EXHIBIT 10.4
EXECUTION COPY
INSURANCE AND INDEMNITY AGREEMENT
among
FINANCIAL SECURITY ASSURANCE INC.,
TFC AUTOMOBILE RECEIVABLES TRUST 2000-1,
TFC RECEIVABLES CORPORATION III,
THE FINANCE COMPANY,
XXXXX FARGO FINANCIAL AMERICA, INC.
and
XXXXX FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
Dated as of September 26, 2000
TABLE OF CONTENTS
ARTICLE I DEFINITIONS............................................................................ 3
Section 1.01. General Definitions............................................................. 3
Section 1.02. Generic Terms................................................................... 12
Section 1.03. Computation of Time Periods..................................................... 12
ARTICLE II THE POLICY AND REIMBURSEMENT.......................................................... 12
Section 2.01. Policy.......................................................................... 12
Section 2.02. Conditions Precedent............................................................ 12
Section 2.03. Premium Letter.................................................................. 16
Section 2.04. Reimbursement Obligations....................................................... 16
Section 2.05. Assignment and Other Rights upon Payments under the Policy...................... 17
Section 2.06. Subrogation; Further Assurances................................................ 17
Section 2.07. Indemnification by TFC; Conduct of Actions or Proceedings; Contribution......... 18
Section 2.08. Indemnification by TFCRC III; Conduct of Actions or Proceedings; Contribution... 20
Section 2.09. Other Payment Obligations....................................................... 21
Section 2.10. Payments, Generally............................................................. 22
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................................... 23
Section 3.01. Representations and Warranties with respect to TFC and TFCRC III................ 23
Section 3.02. Representations and Warranties of the Issuer.................................... 29
ARTICLE IV COVENANTS............................................................................. 33
Section 4.01. Covenants of TFCRC III and TFC.................................................. 33
Section 4.02. Negative Covenants with Respect to TFCRC III and TFC............................ 43
Section 4.03. Affirmative Covenants of the Issuer............................................. 47
Section 4.04. Negative Covenants on Behalf of the Issuer...................................... 52
ARTICLE V FURTHER AGREEMENTS..................................................................... 53
Section 5.01. Effective Date; Term of Insurance Agreement..................................... 53
Section 5.02. Obligations Absolute............................................................ 53
Section 5.03. Assignments; Reinsurance; Third-Party Rights.................................... 55
Section 5.04. Liability of Financial Security................................................. 56
ARTICLE VI EVENTS OF DEFAULT; REMEDIES........................................................... 56
Section 6.01. Insurance Agreement Events of Default........................................... 56
Section 6.02. Remedies: Waivers.............................................................. 59
ARTICLE VII MISCELLANEOUS PROVISIONS............................................................. 60
Section 7.01. Amendments, Etc................................................................. 61
Section 7.02. Notices......................................................................... 61
Section 7.03. No Waiver; Remedies and Severability............................................ 63
Section 7.04. Payments........................................................................ 63
Section 7.05. Governing Law................................................................... 64
Section 7.06. Counterparts.................................................................... 64
Section 7.07. Paragraph Headings, Etc......................................................... 64
Section 7.08. No Petition..................................................................... 64
Section 7.09. Consent to Jurisdiction......................................................... 64
Section 7.10. Consent of Financial Security................................................... 65
Section 7.11. Jury Trial Waiver............................................................... 65
Section 7.12. Limitation of Liability......................................................... 65
Section 7.13. Third Party Beneficiary......................................................... 66
Section 7.14. Entire Agreement................................................................ 66
INSURANCE AND INDEMNITY AGREEMENT
THIS INSURANCE AND INDEMNITY AGREEMENT (this "Insurance Agreement") is made
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as of September 26, 2000 among Financial Security Assurance Inc., a financial
guaranty insurance company incorporated in the State of New York, as note
insurer ("Financial Security"), TFC Automobile Receivables Trust 2000-1, a
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Delaware business trust (individually, the "Trust"), as issuer (the "Issuer"),
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TFC Receivables Corporation III, a Delaware corporation ("TFCRC III"), The
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Finance Company, a Virginia corporation (individually, "TFC") and as servicer
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(together with its successors and assigns in such capacity, including without
limitation the Back-up Servicer (as defined below) and any successor servicer
appointed pursuant to the Sale and Servicing Agreement (as defined below), the
"Servicer"), Xxxxx Fargo Bank Minnesota, National Association, a national
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banking association (individually "Xxxxx Fargo"), as trustee (together with its
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successors and assigns, in such capacity, the "Trustee"), as trust collateral
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agent (together with its successors and assigns, in such capacity, the "Trust
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Collateral Agent"), as back-up servicer (together with its successors and
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assigns, in such capacity, the "Back-up Servicer") and as post office box owner
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(together with its successors and assigns, in such capacity, the "P.O. Box
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Owner"), and Xxxxx Fargo Financial America, Inc. (individually, "WFCar"), as
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"Successor Servicer" under the Sale and Servicing Agreement (together with its
successors and assigns, in such capacity, the "Successor Servicer")]
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PRELIMINARY STATEMENTS
The Issuer will issue (a) the TFC 7.36% Asset Backed Notes, Series 2000-1
(the "Notes") pursuant to the Indenture, dated as of September 26, 2000, among
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the Issuer and Xxxxx Fargo as Trustee and Trust Collateral Agent (as the same
may be amended, restated, supplemented or otherwise modified from time to time
in accordance with its terms and the terms hereof the "Indenture") and (b) a
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certificate (the "Certificate") pursuant to the Amended and Restated Trust
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Agreement, dated as of September 26, 2000, between Wilmington Trust Company as
owner trustee (together with its successors and assigns, in such capacity, the
"Owner Trustee") and TFCRC III as depositor (as the same may be amended,
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restated, supplemented or otherwise modified from time to time in accordance
with its terms and the terms hereof, the "Trust Agreement").
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Pursuant to the Indenture, the Issuer will grant to the Trust Collateral
Agent for the benefit of the Trustee on behalf of the Noteholders and Financial
Security, to secure repayment of the Notes (and other related amounts), a
security interest in collateral consisting of all of the Issuer's right, title
and interest in, to and under a pool of receivables, including, among other
types of receivables, receivables of retail installment sale contracts secured
by the financed vehicles and certain other assets and rights, all as more fully
set forth in the Indenture (the "Trust Property"). Such receivables and related
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assets constituting a part of the Trust Property were sold to the Issuer
pursuant to the Sale and Servicing Agreement, dated as of September 26, 2000,
among the Issuer, TFCRC III as seller (the "Seller"), the Servicer, the Trust
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Collateral Agent, the Back-up Servicer and the Successor Servicer (as the same
may be amended, restated,
supplemented or otherwise modified from time to time in accordance with its
terms and the terms hereof, the "Sale and Servicing Agreement"); and
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Financial Security is authorized to transact a financial guaranty insurance
business in the State of New York and has agreed, subject to the terms and
conditions of this Insurance Agreement, to issue to the Trustee, for the benefit
of the Noteholders, a financial guaranty insurance policy substantially in the
form of Exhibit A hereto (the "Policy"); and
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The parties hereto, among other things, desire to specify the conditions
precedent to the issuance by Financial Security of the Policy, the obligations
of the Issuer, the Servicer, the Back-up Servicer, the P.O. Box Owner, the
Successor Servicer, TFC and TFCRC III, as applicable, to make payments in
respect of premiums, reimbursement obligations and other amounts relating to the
Policy, and to perform certain other obligations in respect of the issuance of
the Policy, and to provide for certain other matters related thereto.
NOW, THEREFORE, in consideration of the premises and of the agreements
herein contained, Financial Security, the Issuer, the Servicer, TFC, TFCRC III,
the Trustee, the Trust Collateral Agent, the Back-up Servicer, the P.O. Box
Owner and the Successor Servicer agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. General Definitions. The terms defined in this Article I
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shall have the meanings provided herein for all purposes of this Insurance
Agreement, unless the context clearly requires otherwise, in both singular and
plural form, as appropriate. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to such terms in the Indenture or the
Sale and Servicing Agreement (as applicable).
"Affiliate" means, as to any specified Person, any other Person controlling
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or controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
"Back-up Servicer" has the meaning assigned to such term in the preamble
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above.
"Certificate" has the meaning assigned to such term in the Preliminary
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Statements above.
"Closing Date" means September 27, 2000.
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"Commonly Controlled Entity" means TFC and each entity, whether or not
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incorporated, which is affiliated with TFC pursuant to Section 414(b), (c), (m)
or (o) of the Code.
"Cumulative Net Loss Rate" means with respect to any Determination Date,
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the fraction, expressed as a percentage, the numerator of which is equal to the
aggregate amount of Net
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Losses through the end of the related Monthly Period for such Determination Date
and the denominator of which is equal to the Original Pool Balance.
"Cumulative Net Loss Test Failure" means (a) with respect to the
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Determination Date occurring during October of 2000 hereunder, the Cumulative
Net Loss Rate shall be greater than 1.25%, and (b) with respect to any
Determination Date described below, the Cumulative Net Loss Rate shall be
greater than the percentage set forth below opposite the description of such
Determination Date:
Period Maximum Percentage
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For the November and December 2000 and 4.20%
January 2001 Determination Dates
For the February, March and April 9.50%
2001 Determination Dates
For the May, June and July 2001 14.50%
Determination Dates
For the August, September and October 14.70%
2001 Determination Dates
For the November and December 2001 and 15.30%
January 2002 Determination Dates
For the February, March and April 16.00%
2002 Determination Dates
For the May, June and July 2002 16.75%
Determination Dates
For the August, September and October 17.50%
2002 Determination Dates
For the November 2002, December 2002 and January 18.25%
2003 Determination Dates
For the February 2003 Determination Date and any 19.65%
Determination Date occurring thereafter.
"Date of Issuance" has the meaning assigned to such term in the Policy.
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"Deemed Cured" means, as of a Determination Date, (a) with respect to a
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Trigger Event that has occurred solely as a result of the occurrence of a
Delinquency Test Failure, that no Trigger Event or any Insurance Agreement Event
of Default shall have occurred as of such Determination Date or as of any of the
three (3) next preceding Determination Dates; or (b) with respect to any other
Trigger Event, that no Trigger Event or any Insurance Agreement Event of
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Default shall have occurred as of such Determination Date or as of any of the
six (6) next preceding Determination Dates.
"Default" means any event which results, or which with the giving of notice
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or the lapse of time or both would result, in an Insurance Agreement Event of
Default.
"Delinquency Category" means (a) for Receivables having monthly Scheduled
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Receivable Payments ("Monthly-Pay Contracts" as defined in Schedule 1) in
respect of which the relevant Obligor shall have failed to make a Scheduled
Receivable Payment or a portion thereof on the due date therefor, the applicable
Delinquency Category into which such Receivable falls based on the number of
months delinquent, as described in Schedule 1 hereto and (b) for Receivables not
having monthly Scheduled Receivable Payments ("Non-Monthly-Pay Contracts," as
defined in Schedule 1) in respect of which the relevant Obligor shall have
failed to make a Scheduled Receivables Payment or a portion thereof on the due
date therefor, the applicable Delinquency Category into which such Receivable
falls based on the number of weeks delinquent, as described in Schedule 1
hereto.
"Delinquency Ratio" means, with respect to any Determination Date, the
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fraction, expressed as a percentage, (a) the numerator of which is equal to the
sum of the Principal Balances (as of the related Accounting Date) of all
Receivables that are Delinquent Receivables as of the related Accounting Date,
or that became Purchased Receivables as of the related Accounting Date and were
Delinquent Receivables as of such Accounting Date and (b) the denominator of
which is equal to the Aggregate Principal Balance as of such Accounting Date.
"Delinquency Test Failure" means, with respect to any Determination Date
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described below, the arithmetic average of the Delinquency Ratios for such
Determination Date and the two immediately preceding Determination Dates shall
be greater than the percentage set forth below opposite the period during which
such Determination Date occurs:
Period Maximum Percentage
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For each Determination Date occurring 17.00%
prior to the August 2001 Determination Date
For the August 2001 Determination Date 20.00%
through the January 2002 Determination Date
For each Determination Date occurring 25.00%
after the January 2002 Determination Date.
For purposes of the foregoing calculation to be made on each of the October and
November 2000 Determination Dates, the Delinquency Ratios shall be calculated
for each of the calendar months of July, August and September 2000 as if each
such calendar month was a "Monthly Period" hereunder, and the first Business Day
to occur in the next succeeding calendar month was a "Determination Date"
hereunder.
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"Delinquent Receivable" means a Receivable which (a) falls into any
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Delinquency Category other than the "Current" category (as described in Schedule
1 hereto) and (b) is not a Liquidated Receivable.
"ERISA" means the Employee Retirement Income Security Act of 1974,
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including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Event of Default" has the meaning assigned to such term in the Indenture.
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"Financial Security" has the meaning assigned to such term in the preamble
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above.
"Financial Security Information" has the meaning given to such term under
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the Indemnification Agreement.
"Financial Statements" means with respect to each of TFC and the Parent,
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the audited consolidated balance sheets as of December 31, 1999 and the
statements of income, shareholder's equity and cash flows for the 12-month
period then ended and the notes thereto, and the unaudited consolidated balance
sheets as of June 30, 2000 and the consolidated statements of income and cash
flows for the fiscal quarter then ended.
"Fort Xxxx ACH Letter" means the letter agreement by TFC, dated as of
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September 26, 2000, acknowledged and agreed to by Fort Xxxx National Company,
Fort Xxxx National Bank and the Trust Collateral Agent (with respect to TFC's
ACH Obligor payment program).
"Fort Xxxx Allotment Letter" means the letter agreement by TFC, dated as of
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September 26, 2000, acknowledged and agreed to by Fort Xxxx National Company and
Fort Xxxx National Bank (with respect to TFC's military allotment Obligor
payment program).
"Fort Xxxx Letters" means each of the Fort Xxxx TrueCheck Letter, the Fort
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Xxxx ACH Letter and the Fort Xxxx Allotment Letter.
"Fort Xxxx TrueCheck Letter" means the letter agreement by TFC, dated as of
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September 26, 2000, acknowledged and agreed to by Fort Xxxx National Company,
Fort Xxxx National Bank and the Trust Collateral Agent (with respect to TFC's
TrueCheck Obligor payment program).
"GAAP" means generally accepted accounting principles in effect from time
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to time in the United States of America.
"GE Capital" means General Electric Capital Corporation, a New York
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corporation.
"GE Capital Agreement" means the Amended and Restated Motor Vehicle
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Installment Contract Loan and Security Agreement, dated as of January 1, 1999,
between GE Capital as lender and TFC as borrower, as amended by Amendment No. 1
thereto dated as of May 10, 2000.
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"Governmental Authority" means any nation or government, any state or other
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political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
as in effect on the date hereof.
"Indemnification Agreement" means the Indemnification Agreement, dated as
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of September 26, 2000, among Financial Security, the Issuer, the Placement Agent
and TFC.
"Indenture" has the meaning assigned to such term in the Preliminary
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Statements above.
"Independent Accountants" has the meaning specified in Section 4.01(q).
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"Independent Director" means a natural person who (i) is not a stockholder
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(whether direct, indirect or beneficial), customer, advisor or supplier of TFCRC
III, the Parent or any of their respective Affiliates (other than by means of
indirect stock ownership of TFCRC III or the Parent or of any of their
respective Affiliates by any Person through a mutual fund or similar diversified
investment pool); (ii) is not a director, officer, employee or Affiliate of
TFCRC III or the Parent or any of their respective Affiliates; (iii) is not a
Person related to any Person referred to in clauses (i) and (ii); (iv) is not a
trustee, conservator or receiver for any of TFCRC III or the Parent or any of
their respective Affiliates; and (v) has (A) prior experience as an independent
director or independent manager for a corporation or limited liability company
whose charter documents require the unanimous written consent of all independent
directors or independent managers thereof before such corporation or limited
liability company could consent to the institution of bankruptcy or insolvency
proceedings against it or could file a petition seeking relief under any
applicable federal or state law relating to bankruptcy, and (B) at least three
years of employment experience with one or more entities that provide, in the
ordinary course of their respective businesses, advisory, management or
placement services to issuers of securitization or structured finance
instruments, agreements or securities.
"Initial Cutoff Date" means June 30, 2000.
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"Initial Spread Account Deposit Amount" means 4.00% of the Original Pool
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Balance.
"Insurance Agreement" has the meaning assigned to such term in the preamble
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above.
"Insurance Agreement Event of Default" has the meaning specified in Section
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6.01.
"Insurance Agreement Indenture Cross Default" means any Insurance Agreement
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Event of Default specified in clauses (a), (c), (d), (e), (f), (k) and (l) of
Section 6.01.
"Investment Company Act" means the Investment Company Act of 1940,
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including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"IRS" means the Internal Revenue Service.
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"Issuer" has the meaning assigned to such term in the preamble above.
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"Lien" means, as applied to the property or assets (or the income or
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profits therefrom) of any Person, in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or
otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease,
conditional sale or other title retention agreement, or other security interest
or encumbrance of any kind or (b) any arrangement, express or implied, under
which such property or assets are transferred, sequestered or otherwise
identified for the purpose of subjecting or making available the same for the
payment of debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.
"Material Adverse Change" means, (a) in respect of any Person, a material
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adverse change in (i) the business, financial condition, results of operations
or properties of such Person or any of its Subsidiaries or (ii) the ability of
such Person to perform its obligations under any of the Basic Documents to which
it is a party and (b) in respect of the Receivables, a material adverse change
in (i) the value or marketability of the Receivables, taken as a whole, or (ii)
the probability that amounts now or hereafter due in respect of a material
portion of the Receivables will be collected on a timely basis.
"Moody's" means Xxxxx'x Investors Service, Inc., or its successor.
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"Multiemployer Plan" means a multiemployer plan (within the meaning of
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Section 400 1(a)(3) of ERISA) in respect of which a Commonly Controlled Entity
makes contributions or has liability.
"Net Losses" means, with respect to any Determination Date and the most
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recently concluded Monthly Period, the positive difference of (a) the sum of (i)
the aggregate amount of the Principal Balances as of the related Accounting Date
(plus accrued and unpaid interest through and including such Accounting Date, at
the applicable APR) of all Receivables that became Liquidated Receivables since
the Initial Cutoff Date, plus (ii) the aggregate Cram Down Losses as of the
related Accounting Date that occurred since the Initial Cutoff Date, over (b)
the aggregate, cumulative Net Liquidation Proceeds received by the Issuer as of
the related Accounting Date since the Initial Cutoff Date.
"Notes" has the meaning assigned to such term in the Preliminary Statements
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above.
"Offering Document" means the Private Placement Memorandum dated September
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20, 2000 relating to the Notes and any amendment or supplement thereto and any
other offering document in respect of the Notes that makes reference to the
Policy.
"Owner Trustee" has the meaning assigned to such term in the Preliminary
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Statements above.
"Parent" means TFC Enterprises, Inc., a Delaware corporation.
