Exhibit
10.115


 


EXECUTION COPY


 


MBIA INSURANCE CORPORATION,


as Surety


 


 


FIRST INVESTORS AUTO RECEIVABLES CORPORATION,


as Transferor


 


 


FIRST INVESTORS FINANCIAL SERVICES, INC.,


as Seller


 


 


WELLS FARGO BANK, NATIONAL ASSOCIATION


as Custodian, Collateral Agent, and Back-up Servicer


 


 


and


 


 


WACHOVIA CAPITAL MARKETS, LLC,


as Reserve Account Agent


 


 


AMENDED AND RESTATED

INSURANCE AGREEMENT


 


 


First Investors Auto Receivables Corporation Revolving


Automobile Receivables Financing Facility


 


 


Dated as of February 18, 2005


 





















 


TABLE OF CONTENTS


 


	
  ARTICLE I

  	
   

  
	
  DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 1.01.

  	
  General Definitions.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  REPRESENTATIONS,
  WARRANTIES AND COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
  Representations and Warranties of the
  Transferor, the Seller, the Collateral Agent, and the Reserve Account Agent.

  	
   

  
	
  Section 2.02.

  	
  Affirmative Covenants of the Transferor,
  the Seller, the Collateral Agent, and the Reserve Account Agent.

  	
   

  
	
  Section 2.03.

  	
  Negative Covenants of the Transferor, the
  Collateral Agent and the Seller.

  	
   

  
	
  Section 2.04.

  	
  Representations and Warranties of the
  Servicer.

  	
   

  
	
  Section 2.05.

  	
  Affirmative Covenants of the Servicer

  	
   

  
	
  Section 2.06.

  	
  Negative Covenants of the Servicer.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  THE SURETY BOND; SECURITY

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
  Agreement To Issue Surety Bond.

  	
   

  
	
  Section
  3.02.

  	
  Conditions
  Precedent To Issuance of the Surety Bond.

  	
   

  
	
  Section 3.03.

  	
  Premium.

  	
   

  
	
  Section 3.04.

  	
  Indemnification.

  	
   

  
	
  Section 3.05.

  	
  Payment
  Procedure.

  	
   

  
	
  Section 3.06.

  	
  Subrogation.

  	
   

  
	
  Section
  3.07.

  	
  Reimbursement
  and Additional Payment Obligation.

  	
   

  
	
  Section 3.08.

  	
  Assignment
  by Transferor.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  IV

  	
   

  
	
  FURTHER AGREEMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  4.01.

  	
  Effective
  Date; Term of Agreement.

  	
   

  
	
  Section
  4.02.

  	
  Waiver
  of Rights; Further Assurances and Corrective Instruments.

  	
   

  
	
  Section 4.03.

  	
  Obligations
  Absolute.

  	
   

  
	
  Section
  4.04.

  	
  Assignments;
  Reinsurance; Third-Party Rights.

  	
   

  
	
  Section 4.05.

  	
  Due Diligence
  Review

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  V

  	
   

  
	
  DEFAULTS; REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
  Defaults.

  	
   

  
	
  Section
  5.02.

  	
  Remedies;
  No Remedy Exclusive.

  	
   

  
	
  Section 5.03.

  	
  Waivers.

  	
   

  
	
  Section
  5.04.

  	
  No
  Insolvency Proceedings.

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE
  VI

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  
	
  Section
  6.01.

  	
  Amendments,
  Changes and Modifications.

  	
   

  
	
  Section 6.02.

  	
  Notices.

  	
   

  



 





















 


	
  Section 6.03.

  	
  Severability.

  	
   

  
	
  Section 6.04.

  	
  Governing Law.

  	
   

  
	
  Section
  6.05.

  	
  Consent
  to Jurisdiction and Venue, Etc.

  	
   

  
	
  Section 6.06.

  	
  Consent of
  Surety.

  	
   

  
	
  Section 6.07.

  	
  Counterparts.

  	
   

  
	
  Section 6.08.

  	
  Recitals.

  	
   

  
	
  Section 6.09.

  	
  Headings.

  	
   

  



 


ii





















 


AMENDED AND RESTATED 

INSURANCE AGREEMENT


 


THIS AMENDED AND RESTATED INSURANCE AGREEMENT, (this “Agreement”) is
made as of February 18, 2005 by and among MBIA INSURANCE CORPORATION (the “Surety”),
FIRST INVESTORS AUTO RECEIVABLES CORPORATION, in its capacity as transferor
(the “Transferor”), FIRST INVESTORS FINANCIAL SERVICES, INC., in its capacity
as seller (the “Seller”), FIRST INVESTORS SERVICING CORPORATION, in its
capacity as Servicer (the “Servicer”), and WELLS FARGO BANK, NATIONAL
ASSOCIATION in its capacity as Collateral Agent (the “Collateral Agent”), in
its capacity as  Custodian (the “Custodian”)
in its capacity as Back-up Servicer (the “Back-up Servicer”) and in its
capacity as Reserve Account Agent (the “Reserve Account Agent”).


 


RECITALS:


 


1.             The
Transferor, the Seller, the Servicer, Variable Funding Capital Corporation (the
“Company”), Wachovia Capital Markets, LLC (the “Administrative Agent”), the
Surety, the Collateral Agent and the Reserve Account Agent have entered into an
Amended and Restated Security Agreement dated as of February 18, 2005, (the “Security
Agreement”) pursuant to which, among other things, the Transferor granted a
security interest in certain collateral more fully described therein to the
Collateral Agent there under for the benefit of the Company and the Surety to
secure payments under the Note, the Security Agreement and this Agreement.


 


2.             The
Transferor and the Seller have requested that the Surety issue its Surety Bond
(as defined below) to guarantee payment of Insured Amounts (as defined in the
Surety Bond), upon such terms and conditions as were mutually agreed upon by
the parties and subject to the terms and conditions of the Surety Bond.


 


3.             The
parties hereto desire to specify the conditions precedent to the issuance of
the Surety Bond by the Surety, the indemnity and reimbursement to be provided
in respect of amounts paid by the Surety under the Surety Bond, the security to
be provided to the Surety as an inducement for the Surety to deliver the Surety
Bond and to provide for certain other indemnities and for certain other
matters.


 


NOW, THEREFORE, in consideration of the premises and
of the agreements herein contained, the Surety, the Transferor, the Seller, the
Servicer, the Collateral Agent, the Custodian, the Back-up Servicer and the
Reserve Account Agent agree as follows:


 


ARTICLE
I


 


DEFINITIONS


 


Section 1.01.  General Definitions. 
The terms defined in this Article I shall have the meanings
provided herein for all purposes of this Agreement, unless the context clearly
requires otherwise, in both singular and plural form, as appropriate.  Capitalized terms used in this


 


1





















 


Agreement but not otherwise defined
herein will have the meanings ascribed to such terms in the Security Agreement.


 


“Adverse Selection
Procedure” means any method of selecting or identifying a Receivable
eligible to be included in the Collateral, other than in accordance with the
Transaction Documents, that materially and adversely affects the representative
nature of the sample of Receivables so selected.


 


“Agreement”
means this Amended and Restated Insurance Agreement dated as of February 18,
2005, including any amendments or any supplements hereto as herein permitted.


 


“Closing Date”
means October 22, 1996.


 


“Commitment”
means the Commitment Letter dated as of October 17, 1996 between the
Transferor, the Seller and the Surety.


 


“Date of Issuance”
means the date on which the Surety Bond is issued.


 


“Event of Default”
means any event of default set forth in Section 5.01 hereof.


 


“FIFSG” means First Investors
Financial Services Group, Inc.


 


“Financial Statements”
means the balance sheets and the statements of income, retained earnings and
cash flows and notes thereto of FIFSG prepared on a consolidated basis and
furnished on behalf of the Seller and the Servicer to the Surety pursuant to
§ 2.02(c) and 2.05 (c) hereof.


 


“Guaranty” means the Guaranty
dated as of March 31, 1999 among the Seller, the Transferor, the Servicer, the
Collateral Agent, and the Back-up Servicer, including any amendments thereto or
substitutes therefor approved in writing by MBIA.


 


“Insurance Agreement Amortization Event” means
the occurrence of any of the following events:


 


(a)           The
Seller shall no longer own and control 100% of Farragut Financial Corporation;
or:


 


(b)           Notwithstanding
Section 6.3(h) of the Security Agreement, the Delinquency Ratio for the Seller’s
total managed portfolio over any three consecutive Collection Periods shall
equal or exceed 7.25%.


 


“Insured Amounts”
shall have the meaning assigned thereto in the Surety Bond.


 


“Late Payment Rate”
means the rate of interest as is publicly announced by Citibank, N.A. at its
principal office in New York, New York as its prime rate (any change
in such prime rate of interest to be effective on the date such change is
announced by Citibank, N.A.) plus 2%.


 


2





















 


The Late Payment Rate shall be computed on the basis
of a year of 365 days calculating the actual number of days elapsed.  In no event shall the Late Payment Rate
exceed the maximum rate permissible under law applicable to this Agreement
limiting interest rates.


 


“MBIA Premium”
means the amount set forth in paragraph 1.a. of the Commitment.


 


 “Moody’s” means Moody’s Investors Service Inc., its
successors and their assigns, and, if such corporation shall for any reason no
longer perform the functions of a securities rating agency, “Moody’s” shall be
deemed to refer to any other nationally recognized rating agency designated by
the Transferor with the approval of the Surety.


 


“Note” means the
promissory note issued by the Transferor to the Company pursuant to the Note
Purchase Agreement.


 


“Note Purchase Agreement” means
the Note Purchase Agreement dated as of October 22, 1996 between the
Company and the Transferor.


 


“Security Agreement” means the Amended
and Restated Security Agreement dated as of February 18, 2005, among the
Company, the Transferor, the Surety, the Seller, the Administrative Agent, the
Reserve Account Agent and the Collateral Agent as the same may be further
amended and supplemented as provided therein.


 


 “Servicing
Agreement” shall have the meaning assigned thereto in the
Security Agreement.


 


“Standard & Poor’s”
means Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, its successors and their assigns and, if such
corporation shall for any reason no longer perform the functions of a
securities rating agency, “Standard & Poor’s” shall be deemed to refer to
any other nationally recognized rating agency designated by the Transferor with
the approval of the Surety.


 


“State” means
the State of New York.


 


“Surety” means
MBIA Insurance Corporation.


 


“Surety Bond”
means the Surety Bond issued with respect to the Receivables.


 


“Surety Default”
means the occurrence and continuance of any failure of the Surety to make
payments under the Surety Bond in accordance with its terms.


 


“Surety Insolvency”
means (i) the entry of a decree or order of a court or agency having
jurisdiction in respect of the Surety in an involuntary case under any present
or future Federal or state bankruptcy, insolvency or similar law or appointing
a conservator or receiver or liquidator or rehabilitator or other similar
official of the Surety or of any substantial part of its property, or the
entering of an order for the winding up or liquidation of the affairs of the
Surety and the continuance of any such decree or order undischarged or unstayed
and in force for a period of 90


 


3





















 


consecutive days; (ii) the Surety shall consent
to the appointment of a conservator or receiver or liquidator or other similar
official in any insolvency, readjustment of debt, marshaling of assets and
liabilities, rehabilitation or similar proceedings of or relating to the Surety
or of or relating to all or substantially all of its property; or
(iii) the Surety shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of or otherwise
voluntarily commence a case or proceeding under any applicable bankruptcy,
insolvency, reorganization or other similar statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its obligations.


 


“Term of the Agreement”
shall be determined as provided in Section 4.01.


