--------------------------------------------------------------------------------
INSURANCE AND INDEMNITY AGREEMENT
between
FINANCIAL SECURITY ASSURANCE INC.
and
ACCREDITED HOME LENDERS, INC.
Dated as of September 1, 1996
$92,121,000
------------------------------------------------------
Mortgage Loan Asset-Backed Certificates, Series 1996-1
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
INTRODUCTORY STATEMENTS
ARTICLE I DEFINITIONS; LIMITED RECOURSE
Section 1.01. Definitions...................................... 1
Section 1.02. Limited Recourse................................. 1
ARTICLE II REPRESENTATIONS, WARRANTIES AND
COVENANTS
Section 2.01. Representations and Warranties of
the Company............................................... 2
Section 2.02. [Intentionally Omitted........................... 5
Section 2.03. Affirmative Covenants of the
Company................................................... 5
Section 2.04. [Intentionally Omitted........................... 7
Section 2.05. Negative Covenants of the Company................ 7
Section 2.06. [Intentionally Omitted........................... 8
ARTICLE III THE POLICY; REIMBURSEMENT;
INDEMNIFICATION
Section 3.01. Issuance of the Policy........................... 8
Section 3.02. Payment of Fees and Premium...................... 8
Section 3.03. Reimbursement and Additional Payment
Obligation................................................ 9
Section 3.04. Indemnification.................................. 10
Section 3.05. Subrogation...................................... 11
ARTICLE IV FURTHER AGREEMENTS
Section 4.01. Effective Date: Term of Agreement................ 12
Section 4.02. Obligations Absolute............................ 12
Section 4.03. Assignments; Reinsurance;
Third-Party Rights........................................ 13
Section 4.04. Liability of FSA................................ 13
Section 5.01. Events of Default................................ 14
Section 5.02. Remedies: Waivers................................ 15
ARTICLE VI MISCELLANEOUS
Section 6.01. Amendments. Etc.................................. 16
Section 6.02. Notices.......................................... 16
Section 6.03. Payment Procedure................................ 17
Section 6.04. Severability..................................... 17
Section 6.05. Governing Law.................................... 17
Section 6.06. Consent to Jurisdiction.......................... 17
Section 6.07. Consent of FSA................................... 18
i
Section 6.08. Counterparts..................................... 18
Section 6.09. Trial by Jury Waived............................. 18
Section 6.10. Limited Liability................................ 18
Section 6.11. Entire Agreement................................. 19
APPENDIX I
DEFINITIONS
Appendix I--Definitions
Appendix II--Opinions of Counsel
Annex I--Form of Policy
Appendix A--Conditions Precedent to Issuance of the Policy
ii
INSURANCE AND INDEMNITY AGREEMENT
INSURANCE AND INDEMNITY AGREEMENT (this "Agreement"), dated as of September 1,
1996, between FINANCIAL SECURITY ASSURANCE INC. ("FSA") and ACCREDITED HOME
LENDERS, INC. (the "Company").
INTRODUCTORY STATEMENTS
Pursuant to a Pooling and Servicing Agreement, dated as of September 1,
1996, made by and between the Company, as sponsor and master servicer, and
Bankers Trust Company, as trustee (the "Trustee"), $92,121,000 Accredited
Mortgage Loan Trust 1996-1 Mortgage Loan Asset-Backed Certificates, Series
1996-1, Class A-1 and Class A-2 Certificates (collectively, the "Securities"),
together with Class B-1, Class B-2 and Class R Certificates, are being issued.
The Company has requested that FSA issue a financial guaranty insurance
policy guarantying certain distributions of the principal of and interest on the
Securities (including any such distributions subsequently avoided as a
preference under applicable bankruptcy law) upon the terms and subject to the
conditions provided herein.
The parties hereto desire to specify the conditions precedent to the
issuance of the Policy by FSA, the payment of premium in respect of the Policy,
the indemnity and reimbursement to be provided to FSA in respect of amounts paid
by FSA under the Policy or otherwise and certain other matters.
In consideration of the premises and of the agreements herein contained,
FSA and the Company hereby agree as follows:
ARTICLE I
DEFINITIONS; LIMITED RECOURSE
Section 1.01. Definitions. Capitalized terms used herein shall have the
meanings provided in Appendix I hereto or, if not defined in Appendix I shall
have the meanings provided in the Pooling and Servicing Agreement.
Section 1.02. Limited Recourse. Notwithstanding any provision of this
Agreement to the contrary, the payment obligations of the Company set forth
herein (other than those set forth in Sections 3.02 and Section 3.04) shall be
non-recourse obligations and shall be payable only from monies available for
such payment in accordance with the provisions of the Pooling and Servicing
Agreement (except to the extent that any such payment obligation arises from a
failure to perform or default of the Company or any affiliate thereof in
accordance with the Pooling and Servicing Agreement or any other Transaction
Document or by reason of gross negligence, willful misconduct or bad faith on
the part of the Company in the performance of its duties and
obligations thereunder or reckless disregard by the Company of its duties and
obligations thereunder).
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Company. The Company
represents, warrants and covenants, as of the date hereof and as of the Date of
Issuance, as follows:
(a) Due Organization and Qualification. The Company is a
corporation, duly organized, validly existing and in good standing under
the laws of the state of California. The Company is duly qualified to do
business, is in good standing and has obtained all necessary licenses,
permits, charters, registrations and approvals (together, "approvals")
necessary for the conduct of its business as currently conducted and as
described in the Offering Document and the performance of its obligations
under the Transaction Documents to which it is a party, in each
jurisdiction in which the failure to be so qualified or to obtain such
approvals would, in any respect, have a material adverse effect upon the
Transaction.
(b) Power and Authority. The Company has all necessary corporate
power and authority to conduct its business as currently conducted and as
described in the Offering Document, to execute the Transaction Documents
to which it is a party, to deliver and perform its obligations under such
Transaction Documents and to consummate the Transaction.
(c) Due Authorization. The execution, delivery and performance by
the Company of the Transaction Documents to which it is a party have been
duly authorized by all necessary corporate action on the part of the
Company and do not require any additional approvals or consents or other
action by, or any notice to or filing by the Company (other than filings
contemplated by the Pooling and Servicing Agreement and routine filings by
the Company under the Securities Exchange Act of 1934, as amended) or any
affiliate thereof with, any Person, including, without limitation, any
governmental entity or the Company's stockholders.
