Exhibit 10.4
EXECUTION COPY
INSURANCE AND INDEMNITY AGREEMENT
among
RADIAN ASSET ASSURANCE INC.,
TFC AUTOMOBILE RECEIVABLES TRUST 2002-1,
TFC RECEIVABLES CORPORATION V,
THE FINANCE COMPANY,
XXXXX FARGO FINANCIAL AMERICA, INC.
and
XXXXX FARGO BANK MINNESOTA, NATIONAL ASSOCIATION
Dated as of March 19, 2002
TABLE OF CONTENTS
ARTICLE I DEFINITIONS.................................................................................. 2
Section 1.01. General Definitions................................................................. 2
Section 1.02. Generic Terms....................................................................... 11
Section 1.03. Computation of Time Periods......................................................... 11
ARTICLE II THE POLICY AND REIMBURSEMENT................................................................ 11
Section 2.01. Policy.............................................................................. 11
Section 2.02. Conditions Precedent................................................................ 11
Section 2.03. Premium Letter...................................................................... 15
Section 2.04. Reimbursement Obligations........................................................... 15
Section 2.05. Assignment and Other Rights upon Payments under the Policy.......................... 16
Section 2.06. Subrogation; Further Assurances..................................................... 16
Section 2.07. Indemnification by TFC; Conduct of Actions or Proceedings; Contribution............. 17
Section 2.08. Indemnification by TFCRC V; Conduct of Actions or Proceedings; Contribution......... 19
Section 2.09. Other Payment Obligations........................................................... 21
Section 2.10. Payments, Generally................................................................. 22
ARTICLE III REPRESENTATIONS AND WARRANTIES............................................................. 22
Section 3.01. Representations and Warranties with respect to TFC and TFCRC V...................... 23
Section 3.02. Representations and Warranties of the Issuer........................................ 29
ARTICLE IV COVENANTS................................................................................... 32
Section 4.01. Covenants of TFCRC V and TFC........................................................ 32
Section 4.02. Negative Covenants with Respect to TFCRC V and TFC.................................. 43
Section 4.03. Affirmative Covenants of the Issuer................................................. 46
Section 4.04. Negative Covenants on Behalf of the Issuer.......................................... 51
ARTICLE V FURTHER AGREEMENTS........................................................................... 53
Section 5.01. Effective Date; Term of Insurance Agreement......................................... 53
Section 5.02. Obligations Absolute................................................................ 53
Section 5.03. Assignments; Reinsurance; Third-Party Rights........................................ 55
Section 5.04. Liability of Radian................................................................. 55
ARTICLE VI EVENTS OF DEFAULT; REMEDIES................................................................. 56
Section 6.01. Insurance Agreement Events of Default............................................... 56
Section 6.02. Remedies; Waivers................................................................... 59
ARTICLE VII MISCELLANEOUS PROVISIONS................................................................... 60
Section 7.01. Amendments, Etc..................................................................... 60
Section 7.02. Notices............................................................................. 60
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Section 7.03. No Waiver; Remedies and Severability........................... 63
Section 7.04. Payments....................................................... 63
Section 7.05. Governing Law.................................................. 63
Section 7.06. Counterparts................................................... 63
Section 7.07. Paragraph Headings, Etc........................................ 64
Section 7.08. No Petition.................................................... 64
Section 7.09. Consent to Jurisdiction........................................ 64
Section 7.10. Consent of Radian.............................................. 65
Section 7.11. Jury Trial Waiver.............................................. 65
Section 7.12. Limitation of Liability........................................ 65
Section 7.13. Third Party Beneficiary........................................ 66
Section 7.14. Entire Agreement............................................... 66
ii
INSURANCE AND INDEMNITY AGREEMENT
THIS INSURANCE AND INDEMNITY AGREEMENT (this "Insurance Agreement") is made
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as of March 19, 2002 among Radian Asset Assurance Inc., a financial guaranty
insurance company incorporated in the State of New York, as note insurer
("Radian"), TFC Automobile Receivables Trust 2002-1, a Delaware business trust
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(individually, the "Trust"), as issuer (the "Issuer"), TFC Receivables
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Corporation V, a Delaware corporation ("TFCRC V"), 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 Backup
Servicer (as defined below) and any successor servicer appointed pursuant to the
Sale and Servicing Agreement (as defined below), the "Servicer"), Xxxxx Fargo
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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 backup servicer (together with its successors and assigns, in such
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capacity, the "Backup Servicer") and as post office box owner (together with its
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successors and assigns, in such capacity, the "P.O. Box Owner"), and Xxxxx Fargo
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Financial America, Inc. (individually, "Xxxxx Fargo Financial"), as "Successor
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Servicer" under the Sale and Servicing Agreement (together with its successors
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and assigns, in such capacity, the "Successor Servicer").
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PRELIMINARY STATEMENTS
The Issuer will issue (a) the TFC 4.23% Asset Backed Notes, Series 2002-1
(the "Notes") pursuant to the Indenture, dated as of March 19, 2002, among the
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Insurer, the Issuer and Xxxxx Fargo as Trustee and Trust Collateral Agent (as
the same may be amended, restated, supplemented or otherwise modified from time
to time in accordance with its terms and the terms hereof the "Indenture") and
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(b) a certificate (the "Certificate") pursuant to the Trust Agreement, dated as
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of March 19, 2002, between Wilmington Trust Company as owner trustee (together
with its successors and assigns, in such capacity, the "Owner Trustee") and
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TFCRC V as depositor (as the same may be amended, restated, supplemented or
otherwise modified from time to time in accordance with its terms and the terms
hereof, the "Trust Agreement").
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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 Radian, to
secure repayment of the Notes (and other related amounts), a security interest
in collateral consisting of all of the Issuer's right, title and interest in, to
and under a pool of receivables, including, among other types of receivables,
receivables of retail installment sale contracts secured by the financed
vehicles and certain other assets and rights, all as more fully set forth in the
Indenture (the "Collateral"). Such receivables and related assets constituting a
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part of the Collateral are being sold to the Issuer pursuant to the Sale and
Servicing Agreement, dated as of March 19, 2002, among the Issuer, TFCRC V as
seller (the "Seller"), the Servicer, Radian, the Trust Collateral Agent, the
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Backup 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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Radian is authorized to transact a financial guaranty insurance business in
the State of New York and has agreed, subject to the terms and conditions of
this Insurance Agreement, to issue to the Trustee, for the benefit of the
Noteholders, a financial guaranty insurance policy substantially in the form of
Exhibit A hereto (the "Policy"); and
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The parties hereto, among other things, desire to specify the conditions
precedent to the issuance by Radian of the Policy, the obligations of the
Issuer, the Servicer, the Backup Servicer, the P.O. Box Owner, the Successor
Servicer, TFC and TFCRC V, as applicable, to make payments in respect of
premiums, reimbursement obligations and other amounts relating to the Policy,
and to perform certain other obligations in respect of the issuance of the
Policy, and to provide for certain other matters related thereto.
NOW, THEREFORE, in consideration of the premises and of the agreements
herein contained, Radian, the Issuer, the Servicer, TFCRC V, the Trustee, the
Trust Collateral Agent, the Backup 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.
"Backup 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 March 19, 2002.
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"Collateral" has the meaning assigned to such term in the Indenture.
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"Commonly Controlled Entity" means TFC and each entity, whether or not
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incorporated, which is affiliated with TFC pursuant to Section 414(b), (c), (m)
or (o) of the Code.
"Cumulative Net Loss Rate" means with respect to any Determination Date,
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the fraction, expressed as a percentage, the numerator of which is equal to the
aggregate amount of Net Losses through the end of the related Monthly Period for
such Determination Date and the denominator of which is equal to the Original
Pool Balance.
2
"Cumulative Net Loss Test Failure" means with respect to any Determination
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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 January, February and March 2002 Determination 1.36%
Dates
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For the April, May and June 2002 Determination Dates 4.73%
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For the July, August and September 2002 Determination Dates 11.23%
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For the October, November and December 2003 Determination 17.23%
Dates
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For the January, February and March 2003 Determination 17.53%
Dates
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For the April, May and June 2003 Determination Dates 18.22%
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For the July, August and September 2003 Determination Dates 19.10%
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For the October, November and December 2003 Determination 19.97%
Dates
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For the January, February and March 2004 Determination 20.85%
Dates
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For the April, May and June 2004 Determination Dates 21.72%
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For the July 2004 Determination Date and thereafter 22.66%
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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) immediately preceding Determination Dates; or (b) with respect to a
Trigger Event that has occurred as a result of a Cumulative Net Loss
3
Failure, that no Trigger Event or any Insurance Agreement Event of Default shall
have occurred as of such Determination Date or as of any of the six (6)
immediately preceding Determination Dates.
"Default" means any event which results, or which with the giving of notice
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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 sum of the Aggregate Principal Balance as of such
Accounting Date plus the Principal Balances (as of the related Accounting Date)
of all Receivables that became Purchased Receivables as of such Accounting Date
and were Delinquent Receivables as of such Accounting Date.
"Delinquency Test Failure" means, (i) with respect to the April 2002
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Determination Date, the Delinquency Ratio shall be greater than 18.25%; (ii)
with respect to the May 2002 Determination Date, the arithmetic average of the
Delinquency Ratios for such Determination Date and the preceding Determination
Date shall be greater than 18.25% and (iii) for each subsequent Determination
Date described below, the arithmetic average of the Delinquency Ratios for such
Determination Date and the two immediately preceding Determination Dates shall
be greater than the percentage set forth below opposite the period during which
such Determination Date occurs:
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Period Maximum Percentage
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For each Determination Date prior to the January 2003 18.25%
Determination Date
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For the January 2003 Determination Date through the June 2003 21.46%
Determination Date
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For each Determination Date occurring after the June 2003 26.96%
Determination Date
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June 2003 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, 2000 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, 2001 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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19, 2002, acknowledged and agreed to by Fort Xxxx National Company, Fort Xxxx
National Bank and the Trust Collateral Agent (with respect to TFC's ACH Obligor
payment program).
"Fort Xxxx Allotment Letter" means the letter agreement by TFC, dated as of
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March 19, 2002, acknowledged and agreed to by Fort Xxxx National Company and
Fort Xxxx National Bank (with respect to TFC's military allotment Obligor
payment program).
"Fort Xxxx Letters" means each of the Fort Xxxx TrueCheck Letter, the Fort
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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 19, 2002, acknowledged and agreed to by Fort Xxxx National Company, Fort
Xxxx National Bank and the Trust Collateral Agent (with respect to TFC's
TrueCheck Obligor payment program).
"GAAP" means generally accepted accounting principles in effect from time
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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.
"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.
5
"Indemnification Agreement" means the Indemnification Agreement, dated as
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of March 19, 2002, among Radian, the Issuer, TFC and TFCRC V.
"Indemnified Party" has the meaning specified in Section 2.07(a).
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"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
V, the Parent or any of their respective Affiliates (other than by means of
indirect stock ownership of TFCRC V 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 V 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 V 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 December 31, 2001.
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"Initial Purchaser" means West LB in its capacity as "Initial Purchaser"
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under the Note Purchase Agreement.
"Initial Purchaser Information" means the information relating to the
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Initial Purchaser in the Private Placement Memorandum.
"Initial Spread Account Deposit Amount" means 4.00% of the Original Pool
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Balance.
"Insurance Agreement" has the meaning assigned to such term in the preamble
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above.
"Insurance Agreement Event of Default" has the meaning specified in Section
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6.01.
"Insurance Agreement Indenture Cross Default" means any Insurance Agreement
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Event of Default specified in clauses (a), (c), (d), (e), (f), (k) and (l) of
Section 6.01.
"Investment Company Act" means the Investment Company Act of 1940,
----------------------
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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6
"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
----
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 annual percentage rate) of all Receivables that became Liquidated
Receivables since the Initial Cutoff Date, plus (ii) the aggregate Cram Down
Losses as of the related Accounting Date that occurred since the Initial Cutoff
Date, over (b) the aggregate, cumulative Net Liquidation Proceeds received by
the Issuer as of the related Accounting Date since the Initial Cutoff Date.
"Note Purchase Agreement" means the Note Purchase Agreement dated as of
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March 19, 2002, among TFC, TFCRC V, WestLB Panmure Securities Inc. and the
Initial Purchaser.
"Notes" has the meaning assigned to such term in the Preliminary Statements
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above.
"Notice for Payment" has the meaning assigned to such term in the Policy.
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"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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7
"Parent Support Agreement" means the agreement among TFCRC V, TFC, Radian,
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the Trust Collateral Agent, and the Parent, dated as of March 19, 2002.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
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agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.
"Person" means an individual, a partnership, a corporation, a limited
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liability company, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture, a Governmental Authority or other
entity of whatever nature.
"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 among Radian, TFC and the
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Issuer, dated as of the Closing Date, setting forth the payment arrangement for
the premiums payable by the Issuer in respect of the Policy, and certain other
fees, related expenses and other related matters.
"Premium Rate" has the meaning assigned to such term in the Premium Letter.
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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 Preliminary Private Placement
----------------------------
Memorandum dated February 28, 2002, 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 Radian (or any of
its reinsurers or potential reinsurers identified to TFC, including, without
limitation, Radian Reinsurance Inc.) by or on behalf of TFC, the Parent or TFCRC
V with respect to itself, its respective Subsidiaries, the Receivables or the
Transaction.
"Purchaser" means TFCRC V, in its capacity as the "Purchaser" under the
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Purchase Agreement.
8
"Purchase Agreement" means the Purchase Agreement between TFC, as seller,
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and TFCRC V, as purchaser, dated as of March 19, 2002.
"Radian" has the meaning assigned to such term in the preamble above.
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"Radian Information" has the meaning given to such term under the
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Indemnification Agreement.
"Rating Agency" means S&P. If S&P fails to maintain a rating on the Notes,
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the Rating Agency shall be a nationally recognized statistical rating
organization or other comparable Person designated by the Seller and acceptable
to Radian.
"Receivable" has the meaning provided in the Sale and Servicing Agreement.
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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) the Initial Spread Account Deposit Amount
and (B) an amount equal to the Note Principal Balance, (ii) after the occurrence
of a Trigger Event, the lesser of (A) an amount equal to 6.0% of the Original
Pool Balance and (B) an amount equal to the Note Principal Balance; provided,
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however, that, in the event such Trigger Event has been Deemed Cured, an amount
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equal to the amount calculated for such Determination Date pursuant to clause
(i) above, and (iii) notwithstanding anything in clauses (i) and (ii) above to
the contrary, after the occurrence of an Insurance Agreement Event of Default,
an amount equal to the Note Principal Balance.
