**Exhibit10.115**

 

EXECUTION COPY

 

MBIA INSURANCE CORPORATION,

as Surety

 

 

FIRST INVESTORS AUTO RECEIVABLES CORPORATION,

as Transferor

 

 

FIRST INVESTORS FINANCIAL SERVICES, INC.,

as Seller

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

as Custodian, Collateral Agent, and Back-up Servicer

 

 

and

 

 

WACHOVIA CAPITAL MARKETS, LLC,

as Reserve Account Agent

 

 

AMENDED AND RESTATEDINSURANCE AGREEMENT

 

 

First Investors Auto Receivables Corporation Revolving

Automobile Receivables Financing Facility

 

 

Dated as of February 18, 2005

 

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TABLE OF CONTENTS

 
| ARTICLE I                                  |                                                                                                                |
|--------------------------------------------|---------------------------------------------------------------------------------------------------------------------|
| DEFINITIONS                                |                                                                                                                |
|                                       |                                                                                                                |   |
| Section 1.01.                              | General Definitions.                                                                                                |   |
|                                       |                                                                                                                |   |
| ARTICLE II                                 |                                                                                                                |
| REPRESENTATIONS,  WARRANTIES AND COVENANTS |                                                                                                                |
|                                       |                                                                                                                |   |
| Section 2.01.                              | Representations and Warranties of the  Transferor, the Seller, the Collateral Agent, and the Reserve Account Agent. |   |
| Section 2.02.                              | Affirmative Covenants of the Transferor,  the Seller, the Collateral Agent, and the Reserve Account Agent.          |   |
| Section 2.03.                              | Negative Covenants of the Transferor, the  Collateral Agent and the Seller.                                         |   |
| Section 2.04.                              | Representations and Warranties of the  Servicer.                                                                    |   |
| Section 2.05.                              | Affirmative Covenants of the Servicer                                                                               |   |
| Section 2.06.                              | Negative Covenants of the Servicer.                                                                                 |   |
|                                       |                                                                                                                |   |
| ARTICLE III                                |                                                                                                                |
| THE SURETY BOND; SECURITY                  |                                                                                                                |
|                                       |                                                                                                                |   |
| Section 3.01.                              | Agreement To Issue Surety Bond.                                                                                     |   |
| Section  3.02.                             | Conditions  Precedent To Issuance of the Surety Bond.                                                               |   |
| Section 3.03.                              | Premium.                                                                                                            |   |
| Section 3.04.                              | Indemnification.                                                                                                    |   |
| Section 3.05.                              | Payment  Procedure.                                                                                                 |   |
| Section 3.06.                              | Subrogation.                                                                                                        |   |
| Section  3.07.                             | Reimbursement  and Additional Payment Obligation.                                                                   |   |
| Section 3.08.                              | Assignment  by Transferor.                                                                                          |   |
|                                       |                                                                                                                |   |
| ARTICLE  IV                                |                                                                                                                |
| FURTHER AGREEMENTS                         |                                                                                                                |
|                                       |                                                                                                                |   |
| Section  4.01.                             | Effective  Date; Term of Agreement.                                                                                 |   |
| Section  4.02.                             | Waiver  of Rights; Further Assurances and Corrective Instruments.                                                   |   |
| Section 4.03.                              | Obligations  Absolute.                                                                                              |   |
| Section  4.04.                             | Assignments;  Reinsurance; Third-Party Rights.                                                                      |   |
| Section 4.05.                              | Due Diligence  Review                                                                                               |   |
|                                       |                                                                                                                |   |
| ARTICLE  V                                 |                                                                                                                |
| DEFAULTS; REMEDIES                         |                                                                                                                |
|                                       |                                                                                                                |   |
| Section 5.01.                              | Defaults.                                                                                                           |   |
| Section  5.02.                             | Remedies;  No Remedy Exclusive.                                                                                     |   |
| Section 5.03.                              | Waivers.                                                                                                            |   |
| Section  5.04.                             | No  Insolvency Proceedings.                                                                                         |   |
|                                       |                                                                                                                |   |
| ARTICLE  VI                                |                                                                                                                |
| MISCELLANEOUS                              |                                                                                                                |
|                                       |                                                                                                                |   |
| Section  6.01.                             | Amendments,  Changes and Modifications.                                                                             |   |
| Section 6.02.                              | Notices.                                                                                                            |   |

 

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| Section 6.03.  | Severability.                            |   |
|----------------|------------------------------------------|--------|
| Section 6.04.  | Governing Law.                           |   |
| Section  6.05. | Consent  to Jurisdiction and Venue, Etc. |   |
| Section 6.06.  | Consent of  Surety.                      |   |
| Section 6.07.  | Counterparts.                            |   |
| Section 6.08.  | Recitals.                                |   |
| Section 6.09.  | Headings.                                |   |

 

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**AMENDED AND RESTATED INSURANCE AGREEMENT**

 

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

 

**RECITALS**:

 

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

 

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

 

3.             Theparties hereto desire to specify the conditions precedent to the issuance ofthe Surety Bond by the Surety, the indemnity and reimbursement to be providedin respect of amounts paid by the Surety under the Surety Bond, the security tobe provided to the Surety as an inducement for the Surety to deliver the SuretyBond and to provide for certain other indemnities and for certain othermatters.

 

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

 

**ARTICLEI**

** **

**DEFINITIONS**

** **

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

 

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**Agreement but not otherwise definedherein will have the meanings ascribed to such terms in the Security Agreement.**

** **

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

 

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

 

“*Closing Date*”means October 22, 1996.

 

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

 

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

 

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

 

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

 

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

 

*“Guaranty*” means the Guarantydated as of March 31, 1999 among the Seller, the Transferor, the Servicer, theCollateral Agent, and the Back-up Servicer, including any amendments thereto orsubstitutes therefor approved in writing by MBIA.

 

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

 

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

 

(b)           NotwithstandingSection 6.3(h) of the Security Agreement, the Delinquency Ratio for the Seller’stotal managed portfolio over any three consecutive Collection Periods shallequal or exceed 7.25%.

 

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

 

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

 

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

 

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

 

 “*Moody’s*” means Moody’s Investors Service Inc., itssuccessors and their assigns, and, if such corporation shall for any reason nolonger perform the functions of a securities rating agency, “Moody’s” shall bedeemed to refer to any other nationally recognized rating agency designated bythe Transferor with the approval of the Surety.

 

“*Note*” means thepromissory note issued by the Transferor to the Company pursuant to the NotePurchase Agreement.

 

*“Note Purchase Agreement”*meansthe Note Purchase Agreement dated as of October 22, 1996 between theCompany and the Transferor.

 

*“Security Agreement”*means the Amendedand Restated Security Agreement dated as of February 18, 2005, among theCompany, the Transferor, the Surety, the Seller, the Administrative Agent, theReserve Account Agent and the Collateral Agent as the same may be furtheramended and supplemented as provided therein.

 

* “ServicingAgreement”*shall have the meaning assigned thereto in theSecurity Agreement.

 

“*Standard & Poor’s*”means Standard & Poor’s Ratings Services, a division of TheMcGraw-Hill Companies, its successors and their assigns and, if suchcorporation shall for any reason no longer perform the functions of asecurities rating agency, “Standard & Poor’s” shall be deemed to refer toany other nationally recognized rating agency designated by the Transferor withthe approval of the Surety.

