exv10w2



 





EXHIBIT 10.2




INSURANCE AND INDEMNITY AGREEMENT

Dated as of May 30, 2007




FINANCIAL SECURITY ASSURANCE INC.,

as Insurer,




TRIAD AUTOMOBILE RECEIVABLES TRUST 2007-A,

as Issuer,




TRIAD FINANCIAL CORPORATION,

as Seller and Servicer,




TRIAD FINANCIAL SPECIAL PURPOSE LLC,

as Depositor,




and




CITIBANK, N.A.

as Indenture Trustee




Triad Automobile Receivables Trust 2007-A

Class A Asset Backed Notes




 









 





TABLE OF CONTENTS




	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 
	 	ARTICLE I	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	DEFINITIONS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 1.1
	 	Defined Terms	 	 	1	 
	Section 1.2
	 	Other Definitional Provisions	 	 	9	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE II	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	REPRESENTATIONS, WARRANTIES AND COVENANTS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 2.1
	 	Representations and Warranties of the Seller and Servicer	 	 	10	 
	Section 2.2
	 	Affirmative Covenants of Seller and Servicer	 	 	10	 
	Section 2.3
	 	Negative Covenants of the Seller and Servicer	 	 	14	 
	Section 2.4
	 	Representations and Warranties of the Insurer	 	 	15	 
	Section 2.5
	 	Representations and Warranties of the Depositor and the Issuer	 	 	16	 
	Section 2.6
	 	Affirmative Covenants of the Depositor and the Issuer	 	 	17	 
	Section 2.7
	 	Negative Covenants of the Depositor and the Issuer	 	 	20	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE III	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	THE POLICIES; REIMBURSEMENT	 	 	 	 
	 
	 	 	 	 	 	 
	Section 3.1
	 	Issuance of the Policies	 	 	22	 
	Section 3.2
	 	Payment of Fees and Premium	 	 	23	 
	Section 3.3
	 	Reimbursement Obligation	 	 	24	 
	Section 3.4
	 	Indemnification	 	 	25	 
	Section 3.5
	 	Payment Procedure	 	 	28	 
	Section 3.6
	 	Subrogation	 	 	28	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE IV	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	FURTHER AGREEMENTS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 4.1
	 	Effective Date; Term of the Insurance Agreement	 	 	29	 
	Section 4.2
	 	Further Assurances and Corrective Instruments	 	 	29	 
	Section 4.3
	 	Obligations Absolute	 	 	30	 
	Section 4.4
	 	Assignments; Reinsurance; Third-Party Rights	 	 	31	 
	Section 4.5
	 	Liability of the Insurer	 	 	32	 
	Section 4.6
	 	Purchase of Replacement Swap Agreement	 	 	32	 
	Section 4.7
	 	Rights and Remedies	 	 	32	 






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	 	 	 	 	Page	 
	 
	 	ARTICLE V	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	DEFAULTS AND REMEDIES	 	 	 	 
	 
	 	 	 	 	 	 
	Section 5.1
	 	Defaults	 	 	33	 
	Section 5.2
	 	Remedies; No Remedy Exclusive	 	 	34	 
	Section 5.3
	 	Waivers	 	 	34	 
	 
	 	 	 	 	 	 
	 
	 	ARTICLE VI	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	MISCELLANEOUS	 	 	 	 
	 
	 	 	 	 	 	 
	Section 6.1
	 	Amendments, Etc	 	 	35	 
	Section 6.2
	 	Notices	 	 	35	 
	Section 6.3
	 	Severability	 	 	37	 
	Section 6.4
	 	Governing Law	 	 	37	 
	Section 6.5
	 	Consent to Jurisdiction	 	 	37	 
	Section 6.6
	 	Consent of the Insurer	 	 	38	 
	Section 6.7
	 	Counterparts	 	 	38	 
	Section 6.8
	 	Headings	 	 	38	 
	Section 6.9
	 	Trial by Jury Waived	 	 	38	 
	Section 6.10
	 	Limited Liability	 	 	38	 
	Section 6.11
	 	Entire Agreement: Facsimile Signatures	 	 	38	 
	Section 6.12
	 	Indenture Trustee	 	 	39	 
	Section 6.13
	 	Third-Party Beneficiary	 	 	39	 
	Section 6.14
	 	No Proceedings	 	 	39	 
	Section 6.15
	 	Limitation of Owner Trustee Liability	 	 	39	 






	 	 	 
	EXHIBITS
	 	 
	 
	 	 
	EXHIBIT A Triad Automobile Receivables Trust 2007-A Consolidated
	 	 
	 
	 	 
	Tangible Net Worth Calculation as of March 31, 2007

	 	A-1
	 
	 	 
	EXHIBIT B [Reserved]

	 	B-1
	 
	 	 
	EXHIBIT C Triad Automobile Receivables Trust 2007-A Tangible Net Worth Floor
	 	C-1
	 
	 	 
	SCHEDULES
	 	 
	 
	 	 
	SCHEDULE A

	 	Schedule A-1
	 
	 	 
	SCHEDULE B

	 	Schedule B-1
	 
	 	 
	SCHEDULE C

	 	Schedule C-1
	 
	 	 
	SCHEDULE D

	 	Schedule D-1






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          INSURANCE AND INDEMNITY AGREEMENT (as it may be amended, modified or supplemented from time to
time, this “Insurance Agreement”), dated as of May 30, 2007, by and among FINANCIAL
SECURITY ASSURANCE INC., as Insurer (the “Insurer”), TRIAD AUTOMOBILE RECEIVABLES TRUST
2007-A, as Issuer (the “Issuer”), TRIAD FINANCIAL CORPORATION (“Triad”), as Seller
and Servicer (the “Seller” and the “Servicer”, respectively), TRIAD FINANCIAL
SPECIAL PURPOSE LLC, as Depositor (the “Depositor”) and CITIBANK, N.A. as Indenture Trustee
(the “Indenture Trustee”).




PRELIMINARY STATEMENTS




          A. The Indenture, dated as of May 30, 2007, by and between the Issuer and the Indenture
Trustee (the “Indenture”), provides for, among other things, the issuance of the Triad
Automobile Receivables Trust 2007-A Class A Asset Backed Notes.




          B. The parties hereto desire that the Insurer issue the FSA Policy to the Indenture Trustee
for the benefit of the Holders, to issue the Swap Policy to the Swap Counterparty and to, among
other things, specify the conditions precedent thereto, the premium in respect thereof and the
indemnity, reimbursement, reporting and other obligations of the parties hereto other than the
Insurer in consideration thereof.




          NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained,
the parties hereto agree as follows:




ARTICLE I




DEFINITIONS




          Section 1.1 Defined Terms. Capitalized terms used in this Insurance Agreement shall
have the meanings set forth below. Unless the context clearly requires otherwise, all capitalized
terms used but not defined herein shall have the respective meanings assigned to them in the FSA
Policy or, if not defined therein, in the Swap Policy, or, if not defined therein, in the Indenture
or, if not defined therein, in the Sale and Servicing Agreement, or, if not defined therein, in the
Purchase Agreement, each as described below.




          “Affiliate” means, with respect 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 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” and “controlled” have meanings
correlative to the foregoing.




          “Certificate” means the trust certificate evidencing the beneficial interest of the
Certificateholder in the Trust.




          “Charter Documents” means, with respect to any Transaction Party, such entity’s
organizational documents, including its trust agreement, certificate of trust, memorandum of
association, articles of organization, certificate or articles of incorporation, by-laws and/or
operating agreement.




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          “Class A Notes” means the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes
and the Class A-4 Notes.




          “Class A-1 Notes” means the Class A-1 5.3032% Asset Backed Notes, issued pursuant to
the Indenture and substantially in the form attached as an Exhibit to the Indenture.




          “Class A-2 Notes” means the Class A-2 5.35% Asset Backed Notes, issued pursuant to the
Indenture and substantially in the form attached as an Exhibit to the Indenture.




          “Class A-3 Notes” means the Class A-3 5.28% Asset Backed Notes, issued pursuant to the
Indenture and substantially in the form attached as an Exhibit to the Indenture.




          “Class A-4 Notes” means the Class A-4 Floating Rate Asset Backed Notes, issued
pursuant to the Indenture and substantially in the form attached as an Exhibit to the Indenture.




          “Closing Date” means May 30, 2007.




          “Collection Period” means, (i) with respect to the first Distribution Date, the period
beginning on the close of business on April 30, 2007 and ending on the close of business on May 31,
2007, and (ii) with respect to each subsequent Distribution Date, the period beginning on the
opening of business on the first day of the immediately preceding calendar month and ending on the
close of business on the last day of the immediately preceding calendar month. Any amount stated
“as of the close of business on the last day of a Collection Period” shall give effect to the
following calculations as determined as of the end of the day on such last day: (i) all
applications of collections and (ii) all distributions.




          “Consolidated Tangible Net Worth” means, as of any date, the consolidated
Stockholders’ Equity of any entity and its consolidated subsidiaries, less the consolidated net
book value of all assets of such entity and its consolidated subsidiary (to the extent reflected as
an asset in the balance sheet of such entity or any consolidated subsidiary at such date) which
will be treated as intangibles under GAAP, including without limitation, such items as deferred
financing expenses, net leasehold improvements, good will, trademarks, trade names, service marks,
copyrights, patents, licenses and unamortized debt discount and expense, all as determined as of
such date, and calculated in accordance with the example set forth as Exhibit A; provided,
that interest-only strips, residual interests or residual certificates issued in connection with a
public or private securitization transaction (including rights to receive remaining amounts in
spread accounts) owned by such entity or its consolidated subsidiaries shall not be treated as
intangibles for purposes of this definition; provided further, for purposes of this
definition, the consolidated net book value of deferred financing expenses shall be deemed to equal
the product of (1) the total consolidated net book value of deferred financing expenses and (2)
0.605. For purposes of this definition “Stockholders’ Equity” shall include GAAP retained
earnings and any equity securities such as common stock or common stock equivalents, including, but
not limited to, any non-coupon bearing instruments (other than in a liquidation preference) such as
preferred stock, convertible stock or convertible preferred stock of Triad or its Successor. In
addition, any coupon bearing stock equivalent (cash, Pay-In-Kind security or combination thereof),
preferred or otherwise, will receive equity treatment (not to exceed 30% of total consolidated
Stockholders’ Equity) so long as such instrument provides for the ability to defer cash coupon




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payments for a period not to exceed five years and the holder thereof is not entitled to
commence bankruptcy, insolvency or similar proceedings against Triad or its Successor. In the
event of any dispute among the parties, or any of them, regarding the calculation of Consolidated
Tangible Net Worth or the valuation of any assets included in such calculation, which cannot be
resolved by such parties, in good faith, within thirty (30) days of all relevant requested
information being supplied, the disputing parties shall, within ten (10) Business Days, agree on a
third party (such as an accounting or investment banking firm) to furnish the results of such
calculation within thirty (30) days, such conclusion to be final and binding on the parties.
Notwithstanding any provision in this Agreement to the contrary, if the valuation or other
calculation made by such third party is 10% or more higher than the number put forth by the party
promoting the lower valuation or other calculation, then the party promoting the lower valuation
shall pay the costs of the third party, provided that, notwithstanding the foregoing, if
the valuation or other calculation made by such third party is 10% or more higher than the number
put forth by the party promoting the lower valuation or other calculation and is still less than
the greater of (x) 7.5% of such entity’s Total Assets and (y) Tangible Net Worth Floor, then the
party promoting such lower valuation shall not be required to pay the costs of the third party. If
the valuation or other calculation by such third party is 10% or more lower than the number put
forth by the party promoting the higher valuation, then that party shall pay the costs of the third
party, even in the circumstance where such calculation results in a valuation or other calculation
greater than the greater of (x)7.5% of such entity’s Total Assets and (y) Tangible Net Worth Floor.
In all other cases, the costs of the third party shall be shared equally by the disputing parties.




          “Cram Down Loss” means, for any Receivable (other than a Purchased Receivable or a
Liquidated Receivable), if a court of appropriate jurisdiction in an insolvency proceeding issued
an order reducing the amount owed on the Receivable or otherwise modifying or restructuring the
scheduled payments to be made on the Receivable, an amount equal to the excess of the Receivable’s
Principal Balance immediately prior to the order over the Receivable’s Principal Balance as
reduced.




          “Cumulative Net Loss Ratio” means the ratio, expressed as a percentage, computed by
dividing: (a) the Cumulative Net Losses by (b) the Original Pool Balance.




          “Cumulative Net Losses” means the aggregate principal balance of all Net Liquidation
Losses for each Collection Period from the Closing Date to and including the then-current
Collection Period.




          “Cut-off Date” means April 30, 2007.




          “Deemed Cured” means, as of a Determination Date, that no Spread Cap Event shall have
occurred and be continuing as of such Determination Date and with respect to the two consecutively
preceding Determination Dates.




          “Default” means any occurrence that is, or with notice or the lapse of time or both
would become, an Event of Default.