"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.
9
"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 Radian, Financial
Security Assurance Inc., a financial guaranty insurance company incorporated in
the State of New York, TFC Receivables Corporation 2, a Delaware corporation,
TFC Receivables Corporation III, a Delaware corporation, Asset Guaranty
Insurance Company, TFCRC IV, TFCRC V, TFC, GE Capital, Xxxxx Fargo, as Trust
Collateral Agent, P.O. Box Owner and trust collateral agent for certain other
trusts, dated as of March 19, 2002, as the same may be amended, restated,
supplemented or otherwise modified from time to time in accordance with its
terms and the terms hereof.
"Stock Pledge Agreement" means the Stock Pledge and Collateral Agency
----------------------
Agreement made by TFC in favor of Xxxxx Fargo Bank Minnesota, National
Association, as "Collateral Agent" on behalf of Radian, dated as of March 19,
2002, as the same may be amended, restated, supplemented or otherwise modified
from time to time in accordance with its terms and the terms hereof.
"Subordinated Debt" means a debt obligation of TFC which is subordinated to
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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.
---
10
"Transaction" means the transactions contemplated by the Transaction
-----------
Documents, including the transactions described in the Offering Document.
"Transaction Documents" has the meaning assigned to such term in Section
---------------------
2.02(a).
"Trigger Event" means the occurrence of either of the following events, the
-------------
occurrence of which shall not have been waived in writing by Radian: (a) a
Delinquency Test Failure or (b) a Cumulative Net Loss Test Failure.
"Trust Agreement" has the meaning assigned to such term in the Preliminary
---------------
Statements above.
"Trust Collateral Agent" has the meaning assigned to such term in the
----------------------
preamble above.
"Trustee" has the meaning assigned to such term in the preamble above.
-------
"Trust Property" has the meaning assigned to such term in the Preliminary
--------------
Statements above.
"West LB" means Westdeutsche Landesbank Gironzentrale, London Branch.
-------
Section 1.02. Generic Terms. All words used herein shall be construed to be
-------------
of such gender or number as the circumstances require. The words "herein,"
"hereby," "hereof," "hereto," "hereinbefore" and "hereinafter," and words of
similar import, refer to this Insurance Agreement in its entirety and not to any
particular paragraph, clause or other subdivision, unless otherwise specified.
Section 1.03. Computation of Time Periods. In this Insurance Agreement, the
---------------------------
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to and including". Periods of days referred to in this Insurance
Agreement shall be counted in calendar days unless Business Days are expressly
prescribed and periods of months and years shall be counted in calendar months
and calendar years unless otherwise specified.
ARTICLE II
THE POLICY AND REIMBURSEMENT
Section 2.01. Policy. Radian agrees, subject to the satisfaction or waiver
------
of the conditions hereinafter set forth on or prior to the Closing Date, to
issue the Policy on the Closing Date.
Section 2.02. Conditions Precedent. The obligation of Radian to issue the
--------------------
Policy is subject to the satisfaction of the following conditions on or prior to
the Closing Date:
(a) The following documents shall have been duly authorized, executed
and delivered by each of the parties thereto (other than Radian) and shall
be in full force and effect and in form and substance satisfactory to
Radian, in the exercise of Radian's sole
11
discretion, and an executed counterpart of each thereof shall have been
delivered to Radian:
(i) this Insurance Agreement;
(ii) the Indenture;
(iii) the Sale and Servicing Agreement, including the Schedule of
Receivables;
(iv) the Purchase Agreement, including the Schedule of Receivables;
(v) the Note Purchase Agreement;
(vi) the Indemnification Agreement;
(vii) the Standby Remittance and Processing Agreement;
(viii) the Trust Agreement;
(ix) the Parent Support Agreement;
(x) the Securities Account Control Agreement;
(xi) the Premium Letter;
(xii) the Stock Pledge Agreement; and
(xiii) the Fort Xxxx Letters.
(items (i) through (xiii) being, collectively, the "Transaction Documents").
---------------------
(b) Radian shall have received:
(i) copies certified by the Secretary or an Assistant Secretary of
each of the Parent, the Issuer, TFC and TFCRC V, 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 V,
the Trustee, the Owner Trustee, the Backup Servicer and TFC
certifying the names and true signatures of its officers
authorized to sign such Basic Documents to which it is a party;
12
(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 V 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 Radian or an agent or employee thereof), in each
case (1) dated the Closing Date, (2) in full force and effect
at the time of delivery thereof, (3) in form and substance
satisfactory to Radian in the exercise of its sole discretion,
and (4) covering such matters as Radian shall require in the
exercise of its sole discretion;
(v) evidence that one or more UCC financing statements covering the
security interest of the Trust Collateral Agent created by or
pursuant to the Indenture in the Collateral and the other
property and rights which the Trust Collateral Agent is granted
in the Indenture and the proceeds thereof has been (A) executed
by the Issuer in favor of the Trust Collateral Agent and (B)
duly filed in such place or places which, in the opinion of
counsel for the Issuer, TFC and Radian, are necessary or
desirable to perfect such interest;
(vi) evidence that one or more UCC financing statements covering the
interest of TFCRC V in the Receivables and the Other Conveyed
Property (as defined in the Purchase Agreement) and other
property and rights which TFCRC V is granted in the Purchase
Agreement has been (A) executed by TFC in favor of TFCRC V and
assigned to the Trust Collateral Agent and (B) duly filed in
such place or places which, in the opinion of counsel for the
Issuer, TFC and Radian, are necessary or desirable to perfect
such interest;
(vii) evidence that one or more UCC financing statements covering the
interest of the Issuer in the Trust Property and other property
and rights which the Issuer is granted in the Sale and
Servicing Agreement has been (A) executed by TFCRC V in favor
of the Issuer and assigned to the Trust Collateral Agent and
(B) duly filed in such place or places which, in the opinion of
counsel for the Issuer, TFC and Radian, are necessary or
desirable to perfect such interest;
(viii) evidence that each of the Collection Account, the Spread
Account, and the Note Payment Account have been established in
accordance with the terms and conditions of the Indenture and
the Sale and Servicing Agreement;
13
(ix) certified copies of documents, certificates, instruments,
approvals or executed copies thereof that relate to the
transactions as contemplated by the Basic Documents as Radian
may reasonably request;
(x) a specimen Note;
(xi) evidence that one or more UCC financing statements covering the
security interest of Radian created by or pursuant to the Stock
Pledge Agreement and the other property and rights which Radian
is granted in the Stock Pledge Agreement and the proceeds
thereof has been (A) executed by TFC in favor of Radian and (B)
duly filed in such place or places which, in the opinion of
counsel for TFC and Radian, are necessary or desirable to
perfect such interest; and
(xii) a statement, in form and substance satisfactory to Radian,
reviewing the results of the Independent Accountants'
performance of certain agreed upon procedures with respect to
TFC, its reporting and recordkeeping, and the characteristics
of the Receivables as of the Cut-Off Date, by way of
independent verification of (x) information provided by TFC for
inclusion in the Offering Document and (y) certain cash flow
models supplied to Radian by the Initial Purchaser in advance
of the Closing Date (the full costs of which statement shall
have been paid on or before the Closing Date by or on behalf of
TFC).
(c) (i) No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any Governmental Authority or
other governmental or administrative agency or court which would make the
transactions contemplated by the Transaction Documents illegal or otherwise
prevent the consummation thereof, (ii) no material omission or change of
fact shall have occurred or come to the attention of any of TFC, TFCRC V,
the Issuer, the Parent, the Trustee, the Initial Purchaser or Radian that
would cause information or documents heretofore supplied to Radian to be
untrue or misleading, (iii) no other material change or omission shall have
occurred or come to the attention of any of TFC, TFCRC V, the Issuer, the
Parent, the Trustee, the Initial Purchaser or Radian that would entitle the
Initial Purchaser to decline to purchase the Notes, and (iv) no Material
Adverse Change shall have occurred in the security for the Notes since the
date of the Purchase Agreement.
(d) No suit, action or other proceeding, investigation, or
injunction or final judgment relating thereto, shall be threatened or
pending before any court or governmental agency in which it is sought to
restrain or prohibit or obtain damages or other relief in connection with
the consummation of the Transactions, and no investigation that might
result in any such suit, action or proceeding shall be pending or
threatened.
(e) Radian shall have received an executed copy of all legal
opinions, certificates, accountant's reports and other documents required
to be furnished by the Issuer, the Servicer, the Backup Servicer, the
Trustee, TFCRC V, the Parent and TFC
14
pursuant to any of the Transaction Documents or pursuant to the
requirements of the Rating Agency (if any). Such documents shall be in form
and substance satisfactory to Radian in the exercise of its sole discretion
and each such legal opinion or certificate shall be addressed to Radian, or
accompanied by appropriate reliance letters to Radian.
(f) There shall be on deposit in the Spread Account a sum of not less
than $2,582,087.92 in immediately available funds.
(g) Simultaneously with the issuance of the Policy, the Notes shall
have been duly executed and authenticated and delivered to the relevant
Noteholders pursuant to the Indenture.
(h) All fees and expenses payable hereunder and pursuant to the
Premium Letter to Radian on or prior to the Closing Date shall have been
paid in full by TFC or the Issuer.
(i) Radian shall have received confirmation that the risk insured by
the Policy constitutes at least "BBB-" by S&P, and that the Notes, when
issued, will be rated "AA" by S&P.
(j) No Trigger Event, Event of Default, Servicer Termination Event,
Default or Insurance Agreement Event of Default shall have occurred or be
in effect.
Section 2.03. Premium Letter. Radian shall be entitled to receive the
--------------
Premium payable under the Premium Letter on each Payment Date, and the timely
payment or other performance of all other obligations set forth in the Premium
Letter, in each case in accordance with the terms and conditions of the Premium
Letter on any Payment Date and in accordance with the provisions of Section 5.7
-----------
of the Sale and Servicing Agreement. The Premium shall be nonrefundable without
regard to whether Radian makes any payment under the Policy or to any other
circumstances relating to the Notes, or any provision being made for payment of
the Notes prior to maturity.
Section 2.04. Reimbursement Obligations.
-------------------------
(a) In consideration of the issuance of the Policy by Radian, Radian
shall be entitled to reimbursement by the Issuer from the Collateral,
pursuant to the terms hereof, the Indenture and the Sale and Servicing
Agreement, for any payment made under the Policy, which reimbursement shall
be due and payable to Radian on the date that any amount is to be paid
pursuant to a Notice for Payment. Such reimbursement shall be made in
accordance with the terms hereof and of the Sale and Servicing Agreement
and the Indenture, in an amount equal to the sum of all amounts paid or
previously paid that remain unpaid under the Policy, together with interest
on any and all amounts remaining unpaid (to the extent permitted by law, if
in respect of any unpaid amounts representing interest) from the date such
amounts became due until paid in full (after as well as before judgment),
at a rate of interest equal to the Prime Rate from time to time in effect
plus 2.0%.
15
(b) Anything in Section 2.04(a) to the contrary notwithstanding,
---------------
Radian shall be entitled to reimbursement (to the extent such reimbursement
and related interest has not previously been paid by payment to Radian from
the Collateral) from (i) the Issuer, for payments made under the Policy
arising as a result of the Issuer's failure to make any payment or deposit
with respect to a Receivable required to be made pursuant to Section 3.2 of
-----------
the Sale and Servicing Agreement, together with interest on any and all
such amounts remaining unpaid (to the extent permitted by law, if in
respect of any unpaid amounts representing interest) from the date such
amounts became due until paid in full (after as well as before judgment),
at a rate of interest equal to the Prime Rate from time to time in effect
plus 2.0%, and (ii) the Servicer, for payments made under the Policy
arising as a result of the Servicer's failure to make any deposit,
including without limitation, a deposit required to be made pursuant to
Section 4.7 of the Sale and Servicing Agreement, together with interest on
-----------
any and all such amounts remaining unpaid (to the extent permitted by law,
if in respect of any unpaid amounts representing interest) from the date
such amounts became due until paid in full (after as well as before
judgment), at a rate of interest equal to the Prime Rate from time to time
in effect plus 2.0% (provided, however, that a successor to the Servicer
-------- -------
shall under no circumstances be liable to Radian for the failure of its
predecessor Servicer to so make a deposit).
Section 2.05. Assignment and Other Rights upon Payments under the Policy.
----------------------------------------------------------
(a) In consideration of the issuance of the Policy by Radian, in the
case of any payment made by or on behalf of Radian under the Policy, in
addition to and not by way of limitation of, any of the rights and remedies
of Radian hereunder, under the Policy, the Sale and Servicing Agreement or
the Indenture with respect to such payment, each of the Issuer, TFCRC V and
TFC hereby acknowledges and consents to the assignment by the Trustee, on
behalf of the Noteholders, to Radian in accordance with the terms of the
relevant Notice for Payment:
(i) the rights of the Noteholders with respect to the Notes and the
Collateral, to the extent of any such payment under the Policy;
and
(ii) the rights of the Trustee and each Noteholder in the conduct of
any Insolvency Proceeding relating to any Preference Event (as
such terms are defined in the Policy), including, without
limitation, all rights of any party to an adversary proceeding or
action with respect to any court order issued in connection with
any such Insolvency Proceeding.
(b) The rights and remedies of Radian described in clause (a) above
----------
are in addition to, and not in limitation of, rights of subrogation and
other rights and remedies otherwise available to Radian in respect of
payments under the Policy. The Trustee shall take such action and deliver
such instruments as may be reasonably requested or required by Radian to
effectuate the purpose or provisions of this Section 2.05.
------------
Section 2.06. Subrogation; Further Assurances.
--------------------------------
16
(a) The interests, rights and remedies of Radian described in this Article
-------
II are in addition to, and not in lieu of, Radian's equitable rights of
--
subrogation, and Radian reserves all of such rights. Each of the
Issuer, TFCRC V and TFC agrees to take, or cause to be taken, all
actions deemed desirable by Radian to preserve, enforce, perfect or
maintain the perfection in Radian's favor of such interests, rights and
remedies and such equitable rights of subrogation.
(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 V and TFC agrees to promptly and duly take,
execute, acknowledge and deliver such further acts, documents,
instruments and assurances as Radian may from time to time reasonably
request to more effectively evidence any rights to assignment or
subrogation under this Article II, and to protect and perfect all of
----------
Radian's other rights as against the Issuer, TFCRC V and TFC, as the
case may be.
