EXECUTION COPY
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MBIA INSURANCE CORPORATION,
as Insurer
FLAGSHIP CREDIT CORPORATION
as Originator and as Servicer
FLAGSHIP AUTO LOAN FUNDING LLC 1999-II,
as Seller
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2,
as Issuer
PRUDENTIAL SECURITIES SECURED FINANCING CORPORATION,
as Depositor
FLAGSHIP SPECIAL MEMBER, INC.
as Special Member
FIRST UNION NATIONAL BANK,
not in its individual capacity but solely as Owner Trustee
COPELCO FINANCIAL SERVICES GROUP, INC.
as Back-up Servicer and as Guarantor
and
▇▇▇▇▇▇ TRUST AND SAVINGS BANK,
as Indenture Trustee and as Collateral Agent
INSURANCE AGREEMENT
$250,000,000
Flagship Auto Receivables Owner Trust 1999-2
$117,000,000 6.420% Class A-1 Notes
$60,000,000 6.705% Class A-2 Notes
$43,000,000 6.835% Class A-3 Notes
$30,000,000 6.900% Class A-4 Notes
Dated as of November 1, 1999
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ARTICLE I
DEFINITIONS......................................................................................................1
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representation and Warranties of the Servicer, the Seller, the Originator, the
Guarantor, the Special Member and the Issuer...................................................9
Section 2.02. Affirmative Covenants of the Servicer, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer.................................................................13
Section 2.03. Negative Covenants of the Servicer, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer.................................................................21
Section 2.04. Representations, Warranties and Covenants of Indenture Trustee, the Collateral Agent
and Back-up Servicer..........................................................................22
Section 2.05. Representations and Warranties of the Depositor...............................................24
Section 2.06. Affirmative Covenants of the Depositor........................................................27
Section 2.07. Negative Covenants of the Depositor...........................................................30
Section 2.08. Representations, Warranties and Covenants of the Owner Trustee................................30
ARTICLE III
THE POLICY; REIMBURSEMENT
Section 3.01. Issuance of the Policy........................................................................31
Section 3.02. Payment of Fees and Premium...................................................................33
Section 3.03. Reimbursement and Additional Payment Obligation...............................................34
Section 3.04. Indemnification; Limitation of Liability......................................................36
Section 3.05. Payment Procedure.............................................................................39
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of the Insurance Agreement...............................................39
Section 4.02. Further Assurances and Corrective Instruments.................................................40
Section 4.03. Obligations Absolute..........................................................................40
Section 4.04. Assignments; Reinsurance; Third-party Rights..................................................42
Section 4.05. Liability of the Insurer......................................................................43
Section 4.06. Parties Will Not Institute Insolvency Proceedings.............................................43
Section 4.07. Indenture Trustee, the Collateral Agent, Issuer, Back-up Servicer, Originator, the
Depositor, the Seller, the Owner Trustee, the Guarantor, the Special Member and
Servicer To Join in Enforcement Action........................................................43
Section 4.08. Subrogation...................................................................................43
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ARTICLE V
DEFAULTS; REMEDIES
Section 5.01. Defaults......................................................................................43
Section 5.02. Remedies; No Remedy Exclusive.................................................................45
Section 5.03. Waivers.......................................................................................46
ARTICLE VI
MISCELLANEOUS
Section 6.01. Amendments, Etc...............................................................................46
Section 6.02. Notices.......................................................................................46
Section 6.03. Severability..................................................................................49
Section 6.04. Governing Law.................................................................................49
Section 6.05. Consent to Jurisdiction.......................................................................49
Section 6.06. Consent of the Insurer........................................................................50
Section 6.07. Counterparts..................................................................................50
Section 6.08. Headings......................................................................................50
Section 6.09. Trial by Jury Waived..........................................................................50
Section 6.10. Limited Liability.............................................................................51
Section 6.11. Entire Agreement..............................................................................51
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INSURANCE AGREEMENT
This INSURANCE AGREEMENT (this "Insurance Agreement"), is dated as of November
1, 1999 by and among FLAGSHIP CREDIT CORPORATION, as Originator, (together with
their permitted successors and assigns the "Originator") and in its capacity as
Servicer under the Sales and Servicing Agreement described below (together with
its permitted successors and assigns the "Servicer"), FLAGSHIP AUTO LOAN FUNDING
LLC 1999-II, as Seller (the "Seller"), FLAGSHIP AUTO RECEIVABLES OWNER TRUST
1999-2, as Issuer, (the "Issuer"), PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, as Depositor, (the "Depositor"), FLAGSHIP SPECIAL MEMBER, INC., as
Special Member (the "Special Member"), FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Owner Trustee (the "Owner Trustee"), COPELCO
FINANCIAL SERVICES GROUP, INC. in its capacity as Back-up Servicer (the "Back-up
Servicer") and in its capacity as Guarantor (the "Guarantor"), and ▇▇▇▇▇▇ TRUST
AND SAVINGS BANK, in its capacity as Indenture Trustee (the "Indenture Trustee")
and in its capacity as Collateral Agent (the "Collateral Agent").
WHEREAS, the Indenture dated as of November 1, 1999 by and among the
Issuer, the Servicer and the Indenture Trustee (the "Indenture") relating to the
$250,000,000 Flagship Auto Receivables Owner Trust 1999-2 $117,000,000 6.420%
Class A-1 Notes $60,000,000 6.705% Class A-2 Notes $43,000,000 6.835% Class A-3
Notes $30,000,000 6.900% Class A-4 Notes (the "Securities") provides for, among
other things, the issuance of asset-backed notes, and the Insurer has issued its
note guaranty insurance policy (the "Policy") that guarantees certain payments
due from the Issuer on the Securities; and
WHEREAS, the Insurer shall be paid an insurance premium pursuant to the
Indenture and the details of such premium are set forth herein; and
WHEREAS, the Servicer, the Guarantor, the Seller, the Depositor, the
Originator and the Issuer have undertaken certain obligations in consideration
for the Insurer's issuance of the Policy;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The terms defined in this Article I shall have the meanings provided herein
for all purposes of this Insurance Agreement, unless the context clearly
requires otherwise, in both singular and plural form, as appropriate. Unless the
context clearly requires otherwise, all capitalized terms used herein and not
otherwise defined in this Article I shall have the meanings assigned to them in
the Indenture. All words used herein shall be construed to be of such gender or
number, as the circumstances require. This "Insurance Agreement" shall mean this
Insurance
Agreement as a whole and as the same may, from time to time hereafter,
be amended, supplemented or modified. The words "herein," "hereby," "hereof,"
"hereto," "hereinabove" and "hereinbelow," and words of similar import refer to
this Insurance Agreement as a whole and not to any particular paragraph, clause
or other subdivision hereof, unless otherwise specifically noted.
"Business Day" means any day other than (i) a Saturday or a Sunday, (ii) a
day on which the Insurer is closed or (iii) a day on which banking institutions
in New York City or in the city in which the corporate trust office of the
Indenture Trustee under the Indenture is located are authorized or obligated by
law or executive order to close.
"Change of Control" means, with respect to Flagship a change from Copelco
possessing the power to direct or cause the direction of the management and
policies of Flagship, through the ownership of voting securities, unless (i)
such control is held by Itochu International, Inc. and (ii) Itochu
International, Inc. owns a larger percentage of voting securities of Copelco
than any other shareholder.
"Code" means the Internal Revenue Code of 1986, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Collateral" means the property of the Issuer pledged to the Indenture
Trustee pursuant to the Indenture.
"Collateral Agent" means initially ▇▇▇▇▇▇ Trust and Savings Bank and any
successor appointed pursuant to the Spread Account Agreement.
"Commission" means the Securities and Exchange Commission.
"Commitment" means the letter of commitment from the Insurer to Flagship
dated November 22, 1999.
"Copelco" means Copelco Financial Services Group, Inc.
"Date of Issuance" means the date on which the Policy is issued as
specified therein.
"Default" means any event which results, or which with the giving of notice
or the lapse of time or both would result, in an Event of Default.
"Depositor Purchase Agreement" means the Depositor Purchase Agreement dated
as of November 1, 1999 among the Seller and the Depositor as the same may be
amended or supplemented from time to time in accordance with the terms thereof.
"Event of Default" means any event of default specified in Section 5.01
hereof.
"Flagship" means Flagship Credit Corporation.
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"Financial Statements" means, with respect to the Guarantor, the Originator
and the Servicer, the balance sheets and the statements of income, retained
earnings and cash flows and the notes thereto which have been provided to the
Insurer.
"Fiscal Agent" means the Fiscal Agent, if any, designated pursuant to the
terms of the Policy.
"Guaranty Agreement" means the Guaranty dated as of November 1, 1999 by the
Guarantor.
"Indemnification Agreement" means the Indemnification Agreement dated as of
November 17, 1999 among the Insurer, the Originator and the Underwriter as the
same may be amended or supplemented from time to time in accordance with the
terms thereof.
"Indenture Trustee" means ▇▇▇▇▇▇ Trust and Savings Bank, an Illinois
banking corporation, as indenture trustee under the Indenture, and any successor
to the Indenture Trustee under the Indenture.
"Insurance Agreement Indenture Indicator" means the occurrence of any of
the following events:
(1) a demand for payment under the Policy;
(2) an Insolvency Event relating to Copelco, any Subsidiary or the
Issuer;
(3) the Issuer becomes taxable as an association (or publicly traded
partnership taxable as a corporation) for federal or state income tax
purposes;
(4) the sum of the amount of Available Funds with respect to any
Payment Date plus the amount (if any) available from the Spread Account is
less than the sum of the amounts described in clauses (i) through (vi)
under Section 4.07(a) in the Indenture.
(5) the occurrence of a Servicer Termination Event under the Sales and
Servicing Agreement; and
(6) any failure by the Servicer, the Seller, the Originator, Copelco
or the Issuer to observe or perform in any material respect any other
covenants, representations, warranties or agreements in the Sales and
Servicing Agreement, the Indenture or any of the other Transaction
Documents, which failure continues past any applicable cure period, if any,
set forth in the related Transaction Documents.
The Insurer shall have the right in its sole discretion without the
consent of any of the Noteholders or the Indenture Trustee to waive any
Insurance Agreement Indenture Indicator. In addition, upon the occurrence
of an Insurance Agreement Indenture Indicator, the Insurer shall have the
right in its sole discretion to notify the Indenture Trustee in writing
that such Insurance Agreement Indenture Indicator constitutes an Event of
Default under the Indenture pursuant to Section 7.01 (a)(iii) of the
Indenture.
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"Insurance Agreement Indicator" means the occurrence of any one of the
following events:
(1) for any Determination Date, the average of the Delinquency Ratio
for the four previous months exceeds 8.08%;
(2) for any Determination Date, the average of the Net Loss Rate for
the four previous months exceeds 10%.
(3) for any Determination Date in a given time period set forth in the
table below, the Cumulative Net Loss Percentage exceeds the level specified
for such point in time:
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Time Period Cumulative Net Loss Percentage
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Closing through June 2000 1.75%
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July 2000 through September 2000 2.40%
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October 2000 through December 2001 3.70%
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January 2001 through March 2001 5.35%
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April 2001 through June 2001 6.85%
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July 2001 through September 2001 8.05%
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October 2001 through December 2002 9.15%
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January 2002 through March 2002 10.05%
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April 2002 through June 2002 10.75%
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After June 2002 11.30%
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(4) Copelco fails to maintain Tangible Capital Funds at all times in
an amount equal to or in excess of the sum of (a) $200,000,000 plus (b)
seventy-five percent (75%) of its net income after December 31, 1997 (not
reduced by any net loss), as reported on Copelco's income statements, and
to be computed and tested against Copelco's quarterly financial statements;
(5) Copelco incurs Total Liabilities, including contingent liabilities
in the form of letters of credit and other credit supports arising from
asset securitization and indebtedness for borrowed money, in excess of
seven (7) times Tangible Capital Funds and to be computed and tested
against Copelco's quarterly Financial Statements;
(6) Copelco fails to maintain, on a rolling four quarter basis, a
minimum ratio of (a) income before taxes (but after extraordinary items)
plus total interest expense to (b) total interest expense, of at least 1.25
to 1, to be computed and tested against Copelco's consolidated statements
of income;
(7) Itochu International, Inc. or any Person rated not less than
"BBB-" by S&P and "Baa3" by Moody's fails to own a larger percentage of
voting securities of Copelco than any other shareholder;
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(8) a Change in Control of Flagship;
(9) a failure by Copelco or Flagship to provide to the Insurer
quarterly un-audited financial statements within 60 days of the end of each
quarter and audited annual financial statements within 135 days of the end
of each fiscal year. Such reporting shall include consolidating statements,
be prepared by a nationally recognized independent accounting firm
acceptable to the Insurer and contain no qualified opinions;
(10) a failure by Copelco or Flagship to deliver an annual budget to
the Insurer within 135 days of the end of each fiscal year;
(11) a failure by Copelco to deliver to the Insurer a quarterly
covenant compliance certificate which shall include a calculation of each
required covenant, signed by the Vice President - Finance of Copelco or
other authorized senior Copelco officer;
(12) a failure by Copelco to deliver to the Insurer a copy of any
amendment, modification, restatement or supplement of Copelco's Revolving
Bank Facility or any new agreement in replacement of or in addition to the
Revolving Bank Facility within 45 days of such execution thereof.
