Document:

exv10w5

 

Exhibit 10.5

AMBAC ASSURANCE CORPORATION

as Insurer,

INDYMAC ABS, INC.

as Depositor,

INDYMAC BANK, F.S.B.

as Seller and Servicer,

INDYMAC RESIDENTIAL ASSET-BACKED TRUST, SERIES 2004-LH1

as Issuer,

and

DEUTSCHE BANK NATIONAL TRUST COMPANY

as Indenture Trustee

INSURANCE AND INDEMNITY AGREEMENT

INDYMAC RESIDENTIAL ASSET-BACKED NOTES,

SERIES 2004-LH1

Dated as of December 22, 2004

 

 

TABLE OF CONTENTS

          (This Table of Contents is for convenience of reference only and shall not be deemed to be
part of this Agreement. All capitalized terms used in this Agreement and not otherwise defined
shall have the meanings set forth in Article I of this Agreement.)

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	ARTICLE I
DEFINITIONS	 	 	 	 
	Section 1.01.
	 	Defined Terms	 	 	1	 
	Section 1.02.
	 	Other Definitional Provisions	 	 	5	 
	 
	 	ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS	 	 	 	 
	Section 2.01.
	 	Representations and Warranties of the Seller, the Servicer and the Depositor	 	 	5	 
	Section 2.02.
	 	Affirmative Covenants of the Seller, the Servicer and the Depositor	 	 	9	 
	Section 2.03.
	 	Negative Covenants of the Seller, the Servicer and the Depositor	 	 	14	 
	Section 2.04.
	 	[Reserved]	 	 	14	 
	Section 2.05.
	 	[Reserved]	 	 	14	 
	Section 2.06.
	 	Representations and Warranties of the Issuer	 	 	15	 
	Section 2.07.
	 	Affirmative Covenants of the Issuer	 	 	17	 
	Section 2.08.
	 	Negative Covenants of the Issuer	 	 	20	 
	Section 2.09.
	 	Representations and Warranties of the Insurer	 	 	20	 
	 
	 	ARTICLE III
THE NOTE POLICY; REIMBURSEMENT	 	 	 	 
	Section 3.01.
	 	Issuance of the Note Policy	 	 	22	 
	Section 3.02.
	 	Payment of Fees and Premium	 	 	24	 
	Section 3.03.
	 	Reimbursement Obligation	 	 	25	 
	Section 3.04.
	 	Indemnification	 	 	26	 
	Section 3.05.
	 	Indemnification with respect to the Issuer	 	 	29	 
	Section 3.06.
	 	Payment Procedure	 	 	31	 
	 
	 	ARTICLE IV
FURTHER AGREEMENTS	 	 	 	 
	Section 4.01.
	 	Effective Date; Term of the Insurance Agreement	 	 	31	 
	Section 4.02.
	 	Further Assurances and Corrective Instruments	 	 	31	 
	Section 4.03.
	 	Obligations Absolute	 	 	32	 
	Section 4.04.
	 	Assignments; Reinsurance; Third-Party Rights	 	 	33	 

(i)

 

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	Section 4.05.
	 	Liability of the Insurer	 	 	34	 
	Section 4.06.
	 	Annual Servicing Audit and Certification	 	 	34	 
	 
	 	ARTICLE V
DEFAULTS AND REMEDIES	 	 	 	 
	Section 5.01.
	 	Defaults	 	 	34	 
	Section 5.02.
	 	Remedies; No Remedy Exclusive	 	 	36	 
	Section 5.03.
	 	Waivers	 	 	36	 
	 
	 	ARTICLE VI
MISCELLANEOUS	 	 	 	 
	Section 6.01.
	 	Amendments, Etc	 	 	37	 
	Section 6.02.
	 	Notices	 	 	37	 
	Section 6.03.
	 	Severability	 	 	38	 
	Section 6.04.
	 	Governing Law	 	 	38	 
	Section 6.05.
	 	Consent to Jurisdiction	 	 	38	 
	Section 6.06.
	 	Consent of the Insurer	 	 	39	 
	Section 6.07.
	 	Counterparts	 	 	39	 
	Section 6.08.
	 	Headings	 	 	39	 
	Section 6.09.
	 	Trial by Jury Waived	 	 	39	 
	Section 6.10.
	 	Limited Liability	 	 	40	 
	Section 6.11.
	 	Entire Agreement	 	 	40	 
	Section 6.12.
	 	Indenture Trustee	 	 	40	 
	Section 6.13.
	 	No Petition	 	 	40	 

(ii)

 

          INSURANCE AND INDEMNITY AGREEMENT (as may be amended, modified or supplemented from time to
time, this “Insurance Agreement”), dated as of December 22, 2004, by and among AMBAC
ASSURANCE CORPORATION, as Insurer, INDYMAC ABS, INC., as Depositor, INDYMAC BANK, F.S.B., as Seller
and Servicer, INDYMAC RESIDENTIAL ASSET-BACKED TRUST, SERIES 2004-LH1, as Issuer and DEUTSCHE BANK
NATIONAL TRUST COMPANY, as Indenture Trustee.

          WHEREAS, the Indenture, dated as of December 22, 2004, related to the IndyMac Residential
Asset-Backed Notes, Series 2004-LH1 (the “Indenture”), between the Issuer and the Indenture
Trustee provides for, among other things, the issuance of Notes by the Issuer representing
indebtedness of the Trust Fund established thereby;

          WHEREAS, the Insurer has issued the Note Policy pursuant to which it has agreed to pay to the
Indenture Trustee for the benefit of the Class A Noteholders certain payments in respect of the
Notes;

          WHEREAS, the Insurer shall be paid a Premium with respect to the Note Policy as set forth
herein; and

          WHEREAS, the Seller, the Servicer and the Depositor have undertaken certain obligations in
consideration for the Insurer’s issuance of its Note Policy;

          NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained,
the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

          Section 1.01. Defined Terms. Unless the context clearly requires otherwise, all
capitalized terms used but not defined herein shall have the respective meanings assigned to them
in the Sale and Servicing Agreement, the Indenture or the Note Policy described below. For
purposes of this Insurance Agreement, the following terms shall have the following meanings:

          “Ambac Premium Letter” means the letter agreement between the Issuer and the Insurer
dated December 22, 2004 setting forth the Premium with respect to the Note Policy and the expenses
of the Insurer.

          “Business Day” shall mean any day other than (i) a Saturday or Sunday, (ii) a day on
which banking institutions in the state of New York or the state of California or the city in which
the Corporate Trust Office or the office of the Insurer is located are required or authorized by
law or executive order to be closed or (iii) a day on which the Insurer is closed.

          “Closing Date” means December 22, 2004.

 

 

          “Commission” means the Securities and Exchange Commission.

          “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.

          “Depositor” means IndyMac ABS, Inc.

          “Documents” has the meaning given such term in Section 2.01(j).

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

          “Financial Statements” means, with respect to each of the Seller, the Servicer and the
Depositor, the consolidated statements of financial condition as of December 31, 2003, 2002 and
2001 and as of the quarters ending March 31, 2004, June 30, 2004 and September 30, 2004 and the
statements of operations, stockholders’ equity and cash flows for each of the years in the
three-year period ended December 31, 2003 and the periods ended March 31, 2004, June 30, 2004 and
September 30, 2004 and the notes thereto.

          “Holder” has the meaning given such term in the Note Policy.

          “Indemnification Agreement” means the indemnification agreement dated as of December
17, 2004 between the Insurer and the Underwriters.

          “Indenture” has the meaning given such term in the first recital hereof.

          “Indenture Trustee” means Deutsche Bank National Trust Company, a national banking
association existing under the laws of the United States of America, as Indenture Trustee under the
Indenture, and any successor thereto under the Indenture.

          “Insurance Agreement” has the meaning given such term in the initial paragraph hereof.

          “Insurer” means Ambac Assurance Corporation, or any successor thereto, as issuer of
the Note Policy.

          “Insurer Information” has the meaning given such term in Section 3.04(b).

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

          “Late Payment Rate” shall mean for any Payment Date, the lesser of (a) the greater of
(i) the per annum rate of interest publicly announced from time to time by Citibank, N.A. at its
principal office in New York, New York as its prime lending rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.) plus 2%
per annum and (ii) the then applicable highest rate

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of interest on the Notes and (b) the maximum rate permissible under applicable usury or
similar law limiting interest rates, such maximum rate as determined by the Insurer. 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, in respect of any Person, a material adverse change
in (i) the business, financial condition, results of operations or properties of such Person on a
consolidated basis with its subsidiaries or (ii) the ability of such Person to perform its
obligations under any of the Transaction Documents.

          “Moody’s” means Moody’s Investors Service, Inc., and any successor thereto.

          “Issuer Documents” has the meaning given such term in Section 2.06(i).

          “Issuer” means IndyMac Residential Asset-Backed Trust, Series 2004-LH1, a Delaware
statutory trust.

          “Note Policy” means the certificate guaranty insurance policy, No. AB0851BE, together
with all endorsements thereto, issued by the Insurer to the Indenture Trustee, for the benefit of
the Holders of the Notes.

          “Notes” means the IndyMac Residential Asset-Backed Notes, Series 2004-LH1,
substantially in the form set forth in Exhibit A to the Sale and Servicing Agreement.

          “Offering Document” means the Prospectus Supplement, dated December 17, 2004 to the
Prospectus dated December 3, 2004, in respect of the Notes, and any amendment or supplement
thereto.

          “Owner Trustee” means Wilmington Trust Company as trustee under the Trust Agreement,
and any successor thereto under the Trust Agreement.

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

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          “Premium” means the premium payable in accordance with the Note Policy and the Ambac
Premium Letter.

          “Premium Percentage” has the meaning set forth in the Ambac Premium Letter.

          “Registration Statement” means the registration statement on Form S-3 (No.
333-120706), including the prospectus, relating to the Notes, at the time it became effective.

          “Restrictions on Transferability” means, as applied to the property or assets (or
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.

          “Sale and Servicing Agreement” means the Sale and Servicing Agreement, dated as of
December 22, 2004, by and among the Depositor, the Seller, the Servicer, the Issuer and the
Indenture Trustee.

          “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, a division of The McGraw-Hill Companies, Inc. and any
successor thereto.

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

          “Transaction Documents” means this Insurance Agreement, the Mortgage Loan Purchase
Agreement, the Sale and Servicing Agreement, the Trust Agreement, the Indenture, the Administration
Agreement, the Auction Administration Agreement and the Notes.

          “Trust Agreement” means the Trust Agreement, dated as of December 14, 2004, between
the Depositor and the Owner Trustee, as amended and restated as of December 22, 2004.

          “Trust Fund ” means the trust created pursuant to the Trust Agreement.

4

 

          “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.

          “Underwriters” means Lehman Brothers, Inc. and Bear, Stearns & Co. Inc.

          “Underwriter Information” has the meaning given such term in the Indemnification
Agreement.

          “Underwriting Agreement” means the Underwriting Agreement dated December 17, 2004,
between the Underwriters and the Depositor with respect to the offer and sale of the Notes, as may
be amended, modified or supplemented from time to time.

          Section 1.02. Other Definitional Provisions. The words “hereof,” “herein” and
“hereunder” and words of similar import when used in this Insurance Agreement shall refer to this
Insurance Agreement as a whole and not to any particular provision of this Insurance Agreement, and
Section, subsection, Schedule and Exhibit references are to this Insurance Agreement unless
otherwise specified. The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms. The words “include” and “including” shall be
deemed to be followed by the phrase “without limitation.”

ARTICLE II

REPRESENTATIONS, WARRANTIES AND COVENANTS

          Section 2.01. Representations and Warranties of the Seller, the Servicer and the
Depositor. The Seller, the Servicer and the Depositor represent and warrant as of the Closing
Date as follows:

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

               (b) Power and Authority. Each of the Seller, the Servicer and the Depositor 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 party and to consummate the Transaction.

5

 

               (c) Due Authorization. The execution, delivery and performance of the Transaction
Documents to which they are party by the Seller, the Servicer and the Depositor have been duly
authorized by all necessary action and do not require any additional approvals or consents, or
other action by or any notice to or filing with any Person, including any governmental entity or
any of the stockholders of the Seller, the Servicer or the Depositor which have not previously
been obtained or given by the Seller, the Servicer or the Depositor.

