Exhibit 10.2
EXECUTION COPY
INDEMNIFICATION AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
LONG BEACH ACCEPTANCE RECEIVABLES CORP.,
CITIGROUP GLOBAL MARKETS INC.
and
GREENWICH CAPITAL MARKETS, INC.
Dated as of September 20, 2006
Long Beach Acceptance Auto Receivables Trust 2006-B
$100,000,000 5.37% Asset Backed Notes, Class A-1,
$137,000,000 5.34% Asset Backed Notes, Class A-2,
$147,000,000 5.17% Asset Backed Notes, Class A-3,
$116,000,000 5.18% Asset Backed Notes, Class A-4
Section 1. Definitions ...................................................... 1
Section 2. Representations, Warranties and Agreements of
Financial Security ................................................3
Section 3. Representations, Warranties and Agreements of
the Underwriters ..................................................6
Section 4. Indemnification .................................................. 7
Section 5. Indemnification Procedures ....................................... 8
Section 6. Contribution ..................................................... 9
Section 7. Miscellaneous ................................................... 10
EXHIBIT A - Opinion of Associate General Counsel
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT, dated as of September 20, 2006, among
FINANCIAL SECURITY ASSURANCE INC. ("Financial Security"), LONG BEACH ACCEPTANCE
RECEIVABLES CORP. (the "Company"), CITIGROUP GLOBAL MARKETS INC., ("Citigroup")
and GREENWICH CAPITAL MARKETS, INC. ("RBS GC" and, together with Citigroup, the
"Underwriters"):
Section 1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings provided below:
"Agreement" means this Indemnification Agreement, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms hereof.
"Commission" means the Securities and Exchange Commission.
"Company Party" means any of the Company, its parent, subsidiaries
and affiliates and any shareholder, director, officer, employee, agent or
"controlling person" (as such term is used in the Securities Act) of any of the
foregoing.
"Federal Securities Laws" means the Securities Act, the Securities
Exchange Act of 1934, the Trust Indenture Act of 1939, the Investment Company
Act of 1940, the Investment Advisers Act of 1940 and the Public Utility Holding
Company Act of 1935, each as amended from time to time, and the rules and
regulations in effect from time to time under such Acts.
"Financial Security Agreements" means this Agreement, the Spread
Account Agreement and the Insurance Agreement.
"Financial Security Information" has the meaning provided in Section
2(g) hereof.
"Financial Security Party" means any of Financial Security, its
parent, subsidiaries and affiliates, and any shareholder, director, officer,
employee, agent or "controlling person" (as such term is used in the Securities
Act) of any of the foregoing.
"Free Writing Prospectus" means the Free Writing Prospectus dated
September 18, 2006 relating to the Securities.
"Indemnified Party" means any party entitled to any indemnification
pursuant to Section 4 hereof.
"Indemnifying Party" means any party required to provide
indemnification pursuant to Section 4 hereof.
"Insurance Agreement" means the Insurance and Indemnity Agreement,
dated as of September 1, 2006, among Financial Security, the Company and LBAC,
and Long Beach Acceptance Auto Receivables Trust 2006-B as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms thereof.
"LBAC" means Long Beach Acceptance Corp., a Delaware Corporation.
"Losses" means (a) any actual out-of-pocket damages incurred by the
party entitled to indemnification or contribution hereunder, (b) any actual
out-of-pocket costs or expenses incurred by such party, including reasonable
fees or expenses of its counsel and other expenses incurred in connection with
investigating or defending any claim, action or other proceeding which entitle
such party to be indemnified hereunder (subject to the limitations set forth in
Section 5 hereof), to the extent not paid, satisfied or reimbursed from funds
provided by any other Person other than an affiliate of such party (provided
that the foregoing shall not create or imply any obligation to pursue recourse
against any such other Person), plus (c) interest on the amount paid by the
party entitled to indemnification or contribution from the date of such payment
to the date of payment by the party who is obligated to indemnify or contribute
hereunder at the statutory rate applicable to judgments for breach of contract.
"Offering Document" means the Prospectus, Prospectus Supplement, the
Free Writing Prospectus and any other material or documents delivered by the
Underwriters or any Underwriter Party to any Person in connection with the offer
or sale of the Securities.
