**Exhibit 10.139**

 

NOTE PURCHASE AGREEMENTdated September 12, 2007

 

 

FIRST INVESTORS FINANCIAL SERVICES GROUP,INC.

 

 

12.75% Senior Subordinated Notes due September 12,2017

 

 

14.75% Senior Subordinated Paid-In-Kind Notesdue September 12, 2017

 

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TABLE OF CONTENTS

 
| ** **        | ** **                                                       | ** ** | **Page** |
|-------------------|------------------------------------------------------------------|------------|----------|
|              |                                                             |       |     |
| Article I    | Authorization of Notes                                           | 1          |
| Article II   | Sale and Purchase of Notes; Guaranty Agreement                   | 1          |
| Section 2.1  | Sale and Purchase of Notes                                       | 1          |
| Section 2.2  | Guaranty Agreement                                               | 2          |
| Article III  | Closing                                                          | 2          |
| Section 3.1  | Senior Subordinated Notes                                        | 2          |
| Section 3.2  | Senior Subordinated PIK Notes                                    | 2          |
| Article IV   | Conditions to Closing                                            | 3          |
| Section 4.1  | Representations and Warranties                                   | 3          |
| Section 4.2  | Performance; No Default                                          | 3          |
| Section 4.3  | Compliance Certificates                                          | 3          |
| Section 4.4  | Opinions of Counsel                                              | 4          |
| Section 4.5  | Purchase Permitted By Applicable Law, etc                        | 4          |
| Section 4.6  | Reserved                                                         | 4          |
| Section 4.7  | Payment of Fees                                                  | 4          |
| Section 4.8  | Reserved                                                         | 4          |
| Section 4.9  | Changes in Corporate Structure                                   | 4          |
| Section 4.10 | Proceedings and Documents                                        | 4          |
| Section 4.11 | Guaranty Agreement                                               | 5          |
| Section 4.12 | Junior Debt                                                      | 5          |
| Article V    | Representations and Warranties of the Company                    | 5          |
| Section 5.1  | Organization; Power and Authority                                | 5          |
| Section 5.2  | Authorization, etc                                               | 5          |
| Section 5.3  | Disclosure                                                       | 5          |
| Section 5.4  | Organization and Ownership of Shares of Subsidiaries; Affiliates | 6          |
| Section 5.5  | Financial Statements                                             | 7          |
| Section 5.6  | Compliance with Laws, Other Instruments, etc                     | 7          |
| Section 5.7  | Governmental Authorizations, etc                                 | 7          |
| Section 5.8  | Litigation; Observance of Agreements, Statutes and Orders        | 7          |
| Section 5.9  | Taxes                                                            | 8          |
| Section 5.10 | Title to Property; Leases                                        | 8          |
| Section 5.11 | Licenses, Permits, etc                                           | 8          |
| Section 5.12 | Compliance with ERISA                                            | 9          |
| Section 5.13 | Private Offering by the Company                                  | 9          |
| Section 5.14 | Use of Proceeds; Margin Regulations                              | 10         |
| Section 5.15 | Existing Indebtedness; Future Liens                              | 10         |
| Section 5.16 | Foreign Assets Control Regulations, etc.                         | 10         |
| Section 5.17 | Status under Certain Statutes                                    | 11         |
| Section 5.18 | Environmental Matters                                            | 11         |
| Article VI   | Representations of the Purchaser                                 | 11         |
| Section 6.1  | Purchase for Investment                                          | 11         |
| Section 6.2  | Source of Funds                                                  | 12         |
| Article VII  | Information as to Company                                        | 13         |
|                   |                                                                  |            |          |  |  |

 

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| Section 7.1   | Financial and Business Information                 | 13 |
|--------------------|----------------------------------------------------|----|
| Section 7.2   | Officer’s Certificate                         | 15 |
| Section 7.3   | Inspection                                         | 15 |
| Article VIII  | Prepayment of the Notes                            | 16 |
| Section 8.1   | Required Prepayments                               | 16 |
| Section 8.2   | Optional Prepayments                               | 16 |
| Section 8.3   | Allocation of Partial Prepayments                  | 16 |
| Section 8.4   | Maturity; Surrender, etc.                          | 17 |
| Section 8.5   | Purchase of Notes                                  | 17 |
| Article IX    | Affirmative Covenants                              | 17 |
| Section 9.1   | Compliance with Law                                | 17 |
| Section 9.2   | Insurance                                          | 17 |
| Section 9.3   | Maintenance of Properties                          | 18 |
| Section 9.4   | Payment of Taxes and Claims                        | 18 |
| Section 9.5   | Corporate Existence, etc.                          | 18 |
| Section 9.6   | Guaranty Agreement                                 | 18 |
| Section 9.7   | Financial Statement; Other Information             | 20 |
| Section 9.8   | Ranking of Notes                                   | 20 |
| Section 9.9   | Use of Proceeds                                    | 20 |
| Article X     | Negative Covenants                                 | 20 |
| Section 10.1  | Transactions with Affiliates                       | 20 |
| Section 10.2  | Merger, Consolidation, etc.                        | 20 |
| Section 10.3  | Liens                                              | 21 |
| Section 10.4  | Financial Covenants                                | 22 |
| Section 10.5  | Debt                                               | 22 |
| Section 10.6  | Sale of Assets, etc.                               | 23 |
| Section 10.7  | Dividends, Distributions and Stock Repurchases     | 23 |
| Section 10.8  | Reserved                                           | 24 |
| Section 10.9  | Nature of Business                                 | 24 |
| Section 10.10 | Restrictions on Guarantors                         | 24 |
| Section 10.11 | Limitation on Issuance of Capital Stock            | 24 |
| Section 10.12 | Limitation on Transfer of Capital Stock            | 25 |
| Section 10.13 | Junior Debt                                        | 25 |
| Section 10.14 | Subordination of Intercompany Debt                 | 25 |
| Article XI    | Events of Default                                  | 26 |
| Article XII   | Remedies on Default, etc.                          | 28 |
| Section 12.1  | Acceleration                                       | 28 |
| Section 12.2  | Other Remedies                                     | 29 |
| Section 12.3  | Rescission                                         | 29 |
| Section 12.4  | No Waivers or Election of Remedies, Expenses, etc. | 29 |
| Article XIII  | Registration; Exchange; Substitution of Notes      | 30 |
| Section 13.1  | Registration of Notes                              | 30 |
| Section 13.2  | Transfer and Exchange of Notes                     | 30 |
| Section 13.3  | Replacement of Notes                               | 31 |
| Article XIV   | Payments on Notes                                  | 31 |
|                    |                                                    |    |  |

 

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| Section 14.1  | Place of Payment                                                      | 31 |
|--------------------|-----------------------------------------------------------------------|----|
| Section 14.2  | Home Office Payment                                                   | 31 |
| Article XV    | Expenses, etc.                                                        | 32 |
| Section 15.1  | Transaction Expenses                                                  | 32 |
| Section 15.2  | Survival                                                              | 32 |
| Article XVI   | Survival of Representations and Warranties; Entire Agreement          | 32 |
| Article XVII  | Amendment and Waiver                                                  | 33 |
| Section 17.1  | Requirements                                                          | 33 |
| Section 17.2  | Solicitation of Holders of Notes                                      | 33 |
| Section 17.3  | Binding Effect, etc.                                                  | 33 |
| Section 17.4  | Notes held by Company, etc.                                           | 34 |
| Article XVIII | Notices                                                               | 34 |
| Article XIX   | Reproduction of Documents                                             | 34 |
| Article XX    | Confidential Information                                              | 35 |
| Article XXI   | Substitution of Purchaser                                             | 36 |
| Article XXII  | Miscellaneous                                                         | 36 |
| Section 22.1  | Successors and Assigns                                                | 36 |
| Section 22.2  | Payments Due on Non-Business Days                                     | 36 |
| Section 22.3  | Severability                                                          | 36 |
| Section 22.4  | Construction                                                          | 37 |
| Section 22.5  | Counterparts                                                          | 37 |
| Section 22.6  | Governing Law                                                         | 37 |
| Article XXIII | Subordination                                                         | 37 |
| Section 23.1  | Agreement to Subordinate                                              | 37 |
| Section 23.2  | General Subordination to Senior Debt                                  | 37 |
| Section 23.3  | Amendments and Exchanges of Subordinated Debt                         | 37 |
| Section 23.4  | Payments Received in Contravention of Subordination Provisions        | 38 |
| Section 23.5  | Subrogation                                                           | 38 |
| Section 23.6  | Relative Rights                                                       | 38 |
| Section 23.7  | Reliance on Judicial Order or Decree or Senior Debtholder Certificate | 39 |
| Section 23.8  | Proof of Claim                                                        | 39 |
|                    |                                                                       |    |  |

 

Schedules and Exhibits

 
| SCHEDULE A  |   | — |   | Information Relating to Purchasers                       |
|-------------|--------|--------|--------|----------------------------------------------------------|
| SCHEDULE B  |   | — |   | Defined Terms                                            |
| EXHIBIT 1   |   | — |   | Form of Senior Subordinated Note                    |
| EXHIBIT 2   |   | — |   | Form of Senior Subordinated  Paid-In-Kind Note      |
| EXHIBIT 3   |   | — |   | Form of Guaranty Agreement                          |
| EXHIBIT 4.4 |   | — |   | Form of Opinion of Special Counsel for  the Company |

 

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September 12, 2007

 

TO EACH OF THE PURCHASERS LISTED INTHE ATTACHED SCHEDULE A:

 

Ladies and Gentlemen:

 

First Investors Financial Services Group, Inc., a Texascorporation (the “*Company*”),agrees with you as follows:

 

# **Article IAuthorization of Notes**

#  

The Company will authorize the issue and sale of its 12.75% SeniorSubordinated Notes in the aggregate principal amount of $5,000,000 due September 12,2017 (the “*Senior Subordinated Notes*,”such term to include any such notes issued in substitution therefor pursuant toArticle XIII of this Agreement or the Other Agreements (ashereinafter defined)), and may authorize the issue and sale from time to timeof its 14.75% Senior Subordinated Paid-In-Kind Notes in the aggregate principalamount of up to $318,750 due September 12, 2017 (the “*Senior Subordinated PIK Notes*,” suchterm to include any such notes issued in substitution therefor pursuant to Article XIIIof this Agreement, and together with the Senior Subordinated Notes, the “*Notes*”).  The Senior Subordinated Notes shall besubstantially in the form set out in Exhibit 1, with such changestherefrom, if any, as may be approved by you and the Company.  The Senior Subordinated PIK Notes shall besubstantially in the form set out in Exhibit 2, with such changestherefrom, if any, as may be approved by you and the Company.  Certain capitalized terms used in thisAgreement are defined in Schedule B; references to a “Schedule” or an “Exhibit”are, unless otherwise specified, to a Schedule or an Exhibit attached tothis Agreement.

 

# **Article IISale and Purchase of Notes; Guaranty Agreement**

#  

## **Section 2.1****            Sale and Purchaseof Notes.**

##  

Subject to the terms and conditions of this Agreement, the Company willissue and sell to you and you will purchase from the Company, at the Closingprovided for in Section 3.1, Senior Subordinated Notes in theprincipal amount specified opposite your name in Schedule A at thepurchase price of 100% of the principal amount thereof.  Subject to the terms and conditions of thisAgreement, the Company may issue and sell to you and you will purchase from theCompany, at par at each PIK Closing provided for in Section 3.2,Senior Subordinated PIK Notes in the principal amount specified in theapplicable Senior Subordinated PIK Note.

 

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## **Section 2.2****            Guaranty Agreement.**

##  

The obligations of the Company hereunder and under the Notes areabsolutely, unconditionally and irrevocably guaranteed by the Company’sSubsidiaries (other than the Insurance Subsidiary and any SecuritizationSubsidiary) and each other Company Subsidiary from time to time required toguaranty the Notes pursuant to Section 9.6 (each a “*Guarantor*” and, collectively, the “*Guarantors*”), pursuant to that certainSubsidiary Guaranty Agreement dated as of September 12, 2007 (as the samemay be amended, supplemented, restated or otherwise modified from time to time,the “*Guaranty Agreement*”)substantially in the form of Exhibit 3.

 

# **Article IIIClosing**

#  

## **Section 3.1****            Senior SubordinatedNotes.**

##  

The sale and purchase of the Senior Subordinated Notes to be purchasedby you shall occur at the offices of Hunton & Williams LLP, 101 SouthTryon Street, Suite 3500, Charlotte, North Carolina 28280, at 10:00 a.m.,Charlotte time, at a closing (the “*Closing*”)on September 12, 2007 or on such other Business Day thereafter on or priorto September 30, 2007 as may be agreed upon by the Company and you.  At the Closing the Company will deliver toyou the Senior Subordinated Notes to be purchased by you in the form of asingle Senior Subordinated Note (or such greater number of Senior SubordinatedNotes in denominations of at least $100,000 as you may request) dated the dateof the Closing and registered in your name (or in the name of your nominee),against delivery by you to the Company or its order of immediately availablefunds in the amount of the purchase price therefor by wire transfer ofimmediately available funds for the account of the Company to account number1294161139 at Bank of America, N.A., ABA Number 111222212, Account Name-FirstInvestors Financial Services-Holding Company Operating Account.  If at the Closing the Company shall fail totender such Senior Subordinated Notes to you as provided above in this Section 3.1,or any of the conditions specified in Section 4 shall not have beenfulfilled to your satisfaction, you shall, at your election, be relieved of allfurther obligations under this Agreement, without thereby waiving any rightsyou may have by reason of such failure or such nonfulfillment.

 

## **Section 3.2****            Senior SubordinatedPIK Notes.**

##  

Each sale and purchase of the Senior Subordinated PIK Notes to bepurchased by you shall occur at the offices of Hunton & Williams LLP,101 South Tryon Street, Suite 3500, Charlotte, North Carolina 28280, at10:00 a.m., Charlotte time, at a closing (each, a “*PIK Closing*”) on a date on which aninterest payment is due under the Senior Subordinated Notes, providedthat there shall not be more than six PIK Closings and the aggregate amount ofSenior Subordinated PIK Notes issued on at any PIK Closing shall not exceed onemonth’s accrued interest on the Senior Subordinated Notes.  The Company will give you not less than five (5) BusinessDays prior written notice of each PIK Closing. At each PIK Closing the Company will deliver to you the SeniorSubordinated PIK Notes to be purchased by you in the form of a single SeniorSubordinated Note (or such greater number of Senior Subordinated Notes in

 

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denominations of at least $25,000 as you may request) dated the date ofthe PIK Closing and registered in your name (or in the name of your nominee),against delivery by you to the Company or its order of immediately availablefunds in the amount of the purchase price therefor to be applied to the paymentof interest accrued and unpaid interest then due on the Senior SubordinatedNotes.  If at the PIK Closing the Companyshall fail to tender such Senior Subordinated PIK Notes to you as provided abovein this Section 3.2, or any of the conditions specified in Sections4.1, 4.2 or 4.5, shall not have been fulfilled to your satisfaction withrespect to such PIK Closing,  you shall,at your election, be relieved of all further obligations under this Agreement,without thereby waiving any rights you may have by reason of such failure orsuch nonfulfillment.

 

# **Article IVConditions to Closing**

#  

Your obligation to purchase and pay for the Notes to be sold to you atthe Closing is subject to the fulfillment to your satisfaction, prior to or atthe Closing, of the following conditions:

 

## **Section 4.1****            Representations andWarranties.**

##  

The representations and warranties of the Company in this Agreementshall be correct when made and at the time of the Closing.  The representations and warranties of eachObligated Party in the Guaranty Agreement shall be correct when made and at thetime of the Closing.

 

## **Section 4.2****            Performance; NoDefault.**

##  

The Company and each Obligated Party shall have performed and compliedwith all agreements and conditions contained in this Agreement and the GuarantyAgreement required to be performed or complied with by it prior to or at theClosing or the applicable PIK Closing and after giving effect to the issue andsale of the Notes (and the application of the proceeds thereof as contemplatedby Schedule 5.14) no Default or Event of Default shall have occurred andbe continuing.  Neither the Company norany Subsidiary shall have entered into any transaction since the date of theMemorandum that would have been prohibited by Sections 10.1, 10.3,10.5, and 10.7 hereof had such Sections applied since such date.

 

## **Section 4.3****            ComplianceCertificates.**

##  

### (a)           Officer’sCertificate.  The Company shall havedelivered to you an Officer’s Certificate, dated the date of the Closingcertifying that the conditions specified in Sections 4.1, 4.2 and4.9 have been fulfilled.

###  

### (b)           Secretary’sCertificate.  At the Closing, theCompany shall have delivered to you a certificate certifying as to theresolutions attached thereto and other corporate proceedings relating to theauthorization, execution and delivery of the Notes, the Guaranty Agreement andthis Agreement.

 

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## **Section 4.4****            Opinions of Counsel.**

##  

At the Closing, you shall have received an opinion in form andsubstance satisfactory to you dated the date of the Closing from Thompson &Knight LLP, outside counsel for the Company, covering the matters set forth in Exhibit 4.4and covering such other matters incident to the transactions contemplatedhereby as you or your counsel may reasonably request (and the Company herebyinstructs its counsel to deliver such opinion to you).

 

## **Section 4.5****            Purchase PermittedBy Applicable Law, etc.**

##  

On the date of the Closing your purchase of Notes shall (i) bepermitted by the laws and regulations of each jurisdiction to which you aresubject, (ii) not violate any applicable law or regulation (including,without limitation, Regulation G, T or X of the Board of Governors of theFederal Reserve System) and (iii) not subject you to any tax, penalty orliability under or pursuant to any applicable law or regulation, which law orregulation was not in effect on the date hereof.  If requested by you, you shall have receivedan Officer’s Certificate certifying as to such matters of fact as you mayreasonably specify to enable you to determine whether such purchase is sopermitted.