 


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


 


“Transaction Documents”
means this Agreement, the Guaranty, the Interest Rate Cap, the Note Purchase
Agreement, the Servicing Agreement, the Security Agreement, the Purchase
Agreement, any Originator Agreement and the Note.


 


Section 1.02.  Generic Terms.  All words used herein shall be construed to
be of such gender or number as the circumstances require.  This “Agreement” shall mean this Agreement as
a whole and as the same may, from time to time hereafter, be amended,
supplemented or modified.  The words “herein,”
“hereby,” “hereof,” “hereto,” “hereinabove” and “hereinbelow,” and words of
similar import, refer to this Agreement as a whole and not to any particular
paragraph, clause or other subdivision hereof, unless otherwise specifically
noted.


 


ARTICLE
II


 


REPRESENTATIONS, WARRANTIES AND COVENANTS


 


Section 2.01.  Representations and Warranties of the
Transferor, the Seller, the Collateral Agent, and the Reserve Account Agent.  The Transferor, the Seller, the Collateral
Agent, and the Reserve Account Agent represent and warrant to, and covenant
with, the other parties hereto (in each case only as to matters concerning
itself) as follows:


 


(a)  Representations and Warranties of Transferor, Seller and the Collateral
Agent Contained in Other Transaction Documents.  All of the representations and warranties
made by the Transferor, the Seller and the Collateral Agent, as the case may
be, as of the Closing Date in any of the Transaction Documents (except with
respect to the Originator Agreements) are incorporated as if fully set forth
herein for the benefit of the Surety and are true and correct as of the Closing
Date.


 


(b)  Due Organization and Qualification.  Each of the Transferor and the Seller is a
corporation, duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation. The Collateral Agent is a
national banking institution duly organized, validly existing and in good
standing under the laws of the United States.  Each of the Transferor, the Seller and the
Collateral Agent is duly


 


4





















 


qualified
to do business, is in good standing and has obtained all necessary licenses,
permits, charters, registrations and approvals (together, “approvals”) required
to be obtained by the Transferor, the Seller and the Collateral Agent in each
jurisdiction in which the failure to obtain such approvals would render any
portion of the Transaction Documents unenforceable by the Transferor, the
Seller or the Collateral Agent or any other party to the Transaction Documents,
as the case may be, and would have a material adverse effect on the Surety.


 


(c)  Power and Authority.  Each of the Transferor, the Seller and the
Collateral Agent has all necessary corporate or institutional power and
authority to conduct its business as currently conducted and to execute,
deliver and perform its obligations under the Transaction Documents and to
consummate the Transaction.


 


(d)  Due Authorization.  The execution, delivery and performance of
the Transaction Documents by the Transferor, the Seller and the Collateral
Agent have been duly authorized by all necessary corporate or institutional
action, as the case may be, and do not require any additional approvals or
consents, or other action by or any notice to or filing with any Person,
including, without limitation, any governmental entity or the Transferor’s or
the Seller’s stockholders, which have not previously been obtained or given by
the Transferor, the Seller or the Collateral Agent.


 


(e)  Noncontravention.  Neither the execution and delivery of the
Transaction Documents by the Seller, the Transferor, the Collateral Agent or
the Reserve Account Agent, as the case may be, the consummation of the
transactions contemplated thereby nor the satisfaction of the terms and
conditions of the Transaction Documents:


 


(i)            conflicts with or results in any
breach or violation of any provision of the certificate of incorporation,
bylaws or other organizational document of the Seller, the Transferor or the
Collateral Agent or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award currently in effect having
applicability to the Seller, the Transferor or the Collateral Agent or any of
their material properties, including regulations issued by an administrative
agency or other governmental authority having supervisory powers over the
Seller, the Transferor or the Collateral Agent;


 


(ii)           constitutes a default by the Seller,
the Transferor or the Collateral Agent under or a breach of any provision of
any loan agreement, mortgage, indenture or other agreement or instrument which
is material to the Seller, the Transferor or the Collateral Agent to which the
Seller, the Transferor or the Collateral Agent is a party or by which any of
its or their respective properties, which are individually or in the aggregate
material to the Seller, the Transferor or the Collateral Agent, is or may be
bound or affected; or


 


5





















 


(iii)          except as contemplated by the
Transaction Documents, results in or requires the creation of any lien upon or
in respect of any assets of the Seller, the Transferor, the Collateral Agent or
the Reserve Account Agent.


 


(f)  Pending Litigation or Other Proceeding.  There is no pending action or proceeding
before any court, governmental or administrative agency or arbitrator against
or affecting the Transferor, the Seller, the Collateral Agent or the Reserve
Account Agent or any of its or their subsidiaries or any properties or rights
of the Transferor, the Seller, the Collateral Agent or the Reserve Account
Agent or any of its or their subsidiaries or, to the Transferor’s, the Seller’s,
the Collateral Agent’s or the Reserve Account Agent’s knowledge, any
investigation or any threatened action or proceeding before any of the
foregoing, which, if decided adversely to the Transferor, the Seller, the
Collateral Agent or the Reserve Account Agent, would materially and adversely
affect the ability of the Transferor, the Seller, the Collateral Agent or the
Reserve Account Agent to perform their respective obligations under the
Transaction Documents or would have a material adverse effect on the Surety.


 


(g)  Valid and Binding Obligations. The
Transaction Documents to which the Transferor, the Seller and the Collateral
Agent, respectively, is a party constitute, and when executed will constitute,
the legal, valid and binding agreements of the Transferor, the Seller and the
Collateral Agent, respectively, enforceable against the Transferor, the Seller,
and the Collateral Agent in accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or limiting
creditors’ rights generally or general equitable principles, as such relate to
the Transferor, the Seller and the Collateral Agent.  The Transferor, the Seller and the Collateral
Agent hereby agree and covenant that each will not at any time in the future,
deny that the Transaction Documents to which the Transferor, the Seller and the
Collateral Agent, respectively, is a party constitute the valid, legal and
binding agreements of the Transferor, the Seller and the Collateral Agent,
respectively, subject to the aforesaid limitations.


 


(h)  Financial Statements.  The Financial Statements of FIFSG, copies of
which the Seller has caused to be furnished to the Surety on behalf of the
Seller and Servicer, (i) are, as of the dates and for the periods referred
to therein, complete and correct in all material respects, (ii) present
fairly the financial condition and results of operations of the companies
reported therein as of the dates and for the periods indicated and
(iii) have been prepared in accordance with generally accepted accounting
principles consistently applied, except as noted therein and subject to year-end
adjustments with respect to interim statements. 
Since the date of the most recent Financial Statements, there has been
no material adverse change in such condition or operations.  Except as disclosed in the Financial
Statements, neither the Seller nor the Servicer, is not subject to any
contingent liabilities or commitments that, individually or in the aggregate,
have a material possibility of causing a material adverse change in respect of
the Seller or the Servicer.


 


6





















 


(i)  Compliance With Law, Regulations, Etc.  None of the Transferor, the Seller, the
Collateral Agent or the Reserve Account Agent has notice or any reason to
believe that any practice, procedure or policy employed by the Transferor, the
Seller, the Collateral Agent or the Reserve Account Agent in the conduct of its
business violates any law, regulation, judgment or agreement applicable to the
Transferor, the Seller, the Collateral Agent or the Reserve Account Agent
which, if enforced, would have a material adverse effect on the ability of the
Seller, the Transferor, the Collateral Agent or the Reserve Account Agent, as
the case may be, to perform its respective obligations under the Transaction
Documents. None of the Transferor, the Seller, the Collateral Agent or the
Reserve Account Agent is in breach of or in default under any applicable law or
administrative regulation of the state of its respective incorporation or any
department, division, agency or instrumentality thereof or of the United States
or any applicable judgment or decree or any loan agreement, note, resolution,
certificate, agreement or other instrument to which the Transferor is a party
or is otherwise subject which, if enforced, would have a material adverse
effect on the ability of the Collateral Agent, the Reserve Account Agent, the
Transferor or the Seller, as the case may be, to perform its respective
obligations under the Transaction Documents.


 


(j)  Taxes. 
Each of the Transferor and the Seller and its respective parent company
or companies have filed prior to the date hereof all federal and state tax
returns that are required to be filed and paid all taxes, including any
assessments received by them that are not being contested in good faith, to the
extent that such taxes have become due, except for any failures to file or pay
that, individually or in the aggregate, would not result in a material adverse
change with respect to the Transferor and the Seller.


 


(k)  Delivery of Information.  Each of the Transferor and the Seller represents
and warrants that none of the Transaction Documents nor any other information
furnished in writing to the Surety by the Transferor or the Seller, as the case
may be, contain any statement of a material fact by the Transferor or the
Seller as the case may be, which was untrue or misleading in any material
respect when made.  None of the
Transferor or the Seller has any knowledge of circumstances that could
reasonably be expected to cause a material adverse change with respect to the
Transferor or the Seller.  Since the
furnishing of such information by the Transferor and the Seller, there has been
no change nor any development or event involving a prospective change which
would render any of the Transaction Documents or other information furnished to
the Surety untrue or misleading in a material respect.


 


(l)  Solvency. 
The Transferor and the Seller are solvent and will not be rendered
insolvent by the Transaction and, after giving effect to the Transaction,
neither of the Transferor or the Seller will be left with an unreasonably small
amount of capital with which to engage in its business, nor does the Transferor
or the Seller intend to incur, or believe that it has incurred, debts beyond
its ability to pay as they mature.  None
of the Transferor or the Seller contemplates the commencement of insolvency,
bankruptcy, liquidation or consolidation proceedings or the appointment of a
receiver, liquidator,


 


7





















 


conservator, trustee or similar official in respect
of the Transferor or the Seller or any of its respective assets.


 


(m)  Principal Place of Business.  The principal place of the Collateral Agent
is located in Texas and the principal place of business of the Transferor is
located in Texas.  The principal place of
business of the Seller is located in Texas.


 


(n)  Requirements for Receivables.  The
Seller and the Transferor represent and warrant with respect to each Receivable
that: (a) the related Obligor has no right of recission or cancellation,
claims or defenses, set-offs or counterclaims of any kind whatsoever as to or
against each Receivable; (b) the obligation created by the contract
evidencing each Receivable is a bonafide sale in the ordinary course of the
Originator’s business; (c) the contract evidencing such Receivable
complies with all state and federal laws and regulations; (d) the contract
evidencing each Receivable, including, but not limited to, description of the
motor vehicle and/or services contained therein, is in all respects complete, accurate
and represents the entire agreement between the Originator and the Obligor and
complies with Federal Consumer Credit Protection Act and all other applicable
state and federal laws and regulations.


 


Section 2.02.  Affirmative Covenants of the Transferor, the
Seller, the Collateral Agent, and the Reserve Account Agent.  The Transferor, the Seller, the Collateral
Agent,  and the Reserve Account Agent
hereby covenant and agree that during the term of this Agreement:


 


(a)  Compliance With Agreements.  The Transferor, the Seller, the Collateral
Agent and the Reserve Account Agent shall comply in all material respects with
the terms and conditions of the Transaction Documents to which each,
respectively, is a party and, so long as no Surety Default or Surety Insolvency
exists, unless the Surety shall otherwise consent, none of the Transferor, the
Seller, the Collateral Agent or the Reserve Account Agent shall agree to any
waiver, amendment to or modification of the terms of any of the Transaction
Documents to which each, respectively, is a party, except with respect to the
Originator Agreements and except under the circumstances and in accordance with
the terms specifically set forth in the related Transaction Document.


 


(b)  Corporate Existence.  The Transferor, the Seller, the Collateral
Agent,  and the Reserve Account Agent
shall maintain their respective existences and continue to be duly organized,
duly qualified and duly authorized under the laws of its respective
jurisdiction of incorporation or organization and shall conduct its business in
accordance with the terms of its certificate of incorporation and bylaws, or
other organization documents.


