**Exhibit10.114**

 

AMENDED AND RESTATED SECURITYAGREEMENT

 

among

 

FIRST INVESTORS AUTORECEIVABLES CORPORATIONas the Debtor,

 

FIRST INVESTORS FINANCIALSERVICES, INC.,as the Seller,

 

FIRST INVESTORS SERVICINGCORPORATION,as the Servicer,

 

VARIABLE FUNDING CAPITALCORPORATION,as the Company,

 

WACHOVIA CAPITAL MARKETS, LLC,as the Administrative Agent and Reserve Account Agent,

 

MBIA INSURANCE CORPORATION,as the Surety Bond Provider,

 

and

 

WELLS FARGO BANK, NATIONALASSOCIATION,as the Collateral Agent

 

Dated as of February 18,2005

 

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TABLE OF CONTENTS

 
| Article I Definitions                                                 |                                                                     |
|----------------------------------------------------------------------------|--------------------------------------------------------------------------|
| Section 1.1                                                           | Definitions.                                                             |   |
| Article II Grant of Security Interest                                 |                                                                     |
| Section 2.1                                                           | Grant of Security Interest.                                              |   |
| Section 2.2                                                           | Additional Receivables.                                                  |   |
| Section 2.3                                                           | Re-Liening Trigger.                                                      |   |
| Section 2.4                                                           | Subrogation.                                                             |   |
| Section 2.5                                                           | Increase of Note.                                                        |   |
| Section 2.6                                                           | Release of Receivables.                                                  |   |
| Article III Representations,  Warranties and Covenants of The Debtor  |                                                                     |
| Section 3.1                                                           | Representations and Warranties Concerning  Receivables.                  |   |
| Section 3.2                                                           | Covenants of the Debtor.                                                 |   |
| Section 3.3                                                           | WAC Requirement.                                                         |   |
| Section 3.4                                                           | Covenants of the Seller.                                                 |   |
| Article IV Servicing and  Administration                              |                                                                     |
| Section 4.1                                                           | Servicing.                                                               |   |
| Section 4.2                                                           | Rights After Designation of Successor  Servicer.                         |   |
| Section 4.3                                                           | Responsibilities of the Debtor.                                          |   |
| Section 4.4                                                           | Monthly Debtor’s Certificate.                                       |   |
| Article V Allocation and Application  of Collections; Reserve Account |                                                                     |
| Section 5.1                                                           | Collections.                                                             |   |
| Section 5.2                                                           | Remittances to the Secured Parties.                                      |   |
| Article V-A The Reserve Account and  The Reserve Account Agent        |                                                                     |
| Section 5A.1                                                          | Establishment of the Reserve Account.                                    |   |
| Section 5A.2                                                          | Maintenance of Eligible Investments.                                     |   |
| Section 5A.3                                                          | Termination of Reserve Account; Release of  Funds.                       |   |
| Section 5A.4                                                          | Duties of the Reserve Account Agent.                                     |   |
| Section 5A.5                                                          | Representations, Warranties and Covenants  of the Reserve Account Agent. |   |
| Section 5A.6                                                          | Liability of the Reserve Account Agent.                                  |   |
| Section 5A.7                                                          | Limitation on Liability of the Reserve Account  Agent and Others.        |   |
| Article VI Termination Events;  Servicing Termination                 |                                                                     |
| Section 6.1                                                           | Termination Events.                                                      |   |
| Section 6.2                                                           | Wind-Down Events.                                                        |   |
| Section 6.3                                                           | Amortization Events.                                                     |   |
| Section 6.4                                                           | Remedies.                                                                |   |
| Section 6.5                                                           | Proceeds.                                                                |   |
| Article VII The Collateral Agent                                      |                                                                     |
| Section 7.1                                                           | Duties of the Collateral Agent.                                          |   |
| Section 7.2                                                           | Compensation and Indemnification of  Collateral Agent.                   |   |
| Section 7.3                                                           | Representations, Warranties and Covenants  of the Collateral Agent.      |   |
| Section 7.4                                                           | Liability of the Collateral Agent.                                       |   |

 

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| Section 7.5                | Merger or Consolidation of, or Assumption  of the Obligations of, the Collateral Agent.                              |   |
|---------------------------------|----------------------------------------------------------------------------------------------------------------------|--------|
| Section 7.6                | Limitation on Liability of the Collateral  Agent and Others.                                                         |   |
| Section 7.7                | Indemnification of the Secured Parties.                                                                              |   |
| Section 7.8                | Documents Held by the Collateral Agent;  Indication of Debtor Ownership; Inspection and Release of Receivable Files. |   |
| Article VIII Miscellaneous |                                                                                                                 |
| Section 8.1                | Notices, etc.                                                                                                        |   |
| Section 8.2                | Successors and Assigns.                                                                                              |   |
| Section 8.3                | Severability Clause.                                                                                                 |   |
| Section 8.4                | Amendments; Governing Law.                                                                                           |   |
| Section 8.5                | No Bankruptcy Petition Against the Company  or the Debtor.                                                           |   |
| Section 8.6                | Setoff.                                                                                                              |   |
| Section 8.7                | No Recourse.                                                                                                         |   |
| Section 8.8                | Further Assurances.                                                                                                  |   |
| Section 8.9                | Other Costs, Expenses and Related Matters.                                                                           |   |
| Section 8.10               | Exercise of Rights by Surety Bond Provider.                                                                          |   |
| Section 8.11               | Counterparts.                                                                                                        |   |
| Section 8.12               | Headings                                                                                                             |   |
| Section 8.13               | No Recourse Against Certain Persons.                                                                                 |   |
| Section 8.14               | Amendment and Restatement of Prior Agreement;  No Novation.                                                          |   |
|                            |                                                                                                                 |   |
| Exhibits                        |                                                                                                                 |   |
|                            |                                                                                                                 |   |
| Exhibit A                       | Form of Note                                                                                                         |   |
| Exhibit B                       | Receivables Schedule                                                                                                 |   |
| Exhibit C                       | Servicing Agreement                                                                                                  |   |
| Exhibit D                       | List of Eligible Investments                                                                                         |   |
| Exhibit E                       | Credit Guidelines                                                                                                    |   |
| Exhibit F                       | Perfection Representations, Warranties and Covenants  of the Debtor                                                  |   |
| Exhibit G                       | Form of Reassignment of Removed Receivables                                                                          |   |
| Exhibit H                       | [Reserved]                                                                                                           |   |
| Exhibit I                       | [Reserved]                                                                                                           |   |
| Exhibit J                       | Form of Surety Bond                                                                                                  |   |
| Exhibit K                       | Forms of Contracts                                                                                                   |   |
| Exhibit L                       | Form of Certificate as to UCC Filing                                                                                 |   |
| Exhibit M                       | Form of Interest Rate Cap Agreement                                                                                  |   |
| Exhibit N                       | Form of Servicers’ Officer’s Certificate as  to Additional Receivables                                     |   |
| Exhibit O                       | Form of Debtor’s Officer’s Certificate as  to Additional Receivables                                       |   |
| Exhibit P                       | Summary Credit and Collection Guidelines  for Extended Term Financings                                               |   |