 

## **Section 4.6****            Reserved.**

##  

## **Section 4.7****            Payment of Fees.**

##  

Without limiting the provisions of Section 15.1, the Companyshall have paid on or before the Closing the fees, charges and disbursements ofyour special counsel referred to in Section 4.4 to the extentreflected in a statement of such counsel rendered to the Company at least oneBusiness Day prior to the Closing or the applicable PIK Closing.  Furthermore, the Company shall have paid allother fees and expenses of you required to be paid as a condition to thepurchase of any Notes, including, without limitation, any fees described in theFee Letter.

 

## **Section 4.8****            Reserved.**

##  

## **Section 4.9****            Changes inCorporate Structure.**

##  

Except as specified in Schedule 4.9, the Company shall not havechanged its jurisdiction of incorporation or been a party to any merger orconsolidation or other transaction pursuant to which it shall have succeeded toany Material liabilities of any other entity at any time following the date ofthe most recent financial statements referred to in Schedule 5.5.

 

## **Section 4.10****         Proceedings andDocuments.**

##  

All corporate and other proceedings in connection with the transactionscontemplated by this Agreement and all documents and instruments incident tosuch transactions shall be satisfactory to you and your special counsel, andyou and your special counsel shall have received all such counterpart originalsor certified or other copies of such documents as you or they may reasonablyrequest.

 

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## **Section 4.11****         Guaranty Agreement.**

##  

The Guaranty Agreement shall have been duly authorized, executed anddelivered by each Guarantor and shall be in full force and effect and thepurchaser hereof shall have received a duly executed copy thereof.

 

## **Section 4.12****         Junior Debt.**

##  

The Company shall provide to the Purchaser evidence that the JuniorDebt has a maturity date of not earlier than three (3) years from the dateof the Closing or PIK Closing, as applicable.

 

# **Article VRepresentations and Warranties of the Company**

#  

The Company represents and warrants to you that:

 

## **Section 5.1****            Organization; Powerand Authority.**

##  

The Company is a corporation duly organized, validly existing and ingood standing under the laws of its jurisdiction of incorporation, and is dulyqualified as a foreign corporation and is in good standing in each jurisdictionin which such qualification is required by law, other than those jurisdictionsas to which the failure to be so qualified or in good standing could not,individually or in the aggregate, reasonably be expected to have a MaterialAdverse Effect.  The Company has thecorporate power and authority to own or hold under lease the properties itpurports to own or hold under lease, to transact the business it transacts andproposes to transact, to execute and deliver this Agreement and the Notes andto perform the provisions hereof and thereof.

 

## **Section 5.2****            Authorization, etc.**

##  

This Agreement and the Notes have been duly authorized by all necessarycorporate action on the part of the Company, and this Agreement constitutes,and upon execution and delivery thereof each Note will constitute, a legal,valid and binding obligation of the Company enforceable against the Company inaccordance with its terms, except as such enforceability may be limited by (i) applicablebankruptcy, insolvency, reorganization, moratorium or other similar lawsaffecting the enforcement of creditors’ rights generally and (ii) generalprinciples of equity (regardless of whether such enforceability is consideredin a proceeding in equity or at law).

 

## **Section 5.3****            Disclosure.**

##  

The Company has delivered to you a copy of a Confidential InformationMemorandum, dated May 2007, as supplemented June 2007 (collectively,the “*Memorandum*”),relating to the Company’s intention to raise additional capital.  The Memorandum fairly describes, in allmaterial respects, the general nature of the business and principal propertiesof the Company and its Subsidiaries. Except as disclosed in Schedule 5.3, this Agreement, theMemorandum (except for the financial projections contained therein, as to whichno representation is made herein), the documents, certificates or otherwritings delivered to you by or on behalf of the Company in

 

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connection with the transactions contemplated hereby and the financialstatements listed in Schedule 5.5, taken as a whole, do not contain anyuntrue statement of a material fact or omit to state any material factnecessary to make the statements therein not misleading in light of thecircumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule5.3, or in one of the documents, certificates or other writings identifiedtherein, or in the financial statements listed in Schedule 5.5, since April 30,2007, there has been no change in the financial condition, operations, business,properties or prospects of the Company or any Subsidiary except changes thatindividually or in the aggregate could not reasonably be expected to have aMaterial Adverse Effect.  Other thanconditions affecting the financial markets and consumer finance industrygenerally, there is no fact known to the Company that could reasonably beexpected to have a Material Adverse Effect that has not been set forth hereinor in the Memorandum or in the other documents, certificates and other writingsdelivered to you by or on behalf of the Company specifically for use inconnection with the transactions contemplated hereby.

 

## **Section 5.4****            Organization andOwnership of Shares of Subsidiaries; Affiliates.**

##  

### (a)           Schedule5.4 contains (except as noted therein) complete and correct lists (i) ofthe Company’s Subsidiaries, showing, as to each Subsidiary, the correct namethereof, the jurisdiction of its organization, and the percentage of shares ofeach class of its capital stock or similar equity interests outstanding owned bythe Company and each other Subsidiary, (ii) of the Company’s Affiliates,other than Subsidiaries, and (iii) of the Company’s directors and seniorofficers.

###  

### (b)           Allof the outstanding shares of capital stock or similar equity interests of eachSubsidiary shown in Schedule 5.4 as being owned by the Company and itsSubsidiaries have been validly issued, are fully paid and nonassessable and areowned by the Company or another Subsidiary free and clear of any Lien (exceptas otherwise disclosed in Schedule 5.4).

###  

### (c)           EachSubsidiary identified in Schedule 5.4 is a corporation or other legalentity duly organized, validly existing and in good standing under the laws ofits jurisdiction of organization, and is duly qualified as a foreigncorporation or other legal entity and is in good standing in each jurisdictionin which such qualification is required by law, other than those jurisdictionsas to which the failure to be so qualified or in good standing could not,individually or in the aggregate, reasonably be expected to have a MaterialAdverse Effect.  Each such Subsidiary hasthe corporate or other power and authority to own or hold under lease theproperties it purports to own or hold under lease and to transact the businessit transacts and proposes to transact, and in the case of each Subsidiary thatis an Obligated Party, to execute and deliver the Guaranty Agreement and toperform the provisions thereof.

###  

### (d)           NoGuarantor is a party to, or otherwise subject to any legal restriction or anyagreement (other than this Agreement, the agreements listed on Schedule 5.4and customary limitations imposed by corporate law statutes) restricting theability of such Guarantor to pay dividends out of profits or make any othersimilar distributions of profits to the Company or each other Guarantor thatowns outstanding shares of capital stock or similar equity interests of suchGuarantor.

 

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## **Section 5.5****            FinancialStatements.**

##  

The Company has delivered to each you copies of the financialstatements of the Company and its Subsidiaries listed on Schedule 5.5.  All of said financial statements (includingin each case the related schedules and notes) fairly present in all materialrespects the consolidated financial position of the Company and itsSubsidiaries as of the respective dates specified in such Schedule and theconsolidated results of their operations and cash flows for the respectiveperiods so specified and have been prepared in accordance with GAAPconsistently applied throughout the periods involved except as set forth in thenotes thereto (subject, in the case of any interim financial statements, tonormal year-end adjustments).

 

## **Section 5.6****            Compliance withLaws, Other Instruments, etc.**

##  

The execution, delivery and performance by the Company of thisAgreement and the Notes and the execution, delivery and performance by eachObligated Party of the Guaranty Agreement will not (i) contravene, resultin any breach of, or constitute a default under, or result in the creation ofany Lien in respect of any property of the Company or any Subsidiary under, anyindenture, mortgage, deed of trust, loan, purchase or credit agreement, lease,corporate charter or by-laws, or any other agreement or instrument to which theCompany or any Subsidiary is bound or by which the Company or any Subsidiary orany of their respective properties may be bound or affected, (ii) conflictwith or result in a breach of any of the terms, conditions or provisions of anyorder, judgment, decree, or ruling of any court, arbitrator or GovernmentalAuthority applicable to the Company or any Subsidiary or (iii) violate anyprovision of any statute or other rule or regulation of any GovernmentalAuthority applicable to the Company or any Subsidiary.

 

## **Section 5.7****            GovernmentalAuthorizations, etc.**

##  

Except for routine filings in connection with exemptions fromregistration under blue sky laws and federal securities laws applicable to theoffer and sale of the Notes and the Guaranty Agreement, no consent, approval orauthorization of, or registration, filing or declaration with, any GovernmentalAuthority is required in connection with the execution, delivery or performance(a) by the Company of this Agreement or the Notes or (b) by anyObligated Party of the Guaranty Agreement.

 

## **Section 5.8****            Litigation;Observance of Agreements, Statutes and Orders.**

##  

### (a)           Exceptas disclosed in Schedule 5.8, there are no actions, suits or proceedingspending or, to the knowledge of the Company, threatened against or affectingthe Company or any Subsidiary or any property of the Company or any Subsidiaryin any court or before any arbitrator of any kind or before or by anyGovernmental Authority that, individually or in the aggregate, could reasonablybe expected to have a Material Adverse Effect.

###  

### (b)           Neitherthe Company nor any Subsidiary is in default under any term of any agreement orinstrument to which it is a party or by which it is bound, or any order,judgment, decree or ruling of any court, arbitrator or Governmental Authorityor is in violation of any applicable law, ordinance, rule or regulation(including without limitation Environmental Laws)

 

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### of anyGovernmental Authority, which default or violation, individually or in theaggregate, could reasonably be expected to have a Material Adverse Effect.

###  

## **Section 5.9****            Taxes.**

##  

The Company and its Subsidiaries have filed all tax returns that arerequired to have been filed in any jurisdiction, and have paid all taxes shownto be due and payable on such terms and all other taxes and assessments leviedupon them or their properties, assets, income or franchises, to the extent suchtaxes and assessments have become due and payable and before they have becomedelinquent, except for any taxes and assessments (i) the amount of whichis not individually or in the aggregate Material or (ii) the amount,applicability or validity of which is currently being contested in good faithby appropriate proceedings and with respect to which the Company or aSubsidiary, as the case may be, has established adequate reserves in accordancewith GAAP.  The Company knows of no basisfor any other tax or assessment that could reasonably be expected to have aMaterial Adverse Effect.  The charges,accruals and reserves on the books of the Company and its Subsidiaries inrespect of Federal, state or other taxes for all fiscal periods are adequate.

 

## **Section 5.10****         Title to Property;Leases.**

##  

The Company and its Subsidiaries have good and sufficient title totheir respective properties that individually or in the aggregate are Material,including all such properties reflected in the most recent audited balancesheet referred to in Section 5.5 or purported to have been acquiredby the Company or any Subsidiary after said date (except as sold or otherwisedisposed of in the ordinary course of business), in each case free and clear ofLiens prohibited by this Agreement.  Allleases that individually or in the aggregate are Material are valid andsubsisting and are in full force and effect in all material respects.

 

## **Section 5.11****         Licenses, Permits, etc.**

##  

Except as disclosed in Schedule 5.11,

 

### (a)           theCompany and its Subsidiaries own or possess all licenses, permits, franchises,authorizations, patents, copyrights, service marks, trademarks and trade names,or rights thereto, that individually or in the aggregate are Material, withoutknown conflict with the rights of others;

###  

### (b)           tothe best knowledge of the Company, no product of the Company infringes in anymaterial respect any license, permit, franchise, authorization, patent,copyright, service mark, trademark, trade name or other right owned by anyother Person; and

###  

### (c)           tothe best knowledge of the Company, there is no Material violation by any Personof any right of the Company or any of its Subsidiaries with respect to anypatent, copyright, service mark, trademark, trade name or other right owned orused by the Company or any of its Subsidiaries.

 

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## **Section 5.12****         Compliance with ERISA.**

##  

### (a)           TheCompany and each ERISA Affiliate have operated and administered each Plan incompliance with all applicable laws except for such instances of noncomplianceas have not resulted in and could not reasonably be expected to result in a MaterialAdverse Effect.  Neither the Company norany ERISA Affiliate has incurred any liability pursuant to Title I or IV ofERISA or the penalty or excise tax provisions of the Code relating to employeebenefit plans (as defined in Section 3 of ERISA), and no event,transaction or condition has occurred or exists that could reasonably beexpected to result in the incurrence of any such liability by the Company orany ERISA Affiliate, or in the imposition of any Lien on any of the rights,properties or assets of the Company or any ERISA Affiliate, in either casepursuant to Title I or IV of ERISA or to such penalty or excise tax provisionsor to Section 401(a)(29) or 412 of the Code, other than such liabilitiesor Liens as would not be individually or in the aggregate Material.

###  

### (b)           Thepresent value of the aggregate benefit liabilities under each of the Plans(other than Multiemployer Plans), determined as of the end of such Plan’s mostrecently ended plan year on the basis of the actuarial assumptions specifiedfor funding purposes in such Plan’s most recent actuarial valuation report, didnot exceed the aggregate current value of the assets of such Plan allocable tosuch benefit liabilities.The term “benefit liabilities” has the meaning specified insection 4001 of ERISA and the terms “current value” and “present value” havethe meaning specified in section 3 of ERISA.

###  

### (c)           TheCompany and its ERISA Affiliates have not incurred withdrawal liabilities (andare not subject to contingent withdrawal liabilities) under section 4201 or4204 of ERISA in respect of Multiemployer Plans that individually or in theaggregate are Material.

###  

### (d)           Theexpected post-retirement benefit obligation (determined as of the last day ofthe Company’s most recently ended fiscal year in accordance with FinancialAccounting Standards Board Statement No. 106, without regard toliabilities attributable to continuation coverage mandated by section 4980B ofthe Code) of the Company and its Subsidiaries is not Material.

###  

### (e)           Theexecution and delivery, of this Agreement and the issuance and sale of theNotes hereunder will not involve any transaction that is subject to theprohibitions of section 406 of ERISA or in connection with which a tax could beimposed pursuant to section 4975(c)(1)(A)-(D) of the Code.  The representation by the Company in thefirst sentence of this Section 5.12(e) is made in relianceupon and subject to (i) the accuracy of your representation in Section 6.2as to the sources of the funds used to pay the purchase price of the Notes tobe purchased by you and (ii) the assumption, made solely for the purposeof making such representation, that Department of Labor Interpretive Bulletin75-2 with respect to prohibited transactions remains valid in the circumstancesof the transactions contemplated herein.

###  

## **Section 5.13****         Private Offering bythe Company.**

##  

Neither the Company nor anyone acting on its behalf has offered theNotes, the Guaranty Agreement or any similar securities for sale to, orsolicited any offer to buy any of the same

 

9

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from, or otherwise approached or negotiated in respect thereof with,any person other than you, and not more than 10 other Institutional Investors,each of which has been offered the Notes and the Guaranty Agreement at aprivate sale for investment.  Neither theCompany nor anyone acting on its behalf has taken, or will take, any actionthat would subject the issuance or sale of the Notes or the Guaranty Agreementto the registration requirements of Section 5 of the Securities Act.

 

## **Section 5.14****         Use of Proceeds;Margin Regulations.**

##  

The Company will apply the proceeds of the sale of the Notes as setforth in Schedule 5.14.  No partof the proceeds from the sale of the Notes hereunder will be used, directly orindirectly, for the purpose of buying or carrying any margin stock within themeaning of Regulation G of the Board of Governors of the Federal Reserve System(12 CFR 207), or for the purpose of buying or carrying or trading in anysecurities under such circumstances as to involve the Company in a violation ofRegulation X of said Board (12 CFR 224) or to involve any broker or dealer in aviolation of Regulation T of said Board (12 CFR 220).  Margin stock does not constitute more than25% of the value of the consolidated assets of the Company and its Subsidiariesand the Company does not have any present intention that margin stock willconstitute more than 25% of the value of such assets. As used in this Section,the terms “*margin stock*”and “*purpose of buying or carrying*”shall have the meanings assigned to them in said Regulation G.

 

## **Section 5.15****         Existing Indebtedness;Future Liens.**

##  

### (a)           Exceptas described therein, Schedule 5.15 sets forth a complete and correctlist of all outstanding Debt of the Company and its Subsidiaries as of July 31,2007, since which date there has been no Material change in the amounts,interest rates, sinking funds, installment payments or maturities of theIndebtedness of the Company or its Subsidiaries.  Neither the Company nor any Subsidiary is indefault and no waiver of default is currently in effect, in the payment of anyprincipal or interest on any Indebtedness of the Company or such Subsidiary andno event or condition exists with respect to any Indebtedness of the Company orany Subsidiary that would permit (or that with notice or the lapse of time, orboth, would permit) one or more Persons to cause such Indebtedness to becomedue and payable before its stated maturity or before its regularly scheduleddates of payment.

###  

### (b)           Exceptas disclosed in Schedule 5.15, neither the Company nor any Guarantor hasagreed or consented to cause or permit in the future (upon the happening of acontingency or otherwise) any of its property, whether now owned or hereafteracquired, to be subject to a Lien not permitted by Section 10.3.

###  

## **Section 5.16****         Foreign Assets ControlRegulations, etc.**

##  

Neither the sale of the Notes by the Company hereunder nor its use ofthe proceeds thereof will violate the Anti-Terrorism Order, the Patriot Act,the Trading with the Enemy Act, as amended, or any of the foreign assetscontrol regulations of the United States Treasury Department (31 CFR, SubtitleB, Chapter V, as amended) or any enabling legislation or executive orderrelating thereto.

 

10

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## **Section 5.17****         Status under CertainStatutes.**

##  

Neither the Company nor any Subsidiary is subject to regulation underthe Investment Company Act of 1940, as amended, the Interstate Commerce Act, asamended, or the Federal Power Act, as amended.

 

## **Section 5.18****         Environmental Matters.**

##  

Neither the Company nor any Subsidiary has knowledge of any claim orhas received any notice of any claim, and no proceeding has been institutedraising any claim against the Company or any of its Subsidiaries or any oftheir respective real properties now or formerly owned, leased or operated byany of them or other assets, alleging any damage to the environment orviolation of any Environmental Laws, except, in each case, such as could notreasonably be expected to result in a Material Adverse Effect.  Except as otherwise disclosed to you inwriting,

 

### (a)           neitherthe Company nor any Subsidiary has knowledge of any facts which would give riseto any claim, public or private, of violation of Environmental Laws or damageto the environment emanating from, occurring on or in any way related to realproperties now or formerly owned, leased or operated by any of them or to otherassets or their use, except, in each case, such as could not reasonably beexpected to result in a Material Adverse Effect;

###  

### (b)           neitherthe Company nor any of its Subsidiaries has stored any Hazardous Materials onreal properties now or formerly owned, leased or operated by any of them andhas not disposed of any Hazardous Materials in a manner contrary to anyEnvironmental Laws in each case in any manner that could reasonably be expectedto result in a Material Adverse Effect; and

###  

### (c)           allbuildings on all real properties now owned, leased or operated by the Company orany of its Subsidiaries are in compliance with applicable Environmental Laws,except where failure to comply could not reasonably be expected to result in aMaterial Adverse Effect.