(13) the occurrence of a Servicer Termination Event or Insurance
Agreement Indenture Indicator;
(14) an Insolvency Event relating to Copelco, any Subsidiary or the
Issuer;
(15) a failure by Copelco or the Servicer to perform or observe any
provision of the Transaction Documents, including the furnishing of reports
and making payments when due, which is not cured within the applicable cure
period, if any, set forth in the related Transaction Documents;
(16) a default under any of the Transaction Documents which is not
cured within the applicable cure period, if any, set forth in the related
Transaction Documents;
(17) the cessation of a valid perfected first priority security
interest in the Auto Loans in favor of the Indenture Trustee; and
(18) a demand for payment under the Policy.
The Insurer shall have the right in its sole discretion without the consent of
any of the Noteholders or Indenture Trustee to waive or amend any Insurance
Agreement Indicator; provided, however, that with respect to the occurrence of
any event described in clauses (4) through (8) above, such waiver or amendment
shall not be unreasonably withheld if the occurrence of such event does not have
a material adverse effect on the Notes or the rating of the Notes without regard
to the Policy.
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"Investment Company Act" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended.
"Itochu International Affiliate" shall have the meaning set forth in the
Revolving Bank Facility.
"Late Payment Rate" means, for any date of determination, the rate of
interest as it is publicly announced by Citibank, N.A. at its principal office
in New York, New York as its prime rate (any change in such prime rate of
interest to be effective on the date such change is announced by Citibank, N.A.)
plus 3%. The Late Payment Rate shall be computed on the basis of a year of 365
days, calculating the actual number of days elapsed. In no event shall the Late
Payment Rate exceed the maximum rate permissible under any applicable law
limiting interest rates.
"Liabilities" shall have the meaning ascribed to such term in Section
3.04(a) hereof.
"Losses" means (a) any actual out-of-pocket loss paid by the Insurer or its
respective parents, subsidiaries and affiliates or any shareholder, director,
officer, employee, agent or any "controlling person" (as such term is used in
the Securities Act) of any of the foregoing, and (b) any actual out-of-pocket
costs and expenses paid by such party, including reasonable fees and expenses of
its counsel, to the extent not paid, satisfied or reimbursed from funds provided
by any other Person (provided that the foregoing shall not create or imply any
obligation to pursue recourse against any such other Person).
"Material Adverse Change" means, in respect of any Person, a material
adverse change in (a) the business, financial condition, results of operations
or properties of such Person taken as a whole or (b) the ability of such Person
to perform its obligations under any of the Transaction Documents.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc., a Delaware corporation,
and any successor thereto, and, if such corporation shall for any reason no
longer perform the functions of a securities rating agency, "Moody's" shall be
deemed to refer to any other nationally recognized rating agency designated by
the Insurer.
"Obligor" means the original obligor under each Auto Loan, including any
guarantor of such obligor and their respective successors.
"Offering Document" means the Prospectus dated November 8, 1999, the
preliminary Prospectus Supplement dated November 8, 1999 and the final
Prospectus Supplement dated November 17, 1999, (and any amendment or supplement
thereto) and any other offering document in respect of the Securities prepared
by the Seller, the Depositor, the Servicer, the Originator or the Issuer that
makes reference to the Policy.
"Opinion Facts and Assumptions" means the facts and assumptions contained
in the insolvency opinion dated November 24, 1999 by ▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇ insofar
as they relate to the Originator, the Seller, the Depositor, the Special Member
and the Issuer.
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"Owner Trust Purchase Agreement" means the Owner Trust Purchase Agreement
dated as of November 1, 1999 among the Issuer and the Depositor as the same may
be amended or supplemented from time to time in accordance with the terms
thereof.
"Owners" means registered holders of Securities.
"Person" means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, business or owner trust, limited
liability company, partnership or other organization or entity (whether
governmental or private).
"Premium" means the premium payable in accordance with Section 3.02 hereof.
"Premium Percentage" shall have the meaning ascribed to such term in
Section 3.02 hereof.
"Revolving Bank Facility" means the Amended and Restated Credit Agreement
dated October 27,1998.
"Sales and Servicing Agreement" means the Sales and Servicing Agreement
dated as of November 1, 1999 among the Originator, the Servicer, the Seller, the
Issuer, the Back-up Servicer and the Indenture Trustee as the same may be
amended or supplemented from time to time in accordance with the terms thereof.
"Securities Act" means the Securities Act of 1933, including, unless the
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.
"Securities" shall have the meaning set forth in the first "Whereas" clause
above.
"S&P" means Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and any successor thereto, and, if such corporation
shall for any reason no longer perform the functions of a securities rating
agency, "S&P" shall be deemed to refer to any other nationally recognized rating
agency designated by the Insurer.
"Subordinated Debt" means unsecured debt to the extent not due and payable
prior to, or subject to scheduled prepayments prior to, the "Revolving
Termination Date" (as defined in the Revolving Bank Facility); provided,
however, that debt from an Itochu International Affiliate shall not be included
in Subordinated Debt.
"Subsidiary" shall mean a corporation or other entity the shares of stock
or other equity interests of which having ordinary voting power (other than
stock or other equity interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of directors or
other managers of such corporation are at the time owned, or the management of
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which is otherwise controlled, directly or indirectly through one or more
intermediaries or both, by Copelco.
"Tangible Capital Funds" means, as of the time of determination, Tangible
Net Worth plus Subordinated Debt.
"Tangible Net Worth" means Total Assets less Total Liabilities computed in
accordance with generally accepted accounting principles, less the aggregate net
amount of the following items to the extent, if any, that they were included in
Total Assets or deducted from Total Liabilities in computing shareholders'
equity:
(a) All licenses, patents, copyrights, trade names, trademarks,
goodwill or any premium paid in excess of the book value of purchased
assets, experimental or organizational expense, unamortized debt discount
and expense, and all other assets which under generally accepted accounting
principles are deemed intangible;
(b) Any write-up of assets (other than current assets) made after the
date of the Revolving Bank Facility;
(c) All assets located outside the United States of America as defined
in the Revolving Bank Facility; and
(d) Deferred assets other than prepaid insurance and taxes.
Any receivables from an Itochu International Affiliate arising under any
tax sharing arrangement shall only be included in the calculation of Tangible
Net Worth as a deduction from Total Assets if the existing bank group for the
Revolving Bank Facility fails to approve an amendment to such agreement to
exclude this amount.
"Term of the Insurance Agreement" shall be determined as provided in
Section 4.01 hereof.
"Total Assets" means the total assets of Copelco and its Subsidiaries
computed on a consolidated basis in accordance with generally accepted
accounting principles.
"Total Liabilities" means the total liabilities of Copelco and its
Subsidiaries (other than debt that is issued by a special purpose subsidiary
that is nonrecourse to Copelco), including, without limitation, deferred taxes,
computed on a consolidated basis in accordance with generally accepted
accounting principles.
"Transaction" means the transactions contemplated by the Transaction
Documents, including the transactions described in the Offering Document.
"Transaction Documents" means this Insurance Agreement, the Commitment, the
Indenture, the Sales and Servicing Agreement, the Trust Agreement, the Depositor
Purchase Agreement, the Owner Trust Purchase Agreement, the Guaranty Agreement,
the Indemnification
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Agreement, the Spread Account Agreement, the Offering Document, the Securities
and the Underwriting Agreement.
"Trust Agreement" means the Trust Agreement dated as of November 1, 1999
among the Depositor, the Originator and the Owner Trustee as the same may be
amended or supplemented from time to time in accordance with the terms thereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939, including,
unless the context otherwise requires, the rules and regulations thereunder, as
amended from time to time.
"Underwriter " means Prudential Securities Incorporated.
"Underwriting Agreement" means the Underwriting Agreement between the
Originator, the Depositor and the Underwriter with respect to the offer and sale
of the Securities, as the same may be amended from time to time.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. REPRESENTATION AND WARRANTIES OF THE SERVICER, THE SELLER,
THE ORIGINATOR, THE GUARANTOR, THE SPECIAL MEMBER AND THE ISSUER. The Servicer,
the Seller, the Originator, the Guarantor, the Special Member and the Issuer,
respectively, represent, warrant and covenant as of the Date of Issuance, each
as to those matters relating to itself, as follows:
(a) Due Organization and Qualification. The Servicer, the Seller, the
Originator, the Guarantor, the Special Member and the Issuer are each a
corporation, owner trust, or limited liability company duly organized,
validly existing and in good standing under the laws of its respective
jurisdiction of organization. Each of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member and the Issuer is duly
qualified to do business, is in good standing and has obtained all
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 Transaction Document unenforceable in any respect or would have
a material adverse effect upon the Transaction, the Owners or the Insurer.
(b) Power and Authority. Each of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member and the Issuer has all
necessary 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 to
consummate the Transaction.
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(c) Due Authorization. The execution, delivery and performance of the
Transaction Documents by the Servicer, the Originator, the Seller, the
Guarantor, the Special Member and the Issuer have been duly authorized by
all necessary action and do not require any additional approvals or
consents of, or other action by or any notice to or filing with, any
Person, including, without limitation, any governmental entity or the
Servicer's, the Seller's, the Originator's, the Guarantor's, the Special
Member's or the Issuer's stockholders or members, which have not previously
been obtained or given by the Servicer, the Originator, the Guarantor, the
Special Member or the Issuer.
(d) Noncontravention. None of the execution and delivery of the
Transaction Documents by the Servicer, the Seller, the Originator, the
Guarantor, the Special Member or the Issuer, the consummation of the
transactions contemplated thereby or the satisfaction of the terms and
conditions of the Transaction Documents:
(i) conflicts with or results in any breach or violation of any
provision of the organizational documents of the Servicer, the Seller,
the Originator, the Guarantor, the Special Member or the Issuer or any
law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to the
Servicer, the Seller, the Guarantor, the Originator, the Special
Member or the Issuer or any of their material properties, including
regulations issued by an administrative agency or other governmental
authority having supervisory powers over the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer;
(ii) constitutes a default by the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer under or a
breach of any provision of any loan agreement, mortgage, indenture or
other agreement or instrument to which the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer is a party
or by which any of its or their respective properties, which are
individually or in the aggregate material to the Servicer, the Seller,
the Originator, the Guarantor, the Special Member or the Issuer, is or
may be bound or affected; or
(iii) results in or requires the creation of any lien upon or in
respect of any assets of the Servicer, the Seller, the Originator, the
Guarantor, the Special Member or the Issuer, except as contemplated by
the Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or investigation
by or before any court, governmental or administrative agency or arbitrator
against or affecting the Servicer, the Seller, the Originator, the
Guarantor, the Special Member, the Issuer or any of its or their
subsidiaries, or any properties or rights of the Servicer, the Originator,
the Seller, the Guarantor, the Special Member, the Issuer or any of its or
their subsidiaries, pending or, to the Servicer's, the Seller's, the
Originator's, the Guarantor's, the Special Member's or the Issuer's
knowledge after reasonable inquiry, threatened, which in any case could
reasonably be expected to result in a Material Adverse Change
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with respect to the Servicer, the Seller, the Originator, the Guarantor,
the Special Member or Issuer.
(f) Valid and Binding Obligations. The Securities, when executed,
authenticated and issued in accordance with the Indenture, and the
Transaction Documents (other than the Securities), when executed and
delivered by the Servicer, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer, will constitute the legal, valid and binding
obligations of the Servicer, the Seller, the Originator, the Guarantor, the
Issuer and the Special Member, as applicable, 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 and
public policy considerations as to rights of indemnification for violations
of federal securities laws. None of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer will at any
time in the future deny that the Transaction Documents constitute the
legal, valid and binding obligations of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer, as applicable.
(g) Financial Statements. The Financial Statements of the Guarantor,
the Originator and the Servicer, copies of which have been furnished to the
Insurer, (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 the Guarantor, the
Originator and the Servicer as of the dates and for the periods indicated
and (iii) have been prepared in accordance with generally accepted
accounting principles 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 in respect of the Servicer, the Guarantor or the
Originator. Except as disclosed in the Financial Statements, the Servicer,
the Guarantor and the Originator are not subject to any contingent
liabilities or commitments that, individually or in the aggregate, have a
material possibility of causing a Material Adverse Change in respect of the
Servicer, the Guarantor or the Originator.
(h) Compliance With Law, Etc. No practice, procedure or policy
employed, or proposed to be employed, by the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer in the conduct
of its business violates any law, regulation, judgment, agreement, order or
decree applicable to any of them that, if enforced, could reasonably be
expected to result in a Material Adverse Change with respect to the
Servicer, the Originator, the Seller, the Guarantor, the Special Member or
the Issuer. The Servicer, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer are not in breach of or in default under any
applicable law or administrative regulation of its respective jurisdiction
of incorporation or organization, or any department, division, agency or
instrumentality thereof or of the United States or any applicable judgment
or decree or any loan agreement, note, resolution, certificate, agreement
or other instrument to which the Servicer, the Seller, the Originator, the
Guarantor, the Special Member or the Issuer is a party or is otherwise
subject which, if enforced, would have a material adverse effect on the
ability of the Servicer, the Seller, the Originator, the Guarantor, the
11
Special Member or the Issuer, as the case may be, to perform its respective
obligations under the Transaction Documents.
(i) Taxes. The Servicer, the Guarantor, the Seller, the Originator,
the Special Member and the Issuer and the Servicer's, the Seller's, the
Originator's, the Guarantor's, the Special Member's and the Issuer's parent
company or companies have filed prior to the date hereof all federal and
state tax returns that are required to be filed and paid all taxes,
including any assessments received by them that are not being contested in
good faith, to the extent that such taxes have become due, except for any
failures to file or pay that, individually or in the aggregate, would not
result in a Material Adverse Change with respect to the Servicer, the
Seller, the Originator, the Guarantor, the Special Member or the Issuer.
