[Execution Version]
INSURANCE AND REIMBURSEMENT AGREEMENT
among
ASSET GUARANTY INSURANCE COMPANY,
TFC AUTOMOBILE RECEIVABLES TRUST 1999-1,
TFC RECEIVABLES CORPORATION 2,
THE FINANCE COMPANY,
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Dated as of December 1, 1999
INSURANCE AND REIMBURSEMENT AGREEMENT
THIS INSURANCE AND REIMBURSEMENT AGREEMENT (this "Insurance Agreement") is
-------------------
made as of December 1, 1999 among Asset Guaranty Insurance Company, a stock
insurance company incorporated in the State of New York, as note insurer
("AGIC"), TFC Automobile Receivables Trust 1999-1, a Delaware business trust
----
(individually, the "Trust"), as issuer (the "Issuer"), TFC Receivables
----- ------
Corporation 2, a Delaware corporation ("TFCRC"), The Finance Company, a Virginia
-----
corporation (individually, "TFC") and as servicer (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") and Norwest Bank
--------
Minnesota, National Association, a national banking association (individually
"Norwest"), as trustee (together with its successors and assigns, in such
--------
capacity, the "Trustee"), as trust collateral agent (together with its
-------
successors and assigns, in such capacity, the "Trust Collateral Agent"), and as
----------------------
back-up servicer (in such capacity, the "Back-up Servicer").
----------------
PRELIMINARY STATEMENTS
The Issuer will issue (a) the TFC 7.50% Asset Backed Notes, Series 1999-1
(the "Notes") pursuant to the Indenture, dated as of December 1, 1999, among the
-----
Issuer, AGIC and Norwest as Trustee and Trust Collateral Agent (as the same may
be amended, restated, supplemented or otherwise modified from time to time, the
"Indenture") and (b) a certificate (the "Certificate") pursuant to the Amended
--------- -----------
and Restated Trust Agreement, dated as of December 1, 1999, between Wilmington
Trust Company as owner trustee (together with its successors and assigns, in
such capacity, the "Owner Trustee") and TFCRC as depositor (as the same may be
-------------
amended, restated, supplemented or otherwise modified from time to time, the
"Trust Agreement").
----------------
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 AGIC, 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 assets
--------------
constituting a part of the Trust Property were sold to the Issuer pursuant to
the Sale and Servicing Agreement, dated as of December 1, 1999, among the
Issuer, TFCRC as seller (the "Seller"), the Servicer, AGIC, the Trust Collateral
------
Agent, the Back-up Servicer and Norwest as P.O. Box owner (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
"Sale and Servicing Agreement"); and
----------------------------
AGIC 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
------
2
The parties hereto, among other things, desire to specify the conditions
precedent to the issuance by AGIC of the Policy, the obligations of the Issuer,
the Servicer, the Back-up Servicer and TFC, 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, AGIC, the Issuer, the Servicer, TFC, the Parent, the Trustee,
the Trust Collateral Agent and the Back-up Servicer agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. General Definitions. The terms defined in this Article I
-------------------
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
---------
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.
"AGIC" has the meaning assigned to such term in the Preliminary Statements
----
above.
"AGIC Information" has the meaning given to such term under the
----------------
Indemnification Agreement.
"Back-up Servicer" has the meaning assigned to such term in the Preliminary
----------------
Statements above.
"Certificate" has the meaning assigned to such term in the Preliminary
-----------
Statements above.
"Closing Date" means December 1, 1999.
------------
"Commonly Controlled Entity" means TFC and each entity, whether or not
--------------------------
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,
------------------------
the fraction, expressed as a percentage, the numerator of which is equal to the
aggregate amount of Net 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.
3
"Cumulative Net Loss Test Failure" means, with respect to any Determination
--------------------------------
Date occurring during a period set forth below, the Cumulative Net Loss Rate for
such Determination Date shall be greater than the percentage set forth below
opposite the period during which such Determination Date occurs:
Period Maximum Percentage
------ ------------------
from the Initial Cut-Off Date to third Monthly 1.40%
Period to occur after the Initial Cut-Off Date
from the fourth Monthly Period to occur 4.80%
after the Initial Cut-Off Date to sixth Monthly
Period to occur after the Initial Cut-Off Date
from the seventh Monthly Period to occur 11.30%
after the Initial Cut-Off Date to the ninth Monthly
Period to occur after the Initial Cut-Off Date
from the tenth Monthly Period to occur 17.50%
after the Initial Cut-Off Date to the 12th Monthly
Period to occur after the Initial Cut-Off Date
from the 13th Monthly Period to occur 17.80%
after the Initial Cut-Off Date to the 15th Monthly
Period to occur after the Initial Cut-Off Date
from the 16th Monthly Period to occur 18.20%
after the Initial Cut-Off Date to the 18th Monthly
Period to occur after the Initial Cut-Off Date
from the 19th Monthly Period to occur 19.10%
after the Initial Cut-Off Date to the 21st Monthly
Period to occur after the Initial Cut-Off Date
from the 22nd Monthly Period to occur 20.00%
after the Initial Cut-Off Date to the 24th Monthly
Period to occur after the Initial Cut-Off Date
from the 25th Monthly Period to occur 20.90%
after the Initial Cut-Off Date to the 27th Monthly
Period to occur after the Initial Cut-Off Date
from the 28th Monthly Period to occur after 21.80%
after the Initial Cut-Off Date and at any time
thereafter.
"Delinquency Category" means (a) for Receivables having monthly Scheduled
--------------------
Payments ("Monthly-Pay Contracts, as defined in Schedule 1) in respect of which
the relevant Obligor shall have failed to make a Scheduled Payment or a portion
thereof on the due date therefor, the
4
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 Payments ("Non-Monthly-Pay Contracts,"
as defined in Schedule 1) in respect of which the relevant Obligor shall have
failed to make a Scheduled 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.
"Delinquent Receivable" means a Receivable which (a) falls into any
---------------------
Delinquency Category other than the "Current" category (as described in Schedule
I hereto) and (b) is not a Liquidated Receivable.
"Deemed Cured" means, as of a Determination Date, (a) with respect to a
------------
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 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
-------
or the lapse of time or both would result, in an Insurance Agreement Event of
Default.
"Delinquency Ratio" means, with respect to any Determination Date, the
-----------------
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
------------------------
occurring during a period set forth 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
------ ------------------
from the Initial Cut-Off Date to the 12th 17.00%
Monthly Period to occur after the
Initial Cut-Off Date
from the 13th Monthly Period to 20.00%
occur after the Initial Cut-Off Date to the
18th Monthly Period to occur after
the Initial Cut-Off Date
from the 19th Monthly Period to occur 25.00%
after the Initial Cut-Off Date and at any time
5
thereafter.
"ERISA" means the Employee Retirement Income Security Act of 1974,
-----
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Event of Default" has the meaning assigned to such term in the Indenture.
----------------
"Financial Statements" means with respect to each of TFC and the Parent,
--------------------
the audited consolidated balance sheets as of December 31, 1998 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, 1999 and the consolidated statements of income and cash
flows for the fiscal quarter then ended.
"Fort Xxxx Acknowledgment Letter" means the letter agreement by TFC, dated
-------------------------------
as of December 1, 1999, acknowledged and agreed to by Fort Xxxx National Company
and the Trust Collateral Agent.