(d) Noncontravention. Neither the execution and delivery of the
Transaction Documents to which it is a party by the Company, the
consummation of the transactions contemplated thereby nor the satisfaction
of the terms and conditions of such Transaction Documents,
(i) conflicts with or results in any breach or violation of
any provision of the charter or Bylaws of the Company or any law,
rule,
2
regulation, order, writ, judgment, injunction, decree, determination
or award currently in effect having applicability to the Company or
any of its properties, including regulations issued by an
administrative agency or other governmental authority having
supervisory powers over the Company,
(ii) constitutes a default by the Company under or a breach of
any provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Company is a party or by which
it or any of its affiliates or their properties is or may be bound
or affected, or
(iii) results in or requires the creation of any Lien upon or
in respect of any of the Company's assets except as otherwise
expressly contemplated by the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or
investigation by or before any court, governmental or administrative
agency or arbitrator against or affecting all or any of the Mortgage
Loans, or the Company, or any properties or rights of the Company, pending
or, to the Company's knowledge after reasonable inquiry, threatened,
which, in any case, if decided adversely to the Company, would result in a
Material Adverse Change with respect to the Company or a material portion
of the Mortgage Loans.
(f) Valid and Binding Obligations. The Transaction Documents to
which Company is a party, when executed and delivered by the Company, will
constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equitable principles. The Securities, when executed, authenticated
and delivered in accordance with the Pooling and Servicing Agreement, will
be validly issued and outstanding and entitled to the benefits of the
Pooling and Servicing Agreement and, together with the Class B and Class R
Certificates, will evidence the entire beneficial ownership interest in
the Trust Estate.
(g) ERISA. No Accumulated Funding Deficiency, whether or not waived,
has occurred with respect to any Plan. No Plan has been terminated, and no
Commonly Controlled Entity has withdrawn from any Multiemployer Plan which
could result in any liability under ERISA of a Commonly Controlled Entity.
No Reportable Event or other event or condition has occurred which could
result in the termination of any Plan by the PBGC. No Plan has an
Underfunding greater than $100,000. The aggregate amount of Underfunding
for all Underfunded Plans does not exceed $100,000. The liability to which
the Commonly Controlled Entities would become subject under ERISA if they
were to withdraw completely from all Multiemployer Plans as of the most
recent
3
valuation date is not in excess of $100,000. The Multiemployer Plans are
neither in Reorganization (as defined in Section 4241 of ERISA) nor
Insolvent (as defined in Section 4245 of ERISA). The Company is in
compliance in all material respects with ERISA and has not incurred and
does not reasonably expect to incur any liabilities to the PBGC (other
than premiums due to the PBGC) in connection with any Plan or
Multiemployer Plan.
(h) Accuracy of Information. None of the Related Documents contains
any statement of a material fact with respect to the Company or the
Transaction that was untrue or misleading in any material respect when
made. Since the furnishing of the Related Documents, including any
revisions thereto, there has been no change, nor any development or event
involving a prospective change known to the Company, that would render any
of the Related Documents untrue or misleading in any material respect.
There is no fact known to the Company which has a material possibility of
causing a Material Adverse Change with respect to the Company or a
material portion of the Mortgage Loans.
(i) Transaction Documents. Each of the representations and
warranties of the Company contained in the Transaction Documents is true
and correct in all material respects and the Company hereby makes each
such representation and warranty to, and for the benefit of, FSA as if the
same were set forth in full herein.
(j) Compliance With Law. Etc. No practice, procedure or policy
employed or proposed to be employed by the Company in the conduct of its
business violates any law, regulation, judgment, agreement, order or
decree applicable to the Company which, if enforced, would result in a
Material Adverse Change with respect to the Company.
(k) Compliance With Securities Laws. The offer and sale of the
Securities comply in all material respects with all requirements of law,
including all registration requirements of applicable securities laws.
Without limitation of the foregoing, and except with respect to
information provided in writing by FSA to the Underwriter and the Company
(such information being limited to the information included under the
caption "The Certificate Insurer" and the financial statements
incorporated by reference in the Offering Document), the Offering Document
does not contain any untrue statement of a material fact and does not omit
to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under
which they were made, not misleading. The Trust Estate is not required to
be registered as an "investment company" under the Investment Company Act.
The Pooling and Servicing Agreement is not required to be qualified under
the Trust Indenture Act.
(l) Taxes. Any taxes, fees and other governmental charges due and
payable by the Company in connection with the Transaction, the execution
and
4
delivery of the Transaction Documents and the issuance of the Securities
have been paid or shall have been paid at or prior to the Date of
Issuance.
(m) Good Title: Absence of Liens: Security Interest. The Company is
the owner of, and has good and marketable title to, the Mortgage Loans
free and clear of all Liens and Restrictions on Transferability other than
such Liens or Restrictions on Transferability as will be satisfied or
removed concurrently with the transfer of the Mortgage Loans to the Trust
Estate, and has full right, corporate power and lawful authority to
assign, transfer and pledge the Mortgage Loans. In the event that, in
contravention of the intention of the parties, the transfer of the
Mortgage Loans by the Company to the Trust Estate is characterized as
other than a sale, such transfer shall be characterized as a secured
financing, and the Trustee shall, for the benefit of the Owners and FSA,
have a valid and perfected first priority security interest in the
Mortgage Loans free and clear of all Liens and Restrictions on
Transferability.
(n) Solvency; Fraudulent Conveyance. The Company is solvent and will
not be rendered insolvent by the transactions contemplated by the
Transaction Documents and, after giving effect to such transactions, the
Company will not be left with an unreasonably small amount of capital with
which to engage in its business. The Company does not intend to incur, or
believe that it has incurred, debts beyond its ability to pay such debts
as they mature. The Company does not contemplate the commencement of
insolvency, bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Company or any of its assets. The amount of
consideration being received by the Company upon the sale of the
Securities to the Underwriter constitutes reasonably equivalent value and
fair consideration for the interest in the Mortgage Loans evidenced by the
Securities. The Company is not selling the Securities to the Underwriter,
as provided in the Transaction Documents, with any intent to hinder, delay
or defraud any of the Company's creditors.
Section 2.02. [Intentionally Omitted].
Section 2.03. Affirmative Covenants of the Company. The Company hereby
agrees that during the Term of the Agreement, unless FSA shall otherwise
expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws. The Company
shall perform each of its obligations under the Transaction Documents and
shall comply with all material requirements of, and the Securities shall
be offered and sold in accordance with, any law, rule or regulation
applicable to it or thereto, or that are required in connection with its
performance under any of the Transaction Documents.
5
(b) Corporate Existence. The Company shall maintain its corporate
existence and shall at all times continue to be duly organized under the
laws of the state of its incorporation and duly qualified and duly
authorized (as described in Sections 2.01(a), (b) and (c) hereof) and
shall conduct its business in accordance with the terms of its articles of
incorporation and bylaws.
(c) Financial Statements; Accountants' Reports; Other Information.
