Exhibit 10.45
EXECUTION COPY
INSURANCE AND INDEMNITY AGREEMENT
among
RADIAN ASSET ASSURANCE INC.,
TFC AUTOMOBILE RECEIVABLES TRUST 2002-2,
TFC RECEIVABLES CORPORATION VI,
THE FINANCE COMPANY,
XXXXX FARGO FINANCIAL SERVICING SOLUTIONS, LLC
and
XXXXX FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
Dated as of October 9, 2002
TABLE OF CONTENTS
ARTICLE I DEFINITIONS ............................................................................. 2
Section 1.01. General Definitions .............................................................. 2
Section 1.02. Generic Terms .................................................................... 11
Section 1.03. Computation of Time Periods ...................................................... 11
ARTICLE II THE POLICY AND REIMBURSEMENT ........................................................... 11
Section 2.01. Policy ........................................................................... 11
Section 2.02. Conditions Precedent ............................................................. 11
Section 2.03. Premium Letter ................................................................... 15
Section 2.04. Reimbursement Obligations. ....................................................... 15
Section 2.05. Assignment and Other Rights upon Payments under the Policy. ...................... 16
Section 2.06. Subrogation; Further Assurances. ................................................ 16
Section 2.07. Indemnification by TFC; Conduct of Actions or Proceedings; Contribution. ......... 17
Section 2.08. Indemnification by TFCRC VI; Conduct of Actions or Proceedings; Contribution...... 19
Section 2.09. Other Payment Obligations. ....................................................... 21
Section 2.10. Payments, Generally. ............................................................. 22
ARTICLE III REPRESENTATIONS AND WARRANTIES ........................................................ 22
Section 3.01. Representations and Warranties with respect to TFC and TFCRC VI .................. 22
Section 3.02. Representations and Warranties of the Issuer ..................................... 28
ARTICLE IV COVENANTS .............................................................................. 32
Section 4.01. Covenants of TFCRC VI and TFC .................................................... 32
Section 4.02. Negative Covenants with Respect to TFCRC VI and TFC .............................. 43
Section 4.03. Affirmative Covenants of the Issuer .............................................. 46
Section 4.04. Negative Covenants on Behalf of the Issuer ....................................... 51
ARTICLE V FURTHER AGREEMENTS ...................................................................... 52
Section 5.01. Effective Date; Term of Insurance Agreement ...................................... 53
Section 5.02. Obligations Absolute. ............................................................ 53
Section 5.03. Assignments; Reinsurance; Third-Party Rights. .................................... 54
Section 5.04. Liability of Radian .............................................................. 55
ARTICLE VI EVENTS OF DEFAULT; REMEDIES ............................................................ 55
Section 6.01. Insurance Agreement Events of Default ............................................ 55
Section 6.02. Remedies; Waivers. ............................................................... 59
ARTICLE VII MISCELLANEOUS PROVISIONS .............................................................. 60
Section 7.01. Amendments, Etc .................................................................. 60
Section 7.02. Notices .......................................................................... 60
i
Section 7.03. No Waiver; Remedies and Severability .... 62
Section 7.04. Payments. ............................... 62
Section 7.05. Governing Law ........................... 63
Section 7.06. Counterparts ............................ 63
Section 7.07. Paragraph Headings, Etc ................. 63
Section 7.08. No Petition ............................. 63
Section 7.09. Consent to Jurisdiction ................. 63
Section 7.10. Consent of Radian ....................... 64
Section 7.11. Jury Trial Waiver ....................... 64
Section 7.12. Limitation of Liability. ................ 65
Section 7.13. Third Party Beneficiary ................. 65
Section 7.14. Entire Agreement ........................ 65
ii
INSURANCE AND INDEMNITY AGREEMENT
THIS INSURANCE AND INDEMNITY AGREEMENT (this "Insurance Agreement") is
made as of October 9, 2002 among Radian Asset Assurance Inc., a financial
guaranty insurance company incorporated in the State of New York, as note
insurer ("Radian"), TFC Automobile Receivables Trust 2002-2, a Delaware
statutory trust (individually, the "Trust"), as issuer (the "Issuer"), TFC
Receivables Corporation VI, a Delaware corporation ("TFCRC VI"), 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"), Xxxxx Fargo Bank Minnesota, National Association, a national
banking association (individually "Xxxxx Fargo"), 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"), as back-up servicer (together with its successors and
assigns, in such capacity, the "Back-up Servicer") and as post office box owner
(together with its successors and assigns, in such capacity, the "P.O. Box
Owner"), and Xxxxx Fargo Financial Servicing Solutions, LLC, as "Successor
Servicer" under the Sale and Servicing Agreement (together with its successors
and assigns, in such capacity, the "Successor Servicer").
PRELIMINARY STATEMENTS
The Issuer will issue (a) the TFC 2.95% Asset Backed Notes, Series
2002-2 (the "Notes") pursuant to the Indenture, dated as of October 9, 2002,
among the Insurer, the Issuer and Xxxxx Fargo as Trustee and Trust Collateral
Agent (as the same may be amended, restated, supplemented or otherwise modified
from time to time in accordance with its terms and the terms hereof the
"Indenture") and (b) a certificate (the "Certificate") pursuant to the Trust
Agreement, dated as of October 9, 2002, between Wilmington Trust Company as
owner trustee (together with its successors and assigns, in such capacity, the
"Owner Trustee") and TFCRC VI as depositor (as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with its terms and the terms hereof, the "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
Radian, 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 "Collateral"). Such receivables and related assets
constituting a part of the Collateral are being sold to the Issuer pursuant to
the Sale and Servicing Agreement, dated as of October 9, 2002, among the Issuer,
TFCRC VI as seller (the "Seller"), the Servicer, Radian, the Trust Collateral
Agent, the Back-up Servicer and the Successor Servicer (as the same may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with its terms and the terms hereof, the "Sale and Servicing
Agreement"); and
Radian 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
The parties hereto, among other things, desire to specify the
conditions precedent to the issuance by Radian of the Policy, the obligations of
the Issuer, the Servicer, the Back-up Servicer, the P.O. Box Owner, the
Successor Servicer, TFC and TFCRC VI, 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, Radian, the Issuer, the Servicer, TFCRC VI, the Trustee, the
Trust Collateral Agent, the Back-up Servicer, the P.O. Box Owner and the
Successor Servicer agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. General Definitions. The terms defined in this Article I
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.
"Back-up Servicer" has the meaning assigned to such term in the
preamble above.
"Certificate" has the meaning assigned to such term in the Preliminary
Statements above.
"Closing Date" means October 9, 2002.
"Collateral" has the meaning assigned to such term in the Indenture.
"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.
2
"Cumulative Net Loss Test Failure" means with respect to any
Determination Date described below, the Cumulative Net Loss Rate shall be
greater than the percentage set forth below opposite the description of such
Determination Date:
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Period Maximum Percentage
-----------------------------------------------------------------------------------------------
For the August, September and October 2002 Determination 1.32%
Dates
-----------------------------------------------------------------------------------------------
For the November and December 2002 and January 2003 4.58%
Determination Dates
-----------------------------------------------------------------------------------------------
For the February, March and April 2003 Determination Dates 11.00%
-----------------------------------------------------------------------------------------------
For the May, June and July 2003 Determination Dates 17.15%
-----------------------------------------------------------------------------------------------
For the August, September and October 2003 Determination 17.45%
Dates
-----------------------------------------------------------------------------------------------
For the November and December 2003 and January 2004 18.10%
Determination Dates
-----------------------------------------------------------------------------------------------
For the February, March and April 2004 Determination Dates 18.95%
-----------------------------------------------------------------------------------------------
For the May, June and July 2004 Determination Dates 19.36%
-----------------------------------------------------------------------------------------------
For the August, September and October 2004 Determination 20.22%
Dates
-----------------------------------------------------------------------------------------------
For the November and December 2004 and January 2005 21.06%
Determination Dates
-----------------------------------------------------------------------------------------------
For the February 2005 Determination Date and thereafter 21.97%
-----------------------------------------------------------------------------------------------
"Date of Issuance" has the meaning assigned to such term in the Policy.
"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) immediately preceding Determination Dates; or (b) with respect to a
Trigger Event that has occurred as a result of a Cumulative Net Loss
3
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 six (6)
immediately 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 Category" means (a) for Receivables having monthly
Scheduled Receivable Payments ("Monthly-Pay Contracts" as defined in Schedule 1)
in respect of which the relevant Obligor shall have failed to make a Scheduled
Receivable Payment or a portion thereof on the due date therefor, the applicable
Delinquency Category into which such Receivable falls based on the number of
months delinquent, as described in Schedule 1 hereto and (b) for Receivables not
having monthly Scheduled Receivable Payments ("Non-Monthly-Pay Contracts," as
defined in Schedule 1) in respect of which the relevant Obligor shall have
failed to make a Scheduled Receivables Payment or a portion thereof on the due
date therefor, the applicable Delinquency Category into which such Receivable
falls based on the number of weeks delinquent, as described in Schedule 1
hereto.
"Delinquency Ratio" means, with respect to any Determination Date, the
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 sum of the Aggregate Principal Balance as of such
Accounting Date plus the Principal Balances (as of the related accounting date)
of all Receivables that became Purchaser Receivables as of such accounting date
and were Delinquent Receivables as of such accounting date.
"Delinquency Test Failure" means, (i) with respect to the October 2002
Determination Date, the Delinquency Ratio shall be greater than 18.25%; (ii)
with respect to the November 2002 Determination Date, the arithmetic average of
the Delinquency Ratios for such Determination Date and the preceding
Determination Date shall be greater than 18.25% and (iii) for each subsequent
Determination Date described below, the arithmetic average of the Delinquency
Ratios for such Determination Date and the two immediately preceding
Determination Dates shall be greater than the percentage set forth below
opposite the period during which such Determination Date occurs:
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Period Maximum Percentage
------ ------------------
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For each Determination Date prior to the August 2003 17.69%
Determination Date
------------------------------------------------------------------------------------------
For the August 2003 Determination Date through the February 20.81%
2004 Determination Date
------------------------------------------------------------------------------------------
For each Determination Date occurring after the February 2004 26.14%
Determination Date
------------------------------------------------------------------------------------------
4
"Delinquent Receivable" means a Receivable which (a) falls into any
Delinquency Category other than the "Current" category (as described in Schedule
1 hereto) and (b) is not a Liquidated Receivable.
"ERISA" means the Employee Retirement Income Security Act of 1974,
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, 2001 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, 2002 and the consolidated statements of income and cash
flows for the fiscal quarter then ended.
"Fort Xxxx ACH Letter" means the letter agreement by TFC, dated as of
October 9, 2002, acknowledged and agreed to by Fort Xxxx National Company, Fort
Xxxx National Bank and the Trust Collateral Agent (with respect to TFC's ACH
Obligor payment program).
"Fort Xxxx Allotment Letter" means the letter agreement by TFC, dated
as of October 9, 2002, acknowledged and agreed to by Fort Xxxx National Company
and Fort Xxxx National Bank (with respect to TFC's military allotment Obligor
payment program).
"Fort Xxxx Letters" means each of the Fort Xxxx TrueCheck Letter, the
Fort Xxxx ACH Letter and the Fort Xxxx Allotment Letter.
"Fort Xxxx TrueCheck Letter" means the letter agreement by TFC, dated
as of October 9, 2002, acknowledged and agreed to by Fort Xxxx National Company,
Fort Xxxx National Bank and the Trust Collateral Agent (with respect to TFC's
TrueCheck Obligor payment program).
"GAAP" means generally accepted accounting principles in effect from
time 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 March 31, 2001,
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.
5
"Indemnification Agreement" means the Indemnification Agreement, dated
as of October 9, 2002, among Radian, the Issuer, TFC and TFCRC VI.
"Indemnified Party" has the meaning specified in Section 2.07(a).
"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 VI, the Parent or any of their respective Affiliates (other
than by means of indirect stock ownership of TFCRC VI or the Parent or of any of
their respective Affiliates by any Person through a mutual fund or similar
diversified investment pool); (ii) is not a director, officer, employee or
Affiliate of TFCRC VI 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 VI 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 July 31, 2002.
"Initial Purchaser" means West LB in its capacity as "Initial
Purchaser" under the Note Purchase Agreement.
"Initial Purchaser Information" means the information relating to the
Initial Purchaser in the Private Placement Memorandum.
"Initial Spread Account Deposit Amount" means 4.00% of the Original
Pool Balance.
"Insurance Agreement" has the meaning assigned to such term in the
preamble 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), (d), (e), (f), (k) and
(l) 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.
6
"Issuer" has the meaning assigned to such term in the preamble 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 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 annual percentage rate) 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.
"Note Purchase Agreement" means the Note Purchase Agreement dated as of
October 9, 2002, among TFC, TFCRC VI, WestLB Panmure Securities Inc. and the
Initial Purchaser.
"Notes" has the meaning assigned to such term in the Preliminary
Statements above.