"Fort Xxxx Additional Letters" means (a) the letter agreement by TFC, dated
----------------------------
as of December __, 1999, acknowledged and agreed to by Fort Xxxx National
Company and the Trust Collateral Agent (with respect to TFC's TrueCheck Program)
and (b) the letter agreement by TFC, dated as of December __, 1999, acknowledged
and agreed to by Fort Xxxx National Company and the Trust Collateral Agent (with
respect to TFC's ACH Program).
"GAAP" means generally accepted accounting principles in effect from time
----
to time in the United States of America.
"GE Capital" means General Electric Capital Corporation, a New York
----------
corporation.
"GE Capital Agreement" means the Amended and Restated Motor Vehicle
--------------------
Installment Contract Loan and Security Agreement, dated as of January 1, 1999,
between GE Capital as lender and TFC as borrower.
"Governmental Authority" means any nation or government, any state or other
----------------------
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
-------------------------
of December 1, 1999, among AGIC, the Issuer, the Placement Agent and TFC.
"Indenture" has the meaning assigned to such term in the Preliminary
---------
Statements above.
"Independent Accountants" has the meaning specified in Section 4.01(q).
-----------------------
"Independent Director" means a natural person who (i) is not a stockholder
--------------------
(whether direct, indirect or beneficial), customer, advisor or supplier of
TFCRC, the Parent or any of their respective Affiliates (other than by means of
indirect stock ownership of TFCRC or the Parent or of any of their respective
Affiliates by any Person through a mutual fund or similar diversified
6
investment pool); (ii) is not a director, officer, employee or Affiliate of
TFCRC 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 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 August 31, 1999.
-------------------
"Initial Spread Account Deposit Amount" means 4.00% of the Original Pool
-------------------------------------
Balance.
"Insurance Agreement" has the meaning assigned to such term in the
-------------------
Preliminary Statements above.
"Insurance Agreement Event of Default" has the meaning specified in Section
------------------------------------
6.01.
"Insurance Agreement Indenture Cross Default" means any Insurance Agreement
-------------------------------------------
Event of Default specified in clauses (a), (c) (e), (f), (l), (m) of Section
6.01.
"Investment Company Act" means the Investment Company Act of 1940,
----------------------
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"IRS" means the Internal Revenue Service.
---
"Issuer" has the meaning assigned to such term in the Preliminary
------
Statements above.
"Lien" means, as applied to the property or assets (or the income or
----
profits therefrom) of any Person, in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or
otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease,
conditional sale or other title retention agreement, or other security interest
or encumbrance of any kind or (b) any arrangement, express or implied, under
which such property or assets are transferred, sequestered or otherwise
identified for the purpose of subjecting or making available the same for the
payment of debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.
"Material Adverse Change" means, (a) in respect of any Person, a material
-----------------------
adverse change in (i) the business, financial condition, results of operations
or properties of such Person or 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
7
probability that amounts now or hereafter due in respect of a material portion
of the Receivables will be collected on a timely basis.
"Multiemployer Plan" means a multiemployer plan (within the meaning of
------------------
Section 400 1(a)(3) of ERISA) in respect of which a Commonly Controlled Entity
makes contributions or has liability.
"Net Losses" means, with respect to any Determination Date and the most
----------
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
-----
above.
"Offering Document" means the Preliminary Private Placement Memorandum
-----------------
dated December 1, 1999, and the Private Placement Memorandum dated December 1,
1999 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
-------------
Statements above.
"Parent" means TFC Enterprises, Inc., a Delaware corporation.
------
"Parent Support Agreement" means the agreement among TFCRC, TFC, AGIC, the
------------------------
Trust Collateral Agent, and the Parent, dated as of December 1, 1999.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
----
agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.
"Person" means an individual, a partnership, a corporation, a limited
------
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.
---------------
"Placement Agent Agreement" means the Placement Agent Agreement dated as of
-------------------------
December 1, 1999, among the Issuer, TFC, TFCRC and the Placement Agent.
"Placement Agent Information" means the information relating to the
---------------------------
Placement Agent in the Private Placement Memorandum.
8
"Plan" means any pension plan (other than a Multiemployer Plan) covered by
----
Title IV of ERISA, which is maintained by a Commonly Controlled Entity or in
respect of which a Commonly Controlled Entity has liability.
"Policy" has the meaning assigned to such term in the Preliminary
------
Statements above.
"Premium" means the premium payable by the Issuer pursuant to the Premium
-------
Letter.
"Premium Letter" means the letter agreement between AGIC, TFC 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.
------------
"Prime Rate" means the fluctuating rate of interest as published from time
----------
to time in the New York, New York edition of The Wall Street Journal, under the
-----------------------
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 final Private Placement Memorandum
----------------------------
dated December 1, 1999, relating to the offering of the Notes.
"Provided Documents" means the Transaction Documents and any documents,
------------------
agreements, instruments, schedules, certificates, statements, cash flow
schedules, number runs or other writings or data furnished to AGIC by or on
behalf of TFC, the Parent or TFCRC with respect to itself, its respective
Subsidiaries, the Receivables or the Transaction.
"Purchaser" has the meaning assigned to such term in the Preliminary
---------
Statements above.
"Purchase Agreement" means the Purchase Agreement between TFC, as seller,
------------------
and TFCRC, as purchaser, dated as of December 1, 1999.
"Rating Agency" means Standard & Poor's Rating Services, a division of
-------------
XxXxxx-Xxxx Companies, Inc.
"Receivable" has the meaning provided in the Sale and Servicing Agreement.
----------
"Reportable Event" means any of the events set forth in Section 4043(b) of
----------------
ERISA or the regulations thereunder.
"Restrictions on Transferability" means, as applied to the property or
-------------------------------
assets (or the income or profits therefrom) of any Person, in each case whether
the same is consensual or 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.
9
"Requisite Amount" means (a) on the Closing Date, the Initial Spread
----------------
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,
--------
however, that, in the event such Trigger Event has been Deemed Cured, an amount
-------
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
----------------------------
Preliminary Statements above.
"Schedule of Receivables" means the schedule of receivables delivered to
-----------------------
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
--------------
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
-----------------------
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"S&P" means Standard & Poor's Ratings Service, a division of XxXxxx-Xxxx
---
Corporation, and any successor thereto, and, if such corporation shall for any
reason no longer perform the functions of a securities rating agency, "S&P"
shall be deemed to refer to any other nationally recognized rating agency
designated by AGIC.
"Servicer" has the meaning assigned to such term in the Preliminary
--------
Statements above.
"Standby Remittance and Processing Agreement" means the Standby Remittance
-------------------------------------------
and Processing Agreement among TFCRC, TFC, General Electric Capital Corporation,
AGIC, the Trust Collateral Agent and Norwest as P.O. Box owner, dated as of
December 1, 1999.
"Subordinated Debt" means a debt obligation of TFC which is subordinated to
-----------------
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
----------
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.
"Tangible Net Worth" means, with respect to TFC, the excess of (a) the
------------------
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)
-------- -------
10
in no 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 Preliminary Statements
---
above.
"Transaction" means the transactions contemplated by the Transaction
-----------
Documents, including the transactions described in the Offering Documents.
"Trigger Event" means the occurrence of any of the following events, the
-------------
occurrence of which shall not have been waived in writing by AGIC: (a) the
occurrence of a Delinquency Test Failure, or (b) the occurrence of a Cumulative
Net Loss Test Failure.