(j) Accuracy of Information. Neither the Transaction Documents nor
other information relating to the Auto Loans, the operations of the
Servicer, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer (including servicing or origination of loans) or the financial
condition of the Servicer, the Seller, the Originator, the Guarantor, the
Special Member or the Issuer (collectively, the "Documents"), as amended,
supplemented or superseded, furnished to the Insurer by the Servicer, the
Seller, the Originator, the Guarantor, the Special Member or the Issuer
contains any statement of a material fact by the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or Issuer which was untrue or
misleading in any material adverse respect when made. None of the Servicer,
the Seller, the Originator, the Guarantor, the Special Member or the Issuer
has any knowledge of circumstances that could reasonably be expected to
cause a Material Adverse Change with respect to the Servicer, the Seller,
the Originator, the Guarantor, the Special Member or the Issuer. Since the
furnishing of the Documents, there has been no change or any development or
event involving a prospective change known to the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer that would
render any of the Documents untrue or misleading in any material respect.
(k) Compliance With Securities Laws. The offer and sale of the
Securities comply in all material respects with all requirements of law,
including all registration requirements of applicable securities laws.
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 necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading; provided,
however, that no representation is made with respect to the information in
the Offering Document set forth under the headings "The Policy" and "The
Insurer" or the consolidated financial statements of the Insurer
incorporated by reference in the Offering Document. Neither the offer nor
the sale of the Securities has been or will be in violation of the
Securities Act or any other federal or state securities laws. The Issuer is
not required to be registered as an "investment company" under the
Investment Company Act.
(l) Transaction Documents. Each of the representations and warranties
of the Servicer, the Seller, the Originator, the Guarantor, the Special
Member and the Issuer
12
contained in the Transaction Documents is true and correct in all material
respects, and the Servicer, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer hereby make each such representation and
warranty to, and for the benefit of, the Insurer as if the same were set
forth in full herein.
(m) Solvency; Fraudulent Conveyance. The Servicer, the Seller, the
Originator, the Guarantor, the Special Member and the Issuer are solvent
and will not be rendered insolvent by the Transaction and, after giving
effect to the Transaction, none of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer will be left
with an unreasonably small amount of capital with which to engage in its
business, nor does the Servicer, the Seller, the Originator, the Guarantor,
the Special Member or the Issuer intend to incur, or believe that it has
incurred, debts beyond its ability to pay as they mature. None of the
Servicer, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer 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 the
Servicer, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer or any of their assets. The amount of consideration being
received by the Issuer upon the sale of the Securities to the Underwriter
constitutes reasonably equivalent value and fair consideration for the
interest in the Auto Loans evidenced by the Securities. The Originator is
not transferring the Auto Loans to the Seller, the Seller is not
transferring the Auto Loans to the Depositor, the Depositor is not
transferring the Auto Loans to the Issuer, the Issuer is not pledging the
Collateral to the Indenture Trustee and the Issuer is not selling the
Securities to the Underwriter, as provided in the Transaction Documents,
with any intent to hinder, delay or defraud any of the Seller's, the
Seller's, the Originator's or the Issuer's creditors.
(n) Principal Place of Business. The principal place of business of
Flagship is located in Philadelphia, Pennsylvania, the principal place of
business of the Seller is located in Philadelphia, Pennsylvania, the
principal place of business of the Guarantor is located in Mount Laurel,
New Jersey, the principal place of business of the Issuer is located in
Wilmington, Delaware and the principal place of business of the Special
Member is located in Philadelphia, Pennsylvania.
(o) Opinion Facts and Assumptions. The Opinion Facts and Assumptions
insofar as they relate to the Seller, the Originator, the Special Member
and the Issuer are true and correct as of the Date of Issuance.
Section 2.02. AFFIRMATIVE COVENANTS OF THE SERVICER, THE SELLER, THE
ORIGINATOR, THE GUARANTOR, THE SPECIAL MEMBER AND THE ISSUER. The Servicer, the
Seller, the Originator, the Guarantor, the Special Member and the Issuer hereby
agree that during the Term of the Insurance Agreement, and to the extent each of
the following applies to it, unless the Insurer shall otherwise expressly
consent in writing:
(a) Compliance With Agreements and Applicable Laws. The Servicer, the
Seller, the Originator, the Guarantor, the Special Member and the Issuer
shall not be in
13
default under the Transaction Documents and shall comply with all material
requirements of any law, rule or regulation applicable to it. None of the
Servicer, the Guarantor, the Seller, the Originator, the Special Member or
the Issuer shall agree to any amendment to or modification of the terms of
any Transaction Documents unless the Insurer shall have given its prior
written consent.
(b) Corporate Existence. The Servicer, its successors and assigns, the
Seller, its successors and assigns, the Originator, its successors and
assigns, the Guarantor, its successors and assigns, the Special Member, its
successors and assigns, and the Issuer, its successors and assigns, shall
maintain their respective existence and shall at all times continue to be
duly organized under the laws of their respective jurisdictions of
organization and duly qualified and duly authorized (as described in
section 2.01(a), (b) and (c) hereof) and shall conduct its business in
accordance with the terms of its organizational documents.
(c) Financial Statements; Accountants' Reports; Other Information. The
Servicer, the Seller, the Originator, the Guarantor, the Special Member and
the Issuer shall keep or cause to be kept in reasonable detail books and
records of account of their assets and business, including, but not limited
to, books and records relating to the Transaction. The Servicer, the
Guarantor and the Originator shall furnish or cause to be furnished to the
Insurer:
(i) Annual Financial Statements. As soon as available, and in any
event within 135 days after the close of each fiscal year of the
Servicer, the Guarantor and the Originator, the audited consolidated
balance sheets of the Servicer, the Guarantor and the Originator and
their subsidiaries as of the end of such fiscal year and the related
audited consolidated statements of income, changes in 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 generally accepted accounting principles
consistently applied and accompanied by the audit opinion of the
Servicer's, the Guarantor's and the Originator's independent
accountants (which shall be nationally recognized independent public
accounting firms acceptable to the Insurer) and by the certificate
specified in Section 2.02(e) hereof.
(ii) Quarterly Financial Statements. As soon as available, and in
any event within 60 days after each of the first three fiscal quarters
of each fiscal year of the Servicer, the Guarantor and the Originator,
the unaudited consolidated balance sheets of the Servicer, the
Guarantor and the Originator and their subsidiaries as of the end of
such fiscal quarter and the related unaudited consolidated statements
of income, changes in shareholders' equity and cash flows for such
fiscal quarter, 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 generally
accepted accounting principles
14
consistently applied and accompanied by the certificate specified in
Section 2.02(e) hereof.
(iii) Initial and Continuing Reports. On or before the Closing
Date, the Servicer will provide the Insurer a copy of the magnetic
tape to be delivered to the Indenture Trustee on the Closing Date
setting forth, as to each Auto Loan, the information required under
the definition of Schedule of Auto Loans attached as Exhibit A to the
Sales and Servicing Agreement. Thereafter, the Servicer shall deliver
to the Insurer not later than 12:00 noon, New York City time, on each
Payment Date the report required by Section 3.9 of the Sales and
Servicing Agreement.
(iv) Computer Diskette. Beginning in February 2000, the Servicer
will deliver to the Insurer on a quarterly basis a computer diskette
containing a quarterly summary of the information provided to the
Insurer pursuant to clause (iii) of this Section 2.02(c) and also
containing information similar to the information provided in the
Schedule of Auto Loans delivered to the Indenture Trustee pursuant to
the Sales and Servicing Agreement and described in Schedule A of the
Sales and Servicing Agreement.
(v) Certain Information. Upon the reasonable request of the
Insurer, the Servicer, the Guarantor, and the Originator shall
promptly provide copies of any requested proxy statements, financial
statements, reports and registration statements which the Servicer,
the Guarantor or the Originator files with, or deliver to, the
Commission or any national securities exchange.
(vi) Other Information. Promptly upon receipt thereof, copies of
all schedules, financial statements or other similar reports delivered
to or by the Servicer, the Originator, the Guarantor, the Special
Member or the Issuer pursuant to the terms of the Sales and Servicing
Agreement, promptly upon request, such other data as the Insurer may
reasonably request.
(vii) Quarterly Covenant Compliance Certificate. Copelco shall
deliver to the Insurer, concurrently with the delivery of the
financial statements required pursuant to clauses (i) and (ii) of this
Section 2.02(c), one or more certificates signed by an officer of
Copelco, authorized to execute such certificates on behalf of Copelco,
setting forth each of the calculations under the definition of
"Insurance Agreement Indicators" hereunder for the related quarter and
stating that to the best of such individual's knowledge following
reasonable inquiry, no Insurance Agreement Indicator has occurred, or
if an Insurance Agreement Indicator has occurred, specifying the
nature thereof.
(viii) Annual Budget. As soon as available, and in any event
within 135 days after the close of each fiscal year of the Servicer,
the Guarantor and the Originator, the annual budget of the Servicer,
the Guarantor and the Originator for the next succeeding fiscal year.
15
All financial statements specified in clause (i) of this Section
2.02(c) shall be furnished in consolidated form for the Servicer and all
its subsidiaries in the event the Servicer shall consolidate its financial
statements with its subsidiaries, for the Guarantor and all its
subsidiaries in the event the Guarantor shall consolidate its financial
statements with its subsidiaries, and for the Originator and its
subsidiaries in the event the Originator shall consolidate its financial
statements with its subsidiaries unless the Originator's financial
statements are consolidated with those of the Servicer or the Guarantor,
the Servicer's financial statements are consolidated with those of the
Originator or the Guarantor, or the Guarantor's financial statements are
consolidated with those of the Servicer or the Originator.
The Insurer agrees that it and its agents, accountants and attorneys
shall keep confidential all financial statements, reports and other
information delivered by the Servicer, the Originator, the Guarantor, the
Special Member or the Issuer pursuant to this Section 2.02(c) to the extent
provided in Section 2.02(f) hereof.
(d) Corporate Formalities. The Issuer, the Seller and the Special
Member shall have at least annual meetings of the members or the
shareholders, as applicable, and at least annual board of director meetings
(in each case, or written consents in lieu of the same) and shall prepare
income and franchise tax returns as appropriate. The Issuer, the Seller and
the Special Member shall deliver to the Insurer copies of the minutes of
such meetings upon written request and such tax returns promptly upon
filing but in no event later than August 31 of each year, beginning in
2000. Each of the Issuer, the Seller and the Special Member shall observe
all corporate or other formalities necessary to preserve its status a
separate legal entity. The Issuer, the Seller and the Special Member agree
that they shall not modify, alter or amend their respective organizational
documents without the prior written consent of the Insurer.
(e) Compliance Certificate. The Servicer, the Guarantor and the
Originator shall deliver to the Insurer, concurrently with the delivery of
the financial statements required pursuant to Section 2.02(c)(i) and (ii)
hereof, one or more certificates signed by an officer of the Servicer, an
officer of the Guarantor and an officer of the Originator authorized to
execute such certificates on behalf of the Servicer, the Guarantor and the
Originator stating that:
(i) a review of the Servicer's performance under the Transaction
Documents during such period has been made under such officer's
supervision;
(ii) to the best of such individual's knowledge following
reasonable inquiry, no Default or Event of Default has occurred or, if
a Default or Event of Default has occurred, specifying the nature
thereof and, if the Servicer has a right to cure pursuant to the
related Transaction Documents, stating in reasonable detail
(including, if applicable, any supporting calculations) the steps, if
any, being taken by the Servicer to cure such Default or Event of
Default or to otherwise comply with the terms of the agreement to
which such Default or Event of Default relates;
16
(iii) the attached financial statements submitted in accordance
with Section 2.02(c)(i) or (ii) hereof, as the case may be, are
complete and correct in all material respects and present fairly the
financial condition and results of operations of the Servicer, the
Guarantor, and the Originator as of the dates and for the periods
indicated, in accordance with generally accepted accounting principles
consistently applied; and
(iv) the Servicer has in full force and effect a blanket fidelity
bond (or direct surety bond) and an errors and omissions insurance
policy in accordance with the terms and requirements of Section 3.14
of the Sales and Servicing Agreement.
(f) Access to Records; Discussions With Officers and Accountants. On
an annual basis, or upon the occurrence of a Material Adverse Change, the
Servicer, the Guarantor, and the Originator shall, upon the reasonable
request of the Insurer, permit the Insurer or its authorized agents:
(i) to inspect the books and records of the Servicer, of the
Guarantor and of the Originator as they may relate to the Securities,
the obligations of the Servicer, of the Guarantor or of the Originator
under the Transaction Documents, and the Transaction;
(ii) to discuss the affairs, finances and accounts of the
Servicer, of the Guarantor or of the Originator with the chief
operating officer and the chief financial officer of the Servicer, of
the Guarantor, or of the Originator, as the case may be; and
(iii) with the Servicer's, the Guarantor's or the Originator's
consent, as applicable, which consent shall not be unreasonably
withheld, to discuss the affairs, finances and accounts of the
Servicer, the Guarantor or the Originator with the Servicer's, the
Guarantor's or the Originator's independent accountants, provided that
an officer of the Servicer, the Guarantor or the Originator 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 the
Servicer, the Guarantor or the Originator. The books and records of the
Servicer shall be maintained at the address of the Servicer designated
herein for receipt of notices, unless the Servicer shall otherwise advise
the parties hereto in writing. The books and records of the Guarantor shall
be maintained at the address of the Guarantor designated herein for receipt
of notices, unless the Guarantor shall otherwise advise the parties hereto
in writing. The books and records of the Originator shall be maintained at
the address of the Originator designated herein for receipt of notices,
unless the Originator shall otherwise advise the parties hereto in writing.