###  

# **Article VIRepresentations of the Purchaser**

#  

## **Section 6.1****            Purchase for Investment.**

##  

You represent that (i) you are purchasing the Notes for your ownaccount or for one or more separate accounts maintained by you or for theaccount of one or more pension or trust funds and not with a view to thedistribution thereof, and (ii) your ability to transfer the Notes isrestricted pursuant to Section 13.2 of this Agreement.  You understand that the Notes have not beenregistered under the Securities Act and may be resold only if registeredpursuant to the provisions of the Securities Act or if an exemption fromregistration is available, except under circumstances where neither suchregistration nor such an exemption is required by law, and that the Company isnot required to register the Notes.

 

11

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## **Section 6.2****            Source of Funds.**

##  

You represent that at least one of the following statements is anaccurate representation as to each source of funds (a “*Source*”) to be used by you to pay thepurchase price of the Notes to be purchased by you hereunder:

 

### (a)           ifyou are an insurance company, the Source does not include assets allocated toany separate account maintained by you in which any employee benefit plan (orits related trust) has any interest, other than a separate account that ismaintained solely in connection with your fixed contractual obligations underwhich the amounts payable, or credited, to such plan and to any participant orbeneficiary of such plan (including any annuitant) are not affected in anymanner by the investment performance of the separate account; or

###  

### (b)           theSource is either (i) an insurance company pooled separate account, withinthe meaning of Prohibited Transaction Exemption (“*PTE*”) 90-1 (issued January 29, 1990), or (ii) abank collective investment fund, within the meaning of the PTE 91-38 (issued July 12,1991) and, except as you have disclosed to the Company in writing pursuant tothis paragraph (b), no employee benefit plan or group of plansmaintained by the same employer or employee organization beneficially owns morethan 10% of all assets allocated to such pooled separate account or collectiveinvestment fund; or

###  

### (c)           theSource constitutes assets of an “investment fund” (within the meaning of Part Vof the QPAM Exemption) managed by a “qualified professional asset manager” or “QPAM”(within the meaning of Part V of the QPAM Exemption), no employee benefitplan’s assets that are included in such investment fund, when combined with theassets of all other employee benefit plans established or maintained by the sameemployer or by an affiliate (within the meaning of Section V(c)(1) ofthe QPAM Exemption) of such employer or by the same employee organization andmanaged by such QPAM, exceed 20% of the total client assets managed by suchQPAM, the conditions of Part I(c) and (g) of the QPAM Exemptionare satisfied, neither the QPAM nor a person controlling or controlled by theQPAM (applying the definition of “control” in Section V(e) of theQPAM Exemption) owns a 5% or more interest in the Company and (i) theidentity of such QPAM and (ii) the names of all employee benefit planswhose assets are included in such investment fund have been disclosed to theCompany in writing pursuant to this paragraph (c); or

###  

### (d)           theSource is a governmental plan; or

###  

### (e)           theSource is one or more employee benefit plans, or a separate account or trustfund comprised of one or more employee benefit plans, each of which has ‘ beenidentified to the Company in writing pursuant to this paragraph (e); or

###  

### (f)            theSource does not include assets of any employee benefit plan, other than a planexempt from the coverage of ERISA.

 

As used in this Section 6.2, the terms “employee benefitplan”, “governmental plan”, “party in interest” and “separate account” shallhave the respective meanings assigned to such terms in Section 3 of ERISA.

 

12

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# **Article VIIInformation as to Company**

#  

## **Section 7.1****            Financial andBusiness Information.**

##  

The Company shall deliver to each holder of Notes:

 

### (a)           QuarterlyStatements.  Within 60 days after theend of each quarterly fiscal period in each fiscal year of the Company (otherthan the last quarterly fiscal period of each such fiscal year), duplicatecopies of,

###  

#### (i)            aconsolidated balance sheet of the Company and its Subsidiaries as at the end ofsuch quarter, and

####  

#### (ii)           consolidatedstatements of income, changes in shareholders’ equity and cash flows of theCompany and its Subsidiaries, for such quarter and (in the case of the secondand third quarters) for the portion of the fiscal year ending with suchquarter, setting forth in each case in comparative form the figures for thecorresponding periods in the previous fiscal year, all in reasonable detail,prepared in accordance with GAAP applicable to quarterly financial statementsgenerally, and certified by a Senior Financial Officer as fairly presenting, inall material respects, the financial position of the companies being reportedon and their results of operations and cash flows, subject to changes resultingfrom year-end adjustments, provided that delivery within the time periodspecified above of copies of the Company’s Quarterly Report on Form 10-Qprepared in compliance with the requirements therefor and filed with theSecurities and Exchange Commission shall be deemed to satisfy the requirementsof this Section 7.1(a);

####  

### (b)           AnnualStatements.  Within 120 days afterthe end of each fiscal year of the Company, duplicate copies of,

###  

#### (i)            aconsolidated balance sheet of the Company and its Subsidiaries, as at the endof such year, and

####  

#### (ii)           consolidatedstatements of income, changes in shareholders’ equity and cash flows of theCompany and its Subsidiaries, for such year, 

 

setting forth in each case in comparative form the figures for theprevious fiscal year, all in reasonable detail, prepared in accordance withGAAP, and accompanied by an opinion thereon of independent certified publicaccountants of recognized national standing, which opinion shall state thatsuch financial statements present fairly, in all material respects, thefinancial position of the companies being reported upon and their results ofoperations and cash flows and have been prepared in conformity with GAAP, andthat the examination of such accountants in connection with such financialstatements has been made in accordance with generally accepted auditingstandards, and that such audit provides a reasonable basis for such opinion inthe circumstances, provided that the delivery within the time periodspecified above of the Company’s Annual Report on Form 10-K for suchfiscal year (together with the Company’s annual report to shareholders, if any,prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in

 

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accordance with the requirements therefor and filed with the Securitiesand Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(b);

 

### (c)           SECand Other Reports.  Promptly upontheir becoming available, one copy of each financial statement, report, noticeor proxy statement sent by the Company or any Subsidiary to public securitiesholders generally, and (ii)each regular or periodic report, each registrationstatement (without exhibits except as expressly requested by such holder), andeach prospectus and all amendments thereto filed by the Company or anySubsidiary with the Securities and Exchange Commission and of all pressreleases and other statements made available generally by the Company or anySubsidiary to the public concerning developments that are Material;

###  

### (d)           Noticeof Default or Event of Default. Promptly, and in any event within five days after a Responsible Officerbecoming aware of the existence of any Default or Event of Default or that anyPerson has given any notice or taken any action with respect to a claimeddefault hereunder or that any Person has given any notice or taken any actionwith respect to a claimed default of the type referred to in Article XI(f),a written notice specifying the nature and period of existence thereof and whataction the Company is taking or proposes to take with respect thereto;

###  

### (e)           ERISAMatters.  Promptly, and in any eventwithin five (5) days after a Responsible Officer becoming aware of any ofthe following, a written notice setting forth the nature thereof and theaction, if any, that the Company or an ERISA Affiliate proposes to take withrespect thereto:

###  

#### (i)            withrespect to any Plan, any reportable event, as defined in section 4043(b) ofERISA and the regulations thereunder, for which notice thereof has not beenwaived pursuant to such regulations as in effect on the date hereof; or

####  

#### (ii)           thetaking by the PBGC of steps to institute, or the threatening by the PBGC of theinstitution of, proceedings under section 4042 of ERISA for the termination of,or the appointment of a trustee to administer, any Plan, or the receipt by theCompany or any ERISA Affiliate of a notice from a Multiemployer Plan that suchaction has been taken by the PBGC with respect to such Multiemployer Plan; or

####  

#### (iii)          anyevent, transaction or condition that could result in the incurrence of anyliability by the Company or any ERISA Affiliate pursuant to Title I or IV ofERISA or the penalty or excise tax provisions of the Code relating to employeebenefit plans, or in the imposition of any Lien on any of the rights,properties or assets of the Company or any ERISA Affiliate pursuant to Title Ior IV of ERISA or such penalty or excise tax provisions, if such liability orLien, taken together with any other such liabilities or Liens then existing,could reasonably be expected to have a Material Adverse Effect;

####  

### (f)            Noticesfrom Governmental Authority. Promptly, and in any event within 30 days of receipt thereof, copies ofany notice to the Company or any Subsidiary from any Federal or stateGovernmental Authority relating to any order, ruling, statute or other law orregulation that could reasonably be expected to have a Material Adverse Effect;and

 

14

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### (g)           RequestedInformation.  With reasonablepromptness, such other data and information relating to the business,operations, affairs, financial condition, assets or properties of the Companyor any of its Subsidiaries or relating to the ability of the Company to performits obligations hereunder and under the Notes as from time to time may bereasonably requested by any such holder of Notes.

###  

## **Section 7.2****            Officer’sCertificate.**

##  

Each set of financial statements delivered to a holder of Notespursuant to Section 7.1(a) or Section 7.1(b) hereofshall be accompanied by a certificate of a Senior Financial Officer settingforth:

 

### (a)           CovenantCompliance.  The information(including reasonably detailed calculations) required in order to establishwhether the Company was in compliance with the requirements of Section 10.4(a) throughSection 10.4(c) hereof, inclusive, during the quarterly orannual period covered by the statements then being furnished (including withrespect to each such Section, where applicable, the calculations of the maximumor minimum amount, ratio or percentage, as the case may be, permissible underthe terms of such Sections, and the calculation of the amount, ratio orpercentage then in existence); and

###  

### (b)           Eventof Default.  A statement that suchofficer has reviewed the relevant terms hereof and has made, or caused to bemade, under his or her supervision, a review of the transactions and conditionsof the Company and its Subsidiaries from the beginning of the quarterly orannual period covered by the statements then being furnished to the date of thecertificate and that such review shall not have disclosed the existence duringsuch period of any condition or event that constitutes a Default or an Event ofDefault or, if any such condition or event existed or exists (including,without limitation, any such event or condition resulting from the failure ofthe Company or any Subsidiary to comply with any Environmental Law), specifyingthe nature and period of existence thereof and what action the Company shallhave taken or proposes to take with respect thereto.

###  

## **Section 7.3****            Inspection.**

##  

The Company shall permit the representatives of each holder of Notes:

 

### (a)           NoDefault.  If no Default or Event ofDefault then exists, at the expense of such holder and upon reasonable priornotice to the Company, to visit the principal executive office of the Company,to discuss the affairs, finances and accounts of the Company and itsSubsidiaries with the Company’s officers, and (with the consent of the Company,which consent will not be unreasonably withheld) its independent publicaccountants, and (with the consent of the Company, which consent will not beunreasonably withheld) to visit the other offices and properties of, theCompany and each Subsidiary, all at such reasonable times and as often as maybe reasonably requested in writing; and

###  

### (b)           Default.  If a Default or Event of Default then exists,at the expense of the Company to visit and inspect any of the offices orproperties of the Company or any Subsidiary, to examine all their respectivebooks of account, records, reports and other papers, to make copies andextracts therefrom, and to discuss their respective affairs, finances andaccounts with

 

15

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### theirrespective officers and independent public accountants (and by this provisionthe Company authorizes said accountants to discuss the affairs, finances andaccounts of the Company and its Subsidiaries), all at such reasonable times andas often as may be reasonably requested in writing.

###  

# **Article VIIIPrepayment of the Notes**

#  

## **Section 8.1****            RequiredPrepayments.**

##  

The Company shall prepay the Notes, at the election of the any holderthereof, at a redemption price equal to the full principal amount of the Notestimes the applicable Redemption Price Percentage set forth below, plus allaccrued and unpaid interest thereon, upon the earlier to occur of thefollowing:  a Change in Control of theCompany, a sale of a Material portion of the assets of the Company (excluding asale pursuant to any whole loan sale arrangement with you, any other holder ofthe Notes or any of their respective Affiliates), or an Event of Default whichresults in the acceleration of the Notes as set forth in Section 12.1.

 
| **Years from Closing**                         | ** ** | **Redemption Price Percentage** | ** ** |
|------------------------------------------------|------------|---------------------------------|------------|
| Less than or equal to 1                        |       |                            | 106        | % |
| Greater than 1 and less than or equal to 2     |       |                            | 104        | % |
| Greater than 2 and less than or equal to 3     |       |                            | 102        | % |
| Greater than three and less than or equal to 5 |       |                            | 101        | % |
| Thereafter                                     |       |                            | 100        | % |

 

## **Section 8.2****            OptionalPrepayments.**

##  

The Company may, at its option, upon notice as provided below, prepayat any time all, or from time to time any part of, the Notes, in an amountequal to the principal amount of such Notes being prepaid, whether in all or inpart, times the applicable Redemption Price Percentage set forth in Section 8.1above, plus all accrued and unpaid interest thereon.  The Company will give each holder of Noteswritten notice of each optional prepayment under this Section 8.2not less than 30 days and not more than 60 days prior to the date fixed forsuch prepayment.  Each such notice shallspecify such date, the aggregate principal amount of the Notes to be prepaid onsuch date, the principal amount of each Note held by such holder to be prepaid(determined in accordance with Section 8.3), and the interest to bepaid on the prepayment date with respect to such principal amount beingprepaid.

 

## **Section 8.3****            Allocation ofPartial Prepayments.**

##  

In the case of each partial prepayment of the Notes, the principalamount of the Notes to be prepaid shall be allocated among all of the Notes atthe time outstanding in proportion, as nearly as practicable, to the respectiveunpaid principal amounts thereof not theretofore called for prepayment.

 

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## **Section 8.4****            Maturity;Surrender, etc.**

##  

In the case of each prepayment of Notes pursuant to this Article VIII,the principal amount of each Note to be prepaid shall mature and become due andpayable on the date fixed for such prepayment, together with interest on suchprincipal amount accrued to such date. From and after such date, unless the Company shall fail to pay suchprincipal amount when so due and payable, interest on such principal amountshall cease to accrue.  Any Note paid orprepaid in full shall be surrendered to the Company and cancelled and shall notbe reissued, and no Note shall be issued in lieu of any prepaid principalamount of any Note.

 

## **Section 8.5****            Purchase of Notes.**

##  

The Company will not and will not permit any Affiliate to purchase,redeem, prepay or otherwise acquire, directly or indirectly, any of theoutstanding Notes except upon the payment or prepayment of the Notes inaccordance with the terms of this Agreement and the Notes.  The Company will promptly cancel all Notesacquired by it or any Affiliate pursuant to any payment, prepayment or purchaseof Notes pursuant to any provision of this Agreement and no Notes may be issuedin substitution or exchange for any such Notes.

 

# **Article IXAffirmative Covenants**

#  

The Company covenants that so long as any of the Notes are outstanding:

 

## **Section 9.1****            Compliance with Law.**

##  

The Company will and will cause each of its Subsidiaries to comply withall laws, ordinances or governmental rules or regulations to which each ofthem is subject, including, without limitation, Environmental Laws, and willobtain and maintain in effect all licenses, certificates, permits, franchisesand other governmental authorizations necessary to the ownership of theirrespective properties or to the conduct of their respective businesses, in eachcase to the extent necessary to ensure that non-compliance with such laws,ordinances or governmental rules or regulations or failures to obtain ormaintain in effect such licenses, certificates, permits, franchises and othergovernmental authorizations could not, individually or in the aggregate,reasonably be expected to have a Material Adverse Effect.

 

## **Section 9.2****            Insurance.**

##  

The Company shall maintain the insurance coverages described on Schedule9.2, and the Company shall not make any changes to reduce such coverages orto increase the deductibles, or co-insurance thereunder.  In addition, the Company will and will causeeach of its Subsidiaries to maintain, with financially sound and reputableinsurers, such additional insurance with respect to their respective propertiesand businesses against such casualties and contingencies, of such types, onsuch terms and in such amounts (including deductibles, co-insurance andself-insurance, if adequate reserves are maintained with respect thereto) asthe Required Holders may reasonably require, to the extent that such additionalinsurance is customary in the case of

 

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entities of established reputations engaged in the same or a similarbusiness and similarly situated.

 

## **Section 9.3****            Maintenance ofProperties.**

##  

The Company will and will cause each of its Subsidiaries to maintainand keep, or cause to be maintained and kept, their respective properties ingood repair, working order and condition (other than ordinary wear and tear),so that the business carried on in connection therewith may be properlyconducted at all times, provided that this Section shall notprevent the Company or any Subsidiary from discontinuing the operation and themaintenance of any of its properties if such discontinuance is desirable in theconduct of its business and the Company has concluded that such discontinuancecould not, individually or in the aggregate, reasonably be expected to have aMaterial Adverse Effect.

 

## **Section 9.4****            Payment of Taxesand Claims.**

##  

The Company will and will cause each of its Subsidiaries to file alltax returns required to be filed in any jurisdiction and to pay and dischargeall taxes shown to be due and payable on such returns and all other taxes,assessments, governmental charges, or levies imposed on them or any of theirproperties, assets, income or franchises, to the extent such taxes andassessments have become due and payable and before they have become delinquentand all claims for which sums have become due and payable that have or mightbecome a Lien on properties or assets of the Company or any Subsidiary, providedthat neither the Company nor any Subsidiary need pay any such tax or assessmentor claims if (i) the amount, applicability or validity thereof iscontested by the Company or such Subsidiary on a timely basis in good faith andin appropriate proceedings, and the Company or a Subsidiary has establishedadequate reserves therefor in accordance with GAAP on the books of the Companyor such Subsidiary or (ii) the nonpayment of all such taxes andassessments in the aggregate could not reasonably be expected to have aMaterial Adverse Effect.

