EXHIBIT 10.3 


INSURANCE AND INDEMNITY AGREEMENT


by and among


FINANCIAL SECURITY ASSURANCE INC.,


INDYMAC BANK, F.S.B., 


INDYMAC ABS, INC. 


and


INDYMAC HOME EQUITY MORTGAGE LOAN
ASSET-BACKED TRUST,


SERIES 2007-H1


March 23, 2007


INDYMAC HOME EQUITY MORTGAGE LOAN
ASSET-BACKED TRUST, SERIES 2007-H1


$650,071,000 IndyMac Home Equity Mortgage
Loan Asset-Backed Notes, Series 2007-H1






TABLE OF CONTENTS


	
 

	
 

	
 


	
 

	
 

	
Page


	
INTRODUCTORY
  STATEMENTS

	
1


	
ARTICLE I
  DEFINITIONS; LIMITED RECOURSE

	
1


	
Section 1.01.

	
Definitions

	
1


	
Section 1.02.

	
Limited
  Recourse

	
1


	
ARTICLE II
  REPRESENTATIONS, WARRANTIES AND COVENANTS

	
2


	
Section 2.01.

	
Representations
  and Warranties of the Company and the Depositor

	
2


	
Section 2.02.

	
Representations
  and Warranties of the Trust

	
9


	
Section 2.03.

	
Affirmative
  Covenants of the Company and the Depositor

	
12


	
Section 2.04.

	
Affirmative
  Covenants of the Trust

	
20


	
Section 2.05.

	
Negative
  Covenants of the Company and the Depositor

	
22


	
Section 2.06.

	
Negative
  Covenants of the Trust

	
23


	
ARTICLE III
  THE POLICY; REIMBURSEMENT; INDEMNIFICATION

	
25


	
Section 3.01.

	
Issuance of
  the Policy

	
25


	
Section 3.02.

	
Payment of
  Fees and Premium

	
25


	
Section 3.03.

	
Reimbursement
  and Additional Payment Obligation

	
26


	
Section 3.04.

	
Indemnification

	
27


	
Section 3.05.

	
Subrogation

	
30


	
Section 3.06.

	
Assignment
  and Other Rights

	
30


	
ARTICLE IV
  FURTHER AGREEMENTS

	
30


	
Section 4.01.

	
Effective
  Date; Term of Agreement

	
30


	
Section 4.02.

	
Obligations
  Absolute

	
31


	
Section 4.03.

	
Assignments;
  Reinsurance; Third-Party Rights

	
32


	
Section 4.04.

	
Liability of
  FSA

	
32


	
ARTICLE V
  EVENTS OF DEFAULT; REMEDIES

	
34


	
Section 5.01.

	
Events of
  Default

	
34


	
Section 5.02.

	
Remedies;
  Waivers

	
35


	
ARTICLE VI
  MISCELLANEOUS

	
36


	
Section 6.01.

	
Amendments

	
36


	
Section 6.02.

	
Notices

	
36


	
Section 6.03.

	
Payment
  Procedure

	
38


	
Section 6.04.

	
Severability

	
38


	
Section 6.05.

	
Governing
  Law

	
38


	
Section 6.06.

	
Consent to
  Jurisdiction

	
38


	
Section 6.07.

	
Consent of
  FSA

	
39


	
Section 6.08.

	
Counterparts

	
39


	
Section 6.09.

	
Trial by
  Jury Waived

	
40


	
Section 6.10.

	
Limited
  Liability

	
40


	
Section 6.11.

	
Entire
  Agreement

	
40


	
Section 6.12.

	
Owner
  Trustee Liability

	
40





Appendix
I—Definitions

Annex I—Form of Policy 

Appendix A—Conditions Precedent to Issuance of the Policy 


i






INSURANCE AND INDEMNITY AGREEMENT


          INSURANCE
AND INDEMNITY AGREEMENT, dated as of March 23, 2007, among FINANCIAL SECURITY
ASSURANCE INC. (“FSA”), INDYMAC BANK, F.S.B. (the “Company”), INDYMAC ABS, INC.
(the “Depositor”) and INDYMAC HOME EQUITY MORTGAGE LOAN ASSET-BACKED TRUST,
SERIES 2007-H1 (the “Trust”). 


INTRODUCTORY STATEMENTS


          Pursuant
to an Indenture dated as of March 23, 2007, made by and between the Trust and
the Indenture Trustee, $650,071,000 of IndyMac Home Equity Mortgage Loan
Asset-Backed Notes, Series 2007-H1 (the “Securities”) are being issued. 


          The
Company has requested that FSA issue a financial guaranty insurance policy
guaranteeing certain payments of principal of and interest on the Securities
upon the terms and subject to the conditions provided herein. 


          The
parties hereto desire to specify the conditions precedent to the issuance of
the Policy by FSA, the payment of premium in respect of the Policy, the
indemnity and reimbursement to be provided to FSA in respect of amounts paid by
FSA under the Policy or otherwise and certain other matters. 


          In
consideration of the premises and of the agreements herein contained, FSA, the
Company, the Depositor and the Trust hereby agree as follows: 


ARTICLE I


DEFINITIONS; LIMITED RECOURSE


          Section
1.01. Definitions. Capitalized terms used herein shall have the meanings
provided in Appendix I hereto or, if not defined in Appendix I, shall have the
meanings provided in the Indenture or the Sale and Servicing Agreement, as
applicable. 


          Section
1.02. Limited Recourse. Notwithstanding any provision of this Agreement
to the contrary, the respective payment obligations of each of the Company, the
Depositor and the Trust set forth herein (other than those set forth in
Sections 3.02(a), (b), (c) and (d)(i), Section 3.03(b), Section 3.03(c)(ii),
Section 3.03(d) and Section 3.04) shall be non-recourse obligations and shall
be payable only from monies available for such payment in accordance with the
provisions of the Indenture (except to the extent that any such payment
obligation arises from a failure to perform or default of the Company or the
Depositor (except as provided in Section 3.04) respectively, or any affiliate
thereof in accordance with the Indenture or any other Transaction Document or
by reason of negligence, willful misconduct or bad faith on the part of the
Company or the Depositor, respectively, in the performance of its duties and
obligations thereunder or reckless disregard by the Company or the Depositor of
its duties and obligations thereunder). 


1






ARTICLE II


REPRESENTATIONS, WARRANTIES AND COVENANTS


          Section
2.01. Representations and Warranties of the Company and the Depositor. 


          (a) The
Company represents, warrants and covenants, as of the date hereof, as of the
Date of Issuance and as of the date of the transfer of Mortgage Loans to the
Trust created by the Trust Agreement, as follows: 


	
 

	
 


	
 

	
          (i) Due
  Organization and Qualification. The Company is a federal savings bank,
  duly organized and validly existing under the laws of the United States of
  America, and in good standing under the laws of its jurisdiction of
  organization. The Company is duly qualified to do business, is in good
  standing and has obtained all licenses, permits, charters, registrations and
  approvals (together, “Approvals”) necessary for the conduct of its business
  as currently conducted and as described in the Offering Document and the
  performance of its obligations under the Transaction Documents to which it is
  a party, in each jurisdiction in which the failure to be so qualified or to
  obtain such Approvals would render any Transaction Document unenforceable in
  any material respect or would have a material adverse effect upon the
  Transaction. The Depositor is a Subsidiary of the Company. 


	
 

	
 


	
 

	
          (ii) Power
  and Authority. The Company has all necessary power and authority to
  conduct its business as currently conducted and as described in the Offering
  Document, to execute the Transaction Documents to which it is a party, to
  deliver and perform its obligations under such Transaction Documents and to
  consummate the Transaction. 


	
 

	
 


	
 

	
          (iii) Due
  Authorization. The execution, delivery and performance by the Company of
  the Transaction Documents to which it is a party have been duly authorized by
  all necessary corporate action on the part of the Company and do not require
  any additional approvals or consents from, or other action by, or any notice
  to or filing with, any Person, including, without limitation, any
  governmental entity or the Company’s stockholders, except for such approvals and
  consents as shall have been obtained or filed prior to the Closing Date. 


	
 

	
 


	
 

	
          (iv) Noncontravention.
  Neither the execution and delivery by the Company of the Transaction
  Documents to which it is a party, the consummation of the transactions contemplated
  thereby nor the satisfaction of the terms and conditions of such Transaction
  Documents, 








	
 

	
 


	
 

	
          (a) conflicts
  with or results in any breach or violation of any provision of the
  organizational documents of the Company or any law, rule, regulation, order,
  writ, judgment, injunction, decree, determination or award currently in
  effect having applicability to the Company or any of their properties,
  including regulations issued by any administrative agency or other
  governmental authority having supervisory powers over the Company, 





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          (b) constitutes
  a default by the Company under, results in the acceleration of any obligation
  under, or constitutes a breach of any provision of any loan agreement,
  mortgage, indenture or other agreement or instrument to which the Company or
  any of its Subsidiaries is a party or by which it or any of its or their
  properties is or may be bound or affected which would have a material adverse
  effect on the Transaction or on any material portion of the Mortgage Loans,
  or 


	
 

	
 


	
 

	
          (c) results
  in or requires the creation of any Lien upon or in respect of any of the
  Company’s assets except as otherwise expressly contemplated by the
  Transaction Documents. 








	
 

	
 


	
 

	
          (v) Legal
  Proceedings. There is no action, proceeding or investigation by or before
  any court, governmental or administrative agency or arbitrator against or
  affecting the Company or any properties or rights of the Company or, to the
  best of the Company’s knowledge, any or all of the Mortgage Loans, pending
  or, to the Company’s knowledge after reasonable inquiry regarding threatened
  legal proceedings against or affecting the Company or the properties or
  rights of the Company, threatened, which, in any case, if decided adversely
  to the Company, would result in a Material Adverse Change with respect to the
  Company or any of the Mortgage Loans. 


	
 

	
 


	
 

	
          (vi) Valid
  and Binding Obligations. The Transaction Documents to which the Company
  is a party, when executed and delivered by the Company and assuming due
  authorization, execution and delivery by the other parties thereto, will or
  do constitute the legal, valid and binding obligations of the Company
  enforceable in accordance with their respective terms, except as such
  enforceability may be limited by bankruptcy, insolvency, reorganization,
  moratorium or other similar laws affecting creditors’ rights generally and
  general equitable principles. The Securities, when executed, authenticated
  and delivered in accordance with the Indenture will be validly issued and
  outstanding and entitled to the benefits of the Indenture. 


	
 

	
 


	
 

	
          (vii) Financial
  Statements. The Financial Statements of Bancorp, copies of which have
  been made available to FSA, (i) are, as of the dates and for the periods
  referred to therein, complete and correct in all material respects, (ii)
  present fairly the financial condition and results of operations of Bancorp
  as of the dates and for the periods indicated and (iii) have been prepared in
  accordance with generally accepted accounting principles consistently
  applied, except as noted therein (subject as to interim statements to normal
  year-end adjustments). Since the date of the most recent Financial
  Statements, there has been no material adverse change in such financial
  condition or results of operations. Except as disclosed in the Financial
  Statements, Bancorp is not subject to any contingent liabilities or
  commitments that, individually or in the aggregate, have a material
  possibility of causing a Material Adverse Change in respect of the Company. 


	
 

	
 


	
 

	
          (viii) ERISA.
  The Company is in compliance in all material respects with ERISA and have not
  incurred and do not reasonably expect to incur any liabilities to the PBGC
  (other than premiums due to the PBGC) in connection with any Plan or 





3







	
 

	
 


	
 

	
Multiemployer
  Plan in any capacity other than as a Commonly Controlled Entity with respect
  to the Company, or to contribute now or in the future in respect of any Plan
  or Multiemployer Plan.


	
 

	
 


	
 

	
          (ix) Accuracy
  of Information. None of the Provided Documents contain any statement of a
  material fact with respect to the Company or the Transaction Documents or
  Mortgage Loans that was untrue or misleading in any material respect when
  made. Since the furnishing of the Provided Documents, there has been no
  change, nor any development or event involving a prospective change known to
  the Company, that would render any of the Provided Documents untrue or
  misleading in any material respect. There is no fact known to the Company
  (excluding general market conditions) which has a material possibility of
  causing a Material Adverse Change with respect to the Company or the Mortgage
  Loans. 


	
 

	
 


	
 

	
          (x) Compliance
  With Securities Laws. The offer and sale of the Securities comply in all
  material respects with all requirements of law, including requirements of
  applicable securities laws. Without limitation of the foregoing, and except
  with respect to (A) information provided in writing by FSA expressly for use
  in the Offering Document (such information being limited to the information
  included (i) under the caption “The Insurer and the Policy – The Insurer”
  (including only the first three paragraphs under the subcaption
  “Incorporation of Certain Documents by Reference”), including the financial
  statements incorporated by reference therein, and (ii) in the penultimate
  paragraph under the caption “The Insurer and the Policy – The Policy”
  (collectively, as revised from time to time in accordance with the provisions
  hereof, the “FSA Information”) and (B) the Underwriter Information, the
  Offering Document does not contain any untrue statement of a material fact
  and does not omit to state a material fact required to be stated therein or
  necessary to make the statements made therein, in light of the circumstances
  under which they were made, not misleading. Neither the Trust nor the Company
  is required to be registered as an “investment company” under the Investment
  Company Act. The Indenture is qualified under the Trust Indenture Act. 


	
 

	
 


	
 

	
          (xi) Transaction
  Documents. Each of the representations and warranties of the Company
  contained in the Transaction Documents is true and correct in all material
  respects and the Company hereby makes each such representation and warranty
  to, and for the benefit of, FSA as if the same were set forth in full herein.
  


	
 

	
 


	
 

	
          (xii) Good
  Title; Absence of Liens; Security Interest. The Company, at the time of
  transfer of the Mortgage Loans to the Depositor, was the owner of, and had
  good and marketable title to, each Mortgage Loan free and clear of all Liens
  and Restrictions on Transferability, and had full right, power and lawful
  authority to assign, transfer and pledge the Mortgage Loans it owned. In the
  event that, in contravention of the intention of the parties, the transfer of
  Mortgage Loans by the Company to the Depositor or by the Depositor to the
  Trust is characterized as other than a sale, such transfer shall be
  characterized as a secured financing, and the Trust shall, for the benefit of
  the Noteholders and FSA, have a valid and perfected first priority security
  interest in the Mortgage Loans free and clear of all Liens and Restrictions
  on Transferability. The Indenture Trustee shall, for the benefit of the
  Noteholders and FSA, have a valid and 





4







	
 

	
 


	
 

	
perfected
  first priority security interest in the Mortgage Loans free and clear of all
  Liens and Restrictions on Transferability. 


	
 

	
 


	
 

	
          (xiii) Taxes.
  The Company has filed all federal and state tax returns which are required to
  be filed by it and paid all taxes owed by it, including any assessments
  received by it, in each case, which are not being contested in good faith and
  for which the Company has made adequate reserves, to the extent that such
  taxes have become due. Any taxes, fees and other governmental charges payable
  by the Company in connection with the Transaction, the execution and delivery
  of the Transaction Documents and the issuance of the Securities have been
  paid or shall have been paid at or prior to the Date of Issuance. 


	
 

	
 


	
 

	
          (xiv) Solvency;
  Fraudulent Conveyance. The Company is solvent and will not be rendered
  insolvent by the transactions contemplated by the Transaction Documents and,
  after giving effect to such transactions, the Company will not be left with
  an unreasonably small amount of capital with which to engage in its business.
  The Company does not intend to incur, or believe they have incurred, debts
  beyond their ability to pay such debts as they mature. The Company does not
  contemplate the commencement of insolvency, bankruptcy, liquidation or
  consolidation proceedings or the appointment of a receiver, liquidator,
  conservator, trustee or similar official in respect of the Company or any of
  their assets. The amount of consideration received by the Company upon the
  sale of the Mortgage Loans to the Depositor constitutes reasonably equivalent
  value and fair consideration therefor. The Company did not transfer the
  Mortgage Loans to the Depositor with any intent to hinder, delay or defraud
  any of the Company’s creditors. 