The Company shall keep or cause to be kept in reasonable detail books and
records of account of the Company's assets and business, and shall clearly
reflect therein the transfer of the Mortgage Loans to the Trust and the
sale of the Securities to the Underwriter as a sale of the Company's
interest in the Mortgage Loans evidenced by the Securities. The Company
shall furnish or caused to be furnished to FSA:
(i) Promptly upon receipt thereof, copies of all reports,
statements, certifications, schedules, or other similar items
delivered to or by the Company pursuant to the terms of the
Transaction Documents and, promptly upon request, such other data as
FSA may reasonably request; provided, however, that the Company
shall not be required to deliver any such items if provision by some
other party to FSA is required under the Related Documents unless
such other party wrongfully fails to deliver such item. The Company
shall, upon the request of FSA, permit FSA or its authorized agents
(A) to inspect the books and records of the Company as they may
relate to the Securities, the Mortgage Loans, the obligations of the
Company under the Transaction Documents, the Transaction and, but
only following the occurrence of a Trigger Event, the Company's
business; (B) to discuss the affairs, finances and accounts of the
Company with the Chief Operating Officer and the Chief Financial
Officer of the Company, no more frequently than annually unless a
Trigger Event has occurred; and (C) upon the occurrence of a Trigger
Event, to discuss the affairs, finances and accounts of the Company
with the Company's independent accountants, provided that an officer
of the Company shall have the right to be present during such
discussions. Such inspections and discussions shall be conducted
during normal business hours and shall not unreasonably disrupt the
business of the Company. In addition, the Company shall promptly
(but in no case more than 30 days following issuance or receipt by
the Commonly Controlled Entity) provide to FSA a copy of all
correspondence between a Commonly Controlled Entity and the PBGC,
IRS, Department of Labor or the administrators of a Multiemployer
Plan relating to any Reportable Event or the underfunded status,
termination or possible termination of a Plan or a Multiemployer
Plan. The books and records of the Company will be maintained at the
address of the Company designated herein for receipt of notices,
unless the Company shall otherwise advise the parties hereto in
writing.
6
(ii) The Company shall provide or cause to be provided to FSA
an executed original copy of each document executed in connection
with the Transaction within 30 days after the date of closing.
(d) Compliance Certificate. The Company shall deliver to FSA within
90 days after the close of each fiscal year of the Company a certificate
signed by an officer of the Company stating that:
(i) a review of the Company's performance under the
Transaction Documents to which it is a party during such period has
been made under such officer's supervision; and
(ii) to the best of such individual's knowledge following
reasonable inquiry, no Trigger Event, Default or Event of Default
has occurred, or if a Trigger Event, Default or Event of Default has
occurred, specifying the nature thereof and, if the Company has a
right to cure any such Default or Event of Default, stating in
reasonable detail the steps, if any, being taken by the Company to
cure such Default or to otherwise comply with the terms of the
agreement to which such Default or Event of Default relates.
(e) Notice of Material Events. The Company shall promptly inform
FSA in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation (A)
with respect to a material portion of the Mortgage Loans or (B) in
which a request has been made for certification as a class action
(or equivalent relief) that would involve a material portion of the
Mortgage Loans;
(ii) any change in the location of the Company's principal
office or any change in the location of the Company's books and
records;
(iii) the occurrence of any Trigger Event, Default or Event of
Default; or
(iv) any other event, circumstance or condition that has
resulted, or has a material possibility of resulting, in a Material
Adverse Change in respect of the Company.
(f) Further Assurances. The Company shall, upon the request of FSA,
from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within thirty (30) days of such
request, such amendments hereto and such further instruments and take such
further action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Transaction Documents or to protect the
interest of the Trustee,
7
for the benefit of the Owners and FSA, in the Mortgage Loans, free and
clear of all Liens and Restrictions on Transferability except the Lien in
favor of the Trustee, for the benefit of the Owners and FSA, and the
Restrictions on Transferability imposed by the Pooling and Servicing
Agreement. In addition, the Company agrees to cooperate in good faith with
S&P and Moody's in connection with any review of the Transaction which may
be undertaken by S&P and Moody's after the date hereof.
(g) Existence. The Company shall maintain its existence and shall at
all times continue to be duly organized under the laws of the state of
California and duly qualified and duly authorized (as described in
Sections 2.01(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its Articles of Incorporation and By-Laws.
(h) Third-Party Beneficiary. The Company agrees that FSA shall have
all rights of a third-party beneficiary in respect of the Pooling and
Servicing Agreement and hereby incorporates and restates its
representations, warranties and covenants as set forth therein for the
benefit of FSA.
Section 2.04. [Intentionally Omitted.]
Section 2.05. Negative Covenants of the Company. The Company hereby agrees
that during the Term of the Agreement, unless FSA shall otherwise expressly
consent in writing:
(a) Restrictions on Liens. The Company shall not (i) create, incur
or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any
Lien or Restriction on Transferability on the Mortgage Loans except for
the Lien in favor of the Trustee, for the benefit of the Owners and FSA,
and the Restrictions on Transferability imposed by the Pooling and
Servicing Agreement or (ii) sign or file under the Uniform Commercial Code
of any jurisdiction any financing statement which names the Company as a
debtor, or sign any security agreement authorizing any secured party
thereunder to file such financing statement, with respect to the Mortgage
Loans, except in each case any such instrument solely securing the rights
and preserving the Lien of the Trustee, for the benefit of the Owners and
FSA.
(b) Impairment of Rights. The Company shall not take any action, or
fail to take any action, if such action or failure to take action may (i)
interfere with the enforcement of any rights under the Transaction
Documents that are material to the rights, benefits or obligations of the
Trustee, the Owners or FSA, (ii) result in a Material Adverse Change in
respect of any Mortgage Loan or (iii)
8
impair the ability of the Company to perform its obligations under the
Transaction Documents.
(c) Waiver, Amendments, Etc. The Company shall not waive, modify or
amend, or consent to any waiver, modification or amendment of, any of the
provisions of any of the Transaction Documents.
Section 2.06. [Intentionally Omitted.]
ARTICLE III
THE POLICY; REIMBURSEMENT; INDEMNIFICATION
Section 3.01. Issuance of the Policy. FSA agrees to issue the Policy
subject to satisfaction of the conditions precedent set forth in Appendix A
hereto.
Section 3.02. Payment of Fees and Premium.
(a) Legal Fees. On the Date of Issuance, the Company shall pay or
cause to be paid legal fees and disbursements incurred by FSA in
connection with the issuance of the Policy pursuant to the terms of the
Premium Letter.
(b) Rating Agency Fees. The initial fees of S&P and Moody's with
respect to the Securities and the transactions contemplated hereby shall
be paid by the Company in full on the Date of Issuance, or otherwise
provided for to the satisfaction of FSA. All periodic and subsequent fees
of S&P or Moody's with respect to, and directly allocable to, the
Securities shall be the responsibility of the Company. The fees for any
other rating agency shall be paid by the party requesting such other
agency's rating, unless such other agency is a substitute for S&P or
Moody's in the event that S&P or Xxxxx'x is no longer rating the
Securities, in which case the cost for such agency shall be the
responsibility of the Company.