"Trust Agreement" is the Amended and Restated Trust Agreement, dated as of
---------------
December 1, 1999 between TFCRC and Wilmington Trust Company as owner trustee.
"Trust Collateral Agent" has the meaning assigned to such term in the
----------------------
Preliminary Statements above.
"Trustee" has the meaning assigned to such term in the Preliminary
-------
Statements above.
"Trust Property" has the meaning assigned to such term in the Preliminary
--------------
Statements above.
"Year 2000 Problem" means the risk that computer applications used by a
-----------------
Person (or suppliers, vendors and customers of such Person) may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999.
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.
11
ARTICLE II
THE POLICY AND REIMBURSEMENT
Section 2.01. Policy. AGIC 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 AGIC 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 AGIC) and shall be
in full force and effect and in form and substance satisfactory to AGIC, in
the exercise of AGIC's sole discretion, and an executed counterpart of each
thereof shall have been delivered to AGIC:
(i) this Insurance Agreement;
(ii) the Indenture;
(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; and
(xii) the Fort Xxxx Letters.
(items (i) through (xii) being, collectively, the "Transaction Documents").
(b) AGIC shall have received:
(i) copies certified by the Secretary or an Assistant Secretary of
each of the Parent, the Issuer, TFC and TFCRC, 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
12
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,
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 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 AGIC or an 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 AGIC in the exercise of its sole discretion,
and (4) covering such matters as AGIC 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 AGIC, are necessary or
desirable to perfect such interest;
(vi) evidence that one or more UCC financing statements covering
the interest of TFCRC in the Receivables and the other related
assets assigned pursuant to the Purchase Agreement has been
executed by TFC in favor of TFCRC, and has been duly filed in
such place or places which, in the opinion of counsel for the
Issuer, TFC and AGIC, 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 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 AGIC, are necessary or desirable to
perfect such interest;
13
(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 AGIC
may reasonably request;
(x) a specimen Note; and
(xi) a statement, in form and substance satisfactory to AGIC,
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 AGIC 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, the Issuer,
the Parent, the Trustee, the Placement Agent or AGIC that would cause
information or documents heretofore supplied to AGIC 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, the Issuer, the Parent, the
Trustee, the Placement Agent or AGIC 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) AGIC 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, the Parent and TFC pursuant to any of the Transaction Documents or
pursuant to the requirements of the Rating Agency (if any). Such documents
shall be in form and substance satisfactory to AGIC in the
14
exercise of its sole discretion and each such legal opinion or certificate
shall be addressed to AGIC, or accompanied by appropriate reliance letters
to AGIC.
(f) There shall be on deposit in the Spread Account a sum of not less
than $2,606,028 in immediately available funds.
(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 AGIC on or prior to the Closing Date shall have been paid
in full by TFC or the Issuer.
(i) AGIC shall have received confirmation that the risk secured by
the Policy constitutes at least "BBB-" by S&P and that the Notes, when
issued, will be rated "AA" by S&P.
(j) No Trigger Event, Event of Default, Servicer Termination Event,
Default or Insurance Agreement Event of Default shall have occurred.
Section 2.03. Premium Letter. AGIC 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.
Section 2.04. Reimbursement Obligations. (a) In consideration of the
-------------------------
issuance of the Policy by AGIC, AGIC 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 AGIC 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, AGIC
shall be entitled to reimbursement (to the extent such reimbursement and
related interest has not previously been paid by payment to AGIC 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 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
15
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%.
(c) Interest payable to AGIC 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 amounts payable pursuant to Sections 2.03 or
2.04(a) or (b) 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, on demand.
Section 2.05. Assignment and Other Rights upon Payments under the Policy.
----------------------------------------------------------
(a) In consideration of the issuance of the Policy by AGIC, in the case of any
payment made by or on behalf of AGIC under the Policy, in addition to and not by
way of limitation of, any of the rights and remedies of AGIC hereunder or under
the Indenture with respect to such payment, each of the Issuer, TFCRC and TFC
hereby acknowledges and consents to the assignment by the Trustee, on behalf of
the Noteholders, to AGIC 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 AGIC 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 AGIC 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 AGIC to
effectuate the purpose or provisions of this Section 2.05.
Section 2.06. Subrogation; Further Assurances. (a) The interests, rights
-------------------------------
and remedies of AGIC described in Article II above are in addition to, and not
in lieu of, AGIC's equitable rights of subrogation, and AGIC reserves all of
such rights. Each of the Issuer, TFCRC and TFC agrees to take, or cause to be
taken, all actions deemed desirable by AGIC to preserve, enforce, perfect or
maintain the perfection in AGIC'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.
16
(c) Each of the Issuer, TFCRC and TFC agrees to promptly and duly
take, execute, acknowledge and deliver such further acts, documents,
instruments and assurances as AGIC 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 AGIC's other rights as
against the Issuer, 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, AGIC and its officers, directors, shareholders, employees, agents
and each Person, if any, who controls AGIC 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, the Seller, as the case may be; or
(ii) the breach by the Issuer, TFC, the Servicer, the Parent, TFCRC,
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, or the
Seller, under any of the Transaction Documents of any
"default," "event of default" or any event which, with the
giving of notice or the lapse of time or both, would constitute
any "event of default"; 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 TFCRC 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 purchase 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 AGIC (and its respective directors, officers,
employees and agents) 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
17
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, AGIC shall
promptly notify TFC in writing, and TFC shall assume the defense thereof,
including the employment of counsel satisfactory to AGIC 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 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 AGIC 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 AGIC).
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.
(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; 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 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,
18
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; or
(ii) the breach by TFCRC of any representation, warranty or covenant
under any of the Transaction Documents, or the occurrence, in
respect of TFCRC, under any of the Transaction Documents of any
"default," "event of default" or any event which, with the
giving of notice or the lapse of time or both, would constitute
any "event of default"; 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 hereunder, AGIC
shall promptly notify TFCRC in writing, and TFCRC shall assume the defense
thereof, including the employment of counsel satisfactory to AGIC 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 if (i) TFCRC has agreed to pay such fees and expenses,
(ii) TFCRC shall have failed to assume the defense of such action or
proceeding and employ counsel satisfactory to AGIC 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
TFCRC, 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 and (B) the
representation of TFCRC 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 in writing that it elects to employ
separate counsel at the expense of TFCRC, TFCRC 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 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 AGIC). TFCRC 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, but, if settled with its
19
written consent, or if there be a final judgment for the plaintiff in any
such action or proceeding with respect to which TFCRC shall have received
notice in accordance with this subsection (b), TFCRC 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 is determined to be unavailable for any
Indemnified Party (other than due to application of this Section), TFCRC
shall contribute to the losses incurred by the Indemnified Party on the
basis of the relative fault of TFCRC, on the one hand, and the Indemnified
Party, on the other hand.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties with respect to TFC and
------------------------------------------------------
TFCRC. Each of TFC and TFCRC represents and warrants, as of the Closing Date,
-----
with respect to TFC and TFCRC, 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 is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware. With the exception of becoming qualified to do business
under the laws of Virginia, TFCRC 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 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 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 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.
20
(d) Noncontravention. None of the execution and delivery of the
----------------
Transaction Documents by TFC or TFCRC, 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, 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, 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, as the case may be,
(ii) constitutes or will constitute a default by TFC or TFCRC, 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 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 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 after reasonable inquiry,
threatened by or before any court, regulatory body, governmental or
administrative agency or arbitrator against or affecting TFC or TFCRC, or
any properties or rights of TFC or TFCRC, including without limitation, the
Receivables, which might result in a Material Adverse Change with respect
to TFC or TFCRC.