17
The Insurer agrees that it and its shareholders, directors, agents,
accountants and attorneys shall keep confidential any matter of which it
becomes aware through such inspections or discussions (unless readily
available from public sources), except as may be otherwise required by
regulation, law or court order or requested by appropriate governmental
authorities or as necessary to preserve its rights or security under or to
enforce the Transaction Documents, provided that the foregoing shall not
limit the right of the Insurer to make such information available to its
regulators, securities rating agencies, reinsurers, credit and liquidity
providers, counsel and accountants.
(g) Notice of Material Events. The Servicer, the Seller, the
Originator, the Guarantor, the Special Member and the Issuer shall be
obligated (which obligation shall be satisfied as to each if performed by
the Servicer, the Seller, the Originator, the Guarantor, the Special Member
or the Issuer) promptly to inform the Insurer in writing of the occurrence
of any of the following to the extent any of the following relate to it:
(i) the submission of any claim or the initiation or threat of
any legal process, litigation or administrative or judicial
investigation or rule making or disciplinary proceeding by or against
the Servicer, the Seller, the Originator, the Guarantor, the Special
Member or the Issuer that (A) would likely be required to be disclosed
to the Commission or to the Servicer's, the Guarantor's, the Seller's,
the Originator's, the Special Member's or the Issuer's shareholders or
members, as applicable, or (B) would likely result in a Material
Adverse Change with respect to the Servicer, the Guarantor, the
Seller, the Originator, the Special Member or the Issuer, or the
promulgation of any proceeding or any proposed or final rule which
would result in a Material Adverse Change with respect to the
Servicer, the Guarantor, the Seller, the Originator, the Special
Member or the Issuer;
(ii) the submission of any claim or the initiation or threat of
any legal process, litigation or administrative or judicial
investigation in any federal, state or local court or before any
arbitration board, or any such proceeding threatened by any government
agency, which, if adversely determined, would have a material adverse
effect on the Issuer, the Owners, the Special Member or the Insurer;
(iii) any change in the location of the Servicer's, the
Guarantor's, the Seller's, the Originator's, the Special Member's or
the Issuer's principal office or any change in the location of the
Servicer's, the Guarantor's, the Seller's, the Originator's, the
Special Member's or the Issuer's books and records;
(iv) the occurrence of any Default or Event of Default or of any
Material Adverse Change;
(v) the commencement of any proceedings by or against the
Servicer, the Guarantor, the Seller, the Originator, the Special
Member or the Issuer under any applicable bankruptcy, reorganization,
liquidation, rehabilitation, insolvency or other similar law now or
hereafter in effect or of any proceeding in which a
18
receiver, liquidator, conservator, trustee or similar official shall
have been, or may be, appointed or requested for the Servicer, the
Guarantor, the Seller, the Originator, the Special Member or the
Issuer or any of its or their assets; or
(vi) the receipt of notice that (A) the Servicer, the Guarantor,
the Seller, the Originator, the Special Member or the Issuer is being
placed under regulatory supervision, (B) any license, permit, charter,
registration or approval which are material for the conduct of the
Servicer's, the Guarantor's, the Seller's, the Originator's, the
Special Member's or the Issuer's business is to be or may be suspended
or revoked, or (C) the Servicer, the Seller, the Originator, the
Guarantor, the Special Member or the Issuer is to cease and desist any
practice, procedure or policy employed by the Servicer, the Seller,
the Originator, the Guarantor, the Special Member or the Issuer in the
conduct of its business, and such cessation may result in a Material
Adverse Change with respect to the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer.
(h) Financing Statements and Further Assurances. The Servicer will
cause to be filed all necessary financing statements 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 interest of the Indenture Trustee
in the Collateral. The Servicer, the Seller, the Originator, the Guarantor,
the Special Member and the Issuer shall, upon the request of the Insurer,
from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within 10 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. In addition, each of the Servicer,
the Seller, the Originator, the Guarantor, the Special Member and the
Issuer agrees to cooperate with S&P and ▇▇▇▇▇'▇ in connection with any
review of the Transaction that may be undertaken by S&P and ▇▇▇▇▇'▇ after
the date hereof and to provide all information reasonably requested by S&P
or ▇▇▇▇▇'▇.
(i) Maintenance of Licenses. The Servicer, the Guarantor, the Seller,
the Originator, the Special Member and the Issuer, respectively, or any
successors thereof shall maintain or cause to be maintained all licenses,
permits, charters and registrations which are material to the conduct of
its business.
(j) Redemption of Securities. The Issuer shall instruct the Indenture
Trustee, upon redemption or payment of all of the Securities pursuant to
the Indenture or otherwise, to furnish to the Insurer a notice of such
redemption and, upon a redemption or payment of all of the Securities, to
surrender the Policy to the Insurer for cancellation.
(k) Disclosure Document. Each Offering Document delivered with respect
to the Securities 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.
19
(l) Servicing of Auto Loans. The Servicer shall perform such actions
with respect to the Auto Loans as are required by or provided in the Sales
and Servicing Agreement. The Servicer will provide the Insurer with written
notice of any change or amendment to any Transaction Document as currently
in effect.
(m) Maintenance of Collateral. On or before each November 1 beginning
in 2000, so long as any of the Securities are outstanding, the Servicer
shall furnish to the Insurer and the Indenture Trustee an officers'
certificate either stating that such action has been taken with respect to
the recording, filing, rerecording and refiling of any financing statements
and continuation statements as is necessary to maintain the interest of the
Indenture Trustee created by the Indenture with respect to the Collateral
and reciting the details of such action or stating that no such action is
necessary to maintain such interests. Such officers' certificate shall also
describe the recording, filing, rerecording and refiling of any financing
statements and continuation statements that will be required to maintain
the interest of the Indenture Trustee in the Collateral until the date such
next officers' certificate is due. The Servicer will use its best efforts
to cause any necessary recordings or filings to be made with respect to the
Collateral.
(n) Closing Documents. The Servicer, the Seller, the Originator, the
Guarantor, the Special Member and the Issuer shall provide or cause to be
provided to the Insurer a bound volume or volumes of the Transaction
Documents and an executed original copy of each document executed in
connection with the Transaction within 60 days after the date of closing.
Upon the request of the Insurer, the Servicer, the Guarantor, the Seller,
the Originator, the Special Member and the Issuer shall provide or cause to
be provided to the Insurer a copy of each of the Transaction Documents on
computer diskette, in a format acceptable to the Insurer.
(o) Preference Payments. With respect to any Preference Amount (as
defined in the Policy), the Servicer shall provide to the Insurer upon the
request of the Insurer:
(i) a certified copy of the final nonappealable order of a court
having competent jurisdiction ordering the recovery by a trustee in
bankruptcy as voidable preference amounts included in previous
distributions under Section 4.07 of the Indenture to any Owner
pursuant to the United States Bankruptcy Code, 11 ▇.▇.▇.▇▇.▇▇. 101 et
seq., as amended (the "Bankruptcy Code");
(ii) an opinion of counsel satisfactory to the Insurer, and upon
which the Insurer shall be entitled to rely, stating that such order
is final and is not subject to appeal;
(iii) an assignment in such form as reasonably required by the
Insurer, irrevocably assigning to the Insurer all rights and claims of
the Servicer, the Indenture Trustee and any Owner relating to or
arising under the Auto Loan against the debtor which made such
preference payment or otherwise with respect to such preference
amount; and
20
(iv) appropriate instruments to effect (when executed by the
affected party) the appointment of the Insurer as agent for the
Indenture Trustee and any Owner in any legal proceeding relating to
such preference payment being in a form satisfactory to the Insurer.
(p) Flagship To Hold Common Stock of Special Member. Flagship shall
hold, either directly or indirectly, all of the common stock of the Special
Member during the Term of the Insurance Agreement. Flagship shall not sell,
pledge or otherwise transfer such stock without the prior written consent
of the Insurer.
(q) Membership Interest of the Seller and Beneficial Ownership of the
Issuer. Flagship shall hold, either directly or indirectly, all of the
membership interest in the Seller and the Special Member during the Term of
the Insurance Agreement. Flagship shall not sell, pledge or otherwise
transfer such interest without the prior written consent of the Insurer.
The Seller shall maintain the beneficial ownership of the Issuer and shall
not transfer any certificate issued by the Issuer without the prior written
consent of the Insurer.
(r) Year 2000 Program. The Servicer has taken, all steps reasonably
necessary and appropriate to prevent any problems in its computer and
information systems arising from or in connection with the information
processing challenges associated with the Year 2000, and will provide to
the Insurer such information and reports as the Insurer may reasonably
request from time to time with respect to such steps as have or will be
taken with respect thereto.
(s) Reliening. The Servicer agrees that, upon the occurrence of any
event set forth in clauses (4), (5), (6), (7), (8), (9), (11), (14), (15),
(17) or (18) of the definition of "Insurance Agreement Indicator", the
Indenture Trustee at the written direction of the Insurer may take or cause
to be taken such actions as may, in the reasonable opinion of the Insurer
or the Indenture Trustee with the consent of the Insurer, be necessary to
perfect or re-perfect the security interest in the Vehicles in the name of
the Issuer, including by amending the title documents of the Vehicles. The
Servicer hereby agrees to pay all expenses reasonably related to such
perfection or re-perfection and to take all action reasonably necessary
therefor and shall not be entitled to reimbursement therefor. If such
expenses are not paid within 15 days after delivery of any invoice for such
expenses to the Servicer, such expenses shall be paid pursuant to Section
4.07 (a)(x) of the Indenture. If such expenses are paid by the Indenture
Trustee they may be reimbursed pursuant to Section 4.07(a)(x) without
regard to the Annual Indenture Trustee Expense Cap. The Insurer may, in its
sole discretion, pay such costs and any such amounts shall be included in
Reimbursement Amounts owed to the Insurer pursuant to Section 4.07 of the
Indenture.
(t) BDO ▇▇▇▇▇▇▇ Review. Three months after closing, at the expense of
Flagship, BDO ▇▇▇▇▇▇▇ shall perform the following procedures:
21
(i) verify that Flagship is not granting any extensions on the
Auto Loans;
(ii) for the prior twelve months, verify the monthly trend data
relating to the number of days from repossession of a Financed Vehicle
to auction of such Financed Vehicle;
(iii) verify that the Actual Recovery Amounts on the Auto Loans
are reported as of the time of disposition of the Financed Vehicle in
an amount equal to the actual proceeds of sale, the actual proceeds
from insurance, the actual proceeds from any dealer agreements or the
actual proceeds from any other disposition of the Financed Vehicle, as
applicable, and that no estimations are used as to the amount of
proceeds received from the disposition of the Financed Vehicle;
(iv) BDO ▇▇▇▇▇▇▇ shall repeat the "Account Testing" procedures
reported in the October 27, 1999 report and shall verify that all
Charged-off Auto Loans are properly reported on the Servicer's
Certificate required by the Servicing Agreement and in Flagship's
account records; and
(v) verify Flagship's ability to track recency statistics.
Section 2.03. NEGATIVE COVENANTS OF THE SERVICER, THE SELLER, THE
ORIGINATOR, THE GUARANTOR, THE SPECIAL MEMBER AND THE ISSUER. The Servicer, the
Seller, the Originator, the Guarantor, the Special Member and the Issuer,
respectively, hereby agree that during the Term of the Insurance Agreement,
unless the Insurer shall otherwise expressly consent in writing:
(a) Impairment of Rights. None of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer shall take any
action, or fail to take any action, if such action or failure to take
action may result in a material adverse change as described in clause (b)
of the definition of Material Adverse Change with respect to the Servicer,
the Seller, the Originator, the Guarantor, the Special Member or the
Issuer, or may materially interfere with the enforcement of any rights of
the Insurer under or with respect to the Transaction Documents. The
Servicer, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer shall give the Insurer written notice of any such action or
failure to act on the earlier of (i) the date upon which any publicly
available filing or release is made with respect to such action or failure
to act or (ii) promptly prior to the date of consummation of such action or
failure to act. The Servicer and the Originator shall furnish to the
Insurer all information requested by it that is reasonably necessary to
determine compliance with this Section (a).
(b) Adverse Selection Procedure. The Servicer, the Seller, the
Originator, the Guarantor, the Special Member and the Issuer shall not use
any adverse selection procedure in selecting Auto Loans to be transferred
to the Indenture Trustee from the outstanding auto loans that qualify under
the Sales and Servicing Agreement for inclusion in the Collateral.
22
(c) Waiver, Amendments, Etc. None of the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer shall waive,
modify or amend, or consent to any waiver, modification or amendment of,
any of the terms, provisions or conditions of any of the Transaction
Documents without the prior written consent of the Insurer.
(d) Auto Loan Agreements; Charge-off Policy. Except as otherwise
permitted in the Sales and Servicing Agreement, the Servicer and the Issuer
shall not alter or amend any Auto Loan, or with respect to the Servicer its
respective collection policies or their respective charge-off policies in a
manner that materially adversely affects the Insurer unless the Insurer
shall have previously given its consent, which consent shall not be
withheld unreasonably.
Section 2.04. REPRESENTATIONS, WARRANTIES AND COVENANTS OF INDENTURE TRUSTEE,
THE COLLATERAL AGENT AND BACK-UP SERVICER. Each of the Indenture Trustee, the
Collateral Agent and the Back-up Servicer represents and warrants to, as of the
Date of Issuance, and covenants with the other parties hereto, each as to those
matters relating to itself, as follows:
(a) Due Organization and Qualification. The Indenture Trustee, the
Collateral Agent and the Back-up Servicer are each a corporation or banking
corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation. Each of the Indenture
Trustee, the Collateral Agent and the Back-up Servicer is duly qualified to
do business, is in good standing and has obtained all 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 Transaction Document
unenforceable in any respect or would have a material adverse effect upon
the Transaction, the Owners or the Insurer.