(c) Auditors' Fees. In the event that FSA's auditors are required to
provide information or any consent in connection with the Offering
Document prepared prior to the Date of Issuance, fees therefor in an
amount set forth in the Premium Letter shall be paid by the Company. The
Company shall pay on demand any additional fees of FSA's auditors payable
in respect of any Offering Document that are reasonably incurred after the
Date of Issuance. It is understood that FSA's auditors shall not incur any
additional fees in respect of future offering documents except at the
request of or with the consent of the Company.
9
(d) Premium. In consideration of the issuance by FSA of the Policy,
FSA shall be entitled to receive the Premium as and when due in accordance
with the terms of the Premium Letter (i) in the case of Premium due on or
before the Date of Issuance, directly from the Company and (ii) in the
case of Premium due after the Date of Issuance pursuant to Section 7.5 of
the Pooling and Servicing Agreement. The Premium paid hereunder or under
the Pooling and Servicing Agreement shall be nonrefundable without regard
to whether FSA makes any payment under the Policy or any other
circumstances relating to the Securities or provision being made for
payment of the Securities prior to maturity.
Section 3.03. Reimbursement and Additional Payment Obligation. The
Company agrees to pay to FSA the following amounts as and when incurred:
(a) a sum equal to the total of all amounts paid by FSA under the
Policy;
(b) any and all out-of-pocket charges, fees, costs and expenses
which FSA may reasonably pay or incur, including, but not limited to,
attorneys' and accountants' fees and expenses, in connection with (i) in
the event of payments under the Policy, any accounts established to
facilitate payments under the Policy, to the extent FSA has not been
immediately reimbursed on the date that any amount is paid by FSA under
the Policy, or other administrative expenses relating to such payments
under the Policy, (ii) the enforcement, defense or preservation of any
rights in respect of any of the Related Documents, including defending,
monitoring or participating in any litigation or proceeding (including any
insolvency or bankruptcy proceeding in respect of any participant in the
Transaction or any affiliate thereof) relating to any of the Related
Documents, any party to any of the Related Documents or the Transaction,
(iii) any amendment, waiver or other action with respect to, or related
to, any Related Document whether or not executed or completed, and (iv)
any review or investigation made by FSA in those circumstances where its
approval or consent is sought under any of the Related Documents;
(c) interest on any and all amounts described in Section 3.03 or
Section 3.02(d) from the date due to FSA pursuant to the provisions hereof
until payment thereof in full, payable to FSA at the Late Payment Rate per
annum; and
(d) any payments made by FSA on behalf of, or advanced to, the
Company including, without limitation, any amounts payable by the Company
pursuant to the Securities or any other Related Documents; and any
payments made by FSA as, or in lieu of, any servicing, management,
trustee, custodial or administrative fees payable, in the reasonable
discretion of FSA to third parties in connection with the Transaction.
Notwithstanding any provision of this Section to the contrary, the payment
obligations set forth herein shall be non-recourse obligations with respect to
the Company and shall
10
be payable only from monies available for such payment in accordance with the
provisions of the Pooling and Servicing Agreement (except to the extent that any
such payment obligation arises from a failure to perform or default of the
Company or any affiliate thereof under any Transaction Document or by reason of
gross negligence, willful misconduct or bad faith on the part of the Company in
the performance of its duties and obligations thereunder or reckless disregard
by the Company of its duties and obligations thereunder).
Section 3.04. Indemnification.
(a) Indemnification by the Company. In addition to any and all
rights of reimbursement, indemnification, subrogation and any other rights
pursuant hereto or under law or in equity, the Company agrees to pay, and
to protect, indemnify and save harmless, FSA and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls FSA
within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act from and against any and all claims, losses,
liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including, without limitation, reasonable fees
and expenses of attorneys, consultants and auditors and reasonable costs
of investigations) of any nature arising out of or relating to the
transactions contemplated by the Related Documents by reason of:
(i) the gross negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director,
officer, employee or agent of the Company;
(ii) the breach by the Company of any representation, warranty
or covenant under any of the Transaction Documents or the
occurrence, in respect of the Company, under any of the Transaction
Documents of any "event of default" or any event which, with the
giving of notice or the lapse of time or both, would constitute any
"event of default" with respect to the Company;
(iii) any untrue statement or alleged untrue statement of a
material fact contained in any 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 not
misleading, except insofar as such claims arise out of or are based
upon any untrue statement or omission in information included in an
Offering Document and furnished by FSA in writing expressly for use
therein (all such information so furnished being referred to herein
as "FSA Information"), it being understood that, in respect of the
initial Offering Document, the FSA Information is limited to the
information included under the caption "The Certificate Insurer" and
the financial statements of FSA incorporated therein by reference.
11
(b) Intentionally Omitted.
(c) Conduct of Actions or Proceedings. If any action or proceeding
(including any governmental investigation) shall be brought or asserted
against FSA, any officer, director, shareholder, employee or agent of FSA
or any Person controlling FSA (individually, an "Indemnified Party" and,
collectively, the "Indemnified Parties") in respect of which indemnity may
be sought from the Company (the "Indemnifying Party") hereunder, FSA shall
promptly notify the Indemnifying Party in writing, and the Indemnifying
Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to FSA and the payment of all expenses. An
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, within a reasonable period of
time, to assume the defense of such action or proceeding and employ
counsel reasonably satisfactory to FSA 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 the
Indemnified Parties, which firm shall be designated in writing by FSA).
The Indemnifying Party shall not be liable for any settlement of any such
action or proceeding effected without its written consent to the extent
that any such settlement shall be prejudicial to the Indemnifying Party,
but, if settled with its written consent, or if there be a final judgment
for the plaintiff in any such action or proceeding with respect to which
the Indemnifying Party shall have received notice in accordance with this
subsection (c), the Indemnifying Party agrees to indemnify and hold the
Indemnified Parties harmless from and against any loss or liability by
reason of such settlement or judgment.
(d) Contribution. To provide for just and equitable contribution if
the indemnification provided by the Indemnifying Party is determined to be
12
unavailable for any Indemnified Party (other than due to application of
this Section), each Indemnifying Party shall contribute to the losses
incurred by the Indemnified Party on the basis of the relative fault of
the Indemnifying Party, on the one hand, and the Indemnified Party, on the
other hand.
Section 3.05. Subrogation. Subject only to the priority of payment
provisions of the Pooling and Servicing Agreement, the Company acknowledges
that, to the extent of any payment made by FSA pursuant to the Policy, FSA is to
be fully subrogated to the extent of such payment and any additional interest
due on any late payment, to the rights of the Owners to any moneys paid or
payable in respect of the Securities under the Related Documents or otherwise.
