EXHIBIT 10.66
EXECUTION COPY
MBIA INSURANCE CORPORATION,
as Insurer
FIRST INVESTORS SERVICING CORPORATION,
as Servicer
FIRST INVESTORS FINANCIAL SERVICES, INC.
as Seller and as Administrator
FIRST INVESTORS AUTO INVESTMENT CORP.,
as Depositor
FIRST INVESTORS AUTO OWNER TRUST 2000-A,
as Issuer
BANKERS TRUST (DELAWARE),
as Owner Trustee
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,
as Back-up Servicer and Indenture Trustee
INSURANCE AGREEMENT
First Investors Auto Owner Trust 2000-A
$167,969,000 7.174% Asset-Backed Notes
Dated as of January 1, 2000
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS.............................................................. 1
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Servicer, the
Seller and the Depositor .................................. 6
Section 2.02. Affirmative Covenants of the Servicer, the Seller
and the Depositor ......................................... 10
Section 2.03. Negative Covenants of the Servicer, the Seller and
the Depositor ............................................. 17
Section 2.04. Representations and Warranties of the Issuer .............. 18
Section 2.05. Affirmative Covenants of the Issuer ....................... 21
Section 2.06. Negative Covenants of the Issuer .......................... 24
Section 2.07. Representations, Warranties and Covenants of Indenture
Trustee and Back-up Servicer .............................. 25
Section 2.08. Representations, Warranties and Covenants of Owner Trustee 27
Section 2.09. Negative Covenant of the Administrator..................... 28
ARTICLE III
THE POLICY; REIMBURSEMENT
Section 3.01. Issuance of the Policy..................................... 28
Section 3.02. Payment of Fees and Insurance Premium ..................... 30
Section 3.03. Reimbursement and Additional Payment Obligation ........... 31
Section 3.04. Indemnification; Limitation of Liability .................. 32
Section 3.05. Payment Procedure ......................................... 35
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of the Insurance Agreement .......... 35
Section 4.02. Further Assurances and Corrective Instruments ............. 35
Section 4.03. Obligations Absolute ...................................... 36
Section 4.04. Assignments; Reinsurance; Third-Party Rights .............. 37
Section 4.05. Liability of the Insurer .................................. 38
Section 4.06. Parties Will Not Institute Insolvency Proceedings ......... 39
Section 4.07. Indenture Trustee, Depositor, Back-up Servicer, Seller
and Servicer To Join in Enforcement Action................. 39
Section 4.08. Subrogation ............................................... 39
ARTICLE V
DEFAULTS; REMEDIES
Section 5.01. Defaults .................................................. 39
Section 5.02. Remedies; No Remedy Exclusive ............................. 41
Section 5.03. Waivers ................................................... 42
ARTICLE VI
MISCELLANEOUS
Section 6.01. Amendments, Etc ........................................... 42
Section 6.02. Notices ................................................... 42
Section 6.03. Severability .............................................. 44
Section 6.04. Governing Law ............................................. 45
Section 6.05. Consent to Jurisdiction ................................... 45
Section 6.06. Consent of the Insurer..................................... 45
Section 6.07. Counterparts .............................................. 46
Section 6.08. Headings .................................................. 46
Section 6.09. Trial by Jury Waived ...................................... 46
Section 6.10. Limited Liability ......................................... 46
Section 6.11. Entire Agreement .......................................... 46
Section 6.12. Limitation of Liability ................................... 46
ii
INSURANCE AGREEMENT
This INSURANCE AGREEMENT (this "Insurance Agreement"), dated as of January
1, 2000 by and among FIRST INVESTORS FINANCIAL SERVICES, INC. as seller
(together with its permitted successors and assigns, the "Seller") and as
Administrator, FIRST INVESTORS SERVICING CORPORATION, as Servicer (together with
its permitted successors and assigns, the "Servicer"), FIRST INVESTORS AUTO
INVESTMENT CORP., as Depositor (the "Depositor"), FIRST INVESTORS AUTO OWNER
TRUST 2000-A, as Issuer (the "Issuer"), BANKERS TRUST (DELAWARE), as Owner
Trustee (the "Owner Trustee") MBIA INSURANCE CORPORATION, as Insurer (the
"Insurer"), NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as Back-up Servicer
(the "Back-up Servicer") and as Indenture Trustee (the "Indenture Trustee").
WHEREAS, the Indenture dated as of January 1, 2000 relating to the First
Investors Auto Owner Trust 2000-A $167,969,000 7.174% Asset-Backed Notes (the
"Obligations"), between the Issuer and the Indenture Trustee (the "Indenture")
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 on the Obligations;
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 Seller, the Depositor 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.
"ADMINISTRATION AGREEMENT" means the Administration Agreement dated as of
January 1, 2000, between the Administrator, the Issuer and the Indenture Trustee
as the same may be amended or supplemented from time to time in accordance with
the terms thereof.
"ADMINISTRATOR" means First Investors Financial Services, Inc. or any
successor Administrator under the Administration Agreement.
"ADVERSE SELECTION PROCEDURE" means any method of selecting or identifying
a Contract eligible to be included in the Trust Estate, other than in accordance
with the Transaction Documents, that materially and adversely affects the
representative nature of the sample of Contracts so selected.
"BUSINESS DAY" means any day other than (i) a Saturday or a Sunday or (ii)
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 IN CONTROL" shall mean the occurrence of any of the following (a)
any Person shall, at any time following the Closing Date, acquire 51% or more of
the total outstanding shares of FIFSG; (b) any Person shall, at any time
following the Closing Date, acquire directly or indirectly 51% or more of the
voting control with respect to the total outstanding shares of FIFSG; (c) FIFSG
shall cease to own, directly or indirectly, 51% or more of the total outstanding
shares of the Seller or the Servicer; or (d) FIFSG shall not have directly or
indirectly 51% or more of the voting control with respect to the total
outstanding shares of the Seller or the Servicer.
"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.
"COMMISSION" means the Securities and Exchange Commission.
"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.
"DOCUMENTS" shall have the meaning set forth in section 2.01(k) hereof.
"EVENT OF DEFAULT" means any event of default specified in Section 5.01
hereof.
"FIFSG" means First Investors Financial Services Group, Inc.
"FINANCIAL STATEMENTS" means, with respect to FIFSG, the balance sheets
and the statements of income, retained earnings and cash flows and the notes
thereto which have been provided to the Insurer.
2
"FISCAL AGENT" means the Fiscal Agent, if any, designated pursuant to the
terms of the Policy.
"GUARANTY" means the Guaranty entered into as of January 1, 2000, by First
Investors Financial Services, Inc., as Guarantor, the Depositor, the Issuer, the
Servicer, the Back-up Servicer and the Indenture Trustee.
"INDEMNIFICATION AGREEMENT" means the Indemnification Agreement dated as
of January 12, 2000, among the Insurer, the Seller and the Initial Purchaser.
"INDENTURE" means the Indenture dated as of January 1, 2000 between the
Issuer, the Seller and the Indenture Trustee as the same may be amended or
supplemented from time to time in accordance with the terms thereof.
"INDENTURE TRUSTEE" means Norwest Bank Minnesota, National Association, a
national banking association, as Indenture Trustee under the Indenture, and any
successor Indenture Trustee under the Indenture.
"INITIAL PURCHASER" means Banc of America Securities LLC.
"INSURANCE PREMIUM" means the premium payable in accordance with Section
3.02 hereof.
"INSURER DEFAULT" means the occurrence and continuance of any failure of
the Insurer to make payments under the Policy in accordance with its terms.