(b) Due Authorization. The execution, delivery and performance of the
Transaction Documents by the Indenture Trustee, the Collateral Agent and
the Back-up Servicer have been duly authorized by all necessary corporate
action and do not require any additional approvals or consents of, or other
action by or any notice to or filing with, any Person, including, without
limitation, any governmental entity or the Indenture Trustee's, the
Collateral Agent's or the Back-up Servicer's stockholders, which have not
previously been obtained or given by the Indenture Trustee, the Collateral
Agent or the Back-up Servicer, as applicable.
(c) Noncontravention. None of the execution and delivery of the
Transaction Documents by the Indenture Trustee, the Collateral Agent or the
Back-up Servicer, the consummation of the transactions contemplated thereby
or the satisfaction of the terms and conditions of the Transaction
Documents:
(i) conflicts with or results in any breach or violation of any
provision of the certificate or articles of incorporation or bylaws of
the Indenture Trustee, the Collateral Agent or the Back-up Servicer or
any law, rule, regulation, order,
23
writ, judgment, injunction, decree, determination or award currently
in effect having applicability to the Indenture Trustee, the
Collateral Agent or the Back-up Servicer or any of their material
properties, including regulations issued by an administrative agency
or other governmental authority having supervisory powers over the
Indenture Trustee, the Collateral Agent or the Back-up Servicer,
respectively;
(ii) constitutes a default by the Indenture Trustee, the
Collateral Agent or the Back-up Servicer under or a breach of any
provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Indenture Trustee, the Collateral
Agent or the Back-up Servicer is a party or by which any of their
respective properties, which are individually or in the aggregate
material to the Indenture Trustee, the Collateral Agent or the Back-up
Servicer, is or may be bound or affected; or
(iii) results in or requires the creation of any lien upon or in
respect of any assets of the Indenture Trustee, the Collateral Agent
or the Back-up Servicer, except as contemplated by the Transaction
Documents.
(d) Legal Proceedings. There is no action, proceeding or investigation
by or before any court, governmental or administrative agency or arbitrator
against or affecting the Indenture Trustee, the Collateral Agent, the
Back-up Servicer or any of their subsidiaries, or any properties or rights
of the Indenture Trustee, the Collateral Agent, the Back-up Servicer or any
of their subsidiaries, pending or, to the Indenture Trustee, the Collateral
Agent's or the Back-up Servicer's knowledge after reasonable inquiry,
threatened, which in any case would reasonably be expected to result in a
Material Adverse Change with respect to the Indenture Trustee, the
Collateral Agent or the Back-up Servicer, respectively.
(e) Valid and Binding Obligations. The Transaction Documents to which
they are parties, when executed and delivered by the Indenture Trustee, the
Collateral Agent and the Back-up Servicer, will constitute the legal, valid
and binding obligations of the Indenture Trustee, the Collateral Agent and
the Back-up Servicer, as applicable, 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.
None of the Indenture Trustee, the Collateral Agent or the Back-up Servicer
will at any time in the future deny that the Transaction Documents
constitute the legal, valid and binding obligations of the Indenture
Trustee, the Collateral Agent and the Back-up Servicer, as applicable.
(f) Compliance With Law, Etc. No practice, procedure or policy
employed, or proposed to be employed, by the Indenture Trustee, the
Collateral Agent or the Back-up Servicer in the conduct of their business
violates any law, regulation, judgment, agreement, order or decree
applicable to the Indenture Trustee, the Collateral Agent or the Back-up
Servicer that, if enforced, would reasonably be expected to result in a
Material
24
Adverse Change with respect to the Indenture Trustee, the Collateral Agent
or the Back-up Servicer, respectively. None of the Indenture Trustee, the
Collateral Agent or the Back-up Servicer is in breach of or in default
under any applicable law or administrative regulation of its respective
jurisdiction of organization, or any department, division, agency or
instrumentality thereof or of the United States or any applicable judgment
or decree or any loan agreement, note, resolution, certificate, agreement
or other instrument to which the Indenture Trustee, the Collateral Agent or
the Back-up Servicer is a party or is otherwise subject which, if enforced,
would have a material adverse effect on the ability of the Indenture
Trustee, the Collateral Agent or the Back-up Servicer, as the case may be,
to perform its respective obligations under the Transaction Documents.
(g) Transaction Documents. Each of the representations and warranties
of the Indenture Trustee, the Collateral Agent and the Back-up Servicer,
respectively, contained in the Transaction Documents is true and correct in
all material respects, and the Indenture Trustee, the Collateral Agent and
the Back-up Servicer hereby makes each such representation and warranty to,
and for the benefit of, the Insurer as if the same were set forth in full
herein.
(h) Compliance and Amendments. The Indenture Trustee, the Collateral
Agent and the Back-up Servicer, respectively, shall comply in all material
respects with the terms and conditions of the Transaction Documents to
which it is a party and the Indenture Trustee, the Collateral Agent and the
Back-up Servicer shall not agree to any amendment to or modification of the
terms of any of the Transaction Documents to which it is a party unless the
Insurer shall otherwise give its prior written consent.
Section 2.05. REPRESENTATIONS AND WARRANTIES OF THE DEPOSITOR. The
Depositor represents, warrants and covenants as of the Date of Issuance, as
follows:
(a) Due Organization and Qualification. The Depositor is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. The Depositor is duly qualified to do
business, is in good standing and has obtained all 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 Transaction Document
unenforceable in any respect or would have a material adverse effect upon
the Transaction, the Owners or the Insurer.
(b) Power and Authority. The Depositor 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 to consummate the
Transaction.
(c) Due Authorization. The execution, delivery and performance of the
Transaction Documents by the Depositor have been duly authorized by all
necessary corporate action and do not require any additional approvals or
consents of, or other
25
action by or any notice to or filing with, any Person, including, without
limitation, any governmental entity or the Depositor's stockholders, which
have not previously been obtained or given by the Depositor, other than
consents, approvals, notices and filings which would not have a material
adverse effect on the Depositor or its ability to perform its obligations
under any of the Transaction Documents.
(d) Noncontravention. None of the execution and delivery of the
Transaction Documents by the Depositor, the consummation of the
transactions contemplated thereby or the satisfaction of the terms and
conditions of the Transaction Documents:
(i) conflicts with or results in any breach or violation of any
provision of the certificate of incorporation or bylaws of the
Depositor or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect having
applicability to the Depositor or any of its material properties,
including regulations issued by an administrative agency or other
governmental authority having supervisory powers over the Depositor;
(ii) constitutes a default by the Depositor under or a breach of
any provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Depositor is a party or by which
any of its respective properties, which are individually or in the
aggregate material to the Depositor, is or may be bound or affected;
or
(iii) results in or requires the creation of any lien upon or in
respect of any assets of the Depositor, except as contemplated by the
Transaction Documents;
except, in the case of any of the foregoing, where such conflicts breaches,
violations, defaults or liens would not have a material adverse effect on
the Depositor or its ability to perform its obligations under any of the
Transaction Documents.
(e) Legal Proceedings. There is no action, proceeding or investigation
by or before any court, governmental or administrative agency or arbitrator
against or affecting the Depositor or any of its subsidiaries, or any
properties or rights of the Depositor or any of its subsidiaries, pending
or, to the Depositor's knowledge after reasonable inquiry, threatened,
which in any case could reasonably be expected to result in a Material
Adverse Change with respect to the Depositor.
(f) Valid and Binding Obligations. The Transaction Documents (other
than the Notes) to which the Depositor is a party, when executed and
delivered by the Depositor, will constitute the legal, valid and binding
obligations of the Depositor, enforceable against the Depositor,
respectively, 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 and public policy considerations as to rights
of indemnification for violations of federal securities laws. The Depositor
will not at any time in the future deny
26
that the Transaction Documents to which it is a party constitute the legal,
valid and binding obligations of the Depositor.
(g) Accuracy of Information. Neither the Transaction Documents nor
other information relating to the Depositor, as amended, supplemented or
superseded, furnished to the Insurer by the Depositor contains any
statement of a material fact by the Depositor which was untrue or
misleading in any material adverse respect when made. The Depositor has no
knowledge of circumstances that could reasonably be expected to cause a
Material Adverse Change with respect to the Depositor.
(h) Transaction Documents. Each of the representations and warranties
of the Depositor contained in the Transaction Documents is true and correct
in all material respects, and the Depositor hereby makes each such
representation and warranty to, and for the benefit of, the Insurer as if
the same were set forth in full herein.
(i) Solvency; Fraudulent Conveyance. The Depositor is not insolvent
and will not become insolvent as a result of the transfer of the Auto
Loans. The Depositor does not intend to incur or believe that it will incur
debts beyond the Depositor's ability to pay as such debts mature. The
transfer of Auto Loans by the Depositor is not and will not be made with
actual intent to hinder, delay or defraud any Person. The assets of the
Depositor do not constitute unreasonably small capital to carry out its
business as conducted.
(j) Principal Place of Business. The principal place of business of
the Depositor is located in New York, New York.
(k) Opinion Facts and Assumptions. The Opinion Facts and Assumptions
insofar as they relate to the Depositor are true and correct as of the Date
of Issuance.
(l) No Material Event of Default. There is no material event of
default on the part of the Depositor under any agreement involving
financial obligations which would materially adversely impact the financial
conditions or the operations of the Issuer or the obligations of the
Depositor under any document associated with this Transaction.
Section 2.06. AFFIRMATIVE COVENANTS OF THE DEPOSITOR. The Depositor hereby
agrees that during the Term of the Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) Further Assurances. The Depositor shall, upon the request of the
Insurer, from time to time, execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered, within 10 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. In addition, the
Depositor agrees to cooperate with S&P and ▇▇▇▇▇'▇ in connection with any
review of the Transaction that may be undertaken by S&P and ▇▇▇▇▇'▇ after
the date hereof and to provide all information reasonably requested by S&P
or ▇▇▇▇▇'▇.
27
(b) Maintenance of Licenses. The Depositor or any successors thereof
shall maintain or cause to be maintained all licenses, permits, charters
and registrations which are material to the conduct of its business to the
extent also material to the obligations of the Depositor under the
Transaction Documents.
Section 2.07. NEGATIVE COVENANTS OF THE DEPOSITOR. The Depositor hereby
agrees that during the Term of the Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) Impairment of Rights. The Depositor shall not take any action if
such action may reasonably be expected to interfere with the enforcement of
any rights of the Insurer under or with respect to the Transaction
Documents.
(b) Waiver, Amendments, Etc. The Depositor shall not waive, modify or
amend, or consent to any waiver, modification or amendment of, any of the
terms, provisions or conditions of any of the Transaction Documents without
the prior written consent of the Insurer.
Section 2.08. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE OWNER
TRUSTEE. The Owner Trustee hereby represents and warrants as follows:
(a) Representations and Warranties. As of the Date of Issuance, each
of the representations and warranties of the Owner Trustee set forth in the
Transaction Documents to which it is a party is true and correct in all
material respects and the Owner Trustee makes each such representation and
warranty to, and for the benefit of, the Insurer as if the same were set
forth in full herein.
(b) Compliance and Amendments. The Owner Trustee shall comply in all
material respects with the terms and conditions of the Transaction
Documents to which it is a party and the Owner Trustee shall not agree to
any amendment to or modification of the terms of any of the Transaction
Documents to which it is a party unless the Insurer shall otherwise give
its prior written consent.
(c) Principal Place of Business. The principal place of business of
the Owner Trustee is located in Charlotte, North Carolina.
ARTICLE III
THE POLICY; REIMBURSEMENT
Section 3.01. ISSUANCE OF THE POLICY. The Insurer agrees to issue the
Policy on the Closing Date subject to satisfaction of the conditions precedent
set forth below:
(a) Payment of Initial Premium and Expenses. The Insurer shall have
been paid, by the Servicer, the Seller, the Originator and the Issuer, that
portion of a nonrefundable Premium payable on the Date of Issuance, and the
Servicer shall agree to
28
reimburse or pay directly other fees and expenses identified in Section
3.02 hereof as payable.
(b) Transaction Documents. The Insurer shall have received a fully
executed copy of the Commitment and a copy of each of the Transaction
Documents, in form and substance satisfactory to the Insurer, duly
authorized, executed and delivered by each party thereto.
(c) Certified Documents and Resolutions. The Insurer shall have
received a copy of (i) the organizational documents of the Servicer, the
Seller, the Depositor, the Originator, the Special Member and the Issuer,
(ii) the resolutions of the Seller's, the Depositor's the Originator's and
the Issuer's Board of Directors authorizing the sale of the Auto Loans and
(iii) the execution, delivery and performance by the Servicer, the
Depositor, the Seller, the Originator, the Guarantor, the Special Member
and the Issuer of the Transaction Documents and the transactions
contemplated thereby, certified by the Secretary or an Assistant Secretary
of the Servicer, the Seller, the Depositor, the Originator, the Guarantor,
the Special Member and the Issuer (which certificate shall state that such
certificate or articles of incorporation or organization, bylaws and
resolutions are in full force and effect without modification on the Date
of Issuance).
(d) Incumbency Certificate. The Insurer shall have received a
certificate of the Secretary or an Assistant Secretary of the Servicer, the
Seller, the Depositor, the Originator, the Guarantor the Special Member and
the Issuer certifying the names and signatures of the officers of the
Servicer, the Seller, the Depositor, the Originator, the Special Member and
the Issuer authorized to execute and deliver the Transaction Documents and
that shareholder consent to the execution and delivery of such documents is
not necessary.