 

“*State*” meansthe State of New York.

 

“*Surety*” meansMBIA Insurance Corporation.

 

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

 

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

 

“*Surety Insolvency*”means (i) the entry of a decree or order of a court or agency havingjurisdiction in respect of the Surety in an involuntary case under any presentor future Federal or state bankruptcy, insolvency or similar law or appointinga conservator or receiver or liquidator or rehabilitator or other similarofficial of the Surety or of any substantial part of its property, or theentering of an order for the winding up or liquidation of the affairs of theSurety and the continuance of any such decree or order undischarged or unstayedand in force for a period of 90

 

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

 

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

 

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

 

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

 

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

 

**ARTICLEII**

** **

**REPRESENTATIONS, WARRANTIES AND COVENANTS**

** **

**Section 2.01.*** Representations and Warranties of theTransferor, the Seller, the Collateral Agent, and the Reserve Account Agent*.  The Transferor, the Seller, the CollateralAgent, and the Reserve Account Agent represent and warrant to, and covenantwith, the other parties hereto (in each case only as to matters concerningitself) as follows:

** **

**(a) *****Representations and Warranties of Transferor, Seller and the CollateralAgent Contained in Other Transaction Documents*****.  All of the representations and warrantiesmade by the Transferor, the Seller and the Collateral Agent, as the case maybe, as of the Closing Date in any of the Transaction Documents (except withrespect to the Originator Agreements) are incorporated as if fully set forthherein for the benefit of the Surety and are true and correct as of the ClosingDate.**

** **

**(b) *****Due Organization and Qualification*****.  Each of the Transferor and the Seller is acorporation, duly organized, validly existing and in good standing under thelaws of its respective jurisdiction of incorporation. The Collateral Agent is anational banking institution duly organized, validly existing and in goodstanding under the laws of the United States.  Each of the Transferor, the Seller and theCollateral Agent is duly**

** **

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

** **

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

** **

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

** **

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

** **

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

** **

**(ii)           constitutes a default by the Seller,the Transferor or the Collateral Agent under or a breach of any provision ofany loan agreement, mortgage, indenture or other agreement or instrument whichis material to the Seller, the Transferor or the Collateral Agent to which theSeller, the Transferor or the Collateral Agent is a party or by which any ofits or their respective properties, which are individually or in the aggregatematerial to the Seller, the Transferor or the Collateral Agent, is or may bebound or affected; or**

 

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

** **

**(f) *****Pending Litigation or Other Proceeding*****.  There is no pending action or proceedingbefore any court, governmental or administrative agency or arbitrator againstor affecting the Transferor, the Seller, the Collateral Agent or the ReserveAccount Agent or any of its or their subsidiaries or any properties or rightsof the Transferor, the Seller, the Collateral Agent or the Reserve AccountAgent or any of its or their subsidiaries or, to the Transferor’s, the Seller’s,the Collateral Agent’s or the Reserve Account Agent’s knowledge, anyinvestigation or any threatened action or proceeding before any of theforegoing, which, if decided adversely to the Transferor, the Seller, theCollateral Agent or the Reserve Account Agent, would materially and adverselyaffect the ability of the Transferor, the Seller, the Collateral Agent or theReserve Account Agent to perform their respective obligations under theTransaction Documents or would have a material adverse effect on the Surety.**

** **

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

** **

**(h) *****Financial Statements*****.  The Financial Statements of FIFSG, copies ofwhich the Seller has caused to be furnished to the Surety on behalf of theSeller and Servicer, (i) are, as of the dates and for the periods referredto therein, complete and correct in all material respects, (ii) presentfairly the financial condition and results of operations of the companiesreported therein as of the dates and for the periods indicated and(iii) have been prepared in accordance with generally accepted accountingprinciples consistently applied, except as noted therein and subject to year-endadjustments with respect to interim statements. Since the date of the most recent Financial Statements, there has beenno material adverse change in such condition or operations.  Except as disclosed in the FinancialStatements, neither the Seller nor the Servicer, is not subject to anycontingent liabilities or commitments that, individually or in the aggregate,have a material possibility of causing a material adverse change in respect ofthe Seller or the Servicer.**

 

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**(i) *****Compliance With Law, Regulations, Etc*****.  None of the Transferor, the Seller, theCollateral Agent or the Reserve Account Agent has notice or any reason tobelieve that any practice, procedure or policy employed by the Transferor, theSeller, the Collateral Agent or the Reserve Account Agent in the conduct of itsbusiness violates any law, regulation, judgment or agreement applicable to theTransferor, the Seller, the Collateral Agent or the Reserve Account Agentwhich, if enforced, would have a material adverse effect on the ability of theSeller, the Transferor, the Collateral Agent or the Reserve Account Agent, asthe case may be, to perform its respective obligations under the TransactionDocuments. None of the Transferor, the Seller, the Collateral Agent or theReserve Account Agent is in breach of or in default under any applicable law oradministrative regulation of the state of its respective incorporation or anydepartment, division, agency or instrumentality thereof or of the United Statesor any applicable judgment or decree or any loan agreement, note, resolution,certificate, agreement or other instrument to which the Transferor is a partyor is otherwise subject which, if enforced, would have a material adverseeffect on the ability of the Collateral Agent, the Reserve Account Agent, theTransferor or the Seller, as the case may be, to perform its respectiveobligations under the Transaction Documents.**

** **

**(j) *****Taxes*****. Each of the Transferor and the Seller and its respective parent companyor companies have filed prior to the date hereof all federal and state taxreturns that are required to be filed and paid all taxes, including anyassessments received by them that are not being contested in good faith, to theextent that such taxes have become due, except for any failures to file or paythat, individually or in the aggregate, would not result in a material adversechange with respect to the Transferor and the Seller.**

** **

**(k) *****Delivery of Information*****.  Each of the Transferor and the Seller representsand warrants that none of the Transaction Documents nor any other informationfurnished in writing to the Surety by the Transferor or the Seller, as the casemay be, contain any statement of a material fact by the Transferor or theSeller as the case may be, which was untrue or misleading in any materialrespect when made.  None of theTransferor or the Seller has any knowledge of circumstances that couldreasonably be expected to cause a material adverse change with respect to theTransferor or the Seller.  Since thefurnishing of such information by the Transferor and the Seller, there has beenno change nor any development or event involving a prospective change whichwould render any of the Transaction Documents or other information furnished tothe Surety untrue or misleading in a material respect.**

** **

**(l) *****Solvency*****. The Transferor and the Seller are solvent and will not be renderedinsolvent by the Transaction and, after giving effect to the Transaction,neither of the Transferor or the Seller will be left with an unreasonably smallamount of capital with which to engage in its business, nor does the Transferoror the Seller intend to incur, or believe that it has incurred, debts beyondits ability to pay as they mature.  Noneof the Transferor or the Seller contemplates the commencement of insolvency,bankruptcy, liquidation or consolidation proceedings or the appointment of areceiver, liquidator,**

** **

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

** **

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

** **

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

** **

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

** **

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

** **

**(b) *****Corporate Existence*****.  The Transferor, the Seller, the CollateralAgent,  and the Reserve Account Agentshall maintain their respective existences and continue to be duly organized,duly qualified and duly authorized under the laws of its respectivejurisdiction of incorporation or organization and shall conduct its business inaccordance with the terms of its certificate of incorporation and bylaws, orother organization documents.**