               (d) Noncontravention. The execution and delivery by the Seller, the Servicer and
the Depositor of the Transaction Documents to which they are party, the consummation of the
Transaction and the satisfaction of the terms and conditions of the Transaction Documents and the
Premium Letter do not and will not:

          (i) conflict with or result in any breach or violation of any provision of the
organizational documents of the Seller, the Servicer or the Depositor or any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award currently in
effect having applicability to the Seller, the Servicer and the Depositor or any of their
respective material properties, including regulations issued by any administrative agency
or other governmental authority having supervisory powers over the Seller, the Servicer or
the Depositor;

          (ii) constitute a default by the Seller, the Servicer or the Depositor under, result
in the acceleration of any obligation under, or breach any provision of any loan agreement,
mortgage, indenture or other agreement or instrument to which either the Seller, the
Servicer or the Depositor is a party or by which any of their properties are or may be
bound or affected; or

          (iii) result in or require the creation of any lien upon or in respect of any assets
of the Seller, the Servicer or the Depositor 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 Seller,
the Servicer or the Depositor, any of their subsidiaries, any properties or rights of either the
Seller, the Servicer or the Depositor or any of their subsidiaries or any of the Mortgage Loans
pending or, to the Seller’s, the Servicer’s or the Depositor’s knowledge after reasonable
inquiry, threatened, which, in any case, if decided adversely to the Seller, the Servicer or the
Depositor or any such subsidiary could result in a Material Adverse Change with respect to the
Seller, the Servicer or the Depositor.

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

6

 

equitable principles and public policy considerations as to rights of indemnification for
violations of federal securities laws. The Notes, when executed, authenticated and delivered in
accordance with the Indenture, will be validly issued and outstanding and entitled to the
benefits of the Indenture. The Seller, the Servicer and the Depositor will not at any time in
the future deny that the Transaction Documents to which they are party, constitute the legal,
valid and binding obligations of the Seller, the Servicer and the Depositor.

               (g) Financial Statements. The Financial Statements of the Seller, the Servicer and
the Depositor, copies of which have been furnished to the Insurer, (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 the Seller, the Servicer and the
Depositor 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 respect of the
Seller, the Servicer or the Depositor. Except as disclosed in the Financial Statements, the
Seller, the Servicer and the Depositor are 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 Seller, the Servicer or the Depositor.

               (h) Compliance with Law, Etc. No practice, procedure or policy employed, or
proposed to be employed, by the Seller, the Servicer or the Depositor in the conduct of its
business violates any law, regulation, judgment, agreement, order or decree applicable to the
Seller, the Servicer or the Depositor that, if enforced, could result in a Material Adverse
Change with respect to the Seller, the Servicer or the Depositor. None of the Seller, the
Servicer or the Depositor is in violation of any applicable law or administrative regulation of
its jurisdiction of incorporation, or any department, division, agency, instrumentality thereof
or of the United States or any applicable judgment or decree or any note, resolution,
certificate, agreement or other instrument to which the Seller, the Servicer or the Depositor, as
applicable, is a party or is otherwise subject which, if enforced, would result in a Material
Adverse Change with respect to the Seller, the Servicer or the Depositor.

               (i) Taxes. Each of the Seller, the Servicer and the Depositor has filed prior to
the date hereof all federal and state tax returns that are required to be filed and has paid all
taxes, including any assessments received by it that are not being contested in good faith, to
the extent that such taxes have become due. Any taxes, fees and other governmental charges
payable by the Seller, the Servicer or the Depositor in connection with the Transaction, the
execution and delivery of the Transaction Documents and the Premium Letter and the issuance of
the Notes have been paid or shall have been paid at or prior to the Closing Date.

               (j) Accuracy of Information. Neither the Transaction Documents nor other
information relating to the Mortgage Loans, the operations of the Seller, the

7

 

Servicer or the Depositor or the financial condition of the Seller, the Servicer or the
Depositor (collectively, the “Documents”), as amended, supplemented or superseded,
furnished to the Insurer by the Seller, the Servicer or the Depositor contains any statement of a
material fact which was untrue or misleading in any material respect when made. Neither the
Seller, the Servicer nor the Depositor have knowledge of any circumstances that could reasonably
be expected to cause a Material Adverse Change with respect to the Seller, the Servicer or the
Depositor. Since the furnishing of the Documents, there has been no change nor any development
or event involving a prospective change known to the Seller, the Servicer or the Depositor that
would render any of the Documents untrue or misleading in any material respect.

               (k) Compliance With Securities Laws. The offer and sale of the Notes comply in all
material respects with all applicable laws, including applicable securities laws. Without
limiting the foregoing, the Offering Document does not contain any untrue statement of a material
fact and does not omit to state a material fact necessary to make the statements made therein, in
light of the circumstances under which they were made, not misleading; provided, however, that no
representation is made with respect to the Insurer Information or with respect to the Underwriter
Information. The Sale and Servicing Agreement is not and the Indenture is required to be
qualified under the Trust Indenture Act and the Trust Fund is not required to be registered as an
“investment company” under the Investment Company Act. The Seller, the Servicer and the
Depositor will satisfy any applicable information reporting requirements of the Securities
Exchange Act arising out of the Transaction to which they are subject.

               (l) Transaction Documents. Each of the representations and warranties of the
Seller, the Servicer and the Depositor contained in the Transaction Documents and the
Underwriting Agreement is true and correct in all material respects and the Seller, the Servicer
and the Depositor hereby make each such representation and warranty to, and for the benefit of,
the Insurer as if the same were set forth in full herein, provided that the remedy with respect
to any defective Mortgage Loans under Section 3.01 of the Mortgage Loan Purchase Agreement and
Section 2.04 of the Sale and Servicing Agreement shall be limited to the remedies specified
therein.

               (m) Solvency; Fraudulent Conveyance. The Seller, the Servicer and the Depositor are
solvent and will not be rendered insolvent by the Transaction and, after giving effect to the
Transaction, the Seller, the Servicer and the Depositor will not be left with an unreasonably
small amount of capital with which to engage in its business. None of the Seller, the Servicer
or the Depositor intends to incur, or believe that it has incurred, debts beyond its ability to
pay as they mature. The Seller, the Servicer and the Depositor do not contemplate the
commencement of insolvency, liquidation or consolidation proceedings or the appointment of a
receiver, liquidator, conservator, trustee or similar official in respect of the Seller, the
Servicer or the Depositor or any of their assets. The amount of consideration being received by
the Seller and the Depositor upon the sale of the Class A Notes constitutes reasonably equivalent
value and fair consideration for the interest in the Mortgage Loans. The

8

 

Seller did not transfer the Mortgage Loans to the Depositor with any intent to hinder, delay
or defraud any of the Seller’s creditors.

               (n) Principal Place of Business. The principal place of business of the Seller, the
Servicer and the Depositor is 155 N. Lake Avenue, Pasadena, California 91101.

               (o) Good Title; Absence of Liens; Security Interest. Immediately prior to the
transfer to the Depositor, the Seller was the owner of, and had good and marketable title to, the
Mortgage Loans 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.

          Section 2.02. Affirmative Covenants of the Seller, the Servicer and the Depositor.
The Seller, the Servicer and the Depositor hereby agree that during the term of this Insurance
Agreement, unless the Insurer shall otherwise expressly consent in writing:

               (a) Compliance With Agreements and Applicable Laws. The Seller, the Servicer and
the Depositor shall comply with the terms and conditions of and perform its respective
obligations under the Transaction Documents to which they are party in all cases in which failure
to so comply or perform would result in a default thereunder and shall comply with all material
requirements of any law, rule or regulation applicable to them.

               (b) Corporate Existence. The Seller, the Servicer and the Depositor and their
respective successors and permitted assigns shall each maintain its corporate existence and shall
at all times continue to be duly organized under the laws of the United States and duly qualified
and duly authorized (as described in subsections 2.01(a), (b) and (c) hereof) and shall conduct
its business in accordance with the terms of its charter and bylaws.

               (c) Financial Statements; Accountants’ Reports; Other Information. The Seller, the
Servicer and the Depositor shall keep or cause to be kept in reasonable detail books and records
of account of its assets and business, including books and records relating to the Transaction,
and shall clearly reflect therein that the Mortgage Loans have been legally isolated and such
assets are not available to satisfy claims of their general creditors. The Seller, the Servicer
and the Depositor shall furnish or cause to be furnished to the Insurer:

          (i) Annual Financial Statements. As soon as available, and in any event
within 105 days after the close of each fiscal year of the Seller, the Servicer and the
Depositor, the audited consolidated statement of financial condition of the Seller, the
Servicer and the Depositor and their subsidiaries as of the end of such fiscal year and the
related audited consolidated statements of operations, stockholders’ equity and cash flows
for such fiscal year, all in reasonable detail and stating in comparative form the
respective figures for the

9

 

corresponding date and period in the preceding fiscal year, prepared in accordance
with generally accepted accounting principles, consistently applied, and accompanied by the
audit opinion of the Seller, the Servicer and the Depositor’s independent accountants
(which shall be a nationally recognized independent public accounting firm or otherwise
acceptable to the Insurer) and by the certificate specified in Section 2.02(d).

          (ii) Quarterly Financial Statements. (A) Upon the reasonable request of the
Insurer following any Material Adverse Change of the Seller, the Servicer or the Depositor
or the reasonable belief of the Insurer that a Material Adverse Change of the Seller, the
Servicer or the Depositor has occurred, as soon as available, and (B) in any event within
60 days after the close of each of the first three quarters of each fiscal year of the
Seller, the Servicer and the Depositor, the unaudited consolidated statement of financial
condition of the Seller, the Servicer and the Depositor and their subsidiaries as of the
end of such quarter and the related unaudited consolidated statements of operations,
stockholders’ equity and cash flows for the portion of the fiscal year then ended, all in
reasonable detail and stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared in accordance with
generally accepted accounting principles consistently applied (subject to normal year-end
adjustments), and accompanied by the certificate specified in Section 2.02(d).

          (iii) Initial Report. On or before the Closing Date, a copy of the magnetic
tape to be delivered to the Indenture Trustee on the Closing Date setting forth as to each
Mortgage Loan, the information required in the definition of “Mortgage Loan Schedule” in
the Sale and Servicing Agreement.

          (iv) Certain Information. Upon the reasonable request of the Insurer, copies
of any requested proxy statements, financial statements, reports and registration
statements that the Seller, the Servicer and the Depositor file with, or deliver to, the
Commission or any national securities exchange.

          (v) Other Information. (A) Promptly upon receipt thereof, copies of all
schedules, financial statements or other similar reports delivered to or by the Seller, the
Servicer and the Depositor, pursuant to the terms of the Sale and Servicing Agreement, (B)
promptly upon request, such other data as the Insurer may reasonably request and (C) all
information required to be furnished to the Indenture Trustee simultaneously with the
furnishing thereof to the Indenture Trustee.

               (d) Compliance Certificate. The Seller, the Servicer and the Depositor shall
deliver to the Insurer, at the time that the delivery of the financial statements of the Seller,
the Servicer and the Depositor are required pursuant to subsection 2.02(c)(i) and (ii)
certificates of one (or more) of its officers stating that:

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          (i) a review of the performance of the Seller, the Servicer or the Depositor, as
applicable, under the Transaction Documents to which it is a party during such period has
been made under such officer’s supervision;

          (ii) to the best of such officer’s knowledge following reasonable inquiry, no Default
or Event of Default has occurred, or if a Default or Event of Default has occurred,
specifying the nature thereof and, if the Seller, the Servicer or the Depositor has a right
to cure pursuant to Section 5.01, stating in reasonable detail (including, if applicable,
any supporting calculations) the steps, if any, being taken by the Seller, the Servicer 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

          (iii) the attached financial statements submitted in accordance with subsection
2.02(c)(i) or (ii), if applicable, are complete and correct in all material respects and
present fairly the financial condition and results of operations of the Seller, the
Servicer and the Depositor 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).

               (e) Access to Records; Discussions with Officers and Accountants. On an annual
basis, or upon the occurrence of a Material Adverse Change, the Seller, the Servicer and the
Depositor shall, upon the reasonable request of the Insurer, permit the insurer or its authorized
agents:

          (i) to inspect the books and records of the Seller, the Servicer and the Depositor as
they may relate to the Notes, the obligations of the Seller, the Servicer and the Depositor
under the Transaction Documents and the Transaction;

          (ii) to discuss the affairs, finances and accounts of the Seller, the Servicer and the
Depositor with the Chief Operating Officer and the Chief Financial Officer of the Seller,
the Servicer and the Depositor; and

          (iii) with the Seller, the Servicer and the Depositor’s consent, to discuss the
affairs, finances and accounts of the Seller, the Servicer and the Depositor with the
Seller, the Servicer and the Depositor’s independent accountants, provided that an officer
of the Seller, the Servicer and 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 Seller, the Servicer and the Depositor.