 


(c)  The Seller To Provide Financial Statements; Accountants’ Reports; Other
Information. 
The Seller shall keep or cause to be kept in reasonable detail books and
records of account of the Seller’s books and records relating to its
obligations assumed under the Transaction Documents, in accordance with its
operating rules and procedures.  The
Seller shall furnish or cause to be furnished to the Surety:


 


8





















 


(i)            Annual Financial
Statements.  As soon as
available, and in any event within 120 days after the close of each fiscal year
of FIFSG the audited consolidated balance sheets of FIFSG as of the end of such
fiscal year and the related audited consolidated statements of income, changes
in shareholders’ equity and cash flows for such fiscal year, all in reasonable
detail and stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared in
accordance with generally accepted accounting principles, consistently applied,
and accompanied by the audit opinion of the FIFSG’s independent accountants
(which shall be a nationally recognized independent public accounting firm) and
by the certificate specified in Section 2.02(e) hereof.


 


(ii)           Quarterly Financial
Statements.  As soon as
available, and in any event within 90 days after each of the first three
fiscal quarters of each fiscal year of FIFSG, the unaudited consolidated
balance sheets of FIFSG and its subsidiaries as of the end of such fiscal
quarter and the related unaudited consolidated statements of income, changes in
shareholders’ equity and cash flows for such fiscal quarter, all in reasonable
detail and stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared in
accordance with generally accepted accounting principles, consistently applied,
and accompanied by the certificate specified in Section 2.02(e) hereof.


 


(iii)          [Reserved.]


 


(iv)          Other Reports and
Information.  The Seller shall
also furnish, or cause to be furnished, with reasonable promptness, such other
financial data, financial reports relating to the Seller or FIFSG prepared by
third parties and other data relating to the Seller or FIFSG which are commonly
prepared and can be provided without undue effort, as the Surety may reasonably
request.


 


(d)  The Transferor Shareholder Meetings.  The Transferor shall have annual shareholder
meetings and at least annual board of director meetings and shall prepare
income and franchise tax returns as appropriate.  Upon the request of the Surety, the
Transferor shall deliver to the Surety copies of the minutes of such meetings
and such tax returns promptly upon filing.


 


(e)  Certificate of Compliance.  The Seller shall cause the Transferor to
deliver to the Surety concurrently with the delivery of the Financial
Statements required pursuant to paragraph (c) above any statement required to
be delivered under the Security Agreement.


 


(f)  Access to Records; Discussions With Officers and Accountants.  The Transferor, the Seller, the Collateral
Agent and the Reserve Account Agent shall, upon the request of the Surety,
permit the Surety, or its authorized agent, at reasonable times and upon
reasonable notice:


 


9





















 


(i)            to inspect such books and records of
the Transferor, the Seller and the Collateral Agent as the case may be, as they
may relate to the Receivables, the obligations of the Transferor, the Seller
and the Collateral Agent, as the case may be, under the Transaction Documents
and the transactions consummated in connection herewith and to inspect the
books and records of the Reserve Account Agent as they may relate to the
Reserve Account;


 


(ii)           to discuss the affairs, finances and
accounts of the Transferor, the Seller and the Collateral Agent as such relate
to the performance by it of its obligations under the Transaction Documents
with an appropriate officer of the Transferor, the Seller and the Collateral
Agent, as the case may be; and to discuss the affairs, finances and accounts of
the Reserve Account Agent as such may relate to the Reserve Account with an
appropriate officer of the Reserve Account Agent.


 


(iii)          to discuss the affairs, finances and
accounts of the Transferor, the Seller and the Collateral Agent as such relate
to the performance by it of its obligations under the Transaction Documents
with the Transferor’s, the Seller’s and the Collateral Agent’s independent
public accountants, as the case may be, provided that an appropriate officer of
the Transferor, the Seller and the Collateral Agent, as the case may be, shall
have the right to be present during such discussions.


 


Such inspections and
discussions shall be conducted upon the request of the Surety and during normal
business hours and shall not unreasonably disrupt the business of the
Transferor, the Seller, the Collateral Agent or the Reserve Account Agent.  The books and records of the Transferor will
be maintained at the address of the Transferor designated herein for receipt of
notices, unless the Transferor shall otherwise advise the parties hereto in
writing, the books and records of the Collateral Agent will be maintained at
the address of the Collateral Agent designated herein for receipt of notices,
unless the Collateral Agent shall otherwise advise the parties hereto in
writing, the books and records of the Reserve Account Agent will be maintained
at the address of the Reserve Account Agent designated herein for receipt of
notices, unless the Reserve Account Agent shall otherwise advise the parties
hereto in writing and the books and records of the Seller will be maintained at
the Seller’s address designated herein for receipt of notices, unless the
Seller shall otherwise advise the parties hereto in writing.


 


The Surety shall keep confidential all financial
statements and reports delivered to it, the Credit Guidelines and any matter of
which it becomes aware through such inspections or discussions, except as may
be otherwise required, by regulation, law or court order or requested by
appropriate governmental authorities or as necessary to enforce any of the
provisions of the Transaction Documents, provided that the foregoing shall not
limit the right of the Surety to make such information available on a
confidential basis, to its regulators, securities rating agencies, reinsurers,
credit and liquidity providers, counsel and accountants.  If the Surety is requested or required (by
oral questions,


 


10





















 


interrogatories, requests for information or documents
subpoena, civil investigative demand or similar process) to disclose any information
of which it becomes aware through such inspections or discussions, the Surety
will promptly notify the Seller of such request(s) so that the Seller may seek
an appropriate protective order and/or waive the Surety’s compliance with the
provisions of this Insurance Agreement. 
If, in the absence of a protective order or the receipt of a waiver
hereunder, the Surety is, nonetheless, in the opinion of its counsel, compelled
to disclose such information to any tribunal or else stand liable for contempt
or suffer other censure or significant penalty, the Surety may disclose such
information to such tribunal that the Surety is compelled to disclose, provided
that a copy of all information disclosed is provided to the Seller promptly
upon such disclosure.


 


(g)  Inform Surety of Material Events.  Each of the Transferor, the Seller and the
Collateral Agent (each, as to matters relating to itself) shall promptly inform
the Surety in writing of the following:


 


(i)            any default or any fact or event (of
which, in the case of the Collateral Agent, the Collateral Agent has actual
knowledge) which results, or which with notice or the passage of time, or both,
would result in an Event of Default, or Servicer Event of Default, Termination
Event, Wind-Down Event or Amortization Event under any Transaction Document or
would constitute a material breach of a representation, warranty or covenant by
it under any Transaction Document;


 


(ii)           the submission of any claim or the
initiation of any legal process, litigation or administrative or judicial
investigation against it in any federal, state or local court or before any
governmental body or agency, or before any arbitration board, or any such
proceedings threatened by any governmental agency, (of which, in the case of
the Collateral Agent, the Collateral Agent has actual knowledge), which, if
adversely determined, would have a material adverse effect upon its ability to
perform its obligations under any Transaction Document;


 


(iii)          except in the case of the Collateral
Agent, the submission of any claim or the initiation of any legal process,
litigation or administrative or judicial investigation in any federal, state or
local court or before any arbitration board, or any such proceeding threatened
by any governmental agency transferred, which, if adversely determined, would
have a material adverse effect on the Receivables;


 


(iv)          the commencement of any proceedings
under any applicable bankruptcy, reorganization, liquidation, insolvency or
other similar law now or hereafter in effect or of any proceeding in which a
receiver, liquidator, trustee or other similar official shall have been, or may
be, appointed or requested;


 


(v)           the receipt of notice from any agency
or governmental body having authority over the conduct of its business that it
is to cease and desist, or to


 


11





















 


undertake any, practice, program,
procedure or policy employed by it in the conduct of its business, and such
cessation or undertaking will materially adversely affect its ability to
perform its obligations under the Transaction Documents; and


 


(vi)          any change in the location of the
Seller’s, the Transferor’s or the Collateral Agent’s principal offices or books
and records.


 


(h)  Financing Statements and Further Assurances.  The Seller shall cause the Transferor to file
all necessary financing statements or other instruments, and any amendments or
continuation statements relating thereto, necessary to be kept and filed in
such manner and in such places as may be required by law to preserve and
protect fully the interest of the Surety in the Receivables.  The parties hereto shall, upon the request of
the Surety, from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within ten days of such request, such
amendments hereto and such further instruments and take such further action as
may be reasonably necessary to effectuate the intention, performance and
provisions of the Transaction Documents. 
The parties hereto agree to fully cooperate with the Surety, Standard
& Poor’s and Moody’s in connection with any review which may be undertaken
by Standard & Poor’s and/or Moody’s after the date hereof and to provide
all information reasonably requested by Standard & Poor’s and/or Moody’s.


 


(i)  Notice of Amendments.  The Seller will provide the Surety with
written notice of any change or amendment to any Transaction Document (except
with respect to the Originator Agreements) as currently in effect.


 


(j)  Third-Party Rights.  Each of the Transferor, the Seller, the
Collateral Agent, and the Reserve Account Agent agrees that the Surety shall
have all of the rights of a third-party beneficiary of, and pursuant to, its
agreements under each Transaction Document (except with respect to the
Originator Agreements) to which the Transferor, the Seller, the Collateral
Agent, respectively, is a party, unless otherwise expressly provided in the
related Transaction Document.


 


(k)  Maintenance of Loans.  On or before each April 15, beginning in
1997, the Seller shall cause the Transferor to furnish to the Surety an officer’s
certificate either stating that such action has been taken with respect to the
recording, filing, rerecording and refiling of any financing statements and
continuation statements as is necessary to maintain the interest of the Surety
created by the Security Agreement with respect to the Receivables and reciting
the details of such action or stating that no such action is necessary to
maintain such interests.  Such officer’s certificate
shall also describe the recording, filing, rerecording and refiling of any
financing statements and continuation statements that will be required to
maintain the interest of the Surety in the Receivables until the date such next
officer’s certificate is due.  The Seller
will use its best efforts to cause any necessary recordings or filings to be
made with respect to the Receivables.


 


12





















 


(l)  Seller’s Indemnity.  Notwithstanding anything in subsection 3.07(a)
hereof, the Seller shall pay to the Surety an amount equal to any amount paid
by the Surety because of the Servicer’s failure to deposit into the Collection
Account any amount required to be so deposited by it pursuant to the Servicing
Agreement, together with interest on any and all amounts remaining unreimbursed
(to the extent permitted by law, if in respect to any unreimbursed amounts
representing interest) from the date such amounts became due until paid in full
(after as well as before judgment) at a rate of interest equal to the Late
Payment Rate.


 


(m)  Maintenance of Licenses.  The Collateral Agent, the Seller and the
Transferor, respectively, or any successors thereof, shall maintain all
licenses, permits, charters and registrations which are material to the conduct
of its business.


 


(n)  Closing Documents.  The Seller shall provide or cause to be
provided to the Surety an executed original copy of each document executed in
connection with the Transaction within 30 days after the date of closing.


 


(o)  [Reserved]


 


(p)  Collateral Agent to Act Upon Direction of Surety; Delivery of
Notices.  The
Collateral Agent agrees that so long as no Surety Default has occurred and is
continuing (i) the Collateral Agent shall not take any action which the
Collateral Agent is entitled to take pursuant to the Servicing Agreement
without the prior written consent of the Surety, and (ii) following the
Surety’s written request or direction, it will take or refrain from taking any
action which the Collateral Agent is entitled to take pursuant to the Servicing
Agreement.  The Collateral Agent shall
promptly forward to the Surety a copy of each notice or other communication
given or received by the Collateral Agent pursuant to the Servicing Agreement.  The Transferor shall promptly forward to the
Surety a copy of each executed Interest Rate Cap entered into by the Transferor
and any amendments or revisions thereto.