(f) Valid and Binding Obligations. Each of the Transaction Documents
-----------------------------
to which either TFC or TFCRC is a party when executed and delivered by TFC
or TFCRC, 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 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.
21
(g) ERISA. Each of TFC and TFCRC 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 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, that would render any of the
Provided Documents untrue or misleading in any material respect. There is
no fact known to TFC or TFCRC which has a material possibility of causing a
Material Adverse Change with respect to either of TFC or TFCRC, 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 contained in the Transaction Documents is true
and correct in all material respects and each of TFC or TFCRC hereby makes
each such representation and warranty made by it to, and for the benefit
of, AGIC 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 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 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 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.
22
(m) Special Purpose Entity.
----------------------
(i) The capital of TFCRC is adequate for the business and
undertakings of TFCRC.
(ii) Other than with respect to the purchase by TFC of the stock of
TFCRC, and as provided in this Insurance Agreement and the
Transaction Documents, TFCRC is not engaged in any business
transactions with TFC.
(iii) At least two directors of TFCRC 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 are not, and will not be,
commingled with the funds of any other person.
(v) The Bylaws of TFCRC 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 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 will be left with an unreasonably small
amount of capital with which to engage in its business. Neither TFC nor
TFCRC intends to incur, or believes that it has incurred, debts beyond its
ability to pay such debts as they mature. Neither TFC nor TFCRC
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, as the
case may be, or any of their respective assets. The amount of consideration
being received by TFCRC upon the sale of the Receivables to the Issuer
constitutes reasonably equivalent value and fair consideration for the
Receivables. TFCRC 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.
(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.
23
(ii) Immediately prior to the transfer of any Receivables to the
Issuer pursuant to the Sale and Servicing Agreement, TFCRC 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 to the Issuer is characterized as
other than a sale, such transfer shall be characterized as a
secured financing, and the Trustee 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
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 is characterized
as other than a sale, such transfer shall be characterized as a
secured financing, and TFCRC 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 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 or any of
the properties, income or franchise of TFC or TFCRC, 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, all such tax returns were true and correct in
all material respects and neither of TFC nor TFCRC 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 in
connection with the Transaction, the execution and delivery of the Transaction
Documents and the issuance of the Notes have been paid or shall have been paid
at or prior to 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 AGIC 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) Year 2000 Compliance.
--------------------
(i) TFC (A) initiated a review and assessment of all areas within
its business and operations that could be adversely affected by
the Year 2000 Problem
24
(including those affected by Dealers, suppliers, vendors and
subservicers, but only to the extent that the adverse effect on
such businesses and operations affected by Dealers, suppliers,
vendors and subservicers would be reasonably likely to
constitute a material adverse effect on the financial
conditions or operations of TFC or the collectibility of the
Receivables), (B) developed a plan and timeline for addressing
the Year 2000 Problem, (C) implemented the plan in accordance
with that timetable. Based on the foregoing, TFC believes that
all computer applications (including those of its Dealers,
suppliers, vendors, and subservicers) that are material to its
business and operations are reasonably expected to be able to
perform properly date-sensitive functions for dates before and
after January 1, 2000 (that is, be "Year 2000 Compliant"),
-------------------
except to the extent that a failure to do so could not
reasonably be expected to have material adverse effect, or to
result in (1) a Default under the Indenture, (2) an Event of
Default under the Indenture, (3) a Servicer Termination Event,
or (4) an event which, with the giving of notice or the passage
of time or both, would constitute a Servicer Termination Event,
(D) has completed a review and assessment of all computer
applications (including, but not limited to those of its
Dealers, suppliers, vendors and subservicers, but only to the
extent that the failure of any such applications of its
Dealers, suppliers, vendors and subservicers to be Year 2000
Compliant would be reasonably likely to have material adverse
effect), which are related to or involved in the collection,
management or servicing of the Receivables and Related Security
(the "Management Systems"), and (E) has determined that such
------------------
Management Systems are Year 2000 Compliant.
(ii) All of the representations and warranties set forth in this
Section 3.01 (r) (other than representations and warranties, if
----------------
any, that expressly speak only as of a different date) shall be
deemed to be made, without further act by any Person, on and as
of the Closing Date. All of the representations and warranties
set forth in this Section 3.01 (r) shall survive the
----------------
termination of this Insurance Agreement.
(s) Investment Company. Neither TFC nor TFCRC 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 Affecting Its Business. TFCRC 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
25
and are in full force and effect. TFCRC 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 in all of the Receivables is fully protected.
(v) Ownership of TFCRC. 100.00% of the issued and outstanding shares
------------------
of capital stock of TFCRC 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.
(w) No Broker, Finder or Financial Adviser Other Than Rothschild.
------------------------------------------------------------
Neither TFCRC 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) S&P. The information supplied by TFC or TFCRC to S&P in
---
connection with obtaining a rating for the Notes did not contain any untrue
statement of a material fact or omit to state any material fact required to
be stated in order to make such information not misleading.
(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) will result in a violation
of Section 7 of the Securities and Exchange Act, or any regulations issued
pursuant thereto, including Regulations T, U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R, Chapter II.
(z) Financial Statements. The Financial Statements of TFC, copies of
--------------------
which have been furnished to AGIC, (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
26
(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.
(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
27
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 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, AGIC 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
28
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.
(ii) Except as contemplated by the Transaction Documents, the Issuer
is not engaged in any business transactions with TFC, the
Parent, TFCRC 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
29
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, 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 (on behalf of the Noteholders)
and AGIC.
(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 Section 8 of the Exchange Act, or any regulations issues
pursuant thereto, including Regulations T, U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R., Chapter II. 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 and TFC. Each of TFCRC and TFC hereby
--------------------------
covenants and agrees that during the term of this Insurance Agreement, unless
AGIC shall otherwise expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws. Each of TFCRC
----------------------------------------------
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 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 AGIC shall have previously approved in writing the
form of such amendment or modification. Neither TFCRC nor TFC shall take
any action or fail to take any action that would interfere with the
enforcement of any rights of AGIC or the Trust Collateral Agent under the
Transaction Documents.
(b) Reports: Other Information. Each of TFCRC 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, and, in the case of
TFCRC, which shall clearly reflect the transfer of the Receivables to the
Trust Collateral Agent. Each of TFCRC and TFC shall furnish or caused to be
furnished to AGIC:
30
(i) Promptly upon receipt thereof, copies of all reports,
statements, certifications, schedules, or other similar items
delivered to or by TFCRC and TFC pursuant to the terms of the
Transaction Documents and, promptly upon request, such other
data as AGIC may reasonably request; provided, however, that
neither TFCRC nor TFC shall be required to deliver any such
items if provision by some other party to AGIC is required
under the Transaction Documents unless such other party
wrongfully fails to deliver such item. TFCRC and TFC shall,
upon the reasonable request of AGIC, permit AGIC or its
authorized agents (A) to inspect its books and records as they
may relate to the Notes, the Receivables, the obligations of
TFCRC and TFC under the Transaction Documents, the Transaction
and the business of TFC or TFCRC; (B) to discuss the affairs,
finances and accounts of TFCRC and TFC with an officer of each
upon AGIC's reasonable request; and (C) to discuss the affairs,
finances and accounts of TFCRC 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 AGIC or any
such authorized agents shall be for the account of TFC.
