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THIS EXHIBIT CONTAINS CONFIDENTIAL INFORMATION WHICH HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
CONFIDENTIAL TREATMENT REQUEST UNDER RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED. THE CONFIDENTIAL INFORMATION ON PAGES 7, 17 AND 18 HAS BEEN REPLACED
WITH ASTERISKS.
EXHIBIT 10.6
[EXECUTION VERSION]
INSURANCE AND REIMBURSEMENT AGREEMENT
THIS INSURANCE AND REIMBURSEMENT AGREEMENT (the "Insurance Agreement")
is made as of March 31, 1999 among Asset Guaranty Insurance Company, a stock
insurance company incorporated in the State of New York, as note insurer
("AGIC"), Midland Funding 98-A Corporation, as issuer (the "Issuer"), Midland
Credit Management, Inc., individually ("Midland") and as servicer, together with
its successors and assigns in such capacity, including without limitation the
backup servicer and any successor servicer appointed pursuant to the Indenture
(as defined below) (the "Servicer"), and Norwest Bank Minnesota, National
Association (individually "Norwest"), as trustee (together with its successors
and assigns, in such capacity, the "Trustee") and as backup servicer (in such
capacity, the "Backup Servicer").
PRELIMINARY STATEMENTS
The Issuer is the issuer of the Floating Rate Midland
Receivables-Backed Variable Funding Notes, Series 1999-A (the "Notes") for which
a security interest in collateral consisting of all of the Issuer's right, title
and interest in, to and under pools of receivables now owned and hereafter
acquired, including, among other types of receivables, consumer loan receivables
generated on credit card accounts and installment accounts and certain other
assets and rights (the "Trust Estate") has been granted to the Trustee for the
benefit of the holders of the Notes and AGIC. Such receivables and related
assets were assigned to the Issuer pursuant to a Receivables Contribution
Agreement, dated as of March _, 1999 between Midland, as seller and the Issuer,
as purchaser (as the same may be amended, restated, supplemented or otherwise
modified from time to time, the "Receivables Contribution Agreement") and the
Schedule of Receivables (as defined below).
The Issuer has granted the security interest in the Trust Estate to
secure repayment of the Notes (and other related amounts) to the Trustee for the
benefit of the holders of the Notes and AGIC pursuant to the Indenture and
Servicing Agreement, dated as of March 31, 1999, among the Issuer, the Servicer,
AGIC and Norwest, as Trustee and as Backup Servicer (as the same may be amended,
restated, supplemented or otherwise modified from time to time, the
"Indenture"); and
The Notes have been sold to the "Purchasers" parties to that certain
Note Purchase Agreement, dated as of March 31, 1999, among such Purchasers and
the Issuer (as the same may be amended, restated, supplemented and otherwise
modified from time to time, the "Purchase Agreement"); and
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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
holders of the Notes, a financial guaranty insurance policy substantially in the
form of Exhibit A hereto (the "Policy"); and
The parties hereto, among other things, desire to specify the
conditions precedent to the issuance by AGIC of the Policy, the obligation to
make payments in respect of premiums, reimbursement obligations and other
amounts relating to the Policy, and to perform certain other obligations of the
Issuer, the Servicer, the Backup Servicer and Midland to AGIC 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, Midland, the Trustee and the
Backup 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.
"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.
"Backup Servicer" has the meaning assigned to such term in the
Preliminary Statements above.
"Closing Date" means March 31, 1999.
"GAAP" means generally accepted accounting principles in effect from
time to time in
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the United States of America.
"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.
"Indemnification Agreement" means the Indemnification Agreement, dated
as of March 31, 1999, among AGIC, the Issuer, the Placement Agent and Midland.
"Indenture" has the meaning assigned to such term in the Preliminary
Statements above.
"Insurance Agreement" has the meaning assigned to such term in the
Preliminary Statements above.
"Issuer" has the meaning assigned to such term in the Preliminary
Statements above.
"Midland" has the meaning assigned to such term in the Preliminary
Statements above.
"Notes" has the meaning assigned to such term in the Preliminary
Statements above.
"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 18, 1998, among the Issuer, Midland and the Placement Agent.
"Placement Agent Information" means the information relating to the
Placement Agent in the Private Placement Memorandum.