	
 

	
 


	
 

	
          (xv) Compliance
  With Law, Etc. No practice, procedure or policy employed or proposed to
  be employed by the Company in the conduct of its business violates any law,
  regulation, judgment, agreement, order or decree applicable to the Company
  which, if enforced, would result in a Material Adverse Change with respect to
  the Company or the Mortgage Loans. 


	
 

	
 


	
 

	
          (xvi) Compliance
  With Anti-Money Laundering Laws. No practice, procedure or policy
  employed or proposed to be employed by the Company in the conduct of its
  business violates any anti-money laundering law or regulation (including
  without limitation, the USA PATRIOT Act, Public Law No. 107-56 (2001), and
  regulations promulgated thereunder) applicable to the Company. 


	
 

	
 


	
 

	
          (xvii) Rating
  Agencies. The information supplied by the Company to S&P and Moody’s
  in connection with obtaining their respective ratings of the Securities did
  not contain any untrue statement of a material fact or omit to state any
  material fact required to be stated in order to make such information not
  misleading. 


	
 

	
 


	
 

	
          (xviii) Tax
  Characterization. Upon issuance and for so long as the Securities shall
  be outstanding, for federal income tax purposes, the Securities will be
  characterized as indebtedness, and the Trust will not be classified as an
  association or publicly traded 





5







	
 

	
 


	
 

	
partnership
  taxable as a corporation or a taxable mortgage pool within the meaning of
  Section 7701(i) of the Code.





          (b) The
Depositor represents, warrants and covenants, as of the date hereof, as of the
Date of Issuance and as of the date of the transfer of Mortgage Loans to the
Trust created by the Trust Agreement, as follows: 


	
 

	
 


	
 

	
          (i) Due
  Organization and Qualification. The Depositor is a corporation organized
  under the laws of the State of Delaware, duly organized, validly existing and
  in good standing under the laws of the State of Delaware. The Depositor is
  duly qualified to do business, is in good standing and has obtained all
  licenses, permits, charters, registrations and approvals (together,
  “Approvals”) necessary for the conduct of its business as currently conducted
  and as described in the Offering Document and the performance of its
  obligations under the Transaction Documents to which it is a party, in each
  jurisdiction in which the failure to be so qualified or to obtain such
  Approvals would render any Transaction Document unenforceable in any material
  respect or would have a material adverse effect upon the Transaction. The
  Depositor is a Subsidiary of the Company. 


	
 

	
 


	
 

	
          (ii) Power
  and Authority. The Company has all necessary power and authority to
  conduct its business as currently conducted and as described in the Offering
  Document, to execute the Transaction Documents to which it is a party, to
  deliver and perform its obligations under such Transaction Documents and to
  consummate the Transaction. 


	
 

	
 


	
 

	
          (iii) Due
  Authorization. The execution, delivery and performance by the Depositor
  of the Transaction Documents to which it is a party have been duly authorized
  by all necessary corporate action on the part of the Depositor and do not
  require any additional approvals or consents from, or other action by, or any
  notice to or filing with, any Person, including, without limitation, any
  governmental entity or the stockholders, except for such approvals and
  consents as shall have been obtained or filed prior to the Closing Date. 


	
 

	
 


	
 

	
          (iv) Noncontravention.
  Neither the execution and delivery by the Depositor of the Transaction
  Documents to which it is a party, the consummation of the transactions
  contemplated thereby nor the satisfaction of the terms and conditions of such
  Transaction Documents, 








	
 

	
 


	
 

	
          (a) conflicts
  with or results in any breach or violation of any provision of the
  organizational documents of the Depositor or any law, rule, regulation,
  order, writ, judgment, injunction, decree, determination or award currently
  in effect having applicability to the Depositor or any of their properties,
  including regulations issued by any administrative agency or other
  governmental authority having supervisory powers over the Depositor, 


	
 

	
 


	
 

	
          (b) constitutes
  a default by the Depositor under, results in the acceleration of any obligation
  under, or constitutes a breach of any provision of 





6







	
 

	
 


	
 

	
any loan
  agreement, mortgage, indenture or other agreement or instrument to which the
  Depositor or any of its Subsidiaries is a party or by which it or any of its
  or their properties is or may be bound or affected which would have a
  material adverse effect on the Transaction or on any material portion of the
  Mortgage Loans, or 


	
 

	
 


	
 

	
          (c) results
  in or requires the creation of any Lien upon or in respect of any of the
  Depositor’s assets except as otherwise expressly contemplated by the
  Transaction Documents. 








	
 

	
 


	
 

	
          (v) Legal
  Proceedings. There is no action, proceeding or investigation by or before
  any court, governmental or administrative agency or arbitrator against or affecting
  the Depositor or any properties or rights of the Depositor or, to the best of
  the Depositor’s knowledge, any or all of the Mortgage Loans, pending or, to
  the Depositor’s knowledge after reasonable inquiry regarding threatened legal
  proceedings against or affecting the Depositor or the properties or rights of
  the Depositor, threatened, which, in any case, if decided adversely to the
  Depositor, would result in a Material Adverse Change with respect to the
  Company, the Depositor, or any of the Mortgage Loans. 


	
 

	
 


	
 

	
          (vi) Valid
  and Binding Obligations. The Transaction Documents to which the Depositor
  is a party, when executed and delivered by the Depositor and assuming due
  authorization, execution and delivery by the other parties thereto, will or
  do constitute the legal, valid and binding obligations of the Depositor,
  enforceable in accordance with their respective terms, except as such
  enforceability may be limited by bankruptcy, insolvency, reorganization,
  moratorium or other similar laws affecting creditors’ rights generally and
  general equitable principles. The Securities, when executed, authenticated
  and delivered in accordance with the Indenture will be validly issued and
  outstanding and entitled to the benefits of the Indenture. 


	
 

	
 


	
 

	
          (vii) ERISA.
  The Depositor is in compliance in all material respects with ERISA and have
  not incurred and do not reasonably expect to incur any liabilities to the
  PBGC (other than premiums due to the PBGC) in connection with any Plan or
  Multiemployer Plan in any capacity other than as a Commonly Controlled Entity
  with respect to the Company, or to contribute now or in the future in respect
  of any Plan or Multiemployer Plan. 


	
 

	
 


	
 

	
          (viii) Accuracy
  of Information. None of the Provided Documents contain any statement of a
  material fact with respect to the Depositor or the Transaction Documents or
  Mortgage Loans that was untrue or misleading in any material respect when
  made. Since the furnishing of the Provided Documents, there has been no change,
  nor any development or event involving a prospective change known to the
  Depositor, that would render any of the Provided Documents untrue or
  misleading in any material respect. There is no fact known to the Depositor
  (excluding general market conditions) which has a material possibility of
  causing a Material Adverse Change with respect to the Depositor or the
  Mortgage Loans. 





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          (ix) Compliance
  With Securities Laws. The offer and sale of the Securities comply in all
  material respects with all requirements of law, including requirements of
  applicable securities laws. Without limitation of the foregoing, and except
  with respect to (A) information provided in writing by FSA expressly for use
  in the Offering Document (such information being limited to the information
  included (i) under the caption “The Insurer and the Policy – The Insurer”
  (including only the first three paragraphs under the subcaption
  “Incorporation of Certain Documents by Reference”), including the financial
  statements incorporated by reference therein, and (ii) in the penultimate
  paragraph under the caption “The Insurer and the Policy – The Policy”
  (collectively, as revised from time to time in accordance with the provisions
  hereof, the “FSA Information”) and (B) the Underwriter Information,
  the Offering Document does not contain any untrue statement of a material
  fact and does not omit to state a material fact required to be stated therein
  or necessary to make the statements made therein, in light of the
  circumstances under which they were made, not misleading. The Depositor is
  not required to be registered as an “investment company” under the Investment
  Company Act. The Indenture is qualified under the Trust Indenture Act. 


	
 

	
 


	
 

	
          (x) Transaction
  Documents. Each of the representations and warranties of the Depositor
  contained in the Transaction Documents is true and correct in all material
  respects and the Depositor hereby makes each such representation and warranty
  to, and for the benefit of, FSA as if the same were set forth in full herein.
  


	
 

	
 


	
 

	
          (xi) Good
  Title; Absence of Liens; Security Interest. The Depositor, at the time of
  transfer of the Mortgage Loans to the Trust, was the owner of, and had good
  and marketable title to, each Mortgage Loan free and clear of all Liens and
  Restrictions on Transferability, and had full right, power and lawful
  authority to assign, transfer and pledge the Mortgage Loans it owned. The
  Depositor transferred the Mortgage Loans it owned to the Trust free and clear
  of all Liens and Restrictions on Transferability. In the event that, in
  contravention of the intention of the parties, the transfer of Mortgage Loans
  by the Company to the Depositor or by the Depositor to the Trust is
  characterized as other than a sale, such transfer shall be characterized as a
  secured financing, and the Trust shall, for the benefit of the Noteholders
  and FSA, have a valid and perfected first priority security interest in the
  Mortgage Loans free and clear of all Liens and Restrictions on Transferability.
  The Indenture Trustee shall, for the benefit of the Noteholders and FSA, have
  a valid and perfected first priority security interest in the Mortgage Loans
  free and clear of all Liens and Restrictions on Transferability. 


	
 

	
 


	
 

	
          (xii) Taxes.
  The Depositor has filed all federal and state tax returns which are required
  to be filed by it and paid all taxes owed by it, including any assessments
  received by it, in each case, which are not being contested in good faith and
  for which the Depositor has made adequate reserves, to the extent that such
  taxes have become due. Any taxes, fees and other governmental charges payable
  by the Depositor in connection with the Transaction, the execution and
  delivery of the Transaction Documents and the issuance of the Securities have
  been paid or shall have been paid at or prior to the Date of Issuance. 





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          (xiii) Solvency;
  Fraudulent Conveyance. The Depositor is solvent and will not be rendered
  insolvent by the transactions contemplated by the Transaction Documents and,
  after giving effect to such transactions, the Depositor will not be left with
  an unreasonably small amount of capital with which to engage in its business.
  The Depositor does not intend to incur, or believe they have incurred, debts
  beyond their ability to pay such debts as they mature. The Depositor does not
  contemplate the commencement of insolvency, bankruptcy, liquidation or
  consolidation proceedings or the appointment of a receiver, liquidator,
  conservator, trustee or similar official in respect of the Depositor or any
  of its assets. The amount of consideration received (i) by the Depositor upon
  the sale of the Mortgage Loans to the Trust and (ii) by the Depositor upon
  the sale of the Securities, each constitutes reasonably equivalent value and
  fair consideration therefor. The Depositor did not transfer the Mortgage
  Loans to the Trust with any intent to hinder, delay or defraud any of the
  Depositor’s creditors. 


	
 

	
 


	
 

	
          (xiv) Compliance
  With Law, Etc. No practice, procedure or policy employed or proposed to
  be employed by the Depositor in the conduct of its business violates any law,
  regulation, judgment, agreement, order or decree applicable to the Depositor
  which, if enforced, would result in a Material Adverse Change with respect to
  the Depositor or the Mortgage Loans. 


	
 

	
 


	
 

	
          (xv) Compliance
  With Anti-Money Laundering Laws. No practice, procedure or policy
  employed or proposed to be employed by the Depositor in the conduct of its
  business violates any anti-money laundering law or regulation (including
  without limitation, the USA PATRIOT Act, Public Law No. 107-56 (2001), and
  regulations promulgated thereunder) applicable to the Company or the
  Depositor. 


	
 

	
 


	
 

	
          (xvi) Rating
  Agencies. The information supplied by the Depositor to S&P and
  Moody’s in connection with obtaining their respective ratings of the
  Securities did not contain any untrue statement of a material fact or omit to
  state any material fact required to be stated in order to make such information
  not misleading. 


	
 

	
 


	
 

	
          (xvii) Tax
  Characterization. Upon issuance and for so long as the Securities shall
  be outstanding, for federal income tax purposes, the Securities will be
  characterized as indebtedness, and the Trust will not be classified as an
  association or publicly traded partnership taxable as a corporation or a
  taxable mortgage pool within the meaning of Section 7701(i) of the Code. 





          Section
2.02. Representations and Warranties of the Trust. The Trust represents,
warrants and covenants, as of the date hereof and as of the Date of Issuance,
as follows: 


	
 

	
 


	
 

	
          (a) Due
  Organization and Qualification. The Trust is a statutory trust, duly
  organized, validly existing and in good standing under the laws of Delaware.
  The Trust is duly qualified to do business, is in good standing and has
  obtained all Approvals necessary to the conduct of its business as currently
  conducted and as described in the Offering Document and the performance of
  its obligations under the Transaction Documents to which it is a party, in
  each jurisdiction in which failure to be so qualified or 





9







	
 

	
 


	
 

	
to obtain
  such Approvals would render any Transaction Document unenforceable in any
  respect or would have a material adverse effect upon the Transaction. 


	
 

	
 


	
 

	
          (b) Power
  and Authority. The Trust has all necessary power and authority to conduct
  its business as currently conducted and as described in the Offering
  Document, to execute, deliver and perform its obligations under the
  Transaction Documents to which it is a party and to consummate the
  Transaction. 


	
 

	
 


	
 

	
          (c) Due
  Authorization. The execution, delivery and performance by the Trust of
  the Transaction Documents to which it is a party have been duly authorized by
  all necessary corporate action and do not require any additional approvals or
  consents from, or other action by or any notice to or filing with any Person,
  including, without limitation, any governmental entity, except for such
  approvals and consents as shall have been obtained or filed prior to the
  Closing Date. 


	
 

	
 


	
 

	
          (d) Noncontravention.
  Neither the execution and delivery by the Trust of the Transaction Documents
  to which it is a party, the consummation of the transactions contemplated
  thereby nor the satisfaction of the terms and conditions of the Transaction
  Documents to which it is a party, 








	
 

	
 


	
 

	
          (i) conflicts
  with or results in any breach or violation of any provision of the
  organizational or governing documents of the Trust or any law, rule,
  regulation, order, writ, judgment, injunction, decree, determination or award
  currently in effect having applicability to the Trust or any of its
  properties, including regulations issued by any administrative agency or
  other governmental authority having supervisory powers over the Trust, 


	
 

	
 


	
 

	
          (ii) constitutes
  a default by the Trust under, results in the acceleration of any obligation
  under, or constitutes a breach of any provision of any loan agreement,
  mortgage, indenture or other agreement or instrument to which the Trust is a
  party or by which it or its properties is or may be bound or affected, or 


	
 

	
 


	
 

	
          (iii) results
  in or requires the creation of any Lien upon or in respect of any of the
  Trust’s assets except as otherwise expressly contemplated by the Transaction
  Documents. 








	
 

	
 


	
 

	
          (e) Legal
  Proceedings. There is no action, proceeding or investigation by or before
  any court, governmental or administrative agency or arbitrator against or
  affecting the Trust, or any properties or rights of the Trust, pending or, to
  the Trust’s knowledge after reasonable inquiry, threatened, which, in any
  case, if decided adversely to the Trust, would result in a Material Adverse
  Change with respect to the Trust or the Mortgage Loans. 


	
 

	
 


	
 

	
          (f) Valid
  and Binding Obligations. The Transaction Documents to which it is a
  party, when executed and delivered by the Trust, will constitute the legal,
  valid and binding obligations of the Trust, enforceable in accordance with
  their respective terms, except as such enforceability may be limited by
  bankruptcy, insolvency, reorganization, moratorium or other similar laws
  affecting creditors’ rights generally and general 





10







	
 

	
 


	
 

	
equitable
  principles. The Securities, when executed, authenticated and delivered in
  accordance with the Indenture, will be validly issued and outstanding and
  entitled to the benefits of the Indenture. 