The Company agrees to such subrogation and, further, agrees to execute such
instruments and to take such actions as, in the reasonable judgment of FSA, are
necessary to evidence such subrogation and to perfect the rights of FSA to
receive any moneys paid or payable in respect of the Securities under the
Related Documents or otherwise.
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date: Term of Agreement. This Insurance Agreement
shall take effect on the Date of Issuance and shall remain in effect until the
later of (a) such time as FSA is no longer subject to a claim under the Policy
and the Policy shall have been surrendered to FSA for cancellation and (b) all
amounts payable to FSA and the Owners under the Related Documents and under the
Securities have been paid in full; provided, however, that the provisions of
Sections 3.02, 3.03 and 3.04 hereof shall survive any termination of this
Agreement.
Section 4.02. Obligations Absolute.
(a) The payment obligations of the Company hereunder shall be
absolute and unconditional, and shall be paid strictly in accordance with
this Agreement under all circumstances irrespective of (i) any lack of
validity or enforceability of, or any amendment or other modifications of,
or waiver with respect to, any of the Related Documents, the Securities or
the Policy; (ii) any exchange or release of any other obligations
hereunder; (iii) the existence of any claim, setoff, defense, reduction,
abatement or other right which the Company may have at any time against
FSA or any other Person; (iv) any document presented in connection with
the Policy proving to be forged, fraudulent, invalid or insufficient in
any respect, including any failure to strictly comply with the terms of
the Policy, or any statement therein being untrue or inaccurate in any
respect; (v) any failure of the Company to receive the proceeds from the
sale of the Securities; (vii) any breach by the Company of any
representation, warranty or covenant contained in any of the Related
Documents; or (viii) any other circumstances, other than
13
payment in full, which might otherwise constitute a defense available to,
or discharge of, the Company in respect of any Related Document.
(b) The Company and any and all others who are now or may become
liable for all or part of the obligations of the Company under this
Agreement agree to be bound by this Agreement and (i) to the extent
permitted by law, waive and renounce any and all redemption and exemption
rights and the benefit of all valuation and appraisement privileges
against the indebtedness, if any, and obligations evidenced by any Related
Document or by any extension or renewal thereof; (ii) waive presentment
and demand for payment, notices of nonpayment and of dishonor, protest of
dishonor and notice of protest; (iii) 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 Related Documents; (iv) waive all rights of
abatement, diminution, postponement or deduction, or to any defense other
than payment, or to any right of setoff or recoupment arising out of any
breach under any of the Related Documents, by any party thereto or any
beneficiary thereof, or out of any obligation at any time owing to the
Company; (v) agree that any consent, waiver or forbearance hereunder with
respect to an event shall operate only for such event and not for any
subsequent event; (vi) consent to any and all extensions of time that may
be granted by FSA 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 (vii) 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 Company
from pursuing any rights or remedies it may have against any Person other
than FSA in a separate legal proceeding.
Section 4.03. 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 Company
may not assign its rights under this Agreement, or delegate any of its
duties hereunder, without the prior written consent of FSA. Any assignment
made in violation of this Agreement shall be null and void.
(b) FSA shall have the right to give participations in its rights
under this Agreement and to enter into contracts of reinsurance with
respect to the Policy upon such terms and conditions as FSA may in its
discretion determine;
14
provided, however, that no such participation or reinsurance agreement or
arrangement shall relieve FSA of any of its obligations hereunder or under
the Policy.
(c) In addition, FSA shall be entitled to assign or pledge to any
bank or other lender providing liquidity or credit with respect to the
Transaction or the obligations of FSA in connection therewith any rights
of FSA under the Related Documents or with respect to any real or personal
property or other interests pledged to FSA, or in which FSA has a security
interest, in connection with the Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or
claim, express or implied, upon any Person, including, particularly, any
Owner, other than FSA, against the Company, 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. Neither the Trustee nor any Owner shall have any right
to payment from any premiums paid or payable hereunder or from any other
amounts paid by the Company pursuant to Section 3.02, 3.03 or 3.04 hereof.
Section 4.04. Liability of FSA. Neither FSA nor any of its officers,
directors or employees shall be liable or responsible for: (a) the use which may
be made of the Policy by the Trustee or for any acts or omissions of the Trustee
in connection therewith or (b) the validity, sufficiency, accuracy or
genuineness of documents delivered to FSA (or its Fiscal Agent) in connection
with any claim under the Policy, or of any signatures thereon, even if such
documents or signatures should in fact prove to be in any or all respects
invalid, insufficient, fraudulent or forged (unless FSA had actual knowledge
thereof). In furtherance and not in limitation of the foregoing, FSA (or its
Fiscal Agent) may accept documents that appear on their face to be in order,
without responsibility for further investigation.
ARTICLE V
EVENTS OF DEFAULT; REMEDIES
Section 5.01. Events of Default. The occurrence of any of the following
events shall constitute an Event of Default with respect to the Company
hereunder:
(a) any representation or warranty made by the Company under any of
the Related Documents, or in any certificate or report furnished under any
of the Related Documents, shall prove to be untrue or incorrect in any
material respect; provided, however, that if the Company effectively cures
any such defect in any representation or warranty under any Related
Document, or certificate or report furnished under any Related Document,
within the time period specified
15
in the relevant Related Document as the cure period therefor, or, in
respect of this Agreement, if the Company effectively cures any such
defect in any representation or warranty hereunder, or certificate or
report furnished hereunder, within thirty (30) days of notice to the
Company or discovery thereof by the Company, such defect shall not in and
of itself constitute an Event of Default hereunder;
(b) (i) the Company shall fail to pay when due any amount payable by
the Company under any of the Related Documents unless such amounts are
paid in full within any applicable cure period explicitly provided for
under the relevant Related Document; (ii) the Company shall have asserted
that any of the Related Documents to which it is a party is not valid and
binding on the parties thereto; or (iii) any court, governmental authority
or agency having jurisdiction over any of the parties to any of the
Related Documents or any property thereof shall find or rule that any
material provision of any of the Related Documents is not valid and
binding on the parties thereto;
(c) the Company shall fail to perform or observe any other covenant
or agreement contained in any of the Related Documents (except for the
obligations described under clause (b) above) and such failure shall
continue for a period of 30 days after written notice given it; provided,
however, that, if such failure shall be of a nature that it cannot be
cured within 30 days, such failure shall not constitute an Event of
Default hereunder if within such 30-day period the Company shall have
given notice to FSA of corrective action it proposes to take, which
corrective action is agreed in writing by FSA to be satisfactory, such
written agreement not to be unreasonably withheld, and the Company shall
thereafter pursue such corrective action diligently until such default is
cured;
(d) the Company shall fail to pay its debts generally as they come
due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors, or shall
institute any proceeding seeking to adjudicate itself insolvent or seeking
a liquidation, or shall take advantage of any insolvency act, or shall
commence a case or other proceeding naming itself as debtor under the
United States Bankruptcy Code or similar law, domestic or foreign, or a
case or other proceeding shall be commenced against the Company under the
United States Bankruptcy Code or similar law, domestic or foreign, or any
proceeding shall be instituted against the Company seeking liquidation of
its assets and the Company shall fail to take appropriate action resulting
in the withdrawal or dismissal of such proceeding within 30 days or there
shall be appointed or the Company shall consent to, or acquiesce in, the
appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Company or the whole or any substantial part of
its properties or assets or the Company shall take any corporate action in
furtherance of any of the foregoing; and
16
(e) the occurrence of an "event of default" under any of the Related
Documents.