"INSURER INSOLVENCY" means (i) the entry of a decree or order of a court
or agency having jurisdiction in respect of the Insurer in an involuntary case
under any present or future Federal or state bankruptcy, insolvency or similar
law or appointing a conservator or receiver or liquidator or rehabilitator or
other similar official of the Insurer or of any substantial part of its
property, or the entering of an order for the winding up or liquidation of the
affairs of the Insurer and the continuance of any such decree or order
undischarged or unstayed and in force for a period of 90 consecutive days; (ii)
the Insurer shall consent to the appointment of a conservator or receiver or
liquidator or other similar official in any insolvency, readjustment of debt,
marshaling of assets and liabilities, rehabilitation or similar proceedings of
or relating to the Insurer or of or relating to all or substantially all of its
property; or (iii) the Insurer 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.
"INVESTMENT COMPANY ACT" means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended.
"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
3
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 (i) 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 (ii) 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 (i) the business, financial condition, results of operations
or properties of such Person or (ii) 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.
"OBLIGATIONS" shall have the meaning as defined in the Policy.
"OBLIGOR" means the original obligor under each Contract, including any
guarantor of such obligor and their respective successors.
"OFFERING DOCUMENT" means the offering memorandum dated January 12, 2000
of the Issuer in respect of the Obligations (and any amendment or supplement
thereto) and any other offering document in respect of the Obligations prepared
by the Servicer, the Seller, Depositor or the Issuer that makes reference to the
Policy.
"OPINION FACTS AND ASSUMPTIONS" means the facts and assumptions contained
in the insolvency opinion dated January 24, 2000 by ▇▇▇▇▇▇▇▇ & Knight under the
heading "Facts and Assumptions" insofar as they relate to the Seller, the Issuer
and the Depositor.
"OWNERS" means registered holders of Obligations.
"OWNER TRUSTEE" means Bankers Trust (Delaware), not in its individual
capacity, but solely as Owner Trustee of the Issuer.
4
"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 PERCENTAGE" shall have the meaning ascribed to such term in
Section 3.02 hereof.
"PREMIUM SIDE LETTER AGREEMENT" means that certain Premium Letter dated as
of January 21, 2000 between the Seller and the Insurer specifying the up-front
Insurance Premium payable on the Closing Date and the monthly Insurance Premium
payable to the Insurer pursuant to the Indenture.
"PURCHASE AGREEMENT" means the Purchase Agreement between the Initial
Purchaser and the Depositor with respect to the offer and sale of the
Obligations, as the same may be amended from time to time.
"SALE AND ALLOCATION AGREEMENT" means the Sale and Allocation Agreement
dated as of January 1, 2000, among the Servicer, the Indenture Trustee and the
Issuer and the Seller 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.
"SERVICING AGREEMENT" means the Servicing Agreement dated as of January 1,
2000 between the Servicer, the Back-up Servicer, and the Issuer.
"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.
"TERM OF THE INSURANCE AGREEMENT" shall be determined as provided in
Section 4.01 hereof.
"TRANSACTION" means the transactions contemplated by the Transaction
Documents, including the transactions described in the Offering Document.
"TRANSACTION DOCUMENTS" means this Insurance Agreement, the
Indemnification Agreement, the Premium Side Letter Agreement, the Indenture, the
Offering Document, the Guaranty, the Trust Agreement, the Certificate of Trust,
the Sale and Allocation Agreement, the Servicing Agreement, the Administration
Agreement, the Purchase Agreement, and the Obligations.
5
"TRUST" means the trust created pursuant to the Indenture.
"TRUST AGREEMENT" means the Amended and Restated Trust Agreement dated as
of January 24, 2000 among the Depositor 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.
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 2.01. REPRESENTATIONS AND WARRANTIES OF THE SERVICER, THE SELLER
AND THE DEPOSITOR. The Servicer, the Seller and the Depositor 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 and
the Depositor are each a corporation, duly organized, validly existing and
in good standing under the laws of its respective jurisdiction of
incorporation. Each of the Servicer, the Seller and 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. Each of the Servicer, the Seller and 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 Servicer, the Seller and the Depositor
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 Servicer's, the Seller's or the Depositor's
stockholders, which have not previously been obtained or given by the
Servicer, the Seller or the Depositor.
(d) NONCONTRAVENTION. None of the execution and delivery of the
Transaction Documents by the Servicer, the Seller or the Depositor, the
consummation of the Transaction contemplated thereby or the satisfaction
of the terms and conditions of the Transaction Documents:
6
(i) conflicts with or results in any breach or violation of
any provision of the certificate of incorporation or bylaws of the
Servicer, the Seller or the Depositor or any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award
currently in effect having applicability to the Servicer, the Seller
or the Depositor 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 or
the Depositor;
(ii) constitutes a default by the Servicer, the Seller or the
Depositor under or a breach of any provision of any loan agreement,
mortgage, indenture or other agreement or instrument to which the
Servicer, the Seller or the Depositor 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 or 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 Servicer, the Seller or the
Depositor, 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
Depositor or any of its or their subsidiaries, or any properties or rights
of the Servicer, the Seller, the Depositor or any of its or their
subsidiaries, pending or, to the Servicer's, the Seller's or 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 Servicer, the Seller or Depositor.
(f) VALID AND BINDING OBLIGATIONS. The Obligations, when executed,
authenticated and issued in accordance with the Indenture, and the
Transaction Documents (other than the Obligations), when executed and
delivered by the Servicer, the Seller and the Depositor, will constitute
the legal, valid and binding obligations of the Servicer, the Seller, the
Depositor and the Trust, 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 or
the Depositor 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 Depositor or the Trust, as applicable.
(g) FINANCIAL STATEMENTS. The Financial Statements of FIFSG, 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 companies reported therein as of the dates and for the
periods indicated and (iii) have been prepared in accordance with
generally
7
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 or the Seller. Except
as disclosed in the Financial Statements, the Servicer and the Seller 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 or the Seller.
(h) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed, or proposed to be employed, by the Servicer, the Seller or the
Depositor 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 Seller or the Depositor. The
Servicer, the Seller and the Depositor are not in breach of or in default
under any applicable law or administrative regulation of its respective
jurisdiction of incorporation, 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 or the Depositor is
a party or is otherwise subject which, if enforced, would have a material
adverse effect on the ability of the Servicer, the Seller or the
Depositor, as the case may be, to perform its respective obligations under
the Transaction Documents.
(i) TAXES. The Servicer, the Seller and the Depositor and the
Servicer's, the Seller's and the Depositor'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 or the Depositor.
(j) ACCURACY OF INFORMATION. Neither the Transaction Documents, nor
other information relating to the Contracts, the operations of the
Servicer, the Seller or the Depositor (including servicing or origination
of loans) or the financial condition of the Servicer, the Seller or the
Depositor (collectively, the "Documents"), as amended, supplemented or
superseded, furnished to the Insurer by the Servicer, the Seller or the
Depositor contains any statement of a material fact by the Servicer, the
Seller or Depositor which was untrue or misleading in any material adverse
respect when made. None of the Servicer, the Seller or the Depositor has
any knowledge of circumstances that could reasonably be expected to cause
a Material Adverse Change with respect to the Servicer, the Seller or the
Depositor. 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 or the Depositor that would render any of the
Documents untrue or misleading in any material respect.
8
(k) COMPLIANCE WITH SECURITIES LAWS. The offer and sale of the
Obligations 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 heading "Description of the
Insurer and the Insurance Policy" or the consolidated financial statements
of the Insurer incorporated by reference in the Offering Document. Neither
the offer nor the sale of the Obligations 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 and the Depositor contained in the
Transaction Documents is true and correct in all material respects, and
the Servicer, the Seller and the Depositor 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 and
the Depositor are solvent and will not be rendered insolvent by the
Transaction and, after giving effect to the Transaction, none of the
Servicer, the Seller or the Depositor will be left with an unreasonably
small amount of capital with which to engage in its business, nor does the
Servicer, the Seller or the Depositor intend to incur, or believe that it
has incurred, debts beyond its ability to pay as they mature. None of the
Servicer, the Seller or the Depositor 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 or the Depositor or any of
their assets. The amount of consideration being received by the Issuer
upon the sale of the Obligations to the Initial Purchaser constitutes
reasonably equivalent value and fair consideration for the interest in the
Contracts evidenced by the Obligations. The Seller is not transferring the
Contracts to the Issuer and the Issuer is not selling the Obligations to
any Initial Purchaser, as provided in the Transaction Documents, with any
intent to hinder, delay or defraud any of the Seller's or the Depositor's
creditors.