          “Delinquency Rate” means, with respect to any Determination Date, a fraction,
expressed as a percentage, (a) the numerator of which is equal to the aggregate Principal Balance





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of all Receivables, other than Liquidated Receivables, for which all or more than 10% of a
Scheduled Receivables Payment was 60 or more days delinquent as of the last day of the related
Collection Period and (b) the denominator of which is equal to the Aggregate Principal Balance as
of the last day of the related Collection Period.




          “Depositor” has the meaning specified in the initial paragraph hereof.




          “Determination Date” means, with respect to any Collection Period, the 3rd Business
Day preceding the Distribution Date in the next Collection Period.




          “Distribution Date” means, with respect to each Collection Period, the 12th day of the
following Collection Period, or, if such day is not a Business Day, the immediately following
Business Day, commencing June 12, 2007.




          “Event of Default” has the meaning specified in Section 5.1 hereof




          “Fee Letter” means that certain letter agreement dated as of the date hereof between
the Issuer and the Insurer and acknowledged by the Indenture Trustee setting forth certain fees and
other matters referred to herein, as the same may be amended or supplemented from time to time in
accordance therewith and with this Insurance Agreement.




          “Financed Vehicle” means an automobile or light-duty truck, together with all
accessions thereto, securing an Obligor’s indebtedness under the respective Receivable.




          “FSA” means Financial Security Assurance Inc., a New York financial guaranty insurance
company.




          “FSA Policy” means the Financial Guaranty Insurance Policy No. 51840A-N dated May 30,
2007, including any endorsements thereto, issued by the Insurer to the Indenture Trustee with
respect to the Class A Notes, for the benefit of the Holders.




          “Holder” has the meaning given thereto in the FSA Policy.




          “Indemnified Party” has the meaning specified in Section 3.4 hereof.




          “Indemnifying Party” has the meaning specified in Section 3.4 hereof.




          “Indenture” means the Indenture dated as of May 30, 2007 between the Issuer and
Citibank, N.A. as Indenture Trustee, as the same may be amended or supplemented from time to time.




          “Information” has the meaning specified in Section 2.1(c) hereof.




          “Insolvency Proceeding” means any proceeding by or against any person under any
applicable reorganization, bankruptcy, liquidation, rehabilitation, insolvency or other similar law
now or hereafter in effect or any proceeding in which a receiver, liquidator, conservator, trustee
or similar official shall have been, or may be, appointed or requested for a person or any of its
assets.




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          “Insurance Agreement” has the meaning given such term in the initial paragraph hereof.




          “Insurance Agreement Repurchase Event” means, with respect to any Collection Period
following six (6) months from the Closing Date, the repurchase of more than five (5) Receivables.




          “Insurer” means FSA and any successor thereto, as issuer of the FSA Policy and the
Swap Policy.




          “Insurer Information” means the information furnished by the Insurer in writing
expressly for use in the Offering Document and is limited to the information included under the
headings “The Note Insurer” and “The Policy” in the Preliminary Prospectus Supplement dated May 21,
2007 and the Prospectus Supplement dated May 22, 2007.




          “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.




          “Late Payment Rate” means the lesser of (a) the greater of (i) the per annum rate of
interest publicly announced from time to time by Citibank, N.A. as its prime or base lending rate
(any change in such rate of interest to be effective on the date such change is announced by
Citibank, N.A.), plus 2% per annum and (ii) the then applicable highest rate of interest on the
Class A Notes and (b) the maximum rate permissible under applicable usury or similar laws limiting
interest rates. The Late Payment Rate shall be computed on the basis of the actual number of days
elapsed over a year of 360 days.




          “Liquidated Receivable” means, with respect to any Collection Period, any Receivable
with respect to which any of the following has occurred: (i) 10% or more of any Scheduled
Receivable Payment is 120 days or more past due, except Receivables with respect to which the
related Financed Vehicles have been repossessed within such 120 days; (ii) the earlier of (A) 90
days have elapsed since the Servicer repossessed the Financed Vehicle and (B) the sale of the
related Financed Vehicle; or (iii) the Servicer has determined in good faith that all amounts it
expects to be recovered have been received.




          “Material Adverse Effect” means, with respect to any event or circumstance, a material
adverse effect on (a) the business, financial condition, operations or assets of the Issuer
(considered separately) or the Issuer, the Seller, the Servicer and the Depositor (taken as a
whole), (b) the ability of any Triad Party to perform its obligations under any Transaction
Document to which it is a party, (c) the validity, enforceability of, or collectibility of, amounts
payable by any Triad Party under any Transaction Document to which it is a party, (d) the status,
existence, perfection or priority of the interest of the Issuer or of the Indenture Trustee in the
Trust Estate, (e) the validity, enforceability or collectibility of all or any portion of the Trust
Estate with an aggregate value of at least $500,000 or (f) the ability of the Insurer to monitor
the performance of the Receivables and compliance of the Triad Parties with the Transaction
Documents unless such impediment results from an action or omission on the part of the Insurer.




          “Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.




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          “Net Liquidation Losses” means, with respect to any Determination Date, the amount, if
any, by which (a) the sum of (i) the Principal Balance of all Receivables which became Liquidated
Receivables during the related Collection Period, and (ii) the aggregate of all Cram Down Losses
that occurred during such Collection Period, exceeds (b) the Net Liquidation Proceeds received
during the related Collection Period in respect of all Liquidated Receivables.




          “Net Liquidation Proceeds” means, with respect to a Liquidated Receivable, (1)
proceeds from the disposition of the underlying Financed Vehicle; plus (2) any related
insurance proceeds; plus (3) other monies received from the Obligor that are allocable to
principal and interest due under the Receivable, minus (4) the Servicer’s reasonable
out-of-pocket costs, including repossession and resale expenses not already deducted from the
proceeds, and any amounts required to be remitted to the Obligor by law.




          “Net Loss Rate” means, with respect to a Collection Period, the fraction, expressed as
a percentage, the numerator of which is equal to the aggregate of the Net Liquidation Losses for
such Collection Period and the denominator of which is the Aggregate Principal Balance as of the
first day of such Collection Period.




          “Obligor” on a Receivable means the purchaser or co-purchaser(s) of the Financed
Vehicle and any other Person who owes payments under the Receivable.




          “Offering Document” means, taken together, the Preliminary Prospectus Supplement,
dated May 21, 2007 (the “Preliminary Prospectus Supplement”), the Preliminary Prospectus,
dated May 21, 2007, the Prospectus Supplement, dated May 22, 2007 (the “Prospectus
Supplement”), and the Prospectus, dated May 21, 2007, of the Issuer, in respect of the offering
and sales of the Class A Notes, any amendment or supplement thereto, and any other offering
document in respect of the Class A Notes that makes reference to the FSA Policy or the Swap Policy.




          “Person” means an individual, corporation, estate, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof), unincorporated
organization or government or any agency or political subdivision thereof.




          “Premium” means the premium payable in accordance with the Fee Letter.




          “Principal Balance” means, for any Receivable as of any date of determination, (i) the
Amount Financed; minus (ii) the sum of (a) that portion of all amounts received on or prior
to that date and allocable to principal according to the Receivable’s terms, and (b) any Cram Down
Losses for the Receivable accounted for as of that date.




          “Purchase Agreement” means the Purchase Agreement dated as of May 30, 2007 between
Triad Financial Special Purpose LLC and Triad, as the same may be amended or supplemented from time
to time.




          “Purchased Receivable” means, with respect to any Collection Period, a Receivable
purchased as of the close of business on the last day of the Collection Period by Triad or the
servicer, as long as Citibank, N.A. is not acting as servicer, as the result of a breach of a
covenant or as an exercise of its optional redemption right.




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          “Rating Agencies” means Moody’s and S&P.




          “Receivables” means each motor vehicle retail installment sale contract, installment
loan contract or note and security agreement listed on the Schedule of Receivables attached as an
Exhibit to the Sale and Servicing Agreement.




          “Reimbursement Amount” means, as of any Distribution Date, the sum of (x)(i) all
Scheduled Payments (with respect to the FSA Policy and the Swap Policy, as defined in the FSA
Policy and the Swap Policy, respectively) and all Insurer Optional Deposits paid by FSA, but for
which FSA has not been reimbursed prior to such Distribution Date pursuant to Section 3.3 of this
Insurance Agreement, Section 5.6 of the Indenture and Section 5.7 of the Sale and Servicing
Agreement, plus (ii) interest accrued on such Scheduled Payments and Insurer Optional
Deposits not previously repaid calculated at the Late Payment Rate from the date the Indenture
Trustee, or any other Person at its direction, received the related payments or the date such
payments were made, and (y) without duplication (i) any amounts then due and owing to FSA under
this Insurance Agreement, the Indenture or the Sale and Servicing Agreement, as certified to the
Indenture Trustee by FSA plus (ii) interest on such amounts at the Late Payment Rate.




          “Responsible Officer” means any Vice President, Assistant Vice President, Assistant
Treasurer, Assistant Secretary or any other officer of the relevant Transaction Party responsible
for the performance of such Transaction Party’s obligations under the Transaction Documents and
also, with respect to a particular matter, any other officer to whom such matter is referred
because of such officer’s knowledge of and familiarity with the particular subject.




          “Sale and Servicing Agreement” means the Sale and Servicing Agreement, dated as of May
30, 2007, among the Issuer, the Depositor, Triad, as Servicer and Custodian, the Indenture Trustee
and the Backup Servicer, as the same may be amended or supplemented from time to time.




          “Scheduled Receivables Payment” means, with respect to any Collection Period for any
Receivable, the amount set forth in the Receivable as required to be paid by the Obligor in the
Collection Period. If, after the Closing Date, the Obligor’s obligation under a Receivable with
respect to a Collection Period is modified so as to differ from the amount specified in the
Receivable as a result of (i) the order of a court in an insolvency proceeding involving the
Obligor, (ii) pursuant to the Servicemembers Civil Relief Act or (iii) modifications or extensions
of the Receivable permitted by Section 4.2(b) of the Sale and Servicing Agreement, the Scheduled
Receivables Payment with respect to such Collection Period will refer to the Obligor’s payment
obligation with respect to the Collection Period as so modified.




          “Schedule of Receivables” means the schedule of all motor vehicle retail installment
sale contracts, installment loan contracts and note and security agreements originally held as part
of the Trust which is attached as a Schedule to the Sale and Servicing Agreement.




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




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




          “Seller” has the meaning specified in the initial paragraph hereof.




          “Servicer” has the meaning specified in the recitals hereof.




          “Servicer Termination Event” has the meaning specified in Section 9.1 of the Sale and
Servicing Agreement.




          “Servicing Policy and Procedures” means the policies and procedures set forth on
Schedule C to the Sale and Servicing Agreement, and any amendments thereto.




          “S&P” means Standard & Poor’s, a division of The McGraw-Hill Companies, Inc., and any
successor thereto.




          “Spread Cap Event” means, with respect to any Determination Date, the occurrence of
any of the following:





     (a) the Delinquency Rate with respect to such Determination Date shall exceed the rate
provided for the related Collection Period as set forth in Schedule A; or




     (b) the Cumulative Net Loss Ratio with respect to such Determination Date shall exceed
the rate provided for the related Collection Period as set forth in Schedule B;


provided that if the Spread Cap Event is Deemed Cured as of such Determination Date, there
shall be no Spread Cap Event on such Determination Date.




          “Swap Policy” means the Financial Guaranty Insurance Policy No. 51840B-N dated May 30,
2007, including any endorsements thereto, issued by the Insurer to the Swap Counterparty with
respect to the Swap Agreement.




          “Successor” means, following the merger or a consolidation of Triad with any other
Person, or the conveyance, transfer or lease by Triad of all or substantially all of its assets to
another Person, or Triad’s permitting any other Person to become the successor to Triad’s business,
in each case, such other Person.




          “Tangible Net Worth Floor” means, with respect to Triad, the calculation set forth in
Exhibit C attached hereto.




          “Total Assets” means, all receivables owned by Triad and all receivables serviced by
Triad and owned by any other Person.




          “Transaction” means the transactions contemplated by the Transaction Documents.




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          “Transaction Documents” means this Agreement, the Underwriting Agreement, the Sale and
Servicing Agreement, the Certificate of Trust, the Trust Agreement, the Purchase Agreement, the
Indenture, the Swap Agreement and all other documents and certificates delivered in connection
therewith except for the FSA Policy and the Swap Policy.




          “Transaction Parties” means the Triad Parties and the Indenture Trustee.




          “Triad” has the meaning specified in the recitals hereof.




          “Triad Party” means any of the Issuer, Triad, the Servicer, the Depositor and the
Holder of the Residual Certificate (collectively, the “Triad Parties”).




          “Trigger Event” means, with respect to any Determination Date, the occurrence of any
of the following:





     (a) the Delinquency Rate with respect to such Determination Date shall exceed the rate
provided for the related Collection Period, as set forth in Schedule C;




     (b) the Cumulative Net Loss Ratio with respect to such Determination Date shall exceed
the rate provided for the related Collection Period, as set forth in Schedule D; or




     (c) the Consolidated Tangible Net Worth of Triad, or its Successor, is less than the
greater of (x) 7.5% of its Total Assets and (y) the Tangible Net Worth Floor, as set forth
in Exhibit C.