"Person" means any individual, partnership, joint venture,
corporation, trust, unincorporated organization, limited liability company,
limited liability partnership or other organization or entity (whether
governmental or private).
"Policy" means the financial guaranty insurance policy delivered by
Financial Security with respect to the Securities.
"Prospectus" means, collectively, the Prospectus relating to the
Securities dated March 31, 2006, and the Prospectus Supplement.
"Prospectus Supplement" means the Prospectus Supplement dated
September 25, 2006 relating to the Securities.
"Rating Agencies" has the meaning provided in the last paragraph of
Section 2 hereof.
"Representative" means Citigroup as representative of the
Underwriters.
"Securities" means the Long Beach Acceptance Auto Receivables Trust
2006-B $100,000,000 5.37% Asset Backed Notes, Class A-1, $137,000,000 5.34%
Asset
2
Backed Notes, Class A-2, $147,000,000 5.17% Asset Backed Notes, Class A-3, and
$116,000,000 5.18% Asset Backed Notes, Class A-4, each as described in the
Prospectus Supplement and covered by the Policy.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and any rule or regulation in effect from time to time under such
Act.
"Spread Account Agreement" means the Master Spread Account
Agreement, dated as of September 1, 2006 among the Company, the Collateral Agent
specified therein, Financial Security and the Trustee specified therein, as the
same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
"Underwriters" means Citigroup and RBS GC.
"Underwriter Information" has the meaning provided in Section 3(c)
hereof.
"Underwriter Party" means any of the Underwriters, its respective
parent, subsidiaries and affiliates and any shareholder, director, officer,
employee, or agent of the "controlling person" (as such item is used in the
Securities Act) of any of the foregoing.
"Underwriting Agreement" means the Underwriting Agreement dated as
of September 20, 2006 among the Company, LBAC and the Underwriters with respect
to the offer and sale of the Securities, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.
Section 2. Representations, Warranties and Agreements of Financial
Security. Financial Security represents, warrants and agrees with the parties
hereto as follows:
(a) Organization, Etc. Financial Security is a stock insurance
company duly organized, validly existing and authorized to transact
financial guaranty insurance business under the laws of the State of
New York.
(b) Authorization, Etc. The Policy and the Financial Security
Agreements have been duly authorized, executed and delivered by
Financial Security.
(c) Validity, Etc. The Policy and the Financial Security
Agreements constitute valid and binding obligations of Financial
Security, enforceable against Financial Security in accordance with
their terms, subject, as to the enforcement of remedies, to
bankruptcy, insolvency, reorganization, rehabilitation, moratorium
and other similar laws affecting the enforceability of creditors'
rights generally applicable in the event
3
of the bankruptcy or insolvency of Financial Security and to the
application of general principles of equity and subject, in the case
of this Agreement, to principles of public policy limiting the right
to enforce the indemnification provisions contained herein.
(d) Exemption From Registration. The Policy is exempt from
registration under the Securities Act.
(e) No Conflicts. Neither the execution or delivery by
Financial Security of the Policy or the Financial Security
Agreements, nor the performance by Financial Security of its
obligations thereunder, will conflict with any provision of the
certificate of incorporation or the bylaws of Financial Security nor
result in a breach of, or constitute a default under, any material
agreement or other instrument to which Financial Security is a party
or by which any of its property is bound nor violate any judgment,
order or decree applicable to Financial Security of any governmental
or regulatory body, administrative agency, court or arbitrator
having jurisdiction over Financial Security (except that, in the
published opinion of the Securities and Exchange Commission, the
indemnification provisions of this Agreement, insofar as they relate
to indemnification for liabilities arising under the Securities Act,
are against public policy as expressed in the Securities Act and are
therefore unenforceable).
(f) Financial Information. The consolidated balance sheets of
Financial Security as of December 31, 2005 and December 31, 2004 and
the related consolidated statements of income, changes in
shareholder's equity and cash flows for the fiscal years then ended,
and the interim consolidated balance sheets for Financial Security
as of March 31, 2006 and June 30, 2006, and the related statements
of income, changes in shareholders equity and cash flows for the
interim period then ended, furnished by Financial Security to the
Underwriters fairly present in all material respects the financial
condition of Financial Security as of such dates and for such
periods in accordance with generally accepted accounting principles
consistently applied (subject as to interim statements to normal
year-end adjustments) and since the date of the most current interim
consolidated balance sheet referred to above there has been no
change in the financial condition of Financial Security which would
materially and adversely affect its ability to perform its
obligations under the Policy.