(n) PRINCIPAL PLACE OF BUSINESS. The principal place of business of
the Servicer is located in Atlanta, Georgia, the principal place of
business of the Seller is located in Houston, Texas, and the principal
place of business of the Depositor is located in Houston, Texas.
(o) OPINION FACTS AND ASSUMPTIONS. The Opinion Facts and Assumptions
insofar as they relate to the Seller and the Depositor are true and
correct as of the Date of Issuance.
9
(p) REQUIREMENTS FOR RECEIVABLES. The Seller and the Depositor
represent and warrant with respect to each Contract that: (a) the related
Obligor has no right of recission or cancellation, claims or defenses,
set-offs or counterclaims of any kind whatsoever as to or against each
Contract; (b) the obligation created by the contract evidencing each
Contract is a bonafide sale in the ordinary course of the Originator's
business; (c) the contract evidencing such Contract complies with all
state and federal laws and regulations; (d) the contract evidencing each
Contract, including, but not limited to, description of the motor vehicle
and/or services contained therein, is in all respects complete, accurate
and represents the entire agreement between the Originator and the Obligor
and complies with Federal Consumer Credit Protection Act and all other
applicable state and federal laws and regulations.
SECTION 2.02. AFFIRMATIVE COVENANTS OF THE SERVICER, THE SELLER AND THE
DEPOSITOR. The Servicer, the Seller and the Depositor hereby agree that during
the Term of the Insurance Agreement, unless the Insurer shall otherwise
expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Servicer,
the Seller and the Depositor shall not be in default under the Transaction
Documents and shall comply with all material requirements of any law, rule
or regulation applicable to it. So long as no Insurer Default or Insurer
Insolvency exists, unless the Insurer shall otherwise consent, none of the
Servicer, the Seller or the Depositor 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, and the Depositor, its successors
and assigns, shall maintain their corporate existence and shall at all
times continue to be duly organized under the laws of their respective
jurisdictions of incorporation and duly qualified and duly authorized (as
described in sections 2.01(a), (b) and (c) hereof) and shall conduct its
business in accordance with the terms of its certificate or articles of
incorporation and bylaws. The Seller, the Depositor and the Servicer shall
notify the Insurer within sixty (60) days prior to any change in its name,
identify or corporate structure. The Seller, the Servicer and the
Depositor shall notify the Insurer within sixty (60) days prior to any
relocation of its principal office.
(c) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
The Servicer, the Seller and the Depositor 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 and the Seller shall furnish or cause to be
furnished to the Insurer:
(i) ANNUAL FINANCIAL STATEMENTS. As soon as available, and in
any event within 120 days after the close of each fiscal year of
FIFSG, the audited consolidated balance sheets of FIFSG and its
subsidiaries as of the end of such fiscal year and the related
audited consolidated statements of income, changes in
10
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 FIFSG's independent accountants (which shall be a
nationally recognized independent public accounting firm) and by the
certificate specified in Section 2.02(e) hereof.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available, and
in any event within 90 days after each of the first three fiscal
quarters of each fiscal year of FIFSG, the unaudited consolidated
balance sheets of FIFSG and its 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, 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 Contract, the information required under
the definition of "Contract Schedule" in Section 1.1 of the Sale and
Allocation Agreement. Thereafter, the Servicer shall deliver to the
Insurer not later than 12:00 noon, New York City time, on each
Determination Date the report required by Section 3.7 of the Sale
and Allocation Agreement.
(iv) COMPUTER DISKETTE. Beginning in February 2000, the
Servicer will deliver to the Insurer on a monthly basis, a computer
diskette or other electronic file in a format acceptable to the
Insurer, containing the information provided to the Insurer pursuant
to clause (iii) of this subsection 2.02(c) and also containing
information similar to the information provided in the Contract
Schedule delivered to the Indenture Trustee pursuant to the Sale and
Allocation Agreement and described in Schedule 1 of the Sale and
Allocation Agreement.
(v) CERTAIN INFORMATION. Upon the reasonable request of the
Insurer, the Servicer and the Seller shall promptly provide copies
of any requested proxy statements, financial statements, reports and
registration statements which the Servicer or the Seller files with,
or delivers to, the Commission or any national securities exchange.
(vi) OTHER INFORMATION. Promptly upon receipt thereof, copies
of all schedules, list of contracts, financial statements or other
similar reports delivered to or by the Servicer, the Seller or the
Depositor pursuant to the terms of the Transaction Documents and,
promptly upon request, such other data as the Insurer
11
may reasonably request. The Seller agrees, in the event of any
merger, consolidation or asset transfer of the Seller as described
in Section 4.3 of the Sale and Allocation Agreement, to deliver the
certificates and opinions described therein to the Insurer.
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 Seller or the Depositor
pursuant to this Section 2.02(c) to the extent provided in Section 2.02(f)
hereof.
(d) THE DEPOSITOR SHAREHOLDER MEETINGS. The Depositor shall have
annual shareholder meetings and at least annual board of director meetings
and shall prepare income and franchise tax returns as appropriate. The
Depositor shall deliver to the Insurer copies of the minutes of such
meetings no later than April 30 of each year and such tax returns promptly
upon filing but in no event later than August 31 of each year, beginning
in 2000.
(e) COMPLIANCE CERTIFICATE. The Servicer and the Seller shall
deliver to the Insurer, concurrently with the delivery of the financial
statements required pursuant to Sections 2.02(c)(i) and (ii) hereof, one
or more certificates signed by an officer of the Servicer and an officer
of the Seller authorized to execute such certificates on behalf of the
Servicer and the Seller 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 Section
5.1 of the Indenture, 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;
(iii) the attached financial statements submitted in
accordance with Sections 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 FIFSG 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 insurer bond) and an errors and omissions
insurance policy in accordance with the terms and requirements of
Section 2.25 of the Servicing Agreement.
12
(f) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS. On
an annual basis, or upon the occurrence of a Material Adverse Change, the
Servicer and the Seller shall, upon the reasonable request of the Insurer,
permit the Insurer or its authorized agents:
(i) to inspect, audit and make copies of abstracts from, the
books and records of the Servicer and of the Seller as they may
relate to the Obligations, the Contracts, the obligations of the
Servicer or of the Seller under the Transaction Documents, and the
Transaction;
(ii) to discuss the affairs, finances and accounts of the
Servicer or of the Seller with the chief operating officer and the
chief financial officer of the Servicer or of the Seller, as the
case may be; and
(iii) with the Servicer's or the Seller's consent, as
applicable, which consent shall not be unreasonably withheld, to
discuss the affairs, finances and accounts of the Servicer or the
Seller with the Servicer's or the Seller's independent accountants,
provided that an officer of the Servicer or the Seller 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 or the Seller. 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, and the books and records of the Seller shall be maintained at
the address of the Seller designated herein for receipt of notices, unless
the Seller shall otherwise advise the parties hereto in writing.