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"Parent Support Agreement" means the agreement among TFCRC III, TFC,
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Financial Security, the Trust Collateral Agent, and the Parent, dated as of
September 26, 2000.
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"PBGC" means the Pension Benefit Guaranty Corporation or any successor
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agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.
"Person" means an individual, a partnership, a corporation, a limited
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liability company, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture, a Governmental Authority or other
entity of whatever nature.
"Placement Agent" means Rothschild Inc.
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"Placement Agent Agreement" means the Placement Agent Agreement dated as of
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September 12, 2000, among the Issuer, TFC, TFCRC III and the Placement Agent.
"Placement Agent Information" means the information relating to the
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Placement Agent in the Private Placement Memorandum.
"Plan" means any pension plan (other than a Multiemployer Plan) covered by
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Title IV of ERISA, which is maintained by a Commonly Controlled Entity or in
respect of which a Commonly Controlled Entity has liability.
"P.O. Box Owner" has the meaning assigned to such term in the preamble
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above.
"Policy" has the meaning assigned to such term in the Preliminary
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Statements above.
"Premium" means the premium payable by the Issuer pursuant to the Premium
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Letter (including, without limitation, the Premium Supplement payable
thereunder).
"Premium Letter" means the letter agreement between Financial Security, TFC
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and the Issuer, dated as of the Closing Date, setting forth the payment
arrangement for the premiums in respect of the Policy, and certain other fees,
related expenses and other related matters.
"Premium Rate" has the meaning assigned to such term in the Premium Letter.
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"Premium Supplement" has the meaning assigned to such term in the Premium
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Letter.
"Prime Rate" means the fluctuating rate of interest as published from time
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to time in the New York, New York edition of The Wall Street Journal, under the
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caption "Money Rates" as the "prime rate", the "Prime Rate" to change when and
as such published prime rate changes.
"Private Placement Memorandum" means the Private Placement Memorandum dated
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September 20, 2000, relating to the offering of the Notes.
"Provided Documents" means the Basic Documents and any documents,
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agreements, instruments, schedules, certificates, statements, cash flow
schedules, number runs or other writings or data furnished to Financial Security
(or any of its reinsurers or potential reinsurers identified to TFC, including,
without limitation, Asset Guaranty Insurance Company) by or on behalf of TFC,
the Parent or TFCRC III with respect to itself, its respective Subsidiaries, the
Receivables or the Transaction.
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"Purchaser" means TFCRC III, in its capacity as the "Purchaser" under the
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Purchase Agreement.
"Purchase Agreement" means the Purchase Agreement between TFC, as seller,
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and TFCRC III, as purchaser, dated as of September 26, 2000.
"Rating Agencies" means in the plural Moody's and S&P, and in the singular
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each of Moody's and S&P. If either Moody's or S&P, or their respective
successor, fails to maintain a rating on the Notes, each rating agency shall be
a nationally recognized statistical rating organization or other comparable
Person designated by the Seller and acceptable to Financial Security.
"Receivable" has the meaning provided in the Sale and Servicing Agreement.
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"Reportable Event" means any of the events set forth in Section 4043(b) of
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ERISA or the regulations thereunder.
"Restrictions on Transferability" means, as applied to the property or
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assets (or the income or profits therefrom) of any Person, in each case whether
the same is consensual or non-consensual 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.
"Requisite Amount" means (a) on the Closing Date, the Initial Spread
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Account Deposit Amount and (b) with respect to any Determination Date
thereafter, (i) if no Trigger Event or Insurance Agreement Event of Default
shall have occurred, the lesser of (A) the Initial Spread Account Deposit Amount
and (B) an amount equal to the Note Principal Balance, (ii) after the occurrence
of a Trigger Event, the lesser of (A) an amount equal to 6.00% of the Original
Pool Balance and (B) an amount equal to the Note Principal Balance; provided,
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however, that, in the event such Trigger Event has been Deemed Cured, an amount
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equal to the amount calculated for such Determination Date pursuant to clause
(i) above, and (iii) notwithstanding anything in clauses (i) and (ii) above to
the contrary, after the occurrence of an Insurance Agreement Event of Default,
an amount equal to the Note Principal Balance.
"Sale and Servicing Agreement" has the meaning assigned to such term in the
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Preliminary Statements above.
"Schedule of Receivables" means the schedule of receivables delivered to
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the Trust Collateral Agent by the Issuer in connection with the Sale and
Servicing Agreement.
"Securities Act" means the Securities Act of 1933, including, unless the
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context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
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including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
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"S&P" means Standard & Poor's Ratings Services, or its successor.
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"Servicer" has the meaning assigned to such term in the preamble above.
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"Standby Remittance and Processing Agreement" means the Amended and
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Restated Standby Remittance and Processing Agreement among TFC Receivables
Corporation 2, a Delaware corporation, Asset Guaranty Insurance Company, TFCRC
III, TFC, General Electric Capital Corporation, Financial Security, the Trust
Collateral Agent and the P.O. Box Owner, dated as of September 26, 2000, as the
same may be amended, restated, supplemented or otherwise modified from time to
time in accordance with its terms and the terms hereof.
"Stock Pledge Agreement" means the Stock Pledge and Collateral Agency
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Agreement made by TFC in favor of Xxxxx Fargo Bank Minnesota, National
Association, as "Collateral Agent" on behalf of Financial Security, dated as of
September 26, 2000, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with its terms and the terms
hereof.
"Subordinated Debt" means a debt obligation of TFC which is subordinated to
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obligations owed to GE Capital as lender under the GE Capital Agreement,
pursuant to a subordination agreement which is in the form of Exhibit 16 to the
GE Capital Agreement or pursuant to some other agreement approved by GE Capital
and the Insurer.
"Subsidiary" means, with respect to any Person, any corporation of which a
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majority of the outstanding shares of capital stock having ordinary voting power
for the election of directors is at the time owned by such Person directly or
through one or more Subsidiaries.
"Successor Servicer" has the meaning assigned to such term in the preamble
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above.
"Tangible Net Worth" means, with respect to TFC, the excess of (a) the
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tangible assets of TFC and all of its consolidated subsidiaries calculated in
accordance with GAAP, as reduced by adequate reserves in each case where
reserves are proper, over (b) all Indebtedness (excluding Subordinated Debt) of
TFC and all of its consolidated subsidiaries; provided, however, that (i) in no
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event shall there be included in the above calculation any intangible assets
such as patents, trademarks, trade names, copyrights, licenses, goodwill,
organizational costs, advances or loans to, or receivables from, directors,
shareholders, officers, employees or subsidiaries, amounts relating to covenants
not to compete, pension assets or treasury stock or any securities of TFC or of
any Affiliate of TFC, or any other securities unless the same are readily
marketable in the United States of America or entitled to be used as a credit
against federal income tax liabilities, (ii) securities included as such
intangible assets shall be taken into account at their current market price or
cost, whichever is lower, and (iii) any write-up in the book value of any assets
shall not be taken into account.
"TFC" has the meaning assigned to such term in the preamble above.
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"Transaction" means the transactions contemplated by the Transaction
-----------
Documents, including the transactions described in the Offering Documents.
"Transaction Documents" has the meaning assigned to such term in Section
---------------------
2.02(a).
11
"Trigger Event" means the occurrence of any of the following events, the
-------------
occurrence of which shall not have been waived in writing by Financial Security:
(a) a Delinquency Test Failure, or (b) a Cumulative Net Loss Test Failure.
"Trust Agreement" is the Amended and Restated Trust Agreement, dated as of
---------------
September 26, 2000 between TFCRC III and Wilmington Trust Company as owner
trustee.
"Trust Collateral Agent" has the meaning assigned to such term in the
----------------------
preamble above.
"Trustee" has the meaning assigned to such term in the preamble above.
-------
"Trust Property" has the meaning assigned to such term in the Preliminary
--------------
Statements above.
Section 1.02. Generic Terms. All words used herein shall be construed
-------------
to be of such gender or number as the circumstances require. The words
"herein," "hereby," "hereof," "hereto," "hereinbefore" and "hereinafter," and
words of similar import, refer to this Insurance Agreement in its entirety and
not to any particular paragraph, clause or other subdivision, unless otherwise
specified.
Section 1.03. Computation of Time Periods. In this Insurance Agreement
---------------------------
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each means "to and including". Periods of days referred to in this Insurance
Agreement shall be counted in calendar days unless Business Days are expressly
prescribed and references in this Insurance Agreement to months and years shall
be to calendar months and calendar years unless otherwise specified.
ARTICLE II
THE POLICY AND REIMBURSEMENT
Section 2.01. Policy. Financial Security agrees, subject to the
------
satisfaction or waiver of the conditions hereinafter set forth on or prior to
the Closing Date, to issue the Policy on the Closing Date.
Section 2.02. Conditions Precedent. The obligation of Financial
--------------------
Security to issue the Policy is subject to the satisfaction of the following
conditions on or prior to the Closing Date:
(a) The following documents shall have been duly authorized, executed
and delivered by each of the parties thereto (other than Financial
Security) and shall be in full force and effect and in form and substance
satisfactory to Financial Security, in the exercise of Financial Security's
sole discretion, and an executed counterpart of each thereof shall have
been delivered to Financial Security:
(i) this Insurance Agreement;
(ii) the Indenture;
12
(iii) the Sale and Servicing Agreement, including the Schedule of
Receivables;
(iv) the Purchase Agreement, including the Schedule of
Receivables;
(v) the Placement Agent Agreement;
(vi) the Indemnification Agreement;
(vii) the Standby Remittance and Processing Agreement;
(viii) the Trust Agreement;
(ix) the Parent Support Agreement;
(x) the Securities Account Control Agreement;
(xi) the Premium Letter;
(xii) the Stock Pledge Agreement; and
(xiii) the Fort Xxxx Letters.
(items (i) through (xiii) being, collectively, the "Transaction Documents").
---------------------
(b) Financial Security shall have received:
(i) copies certified by the Secretary or an Assistant Secretary of
each of the Parent, the Issuer, TFC and TFCRC III, dated the
Closing Date, of its certificate of incorporation and by-laws
and the resolutions of its Board of Directors, as the case may
be, or a duly authorized committee thereof authorizing its
execution and delivery of the Basic Documents and of all
documents evidencing other corporate or company action and
governmental approvals, if any, that are necessary for the
consummation of the transactions contemplated in such
documents;
(ii) a certificate, dated the Closing Date, of the secretary or an
assistant secretary of each of the Parent, the Issuer, TFCRC
III, the Trustee, the Owner Trustee, the Back-up Servicer and
TFC certifying the names and true signatures of its officers
authorized to sign such Basic Documents to which it is a party;
(iii) a certificate, dated the Closing Date, of a Chief Financial
Officer, a Treasurer, an Assistant Treasurer or Vice President
of each of the Issuer, TFCRC III and TFC certifying to the
effect of the representation and warranty set forth in Section
3.01(e) hereof;
(iv) each of the opinions, letters and certificates described in the
closing checklist attached hereto as Exhibit B (other than any
such opinion, letter or certificate required to be issued or
delivered by Financial Security or an
13
agent or employee thereof), in each case (1) dated the Closing
Date, (2) in full force and effect at the time of delivery
thereof, (3) in form and substance satisfactory to Financial
Security in the exercise of its sole discretion, and (4)
covering such matters as Financial Security shall require in
the exercise of its sole discretion;
(v) evidence that one or more UCC financing statements covering the
security interest of the Trust Collateral Agent created by or
pursuant to the Indenture in the Trust Property and the other
property and rights which the Trustee is granted in the
Indenture and the proceeds thereof has been executed by the
Issuer in favor of the Trust Collateral Agent, and has been
duly filed in such place or places which, in the opinion of
counsel for the Issuer, TFC and Financial Security, are
necessary or desirable to perfect such interest;
(vi) evidence that one or more UCC financing statements covering the
interest of TFCRC III in the Receivables and the other related
assets assigned pursuant to the Purchase Agreement has been
executed by TFC in favor of TFCRC III, and has been duly filed
in such place or places which, in the opinion of counsel for
the Issuer, TFC and Financial Security, are necessary or
desirable to perfect such interest;
(vii) evidence that one or more UCC financing statements covering the
interest of the Issuer in the Receivables and the other related
assets assigned pursuant to the Sale and Servicing Agreement
has been executed by TFCRC III in favor of the Issuer, and
assigned to the Trust Collateral Agent, and has been duly filed
in such place or places which, in the opinion of counsel for
the Issuer, TFC and Financial Security, are necessary or
desirable to perfect such interest;
(viii) evidence that each of the Collection Account, the Spread
Account, and the Note Payment Account have been established in
accordance with the terms and conditions of the Indenture and
the Sale and Servicing Agreement;
(ix) certified copies of documents, certificates, instruments,
approvals or executed copies thereof that relate to the
transactions as contemplated by the Basic Documents as
Financial Security may reasonably request;
(x) a specimen Note;
(xi) evidence that one or more UCC financing statements covering the
security interest of Financial Security created by or pursuant
to the Stock Pledge Agreement and the other property and rights
which Financial Security is granted in the Stock Pledge
Agreement and the proceeds thereof has been executed by TFC in
favor of Financial Security, and has been duly filed in
14
such place or places which, in the opinion of counsel for TFC
and Financial Security, are necessary or desirable to perfect
such interest; and
(xii) a statement, in form and substance satisfactory to Financial
Security, reviewing the results of the Independent Accountants'
performance of certain agreed upon procedures with respect to
TFC, its reporting and record keeping, and the characteristics
of the Receivables as of the Cut-Off Date, by way of
independent verification of (x) information provided by TFC for
inclusion in the Offering Document and (y) certain cash flow
models supplied to Financial Security by the Placement Agent in
advance of the Closing Date (the full costs of which statement
shall have been paid on or before the Closing Date by or on
behalf of TFC).
(c) (i) No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court which would make the transactions
contemplated by the Transaction Documents illegal or otherwise prevent the
consummation thereof, (ii) no material omission or change of fact shall
have occurred or come to the attention of any of TFC, TFCRC III, the
Issuer, the Parent, the Trustee, the Placement Agent or Financial Security
that would cause information or documents heretofore supplied to Financial
Security to be untrue or misleading, (iii) no other material change or
omission shall have occurred or come to the attention of any of TFC, TFCRC
III, the Issuer, the Parent, the Trustee, the Placement Agent or Financial
Security that would entitle the Placement Agent to decline to place the
Notes, and (iv) no Material Adverse Change shall have occurred in the
security for the Notes since the date of the Purchase Agreement.
(d) No suit, action or other proceeding, investigation, or
injunction or final judgment relating thereto, shall be threatened or
pending before any court or governmental agency in which it is sought to
restrain or prohibit or obtain damages or other relief in connection with
the consummation of the Transactions, and no investigation that might
result in any such suit, action or proceeding shall be pending or
threatened.
(e) Financial Security shall have received an executed copy of all
legal opinions, certificates, accountant's reports and other documents
required to be furnished by the Issuer, the Servicer, the Back-up Servicer,
the Trustee, TFCRC III, the Parent and TFC pursuant to any of the
Transaction Documents or pursuant to the requirements of the Rating
Agencies (if any). Such documents shall be in form and substance
satisfactory to Financial Security in the exercise of its sole discretion
and each such legal opinion or certificate shall be addressed to Financial
Security, or accompanied by appropriate reliance letters to Financial
Security.
(f) There shall be on deposit in the Spread Account a sum of not
less than $4,000,000 in immediately available funds.
15
(g) Simultaneously with the issuance of the Policy, the Notes shall
have been duly executed and authenticated and delivered to the relevant
Noteholders pursuant to the Indenture.
(h) All fees and expenses payable hereunder or pursuant to the
Premium Letter to Financial Security on or prior to the Closing Date shall
have been paid in full by TFC or the Issuer.
(i) Financial Security shall have received confirmation that the
risk insured by the Policy constitutes at least "BBB-" by S&P and "Baa3" by
Moody's, and that the Notes, when issued, will be rated "AAA" by S&P and
"Aaa" by Moody's.
(j) No Trigger Event, Event of Default, Servicer Termination Event,
Default or Insurance Agreement Event of Default shall have occurred or then
be in effect.
Section 2.03. Premium Letter. Financial Security shall be entitled to
--------------
receive the Premium payable under the Premium Letter on each Payment Date, and
the timely payment or other performance of all other obligations set forth in
the Premium Letter, in each case in accordance with the terms and conditions of
the Premium Letter on any Payment Date, in accordance with the provisions of
Section 5.7 of the Sale and Servicing Agreement. The Premium payable under the
Sale and Servicing Agreement shall be nonrefundable without regard to whether
Financial Security makes any payment under the Policy or to any other
circumstances relating to the Notes, or any provision being made for payment of
the Notes prior to maturity.
Section 2.04. Reimbursement Obligations.
-------------------------
(a) In consideration of the issuance of the Policy by Financial
Security, Financial Security shall be entitled to reimbursement by the
Issuer from the Trust Property, pursuant to the terms hereof, the Indenture
and the Sale and Servicing Agreement, for any payment made under the
Policy, which reimbursement shall be due and payable to Financial Security
on the date that any amount is to be paid pursuant to a Notice for Payment
(as defined in the Policy). Such reimbursement shall be made in accordance
with the terms hereof and of the Indenture, in an amount equal to the sum
of all amounts paid or previously paid that remain unpaid under the Policy,
together with interest on any and all amounts remaining unpaid (to the
extent permitted by law, if in respect of any unpaid 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 Prime Rate
from time to time in effect plus 2.0%.
(b) Anything in Section 2.04(a) to the contrary notwithstanding,
Financial Security shall be entitled to reimbursement (to the extent such
reimbursement and related interest has not previously been paid by payment
to Financial Security from the Trust Property) from (i) the Issuer, for
payments made under the Policy arising as a result of the Issuer's failure
to make any payment or deposit with respect to a Receivable required to be
made pursuant to Section 3.2 of the Sale and Servicing Agreement, together
with interest on any and all such amounts remaining unpaid (to the extent
permitted by law, if in respect of any unpaid amounts representing
interest) from the date such amounts
16
became due until paid in full (after as well as before judgment), at a rate
of interest equal to the Prime Rate from time to time in effect plus 2.0%,
and (ii) the Servicer, for payments made under the Policy arising as a
result of the Servicer's failure to make any deposit, including without
limitation, a deposit required to be made pursuant to Section 4.7 of the
Sale and Servicing Agreement, together with interest on any and all such
amounts remaining unpaid (to the extent permitted by law, if in respect of
any unpaid 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 Prime Rate from time to time in effect plus 2.0%
(provided, however, that a successor Security for the failure of its
-------- -------
to the Servicer shall under no circumstances be liable to Financial
predecessor Servicer to so make a deposit).
Section 2.05. Assignment and Other Rights upon Payments under the
---------------------------------------------------
Policy.