"Notice for Payment" has the meaning assigned to such term in the
Policy.
"Offering Document" means the Private Placement Memorandum 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.
7
"Parent Support Agreement" means the agreement among TFCRC VI, TFC,
Radian, the Trust Collateral Agent, and the Parent, dated as of October 9, 2002.
"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 or statutory trust, a joint stock company, a
trust, an unincorporated association, a joint venture, a Governmental Authority
or other entity of whatever nature.
"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.
"P.O. Box Owner" has the meaning assigned to such term in the preamble
above.
"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 (including, without limitation, the Premium Supplement payable
thereunder).
"Premium Letter" means the letter agreement among Radian, TFC and the
Issuer, dated as of the Closing Date, setting forth the payment arrangement for
the premiums payable by the Issuer 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.
"Premium Supplement" 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 Private Placement Memorandum
dated October 8, 2002, relating to the offering of the Notes.
"Provided Documents" means the Basic Documents and any documents,
agreements, instruments, schedules, certificates, statements, cash flow
schedules, number runs or other writings or data furnished to Radian (or any of
its reinsurers or potential reinsurers identified to TFC, including, without
limitation, Radian Reinsurance Inc.) by or on behalf of TFC, the Parent or TFCRC
VI with respect to itself, its respective Subsidiaries, the Receivables or the
Transaction.
"Purchaser" means TFCRC VI, in its capacity as the "Purchaser" under
the Purchase Agreement.
8
"Purchase Agreement" means the Purchase Agreement between TFC, as
seller, and TFCRC VI, as purchaser, dated as of October 9, 2002.
"Radian" has the meaning assigned to such term in the preamble above.
"Radian Information" has the meaning given to such term under the
Indemnification Agreement.
"Rating Agency" means S&P. If S&P fails to maintain a rating on the
Notes, the Rating Agency shall be a nationally recognized statistical rating
organization or other comparable Person designated by the Seller and acceptable
to Radian.
"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.
"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 6.0% 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.
"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.
"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.
9
"S&P" means Standard & Poor's Ratings Services, or its successor.
"Servicer" has the meaning assigned to such term in the preamble above.
"Standby Remittance and Processing Agreement" means the Amended and
Restated Standby Remittance and Processing Agreement among Royal Indemnity
Company, Radian, GE Capital, Westside Funding Corporation, TFC Warehouse
Corporation I, TFC, TFC Receivables Corporation IV, TFC Receivables Corporation
V, TFC Receivables Corporation VI, the Seller, Xxxxx Fargo, as Trust Collateral
Agent, P.O. Box Owner and trust collateral agent for certain other trusts, dated
as of October 9, 2002, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with its terms and the terms
hereof.
"Stock Pledge Agreement" means the Stock Pledge and Collateral Agency
Agreement made by TFC in favor of Xxxxx Fargo, as "Collateral Agent" on behalf
of Radian, dated as of October 9, 2002, as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with its
terms and the terms hereof.
"Subordinated Debt" means a debt obligation of TFC which is
subordinated to 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.
"Successor Servicer" has the meaning assigned to such term in the
preamble above.
"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) 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 preamble above.
"Transaction" means the transactions contemplated by the Transaction
Documents, including the transactions described in the Offering Document.
"Transaction Documents" has the meaning assigned to such term in
Section 2.02(a).
10
"Trigger Event" means the occurrence of either of the following events,
the occurrence of which shall not have been waived in writing by Radian: (a) a
Delinquency Test Failure or (b) a Cumulative Net Loss Test Failure.
"Trust Agreement" has the meaning assigned to such term in the
Preliminary Statements above.
"Trust Collateral Agent" has the meaning assigned to such term in the
preamble above.
"Trustee" has the meaning assigned to such term in the preamble above.
"Trust Property" has the meaning assigned to such term in the
Preliminary Statements above.
"Xxxx XX" xxxxx XxxxXX XX, Xxxxxx Branch.
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,
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 periods of months and years shall be counted in calendar months
and calendar years unless otherwise specified.
ARTICLE II
THE POLICY AND REIMBURSEMENT
Section 2.01. Policy. Radian 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 Radian 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 Radian) and shall
be in full force and effect and in form and substance satisfactory to
Radian, in the exercise of Radian's sole discretion, and an executed
counterpart of each thereof shall have been delivered to Radian:
(i) this Insurance Agreement;
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(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 Note Purchase Agreement;
(vi) the Indemnification Agreement;
(vii) the Standby Remittance and Processing Agreement;
(viii) the Trust Agreement;
(ix) the Parent Support Agreement;
(x) the Securities Account Control Agreement;
(xi) the Premium Letter;
(xii) the Stock Pledge Agreement; and
(xiii) the Fort Xxxx Letters.
(items (i) through (xiii) being, collectively, the "Transaction Documents").
(b) Radian shall have received:
(i) copies certified by the Secretary or an Assistant Secretary of
each of the Parent, the Issuer, TFC and TFCRC VI, dated the
Closing Date, of its certificate of incorporation and by-laws
and the resolutions of its Board of Directors, as the case may
be, or a duly authorized committee thereof authorizing its
execution and delivery of the Basic Documents and of all
documents evidencing other corporate or company action and
governmental approvals, if any, that are necessary for the
consummation of the transactions contemplated in such
documents;
(ii) a certificate, dated the Closing Date, of the Secretary or an
Assistant Secretary of each of the Parent, the Issuer,
TFCRC VI, 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 VI and TFC certifying to the
effect of the representation and warranty set forth in Section
3.01(e) hereof;
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(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 Radian 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 Radian in the exercise of its sole discretion,
and (4) covering such matters as Radian 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 Collateral and the other
property and rights which the Trust Collateral Agent is granted
in the Indenture and the proceeds thereof has been (A) executed
by the Issuer in favor of the Trust Collateral Agent and (B)
duly filed in such place or places which, in the opinion of
counsel for the Issuer, TFC and Radian, are necessary or
desirable to perfect such interest;
(vi) evidence that one or more UCC financing statements covering the
interest of TFCRC VI in the Receivables and the Other Conveyed
Property (as defined in the Purchase Agreement) and other
property and rights which TFCRC VI is granted in the Purchase
Agreement has been (A) executed by TFC in favor of TFCRC VI and
assigned to the Trust Collateral Agent and (B) duly filed in
such place or places which, in the opinion of counsel for the
Issuer, TFC and Radian, 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 Trust Property and other property
and rights which the Issuer is granted in the Sale and
Servicing Agreement has been (A) executed by TFCRC VI in favor
of the Issuer and assigned to the Trust Collateral Agent and
(B) duly filed in such place or places which, in the opinion of
counsel for the Issuer, TFC and Radian, are necessary or
desirable to perfect such interest;
(viii) evidence that each of the Collection Account, the Spread
Account, and the Note Payment Account have been established in
accordance with the terms and conditions of the Indenture and
the Sale and Servicing Agreement;
(ix) certified copies of documents, certificates, instruments,
approvals or executed copies thereof that relate to the
transactions as contemplated by the Basic Documents as Radian
may reasonably request;
(x) a specimen Note;
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(xi) evidence that one or more UCC financing statements covering the
security interest of Radian created by or pursuant to the Stock
Pledge Agreement and the other property and rights which Radian
is granted in the Stock Pledge Agreement and the proceeds
thereof has been (A) executed by TFC in favor of Radian and (B)
duly filed in such place or places which, in the opinion of
counsel for TFC and Radian, are necessary or desirable to
perfect such interest; and
(xii) a statement, in form and substance satisfactory to Radian,
reviewing the results of the Independent Accountants'
performance of certain agreed upon procedures with respect to
TFC, its reporting and recordkeeping, 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 Radian by the Initial Purchaser 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 Governmental Authority or
other 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 VI,
the Issuer, the Parent, the Trustee, the Initial Purchaser or Radian that
would cause information or documents heretofore supplied to Radian 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 VI, the Issuer, the
Parent, the Trustee, the Initial Purchaser or Radian that would entitle the
Initial Purchaser to decline to purchase 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) Radian 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 VI, 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 Radian in the
exercise of its sole discretion and each such legal opinion or certificate
shall be addressed to Radian, or accompanied by appropriate reliance
letters to Radian.
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(f) There shall be on deposit in the Spread Account a sum of not
less than $3,079,434.44 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 and pursuant to the
Premium Letter to Radian on or prior to the Closing Date shall have been
paid in full by TFC or the Issuer.
(i) Radian shall have received confirmation that the risk insured
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
or be in effect.
Section 2.03. Premium Letter. Radian shall be entitled to receive the
Premium payable under the Premium Letter on each Payment Date, and the timely
payment or other performance of all other obligations set forth in the Premium
Letter, in each case in accordance with the terms and conditions of the Premium
Letter on any Payment Date and in accordance with the provisions of Section 5.7
of the Sale and Servicing Agreement. The Premium shall be nonrefundable without
regard to whether Radian makes any payment under the Policy or to any other
circumstances relating to the Notes, or any provision being made for payment of
the Notes prior to maturity.
Section 2.04. Reimbursement Obligations.
(a) In consideration of the issuance of the Policy by Radian,
Radian shall be entitled to reimbursement by the Issuer from the
Collateral, 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 Radian on the date that any
amount is to be paid pursuant to a Notice for Payment. Such reimbursement
shall be made in accordance with the terms hereof and of the Sale and
Servicing Agreement and 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,
Radian shall be entitled to reimbursement (to the extent such reimbursement
and related interest has not previously been paid by payment to Radian from
the Collateral) 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
15
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
limitation, a deposit required to be made pursuant to Section 4.7 of the
Sale and Servicing Agreement, together with interest on any and all such
amounts remaining unpaid (to the extent permitted by law, if in respect of
any unpaid amounts representing interest) from the date such amounts became
due until paid in full (after as well as before judgment), at a rate of
interest equal to the Prime Rate from time to time in effect plus 2.0%
(provided, however, that a successor to the Servicer shall under no
circumstances be liable to Radian for the failure of its predecessor
Servicer to so make a deposit).
Section 2.05. Assignment and Other Rights upon Payments under the Policy.
(a) In consideration of the issuance of the Policy by Radian, in
the case of any payment made by or on behalf of Radian under the Policy, in
addition to and not by way of limitation of, any of the rights and remedies
of Radian hereunder, under the Policy, the Sale and Servicing Agreement or
the Indenture with respect to such payment, each of the Issuer, TFCRC VI
and TFC hereby acknowledges and consents to the assignment by the Trustee,
on behalf of the Noteholders, to Radian in accordance with the terms of the
relevant Notice for Payment:
(i) the rights of the Noteholders with respect to the Notes and
the Collateral, 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 Radian 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 Radian 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 Radian to
effectuate the purpose or provisions of this Section 2.05.
Section 2.06. Subrogation; Further Assurances.
(a) The interests, rights and remedies of Radian described in this
Article II are in addition to, and not in lieu of, Radian's
equitable rights of subrogation, and Radian reserves all of such
rights. Each of the Issuer, TFCRC VI and TFC agrees to take, or
cause to be taken, all actions deemed desirable by Radian to
preserve, enforce, perfect or maintain the perfection in Radian's
favor of such interests, rights and remedies and such equitable
rights of subrogation.
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(b) For the avoidance of doubt, the parties hereto acknowledge and agree
that the receipt of any payment under the Policy shall not
constitute (x) a reduction of any unpaid amounts of principal or
interest of Notes outstanding under the Indenture or (y) otherwise
discharge any other obligations whatsoever of the Issuer under the
Indenture.
(c) Each of the Issuer, TFCRC VI and TFC agrees to promptly and duly
take, execute, acknowledge and deliver such further acts, documents,
instruments and assurances as Radian 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 Radian's other rights as against the Issuer, TFCRC VI
and TFC, as the case may be.
Section 2.07. Indemnification by TFC; Conduct of Actions or Proceedings;
Contribution.
(a) In addition to any and all rights of reimbursement,
indemnification, subrogation and any other rights pursuant hereto or under
law or in equity, TFC agrees to pay, protect, indemnify and save harmless,
Radian and its officers, directors, shareholders, employees, agents,
assignees, participants, reinsurers and each Person, if any, who controls
Radian 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 VI, the Seller, as the case may be;
(ii) the breach by the Issuer, TFC, the Servicer, the Parent,
TFCRC VI, 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 VI, or the Seller, under any of the Transaction
Documents of any "default," "event of default" or similar
event (howsoever designated), or any event which, with the
giving of notice or the lapse of time or both, would
constitute any "event of default" or similar event (howsoever
designated); provided, however, it is understood and agreed
that the sole remedy with respect to a breach of
representations and warranties pursuant to Section 3.1 of the
Sale and Servicing Agreement shall be the repurchase of
Receivables pursuant to Section 3.2 of the Sale and Servicing
Agreement, subject to the conditions contained therein, or to
enforce the obligation of TFC to TFCRC VI to repurchase such
Receivables pursuant to the Purchase Agreement; provided,
further, it is understood and agreed that the sole remedy
with
17
respect to the breach of any of the covenants set forth in
Sections 4.5(a) or 4.6(a) of the Sale and Servicing Agreement
shall be the repurchase of Receivables pursuant to Section
4.7 of the Sale and Servicing Agreement, subject to the
conditions contained therein; provided further, however, that
TFC shall indemnify the Indemnified Parties against all
costs, expenses, losses, damages, claims and liabilities,
including reasonable fees and expenses of counsel, which may
be asserted against or incurred by it as a result of third
party claims arising out of the events or facts giving rise
to any such breach of such covenant; or
(iii) any untrue statement or alleged untrue statement of a
material fact contained in the Private Placement Memorandum,
or in any amendment or supplement to the Private Placement
Memorandum, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided, however, that TFC will not be liable as a result of
this clause (iii) to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement in or omission or
alleged omission from any of such documents in reliance upon
the representation made by Radian with regard to the Radian
Information.
