Document:

exv10w2

 

EXHIBIT 10.2

INSURANCE AND INDEMNITY AGREEMENT

Dated as of October 18, 2006

AMBAC ASSURANCE CORPORATION,

as Insurer,

TRIAD AUTOMOBILE RECEIVABLES TRUST 2006-C,

as Issuing Entity,

TRIAD FINANCIAL CORPORATION,

as Sponsor and Servicer,

TRIAD FINANCIAL SPECIAL PURPOSE LLC,

as Depositor,

and

CITIBANK, N.A.

as Indenture Trustee

Triad Automobile Receivables Trust 2006-C

Class A Asset Backed Notes

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page	 
	 	 	ARTICLE I
	 	 	 	 
	 	 	 
	 	 	 	 
	 	 	DEFINITIONS
	 	 	 	 
	Section 1.1
Section 1.2
	 	Defined Terms 

Other Definitional Provisions

	 	 	1

9	 
	 	 	 
	 	 	 	 
	 	 	ARTICLE II
	 	 	 	 
	 	 	 
	 	 	 	 
	 	 	REPRESENTATIONS, WARRANTIES AND COVENANTS
	 	 	 	 
	 	 	 
	 	 	 	 
	Section 2.1
	 	Representations and Warranties of the Sponsor and Servicer

	 	 	9	 
	Section 2.2
	 	Affirmative Covenants of Sponsor and Servicer

	 	 	10	 
	Section 2.3
	 	Negative Covenants of the Sponsor and Servicer

	 	 	14	 
	Section 2.4
	 	Representations and Warranties of the Insurer

	 	 	15	 
	Section 2.5
	 	Representations and Warranties of the Depositor and the Issuing Entity

	 	 	15	 
	Section 2.6
	 	Affirmative Covenants of the Depositor and the Issuing Entity

	 	 	16	 
	Section 2.7
	 	Negative Covenants of the Depositor and the Issuing Entity

	 	 	20	 
	 	 	 
	 	 	 	 
	 	 	ARTICLE III
	 	 	 	 
	 	 	 
	 	 	 	 
	 	 	THE AMBAC POLICY; REIMBURSEMENT
	 	 	 	 
	 	 	 
	 	 	 	 
	Section 3.1
	 	Issuance of the Ambac Policy

	 	 	21	 
	Section 3.2
	 	Payment of Fees and Premium

	 	 	23	 
	Section 3.3
	 	Reimbursement Obligation

	 	 	23	 
	Section 3.4
	 	Indemnification

	 	 	24	 
	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

	 	 	28	 
	Section 4.2
	 	Further Assurances and Corrective Instruments

	 	 	28	 
	Section 4.3
	 	Obligations Absolute

	 	 	29	 
	Section 4.4
	 	Assignments; Reinsurance; Third-Party Rights

	 	 	30	 
	Section 4.5
	 	Liability of the Insurer

	 	 	31	 
	Section 4.6
	 	Regulation AB

	 	 	31	 
	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

	 	 	36	 
	Section 6.4
	 	Governing Law

	 	 	37	 
	Section 6.5
	 	Consent to Jurisdiction

	 	 	37	 
	Section 6.6
	 	Consent of the Insurer

	 	 	37	 
	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

	 	 	38	 
	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
	 	Form of Ambac Policy

	 	A-1	 
	 
	EXHIBIT B
	 	Triad Automobile Receivables Trust 2006-C Consolidated

	 	 	 
	 
	 	
Tangible Net Worth Calculation Pro-forma June 30, 2006

	 	B-1	 
	 
	EXHIBIT C
	 	Triad Automobile Receivables Trust 2006-C Consolidated

	 	 	 
	 
	 	
Tangible Net Worth Calculation as of [   ] [2006]

	 	C-1	 
	 
	EXHIBIT D
	 	Triad Automobile Receivables Trust 2006-C Tangible Net Worth Floor

	 	D-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 October 18, 2006, by and among AMBAC
ASSURANCE CORPORATION, as Insurer (the “Insurer”), TRIAD AUTOMOBILE RECEIVABLES TRUST
2006-C, as Issuing Entity (the “Issuing Entity”), TRIAD FINANCIAL CORPORATION
(“Triad”), as Sponsor and Servicer (the “Sponsor” and “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 October 18, 2006, by and between the Issuing Entity and the
Indenture Trustee (the “Indenture”), provides for, among other things, the issuance of the
Triad Automobile Receivables Trust 2006-C Class A Asset Backed Notes.

