**Exhibit 10.127(u)**

 

EXECUTIONCOPY

 

 

**MBIAINSURANCE CORPORATION,**

as Insurer

 

**FIRSTINVESTORS SERVICING CORPORATION,**

as Servicer

 

**FIRSTINVESTORS FINANCIAL SERVICES, INC.**

as Seller and as Administrator

 

**FIRSTINVESTORS AUTO FUNDING CORPORATION,**

as Depositor

 

**FIRSTINVESTORS AUTO OWNER TRUST 2006-A,**

as Issuer

 

**WELLSFARGO DELAWARE TRUST COMPANY,**

as Owner Trustee

 

**WELLSFARGO BANK, NATIONAL ASSOCIATION,**

as Back-up Servicer andIndenture Trustee

 

 

**INSURANCEAGREEMENT**

 

First Investors Auto OwnerTrust 2006-A

$32,000,000 4.5685% Class A-1Asset-Backed Notes

$47,000,000 4.87% Class A-2Asset-Backed Notes

$74,000,000 4.93% Class A-3Asset-Backed Notes

$36,060,000 5.00% Class A-4Asset-Backed Notes

 

Dated as of January 26,2006

 

 

 

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Tableof Contents

 
| ** **                                 | ** ** | ** **                                                                                          | **Page** |
|--------------------------------------------|------------|-----------------------------------------------------------------------------------------------------|----------|
|                                       |       |                                                                                                |     |
| ARTICLE I                             |       |
|                                       |       |                                                                                                |     |
| DEFINITIONS                                |       |                                                                                                | 1        |
|                                       |       |                                                                                                |     |
| ARTICLE II                            |       |
| REPRESENTATIONS, WARRANTIES AND  COVENANTS |       |
|                                       |       |                                                                                                |     |
| Section 2.01.                         |       | Representations and  Warranties of the Servicer, the Seller and the Depositor                       | 6        |
|                                       |       |                                                                                                |     |
| Section 2.02.                         |       | Affirmative Covenants  of the Servicer, the Seller and the Depositor                                | 10       |
|                                       |       |                                                                                                |     |
| Section 2.03.                         |       | Negative Covenants of  the Servicer, the Seller and the Depositor                                   | 17       |
|                                       |       |                                                                                                |     |
| Section 2.04.                         |       | Representations and  Warranties of the Issuer                                                       | 18       |
|                                       |       |                                                                                                |     |
| Section 2.05.                         |       | Affirmative Covenants  of the Issuer                                                                | 21       |
|                                       |       |                                                                                                |     |
| Section 2.06.                         |       | Negative Covenants of  the Issuer                                                                   | 24       |
|                                       |       |                                                                                                |     |
| Section 2.07.                         |       | Representations,  Warranties and Covenants of Indenture Trustee and Back-up Servicer                | 25       |
|                                       |       |                                                                                                |     |
| Section 2.08.                         |       | Representations,  Warranties and Covenants of Owner Trustee                                         | 27       |
|                                       |       |                                                                                                |     |
| Section 2.09.                         |       | Negative Covenant of  the Administrator                                                             | 28       |
|                                       |       |                                                                                                |     |
| ARTICLE III                           |       |
| THE POLICY; REIMBURSEMENT                  |       |
|                                       |       |                                                                                                |     |
| Section 3.01.                         |       | Issuance of the Policy                                                                              | 28       |
|                                       |       |                                                                                                |     |
| Section 3.02.                         |       | Payment of Fees and  Insurance Premium                                                              | 30       |
|                                       |       |                                                                                                |     |
| Section 3.03.                         |       | Reimbursement and  Additional Payment Obligation                                                    | 31       |
|                                       |       |                                                                                                |     |
| Section 3.04.                         |       | Indemnification;  Limitation of Liability                                                           | 32       |
|                                       |       |                                                                                                |     |
| Section 3.05.                         |       | Payment Procedure                                                                                   | 35       |
|                                       |       |                                                                                                |     |
| ARTICLE IV                            |       |
| FURTHER AGREEMENTS                         |       |
|                                       |       |                                                                                                |     |
| Section 4.01.                         |       | Effective Date; Term of  the Insurance Agreement                                                    | 35       |
|                                       |       |                                                                                                |     |
| Section 4.02.                         |       | Further Assurances and  Corrective Instruments                                                      | 36       |
|                                       |       |                                                                                                |     |
| Section 4.03.                         |       | Obligations Absolute                                                                                | 36       |
|                                       |       |                                                                                                |     |
| Section 4.04.                         |       | Assignments;  Reinsurance; Third-Party Rights                                                       | 38       |
|                                       |       |                                                                                                |     |
| Section 4.05.                         |       | Liability of the  Insurer                                                                           | 38       |
|                                       |       |                                                                                                |     |
| Section 4.06.                         |       | Parties Will Not Institute  Insolvency Proceedings                                                  | 39       |
|                                       |       |                                                                                                |     |
| Section 4.07.                         |       | Indenture Trustee,  Depositor, Back-up Servicer, Seller and Servicer To Join in Enforcement  Action | 39       |

 

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| Section 4.08. |   | Subrogation                    | 40     |
|--------------------|--------|--------------------------------|--------|
|               |   |                           |   |
| ARTICLE V     |   |
| DEFAULTS; REMEDIES |   |
|               |   |                           |   |
| Section 5.01. |   | Defaults                       | 40     |
|               |   |                           |   |
| Section 5.02. |   | Remedies; No Remedy  Exclusive | 41     |
|               |   |                           |   |
| Section 5.03. |   | Waivers                        | 42     |
|               |   |                           |   |
| ARTICLE VI    |   |
| MISCELLANEOUS      |   |
|               |   |                           |   |
| Section 6.01. |   | Amendments, Etc                | 42     |
|               |   |                           |   |
| Section 6.02. |   | Notices                        | 43     |
|               |   |                           |   |
| Section 6.03. |   | Severability                   | 44     |
|               |   |                           |   |
| Section 6.04. |   | Governing Law                  | 45     |
|               |   |                           |   |
| Section 6.05. |   | Consent to Jurisdiction        | 45     |
|               |   |                           |   |
| Section 6.06. |   | Consent of the Insurer         | 45     |
|               |   |                           |   |
| Section 6.07. |   | Counterparts                   | 45     |
|               |   |                           |   |
| Section 6.08. |   | Headings                       | 45     |
|               |   |                           |   |
| Section 6.09. |   | Trial by Jury Waived           | 46     |
|               |   |                           |   |
| Section 6.10. |   | Limited Liability              | 46     |
|               |   |                           |   |
| Section 6.11. |   | Entire Agreement               | 46     |
|               |   |                           |   |
| Section 6.12. |   | Limitation of Liability        | 46     |
|               |   |                           |   |
| Section 6.13. |   | Limited Recourse               | 46     |
|               |   |                           |   |
| Section 6.14. |   | Subordination                  | 47     |

 

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**INSURANCE AGREEMENT**

** **

This **INSURANCE AGREEMENT**(this “Insurance Agreement”), dated as of January 26, 2006 by and among **FIRST INVESTORS FINANCIAL SERVICES**, **INC.**as seller (together with its permitted successors and assigns, the “Seller”)and as Administrator,**FIRST INVESTORS SERVICINGCORPORATION,**as Servicer (together with its permitted successors andassigns, the “Servicer”), **FIRST INVESTORS AUTOFUNDING CORPORATION**, as Depositor (the “Depositor”), **FIRST INVESTORS AUTO OWNER TRUST 2006-A**, as Issuer (the “Issuer”or the “Trust”), **WELLS FARGO DELAWARE TRUST COMPANY,**asOwner Trustee (the “Owner Trustee”) **MBIA INSURANCECORPORATION,**as Insurer (the “Insurer”), **WELLS FARGOBANK, NATIONAL ASSOCIATION**, as Back-up Servicer (the “Back-upServicer”) and as Indenture Trustee (the “Indenture Trustee”).

 

WHEREAS, the Indenture dated as of January 26, 2006 (the “Indenture”)relating to the First Investors Auto Owner Trust 2006-A $32,000,000 4.5685% Class A-1Asset-Backed Notes (the “Class A-1 Notes”), $47,000,000 4.87% Class A-2Asset-Backed Notes (the “Class A-2 Notes”), $74,000,000 4.93% Class A-3Asset-Backed Notes (the “Class A-3 Notes”) and $36,060,000 5.00% Class A-4Asset-Backed Notes (the “Class A-4 Notes” and, together with the Class A-1Notes, the Class A-2 Notes and the Class A-3 Notes, the “Obligations”),between the Issuer and the Indenture Trustee, in its capacity as IndentureTrustee and Custodian, provides for, among other things, the issuance of assetbacked notes and the Insurer has issued its note guaranty insurance policy (the“Policy”) that guarantees certain payments on the Obligations;

 

WHEREAS, the Insurer shall be paid an insurancepremium pursuant to the Indenture, and the details of such premium are setforth herein; and

 

WHEREAS, the Servicer, the Seller, the Depositor andthe Issuer have undertaken certain obligations in consideration for the Insurer’sissuance of the Policy;

 

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

 

**ARTICLE IDEFINITIONS**

** **

The terms defined in this Article I shall havethe meanings provided herein for all purposes of this Insurance Agreement,unless the context clearly requires otherwise, in both singular and pluralform, as appropriate.  Unless the contextclearly requires otherwise, all capitalized terms used herein and not otherwisedefined in this Article I shall have the meanings assigned to them in theIndenture, the Sale and Allocation Agreement, or the Servicing Agreement.  All words used herein shall be construed tobe of such gender or number as the circumstances require.  This “Insurance Agreement” shall mean thisInsurance Agreement as a whole and as the same may, from time to timehereafter, be amended, supplemented or modified.  The words “herein,” “hereby,” “hereof,” “hereto,”“hereinabove” and “hereinbelow,” and words

 

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of similar import, refer tothis Insurance Agreement as a whole and not to any particular paragraph, clauseor other subdivision hereof, unless otherwise specifically noted.

 

*“Adjusted Net Income”* means, forany period and any Person, such Person’s consolidated net income (or loss)determined in accordance with GAAP, but excluding: (a) the income of anyother Person (other than its Subsidiaries) in which such Person or any of itsSubsidiaries has an ownership interest, unless received by such Person or itsSubsidiary in a cash distribution; (b) any after-tax gains or lossesattributable to an asset disposition other than in the ordinary course ofbusiness; and (c) to the extent not included in clause (a) and clause(b) above, any after-tax extraordinary, non-cash or nonrecurring gains orlosses.

 

*“Administration Agreement”* meansthe Administration Agreement dated as of January 26, 2006, between theAdministrator, the Issuer and the Indenture Trustee as the same may be amendedor supplemented from time to time in accordance with the terms thereof.

 

*“Administrator”* means FirstInvestors Financial Services, Inc. or any successor Administrator underthe Administration Agreement.

 

“*Adverse SelectionProcedure*” means any method of selecting or identifying a Contracteligible to be included in the Trust Estate, other than in accordance with theTransaction Documents, that materially and adversely affects the representativenature of the sample of Contracts so selected.

 

*“Business Day”*means any dayother than (a) a Saturday or a Sunday or (b) a day on which bankinginstitutions or trust companies in New York, New York; Wilmington, Delaware;Houston, Texas; Minneapolis, Minnesota; or Atlanta, Georgia are authorized orobligated by law, executive order or governmental decree to remain closed.

 

*“Change in Control”* shall meanthe occurrence of any of the following (a) any Person shall, at any timefollowing the Closing Date, acquire 51% or more of the total outstanding sharesof FIFSG; (b) any Person shall, at any time following the Closing Date,acquire directly or indirectly 51% or more of the voting control with respectto the total outstanding shares of FIFSG; (c) FIFSG shall cease to own,directly or indirectly, 51% or more of the total outstanding shares of theSeller or the Servicer; or (d) FIFSG shall not have directly or indirectly51% or more of the voting control with respect to the total outstanding sharesof the Seller or the Servicer.

 

*“Code”* means the Internal RevenueCode of 1986, including, unless the context otherwise requires, the rules andregulations thereunder, as amended from time to time.

 

*“Commission”* means the Securitiesand Exchange Commission.

 

*“Contribution Agreement”* means theContribution Agreement dated as of January 26, 2006 between the Seller andthe Depositor.

 

*“Date of Issuance”*means the dateon which the Policy is issued as specified therein.

 

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*“Default”*means any event whichresults, or which with the giving of notice or the lapse of time or both wouldresult, in an Event of Default.

 

*“Documents”* shall have themeaning set forth in Section 2.01(j) hereof.

 

*“EBITDA”*means, for any periodand any Person, the total of the following (calculated without duplication) forsuch Person on a consolidated basis for such period: (a) Adjusted NetIncome; plus (b) any provision for (or less any benefit from) income orfranchise taxes deducted in determining Net Adjusted Income; plus (c) InterestExpense deducted in determining Adjusted Net Income; plus amortization anddepreciation expense deducted in determining Adjusted Net Income, plus (e) othernoncash charges deducted in determining Net Adjusted Income and no alreadydeducted in accordance with clause (d) above or clause (b) and clause(c) of the definition of Adjusted Net Income; minus (f) noncashcredits included in determining consolidated Adjusted Net Income and notalready excluded in accordance with the definitions of Adjusted Net Income.

 

*“EBIDTA Coverage Ratio” *means the ratio of EBITDAto Interest Expense.

 

*“Event of Default”*means anyevent of default specified in Section 5.01 hereof.

 

*“FIFSG”* means First InvestorsFinancial Services Group, Inc.

 

 “*Financial Statements*”**means, withrespect to FIFSG, the balance sheets and the statements of income, retainedearnings and cash flows and the notes thereto which have been provided to theInsurer by FIFSG.

 

*“Fiscal Agent”*means the FiscalAgent, if any, designated pursuant to the terms of the Policy.

 

*“GAAP”*means generally acceptedaccounting principles of the United States as in effect from time to time.

 

*“Guaranty”* means the Guarantyentered into as of January 26, 2006, by First Investors Financial Services, Inc.,as Guarantor, the Servicer, the Back-up Servicer and  the Indenture Trustee.

 

*“Indemnification Agreement”* meansthe Indemnification Agreement dated as of January 10, 2006, among theInsurer, the Seller and the Initial Purchaser.

 

*“Indenture”*means the Indenture datedas of January 26, 2006 between the Issuer and the Indenture Trustee andCustodian as the same may be amended or supplemented from time to time inaccordance with the terms thereof.

 

*“Indenture Trustee”*means WellsFargo Bank, National Association, a national banking association, as IndentureTrustee under the Indenture, and any successor Indenture Trustee under theIndenture.

 

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*“Initial Purchaser”* meansWachovia Capital Markets, LLC.

 

*“Insurance Premium”*means thepremium payable in accordance with Section 3.02 hereof.

 

“*Insurer Default*”means the occurrence and continuance of any failure of the Insurer to makepayments under the Policy in accordance with its terms.

 

“*Insurer Insolvency*”means (i) the entry against the Insurer ofa decree or order by a court or agency or supervisory authority havingjurisdiction in the premises for the appointment of a trustee, conservator,receiver or liquidator in any insolvency, conservatorship, receivership,readjustment of debt, marshalling of assets and liabilities or similarproceedings, or for the winding up or liquidation of the Insurer’s affairs, andthe continuance of any such decree or order unstayed and in effect or (ii) theconsent by the Insurer to the appointment of a trustee, conservator, receiveror liquidator in any insolvency, conservatorship, receivership, readjustment ofdebt, marshalling of assets and liabilities or similar proceedings of orrelating to such Insurer as of or relating to substantially all of itsproperty, or such Insurer shall admit in writing its liability to pay its debtsgenerally as they become due, file a petition (or have one filed against suchInsurer) to take advantage of any applicable insolvency or reorganizationstatute, make an assignment for the benefit of its creditors, or suspend(voluntarily or involuntarily) payment of its obligations.

 

*“Interest Expense”* means, for anyperiod and any Person, interest expense of such Person calculated withoutduplication on a consolidated basis for such period in accordance with GAAP.