** **

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

 

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

** **

**(ii)           *Quarterly FinancialStatements*.  As soon asavailable, and in any event within 90 days after each of the first threefiscal quarters of each fiscal year of FIFSG, the unaudited consolidatedbalance sheets of FIFSG and its subsidiaries as of the end of such fiscalquarter and the related unaudited consolidated statements of income, changes inshareholders’ equity and cash flows for such fiscal quarter, all in reasonabledetail and stating in comparative form the respective figures for thecorresponding date and period in the preceding fiscal year, prepared inaccordance with generally accepted accounting principles, consistently applied,and accompanied by the certificate specified in Section 2.02(e) hereof.**

** **

**(iii)          [Reserved.]**

** **

**(iv)          *Other Reports andInformation*.  The Seller shallalso furnish, or cause to be furnished, with reasonable promptness, such otherfinancial data, financial reports relating to the Seller or FIFSG prepared bythird parties and other data relating to the Seller or FIFSG which are commonlyprepared and can be provided without undue effort, as the Surety may reasonablyrequest.**

** **

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

** **

**(e) *****Certificate of Compliance*****.  The Seller shall cause the Transferor todeliver to the Surety concurrently with the delivery of the FinancialStatements required pursuant to paragraph (c) above any statement required tobe delivered under the Security Agreement.**

** **

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

 

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

** **

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

** **

**(iii)          to discuss the affairs, finances andaccounts of the Transferor, the Seller and the Collateral Agent as such relateto the performance by it of its obligations under the Transaction Documentswith the Transferor’s, the Seller’s and the Collateral Agent’s independentpublic accountants, as the case may be, provided that an appropriate officer ofthe Transferor, the Seller and the Collateral Agent, as the case may be, shallhave the right to be present during such discussions.**

** **

Such inspections anddiscussions shall be conducted upon the request of the Surety and during normalbusiness hours and shall not unreasonably disrupt the business of theTransferor, the Seller, the Collateral Agent or the Reserve Account Agent.  The books and records of the Transferor willbe maintained at the address of the Transferor designated herein for receipt ofnotices, unless the Transferor shall otherwise advise the parties hereto inwriting, the books and records of the Collateral Agent will be maintained atthe address of the Collateral Agent designated herein for receipt of notices,unless the Collateral Agent shall otherwise advise the parties hereto inwriting, the books and records of the Reserve Account Agent will be maintainedat the address of the Reserve Account Agent designated herein for receipt ofnotices, unless the Reserve Account Agent shall otherwise advise the partieshereto in writing and the books and records of the Seller will be maintained atthe Seller’s address designated herein for receipt of notices, unless theSeller shall otherwise advise the parties hereto in writing.

 

The Surety shall keep confidential all financialstatements and reports delivered to it, the Credit Guidelines and any matter ofwhich it becomes aware through such inspections or discussions, except as maybe otherwise required, by regulation, law or court order or requested byappropriate governmental authorities or as necessary to enforce any of theprovisions of the Transaction Documents, provided that the foregoing shall notlimit the right of the Surety to make such information available on aconfidential basis, to its regulators, securities rating agencies, reinsurers,credit and liquidity providers, counsel and accountants.  If the Surety is requested or required (byoral questions,

 

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interrogatories, requests for information or documentssubpoena, civil investigative demand or similar process) to disclose any informationof which it becomes aware through such inspections or discussions, the Suretywill promptly notify the Seller of such request(s) so that the Seller may seekan appropriate protective order and/or waive the Surety’s compliance with theprovisions of this Insurance Agreement. If, in the absence of a protective order or the receipt of a waiverhereunder, the Surety is, nonetheless, in the opinion of its counsel, compelledto disclose such information to any tribunal or else stand liable for contemptor suffer other censure or significant penalty, the Surety may disclose suchinformation to such tribunal that the Surety is compelled to disclose, providedthat a copy of all information disclosed is provided to the Seller promptlyupon such disclosure.

 

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

** **

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

** **

**(ii)           the submission of any claim or theinitiation of any legal process, litigation or administrative or judicialinvestigation against it in any federal, state or local court or before anygovernmental body or agency, or before any arbitration board, or any suchproceedings threatened by any governmental agency, (of which, in the case ofthe Collateral Agent, the Collateral Agent has actual knowledge), which, ifadversely determined, would have a material adverse effect upon its ability toperform its obligations under any Transaction Document;**

** **

**(iii)          except in the case of the CollateralAgent, the submission of any claim or the initiation of any legal process,litigation or administrative or judicial investigation in any federal, state orlocal court or before any arbitration board, or any such proceeding threatenedby any governmental agency transferred, which, if adversely determined, wouldhave a material adverse effect on the Receivables;**

** **

**(iv)          the commencement of any proceedingsunder any applicable bankruptcy, reorganization, liquidation, insolvency orother similar law now or hereafter in effect or of any proceeding in which areceiver, liquidator, trustee or other similar official shall have been, or maybe, appointed or requested;**

** **

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

 

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

** **

**(vi)          any change in the location of theSeller’s, the Transferor’s or the Collateral Agent’s principal offices or booksand records.**

** **

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

** **

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

** **

**(j) *****Third-Party Rights*****.  Each of the Transferor, the Seller, theCollateral Agent, and the Reserve Account Agent agrees that the Surety shallhave all of the rights of a third-party beneficiary of, and pursuant to, itsagreements under each Transaction Document (except with respect to theOriginator Agreements) to which the Transferor, the Seller, the CollateralAgent, respectively, is a party, unless otherwise expressly provided in therelated Transaction Document.**

** **

**(k) *****Maintenance of Loans*****.  On or before each April 15, beginning in1997, the Seller shall cause the Transferor to furnish to the Surety an officer’scertificate either stating that such action has been taken with respect to therecording, filing, rerecording and refiling of any financing statements andcontinuation statements as is necessary to maintain the interest of the Suretycreated by the Security Agreement with respect to the Receivables and recitingthe details of such action or stating that no such action is necessary tomaintain such interests.  Such officer’s certificateshall also describe the recording, filing, rerecording and refiling of anyfinancing statements and continuation statements that will be required tomaintain the interest of the Surety in the Receivables until the date such nextofficer’s certificate is due.  The Sellerwill use its best efforts to cause any necessary recordings or filings to bemade with respect to the Receivables.**

 

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

** **

**(m) *****Maintenance of Licenses*****.  The Collateral Agent, the Seller and theTransferor, respectively, or any successors thereof, shall maintain alllicenses, permits, charters and registrations which are material to the conductof its business.**

** **

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

** **

**(o)  [Reserved]**

** **

**(p) *****Collateral Agent to Act Upon Direction of Surety; Delivery ofNotices. *****TheCollateral Agent agrees that so long as no Surety Default has occurred and iscontinuing (i) the Collateral Agent shall not take any action which theCollateral Agent is entitled to take pursuant to the Servicing Agreementwithout the prior written consent of the Surety, and (ii) following theSurety’s written request or direction, it will take or refrain from taking anyaction which the Collateral Agent is entitled to take pursuant to the ServicingAgreement.  The Collateral Agent shallpromptly forward to the Surety a copy of each notice or other communicationgiven or received by the Collateral Agent pursuant to the Servicing Agreement.  The Transferor shall promptly forward to theSurety a copy of each executed Interest Rate Cap entered into by the Transferorand any amendments or revisions thereto.**