(g) Financial Security Information. The information in the
Prospectus Supplement set forth under the caption "THE INSURER" (as
revised from time to time in accordance with the provisions hereof,
the "Financial Security Information") is limited and does not
purport to provide the scope of disclosure required to be included
in a prospectus
4
with respect to a registrant in connection with the offer and sale
of securities of such registrant registered under the Securities
Act. Within such limited scope of disclosure, however, as of the
date of the Prospectus Supplement and as of the date hereof, the
Financial Security Information does not contain any untrue statement
of a material fact, or omit to state a material fact necessary to
make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.
(h) Additional Information. Financial Security will furnish to
the Underwriters or the Company, upon request of the Underwriters or
the Company, as the case may be, copies of Financial Security's most
recent financial statements (annual or interim, as the case may be)
which fairly present in all material respects the financial
condition of Financial Security as of the dates and for the periods
indicated, in accordance with generally accepted accounting
principles consistently applied except as noted therein (subject, as
to interim statements, to normal year-end adjustments). In addition,
if the delivery of a Prospectus relating to the Securities is
required at any time prior to the expiration of nine months after
the time of issuance of the Prospectus in connection with the
offering or sale of the Securities, the Company or the Underwriters
will notify Financial Security of such requirement to deliver a
Prospectus and Financial Security will promptly provide the
Underwriters and the Company with any revisions to the Financial
Security Information that are in the judgment of Financial Security
reasonably necessary to prepare a supplement to the Prospectus.
(i) Opinion of Counsel. Financial Security will furnish to the
Underwriters and the Company, on the closing date for the sale of
the Securities, an opinion of its Assistant General Counsel, to the
effect set forth in Exhibit A attached hereto, dated such closing
date and addressed to the Company and the Underwriters.
(j) Consents and Reports of Independent Accountants. Financial
Security will furnish to the Underwriters and the Company, upon
request, as comfort from its independent accountants in respect of
its financial condition (i) at the expense of the Person specified
in the Insurance Agreement, a copy of the Prospectus, including
either a manually signed consent or a manually signed report of
Financial Security's independent accountants and (ii) the quarterly
review letter by Financial Security's independent accountants in
respect of the most recent interim financial statements of Financial
Security.
Nothing in this Agreement shall be construed as a representation or
warranty by Financial Security concerning the rating of its insurance financial
strength by Fitch Ratings, Xxxxx'x Investors Service, Inc., Standard & Poor's
and Rating and Investment Information, Inc. or any other rating assigned by a
rating agency (collectively, the
5
"Rating Agencies"). The Rating Agencies, in assigning such ratings, take into
account facts and assumptions not described in the Prospectus and the facts and
assumptions which are considered by the Rating Agencies, and the ratings issued
thereby, are subject to change over time.
Section 3. Representations, Warranties and Agreements of the
Underwriters. Each of the Underwriters represents, warrants and agrees with the
parties hereto as follows:
(a) Compliance With Laws. Such Underwriter will comply in all
material respects with all legal requirements in connection with
offers and sales of the Securities and make such offers and sales in
the manner provided in any Offering Document.
(b) Offering Document. Such Underwriter will not use, or
distribute to other broker-dealers for use, any Offering Document in
connection with the offer and sale of the Securities unless such
Offering Document includes such information as has been furnished by
Financial Security for inclusion therein and the information therein
concerning Financial Security has been approved by Financial
Security in writing. Financial Security hereby consents to the
information in respect of Financial Security included in the Free
Writing Prospectus and the Prospectus Supplement. Each Offering
Document will include the following statement:
"The Policy is not covered by the property/casualty insurance security
fund specified in Article 76 of the New York Insurance Law".
Each Offering Document including financial statements (other than
financial information included in the Financial Security Information) with
respect to Financial Security prepared in accordance with generally accepted
accounting principles will include the following statement immediately preceding
such financial statements:
"The New York State Insurance Department recognizes only statutory
accounting practices for determining and reporting the financial condition
and results of operations of an insurance company, for determining its
solvency under the New York Insurance Law, and for determining whether its
financial condition warrants the payment of a dividend to its
stockholders. No consideration is given by the New York State Insurance
Department to financial statements prepared in accordance with generally
accepted accounting principles in making such determinations."