	
 

	
 


	
 

	
          (g) Compliance
  With Securities Laws. The offer and sale of the Securities comply in all
  material respects with all requirements of law, including requirements of
  applicable securities laws. Without limitation of the foregoing, and except
  with respect to the FSA Information, the Offering Document does not contain
  any untrue statement of a material fact and does not omit to state a material
  fact required to be stated therein or necessary to make the statements made
  therein, in light of the circumstances under which they were made, not
  misleading. Neither the Trust nor the Trust Fund is required to be registered
  as an “investment company” under the Investment Company Act. The Indenture is
  qualified under the Trust Indenture Act. 


	
 

	
 


	
 

	
          (h) Transaction
  Documents. Each of the representations and warranties of the Trust
  contained in the Transaction Documents is true and correct in all material
  respects and the Trust hereby makes each such representation and warranty to,
  and for the benefit of, FSA as if the same were set forth in full herein. 


	
 

	
 


	
 

	
          (i) Compliance
  With Law. No practice, procedure or policy employed or proposed to be
  employed by the Trust in the conduct of its business violates any law,
  regulation, judgment, agreement, order or decree applicable to the Trust
  which, if enforced, would result in a Material Adverse Change with respect to
  the Trust. 


	
 

	
 


	
 

	
          (j) Compliance
  With Anti-Money Laundering Laws. No practice, procedure or policy
  employed or proposed to be employed by the Trust in the conduct of its
  business violates any anti-money laundering law or regulation (including
  without limitation, the USA PATRIOT Act, Public Law No. 107-56 (2001), and
  regulations promulgated thereunder) applicable to the Trust. 


	
 

	
 


	
 

	
          (k) Taxes.
  The Trust is not delinquent in the filing of any federal and state tax
  returns which are required to be filed and is not delinquent in the payment
  of any taxes, including assessments received by it, to the extent that such
  taxes have become due. Any taxes, fees and other governmental charges payable
  by the Trust in connection with the Transaction, the execution and delivery
  of the Transaction Documents and the issuance of the Securities have been
  paid or shall have been paid at or prior to the Date of Issuance. 


	
 

	
 


	
 

	
          (l) Solvency;
  Fraudulent Conveyance. The Trust is solvent and will not be rendered
  insolvent by the transactions contemplated by the Transaction Documents and,
  after giving effect to such transactions, the Trust will not be left with an
  unreasonably small amount of capital with which to engage in its business.
  The Trust does not intend to incur, or believe that it has incurred, debts
  beyond its ability to pay such debts as they mature. The Trust does not
  contemplate the commencement of insolvency, bankruptcy, liquidation or
  consolidation proceedings or the appointment of a receiver, liquidator, conservator,
  trustee or similar official in respect of the Trust or any of its assets. The
  amount of consideration being received by the Trust upon the sale of the
  Securities to the 





11







	
 

	
 


	
 

	
Depositor
  constitutes reasonably equivalent value and fair consideration for the
  Securities. The Trust is not making a Grant of the Trust Fund to the
  Indenture Trustee or selling the Securities to the Depositor, as provided in
  the Transaction Documents, with any intent to hinder, delay or defraud any of
  the Trust’s creditors. 


	
 

	
 


	
 

	
          (m) Rating
  Agencies. The information supplied by the Trust to S&P and Moody’s in
  connection with obtaining their respective ratings of the Securities, if any,
  did not contain any untrue statement of a material fact or omit to state any
  material fact required to be stated in order to make such information not
  misleading. 





          Section
2.03. Affirmative Covenants of the Company and the Depositor. 


          (a) The
Company hereby agrees that during the Term of the Agreement, unless FSA shall
otherwise expressly consent in writing: 


	
 

	
 


	
 

	
          (i) Corporate
  Existence. The Company shall maintain its corporate existence and shall
  at all times continue to be duly organized under the laws of its jurisdiction
  of incorporation or organization and duly qualified and duly authorized (as
  described in Sections 2.01(a), (b) and (c) hereof) and shall conduct its
  business in accordance with the terms of its organizational documents. 


	
 

	
 


	
 

	
          (ii) Compliance
  With Agreements and Applicable Laws. The Company shall perform each of
  its obligations under the Transaction Documents and shall comply with all
  material requirements of, and the Securities shall be offered and sold in
  accordance with, any law, rule or regulation applicable to it or thereto, or
  that are required in connection with its performance under any of the
  Transaction Documents. 


	
 

	
 


	
 

	
          (iii) Financial
  Statements; Other Information. The Company shall keep or cause to be kept
  in reasonable detail books and records of account of the Company’s assets and
  business and shall clearly reflect therein the transfer of the Mortgage Loans
  from the Company to the Depositor as sale of the Company’s interest in the
  Mortgage Loans. The Company shall treat the transfer of the Mortgage Loans
  from the Company to the Depositor as a sale for accounting purposes. The
  Company shall furnish or make available to FSA: 








	
 

	
 


	
 

	
          (a) Annual
  Financial Statements. As soon as available, and in any event within 120
  days after the close of each fiscal year of Bancorp, the audited balance
  sheets of Bancorp as of the end of such fiscal year and the audited
  statements of income, changes in shareholders’ equity and cash flows of
  Bancorp 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, if any, prepared in accordance with generally accepted
  accounting principles, consistently applied, and accompanied by the
  certificate of Bancorp’s independent accountants (who shall be a nationally
  recognized firm or otherwise acceptable to FSA) and by the certificate
  specified in Section 2.03(a)(iv) hereof. 


	
 

	
 


	
 

	
          (b) Quarterly
  Financial Statements. As soon as available, and in any event within 45
  days after the close of each of the first three quarters of each 





12







	
 

	
 


	
 

	
fiscal year
  of Bancorp, the unaudited balance sheets of Bancorp as of the end of such
  quarter and the unaudited statements of income, changes in shareholders’
  equity and cash flows of Bancorp 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, if any, prepared in accordance with generally accepted
  accounting principles, consistently applied (subject to normal year-end
  adjustments), and accompanied by the certificate specified in Section
  2.03(a)(iv) hereof if such certificate is required to be provided pursuant to
  such Section. 


	
 

	
 


	
 

	
          (c) Other
  Information. Promptly upon receipt thereof, copies of all reports,
  statements, certifications, schedules, or other similar items delivered to or
  by the Company, the Trust and the Indenture Trustee pursuant to the terms of
  the Transaction Documents and, promptly upon request, such other data as FSA
  may reasonably request; provided, however, that the Company shall not be
  required to deliver any such items if provision by some other party to FSA is
  required under the Transaction Documents unless such other party wrongfully
  fails to deliver such item. The Company shall, upon the request of FSA,
  permit FSA or its authorized agents, no more than two times per year (so long
  as no Trigger Event has occurred) or following the occurrence of a Trigger Event:
  (A) to inspect the books and records of the Company as they may relate to the
  Securities, the Mortgage Loans, the obligations of the Company under the
  Transaction Documents, the Transaction and, but only following the occurrence
  of a Trigger Event, the Company’s business; (B) to discuss the affairs,
  finances and accounts of the Company with the senior financial officer of the
  Company, no more frequently than annually unless a Trigger Event has
  occurred; and (C) upon the occurrence of a Trigger Event, to discuss the
  affairs, finances and accounts of the Company with the Company’s independent
  accountants, provided that an officer of the Company shall have the right to
  be present during such discussions. Such inspections and discussions shall be
  conducted during normal business hours and shall not unreasonably disrupt the
  business of the Company. In addition, the Company shall promptly (but in no
  case more than 30 days following issuance or receipt by the Commonly
  Controlled Entity) provide to FSA a copy of all correspondence between a
  Commonly Controlled Entity and the PBGC, IRS, Department of Labor or the
  administrators of a Multiemployer Plan relating to any Reportable Event or
  the underfunded status, termination or possible termination of a Plan or a
  Multiemployer Plan. 


	
 

	
 


	
 

	
          (e) Closing
  Documents. The Company shall provide or cause to be provided to FSA an
  executed original copy of each document executed in connection with the
  Transaction within 60 days after the date of closing. 





All financial statements
specified in clauses (a) and (b) above shall be furnished in consolidated form
for the Company and all Subsidiaries in the event the Company shall consolidate
its financial statements with its Subsidiaries. 


13







	
 

	
 


	
 

	
          (iv) Compliance
  Certificate. The Company shall deliver to FSA concurrently with the
  delivery of the financial statements required pursuant to Section
  2.03(a)(iii)(a) hereof (and concurrently with the delivery of the financial
  statements required pursuant to Section 2.03(a)(iii)(b) hereof, if a Trigger
  Event has occurred), a certificate signed by the senior financial officer of
  the Company stating that:


	
 

	
 








	
 

	
 


	
 

	
          (a) a
  review of the Company’s and the Depositor’s performance under the Transaction
  Documents during such period has been made under such officer’s supervision; 


	
 

	
 


	
 

	
          (b) to
  the best of such individual’s knowledge following reasonable inquiry, no
  Trigger Event, Default or Event of Default has occurred, or if a Trigger
  Event, Default or Event of Default has occurred, specifying the nature
  thereof and, if the Company or the Depositor has a right to cure any such
  Default or Event of Default pursuant to Section 5.01, stating in reasonable
  detail the steps, if any, being taken by the Company or the Depositor to cure
  such Default or Event of Default or to otherwise comply with the terms of the
  agreement to which such Default or Event of Default relates; and 


	
 

	
 


	
 

	
          (c) the
  financial reports made available in accordance with Section 2.03(a)(iii)(a) or
  (b) hereof, as applicable, are complete and correct in all material respects
  and present fairly the financial condition and results of operations of
  Bancorp as of the dates and for the periods indicated, in accordance with
  generally accepted accounting principles consistently applied (subject as to
  interim statements to normal year-end adjustments). 








	
 

	
 


	
 

	
          (v) Notice
  of Material Events. The Company shall promptly inform FSA in writing of
  the occurrence of any of the following: 








	
 

	
 


	
 

	
          (a) the
  submission of any claim or the initiation or threat of any legal process,
  litigation or administrative or judicial investigation (A) with respect to a
  material portion of the Mortgage Loans or (B) in which a request has been
  made for certification as a class action (or equivalent relief) that would
  involve a material portion of the Mortgage Loans; 


	
 

	
 


	
 

	
          (b) any
  change in the location of the Company’s principal office or any change in the
  location of the Company’s books and records; 


	
 

	
 


	
 

	
          (c) the
  occurrence of any Trigger Event, Default or Event of Default; 


	
 

	
 


	
 

	
          (d) unless
  prohibited by law from making such disclosure, the commencement or to its
  knowledge, the threat, of any disciplinary proceedings or any proceedings instituted
  by or against the Company or the Depositor in any federal, state or local
  court or before any governmental body or agency, or before any arbitration
  board, or the promulgation of any proceeding or any proposed or final rule
  which, if adversely determined, would result in a Material Adverse Change
  with respect to the Company or the Depositor, as applicable; 





14







	
 

	
 


	
 

	
          (e) the
  commencement of any proceedings by or against the Company or the Depositor
  under any applicable bankruptcy, reorganization, liquidation, rehabilitation,
  insolvency or other similar law now or hereafter in effect or of any
  proceeding in which a receiver, liquidator, conservator, trustee or similar
  official shall have been, or may be, appointed or requested for the Company
  or the Depositor or any of their assets; 


	
 

	
 


	
 

	
          (f) the
  receipt of notice that (A) the Company or the Depositor is being placed under
  regulatory supervision, (B) any license, permit, charter, registration or
  approval necessary for the conduct of the Company’s or the Depositor’s
  business is to be, or may be, suspended or revoked, or (C) the Company or the
  Depositor is to cease and desist any practice, procedure or policy employed
  by the Company or the Depositor in the conduct of its business, and such
  cessation may reasonably be expected to result in a Material Adverse Change
  with respect to the Company or the Depositor, as applicable; or 


	
 

	
 


	
 

	
          (g) any
  other event, circumstance or condition that has resulted, or is reasonably
  likely to result in a Material Adverse Change in respect of the Company, the
  Depositor or the Mortgage Loans. 








	
 

	
 


	
 

	
          (vi) Further
  Assurances. The Company shall, upon the request of FSA, from time to
  time, execute, acknowledge and deliver, or cause to be executed, acknowledged
  and delivered, within thirty (30) days of such request, such amendments
  hereto and such further instruments and take such further action as may be
  reasonably necessary to effectuate the intention, performance and provisions
  of the Transaction Documents or to protect the interest of the Indenture
  Trustee, for the benefit of the Noteholders and FSA, in the Mortgage Loans,
  free and clear of all Liens and Restrictions on Transferability except the
  Lien in favor of the Indenture Trustee, for the benefit of the Noteholders
  and FSA, and the Restrictions on Transferability imposed by the Indenture. In
  addition, the Company agrees to cooperate with S&P and Moody’s in
  connection with any review of the Transaction which may be undertaken by S&P
  and Moody’s after the date hereof. 


	
 

	
 


	
 

	
          (viii) Third-Party
  Beneficiary. The Company agrees that FSA shall have all rights of a
  third-party beneficiary in respect of the Transaction Documents and hereby
  incorporate and restate their representations, warranties and covenants as
  set forth therein for the benefit of FSA, subject to the limitations as to
  remedies as set forth in the Transaction Documents (so long as the Company is
  in compliance with its repurchase obligation thereunder), as set forth therein.
  


	
 

	
 


	
 

	
          (ix) Maintenance
  of Grant. On or before each December 31st beginning in 2008, so long as
  any of the Notes are outstanding, the Company shall furnish to FSA an Opinion
  of Counsel either stating that such action has been taken with respect to the
  recording, filing, re-recording and re-filing of any financing statements and
  continuation statements as is necessary to maintain the security interest of
  the Indenture Trustee created by the Indenture with respect to the Trust Fund
  and reciting the details of such action or stating that no such action is
  necessary to maintain such security interest. Such Opinion of Counsel shall
  also describe the recording, filing, re-recording and re-filing of 





15







	
 

	
 


	
 

	
any
  financing statements and continuation statements that will be required to
  maintain the security interest of the Indenture Trustee in the Trust Fund
  until the date such next officers’ certificate is due. The Company shall, at
  its own expense, promptly take, or cause to be taken, such actions as may be
  necessary or desirable, in the reasonable judgment of FSA, (i) to create and
  maintain the grant under the Indenture as a valid and perfected Lien covering
  the Mortgage Loans, (ii) to fully preserve and protect the perfected first
  priority security interest in the Indenture Trustee in, and all rights of the
  Indenture Trustee with respect to, the Mortgage Loans, including, without
  limitation, the execution and filing of all necessary financing statements or
  other instruments, and any amendments or continuation statements relating
  thereto, necessary to be kept and filed in such manner and in such places as
  may be required by law to preserve, protect and perfect fully the Lien and
  security interest in and all rights of the Indenture Trustee with respect to
  the Mortgage Loans. 


	
 

	
 


	
 

	
          (xi) Benefit
  Plan. The Company shall comply in all material respects with the
  provisions of ERISA, the Code and all other applicable laws, and the Plan and
  Multiemployer Plan regulations and interpretations thereunder to the extent
  applicable, with respect to each Plan or Multiemployer Plan. 


	
 

	
 


	
 

	
          (xii) Maintenance
  of Licenses. The Company shall maintain all licenses, permits, charters
  and registrations which are material to (i) the conduct of its business and
  the loss or suspension of which could result in a Material Adverse Change or
  (ii) the performance of its obligations under the Transaction Documents. 


	
 

	
 


	
 

	
          (xiii) Disclosure
  Document. Each Offering Document delivered with respect to the Securities
  shall clearly disclose that the Policy is not covered by the
  property/casualty insurance security fund specified in Article 76 of the New
  York Insurance Law. In addition, each Offering Document delivered with
  respect to the Securities which includes (other than as incorporated by
  reference) financial statements of Financial Security prepared in accordance
  with generally accepted accounting principles shall include the following
  statement immediately preceding such financial statements: “The New York State
  Insurance Department recognizes only statutory accounting practices for
  determining and reporting the financial condition and results of operations
  of an insurance company, for determining its solvency under the New York
  Insurance Law, and for determining whether its financial condition warrants
  the payment of a dividend to its stockholders. No consideration is given by
  the New York State Insurance Department to financial statements prepared in
  accordance with generally accepted accounting principles in making such
  determinations.” 