          B. The parties hereto desire that the Insurer issue the Ambac Policy to the Indenture Trustee
for the benefit of the Holders 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 Ambac
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.

          “Ambac” means Ambac Assurance Corporation, a Wisconsin domiciled stock insurance
corporation.

          “Ambac Policy” means the Note Guaranty Insurance Policy No. AB1038BE dated October 18,
2006, including any endorsements thereto, issued by the Insurer to the

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Indenture Trustee with respect to the Class A Notes, for the benefit of the Holders, in the
form attached as Exhibit A to this Insurance Agreement.

          “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.

          “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 5.3409% 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 5.40% 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 5.26% 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 5.31% Asset Backed Notes, issued pursuant to the
Indenture and substantially in the form attached as an Exhibit to the Indenture.

          “Closing Date” means October 18, 2006.

          “Collection Period” means, (i) with respect to the first Distribution Date, the period
beginning on the close of business on September 30, 2006 and ending on the close of business on
October 31, 2006, 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 subsidiaries (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 B; 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

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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
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 last day of the
then-current Collection Period.

          “Cut-off Date” means September 30, 2006.

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          “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
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, of, if such day is not a Business Day, the immediately following
Business Day, commencing November 13, 2006.

          “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 Issuing Entity 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.

          “Holder” has the meaning given thereto in the Ambac 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 October 18, 2006 between the Issuing
Entity 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,

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trustee or similar official shall have been, or may be, appointed or requested for a person or
any of its assets.

          “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 Ambac and any successor thereto, as issuer of the Ambac 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 Insurer” including any information incorporated therein by reference and “The Policy”
in the Preliminary Prospectus Supplement and the Prospectus Supplement.

          “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 Issuing Entity
(considered separately) or the Issuing Entity, the Sponsor, 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 Issuing Entity 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

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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.

          “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 October 10, 2006 (the “Preliminary Prospectus Supplement”), the Preliminary
Prospectus, dated October 10, 2006, the Prospectus Supplement, dated October 13, 2006 (the
“Prospectus Supplement”), and the Prospectus, dated October 10, 2006, of the Issuing
Entity, 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 Ambac 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 among Triad Financial Special
Purpose LLC and Triad, dated as of October 18, 2006, as such Purchase Agreement may be amended or
supplemented from time to time.

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          “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 successor servicer, as the result of a breach
of a covenant or as an exercise of its optional redemption right.

          “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.

          “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
October 18, 2006, among the Issuing Entity, the Depositor, Triad as Servicer and Custodian, and the
Indenture Trustee and 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.

          “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.

          “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.

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          “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.

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

          “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 D 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.

          “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 and all other documents and certificates delivered in connection therewith except for the
Ambac 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 Issuing Entity, Triad, the Servicer, the Depositor and
the Holder of the Residual Certificate (collectively, the “Triad Parties”);
provided, however, that solely with respect to the definition of “Triad Party” as
such term is used in the Ambac Policy, “Triad Party” shall have the meaning as specified therein.

8

 

          “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 June 9, 2006, among Triad, as
Administrator, the Depositor and the Owner Trustee, as amended and restated as of October 18, 2006
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 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 October 13, 2006
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 “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 Sponsor 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

9

 

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 Issuing Entity 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 Issuing Entity 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 Issuing Entity 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 Issuing Entity 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 Sponsor 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 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.