------
(a) In consideration of the issuance of the Policy by Financial
Security, in the case of any payment made by or on behalf of Financial
Security under the Policy, in addition to and not by way of limitation of,
any of the rights and remedies of Financial Security hereunder, under the
Policy or under the Indenture with respect to such payment, each of the
Issuer, TFCRC III and TFC hereby acknowledges and consents to the
assignment by the Trustee, on behalf of the Noteholders, to Financial
Security in accordance with the terms of the relevant Notice for Payment
(as such term is defined in the Policy):
(i) the rights of the Noteholders with respect to the Notes and the
Trust Property, to the extent of any such payment under the
Policy; and
(ii) the rights of the Trustee and each Noteholder in the conduct of
any Insolvency Proceeding relating to any Preference Event (as
such terms are defined in the Policy), including, without
limitation, all rights of any party to an adversary proceeding
or action with respect to any court order issued in connection
with any such Insolvency Proceeding.
(b) The rights and remedies of Financial Security described in
clause (a) above are in addition to, and not in limitation of, rights of
subrogation and other rights and remedies otherwise available to Financial
Security in respect of payments under the Policy. The Trustee shall take
such action and deliver such instruments as may be reasonably requested or
required by Financial Security to effectuate the purpose or provisions of
this Section 2.05.
Section 2.06. Subrogation; Further Assurances.
--------------------------------
(a) The interests, rights and remedies of Financial Security described in
this Article II are in addition to, and not in lieu of, Financial
Security's equitable rights of subrogation, and Financial Security
reserves all of such rights. Each of the Issuer, TFCRC III and TFC
agrees to take, or cause to be taken, all actions deemed desirable by
Financial Security to preserve, enforce, perfect or maintain the
perfection in
17
Financial Security's favor of such interests, rights and remedies and
such equitable rights of subrogation.
(b) For the avoidance of doubt, the parties hereto acknowledge and agree
that the receipt of any payment under the Policy shall not constitute
(x) a reduction of any unpaid amounts of principal or interest of
Notes outstanding under the Indenture or (y) otherwise discharge any
other obligations whatsoever of the Issuer under the Indenture.
(c) Each of the Issuer, TFCRC III and TFC agrees to promptly and duly
take, execute, acknowledge and deliver such further acts, documents,
instruments and assurances as Financial Security may from time to time
reasonably request to more effectively evidence any rights to
assignment or subrogation under this Article II, and to protect and
perfect all of Financial Security's other rights as against the
Issuer, TFCRC III and TFC, as the case may be.
Section 2.07. Indemnification by TFC; Conduct of Actions or Proceedings;
----------------------------------------------------------
Contribution.
------------
(a) In addition to any and all rights of reimbursement,
indemnification, subrogation and any other rights pursuant hereto or under
law or in equity, TFC agrees to pay, and to protect, indemnify and save
harmless, Financial Security and its officers, directors, shareholders,
employees, agents, assignees, participants, reinsurers and each Person, if
any, who controls Financial Security within the meaning of either Section
15 of the Securities Act or Section 20 of the Securities Exchange Act
(individually, an "Indemnified Party" and, collectively, the "Indemnified
Parties"), from and against any and all claims, losses, liabilities
(including penalties), actions, suits, judgments, demands, damages, costs
or expenses (including, without limitation, reasonable fees and expenses of
attorneys, consultants and auditors and reasonable costs of investigations)
of any nature arising out of or relating to the transactions contemplated
by the Transaction Documents by reason of:
(i) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer, employee
or agent of the Issuer, TFC, the Servicer, the Parent, TFCRC III,
the Seller, as the case may be; or
(ii) the breach by the Issuer, TFC, the Servicer, the Parent, TFCRC
III, or the Seller of any representation, warranty or covenant
under any of the Transaction Documents, or the occurrence, in
respect of the Issuer, TFC, the Servicer, the Parent, TFCRC III,
or the Seller, under any of the Transaction Documents of any
"default," "event of default" or similar event (howsoever
designated), or any event which, with the giving of notice or the
lapse of time or both, would constitute any "event of default" or
similar event (howsoever designated); provided, however, it is
-------- -------
understood and agreed that the sole remedy with respect to a
breach of representations and warranties pursuant to Section 3.1
of the Sale and Servicing Agreement shall be the repurchase of
Receivables pursuant to
18
Section 3.2 of the Sale and Servicing Agreement, subject to the
conditions contained therein, or to enforce the obligation of TFC
to TFCRC III to repurchase such Receivables pursuant to the
Purchase Agreement; provided, further, it is understood and
-------- -------
agreed that the sole remedy with respect to the breach of any of
the covenants set forth in Sections 4.5(a) or 4.6(a) of the Sale
and Servicing Agreement shall be the repurchase of Receivables
pursuant to Section 4.7 of the Sale and Servicing Agreement,
subject to the conditions contained therein; provided further,
----------------
however, that TFC shall indemnify Financial Security and each of
-------
the other Indemnified Parties against all costs, expenses,
losses, damages, claims and liabilities, including reasonable
fees and expenses of counsel, which may be asserted against or
incurred by it as a result of third party claims arising out of
the events or facts giving rise to any such breach of such
covenant.
(b) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against the Indemnified Parties
in respect of which indemnity may be sought from TFC hereunder, Financial
Security shall promptly notify TFC in writing, and TFC shall assume the
defense thereof, including the employment of counsel satisfactory to
Financial Security and the payment of all reasonable expenses. An
Indemnified Party (including Financial Security) 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 TFC if (i) TFC has agreed to pay such fees and expenses, (ii) TFC shall
have failed to assume the defense of such action or proceeding and employ
counsel satisfactory to Financial Security 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 TFC, and the
Indemnified Party shall have been advised by counsel that (A) there may be
one or more legal defenses available to it which are different from or
additional to those available to TFC and (B) the representation of TFC and
the Indemnified Party by the same counsel would be inappropriate or
contrary to prudent practice (in which case, if the Indemnified Party
notifies TFC in writing that it elects to employ separate counsel at the
expense of TFC, TFC 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 TFC 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 Financial
Security). TFC 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 TFC, but, if settled with its written
consent, or if there be a final judgment for the plaintiff in any such
action or proceeding with respect to which TFC shall have received notice
in accordance with this subsection (b), TFC agrees to indemnify and hold
the Indemnified Parties harmless from and against any loss or liability by
reason of such settlement or judgment.
19
(c) To provide for just and equitable contribution, if the
indemnification provided by TFC is determined to be unavailable for any
Indemnified Party (other than due to application of this Section), TFC
shall contribute to the losses incurred by the Indemnified Party on the
basis of the relative fault of TFC, on the one hand, and the Indemnified
Party, on the other hand.
Section 2.08. Indemnification by TFCRC III; Conduct of Actions or
---------------------------------------------------
Proceedings; Contribution.
-------------------------
(a) In addition to any and all rights of reimbursement,
indemnification, subrogation and any other rights pursuant hereto or under
law or in equity, TFCRC III agrees to pay, and to protect, indemnify and
save harmless the Indemnified Parties, from and against any and all claims,
losses, liabilities (including penalties), actions, suits, judgments,
demands, damages, costs or expenses (including, without limitation,
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) of any nature arising out of or
relating to the transactions contemplated by the Transaction Documents by
reason of:
(i) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer, employee
or agent of TFCRC III; or
(ii) the breach by TFCRC III of any representation, warranty or
covenant under any of the Transaction Documents, or the
occurrence, in respect of TFCRC III, under any of the Transaction
Documents of any "default," "event of default" or similar event
(howsoever designated), or any event which, with the giving of
notice or the lapse of time or both, would constitute any "event
of default" or similar event (howsoever designated); provided,
--------
however, it is understood and agreed that the sole remedy with
-------
respect to a breach of representations and warranties pursuant to
Section 3.1 of the Sale and Servicing Agreement shall be the
repurchase of Receivables pursuant to Section 3.2 of the Sale and
Servicing Agreement, subject to the conditions contained therein,
or to enforce the obligation of TFC to repurchase such
Receivables pursuant to the Purchase Agreement;
(b) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against the Indemnified Parties
in respect of which indemnity may be sought from TFCRC III hereunder,
Financial Security shall promptly notify TFCRC III in writing, and TFCRC
III shall assume the defense thereof, including the employment of counsel
satisfactory to Financial Security and the payment of all reasonable
expenses. An Indemnified Party shall have the right to employ separate
counsel in any such action and to participate in the defense thereof at the
expense of the Indemnified Party; provided, however, that the fees and
-------- -------
expenses of such separate counsel shall be at the expense of TFCRC III if
(i) TFCRC III has agreed to pay such fees and expenses, (ii) TFCRC III
shall have failed to assume the defense of such action or proceeding and
employ counsel satisfactory to Financial Security in any such action or
proceeding or (iii) the named parties to any such action or proceeding
(including any
20
impleaded parties) include both the Indemnified Party and TFCRC III, and
the Indemnified Party shall have been advised by counsel that (A) there may
be one or more legal defenses available to it which are different from or
additional to those available to TFCRC III and (B) the representation of
TFCRC III and the Indemnified Party by the same counsel would be
inappropriate or contrary to prudent practice (in which case, if the
Indemnified Party notifies TFCRC III in writing that it elects to employ
separate counsel at the expense of TFCRC III, TFCRC III 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 TFCRC III 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 Financial Security). TFCRC III 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 TFCRC III, but, if settled with its written consent, or if
there be a final judgment for the plaintiff in any such action or
proceeding with respect to which TFCRC III shall have received notice in
accordance with this subsection (b), TFCRC III agrees to indemnify and hold
the Indemnified Parties harmless from and against any loss or liability by
reason of such settlement or judgment.
(c) To provide for just and equitable contribution, if the
indemnification provided by TFCRC III is determined to be unavailable for
any Indemnified Party (other than due to application of this Section),
TFCRC III shall contribute to the losses incurred by the Indemnified Party
on the basis of the relative fault of TFCRC III, on the one hand, and the
Indemnified Party, on the other hand.
Section 2.09. Other Payment Obligations.
-------------------------
(a) Legal Fees. On the Date of Issuance, TFC agrees to pay to Financial
----------
Security all reasonable out-of-pocket legal fees and disbursements
incurred by Financial Security in connection with the negotiation,
preparation, execution and delivery of the Private Placement
Memorandum, the Transaction Documents and all other documents,
instruments and agreements delivered with respect thereto.
(b) Rating Agency Fees. The initial fees of S&P and Moody's with respect
------------------
to the Notes and the transactions contemplated hereby shall be paid by
TFC in full on the date of Issuance. Each of TFC and the Issuer agrees
to pay all periodic and subsequent fees of S&P or Moody's with respect
to, and directly allocable to, the Notes and the transactions
contemplated hereby. The fees for any other rating agency shall be
paid by the party requesting such other agency's rating, unless such
other agency is a substitute for S&P or Moody's in the event that S&P
or Xxxxx'x is no longer rating the Notes, in which case the cost for
such substitute agency shall be paid by each of TFC and the Issuer.
(c) Accountants' and Auditors' Fees. In the event that Financial
-------------------------------
Security's auditors are required to provide information or any consent
in connection with the Offering
21
Document prepared on or prior to the Date of Issuance, any reasonable
fees therefor shall be paid by TFC. Each of TFC and the Issuer shall
pay on demand any additional fees of Financial Security's auditors
payable in respect of any Offering Document, the Notes or the
transactions contemplated hereby that are incurred after the Date of
Issuance.
(d) Enforcement and Modifications. Each of TFC and the Issuer agrees to
-----------------------------
pay to Financial Security any and all out-of-pocket charges, fees,
costs and expenses (including, without limitation, reasonable fees and
expenses of legal counsel and accountants) reasonably incurred by
Financial Security in connection with (i) in the event of payments
under the Policy, any accounts established to facilitate payments
under the Policy, to the extent Financial Security has not been
immediately reimbursed on the date that any amount is paid by
Financial Security under the Policy, or other administrative expenses
relating to such payments under the Policy, (ii) the enforcement,
defense or preservation of any rights of Financial Security, including
but not limited to defending, monitoring or participating in any
litigation or proceeding (including any insolvency or bankruptcy
proceeding commenced by or against the Issuer, the Servicer, the
Parent, TFCRC III or TFC, as the case may be) relating to any of the
Transaction Documents, any party to any of the Transaction Documents
or to the Transaction, (iii) any amendment, modification, waiver or
any similar action, with respect to, or related to, any Transaction
Document or the Transaction, whether or not executed or completed
and/or (iv) any review or investigation made by Financial Security in
those circumstances where the approval or consent of Financial
Security is sought under any of the Transaction Documents.
(e) Third Party Advances. Each of TFC and the Issuer agrees to pay to
--------------------
Financial Security the amount of any and all payments made by
Financial Security on behalf of, or advanced to, TFC, in its capacity
as Servicer, or the Trustee, including, without limitation, any
amounts payable by TFC, in its capacity as Servicer, or the Trustee
pursuant to the Notes or any other Transaction Documents; and any
payments made by Financial Security as, or in lieu of, any servicing,
management, trustee, custodial or administrative fees payable, in the
sole discretion of Financial Security to third parties in connection
with the Transaction.
(f) No Obligation to Seek Reimbursement. All amounts payable under this
-----------------------------------
Section 2.09 are to be immediately due and payable without demand, in
full, without any requirement on the part of Financial Security or any
other Person to seek reimbursement of such amounts from any other
source of reimbursement or indemnity, or to allocate such amount to
any other transaction that may have benefited from the expenditure of
such amounts.
Section 2.10. Payments, Generally.
-------------------
(a) Interest. Interest shall accrue and be payable in respect of any
--------
amounts not paid when due under this Insurance Agreement, 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 Prime Rate from
time to time in effect plus 2.0%. All amounts in respect of interest
22
payable under this Insurance Agreement shall be calculated on the
basis of a 360-day year for the actual number of days elapsed, and
with respect to all amounts payable pursuant to Sections 2.03 or
2.04(a) hereof shall be payable in accordance with the Indenture and
the Sale and Servicing Agreement, or to the extent payable pursuant to
any other Section herein, payable on demand.
(b) Certain Obligations Not Recourse to TFC. Notwithstanding any provision
---------------------------------------
of this Article II to the contrary, the payment obligations provided
in Section 2.09(d)(ii) and 2.09(e) (but only to the extent of advances
to the Trustee in respect of payments on the Notes), in each case, to
the extent that such payment obligations do not arise from any failure
or default in performance by the Parent, TFC, or TFCRC III of any of
its obligations under the Transaction Documents, and any interest on
the foregoing in accordance with Section 2.10(a), shall not be
recourse to TFC, but shall be payable in the manner and in accordance
with priorities provided in the Sale and Servicing Agreement. For the
avoidance of doubt, all obligations of TFC hereunder shall constitute
amounts owing under this Insurance Agreement and shall be payable in
the manner and in accordance with the priorities provided in the Sale
and Servicing Agreement with respect to such amounts.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties with respect to TFC and
------------------------------------------------------
TFCRC III. Each of TFC and TFCRC III represents and warrants, as of the Closing
---------
Date, with respect to TFC and TFCRC III (and to the extent specifically set
forth below, with respect to the Issuer), that:
(a) Due Organization and Qualification. (i) TFC is a corporation,
----------------------------------
duly organized, validly existing and in good standing under the laws of
Virginia. TFC 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, in each
jurisdiction in which the failure to be so qualified or to obtain such
approvals might result in a Material Adverse Change. (ii) TFCRC III is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware. TFCRC III 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, in each jurisdiction in which the failure to be so
qualified or to obtain such approvals might result in a Material Adverse
Change.
(b) Power and Authority. Each of TFC and TFCRC III has all necessary
-------------------
corporate 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 and has full
power and authority to sell and assign the
23
Receivables as contemplated by the Transaction Documents and to consummate
the Transaction.
(c) Due Authorization. The execution, delivery and performance of
-----------------
the Transaction Documents by each of TFC and TFCRC III has been duly
authorized by all necessary corporate action and does not require any
additional approvals or consents or other action by, or any notice to, or
filing with, any Person, including, without limitation, any governmental
entity or any of its stockholders.
(d) Noncontravention. None of the execution and delivery of the
----------------
Transaction Documents by TFC or TFCRC III, the consummation of the
transactions contemplated thereby nor the satisfaction of the terms and
conditions of the Transaction Documents,
(i) conflicts with or results in any material breach or violation
of any provision of the Certificate of Incorporation or Bylaws
of TFC or TFCRC III, as the case may be, or any law, rule,
regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability
to TFC or TFCRC III, as the case may be, or any of their
respective properties, including regulations issued by an
administrative agency or other governmental authority having
supervisory powers over TFC or TFCRC III, as the case may be,
(ii) constitutes or will constitute a default by TFC or TFCRC III,
as the case may be, under or a material breach of any provision
of any loan agreement, mortgage, indenture or other agreement
or instrument to which TFC or TFCRC III is a party or by which
it, or any of its or their properties is, or may be, bound or
affected, or
(iii) results in or requires the creation of any Lien upon or in
respect of any of the assets of TFC or TFCRC III except as
otherwise expressly contemplated by the Transaction Documents.
(e) Legal Proceedings. Other than as stated in the Private
-----------------
Placement Memorandum, there is no action, proceeding or investigation
pending, or to the best knowledge of TFC or TFCRC III after reasonable
inquiry, threatened by or before any court, regulatory body, governmental
or administrative agency or arbitrator against or affecting TFC or TFCRC
III, or any properties or rights of TFC or TFCRC III, including without
limitation, the Receivables, which might result in a Material Adverse
Change with respect to TFC or TFCRC III.
(f) Valid and Binding Obligations. Each of the Transaction
-----------------------------
Documents to which either TFC or TFCRC III is a party when executed and
delivered by TFC or TFCRC III, as the case may be, will constitute the
legal, valid and binding obligations of such Person, enforceable in
accordance with their respective terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and general equitable
principles. The Certificate, when executed, authenticated and delivered in
accordance with the Trust
24
Agreement, will be validly issued and outstanding and entitled to the
benefits of the Trust Agreement and will evidence the entire beneficial
ownership interest in the Issuer. The Notes when executed, authenticated
and delivered in accordance with the Indenture, will be entitled to the
benefits of the Indenture and will constitute legal, valid and binding
obligations of the Issuer, enforceable in accordance with their terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the enforcement of creditors' rights
generally or general equitable principles (whether in a proceeding at law
or in equity) and except to the extent that rights to indemnity and
contribution may be limited by public policy.
(g) ERISA. Each of TFC and TFCRC III is in compliance with ERISA
-----
and has not incurred and does not reasonably expect to incur, any
liabilities to the PBGC under ERISA in connection with any Plan or
Multiemployer Plan.
(h) Accuracy of Information. None of the Transaction Documents
-----------------------
nor any of the Provided Documents contain any statement of a material fact
with respect to TFC or TFCRC III or the Transaction that was untrue or
misleading in any material respect when made. Since the furnishing of the
Provided Documents, there has been no change, nor any development or event
involving a prospective change known to TFC or TFCRC III, that would render
any of the Provided Documents untrue or misleading in any material respect.