               (f) Notice of Material Events. The Seller, the Servicer and the Depositor shall be
obligated promptly to inform the Insurer in writing of the occurrence of any of the following:

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          (i) the submission of any claim or the initiation or threat of any legal process,
litigation or administrative or judicial investigation, or rule making or disciplinary
proceeding by or against the Seller, the Servicer or the Depositor that (A) could be
required to be disclosed to the Commission or the Seller, the Servicer or the Depositor’s
shareholders or (B) would likely result in a Material Adverse Change with respect to the
Seller, the Servicer and the Depositor or, to their knowledge, the initiation of any
proceeding or the promulgation of any proposed or final rule which would likely result in a
Material Adverse Change with respect to the Seller, the Servicer or the Depositor;

          (ii) any change in (A) the location of the principal office of the Seller, the
Servicer or the Depositor, (B) the jurisdiction of organization or (C) its legal name;

          (iii) the occurrence of any Default or Event of Default involving the Seller, the
Servicer or the Depositor or any Material Adverse Change in respect of the Seller, the
Servicer or the Depositor;

          (iv) the commencement of any proceedings by or against the Seller, the Servicer or the
Depositor under any applicable 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 appointed for the
Seller, the Servicer or the Depositor or any of their assets; or

          (v) the receipt of notice that (A) any license, permit, charter, registration or
approval necessary for the conduct of the Seller, the Servicer or the Depositor’s business
are to be suspended or revoked and such supervision or revocation would result in a
Material Adverse Change or (B) the Seller, the Servicer or the Depositor are to cease and
desist any practice, procedure or policy employed by the Seller, the Servicer or the
Depositor in the conduct of its business, and such cessation may result in a Material
Adverse Change with respect to the Seller, the Servicer or the Depositor.

               (g) Financing Statements and Further Assurances. The Seller, the Servicer and the
Depositor will cause to be filed 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 and protect fully the interest of
(i) the Indenture Trustee in the assets of the Trust (as defined in the Sale and Servicing
Agreement) and (ii) the Indenture Trustee in the Collateral (as defined in the Indenture). In
addition, the Seller, the Servicer and the Depositor agree to cooperate with S&P and Moody’s in
connection with any review of the Transaction that may be undertaken by S&P and Moody’s after the
date hereof.

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               (h) Maintenance of Licenses. The Seller, the Servicer and the Depositor and any
successors thereof shall maintain all licenses, permits, charters and registrations which are
material to the conduct of their business.

               (i) Retirement of Notes. The Servicer shall instruct the Indenture Trustee, upon a
retirement or other payment of all of the Notes, to surrender the Note Policy to the Insurer for
cancellation.

               (j) [Reserved].

               (k) Disclosure Document. Each Offering Document delivered with respect to the Notes
shall clearly disclose that in the event that the Insurer were to become insolvent, any claims
arising under the Note Policy would be excluded from coverage by the California Insurance
Guaranty Association.

               (l) Third-Party Beneficiary. The Seller, the Servicer and the Depositor agree that
the Insurer shall have all rights of a third-party beneficiary in respect of the Transaction
Documents to which they are party to and hereby incorporate and restate their representations,
warranties and covenants as set forth therein for the benefit of the Insurer.

               (m) Servicing of Mortgage Loans. All Mortgage Loans will be serviced in compliance
with the Sale and Servicing Agreement.

               (n) Closing Documents. The Seller, the Servicer and the Depositor shall provide or
cause to be provided to the Insurer an executed original copy of each document executed in
connection with the Transaction within 30 Business Days after the date of closing.

               (o) Special Purpose Entity. In addition, the Depositor shall:

          (i) ensure that its capital is adequate for the business and undertakings of the Depositor;

          (ii) other than activities in connection with the Transaction, be restricted from undertaking
any activities other than purchasing financial assets and transferring the proceeds to other
special-purpose entities in connection with the issuance of other asset backed securities and
activities incidental to the foregoing;

          (iii) have at least one director, manager or member that is a person who is not, and will not
be, a director, officer, employee or holder of any equity securities of the Seller or any of its
affiliates or subsidiaries;

          (iv) not commingle its funds and assets with the funds of any other person; and

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          (v) maintain (A) correct and complete minute books and records of account, and (B) minutes of
the meetings and other proceedings of its board of managers, as provided in its articles of
incorporation.

          Section 2.03. Negative Covenants of the Seller, the Servicer and the Depositor. The
Seller, the Servicer and the Depositor hereby agree that during the term of this Insurance
Agreement, unless the Insurer shall otherwise expressly consent in writing:

               (a) Impairment of Rights. The Seller, the Servicer and the Depositor shall not take
any action, or fail to take any action, if such action or failure to take action may result in a
Material Adverse Change specified in clause (ii) of the definition of Material Adverse Change
with respect to the Seller, the Servicer or the Depositor, respectively, or may not interfere
with the enforcement of any rights of the Insurer under or with respect to any of the Transaction
Documents. The Seller, the Servicer and the Depositor shall give the Insurer written notice of
any such action or failure to act on the earlier of: (i) the date upon which any publicly
available filing or release is made with respect to such action or failure to act or (ii)
promptly prior to the date of consummation of such action or failure to act. The Seller, the
Servicer and the Depositor shall furnish to the Insurer all information requested by it that is
reasonably necessary to determine compliance with this paragraph.

               (b) Amendments, Etc. Unless otherwise provided in the Transaction Documents,
neither the Seller, the Servicer nor the Depositor shall modify or amend, or consent to any
modification or amendment of, any of the terms, provisions or conditions of the Transaction
Documents to which they are party, without the prior written consent of the Insurer thereto, but
excluding any amendment to the Offering Document required by law and excluding any modifications
or amendments to which Insurer’s consent is not required.

               (c) Limitation on Mergers, Etc. The Depositor shall not consolidate with or merge
with or into any Person or transfer all or substantially all of its assets to any Person or
liquidate or dissolve except as provided in the Sale and Servicing Agreement or as permitted
hereby. The Depositor shall furnish to the Insurer all information requested by it that is
reasonably necessary to determine compliance with this paragraph.

               (d) Successors. None of the Indenture Trustee, the Seller, the Servicer or the
Depositor shall terminate or designate, or consent to the termination or designation of, any
successor to the Servicer or the Indenture Trustee without the prior written approval of the
Insurer, which approval shall not be unreasonably withheld, conditioned or delayed.

          Section 2.04. [Reserved].

          Section 2.05. [Reserved].

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          Section 2.06. Representations and Warranties of the Issuer. The Issuer represents and
warrants as of the Closing Date as follows:

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

               (b) Power and Authority. The Issuer 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 of the Transaction
Documents to which it is a party by the Issuer has been duly authorized by all necessary action
and does not require any additional approvals or consents, or other action by or any notice to or
filing with any Person, including any governmental entity or any of the certificateholders of the
Issuer or the Owner Trustee, which have not previously been obtained or given.

               (d) Noncontravention. The execution and delivery by the Issuer of the Transaction
Documents to which it is a party, the consummation of the Transaction and the satisfaction of the
terms and conditions of the Transaction Documents do not and will not:

          (i) conflict with or result in any breach or violation of any provision of the trust
agreement of the Issuer or any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award currently in effect having applicability to the Issuer or
any of its respective material properties, including regulations issued by any
administrative agency or other governmental authority having supervisory powers over the
Issuer;

          (ii) constitute a default by the Issuer under, result in the acceleration of any
obligation under, or breach any provision of any loan agreement, mortgage, indenture or
other agreement or instrument to which the Issuer either is a party or by which any of its
properties s are or may be bound or affected; or

          (iii) result in or require the creation of any lien upon or in respect of any assets
of the Issuer, except as otherwise expressly contemplated by the Transaction Documents.

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               (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 Issuer,
any properties or rights of the Issuer pending or, to the Issuer’s knowledge after reasonable
inquiry, threatened, which, in any case, if decided adversely to the Issuer or any such
subsidiary could result in a Material Adverse Change with respect to the Issuer.

               (f) Valid and Binding Obligations. The Transaction Documents to which it is a
party, when executed and delivered by the Issuer, will constitute the legal, valid and binding
obligations of the Issuer, enforceable in accordance with their respective terms, except as such
enforceability may be limited by insolvency, reorganization, moratorium or other similar laws
affecting creditors` rights generally and general equitable principles and public policy
considerations as to rights of indemnification for violations of federal securities laws. The
Notes, when executed, authenticated and delivered in accordance with the Indenture and the Sale
and Servicing Agreement will be validly issued and outstanding and entitled to the benefits of
the Indenture and the Sale and Servicing Agreement. The Issuer will not at any time in the
future deny that the Transaction Documents to which it is a party constitute the legal, valid and
binding obligations of the Issuer.

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

               (h) Taxes. The Issuer has filed prior to the date hereof all federal and state tax
returns that are required to be filed and has paid all taxes, including any assessments received
by it that are not being contested in good faith, to the extent that such taxes have become due.
Any taxes, fees and other governmental charges payable by the Issuer in connection with the
Transaction, the execution and delivery of the Transaction Documents and the issuance of the
Notes have been paid or shall have been paid at or prior to the Closing Date.

               (i) Accuracy of Information. Neither the Transaction Documents to which it is a
party nor other information relating to the Mortgage Loans, the operations of the Issuer or the
financial condition of the Issuer (collectively, the “Issuer Documents”), as amended,
supplemented or superseded, furnished to the Insurer by the Issuer contains any statement of a
material fact which was untrue or misleading in any material respect when made. The Issuer has
no knowledge of any circumstances that could reasonably be expected to cause a Material Adverse
Change with respect to the Issuer. Since the furnishing of the Issuer Documents, there has been
no change nor any development or event involving a prospective change is known to the Issuer that
would render any of the Issuer Documents untrue or misleading in any material respect.

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               (j) Compliance With Securities Laws. The offer and sale of the Notes comply in all
material respects with all requirements of law, including all registration requirements of
applicable securities laws. Without limiting the foregoing, the Offering Document does not
contain any untrue statement of a material fact and does note omit to state a material fact
necessary to make the statements made therein, in light of the circumstances under which they
were made, not misleading; provided, however, that no representation is made with respect to the
Insurer Information or with respect to the Underwriter Information. Neither the offer nor sale
of the Notes by the Issuer has been or will be in violation of the Securities Act or any other
federal or state securities laws. The Indenture has been qualified under the TIA. The Issuer is
not required to be registered as an “investment company” under the Investment Company Act. The
Issuer will satisfy any of the information reporting requirements of the Securities Exchange Act
arising out of the Transaction to which it or the Trust Fund are subject.

               (k) Transaction Documents. Each of the representations and warranties of the Issuer
contained in the Transaction Documents to which it is a party is true and correct in all material
respects and the Issuer hereby makes each such representation and warranty to, and for the
benefit of, the Insurer as if the same were set forth in full herein.

               (l) Solvency; Fraudulent Conveyance. The Issuer is solvent and will not be rendered
insolvent by the Transaction and, after giving effect to the Transaction, the Issuer will not be
left with an unreasonably small amount of capital with which to engage in its business, and the
Issuer does not intend to incur, or believe that it has incurred, debts beyond its ability to pay
as they mature. The Issuer does not contemplate the commencement of insolvency, liquidation or
consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or
similar official in respect of the Issuer or any of their assets. The Issuer is not pledging the
Mortgage Loans to the Indenture Trustee or selling the Notes, as provided in the Transaction
Documents, with any intent to hinder, delay or defraud any of the Issuer’s creditors.

               (m) Principal Place of Business. The principal place of business of the Issuer is
Wilmington, Delaware.

          Section 2.07. Affirmative Covenants of the Issuer. The Issuer hereby agrees that
during the term of this Insurance Agreement, unless the Insurer shall otherwise expressly consent
in writing:

               (a) Compliance With Agreements and Applicable Laws. The Issuer shall comply with
the terms and conditions of and perform its respective obligations under the Transaction
Documents to which it is a party in all cases in which failure to so comply or perform would
result in a default thereunder and shall comply with all material requirements of any law, rule
or regulation applicable to it.

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               (b) Existence. The Issuer and its successors and permitted assigns shall maintain
its existence and shall at all times continue to be duly organized under the laws of the State of
Delaware and duly qualified and duly authorized (as described in subsections 2.06(a), (b) and (c)
hereof) and shall conduct its business in accordance with the terms of its trust agreement.

