EXHIBIT 10.4
EXECUTION COPY
INSURANCE AND INDEMNITY AGREEMENT
among
ASSET GUARANTY INSURANCE COMPANY,
TFC AUTOMOBILE RECEIVABLES TRUST 2001-1,
TFC RECEIVABLES CORPORATION IV,
THE FINANCE COMPANY,
XXXXX FARGO FINANCIAL AMERICA, INC.
and
XXXXX FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
Dated as of March 30, 2001
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 IV; Conduct of Actions or Proceedings; Contribution.... 19
Section 2.09. Other Payment Obligations....................................................... 20
Section 2.10. Payments, Generally............................................................. 22
ARTICLE III REPRESENTATIONS AND WARRANTIES...................................................... 22
Section 3.01. Representations and Warranties with respect to TFC and TFCRC IV................. 22
Section 3.02. Representations and Warranties of the Issuer.................................... 28
ARTICLE IV COVENANTS............................................................................ 32
Section 4.01. Covenants of TFCRC IV and TFC................................................... 32
Section 4.02. Negative Covenants with Respect to TFCRC IV and TFC............................. 42
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..................................... 52
Section 5.02. Obligations Absolute............................................................ 52
Section 5.03. Assignments; Reinsurance; Third-Party Rights.................................... 54
Section 5.04. Liability of AGIC............................................................... 55
ARTICLE VI EVENTS OF DEFAULT; REMEDIES.......................................................... 55
Section 6.01. Insurance Agreement Events of Default........................................... 55
Section 6.02. Remedies; Waivers............................................................... 58
ARTICLE VII MISCELLANEOUS PROVISIONS............................................................ 59
Section 7.01. Amendments, Etc................................................................. 59
Section 7.02. Notices......................................................................... 60
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Section 7.03. No Waiver; Remedies and Severability.............................................. 61
Section 7.04. Payments.......................................................................... 62
Section 7.05. Governing Law..................................................................... 62
Section 7.06. Counterparts...................................................................... 62
Section 7.07. Paragraph Headings, Etc........................................................... 62
Section 7.08. No Petition....................................................................... 63
Section 7.09. Consent to Jurisdiction........................................................... 63
Section 7.10. Consent of AGIC................................................................... 64
Section 7.11. Jury Trial Waiver................................................................. 64
Section 7.12. Limitation of Liability........................................................... 64
Section 7.13. Third Party Beneficiary........................................................... 65
Section 7.14. Entire Agreement.................................................................. 65
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INSURANCE AND INDEMNITY AGREEMENT
THIS INSURANCE AND INDEMNITY AGREEMENT (this "Insurance Agreement") is made
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as of March 30, 2001 among Asset Guaranty Insurance Company, a financial
guaranty insurance company incorporated in the State of New York, as note
insurer ("AGIC"), TFC Automobile Receivables Trust 2001-1, a Delaware business
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trust (individually, the "Trust"), as issuer (the "Issuer"), TFC Receivables
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Corporation IV, a Delaware corporation ("TFCRC IV"), The Finance Company, a
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Virginia corporation (individually, "TFC") and as servicer (together with its
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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
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Fargo Bank Minnesota, National Association, a national banking association
(individually "Xxxxx Fargo"), as trustee (together with its successors and
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assigns, in such capacity, the "Trustee"), as trust collateral agent (together
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with its successors and assigns, in such capacity, the "Trust Collateral
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Agent"), as back-up servicer (together with its successors and assigns, in such
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capacity, the "Back-up Servicer") and as post office box owner (together with
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its successors and assigns, in such capacity, the "P.O. Box Owner"), and Xxxxx
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Fargo Financial America, Inc. (individually, "WFCar"), as "Successor Servicer"
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under the Sale and Servicing Agreement (together with its successors and
assigns, in such capacity, the "Successor Servicer").
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PRELIMINARY STATEMENTS
The Issuer will issue (a) the TFC 5.853% Asset Backed Notes, Series 2000-1
(the "Notes") pursuant to the Indenture, dated as of March 30, 2001, among the
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Issuer and Xxxxx Fargo as Trustee and Trust Collateral Agent (as the same may be
amended, restated, supplemented or otherwise modified from time to time in
accordance with its terms and the terms hereof the "Indenture") and (b) a
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certificate (the "Certificate") pursuant to the Amended and Restated Trust
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Agreement, dated as of March 30, 2001, between Wilmington Trust Company as owner
trustee (together with its successors and assigns, in such capacity, the "Owner
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Trustee") and TFCRC IV as depositor (as the same may be amended, restated,
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supplemented or otherwise modified from time to time in accordance with its
terms and the terms hereof, the "Trust Agreement").
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Pursuant to the Indenture, the Issuer will grant to the Trust Collateral
Agent for the benefit of the Trustee on behalf of the Noteholders and AGIC, to
secure repayment of the Notes (and other related amounts), a security interest
in collateral consisting of all of the Issuer's right, title and interest in, to
and under a pool of receivables, including, among other types of receivables,
receivables of retail installment sale contracts secured by the financed
vehicles and certain other assets and rights, all as more fully set forth in the
Indenture (the "Trust Property"). Such receivables and related assets
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constituting a part of the Trust Property were sold to the Issuer pursuant to
the Sale and Servicing Agreement, dated as of March 30, 2001, among the Issuer,
TFCRC IV as seller (the "Seller"), the Servicer, the Trust Collateral Agent, the
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Back-up Servicer and the Successor Servicer (as the same may be amended,
restated, supplemented or otherwise modified from time to time in accordance
with its terms and the terms hereof, the "Sale and Servicing Agreement"); and
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AGIC is authorized to transact a financial guaranty insurance business in
the State of New York and has agreed, subject to the terms and conditions of
this Insurance Agreement, to issue to the Trustee, for the benefit of the
Noteholders, a financial guaranty insurance policy substantially in the form of
Exhibit A hereto (the "Policy"); and
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The parties hereto, among other things, desire to specify the conditions
precedent to the issuance by AGIC of the Policy, the obligations of the Issuer,
the Servicer, the Back-up Servicer, the P.O. Box Owner, the Successor Servicer,
TFC and TFCRC IV, as applicable, to make payments in respect of premiums,
reimbursement obligations and other amounts relating to the Policy, and to
perform certain other obligations in respect of the issuance of the Policy, and
to provide for certain other matters related thereto.
NOW, THEREFORE, in consideration of the premises and of the agreements
herein contained, AGIC, the Issuer, the Servicer, TFC, TFCRC IV, the Trustee,
the Trust Collateral Agent, the Back-up Servicer, the P.O. Box Owner and the
Successor Servicer agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. General Definitions. The terms defined in this Article I
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shall have the meanings provided herein for all purposes of this Insurance
Agreement, unless the context clearly requires otherwise, in both singular and
plural form, as appropriate. Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to such terms in the Indenture or the
Sale and Servicing Agreement (as applicable).
"Affiliate" means, as to any specified Person, any other Person controlling
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or controlled by or under common control with such specified Person. For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.
"AGIC" has the meaning assigned to such term in the preamble above.
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"AGIC Information" has the meaning given to such term under the
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Indemnification Agreement.
"Back-up Servicer" has the meaning assigned to such term in the preamble
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above.
"Certificate" has the meaning assigned to such term in the Preliminary
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Statements above.
"Closing Date" means April 2, 2001.
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"Commonly Controlled Entity" means TFC and each entity, whether or not
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incorporated, which is affiliated with TFC pursuant to Section 414(b), (c), (m)
or (o) of the Code.
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"Cumulative Net Loss Rate" means with respect to any Determination Date,
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the fraction, expressed as a percentage, the numerator of which is equal to the
aggregate amount of Net Losses through the end of the related Monthly Period for
such Determination Date and the denominator of which is equal to the Original
Pool Balance.
"Cumulative Net Loss Test Failure" means with respect to any Determination
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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
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For the April, May and June 2001 1.31%
Determination Dates
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For the July, August and September 2001 4.56%
Determination Dates
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For the October, November and December 2001 10.83%
Determination Dates
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For the January, February and March 2002 16.62%
Determination Dates
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For the April, May and June 2002 16.91%
Determination Dates
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For the July, August and September 2002 17.57%
Determination Dates
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For the October, November and December 2002 18.42%
Determination Dates
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For the January, February and March 2003 19.26%
Determination Dates
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For the April, May and June 2003 20.11%
Determination Dates
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For the July, August and September 2003 20.95%
Determination Dates
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For the October, November and December 2003 22.60%
Determination Dates
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For the January 2004 Determination Date and 22.62%
thereafter
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"Date of Issuance" has the meaning assigned to such term in the Policy.
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"Deemed Cured" means, as of a Determination Date, (a) with respect to a
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Trigger Event that has occurred solely as a result of the occurrence of a
Delinquency Test Failure, that no Trigger Event or any Insurance Agreement Event
of Default shall have occurred as of such Determination Date or as of any of the
three (3) next preceding Determination Dates; or (b) with respect to any other
Trigger Event, that no Trigger Event or any Insurance Agreement Event of Default
shall have occurred as of such Determination Date or as of any of the six (6)
next preceding Determination Dates.
"Default" means any event which results, or which with the giving of notice
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or the lapse of time or both would result, in an Insurance Agreement Event of
Default.
"Delinquency Category" means (a) for Receivables having monthly Scheduled
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Receivable Payments ("Monthly-Pay Contracts" as defined in Schedule 1) in
respect of which the relevant Obligor shall have failed to make a Scheduled
Receivable Payment or a portion thereof on the due date therefor, the applicable
Delinquency Category into which such Receivable falls based on the number of
months delinquent, as described in Schedule 1 hereto and (b) for Receivables not
having monthly Scheduled Receivable Payments ("Non-Monthly-Pay Contracts," as
defined in Schedule 1) in respect of which the relevant Obligor shall have
failed to make a Scheduled Receivables Payment or a portion thereof on the due
date therefor, the applicable Delinquency Category into which such Receivable
falls based on the number of weeks delinquent, as described in Schedule 1
hereto.
"Delinquency Ratio" means, with respect to any Determination Date, the
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fraction, expressed as a percentage, (a) the numerator of which is equal to the
sum of the Principal Balances (as of the related Accounting Date) of all
Receivables that are Delinquent Receivables as of the related Accounting Date,
or that became Purchased Receivables as of the related Accounting Date and were
Delinquent Receivables as of such Accounting Date and (b) the denominator of
which is equal to the Aggregate Principal Balance as of such Accounting Date.
"Delinquency Test Failure" means, (i) with respect to the April 2001
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Determination Date, the Delinquency Ratio shall be greater than 17.6%; (ii) with
respect to the May 2001 Determination Date, the arithmetic average of the
Delinquency Ratios for such Determination Date and the preceding Determination
Date shall be greater than 17.6% 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 occurring prior to the 17.60%
April 2002 Determination Date
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For the April 2002 Determination Date through the 20.70%
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September 2002 Determination Date
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For each Determination Date occurring after the 26.00%
September 2002 Determination Date
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"Delinquent Receivable" means a Receivable which (a) falls into any
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Delinquency Category other than the "Current" category (as described in Schedule
1 hereto) and (b) is not a Liquidated Receivable.
"ERISA" means the Employee Retirement Income Security Act of 1974,
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including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Event of Default" has the meaning assigned to such term in the Indenture.
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"Financial Statements" means with respect to each of TFC and the Parent,
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the audited consolidated balance sheets as of December 31, 1999 and the
statements of income, shareholder's equity and cash flows for the 12-month
period then ended and the notes thereto, and the unaudited consolidated balance
sheets as of September 30, 2000 and the consolidated statements of income and
cash flows for the fiscal quarter then ended.
"Fort Xxxx ACH Letter" means the letter agreement by TFC, dated as of March
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30, 2001, acknowledged and agreed to by Fort Xxxx National Company, Fort Xxxx
National Bank and the Trust Collateral Agent (with respect to TFC's ACH Obligor
payment program).
"Fort Xxxx Allotment Letter" means the letter agreement by TFC, dated as of
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March 30, 2001, acknowledged and agreed to by Fort Xxxx National Company and
Fort Xxxx National Bank (with respect to TFC's military allotment Obligor
payment program).
"Fort Xxxx Letters" means each of the Fort Xxxx TrueCheck Letter, the Fort
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Xxxx ACH Letter and the Fort Xxxx Allotment Letter.
"Fort Xxxx TrueCheck Letter" means the letter agreement by TFC, dated as of
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March 30, 2001, acknowledged and agreed to by Fort Xxxx National Company, Fort
Xxxx National Bank and the Trust Collateral Agent (with respect to TFC's
TrueCheck Obligor payment program).
"GAAP" means generally accepted accounting principles in effect from time
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to time in the United States of America.
"GE Capital" means General Electric Capital Corporation, a New York
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corporation.
"GE Capital Agreement" means the Amended and Restated Motor Vehicle
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Installment Contract Loan and Security Agreement, dated as of March 31, 2001,
between GE Capital as lender and TFC as borrower.
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"Governmental Authority" means any nation or government, any state or other
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political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
as in effect on the date hereof.
"Indemnification Agreement" means the Indemnification Agreement, dated as
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of March 30, 2001, among AGIC, the Issuer, the Placement Agent and TFC.
"Indenture" has the meaning assigned to such term in the Preliminary
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Statements above.
"Independent Accountants" has the meaning specified in Section 4.01(q).
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"Independent Director" means a natural person who (i) is not a stockholder
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(whether direct, indirect or beneficial), customer, advisor or supplier of TFCRC
IV, the Parent or any of their respective Affiliates (other than by means of
indirect stock ownership of TFCRC IV 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 IV 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 IV 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 February 28, 2001.