(e) Representations and Warranties; Certificate. The representations
and warranties of the Servicer, the Depositor, the Seller, the Originator,
the Guarantor, the Special Member and the Issuer set forth or incorporated
by reference in this Insurance Agreement shall be true and correct as of
the Date of Issuance as if made on the Date of Issuance, and the Insurer
shall have received a certificate of appropriate officers of the Servicer,
the Depositor, the Seller, the Originator, the Guarantor, the Special
Member and the Issuer to that effect.
(f) Opinions of Counsel.
(i) ▇▇▇▇▇ ▇▇▇▇▇▇, Esq., General Counsel of Flagship Credit
Corporation shall have issued his favorable opinion, in form and
substance acceptable to the Insurer and its counsel, regarding the
corporate existence and authority of the Servicer, the Special Member,
the Seller and the Originator.
(ii) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Esq., General Counsel of Copelco shall
have issued his favorable opinion, in form and substance acceptable to
the Insurer and its counsel, regarding the corporate existence and
authority of the Guarantor.
29
(iii) ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esq., Associate General Counsel of
Prudential Securities Incorporated shall have issued his favorable
opinion, in form and substance acceptable to the Insurer and its
counsel, regarding the corporate existence and authority of the
Depositor.
(iv) The law firm of Morris, James, Hitchens & ▇▇▇▇▇▇▇▇, LLP
shall have issued it favorable opinion, in form and substance
acceptable to the Insurer and its counsel, regarding the corporate
existence and authority of the Issuer.
(v) The law firm of ▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇ shall have furnished its
opinions, in form and substance acceptable to the Insurer and its
counsel, regarding (A) the sale of the Auto Loans, (B) the tax
treatment of payments on the Securities under federal tax laws, and
(C) the validity and enforceability of the Transaction Documents
against the Servicer, the Special Member, the Originator, the
Guarantor, and the Issuer.
(vi) The Insurer shall have received such other opinions of
counsel, in form and substance acceptable to the Insurer and its
counsel, addressing such other matters as the Insurer may reasonably
request. Each opinion of counsel delivered in connection with the
Transaction shall be addressed to and delivered to the Insurer.
(g) Approvals, Etc. The Insurer shall have received true and correct
copies of all approvals, licenses and consents, if any, including, without
limitation, any required approval of the shareholders or members of the
Servicer, the Depositor, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer, required in connection with the Transaction.
(h) No Litigation, Etc. No suit, action or other proceeding,
investigation or injunction, or final judgment relating thereto, shall be
pending or threatened before any court or governmental agency in which it
is sought to restrain or prohibit or to obtain damages or other relief in
connection with the Transaction Documents or the consummation of the
Transaction.
(i) Legality. No statute, rule, regulation or order shall have been
enacted, entered or deemed applicable by any government or governmental or
administrative agency or court that would make the transactions
contemplated by any of the Transaction Documents illegal or otherwise
prevent the consummation thereof.
(j) Issuance of Ratings. Receipt from S&P and ▇▇▇▇▇'▇ of the highest
(A) long-term rating on the Class A-1, Class A-2, Class A-3 and Class A-4
Notes.
(k) No Default. No Default or Event of Default shall have occurred.
(l) Additional Items. The Insurer shall have received such other
documents, instruments, approvals or opinions requested by the Insurer or
its counsel as may be reasonably necessary to effect the Transaction,
including, but not limited to, evidence
30
satisfactory to the Insurer and its counsel that the conditions precedent,
if any, in the Transaction Documents have been satisfied.
(m) Conform to Documents. The Insurer and its counsel shall have
determined that all documents, certificates and opinions to be delivered in
connection with the Securities conform to the terms of the Transaction
Documents.
(n) Compliance With Commitment. All other terms, conditions and
requirements of the Commitment shall have been satisfied.
(o) Satisfaction of Conditions of the Underwriting Agreement. All
conditions in the Underwriting Agreement relating to the Underwriter's
obligation to purchase the Securities shall have been satisfied.
(p) Underwriting Agreement. The Insurer shall have received copies of
each of the documents, and shall be entitled to rely on each of the
documents, required to be delivered to the Underwriter pursuant to the
Underwriting Agreement.
(q) Guaranty Agreement. The Guarantor shall have executed the Guaranty
Agreement, which shall be acceptable, in form and substance, to the
Insurer, and an original executed copy of such Guaranty Agreement shall
have been delivered to the Insurer.
Section 3.02. PAYMENT OF FEES AND PREMIUM.
(a) Legal and Accounting Fees. The Servicer, the Seller, the
Originator and the Issuer shall pay or cause to be paid, on the Date of
Issuance, reasonable legal fees and disbursements incurred by the Insurer
in connection with the issuance of the Policy and any fees of the Insurer's
auditors in accordance with the terms of the Commitment. Any fees of the
Insurer's auditors payable in respect of any amendment or supplement to the
Offering Document or any other Offering Document incurred after the Date of
Issuance shall be paid by the Servicer, the Seller, the Originator and the
Issuer on demand.
(b) Premium. In consideration of the issuance by the Insurer of the
Policy, the Insurer shall be entitled to receive the Premium as and when
due in accordance with the terms of the Commitment (i) in the case of
Premium due on or before the Date of Issuance, directly from the Servicer,
the Seller, the Originator and the Issuer and (ii) in the case of Premium
due after the Date of Issuance, first, pursuant to the Indenture, and
second, to the extent the amounts in subclause first are not sufficient,
directly from the Servicer. The Premium shall be calculated according to
paragraph 1 of the Commitment for the amount due on or before the Date of
Issuance and paragraph 1 of the Commitment for the amount due on each
Payment Date. The Premium paid hereunder or under the Indenture shall be
nonrefundable without regard to whether the Insurer makes any payment under
the Policy or any other circumstances relating to the Securities or
provision being made for payment of the Securities prior to maturity. The
Servicer, the Seller, the Originator, the Issuer and the Indenture Trustee
shall make all payments of
31
Premium to be made by them by wire transfer to an account designated from
time to time by the Insurer by written notice to the Servicer, the Seller,
the Originator, the Issuer and the Indenture Trustee.
Section 3.03. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION.
(a) In accordance with the priorities established in Section 4.07 of
the Indenture the Insurer shall be entitled to reimbursement for any
payment made by the Insurer under the Policy, which reimbursement shall be
due and payable on the date that any amount is to be paid pursuant to a
Notice (as defined in the Policy), in an amount equal to the amount to be
so paid and all amounts previously paid that remain unreimbursed, together
with interest on any and all amounts remaining unreimbursed (to the extent
permitted by law, if in respect of any unreimbursed 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 Late
Payment Rate.
(b) Notwithstanding anything in Section 3.03(a) hereof to the
contrary, the Servicer, the Guarantor and the Originator agree to reimburse
the Insurer as follows: (i) from the Originator and the Guarantor for
payments made under the Policy arising as a result of the Originator's
failure to repurchase any Auto Loan required to be repurchased pursuant to
Section 2.2 or 2.4 of the Sales and Servicing Agreement, together with
interest on any and all amounts remaining unreimbursed (to the extent
permitted by law, if in respect of any unreimbursed 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 Late
Payment Rate, (ii) from the Servicer, for payments made under the Policy,
arising as a result of (A) the Servicer's failure to deposit into the
Collection Account any amount required to be so deposited pursuant to the
Sales and Servicing Agreement or (B) the Servicer's failure to repurchase
any Auto Loan required to be repurchased under Section 3.7 of the Sales and
Servicing Agreement or Section 4.06 of the Indenture, together with
interest on any and all amounts remaining unreimbursed (to the extent
permitted by law, if in respect to any unreimbursed 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 Late
Payment Rate and (iii) from the Guarantor, for payments made under the
Policy (or pursuant to Sections 2.02(s) of this Insurance Agreement or
Section 6.2 of the Sales and Servicing Agreement) arising as a result of
the Guarantor's failure to make payment pursuant to the Guaranty Agreement,
together with interest on any and all amounts remaining unreimbursed 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 Late Payment Rate.
(c) The Servicer, the Guarantor, the Seller and the Originator agree
to pay to the Insurer as follows: any and all charges, fees, costs and
expenses that the Insurer may reasonably pay or incur, including, but not
limited to, attorneys' and accountants' fees and expenses, in connection
with (i) any accounts established to facilitate payments under the Policy
to the extent the Insurer has not been immediately reimbursed on the date
that any amount is paid by the Insurer under the Policy, (ii) the
enforcement, defense or
32
preservation of any rights in respect of any of the Transaction Documents,
including defending, monitoring or participating in any litigation or
proceeding (including any insolvency or bankruptcy proceeding in respect of
any Transaction participant or any affiliate thereof) relating to any of
the Transaction Documents, any party to any of the Transaction Documents,
in its capacity as such a party, or the Transaction including a reasonable
allocation of compensation and overhead attributable to the time of
employees of the Insurer spent in connection with the actions described in
this clause (ii), (iii) any amendment, transfer of servicing, reliening,
consent, waiver or other action with respect to, or related to, any
Transaction Document, whether or not executed or completed including any
reasonable fee as a condition to executing any waiver or consent proposed
in respect of any of the Transaction Documents, or (iv) preparation of
bound volumes of the Transaction Documents.
(d) The Servicer, the Seller, the Originator, the Guarantor and the
Issuer agree to pay to the Insurer as follows: interest on any and all
amounts described in subsections (b), (c), (e) and (f) of this Section 3.03
from the date payable or paid by such party until payment thereof in full,
and interest on any and all amounts described in Section 3.02 hereof from
the date due until payment thereof in full, in each case payable to the
Insurer at the Late Payment Rate per annum.
(e) The Servicer, the Seller, the Originator, the Guarantor, the
Special Member and the Issuer agree to pay to the Insurer as follows: any
payments made by the Insurer on behalf of, or advanced to, the Servicer,
the Seller, the Originator, the Guarantor, the Special Member or the
Issuer, respectively, including, without limitation, any amounts payable by
the Servicer, the Seller, the Originator, the Guarantor, the Special Member
or the Issuer pursuant to the Securities or any other Transaction
Documents.
(f) Following termination of the Indenture pursuant to Section 12.01
thereof, the Seller agrees to reimburse the Insurer for any Insured
Payments required to be made pursuant to the Policy subsequent to the date
of such termination.
All such amounts are to be immediately due and payable without demand.
Section 3.04. INDEMNIFICATION; LIMITATION OF LIABILITY.
(a) In addition to any and all rights of indemnification or any other
rights of the Insurer pursuant hereto or under law or equity, the Issuer,
the Seller, the Originator, the Guarantor, the Special Member, the Servicer
and any successors thereto agree to pay, and to protect, indemnify and save
harmless, the Insurer and its officers, directors, shareholders, employees,
agents and each person, if any, who controls the Insurer within the meaning
of either Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act from and against any and all claims, Losses, liabilities
(including penalties), actions, suits, judgments, demands, damages, costs
or reasonable expenses (including, without limitation, reasonable fees and
expenses of attorneys, consultants and auditors and reasonable costs of
investigations) or obligations whatsoever paid by the
33
Insurer (herein collectively referred to as "Liabilities") of any nature
arising out of or relating to the transactions contemplated by the
Transaction Documents by reason of:
(i) any untrue statement or alleged untrue statement of a
material fact contained in the Offering Document or in any amendment
or supplement thereto or in any preliminary offering document, or
arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such
Liabilities arise out of or are based upon any such untrue statement
or omission or allegation thereof based upon information set forth in
the Offering Document under the captions "The Policy" and "The
Insurer", or in the financial statements of the Insurer, including any
information in any amendment or supplement to the Offering Document
furnished by the Insurer in writing expressly for use therein that
amends or supplements such information (all such information being
referred to herein as "Insurer Information");
(ii) to the extent not covered by clause (i) above, any act or
omission of the Seller, the Originator, the Guarantor, the Servicer,
the Special Member or the Issuer, or the allegation thereof, in
connection with the offering, issuance, sale or delivery of the
Securities other than by reason of false or misleading information
provided by the Insurer in writing for inclusion in the Offering
Document as specified in clause (i) above;
(iii) the misfeasance or malfeasance of, or negligence or theft
committed by, any director, officer, employee or agent of the
Servicer, the Seller, the Originator, the Guarantor, the Special
Member or the Issuer;
(iv) violation by the Issuer, the Seller, the Originator, the
Guarantor, the Special Member or the Servicer of any federal or state
securities, banking or antitrust laws, rules or regulations in
connection with the issuance, offer and sale of the Securities or the
transactions contemplated by the Transaction Documents;
(v) violation by the Issuer, the Seller, the Originator, the
Guarantor, the Special Member or the Servicer of any federal or state
laws, rules or regulations relating to the Transaction, including
without limitation the maximum amount of interest permitted to be
received on account of any loan of money or with respect to the Auto
Loans;
(vi) breach by the Issuer, the Seller, the Originator, the
Guarantor, the Special Member or the Servicer of any of its
obligations under this Insurance Agreement or any of the other
Transaction Documents; and
(vii) breach by the Servicer, the Seller, the Originator, the
Guarantor, the Special Member or the Issuer of any representation or
warranty on the part of the Servicer, the Seller, the Originator, the
Special Member or the Issuer
34
contained in the Transaction Documents or in any certificate or report
furnished or delivered to the Insurer thereunder.
This indemnity provision shall survive the termination of this
Insurance Agreement and shall survive until the statute of limitations has
run on any causes of action which arise from one of these reasons and until
all suits filed as a result thereof have been finally concluded.