"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 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.
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"Private Placement Memorandum" means the final Private Placement
Memorandum dated March 31, 1999, relating to the offering of the Notes.
"Purchase Agreement" has the meaning assigned to such term in the
Preliminary Statements above.
"Purchaser" has the meaning assigned to such term in the Preliminary
Statements above.
"Rating Agency" means Standard & Poor's Rating Services, a division of
XxXxxx-Xxxx Companies, Inc.
"Receivables Contribution Agreement" has the meaning assigned to such
term in the Preliminary Statements above.
"Schedule of Receivables" means the schedule of receivables delivered
to the Trustee by the Issuer in connection with the Indenture.
"Servicer" has the meaning assigned to such term in the Preliminary
Statements above.
"Trust Estate" 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.
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.
ARTICLE II
THE POLICY AND REIMBURSEMENT
Section 2.01. Policy. AGIC agrees, subject to the satisfaction 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:
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(i) this Insurance Agreement;
(ii) the Indenture, including the Schedule of Receivables;
(iii) the Purchase Agreement;
(iv) the Receivables Contribution Agreement, including the
Schedule of Receivables;
(v) the Placement Agent Agreement;
(vi) the Indemnification Agreement; and
(vii) the Premium Letter
(items (i) through (vii) being, collectively, the "Transaction Documents").
(b) AGIC shall have received:
(i) copies certified by the Secretary or an Assistant
Secretary of each of the Issuer and Midland, dated the Closing Date, of
its certificate of incorporation and by-laws and the resolutions of its
Board of Directors, as the case may be, or a duly authorized committee
thereof authorizing its execution and delivery of the Transaction
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 Issuer, the Trustee, the
Backup Servicer and Midland certifying the names and true signatures of
its officers authorized to sign such Transaction Documents to which it
is a party;
(iii) a certificate, dated the Closing Date, of a Responsible
Officer of each of the Issuer and Midland 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
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interest of the Trustee created by or pursuant to the Indenture in the
Trust Estate 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 Trustee, and has been duly filed in such
place or places which, in the opinion of counsel for the Issuer,
Midland and AGIC, are necessary or desirable to perfect such interest;
(vi) evidence that one or more UCC financing statements
covering the ownership interest of the Issuer in the Receivables and
the other related assets assigned pursuant to the Receivables
Contribution Agreement has been executed by Midland in favor of the
Issuer, and assigned to the Trustee, and has been duly filed in such
place or places which, in the opinion of counsel for the Issuer,
Midland and AGIC, are necessary or desirable to perfect such interest;
(vii) evidence that each of the Collection Account, the
Reserve Account, and the Note Payment Account have been established in
accordance with the terms and conditions of the Indenture;
(viii) certified copies of documents, certificates,
instruments, approvals or executed copies thereof that relate to the
transactions as contemplated by the Transaction Documents as AGIC may
reasonably request; and
(ix) a specimen Note.
(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 Midland, the Issuer, 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 Midland, the Issuer, 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 Backup Servicer, the Trustee and Midland
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 exercise of its sole discretion and each such legal
opinion
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment
request.
or certificate shall be addressed to AGIC, or accompanied by appropriate
reliance letters to AGIC.
(f) There shall be on deposit in the Reserve Account a sum of not less
than [*] 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
Purchaser pursuant to the Purchase Agreement.
(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
Midland or the Issuer.
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 Estate, pursuant to the terms hereof and the Indenture,
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 [*]
(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 Estate)
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 either of Sections 2.05 or 7.02 of the
Indenture, 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 [*] (ii) the
Servicer, for payments made under the Policy arising as a result of the
Servicer's failure to make any deposit, including without limitation, a deposit
required to be made pursuant to Section 3.04 of the Indenture, 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 [*]
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(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, 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 and the
Servicer 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 Estate, 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,
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 and the Servicer 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 or the Servicer under the Indenture.
(c) Each of the Issuer and the Servicer 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 and the Servicer, as the case may be.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties of the Issuer, the
Servicer and Midland. Each of the Issuer and Midland both in its individual
capacity and as Servicer, represents and warrants to AGIC, severally and not
jointly, as of the Closing Date that:
(a) It has the power and authority to execute and deliver each of the
Transaction Documents and all other documents and agreements contemplated hereby
and thereby to which it is a party, as well as to carry out the terms hereof and
thereof.
