<PAGE>

                                                             [Execution Version]



                     INSURANCE AND REIMBURSEMENT AGREEMENT



                                     among



                       ASSET GUARANTY INSURANCE COMPANY,



                   TFC AUTOMOBILE RECEIVABLES TRUST 1999-1,



                        TFC RECEIVABLES CORPORATION 2,



                             THE FINANCE COMPANY,



                                      and



                 NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION



                         Dated as of December 1, 1999
<PAGE>

                     INSURANCE AND REIMBURSEMENT AGREEMENT

     THIS INSURANCE AND REIMBURSEMENT AGREEMENT (this "Insurance Agreement") is
                                                       -------------------
made as of December 1, 1999 among Asset Guaranty Insurance Company, a stock
insurance company incorporated in the State of New York, as note insurer

("AGIC"), TFC Automobile Receivables Trust 1999-1, a Delaware business trust
  ----
(individually, the "Trust"), as issuer (the "Issuer"), TFC Receivables
                    -----                    ------
Corporation 2, a Delaware corporation ("TFCRC"), The Finance Company, a Virginia
                                        -----
corporation (individually, "TFC") and as servicer (together with its successors
                            ---
and assigns in such capacity, including without limitation the Back-up Servicer
(as defined below) and any successor servicer appointed pursuant to the Sale and
Servicing Agreement (as defined below), the "Servicer") and Norwest Bank
                                             --------
Minnesota, National Association, a national banking association (individually

"Norwest"), as trustee (together with its successors and assigns, in such
--------
capacity, the "Trustee"),  as trust collateral agent (together with its
               -------
successors and assigns, in such capacity, the "Trust Collateral Agent"), and as
                                               ----------------------
back-up servicer (in such capacity, the "Back-up Servicer").
                                         ----------------

                            PRELIMINARY STATEMENTS

     The Issuer will issue (a) the TFC 7.50% Asset Backed Notes, Series 1999-1
(the "Notes") pursuant to the Indenture, dated as of December 1, 1999, among the
      -----
Issuer, AGIC and Norwest as Trustee and Trust Collateral Agent (as the same may
be amended, restated, supplemented or otherwise modified from time to time, the
"Indenture") and (b) a certificate (the "Certificate") pursuant to the Amended
 ---------                               -----------
and Restated Trust Agreement, dated as of December 1, 1999, between Wilmington
Trust Company as owner trustee (together with its successors and assigns, in
such capacity, the "Owner Trustee") and TFCRC as depositor (as the same may be
                    -------------
amended, restated, supplemented or otherwise modified from time to time, the
"Trust Agreement").
----------------

     Pursuant to the Indenture, the Issuer will grant to the Trust Collateral
Agent for the benefit of the Trustee on behalf of the Noteholders and AGIC, to
secure repayment of the Notes (and other related amounts), a security interest
in collateral consisting of all of the Issuer's right, title and interest in, to
and under a pool of receivables, including, among other types of receivables,
receivables of retail installment sale contracts secured by the financed
vehicles and certain other assets and rights, all as more fully set forth in the
Indenture (the "Trust Property").  Such receivables and related assets
                --------------
constituting a part of the Trust Property were sold to the Issuer pursuant to
the Sale and Servicing Agreement, dated as of December 1, 1999, among the
Issuer, TFCRC as seller (the "Seller"), the Servicer, AGIC, the Trust Collateral
                              ------
Agent, the Back-up Servicer and Norwest as P.O. Box owner (as the same may be
amended, restated, supplemented or otherwise modified from time to time, the
"Sale and Servicing Agreement"); and
 ----------------------------

     AGIC is authorized to transact a financial guaranty insurance business in
the State of New York and has agreed, subject to the terms and conditions of
this Insurance Agreement, to issue to the Trustee, for the benefit of the
Noteholders, a financial guaranty insurance policy substantially in the form of
Exhibit A hereto (the "Policy"); and
                       ------

                                       2
<PAGE>

     The parties hereto, among other things, desire to specify the conditions
precedent to the issuance by AGIC of the Policy, the obligations of the Issuer,
the Servicer, the Back-up Servicer and TFC, as applicable, to make payments in
respect of premiums, reimbursement obligations and other amounts relating to the
Policy, and to perform certain other obligations in respect of the issuance of
the Policy, and to provide for certain other matters related thereto.

     NOW, THEREFORE, in consideration of the premises and of the agreements
herein contained, AGIC, the Issuer, the Servicer, TFC, the Parent, the Trustee,
the Trust Collateral Agent and the Back-up Servicer agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

     Section 1.01.  General Definitions.  The terms defined in this Article I
                    -------------------
shall have the meanings provided herein for all purposes of this Insurance
Agreement, unless the context clearly requires otherwise, in both singular and
plural form, as appropriate.  Capitalized terms used and not otherwise defined
herein shall have the meanings assigned to such terms in the Indenture or the
Sale and Servicing Agreement (as applicable).

     "Affiliate" means, as to any specified Person, any other Person controlling
      ---------
or controlled by or under common control with such specified Person.  For the
purposes of this definition, "control" when used with respect to any specified
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" or "controlled" have meanings
correlative to the foregoing.

     "AGIC" has the meaning assigned to such term in the Preliminary Statements
      ----
above.

     "AGIC Information" has the meaning given to such term under the
      ----------------
Indemnification Agreement.

     "Back-up Servicer" has the meaning assigned to such term in the Preliminary
      ----------------
Statements above.

     "Certificate" has the meaning assigned to such term in the Preliminary
      -----------
Statements above.

     "Closing Date" means December 1, 1999.
      ------------

     "Commonly Controlled Entity" means TFC and each entity, whether or not
      --------------------------
incorporated, which is affiliated with TFC pursuant to Section 414(b), (c), (m)
or (o) of the Code.

     "Cumulative Net Loss Rate" means with respect to any Determination Date,
      ------------------------
the fraction, expressed as a percentage, the numerator of which is equal to the
aggregate amount of Net Losses through the end of the related Monthly Period for
such Determination Date and the denominator of which is equal to the Original
Pool Balance.

                                       3
<PAGE>

     "Cumulative Net Loss Test Failure" means, with respect to any Determination
      --------------------------------
Date occurring during a period set forth below, the Cumulative Net Loss Rate for
such Determination Date shall be greater than the percentage set forth below
opposite the period during which such Determination Date occurs:

<TABLE>
<CAPTION>
     Period                                                                  Maximum Percentage
     ------                                                                  ------------------
     <S>                                                                     <C>
     from the Initial Cut-Off Date to third Monthly                                1.40%
     Period to occur after the Initial Cut-Off Date

     from the fourth Monthly Period to occur                                       4.80%
     after the Initial Cut-Off Date to sixth Monthly
     Period to occur after the Initial Cut-Off Date

     from the seventh Monthly Period to occur                                     11.30%
     after the Initial Cut-Off Date to the ninth Monthly
     Period to occur after the Initial Cut-Off Date

     from the tenth Monthly Period to occur                                       17.50%
     after the Initial Cut-Off Date to the 12th Monthly
     Period to occur after the Initial Cut-Off Date

     from the 13th Monthly Period to occur                                        17.80%
     after the Initial Cut-Off Date to the 15th Monthly
     Period to occur after the Initial Cut-Off Date

     from the 16th Monthly Period to occur                                        18.20%
     after the Initial Cut-Off Date to the 18th Monthly
     Period to occur after the Initial Cut-Off Date

     from the 19th Monthly Period to occur                                        19.10%
     after the Initial Cut-Off Date to the 21st Monthly
     Period to occur after the Initial Cut-Off Date

     from the 22nd Monthly Period to occur                                        20.00%
     after the Initial Cut-Off Date to the 24th Monthly
     Period to occur after the Initial Cut-Off Date

     from the 25th Monthly Period to occur                                        20.90%
     after the Initial Cut-Off Date to the 27th Monthly
     Period to occur after the Initial Cut-Off Date
     from the 28th Monthly Period to occur after                                  21.80%
     after the Initial Cut-Off Date and at any time
     thereafter.
</TABLE>

     "Delinquency Category" means (a) for Receivables having monthly Scheduled
      --------------------
Payments ("Monthly-Pay Contracts, as defined in Schedule 1) in respect of which
the relevant Obligor shall have failed to make a Scheduled Payment or a portion
thereof on the due date therefor, the

                                       4
<PAGE>

applicable Delinquency Category into which such Receivable falls based on the
number of months delinquent, as described in Schedule 1 hereto and (b) for
Receivables not having monthly Scheduled Payments ("Non-Monthly-Pay Contracts,"
as defined in Schedule 1) in respect of which the relevant Obligor shall have
failed to make a Scheduled Payment or a portion thereof on the due date
therefor, the applicable Delinquency Category into which such Receivable falls
based on the number of weeks delinquent, as described in Schedule 1 hereto.

     "Delinquent Receivable" means a Receivable which (a) falls into any
      ---------------------
Delinquency Category other than the "Current" category (as described in Schedule
I hereto) and (b) is not a Liquidated Receivable.

     "Deemed Cured" means, as of a Determination Date, (a) with respect to a
      ------------
Trigger Event that has occurred solely as a result of the occurrence of a
Delinquency Test Failure, that no Trigger Event or any Insurance Agreement Event
of Default shall have occurred as of such Determination Date or as of any of the
three (3) next preceding Determination Dates; or (b) with respect to any other
Trigger Event, that no Trigger Event or any Insurance Agreement Event of Default
shall have occurred as of such Determination Date or as of any of the six (6)
next preceding Determination Dates.

     "Default" means any event which results, or which with the giving of notice
      -------
or the lapse of time or both would result, in an Insurance Agreement Event of
Default.

     "Delinquency Ratio" means, with respect to any Determination Date, the
      -----------------
fraction, expressed as a percentage, (a) the numerator of which is equal to the
sum of the Principal Balances (as of the related Accounting Date) of all
Receivables that are Delinquent Receivables as of the related Accounting Date,
or that became Purchased Receivables as of the related Accounting Date and were
Delinquent Receivables as of such Accounting Date and (b) the denominator of
which is equal to the Aggregate Principal Balance as of such Accounting Date.

     "Delinquency Test Failure" means, with respect to any Determination Date
      ------------------------
occurring during a period set forth below, the arithmetic average of the
Delinquency Ratios for such Determination Date and the two immediately preceding
Determination Dates shall be greater than the percentage set forth below
opposite the period during which such Determination Date occurs:

<TABLE>
<CAPTION>
     Period                                                                   Maximum Percentage
     ------                                                                   ------------------
     <S>                                                                      <C>
     from the Initial Cut-Off Date to the 12th                                     17.00%
     Monthly Period to occur after the
     Initial Cut-Off Date

     from the 13th Monthly Period to                                               20.00%
     occur after the Initial Cut-Off Date to the
     18th Monthly Period to occur after
     the Initial Cut-Off Date

     from the 19th Monthly Period to occur                                         25.00%
     after the Initial Cut-Off Date and at any time
</TABLE>

                                       5
<PAGE>

     thereafter.

     "ERISA" means the Employee Retirement Income Security Act of 1974,
      -----
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.

     "Event of Default" has the meaning assigned to such term in the Indenture.
      ----------------

     "Financial Statements" means with respect to each of TFC and the Parent,
      --------------------
the audited consolidated balance sheets as of December 31, 1998 and the
statements of income, shareholder's equity and cash flows for the 12-month
period then ended and the notes thereto, and the unaudited consolidated balance
sheets as of June 30, 1999 and the consolidated statements of income and cash
flows for the fiscal quarter then ended.

     "Fort Knox Acknowledgment Letter" means the letter agreement by TFC, dated
      -------------------------------
as of December 1, 1999, acknowledged and agreed to by Fort Knox National Company
and the Trust Collateral Agent.

     "Fort Knox Additional Letters" means (a) the letter agreement by TFC, dated
      ----------------------------
as of December __, 1999, acknowledged and agreed to by Fort Knox National
Company and the Trust Collateral Agent (with respect to TFC's TrueCheck Program)
and (b) the letter agreement by TFC, dated as of December __, 1999, acknowledged
and agreed to by Fort Knox National Company and the Trust Collateral Agent (with
respect to TFC's ACH Program).

     "GAAP" means generally accepted accounting principles in effect from time
      ----
to time in the United States of America.

     "GE Capital" means General Electric Capital Corporation, a New York
      ----------
corporation.

     "GE Capital Agreement" means the Amended and Restated Motor Vehicle
      --------------------
Installment Contract Loan and Security Agreement, dated as of January 1, 1999,
between GE Capital as lender and TFC as borrower.

     "Governmental Authority" means any nation or government, any state or other
      ----------------------
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
as in effect on the date hereof.

     "Indemnification Agreement" means the Indemnification Agreement, dated as
      -------------------------
of December 1, 1999, among AGIC, the Issuer, the Placement Agent and TFC.

     "Indenture" has the meaning assigned to such term in the Preliminary
      ---------
Statements above.

     "Independent Accountants" has the meaning specified in Section 4.01(q).
      -----------------------

     "Independent Director" means a natural person who (i) is not a stockholder
      --------------------
(whether direct, indirect or beneficial), customer, advisor or supplier of
TFCRC, the Parent or any of their respective Affiliates (other than by means of
indirect stock ownership of  TFCRC or the Parent or of any of their respective
Affiliates by any Person through a mutual fund or similar diversified

                                       6
<PAGE>

investment pool); (ii) is not a director, officer, employee or Affiliate of
TFCRC or the Parent or any of their respective Affiliates; (iii) is not a Person
related to any Person referred to in clauses (i) and (ii); (iv) is not a
trustee, conservator or receiver for any of TFCRC or the Parent or any of their
respective Affiliates; and (v) has (A) prior experience as an independent
director or independent manager for a corporation or limited liability company
whose charter documents require the unanimous written consent of all independent
directors or independent managers thereof before such corporation or limited
liability company could consent to the institution of bankruptcy or insolvency
proceedings against it or could file a petition seeking relief under any
applicable federal or state law relating to bankruptcy, and (B) at least three
years of employment experience with one or more entities that provide, in the
ordinary course of their respective businesses, advisory, management or
placement services to issuers of securitization or structured finance
instruments, agreements or securities.

     "Initial Cutoff Date" means August 31, 1999.
      -------------------

     "Initial Spread Account Deposit Amount" means 4.00% of the Original Pool
      -------------------------------------
Balance.

     "Insurance Agreement" has the meaning assigned to such term in the
      -------------------
Preliminary Statements above.

     "Insurance Agreement Event of Default" has the meaning specified in Section
      ------------------------------------
6.01.

     "Insurance Agreement Indenture Cross Default" means any Insurance Agreement
      -------------------------------------------
Event of Default specified in clauses (a), (c) (e), (f), (l), (m) of Section
6.01.

     "Investment Company Act" means the Investment Company Act of 1940,
      ----------------------
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.

     "IRS" means the Internal Revenue Service.
      ---

     "Issuer" has the meaning assigned to such term in the Preliminary
      ------
Statements above.

     "Lien" means, as applied to the property or assets (or the income or
      ----
profits therefrom) of any Person, in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or
otherwise:  (a) any mortgage, lien, pledge, attachment, charge, lease,
conditional sale or other title retention agreement, or other security interest
or encumbrance of any kind or (b) any arrangement, express or implied, under
which such property or assets are transferred, sequestered or otherwise
identified for the purpose of subjecting or making available the same for the
payment of debt or performance of any other obligation in priority to the
payment of the general, unsecured creditors of such Person.

     "Material Adverse Change" means, (a) in respect of any Person, a material
      -----------------------
adverse change in (i) the business, financial condition, results of operations
or properties of such Person or any of its Subsidiaries or (ii) the ability of
such Person to perform its obligations under any of the Basic Documents to which
it is a party and (b) in respect of the Receivables, a material adverse change
in (i) the value or marketability of the Receivables, taken as a whole, or (ii)
the

                                       7
<PAGE>

probability that amounts now or hereafter due in respect of a material portion
of the Receivables will be collected on a timely basis.

     "Multiemployer Plan" means a multiemployer plan (within the meaning of
      ------------------
Section 400 1(a)(3) of ERISA) in respect of which a Commonly Controlled Entity
makes contributions or has liability.

     "Net Losses" means, with respect to any Determination Date and the most
      ----------
recently concluded Monthly Period, the positive difference of (a) the sum of (i)
the aggregate amount of the Principal Balances as of the related Accounting Date
(plus accrued and unpaid interest through and including such Accounting Date, at
the applicable APR) of all Receivables that became Liquidated Receivables since
the Initial Cutoff Date, plus (ii) the aggregate Cram Down Losses as of the
related Accounting Date that occurred since the Initial Cutoff Date, over (b)
the aggregate, cumulative Net Liquidation Proceeds received by the Issuer as of
the related Accounting Date since the Initial Cutoff Date.

     "Notes" has the meaning assigned to such term in the Preliminary Statements
      -----
above.

     "Offering Document" means the Preliminary Private Placement Memorandum
      -----------------
dated December 1, 1999, and the Private Placement Memorandum dated December 1,
1999 relating to the Notes and any amendment or supplement thereto and any other
offering document in respect of the Notes that makes reference to the Policy.

     "Owner Trustee" has the meaning assigned to such term in the Preliminary
      -------------
Statements above.

     "Parent" means TFC Enterprises, Inc., a Delaware corporation.
      ------

     "Parent Support Agreement" means the agreement among TFCRC, TFC, AGIC, the
      ------------------------
Trust Collateral Agent, and the Parent, dated as of December 1, 1999.

     "PBGC" means the Pension Benefit Guaranty Corporation or any successor
      ----
agency, corporation or instrumentality of the United States to which the duties
and powers of the Pension Benefit Guaranty Corporation are transferred.

     "Person" means an individual, a partnership, a corporation, a limited
      ------
liability company, a business trust, a joint stock company, a trust, an
unincorporated association, a joint venture, a Governmental Authority or other
entity of whatever nature.

     "Placement Agent" means Rothschild Inc.
      ---------------

     "Placement Agent Agreement" means the Placement Agent Agreement dated as of
      -------------------------
December 1, 1999, among the Issuer, TFC, TFCRC and the Placement Agent.

     "Placement Agent Information" means the information relating to the
      ---------------------------
Placement Agent in the Private Placement Memorandum.

                                       8
<PAGE>

     "Plan" means any pension plan (other than a Multiemployer Plan) covered by
      ----
Title IV of ERISA, which is maintained by a Commonly Controlled Entity or in
respect of which a Commonly Controlled Entity has liability.

     "Policy" has the meaning assigned to such term in the Preliminary
      ------
Statements above.

     "Premium" means the premium payable by the Issuer pursuant to the Premium
      -------
Letter.

     "Premium Letter" means the letter agreement between AGIC, TFC and the
      --------------
Issuer, dated as of the Closing Date, setting forth the payment arrangement for
the premiums in respect of the Policy, and certain other fees, related expenses
and other related matters.

     "Premium Rate" has the meaning assigned to such term in the Premium Letter.
      ------------

     "Prime Rate" means the fluctuating rate of interest as published from time
      ----------
to time in the New York, New York edition of The Wall Street Journal, under the
                                             -----------------------
caption "Money Rates" as the "prime rate", the "Prime Rate" to change when and
as such published prime rate changes.

     "Private Placement Memorandum" means the final Private Placement Memorandum
      ----------------------------
dated December 1, 1999, relating to the offering of the Notes.

     "Provided Documents" means the Transaction Documents and any documents,
      ------------------
agreements, instruments, schedules, certificates, statements, cash flow
schedules, number runs or other writings or data furnished to AGIC by or on
behalf of TFC, the Parent or TFCRC with respect to itself, its respective
Subsidiaries, the Receivables or the Transaction.

     "Purchaser" has the meaning assigned to such term in the Preliminary
      ---------
Statements above.

     "Purchase Agreement" means the Purchase Agreement between TFC, as seller,
      ------------------
and TFCRC, as purchaser, dated as of December 1, 1999.

     "Rating Agency" means Standard & Poor's Rating Services, a division of
      -------------
McGraw-Hill Companies, Inc.