 

*“Investment Company Act”*meansthe Investment Company Act of 1940, including, unless the context otherwiserequires, the rules and regulations thereunder, as amended.

 

*“Late Payment Rate”*means, forany date of determination, the rate of interest as it is publicly announced byCitibank, N.A. at its principal office in New York, New York as itsprime rate (any change in such prime rate of interest to be effective on thedate such change is announced by Citibank, N.A.) plus 3%.  The Late Payment Rate shall be computed onthe basis of a year of 365 days calculating the actual number of dayselapsed.  In no event shall the Late PaymentRate exceed the maximum rate permissible under any applicable law limiting interestrates.

 

*“Liabilities”* shall have themeaning ascribed to such term in Section 3.04(a) hereof.

 

*“Material Adverse Change”*means,in respect of any Person, a material adverse change in (i) the business,financial condition, results of operations or properties of such Person or (ii) theability of such Person to perform its obligations under any of the TransactionDocuments.

 

* “Moody’s”*meansMoody’s Investors Service, Inc., a Delaware corporation, and any successorthereto, and, if such corporation shall for any reason no longer perform thefunctions of a securities rating agency, “Moody’s” shall be deemed to refer toany other nationally recognized rating agency designated by the Insurer.

 

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*“Obligations”* shall have themeaning as defined in the Policy.

 

*“Obligor”*means the originalobligor under each Contract, including any guarantor of such obligor and theirrespective successors.

 

*“Offering Document”*means theoffering memorandum dated January 10, 2006 in respect of the Obligations(and any amendment or supplement thereto) and any other offering document inrespect of the Obligations prepared by the Servicer, the Seller, Depositor orthe Issuer that makes reference to the Policy.

 

*“Opinion Facts and Assumptions”*means the facts and assumptions contained in the insolvency opinions dated January 26,2006 by Dechert LLP under the heading “Facts and Assumptions” insofar as theyrelate to the Seller, the Issuer and the Depositor.

 

*“Owners”*means registered holdersof Obligations.

 

*“Owner Trustee”*means Wells FargoDelaware Trust Company, not in its individual capacity, but solely as OwnerTrustee of the Issuer.

 

*“Person”*means an individual,joint stock company, trust, unincorporated association, joint venture,corporation, business or owner trust, limited liability company, partnership orother organization or entity (whether governmental or private).

 

*“Premium Percentage”*shall havethe meaning ascribed to such term in Section 3.02 hereof.

 

*“Premium Side Letter Agreement”*means that certain Premium Letter dated as of January 26, 2006, among theSeller, the Issuer, the Servicer, and the Insurer specifying the up-frontInsurance Premium payable on the Closing Date and the monthly Insurance Premiumpayable to the Insurer pursuant to the Indenture.

 

*“Purchase Agreement”* means thePurchase Agreement dated as of January 10, 2006, among the InitialPurchaser, the Seller, the Depositor and the Issuer with respect to the offerand sale of the Obligations, as the same may be amended from time to time.

 

*“Sale**andAllocation Agreement”* means the Sale and Allocation Agreement datedas of January 26, 2006, among the Servicer, the Indenture Trustee, theDepositor, the Securities Intermediary, and the Issuer as the same may be amendedor supplemented from time to time in accordance with the terms thereof.

 

*“Securities Act”*means theSecurities Act of 1933, including, unless the context otherwise requires, the rules andregulations thereunder, as amended from time to time.

 

*“Securities Exchange Act”*meansthe Securities Exchange Act of 1934, including, unless the context otherwiserequires, the rules and regulations thereunder, as amended from time totime.

 

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“*Servicing Agreement*”means the Servicing Agreement dated as of January 26, 2006 among theServicer, the Back-up Servicer, and the Issuer.

 

*“S&P”*means Standard &Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.,and any successor thereto, and, if such corporation shall for any reason nolonger perform the functions of a securities rating agency, “S&P” shall bedeemed to refer to any other nationally recognized rating agency designated bythe Insurer.

 

*“Term of the Insurance Agreement”*shallbe determined as provided in Section 4.01 hereof.

 

*“Transaction”*means thetransactions contemplated by the Transaction Documents, including thetransactions described in the Offering Document.

 

*“Transaction Documents”*meansthis Insurance Agreement, the Premium Side Letter Agreement, the Indenture, theGuaranty, the Trust Agreement, the Certificate of Trust, the Sale andAllocation Agreement, the Contribution Agreement, the Servicing Agreement, theAdministration Agreement, the Purchase Agreement, and the Obligations.

 

*“Trust”*means the trust createdpursuant to the Indenture.

 

*“Trust Agreement”*means theAmended and Restated Trust Agreement dated as of January 26, 2006 amongthe Depositor and the Owner Trustee as the same may be amended or supplementedfrom time to time in accordance with the terms thereof.

 

*“Trust Indenture Act”*means theTrust Indenture Act of 1939, including, unless the context otherwise requires,the rules and regulations thereunder, as amended from time to time.

 

**ARTICLE IIREPRESENTATIONS, WARRANTIES AND COVENANTS**

** **

**Section 2.01.        Representationsand Warranties of the Servicer, the Seller and the Depositor.**  The Servicer, the Seller and the Depositorrepresent, warrant and covenant as of the Date of Issuance, each as to thosematters relating to itself, as follows:

 

(a)           *Due Organization andQualification*.  Each of theServicer, the Seller and the Depositor is a corporation, duly organized,validly existing and in good standing under the laws of its respectivejurisdiction of incorporation.  Each ofthe Servicer, the Seller and the Depositor is duly qualified to do business, isin good standing and has obtained all licenses, permits, charters,registrations and approvals (together, “approvals”) necessary for the conductof its business as currently conducted and as described in the OfferingDocument and the performance of its obligations under the TransactionDocuments, in each jurisdiction in which the failure to be so qualified or toobtain such approvals would render any Transaction Document unenforceable inany respect or would have a material adverse effect upon the Transaction, theOwners or the Insurer.

 

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(b)           *Power and Authority*.  Each of the Servicer, the Seller and theDepositor has all necessary corporate power and authority to conduct itsbusiness as currently conducted and, as described in the Offering Document, toexecute, deliver and perform its obligations under the Transaction Documentsand to consummate the Transaction.

 

(c)           *Due Authorization*.  The execution, delivery and performance ofthe Transaction Documents by the Servicer, the Seller and the Depositor havebeen duly authorized by all necessary corporate action and do not require anyadditional approvals or consents of, or other action by or any notice to orfiling with any Person, including, without limitation, any governmental entityor the Servicer’s, the Seller’s or the Depositor’s stockholders, which have notpreviously been obtained or given by the Servicer, the Seller or the Depositor.

 

(d)           *Noncontravention*.  None of the execution and delivery of theTransaction Documents by the Servicer, the Seller or the Depositor, theconsummation of the Transaction contemplated thereby or the satisfaction of theterms and conditions of the Transaction Documents:

 

(i)            conflicts with or results in anybreach or violation of any provision of the certificate of incorporation orbylaws of the Servicer, the Seller or the Depositor or any law, rule,regulation, order, writ, judgment, injunction, decree, determination or awardcurrently in effect having applicability to the Servicer, the Seller or theDepositor or any of their material properties, including regulations issued byan administrative agency or other governmental authority having supervisory powersover the Servicer, the Seller or the Depositor;

 

(ii)           constitutes a default by theServicer, the Seller or the Depositor under or a breach of any provision of anyloan agreement, mortgage, indenture or other agreement or instrument to whichthe Servicer, the Seller or the Depositor is a party or by which any of its ortheir respective properties, which individually or in the aggregate could have a material adverse effect onthe Transaction; or

 

(iii)          results in or requires the creation ofany lien upon or in respect of any assets of the Servicer, the Seller or theDepositor, except as contemplated by the Transaction Documents.

 

(e)           *Legal Proceedings*.  There is no action, proceeding orinvestigation by or before any court, governmental or administrative agency orarbitrator against or affecting the Servicer, the Seller, the Depositor or anyof its or their subsidiaries, or any properties or rights of the Servicer, theSeller, the Depositor or any of its or their subsidiaries, pending or, to theServicer’s, the Seller’s or the Depositor’s knowledge after reasonable inquiry,threatened, which, in any case, could reasonably be expected to result in aMaterial Adverse Change with respect to the Servicer, the Seller or theDepositor.

 

(f)            *Valid and Binding Obligations*.  The Obligations, when executed, authenticatedand issued in accordance with the Indenture, and the Transaction

 

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Documents(other than the Obligations), when executed and delivered by the Servicer, theSeller and the Depositor, will constitute the legal, valid and bindingobligations of the Servicer, the Seller, the Depositor and the Trust, asapplicable, enforceable in accordance with their respective terms, except assuch enforceability may be limited by bankruptcy, insolvency, reorganization,moratorium or other similar laws affecting creditors’ rights generally andgeneral equitable principles and public policy considerations as to rights ofindemnification for violations of federal securities laws.  None of the Servicer, the Seller or theDepositor will at any time in the future deny that the Transaction Documentsconstitute the legal, valid and binding obligations of the Servicer, theSeller, the Depositor or the Trust, as applicable.

 

(g)           *Financial Statements*.  The Financial Statements of FIFSG, copies ofwhich have been furnished to the Insurer, (i) are, as of the dates and forthe periods referred to therein, complete and correct in all material respects,(ii) present fairly the financial condition and results of operations ofthe companies reported therein as of the dates and for the periods indicatedand (iii) have been prepared in accordance with generally acceptedaccounting principles consistently applied, except as noted therein (subject asto interim statements to normal year-end adjustments).  Since the date of the most recent FinancialStatements, there has been no Material Adverse Change in respect of theServicer or the Seller.  Except asdisclosed in the Financial Statements, the Servicer and the Seller are notsubject to any contingent liabilities or commitments that, individually or inthe aggregate, have a material possibility of causing a Material Adverse Changein respect of the Servicer or the Seller.

 

(h)           *Compliance With Law, Etc*.  No practice, procedure or policy employed, orproposed to be employed, by the Servicer, the Seller or the Depositor in theconduct of its business violates any law, regulation, judgment, agreement,order or decree applicable to any of them that, if enforced, could reasonablybe expected to result in a Material Adverse Change with respect to theServicer, the Seller or the Depositor. None of the Servicer, the Seller and the Depositor is in breach of or indefault under any applicable law or administrative regulation of its respectivejurisdiction of incorporation, or any department, division, agency orinstrumentality thereof or of the United States or any applicable judgmentor decree or any loan agreement, note, resolution, certificate, agreement orother instrument to which the Servicer, the Seller or the Depositor is a partyor is otherwise subject which, if enforced, would have a material adverseeffect on the ability of the Servicer, the Seller or the Depositor, as the casemay be, to perform its respective obligations under the Transaction Documents.

 

(i)            *Taxes*.  The Servicer, the Seller and the Depositorand the Servicer’s, the Seller’s and the Depositor’s parent company orcompanies have filed prior to the date hereof all federal and state tax returnsthat are required to be filed and paid all taxes, including any assessmentsreceived by them that are not being contested in good faith, to the extent thatsuch 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 Changewith respect to the Servicer, the Seller or the Depositor.

 

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(j)            *Accuracy of Information*.  Neither the Transaction Documents, nor otherinformation relating to the Contracts, the operations of the Servicer, theSeller or the Depositor (including servicing or origination of loans) or thefinancial condition of the Servicer, the Seller or the Depositor (collectively,the “Documents”), as amended, supplemented or superseded, furnished to theInsurer by the Servicer, the Seller or the Depositor contains any statement ofa material fact by the Servicer, the Seller or Depositor which was untrue ormisleading in any material respect when made. None of the Servicer, the Seller or the Depositor has any knowledge ofcircumstances that could reasonably be expected to cause a Material AdverseChange with respect to the Servicer, the Seller or the Depositor.  Since the furnishing of the Documents, therehas been no change or any development or event involving a prospective changeknown to the Servicer, the Seller or the Depositor that would render any of theDocuments untrue or misleading in any material respect.

 

(k)           *Compliance With SecuritiesLaws*.  The offer and sale ofthe Obligations comply in all material respects with all requirements of law,including all registration requirements of applicable securities laws.  Without limitation of the foregoing, theOffering Document does not contain any untrue statement of a material fact anddoes not omit to state a material fact necessary to make the statements madetherein, in light of the circumstances under which they were made, notmisleading; provided, however, that no representation is made with respect tothe information in the Offering Document set forth under the heading “Descriptionof the Insurer and the Insurance Policy” or the consolidated financialstatements of the Insurer incorporated by reference in the Offering Document;and provided, further, that no representation is made with respect to thestatements set forth in the last paragraph of the cover page of theOffering Document regarding the delivery of the Obligations and the disclosureunder the heading “Plan of Distribution” in the Offering Document.  Neither the offer nor the sale of theObligations has been or will be in violation of the Securities Act or any otherfederal or state securities laws.  TheIssuer is not required to be registered as an “investment company” under theInvestment Company Act.

 

(l)            *Transaction Documents*.  Each of the representations and warranties ofthe Servicer, the Seller and the Depositor contained in the TransactionDocuments is true and correct in all material respects, and each of theServicer, the Seller and the Depositor hereby make each such representation andwarranty to, and for the benefit of, the Insurer as if the same were set forthin full herein.

 

(m)          *Solvency, FraudulentConveyance*.  The Servicer, theSeller and the Depositor are solvent and will not be rendered insolvent by theTransaction and, after giving effect to the Transaction, none of the Servicer,the Seller or the Depositor will be left with an unreasonably small amount ofcapital with which to engage in its business. None of the Servicer, the Selleror the Depositor intend to incur, or believe that it has incurred, debts beyondits ability to pay as they mature.  Noneof the Servicer, the Seller or the Depositor contemplates the commencement ofinsolvency, bankruptcy, liquidation or consolidation proceedings or theappointment of a receiver, liquidator, conservator, trustee or similar officialin respect of the Servicer, the Seller or the Depositor or any of

 

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theirassets.  The amount of considerationbeing received by the Issuer upon the sale of the Obligations to the InitialPurchaser constitutes reasonably equivalent value and fair consideration forthe interest in the Contracts evidenced by the Obligations.  The Seller is not transferring the Contracts to the Issuer and the Issuer is notselling the Obligations to any Initial Purchaser, as provided in theTransaction Documents, with any intent to hinder, delay or defraud any of theSeller’s or the Depositor’s creditors.

 

(n)           Principal Place of Business.

 

(i)            The principal place of business ofthe Servicer is located in Atlanta, Georgia, and the Servicer is a corporationorganized under the laws of the State of Delaware.  “FirstInvestors Servicing Corporation” is the correct legal name of the Servicerindicated on the public records of the Servicer’s jurisdiction of organizationwhich shows the Servicer to be organized.

 

(ii)           The principal place of business ofthe Seller is located in Houston, Texas, and the Seller is a corporationorganized under the laws of the State of Texas. “First Investors Financial Services, Inc.”****isthe correct legal name of the Seller indicated on the public records of theSeller’s jurisdiction of organization which shows the Seller to be organized.

 

(iii)          The principal place of business of theDepositor is located in Houston, Texas and the Depositor is a corporationorganized under the laws of the State of Delaware.  “FirstInvestors Auto Funding Corporation” is the correct legal name of theDepositor indicated on the public records of the Depositor’s jurisdiction oforganization which shows the Depositor to be organized.

 

(o)           *Opinion Facts andAssumptions*.  The OpinionFacts and Assumptions insofar as they relate to the Seller and the Depositorare true and correct as of the Date of Issuance.

 

(p)           *Requirements forReceivables. *The Seller andthe Depositor represent and warrant with respect to each Contract that: (a) therelated Obligor has no right of recission or cancellation, claims or defenses,set-offs or counterclaims of any kind whatsoever as to or against eachContract; (b) the obligation created by the contract evidencing eachContract is a bonafide sale or refinancing in the ordinary course of theOriginator’s business; (c) the contract evidencing such Contract complieswith all applicable state and federal laws and regulations; (d) thecontract evidencing each Contract, including, but not limited to, descriptionof the motor vehicle and/or services contained therein, is in all respectscomplete, accurate and represents the entire agreement between the Originatorand the Obligor and complies with the Federal Consumer Credit Protection Actand all other applicable state and federal laws and regulations.