Section 5.02. Remedies: Waivers. (a) Upon the occurrence of an Event of
Default, FSA may exercise any one or more of the rights and remedies set forth
below:
(i) exercise any rights and remedies available under the Related
Documents with respect to the Company in its own capacity or in its
capacity as the Person entitled to exercise the rights of the Owners in
respect of the Securities; or
(ii) take whatever action at law or in equity that may appear
necessary or desirable in its judgment to enforce performance of any
obligation of the Company under the Related Documents.
(b) Unless otherwise expressly provided, no remedy herein conferred upon
or reserved 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 Related Documents or existing at law or in equity. No delay or failure
to exercise any right or power accruing under any Related 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 and power
may be exercised from time to time and as often as may be deemed expedient. In
order to entitle FSA to exercise any remedy reserved to FSA in this Article, it
shall not be necessary to give any notice, other than such notice as may be
expressly required in this Article.
(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 FSA, 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 FSA shall continue as though no such proceeding had been
instituted.
(d) FSA shall have the right, to be exercised in its complete 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 FSA and delivered to
the Company. Any such waiver may only be effected in a writing duly executed by
FSA, 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.
ARTICLE VI
MISCELLANEOUS
17
Section 6.01. 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.
Section 6.02. 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 or personally delivered or
telecopied to the recipient as follows:
(a) To FSA: Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Surveillance Department
Re: Accredited Mortgage Loan Trust 1996-1
Mortgage Loan Asset-Backed Certificates,
Series 1996-1
Confirmation: (000) 000-0000
Telecopy Nos.: (000) 000-0000, (000) 000-0000
(in each case in which notice or other
communication to FSA refers to an Event of
Default, a claim on the Policy or with
respect to which failure on the part of FSA
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.")
(b) To the Trustee: [Bankers Trust Company
Corporate Trust and Agency Group
Four Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: ____________________]
(c) To the Company: Accredited Home Lenders, Inc.
00000 Xxxxxx xx Xxxxxxx, Xxxxx 000
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: President and Executive Vice President
18
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other party as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03. Payment Procedure. In the event of any payment by FSA for
which it is entitled to be reimbursed or indemnified as provided above, the
Company agrees to accept the voucher or other evidence of payment as prima facie
evidence of the propriety thereof and the liability therefor to FSA. All
payments to be made to FSA under this Agreement shall be made to FSA in lawful
currency of the United States of America in immediately available funds to the
account number provided in the Premium Letter before 1:00 p.m. (New York, New
York time) on the date when due or as FSA shall otherwise direct by written
notice to the Company. In the event that the date of any payment to FSA 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. Payments to be made to FSA under this Agreement shall bear
interest at the Late Payment Rate from the date when due to the date paid.
Section 6.04. 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
render 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.
Section 6.05. Governing Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.
Section 6.06. 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 FROM ANY 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
19
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO HEREBY WAIVES AND
AGREES 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.
(c) The Company hereby irrevocably appoints and designates CT Corporation
System, whose address is 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, as its true
and lawful attorney and duly authorized agent for acceptance of service of legal
process. The Company agrees that service of such process upon such Person shall
constitute personal service of such process upon it.
(d) Nothing contained in this Agreement shall limit or affect FSA'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 Company or
its property in the courts of any jurisdiction.
Section 6.07. Consent of FSA. In the event that FSA's consent is required
under any of the Transaction Documents, the determination whether to grant or
withhold such consent shall be made by FSA in its sole discretion without any
implied duty towards any other Person, except as otherwise expressly provided
therein.
Section 6.08. Counterparts. This Agreement may be executed in counterparts
by the parties hereto, and all such counterparts shall constitute one and the
same instrument.
Section 6.09. 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
20
TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS
WAIVER.
Section 6.10. Limited Liability. No recourse under any Transaction
Document shall be had against, and no personal liability shall attach to, any
officer, employee, director, affiliate or shareholder of any party hereto, as
such, 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, the Securities or the Policy, it being expressly agreed
and understood that each Transaction Document is solely a corporate obligation
of each party hereto, 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 or shareholder for breaches by any party hereto of
any obligations under any Transaction Document is hereby expressly waived as a
condition of and in consideration for the execution and delivery of this
Agreement.
Section 6.11. Entire Agreement. This Agreement, the Premium Letter and the
Policy set forth the entire agreement between the parties with respect to the
subject matter thereof, and this Agreement supersedes and replaces any agreement
or understanding that may have existed between the parties prior to the date
hereof in respect of such subject matter.
21
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement, all as of the day and year first above written.
FINANCIAL SECURITY ASSURANCE INC.
By /s/ Xxxxxxx Xxxxxx
-----------------------------
Authorized Officer
ACCREDITED HOME LENDERS, INC.
By /s/ Xxx X. XxXxxxx
-----------------------------
Authorized Officer
22
APPENDIX I
DEFINITIONS
"Accumulated Funding Deficiency" shall have the meaning provided in
Section 412 of the Code and Section 302 of ERISA, whether or not waived.
"Agreement" means this Insurance and Indemnity Agreement.
"Business Day" means any day other than (a) a Saturday or Sunday or (b) a
day on which banking institutions in the City of New York, New York, or in the
city in which the Corporate Trust Office of the Trustee is located, are
authorized or obligated by law or executive order to be closed.
"Class B and Class R Certificates" means the Series 1996-1 Class B-1,
Class B-2 and Class R Certificates issued under the Pooling and Servicing
Agreement.
"Closing Date" means September 27, 1996.
"Code" means the Internal Revenue Code of 1986, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Commission" means the Securities and Exchange Commission.
"Commonly Controlled Entity" means the Company and each entity, whether or
not incorporated, which is affiliated with the Company pursuant to Section
414(b), (c), (m) or (o) of the Code.
"Company" means Accredited Home Lenders, Inc. and its successors.
"Date of Issuance" means the date on which the Policy is issued as
specified therein.
"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.