 

## **Section 9.5****            CorporateExistence, etc.**

##  

The Company will at all times preserve and keep in full force andeffect its corporate existence.  Subjectto Sections 10.2 and 10.6, the Company will at all times preserveand keep in full force and effect the corporate existence of each of itsSubsidiaries (unless merged into the Company or a Subsidiary) and all rightsand franchises of the Company and its Subsidiaries unless, in the good faithjudgment of the Company, the termination of or failure to preserve and keep infull force and effect such corporate existence, right or franchise could not,individually or in the aggregate, have a Material Adverse Effect.

 

## **Section 9.6****            Guaranty Agreement.**

##  

### (a)           (1)           Concurrently with theformation or acquisition of any Subsidiary (other than a SecuritizationSubsidiary), the Company shall cause such Subsidiary to execute and deliver asupplement to the Guaranty Agreement (a “*Supplement*”)in the form of Exhibit A to the Guaranty Agreement.

 

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###### (2)           Concurrentlywith the delivery by any Subsidiary of a Supplement pursuant to Section 9.6(a)(1),the Company shall cause such Subsidiary to deliver to each holder of Notes (i) suchdocuments and evidence with respect to such Subsidiary as any holder mayreasonably request in order to establish the existence and good standing ofsuch Subsidiary and evidence that the Board of Directors of such Subsidiary hasadopted resolutions authorizing the execution and delivery of such Supplementand the guaranty of the Notes, (ii) evidence of compliance with suchSubsidiary’s outstanding Debt instruments in the form of (A) a compliancecertificate from such Subsidiary to the effect that such Subsidiary is incompliance with all terms and conditions of its outstanding Debt instruments, (B) consentsor approvals of the holder or holders of any evidence of Debt or Security,and/or (C) amendments of agreements pursuant to which any evidence of Debtor Security may have been issued, all as may be reasonably deemed necessary bythe holders of Notes to permit the execution and delivery of such Supplement bysuch Subsidiary, (iii) an opinion of counsel to the effect that (A) suchSubsidiary is a corporation or other business entity, duly organized, validlyexisting and in good standing, if applicable, under the laws of itsjurisdiction of organization, has the corporate or other power and theauthority to execute and deliver such Supplement and to perform the GuarantyAgreement, (B) the execution and delivery of such Supplement andperformance of the Guaranty Agreement has been duly authorized by all necessaryaction on the part of such Subsidiary, such Supplement has been duly executedand delivered by such Subsidiary and the Guaranty Agreement constitutes thelegal, valid and binding contract of such Subsidiary enforceable against suchSubsidiary in accordance with its terms, subject to bankruptcy, insolvency,fraudulent conveyance or similar laws affecting creditors’ rights generally,and general principles of equity (regardless of whether the application of suchprinciples is considered in a proceeding in equity or at law), (C) theexecution and delivery of such Supplement and the performance by suchSubsidiary of the Guaranty Agreement do not conflict with or result in anybreach of any of the provisions of or constitute a default under or result inthe creation of a Lien upon any of the property of such Subsidiary pursuant tothe provisions of any applicable law, order, rule or regulation, itscharter documents or any agreement or other instrument known to such counsel towhich such Subsidiary is a party to or by which such Subsidiary may be boundand (D) no approval, consent or withholding of objection on the part of,or filing, registration or qualification with, any applicable GovernmentalAuthority, Federal or state, is necessary in connection with the lawfulexecution and delivery of such Supplement by such Subsidiary or the performanceof the Guaranty Agreement by such Subsidiary, which opinion may contain suchassumptions and qualifications as are reasonably acceptable to the RequiredHolders and (iv) all other documents and showings reasonably requested bythe holders of Notes in connection with the execution and delivery of suchSupplement, which documents shall be reasonably satisfactory in form andsubstance to such holders and their special counsel, and each holder of Notesshall have received a copy (executed or certified as may be appropriate) of allof the foregoing legal documents.

######  

### (b)           TheCompany agrees that it will not, nor will it permit any Subsidiary or Affiliateto, directly or indirectly, pay or cause to be paid any consideration orremuneration, whether by way of supplemental or additional interest, fee orotherwise, to any creditor of the Company, of any Guarantor or any Affiliate asconsideration for or as an inducement to the entering into by any such creditorof any release or discharge of any Guarantor with respect to any liability ofsuch Guarantor as an obligor or guarantor under or in respect of Debt of theCompany, unless such consideration or remuneration is concurrently paid, on thesame terms, ratably to each of the holders of the Notes.

 

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## **Section 9.7****            FinancialStatement; Other Information.**

##  

The Company will deliver to the holders of the Notes the financialinformation set forth in Section 5.5 and Section 7.1,other financial information reasonably requested by the holders of the Notesand any financial material and minutes prepared for meetings of the Board ofDirectors of the Company.

 

## **Section 9.8****            Ranking of Notes.**

##  

The Notes and all other obligations of the Company and the Guarantorsunder this Agreement and the Guaranty Agreement shall be subordinated to theSenior Debt, on the terms set forth herein, shall be at least pari passu withthe Junior Debt, and shall be senior to all other Debt of the Company and theGuarantors.

 

## **Section 9.9****            Use of Proceeds.**

##  

The Company will use not more than $2,500,000 of the proceeds of thesale of the Notes to purchase outstanding common equity of the Company.

 

# **Article XNegative Covenants**

#  

The Company covenants that so long as any of the Notes are outstanding:

 

## **Section 10.1****         Transactions withAffiliates.**

##  

The Company will not and will not permit any Subsidiary to enter intodirectly or indirectly any Material transaction or Material group of relatedtransactions (including without limitation the purchase, lease, sale orexchange of properties of any kind or the rendering of any service) with anyAffiliate (other than the Company or another Subsidiary), except in theordinary course and pursuant to the reasonable requirements of the Company’s orsuch Subsidiary’s business and upon fair and reasonable terms no less favorableto the Company or such Subsidiary than would be obtainable in a comparable arm’s-lengthtransaction with a Person not an Affiliate.

##  

## **Section 10.2****         Merger, Consolidation,etc.**

##  

The Company shall not, and shall not permit any Subsidiary to, become aparty to a merger or consolidation, or purchase or otherwise acquire all or asubstantial part of the business or Property of any Person or all or asubstantial part of the business or Property of a division or branch of aPerson or a majority interest in the Capital Stock of any Person, or wind up,dissolve, or liquidate itself; provided that as long as no Default orEvent of Default exists or would result therefrom and provided the Companygives you prior written notice:

 

### (a)           ASubsidiary of the Company may wind-up, dissolve, or liquidate if its Propertyis transferred to the Company or a Wholly-Owned Subsidiary of the Company; and

 

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### (b)           AnySubsidiary of the Company may merge or consolidate with the Company (providedthe Company is the surviving entity) or with any Wholly-Owned Subsidiary of theCompany (provided the Wholly Owned Subsidiary is the surviving entity).

###  

## **Section 10.3****         Liens.**

##  

The Company shall not, and shall not permit any of the Guarantors to,incur, create, assume, or permit to exist any Lien upon any of its property, assets,or revenues, whether now owned or hereafter acquired, except the following (“*Permitted Liens*”):

 

### (a)           Liensdescribed on Schedule 10.3 hereto or securing Senior Debt, and anyextensions, renewals, or refinancings of the Debt secured by such Liens, providedthat (i) no such Lien is expanded to cover any additional property (otherthan after acquired title in or on such Property and proceeds of the existingcollateral) after the Closing and (ii) no such Lien is spread to secureany additional Debt after the Closing;

###  

### (b)           Liensin favor of the for the equal and ratable benefit of the holders of the Notes;

###  

### (c)           Encumbrancesconsisting of easements, zoning restrictions, or other restrictions on the useof real property that do not (individually or in the aggregate) materiallydetract from the value of the real property encumbered thereby;

###  

### (d)           Liensfor taxes, assessments, or other governmental charges (but excluding Liensunder ERISA or Environmental Laws) that are not delinquent or which are beingcontested in good faith and for which adequate reserves have been establishedin accordance with GAAP;

###  

### (e)           Liensof mechanics, materialmen, warehousemen, carriers, landlords, or other similarstatutory Liens securing obligations that are not overdue or are being contestedin good faith by appropriate proceedings diligently pursued and for whichadequate reserves have been established in accordance with GAAP and areincurred in the ordinary course of business;

###  

### (f)            Liensresulting from deposits to secure payments of worker’s compensation,unemployment insurance or other social security programs or to secure theperformance of tenders, statutory obligations, leases, insurance contracts,surety and appeal bonds, bids, and other contracts incurred in the ordinarycourse of business (other than for payment of Debt);

###  

### (g)           Liensfor purchase money obligations and Liens securing Capital Lease Obligations; providedthat: (i) the Debt secured by any such Lien is permitted under Section 10.5(d) hereof;and (ii) any such Lien encumbers only the property so purchased or leased;

###  

### (h)           Anyinterest or title of a licensor, lessor, or sublessor under any license orlease entered into in the ordinary course of business;

###  

### (i)            Liensagainst equipment arising from precautionary UCC financing statement filingsregarding operating leases entered into by the Company or a Subsidiary in theordinary course of business;

 

21

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### (j)            NonconsensualLiens in favor of banking institutions arising as a matter of law andencumbering the deposits (including the right of set-off) held by such bankinginstitutions in the ordinary course of business; and

###  

### (k)           Lienssecuring Debt arising under Swaps permitted under Section 10.5(g) hereof.

###  

Notwithstanding the foregoing Permitted Liens or any other provision inthis Agreement or any other Transaction Document to the contrary, the Companyshall not enter into, and the Company shall not permit any of the Guarantors toenter into, any agreement that (i) prohibits the creation or assumption ofany Lien upon, or the pledge, hypothecation or encumbrance of, any Property ofthe Company or such Guarantor in favor of any Person, or (ii) requires anyobligation of the Company, or such Subsidiary to be secured in favor of anotherPerson if any Debt of the Company is so secured.

 

## **Section 10.4****         Financial Covenants.**

##  

### (a)           MinimumShareholders’ Equity.  At the end ofany fiscal quarter, the Company shall not permit its Shareholders’ Equity to beless than the sum of (i) $27,000,000 and (ii) 50% of the aggregate ofthe net income of the Company (determined in accordance with GAAP and withoutdeduction for any net losses) for such fiscal quarter and all prior fiscalquarters ending after April 30, 2007.

###  

### (b)           MinimumShareholders’ Equity to Receivables Ratio. As of the end of any fiscal quarter, the Company shall not permit thesum of its Shareholders’ Equity plus any outstanding principal amounts of theJunior Debt and the Notes, as a percentage of Managed Assets, to be less than7.0%

###  

### (c)           MinimumConsolidated Fixed Charge Coverage Ratio. As of the end of any fiscal quarter, the Company shall not permit theratio of (i) EBITDA plus Rental Expense of the Company and itsconsolidated Subsidiaries for the prior four fiscal quarters to (ii) thesum of (A) Interest Expense for such fiscal quarters, plus (B) RentalExpense for such fiscal quarters, to be less than 1.10 to 1.00.

###  

## **Section 10.5****         Debt.**

##  

The Company will not, and shall not permit any Guarantor to, incur,create, assume, or permit to exist any Debt, except:

 

### (a)           Debtdescribed on Schedule 10.5 or in this Section 10.5 (a), andany extensions, renewals, or refinancings of such existing Debt so long as (A) theprincipal amount of such Debt after such renewal, extension, or refinancingshall not exceed the principal amount of such Debt which was outstandingimmediately prior to such renewal, extension, or refinancing and (B) suchDebt shall not be secured by any assets other than assets securing such Debt,if any, prior to such renewal, extension, or refinancing;

###  

### (b)           Debtof a Guarantor, other than any such Debt incurred in the ordinary course ofbusiness, owed to the Company or another Guarantor provided that such Debt ison terms satisfactory to you in your sole discretion;

 

22

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### (c)           ContingentObligations and other Debt incurred in the ordinary course of business withrespect to Receivables purchase commitments, or a Receivables portfoliopurchase, reinsurance obligations, surety and appeal bonds and performance andreturn-of-money bonds;

###  

### (d)           Debtof the Company or any Guarantor constituting purchase money Debt (including,without limitation, Capital Lease Obligations) incurred after the Closing notto exceed $500,000 in the aggregate at any time outstanding secured by purchasemoney Liens constituting Permitted Liens;

###  

### (e)           Debtconstituting obligations to reimburse worker’s compensation insurance companiesfor claims paid by such companies on the Company’s or any of its Subsidiaries’behalf in accordance with the policies issued to the Company or such Subsidiaryof the Company;

###  

### (f)            Debtsecured by the Permitted Liens;

###  

### (g)           Debtarising under, created by and consisting of Swaps, provided, (i) suchSwaps shall have been entered into for the purpose of hedging actual risk andnot for speculative purposes and (ii) that each counterparty to such Swapshall be Wachovia Bank, National Association or one of its Affiliates or shallbe rated in one of the two highest rating categories of S&P or Moody’s; and

###  

### (h)           Intercompanyobligations among the Company and the Guarantors for reasonable net rentallocation, reasonable management fees, dividends declared, equity investmentsand intercompany debt service.

###  

## **Section 10.6****         Sale of Assets, etc.**

##  

The Company shall not, and shall not permit any Subsidiary to, sell,lease, assign, transfer, or otherwise voluntarily dispose of: (a) any ofits Receivables other than the transfer and assignment of Receivables (i) toFIRC (directly or through any Wholly-Owned Subsidiary) pursuant to the FIRCPurchase Agreement, (ii) to FIARC pursuant to the FIARC PurchaseAgreement, and (iii) to any Wholly-Owned Subsidiary (directly or throughany Wholly-Owned Subsidiary) for inclusion in a Securitization program pursuantto which such Wholly-Owned Subsidiary transfers directly or indirectly all ofits subordinated and residual interests in such Securitization to the issuer inany Securitization; (b) any substantial portion of the consolidated assetsof the Company or such Subsidiary; or (c) any other property other thandispositions of inventory and equipment in the ordinary course of business andsales of charged off deficiency balances in the ordinary course of businessgenerating aggregate Net Proceeds not in excess of $500,000 in any calendaryear.

 

## **Section 10.7****         Dividends,Distributions and Stock Repurchases.**

##  

The Company shall not, and shall not permit any Subsidiary to, directlyor indirectly declare, order, pay, make, or set apart any sum for (a) anydividend or other distribution, direct or indirect, on account of any shares ofany class of Capital Stock of such Person now or hereafter outstanding; (b) anyredemption, conversion, exchange, retirement, sinking fund, or similar payment,purchase, or other acquisition for value, direct or indirect, of any shares ofany class of

 

23

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Capital Stock of Person now or hereafter outstanding; or (c) anypayment made to retire, or to obtain the surrender of, any outstandingwarrants, options, or other rights to acquire shares of any class of CapitalStock of such Person now or hereafter outstanding except:

 

### (a)           Subsidiariesof the Company may make, declare, and pay dividends and make otherdistributions with respect to their Capital Stock to the Company;

###  

### (b)           theCompany may declare and pay dividends on any class of its Capital Stock payablesolely in shares of Capital Stock of the Company;

###  

### (c)           theCompany may acquire or redeem Capital Stock of the Company held by any formerofficer, director, or employee of the Company or beneficiaries of any suchPerson’s estate or trusts created by or for the benefit of any such Person ortheir beneficiaries; and

###  

### (d)           ifno Default or Event of Default has occurred and is continuing, or would occurafter giving effect thereto, the Company may acquire or redeem Capital Stock ofthe Company from any stockholder of the Company in an aggregate amount not toexceed $2,500,000 during the term of this Agreement.

###  

## **Section 10.8****         Reserved.**

##  

## **Section 10.9****         Nature of Business.**

##  

The Company shall not, and shall not permit any Subsidiary to, engagein any business if, as a result thereof, the general nature of the business,which would then be engaged in by the Company and its Subsidiaries taken as awhole would be substantially changed from the general nature of the businessengaged in by the Company and its Subsidiaries on the date of the Closing.

 

## **Section 10.10****       Restrictions onGuarantors.**

##  

Other than as required pursuant to the terms of any Senior DebtDocuments, the Company shall not, and shall not permit any Guarantor to, enterinto or assume any material agreement (other than the Transaction Documents)prohibiting the creation or assumption of any Lien upon its material propertiesor assets, whether now owned or hereafter acquired.  Except as provided herein, the Company shallnot, and shall not permit any Guarantor to, directly or indirectly create orotherwise cause or suffer to exist or become effective any consensualencumbrance or restriction of any kind on the ability of the Company or any ofthe Guarantors to:  (a) paydividends or make any other distribution on any of such Guarantor’s CapitalStock owned by the Company or any of its Affiliates; (b) pay any Debt owedto any Person; (c) make loans or advances to any Person; or (d) transferany of its Property to any Person, except pursuant to non-assignment provisionsof licenses and leases entered into in the ordinary course of business.

 

## **Section 10.11****       Limitation on Issuanceof Capital Stock.**

##  

The Company shall not permit any Subsidiary to, at any time issue,sell, assign, or otherwise dispose of, except to the Company, a Subsidiary ofthe Company, or a newly created Wholly-Owned Subsidiary of the Company, (i) anyof its Capital Stock, (ii) any securities

 

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exchangeable for or convertible into or carrying any rights to acquireany of its Capital Stock, or (iii) any option, warrant, or other right toacquire any of its Capital Stock.

 

## **Section 10.12****       Limitation on Transferof Capital Stock.**

##  

The Company shall not transfer, sell, assign, grant a security interestin, or transfer any other interest into or under any Capital Stock of anySubsidiary owned by it or in any rights represented by such Capital Stock.

 

## **Section 10.13****       Junior Debt.**

##  

The Company shall not permit the outstanding principal balance of theJunior Debt to be less than $2,500,000 at any time or to have a maturity dateof less than three (3) years.