(c) Underwriter Information. With respect to any Underwriter,
all material provided by such Underwriter for inclusion in any
Offering Document (as revised from time to time and certified by
such Underwriter in writing to constitute Underwriter Information,
the "Underwriter
6
Information"), insofar as such information relates to such
Underwriter, is true and correct in all material respects. In
respect of the Prospectus Supplement, the Underwriter Information
with respect to such Underwriter is limited to the information
relating to such Underwriter set forth (i) in the body of the
Prospectus Supplement under the caption "Method of Distribution" the
first, second and last paragraph and (ii) any other information
certified in writing by such Underwriter to be Underwriter
Information.
Section 4. Indemnification.
(a) Financial Security agrees, upon the terms and subject to
the conditions provided herein, to indemnify, defend and hold
harmless each Company Party and each Underwriter Party against (i)
any and all Losses incurred by them with respect to the offer and
sale of the Securities and resulting from Financial Security's
breach of any of its representations, warranties or agreements set
forth in Section 2 hereof and (ii) any and all Losses to which any
Company Party or Underwriter Party may become subject, under the
Securities Act or otherwise, insofar as such Losses arise out of or
result from an untrue statement of a material fact contained in any
Offering Document or the omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or omission was made in the
Financial Security Information included therein in accordance with
the provisions hereof.
(b) Each of the Underwriters agrees, severally and not
jointly, upon the terms and subject to the conditions provided
herein, to indemnify, defend and hold harmless each Financial
Security Party against (i) any and all Losses incurred by them with
respect to the offer and sale of the Securities and resulting from
such Underwriter's breach of any of its representations, warranties
or agreements set forth in Section 3 hereof and (ii) any and all
Losses to which any Financial Security Party may become subject,
under the Securities Act or otherwise, insofar as such Losses arise
out of or result from an untrue statement of a material fact
contained in any Offering Document or the omission to state therein
a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent,
but only to the extent, that such untrue statement or omission was
made in the Underwriter Information with respect to such Underwriter
included therein.
(c) Upon the incurrence of any Losses for which a party is
entitled to indemnification hereunder, the Indemnifying Party shall
reimburse the
7
Indemnified Party promptly upon establishment by the Indemnified
Party to the Indemnifying Party of the Losses incurred.
Section 5. Indemnification Procedures. Except as provided below in
Section 6 with respect to contribution, the indemnification provided herein by
an Indemnifying Party shall be the exclusive remedy of any and all Indemnified
Parties for the breach of a representation, warranty or agreement hereunder by
an Indemnifying Party; provided, however, that each Indemnified Party shall be
entitled to pursue any other remedy at law or in equity for any such breach so
long as the damages sought to be recovered shall not exceed the Losses incurred
thereby resulting from such breach. In the event that any action or regulatory
proceeding shall be commenced or claim asserted which may entitle an Indemnified
Party to be indemnified under this Agreement, such party shall give the
Indemnifying Party written or telegraphic notice of such action or claim
reasonably promptly after receipt of written notice thereof. The Indemnifying
Party shall be entitled to participate in and, upon notice to the Indemnified
Party, assume the defense of any such action or claim in reasonable cooperation
with, and with the reasonable cooperation of, the Indemnified Party. The
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof at the expense of the
Indemnified Party; provided, however, that the fees and expenses of such
separate counsel shall be at the expense of the Indemnifying Party if (i) the
Indemnifying Party has agreed to pay such fees and expenses, (ii) the
Indemnifying Party shall have failed to assume the defense of such action or
proceeding and employ counsel satisfactory to the Indemnified Party in any such
action or proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnified Party and the
Indemnifying Party, and the Indemnified Party shall have been advised by counsel
that (A) there may be one or more legal defenses available to it which are
different from or additional to those available to the Indemnifying Party and
(B) the representation of the Indemnifying Party and the Indemnified Party by
the same counsel would be inappropriate or contrary to prudent practice, in
which case, if the Indemnified Party notifies the Indemnifying Party in writing
that it elects to employ separate counsel at the expense of the Indemnifying
Party, the Indemnifying Party shall not have the right to assume the defense of
such action or proceeding on behalf of such Indemnified Party, it being
understood, however, that the Indemnifying Party shall not, in connection with
any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for all the
Company Parties, one such firm for all Underwriter Parties and one such firm for
all Financial Security Parties, as the case may be, which firm shall be
designated in writing by the Company in respect of the Company Parties, by the
Representative in respect of the Underwriter Parties and by Financial Security
in respect of the Financial Security Parties. The Indemnifying Party shall not
be liable for any settlement of any such claim or action unless the Indemnifying
Party shall have consented thereto or be in default in its obligations
hereunder. Any failure by an Indemnified Party to comply with the provisions of
this Section shall relieve
8
the Indemnifying Party of liability only if such failure is prejudicial to the
position of the Indemnifying Party and then only to the extent of such
prejudice.