(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, Radian
shall promptly notify TFC in writing, and TFC shall assume the defense
thereof, including the employment of counsel satisfactory to Radian and the
payment of all reasonable expenses. An Indemnified Party (including Radian)
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 Radian 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 Radian).
TFC shall not be liable for any settlement of any such action or proceeding
effected without its written consent to the
18
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 2.07), 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 VI; 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 VI agrees to pay, protect, indemnify and save
harmless the Indemnified Parties, from and against any and all claims,
losses, liabilities (including penalties), actions, suits, judgments,
demands, damages, costs or expenses (including, without limitation,
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) of any nature arising out of or
relating to the transactions contemplated by the Transaction Documents by
reason of:
(i) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer,
employee or agent of TFCRC VI;
(ii) the breach by TFCRC VI of any representation, warranty or
covenant under any of the Transaction Documents, or the
occurrence, in respect of TFCRC VI, under any of the
Transaction Documents of any "default," "event of default" or
similar event (howsoever designated), or any event which,
with the giving of notice or the lapse of time or both, would
constitute any "event of default" or similar event (howsoever
designated); provided, however, it is understood and agreed
that the sole remedy with respect to a breach of
representations and warranties pursuant to Section 3.1 of the
Sale and Servicing Agreement shall be the repurchase of
Receivables pursuant to Section 3.2 of the Sale and Servicing
Agreement, subject to the conditions contained therein, or to
enforce the obligation of TFC to repurchase such Receivables
pursuant to the Purchase Agreement; or
(iii) any untrue statement or alleged untrue statement of a
material fact contained in the Private Placement Memorandum,
or in any amendment or supplement to the Private Placement
Memorandum, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided, however, that TFCRC VI will not be liable as a
result of this
19
clause (iii) to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or
alleged untrue statement in or omission or alleged omission from
any of such documents in reliance upon the representation made by
Radian with regard to the Radian Information.
(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 VI hereunder, Radian
shall promptly notify TFCRC VI in writing, and TFCRC VI shall assume the
defense thereof, including the employment of counsel satisfactory to Radian
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 VI if (i) TFCRC VI has agreed to pay such fees and
expenses, (ii) TFCRC VI shall have failed to assume the defense of such
action or proceeding and employ counsel satisfactory to Radian 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 VI, 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 VI and
(B) the representation of TFCRC VI 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 VI in writing that it elects
to employ separate counsel at the expense of TFCRC VI, TFCRC VI 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 VI
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 Radian). TFCRC VI 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 VI, but, if settled with its written consent, or if there be a final
judgment for the plaintiff in any such action or proceeding with respect to
which TFCRC VI shall have received notice in accordance with this
subsection (b), TFCRC VI 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 VI is determined to be unavailable for
any Indemnified Party (other than due to application of this Section),
TFCRC VI shall contribute to the losses incurred by the Indemnified Party
on the basis of the relative fault of TFCRC VI, on the one hand, and the
Indemnified Party, on the other hand.
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Section 2.09. Other Payment Obligations.
(a) Legal Fees. On the Date of Issuance, TFC agrees to pay to Radian all
reasonable out-of-pocket legal fees and disbursements incurred by
Radian in connection with the negotiation, preparation, execution and
delivery of the Private Placement Memorandum, the Transaction
Documents and all other documents, instruments and agreements
delivered with respect thereto.
(b) Rating Agency Fees. The initial fees of S&P with respect to the Notes
and the transactions contemplated hereby shall be paid by TFC in full
on the Date of Issuance. Each of TFC and the Issuer agrees to pay all
periodic and subsequent fees of S&P with respect to, and directly
allocable to, the Notes and the transactions contemplated hereby and
thereby. The fees for any other rating agency shall be paid by the
party requesting such other agency's rating, unless such other agency
is a substitute for S&P in the event that S&P is no longer rating the
Notes, in which case the cost for such substitute agency shall be paid
by each of TFC and the Issuer.
(c) Accountants' and Auditors' Fees. In the event that Radian's auditors
are required to provide information or any consent in connection with
the Offering Document prepared on or prior to the Date of Issuance,
any reasonable fees therefor shall be paid by TFC. Each of TFC and the
Issuer shall pay on demand any additional fees of Radian's auditors
payable in respect of any Offering Document, the Notes or the
transactions contemplated hereby and thereby that are incurred after
the Date of Issuance.
(d) Enforcement and Modifications. Each of TFC and the Issuer agrees to
pay to Radian any and all out-of-pocket charges, fees, costs and
expenses (including, without limitation, reasonable fees and expenses
of legal counsel and accountants) reasonably incurred by Radian in
connection with (i) in the event of payments under the Policy, any
accounts established to facilitate payments under the Policy, to the
extent Radian has not been immediately reimbursed on the date that any
amount is paid by Radian under the Policy, or other administrative
expenses relating to such payments under the Policy, (ii) the
enforcement, defense or preservation of any rights of Radian,
including but not limited to defending, monitoring or participating in
any litigation or proceeding (including any insolvency or bankruptcy
proceeding commenced by or against the Issuer, the Servicer, the
Parent, TFCRC VI or TFC, as the case may be) relating to any of the
Transaction Documents, any party to any of the Transaction Documents
or to the Transaction, (iii) any amendment, modification, waiver or
any similar action, with respect to, or related to, any Transaction
Document or the Transaction, whether or not executed or completed
and/or (iv) any review or investigation made by Radian in those
circumstances where the approval or consent of Radian is sought under
any of the Transaction Documents.
(e) Third Party Advances. Each of TFC and the Issuer agrees to pay to
Radian the amount of any and all payments made by Radian on behalf of,
or advanced to, TFC, in its capacity as Servicer, or to the Trustee,
including, without limitation, any amounts payable by TFC in its
capacity as Servicer, or by the Trustee pursuant to the
21
Notes or any other Transaction Documents, and any payments made by
Radian as, or in lieu of, any servicing, management, trustee,
custodial or administrative fees payable, in the sole discretion of
Radian to third parties in connection with the Transaction.
(f) No Obligation to Seek Reimbursement. All amounts payable under this
Section 2.09 are to be immediately due and payable without demand, in
full, without any requirement on the part of Radian or any other
Person to seek reimbursement of such amounts from any other source of
reimbursement or indemnity, or to allocate such amount to any other
transaction that may have benefited from the expenditure of such
amounts.
Section 2.10. Payments, Generally.
(a) Interest. Interest shall accrue and be payable in respect of any
amounts not paid when due under this Insurance Agreement, from the
date such amounts became due until paid in full (after as well as
before judgment), at a rate of interest equal to the Prime Rate from
time to time in effect plus 2.0%. All amounts in respect of interest
payable under this Insurance Agreement shall be calculated on the
basis of a 360-day year for the actual number of days elapsed, and
with respect to all amounts payable pursuant to Sections 2.03 or
2.04(a) hereof shall be payable in accordance with the Indenture and
the Sale and Servicing Agreement, or to the extent payable pursuant to
any other Section herein, payable on demand.
(b) Certain Obligations Not Recourse to TFC. Notwithstanding any provision
of this Article II to the contrary, the payment obligations provided
in Section 2.09(d)(ii) and 2.09(e) (but only to the extent of advances
to the Trustee in respect of payments on the Notes), in each case, to
the extent that such payment obligations do not arise from any failure
or default in performance by the Parent, TFC, or TFCRC VI of any of
its obligations under the Transaction Documents, and any interest on
the foregoing in accordance with Section 2.10(a), shall not be
recourse to TFC, but shall be payable in the manner and in accordance
with priorities provided in the Sale and Servicing Agreement. For the
avoidance of doubt, all obligations of TFC hereunder shall constitute
amounts owing under this Insurance Agreement and shall be payable in
the manner and in accordance with the priorities provided in the Sale
and Servicing Agreement with respect to such amounts.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.01. Representations and Warranties with respect to TFC and TFCRC
VI. Each of TFC and TFCRC VI represents and warrants, as of the Closing Date,
with respect to TFC and TFCRC VI (and to the extent specifically set forth
below, with respect to the Issuer), that:
(a) Due Organization and Qualification. (i) TFC is a corporation, duly
organized, validly existing and in good standing under the laws of
Virginia. TFC is not
22
organized under the laws of any other jurisdiction. 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 VI is a corporation duly
organized, validly existing and in good standing under the laws of
Delaware. TFCRC VI is not organized under the laws of any other
jurisdiction. TFCRC VI is duly qualified to do business, is in good
standing and has obtained all necessary 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 VI 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 and related property
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 VI 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 Authority or
any of its stockholders.
(d) Noncontravention. None of the execution and delivery of the
Transaction Documents by TFC or TFCRC VI, 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 Articles of Incorporation of TFC or
Certificate of Incorporation of TFCRC VI, or the Bylaws of TFC or
TFCRC VI, 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 VI, 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 VI, as the case may be,
(ii) constitutes or will constitute a default by TFC or TFCRC VI, 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 VI is a party or by which it, or
any of its or their properties is, or may be, bound or affected,
or
23
(iii) results in or requires the creation of any Lien upon or in
respect of any of the assets of TFC or TFCRC VI 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 VI after reasonable inquiry, threatened
by or before any court, regulatory body, governmental or administrative
agency or arbitrator against or affecting TFC or TFCRC VI, or any
properties or rights of TFC or TFCRC VI, including without limitation, the
Receivables, which might result in a Material Adverse Change with respect
to TFC or TFCRC VI.
(f) Valid and Binding Obligations. Each of the Transaction Documents
to which either TFC or TFCRC VI is a party when executed and delivered by
TFC or TFCRC VI, 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.
(g) ERISA. Each of TFC and TFCRC VI 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 VI 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 VI, that would render any of the
Provided Documents untrue or misleading in any material respect. There is
no fact known to TFC or TFCRC VI which has a material possibility of
causing a Material Adverse Change with respect to either of TFC or TFCRC
VI, 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
24
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 Initial Purchaser of its
obligations set forth in the Note Purchase 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 VI contained in the Transaction Documents is
true and correct in all material respects and each of TFC or TFCRC VI
hereby makes each such representation and warranty made by it to, and for
the benefit of, Radian 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 VI 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 VI in the conduct of
their respective businesses violates any law, regulation, judgment,
agreement, order or decree applicable to it which, if enforced, would
result in a Material Adverse Change with respect to such Person.
(m) Special Purpose Entity.
(i) The capital of TFCRC VI is adequate for the business and
undertakings of TFCRC VI.
(ii) Other than with respect to the purchase by TFC of the stock of
TFCRC VI, and as provided in this Insurance Agreement and the
Transaction Documents, TFCRC VI is not engaged in any business
transactions with TFC.
(iii) At least two directors of TFCRC VI 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 VI are not, and will not be,
commingled with the funds of any other Person.
25
(v) The Bylaws of TFCRC VI 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 VI 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 VI will be left with an unreasonably
small amount of capital with which to engage in its business. Neither TFC
nor TFCRC VI intends to incur, or believes that it has incurred, debts
beyond its ability to pay such debts as they mature. Neither TFC nor TFCRC
VI 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 VI, as
the case may be, or any of their respective assets. The amount of
consideration being received by TFCRC VI upon the sale of the Receivables
to the Issuer constitutes reasonably equivalent value and fair
consideration for the Receivables. TFCRC VI 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.
(ii) Immediately prior to the transfer of any Trust Property to the
Issuer pursuant to the Sale and Servicing Agreement, TFCRC VI
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 VI to the Issuer is characterized as other
than a sale, such transfer shall be characterized as a secured
financing, and the Issuer shall have a valid and perfected first
priority security interest in such Receivables free and clear of
all Liens and Restrictions on Transferability.
(iii) Immediately prior to the sale of the Receivables and Other
Conveyed Property to TFCRC VI 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
26
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 VI is characterized as other than a
sale, such transfer shall be characterized as a secured
financing, and TFCRC VI 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 VI 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 VI or
any of the properties, income or franchises of TFC or TFCRC VI, 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
VI, all such tax returns were true and correct in all material respects and
neither of TFC nor TFCRC VI 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 VI 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 Radian Information and the Initial Purchaser
Information) contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(r) Pledge of Shares. The shares of stock of TFCRC VI which have
been pledged pursuant to the Stock Pledge Agreement constitute all of the
issued and outstanding shares of stock of TFCRC VI.