There is no fact known to TFC or TFCRC III which has a material possibility
of causing a Material Adverse Change with respect to either of TFC or TFCRC
III, or which has a material possibility of impairing the value or
marketability of the Receivables, taken as a whole, or decreasing the
possibility that amounts due in respect of the Receivables will be
collected as due.
(i) Compliance With Securities Laws. The Notes have not been
-------------------------------
offered or sold in any manner that would render the issuance and sale of
the Notes a violation of the Securities Act or any state securities or
"Blue Sky" laws or require registration pursuant thereto, nor has any
Person been authorized to act in such manner. No registration under the
Securities Act is required for the sale of the Notes as contemplated by the
Transaction Documents, assuming the accuracy of the Purchaser's
representations and warranties set forth in the Purchase Agreement, and
satisfaction by the Placement Agent of its obligations set forth in the
Placement Agency Agreement. Without limitation of the foregoing, the
Offering Document does not contain any untrue statement of a material fact
and does not omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(j) Transaction Documents. Each of the representations and
---------------------
warranties of TFC or TFCRC III contained in the Transaction Documents is
true and correct in all material respects and each of TFC or TFCRC III
hereby makes each such representation and warranty made by it to, and for
the benefit of, Financial Security as if the same were set forth in full
herein.
(k) No Consents. No consent, license, approval or authorization
-----------
from, or registration, filing or declaration with, any regulatory body,
administrative agency, or
25
other governmental instrumentality, nor any consent, approval, waiver or
notification of any creditor, lessor or other nongovernmental person, is
required in connection with the execution, delivery and performance by TFC
or TFCRC III of this Insurance Agreement or of any other Transaction
Document to which such Person is a party, except (in each case) as have
been obtained and are in full force and effect.
(l) Compliance With Law. Etc. No practice, procedure or policy
-------------------------
employed or proposed to be employed by TFC or TFCRC III in the conduct of
their respective businesses violates any law, regulation, judgment,
agreement, order or decree applicable to it which, if enforced, would
result in a Material Adverse Change with respect to such Person.
(m) Special Purpose Entity.
----------------------
(i) The capital of TFCRC III is adequate for the business and
undertakings of TFCRC III.
(ii) Other than with respect to the purchase by TFC of the stock of
TFCRC III, and as provided in this Insurance Agreement and the
Transaction Documents, TFCRC III is not engaged in any business
transactions with TFC.
(iii) At least two directors of TFCRC III shall be persons who are
not, and will not be, a director, officer, employee or holder
of any equity securities of TFC or any of its affiliates or
subsidiaries.
(iv) The funds and assets of TFCRC III are not, and will not be,
commingled with the funds of any other person.
(v) The Bylaws of TFCRC III require it to maintain (A) correct and
complete minute books and records of account, and (B) minutes
of the meetings and other proceedings of its shareholders and
board of directors.
(n) Solvency: Fraudulent Conveyance. Each of TFC and TFCRC III is
--------------------------------
solvent, is able to pay its debts as they become due and will not be
rendered insolvent by the Transaction and, after giving effect to such
Transaction, neither TFC nor TFCRC III will be left with an unreasonably
small amount of capital with which to engage in its business. Neither TFC
nor TFCRC III intends to incur, or believes that it has incurred, debts
beyond its ability to pay such debts as they mature. Neither TFC nor TFCRC
III contemplates the commencement of insolvency, bankruptcy, liquidation or
consolidation proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of TFC or TFCRC III, as
the case may be, or any of their respective assets. The amount of
consideration being received by TFCRC III upon the sale of the Receivables
to the Issuer constitutes reasonably equivalent value and fair
consideration for the Receivables. TFCRC III is not selling the Receivables
to the Issuer, as provided in the Transaction Documents, with any intent to
hinder, deal or defraud any of TFC's creditors.
26
(o) Good Title; Valid Transfer: Absence of Liens: Security
--------------------------------------------------------
Interest.
--------
(i) Immediately prior to the pledge of the Collateral to the Trust
Collateral Agent pursuant to the Indenture, the Issuer was the
owner of, and had good and marketable title to, such property
free and clear of all Liens and Restrictions on
Transferability, and had or will have had full right, power and
lawful authority to assign, transfer and pledge such
Receivables. The Indenture constitutes a valid pledge of the
Collateral to the Trust Collateral Agent and the Trust
Collateral Agent shall have a valid and perfected first
priority security interest in the Collateral, free and clear of
all Liens and Restrictions on Transferability.
(ii) Immediately prior to the transfer of any Receivables to the
Issuer pursuant to the Sale and Servicing Agreement, TFCRC III
was or will have been the owner of, and had good and marketable
title to, such property free and clear of all Liens and
Restrictions on Transferability, and had or will have had full
right, corporate power and lawful authority to assign, transfer
and pledge such Receivables. In the event that a transfer of
the Receivables by TFCRC III to the Issuer is characterized as
other than a sale, such transfer shall be characterized as a
secured financing, and the Issuer shall have a valid and
perfected first priority security interest in such Receivables
free and clear of all Liens and Restrictions on
Transferability.
(iii) Immediately prior to the sale of the Receivables to TFCRC III
pursuant to the Purchase Agreement, TFC was or will have been
the owner of, and had good and marketable title to, the
Receivables being transferred by such party free and clear of
all Liens and Restrictions on Transferability, and had or will
have had full right, corporate power and lawful authority to
assign, transfer and pledge such Receivables. In the event that
a transfer of the Receivables by TFC to TFCRC III is
characterized as other than a sale, such transfer shall be
characterized as a secured financing, and TFCRC III shall have
a valid and perfected first priority security interest in such
Receivables free and clear of all Liens and Restrictions on
Transferability.
(p) Taxes. Each of TFC and TFCRC III has (i) filed all tax returns
-----
which are required to be filed in any jurisdiction and (ii) paid all taxes,
assessments, fees and other governmental charges against TFC or TFCRC III
or any of the properties, income or franchise of TFC or TFCRC III, to the
extent that such taxes have become due, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which it has set aside adequate
reserves on its books in accordance with GAAP and which proceedings have
not given rise to any Lien. To the best of the knowledge of TFC and TFCRC
III, all such tax returns were true and correct in all material respects
and neither of TFC nor TFCRC III knows of any proposed material additional
tax assessment against it nor any basis therefor. Any taxes, assessments,
fees and other governmental charges payable by TFC or TFCRC III in
connection with the Transaction, the execution and delivery of the
Transaction
27
Documents and the issuance of the Notes have been paid or shall have been
paid at or prior to Closing Date.
(q) Private Placement Memorandum. As of the Closing Date, neither
----------------------------
the Private Placement Memorandum nor any amendment thereof or supplement
thereto (other than the Financial Security Information and the Placement
Agent Information) contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(r) Pledge of Shares. The shares of stock of TFCRC III which have
----------------
been pledged pursuant to the Stock Pledge Agreement constitute all of the
issued and outstanding shares of stock of TFCRC III.
(s) Investment Company. Neither TFC nor TFCRC III is an "investment
------------------
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act, and none of the execution, delivery
or performance of obligations under the Agreement or any of the Transaction
Documents or the consummation of any of the transactions contemplated
thereby will violate any provision of the Investment Company Act, or any
rule, regulation or order issued by the Securities and Exchange Commission
thereunder.
(t) No Restrictions on TFCRC III Affecting Its Business. TFCRC III
---------------------------------------------------
is not a party to any contract or agreement, or subject to any charter or
other corporate restriction which materially and adversely affects it
business.
(u) Perfection of Security Interest. All filings and recordings as
-------------------------------
may be necessary to perfect the interest of the Issuer in the Receivables
have been accomplished and are in full force and effect. TFCRC III will
from time to time, at its own expense, execute and file such additional
financing statements (including continuation statements) as may be
necessary to ensure that at any time, the interest of the Issuer (and the
priority of such interest) in all of the Receivables is fully protected.
(v) Ownership of TFCRC III. 100% of the issued and outstanding
----------------------
shares of capital stock of TFCRC III are directly owned (both beneficially
and of record) by TFC. Such shares are validly issued, fully paid and
nonassessable and no one other than TFC has any options, warrants or other
rights to acquire shares of capital stock of and from TFCRC III.
(w) No Broker, Finder or Financial Adviser Other Than Rothschild.
------------------------------------------------------------
Neither TFCRC III nor any of its officers, directors, employees or agents
has employed any broker, finder or financial adviser other than Rothschild
Inc. or incurred any liability for fees or commissions to any person other
than Rothschild Inc. in connection with the offering, issuance or sale of
the Notes.
(x) Rating Agencies. The information supplied by TFC or TFCRC III to
---------------
each of the Rating Agencies in connection with obtaining a rating for the
Notes did not contain
28
any untrue statement of a material fact or omit to state any material fact
required to be stated in order to make such information not misleading.
(y) No Violation of Exchange Act or Regulations T, U or X. None of
-----------------------------------------------------
the transactions contemplated in the Transaction Documents (including the
use of the proceeds from the sale of the Notes and the pledge of the shares
of TFCRC III under the Stock Pledge Agreement) will result in a violation
of Section 7 of the Securities and Exchange Act, or any regulations issued
pursuant thereto, or in a violation of any of Regulations T, U and X of the
Board of Governors of the Federal Reserve System.
(z) Financial Statements. The Financial Statements of TFC, copies of
--------------------
which have been furnished to Financial Security, (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 TFC as of the dates and for the periods indicated, and
(iii) have been prepared in accordance with GAAP 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. Except as disclosed in the
Financial Statements, TFC is not subject to any contingent liabilities or
commitments that, individually or in the aggregate, have a material
possibility of causing a Material Adverse Change with respect to TFC.
Section 3.02. 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 duly formed
----------------------------------
and validly existing as a Delaware statutory business trust and is 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, in each
jurisdiction in which the failure to be so qualified or to obtain such
approvals would render any Receivable or Transaction Document unenforceable
in any material respect or would otherwise cause a Material Adverse Change
to occur with respect to the Transaction.
(b) Power and Authority. The Issuer has all necessary trust 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 and has full power and
authority to sell and assign the Receivables as contemplated by the
Transaction Documents and to consummate the Transaction.
(c) Due Authorization. The execution, delivery and performance of the
-----------------
Transaction Documents by the Issuer have been duly authorized by all
necessary trust action and do not require any additional approvals or
consents or other action by, or any notice to or filing with, any Person,
including, without limitation, any governmental entity.
29
(d) Noncontravention. None of the execution and delivery of the
----------------
Transaction Documents by the Issuer, the consummation of the transactions
contemplated thereby nor the satisfaction of the terms and conditions of
the Transaction Documents,
(i) conflicts with, or results in any material breach or violation
of, any provision of the Certificate or the Trust Agreement, or
any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award currently in effect having
applicability to the Issuer or its property, including
regulations issued by an administrative agency or other
governmental authority having supervisory powers over the
Issuer,
(ii) constitutes, or will constitute, a material default by the
Issuer under, or a material breach of, any provision of any
loan agreement, mortgage, indenture or other agreement or
instrument to which the Issuer is a party or by which it or any
of its property is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or in
respect of any of the assets of the Issuer, except as otherwise
expressly contemplated by the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding, suit or
-----------------
investigation by or before any court, governmental or administrative agency
or arbitrator against or affecting the Issuer, or any properties or rights
of the Issuer, pending or, to the knowledge of the Issuer, threatened,
which, in any case, if decided adversely, would result in a Material
Adverse Change with respect to the Issuer, the Certificate or the Notes.
(f) Valid and Binding Obligations. Each of the Transaction
-----------------------------
Documents to which the Issuer is a party when executed by the Owner Trustee
on behalf of the Issuer, will constitute the legal, valid and binding
obligations of the Issuer enforceable against the Issuer in accordance with
their respective terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally or general equitable principles
(whether in a proceeding at law or in equity) and except to the extent that
rights to indemnity and contribution may be limited by public policy. The
Certificate, when executed, authenticated and delivered in accordance with
the Trust Agreement, will be validly issued and outstanding and entitled to
the benefits of the Trust Agreement and will evidence the entire beneficial
ownership interest in the Issuer. The Notes when executed, authenticated
and delivered in accordance with the Indenture, will be entitled to the
benefits of the Indenture and will constitute legal, valid and binding
obligations of the Issuer, enforceable in accordance with their terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the enforcement of creditors' rights
generally or general equitable principles (whether in a proceeding at law
or in equity) and except to the extent that rights to indemnity and
contribution may be limited by public policy.
(g) Accuracy of Information. None of the Transaction Documents,
-----------------------
nor any of the Provided Documents, contain any statement of a material fact
with respect to the
30
Issuer or the Transaction that was untrue or misleading in any material
respect when made. Since the furnishing of the Provided Documents, there
has been no change, that would render any of the Provided Documents untrue
or misleading in any material respect. There is no fact known to the Issuer
which has a material possibility of causing a Material Adverse Change with
respect to the Issuer or which has a material possibility of impairing the
value or marketability of the Receivables, taken as a whole, or decreasing
the possibility that amounts due in respect of the Receivables will be
collected as due.
(h) Compliance With Securities Laws; Offering Document. The Notes
--------------------------------------------------
have not been offered or sold in any manner that would render the issuance
and sale of the Notes a violation of the Securities Act or any state
securities or "Blue Sky" laws or require registration pursuant thereto, nor
has any Person been authorized to act in such manner. No registration under
the Securities Act is required for the sale of the Notes as contemplated by
the Transaction Documents, assuming the accuracy of the Purchaser's
representations and warranties set forth in the Purchase Agreement, and
satisfaction by the Placement Agent of its obligations set forth in the
Placement Agency Agreement. Without limitation of the foregoing, the
Offering Document did not, as of its date, and does not, as of the date
hereof, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they
were made, not misleading.
(i) Transaction Documents. Each of the representations and
---------------------
warranties of the Issuer contained in the Transaction Documents is true and
correct in all material respects and the Issuer hereby makes each such
representation and warranty made by it to, and for the benefit of,
Financial Security as if the same were set forth in full herein.
(j) No Consents. No consent, license, authorization or approval
-----------
from, or registration or other action by, and no notice to or filing or
declaration with, any governmental entity or regulatory body, is required
for the due execution, delivery and performance by the Issuer of the
Transaction Documents or any other material document or instrument to be
delivered thereunder, except (in each case) as have been obtained or the
failure of which to be obtained would not be reasonably likely to cause a
Material Adverse Change with respect to the Transaction.
(k) 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 it which, if enforced, would result in a Material Adverse
Change with respect to the financial condition of such Person.
(l) Special Purpose Entity.
----------------------
(i) The capital of the Issuer is adequate for the business and
undertakings of the Issuer.
31
(ii) Except as contemplated by the Transaction Documents, the Issuer
is not engaged in any business transactions with TFC, the
Parent, TFCRC III or any Affiliate of any of them.
(iii) The Issuer's funds and assets are not, and will not be,
commingled with the funds of any other Person.
(m) Solvency: Fraudulent Conveyance. The Issuer is solvent and will
-------------------------------
not be rendered insolvent by the Transaction and, after giving effect to
such Transaction, the Issuer will not be left with an unreasonably small
amount of capital with which to engage in its business. The Issuer does not
intend to incur, or believe that it has incurred, debts beyond its ability
to pay such debts as they mature. The Issuer does not contemplate the
commencement of insolvency, bankruptcy, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator, conservator,
trustee or similar official in respect of the Issuer or any of its assets.
(n) Perfection of Liens and Security Interest. On the Closing Date,
-----------------------------------------
the Lien and security interest in favor of the Trust Collateral Agent with
respect to the Collateral will be perfected by the filing of financing
statements on Form UCC-1 in each jurisdiction where such recording or
filing is necessary for the perfection thereof, the delivery of the
Receivables Files to the Trust Collateral Agent, and the establishment of
the Collection Account, the Spread Account and the Note Payment Account in
accordance with the provisions of the Transaction Documents, and no other
filings in any jurisdiction or any other actions (except as expressly
provided herein) are necessary to perfect the Trust Collateral Agent's Lien
on and security interest in the Collateral as against any third parties.
(o) Investment Company. The Issuer is not an "investment company"
------------------
or a company "controlled" by an "investment company" within the meaning of
the Investment Company Act, and none of the execution, delivery or
performance of obligations under the Agreement or any of the Transaction
Documents or the consummation of any of the transactions contemplated
thereby by the Issuer or the acquisition by the Issuer of the Receivables
will violate any provision of the Investment Company Act, or any rule,
regulation or order issued by the Securities and Exchange Commission
thereunder.
(p) Collateral. On the Closing Date, the Issuer will have good and
----------
marketable title to each item of other Trust Property conveyed on such date
and will own each such item free and clear of any Lien (other than Liens
contemplated under the Indenture) or any equity or participation interest
of any other Person.
(q) Security Interest in Funds and Investments. Assuming the
------------------------------------------
retention of funds in the Trust Accounts and/or the Spread Account, such
funds will be subject to a valid and perfected, first priority security
interest in favor of the Trust Collateral Agent on behalf of the Trustee
(for the benefit of the Noteholders and Financial Security).^
(r) No Violation of Exchange Act or Regulations T, U or X. None of
-----------------------------------------------------
the transactions contemplated in the Transaction Documents will result in a
violation of
32
Section 7 of the Securities Exchange Act, or any regulations issues
pursuant thereto, or any of Regulations T, U and X of the Board of
Governors of the Federal Reserve System. The Issuer does not own nor does
it intend to carry or purchase any "Margin Security" within the meaning of
said Regulation U, including margin securities originally issued by it or
any "margin stock" within the meaning of said Regulation U.
ARTICLE IV
COVENANTS
Section 4.01. Covenants of TFCRC III and TFC. Each of TFCRC III and TFC
------------------------------
hereby covenants and agrees that during the term of this Insurance Agreement,
unless Financial Security shall otherwise expressly consent in writing (in the
absence of an Insurer Default which shall have occurred and be continuing):
(a) Compliance With Agreements and Applicable Laws. Each of TFCRC
----------------------------------------------
III and TFC shall perform each of its respective obligations under the
Transaction Documents and shall comply with all material requirements of
any law, rule or regulation applicable to it, or that are required in
connection with its performance under any of the Transaction Documents.
Neither TFCRC III nor TFC will cause or permit to become effective any
amendment to or modification of any of the Transaction Documents to which
it is a party, unless Financial Security shall have previously approved in
writing the form of such amendment or modification (provided that such
--------
prior written approval of Financial Security shall not be required in the
event that (x) an Insurer Default shall have occurred and be continuing,
and (y) the proposed amendment or modification shall not have any adverse
effect on Financial Security). Neither TFCRC III nor TFC shall take any
action or fail to take any action that would interfere with the enforcement
of any rights of Financial Security or the Trust Collateral Agent under the
Transaction Documents.
(b) Reports: Other Information. Each of TFCRC III and TFC shall
--------------------------
keep or cause to be kept in reasonable detail books and records of account
of their respective assets and business, and in the case of TFC, which
shall clearly reflect the transfer of the Receivables to TFCRC III, and, in
the case of TFCRC III, which shall clearly reflect the transfer of the
Receivables to the Issuer, and subsequently to the Trust Collateral Agent.