Section 2.07. Indemnification by TFC; Conduct of Actions or Proceedings;
----------------------------------------------------------
Contribution.
------------
(a) In addition to any and all rights of reimbursement,
indemnification, subrogation and any other rights pursuant hereto or under
law or in equity, TFC agrees to pay, protect, indemnify and save harmless,
Radian and its officers, directors, shareholders, employees, agents,
assignees, participants, reinsurers and each Person, if any, who controls
Radian within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act (individually, an "Indemnified
-----------
Party" and, collectively, the "Indemnified Parties"), from and against any
----- -------------------
and all claims, losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or expenses (including, without
limitation, reasonable fees and expenses of attorneys, consultants and
auditors and reasonable costs of investigations) of any nature arising out
of or relating to the transactions contemplated by the Transaction
Documents by reason of:
(i) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer, employee
or agent of the Issuer, TFC, the Servicer, the Parent, TFCRC V,
the Seller, as the case may be;
(ii) the breach by the Issuer, TFC, the Servicer, the Parent, TFCRC V,
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 V, 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
-------- -------
17
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 V 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 the Indemnified Parties against all costs, expenses,
losses, damages, claims and liabilities, including reasonable
fees and expenses of counsel, which may be asserted against or
incurred by it as a result of third party claims arising out of
the events or facts giving rise to any such breach of such
covenant; or
(iii) any untrue statement or alleged untrue statement of a material
fact contained in the Private Placement Memorandum, or in any
amendment or supplement to the Private Placement Memorandum, or
the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that TFC
-------- -------
will not be liable as a result of this clause (iii) to the
------ -----
extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such
documents in reliance upon the representation made by Radian
with regard to the Radian Information.
(b) If any action or proceeding (including any governmental
investigation) shall be brought or asserted against the Indemnified Parties
in respect of which indemnity may be sought from TFC hereunder, Radian
shall promptly notify TFC in writing, and TFC shall assume the defense
thereof, including the employment of counsel satisfactory to Radian and the
payment of all reasonable expenses. An Indemnified Party (including Radian)
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof at the expense of the Indemnified Party;
provided, however, that the fees and expenses of such separate counsel
-------- -------
shall be at the expense of TFC if (i) TFC has agreed to pay such fees and
expenses, (ii) TFC shall have failed to assume the defense of such action
or proceeding and employ counsel satisfactory to Radian in any such action
or proceeding or (iii) the named parties to any such action or proceeding
(including any impleaded parties) include both the Indemnified Party and
TFC, and the Indemnified Party shall have been advised by counsel that (A)
there may be one or more legal defenses available to it which are different
from or additional to those available to TFC and (B) the representation of
TFC and the Indemnified Party by the same counsel would be inappropriate or
contrary to prudent practice (in which case, if the Indemnified Party
notifies TFC in writing that it elects to employ separate counsel at the
expense of TFC, TFC shall not have the right to assume the defense of such
action or
18
proceeding on behalf of such Indemnified Party, it being understood,
however, that TFC shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys at any time for the
Indemnified Parties, which firm shall be designated in writing by Radian).
TFC shall not be liable for any settlement of any such action or proceeding
effected without its written consent to the extent that any such settlement
shall be prejudicial to TFC, but, if settled with its written consent, or
if there be a final judgment for the plaintiff in any such action or
proceeding with respect to which TFC shall have received notice in
accordance with this subsection (b), TFC agrees to indemnify and hold the
---------- ---
Indemnified Parties harmless from and against any loss or liability by
reason of such settlement or judgment.
(c) To provide for just and equitable contribution, if the
indemnification provided by TFC is determined to be unavailable for any
Indemnified Party (other than due to application of this Section 2.07), TFC
------------
shall contribute to the losses incurred by the Indemnified Party on the
basis of the relative fault of TFC, on the one hand, and the Indemnified
Party, on the other hand.
Section 2.08. Indemnification by TFCRC V; 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 V agrees to pay, protect, indemnify and save
harmless the Indemnified Parties, from and against any and all claims,
losses, liabilities (including penalties), actions, suits, judgments,
demands, damages, costs or expenses (including, without limitation,
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) of any nature arising out of or
relating to the transactions contemplated by the Transaction Documents by
reason of:
(i) the negligence, bad faith, willful misconduct, misfeasance,
malfeasance or theft committed by any director, officer, employee
or agent of TFCRC V;
(ii) the breach by TFCRC V of any representation, warranty or covenant
under any of the Transaction Documents, or the occurrence, in
respect of TFCRC V, 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
19
(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
-------- -------
V will not be liable as a result of this clause (iii) to the
extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue
statement in or omission or alleged omission from any of such
documents in reliance upon the representation made by Radian
with regard to the Radian Information.
(b) If any action or Proceeding (including any governmental
investigation) shall be brought or asserted against the Indemnified Parties
in respect of which indemnity may be sought from TFCRC V hereunder, Radian
shall promptly notify TFCRC V in writing, and TFCRC V shall assume the
defense thereof, including the employment of counsel satisfactory to Radian
and the payment of all reasonable expenses. An Indemnified Party shall have
the right to employ separate counsel in any such action and to participate
in the defense thereof at the expense of the Indemnified Party; provided,
--------
however, that the fees and expenses of such separate counsel shall be at
-------
the expense of TFCRC V if (i) TFCRC V has agreed to pay such fees and
expenses, (ii) TFCRC V shall have failed to assume the defense of such
action or proceeding and employ counsel satisfactory to Radian in any such
action or proceeding or (iii) the named parties to any such action or
proceeding (including any impleaded parties) include both the Indemnified
Party and TFCRC V, 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 V and
(B) the representation of TFCRC V 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 V in writing that it elects
to employ separate counsel at the expense of TFCRC V, TFCRC V 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 V shall
not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances,
be liable for the reasonable fees and expenses of more than one separate
firm of attorneys at any time for the Indemnified Parties, which firm shall
be designated in writing by Radian). TFCRC V 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 V, 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 V shall have received notice in accordance with this subsection
----------
(b), TFCRC V 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 V is determined to be unavailable for any
Indemnified Party (other than due to application of this Section), TFCRC V
shall contribute to the losses incurred
20
by the Indemnified Party on the basis of the relative fault of TFCRC V, 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 Radian all
----------
reasonable out-of-pocket legal fees and disbursements incurred by
Radian in connection with the negotiation, preparation, execution and
delivery of the Private Placement Memorandum, the Transaction
Documents and all other documents, instruments and agreements
delivered with respect thereto.
(b) Rating Agency Fees. The initial fees of S&P with respect to the Notes
------------------
and the transactions contemplated hereby shall be paid by TFC in full
on the Date of Issuance. Each of TFC and the Issuer agrees to pay all
periodic and subsequent fees of S&P with respect to, and directly
allocable to, the Notes and the transactions contemplated hereby and
thereby. The fees for any other rating agency shall be paid by the
party requesting such other agency's rating, unless such other agency
is a substitute for S&P in the event that S&P is no longer rating the
Notes, in which case the cost for such substitute agency shall be paid
by each of TFC and the Issuer.
(c) Accountants' and Auditors' Fees. In the event that Radian's auditors
-------------------------------
are required to provide information or any consent in connection with
the Offering Document prepared on or prior to the Date of Issuance,
any reasonable fees therefor shall be paid by TFC. Each of TFC and the
Issuer shall pay on demand any additional fees of Radian's auditors
payable in respect of any Offering Document, the Notes or the
transactions contemplated hereby and thereby that are incurred after
the Date of Issuance.
(d) Enforcement and Modifications. Each of TFC and the Issuer agrees to
-----------------------------
pay to Radian any and all out-of-pocket charges, fees, costs and
expenses (including, without limitation, reasonable fees and expenses
of legal counsel and accountants) reasonably incurred by Radian in
connection with (i) in the event of payments under the Policy, any
accounts established to facilitate payments under the Policy, to the
extent Radian has not been immediately reimbursed on the date that any
amount is paid by Radian under the Policy, or other administrative
expenses relating to such payments under the Policy, (ii) the
enforcement, defense or preservation of any rights of Radian,
including but not limited to defending, monitoring or participating in
any litigation or proceeding (including any insolvency or bankruptcy
proceeding commenced by or against the Issuer, the Servicer, the
Parent, TFCRC V or TFC, as the case may be) relating to any of the
Transaction Documents, any party to any of the Transaction Documents
or to the Transaction, (iii) any amendment, modification, waiver or
any similar action, with respect to, or related to, any Transaction
Document or the Transaction, whether or not executed or completed
and/or (iv) any review or investigation made by Radian in those
circumstances where the approval or consent of Radian is sought under
any of the Transaction Documents.
21
(e) Third Party Advances. Each of TFC and the Issuer agrees to pay to
--------------------
Radian the amount of any and all payments made by Radian on behalf of,
or advanced to, TFC, in its capacity as Servicer, or to the Trustee,
including, without limitation, any amounts payable by TFC in its
capacity as Servicer, or by the Trustee pursuant to the Notes or any
other Transaction Documents, and any payments made by Radian as, or in
lieu of, any servicing, management, trustee, custodial or
administrative fees payable, in the sole discretion of Radian to third
parties in connection with the Transaction.
(f) No Obligation to Seek Reimbursement. All amounts payable under this
-----------------------------------
Section 2.09 are to be immediately due and payable without demand, in
full, without any requirement on the part of Radian or any other
Person to seek reimbursement of such amounts from any other source of
reimbursement or indemnity, or to allocate such amount to any other
transaction that may have benefited from the expenditure of such
amounts.
Section 2.10. Payments, Generally.
-------------------
(a) Interest. Interest shall accrue and be payable in respect of any
--------
amounts not paid when due under this Insurance Agreement, from the
date such amounts became due until paid in full (after as well as
before judgment), at a rate of interest equal to the Prime Rate from
time to time in effect plus 2.0%. All amounts in respect of interest
payable under this Insurance Agreement shall be calculated on the
basis of a 360-day year for the actual number of days elapsed, and
with respect to all amounts payable pursuant to Sections 2.03 or
-------------
2.04(a) hereof shall be payable in accordance with the Indenture and
-------
the Sale and Servicing Agreement, or to the extent payable pursuant to
any other Section herein, payable on demand.
(b) Certain Obligations Not Recourse to TFC. Notwithstanding any provision
---------------------------------------
of this Article II to the contrary, the payment obligations provided
in Section 2.09(d)(ii) and 2.09(e) (but only to the extent of advances
------------------- -------
to the Trustee in respect of payments on the Notes), in each case, to
the extent that such payment obligations do not arise from any failure
or default in performance by the Parent, TFC, or TFCRC V 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
22
Section 3.02. Representations and Warranties with respect to TFC and TFCRC
------------------------------------------------------------
V. Each of TFC and TFCRC V represents and warrants, as of the Closing Date, with
-
respect to TFC and TFCRC V (and to the extent specifically set forth below, with
respect to the Issuer), that:
(a) Due Organization and Qualification. (i) TFC is a corporation,
----------------------------------
duly organized, validly existing and in good standing under the laws of
Virginia. TFC is not organized under the laws of any other jurisdiction.
TFC is duly qualified to do business, is in good standing and has obtained
all necessary licenses, permits, charters, registrations and approvals
(together, "approvals") necessary for the conduct of its business as
---------
currently conducted and as described in the Offering Document and the
performance of its obligations under the Transaction Documents, in each
jurisdiction in which the failure to be so qualified or to obtain such
approvals might result in a Material Adverse Change. (ii) TFCRC V is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware. TFCRC V is not organized under the laws of any other
jurisdiction. TFCRC V is duly qualified to do business, is in good standing
and has obtained all necessary approvals necessary for the conduct of its
business as currently conducted and as described in the Offering Document
and the performance of its obligations under the Transaction Documents, in
each jurisdiction in which the failure to be so qualified or to obtain such
approvals might result in a Material Adverse Change.
(b) Power and Authority. Each of TFC and TFCRC V has all necessary
-------------------
corporate power and authority to conduct its business as currently
conducted and as described in the Offering Document, to execute, deliver
and perform its obligations under the Transaction Documents and has full
power and authority to sell and assign the Receivables and related property
as contemplated by the Transaction Documents and to consummate the
Transaction.
(c) Due Authorization. The execution, delivery and performance of the
-----------------
Transaction Documents by each of TFC and TFCRC V has been duly authorized
by all necessary corporate action and does not require any additional
approvals or consents or other action by, or any notice to, or filing with,
any Person, including, without limitation, any Governmental Authority or
any of its stockholders.
(d) Noncontravention. None of the execution and delivery of the
----------------
Transaction Documents by TFC or TFCRC V, 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 V, or the Bylaws of TFC or
TFCRC V, 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 V, 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 V, as the case may be,
23
(ii) constitutes or will constitute a default by TFC or TFCRC V, 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 V 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 V 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 V after reasonable
inquiry, threatened by or before any court, regulatory body, governmental
or administrative agency or arbitrator against or affecting TFC or TFCRC V,
or any properties or rights of TFC or TFCRC V, including without
limitation, the Receivables, which might result in a Material Adverse
Change with respect to TFC or TFCRC V.
(f) Valid and Binding Obligations. Each of the Transaction
-----------------------------
Documents to which either TFC or TFCRC V is a party when executed and
delivered by TFC or TFCRC V, 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 V 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 V 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 V, that would render any of the
Provided Documents untrue or misleading in any material respect. There is
no fact known to TFC or TFCRC V which has a material possibility of causing
a Material Adverse Change with respect to either of TFC or TFCRC V, or
which
24
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 Initial Purchaser of its obligations set forth in the
Note Purchase Agreement. Without limitation of the foregoing, the Offering
Document does not contain any untrue statement of a material fact and does
not omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(j) Transaction Documents. Each of the representations and
---------------------
warranties of TFC or TFCRC V contained in the Transaction Documents is true
and correct in all material respects and each of TFC or TFCRC V hereby
makes each such representation and warranty made by it to, and for the
benefit of, Radian as if the same were set forth in full herein.
(k) No Consents. No consent, license, approval or authorization
-----------
from, or registration, filing or declaration with, any regulatory body,
administrative agency, or other governmental instrumentality, nor any
consent, approval, waiver or notification of any creditor, lessor or other
nongovernmental person, is required in connection with the execution,
delivery and performance by TFC or TFCRC V 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 V 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 V is adequate for the business and
undertakings of TFCRC V.
(ii) Other than with respect to the purchase by TFC of the stock of
TFCRC V, and as provided in this Insurance Agreement and the
Transaction Documents, TFCRC V is not engaged in any business
transactions with TFC.
