement or arrangement shall relieve Ambac of any of its
obligations hereunder or under the Loans Insurance Policy.
(c) In addition, Ambac shall be entitled to assign or pledge to any
bank or other lender providing liquidity or credit with respect to the
Transactions or the obligations of Ambac in connection therewith, any rights of
Ambac under the Transaction Documents or with respect to any real or personal
property or other interests pledged to Ambac or in which Ambac has a security
interest, in connection with the Transactions, subject in each case to the
Liens granted pursuant to the Transaction Documents, provided that no such bank
or other lender shall thereby obtain any direct right against the Borrower and
further provided that no such assignment or pledge shall give any assignee the
right to exercise any discretionary authority that the Transaction Documents
provide shall be exercisable by Ambac and further provided that no such
assignment shall relieve Ambac of any of its obligations hereunder or under the
Loans Insurance Policy.
(d) Except as provided herein with respect to participants, reinsurers
and Indemnified Parties, nothing in this Agreement shall confer any right,
remedy or claim, express or implied, upon any Person, including, particularly,
any Lender, other than Ambac, against the Borrower, and all the terms,
covenants, conditions, promises and agreements contained herein shall be for
the sole and exclusive benefit of the parties hereto and their successors and
permitted assigns. No Person other than Ambac shall have any right to payment
from any premiums paid or payable hereunder or from any other amounts paid by
the Borrower pursuant to Article IV.
5.4. Liability of Ambac. Neither Ambac nor any of its officers,
directors or employees shall be liable or responsible for:
(a) the use which may be made of the Loans Insurance Policy by the
Administrative Agent or for any acts or omissions of the Administrative Agent
in connection therewith;
(b) the validity, sufficiency, accuracy or genuineness of documents
delivered to Ambac in connection with any claim under the Loans Insurance
Policy, or of any signatures thereon, even if such documents or signatures
should in fact prove to be in any or all respects invalid, inaccurate,
insufficient, fraudulent or forged (unless Ambac shall have actual knowledge
thereof), provided that such document is reasonably believed by Ambac to be
genuine; or
(c) any acts or omissions of the Administrative Agent, the Investment
Manager or the Borrower in connection with the Collateral other than such acts
or omissions that are at the written direction (which shall include any
direction sent electronically or by facsimile) of Ambac.
In furtherance and not in limitation of the foregoing, Ambac may
accept documents that reasonably appear on their face to be in order, without
responsibility for further investigation.
ARTICLE VI.
EVENTS OF DEFAULT; REMEDIES
6.1. Events of Default. The occurrence of any of the following events
shall constitute an Event of Default hereunder:
(a) the occurrence of "event of default" under any of the Transaction
Documents, including, but not limited to, an "Event of Default" under the
Credit Agreement;
(b) any demand for payment shall be made under and in accordance with
the terms of the Loans Insurance Policy;
(c) any representation or warranty made by the Borrower under any
Transaction Document to which it is a party, or in any certificate or report
furnished under any such Transaction Document, shall prove to have been untrue
or incorrect in any material respect when made or deemed made, and the
Borrower, as applicable, shall fail to cure such breach of representation or
warranty within the time period specified in such Transaction Document;
(d) (i) the Borrower shall fail to pay when due any material amount
payable by it under any Transaction Document to which it is a party in
accordance with the terms thereof, including, without limitation, any grace
period thereunder; (ii) the Borrower shall have asserted that any of the
Transaction Documents to which it is a party is not valid and binding on any
party thereto; or (iii) any court, governmental authority or agency having
jurisdiction over any of the parties to any of the Transaction Documents or any
property thereof shall find or rule that any material provision of any of the
Transaction Documents is not valid and binding on any of the parties thereto
(other than Ambac);
(e) the Borrower shall fail to perform or observe in any material
respect any other covenant or agreement to be performed or observed by it
hereunder or under any Transaction Document to which it is a party (except for
the obligations described under clause (c) or (d) above) and such failure shall
continue for a period of 30 days or more after the earlier of (x) notice