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"Initial Spread Account Deposit Amount" means 1.00% of the Original Pool
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Balance.
"Insurance Agreement" has the meaning assigned to such term in the preamble
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above.
"Insurance Agreement Event of Default" has the meaning specified in Section
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6.01.
"Insurance Agreement Indenture Cross Default" means any Insurance Agreement
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Event of Default specified in clauses (a), (c), (d), (e), (f), (k) and (l) of
Section 6.01.
"Investment Company Act" means the Investment Company Act of 1940,
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including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"IRS" means the Internal Revenue Service.
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"Issuer" has the meaning assigned to such term in the preamble above.
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"Lien" means, as applied to the property or assets (or the income or
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profits therefrom) of any Person, in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or
otherwise: (a) any mortgage, lien, pledge, attachment, charge, lease,
conditional sale or other title retention agreement, or other security interest
or encumbrance of any kind or (b) any arrangement, express or implied, under
which such property or assets are transferred, sequestered or otherwise
identified for the purpose of subjecting or making available the same for the
payment of debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.
"Material Adverse Change" means, (a) in respect of any Person, a material
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adverse change in (i) the business, financial condition, results of operations
or properties of such Person or any of its Subsidiaries or (ii) the ability of
such Person to perform its obligations under any of the Basic Documents to which
it is a party and (b) in respect of the Receivables, a material adverse change
in (i) the value or marketability of the Receivables, taken as a whole, or (ii)
the probability that amounts now or hereafter due in respect of a material
portion of the Receivables will be collected on a timely basis.
"Multiemployer Plan" means a multiemployer plan (within the meaning of
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Section 400 1(a)(3) of ERISA) in respect of which a Commonly Controlled Entity
makes contributions or has liability.
"Net Losses" means, with respect to any Determination Date and the most
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recently concluded Monthly Period, the positive difference of (a) the sum of (i)
the aggregate amount of the Principal Balances as of the related Accounting Date
(plus accrued and unpaid interest through and including such Accounting Date, at
the applicable APR) of all Receivables that became Liquidated Receivables since
the Initial Cutoff Date, plus (ii) the aggregate Cram Down Losses as of the
related Accounting Date that occurred since the Initial Cutoff Date, over (b)
the aggregate, cumulative Net Liquidation Proceeds received by the Issuer as of
the related Accounting Date since the Initial Cutoff Date.
"Notes" has the meaning assigned to such term in the Preliminary Statements
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above.
"Offering Document" means the Private Placement Memorandum and any
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amendment or supplement thereto and any other offering document in respect of
the Notes that makes reference to the Policy.
"Owner Trustee" has the meaning assigned to such term in the Preliminary
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Statements above.
"Parent" means TFC Enterprises, Inc., a Delaware corporation.
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"Parent Support Agreement" means the agreement among TFCRC IV, TFC, AGIC,
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the Trust Collateral Agent, and the Parent, dated as of March 30, 2001.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
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agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.
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"Person" means an individual, a partnership, a corporation, a limited
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liability company, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture, a Governmental Authority or other
entity of whatever nature.
"Placement Agent" means Rothschild Inc.
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"Placement Agent Agreement" means the Placement Agent Agreement dated as of
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March 30, 2001, among the Issuer, TFC, TFCRC IV and the Placement Agent.
"Placement Agent Information" means the information relating to the
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Placement Agent in the Private Placement Memorandum.
"Plan" means any pension plan (other than a Multiemployer Plan) covered by
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Title IV of ERISA, which is maintained by a Commonly Controlled Entity or in
respect of which a Commonly Controlled Entity has liability.
"P.O. Box Owner" has the meaning assigned to such term in the preamble
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above.
"Policy" has the meaning assigned to such term in the Preliminary
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Statements above.
"Premium" means the premium payable by the Issuer pursuant to the Premium
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Letter (including, without limitation, the Premium Supplement payable
thereunder).
"Premium Letter" means the letter agreement between AGIC, TFC and the
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Issuer, dated as of the Closing Date, setting forth the payment arrangement for
the premiums in respect of the Policy, and certain other fees, related expenses
and other related matters.
"Premium Rate" has the meaning assigned to such term in the Premium Letter.
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"Premium Supplement" has the meaning assigned to such term in the Premium
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Letter.
"Prime Rate" means the fluctuating rate of interest as published from time
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to time in the New York, New York edition of The Wall Street Journal, under the
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caption "Money Rates" as the "prime rate", the "Prime Rate" to change when and
as such published prime rate changes.
"Private Placement Memorandum" means the Private Placement Memorandum dated
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March 30, 2001, relating to the offering of the Notes.
"Provided Documents" means the Basic Documents and any documents,
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agreements, instruments, schedules, certificates, statements, cash flow
schedules, number runs or other writings or data furnished to AGIC (or any of
its reinsurers or potential reinsurers identified to TFC, including, without
limitation, Asset Guaranty Insurance Company) by or on behalf of TFC, the Parent
or TFCRC IV with respect to itself, its respective Subsidiaries, the Receivables
or the Transaction.
"Purchaser" means TFCRC IV, in its capacity as the "Purchaser" under the
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Purchase Agreement.
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"Purchase Agreement" means the Purchase Agreement between TFC, as seller,
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and TFCRC IV, as purchaser, dated as of March 30, 2001.
"Rating Agency" means S&P. If S&P, or its successor, fails to maintain a
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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 AGIC.
"Receivable" has the meaning provided in the Sale and Servicing Agreement.
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"Reportable Event" means any of the events set forth in Section 4043(b) of
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ERISA or the regulations thereunder.
"Requisite Amount" means (a) on the Closing Date, the Initial Spread
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Account Deposit Amount and (b) with respect to any Determination Date
thereafter, (i) if no Trigger Event or Insurance Agreement Event of Default
shall have occurred, the lesser of (A) an amount equal to 4.0% of the Original
Pool Balance 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,
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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
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assets (or the income or profits therefrom) of any Person, in each case whether
the same is consensual or non-consensual or arises by contract, operation of
law, legal process or otherwise, any material condition to, or restriction on,
the ability of such Person or any transferee therefrom to sell, assign, transfer
or otherwise liquidate such property or assets in a commercially reasonable time
and manner or which would otherwise materially deprive such Person or any
transferee therefrom of the benefits of ownership of such property or assets.
"Sale and Servicing Agreement" has the meaning assigned to such term in the
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Preliminary Statements above.
"Schedule of Receivables" means the schedule of receivables delivered to
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the Trust Collateral Agent by the Issuer in connection with the Sale and
Servicing Agreement.
"Securities Act" means the Securities Act of 1933, including, unless the
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context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
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including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"S&P" means Standard & Poor's Ratings Services, or its successor.
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"Servicer" has the meaning assigned to such term in the preamble above.
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"Standby Remittance and Processing Agreement" means the Amended and
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Restated Standby Remittance and Processing Agreement among TFC Receivables
Corporation 2, a Delaware corporation, TFC Receivables Corporation III, a
Delaware corporation, Asset Guaranty Insurance Company, TFCRC IV, TFC, General
Electric Capital Corporation, AGIC, Xxxxx Fargo, as the Trust Collateral Agent,
the P.O. Box Owner and trust collateral agent for certain other trusts, dated as
of March 30, 2001, as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with its terms and the terms
hereof.
"Stock Pledge Agreement" means the Stock Pledge and Collateral Agency
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Agreement made by TFC in favor of Xxxxx Fargo Bank Minnesota, National
Association, as "Collateral Agent" on behalf of AGIC, dated as of March 30,
2001, as the same may be amended, restated, supplemented or otherwise modified
from time to time in accordance with its terms and the terms hereof.
"Subordinated Debt" means a debt obligation of TFC which is subordinated to
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obligations owed to GE Capital as lender under the GE Capital Agreement,
pursuant to a subordination agreement which is in the form of Exhibit 16 to the
GE Capital Agreement or pursuant to some other agreement approved by GE Capital
and the Insurer.
"Subsidiary" means, with respect to any Person, any corporation of which a
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majority of the outstanding shares of capital stock having ordinary voting power
for the election of directors is at the time owned by such Person directly or
through one or more Subsidiaries.
"Successor Servicer" has the meaning assigned to such term in the preamble
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above.
"Tangible Net Worth" means, with respect to TFC, the excess of (a) the
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tangible assets of TFC and all of its consolidated subsidiaries calculated in
accordance with GAAP, as reduced by adequate reserves in each case where
reserves are proper, over (b) all Indebtedness (excluding Subordinated Debt) of
TFC and all of its consolidated subsidiaries; provided, however, that (i) in no
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event shall there be included in the above calculation any intangible assets
such as patents, trademarks, trade names, copyrights, licenses, goodwill,
organizational costs, advances or loans to, or receivables from, directors,
shareholders, officers, employees or subsidiaries, amounts relating to covenants
not to compete, pension assets or treasury stock or any securities of TFC or of
any Affiliate of TFC, or any other securities unless the same are readily
marketable in the United States of America or entitled to be used as a credit
against federal income tax liabilities, (ii) securities included as such
intangible assets shall be taken into account at their current market price or
cost, whichever is lower, and (iii) any write-up in the book value of any assets
shall not be taken into account.
"TFC" has the meaning assigned to such term in the preamble above.
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"Transaction" means the transactions contemplated by the Transaction
-----------
Documents, including the transactions described in the Offering Documents.
"Transaction Documents" has the meaning assigned to such term in Section
---------------------
2.02(a).
10
"Trigger Event" means the occurrence of any of the following events, the
-------------
occurrence of which shall not have been waived in writing by AGIC: (a) a
Delinquency Test Failure, or (b) a Cumulative Net Loss Test Failure.
"Trust Agreement" is the Amended and Restated Trust Agreement, dated as of
---------------
March 30, 2001 between TFCRC IV and Wilmington Trust Company as owner trustee.
"Trust Collateral Agent" has the meaning assigned to such term in the
----------------------
preamble above.
"Trustee" has the meaning assigned to such term in the preamble above.
-------
"Trust Property" has the meaning assigned to such term in the Preliminary
--------------
Statements above.
Section 1.02. Generic Terms. All words used herein shall be construed
-------------
to be of such gender or number as the circumstances require. The words "herein,"
"hereby," "hereof," "hereto," "hereinbefore" and "hereinafter," and words of
similar import, refer to this Insurance Agreement in its entirety and not to any
particular paragraph, clause or other subdivision, unless otherwise specified.
Section 1.03. Computation of Time Periods. In this Insurance Agreement
---------------------------
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each means "to and including". Periods of days referred to in this Insurance
Agreement shall be counted in calendar days unless Business Days are expressly
prescribed and references in this Insurance Agreement to months and years shall
be to calendar months and calendar years unless otherwise specified.
ARTICLE II
THE POLICY AND REIMBURSEMENT
Section 2.01. Policy. AGIC agrees, subject to the satisfaction or
------
waiver of the conditions hereinafter set forth on or prior to the Closing Date,
to issue the Policy on the Closing Date.
Section 2.02. Conditions Precedent. The obligation of AGIC to issue the
--------------------
Policy is subject to the satisfaction of the following conditions on or prior to
the Closing Date:
(a) The following documents shall have been duly authorized, executed
and delivered by each of the parties thereto (other than AGIC) and shall be
in full force and effect and in form and substance satisfactory to AGIC, in
the exercise of AGIC's sole discretion, and an executed counterpart of each
thereof shall have been delivered to AGIC:
(i) this Insurance Agreement;
(ii) the Indenture;
(iii) the Sale and Servicing Agreement, including the Schedule of
Receivables;
11
(iv) the Purchase Agreement, including the Schedule of Receivables;
(v) the Placement Agent Agreement;
(vi) the Indemnification Agreement;
(vii) the Standby Remittance and Processing Agreement;
(viii) the Trust Agreement;
(ix) the Parent Support Agreement;
(x) the Securities Account Control Agreement;
(xi) the Premium Letter;
(xii) the Stock Pledge Agreement; and
(xiii) the Fort Xxxx Letters.
(items (i) through (xiii) being, collectively, the "Transaction Documents").