"ERISA" means the Employee Retirement Income Security Act of 1974,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Event of Default" means any event of default specified in Section 5.01 of
the Insurance Agreement.
"Expiration Date" means the final date of the Term of the Policy, as
specified in the Policy.
23
"FSA" means Financial Security Assurance Inc., a New York stock insurance
company, its successors and assigns.
"Financial Statements" means with respect to the Company the balance
sheets as of December 31, 1994 and 1995 and the statements of income, retained
earnings and cash flows for the 12-month period then ended and the notes thereto
and the balance sheet and the statement of income, retained earnings and cash
flows for the fiscal quarter ended June 30, 1996 and the notes thereto.
"Fiscal Agent" means the Fiscal Agent, if any, designated pursuant to the
terms of the Policy.
"Indemnification Agreement" means the Indemnification Agreement, dated as
of September 23, 1996 among FSA, the Company and the Underwriter, as the same
may be amended from time to time.
"Insurance Agreement" means this Insurance and Indemnity Agreement dated
as of September 1, 1996, between FSA and the Company, as the same may be amended
from time to time.
"Investment Company Act" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"IRS" means the Internal Revenue Service.
"Late Payment Rate" means the lesser of (a) the then applicable highest
rate of interest on the Securities and (b) the maximum rate permissible under
applicable usury or similar laws limiting interest rates. The Late Payment Rate
shall be computed on the basis of the actual number of days elapsed over a year
of 360 days.
"Lien" means, as applied to the property or assets (or the income or
profits therefrom) of any Person, in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or
otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease,
conditional sale or other title retention agreement, or other security interest
or encumbrance of any kind; or (b) any arrangement, express or implied, under
which such property or assets are transferred, sequestered or otherwise
identified for the purpose of subjecting or making available the same for the
payment of debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.
"Material Adverse Change" means, (a) in respect of any Person, a material
adverse change in the ability of such Person to perform its obligations under
any of the Transaction Documents to which it is a party and (b) in respect of
any Mortgage Loan, a material adverse change in (i) the value or marketability
of such Mortgage Loan or (ii)
24
the probability that amounts now or hereafter due in respect of such Mortgage
Loan will be collected in full.
"Moody's" means Xxxxx'x Investors Service, Inc., a Delaware corporation,
and any successor thereto, and, if such corporation shall for any reason no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized rating agency designated by
FSA.
"Mortgage Documents" means the Mortgage Notes, Mortgages, assignments of
Mortgages and other related documents required to be delivered to the Trustee
pursuant to Section ____ of the Pooling and Servicing Agreement.
"Mortgage Loan" has the meaning provided in the Pooling and Servicing
Agreement.
"Multiemployer Plan" means a multiemployer plan (within the meaning of
Section 4001(a)(3) of ERISA) in respect of which a Commonly Controlled Entity
makes contributions or has liability.
"Offering Document" means the Prospectus dated September 23, 1996 of the
Company in respect of the Securities and any amendment or supplement thereto and
any other offering document in respect of the Securities that makes reference to
the Policy.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.
"Person" means an individual, joint stock the Company, trust,
unincorporated association, joint venture, corporation, business or owner trust,
partnership or other organization or entity (whether governmental or private).
"Plan" means any pension plan (other than a Multiemployer Plan) covered by
Title IV of ERISA, which is maintained by a Commonly Controlled Entity or in
respect of which a Commonly Controlled Entity has liability.
"Policy" means the financial guaranty insurance policy, including any
endorsements thereto, issued by FSA with respect to the Securities,
substantially in the form attached as Annex I to this Agreement.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement, dated as of September 1, 1996, among the Company, as sponsor and
master servicer, and the Trustee on behalf of FSA and the Owners, pursuant to
which the Securities are to be issued and the Mortgage Loans are to be serviced
and administered, as the same may be amended from time to time.
25
"Premium" means the premium payable in accordance with Section 3.02 of
this Insurance Agreement.
"Premium Letter" means the side letter between FSA and the Company dated
the date hereof in respect of the premium payable by the Company in
consideration of the issuance of the Policy.
"Prospectus" means the form of prospectus, as supplemented, relating to
the Securities, as first filed with the Commission pursuant to Rule 424 under
the Securities Act.
"Related Documents" means the Transaction Documents and any documents,
agreements, instruments, schedules, certificates, statements, cash flow
schedules, number runs or other writings or data furnished to FSA by or on
behalf of the Company with respect to either of them, or the Transaction.
"Registration Statement" means the registration statement on Form S-3 (No.
33- 07219), including a form of prospectus, relating to the Securities, as
amended to the date hereof.
"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder.
"Restrictions on Transferability" means, as applied to the property or
assets (or the income or profits therefrom) of any Person, in each case whether
the same is consensual or nonconsensual or arises by contract, operation of law,
legal process or otherwise, any material condition to, or restriction on, the
ability of such Person or any transferee therefrom to sell, assign, transfer or
otherwise liquidate such property or assets in a commercially reasonable time
and manner or which would otherwise materially deprive such Person or any
transferee therefrom of the benefits of ownership of such property or assets.
"Securities" means $92,121,000 of the Accredited Mortgage Loan Trust
1996-1 Mortgage Loan Asset-Backed Certificates, Series 1996-1, Class A-1 and
Class A-2 Certificates issued pursuant to the Pooling and Servicing Agreement.
"Securities Act" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"S&P" means Standard & Poor's Corporation, a New York corporation, and any
successor thereto, and, if such corporation shall for any reason no longer
perform the
26
functions of a securities rating agency, "S&P" shall be deemed to refer to any
other nationally recognized rating agency designated by FSA.
"Subsidiary" means, with respect to any Person, any corporation of which a
majority of the outstanding shares of capital stock having ordinary voting power
for the election of directors is at the time owned by such Person directly or
through one or more Subsidiaries.
"Term of the Agreement" shall be determined as provided in Section 4.01 of
this Insurance Agreement.
"Term of the Policy" has the meaning provided in the Policy.
"Transaction" means the transaction contemplated by the Transaction
Documents, including the transaction described in the Offering Document.
"Transaction Documents" means this Insurance Agreement, the
Indemnification Agreement, the Pooling and Servicing Agreement, the Underwriting
Agreement and the Premium Letter.
"Trigger Event" means the occurrence of any one of the following: (a) an
Event of Default under this Insurance Agreement has occurred and is continuing,
(b) any legal proceeding or binding arbitration is instituted with respect to
the Transaction, (c) any governmental or administrative investigation, action or
proceeding is instituted that would, if adversely decided, result in a Material
Adverse Change in respect of the Company or of a material portion of the
Mortgage Loans or (d) FSA pays a claim under the Policy.
"Trust" has the meaning provided in the Pooling and Servicing Agreement.
"Trustee" means Bankers Trust Company, a New York banking corporation, as
trustee under the Pooling and Servicing Agreement, and any successor thereto as
trustee under the Pooling and Servicing Agreement.