 


Section 2.03.  Negative Covenants of the Transferor, the
Collateral Agent and the Seller. 
The Transferor, the Collateral Agent and the Seller agree and covenant
with the Surety that at all times during the Term of the Agreement:


 


(a)  Adverse Selection Procedure.  The Transferor and the Seller will not use
any Adverse Selection Procedure in selecting the Receivables that qualify under
the Security Agreement for inclusion as Collateral.


 


(b)  Impairment of Rights.  The Transferor, the Collateral Agent and the
Seller each agree and covenant with the Surety that at all times during the
Term of the Agreement the Transferor, the Seller and the Collateral Agent shall
not take any action, or decline to take any action if reasonably requested by
the Surety at a time when no Surety Default or Surety Insolvency exists, if
such action or failure to take action will interfere with the enforcement of
any rights under any of the Transaction Documents.  The


 


13





















 


Transferor, the Collateral Agent and the Seller
shall give the Surety written notice of any such action or failure to act on
the earlier of: (i) the date upon which any publicly available filing or
release is made with respect to such action or failure to act or
(ii) promptly prior to the date of consummation of such action or failure
to act.  The Transferor, the Collateral
Agent, and the Seller shall furnish to the Surety all information requested by
it that is reasonably necessary to determine compliance with this paragraph.


 


(c)  Amendment to Certificate of Incorporation.  The Transferor shall not amend its certificate
of incorporation at a time when no Surety Default or Surety Insolvency exists
without the Surety’s prior written consent except in accordance with the terms
thereof.


 


(d)  Loan Agreements; Charge-off Policy.  Except as otherwise permitted in the Security
Agreement, the Seller shall not, and shall not permit the Servicer to, alter or
amend any Receivable or their respective charge-off policies in a manner that
materially adversely affects the Surety unless the Surety shall have previously
given its consent.


 


Section 2.04.  Representations
and Warranties of the Servicer. As of the date of the Amendment,
the Servicer represents, warrants and covenants as follows:


 


(a)           Due Organization and
Qualification.  The Servicer is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction.  The Servicer is duly qualified to do
business, is in good standing and has obtained all necessary licenses, permits,
charters, registrations and approvals (together, “approvals”) necessary for the
conduct of its business as currently conducted and the performance of its
obligations under the Transaction Documents, in each jurisdiction in which the
failure to be so qualified or to obtain such approvals would render any
Transaction Document unenforceable in any respect or would have a material
adverse effect upon the Transaction.


 


(b)           Power and Authority.  The Servicer has
all necessary corporate or other power and authority to conduct its business as
currently conducted and to execute, deliver and perform its obligations under
the Transaction Documents and to consummate the Transaction.


 


(c)           Due Authorization.  The execution, delivery and performance of
the Transaction Documents by the Servicer has been duly authorized by all
necessary corporate action and do not require any additional approvals or
consents, or other action by or any notice to or filing with any Person.
Including, without limitation, any governmental entity or any partners or
stockholders, which have not previously been obtained or given by the Servicer.


 


(d)           Noncontravention.  Neither the
execution and delivery of the Transaction Documents by the Servicer, the
consummation of the transactions contemplated thereby nor the satisfaction of
the terms and conditions of the Transaction Documents:


 


14





















 


(i)            conflicts with or results in any
breach or violation of any provision of the certificate of incorporation or
bylaws or other organizational document of the Servicer or any law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award currently in
effect having applicability to the Servicer or any of its material properties,
including regulations issued by an administrative agency or other governmental
authority having supervisory powers over the Servicer;


 


(ii)           constitutes a default by the Servicer
under or a breach of any provision of any loan agreement, mortgage, indenture
or other agreement or instrument to which the Servicer is a party or by which
any of its properties, which are individually or in the aggregate material to
the Servicer, is or may be bound or affected; or


 


(iii)          results in or requires the creation of
any lien upon or in respect of any assets of the Servicer.


 


(e)           Legal Proceedings. 
There is no action, proceeding or investigation by or before any court,
governmental or administrative agency or arbitrator against or affecting the
Servicer or any of its subsidiaries, or any properties or rights of the
Servicer or any of its subsidiaries, pending or, to the Servicer’s knowledge
after reasonable inquiry, threatened, which, in any case, could reasonably be
expected to result in a material adverse effect upon the Servicer’s ability
to  perform its respective obligations
under the Transaction Documents or have a material adverse effect upon the
Surety.


 


(f)            Valid and Binding
Obligations.  The Transaction Documents (other than the
Note), when executed and delivered by the Servicer, will constitute the legal,
valid and binding obligations of the Servicer, enforceable in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally and general equitable principles and public
Surety bond considerations as to rights of indemnification for violations of
federal securities laws.


 


(g)           Financial Statements.  The Servicer hereby
represents and warrants that: (a) the financial statements of FIFSG, copies of
which have been furnished to the Surety, (i) are, as of the dates and for the
periods referred to therein, complete and correct in all material respects,
(ii) present fairly the financial condition and results of operations of FIFSG
as of the dates and for the periods indicated and (iii) have been prepared in
accordance with generally accepted accounting principles consistently applied,
except as noted therein (subject as to interim statements to normal year-end
adjustments); (b) since the date of the most recent financial statements, there
has been no material adverse change in respect of such operations or financial
condition; and (c) except as disclosed in the financial statements, the
Servicer is not subject to any contingent liabilities or commitments that,
individually or in the aggregate, have a material possibility of causing a
material adverse change in respect of the Servicer.


 


15





















 


(h)           Compliance
with Law, Etc.  No practice, procedure or policy
employed, or proposed to be employed, by the Servicer in the conduct of its
business violates any law, regulation, judgment, agreement, order or decree
applicable to it that, if enforced, could reasonably be expected to result in a
material adverse effect upon the Servicer’s ability to perform its respective
obligations under the Transaction Documents or have a material adverse effect
upon the Surety.


 


(i)            Taxes.  The Servicer and
the Servicer’s parent company or companies have filed prior to the date hereof
all federal and state tax returns that are required to be filed and paid all
taxes, including any assessments received by them that are not being contested
in good faith, to the extent that such taxes have become due, except for any
failures to file or pay that, individually or in the aggregate, would not
result in a material adverse change with respect to the Servicer.


 


(j)            Accuracy
of Information.  Neither
the Transaction Documents, nor other information relating to the Receivables or
related assets, the operations of the Servicer (including servicing or
origination of loans) or the financial condition of the Servicer (collectively,
the “Documents”), as amended , supplemented or superseded, furnished to the
Surety by the Servicer contain any statement of a material fact by the Servicer
which was untrue or misleading in any material adverse respect when made.  The Servicer has no knowledge or
circumstances that could reasonably be expected to cause a material adverse
change with respect to the Servicer. 
Since the furnishing of the Documents, there has been no change nor any
development or event involving a prospective change known to the Servicer that
would render any of the Documents untrue or misleading in a material respect.


 


(k)           Transaction
Documents  Each of
the representations and warranties of the Servicer contained in the Transaction
Documents is true and correct in all material respects, and the Servicer hereby
makes each such representation and warranty to, and for the benefit of, the
Surety as if the same were set forth in full herein.


 


(l)            Solvency. 
The Servicer is solvent and will not be rendered insolvent by the
Transaction and, after giving effect to the Transaction, the Servicer will not
be left with an unreasonably small amount of capital with which to engage in
its business nor does the Servicer intend to incur, or believe that it has
incurred, debts beyond its ability to pay as they mature.  The Servicer does not contemplate the
commencement of insolvency, bankruptcy, liquidation or consolidation
proceedings or the appointment of a receiver, liquidator conservator, trustee
or similar official in respect of the Servicer or any of its assets.


 


(m)          Principal Place of Business.  The principal place of business of the
Servicer is located in Georgia.


 


16





















 


Section 2.05.  Affirmative
Covenants of the Servicer.  The Servicer hereby agrees that
during the Term of this Agreement, unless the Surety shall otherwise expressly
consent in writing:


 


(a)         Compliance
With Agreements and Applicable Laws.  The Servicer shall not be in default under
the Transaction Documents and shall comply with all material requirements of
any law, rule or regulation applicable to it. 
The Servicer shall not agree to any amendment to or modification of the
terms of any Transaction Documents or its organizational documents (including
without limitation, its articles of incorporation and bylaws) unless the Surety
shall have otherwise consented.


 


(b)        Corporate
Existence.  The
Servicer, its successors and assigns, shall maintain its corporate or other
existence and shall at all times continue to be duly organized under the laws
of its jurisdiction of incorporation or formation and duly qualified and duly
authorized (as described in subsections 2.04(a), (b) and (c) hereof) and shall
conduct its business in accordance with the terms of its certificate of
incorporation and bylaws or other formation documents.


 


(c)         The
Servicer To Provide Financial Statements; Accountants’ Reports; Other
Information.  The Servicer shall keep or cause to be kept
in reasonable detail books and records of account of the Servicer’s, and its
consolidated subsidiaries, assets and business, including but not limited to,
books and records relating to the Transaction. 
The Servicer shall furnish or cause to be furnished to the Surety:


 


(i)            Financial Statements.   All reports, Financial
Statements, Officer’s Certificates and reviews required to be furnished under
Article II of the Servicing Agreement and Section 2.02(c) of this Agreement,
including without limitation, annual audited and quarterly unaudited financial
statements of FIFSG and its consolidated subsidiaries.


 


(ii)           Initial and Continuing
Reports.  The Servicer shall
deliver to the Surety the Monthly Servicer Report required by Section 2.02(c)
of the Servicing Agreement.  Such Monthly
Report shall include, among other things, the outstanding Notional Amount of
each Interest Rate Cap, and, to the extent that the Floating Rate, with respect
to any Interest Rate Cap exceeds the Cap Rate of the related Collection Period,
the termination value of the related Interest Rate Cap.


 


All financial
statements specified in clause (i) above shall be furnished in consolidated
form for FIFSG and its subsidiaries.


 


The Surety agrees
that it and its agents, accountants and attorneys shall keep confidential all
financial statements, reports and other information delivered by the Servicer pursuant
to this subsection 2.05(c) to the extent provided in subsection 2.05(e) hereof.


 


17





















 


(d)           Access to Records;
Discussions With Officers and Accountants.  The Servicer shall, upon the reasonable
request of the Surety, permit the Surety or its authorized agents:


 


(i)            to inspect its books and records as
they may relate to the Note, the obligations of such party under the
Transaction Documents, and the Transaction;


 


(ii)           to discuss the affairs, finances and
accounts of the Servicer with the chief operating officer and the chief
financial officer of the Servicer, and


 


(iii)          with the Servicer’s consent, which
consent shall not be unreasonably withheld, to discuss the affairs, finances
and accounts of the Servicer with such company’s independent accountants,
provided that an officer of the company shall have the right to be present during
such discussions.


 


Such inspections
and discussions shall be conducted during normal business hours and shall not
unreasonably disrupt the business of the Servicer.  The books and records of the Servicer will be
maintained at the address of the Servicer designated herein for receipt of
notices, unless the Servicer shall otherwise advise the parties hereto in
writing.