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 and the
Depositor shall be obligated (which obligation shall be satisfied as to
each if performed by the Servicer, the Seller or the Depositor) 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 or the Depositor that
13
(A) could be required to be disclosed to the Commission or to the
Servicer's, the Seller's or the Depositor's shareholders or (B)
could result in a Material Adverse Change with respect to the
Servicer, the Seller or the Depositor, 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 Seller or
the Depositor;
(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 or the Insurer;
(iii) any change in the location of the Servicer's, the
Seller's or the Depositor's principal office, any change in the
location of the Servicer's, the Seller's or the Depositor's books
and records, or any change in the location of the Corporate Trust
Office (as defined in the Sale and Allocation Agreement), or any
change in the account number or location of the Collection Account,
the Note Payment Account, the Certificate Payment Account or the
Reserve Account;
(iv) the occurrence of any Event of Servicing Termination,
Default or Event of Default or of any Material Adverse Change;
(v) the commencement of any proceedings by or against the
Servicer, the Seller or the Depositor under any applicable
bankruptcy, reorganization, liquidation, rehabilitation, insolvency
or other similar law now or hereafter in effect or of any proceeding
in which a receiver, liquidator, conservator, trustee or similar
official shall have been, or may be, appointed or requested for the
Servicer, the Seller or the Depositor or any of its or their assets;
or
(vi) the receipt of notice that (A) the Servicer, the Seller
or the Depositor is being placed under regulatory supervision, (B)
any license, permit, charter, registration or approval necessary for
the conduct of the Servicer's, the Seller's or the Depositor's
business is to be, or may be suspended or revoked, or (C) the
Servicer, the Seller or the Depositor is to cease and desist any
practice, procedure or policy employed by the Servicer, the Seller
or the Depositor in the conduct of its business, and such cessation
may result in a Material Adverse Change with respect to the
Servicer, the Seller or the Depositor.
(vii) The occurrence of any merger, consolidation or asset
transfer of the Seller as described in Section 4.3 of the Sale and
Allocation Agreement.
(h) FINANCING STATEMENTS AND FURTHER ASSURANCES. The Seller shall
cause the Depositor to file all necessary financing statements or other
instruments, and any amendments or continuation statements relating
thereto, necessary to be kept and filed in
14
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 Trust. The
Servicer, the Seller and 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 ten 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 and 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 ▇▇▇▇▇'▇.
(i) MAINTENANCE OF LICENSES. The Servicer, the Seller and the
Depositor, 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 OBLIGATIONS. The Servicer, the Seller and the
Depositor shall instruct the Indenture Trustee, upon redemption or payment
of all of the Obligations 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 Obligations, to surrender the Policy to the
Insurer for cancellation.
(k) DISCLOSURE DOCUMENT. Each Offering Document delivered with
respect to the Obligations 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.
(l) SERVICING OF CONTRACTS. The Servicer shall perform such actions
with respect to the Contracts as are required by or provided for in the
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 TRUST. On or before each March 31, beginning in
2001, so long as any of the Obligations are outstanding, and promptly
after the execution and delivery of each amendment to any financing
statement, the Servicer shall furnish to the Insurer and the Indenture
Trustee an officers' certificate and an opinion of counsel as described in
Section 3.6(b) of the Indenture, 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 Trust 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 Trust 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 Trust.
15
(n) SELLER'S INDEMNITY. Notwithstanding anything in subsection 3.03
hereof, the Seller shall pay to the Insurer an amount equal to any amount
paid by the Insurer because of the Servicer's failure to deposit into the
Collection Account any amount required to be so deposited by it pursuant
to the Servicing Agreement or the Sale and Allocation Agreement, 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.
(o) CLOSING DOCUMENTS. The Servicer, the Seller and the Depositor
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
Seller and the Depositor 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.
(p) 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 3.3 of the Sale and Allocation
Agreement to any Owner pursuant to the United States Bankruptcy
Code, 11 U.S.C. ▇▇.▇▇. 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 Contracts against the debtor which made such
preference payment or otherwise with respect to such preference
amount; and
(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.
(q) SELLER TO HOLD COMMON STOCK OF DEPOSITOR. The Seller shall hold,
either directly or indirectly, all of the common stock of the Depositor
during the Term of the Insurance Agreement. The Seller shall not sell,
pledge or otherwise transfer such stock without the prior written consent
of the Insurer.
16
(r) YEAR 2000 PROGRAM. The Servicer has taken steps 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) PURCHASE OPTION. In the event the Depositor exercises its
purchase option pursuant to Section 9.3 of the Trust Agreement, the
Depositor shall promptly deliver to the Insurer the documents described in
Section 9.3(b) of the Trust Agreement.
SECTION 2.03. NEGATIVE COVENANTS OF THE SERVICER, THE SELLER AND THE
DEPOSITOR. The Servicer, the Seller and the Depositor 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 or the
Depositor shall take any action, or fail to take any action, if reasonably
requested by the Insurer at a time when no Insurer Default or Insurer
Insolvency exists or if such action or failure to take action may result
in a material adverse change as described in clause (ii) of the definition
of Material Adverse Change with respect to the Servicer, the Seller or the
Depositor, or may interfere with the enforcement of any rights of the
Insurer under or with respect to the Transaction Documents. The Servicer,
the Seller or the Depositor 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, the Seller
and the Depositor 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 and the
Depositor will not use any Adverse Selection Procedure in selecting
Contracts to be transferred to the Indenture Trustee from the outstanding
contracts that qualify under the Sale and Allocation Agreement for
inclusion in the Trust.
(c) WAIVER, AMENDMENTS, ASSIGNMENTS, ETC. None of the Servicer, the
Seller or the Depositor 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; and (if no Insurer Default or Insurer Insolvency
exists) none of the Servicer, the Seller or the Depositor shall assign any
of the Transaction Documents to which it is a party without the prior
written consent of the Insurer.
(d) CONTRACTS; CHARGE-OFF POLICY. Except as otherwise permitted in
the Sale and Allocation Agreement or the Servicing Agreement, the
Servicer, the Seller and the Depositor shall not alter or amend any
Contract, their respective collection policies or
17
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 AND WARRANTIES OF THE ISSUER. As of the Date
of Issuance, the Issuer represents, warrants and covenants as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Issuer is a business
trust and is duly organized, validly existing and in good standing under
the laws of the State of Delaware. The Issuer is duly qualified to do
business, is in good standing and has obtained all 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 to which it is a party, in each jurisdiction in
which the failure to be so qualified or to obtain such approvals would
render any Transaction Document to which it is a party unenforceable in
any respect or would have a material adverse effect upon the Transaction,
the Owner or the Insurer.
(b) POWER AND AUTHORITY. 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 to which it is a party and to consummate
the Transaction.
(c) DUE AUTHORIZATION. The execution, delivery and performance of
the Transaction Documents by the Issuer have been duly authorized by all
necessary corporate action and do not require any additional approvals or
consents, or other action by or any notice to or filing with any Person,
including, without limitation, any governmental entity or the Issuer's
stockholders, which have not previously been obtained or given by the
Issuer.
(d) NONCONTRAVENTION. Neither the execution and delivery of the
Transaction Documents by the Issuer, the consummation of the Transaction
contemplated thereby nor 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 Trust Agreement or any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award
currently in effect having applicability to the Issuer or any of its
material properties, including regulations issued by an
administrative agency or other governmental authority having
supervisory powers over the Issuer;
(ii) constitutes a default by the Issuer under or a breach of
any provision of any loan agreement, mortgage, indenture or other
agreement or instrument to which the Issuer is a party or by which
any of its properties, which
18
are individually or in the aggregate material to 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 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 Issuer or any properties or
rights of the Issuer pending or, to the Issuer'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
Issuer.
(f) VALID AND BINDING OBLIGATIONS. The Obligations, when executed,
authenticated and issued in accordance with the Indenture and the
Transaction Documents (other than the Obligations), when executed and
delivered by the Issuer, will constitute the legal, valid and binding
obligations of the Issuer 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. The Issuer will not at any time in the future
deny that the Transaction Documents constitute the legal, valid and
binding obligations of the Issuer.