          “Trust Agreement” means the Trust Agreement dated as of March 27, 2007 among Triad, as
Administrator, the Depositor and the Owner Trustee, as amended and restated as of May 30, 2007 as
the same may be amended and supplemented from time to time.




          “Underwriter Information” means the information furnished by any Underwriter in
writing expressly for use in the Offering Document and included in the third, fourth, sixth,
seventh, eighth or ninth paragraphs under the heading “Underwriting” in the Preliminary Prospectus
Supplement and the Prospectus Supplement.




          “Underwriters” shall mean Citigroup Global Markets Inc. and Goldman, Sachs & Co. as
representatives of the several underwriters named in the Underwriting Agreement.




          “Underwriting Agreement” means the Underwriting Agreement, dated May 22, 2007 among
the Underwriters and the Depositor with respect to the offer and sale of the Class A Notes, as
amended, modified or supplemented from time to time.




          Section 1.2 Other Definitional Provisions. The words “hereof,” “herein” and
“hereunder” and words of similar import when used in this Insurance Agreement shall refer to this
Insurance Agreement as a whole and not to any particular provision of this Insurance Agreement, and
Section, subsection, Schedule and Exhibit references are to this Insurance Agreement unless
otherwise specified. The meanings given to terms defined herein shall be equally applicable to
both the singular and plural forms of such terms. The words “include” and




9









 







“including” shall be deemed to be followed by the phrase “without limitation.” Where a
representation, warranty or covenant herein begins with the words “as to a Person only,” such
representation, warranty or covenant is given by and as to such Person only.




ARTICLE II




REPRESENTATIONS, WARRANTIES AND COVENANTS




          Section 2.1 Representations and Warranties of the Seller and Servicer. Triad hereby
makes, to and for the benefit of the Insurer, each of the representations and warranties made by it
in each of the Transaction Documents to which it is a party, including Section 3.1 of the Purchase
Agreement and Sections 4.6 and 8.1 of the Sale and Servicing Agreement. Such representations and
warranties are incorporated herein by this reference as if fully set forth herein, and may not be
amended except by an amendment complying with the terms of the last sentence of Section 6.1 hereof.
In addition, Triad represents and warrants as of the Closing Date as follows:




          (a) The offer and sale of the Class A Notes by the Issuer comply in all material respects with
all requirements of law, including all registration requirements of applicable securities laws and,
without limiting the generality of the foregoing, the Offering Document (other than the Underwriter
Information and the Insurer Information) does not contain any untrue statement of a material fact
and does not omit to state a material fact necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading.




          (b) The Indenture has been duly qualified under the Trust Indenture Act of 1939, as amended;
the Issuer is not required to be registered as an “investment company” under the Investment Company
Act; and neither the offer nor the sale of the Class A Notes by the Issuer will be in violation of
the Securities Act or any other federal or state securities law. Triad shall satisfy any of the
information reporting requirements of the Securities Exchange Act arising out of the Transaction to
which it, the Depositor or the Issuer is subject.




          (c) Neither the Transaction Documents nor any other information relating to the Receivables,
the Other Conveyed Property or any other asset in the Trust Estate, the operations or financial
condition of any of the Triad Parties (collectively, the “Information”), as amended,
supplemented or superseded, furnished to the Insurer by such Triad Party contains any statement of
a material fact which was untrue or misleading in any material respect when made. None of the Triad
Parties has any knowledge of any circumstances that could reasonably be expected to have a Material
Adverse Effect. Since the furnishing of the Information, there has been no change nor any
development or event involving a prospective change known to any of the Triad Parties that would
render any of the Transaction Documents untrue or misleading in any material respect.




          Section 2.2 Affirmative Covenants of Seller and Servicer. Triad hereby makes, to and
for the benefit of the Insurer, all of the covenants made by it in the Transaction Documents to
which it is a party, including Section 4.5 of the Purchase Agreement and Section 4.6 of the Sale
and Servicing Agreement. Such covenants are hereby incorporated herein by this





10









 







reference as if fully set forth herein, and may not be amended except by an amendment
complying with the terms of the last sentence of Section 6.1. In addition, Triad hereby agrees
that during the term of this Insurance Agreement, unless the Insurer shall otherwise expressly
consent in writing:




          (a) Compliance with Agreements and Applicable Laws. It shall comply with the terms
and conditions of and perform its obligations under the Transaction Documents to which it is a
party and shall comply with any law, rule or regulation applicable to it, except where the failure
to comply with any such law, rule or regulation is not reasonably likely to have a Material Adverse
Effect.




          (b) Existence. Except as otherwise expressly provided by the Transaction Documents,
it shall maintain its corporate existence and shall at all times continue to be duly organized
under the laws of the place of its organization and duly qualified and duly authorized thereunder.
Additionally, it shall conduct its business in accordance with the terms of its Charter Documents
and shall maintain all licenses, permits, charters and registrations, except for any such license,
permit, charter or registration the failure of which to maintain is not reasonably likely to have a
Material Adverse Effect.




          (c) Notice of Material Events. It shall promptly (and, with respect to item (ii)
below, in any event not later than two (2) Business Days, and, with respect to all other items not
later than five (5) Business Days) following receipt of actual knowledge by a Responsible Officer
thereof inform the Insurer 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, or disciplinary proceeding by or against it that
would be reasonably likely to have a Material Adverse Effect or the promulgation of any
proceeding or any proposed or final ruling in connection with any such litigation,
investigation or proceeding that would be reasonably likely to have a Material Adverse
Effect;




     (ii) the occurrence of any Event of Default hereunder, any Default or Event of Default
under the Indenture, any Servicer Termination Event, any Trigger Event or any Spread Cap
Event;




     (iii) the commencement of any Insolvency Proceeding against any Transaction Party;




     (iv) any Person becoming a Successor; and




     (v) the receipt of written notice that (a) any license, permit, charter, registration
or approval necessary and material for the conduct of its business is to be, or may be,
suspended or revoked and such suspension or revocation would be reasonably likely to have a
Material Adverse Effect or (b) it is to cease and desist any practice, procedure or policy
employed by it in the conduct of its business, and such cessation would be reasonably likely
to have a Material Adverse Effect.



11









 





          (d) Notice of Change. It shall give the Insurer not less than thirty (30) days’ prior
written notice of any proposed change in its name, principal place of business or jurisdiction of
organization.




          (e) Access to Records; Discussions with Officers and Accountants. As long as upon
reasonable prior written notice of the Insurer, at any time, it shall permit the Insurer or its
authorized agents:





     (i) to inspect its books and its records as they may relate to the Transaction, the
Receivables, the Other Conveyed Property, the Swap Agreement or any other assets in the
Trust Estate, as the case may be, or its obligations under the Transaction Documents;




     (ii) to discuss its affairs, finances and accounts with its principal executive officer
and its principal financial officer; and




     (iii) to discuss its affairs, finances and accounts with its independent accountants,
provided that one of its officers shall have the right to be present during such
discussions.



          Such inspections and discussions shall be conducted during normal business hours at Triad’s
cost and expense and shall not unreasonably disrupt the business of the Seller or the Servicer.
Absent an Event of Default hereunder, any Default or Event of Default under the Indenture, a
Servicer Termination Event, a Trigger Event or an Insurance Agreement Repurchase Event, the Insurer
shall not conduct such inspections or discussions more often than annually, unless otherwise
mutually agreed by the Insurer and Triad. If, however, an Event of Default hereunder or under the
Indenture, a Servicer Termination Event, a Trigger Event, a Spread Cap Event or an Insurance
Agreement Repurchase Event has occurred and is continuing, the Insurer may increase the frequency
of such audits to semi-annual, quarterly, or otherwise as it deems appropriate. Without limiting
the foregoing, upon the occurrence of a Trigger Event an Event of Default hereunder or under the
Indenture, a Servicer Termination Event, a Spread Cap Event or an Insurance Agreement Repurchase
Event, Triad shall make its principal officers available to discuss the Transaction with
representatives of the Insurer within 15 days of receipt by Triad of such a request from the
Insurer.




          (f) Closing Documents. It shall provide or cause to be provided to the Insurer an
executed original copy of each Transaction Document executed by it in connection with the closing
of the Transaction within thirty (30) days of the Closing Date.




          (g) Field Examination by Independent Public Accountants. Upon reasonable prior
written notice of the Insurer at any time, it shall permit independent public accountants
designated by the Insurer, from time to time to conduct a field examination(s), and in connection
therewith shall permit such independent public accountants without limitation:





     (i) to inspect its books and records as they may relate to the Transaction, the
Receivables, the Other Conveyed Property, the Swap Agreement or any other assets in the
Trust Estate, as the case may be, or its obligations under the Transaction Documents;



12









 






     (ii) to discuss its affairs, finances and accounts with its principal executive officer
and its principal financial officer; and




     (iii) to discuss its affairs, finances and accounts with its independent accountants,
provided that one of its officers shall have the right to be present during such
discussions.



          Such inspections and discussions shall be conducted during normal business hours at Triad’s
cost and expense and shall not unreasonably disrupt the business of the Seller or the Servicer.
Absent an Event of Default hereunder or under the Indenture, a Servicer Termination Event, a
Trigger Event, a Spread Cap Event or an Insurance Agreement Repurchase Event, the Insurer shall not
conduct such inspections and discussion more often than annually, unless otherwise mutually agreed
by the Insurer and Triad. If, however, an Event of Default hereunder or under the Indenture, a
Servicer Termination Event, a Trigger Event, a Spread Cap Event or an Insurance Agreement
Repurchase Event has occurred and is continuing, the Insurer may increase the frequency of such
audits to semi-annual, quarterly, or otherwise as it deems appropriate.




          (h) Financial Reporting. Triad shall provide or cause to be provided to the Insurer
the following:





     (i) Annual and Periodic Financial Statements; Other Reporting. Copies of the
“Accountant’s Report” required to be delivered pursuant to Section 4.11 of the Sale and
Servicing Agreement and such notices, certificates, reports and other information delivered
by Triad under the Transaction Documents, as and when required pursuant to such sections or
agreements, and any other reporting or financial information required to be provided to the
Insurer pursuant to the terms of the Transaction Documents, including, without limitation,
financial projections, as and when required pursuant to such terms. Such statements will be
provided no later than thirty (30) days following each fiscal quarter.




     (ii) Compliance Certificate. Together with the “Accountant’s Report” required
under Section 4.11 of the Sale and Servicing Agreement, a compliance certificate signed by
its principal financial officer stating that to the best of such person’s knowledge, (a)
each Triad Party is in compliance with its obligations hereunder and under the other
Transaction Documents, and (b) no Event of Default hereunder or under the Indenture or
Servicer Termination Event exists and no event which but for the lapse of time or the giving
of notice, or both, would constitute an Event of Default hereunder or under the Indenture or
Servicer Termination Event or Trigger Event exists, or if an Event of Default hereunder or
under the Indenture or Servicer Termination Event or other such event exists, stating the
nature and status thereof (including all relevant financial and other information and
amounts used in determining whether such Event of Default hereunder or under the Indenture
or Servicer Termination Event or Trigger Event or other such event exists).




     (iii) S.E.C. Filings. Promptly after the filing thereof; copies of all
registration statements and annual, quarterly or other regular reports which Triad or any
subsidiary files with the Securities and Exchange Commission.



13









 






     (iv) Shareholders Statements and Reports. Promptly after the furnishing
thereof to its shareholders, copies of all financial statements, reports and proxy
statements so furnished.




     (v) Amendments to Servicing Policy and Procedure. Within ten (10) Business
Days after the date of any material change or amendment to its Servicing Policy and
Procedure, a true and complete copy of such change or amendment, and if requested by the
Insurer, a copy of the Servicing Policy and Procedure then in effect. No such change or
amendment shall become effective if the Insurer determines, in its sole discretion, that
such change or amendment will have a Material Adverse Effect; provided that such
change or amendment shall become effective and continue to be effective if the Insurer has
not objected to such change or amendment within ten (10) Business Days of receipt of written
notice thereof.




     (vi) Servicing Policy and Procedure. Within ninety (90) days after the end of
each of its fiscal years, a true and complete copy of its Servicing Policy and Procedure
then in effect.



          (i) Public Debt Ratings. Promptly, but in any event within five (5) Business Days
after the date of any change in its public debt ratings, if any, a written certification of its
public debt ratings after giving effect to such change.




          (j) Compliance with Securities Laws. It shall comply with the Securities Act and the
Securities Exchange Act and the regulations thereunder so as to permit the completion of the offer
and sale of the Class A Notes as contemplated by the Underwriting Agreement.




          (k) Disclosure Document. Each Offering Document delivered with respect to the Class A
Notes shall clearly disclose that the insurance provided by the FSA Policy (and the Swap Policy, to
the extent such Offering Document contains substantive disclosure regarding the Swap Policy) is not
covered by the property/casualty insurance security fund specified in Article 76 of the New York
Insurance Law.