 

**Section 2.02.        AffirmativeCovenants of the Servicer, the Seller and the Depositor.**  The Servicer, the Seller and the Depositorhereby agree, each as to itself, that during the Term of the InsuranceAgreement, unless the Insurer shall otherwise expressly consent in writing:

 

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(a)           *Compliance With Agreementsand Applicable Laws*.  TheServicer, the Seller and the Depositor shall not be in default under theTransaction Documents and shall comply with all material requirements of anylaw, rule or regulation applicable to it. So long as no Insurer Default orInsurer Insolvency exists, unless the Insurer shall otherwise consent, none ofthe Servicer, the Seller or the Depositor shall agree to any amendment to ormodification of the terms of any Transaction Documents unless the Insurer shallhave given its prior written consent.

 

(b)           *Corporate Existence*.  The Servicer, its successors and assigns, theSeller, its successors and assigns, and the Depositor, its successors andassigns, shall maintain their corporate existence and shall at all timescontinue to be duly organized under the laws of their respective jurisdictionsof incorporation and duly qualified and duly authorized (as described insections 2.01(a), (b) and (c) hereof) and shall conduct its businessin accordance with the terms of its certificate or articles of incorporationand bylaws.  The Seller, the Depositorand the Servicer shall notify the Insurer within sixty (60) days prior to anychange in its legal name as indicated on the public records of the Servicer’s,the Seller’s or the Depositor’s jurisdiction of organization which shows theServicer, the Seller, or the Depositor to be organized, jurisdiction oforganization, identity or corporate structure. The Seller, the Servicer and the Depositor shall notify the Insurerwithin sixty (60) days prior to any relocation of its principal office.

 

(c)           *Financial Statements;Accountants’ Reports; Other Information*.  The Servicer, the Seller and the Depositorshall keep or cause to be kept in reasonable detail books and records ofaccount of their assets and business, including, but not limited to, books andrecords relating to the Transaction.  TheServicer and the Seller shall furnish or cause to be furnished to the Insurer:

 

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

 

(ii)           *Quarterly FinancialStatements. *As soon asavailable, and in any event within 90 days after each of the first threefiscal quarters of each fiscal year of FIFSG, the unaudited consolidatedbalance sheets of FIFSG and its subsidiaries as of the end of such fiscalquarter and the related unaudited consolidated statements of income, changes inshareholders’ equity and cash flows for such fiscal quarter, all in reasonabledetail and stating in comparative form the respective figures for thecorresponding date and period in the preceding fiscal

 

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year, preparedin accordance with generally accepted accounting principles, consistentlyapplied, and accompanied by the certificate specified in Section 2.02(e) hereof.

 

(iii)          *Initial and ContinuingReports*.  On or before theClosing Date, the Servicer will provide the Insurer a copy of the electronicfile to be delivered to the Indenture Trustee on the Closing Date setting forthas to each Contract, the information required under the definition of “ContractSchedule” in Section 1.1 of the Sale and Allocation Agreement.  Thereafter, the Servicer shall deliver to theInsurer not later than 12:00 noon, New York City time, on eachDetermination Date the report required by Section 3.8 of the Sale andAllocation Agreement.

 

(iv)          *Computer Diskette. *Beginning in February 2006,the Servicer will deliver to the Insurer on a monthly basis, a computerdiskette or other electronic file in a format acceptable to the Insurer, containingthe information provided to the Insurer pursuant to clause (iii) ofthis subsection 2.02(c) and also containing information similar tothe information provided in the Contract Schedule delivered to theIndenture Trustee pursuant to the Sale and Allocation Agreement and describedin Schedule 1 of the Sale and Allocation Agreement.

 

(v)           *Certain Information*.  Upon the reasonable request of the Insurer,the Servicer and the Seller shall promptly provide copies of any requestedproxy statements, financial statements, reports and registration statementswhich the Servicer or the Seller files with, or delivers to, the Commission orany national securities exchange.

 

(vi)          *Other Information*.  Promptly upon receipt thereof, copies of allschedules, list of contracts, financial statements or other similar reportsdelivered to or by the Servicer, the Seller or the Depositor pursuant to theterms of the Transaction Documents and, promptly upon request, such other dataas the Insurer may reasonably request. The Seller agrees, in the event of any merger, consolidation or assettransfer of the Seller as described in Section 4.3 of the Sale andAllocation Agreement, to deliver the certificates and opinions describedtherein to the Insurer.

 

The Insurer agreesthat it and its agents, accountants and attorneys shall keep confidential allfinancial statements, reports and other information delivered by the Servicer,the Seller or the Depositor pursuant to this Section 2.02(c) to theextent provided in Section 2.02(f) hereof.

 

(d)           *The Depositor ShareholderMeetings. *The Depositor shallhave annual shareholder meetings and at least annual board of director meetingsand shall prepare income and franchise tax returns as appropriate.  The Depositor shall deliver to the Insurercopies of the minutes of such meetings no later than April 30 of each yearand such tax returns promptly upon filing but in no event later than August 31of each year, beginning in 2006.

 

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(e)           *Compliance Certificate*.  The Servicer and the Seller shall deliver tothe Insurer, concurrently with the delivery of the financial statementsrequired pursuant to Sections 2.02(c)(i) and (ii) hereof, one ormore certificates signed by an officer of the Servicer and an officer of theSeller authorized to execute such certificates on behalf of the Servicer andthe Seller stating that:

 

(i)            a review of the Servicer’sperformance under the Transaction Documents during such period has been madeunder such officer’s supervision;

 

(ii)           to the best of such individual’sknowledge following reasonable inquiry, no Default or Event of Default hasoccurred, or if a Default or Event of Default has occurred, specifying thenature thereof and, if the Servicer has a right to cure pursuant to Section 5.1of the Indenture, stating in reasonable detail (including, if applicable, anysupporting calculations) the steps, if any, being taken by the Servicer to curesuch Default or Event of Default or to otherwise comply with the terms of the agreementto which such Default or Event of Default relates;

 

(iii)          the attached financial statementssubmitted in accordance with Sections 2.02(c)(i) or (ii) hereof, asthe case may be, are complete and correct in all material respects and presentfairly the financial condition and results of operations of FIFSG as of thedates and for the periods indicated, in accordance with generally acceptedaccounting principles consistently applied; and

 

(iv)          the Servicer has in full force andeffect an errors and omissions insurance policy in accordance with the termsand requirements of Section 2.25 of the Servicing Agreement.

 

(f)            *Access to Records;Discussions With Officers and Accountants*.  On an annual basis, or upon the occurrence ofa Material Adverse Change, the Servicer and the Seller shall, upon thereasonable request of the Insurer, permit the Insurer or its authorized agents(provided that no Insurer Default shall have occurred and is continuing):

 

(i)            to inspect, audit and make copies ofabstracts from, the books and records of the Servicer and of the Seller as theymay relate to the Obligations, the Contracts, the obligations of the Serviceror of the Seller under the Transaction Documents, and the Transaction;

 

(ii)           to discuss the affairs, finances andaccounts of the Servicer or of the Seller with the chief operating officer andthe chief financial officer of the Servicer or of the Seller, as the case maybe; and

 

(iii)          with the Servicer’s or the Seller’sconsent, as applicable, which consent shall not be unreasonably withheld, todiscuss the affairs, finances and accounts of the Servicer or the Seller withthe Servicer’s or the Seller’s

 

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independentaccountants, provided that an officer of the Servicer or the Seller shall havethe right to be present during such discussions.

 

Such inspections and discussions shall be conductedduring normal business hours and shall not unreasonably disrupt the business ofthe Servicer or the Seller.  The booksand records of the Servicer shall be maintained at the address of the Servicerdesignated herein for receipt of notices, unless the Servicer shall otherwiseadvise the parties hereto in writing, and the books and records of the Sellershall be maintained at the address of the Seller designated herein for receiptof notices, unless the Seller shall otherwise advise the parties hereto inwriting.

 

The Insurer agrees that it and its shareholders,directors, agents, accountants and attorneys shall keep confidential any matterof which it becomes aware through such inspections or discussions (unlessreadily available from public sources), except as may be otherwise required byregulation, law or court order or requested by appropriate governmentalauthorities or as necessary to preserve its rights or security under or toenforce the Transaction Documents, provided that the foregoing shall not limitthe right of the Insurer to make such information available to its regulators,securities rating agencies, reinsurers, credit and liquidity providers, counseland accountants.

 

(g)           *Notice of Material Events*.  The Servicer, the Seller and the Depositorshall be obligated (which obligation shall be satisfied as to each if performedby the Servicer, the Seller or the Depositor) promptly to inform the Insurer inwriting of the occurrence of any of the following to the extent any of thefollowing relate to it:

 

(i)            the submission of any claim or theinitiation or threat of any legal process, litigation or administrative orjudicial investigation, or rule making or disciplinary proceeding by oragainst the Servicer, the Seller or the Depositor that (A) could berequired to be disclosed to the Commission or to the Servicer’s, the Seller’sor the Depositor’s shareholders or (B) could result in a Material AdverseChange with respect to the Servicer, the Seller or the Depositor, or thepromulgation of any proceeding or any proposed or final rule which wouldresult in a Material Adverse Change with respect to the Servicer, the Seller orthe Depositor;

 

(ii)           the submission of any claim or theinitiation or threat of any legal process, litigation or administrative orjudicial investigation in any federal, state or local court or before anyarbitration board, or any such proceeding threatened by any government agency,which, if adversely determined, would have a material adverse effect on theIssuer, the Owners or the Insurer;

 

(iii)          any change in the location of theServicer’s, the Seller’s or the Depositor’s principal office, jurisdiction oforganization, legal name as indicated on the public records of the Servicer’s,the Seller’s or the Depositor’s jurisdiction of organization which shows theServicer, the Seller, or the Depositor to be organized, any change in thelocation of the Servicer’s, the Seller’s or the

 

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Depositor’sbooks and records, or any change in the location of the Corporate Trust Office(as defined in the Sale and Allocation Agreement), or any change in the accountnumber or location of the Collection Account, the Note Payment Account, theCertificate Payment Account or the Reserve Account;

 

(iv)          the occurrence of any Event ofServicing Termination, Default or Event of Default or of any Material AdverseChange;

 

(v)           the commencement of any proceedingsby or against the Servicer, the Seller or the Depositor under any applicablebankruptcy, reorganization, liquidation, rehabilitation, insolvency or othersimilar law now or hereafter in effect or of any proceeding in which areceiver, liquidator, conservator, trustee or similar official shall have been,or may be, appointed or requested for the Servicer, the Seller or the Depositoror any of its or their assets; or

 

(vi)          the receipt of notice that (A) theServicer, the Seller or the Depositor is being placed under regulatorysupervision, (B) any license, permit, charter, registration or approvalnecessary for the conduct of the Servicer’s, the Seller’s or the Depositor’sbusiness is to be, or may be suspended or revoked, or (C) the Servicer,the Seller or the Depositor is to cease and desist any practice, procedure orpolicy employed by the Servicer, the Seller or the Depositor in the conduct ofits business, and such cessation may result in a Material Adverse Change withrespect to the Servicer, the Seller or the Depositor.

 

(vii)         The occurrence of any merger,consolidation or asset transfer of the Seller as described in Section 4.3of the Sale and Allocation Agreement.

 

(h)           *Financing Statements andFurther Assurances*.  TheSeller shall cause the Issuer to file all necessary financing statements orother instruments, and any amendments or continuation statements relatingthereto, necessary to be kept and filed in such manner and in such places asmay be required by law to preserve and protect fully the interest of theIndenture Trustee in the Trust.  TheServicer, the Seller and the Depositor shall, upon the request of the Insurer,from time to time, execute, acknowledge and deliver, or cause to be executed,acknowledged and delivered, within ten days of such request, such amendmentshereto and such further instruments and take such further action as may bereasonably necessary to effectuate the intention, performance and provisions ofthe Transaction Documents.  In addition,each of the Servicer, the Seller and the Depositor agrees to cooperate withS&P and Moody’s in connection with any review of the Transaction that maybe undertaken by S&P and Moody’s after the date hereof and to provide allinformation reasonably requested by S&P or Moody’s.

 

(i)            *Maintenance of Licenses*.  The Servicer, the Seller and the Depositor,respectively, or any successors thereof shall maintain or cause to bemaintained all licenses, permits, charters and registrations which are materialto the conduct of its business.

 

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(j)            *Redemption of Obligations*.  The Servicer, the Seller and the Depositorshall instruct the Indenture Trustee, upon redemption or payment of all of theObligations pursuant to the Indenture or otherwise, to furnish to the Insurer anotice of such redemption and, upon a redemption or payment of all of theObligations, to surrender the Policy to the Insurer for cancellation.

 

(k)           *Disclosure Document*.  Each Offering Document delivered with respectto the Obligations shall clearly disclose that the Policy is not covered by theproperty/casualty insurance security fund specified in Article 76 of theNew York Insurance Law.

 

(l)            *Servicing of Contracts*.  The Servicer shall perform such actions withrespect to the Contracts as are required by or provided for in the ServicingAgreement.  The Servicer will provide theInsurer with written notice of any change or amendment to any TransactionDocument as currently in effect.

 

(m)          *Maintenance of Trust*.  On or before each January 31, beginningin 2007, so long as any of the Obligations are outstanding, and promptly afterthe execution and delivery of each amendment to any financing statement, theServicer shall furnish to the Insurer and the Indenture Trustee an officers’certificate and an opinion of counsel as described in Section 3.6(b) ofthe Indenture, either stating that such action has been taken with respect tothe recording, filing, rerecording and refiling of any financing statements andcontinuation statements as is necessary to maintain the interest of theIndenture Trustee created by the Indenture with respect to the Trust andreciting the details of such action or stating that no such action is necessaryto maintain such interests.  Suchofficers’ certificate shall also describe the recording, filing, rerecordingand refiling of any financing statements and continuation statements that willbe required to maintain the interest of the Indenture Trustee in the Trustuntil the date such next officers’ certificate is due.  The Servicer will use its best efforts tocause any necessary recordings or filings to be made with respect to the Trust.

 

(n)           *Seller’s Indemnity*.  Notwithstanding anything in subsection 3.03hereof, the Seller shall pay to the Insurer an amount equal to any amount paidby the Insurer because of the Servicer’s failure to deposit into the CollectionAccount any amount required to be so deposited by it pursuant to the ServicingAgreement or the Sale and Allocation Agreement, together with interest on anyand all amounts remaining unreimbursed (to the extent permitted by law, if inrespect to any unreimbursed amounts representing interest) from the date suchamounts became due until paid in full (after as well as before judgment) at arate of interest equal to the Late Payment Rate. Notwithstanding anythingherein to the contrary, the Seller shall have no obligation to guaranty anyamounts representing (i) recourse for uncollectible Contracts and (ii) anyprincipal or interest on any Note.

 

(o)           *Closing Documents*.  The Servicer, the Seller and the Depositorshall provide or cause to be provided to the Insurer a bound volume or volumesof the Transaction Documents and an executed original copy of each documentexecuted in

 

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connectionwith the Transaction within 60 days after the date of closing.  Upon the reasonable request of the Insurer,the Servicer, the Seller and the Depositor shall provide or cause to beprovided to the Insurer a copy of each of the Transaction Documents on computerdiskette, in a format acceptable to the Insurer;  provided, however, that the failure to sodeliver shall not constitute (i) an Event of Default hereunder or underthe Indenture or (ii) an Event of Servicing Termination.