     "Receivable" has the meaning provided in the Sale and Servicing Agreement.
      ----------

     "Reportable Event" means any of the events set forth in Section 4043(b) of
      ----------------
ERISA or the regulations thereunder.

     "Restrictions on Transferability" means, as applied to the property or
      -------------------------------
assets (or the income or profits therefrom) of any Person, in each case whether
the same is consensual or non-consensual or arises by contract, operation of
law, legal process or otherwise, any material condition to, or restriction on,
the ability of such Person or any transferee therefrom to sell, assign, transfer
or otherwise liquidate such property or assets in a commercially reasonable time
and manner or which would otherwise materially deprive such Person or any
transferee therefrom of the benefits of ownership of such property or assets.

                                       9
<PAGE>

     "Requisite Amount" means (a) on the Closing Date, the Initial Spread
      ----------------
Account Deposit Amount and (b) with respect to any Determination Date
thereafter, (i) if no Trigger Event or Insurance Agreement Event of Default
shall have occurred, the lesser of (A) the Initial Spread Account Deposit Amount
and (B) an amount equal to the Note Principal Balance, (ii) after the occurrence
of a Trigger Event, the lesser of (A) an amount equal to 6.00% of the Original
Pool Balance and (B) an amount equal to the Note Principal Balance; provided,
                                                                    --------
however, that, in the event such Trigger Event has been Deemed Cured, an amount
-------
equal to the amount calculated for such Determination Date pursuant to clause
(i) above, and (iii) notwithstanding anything in clauses (i) and (ii) above to
the contrary, after the occurrence of an Insurance Agreement Event of Default,
an amount equal to the Note Principal Balance.

     "Sale and Servicing Agreement" has the meaning assigned to such term in the
      ----------------------------
Preliminary Statements above.

     "Schedule of Receivables" means the schedule of receivables delivered to
      -----------------------
the Trust Collateral Agent by the Issuer in connection with the Sale and
Servicing Agreement.

     "Securities Act" means the Securities Act of 1933, including, unless the
      --------------
context otherwise requires, the rules and regulations thereunder, as amended
from time to time.

     "Securities Exchange Act" means the Securities Exchange Act of 1934,
      -----------------------
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.

     "S&P" means Standard & Poor's Ratings Service, a division of McGraw-Hill
      ---
Corporation, 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 AGIC.

     "Servicer" has the meaning assigned to such term in the Preliminary
      --------
Statements above.

     "Standby Remittance and Processing Agreement" means the Standby Remittance
      -------------------------------------------
and Processing Agreement among TFCRC, TFC, General Electric Capital Corporation,
AGIC, the Trust Collateral Agent and Norwest as P.O. Box owner, dated as of
December 1, 1999.

     "Subordinated Debt" means a debt obligation of TFC which is subordinated to
      -----------------
obligations owed to GE Capital as lender under the GE Capital Agreement,
pursuant to a subordination agreement which is in the form of Exhibit 16 to the
GE Capital Agreement or pursuant to some other agreement approved by GE Capital
and the Insurer.

     "Subsidiary" means, with respect to any Person, any corporation of which a
      ----------
majority of the outstanding shares of capital stock having ordinary voting power
for the election of directors is at the time owned by such Person directly or
through one or more Subsidiaries.

     "Tangible Net Worth" means, with respect to TFC, the excess of (a) the
      ------------------
tangible assets of TFC and all of its consolidated subsidiaries calculated in
accordance with GAAP, as reduced by adequate reserves in each case where
reserves are proper, over (b) all Indebtedness (excluding Subordinated Debt) of
TFC and all of its consolidated subsidiaries; provided, however, that (i)
                                              --------  -------

                                      10
<PAGE>

in no event shall there be included in the above calculation any intangible
assets such as patents, trademarks, trade names, copyrights, licenses, goodwill,
organizational costs, advances or loans to, or receivables from, directors,
shareholders, officers, employees or subsidiaries, amounts relating to covenants
not to compete, pension assets or treasury stock or any securities of TFC or of
any Affiliate of TFC, or any other securities unless the same are readily
marketable in the United States of America or entitled to be used as a credit
against federal income tax liabilities, (ii) securities included as such
intangible assets shall be taken into account at their current market price or
cost, whichever is lower, and (iii) any write-up in the book value of any assets
shall not be taken into account.

     "TFC" has the meaning assigned to such term in the Preliminary Statements
      ---
above.

     "Transaction" means the transactions contemplated by the Transaction
      -----------
Documents, including the transactions described in the Offering Documents.

     "Trigger Event" means the occurrence of any of the following events, the
      -------------
occurrence of which shall not have been waived in writing by AGIC:  (a) the
occurrence of a Delinquency Test Failure, or (b) the occurrence of a Cumulative
Net Loss Test Failure.

     "Trust Agreement" is the Amended and Restated Trust Agreement, dated as of
      ---------------
December 1, 1999 between TFCRC and Wilmington Trust Company as owner trustee.

     "Trust Collateral Agent" has the meaning assigned to such term in the
      ----------------------
Preliminary Statements above.

     "Trustee" has the meaning assigned to such term in the Preliminary
      -------
Statements above.

     "Trust Property" has the meaning assigned to such term in the Preliminary
      --------------
Statements above.

     "Year 2000 Problem" means the risk that computer applications used by a
      -----------------
Person  (or suppliers, vendors and customers of such Person) may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999.

     Section 1.02.  Generic Terms.  All words used herein shall be construed to
                    -------------
be of such gender or number as the circumstances require.  The words "herein,"
"hereby," "hereof," "hereto," "hereinbefore" and "hereinafter," and words of
similar import, refer to this Insurance Agreement in its entirety and not to any
particular paragraph, clause or other subdivision, unless otherwise specified.

     Section 1.03.  Computation of Time Periods.  In this Insurance Agreement in
                    ---------------------------
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each means "to and including".  Periods of days referred to in this Insurance
Agreement shall be counted in calendar days unless Business Days are expressly
prescribed and references in this Insurance Agreement to months and years shall
be to calendar months and calendar years unless otherwise specified.

                                       11
<PAGE>

                                  ARTICLE II

                         THE POLICY AND REIMBURSEMENT

     Section 2.01.  Policy.  AGIC agrees, subject to the satisfaction or waiver
                    ------
of the conditions hereinafter set forth on or prior to the Closing Date, to
issue the Policy on the Closing Date.

     Section 2.02.  Conditions Precedent.  The obligation of AGIC to issue the
                    --------------------
Policy is subject to the satisfaction of the following conditions on or prior to
the Closing Date:

          (a)  The following documents shall have been duly authorized, executed
     and delivered by each of the parties thereto (other than AGIC) and shall be
     in full force and effect and in form and substance satisfactory to AGIC, in
     the exercise of AGIC's sole discretion, and an executed counterpart of each
     thereof shall have been delivered to AGIC:

          (i)     this Insurance Agreement;

          (ii)    the Indenture;

          (iii)   the Sale and Servicing Agreement, including the Schedule of
                  Receivables;

          (iv)    the Purchase Agreement, including the Schedule of Receivables;

          (v)     the Placement Agent Agreement;

          (vi)    the Indemnification Agreement;

          (vii)   the Standby Remittance and Processing Agreement;

          (viii)  the Trust Agreement;

          (ix)    the Parent Support Agreement;

          (x)     the Securities Account Control Agreement;

          (xi)    the Premium Letter; and

          (xii)   the Fort Knox Letters.

(items (i) through (xii) being, collectively, the "Transaction Documents").

          (b)  AGIC shall have received:

          (i)     copies certified by the Secretary or an Assistant Secretary of
                  each of the Parent, the Issuer, TFC and TFCRC, dated the
                  Closing Date, of its certificate of incorporation and by-laws
                  and the resolutions of its Board of Directors, as the case may
                  be, or a duly authorized committee thereof

                                       12
<PAGE>

                  authorizing its execution and delivery of the Basic Documents
                  and of all documents evidencing other corporate or company
                  action and governmental approvals, if any, that are necessary
                  for the consummation of the transactions contemplated in such
                  documents;

          (ii)    a certificate, dated the Closing Date, of the secretary or an
                  assistant secretary of each of the Parent, the Issuer, TFCRC,
                  the Trustee, the Owner Trustee, the Back-up Servicer and TFC
                  certifying the names and true signatures of its officers
                  authorized to sign such Basic Documents to which it is a
                  party;

          (iii)   a certificate, dated the Closing Date, of a Chief Financial
                  Officer, a Treasurer, an Assistant Treasurer or Vice President
                  of each of the Issuer, TFCRC and TFC certifying to the effect
                  of the representation and warranty set forth in Section
                  3.01(e) hereof;

          (iv)    each of the opinions, letters and certificates described in
                  the closing checklist attached hereto as Exhibit B (other than
                  any such opinion, letter or certificate required to be issued
                  or delivered by AGIC or an agent or employee thereof), in each
                  case (1) dated the Closing Date, (2) in full force and effect
                  at the time of delivery thereof, (3) in form and substance
                  satisfactory to AGIC in the exercise of its sole discretion,
                  and (4) covering such matters as AGIC shall require in the
                  exercise of its sole discretion;

          (v)     evidence that one or more UCC financing statements covering
                  the security interest of the Trust Collateral Agent created by
                  or pursuant to the Indenture in the Trust Property and the
                  other property and rights which the Trustee is granted in the
                  Indenture and the proceeds thereof has been executed by the
                  Issuer in favor of the Trust Collateral Agent, and has been
                  duly filed in such place or places which, in the opinion of
                  counsel for the Issuer, TFC and AGIC, are necessary or
                  desirable to perfect such interest;

          (vi)    evidence that one or more UCC financing statements covering
                  the interest of TFCRC in the Receivables and the other related
                  assets assigned pursuant to the Purchase Agreement has been
                  executed by TFC in favor of TFCRC, and has been duly filed in
                  such place or places which, in the opinion of counsel for the
                  Issuer, TFC and AGIC, are necessary or desirable to perfect
                  such interest;

          (vii)   evidence that one or more UCC financing statements covering
                  the interest of the Issuer in the Receivables and the other
                  related assets assigned pursuant to the Sale and Servicing
                  Agreement has been executed by TFCRC in favor of the Issuer,
                  and assigned to the Trust Collateral Agent, and has been duly
                  filed in such place or places which, in the opinion of counsel
                  for the Issuer, TFC and AGIC, are necessary or desirable to
                  perfect such interest;

                                       13
<PAGE>

          (viii)  evidence that each of the Collection Account, the Spread
                  Account, and the Note Payment Account have been established in
                  accordance with the terms and conditions of the Indenture and
                  the Sale and Servicing Agreement;

          (ix)    certified copies of documents, certificates, instruments,
                  approvals or executed copies thereof that relate to the
                  transactions as contemplated by the Basic Documents as AGIC
                  may reasonably request;

          (x)     a specimen Note; and

          (xi)    a statement, in form and substance satisfactory to AGIC,
                  reviewing the results of the Independent Accountants'
                  performance of certain agreed upon procedures with respect to
                  TFC, its reporting and record keeping, and the characteristics
                  of the Receivables as of the Cut-Off Date, by way of
                  independent verification of (x) information provided by TFC
                  for inclusion in the Offering Document and (y) certain cash
                  flow models supplied to AGIC by the Placement Agent in advance
                  of the Closing Date (the full costs of which statement shall
                  have been paid on or before the Closing Date by or on behalf
                  of TFC).

          (c) (i) No statute, rule, regulation or order shall have been
     enacted, entered or deemed applicable by any government or governmental or
     administrative agency or court which would make the transactions
     contemplated by the Transaction Documents illegal or otherwise prevent the
     consummation thereof, (ii)  no material omission or change of fact shall
     have occurred or come to the attention of any of TFC, TFCRC, the Issuer,
     the Parent, the Trustee, the Placement Agent or AGIC that would cause
     information or documents heretofore supplied to AGIC to be untrue or
     misleading, (iii)  no other material change or omission shall have occurred
     or come to the attention of any of TFC, TFCRC, the Issuer, the Parent, the
     Trustee, the Placement Agent or AGIC that would entitle the Placement Agent
     to decline to place the Notes, and (iv)  no Material Adverse Change shall
     have occurred in the security for the Notes since the date of the Purchase
     Agreement.

          (d)  No suit, action or other proceeding, investigation, or injunction
     or final judgment relating thereto, shall be threatened or pending before
     any court or governmental agency in which it is sought to restrain or
     prohibit or obtain damages or other relief in connection with the
     consummation of the Transactions, and no investigation that might result in
     any such suit, action or proceeding shall be pending or threatened.

          (e)  AGIC shall have received an executed copy of all legal opinions,
     certificates, accountant's reports and other documents required to be
     furnished by the Issuer, the Servicer, the Back-up Servicer, the Trustee,
     TFCRC, the Parent and TFC pursuant to any of the Transaction Documents or
     pursuant to the requirements of the Rating Agency (if any).  Such documents
     shall be in form and substance satisfactory to AGIC in the

                                       14
<PAGE>

     exercise of its sole discretion and each such legal opinion or certificate
     shall be addressed to AGIC, or accompanied by appropriate reliance letters
     to AGIC.

          (f)  There shall be on deposit in the Spread Account a sum of not less
     than $2,606,028 in immediately available funds.

          (g)  Simultaneously with the issuance of the Policy, the Notes shall
     have been duly executed and authenticated and delivered to the relevant
     Noteholders pursuant to the Indenture.

          (h)  All fees and expenses payable hereunder or pursuant to the
     Premium Letter to AGIC on or prior to the Closing Date shall have been paid
     in full by TFC or the Issuer.

          (i)  AGIC shall have received confirmation that the risk secured by
     the Policy constitutes at least "BBB-" by S&P and that the Notes, when
     issued, will be rated "AA" by S&P.

          (j)  No Trigger Event, Event of Default, Servicer Termination Event,
     Default or Insurance Agreement Event of Default shall have occurred.

     Section 2.03.  Premium Letter.  AGIC shall be entitled to receive the
                    --------------
Premium payable under the Premium Letter on each Payment Date, and the timely
payment or other performance of all other obligations set forth in the Premium
Letter, in each case in accordance with the terms and conditions of the Premium
Letter.

     Section 2.04.  Reimbursement Obligations.  (a)  In consideration of the
                    -------------------------
issuance of the Policy by AGIC, AGIC shall be entitled to reimbursement by the
Issuer from the Trust Property, pursuant to the terms hereof, the Indenture and
the Sale and Servicing Agreement, for any payment made under the Policy, which
reimbursement shall be due and payable to AGIC on the date that any amount is to
be paid pursuant to a Notice for Payment (as defined in the Policy).  Such
reimbursement shall be made in accordance with the terms hereof and of the
Indenture, in an amount equal to the sum of all amounts paid or previously paid
that remain unpaid under the Policy, together with interest on any and all
amounts remaining unpaid (to the extent permitted by law, if in respect of any
unpaid amounts representing interest) from the date such amounts became due
until paid in full (after as well as before judgment), at a rate of interest
equal to the Prime Rate from time to time in effect plus 2.0%.

          (b)  Anything in Section 2.04(a) to the contrary notwithstanding, AGIC
     shall be entitled to reimbursement (to the extent such reimbursement and
     related interest has not previously been paid by payment to AGIC from the
     Trust Property) from (i) the Issuer, for payments made under the Policy
     arising as a result of the Issuer's failure to make any payment or deposit
     with respect to a Receivable required to be made pursuant to Section 3.2 of
     the Sale and Servicing Agreement, together with interest on any and all
     such amounts remaining unpaid (to the extent permitted by law, if in
     respect of any unpaid amounts representing interest) from the date such
     amounts became due until paid in full (after as well as before judgment),
     at a rate of interest equal to the Prime Rate from time to time in effect
     plus 2.0%, and (ii) the Servicer, for payments made under the Policy
     arising as a result of the Servicer's failure to make any deposit,
     including without

                                       15
<PAGE>

     limitation, a deposit required to be made pursuant to Section 4.7 of the
     Sale and Servicing Agreement, together with interest on any and all such
     amounts remaining unpaid (to the extent permitted by law, if in respect of
     any unpaid amounts representing interest) from the date such amounts became
     due until paid in full (after as well as before judgment), at a rate of
     interest equal to the Prime Rate from time to time in effect plus 2.0%.

          (c)  Interest payable to AGIC under this Insurance Agreement shall be
     calculated on the basis of a 360-day year for the actual number of days
     elapsed and with respect to amounts payable pursuant to Sections 2.03 or
     2.04(a) or (b) shall be payable in accordance with the Indenture and the
     Sale and Servicing Agreement, or to the extent payable pursuant to any
     other section herein, on demand.

     Section 2.05.  Assignment and Other Rights upon Payments under the Policy.
                    ----------------------------------------------------------
(a)  In consideration of the issuance of the Policy by AGIC, in the case of any
payment made by or on behalf of AGIC under the Policy, in addition to and not by
way of limitation of, any of the rights and remedies of AGIC hereunder or under
the Indenture with respect to such payment, each of the Issuer, TFCRC and TFC
hereby acknowledges and consents to the assignment by the Trustee, on behalf of
the Noteholders, to AGIC in accordance with the terms of the relevant Notice for
Payment (as such term is defined in the Policy):

               (i)  the rights of the Noteholders with respect to the Notes and
                    the Trust Property, to the extent of any such payment under
                    the Policy; and

               (ii) the rights of the Trustee and each Noteholder in the conduct
                    of any Insolvency Proceeding relating to any Preference
                    Event (as such terms are defined in the Policy), including,
                    without limitation, all rights of any party to an adversary
                    proceeding or action with respect to any court order issued
                    in connection with any such Insolvency Proceeding.

          (b)  The rights and remedies of AGIC described in clause (a) above are
     in addition to, and not in limitation of, rights of subrogation and other
     rights and remedies otherwise available to AGIC in respect of payments
     under the Policy.  The Trustee shall take such action and deliver such
     instruments as may be reasonably requested or required by AGIC to
     effectuate the purpose or provisions of this Section 2.05.

     Section 2.06.  Subrogation; Further Assurances.  (a)  The interests, rights
                    -------------------------------
and remedies of AGIC described in Article II above are in addition to, and not
in lieu of, AGIC's equitable rights of subrogation, and AGIC reserves all of
such rights. Each of the Issuer, TFCRC and TFC agrees to take, or cause to be
taken, all actions deemed desirable by AGIC to preserve, enforce, perfect or
maintain the perfection in AGIC's favor of such interests, rights and remedies
and such equitable rights of subrogation.

          (b)  For the avoidance of doubt, the parties hereto acknowledge and
     agree that the receipt of any payment under the Policy shall not constitute
     (x) a reduction of any unpaid amounts of principal or interest of Notes
     outstanding under the Indenture or (y) otherwise discharge any other
     obligations whatsoever of the Issuer under the Indenture.

                                       16
<PAGE>

          (c)  Each of the Issuer, TFCRC and TFC agrees to promptly and duly
     take, execute, acknowledge and deliver such further acts, documents,
     instruments and assurances as AGIC may from time to time reasonably request
     to more effectively evidence any rights to assignment or subrogation under
     this Article II, and to protect and perfect all of AGIC's other rights as
     against the Issuer, as the case may be.

     Section 2.07  Indemnification by TFC; Conduct of Actions or Proceedings;
Contribution.