Section 6. Contribution.
(a) To provide for just and equitable contribution if the
indemnification provided by any Indemnifying Party is determined to
be unavailable for any Indemnified Party (other than due to
application of this Section), each Indemnifying Party shall
contribute to the Losses arising from any breach of any of its
representations, warranties or agreements contained in this
Agreement on the basis of the relative fault of each of the parties
as set forth in Section 6(b) below; provided, however, that an
Indemnifying Party shall in no event be required to contribute to
all Indemnified Parties an aggregate amount in excess of the Losses
incurred by such Indemnified Parties resulting from the breach of
representations, warranties or agreements contained in this
Agreement.
(b) The relative fault of each Indemnifying Party, on the one
hand, and of each Indemnified Party, on the other, shall be
determined by reference to, among other things, whether the breach
of, or alleged breach of, any representations, warranties or
agreements contained in this Agreement relates to information
supplied by, or action within the control of, the Indemnifying Party
or the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such breach.
(c) The parties agree that Financial Security shall be solely
responsible for the Financial Security Information, each Underwriter
shall be solely responsible for the Underwriter Information with
respect to such Underwriter and that the balance of each Offering
Document shall be the responsibility of LBAC and the Company.
(d) Notwithstanding anything in this Section 6 to the
contrary, no Underwriter shall be required to contribute an amount
in excess of the amount by which the total principal balance of the
Securities underwritten by such Underwriter exceeds the amount of
any damages that such Underwriter has otherwise been required to pay
in respect of any breach by such Underwriter of its representations
or warranties contained in Section 3 hereof.
(e) No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
9
(f) Upon the incurrence of any Losses entitled to contribution
hereunder, the contributor shall reimburse the party entitled to
contribution promptly upon establishment by the party entitled to
contribution to the contributor of the Losses incurred.
Section 7. Miscellaneous.
(a) Notices. All notices and other communications provided for
under this Agreement shall be delivered to the address set forth
below or to such other address as shall be designated by the
recipient in a written notice to the other party or parties hereto:
If to Financial Security:
Financial Security Assurance Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Senior Vice President--Transaction
Oversight Department (with a copy to the Attention
of the General Counsel)
Re: Long Beach Acceptance Auto Receivables Trust
2006-B
Policy No. 51759-N
Confirmation: (000) 000-0000
Facsimile Nos.: (000) 000-0000, (000) 000-0000 (in
each case in which notice or other communication
to Financial Security refers to an Event of
Default, a claim on the Policy or with respect to
which failure on the part of Financial Security to
respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other
communication should also be sent to the attention
of each of the General Counsel and the
Head-Financial Guaranty Group and shall be marked
to indicate "URGENT MATERIAL ENCLOSED.")
If to the Company:
Long Beach Acceptance Receivables Corp.
Xxx Xxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
Confirmation: (000) 000-0000
10
If to the Citigroup:
Citigroup Global Markets Inc.
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Asset Backed Finance
Facsimile No.: (000) 000-0000
Confirm No. (000) 000-0000
Phone: (000) 000-0000
If to the RBS GC:
Greenwich Capital Markets, Inc.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Asset-Backed Finance
Facsimile No: (000) 000-0000
Confirm No: (000) 000-0000
(b) Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND THIS AGREEMENT AND ALL MATTERS ARISING OUT OF
OR RELATING IN ANY WAY TO THIS AGREEMENT SHALL BE GOVERNED BY, THE
LAW OF THE STATE OF NEW YORK.