(s) Investment Company. Neither TFC nor TFCRC VI 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 VI Affecting Its Business. TFCRC VI is
not a party to any contract or agreement, or subject to any charter or
other corporate restriction which materially and adversely affects its
business.
27
(u) Perfection of Security Interest. All filings and recordings as
may be necessary to perfect the interest of the Issuer in the Receivables
have been accomplished and are in full force and effect. TFCRC VI will from
time to time, at its own expense, execute and file such additional
financing statements (including continuation statements) as may be
necessary to ensure that at any time, the interest of the Issuer (and the
priority of such interest) in all of the Receivables is fully protected.
(v) Ownership of TFCRC VI. 100% of the issued and outstanding shares
of capital stock of TFCRC VI 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 VI.
(w) No Broker, Finder or Financial Adviser Other Than West LB.
Neither TFCRC VI nor any of its officers, directors, employees or agents
has employed any broker, finder or financial adviser other than West LB or
incurred any liability for fees or commissions to any person other than
West LB in connection with the offering, issuance or sale of the Notes.
(x) Rating Agency. The information supplied by TFC or TFCRC VI to
the Rating Agency 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 and the pledge of the shares
of TFCRC VI under the Stock Pledge Agreement) will result in a violation of
Section 7 of the Securities and Exchange Act, or any regulations issued
pursuant thereto, or in a violation of any of Regulations T, U and X of the
Board of Governors of the Federal Reserve System.
(z) Financial Statements. The Financial Statements of TFC, copies of
which have been furnished to Radian, (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 trust and is in good standing
under the laws of the
28
State of Delaware. The Issuer is not organized under the laws of any other
jurisdiction. The Issuer is duly qualified to do business, is in good
standing and has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for the
conduct of its business as currently conducted and as described in the
Offering Document and the performance of its obligations under the
Transaction Documents, in each jurisdiction in which the failure to be so
qualified or to obtain such approvals would render any Receivable or
Transaction Document unenforceable in any material respect or would
otherwise cause a Material Adverse Change to occur with respect to the
Transaction.
(b) Power and Authority. The Issuer has all necessary trust power
and authority to conduct its business as currently conducted and as
described in the Offering Document, to execute, deliver and perform its
obligations under the Transaction Documents and has full power and
authority to sell and assign the Receivables as contemplated by the
Transaction Documents and to consummate the Transaction.
(c) Due Authorization. The execution, delivery and performance of
the Transaction Documents by the Issuer have been duly authorized by all
necessary trust action and do not require any additional approvals or
consents or other action by, or any notice to or filing with, any Person,
including, without limitation, any Governmental Authority.
(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.
29
(f) Valid and Binding Obligations. Each of the Transaction Documents
to which the Issuer is a party when executed by the Owner Trustee on behalf
of the Issuer, will constitute the legal, valid and binding obligations of
the Issuer enforceable against the Issuer in accordance with their
respective terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally or general equitable principles (whether in a
proceeding at law or in equity) and except to the extent that rights to
indemnity and contribution may be limited by public policy. The
Certificate, when executed, authenticated and delivered in accordance with
the Trust Agreement, will be validly issued and outstanding and entitled to
the benefits of the Trust Agreement and will evidence the entire beneficial
ownership interest in the Issuer. The Notes when executed, authenticated
and delivered in accordance with the Indenture, will be entitled to the
benefits of the Indenture and will constitute legal, valid and binding
obligations of the Issuer, enforceable in accordance with their terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the enforcement of creditors' rights
generally or general equitable principles (whether in a proceeding at law
or in equity) and except to the extent that rights to indemnity and
contribution may be limited by public policy.
(g) Accuracy of Information. None of the Transaction Documents, nor
any of the Provided Documents, contain any statement of a material fact
with respect to the 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 Initial Purchaser of its obligations set forth in the
Note Purchase 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, Radian as if the same
were set forth in full herein.
30
(j) No Consents. No consent, license, authorization or approval
from, or registration or other action by, and no notice to or filing or
declaration with, any governmental entity or regulatory body, is required
for the due execution, delivery and performance by the Issuer of the
Transaction Documents or any other material document or instrument to be
delivered thereunder, except (in each case) as have been obtained or the
failure of which to be obtained would not be reasonably likely to cause a
Material Adverse Change with respect to the Transaction.
(k) Compliance With Law. Etc. No practice, procedure or policy
employed or proposed to be employed by the Issuer in the conduct of its
business violates any law, regulation, judgment, agreement, order or decree
applicable to it which, if enforced, would result in a Material Adverse
Change with respect to the financial condition of such Person.
(l) Special Purpose Entity.
(i) The capital of the Issuer is adequate for the business and
undertakings of the Issuer.
(ii) Except as contemplated by the Transaction Documents, the Issuer
is not engaged in any business transactions with TFC, the
Parent, TFCRC VI 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.
31
(o) Investment Company. The Issuer is not an "investment company" or
a company "controlled" by an "investment company" within the meaning of the
Investment Company Act, and none of the execution, delivery or performance
of obligations under the Agreement or any of the Transaction Documents or
the consummation of any of the transactions contemplated thereby by the
Issuer or the acquisition by the Issuer of the Receivables will violate any
provision of the Investment Company Act, or any rule, regulation or order
issued by the Securities and Exchange Commission thereunder.
(p) Collateral. On the Closing Date, the Issuer will have good and
marketable title to each item of Trust Property conveyed on such date and
will own each such item free and clear of any Lien (other than Liens
contemplated under the Indenture) or any equity or participation interest
of any other Person.
(q) Security Interest in Funds and Investments. Assuming the
retention of funds in the Trust Accounts and/or the Spread Account, such
funds will be subject to a valid and perfected, first priority security
interest in favor of the Trust Collateral Agent on behalf of the Trustee
(for the benefit of the Noteholders and Radian).
(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 7 of the Securities Exchange Act, or any regulations
issues pursuant thereto, or any of Regulations T, U and X of the Board of
Governors of the Federal Reserve System. The Issuer does not own nor does
it intend to carry or purchase any "Margin Security" within the meaning of
said Regulation U, including margin securities originally issued by it or
any "margin stock" within the meaning of said Regulation U.
ARTICLE IV
COVENANTS
Section 4.01. Covenants of TFCRC VI and TFC. Each of TFCRC VI and TFC
hereby covenants and agrees that during the term of this Insurance Agreement,
unless Radian shall otherwise expressly consent in writing (in the absence of an
Insurer Default which shall have occurred and be continuing):
(a) Compliance With Agreements and Applicable Laws. Each of TFCRC VI
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 VI 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 Radian shall have previously approved in writing the
form of such amendment or modification and shall have received all fees and
expenses payable under the Premium Letter in connection therewith (provided
that such prior written approval of Radian shall not be required in the
event that (x) an Insurer Default shall have occurred and be continuing or
(y) the proposed amendment or modification shall not have any adverse
effect on Radian). Neither TFCRC VI nor TFC shall take any action or fail
32
to take any action that would interfere with the enforcement of any rights
of Radian or the Trust Collateral Agent under the Transaction Documents.
(b) Reports; Other Information. Each of TFCRC VI 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 VI, and, in the
case of TFCRC VI, which shall clearly reflect the transfer of the
Receivables to the Issuer, and subsequently to the Trust Collateral Agent.
Each of TFCRC VI and TFC shall furnish or caused to be furnished to Radian:
(i) Promptly upon receipt thereof, copies of all reports,
statements, certifications, schedules, or other similar items
delivered to or by TFCRC VI and TFC pursuant to the terms of the
Transaction Documents and, promptly upon request, such other
data as Radian may reasonably request; provided, however, that
neither TFCRC VI nor TFC shall be required to deliver any such
items if provision by some other party to Radian is required
under the Transaction Documents unless such other party
wrongfully fails to deliver such item. TFCRC VI and TFC shall,
upon the reasonable request of Radian, permit Radian or its
authorized agents (including, without limitation, any reinsurers
of Radian appointed by Radian as an agent for such purposes) (A)
to inspect its books and records as they may relate to the
Notes, the Receivables, the obligations of TFCRC VI and TFC
under the Transaction Documents, the Transaction and the
business of TFC or TFCRC VI; (B) to discuss the affairs,
finances and accounts of TFCRC VI and TFC with an officer of
each such Person upon Radian's reasonable request; and (C) to
discuss the affairs, finances and accounts of TFCRC VI 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
Radian or any such authorized agents shall be for the account of
TFC.
(ii) TFC shall provide or cause to be provided to Radian 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 VI and TFC shall promptly
inform Radian 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 VI or TFC
33
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 VI or TFC or any change in the location of the books and
records of TFCRC VI or TFC;
(iii) the occurrence of any Trigger Event, Event of Default, Servicer
Termination Event, Default or Insurance Agreement Event of
Default; or
(iv) any other event, circumstance or condition that has resulted, or
which TFCRC VI or TFC, as the case may be, reasonably believes
might result, in a Material Adverse Change with respect to TFCRC
VI or TFC.
(d) Further Assurances. Each of TFCRC VI 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 (on
behalf of the Noteholders) and Radian with respect to the Receivables, the
Collection Account, the Note Payment Account, the Spread Account, the stock
of TFCRC VI subject to the Stock Pledge Agreement and all of the other
Collateral. In addition, each of TFCRC VI and TFC shall, upon the request
of Radian, 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 (for the benefit of
the Noteholders) and Radian, in the Receivables, the Collection Account,
the Note Payment Account, the Spread Account, the stock of TFCRC VI subject
to the Stock Pledge Agreement and all of the other Collateral, free and
clear of all Liens and Restrictions on Transferability except as
contemplated by the Transaction Documents. In addition, each of TFCRC VI
and TFC agrees to cooperate with the Rating Agency in connection with any
review of the Transaction which may be undertaken by such Rating Agency and
after the date hereof.
(e) TFCRC VI's Corporate Existence. TFCRC VI 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 the
laws of Virginia, and duly qualified and duly authorized (as described in
Sections 3.01 (a), (b) and (c) hereof) and
34
shall conduct its business in accordance with the terms of its Articles 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 Radian
prepared in accordance with GAAP shall include the following statement
immediately preceding such financial statements:
The New York State Insurance Department
recognizes only statutory accounting
practices for determining and reporting
the financial condition and results of
operations of an insurance company, for
determining its solvency under the New
York Insurance Law, and for determining
where its financial condition warrants
the payment of a dividend to its
stockholders. No consideration is given
by the New York State Insurance
Department to financial statements
prepared in accordance with generally
accepted accounting principles in making
such determinations.
(h) Special Purpose Entity.
(i) TFCRC VI 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 VI shall (A) require
that its employees, if any, identify themselves as employees of
TFCRC VI when conducting business of TFCRC VI, (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 VI.
(ii) Each of TFC and TFCRC VI shall respond to any inquiries made
directly to it with respect to ownership of a Receivable by
stating that TFCRC VI acquired such Receivable from TFC, that
TFCRC VI contributed such Receivable to the Issuer and that the
Trust Collateral Agent has been granted a security interest in
such Receivable.
(iii) TFCRC VI shall compensate all employees, consultants and agents
directly or indirectly through reimbursement of TFC, from TFCRC
VI's bank accounts, for services provided to TFCRC VI by such
employees,
35
consultants and agents and, to the extent any employee,
consultant or agent of TFCRC VI is also an employee, consultant
or agent of TFC, allocate the compensation of such employee,
consultant or agent between TFCRC VI and TFC on a basis which
reflects the respective services rendered to TFCRC VI and TFC.
(iv) TFCRC VI 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 VI shall
not commingle its funds or other assets with those of any of
its Affiliates (other than in respect of items of payment or
funds which may be commingled until deposit into the Collection
Account in accordance with the Sale and Servicing Agreement),
and not hold its assets in any manner that would create an
appearance that such assets belong to any such Affiliate, not
maintain bank accounts or other depository accounts to which
any such Affiliate is an account party, into which such
Affiliate makes deposits or from which any such Affiliate has
the power to make withdrawals, and not act as an agent or
representative of any of its Affiliates in any capacity.
(v) TFCRC VI 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 VI shall maintain corporate records and books of account
separate from those of TFC or the Parent, and the Affiliates
thereof.
(vii) TFCRC VI shall obtain proper authorization from its Board of
Directors of all corporate action requiring such authorization.
Meetings of the Board of Directors of TFCRC VI 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 Radian
within 30 days of such meeting.
(viii) TFCRC VI shall obtain proper authorization from its
shareholders of all corporate action requiring shareholder
approval. Meetings of the shareholders of TFCRC VI 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 Radian within 30 days
of such authorization or meeting, as the case may be.
(ix) TFCRC VI 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 VI and
any Affiliate thereof, on the basis of actual use to the extent
practicable, and to the extent such allocation is not
36
practicable, on a basis reasonably related to actual use or the
value of services rendered. TFCRC VI shall not permit any of
its Affiliates to pay its operation expenses.