          (b) The
Depositor hereby agrees that during the Term of the Agreement, unless FSA shall
otherwise expressly consent in writing: 


	
 

	
 


	
 

	
          (i) Corporate
  Existence. The Depositor shall maintain its corporate existence and shall
  at all times continue to be duly organized under the laws of its jurisdiction
  of incorporation or organization and duly qualified and duly authorized (as
  described in Sections 2.01(a), (b) and (c) hereof) and shall conduct its
  business in accordance with the terms of its organizational documents. 





16







	
 

	
 


	
 

	
          (ii) Compliance
  With Agreements and Applicable Laws. The Depositor shall perform each of
  its obligations under the Transaction Documents and shall comply with all
  material requirements of, and the Securities shall be offered and sold in
  accordance with, any law, rule or regulation applicable to it or thereto, or
  that are required in connection with its performance under any of the
  Transaction Documents. 


	
 

	
 


	
 

	
          (iii) Other
  Information. The Depositor shall keep or cause to be kept in reasonable
  detail books and records of account of the Depositor’s assets and business,
  respectively, and shall clearly reflect therein the transfer of the Mortgage
  Loans from the Depositor to the Trust as a sale of the Depositor’s interest
  in the Mortgage Loans. The Depositor shall treat the transfer of the Mortgage
  Loans from Depositor to the Trust as a sale for accounting purposes. The
  Depositor shall furnish or cause to be furnished to FSA promptly upon receipt
  thereof, copies of all reports, statements, certifications, schedules, or
  other similar items delivered to or by the Depositor and the Indenture
  Trustee pursuant to the terms of the Transaction Documents and, promptly upon
  request, such other data as FSA may reasonably request; provided, however,
  that the Depositor shall not be required to deliver any such items if
  provision by some other party to FSA is required under the Transaction
  Documents unless such other party wrongfully fails to deliver such item. The
  Depositor shall, upon the request of FSA, permit FSA or its authorized
  agents, no more than two times per year (so long as no Trigger Event has
  occurred) or following the occurrence of a Trigger Event: (A) to inspect the
  books and records of the Depositor as they may relate to the Securities, the
  Mortgage Loans, the obligations of the Depositor under the Transaction
  Documents, the Transaction and, but only following the occurrence of a
  Trigger Event, the Depositor’s business; (B) to discuss the affairs, finances
  and accounts of the Depositor with the senior financial officer of the
  Depositor, no more frequently than annually unless a Trigger Event has
  occurred; and (C) upon the occurrence of a Trigger Event, to discuss the
  affairs, finances and accounts of the Depositor with the Depositor’s
  independent accountants, provided that an officer of the Depositor 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. In addition, the
  Depositor shall promptly (but in no case more than 30 days following issuance
  or receipt by the Commonly Controlled Entity) provide to FSA a copy of all
  correspondence between a Commonly Controlled Entity and the PBGC, IRS,
  Department of Labor or the administrators of a Multiemployer Plan relating to
  any Reportable Event or the underfunded status, termination or possible
  termination of a Plan or a Multiemployer Plan. 


	
 

	
 


	
 

	
          (v) Notice
  of Material Events. The Depositor shall promptly inform FSA in writing of
  the occurrence of any of the following (and such obligations of the Depositor
  shall be satisfied if performed by the Company): 








	
 

	
 


	
 

	
          (a) the
  submission of any claim or the initiation or threat of any legal process,
  litigation or administrative or judicial investigation (A) with respect to a
  material portion of the Mortgage Loans or (B) in which a request has been
  made for certification as a class action (or equivalent relief) that would
  involve a material portion of the Mortgage Loans; 





17







	
 

	
 


	
 

	
          (b) any
  change in the location of the Depositor’s principal office or any change in
  the location of the Depositor’s books and records; 


	
 

	
 


	
 

	
          (c) the
  occurrence of any Trigger Event, Default or Event of Default; 


	
 

	
 


	
 

	
          (d) the
  commencement or to its knowledge, the threat, of any disciplinary proceedings
  or any proceedings instituted by or against the Depositor in any federal,
  state or local court or before any governmental body or agency, or before any
  arbitration board, or the promulgation of any proceeding or any proposed or
  final rule which, if adversely determined, would result in a Material Adverse
  Change with respect to the Depositor; 


	
 

	
 


	
 

	
          (e) the
  commencement of any proceedings by or against the Depositor under any
  applicable bankruptcy, reorganization, liquidation, rehabilitation,
  insolvency or other similar law now or hereafter in effect or of any
  proceeding in which a receiver, liquidator, conservator, trustee or similar
  official shall have been, or may be, appointed or requested for the Depositor
  or any of their assets; 


	
 

	
 


	
 

	
          (f) the
  receipt of notice that (A) the Depositor is being placed under regulatory
  supervision, (B) any license, permit, charter, registration or approval
  necessary for the conduct of the Depositor’s business is to be, or may be,
  suspended or revoked, or (C) the Depositor is to cease and desist any
  practice, procedure or policy employed by the Depositor in the conduct of its
  business, and such cessation may reasonably be expected to result in a
  Material Adverse Change with respect to the Depositor; or 


	
 

	
 


	
 

	
          (g) any
  other event, circumstance or condition that has resulted, or is reasonably
  likely to result in a Material Adverse Change in respect of the Depositor or
  the Mortgage Loans. 








	
 

	
 


	
 

	
          (vi) Further
  Assurances. The Depositor shall, upon the request of FSA, from time to
  time, execute, acknowledge and deliver, or cause to be executed, acknowledged
  and delivered, within thirty (30) days of such request, such amendments
  hereto and such further instruments and take such further action as may be
  reasonably necessary to effectuate the intention, performance and provisions
  of the Transaction Documents or to protect the interest of the Indenture
  Trustee, for the benefit of the Noteholders and FSA, in the Mortgage Loans,
  free and clear of all Liens and Restrictions on Transferability except the
  Lien in favor of the Indenture Trustee, for the benefit of the Noteholders
  and FSA, and the Restrictions on Transferability imposed by the Indenture. In
  addition, the Depositor agrees to cooperate with S&P and Moody’s in
  connection with any review of the Transaction which may be undertaken by
  S&P and Moody’s after the date hereof. 


	
 

	
 


	
 

	
          (viii) Third-Party
  Beneficiary. The Depositor agrees that FSA shall have all rights of a
  third-party beneficiary in respect of the Transaction Documents and hereby
  incorporate and restate their representations, warranties and covenants as
  set forth therein for the benefit of FSA, subject to the limitations as to
  remedies as set forth in the 





18







	
 

	
 


	
 

	
Transaction
  Documents (so long as the Company is in compliance with its repurchase obligation
  thereunder), as set forth therein. 


	
 

	
 


	
 

	
          (ix) Special
  Purpose Entities. 








	
 

	
 


	
 

	
          (a) The
  Depositor shall conduct its business solely in its own name, managed by or
  under the direction of its board of directors, so as not to mislead others as
  to the identity of the entity with which those others are concerned. 


	
 

	
 


	
 

	
          (b) The
  Depositor shall not commingle its funds or other assets with those of any of
  its stockholders or affiliates (other than in respect of items of payment or
  funds which may be commingled until deposited into the Collection Account in
  accordance with the Sale and Servicing Agreement) and shall maintain separate
  corporate records and books of account from those of any of its stockholders
  or affiliates. 


	
 

	
 


	
 

	
          (c) The
  Depositor shall not issue, assume or guarantee any debt securities unless
  such issuance, assumption or guarantee will not result in the downgrade or
  withdrawal of the rating then assigned to any outstanding securities then
  rated by such rating agency nor shall the Depositor guarantee any obligation
  of any of its affiliates nor have any of its obligations guaranteed by any
  such affiliate (either directly or by seeking credit based on the assets of
  such affiliate), or otherwise hold itself out as responsible for the debts of
  any affiliate. 


	
 

	
 


	
 

	
          (d) The
  Depositor shall take such actions as are necessary on its part to ensure that
  the facts and assumptions set forth in the non-consolidation opinion
  delivered by its counsel remain true and correct at all times. 








	
 

	
 


	
 

	
          (x) Benefit
  Plan. The Depositor shall comply in all material respects with the
  provisions of ERISA, the Code and all other applicable laws, and the Plan and
  Multiemployer Plan regulations and interpretations thereunder to the extent
  applicable, with respect to each Plan or Multiemployer Plan. 


	
 

	
 


	
 

	
          (xi) Maintenance
  of Licenses. The Depositor shall maintain all licenses, permits, charters
  and registrations which are material to (i) the conduct of its business and
  the loss or suspension of which could result in a Material Adverse Change or
  (ii) the performance of its obligations under the Transaction Documents. 


	
 

	
 


	
 

	
          (xii) Disclosure
  Document. Each Offering Document delivered with respect to the Securities
  shall clearly disclose that the Policy is not covered by the
  property/casualty insurance security fund specified in Article 76 of the New
  York Insurance Law. In addition, each Offering Document delivered with
  respect to the Securities which includes (other than as incorporated by
  reference) financial statements of Financial Security prepared in accordance
  with generally accepted accounting principles shall include the following
  statement immediately preceding such financial statements: “The New York
  State Insurance Department recognizes only statutory accounting practices for
  determining and reporting the financial condition and results of operations
  of an insurance company, for determining its solvency under the New York
  Insurance Law, and for determining whether 





19







	
 

	
 


	
 

	
its
  financial condition warrants the payment of a dividend to its stockholders.
  No consideration is given by the New York State Insurance Department to
  financial statements prepared in accordance with generally accepted accounting
  principles in making such determinations.” 





          Section
2.04. Affirmative Covenants of the Trust. The Trust hereby agrees that
during the Term of the Agreement, unless FSA shall otherwise expressly consent
in writing: 


	
 

	
 


	
 

	
          (a) Existence.
  The Trust shall maintain its existence and shall at all times continue to be
  duly organized under the laws of the state of its organization and duly
  qualified and duly authorized (as described in Sections 2.02(a), (b) and (c)
  hereof) and shall conduct its business in accordance with the terms of its
  governing documents. 


	
 

	
 


	
 

	
          (b) Compliance
  With Agreements and Applicable Laws. The Trust shall perform each of its
  obligations under the Transaction Documents to which it is a party and shall
  comply with all material requirements of, and the Securities shall be offered
  and sold in accordance with, any law, rule or regulation applicable to it or
  thereto, or that are required in connection with its performance under any of
  the Transaction Documents to which it is a party. 


	
 

	
 


	
 

	
          (c) Other
  Information. The Trust shall keep or cause to be kept in reasonable
  detail books and records of account of the Trust’s assets and business. The
  Trust shall furnish or cause to be furnished to FSA promptly upon receipt
  thereof, copies of all reports, statements, certifications, schedules, or
  other similar items delivered to or by the Trust pursuant to the terms of the
  Transaction Documents and, promptly upon request, such other data relating to
  the Transaction, the Transaction Documents or the Trust’s ability to perform
  its obligations under the Transaction Documents, as FSA may reasonably
  request; provided, however, that the Trust shall not be required to deliver
  any such items if provision by some other party to FSA is required under the
  Transaction Documents unless such other party wrongfully fails to deliver
  such item. The Trust shall, upon the request of FSA, permit FSA or its
  authorized agents to inspect the books and records of the Trust as they may
  relate to the Securities, the obligations of the Trust under the Transaction
  Documents and the Transaction. Such inspections and discussions shall be
  conducted during normal business hours and shall not unreasonably disrupt the
  business of the Trust. The books and records of the Trust will be maintained
  at the address of the Trust designated herein for receipt of notices, unless
  the Trust shall otherwise advise the parties hereto in writing. 


	
 

	
 


	
 

	
          (d) Notice
  of Material Events. The Trust shall promptly inform FSA in writing of the
  occurrence of any of the following: 








	
 

	
 


	
 

	
          (i) the
  submission of any claim or the initiation or threat of any legal process,
  litigation or administrative or judicial investigation (A) against the Trust,
  (B) with respect to a material portion of the Mortgage Loans or (C) in which
  a request has been made for certification as a class action (or equivalent
  relief) that would involve a material portion of the Mortgage Loans; 





20







	
 

	
 


	
 

	
          (ii) any
  change in the location of the Trust’s principal office or any change in the
  location of the Trust’s books and records; 


	
 

	
 


	
 

	
          (iii) the
  occurrence of any Trigger Event, Default or Event of Default; 


	
 

	
 


	
 

	
          (iv) the
  commencement or threat of any rule making or disciplinary proceedings or any
  proceedings instituted by or against the Trust in any federal, state or local
  court or before any governmental body or agency, or before any arbitration
  board, or the promulgation of any proceeding or any proposed or final rule
  which, if adversely determined, would result in a Material Adverse Change
  with respect to the Trust; 


	
 

	
 


	
 

	
          (v) the
  commencement of any proceedings by or against the Trust under any applicable
  bankruptcy, reorganization, liquidation, rehabilitation, insolvency or other
  similar law now or hereafter in effect or of any proceeding in which a
  receiver, liquidator, conservator, trustee or similar official shall have
  been, or may be, appointed or requested for the Trust or any of its assets; 


	
 

	
 


	
 

	
          (vi)
  the receipt of notice that (A) the Trust is being placed under regulatory
  supervision, (B) any license, permit, charter, registration or approval
  necessary for the conduct of the Trust ‘s business is to be, or may be,
  suspended or revoked, or (C) the Trust is to cease and desist any practice,
  procedure or policy employed by the Trust in the conduct of its business, and
  such cessation may result in a Material Adverse Change with respect to the
  Trust; or 


	
 

	
 


	
 

	
          (vii) any
  other event, circumstance or condition that has resulted, or has a material
  possibility of resulting, in a Material Adverse Change in respect of the
  Trust or the Mortgage Loans. 








	
 

	
 


	
 

	
          (e) Further
  Assurances. The Trust shall, upon the request of FSA, from time to time,
  execute, acknowledge and deliver, or cause to be executed, acknowledged and
  delivered, within thirty (30) days of such request, such amendments hereto
  and such further instruments and take such further action as may be
  reasonably necessary to effectuate the intention, performance and provisions
  of the Transaction Documents or to protect the interest of the Indenture
  Trustee, for the benefit of the Noteholders and FSA, in the Mortgage Loans,
  free and clear of all Liens and Restrictions on Transferability except the
  Lien in favor of the Indenture Trustee, if any, for the benefit of the
  Noteholders and FSA, and the Restrictions on Transferability imposed by the
  Indenture. In addition, the Trust agrees to cooperate with S&P and
  Moody’s in connection with any review of the Transaction which may be
  undertaken by S&P and Moody’s after the date hereof. 


	
 

	
 


	
 

	
          (f) Third-Party
  Beneficiary. The Trust agrees that FSA shall have all rights of a
  third-party beneficiary in respect of the Transaction Documents to which FSA
  is not a party and hereby incorporates and restates its representations,
  warranties and covenants as set forth therein for the benefit of FSA. 





21









	
 

	
 


	
 

	
          (h)
  Benefit Plan. The Trust shall not create or maintain any Plans or
  Multiemployer Plan or any other defined benefit plan (as defined in ERISA). 


	
 

	
 


	
 

	
          (i)
  Maintenance of Licenses. The Trust shall maintain all licenses,
  permits, charters and registrations which are material to the conduct of its
  business and the performance of its obligations under the Transaction
  Documents. 