(b) The Originator and the Guarantor agree to indemnify the Depositor,
the Indenture Trustee, the Issuer and the Insurer for any and all
Liabilities incurred by the Indenture Trustee, the Depositor, the Issuer
and the Insurer due to any claim, counterclaim, rescission, setoff or
defense asserted by an Obligor under any Auto Loan subject to the Federal
Trade Commission regulations provided in 16 C.F.R. Part 433.
(c) Any party which proposes to assert the right to be indemnified
under this Section 3.04 will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in
respect of which a claim is to be made against the Servicer, the Depositor,
the Seller, the Originator, the Guarantor, the Special Member or the Issuer
under this Section 3.04, notify the Servicer, the Seller, the Originator,
the Depositor, the Guarantor, the Special Member or the Issuer of the
commencement of such action, suit or proceeding, enclosing a copy of all
papers served. In case any action, suit or proceeding shall be brought
against any indemnified party and it shall notify the Servicer, the
Depositor, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer of the commencement thereof, the Servicer, the Depositor, the
Seller, the Originator, the Guarantor, the Special Member or the Issuer
shall be entitled to participate in, and, to the extent that it shall wish,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the Servicer, the Depositor, the
Seller, the Originator, the Guarantor, the Special Member or the Issuer to
such indemnified party of its election so to assume the defense thereof,
the Servicer, the Depositor, the Seller, the Originator, the Guarantor, the
Special Member or the Issuer shall not be liable to such indemnified party
for any legal or other expenses other than reasonable costs of
investigation subsequently incurred by such indemnified party in connection
with the defense thereof. The indemnified party shall have the right to
employ its counsel in any such action the defense of which is assumed by
the Servicer, the Depositor, the Seller, the Originator, the Guarantor, the
Special Member or the Issuer in accordance with the terms of this
subsection (c), but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless the employment of counsel by such
indemnified party has been authorized by the Servicer, the Depositor, the
Seller, the Originator, the Special Member or the Issuer. The Servicer, the
Depositor, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer shall not be liable for any settlement of any action or claim
effected without its consent.
(d) In addition to any and all rights of indemnification or any other
rights of the Insurer pursuant hereto or under law or equity, the Indenture
Trustee and the Collateral Agent agree to pay, and to protect, indemnify
and save harmless, the Insurer and its officers, directors, shareholders,
employees, agents, including each person, if any,
35
who controls the Insurer within the meaning of either Section 15 of the
Securities Act of 1933, as amended, or Section 20 of the Securities and
Exchange Act of 1934, as amended, from and against any and all claims,
losses, liabilities (including penalties), actions, suits, judgments,
demands, damages, costs or reasonable expenses (including, without
limitation, reasonable fees and expenses of attorneys, consultants and
auditors and reasonable costs of investigations) or obligations whatsoever
of any nature arising out of the breach by the Indenture Trustee and the
Collateral Agent of any of its respective obligations under this Insurance
Agreement or under the Indenture. This indemnity provision shall survive
the termination of this Insurance Agreement and shall survive until the
statute of limitations has run on any causes of action which arise from one
of these reasons and until all suits filed as a result thereof have been
finally concluded.
(e) In addition to any and all rights of indemnification or any other
rights of the Insurer pursuant hereto or under law or equity, the Back-up
Servicer agrees to pay, and to protect, indemnify and save harmless, the
Insurer and its officers, directors, shareholders, employees and agents,
including each person, if any, who controls the Insurer within the meaning
of either Section 15 of the Securities Act of 1933, as amended, or Section
20 of the Securities and Exchange Act of 1934, as amended, from and against
any and all claims, losses, liabilities (including penalties), actions,
suits, judgments, demands, damages, costs or reasonable expenses
(including, without limitation, reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) or
obligations whatsoever of any nature arising out of the breach by the
Back-up Servicer of any of its obligations under this Insurance Agreement
or under the Sales and Servicing Agreement. This indemnity provision shall
survive the termination of this Insurance Agreement and shall survive until
the statute of limitations has run on any causes of action which arise from
one of these reasons and until all suits filed as a result thereof have
been finally concluded.
Section 3.05. PAYMENT PROCEDURE. In the event of any payment by the
Insurer, the Indenture Trustee, the Servicer, the Seller, the Originator, the
Special Member, the Guarantor and the Issuer agree to accept the voucher or
other evidence of payment as prima facie evidence of the propriety thereof and
the liability therefor to the Insurer. All payments to be made to the Insurer
under this Insurance Agreement shall be made to the Insurer in lawful currency
of the United States of America in immediately available funds at the notice
address for the Insurer as specified in Section 6.02 hereof on the date when due
or as the Insurer shall otherwise direct by written notice to the other parties
hereto. In the event that the date of any payment to the Insurer or the
expiration of any time period hereunder occurs on a day which is not a Business
Day, then such payment or expiration of time period shall be made or occur on
the next succeeding Business Day with the same force and effect as if such
payment was made or time period expired on the scheduled date of payment or
expiration date. Payments to be made to the Insurer under this Insurance
Agreement shall bear interest at the Late Payment Rate from the date when due to
the date paid.
ARTICLE IV
FURTHER AGREEMENTS
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Section 4.01. EFFECTIVE DATE; TERM OF THE INSURANCE AGREEMENT. This
Insurance Agreement shall take effect on the Date of Issuance and shall remain
in effect until the later of (a) such time as the Insurer is no longer subject
to a claim under the Policy and the Policy shall have been surrendered to the
Insurer for cancellation and (b) all amounts payable to the Insurer by the
Servicer, the Indenture Trustee, the Collateral Agent, the Back-up Servicer, the
Seller, the Originator, the Guarantor, the Special Member or the Issuer or from
any other source under the Transaction Documents and all amounts payable under
the Securities have been paid in full; provided, however, that the provisions of
Sections 3.02, 3.03, 3.04 and 4.06 hereof shall survive any termination of this
Insurance Agreement.
Section 4.02. FURTHER ASSURANCES AND CORRECTIVE INSTRUMENTS.
(a) Excepting at such times as a default in payment under the Policy
shall exist, none of the Servicer, the Indenture Trustee, the Collateral
Agent, the Back-up Servicer, the Owner Trustee, the Depositor, the Seller,
the Originator, the Guarantor, the Special Member or the Issuer shall grant
any waiver of rights under any of the Transaction Documents to which any of
them is a party without the prior written consent of the Insurer, and any
such waiver without the prior written consent of the Insurer shall be null
and void and of no force or effect.
(b) To the extent permitted by law, the Servicer, the Indenture
Trustee, the Owner Trustee, the Collateral Agent, the Back-up Servicer, the
Depositor, the Seller, the Originator, the Special Member, the Guarantor
and the Issuer agree that they will, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such supplements hereto and such further instruments as the
Insurer may reasonably request and as may be required in the Insurer's
judgment to effectuate the intention of or facilitate the performance of
this Insurance Agreement.
Section 4.03. OBLIGATIONS ABSOLUTE.
(a) The obligations of the Servicer, the Indenture Trustee, the
Collateral Agent, the Owner Trustee, the Back-up Servicer, the Seller, the
Originator, the Special Member, the Guarantor and the Issuer, respectively,
hereunder shall be absolute and unconditional and shall be paid or
performed strictly in accordance with this Insurance Agreement under all
circumstances irrespective of:
(i) any lack of validity or enforceability of, or any amendment
or other modifications of, or waiver with respect to any of the
Transaction Documents, the Securities or the Policy;
(ii) any exchange or release of any other obligations hereunder;
(iii) the existence of any claim, setoff, defense, reduction,
abatement or other right that the Servicer, the Indenture Trustee, the
Collateral Agent, the Back-up Servicer, the Owner Trustee, the Seller,
the Originator, the Special Member,
37
the Guarantor or the Issuer may have at any time against the Insurer
or any other Person;
(iv) any document presented in connection with the Policy proving
to be forged, fraudulent, invalid or insufficient in any respect or
any statement therein being untrue or inaccurate in any respect;
(v) any payment by the Insurer under the Policy against
presentation of a certificate or other document that does not strictly
comply with terms of the Policy;
(vi) any failure of the Servicer, the Indenture Trustee, the
Collateral Agent, the Owner Trustee, the Back-up Servicer, the Seller,
the Originator, the Special Member, the Guarantor or the Issuer to
receive the proceeds from the sale of the Securities; or
(vii) any breach by the Servicer, the Indenture Trustee, the
Collateral Agent, the Owner Trustee, the Back-up Servicer, the
Guarantor, the Seller, the Originator or the Issuer of any
representation, warranty or covenant contained in any of the
Transaction Documents.
(b) The Servicer, the Indenture Trustee, the Collateral Agent, the
Owner Trustee, the Back-up Servicer, the Seller, the Originator, the
Guarantor, the Special Member, the Issuer and any and all others who are
now or may become liable for all or part of the obligations of the
Servicer, the Indenture Trustee, the Collateral Agent, the Owner Trustee,
the Back-up Servicer, the Seller, the Originator the Guarantor, the Special
Member or the Issuer under this Insurance Agreement agree to be bound by
this Insurance Agreement and (i) to the extent permitted by law, waive and
renounce any and all redemption and exemption rights and the benefit of all
valuation and appraisement privileges against the indebtedness and
obligations evidenced by any Transaction Document or by any extension or
renewal thereof; (ii) waive presentment and demand for payment, notices of
nonpayment and of dishonor, protest of dishonor and notice of protest;
(iii) waive 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) waive all rights of abatement, diminution, postponement or
deduction, or any defense other than payment, or 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 the Servicer, the Indenture Trustee, the Collateral
Agent, the Owner Trustee, the Back-up Servicer, the Seller, the Originator,
the Guarantor, the Special Member or the Issuer; (v) agree that its
liabilities hereunder shall, except as otherwise expressly provided in this
Section 4.03, be unconditional and without regard to any setoff,
counterclaim or the liability of any other Person for the payment hereof;
(vi) agree that any consent, waiver or forbearance hereunder with respect
to an event shall operate only for such event and not for any subsequent
event; (vii) consent to any and all extensions of time that may be granted
by the Insurer with respect to any payment
38
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 (viii) consent to the addition of any and all other
makers, endorsers, guarantors and other obligors for any payment hereunder,
and to the acceptance of any and all other security for any payment
hereunder, and agree 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 the Servicer, the
Indenture Trustee, the Collateral Agent, the Owner Trustee, the Back-up
Servicer, the Seller, the Depositor, the Originator, the Guarantor, the
Special Member or the Issuer from pursuing any rights or remedies it may
have against any other Person in a separate legal proceeding.
Section 4.04. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS.
(a) This Insurance Agreement shall be a continuing obligation of the
parties hereto and shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. None
of the Servicer, the Indenture Trustee, the Collateral Agent, the Owner
Trustee, the Back-up Servicer, the Seller, the Originator, the Guarantor,
the Special Member or the Issuer may assign its rights under this Insurance
Agreement, or delegate any of its duties hereunder, without the prior
written consent of the Insurer. Any assignment made in violation of this
Insurance Agreement shall be null and void.
(b) The Insurer shall have the right to give participations in its
rights under this Insurance Agreement and to enter into contracts of
reinsurance with respect to the Policy upon such terms and conditions as
the Insurer may in its discretion determine; provided, however, that no
such participation or reinsurance agreement or arrangement shall relieve
the Insurer of any of its obligations hereunder or under the Policy.
(c) In addition, the Insurer shall be entitled to assign or pledge to
any bank or other lender providing liquidity or credit with respect to the
Transaction or the obligations of the Insurer in connection therewith any
rights of the Insurer under the Transaction Documents or with respect to
any real or personal property or other interests pledged to the Insurer, or
in which the Insurer has a security interest, in connection with the
Transaction.
(d) Except as provided herein with respect to participants and
reinsurers, nothing in this Insurance Agreement shall confer any right,
remedy or claim, express or implied, upon any Person, including,
particularly, any Owner, other than the Insurer against the Servicer, the
Indenture Trustee, the Collateral Agent, the Owner Trustee, the Back-up
Servicer, the Seller, the Depositor, the Originator, the Guarantor, the
Special Member or the Issuer, 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. Neither the Indenture Trustee, the Collateral Agent nor
39
any Owner shall have any right to payment from any Premiums paid or payable
hereunder or under the Indenture or from any other amounts paid by the
Servicer, the Indenture Trustee, the Collateral Agent, the Back-up
Servicer, the Seller, the Depositor, the Originator, the Guarantor, the
Special Member or the Issuer pursuant to Section 3.02, 3.03 or 3.04 hereof.
(e) The Servicer, the Seller, the Depositor, the Originator, the
Issuer, the Back-up Servicer, the Owner Trustee, the Guarantor, the Special
Member and the Indenture Trustee, the Collateral Agent agree that the
Insurer shall have all rights of a third-party beneficiary in respect of
the Indenture and each other Transaction Document to which it is not a
signing party and hereby incorporate and restate their representations,
warranties and covenants as set forth therein for the benefit of the
Insurer.
Section 4.05. LIABILITY OF THE INSURER. Neither the Insurer nor any of its
officers, directors or employees shall be liable or responsible for (a) the use
that may be made of the Policy by the Indenture Trustee or for any acts or
omissions of the Indenture Trustee in connection therewith or (b) the validity,
sufficiency, accuracy or genuineness of documents delivered to the Insurer (or
its Fiscal Agent) in connection with any claim under the Policy, or of any
signatures thereon, even if such documents or signatures should in fact prove to
be in any or all respects invalid, insufficient, fraudulent or forged (unless
the Insurer shall have actual knowledge thereof). In furtherance and not in
limitation of the foregoing, the Insurer (or its Fiscal Agent) may accept
documents that appear on their face to be in order, without responsibility for
further investigation.