25
(iii) At least two directors of TFCRC V 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 V are not, and will not be,
commingled with the funds of any other Person.
(v) The Bylaws of TFCRC V 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 V 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 V will be left with an unreasonably
small amount of capital with which to engage in its business. Neither TFC
nor TFCRC V intends to incur, or believes that it has incurred, debts
beyond its ability to pay such debts as they mature. Neither TFC nor TFCRC
V contemplates the commencement of insolvency, bankruptcy, liquidation or
consolidation proceedings or the appointment of a receiver, liquidator,
conservator, trustee or similar official in respect of TFC or TFCRC V, as
the case may be, or any of their respective assets. The amount of
consideration being received by TFCRC V upon the sale of the Receivables to
the Issuer constitutes reasonably equivalent value and fair consideration
for the Receivables. TFCRC V is not selling the Receivables to the Issuer,
as provided in the Transaction Documents, with any intent to hinder, deal
or defraud any of TFC's creditors.
(o) Good Title; Valid Transfer; Absence of Liens; Security
------------------------------------------------------
Interest.
--------
(i) Immediately prior to the pledge of the Collateral to the Trust
Collateral Agent pursuant to the Indenture, the Issuer was the
owner of, and had good and marketable title to, such property
free and clear of all Liens and Restrictions on
Transferability, and had or will have had full right, power
and lawful authority to assign, transfer and pledge such
Receivables. The Indenture constitutes a valid pledge of the
Collateral to the Trust Collateral Agent and the Trust
Collateral Agent shall have a valid and perfected first
priority security interest in the Collateral, free and clear
of all Liens and Restrictions on Transferability.
(ii) Immediately prior to the transfer of any Trust Property to the
Issuer pursuant to the Sale and Servicing Agreement, TFCRC V
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 V 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
26
such Receivables free and clear of all Liens and Restrictions
on Transferability.
(iii) Immediately prior to the sale of the Receivables and Other
Conveyed Property to TFCRC V 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 V is characterized
as other than a sale, such transfer shall be characterized as
a secured financing, and TFCRC V 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 V 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 V or
any of the properties, income or franchises of TFC or TFCRC V, to the
extent that such taxes have become due, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which it has set aside adequate
reserves on its books in accordance with GAAP and which proceedings have
not given rise to any Lien. To the best of the knowledge of TFC and TFCRC
V, all such tax returns were true and correct in all material respects and
neither of TFC nor TFCRC V 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 V in connection with
the Transaction, the execution and delivery of the Transaction Documents
and the issuance of the Notes have been paid or shall have been paid at or
prior to Closing Date.
(q) Private Placement Memorandum. As of the Closing Date, neither
----------------------------
the Private Placement Memorandum nor any amendment thereof or supplement
thereto (other than the Radian Information and the Initial Purchaser
Information) contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(r) Pledge of Shares. The shares of stock of TFCRC V which have
----------------
been pledged pursuant to the Stock Pledge Agreement constitute all of the
issued and outstanding shares of stock of TFCRC V.
(s) Investment Company. Neither TFC nor TFCRC V 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
27
of the Investment Company Act, or any rule, regulation or order issued by
the Securities and Exchange Commission thereunder.
(t) No Restrictions on TFCRC V Affecting Its Business. TFCRC V 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 V 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 V. 100% of the issued and outstanding
--------------------
shares of capital stock of TFCRC V 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 V.
(w) No Broker, Finder or Financial Adviser Other Than West LB.
---------------------------------------------------------
Neither TFCRC V nor any of its officers, directors, employees or agents has
employed any broker, finder or financial adviser other than West LB or
incurred any liability for fees or commissions to any person other than
West LB in connection with the offering, issuance or sale of the Notes.
(x) Rating Agency. The information supplied by TFC or TFCRC V 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 V under the Stock Pledge Agreement) will result in a violation of
Section 7 of the Securities and Exchange Act, or any regulations issued
pursuant thereto, or in a violation of any of Regulations T, U and X of the
Board of Governors of the Federal Reserve System.
(Z) Financial Statements. The Financial Statements of TFC, copies
--------------------
of which have been furnished to Radian, (i) are, as of the dates and for
the periods referred to therein, complete and correct in all material
respects. (ii) present fairly the financial condition and results of
operations of TFC as of the dates and for the periods indicated, and (iii)
have been prepared in accordance with GAAP consistently applied, except as
noted therein (subject as to interim statements to normal year-end
adjustments). Since the date of the most recent Financial Statements, there
has been no Material Adverse Change. Except as disclosed in the Financial
Statements, TFC is not subject to any
28
contingent liabilities or commitments that, individually or in the
aggregate, have a material possibility of causing a Material Adverse Change
with respect to TFC.
(aa) Available Financing. TFC is not dependent on the renewal of
-------------------
the financing arrangements provided by GE Capital under the GE Capital
Agreement for the maintenance of its operations and businesses.
Section 3.03. 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 not
organized under the laws of any other jurisdiction. The Issuer is duly
qualified to do business, is in good standing and has obtained all
necessary licenses, permits, charters, registrations and approvals
(together, "approvals") necessary for the conduct of its business as
currently conducted and as described in the Offering Document and the
performance of its obligations under the Transaction Documents, in each
jurisdiction in which the failure to be so qualified or to obtain such
approvals would render any Receivable or Transaction Document unenforceable
in any material respect or would otherwise cause a Material Adverse Change
to occur with respect to the Transaction.
(b) Power and Authority. The Issuer has all necessary trust power
-------------------
and authority to conduct its business as currently conducted and as
described in the Offering Document, to execute, deliver and perform its
obligations under the Transaction Documents and has full power and
authority to sell and assign the Receivables as contemplated by the
Transaction Documents and to consummate the Transaction.
(c) Due Authorization. The execution, delivery and performance of
-----------------
the Transaction Documents by the Issuer have been duly authorized by all
necessary trust action and do not require any additional approvals or
consents or other action by, or any notice to or filing with, any Person,
including, without limitation, any Governmental Authority.
(d) Noncontravention. None of the execution and delivery of the
----------------
Transaction Documents by the Issuer, the consummation of the transactions
contemplated thereby nor the satisfaction of the terms and conditions of
the Transaction Documents,
(i) conflicts with, or results in any material breach or violation
of, any provision of the Certificate or the Trust Agreement,
or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect
having applicability to the Issuer or its property, including
regulations issued by an administrative agency or other
Governmental Authority having supervisory powers over the
Issuer,
(ii) constitutes, or will constitute, a material default by the
Issuer under, or a material breach of, any provision of any
loan agreement, mortgage,
29
indenture or other agreement or instrument to which the Issuer
is a party or by which it or any of its property is or may be
bound or affected, or
(iii) results in or requires the creation of any Lien upon or in
respect of any of the assets of the Issuer, except as
otherwise expressly contemplated by the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding, suit or
-----------------
investigation by or before any court, governmental or administrative agency
or arbitrator against or affecting the Issuer, or any properties or rights
of the Issuer, pending or, to the knowledge of the Issuer, threatened,
which, in any case, if decided adversely, would result in a Material
Adverse Change with respect to the Issuer, the Certificate or the Notes.
(f) Valid and Binding Obligations. Each of the Transaction
-----------------------------
Documents to which the Issuer is a party when executed by the Owner Trustee
on behalf of the Issuer, will constitute the legal, valid and binding
obligations of the Issuer enforceable against the Issuer in accordance with
their respective terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally or general equitable principles
(whether in a proceeding at law or in equity) and except to the extent that
rights to indemnity and contribution may be limited by public policy. The
Certificate, when executed, authenticated and delivered in accordance with
the Trust Agreement, will be validly issued and outstanding and entitled to
the benefits of the Trust Agreement and will evidence the entire beneficial
ownership interest in the Issuer. The Notes when executed, authenticated
and delivered in accordance with the Indenture, will be entitled to the
benefits of the Indenture and will constitute legal, valid and binding
obligations of the Issuer, enforceable in accordance with their terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the enforcement of creditors' rights
generally or general equitable principles (whether in a proceeding at law
or in equity) and except to the extent that rights to indemnity and
contribution may be limited by public policy.
(g) Accuracy of Information. None of the Transaction Documents,
-----------------------
nor any of the Provided Documents, contain any statement of a material fact
with respect to the 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
30
contemplated by the Transaction Documents, assuming the accuracy of the
Purchaser's representations and warranties set forth in the Purchase
Agreement, and satisfaction by the Initial Purchaser of its obligations set
forth in the Note Purchase Agreement. Without limitation of the foregoing,
the Offering Document did not, as of its date, and does not, as of the date
hereof, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they
were made, not misleading.
(i) Transaction Documents. Each of the representations and
---------------------
warranties of the Issuer contained in the Transaction Documents is true and
correct in all material respects and the Issuer hereby makes each such
representation and warranty made by it to, and for the benefit of, Radian
as if the same were set forth in full herein.
(j) No Consents. No consent, license, authorization or approval
-----------
from, or registration or other action by, and no notice to or filing or
declaration with, any governmental entity or regulatory body, is required
for the due execution, delivery and performance by the Issuer of the
Transaction Documents or any other material document or instrument to be
delivered thereunder, except (in each case) as have been obtained or the
failure of which to be obtained would not be reasonably likely to cause a
Material Adverse Change with respect to the Transaction.
(k) Compliance With Law. Etc. No practice, procedure or policy
-------------------
employed or proposed to be employed by the Issuer in the conduct of its
business violates any law, regulation, judgment, agreement, order or decree
applicable to it which, if enforced, would result in a Material Adverse
Change with respect to the financial condition of such Person.
(l) Special Purpose Entity.
----------------------
(i) The capital of the Issuer is adequate for the business and
undertakings of the Issuer.
(ii) Except as contemplated by the Transaction Documents, the
Issuer is not engaged in any business transactions with TFC,
the Parent, TFCRC V 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.
31
(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 Trust Property conveyed on such
date and will own each such item free and clear of any Lien (other than
Liens contemplated under the Indenture) or any equity or participation
interest of any other Person.
(q) Security Interest in Funds and Investments. Assuming the
------------------------------------------
retention of funds in the Trust Accounts and/or the Spread Account,
such funds will be subject to a valid and perfected, first priority
security interest in favor of the Trust Collateral Agent on behalf of
the Trustee (for the benefit of the Noteholders and Radian).
(r) No Violation of Exchange Act or Regulations T, U or X. None
-----------------------------------------------------
of the transactions contemplated in the Transaction Documents will
result in a violation of Section 7 of the Securities Exchange Act, or
any regulations issues pursuant thereto, or any of Regulations T, U and
X of the Board of Governors of the Federal Reserve System. The Issuer
does not own nor does it intend to carry or purchase any "Margin
Security" within the meaning of said Regulation U, including margin
securities originally issued by it or any "margin stock" within the
meaning of said Regulation U.
ARTICLE IV
COVENANTS
Section 4.01. Covenants of TFCRC V and TFC. Each of TFCRC V and TFC
----------------------------
hereby covenants and agrees that during the term of this Insurance Agreement,
unless Radian shall otherwise expressly consent in writing (in the absence of an
Insurer Default which shall have occurred and be continuing):
32
(a) Compliance With Agreements and Applicable Laws. Each of TFCRC
----------------------------------------------
V 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 V nor TFC will cause or permit to become
effective any amendment to or modification of any of the Transaction
Documents to which it is a party, unless Radian shall have previously
approved in writing the form of such amendment or modification and
shall have received all fees and expenses payable under the Premium
Letter in connection therewith (provided that such prior written
--------
approval of Radian shall not be required in the event that (x) an
Insurer Default shall have occurred and be continuing or (y) the
proposed amendment or modification shall not have any adverse effect on
Radian). Neither TFCRC V nor TFC shall take any action or fail to take
any action that would interfere with the enforcement of any rights of
Radian or the Trust Collateral Agent under the Transaction Documents.
(b) Reports; Other Information. Each of TFCRC V 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 V, and, in the case of TFCRC V, which shall clearly reflect the
transfer of the Receivables to the Issuer, and subsequently to the
Trust Collateral Agent. Each of TFCRC V and TFC shall furnish or caused
to be furnished to Radian:
(i) Promptly upon receipt thereof, copies of all reports,
statements, certifications, schedules, or other similar items
delivered to or by TFCRC V and TFC pursuant to the terms of
the Transaction Documents and, promptly upon request, such
other data as Radian may reasonably request; provided,
--------
however, that neither TFCRC V nor TFC shall be required to
-------
deliver any such items if provision by some other party to
Radian is required under the Transaction Documents unless
such other party wrongfully fails to deliver such item. TFCRC
V and TFC shall, upon the reasonable request of Radian,
permit Radian or its authorized agents (including, without
limitation, any reinsurers of Radian appointed by Radian as
an agent for such purposes) (A) to inspect its books and
records as they may relate to the Notes, the Receivables, the
obligations of TFCRC V and TFC under the Transaction
Documents, the Transaction and the business of TFC or TFCRC
V; (B) to discuss the affairs, finances and accounts of TFCRC
V and TFC with an officer of each such Person upon Radian's
reasonable request; and (C) to discuss the affairs, finances
and accounts of TFCRC V and TFC with its independent
accountants, provided that an officer of such Person shall
have the right to be present during such discussions. Such
inspections and discussions shall be conducted during normal
business hours and shall not unreasonably disrupt the
business of such Person. The reasonable fees and expenses of
Radian or any such authorized agents shall be for the account
of TFC.
33
(ii) TFC shall provide or cause to be provided to Radian an
executed original copy of each document executed in
connection with the transaction within 30 days after the
Closing Date.
(iii) At least 30 days prior to the implementation thereof,
notice of any material change to the software, hardware or
other systems employed by the Parent or TFC in connection
with billing, collecting or otherwise servicing the
Receivables.
(c) Notice of Material Events. TFCRC V and TFC shall promptly
-------------------------
inform Radian in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial
investigation (A) against TFCRC V 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 V or TFC or any change in the location of
the books and records of TFCRC V or TFC;
(iii) the occurrence of any Trigger Event, Event of Default,
Servicer Termination Event, Default or Insurance Agreement
Event of Default; or
(iv) any other event, circumstance or condition that has
resulted, or which TFCRC V or TFC, as the case may be,
reasonably believes might result, in a Material Adverse
Change with respect to TFCRC V or TFC.