** **

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

** **

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

** **

**(b) *****Impairment of Rights*****.  The Transferor, the Collateral Agent and theSeller each agree and covenant with the Surety that at all times during theTerm of the Agreement the Transferor, the Seller and the Collateral Agent shallnot take any action, or decline to take any action if reasonably requested bythe Surety at a time when no Surety Default or Surety Insolvency exists, ifsuch action or failure to take action will interfere with the enforcement ofany rights under any of the Transaction Documents.  The**

** **

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** **

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

** **

**(c) *****Amendment to Certificate of Incorporation*****.  The Transferor shall not amend its certificateof incorporation at a time when no Surety Default or Surety Insolvency existswithout the Surety’s prior written consent except in accordance with the termsthereof.**

** **

**(d) *****Loan Agreements; Charge-off Policy*****.  Except as otherwise permitted in the SecurityAgreement, the Seller shall not, and shall not permit the Servicer to, alter oramend any Receivable or their respective charge-off policies in a manner thatmaterially adversely affects the Surety unless the Surety shall have previouslygiven its consent.**

** **

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

** **

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

 

**(b)*           Power and Authority*****.**  The Servicer hasall necessary corporate or other power and authority to conduct its business ascurrently conducted and to execute, deliver and perform its obligations underthe Transaction Documents and to consummate the Transaction.

 

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

 

**(d)*           Noncontravention*****.**  Neither theexecution and delivery of the Transaction Documents by the Servicer, theconsummation of the transactions contemplated thereby nor the satisfaction ofthe terms and conditions of the Transaction Documents:

 

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

 

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

 

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

 

**(e)*           Legal Proceedings******.*** There is no action, proceeding or investigation by or before any court,governmental or administrative agency or arbitrator against or affecting theServicer or any of its subsidiaries, or any properties or rights of theServicer or any of its subsidiaries, pending or, to the Servicer’s knowledgeafter reasonable inquiry, threatened, which, in any case, could reasonably beexpected to result in a material adverse effect upon the Servicer’s abilityto  perform its respective obligationsunder the Transaction Documents or have a material adverse effect upon theSurety.

 

**(f)*            Valid and BindingObligations****.*  The Transaction Documents (other than theNote), when executed and delivered by the Servicer, will constitute the legal,valid and binding obligations of the Servicer, enforceable in accordance withtheir respective terms, except as such enforceability may be limited bybankruptcy, insolvency, reorganization, moratorium or other similar lawsaffecting creditors’ rights generally and general equitable principles and publicSurety bond considerations as to rights of indemnification for violations offederal securities laws.

 

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

 

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(h)           ***Compliancewith Law, Etc*****. **No practice, procedure or policyemployed, or proposed to be employed, by the Servicer in the conduct of itsbusiness violates any law, regulation, judgment, agreement, order or decreeapplicable to it that, if enforced, could reasonably be expected to result in amaterial adverse effect upon the Servicer’s ability to perform its respectiveobligations under the Transaction Documents or have a material adverse effectupon the Surety.

 

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

 

(j)            ***Accuracyof Information***.  Neitherthe Transaction Documents, nor other information relating to the Receivables orrelated assets, the operations of the Servicer (including servicing ororigination of loans) or the financial condition of the Servicer (collectively,the “Documents”), as amended , supplemented or superseded, furnished to theSurety by the Servicer contain any statement of a material fact by the Servicerwhich was untrue or misleading in any material adverse respect when made.  The Servicer has no knowledge orcircumstances that could reasonably be expected to cause a material adversechange with respect to the Servicer. Since the furnishing of the Documents, there has been no change nor anydevelopment or event involving a prospective change known to the Servicer thatwould render any of the Documents untrue or misleading in a material respect.

 

(k)           ***TransactionDocuments***  Each ofthe representations and warranties of the Servicer contained in the TransactionDocuments is true and correct in all material respects, and the Servicer herebymakes each such representation and warranty to, and for the benefit of, theSurety as if the same were set forth in full herein.

 

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

** **

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

 

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**Section 2.05.**  *AffirmativeCovenants of the Servicer*.  The Servicer hereby agrees thatduring the Term of this Agreement, unless the Surety shall otherwise expresslyconsent in writing:

** **

**(a)*****        ******ComplianceWith Agreements and Applicable Laws***.  The Servicer shall not be in default underthe Transaction Documents and shall comply with all material requirements ofany law, rule or regulation applicable to it. The Servicer shall not agree to any amendment to or modification of theterms of any Transaction Documents or its organizational documents (includingwithout limitation, its articles of incorporation and bylaws) unless the Suretyshall have otherwise consented.

 

**(b)*****       ******CorporateExistence***.  TheServicer, its successors and assigns, shall maintain its corporate or otherexistence and shall at all times continue to be duly organized under the lawsof its jurisdiction of incorporation or formation and duly qualified and dulyauthorized (as described in subsections 2.04(a), (b) and (c) hereof) and shallconduct its business in accordance with the terms of its certificate ofincorporation and bylaws or other formation documents.

 

**(c)*****        ******TheServicer To Provide Financial Statements; Accountants’ Reports; OtherInformation******.***  The Servicer shall keep or cause to be keptin reasonable detail books and records of account of the Servicer’s, and itsconsolidated subsidiaries, assets and business, including but not limited to,books and records relating to the Transaction. The Servicer shall furnish or cause to be furnished to the Surety:

 

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

** **

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

** **

All financialstatements specified in clause (i) above shall be furnished in consolidatedform for FIFSG and its subsidiaries.

 

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

 

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

 

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

 

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

 

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

 

Such inspectionsand discussions shall be conducted during normal business hours and shall notunreasonably disrupt the business of the Servicer.  The books and records of the Servicer will bemaintained at the address of the Servicer designated herein for receipt ofnotices, unless the Servicer shall otherwise advise the parties hereto inwriting.

 

(e)           *Confidentiality*.  The Surety agrees that it and itsshareholders, directors, agents, accountants and attorneys shall keepconfidential any matter of which it becomes aware through such inspections ordiscussions (unless readily available from public sources), except as may beotherwise required by regulation, law or court order or requested byappropriate governmental authorities or as necessary to preserve its rights orsecurity under or to enforce the Transaction Documents, provided that theforegoing shall not limit the right of the Surety to make such informationavailable to its regulators, securities rating agencies, reinsurers, credit andliquidity providers, counsel and accountants. If the Surety is requested or required (by oral questions,interrogatories, requests for information or documents subpoena, civil investigativedemand or similar process) to disclose any information of which it becomesaware through such inspections or discussions, the Surety will promptly notifythe Servicer of such request(s) so that the Servicer may seek an appropriateprotective order and/or waive the Surety’s compliance with the provisions ofthis Agreement.  If, in the absence of aprotective order or the receipt of a waiver hereunder, the Surety is,nonetheless, in the opinion of its counsel, compelled to disclose suchinformation to any tribunal or else stand liable for contempt or suffer other censureor significant penalty, the Surety may disclose such information to suchtribunal that the Surety is compelled to disclose, provided that a copy of allinformation disclosed is provided to the Servicer, promptly upon suchdisclosure.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(h)           *Maintenance ofLicenses. *The Servicer or anysuccessors thereof shall maintain all licenses, permits, charters andregistrations which are material to the conduct of its business.