          (a)  In addition to any and all rights of reimbursement,
     indemnification, subrogation and any other rights pursuant hereto or under
     law or in equity, TFC agrees to pay, and to protect, indemnify and save
     harmless, AGIC and its officers, directors, shareholders, employees, agents
     and each Person, if any, who controls AGIC within the meaning of either
     Section 15 of the Securities Act or Section 20 of the Securities Exchange
     Act (individually, an "Indemnified Party" and, collectively, the
     "Indemnified Parties"), from and against any and all claims, losses,
     liabilities (including penalties), actions, suits, judgments, demands,
     damages, costs or expenses (including, without limitation, reasonable fees
     and expenses of attorneys, consultants and auditors and reasonable costs of
     investigations) of any nature arising out of or relating to the
     transactions contemplated by the Transaction Documents by reason of:

          (i)    the negligence, bad faith, willful misconduct, misfeasance,
                 malfeasance or theft committed by any director, officer,
                 employee or agent of the Issuer, TFC, the Servicer, the Parent,
                 TFCRC, the Seller, as the case may be; or

          (ii)   the breach by the Issuer, TFC, the Servicer, the Parent, TFCRC,
                 or the Seller of any representation, warranty or covenant under
                 any of the Transaction Documents, or the occurrence, in respect
                 of the Issuer, TFC, the Servicer, the Parent, TFCRC, or the
                 Seller, under any of the Transaction Documents of any
                 "default," "event of default" or any event which, with the
                 giving of notice or the lapse of time or both, would constitute
                 any "event of default"; provided, however, it is understood and
                                         --------  -------
                 agreed that the sole remedy with respect to a breach of
                 representations and warranties pursuant to Section 3.1 of the
                 Sale and Servicing Agreement shall be the repurchase of
                 Receivables pursuant to Section 3.2 of the Sale and Servicing
                 Agreement, subject to the conditions contained therein, or to
                 enforce the obligation of TFC to TFCRC to repurchase such
                 Receivables pursuant to the Purchase Agreement; provided,
                                                                 --------
                 further, it is understood and agreed that the sole remedy with
                 -------
                 respect to the breach of any of the covenants set forth in
                 Sections 4.5(a) or 4.6(a) of the Sale and Servicing Agreement
                 shall be the purchase of Receivables pursuant to Section 4.7 of
                 the Sale and Servicing Agreement, subject to the conditions
                 contained therein; provided further, however, that TFC shall
                                    ----------------  ------
                 indemnify AGIC (and its respective directors, officers,
                 employees and agents) against all costs, expenses, losses,
                 damages, claims and liabilities, including reasonable fees and
                 expenses of counsel, which may be asserted against or incurred
                 by it

                                       17
<PAGE>

                 as a result of third party claims arising out of the events or
                 facts giving rise to any such breach of such covenant.

          (b)  If any action or proceeding (including any governmental
     investigation) shall be brought or asserted against the Indemnified Parties
     in respect of which indemnity may be sought from TFC hereunder, AGIC shall
     promptly notify TFC in writing, and TFC shall assume the defense thereof,
     including the employment of counsel satisfactory to AGIC and the payment of
     all reasonable expenses. An Indemnified Party shall have the right to
     employ separate counsel in any such action and to participate in the
     defense thereof at the expense of the Indemnified Party; provided, however,
                                                              --------  -------
     that the fees and expenses of such separate counsel shall be at the expense
     of TFC if (i) TFC has agreed to pay such fees and expenses, (ii) TFC shall
     have failed to assume the defense of such action or proceeding and employ
     counsel satisfactory to AGIC in any such action or proceeding or (iii) the
     named parties to any such action or proceeding (including any impleaded
     parties) include both the Indemnified Party and TFC, and the Indemnified
     Party shall have been advised by counsel that (A) there may be one or more
     legal defenses available to it which are different from or additional to
     those available to TFC and (B) the representation of TFC and the
     Indemnified Party by the same counsel would be inappropriate or contrary to
     prudent practice (in which case, if the Indemnified Party notifies TFC in
     writing that it elects to employ separate counsel at the expense of TFC,
     TFC shall not have the right to assume the defense of such action or
     proceeding on behalf of such Indemnified Party, it being understood,
     however, that TFC shall not, in connection with any one such action or
     proceeding or separate but substantially similar or related actions or
     proceedings in the same jurisdiction arising out of the same general
     allegations or circumstances, be liable for the reasonable fees and
     expenses of more than one separate firm of attorneys at any time for the
     Indemnified Parties, which firm shall be designated in writing by AGIC).
     TFC shall not be liable for any settlement of any such action or proceeding
     effected without its written consent to the extent that any such settlement
     shall be prejudicial to TFC, but, if settled with its written consent, or
     if there be a final judgment for the plaintiff in any such action or
     proceeding with respect to which TFC shall have received notice in
     accordance with this subsection (b), TFC agrees to indemnify and hold the
     Indemnified Parties harmless from and against any loss or liability by
     reason of such settlement or judgment.

          (c)  To provide for just and equitable contribution, if the
     indemnification provided by TFC is determined to be unavailable for any
     Indemnified Party (other than due to application of this Section), TFC
     shall contribute to the losses incurred by the Indemnified Party on the
     basis of the relative fault of TFC, on the one hand, and the Indemnified
     Party, on the other hand.

     Section 2.08  Indemnification by TFCRC; Conduct of Actions or Proceedings;
Contribution.

          (a)  In addition to any and all rights of reimbursement,
     indemnification, subrogation and any other rights pursuant hereto or under
     law or in equity TFCRC agrees to pay, and to protect, indemnify and save
     harmless the Indemnified Parties, from and against any and all claims,
     losses, liabilities (including penalties), actions, suits,

                                       18
<PAGE>

     judgments, demands, damages, costs or expenses (including, without
     limitation, reasonable fees and expenses of attorneys, consultants and
     auditors and reasonable costs of investigations) of any nature arising out
     of or relating to the transactions contemplated by the Transaction
     Documents by reason of:

          (i)    the negligence, bad faith, willful misconduct, misfeasance,
                 malfeasance or theft committed by any director, officer,
                 employee or agent of TFCRC; or

          (ii)   the breach by TFCRC of any representation, warranty or covenant
                 under any of the Transaction Documents, or the occurrence, in
                 respect of TFCRC, under any of the Transaction Documents of any
                 "default," "event of default" or any event which, with the
                 giving of notice or the lapse of time or both, would constitute
                 any "event of default"; provided, however, it is understood and
                                         --------  -------
                 agreed that the sole remedy with respect to a breach of
                 representations and warranties pursuant to Section 3.1 of the
                 Sale and Servicing Agreement shall be the repurchase of
                 Receivables pursuant to Section 3.2 of the Sale and Servicing
                 Agreement, subject to the conditions contained therein, or to
                 enforce the obligation of TFC to repurchase such Receivables
                 pursuant to the Purchase Agreement;

          (b)  If any action or proceeding (including any governmental
     investigation) shall be brought or asserted against the Indemnified Parties
     in respect of which indemnity may be sought from TFCRC hereunder, AGIC
     shall promptly notify TFCRC in writing, and TFCRC shall assume the defense
     thereof, including the employment of counsel satisfactory to AGIC and the
     payment of all reasonable expenses. An Indemnified Party shall have the
     right to employ separate counsel in any such action and to participate in
     the defense thereof at the expense of the Indemnified Party; provided,
                                                                  --------
     however, that the fees and expenses of such separate counsel shall be at
     -------
     the expense of TFCRC if (i) TFCRC has agreed to pay such fees and expenses,
     (ii) TFCRC shall have failed to assume the defense of such action or
     proceeding and employ counsel satisfactory to AGIC in any such action or
     proceeding or (iii) the named parties to any such action or proceeding
     (including any impleaded parties) include both the Indemnified Party and
     TFCRC, and the Indemnified Party shall have been advised by counsel that
     (A) there may be one or more legal defenses available to it which are
     different from or additional to those available to TFCRC and (B) the
     representation of TFCRC and the Indemnified Party by the same counsel would
     be inappropriate or contrary to prudent practice (in which case, if the
     Indemnified Party notifies TFCRC in writing that it elects to employ
     separate counsel at the expense of TFCRC, TFCRC shall not have the right to
     assume the defense of such action or proceeding on behalf of such
     Indemnified Party, it being understood, however, that TFCRC shall not, in
     connection with any one such action or proceeding or separate but
     substantially similar or related actions or proceedings in the same
     jurisdiction arising out of the same general allegations or circumstances,
     be liable for the reasonable fees and expenses of more than one separate
     firm of attorneys at any time for the Indemnified Parties, which firm shall
     be designated in writing by AGIC). TFCRC shall not be liable for any
     settlement of any such action or proceeding effected without its written
     consent to the extent that any such settlement shall be prejudicial to
     TFCRC, but, if settled with its

                                       19
<PAGE>

     written consent, or if there be a final judgment for the plaintiff in any
     such action or proceeding with respect to which TFCRC shall have received
     notice in accordance with this subsection (b), TFCRC agrees to indemnify
     and hold the Indemnified Parties harmless from and against any loss or
     liability by reason of such settlement or judgment.

          (c)  To provide for just and equitable contribution, if the
     indemnification provided by TFCRC is determined to be unavailable for any
     Indemnified Party (other than due to application of this Section), TFCRC
     shall contribute to the losses incurred by the Indemnified Party on the
     basis of the relative fault of TFCRC, on the one hand, and the Indemnified
     Party, on the other hand.

                                  ARTICLE III

                        REPRESENTATIONS AND WARRANTIES

     Section 3.01.  Representations and Warranties with respect to TFC and
                    ------------------------------------------------------
TFCRC.  Each of TFC and TFCRC represents and warrants, as of the Closing Date,
-----
with respect to TFC and TFCRC, that:

          (a)  Due Organization and Qualification.  (i) TFC is a corporation,
               ----------------------------------
     duly organized, validly existing and in good standing under the laws of
     Virginia.  TFC is duly qualified to do business, is in good standing and
     has obtained all necessary licenses, permits, charters, registrations and
     approvals (together, "approvals") necessary for the conduct of its business
     as currently conducted and as described in the Offering Document and the
     performance of its obligations under the Transaction Documents, in each
     jurisdiction in which the failure to be so qualified or to obtain such
     approvals might result in a Material Adverse Change.  (ii) TFCRC is a
     corporation duly organized, validly existing and in good standing under the
     laws of Delaware.  With the exception of becoming qualified to do business
     under the laws of Virginia, TFCRC is duly qualified to do business, is in
     good standing and has obtained all necessary licenses, permits, charters,
     registrations and approvals (together, "approvals") necessary for the
     conduct of its business as currently conducted and as described in the
     Offering Document and the performance of its obligations under the
     Transaction Documents, in each jurisdiction in which the failure to be so
     qualified or to obtain such approvals might result in a Material Adverse
     Change.

          (b)  Power and Authority.  Each of TFC and TFCRC has all necessary
               -------------------
     corporate power and authority to conduct its business as currently
     conducted and as described in the Offering Document, to execute, deliver
     and perform its obligations under the Transaction Documents and has full
     power and authority to sell and assign the Receivables as contemplated by
     the Transaction Documents and to consummate the Transaction.

          (c)  Due Authorization.  The execution, delivery and performance of
               -----------------
     the Transaction Documents by each of TFC and TFCRC has been duly authorized
     by all necessary corporate action and does not require any additional
     approvals or consents or other action by, or any notice to, or filing with,
     any Person, including, without limitation, any governmental entity or any
     of its stockholders.

                                       20
<PAGE>

          (d)  Noncontravention.  None of the execution and delivery of the
               ----------------
     Transaction Documents by TFC or TFCRC, the consummation of the transactions
     contemplated thereby nor the satisfaction of the terms and conditions of
     the Transaction Documents,

          (i)    conflicts with or results in any material breach or violation
                 of any provision of the Certificate of Incorporation or Bylaws
                 of TFC or TFCRC, as the case may be, or any law, rule,
                 regulation, order, writ, judgment, injunction, decree,
                 determination or award currently in effect having applicability
                 to TFC or TFCRC, as the case may be, or any of their respective
                 properties, including regulations issued by an administrative
                 agency or other governmental authority having supervisory
                 powers over TFC or TFCRC, as the case may be,

          (ii)   constitutes or will constitute a default by TFC or TFCRC, as
                 the case may be, under or a material breach of any provision of
                 any loan agreement, mortgage, indenture or other agreement or
                 instrument to which TFC or TFCRC is a party or by which it, or
                 any of its or their properties is, or may be, bound or
                 affected, or

          (iii)  results in or requires the creation of any Lien upon or in
                 respect of any of the assets of TFC or TFCRC except as
                 otherwise expressly contemplated by the Transaction Documents.

          (e)  Legal Proceedings. Other than as stated in the Private
               -----------------
     Placement Memorandum, there is no action, proceeding or investigation
     pending, or to the best knowledge of TFC or TFCRC after reasonable inquiry,
     threatened by or before any court, regulatory body, governmental or
     administrative agency or arbitrator against or affecting TFC or TFCRC, or
     any properties or rights of TFC or TFCRC, including without limitation, the
     Receivables, which might result in a Material Adverse Change with respect
     to TFC or TFCRC.

          (f)  Valid and Binding Obligations.  Each of the Transaction Documents
               -----------------------------
     to which either TFC or TFCRC is a party when executed and delivered by TFC
     or TFCRC, as the case may be, will constitute the legal, valid and binding
     obligations of such Person, enforceable in accordance with their respective
     terms, except as such enforceability may be limited by bankruptcy,
     insolvency, reorganization, moratorium or other similar laws affecting
     creditors' rights generally and general equitable principles. The
     Certificate, when executed, authenticated and delivered in accordance with
     the Trust Agreement, will be validly issued and outstanding and entitled to
     the benefits of the Trust Agreement and will evidence the entire beneficial
     ownership interest in the Issuer. The Notes when executed, authenticated
     and delivered in accordance with the Indenture, will be entitled to the
     benefits of the Indenture and will constitute legal, valid and binding
     obligations of the Issuer, enforceable in accordance with their terms,
     except as limited by applicable bankruptcy, insolvency, reorganization,
     moratorium and similar laws affecting the enforcement of creditors' rights
     generally or general equitable principles (whether in a proceeding at law
     or in equity) and except to the extent that rights to indemnity and
     contribution may be limited by public policy.

                                       21
<PAGE>

          (g)  ERISA.  Each of TFC and TFCRC is in compliance with ERISA and has
               -----
     not incurred and does not reasonably expect to incur, any liabilities to
     the PBGC under ERISA in connection with any Plan or Multiemployer Plan.

          (h)  Accuracy of Information.  None of the Transaction Documents nor
               -----------------------
     any of the Provided Documents contain any statement of a material fact with
     respect to TFC or TFCRC or the Transaction that was untrue or misleading in
     any material respect when made.  Since the furnishing of the Provided
     Documents, there has been no change, nor any development or event involving
     a prospective change known to TFC or TFCRC, that would render any of the
     Provided Documents untrue or misleading in any material respect. There is
     no fact known to TFC or TFCRC which has a material possibility of causing a
     Material Adverse Change with respect to either of TFC or TFCRC, or which
     has a material possibility of impairing the value or marketability of the
     Receivables, taken as a whole, or decreasing the possibility that amounts
     due in respect of the Receivables will be collected as due.

          (i)  Compliance With Securities Laws.  The Notes have not been offered
               -------------------------------
     or sold in any manner that would render the issuance and sale of the Notes
     a violation of the Securities Act or any state securities or "Blue Sky"
     laws or require registration pursuant thereto, nor has any Person been
     authorized to act in such manner.  No registration under the Securities Act
     is required for the sale of the Notes as contemplated by the Transaction
     Documents, assuming the accuracy of the Purchaser's representations and
     warranties set forth in the Purchase Agreement, and satisfaction by the
     Placement Agent of its obligations set forth in the Placement Agency
     Agreement.  Without limitation of the foregoing, the Offering Document does
     not contain any untrue statement of a material fact and does not omit to
     state a material fact required to be stated therein or necessary to make
     the statements made therein, in light of the circumstances under which they
     were made, not misleading.

          (j)  Transaction Documents.  Each of the representations and
               ---------------------
     warranties of TFC or TFCRC contained in the Transaction Documents is true
     and correct in all material respects and each of TFC or TFCRC hereby makes
     each such representation and warranty made by it to, and for the benefit
     of, AGIC as if the same were set forth in full herein.

          (k)  No Consents.  No consent, license, approval or authorization
               -----------
     from, or registration, filing or declaration with, any regulatory body,
     administrative agency, or other governmental instrumentality, nor any
     consent, approval, waiver or notification of any creditor, lessor or other
     nongovernmental person, is required in connection with the execution,
     delivery and performance by TFC or TFCRC of this Insurance Agreement or of
     any other Transaction Document to which such Person is a party, except (in
     each case) as have been obtained and are in full force and effect.

          (l)  Compliance With Law. Etc.  No practice, procedure or policy
               -------------------------
     employed or proposed to be employed by TFC or TFCRC in the conduct of their
     respective businesses violates any law, regulation, judgment, agreement,
     order or decree applicable to it which, if enforced, would result in a
     Material Adverse Change with respect to such Person.

                                       22
<PAGE>

          (m)    Special Purpose Entity.
                 ----------------------

          (i)    The capital of TFCRC is adequate for the business and
                 undertakings of TFCRC.

          (ii)   Other than with respect to the purchase by TFC of the stock of
                 TFCRC, and as provided in this Insurance Agreement and the
                 Transaction Documents, TFCRC is not engaged in any business
                 transactions with TFC.

          (iii)  At least two directors of TFCRC shall be persons who are not,
                 and will not be, a director, officer, employee or holder of any
                 equity securities of TFC or any of its affiliates or
                 subsidiaries.

          (iv)   The funds and assets of TFCRC are not, and will not be,
                 commingled with the funds of any other person.

          (v)    The Bylaws of TFCRC require it to maintain (A) correct and
                 complete minute books and records of account, and (B) minutes
                 of the meetings and other proceedings of its shareholders and
                 board of directors.

          (n)  Solvency: Fraudulent Conveyance.  Each of TFC and TFCRC is
               -------------------------------
     solvent, is able to pay its debts as they become due and will not be
     rendered insolvent by the Transaction and, after giving effect to such
     Transaction, neither TFC nor TFCRC will be left with an unreasonably small
     amount of capital with which to engage in its business.  Neither TFC nor
     TFCRC intends to incur, or believes that it has incurred, debts beyond its
     ability to pay such debts as they mature. Neither TFC nor TFCRC
     contemplates the commencement of insolvency, bankruptcy, liquidation or
     consolidation proceedings or the appointment of a receiver, liquidator,
     conservator, trustee or similar official in respect of TFC or TFCRC, as the
     case may be, or any of their respective assets. The amount of consideration
     being received by TFCRC upon the sale of the Receivables to the Issuer
     constitutes reasonably equivalent value and fair consideration for the
     Receivables. TFCRC is not selling the Receivables to the Issuer, as
     provided in the Transaction Documents, with any intent to hinder, deal or
     defraud any of TFC's creditors.

          (o)  Good Title; Valid Transfer: Absence of Liens: Security Interest.
               ---------------------------------------------------------------

          (i)    Immediately prior to the pledge of the Collateral to the Trust
                 Collateral Agent pursuant to the Indenture, the Issuer was the
                 owner of, and had good and marketable title to, such property
                 free and clear of all Liens and Restrictions on
                 Transferability, and had or will have had full right, power and
                 lawful authority to assign, transfer and pledge such
                 Receivables. The Indenture constitutes a valid pledge of the
                 Collateral to the Trust Collateral Agent and the Trust
                 Collateral Agent shall have a valid and perfected first
                 priority security interest in the Collateral, free and clear of
                 all Liens and Restrictions on Transferability.

                                       23
<PAGE>

          (ii)   Immediately prior to the transfer of any Receivables to the
                 Issuer pursuant to the Sale and Servicing Agreement, TFCRC was
                 or will have been the owner of, and had good and marketable
                 title to, such property free and clear of all Liens and
                 Restrictions on Transferability, and had or will have had full
                 right, corporate power and lawful authority to assign, transfer
                 and pledge such Receivables. In the event that a transfer of
                 the Receivables by TFCRC to the Issuer is characterized as
                 other than a sale, such transfer shall be characterized as a
                 secured financing, and the Trustee shall have a valid and
                 perfected first priority security interest in such Receivables
                 free and clear of all Liens and Restrictions on
                 Transferability.

          (iii)  Immediately prior to the sale of the Receivables to TFCRC
                 pursuant to the Purchase Agreement, TFC was or will have been
                 the owner of, and had good and marketable title to, the
                 Receivables being transferred by such party free and clear of
                 all Liens and Restrictions on Transferability, and had or will
                 have had full right, corporate power and lawful authority to
                 assign, transfer and pledge such Receivables. In the event that
                 a transfer of the Receivables by TFC to TFCRC is characterized
                 as other than a sale, such transfer shall be characterized as a
                 secured financing, and TFCRC shall have a valid and perfected
                 first priority security interest in such Receivables free and
                 clear of all Liens and Restrictions on Transferability.