               (c) Books and Records; Other Information. The Issuer shall keep or cause to be kept
in reasonable detail books and records relating to the Transaction, and shall clearly reflect
therein the pledge of the Collateral to the Indenture Trustee as a pledge of the Issuer’s
interest in the Collateral to secure the Issuer’s obligations to the Indenture Trustee under the
Indenture. The Issuer shall furnish or cause to be furnished to the Insurer:

          (i) Certain Information. Upon the reasonable request of the Insurer, copies
of any requested financial statements, reports and registration statements that the Issuer
files with, or delivers to, the Commission or any national securities exchange, if any.

          (ii) Other Information. (A) Promptly upon receipt thereof, copies of all
schedules, financial statements or other similar reports delivered to the Issuer, pursuant
to the terms of each of the Transaction Documents, (B) promptly upon request, such other
data as the Insurer may reasonably request and (C) all information required to be furnished
to the Indenture Trustee or to the holders of the Notes simultaneously with the furnishing
thereof to the Indenture Trustee or the Holders of the Notes, as the case may be; provided,
however, that the Issuer shall not be required to deliver and such items listed in (A) or
(B) if provision by another party to the Insurer is required under the Transaction
Documents, unless such other party fails to deliver such items.

               (d) Access to Records; Discussions with Officers and Accountants. On an annual
basis, or upon the occurrence of a Material Adverse Change, the Issuer shall, upon the reasonable
request of the Insurer, permit the Insurer or its authorized agents:

          (i) to inspect the books and records of the Issuer as they may relate to the Notes,
the Collateral, the Mortgage Loans, the obligations of the Issuer under the Transaction
Documents and the Transaction;

          (ii) to discuss the affairs, finances and accounts of the Issuer with the Insurer; and

          (iii) to discuss the affairs, finances and accounts of the Issuer with the Issuer’s
independent accountants, provided that an officer of the Issuer, or the Administrator on
its behalf, 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 Issuer.

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               (e) Notice of Material Events. The Issuer shall be obligated promptly to inform the
Insurer 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, or rule making or disciplinary
proceeding by or against the Issuer that (A) could be required to be disclosed to the
Commission or the Issuer’s certificateholders or (B) would likely result in a Material
Adverse Change with respect to the Issuer, or the promulgation of any proceeding or any
proposed or final rule which would likely result in a Material Adverse Change with respect
to the Issuer;

          (ii) any change in the location of the principal office of the Issuer;

          (iii) the occurrence of any Default or Event of Default any Material Adverse Change in
respect of the Issuer;

          (iv) the commencement of any proceedings by or against the Issuer under any applicable
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
Issuer or any of their assets; or

          (v) the receipt of notice that (A) any license, permit, charter, registration or
approval necessary for the conduct of the Issuer’s business is to be, or may be suspended
or revoked or (B) the Issuer is to cease and desist any practice, procedure or policy
employed by the Issuer in the conduct of its business, and such cessation may result in a
Material Adverse Change with respect to the Issuer.

               (f) Financing Statements and Further Assurances. The Issuer will cause to be filed
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 and protect fully the interest of the Indenture Trustee in the
Collateral. The Issuer shall, upon the request of the Insurer, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered, within ten 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. In addition, the Issuer agrees to cooperate with S&P and Moody’s in
connection with any review of the Transaction that may be undertaken by S&P and Moody’s after the
date hereof.

               (g) Maintenance of Licenses. The Issuer and any successors thereof shall maintain
all licenses, permits, charters and registrations which are material to the conduct of its
business.

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               (h) Retirement of Notes. The Issuer shall instruct the Indenture Trustee, upon a
retirement or other payment of all of the Notes, to surrender the Note Policy to the Insurer for
cancellation.

               (i) Disclosure Document. Each Offering Document delivered with respect to the Notes
shall clearly disclose that in the event that the Insurer were to become insolvent, any claims
arising under the Note Policy would be excluded from coverage by the California Insurance
Guaranty Association.

               (j) Third-Party Beneficiary. The Issuer agrees that the Insurer shall have all
rights of a third-party beneficiary in respect of the Transaction Documents to which it is a
party and hereby incorporates and restates its representations, warranties and covenants as set
forth therein for the benefit of the Insurer.

          Section 2.08. Negative Covenants of the Issuer. The Issuer hereby agrees that during
the term of this Insurance Agreement, unless the Insurer shall otherwise expressly consent in
writing:

               (a) Impairment of Rights. The Issuer shall not take any action, or fail to take any
action, if such action or failure to take action may result in a Material Adverse Change
specified in clause (ii) of the definition of Material Adverse Change with respect to the Issuer,
respectively, or may not interfere with the enforcement of any rights of the Insurer under or
with respect to any of the Transaction Documents. The Issuer shall give the Insurer written
notice of any such action or failure to act on the earlier of: (i) the date upon which any
publicly available filing or release is made with respect to such action or failure to act or
(ii) promptly prior to the date of consummation of such action or failure to act. The Issuer
shall furnish to the Insurer all information requested by it that is reasonably necessary to
determine compliance with this paragraph.

               (b) Amendments, Etc. The Issuer shall not modify or amend, or consent to any
modification or amendment of, any of the terms, provisions or conditions of the Transaction
Documents to which it is a party without the prior written consent of the Insurer thereto, but
excluding any amendment to the Offering Document required by law and excluding any modifications
or amendments to which Insurer’s consent is not required.

               (c) Limitation on Mergers, Etc. The Issuer shall not consolidate with or merge with
or into any Person or transfer all or substantially all of its assets to any Person or liquidate
or dissolve except as provided in the Indenture or as permitted hereby. The Issuer shall furnish
to the Insurer all information requested by it that is reasonably necessary to determine
compliance with this paragraph.

          Section 2.09. Representations and Warranties of the Insurer. The Insurer represents
and warrants to the Seller, the Servicer, the Depositor and the Issuer as follows:

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               (a) Organization and Licensing. The Insurer is a duly organized and validly
existing Wisconsin-domiciled stock insurance company duly qualified to conduct an insurance
business in the State of New York.

               (b) Corporate Power. The Insurer has the corporate power and authority to issue the
Note Policy and execute and deliver this Insurance Agreement and to perform all of its
obligations hereunder and thereunder.

               (c) Authorization; Approvals. Proceedings legally required for the issuance of the
Note Policy and the execution, delivery and performance of this Insurance Agreement have been
taken and all licenses, orders, consents or other authorizations or approvals of the Insurer’s
Board of Directors or stockholders or any governmental boards or bodies legally required for the
enforceability of the Note Policy have been obtained; any proceedings not taken and any licenses,
authorizations or approvals not obtained are not material to the enforceability of the Note
Policy.

               (d) Enforceability. The Note Policy, when issued, and this Insurance Agreement will
each constitute a legal, valid and binding obligation of the Insurer, enforceable in accordance
with its terms, subject to insolvency, reorganization, moratorium, receivership and other similar
laws affecting creditors’ rights generally and by general principles of equity and subject to
principles of public policy limiting the right to enforce the indemnification provisions
contained therein and herein, insofar as such provisions relate to indemnification for
liabilities arising under federal securities laws.

               (e) Financial Information. The consolidated financial statements of the Insurer and
subsidiaries as of December 31, 2003 and December 31, 2002 and for each of the years in the
three-year period ended December 31, 2003, prepared in accordance with accounting principles
generally accepted in the United States of America, included in the Annual Report on Form 10-K of
Ambac Financial Group, Inc. (which was filed with the Commission on March 15, 2004; Commission
File No. 1-10777); the unaudited consolidated financial statements of the Insurer and
subsidiaries as of March 31, 2004 and for the periods ending March 31, 2004 and March 31, 2003
included in the Quarterly Report on Form 10-Q of Ambac Financial Group, Inc. for the period ended
March 31, 2004 (which was filed with the Commission on May 10, 2004); the unaudited consolidated
financial statements of the Insurer and subsidiaries as of June 30, 2004 and for the three and
six month periods ended June 30, 2004 and June 30, 2003 included in the Quarterly Report on Form
10-Q of Ambac Financial Group, Inc. for the period ended June 30, 2004 (which was filed with the
Commission on August 9, 2004); the unaudited consolidated financial statements of the Insurer and
subsidiaries as of September 30, 2004 and for the three and nine month periods ended September
30, 2004 and September 30, 2003 included in the Quarterly Report on Form 10-Q of Ambac Financial
Group, Inc. for the period ended September 30, 2004 (which was filed with the Commission on
November 9, 2004) and the Current Reports on Form 8-K filed with the Commission on April 22,
2004, July 22, 2004, August 20, 2004, October 20, 2004 and November 12, 2004 as they relate to
the Insurer, are hereby incorporated by reference in the Offering

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Document and fairly present in all material respects the financial condition of the Insurer
as of such dates and for the periods covered by such statements in accordance with accounting
principles generally accepted in the United States of America. Since September 30, 2004, there
has been no material change with respect to financial condition of the Insurer that would
materially and adversely affect its ability to perform its obligations under the Note Policy.

               (f) Insurer Information. The Insurer Information is true and correct in all
material respects and does not contain any untrue statement of a material fact.

               (g) No Litigation. There are no actions, suits, proceedings or investigations
pending or, to the best of the Insurer’s knowledge, threatened against it at law or in equity or
before or by any court, governmental agency, board or commission or any arbitrator which, if
decided adversely, would result in a Material Adverse Change or would materially and adversely
affect its ability to perform its obligations under the Note Policy or this Insurance Agreement.

               (h) The execution by the Insurer of this Insurance Agreement will not, and the satisfaction
of the terms hereof will not, conflict with or result in a breach of any of the terms, conditions
or provisions of the Certificate of Incorporation or By-Laws of the Insurer, or any restriction
contained in any contract, agreement or instrument to which the Insurer is a party or by which it
is bound or constitute a default under any of the foregoing.

               (i) Rating. The Insurer is not aware of any facts that if disclosed to Moody’s or
S&P would be reasonably expected to result in a downgrade of the rating of the financial strength
rating of the Insurer by either of such Rating Agencies.

               (j) Securities Act Registration. The Note Policy is exempt from registration under
the Securities Act.

ARTICLE III

THE NOTE POLICY; REIMBURSEMENT

          Section 3.01. Issuance of the Note Policy. The Insurer agrees to issue the Note
Policy on the Closing Date subject to satisfaction of the conditions precedent set forth below:

               (a) Payment of Initial Premium and Expenses. The Insurer shall have been paid by
the Seller the fees and expenses payable on the Closing Date in accordance with Section 3.02;

               (b) Transaction Documents. The Insurer shall have received a copy of each of the
Transaction Documents, in form and substance reasonably satisfactory to the Insurer, duly
authorized, executed and delivered by each party thereto;

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               (c) Certified Documents and Resolutions. The Insurer shall have received (i) a copy
of the organizational documents of the Seller, the Servicer, the Depositor and the Issuer and
(ii) a certificate of the Secretary or Assistant Secretary of the Seller, the Servicer and the
Depositor stating that attached thereto is a true, complete and correct copy of resolutions duly
adopted by the Board of Directors or a duly authorized Committee of the Seller, the Servicer and
the Depositor authorizing the issuance of the Notes, the execution, delivery and performance by
the Seller, the Servicer and the Depositor of the Transaction Documents to which they are party
and the consummation of the Transaction and that such organizational documents and resolutions
are in full force and effect without amendment or modification on the Closing Date;

               (d) Incumbency Certificate. The Insurer shall have received a certificate of the
Secretary or an Assistant Secretary of the Seller, the Servicer and the Depositor certifying the
names and signatures of the officers of the Seller, the Servicer and the Depositor authorized to
execute and deliver the Transaction Documents to which they are party;

               (e) Representations and Warranties; Certificate. The representations and warranties
of the Seller, the Servicer, the Depositor and the Issuer set forth or incorporated by reference
in this Insurance Agreement shall be true and correct on and as of the Closing Date as if made on
the Closing Date, and the Insurer shall have received a certificate of appropriate officers of
the Seller, the Servicer, the Depositor and the Issuer to that effect;

               (f) Opinions of Counsel. The Insurer shall have received all opinions of counsel
addressed to any of Moody’s, S&P, the Indenture Trustee, the Depositor, the Seller, the Servicer
and the Underwriters, the other parties to the Transaction Documents and the Transaction in form
and substance reasonably satisfactory to the Insurer, addressed to the Insurer and addressing
such matters as the Insurer 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. The Insurer shall have received true and correct copies of all
approvals, licenses and consents, if any, including any required approval of the shareholders of
the Seller, the Servicer and the Depositor, required in connection with the Transaction;

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

               (i) Legality. No statute, rule, regulation or order shall have been enacted,
entered or deemed applicable by any government or governmental or

23

 

administrative agency or court that would make the Transaction illegal or otherwise prevent
the consummation thereof;

               (j) Satisfaction of Conditions of the Underwriting Agreement. All conditions in the
Underwriting Agreement relating to the Underwriters’ obligation to purchase the Notes shall have
been satisfied, without taking into account any waiver by the Underwriters of any condition
unless such waiver has been approved by the Insurer. The Insurer shall have received copies of
each of the documents, and shall be entitled to rely on each of the documents, required to be
delivered to the Underwriters pursuant to the Underwriting Agreement;

               (k) Issuance of Ratings. The Insurer shall have received confirmation that the risk
secured by the Note Policy constitutes at least a “BBB” risk by S&P and at least a “Baa2” risk by
Moody’s and that the Notes, when issued, will be rated “AAA” by S&P and “Aaa” by Moody’s,
respectively;

               (l) No Default. No Default or Event of Default shall have occurred;

               (m) Additional Items. The Insurer shall have received such other documents,
instruments, approvals or opinions reasonably requested by the Insurer as may be reasonably
necessary to effect the Transaction, including evidence reasonably satisfactory to the Insurer
that the conditions precedent, if any, in the Transaction Documents have been satisfied; and

               (n) Satisfactory Documentation. The Insurer and its counsel shall have reasonably
determined that all documents, certificates and opinions to be delivered in connection with the
Notes conform to the terms of Transaction Documents and the Offering Document.