 

(p)           *Preference Payments*.  With respect to any Preference Amount (asdefined in the Policy), the Servicer shall provide to the Insurer upon therequest of the Insurer:

 

(i)            a certified copy of the finalnonappealable order of a court having competent jurisdiction ordering therecovery by a trustee in bankruptcy as voidable preference amounts included inprevious distributions under Section 3.3 of the Sale and AllocationAgreement to any Owner pursuant to the United States Bankruptcy Code,11 U.S.C. §§ 101 et seq., as amended (the “Bankruptcy Code”);

 

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

 

(iii)          an assignment in such form asreasonably required by the Insurer, irrevocably assigning to the Insurer allrights and claims of the Servicer, the Indenture Trustee and any Owner relatingto or arising under the Contracts against the debtor which made such preferencepayment or otherwise with respect to such preference amount; and

 

(iv)          appropriate instruments to effect(when executed by the affected party) the appointment of the Insurer as agentfor the Indenture Trustee and any Owner in any legal proceeding relating to suchpreference payment being in a form satisfactory to the Insurer.

 

(q)           *Seller To Hold CommonStock of Depositor. *TheSeller shall hold, either directly or indirectly, all of the common stock ofthe Depositor during the Term of the Insurance Agreement.  The Seller shall not sell, pledge or otherwisetransfer such stock without the prior written consent of the Insurer.

 

(r)            *Purchase Option.*  In the event the Depositor exercises itspurchase option pursuant to Section 5.16 of the Sale and Allocation Agreement,the Depositor shall promptly deliver to the Insurer the documents described in Section 5.16of the Sale and Allocation Agreement.

 

**Section 2.03.        NegativeCovenants of the Servicer, the Seller and the Depositor**.  The Servicer, the Seller and the Depositorhereby agree that during the Term of the Insurance Agreement, unless theInsurer shall otherwise expressly consent in writing:

 

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(a)           *Impairment of Rights*.  None of the Servicer, the Seller or the Depositorshall take any action, or fail to take any action, if reasonably requested bythe Insurer at a time when no Insurer Default or Insurer Insolvency exists orif such action or failure to take action may result in a material adversechange as described in clause (ii) of the definition of MaterialAdverse Change with respect to the Servicer, the Seller or the Depositor, ormay interfere with the enforcement of any rights of the Insurer under or withrespect to the Transaction Documents. The Servicer, the Seller or the Depositor shall give the Insurer writtennotice of any such action or failure to act on the earlier of: (i) thedate upon which any publicly available filing or release is made with respectto such action or failure to act or (ii) promptly prior to the date ofconsummation of such action or failure to act. The Servicer, the Seller and the Depositor shall furnish to the Insurerall information requested by it that is reasonably necessary to determine compliancewith this Section (a).

 

(b)           *Adverse SelectionProcedure*.  The Servicer, theSeller and the Depositor will not use any Adverse Selection Procedure inselecting Contracts to be transferred to the Indenture Trustee from theoutstanding contracts that qualify under the Sale and Allocation Agreement forinclusion in the Trust.

 

(c)           *Waiver, Amendments,Assignments, Etc*.  Except asmay be otherwise expressly set forth in the Transaction Documents, none of theServicer, the Seller or the Depositor shall waive, modify or amend, or consentto any waiver, modification or amendment of, any of the terms, provisions orconditions of any of the Transaction Documents without the prior writtenconsent of the Insurer; and (if no Insurer Default or Insurer Insolvencyexists) none of the Servicer, the Seller or the Depositor shall assign any ofthe Transaction Documents to which it is a party without the prior writtenconsent of the Insurer.

 

(d)           *Contracts; Charge-offPolicy*.  Except as otherwisepermitted in the Sale and Allocation Agreement or the Servicing Agreement, theServicer and the Seller shall not, and the Depositor shall not cause theServicer or the Seller to, alter or amend any Contract or, with regard to theServicer, alter or amend its Collection Policy or, with regard to the Seller,prior to the day following the Prefunding Account End Date, alter or amend itsCredit Policy, in any case in a manner that materially adversely affects theInsurer unless the Insurer shall have previously given its consent, whichconsent shall not be withheld unreasonably.

 

**Section 2.04.        Representationsand Warranties of the Issuer. **Asof the Date of Issuance, the Issuer represents, warrants and covenants asfollows:

 

(a)           *Due Organization andQualification*.  The Issuer isa statutory trust and is duly organized, validly existing and in good standingunder the laws of the State of Delaware. The Issuer is duly qualified to do business, is in good standing and hasobtained all licenses, permits, charters, registrations and approvals(together, “approvals”) necessary for the conduct of its business as currentlyconducted and as described in the Offering Document and the performance of itsobligations under the

 

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TransactionDocuments to which it is a party, in each jurisdiction in which the failure tobe so qualified or to obtain such approvals would render any TransactionDocument to which it is a party unenforceable in any respect or would have amaterial adverse effect upon the Transaction, the Owner or the Insurer.

 

(b)           *Power and Authority*.  The Issuer has all necessary power andauthority to conduct its business as currently conducted and, as described inthe Offering Document, to execute, deliver and perform its obligations underthe Transaction Documents to which it is a party and to consummate theTransaction.

 

(c)           *Due Authorization*.  The execution, delivery and performance ofthe Transaction Documents by the Issuer have been duly authorized by allnecessary corporate action and do not require any additional approvals orconsents, or other action by or any notice to or filing with any Person,including, without limitation, any governmental entity or the Issuer’sstockholders, which have not previously been obtained or given by the Issuer.

 

(d)           *Noncontravention*.  Neither the execution and delivery of theTransaction Documents by the Issuer, the consummation of the Transactioncontemplated thereby nor the satisfaction of the terms and conditions of theTransaction Documents:

 

(i)            conflicts with or results in anybreach or violation of any provision of the Trust Agreement or any law, rule,regulation, order, writ, judgment, injunction, decree, determination or awardcurrently in effect having applicability to the Issuer or any of its materialproperties, including regulations issued by an administrative agency or othergovernmental authority having supervisory powers over the Issuer;

 

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

 

(iii)          results in or requires the creation ofany lien upon or in respect of any assets of the Issuer except as contemplatedby the Transaction Documents.

 

(e)           *Legal Proceedings*.  There is no action, proceeding orinvestigation by or before any court, governmental or administrative agency orarbitrator against or affecting the Issuer or any properties or rights of theIssuer pending or, to the Issuer’s knowledge after reasonable inquiry,threatened, which, in any case, could reasonably be expected to result in aMaterial Adverse Change with respect to the Issuer.

 

(f)            *Valid and BindingObligations*.  The Obligations,when executed, authenticated and issued in accordance with the Indenture andthe Transaction Documents (other than the Obligations), when executed anddelivered by the Issuer, will constitute the legal, valid and binding obligationsof the Issuer enforceable in accordance

 

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with theirrespective terms, except as such enforceability may be limited by bankruptcy,insolvency, reorganization, moratorium or other similar laws affectingcreditors’ rights generally and general equitable principles and public policyconsiderations as to rights of indemnification for violations of federalsecurities laws.  The Issuer will not atany time in the future deny that the Transaction Documents constitute thelegal, valid and binding obligations of the Issuer.

 

(g)           *Compliance With Law, Etc*.  No practice, procedure or policy employed, orproposed to be employed, by the Issuer in the conduct of its business violatesany law, regulation, judgment, agreement, order or decree applicable to itthat, if enforced, could reasonably be expected to result in a Material AdverseChange with respect to the Issuer.  TheIssuer is not in breach of or default under any applicable law oradministrative regulation of its respective jurisdiction or incorporation, orany department, division, agency or instrumentality thereof or of theUnited States or any applicable judgment or decree or any loan agreement,note, resolution, certificate, agreement or other instrument to which theIssuer is a party or is otherwise subject which, if enforced, would have amaterial adverse effect on the ability of the Issuer, to perform itsobligations under the Transaction Documents.

 

(h)           *Compliance With SecuritiesLaws*.  The offer and sale ofthe Obligations comply in all material respects with all requirements of law,including all registration requirements of applicable securities laws.  Without limitation of the foregoing, theOffering Document does not contain any untrue statement of a material fact anddoes not omit to state a material fact necessary to make the statements madetherein, in light of the circumstances under which they were made, notmisleading; provided, however, that no representation is made with respect tothe information in the Offering Document set forth under the heading “Descriptionof the Insurer and the Insurance Policy” or the consolidated financialstatements of the Insurer incorporated by reference in the Offering Document;and provided, further, that no representation is made with respect to thestatements set forth in the last paragraph of the cover page of theOffering Document regarding the delivery of the Obligations and the disclosureunder the heading “Plan of Distribution” in the Offering Document.   Neither the offer nor the sale of theObligations has been or will be in violation of the Securities Act or any otherfederal or state securities laws.

 

(i)            *Taxes*.  The Issuer has filed prior to the date hereofall federal and state tax returns that are required to be filed and paid alltaxes, including any assessments received by them that are not being contestedin good faith, to the extent that such taxes have become due, except for anyfailures to file or pay that, individually or in the aggregate, would notresult in a Material Adverse Change with respect to the Issuer.

 

(j)            *Transaction Documents*.  Each of the representations and warranties ofthe Issuer contained in the Transaction Documents is true and correct in allmaterial respects, and the Issuer hereby makes each such representation andwarranty to, and for the benefit of, the Insurer as if the same were set forthin full herein; provided that the remedy for

 

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any breach ofthis paragraph shall be limited to the remedies specified in the relatedTransaction Document or in this Insurance Agreement.

 

(k)           *Solvency*.  The Issuer is solvent and will not berendered insolvent by the Transaction and, after giving effect to theTransaction, the Issuer will not be left with an unreasonably small amount ofcapital with which to engage in its respective business, nor does the Issuerintend to incur, or believe that it has incurred, debts beyond its ability topay as they mature.  The Issuer does notcontemplate the commencement of insolvency, bankruptcy, liquidation orconsolidation proceedings or the appointment of a receiver, liquidator,conservator, trustee or similar official in respect of the Issuer or any of itsassets.

 

(l)            *Principal Place ofBusiness*.  The principal placeof business of the Issuer is located in Wilmington, Delaware and the Issuer isa statutory trust organized under the laws of the State of Delaware.  “FirstInvestors Auto Owner Trust 2006-A” is the correct legal name of theIssuer indicated on the public records of the Issuer’s jurisdiction oforganization which shows the Issuer to be organized.

 

(m)          *Investment Company Act*.  The Issuer is not an “investment company,” oran “affiliated person” of, or “promoter” or “principal underwriter” for, an “investmentcompany,” as such terms are defined in the Investment Company Act. The Issueris not required to be registered as an “investment company” under theInvestment Company Act.

 

(n)           *No Consents*.  No authorization or approval or other actionby, and no notice to or filing with, any Person, including, without limitation,any governmental entity or regulatory body, is required for the due execution,delivery and performance by the Issuer of the Transaction Documents or anyother material document or instrument to be delivered thereunder, except (ineach case) such as have been obtained or the failure of which to be obtainedwould not be reasonably likely to have a material adverse effect on theTransaction.

 

(o)           *No Material Event ofDefault*.  There is no materialevent of default on the part of the Issuer under any agreement involvingfinancial obligations which would materially adversely impact the financialconditions or operations of the Trust or its obligations under any documentassociated with this Transaction.

 

(p)           *Opinion Facts andAssumptions*. The opinion Facts and Assumptions insofar as theyrelate to the Issuer are true and correct as of the Date of Issuance.

 

**Section 2.05.        AffirmativeCovenants of the Issuer**. The Issuer hereby agrees that during the Term of the InsuranceAgreement, unless the Insurer shall otherwise expressly consent in writing:

 

(a)           *Compliance With Agreementsand Applicable Laws*.  TheIssuer shall not be in default under the Transaction Documents and shall complywith all material requirements of any law, rule or regulation applicableto it.  Except in accordance with

 

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the terms ofthe Transaction Documents, the Issuer shall not agree to or consent to anywaiver of, any material amendment to, or any modification of the terms of anyTransaction Documents unless the Insurer shall have given its prior writtenconsent; provided, however, that if an Insurer Default has occurred and iscontinuing, the Issuer need not obtain the consent of the Insurer for anywaiver, amendment, or modification which is not materially adverse to theInsurer.

 

(b)           *Maintain Existence*.  The Issuer and its successors and assignsshall maintain their existence and shall at all times continue to be dulyorganized under the laws of its respective jurisdiction and duly qualified andduly authorized and shall conduct its business in accordance with the terms ofits organizational documents.

 

(c)           *Notice of Material Events*.  The Issuer shall be obligated promptly toinform the Insurer in writing of the occurrence of any of the following to theextent any of the following relate to it and to the extent that it receivesactual notice of the occurrence of any of the following events:

 

(i)            the submission of any claim or theinitiation or threat of any legal process, litigation or administrative orjudicial investigation, or rule making or disciplinary proceeding by oragainst the Issuer that (A) could be required to be disclosed to theCommission or to the Issuer’s owners or  (B) couldresult in a Material Adverse Change with respect to the Issuer or  the promulgation of any proceeding or anyproposed or final rule which would result in a Material Adverse Changewith respect to the Issuer;

 

(ii)           any change in the location of theIssuer’s or the Owner Trustee’s principal place of business, jurisdiction oforganization, legal name as indicated on the public records of the Issuer’s orthe Owner Trustee’s jurisdiction of organization which shows the Issuer’s orthe Owner Trustee’s to be organized or any change in the location of the Issuer’sbooks and records;

 

(iii)          the occurrence of any Default or Eventof Default or of any Material Adverse Change;

 

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

 

(v)           the receipt of notice that (A) theIssuer is being placed under regulatory supervision, (B) any license,permit, charter, registration or approval necessary for the conduct of the Issuer’sbusiness is to be, or may be suspended or revoked, or (C) the Issuer is tocease and desist any practice, procedure or policy employed by the Issuer inthe conduct of its business, and such cessation may result in a MaterialAdverse Change with respect to the Issuer.

 

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(d)           *Financing Statements andFurther Assurances*.  To theextent provided in the Indenture, the Issuer will cause to be filed allnecessary financing statements or other instruments, and any amendments orcontinuation statements relating thereto, necessary to be kept and filed insuch manner and in such places as may be required by law to preserve andprotect fully the interest of the Indenture Trustee.  The Issuer shall, upon the request of theInsurer, from time to time, execute, acknowledge and deliver, or cause to beexecuted, acknowledged and delivered, within ten days of such request,such amendments hereto and such further instruments and take such furtheraction as may be reasonably necessary to effectuate the intention, performanceand provisions of the Transaction Documents to which it is a party.  In addition, the Issuer agrees to cooperatewith S&P and Moody’s in connection with any review of the Transaction thatmay be undertaken by S&P and Moody’s after the date hereof.

 

(e)           *Maintenance of Licenses*.  The Issuer, or any successors thereof, shallmaintain all licenses, permits, charters and registrations which are materialto the conduct of its business.

 

(f)            *Third-Party Beneficiary*.  The Issuer agrees that the Insurer shall haveall rights of a third-party beneficiary in respect of each Transaction Documentand hereby incorporates and restates its representations, warranties andcovenants as set forth therein for the benefit of the Insurer.

 

(g)           *Tax Matters. *The Issuer will take all actionsnecessary to ensure that the Issuer is treated as a trust for federal and stateincome tax purposes and not as an association (or publicly traded partnership),taxable as a corporation.

 

(h)           *Financial Statements;Accountants’ Reports; Other Information*.  The Issuer shall keep or cause to be kept in reasonable detail books and records ofaccount of its assets and business, including, but not limited to, books andrecords relating to the Transaction.  TheIssuer shall furnish or cause to be furnished to the Insurer promptly uponreceipt thereof, copies of all schedules, opinions of counsel or accountants,officer’s certificates, financial statements or other similar reports deliveredto or by the Issuer pursuant to the terms of the Transaction Documents and,promptly upon request, such other data as the Insurer may reasonably request.

