EXHIBIT 10.2
EXECUTION COPY
INSURANCE AND INDEMNITY AGREEMENT
Dated as of November 26, 2002
AMBAC ASSURANCE CORPORATION,
as Insurer,
NEW SOUTH MOTOR VEHICLE TRUST 2002-A,
as Issuer,
NEW SOUTH FEDERAL SAVINGS BANK,
as Originator and Servicer,
BOND SECURITIZATION, L.L.C.,
as Depositor,
and
JPMORGAN CHASE BANK,
as Indenture Trustee
New South Motor Vehicle Trust 2002-A
Class A Asset Backed Notes
TABLE OF CONTENTS
ARTICLE I DEFINITIONS .................................................................... 1
Section 1.1. Defined Terms ............................................................ 1
Section 1.2. Other Definitional Provisions ............................................ 5
ARTICLE II REPRESENTATIONS, WARRANTIES AND COVENANTS ..................................... 6
Section 2.1. Representations and Warranties of the Originator and Servicer ............ 6
Section 2.2. Affirmative Covenants of Originator and Servicer ......................... 7
Section 2.3. Negative Covenants of the Originator and Servicer ........................ 11
Section 2.4. Representations and Warranties of the Insurer ............................ 11
Section 2.5. Representations and Warranties of the Issuer ............................. 12
Section 2.6. Affirmative Covenants of the Issuer ...................................... 13
Section 2.7. Negative Covenants of the Issuer ......................................... 16
Section 2.8. Representations and Warranties of the Depositor .......................... 17
Section 2.9. Affirmative Covenants of the Depositor ................................... 17
Section 2.10. Negative Covenants of the Depositor ...................................... 18
ARTICLE III THE AMBAC POLICY; REIMBURSEMENT .............................................. 18
Section 3.1. Issuance of the Ambac Policy ............................................. 18
Section 3.2. Payment of Fees and Premium .............................................. 20
Section 3.3. Reimbursement Obligation ................................................. 21
Section 3.4. Indemnification .......................................................... 21
Section 3.5. Payment Procedure ........................................................ 25
Section 3.6. Subrogation .............................................................. 25
ARTICLE IV FURTHER AGREEMENTS ............................................................ 25
Section 4.1. Effective Date; Term of the Insurance Agreement .......................... 25
Section 4.2. Further Assurances and Corrective Instruments ............................ 26
Section 4.3. Obligations Absolute ..................................................... 26
Section 4.4. Assignments; Reinsurance; Third-Party Rights ............................. 28
Section 4.5. Liability of the Insurer ................................................. 29
Section 4.6. [Reserved] ............................................................... 29
Section 4.7. Rights and Remedies ...................................................... 29
Section 4.8. Approval of Successor Servicer ........................................... 30
ARTICLE V DEFAULTS AND REMEDIES .......................................................... 30
Section 5.1. Defaults ................................................................. 30
Section 5.2. Remedies; No Remedy Exclusive ............................................ 31
Section 5.3. Waivers .................................................................. 32
ARTICLE VI MISCELLANEOUS ................................................................. 32
Section 6.1. Amendments, Etc .......................................................... 32
Section 6.2. Notices .................................................................. 33
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Section 6.3. Severability ............................................................. 34
Section 6.4. Governing Law ............................................................ 34
Section 6.5. Consent to Jurisdiction .................................................. 34
Section 6.6. Consent of the Insurer ................................................... 35
Section 6.7. Counterparts ............................................................. 35
Section 6.8. Headings ................................................................. 35
Section 6.9. Trial by Jury Waived ..................................................... 36
Section 6.10. Limited Liability ........................................................ 36
Section 6.11. Entire Agreement; Facsimile Signatures ................................... 36
Section 6.12. Indenture Trustee ........................................................ 36
Section 6.13. Third Party Beneficiary .................................................. 36
Section 6.14. No Proceedings ........................................................... 36
Section 6.15. Limitation of Owner Trustee Liability .................................... 37
EXHIBITS
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EXHIBIT A FORM OF AMBAC POLICY ....................................... A-1
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INSURANCE AND INDEMNITY AGREEMENT (as it may be amended, modified or
supplemented from time to time, this "Insurance Agreement"), dated as of
November 26, 2002, by and among AMBAC ASSURANCE CORPORATION, as Insurer (the
"Insurer"), NEW SOUTH MOTOR VEHICLE TRUST 2002-A, as Issuer (the "Issuer"), NEW
SOUTH FEDERAL SAVINGS BANK ("New South"), as Originator and Servicer (the
"Originator" and "Servicer", respectively), BOND SECURITIZATION, L.L.C., as
Depositor (the "Depositor") and JPMORGAN CHASE BANK, as Indenture Trustee (the
"Indenture Trustee").
PRELIMINARY STATEMENTS
A. The Indenture, dated as of November 26, 2002, by and between the Issuer
and JPMorgan Chase Bank, as Indenture Trustee (the "Indenture"), provides for,
among other things, the issuance of the New South Motor Vehicle Trust 2002-A
Class A Asset-Backed Notes.
B. The parties hereto desire that the Insurer issue the Ambac Policy to the
Indenture Trustee for the benefit of the Holders and to, among other things,
specify the conditions precedent thereto, the premium in respect thereof and the
indemnity, reimbursement, reporting and other obligations of the parties hereto
other than the Insurer in consideration thereof.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Defined Terms. Capitalized terms used in this Insurance
Agreement shall have the meanings set forth below. Unless the context clearly
requires otherwise, all capitalized terms used but not defined herein shall have
the respective meanings assigned to them in the Ambac Policy or, if not defined
therein, in the Indenture or, if not defined therein, in the Sale and Servicing
Agreement, or, if not defined therein, in the Purchase Agreement, each as
described below.
"Affiliate" means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Ambac" means Ambac Assurance Corporation, a Wisconsin domiciled stock
insurance corporation.
"Ambac Policy" means the Note Guaranty Insurance Policy No. AB0624BE, dated
November 26, 2002, including any endorsements thereto, issued by the Insurer to
the Indenture Trustee with respect to the Class A Notes, for the benefit of the
Holders, in the form attached as Exhibit A to this Insurance Agreement.
"Certificate" means the trust certificate evidencing the beneficial
interest of the Certificateholder in the Trust.
"Charter Documents" means, with respect to any Transaction Party, such
entity's organizational documents, including without limitation and as
applicable, its trust agreement, certificate of trust, memorandum of
association, articles of organization, certificate or articles of incorporation,
by-laws and/or operating agreement.
"Class A Notes" means the Class A-1 Notes, the Class A-2 Notes and the
Class A-3 Notes.
"Class A-1 Notes" means the Class A-1 1.44% Asset-Backed Notes, issued
pursuant to the Indenture and substantially in the form attached as an Exhibit
to the Indenture.
"Class A-2 Notes" means the Class A-2 1.94% Asset-Backed Notes, issued
pursuant to the Indenture and substantially in the form attached as an Exhibit
to the Indenture.
"Class A-3 Notes" means the Class A-3 3.03% Asset-Backed Notes, issued
pursuant to the Indenture and substantially in the form attached as an Exhibit
to the Indenture.
"Closing Date" means November 26, 2002.
"Fee Letter" means that certain letter agreement dated as of the date
hereof between the Issuer and the Insurer and acknowledged by the Indenture
Trustee setting forth certain fees and other matters referred to herein, as the
same may be amended or supplemented from time to time in accordance therewith
and with this Insurance Agreement.
"Holder" has the meaning given thereto in the Ambac Policy.
"Indemnified Party" has the meaning specified in Section 3.4 hereof.
"Indemnifying Party" has the meaning specified in Section 3.4 hereof.
"Indenture" means the Indenture dated as of November 26, 2002 between the
Issuer and JPMorgan Chase Bank, as Indenture Trustee, as the same may be amended
and supplemented from time to time.
"Information" has the meaning specified in Section 2.1 (c) hereof.
"Insolvency Proceeding" means any proceeding by or against any person under
any applicable reorganization, bankruptcy, liquidation, rehabilitation,
insolvency or other
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similar law now or hereafter in effect or any proceeding in which a receiver,
liquidator, conservator, trustee or similar official shall have been, or may be,
appointed or requested for a person or any of its assets.
"Insurance Agreement" has the meaning given such term in the initial
paragraph hereof.
"Insurance Event of Default" has the meaning specified in Section 5.1
hereof.
"Insurer" means Ambac and any successor thereto, as issuer of the Ambac
Policy.
"Insurer Information" means the information furnished by the Insurer in
writing expressly for use in the Offering Document and is limited to the
information included under the headings "The Insurer" and "The Insurance Policy"
in the Prospectus Supplement.
"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.
"Late Payment Rate" means the lesser of (a) the greater of (i) the per
annum rate of interest publicly announced from time to time by Citibank, N.A. as
its prime or base lending rate (any change in such rate of interest to be
effective on the date such change is announced by Citibank, N.A.), plus 2% per
annum and (ii) the then applicable highest rate of interest on the Class A Notes
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.
"Material Adverse Effect" means, with respect to any event or circumstance,
a material adverse effect on (a) the business, financial condition, operations
or assets of the Issuer (considered separately) or the Issuer, the Originator
and the Servicer (taken as a whole), (b) the ability of any New South Party to
perform its obligations under any Transaction Document to which it is a party,
(c) the validity, enforceability of, or collectibility of, amounts payable by
any New South Party under any Transaction Document to which it is a party, (d)
the status, existence, perfection or priority of the interest of the Issuer or
of the Indenture Trustee in the Trust Estate, (e) the validity, enforceability
or collectibility of all or any portion of the Trust Estate with an aggregate
value of at least $500,000 or (f) the ability of the Insurer to monitor the
performance of the Receivables and compliance of the New South Parties with the
Transaction Documents unless such impediment results from an action or omission
on the part of the Insurer.
"Moody's" means ▇▇▇▇▇'▇ Investors Service and any successor thereto.
"New South Parties" means the Issuer, the Originator and the Servicer and
their respective Affiliates.
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"Offering Document" means, taken together, the Prospectus Supplement, dated
November 18, 2002 (the "Prospectus Supplement"), and the Prospectus, dated
November 18, 2002 (the "Prospectus"), of the Issuer, in respect of the offering
and sales of the Class A Notes, any amendment or supplement thereto, and any
other offering document in respect of the Class A Notes that makes reference to
the Ambac Policy.