---------------------
(b) AGIC shall have received:
(i) copies certified by the Secretary or an Assistant Secretary of
each of the Parent, the Issuer, TFC and TFCRC IV, 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 IV,
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 IV and TFC certifying to the effect of
the representation and warranty set forth in Section 3.01(e)
hereof;
(iv) each of the opinions, letters and certificates described in the
closing checklist attached hereto as Exhibit B (other than any
such opinion, letter or certificate required to be issued or
delivered by AGIC or an agent or employee thereof), in each case
(1) dated the Closing Date, (2) in full
12
force and effect at the time of delivery thereof, (3) in form and
substance satisfactory to AGIC in the exercise of its sole
discretion, and (4) covering such matters as AGIC shall require
in the exercise of its sole discretion;
(v) evidence that one or more UCC financing statements covering the
security interest of the Trust Collateral Agent created by or
pursuant to the Indenture in the Trust Property and the other
property and rights which the Trustee is granted in the Indenture
and the proceeds thereof has been executed by the Issuer in favor
of the Trust Collateral Agent, and has been duly filed in such
place or places which, in the opinion of counsel for the Issuer,
TFC and AGIC, are necessary or desirable to perfect such
interest;
(vi) evidence that one or more UCC financing statements covering the
interest of TFCRC IV in the Receivables and the other related
assets assigned pursuant to the Purchase Agreement has been
executed by TFC in favor of TFCRC IV, and has been duly filed in
such place or places which, in the opinion of counsel for the
Issuer, TFC and AGIC, are necessary or desirable to perfect such
interest;
(vii) evidence that one or more UCC financing statements covering the
interest of the Issuer in the Receivables and the other related
assets assigned pursuant to the Sale and Servicing Agreement has
been executed by TFCRC IV in favor of the Issuer, and assigned to
the Trust Collateral Agent, and has been duly filed in such place
or places which, in the opinion of counsel for the Issuer, TFC
and AGIC, are necessary or desirable to perfect such interest;
(viii) evidence that each of the Collection Account, the Spread Account,
and the Note Payment Account have been established in accordance
with the terms and conditions of the Indenture and the Sale and
Servicing Agreement;
(ix) certified copies of documents, certificates, instruments,
approvals or executed copies thereof that relate to the
transactions as contemplated by the Basic Documents as AGIC may
reasonably request;
(x) a specimen Note;
(xi) evidence that one or more UCC financing statements covering the
security interest of AGIC created by or pursuant to the Stock
Pledge Agreement and the other property and rights which AGIC is
granted in the Stock Pledge Agreement and the proceeds thereof
has been executed by TFC in favor of AGIC, and has been duly
filed in such place or places which, in the opinion of counsel
for TFC and AGIC, are necessary or desirable to perfect such
interest; and
(xii) a statement, in form and substance satisfactory to AGIC,
reviewing the results of the Independent Accountants' performance
of certain agreed
13
upon procedures with respect to TFC, its reporting and record
keeping, and the characteristics of the Receivables as of the
Cut-Off Date, by way of independent verification of (x)
information provided by TFC for inclusion in the Offering
Document and (y) certain cash flow models supplied to AGIC by the
Placement Agent in advance of the Closing Date (the full costs of
which statement shall have been paid on or before the Closing
Date by or on behalf of TFC).
(c) (i) No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court which would make the transactions
contemplated by the Transaction Documents illegal or otherwise prevent the
consummation thereof, (ii) no material omission or change of fact shall
have occurred or come to the attention of any of TFC, TFCRC IV, the Issuer,
the Parent, the Trustee, the Placement Agent or AGIC that would cause
information or documents heretofore supplied to AGIC to be untrue or
misleading, (iii) no other material change or omission shall have occurred
or come to the attention of any of TFC, TFCRC IV, the Issuer, the Parent,
the Trustee, the Placement Agent or AGIC that would entitle the Placement
Agent to decline to place the Notes, and (iv) no Material Adverse Change
shall have occurred in the security for the Notes since the date of the
Purchase Agreement.
(d) No suit, action or other proceeding, investigation, or injunction
or final judgment relating thereto, shall be threatened or pending before
any court or governmental agency in which it is sought to restrain or
prohibit or obtain damages or other relief in connection with the
consummation of the Transactions, and no investigation that might result in
any such suit, action or proceeding shall be pending or threatened.
(e) AGIC shall have received an executed copy of all legal opinions,
certificates, accountant's reports and other documents required to be
furnished by the Issuer, the Servicer, the Back-up Servicer, the Trustee,
TFCRC IV, the Parent and TFC pursuant to any of the Transaction Documents
or pursuant to the requirements of the Rating Agency (if any). Such
documents shall be in form and substance satisfactory to AGIC in the
exercise of its sole discretion and each such legal opinion or certificate
shall be addressed to AGIC, or accompanied by appropriate reliance letters
to AGIC.
(f) There shall be on deposit in the Spread Account a sum of not less
than $800,000 in immediately available funds.
(g) Simultaneously with the issuance of the Policy, the Notes shall
have been duly executed and authenticated and delivered to the relevant
Noteholders pursuant to the Indenture.
(h) All fees and expenses payable hereunder or pursuant to the
Premium Letter to AGIC on or prior to the Closing Date shall have been paid
in full by TFC or the Issuer.
14
(i) AGIC 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 then be in effect.
Section 2.03. Premium Letter. AGIC shall be entitled to receive the
--------------
Premium payable under the Premium Letter on each Payment Date, and the timely
payment or other performance of all other obligations set forth in the Premium
Letter, in each case in accordance with the terms and conditions of the Premium
Letter on any Payment Date, in accordance with the provisions of Section 5.7 of
the Sale and Servicing Agreement. The Premium payable under the Sale and
Servicing Agreement shall be nonrefundable without regard to whether AGIC 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 AGIC, AGIC
shall be entitled to reimbursement by the Issuer from the Trust Property,
pursuant to the terms hereof, the Indenture and the Sale and Servicing
Agreement, for any payment made under the Policy, which reimbursement shall
be due and payable to AGIC on the date that any amount is to be paid
pursuant to a Notice for Payment (as defined in the Policy). Such
reimbursement shall be made in accordance with the terms hereof and of the
Indenture, in an amount equal to the sum of all amounts paid or previously
paid that remain unpaid under the Policy, together with interest on any and
all amounts remaining unpaid (to the extent permitted by law, if in respect
of any unpaid amounts representing interest) from the date such amounts
became due until paid in full (after as well as before judgment), at a rate
of interest equal to the Prime Rate from time to time in effect plus 2.0%.
(b) Anything in Section 2.04(a) to the contrary notwithstanding, AGIC
shall be entitled to reimbursement (to the extent such reimbursement and
related interest has not previously been paid by payment to AGIC from the
Trust Property) from (i) the Issuer, for payments made under the Policy
arising as a result of the Issuer's failure to make any payment or deposit
with respect to a Receivable required to be made pursuant to Section 3.2 of
the Sale and Servicing Agreement, together with interest on any and all
such amounts remaining unpaid (to the extent permitted by law, if in
respect of any unpaid amounts representing interest) from the date such
amounts became due until paid in full (after as well as before judgment),
at a rate of interest equal to the Prime Rate from time to time in effect
plus 2.0%, and (ii) the Servicer, for payments made under the Policy
arising as a result of the Servicer's failure to make any deposit,
including without 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,
--------
15
however, that a successor to the Servicer shall under no circumstances be
-------
liable to AGIC 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 AGIC, in
the case of any payment made by or on behalf of AGIC under the Policy, in
addition to and not by way of limitation of, any of the rights and remedies
of AGIC hereunder, under the Policy or under the Indenture with respect to
such payment, each of the Issuer, TFCRC IV and TFC hereby acknowledges and
consents to the assignment by the Trustee, on behalf of the Noteholders, to
AGIC in accordance with the terms of the relevant Notice for Payment (as
such term is defined in the Policy):
(i) the rights of the Noteholders with respect to the Notes and
the Trust Property, to the extent of any such payment under
the Policy; and
(ii) the rights of the Trustee and each Noteholder in the conduct
of any Insolvency Proceeding relating to any Preference
Event (as such terms are defined in the Policy), including,
without limitation, all rights of any party to an adversary
proceeding or action with respect to any court order issued
in connection with any such Insolvency Proceeding.
(b) The rights and remedies of AGIC described in clause (a)
above are in addition to, and not in limitation of, rights of subrogation
and other rights and remedies otherwise available to AGIC in respect of
payments under the Policy. The Trustee shall take such action and deliver
such instruments as may be reasonably requested or required by AGIC to
effectuate the purpose or provisions of this Section 2.05.
Section 2.06. Subrogation; Further Assurances.
--------------------------------
(a) The interests, rights and remedies of AGIC described in this Article
II are in addition to, and not in lieu of, AGIC's equitable rights of
subrogation, and AGIC reserves all of such rights. Each of the Issuer,
TFCRC IV and TFC agrees to take, or cause to be taken, all actions
deemed desirable by AGIC to preserve, enforce, perfect or maintain the
perfection in AGIC's favor of such interests, rights and remedies and
such equitable rights of subrogation.
(b) For the avoidance of doubt, the parties hereto acknowledge and agree
that the receipt of any payment under the Policy shall not constitute
(x) a reduction of any unpaid amounts of principal or interest of
Notes outstanding under the Indenture or (y) otherwise discharge any
other obligations whatsoever of the Issuer under the Indenture.
(c) Each of the Issuer, TFCRC IV and TFC agrees to promptly and duly take,
execute, acknowledge and deliver such further acts, documents,
instruments and assurances as AGIC may from time to time reasonably
request to more effectively evidence any rights to assignment or
subrogation under this Article II, and to protect and perfect
16
all of AGIC's other rights as against the Issuer, TFCRC IV and TFC, as
the case may be.
Section 2.07. Indemnification by TFC; Conduct of Actions or Proceedings;
----------------------------------------------------------
Contribution.
------------
(a) In addition to any and all rights of reimbursement,
indemnification, subrogation and any other rights pursuant hereto or under
law or in equity, TFC agrees to pay, and to protect, indemnify and save
harmless, AGIC and its officers, directors, shareholders, employees,
agents, assignees, participants, reinsurers and each Person, if any, who
controls AGIC within the meaning of either Section 15 of the Securities Act
or Section 20 of the Securities Exchange Act (individually, an "Indemnified
Party" and, collectively, the "Indemnified Parties"), from and against any
and all claims, losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or expenses (including, without
limitation, reasonable fees and expenses of attorneys, consultants and
auditors and reasonable costs of investigations) of any nature arising out
of or relating to the transactions contemplated by the Transaction
Documents by reason of:
(i) the negligence, bad faith, willful misconduct,
misfeasance, malfeasance or theft committed by any
director, officer, employee or agent of the Issuer, TFC,
the Servicer, the Parent, TFCRC IV, the Seller, as the
case may be;
(ii) the breach by the Issuer, TFC, the Servicer, the Parent,
TFCRC IV, 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 IV, 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 IV to repurchase such Receivables pursuant
to the Purchase Agreement; provided, further, it is
-------- -------
understood and agreed that the sole remedy with respect to
the breach of any of the covenants set forth in Sections
4.5(a) or 4.6(a) of the Sale and Servicing Agreement shall
be the repurchase of Receivables pursuant to Section 4.7
of the Sale and Servicing Agreement, subject to the
conditions contained therein; provided further, however,
-------- ------- -------
that TFC shall indemnify AGIC and each of the other
Indemnified Parties against all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees
and expenses of counsel, which may be asserted against or
incurred by it as a result of third party claims arising
out of the events or facts giving rise to any such breach
of such covenant; or
17
(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 AGIC with regard to the
AGIC 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, AGIC shall
promptly notify TFC in writing, and TFC shall assume the defense thereof,
including the employment of counsel satisfactory to AGIC and the payment of
all reasonable expenses. An Indemnified Party (including AGIC) shall have
the right to employ separate counsel in any such action and to participate
in the defense thereof at the expense of the Indemnified Party; provided,
--------
however, that the fees and expenses of such separate counsel shall be at
-------
the expense of TFC if (i) TFC has agreed to pay such fees and expenses,
(ii) TFC shall have failed to assume the defense of such action or
proceeding and employ counsel satisfactory to AGIC in any such action or
proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnified Party and
TFC, and the Indemnified Party shall have been advised by counsel that (A)
there may be one or more legal defenses available to it which are different
from or additional to those available to TFC and (B) the representation of
TFC and the Indemnified Party by the same counsel would be inappropriate or
contrary to prudent practice (in which case, if the Indemnified Party
notifies TFC in writing that it elects to employ separate counsel at the
expense of TFC, TFC shall not have the right to assume the defense of such
action or proceeding on behalf of such Indemnified Party, it being
understood, however, that TFC shall not, in connection with any one such
action or proceeding or separate but substantially similar or related
actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for the
Indemnified Parties, which firm shall be designated in writing by AGIC).
TFC shall not be liable for any settlement of any such action or proceeding
effected without its written consent to the extent that any such settlement
shall be prejudicial to TFC, but, if settled with its written consent, or
if there be a final judgment for the plaintiff in any such action or
proceeding with respect to which TFC shall have received notice in
accordance with this subsection (b), TFC agrees to indemnify and hold the
Indemnified Parties harmless from and against any loss or liability by
reason of such settlement or judgment.
(c) To provide for just and equitable contribution, if the
indemnification provided by TFC is determined to be unavailable for any
Indemnified Party (other than due to application of this Section), TFC
shall contribute to the losses incurred by the
18
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 IV; 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 IV agrees to pay, and to protect, indemnify and
save harmless the Indemnified Parties, from and against any and all claims,
losses, liabilities (including penalties), actions, suits, judgments,
demands, damages, costs or expenses (including, without limitation,
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) of any nature arising out of or
relating to the transactions contemplated by the Transaction Documents by
reason of:
(i) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer,
employee or agent of TFCRC IV;
(ii) the breach by TFCRC IV of any representation, warranty or
covenant under any of the Transaction Documents, or the
occurrence, in respect of TFCRC IV, 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 IV 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 AGIC with regard to the AGIC
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 IV hereunder, AGIC
shall promptly notify TFCRC IV in
19
writing, and TFCRC IV shall assume the defense thereof, including the
employment of counsel satisfactory to AGIC and the payment of all
reasonable expenses. An Indemnified Party shall have the right to employ
separate counsel in any such action and to participate in the defense
thereof at the expense of the Indemnified Party; provided, however, that
-------- -------
the fees and expenses of such separate counsel shall be at the expense of
TFCRC IV if (i) TFCRC IV has agreed to pay such fees and expenses, (ii)
TFCRC IV shall have failed to assume the defense of such action or
proceeding and employ counsel satisfactory to AGIC in any such action or
proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnified Party and
TFCRC IV, 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 IV and (B) the
representation of TFCRC IV 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 IV in writing that it elects to employ
separate counsel at the expense of TFCRC IV, TFCRC IV 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 IV shall not,
in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate
firm of attorneys at any time for the Indemnified Parties, which firm shall
be designated in writing by AGIC). TFCRC IV 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 IV, 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 IV shall have received notice in accordance with this
subsection (b), TFCRC IV 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 IV is determined to be unavailable for
any Indemnified Party (other than due to application of this Section),
TFCRC IV shall contribute to the losses incurred by the Indemnified Party
on the basis of the relative fault of TFCRC IV, on the one hand, and the
Indemnified Party, on the other hand.