 

(i)            *Third-Party Beneficiary.*  The Servicer agrees that the Surety shallhave all rights of a third-party beneficiary in respect of each TransactionDocument to which it is a party and hereby incorporates and restates theirrepresentations, warranties and covenants as set forth therein for the benefitof the Surety.

 

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

 

(k)           *Maintenance ofCollateral. *On or before eachApril 15, beginning in 2000, so long as the Note is outstanding, the Servicershall furnish, or cause to be furnished, to the Surety and the Collateral Agentan officers’ certificate either stating that such action has been taken withrespect to the recording, filing, rerecording and refilling of any financingstatements and continuation statements as is necessary to maintain the interestof the Collateral Agent created by the Security Agreement with respect to theCollateral and reciting the details of such action or stating that no suchaction is necessary to maintain such interests. Such officers’ certificate shall also describe the recording, filing,rerecording and refilling of any financing statements and continuationstatements that will be required to maintain the interest of the CollateralAgent (on behalf of the Secured Parties) in the Collateral until the date suchnext officers’ certificate is due.  TheServicer will use its best efforts to cause any necessary recordings or filingsto be made with respect to the Collateral.

 

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

 

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

 

(i)            a certified copy of the finalnonappealbable order of a court having competent jurisdiction ordering therecovery by a trustee in bankruptcy as voidable preference amounts included inprevious payments to any Insured Party pursuant to the United States BankruptcyCode;

 

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

 

(iii)          an assignment in such form asreasonably required by the Surety, irrevocably assigning to the surety allrights and claims of the Servicer, the Collateral Agent and any Insured partyrelating to or arising under the Transaction Documents against the debtor whichmade such preference payment or otherwise with respect to such preferenceamount; and

 

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

 

**Section2.06.**  *NegativeCovenants of the Servicer.***TheServicer hereby agrees that during the Term of this Agreement, unless theSurety shall otherwise expressly consent in writing:

** **

(a)           *Impairment of Rights. *The Servicer shall not take anyaction, or fail to take any action, if reasonably requested by the surety, ifsuch action or failure to take action may interfere with the enforcement of anyrights of the Surety under or with respect to the Transaction Documents.  The Servicer shall give the Surety writtennotice of any such action or failure to act on the earlier of: (i) the dateupon which any publicly available filing or release is made with respect tosuch action or failure to act or (ii) promptly prior to the date ofconsummation of such action or failure to act. The Servicer shall furnish to the Surety all information requested by itthat is reasonably necessary to determine compliance with this paragraph.

 

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

 

(c)           *Receivables;Policies. *Except as otherwisepermitted in the Security Agreement, the Servicer shall not alter or amend anyReceivable, its credit policies, its collection policies or its charge-offpolicies in a manner that materially adversely affects the Surety unless theSurety shall have previously given its consent, which consent shall not beunreasonably withheld.

 

(d)           *TransactionDocuments. *The Servicer willnot an any time in the future deny that the Transaction Documents constitutethe legal, valid and binding obligations of the Servicer.

 

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**ARTICLEIII**

** **

**THE SURETY BOND; SECURITY**

** **

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

** **

**Section3.02.*  ConditionsPrecedent To Issuance of the Surety Bond*.** The Transferor andthe Seller shall have complied with the terms and satisfied the conditionsprecedent set forth below:

** **

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

 

(ii)           Payment of or satisfactoryarrangements for payment by the Transferor of (a) rating agency fees ofStandard & Poor’s and Moody’s; and (b) the fees and expenses incurredby the Surety in connection with the issuance of such Surety Bond, includingreasonable fees and expenses of counsel to the Surety and accountants for theSurety, all in accordance with the terms of the Commitment.  The fees for any other rating agency shall bepaid by the party requesting such other agency’s rating, unless such otheragency is a substitute for Standard & Poor’s or Moody’s in the event thatStandard & Poor’s or Moody’s is no longer rating securities, in which casethe cost for such agency shall be paid by the Transferor;

 

(iii)          Receipt by the Surety of a fullyexecuted copy of the Transaction Documents (except for the OriginatorAgreements);

 

(iv)          Receipt by the Surety of (A) thecertificate of incorporation and bylaws of the Transferor and (B) certified copies of the resolutions of theboard of directors of the Transferor authorizing the execution and delivery andperformance of the Transaction Documents and the other matters contemplatedthereby, and of all other documents evidencing any other action of theTransferor necessary to enter into the Transaction Documents, all in form andsubstance acceptable to the Surety and its counsel;

 

(v)           [Reserved.]

 

(vi)          Receipt by the Surety of the followingopinions of counsel:

 

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

 

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and substance acceptable to the Surety and itscounsel, regarding and the validity and enforceability of the TransactionDocuments against the Collateral Agent.

 

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

 

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

 

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

 

(vii)         Receipt by the Surety of true andcorrect copies of all approvals, licenses and consents, if any, including,without limitation, any required approval of the shareholders of the partieshereto, necessary for the transactions contemplated by the TransactionDocuments;

 

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

 

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

 

(x)            [Reserved.]

 

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

 

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

 

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

 

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

 

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

 

(xv)         No statute, rule, regulation or ordershall have been enacted, entered or deemed applicable by any government orgovernmental or administrative agency or court that would make the transactionscontemplated by any of the Transaction Documents illegal or otherwise preventthe consummation thereof;

 

(xvi)        No default or any fact or event whichresults, or which with notice or the passage of time, or both, would result ina Termination Event, Amortization Event, Wind-Down Event or Event of Defaultshall have occurred;

 

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

 

(xiii)         The Surety and its counsel shall havedetermined that all documents, certificates and opinions to be delivered inconnection with the Receivables conform to the terms of the TransactionDocuments; and

 

(xix)         The Surety shall have received suchother documents, instruments, approvals or opinions requested by the Surety asmay be reasonably necessary to effect the Transaction, including but notlimited to, evidence satisfactory to the Surety that the conditions precedent,if any, in the Transaction Documents have been satisfied.

 

Issuance of such SuretyBond will be conclusive evidence of satisfaction or waiver of any of theconditions set forth in this Section 3.02.

 

**Section 3.03.  *Premium.*** The MBIA Premium shall be payable in accordance with the SecurityAgreement so long as no Surety Default or Surety Insolvency has occurred.  The MBIA Premium shall be nonrefundablewithout regard to whether the Surety makes any payment under the Surety Bond.