          (l) Other Information. It shall provide to the Insurer such other information
(including non-financial information) in respect of the Receivables, the Other Conveyed Property or
the other assets in the Trust Estate, as the case may be, the Transaction and the Transaction
Documents and such other financial or operating information in respect of itself, the Depositor,
the Issuer or any of their Affiliates, in each case, which the Insurer may from time to time
reasonably request.




          Section 2.3 Negative Covenants of the Seller and Servicer. Triad hereby agrees that
during the term of this Insurance Agreement, unless the Insurer shall otherwise expressly consent
in writing:




          (a) Impairment of Rights. It shall not take any action, or fail to take any action,
if such action or failure to take action (x) is reasonably likely to have a Material Adverse Effect
or (y) is reasonably likely to interfere with the enforcement of any rights of the Insurer under or
with respect to any of the Transaction Documents. It shall give the Insurer written notice of any
such action or failure to act promptly prior to the date of consummation of such





14









 







action or failure to act. It shall furnish to the Insurer all information requested by it
that is reasonably necessary to determine compliance with this paragraph.




          (b) Amendments, Etc. It shall not modify, amend or waive, or consent to any
modification or amendment of, any of the terms, provisions or conditions of the Transaction
Documents to which it is a party without the prior written consent of the Insurer thereto.




          (c) Change in Processing Bank. Except as provided in a Blocked Account Agreement, it
shall not permit a change in the Lockbox Account or any Processing Bank designated in a Blocked
Account Agreement without the prior written consent of the Insurer, which consent shall not be
unreasonably withheld; provided, however, that without limiting the foregoing, it
shall be deemed reasonable for the Insurer to withhold its consent if the long term senior
unsecured debt of any new Processing Bank is not rated at least “A” by S&P and “A2” by Moody’s.




          Section 2.4 Representations and Warranties of the Insurer. The Insurer represents and
warrants to the Indenture Trustee (on behalf of the Holders), the Issuer and each other Transaction
Party as follows:




          (a) Organization and Licensing. The Insurer is a financial guaranty insurance
corporation duly organized, validly existing and in good standing under the laws of the State of
New York.




          (b) Corporate Power. The Insurer has the corporate power and authority to issue the
FSA Policy and the Swap Policy and execute and deliver this Insurance Agreement and to perform all
of its obligations hereunder and thereunder.




          (c) Authorization; Approvals. All proceedings legally required for the issuance of
the FSA Policy and the execution, delivery and performance of this Insurance Agreement have been
taken and all licenses, orders, consents or other authorizations or approvals of the Insurer’s
Board of Directors or stockholders or any governmental boards or bodies legally required for the
enforceability of the FSA Policy and the Swap Policy have been obtained or are not material to the
enforceability of the FSA Policy or the Swap Policy.




          (d) Enforceability. Each of the FSA Policy and the Swap Policy, when issued, will
constitute, and this Insurance Agreement constitutes, legal, valid and binding obligations of the
Insurer, enforceable in accordance with their respective terms, subject to insolvency,
reorganization, moratorium, receivership and other similar laws affecting creditors’ rights
generally and by general principles of equity and subject to principles of public policy limiting
the right to enforce the indemnification provisions contained therein and herein, insofar as such
provisions relate to indemnification for liabilities arising under federal securities laws.




          (e) No Conflict. The execution by the Insurer of this Insurance Agreement will not,
and the satisfaction of the terms hereof will not, conflict with or result in a breach of any of
the terms, conditions or provisions of the Certificate of Incorporation or By-Laws of the Insurer,
or any restriction contained in any contract, agreement or instrument to which the Insurer is a
party or by which it is bound or constitute a default under any of the foregoing which





15









 







would materially and adversely affect its ability to perform its obligations under the FSA
Policy, the Swap Policy or this Insurance Agreement.




          (f) Accuracy of Information. The Insurer Information included in the Offering
Document is limited and does not purport to provide the scope of disclosure required to be included
in a prospectus with respect to a registrant in connection with the offer and sale of securities of
such registrant registered under the Securities Act. Within such limited scope of disclosure,
however, as of the date of the Offering Document, the Insurer Information does not contain an
untrue statement of a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances in which they were made, not misleading.



Nothing in this Agreement shall be construed as a representation or warranty by the Insurer
concerning the rating of its insurance financial strength by Moody’s or its insurer financial
strength by S&P or any other rating assigned by a rating agency. The Rating Agencies, in assigning
such ratings, take into account facts and assumptions not described in the Offering Document and
the facts and assumptions which are considered by the Rating Agencies, and the ratings issued
thereby, are subject to change over time.




          Section 2.5 Representations and Warranties of the Depositor and the Issuer. Each of
the Depositor and the Issuer hereby makes, to and for the benefit of the Insurer, each of the
representations and warranties made by the Depositor or the Issuer, as the case may be, in the
Transaction Documents to which it is a party, including Section 3.2 of the Purchase Agreement and
Section 7.1 of the Sale and Servicing Agreement (in the case of the Depositor). Such
representations and warranties are incorporated herein by this reference as if fully set forth
herein, and may not be amended except by an amendment complying with the terms of Section 6.1
hereof. In addition, the Issuer represents and warrants as of the Closing Date as follows:




          (a) Accuracy of Information. The information or statements contained in the
Transaction Documents furnished to the Insurer by it, as amended, supplemented or superseded on or
prior to the date hereof, taken as a whole, does not, if restated at and as of the date hereof,
contain any untrue statement of a material fact or omit to state a material fact necessary to make
such information or statements not misleading in any material respect.




          (b) Compliance with Securities Laws. The Depositor will comply with the Securities
Act and the Securities Exchange Act and the regulations thereunder so as to permit the completion
of the offer and sale of the Class A Notes as contemplated by the Underwriting Agreement. The
offer and sale of the Class A Notes by the Issuer will comply in all material respects with all
requirements of law, including all registration requirements of applicable securities laws.
Without limiting the foregoing, the Offering Document (other than the Insurer Information and the
Underwriter Information) does not contain any untrue statement of a material fact and does not omit
to state a material fact necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Neither the offer nor the sale of the
Class A Notes by the Issuer has been or will be in violation of the Securities Act or any other
federal or state securities laws. The Depositor will satisfy all applicable information reporting
requirements of the Securities Exchange Act arising out of the Transaction to which it or the Trust
Estate are subject. The Indenture has been duly qualified under the Trust Indenture Act of 1939,
as amended.




16









 








          (c) Swap Agreement. On the Closing Date, the Issuer has entered into the Swap
Agreement.




          Section 2.6 Affirmative Covenants of the Depositor and the Issuer. Each of the
Depositor and the Issuer hereby makes, to and for the benefit of the Insurer, all of the covenants
of the Depositor or the Issuer, as the case may be, set forth in the Transaction Documents to which
it is a party, including the covenants contained in Article IV of the Purchase Agreement and
Section 7.2 of the Sale and Servicing Agreement (in the case of the Depositor) and in Article III
of the Indenture (in the case of the Issuer). Such covenants are incorporated herein by this
reference, and may not be amended except by an amendment complying with the terms of Section 6.1
hereof. In addition, each of the Depositor and the Issuer hereby agrees that during the term of
this Insurance Agreement, unless the Insurer shall otherwise expressly consent in writing:




          (a) Compliance with Agreements and Applicable Laws. It shall comply with the terms
and conditions of and perform its obligations under the Transaction Documents to which it is a
party and shall comply with any law, rule or regulation applicable to it, except where the failure
to comply with any such law, rule or regulation is not reasonably likely to have a Material Adverse
Effect.




          (b) Existence. It shall maintain its existence as a limited liability company or a
statutory trust, as the case may be, under the laws of the State of Delaware and shall at all times
continue to be duly formed and validly existing in good standing under the laws of the State of
Delaware and duly qualified and duly authorized thereunder and shall conduct its business in
accordance with the terms of its Charter Documents. The Issuer shall cause the Receivables Files
to be located at such location as specified in Section 3.3(c) of the Sale and Servicing Agreement.




          (c) Access to Records; Discussions with Officers and Accountants. Upon reasonable
prior written notice of the Insurer, at any time, it shall permit the Insurer or its authorized
agents:





     (i) to inspect its books and records;




     (ii) to discuss its affairs, finances and accounts with its principal executive officer
and its principal financial officer; and




     (iii) to discuss its affairs, finances and accounts with its independent accountants,
provided that one of its officers and an officer of Triad shall have the right to be
present during such discussions.



          Such inspections and discussions shall be conducted during normal business hours at the cost
and expense of Triad and shall not unreasonably disrupt the Depositor’s or Issuer’s business, as
the case may be. Absent an Event of Default hereunder or under the Indenture, a Servicer
Termination Event, a Trigger Event, a Spread Cap Event or an Insurance Agreement Repurchase Event,
the Insurer shall not conduct such inspections or discussions more often than annually, unless
otherwise mutually agreed by the Insurer and Triad. If, however, an Event of Default hereunder or
under the Indenture, a Servicer Termination Event, a Trigger Event, a





17









 







Spread Cap Event or an Insurance Agreement Repurchase Event has occurred and is continuing,
the Insurer may increase the frequency of such audits to semi-annual, quarterly, or otherwise as it
deems appropriate. Without limiting the foregoing, upon the occurrence of an Event of Default
hereunder or under the Indenture, a Servicer Termination Event, a Trigger Event, a Spread Cap Event
or an Insurance Agreement Repurchase Event, the Depositor and the Issuer shall make their
respective principal officers available to discuss the Transaction with representatives of the
Insurer within 15 days of receipt by the Depositor and the Issuer, as the case may be, of such a
request from the Insurer.




          (d) Notice of Material Events. It shall be obligated promptly (and, with respect to
item (ii) below, in any event not later than two (2) Business Days, and with respect to all other
items below, not later than five (5) Business Days) following receipt of actual knowledge by a
Responsible Officer thereof to inform the Insurer 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, or disciplinary proceeding by or against it that
would be reasonably likely to have a Material Adverse Effect or the promulgation of any
proceeding or any proposed or final ruling in connection with any such litigation,
investigation or proceeding that would be reasonably likely to have a Material Adverse
Effect;




     (ii) the occurrence of an Event of Default hereunder, a Default or Event of Default
under the Indenture, a Servicer Termination Event, a Trigger Event or a Spread Cap Event;




     (iii) the commencement of any Insolvency Proceeding against any Transaction Party; and




     (iv) the receipt of written notice that (a) any license, permit, charter, registration
or approval necessary for the conduct of its business is to be, or may be, suspended or
revoked and such suspension or revocation would be reasonably likely to have a Material
Adverse Effect or (b) it is to cease and desist any practice, procedure or policy employed
by it in the conduct of its business, and such cessation would be reasonably likely to have
a Material Adverse Effect.



          (e) It shall give the Insurer not less than thirty (30) days’ prior written notice of any
proposed change in its name, principal place of business or jurisdiction of organization.




          (f) Field Examination by Independent Public Accountants. Upon reasonable prior
written notice of the Insurer at any time, it shall permit independent public accountants
designated by the Insurer, from time to time to conduct a field examination(s), and in connection
therewith shall permit such independent public accountants, without limitation:





          (i) to inspect its books and records;




          (ii) to discuss its affairs, finances and accounts with its principal executive officer
and its principal financial officer; and




18









 









     (iii) to discuss its affairs, finances and accounts with its independent accountants;
provided that one of its officers and an officer of the Depositor or the Issuer, as
the case may be, and one officer of Triad (if Triad is then the Servicer) shall have the
right to be present during such discussions.



          Such inspections and discussions shall be conducted during normal business hours at the cost
and expense of Triad and shall not unreasonably disrupt the business of the Depositor or the
Issuer, as the case may be. Absent an Event of Default hereunder or under the Indenture, a
Servicer Termination Event, a Trigger Event, a Spread Cap Event or an Insurance Agreement
Repurchase Event, the Insurer shall not conduct field examinations more often than annually, unless
otherwise mutually agreed by the Insurer and Triad. If, however, an Event of Default hereunder or
under the Indenture, a Servicer Termination Event, a Trigger Event, a Spread Cap Event or an
Insurance Agreement Repurchase Event has occurred and is continuing, the Insurer may increase the
frequency of such audits to semi-annual, quarterly, or otherwise as it deems appropriate.




          (g) Maintenance of Licenses. It shall maintain all licenses, permits, charters and
registrations, except for licenses, permits, charters and registrations the failure of which to
maintain is not reasonably likely to have a Material Adverse Effect.




          (h) Financial Reporting. It shall provide or cause to be provided to the Insurer, as
soon as practicable and in any event within 90 days after the end of each of its fiscal years, an
annual balance sheet as at the end of such fiscal year and the notes thereto, and the related
statements of income and cash flows and the respective notes thereto for such fiscal year,
certified by its principal financial officer.




          (i) Financial Statements. Its financial statements and books and records will reflect
its separate existence and will present fairly its financial position.