10

 

          (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 which would 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.

          (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 or any other assets in the Trust Estate, as the
case may be, or its obligations under the Transaction Documents;

11

 

     (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 Sponsor 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 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 Sponsor 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

12

 

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.

     (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

13

 

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 Ambac 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 Issuing Entity 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 Sponsor 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 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

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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 Issuing Entity and each other
Transaction Party as follows:

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

          (b) Corporate Power. The Insurer has the corporate power and authority to issue the
Ambac 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 Ambac 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 Ambac Policy have been obtained or are not material to the enforceability of
the Ambac Policy.

          (d) Enforceability. The Ambac 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 would
materially and adversely affect its ability to perform its obligations under the Ambac 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.

          Section 2.5 Representations and Warranties of the Depositor and the Issuing Entity.
Each of the Depositor and the Issuing Entity hereby makes, to and for the benefit of the Insurer,
each of the representations and warranties made by the Depositor or the Issuing Entity,

15

 

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 Issuing Entity 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 Issuing Entity 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 Issuing Entity 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.

          Section 2.6 Affirmative Covenants of the Depositor and the Issuing Entity. Each of
the Depositor and the Issuing Entity hereby makes, to and for the benefit of the Insurer, all of
the covenants of the Depositor or the Issuing Entity, 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 Issuing Entity). 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 Issuing Entity
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

16

 

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 Issuing Entity 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 Issuing Entity’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 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 Issuing Entity 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 Issuing Entity, 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 which would reasonably likely to have a Material Adverse Effect;

17

 

     (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

     (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 Issuing
Entity, 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
Issuing Entity, 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.

18

 

          (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 Sponsor;

     (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 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

19

 

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 Issuing Entity. Each of the
Depositor and the Issuing Entity 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 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 Issuing Entity, 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.

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          (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 Issuing
Entity 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 Sponsor;

     (iv) not incur, assume or guarantee any indebtedness except for such indebtedness as
may be incurred by the Issuing Entity 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.

ARTICLE III

THE AMBAC POLICY; REIMBURSEMENT

          Section 3.1 Issuance of the Ambac Policy. The Insurer agrees to issue the Ambac
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 and of each Transaction Document fully executed and delivered by each applicable Transaction
Party;

          (c) Representations and Warranties; Certificate. The representations and warranties
of the Triad Parties set forth or incorporated by reference in this Insurance Agreement

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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;

          (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 Ambac 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 Ambac Policy, the Class A Notes
will have a shadow rating of at least “BBB” from S&P and “Baa2” 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 Issuing Entity have
executed the Fee Letter;

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

          (l) Opinions. The Insurer has received opinions of counsel to the Issuing Entity 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;

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          (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 Ambac 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.

          (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 Ambac Policy, the
Issuing Entity 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 Ambac Policy is
issued, until the Ambac Policy has been terminated in accordance with its terms. The Premium paid
pursuant to the Indenture and the Sale and Servicing Agreement shall be nonrefundable without
regard to whether any Notice (as defined in the Ambac Policy) is delivered to the Insurer requiring
the Insurer to make any payment under the Ambac 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 Issuing Entity agrees absolutely and
unconditionally to reimburse the Insurer for any amounts paid by the Insurer under the Ambac
Policy, plus the amount of any other due and payable and unpaid Reimbursement Amounts (as defined
in the Ambac Policy), 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

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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 Issuing Entity 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, or (ii) any amendment, waiver or other similar action with respect to, or
related to, any Transaction Document, whether or not executed or completed.

          (c) Each of the Issuing Entity 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 Issuing Entity 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)(vi),(vii) or (x) 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;

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     (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 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
Issuing Entity 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;

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     (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 Issuing Entity, and their respective officers, directors, shareholders,
employees, agents and each Person, if any, who controls Triad, the Depositor and the Issuing
Entity, 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 or any omission or alleged omission to state in
the Insurer Information a material fact required to be stated therein or necessary to make the
statements in the Insurer Information, in light of the circumstances under which they were made,
not misleading.