thereof having been given to the Borrower by Ambac or (y) the first date on
which a portfolio manager, senior accounting officer or controller of the
Borrower had actual knowledge of such default;
(f) an aggregate principal amount of any Indebtedness of the Borrower
or any subsidiary of the Borrower equal to or exceeding 0.80% of the Net Asset
Value shall become due and payable (whether at maturity, by acceleration or
otherwise) and not be paid or satisfied in full, or the holder of such
Indebtedness shall be entitled to require the Borrower or any such subsidiary
to repay, repurchase, redeem, defease or otherwise retire for value such
Indebtedness, in whole or in part, prior to its scheduled payment date (in each
case, after giving effect to any grace periods applicable thereto);
(g) any default by the Borrower in the payment when due (whether at
stated maturity or by acceleration, mandatory prepayment or otherwise) of any
amount in excess of 3.0% of the Net Asset Value (after giving effect to any
grace periods applicable thereto) required to be paid by it under any Secured
Hedging Transaction (other than any such amount that is being contested in good
faith by appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on the Borrower's books), and such default
shall continue unremedied for a period of ten (10) Business Days or more;
(h) any final judgments or orders (not subject to appeal) by one or
more courts of competent jurisdiction for the payment of money in an aggregate
amount in excess of 1.5% of the Net Asset Value (after giving effect to
insurance, if any, available with respect thereto) shall be rendered against
the Borrower, and the same shall remain unsatisfied, unvacated, unbonded or
unstayed for a period of thirty (30) days after the date on which the right to
appeal has expired;
(i) the Borrower shall become (i) insolvent or generally fail to pay,
or admit in writing its inability to pay, Indebtedness as it becomes due; (ii)
apply for, consent to, or acquiesce in, the appointment of a trustee, receiver,
sequestrator or other custodian for the Borrower or any property of any
thereof, or make a general assignment for the benefit of creditors; (iii) in
the absence of such application, consent or acquiescence, permit or suffer to
exist the appointment of a trustee, receiver, sequestrator or other custodian
for the Borrower or for a substantial part of the property of any thereof, and
such trustee, receiver, sequestrator or other custodian shall not be discharged
within sixty (60) days; (iv) permit or suffer to exist the commencement of any
bankruptcy, reorganization, Indebtedness arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution, winding
up or liquidation proceeding, in respect of the Borrower and, if such case or
proceeding is not commenced by the Borrower, such case or proceeding shall be
consented to or acquiesced in by the Borrower or shall result in the entry of
an order for relief or shall remain for sixty (60) days undismissed; or (v)
take any action authorizing, or in furtherance of, any of the foregoing;
(j) any Lien on any Collateral granted shall, at any time after
delivery of the respective Collateral Documents, cease to be fully valid and
perfected as a first-priority Lien, except (i) for Permitted Liens, (ii) Liens
on Fund Investments the Market Value of which if excluded from the Collateral
would not cause a violation of the Over-Collateralization Test (in each case,
without giving effect to any applicable grace period) or (iii) as otherwise
expressly permitted hereunder or under such Collateral Documents;
(k) the Borrower ceases to be a registered "investment company" under
the Investment Company Act for more than ninety (90) days;
(l) the Borrower shall be dissolved or terminated, and not
reconstituted substantially simultaneously therewith (and in no event later
than the same day) in accordance with the Operating Agreement; and
(m) the Investment Manager is removed or terminated pursuant to the
Investment Management Agreement or is otherwise no longer the investment
advisor to the Borrower and Ambac has not approved the new Investment Manager
within thirty (30) days; provided, however, it shall not be an Event of Default
under this Agreement if, at any point in time, there fails to be an Investment
Management Agreement in place and such failure is due to the fact that such
Investment Management Agreement could not timely be renewed for a period of
less than twenty (20) Business Days because of (i) the death of a Director or
other person necessary for renewal, (ii) an act of terrorism, war, civil
disturbance or other hostility, (iii) a breakdown in mass communication or (iv)
any force majeure, or any other cause not within the control of any party to
this Agreement or the Investment Management Agreement.