 


(e)           Confidentiality.  The Surety agrees that it and its
shareholders, directors, agents, accountants and attorneys shall keep
confidential any matter of which it becomes aware through such inspections or
discussions (unless readily available from public sources), except as may be
otherwise required by regulation, law or court order or requested by
appropriate governmental authorities or as necessary to preserve its rights or
security under or to enforce the Transaction Documents, provided that the
foregoing shall not limit the right of the Surety to make such information
available to its regulators, securities rating agencies, reinsurers, credit and
liquidity providers, counsel and accountants. 
If the Surety is requested or required (by oral questions,
interrogatories, requests for information or documents subpoena, civil investigative
demand or similar process) to disclose any information of which it becomes
aware through such inspections or discussions, the Surety will promptly notify
the Servicer of such request(s) so that the Servicer may seek an appropriate
protective order and/or waive the Surety’s compliance with the provisions of
this Agreement.  If, in the absence of a
protective order or the receipt of a waiver hereunder, the Surety is,
nonetheless, in the opinion of its counsel, compelled to disclose such
information to any tribunal or else stand liable for contempt or suffer other censure
or significant penalty, the Surety may disclose such information to such
tribunal that the Surety is compelled to disclose, provided that a copy of all
information disclosed is provided to the Servicer, promptly upon such
disclosure.


 


(f)            Notice of Material Events.  The Servicer shall be obligated promptly to
inform the Surety in writing of the occurrence of any of the following to the
extent any of the following relate to it:


 


18





















 


(i)            the submission of any claim or the
initiation or threat of any legal process, litigation or administrative or
judicial investigation, or rule making or disciplinary proceeding by or against
the Servicer that could result in a material adverse effect upon the Servicer’s
ability to perform its respective obligations under the Transaction Documents
or have a material adverse effect upon the Surety, or the promulgation of any
proceeding or any proposed or final rule which would result in a material
adverse effect upon the Servicer’s ability to perform its respective
obligations under the Transaction Documents or have a material adverse effect
upon the Surety;


 


(ii)           any change in location of the
Servicer’s principal offices or any change in the location of the Servicer’s
books and records;


 


(iii)          the occurrence of any Event of
Default, Potential Termination Event, Termination Event, Potential Amortization
Event, Amortization Event, Potential Wind-Down Event, Wind-Down Event, Servicer
Event of Default or of any event that would result in a material adverse effect
upon the Servicer’s ability to perform its respective obligations under the
Transaction Documents or have a material adverse effect upon the Surety;


 


(iv)          the commencement of any proceedings by
or against the Servicer under any applicable bankruptcy, reorganization,
liquidation, rehabilitation, insolvency or other similar law now or hereafter
in effect or of any proceeding in which a receiver, liquidator, conservator,
trustee or similar official shall have been, or may be, appointed or requested
for the Servicer or any of its assets; or


 


(v)           the receipt of notice that (A) the
Servicer is being placed under regulatory supervision, (B) any license, permit,
charter, registration or approval necessary for the conduct of the Servicer’s
business is to be, or may be suspended or revoked, or (C) the Servicer is to
cease and desist any practice, procedure or Surety Bond employed by the
Servicer in the conduct of its business, and such cessation may result in a
material adverse effect upon the Servicer’s ability to perform its respective
obligations under the Transaction Documents or have a material adverse effect
upon the Surety.


 


(g)           Financing Statements and
Further Assurances.  The
Servicer will cause to be filed all necessary financing statements or other
instruments, and any amendments or continuation statements relating thereto,
necessary to be kept and filed in such manner and in such places as may be
required by law to preserve and protect fully the interest of the Collateral Agent
(on behalf of the Secured Parties) in the Collateral.  The Servicer shall, upon the request of the
Surety, from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within ten days of such request, such amendments
hereto and such further instruments and take such further action as may be
reasonably necessary to effectuate the intention, performance and provisions of
the Transaction Documents.  In addition,
the Servicer agrees to cooperate


 


19





















 


with Standard & Poor’s
and Moody’s in connection with any review of the Transaction that may be
undertaken by Standard & Poor’s and Moody’s after the date hereof.


 


(h)           Maintenance of
Licenses.  The Servicer or any
successors thereof shall maintain all licenses, permits, charters and
registrations which are material to the conduct of its business.


 


(i)            Third-Party Beneficiary.  The Servicer agrees that the Surety shall
have all rights of a third-party beneficiary in respect of each Transaction
Document to which it is a party and hereby incorporates and restates their
representations, warranties and covenants as set forth therein for the benefit
of the Surety.


 


(j)            Amendments.  The Servicer will provide the
Surety with written notice of any change or amendment to any Transaction
Document as currently in effect and the Servicer agrees that it will not make
any change or amendment to any Transaction Document without the prior written
consent of the Surety thereto.


 


(k)           Maintenance of
Collateral.  On or before each
April 15, beginning in 2000, so long as the Note is outstanding, the Servicer
shall furnish, or cause to be furnished, to the Surety and the Collateral Agent
an officers’ certificate either stating that such action has been taken with
respect to the recording, filing, rerecording and refilling of any financing
statements and continuation statements as is necessary to maintain the interest
of the Collateral Agent created by the Security Agreement with respect to the
Collateral and reciting the details of such action or stating that no such
action is necessary to maintain such interests. 
Such officers’ certificate shall also describe the recording, filing,
rerecording and refilling of any financing statements and continuation
statements that will be required to maintain the interest of the Collateral
Agent (on behalf of the Secured Parties) in the Collateral until the date such
next officers’ certificate is due.  The
Servicer will use its best efforts to cause any necessary recordings or filings
to be made with respect to the Collateral.


 


(l)            Closing Documents.  The Servicer shall provide or
cause to be provided to the Surety an executed original copy of each document
executed in connection with the Servicing Transfer within 30 days after the
date of such closing.


 


(m)          Preference Amounts.  With respect to any Preference
Amount (as defined in the Surety Bond), the Servicer shall provide to the
Surety upon the request of the Surety:


 


(i)            a certified copy of the final
nonappealbable order of a court having competent jurisdiction ordering the
recovery by a trustee in bankruptcy as voidable preference amounts included in
previous payments to any Insured Party pursuant to the United States Bankruptcy
Code;


 


20





















 


(ii)           an opinion of counsel satisfactory to
the Surety, and upon which the Surety shall be entitled to rely, stating that
such order is final and is not subject to appeal;


 


(iii)          an assignment in such form as
reasonably required by the Surety, irrevocably assigning to the surety all
rights and claims of the Servicer, the Collateral Agent and any Insured party
relating to or arising under the Transaction Documents against the debtor which
made such preference payment or otherwise with respect to such preference
amount; and


 


(iv)          appropriate instruments to effect
(when executed by the affected party) the appointment of the Surety as agent
for the Collateral Agent and any Insured Party in any legal proceeding relating
to such preference payment being in a form satisfactory to the Surety.


 


Section
2.06.  Negative
Covenants of the Servicer. The
Servicer hereby agrees that during the Term of this Agreement, unless the
Surety shall otherwise expressly consent in writing:


 


(a)           Impairment of Rights.  The Servicer shall not take any
action, or fail to take any action, if reasonably requested by the surety, if
such action or failure to take action may interfere with the enforcement of any
rights of the Surety under or with respect to the Transaction Documents.  The Servicer shall give the Surety written
notice of any such action or failure to act on the earlier of: (i) the date
upon which any publicly available filing or release is made with respect to
such action or failure to act or (ii) promptly prior to the date of
consummation of such action or failure to act. 
The Servicer shall furnish to the Surety all information requested by it
that is reasonably necessary to determine compliance with this paragraph.


 


(b)           Waiver, Amendments,
Etc.  Except in accordance
with the Transaction Documents, the Servicer shall not waive, modify or amend,
or consent to any waiver, modification or amendment of , any of the terms,
provisions or conditions of the Transaction Documents without the consent of
the Surety.


 


(c)           Receivables;
Policies.  Except as otherwise
permitted in the Security Agreement, the Servicer shall not alter or amend any
Receivable, its credit policies, its collection policies or its charge-off
policies in a manner that materially adversely affects the Surety unless the
Surety shall have previously given its consent, which consent shall not be
unreasonably withheld.


 


(d)           Transaction
Documents.  The Servicer will
not an any time in the future deny that the Transaction Documents constitute
the legal, valid and binding obligations of the Servicer.


 


21





















 


ARTICLE
III


 


THE SURETY BOND; SECURITY


 


Section 3.01.  Agreement To Issue Surety Bond. 
The Surety agrees, subject to the conditions set forth in Section 3.02
hereof, to issue the Surety Bond.


 


Section
3.02.  Conditions
Precedent To Issuance of the Surety Bond. The Transferor and
the Seller shall have complied with the terms and satisfied the conditions
precedent set forth below:


 


(i)            Payment of the MBIA Premium in
accordance with Section 3.03 hereof;


 


(ii)           Payment of or satisfactory
arrangements for payment by the Transferor of (a) rating agency fees of
Standard & Poor’s and Moody’s; and (b) the fees and expenses incurred
by the Surety in connection with the issuance of such Surety Bond, including
reasonable fees and expenses of counsel to the Surety and accountants for the
Surety, all in accordance with the terms of the Commitment.  The fees for any other rating agency shall be
paid by the party requesting such other agency’s rating, unless such other
agency is a substitute for Standard & Poor’s or Moody’s in the event that
Standard & Poor’s or Moody’s is no longer rating securities, in which case
the cost for such agency shall be paid by the Transferor;


 


(iii)          Receipt by the Surety of a fully
executed copy of the Transaction Documents (except for the Originator
Agreements);


 


(iv)          Receipt by the Surety of (A) the
certificate of incorporation and bylaws of 
the Transferor and (B) certified copies of the resolutions of the
board of directors of the Transferor authorizing the execution and delivery and
performance of the Transaction Documents and the other matters contemplated
thereby, and of all other documents evidencing any other action of the
Transferor necessary to enter into the Transaction Documents, all in form and
substance acceptable to the Surety and its counsel;


 


(v)           [Reserved.]


 


(vi)          Receipt by the Surety of the following
opinions of counsel:


 


(A)          The law firm of Buck, Keenan &
Owens shall have issued its favorable opinion, in form and substance acceptable
to the Surety and its counsel, regarding and the validity and enforceability of
the Transaction Documents (except with respect to the Originator Agreements)
against the Transferor and the Seller, the law firm of Skadden, Arps, Slate,
Meagher & Flom shall have issued its favorable opinion, in form and
substance acceptable to the Surety and its counsel, regarding and the validity
and enforceability of the Security Agreement and the Insurance Agreement against
the Reserve Account Agent, and the law firm of Andrews & Kurth, L.L.P.
shall have issued its favorable opinion, in form 


 


22





















 


and substance acceptable to the Surety and its
counsel, regarding and the validity and enforceability of the Transaction
Documents against the Collateral Agent.


 


(B)           The law firm of Vinson & Elkins
shall have issued its favorable opinions, in form and substance acceptable to
the Surety and its counsel, regarding the sale of the Receivables from the
Seller to the Transferor, consolidation of the Seller and the Transferor in the
event of the Seller’s bankruptcy.


 


(C)           The law firm of Buck, Keenan &
Owens shall have issued its favorable opinions, in form and substance
acceptable to the Surety and its counsel, regarding the perfection of the
Collateral Agent’s interest in the Receivables and the Reserve Account Agent’s
interest in (i) the funds on deposit in, and (ii) investments with respect to,
the Reserve Account.


 


(D)          The Surety shall have received such
other opinions of counsel, in form and substance acceptable to the Surety and
its counsel, including tax opinions, addressing such other matters as the
Surety may reasonably request.