"Person" means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, limited liability company, business or
owner trust, partnership or other organization or entity (whether governmental
or private).
"Premium" means the premium payable in accordance with the Fee Letter.
"Purchase Agreement" means the Purchase Agreement among the Originator and
the Depositor, dated as of November 26, 2002, as such Purchase Agreement may be
amended from time to time.
"Rating Agencies" means Moody's and S&P.
"Receivables" means each motor vehicle retail installment sale contract,
installment loan contract or note and security agreement listed on the Schedule
of Receivables attached as an Exhibit to the Sale and Servicing Agreement.
"Reserve Event" means, (x) if for any Payment Date prior to the date on
which the Pool Balance is greater than or equal to than 25% of the Original Pool
Balance, either (i) the Rolling Average Delinquency Rate for the related
Determination Date exceeds 1.75% or (ii) the Rolling Average Net Loss Rate for
the related Determination Date exceeds 4.75% and (y) if for any Payment Date on
or after which the Pool Balance is less than 25% of the Original Pool Balance,
either (i) the Rolling Average Delinquency Rate for the related Determination
Date exceeds 2.75% or (ii) the Rolling Average Net Loss Rate for the related
Determination Date exceeds 5.75%.
"Responsible Officer" means any Vice President, Assistant Vice President,
Treasurer, Assistant Treasurer, Secretary, Assistant Secretary or any other
officer of the relevant Transaction Party responsible for the performance of
such Transaction Party's obligations under the Transaction Documents and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement,
dated as of November 26, 2002, among the Issuer, the Depositor, New South as the
Servicer and Custodian and the Indenture Trustee, as the same may be amended or
supplemented from time to time.
"Schedule of Receivables" means the schedule of all motor vehicle retail
installment sale contracts, installment loan contracts and note and security
agreements originally held as part of the Trust which is attached as a Schedule
to the Sale and Servicing Agreement.
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"Securities Act" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations promulgated 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
promulgated thereunder, as amended from time to time.
"Servicer Default" has the meaning specified in Section 9.1 of the Sale and
Servicing Agreement.
"Servicing Policy and Procedures" means the policies and procedures set
forth on Schedule C to the Sale and Servicing Agreement, and any amendments
thereto.
"S&P" means Standard & Poor's, a division of The McGraw Hill Companies,
Inc., and any successor thereto.
"Transaction" means the transactions contemplated by the Transaction
Documents.
"Transaction Documents" means this Agreement, the Indemnification
Agreement, dated as of November 18, 2002, between the Insurer and the
Underwriter, the Underwriting Agreement, the Sale and Servicing Agreement, the
Trust Agreement, the Purchase Agreement, the Indenture and all other documents
and certificates delivered in connection therewith except for the Ambac Policy.
"Transaction Parties" means the New South Parties and the Indenture
Trustee.
"Trust Agreement" means the Trust Agreement dated as of November 26, 2002
among New South, the Depositor and the Owner Trustee, as the same may be amended
and supplemented from time to time.
"Underwriter Information" means the information furnished by the
Underwriter in writing expressly for use in the Offering Document and included
in the second sentence of the third paragraph under the heading "Underwriting"
in the Prospectus Supplement and in the fifth paragraph under the heading
"Underwriting" in the Prospectus.
"Underwriter" shall mean Banc One Capital Markets, Inc.
"Underwriting Agreement" means the Underwriting Agreement, dated November
18, 2002, among the Underwriter, New South and the Depositor with respect to the
offer and sale of the Class A Notes, as amended, modified or supplemented from
time to time.
Section 1.2. Other Definitional Provisions. The words "hereof," "herein"
and "hereunder" and words of similar import when used in this Insurance
Agreement shall refer to this Insurance Agreement as a whole and not to any
particular provision of this Insurance Agreement, and Section, subsection,
Schedule and Exhibit references are to this Insurance Agreement unless otherwise
specified. The meanings given to terms
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defined herein shall be equally applicable to both the singular and plural forms
of such terms. The words "include" and "including" shall be deemed to be
followed by the phrase "without limitation." Where a representation, warranty or
covenant herein begins with the words "as to a Person only," such
representation, warranty or covenant is given by and as to such Person only.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.1. Representations and Warranties of the Originator and Servicer.
New South hereby makes, to and for the benefit of the Insurer, each of the
representations and warranties made by it in each of the Transaction Documents
to which it is a party, including Sections 3.1 and 3.2 of the Purchase Agreement
and Sections 4.6 and 8.1 of the Sale and Servicing Agreement. Such
representations and warranties are incorporated herein by this reference as if
fully set forth herein, and may not be amended except by an amendment complying
with the terms of the last sentence of Section 6.1 hereof. In addition, New
South represents and warrants as of the Closing Date as follows:
(a) The offer and sale of the Class A Notes by the Issuer comply in
all material respects with all requirements of law, including all registration
requirements of applicable securities laws and, without limiting the generality
of the foregoing, the Offering Document (other than the Underwriter Information
and the Insurer Information) does not contain any untrue statement of a material
fact and does not omit to state a material fact necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
(b) The Indenture has been duly qualified under the Trust Indenture
Act of 1939, as amended; the Issuer is not required to be registered as an
"investment company" under the Investment Company Act; and neither the offer nor
the sale of the Class A Notes by the Issuer will be in violation of the
Securities Act or any other federal or state securities law. New South shall
satisfy any of the information reporting requirements of the Securities Exchange
Act arising out of the Transaction to which it, the Depositor or the Issuer is
subject.
(c) Neither the Transaction Documents nor any other information
relating to the Receivables, the Other Conveyed Property or any other asset in
the Trust Estate, the operations or financial condition of any of the New South
Parties (collectively, the "Information"), as amended, supplemented or
superseded, furnished to the Insurer by such New South Party contains any
statement of a material fact which was untrue or misleading in any material
respect when made. None of the New South Parties has any knowledge of any
circumstances that could reasonably be expected to have a Material Adverse
Effect. Since the furnishing of the Information, there has been no change nor
any development or event involving a prospective change known to any of the New
South Parties that would render any of the Transaction Documents untrue or
misleading in any material respect.
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Section 2.2. Affirmative Covenants of Originator and Servicer. New South
hereby makes, to and for the benefit of the Insurer, all of the covenants made
by it in the Transaction Documents to which it is a party, including Article IV
of the Purchase Agreement and Section 4.6 of the Sale and Servicing Agreement.
Such covenants are hereby incorporated herein by this reference as if fully set
forth herein, and may not be amended except by an amendment complying with the
terms of the last sentence of Section 6.1. In addition, New South hereby agrees
that during the term of this Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) Compliance with Agreements and Applicable Laws. It shall comply
with the terms and conditions of and perform its obligations under the
Transaction Documents to which it is a party and shall comply with any law, rule
or regulation applicable to it, except where the failure to comply with any such
law, rule or regulation is not reasonably likely to have a Material Adverse
Effect.
(b) Existence. Except as otherwise expressly provided by the
Transaction Documents, it shall maintain its corporate existence and shall at
all times continue to be duly organized under the laws of the place of its
organization and duly qualified and duly authorized thereunder. Additionally, it
shall conduct its business in accordance with the terms of its Charter Documents
and shall maintain all licenses, permits, charters and registrations, except for
any such license, permit, charter or registration the failure of which to
maintain is not reasonably likely to have a Material Adverse Effect.
(c) Notice of Material Events. It shall promptly (and, with respect
to item (ii) below, in any event not later than two (2) Business Days, and, with
respect to all other items not later than five (5) Business Days) following
receipt of actual knowledge by a Responsible Officer thereof inform the Insurer
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, or disciplinary
proceeding by or against it that would be reasonably likely to have a Material
Adverse Effect or the promulgation of any proceeding or any proposed or final
ruling in connection with any such litigation, investigation or proceeding which
would reasonably likely to have a Material Adverse Effect;
(ii) the occurrence of any Insurance Event of Default hereunder,
any Default or Event of Default under the Indenture, any Servicer Default or any
Reserve Event;
(iii) the commencement of any Insolvency Proceeding against any
Transaction Party; and
(iv) the receipt of written notice that (a) any license, permit,
charter, registration or approval necessary and material for the conduct of its
business is to be, or may be, suspended or revoked and such suspension or
revocation would be
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reasonably likely to have a Material Adverse Effect or (b) it is to cease and
desist any practice, procedure or policy employed by it in the conduct of its
business, and such cessation would be reasonably likely to have a Material
Adverse Effect.
(d) Notice of Change. It shall give the Insurer not less than thirty
(30) days' prior written notice of any proposed change in its name, principal
place of business or jurisdiction of organization.
(e) Access to Records; Discussions with Officers and Accountants. As
long as upon reasonable prior written notice of the Insurer, at any time, it
shall permit the Insurer or its authorized agents, including without limitation,
the Insurer's independent public accountants:
(i) to inspect its books and its records as they may relate to
the Transaction, the Receivables, the Other Conveyed Property or any other
assets in the Trust Estate, as the case may be, or its obligations under the
Transaction Documents;
(ii) to discuss its affairs, finances and accounts with its
principal executive officer and its principal financial officer; and
(iii) to discuss its affairs, finances and accounts with its
independent accountants, provided that one of its officers 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 Originator or the
Servicer. Absent an Insurance Event of Default hereunder or an Event of Default
under the Indenture or a Servicer Default, the Insurer shall not conduct such
inspections or discussions more often than annually, unless otherwise mutually
agreed by the Insurer and New South. If, however, an Insurance Event of Default
hereunder or an Event of Default under the Indenture, a Servicer Default or a
Reserve Event has occurred and is continuing, the Insurer may increase the
frequency of such audits to semi-annual, quarterly, or otherwise as it deems
appropriate. Without limiting the foregoing, upon the occurrence of an Insurance
Event of Default hereunder or an Event of Default under the Indenture, a
Servicer Default or a Reserve Event, New South shall make its principal officers
available to discuss the Transaction with representatives of the Insurer within
15 days of receipt by New South of such a request from the Insurer.
(f) Closing Documents. It shall provide or cause to be provided to
the Insurer an executed original copy of each Transaction Document executed by
it in connection with the closing of the Transaction within sixty (60) days of
the Closing Date.