Each of TFCRC III and TFC shall furnish or caused to be furnished to
Financial Security:
(i) Promptly upon receipt thereof, copies of all reports,
statements, certifications, schedules, or other similar items
delivered to or by TFCRC III and TFC pursuant to the terms of
the Transaction Documents and, promptly upon request, such
other data as Financial Security may reasonably request;
provided, however, that neither TFCRC III nor TFC shall be
required to deliver any such items if provision by some other
party to Financial Security is required under the Transaction
Documents unless such other party wrongfully fails to deliver
such item. TFCRC III and TFC shall, upon the reasonable request
of Financial Security, permit Financial Security or its
authorized agents (including, without limitation,
33
any reinsurers of Financial Security appointed by Financial
Security as an agent for such purposes) (A) to inspect its
books and records as they may relate to the Notes, the
Receivables, the obligations of TFCRC III and TFC under the
Transaction Documents, the Transaction and the business of TFC
or TFCRC III; (B) to discuss the affairs, finances and accounts
of TFCRC III and TFC with an officer of each upon Financial
Security's reasonable request; and (C) to discuss the affairs,
finances and accounts of TFCRC III and TFC with its independent
accountants, provided that an officer of such Person 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 such Person. The reasonable fees and expenses of Financial
Security or any such authorized agents shall be for the account
of TFC.
(ii) TFC shall provide or cause to be provided to Financial Security
an executed original copy of each document executed in
connection with the transaction within 30 days after the
Closing Date.
(iii) At least 30 days prior to the implementation thereof, notice of
any material change to the software, hardware or other systems
employed by the Parent or TFC in connection with billing,
collecting or otherwise servicing the Receivables.
(c) Notice of Material Events. TFCRC III and TFC shall promptly
-------------------------
inform Financial Security in writing of the occurrence of any of the
following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation
(A) against TFCRC III or TFC pertaining to the Receivables in
general, (B) with respect to a material portion of the
Receivables, or (C) in which a request has been made for
certification as a class action (or equivalent relief) that
would involve a material portion of the Receivables;
(ii) any change in the location of the principal office of either of
TFCRC III or TFC or any change in the location of the books and
records of TFCRC III or TFC;
(iii) the occurrence of any Trigger Event, Event of Default, Servicer
Termination Event, Default or Insurance Agreement Event of
Default; or
(iv) any other event, circumstance or condition that has resulted,
or which TFCRC III or TFC, as the case may be, reasonably
believes might result, in a Material Adverse Change with
respect to TFCRC III or TFC.
(d) Further Assurances. Each of TFCRC III and TFC will file all
------------------
necessary financing statements, assignments 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 Lien on
34
and security interest in, and all rights of the Trust Collateral Agent, for
the benefit of the Trustee (on behalf of the Noteholders and Financial
Security) with respect to the Receivables, the Collection Account, the Note
Payment Account, the Spread Account, the stock of TFCRC III subject to the
Stock Pledge Agreement and all of the other Collateral. In addition, each
of TFCRC III and TFC shall, upon the request of Financial Security, from
time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, within thirty (30) days of such request, such
amendments hereto and such further instruments and take such further action
as may be reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents or to protect the interest of the
Issuer, the Owner Trustee, the Trustee and Financial Security, in the
Receivables, the Collection Account, the Note Payment Account, the Spread
Account, the stock of TFCRC III subject to the Stock Pledge Agreement and
all of the other Collateral, free and clear of all Liens and Restrictions
on Transferability except as contemplated by the Transaction Documents. In
addition, each of TFCRC III and TFC agrees to cooperate with each of the
Rating Agencies in connection with any review of the Transaction which may
be undertaken by such Rating Agency and after the date hereof.
(e) TFCRC III's Corporate Existence. TFCRC III shall maintain its
-------------------------------
corporate existence and shall at all times continue to be duly organized
under the laws of Delaware, and duly qualified and duly authorized (as
described in Sections 3.01 (a), (b) and (c) hereof, including, but not
limited to, in the Commonwealth of Virginia) and shall conduct its business
in accordance with the terms of its Certificate of Incorporation and
Bylaws.
(f) TFC's Corporate Existence. TFC shall maintain its corporate
-------------------------
existence and shall at all times continue to be duly organized under
applicable law, and duly qualified and duly authorized (as described in
Sections 3.01 (a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its Certificate of Incorporation and Bylaws.
(g) Disclosure Document. Each Offering Document delivered with
-------------------
respect to the Notes shall clearly disclose that the Policy is not covered
by the property/casualty insurance security fund specified in Article 76 of
the New York Insurance Law. In addition, each Offering Document delivered
with respect to the Notes which includes financial statements of Financial
Security prepared in accordance with GAAP shall include the following
statement immediately preceding such financial statements:
The New York State Insurance Department recognizes
only statutory accounting practices for determining
and reporting the financial condition and results of
operations of an insurance company, for determining
its solvency under the New York Insurance Law, and
for determining where its financial condition
warrants the payment of a dividend to its
stockholders. No consideration is given by the New
York State Insurance Department to financial
statements prepared in accordance with
35
generally accepted accounting principles in making
such determinations.
(h) Special Purpose Entity.
----------------------
(i) TFCRC III shall conduct its business solely in its own name
through its duly authorized officers or agents so as not to
mislead others as to the identity of the entity with which
those others are concerned; in particular, TFCRC III shall (A)
require that its employees, if any, identify themselves as
employees of TFCRC III when conducting business of TFCRC III;
(B) use its best efforts to avoid the appearance that it is
conducting business on behalf of any Affiliate thereof or that
its assets are available to pay the creditors of TFC or the
Parent or any Affiliate thereof; (C) maintain at all times
stationary separate from that of any Affiliate; and (D) conduct
all oral and written communications, including, without
limitation, letters, invoices, purchase orders, contracts,
statements and loan applications, solely in the name of TFCRC
III.
(ii) Each of TFC and TFCRC III shall respond to any inquiries made
directly to it with respect to ownership of a Receivable by
stating that TFCRC III acquired such Receivable from TFC, that
TFCRC III contributed such Receivable to the Issuer and that
the Trust Collateral Agent has been granted a security interest
in such Receivable
(iii) TFCRC III shall compensate all employees, consultants and
agents directly or indirectly through reimbursement of TFC,
from TFCRC III's bank accounts, for services provided to TFCRC
III by such employees, consultants and agents and, to the
extent any employee, consultant or agent of TFCRC III is also
an employee, consultant or agent of TFC, allocate the
compensation of such employee, consultant or agent between
TFCRC III and TFC on a basis which reflects the respective
services rendered to TFCRC III and TFC.
(iv) TFCRC III shall keep its assets and liabilities wholly separate
from those of all other entities, including, but not limited to
TFC and the Parent and the Affiliates thereof. TFCRC III shall
not commingle its funds or other assets with those of any of
its Affiliates (other than in respect of items of payment or
funds which may be commingled until deposit into the Collection
Account in accordance with the Sale and Servicing Agreement),
and not hold its assets in any manner that would create an
appearance that such assets belong to any such Affiliate, not
maintain bank accounts or other depository accounts to which
any such Affiliate is an account party, into which such
Affiliate makes deposits or from which any such Affiliate has
the power to make withdrawals, and not act as an agent or
representative of any of its Affiliates in any capacity.
36
(v) TFCRC III shall not guarantee any obligation of any of its
Affiliates nor have any of its obligations guaranteed by any
such Affiliate (either directly or by seeking credit based on
the assets of such Affiliate), or otherwise hold itself out as
responsible for the debts of any Affiliate;
(vi) TFCRC III shall maintain corporate records and books of account
separate from those of TFC or the Parent, and the Affiliates
thereof.
(vii) TFCRC III shall obtain proper authorization from its Board of
Directors of all corporate action requiring such authorization.
Meetings of the Board of Directors of TFCRC III shall be held
not less frequently than one time per annum, and copies of the
minutes of each such board meeting shall be delivered to
Financial Security within 30 days of such meeting.
(viii) TFCRC III shall obtain proper authorization from its
shareholders of all corporate action requiring shareholder
approval. Meetings of the shareholders of TFCRC III shall be
held not less frequently than one time per annum, and copies of
each such authorization and the minutes of each such
shareholder meeting shall be delivered to Financial Security
within 30 days of such authorization or meeting, as the case
may be.
(ix) TFCRC III shall (A) pay its own incidental administrative costs
and expenses from its own funds, (B) allocate all other shared
overhead expenses (including, without limitation, telephone and
other utility charges, the services of shared employees,
consultants and agent, and reasonable legal auditing expenses),
and other items of cost and expense shared between TFCRC III
and any Affiliate thereof, on the basis of actual use to the
extent practicable, and to the extent such allocation is not
practicable, on a basis reasonably related to actual use or the
value of services rendered. TFCRC III shall not permit any of
its Affiliates to pay its operation expenses.
(x) The annual financial statements of each of the Parent, TFC and
TFCRC III shall disclose the effects of the Transactions in
accordance with GAAP and shall disclose that neither the assets
of TFCRC III nor the assets of the Issuer are available to pay
creditors of the Parent or TFC, or any of their other
Affiliates. Without limiting the foregoing, each of the Parent
and TFC shall ensure that any of its consolidated financial
statements have notes to the effect that TFCRC III and the
Issuer are separate entities whose creditors have a claim on
their respective assets prior to those assets becoming
available to its equity holders and to any of their respective
creditors.
(xi) The resolutions, agreements and other instruments of TFCRC III
underlying the transactions described in this Insurance
Agreement and in the other Transaction Documents shall be
continuously maintained by
37
TFCRC III as official records of TFCRC III, separately
identified and held apart from the records of TFC and the
Parent and each affiliate thereof.
(xii) TFCRC III shall at all times have at least two independent
directors who satisfy the definition of Independent Director
provided in its certificate of incorporation, and have at least
one officer responsible for managing its day-to-day business
and manage such business by or under the direction of its board
of directors.
(xiii) TFCRC III shall take such actions as are necessary on its part
to ensure that the facts and assumptions set forth in the non-
consolidation opinion delivered by its counsel remain true and
correct at all times.
(i) Maintenance of Licenses. Each of TFCRC III and TFC shall
-----------------------
maintain all licenses, permits, charters and registrations which are
material to the performance by it of its obligations under this Insurance
Agreement and each other Transaction Document to which it is a party or by
which it is bound.
(j) Transaction Documents. Each of TFCRC III and TFC shall comply
---------------------
with each of the covenants, as applicable, made by it in each of the
Transaction Documents.
(k) Ownership of TFCRC III. TFC shall at all times own 100% of the
----------------------
issued and outstanding shares of capital stock of TFCRC III free and clear
of any Liens.
(l) Civilian Portfolio. TFC shall cause, with respect to each
------------------
calendar quarter ending before January of 2003, the fraction (stated as a
percentage) (A) the numerator of which is the aggregate outstanding
principal balance of Contracts serviced by TFC (including, without
limitation, those Contracts pledged to secure loans to TFC or transferred
by TFC in connection with securitization transactions) as determined as of
the close of business of the last day of the most recently concluded
calendar quarter, and in respect of which the Obligors are not military
personnel and (B) the denominator of which is the aggregate outstanding
principal balance of all such Contracts serviced by TFC as determined as of
the close of business of the last day of such calendar quarter, not to
exceed for such calendar quarter, the percentage set forth opposite such
Monthly Period on Schedule 2 attached hereto and under the heading
----------
"Civilian Percentage Limit.
(m) Access to Records; Discussions with Officers. TFC shall, upon
--------------------------------------------
the reasonable request of Financial Security, permit Financial Security or
its authorized agent (including, without limitation, any reinsurers of
Financial Security appointed by Financial Security as an agent for such
purposes) access to:
(i) the documentation regarding the Receivables, the other Trust
Property, the obligations of TFC under the Transaction
Documents, the business of TFC and the transactions consummated
in connection therewith including, but not limited to, the
accounts, records and computer systems maintained by TFC with
respect thereto; and
38
(ii) any of the properties of TFC, to examine all of its books of
account, records, reports and other papers, to make copies and
extracts therefrom and to discuss its affairs, finances and
accounts with its officers, employees, and independent public
accounts (and by this provision TFC authorizes said accountants
to discuss the finances and affairs of TFC) (in each such case,
it being understood that an officer of TFC shall be entitled to
be present during any such examination and/or discussion).
Such inspections and discussions shall be conducted at such reasonable
times and as often as may be reasonably requested. In each case, such
access shall be afforded without charge but only upon reasonable request
and during normal business hours.
(n) Benefit Plan. Each of TFC and TFCRC III shall comply in all
------------
material respects with the provisions of ERISA, the Code, and all other
applicable laws, and the regulations and interpretations thereunder to the
extent applicable, with respect to each Benefit Plan. Each of TFC and
TFCRC III will not, and will cause any ERISA Affiliate not to:
(i) engage in any non-exempt prohibited transaction (within the
meaning of Code Section 4975 or ERISA Section 406) with respect
to any Benefit Plan which would result in a material liability
to either of TFC or TFCRC III;
(ii) permit to exist any accumulated funding deficiency as defined
in Section 301(a) of ERISA and Section 412(a) of the Code, with
respect to any Benefit Plan which is subject to Section 302(q)
of ERISA or 412 of the Code;
(iii) terminate any Benefit Plan of either of TFC or TFCRC III or any
ERISA Affiliate if such termination would result in any
material liability to either of TFC or TFCRC III or an ERISA
Affiliate; or
(iv) create any defined benefit plan (as defined in ERISA).
(o) Reporting and Accounting Treatment. For reporting and
----------------------------------
accounting purposes, and in its books of account and records, TFCRC III
will treat each transfer of Receivables pursuant to the Sale and Servicing
Agreement as an absolute sale and assignment of TFCRC III's full right,
title and ownership interest in such Receivable and TFCRC III will not
account for or treat the Transactions in any other manner.
(p) Financial Statements: Accountants' Reports: Other Information.
-------------------------------------------------------------
TFC shall keep, or cause to be kept, in reasonable detail books and records
of account of its assets and business, and shall clearly reflect therein
the transfer of the Receivables from TFC to TFCRC III, and from TFCRC III
to the Issuer, and the sale of the Notes to the Noteholders, as a sale of
TFCRC III's respective interests in the Receivables evidenced by the Notes.
TFC shall furnish or cause to be furnished to Financial Security:
39
(i) Annual Financial Statements. As soon as available, and in any
---------------------------
event within 120 days after the close of each fiscal year of
the Parent, the audited consolidated balance sheets of TFC and
the Parent, and the unaudited balance sheets of TFCRC III, in
each case as of the end of such fiscal year, and the audited
consolidated statements of income, shareholders' equity and
cash flows of TFC and the Parent, and the unaudited
consolidated statements of income, shareholders' equity and
cash flows of TFCRC III, as applicable, for such fiscal year,
all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the
preceding fiscal year, in each case prepared in accordance with
GAAP, consistently applied, and in the case of TFC and the
Parent, accompanied by the certificate of independent
accountants (which shall be a nationally recognized firm or
otherwise acceptable to Financial Security) and certified by an
authorized officer of the relevant entity as being complete and
correct in all material respects, and in the case of TFCRC III,
certified by an authorized officer of the TFCRC III as being
complete and correct in all material respects, and in each case
presenting the financial condition and results of operations of
the Parent, TFC or TFCRC III, as applicable, as of the dates
and for the periods indicated, in accordance with GAAP
consistently applied.
(ii) Quarterly Financial Statements. As soon as available, and in
------------------------------
any event within 45 days after the close of the first three
quarters of each fiscal year of TFC and the Parent, the
unaudited consolidated balance sheets of as of the end of each
such quarter and the unaudited consolidated statements of
income and cash flows of TFC and the Parent 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 GAAP, consistently applied (subject
to normal year-end adjustments), and certified by an authorized
officer of TFC as being complete and correct in all material
respects and presenting the financial condition and results of
operations of TFC or the Parent, as applicable, as of the dates
and for the periods indicated, in accordance with GAAP
consistently applied (subject as to interim statements to
normal year-end adjustments).
(iii) Other Information. Promptly upon receipt thereof, copies of all
-----------------
reports, statements, certifications, schedules, or other
similar items delivered to or by TFC pursuant to the terms of
the Transaction Documents and, promptly upon request, such
other data as Financial Security may reasonably request;
provided, however, that TFC shall not be required to deliver
any such items if provision by some other party to Financial
Security is required under the Transaction Documents unless
such other party wrongfully fails to deliver such item. The
reasonable fees and expenses of Financial Security or any such
authorized agents shall be for the account of TFC. In addition,
TFC shall promptly (but in no case more than 30 days following
issuance or receipt by a Commonly Controlled Entity) provide
40
to Financial Security a copy of all correspondence between a
Commonly Controlled Entity and the PBGC, IRS, Department of
Labor or the administrators of a Multiemployer Plan relating to
any Reportable Event or the under-funded status, termination or
possible termination of a Plan or a Multiemployer Plan. The
books and records of TFC will be maintained at the address for
it designated herein for receipt of notices, unless it shall
otherwise advise the parties hereto in writing.