Section 2.09. Other Payment Obligations.
-------------------------
(a) Legal Fees. On the Date of Issuance, TFC agrees to pay to AGIC all
----------
reasonable out-of-pocket legal fees and disbursements incurred by AGIC
in connection with the negotiation, preparation, execution and
delivery of the Private Placement Memorandum, the Transaction
Documents and all other documents, instruments and agreements
delivered with respect thereto.
(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
20
contemplated hereby. The fees for any other rating agency shall be
paid by the party requesting such other agency's rating, unless such
other agency is a substitute for S&P 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 AGIC'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 AGIC's auditors
payable in respect of any Offering Document, the Notes or the
transactions contemplated hereby that are incurred after the Date of
Issuance.
(d) Enforcement and Modifications. Each of TFC and the Issuer agrees to
-----------------------------
pay to AGIC 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 AGIC in
connection with (i) in the event of payments under the Policy, any
accounts established to facilitate payments under the Policy, to the
extent AGIC has not been immediately reimbursed on the date that any
amount is paid by AGIC under the Policy, or other administrative
expenses relating to such payments under the Policy, (ii) the
enforcement, defense or preservation of any rights of AGIC, 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 IV 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 AGIC in those
circumstances where the approval or consent of AGIC is sought under
any of the Transaction Documents.
(e) Third Party Advances. Each of TFC and the Issuer agrees to pay to AGIC
--------------------
the amount of any and all payments made by AGIC on behalf of, or
advanced to, TFC, in its capacity as Servicer, or the Trustee,
including, without limitation, any amounts payable by TFC, in its
capacity as Servicer, or the Trustee pursuant to the Notes or any
other Transaction Documents; and any payments made by AGIC as, or in
lieu of, any servicing, management, trustee, custodial or
administrative fees payable, in the sole discretion of AGIC to third
parties in connection with the Transaction.
(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 AGIC 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.
21
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 IV 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
------------------------------------------------------------
IV. Each of TFC and TFCRC IV represents and warrants, as of the Closing Date,
--
with respect to TFC and TFCRC IV (and to the extent specifically set forth
below, with respect to the Issuer), that:
(a) Due Organization and Qualification. (i) TFC is a
----------------------------------
corporation, duly organized, validly existing and in good standing under
the laws of Virginia. TFC is duly qualified to do business, is in good
standing and has obtained all necessary licenses, permits, charters,
registrations and approvals (together, "approvals") necessary for the
conduct of its business as currently conducted and as described in the
Offering Document and the performance of its obligations under the
Transaction Documents, in each jurisdiction in which the failure to be so
qualified or to obtain such approvals might result in a Material Adverse
Change. (ii) TFCRC IV is a corporation duly organized, validly existing and
in good standing under the laws of Delaware. TFCRC IV 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
22
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 IV has all
-------------------
necessary corporate power and authority to conduct its business as
currently conducted and as described in the Offering Document, to execute,
deliver and perform its obligations under the Transaction Documents and has
full power and authority to sell and assign the Receivables as contemplated
by the Transaction Documents and to consummate the Transaction.
(c) Due Authorization. The execution, delivery and performance
-----------------
of the Transaction Documents by each of TFC and TFCRC IV has been duly
authorized by all necessary corporate action and does not require any
additional approvals or consents or other action by, or any notice to, or
filing with, any Person, including, without limitation, any governmental
entity or any of its stockholders.
(d) Noncontravention. None of the execution and delivery of the
----------------
Transaction Documents by TFC or TFCRC IV, 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 IV, or the Bylaws of
TFC or TFCRC IV, 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 IV, 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 IV, as the case
may be,
(ii) constitutes or will constitute a default by TFC or TFCRC IV,
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 IV is a party
or by which it, or any of its or their properties is, or may
be, bound or affected, or
(iii) results in or requires the creation of any Lien upon or in
respect of any of the assets of TFC or TFCRC IV 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 IV after reasonable
inquiry, threatened by or before any court, regulatory body, governmental
or administrative agency or arbitrator against or affecting TFC or TFCRC
IV, or any properties or rights of TFC or TFCRC IV, including without
limitation, the Receivables, which might result in a Material Adverse
Change with respect to TFC or TFCRC IV.
23
(f) Valid and Binding Obligations. Each of the Transaction Documents
-----------------------------
to which either TFC or TFCRC IV is a party when executed and delivered by
TFC or TFCRC IV, 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 IV 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 IV 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 IV, that would render any of the
Provided Documents untrue or misleading in any material respect. There is
no fact known to TFC or TFCRC IV which has a material possibility of
causing a Material Adverse Change with respect to either of TFC or TFCRC
IV, or which has a material possibility of impairing the value or
marketability of the Receivables, taken as a whole, or decreasing the
possibility that amounts due in respect of the Receivables will be
collected as due.
(i) Compliance With Securities Laws. The Notes have not been offered
-------------------------------
or sold in any manner that would render the issuance and sale of the Notes
a violation of the Securities Act or any state securities or "Blue Sky"
laws or require registration pursuant thereto, nor has any Person been
authorized to act in such manner. No registration under the Securities Act
is required for the sale of the Notes as contemplated by the Transaction
Documents, assuming the accuracy of the Purchaser's representations and
warranties set forth in the Purchase Agreement, and satisfaction by the
Placement Agent of its obligations set forth in the Placement Agency
Agreement. Without limitation of the foregoing, the Offering Document does
not contain any untrue statement of a material fact and does not omit to
state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they
were made, not misleading.
24
(j) Transaction Documents. Each of the representations and
---------------------
warranties of TFC or TFCRC IV contained in the Transaction Documents is
true and correct in all material respects and each of TFC or TFCRC IV
hereby makes each such representation and warranty made by it to, and for
the benefit of, AGIC as if the same were set forth in full herein.
(k) No Consents. No consent, license, approval or authorization
-----------
from, or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any
consent, approval, waiver or notification of any creditor, lessor or other
nongovernmental person, is required in connection with the execution,
delivery and performance by TFC or TFCRC IV 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 IV 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 IV is adequate for the business and
undertakings of TFCRC IV.
(ii) Other than with respect to the purchase by TFC of the stock of
TFCRC IV, and as provided in this Insurance Agreement and the
Transaction Documents, TFCRC IV is not engaged in any business
transactions with TFC.
(iii) At least two directors of TFCRC IV 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 IV are not, and will not be,
commingled with the funds of any other person.
(v) The Bylaws of TFCRC IV 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 IV 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 IV will be left with an unreasonably
small amount of capital with which to engage in its business. Neither TFC
nor TFCRC IV intends to incur, or believes that it has incurred, debts
beyond its ability to pay such debts as they mature. Neither TFC nor TFCRC
IV contemplates the commencement of insolvency, bankruptcy, liquidation or
consolidation
25
proceedings or the appointment of a receiver, liquidator, conservator,
trustee or similar official in respect of TFC or TFCRC IV, as the case may
be, or any of their respective assets. The amount of consideration being
received by TFCRC IV upon the sale of the Receivables to the Issuer
constitutes reasonably equivalent value and fair consideration for the
Receivables. TFCRC IV 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 Receivables to the
Issuer pursuant to the Sale and Servicing Agreement, TFCRC IV
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 IV to the Issuer is characterized as other
than a sale, such transfer shall be characterized as a secured
financing, and the Issuer shall have a valid and perfected first
priority security interest in such Receivables free and clear of
all Liens and Restrictions on Transferability.
(iii) Immediately prior to the sale of the Receivables to TFCRC IV
pursuant to the Purchase Agreement, TFC was or will have been
the owner of, and had good and marketable title to, the
Receivables being transferred by such party free and clear of
all Liens and Restrictions on Transferability, and had or will
have had full right, corporate power and lawful authority to
assign, transfer and pledge such Receivables. In the event that
a transfer of the Receivables by TFC to TFCRC IV is
characterized as other than a sale, such transfer shall be
characterized as a secured financing, and TFCRC IV 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 IV 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 IV or
any of the properties, income or franchise of TFC or TFCRC IV, to the
extent that such taxes have become due, other than
26
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 IV, all such tax returns were true and correct in all
material respects and neither of TFC nor TFCRC IV 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 IV in connection with the Transaction, the execution and delivery of
the Transaction Documents and the issuance of the Notes have been paid or
shall have been paid at or prior to Closing Date.
(q) Private Placement Memorandum. As of the Closing Date, neither the
----------------------------
Private Placement Memorandum nor any amendment thereof or supplement
thereto (other than the AGIC Information and the Placement Agent
Information) contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(r) Pledge of Shares. The shares of stock of TFCRC IV which have
----------------
been pledged pursuant to the Stock Pledge Agreement constitute all of the
issued and outstanding shares of stock of TFCRC IV.
(s) Investment Company. Neither TFC nor TFCRC IV 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 IV Affecting Its Business. TFCRC IV 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.
(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 IV 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 IV. 100% of the issued and outstanding shares
---------------------
of capital stock of TFCRC IV 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 IV.
27
(w) No Broker, Finder or Financial Adviser Other Than Rothschild.
------------------------------------------------------------
Neither TFCRC IV nor any of its officers, directors, employees or agents
has employed any broker, finder or financial adviser other than Rothschild
Inc. or incurred any liability for fees or commissions to any person other
than Rothschild Inc. in connection with the offering, issuance or sale of
the Notes.
(x) Rating Agency. The information supplied by TFC or TFCRC IV 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 IV 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 AGIC, (i) are, as of the dates and for the
periods referred to therein, complete and correct in all material respects.
(ii) present fairly the financial condition and results of operations of
TFC as of the dates and for the periods indicated, and (iii) have been
prepared in accordance with GAAP consistently applied, except as noted
therein (subject as to interim statements to normal year-end adjustments).
Since the date of the most recent Financial Statements, there has been no
Material Adverse Change. Except as disclosed in the Financial Statements,
TFC is not subject to any contingent liabilities or commitments that,
individually or in the aggregate, have a material possibility of causing a
Material Adverse Change with respect to TFC.
Section 3.02. Representations and Warranties of the Issuer. The Issuer
--------------------------------------------
represents and warrants, as of the Closing Date, as follows:
(a) Due Organization and Qualification. The Issuer is duly formed and
----------------------------------
validly existing as a Delaware statutory business trust and is in good
standing under the laws of the State of Delaware. The Issuer is duly
qualified to do business, is in good standing and has obtained all
necessary licenses, permits, charters, registrations and approvals
(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
28
Documents and has full power and authority to sell and assign the
Receivables as contemplated by the Transaction Documents and to consummate
the Transaction.
(c) Due Authorization. The execution, delivery and performance of the
-----------------
Transaction Documents by the Issuer have been duly authorized by all
necessary trust action and do not require any additional approvals or
consents or other action by, or any notice to or filing with, any Person,
including, without limitation, any governmental entity.
(d) Noncontravention. None of the execution and delivery of the
----------------
Transaction Documents by the Issuer, the consummation of the transactions
contemplated thereby nor the satisfaction of the terms and conditions of
the Transaction Documents,
(i) conflicts with, or results in any material breach or violation
of, any provision of the Certificate or the Trust Agreement, or
any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award currently in effect having
applicability to the Issuer or its property, including
regulations issued by an administrative agency or other
governmental authority having supervisory powers over the Issuer,
(ii) constitutes, or will constitute, a material default by the Issuer
under, or a material breach of, any provision of any loan
agreement, mortgage, indenture or other agreement or instrument
to which the Issuer is a party or by which it or any of its
property is or may be bound or affected, or
(iii) results in or requires the creation of any Lien upon or in
respect of any of the assets of the Issuer, except as otherwise
expressly contemplated by the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding, suit or
-----------------
investigation by or before any court, governmental or administrative agency
or arbitrator against or affecting the Issuer, or any properties or rights
of the Issuer, pending or, to the knowledge of the Issuer, threatened,
which, in any case, if decided adversely, would result in a Material
Adverse Change with respect to the Issuer, the Certificate or the Notes.
(f) Valid and Binding Obligations. Each of the Transaction Documents
-----------------------------
to which the Issuer is a party when executed by the Owner Trustee on behalf
of the Issuer, will constitute the legal, valid and binding obligations of
the Issuer enforceable against the 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
29
benefits of the Indenture and will constitute legal, valid and binding
obligations of the Issuer, enforceable in accordance with their terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the enforcement of creditors' rights
generally or general equitable principles (whether in a proceeding at law
or in equity) and except to the extent that rights to indemnity and
contribution may be limited by public policy.
(g) Accuracy of Information. None of the Transaction Documents, nor any
-----------------------
of the Provided Documents, contain any statement of a material fact with
respect to the Issuer or the Transaction that was untrue or misleading in
any material respect when made. Since the furnishing of the Provided
Documents, there has been no change, that would render any of the Provided
Documents untrue or misleading in any material respect. There is no fact
known to the Issuer which has a material possibility of causing a Material
Adverse Change with respect to the Issuer or which has a material
possibility of impairing the value or marketability of the Receivables,
taken as a whole, or decreasing the possibility that amounts due in respect
of the Receivables will be collected as due.