(g) [Reserved].
(h) Financial Reporting. New South shall provide or cause to be
provided to the Insurer the following:
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(i) Annual Financial Statements. As soon as available, and in
any event within 120 days after the close of each fiscal year of New South and
its consolidated subsidiaries, the audited consolidated statements of financial
condition of New South and its consolidated subsidiaries as of the end of such
fiscal year and the related audited consolidated statements of income, changes
in operations, stockholders' equity and cash flows for such fiscal year, all in
reasonable detail and stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared in
accordance with generally accepted accounting principles, consistently applied,
and accompanied by the audit opinion of New South and its consolidated
subsidiaries' independent accountants (which shall be a nationally recognized
independent public accounting firm or otherwise acceptable to the Insurer).
(ii) Quarterly Financial Statements. As soon as available, and
in any event within 90 days after the close of each of the first three quarters
of each fiscal year of New South and its consolidated subsidiaries, the
unaudited consolidated statement of financial condition of New South and its
consolidated subsidiaries as of the end of such quarter and the related
unaudited consolidated statements of income, changes in operations,
stockholders' equity and cash flows for the portion of the fiscal year then
ended, all in reasonable detail and stating in comparative form the respective
figures for the corresponding date and period in the preceding fiscal year,
prepared in accordance with generally accepted accounting principles
consistently applied (subject to normal year-end adjustments).
(iii) Other Information. Such notices, certificates, reports and
other information delivered by New South under the Transaction Documents, as and
when required pursuant to such sections or agreements, and any other reporting
or financial information required to be provided to the Insurer pursuant to the
terms of the Transaction Documents, as and when required pursuant to such terms.
(iv) Compliance Certificate. Together with the financial
statements required under Section 4.11 of the Sale and Servicing Agreement, a
compliance certificate signed by its principal financial officer stating that to
the best of such person's knowledge, (a) each New South Party is in compliance
with its obligations hereunder and under the other Transaction Documents, and
(b) no Insurance Event of Default hereunder, an Event of Default under the
Indenture, Reserve Event or Servicer Default exists and no event which but for
the lapse of time or the giving of notice, or both, would constitute an
Insurance Event of Default hereunder, an Event of Default under the Indenture,
Reserve Event or Servicer Default exists, or if an Insurance Event of Default
hereunder, an Event of Default under the Indenture, Reserve Event or Servicer
Default or other such event exists, stating the nature and status thereof
(including all relevant financial and other information and amounts used in
determining whether such Insurance Event of Default hereunder, an Event of
Default under the Indenture, Reserve Event or Servicer Default or other such
event exists).
(v) S.E.C. Filings. Promptly after the filing thereof, copies
of all registration statements and annual, quarterly or other regular reports
which New South or any subsidiary files with the Securities and Exchange
Commission.
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(vi) Shareholders Statements and Reports. Promptly after the
furnishing thereof to its shareholders, copies of all financial statements,
reports and proxy statements so furnished.
(vii) Servicing Policy and Procedure. Within ninety (90) days
after the end of each of its fiscal years, a true and complete copy of its
Servicing Policy and Procedure then in effect.
(viii) Amendments to Servicing Policy and Procedure. Within ten
(10) Business Days after the date of any material change or amendment to its
Servicing Policy and Procedure, a true and complete copy of such change or
amendment, and if requested by the Insurer, a copy of the Servicing Policy and
Procedure then in effect. No such change or amendment shall become effective if
the Insurer determines, in its sole discretion, that such change or amendment
will have a Material Adverse Effect; provided, that such change or amendment
shall become effective and continue to be effective if the Insurer has not
objected to such change or amendment within ten (10) Business Days of receipt of
written notice thereof; provided, further, that if such change or amendment is
required by rule, law, regulation or regulatory authority, the approval of the
Insurer will not be required so long as the Servicer provides prior written
notice of such change to the Insurer.
(i) Public Debt Ratings. Promptly, but in any event within five (5)
Business Days after the date of any change in its public debt ratings, if any, a
written certification of its public debt ratings after giving effect to such
change.
(j) Compliance with Securities Laws. It shall comply with the
Securities Act and the Securities Exchange Act and the regulations thereunder so
as to permit the completion of the offer and sale of the Class A Notes as
contemplated by the Underwriting Agreement.
(k) Disclosure Document. Each Offering Document delivered with
respect to the Class A Notes shall clearly disclose that the insurance provided
by the Ambac Policy is not covered by the property/casualty insurance security
fund specified in Article 76 of the New York Insurance Law.
(l) Other Information. It shall provide to the Insurer such other
information (including non-financial information) in respect of the Receivables,
the Other Conveyed Property or the other assets in the Trust Estate, as the case
may be, the Transaction and the Transaction Documents and such other financial
or operating information in respect of itself, the Issuer or any of their
Affiliates, in each case, which the Insurer may from time to time reasonably
request.
(m) Shadow Ratings. It shall cooperate with the Insurer and S&P to
obtain a possible upgrade in the shadow ratings of the Class A Notes from BB to
BBB by S&P. For the avoidance of doubt, it is understood that its cooperation
will not include the provision of additional recourse or additional credit
enhancement for the Class A Notes. It will pay the one-time fees and expenses
(such expenses not to exceed $10,000) of S&P
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in connection with such upgrade. It is expected that this upgrade will take
place within the 12 month period following the Closing Date.
Section 2.3. Negative Covenants of the Originator and Servicer. New South
hereby agrees that during the term of this Insurance Agreement, unless the
Insurer shall otherwise expressly consent in writing:
(a) Impairment of Rights. It shall not take any action, or fail to
take any action, if such action or failure to take action (x) is reasonably
likely to have a Material Adverse Effect or (y) is reasonably likely to
interfere with the enforcement of any rights of the Insurer under or with
respect to any of the Transaction Documents. It shall give the Insurer written
notice of any such action or failure to act promptly prior to the date of
consummation of such action or failure to act. It shall furnish to the Insurer
all information requested by it that is reasonably necessary to determine
compliance with this paragraph.
(b) Amendments, Etc. It shall not modify, amend or waive, or consent
to any modification or amendment of, any of the terms, provisions or conditions
of the Transaction Documents to which it is a party without the prior written
consent of the Insurer thereto.
Section 2.4. Representations and Warranties of the Insurer. The Insurer
represents and warrants to the Indenture Trustee (on behalf of the Holders), the
Issuer and each other Transaction Party as follows:
(a) Organization and Licensing. The Insurer is a stock insurance
corporation duly organized, validly existing and in good standing under the laws
of the State of Wisconsin.
(b) Corporate Power. The Insurer has the corporate power and authority
to issue the Ambac Policy and execute and deliver this Insurance Agreement and
to perform all of its obligations hereunder and thereunder.
(c) Authorization; Approvals. All proceedings legally required for the
issuance of the Ambac Policy and the execution, delivery and performance of this
Insurance Agreement have been taken and all licenses, orders, consents or other
authorizations or approvals of the Insurer's Board of Directors or stockholders
or any governmental boards or bodies legally required for the enforceability of
the Ambac Policy have been obtained or are not material to the enforceability of
the Ambac Policy.
(d) Enforceability. The Ambac Policy, when issued, will constitute,
and this Insurance Agreement constitutes, legal, valid and binding obligations
of the Insurer, enforceable in accordance with their respective terms, subject
to insolvency, reorganization, moratorium, receivership and other similar laws
affecting creditors' rights generally and by general principles of equity and
subject to principles of public policy limiting the right to enforce the
indemnification provisions contained therein and herein, insofar as such
provisions relate to indemnification for liabilities arising under federal
securities laws.
11
(e) No Conflict. The execution by the Insurer of this Insurance
Agreement will not, and the satisfaction of the terms hereof will not, conflict
with or result in a breach of any of the terms, conditions or provisions of the
Certificate of Incorporation or By-Laws of the Insurer, or any restriction
contained in any contract, agreement or instrument to which the Insurer is a
party or by which it is bound or constitute a default under any of the foregoing
which would materially and adversely affect its ability to perform its
obligations under the Ambac Policy or this Insurance Agreement.
(f) Accuracy of Information. The Insurer Information included in the
Offering Document is limited and does not purport to provide the scope of
disclosure required to be included in a prospectus with respect to a registrant
in connection with the offer and sale of securities of such registrant
registered under the Securities Act. Within such limited scope of disclosure,
however, as of the date of the Offering Document, the Insurer Information does
not contain an untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading.
Section 2.5. Representations and Warranties of the Issuer. The Issuer
hereby makes, to and for the benefit of the Insurer, each of the representations
and warranties made by it in the Transaction Documents to which it is a party,
including Section 3.3 of the Purchase Agreement (in the case of the Depositor).
Such representations and warranties are incorporated herein by this reference as
if fully set forth herein, and may not be amended except by an amendment
complying with the terms of Section 6.1 hereof. In addition, the Issuer
represents and warrants as of the Closing Date as follows:
(a) Accuracy of Information. The information or statements contained
in the Transaction Documents furnished to the Insurer by it, as amended,
supplemented or superseded on or prior to the date hereof, taken as a whole,
does not, if restated at and as of the date hereof, contain any untrue statement
of a material fact or omit to state a material fact necessary to make such
information or statements not misleading in any material respect.
(b) Compliance with Securities Laws. The Issuer will comply with the
Securities Act and the Securities Exchange Act and the regulations thereunder so
as to permit the completion of the offer and sale of the Class A Notes as
contemplated by the Underwriting Agreement. The offer and sale of the Class A
Notes by the Issuer will comply in all material respects with all requirements
of law, including all registration requirements of applicable securities laws.
Without limiting the foregoing, the Offering Document (other than the Insurer
Information and the Underwriter Information) does not contain any untrue
statement of a material fact and does not omit to state a material fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. Neither the offer nor the sale of
the Class A Notes by the Issuer has been or will be in violation of the
Securities Act or any other federal or state securities laws. The Issuer will
satisfy all applicable information reporting requirements of the Securities
Exchange Act arising out of the Transaction to which it or
12
the Trust Estate are subject. The Indenture has been duly qualified under the
Trust Indenture Act of 1939, as amended.