(iv) Closing Documents. TFC shall provide, or cause to be provided,
-----------------
to Financial Security an executed original copy of each
document executed in connection with the Transaction within 30
days after the Closing Date
(q) Agreed Upon Procedures; Reports. (1) TFC shall cause a firm of
-------------------------------
nationally recognized independent certified public accountants (the "Independent
-----------
Accountants"), who may also render other services to TFC and/or to TFCRC III, to
-----------
deliver to the Board of Directors of the Servicer, to the Trustee, the Owner
Trustee, the Trust Collateral Agent and Financial Security (with a copy
delivered to the Rating Agency):
(i) As soon as practical, but in no event later than 45 days after
the delivery by the Servicer of the third Servicer's
Certificate required to be delivered by the Servicer after the
Closing Date pursuant to Section 4.8 of the Sale and Servicing
Agreement, a statement (the "Initial Accountant's Statement"),
in form and substance satisfactory to Financial Security,
reviewing the results of the Independent Accountants'
performance of certain agreed upon procedures with respect to
the Servicer, its reporting and record keeping and the degree
of its compliance with provisions of the Basic Documents
requiring the deposit or remittance of funds by the Servicer to
the Collection Account, substantially to the effect that: (1)
the Independent Accountants have examined the accounts and
records of the Servicer relating to the Receivables (which
records shall be described in one or more schedules to such
statement), (2) such firm has compared the information
contained in the third Servicer's Certificate delivered by the
Servicer pursuant to Section 4.9 of the Sale and Servicing
Agreement with information contained in such accounts and
records for such periods, (3) such firm has traced deposits and
remittances made to the Collection Account by the Servicer for
such periods, and (4) on the basis of the agreed upon
procedures so performed, whether and to what extent (x) the
information contained in such Servicer's Certificates
reconciles with the information contained in such accounts and
records, (y) such accounts and records of the Servicer related
to the Receivables agree to the respective source documents,
and (z) the Servicer has complied with the obligations set
forth in the Basic Documents with respect to the deposits and
remittances made to the Collection Account by the Servicer for
such periods, except for such exceptions as TFC and Financial
Security believe to be immaterial and such other exceptions as
shall be set forth in such statement;
41
(ii) In the event that the Initial Accountant's Statement
indicates a degree of accuracy with respect to the third
Servicer's Certificate deemed by Financial Security to be
unsatisfactory in the exercise of its sole discretion, as
soon as practical after written demand therefor by Financial
Security to TFC and the Independent Accountants (which
demand may be made as frequently as deemed necessary in the
sole discretion of Financial Security), but in no event
later than 30 days after the delivery to Financial Security
by the Servicer of any subsequent Servicer's Certificate
constituting the subject of such demand, a statement (each,
an "Additional Accountant's Statement"), in form and
substance satisfactory to Financial Security, reviewing the
results of the Independent Accountants' performance of
certain agreed upon procedures with respect to then most
recently completed and delivered Servicer's Certificate, and
otherwise covering the same subjects, and having the same
scope, as the Initial Accountant's Statement; provided,
--------
however, that Financial Security shall not demand Additional
-------
Accountant's Statements if and to the extent that no fewer
than three consecutive Additional Accountant's Statements
are deemed by Financial Security, in the exercise of its
sole discretion, to indicate a high degree of accuracy with
respect to the related Servicer's Certificate;
(iii) As soon as practical, but in no event later than 90 days
after the end of each calendar year during the term hereof
(commencing with the calendar year 2001), a statement (each,
an "Annual Accountant's Statement"), in form and substance
satisfactory to Financial Security, reviewing the results of
the Independent Accountants' performance of certain agreed
upon procedures with respect to a sample of (A) no more
than, and in the Insurer's discretion, less than six of the
preceding twelve Servicer's Certificates and (B) no more
than, and in the Insurer's discretion, less than three of
the preceding twelve months' reporting and recordkeeping
practices with respect to the Servicer's compliance with
provisions of the Basic Documents requiring the deposit or
remittance of funds to the Collection Account (in each case,
randomly selected by such Independent Accountants), and
otherwise covering the same subjects, and having the same
scope, as the Initial Accountant's Statement; provided that
--------
each of the three months described in clause (B) shall
constitute a Monthly Period to which one of the six
Servicer's Certificates referred to in clause (A) shall
relate; and
(iv) TFC shall use its best efforts to arrive at a mutually
satisfactory agreement with Financial Security concerning
the agreed upon procedures referred to in each of clauses
(i), (ii) and (iii) above, by no later than November 30,
2000, provided, however, that such procedures will be
-------- -------
substantially the same procedures agreed upon and performed
during calendar year 2000 in connection with TFC's
participation in a securitization transaction pursuant to
which the TFC Asset Backed Notes Series 1999-1 were issued.
42
(2) On or before April 30 (or 120 days after the end of the
Servicer's fiscal year, if other than December 31) of each year, beginning on
April 30, 2001, with respect to the twelve months ended on the immediately
preceding December 31 (or other applicable date) (or such other period as shall
have elapsed from the Closing Date to the date of such certificate) the
financial statements of TFC containing a report of the Independent Accountants
to the effect that such firm has examined the books and records of TFC and that,
on the basis of such examination conducted in compliance with generally accepted
audit standards, such financial statements accurately reflect the financial
condition of TFC, in each case certified by a Responsible Officer of TFC to be
true, accurate and complete copies of such financial statements. The statements
referenced above shall also indicate that the Independent Accountants are
independent of TFC and TFCRC III within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants.
(3) In the event the above-referenced Independent Accountants require
the Trust Collateral Agent to agree to the procedures to be performed by such
firm in any of the reports required to be prepared pursuant to this Section
4.01(q), TFC, in its capacity as Servicer only, shall direct the Trust
Collateral Agent in writing to so agree; it being understood and agreed that the
Trust Collateral Agent will deliver such letter of agreement in conclusive
reliance upon the direction of the Servicer, and the Trust Collateral Agent has
not made any independent inquiry or investigation as to, and shall have no
obligation or liability in respect of, the sufficiency, validity or correctness
of such procedures.
(4) All fees, costs and expenses incurred by Financial Security and
the Trust Collateral Agent in connection with obtaining any of the foregoing
described statements shall be for the sole cost and expense of TFC.
(r) UCC Matters. Within fifteen (15) days of the Closing Date, TFC
-----------
and TFRC shall execute and deliver, an assignment of all of the rights,
title and interest of the Issuer in, to and under (a) the UCC-1 financing
statement, filing no. 000925-7043, filed with the Secretary of State of the
Commonwealth of Virginia, and (b) the UCC-1 financing statement, filing no.
00-1292, filed with the clerk, Circuit Court of the City of Norfolk,
Virginia, to the Trust Collateral Agent.
(s) Maintenance of Licenses. Each of the TFC and TFCRC III shall
-----------------------
maintain all licenses, permits, charges and registrations which are
material to the performance of its obligations under this Insurance
Agreement and each of the Transaction Documents to which it is a party or
by which it is bound.
Section 4.02. Negative Covenants with Respect to TFCRC III and TFC. Each of
----------------------------------------------------
TFCRC III and TFC hereby covenants and agrees that during the term of this
Insurance Agreement, unless Financial Security shall otherwise expressly consent
in writing (in the absence of an Insurer Default which shall have occurred and
be continuing), which consent shall not be unreasonably withheld:
(a) Restrictions on Liens. Neither TFCRC III nor TFC shall, except as
---------------------
contemplated by the Transaction Documents, (i) create, incur or suffer to
exist, or agree to create, incur or suffer to exist, or consent to cause or
permit in the fixture (upon the
43
happening of a contingency or otherwise) the creation, incurrence or
existence of any Lien or Restriction on Transferability of the Receivables,
or (ii) sign or file under the Uniform Commercial Code of any jurisdiction
any financing statement which names TFCRC III or TFC as a debtor, or sign
any security agreement authorizing any secured party thereunder to file
such financing statement, with respect to the Receivables.
(b) Impairment of Rights. Neither TFCRC III nor TFC shall take any
--------------------
action, or fail to take any action, if such action or failure to take
action may reasonably be expected to (i) interfere with the enforcement of
any rights under the Transaction Documents that are material to the rights,
benefits or obligations of the Trustee, the Trust Collateral Agent, the
Noteholders or Financial Security, (ii) result in a Material Adverse Change
with respect to the Receivables, or (iii) impair the ability of TFCRC III
or TFC to perform their respective obligations under the Transaction
Documents.
(c) Waiver. Amendments, Etc. Neither TFCRC III nor TFC shall waive,
------------------------
modify or amend, or consent to any waiver, modification or amendment of,
any of the provisions of any of the Transaction Documents.
(d) Successors. Neither TFCRC III nor TFC shall terminate or
----------
designate, or consent to the termination or designation of, the Servicer,
the Trustee, the Back-up Servicer, the Trust Collateral Agent, the P.O. Box
Owner, the Successor Servicer, the Owner Trustee or any successor thereto.
(e) Creation of Indebtedness: Guarantees. TFCRC III shall not create,
------------------------------------
incur, assume or suffer to exist any Indebtedness. TFCRC III shall not
assume, guarantee, endorse or otherwise be or become directly or
contingently liable for the obligations of any Person by, among other
things, agreeing to purchase any obligation of another Person, agreeing to
advance funds to such Person or causing or assisting such Person to
maintain any amount of capital.
(f) Subsidiaries. TFCRC III shall not form, or cause to be formed,
------------
any Subsidiaries.
(g) Issuance of Stock. TFCRC III shall not issue any shares of
-----------------
capital stock or rights, warrants or options in respect of capital stock or
securities convertible into or exchangeable for capital stock.
(h) No Mergers. TFCRC III shall not consolidate with or merge into
----------
any Person or transfer all or any material amount of their respective
assets to any Person or liquidate or dissolve.
(i) No Related Transactions.
-----------------------
(i) TFCRC III shall not conduct transactions with the Parent, TFC or
any other Affiliate of the Parent, TFC or TFCRC III or with any
shareholder, director, officer, or employee of TFCRC III, other
than in the ordinary course of business and on an arm's length
basis upon fair and reasonable terms materially no less favorable
to TFCRC III than would be obtained in
44
a comparable arm's-length transaction with a Person not an
Affiliate of the Parent or TFCRC III or a shareholder, director,
officer, or employee of TFCRC III, as the case may be; and
(ii) TFC shall not conduct transactions with the Parent, TFCRC III or
any other Affiliate of the Parent or TFC or with any shareholder,
director, officer, or employee of TFC which would cause a
Material Adverse Change with respect to the financial condition
or operations of TFC, other than in the ordinary course of
business and on an arm's-length basis upon fair and reasonable
terms materially no less favorable to TFC than would be obtained
in a comparable arm's-length transaction with a Person not an
Affiliate of the Parent or TFC or a shareholder, director,
officer, or employee of TFC, as the case may be.
(j) No Sale of Assets. TFCRC III shall not sell, transfer, exchange
-----------------
or otherwise dispose of any of its assets except pursuant to the
Transaction as expressly permitted under the Transaction Documents.
(k) Other Activities. TFCRC III shall not engage in any business or
----------------
activity other than in connection with the Transaction Documents, except
(i) as otherwise specifically approved in writing by Financial Security, or
(ii) as otherwise permitted by its certificate of incorporation.
(l) Insolvency. Neither TFCRC III nor TFC shall commence with respect
----------
to TFCRC III or the Issuer any case, proceeding or other action (A) under
any existing or future law of any jurisdiction, domestic or foreign,
relating to the bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, corporation or other relief with respect to it or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for
it or for all or any substantial part of its assets, or make a general
assignment for the benefit of its creditors. Neither of TFCRC III nor TFC
shall take any action in furtherance of, or indicating the consent to,
approval of, or acquiescence in any of the acts set forth above. TFCRC III
shall not admit in writing its inability to pay its debts.
(m) Tangible Net Worth of TFC. TFC shall not permit its Tangible Net
-------------------------
Worth, at any time, calculated as of the close of TFC's then most recently
concluded fiscal quarter and commencing with the quarter ended June 30,
2000, to be less than the sum of (i) $32,000,000 plus (ii) 50% of the net
earnings (after taxes) of TFC for the period commencing on July 1, 2000 and
ending at the end of TFC's then most recently concluded fiscal quarter
(treated for this purpose as a single accounting period). For purposes of
this clause, if net earnings of TFC for any period shall be less than zero,
the amount calculated pursuant to clause (ii) above for such period shall
be zero.
(n) No Change in Name, Etc. (i) TFCRC III shall not make any change
-----------------------
to its corporate name, or use any trade names, fictitious names, assumed
names or "doing business as" names. (ii) TFC shall not change its name
(including using any trade names,
45
fictitious names, assumed names or "doing business as" names), identity or
organizational structure in any manner that would, could or might make any
financing statement or continuation statement filed in connection with the
closing of the Transactions, or otherwise in accordance with Section
4.01(d) above, seriously misleading within the meaning of Section 9-402(7)
of the UCC, unless it shall have given Financial Security at least 60 days'
prior written notice thereof and shall have filed before the date of such
change appropriate amendments to all such previously filed financing
statements or continuation statements.
(o) No Merger or Consolidation of, or Assumption of the Obligations
---------------------------------------------------------------
of, TFC. (x) TFC shall not merge or consolidate with any other Person,
-------
convey, transfer or lease substantially all its assets as an entirety to
another Person, or permit any other Person to become the successor to TFC's
business unless, after the merger, consolidation, conveyance, transfer,
lease or succession, the successor or surviving entity, there shall be no
Material Adverse Change with respect to the ability of the surviving entity
to fulfill its duties contained in this Insurance Agreement or in any other
Transaction Document to which it is a party. Any corporation (i) into which
TFC may be merged or consolidated, (ii) resulting from any merger or
consolidation to which TFC shall be a party, (iii) which acquires by
conveyance, transfer, or lease substantially all of the assets of TFC, or
(iv) succeeding to the business of TFC, in any of the foregoing cases shall
execute an agreement of assumption to perform every obligation of TFC under
this Insurance Agreement and, whether or not such assumption agreement is
executed, shall be the successor to TFC under this Insurance Agreement
without the execution or filing of any paper or any further act on the part
of any of the parties to this Insurance Agreement, anything in this
Insurance Agreement to the contrary notwithstanding; provided, however,
-------- -------
that nothing contained herein shall be deemed to release TFC from any
obligation. TFC shall provide notice of any merger, consolidation or
succession pursuant to this Section 4.02(o) to the Issuer, the Trust
Collateral Agent, the Noteholders, Financial Security and each of the
Rating Agencies. Notwithstanding the foregoing, TFC shall not merge or
consolidate with any other Person or permit any other Person to become a
successor to TFC's business, unless (x) immediately after giving effect to
such transaction, no representation or warranty made by TFC with respect to
the business, operations or condition (financial or otherwise of TFC)
pursuant to this Insurance Agreement (by way of avoidance of doubt, the
representations and warranties referred to in this clause (x) shall exclude
the representations and warranties made under Schedule B of the Purchase
Agreement) shall have been breached (for purposes hereof, such
representations and warranties shall speak as of the date of the
consummation of such transaction) and no event that, after notice or lapse
of time, or both, would become an Insurance Agreement Event of Default
shall have occurred and be continuing, (y) TFC shall have delivered to the
Issuer, the Trust Collateral Agent, each of the Rating Agencies and
Financial Security an Officer's Certificate and an Opinion of Counsel each
stating that such consolidation, merger or succession and such agreement of
assumption comply with this Section 4.02(o) and that all conditions
precedent, if any, provided for in this Insurance Agreement relating to
such transaction have been complied with, and (z) TFC shall have delivered
to the Issuer, the Trust Collateral Agent, each of the Rating Agencies and
Financial Security an Opinion of Counsel, stating in the opinion of such
counsel, either (A) all financing statements and continuation statements
and amendments thereto
46
have been executed and filed that are necessary to preserve and protect the
interest of the Trust Collateral Agent in the Receivables and the Other
Conveyed Property and reciting the details of the filings or (B) no such
action shall be necessary to preserve and protect such interest.
(p) Incorporation of Covenants. Each of TFC and TFCRC III shall
--------------------------
comply with each of their respective covenants set forth in the Transaction
Documents and hereby incorporates such covenants by reference as if each
were set forth herein.
Section 4.03. Affirmative Covenants of the Issuer. The Issuer hereby
-----------------------------------
covenants and agrees that during the term of this Insurance Agreement, unless
Financial Security shall otherwise expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws. The Issuer shall
----------------------------------------------
perform each of its obligations under the Transaction Documents and shall
comply with all material requirements of, and the Notes shall be offered
and sold in accordance with, any law, rule, regulation or order applicable
to it or thereto, or that are required in connection with its performance
under any of the Transaction Documents. The Issuer will not cause or permit
to become effective any amendment to or modification of any of the
Transaction Documents to which it is a party unless Financial Security
shall have previously approved in writing the substance of such amendment
or modification. The Issuer shall not take any action or fail to take any
action that would interfere with the enforcement of any rights under the
Transaction Documents.
(b) Certain Information. The Issuer shall keep, or cause to be kept,
-------------------
in reasonable detail books and records of account of its assets and
business, which shall be furnished to Financial Security upon request. The
Issuer shall furnish to Financial Security, simultaneously with the
delivery of such documents to the Trustee, the Noteholders or the
Certificateholder, as the case may be, copies of all reports, certificates,
statements, financial statements or notices furnished to the Trustee, the
Noteholders or the Certificateholder, as the case may be, pursuant to the
Transaction Documents. In addition, the Issuer shall furnish to Financial
Security the following:
(i) Certain Information. Not less than two weeks prior to the date of
-------------------
filing with the IRS of any tax return or amendment thereto,
copies of the proposed form of such return or amendment and,
promptly after the filing or sending thereof, (A) copies of each
tax return and amendment thereto that the Issuer files with the
IRS and (B) copies of all financial statements, reports, and
registration statements which the Issuer files with, or delivers
to, any federal government agency, authority or body which
supervises the issuance of securities by the Issuer.
(ii) Other Information. Promptly upon the request of Financial
-----------------
Security, copies of all schedules, financial statements or other
similar reports delivered to or by the Issuer pursuant to the
terms of this Insurance Agreement and the other Transaction
Documents and such other data as Financial Security may
reasonably request.
47
(c) Access to Records; Discussions with Officers. The Issuer shall,
--------------------------------------------
upon the reasonable request of Financial Security, permit Financial
Security or its authorized agent:
(i) to inspect such books and records of the Issuer as may relate
to the Notes, the Certificate, the Receivables and the other
Trust Property, the obligations of the Issuer under the
Transaction Documents, the business of the Issuer and the
transactions consummated in connection therewith; and
(ii) to discuss the affairs, finances and accounts of the Issuer
with an appropriate officer of the Issuer.
Such inspections and discussions shall be conducted at such reasonable
times and as often as may be reasonably requested. In each case, such
access shall be afforded without charge but only upon reasonable request
and during normal business hours.
(d) Notice of Material Events. The Issuer shall promptly inform
-------------------------
Financial Security in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation
against the Issuer in any federal, state or local court or
before any arbitration board, or any such proceeding threatened
by any governmental agency, which, if adversely determined,
would cause a Material Adverse Change to occur with respect to
the Receivables as a whole, or which, if adversely determined,
would cause a Material Adverse Change to occur with respect to
the ability of the Issuer to perform its obligations under any
Transaction Document;
(ii) any change in the location of the Issuer's principal office or
any. change in the location of the books and records of the
Issuer;
(iii) the occurrence of any Trigger Event, Event of Default, Servicer
Termination Event, Default or Insurance Agreement Event of
Default; or
(iv) any other event, circumstance or condition that has resulted,
or which is reasonably likely to result, in a Material Adverse
Change with respect to the Issuer.
(e) Further Assurances. The Issuer will file all necessary
------------------
financing statements, assignments 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 Lien on and security interest in, and all rights of the
Trust Collateral Agent with respect to the Collateral under the Indenture.
In addition, the Issuer shall, upon the request of Financial Security, from
time to time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, within thirty (30) days of such request, such
amendments hereto and such further instruments and take such further action
as may be reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents or to
48
protect the interest of the Trust Collateral Agent in the Collateral under
the Indenture. In addition, the Issuer agrees to cooperate with each of the
Rating Agencies in connection with any review of the Transaction which may
be undertaken by the Rating Agencies after the date hereof.
(f) Retirement of Notes. The Issuer shall, upon retirement of the
-------------------
Notes, furnish to Financial Security a notice of such retirement, and, upon
such retirement and the expiration of the term of the Policy, surrender the
Policy to Financial Security for cancellation.