 

(i)            *Access to Records;Discussions With Officers and Accountants*.  On an annual basis, or upon the occurrence ofa Material Adverse Change, the Issuer shall, upon the reasonable request of theInsurer, at its expense, permit the Insurer or its authorized agents:

 

(i)            to inspect the books and records ofthe Issuer as they may relate to the Obligations, the obligations of the Issuerunder the Transaction Documents, and the Transaction;

 

(ii)           to discuss the affairs, finances andaccounts of the Issuer; and

 

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(iii)          with the Issuer’s consent, as the casemay be, which consent shall not be unreasonably withheld, to discuss theaffairs, finances and accounts of the Issuer with the Issuer’s independentaccountants, provided that a representative of the Seller or the Issuer  shall have the right to be present duringsuch discussions.

 

Suchinspections and discussions shall be conducted during normal business hours andshall not unreasonably disrupt the business of the Issuer.  The booksand records of the Issuer will be maintained at the address of the Issuerdesignated herein for receipt of notices, unless the Issuer shall otherwiseadvise the parties hereto in writing.

 

The Insureragrees that it and its shareholders, directors, agents, accountants andattorneys shall keep confidential any matter of which it becomes aware throughsuch inspections or discussions (unless readily available from public sources),except as may be otherwise required by regulation, law or court order orrequested by appropriate governmental authorities or as necessary to preserveits rights or security under or to enforce the Transaction Documents, providedthat the foregoing shall not limit the right of the Insurer to make suchinformation available to its regulators, securities rating agencies,reinsurers, credit and liquidity providers, counsel and accountants.

 

**Section 2.06.        NegativeCovenants of the Issuer.*** *The Issuer hereby agrees thatduring the Term of the Insurance Agreement, unless the Insurer shall otherwiseexpressly consent in writing:

 

(a)           *Impairment of Rights*.  The Issuer shall not take any action, or failto take any action, if such action or failure to take action may result in amaterial adverse change as described in clause (ii) of the definitionof Material Adverse Change with respect to the Issuer, or may interfere withthe enforcement of any rights of the Insurer under or with respect to theTransaction Documents.  The Issuer shallgive the Insurer written notice of any such action or failure to act on theearlier of: (i) the date upon which any publicly available filing orrelease is made with respect to such action or failure to act or (ii) promptlyprior to the date of consummation of such action or failure to act.  The Issuer shall furnish to the Insurer allinformation requested by it that is reasonably necessary to determinecompliance with this paragraph.

 

(b)           *Waiver, Amendments, Etc*.  Except upon the prior written consent of theInsurer which consent shall not unreasonably be withheld, the Issuer shall notallow the transfer, modification or amendment, nor consent to any transfer,modification or amendment of the Certificate of Trust unless such amendment isrequired under the Delaware Statutory Trust Act.

 

(c)           *Restrictions onLiens. *The Issuer shall not,except as contemplated by the Transaction Documents, (i) create, incur orsuffer to exist, or agree to create, incur or suffer to exist, or consent tocause or permit in the future (upon the happening of a contingency orotherwise) the creation, incurrence or existence of any lien of the Contractsor (ii) file under the Uniform Commercial Code of any jurisdiction anyfinancing statement which names the Issuer as a debtor, or sign any securityagreement

 

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authorizingany secured party thereunder to file such financing statement, with respect tothe Contracts.

 

(d)           *Successors.*  The Issuer shall not remove or replace, orcause to be removed or replaced, the Servicer, the Indenture Trustee or theOwner Trustee without the prior written approval of the Insurer.

 

(e)           *Subsidiaries.*  The Issuer shall not form, or cause to beformed, any subsidiaries.

 

(f)            *No Mergers*.  The Issuer shall not consolidate with ormerge into any Person or transfer all or any material amount of its assets toany Person, liquidate or dissolve except as permitted by the Trust Agreementand as contemplated by the Transaction Documents.

 

(g)           *Other Activities*.  The Issuer shall not (i) sell, pledge,transfer, exchange or otherwise dispose of any of its assets except aspermitted under the Transaction Documents; or (ii) engage in any businessor activity except as contemplated by the Transaction Documents and aspermitted by the Trust Agreement.

 

(h)           *Trust Agreement*.  The Issuer shall not amend the TrustAgreement without the prior written consent of the Insurer.

 

**Section 2.07.        Representations,Warranties and Covenants of Indenture Trustee and Back-up Servicer.**  The Indenture Trustee and the Back-upServicer represents and warrants to, as of the Date of Issuance, and covenantswith the other parties hereto as follows:

 

(a)           *Due Organization andQualification*.  The IndentureTrustee and the Back-up Servicer are each a national banking association orcorporation, duly organized, validly existing and in good standing under thelaws of its respective jurisdiction of incorporation.  Each of the Indenture Trustee and the Back-upServicer is duly qualified to do business, is in good standing and has obtainedall licenses, permits, charters, registrations and approvals (together, “approvals”)necessary for the conduct of its business as currently conducted and asdescribed in the Offering Document and the performance of its obligations underthe Transaction Documents, in each jurisdiction in which the failure to be soqualified or to obtain such approvals would render any Transaction Documentunenforceable in any respect or would have a material adverse effect upon theTransaction, the Owners or the Insurer.

 

(b)           *Due Authorization*.  The execution, delivery and performance ofthe Transaction Documents by the Indenture Trustee and the Back-up Servicerhave been duly authorized by all necessary corporate action and do not requireany additional approvals or consents of, or other action by or any notice to orfiling with any Person, including, without limitation, any governmental entityor the Indenture Trustee’s or the Back-up Servicer’s stockholders, which havenot previously been obtained or given by the Indenture Trustee or the Back-upServicer, as applicable.

 

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(c)           *Noncontravention*.  None of the execution and delivery of theTransaction Documents by the Indenture Trustee or the Back-up Servicer, theconsummation of the Transaction contemplated thereby or the satisfaction of theterms and conditions of the Transaction Documents:

 

(i)            conflicts with or results in anybreach or violation of any provision of the certificate or articles ofincorporation or bylaws of the Indenture Trustee or the Back-up Servicer or anylaw, rule, regulation, order, writ, judgment, injunction, decree, determinationor award currently in effect having applicability to the Indenture Trustee orthe Back-up Servicer or any of their material properties, including regulationsissued by an administrative agency or other governmental authority havingsupervisory powers over the Indenture Trustee or the Back-up Servicer;

 

(ii)           constitutes a default by theIndenture Trustee or the Back-up Servicer under or a breach of any provision ofany loan agreement, mortgage, indenture or other agreement or instrument towhich the Indenture Trustee or the Back-up Servicer is a party or by which anyof their respective properties, which are individually or in the aggregatematerial to the Indenture Trustee or the Back-up Servicer, is or may be boundor affected; or

 

(iii)          results in or requires the creation ofany lien upon or in respect of any assets of the Indenture Trustee or theBack-up Servicer, except as contemplated by the Transaction Documents.

 

(d)           *Legal Proceedings*.  There is no action, proceeding orinvestigation by or before any court, governmental or administrative agency orarbitrator against or affecting the Indenture Trustee, the Back-up Servicer, orany of their subsidiaries, or any properties or rights of the IndentureTrustee, the Back-up Servicer or any of their subsidiaries, pending or, to theIndenture Trustee’s or the Back-up Servicer’s knowledge after reasonableinquiry, threatened, which, in any case, could reasonably be expected to resultin a Material Adverse Change with respect to the Indenture Trustee or theBack-up Servicer.

 

(e)           *Valid and BindingObligations and Agreements*. The Obligations, when executed, authenticated and issued in accordancewith the Indenture, and the Transaction Documents (other than the Obligations),to which they are parties when executed and delivered by the Indenture Trusteeand the Back-up Servicer, will constitute the legal, valid and bindingobligations of the Indenture Trustee and the Back-up Servicer, as applicable,enforceable in accordance with their respective terms, except as suchenforceability may be limited by bankruptcy, insolvency, reorganization,moratorium or other similar laws affecting creditors’ rights generally andgeneral equitable principles. Neither the Indenture Trustee nor the Back-upServicer will at any time in the future deny that the Transaction Documentsconstitute the legal, valid and binding obligations of the Indenture Trusteeand the Back-up Servicer, as applicable.

 

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(f)            *Compliance With Law, Etc*.  No practice, procedure or policy employed, orproposed to be employed, by the Indenture Trustee or the Back-up Servicer inthe conduct of their business violates any law, regulation, judgment,agreement, order or decree applicable to any the Indenture Trustee or theBack-up Servicer that, if enforced, could reasonably be expected to result in aMaterial Adverse Change with respect to the Indenture Trustee or the Back-upServicer.  Neither the Indenture Trusteenor the Back-up Servicer is in breach of or in default under any applicable lawor administrative regulation of its respective jurisdiction of organization, orany department, division, agency or instrumentality thereof or of the United Statesor any applicable judgment or decree or any loan agreement, note, resolution,certificate, agreement or other instrument to which the Indenture Trustee orthe Back-up Servicer is a party or is otherwise subject which, if enforced,would have a material adverse effect on the ability of the Indenture Trustee orthe Back-up Servicer, as the case may be, to perform their respectiveobligations under the Transaction Documents.

 

(g)           *Transaction Documents*.  Each of the representations and warranties ofthe Indenture Trustee and the Back-up Servicer contained in the TransactionDocuments is true and correct in all material respects, and the IndentureTrustee and the Back-up Servicer hereby makes each such representation andwarranty to, and for the benefit of, the Insurer as if the same were set forthin full herein.

 

(h)           *Compliance andAmendments. *The IndentureTrustee and the Back-up Servicer shall comply in all material respects with theterms and conditions of the Transaction Documents to which it is a party andthe Indenture Trustee and the Back-up Servicer shall not agree to any amendmentto or modification of the terms of any of the Transaction Documents to which itis a party unless the Insurer shall otherwise give its prior written consent.

 

(i)            *Notices*.  The Indenture Trustee shall promptly notifythe Insurer of any merger, consolidation or asset transfer with respect to itas described in Section 6.9 of the Indenture.

 

**Section 2.08.        Representations,Warranties and Covenants of Owner Trustee.**  The Owner Trustee hereby represents andwarrants as follows:

 

(a)           *Representations andWarranties. *As of the Date ofIssuance, each of the representations and warranties of the Owner Trustee setforth in the Transaction Documents is true and correct in all material respectsand the Owner Trustee makes each such representation and warranty to, and forthe benefit of, the Insurer as if the same were set forth in full herein.

 

(b)           *Compliance and Amendments.*  The Owner Trustee shall comply in allmaterial respects with the terms and conditions of the Transaction Documents towhich it is a party and the Owner Trustee shall not agree to any amendment toor modification of the terms of any of the Transaction Documents to which it isa party unless the Insurer shall otherwise give its prior written consent.

 

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**Section 2.09.        NegativeCovenant of the Administrator**.  The Administrator shall not remove the OwnerTrustee pursuant to Section 10.2 of the Trust Agreement unless it hasobtained the prior written consent of the Insurer if no Insurer Default orInsurer Insolvency exists.

 

**ARTICLE IIITHE POLICY; REIMBURSEMENT**

** **

**Section 3.01.        Issuanceof the Policy**.  TheInsurer agrees to issue the Policy on the Closing Date subject to satisfactionof the conditions precedent set forth below:

 

(a)           *Payment of InitialInsurance Premium and Expenses*. The Insurer shall have been paid by the Servicer or the Seller, inaccordance with the terms of the Premium Side Letter Agreement, that portion ofa nonrefundable Insurance Premium payable on the Date of Issuance and theServicer shall agree to reimburse or pay directly other fees and expensesidentified in Section 3.02 hereof as payable.

 

(b)           *Transaction Documents*.  The Insurer shall have received a fullyexecuted copy of the Premium Side Letter Agreement and a copy of each of theTransaction Documents, in form and substance satisfactory to the Insurer, dulyauthorized, executed and delivered by each party thereto.

 

(c)           *Certified Documents andResolutions*.  The Insurershall have received a copy of (i) the certificate or articles ofincorporation and bylaws of the Servicer, the Seller and the Depositor and (ii) theresolutions of the Seller’s Board of Directors authorizing the sale of theContracts and (iii) the execution, delivery and performance by theServicer, the Seller and the Depositor of the Transaction Documents and theTransaction contemplated thereby, certified by the Secretary or an AssistantSecretary of the Servicer, the Seller and the Depositor (which certificateshall state that such certificate or articles of incorporation, bylaws andresolutions are in full force and effect without modification on the Date ofIssuance).

 

(d)           *Incumbency Certificate*.  The Insurer shall have received a certificateof the Secretary or an Assistant Secretary of the Servicer, the Seller and theDepositor certifying the names and signatures of the officers of the Servicer,the Seller and the Depositor authorized to execute and deliver the TransactionDocuments and that shareholder consent to the execution and delivery of suchdocuments is not necessary.

 

(e)           *Representations andWarranties; Certificate*.  Therepresentations and warranties of the Servicer, the Seller and the Depositorset forth or incorporated by reference in this Insurance Agreement shall betrue and correct in all material respects as of the Date of Issuance as if madeon the Date of Issuance and the Insurer shall have received a certificate ofappropriate officers of the Servicer, the Seller and the Depositor to thateffect.

 

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(f)            *Opinions of Counsel*.

 

(i)            The law firm of Dechert LLP shallhave issued its favorable opinion, in form and substance reasonably acceptableto the Insurer and its counsel, regarding and the validity and enforceabilityof the Transaction Documents, other than the Trust Agreement, against theDepositor, the Servicer, the Issuer and the Seller.

 

(ii)           The law firm of Dechert LLP shallhave issued its favorable opinions, in form and substance reasonably acceptableto the Insurer and its counsel, regarding the transfer of the Contracts fromthe Seller to the Depositor and from the Depositor to the Issuer, andconsolidation of the Depositor and the Seller and the Seller and the Issuer inthe event of the Seller’s bankruptcy.

 

(iii)          The law firm of Richards, Layton & Finger, P.A. shallhave issued its favorable opinions, in form and substance reasonably acceptableto the Insurer and its counsel, regarding the perfection of the IndentureTrustee’s interest in the Trust Estate, including in the Reserve AccountProperty.

 

(iv)          The law firm of Richards, Layton & Finger, P.A. shallhave issued its favorable opinion, in form and substance reasonably acceptableto the Insurer and its counsel, regarding and the validity and enforceabilityof the Trust Agreement.

 

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

 

(g)           *Approvals, Etc*.  The Insurer shall have received true andcorrect copies of all approvals, licenses and consents, if any, including,without limitation, any required approval of the shareholders of the Servicer,the Seller and the Depositor, required in connection with the Transaction.

 

(h)           *No Litigation, Etc*.  No suit, action or other proceeding,investigation or injunction, or final judgment relating thereto, shall bepending or, to the knowledge of the Seller, Servicer, or the Issuer, threatenedbefore any court or governmental agency in which it is sought to restrain orprohibit or to obtain damages or other relief in connection with theTransaction Documents or the consummation of the Transaction.

 

(i)            *Legality*.  No statute, rule, regulation or order shallhave been enacted, entered or deemed applicable by any government orgovernmental or administrative agency or court that would make the Transactioncontemplated by any of the Transaction Documents illegal or otherwise preventthe consummation thereof.

 

(j)            *Issuance of Ratings*.  The Insurer shall have received confirmationthat the risk secured by the Policy constitutes at least an investment graderisk by S&P and Moody’s, and that the Class A-1 Notes, when issuedwill be rated “A-1+” by S&P and “Prime-1” by Moody’s, and the remainingObligations, when issued, will be rated “AAA” by S&P and “Aaa” by Moody’s.

 

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(k)           *No Default*.  No Default or Event of Default shall haveoccurred.

 

(l)            *Additional Items*.  The Insurer shall have received such otherdocuments, instruments, approvals or opinions requested by the Insurer or itscounsel as may be reasonably necessary to effect the Transaction, including,but not limited to, evidence satisfactory to the Insurer and its counsel thatthe conditions precedent, if any, in the Transaction Documents have beensatisfied.

 

(m)          *Conform to Documents*.  The Insurer and its counsel shall havedetermined that all documents, certificates and opinions to be delivered inconnection with the Obligations conform to the terms of the TransactionDocuments.