Section 2.6. Affirmative Covenants of the Issuer. The Issuer hereby makes,
to and for the benefit of the Insurer, all of the covenants of the Issuer set
forth in the Transaction Documents to which it is a party, including without
limitation the covenants contained in Article III of the Indenture. Such
covenants are incorporated herein by this reference, and may not be amended
except by an amendment complying with the terms of Section 6.1 hereof. In
addition, the Issuer hereby agrees that during the term of this Insurance
Agreement, unless the Insurer shall otherwise expressly consent in writing:
(a) Compliance with Agreements and Applicable Laws. It shall comply
with the terms and conditions of and perform its obligations under the
Transaction Documents to which it is a party and shall comply with any law, rule
or regulation applicable to it, except where the failure to comply with any such
law, rule or regulation is not reasonably likely to have a Material Adverse
Effect.
(b) Existence. It shall maintain its existence as an owner trust
under the laws of the State of Delaware and shall at all times continue to be
duly formed and validly existing under the laws of the State of Delaware and
duly qualified and duly authorized thereunder and shall conduct its business in
accordance with the terms of its Charter Documents. The Issuer shall cause the
Receivables Files to be located at such location as specified in Section 3.3(c)
of the Sale and Servicing Agreement.
(c) Access to Records; Discussions with Officers and Accountants.
Upon reasonable prior written notice of the Insurer, at any time, it shall
permit the Insurer or its authorized agents:
(i) to inspect its books and records;
(ii) to discuss its affairs, finances and accounts with its
principal executive officer and its principal financial officer; and
(iii) to discuss its affairs, finances and accounts with its
independent accountants, provided that one of its officers and an officer of New
South 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 Depositor's or Issuer's business, as the
case may be. Absent an Insurance Event of Default hereunder or an Event of
Default under the Indenture or a Servicer Default, the Insurer shall not conduct
such inspections or discussions more often than annually, unless otherwise
mutually agreed by the Insurer and New South. If, however, an Insurance Event of
Default hereunder or an Event of Default under the Indenture or a Servicer
Default has occurred and is continuing, the Insurer may increase the frequency
of such audits to semi-annual, quarterly, or otherwise as it deems appropriate.
Without limiting the foregoing, upon the occurrence of an Insurance Event of
Default hereunder or an Event of Default under the Indenture, a Servicer Default
or a Reserve Event, the Depositor and the Issuer shall make their
13
respective principal officers available to discuss the Transaction with
representatives of the Insurer within 15 days of receipt by the Depositor and
the Issuer, as the case may be, of such a request from the Insurer.
(d) Notice of Material Events. It shall be obligated promptly (and,
with respect to item (ii) below, in any event not later than two (2) Business
Days, and with respect to all other items below, not later than five (5)
Business Days) following receipt of actual knowledge by a Responsible Officer
thereof to inform the Insurer 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, or disciplinary
proceeding by or against it that would be reasonably likely to have a Material
Adverse Effect or the promulgation of any proceeding or any proposed or final
ruling in connection with any such litigation, investigation or proceeding which
would reasonably likely to have a Material Adverse Effect;
(ii) the occurrence of an Insurance Event of Default hereunder,
a Default or Event of Default under the Indenture, a Servicer Default or a
Reserve Event;
(iii) the commencement of any Insolvency Proceeding against any
Transaction Party; and
(iv) the receipt of written notice that (a) any license, permit,
charter, registration or approval necessary for the conduct of its business is
to be, or may be, suspended or revoked and such suspension or revocation would
be reasonably likely to have a Material Adverse Effect or (b) it is to cease and
desist any practice, procedure or policy employed by it in the conduct of its
business, and such cessation would be reasonably likely to have a Material
Adverse Effect.
(e) It shall give the Insurer not less than thirty (30) days' prior
written notice of any proposed change in its name, principal place of business
or jurisdiction of organization.
(f) Field Examination by Independent Public Accountants. Upon
reasonable prior written notice of the Insurer at any time, it shall permit
independent public accountants designated by the Insurer, from time to time to
conduct a field examination(s), and in connection therewith shall permit such
independent public accountants, without limitation:
(i) to inspect its books and records;
(ii) to discuss its affairs, finances and accounts with its
principal executive officer and its principal financial officer; and
(iii) to discuss its affairs, finances and accounts with its
independent accountants; provided that one of its officers and an officer of the
Depositor
14
or the Issuer, as the case may be, and one officer of New South (if New South is
then the Servicer) 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 Depositor or the
Issuer, as the case may be. Absent an Insurance Event of Default hereunder or an
Event of Default under the Indenture, a Servicer Default or a Reserve Event, the
Insurer shall not conduct field examinations more often than annually, unless
otherwise mutually agreed by the Insurer and New South. If, however, an
Insurance Event of Default hereunder or an Event of Default under the Indenture,
a Servicer Default or a Reserve Event has occurred and is continuing, the
Insurer may increase the frequency of such audits to semi-annual, quarterly, or
otherwise as it deems appropriate.
(g) Maintenance of Licenses. It shall maintain all licenses, permits,
charters and registrations, except for licenses, permits, charters and
registrations the failure of which to maintain is not reasonably likely to have
a Material Adverse Effect.
(h) Financial Reporting. It shall provide or cause to be provided to
the Insurer, as soon as practicable and in any event within 90 days after the
end of each of its fiscal years, an annual balance sheet as at the end of such
fiscal year and the notes thereto, and the related statements of income and cash
flows and the respective notes thereto for such fiscal year, certified by its
principal financial officer.
(i) Financial Statements. Its financial statements and books and
records will reflect its separate existence and will present fairly its
financial position.
(j) Other Information. It shall provide to the Insurer such other
information (including non-financial information) in respect of the Receivables,
the Other Conveyed Property or the other assets in the Trust Estate, as the case
may be, the Transaction and the Transaction Documents and such other financial
or operating information in respect of itself and the Receivables which the
Insurer may from time to time reasonably request.
(k) Operation. It shall:
(i) manage its day-to-day business without the involvement of
any other Transaction Party except as required, permitted or contemplated by the
Transaction Documents;
(ii) act solely in its own name or the name of the Owner Trustee
in the conduct of its business, including business correspondence and other
communications, and shall conduct its business so as not to mislead others as to
the identity of the entity with which they are concerned;
(iii) Except as contemplated by the Sale and Servicing Agreement,
all material transactions between the other Transaction Parties and its
Affiliates shall only be on an arm's length basis;
15
(iv) require that all of its full-time employees, if any,
identify themselves as such and not as employees of New South or any other New
South Party (including, without limitation, by means of providing appropriate
employees with business or identification cards identifying such employees as
its employees); provided that New South may act as Servicer and provide certain
administrative services for the Issuer accordance with the Transaction
Documents; and
(l) Special Purpose Entity. In addition, the Issuer shall:
(i) ensure that its capital is adequate for the business and
undertakings of the Issuer;
(ii) other than activities in connection with the Transaction,
be restricted from undertaking any activities other than those activities
permitted by the Trust Agreement;
(iii) Except as contemplated by the Transaction Documents, not
commingle its funds and assets with the funds of any other person; provided,
that it is understood that, under the Sale and Servicing Agreement, the Servicer
will deposit collections on the Loans within 2 Business Days of receipt;
Section 2.7. Negative Covenants of the Issuer. The Issuer hereby agrees
that during the term of this Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) Impairment of Rights. It shall not take any action, or fail to
take any action, if such action or failure to take action (x) is reasonably
likely to have a Material Adverse Effect or (y) is reasonably likely to
interfere with the enforcement of any rights of the Insurer under or with
respect to any of the Transaction Documents. It shall give the Insurer written
notice of any such action or failure to act promptly prior to the date of
consummation of such action or failure to act. It shall furnish to the Insurer
all information requested by the Insurer that is reasonably necessary to
determine compliance with this paragraph.
(b) Amendments, Etc. It shall not modify, amend or waive, or consent
to any modification, amendment or waiver of, any of the terms, provisions or
conditions of the Transaction Documents to which it is a party, or any of its
Charter Documents without the prior written consent of the Insurer.
(c) Limitation on Mergers, Etc. It shall not consolidate with or
merge with or into any Person or liquidate or dissolve, or transfer all or
substantially all of its assets to any Person except, in the case of the Issuer,
by way of the grant of a lien to the Indenture Trustee pursuant to the
Transaction Documents, or, except as expressly permitted by the Transaction
Documents, transfer any of its assets to any Person.
(d) Certain Other Limitations. It shall
16
(i) not be named as an insured on the insurance policy held
by another New South Party or covering the property of any other New South
Party, except to the extent it shall bear its allocable share of the expense
thereof, or enter into an agreement with the holder of such policy whereby in
the event of a loss in connection with property not owned by the Issuer proceeds
are paid to it, except in the case of any insurance proceeds assigned to the
Issuer pursuant to the Sale and Servicing Agreement.
(ii) be restricted from undertaking activities in connection
with the issuance of the Class A Notes other than activities as set forth in its
Charter Documents;
(iii) not be involved in the day to day management of any of
the other New South Parties except as required by or permitted by the
Transaction Documents;
(iv) not incur, assume or guarantee any indebtedness except
for such indebtedness as may be incurred by the Issuer in connection with the
issuance of the Class A Notes, or as otherwise expressly permitted by the
Insurer or the Transaction Documents;
(v) not commingle its deposit accounts (and funds therein)
or other assets with the deposit accounts (and funds therein) or other assets of
any other entity; provided, that it is understood that, under the Sale and
Servicing Agreement, the Servicer will deposit collections on the Loans within 2
Business Days of receipt;
(vi) not act as an agent of any other New South Party; and
(vii) not form, or cause to be formed, any subsidiaries.
Section 2.8. Representations and Warranties of the Depositor. The Depositor
hereby makes, to and for the benefit of the Insurer, each of the representations
and warranties made by it in the Transaction Documents to which it is a party,
including Section 3.3 of the Purchase Agreement. Such representations and
warranties are incorporated herein by this reference as if fully set forth
herein, and may not be amended except by an amendment complying with the terms
of Section 6.1 hereof. In addition, the Depositor represents and warrants as of
the Closing Date that it will comply with the Securities Act and the Securities
Exchange Act and the regulations thereunder so as to permit the completion of
the offer and sale of the Class A Notes as contemplated by the Underwriting
Agreement.