          (p)  Taxes. Each of TFC and TFCRC has (i) filed all tax returns which
               -----
are required to be filed in any jurisdiction and (ii) paid all taxes,
assessments, fees and other governmental charges against TFC or TFCRC or any of
the properties, income or franchise of TFC or TFCRC, to the extent that such
taxes have become due, other than any taxes or assessments, the validity of
which are being contested in good faith by appropriate proceedings and with
respect to which it has set aside adequate reserves on its books in accordance
with GAAP and which proceedings have not given rise to any Lien. To the best of
the knowledge of TFC and TFCRC, all such tax returns were true and correct in
all material respects and neither of TFC nor TFCRC knows of any proposed
material additional tax assessment against it nor any basis therefor. Any taxes,
assessments, fees and other governmental charges payable by TFC or TFCRC in
connection with the Transaction, the execution and delivery of the Transaction
Documents and the issuance of the Notes have been paid or shall have been paid
at or prior to Closing Date.

          (q)  Private Placement Memorandum.  As of the Closing Date, neither
               ----------------------------
     the Private Placement Memorandum nor any amendment thereof or supplement
     thereto (other than the AGIC Information and the Placement Agent
     Information) contain any untrue statement of a material fact or omit to
     state a material fact necessary in order to make the statements therein, in
     light of the circumstances under which they were made, not misleading.

          (r)  Year 2000 Compliance.
               --------------------

          (i)    TFC (A) initiated a review and assessment of all areas within
                 its business and operations that could be adversely affected by
                 the Year 2000 Problem

                                       24
<PAGE>

                 (including those affected by Dealers, suppliers, vendors and
                 subservicers, but only to the extent that the adverse effect on
                 such businesses and operations affected by Dealers, suppliers,
                 vendors and subservicers would be reasonably likely to
                 constitute a material adverse effect on the financial
                 conditions or operations of TFC or the collectibility of the
                 Receivables), (B) developed a plan and timeline for addressing
                 the Year 2000 Problem, (C) implemented the plan in accordance
                 with that timetable. Based on the foregoing, TFC believes that
                 all computer applications (including those of its Dealers,
                 suppliers, vendors, and subservicers) that are material to its
                 business and operations are reasonably expected to be able to
                 perform properly date-sensitive functions for dates before and
                 after January 1, 2000 (that is, be "Year 2000 Compliant"),
                                                     -------------------
                 except to the extent that a failure to do so could not
                 reasonably be expected to have material adverse effect, or to
                 result in (1) a Default under the Indenture, (2) an Event of
                 Default under the Indenture, (3) a Servicer Termination Event,
                 or (4) an event which, with the giving of notice or the passage
                 of time or both, would constitute a Servicer Termination Event,
                 (D) has completed a review and assessment of all computer
                 applications (including, but not limited to those of its
                 Dealers, suppliers, vendors and subservicers, but only to the
                 extent that the failure of any such applications of its
                 Dealers, suppliers, vendors and subservicers to be Year 2000
                 Compliant would be reasonably likely to have material adverse
                 effect), which are related to or involved in the collection,
                 management or servicing of the Receivables and Related Security
                 (the "Management Systems"), and (E) has determined that such
                       ------------------
                 Management Systems are Year 2000 Compliant.

          (ii)   All of the representations and warranties set forth in this
                 Section 3.01 (r) (other than representations and warranties, if
                 ----------------
                 any, that expressly speak only as of a different date) shall be
                 deemed to be made, without further act by any Person, on and as
                 of the Closing Date. All of the representations and warranties
                 set forth in this Section 3.01 (r) shall survive the
                                   ----------------
                 termination of this Insurance Agreement.

          (s)  Investment Company.  Neither TFC nor TFCRC is an "investment
               ------------------
     company" or a company "controlled" by an "investment company" within the
     meaning of the Investment Company Act, and none of the execution, delivery
     or performance of obligations under the Agreement or any of the Transaction
     Documents or the consummation of any of the transactions contemplated
     thereby will violate any provision of the Investment Company Act, or any
     rule, regulation or order issued by the Securities and Exchange Commission
     thereunder.

          (t)  No Restrictions on TFCRC Affecting Its Business.  TFCRC is not a
               -----------------------------------------------
     party to any contract or agreement, or subject to any charter or other
     corporate restriction which materially and adversely affects it business.

          (u)  Perfection of Security Interest.  All filings and recordings as
               -------------------------------
     may be necessary to perfect the interest of the Issuer in the Receivables
     have been accomplished

                                       25
<PAGE>

     and are in full force and effect. TFCRC will from time to time, at its own
     expense, execute and file such additional financing statements (including
     continuation statements) as may be necessary to ensure that at any time,
     the interest of the Issuer in all of the Receivables is fully protected.

          (v)  Ownership of TFCRC.  100.00% of the issued and outstanding shares
               ------------------
     of capital stock of TFCRC are directly owned (both beneficially and of
     record) by TFC.  Such shares are validly issued, fully paid and
     nonassessable and no one other than TFC has any options, warrants or other
     rights to acquire shares of capital stock of and from TFCRC.

          (w)  No Broker, Finder or Financial Adviser Other Than Rothschild.
               ------------------------------------------------------------
     Neither TFCRC nor any of its officers, directors, employees or agents has
     employed any broker, finder or financial adviser other than Rothschild Inc.
     or incurred any liability for fees or commissions to any person other than
     Rothschild Inc. in connection with the offering, issuance or sale of the
     Notes.

          (x)  S&P.  The information supplied by TFC or TFCRC to S&P in
               ---
     connection with obtaining a rating for the Notes did not contain any untrue
     statement of a material fact or omit to state any material fact required to
     be stated in order to make such information not misleading.

          (y)  No Violation of Exchange Act or Regulations T, U or X.  None of
               -----------------------------------------------------
     the transactions contemplated in the Transaction Documents (including the
     use of the proceeds from the sale of the Notes) will result in a violation
     of Section 7 of the Securities and Exchange Act, or any regulations issued
     pursuant thereto, including Regulations T, U and X of the Board of
     Governors of the Federal Reserve System, 12 C.F.R, Chapter II.

          (z)  Financial Statements.  The Financial Statements of TFC, copies of
               --------------------
     which have been furnished to AGIC, (i) are, as of the dates and for the
     periods referred to therein, complete and correct in all material respects.
     (ii) present fairly the financial condition and results of operations of
     TFC as of the dates and for the periods indicated, and (iii) have been
     prepared in accordance with GAAP consistently applied, except as noted
     therein (subject as to interim statements to normal year-end adjustments).
     Since the date of the most recent Financial Statements, there has been no
     Material Adverse Change.  Except as disclosed in the Financial Statements,
     TFC is not subject to any contingent liabilities or commitments that,
     individually or in the aggregate, have a material possibility of causing a
     Material Adverse Change with respect to TFC.

     Section 3.02.  Representations and Warranties of the Issuer.  The Issuer
                    --------------------------------------------
represents and warrants, as of the Closing Date, as follows:

          (a)  Due Organization and Qualification.  The Issuer is duly formed
               ----------------------------------
     and validly existing as a Delaware statutory business trust and is in good
     standing under the laws of the State of Delaware. The Issuer is duly
     qualified to do business, is in good standing and has obtained all
     necessary licenses, permits, charters, registrations and approvals

                                       26
<PAGE>

     (together, "approvals") necessary for the conduct of its business as
     currently conducted and as described in the Offering Document and the
     performance of its obligations under the Transaction Documents, in each
     jurisdiction in which the failure to be so qualified or to obtain such
     approvals would render any Receivable or Transaction Document unenforceable
     in any material respect or would otherwise cause a Material Adverse Change
     to occur with respect to the Transaction.

          (b)  Power and Authority.  The Issuer has all necessary trust power
               -------------------
     and authority to conduct its business as currently conducted and as
     described in the Offering Document, to execute, deliver and perform its
     obligations under the Transaction Documents and has full power and
     authority to sell and assign the Receivables as contemplated by the
     Transaction Documents and to consummate the Transaction.

          (c)  Due Authorization. The execution, delivery and performance of
               -----------------
     the Transaction Documents by the Issuer have been duly authorized by all
     necessary trust action and do not require any additional approvals or
     consents or other action by, or any notice to or filing with, any Person,
     including, without limitation, any governmental entity.

          (d)  Noncontravention. None of the execution and delivery of the
               ----------------
     Transaction Documents by the Issuer, the consummation of the transactions
     contemplated thereby nor the satisfaction of the terms and conditions of
     the Transaction Documents,

          (i)    conflicts with, or results in any material breach or violation
                 of, any provision of the Certificate or the Trust Agreement, or
                 any law, rule, regulation, order, writ, judgment, injunction,
                 decree, determination or award currently in effect having
                 applicability to the Issuer or its property, including
                 regulations issued by an administrative agency or other
                 governmental authority having supervisory powers over the
                 Issuer,

          (ii)   constitutes, or will constitute, a material default by the
                 Issuer under, or a material breach of, any provision of any
                 loan agreement, mortgage, indenture or other agreement or
                 instrument to which the Issuer is a party or by which it or any
                 of its property is or may be bound or affected, or

          (iii)  results in or requires the creation of any Lien upon or in
                 respect of any of the assets of the Issuer, except as otherwise
                 expressly contemplated by the Transaction Documents.

          (e)  Legal Proceedings.  There is no action, proceeding, suit or
               -----------------
     investigation by or before any court, governmental or administrative agency
     or arbitrator against or affecting the Issuer, or any properties or rights
     of the Issuer, pending or, to the knowledge of the Issuer, threatened,
     which, in any case, if decided adversely, would result in a Material
     Adverse Change with respect to the Issuer, the Certificate or the Notes.

          (f)  Valid and Binding Obligations. Each of the Transaction
               -----------------------------
     Documents to which the Issuer is a party when executed by the Owner Trustee
     on behalf of the Issuer, will constitute the legal, valid and binding
     obligations of the Issuer enforceable against the

                                       27
<PAGE>

     Issuer in accordance with their respective terms, except as limited by
     applicable bankruptcy, insolvency, reorganization, moratorium and similar
     laws affecting the enforcement of creditors' rights generally or general
     equitable principles (whether in a proceeding at law or in equity) and
     except to the extent that rights to indemnity and contribution may be
     limited by public policy. The Certificate, when executed, authenticated and
     delivered in accordance with the Trust Agreement, will be validly issued
     and outstanding and entitled to the benefits of the Trust Agreement and
     will evidence the entire beneficial ownership interest in the Issuer. The
     Notes when executed, authenticated and delivered in accordance with the
     Indenture, will be entitled to the benefits of the Indenture and will
     constitute legal, valid and binding obligations of the Issuer, enforceable
     in accordance with their terms, except as limited by applicable bankruptcy,
     insolvency, reorganization, moratorium and similar laws affecting the
     enforcement of creditors' rights generally or general equitable principles
     (whether in a proceeding at law or in equity) and except to the extent that
     rights to indemnity and contribution may be limited by public policy.

          (g)  Accuracy of Information.  None of the Transaction Documents, nor
               -----------------------
     any of the Provided Documents, contain any statement of a material fact
     with respect to the Issuer or the Transaction that was untrue or misleading
     in any material respect when made. Since the furnishing of the Provided
     Documents, there has been no change, that would render any of the Provided
     Documents untrue or misleading in any material respect. There is no fact
     known to the Issuer which has a material possibility of causing a Material
     Adverse Change with respect to the Issuer or which has a material
     possibility of impairing the value or marketability of the Receivables,
     taken as a whole, or decreasing the possibility that amounts due in respect
     of the Receivables will be collected as due.

          (h)  Compliance With Securities Laws; Offering Document.  The Notes
               --------------------------------------------------
     have not been offered or sold in any manner that would render the issuance
     and sale of the Notes a violation of the Securities Act or any state
     securities or "Blue Sky" laws or require registration pursuant thereto, nor
     has any Person been authorized to act in such manner.  No registration
     under the Securities Act is required for the sale of the Notes as
     contemplated by the Transaction Documents, assuming the accuracy of the
     Purchaser's representations and warranties set forth in the Purchase
     Agreement, and satisfaction by the Placement Agent of its obligations set
     forth in the Placement Agency Agreement.  Without limitation of the
     foregoing, the Offering Document did not, as of its date, and does not, as
     of the date hereof, contain any untrue statement of a material fact or omit
     to state a material fact required to be stated therein or necessary to make
     the statements made therein, in light of the circumstances under which they
     were made, not misleading.

          (i)  Transaction Documents.  Each of the representations and
               ---------------------
     warranties of the Issuer contained in the Transaction Documents is true and
     correct in all material respects and the Issuer hereby makes each such
     representation and warranty made by it to, and for the benefit of, AGIC as
     if the same were set forth in full herein.

          (j)  No Consents.  No consent, license, authorization or approval
               -----------
     from, or registration or other action by, and no notice to or filing or
     declaration with, any governmental entity or regulatory body, is required
     for the due execution, delivery and

                                       28
<PAGE>

     performance by the Issuer of the Transaction Documents or any other
     material document or instrument to be delivered thereunder, except (in each
     case) as have been obtained or the failure of which to be obtained would
     not be reasonably likely to cause a Material Adverse Change with respect to
     the Transaction.

          (k)  Compliance With Law. Etc.  No practice, procedure or policy
               ------------------------
     employed or proposed to be employed by the Issuer in the conduct of its
     business violates any law, regulation, judgment, agreement, order or decree
     applicable to it which, if enforced, would result in a Material Adverse
     Change with respect to the financial condition of such Person.

          (l)  Special Purpose Entity.
               ----------------------

          (i)    The capital of the Issuer is adequate for the business and
                 undertakings of the Issuer.

          (ii)   Except as contemplated by the Transaction Documents, the Issuer
                 is not engaged in any business transactions with TFC, the
                 Parent, TFCRC or any Affiliate of any of them.

          (iii)  The Issuer's funds and assets are not, and will not be,
                 commingled with the funds of any other Person.

          (m)  Solvency: Fraudulent Conveyance. The Issuer is solvent and will
               -------------------------------
     not be rendered insolvent by the Transaction and, after giving effect to
     such Transaction, the Issuer will not be left with an unreasonably small
     amount of capital with which to engage in its business. The Issuer does not
     intend to incur, or believe that it has incurred, debts beyond its ability
     to pay such debts as they mature. The Issuer does not contemplate the
     commencement of insolvency, bankruptcy, liquidation or consolidation
     proceedings or the appointment of a receiver, liquidator, conservator,
     trustee or similar official in respect of the Issuer or any of its assets.

          (n)  Perfection of Liens and Security Interest. On the Closing Date,
               -----------------------------------------
     the Lien and security interest in favor of the Trust Collateral Agent with
     respect to the Collateral will be perfected by the filing of financing
     statements on Form UCC-1 in each jurisdiction where such recording or
     filing is necessary for the perfection thereof, the delivery of the
     Receivables Files to the Trust Collateral Agent, and the establishment of
     the Collection Account, the Spread Account and the Note Payment Account in
     accordance with the provisions of the Transaction Documents, and no other
     filings in any jurisdiction or any other actions (except as expressly
     provided herein) are necessary to perfect the Trust Collateral Agent's Lien
     on and security interest in the Collateral as against any third parties.

          (o)  Investment Company.  The Issuer is not an "investment company"
               ------------------
     or a company "controlled" by an "investment company" within the meaning of
     the Investment Company Act, and none of the execution , delivery or
     performance of obligations under the Agreement or any of the Transaction
     Documents or the consummation of any of the transactions contemplated
     thereby by the Issuer or the acquisition by the Issuer of the

                                       29
<PAGE>

     Receivables will violate any provision of the Investment Company Act, or
     any rule, regulation or order issued by the Securities and Exchange
     Commission thereunder.

          (p)  Collateral.  On the Closing Date, the Issuer will have good and
               ----------
     marketable title to each item of other Trust Property conveyed on such date
     and will own each such item free and clear of any Lien (other than Liens
     contemplated under the Indenture) or any equity or participation interest
     of any other Person.

          (q)  Security Interest in Funds and Investments.  Assuming the
               ------------------------------------------
     retention of funds in the Trust Accounts, such funds will be subject to a
     valid and perfected, first priority security interest in favor of the Trust
     Collateral Agent on behalf of the Trustee (on behalf of the Noteholders)
     and AGIC.

          (r)  No Violation of Exchange Act or Regulations T, U or X.  None of
               -----------------------------------------------------
     the transactions contemplated in the Transaction Documents will result in a
     violation of Section 8 of the Exchange Act, or any regulations issues
     pursuant thereto, including Regulations T, U and X of the Board of
     Governors of the Federal Reserve System, 12 C.F.R., Chapter II.  The Issuer
     does not own nor does it intend to carry or purchase any "Margin Security"
     within the meaning of said Regulation U, including margin securities
     originally issued by it or any "margin stock" within the meaning of said
     Regulation U.

                                  ARTICLE IV

                                   COVENANTS

     Section 4.01.  Covenants of TFCRC and TFC.  Each of TFCRC and TFC hereby
                    --------------------------
covenants and agrees that during the term of this Insurance Agreement, unless
AGIC shall otherwise expressly consent in writing:

          (a)  Compliance With Agreements and Applicable Laws.  Each of TFCRC
               ----------------------------------------------
     and TFC shall perform each of its respective obligations under the
     Transaction Documents and shall comply with all material requirements of
     any law, rule or regulation applicable to it, or that are required in
     connection with its performance under any of the Transaction Documents.
     Neither TFCRC nor TFC will cause or permit to become effective any
     amendment to or modification of any of the Transaction Documents to which
     it is a party unless AGIC shall have previously approved in writing the
     form of such amendment or modification.  Neither TFCRC nor TFC shall take
     any action or fail to take any action that would interfere with the
     enforcement of any rights of AGIC or the Trust Collateral Agent under the
     Transaction Documents.

          (b)  Reports: Other Information.  Each of TFCRC and TFC shall keep or
               --------------------------
     cause to be kept in reasonable detail books and records of account of their
     respective assets and business, and in the case of TFC, which shall clearly
     reflect the transfer of the Receivables to TFCRC, and, in the case of
     TFCRC, which shall clearly reflect the transfer of the Receivables to the
     Trust Collateral Agent. Each of TFCRC and TFC shall furnish or caused to be
     furnished to AGIC:

                                       30
<PAGE>

          (i)    Promptly upon receipt thereof, copies of all reports,
                 statements, certifications, schedules, or other similar items
                 delivered to or by TFCRC and TFC pursuant to the terms of the
                 Transaction Documents and, promptly upon request, such other
                 data as AGIC may reasonably request; provided, however, that
                 neither TFCRC nor TFC shall be required to deliver any such
                 items if provision by some other party to AGIC is required
                 under the Transaction Documents unless such other party
                 wrongfully fails to deliver such item. TFCRC and TFC shall,
                 upon the reasonable request of AGIC, permit AGIC or its
                 authorized agents (A) to inspect its books and records as they
                 may relate to the Notes, the Receivables, the obligations of
                 TFCRC and TFC under the Transaction Documents, the Transaction
                 and the business of TFC or TFCRC; (B) to discuss the affairs,
                 finances and accounts of TFCRC and TFC with an officer of each
                 upon AGIC's reasonable request; and (C) to discuss the affairs,
                 finances and accounts of TFCRC and TFC with its independent
                 accountants, provided that an officer of such Person shall have
                 the right to be present during such discussions. Such
                 inspections and discussions shall be conducted during normal
                 business hours and shall not unreasonably disrupt the business
                 of such Person. The reasonable fees and expenses of AGIC or any
                 such authorized agents shall be for the account of TFC.

          (ii)   TFC shall provide or cause to be provided to AGIC an executed
                 original copy of each document executed in connection with the
                 transaction within 30 days after the Closing Date.