 


(vii)         Receipt by the Surety of true and
correct copies of all approvals, licenses and consents, if any, including,
without limitation, any required approval of the shareholders of the parties
hereto, necessary for the transactions contemplated by the Transaction
Documents;


 


(viii)        Receipt of confirmation from Standard
& Poor’s and Moody’s that the rating of the Facility without regard to the
Surety Bond is at least BBB- and Baa3, respectively;


 


(ix)           The Surety shall have received a
certificate of an authorized officer of the Transferor, the Collateral Agent,
the Seller and the Reserve Account Agent certifying the name and true
signatures of the officers of the Transferor, the Collateral Agent, the Seller
and the Reserve Account Agent, executing the Transaction Documents;


 


(x)            [Reserved.]


 


(xi)           The representations and warranties of
the parties hereto set forth or incorporated by reference in this Agreement
shall be true and correct as of the Date of Issuance as if made on the Date of
Issuance and the Surety shall have received a certificate of appropriate officers
of each of the parties hereto to that effect.


 


(xii)          The Seller will cause FIFSG to furnish
a certificate to the Surety to the effect that (i) the Financial Statements
which have been furnished to the Surety are, as of the date thereof, complete
and correct in all material respects; present fairly the financial condition of
FIFSG on a consolidated basis as of the date thereof; and have been prepared in
accordance with generally accepted accounting principles consistently applied
(except


 


23





















 


as noted therein and subject to year-end adjustments
for interim statements) and (ii) there has been no material adverse change in
such conditions or operations;


 


(xiii)         Delivery of such other documents,
customary closing certificates, instruments, approvals or opinions as are
reasonably requested by the Surety;


 


(xiv)        No suit, action or other proceeding,
investigation or injunction, or final judgment relating thereto, shall be
pending or threatened before any court or governmental agency in which it is
sought to restrain or prohibit or to obtain damages or other relief in
connection with the Transaction Documents or the consummation of the
Transaction;


 


(xv)         No statute, rule, regulation or order
shall have been enacted, entered or deemed applicable by any government or
governmental or administrative agency or court that would make the transactions
contemplated by any of the Transaction Documents illegal or otherwise prevent
the consummation thereof;


 


(xvi)        No default or any fact or event which
results, or which with notice or the passage of time, or both, would result in
a Termination Event, Amortization Event, Wind-Down Event or Event of Default
shall have occurred;


 


(xvii)       Compliance with all other terms,
conditions and requirements of the Commitment;


 


(xiii)         The Surety and its counsel shall have
determined that all documents, certificates and opinions to be delivered in
connection with the Receivables conform to the terms of the Transaction
Documents; and


 


(xix)         The Surety shall have received such
other documents, instruments, approvals or opinions requested by the Surety as
may be reasonably necessary to effect the Transaction, including but not
limited to, evidence satisfactory to the Surety that the conditions precedent,
if any, in the Transaction Documents have been satisfied.


 


Issuance of such Surety
Bond will be conclusive evidence of satisfaction or waiver of any of the
conditions set forth in this Section 3.02.


 


Section 3.03.  Premium. 
The MBIA Premium shall be payable in accordance with the Security
Agreement so long as no Surety Default or Surety Insolvency has occurred.  The MBIA Premium shall be nonrefundable
without regard to whether the Surety makes any payment under the Surety Bond.


 


Section 3.04.  Indemnification.


 


(a)  In addition to any and all rights of
indemnification or any other rights of the Surety pursuant hereto or under law
or equity, the Transferor, the Seller, the Servicer, the Reserve Account Agent
(subject to Section 3.04(g) hereof) and the Collateral Agent


 


24





















 


(subject
to the provisions of Section 3.04(g) hereof), and any successors thereto
agree to pay, and to protect, indemnify and save harmless, the Surety and its
officers, directors, shareholders, employees, agents, including each person, if
any, who controls the Surety within the meaning of either Section 15 of
the Securities Act of 1933, as amended, or Section 20 of the Securities
and Exchange Act of 1934, as amended, from and against any and all claims,
losses, liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or reasonable expenses (including, without limitation,
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) or obligations whatsoever (herein
collectively referred to as “Liabilities”) of any nature arising out of or
relating to the transactions contemplated by the Transaction Documents by
reason of:


 


(i)            the misfeasance or malfeasance of,
or gross negligence or theft committed by, any director, officer, employee or
agent of the Transferor, the Servicer, the Seller, the Reserve Account Agent or
the Collateral Agent;


 


(ii)           the violation by the Transferor, the
Servicer or the Seller of any federal or state laws, rules or regulations
relating to the maximum amount of interest permitted to be received on account
of the loan of money or with respect to the Receivables;


 


(iii)          the breach by the Transferor, the
Servicer, the Seller or the Collateral Agent of any of its material obligations
under this Agreement or any of the Transaction Documents;


 


(iv)          the breach by the Reserve Account
Agent or the Servicer under any of the Transaction Documents to which it is a
party, and such breach is not cured within the applicable time period set forth
in the related Transaction Document;


 


(v)           the breach by the Transferor, the
Servicer, the Seller, the Reserve Account Agent, the Servicer or the Collateral
Agent of any representation or warranty on the part of the Transferor, the
Seller, the Reserve Account Agent, the Servicer or the Collateral Agent
contained in the Transaction Documents or in any certificate furnished or
delivered to the Surety thereunder, and such breach is not cured within the
applicable time period set forth in the related Transaction Document; and


 


(vi)          any state or federal tax liability
imposed upon the Transferor or in connection with the transactions contemplated
by the Transaction Documents.


 


(b)  The Transferor and the Seller agree to pay,
and to protect, indemnify and save harmless, the Surety and its officers,
directors, shareholders, employees, agents, including each person, if any, who
controls the Surety within the meaning of either Section 15 of the
Securities Act of 1933, as amended, or Section 20 of the Securities and
Exchange Act of 1934, as amended, from and against any and all claims, losses,
liabilities (including


 


25





















 


penalties),
actions, suits, judgments, demands, damages, costs or reasonable expenses
(including, without limitation, reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) or obligations
whatsoever (herein collectively referred to as “Liabilities”) of any nature
arising out of or relating to the transactions contemplated by the Transaction
Documents by reason of any losses, damages or expenses of whatsoever kind or
nature, including reasonable attorney’s fees, which the Surety may at any time
incur by reason of or in consequence of any Obligor making any legally proven
claim relating to an Originator’s acts regarding each contract evidencing the
related Receivable purchased by the Seller or Transferor.


 


(c)  The Transferor
and the Seller agree to pay, and to protect, indemnify and save harmless, the
Surety and its officers, directors, shareholders, employees, agents, including
each person, if any, who controls the Surety within the meaning of either Section 15
of the Securities Act of 1933, as amended, or Section 20 of the Securities
and Exchange Act of 1934, as amended, from and against any and all claims,
losses, liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or reasonable expenses (including, without limitation,
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) or obligations whatsoever (herein
collectively referred to as “Liabilities”) of any nature arising out of or
relating to the occurrence of the events set forth in Section 4.1(a)
through (g) of the Note Purchase Agreement.


 


(d)  Any party which
proposes to assert the right to be indemnified under this Section 3.04
will, promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim is to be made against
the Transferor, the Servicer, the Seller, the Reserve Account Agent or the
Collateral Agent under this Section 3.04, notify the Transferor, the
Servicer, the Collateral Agent, the Reserve Account Agent or the Seller of the
commencement of such action, suit or proceeding, enclosing a copy of all papers
served.  In case any action, suit or
proceeding shall be brought against any indemnified party and it shall notify
the Transferor, the Servicer, the Collateral Agent, the Reserve Account Agent
or the Seller of the commencement thereof, the Transferor, the Servicer, the
Seller, the Reserve Account Agent or the Collateral Agent shall be entitled to
participate in, and, to the extent that it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party, and
after notice from the Transferor, the Servicer the Seller, the Reserve Account
Agent or the Collateral Agent to such indemnified party of its election so to
assume the defense thereof, the Transferor, the Servicer, the Seller, the
Reserve Account Agent or the Collateral Agent shall not be liable to such
indemnified party for any legal or other expenses other than reasonable costs
of investigation subsequently incurred by such indemnified party in connection
with the defense thereof.  The
indemnified party shall have the right to employ its counsel in any such action
the defense of which is assumed by the Transferor, the Servicer, the Seller,
the Reserve Account Agent or the Collateral Agent in accordance with the terms
of this subsection (d), but the fees and expenses of such counsel shall be
at the expense of such indemnified party unless the employment of counsel by
such indemnified party has been authorized by the


 


26





















 


Transferor,
the Servicer, the Seller, the Reserve Account Agent or the Collateral
Agent.  None of the Transferor, the
Servicer, the Seller, the Reserve Account Agent and the Collateral Agent shall
be liable for any settlement of any action or claim effected without its
consent.


 


(e)  This indemnity
provision shall survive the termination of this Agreement and shall survive
until the statute of limitations has run on any causes of action which arise
from one of these reasons and until all suits filed as a result thereof have
been finally concluded.


 


(f)  Notwithstanding
any provision or obligation to the contrary set forth in this Agreement or any
instrument now or hereafter securing, affecting or relating to any obligation
of the Transferor, the Servicer, the Seller, the Reserve Account Agent or the
Collateral Agent under this Agreement, including, without limitation, the
Security Agreement, no individual representative of the Transferor, the
Servicer, the Collateral Agent, the Reserve Account Agent or the Seller
(including, without limitation, employees, officers, directors and shareholders
thereof) shall have any personal liability under this Agreement including,
without limitation, any liability for the performance or observance or
nonperformance or nonobservance of any covenant or obligation of the
Transferor, the Servicer, the Collateral Agent, the Reserve Account Agent and
the Seller or for breach of any representation or warranty contained in this
Agreement.


 


(g)  Notwithstanding
any other provision of this Section 3.04, (I) the Collateral Agent
shall be obligated under this Section 3.04 to pay, protect, indemnify and
save harmless any indemnified party hereunder from and against Liabilities only
with respect to any misfeasance or malfeasance of, or gross negligence or theft
committed by any director, officer, employee or agent of the Collateral Agent,
as specified in Section 3.04(a)(i), and any breach by the Collateral
Agent, as specified in Section 3.04(a)(iii) or (v); and (II) in
connection with its duties, representations, warranties, covenants and
obligations pursuant to the Security Agreement and this Agreement, the Reserve
Account Agent shall be obligated under this Section 3.04 to pay, protect,
indemnify, and save harmless any indemnified party hereunder from and against
Liabilities only with respect to any gross negligence by the Reserve Account
Agent or theft committed by any director, officer, employee or agent of the
Reserve Account Agent, as specified in Section 3.04(a)(i) and any breach
by the Reserve Account Agent, as specified in Section 3.04(a)(iv) or (v).


 


Section 3.05. 
Payment Procedure. 
If the Surety makes any payment under the Surety Bond, the Transferor, the
Servicer, the Seller and the Collateral Agent shall accept, except in the case
of manifest error, a voucher or other evidence of payment as prima facie
evidence that such payment was properly made. 
In the event of any payment by the Surety, the Transferor, the Servicer,
the Seller and the Collateral Agent agree to accept a voucher or other evidence
of payment complete on its face as prima facie evidence of the propriety
thereof and the liability therefor of the Surety except in the case of manifest
error.  All payments to be made to the
Surety under this Agreement shall be made to the Surety in lawful currency of
the United States of


 


27





















 


America
in immediately available funds at the notice address for the Surety as
specified in Section 6.02 hereof on the date when due.  Payments to be made to the Surety under this
Agreement shall bear interest payable to the extent provided in this Agreement
at the Late Payment Rate from the date when due to the date paid.