(b) It has taken all necessary action, including but not limited to all
requisite corporate action, to authorize the execution, delivery and performance
of the Transaction Documents and all other documents and agreements contemplated
hereby and thereby to which it is a party. When executed and delivered by it,
each of the Transaction Documents to which it is a party will constitute its
legal, valid and binding obligation enforceable in accordance with its terms
subject, as to enforcement, to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors rights in general, and except as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity) and, except to the extent that rights
to indemnification and contribution may be unenforceable as against public
policy.
(c) All authorizations, licenses, permits, certificates, franchises,
consents, approvals and undertakings which are required to be obtained by it
under any applicable law (including, without limitation, state securities or
"blue sky" laws) which are material to (i) the conduct of its business, (ii) the
ownership, use, operation or maintenance of its properties, (iii) the execution,
delivery and performance by it of its obligations to AGIC and the Noteholders
under or in connection with the Transaction Documents and (iv) the distribution
of the Notes, and the issuance of the Policy have been received, and all such
authorizations, licenses, permits, certificates, franchises, consents, approvals
and undertakings are in full force and effect.
(d) Its execution, issuance, delivery of, and performance of its
obligations under the Transaction Documents and any and all instruments or
documents required to be executed or delivered pursuant to or in connection
herewith or therewith were and are within its corporate powers and will not
violate any provision of any law, regulation, decree or governmental
authorization applicable to it, or its certificate of incorporation or by-laws,
and will not violate or cause a default under any material provision of any
material contract, agreement, mortgage, indenture or other undertaking to which
it is a party or which is binding upon it or any of its property or assets, and
will not result in the imposition or creation of any lien, charge, or
encumbrance upon any of its properties or assets pursuant to the provisions of
any such contract, agreement, mortgage, indenture or undertaking, other than as
specifically set forth in any of the Transaction Documents.
(e) Its execution and delivery of the Transaction Documents and the
consummation
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of the transactions contemplated by such agreements were not made (i) in
contemplation of its insolvency, (ii) with the intent to hinder, delay or
defraud the Issuer, the Servicer, Midland or any creditor of the Issuer, the
Servicer or Midland or (iii) after the commission of any act of insolvency by
the Issuer, the Servicer or Midland or (iv) without fair consideration. It is
not possessed of assets or capital unreasonably small in value in relation to
and after giving effect to Midland's transfer under the Receivables Contribution
Agreement to the Issuer and the Issuer's grant of a security interest in the
Trust Estate and other assets to the Trustee under the Indenture and the
consummation of the other transactions contemplated by the aforementioned
agreements. It is not insolvent at the time of, and will not be rendered
insolvent by virtue of, such transfers and transactions. By consummating the
transactions contemplated by the aforementioned agreements, it does not intend
to, and does not believe that it will, incur debts beyond its ability to pay
such debts as they become due.
(f) There are no legal, governmental or regulatory proceedings or
investigations pending to which it is a party or of which any of its property is
the subject, which if determined adversely to any of them would individually or
in the aggregate have a material adverse effect on its performance of the
Transaction Documents or the consummation of the transactions contemplated
hereunder or thereunder; and to the best of its knowledge, no such proceedings
or investigations are threatened or contemplated by Governmental Authorities or
threatened or contemplated by others.
(g) Each of the representations and warranties, as applicable, made by
it in each of the Transaction Documents are true and correct in all material
respects as of the date made or deemed made.
(h) Each of the Issuer, the Servicer and Midland, severally and not
jointly, represents and warrants that, 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.
ARTICLE IV
COVENANTS
Section 4.01. Covenants of Midland individually and as Servicer.
Midland, individually and as Servicer hereby covenants and agrees that during
the term of this Insurance Agreement:
(a) It shall not terminate (except in accordance with the terms
thereof), amend, waive or otherwise modify the provisions of the Transaction
Documents or any term or provision thereof, or the performance of any of the
terms of any of the foregoing.