          (d) The Insurer agrees to pay, and to protect, indemnify and save harmless, the Depositor and
the Issuing Entity and each of their officers, directors, shareholders, employees, agents and each
Person, if any, who controls the Depositor or the Issuing Entity 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 of a material fact or an omission to state a material fact necessary in order to
make the statements therein in light of the circumstances in which they were made not misleading
contained in the consolidated financial statements of the Insurer incorporated by reference into
the Issuing Entity’s Regulation AB periodic reports pursuant to Section 4.6 of this Agreement.

          (e) 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), (c) or (d) may be sought from Triad, the Depositor, the
Issuing Entity 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

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

          (f) 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.

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          Section 3.5 Payment Procedure. In the event of any payment by the Insurer for which
reimbursement is sought under Section 3.3, the Issuing Entity, 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 Ambac 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 Ambac 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, under the Transaction
Documents or otherwise.

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 Ambac Policy and 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.

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          (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 Issuing Entity, in the
event the Issuing Entity 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 Issuing Entity 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 Issuing Entity 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.

          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 Ambac Policy proving to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;

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

     (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 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.

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          (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 Ambac 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 Ambac 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 Ambac 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 Ambac 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 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
Issuing Entity 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
Ambac 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 Ambac 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 Regulation AB. The Insurer agrees that all consolidated financial
statements of Ambac Assurance Corporation and subsidiaries included in documents filed by Ambac
Financial Group, Inc. with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, may be incorporated by reference into any Form 8-K,
Form 10-D or Form 10-K filed by the Depositor, solely to the extent required under Regulation AB.
It is understood and agreed that, to the extent any consent letter of the Insurer’s

31

 

accountants is required by the Depositor in connection with such filing, solely to the extent
required under the Securities Exchange Act of 1934, as may be amended, the Insurer agrees that it
will use commercially reasonable efforts to cause its accountants to provide such consent letter,
provided, however, the fees and expenses payable in respect thereof shall be paid by Triad upon
demand.

          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
collateral sale and assignment by the Sponsor to the Depositor, by the Depositor to the Issuing
Entity, and the pledge by the Issuing Entity 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
Issuing Entity’s rights, remedies, powers and privileges and all claims of the Issuing Entity or
the Depositor, as the case may be, against the Sponsor, of the Issuing Entity against the Depositor
and of the Issuing Entity against the Depositor or the Sponsor, 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 Issuing Entity at any
time to enforce the Transaction Documents against the Servicer, the Depositor or the Sponsor and
the obligations of the Servicer, the Sponsor 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 Issuing Entity, the Servicer, the Depositor or the Sponsor 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 Issuing Entity to the same extent as the
Depositor or the Issuing Entity 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 Issuing Entity 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 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.

32

 

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 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; or

          (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

33

 

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.

          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 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.

34

 

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 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:

Ambac Assurance Corporation

One State Street Plaza

New York, New York 10004

Attention: Structured Finance Department — ABS

Telecopy No.: 212-208-3547

Confirmation: 212-668-0340

			
	                with a copy to the attention of:	 	Michael Babick, First Vice President

Telecopy No.: 212-363-1459

Confirmation: 212-208-3407

(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 Ambac Policy or any event with respect to which failure on
the part of the Insurer to respond shall be deemed to constitute consent or
acceptance, then a copy of such notice or other communication 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.”)

35

 

          (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 Issuing Entity:

Triad Automobile Receivables Trust 2006-C

			
	                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: Structure Finance Agency and Trust — Triad 2006-C

Phone: 1-800-422-2066

Facsimile: 1-212-816-5527

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.

          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

36

 

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 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

37

 

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 and the Ambac 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 and the Ambac 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.

          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 thereto.