 


Section 3.06. 
Subrogation. 
Upon any payment by the Surety pursuant to the Surety Bond, the Surety
shall be fully subrogated to the rights of the Insured Party (as defined in the
Surety Bond) to the extent of such payment, pursuant to the priority set forth
in Section 5.1 of the Security Agreement. 
Each of the Transferor, the Servicer, the Seller, the Collateral Agent,
and the Reserve Account Agent acknowledges such subrogation and, further,
agrees to execute such instruments prepared by the Surety and to take such
reasonable actions as, in the sole judgment of the Surety, are necessary to
evidence such subrogation and to perfect the rights of the Surety to receive
any moneys paid or payable under the Security Agreement.


 


Section 3.07.  Reimbursement and Additional Payment
Obligation.


 


(a)  In accordance
with Section 5.1(a)(vi) of the Security Agreement, the Surety shall be
entitled to reimbursement for any payment made by the Surety under the Surety
Bond, which reimbursement shall be due and payable on the date that any amount
is to be paid pursuant to a Notice or a Remittance Date Notice (each as defined
in the Surety Bond), in an amount equal to the amount to be so paid and all
amounts previously paid that remain unreimbursed, together with interest on any
and all amounts remaining unreimbursed (to the extent permitted by law, if in
respect of any unreimbursed amounts representing interest) from the date such
amounts became due until paid in full (after as well as before judgment), at a
rate of interest equal to the Late Payment Rate.


 


(b)  Anything in subsection 3.07(a)
hereof to the contrary notwithstanding, the Surety shall be entitled to
reimbursement (i) from the Seller for payments made under the Surety Bond arising
as a result of the Transferor’s failure to repurchase any Receivable required
to be repurchased pursuant to Section 3.1 of the Security Agreement, or Section 3.02
of the Servicing Agreement, or the Seller’s failure to repurchase any
Receivable required to be repurchased pursuant to Section 6.2 of the
Purchase Agreement at a rate of interest equal to the Late Payment Rate and (ii)
from the Servicer for payments made under the Surety Bond, arising as a result
of the Servicer’s failure to deposit into the Collection Account any other
amount required to be so deposited pursuant to the Security Agreement, together
with interest on any and all amounts remaining unreimbursed (to the extent
permitted by law, if in respect to any unreimbursed amounts representing
interest) from the date such amounts became due until paid in full (after as
well as before judgment), at a rate of interest equal to the Late Payment Rate.


 


(c)  The Seller
agrees to pay to the Surety as follows: any and all charges, fees, costs and
expenses that the Surety may reasonably pay or incur, including, but not
limited to, reasonable attorneys’ and accountants’ fees and expenses, in
connection with (i) any accounts established to facilitate payments under
the Surety Bond to the extent the Surety has not been immediately reimbursed on
the date that any amount is paid by the Surety


 


28





















 


under
the Surety Bond, (ii) the enforcement, defense or preservation of any
rights in respect of any of the Transaction Documents, including defending,
monitoring or participating in any litigation or proceeding (including any
insolvency or bankruptcy proceeding  in
respect of any Transaction participant or any affiliate thereof) relating to
any of the Transaction Documents, any party to any of the Transaction
Documents, in its capacity as such a party, or the Transaction, or
(iii) any amendment, waiver or other action with respect to, or related
to, any Transaction Document, whether or not executed or completed, and the
Surety reserves the right to charge a reasonable fee as a condition to
executing any waiver or consent proposed in respect of any of the Transaction
Documents.


 


(d)  The Reserve
Account Agent agrees to pay the Surety as follows:  any and all charges, fees, costs and expenses
that the Surety may reasonably pay or incur, including, but not limited to,
reasonable attorneys’ fees and expenses, in connection with the Reserve Account
Agent’s failure to perform in any respect any of its obligations, covenants or
agreements contained in the Security Agreement and in this Agreement.


 


(e)  The Seller and
the Reserve Account Agent, as the case may be, and in each case as to matters
concerning itself, agree to pay to the Surety as follows: with respect to the
Seller, interest on any and all amounts described in subclauses (b), (c), (f)
and (g) and with respect to the Reserve Account Agent, interest on any and all
amounts described in subclause (d) of this Section 3.07 from the date
payable or paid by such party until payment thereof in full, payable to the
Surety at the Late Payment Rate per annum.


 


(f)  The Collateral
Agent, the Seller, the Servicer and the Transferor agree to pay to the Surety
as follows:  any payments made by the
Surety on behalf of, or advanced to, the Collateral Agent the Seller, the
Servicer or the Transferor, as the case may be, consisting of any amounts
payable by the Collateral Agent, the Seller, the Servicer or the Transferor
pursuant to the Transaction Documents.


 


(g)  Following
termination of the Security Agreement pursuant to Section 6.1 thereof, the
Seller agrees to reimburse the Surety for any Insured Payments required to be
made pursuant to the Surety Bond subsequent to the date of such termination.


 


Section 3.08.  Assignment by Transferor.  The Transferor hereby assigns to the Surety
all of its rights in and to any indemnification provided to the Transferor by
the Servicer under the Servicing Agreement, including, but not limited to, the
indemnification rights of the Transferor pursuant to Sections 3.07 and 7.02 of
the Servicing Agreement.


 


ARTICLE IV


 


FURTHER AGREEMENTS


 


Section 4.01.  Effective Date; Term of Agreement.  This Agreement shall take effect on the Date
of Issuance and shall remain in effect until such time as the Surety is no longer
subject


 


29





















 


to
a claim under the Surety Bond and all amounts payable by the Transferor, the
Servicer, the Seller, the Collateral Agent or the Reserve Account Agent
hereunder or under any other Transaction Document have been paid in full and
any preference period applicable to any such payment has expired and all other
obligations of the Transferor, the Servicer, the Seller, the Collateral Agent
or the Reserve Account Agent hereunder or under any other Transaction Document
have been performed in full.


 


Section 4.02.  Waiver of Rights; Further Assurances and
Corrective Instruments. (a) Excepting at such times as a
Surety Insolvency or a Surety Default shall exist or shall have occurred and be
continuing, none of the Transferor, the Servicer, the Seller, the Collateral
Agent or the Reserve Account Agent shall grant any waiver of rights under any
of the Transaction Documents (except with respect to the Originator Agreements)
to which any of them is a party without the prior written consent of the
Surety, and any amendment or supplement to the Transaction Documents without
the written consent of the Surety shall be null and void and of no force or
effect, unless otherwise expressly provided under the terms of the related
Transaction Document.


 


(a)  Each of the
Transferor, the Servicer, the Collateral Agent, the Reserve Account Agent and
the Seller 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 as the Surety may reasonably request and as
may be reasonably required in the Surety’s judgment to effectuate the intention
of or facilitate the performance of this Agreement.


 


Section 4.03.  Obligations Absolute.  The obligations of the Transferor, the
Servicer, the Collateral Agent, the Reserve Account Agent and the Seller
hereunder shall be absolute and unconditional, and shall not be subject to, and
the Transferor, the Servicer, the Seller, the Collateral Agent, and the Reserve
Account Agent hereby waive any of their rights of, abatement, diminution,
postponement or deduction, or to any defense other than payment, or to any
right of setoff or recoupment arising out of any breach under any of the
Transaction Documents, by any party thereto or any beneficiary thereof, or out
of any obligation at any time owing to the Transferor, the Servicer, the
Seller, the Collateral Agent or the Reserve Account Agent.  Nothing herein shall be construed as prohibiting
the Transferor, the Servicer, the Seller, the Collateral Agent or the Reserve
Account Agent from pursuing any rights or remedies they may have against any
other person or entity in a separate legal proceeding.  The obligations of the Transferor, the
Servicer, the Seller, the Collateral Agent and the Reserve Account Agent are
absolute and unconditional and will be paid or performed strictly in accordance
with this Agreement.


 


Section 4.04.  Assignments; Reinsurance; Third-Party Rights.


 


(a)  This Agreement
shall be a continuing obligation of the Transferor, the Servicer, the Seller,
the Collateral Agent and the Reserve Account Agent and shall (i) be
binding upon the Transferor, the Servicer, the Seller, the Collateral Agent and
the Reserve Account Agent and their respective successors and assigns and
(ii) inure to the benefit of and be enforceable by the Surety and its
successors, transferees and assigns.


 


30





















 


None
of the Transferor, the Servicer, the Seller, the Collateral Agent or the
Reserve Account Agent may assign this Agreement, or delegate any of its duties
specifically set forth herein, without the prior written consent of the Surety
which consent shall not be unreasonably withheld.


 


(b)  The Surety shall
have the right to give participations in its rights under this Agreement and to
enter into contracts of reinsurance with respect to the Surety Bond and each
such participant or reinsurer shall be entitled to the benefit of any
representation, warranty, covenant and obligation of the Transferor, the
Servicer, the Seller, the Collateral Agent and the Reserve Account Agent
hereunder as if such participant or Surety was a party hereto; provided that no
such grant of participation shall operate to relieve the Surety of liability on
the Surety Bond.


 


(c)  Except as
provided herein with respect to participants and reinsurers, nothing in this
Agreement shall confer any right, remedy or claim, express or implied, upon any
person, other than the Surety, against the Transferor, the Servicer, the
Seller, the Collateral Agent or the Reserve Account Agent, 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.


 


Section 4.05.  Due Diligence Review.  The parties agree that the Surety (or
its designee) may conduct, at the expense of the Seller, a due diligence review
with respect to the Receivables every six months.  The parties further agree that the Surety or
its designees may conduct a due diligence review, at the expense of the Seller,
at a date earlier than six months from the date of the last review if the
aggregate Principal Balance as of the Addition Cut-off Date of Additional
Receivables included as Collateral which have not been subject to a due
diligence review equals or exceeds $25,000,000. 
Such reviews shall be the semi-annual due diligence review described in Section 6.3(c)
of the Security Agreement.


 


ARTICLE V


 


DEFAULTS; REMEDIES


 


Section 5.01.  Defaults.  The occurrence of any of the following events
shall constitute an Event of Default:


 


(a)  Any
representation or warranty made by the Transferor, the Servicer, the Seller,
the Collateral Agent or the Reserve Account Agent (i) hereunder which, if
capable of being cured, is not cured within 15 days after notice thereof is
given to the Transferor, the Servicer, the Seller, the Collateral Agent or the
Reserve Account Agent or (ii) under the Transaction Documents, or in any
certificate furnished hereunder or under the Transaction Documents, which is
not cured within the applicable cure period set forth in the related
Transaction Document shall prove to be untrue or incomplete in any material
respect;


 


31





















 


(b)  (i) The
Transferor, the Servicer, the Seller, the Reserve Account Agent or the
Collateral Agent shall fail to pay when due any amount payable by the
Transferor, the Servicer, the Seller, the Reserve Account Agent or the
Collateral Agent hereunder or (ii) a legislative body has enacted any law
that declares or a court of competent jurisdiction shall find or rule that any
of the Transaction Documents to which the related Person is a party are not
valid and binding on the Transferor, the Servicer, the Seller, the Collateral
Agent or the Reserve Account Agent;


 


(c)  The occurrence
and continuance of a Servicer Event of Default under the Servicing Agreement
(as defined therein) or a Termination Event, a Wind-Down Event or Amortization
Event under the Security Agreement, which is not cured within the applicable
cure period set forth in the related Transaction Document (except with respect
to a Termination Event);


 


(d)  Any failure on
the part of the Transferor, the Servicer, the Seller, the Collateral Agent or
the Reserve Account Agent duly to observe or perform in any material respect
any other of the covenants or agreements on the part of the Transferor, the
Servicer, the Seller, the Collateral Agent or the Reserve Account Agent
contained in this Agreement which continues unremedied for 30 days, or in any
other Transaction Document which is not cured within the applicable cure period
set forth in the related Transaction Document after the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given to the Transferor, the Servicer, the Seller, the Collateral Agent or the
Reserve Account Agent, as the case may be, by the Surety or by the Reserve
Account Agent or the Collateral Agent (with a copy to the Surety);