          (iii)  At least 30 days prior to the implementation thereof, notice of
                 any material change to the software, hardware or other systems
                 employed by the Parent or TFC in connection with billing,
                 collecting or otherwise servicing the Receivables.

          (c)    Notice of Material Events.  TFCRC and TFC shall promptly inform
                 -------------------------
     AGIC in writing of the occurrence of any of the following:

          (i)    the submission of any claim or the initiation of any legal
                 process, litigation or administrative or judicial investigation
                 (A) against TFCRC or TFC pertaining to the Receivables in
                 general, (B) with respect to a material portion of the
                 Receivables, or (C) in which a request has been made for
                 certification as a class action (or equivalent relief) that
                 would involve a material portion of the Receivables;

          (ii)   any change in the location of the principal office of either of
                 TFCRC or TFC or any change in the location of the books and
                 records of TFCRC or TFC;

          (iii)  the occurrence of any Default, Event of Default or Trigger
                 Event; or

                                       31
<PAGE>

          (iv)   any other event, circumstance or condition that has resulted,
                 or which TFCRC or TFC, as the case may be, reasonably believes
                 might result, in a Material Adverse Change with respect to
                 TFCRC or TFC.

          (d)  Further Assurances.  Each of TFCRC and TFC will file all
               ------------------
     necessary financing statements, assignments or other instruments, and any
     amendments or continuation statements relating thereto, necessary to be
     kept and filed in such manner and in such places as may be required by law
     to preserve and protect fully the Lien on and security interest in, and all
     rights of the Trust Collateral Agent, for the benefit of the Trustee (for
     the Noteholders and AGIC), with respect to the Receivables, the Collection
     Account, the Note Payment Account and the Spread Account. In addition, each
     of TFCRC and TFC shall, upon the request of AGIC, from time to time,
     execute, acknowledge and deliver, or cause to be executed, acknowledged and
     delivered, within thirty (30) days of such request, such amendments hereto
     and such further instruments and take such further action as may be
     reasonably necessary to effectuate the intention, performance and
     provisions of the Transaction Documents or to protect the interest of the
     Issuer, the Owner Trustee, the Trustee and AGIC, in the Receivables, the
     Collection Account, the Note Payment Account and the Spread Account, free
     and clear of all Liens and Restrictions on Transferability except as
     contemplated by the Transaction Documents.  In addition, each of TFCRC and
     TFC agrees to cooperate with S&P in connection with any review of the
     Transaction which may be undertaken by S&P and after the date hereof.

          (e)  TFCRC's Corporate Existence.  TFCRC shall become qualified to do
               ---------------------------
     business and be in good standing under the laws of Virginia within fourteen
     (14) days of the Closing Date.  TFCRC shall maintain its corporate
     existence and shall at all times continue to be duly organized under the
     laws of Delaware, and duly qualified and duly authorized (as described in
     Sections 3.01 (a), (b) and (c) hereof, including, but not limited to, in
     the Commonwealth of Virginia) and shall conduct its business in accordance
     with the terms of its Certificate of Incorporation and Bylaws.

          (f)  TFC's Corporate Existence.  TFC shall maintain its corporate
               -------------------------
     existence and shall at all times continue to be duly organized under
     applicable law, and duly qualified and duly authorized (as described in
     Sections 3.01 (a), (b) and (c) hereof) and shall conduct its business in
     accordance with the terms of its Certificate of Incorporation and Bylaws.

          (g)  Disclosure Document.  Each Offering Document delivered with
               -------------------
     respect to the Notes shall clearly disclose that the Policy is not covered
     by the property/casualty insurance security fund specified in Article 76 of
     the New York Insurance Law.  In addition, each Offering Document delivered
     with respect to the Notes which includes financial statements of AGIC
     prepared in accordance with GAAP shall include the following statement
     immediately preceding such financial statements:

                 The New York State Insurance Department
                 recognizes only statutory accounting
                 practices for determining and reporting the
                 financial condition

                                       32
<PAGE>

                 and results of operations of an insurance
                 company, for determining its solvency under
                 the New York Insurance Law, and for
                 determining where its financial condition
                 warrants the payment of a dividend to its
                 stockholders. No consideration is given by
                 the New York State Insurance Department to
                 financial statements prepared in accordance
                 with GAAP in making such determinations.

          (h)  Special Purpose Entity.
               ----------------------

          (i)    TFCRC shall conduct its business solely in its own name through
                 its duly authorized officers or agents so as not to mislead
                 others as to the identity of the entity with which those others
                 are concerned; in particular, TFCRC shall (A) require that its
                 employees, if any, identify themselves as employees of TFCRC
                 when conducting business of TFCRC; (B) use its best efforts to
                 avoid the appearance that it is conducting business on behalf
                 of any Affiliate thereof or that its assets are available to
                 pay the creditors of TFC or the Parent or any Affiliate
                 thereof; (C) maintain at all times stationary separate from
                 that of any Affiliate; and (D) conduct all oral and written
                 communications, including, without limitation, letters,
                 invoices, purchase orders, contracts, statements and loan
                 applications, solely in the name of TFCRC.

          (ii)   TFCRC shall respond to any inquiries made directly to it with
                 respect to ownership of a Receivable by stating that it is the
                 owner of such contributed Receivable, and, if requested to do
                 so, that the Trust Collateral Agent has been granted a security
                 interest in such Receivable

          (iii)  TFCRC shall compensate all employees, consultant and agent
                 directly or indirectly through reimbursement of TFC, from
                 TFCRC's bank accounts, for services provided to TFCRC by such
                 employees, consultants and agents and, to the extent any
                 employee, consultant or agent of TFCRC is also an employee,
                 consultant or agent of TFC, allocate the compensation of such
                 employee, consultant or agent between TFCRC and TFC on a basis
                 which reflects the respective services rendered to TFCRC and
                 TFC.

          (iv)   TFCRC shall keep its assets and liabilities wholly separate
                 from those of all other entities, including, but not limited to
                 TFC and the Parent and the Affiliates thereof. TFCRC shall not
                 commingle its funds or other assets with those of any of its
                 Affiliates (other than in respect of items of payment or funds
                 which may be commingled until deposit into the Collection
                 Account in accordance with the Sale and Servicing Agreement),
                 and not hold its assets in any manner that would create an
                 appearance that such assets belong to any such Affiliate, not
                 maintain bank accounts or other depository accounts to which
                 any such Affiliate is an account party, into which such
                 Affiliate makes deposits or from which

                                       33
<PAGE>

                  any such Affiliate has the power to make withdrawals, and not
                  act as an agent or representative of any of its Affiliates in
                  any capacity.

          (v)     TFCRC shall not guarantee any obligation of any of its
                  Affiliates nor have any of its obligations guaranteed by any
                  such Affiliate (either directly or by seeking credit based on
                  the assets of such Affiliate), or otherwise hold itself out as
                  responsible for the debts of any Affiliate;

          (vi)    TFCRC shall maintain corporate records and books of account
                  separate from those of TFC or the Parent, and the Affiliates
                  thereof.

          (vii)   TFCRC shall obtain proper authorization from its Board of
                  Directors of all corporate action requiring such
                  authorization. Meetings of the Board of Directors of TFCRC
                  shall be held not less frequently than one time per annum, and
                  copies of the minutes of each such board meeting shall be
                  delivered to AGIC within 30 days of such meeting.

          (viii)  TFCRC shall obtain proper authorization from its shareholders
                  of all corporate action requiring shareholder approval.
                  Meetings of the shareholders of TFCRC shall be held not less
                  frequently than one time per annum, and copies of each such
                  authorization and the minutes of each such shareholder meeting
                  shall be delivered to AGIC within 30 days of such
                  authorization or meeting, as the case may be.

          (ix)    TFCRC shall (A) pay its own incidental administrative costs
                  and expenses from its own funds, (B) allocate all other shared
                  overhead expenses (including, without limitation, telephone
                  and other utility charges, the services of shared employees,
                  consultants and agent, and reasonable legal auditing
                  expenses), and other items of cost and expense shared between
                  TFCRC and any Affiliate thereof, on the basis of actual use to
                  the extent practicable, and to the extent such allocation is
                  not practicable, on a basis reasonably related to actual use
                  or the value of services rendered. TFCRC shall not permit any
                  of its Affiliates to pay the its operation expenses.

          (x)     The annual financial statements of TFCRC shall disclose the
                  effects of TFCRC's transactions in accordance with GAAP and
                  shall disclose that the assets of TFCRC are not available to
                  pay creditors of TFC, the Parent or any Affiliate thereof.
                  Without limiting the foregoing, TFCRC shall prepare its
                  financial statements separately from those of its Affiliates
                  and ensure that any consolidated financial statement have
                  notes to the effect that TFCRC is a separate entity whose
                  creditors have a claim on its assets prior to those assets
                  becoming available to its equity holders and to any of their
                  respective creditors.

          (xi)    The resolutions, agreements and other instruments of TFCRC
                  underlying the transactions described in this Insurance
                  Agreement and in the other Transaction Documents shall be
                  continuously maintained by TFCRC as

                                       34
<PAGE>

                  official records of TFCRC, separately identified and held
                  apart from the records of TFC and the Parent and each
                  affiliate thereof.

          (xii)   TFCRC shall at all times have at least two independent
                  directors who satisfy the definition of Independent Director
                  provided in its certificate of incorporation, and have at
                  least one officer responsible for managing its day-to-day
                  business and manage such business by or under the direction of
                  its board of directors.

          (xiii)  TFCRC shall take such actions as are necessary on its part to
                  ensure that the facts and assumptions set forth in the non-
                  consolidation opinion delivered by its counsel remain true and
                  correct at all times.

          (i)  Maintenance of Licenses.  Each of TFCRC and TFC shall maintain
               -----------------------
     all licenses, permits, charters and registrations which are material to the
     performance by it of its obligations under this Insurance Agreement and
     each other Transaction Document to which it is a party or by which it is
     bound.

          (j)  Transaction Documents.  Each of  TFCRC and TFC shall comply with
               ---------------------
     each of the covenants, as applicable, made by it in each of the Transaction
     Documents.

          (k)  Ownership of TFCRC.  TFC shall at all times own 100.00% of the
               ------------------
     issued and outstanding shares of capital stock of TFCRC free and clear of
     any liens.

          (l)  Civilian Portfolio.  At all times prior to December 31, 2000,
               ------------------
     unless AGIC shall otherwise consent in writing (which consent shall not be
     unreasonably withheld, delayed or conditioned), TFC shall cause

          (i)  the fraction (stated as a percentage) (A) the numerator of which
               is the aggregate outstanding principal balance of Contracts
               serviced by TFC (including, without limitation, those Contracts
               pledged to secure loans to TFC or transferred by TFC in
               connection with securitization transactions) as determined as of
               the close of business of the last day of the most recently
               concluded Monthly Period, and in respect of which the obligors
               are not military personnel and which were purchased by or on
               behalf of TFC in connection with a purchase in bulk of such
               Contracts from an originator thereof, and (B) the denominator of
               which is the aggregate outstanding principal balance of all such
               Contracts serviced by TFC as determined as of the close of
               business of the last day of such Monthly Period, not to exceed
               35.0%; and

          (ii) the fraction (stated as a percentage) (A) the numerator of which
               is the aggregate outstanding principal balance of Contracts
               serviced by TFC (including, without limitation, those Contracts
               pledged to secure loans to TFC or transferred by TFC in
               connection with securitization transactions) as determined as of
               the close of business of the last day of the most recently
               concluded Monthly Period, and in respect of which the obligors

                                       35
<PAGE>

               are not military personnel and which were purchased by or on
               behalf of TFC from a Dealer in connection with a point-of-sale
               transaction, and (B) the denominator of which is the aggregate
               outstanding principal balance of all such Contracts serviced by
               TFC as determined as of the close of business of the last day of
               such Monthly Period, not to exceed the percentage set forth below
               opposite the relevant period set forth below:

            Period                                Maximum Percentage
            ------                                ------------------

     from the Closing Date to the                       5.00%
     the third Monthly Period to
     occur after the Closing Date

     from the fourth Monthly                           10.00%
     Period to occur after the
     Closing Date to the sixth
     Monthly Period to occur
     after the Closing Date

     thereafter                                        15.00%.

          (m)  Access to Records; Discussions with Officers.  TFC shall, upon
               --------------------------------------------
     the reasonable request of AGIC, permit AGIC or its authorized agent access
     to:

          (i)    the documentation regarding the Receivables, the other Trust
                 Property, the obligations of TFC under the Transaction
                 Documents, the business of TFC and the transactions consummated
                 in connection therewith including, but not limited to, the
                 accounts, records and computer systems maintained by TFC with
                 respect thereto; and

          (ii)   any of the properties of TFC, to examine all of its books of
                 account, records, reports and other papers, to make copies and
                 extracts therefrom and to discuss its affairs, finances and
                 accounts with its officers, employees, and independent public
                 accounts (and by this provision TFC authorizes said accountants
                 to discuss the finances and affairs of TFC) (in each such case,
                 it being understood that an officer of TFC shall be entitled to
                 be present during any such examination and/or discussion).

          Such inspections and discussions shall be conducted at such reasonable
     times and as often as may be reasonably requested.  In each case, such
     access shall be afforded without charge but only upon reasonable request
     and during normal business hours.

          (n)  Benefit Plan.  Each of TFC and TFCRC shall comply in all material
               ------------
     respects with the provisions of ERISA, the Code, and all other applicable
     laws, and the regulations and interpretations thereunder to the extent
     applicable, with respect to each Benefit Plan.  Each  of TFC and TFCRC will
     not, and will cause any ERISA Affiliate not to:

                                       36
<PAGE>

          (i)    engage in any non-exempt prohibited transaction (within the
                 meaning of Code Section 4975 or ERISA Section 406) with respect
                 to any Benefit Plan which would result in a material liability
                 to either of TFC or TFCRC;

          (ii)   permit to exist any accumulated funding deficiency as defined
                 in Section 301(a) of ERISA and Section 412(a) of the Code,
                 with respect to any Benefit Plan which is subject to Section
                 302(q) of ERICA or 412 of the Code;

          (iii)  terminate any Benefit Plan of either of TFC or TFCRC or any
                 ERISA Affiliate if such termination would result in any
                 material liability to either of TFC or TFCRC or an ERISA
                 Affiliate; or

          (iv)   create any defined benefit plan (as defined in ERISA).

          (o)  Reporting and Accounting Treatment.  For reporting and accounting
               ----------------------------------
     purposes, and in its books of account and records, TFCRC will treat each
     transfer of Receivables pursuant to the Sale and Servicing Agreement as an
     absolute sale and assignment of TFCRC's full right, title and ownership
     interest in such Receivable and TFCRC will not account for or treat the
     transactions in any other manner.

          (p)  Financial Statements: Accountants' Reports: Other Information.
               -------------------------------------------------------------
     TFC shall keep, or cause to be kept, in reasonable detail books and records
     of account of its assets and business, and shall clearly reflect therein
     the transfer of the Receivables to the Issuer and the sale of the Notes to
     the underwriters as a sale of TFCRC's interest in the Receivables evidenced
     by the Notes. TFC shall furnish or cause to be furnished to AGIC:

          (i)    Annual Financial Statements.  As soon as available, and in any
                 ---------------------------
                 event within 120 days after the close of each fiscal year of
                 the Parent, the audited consolidated balance sheets of TFC and
                 the Parent as of the end of such fiscal year and the audited
                 consolidated statements of income, shareholders' equity and
                 cash flows of TFC or the Parent, as applicable, for such fiscal
                 year, all in reasonable detail and stating in comparative form
                 the respective figures for the corresponding date and period in
                 the preceding fiscal year, prepared in accordance with GAAP,
                 consistently applied, and certified by an authorized officer of
                 TFC as being complete and correct in all material respects and
                 present the financial condition and results of operations of
                 TFC or the Parent, as applicable, as of the dates and for the
                 periods indicated, in accordance with GAAP consistently
                 applied.

          (ii)   Quarterly Financial Statements. As soon as available, and in
                 ------------------------------
                 any event within 45 days after the close of the first three
                 quarters of each fiscal year of TFC and the Parent, the
                 unaudited consolidated balance sheets of as of the end of each
                 such quarter and the unaudited consolidated statements of
                 income and cash flows of TFC and the Parent for the portion of
                 the fiscal year then ended, all in reasonable detail and
                 stating in comparative form

                                       37
<PAGE>

                 the respective figures for the corresponding date and period in
                 the preceding fiscal year, prepared in accordance with GAAP,
                 consistently applied (subject to normal year-end adjustments),
                 and certified by an authorized officer of TFC as being complete
                 and correct in all material respects and present the financial
                 condition and results of operations of TFC or the Parent, as
                 applicable, as of the dates and for the periods indicated, in
                 accordance with GAAP consistently applied (subject as to
                 interim statements to normal year-end adjustments).

          (iii)  Other Information.  Promptly upon receipt thereof, copies of
                 -----------------
                 all reports, statements, certifications, schedules, or other
                 similar items delivered to or by TFC pursuant to the terms of
                 the Transaction Documents and, promptly upon request, such
                 other data as AGIC may reasonably request; provided, however,
                 that TFC shall not be required to deliver any such items if
                 provision by some other party to AGIC is required under the
                 Transaction Documents unless such other party wrongfully fails
                 to deliver such item. The reasonable fees and expenses of AGIC
                 or any such authorized agents shall be for the account of TFC.
                 In addition, TFC shall promptly (but in no case more than 30
                 days following issuance or receipt by a Commonly Controlled
                 Entity) provide to AGIC a copy of all correspondence between a
                 Commonly Controlled Entity and the PBGC, IRS, Department of
                 Labor or the administrators of a Multiemployer Plan relating to
                 any Reportable Event or the under-funded status, termination or
                 possible termination of a Plan or a Multiemployer Plan. The
                 books and records of TFC will be maintained at the address for
                 it designated herein for receipt of notices, unless it shall
                 otherwise advise the parties hereto in writing.

          (iv)   TFC shall provide, or cause to be provided, to AGIC an executed
                 original copy of each document executed in connection with the
                 Transaction within 30 days after the Closing Date.