38

 

          Section 6.13 Third-Party Beneficiary. Subject to the provisions of the Transaction
Documents, 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 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 Issuing Entity 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 2006-C, (b) each of the representations, undertakings and agreements herein made
on the part of the Issuing Entity 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 Issuing Entity, (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 Issuing Entity or be liable for the breach or failure of any
obligation, representation, warranty or covenant made or undertaken by the Issuing Entity under
this Agreement or any other related documents.

          ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR OTHER PERSON
FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM CONTAINING ANY MATERIALLY FALSE
INFORMATION, OR CONCEALS FOR THE PURPOSE OF MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL
THERETO, COMMITS A FRAUDULENT INSURANCE ACT, WHICH IS A CRIME AND SHALL ALSO BE SUBJECT TO A CIVIL
PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS AND THE STATED VALUE OF THE CLAIM FOR EACH SUCH
VIOLATION.

[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.

	 	 	 	 	 
	 	AMBAC ASSURANCE CORPORATION, as Insurer

 	 
	 	By:  	/s/ Michael N. Babick
 	 
	 	 	Name:  	Michael N. Babick 	 
	 	 	Title:  	Managing Director 	 
	 
	 	TRIAD AUTOMOBILE RECEIVABLES TRUST 2006-C,

  as Issuing Entity

 	 
	 	By:  	 WILMINGTON TRUST COMPANY,
 	 
	 	 	not in its individual capacity, 	 
	 	 	but solely as Owner Trustee 	 
	 	 
	 
	 	By:  	/s/ Robert J. Perkins
 	 
	 	 	Name:  	Robert J. Perkins 	 
	 	 	Title:  	Sr. 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 Sponsor 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 	 
	 

41ex4-15.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing

SETTLEMENT AGREEMENT AND MUTUAL RELEASE

     KNOW ALL MEN BY THESE PRESENTS that Erika Bender (hereinafter “Bender”) and USA Technologies, Inc., a Pennsylvania Corporation (hereinafter “USAT”), desire to amicably and fully and finally to settle all matters between them and hereby agree as follows:

     1. For and in consideration of the total gross sum of Thirty-Six Thousand Dollars ($36,000.00), payable with $18,000 in cash and $18,000 in USAT restricted stock, Bender does hereby remise, release and forever discharge USAT and Stitch Networks Corporation, a Delaware Corporation, and their past, present and future successors, assigns, trustees, officers, directors, employees, insurers, attorneys and agents (hereafter the “Released Parties”), of and from all actions, causes of action, demands, or claims of any kind, whether in law or in equity, direct or indirect, known or unknown which Bender ever had or now has against the Released Parties. This Release specifically includes, but is not limited to: 

     a. all claims that were asserted by Bender, or could have been asserted by Bender, in the court action filed by her in the Court of Common Pleas of Chester County, Pennsylvania, No. 04-08644(hereinafter the “court action”);

     b. any and all claims related in any way to Bender’s employment with USAT and for the termination of Bender’s employment with USAT;

     c. any and all rights, interests, and claims under USAT’s policies, procedures, manuals and handbooks;

     d. any and all claims for wages and benefits (including without limitation salary, commissions, vacation pay, severance pay, expenses, incentive pay, disability pay, pay differential, pay continuation, health and welfare benefits and bonuses);

     e. any and all claims under the Pennsylvania Wage Payment and Collection Law, the Pennsylvania Wage and Hour Law and the U.S. Fair Labor Standards Act;

     f. any and all claims for alleged discrimination or harassment on the basis of age, race, religion, sex, national origin, color, creed, citizenship, sexual orientation and/or disability, in violation of any federal, state or local statute, 