Section 2.9. Affirmative Covenants of the Depositor. The Depositor hereby
makes, to and for the benefit of the Insurer, all of the covenants of the
Depositor set forth in the Transaction Documents to which it is a party,
including without limitation the covenants contained in Article VII of the Sale
and Servicing Agreement. Such covenants are incorporated herein by this
reference, and may not be amended except by an amendment complying with the
terms of Section 6.1 hereof. In addition, the Depositor hereby agrees that
during the term of this Insurance Agreement, unless the Insurer shall otherwise
expressly consent in writing:
17
(a) Compliance with Agreements and Applicable Laws. It shall comply
with the terms and conditions of and perform its obligations under the
Transaction Documents to which it is a party and shall comply with any law, rule
or regulation applicable to it, except where the failure to comply with any such
law, rule or regulation is not reasonably likely to have a Material Adverse
Effect.
(b) Existence. It shall maintain its existence as a limited liability
company under the laws of the State of Delaware and shall at all times continue
to be duly formed and validly existing in good standing under the laws of the
State of Delaware and duly qualified and duly authorized thereunder and shall
conduct its business in accordance with the terms of its Charter Documents.
(c) It shall give the Insurer not less than thirty (30) days' prior
written notice of any proposed change in its name, principal place of business
or jurisdiction of organization.
(d) Maintenance of Licenses. It shall maintain all licenses, permits,
charters and registrations, except for licenses, permits, charters and
registrations the failure of which to maintain is not reasonably likely to have
a Material Adverse Effect.
Section 2.10. Negative Covenants of the Depositor. The Depositor hereby
agrees that during the term of this Insurance Agreement, unless the Insurer
shall otherwise expressly consent in writing:
(a) Impairment of Rights. It shall not knowingly take any action, if
such action (x) is reasonably likely to have a Material Adverse Effect or (y) is
reasonably likely to interfere with the enforcement of any rights of the Insurer
under or with respect to any of the Transaction Documents.
(b) Amendments, Etc. It shall not modify, amend or waive, or consent
to any modification, amendment or waiver of, any of the terms, provisions or
conditions of the Transaction Documents to which it is a party without the prior
written consent of the Insurer.
ARTICLE III
THE AMBAC POLICY; REIMBURSEMENT
Section 3.1. Issuance of the Ambac Policy. The Insurer agrees to issue the
Ambac Policy on the Closing Date subject to satisfaction of the conditions
precedent set forth below:
(a) Payment of Expenses. The applicable parties shall have been paid
their related fees and expenses payable in accordance with Section 3.2(a) and
(b);
(b) Receipt of Certain Documents. The Insurer shall have received a
complete copy of the Servicing Policy and Procedures then in effect certified by
the
18
principal financial officer of New South and of each Transaction Document fully
executed and delivered by each applicable Transaction Party;
(c) Representations and Warranties; Certificate. The
representations and warranties of the New South Parties set forth or
incorporated by reference in this Insurance Agreement and the representations
and warranties set forth by the Indenture Trustee in the Indenture are true and
correct on and as of the Closing Date as if made on the Closing Date, and the
Insurer has received a certificate of appropriate officers of the related New
South Party to that effect;
(d) No Litigation, Etc. No suit, action or other proceeding,
investigation or injunction, or final judgment relating thereto, is pending or,
to any Transaction Party's knowledge, threatened before any court, governmental
or administrative agency or arbitrator 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;
(e) Legality. No statute, rule, regulation or order has been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court that would make the Transaction illegal or
otherwise prevent the consummation thereof;
(f) No Event of Default. No Insurance Event of Default hereunder,
Default or Event of Default under the Indenture, Servicer Termination or Reserve
Event has occurred;
(g) Satisfaction of Conditions of the Underwriting Agreement. All
conditions in the Underwriting Agreement relating to the Underwriters'
obligation to purchase the Class A Notes have been fulfilled to the satisfaction
of the Insurer, with such satisfaction deemed to have occurred upon issuance of
the Ambac Policy. The Insurer has received copies of each of the documents, and
shall be entitled to rely on each of the documents, required to be delivered to
the Underwriters pursuant to the Underwriting Agreement (except that the Insurer
shall not be required to be an addressee on the accountant's comfort letter);
(h) Issuance of Ratings. The Insurer has received confirmation
that the Class A-1 Notes will be rated in the highest short-term rating category
by at least two nationally recognized statistical rating agencies, that the
Class A-2 Notes and the Class A-3 Notes will be rated in the highest long-term
rating category by at least two nationally recognized statistical rating
agencies and that, without the benefit of the Ambac Policy, the Class A Notes
will have a shadow rating of at least BB from S&P and Baa3 from ▇▇▇▇▇'▇;
(i) Approvals, Etc. The Insurer has received true and correct
copies of all approvals, licenses and consents, if any, required in connection
with the Transaction;
19
(j) Fee Letter. The Insurer, the Indenture Trustee and the Issuer
have executed the Fee Letter;
(k) Certified Copies. The Insurer has received an executed copy of
each Transaction Document;
(l) Opinions. The Insurer has received opinions of counsel to the
Issuer and New South concerning the perfection of the Indenture Trustee's
security interest in the Trust Estate and other matters under the laws of the
United States, and has received copies of any opinions delivered to the Rating
Agencies, the Noteholders and the Indenture Trustee, in each case addressed to,
and in form and substance satisfactory to, the Insurer;
(m) Satisfactory Documentation. The Insurer and its counsel have
determined that all documents, the Class A Notes and opinions to be delivered in
connection with the Class A Notes conform to the terms of the Indenture, the
Offering Document, the Underwriting Agreement, the Sale and Servicing Agreement,
the Purchase Agreement and this Insurance Agreement; and
(n) Additional Items, The Insurer has received such other
documents, instruments, approvals or opinions in form and substance reasonably
satisfactory to the Insurer as are reasonably requested by the Insurer,
including evidence reasonably satisfactory to the Insurer that the conditions
precedent, if any, in the Transaction Documents have been satisfied.
Section 3.2. Payment of Fees and Premium.
(a) Legal and Accounting Fees. New South shall pay or cause to be
paid on the Closing Date all reasonable and actual legal fees not to exceed
$35,000, auditors' fees and disbursements incurred by the Insurer in connection
with the issuance of the Ambac Policy and the Transaction Documents through the
Closing Date. Additional fees of the Insurer's counsel or auditors payable in
connection with the Transaction Documents incurred after the Closing Date shall
be paid by New South as and to the extent provided in Section 3.3(b) below.
(b) Rating Agency Fees. New South shall promptly pay the initial
fees of the Rating Agencies with respect to the Class A Notes and the
transactions contemplated hereby following receipt of a statement with respect
thereto, and shall pay or cause to be paid any subsequent fees of the Rating
Agencies with respect to, and directly allocable to, the Class A Notes. The
Insurer shall not be responsible for any fees or expenses of the Rating
Agencies. The fees for any other rating agency shall be paid by the party
requesting such other rating agency's rating.
(c) Premium. In consideration of the issuance by the Insurer of
the Ambac Policy, the Issuer shall pay or cause to be paid the Premiums to the
Insurer as set forth in the Fee Letter in accordance with the Indenture and this
Insurance Agreement and from the funds specified by Section 5.7 of the Sale and
Servicing Agreement, commencing on the day the Ambac Policy is issued, until the
Ambac Policy has been
20
terminated in accordance with its terms. The Premium paid pursuant to the
Indenture and the Sale and Servicing Agreement shall be nonrefundable without
regard to whether any Notice (as defined in the Ambac Policy) is delivered to
the Insurer requiring the Insurer to make any payment under the Ambac Policy or
any other circumstances relating to the Class A Notes or provision being made
for payment of the Class A Notes prior to maturity.
Section 3.3. Reimbursement Obligation.
(a) The Issuer agrees absolutely and unconditionally to reimburse
the Insurer for any amounts paid by the Insurer under the Ambac Policy, plus the
amount of any other due and payable and unpaid Reimbursement Amounts (as defined
in the Ambac Policy) and any Insurer Optional Deposits, which reimbursement
shall be due and payable on the date that any such amount is paid thereunder
from amounts available for such payment under the Indenture and the Sale and
Servicing Agreement, in an amount equal to the amounts so paid and all amounts
previously paid that remain unreimbursed, together (without duplication) with
interest on any and all amounts remaining unreimbursed (to the extent permitted
by law, if in respect of any unreimbursed amounts representing interest) from
the date such amounts became due until paid in full (after as well as before
judgment), at a rate of interest equal to the Late Payment Rate.
(b) Each of the Issuer and New South agrees, jointly and
severally, to pay to the Insurer, promptly, but in no event later than 30 days
after demand thereof, as follows: any and all charges, fees, costs and expenses,
including reasonable attorneys' and accountants' fees and expenses, that the
Insurer may pay or incur in connection with the Transaction Documents, including
(i) the enforcement, defense or preservation of any rights in respect of any of
the Transaction Documents, defending, monitoring or participating in any
litigation or proceeding (including any insolvency proceeding in respect of any
New South Party or any Affiliate thereof) relating to any of the Transaction
Documents, any party to any of the Transaction Documents (in its capacity as
such a party) or the Transaction, the costs and fees of inspections by the
Insurer or audits or field examinations by accountants and the ongoing
administration of the Transaction pursuant to the Transaction Documents, or (ii)
any amendment, waiver or other similar action with respect to, or related to,
any Transaction Document, whether or not executed or completed.
(c) Each of the Issuer and New South agrees, jointly and
severally, to pay to the party to whom such amounts are owed on demand interest
at the Late Payment Rate on any and all amounts described in Sections 3.3(b) and
3.4 after the date such amounts become due and payable until payment thereof in
full.
Section 3.4. Indemnification.