          (j) Other Information. It shall provide to the Insurer such other information
(including non-financial information) in respect of the Receivables, the Other Conveyed Property or
the other assets in the Trust Estate, as the case may be, the Transaction and the Transaction
Documents and such other financial or operating information in respect of itself and the
Receivables which the Insurer may from time to time reasonably request.




          (k) Operation. It shall:





     (i) manage its day-to-day business without the involvement of any other Transaction
Party except as required or permitted by the Transaction Documents or in connection with
certain administrative services provided to the Depositor by the Seller;




     (ii) act solely in its own name in the conduct of its business, including business
correspondence and other communications, and shall conduct its business so as not to mislead
others as to the identity of the entity with which they are concerned;




     (iii) ensure that, to the extent that it shares the same officers or other employees as
any of its Affiliates, the salaries of and the expenses related to providing benefits to
such officers and other employees shall be fairly allocated among such



19









 







entities, and each such entity shall bear its fair share of the salary and benefit
costs associated with all such common officers and employees;




     (iv) ensure that, to the extent that it jointly contracts with any of its Affiliates to
do business with vendors or service providers or to share overhead expenses, the costs
incurred in doing so shall be allocated fairly among such entities, and each such entity
shall bear its fair share of such costs. To the extent that it contracts or does business
with vendors or service providers when the goods and services provided are partially for the
benefit of any other Person, the costs incurred in so doing shall be fairly allocated to or
among such entities for whose benefit the goods and services are provided, and each such
entity shall bear its fair share of such costs. All material transactions between the other
Transaction Parties and its Affiliates shall only be on an arm’s-length basis;




     (v) require that all of its full-time employees identify themselves as such and not as
employees of Triad or any other Triad Party (including, without limitation, by means of
providing appropriate employees with business or identification cards identifying such
employees as its employees); and




     (vi) compensate all employees, consultants and agents directly, from its bank accounts,
for services provided to it by such employees, consultants and agents, and, to the extent
any of its employees, consultants or agents is also an employee, consultant or agent of
Triad (or any Affiliate thereof), allocate the compensation of such employee, consultant or
agent between itself and Triad (or any Affiliate thereof) on a basis which reflects the
services rendered to itself and Triad (or such Affiliate thereof).




     (l) Special Purpose Entity. In addition, the Depositor shall:




     (i) ensure that its capital is adequate for the business and undertakings of the
Depositor;




     (ii) other than activities in connection with the Transaction, be restricted from
undertaking any activities other than purchasing automobile loans receivables and
transferring the proceeds to other special-purpose entities in connection with the issuance
of other asset-backed securities;




     (iii) have at least one director, manager or member that is a person who is not, and
will not be, a director, officer, employee or holder of any equity securities of Triad or
any of its affiliates or subsidiaries;




     (iv) not commingle its funds and assets with the funds of any other person; and




     (v) maintain (A) correct and complete minute books and records of account, and (B)
minutes of the meetings and other proceedings of its board of managers, as provided in its
limited liability company agreement.



          Section 2.7 Negative Covenants of the Depositor and the Issuer. Each of the Depositor
and the Issuer hereby agrees that during the term of this Insurance Agreement, unless the Insurer
shall otherwise expressly consent in writing:




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          (a) Impairment of Rights. It shall not take any action, or fail to take any action,
if such action or failure to take action (x) is reasonably likely to have a Material Adverse Effect
or (y) is reasonably likely to interfere with the enforcement of any rights of the Insurer under or
with respect to any of the Transaction Documents. It shall give the Insurer written notice of any
such action or failure to act promptly prior to the date of consummation of such action or failure
to act. It shall furnish to the Insurer all information requested by the Insurer that is
reasonably necessary to determine compliance with this paragraph.




          (b) Amendments, Etc. It shall not modify, amend or waive, or consent to any
modification, amendment or waiver of, any of the terms, provisions or conditions of the Transaction
Documents to which it is a party, or any of its Charter Documents without the prior written consent
of the Insurer.




          (c) Limitation on Mergers, Etc. It shall not consolidate with or merge with or into
any Person or liquidate or dissolve, or transfer all or substantially all of its assets to any
Person except, in the case of the Issuer, by way of the grant of a lien to the Indenture Trustee
pursuant to the Transaction Documents, or, except as expressly permitted by the Transaction
Documents, transfer any of its assets to any Person.




          (d) Certain Other Limitations. It shall





     (i) not be named as an insured on the insurance policy held by another Triad Party or
covering the property of any other Triad Party, except to the extent it shall bear its
allocable share of the expense thereof, or enter into an agreement with the holder of such
policy whereby in the event of a loss in connection with property not owned by the Issuer or
the Depositor, as the case may be, proceeds are paid to it.




     (ii) be restricted from undertaking activities in connection with the issuance of the
Class A Notes other than activities as set forth in its Charter Documents;




     (iii) not be involved in the day-to-day management of any of the other Triad Parties
except as required by or permitted by the Transaction Documents or in connection with
certain administrative services provided to the Depositor by the Seller;




     (iv) not incur, assume or guarantee any indebtedness except for such indebtedness as
may be incurred by the Issuer in connection with the issuance of the Class A Notes, or as
otherwise expressly permitted by the Insurer or the Transaction Documents;




     (v) not commingle its deposit accounts (and funds therein) or other assets with the
deposit accounts (and funds therein) or other assets of any other entity;




     (vi) not act as an agent of any other Triad Party; and




     (vii) not form, or cause to be formed, any subsidiaries; provided that the Depositor
may form other special purpose entities in connection with the issuance of other
asset-backed securities to the extent the Insurer acts as an insurer in connection with such
transactions.



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          (e) The Swap Agreement. The Issuer shall not take any action that would permit, or
fail to take any action if a failure to take such action would permit, termination of the Swap
Agreement by the Swap Provider, and shall not designate an “Early Termination Date” (as defined in
the Swap Agreement) to terminate the Swap Agreement, except with the prior written consent of the
Insurer unless the Insurer has failed to make payments under the Swap Policy, or if termination of
the Swap Agreement would be permitted pursuant to Section 5(b)(i) and Part 5(l)(i) of the Swap
Agreement. The Issuer shall send to the Insurer a copy of each communication it sends under the
Swap Agreement contemporaneously with its delivery thereof to the Swap Provider and shall not
deliver notice designating an “Early Termination Date” as a result of an “Event of Default” or
“Termination Event” (as such terms are defined in the Swap Agreement) to any Swap Provider pursuant
to the Swap Agreement without the prior written consent of the Insurer, except as permitted by the
immediately preceding sentence.




ARTICLE III




THE POLICIES; REIMBURSEMENT




          Section 3.1 Issuance of the Policies. The Insurer agrees to issue the FSA Policy and
the Swap Policy on the Closing Date subject to satisfaction of the conditions precedent set forth
below:




          (a) Payment of Expenses. The applicable parties shall have been paid their related
fees and expenses payable in accordance with Sections 3.2(a) and (b);




          (b) Receipt of Certain Documents. The Insurer shall have received a complete copy of
the Servicing Policy and Procedures then in effect certified by the principal financial officer of
Triad;




          (c) Representations and Warranties; Certificate. The representations and warranties
of the Triad Parties set forth or incorporated by reference in this Insurance Agreement and the
representations and warranties set forth by the Indenture Trustee in the Indenture are true and
correct on and as of the Closing Date as if made on the Closing Date, and the Insurer has received
a certificate of appropriate officers of the related Triad Party to that effect;




          (d) No Litigation, Etc. No suit, action or other proceeding, investigation or
injunction, or final judgment relating thereto, is pending or, to any Transaction Party’s
knowledge, threatened before any court, governmental or administrative agency or arbitrator in
which it is sought to restrain or prohibit or to obtain damages or other relief in connection with
any of the Transaction Documents or the consummation of the Transaction;




          (e) Legality. No statute, rule, regulation or order has been enacted, entered or
deemed applicable by any government or governmental or administrative agency or court that would
make the Transaction illegal or otherwise prevent the consummation thereof,




          (f) No Event of Default. No Event of Default hereunder, Default or Event of Default
under the Indenture, Trigger Event, Servicer Termination Event, Spread Cap Event or Insurance
Agreement Repurchase Event has occurred;




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          (g) Satisfaction of Conditions of the Underwriting Agreement. All conditions in the
Underwriting Agreement relating to the Underwriters’ obligation to offer and sell the Class A Notes
have been fulfilled to the satisfaction of the Insurer, with such satisfaction deemed to have
occurred upon issuance of the FSA Policy and the Swap Policy. The Insurer has received copies of
each of the documents, and shall be entitled to rely on each of the documents, required to be
delivered to the Underwriters pursuant to the Underwriting Agreement;




          (h) Issuance of Ratings. The Insurer has received confirmation that the Class A-1
Notes will be rated in the highest short-term rating category by at least two nationally recognized
statistical rating agencies, that the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes
will be rated in the highest long-term rating category by at least two nationally recognized
statistical rating agencies and that, without the benefit of the FSA Policy, the Class A Notes will
have a shadow rating of at least “BBB-” from S&P and “Baa3” from Moody’s;




          (i) Approvals, Etc. The Insurer has received true and correct copies of all
approvals, licenses and consents, if any, required in connection with the Transaction;




          (j) Fee Letter. The Insurer, the Indenture Trustee and the Issuer have executed the
Fee Letter;




          (k) Certified Copies. The Insurer has received a fully executed copy of each
Transaction Document;




          (l) Opinions. The Insurer has received opinions of counsel to the Issuer and Triad
concerning the perfection of the Indenture Trustee’s security interest in the Trust Estate and
other matters under the laws of the United States, and has received copies of any opinions
delivered to the Rating Agencies, the Noteholders and the Indenture Trustee, in each case addressed
to, and in form and substance satisfactory to, the Insurer;




          (m) Satisfactory Documentation. The Insurer and its counsel have determined that all
documents, the Class A Notes and opinions to be delivered in connection with the Class A Notes
conform to the terms of the Indenture, the Offering Document, the Underwriting Agreement, the Sale
and Servicing Agreement, the Purchase Agreement and this Insurance Agreement; and




          (n) Additional Items. The Insurer has received such other documents, instruments,
approvals or opinions in form and substance reasonably satisfactory to the Insurer as are
reasonably requested by the Insurer, including evidence reasonably satisfactory to the Insurer that
the conditions precedent, if any, in the Transaction Documents have been satisfied.




          Section 3.2 Payment of Fees and Premium.




          (a) Legal and Accounting Fees. Triad shall pay or cause to be paid on the Closing
Date all reasonable legal fees, auditors’ fees and disbursements incurred by the Insurer in
connection with the issuance of the FSA Policy, the Swap Policy and the Transaction Documents
through the Closing Date. Additional fees of the Insurer’s counsel or auditors payable in
connection with the Transaction Documents incurred after the Closing Date shall be paid by Triad as
provided in Section 3.3 below.




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          (b) Rating Agency Fees. Triad shall promptly pay the initial fees of the Rating
Agencies with respect to the Class A Notes and the transactions contemplated hereby following
receipt of a statement with respect thereto, and shall pay or cause to be paid any subsequent fees
of the Rating Agencies with respect to, and directly allocable to, the Class A Notes. The Insurer
shall not be responsible for any fees or expenses of the Rating Agencies. The fees for any other
rating agency shall be paid by the party requesting such other rating agency’s rating.




          (c) Premium. In consideration of the issuance by the Insurer of the FSA Policy and
the Swap Policy, the Issuer shall pay or cause to be paid the Premiums to the Insurer as set forth
in the Fee Letter in accordance with the Indenture and this Insurance Agreement and from the funds
specified by Section 5.7 of the Sale and Servicing Agreement, commencing on the day the FSA Policy
is issued, until the FSA Policy and the Swap Policy have each been terminated in accordance with
their respective terms. The Premium paid pursuant to the Indenture and the Sale and Servicing
Agreement shall be nonrefundable without regard to whether any notice required in the FSA Policy or
the Swap Policy is delivered to the Insurer requiring the Insurer to make any payment under the FSA
Policy or the Swap Policy or any other circumstances relating to the Class A Notes or provision
being made for payment of the Class A Notes prior to maturity.




          Section 3.3 Reimbursement Obligation. (a) The Issuer agrees absolutely and
unconditionally to reimburse the Insurer for any amounts paid by the Insurer under the FSA Policy
and the Swap Policy, plus the amount of any other due and payable and unpaid Reimbursement Amounts,
which reimbursement shall be due and payable, on the date that any such amount is paid thereunder
in an amount equal to the amounts so paid and all amounts previously paid that remain unreimbursed,
together (without duplication) with interest on any and all amounts remaining unreimbursed (to the
extent permitted by law, if in respect of any unreimbursed amounts representing interest) from the
date such amounts became due until paid in full (after as well as before judgment), at a rate of
interest equal to the Late Payment Rate.