 

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AMENDED AND RESTATED SECURITYAGREEMENT

 

AMENDED AND RESTATED SECURITY AGREEMENT,dated as of February 18, 2005 (this “*Agreement*”),is entered into by and among FIRST INVESTORS AUTO RECEIVABLES CORPORATION, aDelaware corporation (the “*Debtor*”),FIRST INVESTORS FINANCIAL SERVICES, INC., a Texas corporation (“*FIFS*” or “*Seller*”), FIRST INVESTORS SERVICINGCORPORATION, a Delaware corporation (“*FISC*”or the “*Servicer*”),VARIABLE FUNDING CAPITAL CORPORATION, a Delaware corporation, (“*VFCC*”), WACHOVIA CAPITAL MARKETS, LLC,a Delaware limited liability company (successor in interest to WachoviaSecurities, Inc., formerly known as First Union Securities, Inc.)(*“Wachovia Capital Markets*”), MBIAINSURANCE CORPORATION, a New York stock insurance company (“*Surety Bond Provider*”), and WELLSFARGO BANK, NATIONAL ASSOCIATION, successor by merger to Wells Fargo Bank,National Association (“*Wells Fargo*”).

 

WITNESSETH :

 

WHEREAS, subject to the terms and conditionsof that certain Security Agreement, dated as of October 22, 1996 (asamended, supplemented or restated to the date hereof, the “*Security Agreement*”), the Debtorgranted a security interest in and to the Receivables and related property includingthe Debtor’s security interest in the Financed Vehicles and the Collectionsderived therefrom during the full term of this Agreement;

 

WHEREAS, the parties hereto have amended theSecurity Agreement in certain respects;

 

WHEREAS, the parties hereto have requestedthat the Security Agreement be amended and restated in its entirety to reflectthe amendment of certain provisions thereof;

 

NOW THEREFORE, in consideration of thepremises and the other mutual covenants contained herein, the parties heretoagree as follows:

 

# **Article I**

 

# **Definitions**

 

## **Section 1.1****                                   Definitions.**

 

All capitalized terms used herein shall havethe meanings herein specified, and shall include in the singular number theplural and in the plural number the singular:

 

Accrued Interest:  For any Collection Period, the sum of theInterest for each day during the Collection Period.

 

Addition Closing Date:  The closing date on which AdditionalReceivables are funded pursuant to the terms and conditions set forth in Section 2.2hereof.

 

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Addition Cut-Off Date:  The cut-off date with respect to AdditionalReceivables to be added as of any Addition Date.  The Addition Cut-Off Date shall be the lastday of the Collection Period immediately preceding any Addition Date.

 

Addition Date:  The date as of which Additional Receivablesare to be included as Collateral in accordance with Section 2.2 ofthis Agreement.

 

Additional Amounts:  (i) any refunds or other payments under anyExtended Service Agreement; (ii) refunds in connection with (a) credit lifepolicies relating to Financed Vehicles and (b) accident and health policiesrelating to Financed Vehicles and (iii) sales tax refunds relating to FinancedVehicles.

 

Additional Investment:  Additional advances of funds evidenced by theNote.

 

Additional Receivables:  Those Eligible Receivables designated by theDebtor as additional Collateral and included as Collateral in accordance with Section 2.2of this Agreement.

 

Adjusted LIBOR Rate:  With respect to any Collection Period, aninterest rate per annum equal to the sum of (x) a fraction, expressed as apercentage and rounded upwards (if necessary), to the nearest 1/100 of 1%, (i)the numerator of which is equal to the LIBOR Rate for such Collection Periodand (ii) the denominator of which is equal to 100% minus the EurodollarReserve Percentage for such Collection Period and (y) 0.30%; provided, however,the Adjusted LIBOR Rate shall be the Base Rate if a Eurodollar Disruption Eventoccurs.

 

Adjusted Net Income:  For any period and any Person, such Person’sconsolidated net income (or loss) determined in accordance with GAAP, butexcluding: (a) the income of any other Person (other than its Subsidiaries) inwhich such Person or any of its Subsidiaries has an ownership interest, unlessreceived by such Person or its Subsidiary in a cash distribution; (b) anyafter-tax gains or losses attributable to an asset disposition other than inthe ordinary course of business; and (c) to the extent not included in clause(a) and clause (b) above, any after-tax extraordinary, non-cash or nonrecurringgains or losses.