(c) Assignments. This Agreement may not be assigned by any
party without the express written consent of each other party. Any
assignment made in violation of this Agreement shall be null and
void.
(d) Amendments. Amendments of this Agreement shall be in
writing signed by each party hereto.
(e) Survival, Etc. The indemnity and contribution agreements
contained in this Agreement shall remain operative and in full force
and effect, regardless of (i) any investigation made by or on behalf
of any Indemnifying Party, (ii) the issuance of the Securities or
(iii) any termination of this Agreement or the Policy. The
indemnification provided in this Agreement will be in addition to
any liability which the parties may otherwise have and shall in no
way limit any obligations of LBAC or the Company under the
Underwriting Agreement or under the Insurance Agreement.
(f) Counterparts. This Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall
constitute one and the same instrument.
11
[Remainder of Page Intentionally Blank]
12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
FINANCIAL SECURITY ASSURANCE INC.
By:______________________________
Name:
Title:
LONG BEACH ACCEPTANCE
RECEIVABLES CORP.
By:______________________________
Name:
Title:
CITIGROUP GLOBAL MARKETS INC.
By:______________________________
Name:
Title:
GREENWICH CAPITAL MARKETS, INC.
By:______________________________
Name:
Title:
13
EXHIBIT A
OPINION OF ASSOCIATE GENERAL COUNSEL
Based upon the foregoing, I am of the opinion that:
1. Financial Security is a stock insurance company duly organized,
validly existing and authorized to transact financial guaranty insurance
business under the laws of the State of New York.
2. The Policy, the Insurance Agreement and the Indemnification
Agreement been duly authorized, executed and delivered by Financial Security.
3. The Policy, the Insurance Agreement and the Indemnification
Agreement constitute valid and binding obligations of Financial Security,
enforceable against Financial Security in accordance with their terms, subject,
as to the enforcement of remedies, to bankruptcy, insolvency, reorganization,
rehabilitation, moratorium and other similar laws affecting the enforceability
of creditors' rights generally applicable in the event of the bankruptcy or
insolvency of Financial Security and to the application of general principles of
equity and subject, in the case of the Indemnification Agreement, to principles
of public policy limiting the right to enforce the indemnification provisions
contained therein insofar as they relate to indemnification for liabilities
arising under applicable securities laws.
4. The Policy is exempt from registration under the Securities Act
of 1933, as amended (the "Act").
5. Neither the execution or delivery by Financial Security of the
Policy or the Insurance Agreement or the Indemnification Agreement, nor the
performance by Financial Security of its obligations thereunder, will conflict
with any provision of the certificate of incorporation or the bylaws of
Financial Security or, to the best of my knowledge, result in a breach of, or
constitute a default under, any agreement or other instrument to which Financial
Security is a party or by which it or any of its property is bound or, to the
best of my knowledge, violate any judgment, order or decree applicable to
Financial Security of any governmental or regulatory body, administrative
agency, court or arbitrator having jurisdiction over Financial Security (except
that in the published opinion of the Securities and Exchange Commission the
indemnification provisions of the Indemnification Agreement, insofar as they
relate to indemnification for liabilities arising under the Act, are against
public policy as expressed in the Act and are therefore unenforceable).
6. In addition, please be advised that I have reviewed the
description of Financial Security under the caption "THE INSURER" in the
Prospectus Supplement dated September 25, 2006 and in the Free Writing
Prospectus dated September 18, 2006 (each, an "Offering Document") of the
Company with respect to the Securities. The information provided in each
Offering Document with respect to Financial Security is
14
limited and does not purport to provide the scope of disclosure required to be
included in a prospectus with respect to a registrant under the Securities Act
of 1933, as amended, in connection with the public offer and sale of securities
of such registrant. Within such limited scope of disclosure, however, there has
not come to my attention any information which would cause me to believe that
the description of Financial Security referred to above, as of the date of the
Free Writing Prospectus, the date of the Prospectus Supplement or the date
hereof, contained any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading (except that no opinion
is rendered with respect to any financial statements or other financial
information contained or referred to therein).
15