(x) The annual financial statements of each of the Parent, TFC and
TFCRC VI shall disclose the effects of the Transactions in
accordance with GAAP and shall disclose that neither the assets
of TFCRC VI nor the assets of the Issuer are available to pay
creditors of the Parent or TFC, or any of their other
Affiliates. Without limiting the foregoing, each of the Parent
and TFC shall ensure that any of its consolidated financial
statements have notes to the effect that TFCRC VI and the
Issuer are separate entities whose creditors have a claim on
their respective assets prior to those assets becoming
available to its equity holders and to any of their respective
creditors.
(xi) The resolutions, agreements and other instruments of TFCRC VI
underlying the transactions described in this Insurance
Agreement and in the other Transaction Documents shall be
continuously maintained by TFCRC VI as official records of
TFCRC VI, separately identified and held apart from the records
of TFC and the Parent and each affiliate thereof.
(xii) TFCRC VI 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 VI 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 VI 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 VI and TFC shall comply
with each of the covenants, as applicable, made by it in each of the
Transaction Documents.
(k) Ownership of TFCRC VI. TFC shall at all times own 100% of the
issued and outstanding shares of capital stock of TFCRC VI free and clear
of any Liens.
(l) Civilian Portfolio. TFC shall cause, with respect to each
calendar quarter ending before January 1, 2004, the fraction (stated as a
percentage) (A) the numerator of which is the aggregate outstanding
principal balance of Contracts serviced by TFC (including, without
limitation, those Contracts pledged to secure loans to TFC or transferred
by TFC in connection with securitization transactions) as determined as of
the close of business of the last day of the most recently concluded
calendar quarter, and in
37
respect of which the Obligors are not military personnel and (B) the
denominator of which is the aggregate outstanding principal balance of all
such Contracts serviced by TFC as determined as of the close of business of
the last day of such calendar quarter, not to exceed for such calendar
quarter, the percentage set forth opposite such Monthly Period on Schedule
2 attached hereto and under the heading "Civilian Percentage Limit".
(m) Access to Records; Discussions with Officers. TFC shall, upon
the reasonable request of Radian, permit Radian or its authorized agent
(including, without limitation, any reinsurers of Radian appointed by
Radian as an agent for such purposes) access to:
(i) the documentation regarding the Receivables, the other
Collateral, 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 VI 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
VI will not, and will cause any ERISA Affiliate not to:
(i) engage in any non-exempt prohibited transaction (within the
meaning of Code Section 4975 or ERISA Section 406) with respect
to any Benefit Plan which would result in a material liability
to either of TFC or TFCRC VI;
(ii) permit to exist any accumulated funding deficiency as defined
in Section 301(a) of ERISA and Section 412(a) of the Code, with
respect to any Benefit Plan which is subject to Section 302(q)
of ERISA or 412 of the Code;
(iii) terminate any Benefit Plan of either of TFC or TFCRC VI or any
ERISA Affiliate if such termination would result in any
material liability to either of TFC or TFCRC VI or an ERISA
Affiliate; or
38
(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 VI will
treat each transfer of Receivables pursuant to the Sale and Servicing
Agreement as an absolute sale and assignment of TFCRC VI's full right,
title and ownership interest in such Receivable and TFCRC VI will not
account for or treat the Transactions in any other manner.
(p) Financial Statements; Accountants' Reports; Other Information.
TFC shall keep, or cause to be kept, in reasonable detail books and records
of account of its assets and business, and shall clearly reflect therein
the transfer of the Receivables from TFC to TFCRC VI, and from TFCRC VI to
the Issuer, and the sale of the Notes to the Noteholders, as a sale of
TFCRC VI's respective interests in the Receivables evidenced by the Notes.
TFC shall furnish or cause to be furnished to Radian:
(i) Annual Financial Statements. As soon as available, and in any
event within 120 days after the close of each fiscal year of
the Parent, the audited consolidated balance sheets of TFC and
the Parent, and the unaudited balance sheets of TFCRC VI, in
each case as of the end of such fiscal year, and the audited
consolidated statements of income, shareholders' equity and
cash flows of TFC and the Parent, and the unaudited
consolidated statements of income, shareholders' equity and
cash flows of TFCRC VI, as applicable, for such fiscal year,
all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in the
preceding fiscal year, in each case prepared in accordance with
GAAP, consistently applied, and in the case of TFC and the
Parent, accompanied by the certificate of independent
accountants (which shall be a nationally recognized firm or
otherwise acceptable to Radian) and certified by an authorized
officer of the relevant entity as being complete and correct in
all material respects, and in the case of TFCRC VI, certified
by an authorized officer of TFCRC VI as being complete and
correct in all material respects, and in each case presenting
the financial condition and results of operations of the
Parent, TFC or TFCRC VI, 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 TFC, the Parent and
TFCRC VI, in each case as of the end of each such quarter and
the unaudited consolidated statements of income and cash flows
of TFC and the Parent for the portion of the fiscal year then
ended, all in reasonable detail and stating in comparative form
the respective figures for the corresponding date and period in
the preceding fiscal year, prepared in accordance with GAAP,
consistently applied (subject to normal year-end adjustments),
and certified by an authorized officer of TFC as being complete
and correct in all material respects and presenting the
financial
39
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 Radian may reasonably request; provided, however, that
TFC shall not be required to deliver any such items if provision
by some other party to Radian is required under the Transaction
Documents unless such other party wrongfully fails to deliver
such item. The reasonable fees and expenses of Radian 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 Radian a copy of all correspondence between a
Commonly Controlled Entity and the PBGC, IRS, Department of
Labor or the administrators of a Multiemployer Plan relating to
any Reportable Event or the under-funded status, termination or
possible termination of a Plan or a Multiemployer Plan. The
books and records of TFC will be maintained at the address for
it designated herein for receipt of notices, unless it shall
otherwise advise the parties hereto in writing.
(iv) Closing Documents. TFC shall provide, or cause to be provided,
to Radian 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 VI, to deliver to the Board of Directors of the Servicer,
to the Trustee, the Owner Trustee, the Trust Collateral Agent and Radian
(with a copy delivered to the Rating Agency):
(i) As soon as practical, but in no event later than 45 days after
the delivery by the Servicer of the third Servicer's Certificate
required to be delivered by the Servicer after the Closing Date
pursuant to Section 4.8 of the Sale and Servicing Agreement, a
statement (the "Initial Accountant's Statement"), in form and
substance satisfactory to Radian, reviewing the results of the
Independent Accountants' performance of certain agreed upon
procedures with respect to the Servicer, its reporting and
record keeping and the degree of its compliance with provisions
of the Basic Documents requiring the deposit or remittance of
funds by the Servicer to the Collection Account, substantially
to the effect that: (1) the Independent Accountants have
examined the accounts and records of the Servicer relating to
the Receivables (which records shall be described in one or more
schedules to such statement), (2) such firm has compared the
information contained in the third Servicer's Certificate
delivered by the
40
Servicer pursuant to Section 4.8 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 Radian 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 the third Servicer's
Certificate deemed by Radian to be unsatisfactory in the
exercise of its sole discretion, as soon as practical after
written demand therefor by Radian to TFC and the Independent
Accountants (which demand may be made as frequently as deemed
necessary in the sole discretion of Radian), but in no event
later than 30 days after the delivery to Radian 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
Radian, 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 Radian 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 Radian, in the exercise of its sole discretion, to indicate a
high degree of accuracy with respect to the related Servicer's
Certificate;
(iii) As soon as practical, but in no event later than 90 days after
the end of each calendar year during the term hereof (commencing
with the calendar year 2003), a statement (each, an "Annual
Accountant's Statement"), in form and substance satisfactory to
Radian, reviewing the results of the Independent Accountants'
performance of certain agreed upon procedures with respect to a
sample of (A) no more than, and in the Insurer's discretion,
less than six of the preceding twelve Servicer's Certificates
and (B) no more than, and in the Insurer's discretion, less than
three of the preceding twelve months' reporting and record
keeping practices with respect to the Servicer's compliance with
provisions of the Basic Documents requiring the deposit or
remittance of funds to the Collection Account (in each case,
randomly selected by such Independent Accountants), and
otherwise covering the same subjects, and having the
41
same scope, as the Initial Accountant's Statement; provided that
each of the three months described in clause (B) shall constitute
a Monthly Period to which one of the six Servicer's Certificates
referred to in clause (A) shall relate; and
(iv) The agreed upon procedures referred to in each of clauses (i),
(ii) and (iii) above will be substantially the same procedures
agreed upon by Radian and TFC with respect to the securitization
transaction pursuant to which the TFC Asset Backed Notes Series
2002-1 were issued.
(1) 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, 2003, with respect to the twelve months ended on the immediately
preceding December 31 (or other applicable date) 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 VI within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
(2) In the event the above-referenced Independent Accountants require
the Trust Collateral Agent to agree to the procedures to be performed by such
firm in any of the reports required to be prepared pursuant to this Section
4.01(q), TFC, in its capacity as Servicer only, shall direct the Trust
Collateral Agent in writing to so agree; it being understood and agreed that the
Trust Collateral Agent will deliver such letter of agreement in conclusive
reliance upon the direction of the Servicer, and the Trust Collateral Agent has
not made any independent inquiry or investigation as to, and shall have no
obligation or liability in respect of, the sufficiency, validity or correctness
of such procedures.
(3) All fees, costs and expenses incurred by Radian and the Trust
Collateral Agent in connection with obtaining any of the foregoing described
statements shall be for the sole cost and expense of TFC.
(r) UCC Matters. Within ten days of the Closing Date, TFC and TFCRC
VI shall cause to be filed an assignment to the Trust Collateral Agent of
all of the rights, title and interest of the Issuer in, to and under the
UCC-1 financing statements filed with (a) the Secretary of State of the
Commonwealth of Virginia and (b) the Secretary of State of Delaware to the
extent that the Trust Collateral Agent is not otherwise the secured party
of record on such financing statements.
(s) Maintenance of Licenses. Each of TFC and TFCRC VI shall maintain
all licenses, permits, charges and registrations which are material to the
performance of its obligations under this Insurance Agreement and each of
the Transaction Documents to which it is a party or by which it is bound.
42
Section 4.02. Negative Covenants with Respect to TFCRC VI and TFC. Each of
TFCRC VI and TFC hereby covenants and agrees that during the term of this
Insurance Agreement, unless Radian shall otherwise expressly consent in writing
(in the absence of an Insurer Default which shall have occurred and be
continuing), which consent shall not be unreasonably withheld:
(a) Restrictions on Liens. Neither TFCRC VI 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 Collateral, or (ii) sign or file under the Uniform
Commercial Code of any jurisdiction any financing statement which names
TFCRC VI or TFC as a debtor, or sign any security agreement authorizing any
secured party thereunder to file such financing statement, with respect to
the Collateral.
(b) Impairment of Rights. Neither TFCRC VI nor TFC shall take any
action, or fail to take any action, if such action or failure to take
action may reasonably be expected to (i) interfere with the enforcement of
any rights under the Transaction Documents that are material to the rights,
benefits or obligations of the Trustee, the Trust Collateral Agent, the
Noteholders or Radian, (ii) result in a Material Adverse Change with
respect to the Collateral, or (iii) impair the ability of TFCRC VI or TFC
to perform their respective obligations under the Transaction Documents.
(c) Waiver, Amendments, Etc. Neither TFCRC VI nor TFC shall waive,
modify or amend, or consent to any waiver, modification or amendment of,
any of the provisions of any of the Transaction Documents.
(d) Successors. Neither TFCRC VI nor TFC shall terminate or
designate, or consent to the termination or designation of, the Servicer,
the Trustee, the Back-up Servicer, the Trust Collateral Agent, the P.O. Box
Owner, the Successor Servicer, the Owner Trustee or any successor thereto.
(e) Creation of Indebtedness; Guarantees. TFCRC VI shall not create,
incur, assume or suffer to exist any Indebtedness. TFCRC VI shall not
assume, guarantee, endorse or otherwise be or become directly or
contingently liable for the obligations of any Person by, among other
things, agreeing to purchase any obligation of another Person, agreeing to
advance funds to such Person or causing or assisting such Person to
maintain any amount of capital.
(f) Subsidiaries. TFCRC VI shall not form, or cause to be formed, any
Subsidiaries.
(g) Issuance of Stock. TFCRC VI 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.
43
(h) No Mergers. TFCRC VI 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 VI shall not conduct transactions with the Parent, TFC or
any other Affiliate of the Parent, TFC or TFCRC VI or with any
shareholder, director, officer, or employee of TFCRC VI, 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 VI than would be obtained in a comparable arm's-length
transaction with a Person not an Affiliate of the Parent or TFCRC
VI or a shareholder, director, officer, or employee of TFCRC VI,
as the case may be; and
(ii) TFC shall not conduct transactions with the Parent, TFCRC VI 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 VI shall not sell, transfer, exchange or
otherwise dispose of any of its assets except pursuant to the Transaction
as expressly permitted under the Transaction Documents.