6.2. Remedies; Waivers
(a) Upon the occurrence and during the continuance of an Event of
Default, Ambac may exercise any one or more of the rights and remedies set
forth below:
(i) exercise any rights and remedies available to Ambac under the
Transaction Documents in its own capacity or in its capacity as
Controlling Class or Controlling Class under the Pledge and Intercreditor
Agreement; and
(ii) subject to the provisions of the Transaction Documents, take
whatever action at law or in equity as may appear necessary or desirable
in its judgment to collect the amounts then due and thereafter to become
due under the Transaction Documents or to enforce performance of any
obligation of the Borrower under any Transaction Document to which it is a
party.
(b) Unless otherwise expressly provided, whether or not an Event of
Default is continuing, no remedy herein conferred upon or reserved to Ambac is
intended to be exclusive of any other available remedy, but each remedy shall
be cumulative and shall be in addition to other remedies given under the
Transaction Documents or existing at law or in equity. No delay or failure to
exercise any right or power occurring under any Transaction Document upon the
occurrence of any Event of Default or otherwise shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right or power
may be exercised from time to time and as often as may be deemed expedient.
(c) If any proceeding has been commenced to enforce any right or
remedy under this Agreement, and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to Ambac, then and
in every such case the parties hereto shall, subject to any determination in
such proceeding, be restored to their respective former positions hereunder,
and, thereafter, all rights and remedies of Ambac shall continue as though no
such proceeding had been instituted.
(d) Without prejudice to the rights of the other parties to the
Transaction Documents, Ambac shall have the right, to be exercised in its sole
discretion, to waive any covenant, Default or Event of Default by a writing
setting forth the terms, conditions and extent of such waiver signed by Ambac
and delivered to the Borrower. Any such waiver may only be affected in writing
duly executed by Ambac, and no other course of conduct shall constitute a
waiver of any provision hereof. Unless such writing expressly provides to the
contrary, any waiver so granted shall extend only to the specific event or
occurrence so waived and not to any other similar event or occurrence which
occurs subsequent to the date of such waiver.
ARTICLE VII.
MISCELLANEOUS
7.1. Amendments, etc. This Agreement may be amended, modified or
terminated only by written instrument or written instruments signed by the
parties hereto. No act or course of dealing shall be deemed to constitute an
amendment, modification or termination hereof.
7.2. Restructuring of the Borrower. Ambac hereby acknowledges that in
order to preserve the economics of the Carried Interest (as defined in the
Operating Agreement) payable to the Special Member, the Borrower may desire to
establish a partnership, limited liability company or other business entity
through which it would conduct substantially all its investment activities, and
in order to achieve that desired objective, Ambac agrees to reasonably
cooperate with the Borrower, at the sole expense of the Borrower, to amend,
supplement or otherwise modify the terms and provisions of the Credit
Agreement, the this Agreement, the Preferred Shares Insurance Agreement, the
Preferred Shares Auction Agency Agreement and the Preferred Shares
Broker-Dealer Agreement or any of the Collateral Documents, in each case in a
manner that would not result in a Material Adverse Change; provided that upon
any such amendment, supplement or modification, the Rating Agency Condition
shall be satisfied.
7.3. Notices. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by registered mail, electronic mail or personally
delivered or telecopied to the recipient as follows:
(a) To Ambac:
Ambac Assurance Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Risk Management, Structured Finance
and Credit Derivatives
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
(in each case in which notice or other communication to Ambac refers to an
Event of Default, a claim on the Loans Insurance Policy or any other event
with respect to which failure on the part of Ambac 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 the General
Counsel and shall be marked to indicate "URGENT MATERIAL ENCLOSED.")
(b) To the Borrower:
Special Value Expansion Fund, LLC
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.
7.4. Severability. In the event that any provision of this Agreement
shall be held invalid or unenforceable by any court of competent jurisdiction,
the parties hereto agree that such holding shall not invalidate or make
unenforceable any other provision hereof. The parties hereto further agree that
the holding by any court of competent jurisdiction that any remedy pursued by
any party hereto is unavailable or unenforceable shall not affect in any way
the ability of such party to pursue any other remedy available to it.
7.5. 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 LAWS PROVISIONS.