          Section 3.02. Payment of Fees and Premium. (a) Legal and Accounting Fees.
The Seller shall pay or cause to be paid, on the Closing Date, legal fees, auditors fees and
appraisal fees in connection with the provision of information or any consent in connection with
the Offering Document and disbursements in an amount set forth in the Ambac Premium Letter,
incurred by the Insurer in connection with the issuance of the Note Policy. Any additional fees of
the Insurer’s auditors payable in respect of any amendment or supplement to the Offering Document
incurred after the Closing Date shall be paid by the Seller on demand.

               (b) Rating Agency Fees. The Seller shall promptly pay the initial fees of S&P and
Moody’s with respect to the Notes and the transactions contemplated hereby following receipt of a
statement with respect thereto. All periodic and subsequent fees of S&P or Moody’s with respect
to, and directly allocable to, the Notes shall be for the account of, and shall be billed to the
Seller. The fees for any other rating agency shall be paid by the party requesting such other
agency’s rating.

               (c) Premium.

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          (i) In consideration of the issuance by the Insurer of the Note Policy, the Insurer
shall be entitled to receive the Premium with respect to the Note Policy as and when due in
accordance with and from the funds specified in Section 5.01(a) of the Sale and Servicing
Agreement.

          (ii) The Premium shall be nonrefundable without regard to whether any Notice for
Payment is delivered to the Insurer requiring the Insurer to make any payment under the
Note Policy or any other circumstances relating to the Notes or provision being made for
payment of the Notes prior to maturity. The Premium due on each Payment Date or
Distribution Date, as the case may be, shall be an amount equal to the product of (1) the
fraction, expressed as a percentage, the numerator of which is the number of days elapsed
from the last Payment Date or Distribution Date to the current Payment Date or Distribution
Date and the denominator of which is 360, (2) the Premium Percentage and (3) the aggregate
Note Balance of the Notes after giving effect to any distributions of principal to be made
on the Notes on such Payment Date; provided that the initial Premium will be equal to the
amount set forth in the Ambac Premium Letter.

          Section 3.03. Reimbursement Obligation. (a) As and when due in accordance with and
from the funds specified in Section 5.01(a)(I)(vii) and (ix) of the Sale and Servicing Agreement,
the Insurer shall be entitled to reimbursement for the sum of (i) any payment made by the Insurer
under the Note Policy, which reimbursement shall be due and payable on the date that any amount is
paid thereunder, in an amount equal to the amount to be so paid and all amounts previously paid
that remain unreimbursed, and (ii) the amounts set forth in paragraphs (b) and (c) below, together
in each case with interest on any and all amounts remaining unreimbursed (to the extent permitted
by law, if in respect of any unreimbursed amounts representing interest) from the date such amounts
became due until paid in full (after as well as before judgment), at a rate of interest equal to
the Late Payment Rate.

               (b) The Seller, the Servicer, the Depositor and the Issuer agree to pay to the Insurer as
follows: any and all charges, fees, costs and expenses that the Insurer may reasonably pay or
incur, including reasonable attorneys’ and accountants’ fees and expenses, in connection with (i)
the 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 proceeding in respect of any Transaction participant or any affiliate
thereof) relating to any of the Transaction Documents, any party to any of the Transaction
Documents (in its capacity as such a party) or the Transaction, or (ii) any amendment, waiver or
other action with respect to, or related to, any Transaction Document, whether or not executed or
completed.

               (c) In addition to the Insurer’s right to payment and reimbursement as set forth in Section
3.03(a) and (b), the Seller, the Servicer and the Depositor agree to reimburse the Insurer (or
the Trust Fund, to the extent the Insurer has previously been reimbursed for such amount pursuant
to Section 3.03(a)) as follows: (i) from the Seller, the Servicer and the Depositor, for payments
made under the Note Policy,

25

 

arising as a result of the Servicer’s failure to deposit into the Collection Account or the
Payment Account any amount required to be so deposited pursuant to the Sale and Servicing
Agreement together with interest on any and all amounts remaining unreimbursed (to the extent
permitted by law, if in respect to any unreimbursed amounts representing interest) from the date
such amounts became due until paid in full (after as well as before judgment), at a rate of
interest equal to the Late Payment Rate and (ii) from the Seller, the Servicer and the Depositor,
for payments made under the Policy arising as a result of the Seller’s failure to repurchase any
Mortgage Loan required to be repurchased pursuant to Section 3.01 of the Mortgage Loan Purchase
Agreement and Section 2.04 of the Sale and Servicing Agreement together with interest on any and
all amounts remaining unreimbursed (to the extent permitted by law, if in respect of any
unreimbursed amounts representing interest) from the date such amounts became due until paid in
full (after as well as before judgment), at a rate of interest equal to the Late Payment Rate.

               (d) The Seller, the Servicer and the Depositor agree to pay to the Insurer as follows:
interest on any and all amounts described in subclauses (b) and (c) of this Section 3.03 from the
date payable or paid by such party until payment thereof in full, and interest on any and all
amounts described in Section 3.02(a) and (b) from the date due until payment thereof in full and
interest on any and all amounts described in Section 3.04 from the date due until payment thereof
in full, in each case, payable to the Insurer at the Late Payment Rate.

          Section 3.04. Indemnification. (a) In addition to any and all of the Insurer’s rights
of reimbursement, indemnification, subrogation and to any other rights of the Insurer pursuant
hereto or under law or in equity, the Seller, the Servicer and the Depositor agree to pay, and to
protect, indemnify and hold harmless, the Insurer and its officers, directors, shareholders,
employees, agents and each Person, if any, who controls the Insurer within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act from and against, any
and all claims, losses, liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including reasonable fees and expenses of attorneys, consultants and
auditors and reasonable costs of investigations) of any nature arising out of or relating to the
Transactions by reason of:

          (i) any omission or action (other than of or by the Insurer or the Underwriters and
other than any omission or action which is expressly required by the Seller, the Servicer
and the Depositor in the Transaction Documents) in connection with the offering, issuance,
sale or delivery of any of the Notes by the Seller, the Servicer and the Depositor;

          (ii) the negligence, bad faith, willful misconduct, misfeasance, malfeasance or theft
committed by any director, officer, employee or agent of the Seller, the Servicer or the
Depositor in connection with any Transaction arising from or relating to the Transaction
Documents;

26

 

          (iii) the violation by the Seller, the Servicer or the Depositor of any domestic or
foreign law, rule or regulation, or any judgment, order or decree applicable to it;

          (iv) the breach by the Seller, the Servicer or the Depositor of any representation,
warranty or covenant under any of the Transaction Documents or the occurrence, in respect
of the Servicer, under any of the Transaction Documents of any “Event of Servicing
Termination” or any event which, with the giving of notice or the lapse of time or both,
would constitute an “Event of Servicing Termination”; or

          (v) any untrue statement or alleged untrue statement of a material fact contained in
any Offering Document or the Registration Statement or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading, except insofar as such claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses (including reasonable fees
and expenses of attorneys, consultants and auditors and reasonable costs of investigations)
arise out of or are based upon any untrue statement or omission in the Insurer Information
or the Underwriter Information.

               (b) The Insurer agrees to pay, and to protect, indemnify and hold harmless, the Seller, the
Servicer and the Depositor and their respective officers, directors, shareholders, employees,
agents and each Person, if any, who controls the Seller, the Servicer and the Depositor within
the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange
Act from and against, any and all claims, losses, liabilities (including penalties), actions,
suits, judgments, demands, damages, costs or expenses (including reasonable fees and expenses of
attorneys, consultants and auditors and reasonable costs of investigations) of any nature arising
out of or by reason of any untrue statement or alleged untrue statement of a material fact
contained in the information furnished by the Insurer in writing expressly for use in the
Offering Document (all such information so furnished being referred to herein as “Insurer
Information”), it being understood that, in respect of the initial Offering Document, the
Insurer Information is limited to the information with respect to the Insurer included under the
caption “The Surety Provider” and “Description of the Notes—The Note Policy,” or any omission or
alleged omission to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were made, not
misleading.

               (c) If any action or proceeding (including any governmental investigation) shall be brought
or asserted against any Person (individually, an “Indemnified Party” and, collectively,
the “Indemnified Parties”) in respect of which the indemnity provided in Section 3.04(a)
or (b) may be sought from the Seller, the Servicer and the Depositor, on the one hand, or the
Insurer, on the other (each, an “Indemnifying Party”) hereunder, each such Indemnified
Party shall promptly notify the Indemnifying Party in writing, and the Indemnifying Party shall
assume the

27

 

defense thereof, including the employment of counsel satisfactory to the Indemnified Party
and the payment of all expenses. The Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof at the expense of the
Indemnified Party; provided, however, that the fees and expenses of such separate counsel shall
be at the expense of the Indemnifying Party if (i) the Indemnifying Party has agreed to pay such
fees and expenses, (ii) the Indemnifying Party shall have failed to assume the defense of such
action or proceeding and employ counsel reasonably satisfactory to the Indemnified Party in any
such action or proceeding or (iii) the named parties to any such action or proceeding (including
any impleaded parties) include both the Indemnified Party and the Indemnifying Party, and the
Indemnified Party shall have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to the Indemnifying
Party (in which case, if the Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the Indemnifying
Party shall not have the right to assume the defense of such action or proceeding on behalf of
such Indemnified Party, it being understood, however, that the Indemnifying Party shall not, in
connection with any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for the Indemnified Parties, which firm shall be
designated in writing by the Indemnified Party). The Indemnifying Party shall not be liable for
any settlement of any such action or proceeding effected without its written consent to the
extent that any such settlement shall be prejudicial to the Indemnifying Party, but, if settled
with its written consent, or if there is a final judgment for the plaintiff in any such action or
proceeding with respect to which the Indemnifying Party shall have received notice in accordance
with this subsection (c), the Indemnifying Party agrees to indemnify and hold the Indemnified
Parties harmless from and against any loss or liability by reason of such settlement or judgment.

               (d) To provide for just and equitable contribution if the indemnification provided by the
Indemnifying Party is determined to be unavailable or insufficient to hold harmless any
Indemnified Party (other than due to application of this Section), each Indemnifying Party shall
contribute to the losses incurred by the Indemnified Party on the basis of the relative fault of
the Indemnifying Party, on the one hand, and the Indemnified Party, on the other hand. The
relative fault of each Indemnifying Party, on the one hand, and each Indemnified Party, on the
other, shall be determined by reference to, among other things, whether the breach of, or alleged
breach of, any of its representations and warranties set forth are within the control of, the
Indemnifying Party or the Indemnified Party, and the parties relative intent, knowledge, access
to information and opportunity to correct or prevent such breach.

          No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.