** **

**Section 3.04.  *Indemnification.***

** **

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

 

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**(subjectto the provisions of Section 3.04(g) hereof), and any successors theretoagree to pay, and to protect, indemnify and save harmless, the Surety and itsofficers, directors, shareholders, employees, agents, including each person, ifany, who controls the Surety within the meaning of either Section 15 ofthe Securities Act of 1933, as amended, or Section 20 of the Securitiesand Exchange Act of 1934, as amended, from and against any and all claims,losses, liabilities (including penalties), actions, suits, judgments, demands,damages, costs or reasonable expenses (including, without limitation,reasonable fees and expenses of attorneys, consultants and auditors andreasonable costs of investigations) or obligations whatsoever (hereincollectively referred to as “Liabilities”) of any nature arising out of orrelating to the transactions contemplated by the Transaction Documents byreason of:**

** **

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

** **

**(ii)           the violation by the Transferor, theServicer or the Seller of any federal or state laws, rules or regulationsrelating to the maximum amount of interest permitted to be received on accountof the loan of money or with respect to the Receivables;**

** **

**(iii)          the breach by the Transferor, theServicer, the Seller or the Collateral Agent of any of its material obligationsunder this Agreement or any of the Transaction Documents;**

** **

**(iv)          the breach by the Reserve AccountAgent or the Servicer under any of the Transaction Documents to which it is aparty, and such breach is not cured within the applicable time period set forthin the related Transaction Document;**

** **

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

** **

**(vi)          any state or federal tax liabilityimposed upon the Transferor or in connection with the transactions contemplatedby the Transaction Documents.**

** **

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

 

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** **

**penalties),actions, suits, judgments, demands, damages, costs or reasonable expenses(including, without limitation, reasonable fees and expenses of attorneys,consultants and auditors and reasonable costs of investigations) or obligationswhatsoever (herein collectively referred to as “Liabilities”) of any naturearising out of or relating to the transactions contemplated by the TransactionDocuments by reason of any losses, damages or expenses of whatsoever kind ornature, including reasonable attorney’s fees, which the Surety may at any timeincur by reason of or in consequence of any Obligor making any legally provenclaim relating to an Originator’s acts regarding each contract evidencing therelated Receivable purchased by the Seller or Transferor.**

** **

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

** **

**(d)  Any party whichproposes to assert the right to be indemnified under this Section 3.04will, promptly after receipt of notice of commencement of any action, suit orproceeding against such party in respect of which a claim is to be made againstthe Transferor, the Servicer, the Seller, the Reserve Account Agent or theCollateral Agent under this Section 3.04, notify the Transferor, theServicer, the Collateral Agent, the Reserve Account Agent or the Seller of thecommencement of such action, suit or proceeding, enclosing a copy of all papersserved.  In case any action, suit orproceeding shall be brought against any indemnified party and it shall notifythe Transferor, the Servicer, the Collateral Agent, the Reserve Account Agentor the Seller of the commencement thereof, the Transferor, the Servicer, theSeller, the Reserve Account Agent or the Collateral Agent shall be entitled toparticipate in, and, to the extent that it shall wish, to assume the defensethereof, with counsel reasonably satisfactory to such indemnified party, andafter notice from the Transferor, the Servicer the Seller, the Reserve AccountAgent or the Collateral Agent to such indemnified party of its election so toassume the defense thereof, the Transferor, the Servicer, the Seller, theReserve Account Agent or the Collateral Agent shall not be liable to suchindemnified party for any legal or other expenses other than reasonable costsof investigation subsequently incurred by such indemnified party in connectionwith the defense thereof.  Theindemnified party shall have the right to employ its counsel in any such actionthe defense of which is assumed by the Transferor, the Servicer, the Seller,the Reserve Account Agent or the Collateral Agent in accordance with the termsof this subsection (d), but the fees and expenses of such counsel shall beat the expense of such indemnified party unless the employment of counsel bysuch indemnified party has been authorized by the**

 

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**Transferor,the Servicer, the Seller, the Reserve Account Agent or the CollateralAgent.  None of the Transferor, theServicer, the Seller, the Reserve Account Agent and the Collateral Agent shallbe liable for any settlement of any action or claim effected without itsconsent.**

** **

**(e)  This indemnityprovision shall survive the termination of this Agreement and shall surviveuntil the statute of limitations has run on any causes of action which arisefrom one of these reasons and until all suits filed as a result thereof havebeen finally concluded.**

** **

**(f)  Notwithstandingany provision or obligation to the contrary set forth in this Agreement or anyinstrument now or hereafter securing, affecting or relating to any obligationof the Transferor, the Servicer, the Seller, the Reserve Account Agent or theCollateral Agent under this Agreement, including, without limitation, theSecurity Agreement, no individual representative of the Transferor, theServicer, the Collateral Agent, the Reserve Account Agent or the Seller(including, without limitation, employees, officers, directors and shareholdersthereof) shall have any personal liability under this Agreement including,without limitation, any liability for the performance or observance ornonperformance or nonobservance of any covenant or obligation of theTransferor, the Servicer, the Collateral Agent, the Reserve Account Agent andthe Seller or for breach of any representation or warranty contained in thisAgreement.**

** **

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

** **

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

 

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**Americain immediately available funds at the notice address for the Surety asspecified in Section 6.02 hereof on the date when due.  Payments to be made to the Surety under thisAgreement shall bear interest payable to the extent provided in this Agreementat the Late Payment Rate from the date when due to the date paid.**

** **

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

** **

**Section 3.07.*  Reimbursement and Additional PaymentObligation*.**

** **

**(a)  In accordancewith Section 5.1(a)(vi) of the Security Agreement, the Surety shall beentitled to reimbursement for any payment made by the Surety under the SuretyBond, which reimbursement shall be due and payable on the date that any amountis to be paid pursuant to a Notice or a Remittance Date Notice (each as definedin the Surety Bond), in an amount equal to the amount to be so paid and allamounts previously paid that remain unreimbursed, together with interest on anyand all amounts remaining unreimbursed (to the extent permitted by law, if inrespect of any unreimbursed amounts representing interest) from the date suchamounts became due until paid in full (after as well as before judgment), at arate of interest equal to the Late Payment Rate.**

** **

**(b)  Anything in subsection 3.07(a)hereof to the contrary notwithstanding, the Surety shall be entitled toreimbursement (i) from the Seller for payments made under the Surety Bond arisingas a result of the Transferor’s failure to repurchase any Receivable requiredto be repurchased pursuant to Section 3.1 of the Security Agreement, or Section 3.02of the Servicing Agreement, or the Seller’s failure to repurchase anyReceivable required to be repurchased pursuant to Section 6.2 of thePurchase Agreement at a rate of interest equal to the Late Payment Rate and (ii)from the Servicer for payments made under the Surety Bond, arising as a resultof the Servicer’s failure to deposit into the Collection Account any otheramount required to be so deposited pursuant to the Security Agreement, togetherwith interest on any and all amounts remaining unreimbursed (to the extentpermitted by law, if in respect to any unreimbursed amounts representinginterest) from the date such amounts became due until paid in full (after aswell as before judgment), at a rate of interest equal to the Late Payment Rate.**

** **

**(c)  The Selleragrees to pay to the Surety as follows: any and all charges, fees, costs andexpenses that the Surety may reasonably pay or incur, including, but notlimited to, reasonable attorneys’ and accountants’ fees and expenses, inconnection with (i) any accounts established to facilitate payments underthe Surety Bond to the extent the Surety has not been immediately reimbursed onthe date that any amount is paid by the Surety**

 