          Section
2.05. Negative Covenants of the Company and the Depositor. The Company and the Depositor
hereby agree that during the Term of the Agreement, unless FSA shall otherwise
expressly consent in writing: 


	
 

	
 


	
 

	
          (a)
  Restrictions on Liens. The Company and the Depositor shall not (i)
  create, incur or suffer to exist, or agree to create, incur or suffer to
  exist, or consent to cause or permit in the future (upon the happening of a
  contingency or otherwise) the creation, incurrence or existence of any Lien
  or Restriction on Transferability on the Mortgage Loans except for the Lien
  in favor of the Indenture Trustee for the benefit of the Noteholders and FSA,
  and the Restrictions on Transferability imposed by the Indenture or (ii) sign
  or file under the Uniform Commercial Code of any jurisdiction any financing
  statement which names the Company or the Depositor as a debtor, or sign any
  security agreement authorizing any secured party thereunder to file such
  financing statement, with respect to the Mortgage Loans, except in each case
  any such instrument solely securing the rights and preserving the Lien of the
  Indenture Trustee, for the benefit of the Noteholders and FSA. 


	
 

	
 


	
 

	
          (b)
  Impairment of Rights. Neither the Company nor the Depositor shall take
  any action, or fail to take any action, if such action or failure to take
  action may (i) interfere with the enforcement of any rights under the
  Transaction Documents that are material to the rights, benefits or
  obligations of the Indenture Trustee, the Noteholders or FSA, (ii) result in
  a Material Adverse Change in respect of any of the Mortgage Loans, (iii)
  impair the ability of the Company or the Depositor to perform its obligations
  under the Transaction Documents or (iv) be inconsistent with any obligation
  imposed on the Company or the Depositor, as applicable, pursuant to the terms
  of the Transaction Documents. Neither the Company nor the Depositor shall
  file or join in filing any petition in bankruptcy or commence any similar
  proceeding in respect of the Trust for a period of one year and one day
  following payment in full of the Securities. 


	
 

	
 


	
 

	
          (c)
  Waiver, Amendments, Etc. Neither the Company nor the Depositor shall
  waive, modify or amend, or consent to any waiver, modification or amendment
  of, any of the provisions of any of the Transaction Documents. 


	
 

	
 


	
 

	
          (d)
  Successors. Neither the Company nor the Depositor shall terminate or
  designate, or consent to the termination or designation of, any successor
  Servicer, Paying Agent, Indenture Trustee, Owner Trustee or custodian
  (provided that FSA agrees that it shall not unreasonably withhold its consent
  to termination of a sub-servicer that is in breach of its obligations under
  the related sub-servicing agreement). 





22







	
 

	
 


	
 

	
          (e)
  No Related Transactions. Neither the Company nor the Depositor shall
  conduct transactions with the Trust or its affiliates or with any
  shareholder, director, officer or employee of the Company or the Depositor
  which would cause a material adverse change with respect to the financial
  condition or operations of the Company or the Depositor, other than in the
  ordinary course of business and on an arm’s-length basis upon fair and
  reasonable terms materially no less favorable to the Company or the Depositor
  than would be obtained in a comparable arm’s-length transaction with a Person
  not an affiliate of the Trust or a shareholder, director, officer or employee
  of the Company or the Depositor. 


	
 

	
 


	
 

	
          (f)
  Insolvency. Neither the
  Company nor the Depositor shall commence, nor shall they suffer the
  commencement of, any case, proceeding or other action with respect to the
  Depositor or the Trust (A) under any existing or future law of any
  jurisdiction, domestic or foreign, relating to the bankruptcy, insolvency,
  reorganization or relief of debtors, seeking to have an order for relief
  entered with respect to it, or seeking reorganization, arrangement,
  adjustment, winding-up, liquidation, dissolution, corporation or other relief
  or (B) seeking appointment of a receiver, trustee, custodian or other similar
  official for the Depositor or the Trust or for all or any substantial part of
  its assets or make a general assignment for the benefit of its creditors.
  Neither the Company nor the Depositor shall take, nor shall they suffer, any action
  in furtherance of, or indicating the consent to, approval of, or acquiescence
  in, any of the acts set forth above with respect to the Depositor or the
  Trust. The Depositor shall not admit in writing its inability to pay its
  debts. 


	
 

	
 


	
 

	
          (g)
  Compliance With Anti-Money Laundering Laws. Neither the Company nor
  the Depositor shall employ any practice, procedure or policy in the conduct
  of its business that would violate any anti-money laundering law or
  regulation (including without limitation, the USA PATRIOT Act, Public Law No.
  107-56 (2001), and regulations promulgated thereunder) applicable to the
  Company or the Depositor. 


	
 

	
 


	
 

	
          (h)
  Offering Document. Neither the Company nor the Depositor shall use,
  distribute or cause to be distributed any offering document relating to the
  Notes other than the Offering Document or any other offering document that is
  in the nature of “computational materials”. 


	
 

	
 


	
 

	
          (i)
  No Mergers. The Company shall not consolidate with or merge into any
  Person or transfer all or any material amount of its assets to any Person or
  liquidate or dissolve, except as provided in the Transaction Documents. 





          Section
2.06. Negative Covenants of the Trust. The Trust hereby agrees that during the Term of the
Agreement, unless FSA shall otherwise expressly consent in writing:  


	
 

	
 


	
 

	
          (a)
  Restrictions on Liens. The Trust shall not (i) create, incur or suffer
  to exist or agree to create, incur or
  suffer to exist or consent to cause or permit in the future (upon the
  happening of a contingency or otherwise) the creation, incurrence or
  existence of any Lien or Restriction on Transferability on the Mortgage Loans
  except for the Lien in favor of the Indenture Trustee, for the benefit of the
  Noteholders and FSA, and the 





23







	
 

	
 


	
 

	
Restrictions
  on Transferability imposed by the Indenture or (ii) sign or file under the
  Uniform Commercial Code of any jurisdiction any financing statement which
  names the Trust as a debtor, or sign any security agreement authorizing any
  secured party thereunder to file such financing statement, with respect to
  the Mortgage Loans, except in each case any such instrument solely securing
  the rights and preserving the Lien of the Indenture Trustee, for the benefit
  of the Noteholders and FSA.


	
 

	
 


	
 

	
          (b)
  Impairment of Rights. The Trust shall not take any action, or fail to
  take any action, if such action or failure to take action may (i) interfere
  with the enforcement of any rights under the Transaction Documents that are
  material to the rights, benefits or obligations of the Indenture Trustee, the
  Noteholders or FSA, (ii) result in a Material Adverse Change in respect of a
  material portion of the Mortgage Loans or (iii) impair the ability of the
  Trust to perform its obligations under the Transaction Documents to which it
  is a party, including any consolidation, merger with any Person or any
  transfer of all or any material amount of the Trust’s assets to any other
  person. 


	
 

	
 


	
 

	
          (c)
  Waiver, Amendments, Etc. The Trust shall not waive, modify or amend,
  or consent to any waiver, modification or amendment of, any of the provisions
  of any of the Transaction Documents. 


	
 

	
 


	
 

	
          (d)
  Creation of Indebtedness; Guarantees. Except as contemplated by the
  Transaction Documents, the Trust shall not create, incur, assume or suffer to
  exist any indebtedness other than indebtedness guaranteed or approved in
  writing by FSA. The Trust shall not assume, guarantee, endorse or otherwise be
  or become directly or contingently liable for the obligations of any Person
  by, among other things, agreeing to purchase any obligation of another
  Person, agreeing to advance funds to such Person or causing or assisting such
  Person to maintain any amount of capital. 


	
 

	
 


	
 

	
          (e)
  Subsidiaries. The Trust shall not form, or cause to be formed, any
  Subsidiaries. 


	
 

	
 


	
 

	
          (f)
  No Mergers. The Trust shall not consolidate with or merge into any
  Person or transfer all or any material amount of its assets to any Person,
  liquidate or dissolve except as permitted by the Transaction Documents. 


	
 

	
 


	
 

	
          (g)
  No Related Transactions. The Trust shall not conduct transactions with
  the Company, its affiliates or with any shareholder, director, officer, or employee
  of the Trust, other than in the ordinary course of business and on an arm’s
  length basis upon fair and reasonable terms materially no less favorable to
  the Trust than would be obtained in a comparable arm’s-length transaction
  with a Person not an affiliate of the Company or a shareholder, director,
  officer, or employee of the Trust. 


	
 

	
 


	
 

	
          (h)
  Other Activities. The Trust shall not engage in any business or
  activity except as permitted by the Trust Agreement and as contemplated by
  the Transaction Documents. 


	
 

	
 


	
 

	
          (i)
  Insolvency. The Trust shall not admit in writing its inability to pay
  its debts. 





24







	
 

	
 


	
 

	
          (j)
No Change in Name, Etc. The Trust shall not change its name (including using
any trade names, fictitious names, assumed names or “doing business as”
names), identity or organizational structure in any manner that would, could
or might make any financing statement or continuation statement filed in
connection with the closing of the Transaction, or otherwise in accordance
herewith, seriously misleading unless it shall have given FSA at least 60
days’ prior written notice thereof and shall have filed before the date of
such change appropriate amendments to all such previously filed financing
statements or continuation statements.  


	
 

	
 


	
 

	
          (k)
Compliance With Anti-Money Laundering Laws. The Trust shall not employ any
practice, procedure or policy in the conduct of its business that would
violate any anti-money laundering law or regulation (including without limitation,
the USA PATRIOT Act, Public Law No. 107-56 (2001), and regulations
promulgated thereunder) applicable to the Trust.  





ARTICLE III


THE POLICY; REIMBURSEMENT; INDEMNIFICATION


          Section
3.01. Issuance of the Policy. FSA agrees to issue
the Policy on the Closing Date subject to satisfaction of the conditions
precedent set forth in Appendix A hereto. 


          Section
3.02. Payment of Fees and Premium. 


	
 

	
 


	
 

	
          (a)
  Legal Fees. On the Date of Issuance, the Company shall pay or cause to
  be paid legal fees and disbursements incurred by FSA in connection with the
  issuance of the Policy, subject to the Premium Letter. 


	
 

	
 


	
 

	
          (b)
  Rating Agency Fees. The initial fees of S&P and Moody’s with
  respect to the Securities and the transactions contemplated hereby shall be
  paid by the Company. All periodic and subsequent fees of S&P and Moody’s
  with respect to, and directly allocable to, the Securities shall be for the
  account of, and shall be billed to, the Company. The fees for any other
  rating agency shall be paid by the party requesting such other agency’s
  rating, unless such other agency is a substitute for S&P or Moody’s in
  the event that S&P or Moody’s is no longer rating the Securities, in
  which case the cost for such agency shall be paid by the Company. 


	
 

	
 


	
 

	
          (c)
  Auditors’ Fees. In the event that FSA’s auditors are required to
  provide information or any consent in connection with the Offering Document
  prepared prior to the Date of Issuance the fees therefor (which fees will not
  exceed $4000) shall be paid by the Company on the Date of Issuance. The
  Company shall pay on demand any additional fees of FSA’s auditors payable in
  respect of any Offering Document that are incurred after the Date of
  Issuance. It is understood that FSA’s auditors shall not incur any additional
  fees in respect of future Offering Documents except at the request of or with
  the consent of the Company. 


	
 

	
 


	
 

	
          (d)
  Premium. In consideration of the issuance by FSA of the Policy, FSA
  shall be entitled to receive the Premium as and when due in accordance with
  the terms of 





25







	
 

	
 


	
 

	
the Premium
  Letter (i) in the case of Premium due on or before the Date of Issuance,
  directly from the Company, and (ii) in the case of Premium due after the Date
  of Issuance, in accordance with Section 5.01 of the Sale and Servicing
  Agreement. The Premium paid hereunder or under the Indenture shall be
  nonrefundable without regard to whether FSA makes any payment under the
  Policy or any other circumstances relating to the Securities or provision
  being made for payment of the Securities prior to maturity.





          Section
3.03. Reimbursement and Additional Payment Obligation. The Company, the Depositor and the Trust
agree to pay to FSA the following amounts as and when incurred: 


	
 

	
 


	
 

	
          (a)
  in accordance with the priorities established in the Sale and Servicing
  Agreement, except as otherwise provided in the last paragraph in this Section
  3.03, a sum equal to the total of all amounts paid by FSA under the Policy; 


	
 

	
 


	
 

	
          (b)
  any and all charges, fees, costs and expenses that FSA or its affiliates may
  reasonably pay or incur, including, but not limited to, attorneys’ and
  accountants’ fees and expenses, in connection with (i) in the event of
  payments under the Policy, any accounts established to facilitate payments
  under the Policy, to the extent FSA has not been immediately reimbursed on
  the date that any amount is paid by FSA under the Policy, or other
  administrative expenses relating to such payments under the Policy, (ii) the
  administration, enforcement, defense or preservation of any rights in respect
  of any of the Transaction Documents, including defending, monitoring or
  participating in any litigation or proceeding (including any insolvency or
  bankruptcy proceeding in respect of any participant in the Transaction or any
  affiliate thereof) relating to any of the Transaction Documents, any party to
  any of the Transaction Documents or the Transaction, (iii) the foreclosure
  against, sale or other disposition of any collateral securing any obligations
  under any of the Transaction Documents, or pursuit of any other remedies
  under any of the Transaction Documents, to the extent such costs and expenses
  are not recovered from such foreclosure, sale or other disposition, (iv) any
  amendment, waiver or other action with respect to, or related to, any
  Transaction Document whether or not executed or completed, (v) any review or
  approval by FSA in connection with the delivery of any additional or
  substitute collateral under any of the Transaction Documents, and (vi) any
  review or investigation made by FSA in those circumstances where its approval
  or consent is sought under any of the Transaction Documents; costs and
  expenses shall include the reasonable fees and expenses charged by
  Transaction Services Corporation, an affiliate of FSA, spent in connection
  with the actions described in clauses (ii) and (iii) above; and FSA reserves
  the right to charge a reasonable fee as a condition to executing any
  amendment, waiver, or consent proposed in respect of any of the Related
  Documents; 


	
 

	
 


	
 

	
          (c)
  interest on any and all amounts described in (i) Section 3.03 or (ii) Section
  3.02(d) from the date due to FSA pursuant to the provisions hereof until
  payment thereof in full, payable to FSA at the Late Payment Rate per annum,
  together with interest on overdue interest, compounded monthly; and 


	
 

	
 


	
 

	
          (d)
  any payments (other than Scheduled Payments which are reimburseable pursuant
  to Section 3.03(a)) made by FSA on behalf of, or advanced to, the Company, the
  





26







	
 

	
 


	
 

	
Trust or the
  Depositor including, without limitation, any amounts payable by the Company,
  the Depositor or the Trust pursuant to the Securities or any other
  Transaction Documents; and any payments made by FSA as, or in lieu of, any
  servicing, management, trustee, custodial or administrative fees payable, in
  the sole discretion of FSA to third parties in connection with the
  Transaction.





All such
amounts are to be immediately due and payable without demand, in full without
any requirement on the part of FSA to seek reimbursement from any other sources
of indemnity therefor or to allocate to other transactions benefiting
therefrom. Notwithstanding any provision of this Section to the contrary, the
payment obligations set forth herein shall be non-recourse obligations with
respect to the Company, the Depositor and the Trust and shall be payable only
from monies available for such payment in accordance with the provisions of the
Indenture (except to the extent that any such payment obligation arises from a
failure to perform or default of the Company, the Depositor or the Trust or any
affiliate thereof under any Transaction Document or by reason of negligence,
willful misconduct or bad faith on the part of the Company, the Depositor, or
the Trust respectively, in the performance of its duties and obligations
thereunder or reckless disregard by the Company, the Depositor, or the Trust
respectively, of its duties and obligations thereunder). 


          Section
3.04. Indemnification.