 

Administrative Agent:  Wachovia Capital Markets, LLC, asadministrative agent for the Company.

 

Affiliate:  With respect to a Person, any other Personwhich directly or indirectly controls, is controlled by or is under commoncontrol with such Person.  The term “control”means the possession, directly or indirectly, of the power to direct or causethe direction of the management and policies of a Person, whether through theownership of voting securities, by contract or otherwise.

 

Agreement:  This Security Agreement, as amended to thedate hereof, including the First Omnibus Amendment, as the same may be amended,modified and supplemented from time to time in accordance with the termsthereof and hereof.

 

Alternative Rate:  An interest rate per annum equal to theAdjusted LIBOR Rate; provided, however, that the Alternative Rateshall be the Base Rate if a Eurodollar Disruption Event occurs.

 

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Amortization Event:  As defined in Section 6.3 hereof.

 

Amount Financed:  With respect to a Receivable means the amountadvanced under the Receivable toward either (i) the purchase price of theFinanced Vehicle and any related costs or (ii) the satisfaction of the indebtednesswhich was refinanced with the proceeds of such Receivable.

 

Annual Percentage Rateor APR:  Of a Receivable means theannual rate of finance charges stated in the Receivable.

 

Approved Subsidiary:Any subsidiary of the Seller approved in writing by the Administrative Agentand the Surety Bond Provider.

 

Approved Third Party Originator:Any institution approved in writing by Administrative Agent and the Surety BondProvider, which enters into an Approved Third Party Originator Agreement withany Approved Subsidiary.

 

Approved Third Party Originator Agreement:Any origination agreement between any Approved Subsidiary and any ApprovedThird Party Originator providing for the purchase by the Approved Subsidiary ofinstallment loan contracts for the refinancing of indebtedness incurred inconnection with the purchase of a new or used car or a new or used light trucksubstantially in the related form attached hereto as Exhibit K.

 

Assignment: Thedocument of assignment between an Approved Subsidiary and the Seller,substantially in the form attached to this Agreement as Exhibit K.

 

Available Collections:  With respect to each Remittance Date, allCollections received by the Servicer, from whatever source, during or withrespect to the prior Collection Period.

 

Available Funds:  With respect to a Remittance Date, the sum of(a) Available Collections and (b) amounts available for withdrawal from theReserve Account on such date.

 

Back-Up Servicing Fee:  With respect to a Collection Period, shall beequal to the quotient obtained by dividing an amount equal to 0.03% of theaggregate Principal Balance of the Receivables as of the beginning of suchCollection Period, by 12.

 

Bailee:  A “Bailee” within themeaning of Section 9-313 of the UCC.

 

Base Rate:  A rate per annum equal to the greater of (i)the prime rate of interest announced by the Liquidity Provider (or, if morethan one Liquidity Provider, then by Wachovia Bank, National Association) fromtime to time, changing when and as said prime rate changes (such rate notnecessarily being the lowest or best rate charged by the Liquidity Provider (orWachovia Bank, National Association as applicable)) and (ii) the sum of (a)1.50% and (b) the rate equal to the weighted average of the rates on overnightFederal funds transactions with members of the Federal Reserve System arrangedby Federal funds brokers, as published for such day (or, if such day is not aBusiness Day, for the next preceding Business Day) by the Federal Reserve Bankof New York, or, if such rate is not so published for any day that is aBusiness Day, the average of the quotations for such day for such transactionsreceived by the Liquidity Provider (or, if more

 

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than one Liquidity Provider, then by Wachovia Bank, NationalAssociation) from three Federal funds brokers of recognized standing selectedby it.

 

Borrowing Base:  At any time, the aggregate Principal Balanceof all Eligible Receivables minus the aggregate Principal Balance of allEligible Receivables originated by any one Originator (it being understood thatsuch term does not include Approved Third Party Originators) to the extent thatsuch aggregate Principal Balance exceeds 5.0% of the aggregate PrincipalBalance of all Eligible Receivables.

 

Breakage Costs:  Such amount or amounts as shall compensatethe Company for any loss, cost or expense incurred by the Company (asdetermined by the Company (and by the Administrative Agent on behalf of theCompany) in such Person’s sole discretion) as a result of a prepayment by theDebtor of the Interest or the Net Investment.

 

Business Day:  Any day (excluding Saturday or Sunday) onwhich banks are open for business in New York, New York, Charlotte, NorthCarolina and Houston, Texas.

 

Cap Counterparty:  As defined in Section 3.2(n) ofthis Agreement.

 

Carrying Costs:  For any Collection Period the sum of:

 

(a)                                  the Enhanced Yieldfor such Collection Period;

 

### (b)                                 without duplication ofthe amounts described in clause (a) above, any amounts necessary to payinterest, calculated at the Base Rate, with respect to amounts disbursed by theCredit Support Provider in respect of Defaulted Receivables, if the Surety BondProvider shall have failed to make any required payment under the Surety Bondin respect of such Defaulted Receivables, outstanding at any time during suchCollection Period accrued from the first day through the last day of suchCollection Period whether or not such interest is payable during suchCollection Period;

###  

### (c)                                  any past due amountsnot paid in clauses (a) and (b);

###  

### (d)                                 the costs to theCompany with respect to the Yield Protection Provision, which amounts paidpursuant to this clause (d) shall not exceed 1.00% per annum of the NetInvestment (unless the Accrued Interest under (a) above is calculatedwith reference to the Adjusted LIBOR Rate, in which case the amounts paid withrespect to the Yield Protection Provision shall not exceed 0.70% per annum ofthe Net Investment); and

###  

### (e)                                  the Program Fee andUnused Program Fee (the sum of which shall not exceed the product of 0.30% perannum and the Net Investment) accrued from the first day through the last dayof such Collection Period whether or not such amount is payable during suchCollection Period.