          (q)  Agreed Upon Procedures; Reports.  (1) TFC shall cause a firm of
               -------------------------------
     nationally recognized independent certified public accountants (the
     "Independent Accountants"), who may also render other services to TFC
      -----------------------
     and/or to TFCRC, to deliver to the Board of Directors of the Servicer, to
     the Trustee, the Owner Trustee, the Trust Collateral Agent and AGIC (with a
     copy delivered to the Rating Agency):

               (i)  As soon as practical, but in no event later than 30 days
          after the delivery by the Servicer of the second Servicer's
          Certificate required to be delivered by the Servicer after the Closing
          Date pursuant to Section 4.9 of the Sale and Servicing Agreement, a
          statement (the "Initial Accountant's Statement"), in form and
          substance satisfactory to AGIC, reviewing the results of the
          Independent Accountants' performance of certain agreed upon procedures
          with respect to the Servicer, its reporting and record keeping and the
          degree of its compliance with provisions of the Basic Documents
          requiring the deposit or remittance of funds by the Servicer to the
          Collection Account, substantially to the effect that:  (1) the
          Independent Accountants have examined the accounts and

                                       38
<PAGE>

          records of the Servicer relating to the Receivables (which records
          shall be described in one or more schedules to such statement), (2)
          such firm has compared the information contained in the first and
          second Servicer's Certificates delivered by the Servicer pursuant to
          Section 4.9 of the Sale and Servicing Agreement with information
          contained in such accounts and records for such periods, (3) such firm
          has traced deposits and remittances made to the Collection Account by
          the Servicer for such periods, and (4) on the basis of the agreed upon
          procedures so performed, whether and to what extent (x) the
          information contained in such Servicer's Certificates reconciles with
          the information contained in such accounts and records, (y) such
          accounts and records of the Servicer related to the Receivables agree
          to the respective source documents, and (z) the Servicer has complied
          with the obligations set forth in the Basic Documents with respect to
          the deposits and remittances made to the Collection Account by the
          Servicer for such periods, except for such exceptions as TFC and AGIC
          believe to be immaterial and such other exceptions as shall be set
          forth in such statement;

               (ii)    In the event that the Initial Accountant's Statement
          indicates a degree of accuracy with respect to either or both of the
          first and second Servicer's Certificates deemed by AGIC to be
          unsatisfactory in the exercise of its sole discretion, as soon as
          practical after written demand therefor by AGIC to TFC and the
          Independent Accountants (which demand may be made as frequently as
          deemed necessary in the sole discretion of AGIC), but in no event
          later than 30 days after the delivery to AGIC by the Servicer of any
          subsequent Servicer's Certificate constituting the subject of such
          demand, a statement (each, an "Additional Accountant's Statement"), in
          form and substance satisfactory to AGIC, reviewing the results of the
          Independent Accountants' performance of certain agreed upon procedures
          with respect to then most recently completed and delivered Servicer's
          Certificate, and otherwise covering the same subjects, and having the
          same scope, as the Initial Accountant's Statement; provided, however,
                                                             --------  -------
          that AGIC shall not demand Additional Accountant's Statements if and
          to the extent that no fewer than three consecutive Additional
          Accountant's Statements are deemed by AGIC, in the exercise of its
          sole discretion, to indicate a high degree of accuracy with respect to
          the related Servicer's Certificate; and

               (iii)   As soon as practical, but in no event later than 90 days
          after the end of each calendar year during the term hereof (commencing
          with the calendar year 2000), a statement (each, an "Annual
          Accountant's Statement"), in form and substance satisfactory to AGIC,
          reviewing the results of the Independent Accountants' performance of
          certain agreed upon procedures with respect to a sample of six of the
          preceding twelve Servicer's Certificates (randomly selected by such
          Independent Accountants; provided that in no event shall any of the
                                   --------
          Servicer's Certificates so selected include any of the Servicer's
          Certificates which formed the basis of the Initial Accountant's
          Statement or any of the Additional Accountant's Statement), and
          otherwise covering the same subjects, and having the same scope, as
          the Initial Accountant's Statement; and

                                       39
<PAGE>

               (iv)  TFC shall use its best efforts to arrive at a mutually
          satisfactory agreement with AGIC concerning the agreed upon procedures
          referred to in each of clauses (i) and (iii) above, by no later than
          January 31, 2000.

          (2)  On or before April 30 (or 120 days after the end of the
Servicer's fiscal year, if other than December 31) of each year, beginning on
April 30, 2000, with respect to the twelve months ended on the immediately
preceding December 31 (or other applicable date) (or such other period as shall
have elapsed from the Closing Date to the date of such certificate) the
financial statements of TFC containing a report of the Independent Accountants
to the effect that such firm has examined the books and records of TFC and that,
on the basis of such examination conducted in compliance with generally accepted
audit standards, such financial statements accurately reflect the financial
condition of TFC, in each case certified by a Responsible Officer of TFC to be
true, accurate and complete copies of such financial statements. The statements
referenced above shall also indicate that the Independent Accountants are
independent of TFC and TFCRC within the meaning of the Code of Professional
Ethics of the American Institute of Certified Public Accountants.

          (3)  In the event such Independent Accountants require the Trust
Collateral Agent to agree to the procedures to be performed by such firm in any
of the reports required to be prepared pursuant to this Section 4.01(q), TFC, in
its capacity as Servicer only, shall direct the Trust Collateral Agent in
writing to so agree; it being understood and agreed that the Trust Collateral
Agent will deliver such letter of agreement in conclusive reliance upon the
direction of the Servicer, and the Trust Collateral Agent has not made any
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures.

          (4)  All fees, costs and expenses incurred by AGIC and the Trust
Collateral Agent in connection with obtaining any of the foregoing described
statements shall be for the sole cost and expense of TFC.

          (r)  Title Certificates of Financed Vehicles. On or before January 31,
               ---------------------------------------
     2000, TFC shall deliver to the Trust Collateral Agent, as custodian, the
     original title certificate for each of the Financed Vehicles, to be held by
     the Trust Collateral Agent as part of the Receivables Files pursuant to
     Section 3.3.(a) of the Sale and Servicing Agreement.

          (s)  Fort Knox letters.  On or before December 31, 1999,  TFC shall
               -----------------
     deliver the fully executed Fort Knox Additional Letters to the Trust
     Collateral Agent and AGIC.

          (t)  UCC-3 Matters.  Within fifteen (15) days of the Closing Date, TFC
               -------------
     and TFRC shall:

               (x)  execute, deliver and file in the appropriate filing office
          set forth below, the following UCC-3 financing statements:  (1) an
          assignment of the UCC-1 financing statement, filing no. 9962512, filed
          with the Secretary of State of the State of Delaware, to the Trust
          Collateral Agent; (2) an assignment of the UCC-1 financing statement,
          filing no. 9911307186, filed with the Secretary of State of the
          Commonwealth of Virginia, to the Trust Collateral Agent; and (3) an

                                       40
<PAGE>

          assignment of the UCC-1 financing statement, filing no.99-1666, filed
          with the clerk, Circuit Court of the City of Norfolk, Virginia, to the
          Trust Collateral Agent; and

               (y)  execute and deliver, an assignment of all of the rights,
          title and interest of the Issuer in, to and under (a) the UCC-1
          financing statement, filing no. 9911307187, filed with the Secretary
          of State of the Commonwealth of Virginia, and (b) the UCC-1 financing
          statement, filing no.99-16665, filed with the clerk, Circuit Court of
          the City of Norfolk, Virginia, to the Trust Collateral Agent.

     Section 4.02.  Negative Covenants with Respect to TFCRC and TFC.  Each of
                    ------------------------------------------------
TFCRC and TFC hereby covenants and agrees that during the term of this Insurance
Agreement, unless AGIC shall otherwise expressly consent in writing, which
consent shall not be unreasonably withheld:

          (a)  Restrictions on Liens.  Neither TFCRC nor TFC shall, except as
               ---------------------
     contemplated by the Transaction Documents, (i) create, incur or suffer to
     exist, or agree to create, incur or suffer to exist, or consent to cause or
     permit in the fixture (upon the happening of a contingency or otherwise)
     the creation, incurrence or existence of any Lien or Restriction on
     Transferability of the Receivables, or (ii) sign or file under the Uniform
     Commercial Code of any jurisdiction any financing statement which names
     TFCRC or TFC as a debtor, or sign any security agreement authorizing any
     secured party thereunder to file such financing statement, with respect to
     the Receivables.

          (b)  Impairment of Rights.  Neither TFCRC nor TFC shall take any
               --------------------
     action, or fail to take any action, if such action or failure to take
     action may reasonably be expected to (i) interfere with the enforcement of
     any rights under the Transaction Documents that are material to the rights,
     benefits or obligations of the Trustee, the Certificate holder or AGIC,
     (ii) result in a Material Adverse Change with respect to the Receivables,
     or (iii) impair the ability of TFCRC or TFC to perform their respective
     obligations under the Transaction Documents.

          (c)  Waiver. Amendments, Etc.  Neither TFCRC nor TFC shall waive,
               -----------------------
     modify or amend, or consent to any waiver, modification or amendment of,
     any of the provisions of any of the Transaction Documents.

          (d)  Succesor. Neither TFCRC nor TFC shall terminate or designate, or
               --------
     consent to the termination or designation of, the Servicer, the Trustee,
     the Back-up Servicer, the Trust Collateral Agent, the Owner Trustee or any
     successor thereto.

          (e)  Creation of Indebtedness: Guarantees.  TFCRC shall not create,
               ------------------------------------
     incur, assume or suffer to exist any Indebtedness.  TFCRC shall not assume,
     guarantee, endorse or otherwise be or become directly or contingently
     liable for the obligations of any Person by, among other things, agreeing
     to purchase any obligation of another Person, agreeing to advance funds to
     such Person or causing or assisting such Person to maintain any amount of
     capital.

                                       41
<PAGE>

          (f)  Subsidiaries.  TFCRC shall not form, or cause to be formed, any
               ------------
     Subsidiaries.

          (g)  Issuance of Stock.  TFCRC shall not issue any shares of capital
               -----------------
     stock or rights, warrants or options in respect of capital stock or
     securities convertible into or exchangeable for capital stock.

          (h)  No Mergers.  TFCRC shall not consolidate with or merge into any
               ----------
     Person or transfer all or any material amount of their respective assets to
     any Person or liquidate or dissolve.

          (i)  No Related Transactions.
               -----------------------

          (i)    TFCRC shall not conduct transactions with the Parent, TFC or
                 any other Affiliate of the Parent or TFCRC or with any
                 shareholder, director, officer, or employee of TFCRC, other
                 than in the ordinary course of business and on an arm's length
                 basis upon fair and reasonable terms materially no less
                 favorable to TFCRC than would be obtained in a comparable
                 arm's-length transaction with a Person not an Affiliate of the
                 Parent or TFCRC or a shareholder, director, officer, or
                 employee of TFCRC, as the case may be; and

          (ii)   TFC shall not conduct transactions with the Parent, TFCRC or
                 any other Affiliate of the Parent or TFC or with any
                 shareholder, director, officer, or employee of TFC which would
                 cause a Material Adverse Change with respect to the financial
                 condition or operations of TFC, other than in the ordinary
                 course of business and on an arm's-length basis upon fair and
                 reasonable terms materially no less favorable to TFC than would
                 be obtained in a comparable arm's-length transaction with a
                 Person not an Affiliate of the Parent or TFC or a shareholder,
                 director, officer, or employee of TFC, as the case may be.

          (j)  No Sale of Assets. TFCRC shall not sell, transfer, exchange or
               -----------------
     otherwise dispose of any of its assets except pursuant to securitization
     transactions as expressly permitted under the Transaction Documents.

          (k)  Other Activities.  TFCRC shall not engage in any business or
               ----------------
     activity other than in connection with the Transaction Documents, other
     transactions with respect to which AGIC acts as insurer of a financial
     guaranty insurance policy in order to guaranty asset-backed notes or
     certificates issued by an affiliate of TFCRC and as permitted by its
     certificate of incorporation.

          (l)  Insolvency.  Neither TFCRC nor TFC shall commence with respect to
               ----------
     TFCRC or the Issuer any case, proceeding or other action (A) under any
     existing or future law of any jurisdiction, domestic or foreign, relating
     to the bankruptcy, insolvency, reorganization or relief of debtors, seeking
     to have an order for relief entered with respect to it, or seeking
     reorganization, arrangement, adjustment, winding-up, liquidation,
     dissolution, corporation or other relief with respect to it or (B) seeking
     appointment of a receiver, trustee, custodian or other similar official for
     it or for all or any substantial part

                                       42
<PAGE>

     of its assets, or make a general assignment for the benefit of its
     creditors. Neither of TFCRC nor TFC shall take any action in furtherance
     of, or indicating the consent to, approval of, or acquiescence in any of
     the acts set forth above. TFCRC shall not admit in writing its inability to
     pay its debts.

          (m)  Tangible Net Worth of TFC.  TFC shall not permit its Tangible Net
               -------------------------
     Worth, at any time, to be less than the sum of (i) $30,000,000 plus (ii)
     50% of the net earnings (after taxes) of TFC for the period commencing on
     September 30, 1999 and ending at the end of TFC's then most recently
     concluded fiscal quarter (treated for this purpose as a single accounting
     period).  For purposes of this clause,  if net earnings of TFC for any
     period shall be less than zero, the amount calculated pursuant to clause
     (ii) above for such period shall be zero.

          (n)  No Change in Name, Etc.  (i) TFCRC shall not make any change to
               -----------------------
     its corporate name, or use any trade names, fictitious names, assumed names
     or "doing business as" names.  (ii) TFC shall not change its name
     (including using any trade names, fictitious names, assumed names or "doing
     business as" names),  identity or organizational structure in any manner
     that would, could or might make any financing statement or continuation
     statement filed in accordance with Section 4.01(d) above seriously
     misleading within the meaning of Section 9-402(7) of the UCC, unless it
     shall have given AGIC at least 60 days' prior written notice thereof and
     shall have filed before the date of such change appropriate amendments to
     all such previously filed financing statements or continuation statements.

          (o)  No Merger or Consolidation of, or Assumption of the Obligations
               ---------------------------------------------------------------
     of TFC. (x) TFC shall not merge or consolidate with any other person,
     ------
     convey, transfer or lease substantially all its assets as an entirety to
     another Person, or permit any other Person to become the successor to TFC's
     business unless, after the merger, consolidation, conveyance, transfer,
     lease or succession, the successor or surviving entity, there shall be no
     Material Adverse Change with respect to the ability of the surviving entity
     to fulfill its duties contained in this Insurance Agreement.  Any
     corporation (i) into which TFC may be merged or consolidated, (ii)
     resulting from any merger or consolidation to which TFC shall be a party,
     (iii) which acquires by conveyance, transfer, or lease substantially all of
     the assets of TFC, or (iv) succeeding to the business of TFC, in any of the
     foregoing cases shall execute an agreement of assumption to perform every
     obligation of TFC under this Insurance Agreement and, whether or not such
     assumption agreement is executed, shall be the successor to TFC under this
     Insurance Agreement without the execution or filing of any paper or any
     further act on the part of any of the parties to this Insurance Agreement,
     anything in this Insurance Agreement to the contrary notwithstanding;
     provided, however, that nothing contained herein shall be deemed to release
     --------  -------
     TFC from any obligation.  TFC shall provide notice of any merger,
     consolidation or succession pursuant to this Section 4.02(o) to the Issuer,
     the Trust Collateral Agent, the Noteholders, AGIC and the Rating Agency.
     Notwithstanding the foregoing, TFC shall not merge or consolidate with any
     other Person or permit any other Person to become a successor to TFC's
     business, unless (x) immediately after giving effect to such transaction,
     no representation or warranty made by TFC with respect to the business,
     operations or condition (financial or otherwise of TFC) pursuant to this
     Insurance

                                       43
<PAGE>

     Agreement (by way of avoidance of doubt, the representations and warranties
     referred to in this clause (x) shall exclude the representations and
     warranties made under Schedule B of the Purchase Agreement) shall have been
     breached (for purposes hereof, such representations and warranties shall
     speak as of the date of the consummation of such transaction) and no event
     that, after notice or lapse of time, or both, would become an Insurance
     Agreement Event of Default shall have occurred and be continuing, (y) TFC
     shall have delivered to the Issuer, the Trust Collateral Agent, the Rating
     Agency and AGIC an Officer's Certificate and an Opinion of Counsel each
     stating that such consolidation, merger or succession and such agreement of
     assumption comply with this Section 4.02(o) and that all conditions
     precedent, if any, provided for in this Insurance Agreement relating to
     such transaction have been complied with, and (z) TFC shall have delivered
     to the Issuer, the Trust Collateral Agent, the Rating Agency and AGIC an
     Opinion of Counsel, stating in the opinion of such counsel, either (A) all
     financing statements and continuation statements and amendments thereto
     have been executed and filed that are necessary to preserve and protect the
     interest of the Trust Collateral Agent in the Receivables and the Other
     Conveyed Property and reciting the details of the filings or (B) no such
     action shall be necessary to preserve and protect such interest.

     Section 4.03.  Affirmative Covenants of the Issuer.  The Issuer hereby
                    -----------------------------------
covenants and agrees that during the term of this Insurance Agreement:

          (a)  Compliance With Agreements and Applicable Laws.  The Issuer shall
               ----------------------------------------------
     perform each of its obligations under the Transaction Documents and shall
     comply with all material requirements of, and the Notes shall be offered
     and sold in accordance with, any law, rule, regulation or order applicable
     to it or thereto, or that are required in connection with its performance
     under any of the Transaction Documents. The Issuer will not cause or permit
     to become effective any amendment to or modification of any of the
     Transaction Documents to which it is a party unless the Controlling Party
     shall have previously approved in writing the substance of such amendment
     or modification.  The Issuer shall not take any action or fail to take any
     action that would interfere with the enforcement of any rights under the
     Transaction Documents.

          (b)  Certain Information.  The Issuer shall keep, or cause to be kept,
               -------------------
     in reasonable detail books and records of account of its assets and
     business, which shall be furnished to AGIC upon request. The Issuer shall
     furnish to AGIC, simultaneously with the delivery of such documents to the
     Trustee, the Noteholders or the Certificate holder, as the case may be,
     copies of all reports, certificates, statements, financial statements or
     notices furnished to the Trustee, the Noteholders or the Certificate
     holder, as the case may be, pursuant to the Transaction Documents.  In
     addition, the Issuer shall furnish to AGIC the following:

          (i)    Certain Information.  Not less than two weeks prior to the date
                 -------------------
                 of filing with the IRS of any tax return or amendment thereto,
                 copies of the proposed form of such return or amendment and,
                 promptly after the filing or sending thereof, (A) copies of
                 each tax return and amendment thereto that the Issuer files
                 with the IRS and (B) copies of all financial statements,
                 reports, and registration statements which the Issuer files
                 with, or delivers

                                       44
<PAGE>

                 to, any federal government agency, authority or body which
                 supervises the issuance of securities by the Issuer.

          (ii)   Other Information. Promptly upon the request of AGIC, copies of
                 -----------------
                 all schedules, financial statements or other similar reports
                 delivered to or by the Issuer pursuant to the terms of this
                 Insurance Agreement and the other Transaction Documents and
                 such other data as AGIC may reasonably request.

          (c)  Access to Records; Discussions with Officers.  The Issuer shall,
               --------------------------------------------
     upon the reasonable request of AGIC, permit AGIC or its authorized agent:

          (i)    to inspect such books and records of the Issuer as may relate
                 to the Notes, the Certificate, the Receivables and the other
                 Trust Property, the obligations of the Issuer under the
                 Transaction Documents, the business of the Issuer and the
                 transactions consummated in connection therewith; and

          (ii)   to discuss the affairs, finances and accounts of the Issuer
                 with an appropriate officer of the Issuer.

          Such inspections and discussions shall be conducted at such reasonable
     times and as often as may be reasonably requested.  In each case, such
     access shall be afforded without charge but only upon reasonable request
     and during normal business hours.

          (d)  Notice of Material Events.  The Issuer shall promptly inform AGIC
               -------------------------
     in writing of the occurrence of any of the following:

          (i)    the submission of any claim or the initiation of any legal
                 process, litigation or administrative or judicial investigation
                 against the Issuer in any federal, state or local court or
                 before any arbitration board, or any such proceeding threatened
                 by any governmental agency, which, if adversely determined,
                 would cause a Material Adverse Change to occur with respect to
                 the Receivables as a whole, or which, if adversely determined,
                 would cause a Material Adverse Change to occur with respect to
                 the ability of the Issuer to perform its obligations under any
                 Transaction Document;

          (ii)   any change in the location of the Issuer's principal office or
                 any. change in the location of the books and records of the
                 Issuer;

          (iii)  the occurrence of any Default or Trigger Event; or

          (iv)   any other event, circumstance or condition that has resulted,
                 or which is reasonably likely to result, in a Material Adverse
                 Change with respect to the Issuer.

          (e)  Further Assurances.  The Issuer will file all necessary financing
               ------------------
     statements, assignments or other instruments, and any amendments or
     continuation statements relating thereto, necessary to be kept and filed in
     such manner and in such places as may

                                       45
<PAGE>

     be required by law to preserve and protect fully the Lien on and security
     interest in, and all rights of the Trust Collateral Agent with respect to
     the Collateral under the Indenture. In addition, the Issuer shall, upon the
     request of AGIC, from time to time, execute, acknowledge and deliver, or
     cause to be executed, acknowledged and delivered, within thirty (30) days
     of such request, such amendments hereto and such further instruments and
     take such further action as may be reasonably necessary to effectuate the
     intention, performance and provisions of the Transaction Documents or to
     protect the interest of the Trust Collateral Agent in the Collateral under
     the Indenture. In addition, the Issuer agrees to cooperate with S&P in
     connection with any review of the Transaction which may be undertaken by
     S&P after the date hereof.

          (f)  Retirement of Notes.  The Issuer shall, upon retirement of the
               -------------------
     Notes, furnish to AGIC a notice of such retirement, and, upon such
     retirement and the expiration of the term of the Policy, surrender the
     Policy to AGIC for cancellation.