	
 

	
 

	
 


	
 

	
          (a)
  Indemnification by the Company. In addition to any and all rights of
  reimbursement, indemnification, subrogation and any other rights pursuant
  hereto or under law or in equity, the Company (an “Indemnifying Party”), agrees
  to pay, and to protect, indemnify and save harmless, FSA and its officers,
  directors, shareholders, employees, agents and each Person, if any, who
  controls FSA within the meaning of either Section 15 of the Securities Act or
  Section 20 of the Securities Exchange Act from and against any and all
  claims, losses, liabilities (including penalties), actions, suits, judgments,
  demands, damages, costs or expenses (including, without limitation,
  reasonable fees and expenses of attorneys, consultants and auditors and
  reasonable costs of investigations) of any nature arising out of or relating
  to the transactions contemplated by the Transaction Documents by reason of: 


	
 

	
 


	
 

	
 

	
          (i)
  the negligence, bad faith, willful misconduct, misfeasance, malfeasance or
  theft committed by the Company, the Depositor or the Trust or any director,
  officer, employee, agent, advisor, independent contractor or other
  representative of any such Person; 


	
 

	
 

	
 


	
 

	
 

	
          (ii)
  the breach by the Company, the Depositor or the Trust of any representation,
  warranty or covenant under any of the Transaction Documents or the
  occurrence, in respect of the Company, the Depositor or the Trust under any
  of the Transaction Documents of any “event of default” or any event which,
  with the giving of notice or the lapse of time or both, would constitute any
  “event of default”; 


	
 

	
 

	
 


	
 

	
 

	
          (iii)
  any untrue statement or alleged untrue statement of a material fact contained
  in any Offering Document or any omission or alleged omission to state 





27







	
 

	
 

	
 


	
 

	
 

	
therein a
  material fact required to be stated therein or necessary to make the
  statements therein not misleading, except insofar as such claims arise out of
  or are based upon any untrue statement or omission in the FSA Information or
  the Underwriter Information;


	
 

	
 

	
 


	
 

	
 

	
          (iv)
  any omission or action by the Company, the Depositor or the Trust in
  connection with the offering, issuance, sale, remarketing or delivery of
  Securities; 


	
 

	
 

	
 


	
 

	
 

	
          (v)
  shortfalls, if any, attributable to imposition of income or other taxes on or
  with respect to the Trust or the Trust Fund, other than as a result of a
  change in law; or 


	
 

	
 

	
 


	
 

	
 

	
          (vi)
  the violation by the Company, the Depositor or the Trust of any federal or
  state law, rule or regulation, or any judgment, order or decree that is
  applicable to it.


	
 

	
 

	
 


	
 

	
          (b)
  Indemnification by the Depositor. In addition to any and all rights of
  reimbursement, indemnification, subrogation and any other rights pursuant
  hereto or under law or in equity, the Depositor (an “Indemnifying Party”),
  agrees to pay, and to protect, indemnify and save harmless, FSA and its
  officers, directors, shareholders, employees, agents and each Person, if any,
  who controls FSA within the meaning of either Section 15 of the Securities
  Act or Section 20 of the Securities Exchange Act from and against any and all
  claims, losses, liabilities (including penalties), actions, suits, judgments,
  demands, damages, costs or expenses (including, without limitation,
  reasonable fees and expenses of attorneys, consultants and auditors and
  reasonable costs of investigations) of any nature arising out of or relating
  to the transactions contemplated by the Transaction Documents by reason of: 


	
 

	
 


	
 

	
 

	
          (i)
  the negligence, bad faith, willful misconduct, misfeasance, malfeasance or
  theft committed by the Depositor or any director, officer, employee, agent,
  advisor, independent contractor or other representative of the Depositor; 


	
 

	
 

	
 


	
 

	
 

	
          (ii)
  the breach by the Depositor of any representation, warranty or covenant under
  any of the Transaction Documents or the occurrence, in respect of the
  Depositor under any of the Transaction Documents of any “event of default” or
  any event which, with the giving of notice or the lapse of time or both,
  would constitute any “event of default”; 


	
 

	
 

	
 


	
 

	
 

	
          (iii)
  any untrue statement or alleged untrue statement of a material fact contained
  in any Offering Document or any omission or alleged omission to state therein
  a material fact required to be stated therein or necessary to make the
  statements therein not misleading, except insofar as such claims arise out of
  or are based upon any untrue statement or omission in the FSA Information or
  the Underwriter Information; 





28







	
 

	
 

	
 


	
 

	
 

	
          (iv)
  any omission or action by the Depositor in connection with the offering,
  issuance, sale, remarketing or delivery of Securities; 


	
 

	
 

	
 


	
 

	
 

	
          (v)
  shortfalls, if any, attributable to imposition of income or other taxes on or
  with respect to the Trust or the Trust Fund, other than as a result of a
  change in law; or 


	
 

	
 

	
 


	
 

	
 

	
          (vi)
  the violation by the Depositor of any federal or state law, rule or
  regulation, or any judgment, order or decree that is applicable to it.


	
 

	
 

	
 


	
 

	
          (c)
  Conduct of Actions or Proceedings. If any action or proceeding
  (including any governmental investigation) shall be brought or asserted
  against FSA, any officer, director, shareholder, employee or agent of FSA or
  any Person controlling FSA (individually, an “Indemnified Party” and,
  collectively, the “Indemnified Parties”) in respect of which indemnity may be
  sought from the applicable Indemnifying Party hereunder, FSA shall promptly
  notify such Indemnifying Party in writing, and such Indemnifying Party shall
  assume the defense thereof, including the employment of counsel reasonably
  satisfactory to FSA and the payment of all expenses. The omission so to
  notify the Indemnifying Party will not relieve it from any liability which it
  may have to any Indemnified Party except to the extent the Indemnifying Party
  is prejudiced thereby. An Indemnified Party shall have the right to employ
  separate counsel in any such action and to participate in the defense thereof
  at the expense of the Indemnified Party; provided, however, that the fees and
  expenses of such separate counsel shall be at the expense of the Indemnifying
  Party if (i) the Indemnifying Party has agreed to pay such fees and expenses,
  (ii) the Indemnifying Party shall have failed within a reasonable period of
  time to assume the defense of such action or proceeding and employ counsel
  reasonably satisfactory to FSA in any such action or proceeding or (iii) the
  named parties to any such action or proceeding (including any impleaded
  parties) include both the Indemnified Party and the
  Indemnifying Party, and the Indemnified Party shall have been advised by
  counsel that (A) there may be one or more legal defenses available to it
  which are different from or additional to those available to the Indemnifying
  Party and (B) the representation of the Indemnifying Party and the
  Indemnified Party by the same counsel would be inappropriate or contrary to
  prudent practice (in which case, if the Indemnified Party notifies the
  Indemnifying Party in writing that it elects to employ separate counsel at
  the expense of the Indemnifying Party, the Indemnifying Party shall not have
  the right to assume the defense of such action or proceeding on behalf of
  such Indemnified Party, it being understood, however, that the Indemnifying
  Party shall not, in connection with any one such action or proceeding or
  separate but substantially similar or related actions or proceedings in the
  same jurisdiction arising out of the same general allegations or
  circumstances, be liable for the reasonable fees and expenses of more than
  one separate firm of attorneys at any time for the Indemnified Parties, which
  firm shall be designated in writing by FSA). The Indemnifying Party shall not be liable for any
  settlement of any such action or proceeding effected without its written
  consent to the extent that any such settlement shall be prejudicial to the
  Indemnifying Party, but, if settled with its written consent, or, if settled
  without written consent, to the extent not prejudicial to the Indemnifying
  Party, 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





29







	
 

	
 


	
 

	
accordance
  with this subsection (b), the Indemnifying Party agrees to indemnify and hold
  the Indemnified Parties harmless from and against any loss or liability by
  reason of such settlement or judgment.


	
 

	
 


	
 

	
          (d)
  Contribution. To provide for just and equitable contribution if the
  indemnification provided by an Indemnifying Party is determined to be unavailable
  for any Indemnified Party (other than due to application of this Section),
  each Indemnifying Party shall contribute to the losses incurred by the
  Indemnified Party on the basis of the relative fault of the Indemnifying
  Party, on the one hand, and the Indemnified Party, on the other hand.





          Section
3.05. Subrogation.
Subject only to the priority of payment provisions of the Indenture, the
Depositor, the Company and the Trust acknowledge that, to the extent of any
payment made by FSA pursuant to the Policy, FSA is to be fully subrogated to
the extent of such payment and any additional interest due on any late payment,
to the rights of the Noteholders to any moneys paid or payable in respect of
the Securities under the Transaction Documents or otherwise. The Depositor, the
Company and the Trust agree to such subrogation and, further, agree to execute
such instruments and to take such actions as, in the sole judgment of FSA, are
necessary to evidence such subrogation and to perfect the rights of FSA to
receive any moneys paid or payable in respect of the Securities under the
Transaction Documents or otherwise. 


          Section
3.06. Assignment and Other Rights. 


	
 

	
 


	
 

	
          (a)
  In consideration of the issuance of the Policy by FSA, in the case of any
  payment made by or on behalf of FSA under the Policy, in addition to and not
  by way of limitation of any of the rights and remedies of FSA hereunder, under
  the Policy, each of the Trust, the Company and the Depositor hereby
  acknowledges and consents to the assignment by the Indenture Trustee, on
  behalf of the Noteholders, to FSA in accordance with the terms of the
  relevant notice and certificate (in the case of any payment made by or on
  behalf of FSA under the Policy) the rights of the Noteholders with respect to
  the Securities to the extent of any such payment under the Policy. 


	
 

	
 


	
 

	
          (b)
  The rights and remedies of FSA described in clause (a) above are in addition
  to, and not in limitation of, the rights of subrogation and other rights and
  remedies otherwise available to FSA in respect of payments under the Policy.
  The Indenture Trustee shall take such action and deliver such instruments as
  may be reasonably requested or required by FSA to effectuate the purpose or
  provisions of this Section 3.06. 





ARTICLE IV


FURTHER AGREEMENTS


          Section
4.01. Effective Date; Term of Agreement. This Agreement shall take effect on the
Date of Issuance and shall remain in effect until the later of (a) such time as
FSA is no longer subject to a claim under the Policy and the Policy shall have
been surrendered to FSA for cancellation and (b) all amounts payable to FSA and
the Noteholders under the Transaction Documents and under the Securities have
been paid in full; provided, however, that the 


30






provisions of
Sections 3.02, 3.03 and 3.04 hereof shall survive any termination of this
Agreement. 


          Section
4.02. Obligations Absolute.



	
 

	
 


	
 

	
          (a)
  The payment obligations of the Company, the Depositor or the Trust hereunder
  shall be absolute and unconditional, and shall be paid strictly in accordance
  with this Agreement under all circumstances irrespective of (i) any lack of
  validity or enforceability of, or any amendment or other modifications of or
  waiver with respect to, any of the Transaction Documents, the Securities or
  the Policy; (ii) any exchange or release of any other obligations hereunder
  or under any other Transaction Document or any guarantee of or security for
  any obligations hereunder or thereunder; (iii) the existence of any claim,
  setoff, defense, reduction, abatement or other right which the Company, the
  Depositor or the Trust may have at any time against FSA or any other Person;
  (iv) any document presented in connection with the Policy proving to be
  forged, fraudulent, invalid or insufficient in any respect, including any
  failure to strictly comply with the terms of the Policy, or any statement
  therein being untrue or inaccurate in any respect; (v) any failure of the
  Company, the Depositor or the Trust to receive proceeds from the sale of the
  Securities; (vi) any breach by the Company, the Depositor or the Trust of any
  representation, warranty or covenant contained in any of the Transaction
  Documents; or (vii) any other circumstances, other than payment in full,
  which might otherwise constitute a defense available to, or discharge of, the
  Company, the Depositor or the Trust in respect of any Transaction Document or
  any obligation thereunder. 


	
 

	
 


	
 

	
          (b)
  The Company shall be liable for the obligations of each of the Depositor, the
  Company and the Trust under this Agreement. The Depositor, the Company and
  the Trust and any and all others who are now or may become liable for all or
  part of the obligations of the Depositor, the Company or the Trust under this
  Agreement or any other Transaction Document agree to be bound by this
  Agreement and (i) to the extent permitted by law, waive and renounce any and
  all redemption and exemption rights and the benefit of all valuation and
  appraisement privileges against the indebtedness, if any, and obligations
  evidenced by any Transaction Document or by any extension or renewal thereof;
  (ii) waive diligence, 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, or
  to any defense other than payment, or to any right 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 the Depositor, the Company or the Trust; (v) agree that any
  consent, waiver or forbearance hereunder with respect to an event shall
  operate only for such event and not for any subsequent event; (vi) consent to
  any and all extensions of time that may be granted by FSA with respect to any
  payment hereunder or other provisions hereof and to the release of any
  security at any time given for any payment hereunder, or any part thereof,
  with or without substitution, and to the release of any Person or entity
  liable for any such payment; and (vii) consent to the addition of any and all
  other makers, 





31







	
 

	
 


	
 

	
endorsers,
  guarantors and other obligors for any payment hereunder, and to the
  acceptance of any and all other security for any payment hereunder, and agree
  that the addition of any such obligors or security shall not affect the
  liability of the parties hereto for any payment hereunder.


	
 

	
 


	
 

	
          (c)
  Nothing herein shall be construed as prohibiting the Depositor, the Company
  or the Trust from pursuing any rights or remedies it may have against any
  Person other than FSA, including against one another, in a separate legal
  proceeding. 





          Section
4.03. Assignments; Reinsurance; Third-Party Rights.



	
 

	
 


	
 

	
          (a)
  This Agreement shall be a continuing obligation of the parties hereto and
  shall be binding upon and inure to the benefit of the parties hereto and
  their respective successors and permitted assigns. None of the Depositor, the
  Company or the Trust may assign its rights under this Agreement, or delegate
  any of its duties hereunder, without the prior written consent of FSA. Any
  assignment made in violation of this Agreement shall be null and void. 


	
 

	
 


	
 

	
          (b)
  FSA shall have the right to give participations in its rights under this
  Agreement and to enter into contracts of reinsurance with respect to the
  Policy upon such terms and conditions as FSA may in its discretion determine;
  provided, however, that no such participation or reinsurance agreement or
  arrangement shall relieve FSA of any of its obligations hereunder or under
  the Policy; provided, further that neither the Company nor the Depositor
  shall deal directly with any such parties, nor shall such parties have direct
  rights against the Company or the Depositor. 


	
 

	
 


	
 

	
          (c)
  In addition, FSA shall be entitled to assign or pledge to any bank or other
  lender providing liquidity or credit with respect to the Transaction or the
  obligations of FSA in connection therewith any rights of FSA under the
  Transaction Documents or with respect to any real or personal property or
  other interests pledged to FSA, or in which FSA has a security interest, in
  connection with the Transaction. 


	
 

	
 


	
 

	
          (d)
  Except as provided herein with respect to participants and reinsurers,
  nothing in this Agreement shall confer any right, remedy or claim, express or
  implied, upon any Person, including, particularly, any Noteholder, other than
  FSA, against the Depositor, the Company or the Trust, 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 Noteholder shall have
  any right to payment from any premiums paid or payable hereunder or from any
  other amounts paid by the Depositor, the Company or the Trust pursuant to
  Sections 3.02, 3.03 or 3.04 hereof. 





          Section
4.04. Liability of FSA.
Neither FSA nor any of its officers, directors or employees shall be liable or
responsible for: (a) the use which may be made of the Policy by the 


32






Indenture
Trustee or for any acts or omissions of the Indenture Trustee in connection
therewith or (b) the validity, sufficiency, accuracy or genuineness of
documents delivered to FSA (or its Fiscal Agent) in connection with any claim
under the Policy, or of any signatures thereon, even if such documents or
signatures should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged (unless FSA had actual knowledge thereof).
In furtherance and not in limitation of the foregoing, FSA (or its Fiscal
Agent) may accept documents that appear on their face to be in order, without
responsibility for further investigation.