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          Section 3.05. Indemnification with respect to the Issuer. (a) In addition to any and
all of the Insurer’s rights of reimbursement, indemnification, subrogation and to any other rights
of the Insurer pursuant hereto or under law or in equity, the Issuer agrees to pay, and to protect,
indemnify and hold harmless, the Insurer and its officers, directors, shareholders, employees,
agents and each Person, if any, who controls the Insurer within the meaning of either Section 15 of
the Securities Act or Section 20 of the Securities Exchange Act from and against, any and all
claims, losses, liabilities (including penalties), actions, suits, judgments, demands, damages,
costs or expenses (including reasonable fees and expenses of attorneys, consultants and auditors
and reasonable costs of investigations) of any nature arising out of or relating to the
transactions contemplated by the Transaction Documents by reason of:

          (i) any omission or action in connection with the offering, issuance, sale or delivery
of any of the Notes by the Issuer;

          (ii) the negligence, bad faith, willful misconduct, misfeasance, malfeasance or theft
committed by any director, officer, employee or agent of the Issuer in connection with any
Transaction arising from or relating to the Transaction Documents;

          (iii) the violation by the Issuer of any domestic or foreign law, rule or regulation,
or any judgment, order or decree applicable to it;

          (iv) the breach by the Issuer of any representation, warranty or covenant under any of
the Transaction Documents or the occurrence, in respect of the Issuer 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; or

          (v) any untrue statement or alleged untrue statement of a material fact contained in
any Offering Document or the Registration Statement or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made, not
misleading, insofar as such claims, losses, liabilities (including penalties), actions,
suits, judgments, demands, damages, costs or expenses (including reasonable fees and
expenses of attorneys, consultants and auditors and reasonable costs of investigations)
arise out of or are based upon any untrue statement in the Offering Document or the
Registration Statement other than in the Insurer Information and the Underwriter
Information.

               (b) The Insurer agrees to pay, and to protect, indemnify and save harmless the Issuer and
its respective officers, directors, shareholders, employees, agents and each Person, if any, who
controls the Issuer within the meaning of either Section 15 of the Securities Act or Section 20
of the Securities Exchange Act from and against, any and all claims, losses, liabilities
(including penalties), actions, suits, judgments, demands, damages, costs or expenses (including
reasonable fees and expenses of attorneys, consultants and auditors and reasonable costs of
investigations)

29

 

of any nature arising out of or by reason of any untrue statement or alleged untrue
statement of a material fact contained in Insurer Information, or any omission or alleged
omission to state in the Insurer Information a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances under which they were
made, not misleading.

               (c) If any action or proceeding (including any governmental investigation) shall be brought
or asserted against any Person (an “Indemnified Party”) in respect of which the indemnity
provided in Section 3.05(a) or (b) may be sought from the Issuer, on the one hand, or the
Insurer, on the other (each, an “Indemnifying Party”) hereunder, each such Indemnified
Party shall promptly notify the Indemnifying Party in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel satisfactory to the Indemnified
Party and the payment of all expenses. The Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof at the expense of
the Indemnified Party; provided, however, that the fees and expenses of such separate counsel
shall be at the expense of the Indemnifying Party if (i) the Indemnifying Party has agreed to pay
such fees and expenses, (ii) the Indemnifying Party shall have failed to assume the defense of
such action or proceeding and employ counsel reasonably satisfactory to the Indemnified Party in
any such action or proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnified Party and the Indemnifying Party,
and the Indemnified Party shall have been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to those available to the
Indemnifying Party (in which case, if the Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of such action or proceeding on
behalf of such Indemnified Party, it being understood, however, that the Indemnifying Party shall
not, in connection with any one such action or proceeding or separate but substantially similar
or related actions or proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of more than one
separate firm of attorneys at any time for the Indemnified Party, which firm shall be designated
in writing by the Indemnified Party). The Indemnifying Party shall not be liable for any
settlement of any such action or proceeding effected without its written consent to the extent
that any such settlement shall be prejudicial to the Indemnifying Party, but, if settled with its
written consent, or if there is a final judgment for the plaintiff in any such action or
proceeding with respect to which the Indemnifying Party shall have received notice in accordance
with this subsection (c), the Indemnifying Party agrees to indemnify and hold the Indemnified
Parties harmless from and against any loss or liability by reason of such settlement or judgment.

               (d) To provide for just and equitable contribution if the indemnification provided by the
Indemnifying Party is determined to be unavailable or insufficient to hold harmless any
Indemnified Party (other than due to application of this Section), the 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

30

 

one hand, and the Indemnified Party, on the other hand. The relative fault of the
Indemnifying Party, on the one hand, and the Indemnified Party, on the other, shall be determined
by reference to, among other things, whether the breach of, or alleged breach of, any of its
representations and warranties set forth are within the control of, the Indemnifying Party or the
Indemnified Party, and the parties relative intent, knowledge, access to information and
opportunity to correct or prevent such breach.

          No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Act) shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.

          Section 3.06. Payment Procedure. In the event of any payment by the Insurer, the
Indenture Trustee, the Seller, the Servicer, the Depositor and the Issuer agree to accept the
voucher or other evidence of payment as prima facie evidence of the propriety
thereof and the liability, if any, described in Section 3.03 therefor to the Insurer. All payments
to be made to the Insurer under this Insurance Agreement shall be made to the Insurer in lawful
currency of the United States of America in immediately available funds at the notice address for
the Insurer as specified in the Sale and Servicing Agreement and the Indenture on the date when due
or as the Insurer shall otherwise direct by written notice to the other parties hereto. In the
event that the date of any payment to the Insurer or the expiration of any time period hereunder
occurs on a day that is not a Business Day, then such payment or expiration of time period shall be
made or occur on the next succeeding Business Day with the same force and effect as if such payment
was made or time period expired on the scheduled date of payment or expiration date.

ARTICLE IV

FURTHER AGREEMENTS

          Section 4.01. Effective Date; Term of the Insurance Agreement. This Insurance
Agreement shall take effect on the Closing Date and shall remain in effect until the later of (a)
such time as the Insurer is no longer subject to a claim under the Note Policy and the Note Policy
shall have been surrendered to the Insurer for cancellation and (b) all amounts payable to the
Insurer by the Seller, the Servicer, the Depositor and the Issuer hereunder or from any other
source hereunder or under the Transaction Documents and all amounts payable under the Notes have
been paid in full; provided, however, that the provisions of Sections 3.02, 3.03, 3.04 and 3.05
hereof shall survive any termination of this Insurance Agreement.

          Section 4.02. Further Assurances and Corrective Instruments. (a) Except at such times
as an Insurer Default (as defined in the Indenture) shall exist or shall have occurred, neither the
Seller, the Servicer, the Depositor, the Issuer nor the Indenture Trustee shall grant any waiver of
rights under any of the Transaction Documents to which any of them is a party without the prior
written consent of the Insurer, which shall not be unreasonably withheld, conditioned or delayed
and any such waiver without prior written consent of the Insurer shall be null and void and of no
force or effect.

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               (b) To the extent permitted by law, the Seller, the Servicer, the Depositor and the Issuer
agree that each will, from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, such supplements hereto and such further instruments as the
Insurer may reasonably request and as may be required in the Insurer’s reasonable judgment to
effectuate the intention of or facilitate the performance of this Insurance Agreement.

          Section 4.03. Obligations Absolute. (a) The obligations of the Seller, the Servicer,
the Depositor and the Issuer hereunder shall be absolute and unconditional and shall be paid or
performed strictly in accordance with this Insurance 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 or the Notes;

          (ii) any exchange or release of any other obligations hereunder;

          (iii) the existence of any claim, setoff, defense, reduction, abatement or other right
that the Seller, the Servicer, the Depositor and the Issuer may have at any time against
the Insurer or any other Person;

          (iv) any document presented in connection with the Note Policy proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;

          (v) any payment by the Insurer under the Note Policy against presentation of a
certificate or other document that does not strictly comply with terms of the Note Policy;

          (vi) any failure of the Seller, the Servicer and the Depositor to receive the proceeds
from the sale of the Notes; and

          (vii) any other circumstances, other than payment in full, that might otherwise
constitute a defense available to, or discharge of, the Seller, the Servicer, the Depositor
or the Issuer in respect of any Transaction Document.

               (b) The Seller, the Servicer, the Depositor, the Issuer, and any and all others who are now
or may become liable for all or part of the obligations of the Seller, the Servicer, the
Depositor or the Issuer under this Insurance Agreement agree to be bound by this Insurance
Agreement and (i) to the extent permitted by law, waive and renounce any and all redemption and
exemption rights and the benefit of all valuation and appraisement privileges against the
indebtedness and obligations evidenced by any Transaction Document or by any extension or renewal
thereof; (ii) waive presentment and demand for payment, notices of nonpayment and of dishonor,
protest of dishonor and notice of protest; (iii) waive all notices in connection with the
delivery and acceptance hereof and all other notices in connection with the performance, default
or enforcement of any payment hereunder, except as required by

32

 

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 Seller, the Servicer or the Depositor;
(v) agree that its liabilities hereunder shall, except as otherwise expressly provided in this
Section 4.03, be unconditional and without regard to any setoff, counterclaim or the liability of
any other Persons for the payment hereof; (vi) agree that any consent, waiver or forbearance
hereunder with respect to an event shall operate only for such event and not for any subsequent
event; (vii) consent to any and all extensions of time that may be granted by the Insurer with
respect to any payment hereunder or other provisions hereof and to the release of any security at
any time given for any payment hereunder, or any part thereof, with or without substitution, and
to the release of any Person or entity liable for any such payment; and (viii) consent to the
addition of any and all other makers, endorsers, guarantors and other obligors for any payment
hereunder, and to the acceptance of any and all other security for any payment hereunder, and
agree that the addition of any such obligors or security shall not affect the liability of the
parties hereto for any payment hereunder.

               (c) Nothing herein shall be construed as prohibiting the Seller, the Servicer or the
Depositor from pursuing any rights or remedies it may have against any Person in a separate legal
proceeding.

          Section 4.04. Assignments; Reinsurance; Third-Party Rights. (a) This Insurance
Agreement shall be a continuing obligation of the parties hereto and shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and permitted assigns.
The Seller, the Servicer and the Depositor may not assign their respective rights under this
Insurance Agreement, or delegate any of its duties hereunder, without the prior written consent of
the Insurer. Any assignments made in violation of this Insurance Agreement shall be null and void.

               (b) The Insurer shall have the right to give participations in its rights under this
Insurance Agreement and to enter into contracts of reinsurance with respect to the Policy upon
such terms and conditions as the Insurer may in its discretion determine; provided, however, that
no such participation or reinsurance agreement or arrangement shall relieve the Insurer of any of
its obligations hereunder or under the Note Policy; and provided, further, that any reinsurer or
participant will not have any rights against the Seller, the Servicer, the Depositor, the Issuer,
the Holders or the Indenture Trustee and that the Seller, the Servicer, the Depositor, the
Issuer, the Holders and the Indenture Trustee shall have no obligation to have any communication
or relationship with any reinsurer or participant in order to enforce the obligations of the
Insurer hereunder and under the Note Policy.

               (c) Except as provided herein with respect to participants and reinsurers, nothing in this
Insurance Agreement shall confer any right, remedy or claim, express or implied, upon any Person,
including, particularly, any Holder, other than the Insurer against the Seller, the Servicer and
the Depositor, or the Seller, the

33

 

Servicer and the Depositor against the Insurer 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
Holder shall have any right to payment from any Premium paid or payable hereunder or under the
Sale and Servicing Agreement or from any amounts paid by the Seller and the Depositor pursuant to
Sections 3.02 or 3.03.

          Section 4.05. Liability of the Insurer. Neither the Insurer nor any of its officers,
directors or employees shall be liable or responsible for: (a) the use that may be made of the
Note Policy by the 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 the Insurer in connection with any claim under the Note Policy, or of any signatures
thereon, even if such documents or signatures should in fact prove to be in any or all respects
invalid, insufficient, fraudulent or forged (unless the Insurer shall have actual knowledge
thereof). In furtherance and not in limitation of the foregoing, the Insurer may accept documents
that appear on their face to be in order, without responsibility for further investigation.

          Section 4.06. Annual Servicing Audit and Certification. The annual servicing audit
required pursuant to Section 3.11 of the Sale and Servicing Agreement shall be performed by an
independent third party acceptable to the Insurer. Any one of the four major nationally recognized
firms of independent public accountants is deemed to be acceptable.