          (g)  Preservation of Existence.  The Issuer shall observe in all
               -------------------------
     material respects all procedures required by its Certificate and Trust
     Agreement and preserve and maintain its existence as a trust and its
     rights, franchises and privileges in the jurisdiction of its organization,
     and shall qualify and remain qualified in good standing in each
     jurisdiction where the nature of its business requires it to do so except
     where the failure to be so qualified, in good standing and to maintain its
     rights, franchises and privileges would not cause a Material Adverse Change
     to occur with respect to the financial condition of the Issuer, or its
     ability to perform its obligations under this Insurance Agreement or under
     any other Transaction Document to which it is party.

          (h)  Disclosure Document.  Each Offering Document with respect to the
               -------------------
     Notes shall include only information concerning AGIC that is supplied or
     consented to in writing by AGIC expressly for inclusion therein.   Each
     Offering Document delivered with respect to the Notes shall clearly
     disclose that the Policy is not covered by the property/casualty insurance
     security fund specified in Article 76 of the New York Insurance Law. In
     addition, each Offering Document delivered with respect to the Notes which
     includes financial statements of AGIC prepared in accordance with GAAP (but
     excluding any Offering Document in which such financial statements are
     incorporated by reference) shall include the following statement
     immediately preceding such financial statements:

                 The New York State Insurance Department
                 recognizes only statutory accounting
                 practices for determining and reporting the
                 financial condition and results of
                 operations of an insurance company, for
                 determining its solvency under the New York
                 Insurance Law, and for determining where
                 its financial condition warrants the
                 payment of a dividend to its stockholders.
                 No consideration is given by the New York
                 State Insurance Department to financial
                 statements prepared in accordance with

                                       46
<PAGE>

                 generally accepted accounting principles in
                 making such determinations.

          (i)  Special Purpose Entity.
               ----------------------

          (i)    The Issuer shall conduct its business solely in its own name
                 through its duly authorized officers or agents so as not to
                 mislead others as to the identity of the entity with which
                 those others are concerned, and particularly will use its best
                 efforts to avoid the appearance of conducting business on
                 behalf of the Parent, TFC, TFCRC or any other Affiliates
                 thereof or that the assets of the Issuer are available to pay
                 the creditors of the Parent, TFC, TFCRC or any other Affiliates
                 thereof. Without limiting the generality of the foregoing, all
                 oral and written communications, including, without limitation,
                 letters, invoices, purchase orders, contracts, statements and
                 loan applications, will be made solely in the name of the
                 Issuer.

          (ii)   The Issuer shall maintain trust records and books of account
                 separate from those of the Parent, TFC, TFCRC and Affiliates of
                 any of them.

          (iii)  The Issuer shall obtain proper authorization from its equity
                 owners of all trust action requiring such authorization, and
                 copies of each such authorization and the minutes or other
                 written summary of each such meeting shall be delivered to AGIC
                 within 30 days of such authorization or meeting as the case may
                 be.

          (iv)   Although the organizational expenses of the Issuer have been
                 paid by TFC, operating expenses and liabilities of the Issuer
                 shall be paid from its own funds.

          (v)    The annual financial statements of the Issuer shall disclose
                 the effects of the Issuer's transactions in accordance with
                 GAAP and shall disclose that the assets of the Issuer are not
                 available to pay creditors of the Parent, TFC, TFCRC or any
                 Affiliate of any of them.

          (vi)   The resolutions, agreements and other instruments of the Issuer
                 underlying the transactions described in this Insurance
                 Agreement and in the other Transaction Documents shall be
                 continuously maintained by the Issuer as official records of
                 the Issuer separately identified and held apart from the
                 records of the Parent, TFC, TFCRC and each Affiliate of any of
                 them.

          (vii)  The Issuer shall maintain an arm's-length relationship with the
                 Parent, TFC, TFCRC and each Affiliate of any of them and will
                 not hold itself out as being liable for the debts of any such
                 Person.

          (viii) The Issuer shall keep its assets and its liabilities wholly
                 separate from those of all other entities, including, but not
                 limited to the Parent, TFC,

                                      47
<PAGE>

                 TFCRC and each Affiliate of any of them except, in each case,
                 as contemplated by the Transaction Documents.

          (j)  Tax Matters.  The Issuer will take all actions reasonably
               -----------
     necessary to ensure that for federal and State income tax purposes the
     Issuer is not taxable as an association (or publicly traded partnership)
     taxable as a corporation.

          (k)  Securities Laws.  The Issuer shall comply in all material
               ---------------
     respects with all applicable provisions of State and federal securities
     laws, including blue sky laws and the Securities Act, the Securities
     Exchange Act and the Investment Company Act and all rules and regulations
     promulgated thereunder for which non-compliance would result in a Material
     Adverse Change with respect to the Issuer.

          (l)  Incorporation of Covenants.  The Issuer shall comply with each of
               --------------------------
     the Issuer's covenants set forth in the Transaction Documents and hereby
     incorporates such covenants by reference as if each were set forth herein.

          (m)  Reports.  The Issuer shall furnish to AGIC:
               -------

          (i)    Annual Financial Statements.  As soon as available, and in any
                 ---------------------------
                 event within 120 days after the close of each fiscal year, its
                 audited balance sheets as of the end of such fiscal year and
                 the audited statements of income, shareholders' equity and cash
                 flows for such fiscal year, all in reasonable detail and
                 stating in comparative form the respective figures for the
                 corresponding date and period in the preceding fiscal year,
                 prepared in accordance with GAAP, consistently applied, and
                 accompanied by the certificate of independent accountants
                 (which shall be a nationally recognized firm or otherwise
                 acceptable to AGIC) and certified by an authorized officer of
                 the Issuer as being complete and correct in all material
                 respects and present the financial condition and results of
                 operations of the Issuer as of the dates and for the periods
                 indicated, in accordance with GAAP consistently applied.

          (ii)   Quarterly Financial Statements. As soon as available, and in
                 ------------------------------
                 any event within 45 days after the close of the first three
                 quarters of each fiscal year of the Issuer, the unaudited
                 balance sheets of as of the end of each such quarter and the
                 unaudited statements of income and cash flows of the Issuer for
                 the portion of the fiscal year then ended, all in reasonable
                 detail and stating in comparative form the respective figures
                 for the corresponding date and period in the preceding fiscal
                 year, prepared in accordance with GAAP, consistently applied
                 (subject to normal year-end adjustments), and certified by an
                 authorized officer of the Issuer as being complete and correct
                 in all material respects and present the financial condition
                 and results of operations of the Issuer as of the dates and for
                 the periods indicated, in accordance with GAAP consistently
                 applied (subject as to interim statements to normal year-end
                 adjustments).

                                       48
<PAGE>

          (iii)  Other Information.  Promptly upon receipt thereof, copies of
                 -----------------
                 all reports, statements, certifications, schedules, or other
                 similar items delivered to or by the Issuer pursuant to the
                 terms of the Transaction Documents and, promptly upon request,
                 such other data as AGIC may reasonably request. The fees and
                 expenses of AGIC or any such authorized agents shall be for the
                 account of the Issuer. The books and records of the Issuer will
                 be maintained at the address for it designated herein for
                 receipt of notices or at the Servicer, unless it shall
                 otherwise advise the parties hereto in writing.

     Section 4.04.  Negative Covenants on Behalf of the Issuer.  TFCRC as
                    ------------------------------------------
depositor under the Trust Agreement, on behalf of the Issuer, hereby covenants
and agrees, that during the term of this Insurance Agreement, unless AGIC shall
otherwise expressly consent in writing:

          (a)  Restrictions on Liens.  The Issuer shall not, except as
               ---------------------
     contemplated by the Transaction Documents, (i) create, incur or suffer to
     exist, or agree to create, incur or suffer to exist, or consent to cause or
     permit in the future (upon the happening of a contingency or otherwise) the
     creation, incurrence or existence of any Lien or Restriction on
     Transferability of the Receivables, or (ii) sign or file under the Uniform
     Commercial Code of any jurisdiction any financing statement which names the
     Issuer as a debtor, or sign any security agreement authorizing any secured
     party thereunder to file such financing statement, with respect to the
     Receivables.

          (b)  Impairment of Rights.  The Issuer shall not take any action, or
               --------------------
     fail to take any action, if such action or failure to take action would be
     reasonably likely to (i) interfere with the enforcement of any rights under
     the Transaction Documents that are material to the rights, benefits or
     obligations of the Trustee, the Certificate holder, the Noteholders or
     AGIC, (ii) result in a Material Adverse Change with respect to the
     Receivables, or (iii) impair the ability of the Issuer to perform its
     obligations under the Transaction Documents.

          (c)  Waiver, Amendments. Etc.  The Issuer shall not waive, modify or
               ------------------------
     amend, or consent to any waiver, modification or amendment of, any of the
     provisions of any of the Transaction Documents.

          (d)  Successors.  The Issuer shall not terminate or designate, or
               ----------
     consent to the termination or designation of, the Servicer, Back-up
     Servicer, the Trustee, the Trust Collateral Agent, the Owner Trustee or any
     successor thereto.

          (e)  Creation of Indebtedness; Guarantees.  Other than the Transaction
               ------------------------------------
     Documents, the Issuer shall not create, incur, assume or suffer to exist
     any Indebtedness other than Indebtedness guaranteed or approved in writing
     by AGIC.  The Trustee shall not assume, guarantee, endorse or otherwise be
     or become directly or contingently liable for the obligations of any Person
     by, among other things, agreeing to purchase any obligation of another
     Person, agreeing to advance funds to such Person or causing or assisting
     such Person to maintain any amount of capital.

                                       49
<PAGE>

          (f)  Subsidiaries.  The Issuer shall not form, or cause to be formed,
               ------------
     any Subsidiaries.

          (g)  No Mergers.  The Issuer shall not consolidate with or merge into
               ----------
     any Person or transfer all or any material amount of its assets to any
     Person, liquidate or dissolve except as permitted by the Trust Agreement
     and as contemplated by the Transaction Documents.

          (h)  Other Activities. The Issuer shall not:
               ----------------

          (i)    sell, pledge, transfer, exchange or otherwise dispose of any of
                     its assets except as permitted under the Transaction
                     Documents; or

          (ii)   engage in any business or activity except as contemplated by
                     the Transaction Documents and as permitted by the Trust
                     Agreement.

          (i)  Insolvency.  The Issuer shall not commence any case, proceeding
               ----------
     or other action (A) under any existing or future law of any jurisdiction,
     domestic or foreign, relating to the bankruptcy, insolvency, reorganization
     or relief of debtors, seeking to have an order for relief entered with
     respect to it, or seeking reorganization, arrangement, adjustment, winding-
     up, liquidation, dissolution, corporation or other relief or (B) seeking
     appointment of a receiver, trustee, custodian or other similar official for
     it or for all or any substantial part of its assets or make a general
     assignment for the benefit of its creditors. The Issuer shall not take any
     action in furtherance of, or indicating the consent to, approval of, or
     acquiescence in, any of the acts set forth above. The Issuer shall not
     admit in writing its inability to pay its debts.

                                   ARTICLE V

                              FURTHER AGREEMENTS

     Section 5.01.  Obligations Absolute.  The obligations of the Issuer, TFCRC
                    --------------------
and TFC pursuant to this Insurance Agreement are absolute and unconditional and
will be paid or performed strictly in accordance with the respective terms
hereof, irrespective of:

          (a)  any lack of validity or enforceability of, or any amendment or
     other modifications of, or waiver with respect to, the Indenture, the
     Policy or the Indemnification Agreement;

          (b)  any amendment or waiver of, or consent to departure from the
     Indenture, the Policy or the Indemnification Agreement;

          (c)  the existence of any claim, set off, defense or other rights it
     may have at any time against the Trustee, the Trust Collateral Agent, any
     beneficiary or any transferee of the Policy (or any persons or entities for
     whom the Trustee, the Trust Collateral Agent, any such beneficiary or any
     such transferee may be acting), AGIC or any other person or

                                       50
<PAGE>

     entity whether in connection with the Policy, the Transaction Documents or
     any unrelated transactions;

          (d)  any statement or any other document presented under the Policy
     (including any Notice for Payment) proving to be forged, fraudulent,
     invalid or insufficient in any respect or any statement therein being
     untrue or inaccurate in any respect whatsoever;

          (e)  the inaccuracy or alleged inaccuracy of any Monthly Servicer
     Report or Notice for Payment upon which any drawing under the Policy is
     based;

          (f)  payment by AGIC under the Policy against presentation of a draft
     or certificate which does not comply with the terms of the relevant Policy;

          (g)  the bankruptcy or insolvency of AGIC, the Issuer, any other party
     or the Trust Property;

          (h)  any default or alleged default of AGIC under the Policy (other
     than any payment default by AGIC under the Policy);

          (i)  any defense based upon the failure of the Issuer or the Trust
     Property to receive all or part of the proceeds of the sale of the Notes or
     of the Servicer to receive any or all of the servicing fee or other
     compensation required under the Indenture or otherwise, or any
     nonapplication or misapplication of the proceeds of any drawing upon the
     Policy; and

          (j)  any other circumstance or happening whatsoever which would
     otherwise constitute a defense to the obligations of the Issuer, TFCRC or
     TFC hereunder.

     Section 5.02.  Reinsurance.  AGIC shall have the right to grant
                    -----------
participations in its rights under this Insurance Agreement and to enter into
contracts of reinsurance with respect to the Policy, provided that AGIC agrees
                                                     --------
that any such disposition will not alter or affect in any way whatsoever AGIC's
direct obligations hereunder and under the Policy, and provided further that any
                                                       -------- -------
reinsurer or participant will not have any rights against the Trust Property,
the Issuer, the Servicer, TFC, any Noteholders, or the Trustee and that the
Trust Property, the Issuer, the Servicer, TFC, the Noteholders, or the Trustee
shall have no obligation to have any communication or relationship whatsoever
with any reinsurer or participate in order to enforce the obligations of AGIC
hereunder and under the Policy.  None of the Issuer, the Servicer or TFC may
assign its obligations under this Insurance Agreement without the prior written
consent of AGIC, such consent not to be unreasonably withheld.

     Section 5.03.  Liability of AGIC.  Each of the Issuer, the Servicer, TFCRC,
                    -----------------
the Parent and TFC agree that neither AGIC, nor any of its officers, directors
or employees shall be liable or responsible for (except to the extent of its own
gross negligence or willful misconduct): (a) the use which may be made of the
Policy by or for any acts or omissions of another Person in connection therewith
or (b) the validity, sufficiency, accuracy or genuineness of any documents
delivered to AGIC, or of any endorsement(s) thereon, even if such documents
should in fact prove to be in any or all respects invalid, insufficient,
fraudulent or forged.  In furtherance and

                                       51
<PAGE>

not in limitation of the foregoing, AGIC may accept documents that appear on
their face to be in order, without responsibility for further investigation.

     Section 5.04.  [Reserved].

     Section 5.05.  Fees and Expenses.  (a) The Issuer agrees to pay all
                    -----------------
reasonable costs and expenses (including, without limitation, reasonable fees
and expenses of legal counsel and  accountants) incurred by AGIC in connection
with the negotiation, preparation, execution and delivery of the Private
Placement Memorandum, the Transaction Documents and all other documents,
instruments and agreements delivered with respect thereto, and all Rating Agency
fees incurred by AGIC in connection with the initial issuance of the Notes, in
all cases in accordance with the terms of, and subject to the limitations set
forth in, the Premium Letter.  AGIC's attorney's fees and expenses incurred in
connection with the negotiation, preparation, execution and delivery of the
Private Placement Memorandum, the Transaction Documents and all other documents,
instruments and agreements delivered with respect thereto shall be payable (i)
on the Closing Date upon the presentation of an invoice for any such fees, costs
and expenses and (ii) at any time thereafter, promptly upon presentation of an
invoice for any such fees, costs and expenses.

          (b)  TFC agrees to pay all reasonable costs and expenses (including,
     without limitation, reasonable fees and expenses of legal counsel and
     accountants) incurred by AGIC in connection with the amendment,
     modification, waiver or any similar action whether or not executed or
     completed and/or the enforcement, defense or preservation of any rights,
     including but not limited to defending, monitoring or participating in any
     litigation or proceeding (including any insolvency or bankruptcy
     proceeding) against the Issuer, the Servicer, the Parent, TFCRC or TFC, as
     the case may be, of AGIC's rights against any of them under this Insurance
     Agreement, the Policy, the Indenture, the Indemnification Agreement or any
     of the other Transaction Documents.

          (c)  TFC agrees to pay AGIC for any payments made by AGIC on behalf
     of, or advanced to, TFC, in its capacity as Servicer, or the Trustee,
     including, without limitation, any amounts payable by TFC, in its capacity
     as Servicer, or the Trustee pursuant to the Notes or any other Transaction
     Documents; and any payments made by AGIC as, or in lieu of, any servicing,
     management, trustee, custodial or administrative fees payable, in the sole
     discretion of AGIC to third parties in connection with the Transaction.

     Section 5.06.  Certain Obligations Not Recourse to TFC.  Notwithstanding
                    ---------------------------------------
any provision of Section 2.04 to the contrary, the payment obligations provided
in Section 5.05(b) and 5.05(c) (to the extent of advances to the Trustee in
respect of payments on the Notes), in each case, to the extent that such payment
obligations do not arise from any failure or default in performance by the
Parent, TFC, TFCRC, the Issuer of any of its obligations under the Transaction
Documents, and any interest on the foregoing in accordance with Section 2.04,
shall not be recourse to TFC, but shall be payable in the manner and in
accordance with priorities provided in the Sale and Servicing Agreement.