 

(n)           *Satisfaction of Conditionsof the Purchase Agreement*. All conditions in the Purchase Agreement relating to the Initial Purchaser’sobligation to purchase the Obligations shall have been satisfied.

 

(o)           *Purchase Agreement*.  The Insurer shall have received copies ofeach of the documents, and shall be entitled to rely on each of the documents,required to be delivered to the Initial Purchaser pursuant to the PurchaseAgreement.

 

(p)           *Guaranty*.  The Guaranty shall be executed by all partiesthereto and delivered to the Indenture Trustee.

 

**Section 3.02.        Paymentof Fees and Insurance Premium**.

 

(a)           *Legal and Accounting Fees*.  The Servicer or Seller shall pay or cause tobe paid, on the Date of Issuance, legal fees and disbursements incurred by theInsurer in connection with the issuance of the Policy and any fees of theInsurer’s auditors.  Any fees of theInsurer’s auditors payable in respect of any amendment or supplement to theOffering Document or any other Offering Document incurred after the Date ofIssuance shall be paid by the Servicer after presentation of an invoicetherefor.

 

(b)           *Insurance Premium*.  In consideration of the issuance by theInsurer of the Policy, the Insurer shall be entitled to receive the InsurancePremium, so long as no Insurer Default or Insurer Insolvency has occurred,  as and when due in accordance with the termsof the Premium Side Letter Agreement (i) in the case of Insurance Premiumdue on or before the Date of Issuance, directly from the Servicer or the Sellerand (ii) in the case of Insurance Premium due after the Date of Issuance, *first*, pursuant to the Sale and Allocation Agreement, and *second*, to the extent the amounts in subclause *first*are not sufficient, directly from the Servicer.  For purposes of the Sale and AllocationAgreement, the term “Premium Percentage” shall have the meaning set forth inthe Premium Side Letter Agreement. The Insurance Premium shall be calculatedaccording to the Premium Side Letter Agreement for the amount due on or beforethe Date of Issuance and for the amount due on each Payment Date.  The Insurance Premium paid hereunder or underthe Sale and Allocation Agreement shall be nonrefundable without regard towhether the Insurer makes any payment under the Policy or any othercircumstances relating to the Obligations or provision being made for paymentof the Obligations prior

 

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tomaturity.  All payments of InsurancePremium to be made to the Insurer shall be made by wire transfer to an accountdesignated from time to time by the Insurer by written notice to the Servicerand the Indenture Trustee.

 

**Section 3.03.        Reimbursementand Additional Payment Obligation**.

 

(a)           In accordance with the prioritiesestablished in Section  3.5 of the Sale and Allocation Agreement, theInsurer shall be entitled to (i) reimbursement for any payment made by theInsurer under the Policy, which reimbursement by the Issuer shall be due andpayable on the date that any amount is to be paid pursuant to a Notice (asdefined in the Policy), in an amount equal to the amount to be so paid and allamounts previously paid that remain unreimbursed, together with interest on anyand all amounts remaining unreimbursed (to the extent permitted by law, if inrespect of any unreimbursed amounts representing interest) from the date suchamounts became due until paid in full (after as well as before judgment), at a rateof interest equal to the Late Payment Rate, (ii) payment or reimbursementof any other amounts owed to the Insurer under this Agreement together withinterest thereon at a rate equal to the Late Payment Rate and (iii) reimbursementfor any payments made by the Insurer with respect to the fees and expenses of asuccessor Servicer or with respect to any transition costs relating to thetransfer of servicing from the Servicer to such successor Servicer togetherwith interest thereon at a rate equal to the Late Payment Rate.

 

(b)           Notwithstanding anything in Section 3.03(a) tothe contrary, the Servicer and the Seller agree to reimburse the Insurer asfollows:  (i) from the Seller, forpayments made under the Policy arising as a result of the Seller’s failure torepurchase any Contract  required to berepurchased pursuant to Section 2.3 of the Contribution Agreement,together with interest on any and all amounts remaining unreimbursed (to theextent permitted by law, if in respect of any unreimbursed amounts representinginterest) from the date such amounts became due until paid in full (after aswell as before judgment), at a rate of interest equal to the Late Payment Rate,and (ii) from the Servicer, for payments made under the Policy, arising asa result of (A) the Servicer’s failure to deposit into the CollectionAccount any amount required to be so deposited pursuant to the Sale andAllocation Agreement or the Servicing Agreement or (B) the Servicer’sfailure to repurchase any Contract to be repurchased under Section 2.28 ofthe Servicing Agreement, together with interest on any and all amountsremaining unreimbursed (to the extent permitted by law, if in respect to anyunreimbursed amounts representing interest) from the date such amounts becamedue until paid in full (after as well as before judgment), at a rate ofinterest equal to the Late Payment Rate.

 

(c)           The Servicer and the Seller agree topay to the Insurer as follows: any and all charges, fees, costs and expensesthat the Insurer may reasonably pay or incur, including, but not limited to,attorneys’ and accountants’ fees and expenses, in connection with (i) anyaccounts established to facilitate payments under the Policy to the extent theInsurer has not been immediately reimbursed on the date that any amount is paidby the Insurer under the Policy, (ii) the enforcement, defense orpreservation of any rights in respect of any of the Transaction Documents,including defending, monitoring

 

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or participatingin any litigation or proceeding (including any insolvency or bankruptcyproceeding  in respect of any Transactionparticipant or any affiliate thereof) relating to any of the TransactionDocuments, any party to any of the Transaction Documents, in its capacity assuch a party, or the Transaction, (iii) any amendment, consent, waiver orother action with respect to, or related to, any Transaction Document, whetheror not executed or completed, or (iv) any reliening, any replacementservicer or any transition costs relating to the transfer of servicing from theServicer to a replacement servicer; provided, however, that the amountsrecovered by the Insurer from the Seller and the Servicer pursuant to thisparagraph for the items set forth in (iv) above shall be limited to$250,000.00; provided, further, that costs and expenses shall include areasonable allocation of compensation and overhead attributable to the time ofemployees of the Insurer spent in connection with the actions described inclause (ii) above, and the Insurer reserves the right to charge areasonable fee as a condition to executing any waiver or consent proposed inrespect of any of the Transaction Documents. Notwithstanding anything herein to the contrary, the Seller and theServicer shall have no obligation to pay any amounts representing (i) recoursefor uncollectible Contracts and (ii) any principal or interest on anyNote.

 

(d)           The Servicer, the Seller and theDepositor agree to pay, severally but not jointly to the Insurer as follows:interest on any and all amounts described in subsections (b), (c), (e) and(f) of this Section 3.03 from the date payable or paid by such partyuntil payment thereof in full, and interest on any and all amounts described inSection 3.02 hereof from the date due until payment thereof in full, ineach case, payable to the Insurer at the Late Payment Rate per annum.

 

(e)           (i)            TheServicer and the Seller agree to pay to the Insurer as follows: any paymentsmade by the Insurer on behalf of, or advanced to, the Servicer or the Seller,respectively, including, without limitation, any amounts payable by theServicer or the Seller pursuant to the Transaction Documents (other than theObligations).

 

(ii)           The Depositor agrees to pay to theInsurer as follows: any payments made by the Insurer on behalf of, or advancedto, the Depositor, including, without limitation, any amounts payable by theDepositor pursuant to the Transaction Documents (other than the Obligations).

 

(f)            Following termination of theIndenture pursuant to Section 10.1 thereof, the Servicer agrees toreimburse the Insurer for any Insured Payments (including, without limitation,any Insured Payments relating to Preference Amounts as defined in the Policy)required to be made pursuant to the Policy subsequent to the date of suchtermination.

 

All such amounts are to be immediately dueand payable without demand.

 

**Section 3.04.        Indemnification;Limitation of Liability**.

 

(a)           In addition to any and all rights ofindemnification or any other rights of the Insurer pursuant hereto or under lawor equity, the Seller, the Servicer and any

 

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successorsthereto agree to pay, and to protect, indemnify and save harmless, the Insurerand its officers, directors, shareholders, employees, agents, and each person,if any, who controls the Insurer within the meaning of either Section 15of the Securities Act or Section 20 of the Securities Exchange Act fromand 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 obligationswhatsoever paid by the Insurer (herein collectively referred to as “Liabilities”)of any nature arising out of or relating to the Transaction contemplated by theTransaction Documents by reason of:

 

(i)            any untrue statement or allegeduntrue statement of a material fact contained in the Offering Document or inany amendment or supplement thereto or in any preliminary offering document, orarising out of or based upon any omission or alleged omission to state thereina material fact required to be stated therein or necessary to make thestatements therein not misleading, except insofar as such Liabilities arise outof or are based upon any such untrue statement or omission or allegationthereof based upon information set forth (a) in the Offering Documentunder the caption “Description of the Insurer and the Insurance Policy” or inthe financial statements of the Insurer, including any information in anyamendment or supplement to the Offering Document furnished by the Insurer inwriting expressly for use therein that amends or supplements such information(all such information being referred to herein as “Insurer Information”) or (b) inthe last paragraph of the cover page of the Offering Document regardingthe delivery of the Obligations and under the heading “Plan of Distribution” inthe Offering Document;

 

(ii)           to the extent not covered byclause (i) above, any act or omission of the Seller, the Depositor,the Servicer, or the allegation thereof, in connection with the offering,issuance, sale or delivery of the Obligations other than by reason of false ormisleading information provided by the Insurer in writing for inclusion in theOffering Document as specified in clause (i) above;

 

(iii)          the misfeasance or malfeasance of, ornegligence or theft committed by, any director, officer, employee or agent ofthe Servicer, the Seller or the Depositor;

 

(iv)          the violation by the Depositor, theSeller or the Servicer of any federal or state securities, banking or antitrustlaws, rules or regulations in connection with the issuance, offer and saleof the Obligations or the Transaction contemplated by the TransactionDocuments;

 

(v)           the violation by the Depositor, theSeller or the Servicer of any federal or state laws, rules or regulationsrelating to the Transaction, including without limitation the maximum amount ofinterest permitted to be received on account of any loan of money or withrespect to the Contracts;

 

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(vi)          the breach by the Seller or theServicer of any of its obligations under this Insurance Agreement or any of theother Transaction Documents; and

 

(vii)         the breach by the Servicer or theSeller of any representation or warranty on the part of the Servicer or theSeller contained in the Transaction Documents or in any certificate or reportfurnished or delivered to the Insurer thereunder.

 

This indemnityprovision shall survive the termination of this Insurance Agreement and shallsurvive until the statute of limitations has run on any causes of action whicharise from one of these reasons and until all suits filed as a result thereofhave been finally concluded. Notwithstanding anything else in this Section 3.04(a), the Sellershall have no obligation for amounts due under this Section 3.04(a) for(i) acts or omissions of or any liabilities attributable to the Depositoror the Issuer or (ii) for any failure of the Servicer to provideindemnification for acts or omissions of or any liabilities attributable to theDepositor or the Issuer.

 

(b)           [Reserved]

 

(c)           Any party which proposes to assertthe right to be indemnified under this Section 3.04 will, promptly afterreceipt of notice of commencement of any action, suit or proceeding againstsuch party in respect of which a claim is to be made against the Servicer, theSeller or the Depositor under this Section 3.04, notify the Servicer, theSeller or the Depositor of the commencement of such action, suit or proceeding,enclosing a copy of all papers served. In case any action, suit or proceeding shall be brought against anyindemnified party and it shall notify the Servicer, the Seller or the Depositorof the commencement thereof, the Servicer, the Seller or the Depositor shall beentitled to participate in, and, to the extent that it shall wish, to assumethe defense thereof, with counsel satisfactory to such indemnified party, andafter notice from the Servicer, the Seller or the Depositor to such indemnifiedparty of its election so to assume the defense thereof, the Servicer, theSeller or the Depositor shall not be liable to such indemnified party for anylegal or other expenses other than reasonable costs of investigationsubsequently incurred by such indemnified party in connection with the defensethereof.  The indemnified party shallhave the right to employ its counsel in any such action the defense of which isassumed by the Servicer, the Seller or the Depositor in accordance with theterms of this subsection (c), but the fees and expenses of such counselshall be at the expense of such indemnified party unless the employment ofcounsel by such indemnified party has been authorized by the Servicer, theSeller or the Depositor.  The Servicer,the Seller or the Depositor shall not be liable for any settlement of anyaction or claim effected without its consent.

 

(d)           In addition to any and all rights ofindemnification or any other rights of the Insurer pursuant hereto or under lawor equity, the Indenture Trustee agrees to pay, and to protect, indemnify andsave harmless, the Insurer and its officers, directors, shareholders,employees, agents, including each person, if any, who controls the Insurerwithin the meaning of either Section 15 of the Securities Act or Section 20of the

 

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SecuritiesExchange Act from and against any and all claims, losses, liabilities(including penalties), actions, suits, judgments, demands, damages, costs orreasonable expenses (including, without limitation, reasonable fees andexpenses of attorneys, consultants and auditors and reasonable costs ofinvestigations) or obligations whatsoever of any nature arising out of thebreach by the Indenture Trustee of any of its obligations under this InsuranceAgreement or the Indenture.  Thisindemnity provision shall survive the termination of this Insurance Agreementand shall survive until the statute of limitations has run on any causes ofaction which arise from one of these reasons and until all suits filed as aresult thereof have been finally concluded.

 

(e)           In addition to any and all rights ofindemnification or any other rights of the Insurer pursuant hereto or under lawor equity, the Back-up Servicer agrees to pay, and to protect, indemnify andsave harmless, the Insurer and its officers, directors, shareholders,employees, agents, including each person, if any, who controls the Insurerwithin the meaning of either Section 15 of the Securities Act or Section 20of the Securities Exchange Act from and against any and all claims, losses,liabilities (including penalties), actions, suits, judgments, demands, damages,costs or reasonable expenses (including, without limitation, reasonable feesand expenses of attorneys, consultants and auditors and reasonable costs ofinvestigations) or obligations whatsoever of any nature arising out of thebreach by the Back-up Servicer of any of its obligations under this InsuranceAgreement or the Servicing Agreement. This indemnity provision shall survive the termination of this InsuranceAgreement and shall survive until the statute of limitations has run on anycauses of action which arise from one of these reasons and until all suitsfiled as a result thereof have been finally concluded.

 

**Section 3.05.        PaymentProcedure**.  In theevent of any payment by the Insurer, the Indenture Trustee, the Servicer, theBack-up Servicer, the Seller and the Depositor agree to accept the voucher orother evidence of payment as prima facie evidence of the propriety thereof andthe liability therefor to the Insurer. All payments to be made to the Insurer under this Insurance Agreementshall be made to the Insurer in lawful currency of the United States ofAmerica in immediately available funds at the notice address for the Insurer asspecified in Section 6.02 hereof on the date when due or as the Insurershall otherwise direct by written notice to the other parties hereto.  In the event that the date of any payment tothe Insurer or the expiration of any time period hereunder occurs on a daywhich is not a Business Day, then such payment or expiration of time periodshall be made or occur on the next succeeding Business Day with the same forceand effect as if such payment was made or time period expired on the scheduleddate of payment or expiration date. Payments to be made to the Insurer under this Insurance Agreement shallbear interest at the Late Payment Rate from the date when due to the date paid.

 

**ARTICLE IVFURTHER AGREEMENTS**

** **

**Section 4.01.        EffectiveDate; Term of the Insurance Agreement.**  This Insurance Agreement shall take effect onthe Date of Issuance and shall remain in effect until the later of

 

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(a) such time as theInsurer is no longer subject to a claim under the Policy and the Policy shallhave been surrendered to the Insurer for cancellation and (b) all amountspayable to the Insurer by the Servicer, the Indenture Trustee, the Back-upServicer, the Seller or the Depositor or from any other source under theTransaction Documents and all amounts payable under the Obligations have beenpaid in full; provided, however, that the provisions of Sections 3.02,3.03, 3.04 and 4.06 hereof shall survive any termination of this InsuranceAgreement.