33






ARTICLE V


EVENTS OF DEFAULT; REMEDIES


          Section
5.01. Events of Default.
The occurrence of any of the following events shall constitute an Event of
Default hereunder:


	
 

	
 


	
 

	
          (a)
  any representation or warranty (other than a representation or warranty in
  respect of the Mortgage Loans contained in Section 3.01 of the Mortgage Loan
  Purchase Agreement or Section 2.04 of the Sale and Servicing Agreement, with
  respect to which the Company has complied with its obligations to repurchase
  or substitute) made by any party hereto (other than FSA) under this
  Agreement, or any such party, the Owner Trustee or any other Person under any
  of the Transaction Documents, or in any certificate or report furnished under
  any of the Transaction Documents, shall prove to be untrue or incorrect in
  any material respect; provided, however, that if any such Person 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 relevant Transaction Document as the
  cure period therefor, such defect shall not in and of itself constitute an
  Event of Default hereunder; 


	
 

	
 


	
 

	
          (b)
  (i) the Company or the Depositor shall fail to pay when due any amount
  payable by it under any of the Transaction Documents unless such amounts are
  paid in full within any applicable cure period explicitly provided for under
  the relevant Transaction Document; (ii) the Company, the Depositor or the
  Trust shall have asserted that any of the Transaction Documents to which it
  is a party is not valid and binding on the parties thereto; or (iii) any
  court, governmental authority or agency having jurisdiction over any of the
  parties to any of the Transaction Documents or any property thereof shall
  find or rule that any material provision of any of the Transaction Documents
  is not valid and binding on the parties thereto; 


	
 

	
 


	
 

	
          (c)
  the Company or the Depositor shall fail to perform or observe in any material
  respect any other covenant or agreement contained herein or in any of the
  Transaction Documents (except for the obligations described under clause (b)
  above) and such failure shall continue for a period of 30 days after written
  notice given it; provided, however, that, if such failure shall be of a
  nature that it cannot be cured within 30 days, such failure shall not
  constitute an Event of Default hereunder if within such 30-day period such
  Person shall have given notice to FSA of corrective action it proposes to
  take, which corrective action is agreed in writing by FSA to be satisfactory
  and such Person shall thereafter pursue such corrective action diligently
  until such default is cured; 


	
 

	
 


	
 

	
          (d)
  any draw is made under the Policy and remains unreimbursed for 90 days; 


	
 

	
 


	
 

	
          (e)
  the Company, the Depositor or
  the Trust shall fail to pay its debts generally as they come due, or shall
  admit in writing its inability to pay its debts generally, or shall make a
  general assignment for the benefit of creditors, or shall institute any
  proceeding seeking to adjudicate itself insolvent or seeking a liquidation,
  or shall take advantage of any insolvency act, or shall commence a case or
  other proceeding 





34







	
 

	
 


	
 

	
naming
  itself as debtor under the United States Bankruptcy Code or similar law,
  domestic or foreign, or a case or other proceeding shall be commenced against
  the Company, the Depositor or the Trust under the United States Bankruptcy
  Code or similar law, domestic or foreign, or any proceeding shall be
  instituted against the Company, the Depositor or the Trust seeking
  liquidation of its assets and the Company, the Depositor or the Trust, as the
  case may be, shall fail to take appropriate action resulting in the
  withdrawal or dismissal of such proceeding within 90 days or there shall be
  appointed or the Company, the Depositor or the Trust, as the case may be,
  shall consent to, or acquiesce in, the appointment of a receiver, liquidator,
  conservator, trustee or similar official in respect of the Company, the
  Depositor or the Trust or the whole or any substantial part of its properties
  or assets or the Company, the Depositor or the Trust shall take any corporate
  action in furtherance of any of the foregoing; and


	
 

	
 


	
 

	
          (f)
  the occurrence and continuance of an “event of default,” “Event of Default,”
  “termination event,” “Termination Event,” “Event of Servicing Termination” or
  “Default” or any similar occurrence however denominated (during the
  continuance thereof), in each case under any Transaction Document or the
  termination of the Trust or the failure of any Grant to be perfected as a
  first priority security interest and in full force and effect with respect to
  the Trust Fund or any portion thereof. 





          Section
5.02. Remedies; Waivers.
(a) Upon the occurrence of an Event of Default, FSA may exercise any one or
more of the rights and remedies set forth below: 


	
 

	
 

	
 


	
 

	
 

	
          (i)
  exercise any rights and remedies available under the Transaction Documents in
  accordance with the terms of the Transaction Documents in its own capacity or
  in its capacity as the Person entitled to exercise the rights of the
  Noteholders in respect of the Securities in accordance with the terms of the
  Transaction Documents; or 


	
 

	
 

	
 


	
 

	
 

	
          (ii)
  take whatever action at law or in equity that may appear necessary or
  desirable in its judgment to enforce performance of any obligation of the
  Company or the Depositor under the Transaction Documents. 


	
 

	
 

	
 


	
 

	
          (b)
  Unless otherwise expressly provided, no remedy herein conferred upon or
  reserved is intended to be exclusive of any other available remedy, but each
  remedy shall be cumulative and shall be in addition to other remedies given
  under the Transaction Documents or existing at law or in equity. No delay or
  failure to exercise any right or power accruing under any Transaction
  Document upon the occurrence of any Event of Default or otherwise shall
  impair any such right or power or shall be construed to be a waiver thereof,
  but any such right and power may be exercised from time to time and as often
  as may be deemed expedient. In order to entitle FSA to exercise any remedy
  reserved to FSA in this Article, it shall not be necessary to give any
  notice, other than such notice as may be expressly required in this Article. 


	
 

	
 


	
 

	
          (c)
  If any proceeding has been commenced to enforce any right or remedy under
  this Agreement and such proceeding has been discontinued or abandoned for any
  reason, or has been determined adversely to FSA, then and in every such case
  the parties 





35







	
 

	
 


	
 

	
hereto
  shall, subject to any determination in such proceeding, be restored to their
  respective former positions hereunder, and, thereafter, all rights and
  remedies of FSA shall continue as though no such proceeding had been
  instituted.


	
 

	
 


	
 

	
          (d)
  FSA shall have the right, to be exercised in its complete discretion, to
  waive any covenant, Default or Event of Default by a writing setting forth
  the terms, conditions and extent of such waiver signed by FSA and delivered
  to the party as to which such Event of Default occurred. Any such waiver may
  only be effected in writing duly executed by FSA, and no other course of
  conduct shall constitute a waiver of any provision hereof. Unless such
  writing expressly provides to the contrary, any waiver so granted shall
  extend only to the specific event or occurrence so waived and not to any
  other similar event or occurrence. 





ARTICLE VI


MISCELLANEOUS


          Section
6.01. Amendments. This Agreement may be amended, modified or terminated only by written
instrument or written instruments signed by the parties hereto. No act or
course of dealing shall be deemed to constitute an amendment, modification or
termination hereof. 


          Section
6.02. Notices. All demands,
notices and other communications to be given hereunder shall be in writing
(except as otherwise specifically provided herein) and shall be mailed by
registered mail or personally delivered or telecopied to the recipient as
follows: 


	
 

	
 

	
 

	
 

	
 


	
 

	
(a)

	
To FSA:

	
 

	
Financial
  Security Assurance Inc.


	
 

	
 

	
 

	
 

	
31 West 52nd
  Street


	
 

	
 

	
 

	
 

	
New York, NY
  10019


	
 

	
 

	
 

	
 

	
Attention:
  Transaction Oversight


	
 

	
 

	
 

	
 

	
Re: IndyMac
  Home Equity Mortgage Loan Asset-Backed


	
 

	
 

	
 

	
 

	
Trust,
  Series 2007-H1


	
 

	
 

	
 

	
 

	
Confirmation:
  (212) 826-0100


	
 

	
 

	
 

	
 

	
Telecopy
  Nos.: (212) 339-3518, (212) 339-3529


	
 

	
 

	
 

	
(in each
  case in which notice or other communication to FSA refers to an Event of
  Default, a claim on the Policy or with respect to which failure on the part
  of FSA to respond shall be deemed to constitute consent or acceptance, then a
  copy of such notice or other communication should also be sent to the
  attention of each of the General Counsel and the Head—Financial Guaranty
  Group and shall be marked to indicate “URGENT MATERIAL ENCLOSED.”)





36







	
 

	
 

	
 

	
 

	
 


	
 

	
(b)

	
To the
  Company:

	
 

	
IndyMac Bank
  F.S.B.


	
 

	
 

	
 

	
 

	
3465 East
  Foothill Boulevard


	
 

	
 

	
 

	
 

	
Pasadena,
  California 91107


	
 

	
 

	
 

	
 

	
(800)
  699-2300


	
 

	
 

	
 

	
 

	
Attention:
  Secondary Marketing – Transaction


	
 

	
 

	
 

	
 

	
Management


	
 

	
 

	
 

	
(in each
  case in which notice or other communication to the Company refers to an Event
  of Default, a claim against the Company or with respect to which failure on
  the part of the Company to respond shall be deemed to constitute consent or
  acceptance, then a copy of such notice or other communication should also be
  sent to the attention of the general counsel of the Company, at the above
  address, and in all cases, both an original and all copies shall be marked to
  indicate “URGENT MATERIAL ENCLOSED.”)


	
 

	
 

	
 

	
 

	
 


	
 

	
(c)

	
To the
  Depositor:

	
 

	
 IndyMac ABS, Inc.


	
 

	
 

	
 

	
 

	
c/o IndyMac
  Bank F.S.B.


	
 

	
 

	
 

	
 

	
3465 East
  Foothill Boulevard


	
 

	
 

	
 

	
 

	
Pasadena,
  California 91107


	
 

	
 

	
 

	
 

	
Attention:
  Secondary Marketing – Transaction


	
 

	
 

	
 

	
 

	
Management


	
 

	
 

	
 

	
(in each
  case in which notice or other communication to the Depositor refers to an
  Event of Default, a claim against the Depositor or with respect to which
  failure on the part of the Depositor to respond shall be deemed to constitute
  consent or acceptance, then a copy of such notice or other communication
  should also be sent to the attention of the general counsel of the Depositor,
  at the above address, and in all cases, both an original and all copies shall
  be marked to indicate “URGENT MATERIAL ENCLOSED.”)


	
 

	
 

	
 

	
 

	
 


	
 

	
(d)

	
To the
  Trust:

	
 

	
IndyMac Home
  Equity Mortgage Loan Asset-Backed


	
 

	
 

	
 

	
 

	
Trust,
  Series 2007-H1


	
 

	
 

	
 

	
 

	
c/o Wilmington
  Trust Company, as Owner Trustee


	
 

	
 

	
 

	
 

	
Rodney
  Square North


	
 

	
 

	
 

	
 

	
1100 North
  Market Street


	
 

	
 

	
 

	
 

	
Wilmington,
  Delaware 19890-0001


	
 

	
 

	
 

	
 

	
Attention:
  Corporate Trust Administration


	
 

	
 

	
 

	
 

	
Telecopy:
  (302) 651-3653





37







	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
(in each
  case in which notice or other communication to the Trust refers to an Event
  of Default, a claim against the Trust or with respect to which failure on the
  part of the Trust to respond shall be deemed to constitute consent or
  acceptance, then a copy of such notice or other communication should also be
  sent to the attention of the general counsel of the Company, at the address
  listed in clause (b) above, and in all cases, both an original and all copies
  shall be marked to indicate “URGENT MATERIAL ENCLOSED.”)





          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
6.03. Payment Procedure.
In the event of any payment by FSA for which it is entitled to be reimbursed or
indemnified as provided above, each of the Company, the Depositor and the Trust
agrees to accept the voucher or other evidence of payment as prima facie
evidence of the propriety thereof and the liability therefor to FSA. All
payments to be made to FSA under this Agreement shall be made to FSA in lawful
currency of the United States of America in immediately available funds to the
account number provided in the Premium Letter before 1:00 p.m. (New York, New
York time) on the date when due or as FSA shall otherwise direct by written
notice to the Company, the Depositor and the Trust. In the event that the date
of any payment to FSA or the expiration of any time period hereunder occurs on
a day which is not a Business Day, then such payment or expiration of time
period shall be made or occur on the next succeeding Business Day with the same
force and effect as if such payment was made or time period expired on the
scheduled date of payment or expiration date. Payments to be made to FSA under
this Agreement shall bear interest at the Late Payment Rate from the date when
due to the date paid, and shall include interest on overdue interest,
compounded monthly. 


          Section
6.04. Severability.
In the event that any provision of this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, the parties hereto agree
that such holding shall not invalidate or render unenforceable any other
provision hereof. The parties hereto further agree that the holding by any
court of competent jurisdiction that any remedy pursued by any party hereto is
unavailable or unenforceable shall not affect in any way the ability of such
party to pursue any other remedy available to it. 


          Section
6.05. Governing Law.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK. 


          Section
6.06. Consent to Jurisdiction. 


	
 

	
 


	
 

	
          (a)
  THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE
  UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY
  COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK,
  AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION, SUIT OR 





38







	
 

	
 


	
 

	
PROCEEDING
  BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH ANY OF THE TRANSACTION
  DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER OR FOR RECOGNITION OR
  ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND
  UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
  PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE
  EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE PARTIES HERETO AGREE THAT
  A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE
  AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
  OTHER MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
  PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF MOTION, AS A
  DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT
  IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE
  SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE
  VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THE TRANSACTION
  DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH
  COURTS.


	
 

	
 


	
 

	
          (b)
  To the extent permitted by applicable law, the parties hereto shall not seek
  and hereby waive the right to any review of the judgment of any such court by
  any court of any other nation or jurisdiction which may be called upon to
  grant an enforcement of such judgment. 


	
 

	
 


	
 

	
          (c)
  Each of the Company, the Depositor and the Trust hereby irrevocably appoints
  and designates CT Corporation System, whose address is 1633 Broadway, New
  York, New York 10019, as its true and lawful attorney and duly authorized
  agent for acceptance of service of legal process. Each of the Company, the
  Depositor and the Trust agrees that service of such process upon such Person
  shall constitute personal service of such process upon it. 


	
 

	
 


	
 

	
          (d)
  Nothing contained in this Agreement shall limit or affect FSA’s right to
  serve process in any other manner permitted by law or to start legal
  proceedings relating to any of the Transaction Documents against the Company,
  the Depositor or the Trust or their property in the courts of any
  jurisdiction. 





          Section
6.07. Consent of FSA.
In the event that FSA’s consent is required under any of the Transaction
Documents, the determination whether to grant or withhold such consent shall be
made by FSA in its sole discretion without any implied duty towards any other
Person, except as otherwise expressly provided therein. 


          Section
6.08. Counterparts.
This Agreement may be executed in counterparts by the parties hereto, and all
such counterparts shall constitute one and the same instrument. 


39






          Section
6.09. Trial by Jury Waived. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH
ANY OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREUNDER. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION
DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER.


          Section
6.10. Limited Liability. No recourse under any Transaction Document
shall be had against, and no personal liability shall attach to, any officer,
employee, director, affiliate or shareholder of any party hereto, as such, by
the enforcement of any assessment or by any legal or equitable proceeding, by
virtue of any statute or otherwise in respect of any of the Transaction
Documents, the Securities or the Policy, it being expressly agreed and
understood that each Transaction Document is solely a corporate obligation of
each party hereto, and that any and all personal liability, either at common
law or in equity, or by statute or constitution, of every such officer,
employee, director, affiliate or shareholder for breaches by any party hereto
of any obligations under any Transaction Document is hereby expressly waived as
a condition of and in consideration for the execution and delivery of this
Agreement.


          Section
6.11. Entire Agreement. This Agreement, the Premium Letter, the Policy
and the Transaction Documents set forth the entire agreement between the parties
with respect to the subject matter thereof, and this Agreement supersedes and
replaces any agreement or understanding that may have existed between the
parties prior to the date hereof in respect of such subject matter.


          Section
6.12. Owner Trustee Liability. It is expressly understood and agreed by
the parties to this Agreement with respect to the Trust that (a) this Agreement
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, (b)
each of the representations, undertakings and agreements herein made on
the part of the Trust is made and intended not as personal representations,
undertakings and agreements by Wilmington Trust Company but is made and
intended for the purpose of binding only the Trust, (c) nothing herein
contained shall be construed as creating any liability on the part of
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 the
Trust under this Agreement or any other related documents. 


40






          IN
WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement, all as of the day and year first above written.


	
 

	
 

	
 


	
 

	
FINANCIAL
  SECURITY ASSURANCE INC.