(h) Compliance With Securities Laws; Offering Document. The Notes have
--------------------------------------------------
not been offered or sold in any manner that would render the issuance and
sale of the Notes a violation of the Securities Act or any state securities
or "Blue Sky" laws or require registration pursuant thereto, nor has any
Person been authorized to act in such manner. No registration under the
Securities Act is required for the sale of the Notes as contemplated by the
Transaction Documents, assuming the accuracy of the Purchaser's
representations and warranties set forth in the Purchase Agreement, and
satisfaction by the Placement Agent of its obligations set forth in the
Placement Agency Agreement. Without limitation of the foregoing, the
Offering Document did not, as of its date, and does not, as of the date
hereof, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they
were made, not misleading.
(i) Transaction Documents. Each of the representations and warranties
---------------------
of the Issuer contained in the Transaction Documents is true and correct in
all material respects and the Issuer hereby makes each such representation
and warranty made by it to, and for the benefit of, AGIC as if the same
were set forth in full herein.
(j) No Consents. No consent, license, authorization or approval from,
-----------
or registration or other action by, and no notice to or filing or
declaration with, any governmental entity or regulatory body, is required
for the due execution, delivery and 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,
30
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 IV or any Affiliate of any of them.
(iii) The Issuer's funds and assets are not, and will not be,
commingled with the funds of any other Person.
(m) Solvency; Fraudulent Conveyance. The Issuer is solvent and will
-------------------------------
not be rendered insolvent by the Transaction and, after giving effect to
such Transaction, the Issuer will not be left with an unreasonably small
amount of capital with which to engage in its business. The Issuer does not
intend to incur, or believe that it has incurred, debts beyond its ability
to pay such debts as they mature. The Issuer does not contemplate the
commencement of insolvency, bankruptcy, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator, conservator,
trustee or similar official in respect of the Issuer or any of its assets.
(n) Perfection of Liens and Security Interest. On the Closing Date,
-----------------------------------------
the Lien and security interest in favor of the Trust Collateral Agent with
respect to the Collateral will be perfected by the filing of financing
statements on Form UCC-1 in each jurisdiction where such recording or
filing is necessary for the perfection thereof, the delivery of the
Receivables Files to the Trust Collateral Agent, and the establishment of
the Collection Account, the Spread Account and the Note Payment Account in
accordance with the provisions of the Transaction Documents, and no other
filings in any jurisdiction or any other actions (except as expressly
provided herein) are necessary to perfect the Trust Collateral Agent's Lien
on and security interest in the Collateral as against any third parties.
(o) Investment Company. The Issuer is not an "investment company" or
------------------
a company "controlled" by an "investment company" within the meaning of the
Investment Company Act, and none of the execution, delivery or performance
of obligations under the Agreement or any of the Transaction Documents or
the consummation of any of the transactions contemplated thereby by the
Issuer or the acquisition by the Issuer of the Receivables will violate any
provision of the Investment Company Act, or any rule, regulation or order
issued by the Securities and Exchange Commission thereunder.
(p) Collateral. On the Closing Date, the Issuer will have good and
----------
marketable title to each item of other Trust Property conveyed on such date
and will own each such item free and clear of any Lien (other than Liens
contemplated under the Indenture) or any equity or participation interest
of any other Person.
31
(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 AGIC).
(r) No Violation of Exchange Act or Regulations T, U or X. None
-----------------------------------------------------
of the transactions contemplated in the Transaction Documents will result
in a violation of Section 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 IV and TFC. Each of TFCRC IV and TFC
-----------------------------
hereby covenants and agrees that during the term of this Insurance Agreement,
unless AGIC 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
----------------------------------------------
IV 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 IV nor TFC will cause or permit to become effective any
amendment to or modification of any of the Transaction Documents to which
it is a party, unless AGIC shall have previously approved in writing the
form of such amendment or modification and shall have received all fees and
expenses payable under the Premium Letter in connection therewith (provided
--------
that such prior written approval of AGIC shall not be required in the event
that (x) an Insurer Default shall have occurred and be continuing, and (y)
the proposed amendment or modification shall not have any adverse effect on
AGIC). Neither TFCRC IV nor TFC shall take any action or fail to take any
action that would interfere with the enforcement of any rights of AGIC or
the Trust Collateral Agent under the Transaction Documents.
(b) Reports; Other Information. Each of TFCRC IV 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 IV, and, in
the case of TFCRC IV, which shall clearly reflect the transfer of the
Receivables to the Issuer, and subsequently to the Trust Collateral Agent.
Each of TFCRC IV and TFC shall furnish or caused to be furnished to AGIC:
(i) Promptly upon receipt thereof, copies of all reports,
statements, certifications, schedules, or other similar items
delivered to or by TFCRC IV and TFC pursuant to the terms of
the Transaction Documents and,
32
promptly upon request, such other data as AGIC may reasonably
request; provided, however, that neither TFCRC IV nor
TFC shall be required to deliver any such items if provision by
some other party to AGIC is required under the Transaction
Documents unless such other party wrongfully fails to deliver
such item. TFCRC IV and TFC shall, upon the reasonable request of
AGIC, permit AGIC or its authorized agents (including, without
limitation, any reinsurers of AGIC appointed by AGIC 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 IV and TFC under the Transaction Documents, the Transaction
and the business of TFC or TFCRC IV; (B) to discuss the affairs,
finances and accounts of TFCRC IV and TFC with an officer of each
upon AGIC's reasonable request; and (C) to discuss the affairs,
finances and accounts of TFCRC IV and TFC with its independent
accountants, provided that an officer of such Person shall have
the right to be present during such discussions. Such inspections
and discussions shall be conducted during normal business hours
and shall not unreasonably disrupt the business of such Person.
The reasonable fees and expenses of AGIC or any such authorized
agents shall be for the account of TFC.
(ii) TFC shall provide or cause to be provided to AGIC an executed
original copy of each document executed in connection with the
transaction within 30 days after the Closing Date.
(iii) At least 30 days prior to the implementation thereof, notice of
any material change to the software, hardware or other systems
employed by the Parent or TFC in connection with billing,
collecting or otherwise servicing the Receivables.
(c) Notice of Material Events. TFCRC IV and TFC shall promptly
-------------------------
inform AGIC in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation
(A) against TFCRC IV or TFC pertaining to the Receivables in
general, (B) with respect to a material portion of the
Receivables, or (C) in which a request has been made for
certification as a class action (or equivalent relief) that would
involve a material portion of the Receivables;
(ii) any change in the location of the principal office of either of
TFCRC IV or TFC or any change in the location of the books and
records of TFCRC IV or TFC;
(iii) the occurrence of any Trigger Event, Event of Default, Servicer
Termination Event, Default or Insurance Agreement Event of
Default; or
33
(iv) any other event, circumstance or condition that has resulted, or
which TFCRC IV or TFC, as the case may be, reasonably believes
might result, in a Material Adverse Change with respect to TFCRC
IV or TFC.
(d) Further Assurances. Each of TFCRC IV 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 AGIC) with respect to the Receivables, the
Collection Account, the Note Payment Account, the Spread Account, the stock
of TFCRC IV subject to the Stock Pledge Agreement and all of the other
Collateral. In addition, each of TFCRC IV and TFC shall, upon the request
of AGIC, from time to time, execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered, within thirty (30) days of such
request, such amendments hereto and such further instruments and take such
further action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Transaction Documents or to protect the
interest of the Issuer, the Owner Trustee, the Trustee for the benefit of
the Noteholders and AGIC, in the Receivables, the Collection Account, the
Note Payment Account, the Spread Account, the stock of TFCRC IV 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 IV 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 IV's Corporate Existence. TFCRC IV shall maintain its
------------------------------
corporate existence and shall at all times continue to be duly organized
under the laws of Delaware, and duly qualified and duly authorized (as
described in Sections 3.01 (a), (b) and (c) hereof, including, but not
limited to, in the Commonwealth of Virginia) and shall conduct its business
in accordance with the terms of its Certificate of Incorporation and
Bylaws.
(f) TFC's Corporate Existence. TFC shall maintain its corporate
-------------------------
existence and shall at all times continue to be duly organized under
applicable law, and duly qualified and duly authorized (as described in
Sections 3.01 (a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its 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 AGIC
prepared in accordance with GAAP shall include the following statement
immediately preceding such financial statements:
The New York State Insurance Department recognizes only statutory
accounting practices for
34
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 IV 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 IV shall (A)
require that its employees, if any, identify themselves as
employees of TFCRC IV when conducting business of TFCRC IV;
(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 IV.
(ii) Each of TFC and TFCRC IV shall respond to any inquiries made
directly to it with respect to ownership of a Receivable by
stating that TFCRC IV acquired such Receivable from TFC, that
TFCRC IV contributed such Receivable to the Issuer and that
the Trust Collateral Agent has been granted a security
interest in such Receivable
(iii) TFCRC IV shall compensate all employees, consultants and
agents directly or indirectly through reimbursement of TFC,
from TFCRC IV's bank accounts, for services provided to TFCRC
IV by such employees, consultants and agents and, to the
extent any employee, consultant or agent of TFCRC IV is also
an employee, consultant or agent of TFC, allocate the
compensation of such employee, consultant or agent between
TFCRC IV and TFC on a basis which reflects the respective
services rendered to TFCRC IV and TFC.
(iv) TFCRC IV 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 IV 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
35
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 IV 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 IV shall maintain corporate records and books of
account separate from those of TFC or the Parent, and the
Affiliates thereof.
(vii) TFCRC IV shall obtain proper authorization from its Board of
Directors of all corporate action requiring such
authorization. Meetings of the Board of Directors of TFCRC IV
shall be held not less frequently than one time per annum,
and copies of the minutes of each such board meeting shall be
delivered to AGIC within 30 days of such meeting.
(viii) TFCR of all corporate action requiring shareholder approval.
Meetings of the shareholders of TFCRC IV shall be held not
less frequently than one time per annum, and copies of each
such authorization and the minutes of each such shareholder
meeting shall be delivered to AGIC within 30 days of such
authorization or meeting, as the case may be.
(ix) TFCRC IV 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 IV and any Affiliate thereof, on the
basis of actual use to the extent practicable, and to the
extent such allocation is not practicable, on a basis
reasonably related to actual use or the value of services
rendered. TFCRC IV 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 IV shall disclose the effects of the Transactions
in accordance with GAAP and shall disclose that neither the
assets of TFCRC IV 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 IV
and the Issuer are separate entities whose creditors have a
claim on their respective assets prior to those assets
36
becoming available to its equity holders and to any of their
respective creditors.
(xi) The resolutions, agreements and other instruments of TFCRC IV
underlying the transactions described in this Insurance
Agreement and in the other Transaction Documents shall be
continuously maintained by TFCRC IV as official records of
TFCRC IV, separately identified and held apart from the
records of TFC and the Parent and each affiliate thereof.
(xii) TFCRC IV 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 IV 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 IV 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 IV and TFC shall comply
---------------------
with each of the covenants, as applicable, made by it in each of the
Transaction Documents.
(k) Ownership of TFCRC IV. TFC shall at all times own 100% of the
---------------------
issued and outstanding shares of capital stock of TFCRC IV free and clear
of any Liens.
(l) Civilian Portfolio. TFC shall cause, with respect to each
------------------
calendar quarter ending before January 1, 2003, the fraction (stated as a
percentage) (A) the numerator of which is the aggregate outstanding
principal balance of Contracts serviced by TFC (including, without
limitation, those Contracts pledged to secure loans to TFC or transferred
by TFC in connection with securitization transactions) as determined as of
the close of business of the last day of the most recently concluded
calendar quarter, and in respect of which the Obligors are not military
personnel and (B) the denominator of which is the aggregate outstanding
principal balance of all such Contracts serviced by TFC as determined as of
the close of business of the last day of such calendar quarter, not to
exceed for such calendar quarter, the percentage set forth opposite such
Monthly Period on Schedule 2 attached hereto and under the heading
----------
"Civilian Percentage Limit.
(m) Access to Records; Discussions with Officers. TFC shall, upon
--------------------------------------------
the reasonable request of AGIC, permit AGIC or its authorized agent
(including, without limitation, any reinsurers of AGIC appointed by AGIC as
an agent for such purposes) access to:
37
(i) the documentation regarding the Receivables, the other Trust
Property, the obligations of TFC under the Transaction Documents,
the business of TFC and the transactions consummated in
connection therewith including, but not limited to, the accounts,
records and computer systems maintained by TFC with respect
thereto; and
(ii) any of the properties of TFC, to examine all of its books of
account, records, reports and other papers, to make copies and
extracts therefrom and to discuss its affairs, finances and
accounts with its officers, employees, and independent public
accounts (and by this provision TFC authorizes said accountants
to discuss the finances and affairs of TFC) (in each such case,
it being understood that an officer of TFC shall be entitled to
be present during any such examination and/or discussion).
Such inspections and discussions shall be conducted at such reasonable
times and as often as may be reasonably requested. In each case, such
access shall be afforded without charge but only upon reasonable request
and during normal business hours.
(n) Benefit Plan. Each of TFC and TFCRC IV shall comply in all
------------
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 IV
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 IV;
(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 IV or any
ERISA Affiliate if such termination would result in any material
liability to either of TFC or TFCRC IV or an ERISA Affiliate; or
(iv) create any defined benefit plan (as defined in ERISA).