(d) Further Assurances. Each of TFCRC V and TFC will file all
------------------
necessary financing statements, assignments or other instruments, and
any amendments or continuation statements relating thereto, necessary
to be kept and filed in such manner and in such places as may be
required by law to preserve and protect fully the Lien on and security
interest in, and all rights of the Trust Collateral Agent, for the
benefit of the Trustee (on behalf of the Noteholders) and Radian with
respect to the Receivables, the Collection Account, the Note Payment
Account, the Spread Account, the stock of TFCRC V subject to the Stock
Pledge Agreement and all of the other Collateral. In addition, each of
TFCRC V and TFC shall, upon the request of Radian, from time to time,
execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, within thirty (30) days of such request,
such amendments hereto and such further instruments and take such
further action as may be reasonably necessary to effectuate the
intention, performance and provisions of the Transaction Documents or
to protect the interest of the Issuer, the Owner Trustee, the Trustee
(for the benefit of the Noteholders) and Radian, in the Receivables,
the Collection Account, the Note Payment Account, the Spread Account,
the stock of TFCRC V subject to the Stock Pledge Agreement and all of
the other Collateral, free and clear of all Liens and Restrictions on
34
Transferability except as contemplated by the Transaction Documents.
In addition, each of TFCRC V 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 V's Corporate Existence. TFCRC V shall maintain its
-----------------------------
corporate existence and shall at all times continue to be duly
organized under the laws of Delaware, and duly qualified and duly
authorized (as described in Sections 3.01 (a), (b) and (c) hereof,
----------------- --- ---
including, but not limited to, in the Commonwealth of Virginia) and
shall conduct its business in accordance with the terms of its
Certificate of Incorporation and Bylaws.
(f) TFC's Corporate Existence. TFC shall maintain its corporate
-------------------------
existence and shall at all times continue to be duly organized under
the laws of Virginia, and duly qualified and duly authorized (as
described in Sections 3.01 (a), (b) and (c) hereof) and shall conduct
----------------- --- ---
its business in accordance with the terms of its Articles of
Incorporation and Bylaws.
(g) Disclosure Document. Each Offering Document delivered with
-------------------
respect to the Notes shall clearly disclose that the Policy is not
covered by the property/casualty insurance security fund specified in
Article 76 of the New York Insurance Law. In addition, each Offering
Document delivered with respect to the Notes which includes financial
statements of Radian prepared in accordance with GAAP shall include
the following statement immediately preceding such financial
statements:
The New York State Insurance Department recognizes only
statutory accounting practices for determining and reporting
the financial condition and results of operations of an
insurance company, for determining its solvency under the New
York Insurance Law, and for determining where its financial
condition warrants the payment of a dividend to its
stockholders. No consideration is given by the New York State
Insurance Department to financial statements prepared in
accordance with generally accepted accounting principles in
making such determinations.
(h) Special Purpose Entity.
----------------------
(i) TFCRC V 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 V shall (A)
require that its employees, if any, identify themselves as
employees of TFCRC V when conducting business of TFCRC V, (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
35
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 V.
(ii) Each of TFC and TFCRC V shall respond to any inquiries made directly
to it with respect to ownership of a Receivable by stating that TFCRC
V acquired such Receivable from TFC, that TFCRC V contributed such
Receivable to the Issuer and that the Trust Collateral Agent has been
granted a security interest in such Receivable.
(iii) TFCRC V shall compensate all employees, consultants and agents
directly or indirectly through reimbursement of TFC, from TFCRC V's
bank accounts, for services provided to TFCRC V by such employees,
consultants and agents and, to the extent any employee, consultant or
agent of TFCRC V is also an employee, consultant or agent of TFC,
allocate the compensation of such employee, consultant or agent
between TFCRC V and TFC on a basis which reflects the respective
services rendered to TFCRC V and TFC.
(iv) TFCRC V 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 V shall not commingle its
funds or other assets with those of any of its Affiliates (other than
in respect of items of payment or funds which may be commingled until
deposit into the Collection Account in accordance with the Sale and
Servicing Agreement), and not hold its assets in any manner that would
create an appearance that such assets belong to any such Affiliate,
not maintain bank accounts or other depository accounts to which any
such Affiliate is an account party, into which such Affiliate makes
deposits or from which any such Affiliate has the power to make
withdrawals, and not act as an agent or representative of any of its
Affiliates in any capacity.
(v) TFCRC V 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 V shall maintain corporate records and books of account separate
from those of TFC or the Parent, and the Affiliates thereof.
(vii) TFCRC V shall obtain proper authorization from its Board of Directors
of all corporate action requiring such authorization. Meetings of the
Board of Directors of TFCRC V shall be held not less frequently than
one time per annum, and copies of the minutes of each such board
meeting shall be delivered to Radian within 30 days of such meeting.
36
(viii) TFCRC V shall obtain proper authorization from its shareholders of
all corporate action requiring shareholder approval. Meetings of
the shareholders of TFCRC V shall be held not less frequently than
one time per annum, and copies of each such authorization and the
minutes of each such shareholder meeting shall be delivered to
Radian within 30 days of such authorization or meeting, as the
case may be.
(ix) TFCRC V 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 V 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 V 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 V shall disclose the effects of the Transactions in
accordance with GAAP and shall disclose that neither the assets of
TFCRC V 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 V and the Issuer are separate
entities whose creditors have a claim on their respective assets
prior to those assets becoming available to its equity holders and
to any of their respective creditors.
(xi) The resolutions, agreements and other instruments of TFCRC V
underlying the transactions described in this Insurance Agreement
and in the other Transaction Documents shall be continuously
maintained by TFCRC V as official records of TFCRC V, separately
identified and held apart from the records of TFC and the Parent
and each affiliate thereof.
(xii) TFCRC V 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 V 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 V and TFC shall maintain
-----------------------
all licenses, permits, charters and registrations which are material to the
performance by it of
37
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 V and TFC shall
---------------------
comply with each of the covenants, as applicable, made by it in each of
the Transaction Documents.
(k) Ownership of TFCRC V. TFC shall at all times own 100% of
--------------------
the issued and outstanding shares of capital stock of TFCRC V 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 Radian, permit Radian or its authorized
agent (including, without limitation, any reinsurers of Radian
appointed by Radian as an agent for such purposes) access to:
(i) the documentation regarding the Receivables, the other
Collateral, the obligations of TFC under the Transaction
Documents, the business of TFC and the transactions
consummated in connection therewith including, but not
limited to, the accounts, records and computer systems
maintained by TFC with respect thereto; and
(ii) any of the properties of TFC, to examine all of its books
of account, records, reports and other papers, to make
copies and extracts therefrom and to discuss its affairs,
finances and accounts with its officers, employees, and
independent public accounts (and by this provision TFC
authorizes said accountants to discuss the finances and
affairs of TFC) (in each such case, it being understood
that an officer of TFC shall be entitled to be present
during any such examination and/or discussion).
Such inspections and discussions shall be conducted at such
reasonable times and as often as may be reasonably requested. In each
case, such access shall be afforded without charge but only upon
reasonable request and during normal business hours.
(n) Benefit Plan. Each of TFC and TFCRC V shall comply in all
------------
material respects with the provisions of ERISA, the Code, and all other
applicable laws, and the regulations and interpretations thereunder to
the extent applicable, with respect to each
38
Benefit Plan. Each of TFC and TFCRC V 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 V;
(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 V or
any ERISA Affiliate if such termination would result in
any material liability to either of TFC or TFCRC V 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 V
will treat each transfer of Receivables pursuant to the Sale and
Servicing Agreement as an absolute sale and assignment of TFCRC V's
full right, title and ownership interest in such Receivable and TFCRC V
will not account for or treat the Transactions in any other manner.
(p) Financial Statements; Accountants' Reports; Other
-------------------------------------------------
Information. TFC shall keep, or cause to be kept, in reasonable detail
-----------
books and records of account of its assets and business, and shall
clearly reflect therein the transfer of the Receivables from TFC to
TFCRC V, and from TFCRC V to the Issuer, and the sale of the Notes to
the Noteholders, as a sale of TFCRC V's respective interests in the
Receivables evidenced by the Notes. TFC shall furnish or cause to be
furnished to Radian:
(i) Annual Financial Statements. As soon as available, and in
---------------------------
any event within 120 days after the close of each fiscal
year of the Parent, the audited consolidated balance
sheets of TFC and the Parent, and the unaudited balance
sheets of TFCRC V, 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 V, as
applicable, for such fiscal year, all in reasonable detail
and stating in comparative form the respective figures for
the corresponding date and period in the preceding fiscal
year, in each case prepared in accordance with GAAP,
consistently applied, and in the case of TFC and the
Parent, accompanied by the certificate of independent
accountants (which shall be a nationally recognized firm
or otherwise acceptable to Radian) and certified by an
authorized officer of the relevant entity as being
complete and correct in all material respects, and in the
39
case of TFCRC V, certified by an authorized officer
of TFCRC V 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 V, 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 V, 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 Radian may reasonably request; provided, however,
-------- -------
that TFC shall not be required to deliver any such
items if provision by some other party to Radian is
required under the Transaction Documents unless such
other party wrongfully fails to deliver such item.
The reasonable fees and expenses of Radian or any
such authorized agents shall be for the account of
TFC. In addition, TFC shall promptly (but in no case
more than 30 days following issuance or receipt by a
Commonly Controlled Entity) provide to Radian a copy
of all correspondence between a Commonly Controlled
Entity and the PBGC, IRS, Department of Labor or the
administrators of a Multiemployer Plan relating to
any Reportable Event or the under-funded status,
termination or possible termination of a Plan or a
Multiemployer Plan. The books and records of TFC will
be maintained at the address for it designated herein
for receipt of notices, unless it shall otherwise
advise the parties hereto in writing.
(iv) Closing Documents. TFC shall provide, or cause to be
-----------------
provided, to Radian an executed original copy of each
document executed in connection with the Transaction
within 30 days after the Closing Date.
(q) Agreed Upon Procedures; Reports. (1) TFC shall cause
-------------------------------
a firm of nationally recognized independent certified public accountants
(the Independent Accountants"), who may also render other services to
-----------------------
TFC and/or to TFCRC V, to
40
deliver to the Board of Directors of the Servicer, to the Trustee, the
Owner Trustee, the Trust Collateral Agent and Radian (with a copy
delivered to the Rating Agency):
(i) As soon as practical, but in no event later than 45
days after the delivery by the Servicer of the third
Servicer's Certificate required to be delivered by
the Servicer after the Closing Date pursuant to
Section 4.8 of the Sale and Servicing Agreement, a
-----------
statement (the "Initial Accountant's Statement"), in
------------------------------
form and substance satisfactory to Radian, reviewing
the results of the Independent Accountants'
performance of certain agreed upon procedures with
respect to the Servicer, its reporting and record
keeping and the degree of its compliance with
provisions of the Basic Documents requiring the
deposit or remittance of funds by the Servicer to the
Collection Account, substantially to the effect that:
(1) the Independent Accountants have examined the
accounts and records of the Servicer relating to the
Receivables (which records shall be described in one
or more schedules to such statement), (2) such firm
has compared the information contained in the third
Servicer's Certificate delivered by the Servicer
pursuant to Section 4.8 of the Sale and Servicing
-----------
Agreement with information contained in such accounts
and records for such periods, (3) such firm has
traced deposits and remittances made to the
Collection Account by the Servicer for such periods,
and (4) on the basis of the agreed upon procedures so
performed, whether and to what extent (x) the
information contained in such Servicer's Certificates
reconciles with the information contained in such
accounts and records, (y) such accounts and records
of the Servicer related to the Receivables agree to
the respective source documents, and (z) the Servicer
has complied with the obligations set forth in the
Basic Documents with respect to the deposits and
remittances made to the Collection Account by the
Servicer for such periods, except for such exceptions
as TFC and Radian believe to be immaterial and such
other exceptions as shall be set forth in such
statement;
(ii) In the event that the Initial Accountant's Statement
indicates a degree of accuracy with respect to the
third Servicer's Certificate deemed by Radian to be
unsatisfactory in the exercise of its sole
discretion, as soon as practical after written demand
therefor by Radian to TFC and the Independent
Accountants (which demand may be made as frequently
as deemed necessary in the sole discretion of
Radian), but in no event later than 30 days after the
delivery to Radian by the Servicer of any subsequent
Servicer's Certificate constituting the subject of
such demand, a statement (each, an "Additional
----------
Accountant's Statement"), in form and substance
----------------------
satisfactory to Radian, reviewing the results of the
Independent Accountants' performance of certain
agreed upon procedures with respect to then most
recently completed and delivered Servicer's
Certificate, and otherwise covering the same
subjects, and having the same scope, as the Initial
Accountant's Statement; provided, however, that
-------- -------
Radian shall not demand Additional Accountant's
Statements if and to the extent that no
41
fewer than three consecutive Additional Accountant's
Statements are deemed by Radian, in the exercise of
its sole discretion, to indicate a high degree of
accuracy with respect to the related Servicer's
Certificate;
(iii) As soon as practical, but in no event later than 90
days after the end of each calendar year during the
term hereof (commencing with the calendar year 2003),
a statement (each, an "Annual Accountant's
-------------------
Statement"), in form and substance satisfactory to
---------
Radian, reviewing the results of the Independent
Accountants' performance of certain agreed upon
procedures with respect to a sample of (A) no more
than, and in the Insurer's discretion, less than six
of the preceding twelve Servicer's Certificates and
(B) no more than, and in the Insurer's discretion,
less than three of the preceding twelve months'
reporting and record keeping practices with respect
to the Servicer's compliance with provisions of the
Basic Documents requiring the deposit or remittance
of funds to the Collection Account (in each case,
randomly selected by such Independent Accountants),
and otherwise covering the same subjects, and having
the same scope, as the Initial Accountant's
Statement; provided that each of the three months
--------
described in clause (B) shall constitute a Monthly
Period to which one of the six Servicer's
Certificates referred to in clause (A) shall relate;
and
(iv) The agreed upon procedures referred to in each of
clauses (i), (ii) and (iii) above will be
----------- ---- -----
substantially the same procedures agreed upon by
Radian and TFC with respect to the securitization
transaction pursuant to which the TFC Asset Backed
Notes Series 2001-1 were issued.
(1) On or before April 30 (or 120 days after the end of
the Servicer's fiscal year, if other than December 31) of each year, beginning
on April 30, 2002, 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 V 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.
42
(3) All fees, costs and expenses incurred by Radian and
the Trust Collateral Agent in connection with obtaining any of the foregoing
described statements shall be for the sole cost and expense of TFC.