(g) Preservation of Existence. The Issuer shall observe in all
-------------------------
material respects all procedures required by its Certificate and Trust
Agreement and preserve and maintain its existence as a trust and its
rights, franchises and privileges in the jurisdiction of its organization,
and shall qualify and remain qualified in good standing in each
jurisdiction where the nature of its business requires it to do so except
where the failure to be so qualified, in good standing and to maintain its
rights, franchises and privileges would not cause a Material Adverse Change
to occur with respect to the financial condition of the Issuer, or its
ability to perform its obligations under this Insurance Agreement or under
any other Transaction Document to which it is party.
(h) Disclosure Document. Each Offering Document with respect to the
-------------------
Notes shall include only information concerning Financial Security that is
supplied or consented to in writing by Financial Security expressly for
inclusion therein. Each Offering Document delivered with respect to the
Notes shall clearly disclose that the Policy is not covered by the
property/casualty insurance security fund specified in Article 76 of the
New York Insurance Law. In addition, each Offering Document delivered with
respect to the Notes which includes financial statements of Financial
Security prepared in accordance with GAAP (but excluding any Offering
Document in which such financial statements are incorporated by reference)
shall include the following statement immediately preceding such financial
statements:
The New York State Insurance Department recognizes
only statutory accounting practices for determining
and reporting the financial condition and results of
operations of an insurance company, for determining
its solvency under the New York Insurance Law, and
for determining where its financial condition
warrants the payment of a dividend to its
stockholders. No consideration is given by the New
York State Insurance Department to financial
statements prepared in accordance with generally
accepted accounting principles in making such
determinations.
(i) Special Purpose Entity.
----------------------
49
(i) The Issuer shall conduct its business solely in its own name
through its duly authorized officers or agents so as not to
mislead others as to the identity of the entity with which
those others are concerned, and particularly will use its best
efforts to avoid the appearance of conducting business on
behalf of the Parent, TFC, TFCRC III or any other Affiliates
thereof or that the assets of the Issuer are available to pay
the creditors of the Parent, TFC, TFCRC III or any other
Affiliates thereof. Without limiting the generality of the
foregoing, all oral and written communications, including,
without limitation, letters, invoices, purchase orders,
contracts, statements and loan applications, will be made
solely in the name of the Issuer.
(ii) The Issuer shall maintain trust records and books of account
separate from those of the Parent, TFC, TFCRC III and each of
the Affiliates of any of them.
(iii) The Issuer shall obtain proper authorization from its equity
owners of all trust action requiring such authorization, and
copies of each such authorization and the minutes or other
written summary of each such meeting shall be delivered to
Financial Security within 30 days of such authorization or
meeting as the case may be.
(iv) Although the organizational expenses of the Issuer have been
paid by TFC, operating expenses and liabilities of the Issuer
shall be paid from its own funds.
(v) The annual financial statements of the Issuer shall disclose
the effects of the Issuer's transactions in accordance with
GAAP and shall disclose that the assets of the Issuer are not
available to pay creditors of the Parent, TFC, TFCRC III or any
Affiliate of any of them.
(vi) The resolutions, agreements and other instruments of the Issuer
underlying the transactions described in this Insurance
Agreement and in the other Transaction Documents shall be
continuously maintained by the Issuer as official records of
the Issuer separately identified and held apart from the
records of the Parent, TFC, TFCRC III and each Affiliate of any
of them.
(vii) The Issuer shall maintain an arm's-length relationship with the
Parent, TFC, TFCRC III and each Affiliate of any of them and
will not hold itself out as being liable for the debts of any
such Person.
(viii) The Issuer shall keep its assets and its liabilities wholly
separate from those of all other entities, including, but not
limited to the Parent, TFC, TFCRC III and each Affiliate of any
of them except, in each case, as contemplated by the
Transaction Documents.
50
(j) Tax Matters. The Issuer will take all actions reasonably
-----------
necessary to ensure that for federal and State income tax purposes the Issuer is
not taxable as an association (or publicly traded partnership) taxable as a
corporation.
(k) Securities Laws. The Issuer shall comply in all material
---------------
respects with all applicable provisions of State and federal securities laws,
including blue sky laws and the Securities Act, the Securities Exchange Act and
the Investment Company Act and all rules and regulations promulgated thereunder
for which non-compliance would result in a Material Adverse Change with respect
to the Issuer.
(l) Incorporation of Covenants. The Issuer shall comply with each of
--------------------------
the Issuer's covenants set forth in the Transaction Documents and hereby
incorporates such covenants by reference as if each were set forth herein.
(m) Reports. The Issuer shall furnish to Financial Security:
-------
(i) Annual Financial Statements. As soon as available, and in
---------------------------
any event within 120 days after the close of each fiscal year,
its unaudited balance sheet as of the end of such fiscal year and
the unaudited statements of income, shareholders' equity and cash
flows for such fiscal year, all in reasonable detail and stating
in comparative form the respective figures for the corresponding
date and period in the preceding fiscal year, prepared in
accordance with GAAP, consistently applied, and certified by an
authorized officer of the Issuer as being complete and correct in
all material respects and presenting the financial condition and
results of operations of the Issuer as of the dates and for the
periods indicated, in accordance with GAAP consistently applied.
(ii) Quarterly Financial Statements. As soon as available, and
------------------------------
in any event within 45 days after the close of the first three
quarters of each fiscal year of the Issuer, the unaudited balance
sheets of the Issuer as of the end of each such quarter and the
unaudited statements of income and cash flows of the Issuer 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 GAAP, consistently applied (subject
to normal year-end adjustments), and certified by an authorized
officer of the Issuer as being complete and correct in all
material respects and presenting the financial condition and
results of operations of the Issuer as of the dates and for the
periods indicated, in accordance with GAAP consistently applied
(subject as to interim statements to normal year-end
adjustments).
(iii) Other Information. Promptly upon receipt thereof, copies of all
-----------------
reports, statements, certifications, schedules, or other similar
items delivered to or by the Issuer pursuant to the terms of the
Transaction Documents and, promptly upon request, such other data
as Financial Security may reasonably request. The fees and
expenses of Financial Security or any
51
such authorized agents shall be for the account of the
Issuer. The books and records of the Issuer will be
maintained at the address for it designated herein for
receipt of notices or at the Servicer, unless it shall
otherwise advise the parties hereto in writing.
Section 4.04. Negative Covenants on Behalf of the Issuer. TFCRC III as
------------------------------------------
"Depositor" under the Trust Agreement, on behalf of the Issuer, hereby covenants
and agrees, that during the term of this Insurance Agreement, unless Financial
Security shall otherwise expressly consent in writing (in the absence of an
Insurer Default which shall have occurred and be continuing):
(a) Restrictions on Liens. The Issuer shall not, except as
---------------------
contemplated by the Transaction Documents, (i) create, incur or suffer to
exist, or agree to create, incur or suffer to exist, or consent to cause or
permit in the future (upon the happening of a contingency or otherwise) the
creation, incurrence or existence of any Lien or Restriction on
Transferability of the Receivables, or (ii) sign or file under the Uniform
Commercial Code of any jurisdiction any financing statement which names the
Issuer as a debtor, or sign any security agreement authorizing any secured
party thereunder to file such financing statement, with respect to the
Receivables.
(b) Impairment of Rights. The Issuer shall not take any action,
--------------------
or fail to take any action, if such action or failure to take action would
be reasonably likely to (i) interfere with the enforcement of any rights
under the Transaction Documents that are material to the rights, benefits
or obligations of the Trustee, the Certificateholder, the Noteholders or
Financial Security, (ii) result in a Material Adverse Change with respect
to the Receivables, or (iii) impair the ability of the Issuer to perform
its obligations under the Transaction Documents.
(c) Waiver, Amendments. Etc. Absent the prior written approval
------------------------
of Financial Security, the Issuer shall not waive, modify or amend, or
consent to any waiver, modification or amendment of, any of the provisions
of any of the Transaction Documents (provided that such prior written
--------
approval of Financial Security shall not be required in the event that (x)
an Insurer Default shall have occurred and be continuing, and (y) the
proposed amendment or modification shall not have an adverse effect on
Financial Security).
(d) Successors. The Issuer shall not terminate or designate, or
----------
consent to the termination or designation of, the Servicer, the Back-up
Servicer, the P.O. Box Owner, the Successor Servicer, the Trustee, the
Trust Collateral Agent, the Owner Trustee or any successor thereto.
(e) Creation of Indebtedness; Guarantees. Other than the
------------------------------------
Transaction Documents, the Issuer shall not create, incur, assume or suffer
to exist any Indebtedness other than Indebtedness guaranteed or approved in
writing by Financial Security. The Trustee shall not assume, guarantee,
endorse or otherwise be or become directly or contingently liable for the
obligations of any Person by, among other things, agreeing to purchase any
obligation of another Person, agreeing to advance funds to such Person or
causing or assisting such Person to maintain any amount of capital.
52
(f) Subsidiaries. The Issuer shall not form, or cause to be formed,
------------
any Subsidiaries.
(g) No Mergers. The Issuer shall not consolidate with or merge into
----------
any Person or transfer all or any material amount of its assets to any
Person, liquidate or dissolve except as permitted by the Trust Agreement
and as contemplated by the Transaction Documents.
(h) Other Activities. The Issuer shall not:
----------------
(i) sell, pledge, transfer, exchange or otherwise dispose of any of
its assets except as permitted under the Transaction Documents;
or
(ii) engage in any business or activity except as contemplated by the
Transaction Documents and as permitted by the Trust Agreement.
(i) Insolvency. The Issuer shall not commence any case, proceeding
----------
or other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to the bankruptcy, insolvency, reorganization
or relief of debtors, seeking to have an order for relief entered with
respect to it, or seeking reorganization, arrangement, adjustment, winding-
up, liquidation, dissolution, corporation or other relief or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for
it or for all or any substantial part of its assets or make a general
assignment for the benefit of its creditors. The Issuer shall not take any
action in furtherance of, or indicating the consent to, approval of, or
acquiescence in, any of the acts set forth above. The Issuer shall not
admit in writing its inability to pay its debts.
ARTICLE V
FURTHER AGREEMENTS
Section 5.01. Effective Date; Term of Insurance Agreement. This
-------------------------------------------
Insurance Agreement shall take effect on the Closing Date, upon issuance of the
Policy, and shall remain in effect until the later of (a) such time as Financial
Security is no longer subject to a claim under the Policy and the Policy shall
have been surrendered to Financial Security for cancellation and (b) all amounts
payable to Financial Security and the Noteholders under the Transaction
Documents and under the Notes have been paid in full; provided, however, that
-------- -------
the provisions of Sections 2.04, 2.05, 2.06, 2.07, 2.08, 2.09 and 2.10 hereof
shall survive any termination of this Agreement.
Section 5.02. Obligations Absolute.
--------------------
(a) The obligations of the Issuer, TFCRC III and TFC pursuant to
this Insurance Agreement are absolute and unconditional and will be paid or
performed strictly in accordance with the respective terms hereof,
irrespective of:
53
(i) any lack of validity or enforceability of, or any amendment or
other modifications of, or waiver with respect to, the
Indenture, the Sale and Servicing Agreement, the Policy or the
Indemnification Agreement;
(ii) any amendment or waiver of, or consent to departure from the
Indenture, the Sale and Servicing Agreement, the Policy or the
Indemnification Agreement;
(iii) the existence of any claim, set off, defense or other rights it
may have at any time against the Trustee, the Trust Collateral
Agent, any beneficiary or any transferee of the Policy (or any
persons or entities for whom the Trustee, the Trust Collateral
Agent, any such beneficiary or any such transferee may be
acting), Financial Security or any other person or entity
whether in connection with the Policy, the Transaction
Documents or any unrelated transactions;
(iv) any statement or any other document presented under the Policy
(including any Notice for Payment) proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect
whatsoever;
(v) the inaccuracy or alleged inaccuracy of any Monthly Servicer
Report or Notice for Payment upon which any drawing under the
Policy is based;
(vi) payment by Financial Security under the Policy against
presentation of a draft or certificate which does not comply
with the terms of the relevant Policy;
(vii) the bankruptcy or insolvency of Financial Security, the Issuer,
any other party or the Trust Property;
(viii) any default or alleged default of Financial Security under the
Policy (other than any payment default by Financial Security
under the Policy);
(ix) any defense based upon the failure of the Issuer or the Trust
Property to receive all or part of the proceeds of the sale of
the Notes or of the Servicer to receive any or all of the
servicing fee or other compensation required under the
Indenture or otherwise, or any nonapplication or misapplication
of the proceeds of any drawing upon the Policy; and
(x) any other circumstance or happening whatsoever which would
otherwise constitute a defense to the obligations of the
Issuer, TFCRC III or TFC hereunder.
(b) Each of TFC, TFCRC III and the Issuer, and any and all other
Persons who are now or may become liable for all or part of the obligations
of TFC, TFCRC III or the Issuer in connection with the Transaction under
the Transaction Documents (or any of them) agrees to be bound by this
Agreement and (i) to the extent permitted by law,
54
waives and renounces any and all redemption and exemption rights and the
benefit of all valuation and appraisement privileges against the
indebtedness, if any, and obligations evidenced by any Transaction Document
or by any extension or renewal thereof, (ii) waives presentment and demand
for payment, notices of nonpayment and of dishonor, protest of dishonor and
notice of protest; (iii) waives all notices in connection with the delivery
and acceptance hereof and all other notices in connection with the
performance, default or enforcement of any payment hereunder except as
required by the Transaction Documents; (iv) waives 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 TFC,
TFCRC III or the Issuer; (v) agrees that any consent, waiver or forbearance
hereunder with respect to an event shall operate only for such event and
not for any subsequent event; (vi) consents to any and all extensions of
time that may be granted by Financial Security with respect to any payment
hereunder or other provisions hereof and to the release of any security at
any time given for any payment hereunder, or any part thereof, with or
without substitution, and to the release of any Person or entity liable for
any such payment; and (vii) consents 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 agrees 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 TFC, TFCRC
III or the Issuer from pursuing any rights or remedies it may have against
any Person other than Financial Security in a separate legal proceeding.
Section 5.03. Assignments; Reinsurance; Third-Party Rights.
--------------------------------------------
(a) This Insurance Agreement shall be a continuing obligation of
the parties hereto and shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
None of the Issuer, TFC, TFCRC III, the Servicer, the Back-up Servicer or
the Successor Servicer may assign its rights under this Agreement, or
delegate any of its duties hereunder, without the prior written consent of
Financial Security. Any assignment made in violation of this Agreement
shall be null and void.
(b) Financial Security shall have the right to grant
participations in its rights under this Agreement and to enter into
contracts of reinsurance with respect to the Policy upon such terms and
conditions as Financial Security may in its discretion determine; provided,
however, that no such participation or reinsurance agreement or arrangement
shall relieve Financial Security of any of its obligations hereunder or
under the Policy.
(c) In addition, Financial Security shall be entitled to assign
or pledge to any bank or other investor providing liquidity or credit with
respect to the Transaction or the obligations of Financial Security in
connection therewith any rights of Financial Security under the Transaction
Documents or with respect to any real or personal property or other
55
interests pledged to Financial Security, or in which Financial Security has
a security interest, in connection with the Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or
claim, express or implied, upon any Person, including, particularly, any
Noteholder or the Certificateholder, other than Financial Security, against
the Issuer, TFC, TFCRC III, the Servicer, the Back-up Servicer or the
Successor Servicer, 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. None of the
Trustee, the Owner Trustee, or the Trust Collateral Agent, nor any
Noteholder or the Certificateholder shall have any right to payment from
any premiums paid or payable hereunder or from any other amounts paid by
TFC or any other Person pursuant to Article II hereof.
----------
Section 5.04. Liability of Financial Security. Each of the Issuer, the
-------------------------------
Servicer, TFCRC III, the Parent, TFC, the Back-up Servicer and the Successor
Servicer agree that neither Financial Security, nor any of its officers,
directors or employees shall be liable or responsible for (except to the extent
of its own gross negligence or willful misconduct): (a) the use which may be
made of the Policy by or for any acts or omissions of another Person in
connection therewith or (b) the validity, sufficiency, accuracy or genuineness
of any documents delivered to Financial Security, or of any endorsement(s)
thereon, even if such documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged. In furtherance and not in
limitation of the foregoing, Financial Security may accept documents that appear
on their face to be in order, without responsibility for further investigation.
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
Section 6.01. Insurance Agreement Events of Default. The occurrence of
-------------------------------------
any of the following events shall constitute an "Insurance Agreement Event of
Default" hereunder:
(a) any demand for payment shall be made under the Policy;
(b) (i) any representation or warranty made by any of the
Issuer, the Parent, TFC, the Servicer, or TFCRC III under any of the Basic
Documents, or in any certificate or report furnished under any of the Basic
Documents, shall prove to have been untrue or incorrect in any material
respect when made; provided, however, if such default has not been
-------- -------
committed voluntarily and is capable of being cured, it shall be deemed a
default hereunder only if it shall continue or fail to be cured, or the
circumstance or condition in respect of which such misrepresentation or
warranty was incorrect shall not have been eliminated or otherwise cured,
for a period of 30 days after such Person shall have been given a written
notice by Financial Security, the Trustee or the Trust Collateral Agent
specifying such default or incorrect representation or warranty and
requiring it to be remedied;
56
(ii) any covenant made by any of the Issuer, the Parent, TFC, the
Servicer, or TFCRC III under any of the Basic Documents
(other than any covenant described in clause (iii) below),
shall be breached in any material respect; provided,
--------
however, if such breach in the observance or performance of
-------
such covenant has not been committed voluntarily and is
capable of being cured, it shall be deemed a default
hereunder only if it shall continue or fail to be cured, or
the circumstance or condition in respect of which such
covenant was breached shall not have been eliminated or
otherwise cured, for a period of 30 days after such Person
shall have been given a written notice by Financial
Security, the Trustee or the Trust Collateral Agent
specifying such breach and requiring it to be remedied; or
(iii) any of the Issuer, TFC or TFCRC III shall fail to pay when
due any amount payable under any of the Transaction
Documents unless such amounts are paid in full within any
applicable cure period explicitly provided for under the
relevant Transaction Document;
(c) with respect to the Determination Date occurring during
October of 2000 hereunder, the Cumulative Net Loss Rate shall be greater
than 1.30%, and (b) with respect to any Determination Date described below,
the Cumulative Net Loss Rate shall be greater than the percentage set forth
below opposite the description of such Determination Date:
Period Maximum Percentage
------ ------------------
For the November and December 2000 and 4.50%
January 2001 Determination Dates
For the February, March and April 10.65%
2001 Determination Dates
For the May, June and July 2001 16.50%
Determination Dates
For the August, September and October 16.75%
2001 Determination Dates
For the November and December 2001 and 17.25%
January 2002 Determination Dates
For the February, March and April 18.25%
2002 Determination Dates
For the May, June and July 2002 19.00%
Determination Dates
For the August, September and October 19.75%
2002 Determination Dates
57
For the November 2002, December 2002 and January 2003 20.60%
Determination Dates
For the February 2003 Determination Date and any 22.25%
Determination Date occurring thereafter
(d) (i) the Issuer, TFC or TFCRC III shall have asserted that any of the
Transaction Documents to which it is a party is not valid and binding on
the parties thereto; or (ii) any court, governmental authority or agency
having jurisdiction over any of the parties to any of the Transaction
Documents or any property thereof shall find or rule that any material
provision of any of the Transaction Documents is not valid and binding on
the parties thereto;
(e) (i) any of the Issuer, TFC or TFCRC III shall fail to pay its debts
generally as they come due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit of
creditors, or shall institute any proceeding seeking to adjudicate it
insolvent or seeking a liquidation, or shall take advantage of any
insolvency act, or shall commence a case or other proceeding naming it as
debtor under the United States Bankruptcy Code or similar law, domestic or
foreign; (ii) or a case or other proceeding shall be commenced against any
of the Issuer, TFC or TFCRC III under the United States Bankruptcy Code or
similar law, domestic or foreign, or any proceeding shall be instituted
against any of the Issuer, TFC or TFCRC III seeking liquidation of their
respective assets, and such Person shall fail to take appropriate action
resulting in the withdrawal or dismissal of such proceeding within 60 days;
(iii) or there shall be appointed, or any of the Issuer, TFC or TFCRC III
shall consent to, or acquiesce in, the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of such
Person or the whole or any substantial part of its respective properties or
assets; or (iv) such Person shall take any corporate action in furtherance
of any of the foregoing;
(f) on any Payment Date, after taking into account the application in
accordance with Section 5.7(a) of the Sale and Servicing Agreement on the
related Payment Date of the sum of Amount Available with respect to such
related Payment Date and the amounts available in the Spread Account (prior
to withdrawals therefrom in accordance with the terms of the Spread Account
under the Sale and Servicing Agreement) any amounts payable on such related
Payment Date pursuant to clauses (i), (ii), (iii) or (v) of Section 5.7(a)
of the Sale and Servicing Agreement have not been paid in full;
(g) with respect to any Determination Date described below, the
arithmetic average of the Delinquency Ratios for such Determination Date
and the two immediately preceding Determination Dates shall be greater than
the percentage set forth below opposite the period during which such
Determination Date occurs:
Period Maximum Percentage
------ ------------------
For each Determination Date occurring 20.00%
prior to the August 2001 Determination Date
58
For the August 2001 Determination Date 23.00%
through the January 2002 Determination Date
For each Determination Date occurring 28.00%
after the January 2002 Determination Date.