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**underthe Surety Bond, (ii) the enforcement, defense or preservation of anyrights in respect of any of the Transaction Documents, including defending,monitoring or participating in any litigation or proceeding (including anyinsolvency or bankruptcy proceeding  inrespect of any Transaction participant or any affiliate thereof) relating toany of the Transaction Documents, any party to any of the TransactionDocuments, in its capacity as such a party, or the Transaction, or(iii) any amendment, waiver or other action with respect to, or relatedto, any Transaction Document, whether or not executed or completed, and theSurety reserves the right to charge a reasonable fee as a condition toexecuting any waiver or consent proposed in respect of any of the TransactionDocuments.**

** **

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

** **

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

** **

**(f)  The CollateralAgent, the Seller, the Servicer and the Transferor agree to pay to the Suretyas follows:  any payments made by theSurety on behalf of, or advanced to, the Collateral Agent the Seller, theServicer or the Transferor, as the case may be, consisting of any amountspayable by the Collateral Agent, the Seller, the Servicer or the Transferorpursuant to the Transaction Documents.**

** **

**(g)  Followingtermination of the Security Agreement pursuant to Section 6.1 thereof, theSeller agrees to reimburse the Surety for any Insured Payments required to bemade pursuant to the Surety Bond subsequent to the date of such termination.**

** **

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

** **

**ARTICLE IV**

** **

**FURTHER AGREEMENTS**

** **

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

 

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

** **

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

** **

**(a)  Each of theTransferor, the Servicer, the Collateral Agent, the Reserve Account Agent andthe Seller agrees that it will, from time to time, execute, acknowledge anddeliver, or cause to be executed, acknowledged and delivered, such supplementshereto and such further instruments as the Surety may reasonably request and asmay be reasonably required in the Surety’s judgment to effectuate the intentionof or facilitate the performance of this Agreement.**

** **

**Section 4.03.* Obligations Absolute*.** The obligations of the Transferor, theServicer, the Collateral Agent, the Reserve Account Agent and the Sellerhereunder shall be absolute and unconditional, and shall not be subject to, andthe Transferor, the Servicer, the Seller, the Collateral Agent, and the ReserveAccount Agent hereby waive any of their rights of, abatement, diminution,postponement or deduction, or to any defense other than payment, or to anyright of setoff or recoupment arising out of any breach under any of theTransaction Documents, by any party thereto or any beneficiary thereof, or outof any obligation at any time owing to the Transferor, the Servicer, theSeller, the Collateral Agent or the Reserve Account Agent.  Nothing herein shall be construed as prohibitingthe Transferor, the Servicer, the Seller, the Collateral Agent or the ReserveAccount Agent from pursuing any rights or remedies they may have against anyother person or entity in a separate legal proceeding.  The obligations of the Transferor, theServicer, the Seller, the Collateral Agent and the Reserve Account Agent areabsolute and unconditional and will be paid or performed strictly in accordancewith this Agreement.

** **

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

** **

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

 

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**Noneof the Transferor, the Servicer, the Seller, the Collateral Agent or theReserve Account Agent may assign this Agreement, or delegate any of its dutiesspecifically set forth herein, without the prior written consent of the Suretywhich consent shall not be unreasonably withheld.**

** **

**(b)  The Surety shallhave the right to give participations in its rights under this Agreement and toenter into contracts of reinsurance with respect to the Surety Bond and eachsuch participant or reinsurer shall be entitled to the benefit of anyrepresentation, warranty, covenant and obligation of the Transferor, theServicer, the Seller, the Collateral Agent and the Reserve Account Agenthereunder as if such participant or Surety was a party hereto; provided that nosuch grant of participation shall operate to relieve the Surety of liability onthe Surety Bond.**

** **

**(c)  Except asprovided herein with respect to participants and reinsurers, nothing in thisAgreement shall confer any right, remedy or claim, express or implied, upon anyperson, other than the Surety, against the Transferor, the Servicer, theSeller, the Collateral Agent or the Reserve Account Agent, and all the terms,covenants, conditions, promises and agreements contained herein shall be forthe sole and exclusive benefit of the parties hereto and their successors.**

** **

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

** **

**ARTICLE V**

** **

**DEFAULTS; REMEDIES**

** **

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

** **

**(a)  Anyrepresentation or warranty made by the Transferor, the Servicer, the Seller,the Collateral Agent or the Reserve Account Agent (i) hereunder which, ifcapable of being cured, is not cured within 15 days after notice thereof isgiven to the Transferor, the Servicer, the Seller, the Collateral Agent or theReserve Account Agent or (ii) under the Transaction Documents, or in anycertificate furnished hereunder or under the Transaction Documents, which isnot cured within the applicable cure period set forth in the relatedTransaction Document shall prove to be untrue or incomplete in any materialrespect;**

 

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**(b)  (i) TheTransferor, the Servicer, the Seller, the Reserve Account Agent or theCollateral Agent shall fail to pay when due any amount payable by theTransferor, the Servicer, the Seller, the Reserve Account Agent or theCollateral Agent hereunder or (ii) a legislative body has enacted any lawthat declares or a court of competent jurisdiction shall find or rule that anyof the Transaction Documents to which the related Person is a party are notvalid and binding on the Transferor, the Servicer, the Seller, the CollateralAgent or the Reserve Account Agent;**

** **

**(c)  The occurrenceand continuance of a Servicer Event of Default under the Servicing Agreement(as defined therein) or a Termination Event, a Wind-Down Event or AmortizationEvent under the Security Agreement, which is not cured within the applicablecure period set forth in the related Transaction Document (except with respectto a Termination Event);**

** **

**(d)  Any failure onthe part of the Transferor, the Servicer, the Seller, the Collateral Agent orthe Reserve Account Agent duly to observe or perform in any material respectany other of the covenants or agreements on the part of the Transferor, theServicer, the Seller, the Collateral Agent or the Reserve Account Agentcontained in this Agreement which continues unremedied for 30 days, or in anyother Transaction Document which is not cured within the applicable cure periodset forth in the related Transaction Document after the date on which writtennotice of such failure, requiring the same to be remedied, shall have beengiven to the Transferor, the Servicer, the Seller, the Collateral Agent or theReserve Account Agent, as the case may be, by the Surety or by the ReserveAccount Agent or the Collateral Agent (with a copy to the Surety);**

** **

**(e)  Any materialparty thereto shall breach any material representation or warranty or fail toobserve any material covenant or agreement contained in any TransactionDocument (except for the obligations described under paragraph (a) or (c)above), and such failure shall continue for a period of 30 days after writtennotice given to the Transferor and, if applicable, such other party; providedthat, if such failure shall be of a nature that it cannot be cured within 30days, such failure shall not constitute an Event of Default hereunder if withinsuch 30-day period the Transferor or such other party shall have given noticeto the Surety of corrective action it proposes to take, which corrective actionis agreed in writing by the Surety to be satisfactory and the Transferor orsuch other party shall thereafter pursue such corrective action diligentlyuntil such default is cured;**

** **

**(f)  A decree ororder of a court or agency or supervisory authority having jurisdiction in thepremises in an involuntary case under any present or future federal or statebankruptcy, insolvency or similar law or the appointment of a conservator orreceiver or liquidator or other similar official in any insolvency,readjustment of debt, marshaling of assets and liabilities or similarproceedings, or for the winding-up or liquidation of its affairs, shall havebeen entered against the Transferor, the Servicer, the Seller, the CollateralAgent or the Reserve Account Agent and such decree or order shall have remainedin force undischarged or unstayed for a period of 60 consecutive days;**