###  

Certificated Securities:  “Certificated securities” as defined in Section 8-102(a)(4)of the UCC which are in the continuous possession in the State of New York bythe Securities Intermediary.

 

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Change in Control:  The occurrence of any of the following:  (a) any Person shall, at any time followingthe Closing Date, acquire 51% or more of the total outstanding shares of FirstInvestors Financial Services Group, Inc.; (b) any Person shall, at any timefollowing the Closing Date, acquire directly or indirectly 51% or more of thevoting control with respect to the total outstanding shares of First InvestorsFinancial Services Group, Inc.; (c) First Investors Financial Services Group,Inc. shall cease to own, directly or indirectly, 51% or more of the totaloutstanding shares of the Seller or FISC; or (d) First Investors FinancialServices Group, Inc. shall not have directly or indirectly 51% or more of thevoting control with respect to the total outstanding shares of the Seller orFISC.

 

Clearing Corporation:  Depository Trust Company.

 

Clearing Corporation Securities:  “Certificated securities” as defined in Section 8-102(a)(4)of the UCC which are in the continuous possession of the Clearing Corporationin the State of New York or a Securities Intermediary.

 

Closing Date:  October 22, 1996.

 

Code:  The Internal Revenue Code of 1986, as amendedfrom time to time (including any successor statute), and the regulationspromulgated and the rulings issued thereunder.

 

Collateral:  As defined in Section 2.1 of thisAgreement.

 

Collateral Account:  That certain account of the Company pledgedto secure its obligations to the Liquidity Provider, the Credit SupportProvider and certain other secured parties.

 

Collateral Agent:  Wells Fargo Bank, National Association, orany successor thereto.

 

Collection Account:  The account established pursuant to Section 4.1(b).

 

Collection Period:  With respect to any Remittance Date, thecalendar month immediately preceding the month of such Remittance Date (andwith respect to the initial Remittance Date, the time period from the Cut-OffDate to October 31, 1996).

 

Collections:  All Principal Collections and Finance ChargeCollections received by the Servicer in respect of the Collateral in the formof cash, checks, wire transfers or other form of payment.

 

Commercial Paper:  Promissory notes of the Company issued by theCompany in the commercial paper market.

 

Company:  Variable Funding Capital Corporation and itssuccessors and assigns.

 

Conveyance Date:  As defined in Section 3.1(a)hereof.

 

Corporate Trust Office:  The office of the Collateral Agent at whichits corporate trust business shall be principally administered, which officeshall be the office specified in Section 8.1 of this Agreement, orsuch office at some other address which the Collateral Agent shall designatefrom

 

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time to time by notice to the Debtor, the Company, the Surety BondProvider and the Administrative Agent.

 

CP Rate:  For any day during any Collection Period, theper annum rate equivalent to the weighted average of the per annum rates paidor payable by the Company from time to time as interest on or otherwise (bymeans of interest rate hedges or otherwise taking into consideration anyincremental carrying costs associated with short-term promissory notes issuedby the Company maturing on dates other than those certain dates on which theCompany is to receive the funds) in respect of promissory notes issued by theCompany in the commercial paper market that are allocated, in whole or in part,by the Administrative Agent (on behalf of the Company) to fund or maintain theCompany’s investment in the Note during such Collection Period, as determinedby the Administrative Agent (on behalf of the Company) and reported to theDebtor which rate shall reflect and give effect to (i) commissions of placementagents and dealers in respect of such promissory notes, to the extent suchcommissions are allocated, in whole or in part, to such promissory notes by theAdministrative Agent (on behalf of the Company) and (ii) other borrowings bythe Company, including, without limitation, borrowings to fund small or odddollar amounts that are not easily accommodated in the commercial paper market;provided, however, that if any component of such rate is adiscount rate, in calculating the CP Rate, the Administrative Agent shall forsuch component use the rate resulting from converting such discount rate to aninterest bearing equivalent rate per annum.

 

Credit Guidelines:  Policies and procedures of the Seller,relating to the operation of the automotive financing business of the Seller,including, without limitation, the policies and procedures for determining thecreditworthiness of retail automotive installment sales contract customers, theextension of credit to such customers and relating to the maintenance of retailautomotive installment sales contracts and collection of retail automotiveinstallment sales contracts, as such policies and procedures may be amended fromtime to time and which shall be attached hereto as Exhibit E.

 

Credit Insurance:  VSI Insurance and any other insurance withrespect to the Receivables upon which the Company and the Seller have agreed.

 

Credit Support Agreement:  Any agreement between the Company and theCredit Support Provider evidencing the obligation of the Credit SupportProvider to provide credit support to the Company in connection with theissuance of Commercial Paper.

 

Credit Support Provider:  The Person or Persons who will provide creditsupport to the Company in connection with the issuance by the Company of itsCommercial Paper.

 

Custodian Files:  As defined in Section 2.13 of theServicing Agreement.

 

Cut-Off Date:  September 30, 1996.

 

Debtor:  First Investors Auto Receivables Corporationand its successors and assigns.