1

ordinance, judicial precedent or executive order, including but not limited to claims under The Age Discrimination in Employment Act, as amended, 29 U.S.C. § 621 et. seq. the Older Workers Benefit Protection Act; Title VII of the U.S. Civil Rights Act of 1964; the U.S. Civil Rights Act of 1991; the U.S. Americans with Disabilities Act; the Pennsylvania Human Relations Act; and any claims for retaliation thereunder;

     g. any and all claims under any federal or state statute relating to Bender’s benefits or pensions, including, but not limited to, claims under the Employee Retirement Income Security Act of 1974 (“ERISA”);

     h. any claims under the Family and Medical Leave Act of 1993 and/or any other similar state or local laws;

     i. any claims under the Worker Adjustment and Retraining Notification Act and/or any other similar state or local laws;

     j. any and all claims for breach of contract;

     k. any and all claims in tort;

     l. any and all claims for equitable relief, including reinstatement, accounting or injunctive relief;

     m. any and all claims for any type of damages, including but not limited to back pay, front pay, compensatory damages and punitive damages; and

     n. any and all claims for attorney’s fees and costs.

     2. Notwithstanding the other terms of this Release, Bender does not remit, release or discharge any rights or claims to the shares of USAT stock previously issued to Bender prior to the signing of this Release. Likewise, Bender does not remit, release or discharge her rights under the stock option certificate granted to Bender by USAT dated May 14, 2002. Bender may exercise the options so granted by that certificate pursuant to the terms and conditions of such certificate. It is specifically agreed that such terms and provisions survive this Settlement Agreement and Release. Bender does release the Released Parties for any and all claims relating to the granting of those stock options, her previous purchase of USAT stock and any and all claims relating to the purchase of USAT stock pursuant to those stock options. 

2

     3. Bender understands that the $36,000 settlement will be payable as follows: (a) cash payment to Bender in the amount of $18,000 upon execution and delivery to USAT’s counsel of this
Settlement Agreement and Release; and (b) the delivery to Bender of shares of restricted USAT common stock having a value of $18,000 within five (5) business days of the execution and delivery to USAT’s counsel of this Settlement Agreement
and Release. The shares will be valued based upon the average closing bid price of the USAT Common Stock for the thirty (30) trading days immediately preceding the date of the delivery by Bender of this executed Settlement Agreement and Release.
Bender understands that the USAT Common Stock to be delivered to her represents restricted stock as such term is defined under Rule 144 promulgated under the Securities Act of 1933 (the “Act”). Bender also understands that the USAT Common
Stock cannot be sold or transferred by her unless and until the shares are registered under the Act or pursuant to an exception from registration. USAT agrees to include the USAT Common Stock issued to Bender in its next registration statement to be
filed by USAT under the Act. Bender understands that she can only sell the stock upon the earlier of the following two events: (1) the effective date of the next registration statement filed by USAT with the Securities and Exchange Commission; or
(2) one year after the stock is transferred by USAT to Bender pursuant to Rule 144 promulgated under the Act.

     4. Bender understands that USAT will issue a Form 1099 to Bender for the above referenced payment and Bender will be responsible for payment of all taxes due for the payment. Bender acknowledges
that she is responsible for all tax obligations, including but not limited to reporting and payment of all income or other taxes arising out of the payments hereunder. Bender agrees to indemnify USAT for any taxes, interest, penalties and costs
assessed against USAT as a result of her tax reporting and payment responsibilities on any of the payments made under this Agreement and Release.

     5. Bender agrees that she will dismiss the court action with prejudice. 

     6. Bender further agrees and covenants that should any person, organization, or other entity file, charge, claim, sue, or cause or permit to be filed any civil action, suit or legal proceedings
against USAT, its successors, assigns, trustees, directors, officers, employees and agents involving any matter 

3

occurring at any time in the past, Bender will not seek or accept any personal relief in such civil action, suit or proceeding.

     7. Bender understands that this Release extends to all of the aforementioned claims and potential claims which arose on or before the date this Release is executed, including pre- and post-
employment causes of action whether now known or unknown, suspected or unsuspected, and that this constitutes an essential term of this Release.  Bender understands and acknowledges the significance and consequence of this Release and of each
specific release and waiver, and expressly consents that this Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims, demands,
obligations, and causes of action, if any, as well as those relating to any other claims, demands, obligations or causes of action herein above-specified.