 

## **Section 10.14****       Subordination ofIntercompany Debt.**

##  

The Company and, by execution of the Guaranty Agreement, each ObligatedParty, agrees that the Subordinated Intercompany Indebtedness (as definedbelow) shall be subordinate and junior in right of payment to, inter alia, theprior payment in full of all obligations, indebtedness and liabilities of theObligated Parties to the holders of Notes under this Agreement and the GuarantyAgreement  (the “*Obligated Party Obligations*”) asherein provided.

 

### (a)           PaymentSubordination.  The SubordinatedIntercompany Indebtedness shall not be payable, and no payment of principal,interest or other amounts on account thereof, and no property or guarantee ofany nature to secure or pay the Subordinated Intercompany Indebtedness shall bemade or given, directly or indirectly by or on behalf of any Obligated Party orreceived, accepted, retained or applied by the Company unless and until theObligated Party Obligations shall have been paid in full in cash; providedthat prior to the occurrence and continuance of an Event of Default, theCompany shall have the right to receive payments on the SubordinatedIntercompany Indebtedness made in the ordinary course of business.  After the occurrence and during thecontinuance of an Event of Default, no payments may be made or given, directlyor indirectly, by or on behalf of any Obligated Party or received, accepted,retained or applied by the Company unless and until the Obligated Partyobligations shall have been paid in full in cash.  If any sums shall be paid to the Company byany Obligated Party or any other Person on account of the SubordinatedIntercompany Indebtedness when such payment is not permitted hereunder, suchsums shall be held in trust by the Company for the benefit of holders of theNotes and the Obligated Parties.  Theterm “*Subordinated IntercompanyIndebtedness*” shall mean all indebtedness, liabilities, andobligations of any Obligated Party to the Company, whether such indebtedness,liabilities, and obligations now exist or are hereafter incurred or arise, orare direct, indirect, contingent, primary, secondary, several, joint andseveral, or otherwise, and irrespective of whether such indebtedness,liabilities, or obligations are evidenced by a note, contract, open account, orotherwise, and irrespective of the Person or Persons in whose favor suchindebtedness, obligations, or liabilities may, at their inception, have been,or may hereafter be created, or the manner in which they have been or mayhereafter be acquired by the Company.

###  

### (b)           LienSubordination; Remedy Standstill. The Company agrees that any and all Liens (including any judgmentliens), upon any Obligated Party’s assets securing payment of any

 

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### SubordinatedIntercompany Indebtedness shall be and remain inferior and subordinate to anyand all Liens upon any Obligated Party’s assets securing payment of theObligated Party Obligations or any part thereof, regardless of whether suchLiens in favor of the Company, a holder of Notes, another creditor of theCompany or an Obligated Party.  Withoutthe prior written consent of the Required Holders, the Company shall not (1) filesuit against any Obligated Party or exercise or enforce any other creditor’sright it may have against any Obligated Party, or (2) foreclose,repossess, sequester, or otherwise take steps or institute any action orproceedings (judicial or otherwise, including without limitation thecommencement of, or joinder in, any liquidation, bankruptcy, rearrangement,debtor’s relief or insolvency proceeding) to enforce any obligations of anyObligated Party to the Company or any Liens held by the Company on assets ofany Obligated Party.

###  

### (c)           BankruptcyProceedings.  In the event of anyreceivership, bankruptcy, reorganization, rearrangement, debtor’s relief, orother insolvency proceeding involving any Obligated Party as debtor, holders ofNotes shall have the right to prove and vote any claim under the SubordinatedIntercompany Indebtedness and to receive directly from the receiver, trustee orother court custodian all dividends, distributions, and payments made inrespect of the Subordinated Intercompany Indebtedness until the Obligated PartyObligations have been paid in full in cash.

###  

# **Article XIEvents of Default**

#  

An “Event of Default” shall exist if any of the following conditions orevents shall occur and be continuing:

 

### (a)           theCompany defaults in the payment of any principal on any Note when the samebecomes due and payable, whether at maturity or at a date fixed for prepaymentor by declaration or otherwise; or

###  

### (b)           theCompany defaults in the payment of any interest on any Note for more than fiveBusiness Days after the same becomes due and payable; or

###  

### (c)           theCompany defaults in the performance of or compliance with any term contained inSections 7.1(d) and 9.5 or Article X; or

###  

### (d)           theCompany defaults in the performance of or compliance with any term containedherein (other than those referred to in paragraphs (a), (b) and(c) of this Article XI) and such default is notremedied within 30 days after the earlier of (i) a Responsible Officerobtaining actual knowledge of such default and (ii) the Company receivingwritten notice of such default from any holder of a Note (any such writtennotice to be identified as a “notice of default” and to refer specifically tothis paragraph (d) of Article XI); or

###  

### (e)           anyrepresentation or warranty made in writing by or on behalf of the Company orany Obligated Party by any officer of the Company or any Obligated Party inthis Agreement, in the Guaranty Agreement, in any Other Agreement or in anywriting furnished in connection with

 

26

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### thetransactions contemplated hereby or thereby proves to have been false orincorrect in any material respect on the date as of which made; or

###  

### (f)            (i) theCompany or any Subsidiary is in default (as principal or as guarantor or othersurety) in the payment of any principal of or premium or interest on anyIndebtedness, with the exception of the Senior Debt, that is outstanding in anaggregate principal amount of at least $1,000,000 beyond any period of graceprovided with respect thereto, or (ii) the Company or any Subsidiary is indefault in the performance of or compliance with any term of any evidence ofany Indebtedness, with the exception of the Senior Debt, in an aggregateoutstanding principal amount of at least $1,000,000 or of any mortgage,indenture or other agreement relating thereto or any other condition exists,and as a consequence of such default or condition such Indebtedness has become,or has been declared (or one or more Persons are entitled to declare suchIndebtedness to be), due and payable before its stated maturity or before itsregularly scheduled dates of payment, or (iii) as a consequence of theoccurrence or continuation of any event or condition (other than the passage oftime or the fight of the holder of Indebtedness to convert such Indebtednessinto equity interests), (x) the Company or any Subsidiary has becomeobligated to purchase or repay Indebtedness, with the exception of the SeniorDebt, before its regular maturity or before its regularly scheduled dates ofpayment in an aggregate outstanding principal amount of at least $1,000,000, or(y) one or more Persons have the right to require the Company or any Subsidiaryso to purchase or repay such Indebtedness, with the exception of the SeniorDebt; or

###  

### (g)           theCompany or any Subsidiary (i) is generally not paying, or admits inwriting its inability to pay, its debts as they become due, (ii) files, orconsents by answer or otherwise to the filing against it of, a petition forrelief or reorganization or arrangement or any other petition in bankruptcy,for liquidation or to take advantage of any bankruptcy, insolvency,reorganization, moratorium or other similar law of any jurisdiction, (iii) makesan assignment for the benefit of its creditors, (iv) consents to theappointment of a custodian, receiver, trustee or other officer with similarpowers with respect to it or with respect to any substantial part of its property,(v) is adjudicated as insolvent or to be liquidated, or (vi) takescorporate action for the purpose of any of the foregoing; or

###  

### (h)           acourt or governmental authority of competent jurisdiction enters an orderappointing, without consent by the Company or any of its Subsidiaries, acustodian, receiver, trustee or other officer with similar powers with respectto it or with respect to any substantial part of its property, or constitutingan order for relief or approving a petition for relief or reorganization or anyother petition in bankruptcy or for liquidation or to take advantage of anybankruptcy or insolvency law of any jurisdiction, or ordering the dissolution,winding-up or liquidation of the Company or any of its Subsidiaries, or anysuch petition shall be filed against the Company or any of its Subsidiaries andsuch petition shall not be dismissed within 60 days; or

###  

### (i)            afinal judgment or judgments for the payment of money aggregating in excess of$1,000,000 (excluding for the purposes of such calculation the $450,000 paid bythe Company with respect to the settlement of the judgment relating to the *Kudlicki* lawsuit) during any single fiscalyear are rendered against one or more of the Company and its Subsidiaries andwhich

 

27

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### judgments arenot, within 60 days after entry thereof, bonded, discharged or stayed pendingappeal, or are not discharged within 60 days after the expiration of such stay;or

###  

### (j)            if(i) any Plan shall fail to satisfy the minimum funding standards of ERISAor the Code for any plan year or part thereof or a waiver of such standards orextension of any amortization period is sought or granted under section 412 ofthe Code, (ii) a notice of intent to terminate any Plan shall have been oris reasonably expected to be filed with the PBGC or the PBGC shall haveinstituted proceedings under ERISA section 4042 to terminate or appoint atrustee to administer any Plan or the PBGC shall have notified the Company orany ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) theaggregate “amount of unfunded benefit liabilities” (within the meaning ofsection 4001(a)(18) of ERISA) under all Plans, determined in accordance withTitle IV of ERISA, shall exceed $1,000,000, (iv)the Company or any ERISAAffiliate shall have incurred or is reasonably expected to incur any liabilitypursuant to Title I or IV of ERISA or the penalty or excise tax provisions ofthe Code relating to employee benefit plans, (v) the Company or any ERISAAffiliate withdraws from any Multiemployer Plan, or (vi) the Company orany Subsidiary establishes or amends any employee welfare benefit plan thatprovides post-employment welfare benefits in a manner that would increase theliability of the Company or any Subsidiary thereunder; and any such event orevents described in clauses (i) through (vi) above,either individually or together with any other such event or events, couldreasonably be expected to have a Material Adverse Effect; or

###  

### (k)           (1) defaultshall occur under the Guaranty Agreement and such default shall continue beyondthe period of grace, if any, allowed with respect thereto or (2) theGuaranty Agreement shall cease to be in full force and effect for any reasonwhatsoever, including, without limitation, a determination by any GovernmentalAuthority or court that such agreement is invalid, void or unenforceable or anyGuarantor shall contest or deny in writing the validity or enforceability ofthe Guaranty Agreement.

###  

As used in Article XI(j), the terms “employee benefit plan”and “employee welfare benefit plan” shall have the respective meanings assignedto such terms in Section 3 of ERISA.

 

# **Article XIIRemedies on Default, etc**

#  

## **Section 12.1****         Acceleration.**

##  

### (a)           Ifan Event of Default with respect to the Company described in paragraph (g) or(h) of Article XI (other than an Event of Defaultdescribed in clause (i) of paragraph (g) or describedin clause (vi) of paragraph (g) by virtue of the factthat such clause encompasses clause (i) of paragraph (g))has occurred, all the Notes then outstanding shall automatically becomeimmediately due and payable.

###  

### (b)           Ifany other Event of Default has occurred and is continuing, any holder orholders of more than 51% in principal amount of the Notes at the timeoutstanding may at any time at its or their option, by notice or notices to theCompany, declare all the Notes then outstanding to be immediately due andpayable.

 

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### (c)           Ifany Event of Default described in paragraph (a) or (b) ofArticle XI has occurred and is continuing, any holder or holders ofNotes at the time outstanding affected by such Event of Default may at anytime, at its or their option, by notice or notices to the Company, declare allthe Notes held by it or them to be immediately due and payable.

 

Upon and during the continuance of a Default or Event of Default, theNotes shall bear interest at a default rate of 16% per annum payable monthly asset forth in the Notes.  Notwithstandingthe foregoing, upon any Notes becoming due and payable under this Section 12.1,whether automatically or by declaration, such Notes will forthwith mature andthe entire unpaid principal, which will be equal to the full principal amountof such Notes times the applicable Redemption Price Percentage set forth in Section 8.1,plus all accrued and unpaid interest thereon, shall all be immediately due andpayable, in each and every case without presentment, demand, protest or furthernotice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holderof a Note has the right to maintain its investment in the Notes free fromrepayment by the Company (except as herein specifically provided for).

 

## **Section 12.2****         Other Remedies.**

##  

If any Default or Event of Default has occurred and is continuing, andirrespective of whether any Notes have become or have been declared immediatelydue and payable under Section 12.1, the holder of any Note at thetime outstanding may proceed to protect and enforce the rights of such holderby an action at law, suit in equity or other appropriate proceeding, whetherfor the specific performance of any agreement contained herein or in any Note,or for an injunction against a violation of any of the terms hereof or thereof,or in aid of the exercise of any power granted hereby or thereby or by law orotherwise.

 

## **Section 12.3****         Rescission.**

##  

At any time after any Notes have been declared due and payable pursuantto clause (b) or (c) of Section 12.1, theholders of not less than 51% in principal amount of the Notes then outstanding,by written notice to the Company, may rescind and annul any such declarationand its consequences if (a) the Company has paid all overdue interest onthe Notes, all principal on any Notes that are due and payable and are unpaidother than by reason of such declaration, and all interest on such overdueprincipal, and (to the extent permitted by applicable law) any overdue interestin respect of the Notes, at the Default Rate, (b) all Events of Defaultand Defaults, other than non-payment of amounts that have become due solely byreason of such declaration, have been cured or have been waived pursuant to Article XVII,and (c) no judgment or decree has been entered for the payment of anymonies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 willextend to or affect any subsequent Event of Default or Default or impair anyright consequent thereon.

 

## **Section 12.4****         No Waivers or Electionof Remedies, Expenses, etc.**

##  

No course of dealing and no delay on the part of any holder of any Notein exercising any right, power or remedy shall operate as a waiver thereof orotherwise prejudice such holder’s rights, powers or remedies.  No right, power or remedy conferred by thisAgreement or by any Note or the Guaranty Agreement upon any holder thereofshall be exclusive of any other right,

 

29

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power or remedy referred to herein or therein or now or hereafteravailable at law, in equity, by statute or otherwise. Without limiting theobligations of the Company under Article XV, the Company will pay to theholder of each Note on demand such further amount as shall be sufficient tocover all costs and expenses of such holder incurred in any enforcement orcollection under this Article XII, including, without limitation,reasonable attorneys’ fees, expenses and disbursements.

 

# **Article XIIIRegistration; Exchange; Substitution of Notes**

# ** **

## **Section 13.1   Registrationof Notes.**

## ** **

The Companyshall keep at its principal executive office a register for the registrationand registration of transfers of Notes. The name and address of each holder ofone or more Notes, each transfer thereof and the name and address of eachtransferee of one or more Notes shall be registered in such register. Prior todue presentment for registration of transfer, the Person in whose name any Noteshall be registered shall be deemed and treated as the owner and holder thereoffor all purposes hereof, and the Company shall not be affected by any notice orknowledge to the contrary. The Company shall give to any holder of a Note thatis an Institutional Investor promptly upon request therefor, a complete andcorrect copy of the names and addresses of all registered holders of Notes.

 

## **Section 13.2   Transferand Exchange of Notes.**

## ** **

Notes shallnot be transferable by you to a Competitor prior to an Event of Default. Uponsurrender of any Note at the principal executive office of the Company forregistration of a permitted transfer or exchange (and in the case of asurrender for registration of transfer, duly endorsed or accompanied by awritten instrument of transfer duly executed by the registered holder of suchNote or his attorney duly authorized in writing and accompanied by the addressfor notices of each transferee of such Note or part thereof), the Company shallexecute and deliver, at the Company’s expense (except as provided below), oneor more new Notes (as requested by the holder thereof) in exchange therefor, inan aggregate principal amount equal to the unpaid principal amount of thesurrendered Note. Each such new Note shall be payable to such permittedtransferee as such holder may request and shall be substantially in the form ofExhibit 1. Each such new Note shall be dated and bear interest from thedate to which interest shall have been paid on the surrendered Note or datedthe date of the surrendered Note if no interest shall have been paid thereon.The Company may require payment of a sum sufficient to cover any stamp tax orgovernmental charge imposed in respect of any such transfer of Notes. Notesshall not be transferred in denominations of less than $25,000, providedthat if necessary to enable the registration of transfer by a holder of itsentire holding of Notes, one Note may be in a denomination of less than$25,000. Any transferee, by its acceptance of a Note registered in its name (orthe name of its nominee), shall be deemed to have made the representation setforth in Section 6.2.

 

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## **Section 13.3   Replacementof Notes.**

## ** **

Upon receiptby the Company of evidence reasonably satisfactory to it of the ownership of andthe loss, theft, destruction or mutilation of any Note (which evidence shallbe, in the case of an Institutional Investor, notice from such InstitutionalInvestor of such ownership and such loss, theft, destruction or mutilation),and

 

### (a)      inthe case of loss, theft or destruction, of indemnity reasonably satisfactory toit (provided that if the holder of such Note is, or is a nominee for,you or another holder of a Note with a minimum net worth of at least$50,000,000, such Person’s own unsecured agreement of indemnity shall be deemedto be satisfactory), or

###  

### (b)      inthe case of mutilation, upon surrender and cancellation thereof, the Company atits own expense shall execute and deliver, in lieu thereof, a new Note, datedand beating interest from the date to which interest shall have been paid onsuch lost, stolen. destroyed or mutilated Note or dated the date of such lost,stolen, destroyed or mutilated Note if no interest shall have been paidthereon.

###  

# **Article XIVPayments on Notes**

# ** **

## **Section 14.1   Placeof Payment.**

## ** **

Subject to Section14.2, payments of principal, and interest becoming due and payable on theNotes shall be made in Charlotte, North Carolina at the principal office ofWachovia Bank, National Association in such jurisdiction. The Company may atany time, by notice to each holder of a Note, change the place of payment ofthe Notes so long as such place of payment shall be either the principal officeof the Company in such jurisdiction or the principal office of a bank or trustcompany in such jurisdiction.

 

## **Section 14.2   HomeOffice Payment.**

## ** **

So long as youor your nominee shall be the holder of any Note, and notwithstanding anythingcontained in Section 14.l or in such Note to the contrary, the Companywill pay all sums becoming due on such Note for principal, and interest by themethod and at the address specified for such purpose below your name in ScheduleA, or by such other method or at such other address as you shall have fromtime to time specified to the Company in writing for such purpose, without thepresentation or surrender of such Note or the making of any notation thereon,except that upon written request of the Company made concurrently with orreasonably promptly after payment or prepayment in full of any Note, you shallsurrender such Note for cancellation, reasonably promptly after any suchrequest, to the Company at its principal executive office or at the place ofpayment most recently designated by the Company pursuant to Section 14.1.Prior to any sale or other disposition of any Note held by you or your nomineeyou will, at your election, either endorse thereon the amount of principal paidthereon and the last date to which interest has been paid thereon or surrendersuch Note to the Company in exchange for a new Note or Notes pursuant to Section13.2. The Company will afford the benefits of this Section 14.2 toany Institutional Investor that is the direct or indirect transferee of anyNote

 

31

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purchased by you under this Agreement and that has made the sameagreement relating to such Note as you have made in this Section 14.2.