(a) In addition to any and all of the Insurer's rights of
reimbursement, indemnification or subrogation, and to any other rights of the
Insurer pursuant hereto or under law or in equity, New South agrees, to pay, and
to protect, indemnify and save harmless, the Insurer and its officers,
directors, shareholders, employees, agents and each
21
Person, if any, who controls the Insurer within the meaning of either Section 15
of the Securities Act or Section 20 of the Securities Exchange Act from and
against, any and all claims, losses, liabilities (including penalties), actions,
suits, judgments, demands, damages, costs or expenses (including reasonable fees
and expenses of attorneys, consultants and auditors and reasonable and actual
costs of investigations) of any nature arising out of or relating to the
transactions contemplated by the Transaction Documents by reason of:
(i) any statement, omission or action (other than of the
Insurer with respect to the Insurer Information, or of the Underwriter with
respect to the Underwriter Information) in connection with the offering,
issuance, sale or delivery of any of the Class A Notes;
(ii) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director, officer, employee
or agent of any New South Party in connection with the Transaction;
(iii) the violation by any New South Party of any domestic or
foreign law, rule or regulation, or any judgment, order or decree applicable to
them;
(iv) the breach by any New South Party of any representation,
warranty or covenant under any of the Transaction Documents (without giving
effect to any materiality qualifier or limitation therein);
(v) the occurrence, in respect of New South's duties as the
Servicer, under any of the Transaction Documents of any Servicer Default or any
event which, with the giving of notice or the lapse of time or both, would
constitute any Servicer Default; or
(vi) any untrue statement or alleged untrue statement of a
material fact contained in the Offering Document or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as such claims, losses,
liabilities (including penalties), actions, suits, judgments, demands, damages,
costs or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) arise out of or
are based upon any untrue statement or omission in the Offering Document in the
information with respect to (x) the Insurer Information and (y) the Underwriter
Information.
(b) In addition to any and all of the Insurer's rights of
reimbursement, indemnification or subrogation, and to any other rights of the
Insurer pursuant hereto or under law or in equity, the Issuer agrees to pay, and
to protect, indemnify and save harmless, the Insurer and its officers,
directors, shareholders, employees, agents and each Person, if any, who controls
the Insurer within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act from and against, any and all claims,
losses, liabilities (including penalties), actions, suits, judgments, demands,
22
damages, costs or expenses (including 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 Transaction
Documents, including by reason of:
(i) any statement, omission or action (other than of the
Insurer with respect to the Insurer Information, or of the Underwriter with
respect to the Underwriter Information) in connection with the offering,
issuance, sale or delivery of any of the Class A Notes;
(ii) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any director, officer, employee
or agent of any Transaction Party in connection with the Transaction;
(iii) the violation by any Transaction Party of any domestic
or foreign law, rule or regulation, or any judgment, order or decree applicable
to them;
(iv) the breach by any Transaction Party of any
representation, warranty or covenant under any of the Transaction Documents
(without giving effect to any materiality qualifier or limitation therein); or
(v) any untrue statement or alleged untrue statement of a
material fact contained in the Offering Document or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as such claims, losses,
liabilities (including penalties), actions, suits, judgments, demands, damages,
costs or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) arise out of or
are based upon any untrue statement or omission in the Offering Document in the
information with respect to (x) the Insurer Information and (y) the Underwriter
Information.
(c) The Insurer agrees to pay, and to protect, indemnify and save
harmless each of New South, the Depositor and the Issuer, and their respective
officers, directors, shareholders, employees, agents and each Person, if any,
who controls New South, the Depositor and the Issuer, within the meaning of
either Section 15 of the Securities Act or Section 20 of the Securities Exchange
Act from and against, any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or expenses
(including reasonable fees and expenses of attorneys, consultants and auditors
and reasonable costs of investigations) of any nature arising out of or by
reason of any untrue statement or alleged untrue statement of a material fact
contained in the Insurer Information 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, in light of the circumstances under
which they were made, not misleading.
23
(d) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against any Person (each, an
"Indemnified Party") in respect of which the indemnity provided in Section
3.4(a) , (b) or (c) may be sought from New South, the Depositor, the Issuer or
the Insurer, as the case may be (the "Indemnifying Party"), each such
Indemnified Party 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 the Indemnified Party and the
payment of all expenses and legal fees; provided that failure to notify the
Indemnifying Party shall not relieve it from any liability it may have to such
Indemnified Party except to the extent that it shall be actually prejudiced
thereby. 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 and may assume the defense of any such action or claim in
reasonable cooperation with, and with the reasonable cooperation of, the
Indemnifying Party; provided, however, that the fees and expenses of separate
counsel to the Indemnified Party in any such proceeding 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 or employ counsel reasonably satisfactory
to the Indemnified Party in any such action or proceeding within a reasonable
time after the commencement of such action 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 there may be one or more legal defenses
available to it which are different from or additional to those available to the
Indemnifying Party (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
the Indemnified Party). 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, which consent shall not be unreasonably withheld or delayed, but, if
settled with its written consent, or if there is 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
(d), 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.
(e) To provide for just and equitable contribution if the
indemnification provided by the Indemnifying Party is determined to be
unavailable or insufficient to hold harmless 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
24
hand, and the Indemnified Party, on the other hand. The relative fault of each
Indemnifying Party, on the one hand, and each Indemnified Party, on the other,
shall be determined by reference to, among other things, whether the breach or
alleged breach is 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. 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.
Section 3.5. Payment Procedure. In the event of any payment by the
Insurer for which reimbursement is sought under Section 3.3, the Issuer, New
South and the Indenture Trustee agree to accept the voucher or other evidence of
payment as prima facie evidence of the propriety thereof and the liability, if
any, described in Section 3.3 therefor to the Insurer; provided, that with
respect to claims for reimbursement of amounts other than amounts paid by the
Insurer under the Ambac Policy and any interest thereon made to New South under
Section 3.3(b), the Insurer will also provide appropriate supporting documents
to New South for such claims. All payments to be made to the Insurer under this
Insurance Agreement shall be made to the Insurer (to such account as shall be
specified by the Insurer in writing) by no later than 3:00 p.m. (New York time)
on the date when due in lawful currency of the United States of America in
immediately available funds or as the Insurer shall otherwise direct by written
notice to the party making such payment. In the event that the date of any
payment to the Insurer or the expiration of any time period hereunder occurs on
a day that 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.
Section 3.6. Subrogation. The parties hereto acknowledge that, to the
extent of any payment made by the Insurer pursuant to the Ambac Policy, the
Insurer shall be fully subrogated to the extent of such payment and any interest
due thereon, to the rights of the Noteholders to any moneys paid or payable in
respect of the Class A Notes under the Transaction Documents or otherwise
subject to applicable law. The parties hereto agree to such subrogation and
further agree to execute such instruments and to take such actions as, in the
sole and reasonable judgment of the Insurer, are necessary to evidence such
subrogation and to perfect the rights of the Insurer to receive any such moneys
paid or payable in respect of the Class A Notes, under the Transaction Documents
or otherwise.
ARTICLE IV
FURTHER AGREEMENTS
Section 4.1. Effective Date; Term of the Insurance Agreement. This
Insurance Agreement shall take effect on the Closing Date and shall remain in
effect until the later of (a) such time as the Insurer is no longer subject to a
claim under the Ambac Policy and such policy has been surrendered to the Insurer
for cancellation and (b) such time as all amounts payable to the Insurer by the
New South Parties hereunder or under the
25
Transaction Documents and the Class A Notes have been irrevocably paid and
redeemed in full and such Class A Notes have been cancelled; provided, however,
that the provisions of Sections 3.2, 3.3 and 3.4 hereof shall survive any
termination of this Insurance Agreement.
Section 4.2. Further Assurances and Corrective Instruments.
(a) Unless an Insurer Event of Default has occurred and is
continuing, or except as the Indenture otherwise provides, none of the Indenture
Trustee and none of the other Transaction Parties shall grant any waiver of
rights under any of the Transaction Documents to which any of them is a party
without the prior written consent of the Insurer and any such waiver without
prior written consent of the Insurer shall be null and void and of no force or
effect.
(b) Each of the parties hereto agrees that it will, from time
to time, execute, acknowledge and deliver, or cause to be executed, acknowledged
and delivered, such supplements hereto and such further instruments and
agreements and take such further actions as the Insurer may reasonably request
and as may be required in the Insurer's reasonable judgment to effectuate the
intent and purpose of this Insurance Agreement and the other Transaction
Documents. Without limiting the foregoing, to the extent such authorization
shall be required by law, each New South Party hereby authorizes the Indenture
Trustee and the Insurer, at the expense of the Issuer, in the event the Issuer
has failed to do so upon request (provided that no such request shall be
required if there exists any Insolvency Proceeding), to execute and file
financing statements covering the assets covered by any purchase or transfer
pursuant to the Transaction Documents or owned by the Issuer in such
jurisdictions as may be required to confirm title thereto and perfect and
maintain the lien thereon. In addition, each of the parties hereto agrees to
cooperate with the Rating Agencies in connection with any review of the
Transaction conducted during normal business hours and in a manner that does not
unreasonably disrupt the business of the Transaction Parties, that may be
undertaken by the Rating Agencies after the date hereof upon prior written
notice.
(c) None of the Transaction Parties shall cause or permit the
Issuer to issue any notes or other evidences of indebtedness, or to otherwise
incur any indebtedness, other than the indebtedness represented by the Class A
Notes or other indebtedness expressly permitted under the Transaction Documents.
(d) Each Transaction Party shall concurrently provide the
Insurer, as and when delivery thereof is required to be made pursuant to the
Transaction Documents, with copies of all reports, notices, requests and demands
delivered or required to be delivered by it pursuant to the Transaction
Documents.
Section 4.3. Obligations Absolute.
(a) The obligations of the Transaction Parties hereunder shall
be absolute and unconditional and shall be paid or performed strictly in
accordance with this
26
Insurance Agreement and the other Transaction Documents 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
Transaction Documents or the Class A Notes;
(ii) any exchange or release of any other obligations
hereunder;
(iii) the existence of any claim, setoff, defense,
reduction, abatement or other right that a Transaction Party which is a party to
any of the Transaction Documents may have at any time against the Insurer or any
other Person;
(iv) any document presented in connection with the Ambac
Policy proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
(v) any payment by the Insurer under the Ambac Policy
against presentation of a certificate or other document that does not strictly
comply with the terms of the Ambac Policy;
(vi) any failure of the Transaction Parties to receive the
proceeds from the sale of the Class A Notes;
(vii) any Insolvency Event with respect to any Transaction
Party; and
(viii) any other circumstances, other than payment in full,
that might otherwise constitute a defense available to, or discharge of, such
party in respect of any Transaction Document.