(o) Reporting and Accounting Treatment. For reporting and accounting
----------------------------------
purposes, and in its books of account and records, TFCRC IV will treat each
transfer of Receivables pursuant to the Sale and Servicing Agreement as an
absolute sale and assignment of TFCRC IV's full right, title and ownership
interest in such Receivable and TFCRC IV 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
38
assets and business, and shall clearly reflect therein the transfer of the
Receivables from TFC to TFCRC IV, and from TFCRC IV to the Issuer, and the
sale of the Notes to the Noteholders, as a sale of TFCRC IV's respective
interests in the Receivables evidenced by the Notes. TFC shall furnish or
cause to be furnished to AGIC:
(i) Annual Financial Statements. As soon as available, and in any
---------------------------
event within 120 days after the close of each fiscal year of the
Parent, the audited consolidated balance sheets of TFC and the
Parent, and the unaudited balance sheets of TFCRC IV, 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 IV, 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 AGIC) 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 IV, certified by an authorized officer of TFCRC IV
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 IV, 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 IV, 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 condition and
results of operations of TFC or the Parent, as applicable, as of
the dates and for the periods indicated, in accordance with GAAP
consistently applied (subject as to interim statements to normal
year-end adjustments).
(iii) Other Information. Promptly upon receipt thereof, copies of all
-----------------
reports, statements, certifications, schedules, or other similar
items delivered to or by TFC pursuant to the terms of the
Transaction Documents and, promptly upon request, such other data
as AGIC may reasonably request; provided, however, that TFC shall
not be required to deliver any such items if
39
provision by some other party to AGIC is required under the
Transaction Documents unless such other party wrongfully fails to
deliver such item. The reasonable fees and expenses of AGIC or
any such authorized agents shall be for the account of TFC. In
addition, TFC shall promptly (but in no case more than 30 days
following issuance or receipt by a Commonly Controlled Entity)
provide to AGIC a copy of all correspondence between a Commonly
Controlled Entity and the PBGC, IRS, Department of Labor or the
administrators of a Multiemployer Plan relating to any Reportable
Event or the under-funded status, termination or possible
termination of a Plan or a Multiemployer Plan. The books and
records of TFC will be maintained at the address for it
designated herein for receipt of notices, unless it shall
otherwise advise the parties hereto in writing.
(iv) Closing Documents. TFC shall provide, or cause to be provided, to
-----------------
AGIC an executed original copy of each document executed in
connection with the Transaction within 30 days after the Closing
Date.
(q) Agreed Upon Procedures; Reports. (1) TFC shall cause a firm of
-------------------------------
nationally recognized independent certified public accountants (the
"Independent Accountants"), who may also render other services to TFC
-----------------------
and/or to TFCRC IV, to deliver to the Board of Directors of the Servicer,
to the Trustee, the Owner Trustee, the Trust Collateral Agent and AGIC
(with a copy delivered to the Rating Agency):
(i) As soon as practical, but in no event later than 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 AGIC, reviewing the results of the
Independent Accountants' performance of certain agreed upon
procedures with respect to the Servicer, its reporting and record
keeping and the degree of its compliance with provisions of the
Basic Documents requiring the deposit or remittance of funds by
the Servicer to the Collection Account, substantially to the
effect that: (1) the Independent Accountants have examined the
accounts and records of the Servicer relating to the Receivables
(which records shall be described in one or more schedules to
such statement), (2) such firm has compared the information
contained in the third Servicer's Certificate delivered by the
Servicer pursuant to Section 4.9 of the Sale and Servicing
Agreement with information contained in such accounts and records
for such periods, (3) such firm has traced deposits and
remittances made to the Collection Account by the Servicer for
such periods, and (4) on the basis of the agreed upon procedures
so performed, whether and to what extent (x) the information
contained in such Servicer's Certificates reconciles with the
information contained in such accounts and records, (y) such
accounts and records of the Servicer related to the Receivables
agree to the respective source documents, and (z) the Servicer
has complied with the obligations set forth in the Basic
Documents with respect to the deposits and
40
remittances made to the Collection Account by the Servicer for
such periods, except for such exceptions as TFC and AGIC believe
to be immaterial and such other exceptions as shall be set forth
in such statement;
(ii) In the event that the Initial Accountant's Statement indicates a
degree of accuracy with respect to the third Servicer's
Certificate deemed by AGIC to be unsatisfactory in the exercise
of its sole discretion, as soon as practical after written demand
therefor by AGIC to TFC and the Independent Accountants (which
demand may be made as frequently as deemed necessary in the sole
discretion of AGIC), but in no event later than 30 days after the
delivery to AGIC by the Servicer of any subsequent Servicer's
Certificate constituting the subject of such demand, a statement
(each, an "Additional Accountant's Statement"), in form and
substance satisfactory to AGIC, reviewing the results of the
Independent Accountants' performance of certain agreed upon
procedures with respect to then most recently completed and
delivered Servicer's Certificate, and otherwise covering the same
subjects, and having the same scope, as the Initial Accountant's
Statement; provided, however, that AGIC shall not demand
--------- -------
Additional Accountant's Statements if and to the extent that no
fewer than three consecutive Additional Accountant's Statements
are deemed by AGIC, in the exercise of its sole discretion, to
indicate a high degree of accuracy with respect to the related
Servicer's Certificate;
(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 2002), a statement (each, an "Annual
Accountant's Statement"), in form and substance satisfactory to
AGIC, reviewing the results of the Independent Accountants'
performance of certain agreed upon procedures with respect to a
sample of (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 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 AGIC and TFC with respect to the securitization
transaction pursuant to which the TFC Asset Backed Notes Series
2000-1 were issued.
41
(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,
2001, 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 IV 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 AGIC and the Trust
Collateral Agent in connection with obtaining any of the foregoing described
statements shall be for the sole cost and expense of TFC.
(r) UCC Matters. Within fifteen (15) days of the Closing Date, TFC
-----------
and TFCRC IV shall execute and deliver, 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 Circuit Court of the City of Norfolk,
Virginia.
(s) Maintenance of Licenses. Each of TFC and TFCRC IV shall maintain
-----------------------
all licenses, permits, charges and registrations which are material to the
performance of its obligations under this Insurance Agreement and each of the
Transaction Documents to which it is a party or by which it is bound.
Section 4.02. Negative Covenants with Respect to TFCRC IV and TFC. Each
---------------------------------------------------
of TFCRC IV and TFC hereby covenants and agrees that during the term of this
Insurance Agreement, unless AGIC 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 IV nor TFC shall, except as
---------------------
contemplated by the Transaction Documents, (i) create, incur or suffer to
exist, or agree to create, incur or suffer to exist, or consent to cause or
permit in the fixture (upon the happening of a contingency or otherwise) the
creation, incurrence or existence of any Lien or Restriction on
Transferability of the Receivables, or (ii) sign or file under the
42
Uniform Commercial Code of any jurisdiction any financing statement which
names TFCRC IV or TFC as a debtor, or sign any security agreement authorizing
any secured party thereunder to file such financing statement, with respect
to the Receivables.
(b) Impairment of Rights. Neither TFCRC IV 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 AGIC, (ii) result in a Material Adverse Change with respect to
the Receivables, or (iii) impair the ability of TFCRC IV or TFC to perform
their respective obligations under the Transaction Documents.
(c) Waiver. Amendments, Etc. Neither TFCRC IV 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 IV 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 IV shall not create,
------------------------------------
incur, assume or suffer to exist any Indebtedness. TFCRC IV 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 IV shall not form, or cause to be formed, any
------------
Subsidiaries.
(g) Issuance of Stock. TFCRC IV shall not issue any shares of capital
-----------------
stock or rights, warrants or options in respect of capital stock or
securities convertible into or exchangeable for capital stock.
(h) No Mergers. TFCRC IV 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 IV shall not conduct transactions with the Parent, TFC or
any other Affiliate of the Parent, TFC or TFCRC IV or with any
shareholder, director, officer, or employee of TFCRC IV, 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 IV than would be obtained in a comparable arm's-length
transaction with a Person not an Affiliate of the
43
Parent or TFCRC IV or a shareholder, director, officer, or
employee of TFCRC IV, as the case may be; and
(ii) TFC shall not conduct transactions with the Parent, TFCRC IV 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 IV 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 IV 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 AGIC, or (ii) as
otherwise permitted by its certificate of incorporation.
(l) Insolvency. Neither TFCRC IV nor TFC shall commence with respect
----------
to TFCRC IV 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 IV 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 IV
shall not admit in writing its inability to pay its debts.
(m) Tangible Net Worth of TFC. TFC shall not permit its Tangible Net
-------------------------
Worth, at any time, calculated as of the close of TFC's then most recently
concluded fiscal quarter and commencing with the quarter ended June 30,
2000, to be less than the sum of (i) $32,000,000 plus (ii) 50% of the net
earnings (after taxes) of TFC for the period commencing on June 30, 2000
and ending at the end of TFC's then most recently concluded fiscal quarter
(treated for this purpose as a single accounting period). For purposes of
this clause, if net earnings of TFC for any period shall be less than zero,
the amount calculated pursuant to clause (ii) above for such period shall
be zero.
(n) No Change in Name, Etc. (i) TFCRC IV shall not make any change to
-----------------------
its corporate name, or use any trade names, fictitious names, assumed names
or "doing business as" names. (ii) TFC shall not change its name
(including using any trade names, fictitious names, assumed names or "doing
business as" names), identity or
44
organizational structure in any manner that would, could or might make any
financing statement or continuation statement filed in connection with the
closing of the Transactions, or otherwise in accordance with Section
4.01(d) above, seriously misleading within the meaning of Section 9-402(7)
of the UCC, unless it shall have given AGIC at least 60 days' prior written
notice thereof and shall have filed before the date of such change
appropriate amendments to all such previously filed financing statements or
continuation statements.
(o) No Merger or Consolidation of, or Assumption of the Obligations
---------------------------------------------------------------
of, TFC. (x) TFC shall not merge or consolidate with any other Person,
-------
convey, transfer or lease substantially all its assets as an entirety to
another Person, or permit any other Person to become the successor to TFC's
business unless, after the merger, consolidation, conveyance, transfer,
lease or succession, the successor or surviving entity, there shall be no
Material Adverse Change with respect to the ability of the surviving entity
to fulfill its duties contained in this Insurance Agreement 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, AGIC 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) shall exclude the representations and warranties made
under Schedule B of the Purchase Agreement) shall have been breached (for
purposes hereof, such representations and warranties shall speak as of the
date of the consummation of such transaction) and no event that, after
notice or lapse of time, or both, would become an Insurance Agreement Event
of Default shall have occurred and be continuing, (y) TFC shall have
delivered to the Issuer, the Trust Collateral Agent, the Rating Agency and
AGIC an Officer's Certificate and an Opinion of Counsel each stating that
such consolidation, merger or succession and such agreement of assumption
comply with this Section 4.02(o) and that all conditions precedent, if any,
provided for in this Insurance Agreement relating to such transaction have
been complied with, and (z) TFC shall have delivered to the Issuer, the
Trust Collateral Agent, the Rating Agency and AGIC an Opinion of Counsel,
stating in the opinion of such counsel, either (A) all financing statements
and continuation statements and amendments thereto have been executed and
filed that are necessary to preserve and protect the interest of the Trust
Collateral Agent in the Receivables and the Other Conveyed Property and
reciting
45
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 IV 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 IV 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 1,565.
Section 4.03. Affirmative Covenants of the Issuer. The Issuer hereby
-----------------------------------
covenants and agrees that during the term of this Insurance Agreement, unless
AGIC shall otherwise expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws. 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 AGIC shall have
previously approved in writing the substance of such amendment or
modification. The Issuer shall not take any action or fail to take any
action that would interfere with the enforcement of any rights under the
Transaction Documents.
(b) Certain Information. The Issuer shall keep, or cause to be kept, in
-------------------
reasonable detail books and records of account of its assets and business,
which shall be furnished to AGIC upon request. The Issuer shall furnish to
AGIC, simultaneously with the delivery of such documents to the Trustee,
the Noteholders or the 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 AGIC the following:
(i) Certain Information. Not less than two weeks prior to the date of
-------------------
filing with the IRS of any tax return or amendment thereto, copies
of the proposed form of such return or amendment and, promptly after
the filing or sending thereof, (A) copies of each tax return and
amendment thereto that the Issuer files with the IRS and (B) copies
of all financial statements, reports, and registration statements
which the Issuer files with, or delivers to, any federal government
agency, authority or body which supervises the issuance of
securities by the Issuer.
46
(ii) Other Information. Promptly upon the request of AGIC, copies of
-----------------
all schedules, financial statements or other similar reports
delivered to or by the Issuer pursuant to the terms of this
Insurance Agreement and the other Transaction Documents and such
other data as AGIC may reasonably request.
(c) Access to Records; Discussions with Officers. The Issuer shall,
--------------------------------------------
upon the reasonable request of AGIC, permit AGIC or its authorized agent:
(i) to inspect such books and records of the Issuer as may relate to
the Notes, the Certificate, the Receivables and the other Trust
Property, the obligations of the Issuer under the Transaction
Documents, the business of the Issuer and the transactions
consummated in connection therewith; and
(ii) to discuss the affairs, finances and accounts of the Issuer with
an appropriate officer of the Issuer.
Such inspections and discussions shall be conducted at such reasonable
times and as often as may be reasonably requested. In each case, such
access shall be afforded without charge but only upon reasonable request
and during normal business hours.