 

Defaulted Receivable:  Each Receivable with respect to which (i) inaccordance with the Debtor’s Credit Guidelines the Servicer has determined ingood faith that eventual payment in full is unlikely, (ii) the related FinancedVehicle has been repossessed or (iii) any payment or

 

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part thereof is over 120 days contractually delinquent (or if therelated obligor is insolvent or has sought protection under the United StatesBankruptcy Code and such receivable is more than 180 days delinquent).

 

Delinquent Receivable:  Each Receivable (i) as to which more than tendollars ($10.00) of any payment remains unpaid for more than thirty (30) daysfrom the original due date for such payment and (ii) is not a DefaultedReceivable.

 

Delinquency Ratio:  With respect to any date of determination,the ratio (expressed as a percentage) of (i) the aggregate amount of remainingscheduled payments of principal with respect to all Receivables which areDelinquent Receivables as of such date to (ii) the aggregate amount ofremaining scheduled payments of principal with respect to all outstandingReceivables as of such date.

 

Determination Date:  With respect to any Remittance Date, the 15thday of the month in which such Remittance Date falls or, if such day is not aBusiness Day, the Business Day next succeeding such day.

 

Direct Loan:  Any Receivable that was originated by theOriginator through a direct relationship with the Obligor thereof and notthrough a motor vehicle dealer.

 

Direct Loan Percentage:  On any day the percentage equivalent of afraction the numerator of which is the aggregate Principal Balance of allDirect Loans on such date and the denominator of which is the aggregatePrincipal Balance of all Eligible Receivables on such Date.

 

Dollar, Dollarsand the symbol $:  Lawful money ofthe United States of America.

 

EBITDA:  For any period and any Person, the total ofthe following (calculated without duplication) for such Person on aconsolidated basis for such period: (a) Adjusted Net Income; plus (b)any provision for (or less any benefit from) income or franchise taxes deductedin determining Adjusted Net Income; plus (c) Interest Expense deductedin determining Adjusted Net Income; plus (d) amortization anddepreciation expense deducted in determining Adjusted Net Income; plus(e) other noncash charges deducted in determining Adjusted Net Income and notalready deducted in accordance with clause (d) above or clause (b) and clause(c) of the definition of Adjusted Net Income; minus (f) noncash creditsincluded in determining consolidated Adjusted Net Income and not alreadyexcluded in accordance with the definition of Adjusted Net Income.

 

EBITDA Coverage Ratio:  The ratio of EBITDA to Interest Expense.

 

Effective Date:  January 14, 2002.

 

Eligible Investments:  Each of the investments attached hereto onthe list of investments set forth as Exhibit D, as amended or modifiedonly with the prior written consent of the Surety Bond Provider, Moody’s andS&P and which may include investments for which the Collateral Agent (butnot in its capacity as Collateral Agent) or an Affiliate of the CollateralAgent provides services.

 

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Eligible Receivables:  As of any day, each Receivable, includingAdditional Receivables, of the Debtor:

 

(a)                                  which is payable inDollars;

 

### (b)                                 at the time oforigination, the Obligor on which has provided, as its most recent billingaddress, an address located in the United States;

###  

### (c)                                  which is not aDefaulted Receivable at the time such Receivable becomes part of theCollateral;

###  

### (d)                                 which has been createdin accordance with, or under standards no less stringent than, the CreditGuidelines which are attached hereto as Exhibit E;

###  

### (e)                                  which is not morethan thirty (30) days contractually delinquent from the due date, at the timesuch Receivable becomes part of the Collateral (except for no more than 2% ofthe Principal Balance of any Receivables pledged on the Closing Date or 1% ofthe Principal Balance of any Receivables pledged on any Addition Date, which,in each case, may be 30 to 59 days contractually delinquent), nor does theObligor with respect thereto have any other automotive receivable owing to theSeller which is sixty (60) or more days contractually delinquent or defaultedat the time of transfer;

###  

### (f)                                    which is either (i)a Direct Loan or (ii) was sold to the Debtor in the ordinary course of theDebtor’s business and which was created as a result of an advance by anOriginator, directly to or for the benefit of an Obligor for the purchase of anautomobile or light truck or as a result of the extension of credit by anApproved Third Party Originator to an Obligor in satisfaction of indebtedness whichwas incurred in connection with the purchase of an automobile or light truck;

 

### (g)                                 as to which at thetime such Receivable first became part of the Collateral, the Debtor will havegood and marketable title thereto and which is not subject to any Lien or claimor other encumbrance for any work, labor or materials performed on the relatedFinanced Vehicle which are Liens prior to, or equal or coordinate with, thesecurity interest in the Financed Vehicle granted by the Receivable, and as towhich, the Collateral Agent, for the benefit of the Secured Parties, shall havea valid and perfected first priority security interest, free and clear of allLiens, encumbrances, security interests and rights of others; provided, however,that the requirement of good and marketable title shall be deemed satisfied tothe extent that the Debtor fully complies with Section 7.8(a)hereof;

###  

### (h)                                 as to which at thetime such Receivable first became part of the Collateral, to the best of theSeller’s knowledge, a bona-fide down payment has been made;

###  

### (i)                                     which provides forlevel monthly payments (provided that the payment in the first and last monthof the Receivable may be minimally different from the level payment) that fullyamortize the Amount Financed by maturity and yield interest at the APR;

 

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### (j)                                     which providesfor, in the event that such Receivable is prepaid by the Obligor, a prepaymentthat fully pays the Principal Balance of such Receivable and any interestaccrued through the date of prepayment;

###  

### (k)                                  which does notrepresent either a direct or indirect obligation of any federal, state or localgovernment entity;

###  

### (l)                                     the Obligor ofwhich has not previously defaulted on an automobile installment sales contractpurchased by the Seller at the time such Receivable becomes part of theCollateral;