     8. Bender hereby agrees and recognizes that her employment relationship with USAT has been permanently and irrevocably severed. Bender agrees that she shall not apply for or otherwise seek any
future employment with USAT or any parent or subsidiary corporation of USAT. USAT shall have no obligation to consider Bender for employment, even if she applies, or to employ her in the future in any capacity.  Bender agrees that breach of the
terms of this section will constitute a waiver of any and all claims or causes of action she may make at any future time against USAT or its successors, assigns, directors, officers, employees and agents.

     9. Bender agrees and understands that confidentiality is of the utmost importance to USAT and, therefore, Bender agrees that the terms of this Release shall remain confidential. Neither Bender nor
any of her agents or representatives will disclose directly or indirectly any information concerning the terms of this Release or such subject matter to anyone except her spouse, personal financial tax advisors and/or attorneys, if any, or unless
pursuant to a lawful order of court. Bender shall advise all persons receiving such disclosure that it is confidential and is not to be redisclosed. Should it be required or necessary, Bender may disclose the Release to the Internal Revenue Service
or other taxing authority.

     10. Bender acknowledges and agrees that the foregoing confidentiality provisions are a material and significant part of the consideration of this Release and that any violation of 

4

the confidentiality provisions shall be considered a material breach of this Release.

     11. The Release may be pleaded as full bar to the enforcement of any claim which Bender brings against USAT which either in form or substance is based on matters covered by this Release.

     12. Bender understands and acknowledges that this Release is contractual and not a mere recital. Consequently, Bender expressly consents that said Release shall be given full force and effect
according to each and all of its express terms and provisions, and that they shall be binding upon her as well as her heirs, executors, successors, administrators and assigns.

     13. Bender hereby agrees and warrants that she is acting of her own free will; that she has read and fully understands all of the provisions and effects of this Release; that she understands she
may consult and thoroughly discuss all aspects of this Release with an attorney and that she has been provided that opportunity; and that she is executing this Release voluntarily and with full knowledge of its contents.  Bender intends that this
Release shall not be subject to any claim for duress.

     14. Bender agrees and acknowledges that this Release shall not be construed to be an admission of liability or the violation of any federal, state, or local statute or regulation or of any
duty.

     15. If any provisions of this Release shall be held invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or
impaired thereby. If any provisions contained in this Release are in conflict with any applicable statute, rule of law, or regulation, then such provision shall be deemed inoperative to the extent that they may conflict with and shall be deemed
modified to conform with such statute, rule of law, or regulation.

     16. In exchange for Bender’s release of all claims as outlined herein, and for Bender’s agreement to settle, discontinue and end the court action, USAT agrees to remise, release and
forever discharge Bender and her heirs from all past, present and future actions, causes of action, demands, or claims of any kind, whether in law or in equity, known or unknown which USAT ever had, now has, or will have, as against 

5

Bender arising from her employment with USAT and the termination of that employment. 

     17. The Release shall be governed and construed under the laws of the Commonwealth of Pennsylvania.

     18. This Mutual Release and Settlement Agreement may be signed in counterparts.

     19. Facsimile signature on this Mutual Release and Settlement Agreement shall be valid as originals.

     IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned have caused this Release to be executed on the day and year written.

	SWORN  TO AND  SUBSCRIBED  

BEFORE ME THIS 22d DAY  

OF SEPTEMBER  2006.  	  	  
	  	               /s/ ERIKA BENDER  
	  	               Erika Bender  
	
 
	  	  
	NOTARY  PUBLIC	  	               USA TECHNOLOGIES, INC.  
	
 

SWORN  TO AND  SUBSCRIBED  

BEFORE  ME THIS 13th DAY  

OF SEPTEMEBR  2006.  
	  	  
	  	  
	  	               By:/s/STEPHEN P. HERBERT  
	
  
	  	                   Stephen P. Herbert, COO  
	NOTARY  PUBLIC  	  	

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