(g) COMPLIANCE WITH LAW, ETC. No practice, procedure or policy
employed, or proposed to be employed, by the Issuer in the conduct of its
business violates any law, regulation, judgment, agreement, order or
decree applicable to it that, if enforced, could reasonably be expected to
result in a Material Adverse Change with respect to the Issuer. The Issuer
is not in breach of or default under any applicable law or administrative
regulation of its respective jurisdiction or incorporation, 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 Issuer
is a party or is otherwise subject which, if enforced, would have a
material adverse effect on the ability of the Issuer, to perform its
obligations under the Transaction Documents.
(h) COMPLIANCE WITH SECURITIES LAWS. The offer and sale of the
Obligations 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 heading "Description of the
Insurer and the Insurance Policy" or the consolidated financial statements
of the Insurer incorporated by reference in the Offering
19
Document. Neither the offer nor the sale of the Obligations has been or
will be in violation of the Securities Act or any other federal or state
securities laws.
(i) TAXES. The Issuer has 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 Issuer.
(j) TRANSACTION DOCUMENTS. Each of the representations and
warranties of the Issuer contained in the Transaction Documents is true
and correct in all material respects, and the Issuer hereby makes each
such representation and warranty to, and for the benefit of, the Insurer
as if the same were set forth in full herein; provided that the remedy for
any breach of this paragraph shall be limited to the remedies specified in
the related Transaction Document or in this Insurance Agreement.
(k) SOLVENCY. The Issuer is solvent and will not be rendered
insolvent by the Transaction and, after giving effect to the Transaction,
the Issuer will not be left with an unreasonably small amount of capital
with which to engage in its respective business, nor does the Issuer
intend to incur, or believe that it has incurred, debts beyond its ability
to pay as they mature. The Issuer does not contemplate the commencement of
insolvency, bankruptcy, liquidation or consolidation proceedings or the
appointment of a receiver, liquidator, conservator, trustee or similar
official in respect of the Issuer or any of its assets.
(l) PRINCIPAL PLACE OF BUSINESS. The principal place of business of
the Issuer is located in Houston, Texas.
(m) INVESTMENT COMPANY ACT. The Issuer is not an "investment
company," or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are defined in
the Investment Company Act. The Issuer is not required to be registered as
an "investment company" under the Investment Company Act.
(n) NO CONSENTS. No authorization or approval or other action by,
and no notice to or filing with, any Person, including, without
limitation, any governmental entity or regulatory body, is required for
the due execution, delivery and performance by the Issuer of the
Transaction Documents or any other material document or instrument to be
delivered thereunder, except (in each case) such as have been obtained or
the failure of which to be obtained would not be reasonably likely to have
a material adverse effect on the Transaction.
(o) NO MATERIAL EVENT OF DEFAULT. There is no material event of
default on the part of the Issuer under any agreement involving financial
obligations which would materially adversely impact the financial
conditions or operations of the Trust or its obligations under any
document associated with this Transaction.
20
(p) OPINION FACTS AND ASSUMPTIONS. The opinion Facts and Assumptions
insofar as they relate to the Issuer are true and correct as of the Date
of Issuance.
SECTION 2.05. AFFIRMATIVE COVENANTS OF THE ISSUER. The Issuer hereby
agrees that during the Term of the Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) COMPLIANCE WITH AGREEMENTS AND APPLICABLE LAWS. The Issuer shall
not be in default under the Transaction Documents and shall comply with
all material requirements of any law, rule or regulation applicable to it.
The Issuer shall not agree to any material amendment to or modification of
the terms of any Transaction Documents unless the Insurer shall have given
its prior written consent.
(b) MAINTAIN EXISTENCE. The Issuer and its successors and assigns
shall maintain their existence and shall at all times continue to be duly
organized under the laws of its respective jurisdiction and duly qualified
and duly authorized and shall conduct its business in accordance with the
terms of its organizational documents.
(c) NOTICE OF MATERIAL EVENTS. The Issuer shall be obligated
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 and to the
extent that it receives actual notice of the occurrence of any of the
following events:
(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 Issuer that (A) could be required to be disclosed to the
Commission or to the Issuer's owners or (B) could result in a
Material Adverse Change with respect to 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
Issuer;
(ii) any change in the location of the Issuer's or the Owner
Trustee's principal place of business or any change in the location
of the Issuer's books and records;
(iii) the occurrence of any Default or Event of Default or of
any Material Adverse Change;
(iv) the commencement of any proceedings by or against 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 receiver, liquidator,
conservator, trustee or similar official shall have been, or may be,
appointed or requested for the Issuer or any of its assets; or
(v) the receipt of notice that (A) the Issuer is being placed
under regulatory supervision, (B) any license, permit, charter,
registration or approval
20
necessary for the conduct of the Issuer's business is to be, or may
be suspended or revoked, or (C) the Issuer is to cease and desist
any practice, procedure or policy employed by the Issuer in the
conduct of its business, and such cessation may result in a Material
Adverse Change with respect to the Issuer.
(d) FINANCING STATEMENTS AND FURTHER ASSURANCES. To the extent
provided in the Indenture, the Issuer 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. 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
ten 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 to which it is a party. In addition, 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.
(e) MAINTENANCE OF LICENSES. The Issuer, or any successors thereof,
shall maintain all licenses, permits, charters and registrations which are
material to the conduct of its business.
(f) THIRD-PARTY BENEFICIARY. The Issuer agrees that the Insurer
shall have all rights of a third-party beneficiary in respect of each
Transaction Document and hereby incorporates and restates its
representations, warranties and covenants as set forth therein for the
benefit of the Insurer.
(g) TAX MATTERS. The Issuer will take all actions necessary to
ensure that the Issuer is treated as a "non-entity" for federal and state
income tax purposes and not as an association (or publicly traded
partnership), taxable as a corporation.
(h) FINANCIAL STATEMENTS; ACCOUNTANTS' REPORTS; OTHER INFORMATION.
The Issuer shall keep or cause to be kept in reasonable detail books and
records of account of its assets and business, including, but not limited
to, books and records relating to the Transaction. The Issuer shall
furnish or cause to be furnished to the Insurer promptly upon receipt
thereof, copies of all schedules, opinions of counsel or accountants,
officer's certificates, financial statements or other similar reports
delivered to or by the Issuer pursuant to the terms of the Transaction
Documents and, promptly upon request, such other data as the Insurer may
reasonably request.
(i) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS. On
an annual basis, or upon the occurrence of a Material Adverse Change, the
Issuer shall, upon the reasonable request of the Insurer, at its expense,
permit the Insurer or its authorized agents:
22
(i) to inspect the books and records of the Issuer as they may
relate to the Obligations, the obligations of the Issuer under the
Transaction Documents, and the Transaction;
(ii) to discuss the affairs, finances and accounts of the
Issuer; and
(iii) with the Issuer's consent, as the case may be, which
consent shall not be unreasonably withheld, to discuss the affairs,
finances and accounts of the Issuer with the Issuer's independent
accountants, provided that a representative of the Seller or the
Issuer 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
Issuer. The books and records of the Issuer will be maintained at the
address of the Issuer designated herein for receipt of notices, unless the
Issuer shall otherwise advise the parties hereto in writing.
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.
SECTION 2.06. NEGATIVE COVENANTS OF THE ISSUER. The Issuer hereby agrees
that during the Term of the Insurance Agreement, unless the Insurer shall
otherwise expressly consent in writing:
(a) IMPAIRMENT OF RIGHTS. The Issuer shall not 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 (ii) of the
definition of Material Adverse Change with respect to the Issuer, or may
interfere with the enforcement of any rights of the Insurer under or with
respect to the Transaction Documents. 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 Issuer shall
furnish to the Insurer all information requested by it that is reasonably
necessary to determine compliance with this paragraph.