(ii) TFC shall provide or cause to be provided to AGIC 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 and TFC shall promptly inform
-------------------------
AGIC 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 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 or TFC or any change in the location of the books and
records of TFCRC or TFC;
(iii) the occurrence of any Default, Event of Default or Trigger
Event; or
31
(iv) any other event, circumstance or condition that has resulted,
or which TFCRC or TFC, as the case may be, reasonably believes
might result, in a Material Adverse Change with respect to
TFCRC or TFC.
(d) Further Assurances. Each of TFCRC 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 and security interest in, and all
rights of the Trust Collateral Agent, for the benefit of the Trustee (for
the Noteholders and AGIC), with respect to the Receivables, the Collection
Account, the Note Payment Account and the Spread Account. In addition, each
of TFCRC and TFC shall, upon the request of AGIC, 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 AGIC, in the Receivables, the
Collection Account, the Note Payment Account and the Spread Account, free
and clear of all Liens and Restrictions on Transferability except as
contemplated by the Transaction Documents. In addition, each of TFCRC and
TFC agrees to cooperate with S&P in connection with any review of the
Transaction which may be undertaken by S&P and after the date hereof.
(e) TFCRC's Corporate Existence. TFCRC shall become qualified to do
---------------------------
business and be in good standing under the laws of Virginia within fourteen
(14) days of the Closing Date. TFCRC 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 AGIC
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
32
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 GAAP in making such determinations.
(h) Special Purpose Entity.
----------------------
(i) TFCRC 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 shall (A) require that its
employees, if any, identify themselves as employees of TFCRC
when conducting business of TFCRC; (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.
(ii) TFCRC shall respond to any inquiries made directly to it with
respect to ownership of a Receivable by stating that it is the
owner of such contributed Receivable, and, if requested to do
so, that the Trust Collateral Agent has been granted a security
interest in such Receivable
(iii) TFCRC shall compensate all employees, consultant and agent
directly or indirectly through reimbursement of TFC, from
TFCRC's bank accounts, for services provided to TFCRC by such
employees, consultants and agents and, to the extent any
employee, consultant or agent of TFCRC is also an employee,
consultant or agent of TFC, allocate the compensation of such
employee, consultant or agent between TFCRC and TFC on a basis
which reflects the respective services rendered to TFCRC and
TFC.
(iv) TFCRC 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 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
33
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.
(v) TFCRC 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 shall maintain corporate records and books of account
separate from those of TFC or the Parent, and the Affiliates
thereof.
(vii) TFCRC shall obtain proper authorization from its Board of
Directors of all corporate action requiring such
authorization. Meetings of the Board of Directors of TFCRC
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 AGIC within 30 days of such meeting.
(viii) TFCRC shall obtain proper authorization from its shareholders
of all corporate action requiring shareholder approval.
Meetings of the shareholders of TFCRC 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 AGIC within 30 days of such
authorization or meeting, as the case may be.
(ix) TFCRC 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 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 shall not permit any
of its Affiliates to pay the its operation expenses.
(x) The annual financial statements of TFCRC shall disclose the
effects of TFCRC's transactions in accordance with GAAP and
shall disclose that the assets of TFCRC are not available to
pay creditors of TFC, the Parent or any Affiliate thereof.
Without limiting the foregoing, TFCRC shall prepare its
financial statements separately from those of its Affiliates
and ensure that any consolidated financial statement have
notes to the effect that TFCRC is a separate entity whose
creditors have a claim on its 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
underlying the transactions described in this Insurance
Agreement and in the other Transaction Documents shall be
continuously maintained by TFCRC as
34
official records of TFCRC, separately identified and held
apart from the records of TFC and the Parent and each
affiliate thereof.
(xii) TFCRC 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 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 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 and TFC shall comply with
---------------------
each of the covenants, as applicable, made by it in each of the Transaction
Documents.
(k) Ownership of TFCRC. TFC shall at all times own 100.00% of the
------------------
issued and outstanding shares of capital stock of TFCRC free and clear of
any liens.
(l) Civilian Portfolio. At all times prior to December 31, 2000,
------------------
unless AGIC shall otherwise consent in writing (which consent shall not be
unreasonably withheld, delayed or conditioned), TFC shall cause
(i) 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 Monthly Period, and in respect of which the obligors
are not military personnel and which were purchased by or on
behalf of TFC in connection with a purchase in bulk of such
Contracts from an originator thereof, 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 Monthly Period, not to exceed
35.0%; and
(ii) 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 Monthly Period, and in respect of which the obligors
35
are not military personnel and which were purchased by or on
behalf of TFC from a Dealer in connection with a point-of-sale
transaction, 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 Monthly Period, not to exceed the percentage set forth below
opposite the relevant period set forth below:
Period Maximum Percentage
------ ------------------
from the Closing Date to the 5.00%
the third Monthly Period to
occur after the Closing Date
from the fourth Monthly 10.00%
Period to occur after the
Closing Date to the sixth
Monthly Period to occur
after the Closing Date
thereafter 15.00%.
(m) Access to Records; Discussions with Officers. TFC shall, upon
--------------------------------------------
the reasonable request of AGIC, permit AGIC or its authorized agent 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
(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 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 will
not, and will cause any ERISA Affiliate not to:
36
(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;
(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 XXXXX or 412 of the Code;
(iii) terminate any Benefit Plan of either of TFC or TFCRC or any
ERISA Affiliate if such termination would result in any
material liability to either of TFC or TFCRC 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 will treat each
transfer of Receivables pursuant to the Sale and Servicing Agreement as an
absolute sale and assignment of TFCRC's full right, title and ownership
interest in such Receivable and TFCRC 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 to the Issuer and the sale of the Notes to
the underwriters as a sale of TFCRC's interest in the Receivables evidenced
by the Notes. TFC shall furnish or cause to be furnished to AGIC:
(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 as of the end of such fiscal year and the audited
consolidated statements of income, shareholders' equity and
cash flows of TFC or the Parent, 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, prepared in accordance with GAAP,
consistently applied, and certified by an authorized officer of
TFC as being complete and correct in all material respects and
present 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.