ARTICLE V

DEFAULTS AND REMEDIES

          Section 5.01. Defaults. 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, so long as the party breaching such representation or
warranty shall have performed its obligations with respect thereto in accordance with the
Mortgage Loan Purchase Agreement or the Sale and Servicing Agreement, as the case may be) made by
the Seller, the Servicer, the Depositor or the Issuer hereunder or under the Transaction
Documents, or in any certificate furnished hereunder or under the Transaction Documents, shall
prove to be untrue or incomplete in any material respect; provided, however, that if the Seller,
the Servicer, the Depositor or the Issuer effectively cures any such defects in any
representation or warranty under any Transaction Document or certificate or report furnished
under any Transaction Document, within the time period specified in the related document as the
cure period therefor, such defect shall not in and of itself constitute an Event of Default;

34

 

               (b) (i) The Seller, the Servicer, the Depositor or the Issuer shall fail to pay when due any
amount payable by the Seller, the Servicer, the Depositor or the Issuer unless such amounts are
paid in full within the cure period therefor, respectively, hereunder or (ii) a legislative body
has enacted any law that declares or a court of competent jurisdiction shall find or rule that
this Insurance Agreement or the Transaction Documents are not valid and binding on the Seller,
the Servicer, the Depositor or the Issuer;

               (c) The occurrence and continuance of a “Rapid Amortization Event” under the Indenture or an
“Event of Servicing Termination” under the Sale and Servicing Agreement;

               (d) Any failure on the part of the Seller, the Servicer, the Depositor or the Issuer duly to
observe or perform in any material respect any other of the covenants or agreements on the part
of the Seller, the Servicer, the Depositor or the Issuer contained in this Insurance Agreement or
in any other Transaction Document which continues unremedied beyond any cure period provided
therein, or, in the case of this Insurance Agreement, for a period of 60 days after the date on
which written notice of such failure, requiring the same to be remedied, shall have been given to
the Seller, the Servicer, the Depositor or the Issuer by the Insurer (with a copy to the
Indenture Trustee) or by the Indenture Trustee (with a copy to the Insurer). Such failure shall
not constitute an Event of Default hereunder, if within such 60-day period the Seller, the
Servicer, the Depositor or the Issuer, as the case may be, shall have given notice to the Insurer
of corrective action it proposes to take, which corrective action is agreed, in writing by the
Insurer to be satisfactory and the Seller, the Servicer, the Depositor or the Issuer shall
thereafter pursue such corrective action diligently until such default is cured;

               (e) A decree or order of a court or agency or supervisory authority having jurisdiction in
the premises in an involuntary case under any present or future federal or state insolvency or
similar law or the appointment of a conservator or receiver or liquidator or other similar
official in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against
the Seller, the Servicer, the Depositor or the Issuer and such decree or order shall have
remained in force undischarged or unstayed for a period of 90 consecutive days;

               (f) The Seller, the Servicer, the Depositor or the Issuer shall consent to the appointment
of a conservator or receiver or liquidator or other similar official in any involuntary
insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings of
or relating to the Seller, the Servicer, the Depositor or the Issuer or of or relating to all or
substantially all of its property and if the Seller, the Servicer, the Depositor or the Issuer
shall fail to take appropriate action resulting in the withdrawal or dismissal of such proceeding
within 60 Business Days; or

               (g) The Seller, the Servicer, the Depositor or the Issuer shall admit in writing its
inability to pay its debts generally as they become due, file a petition to take

35

 

advantage of or otherwise voluntarily commence a case or proceeding under any applicable
insolvency, reorganization or other similar statute, make an assignment for the benefit of its
creditors or voluntarily suspend payment of its obligations.

          Section 5.02. Remedies; No Remedy Exclusive. (a) Upon the occurrence of an Event of
Default, the Insurer may take whatever action at law or in equity as may appear necessary or
desirable in its judgment to collect the amounts, if any, then due under this Insurance Agreement,
the Sale and Servicing Agreement, the Indenture or the Sale and Servicing Agreement or to enforce
performance and observance of any obligation, agreement or covenant of the Seller, the Servicer,
the Depositor or the Issuer under this Insurance Agreement, the Indenture or the Sale and Servicing
Agreement or exercise any rights and remedies available under the Transaction Documents in its own
capacity or in its capacity as the Person entitled to exercise the rights of the Holders in respect
of the Notes.

               (b) Unless otherwise expressly provided, no remedy herein conferred or reserved is intended
to be exclusive of any other available remedy, but each remedy shall be cumulative and shall be
in addition to other remedies given under this Insurance Agreement, the other Transaction
Documents or existing at law or in equity. No delay or omission to exercise any right or power
accruing under this Insurance Agreement or the Transaction Documents upon the happening of any
event set forth in Section 5.01 shall impair any such right or power or shall be construed to be
a waiver thereof, but any such right and power may be exercised from time to time and as often as
may be deemed expedient. In order to entitle the Insurer to exercise any remedy reserved to the
Insurer in this Article, it shall not be necessary to give any notice, other than such notice as
may be required by this Article.

          Section 5.03. Waivers. (a) No failure by the Insurer to exercise, and no delay by the
Insurer in exercising, any right hereunder shall operate as a waiver thereof. The exercise by the
Insurer of any right hereunder shall not preclude the exercise of any other right, and the remedies
provided herein to the Insurer are declared in every case to be cumulative and not exclusive of any
remedies provided by law or equity.

               (b) The Insurer shall have the right, to be exercised in its complete discretion, to waive
any Event of Default hereunder, by a writing setting forth the terms, conditions and extent of
such waiver signed by the Insurer and delivered to the Seller, the Servicer, the Depositor or the
Issuer, as the case may be. Unless such writing expressly provides to the contrary, any waiver
so granted shall extend only to the specific event or occurrence which gave rise to the Event of
Default so waived and not to any other similar event or occurrence which occurs subsequent to the
date of such waiver.

36

 

ARTICLE VI

MISCELLANEOUS

          Section 6.01. Amendments, Etc. This Insurance Agreement may be amended, modified,
supplemented or terminated only by written instrument or written instruments signed by the parties
hereto. The Seller, the Servicer and the Depositor agree to provide a copy of any amendment to
this Insurance Agreement promptly to the Indenture Trustee and the rating agencies maintaining a
rating on any of the Notes upon request. No act or course of dealing shall be deemed to constitute
an amendment, modification, supplement 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 and telecopied to the recipient as follows:

(a) To the Insurer:

Ambac Assurance Corporation

One State Street Plaza

New York, New York 10004

Attention: Risk Management, Consumer

Asset-Backed
Securities

Telecopy No.: 212-363-1459

Confirmation: 212-668-0340

(in each case in which notice or other communication to the Insurer
refers to an Event of Servicing Termination, a claim on the Note Policy
or with respect to which failure on the part of the Insurer to respond
shall be deemed to constitute consent or acceptance, then a copy of such
notice or other communication should also be sent to the attention of
the general counsel of the Indenture Trustee and shall be marked to
indicate “URGENT MATERIAL ENCLOSED.”)

(b) To the Depositor:

Indymac ABS, Inc.

155 North Lake Avenue

Pasadena, California 91101

Attention: Treasurer

37

 

(c) To the Seller/Servicer:

IndyMac Bank, F.S.B.

155 North Lake Avenue

Pasadena, California 91101

Attention: Treasurer

(d) To the Issuer:

Wilmington Trust Company

Rodney Square North

1100 North Market Street

Wilmington, Delaware 19890-0001

(e) To the Indenture Trustee:

Deutsche Bank National Trust Company

1761 East St. Andrew Place

Santa Ana, California 92705

Attention: Trust Administration-IN04L2

Facsimile: 714-247-6285

          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. Severability. In the event that any provision of this Insurance
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 6.04. Governing Law. This Insurance Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regards to conflicts of law
provisions.

          Section 6.05. Consent to Jurisdiction. (a) The parties hereto hereby irrevocably
submit to the non-exclusive jurisdiction of the United States District Court for the Southern
District of New York and any court in the State of New York located in the City and County of New
York, and any appellate court from any thereof, in any action, suit or proceeding brought against
it and to or in connection with any of the Transaction Documents or the Transaction or for
recognition or enforcement of any judgment, 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

38

 

parties hereto agree that a final unappealable 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 related documents or the subject matter thereof may
not be litigated in or by such courts.

               (b) Service on the Seller, the Servicer or the Depositor may be made by mailing or
delivering copies of the summons and complaint and other process which may be served in any suit,
action or proceeding to the Servicer, the Seller and the Depositor at the addresses specified in
Section 6.02(c), (d) and (e). Such address may be changed by the applicable party or parties,
with the prior written consent of the Insurer, by written notice to the other parties hereto.

               (c) Nothing contained in this Insurance Agreement shall limit or affect any party’s right to
serve process in any other manner permitted by law or to start legal proceedings relating to any
of the Transaction Documents against any other party or its properties in the courts of any
jurisdiction.

          Section 6.06. Consent of the Insurer. In the event that the consent of the Insurer is
required under any of the Transaction Documents, the determination whether to grant or withhold
such consent shall be made by the Insurer in its sole discretion without any implied duty towards
any other Person, except as otherwise expressly provided therein.

          Section 6.07. Counterparts. This Insurance Agreement may be executed in counterparts
by the parties hereto, and all such counterparts shall constitute one and the same instrument.

          Section 6.08. Headings. The headings of Articles and Sections and the Table of
Contents contained in this Insurance Agreement are provided for convenience only. They form no
part of this Insurance Agreement and shall not affect its construction or interpretation.

          Section 6.09. Trial by Jury Waived. Each party hereby waives, to the fullest extent
permitted by law, any right to a trial by jury in respect of any litigation arising directly or
indirectly out of, under or in connection with any of the Transaction Documents or any of the
transactions contemplated thereunder. Each party hereto (A) certifies that no representative,
agent or attorney of any party hereto has represented, expressly or otherwise, that it would not,
in the event of litigation, seek to enforce the foregoing waiver and (B) acknowledges that it has
been induced to enter into the Transaction Documents to which it is a party by, among other things,
this waiver.

39

 

          Section 6.10. Limited Liability. (a) No recourse under any Transaction Document or
the Note Policy 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 or the Note Policy, it being expressly agreed and
understood that each Transaction Document and the Note Policy is solely a corporate obligation of
each party hereto, and that any and all personal liability, either at common law or in equity, or
by statute or constitution, of every such officer, employee, director, affiliate or shareholder for
breaches of any party hereto of any obligations under any Transaction Document or the Note Policy
is hereby expressly waived as a condition of and in consideration for the execution and delivery of
this Insurance Agreement.

               (b) It is expressly understood and agreed by the parties hereto that (i) this Insurance
Agreement is executed and delivered by Wilmington Trust Company, not individually or personally
but solely as Owner Trustee of the Issuer under the Trust Agreement, in the exercise of the
powers and authority conferred and vested in it, (ii) each of the representations, undertakings
and agreements herein made on the part of the Issuer is made and intended not as personal
representations, undertakings and agreements by Wilmington Trust Company but is made and intended
for the purpose for binding only the Issuer, (iii) nothing herein contained shall be construed as
creating any liability on Wilmington Trust Company individually, personally, to perform any
covenant either expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties to this Agreement and by any person claiming by, through or under
them and (iv) under no circumstances shall Wilmington Trust Company be personally liable for the
payment of any indebtedness or expenses of the Issuer or be liable for the breach or failure of
any obligation, representation, warranty or covenant made or undertaking by the Issuer under this
Insurance Agreement or any related documents.

          Section 6.11. Entire Agreement. This Insurance Agreement and the Note Policy set
forth the entire agreement between the parties with respect to the subject matter hereof and
thereof, and this Insurance 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. Indenture Trustee. The Indenture Trustee hereby acknowledges and agrees
to perform all its obligations and duties pursuant to the Transaction Documents to which it is a
party thereto in the manner and subject to the provisions set forth therein.

          Section 6.13. No Petition. Each party hereto, by entering into this Insurance
Agreement, hereby covenants and agrees that they will not at any time institute against the
Depositor or the Issuer, or join any institution against the Depositor or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States federal or state bankruptcy or similar law or similar laws of
other jurisdictions in connection with any obligation

40

 

relating to the Notes, this Insurance Agreement or any of the Transaction Documents; provided
that nothing herein shall prohibit the Indenture Trustee from filing proofs of claim with respect
to any such proceedings. This Section 6.13 will survive for one year and one day following the
last payment on the Notes.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

41

 

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

	 	 	 	 	 
	 	AMBAC ASSURANCE CORPORATION, as Insurer

 	 
	 	By:  	/s/ Patrick E. McCormick
 	 
	 	 	Name:  	Patrick E. McCormick 	 
	 	 	Title:  	First Vice President 	 
	 
	 	INDYMAC ABS, INC.

as Depositor

 	 
	 	By:  	/s/ Andy Sciandra
 	 
	 	 	Name:  	Andy Sciandra 	 
	 	 	Title:  	Senior Vice President 	 
	 
	 	INDYMAC BANK, F.S.B.,

as Seller and Servicer

 	 
	 	By:  	/s/ Andy Sciandra
 	 
	 	 	Name:  	Andy Sciandra 	 
	 	 	Title:  	Senior Vice President 	 
	 
	 	INDYMAC RESIDENTIAL ASSET-BACKED TRUST, SERIES 2004-LH1

 	 
	 	By:  	Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee
 	 
	 
	 	By:  	/s/ Kathleen A. Pedelini
 	 
	 	 	Name:  	Kathleen A. Pedelini 	 
	 	 	Title:  	Financial Services Officer 	 
	 
	 	DEUTSCHE BANK NATIONAL TRUST COMPANY, solely as

Indenture Trustee

 	 
	 	By:  	/s/ Brent Hoyler
 	 
	 	 	Name:  	Brent Hoyler 	 
	 	 	Title:  	Associate 	 
	 

[Signature page to Insurance and Indemnity Agreement]exv10w1

 

Exhibit 10.1

Form Option Award to Employees

PRIDE INTERNATIONAL, INC.