(b) WAIVER, AMENDMENTS, ETC. Except in accordance with the
Transaction Documents, the Issuer shall not waive, modify or amend, or
consent to any waiver, modification or amendment of, any of the material
terms, provisions or conditions of the Transaction Documents without the
consent of the Insurer which consent shall not unreasonably be withheld.
Except upon the prior written consent of the Insurer which
23
consent shall not unreasonably be withheld, the Issuer shall not allow the
transfer, modification or amendment, nor consent to any transfer,
modification or amendment of the Certificate of Trust unless such
amendment is required under the Delaware Business Trust Act.
(c) RESTRICTIONS ON LIENS. The Issuer shall not, except as
contemplated by the Transaction Documents, (i) create, incur or suffer to
exist, or agree to create, incur or suffer to exist, or consent to cause
or permit in the future (upon the happening of a contingency or otherwise)
the creation, incurrence or existence of any lien of the Contracts or (ii)
sign or file under the Uniform Commercial Code of any jurisdiction any
financing statement which names the Issuer as a debtor, or sign any
security agreement authorizing any secured party thereunder to file such
financing statement, with respect to the Contracts.
(d) SUCCESSORS. The Issuer shall not remove or replace, or cause to
be removed or replaced, the Servicer, the Indenture Trustee or the Owner
Trustee without the prior written approval of the Insurer.
(e) SUBSIDIARIES. The Issuer shall not form, or cause to be formed,
any subsidiaries.
(f) NO MERGERS. The Issuer shall not consolidate with or merge into
any Person or transfer all or any material amount of its assets to any
Person, liquidate or dissolve except as permitted by the Trust Agreement
and as contemplated by the Transaction Documents.
(g) OTHER ACTIVITIES. The Issuer shall not (i) sell, pledge,
transfer exchange or otherwise dispose of any of its assets except as
permitted under the Transaction Documents; or (ii) engage in any business
or activity except as contemplated by the Transaction Documents and as
permitted by the Trust Agreement.
(h) TRUST AGREEMENT. The Issuer shall not amend the Trust Agreement
without the prior written consent of the Insurer.
SECTION 2.07. REPRESENTATIONS, WARRANTIES AND COVENANTS OF INDENTURE
TRUSTEE AND BACK-UP SERVICER. The Indenture Trustee and the Back-up Servicer
represents and warrants to, as of the Date of Issuance, and covenants with the
other parties hereto as follows:
(a) DUE ORGANIZATION AND QUALIFICATION. The Indenture Trustee and
the Back-up Servicer are each a national banking association or
corporation, duly organized, validly existing and in good standing under
the laws of its respective jurisdiction of incorporation. Each of the
Indenture Trustee 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
24
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 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 or the Back-up
Servicer's stockholders, which have not previously been obtained or given
by the Indenture Trustee or the Back-up Servicer, as applicable.
(c) NONCONTRAVENTION. None of the execution and delivery of the
Transaction Documents by the Indenture Trustee or the Back-up Servicer,
the consummation of the Transaction 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 or the Back-up Servicer or any law,
rule, regulation, order, writ, judgment, injunction, decree,
determination or award currently in effect having applicability to
the Indenture Trustee 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 or the Back-up
Servicer;
(ii) constitutes a default by the Indenture Trustee 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 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 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 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
Back-up Servicer, or any of their subsidiaries, or any properties or
rights of the Indenture Trustee, the Back-up Servicer or any of their
subsidiaries, pending or, to the Indenture Trustee's or the Back-up
Servicer's knowledge after reasonable inquiry, threatened, which, in any
case, could reasonably be expected to result
25
in a Material Adverse Change with respect to the Indenture Trustee or the
Back-up Servicer.
(e) VALID AND BINDING OBLIGATIONS AND AGREEMENTS. The Obligations,
when executed, authenticated and issued in accordance with the Indenture,
and the Transaction Documents (other than the Obligations), to which they
are parties when executed and delivered by the Indenture Trustee and the
Back-up Servicer, will constitute the legal, valid and binding obligations
of the Indenture Trustee 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. Neither the Indenture Trustee nor 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 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 or the
Back-up Servicer in the conduct of their business violates any law,
regulation, judgment, agreement, order or decree applicable to any the
Indenture Trustee or the Back-up Servicer that, if enforced, could
reasonably be expected to result in a Material Adverse Change with respect
to the Indenture Trustee or the Back-up Servicer. Neither the Indenture
Trustee nor 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 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 or the Back-up
Servicer, as the case may be, to perform their respective obligations
under the Transaction Documents.
(g) TRANSACTION DOCUMENTS. Each of the representations and
warranties of the Indenture Trustee and the Back-up Servicer contained in
the Transaction Documents is true and correct in all material respects,
and the Indenture Trustee 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 and the Back-up
Servicer 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 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.
26
(i) NOTICES. The Indenture Trustee shall promptly notify the Insurer
of any merger, consolidation or asset transfer with respect to it as
described in Section 6.9 of the Indenture.
SECTION 2.08. REPRESENTATIONS, WARRANTIES AND COVENANTS OF 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 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 Wilmington, Delaware.
(d) FURNISHING OF DOCUMENTS; NOTICES. The Owner Trustee hereby
agrees to furnish to the Insurer the documents described in Section 7.2 of
the Trust Agreement to the same extent as required with respect to the
Depositor. The Owner Trustee shall provide the Insurer with prior written
notice of any merger, consolidation or asset transfer with respect to it
as described in Section 10.4 of the Trust Agreement.
SECTION 2.09. NEGATIVE COVENANT OF THE ADMINISTRATOR. The Administrator
shall not remove the Owner Trustee pursuant to Section 10.2 of the Trust
Agreement unless it has obtained the prior written consent of the Insurer if no
Insurer Default or Insurer Insolvency exists.
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 INSURANCE PREMIUM AND EXPENSES. The Insurer
shall have been paid by the Servicer that portion of a nonrefundable
Insurance Premium payable on the Date of Issuance and the Servicer shall
agree to 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 Premium Side Letter Agreement and a copy of each of
the Transaction
27
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 certificate or articles of incorporation and
bylaws of the Servicer, the Seller and the Depositor and (ii) the
resolutions of the Seller's Board of Directors authorizing the sale of the
Contracts and (iii) the execution, delivery and performance by the
Servicer, the Seller and the Depositor of the Transaction Documents and
the Transaction contemplated thereby, certified by the Secretary or an
Assistant Secretary of the Servicer, the Seller and the Depositor (which
certificate shall state that such certificate or articles of
incorporation, 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 and the Depositor certifying the names and signatures of the
officers of the Servicer, the Seller and the Depositor 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 Seller and the Depositor 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 Seller and the Depositor to that effect.
(f) OPINIONS OF COUNSEL.
(i) The law firm of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP shall have issued
its favorable opinion, in form and substance acceptable to the
Insurer and its counsel, regarding and the validity and
enforceability of the Transaction Documents against the Depositor,
the Servicer, the Issuer and the Seller.
(ii) The law firm of ▇▇▇▇▇▇▇▇ & Knight LLP shall have issued
its favorable opinions, in form and substance acceptable to the
Insurer and its counsel, regarding the sale of the Contracts from
the Seller to the Issuer, and consolidation of the Depositor and the
Issuer and the Depositor and the Seller in the event of the
Depositor's bankruptcy.
(iii) The law firm of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP shall have issued
its favorable opinions, in form and substance acceptable to the
Insurer and its counsel, regarding the perfection of the Indenture
Trustee's interest in the Trust Estate, including in the Reserve
Account Property.
28
(iv) The Insurer shall have received such other opinions of
counsel, in form and substance acceptable to the Insurer and its
counsel, including tax opinions, addressing such other matters as
the Insurer may reasonably request.
(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 of the Servicer, the
Seller and the Depositor, 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 Transaction
contemplated by any of the Transaction Documents illegal or otherwise
prevent the consummation thereof.