"Trust Estate" has the meaning provided in the Pooling and Servicing
Agreement.
"Trust Indenture Act" means the Trust Indenture Act of 1939, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"Underfunded Plan" means any Plan that has an Underfunding.
"Underfunding" means, with respect to any Plan, the excess, if any, of (a)
the present value of all benefits under the Plan (based on the assumptions used
to fund the Plan pursuant to Section 412 of the Code) as of the most recent
valuation date over (b) the fair market value of the assets of such Plan as of
such valuation date.
27
"Underwriter" means any of Xxxxxx Brothers Inc., or its parents,
subsidiaries and affiliates and any shareholder, director, officer, employee,
agent or "controlling person" (as such item is used in the Securities Act) of
any of the foregoing.
"Underwriting Agreement" means the Underwriting Agreement between the
Underwriter and the Company with respect to the offer and sale of the
Securities, as the same may be amended from time to time.
28
APPENDIX II
OPINIONS OF COUNSEL
There shall be delivered to FSA opinions of counsel as follows:
(i) opinions to the effect that the Securities have been duly
issued, and the Transaction Documents have been duly executed and
delivered and constitute legal, valid and binding obligations, enforceable
in accordance with their respective terms;
(ii) opinions as to compliance with applicable securities laws,
including, but not limited to, opinions to the effect that:
(A) to the best of counsel's knowledge, no filing or
registration with or notice to or consent, approval, authorization
or order of any court or governmental authority or agency is
required for the consummation of the Transaction, except such as may
be required and have been obtained under the Securities Act and
state securities or "blue sky" laws;
(B) the Registration Statement is effective under the
Securities Act and, to the best of counsel's knowledge and
information, no stop order suspending the effectiveness of the
Registration Statement has been issued under the Securities Act or
proceedings therefor initiated or threatened by the Commission;
(C) the Trust Estate is not required to be registered under
the Investment Company Act; and
(D) the Pooling and Servicing Agreement is not required to be
qualified under the Trust Indenture Act;
(iii) an opinion to the effect that (A) the Trustee is the owner
of the Mortgage Loans, holding good and marketable title thereto; (B) the
Mortgage Loans would not be included as part of the estate of the Company
in the event of any receivership or insolvency proceedings in respect of
the Company; and (C) the transfer of the Mortgage Loans by the Company to
the Trustee would be characterized by a court of competent jurisdiction as
sales of such Mortgage Loans and not as a borrowing by the Company or a
relationship of joint ownership, partnership, joint venture or similar
arrangement;
(iv) an opinion to the effect that (A) the Trust Estate qualifies
as a REMIC for federal income tax purposes; and (B) the Trust Estate will
not be subject to income taxes in the State of New York.
29
APPENDIX A
TO INSURANCE AND INDEMNITY AGREEMENT
CONDITIONS PRECEDENT TO ISSUANCE OF THE POLICY
(a) Payment of Initial Premium and Expenses; Premium Letter. FSA
shall have been paid, by or on behalf of the Company; a nonrefundable Premium
and shall have been reimbursed, by or on behalf the Company, for other fees and
expenses identified in Section 3.02 of the Agreement payable at closing as
provided in the Premium Letter and FSA shall have received a fully executed copy
of the Premium Letter.
(b) Transaction Documents. FSA shall have received a copy of each of
the Transaction Documents, in form and substance satisfactory to FSA, duly
authorized, executed and delivered by each party thereto. Without limiting the
foregoing, the provisions of the Pooling and Servicing Agreement relating to the
payment to FSA of Premium due on the Policy and the reimbursement to FSA of
amounts paid under the Policy shall be in form and substance acceptable to FSA
in its sole discretion.
(c) Certified Documents and Resolutions. FSA shall have received a
copy of (i) the articles of incorporation and bylaws of the Company and (ii) the
resolutions of the Company's Board of Directors authorizing the transfer of the
Mortgage Loans to the Trust and the execution, delivery and performance by the
Company of the Transaction Documents and the transactions contemplated thereby,
certified by the Secretary or an Assistant Secretary of the Company (which
certificate shall state that such certificate of incorporation, bylaws and
resolutions are in full force and effect without modification on the Date of
Issuance).
(d) Incumbency Certificate. FSA shall have received a certificate of
the Secretary or an Assistant Secretary of the Company certifying the names and
signatures of the officers of the Company authorized to execute and deliver the
Transaction Documents and that shareholder consent to the execution and delivery
of such documents is not necessary.
(e) Representations and Warranties; Certificate. The representations
and warranties of the Company in this Agreement shall be true and correct as of
the Date of Issuance as if made on the Date of Issuance and FSA shall have
received a certificate of appropriate officers of the Company to that effect.
(f) Opinions of Counsel. FSA shall have received opinions of counsel
addressed to FSA, Moody's and S&P in respect of the Company, the other parties
to the Transaction Documents and the Transaction in form and substance
satisfactory to FSA, addressing such matters as FSA may reasonably request,
including without limitation, the items set forth in Appendix II hereto, and the
counsel providing each such opinion shall have been instructed by its client to
deliver such opinion to the addressees thereof.
30
(g) Approvals, Etc. FSA shall have received true and correct copies
of all approvals, licenses and consents, if any, including, without limitation,
any approval of the shareholders of the Company required in connection with the
Transaction.
(h) No Litigation, Etc. No suit, action or other proceeding,
investigation, or injunction or final judgment relating thereto, shall be
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with any of the Transaction Documents or the consummation of the
Transaction.
(i) 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 contemplated by
any of the Transaction Documents illegal or otherwise prevent the consummation
thereof.
(j) Satisfaction of Conditions of Underwriting Agreement. All
conditions in the Underwriting Agreement to the Underwriter's obligation to
purchase the Securities shall have been satisfied.
(k) Issuance of Ratings. FSA shall have received confirmation that
the risk secured by the Policy constitutes an investment grade risk by S&P and
an insurable risk by Moody's and that the Securities, when issued, will be rated
"AAA" by S&P and "Aaa" by Moody's.
(l) Delivery of Mortgage Documents. FSA shall have received evidence
satisfactory to it that: (i) delivery has been made to the Trustee of the
Mortgage Documents required to be so delivered pursuant to Section ____ of the
Pooling and Servicing Agreement; and (ii) each Mortgage Note is endorsed as
provided in Section ____ of the Pooling and Servicing Agreement.
(m) No Default. No Default or Event of Default shall have occurred.
(n) Additional Items. FSA shall have received such other documents,
instruments, approvals or opinions requested by FSA as may be reasonably
necessary to effect the Transaction, including but not limited to evidence
satisfactory to FSA that all conditions precedent, if any, in the Related
Documents have been satisfied.
31