(r) UCC Matters. Within ten days of the Closing Date, TFC
-----------
and TFCRC V shall cause to be filed an assignment to the Trust
Collateral Agent of all of the rights, title and interest of the
Issuer in, to and under the UCC-1 financing statements filed with (a)
the Secretary of State of the Commonwealth of Virginia and (b) the
Secretary of State of Delaware to the extent that the Trust Collateral
Agent is not otherwise the secured party of record on such financing
statements.
(s) Maintenance of Licenses. Each of TFC and TFCRC V
-----------------------
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 V and TFC. Each
--------------------------------------------------
of TFCRC V and TFC hereby covenants and agrees that during the term of this
Insurance Agreement, unless Radian shall otherwise expressly consent in writing
(in the absence of an Insurer Default which shall have occurred and be
continuing), which consent shall not be unreasonably withheld:
(a) Restrictions on Liens. Neither TFCRC V nor TFC shall,
---------------------
except as contemplated by the Transaction Documents, (i) create, incur
or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the fixture (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any
Lien or Restriction on Transferability of the Collateral, or (ii) sign
or file under the Uniform Commercial Code of any jurisdiction any
financing statement which names TFCRC V or TFC as a debtor, or sign
any security agreement authorizing any secured party thereunder to
file such financing statement, with respect to the Collateral.
(b) Impairment of Rights. Neither TFCRC V nor TFC shall
--------------------
take any action, or fail to take any action, if such action or failure
to take action may reasonably be expected to (i) interfere with the
enforcement of any rights under the Transaction Documents that are
material to the rights, benefits or obligations of the Trustee, the
Trust Collateral Agent, the Noteholders or Radian, (ii) result in a
Material Adverse Change with respect to the Collateral, or (iii)
impair the ability of TFCRC V or TFC to perform their respective
obligations under the Transaction Documents.
(c) Waiver, Amendments, Etc. Neither TFCRC V 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 V nor TFC shall terminate
----------
or designate, or consent to the termination or designation of, the
Servicer, the Trustee, the Backup Servicer, the Trust Collateral
Agent, the P.O. Box Owner, the Successor Servicer, the Owner Trustee
or any successor thereto.
43
(e) Creation of Indebtedness; Guarantees. TFCRC V shall
------------------------------------
not create, incur, assume or suffer to exist any Indebtedness. TFCRC V
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 V shall not form, or cause to be
------------
formed, any Subsidiaries.
(g) Issuance of Stock. TFCRC V 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 V 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 V shall not conduct transactions with the
Parent, TFC or any other Affiliate of the Parent, TFC
or TFCRC V or with any shareholder, director,
officer, or employee of TFCRC V, 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 V than would be obtained in a
comparable arm's-length transaction with a Person not
an Affiliate of the Parent or TFCRC V or a
shareholder, director, officer, or employee of TFCRC
V, as the case may be; and
(ii) TFC shall not conduct transactions with the Parent,
TFCRC V 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 V 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 V shall not engage in any
----------------
business or activity other than in connection with the Transaction
Documents, except (i) as otherwise specifically approved in writing by
Radian, or (ii) as otherwise permitted by its certificate of
incorporation.
44
(l) Insolvency. Neither TFCRC V nor TFC shall commence with
----------
respect to TFCRC V 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 V 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 V 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 March 31, 2002, to be less than the sum of (i) $40,000,000 plus
(ii) 50% of the net earnings (after taxes) of TFC for the period
commencing on March 31, 2002 and ending at the end of TFC's then most
recently concluded fiscal quarter (treated for this purpose as a
single accounting period). For purposes of this clause, if net
earnings of TFC for any period shall be less than zero, the amount
calculated pursuant to clause (ii) above for such period shall be
zero.
(n) No Change in Name, Etc. TFCRC V shall not make any change to
----------------------
its corporate name, use any trade names, fictitious names, assumed
names or "doing business as" names or change its jurisdiction of
organization. TFC shall not change its name (including using any trade
names, fictitious names, assumed names or "doing business as" names),
identity, organizational structure in any manner that would, could or
might make any financing statement or continuation statement filed in
connection with the closing of the Transactions, or otherwise in
accordance with Section 4.01(d) above, seriously misleading within the
---------------
meaning of Section 9-506 of the UCC, and shall not change its
jurisdiction of organization unless, in any such case, it shall have
given Radian at least 60 days' prior written notice thereof and shall
have filed before the date of such change appropriate new financing
statements or amendments to all such previously filed financing
statements or continuation statements.
(o) No Merger or Consolidation of, or Assumption of the
---------------------------------------------------
Obligations of, TFC. (x) TFC shall not merge or consolidate with any
-------------------
other Person, convey, transfer or lease substantially all its assets
as an entirety to another Person, or permit any other Person to become
the successor to TFC's business unless, after the merger,
consolidation, conveyance, transfer, lease or succession, the
successor or surviving entity, there shall be no Material Adverse
Change with respect to the ability of the surviving entity to fulfill
its duties contained in this Insurance Agreement or in any other
Transaction Document to which it is a party. Any corporation (i) into
which TFC may be merged or consolidated, (ii) resulting from any
merger or consolidation to which TFC shall be a party, (iii) which
acquires by conveyance, transfer, or lease substantially all of the
assets of TFC, or (iv) succeeding to the business of TFC, in any of
the foregoing cases shall execute an agreement of assumption to
perform every obligation of TFC under this Insurance Agreement and,
whether or not such assumption agreement is executed, shall be the
45
successor to TFC under this Insurance Agreement without the execution
or filing of any paper or any further act on the part of any of the
parties to this Insurance Agreement, anything in this Insurance
Agreement to the contrary notwithstanding; provided, however, that
-------- -------
nothing contained herein shall be deemed to release TFC from any
obligation. TFC shall provide notice of any merger, consolidation or
succession pursuant to this Section 4.02(o) to the Issuer, the Trust
---------------
Collateral Agent, the Noteholders, Radian and the Rating Agency.
Notwithstanding the foregoing, TFC shall not merge or consolidate with
any other Person or permit any other Person to become a successor to
TFC's business, unless (x) immediately after giving effect to such
transaction, no representation or warranty made by TFC with respect to
the business, operations or condition (financial or otherwise of TFC)
pursuant to this Insurance Agreement (by way of avoidance of doubt,
the representations and warranties referred to in this clause (x)
shall exclude the representations and warranties made under Schedule B
of the Purchase Agreement) shall have been breached (for purposes
hereof, such representations and warranties shall speak as of the date
of the consummation of such transaction) and no event that, after
notice or lapse of time, or both, would become an Insurance Agreement
Event of Default shall have occurred and be continuing, (y) TFC shall
have delivered to the Issuer, the Trust Collateral Agent, the Rating
Agency and Radian an Officer's Certificate and an Opinion of Counsel
each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section 4.02(o) and that all
---------------
conditions precedent, if any, provided for in this Insurance Agreement
relating to such transaction have been complied with, and (z) TFC
shall have delivered to the Issuer, the Trust Collateral Agent, the
Rating Agency and Radian an Opinion of Counsel, stating in the opinion
of such counsel, either (A) all financing statements and continuation
statements and amendments thereto have been executed and filed that
are necessary to preserve and protect the interest of the Trust
Collateral Agent in the Receivables and the Other Conveyed Property
and reciting the details of the filings or (B) no such action shall be
necessary to preserve and protect such interest.
(p) Incorporation of Covenants. Each of TFC and TFCRC V 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 V 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 1,510.
Section 4.03. Affirmative Covenants of the Issuer. The Issuer hereby
-----------------------------------
covenants and agrees that during the term of this Insurance Agreement, unless
Radian shall otherwise expressly consent in writing:
(a) Compliance With Agreements and Applicable Laws. The Issuer
----------------------------------------------
shall perform each of its obligations under the Transaction Documents
and shall comply with
46
all material requirements of, and the Notes shall be offered and sold in
accordance with, any law, rule, regulation or order applicable to it or
thereto, or that are required in connection with its performance under any
of the Transaction Documents. The Issuer will not cause or permit to become
effective any amendment to or modification of any of the Transaction
Documents to which it is a party unless Radian shall have previously
approved in writing the substance of such amendment or modification. The
Issuer shall not take any action or fail to take any action that would
interfere with the enforcement of any rights under the Transaction
Documents.
(b) Certain Information. The Issuer shall keep, or cause to be kept,
-------------------
in reasonable detail books and records of account of its assets and
business, which shall be furnished to Radian upon request. The Issuer shall
furnish to Radian, simultaneously with the delivery of such documents to
the Trustee, the Noteholders or the Certificateholder, as the case may be,
copies of all reports, certificates, statements, financial statements or
notices furnished to the Trustee, the Noteholders or the Certificateholder,
as the case may be, pursuant to the Transaction Documents. In addition, the
Issuer shall furnish to Radian the following:
(i) Certain Information. Not less than two weeks prior to the date of
-------------------
filing with the IRS of any tax return or amendment thereto,
copies of the proposed form of such return or amendment and,
promptly after the filing or sending thereof, (A) copies of each
tax return and amendment thereto that the Issuer files with the
IRS and (B) copies of all financial statements, reports, and
registration statements which the Issuer files with, or delivers
to, any federal government agency, authority or body which
supervises the issuance of securities by the Issuer.
(ii) Other Information. Promptly upon the request of Radian, copies of
-----------------
all schedules, financial statements or other similar reports
delivered to or by the Issuer pursuant to the terms of this
Insurance Agreement and the other Transaction Documents and such
other data as Radian may reasonably request.
(c) Access to Records; Discussions with Officers. The Issuer shall,
--------------------------------------------
upon the reasonable request of Radian, permit Radian or its authorized
agent:
(i) to inspect such books and records of the Issuer as may relate to
the Notes, the Certificate, the Receivables and the other Trust
Property, the obligations of the Issuer under the Transaction
Documents, the business of the Issuer and the transactions
consummated in connection therewith; and
(ii) to discuss the affairs, finances and accounts of the Issuer with
an appropriate officer of the Issuer.
Such inspections and discussions shall be conducted at such reasonable
times and as often as may be reasonably requested. In each case, such
access shall be afforded without charge but only upon reasonable request
and during normal business hours.
47
(d) Notice of Material Events. The Issuer shall promptly inform
-------------------------
Radian in writing of the occurrence of any of the following:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation
against the Issuer in any federal, state or local court or
before any arbitration board, or any such proceeding threatened
by any governmental agency, which, if adversely determined,
would cause a Material Adverse Change to occur with respect to
the Receivables as a whole, or which, if adversely determined,
would cause a Material Adverse Change to occur with respect to
the ability of the Issuer to perform its obligations under any
Transaction Document;
(ii) any change in the location of the Issuer's principal office or
any change in the location of the books and records of the
Issuer;
(iii) the occurrence of any Trigger Event, Event of Default, Servicer
Termination Event, Default or Insurance Agreement Event of
Default; or
(iv) any other event, circumstance or condition that has resulted, or
which is reasonably likely to result, in a Material Adverse
Change with respect to the Issuer.
(e) Further Assurances. The Issuer will file all necessary financing
------------------
statements, assignments or other instruments, and any amendments or
continuation statements relating thereto, necessary to be kept and filed in
such manner and in such places as may be required by law to preserve and
protect fully the Lien on and security interest in, and all rights of the
Trust Collateral Agent with respect to the Collateral under the Indenture.
In addition, the Issuer shall, upon the request of Radian, from time to
time, execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, within thirty (30) days of such request, such
amendments hereto and such further instruments and take such further action
as may be reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents or to protect the interest of the
Trust Collateral Agent in the Collateral under the Indenture. In addition,
the Issuer agrees to cooperate with the Rating Agency in connection with
any review of the Transaction which may be undertaken by the Rating Agency
after the date hereof.
(f) Retirement of Notes. The Issuer shall, upon retirement of the
------------------
Notes, furnish to Radian a notice of such retirement, and, upon such
retirement and the expiration of the term of the Policy, surrender the
Policy to Radian for cancellation.
(g) Preservation of Existence. The Issuer shall observe in all
------------------
material respects all procedures required by its Certificate and Trust
Agreement and preserve and maintain its existence as a trust and its
rights, franchises and privileges in the jurisdiction of its organization,
and shall qualify and remain qualified in good standing in each
jurisdiction where the nature of its business requires it to do so except
where the failure to be so qualified, in good standing and to maintain its
rights, franchises and privileges would not cause a Material Adverse Change
to occur with respect to the financial condition of the
48
Issuer, or its ability to perform its obligations under this Insurance
Agreement or under any other Transaction Document to which it is party.
(h) Disclosure Document. Each Offering Document with respect to the
-------------------
Notes shall include only information concerning Radian that is supplied or
consented to in writing by Radian expressly for inclusion therein. Each
Offering Document delivered with respect to the Notes shall clearly
disclose that the Policy is not covered by the property/casualty insurance
security fund specified in Article 76 of the New York Insurance Law. In
addition, each Offering Document delivered with respect to the Notes which
includes financial statements of Radian prepared in accordance with GAAP
(but excluding any Offering Document in which such financial statements are
incorporated by reference) shall include the following statement
immediately preceding such financial statements:
The New York State Insurance Department recognizes only
statutory accounting practices for determining and reporting the
financial condition and results of operations of an insurance
company, for determining its solvency under the New York
Insurance Law, and for determining where its financial condition
warrants the payment of a dividend to its stockholders. No
consideration is given by the New York State Insurance
Department to financial statements prepared in accordance with
generally accepted accounting principles in making such
determinations.
(i) Special Purpose Entity.
----------------------
(i) The Issuer shall conduct its business solely in its own name
through its duly authorized officers or agents so as not to
mislead others as to the identity of the entity with which those
others are concerned, and particularly will use its best efforts
to avoid the appearance of conducting business on behalf of the
Parent, TFC, TFCRC V or any other Affiliates thereof or that the
assets of the Issuer are available to pay the creditors of the
Parent, TFC, TFCRC V 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 V 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
49
authorization and the minutes or other written summary of each
such meeting shall be delivered to Radian within 30 days of
such authorization or meeting as the case may be.
(iv) Although the organizational expenses of the Issuer have been
paid by TFC, operating expenses and liabilities of the Issuer
shall be paid from its own funds.
(v) The annual financial statements of the Issuer shall disclose
the effects of the Issuer's transactions in accordance with
GAAP and shall disclose that the assets of the Issuer are not
available to pay creditors of the Parent, TFC, TFCRC V 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 V and each Affiliate of any
of them.