For purposes of the foregoing calculation to be made on each of the October
and November 2000 Determination Dates, the Delinquency Ratios shall be
calculated for each of the calendar months of July, August and September
2000 as if each such calendar month was a "Monthly Period" hereunder, and
the first Business Day to occur in the next succeeding calendar month was a
"Determination Date" hereunder.
(h) the occurrence of a Servicer Termination Event;
(i) TFC shall fail to pay any principal, premium or interest on any
Indebtedness having an aggregate principal amount of $1,000,000 or greater,
when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure
shall continue uncured and unwaived after the applicable grace period, if
any, specified in the agreement or instrument relating to such
Indebtedness; or any other default under any agreement or instrument
relating to any such Indebtedness of either of TFC or any other similar
event, shall occur and shall continue uncured and unwaived after the
applicable grace period, if any, specified in such agreement or instrument
if the effect of such failure to pay, other default or other event is to
accelerate, or permit the acceleration of, the maturity of such
Indebtedness; or any such Indebtedness shall be declared to be due and
payable or required to be prepaid (other than by a regulatory scheduled
required prepayment) prior to the stated maturity thereof;
(j) the occurrence of any Event of Default under the Indenture, which
event is not cured within the applicable grace period, if any;
(k) the Trust Collateral Agent shall fail to have a perfected, first
priority security interest in the Trust Property; or
(l) the Issuer becomes taxable as an association (or publicly traded
partnership) taxable as a corporation for federal or state income tax
purposes.
Section 6.02. Remedies: Waivers.
------------------
(a) Upon the occurrence of an Insurance Agreement Event of Default,
Financial Security may exercise any one or more of the rights and remedies
set forth below:
(i) declare all or a portion of the Premium Supplement that has
accrued or will accrue payable, and the same shall thereupon (A)
be immediately due and payable to the extent then accrued and (B)
become immediately due and payable upon accrual to the extent
accruing thereafter, whether or not Financial Security shall have
declared an "Insurance Agreement Event of
59
Default" or shall have exercised, or be entitled to exercise,
any other rights or remedies hereunder;
(ii) exercise any rights and remedies available under the Basic
Documents in its own capacity or in its capacity as the Person
entitled to exercise the rights of the Controlling Party under
the Basic Documents, including, without limitation, its right
to accelerate the Notes, to sell the Receivables, or to
terminate TFC and to appoint a substitute Servicer, as
applicable; or
(iii) take whatever action at law or in equity may appear necessary
or desirable in its judgment to enforce performance of any
obligation of the Issuer, the Parent, TFC or TFCRC III under
the Basic Documents.
(b) Unless otherwise expressly provided, no remedy herein conferred
upon or reserved is intended to be exclusive of any other available remedy,
but each remedy shall be cumulative and shall be in addition to other
remedies given under the Basic Documents or existing at law or in equity.
No delay or failure to exercise any right or power accruing under any
Transaction Document upon the occurrence of any Event of Default or
otherwise shall impair any such right or power or shall be construed to be
a waiver thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In order to entitle
Financial Security to exercise any remedy reserved to Financial Security in
this Article, it shall not be necessary to give any notice, other than such
notice as may be expressly required in this Article.
(c) If any proceeding has been commenced to enforce any right or
remedy under this Insurance Agreement and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely
to Financial Security, then and in every such case the parties hereto
shall, subject to any determination in such proceeding, be restored to
their respective former positions hereunder, and, thereafter, all rights
and remedies of Financial Security shall continue as though no such
proceeding had been instituted.
(d) Financial Security shall have the right, to be exercised in its
complete discretion, to waive compliance with any covenant, or waive any
Default or Insurance Agreement Event of Default or collection of Premium
Supplement by a writing setting forth the terms, conditions and extent of
such waiver signed by Financial Security and delivered to the Issuer, the
Parent, TFC or TFCRC III, as the case may be. Any such waiver may only be
effected in writing duly executed by Financial Security, and no other
course of conduct shall constitute a waiver of any provision hereof. Unless
such writing expressly provides to the contrary, any waiver so granted
shall extend only to the specific event or occurrence so waived and not to
any other similar event or occurrence.
ARTICLE VII
MISCELLANEOUS PROVISIONS
60
Section 7.01. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Insurance Agreement, nor consent to any departure therefrom, shall in
any event be effective unless in writing and signed by all of the parties
hereto, with written notice thereof to the Rating Agencies in the case of any
material amendment or waiver; provided that any waiver so granted shall extend
--------
only to the specific event of occurrence so waived and not to any other similar
event or occurrence which occurs subsequent to the date of such waiver. No act
or course of dealing shall be deemed to constitute an amendment, modification or
termination hereof.
Section 7.02. Notices. Except to the extent otherwise expressly provided
-------
herein, all notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (and if sent by mail, certified or
registered, return receipt requested) or facsimile transmission and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand, or three (3) Business Days after being deposited in
the mail, postage prepaid, or, in the case of facsimile transmission, when sent,
addressed as follows or to such other address or facsimile number as set forth
in a written notice delivered by a party to each other party hereto:
If to TFC, the Parent or the Servicer:
-------------------------------------
The Finance Company
TFC Enterprises, Inc.
0000 Xxxxx Xxxx Xxxx, Xxxxx 000X
Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxx X. Paris, Jr.
Williams, Mullen, Xxxxx, Xxxxxxx P.C.
000 Xxx Xxxxxxxx Xxxxxx,
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
Attention:
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to TFCRC III:
---------------
0000 Xxxxx Xxxx Xxxx, Xxxxx 000X
Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Telephone: (757) 858-1400 ext. 535
Facsimile: (000) 000-0000
If to the Issuer:
----------------
61
TFC Automobile Receivables Trust 2000-1
c/o Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Corporate Trust Administration
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Financial Security:
------------------------
Financial Security Assurance Inc.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Transaction Oversight Department
Re: TFC RECEIVABLES BACKED NOTES SERIES 2000-1
Confirmation: (000) 000-0000
Telecopy Nos.: (000) 000-0000,
(000) 000-0000
(in each case in which notice or other communication to Financial Security
refers to an Insurance Agreement Event of Default, a claim on the Policy or
with respect to which failure on the part of Financial Security to respond
shall be deemed to constitute consent or acceptance, then a copy of such
notice or other communication should also be sent to the attention of each
of the General Counsel and the Head-Financial Guaranty Group and shall be
marked to indicate "URGENT MATERIAL ENCLOSED.")
With a copy to:
Enhance Reinsurance Company
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Chief Risk Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Trustee, Trust Collateral Agent, Back-up Servicer and P.O. Box
------------------------------------------------------------------------
Owner,:
------
Xxxxx Fargo Bank Minnesota, National Association
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000 MAC N9311-161
Attention: Corporate Trust Services/Asset-Backed Administration
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Successor Servicer:
----------------------------
Xxxxx Fargo Financial America, Inc.
62
00 Xxxxxxx Xxxxx, Xxxxx 0000
Xxxx Xxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 7.03. No Waiver; Remedies and Severability. No failure on the
------------------------------------
part of Financial Security to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law. The parties further agree that
the holding by any court of competent jurisdiction that any remedy pursued by
Financial Security hereunder is unavailable or unenforceable shall not affect in
any way the ability of Financial Security to pursue any other remedy available
to it. In the event 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.
Section 7.04. Payments.
--------
(a) All payments to Financial Security hereunder shall be made in
lawful currency of the United States and in immediately available funds,
shall be made prior to 1:00 p.m. (New York City time) on the date such
payment is due by wire transfer pursuant to the wire transfer instructions
and bank account information set forth in the Premium Letter, or to such
other office or account as Financial Security may direct. Payments received
by Financial Security after 1:00 p.m. (New York City time) shall be deemed
to have been received on the next succeeding Business Day, and such
extension of time shall be included in computing interest, commissions or
fees, if any, in connection with such payment.
(b) Whenever any payment under this Insurance Agreement shall be
stated to be due on a day which is not a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time
shall in such cases be included in computing interest, commissions or fees,
if any, in connection with such payment.
(c) Unless otherwise specified herein, Financial Security shall be
entitled to interest on all amounts owed to Financial Security under this
Insurance Agreement, together with interest on any and all amounts
remaining unpaid (to the extent permitted by law, if in respect of any
unpaid amounts representing interest) from the date such amounts become due
until paid in full (after as well as before judgment), at a rate of
interest equal to the Prime Rate from time to time in effect plus 2.0%.
(d) In the event of any payment by Financial Security for which it is
entitled to be reimbursed or indemnified as provided above, each of the
Issuer, TFC and TFCRC
63
III agrees to accept the voucher or other evidence of payment as prima
facie evidence of the propriety thereof and the liability therefor to
Financial Security.
SECTION 7.05. GOVERNING LAW. THIS INSURANCE AGREEMENT SHALL BE CONSTRUED,
-------------
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 7.06. Counterparts. This Insurance Agreement may be executed in
------------
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
Section 7.07. Paragraph Headings, Etc. The headings of paragraphs
-----------------------
contained in this Insurance Agreement are provided for convenience only. They
form in no part of this Insurance Agreement and shall not affect its
construction or interpretation.
Section 7.08. No Petition. Each of the parties hereto agrees that it will
-----------
not institute against, or join any other Person in instituting against, the
Issuer or the Trust Property any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal or
state bankruptcy or similar law, for one year and one day after satisfaction of
all of the Issuer's payment obligations under the Notes, the Premium Letter and
this Insurance Agreement. The provisions of this Section 7.08 shall survive the
termination of this Insurance Agreement.
Section 7.09. Consent to Jurisdiction. (a) THE PARTIES HERETO HEREBY
-----------------------
IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED
IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN
ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH
ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD OR DETERMTNED IN SUCH NEW YORK STATE COURT OR,
TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE PARTIES HERETO AGREE
THAT A FINAL JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HERETO HEREBY WAIVE AND AGREE NOT TO ASSERT BY WAY OF MOTION, AS A
DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT
IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT THE SUIT,
ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE
SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THE TRANSACTION DOCUMENTS OR THE
SUBJECT MATTER THEREOF MAY NOT BE LITIGATED IN OR BY SUCH COURTS.
64
(b) To the extent permitted by applicable law, the parties hereto
shall not seek and hereby waive the right to any review of the judgment of
any such court by any court of any other nation or jurisdiction which may
be called upon to grant an enforcement of such judgment.
(c) Each of TFC and TFCRC III hereby irrevocably appoints and
designates The Xxxxxxxx-Xxxx Corporation System, Inc., whose address is 00
Xxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, as its true and lawful
attorney and duly authorized agent for acceptance of service of legal
process. Each of TFC and TFCRC III agrees that service of such process upon
such Person shall constitute personal service of such process upon it.
(d) Nothing contained in the Agreement shall limit or affect
Financial Security'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 TFC and TFCRC III or their property in the courts of any
jurisdiction.
Section 7.10. Consent of Financial Security. In the event that Financial
-----------------------------
Security's consent is required under any of the Transaction Documents, the
determination whether to grant or withhold such consent shall be made by
Financial Security in its sole discretion without any implied duty towards any
other Person, except as otherwise expressly provided therein.
Section 7.11. Jury Trial Waiver. EACH PARTY HERETO HEREBY WAIVES, TO THE
-----------------
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH
ANY OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREUNDER. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION
DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER.
Section 7.12. Limitation of Liability.
-----------------------
(a) No recourse under any Transaction Document shall be had against,
and no personal liability shall attach to, any officer, employee, director,
affiliate or shareholder of any party hereto, as such, by the enforcement
of any assessment or by any legal or equitable proceeding, by virtue of any
statute or otherwise in respect of any of the Transaction Documents, the
Notes or the Policy, it being expressly agreed and understood that each
Transaction Document is solely a corporate obligation of each party hereto,
and that any and all personal liability, either at common law or in equity,
or by statute or constitution, of every such officer, employee, director,
affiliate or shareholder for breaches by any party hereto of any
obligations under any Transaction Document is hereby expressly waived as a
condition of and in consideration for the execution and delivery of this
Agreement.
65
(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 or
personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties
to this Insurance 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 7.13. Third Party Beneficiary. Each of TFC, the Servicer, TFCRC
-----------------------
III, the Issuer, the Trustee, the Trust Collateral Agent, the P.O. Box Owner,
the Back-up Servicer and the Successor Servicer hereby agrees that Financial
Security shall have all of the rights of a third-party beneficiary in, to, under
and in respect of the Sale and Servicing Agreement and the Indenture, and hereby
incorporates and restates each of its respective, representations, warranties,
undertakings, covenants and understandings, all as set forth therein, for the
benefit of Financial Security.
Section 7.14. Entire Agreement. This Insurance Agreement, the Premium
----------------
Letter and the 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 any such subject
matter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
66
[Insurance Agreement - signature page]
IN WITNESS WHEREOF, the parties hereto have executed this Insurance
Agreement, all as of the day and year first above mentioned.
FINANCIAL SECURITY ASSURANCE INC.
By: ________________________________
Name:
Title:
TFC RECEIVABLES CORPORATION III
By: ________________________________
Name:
Title:
THE FINANCE COMPANY,
individually and as Servicer
By: ________________________________
Name:
Title:
67
[Insurance Agreement - signature page]
XXXXX FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its individual but
solely as Trust Collateral Agent,
Trustee, P.O. Box Owner and as
Back-up Servicer
By: ________________________________
Name:
Title:
XXXXX FARGO FINANCIAL AMERICA, INC., as
Successor Servicer
By: ________________________________
Name:
Title:
TFC AUTOMOBILE RECEIVABLES TRUST 2000-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely
as Owner Trustee
By: ________________________________
Name:
Title:
68
SCHEDULE 1
The following table is based, in part, on The Finance Company's memo
entitled "Aged Trial Balance Report Modifications for Non-Monthly Accounts MIS
Project #2367", dated March 5, 1998, and for Monthly Accounts, Section 6.1 of
the November 1991 Collection Manual for Monthly Accounts.
1. Pursuant to (i) the Sale and Servicing Agreement dated as of
September 26, 2000 (the "Sale and Servicing Agreement") among TFC Automobile
Receivables Trust 2000-1 as issuer (the "Issuer"), The Finance Company as
Servicer (the "Servicer") TFC Receivables Corporation III as seller ("TFCRC
III"), Xxxxx Fargo Bank Minnesota, National Association (individually "Xxxxx
Fargo") as trust collateral agent, backup servicer and p.o. box owner, and Xxxxx
Fargo Financial America, Inc. (individually, "WFCar"), as "Successor Servicer";
-----
(ii) the Insurance and Indemnity Agreement dated as of September 26, 2000 (the
"Insurance Agreement") among Financial Security, the Issuer, TFCRC III, the
Servicer, Xxxxx Fargo as trustee, trust collateral agent, back-up servicer and
p.o. box owner and WFCar, as "Successor Servicer; (iii) the other Basic
Documents (as defined under the Sale and Servicing Agreement); and (iv) the
transactions contemplated by the agreements listed in clauses (i) through (iii)
above, the following table shall be used to define delinquency categories for
contracts with monthly Scheduled Receivable Payments ("Monthly-Pay Contracts")
and contracts with more frequent Scheduled Receivable Payments ("Non-monthly-Pay
Contracts"):
Monthly-Pay Contracts* Non-Monthly-Pay Contracts** Delinquency
(# Months Delinquent) (# Weeks Delinquent) Category
--------------------------------------------------------------------------------
0 0-5 Current
1 6-9 30
2 10-13 60
3 14-17 90
4 18-21 120
5 22-25 150
6 26+ 180+
2. In accordance with The Finance Company's customary policy, in
assigning a delinquency category to any contract, a single partial payment of at
least 51% of a Scheduled Receivable Payment (a "One-Time Partial Payment") shall
prevent either the characterization of such contract as being in the 30
Delinquency Category or, in the case of a contract which is in a more advanced
Delinquency Category at the time of the receipt of such One-Time Partial
Payment, progression of the contract to the next higher Delinquency Category.
__________________
*Monthly-Pay contracts (e.g., "Monthly Accounts").
**Non-monthly-Pay contracts (e.g., "Weekly Accounts," "Bi-Weekly Accounts," and
"Semi-Monthly Accounts").
SCHEDULE 2
CIVILIAN PORTFOLIO CONCENTRATION
--------------------------------
----------------------------------------------------
Calendar Quarter Civilian Percentage Limit
(ending)
December 2000 34.50%
March 2001 38.00%
June 2001 42.00%
September 2001 46.00%
December 2001 49.00%
March 2002 49.00%
June 2002 49.00%
September 2002 49.00%
December 2002 49.00%
----------------------------------------------------
EXHIBIT A
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
[Attached]
EXHIBIT B
CLOSING CHECKLIST
[Attached]