          (b) Each of the Issuer and Triad agrees, jointly and severally, to pay to the Insurer,
promptly, but in no event later than 30 days after demand thereof, as follows: any and all charges,
fees, costs and expenses, including reasonable attorneys’ and accountants’ fees and expenses, that
the Insurer may pay or incur in connection with the Transaction Documents, including (i) the
enforcement, defense or preservation of any rights in respect of any of the Transaction Documents,
defending, monitoring or participating in any litigation or proceeding (including any insolvency
proceeding in respect of any Triad Party or any Affiliate thereof) relating to any of the
Transaction Documents, any party to any of the Transaction Documents (in its capacity as such a
party) or the Transaction, the costs and fees of inspections by the Insurer or audits or field
examinations by accountants and the ongoing administration of the Transaction pursuant to the
Transaction Documents, (ii) the prepayment of any borrowings made or implementation or cancellation
of any financial contracts for limiting interest rate risk (including, without limitation, any
interest rate swaps and hedges) entered into in connection with, or (following an Event of Default)
in anticipation of, funding payments under the FSA Policy, or (iii) any amendment, waiver or other
similar action with respect to, or related to, any Transaction Document, whether or not executed or
completed.




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          (c) Each of the Issuer and Triad agrees, jointly and severally, to pay to the party to whom
such amounts are owed on demand interest at the Late Payment Rate on any and all amounts described
in Sections 3.3(b) and 3.4 after the date such amounts become due and payable until payment thereof
in full.




          (d) The Insurer acknowledges that any amounts payable by the Issuer pursuant to Sections
3.3(a), 3.3(b), 3.3(c) or 3.4(b) herein, are payable solely from amounts that are available to make
such payments pursuant to clause FOURTH of Section 5.6(a) of the Indenture and Sections
5.7(a)(vii),(viii) or (xi) of the Sale and Servicing Agreement, as applicable.




          Section 3.4 Indemnification. (a) In addition to any and all of the Insurer’s rights
of reimbursement, indemnification or subrogation, and to any other rights of the Insurer pursuant
hereto or under law or in equity, each of Triad and the Depositor agrees, jointly and severally, to
pay, and to protect, indemnify and save harmless, the Insurer and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls the Insurer within the
meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act
from and against, any and all claims, losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or expenses (including 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) any statement, omission or action (other than of the Insurer with respect to the
Insurer Information, or of the Underwriters with respect to the Underwriter Information) in
connection with the offering, issuance, sale or delivery of any of the Class A Notes;




     (ii) the negligence, bad faith, willful misconduct, misfeasance, malfeasance or theft
committed by any director, officer, employee or agent of any Triad Party in connection with
the Transaction;




     (iii) the violation by any Triad Party of any domestic or foreign law, rule or
regulation, or any judgment, order or decree applicable to them;




     (iv) the breach by any Triad Party of any representation, warranty or covenant under
any of the Transaction Documents (without giving effect to any materiality qualifier or
limitation therein);




     (v) the occurrence, in respect of Triad’s duties as the Servicer, under any of the
Transaction Documents of any Servicer Termination Event or any event which, with the giving
of notice or the lapse of time or both, would constitute any Servicer Termination Event; or




     (vi) any untrue statement or alleged untrue statement of a material fact contained in
the Offering Document or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar



25









 







as such claims, losses, liabilities (including penalties), actions, suits, judgments,
demands, damages, costs or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) arise out of or are based
upon any untrue statement or omission in the Offering Document in the information with
respect to (x) the Insurer Information and (y) the Underwriter Information.



          (b) In addition to any and all of the Insurer’s rights of reimbursement, indemnification or
subrogation, and to any other rights of the Insurer pursuant hereto or under law or in equity, the
Issuer agrees to pay, and to protect, indemnify and save harmless, the Insurer and its officers,
directors, shareholders, employees, agents and each Person, if any, who controls the Insurer within
the meaning of either Section 15 of the Securities Act or Section 20 of the Securities Exchange Act
from and against, any and all claims, losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or expenses (including 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, including by
reason of:





     (i) any statement, omission or action (other than of the Insurer with respect to the
Insurer Information, or of the Underwriter with respect to the Underwriter Information) in
connection with the offering, issuance, sale or delivery of any of the Class A Notes;




     (ii) the negligence, bad faith, willful misconduct, misfeasance, malfeasance or theft
committed by any director, officer, employee or agent of any Transaction Party in connection
with the Transaction;




     (iii) the violation by any Transaction Party of any domestic or foreign law, rule or
regulation, or any judgment, order or decree applicable to them;




     (iv) the breach by any Transaction Party of any representation, warranty or covenant
under any of the Transaction Documents (without giving effect to any materiality qualifier
or limitation therein); or




     (v) any untrue statement or alleged untrue statement of a material fact contained in
the Offering Document or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as such claims,
losses, liabilities (including penalties), actions, suits, judgments, demands, damages,
costs or expenses (including reasonable fees and expenses of attorneys, consultants and
auditors and reasonable costs of investigations) arise out of or are based upon any untrue
statement or omission in the Offering Document in the information with respect to (x) the
Insurer Information and (y) the Underwriter Information.



          (c) The Insurer agrees to pay, and to protect, indemnify and save harmless each of Triad, the
Depositor and the Issuer, and their respective officers, directors, shareholders,




26









 







employees, agents and each Person, if any, who controls Triad, the Depositor and the Issuer,
within the meaning of either Section 15 of the Securities Act or Section 20 of the Securities
Exchange Act from and against, any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses (including reasonable fees and
expenses of attorneys, consultants and auditors and reasonable costs of investigations) of any
nature arising out of or by reason of any untrue statement or alleged untrue statement of a
material fact contained in the Insurer Information in any Offering Document or any omission or
alleged omission to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were made, not
misleading.




          (d) If any action or proceeding (including any governmental investigation) shall be brought or
asserted against any Person (each, an “Indemnified Party”) in respect of which the
indemnity provided in Section 3.4(a), (b) or (c) may be sought from Triad, the Depositor, the
Issuer or the Insurer, as the case may be (the “Indemnifying Party”), each such Indemnified
Party shall promptly notify the Indemnifying Party in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all expenses and legal fees; provided that failure to
notify the Indemnifying Party shall not relieve it from any liability it may have to such
Indemnified Party except to the extent that it shall be actually prejudiced thereby. The
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 and may assume the
defense of any such action or claim in reasonable cooperation with, and with the reasonable
cooperation of, the Indemnifying Party; provided, however, that the fees and
expenses of separate counsel to the Indemnified Party in any such proceeding shall be at the
expense of the Indemnifying Party if (i) the Indemnifying Party has agreed to pay such fees and
expenses, (ii) the Indemnifying Party shall have failed to assume the defense of such action or
proceeding or employ counsel reasonably satisfactory to the Indemnified Party in any such action or
proceeding within a reasonable time after the commencement of such action or (iii) the named
parties to any such action or proceeding (including any impleaded parties) include both the
Indemnified Party and the Indemnifying Party, and the Indemnified Party shall have been advised by
counsel that there may be one or more legal defenses available to it which are different from or
additional to those available to the Indemnifying Party (in which case, if the Indemnified Party
notifies the Indemnifying Party in writing that it elects to employ separate counsel at the expense
of the Indemnifying Party, the Indemnifying Party 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
the Indemnifying Party 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 the Indemnified Party). The Indemnifying Party 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 the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed, but, if settled with its written consent, or if there is a final
judgment for the plaintiff in any such action or proceeding with respect to which the Indemnifying
Party shall have received notice in accordance with this subsection (d), the Indemnifying Party
agrees to indemnify and hold the





27









 







Indemnified Parties harmless from and against any loss or liability by reason of such
settlement or judgment.




          (e) To provide for just and equitable contribution if the indemnification provided by the
Indemnifying Party is determined to be unavailable or insufficient to hold harmless any Indemnified
Party (other than due to application of this Section), each Indemnifying Party shall contribute to
the losses incurred by the Indemnified Party on the basis of the relative fault of the Indemnifying
Party, on the one hand, and the Indemnified Party, on the other hand. The relative fault of each
Indemnifying Party, on the one hand, and each Indemnified Party, on the other, shall be determined
by reference to, among other things, whether the breach or alleged breach is within the control of
the Indemnifying Party or the Indemnified Party, and the parties relative intent, knowledge, access
to information and opportunity to correct or prevent such breach. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent misrepresentation.




          Section 3.5 Payment Procedure. In the event of any payment by the Insurer for which
reimbursement is sought under Section 3.3, the Issuer, Triad and the Indenture Trustee agree to
accept the voucher or other evidence of payment as prima facie evidence of the
propriety thereof and the liability, if any, described in Section 3.3 therefor to the Insurer;
provided, that with respect to claims for reimbursement of amounts other than amounts paid
by the Insurer under the FSA Policy or the Swap Policy and any interest thereon made to Triad under
Section 3.3(b), the Insurer will also provide appropriate supporting documents to Triad for such
claims. All payments to be made to the Insurer under this Insurance Agreement shall be made to the
Insurer (to such account as shall be specified by the Insurer in writing) by no later than 3:00
p.m. (New York time) on the date when due in lawful currency of the United States of America in
immediately available funds or as the Insurer shall otherwise direct by written notice to the party
making such payment. In the event that the date of any payment to the Insurer or the expiration of
any time period hereunder occurs on a day that is not a Business Day, then such payment or
expiration of time period shall be made or occur on the next succeeding Business Day with the same
force and effect as if such payment was made or time period expired on the scheduled date of
payment or expiration date.




          Section 3.6 Subrogation. The parties hereto acknowledge that, to the extent of any
payment made by the Insurer pursuant to the FSA Policy or the Swap Policy, the Insurer shall be
fully subrogated to the extent of such payment and any interest due thereon, to the rights of the
Noteholders to any moneys paid or payable in respect of the Class A Notes under the Transaction
Documents or otherwise subject to applicable law. The parties hereto agree to such subrogation and
further agree to execute such instruments and to take such actions as, in the sole and reasonable
judgment of the Insurer, are necessary to evidence such subrogation and to perfect the rights of
the Insurer to receive any such moneys paid or payable in respect of the Class A Notes or the Swap
Agreement, under the Transaction Documents or otherwise.




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ARTICLE IV




FURTHER AGREEMENTS




          Section 4.1 Effective Date; Term of the Insurance Agreement. This Insurance Agreement
shall take effect on the Closing Date and shall remain in effect until the later of (a) such time
as the Insurer is no longer subject to a claim under the FSA Policy and the Swap Policy and each
such policy has been surrendered to the Insurer for cancellation and (b) such time as all amounts
payable to the Insurer by the Triad Parties hereunder or under the Transaction Documents and the
Class A Notes have been irrevocably paid and redeemed in full and such Class A Notes have been
cancelled; provided, however, that the provisions of Sections 3.2, 3.3 and 3.4
hereof shall survive any termination of this Insurance Agreement.




          Section 4.2 Further Assurances and Corrective Instruments. (a) Unless an Insurer
Event of Default has occurred and is continuing, or except as the Indenture otherwise provides,
none of the Indenture Trustee and none of the other Transaction Parties shall grant any waiver of
rights under any of the Transaction Documents to which any of them is a party without the prior
written consent of the Insurer and any such waiver without prior written consent of the Insurer
shall be null and void and of no force or effect.




          (b) Each of the parties hereto agrees that it will, from time to time, execute, acknowledge
and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such
further instruments and agreements and take such further actions as the Insurer may reasonably
request and as may be required in the Insurer’s reasonable judgment to effectuate the intent and
purpose of this Insurance Agreement and the other Transaction Documents. Without limiting the
foregoing, to the extent such authorization shall be required by law, each Triad Party hereby
authorizes the Indenture Trustee and the Insurer, at the expense of the Issuer, in the event the
Issuer has failed to do so upon request (provided that no such request shall be required if
there exists any Insolvency Proceeding), to execute and file financing statements covering the
assets covered by any purchase or transfer pursuant to the Transaction Documents or owned by the
Issuer in such jurisdictions as may be required to confirm title thereto and perfect and maintain
the lien thereon. In addition, each of the parties hereto agrees to cooperate with the Rating
Agencies in connection with any review of the Transaction conducted during normal business hours
and in a manner that does not unreasonably disrupt the business of the Transaction Parties, that
may be undertaken by the Rating Agencies after the date hereof upon prior written notice.




          (c) None of the Transaction Parties shall cause or permit the Issuer to issue any notes or
other evidences of indebtedness, or to otherwise incur any indebtedness, other than the
indebtedness represented by the Class A Notes or other indebtedness expressly permitted under the
Transaction Documents.




          (d) Each Transaction Party shall concurrently provide the Insurer, as and when delivery
thereof is required to be made pursuant to the Transaction Documents, with copies of all reports,
notices, requests and demands delivered or required to be delivered by it pursuant to the
Transaction Documents.