Section 4.06. PARTIES WILL NOT INSTITUTE INSOLVENCY PROCEEDINGS. So long as
this Agreement is in effect, and for one year plus one day following its
termination, none of the parties hereto will file any involuntary petition or
otherwise institute any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding or other proceedings under any federal or state
bankruptcy or similar law against the Seller, the Depositor, the Issuer or the
Special Member.
Section 4.07. INDENTURE TRUSTEE, THE COLLATERAL AGENT, ISSUER, BACK-UP
SERVICER, ORIGINATOR, THE DEPOSITOR, THE SELLER, THE OWNER TRUSTEE, THE
GUARANTOR, THE SPECIAL MEMBER AND SERVICER TO JOIN IN ENFORCEMENT ACTION. To the
extent necessary to enforce any right of the Insurer in or remedy of the Insurer
under any Auto Loan, the Indenture Trustee, the Collateral Agent, the Issuer,
the Back-up Servicer, the Seller, the Owner Trustee, the Depositor, the
Originator, the Guarantor, the Special Member and the Servicer agree to join in
any action initiated by the Indenture Trustee or the Insurer for the protection
of such right or exercise of such remedy.
Section 4.08. SUBROGATION. To the extent of any payments under the Policy,
the Insurer shall be fully subrogated to any remedies against the Issuer, the
Seller, the Originator, the Guarantor or the Servicer or in respect of the Auto
Loans available to the Indenture Trustee under the Transaction Documents. The
Indenture Trustee acknowledges such subrogation and, further, agrees to execute
such instruments prepared by the Insurer and to take such reasonable actions as,
40
in the sole judgment of the Insurer, are necessary to evidence such subrogation
and to perfect the rights of the Insurer to receive any moneys paid or payable
under the Indenture.
ARTICLE V
DEFAULTS; REMEDIES
Section 5.01. DEFAULTS. The occurrence of any of the following events shall
constitute an Event of Default hereunder:
(a) any representation or warranty made by the Servicer, the Indenture
Trustee, the Collateral Agent, the Owner Trustee, the Back-up Servicer, the
Seller, the Originator, the Guarantor, the Special Member or the Issuer
hereunder or under the Transaction Documents, or in any certificate
furnished hereunder or under the Transaction Documents, shall prove to be
untrue or incomplete in any material respect;
(b)(i) the Servicer, the Indenture Trustee, the Collateral Agent, the
Back-up Servicer, the Seller, the Originator, the Guarantor, the Special
Member or the Issuer shall fail to pay when due, beyond any cure period
provided for therein, any amount payable by the Servicer, the Indenture
Trustee, the Collateral Agent, the Back-up Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer hereunder or
(ii) a legislative body has enacted any law that declares or a court of
competent jurisdiction shall find or rule that any Transaction Document is
not valid and binding on the Servicer, the Indenture Trustee, the
Collateral Agent, the Back-up Servicer, the Seller, the Originator, the
Guarantor, the Special Member or the Issuer;
(c) the occurrence and continuance of an "Event of Default" under the
Indenture (as defined therein);
(d) any failure on the part of the Servicer, the Indenture Trustee,
the Collateral Agent, the Owner Trustee, the Back-up Servicer, the Seller,
the Originator, the Guarantor, the Special Member or the Issuer duly to
observe or perform in any material respect any other of the covenants or
agreements on the part of the Servicer, the Indenture Trustee, the
Collateral Agent, the Owner Trustee, the Back-up Servicer, the Seller, the
Originator, the Special Member, the Guarantor or the Issuer contained in
this Insurance Agreement or in any other Transaction Document which
continues unremedied for a period of 30 days with respect to this Insurance
Agreement, or, with respect to any other Transaction Document, beyond any
cure period provided for therein, after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given to
the Servicer, the Collateral Agent, the Owner Trustee, the Back-up
Servicer, the Seller, the Originator, the Guarantor, the Special Member or
the Issuer, as applicable, by the Insurer (with a copy to the Indenture
Trustee) or by the Indenture Trustee (with a copy to the Insurer);
(e) decree or order of a court or agency or supervisory authority
having jurisdiction in the premises in an involuntary case under any
present or future federal or
41
state bankruptcy, insolvency or similar law or the appointment of a
conservator or receiver or liquidator or other similar official in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings, or for the winding-up or liquidation of its affairs,
shall have been entered against the Servicer, the Seller, the Originator,
the Guarantor, the Special Member or the Issuer and such decree or order
shall have remained in force undischarged or unstayed for a period of 90
consecutive days;
(f) the Servicer, the Seller, the Originator, the Guarantor, the
Special Member or the Issuer shall consent to the appointment of a
conservator or receiver or liquidator or other similar official in any
insolvency, readjustment of debt, marshalling of assets and liabilities or
similar proceedings of or relating to the Servicer, the Seller, the
Originator, the Guarantor, the Special Member or the Issuer or of or
relating to all or substantially all of the property of either;
(g) the Servicer, the Seller, the Originator, the Guarantor, the
Special Member or the Issuer shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take advantage
of or otherwise voluntarily commence a case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar statute,
make an assignment for the benefit of its creditors or voluntarily suspend
payment of its obligations;
(h) the occurrence and continuance of a "Servicer Termination Event"
under the Sales and Servicing Agreement as defined herein;
(i) the failure of the Seller, the Originator or the Issuer to comply
with, or maintain the accuracy of, the Opinion Facts and Assumptions; or
(j) the occurrence of an Insurance Agreement Indicator as defined
herein.
Section 5.02. REMEDIES; NO REMEDY EXCLUSIVE.
(a) Upon the occurrence of an Event of Default, the Insurer may
exercise any one or more of the rights and remedies set forth below:
(i) exercise any rights and remedies under the Transaction
Documents in accordance with the terms of the Transaction Documents or
direct the Indenture Trustee to exercise such remedies in accordance
with the terms of the Transaction Documents; or
(ii) take whatever action at law or in equity as may appear
necessary or desirable in its judgment to collect the amounts then due
under the Transaction Documents or to enforce performance and
observance of any obligation, agreement or covenant of the Servicer,
the Indenture Trustee, the Collateral Agent, the Owner Trustee, the
Back-up Servicer, the Seller, the Originator, the Guarantor, the
Special Member or the Issuer under the Transaction Documents.
42
(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 Transaction Documents or existing at law or in
equity. No delay or omission to exercise any right or power accruing under
the Transaction Documents upon the happening of any event set forth in
Section 5.01 hereof shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as may be deemed expedient. In
order to entitle the Insurer to exercise any remedy reserved to the Insurer
in this Article, it shall not be necessary to give any notice other than
such notice as may be required in this Article V.
Section 5.03. WAIVERS.
(a) No failure by the Insurer to exercise, and no delay by the Insurer
in exercising, any right hereunder shall operate as a waiver thereof. The
exercise by the Insurer of any right hereunder shall not preclude the
exercise of any other right, and the remedies provided herein to the
Insurer are declared in every case to be cumulative and not exclusive of
any remedies provided by law or equity.
(b) The Insurer shall have the right, to be exercised in its complete
discretion, to waive any Event of Default hereunder, by a writing setting
forth the terms, conditions and extent of such waiver signed by the Insurer
and delivered to the Servicer, the Indenture Trustee, the Collateral Agent,
the Owner Trustee, the Back-up Servicer, the Seller, the Originator the
Guarantor, the Special Member and the Issuer. Unless such writing expressly
provides to the contrary, any waiver so granted shall extend only to the
specific event or occurrence which gave rise to the Event of Default so
waived and not to any other similar event or occurrence which occurs
subsequent to the date of such waiver.
ARTICLE VI
MISCELLANEOUS
Section 6.01. AMENDMENTS, ETC. This Insurance Agreement may be amended,
modified or terminated only by written instrument or written instruments signed
by the parties hereto. The Servicer agrees to promptly provide a copy of any
amendment to this Insurance Agreement to the Indenture Trustee, S&P and ▇▇▇▇▇'▇.
No act or course of dealing shall be deemed to constitute an amendment,
modification or termination hereof.
Section 6.02. NOTICES. All demands, notices and other communications to be
given hereunder shall be in writing (except as otherwise specifically provided
herein) and shall be mailed by registered mail or personally delivered or
telecopied to the recipient as follows:
(a) To the Insurer:
MBIA Insurance Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Insured Portfolio Management-Structured Finance (IPM-SF)
(Flagship Auto Receivables Owner Trust 1999-2)
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(in each case in which notice or other communication to the Insurer
refers to an Event of Default, a claim on the Policy or with respect
to which failure on the part of the Insurer 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 Insurer and shall be marked to indicate
"URGENT MATERIAL ENCLOSED.")
(b) To the Originator:
Flagship Credit Corporation
▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(c) To the Servicer:
Flagship Credit Corporation
▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(d) To the Indenture Trustee and the Collateral Agent:
▇▇▇▇▇▇ Trust and Savings Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Services--Indenture Trust Administrator
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(e) To the Seller:
Flagship Auto Loan Funding LLC 1999-II
▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
44
Attention: General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(f) To the Back-up Servicer and Guarantor:
Copelco Financial Services Group Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(g) To the Special Member:
Flagship Special Member, Inc.
▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(h) To the Issuer:
Flagship Auto Receivables Owner Trust 1999-2
c/o First Union National Bank
One ▇▇▇▇▇▇ Square
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administrator
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(i) To the Depositor:
Prudential Securities Secured Financing Corporation
c/o Prudential Securities Incorporated
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Group Head Asset-Backed Finance Group
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(j) To the Owner Trustee:
First Union National Bank
One ▇▇▇▇▇▇ Square
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administrator
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
A party may specify an additional or different address or addresses by
writing mailed or delivered to the other parties as aforesaid. All such notices
and other communications shall be effective upon receipt.
Section 6.03. SEVERABILITY. In the event that 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. The parties
hereto further agree that the holding by any court of competent jurisdiction
that any remedy pursued by any party hereto is unavailable or unenforceable
shall not affect in any way the ability of such party to pursue any other remedy
available to it.
Section 6.04. GOVERNING LAW. THIS INSURANCE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO CHOICE OF LAW PROVISIONS.
Section 6.05. CONSENT TO JURISDICTION.
(a) The parties hereto hereby irrevocably submit to the non-exclusive
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 related 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.
46
(c) Except as provided in Section 4.06 herein, nothing contained in
this Insurance Agreement shall limit or affect the Insurer'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 any party hereto or
its or their property in the courts of any jurisdiction.
Section 6.06. CONSENT OF THE INSURER. Except as otherwise provided, in the
event that the consent of the Insurer is required under any of the Transaction
Documents, the determination whether to grant or withhold such consent shall be
made by the Insurer in its sole discretion without any implied duty towards any
other Person.
Section 6.07. COUNTERPARTS. This Insurance Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.
Section 6.08. HEADINGS. The headings of Articles and Sections and the Table
of Contents contained in this Insurance Agreement are provided for convenience
only. They form no part of this Insurance Agreement and shall not affect its
construction or interpretation. Unless otherwise indicated, all references to
Articles and Sections in this Insurance Agreement refer to the corresponding
Articles and Sections of this Insurance Agreement.
Section 6.09. TRIAL BY JURY WAIVED. 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 6.10. LIMITED LIABILITY. 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 Securities 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
Insurance Agreement.
Section 6.11. ENTIRE AGREEMENT. The Transaction Documents and the Policy
set forth the entire agreement between the parties with respect to the subject
matter 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 such subject matter.
47
Section 6.12. LIMITATION OF LIABILITY. Notwithstanding any other provision
herein or elsewhere, this Agreement has been executed and delivered by First
Union National Bank, not in its individual capacity, but solely in its capacity
as Owner Trustee of the Issuer, and in no event shall First Union National Bank
have any liability (except with respect to its own grossly negligent conduct or
failure to act) in respect of the representations, warranties or obligations of
the Issuer hereunder or under any other documents as to all of which recourse
shall be solely to the assets of the Issuer, and for all purposes of the
Agreement and each other document, First Union National Bank shall be entitled
to the benefits of the Trust Agreement.
[Remainder of page intentionally blank; signature page follows]
48
IN WITNESS WHEREOF, the parties hereto have executed this Insurance
Agreement, all as of the day and year first above mentioned.
MBIA INSURANCE CORPORATION,
as Insurer
By
-----------------------------------------
Title
-----------------------------------------
FLAGSHIP CREDIT CORPORATION
as Originator and as Servicer
By
-----------------------------------------
Title
-----------------------------------------
FLAGSHIP AUTO LOAN FUNDING LLC
1999-II, as Seller
By
-----------------------------------------
Title
-----------------------------------------
FLAGSHIP AUTO RECEIVABLES OWNER TRUST 1999-2,
as Issuer
By: First Union National Bank, as Owner Trustee
solely and not in its individual capacity,
By
-----------------------------------------
Title
-----------------------------------------
PRUDENTIAL SECURITIES SECURED FINANCING
CORPORATION, as Depositor
By
-----------------------------------------
Title
-----------------------------------------
FLAGSHIP SPECIAL MEMBER, INC.,
as Special Member
By
-----------------------------------------
Title
-----------------------------------------
COPELCO FINANCIAL SERVICES GROUP, INC.,
as Back-up Servicer and as Guarantor
By
-----------------------------------------
Title
-----------------------------------------
▇▇▇▇▇▇ TRUST AND SAVINGS BANK,
as Indenture Trustee
By
-----------------------------------------
Title
-----------------------------------------
FIRST UNION NATIONAL BANK, not in its
individual capacity but solely as Owner Trustee
By
-----------------------------------------
Title
-----------------------------------------
▇▇▇▇▇▇ TRUST AND SAVINGS BANK, as
Collateral Agent
By
-----------------------------------------
Title
-----------------------------------------