 

# **Article XVExpenses, etc.**

# ** **

## **Section 15.1   TransactionExpenses.**

## ** **

Whether or notthe transactions contemplated hereby are consummated, the Company will pay allcosts and expenses (including reasonable attorneys’ fees of a special counseland, if reasonably required, local or other counsel) incurred by you inconnection with such transactions up to $25,000 in the aggregate, as well asall costs and expenses reasonably incurred by you (including reasonableattorneys’ fees of a special counsel and, if reasonably required, local orother counsel) in connection with any amendments, waivers or consents under orin respect of this Agreement or the Notes or the Guaranty Agreement (whether ornot such amendment, waiver or consent becomes effective), including, withoutlimitation: (a) the costs and expenses incurred in enforcing or defending (ordetermining whether or how to enforce or defend) any rights under thisAgreement or the Notes or the Guaranty Agreement or in responding to anysubpoena or other legal process or informal investigative demand issued inconnection with this Agreement or the Notes or the Guaranty Agreement, or byreason of being a holder of any Note, and (b) the costs and expenses, includingfinancial advisors’ fees, incurred in connection with the insolvency orbankruptcy of the Company or any Subsidiary or in connection with any work-outor restructuring of the transactions contemplated hereby and by the Notes. TheCompany will pay, and will save you and each other holder of a Note harmlessfrom, all claims in respect of any fees, costs or expenses if any, of brokersand finders (other than those retained by you).

 

## **Section 15.2   Survival.**

## ** **

Theobligations of the Company under this Article XV will survive thepayment or transfer of any Note, the enforcement, amendment or waiver of anyprovision of this Agreement or the Notes or the Guaranty Agreement, and thetermination of this Agreement.

 

# **Article XVISurvival of Representations and Warranties; Entire Agreement**

# ** **

Allrepresentations and warranties contained herein shall survive the execution anddelivery of this Agreement and the Notes, the purchase or transfer by you ofany Note or portion thereof or interest therein and the payment of any Note,and may be relied upon by any subsequent holder of a Note, regardless of anyinvestigation made at any time by or on behalf of you or any other holder of aNote. All statements contained in any certificate or other instrument deliveredby or on behalf of the Company pursuant to this Agreement shall be deemedrepresentations and warranties of the Company under this Agreement. Subject tothe preceding sentence, this Agreement and the Notes embody the entireagreement and understanding between you and the Company and supersede all prioragreements and understandings relating to the subject matter hereof.

 

32

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# **Article XVIIAmendment and Waiver**

# ** **

## **Section 17.1   Requirements.**

## ** **

This Agreementand the Notes may be amended, and the observance of any term hereof or of theNotes may be waived (either retroactively or prospectively), with (and onlywith) the written consent of the Company and the Required Holders, except that(a) no amendment or waiver of any of the provisions of  Articles I, II, III, IV,V, VI or XXI hereof, or any defined term (as it is usedtherein), will be effective as to you unless consented to by you in writing,and (b) no such amendment or waiver may, without the written consent of theholder of each Note at the time outstanding affected thereby, (i) subject tothe provisions of Article XII relating to acceleration or rescission,change the amount or time of any prepayment or payment of principal of (ii)change the percentage of the principal amount of the Notes the holders of whichare required to consent to any such amendment or waiver, or (iii) amend any of ArticlesVIII, XI(a), XI(b), XII, XVII or XX.

 

## **Section 17.2   Solicitationof Holders of Notes.**

## ** **

### (a)      Solicitation.The Company will provide each holder of the Notes (irrespective of the amountof Notes then owned by it) with sufficient information, sufficiently far inadvance of the date a decision is required, to enable such holder to make aninformed and considered decision with respect to any proposed amendment, waiveror consent in respect of any of the provisions hereof or of the Notes. TheCompany will deliver executed or true and correct copies of each amendment,waiver or consent effected pursuant to the provisions of this Article XVIIto each holder of outstanding Notes promptly following the date on which it isexecuted and delivered by, or receives the consent or approval of, therequisite holders of Notes.

###  

### (b)      Payment.The Company will not directly or indirectly pay or cause to be paid anyremuneration, whether by way of supplemental or additional interest, fee orotherwise, or grant any security, to any holder of Notes as consideration foror as an inducement to the entering into by any holder of Notes or any waiveror amendment of any of the terms and provisions hereof unless such remunerationis concurrently paid, or security is concurrently granted, on the same terms,ratably to each holder of Notes then outstanding even if such holder did notconsent to such waiver or amendment.

###  

## **Section 17.3   BindingEffect, etc.**

## ** **

Any amendmentor waiver consented to as provided in this Article XVII applies equallyto all holders of Notes and is binding upon them and upon each future holder ofany Note and upon the Company without regard to whether such Note has beenmarked to indicate such amendment or waiver. No such amendment or waiver willextend to or affect any obligation, covenant, agreement, Default or Event ofDefault not expressly amended or waived or impair any right consequent thereon.No course of dealing between the Company and the holder of any Note nor anydelay in exercising any rights hereunder or under any Note shall operate as awaiver of any rights of any holder of such Note. As used herein, the term “thisAgreement” and

 

33

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references thereto shall mean this Agreement as it may from time totime be amended or supplemented.

 

## **Section 17.4   Notesheld by Company, etc.**

## ** **

Solely for thepurpose of determining whether the holders of the requisite percentage of theaggregate principal amount of Notes then outstanding approved or consented toany amendment, waiver or consent to be given under this Agreement or the Notes,or have directed the taking of any action provided herein or in the Notes to betaken upon the direction of the holders of a specified percentage of theaggregate principal amount of Notes then outstanding, Notes directly orindirectly owned by the Company or any of its Affiliates shall be deemed not tobe outstanding.

 

# **Article XVIIINotices**

# ** **

All noticesand communications provided for hereunder shall be in writing and sent (a) bytelecopy if the sender on the same day sends a confirming copy of such noticeby a recognized overnight delivery service (charges prepaid), or (b) byregistered or certified mail with return receipt requested (postage prepaid),or (c) by a recognized overnight delivery service (with charges prepaid). Anysuch notice must be sent:

 

### (a)      ifto you or your nominee, to you or it at the address specified for suchcommunications in Schedule A, or at such other address as you or itshall have specified to the Company in writing,

###  

### (b)      ifto any other holder of any Note, to such holder at such address as such otherholder shall have specified to the Company in writing, or

###  

### (c)      ifto the Company, to the Company at its address set forth at the beginning hereofto the attention of Bennie H. Duck, Executive Vice President,or at such otheraddress as the Company shall have specified to the holder of each Note inwriting.

###  

Notices under this Article XVIII will be deemed given only whenactually received.

 

# **Article XIXReproduction of Documents**

# ** **

This Agreementand all documents relating thereto, including, without limitation, (a)consents, waivers and modifications that may hereafter be executed, (b)documents received by you at the Closing (except the Notes themselves), and (c)financial statements, certificates and other information previously orhereafter furnished to you, may be reproduced by you by any photographic,photostatic, microfilm, microcard, miniature photographic or other similarprocess and you may destroy any original document so reproduced. The Companyagrees and stipulates that, to the extent permitted by applicable law, any suchreproduction shall be admissible in

 

34

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evidence as the original itself in any judicial or administrativeproceeding (whether or not the original is in existence and whether or not suchreproduction was made by you in the regular course of business) and anyenlargement, facsimile or further reproduction of such reproduction shalllikewise be admissible in evidence. This Article XIX shall not prohibitthe Company or any other holder of Notes from contesting any such reproductionto the same extent that it could contest the original, or from introducingevidence to demonstrate the inaccuracy of any such reproduction.

 

# **Article XXConfidential Information**

# ** **

For thepurposes of this Article XX, “*Confidential Information*”means information delivered to you by or on behalf of the Company or anySubsidiary in connection with the transactions contemplated by or otherwisepursuant to this Agreement that is proprietary in nature and that was clearlymarked or labeled or otherwise adequately identified when received by you asbeing confidential information of the Company or such Subsidiary, providedthat such term does not include information that (a) was publicly known orotherwise known to you prior to the time of such disclosure, (b) subsequentlybecomes publicly known through no act or omission by you or any person actingon your behalf, (c) otherwise becomes known to you other than throughdisclosure by the Company or any Subsidiary or (d) constitutes financialstatements delivered to you under Section 7.1 that are otherwisepublicly available. You will maintain the confidentiality of such ConfidentialInformation in accordance with procedures adopted by you in good faith toprotect confidential information of third parties delivered to you, providedthat you may deliver or disclose Confidential Information to (i)your directors,officers, employees, agents, attorneys and affiliates (to the extent such disclosurereasonably relates to the administration of the investment represented by yourNotes), (ii) your financial advisors and other professional advisors who agreeto hold confidential the Confidential Information substantially in accordancewith the terms of this Article XX, (iii) any other holder of any Note,(iv) any Institutional Investor to which you sell or offer to sell such Note orany part thereof or any participation therein (if such Person has agreed inwriting prior to its receipt of such Confidential Information to be bound bythe provisions of this Article XX), (v) any Person from which you offerto purchase any security of the Company (if such Person has agreed in writingprior to its receipt of such Confidential Information to be bound by theprovisions of this Article XX), (vi) pursuant to the specific request ofany federal or state regulatory authority having jurisdiction over you, (vii)the National Association of Insurance Commissioners or any similarorganization, or any nationally recognized rating agency that requires accessto information about your investment portfolio or (viii) any other Person towhich such delivery or disclosure may be necessary or appropriate (w) to effectcompliance with any law, rule, regulation or order applicable to you, (x) inresponse to any subpoena or other legal process, (y) in connection with anylitigation to which you are a party or (z) if an Event of Default has occurredand is continuing, to the extent you may reasonably determine such delivery anddisclosure to be necessary or appropriate in the enforcement or for theprotection of the rights and remedies under your Notes and this Agreement. Eachholder of a Note, by its acceptance of a Note, will be deemed to have agreed tobe bound by and to be entitled to the benefits of this Article XX asthough it were a party to this Agreement. On reasonable request by the Companyin connection with the delivery to any holder of a Note of information requiredto be delivered to such holder

 

35

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under this Agreement or requested by such holder (other than a holderthat is a party to this Agreement or its nominee), such holder will enter intoan agreement with the Company embodying the provisions of this Article XX.

 

# **Article XXISubstitution of Purchaser**

# ** **

You shall havethe right to substitute any one of your Affiliates as the purchaser of theNotes that you have agreed to purchase hereunder, by written notice to theCompany, which notice shall be signed by both you and such Affiliate, shallcontain such Affiliate’s agreement to be bound by this Agreement and shallcontain a confirmation by such Affiliate of the accuracy with respect to it ofthe representations set forth in Article XI. Upon receipt of suchnotice, wherever the word “*you*” isused in this Agreement (other than in this Article XXI), such word shallbe deemed to refer to such Affiliate in lieu of you. In the event that suchAffiliate is so substituted as a purchaser hereunder and such Affiliatethereafter transfers to you all of the Notes then held by such Affiliate, uponreceipt by the Company of notice of such transfer, wherever the word “*you*” is used in this Agreement(other than in this Article XXI), such word shall no longer be deemed to referto such Affiliate, but shall refer to you, and you shall have all the rights ofan original holder of the Notes under this Agreement.

 

# **Article XXIIMiscellaneous**

# ** **

## **Section 22.1   Successorsand Assigns.**

## ** **

All covenantsand other agreements contained in this Agreement by or on behalf of any of theparties hereto bind and inure to the benefit of their respective successors andassigns (including, without limitation, any subsequent holder of a Note)whether so expressed or not.

 

## **Section 22.2   PaymentsDue on Non-Business Days.**

## ** **

Anything inthis Agreement or the Notes to the contrary notwithstanding, any payment ofprincipal or interest on any Note that is due on a date other than a BusinessDay shall be made on the next succeeding Business Day without including the additionaldays elapsed in the computation of the interest payable on such next succeedingBusiness Day.

 

## **Section 22.3   Severability.**

## ** **

Any provisionof this Agreement that is prohibited or unenforceable in any jurisdictionshall, as to such jurisdiction, be ineffective to the extent of suchprohibition or unenforceability without invalidating the remaining provisionshereof, and any such prohibition or unenforceability in any jurisdiction shall(to the full extent permitted by law) not invalidate or render unenforceablesuch provision in any other jurisdiction.

 

36

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## **Section 22.4   Construction.**

## ** **

Each covenantcontained herein shall be construed (absent express provision to the contrary)as being independent of each other covenant contained herein, so thatcompliance with any one covenant shall not (absent such an express contraryprovision) be deemed to excuse compliance with any other covenant. Where anyprovision herein refers to action to be taken by any Person, or which suchPerson is prohibited from taking, such provision shall be applicable whethersuch action is taken directly or indirectly by such Person.

 

## **Section 22.5   Counterparts.**

## ** **

This Agreementmay be executed in any number of counterparts, each of which shall be anoriginal but all of which together shall constitute one instrument. Eachcounterpart may consist of a number of copies hereof, each signed by less thanall, but together signed by all, of the parties hereto.

 

## **Section 22.6   GoverningLaw.**

## ** **

This Agreementshall be construed and enforced in accordance with, and the rights of theparties shall be governed by, the law of the State of New York withoutreference to its conflict of laws provisions (other than Section 5-1401 of NewYork General Obligations Law).

 

# **Article XXIIISubordination**

# ** **

## **Section 23.1   Agreementto Subordinate.**

## ** **

The Companyand, by execution of the Guaranty Agreement, each Obligated Party, and eachholder of the Notes, by acceptance of a Note, covenant and agree that theSenior Subordinated Debt shall, to the extent and in the manner set forthherein, be subordinated in right of payment to the prior payment by the Companyand the Guarantors of the Senior Debt, whether now outstanding or hereaftercreated, incurred, assumed or guaranteed.

 

## **Section 23.2   GeneralSubordination to Senior Debt.**

## ** **

Until theSenior Debt is repaid in full in cash or cash equivalents and all commitmentsto extend Senior Debt have been terminated, no payment or distribution ofassets of the Company or any other Obligated Party of any kind or charactershall be made by the Company for or on account of the Senior Subordinated Debtor any principal, interest, fees or judgment related thereto, or on account ofthe purchase or redemption or other acquisition of Senior Subordinated Debt,other than payment of interest on the Notes as described therein.

 

## **Section 23.3   Amendmentsand Exchanges of Subordinated Debt.**

## ** **

Without theprior written consent of the Requisite Senior Debtholders, but without limitingthe obligations of the Company and the other Obligated Parties to the SeniorDebtholders with regard thereto under the Senior Debt Documents, the Company,the Obligated

 

37

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Parties and the holders of the Notes shall not amend, supplement or otherwise modify the terms of the SeniorSubordinated Debt if the effect of such amendment, supplement or othermodification is to  (a) change (toearlier dates) any dates upon which payments of principal or interest are dueon such Senior Subordinated Debt, (b) cause any Liens to be taken in anyproperty of the Company other than as expressly set forth herein, (c) changeany affirmative or negative covenant in any significant respect, (d) change theredemption or prepayment provisions thereof or change any of the subordinationprovisions thereof (including, without limitation, subordinating the SeniorSubordinated Debt to any other debt) or (e) increase materially the obligationsof the obligor thereunder or to confer any additional rights on the holders ofthe Notes (or a trustee or other representative on their behalf) which would beadverse to any Senior Debtholder. Notwithstanding any other term or provisionof this Agreement (including Section 17.1), no amendment, modification,termination or waiver of any material term or provision of this ArticleXXIII, or of any definitions used herein, or of the form of any Note issuedhereunder, shall be effective without the express written consent of theRequisite Senior Debtholders.

 

## **Section 23.4   PaymentsReceived in Contravention of Subordination Provisions.**

## ** **

If any holderof a Note receives any payment or distribution of assets in violation of this ArticleXXIII, such holder shall receive such payment or distribution of assets intrust for the Senior Debtholders’ benefit and shall forthwith remit suchpayment or distribution of assets, as the case may be, to the SeniorDebtholders in the form in which it was received, together with suchendorsements or documents as may be necessary to effectively negotiate ortransfer the same (but without recourse and without representation orwarranty).

 

## **Section 23.5   Subrogation.**

## ** **

After allSenior Debt of the Company has been paid in full in cash or cash equivalentsand until the Notes are paid in full in cash or Cash Equivalents, the holdersof the Notes shall be subrogated to any rights of the Senior Debtholders toreceive payments or distributions of assets applicable to such Senior Debt tothe extent that payments or distributions otherwise payable to the holders ofthe Notes have been applied to the payment of such Senior Debt. A distributionmade under this Article XXIII to the Senior Debtholders that otherwisewould have been made to the holders of the Notes is not, as between the Companyand the holders of the Notes, a payment by the Company on its Senior Debt.

 

## **Section 23.6   RelativeRights.**

## ** **

This ArticleXXIII defines the relative rights of holders of the Notes and SeniorDebtholders and this Article XXIII shall constitute a continuing offerto all persons who become holders of, or continue to hold, Senior Debt. Nothingin this Article XXIII or elsewhere in this Agreement or any Note isintended to or shall:

 

### (a)       impair,as between the Company, the other Obligated Parties and the holders of theNotes, the Company’s obligations, which are absolute and unconditional, to payprincipal of, and premium, if any, and interest on, the Notes in accordancewith their terms;

###  

38

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### (b)       affectthe relative rights of the holders of the Notes and the creditors of theCompany and the Other Obligated Parties other than the rights of the holders ofthe Notes in relation to the Senior Debtholders; or

###  

### (c)       preventthe holders of the Notes from accelerating the Senior Subordinated Debt inaccordance with Section 12.1 and exercising their available remediesupon a Default or Event of Default, after the Senior Debt has been paid in fulland the Senior Debt Documents have been terminated.