29









 








          Section 4.3 Obligations Absolute. (a) The obligations of the Transaction Parties
hereunder shall be absolute and unconditional and shall be paid or performed strictly in accordance
with this Insurance Agreement and the other Transaction Documents under all circumstances
irrespective of:





     (i) any lack of validity or enforceability of, or any amendment or other modifications
of, or waiver with respect to, any of the Transaction Documents or the Class A Notes;




     (ii) any exchange or release of any other obligations hereunder;




     (iii) the existence of any claim, setoff, defense, reduction, abatement or other right
that a Transaction Party which is a party to any of the Transaction Documents may have at
any time against the Insurer or any other Person;




     (iv) any document presented in connection with the FSA Policy or the Swap Policy
proving to be forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;




     (v) any payment by the Insurer under the FSA Policy or the Swap Policy against
presentation of a certificate or other document that does not strictly comply with the terms
of the FSA Policy or the Swap Policy, as applicable;




     (vi) any failure of the Transaction Parties to receive the proceeds from the sale of
the Class A Notes;




     (vii) any Insolvency Event with respect to any Transaction Party; and




     (viii) any other circumstances, other than payment in full, that might otherwise
constitute a defense available to, or discharge of, such party in respect of any Transaction
Document.



          (b) The Transaction Parties and any and all others who are now or may become liable for all or
any part of the obligations of the Transaction Parties under this Insurance Agreement agree to be
bound by this Insurance Agreement and (i) to the extent permitted by law, waive and renounce any
and all redemption and exemption rights and the benefit of all valuation and appraisement
privileges against the indebtedness and obligations evidenced by any Transaction Document or by any
extension or renewal thereof; (ii) waive presentment and demand for payment, notices of nonpayment
and of dishonor, protest of dishonor and notice of protest; (iii) waive all notices in connection
with the delivery and acceptance hereof and all other notices in connection with the performance,
default or enforcement of any payment hereunder, except as required by the Transaction Documents;
(iv) waive all rights of abatement, diminution, postponement or deduction, all defenses, other than
payment, and all rights of setoff or recoupment arising out of any breach under any of the
Transaction Documents, by any party thereto or any beneficiary thereof, or out of any obligation at
any time owing to any of the Transaction Parties; (v) agree that their liabilities hereunder shall
be unconditional and without regard to any setoff, counterclaim or the liability of any other
Persons for the payment hereof; (vi) agree that any consent, waiver or forbearance hereunder with
respect to an event shall





30









 







operate only for such event and not for any subsequent event; (vii) consent to any and all
extensions of time that may be granted by the Insurer with respect to any payment hereunder or
other provisions hereof and to the release of any security at any time given for any payment
hereunder, or any part thereof, with or without substitution, and to the release of any Person or
entity liable for any such payment; and (viii) consent to the addition of any and all other makers,
endorsers, guarantors and other obligors for any payment hereunder, and to the acceptance of any
and all other security for any payment hereunder, and agree that the addition of any such obligors
or security shall not affect the liability of the parties hereto for any payment hereunder.




          (c) Nothing herein shall be construed as prohibiting any party hereto from pursuing any rights
or remedies it may have against any Person in a separate legal proceeding.




          Section 4.4 Assignments; Reinsurance; Third-Party Rights. (a) This Insurance
Agreement shall be a continuing obligation of the parties hereto and shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and permitted assigns.
None of the Transaction Parties may assign its rights under this Insurance Agreement, or delegate
any of its duties hereunder, without the prior written consent of the Insurer. Any assignments
made in violation of this Insurance Agreement shall be null and void.




          (b) The Insurer shall have the right to give participations in its rights under this Insurance
Agreement and to enter into contracts of reinsurance with respect to the FSA Policy and the Swap
Policy upon such terms and conditions as the Insurer may in its discretion determine;
provided, however, that no such participation or reinsurance agreement or
arrangement shall relieve the Insurer of any of its obligations hereunder or under the FSA Policy
or the Swap Policy, and provided, further, that any reinsurer or participant will
not have any rights against the Transaction Parties or the Holders and that none of the Transaction
Parties or the Holders shall have any obligation to have any communication or relationship with any
reinsurer or participant in order to enforce the obligations of the Insurer hereunder and under the
FSA Policy or the Swap Policy.




          (c) The Insurer shall be entitled to assign or pledge to any bank, other lender or reinsurer
providing liquidity or credit with respect to the Transaction or the obligations of the Insurer in
connection therewith, any rights of the Insurer under the Transaction Documents or with respect to
any real or personal property or other interests pledged to the Insurer or in which the Insurer has
a security interest, in connection with the Transaction, subject in each case to the liens granted
pursuant to the Transaction Documents; provided that no such bank or other lender shall
thereby obtain any direct right against Transaction Parties or the Holders, and further,
provided; that no such assignment or pledge shall give any assignee the right to exercise
any discretionary authority that the Transaction Documents provide shall be exercisable by the
Insurer or relieve the Insurer of any of its obligations hereunder or under the FSA Policy or the
Swap Policy.




          (d) Except as provided herein with respect to participants and reinsurers, nothing in this
Insurance Agreement shall confer any right, remedy or claim, express or implied, upon any Person
not a party hereto, including any Holders, other than the rights of the Insurer against the
Transaction Parties and all the terms, covenants, conditions, promises and agreements contained
herein shall be for the sole and exclusive benefit of the parties hereto and their





31









 







successors and permitted assigns. Neither the Indenture Trustee nor any Holders shall have
any right to payment from any Premiums paid or payable hereunder or under the Indenture or from any
amounts paid by the Issuer or Triad pursuant to Sections 3.2, 3.3 or 3.4 hereof.




          Section 4.5 Liability of the Insurer. Neither the Insurer nor any of its officers,
directors or employees shall be liable or responsible for: (a) the use that may be made of the FSA
Policy or the Swap Policy by the Indenture Trustee or any other party or for any acts or omissions
of the Indenture Trustee or any other party in connection therewith; or (b) the validity,
sufficiency, accuracy or genuineness of documents delivered to the Insurer in connection with any
claim under the FSA Policy or the Swap Policy, or of any signatures thereon, even if such documents
or signatures should in fact prove to be in any or all respects invalid, insufficient, fraudulent
or forged (unless the Insurer shall have actual knowledge thereof). In furtherance and not in
limitation of the foregoing, the Insurer may accept documents that appear on their face to be in
order, without responsibility for further investigation.




          Section 4.6 Purchase of Replacement Swap Agreement. In the event that the Swap
Agreement is terminated prior to its scheduled expiration in accordance with the terms of the Swap
Agreement, the Issuer shall at the request of the Insurer enter into a replacement swap agreement
(the “Replacement Swap Agreement”) in the form and substance satisfactory to the Insurer with a
replacement Swap Provider acceptable to the Insurer on the same terms as the Swap Agreement
executed on the Closing Date mutatis mutandis, or with such amendments to the terms as have been
approved by S&P, Moody’s and the Insurer.




          Section 4.7 Rights and Remedies. Each party to this Insurance Agreement has
acknowledged and agreed to, and hereby confirms its acknowledgement and agreement to, the sale and
assignment by the Seller to the Depositor, by the Depositor to the Issuer, and the pledge by the
Issuer to the Indenture Trustee, of all of its right, title and interest in, to and under the Trust
Estate, and the Transaction Documents and all of the Issuer’s rights, remedies, powers and
privileges and all claims of the Issuer or the Depositor, as the case may be, against the Seller,
of the Issuer against the Depositor and of the Issuer against the Depositor or the Seller, under or
with respect to the Transaction Documents (whether arising pursuant to the terms thereof or
otherwise available at law or in equity), including without limitation (whether or not any of a
Default or Event of Default under the Indenture, an Event of Default hereunder, a Servicer
Termination Event, a Trigger Event or a Spread Cap Event has occurred and is continuing) (i) the
right of the Issuer at any time to enforce the Transaction Documents against the Servicer, the
Depositor or the Seller and the obligations of the Servicer, the Seller and the Depositor
thereunder and (ii) the right at any time to give or withhold any and all consents, requests,
notices, directions, approvals, demands, extensions or waivers under or with respect to any
Transaction Document or the obligations in respect of the Issuer, the Servicer, the Depositor or
the Seller thereunder, all of which rights, remedies, powers, privileges and claims may,
notwithstanding any provision to the contrary by any of the Transaction Documents, be exercised
and/or enforced by the Indenture Trustee in lieu of and in the place and stead of the Depositor and
the Issuer to the same extent as the Depositor or the Issuer would otherwise do, and except to the
extent a Transaction Document provides that the Insurer shall not have such a right upon an Insurer
Default that has occurred and is continuing, neither the Depositor nor the Issuer may exercise any
of the foregoing rights without the prior written consent of the Insurer. Each party hereto
further acknowledges and agrees that, unless an Insurer Default has occurred and is





32









 







continuing, the Indenture Trustee will take or refrain from taking any action, and exercise or
refrain from exercising any rights under the Transaction Documents in its capacity as Indenture
Trustee pursuant to the written direction of the Insurer; provided, however, that
the obligations of the Indenture Trustee to take or refrain from taking, or to exercise or refrain
from exercising, any such action or rights shall not apply to routine administrative tasks required
to be performed by the Indenture Trustee pursuant to the Transaction Documents and shall be limited
to those actions and rights that can be exercised or taken (or not exercised or taken, as the case
may be) in full compliance with the provisions of the Transaction Documents and with applicable
law.




ARTICLE V




DEFAULTS AND REMEDIES




          Section 5.1 Defaults. The occurrence of any of the following events shall constitute
an “Event of Default” hereunder:




          (a) Any representation or warranty made by any of the Transaction Parties hereunder or under
the Transaction Documents, or in any certificate furnished hereunder or under the Transaction
Documents, prove to be untrue or misleading in any material respect; provided,
however, that if such Transaction Party effectively cures any such defect in any
representation or warranty under any Transaction Document or certificate or report furnished under
any Transaction Document, within the time period specified in the related Transaction Document as
the cure period therefor, such defect shall not in and of itself constitute an Event of Default;




          (b) (i) Any Transaction Party fails to pay or deposit when due any amount required to be paid
or deposited by it hereunder or under any other Transaction Document and such failure has continued
for a period of at least two (2) Business Days or, if so specified in the applicable Transaction
Document, the applicable grace period set forth therein, or (ii) a legislative body has enacted any
law that declares or a court of competent jurisdiction finds or rules that this Insurance Agreement
or any other Transaction Document is not valid and binding on the Transaction Parties hereto or
thereto;




          (c) The occurrence and continuance of an Event of Default under the Indenture or Servicer
Termination Event under the Sale and Servicing Agreement;




          (d) Any failure on the part of any Transaction Party duly to observe or perform in any
material respect any other of the covenants or agreements on the part of such Transaction Party
contained in this Insurance Agreement or in any other Transaction Document which continues
unremedied beyond any cure period provided therein, or, in the case of this Insurance Agreement,
for a period of 30 days after the earlier of the date on which written notice of such failure,
requiring the same to be remedied, has been given to Triad by the Insurer (with a copy to the
Indenture Trustee) or by the Indenture Trustee (with a copy to the Insurer), or a Responsible
Officer of such Transaction Party has actual knowledge thereof;




          (e) The entry of a decree or order by a court or agency or supervisory authority having
jurisdiction in the premises for appointment of a conservator, receiver or





33









 







liquidator or similar official for any Transaction Party which is a party to any Transaction
Document in any bankruptcy, insolvency, readjustment of debt, marshaling of assets and liabilities
or similar proceedings or for the winding up or liquidation of its respective affairs, and the
continuance of any such decree or order unstayed and in effect for a period of 30 consecutive days;




          (f) The consent by any Transaction Party to the appointment of a conservator or receiver or
liquidator or similar official in any bankruptcy, insolvency, readjustment of debt, marshaling of
assets and liabilities, or similar proceedings of or relating to such Transaction Party or relating
to all or substantially all of its respective property; or any such Transaction Party admits in
writing its inability to pay its debts generally as they become due, files a petition to take
advantage of any applicable bankruptcy, insolvency or reorganization statute, make an assignment
for the benefit of its creditors or voluntarily suspends payment of its obligations; or




          (g) The Swap Agreement is terminated and a replacement swap agreement that is acceptable to
the Insurer is not entered into within 40 days of the “Early Termination Date” (as defined in the
Swap Agreement); provided , however, that the occurrence of an Event of Default specified in this
clause (g) shall not result in a Servicer Termination Event under Section 9.1(f) of the Sale and
Servicing Agreement.




          Section 5.2 Remedies; No Remedy Exclusive. (a) Upon the occurrence of an Event of
Default hereunder, the Insurer may take whatever action at law or in equity as may appear necessary
or desirable in its judgment to collect the amounts, if any, then due under this Insurance
Agreement or any other Transaction Document or to enforce performance and observance of any
obligation, agreement or covenant of the Transaction Parties under this Insurance Agreement or any
other Transaction Document, either in its own capacity or as Controlling Party.




          (b) Unless otherwise expressly provided, no remedy herein conferred 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 this Insurance Agreement or any other Transaction Document,
or existing at law or in equity. No delay or omission to exercise any right or power accruing
under this Insurance Agreement or any other Transaction Document upon the happening of any event
set forth in Section 5.1 shall impair any such right or power or shall be construed to be a waiver
thereof, but any such right and power may be exercised from time to time and as often as may be
deemed expedient. In order to entitle the Insurer to exercise any remedy reserved to the Insurer
in this Article, it shall not be necessary to give any notice, other than such notice as may be
required by this Article.