###  

### (m)                               which was originated byan Originator or an Approved Third Party Originator, in either case, approvedby the Seller and which Originator or Approved Third Party Originator, asapplicable, is subject to an Originator Agreement with the Seller or subject toan Approved Third Party Originator Agreement, respectively, and which ifacquired by the Seller pursuant to a “bulk purchase” from another Originator orany Approved Subsidiary has been approved in writing by the Surety BondProvider;

###  

### (n)                                 which has a clearright of repossession on the Financed Vehicle securing such Receivable;

###  

### (o)                                 which is not “electronicchattel paper” as defined in Section 9-102(31) of the UCC;

###  

### (p)                                 which is not, at thetime such Receivable became part of the Collateral, subject to any right ofrescission, cancellation, setoff, claim, counterclaim or defense (including thedefense of usury) of the Obligor;

###  

### (q)                                 which has an originalmaturity of 72 months or less; provided, however, that anyEligible Receivable that has an original maturity in excess of sixty (60)months must comply in all material respects with the Guidelines for ExtendedTerm Financings; provided, further, however, that theweighted average remaining term to maturity of all Eligible Receivables shallnot exceed 66 months;

###  

### (r)                                    which has an APR ofat least 8.99%; provided, however, that the WAC Requirement orthe requirements of Section 3.3 must be satisfied at all times;

###  

### (s)                                  the due date for anypayment or payments on which has not been extended as of any date ofdetermination; provided, that if the Obligor with respect to aReceivable has made six consecutive payments in full on such Receivable, suchReceivable shall be an Eligible Receivable if it satisfies all other clauses ofthis definition and if extensions have been granted on the payments withrespect to such Receivable either (A) in the aggregate for no more than onemonth for each twelve months of the original term of such Receivable; or (B) nomore than twice for periods of one month each during the preceding twelvecalendar months;

###  

### (t)                                    which is secured bya valid, subsisting, and enforceable first priority perfected security interestin favor of the Seller in the related Financed Vehicle, which security interesthas been validly assigned by the Seller to the Debtor;

 

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### (u)                                 which represents thegenuine, legal, valid and binding payment obligation in writing of the Obligor,enforceable by the holder thereof in accordance with its terms, subject to theeffect of bankruptcy, insolvency, reorganization or other similar lawsaffecting the enforcement of creditors’ rights generally;

###  

### (v)                                 which shall havecomplied with, at the time of its origination, and shall remain in compliancewith, all Requirements of Law;

###  

### (w)                               the Amount Financedthereunder shall not exceed $50,000; provided, however, that onany date of determination the aggregate Principal Balance of Receivables withan Amount Financed in excess of $40,000 cannot exceed 10% of the BorrowingBase;

###  

### (x)                                   as to which, iforiginated under the Seller’s Participating Program, a period of at least 1month has elapsed since origination and the Originator of which is notobligated to repurchase such Receivable in the event of a payment default bythe Obligor;

###  

### (y)                                 the Obligor of whichis required to make payments to a lockbox under the control of the Servicer;

###  

### (z)                                   which, at the timesuch Receivable first became part of the Collateral, has not been waived ormodified except as permitted herein by the Collateral Agent acting upon thewritten instructions of both the Administrative Agent and the Surety BondProvider;

###  

### (aa)                            as to which the Debtor hasdone nothing, at the time such Receivable first became part of the Collateral,to impair the rights of the Surety Bond Provider, the Company or the CollateralAgent therein;

###  

### (bb)                          which is covered by a validVSI Insurance Policy;

###  

### (cc)                            which constitutes “chattelpaper” under and as defined in Article 9 of the UCC;

###  

### (dd)                          which was (i) acquiredpursuant to an Originator Agreement in a transaction constituting a bona fidesale in the ordinary course of such Originator’s business or (ii) acquired byan Approved Subsidiary pursuant to an Approved Third Party Originator Agreementin a transaction constituting a bona fide sale in the ordinary course of suchApproved Third Party Originator’s business and was acquired by the Seller in atransaction constituting a bona fide sale in the ordinary course of suchApproved Subsidiary’s business; and

###  

### (ee)                            which when combined withall the Receivables will not cause the aggregate Principal Balance of thoseReceivables that meet the criteria of Tier 4 or Tier 5 as set forth in theCredit Guidelines for such designation, to exceed 15% of the aggregatePrincipal Balance of all Receivables.

###  

Enhanced Yield:  For any Collection Period the lesser of (i)the Accrued Interest for such Collection Period and (ii) the sum of theInterest for each day during such Collection Period calculated assuming thatthe applicable Interest Rate for each such day is 5% per annum; provided,that upon the occurrence and continuance of a default by the Surety BondProvider

 

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under the Surety Bond, the Enhanced Yield shall equal the AccruedInterest for such Collection Period.

 

ERISA:  The Employee Retirement Income Security Actof 1974, as amended.

 

ERISA Affiliate:  With respect to the Debtor, at any time, eachtrade or business (whether or not incorporated) that would, at the time, betreated together with the Debtor as a single employer under Section 4001of ERISA or Sections 414(b), (c), (m) or (o) of the Code.

 

Eurocurrency Liabilities:  Shall have the meaning specified inRegulation D.