7.6. Consent to Jurisdiction. (a) THE PARTIES HERETO HEREBY
IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK
LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT WHICH HEARS
APPEALS FROM ANY COURT THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT
AGAINST IT AND TO OR IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREUNDER OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE
THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD OR
DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN
SUCH FEDERAL COURT. THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH
ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND
AGREE NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER OR THAT THE TRANSACTION DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY
NOT BE LITIGATED IN OR BY SUCH COURTS.
(b) To the extent permitted by applicable law, the parties hereto
shall not seek and hereby waive the right to any review of the judgment of any
such court by any court of any other nation or jurisdiction which may be called
upon to grant an enforcement of such judgment.
The Borrower shall appoint and designate an agent for acceptance of
service of legal process in the City of New York. The Borrower agrees that
service of such process upon such Person shall constitute personal service of
such process upon it. The name and address of such process agent is:
CT Corporation
▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
(c) Nothing contained in the Agreement shall limit or affect Ambac's
right to serve process in any other manner permitted by law or to start legal
proceedings relating to any of the Transaction Documents against the Borrower
or their property in the courts of any jurisdiction.
7.7. Consent of Ambac. In the event that Ambac's consent is required
under any of the Transaction Documents, the determination whether to grant or
withhold such consent shall be made by Ambac in its sole discretion, except as
otherwise expressly provided therein without any implied duty towards any other
Person.
7.8. Counterparts. This Agreement may be executed in counterparts by
the parties hereto, and all such counterparts shall constitute one and the same
instrument.
7.9. Headings. The headings of articles and sections and the table of
contents contained in this Agreement are provided for convenience only. They
form no part of this Agreement and shall not affect its construction or
interpretation.
7.10. Trial by Jury Waived. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH
ANY OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREUNDER. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION
DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER.
7.11. Limited Liability. No recourse under this Agreement or any other
Transaction Document shall be had against, and no personal liability shall
attach to, any officer, employee, director, affiliate, advisor or
securityholder of any party hereto, by the enforcement of any assessment or by
any legal or equitable proceeding, by virtue of any statute or otherwise in
respect of any of the Transaction Documents or the Loans Insurance Policy, it
being expressly agreed and understood that each Transaction Document is solely
a corporate obligation of each party hereto (but only to the extent such party
is a party to such Transaction Document), and that any and all personal
liability, either at common law or in equity, or by statute or constitution, of
every such officer, employee, director, affiliate, advisor or securityholder
for breaches by any party hereto of any obligations under the Agreement or any
other Transaction Document is hereby expressly waived as a condition of and in
consideration for the execution and delivery of this Agreement.
7.12. Entire Agreement. This Agreement, the Loans Insurance Policy,
the Premium Letter and the Credit Agreement sets forth the entire agreement
between the parties with respect to the subject matter thereof, and this
Agreement, the Loans Insurance Policy, the Premium Letter and the Credit
Agreement supersede and replace any agreement or understanding that may have
existed between the parties prior to the date hereof in respect of such subject
matter.
7.13. Limited Recourse. Notwithstanding any other provision hereof,
the obligations of the Borrower hereunder are limited recourse obligations
payable solely from the Collateral in accordance with the Pledge and
Intercreditor Agreement and with the subordination provisions of the Pledge and
Intercreditor Agreement, and following the exhaustion of the Collateral, any
unsatisfied claims shall be extinguished and shall not thereafter revive.
7.14. No Bankruptcy Petition. Ambac covenants and agrees that, prior
to the date which is one year and one day or, if longer, the applicable
preference period then in effect, after the payment in full of all Senior
Indebtedness and Preferred Shares, it will not institute against, or join any
other Person in instituting against, the Borrower any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
proceedings under any bankruptcy, insolvency, reorganization or similar law.
7.15. Location of Delivery, etc. The parties hereto acknowledge that
this Agreement has been executed by Ambac, that this Agreement has been
delivered by the parties hereto and that the Loans Insurance Policy have been
issued and delivery received, all in the State of New York.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Insurance and Indemnity Agreement as of the day and year first
above written.
AMBAC ASSURANCE CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title:
SPECIAL VALUE EXPANSION FUND, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: President and Secretary