(vii) The Issuer shall maintain an arm's-length relationship with the
Parent, TFC, TFCRC V 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 V and each Affiliate of any
of them except, in each case, as contemplated by the
Transaction Documents.
(j) Tax Matters. The Issuer will take all actions reasonably
-----------
necessary to ensure that for federal and state income tax purposes the
Issuer is not taxable as an association (or publicly traded partnership)
taxable as a corporation.
(k) Securities Laws. The Issuer shall comply in all material
---------------
respects with all applicable provisions of state and federal securities
laws, including blue sky laws and the Securities Act, the Securities
Exchange Act and the Investment Company Act and all rules and regulations
promulgated thereunder for which non-compliance would result in a Material
Adverse Change with respect to the Issuer.
(l) Incorporation of Covenants. The Issuer shall comply with each
--------------------------
of the Issuer's covenants set forth in the Transaction Documents and hereby
incorporates such covenants by reference as if each were set forth herein.
(m) Reports. The Issuer shall furnish to Radian:
-------
50
(i) Annual Financial Statements. As soon as available, and in any
---------------------------
event within 120 days after the close of each fiscal year,
its unaudited balance sheet as of the end of such fiscal year
and the unaudited statements of income, shareholders' equity
and cash flows for such fiscal year, all in reasonable detail
and stating in comparative form the respective figures for
the corresponding date and period in the preceding fiscal
year, prepared in accordance with GAAP, consistently applied,
and certified by an authorized officer of the Issuer as being
complete and correct in all material respects and presenting
the financial condition and results of operations of the
Issuer as of the dates and for the periods indicated, in
accordance with GAAP consistently applied.
(ii) Quarterly Financial Statements. As soon as available, and in
------------------------------
any event within 45 days after the close of the first three
quarters of each fiscal year of the Issuer, the unaudited
balance sheets of the Issuer as of the end of each such
quarter and the unaudited statements of income and cash flows
of the Issuer for the portion of the fiscal year then ended,
all in reasonable detail and stating in comparative form the
respective figures for the corresponding date and period in
the preceding fiscal year, prepared in accordance with GAAP,
consistently applied (subject to normal year-end
adjustments), and certified by an authorized officer of the
Issuer as being complete and correct in all material respects
and presenting the financial condition and results of
operations of the Issuer as of the dates and for the periods
indicated, in accordance with GAAP consistently applied
(subject as to interim statements to normal year-end
adjustments).
(iii) Other Information. Promptly upon receipt thereof, copies of
-----------------
all reports, statements, certifications, schedules, or other
similar items delivered to or by the Issuer pursuant to the
terms of the Transaction Documents and, promptly upon
request, such other data as Radian may reasonably request.
The fees and expenses of Radian or any such authorized
agents shall be for the account of the Issuer. The books and
records of the Issuer will be maintained at the address for
it designated herein for receipt of notices or at the
Servicer, unless it shall otherwise advise the parties
hereto in writing.
Section 4.04. Negative Covenants on Behalf of the Issuer. TFCRC V as
------------------------------------------
"Depositor" under the Trust Agreement, on behalf of the Issuer, hereby covenants
and agrees, that during the term of this Insurance Agreement, unless Radian
shall otherwise expressly consent in writing (in the absence of an Insurer
Default which shall have occurred and be continuing):
(a) Restrictions on Liens. The Issuer shall not, except as
---------------------
contemplated by the Transaction Documents, (i) create, incur or suffer to
exist, or agree to create, incur or suffer to exist, or consent to cause or
permit in the future (upon the happening of a contingency or otherwise) the
creation, incurrence or existence of any Lien or Restriction on
Transferability of the Receivables, or (ii) sign or file under the Uniform
Commercial Code of any jurisdiction any financing statement which names the
Issuer as a debtor, or
51
sign any security agreement authorizing any secured party thereunder to file
such financing statement, with respect to the Receivables.
(b) Impairment of Rights. The Issuer shall not take any action, or fail to
--------------------
take any action, if such action or failure to take action would be reasonably
likely to (i) interfere with the enforcement of any rights under the Transaction
Documents that are material to the rights, benefits or obligations of the
Trustee, the Certificateholder, the Noteholders or Radian, (ii) result in a
Material Adverse Change with respect to the Receivables, or (iii) impair the
ability of the Issuer to perform its obligations under the Transaction
Documents.
(c) Waiver, Amendments, Etc. Absent the prior written approval of Radian,
-----------------------
the Issuer shall not waive, modify or amend, or consent to any waiver,
modification or amendment of, any of the provisions of any of the Transaction
Documents (provided that such prior written approval of Radian shall not be
required in the event that (x) an Insurer Default shall have occurred and be
continuing, and (y) the proposed amendment or modification shall not have an
adverse effect on Radian).
(d) Successors. The Issuer shall not terminate or designate, or consent to
----------
the termination or designation of, the Servicer, the Backup Servicer, the P.O.
Box Owner, the Successor Servicer, the Trustee, the Trust Collateral Agent, the
Owner Trustee or any successor thereto.
(e) Creation of Indebtedness; Guarantees. Other than the Transaction
------------------------------------
Documents, the Issuer shall not create, incur, assume or suffer to exist any
Indebtedness other than Indebtedness guaranteed or approved in writing by
Radian. The Trustee shall not assume, guarantee, endorse or otherwise be or
become directly or contingently liable for the obligations of any Person by,
among other things, agreeing to purchase any obligation of another Person,
agreeing to advance funds to such Person or causing or assisting such Person to
maintain any amount of capital.
(f) Subsidiaries. The Issuer shall not form, or cause to be formed, any
------------
Subsidiaries.
(g) No Mergers. The Issuer shall not consolidate with or merge into any
----------
Person or transfer all or any material amount of its assets to any Person,
liquidate or dissolve except as permitted by the Trust Agreement and as
contemplated by the Transaction Documents.
(h) Other Activities. The Issuer shall not:
----------------
(i) sell, pledge, transfer, exchange or otherwise dispose of any of its
assets except as permitted under the Transaction Documents; or
(ii) engage in any business or activity except as contemplated by the
Transaction Documents and as permitted by the Trust Agreement.
52
(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 upon issuance of the Policy on the Closing Date and
shall remain in effect until the later of (a) such time as Radian is no longer
subject to a claim under the Policy and the Policy shall have been surrendered
to Radian for cancellation and (b) all amounts payable to Radian and the
Noteholders under the Transaction Documents and under the Notes have been paid
in full; provided, however, that the provisions of Sections 2.04, 2.05, 2.06,
-------- ------- ------------- ---- ----
2.07, 2.08, 2.09 and 2.10 hereof shall survive any termination of this
---- ---- ---- ----
Agreement.
Section 5.02. Obligations Absolute.
--------------------
(a) The obligations of the Issuer, TFCRC V and TFC pursuant to
this Insurance Agreement are absolute and unconditional and will be paid or
performed strictly in accordance with the respective terms hereof,
irrespective of:
(i) any lack of validity or enforceability of, or any amendment
or other modifications of, or waiver with respect to, the
Indenture, the Sale and Servicing Agreement, the Policy or
the Indemnification Agreement;
(ii) any amendment or waiver of, or consent to departure from the
Indenture, the Sale and Servicing Agreement, the Policy or
the Indemnification Agreement;
(iii) the existence of any claim, set off, defense or other rights
it may have at any time against the Trustee, the Trust
Collateral Agent, any beneficiary or any transferee of the
Policy (or any persons or entities for whom the Trustee, the
Trust Collateral Agent, any such beneficiary or any such
transferee may be acting), Radian or any other person or
entity whether in connection with the Policy, the Transaction
Documents or any unrelated transactions;
(iv) any statement or any other document presented under the
Policy (including any Notice for Payment) proving to be
forged, fraudulent,
53
invalid or insufficient in any respect or any statement therein
being untrue or inaccurate in any respect whatsoever;
(v) the inaccuracy or alleged inaccuracy of any Servicer's Certificate
or Notice for Payment upon which any drawing under the Policy is
based;
(vi) payment by Radian under the Policy against presentation of a draft
or certificate which does not comply with the terms of the Policy;
(vii) the bankruptcy or insolvency of Radian, the Issuer, any other party
hereto or the Trust Property;
(viii) any default or alleged default of Radian under the Policy (other
than any payment default by Radian under the Policy);
(ix) any defense based upon the failure of the Issuer or the Trust
Property to receive all or part of the proceeds of the sale of the
Notes or of the Servicer to receive any or all of the Base Servicing
Fee (as defined in the Indenture) or other compensation required
under the Indenture or otherwise, or any nonapplication or
misapplication of the proceeds of any drawing upon the Policy; and
(x) any other circumstance or happening whatsoever which would otherwise
constitute a defense to the obligations of the Issuer, TFCRC V or
TFC hereunder.
(b) Each of TFC, TFCRC V 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 V or the Issuer in connection with the Transaction under the Transaction
Documents (or any of them) agrees to be bound by this Agreement and (i) to the
extent permitted by law, waives and renounces any and all redemption and
exemption rights and the benefit of all valuation and appraisement privileges
against the indebtedness, if any, and obligations evidenced by any Transaction
Document or by any extension or renewal thereof, (ii) waives presentment and
demand for payment, notices of nonpayment and of dishonor, protest of dishonor
and notice of protest; (iii) waives all notices in connection with the delivery
and acceptance hereof and all other notices in connection with the performance,
default or enforcement of any payment hereunder except as required by the
Transaction Documents; (iv) waives all rights of abatement, diminution,
postponement or deduction, or to any defense other than payment, or to any right
of setoff or recoupment arising out of any breach under any of the Transaction
Documents, by any party thereto or any beneficiary thereof, or out of any
obligation at any time owing to TFC, TFCRC V or the Issuer; (v) agrees that any
consent, waiver or forbearance hereunder with respect to an event shall operate
only for such event and not for any subsequent event; (vi) consents to any and
all extensions of time that may be granted by Radian with respect to any payment
hereunder or other provisions hereof and to the release of any security at any
time given for any payment hereunder, or any part thereof, with or without
substitution, and to the release of any Person or entity liable for any such
payment; and (vii) consents to the
54
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
V or the Issuer from pursuing any rights or remedies it may have against
any Person other than Radian in a separate legal proceeding.
Section 5.03. 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 V, the Servicer, the Backup 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 Radian.
Any assignment made in violation of this Agreement shall be null and void.
(b) Radian shall have the right to grant participations in its
rights under this Agreement and to enter into contracts of reinsurance with
respect to the Policy upon such terms and conditions as Radian may in its
discretion determine; provided, however, that no such participation or
reinsurance agreement or arrangement shall relieve Radian of any of its
obligations hereunder or under the Policy.
(c) In addition, Radian shall be entitled to assign or pledge to
any bank or other investor providing liquidity or credit with respect to
the Transaction or the obligations of Radian in connection therewith any
rights of Radian under the Transaction Documents or with respect to any
real or personal property or other interests pledged to Radian, or in which
Radian has a security interest, in connection with the Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or
claim, express or implied, upon any Person, including, particularly, any
Noteholder or the Certificateholder, other than Radian, against the Issuer,
TFC, TFCRC V, the Servicer, the Backup Servicer or the Successor Servicer,
and all the terms, covenants, conditions, promises and agreements contained
herein shall be for the sole and exclusive benefit of the parties hereto
and their successors and permitted assigns. None of the Trustee, the Owner
Trustee, or the Trust Collateral Agent, nor any Noteholder or the
Certificateholder shall have any right to payment from any premiums paid or
payable hereunder or from any other amounts paid by TFC or any other Person
pursuant to Article II hereof.
----------
Section 5.04. Liability of Radian. Each of the Issuer, the Servicer, TFCRC
-------------------
V, the Parent, TFC, the Backup Servicer and the Successor Servicer agree that
neither Radian, nor any of its officers, directors or employees shall be liable
or responsible for (except to the extent of its own gross negligence or willful
misconduct): (a) the use which may be made of the Policy by or for any acts or
omissions of another Person in connection therewith or (b) the validity,
sufficiency, accuracy or genuineness of any documents delivered to Radian, or of
any
55
endorsement(s) thereon, even if such documents should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged.
In furtherance and not in limitation of the foregoing, Radian may accept
documents that appear on their face to be in order, without responsibility for
further investigation.