 

Eurodollar Disruption Event:  The occurrence of any of the following: (a)any Liquidity Provider shall have notified the Administrative Agent of adetermination by such Liquidity Provider or any of its assignees orparticipants that it would be contrary to law or to the directive of anycentral bank or other governmental authority (whether or not having the forceof law) to obtain United States dollars in the London interbank market to fundthe Note or any interest therein, (b) any Liquidity Provider shall have notifiedthe Administrative Agent of the inability, for any reason, of such LiquidityProvider or any of its assignees or participants to determine the AdjustedLIBOR Rate, (c) any Liquidity Provider shall have notified the AdministrativeAgent of a determination by such Liquidity Provider or any of its assignees orparticipants that the rate at which deposits of United States dollars are beingoffered to such Liquidity Provider or any of its assignees or participants inthe London interbank market does not accurately reflect the cost to suchLiquidity Provider, such assignee or such participant of making, funding ormaintaining any Purchased Interest or (d) any Liquidity Provider shall havenotified the Administrative Agent of the inability of such Liquidity Provideror any of its assignees or participants to obtain United States dollars in theLondon interbank market to make, fund or maintain the Note.

 

Eurodollar Reserve Percentage:  With respect to any Reference Bank for anyperiod, shall mean the percentage applicable during such period (or, if morethan one such percentage shall be so applicable, the daily average of suchpercentages for those days in such period during which any such percentageshall be so applicable) under regulations issued from time to time by the Boardof Governors of the Federal Reserve System (or any successor) for determiningthe maximum reserve requirement (including, without limitation, any emergency,supplemental or other marginal reserve requirement) with respect to liabilitiesor assets consisting of or including Eurocurrency Liabilities having a term ofone month.

 

Extended Service Agreement:  A service contract covering repairs to aFinanced Vehicle.

 

Facility Limit:  $150,000,000.

 

Federal Book-Entry Securities:  Securities issued by the U.S. Treasury, FNMAor by FHLMC which are maintained in book-entry form on the records of theFederal Reserve Bank of Dallas.

 

Fee Letter:  The letter agreement dated as of theEffective Date, between the Company, the Administrative Agent and the Debtor inrespect of the payment by the Debtor of certain fees.

 

Finance Charge Collections:  With respect to any Collection Period, thesum of the following amounts:  (i) thatportion of all collections on Receivables allocable to interest, late fees,

 

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insufficient funds check charges and related charges assessed againstObligors, (ii) Liquidation Proceeds to the extent allocable to interest duethereon in accordance with the Servicer’s customary servicing procedures, (iii)any amounts received by the Debtor pursuant to any Interest Rate Cap, and (iv)the interest portion of the amount required to be paid by the Debtor to reducethe principal balance of the Note and release the lien of the Secured Parties oneach Receivable that became an Ineligible Receivable during the relatedCollection Period.

 

Financed Vehicle:  An automobile or light truck, together withall accessions thereto, securing an Obligor’s indebtedness under the respectiveReceivable.

 

FIRC:  F.I.R.C., Inc., a Delawarecorporation.

 

FISC: FirstInvestors Servicing Corporation or any entity which merges or consolidates withFirst Investors Servicing Corporation pursuant to Section 4.05 of theServicing Agreement.

 

First Omnibus Amendment:  The First Omnibus Amendment to theTransaction Documents, dated as of January 14, 2002, among the Debtor,FIFS, FISC, VFCC, Wachovia Capital Markets (as successor in interest toWachovia Securities, LLC, successor in interest to Wachovia Securities, Inc.,formerly known as First Union Securities, Inc), the Surety Bond Provider andWells Fargo.

 

GAAP:  Generally accepted accounting principles inthe United States of America as in effect from time to time.

 

Governmental Authority:  The United States of America, any state orother political subdivision thereof and any entity exercising executive,legislative, judicial, regulatory or administrative functions of or pertainingto government.

 

Gross Default Ratio:  With respect to each Collection Period theratio of (i) the product of (a) 12 and (b) the aggregate Principal Balance ofall Receivables which became Defaulted Receivables during such CollectionPeriod and (ii) the Borrowing Base as of the beginning of such CollectionPeriod.

 

Guaranty:  Any agreement, undertaking or arrangement bywhich any Person guarantees, endorses, or otherwise becomes contingently liable(whether directly, or indirectly by way of agreement, contingent or otherwise,or purchase, to provide funds for payment, to supply funds to or otherwiseinvest in the debtor, or otherwise to assure the creditor against loss) upon,the indebtedness, obligation or liability of any Person, or guarantees thepayment of dividends or other distributions upon the stock of any corporation.

 

Guidelines for Extended Term Financings:  The Summary Credit and Collection Guidelinesfor Extended Term Financings attached as Exhibit P hereto.

 

Incentive Servicing Fee:  With respect to any Collection Period orportion thereof for which FISC is the Servicer, shall be equal to the sum ofthe quotients, for each day of such Collection Period for which FISC is theServicer, obtained by dividing an amount equal to 0.5% of the aggregatePrincipal Balance of the Receivables as of the beginning of such CollectionPeriod by 365 (or 366, as applicable) and with respect to any Collection Periodor portion thereof for which FISC is not the Servicer, shall be equal to thesum of the quotients, for each day of such Collection Period for which

 

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FISC is not the Servicer, obtained by dividing an amount equal to 0% ofthe aggregate Principal Balance of the Receivables as of the beginning of suchCollection Period by 365 (or 366, as applicable).

 

Ineligible Receivable:  As defined in Section 3.1.

 

Instruments:  As defined in Section 9-102 of the UCC.

 

Insurance Agreement:  That certain Insurance Agreement, dated as ofOctober 1, 1996, among the Debtor, the Seller, the Collateral Agent, theReserve Account Agent and the Surety Bond Provider, as amended to the datehereof, including the First Omnibus Amendment, as the same may be amended,modified and supplemented from time to time in accordance with the termsthereof and hereof.

 

Insurance Agreement Amortization Event:  Shall have the meaning set forth in theInsurance Agreement.