 

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

** **

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

** **

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

** **

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

** **

**(i)**                                     declare allindebtedness of every type or description owed by such party to the Surety withrespect to the transactions contemplated by the Transaction Documents to beimmediately due and payable, and the same shall thereupon be immediately dueand payable;

** **

**(ii)**                                  exercise any rightsand remedies under any of the Transaction Documents in accordance with theterms of such Transaction Document; or

** **

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

** **

**(b)  Unless otherwiseexpressly provided, no remedy herein conferred upon or reserved to the Suretyis intended to be exclusive of any other available remedy, but each remedyshall be cumulative and shall be in addition to other remedies given under anyof the Transaction Documents or existing at law or in equity.  No delay or omission to exercise any right orpower accruing under any of the Transaction Documents upon the happening of anyevent set forth in Section 5.01 hereof shall impair any such right orpower or shall be construed to be a waiver thereof, but any such right andpower may be exercised from time to time and as often as may be deemedexpedient.  In order to entitle theSurety to exercise any remedy reserved to the Surety in this Article, it shallnot be necessary to give any notice, other than such notice as may be requiredin this Article.**

 

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**Section 5.03.*  Waivers*.**

** **

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

** **

**(b)  The Surety shallhave the right, to be exercised in its complete discretion, to waive any Eventof Default hereunder, by a writing setting forth the terms, conditions andextent of such waiver signed by the Surety and delivered to the Transferor, theServicer, the Seller, the Collateral Agent, and the Reserve Account Agent.  Unless such writing expressly provides to thecontrary, any waiver so granted shall extend only to the specific event oroccurrence which gave rise to the Event of Default so waived and not to anyother similar event or occurrence which occurs subsequent to the date of suchwaiver.**

** **

**Section 5.04.*  No Insolvency Proceedings*.**  So long as this Agreement is in effect, noparty hereto will file any involuntary petition or otherwise institute anybankruptcy, reorganization, arrangement, insolvency or liquidation proceedingor other proceeding under any federal or state bankruptcy or similar lawagainst the Transferor; provided, however, the Surety may take whatever actionit deems necessary to realize on the Receivables to the extent of any paymentsunder the Surety Bond.

** **

**ARTICLE VI**

** **

**MISCELLANEOUS**

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

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

 

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To the Surety:

 

MBIA Insurance Corporation

113 King Street

Armonk, NY  10504

Attention: Insured Portfolio Management-SF

Telecopy No.: (914) 765-3810

Confirmation: (914) 765-3781

 

To the Seller:

 

First Investors FinancialServices

Group, Inc.

Suite 710

675 Bering Drive

Houston, TX 77057

Attention: Tommy A. Moore, Jr.

Telecopy No.: (713) 977-0657

Confirmation: (713) 977-2600

 

To the Collateral Agent, Custodian

or Back-Up Servicer:

 

Wells Fargo Bank, National Association

MAC N9311-161

Sixth & Marquette

Minneapolis, Minnesota 55479-0070

Attention:  Corporate Trust Services – Asset-Backed Administration

Telecopy No.: (713) 216-4880

Confirmation: (713) 216-4181

 

To the Transferor:

 

First Investors Auto Receivables Corporation

Suite 710

675 Bering Drive

Houston, TX 77057

Attention: Tommy A. Moore, Jr.

Telecopy No.: (713) 977-0657

Confirmation: (713) 977-2600

 

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To the Reserve Account Agent:

 

Wachovia Capital Markets, LLC

301 South College St., TW-10

Charlotte, NC 28288

Attention: Justin Zakocs

Telecopy No.: (704) 383-9106

Confirmation:  (704) 715-8184

 

A party may specify anadditional or different address or addresses by writing mailed or delivered tothe other parties as aforesaid.  All suchnotices and other communications shall be effective upon delivery, except whentelexed or telecopied, in which case, effective upon telex or telecopy againstreceipt of answerback or written confirmation.

 

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

 

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

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

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**Section 6.05.*  Consent to Jurisdiction and Venue, Etc*.**  The Transferor, the Servicer, the Seller, theCollateral Agent and the Reserve Account Agent each irrevocably (a) agreesthat any suit, action or other legal proceeding arising out of or relating tothis Agreement, the Security Agreement or any of the other TransactionDocuments may be brought in a court of record in the State of New York orin the Courts of the United States of America located in such state,(b) consents to the jurisdiction of each such court in any such suit,action or proceeding and (c) waives any objection which they may have tothe laying of venue of any such suit, action or proceeding in any of suchcourts and any claim that any such suit, action or proceeding has been broughtin an inconvenient forum.  TheTransferor, the Servicer, the Seller and the Collateral Agent each herebyirrevocably appoints CT Corporation System, Suite 1301, 116 John Street, NewYork, New York 10038, as its agent to receive on behalf of the Transferor, theServicer, the Seller and the Collateral Agent, as the case may be, and theirrespective properties service of copies of the summons and complaint and otherprocess which may be served in any such suit, action or proceeding (the “ProcessAgent”).  Such service may be made bymailing or delivering a copy of such process to the Transferor, the Servicer, theSeller or the Collateral Agent, as the case may be, in care of the ProcessAgent at the applicable address above, and the Transferor, the

 

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

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Nothing in this Section 6.05shall affect the right of the Surety to serve legal process in any other mannerpermitted by law or affect the right of the Surety to bring any suit, action orproceeding against the Transferor, the Seller, the Collateral Agent or theReserve Account Agent or their respective property in the courts of any otherjurisdiction.

 

**Section 6.06.*  Consent of Surety*.** In the event that the Surety’s consent is required under the termshereof or any term of any other Transaction Document, it is understood andagreed that the determination whether to grant or withhold such consent shallbe made solely by the Surety in its absolute discretion.  The Surety hereby agrees that it will respondto any request for consent in a timely manner, taking into consideration thebusiness of the Transferor, the Servicer, the Seller, the Collateral Agent andthe Reserve Account Agent.

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

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

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

 

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

 

 
|   | MBIA INSURANCE CORPORATION                                                                     |
|--------|------------------------------------------------------------------------------------------------|
|   |                                                                                           |
|   | By                                                                                             |   |   |
|   |                                                                                           |   |
|   |                                                                                           |   |
|   | FIRST INVESTORS AUTO RECEIVABLES                                                               |
|   | CORPORATION, as Transferor                                                                     |
|   |                                                                                           |   |
|   | By                                                                                             |   |   |
|   |                                                                                           |   |
|   |                                                                                           |   |
|   | FIRST INVESTORS FINANCIAL SERVICES,                                                            |
|   | INC., as Seller                                                                                |
|   |                                                                                           |   |
|   | By                                                                                             |   |   |
|   |                                                                                           |   |
|   |                                                                                           |   |
|   | WELLS FARGO BANK, NATIONAL  ASSOCIATION, as Custodian, Collateral Agent,  and Back-up Servicer |
|   |                                                                                           |   |
|   | By                                                                                             |   |   |
|   |                                                                                           |   |
|   |                                                                                           |   |
|   | WACHOVIA CAPITAL MARKETS, LLC, as  Reserve Account Agent                                       |
|   |                                                                                           |   |
|   | By                                                                                             |   |   |

 

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