(j) ISSUANCE OF RATINGS. The Insurer shall have received
confirmation that the risk secured by the Policy constitutes at least an
investment grade risk by S&P and ▇▇▇▇▇'▇, and that the Obligations, when
issued, will be rated "AAA" by S&P and "Aaa" by ▇▇▇▇▇'▇.
(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 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 Obligations conform to the terms of the Transaction
Documents.
(n) SATISFACTION OF CONDITIONS OF THE PURCHASE AGREEMENT. All
conditions in the Purchase Agreement relating to the Initial Purchaser's
obligation to purchase the Obligations shall have been satisfied.
(o) PURCHASE 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 Initial Purchaser pursuant to
the Purchase Agreement.
29
(p) GUARANTY. The Guaranty shall be executed by all parties thereto
and delivered to the Indenture Trustee.
SECTION 3.02. PAYMENT OF FEES AND INSURANCE PREMIUM.
(a) LEGAL AND ACCOUNTING FEES. The Servicer shall pay or cause to be
paid, on the Date of Issuance, legal fees and disbursements incurred by
the Insurer in connection with the issuance of the Policy and any fees of
the Insurer's auditors. 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 on demand.
(b) INSURANCE PREMIUM. In consideration of the issuance by the
Insurer of the Policy, the Insurer shall be entitled to receive the
Insurance Premium, so long as no Insurer Default or Insurer Insolvency has
occurred, as and when due in accordance with the terms of the Premium Side
Letter Agreement (i) in the case of Insurance Premium due on or before the
Date of Issuance, directly from the Servicer and (ii) in the case of
Insurance Premium due after the Date of Issuance, FIRST, pursuant to the
Sale and Allocation Agreement, and SECOND, to the extent the amounts in
subclause FIRST are not sufficient, directly from the Servicer. For
purposes of the Sale and Allocation Agreement, the term "Premium
Percentage" shall have the meaning set forth in the Premium Side Letter
Agreement. The Insurance Premium shall be calculated according to the
Premium Side Letter Agreement for the amount due on or before the Date of
Issuance and for the amount due on each Payment Date. The Insurance
Premium paid hereunder or under the Sale and Allocation Agreement shall be
nonrefundable without regard to whether the Insurer makes any payment
under the Policy or any other circumstances relating to the Obligations or
provision being made for payment of the Obligations prior to maturity. All
payments of Insurance Premium to be made to the Insurer shall be made by
wire transfer to an account designated from time to time by the Insurer by
written notice to the Servicer and the Indenture Trustee.
SECTION 3.03. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION.
(a) In accordance with the priorities established in Section 2.8 of
the Indenture and 3.5 of the Sale and Allocation Agreement, 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.
30
(b) Notwithstanding anything in Section 3.03(a) to the contrary, the
Servicer and the Seller agree to reimburse the Insurer as follows: (i)
from the Seller, for payments made under the Policy arising as a result of
the Seller's failure to repurchase any Contract required to be repurchased
pursuant to Section 2.3 of the Sale and Allocation 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, and (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 Sale and Allocation Agreement or the Servicing Agreement or (B) the
Servicer's failure to repurchase any contract to be repurchased under
Section 2.28 of the Servicing Agreement, 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.
(c) The Servicer and the Seller 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
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, (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, or (iv) preparation of bound volumes of the
Transaction Documents; costs and expenses shall include a reasonable
allocation of compensation and overhead attributable to the time of
employees of the Insurer spent in connection with the actions described in
clause (ii) above, and the Insurer reserves the right to charge a
reasonable fee as a condition to executing any waiver or consent proposed
in respect of any of the Transaction Documents.
(d) The Servicer, the Seller and the Depositor 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 and the Depositor agree to pay to the
Insurer as follows: any payments made by the Insurer on behalf of, or
advanced to, the Servicer, the
31
Seller or the Depositor, respectively, including, without limitation, any
amounts payable by the Servicer, the Seller or the Depositor pursuant to
the Obligations or any other Transaction Documents.
(f) Following termination of the Indenture pursuant to Section 10.1
thereof, the Servicer agrees to reimburse the Insurer for any Insured
Payments (including, without limitation, any Insured Payments relating to
Preference Amounts as defined in the Policy) 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
Seller, 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 Insurer (herein collectively referred
to as "Liabilities") of any nature arising out of or relating to the
Transaction 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 caption
"Description of the Insurer and the Insurance Policy" 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 Depositor, the Servicer, or the
allegation thereof, in connection with the offering, issuance, sale
or delivery of the Obligations 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;
32
(iii) the misfeasance or malfeasance of, or negligence or
theft committed by, any director, officer, employee or agent of the
Servicer, the Seller or the Depositor;
(iv) the violation by the Depositor, the Seller 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 Obligations or the Transaction contemplated by the
Transaction Documents;
(v) the violation by the Depositor, the Seller 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 Contracts;
(vi) the breach by the Depositor, the Seller or the Servicer
of any of its obligations under this Insurance Agreement or any of
the other Transaction Documents; and
(vii) the breach by the Servicer, the Seller or the Depositor
of any representation or warranty on the part of the Servicer, the
Seller or the Depositor 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 Seller agrees to indemnify the Trust and the Insurer for any
and all Liabilities incurred by the Trust and the Insurer due to any
claim, counterclaim, rescission, setoff or defense asserted by an Obligor
under any Contract 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 Seller or
the Depositor under this Section 3.04, notify the Servicer, the Seller or
the Depositor 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 Seller or the Depositor of the commencement
thereof, the Servicer, the Seller or the Depositor shall be entitled to
participate in, and, to the extent that it shall wish, to assume the
defense thereof, with counsel satisfactory to such indemnified
33
party, and after notice from the Servicer, the Seller or the Depositor to
such indemnified party of its election so to assume the defense thereof,
the Servicer, the Seller or the Depositor 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 Seller or the Depositor 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 Seller or the Depositor. The Servicer, the Seller or the
Depositor 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 agrees to pay, and to protect, indemnify and save
harmless, the Insurer and its officers, directors, shareholders,
employees, 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 Indenture Trustee of any of its obligations under this
Insurance Agreement or 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, 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 the 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 Back-up Servicer, the Seller
and the Depositor 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
34
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
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 Back-up Servicer, the Seller or the
Depositor or from any other source under the Transaction Documents and all
amounts payable under the Obligations 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 an Insurer Insolvency or an Insurer
Default shall exist or shall have occurred and be continuing, none of the
Servicer, the Indenture Trustee, the Back-up Servicer, the Seller, the
Depositor, the Issuer, the Owner Trustee or the Indenture Trustee 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 Back-up Servicer, the Seller, the Issuer, the Owner Trustee
and the Depositor 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 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
Back-up Servicer, the Seller, the Issuer, the Owner Trustee and the
Depositor hereunder shall be
35
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 Obligations 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 Back-up Servicer, the Seller, the Issuer, the Owner Trustee or
the Depositor 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
Back-up Servicer, the Seller, the Issuer or the Depositor to receive
the proceeds from the sale of the Obligations; or
(vii) any breach by the Servicer, the Indenture Trustee, the
Back-up Servicer, the Seller, the Issuer, the Owner Trustee or the
Depositor of any representation, warranty or covenant contained in
any of the Transaction Documents.
(b) The Servicer, the Indenture Trustee, the Back-up Servicer, the
Seller, the Depositor, the Issuer, the Owner Trustee 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 Back-up Servicer, the Seller,
the Issuer, the Owner Trustee or the Depositor 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 to any right of setoff or recoupment
36
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 Back-up Servicer,
the Seller, the Issuer, the Owner Trustee or the Depositor; (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 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 Back-up Servicer, the Seller, the Issuer, the
Owner Trustee or the Depositor 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 Back-up Servicer, the Seller,
the Issuer, the Owner Trustee nor the Depositor 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.