###  

The failure to make a payment on account of principal of, or intereston, the Notes by reason of any provision of this Article XXIII shall notbe construed as preventing the occurrence of an Event of Default under ArticleXI(a).

 

## **Section 23.7   Relianceon Judicial Order or Decree or Senior Debtholder Certificate.**

## ** **

The holders ofthe Notes shall be entitled to rely upon any order or decree of any court ofcompetent jurisdiction or any certificate of any Senior Debtholder ascertainingany amount to be paid or distributed to such Senior Debtholders and all otherfacts pertinent to such payment or distribution or to this Article XXIII,provided that, in the case of any such order or decree, such court hasbeen fully apprised of the provisions of, or the order or decree makesreference to, the provisions of this Article XXIII.

 

## **Section 23.8   Proofof Claim.**

## ** **

In the eventthat, while any Senior Debt is outstanding, any bankruptcy or insolvencyproceeding is commenced by or against the Company, any Obligated Party or anyproperty of the Company or any Obligated Party and the holders of the Noteshave not filed appropriate proofs of claim as of the tenth business daypreceding the bar date therefor, the Senior Debtholders will be irrevocablyauthorized and empowered (in its own name or otherwise), but shall have noobligation, to file appropriate proofs of claim for the exercise or enforcementof any of the rights or interests of the holders of the Notes with respect tothe Senior Subordinated Debt in such proceeding. Notwithstanding the foregoing,no Senior Debtholder shall have any right whatsoever to vote any claim that anyholder of a Note may have in such proceeding to accept or reject any plan ofpartial or complete liquidation, reorganization, arrangement, composition or extension.

 

[SIGNATURE PAGE FOLLOWS]

 

39

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If you are inagreement with the foregoing, please sign the form of agreement on theaccompanying counterpart of this Agreement and return it to the Company,whereupon the foregoing shall become a binding agreement between you and theCompany.

 
|   |   | Very truly yours,                                                      |
|--------|--------|------------------------------------------------------------------------|
|   |   |                                                                   |
|   |   | FIRST INVESTORS FINANCIAL SERVICES,   GROUP, INC., a Texas corporation |
|   |   |                                                                   |
|   |   | By:                                                                    |   |
|   |   |                                                                   | Bennie H. Duck |
|   |   |                                                                   | Executive Vice President |
|        |        |                                                                        |  |  |

 
| The  foregoing is hereby             |
|--------------------------------------|
| agreed to as  of the date            |
| thereof.                             |
|                                 |
| WACHOVIA BANK, NATIONAL ASSOCIATION, |
| a national banking association       |
|                                 |
| By:                                  |   |   |
| Name:                                |   |   |
| Title:                               |   |   |
|                                      |  |  |  |  |

 

40

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SCHEDULE A

 

INFORMATION RELATING TO PURCHASERS

 

Principal Amount of

 

Name and Address of Purchaser              Notesto be Purchased

 

Wachovia Bank, National Association                                  $5,000,000.00301 S. College StreetCharlotte, North Carolina  28288-0610

 

(1)           All payments by wiretransfer

of immediately available funds to:

 

Wachovia Bank, National Association

ABA 053 000219

Acct# 1459160104880

Ref: First Investors Subordinated Debt

Attn: Weatherly McGowan

 

with sufficient information to

identify the source and application

of such funds.

 

(2)           All notices ofpayments and

written confirmations of such wire

transfers:

 

Weatherly McGowan

201 S. College St., NC0820

Charlotte, NC

P: (704)715-4125

F: (704)715-1823

 

[CONTINUES ON FOLLOWING PAGE]

 

A-1

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(3)           All othercommunications:

 

Wachovia Bank, National Association

Attn: Curt Sidden

301 S. College St., NC0610

Charlotte, NC 28288-0610

P: (704)715-6030

F: (704)383-9106

 

A-2

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SCHEDULE B

 

**DEFINEDTERMS**

** **

As used herein,the following terms have the respective meanings set forth below or set forthin the Section hereof following such term:

 

“*Adjusted Net Income*” means, for anyperiod and any Person, such Person’s consolidated net income (or loss)determined in accordance with GAAP, but excluding: (a) the income of any otherPerson (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.

 

“*Affiliate*” means, at any time, andwith respect to any Person, (a) any other Person that at such time directly orindirectly through one or more intermediaries Controls, or is Controlled by, oris under common Control with, such first Person, and (b) any Personbeneficially owning or holding, directly or indirectly, 10% or more of anyclass of voting or equity interests of the Company or any Subsidiary or anycorporation of which the Company and its Subsidiaries beneficially own or hold,in the aggregate, directly or indirectly, 10% or more of any class of voting orequity interests. As used in this definition, “*Control*”means the possession, directly or indirectly, of the power to direct or causethe direction of the management and policies of a Person, whether through theownership of voting securities, by contract or otherwise. Unless the contextotherwise clearly requires, any reference to an “*Affiliate*”is a reference to an Affiliate of the Company.

 

“*Anti-Terrorism Order*” shall meanExecutive Order No. 13,224 66 Fed Reg. 49,079 (2001) issued by the President ofthe United States of America (Executive Order Blocking Property and ProhibitingTransactions with Persons Who Commit, Threaten to Commit, or SupportTerrorism).

 

“*Business Day*” means any day otherthan a Saturday, a Sunday or a day on which commercial banks in Charlotte,North Carolina, New York, New York or Houston, Texas are required or authorizedto be closed.

 

“*Capital Lease*” means, at any time, alease with respect to which the lessee is required concurrently to recognizethe acquisition of an asset and the incurrence of a liability in accordancewith GAAP.

 

“*Capital Lease Obligations*” shallmean, as to any Person, the obligations of such Person to pay rent or otheramounts under a lease of (or other agreement conveying the right to use) realand/or personal property, which obligations are required to be classified andaccounted for as a capital lease on a balance sheet of such Person according toGAAP. For purposes of this Agreement, the amount of such Capital LeaseObligations shall be the capitalized amount thereof, determined in accordancewith GAAP.

 

B-1

----

 

“*Capital Stock*”****shallmean corporate stock and any and all shares, partnership interests, membershipinterests, equity interests, rights, securities, or other equivalent evidencesof ownership, or any options, warrants, voting trust certificates, or otherinstruments evidencing an ownership interest or a right to acquire an ownershipinterest in a Person (however designated) issued by any entity (whether acorporation, partnership, limited liability company, limited partnership, orother type of entity).

 

“*Cash Equivalents*” shall mean (a)direct obligations of the United States of America and agencies thereof and (b)obligations fully guaranteed by the United States of America, providedthat, in each case, such obligations mature within 90 days from the date ofacquisition thereof.

 

“*Closing*” is defined in Section3.1.

 

“*Change in Control*” shall mean theoccurrence of one or more of the following events: (a) any sale, lease,exchange or other transfer (in a single transaction or a series of relatedtransactions) of all or substantially all of the assets of the Company to anyPerson or “group” (within the meaning of the Securities Exchange Act of 1934and the rules of the Securities and Exchange Commission thereunder in effect onthe date hereof), (b) the acquisition of ownership, directly or indirectly,beneficially or of record, by any Person or “group” (within the meaning of theSecurities Exchange Act of 1934 and the rules of the Securities and ExchangeCommission thereunder as in effect on the date hereof) of 50.1% or more of theoutstanding shares of the voting stock of the Company; or (c) occupation of amajority of the seats (other than vacant seats) on the board of directors ofthe Company by Persons who were neither (i) nominated by the current board ofdirectors or (ii) appointed by directors so nominated.

 

“*Code*” means the Internal Revenue Codeof 1986, as amended from time to time, and the rules and regulationspromulgated thereunder from time to time.

 

“*Company*” means First InvestorsFinancial Services Group, Inc., a Texas corporation.

 

“*Competitor*”  means a Person engaged primarily in thebusiness of retail auto finance, provided that any of such Person’s Affiliatesshall not be deemed a Competitor hereunder if such Affiliate is not primarilyengaged , directly or indirectly, in the business of retail auto finance.

 

“*Confidential Information*” is definedin Article XX.

 

“*Contingent Obligations*”****shall mean, with respect to any Person, any obligation orarrangement of such Person to guarantee or intended to guarantee any Debt,leases, dividends or other payment obligations (“primary obligations”) of anyother Person (the “primary obligor”) in any manner, whether directly orindirectly, including, without limitation, (a) the direct or indirectguarantee, endorsement (other than for collection or deposit in the ordinarycourse of business), co-making, discounting with recourse or sale with recourseby such Person of the obligation of a primary obligor, (b) the obligation tomake take-or-pay or similar payments, if required, regardless of nonperformanceby any other party or parties to an agreement or (c) any obligation of suchPerson, whether or not contingent, (i) to purchase any such primary obligationor any property constituting direct or indirect security therefor, (ii) toadvance or supply funds (A) for the purchase or payment of any such primaryobligation or (B) to maintain working capital or equity capital of the primaryobligor or otherwise to maintain the net worth or solvency of the

 

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primary obligor, (iii) to purchase property, assets, securities orservices primarily for the purpose of assuring the owner of any such primaryobligation of the ability of the primary obligor to make payment of suchprimary obligation or (iv) otherwise to assure or hold harmless the holder ofsuch primary obligation against loss in respect thereof. The amount of anyContingent Obligation shall be deemed to be an amount equal to the stated ordeterminable amount of the primary obligation in respect of which suchContingent Obligation is made (or, if less, the maximum amount of such primaryobligation for which such Person may be liable pursuant to the terms of theinstrument evidencing such Contingent Obligation) or, if not stated ordeterminable, the maximum reasonably anticipated liability in respect thereof(assuming such Person is required to perform thereunder), as determined by suchPerson in good faith.

 

“*Debt*” shall mean, as to any Personat any time (without duplication): (a) all obligations of such Person forborrowed money; (b) all obligations of such Person evidenced by bonds, notes,debentures, or other similar instruments; (c) all obligations of such Person topay the deferred purchase price of property or services, except trade accountspayable of such Person arising in the ordinary course of business that are notpast due by more than ninety (90) days or that are being contested in goodfaith by appropriate proceedings diligently pursued and for which adequatereserves have been established to the reasonable satisfaction of the RequiredHolders; (d) all Capital Lease Obligations of such Person; (e) all ContingentObligations of such Person; (f) all obligations secured by a Lien existing onproperty owned by such Person, whether or not the obligations secured therebyhave been assumed by such Person or are non recourse to the credit of suchPerson; provided, however, that the amount of such Debt of anyPerson described in this clause (f) shall, for purposes of thisAgreement, be deemed to be equal to the lesser of (i) the aggregate unpaidamount of such Debt or (ii) the fair market value of the property or assetencumbered, as determined by the Required Holders in their reasonablediscretion; (g) all reimbursement obligations of such Person (whethercontingent or otherwise) in respect of letters of credit, bankers’ acceptances,surety or other bonds, and similar instruments; (h) all liabilities of suchPerson in respect of unfunded vested benefits under any Plan (excludingobligations to deliver stock in respect of stock options or stock ownership plans);and (i) all vested obligations of such Person for the payment of money underany noncompete, consulting, or similar arrangements providing for the deferredpayment of the purchase price for an acquisition consummated prior to the datehereof to the extent that any such obligations are, according to GAAP,reflected as a capitalized liability on a balance sheet of such Person.

 

“*Default*” means an event or conditionthe occurrence or existence of which would, with the lapse of time or thegiving of notice or both, become an Event of Default.

 

“*Default Rate*” means that rate ofinterest that is the greater of (i) 16% or (ii) 3% over the rate of interestpublicly announced by Wachovia Bank, National Association in Charlotte, NorthCarolina as its “base” or “prime” rate.

 

 “*EBITDA*”****shall mean for any period and any Person, the total of thefollowing calculated without duplication for such Person on a consolidatedbasis for such period: (a) Adjusted Net Income; plus (b) any provision for (orless any benefit from) income or franchise taxes deducted in determiningAdjusted Net Income; plus (c) Interest Expense deducted in determining AdjustedNet Income; plus (d) amortization and depreciation expense deducted indetermining

 

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Adjusted Net Income; plus (e) other noncash charges deducted indetermining Adjusted Net Income and not already deducted in accordance with clause(d) above or clause (b) and clause (c) of the definition ofAdjusted Net Income; minus (f) noncash credits included in determiningconsolidated Adjusted Net Income and not already excluded in accordance withthe definition of Adjusted Net Income.

 

“*Environmental Laws*” means any andall Federal, state, local, and foreign statutes, laws, regulations, ordinances,rules, judgments, orders, decrees, permits, concessions, grants, franchises,licenses, agreements or governmental restrictions relating to pollution and theprotection of the environment or the release of any materials into theenvironment, including but not limited to those related to hazardous substancesor wastes, air emissions and discharges to waste or public systems.

 

“*ERISA*” means the Employee RetirementIncome Security Act of 1974, as amended from time to time, and the rules andregulations promulgated thereunder from time to time in effect.

 

“*ERISA Affiliate*” means any trade orbusiness (whether or not incorporated) that is treated as a single employertogether with the Company under section 414 of the Code.

 

“*Event of Default*” is defined in ArticleXI.

 

“*Exchange Act*” means the SecuritiesExchange Act of 1934, as amended.

 

“*Fee Letter*” means the letter datedSeptember 12, 2007, between the Company and you.

 

“*FIARC*”****meansFirst Investors Auto Receivables Corp., a Delaware corporation.

 

“*FIARC Purchase Agreement*” means thatcertain Purchase Agreement, dated as of October 22, 1996, as amended, betweenthe Company and FIARC, as the same may hereafter be amended, restated,modified, renewed or extended from time to time

 

“*FIRC Agreement*” means the Amendedand Restated Purchase Agreement, dated as of October 30, 1996, between theCompany and FIRC, as the same has been and may hereafter be amended, restated,modified, renewed or extended from time to time.

 

“*FIRF*”****meansFirst Investors Residual Funding LP, a Delaware limited partnership.

 

“*FIRF Agreement*” means the NotePurchase Agreement, dated as of December 6, 2001, between FIRF, the noteinvestors identified therein, Variable Funding Capital Corporation, First UnionSecurities, Inc., as deal agent, and First Union National Bank, as liquidityagent, as the same has been and may hereafter be amended, restated, modified,renewed or extended from time to time.

 

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

 

“*Governmental Authority*” means

 

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(a)      thegovernment of

 

(i)       theUnited States of America or any State or other political subdivision thereof,or

 

(ii)      anyjurisdiction in which the Company or any Subsidiary conducts all or any part ofits business, or which asserts jurisdiction over any properties of the Companyor any Subsidiary, or

 

(b)      anyentity exercising executive, legislative, judicial, regulatory oradministrative functions of, or pertaining to, any such government.

 

“*Guarantor*” is defined in Section2.2.

 

“*Guaranty Agreement*” is defined in Section2.2.

 

“*Hazardous Material*” means any andall pollutants, toxic or hazardous wastes or any other substances that mightpose a hazard to health or safety, the removal of which may be required or thegeneration, manufacture, refining, production, processing, treatment, storage,handling, transportation, transfer, use, disposal, release, discharge, spillage,seepage, or filtration of which is or shall be restricted, prohibited orpenalized by any applicable law (including, without limitation, asbestos, ureaformaldehyde foam insulation and polycholorinated biphenyls).

 

“*holder*” means, with respect to anyNote, the Person in whose name such Note is registered in the registermaintained by the Company pursuant to Section 13.1.

 

“*Institutional Investor*” means (a)any original purchaser of a Note, (b) any holder of a Note holding more than10% of the aggregate principal amount of the Notes then outstanding, and (c)any bank, trust company, savings and loan association or other financialinstitution, any pension plan, any investment company, any insurance company,any broker or dealer, or any other similar financial institution or entity,regardless of legal form.

 

“*Insurance Subsidiary*” means FirstInvestors Insurance Company, an insurance company organized under the laws ofthe State of Vermont.

 

“*Interest Expense*”****shall mean for any period and for any Person, the sum of(a) interest expense of such Person calculated without duplication on aconsolidated basis for such period in accordance with GAAP, plus (b) expensespaid under Swaps during such period, minus (c) payments received under Swapsduring such period.

 

“*Junior Debt*” means that certainpromissory note issued to Walter A. Stockard L.P. in the original principalamount of $2,500,000, dated December 6, 2004 including all amendments andextensions thereto.

 

“*Lien*” means, with respect to anyPerson, any mortgage, lien, pledge, charge, security interest or otherencumbrance, or any interest or title of any vendor, lessor, lender or othersecured party to or of such Person under any conditional sale or other titleretention agreement or

 

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Capital Lease, upon or with respect to any property or asset of suchPerson (including in the case of stock, stockholder agreements, voting trustagreements and all similar arrangements).

 

“*Managed Assets*”****means“Receivables Held for Investment” as determined historically for inclusionunder such item in the consolidated balance sheet of the Company providedthat such term shall: (i) not be adjusted for any changes in GAAP; and (ii)include Receivables of the Company and its Subsidiaries that have been includedin an off-balance sheet Securitization program created by the Company or suchSubsidiaries after the Closing**.**

 

“*Material*” means material in relationto the business, operations, affairs, financial condition, assets, properties,or prospects of the Company and its Subsidiaries taken as a whole.

 

“*Material Adverse Effect*” means amaterial adverse effect on (a) the business, operations, affairs, financialcondition, assets or properties of the Company and its Subsidiaries taken as awhole, or (b) the ability of the Company to perform its obligations under thisAgreement and the Notes, or (c) the validity or enforceability of thisAgreement or the Notes.

 

“*Memorandum*” is defined in Section5.3.

 

“*Moody’s*”****shallmean Moody’s Investors Service, Inc., and, if such corporation shall bedissolved or liquidated or shall no longer perform the functions of asecurities rating agency, “Moody’s” shall be deemed to refer to any othernationally recognized securities rating agency designated by you.

 

“*Multiemployer Plan*” means any Planthat is a “multiemployer plan” (as such term is defined in section 4001(a)(3)of ERISA).