(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
37
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 present 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 AGIC may reasonably request; provided, however,
that TFC shall not be required to deliver any such items if
provision by some other party to AGIC is required under the
Transaction Documents unless such other party wrongfully fails
to deliver such item. The reasonable fees and expenses of AGIC
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 to AGIC 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) TFC shall provide, or cause to be provided, to AGIC 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, to deliver to the Board of Directors of the Servicer, to
the Trustee, the Owner Trustee, the Trust Collateral Agent and AGIC (with a
copy delivered to the Rating Agency):
(i) As soon as practical, but in no event later than 30 days
after the delivery by the Servicer of the second Servicer's
Certificate required to be delivered by the Servicer after the Closing
Date pursuant to Section 4.9 of the Sale and Servicing Agreement, a
statement (the "Initial Accountant's Statement"), in form and
substance satisfactory to AGIC, 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
38
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 first and
second Servicer's Certificates 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 AGIC
believe to be immaterial and such other exceptions as shall be set
forth in such statement;
(ii) In the event that the Initial Accountant's Statement
indicates a degree of accuracy with respect to either or both of the
first and second Servicer's Certificates deemed by AGIC to be
unsatisfactory in the exercise of its sole discretion, as soon as
practical after written demand therefor by AGIC to TFC and the
Independent Accountants (which demand may be made as frequently as
deemed necessary in the sole discretion of AGIC), but in no event
later than 30 days after the delivery to AGIC 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 AGIC, 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 AGIC 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 AGIC, in the exercise of its
sole discretion, to indicate a high degree of accuracy with respect to
the related Servicer's Certificate; and
(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 2000), a statement (each, an "Annual
Accountant's Statement"), in form and substance satisfactory to AGIC,
reviewing the results of the Independent Accountants' performance of
certain agreed upon procedures with respect to a sample of six of the
preceding twelve Servicer's Certificates (randomly selected by such
Independent Accountants; provided that in no event shall any of the
--------
Servicer's Certificates so selected include any of the Servicer's
Certificates which formed the basis of the Initial Accountant's
Statement or any of the Additional Accountant's Statement), and
otherwise covering the same subjects, and having the same scope, as
the Initial Accountant's Statement; and
39
(iv) TFC shall use its best efforts to arrive at a mutually
satisfactory agreement with AGIC concerning the agreed upon procedures
referred to in each of clauses (i) and (iii) above, by no later than
January 31, 2000.
(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, 2000, 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 within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants.
(3) In the event such 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 AGIC 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) Title Certificates of Financed Vehicles. On or before January 31,
---------------------------------------
2000, TFC shall deliver to the Trust Collateral Agent, as custodian, the
original title certificate for each of the Financed Vehicles, to be held by
the Trust Collateral Agent as part of the Receivables Files pursuant to
Section 3.3.(a) of the Sale and Servicing Agreement.
(s) Fort Xxxx letters. On or before December 31, 1999, TFC shall
-----------------
deliver the fully executed Fort Xxxx Additional Letters to the Trust
Collateral Agent and AGIC.
(t) UCC-3 Matters. Within fifteen (15) days of the Closing Date, TFC
-------------
and TFRC shall:
(x) execute, deliver and file in the appropriate filing office
set forth below, the following UCC-3 financing statements: (1) an
assignment of the UCC-1 financing statement, filing no. 9962512, filed
with the Secretary of State of the State of Delaware, to the Trust
Collateral Agent; (2) an assignment of the UCC-1 financing statement,
filing no. 0000000000, filed with the Secretary of State of the
Commonwealth of Virginia, to the Trust Collateral Agent; and (3) an
40
assignment of the UCC-1 financing statement, filing no.99-1666, filed
with the clerk, Circuit Court of the City of Norfolk, Virginia, to the
Trust Collateral Agent; and
(y) 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. 9911307187, filed with the Secretary
of State of the Commonwealth of Virginia, and (b) the UCC-1 financing
statement, filing no.99-16665, filed with the clerk, Circuit Court of
the City of Norfolk, Virginia, to the Trust Collateral Agent.
Section 4.02. Negative Covenants with Respect to TFCRC and TFC. Each of
------------------------------------------------
TFCRC and TFC hereby covenants and agrees that during the term of this Insurance
Agreement, unless AGIC shall otherwise expressly consent in writing, which
consent shall not be unreasonably withheld:
(a) Restrictions on Liens. Neither TFCRC 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 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 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 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 Certificate holder or AGIC,
(ii) result in a Material Adverse Change with respect to the Receivables,
or (iii) impair the ability of TFCRC or TFC to perform their respective
obligations under the Transaction Documents.
(c) Waiver. Amendments, Etc. Neither TFCRC 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) Succesor. Neither TFCRC 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 Owner Trustee or any
successor thereto.
(e) Creation of Indebtedness: Guarantees. TFCRC shall not create,
------------------------------------
incur, assume or suffer to exist any Indebtedness. TFCRC 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.
41
(f) Subsidiaries. TFCRC shall not form, or cause to be formed, any
------------
Subsidiaries.
(g) Issuance of Stock. TFCRC 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 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 shall not conduct transactions with the Parent, TFC or
any other Affiliate of the Parent or TFCRC or with any
shareholder, director, officer, or employee of TFCRC, 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 than would be obtained in a comparable
arm's-length transaction with a Person not an Affiliate of the
Parent or TFCRC or a shareholder, director, officer, or
employee of TFCRC, as the case may be; and
(ii) TFC shall not conduct transactions with the Parent, TFCRC 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 shall not sell, transfer, exchange or
-----------------
otherwise dispose of any of its assets except pursuant to securitization
transactions as expressly permitted under the Transaction Documents.
(k) Other Activities. TFCRC shall not engage in any business or
----------------
activity other than in connection with the Transaction Documents, other
transactions with respect to which AGIC acts as insurer of a financial
guaranty insurance policy in order to guaranty asset-backed notes or
certificates issued by an affiliate of TFCRC and as permitted by its
certificate of incorporation.
(l) Insolvency. Neither TFCRC nor TFC shall commence with respect to
----------
TFCRC 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
42
of its assets, or make a general assignment for the benefit of its
creditors. Neither of TFCRC 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 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, to be less than the sum of (i) $30,000,000 plus (ii)
50% of the net earnings (after taxes) of TFC for the period commencing on
September 30, 1999 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 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, 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 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 AGIC 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. 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, AGIC and the Rating Agency.
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
43
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, the Rating
Agency and AGIC 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, the Rating Agency and AGIC an
Opinion of Counsel, stating in the opinion of such counsel, either (A) all
financing statements and continuation statements and amendments thereto
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.
Section 4.03. Affirmative Covenants of the Issuer. The Issuer hereby
-----------------------------------
covenants and agrees that during the term of this Insurance Agreement:
(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 the Controlling Party
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 AGIC upon request. The Issuer shall
furnish to AGIC, simultaneously with the delivery of such documents to the
Trustee, the Noteholders or the Certificate holder, as the case may be,
copies of all reports, certificates, statements, financial statements or
notices furnished to the Trustee, the Noteholders or the Certificate
holder, as the case may be, pursuant to the Transaction Documents. In
addition, the Issuer shall furnish to AGIC 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
44
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 AGIC, 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 AGIC may reasonably request.
(c) Access to Records; Discussions with Officers. The Issuer shall,
--------------------------------------------
upon the reasonable request of AGIC, permit AGIC 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 AGIC
-------------------------
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 Default or Trigger Event; 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
45
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 AGIC, 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 Trust Collateral Agent in the Collateral under
the Indenture. In addition, the Issuer agrees to cooperate with S&P in
connection with any review of the Transaction which may be undertaken by
S&P after the date hereof.
(f) Retirement of Notes. The Issuer shall, upon retirement of the
-------------------
Notes, furnish to AGIC a notice of such retirement, and, upon such
retirement and the expiration of the term of the Policy, surrender the
Policy to AGIC 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 AGIC that is supplied or
consented to in writing by AGIC 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 AGIC 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
46
generally accepted accounting principles in
making such determinations.
(i) Special Purpose Entity.
----------------------
(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 or any other Affiliates
thereof or that the assets of the Issuer are available to pay
the creditors of the Parent, TFC, TFCRC 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 and 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 AGIC
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 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 and each Affiliate of any of
them.
(vii) The Issuer shall maintain an arm's-length relationship with the
Parent, TFC, TFCRC 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,
47
TFCRC and each Affiliate of any of them except, in each case,
as contemplated by the Transaction Documents.