(k) Other Activities. TFCRC VI shall not engage in any business or
activity other than in connection with the Transaction Documents, except
(i) as otherwise specifically approved in writing by Radian, or (ii) as
otherwise permitted by its certificate of incorporation.
(l) Insolvency. Neither TFCRC VI nor TFC shall commence with respect
to TFCRC VI or the Issuer any case, proceeding or other action (A) under
any existing or future law of any jurisdiction, domestic or foreign,
relating to the bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, corporation or other relief with respect to it or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for
it or for all or any substantial part of its assets, or make a general
assignment for the benefit of its creditors. Neither of TFCRC VI 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 VI
shall not admit in writing its inability to pay its debts.
44
(m) Tangible Net Worth of TFC. TFC shall not permit its Tangible Net
Worth, at any time, calculated as of the close of TFC's then most recently
concluded fiscal quarter and commencing with the quarter beginning on
January 1, 2002, to be less than the sum of (i) $40,000,000 plus (ii) 50%
of the net earnings (after taxes) of TFC for the period commencing on
January 1, 2002 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. TFCRC VI shall not make any change to its
corporate name, use any trade names, fictitious names, assumed names or
"doing business as" names or change its jurisdiction of organization. TFC
shall not change its name (including using any trade names, fictitious
names, assumed names or "doing business as" names), identity,
organizational structure in any manner that would, could or might make any
financing statement or continuation statement filed in connection with the
closing of the Transactions, or otherwise in accordance with Section
4.01(d) above, seriously misleading within the meaning of Section 9-506 of
the UCC, and shall not change its jurisdiction of organization unless, in
any such case, it shall have given Radian at least 60 days' prior written
notice thereof and shall have filed before the date of such change
appropriate new financing statements or amendments to all such previously
filed financing statements or continuation statements.
(o) No Merger or Consolidation of, or Assumption of the Obligations
of, TFC. (x) TFC shall not merge or consolidate with any other Person,
convey, transfer or lease substantially all its assets as an entirety to
another Person, or permit any other Person to become the successor to TFC's
business unless, after the merger, consolidation, conveyance, transfer,
lease or succession, the successor or surviving entity, there shall be no
Material Adverse Change with respect to the ability of the surviving entity
to fulfill its duties contained in this Insurance Agreement or in any other
Transaction Document to which it is a party. Any corporation (i) into which
TFC may be merged or consolidated, (ii) resulting from any merger or
consolidation to which TFC shall be a party, (iii) which acquires by
conveyance, transfer, or lease substantially all of the assets of TFC, or
(iv) succeeding to the business of TFC, in any of the foregoing cases shall
execute an agreement of assumption to perform every obligation of TFC under
this Insurance Agreement and, whether or not such assumption agreement is
executed, shall be the successor to TFC under this Insurance Agreement
without the execution or filing of any paper or any further act on the part
of any of the parties to this Insurance Agreement, anything in this
Insurance Agreement to the contrary notwithstanding; provided, however,
that nothing contained herein shall be deemed to release TFC from any
obligation. TFC shall provide notice of any merger, consolidation or
succession pursuant to this Section 4.02(o) to the Issuer, the Trust
Collateral Agent, the Noteholders, Radian 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 Agreement (by way of avoidance of doubt, the representations and
warranties referred to in this clause (x)
45
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 Radian 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 Radian 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.
(p) Incorporation of Covenants. Each of TFC and TFCRC VI shall comply
with each of their respective covenants set forth in the Transaction
Documents and hereby incorporates such covenants by reference as if each
were set forth herein.
(q) Modification of Receivables. Neither TFC nor TFCRC VI shall agree
to the deferral or extension of a Receivable of the type contemplated by
the Servicer's charge-off and allowable delinquency policies, to the extent
that (i) the number of Receivables deferred or extended during any Monthly
Period exceeds 0.75% of the number of Receivables as of the Determination
Date related to the immediately preceding Monthly Period, or (ii) the
aggregate number of Receivables deferred or extended since the Closing Date
exceeds 1300.
Section 4.03. Affirmative Covenants of the Issuer. The Issuer hereby
covenants and agrees that during the term of this Insurance Agreement, unless
Radian shall otherwise expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws. The Issuer shall
perform each of its obligations under the Transaction Documents and shall
comply with all material requirements of, and the Notes shall be offered
and sold in accordance with, any law, rule, regulation or order applicable
to it or thereto, or that are required in connection with its performance
under any of the Transaction Documents. The Issuer will not cause or permit
to become effective any amendment to or modification of any of the
Transaction Documents to which it is a party unless Radian 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 Radian upon request. The Issuer shall
furnish to Radian, simultaneously with
46
the delivery of such documents to the Trustee, the Noteholders or the
Certificateholder, as the case may be, copies of all reports, certificates,
statements, financial statements or notices furnished to the Trustee, the
Noteholders or the Certificateholder, as the case may be, pursuant to the
Transaction Documents. In addition, the Issuer shall furnish to Radian the
following:
(i) Certain Information. Not less than two weeks prior to the date of
filing with the IRS of any tax return or amendment thereto,
copies of the proposed form of such return or amendment and,
promptly after the filing or sending thereof, (A) copies of each
tax return and amendment thereto that the Issuer files with the
IRS and (B) copies of all financial statements, reports, and
registration statements which the Issuer files with, or delivers
to, any federal government agency, authority or body which
supervises the issuance of securities by the Issuer.
(ii) Other Information. Promptly upon the request of Radian, 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 Radian may reasonably request.
(c) Access to Records; Discussions with Officers. The Issuer shall,
upon the reasonable request of Radian, permit Radian 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
Radian 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;
47
(ii) any change in the location of the Issuer's principal office or
any change in the location of the books and records of the
Issuer;
(iii)the occurrence of any Trigger Event, Event of Default, Servicer
Termination Event, Default or Insurance Agreement Event of
Default; or
(iv) any other event, circumstance or condition that has resulted, or
which is reasonably likely to result, in a Material Adverse
Change with respect to the Issuer.
(e) Further Assurances. The Issuer will file all necessary financing
statements, assignments or other instruments, and any amendments or
continuation statements relating thereto, necessary to be kept and filed in
such manner and in such places as may be required by law to preserve and
protect fully the Lien on and security interest in, and all rights of the
Trust Collateral Agent with respect to the Collateral under the Indenture.
In addition, the Issuer shall, upon the request of Radian, 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 the Rating Agency in connection with
any review of the Transaction which may be undertaken by the Rating Agency
after the date hereof.
(f) Retirement of Notes. The Issuer shall, upon retirement of the
Notes, furnish to Radian a notice of such retirement, and, upon such
retirement and the expiration of the term of the Policy, surrender the
Policy to Radian 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 Radian that is supplied or
consented to in writing by Radian 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 Radian prepared in accordance with GAAP
(but excluding any Offering Document in which such financial statements are
incorporated by
48
reference) shall include the following statement immediately preceding such
financial statements:
The New York State Insurance Department recognizes only
statutory accounting practices for determining and
reporting the financial condition and results of
operations of an insurance company, for determining its
solvency under the New York Insurance Law, and for
determining where its financial condition warrants the
payment of a dividend to its stockholders. No
consideration is given by the New York State Insurance
Department to financial statements prepared in
accordance with generally accepted accounting
principles in making such determinations.
(i) Special Purpose Entity.
(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 VI or any other Affiliates thereof or that
the assets of the Issuer are available to pay the creditors of
the Parent, TFC, TFCRC VI 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 VI and each of the
Affiliates of any of them.
(iii) The Issuer shall obtain proper authorization from its equity
owners of all trust action requiring such authorization, and
copies of each such authorization and the minutes or other
written summary of each such meeting shall be delivered to
Radian 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
49
the assets of the Issuer are not available to pay creditors of
the Parent, TFC, TFCRC VI 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 VI and each Affiliate of any
of them.
(vii) The Issuer shall maintain an arm's-length relationship with the
Parent, TFC, TFCRC VI and each Affiliate of any of them and
will not hold itself out as being liable for the debts of any
such Person.
(viii) The Issuer shall keep its assets and its liabilities wholly
separate from those of all other entities, including, but not
limited to the Parent, TFC, TFCRC VI 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 Radian:
(i) Annual Financial Statements. As soon as available, and in any
event within 120 days after the close of each fiscal year, its
unaudited balance sheet as of the end of such fiscal year and
the unaudited statements of income, shareholders' equity and
cash flows for such fiscal year, all in reasonable detail and
stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year,
prepared in accordance with GAAP, consistently applied, and
certified by an authorized officer of the Issuer as being
complete and correct in all material respects and presenting
the financial condition and results of operations of the Issuer
as of the dates and for the periods indicated, in accordance
with GAAP consistently applied.
(ii) Quarterly Financial Statements. As soon as available, and in
any event within 45 days after the close of the first three
quarters of each fiscal year
50
of the Issuer, the unaudited balance sheets of the Issuer as
of the end of each such quarter and the unaudited statements
of income and cash flows of the Issuer for the portion of the
fiscal year then ended, all in reasonable detail and stating
in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year,
prepared in accordance with GAAP, consistently applied
(subject to normal year-end adjustments), and certified by an
authorized officer of the Issuer as being complete and
correct in all material respects and presenting the financial
condition and results of operations of the Issuer as of the
dates and for the periods indicated, in accordance with GAAP
consistently applied (subject as to interim statements to
normal year-end adjustments).
(iii) Other Information. Promptly upon receipt thereof, copies of
all reports, statements, certifications, schedules, or other
similar items delivered to or by the Issuer pursuant to the
terms of the Transaction Documents and, promptly upon
request, such other data as Radian may reasonably request.
The fees and expenses of Radian 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 VI as
"Depositor" under the Trust Agreement, on behalf of the Issuer, hereby covenants
and agrees, that during the term of this Insurance Agreement, unless Radian
shall otherwise expressly consent in writing (in the absence of an Insurer
Default which shall have occurred and be continuing):
(a) Restrictions on Liens. The Issuer shall not, except as
contemplated by the Transaction Documents, (i) create, incur or suffer to
exist, or agree to create, incur or suffer to exist, or consent to cause or
permit in the future (upon the happening of a contingency or otherwise) the
creation, incurrence or existence of any Lien or Restriction on
Transferability of the Receivables, or (ii) sign or file under the Uniform
Commercial Code of any jurisdiction any financing statement which names the
Issuer as a debtor, or sign any security agreement authorizing any secured
party thereunder to file such financing statement, with respect to the
Receivables.
(b) Impairment of Rights. The Issuer shall not take any action,
or fail to take any action, if such action or failure to take action would
be reasonably likely to (i) interfere with the enforcement of any rights
under the Transaction Documents that are material to the rights, benefits
or obligations of the Trustee, the Certificateholder, the Noteholders or
Radian, (ii) result in a Material Adverse Change with respect to the
Receivables, or (iii) impair the ability of the Issuer to perform its
obligations under the Transaction Documents.
(c) Waiver, Amendments, Etc. Absent the prior written approval of
Radian, the Issuer shall not waive, modify or amend, or consent to any
waiver, modification or amendment of, any of the provisions of any of the
Transaction Documents (provided that
51
such prior written approval of Radian shall not be required in the event
that (x) an Insurer Default shall have occurred and be continuing, and (y)
the proposed amendment or modification shall not have an adverse effect on
Radian).
(d) Successors. The Issuer shall not terminate or designate, or
consent to the termination or designation of, the Servicer, the Back-up
Servicer, the P.O. Box Owner, the Successor Servicer, the Trustee, the
Trust Collateral Agent, the Owner Trustee or any successor thereto.
(e) Creation of Indebtedness; Guarantees. Other than the
Transaction Documents, the Issuer shall not create, incur, assume or suffer
to exist any Indebtedness other than Indebtedness guaranteed or approved in
writing by Radian. 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.
(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
52
Section 5.02. Effective Date; Term of Insurance Agreement. This Insurance
Agreement shall take effect upon issuance of the Policy on the Closing Date and
shall remain in effect until the later of (a) such time as Radian is no longer
subject to a claim under the Policy and the Policy shall have been surrendered
to Radian for cancellation and (b) all amounts payable to Radian and the
Noteholders under the Transaction Documents and under the Notes have been paid
in full; provided, however, that the provisions of Sections 2.04, 2.05, 2.06,
2.07, 2.08, 2.09 and 2.10 hereof shall survive any termination of this
Agreement.
Section 5.03. Obligations Absolute.