	
 

	
 

	
 


	
 

	
By: 

	
/s/
  David M. Williams


	
 

	
 

	



	
 

	
 

	
                    Authorized
  Officer


	
 

	
 

	
 


	
 

	
INDYMAC
  BANK, F.S.B.


	
 

	
 

	
 


	
 

	
By: 

	
/s/ Jill
  Jacobson


	
 

	
 

	



	
 

	
 

	
                    Authorized
  Officer


	
 

	
 

	
 


	
 

	
INDYMAC ABS,
  INC.


	
 

	
 

	
 


	
 

	
By: 

	
/s/ Jill
  Jacobson


	
 

	
 

	



	
 

	
 

	
                    Authorized
  Officer


	
 

	
 

	
 


	
 

	
INDYMAC HOME EQUITY MORTGAGE LOAN
  
ASSET-BACKED TRUST, SERIES 2007-H1,

  by Wilmington Trust Company, not in its individual capacity but solely as
  Owner Trustee


	
 

	
 

	
 


	
 

	
By:

	
 /s/
  Michele C. Harra


	
 

	
 

	



	
 

	
 

	
                    Authorized
  Officer





41






APPENDIX I


DEFINITIONS


          “Administration
Agreement” means the Administration Agreement dated as of the date hereof
among the Trust, the Owner Trustee and Deutsche Bank National Trust Company, as
administrator, as the same may be amended from time to time.


          “Agreement”
means this Insurance and Indemnity Agreement dated as of March 23, 2007 among
FSA, the Company, the Depositor and the Trust, as the same may be amended from
time to time.


          “Approvals”
has the meaning set forth in section 2.01(a).


          “Bancorp”
means IndyMac Bancorp, Inc., a Delaware corporation. 


          “Business
Day” means any day other than (a) a Saturday or Sunday or (b) a day on
which banking institutions in the States of New York or California or the city
in which the Corporate Trust Office or the office of the Insurer is located,
are authorized or obligated by law, executive order or government decree to be
closed.


          “Closing
Date” means March 23, 2007.


          “Code”
means the Internal Revenue Code of 1986, including, unless the context
otherwise requires, the rules and regulations thereunder, as amended from time
to time.


          “Commonly
Controlled Entity” means, with respect to any Person, such Person and each
entity, whether or not incorporated, which is affiliated with such Person
pursuant to Section 414(b), (c), (m) or (o) of the Code.


          “Company”
means IndyMac Bank, F.S.B., a federal savings bank.


          “Date
of Issuance” means the date on which the Policy is issued as specified
therein.


          “Default”
means any event which results, or which with the giving of notice or the lapse
of time or both would result, in an Event of Default.


          “ERISA”
means the Employee Retirement Income Security Act of 1974, including, unless
the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.


          “Event
of Default” means any event of default specified in Section 5.01 of this
Agreement.


          “Financial
Statements” means with respect to Bancorp, the balance sheet of such party
as of December 31, 2004, December 31, 2005, December 31, 2006 and the
statements of income, changes in shareholders’ equity and cash flows for the
fiscal year then ended.


42






          “Fiscal
Agent” means the Fiscal Agent, if any, designated pursuant to the terms of
the Policy.


          “FSA”
means Financial Security Assurance Inc., a New York stock insurance company,
its successors and assigns.


          “FSA
Information” has the meaning set forth in section 2.01(j).


          “Indemnification
Agreement” means the Indemnification Agreement, dated March 23, 2007 among
FSA, the Underwriters and the Depositor.


          “Indenture”
means the indenture, dated as of March 23, 2007, pertaining to the Securities
between IndyMac Home Equity Mortgage Loan Asset-Backed Trust, Series 2007-H1 as
issuer and Deutsche Bank National Trust Company as indenture trustee, as the
same may be amended, modified or supplemented from time to time.


          “Indenture
Trustee” means Deutsche Bank National Trust Company, a national banking
association, as indenture trustee under the Indenture, and any successor
thereto as indenture trustee under the Indenture.


          “Investment
Company Act” means the Investment Company Act of 1940, including, unless
the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.


          “IRS”
means the Internal Revenue Service.


          “Late
Payment Rate” means the lesser of (a) the greater of (i) the per annum rate
of interest, publicly announced from time to time by JPMorgan Chase Bank, N.A.
at its principal office in the City of New York, 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 JPMorgan Chase Bank, N.A.) plus 2%, and (ii) the
then applicable rate of interest on the Securities and (b)the maximum rate
permissible under applicable usury or similar laws limiting interest rates. The
Late Payment Rate shall be computed on the basis of the actual number of days
elapsed over a year of 360 days.


          “Lien”
means, as applied to the property or assets (or the income or profits
therefrom) of any Person, in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or
otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease,
conditional sale or other title retention agreement, or other security interest
or encumbrance of any kind; or (b) any arrangement, express or implied, under
which such property or assets are transferred, sequestered or otherwise
identified for the purpose of subjecting or making available the same for the
payment of debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.


          “Material
Adverse Change” means, (a) in respect of any Person, a material adverse
change in (i) the business, financial condition, results of operations or
properties of such Person or (ii) the ability of such Person to perform its
obligations under any of the Transaction Documents to which it is a party and
(b) in respect of a material portion of the Mortgage Loans, a


43






material
adverse change in (i) the value or marketability of a material portion of such
Mortgage Loans or (ii) the probability that amounts now or hereafter due in
respect of a material portion of such Mortgage Loans will be collected in full.


          “Moody’s”
means Moody’s Investors Service, Inc., a Delaware corporation, and any
successor thereto, and, if such corporation shall for any reason no longer
perform the functions of a securities rating agency, “Moody’s” shall be deemed
to refer to any other nationally recognized rating agency designated by FSA.


          “Mortgage
Loan” means any “Mortgage Loan” as defined in the Indenture.


          “Mortgage
Loan Purchase Agreement” means the “Mortgage Loan Purchase Agreement” as
defined in the Indenture.


          “Multiemployer
Plan” means a multiemployer plan (within the meaning of Section
400(1)(a)(3) of ERISA) in respect of which a Commonly Controlled Entity makes
contributions, is obligated to contribute or has liability.


          “Noteholders”
means registered holders of Securities.


          “Offering
Document” means each of the Free Writing Prospectus, dated March 19, 2007
(the “Free Writing Prospectus”) and the Prospectus, dated December 11, 2006, as
supplemented by the Prospectus Supplement (the “Prospectus Supplement”), dated
March 22, 2007 and any other offering document in respect of the Securities.


          “Owner
Trustee” means Wilmington Trust Company, not in its individual capacity,
but solely as owner trustee and any successor thereto under the Trust
Agreement.


          “PBGC”
means the Pension Benefit Guaranty Corporation or any successor agency,
corporation or instrumentality of the United States to which the duties and
powers of the Pension Benefit Guaranty Corporation are transferred.


          “Person”
means an individual, joint stock company, trust, unincorporated association,
joint venture, corporation, business or owner trust, limited liability company,
partnership or other organization or entity (whether governmental or private).


          “Plan”
means any pension plan (other than a Multiemployer Plan) covered by Title IV of
ERISA, which is maintained by a Commonly Controlled Entity or in respect of
which a Commonly Controlled Entity has liability.


          “Policy”
means the financial guaranty insurance policy, including any endorsements
thereto, issued by FSA with respect to the Securities, substantially in the
form attached as Annex I to this Agreement.


          “Premium”
means the premium payable in accordance with Section 3.02 of this Agreement.


44






          “Premium
Letter” means the side letter among FSA, the Company and the Depositor
dated the date hereof in respect of the premium payable by the Company in
consideration of the issuance of the Policy.


          “Provided
Documents” means the Transaction Documents and any documents, agreements,
instruments, schedules, certificates, statements, cash flow schedules, number
runs or other writings or data furnished to FSA by or on behalf of the Company
or the Depositor, as the case may be, with respect to itself, the Mortgage
Loans or the Transaction, in each case as amended, supplemented or superseded
through the date hereof.


          “Reportable
Event” means any of the events set forth in Section 4043(b) of ERISA or the
regulations thereunder.


          “Restrictions
on Transferability” means, as applied to the property or assets (or the
income or profits therefrom) of any Person, in each case whether the same is
consensual or nonconsensual or arises by contract, operation of law, legal
process or otherwise, any material condition to, or restriction on, the ability
of such Person or any transferee therefrom to sell, assign, transfer or
otherwise liquidate such property or assets in a commercially reasonable time
and manner or which would otherwise materially deprive such Person or any
transferee therefrom of the benefits of ownership of such property or assets.


          “Scheduled
Payments” means the “Scheduled Payments” as defined in the Policy.


          “Securities”
means the $650,071,000 IndyMac Home Equity Mortgage Loan Asset-Backed Notes,
Series 2007-H1 issued pursuant to the Indenture.


          “Securities
Act” means the Securities Act of 1933, including, unless the context
otherwise requires, the rules and regulations thereunder, as amended from time
to time.


          “Securities
Exchange Act” means the Securities Exchange Act of 1934, including, unless
the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.


          “S&P”
means Standard & Poor’s Rating Services, a division of The McGraw-Hill
Companies, Inc., and any successor thereto, and, if such corporation shall for
any reason no longer perform the functions of a securities rating agency,
“S&P” shall be deemed to refer to any other nationally recognized rating
agency designated by FSA.


          “Subsidiary”
means, with respect to any Person, any corporation of which a majority of the
outstanding shares of capital stock having ordinary voting power for the
election of directors is at the time owned by such Person directly or through
one or more Subsidiaries.


          “Term of
the Agreement” shall be determined as provided in Section 4.01 of this
Agreement.


          “Term
of the Policy” has the meaning provided for in “Term of this Policy” in the
Policy.


45






          “Transaction”
means the transactions contemplated by the Transaction Documents, including the
transactions described in the Offering Document.


          “Transaction
Documents” means this Agreement, the Indenture, the Trust Agreement, the
Administration Agreement, the Mortgage Loan Purchase Agreement, the Sale and
Servicing Agreement and the Premium Letter. 


          “Trigger
Event” means the occurrence of any one of the following: (a) an Event of
Default under this Agreement has occurred and is continuing, (b) any legal
proceeding or binding arbitration is instituted specifically with respect to
the Transaction, (c) any governmental or administrative investigation, action
or proceeding is instituted that would, if adversely decided, result in a
Material Adverse Change in respect of the Company or the Depositor or of any
material portion of the Mortgage Loans, (d) FSA pays a claim under the Policy
or (e) a Recordation Event.


          “Trust
Agreement” means the Trust Agreement dated as of March 12, 2007, among
IndyMac ABS, Inc., as Depositor, and Wilmington Trust Company, as Owner
Trustee, as amended and restated by that certain Amended and Restated Trust
Agreement dated as of March 23, 2007, among IndyMac ABS, Inc., as Depositor,
Wilmington Trust Company, as Owner Trustee and Deutsche Bank National Trust
Company, as Administrator.


          “Trust
Fund” means the Trust Estate as defined in the Trust Agreement.


          “Trust
Indenture Act” means the Trust Indenture Act of 1939, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.


          “Underwriter
Information” has the meaning provided in Section 3(c) of the
Indemnification Agreement. 


          “Underwriters”
means, collectively, Lehman Brothers Inc., Deutsche Bank Securities, Inc., and
IndyMac Securities Corporation.


          “Underwriting
Agreement” means the Underwriting Agreement, dated as of March 20, 2007
among the Underwriters, the Depositor and the Company with respect to the offer
and sale of the Securities, as the same may be amended from time to time.


46






ANNEX I


FORM OF POLICY


47






APPENDIX A
TO INSURANCE AND INDEMNITY AGREEMENT


CONDITIONS PRECEDENT TO ISSUANCE OF THE
POLICY


                    (a)
Payment of Initial Premium and Expenses; Premium Letter. FSA shall have
been paid, by or on behalf of the Company, a nonrefundable Premium and shall
have been reimbursed, by or on behalf of the Company, for other fees and
expenses identified in Section 3.02 of the Agreement as payable at closing and
FSA shall have received a fully executed copy of the Premium Letter.


                    (b)
Transaction Documents. FSA shall have received a copy of each of the
Transaction Documents, in form and substance satisfactory to FSA, duly
authorized, executed and delivered by each party thereto. Without limiting the
foregoing, the provisions of the Indenture relating to the payment to FSA of
the Premium due on the Policy and the reimbursement to FSA of amounts paid
under the Policy shall be in form and substance acceptable to FSA in its sole
discretion.


                    (c)
Certified Documents and Resolutions. FSA shall have received a copy of
(i) the articles of association and bylaws or similar organizational documents
of the Company and the Depositor and (ii) the resolutions of the Boards of
Directors of the Company and the Depositor authorizing the sale or transfer of
the Mortgage Loans and the execution, delivery and performance by the Company
and the Depositor of the Transaction Documents and the transactions
contemplated thereby, certified by the Secretary or an Assistant Secretary of
the Company and the Depositor, as the case may be (which certificate shall
state that such articles of association and bylaws or similar organizational
documents and resolutions are in full force and effect without modification on
the Date of Issuance). 


                    (d)
Incumbency Certificate. FSA shall have received a certificate of the
Secretary or an Assistant Secretary of the Company and the Depositor certifying
the name and signatures of the officers of each of the Company and the
Depositor authorized to execute and deliver the Transaction Documents and that
shareholder consent to the execution and delivery of such documents is not
necessary.


                    (e)
Representations and Warranties; Certificate. The representations and
warranties of the Company and the Depositor in this Agreement shall be true and
correct as of the Date of Issuance as if made on the Date of Issuance.


                    (f)
Opinions of Counsel. FSA shall have received opinions of counsel
addressed to FSA, Moody’s and S&P in respect of the Company and the
Depositor, the other parties to the Transaction Documents and the Transaction
in form and substance satisfactory to FSA, addressing such matters as FSA may
reasonably request, and the counsel providing each such opinion shall have been
instructed by its client to deliver such opinion to the addressees thereof.


                    (g)
Approvals, Etc. FSA shall have received true and correct copies of all
approvals, licenses and consents, if any, required in connection with the
Transaction.


48






                    (h)
No Litigation, Etc. No suit, action or other proceeding, investigation,
or injunction or final judgment relating thereto, shall be pending or
threatened before any court or governmental agency in which it is sought to
restrain or prohibit or to obtain damages or other relief in connection with
any of the Transaction Documents or the consummation of the Transaction.


                    (i)
Legality. No statute, rule, regulation or order shall have been enacted,
entered or deemed applicable by any government or governmental or
administrative agency or court which would make the transactions contemplated
by any of the Transaction Documents illegal or otherwise prevent the consummation
thereof.


                    (j)
Satisfaction of Conditions of Underwriting Agreement. All conditions in
the Underwriting Agreement to the Underwriters’ obligation to purchase the
Securities shall have been satisfied.


                    (k)
Issuance of Ratings. FSA shall have received confirmation that the risk
secured by the Policy constitutes an investment grade risk by S&P and an
insurable risk by Moody’s and that the Securities, when issued, will be rated
“AAA” by S&P and “Aaa” by Moody’s.


                    (l)
UCC Filings. FSA shall have received copies of UCC financing statements
to be filed in each applicable jurisdiction, in form and substance satisfactory
to FSA, as may be necessary in the opinion of FSA or its counsel to perfect the
Liens created by the Mortgage Loan Purchase Agreement, the Sale and Servicing
Agreement and the Indenture, and all taxes, fees and other charges payable in
connection with such execution, delivery, recording and filing shall have been
paid. The Company shall have delivered all the documents required to be
delivered under and in the manner provided in the Transaction Documents.


                    (m)
No Default. No Default or Event of Default shall have occurred.


                    (n)
Additional Items. FSA shall have received such other documents,
instruments, approvals or opinions requested by FSA as may be reasonably
necessary to effect the Transaction, including but not limited to evidence
satisfactory to FSA that all conditions precedent, if any, in the Transaction
Documents have been satisfied.


49