 

“*Net Proceeds*”****means(i) in connection with any disposition of assets of the Company or anySubsidiary (or the assets of any direct or indirect Subsidiary of the Companyor any Subsidiary), the cash proceeds received by such the Company orSubsidiary from such disposition (including, without limitation, payments undernotes or other debt securities received in connection with any suchdisposition, but only as and when received) net of (a) the costs of suchdisposition (including reasonable, out-of-pocket professional fees andexpenses, investment banking fees, financial advisory fees, taxes, notarialfees, survey costs, title insurance premiums, required escrow deposits, andpurchase price adjustments and other customary fees and expenses, in each caseattributable to and actually paid in connection with such disposition), and (b)amounts applied to repayment of Debt secured by a lien, security interest,claim or encumbrance on the asset or property disposed and (ii) in connectionwith issuance of any equity Securities, the cash proceeds received from suchissuance, net of all costs of such issuance (including, without limitation,reasonable, out-of-pocket professional fees and expenses, notarial fees,underwriting discounts and commissions, and other customary fees and expenses)actually paid**.**

 

“*Notes*” is defined in Article I.

 

“*Obligated Parties*” means any Person(other than the Company) who is or becomes a party to any agreement thatguarantees or secures payment and performance of this Agreement or the Notes orany part thereof.

 

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“*Officer’s Certificate*” means acertificate of a Senior Financial Officer or of any other officer of theCompany whose responsibilities extend to the subject matter of suchcertificate.

 

“*Patriot Act*”****shallmean Public Law 107-56 of the United States of America, United andStrengthening America by Providing Appropriate Tools Required to Intercept andObstruct Terrorism (USA PATRIOT Act) Act of 2001.

 

“*PBGC*” means the Pension BenefitGuaranty Corporation referred to and defined in ERISA or any successor thereto.

 

“*Permitted Lien*”****isdefined in Section  10.3.

 

“*Person*” means an individual,partnership, corporation, limited liability company, association, trust,unincorporated organization, or a government or agency or political subdivisionthereof.

 

“*PIK Closing*” is defined in Section3.2.

 

“*Plan*” means an “employee benefitplan” (as defined in section 3(3) of ERISA) that is or, within the precedingfive years, has been established or maintained, or to which contributions areor, within the preceding five years, have been made or required to be made, by theCompany or any ERISA Affiliate or with respect to which the Company or anyERISA Affiliate may have any liability.

 

“*Preferred Stock*” means any class ofcapital stock of a corporation that is preferred over any other class ofcapital stock of such corporation as to the payment of dividends or the paymentof any amount upon liquidation or dissolution of such corporation.

 

“*property*” or “*properties*”means, unless otherwise specifically limited, real or personal property of anykind, tangible or intangible, choate or inchoate.

 

“*QPAM Exemption*” means ProhibitedTransaction Class Exemption 84-14 issued by the United States Department ofLabor.

 

“*Receivables*”****shallmean at any date of determination thereof, each and every present and futureright to payment under any retail installment sales contract or installmentnote and related security agreement, arising from the sale of a motor vehicleor the refinancing thereof.

 

“*Rental Expense*”****shallmean for any period and for any Person, the rental or lease expense of suchPerson under operating leases calculated without duplication on a consolidatedbasis for such period as determined in accordance with GAAP.

 

“*Required Holders*” means, at anytime, the holders of at least 51% in principal amount of the Notes at the timeoutstanding (exclusive of Notes then owned by the Company or any of itsAffiliates).

 

“*Requisite Senior Debtholders*” means,with respect to any action which may be taken by the Senior Debtholders inconnection with any term of this Agreement, the Senior Debtholder or

 

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Senior Debtholders necessary to approve or consent to such actionpursuant to the terms of the Senior Debt Documents.

 

“*Responsible Officer*” means anySenior Financial Officer and any other officer of the Company withresponsibility for the administration of the relevant portion of thisagreement.

 

“*S&P*” means Standard &Poor’s, a division of McGraw-Hill, Inc., a corporation organized and existingunder the laws of the State of New York, its successors and assigns, and, ifsuch corporation shall be dissolved or liquidated or shall no longer performthe functions of a securities rating agency, “S&P” shall be deemed to referto any other nationally recognized securities rating agency designated by you.

 

“*Securities Act*” means the SecuritiesAct of 1933, as amended from time to time.

 

“*Securitization*”****shallmean the Receivables warehouse line provided by the FIRC Agreement, thecommercial paper facility provided by Variable Funding Capital Company toFIARC, the residual funding facility provided by the FIRF Agreement, and anysecuritization occurring after the Closing of the Company’s or any of itsAffiliates’ Receivables through the issuance of asset-backed securities(including First Investors Auto Owner Trust 2005-A and First Investors AutoOwner Trust 2006-A).

 

“*Securitization Subsidiary*” shallmean a Subsidiary that is the issuer in (or has been formed for the solepurpose of engaging in) a Securitization.

 

“*Senior Debt*” means (i) any SecuredDebt of the Company in an aggregate principal amount not in excess of$1,000,000 at any time outstanding which by its express terms states that it is“Senior” to the Notes, and (ii) Debt of the Company approved by each holder ofthe Notes, in such holder’s sole and absolute discretion, as Debt to which theNotes shall be subordinated in accordance with the terms of this Agreement.Senior Debt includes all principal, interest, fees, expenses, attorneys’ feesand any other sum chargeable to the Company under the Senior Debt Documents,together with, subject to the last sentence hereof, (a) all complete or partialrefinancings of the Senior Debt, (b) any amendments, modifications, renewals orextensions of any of the foregoing and (c) any interest accruing on theforegoing after the commencement of any bankruptcy, insolvency or similarproceeding, without regard to whether or not such interest accrues in any suchproceeding or is an allowed claim in any such proceeding. Senior Debt shall beconsidered to be outstanding whenever any loan commitment under any of theSenior Debt Documents is outstanding.

 

“*Senior Debt Documents*” means allagreements, instruments and documents that govern, evidence or secure theSenior Debt and shall include all agreements, instruments and documents thatgovern, evidence or secure any amendment, modification, renewal or extension ofany of the foregoing**.**

 

“*Senior Debtholder*” means a holder ofSenior Debt.

 

“*Senior Financial Officer*” means thechief financial officer, principal accounting officer, treasurer or comptrollerof the Company.

 

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“*Senior Subordinated Debt*” means alldebts, liabilities and obligations, for the performance of covenants, tasks orduties or for the payment of monetary amounts (whether or not such performanceis then required or contingent, or amounts are liquidated or determinable)owing by the Company or its subsidiaries to the purchaser hereunder under thisAgreement and the Notes, and all covenants and duties regarding such amounts,of any kind or nature, present or future, whether or not evidenced by any note,agreement or other instrument, arising under this Agreement and the Notes.Senior Subordinated Debt includes all principal, interest, fees, expenses, attorneys’fees, indemnification and any other sum chargeable to the Company under thisAgreement and the Notes, together with, subject to the last sentence hereof,(a) any amendments, modifications, renewals or extensions of any of theforegoing and (b) any interest accruing on the foregoing after the commencementof any bankruptcy, insolvency or similar proceeding, without regard to whetheror not such interest accrues in any such proceeding or is an allowed claim inany such proceeding.

 

“*Shareholder’s Equity*”****means, on any date with respect to (a) the Company, anamount equal to the Total Assets less the Total Debt and (b) any Person otherthan the Company such Person’s shareholder’s equity determined in accordancewith GAAP, consistently applied.

 

“*Subordinated Debt*”****means, on any date, the aggregate principal amount of anyoutstanding non-recourse, unsecured subordinated debt owing by the Company(including, but not limited to, any shareholder’s loans) that matures more thaneighteen (18) months after such date**, *butexcluding the Notes*.**

 

“*Subsidiary*” means, as to any Person,any corporation, association or other business entity in which such Person orone or more of its Subsidiaries or such Person and one or more of itsSubsidiaries owns sufficient equity or voting interests to enable it or them(as a group) ordinarily, in the absence of contingencies, to elect a majorityof the directors (or Persons performing similar functions) of such entity, andany partnership or joint venture if more than a 50% interest in the profits orcapital thereof is owned by such Person or one or more of its Subsidiaries orsuch Person and one or more of its Subsidiaries (unless such partnership canand does ordinarily take major business actions without the prior approval of suchPerson or one or more of its Subsidiaries). Unless the context otherwiseclearly requires, any reference to a “Subsidiary” is a reference to aSubsidiary of the Company.

 

“*Swaps*” means, with respect to anyPerson, payment obligations with respect to interest rate swaps, currency swapsand similar obligations obligating such Person to make payments, whetherperiodically or upon the happening of a contingency. For the purposes of thisAgreement, the amount of the obligation under any Swap shall be the amountdetermined in respect thereof as of the end of the then most recently endedfiscal quarter of such Person, based on the assumption that such Swap hadterminated at the end of such fiscal quarter, and in making such determination,if any agreement relating to such Swap provides for the netting of amountspayable by and to such Person thereunder or if any such agreement provides forthe simultaneous payment of amounts by and to such Person, then in each suchcase, the amount of such obligation shall be the net amount so determined.

 

“*Total Assets*” means, on any date, anamount equal to the sum of (i) the aggregate amount of assets of the Company onsuch date, determined in accordance with GAAP and (ii) to

 

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the extent not included in clause (i), the aggregate amount ofSubordinated Debt of the Company on such date.

 

“*Total Debt*” means, with respect tothe Company on any date, an amount equal to the sum of (i) the aggregate amountof liabilities of the Company on such date, determined in accordance with GAAP,less (ii) the aggregate amount of Subordinated Debt of the Company on suchdate.

 

 “*Wholly-Owned Subsidiary*”means, at any time, any Subsidiary one hundred percent (100%) of all of theequity interests (except directors’ qualifying shares) and voting interests ofwhich are owned by any one or more of the Company and the Company’s otherWholly-Owned Subsidiaries at such time.

 

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**EXHIBIT 1**

 

FORM OF SENIOR SUBORDINATED NOTE

 

FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.

 

12.75% SENIOR SUBORDINATED NOTE DUE SEPTEMBER 12, 2017

 
| No. [      ]                            |   | [Date]                                                                                |
|-----------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------|
| $[           ] |   | PPN  [             ] |

 

FOR VALUERECEIVED, the undersigned, FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.(herein called the “Company”), a corporation organized and existing under thelaws of the State of Texas, hereby promises to pay to [                    ],or registered assigns, the principal sum of[                           ]DOLLARS on                         , 2017, with interest (computed on the basis of a 360-dayyear of twelve 30-day months) (a) on the unpaid balance thereof at the rate of12.75% per annum from the date hereof, payable monthly in arrears, with thefirst installment being payable on the first (1st ) day of October,2007, and subsequent installments being payable on the first (1st)day of each succeeding month, until the principal hereof shall have become dueand payable, and (b) to the extent permitted by law on any overdue payment(including any overdue prepayment) of principal and any overdue payment ofinterest, payable monthly as aforesaid (or, at the option of the registeredholder hereof, on demand), at a rate per annum from time to time equal to16.00%.

 

Payments ofprincipal of, interest on this Note are to be made in lawful money of theUnited States of America at [                       ]or at such other place as the Company shall have designated by written noticeto the holder of this Note as provided in the Note Purchase Agreements referredto below.

 

This Note isone of a series of Senior Subordinated Notes (herein called the “Notes”) issuedpursuant to separate Note Purchase Agreements, dated as of                     , 2007 (as from time to time amended, the “NotePurchase Agreements”), between the Company and the respective purchasers namedtherein and is entitled to the benefits thereof. Each holder of this Note willbe deemed, by its acceptance hereof, (i) to have agreed to the confidentialityprovisions set forth in Section 20 of the Note Purchase Agreements, (ii) tohave made the representation set forth in Section 6.2 of the Note PurchaseAgreements, and (iii) to abide by the transfer restrictions set forth inSection 13.2 of the Note Purchase Agreements.

 

This Note is aregistered Note and, as provided in the Note Purchase Agreements, uponsurrender of this Note for registration of transfer, duly endorsed, oraccompanied by a written instrument of transfer duly executed, by theregistered holder hereof or such holder’s attorney duly authorized in writing,a new Note for a like principal amount will be issued to, and registered in thename of, the transferee. Prior to due presentment for registration of transfer,the Company may treat the person in whose name this Note is registered as theowner hereof for the purpose of receiving payment and for all other purposes,and the Company will not be affected by any notice to the contrary.

 

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[The Companywill make required prepayments of principal on the dates and in the amountsspecified in the Note Purchase Agreements.] [This Note is [also] subject to[optional] prepayment, in whole or from time to time in part, at the times andon the terms specified in the Note Purchase Agreements, but not otherwise.]

 

If an Event ofDefault, as defined in the Note Purchase Agreements, occurs and is continuing,the principal of this Note may be declared or otherwise become due and payablein the manner, at the price and with the effect provided in the Note PurchaseAgreements.

 

[Add governinglaw clause conforming to that of the Note Purchase Agreements]

 
|   |   | FIRST INVESTORS SERVICES GROUP, INC., a                                         |
|--------|--------|---------------------------------------------------------------------------------|
|   |   | Texas corporation                                                               |
|   |   |                                                                            |
|   |   | By:                                                                             |   |
|   |   |             [Name]  |
|   |   |             [Title] |

 

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**EXHIBIT 2**

 

FORM OF SENIOR SUBORDINATED PAID-IN-KIND NOTE

 

FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.

 

14.75% SENIOR SUBORDINATED PAID-IN-KIND NOTE DUE SEPTEMBER12, 2017

 
| No. [      ]                            |   | [Date]                                                                                |
|-----------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------|
| $[           ] |   | PPN  [             ] |

 

FOR VALUERECEIVED, the undersigned, FIRST INVESTORS FINANCIAL SERVICES GROUP, INC.(herein called the “Company”), a corporation organized and existing under thelaws of the State of Texas, hereby promises to pay to [                    ],or registered assigns, the principal sum of[                           ]DOLLARS on                      , 2017, with interest (computed on the basis of a360-day year of twelve 30-day months) (a) on the unpaid balance thereof at therate of 14.75% per annum from the date hereof, payable monthly in arrears, withthe first installment being payable on the first (1st ) day of                   ,200  , and subsequent installments being payable on the first (1st)day of each succeeding month, until the principal hereof shall have become dueand payable, and (b) to the extent permitted by law on any overdue payment(including any overdue prepayment) of principal and any overdue payment ofinterest, payable monthly as aforesaid (or, at the option of the registeredholder hereof, on demand), at a rate per annum from time to time equal to16.00%.

 

Payments ofprincipal of, interest on this Note are to be made in lawful money of theUnited States of America at [                ]or at such other place as the Company shall have designated by written noticeto the holder of this Note as provided in the Note Purchase Agreements referredto below.

 

This Note isone of a series of Senior Subordinated Paid-In-Kind Notes (herein called the“Notes”) issued pursuant to separate Note Purchase Agreements, dated as of                       , 2007 (as from time to time amended, the “NotePurchase Agreements”), between the Company and the respective purchasers namedtherein and is entitled to the benefits thereof. Each holder of this Note willbe deemed, by its acceptance hereof, (i) to have agreed to the confidentialityprovisions set forth in Section 20 of the Note Purchase Agreements, (ii) tohave made the representation set forth in Section 6.2 of the Note PurchaseAgreements, and (iii) to abide by the transfer restrictions set forth inSection 13.2 of the Note Purchase Agreements.

 

This Note is aregistered Note and, as provided in the Note Purchase Agreements, uponsurrender of this Note for registration of transfer, duly endorsed, oraccompanied by a written instrument of transfer duly executed, by theregistered holder hereof or such holder’s attorney duly authorized in writing,a new Note for a like principal amount will be issued to, and registered in thename of, the transferee. Prior to due presentment for registration of transfer,the Company may treat the person in whose name this Note is registered as theowner hereof for the purpose of receiving payment and for all other purposes,and the Company will not be affected by any notice to the contrary.

 

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[The Companywill make required prepayments of principal on the dates and in the amountsspecified in the Note Purchase Agreements.] [This Note is [also] subject to[optional] prepayment, in whole or from time to time in part, at the times andon the terms specified in the Note Purchase Agreements, but not otherwise.]

 

If an Event ofDefault, as defined in the Note Purchase Agreements, occurs and is continuing,the principal of this Note may be declared or otherwise become due and payablein the manner, at the price and with the effect provided in the Note PurchaseAgreements.

 

[Add governinglaw clause conforming to that of the Note Purchase Agreements]

 
|   |   | FIRST INVESTORS SERVICES GROUP, INC., a                                         |
|--------|--------|---------------------------------------------------------------------------------|
|   |   | Texas corporation                                                               |
|   |   |                                                                            |
|   |   | By:                                                                             |   |
|   |   |             [Name]  |
|   |   |             [Title] |

 

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**EXHIBIT 3**

 

FORM OF GUARANTY AGREEMENT

 

See attached.

 

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**EXHIBIT 4.4**

 

FORM OF OPINION OF SPECIAL COUNSELTO THE COMPANY

 

Matters To Be Covered InOpinion of Special Counsel To the Company

 

1.             Each of the Company and itsSubsidiaries being duly incorporated, validly existing and in good standing andhaving requisite corporate power and authority to issue and sell the Notes andto execute and deliver the documents.

 

2.             Each of the Company and itsSubsidiaries being duly qualified and in good standing as a foreign corporationin jurisdictions identified to such counsel as necessitating suchqualification.

 

3.             Due authorization and execution ofthe documents and such documents being legal, valid, binding and enforceable.

 

4.             No conflicts with charterdocuments, laws customarily governing transactions of the type represented bythe Notes or agreements known to such counsel.

 

5.             All governmental and corporateconsents or approvals required to issue and sell the Notes and to execute anddeliver the documents having been obtained.

 

6.             No litigation known to such counselquestioning validity of documents.

 

7.             The Notes not requiringregistration under the Securities Act of 1933, as amended; no need to qualifyan indenture under the Trust Indenture Act of 1939, as amended.

 

8.             No violation of Regulations G, T orX of the Federal Reserve Board.

 

9.             Company not an “investmentcompany”, or a company “controlled” by an “investment company”, under theInvestment Company Act of 1940, as amended.

 

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