1998 LONG-TERM INCENTIVE PLAN

NON-QUALIFIED STOCK OPTION AGREEMENT

     This option agreement (“Option Agreement” or “Agreement”) executed between PRIDE
INTERNATIONAL, INC. (the “Company”), and ___ (the “Optionee”), an employee of the
Company, regarding a right (the “Option”) awarded to the Optionee on ___(the “Award
Date”) to purchase from the Company up to but not exceeding in
the aggregate ___ shares of
Common Stock (as defined in the Pride International, Inc. 1998 Long-Term Incentive Plan (the
“Plan”)) at $___.___ per share (the “Exercise Price”), such number of shares and such price per share
being subject to adjustment as provided in the Plan, and further subject to the following terms and
conditions:

     1. Relationship to Plan and Employment Agreement.

     This Option is subject to all of the terms, conditions and provisions of the Plan and
administrative interpretations thereunder, if any, which have been adopted by the Company’s
Compensation Committee (“Committee”) and are in effect on the date hereof. Except as defined
herein, capitalized terms shall have the same meanings ascribed to them under the Plan. In
addition, the parties agree that notwithstanding any provision herein to the contrary, this
Agreement shall be deemed modified by the provisions of any employment agreement between the
Optionee and the Company, and vesting of this Award shall occur in the event stock options and
other awards specifically vest under such employment agreement. For purposes of this Option
Agreement:

     (a) “Disability” means illness or other incapacity which prevents the Optionee from continuing
to perform the duties of his job for a period of more than three months.

     (b) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (c) “Option Shares” means the shares of Common Stock covered by this Option Agreement.

     (d) “Retirement” means the Optionee’s termination of employment on or after attainment of age
65, or, if applicable to the Optionee, any earlier age specified as the Optionee’s Normal
Retirement Age under the Pride International, Inc. Supplemental Executive Retirement Plan.

 

 

2. Exercise Schedule.

     (a) This Option may be exercised in installments in accordance with the following schedule:

	 	 	 	 	 
	 	 	Percentage of Option Shares
	Date Vested	 	Available for Purchase
	____________
	 	 	20	%
	____________
	 	 	20	%
	____________
	 	 	20	%
	____________
	 	 	20	%
	____________
	 	 	20	%
	 
	 	
____________________________

	 
	 	 	100	%

     The Optionee must be in continuous employment with the Company or any of its Subsidiaries from
the Award Date through the date of exercisability in order for the Option to become exercisable
with respect to additional shares of Common Stock on such date.

     (b) This Option shall become fully exercisable, irrespective of the limitations set forth in
subparagraph (a) above, provided that the Optionee has been in continuous employment with the
Company or any of its Subsidiaries since the Award Date, upon the occurrence of a Change in
Control.

     (c) To the extent the Option becomes exercisable, such Option may be exercised in whole or in
part (at any time or from time to time, except as otherwise provided herein) until expiration of
the Option pursuant to the terms of this Agreement or the Plan.

     3. Termination of Option

     The Option hereby granted shall terminate and be of no force and effect with respect to any
shares of Common Stock not previously purchased by the Optionee at the earliest time specified
below:

     (a) the tenth anniversary of the Award Date;

     (b) if Optionee’s employment with the Company and its Subsidiaries is terminated by the
Company or a Subsidiary for serious misconduct (as determined by the Committee) at any time after
the Award Date, then the Option shall terminate immediately upon such termination of Optionee’s
employment; or

     (c) if Optionee’s employment with the Company and its Subsidiaries is terminated for any
reason other than death, Retirement, Disability or serious misconduct, then the Option shall
terminate on the first business day following the expiration of the 60-day period which began on
the date of termination of Optionee’s employment; or

     (d) if Optionee’s employment with the Company and its Subsidiaries is terminated due to (i)
death at any time after the Award Date and while in the employ of the Company or its Subsidiaries
or within 60 days after termination of such employment,

 

 

(ii) Retirement, or (iii) Disability at any time after the Award Date, then the Option shall
terminate on the first business day following the expiration of the one-year period which began on
the date of Optionee’s death, Retirement or Disability, as applicable.

     In any event in which the Option remains exercisable for a period of time following the date
of termination of Optionee’s employment, the Option may be exercised during such period of time
only to the extent it was exercisable as provided in Section 2 on such date of termination of
Optionee’s employment. The portion of the Option not exercisable upon termination shall terminate
and be of no force and effect upon the date of the Optionee’s termination of employment.

     4. Exercise of Option

     Subject to the limitations set forth herein and in the Plan, this Option may be exercised by
written notice provided to the Company as set forth in Section 5. Such written notice shall (a)
state the number of shares of Common Stock with respect to which the Option is being exercised, (b)
be accompanied by cash or shares of Common Stock (not subject to limitations on transfer) or a
combination of cash and Common Stock payable to Pride International, Inc. in the full amount of the
purchase price for any shares of Common Stock being acquired and (c) be accompanied by cash or
Common Stock in the full amount of all federal and state withholding or other employment taxes
applicable to the taxable income of such Participant resulting from such exercise (or instructions
to satisfy such withholding obligation by withholding Option Shares in accordance with Section 8);
provided, however, that any shares of Common Stock delivered in payment of the option price that
are or were the subject of an award under the Plan must be shares that the Optionee has owned for a
period of at least six months prior to the date of exercise. For the purpose of determining the
amount, if any, of the purchase price satisfied by payment in Common Stock, such Common Stock shall
be valued at its Fair Market Value on the date of exercise.

     Notwithstanding anything to the contrary contained herein, the Optionee agrees that he will
not exercise the option granted pursuant hereto, and the Company will not be obligated to issue any
option shares pursuant to this Option Agreement, if the exercise of the Option or the issuance of
such shares would constitute a violation by the Optionee or by the Company of any provision of any
law or regulation of any governmental authority or any stock exchange or transaction quotation
system. The Optionee agrees that, unless the options and shares covered by the Plan have been
registered pursuant to the Securities Act of 1933, as amended (the “Act”), the Company may, at its
election, require the Optionee to give a representation in writing in form and substance
satisfactory to the Company to the effect that he is acquiring such shares for his own account for
investment and not with a view to, or for sale in connection with, the distribution of such shares
or any part thereof.

     If any law or regulation requires the Company to take any action with respect to the shares
specified in such notice, the time for delivery thereof, which would otherwise be as promptly as
possible, shall be postponed for the period of time necessary to take such action.

 

 

     5. Notices

     Notice of exercise of the Option must be made in the following manner, using such forms as the
Company may from time to time provide:

     (a) by registered or certified United States mail, postage prepaid, to Pride International,
Inc., Attn: Corporate Secretary, 5847 San Felipe, Suite 3300, Houston, Texas 77057, in which case
the date of exercise shall be the date of mailing; or

     (b) by hand delivery or otherwise to Pride International, Inc., Attn: Corporate Secretary,
5847 San Felipe, Suite 3300, Houston, Texas 77057, in which case the date of exercise shall be the
date when receipt is acknowledged by the Company.

     Notwithstanding the foregoing, in the event that the address of the Company is changed prior
to the date of any exercise of this Option, notice of exercise shall instead be made pursuant to
the foregoing provisions at the Company’s current address.

     Any other notices provided for in this Agreement or in the Plan shall be given in writing and
shall be deemed effectively delivered or given upon receipt or, in the case of notices delivered by
the Company to the Optionee, five days after deposit in the United States mail, postage prepaid,
addressed to the Optionee at the address specified at the end of this Agreement or at such other
address as the Optionee hereafter designates by written notice to the Company.

     6. Assignment of Option

     Subject to the approval of the Committee, in its sole discretion, the Option may be
transferred by the Optionee to (i) the children or grandchildren of the Optionee (“Immediate Family
Members”), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members
(“Immediate Family Member Trusts”) or (iii) a partnership or partnerships in which such Immediate
Family Members have at least 99% of the equity, profit and loss interests (“Immediate Family Member
Partnerships”). Subsequent transfers of transferred Options shall be prohibited except by will or
the laws of descent and distribution, unless such transfers are made to the original Optionee or a
person to whom the original Optionee could have made a transfer in the manner described herein. No
transfer shall be effective unless and until written notice of such transfer is provided to the
Committee, in the form and manner prescribed by the Committee. Following transfer, any such
Options shall continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, and, except as otherwise provided herein, the term Optionee shall be
deemed to refer to the transferee.

     After the death of the Optionee, exercise of the Option shall be permitted only by the
Optionee’s executor or the personal representative of the Optionee’s estate (or by his assignee, in
the event of a permitted assignment) and only to the extent that the option was exercisable on the
date of the Optionee’s death.

     7. Stock Certificates

     Certificates representing the Common Stock issued pursuant to the exercise of the Option will
bear all legends required by law and necessary or advisable to effectuate the

 

 

provisions of the Plan and this Option. The Company may place a “stop transfer” order against
shares of the Common Stock issued pursuant to the exercise of this Option until all restrictions
and conditions set forth in the Plan or this Agreement and in the legends referred to in this
Section 7 have been complied with.

     8. Withholding

     No certificates representing shares of Common Stock purchased hereunder shall be delivered to
or in respect of an Optionee unless the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with respect to the issuance of such shares
of Common Stock has been remitted to the Company or unless provisions to pay such withholding
requirements have been made to the satisfaction of the Committee. The Committee may make such
provisions as it may deem appropriate for the withholding of any taxes which it determines is
required in connection with this Option. The Optionee may pay all or any portion of the taxes
required to be withheld by the Company or paid by the Optionee in connection with the exercise of
all or any portion of this Option by delivering cash, or, with the Committee’s approval, by
electing to have the Company withhold shares of Common Stock, or by delivering previously owned
shares of Common Stock, having a Fair Market Value equal to the amount required to be withheld or
paid. The Optionee may only request withholding Option Shares having a Fair Market Value equal to
the statutory minimum withholding amount. The Optionee must make the foregoing election on or
before the date that the amount of tax to be withheld is determined. If the Optionee is subject to
the short-swing profits recapture provisions of Section 16(b) of the Exchange Act, any such
election shall be subject to such other restrictions as may be established by the Committee in
order that satisfaction of withholding tax obligations with shares of Common Stock might be exempt
from the operation of Section 16(b) of the Exchange Act in whole or in part.

     9. Shareholder Rights

     The Optionee shall have no rights of a shareholder with respect to shares of Common Stock
subject to the Option unless and until such time as the Option has been exercised and ownership of
such shares of Common Stock has been transferred to the Optionee.

     10. Successors and Assigns

     This Agreement shall bind and inure to the benefit of and be enforceable by the Optionee, the
Company and their respective permitted successors and assigns (including personal representatives,
heirs and legatees), except that the Optionee may not assign any rights or obligations under this
Agreement except to the extent and in the manner expressly permitted herein.

     11. No Employment Guaranteed

     No provision of this Option Agreement shall confer any right upon the Optionee to continued
employment with the Company or any Subsidiary.

 

 

     12. Governing Law

     This Option Agreement shall be governed by, construed and enforced in accordance with the laws
of the State of Texas.

     13. Amendment

     This Agreement cannot be modified, altered or amended except by an agreement, in writing,
signed by both the Company and the Optionee.

	 	 	 
	

	 	PRIDE INTERNATIONAL, INC.
	 
	 	 
	Date:                               

	 	By:                                                                                 
	

	 	Name:
	

	 	Title:

     The Optionee hereby accepts the foregoing Option Agreement, subject to the terms and
provisions of the Plan and administrative interpretations thereof referred to above.

	 	 	 
	

	 	OPTIONEE:
	 
	 	 
	Date:

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