(b) The Transaction Parties and any and all others who are now or
may become liable for all or any part of the obligations of the Transaction
Parties under this Insurance Agreement agree to be bound by this Insurance
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 and obligations evidenced by
any Transaction 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 Transaction Documents; (iv) waive all rights of abatement,
diminution, postponement or deduction, all defenses, other than payment, and all
rights of setoff or recoupment arising out of any breach under any of the
Transaction Documents, by any party thereto or any beneficiary thereof, or out
of any obligation at any time owing to any of the Transaction Parties; (v) agree
that their liabilities hereunder shall be unconditional and without regard to
any setoff, counterclaim or the liability of any other Persons for the payment
hereof; (vi) agree that any consent, waiver or forbearance hereunder with
respect to an event
27
shall operate only for such event and not for any subsequent event; (vii)
consent to any and all extensions of time that may be granted by the Insurer
with respect to any payment hereunder or other provisions hereof and to the
release of any security at any time given for any payment hereunder, or any part
thereof, with or without substitution, and to the release of any Person or
entity liable for any such payment; and (viii) 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 any party
hereto from pursuing any rights or remedies it may have against any Person in a
separate legal proceeding.
Section 4.4. Assignments; Reinsurance; Third-Party Rights.
(a) This Insurance 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. None of
the Transaction Parties may assign its rights under this Insurance Agreement, or
delegate any of its duties hereunder, without the prior written consent of the
Insurer. Any assignments made in violation of this Insurance Agreement shall be
null and void.
(b) The Insurer shall have the right to give participations in
its rights under this Insurance Agreement and to enter into contracts of
reinsurance with respect to the Ambac Policy upon such terms and conditions as
the Insurer may in its discretion determine; provided, however, that no such
participation or reinsurance agreement or arrangement shall relieve the Insurer
of any of its obligations hereunder or under the Ambac Policy, and provided,
further, that any reinsurer or participant will not have any rights against the
Transaction Parties or the Holders and that none of the Transaction Parties or
the Holders shall have any obligation to have any communication or relationship
with any reinsurer or participant in order to enforce the obligations of the
Insurer hereunder and under the Ambac Policy.
(c) The Insurer shall be entitled to assign or pledge to any
bank, other lender or reinsurer providing liquidity or credit with respect to
the Transaction or the obligations of the Insurer in connection therewith, any
rights of the Insurer under the Transaction Documents or with respect to any
real or personal property or other interests pledged to the Insurer or in which
the Insurer has a security interest, in connection with the Transaction, subject
in each case to the liens granted pursuant to the Transaction Documents;
provided that no such bank or other lender shall thereby obtain any direct right
against Transaction Parties or the Holders, and further, provided; that no such
assignment or pledge shall give any assignee the right to exercise any
discretionary authority that the Transaction Documents provide shall be
exercisable by the Insurer or relieve the Insurer of any of its obligations
hereunder or under the Ambac Policy.
28
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Insurance Agreement shall confer any right, remedy
or claim, express or implied, upon any Person not a party hereto, including any
Holders, other than the rights of the Insurer against the Transaction Parties
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 Indenture Trustee nor any
Holders shall have any right to payment from any Premiums paid or payable
hereunder or under the Indenture or from any amounts paid by the Issuer or New
South pursuant to Sections 3.2, 3.3 or 3.4 hereof.
Section 4.5. Liability of the Insurer. Neither the Insurer nor any of
its officers, directors or employees shall be liable or responsible for: (a) the
use that may be made of the Ambac Policy by the Indenture Trustee or any other
party or for any acts or omissions of the Indenture Trustee or any other party
in connection therewith; or (b) the validity, sufficiency, accuracy or
genuineness of documents delivered to the Insurer in connection with any claim
under the Ambac 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 the Insurer shall have actual
knowledge thereof). In furtherance and not in limitation of the foregoing, the
Insurer may accept documents that appear on their face to be in order, without
responsibility for further investigation.
Section 4.6. [Reserved]
Section 4.7. Rights and Remedies. Each party to this Insurance
Agreement has acknowledged and agreed to, and hereby confirms its
acknowledgement and agreement to, the collateral sale and assignment by the
Originator to the Depositor, by the Depositor to the Issuer, and the pledge by
the Issuer to the Indenture Trustee, of all of its right, title and interest in,
to and under the Trust Estate, and the Transaction Documents and all of the
Issuer's rights, remedies, powers and privileges and all claims of the Issuer or
the Depositor, as the case may be, against the Originator, of the Issuer against
the Depositor and of the Issuer against the Depositor or the Originator, under
or with respect to the Transaction Documents (whether arising pursuant to the
terms thereof or otherwise available at law or in equity), including without
limitation (whether or not any of a Default or Event of Default under the
Indenture, an Insurance Event of Default hereunder, a Servicer Default has
occurred and is continuing) (i) the right of the Issuer at any time to enforce
the Transaction Documents against the Servicer, the Depositor or the Originator
and the obligations of the Servicer, the Originator and the Depositor thereunder
and (ii) the right at any time to give or withhold any and all consents,
requests, notices, directions, approvals, demands, extensions or waivers under
or with respect to any Transaction Document or the obligations in respect of the
Issuer, the Servicer, the Depositor or the Originator thereunder, all of which
rights, remedies, powers, privileges and claims may, notwithstanding any
provision to the contrary by any of the Transaction Documents, be exercised
and/or enforced by the Indenture Trustee in lieu of and in the place and stead
of the Depositor and the Issuer to the same extent as the Depositor or the
Issuer would otherwise do, and except to the extent a Transaction Document
provides that the Insurer shall not have such a right upon an Insurer Default
that has occurred and is continuing, neither the Depositor nor the Issuer may
exercise any of the foregoing
29
rights without the prior written consent of the Insurer. Each party hereto
further acknowledges and agrees that, unless an Insurer Default has occurred and
is continuing, the Indenture Trustee will take or refrain from taking any
action, and exercise or refrain from exercising any rights under the Transaction
Documents in its capacity as Indenture Trustee pursuant to the written direction
of the Insurer; provided, however, that the obligations of the Indenture Trustee
to take or refrain from taking, or to exercise or refrain from exercising, any
such action or rights shall not apply to routine administrative tasks required
to be performed by the Indenture Trustee pursuant to the Transaction Documents
and shall be limited to those actions and rights that can be exercised or taken
(or not exercised or taken, as the case may be) in full compliance with the
provisions of the Transaction Documents and with applicable law.
Section 4.8. Approval of Successor Servicer. The Insurer agrees that in
connection with any merger or consolidation of the Servicer as contemplated by
Section 8.3 of the Sale and Servicing Agreement, that the successor or surviving
entity will be acceptable to the Insurer if (i) the successor or surviving
entity has a net worth of at least $50 million and (ii) in the Insurer's
reasonable determination, the merger or consolidation would not impair the
Servicer's ability to perform its obligations under the Transaction Documents to
which it is a party.
ARTICLE V
DEFAULTS AND REMEDIES
Section 5.1. Defaults. The occurrence of any of the following events
shall constitute an "Insurance Event of Default" hereunder:
(a) Any representation or warranty made by any of the
Transaction Parties hereunder or under the Transaction Documents, or in any
certificate furnished hereunder or under the Transaction Documents, prove to be
untrue or misleading in any material respect; provided, however, that if such
Transaction Party effectively cures any such defect in any representation or
warranty under any Transaction Document or certificate or report furnished under
any Transaction Document, within the time period specified in the related
Transaction Document as the cure period therefor, such defect shall not in and
of itself constitute an Insurance Event of Default;
(b) (i) Any Transaction Party fails to pay or deposit when due
any amount required to be paid or deposited by it hereunder or under any other
Transaction Document and such failure has continued for a period of at least
three (3) Business Days or, if so specified in the applicable Transaction
Document, the applicable grace period set forth herein, or (ii) a legislative
body has enacted any law that declares or a court of competent jurisdiction
finds or rules that this Insurance Agreement or any other Transaction Document
is not valid and binding on the Transaction Parties hereto or thereto;
30
(c) The occurrence and continuance of an Event of Default under
the Indenture or Servicer Default under the Sale and Servicing Agreement;
(d) Any failure on the part of any Transaction Party duly to
observe or perform in any material respect any other of the covenants or
agreements on the part of such Transaction Party contained in this Insurance
Agreement or in any other Transaction Document which continues unremedied beyond
any cure period provided therein, or, in the case of this Insurance Agreement,
for a period of 45 days after the earlier of the date on which written notice of
such failure, requiring the same to be remedied, has been given to New South by
the Insurer (with a copy to the Indenture Trustee) or by the Indenture Trustee
(with a copy to the Insurer), or a Responsible Officer of such Transaction Party
has actual knowledge thereof;
(e) The entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for appointment of a
conservator, receiver or liquidator or similar official for any Transaction
Party which is a party to any Transaction Document in any bankruptcy,
insolvency, readjustment of debt, marshaling of assets and liabilities or
similar proceedings or for the winding up or liquidation of its respective
affairs, and the continuance of any such decree or order unstayed and in effect
for a period of 30 consecutive days; or
(f) The consent by any Transaction Party to the appointment of a
conservator or receiver or liquidator or similar official in any bankruptcy,
insolvency, readjustment of debt, marshaling of assets and liabilities, or
similar proceedings of or relating to such Transaction Party or relating to all
or substantially all of its respective property; or any such Transaction Party
admits in writing its inability to pay its debts generally as they become due,
files a petition to take advantage of any applicable bankruptcy, insolvency or
reorganization statute, make an assignment for the benefit of its creditors or
voluntarily suspends payment of its obligations.
Section 5.2. Remedies; No Remedy Exclusive.
(a) Upon the occurrence of an Insurance Event of Default
hereunder, the Insurer may take whatever action at law or in equity as may
appear necessary or desirable in its judgment to collect the amounts, if any,
then due under this Insurance Agreement or any other Transaction Document or to
enforce performance and observance of any obligation, agreement or covenant of
the Transaction Parties under this Insurance Agreement or any other Transaction
Document, either in its own capacity or as Controlling Party. For the avoidance
of doubt, (i) no Insurance Event of Default shall constitute an Event of Default
under the Indenture unless the event or circumstance giving rise to such
Insurance Event of Default shall expressly constitute an Event of Default under
the Indenture and (ii) no Insurance Event of Default shall constitute a Servicer
Default under the Sale and Servicing Agreement unless the event or circumstance
giving rise to such Insurance Event of Default shall expressly constitute a
Servicer Default under the Sale and Servicing Agreement.