ARTICLE VI
EVENTS OF DEFAULT; REMEDIES
Section 6.01. Insurance Agreement Events of Default. The occurrence of any
-------------------------------------
of the following events shall constitute an "Insurance Agreement Event of
----------------------------
Default" hereunder:
-------
(a) any demand for payment shall be made under the Policy;
(b) (i) any representation or warranty made by any of the Issuer,
the Parent, TFC, the Servicer, or TFCRC V under any of the
Basic Documents, or in any certificate or report furnished
pursuant to any of the Basic Documents, shall prove to have
been untrue or incorrect in any material respect when made;
provided, however, if such default has not been committed
-------- -------
voluntarily and is capable of being cured, it shall be deemed
a default hereunder only if it shall continue or fail to be
cured, or the circumstance or condition in respect of which
such misrepresentation or warranty was incorrect shall not
have been eliminated or otherwise cured, for a period of 30
days after such Person shall have been given a written notice
by Radian, the Trustee or the Trust Collateral Agent
specifying such default or incorrect representation or
warranty and requiring it to be remedied;
(ii) any covenant made by any of the Issuer, the Parent, TFC, the
Servicer, or TFCRC V under any of the Basic Documents (other
than any covenant described in clause (iii) below), shall be
-----------
breached in any material respect; provided, however, if such
-------- -------
breach in the observance or performance of such covenant has
not been committed voluntarily and is capable of being cured,
it shall be deemed a default hereunder only if it shall
continue or fail to be cured, or the circumstance or
condition in respect of which such covenant was breached
shall not have been eliminated or otherwise cured, for a
period of 30 days after such Person shall have been given a
written notice by Radian, the Trustee or the Trust Collateral
Agent specifying such breach and requiring it to be remedied;
or
(iii) any of the Issuer, TFC or TFCRC V 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:
56
-------------------------------------------------------------------------------
Period Maximum Percentage
------ ------------------
-------------------------------------------------------------------------------
For the January, February and March 2002 1.53%
Determination Dates
-------------------------------------------------------------------------------
For the April, May and June 2002 5.33%
Determination Dates
-------------------------------------------------------------------------------
For the July, August and September 2002 12.65%
Determination Dates
-------------------------------------------------------------------------------
For the October, November and December 2002 19.41%
Determination Dates
-------------------------------------------------------------------------------
For the January, February and March 2003 19.75%
Determination Dates
-------------------------------------------------------------------------------
For the April, May and June 2003 20.53%
Determination Dates
-------------------------------------------------------------------------------
For the July, August and September 2003 21.51%
Determination Dates
-------------------------------------------------------------------------------
For the October, November and December 2003 22.50%
Determination Dates
-------------------------------------------------------------------------------
For the January, February and March 2004 23.48%
Determination Dates
-------------------------------------------------------------------------------
For the April, May and June 2004 24.47%
Determination Dates
-------------------------------------------------------------------------------
For the July, August and September 2004 26.40%
Determination Dates
-------------------------------------------------------------------------------
For the October 2004 Determination Date and 26.43%
thereafter
-------------------------------------------------------------------------------
(d) (i) the Issuer, TFC or TFCRC V 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;
57
(e) (i) any of the Issuer, TFC or TFCRC V 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 V 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 V 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 V
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 Available Funds with respect to such
related Payment Date and the amounts available in the Spread Account (prior
to withdrawals therefrom in accordance with the terms of the Spread Account
under the Sale and Servicing Agreement) any amounts payable on such related
Payment Date pursuant to clauses (i), (ii), (iii) or (v) of Section 5.7(a)
--------------
of the Sale and Servicing Agreement have not been paid in full;
(g) with respect to (i) the April 2002 Determination Date, the
Delinquency Ratio shall be greater than 21.46%; (ii) the May 2002
Determination Date, the arithmetic average of the Delinquency Ratios for
such Determination Date and the preceding Determination Date shall be
greater than 21.46% and (iii) each subsequent Determination Date described
below, any Determination Date described below, the arithmetic average of
the Delinquency Ratios for such Determination Date and the two immediately
preceding Determination Dates shall be greater than the percentage set
forth below opposite the period during which such Determination Date
occurs:
--------------------------------------------------------------------------------
Period Maximum Percentage
------ ------------------
--------------------------------------------------------------------------------
For each Determination Date occurring prior to the 21.46%
June 2002 Determination Date
--------------------------------------------------------------------------------
For the June 2002 Determination Date through the 24.68%
December 2002 Determination Date
--------------------------------------------------------------------------------
For each Determination Date occurring after the 30.07%
December 2002 Determination Date
--------------------------------------------------------------------------------
58
(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,
Radian may exercise any one or more of the rights and remedies set forth below:
(i) declare all or a portion of the Premium Supplement that has
accrued or will accrue payable, and the same shall thereupon (A)
be immediately due and payable to the extent then accrued and
(B) become immediately due and payable upon accrual to the
extent accruing thereafter, whether or not Radian shall have
declared an "Insurance Agreement Event of Default" or shall have
exercised, or be entitled to exercise, any other rights or
remedies hereunder;
(ii) exercise any rights and remedies available under the Basic
Documents in its own capacity or in its capacity as the Person
entitled to exercise the rights of the Controlling Party under
the Basic Documents, including, without limitation, its right to
accelerate the Notes, to sell the Receivables, or to terminate
TFC as Servicer and to appoint a substitute Servicer, as
applicable; or
(iii) take whatever action at law or in equity may appear necessary or
desirable in its judgment to enforce performance of any
obligation of the Issuer, the Parent, TFC or TFCRC V under the
Basic Documents.
59
(b) Unless otherwise expressly provided, no remedy herein conferred
upon or reserved is intended to be exclusive of any other available remedy, but
each remedy shall be cumulative and shall be in addition to other remedies given
under the Basic Documents or existing at law or in equity. No delay or failure
to exercise any right or power accruing under any Transaction Document upon the
occurrence of any Event of Default or otherwise shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right or power
may be exercised from time to time and as often as may be deemed expedient. In
order to entitle Radian to exercise any remedy reserved to Radian in this
Article VI, it shall not be necessary to give any notice, other than such notice
----------
as may be expressly required in this Article VI.
----------
(c) If any proceeding has been commenced to enforce any right or
remedy under this Insurance Agreement and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to Radian, then
and in every such case the parties hereto shall, subject to any determination in
such proceeding, be restored to their respective former positions hereunder,
and, thereafter, all rights and remedies of Radian shall continue as though no
such proceeding had been instituted.
(d) Radian shall have the right, to be exercised in its complete
discretion, to waive compliance with any covenant, or waive any Default or
Insurance Agreement Event of Default or collection of Premium Supplement by a
writing setting forth the terms, conditions and extent of such waiver signed by
Radian and delivered to the Issuer, the Parent, TFC or TFCRC V, as the case may
be. Any such waiver may only be effected in writing duly executed by Radian, and
no other course of conduct shall constitute a waiver of any provision hereof.
Unless such writing expressly provides to the contrary, any waiver so granted
shall extend only to the specific event or occurrence so waived and not to any
other similar event or occurrence.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.01. Amendments, Etc. No amendment or waiver of any provision
---------------
of this Insurance Agreement, nor consent to any departure therefrom, shall in
any event be effective unless in writing and signed by all of the parties
hereto, with written notice thereof to the Rating Agency in the case of any
material amendment or waiver; provided that any waiver so granted shall extend
--------
only to the specific event of occurrence so waived and not to any other similar
event or occurrence which occurs subsequent to the date of such waiver. No act
or course of dealing shall be deemed to constitute an amendment, modification or
termination hereof.
Section 7.02. Notices. Except to the extent otherwise expressly
-------
provided herein, all notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (and if sent by mail,
certified or registered, return receipt requested) or facsimile transmission
and, unless otherwise expressly provided herein, shall be deemed to have been
duly given or made when delivered by hand, or three (3) Business Days after
being deposited in the mail, postage prepaid, or, in the case of facsimile
transmission, when sent, addressed as follows
60
or to such other address or facsimile number as set forth in a written notice
delivered by a party to each other party hereto:
If to TFC, the Parent or the Servicer:
-------------------------------------
The Finance Company
TFC Enterprises, Inc.
0000 Xxxxx Xxxx Xxxx, Xxxxx 000X
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Tray, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxx X. Paris, Jr.
Williams, Mullen, Xxxxx, Xxxxxxx P.C.
000 Xxx Xxxxxxxx Xxxxxx,
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to TFCRC V:
-------------
0000 Xxxxx Xxxx Xxxx, Xxxxx 000X
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Tray, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxx X. Paris, Jr.
Williams, Mullen, Xxxxx, Xxxxxxx P.C.
000 Xxx Xxxxxxxx Xxxxxx,
Xxxxxxxx Xxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Issuer:
----------------
TFC Automobile Receivables Trust 2002-1
c/o Wilmington Trust Company
Xxxxxx Square North
0000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
61
Attention: Corporate Trust Administration
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to Radian:
------------
Radian Asset Assurance Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attention: Chief Risk Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(in each case in which notice or other communication to Radian refers to an
Insurance Agreement Event of Default, a claim on the Policy or with respect to
which failure on the part of Radian to respond shall be deemed to constitute
consent or acceptance, then a copy of such notice or other communication should
also be sent to the attention of each of 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, Backup Servicer and P.O. Box Owner:
-----------------------------------------------------------------------------
Xxxxx Fargo Bank Minnesota, National Association
Sixth Street and Marquette Avenue, MAC N9311-161
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Corporate Trust Services/Asset-Backed Administration
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Successor Servicer:
----------------------------
Xxxxx Fargo Financial America, Inc.
00 Xxxxxxx Xxxxx, Xxxxx 0000
Xxxx Xxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx Fargo Financial, Inc.
000 Xxxxxx Xxxxxx
Xxx Xxxxxx, Xxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
62
Section 7.03. No Waiver; Remedies and Severability. No failure on the part
------------------------------------
of Radian to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law. The parties further agree that the holding by any
court of competent jurisdiction that any remedy pursued by Radian hereunder is
unavailable or unenforceable shall not affect in any way the ability of Radian
to pursue any other remedy available to it. In the event any provision of this
Insurance Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof.
Section 7.04. Payments.
--------
(a) All payments to Radian hereunder shall be made in lawful
currency of the United States and in immediately available funds, shall be
made prior to 1:00 p.m. (New York City time) on the date such payment is
due by wire transfer pursuant to the wire transfer instructions and bank
account information set forth in the Premium Letter, or to such other
office or account as Radian may direct. Payments received by Radian after
1:00 p.m. (New York City time) shall be deemed to have been received on the
next succeeding Business Day, and such extension of time shall be included
in computing interest, commissions or fees, if any, in connection with such
payment.
(b) Whenever any payment under this Insurance Agreement shall be
stated to be due on a day which is not a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time
shall in such cases be included in computing interest, commissions or fees,
if any, in connection with such payment.
(c) Unless otherwise specified herein, Radian shall be entitled
to interest on all amounts owed to Radian under this Insurance Agreement,
together with interest on any and all amounts remaining unpaid (to the
extent permitted by law, if in respect of any unpaid amounts representing
interest) from the date such amounts become due until paid in full (after
as well as before judgment), at a rate of interest equal to the Prime Rate
from time to time in effect plus 2.0%.
(d) In the event of any payment by Radian for which it is
entitled to be reimbursed or indemnified as provided above, each of the
Issuer, TFC and TFCRC V agrees to accept the voucher or other evidence of
payment as prima facie evidence of the propriety thereof and the liability
therefor to Radian.
SECTION 7.05. GOVERNING LAW. THIS INSURANCE AGREEMENT SHALL BE CONSTRUED,
-------------
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BEs
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.
63
Section 7.07. Paragraph Headings, Etc. The headings of paragraphs contained
-----------------------
in this Insurance Agreement are provided for convenience only. They form in no
part of this Insurance Agreement and shall not affect its construction or
interpretation.
Section 7.08. No Petition. Each of the parties hereto agrees that it will
-----------
not institute against, or join any other Person in instituting against, the
Issuer or the Trust Property any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal or
state bankruptcy or similar law, for one year and one day after satisfaction of
all of the Issuer's payment obligations under the Notes, the Premium Letter and
this Insurance Agreement. The provisions of this Section 7.08 shall survive the
------------
termination of this Insurance Agreement.
Section 7.09. Consent to Jurisdiction. (a) THE PARTIES HERETO HEREBY
-----------------------
IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE STATE OF NEW YORK LOCATED
IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN
ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN CONNECTION WITH
ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREUNDER OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD OR 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 V 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 V agrees that service of such process upon
such Person shall constitute personal service of such process upon it.
64
(d) Nothing contained in the Agreement shall limit or affect
Radian's right to serve process in any other manner permitted by law or to
start legal proceedings relating to any of the Transaction Documents
against TFC or TFCRC V or their respective property in the courts of any
jurisdiction.
Section 7.10. Consent of Radian. In the event that Radian's consent is
-----------------
required under any of the Transaction Documents, the determination whether to
grant or withhold such consent shall be made by Radian in its sole discretion
without any implied duty towards any other Person, except as otherwise expressly
provided therein.
Section 7.11. Jury Trial Waiver. EACH PARTY HERETO HEREBY WAIVES, TO THE
-----------------
FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH
ANY OF THE TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREUNDER. EACH PARTY 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
65
under them and (iv) under no circumstances shall Wilmington Trust Company
be personally liable for the payment of any indebtedness or expenses of the
Issuer or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaking by the Issuer
under this Insurance Agreement or any related documents.
Section 7.13. Third Party Beneficiary. Each of TFC, the Servicer, TFCRC V,
-----------------------
the Issuer, the Trustee, the Trust Collateral Agent, the P.O. Box Owner, the
Backup Servicer and the Successor Servicer hereby agrees that Radian shall have
all of the rights of a third-party beneficiary in, to, under and in respect of
the Sale and Servicing Agreement and the Indenture, and hereby incorporates and
restates each of its respective, representations, warranties, undertakings,
covenants and understandings, all as set forth therein, for the benefit of
Radian.
Section 7.14. Entire Agreement. This Insurance Agreement, the Premium
----------------
Letter and the Policy set forth the entire agreement between the parties with
respect to the subject matter hereof and thereof, and this Insurance Agreement
supersedes and replaces any agreement or understanding that may have existed
between the parties prior to the date hereof in respect of any such subject
matter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
66
IN WITNESS WHEREOF, the parties hereto have executed this
Insurance Agreement, all as of the day and year first above mentioned.
RADIAN ASSET ASSURANCE INC.
By: ________________________________
Name:
Title:
TFC RECEIVABLES CORPORATION V
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 Backup
Servicer
By: ________________________________
Name:
Title:
XXXXX FARGO FINANCIAL AMERICA, INC.,
as Successor Servicer
By: ________________________________
Name:
Title:
TFC AUTOMOBILE RECEIVABLES TRUST
2002-1
By: WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Owner Trustee
By: ________________________________
Name:
Title:
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 19, 2002 (the "Sale and Servicing Agreement") among TFC Automobile
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Receivables Trust 2002-1 as issuer (the "Issuer"), The Finance Company ("TFC")
------ ---
as servicer (the "Servicer"), Radian Asset Assurance Inc., ("Radian") TFC
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Receivables Corporation V as seller ("TFCRC V"), Xxxxx Fargo Bank Minnesota,
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National Association (individually "Xxxxx Fargo") as trust collateral agent,
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backup servicer and P.O. box owner, and Xxxxx Fargo Financial America, Inc.
(individually, "Xxxxx Fargo Financial"), as successor servicer; (ii) the
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Insurance and Indemnity Agreement dated as of March 19, 2002 (the "Insurance
---------
Agreement") among Radian, the Issuer, TFCRC V, the Servicer, Xxxxx Fargo as
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trustee, trust collateral agent, Backup servicer and P.O. box owner and Xxxxx
Fargo Financial, as successor servicer; (iii) the other Basic Documents (as
defined under the Sale and Servicing Agreement); and (iv) the transactions
contemplated by the agreements listed in clauses (i) through (iii) above, the
following table shall be used to define delinquency categories for contracts
with monthly Scheduled Receivable Payments ("Monthly-Pay Contracts") and
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contracts with more frequent Scheduled Receivable Payments ("Non-monthly-Pay
---------------
Contracts"):
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Monthly-Pay Contracts* Non-Monthly-Pay Contracts** Delinquency
(# Months Delinquent) (# Weeks Delinquent) Category
---------------------------------------------------------------------------------------------------
0 0-5 Current
1 6-9 30
2 10-13 60
3 14-17 90
4 18-21 120
5 22-25 150
6 26+ 180+
2. In accordance with TFC's customary policy, in assigning a
delinquency category to any contract, a single partial payment of at least 51%
of a Scheduled Receivable Payment (a "One-Time Partial Payment") shall prevent
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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 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]