(b) It shall furnish to AGIC a copy of each material certificate,
report, statement,
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notice or other written communication furnished by or on behalf of it, to any of
the Noteholders, the Trustee or the Rating Agency concurrently therewith, and
furnish to AGIC promptly after receipt thereof, a copy of each notice, demand or
other communication received by it from any of the Noteholders, the Trustee or
the Rating Agency, in each case with respect to any of the Notes or the
Transaction Documents.
(c) It shall not fail to own 100% of the issued and outstanding shares
of capital stock of the Issuer.
(d) It shall comply with each of the covenants, as applicable, made by
it in each of the Transaction Documents.
Section 4.02. Affirmative Covenants of the Issuer. The Issuer hereby
covenants and agrees that during the term of this Insurance Agreement:
(a) It will furnish to AGIC the following financial information
regarding the Issuer:
(i) as soon as available, but in any event within 90 days
after the end of each fiscal year, a copy of its balance sheets as at
the end of such year and the related statements of income and retained
earnings and of cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, reported on by
Ernst & Young or other independent certified public accountants of
nationally recognized standing;
(ii) as soon as available, but in any event not later than 45
days after the end of each quarterly period of each of its fiscal
years, a copy of its unaudited balance sheet as at the end of such
quarter and the related unaudited statements of income and retained
earnings and of cash flows for such period and the portion of the
fiscal year through the end of such period, setting forth in each case
in comparative form the figures for the previous year, certified by an
authorized officer of the Servicer as being fairly stated in all
respects when considered in relation to its financial statements
(subject to normal year-end audit adjustments); and
(iii) From time to time, such other financial data relating to
the Receivables as AGIC shall reasonably request;
all such financial statements to be complete and correct in all material
respects and to be prepared in detail and in accordance with GAAP applied
consistently throughout the periods reflected therein and with prior periods.
(b) It shall include in any offering document for the Notes only
information concerning AGIC that is supplied or consented to in writing by AGIC
expressly for inclusion therein.
(c) It shall provide to AGIC such other information as AGIC may
reasonably require.
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(d) It shall comply with each of the covenants made by it in each of
the Transaction Documents.
Section 4.03. Negative Covenants of the Issuer. The Issuer hereby
covenants and agrees that during the term of this Insurance Agreement:
(a) It shall not engage at any time in any business or business
activity other than such activities expressly set forth in its certificate of
incorporation delivered to AGIC on or prior to the Closing Date.
(b) It shall not consent to amend its certificate of incorporation or
by-laws without the prior written consent of AGIC.
(c) It shall not, without the prior written consent of AGIC,
consolidate with or merge into any other entity or convey, transfer or lease its
properties and assets substantially as an entirety to any entity, or permit any
entity to merge into the Issuer or convey, transfer or lease its properties and
assets substantially as an entirety to the Issuer;
(d) It shall not:
(i) Fail to do all things necessary to maintain its existence
separate and apart from Midland and any other Person, including,
without limitation, holding regular meetings of its shareholders and
Board of Directors and maintaining appropriate company books and
records (including a current minute book);
(ii) Suffer any limitation on the authority of its own
officers and directors to conduct its business and affairs in
accordance with their independent business judgment or authorize or
suffer any Person other than its own officers and directors to act on
its behalf with respect to matters (other than matters customarily
delegated to others under powers of attorney) for which a
corporation's own officers and directors would customarily be
responsible;
(iii) Fail to (A) maintain or cause to be maintained by an
agent of the Issuer under the Issuer's control physical possession of
all its books and records, (B) maintain capitalization reasonably
adequate for the conduct of its business, (C) account for and manage
all its liabilities separately from those of any other Person,
including payment by it of all payroll, administrative expenses and
taxes, if any, from its own assets, (D) segregate and identify
separately all of its assets from those of any other Person as provided
in the Indenture, (E) to the extent any such payments are made, pay its
employees, officers and agents for services performed for the Issuer or
(F) maintain a separately identifiable office space (which space may be
located in the office building of Midland or an Affiliate);
(iv) Except as may be provided in the Indenture (or similar
agreements relating
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to other securitizations pursuant to which the Issuer has similar
rights and obligations to those set forth in the Transaction Documents)
commingle its funds with those of Midland or any Affiliate thereof or
use its funds for other than the Issuer's uses; or
(v) Fail to adhere to each of the factual assumptions
concerning entity separateness made by Xxxxx & Xxxxxx L.L.P., counsel
for the Issuer in its legal opinion concerning non-consolidation
delivered under Section 2.02(b)(iv) hereunder;
(e) It shall not include in any offering document for the Notes any
information concerning AGIC other than information that is supplied or consented
to in writing by AGIC expressly for inclusion therein.