31
(b) Unless otherwise expressly provided, no remedy herein conferred 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 this Insurance Agreement or any other Transaction Document, or existing at
law or in equity. No delay or omission to exercise any right or power accruing
under this Insurance Agreement or any other Transaction Document upon the
happening of any event set forth in Section 5.1 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 the Insurer to exercise any remedy reserved to the Insurer in
this Article, it shall not be necessary to give any notice, other than such
notice as may be required by this Article.
(c) Each party to this Insurance Agreement hereby agrees that, in
addition to any other rights or remedies existing in its favor, it shall be
entitled to specific performance and/or injunctive relief in order to enforce
any of its rights or any obligation owed to it under the Transaction Documents.
Section 5.3. Waivers.
(a) No failure by the Insurer to exercise, and no delay by the Insurer
in exercising, any right hereunder shall operate as a waiver thereof. The
exercise by the Insurer of any right hereunder shall not preclude the exercise
of any other right, and the remedies provided herein to the Insurer are declared
in every case to be cumulative and not exclusive of any remedies provided by law
or equity.
(b) The Insurer shall have the right, to be exercised in its complete
discretion, to waive any Insurance Event of Default hereunder, by a writing
setting forth the terms, conditions and extent of such waiver signed by the
Insurer and delivered to New South and the Indenture Trustee. Unless such
writing expressly provides to the contrary, any waiver so granted shall extend
only to the specific event or occurrence which gave rise to the Insurance Event
of Default so waived and not to any other similar event or occurrence which
occurs subsequent to the date of such waiver.
ARTICLE VI
MISCELLANEOUS
Section 6.1. Amendments, Etc. This Insurance Agreement may be amended,
modified, supplemented or terminated only by written instrument or written
instruments signed by the parties hereto. No consent of any reinsurer or
participant contracted with by the Insurer pursuant to Section 4.4(b) hereof
shall be required for any amendment, modification, supplement or termination
hereof. New South agrees to provide a copy of any amendment to this Insurance
Agreement promptly to the Rating Agencies. No act or course of dealing shall be
deemed to constitute an amendment, modification, supplement or termination
hereof. Unless an Insurer Default has occurred and is continuing, the other
Transaction Documents may be amended, modified or supplemented only with the
prior
32
written consent of the Insurer and any amendment, modification or supplement
without such consent shall be null and void and of no force and effect.
Section 6.2. Notices. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be (i) mailed by prepaid registered or certified mail, return
receipt requested, or (ii) personally delivered by messenger or overnight
courier (with confirmation of receipt) and in either case telecopied to the
recipient as follows:
(a) To the Insurer:
Ambac Assurance Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Structured Finance Department ABS
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Confirmation: 212-668-0340
with a copy to the attention of: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
Vice President
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
Confirmation: 212-208-3407
(in each case in which notice or other communication
to the Insurer refers to a Servicer Default, an
Insurance Event of Default hereunder, a Default or
Event of Default under the Indenture, or a Reserve
Event, a claim on the Ambac Policy or any event with
respect to which failure on the part of the Insurer
to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other
communication shall also be sent to the attention of
the general counsel of each of the Insurer and the
Indenture Trustee and shall be marked to indicate
"URGENT MATERIAL ENCLOSED.")
(b) To New South:
New South Federal Savings Bank
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(c) To the Issuer:
New South Motor Vehicle Trust 2002-A
in care of: Wilmington Trust Company, as Owner Trustee
▇▇▇▇▇▇ Square North
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
33
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ___________________
with a copy to the attention of:
New South Federal Savings Bank
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
(d) To the Indenture Trustee:
JPMorgan Chase Bank
▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Structured Finance Services / New South 2002-A
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
A party may specify an additional or different address or addresses by writing
mailed or delivered to the other parties as aforesaid. All such notices and
other communications shall be effective upon receipt.
Section 6.3. Severability. In the event that any provision of this
Insurance Agreement is 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 6.4. Governing Law. This Insurance Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
regard to conflicts of laws provisions.
Section 6.5. 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 TRANSACTION OR FOR RECOGNITION OR ENFORCEMENT OF
ANY JUDGMENT RELATING THERETO,
34
AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING SHALL BE HEARD OR DETERMINED
IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL
COURT. THE PARTIES AGREE THAT A FINAL NONAPPEALABLE JUDGMENT IN ANY SUCH ACTION,
SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY WAIVE AND AGREE NOT
TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION
OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER
OR THAT THE RELATED 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 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) Service on any party hereto may be made by mailing or
delivering copies of the summons and complaint and other process which may be
served in any suit, action or proceeding to such party at its address listed in
Section 6.2 herein. Such address may be changed by the applicable party or
parties by written notice to each of the other parties hereto.
(d) Nothing contained in this Insurance Agreement shall limit or
affect any party'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 any other party or its properties in the courts of any jurisdiction.
Section 6.6. Consent of the Insurer. In the event that the consent of the
Insurer is required under any of the Transaction Documents, the determination
whether to grant or withhold such consent shall be made by the Insurer in
writing and in its sole discretion except to the extent such consent of the
Insurer pursuant to the terms of the applicable Transaction Document may not be
unreasonably withheld, and without any implied duty towards any other Person.
Section 6.7. Counterparts. This Insurance Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
Section 6.8. Headings. The headings of Articles and Sections and the Table
of Contents contained in this Insurance Agreement are provided for convenience
only.
35
They form no part of this Insurance Agreement and shall not affect its
construction or interpretation.
Section 6.9. Trial by Jury Waived. Each party hereby waives, to the
fullest extent permitted by law, any right to a trial by jury in respect of any
litigation arising directly or indirectly out of, under or in connection with
any of the Transaction Documents or any of the transactions contemplated
thereunder. Each party hereto (a) certifies that no representative, agent or
attorney of any party hereto has represented, expressly or otherwise, that it
would not, in the event of litigation, seek to enforce the foregoing waiver and
(b) acknowledges that it has been induced to enter into the Transaction
Documents to which it is a party by, among other things, this waiver.
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 the Insurer or any other 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 (including the Class A Notes and the Ambac 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 of
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 Insurance Agreement.
Section 6.11. Entire Agreement; Facsimile Signatures. This Insurance
Agreement, the Fee Letter and the Ambac Policy set forth the entire agreement
between the parties with respect to the subject matter hereof and thereof, and
supersede and replace any agreement or understanding that may have existed
between the parties prior to the date hereof in respect of such subject matter.
Execution and delivery of this Insurance Agreement by facsimile signature shall
constitute execution and delivery of this Insurance Agreement for all purposes
hereof with the same force and effect as execution and delivery of a manually
signed copy hereof.
Section 6.12. Indenture Trustee. The Indenture Trustee hereby acknowledges
and agrees to perform all its obligations and duties pursuant to the Transaction
Documents to which it is a party thereto.
Section 6.13. Third Party Beneficiary. Subject to the provisions of the
Transaction Documents, each of the parties hereto agrees that the Insurer shall
have all rights of an intended third party beneficiary in respect of each of the
Transaction Documents, including the right to enforce the respective obligations
of the parties thereunder.
Section 6.14. No Proceedings. Each of the parties hereto agrees that it
will not institute against the Issuer any involuntary proceeding or otherwise
institute any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other
36
proceeding under any federal or state bankruptcy or similar law until the date
which is one year and one day or, if longer, the then applicable preference
period plus one day, since the last day on which any Class A Notes shall have
been outstanding and all amounts payable to the Insurer hereunder shall have
been paid in full. Each of the parties hereto agrees that it will not institute
against the Depositor any involuntary proceeding or otherwise institute any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or
other proceeding under any federal or state bankruptcy or similar law.
Section 6.15. Limitation of Owner Trustee Liability. It is expressly
understood and agreed by the parties hereto that (a) this document is executed
and delivered by Wilmington Trust Company, not individually or personally, but
solely as Owner Trustee, in the exercise of the powers and authority conferred
and vested in it, pursuant to the Trust Agreement for New South Motor Vehicle
Trust 2002-A, (b) each of the representations, undertakings and agreements
herein made on the part of New South Motor Vehicle Trust 2002-A is made and
intended not as personal representations, undertakings and agreements by
Wilmington Trust Company but is made and intended for the purpose for binding
only the Trust, (c) nothing herein contained shall be construed as creating any
liability on Wilmington Trust Company, individually or personally, to perform
any covenant either expressed or implied contained herein, all such liability,
if any, being expressly waived by the parties hereto and by any person claiming
by, through or under the parties hereto, and (d) under no circumstances shall
Wilmington Trust Company be personally liable for the payment of any
indebtedness or expenses of the Trust or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaken by New
South Motor Vehicle Trust 2002-A under this Agreement or any other related
documents.
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY
OR OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM
CONTAINING ANY MATERIALLY FALSE INFORMATION, OR CONCEALS FOR THE PURPOSE OF
MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO, COMMITS A
FRAUDULENT INSURANCE ACT, WHICH IS A CRIME AND SHALL ALSO BE SUBJECT TO A CIVIL
PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM
FOR EACH SUCH VIOLATION.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Insurance
Agreement, all as of the day and year first above mentioned.
AMBAC ASSURANCE CORPORATION,
as Insurer
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
NEW SOUTH MOTOR VEHICLE TRUST 2002-A, as Issuer
By: Wilmington Trust Company,
not in its individual capacity,
but solely as Owner Trustee
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
BOND SECURITIZATION, L.L.C.,
as Depositor
By: /s/ ▇▇▇▇▇ ▇. Ponposelli
-------------------------------------------
Name: ▇▇▇▇▇ ▇. Ponposelli
Title: Managing Director
NEW SOUTH FEDERAL SAVINGS BANK,
as Originator and Servicer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
JPMORGAN CHASE BANK
not in its individual capacity, but solely
as Indenture Trustee
By: /s/ ▇▇▇▇▇▇ ▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇
Title: Trust Officer
38
EXHIBIT A
FORM OF AMBAC POLICY
See Exhibit 4.3
A-1