(d) Notice of Material Events. The Issuer shall promptly inform
-------------------------
AGIC in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation
against the Issuer in any federal, state or local court or before
any arbitration board, or any such proceeding threatened by any
governmental agency, which, if adversely determined, would cause
a Material Adverse Change to occur with respect to the
Receivables as a whole, or which, if adversely determined, would
cause a Material Adverse Change to occur with respect to the
ability of the Issuer to perform its obligations under any
Transaction Document;
(ii) any change in the location of the Issuer's principal office or
any. change in the location of the books and records of the
Issuer;
(iii) the occurrence of any 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
47
the Indenture. In addition, the Issuer shall, upon the request of AGIC,
from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within thirty (30) days of such
request, such amendments hereto and such further instruments and take such
further action as may be reasonably necessary to effectuate the intention,
performance and provisions of the Transaction Documents or to protect the
interest of the Trust Collateral Agent in the Collateral under the
Indenture. In addition, the Issuer agrees to cooperate with 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 AGIC a notice of such retirement, and, upon such
retirement and the expiration of the term of the Policy, surrender the
Policy to AGIC for cancellation.
(g) Preservation of Existence. The Issuer shall observe in all material
-------------------------
respects all procedures required by its Certificate and Trust Agreement and
preserve and maintain its existence as a trust and its rights, franchises
and privileges in the jurisdiction of its organization, and shall qualify
and remain qualified in good standing in each jurisdiction where the nature
of its business requires it to do so except where the failure to be so
qualified, in good standing and to maintain its rights, franchises and
privileges would not cause a Material Adverse Change to occur with respect
to the financial condition of the Issuer, or its ability to perform its
obligations under this Insurance Agreement or under any other Transaction
Document to which it is party.
(h) Disclosure Document. Each Offering Document with respect to the
-------------------
Notes shall include only information concerning AGIC that is supplied or
consented to in writing by AGIC expressly for inclusion therein. Each
Offering Document delivered with respect to the Notes shall clearly
disclose that the Policy is not covered by the property/casualty insurance
security fund specified in Article 76 of the New York Insurance Law. In
addition, each Offering Document delivered with respect to the Notes which
includes financial statements of AGIC prepared in accordance with GAAP (but
excluding any Offering Document in which such financial statements are
incorporated by reference) shall include the following statement
immediately preceding such financial statements:
The New York State Insurance Department recognizes only statutory
accounting practices for determining and reporting the financial
condition and results of operations of an insurance company, for
determining its solvency under the New York Insurance Law, and for
determining where its financial condition warrants the payment of a
dividend to its stockholders. No consideration is given by the New
York State Insurance Department to financial statements prepared in
accordance with generally accepted accounting principles in making
such determinations.
48
(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 IV or any other Affiliates thereof or that the
assets of the Issuer are available to pay the creditors of the
Parent, TFC, TFCRC IV 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 IV 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 AGIC
within 30 days of such authorization or meeting as the case may
be.
(iv) Although the organizational expenses of the Issuer have been paid
by TFC, operating expenses and liabilities of the Issuer shall be
paid from its own funds.
(v) The annual financial statements of the Issuer shall disclose the
effects of the Issuer's transactions in accordance with GAAP and
shall disclose that the assets of the Issuer are not available to
pay creditors of the Parent, TFC, TFCRC IV 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 IV and each Affiliate of any of them.
(vii) The Issuer shall maintain an arm's-length relationship with the
Parent, TFC, TFCRC IV 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 IV and each Affiliate of any of
them except, in each case, as contemplated by the Transaction
Documents.
49
(j) Tax Matters. The Issuer will take all actions reasonably
-----------
necessary to ensure that for federal and State income tax purposes the
Issuer is not taxable as an association (or publicly traded partnership)
taxable as a corporation.
(k) Securities Laws. The Issuer shall comply in all material respects
---------------
with all applicable provisions of State and federal securities laws,
including blue sky laws and the Securities Act, the Securities Exchange Act
and the Investment Company Act and all rules and regulations promulgated
thereunder for which non-compliance would result in a Material Adverse
Change with respect to the Issuer.
(l) Incorporation of Covenants. The Issuer shall comply with each of
--------------------------
the Issuer's covenants set forth in the Transaction Documents and hereby
incorporates such covenants by reference as if each were set forth herein.
(m) Reports. The Issuer shall furnish to AGIC:
-------
(i) Annual Financial Statements. As soon as available, and in any
---------------------------
within 120 days after the close of each fiscal year, its unaudited
balance sheet as of the end of such fiscal year and the unaudited
statements of income, shareholders' equity and cash flows for such
fiscal year, all in reasonable detail and stating in comparative
form the respective figures for the corresponding date and period
in the preceding fiscal year, prepared in accordance with GAAP,
consistently applied, and certified by an authorized officer of
the Issuer as being complete and correct in all material respects
and presenting the financial condition and results of operations
of the Issuer as of the dates and for the periods indicated, in
accordance with GAAP consistently applied.
(ii) Quarterly Financial Statements. As soon as available, and in any
------------------------------
event within 45 days after the close of the first three quarters
of each fiscal year of the Issuer, the unaudited balance sheets of
the Issuer as of the end of each such quarter and the unaudited
statements of income and cash flows of the Issuer for the portion
of the fiscal year then ended, all in reasonable detail and
stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year,
prepared in accordance with GAAP, consistently applied (subject to
normal year-end adjustments), and certified by an authorized
officer of the Issuer as being complete and correct in all
material respects and presenting the financial condition and
results of operations of the Issuer as of the dates and for the
periods indicated, in accordance with GAAP consistently applied
(subject as to interim statements to normal year-end adjustments).
(iii) Other Information. Promptly upon receipt thereof, copies of all
-----------------
reports, statements, certifications, schedules, or other similar
items delivered to or by the Issuer pursuant to the terms of the
Transaction Documents and, promptly upon request, such other data
as AGIC may reasonably request. The fees and expenses of AGIC or
any such authorized agents shall be for
50
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 IV as
------------------------------------------
"Depositor" under the Trust Agreement, on behalf of the Issuer, hereby covenants
and agrees, that during the term of this Insurance Agreement, unless AGIC shall
otherwise expressly consent in writing (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
AGIC, (ii) result in a Material Adverse Change with respect to the
Receivables, or (iii) impair the ability of the Issuer to perform its
obligations under the Transaction Documents.
(c) Waiver, Amendments. Etc. Absent the prior written approval
-----------------------
of AGIC, the Issuer shall not waive, modify or amend, or consent to any
waiver, modification or amendment of, any of the provisions of any of the
Transaction Documents (provided that such prior written approval of AGIC
--------
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 AGIC).
(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 AGIC. The Trustee shall not assume, guarantee, endorse or
otherwise be or become directly or contingently liable for the obligations
of any Person by, among other things, agreeing to purchase any obligation
of another Person, agreeing to advance funds to such Person or causing or
assisting such Person to maintain any amount of capital.
51
(f) Subsidiaries. The Issuer shall not form, or cause to be formed,
------------
any Subsidiaries.
(g) No Mergers. The Issuer shall not consolidate with or merge into
----------
any Person or transfer all or any material amount of its assets to any
Person, liquidate or dissolve except as permitted by the Trust Agreement
and as contemplated by the Transaction Documents.
(h) Other Activities. The Issuer shall not:
----------------
(i) sell, pledge, transfer, exchange or otherwise dispose of any of
its assets except as permitted under the Transaction Documents;
or
(ii) engage in any business or activity except as contemplated by the
Transaction Documents and as permitted by the Trust Agreement.
(i) Insolvency. The Issuer shall not commence any case, proceeding
----------
or other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to the bankruptcy, insolvency, reorganization
or relief of debtors, seeking to have an order for relief entered with
respect to it, or seeking reorganization, arrangement, adjustment, winding-
up, liquidation, dissolution, corporation or other relief or (B) seeking
appointment of a receiver, trustee, custodian or other similar official for
it or for all or any substantial part of its assets or make a general
assignment for the benefit of its creditors. The Issuer shall not take any
action in furtherance of, or indicating the consent to, approval of, or
acquiescence in, any of the acts set forth above. The Issuer shall not
admit in writing its inability to pay its debts.
ARTICLE V
FURTHER AGREEMENTS
Section 5.01. Effective Date; Term of Insurance Agreement. This
-------------------------------------------
Insurance Agreement shall take effect on the Closing Date, upon issuance of the
Policy, and shall remain in effect until the later of (a) such time as AGIC is
no longer subject to a claim under the Policy and the Policy shall have been
surrendered to AGIC for cancellation and (b) all amounts payable to AGIC and the
Noteholders under the Transaction Documents and under the Notes have been paid
in full; provided, however, that the provisions of Sections 2.04, 2.05, 2.06,
-------- -------
2.07, 2.08, 2.09 and 2.10 hereof shall survive any termination of this
Agreement.
Section 5.02. Obligations Absolute.
--------------------
(a) The obligations of the Issuer, TFCRC IV 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;
52
(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), AGIC or any other person or entity whether in
connection with the Policy, the Transaction Documents or any
unrelated transactions;
(iv) any statement or any other document presented under the Policy
(including any Notice for Payment) proving to be forged,
fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect
whatsoever;
(v) the inaccuracy or alleged inaccuracy of any Monthly Servicer
Report or Notice for Payment upon which any drawing under the
Policy is based;
(vi) payment by AGIC under the Policy against presentation of a
draft or certificate which does not comply with the terms of
the relevant Policy;
(vii) the bankruptcy or insolvency of AGIC, the Issuer, any other
party or the Trust Property;
(viii) any default or alleged default of AGIC under the Policy (other
than any payment default by AGIC under the Policy);
(ix) any defense based upon the failure of the Issuer or the Trust
Property to receive all or part of the proceeds of the sale of
the Notes or of the Servicer to receive any or all of the
servicing fee or other compensation required under the
Indenture or otherwise, or any nonapplication or misapplication
of the proceeds of any drawing upon the Policy; and
(x) any other circumstance or happening whatsoever which would
otherwise constitute a defense to the obligations of the
Issuer, TFCRC IV or TFC hereunder.
(b) Each of TFC, TFCRC IV 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 IV 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
53
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 IV 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 AGIC 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
IV or the Issuer from pursuing any rights or remedies it may have against
any Person other than AGIC in a separate legal proceeding.
Section 5.03. Assignments; Reinsurance; Third-Party Rights.
--------------------------------------------
(a) This Insurance Agreement shall be a continuing obligation of
the parties hereto and shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
None of the Issuer, TFC, TFCRC IV, the Servicer, the Back-up Servicer or
the Successor Servicer may assign its rights under this Agreement, or
delegate any of its duties hereunder, without the prior written consent of
AGIC. Any assignment made in violation of this Agreement shall be null and
void.
(b) AGIC 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 AGIC may in its
discretion determine; provided, however, that no such participation or
reinsurance agreement or arrangement shall relieve AGIC of any of its
obligations hereunder or under the Policy.
(c) In addition, AGIC 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 AGIC in connection therewith any
rights of AGIC under the Transaction Documents or with respect to any real
or personal property or other interests pledged to AGIC, or in which AGIC
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 AGIC, against the Issuer,
TFC, TFCRC IV, the Servicer, the Back-up Servicer or the Successor
Servicer, and all the terms, covenants, conditions, promises and agreements
54
contained herein shall be for the sole and exclusive benefit of the parties
hereto and their successors and permitted assigns. None of the Trustee, the
Owner Trustee, or the Trust Collateral Agent, nor any Noteholder or the
Certificateholder shall have any right to payment from any premiums paid or
payable hereunder or from any other amounts paid by TFC or any other Person
pursuant to Article II hereof.
----------
Section 5.04. Liability of AGIC. Each of the Issuer, the Servicer, TFCRC
-----------------
IV, the Parent, TFC, the Back-up Servicer and the Successor Servicer agree that
neither AGIC, nor any of its officers, directors or employees shall be liable or
responsible for (except to the extent of its own gross negligence or willful
misconduct): (a) the use which may be made of the Policy by or for any acts or
omissions of another Person in connection therewith or (b) the validity,
sufficiency, accuracy or genuineness of any documents delivered to AGIC, or of
any endorsement(s) thereon, even if such documents should in fact prove to be in
any or all respects invalid, insufficient, fraudulent or forged. In furtherance
and not in limitation of the foregoing, AGIC may accept documents that appear on
their face to be in order, without responsibility for further investigation.