(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 AGIC:
-------
(i) Annual Financial Statements. As soon as available, and in any
---------------------------
event within 120 days after the close of each fiscal year, its
audited balance sheets as of the end of such fiscal year and
the audited 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
accompanied by the certificate of independent accountants
(which shall be a nationally recognized firm or otherwise
acceptable to AGIC) and certified by an authorized officer of
the Issuer as being complete and correct in all material
respects and present 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 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 present 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).
48
(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 AGIC may reasonably request. The fees and
expenses of AGIC or any 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 as
------------------------------------------
depositor under the Trust Agreement, on behalf of the Issuer, hereby covenants
and agrees, that during the term of this Insurance Agreement, unless AGIC shall
otherwise expressly consent in writing:
(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 Certificate holder, the Noteholders or
AGIC, (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. 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.
(d) Successors. The Issuer shall not terminate or designate, or
----------
consent to the termination or designation of, the Servicer, Back-up
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 AGIC. 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.
49
(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. Obligations Absolute. The obligations of the Issuer, TFCRC
--------------------
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:
(a) any lack of validity or enforceability of, or any amendment or
other modifications of, or waiver with respect to, the Indenture, the
Policy or the Indemnification Agreement;
(b) any amendment or waiver of, or consent to departure from the
Indenture, the Policy or the Indemnification Agreement;
(c) 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), AGIC or any other person or
50
entity whether in connection with the Policy, the Transaction Documents or
any unrelated transactions;
(d) 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;
(e) the inaccuracy or alleged inaccuracy of any Monthly Servicer
Report or Notice for Payment upon which any drawing under the Policy is
based;
(f) payment by AGIC under the Policy against presentation of a draft
or certificate which does not comply with the terms of the relevant Policy;
(g) the bankruptcy or insolvency of AGIC, the Issuer, any other party
or the Trust Property;
(h) any default or alleged default of AGIC under the Policy (other
than any payment default by AGIC under the Policy);
(i) 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
(j) any other circumstance or happening whatsoever which would
otherwise constitute a defense to the obligations of the Issuer, TFCRC or
TFC hereunder.
Section 5.02. Reinsurance. AGIC shall have the right to grant
-----------
participations in its rights under this Insurance Agreement and to enter into
contracts of reinsurance with respect to the Policy, provided that AGIC agrees
--------
that any such disposition will not alter or affect in any way whatsoever AGIC's
direct obligations hereunder and under the Policy, and provided further that any
-------- -------
reinsurer or participant will not have any rights against the Trust Property,
the Issuer, the Servicer, TFC, any Noteholders, or the Trustee and that the
Trust Property, the Issuer, the Servicer, TFC, the Noteholders, or the Trustee
shall have no obligation to have any communication or relationship whatsoever
with any reinsurer or participate in order to enforce the obligations of AGIC
hereunder and under the Policy. None of the Issuer, the Servicer or TFC may
assign its obligations under this Insurance Agreement without the prior written
consent of AGIC, such consent not to be unreasonably withheld.
Section 5.03. Liability of AGIC. Each of the Issuer, the Servicer, TFCRC,
-----------------
the Parent and TFC agree that neither AGIC, 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 AGIC, 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
51
not in limitation of the foregoing, AGIC may accept documents that appear on
their face to be in order, without responsibility for further investigation.
Section 5.04. [Reserved].
Section 5.05. Fees and Expenses. (a) The Issuer agrees to pay all
-----------------
reasonable costs and expenses (including, without limitation, reasonable fees
and expenses of legal counsel and accountants) incurred by AGIC 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, and all Rating Agency
fees incurred by AGIC in connection with the initial issuance of the Notes, in
all cases in accordance with the terms of, and subject to the limitations set
forth in, the Premium Letter. AGIC's attorney's fees and expenses incurred 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 shall be payable (i)
on the Closing Date upon the presentation of an invoice for any such fees, costs
and expenses and (ii) at any time thereafter, promptly upon presentation of an
invoice for any such fees, costs and expenses.
(b) TFC agrees to pay all reasonable costs and expenses (including,
without limitation, reasonable fees and expenses of legal counsel and
accountants) incurred by AGIC in connection with the amendment,
modification, waiver or any similar action whether or not executed or
completed and/or the enforcement, defense or preservation of any rights,
including but not limited to defending, monitoring or participating in any
litigation or proceeding (including any insolvency or bankruptcy
proceeding) against the Issuer, the Servicer, the Parent, TFCRC or TFC, as
the case may be, of AGIC's rights against any of them under this Insurance
Agreement, the Policy, the Indenture, the Indemnification Agreement or any
of the other Transaction Documents.
(c) TFC agrees to pay AGIC for any payments made by AGIC 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 AGIC as, or in lieu of, any servicing,
management, trustee, custodial or administrative fees payable, in the sole
discretion of AGIC to third parties in connection with the Transaction.
Section 5.06. Certain Obligations Not Recourse to TFC. Notwithstanding
---------------------------------------
any provision of Section 2.04 to the contrary, the payment obligations provided
in Section 5.05(b) and 5.05(c) (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, TFCRC, the Issuer of any of its obligations under the Transaction
Documents, and any interest on the foregoing in accordance with Section 2.04,
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.
52
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 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, TFCRC or the Seller 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 AGIC, the Trustee or the Trust Collateral Agent specifying such
default or incorrect representation or warranty and requiring it to be
remedied; or
(ii) any covenant made by any of the Issuer, the Parent, TFC, the
Servicer, TFCRC or the Seller under any of the Basic Documents, 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 AGIC, the Trustee or the Trust Collateral Agent
specifying such breach and requiring it to be remedied;
(c) the Cumulative Net Loss Rate for any Determination Date occurring
during a period set forth below shall be greater than the percentage set
forth opposite such period:
Period Maximum Percentage
------ ------------------
from the Initial Cut-Off Date to the third 2.00%
Monthly Period to occur after the
Initial Cut-Off Date
from the fourth Monthly Period to 6.50%
occur after the Initial Cut-Off Date to the
sixth Monthly Period to occur after
the Initial Cut-Off Date
from the seventh Monthly Period 15.40%
to occur after the Initial Cut-Off Date to
53
the ninth Monthly Period after the
Initial Cut-Off Date
from the tenth Monthly Period to 24.00%
occur after the Initial Cut-Off Date to
the 12th Monthly Period to occur
after the Initial Cut-Off Date
from the 13th Monthly Period to 24.50%
occur after the Initial Cut-Off Date to
the 15th Monthly Period to occur
after the Initial Cut-Off Date
from the 16th Monthly Period to 25.00%
occur after the Initial Cut-Off Date to
the 18th Monthly Period to occur
after the Initial Cut-Off Date
from the 19th Month Period to 26.00%
occur after the Initial Cut-Off Date to
the 21st Monthly Period to occur
after the Initial Cut-Off Date
from the 22nd Monthly Period to 27.30%
occur after the Initial Cut-Off Date to
the 24th Monthly Period to occur
after the Initial Cut-Off Date
from the 25th Monthly Period to 28.60%
occur after the Initial Cut-Off Date to
the 27th Monthly Period to occur
after the Initial Cut-Off Date
from the 28th Monthly Period to 30.00%
occur after the Initial Cut-Off Date
and at any time thereafter;
(d) [Reserved];