37
(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 Back-up Servicer, the Seller, the Issuer, the Owner
Trustee or the Depositor, 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 nor any Owner shall have any right
to payment from any Insurance Premiums paid or payable hereunder or under
the Sale and Allocation Agreement or from any other amounts paid by the
Servicer, the Indenture Trustee, the Back-up Servicer, the Seller or the
Depositor pursuant to Section 3.02, 3.03 or 3.04 hereof.
(e) The Servicer, the Seller, the Depositor , the Back-up Servicer,
the Issuer, the Owner Trustee and the Indenture Trustee 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 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 Depositor or the Issuer.
SECTION 4.07. INDENTURE TRUSTEE, DEPOSITOR, BACK-UP SERVICER, SELLER 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 Contract, the
Indenture Trustee, the Depositor, the Back-up Servicer, the Seller, the Issuer,
the Owner Trustee and the Servicer agree to join in any action initiated by the
Trust 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 Depositor, the
Seller or the Servicer or in respect of the Contracts available to the Indenture
Trustee under the Indenture or Sale and Allocation Agreement. The Indenture
Trustee acknowledges such subrogation and, further,
38
agrees to execute such instruments prepared by the Insurer and to take such
reasonable actions as, 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 or Sale and Allocation Agreement.
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 Back-up Servicer, the Seller or the Depositor
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 Back-up Servicer,
the Seller, the Issuer, the Owner Trustee or the Depositor shall fail to
pay when due any amount payable by the Servicer, the Indenture Trustee,
the Back-up Servicer, the Seller or the Depositor hereunder or (ii) a
legislative body has enacted any law that declares or a court of competent
jurisdiction shall find or rule that this Insurance Agreement or any of
the Transaction Documents are not valid and binding on the Servicer, the
Indenture Trustee, the Back-up Servicer, the Seller, the Issuer, the Owner
Trustee or the Depositor;
(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 Back-up Servicer, the Seller, the Issuer, the Owner Trustee or the
Depositor 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 Back-up Servicer, the Seller, the Issuer, the Owner Trustee
or the Depositor 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 Seller, the Issuer,
the Owner Trustee or the Depositor, as applicable, by the Insurer (with a
copy to the Indenture Trustee) or by the Indenture Trustee (with a copy to
the Insurer);
(e) A 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 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
39
affairs, shall have been entered against the Servicer, the Seller, the
Back-up Servicer, the Issuer, the Owner Trustee or the Depositor 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 Back-up Servicer, the Issuer, the
Owner Trustee or the Depositor 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
Back-up Servicer, the Issuer, the Owner Trustee or the Depositor or of or
relating to all or substantially all of the property of either;
(g) The Servicer, the Seller, the Back-up Servicer, the Issuer, the
Owner Trustee or the Depositor 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 an "Event of Servicing
Termination" under the Servicing Agreement as defined therein;
(i) The failure of the Seller, the Issuer or the Depositor to comply
with, or maintain the accuracy of, the Opinion Facts and Assumptions;
(j) The occurrence of final rulings against the Seller or its
affiliates by a court of competent jurisdiction assessing monetary damages
in excess of $1,000,000 or settlements resulting in the payment by the
Seller or its affiliates of amounts in excess of $1,000,000;
(k) The departure of any two of the following executives from the
Seller or its consolidated subsidiaries: ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ Duck, and
▇▇▇▇▇▇ ▇▇▇▇▇▇, if a replacement for such individuals(s) acceptable to the
Insurer is not made within 90 days;
(l) The Seller fails to maintain a minimum GAAP Equity as a
percentage of on-balance sheet portfolio of 10%. Equity may include 50% of
subordinated debt with a maturity equal to or greater than five years,
subject to MBIA review of and satisfaction with the subordinated debt
agreement;
(m) The Seller fails to maintain either (i) a $10 million non-MBIA
insured, non-asset backed financing facility or (ii) an issuance of $20
million in subordinated debt with a maturity of five to seven years;
(n) The Seller fails to maintain a minimum EBITDA Coverage of
1.1:1.0. The test shall be measured quarterly (coinciding with FIFS
quarterly fiscal reporting) on a rolling six months basis;
40
(o) A Change in Control occurs; or
(p) A material change occurs in the operations of the Servicer which
materially adversely affects the ability of the Servicer to service the
Contracts or to perform its obligations under the Servicing Agreement.
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 Back-up Servicer, the Seller, the Issuer,
the Owner Trustee or the Depositor under the Transaction Documents.
(b) Unless otherwise expressly provided, no remedy herein conferred
upon or reserved is intended to be exclusive of any other available
remedy, but each remedy shall be cumulative and shall be in addition to
other remedies given under the 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
Back-up Servicer, the Seller, the Issuer and the Depositor. Unless
41
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)(First Investors Auto Owner Trust 2000-A)
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 Seller and Administrator:
42
First Investors Financial Services, Inc.
Suite 710
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(c) To the Servicer:
First Investors Servicing Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(d) To the Indenture Trustee:
Norwest Bank Minnesota, National Association
▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Asset-Backed Trust Administration
(e) To the Depositor:
First Investors Auto Investment Corp.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Confirmation: (▇▇▇) ▇▇▇-▇▇▇▇
(f) To the Issuer:
First Investors Auto Owner Trust 2000-A
c/o Bankers Trust (Delaware)
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Trust
(g) To the Owner Trustee:
43
Bankers Trust (Delaware)
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Corporate Trust
with a copy to:
Bankers Trust Company
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Structured Finance Group
(h) To the Back-up Servicer:
Norwest Bank Minnesota, National Association
Sixth and ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Asset-Backed Trust Administration
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.
SECTION 6.05. CONSENT TO JURISDICTION.
(a) The parties hereto hereby irrevocably submit to the jurisdiction
of the United States District Court for the Southern District of New York
and any court in the State of New York located in the City and County of
New York, and any appellate court from any thereof, in any action, suit or
proceeding brought against it and to or in connection with any of the
Transaction Documents or the Transaction 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
44
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.
(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 any party hereto
or its or their property in the courts of any jurisdiction.
SECTION 6.06. CONSENT OF THE INSURER. 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 Transaction 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
45
Documents, the Obligations 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.
SECTION 6.12. LIMITATION OF LIABILITY. Notwithstanding any other provision
herein or elsewhere, this Insurance Agreement has been executed and delivered by
Bankers Trust (Delaware), not in its individual capacity, but solely in its
capacity as Owner Trustee of the Issuer, in no event shall Bankers Trust
(Delaware) or the Owner Trustee have any liability in respect of the
representation, 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 this Insurance Agreement and each other
document, the Owner Trustee and Bankers Trust (Delaware) shall be entitled to
the benefits of the Trust Agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK;
SIGNATURE PAGE FOLLOWS]
46
IN WITNESS WHEREOF, the parties hereto have executed this Insurance
Agreement, all as of the day and year first above mentioned.
MBIA INSURANCE CORPORATION
By ______________________________________
Assistant Secretary
FIRST INVESTORS SERVICING
CORPORATION, as Servicer
By ______________________________________
Title ___________________________________
FIRST INVESTORS FINANCIAL SERVICES, INC., as
Seller and as Administrator
By ______________________________________
Title ___________________________________
FIRST INVESTORS AUTO INVESTMENT CORP., as
Depositor
By ______________________________________
Title ___________________________________
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Back-up Servicer and
Indenture Trustee
By ______________________________________
Title ___________________________________
FIRST INVESTORS AUTO OWNER TRUST 2000-A, as
Issuer,
By: BANKERS TRUST (DELAWARE), not in its
individual capacity, but solely as Owner
Trustee
By ______________________________________
Title ___________________________________
BANKERS TRUST (DELAWARE), not in its
individual capacity, but solely as Owner
Trustee
By ______________________________________
Title ___________________________________