(a) The obligations of the Issuer, TFCRC VI 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:
(i) any lack of validity or enforceability of, or any amendment
or other modifications of, or waiver with respect to, the
Indenture, the Sale and Servicing Agreement, the Policy or
the Indemnification Agreement;
(ii) any amendment or waiver of, or consent to departure from the
Indenture, the Sale and Servicing Agreement, the Policy or
the Indemnification Agreement;
(iii) the existence of any claim, set off, defense or other rights
it may have at any time against the Trustee, the Trust
Collateral Agent, any beneficiary or any transferee of the
Policy (or any persons or entities for whom the Trustee, the
Trust Collateral Agent, any such beneficiary or any such
transferee may be acting), Radian or any other person or
entity whether in connection with the Policy, the Transaction
Documents or any unrelated transactions;
(iv) any statement or any other document presented under the
Policy (including any Notice for Payment) proving to be
forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any
respect whatsoever;
(v) the inaccuracy or alleged inaccuracy of any Servicer's
Certificate or Notice for Payment upon which any drawing
under the Policy is based;
(vi) payment by Radian under the Policy against presentation of a
draft or certificate which does not comply with the terms of
the Policy;
(vii) the bankruptcy or insolvency of Radian, the Issuer, any other
party hereto or the Trust Property;
(viii) any default or alleged default of Radian under the Policy
(other than any payment default by Radian under the Policy);
53
(ix) any defense based upon the failure of the Issuer or the Trust
Property to receive all or part of the proceeds of the sale
of the Notes or of the Servicer to receive any or all of the
Base Servicing Fee (as defined in the Indenture) or other
compensation required under the Indenture or otherwise, or
any nonapplication or misapplication of the proceeds of any
drawing upon the Policy; and
(x) any other circumstance or happening whatsoever which would
otherwise constitute a defense to the obligations of the
Issuer, TFCRC VI or TFC hereunder.
(b) Each of TFC, TFCRC VI and the Issuer, and any and all other
Persons who are now or may become liable for all or part of the obligations
of TFC, TFCRC VI or the Issuer in connection with the Transaction under the
Transaction Documents (or any of them) agrees to be bound by this Agreement
and (i) to the extent permitted by law, waives and renounces any and all
redemption and exemption rights and the benefit of all valuation and
appraisement privileges against the indebtedness, if any, and obligations
evidenced by any Transaction Document or by any extension or renewal
thereof, (ii) waives presentment and demand for payment, notices of
nonpayment and of dishonor, protest of dishonor and notice of protest;
(iii) waives all notices in connection with the delivery and acceptance
hereof and all other notices in connection with the performance, default or
enforcement of any payment hereunder except as required by the Transaction
Documents; (iv) waives all rights of abatement, diminution, postponement or
deduction, or to any defense other than payment, or to any right of setoff
or recoupment arising out of any breach under any of the Transaction
Documents, by any party thereto or any beneficiary thereof, or out of any
obligation at any time owing to TFC, TFCRC VI or the Issuer; (v) agrees
that any consent, waiver or forbearance hereunder with respect to an event
shall operate only for such event and not for any subsequent event; (vi)
consents to any and all extensions of time that may be granted by Radian
with respect to any payment hereunder or other provisions hereof and to the
release of any security at any time given for any payment hereunder, or any
part thereof, with or without substitution, and to the release of any
Person or entity liable for any such payment; and (vii) consents to the
addition of any and all other makers, endorsers, guarantors and other
obligors for any payment hereunder, and to the acceptance of any and all
other security for any payment hereunder, and agrees that the addition of
any such obligors or security shall not affect the liability of the parties
hereto for any payment hereunder.
(c) Nothing herein shall be construed as prohibiting TFC, TFCRC
VI or the Issuer from pursuing any rights or remedies it may have against
any Person other than Radian in a separate legal proceeding.
Section 5.04. Assignments; Reinsurance; Third-Party Rights.
(a) This Insurance Agreement shall be a continuing obligation of
the parties hereto and shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
None of the Issuer, TFC, TFCRC VI, the Servicer, the Back-up Servicer or
the Successor Servicer may assign its rights under this
54
Agreement, or delegate any of its duties hereunder, without the prior
written consent of Radian. Any assignment made in violation of this
Agreement shall be null and void.
(b) Radian shall have the right to grant participations in its
rights under this Agreement and to enter into contracts of reinsurance with
respect to the Policy upon such terms and conditions as Radian may in its
discretion determine; provided, however, that no such participation or
reinsurance agreement or arrangement shall relieve Radian of any of its
obligations hereunder or under the Policy.
(c) In addition, Radian shall be entitled to assign or pledge to
any bank or other investor providing liquidity or credit with respect to
the Transaction or the obligations of Radian in connection therewith any
rights of Radian under the Transaction Documents or with respect to any
real or personal property or other interests pledged to Radian, or in which
Radian has a security interest, in connection with the Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or
claim, express or implied, upon any Person, including, particularly, any
Noteholder or the Certificateholder, other than Radian, against the Issuer,
TFC, TFCRC VI, the Servicer, the Back-up Servicer or the Successor
Servicer, and all the terms, covenants, conditions, promises and agreements
contained herein shall be for the sole and exclusive benefit of the parties
hereto and their successors and permitted assigns. None of the Trustee, the
Owner Trustee, or the Trust Collateral Agent, nor any Noteholder or the
Certificateholder shall have any right to payment from any premiums paid or
payable hereunder or from any other amounts paid by TFC or any other Person
pursuant to Article II hereof.
Section 5.05. Liability of Radian. Each of the Issuer, the Servicer, TFCRC
VI, the Parent, TFC, the Back-up Servicer and the Successor Servicer agree that
neither Radian, 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 Radian, 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, Radian may accept documents that appear
on their face to be in order, without responsibility for further investigation.
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
Section 6.01. Insurance Agreement Events of Default. The occurrence of any
of the following events shall constitute an "Insurance Agreement Event of
Default" hereunder:
(a) any demand for payment shall be made under the Policy;
(b) (i) any representation or warranty made by any of the Issuer,
the Parent, TFC, the Servicer, or TFCRC VI under any of the
Basic Documents, or in
55
any certificate or report furnished pursuant to 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
Radian, the Trustee or the Trust Collateral Agent specifying such
default or incorrect representation or warranty and requiring it
to be remedied;
(i) any covenant made by any of the Issuer, the Parent, TFC, the
Servicer, or TFCRC VI under any of the Basic Documents (other
than any covenant described in clause (iii) below), shall be
breached in any material respect; provided, however, if such
breach in the observance or performance of such covenant has not
been committed voluntarily and is capable of being cured, it
shall be deemed a default hereunder only if it shall continue or
fail to be cured, or the circumstance or condition in respect of
which such covenant was breached shall not have been eliminated
or otherwise cured, for a period of 30 days after such Person
shall have been given a written notice by Radian, the Trustee or
the Trust Collateral Agent specifying such breach and requiring
it to be remedied; or
(ii) any of the Issuer, TFC or TFCRC VI shall fail to pay when due any
amount payable under any of the Transaction Documents unless such
amounts are paid in full within any applicable cure period
explicitly provided for under the relevant Transaction Document;
(c) with respect to any Determination Date described below, the
Cumulative Net Loss Rate shall be greater than the percentage set forth
below opposite the description of such Determination Date:
--------------------------------------------------------------------------------
Period Maximum Percentage
------ ------------------
--------------------------------------------------------------------------------
For the August, September and October 2002 1.49%
Determination Dates
--------------------------------------------------------------------------------
For the November and December 2002 and 5.17%
January 2003 Determination Dates
--------------------------------------------------------------------------------
For the February, March and April 2003 12.40%
Determination Dates
--------------------------------------------------------------------------------
For the May, June and July 2003 19.20%
Determination Dates
--------------------------------------------------------------------------------
For the August, September and October 2003 19.65%
Determination Dates
--------------------------------------------------------------------------------
56
--------------------------------------------------------------------------------
Determination Dates
--------------------------------------------------------------------------------
For the November and December 2003 and 20.40%
January 2004 Determination Dates
--------------------------------------------------------------------------------
For the February, March and April 2004 21.35%
Determination Dates
--------------------------------------------------------------------------------
For the May, June and July 2004 21.81%
Determination Dates
--------------------------------------------------------------------------------
For the August, September and October 2004 22.77%
Determination Dates
--------------------------------------------------------------------------------
For the November and December 2004 and 23.72%
January 2005 Determination Dates
--------------------------------------------------------------------------------
For the February 2005 Determination Date and 25.79%
thereafter
--------------------------------------------------------------------------------
(d) (i) the Issuer, TFC or TFCRC VI shall have asserted that any of
the Transaction Documents to which it is a party is not valid and binding
on the parties thereto; or (ii) any court, governmental authority or agency
having jurisdiction over any of the parties to any of the Transaction
Documents or any property thereof shall find or rule that any material
provision of any of the Transaction Documents is not valid and binding on
the parties thereto;
(e) (i) any of the Issuer, TFC or TFCRC VI shall fail to pay its debts
generally as they come due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit of
creditors, or shall institute any proceeding seeking to adjudicate it
insolvent or seeking a liquidation, or shall take advantage of any
insolvency act, or shall commence a case or other proceeding naming it as
debtor under the United States Bankruptcy Code or similar law, domestic or
foreign; (ii) or a case or other proceeding shall be commenced against any
of the Issuer, TFC or TFCRC VI 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 VI seeking liquidation of their
respective assets, and such Person shall fail to take appropriate action
resulting in the withdrawal or dismissal of such proceeding within 60 days;
(iii) or there shall be appointed, or any of the Issuer, TFC or TFCRC VI
shall consent to, or acquiesce in, the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of such
Person or the whole or any substantial part of its respective properties or
assets; or (iv) such Person shall take any corporate action in furtherance
of any of the foregoing;
(f) on any Payment Date, after taking into account the application in
accordance with Section 5.7(a) of the Sale and Servicing Agreement on the
related
57
Payment Date of the sum of Available Funds 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 (i) the October 2002 Determination Date, the
Delinquency Ratio shall be greater than 21.46%; (ii) the November 2002
Determination Date, the arithmetic average of the Delinquency Ratios for
such Determination Date and the preceding Determination Date shall be
greater than 21.46% and (iii) each subsequent Determination Date described
below, any Determination Date described below, the arithmetic average of
the Delinquency Ratios for such Determination Date and the two immediately
preceding Determination Dates shall be greater than the percentage set
forth below opposite the period during which such Determination Date
occurs:
--------------------------------------------------------------------------------
Period Maximum Percentage
------ ------------------
--------------------------------------------------------------------------------
For each Determination Date prior to the February 20.81%
2003 Determination Date
--------------------------------------------------------------------------------
For the February 2003 Determination Date through 23.93%
the July 2003 Determination Date
--------------------------------------------------------------------------------
For each Determination Date occurring after the 29.15%
July 2003 Determination Date
--------------------------------------------------------------------------------
(h) the occurrence of a Servicer Termination Event;
(i) TFC shall fail to pay any principal, premium or interest on any
Indebtedness having an aggregate principal amount of $1,000,000 or greater,
when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure
shall continue uncured and unwaived after the applicable grace period, if
any, specified in the agreement or instrument relating to such
Indebtedness; or any other default under any agreement or instrument
relating to any such Indebtedness of either of TFC or any other similar
event, shall occur and shall continue uncured and unwaived after the
applicable grace period, if any, specified in such agreement or instrument
if the effect of such failure to pay, other default or other event is to
accelerate, or permit the acceleration of, the maturity of such
Indebtedness; or any such Indebtedness shall be declared to be due and
payable or required to be prepaid (other than by a regulatory scheduled
required prepayment) prior to the stated maturity thereof;
(j) the occurrence of any Event of Default under the Indenture, which
event is not cured within the applicable grace period, if any;
58
(k) the Trust Collateral Agent shall fail to have a perfected, first
priority security interest in the Trust Property; or
(l) the Issuer becomes taxable as an association (or publicly traded
partnership) taxable as a corporation for federal or state income tax
purposes.
Section 6.02. Remedies; Waivers.
(a) Upon the occurrence of an Insurance Agreement Event of Default,
Radian may exercise any one or more of the rights and remedies set forth
below:
(i) declare all or a portion of the Premium Supplement that has
accrued or will accrue payable, and the same shall thereupon (A)
be immediately due and payable to the extent then accrued and
(B) become immediately due and payable upon accrual to the
extent accruing thereafter, whether or not Radian shall have
declared an "Insurance Agreement 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 as Servicer and to appoint a substitute Servicer, as
applicable; or
(iii) take whatever action at law or in equity may appear necessary or
desirable in its judgment to enforce performance of any
obligation of the Issuer, the Parent, TFC or TFCRC VI 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 or power may be exercised from time to
time and as often as may be deemed expedient. In order to entitle Radian to
exercise any remedy reserved to Radian in this Article VI, it shall not be
necessary to give any notice, other than such notice as may be expressly
required in this Article VI.
(c) If any proceeding has been commenced to enforce any right or
remedy under this Insurance Agreement and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely
to Radian, 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
Radian shall continue as though no such proceeding had been instituted.