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 IV under any of the
Basic Documents, or in any certificate or report furnished
under any of the Basic Documents, shall prove to have been
untrue or incorrect in any material respect when made;
provided, however, if such default has not been committed
-------- -------
voluntarily and is capable of being cured, it shall be deemed
a default hereunder only if it shall continue or fail to be
cured, or the circumstance or condition in respect of which
such misrepresentation or warranty was incorrect shall not
have been eliminated or otherwise cured, for a period of 30
days after such Person shall have been given a written notice
by AGIC, the Trustee or the Trust Collateral Agent specifying
such default or incorrect representation or warranty and
requiring it to be remedied;
(ii) any covenant made by any of the Issuer, the Parent, TFC, the
Servicer, or TFCRC IV 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,
55
for a period of 30 days after such Person shall have been given
a written notice by AGIC, the Trustee or the Trust Collateral
Agent specifying such breach and requiring it to be remedied;
or
(iii) any of the Issuer, TFC or TFCRC IV 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 April, May and June 2001 1.48%
Determination Dates
--------------------------------------------------------------------------------
For the July, August and September 2001 5.14%
Determination Dates
--------------------------------------------------------------------------------
For the October, November and December 2001 12.20%
Determination Dates
--------------------------------------------------------------------------------
For the January, February and March 2002 18.72%
Determination Dates
--------------------------------------------------------------------------------
For the April, May and June 2002 19.05%
Determination Dates
--------------------------------------------------------------------------------
For the July, August and September 2002 19.80%
Determination Dates
--------------------------------------------------------------------------------
For the October, November and December 2002 20.75%
Determination Dates
--------------------------------------------------------------------------------
For the January, February and March 2003 21.70%
Determination Dates
--------------------------------------------------------------------------------
For the April, May and June 2003 22.65%
Determination Dates
--------------------------------------------------------------------------------
For the July, August and September 2003 23.60%
Determination Dates
--------------------------------------------------------------------------------
For the October, November and December 2003 25.46%
Determination Dates
--------------------------------------------------------------------------------
56
--------------------------------------------------------------------------------
For the January 2004 Determination Date and 25.49%
thereafter
--------------------------------------------------------------------------------
(d) (i) the Issuer, TFC or TFCRC IV 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 IV 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 IV 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 IV 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 IV shall consent to, or acquiesce in, the appointment
of a receiver, liquidator, conservator, trustee or similar official in
respect of such Person or the whole or any substantial part of its
respective properties or assets; or (iv) such Person shall take any
corporate action in furtherance of any of the foregoing;
(f) on any Payment Date, after taking into account the application in
accordance with Section 5.7(a) of the Sale and Servicing Agreement on the
related Payment Date of the sum of Amount Available with respect to such
related Payment Date and the amounts available in the Spread Account (prior
to withdrawals therefrom in accordance with the terms of the Spread Account
under the Sale and Servicing Agreement) any amounts payable on such related
Payment Date pursuant to clauses (i), (ii), (iii), (iv) 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 April 2001 Determination Date, the
Delinquency Ratio shall be greater than 20.70%; (ii) the May 2001
Determination Date, the arithmetic average of the Delinquency Ratios for
such Determination Date and the preceding Determination Date shall be
greater than 20.70% 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:
57
--------------------------------------------------------------------------------
Period Maximum Percentage
------ ------------------
--------------------------------------------------------------------------------
For each Determination Date occurring prior to the 20.70%
August 2001 Determination Date
--------------------------------------------------------------------------------
For the August 2001 Determination Date through the 23.80%
January 2002 Determination Date
--------------------------------------------------------------------------------
For each Determination Date occurring after the 29.00%
January 2002 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;
(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,
AGIC 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 AGIC shall have declared an
"Insurance Agreement Event of Default" or
58
shall have exercised, or be entitled to exercise, any other
rights or remedies hereunder;
(ii) exercise any rights and remedies available under the Basic
Documents in its own capacity or in its capacity as the Person
entitled to exercise the rights of the Controlling Party under
the Basic Documents, including, without limitation, its right
to accelerate the Notes, to sell the Receivables, or to
terminate TFC and to appoint a substitute Servicer, as
applicable; or
(iii) take whatever action at law or in equity may appear necessary
or desirable in its judgment to enforce performance of any
obligation of the Issuer, the Parent, TFC or TFCRC IV under the
Basic Documents.
(b) Unless otherwise expressly provided, no remedy herein conferred
upon or reserved is intended to be exclusive of any other available remedy,
but each remedy shall be cumulative and shall be in addition to other
remedies given under the Basic Documents or existing at law or in equity.
No delay or failure to exercise any right or power accruing under any
Transaction Document upon the occurrence of any Event of Default or
otherwise shall impair any such right or power or shall be construed to be
a waiver thereof, but any such right and power may be exercised from time
to time and as often as may be deemed expedient. In order to entitle AGIC
to exercise any remedy reserved to AGIC in this Article, it shall not be
necessary to give any notice, other than such notice as may be expressly
required in this Article.
(c) If any proceeding has been commenced to enforce any right or
remedy under this Insurance Agreement and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely
to AGIC, then and in every such case the parties hereto shall, subject to
any determination in such proceeding, be restored to their respective
former positions hereunder, and, thereafter, all rights and remedies of
AGIC shall continue as though no such proceeding had been instituted.
(d) AGIC shall have the right, to be exercised in its complete
discretion, to waive 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 AGIC and delivered to the Issuer, the Parent, TFC or TFCRC IV, as
the case may be. Any such waiver may only be effected in writing duly
executed by AGIC, and no other course of conduct shall constitute a waiver
of any provision hereof. Unless such writing expressly provides to the
contrary, any waiver so granted shall extend only to the specific event or
occurrence so waived and not to any other similar event or occurrence.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.01. Amendments, Etc. No amendment or waiver of any provision
----------------
of this Insurance Agreement, nor consent to any departure therefrom, shall in
any event be effective
59
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: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxx X. Paris, Jr.
Williams, Mullen, Xxxxx, Xxxxxxx P.C.
000 Xxx Xxxxxxxx Xxxxxx,
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
Attention:
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to TFCRC IV:
--------------
0000 Xxxxx Xxxx Xxxx, Xxxxx 000X
Xxxxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Telephone: (757) 858-1400 ext. 535
Facsimile: (000) 000-0000
If to the Issuer:
----------------
TFC Automobile Receivables Trust 2001-1
c/o Wilmington Trust Company
00
Xxxxxx Xxxxxx Xxxxx
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Corporate Trust Administration
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to AGIC:
----------
Asset Guaranty Insurance Company
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Chief Risk Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(in each case in which notice or other communication to AGIC refers to an
Insurance Agreement Event of Default, a claim on the Policy or with respect
to which failure on the part of AGIC to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of each of the General
Counsel and the Head-Financial Guaranty Group and shall be marked to
indicate "URGENT MATERIAL ENCLOSED.")
If to the Trustee, Trust Collateral Agent, Back-up Servicer and P.O. Box
------------------------------------------------------------------------
Owner:
-----
Xxxxx Fargo Bank Minnesota, National Association
Xxxxx Xxxxxx xxx Xxxxxxxxx Xxxxxx,
Xxxxxxxxxxx, Xxxxxxxxx 00000 MAC N9311-161
Attention: Corporate Trust Services/Asset-Backed Administration
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Successor Servicer:
----------------------------
Xxxxx Fargo Financial America, Inc.
00 Xxxxxxx Xxxxx, Xxxxx 0000
Xxxx Xxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Section 7.03. No Waiver; Remedies and Severability. No failure on the
------------------------------------
part of AGIC to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law. The parties further agree that the holding by any
61
court of competent jurisdiction that any remedy pursued by AGIC hereunder is
unavailable or unenforceable shall not affect in any way the ability of AGIC to
pursue any other remedy available to it. In the event any provision of this
Insurance Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof.
Section 7.04. Payments.
--------
(a) All payments to AGIC hereunder shall be made in lawful
currency of the United States and in immediately available funds, shall be
made prior to 1:00 p.m. (New York City time) on the date such payment is
due by wire transfer pursuant to the wire transfer instructions and bank
account information set forth in the Premium Letter, or to such other
office or account as AGIC may direct. Payments received by AGIC 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, AGIC shall be entitled
to interest on all amounts owed to AGIC under this Insurance Agreement,
together with interest on any and all amounts remaining unpaid (to the
extent permitted by law, if in respect of any unpaid amounts representing
interest) from the date such amounts become due until paid in full (after
as well as before judgment), at a rate of interest equal to the Prime Rate
from time to time in effect plus 2.0%.
(d) In the event of any payment by AGIC for which it is
entitled to be reimbursed or indemnified as provided above, each of the
Issuer, TFC and TFCRC IV agrees to accept the voucher or other evidence of
payment as prima facie evidence of the propriety thereof and the liability
therefor to AGIC.
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.
62
Section 7.08. No Petition. Each of the parties hereto agrees that it
-----------
will not institute against, or join any other Person in instituting against, the
Issuer or the Trust Property any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal or
state bankruptcy or similar law, for one year and one day after satisfaction of
all of the Issuer's payment obligations under the Notes, the Premium Letter and
this Insurance Agreement. The provisions of this Section 7.08 shall survive the
termination of this Insurance Agreement.
Section 7.09. Consent to Jurisdiction. (a) THE PARTIES HERETO HEREBY
-----------------------
IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED
IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN
ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH
ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD OR 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 IV 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 IV 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 AGIC's
right to serve process in any other manner permitted by law or to start
legal proceedings relating
63
to any of the Transaction Documents against TFC and TFCRC IV or their
property in the courts of any jurisdiction.
Section 7.10. Consent of AGIC. In the event that AGIC's consent is
---------------
required under any of the Transaction Documents, the determination whether to
grant or withhold such consent shall be made by AGIC in its sole discretion
without any implied duty towards any other Person, except as otherwise expressly
provided therein.
Section 7.11. Jury Trial Waiver. EACH PARTY HERETO HEREBY WAIVES, TO
-----------------
THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION
WITH ANY OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREUNDER. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION
DOCUMENTS TO WHICH IT IS A PARTY BY, AMONG OTHER THINGS, THIS WAIVER.
Section 7.12. Limitation of Liability.
-----------------------
(a) No recourse under any Transaction Document shall be had against,
and no personal liability shall attach to, any officer, employee, director,
affiliate or shareholder of any party hereto, as such, by the enforcement
of any assessment or by any legal or equitable proceeding, by virtue of any
statute or otherwise in respect of any of the Transaction Documents, the
Notes or the Policy, it being expressly agreed and understood that each
Transaction Document is solely a corporate obligation of each party hereto,
and that any and all personal liability, either at common law or in equity,
or by statute or constitution, of every such officer, employee, director,
affiliate or shareholder for breaches by any party hereto of any
obligations under any Transaction Document is hereby expressly waived as a
condition of and in consideration for the execution and delivery of this
Agreement.
(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
64
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
-----------------------
IV, the Issuer, the Trustee, the Trust Collateral Agent, the P.O. Box Owner, the
Back-up Servicer and the Successor Servicer hereby agrees that AGIC 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 AGIC.
Section 7.14. Entire Agreement. This Insurance Agreement, the Premium
----------------
Letter and the Policy set forth the entire agreement between the parties with
respect to the subject matter hereof and thereof, and this Insurance Agreement
supersedes and replaces any agreement or understanding that may have existed
between the parties prior to the date hereof in respect of any such subject
matter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
65
IN WITNESS WHEREOF, the parties hereto have executed this Insurance
Agreement, all as of the day and year first above mentioned.
ASSET GUARANTY INSURANCE COMPANY
By: ________________________________
Name:
Title:
TFC RECEIVABLES CORPORATION IV
By: ________________________________
Name:
Title:
THE FINANCE COMPANY,
individually and as Servicer
By: ________________________________
Name:
Title:
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 AMERICA, INC., as Successor
Servicer
By: ________________________________
Name:
Title:
Signature Page
to
Insurance and Indemnity Agreement
TFC AUTOMOBILE RECEIVABLES TRUST 2001-1
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
March 30, 2001 (the "Sale and Servicing Agreement") among TFC Automobile
Receivables Trust 2001-1 as issuer (the "Issuer"), The Finance Company as
Servicer (the "Servicer") TFC Receivables Corporation IV as seller ("TFCRC IV"),
Xxxxx Fargo Bank Minnesota, National Association (individually "Xxxxx Fargo") as
trust collateral agent, backup servicer and p.o. box owner, and Xxxxx Fargo
Financial America, Inc. (individually, "WFCar"), as "Successor Servicer"; (ii)
-----
the Insurance and Indemnity Agreement dated as of March 30, 2001 (the "Insurance
Agreement") among AGIC, the Issuer, TFCRC IV, the Servicer, Xxxxx Fargo as
trustee, trust collateral agent, back-up servicer and p.o. box owner and WFCar,
as "Successor Servicer; (iii) the other Basic Documents (as defined under the
Sale and Servicing Agreement); and (iv) the transactions contemplated by the
agreements listed in clauses (i) through (iii) above, the following table shall
be used to define delinquency categories for contracts with monthly Scheduled
Receivable Payments ("Monthly-Pay Contracts") and contracts with more frequent
Scheduled Receivable Payments ("Non-monthly-Pay Contracts"):
Monthly-Pay Contracts* Non-Monthly-Pay Contracts** Delinquency
(# Months Delinquent) (# Weeks Delinquent) Category
------------------------------------------------------------------------
0 0-5 Current
1 6-9 30
2 10-13 60
3 14-17 90
4 18-21 120
5 22-25 150
6 26+ 180+
2. In accordance with The Finance Company's customary policy, in
assigning a delinquency category to any contract, a single partial payment of at
least 51% of a Scheduled Receivable Payment (a "One-Time Partial Payment") shall
prevent either the characterization of such contract as being in the 30
Delinquency Category or, in the case of a contract which is in a more advanced
Delinquency Category at the time of the receipt of such One-Time Partial
Payment, progression of the contract to the next higher Delinquency Category.
__________
*Monthly-Pay contracts (e.g., "Monthly Accounts").
**Non-monthly-Pay contracts (e.g., "Weekly Accounts," "Bi-Weekly
Accounts," and "Semi-Monthly Accounts").
SCHEDULE 2
CIVILIAN PORTFOLIO CONCENTRATION
--------------------------------
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Calendar Quarter Civilian Percentage Limit
(ending)
March 2001 38.00%
June 2001 42.00%
September 2001 46.00%
December 2001 49.00%
March 2002 49.00%
June 2002 49.00%
September 2002 49.00%
December 2002 49.00%
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EXHIBIT A
FORM OF FINANCIAL GUARANTY INSURANCE POLICY
[Attached]
EXHIBIT B
CLOSING CHECKLIST
[Attached]