 


(e)  Any material
party thereto shall breach any material representation or warranty or fail to
observe any material covenant or agreement contained in any Transaction
Document (except for the obligations described under paragraph (a) or (c)
above), and such failure shall continue for a period of 30 days after written
notice given to the Transferor and, if applicable, such other party; provided
that, if such failure shall be of a nature that it cannot be cured within 30
days, such failure shall not constitute an Event of Default hereunder if within
such 30-day period the Transferor or such other party shall have given notice
to the Surety of corrective action it proposes to take, which corrective action
is agreed in writing by the Surety to be satisfactory and the Transferor or
such other party shall thereafter pursue such corrective action diligently
until such default is cured;


 


(f)  A decree or
order of a court or agency or supervisory authority having jurisdiction in the
premises in an involuntary case under any present or future federal or state
bankruptcy, insolvency or similar law or the appointment of a conservator or
receiver or liquidator or other similar official in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings, or for the winding-up or liquidation of its affairs, shall have
been entered against the Transferor, the Servicer, the Seller, the Collateral
Agent or the Reserve Account Agent and such decree or order shall have remained
in force undischarged or unstayed for a period of 60 consecutive days;


 


32





















 


(g)  The Transferor,
the Servicer, the Seller, the Collateral Agent or the Reserve Account Agent
shall consent to the appointment of a conservator or receiver or liquidator or
other similar official in any insolvency, readjustment of debt, marshaling of
assets and liabilities or similar proceedings of or relating to the Transferor,
the Servicer, the Seller, the Collateral Agent or the Reserve Account Agent or
of or relating to all or substantially all of the property of any of them; or


 


(h)  The Transferor, the
Servicer, the Seller, the Collateral Agent or the Reserve Account Agent shall
admit in writing its inability to pay its debts generally as they become due,
file a petition to take advantage of or otherwise voluntarily commence a case
or proceeding under any applicable bankruptcy, insolvency, reorganization or
other similar statute, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations.


 


Section 5.02.  Remedies; No Remedy Exclusive.


 


(a)  Upon the
occurrence of an Event of Default, the Surety may exercise any one or more of
the rights and remedies set forth below against the party in default:


 


(i)                                     declare all
indebtedness of every type or description owed by such party to the Surety with
respect to the transactions contemplated by the Transaction Documents to be
immediately due and payable, and the same shall thereupon be immediately due
and payable;


 


(ii)                                  exercise any rights
and remedies under any of the Transaction Documents in accordance with the
terms of such Transaction Document; or


 


(iii)                               take whatever action
at law or in equity as may appear necessary or desirable in its judgment to
collect the amounts then due and thereafter to become due under any of the
Transaction Documents or to enforce performance and observance of any
obligation, agreement or covenant of the Transferor, the Servicer, the Seller,
the Collateral Agent or the Reserve Account Agent, as the case may be, under
any of the Transaction Documents.


 


(b)  Unless otherwise
expressly provided, no remedy herein conferred upon or reserved to the Surety
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 any
of the Transaction Documents or existing at law or in equity.  No delay or omission to exercise any right or
power accruing under any of the Transaction Documents upon the happening of any
event set forth in Section 5.01 hereof shall impair any such right or
power or shall be construed to be a waiver thereof, but any such right and
power may be exercised from time to time and as often as may be deemed
expedient.  In order to entitle the
Surety to exercise any remedy reserved to the Surety in this Article, it shall
not be necessary to give any notice, other than such notice as may be required
in this Article.


 


33





















 


Section 5.03.  Waivers.


 


(a)  No failure by
the Surety to exercise, and no delay by the Surety in exercising, any right
hereunder shall operate as a waiver thereof. 
The exercise by the Surety of any right hereunder shall not preclude the
exercise of any other right, and the remedies provided herein to the Surety are
declared in every case to be cumulative and not exclusive of any remedies
provided by law or equity.


 


(b)  The Surety 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 Surety and delivered to the Transferor, the
Servicer, the Seller, the Collateral Agent, and the Reserve Account Agent.  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.


 


Section 5.04.  No Insolvency Proceedings.  So long as this Agreement is in effect, no
party hereto will file any involuntary petition or otherwise institute any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding
or other proceeding under any federal or state bankruptcy or similar law
against the Transferor; provided, however, the Surety may take whatever action
it deems necessary to realize on the Receivables to the extent of any payments
under the Surety Bond.


 


ARTICLE VI


 


MISCELLANEOUS


 


Section 6.01.  Amendments, Changes and Modifications.  This Agreement may be amended, changed,
modified, altered or terminated only by written instrument or written
instruments signed by the parties hereto. 
The Seller agrees to cause the Transferor to provide prior written
notification to both Moody’s and Standard & Poor’s of any amendment to this
Agreement.


 


Section 6.02.  Notices. 
All demands, notices and other communications to be given hereunder
shall be in writing (except as otherwise specifically provided herein) and
shall be mailed by registered mail or personally delivered or telexed or
telecopied to the recipient as follows:


 


34





















 


To the Surety:


 


MBIA Insurance Corporation


113 King Street


Armonk, NY  10504


Attention: 
Insured Portfolio Management-SF


Telecopy No.: 
(914) 765-3810


Confirmation: 
(914) 765-3781


 


To the Seller:


 


First Investors Financial
Services


Group, Inc.


Suite 710


675 Bering Drive


Houston, TX 
77057


Attention: 
Tommy A. Moore, Jr.


Telecopy No.: 
(713) 977-0657


Confirmation: 
(713) 977-2600


 


To the Collateral Agent, Custodian


or Back-Up Servicer:


 


Wells Fargo Bank, National Association


MAC N9311-161


Sixth & Marquette


Minneapolis, Minnesota 55479-0070


Attention:  Corporate Trust Services – Asset-Backed Administration


Telecopy No.: 
(713) 216-4880


Confirmation: 
(713) 216-4181


 


To the Transferor:


 


First Investors Auto Receivables Corporation


Suite 710


675 Bering Drive


Houston, TX 
77057


Attention: 
Tommy A. Moore, Jr.


Telecopy No.: 
(713) 977-0657


Confirmation: 
(713) 977-2600


 


35





















 


To the Reserve Account Agent:


 


Wachovia Capital Markets, LLC


301 South College St., TW-10


Charlotte, NC 
28288


Attention: 
Justin Zakocs


Telecopy No.: 
(704) 383-9106


Confirmation:  (704) 715-8184


 


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 delivery, except when
telexed or telecopied, in which case, effective upon telex or telecopy against
receipt of answerback or written confirmation.


 


An affidavit by any
Person representing or acting on behalf of any party hereto, as to such
mailing, having the registry receipt attached, shall be conclusive evidence of
the mailing of such demand, notice or communication.


 


Section 6.03.  Severability. 
In the event any provision of this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, the parties hereto agree
that such holding shall not invalidate or render unenforceable any other
provision hereof.  The parties hereto
further agree that the holding by any court of competent jurisdiction that any
remedy pursued by the Surety hereunder is unavailable or unenforceable shall
not affect in any way the ability of the Surety to pursue any other remedy
available to it.


 


Section 6.04. 
Governing Law.  This Agreement shall be construed, and the
obligations, rights and remedies of the parties hereunder shall be determined,
in accordance with the laws of the State of New York.


 


Section 6.05.  Consent to Jurisdiction and Venue, Etc.  The Transferor, the Servicer, the Seller, the
Collateral Agent and the Reserve Account Agent each irrevocably (a) agrees
that any suit, action or other legal proceeding arising out of or relating to
this Agreement, the Security Agreement or any of the other Transaction
Documents may be brought in a court of record in the State of New York or
in the Courts of the United States of America located in such state,
(b) consents to the jurisdiction of each such court in any such suit,
action or proceeding and (c) waives any objection which they may have to
the laying of venue of any such suit, action or proceeding in any of such
courts and any claim that any such suit, action or proceeding has been brought
in an inconvenient forum.  The
Transferor, the Servicer, the Seller and the Collateral Agent each hereby
irrevocably appoints CT Corporation System, Suite 1301, 116 John Street, New
York, New York 10038, as its agent to receive on behalf of the Transferor, the
Servicer, the Seller and the Collateral Agent, as the case may be, and their
respective properties service of copies of the summons and complaint and other
process which may be served in any such suit, action or proceeding (the “Process
Agent”).  Such service may be made by
mailing or delivering a copy of such process to the Transferor, the Servicer, the
Seller or the Collateral Agent, as the case may be, in care of the Process
Agent at the applicable address above, and the Transferor, the


 


36





















 


Servicer,
the Seller and the Collateral Agent each hereby irrevocably authorizes and
directs the Process Agent to accept such service on their behalf.  The Reserve Account Agent hereby irrevocably
consents to the service of any and all process in any such suit, action or
proceeding described in clause (a) above by the mailing of copies of such
process to its New York office located at 767 Fifth Avenue, New York, NY 10153,
with a copy to the Reserve Account Agent at its address provided in Section 6.02
hereof.  The Surety agrees to mail to the
Transferor, the Servicer, the Seller or the Collateral Agent as the case may
be, at its address provided in Section 6.02 hereof a copy of any summons,
complaint or other process mailed or delivered by it to the Process Agent.  As an alternative method of service, the
Transferor, the Servicer, the Seller and the Collateral Agent each also
irrevocably consents to the service of any and all process in any such action
or proceeding described in clause (a) above by the mailing of copies of such
process to the Transferor, the Servicer, the Seller and the Collateral Agent,
as the case may be, at its address provided in Section 6.02 hereof.  The Transferor, the Servicer, the Seller, the
Collateral Agent and the Reserve Account Agent each agrees that a final,
nonappealable judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in other jurisdictions by execution on the
judgment or in any other manner provided by law.  All mailings under this Section 6.05
shall be by certified mail, return receipt requested.


 


Nothing in this Section 6.05
shall affect the right of the Surety to serve legal process in any other manner
permitted by law or affect the right of the Surety to bring any suit, action or
proceeding against the Transferor, the Seller, the Collateral Agent or the
Reserve Account Agent or their respective property in the courts of any other
jurisdiction.


 


Section 6.06.  Consent of Surety. 
In the event that the Surety’s consent is required under the terms
hereof or any term of any other Transaction Document, it is understood and
agreed that the determination whether to grant or withhold such consent shall
be made solely by the Surety in its absolute discretion.  The Surety hereby agrees that it will respond
to any request for consent in a timely manner, taking into consideration the
business of the Transferor, the Servicer, the Seller, the Collateral Agent and
the Reserve Account Agent.


 


Section 6.07. 
Counterparts. 
This Agreement may be executed in counterparts by the parties hereto,
and each such counterpart shall be considered an original and all such
counterparts shall constitute one and the same instrument.


 


Section 6.08.  Recitals. 
All of the recitals hereinabove set forth are incorporated in this
Agreement by reference.


 


Section 6.09.  Headings. 
The headings of sections contained in this Agreement are provided for
convenience only.  They form no part of
this Agreement and shall not affect its construction or interpretation.  All references to sections or subsections of
this Agreement refer to the corresponding sections or subsections of this
Agreement.


 


37





















 


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


 


 


	
   

  	
  MBIA INSURANCE CORPORATION

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FIRST INVESTORS AUTO RECEIVABLES

  
	
   

  	
  CORPORATION, as Transferor

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  FIRST INVESTORS FINANCIAL SERVICES,

  
	
   

  	
  INC., as Seller

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK, NATIONAL

  ASSOCIATION, as Custodian, Collateral Agent,

  and Back-up Servicer

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  WACHOVIA CAPITAL MARKETS, LLC, as

  Reserve Account Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By