59
(d) Radian shall have the right, to be exercised in its complete
discretion, to waive compliance with any covenant, or waive any Default or
Insurance Agreement Event of Default or collection of Premium Supplement by
a writing setting forth the terms, conditions and extent of such waiver
signed by Radian and delivered to the Issuer, the Parent, TFC or TFCRC VI,
as the case may be. Any such waiver may only be effected in writing duly
executed by Radian, 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. No act or course
of dealing shall be deemed to constitute an amendment, modification or
termination hereof.
Section 7.02. Notices. Except to the extent otherwise expressly provided
herein, all notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (and if sent by mail, certified or
registered, return receipt requested) or facsimile transmission and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand, or three (3) Business Days after being deposited in
the mail, postage prepaid, or, in the case of facsimile transmission, when sent,
addressed as follows or to such other address or facsimile number as set forth
in a written notice delivered by a party to each other party hereto:
If to TFC, the Parent or the Servicer:
The Finance Company
TFC Enterprises, Inc.
0000 Xxxxx Xxxx Xxxx, Xxxxx 000X
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Tray, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxx X. Paris, Jr.
Williams, Mullen, Xxxxx, Xxxxxxx P.C.
000 Xxx Xxxxxxxx Xxxxxx,
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
60
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to TFCRC VI:
TFC Receivables Corporation VI
0000 Xxxxx Xxxx Xxxx, Xxxxx 000X
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Tray, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxx X. Paris, Jr.
Williams, Mullen, Xxxxx, Xxxxxxx P.C.
000 Xxx Xxxxxxxx Xxxxxx,
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Issuer:
TFC Automobile Receivables Trust 2002-2
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 Radian:
Radian Asset Assurance Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Chief Risk Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(in each case in which notice or other communication to Radian refers
to an Insurance Agreement Event of Default, a claim on the Policy or
with respect to which failure on the part of Radian to respond shall be
deemed to constitute consent or acceptance, then a copy of such notice
or other communication should also be sent to the attention of each of
61
the each of the Chief Risk Officer and Chief Legal Officer and shall be
marked to indicate "URGENT MATERIAL ENCLOSED.")
If to the Trustee, Trust Collateral Agent, Back-up Servicer and P.O. Box
Owner:
Xxxxx Fargo Bank Minnesota, National Association
Sixth Street and Marquette Avenue, MAC N9311-161
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Corporate Trust Services/Asset-Backed Administration
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Successor Servicer:
Xxxxx Fargo Financial Servicing Solutions, LLC
00 Xxxxxxx Xxxxx, Xxxxx 0000
Xxxx Xxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxx Fargo Financial Florida, Inc.
000 Xxxxxx Xxxxxx
Xxx Xxxxxx, Xxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 7.03. No Waiver; Remedies and Severability. No failure on the part
of Radian 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 Radian hereunder is
unavailable or unenforceable shall not affect in any way the ability of Radian
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 Radian hereunder shall be made in lawful currency
of the United States and in immediately available funds, shall be made
prior to 1:00 p.m. (New York City time) on the date such payment is due by
wire transfer pursuant to the wire
62
transfer instructions and bank account information set forth in the Premium
Letter, or to such other office or account as Radian may direct. Payments
received by Radian after 1:00 p.m. (New York City time) shall be deemed to
have been received on the next succeeding Business Day, and such extension
of time shall be included in computing interest, commissions or fees, if
any, in connection with such payment.
(b) Whenever any payment under this Insurance Agreement shall be
stated to be due on a day which is not a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time
shall in such cases be included in computing interest, commissions or fees,
if any, in connection with such payment.
(c) Unless otherwise specified herein, Radian shall be entitled to
interest on all amounts owed to Radian under this Insurance Agreement,
together with interest on any and all amounts remaining unpaid (to the
extent permitted by law, if in respect of any unpaid amounts representing
interest) from the date such amounts become due until paid in full (after
as well as before judgment), at a rate of interest equal to the Prime Rate
from time to time in effect plus 2.0%.
(d) In the event of any payment by Radian for which it is entitled to
be reimbursed or indemnified as provided above, each of the Issuer, TFC and
TFCRC VI agrees to accept the voucher or other evidence of payment as prima
facie evidence of the propriety thereof and the liability therefor to
Radian.
SECTION 7.05. GOVERNING LAW. THIS INSURANCE AGREEMENT SHALL BE CONSTRUED,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Section 7.06. Counterparts. This Insurance Agreement may be executed in
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
Section 7.07. Paragraph Headings, Etc. The headings of paragraphs contained
in this Insurance Agreement are provided for convenience only. They form in no
part of this Insurance Agreement and shall not affect its construction or
interpretation.
Section 7.08. No Petition. Each of the parties hereto agrees that it will
not institute against, or join any other Person in instituting against, the
Issuer or the Trust Property any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal or
state bankruptcy or similar law, for one year and one day after satisfaction of
all of the Issuer's payment obligations under the Notes, the Premium Letter and
this Insurance Agreement. The provisions of this Section 7.08 shall survive the
termination of this Insurance Agreement.
Section 7.09. Consent to Jurisdiction. (a) THE PARTIES HERETO HEREBY
IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED
IN THE CITY AND COUNTY OF NEW YORK, AND
63
ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT
AGAINST IT AND TO OR IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED THEREUNDER OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE
THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD OR
DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN
SUCH FEDERAL COURT. THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY SUCH
ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND
AGREE NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH
SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER OR THAT THE TRANSACTION DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT
BE LITIGATED IN OR BY SUCH COURTS.
(b) To the extent permitted by applicable law, the parties hereto
shall not seek and hereby waive the right to any review of the judgment of
any such court by any court of any other nation or jurisdiction which may
be called upon to grant an enforcement of such judgment.
(c) Each of TFC and TFCRC VI hereby irrevocably appoints and
designates The Xxxxxxxx-Xxxx Corporation System, Inc., whose address is 00
Xxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, as its true and lawful
attorney and duly authorized agent for acceptance of service of legal
process. Each of TFC and TFCRC VI agrees that service of such process upon
such Person shall constitute personal service of such process upon it.
(d) Nothing contained in the Agreement shall limit or affect Radian's
right to serve process in any other manner permitted by law or to start
legal proceedings relating to any of the Transaction Documents against TFC
or TFCRC VI or their respective property in the courts of any jurisdiction.
Section 7.10. Consent of Radian. In the event that Radian's consent is
required under any of the Transaction Documents, the determination whether to
grant or withhold such consent shall be made by Radian in its sole discretion
without any implied duty towards any other Person, except as otherwise expressly
provided therein.
Section 7.11. Jury Trial Waiver. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH
ANY OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREUNDER. EACH PARTY
64
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY
BY, AMONG OTHER THINGS, THIS WAIVER.
Section 7.12. Limitation of Liability.
(a) No recourse under any Transaction Document shall be had against,
and no personal liability shall attach to, any officer, employee, director,
affiliate or shareholder of any party hereto, as such, by the enforcement
of any assessment or by any legal or equitable proceeding, by virtue of any
statute or otherwise in respect of any of the Transaction Documents, the
Notes or the Policy, it being expressly agreed and understood that each
Transaction Document is solely a corporate obligation of each party hereto,
and that any and all personal liability, either at common law or in equity,
or by statute or constitution, of every such officer, employee, director,
affiliate or shareholder for breaches by any party hereto of any
obligations under any Transaction Document is hereby expressly waived as a
condition of and in consideration for the execution and delivery of this
Agreement.
(b) It is expressly understood and agreed by the parties hereto that
(i) this Insurance Agreement is executed and delivered by Wilmington Trust
Company, not individually or personally but solely as Owner Trustee of the
Issuer under the Trust Agreement, in the exercise of the powers and
authority conferred and vested in it, (ii) each of the representations,
undertakings and agreements herein made on the part of the Issuer is made
and intended not as personal representations, undertakings and agreements
by Wilmington Trust Company but is made and intended for the purpose for
binding only the Issuer, (iii) nothing herein contained shall be construed
as creating any liability on Wilmington Trust Company individually or
personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties
to this Insurance Agreement and by any person claiming by, through or under
them and (iv) under no circumstances shall Wilmington Trust Company be
personally liable for the payment of any indebtedness or expenses of the
Issuer or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaking by the Issuer
under this Insurance Agreement or any related documents.
Section 7.13. Third Party Beneficiary. Each of TFC, the Servicer, TFCRC VI,
the Issuer, the Trustee, the Trust Collateral Agent, the P.O. Box Owner, the
Back-up Servicer and the Successor Servicer hereby agrees that Radian shall have
all of the rights of a third-party beneficiary in, to, under and in respect of
the Sale and Servicing Agreement and the Indenture, and hereby incorporates and
restates each of its respective, representations, warranties, undertakings,
covenants and understandings, all as set forth therein, for the benefit of
Radian.
Section 7.14. Entire Agreement. This Insurance Agreement, the Premium
Letter and the Policy set forth the entire agreement between the parties with
respect to the subject matter hereof
65
and thereof, and this Insurance Agreement supersedes and replaces any agreement
or understanding that may have existed between the parties prior to the date
hereof in respect of any such subject matter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
66
IN WITNESS WHEREOF, the parties hereto have executed this Insurance
Agreement, all as of the day and year first above mentioned.
RADIAN ASSET ASSURANCE INC.
By: ________________________________
Name:
Title:
TFC RECEIVABLES CORPORATION VI
By: ________________________________
Name: Xxxxxx X. Tray
Title: President
THE FINANCE COMPANY,
individually and as Servicer
By: ________________________________
Name: Xxxxxx X. Tray
Title: President
XXXXX FARGO BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its individual
capacity, but solely as Trust
Collateral Agent, Trustee, P.O. Box
Owner and as Back-up Servicer
By: ________________________________
Name:
Title:
XXXXX FARGO FINANCIAL SERVICING
SOLUTIONS, LLC, as Successor Servicer
By: ________________________________
Name:
Title:
Signature Page
to
Insurance and Indemnity Agreement
TFC AUTOMOBILE RECEIVABLES TRUST 2002-2
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee
By: ________________________________
Name:
Title:
Signature Page
to
Insurance and Indemnity Agreement
SCHEDULE 1
The following table is based, in part, on The Finance Company's memo
entitled "Aged Trial Balance Report Modifications for Non-Monthly Accounts MIS
Project #2367", dated March 5, 1998, and for Monthly Accounts, Section 6.1 of
the November 1991 Collection Manual for Monthly Accounts.
1. Pursuant to (i) the Sale and Servicing Agreement dated as of October
9, 2002 (the "Sale and Servicing Agreement") among TFC Automobile Receivables
Trust 2002-2 as issuer (the "Issuer"), The Finance Company ("TFC") as servicer
(the "Servicer"), Radian Asset Assurance Inc., ("Radian") TFC Receivables
Corporation VI as seller ("TFCRC VI"), Xxxxx Fargo Bank Minnesota, National
Association (individually "Xxxxx Fargo") as trust collateral agent, back-up
servicer and P.O. box owner, and Xxxxx Fargo Financial Servicing Solutions, LLC
(individually, "Xxxxx Fargo Financial"), as successor servicer; (ii) the
Insurance and Indemnity Agreement dated as of October 9, 2002 (the "Insurance
Agreement") among Radian, the Issuer, TFCRC VI, the Servicer, Xxxxx Fargo as
trustee, trust collateral agent, Back-up servicer and P.O. box owner and Xxxxx
Fargo Financial, as successor servicer; (iii) the other Basic Documents (as
defined under the Sale and Servicing Agreement); and (iv) the transactions
contemplated by the agreements listed in clauses (i) through (iii) above, the
following table shall be used to define delinquency categories for contracts
with monthly Scheduled Receivable Payments ("Monthly-Pay Contracts") and
contracts with more frequent Scheduled Receivable Payments ("Non-monthly-Pay
Contracts"):
Monthly-Pay Contracts* Non-Monthly-Pay Contracts** Delinquency
(# Months Delinquent) (# Weeks Delinquent) Category
--------------------------------------------------------------------------------
0 0-5 Current
1 6-9 30
2 10-13 60
3 14-17 90
4 18-21 120
5 22-25 150
6 26+ 180+
2. In accordance with TFC's customary policy, in assigning a
delinquency category to any contract, a single partial payment of at least 51%
of a Scheduled Receivable Payment (a "One-Time Partial Payment") shall prevent
either the characterization of such contract as being in the 30 Delinquency
Category or, in the case of a contract which is in a more advanced Delinquency
Category at the time of the receipt of such One-Time Partial Payment,
progression of the contract to the next higher Delinquency Category.
_________________
*Monthly-Pay contracts (e.g., "Monthly Accounts").
**Non-monthly-Pay contracts (e.g., "Weekly Accounts," "Bi-Weekly Accounts,"
and "Semi-Monthly Accounts").
SCHEDULE 2
CIVILIAN PORTFOLIO CONCENTRATION
------------------------------------------------------
Calendar Quarter Civilian Percentage Limit
(ending)
December 2002 49.00%
March 2003 49.00%
June 2003 49.00%
September 2003 49.00%
------------------------------------------------------
EXHIBIT A
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
[Attached]
EXHIBIT B
CLOSING CHECKLIST
[Attached]