          (c) Each party to this Insurance Agreement hereby agrees that, in addition to any other rights
or remedies existing in its favor, it shall be entitled to specific performance and/or injunctive
relief in order to enforce any of its rights or any obligation owed to it under the Transaction
Documents.




          Section 5.3 Waivers. (a) No failure by the Insurer to exercise, and no delay by the
Insurer in exercising, any right hereunder shall operate as a waiver thereof. The exercise by the
Insurer of any right hereunder shall not preclude the exercise of any other right, and the





34









 







remedies provided herein to the Insurer are declared in every case to be cumulative and not
exclusive of any remedies provided by law or equity.




          (b) The Insurer shall have the right, to be exercised in its complete discretion, to waive any
Event of Default hereunder, by a writing setting forth the terms, conditions and extent of such
waiver signed by the Insurer and delivered to Triad and the Indenture Trustee. Unless such writing
expressly provides to the contrary, any waiver so granted shall extend only to the specific event
or occurrence which gave rise to the Event of Default so waived and not to any other similar event
or occurrence which occurs subsequent to the date of such waiver.




ARTICLE VI




MISCELLANEOUS




          Section 6.1 Amendments, Etc. This Insurance Agreement may be amended, modified,
supplemented or terminated only by written instrument or written instruments signed by the parties
hereto. No consent of any reinsurer or participant contracted with by the Insurer pursuant to
Section 4.4(b) hereof shall be required hereunder for any amendment, modification, supplement or
termination hereof. Triad agrees to provide a copy of any amendment to this Insurance Agreement
promptly to the Rating Agencies. No act or course of dealing shall be deemed to constitute an
amendment, modification, supplement or termination hereof. Unless an Insurer Event of Default has
occurred and is continuing, the other Transaction Documents may be amended, modified or
supplemented only with the prior written consent of the Insurer and any amendment, modification or
supplement without such consent shall be null and void and of no force and effect.




          Section 6.2 Notices. All demands, notices and other communications to be given
hereunder shall be in writing (except as otherwise specifically provided herein) and shall be (i)
mailed by prepaid registered or certified mail, return receipt requested, or (ii) personally
delivered by messenger or overnight courier (with confirmation of receipt) and in either case
telecopied to the recipient as follows:




	 	 	 	 	 
	 

	 	(a)
	 	To the Insurer:
	 
	 	 	 	 
	 

	 	 	 	Financial Security Assurance Inc.
	 

	 	 	 	31 West 52nd Street
	 

	 	 	 	New York, New York 10019
	 

	 	 	 	Attention: Managing Director — Transaction Oversight
	 

	 	 	 	Re: Triad Automobile Receivables Trust 2007-A
	 

	 	 	 	Policy No.: 51840A-N or 51840B-N
	 

	 	 	 	Telecopy No.: (212) 339-3518
	 

	 	 	 	Confirmation: (212) 826-0100
	 
	 	 	 	 
	 

	 	 	 	(in each case in which notice or other communication to the Insurer refers
to a Servicer Termination Event, an Event of Default hereunder, a Default or
Event of Default under the Indenture, a Trigger Event or a Spread Cap Event,
a claim on the FSA Policy or the Swap Policy or any event with






35









 






	 	 	 	 	 
	 

	 	 	 	respect to which failure on the part of the Insurer to respond shall be
deemed to constitute consent or acceptance, then a copy of such notice or
other communication shall also be sent to the attention of the general
counsel of each of the Insurer and the Indenture Trustee and shall be marked
to indicate “URGENT MATERIAL ENCLOSED.”)






	 	 	 	 	 	 	 
	 

	 	(b)
	 	To Triad:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	Triad Financial Corporation
	 	 	 	 	7711 Center Avenue, Suite 100
	 	 	 	 	Huntington Beach, CA 92647
	 	 	 	 	Attention: Mike L. Wilhelms, Chief Financial Officer
	 	 	 	 	Telephone: 714-373-3800, extension 22284
	 	 	 	 	Facsimile: 714-894-8617
	 

	 	 	 	with a copy to the attention of:
	 	Timothy O’Connor, General Counsel
	 

	 	 	 	 	 	Telecopy No.: 714-934-6062
	 
	 	 	 	 	 	 
	 

	 	(c)
	 	To the Issuer:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	Triad Automobile Receivables Trust 2007-A
	 

	 	 	 	in care of:
	 	Wilmington Trust Company, as Owner Trustee
	 

	 	 	 	 	 	1100 North Market Street
	 

	 	 	 	 	 	Wilmington, DE 19890
	 

	 	 	 	 	 	Attention: Corporate Trust
	 

	 	 	 	 	 	             
    Administration
	 

	 	 	 	 	 	Telephone: (302) 651-1000
	 

	 	 	 	 	 	Facsimile: (302) 636-4140
	 

	 	 	 	with a copy to the attention of:
	 	Triad Financial Corporation
	 

	 	 	 	 	 	7711 Center Avenue, Suite 100
	 

	 	 	 	 	 	Huntington Beach, CA 92647
	 

	 	 	 	 	 	Attention: Timothy O’Connor
	 

	 	 	 	 	 	             
   General Counsel
	 

	 	 	 	 	 	Telecopy No.: 714-934-6062
	 
	 	 	 	 	 	 
	 	 	(d)	 	To the Indenture Trustee:
	 
	 	 	 	 	 	 
	 

	 	 	 	Citibank, N.A.	 	 
	 	 	 	 	388 Greenwich Street, 14th Floor
	 

	 	 	 	New York, NY 10013	 	 
	 	 	 	 	Attention: Structured Finance Agency and
	 

	 	 	 	             
  Trust – Triad 2007-A	 	 
	 

	 	 	 	Phone: 800-422-2066
	 	 
	 

	 	 	 	Facsimile: 212-816-5527	 	 





A party may specify an additional or different address or addresses by writing mailed or delivered
to the other parties as aforesaid. All such notices and other communications shall be effective
upon receipt.




36









 








          Section 6.3 Severability. In the event that any provision of this Insurance Agreement
is held invalid or unenforceable by any court of competent jurisdiction, the parties hereto agree
that such holding shall not invalidate or render unenforceable any other provision hereof. The
parties hereto further agree that the holding by any court of competent jurisdiction that any
remedy pursued by any party hereto is unavailable or unenforceable shall not affect in any way the
ability of such party to pursue any other remedy available to it.




          Section 6.4 Governing Law. This Insurance Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to conflicts of laws
provisions.




          Section 6.5 Consent to Jurisdiction. (a) THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT
TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND
ANY COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE
COURT FROM ANY THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND TO OR IN
CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTION OR FOR RECOGNITION OR
ENFORCEMENT OF ANY JUDGMENT RELATING THERETO, AND THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING SHALL BE HEARD OR
DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT.
THE PARTIES AGREE THAT A FINAL NONAPPEALABLE JUDGMENT IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL
BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY WAIVE AND
AGREE NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION OR
PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, THAT
THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER OR THAT THE RELATED DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY
NOT BE LITIGATED IN OR BY SUCH COURTS.




          (b) To the extent permitted by applicable law, the parties shall not seek and hereby waive the
right to any review of the judgment of any such court by any court of any other nation or
jurisdiction which may be called upon to grant an enforcement of such judgment.




          (c) Service on any party hereto may be made by mailing or delivering copies of the summons and
complaint and other process which may be served in any suit, action or proceeding to such party at
its address listed in Section 6.2 herein. Such address may be changed by the applicable party or
parties by written notice to each of the other parties hereto.




          (d) Nothing contained in this Insurance Agreement shall limit or affect any party’s right to
serve process in any other manner permitted by law or to start legal proceedings





37









 







relating to any of the Transaction Documents against any other party or its properties in the
courts of any jurisdiction.




          Section 6.6 Consent of the Insurer. In the event that the consent of the Insurer is
required under any of the Transaction Documents, the determination whether to grant or withhold
such consent shall be made by the Insurer in writing and in its sole discretion except to the
extent such consent of the Insurer pursuant to the terms of the applicable Transaction Document may
not be unreasonably withheld, and without any implied duty towards any other Person.




          Section 6.7 Counterparts. This Insurance Agreement may be executed in counterparts by
the parties hereto, and all such counterparts shall constitute one and the same instrument.




          Section 6.8 Headings. The headings of Articles and Sections and the Table of Contents
contained in this Insurance Agreement are provided for convenience only. They form no part of this
Insurance Agreement and shall not affect its construction or interpretation.




          Section 6.9 Trial by Jury Waived. Each party hereby waives, to the fullest extent
permitted by law, any right to a trial by jury in respect of any litigation arising directly or
indirectly out of, under or in connection with any of the Transaction Documents or any of the
transactions contemplated thereunder. Each party hereto (a) certifies that no representative,
agent or attorney of any party hereto has represented, expressly or otherwise, that it would not,
in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it has
been induced to enter into the Transaction Documents to which it is a party by, among other things,
this waiver.




          Section 6.10 Limited Liability. No recourse under any Transaction Document shall be
had against, and no personal liability shall attach to, any officer, employee, director, affiliate
or shareholder of the Insurer or any other party hereto, as such, by the enforcement of any
assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise in
respect of any of the Transaction Documents (including the Class A Notes, the FSA Policy and the
Swap Policy), it being expressly agreed and understood that each Transaction Document is solely a
corporate obligation of each party hereto, and that any and all personal liability, either at
common law or in equity, or by statute or constitution, of every such officer, employee, director,
affiliate or shareholder for breaches of any party hereto of any obligations under any Transaction
Document is hereby expressly waived as a condition of and in consideration for the execution and
delivery of this Insurance Agreement.




          Section 6.11 Entire Agreement: Facsimile Signatures. This Insurance Agreement, the
Fee Letter, the FSA Policy and the Swap Policy set forth the entire agreement between the parties
with respect to the subject matter hereof and thereof, and supersede and replace any agreement or
understanding that may have existed between the parties prior to the date hereof in respect of such
subject matter. Execution and delivery of this Insurance Agreement by facsimile signature shall
constitute execution and delivery of this Insurance Agreement for all purposes hereof with the same
force and effect as execution and delivery of a manually signed copy hereof.




38









 








          Section 6.12 Indenture Trustee. The Indenture Trustee hereby acknowledges and agrees
to perform all its obligations and duties pursuant to the Transaction Documents to which it is a
party.




          Section 6.13 Third-Party Beneficiary. Each of the parties hereto agrees that the
Insurer shall have all rights of an intended third-party beneficiary in respect of each of the
Transaction Documents, including, subject to the provisions of the Transaction Documents, the right
to enforce the respective obligations of the parties thereunder.




          Section 6.14 No Proceedings. Each of the parties hereto agrees that it will not
institute against the Issuer or the Depositor any involuntary proceeding or otherwise institute any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceeding
under any federal or state bankruptcy or similar law until the date which is one year and one day
or, if longer, the then applicable preference period plus one day, since the last day on which any
Class A Notes shall have been outstanding and all amounts payable to the Insurer hereunder shall
have been paid in full.




          Section 6.15 Limitation of Owner Trustee Liability. It is expressly understood and
agreed by the parties hereto that (a) this document is executed and delivered by Wilmington Trust
Company, not individually or personally, but solely as Owner Trustee, in the exercise of the powers
and authority conferred and vested in it, pursuant to the Trust Agreement for Triad Automobile
Receivables Trust 2007-A, (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 hereto and by
any person claiming by, through or under the parties hereto, 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 undertaken by the Issuer under this Agreement or any other related documents.




[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]





39









 








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




	 	 	 	 	 	 	 
	 	 	FINANCIAL SECURITY ASSURANCE INC., as 

     Insurer	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Ravi Ghandi	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Ravi Ghandi

Title: Managing Director	 	 
	 
	 	 	 	 	 	 
	 	 	TRIAD AUTOMOBILE RECEIVABLES TRUST 

       2007-A,	 	 
	 

	 	 	 	as Issuer	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	WILMINGTON TRUST COMPANY,	 	 
	 

	 	 	 	not in its individual capacity,	 	 
	 

	 	 	 	but solely as Owner Trustee	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ J. Christopher Murphy	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: J. Christopher Murphy 

Title:  Financial Services Officer	 	 
	 
	 	 	 	 	 	 
	 	 	TRIAD FINANCIAL SPECIAL PURPOSE LLC, as 

       Depositor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mike L. Wilhelms	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Mike L. Wilhelms 

Title: Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	TRIAD FINANCIAL CORPORATION,
as Seller and 

       Servicer	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mike L. Wilhelms	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Mike L. Wilhelms 

Title: Senior Vice President and Chief Financial Officer







40









 






	 	 	 	 	 	 	 
	 	 	CITIBANK, N.A.	 	 
	 

	 	 	 	not in its individual capacity, but solely

as Indenture Trustee	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John Hannon	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: John Hannon

Title: Vice President	 	 






41