 

**Section 4.02.        FurtherAssurances and Corrective Instruments**.

 

(a)           Excepting at such times as an InsurerInsolvency or an Insurer Default shall exist or shall have occurred and becontinuing, none of the Servicer, the Indenture Trustee, the Back-up Servicer,the Seller, the Depositor, the Issuer, the Owner Trustee or the IndentureTrustee shall grant any waiver of rights under any of the Transaction Documentsto which any of them is a party without the prior written consent of theInsurer, and any such waiver without the prior written consent of the Insurershall be null and void and of no force or effect.

 

(b)           To the extent permitted by law, theServicer, the Indenture Trustee, the Back-up Servicer, the Seller, the Issuer,the Owner Trustee and the Depositor agree that they will, from time to time,execute, acknowledge and deliver, or cause to be executed, acknowledged anddelivered, such supplements hereto and such further instruments as the Insurermay request and as may be required in the Insurer’s judgment to effectuate theintention of or facilitate the performance of this Insurance Agreement.

 

**Section 4.03.        ObligationsAbsolute**.

 

(a)           The obligations of the Servicer, theIndenture Trustee, the Back-up Servicer, the Seller, the Issuer, the OwnerTrustee and the Depositor hereunder shall be absolute and unconditional andshall be paid or performed strictly in accordance with this Insurance Agreementunder all circumstances irrespective of:

 

(i)            any lack of validity orenforceability of, or any amendment or other modifications of, or waiver, withrespect to any of the Transaction Documents, the Obligations or the Policy;

 

(ii)           any exchange or release of any otherobligations hereunder;

 

(iii)          the existence of any claim, setoff,defense, reduction, abatement or other right that the Servicer, the IndentureTrustee, the Back-up Servicer, the Seller, the Issuer, the Owner Trustee or theDepositor may have at any time against the Insurer or any other Person;

 

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

 

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(v)           any payment by the Insurer under thePolicy against presentation of a certificate or other document that does notstrictly comply with terms of the Policy;

 

(vi)          any failure of the Servicer, theIndenture Trustee, the Back-up Servicer, the Seller, the Issuer or theDepositor to receive the proceeds from the sale of the Obligations; or

 

(vii)         any breach by the Servicer, theIndenture Trustee, the Back-up Servicer, the Seller, the Issuer, the OwnerTrustee or the Depositor of any representation, warranty or covenant containedin any of the Transaction Documents.

 

(b)           The Servicer, the Indenture Trustee,the Back-up Servicer, the Seller, the Depositor, the Issuer, the Owner Trusteeand any and all others who are now or may become liable for all or part of theobligations of the Servicer, the Indenture Trustee, the Back-up Servicer, theSeller, the Issuer, the Owner Trustee or the Depositor under this InsuranceAgreement agree to be bound by this Insurance Agreement and (i) to theextent permitted by law, waive and renounce any and all redemption andexemption rights and the benefit of all valuation and appraisement privilegesagainst the indebtedness and obligations evidenced by any Transaction Documentor by any extension or renewal thereof; (ii) waive presentment and demandfor payment, notices of nonpayment and of dishonor, protest of dishonor andnotice of protest; (iii) waive all notices in connection with the deliveryand acceptance hereof and all other notices in connection with the performance,default or enforcement of any payment hereunder, except as required by theTransaction Documents; (iv) waive all rights of abatement, diminution,postponement or deduction, or any defense other than payment, or to any rightof setoff or recoupment arising out of any breach under any of the TransactionDocuments, by any party thereto or any beneficiary thereof, or out of anyobligation at any time owing to the Servicer, the Indenture Trustee, the Back-upServicer, the Seller, the Issuer, the Owner Trustee or the Depositor; (v) agreethat its liabilities hereunder shall, except as otherwise expressly provided inthis Section 4.03, be unconditional and without regard to any setoff,counterclaim or the liability of any other Person for the payment hereof; (vi) agreethat any consent, waiver or forbearance hereunder with respect to an eventshall operate only for such event and not for any subsequent event; (vii) consentto any and all extensions of time that may be granted by the Insurer withrespect to any payment hereunder or other provisions hereof and to the releaseof any security at any time given for any payment hereunder, or any partthereof, with or without substitution, and to the release of any Person orentity liable for any such payment; and (viii) consent to the addition ofany and all other makers, endorsers, guarantors and other obligors for anypayment hereunder, and to the acceptance of any and all other security for anypayment hereunder, and agree that the addition of any such obligors or securityshall not affect the liability of the parties hereto for any payment hereunder.

 

(c)           Nothing herein shall be construed asprohibiting the Servicer, the Indenture Trustee, the Back-up Servicer, theSeller, the Issuer, the Owner Trustee or the

 

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Depositor frompursuing any rights or remedies it may have against any other Person in aseparate legal proceeding.

 

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

 

(a)           This Insurance Agreement shall be acontinuing obligation of the parties hereto and shall be binding upon and inureto the benefit of the parties hereto and their respective successors andpermitted assigns.  None of the Servicer,the Indenture Trustee, the Back-up Servicer, the Seller, the Issuer, the OwnerTrustee nor the Depositor may assign its rights under this Insurance Agreement,or delegate any of its duties hereunder, without the prior written consent ofthe Insurer.  Any assignment made inviolation of this Insurance Agreement shall be null and void.

 

(b)           The Insurer shall have the right togive participations in its rights under this Insurance Agreement and to enterinto contracts of reinsurance with respect to the Policy upon such terms andconditions as the Insurer may in its discretion determine; provided, however,that no such participation or reinsurance agreement or arrangement shallrelieve the Insurer of any of its obligations hereunder or under the Policy.

 

(c)           In addition, the Insurer shall beentitled to assign or pledge to any bank or other lender providing liquidity orcredit with respect to the Transaction or the obligations of the Insurer inconnection therewith any rights of the Insurer under the Transaction Documentsor with respect to any real or personal property or other interests pledged tothe Insurer, or in which the Insurer has a security interest, in connectionwith the Transaction.

 

(d)           Except as provided herein withrespect to participants and reinsurers, nothing in this Insurance Agreementshall confer any right, remedy or claim, express or implied, upon any Person,including, particularly, any Owner, other than the Insurer against theServicer, the Indenture Trustee, the Back-up Servicer, the Seller, the Issuer,the Owner Trustee or the Depositor, and all the terms, covenants, conditions,promises and agreements contained herein shall be for the sole and exclusivebenefit of the parties hereto and their successors and permitted assigns.  Neither the Indenture Trustee nor any Ownershall have any right to payment from any Insurance Premiums paid or payablehereunder or under the Sale and Allocation Agreement or from any other amountspaid by the Servicer, the Indenture Trustee, the Back-up Servicer, the Selleror the Depositor pursuant to Section 3.02, 3.03 or 3.04 hereof.

 

(e)           The Servicer, the Seller, theDepositor , the Back-up Servicer, the Issuer, the Owner Trustee and theIndenture Trustee agree that the Insurer shall have all rights of a third-partybeneficiary in respect of the Indenture and each other Transaction Document towhich it is not a signing party and hereby incorporate and restate theirrepresentations, warranties and covenants as set forth therein for the benefitof the Insurer.

 

**Section 4.05.        Liabilityof the Insurer.** Neither the Insurer nor any of its officers, directors or employeesshall be liable or responsible for: (a) the use that may be made of the

 

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Policy by the Indenture Trusteeor for any acts or omissions of the Indenture Trustee in connection therewith;or (b) the validity, sufficiency, accuracy or genuineness of documentsdelivered to the Insurer (or its Fiscal Agent) in connection with any claimunder the Policy, or of any signatures thereon, even if such documents orsignatures should in fact prove to be in any or all respects invalid,insufficient, fraudulent or forged (unless the Insurer shall have actualknowledge thereof).  In furtherance andnot in limitation of the foregoing, the Insurer (or its Fiscal Agent) mayaccept documents that appear on their face to be in order, withoutresponsibility for further investigation.

 

**Section 4.06.        PartiesWill Not Institute Insolvency Proceedings**.* *So long as thisAgreement is in effect, and for one year following its termination, none of theparties hereto will file any involuntary petition or otherwise institute anybankruptcy, reorganization, arrangement, insolvency or liquidation proceedingor other proceedings under any federal or state bankruptcy or similar lawagainst the Depositor or the Issuer.

 

**Section 4.07.        IndentureTrustee, Depositor, Back-up Servicer, Seller and Servicer To Join inEnforcement Action.**

 

(a)           To the extent necessary to enforceany right of the Insurer in or remedy of the Insurer under any Contract, theIndenture Trustee, the Depositor, the Back-up Servicer, the Seller, the Issuer,the Owner Trustee and the Servicer agree to join in any action initiated by theTrust or the Insurer for the protection of such right or exercise of suchremedy.

 

(b)           In the event of any court proceeding(x) with respect to which the Servicer, Depositor, the Seller or anyaffiliate thereof (each a “First Investors Company”) is a party (including,without limitation, an insolvency or bankruptcy proceeding in respect of anyFirst Investors Company) which affects the Trust Estate, the Policy or theobligations of the Insurer under the Transaction Documents, and (y) withrespect to which such First Investors Company fails to defend or answer, theInsurer shall have the right to direct, assume or otherwise participate in thedefense thereof (so long as no Insurer Default has occurred and iscontinuing).  In such event, the Insurershall, following written notice to the Indenture Trustee, have theexclusive-right to determine, in its sole discretion, the actions necessary topreserve and protect the Trust Estate. All costs and expenses of the Insurer in connection with such action,proceeding or investigation, (including, without limitation, any judgment orsettlement entered into or paid by the Insurer), shall be included in theInsurance Payment Amount and shall be payable to the Insurer pursuant to Section 3.5(d)(vi) ofthe Sale and Allocation Agreement.

 

(c)           The Indenture Trustee shall cooperatewith, and take such action as directed by, the Insurer (so long as no InsurerDefault has occurred and is continuing), including (without limitation)entering into such agreements and settlements as the Insurer in its solediscretion shall direct with respect to such court proceeding.  The Indenture Trustee shall not be liable tothe Insurer for any such action that conforms to the direction of theInsurer.  The Indenture Trustee’sreasonable out-of-pocket costs and

 

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expenses(including attorneys’ fees and expenses) with respect to any such action shallbe reimbursed pursuant to the Sale and Allocation Agreement; provided, however,that if such costs and expenses are not so reimbursed on the Payment Dateimmediately following the date incurred, then the Insurer shall reimburse theIndenture Trustee for such costs and expenses within 60 days of suchnonpayment.

 

(d)           The Indenture Trustee hereby agreesto provide to the Insurer prompt written notice of any action, proceeding orinvestigation that names the Owner Trustee or the Issuer as a party or thatcould adversely affect the Trust Estate or the rights or obligations of theInsurer hereunder or under the Policy or the other Transaction Documents,including (without limitation) any insolvency or bankruptcy proceeding inrespect of the Servicer, Depositor, the Seller or any affiliate thereof.

 

(e)           Notwithstanding anything containedherein or in any of the other Transaction Documents to the contrary, theIndenture Trustee shall not, without the Insurer’s prior written consent orunless directed by the Insurer (so long as no Insurer Default has occurred andis continuing), undertake or join any litigation or agree to any settlement ofany action, proceeding or investigation affecting the Owner Trustee, the Issueror the Trust Estate or the rights or obligations of the Insurer hereunder orunder the Policy or the other Transaction Documents.

 

**Section 4.08.        Subrogation.*** *Tothe extent of any payments under the Policy, the Insurer shall be fullysubrogated to any remedies against the Depositor, the Seller or the Servicer orin respect of the Contracts available to the Indenture Trustee under theIndenture or Sale and Allocation Agreement. The Indenture Trustee acknowledges such subrogation and, further, agreesto execute such instruments prepared by the Insurer and to take such reasonableactions as, in the sole judgment of the Insurer, are necessary to evidence suchsubrogation and to perfect the rights of the Insurer to receive any moneys paidor payable under the Indenture or Sale and Allocation Agreement.

 

**ARTICLE VDEFAULTS; REMEDIES**

** **

**Section 5.01.        Defaults.**  The occurrence of any of the following eventsshall constitute an Event of Default hereunder:

 

(a)           the occurrence and continuance of an “Eventof Default” under the Indenture (as defined therein);

 

(b)           a legislative body has enacted anylaw that declares or a court of competent jurisdiction shall find or rule thatthis Insurance Agreement or any of the Transaction Documents are not valid andbinding on the Servicer, the Indenture Trustee, the Back-up Servicer, theSeller, the Issuer, the Owner Trustee or the Depositor

 

(c)           The occurrence and continuance of an “Eventof Servicing Termination” under the Servicing Agreement as defined therein;

 

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(d)           The failure of the Seller, the Issueror the Depositor to comply with, or maintain the accuracy of, the Opinion Factsand Assumptions, to the extent they are related to a date after the ClosingDate;

 

(e)           The occurrence of final rulingsagainst the Seller or its affiliates by a court of competent jurisdictionassessing monetary damages in excess of $1,000,000 or settlements resulting inthe payment by the Seller or its affiliates of amounts in excess of $1,000,000;

 

(f)            The departure of both Tommy Mooreand Bennie Duck from the Seller or its consolidated subsidiaries, ifreplacement for such individuals acceptable to the Insurer is not made within90 days;

 

(g)           The Seller fails to maintain aminimum GAAP equity as a percentage of on-balance sheet portfolio of 7.0%.  Equity may include 50% of subordinated debtwith a maturity equal to or greater than five years, subject to MBIA review ofand satisfaction with the subordinated debt agreement;

 

(h)           The Seller fails to maintain a $9million non-MBIA insured, non-asset backed financing facility;

 

(i)            The Seller fails to maintain aminimum EBITDA Coverage of 1.3:1.0.  Thetest shall be measured quarterly (coinciding with FIFS quarterly fiscalreporting) on a rolling six months basis;

 

(j)            A Change in Control occurs;

 

(k)           A material change occurs in theoperations of the Servicer which materially adversely affects the ability ofthe Servicer to service the Contracts or to perform its obligations under theServicing Agreement;

 

(l)            As of the end of any of its fiscalquarters, FIFSG shareholder’s equity (determined in accordance with GAAP) isless than the sum of $24,120,545 and 50% of the aggregate of the net income ofFIFSG (determined in accordance with GAAP and without deduction for any netlosses) for such fiscal quarter and all prior fiscal quarters ending after January 31,2005; or

 

(m)          The Servicer or a wholly ownedsubsidiary of the Seller fails to maintain a warehouse facility of at least$150,000,000.

 

**Section 5.02.        Remedies;No Remedy Exclusive**.

 

(a)           Upon the occurrence of an Event ofDefault, the Insurer may exercise any one or more of the rights and remediesset forth below:

 

(i)            exercise any rights and remediesunder the Transaction Documents in accordance with the terms of the TransactionDocuments or direct the Indenture

 

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Trustee toexercise such remedies in accordance with the terms of the TransactionDocuments; or

 

(ii)           take whatever action at law or inequity as may appear necessary or desirable in its judgment to collect theamounts then due under the Transaction Documents or to enforce performance andobservance of any obligation, agreement or covenant of the Servicer, theIndenture Trustee, the Back-up Servicer, the Seller, the Issuer, the OwnerTrustee or the Depositor under the Transaction Documents.

 

(b)           Unless otherwise expressly provided,no remedy herein conferred upon or reserved is intended to be exclusive of anyother available remedy, but each remedy shall be cumulative and shall be inaddition to other remedies given under the Transaction Documents or existing atlaw or in equity.  No delay or omissionto exercise any right or power accruing under the Transaction Documents uponthe happening of any event set forth in Section 5.01 hereof shall impairany such right or power or shall be construed to be a waiver thereof, but anysuch right and power may be exercised from time to time and as often as may bedeemed expedient.  In order to entitlethe Insurer to exercise any remedy reserved to the Insurer in this Article, itshall not be necessary to give any notice, other than such notice as may berequired in this Article V.