                                       52
<PAGE>

                                  ARTICLE VI

                          EVENTS OF DEFAULT; REMEDIES

     Section 6.01.  Insurance Agreement Events of Default.  The occurrence of
                    -------------------------------------
any of the following events shall constitute an Event of Default hereunder:

          (a)  any demand for payment shall be made under the Policy;

          (b)  (i) any representation or warranty made by any of the Issuer, the
     Parent, TFC, the Servicer, TFCRC or the Seller under any of the Basic
     Documents, or in any certificate or report furnished under any of the Basic
     Documents, shall prove to have been untrue or incorrect in any material
     respect when made; provided, however,  if such default has not been
                        --------  -------
     committed voluntarily and is capable of being cured, it shall be deemed a
     default hereunder only if it shall continue or fail to be cured, or the
     circumstance or condition in respect of which such misrepresentation or
     warranty was incorrect shall not have been eliminated or otherwise cured,
     for a period of 30 days after such Person shall have been given a written
     notice by AGIC, the Trustee or the Trust Collateral Agent specifying such
     default or incorrect representation or warranty and requiring it to be
     remedied; or

          (ii) any covenant made by any of the Issuer, the Parent, TFC, the
          Servicer, TFCRC or the Seller under any of the Basic Documents, shall
          be breached in any material respect;  provided, however, if such
                                                --------  -------
          breach in the observance or performance of such covenant has not been
          committed voluntarily and is capable of being cured, it shall be
          deemed a default hereunder only if it shall continue or fail to be
          cured, or the circumstance or condition in respect of which such
          covenant was breached shall not have been eliminated or otherwise
          cured, for a period of 30 days after such Person shall have been given
          a written notice by AGIC, the Trustee or the Trust Collateral Agent
          specifying such breach and requiring it to be remedied;

          (c)  the Cumulative Net Loss Rate for any Determination Date occurring
     during a period set forth below shall be greater than the percentage set
     forth opposite such period:

          Period                                       Maximum Percentage
          ------                                       ------------------

     from the Initial Cut-Off Date to the third              2.00%
     Monthly Period to occur after the
     Initial Cut-Off Date

     from the fourth Monthly Period to                       6.50%
     occur after the Initial Cut-Off Date to the
     sixth Monthly Period to occur after
     the Initial Cut-Off Date

     from the seventh Monthly Period                        15.40%
     to occur after the Initial Cut-Off Date to

                                       53
<PAGE>

     the ninth Monthly Period after the
     Initial Cut-Off Date
     from the tenth Monthly Period to                       24.00%
     occur after the Initial Cut-Off Date to
     the 12th Monthly Period to occur
     after the Initial Cut-Off Date
     from the 13th Monthly Period to                        24.50%
     occur after the Initial Cut-Off Date to
     the 15th Monthly Period to occur
     after the Initial Cut-Off Date
     from the 16th Monthly Period to                        25.00%
     occur after the Initial Cut-Off Date to
     the 18th Monthly Period to occur
     after the Initial Cut-Off Date

     from the 19th Month Period to                          26.00%
     occur after the Initial Cut-Off Date to
     the 21st Monthly Period to occur
     after the Initial Cut-Off Date

     from the 22nd Monthly Period to                        27.30%
     occur after the Initial Cut-Off Date to
     the 24th Monthly Period to occur
     after the Initial Cut-Off Date

     from the 25th Monthly Period to                        28.60%
     occur after the Initial Cut-Off Date to
     the 27th Monthly Period to occur
     after the Initial Cut-Off Date

     from the 28th Monthly Period to                        30.00%
     occur after the Initial Cut-Off Date
     and at any time thereafter;


          (d)  [Reserved];

          (e)  any of the Issuer, TFC or TFCRC shall fail to pay its debts
     generally as they come due, or shall admit in writing its inability to pay
     its debts generally, or shall make a general assignment for the benefit of
     creditors, or shall institute any proceeding seeking to adjudicate it
     insolvent or seeking a liquidation, or shall take advantage of any
     insolvency act, or shall commence a case or other proceeding naming it as
     debtor under the United States Bankruptcy Code or similar law, domestic or
     foreign, or a case or other proceeding shall be commenced against any of
     the Issuer, TFC or TFCRC under the United States Bankruptcy Code or similar
     law, domestic or foreign, or any proceeding shall be instituted against any
     of the Issuer, TFC or TFCRC seeking liquidation of their respective assets;
     and such Person shall fail to take appropriate action resulting in the

                                       54
<PAGE>

     withdrawal or dismissal of such proceeding within 60 days or there shall be
     appointed or any of the Issuer, TFC or TFCRC shall consent to, or acquiesce
     in, the appointment of a receiver, liquidator, conservator, trustee or
     similar official in respect of such Person or the whole or any substantial
     part of its respective properties or assets or such Person shall take any
     corporate action in furtherance of any of the foregoing;

          (f)  on any Payment Date, after taking into account the application in
     accordance with Section 5.7(a) of the Sale and Servicing Agreement on the
     related Payment Date of the sum of Amount Available with respect to such
     related Payment Date and the amounts available in the Spread Account (prior
     to withdrawals therefrom in accordance with the terms of the Spread Account
     under the Sale and Servicing Agreement) any amounts payable on such related
     Payment Date pursuant to clauses (i), (ii), (iii) or (v) of Section 5.7(a)
     of the Sale and Servicing Agreement have not been paid in full;

          (g)  with respect to any Determination Date occurring during a period
     set forth below, the arithmetic average of the Delinquency Ratios for such
     Determination Date and the two immediately preceding Determination Dates
     shall be greater than the percentage set forth below opposite the period
     during which such Determination Date occurs:

          Period                                     Maximum Percentage
          ------                                     ------------------

     from the Initial Cut-Off Date to the 12th              20.00%
     Monthly Period to occur after the
     Initial Cut-Off Date

     from the 13th Monthly Period to                        23.00%
     occur after the Initial Cut-Off Date to the
     18th Monthly Period to occur after
     the Initial Cut-Off Date

     from the 19th Monthly Period to occur                  28.00%
     after the Initial Cut-Off Date and at any time
     thereafter;

          (h)  the Cumulative Net Loss Rate for any Determination Date occurring
     during a period set forth below shall be greater than the percentage set
     forth opposite such period:

          Period                                     Maximum Percentage
          ------                                     ------------------

     from the Initial Cut-Off Date to the third              1.60%
     Monthly Period to occur after the
     Initial Cut-Off Date

     from the fourth Monthly Period to                       5.50%
     occur after the Initial Cut-Off Date to the
     sixth Monthly Period to occur after
     the Initial Cut-Off Date

                                      55
<PAGE>

     from the seventh Monthly Period                        12.90%
     to occur after the Initial Cut-Off Date to
     the ninth Monthly Period after the
     Initial Cut-Off Date
     from the tenth Monthly Period to                       20.00%
     occur after the Initial Cut-Off Date to
     the 12th Monthly Period to occur
     after the Initial Cut-Off Date
     from the 13th Monthly Period to                        20.30%
     occur after the Initial Cut-Off Date to
     the 15th Monthly Period to occur
     after the Initial Cut-Off Date
     from the 16th Monthly Period to                        20.80%
     occur after the Initial Cut-Off Date to
     the 18th Monthly Period to occur
     after the Initial Cut-Off Date

     from the 19th Month Period to                          21.80%
     occur after the Initial Cut-Off Date to
     the 21st Monthly Period to occur
     after the Initial Cut-Off Date

     from the 22nd Monthly Period to                        22.80%
     occur after the Initial Cut-Off Date to
     the 24th Monthly Period to occur
     after the Initial Cut-Off Date

     from the 25th Monthly Period to                        23.80%
     occur after the Initial Cut-Off Date to
     the 27th Monthly Period to occur
     after the Initial Cut-Off Date

     from the 28th Monthly Period to                        24.90%
     occur after the Initial Cut-Off Date
     and at any time thereafter;

          (i)  the occurrence of a Servicer Termination Event;

          (j)  TFC shall fail to pay any principal, premium or interest on any
     Indebtedness having an aggregate principal amount of $1,000,000 or greater,
     when the same becomes due and payable (whether by scheduled maturity,
     required prepayment, acceleration, demand or otherwise) and such failure
     shall continue uncured and unwaived after the applicable grace period, if
     any, specified in the agreement or instrument relating to such
     Indebtedness; or any other default under any agreement or instrument
     relating to any such Indebtedness of either of TFC or any other similar
     event, shall occur and shall continue uncured and unwaived after the
     applicable grace period, if any, specified in such agreement or instrument
     if the effect of such failure to pay, other default or other event is

                                       56
<PAGE>

     to accelerate, or permit the acceleration of, the maturity of such
     Indebtedness; or any such Indebtedness shall be declared to be due and
     payable or required to be prepaid (other than by a regulatory scheduled
     required prepayment) prior to the stated maturity thereof;

          (k)  the occurrence of any Event of Default under the Indenture; and
     not cured within the applicable grace period, if any.

          (l)  the Trust Collateral Agent shall fail to have a perfected, first
     priority security interest in the Trust Property; or

          (m)  the Issuer becomes taxable as an association (or publicly traded
     partnership) taxable as a corporation for federal or state income tax
     purposes.

     Section 6.02. Remedies: Waivers.
                   -----------------

          (a)   Upon the occurrence of an Insurance Agreement Event of Default,
     AGIC may exercise any one or more of the rights and remedies set forth
     below:

          (i)   declare all or a portion of the Premium that has accrued or will
                accrue payable, and the same shall thereupon (A) be immediately
                due and payable to the extent then accrued and (B) become
                immediately due and payable upon accrual to the extent accruing
                thereafter, whether or not AGIC shall have declared an "Event of
                Default" or shall have exercised, or be entitled to exercise,
                any other rights or remedies hereunder;

          (ii)  exercise any rights and remedies available under the Basic
Documents in its own capacity or in its capacity as the Person entitled to
exercise the rights of the Controlling Party under the Basic Documents,
including, without limitation, its right to accelerate the Notes, to sell the
Receivables, or to terminate TFC and to appoint a substitute Servicer; or

          (iii) take whatever action at law or in equity may appear necessary
                or desirable in its judgment to enforce performance of any
                obligation of the Issuer, The Parent, TFC or TFCRC under the
                Basic Documents.

          (b)   Unless otherwise expressly provided, no remedy herein conferred
     upon or reserved is intended to be exclusive of any other available remedy,
     but each remedy shall be cumulative and shall be in addition to other
     remedies given under the Basic Documents or existing at law or in equity.
     No delay or failure to exercise any right or power accruing under any
     Transaction Document upon the occurrence of any Event of Default or
     otherwise shall impair any such right or power or shall be construed to be
     a waiver thereof, but any such right and power may be exercised from time
     to time and as often as may be deemed expedient. In order to entitle AGIC
     to exercise any remedy reserved to AGIC in this Article, it shall not be
     necessary to give any notice, other than such notice as may be expressly
     required in this Article.

          (c)   If any proceeding has been commenced to enforce any right or
     remedy under this Insurance Agreement and such proceeding has been
     discontinued or abandoned for

                                       57
<PAGE>

     any reason, or has been determined adversely to AGIC, then and in every
     such case the parties hereto shall, subject to any determination in such
     proceeding, be restored to their respective former positions hereunder,
     and, thereafter, all rights and remedies of AGIC shall continue as though
     no such proceeding had been instituted.

          (d)  AGIC shall have the right, to be exercised in its complete
     discretion, to waive any covenant, Default or Insurance Agreement Event of
     Default or collection of Premium by a writing setting forth the terms,
     conditions and extent of such waiver signed by AGIC and delivered to the
     Issuer, the Parent, TFC or TFCRC, as the case may be.  Any such waiver may
     only be effected in writing duly executed by AGIC, and no other course of
     conduct shall constitute a waiver of any provision hereof.  Unless such
     writing expressly provides to the contrary, any waiver so granted shall
     extend only to the specific event or occurrence so waived and not to any
     other similar event or occurrence.

                                  ARTICLE VII

                           MISCELLANEOUS PROVISIONS

     Section 7.01.  Amendments, Etc.  No amendment or waiver of any provision of
                    ----------------
this Insurance Agreement, nor consent to any departure therefrom, shall in any
event be effective unless in writing and signed by all of the parties hereto,
with written notice thereof to the Rating Agency in the case of any material
amendment or waiver; provided that any waiver so granted shall extend only to
the specific event of occurrence so waived and not to any other similar event or
occurrence which occurs subsequent to the date of such waiver.

     Section 7.02.  Notices.  Except to the extent otherwise expressly provided
                    -------
herein, all notices, requests and demands to or upon the respective parties
hereto to be effective shall be in writing (and if sent by mail, certified or
registered, return receipt requested) or facsimile transmission and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when delivered by hand, or three (3) Business Days after being deposited in
the mail, postage prepaid, or, in the case of facsimile transmission, when sent,
addressed as follows or to such other address or facsimile number as set forth
in a written notice delivered by a party to each other party hereto:

     If to TFC, the Parent or the Servicer:
     -------------------------------------

     The Finance Company
     5425 Robin Hood Road, Suite 101A
     Norfolk, Virginia 23513
     Attention: Chief Financial Officer
     Telephone: (757) 858-1400
     Facsimile: (757) 858-4093

     With a copy to:

     John M. Paris, Jr.

                                       58
<PAGE>

     Williams, Mullen, Clark, Dobbins P.C.
     900 One Columbus Center,
     Virginia Beach, Virginia 23462
     Attention:
     Telephone:  (757) 473-5308
     Facsimile:  (757) 473-0395

     If to TFCRC:
     -----------

     c/o The Finance Company
     5425 Robin Hood Road, Suite 101B
     Norfolk, Virginia 23513]
     Attention:  Chief Financial Officer
     Telephone: (___) ________
     Facsimile: (___) ________

     If to the Issuer:
     ----------------

     TFC Automobile Receivables Trust 1999-1
     c/o Wilmington Trust Company
     Rodney Square North
     1100 North Market Street
     Wilmington, Delaware  19890-0001
     Attention:  Corporate Trust Administration
     Telephone:  (302) 651-1000
     Facsimile:  (302) 651-8882

     If to AGIC:
     ----------

     Asset Guaranty Insurance Company
     335 Madison Avenue
     New York, NY 10017-4605
     Attention: Chief Risk Officer
     Telephone: (212) 983-5859
     Facsimile: (212) 682-5377

     If to the Back-up Servicer:
     --------------------------

     Norwest Bank Minnesota, National Association
     Sixth Street and Marquette Avenue,
     Minneapolis, Minnesota 55479
     MAC N9311-161
     Attention: Corporate Trust Services/Asset-Backed Administration
     Telephone: (612) 667-8058
     Facsimile: (612) 667-3464

                                       59
<PAGE>

     Section 7.03.  No Waiver; Remedies and Severability.  No failure on the
                    ------------------------------------
part of AGIC to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law. The parties further agree that the holding by any
court of competent jurisdiction that any remedy pursued by AGIC hereunder is
unavailable or unenforceable shall not affect in any way the ability of AGIC to
pursue any other remedy available to it. In the event any provision of this
Insurance Agreement shall be held invalid or unenforceable by any court of
competent jurisdiction, the parties hereto agree that such holding shall not
invalidate or render unenforceable any other provision hereof.

     Section 7.04.  Payments.  (a)  All payments to AGIC hereunder shall be made
                    --------
in lawful currency of the United States and in immediately available funds and
except for payments required to be made pursuant to Section 2.04 hereof, shall
be made prior to 2:00 p.m. (New York City time) on the date such payment is due
by wire transfer to:

                    Chase Manhattan Bank
                    ABA#: 021-000-021
                    Account #: 9102738722
                    Credit: Asset Guaranty Insurance Company
                    Reference: TFC: AGI Insurance Policy # FANI-0404-99337-NY

or to such other office or account as AGIC may direct. Payments received by AGIC
after 2:00 p.m. (New York City time) shall be deemed to have been received on
the next succeeding Business Day, and such extension of time shall be included
in computing interest, commissions or fees, if any, in connection with such
payment.

          (b)  Whenever any payment under this Insurance Agreement shall be
     stated to be due on a day which is not a Business Day, such payment shall
     be made on the next succeeding Business Day, and such extension of time
     shall in such cases be included in computing interest, commissions or fees,
     if any, in connection with such payment.

          (c)  Unless otherwise specified herein, AGIC shall be entitled to
     interest on all amounts owed to AGIC under this Insurance Agreement,
     together with interest on any and all amounts remaining unpaid (to the
     extent permitted by law, if in respect of any unpaid amounts representing
     interest) from the date such amounts become due until paid in full (after
     as well as before judgment), at a rate of interest equal to the Prime Rate
     from time to time in effect plus 2.0%.

     SECTION 7.05.  GOVERNING LAW AND JURY TRIAL WAIVER.  THIS INSURANCE
                    -----------------------------------
AGREEMENT SHALL BE CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY
JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INSURANCE
AGREEMENT, THE POLICY OR ANY TRANSACTION CONTEMPLATED HEREBY, THEREBY OR BY THE
INDENTURE AND FOR ANY COUNTERCLAIM THEREIN.

                                       60
<PAGE>

     Section 7.06.  Counterparts.  This Insurance Agreement may be executed in
                    ------------
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.

     Section 7.07.  Paragraph Headings, Etc.  The headings of paragraphs
                    ------------------------
contained in this Insurance Agreement are provided for convenience only.  They
form in no part of this Insurance Agreement and shall not affect its
construction or interpretation.

     Section 7.08.  No Petition.  Each of the parties hereto agrees that it will
                    -----------
not institute against, or join any other Person in instituting against, the
Issuer or the Trust Property any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal or
state bankruptcy or similar law, for one year and one day after satisfaction of
all of the Issuer's payment obligations under the Notes, the Premium Letter and
the Reimbursement Obligations. The provisions of this Section 7.08 shall survive
the termination of this Insurance Agreement.

      Section 7.09.  Limitation of Owner Trustee Liability.  It is expressly
                     -------------------------------------
understood and agreed by the parties hereto that (a) this Insurance Agreement is
executed and delivered by Wilmington Trust Company, not individually or
personally but solely as Owner Trustee of the Issuer under the Trust Agreement,
in the exercise of the powers and authority conferred and vested in it, (b) each
of the representations, undertakings and agreements herein made on the part of
the Issuer is made and intended not as personal representations, undertakings
and agreements by Wilmington Trust Company but is made and intended for the
purpose for binding only the Issuer, (c) nothing herein contained shall be
construed as creating any liability on Wilmington Trust Company individually or
personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties to
this Insurance Agreement and by any person claiming by, through or under them
and (d) under no circumstances shall Wilmington Trust Company be personally
liable for the payment of any indebtedness or expenses of the Issuer or be
liable for the breach or failure of any obligation, representation, warranty or
covenant made or undertaking by the Issuer under this Insurance Agreement or any
related documents.


                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       61
<PAGE>

                                          [Insurance Agreement - signature page]

     IN WITNESS WHEREOF, the parties hereto have executed this Insurance
Agreement, all as of the day and year first above mentioned.

          ASSET GUARANTY INSURANCE COMPANY


          By: ________________________________
          Name:  Kim Nance-Meier
          Title: Vice President


          TFC RECEIVABLES CORPORATION 2


          By: ________________________________
          Name:
          Title:


          THE FINANCE COMPANY,
          individually and as Servicer


          By: ________________________________
          Name:
          Title:

                                       62
<PAGE>

                                          [Insurance Agreement - signature page]

          NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, not in its individual
          capacity, but solely as Trust Collateral Agent, Trustee and as Back-up
          Servicer

          By: ________________________________
          Name:
          Title:

          TFC AUTOMOBILE RECEIVABLES TRUST 1999-1

          By:  WILMINGTON TRUST COMPANY,
               not in its individual capacity but solely as Owner Trustee


               By: ________________________________
               Name:
               Title:

                                       63
<PAGE>

                                  SCHEDULE 1

          The following table is based, in part, on The Finance Company's memo
entitled "Aged Trial Balance Report Modifications for Non-Monthly Accounts MIS
Project #2367", dated March 5, 1998.

          1.   Pursuant to (i) the Sale and Servicing Agreement dated as of
December 1, 1999 (the "Sale and Servicing Agreement") among TFC Automobile
Receivables Trust 1999-1 as issuer (the "Issuer"), TFC Receivables Corporation 2
as seller ("TFCRC"), Norwest Bank Minnesota, National Association (individually
"Norwest") as trust collateral agent, backup servicer and P.O. Box owner, The
Finance Company as servicer (the "Servicer"), and Asset Guaranty Insurance
Company as insurer ("AGIC"); (ii) the Insurance and Reimbursement Agreement
dated as of December 1, 1999 (the "Insurance Agreement") among AGIC, the Issuer,
TFCRC, the Servicer and Norwest as trustee, trust collateral agent and back-up
servicer; (iii) the other Basic Documents (as defined under the Sale and
Servicing Agreement); and (iv) the transactions contemplated by the agreements
listed in clauses (i) through (iii) above, the following table shall be used to
define delinquency categories for contracts with monthly Scheduled Payments
("Monthly-Pay Contracts") and contracts with more frequent Scheduled Payments
("Non-monthly-Pay Contracts"):

Monthly-Pay Contracts*       Non-Monthly-Pay Contracts**        Delinquency
(# Months Delinquent)            (# Weeks Delinquent)            Category
------------------------------------------------------------------------------

           0                           0-5                        Current
           1                           6-9                        30
           2                           10-13                      60
           3                           14-17                      90
           4                           18-21                      120
           5                           22-25                      150
           6                           26+                        180+


          2.   In accordance with The Finance Company's customary policy, in
assigning a delinquency category to any contract, a single partial payment of at
least 51% of a Scheduled Payment (a "One-Time Partial Payment") shall prevent
either the characterization of such contract as being in the 30 Delinquency
Category or, in the case of a contract which is in a more advanced Delinquency
Category at the time of the receipt of such One-Time Partial Payment,
progression of the contract to the next higher Delinquency Category.

                                                                       EXHIBIT A



__________________________
*Monthly-Pay contracts (e.g., "Monthly Accounts").

**Non-monthly-Pay contracts (e.g., "Weekly Accounts," "Bi-Weekly Accounts," and
"Semi-Monthly Accounts").

                                       64
<PAGE>

                  FORM OF FINANCIAL GUARANTY INSURANCE POLICY

                                  [Attached]

                                       65
<PAGE>

                                                                       EXHIBIT B

                               CLOSING CHECKLIST

                                  [Attached]

                                       66