(e) any of the Issuer, TFC or TFCRC 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, or a case or other proceeding shall be commenced against any of
the Issuer, TFC or TFCRC 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 seeking liquidation of their respective assets;
and such Person shall fail to take appropriate action resulting in the
54
withdrawal or dismissal of such proceeding within 60 days or there shall be
appointed or any of the Issuer, TFC or TFCRC 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 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 occurring during a period
set forth 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
------ ------------------
from the Initial Cut-Off Date to the 12th 20.00%
Monthly Period to occur after the
Initial Cut-Off Date
from the 13th Monthly Period to 23.00%
occur after the Initial Cut-Off Date to the
18th Monthly Period to occur after
the Initial Cut-Off Date
from the 19th Monthly Period to occur 28.00%
after the Initial Cut-Off Date and at any time
thereafter;
(h) the Cumulative Net Loss Rate for any Determination Date occurring
during a period set forth below shall be greater than the percentage set
forth opposite such period:
Period Maximum Percentage
------ ------------------
from the Initial Cut-Off Date to the third 1.60%
Monthly Period to occur after the
Initial Cut-Off Date
from the fourth Monthly Period to 5.50%
occur after the Initial Cut-Off Date to the
sixth Monthly Period to occur after
the Initial Cut-Off Date
55
from the seventh Monthly Period 12.90%
to occur after the Initial Cut-Off Date to
the ninth Monthly Period after the
Initial Cut-Off Date
from the tenth Monthly Period to 20.00%
occur after the Initial Cut-Off Date to
the 12th Monthly Period to occur
after the Initial Cut-Off Date
from the 13th Monthly Period to 20.30%
occur after the Initial Cut-Off Date to
the 15th Monthly Period to occur
after the Initial Cut-Off Date
from the 16th Monthly Period to 20.80%
occur after the Initial Cut-Off Date to
the 18th Monthly Period to occur
after the Initial Cut-Off Date
from the 19th Month Period to 21.80%
occur after the Initial Cut-Off Date to
the 21st Monthly Period to occur
after the Initial Cut-Off Date
from the 22nd Monthly Period to 22.80%
occur after the Initial Cut-Off Date to
the 24th Monthly Period to occur
after the Initial Cut-Off Date
from the 25th Monthly Period to 23.80%
occur after the Initial Cut-Off Date to
the 27th Monthly Period to occur
after the Initial Cut-Off Date
from the 28th Monthly Period to 24.90%
occur after the Initial Cut-Off Date
and at any time thereafter;
(i) the occurrence of a Servicer Termination Event;
(j) 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
56
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;
(k) the occurrence of any Event of Default under the Indenture; and
not cured within the applicable grace period, if any.
(l) the Trust Collateral Agent shall fail to have a perfected, first
priority security interest in the Trust Property; or
(m) 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,
AGIC may exercise any one or more of the rights and remedies set forth
below:
(i) declare all or a portion of the Premium 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 AGIC shall have declared an "Event of
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; 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 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 AGIC
to exercise any remedy reserved to AGIC 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
57
any reason, or has been determined adversely to AGIC, 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 AGIC shall continue as though
no such proceeding had been instituted.
(d) AGIC shall have the right, to be exercised in its complete
discretion, to waive any covenant, Default or Insurance Agreement Event of
Default or collection of Premium by a writing setting forth the terms,
conditions and extent of such waiver signed by AGIC and delivered to the
Issuer, the Parent, TFC or TFCRC, as the case may be. Any such waiver may
only be effected in writing duly executed by AGIC, 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
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 Agency 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.
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
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.
58
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:
-----------
c/o The Finance Company
0000 Xxxxx Xxxx Xxxx, Xxxxx 000X
Xxxxxxx, Xxxxxxxx 00000]
Attention: Chief Financial Officer
Telephone: (___) ________
Facsimile: (___) ________
If to the Issuer:
----------------
TFC Automobile Receivables Trust 1999-1
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 AGIC:
----------
Asset Guaranty Insurance Company
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Chief Risk Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Back-up Servicer:
--------------------------
Norwest 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
59
Section 7.03. No Waiver; Remedies and Severability. No failure on the
------------------------------------
part of AGIC 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 AGIC hereunder is
unavailable or unenforceable shall not affect in any way the ability of AGIC 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 AGIC hereunder shall be made
--------
in lawful currency of the United States and in immediately available funds and
except for payments required to be made pursuant to Section 2.04 hereof, shall
be made prior to 2:00 p.m. (New York City time) on the date such payment is due
by wire transfer to:
Chase Manhattan Bank
ABA#: 000-000-000
Account #: 9102738722
Credit: Asset Guaranty Insurance Company
Reference: TFC: AGI Insurance Policy # FANI-0404-99337-NY
or to such other office or account as AGIC may direct. Payments received by AGIC
after 2:00 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, AGIC shall be entitled to
interest on all amounts owed to AGIC 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%.
SECTION 7.05. GOVERNING LAW AND JURY TRIAL WAIVER. 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. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INSURANCE
AGREEMENT, THE POLICY OR ANY TRANSACTION CONTEMPLATED HEREBY, THEREBY OR BY THE
INDENTURE AND FOR ANY COUNTERCLAIM THEREIN.
60
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
the Reimbursement Obligations. The provisions of this Section 7.08 shall survive
the termination of this Insurance Agreement.
Section 7.09. Limitation of Owner Trustee Liability. It is expressly
-------------------------------------
understood and agreed by the parties hereto that (a) 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, (b) 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, (c) nothing herein contained shall be
construed as creating any liability on Wilmington Trust Company individually or
personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties to
this Insurance Agreement and by any person claiming by, through or under them
and (d) 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
61
[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.
ASSET GUARANTY INSURANCE COMPANY
By: ________________________________
Name: Xxx Xxxxx-Xxxxx
Title: Vice President
TFC RECEIVABLES CORPORATION 2
By: ________________________________
Name:
Title:
THE FINANCE COMPANY,
individually and as Servicer
By: ________________________________
Name:
Title:
62
[Insurance Agreement - signature page]
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual
capacity, but solely as Trust Collateral Agent, Trustee and as Back-up
Servicer
By: ________________________________
Name:
Title:
TFC AUTOMOBILE RECEIVABLES TRUST 1999-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but solely as Owner Trustee
By: ________________________________
Name:
Title:
63
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.
1. Pursuant to (i) the Sale and Servicing Agreement dated as of
December 1, 1999 (the "Sale and Servicing Agreement") among TFC Automobile
Receivables Trust 1999-1 as issuer (the "Issuer"), TFC Receivables Corporation 2
as seller ("TFCRC"), Norwest Bank Minnesota, National Association (individually
"Norwest") as trust collateral agent, backup servicer and P.O. Box owner, The
Finance Company as servicer (the "Servicer"), and Asset Guaranty Insurance
Company as insurer ("AGIC"); (ii) the Insurance and Reimbursement Agreement
dated as of December 1, 1999 (the "Insurance Agreement") among AGIC, the Issuer,
TFCRC, the Servicer and Norwest as trustee, trust collateral agent and back-up
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 Payments
("Monthly-Pay Contracts") and contracts with more frequent Scheduled 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 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.
EXHIBIT A
__________________________
*Monthly-Pay contracts (e.g., "Monthly Accounts").
**Non-monthly-Pay contracts (e.g., "Weekly Accounts," "Bi-Weekly Accounts," and
"Semi-Monthly Accounts").
64
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
[Attached]
65
EXHIBIT B
CLOSING CHECKLIST
[Attached]
66