 

**Section 5.03.        Waivers**.

 

(a)           No failure by the Insurer toexercise, and no delay by the Insurer in exercising, any right hereunder shalloperate as a waiver thereof.  Theexercise by the Insurer of any right hereunder shall not preclude the exerciseof any other right, and the remedies provided herein to the Insurer aredeclared in every case to be cumulative and not exclusive of any remediesprovided by law or equity.

 

(b)           The Insurer shall have the right, tobe exercised in its complete discretion, to waive any Event of Defaulthereunder, by a writing setting forth the terms, conditions and extent of suchwaiver signed by the Insurer and delivered to the Servicer, the IndentureTrustee, the Back-up Servicer, the Seller, the Issuer and the Depositor.  Unless such writing expressly provides to thecontrary, any waiver so granted shall extend only to the specific event oroccurrence which gave rise to the Event of Default so waived and not to anyother similar event or occurrence which occurs subsequent to the date of such waiver.

 

**ARTICLE VI**

** **

**MISCELLANEOUS**

** **

**Section 6.01.        Amendments,Etc.**  This InsuranceAgreement may be amended, modified or terminated only by written instrument orwritten instruments signed by the parties hereto.  The Servicer agrees to promptly provide acopy of any amendment to this Insurance Agreement to

 

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the Indenture Trustee, S&Pand Moody’s.  No act or course of dealingshall be deemed to constitute an amendment, modification or termination hereof.

 

**Section 6.02.        Notices.**  All demands, notices and other communicationsto be given hereunder shall be in writing (except as otherwise specificallyprovided herein) and shall be mailed by registered mail or personally deliveredor telecopied to the recipient as follows:

 
| (a)    |   | To the Insurer:                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | MBIA  Insurance Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   | 113 King  Street                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   | Armonk, NY  10504                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   | Attention:                                                                                                                                                                                                                                                                                                                                                                                                                                                              | Insured  Portfolio Management-Structured Finance (IPM-SF) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | (First  Investors Auto Owner Trust 2006-A) |
|   |   | Telecopy  No.: (914) 765-3810                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   | Confirmation:  (914) 273-4545                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | (in each case in which notice or other communication  to the Insurer refers to an Event of Default, a claim on the Policy or with  respect to which failure on the part of the Insurer to respond shall be  deemed to constitute consent or acceptance, then a copy of such notice or  other communication should also be sent to the attention of each of the  general counsel and the Insurer and shall be marked to indicate “URGENT  MATERIAL ENCLOSED.”) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (b)    |   | To the Seller and Administrator:                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | First  Investors Financial Services, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   | Suite 710                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|   |   | 675 Bering  Drive                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|   |   | Houston, TX  77057                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | Attention:  Bennie H. Duck                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|   |   | Telecopy  No.: (713) 977-0657                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | Confirmation:  (713) 977-2600                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (c)    |   | To the Servicer:                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|   |   | First  Investors Servicing Corporation                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|   |   | 380  Interstate North Parkway                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   | Sixth Floor                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   |   | Atlanta, GA  30339                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |   | Attention:  Bennie H. Duck                                                                                                                                                                                                                                                                                                                                                                                                                                              |

 

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| (d)    |   | To the Indenture Trustee:                                               |
|--------|--------|-------------------------------------------------------------------------|
|   |   |                                                                    |
|   |   | Wells Fargo  Bank, National Association                                 |
|   |   | MAC N9311-161                                                           |
|   |   | Sixth and  Marquette Streets                                            |
|   |   | Minneapolis,  MN 55479                                                  |
|   |   | Attention:  Corporate Trust Services — Asset-Backed Administration |
|   |   |                                                                    |
| (e)    |   | To the Depositor:                                                       |
|   |   |                                                                    |
|   |   | First  Investors Auto Funding Corporation                               |
|   |   | 675 Bering  Drive                                                       |
|   |   | Houston, TX  77057                                                      |
|   |   | Attention:  Bennie H. Duck                                              |
|   |   | Telecopy  No.: (713) 977-0657                                      |
|   |   | Confirmation:  (713) 977-2600                                      |
|   |   |                                                                    |
| (f)    |   | To the Issuer:                                                          |
|   |   |                                                                    |
|   |   | First  Investors Auto Owner Trust 2006-A                                |
|   |   | c/o Wells  Fargo Delaware Trust Company                                 |
|   |   | 919 N.  Market Street, Suite 700                                   |
|   |   | Wilmington,  DE 19801                                                   |
|   |   | Attention:  Corporate Trust Administration                              |
|   |   |                                                                    |
| (g)    |   | To the Owner Trustee:                                                   |
|   |   |                                                                    |
|   |   | Wells Fargo  Delaware Trust Company                                     |
|   |   | 919 N.  Market Street, Suite 700                                   |
|   |   | Wilmington,  DE 19801                                                   |
|   |   | Attention:  Corporate Trust                                             |
|   |   |                                                                    |
| (h)    |   | To the Back-up Servicer:                                                |
|   |   |                                                                    |
|   |   | Wells Fargo  Bank, National Association                                 |
|   |   | Sixth and  Marquette Streets                                            |
|   |   | Minneapolis,  MN 55479-0070                                             |
|   |   | Attention:  Asset-Backed Trust Administration                           |

 

A party may specify an additional or different addressor addresses by writing mailed or delivered to the other parties asaforesaid.  All such notices and othercommunications shall be effective upon receipt.

 

**Section 6.03.        Severability.**  In the event that any provision of thisInsurance Agreement shall be held invalid or unenforceable by any court ofcompetent jurisdiction, the parties hereto agree that such holding shall notinvalidate or render unenforceable any other provision hereof.  The parties hereto further agree that theholding by any court of competent jurisdiction that any remedy pursued by anyparty hereto is unavailable or unenforceable shall not affect in any way theability of such party to pursue any other remedy available to it.

 

44

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**Section 6.04.        GoverningLaw.**  This InsuranceAgreement shall be governed by and construed in accordance with the laws of theState of New York without giving effect to the conflict of law provisionsthereof.

 

**Section 6.05.        Consentto Jurisdiction.**

 

(a)           The parties hereto hereby irrevocablysubmit to the jurisdiction of the United States District Court for the SouthernDistrict of New York and any court in the State of New York locatedin the City and County of New York, and any appellate court from anythereof, in any action, suit or proceeding brought against it and to or inconnection with any of the Transaction Documents or the Transactioncontemplated thereunder or for recognition or enforcement of any judgment, andthe parties hereto hereby irrevocably and unconditionally agree that all claimsin respect of any such action or proceeding may be heard or determined in suchNew York state court or, to the extent permitted by law, in such federalcourt.  The parties hereto agree that afinal judgment in any such action, suit or proceeding shall be conclusive andmay be enforced in other jurisdictions by suit on the judgment or in any othermanner provided by law.  To the extentpermitted by applicable law, the parties hereto hereby waive and agree not toassert by way of motion, as a defense or otherwise in any such suit, action orproceeding, any claim that it is not personally subject to the jurisdiction ofsuch courts, that the suit, action or proceeding is brought in an inconvenientforum, that the venue of the suit, action or proceeding is improper or that therelated documents or the subject matter thereof may not be litigated in or bysuch courts.

 

(b)           To the extent permitted by applicablelaw, the parties hereto shall not seek and hereby waive the right to any reviewof the judgment of any such court by any court of any other nation orjurisdiction which may be called upon to grant an enforcement of such judgment.

 

(c)           Except as provided in Section 4.06herein, nothing contained in this Insurance Agreement shall limit or affect theInsurer’s right to serve process in any other manner permitted by law or tostart legal proceedings relating to any of the Transaction Documents any partyhereto or its or their property in the courts of any jurisdiction.

 

**Section 6.06.        Consentof the Insurer.**  In theevent that the consent of the Insurer is required under any of the TransactionDocuments, the determination whether to grant or withhold such consent shall bemade by the Insurer in its sole discretion without any implied duty towards anyother Person.

 

**Section 6.07.        Counterparts.**  This Insurance Agreement may be executed incounterparts by the parties hereto, and all such counterparts shall constituteone and the same instrument.

 

**Section 6.08.        Headings.**  The headings of Articles and Sections and theTable of Contents contained in this Insurance Agreement are provided forconvenience only.  They form no part ofthis Insurance Agreement and shall not affect its construction orinterpretation.  Unless

 

45

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otherwise indicated, all referencesto Articles and Sections in this Insurance Agreement refer to the correspondingArticles and Sections of this Insurance Agreement.

 

**Section 6.09.        Trialby Jury Waived.** Eachparty hereto hereby waives, to the fullest extent permitted by law, any rightto a trial by jury in respect of any litigation arising directly or indirectlyout of, under or in connection with any of the Transaction Documents or any ofthe Transaction contemplated thereunder. Each party hereto (A) certifies that no representative, agent orattorney of any party hereto has represented, expressly or otherwise, that itwould not, in the event of litigation, seek to enforce the foregoing waiver and(B) acknowledges that it has been induced to enter into the TransactionDocuments to which it is a party by, among other things, this waiver.

 

**Section 6.10.        LimitedLiability.**  No recourseunder any Transaction Document shall be had against, and no personal liabilityshall attach to, any officer, employee, director, affiliate or shareholder ofany party hereto, as such, by the enforcement of any assessment or by any legalor equitable proceeding, by virtue of any statute or otherwise in respect ofany of the Transaction Documents, the Obligations or the Policy, it beingexpressly agreed and understood that each Transaction Document is solely acorporate obligation of each party hereto, and that any and all personalliability, either at common law or in equity, or by statute or constitution, ofevery such officer, employee, director, affiliate or shareholder for breachesby any party hereto of any obligations under any Transaction Document is herebyexpressly waived as a condition of and in consideration for the execution anddelivery of this Insurance Agreement.

 

**Section 6.11.        EntireAgreement.**  TheTransaction Documents and the Policy set forth the entire agreement between theparties with respect to the subject matter thereof, and this InsuranceAgreement supersedes and replaces any agreement or understanding that may haveexisted between the parties prior to the date hereof in respect of such subjectmatter.

 

**Section 6.12.        NoRecourse**.  It isexpressly understood and agreed to by the parties hereto that (a) thisInsurance Agreement is executed and delivered by Wells Fargo Delaware TrustCompany, not individually or personally but solely as trustee of the Issuer, inthe exercise of the powers and authority conferred and vested in it, (b) eachof the representations, undertakings and agreements herein made on the part ofthe Issuer or the Trust is made and intended not as personal representations,undertakings and agreements by Wells Fargo Delaware Trust Company but is madeand intended for the purpose of binding only the Issuer or the Owner Trustee,as applicable, (c) nothing herein contained shall be construed as creatingany liability on the part of Wells Fargo Delaware Trust Company, individuallyor personally, to perform any covenant either expressed or implied containedherein, all such liability, if any, being expressly waived by the partieshereto and by any Person claiming by, through or under the parties hereto and (d) underno circumstances should Wells Fargo Delaware Trust Company be personally liablefor the breach or failure of any obligation, representation, warranty orcovenant made or undertaken by the Issuer or the Trust under this InsuranceAgreement or any other Transaction Documents.

 

**Section 6.13.        LimitedRecourse**. Notwithstanding any other provision contained herein or in any of theTransaction Documents, the liability of the Issuer to the Insurer hereunder is

 

46

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limited in recourse to theCollateral, when and as applied in accordance with the priority of payments setforth in Section 3.5 of the Sale and Allocation Agreement, and to theextent such proceeds of the Collateral are insufficient to meet the obligationsof the Issuer hereunder in full, the Issuer shall have no further liability inrespect of any such outstanding obligations, it being agreed between theparties that, upon realization of the Collateral and its reduction to zero, allclaims arising out of or in connection with this Agreement against the Issuershall thereupon extinguish and shall not thereafter revive.

 

**Section 6.14.        Subordination**.  Any obligations of the Depositor under thisAgreement are obligations solely of the Depositor and will not constitute aclaim against the Depositor to the extent that the Depositor does not havefunds sufficient to make payment of such obligations.  In furtherance of and not in derogation ofthe foregoing, the parties hereto (other than the Depositor), by entering intoor accepting this Agreement, each acknowledges and agrees that it has no right,title, or interest in or to the Other Assets of the Depositor.  To the extent that, notwithstanding theagreements and provisions contained in the preceding sentence, any party heretoeither (i) asserts an interest or claim to, or benefit from, Other Assets,or (ii) is deemed to have any such interest, claim to, or benefit in orfrom Other Assets, whether by operation of law, legal process, pursuant toapplicable provisions of insolvency laws or otherwise (including by virtue of Section 1111(b) ofthe Bankruptcy Code or any successor provision having similar effect under theBankruptcy Code), then such party further acknowledges and agrees that any suchinterest, claim or benefit in or from Other Assets is and will be expresslysubordinated to the indefeasible payment in full, which, under the terms of therelevant documents relating to the securitization or conveyance of such OtherAssets, are entitled to be paid from, entitled to the benefits of, or otherwisesecured by such Other Assets (whether or not any such entitlement or securityinterest is legally perfected or otherwise entitled to a priority ofdistributions or application under applicable law, including insolvency laws,and whether or not asserted against the Depositor), including the payment ofpost-petition interest on such other obligations and liabilities.  This subordination provision will be deemed asubordination provision within the meaning of Section 510(a) of theBankruptcy Code.  Each party hereto(other than the Depositor) further acknowledges and agrees that no adequateremedy at law exists for a breach of this Section 6.14 and the terms ofthis Section 6.14 may be enforced by an action for specificperformance.  The provisions of this Section 6.14will be for the third party benefit of those entitled to rely thereon and willsurvive the termination of this Agreement.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK; SIGNATURE PAGE FOLLOWS]

 

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IN WITNESSWHEREOF, the parties hereto have executed this Insurance Agreement, all as ofthe day and year first above mentioned.

 
|   | MBIA INSURANCE CORPORATION                                                           |
|--------|--------------------------------------------------------------------------------------|
|   |                                                                                 |
|   |                                                                                 |
|   | By                                                                                   |   |
|   | Assistant  Secretary                                                                 |
|   |                                                                                 |
|   |                                                                                 |
|   | FIRST INVESTORS SERVICING  CORPORATION, as Servicer                                  |
|   |                                                                                 |
|   |                                                                                 |
|   | By                                                                                   |   |
|   | Title                                                                                |   |
|   |                                                                                 |
|   | FIRST INVESTORS FINANCIAL SERVICES,  INC., as Seller and as Administrator            |
|   |                                                                                 |
|   |                                                                                 |
|   | By                                                                                   |   |
|   | Title                                                                                |   |
|   |                                                                                 |
|   |                                                                                 |
|   | FIRST INVESTORS AUTO FUNDING  CORPORATION,** **as Depositor                     |
|   |                                                                                 |
|   |                                                                                 |
|   | By                                                                                   |   |
|   | Title                                                                                |   |
|   |                                                                                 |
|   |                                                                                 |
|   | WELLS  FARGO BANK, NATIONAL  ASSOCIATION, as Back-up Servicer and Indenture  Trustee |
|   |                                                                                 |
|   |                                                                                 |
|   | By                                                                                   |   |
|   | Title                                                                                |   |
|        |                                                                                      |  |  |

 

----

 
|   | FIRST INVESTORS AUTO OWNER TRUST  2006-A, as Issuer,                                                  |
|--------|-------------------------------------------------------------------------------------------------------|
|   |                                                                                                  |
|   | By: WELLS FARGO DELAWARE TRUST  COMPANY, not in its individual capacity, but  solely as Owner Trustee |
|   |                                                                                                  |
|   |                                                                                                  |
|   | By                                                                                                    |   |
|   | Title                                                                                                 |   |
|   |                                                                                                  |
|   |                                                                                                  |
|   | WELLS FARGO DELAWARE TRUST  COMPANY, not in its individual capacity, but  solely as Owner Trustee     |
|   |                                                                                                  |
|   | By                                                                                                    |   |
|   | Title                                                                                                 |   |
|        |                                                                                                       |  |  |

 

----