ARTICLE V
FURTHER AGREEMENTS
Section 5.01. Obligations Absolute. The obligations of the Issuer, the
Servicer and Midland 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, any beneficiary or any transferee of the
Policy (or any persons or entities for whom the Trustee, any such beneficiary or
any such transferee may be acting), AGIC or any other person or 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,
provided that such payment shall not have constituted gross negligence or
willful misconduct of AGIC;
(g) the bankruptcy or insolvency of AGIC, the Issuer, any other party
or the Trust
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Estate;
(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
Estate 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, provided that the
same shall not have constituted gross negligence or willful misconduct of AGIC.
Section 5.02. Reinsurance. AGIC shall have the right to give
participation 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 Estate, the
Issuer, the Servicer, Midland, any Noteholders, or the Trustee and that the
Trust Estate, the Issuer, the Servicer, Midland, 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 Midland 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 and
Midland 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 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. Successor Servicer. Any Successor Servicer, including the
Backup Servicer, by accepting its appointment pursuant to the Indenture, (a)
shall agree to be bound by the terms, covenants and conditions contained herein
applicable to the Servicer and subject to the duties and obligations of the
Servicer hereunder (other than the covenants set forth in Sections 4.01(a) and
(c)), (b) as of the date of its acceptance, shall be deemed to have made with
respect to itself the representations and warranties made by the Servicer in
this Insurance Agreement to the extent applicable (other than the
representations and warranties set forth in Sections 3.01(c)(iv), (e) and (h)),
and (c) shall agree to indemnify and hold harmless AGIC from and against any and
all claims, damages, losses, liabilities, costs or expenses whatsoever which
AGIC may incur (or which may be claimed against AGIC) by reason of the
negligence or willful misconduct of the
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Successor Servicer in exercising its powers and carrying out its obligations as
Servicer under the Indenture. No such appointment shall make the successor
Servicer responsible with respect to any liabilities of the outgoing Servicer
incurred prior to such appointment or for any acts, omissions or
misrepresentations of such outgoing Servicer.
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) Midland 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 and/or the enforcement against the Issuer, the
Servicer or Midland, 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.
ARTICLE VI
REMEDIES
Section 6.01. Remedies. Upon the occurrence of an Event of Default or a
Servicer Default under the Indenture, AGIC shall have the rights and remedies
available to the "Note Insurer" under the Indenture.
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; 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.
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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 Midland or the Servicer:
Midland Credit Management, Inc.
000 X. 0xx, Xxx 000
Xxxxxxxxxx, Xxxxxx 00000-0000
Attention: Xxxxx Xxxxxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000)000-0000
Facsimile: (000)000-0000
If to the Issuer:
Midland Funding 98-A Corporation
0000 X. Xxxxxxxx
Xxxxxxxxxx, Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Secretary
Telephone: (000) 000-0000
With a copy to:
Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000)000-0000
Facsimile: (000)000-0000
If to AGIC:
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment
request.
Asset Guaranty Insurance Company
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Manager, Asset-Backed Surveillance
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Backup Servicer:
Norwest Bank Minnesota, National Association
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Corporate Trust Services/Asset-Backed Administration
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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 Sections 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#: [*]
Account #: [*]
Credit: Asset Guaranty Insurance Company
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,
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* Confidential information has been omitted and filed separately with the
Securities and Exchange Commission pursuant to a confidential treatment
request.
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 [*]
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.
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. None of Midland, the Servicer, the Backup
Servicer or AGIC will institute against, or join any other Person in instituting
against, the Issuer or the Trust Estate 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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[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: /s/ Xxxxx Xxxxxx
------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President
MIDLAND FUNDING 98-A CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Treasurer
MIDLAND CREDIT MANAGEMENT, INC.,
individually and as Servicer
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxxxx
Title: Senior Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its individual capacity,
but solely as Trustee and as Backup Servicer
By: /s/ Xxxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxxxx
Title: Asst. Vice President
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