 

Interest:  For any Collection Period with respect to theNote, the sum of the products (for each day during such Collection Period) of:

 

IR x NI x  1

360

 

where:

 

IR                                    =                                         the InterestRate; and

 

NI                                   =                                         the NetInvestment.

 

Interest Expense:  For any period and for any Person, interestexpense of such Person calculated without duplication on a consolidated basisfor such period in accordance with GAAP.

 

Interest Rate:  With respect to the Notes, on any day, (i)for the portion of the Net Investment that is funded on such day through theissuance of Commercial Paper, the CP Rate and (ii) for the portion of the NetInvestment that is not funded through the issuance of commercial paper, theAlternative Rate.

 

Interest Rate Capand Interest Rate Caps:  Asdefined in Section 3.2(n).

 

Law:  Any law (including common law), constitution,statute, treaty, regulation, rule, ordinance, order, injunction, writ, decreeor award of any Official Body.

 

LIBOR Rate:  For any day during any Collection Period, aninterest rate per annum equal to: (i) the posted rate for 30-day deposits inUnited States Dollars appearing on Telerate page 3750 as of 11:00 a.m. (Londontime) on the Business Day which is the second Business Day immediatelypreceding the first day of the applicable Collection Period; or (ii) if no suchrate appears on Telerate page 3750 at such time and day, then LIBOR shall bedetermined by Wachovia Bank, National Association at its principal office inCharlotte, North Carolina as its rate (each such

 

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determination, absent manifest error, to be conclusive and binding onall parties hereto and their assignees) at which 30-day deposits in UnitedStates Dollars are being, have been, or would be offered or quoted by WachoviaBank, National Association to major banks in the applicable interbank marketfor Eurodollar deposits at or about 11:00 a.m. (Charlotte, North Carolina time)on such day.

 

Lien:  Any mortgage, deed of trust, pledge, hypothecation,assignment, deposit arrangement, encumbrance, lien (statutory or other),preference, priority or other security agreement or preferential arrangement ofany kind or nature whatsoever, including, without limitation, any conditionalsale or other title retention agreement, any financing lease havingsubstantially the same economic effect as any of the foregoing and the filingof any financing statement under the Uniform Commercial Code (other than anysuch financing statement filed for informational purposes only) or comparablelaw of any jurisdiction to evidence any of the foregoing.

 

Liquidation Proceeds:  (i) proceeds of any claim under any CreditInsurance and (ii) all monies collected in connection with the disposition ofany Financed Vehicle, from whatever source, securing a Defaulted Receivable,net of the sum of (x) any amounts reasonably expended by the Servicer inconnection with the liquidation of such Financed Vehicle for the account of theObligor and (y) any such amounts required by law to be remitted to the Obligor.

 

Liquidity Agreement:  The agreement between the Company and anyLiquidity Provider evidencing the obligation of the Liquidity Provider toprovide liquidity support to the Company in connection with the issuance ofCommercial Paper.

 

Liquidity Provider:  The Person or Persons who will provideliquidity support to the Company in connection with the issuance by the Companyof its Commercial Paper, which, as of the Effective Date, is Wachovia Bank,National Association.

 

London Business Day:  Any day which is a Business Day and also is aday on which commercial banks are open for international business (includingdealings in U.S. dollar deposits) in London.

 

Monthly Debtor’s Certificate:  As defined in Section 4.4.

 

Monthly Extension Rate:  The number of extensions granted during anyCollection Period divided by the aggregate number of retail installment salescontracts owned or serviced by the Seller at the beginning of the CollectionPeriod.

 

Moody’s:  Moody’s Investors Service, Inc.

 

Multiemployer Plan:  A “multiemployer plan” as defined in Section 4001(a)(3)of ERISA to which contributions are or have been made by the Debtor or anyERISA Affiliate of the Debtor.

 

Net Default Ratio:  The ratio of (i) the product of (a) 12 and(b)(1) the aggregate Principal Balance of all Receivables which becameDefaulted Receivables during such Collection Period minus (2)Liquidation Proceeds received during the related Collection Period andallocable to principal minus (3) the Principal Balance of any Receivablewhich became a Reinstated Receivable during the related Collection Period and(ii) the Borrowing Base as of the beginning of such Collection Period.

 

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Net Investment:  With respect to any date of determination,(i) the Original Investment plus (ii) the amount of any SubsequentFunding occurring on or prior to such date less (iii) all Collectionsdistributed to the Noteholder in reduction of the Net Investment pursuant to Section 5.1hereof on or prior to such date of determination, (iv) draws from the ReserveAccount distributed to the Noteholder in reduction of the Net Investment, and(v) draws on the Surety Bond distributed to the Noteholder in reduction of theNet Investment; providedhowever, that the Net Investment for thefirst day of the first Collection Period shall equal the Original Investment,and providedfurther, that as to the Surety Bond Provider, drawsmade under the Surety Bond will not reduce the principal amount due under theNote.

 

Note:  The note issued by the Debtor to the Companypursuant to Section 2.1 of the Note Purchase Agreement, as the same may beamended from time to time and any other notes issued in replacement therefor.

 

Noteholder:  The Company as holder of the Note or anyassignee thereof which shall include only the Company, any Liquidity Provider,or any commercial paper conduit administered by Wachovia Bank, NationalAssociation or any of its affiliates.

 

Noteholder’s Percentage:  94%.

 

Note Purchase Agreement:  The Note Purchase Agreement, dated as of October 1,1996, between the Debtor and the Company, as amended to the date hereof,including by the First Omnibus Amendment, as the same may be amended, modifiedand supplemented from time to time in accordance with the terms thereof andhereof.

 

Obligor:  For any Receivable, each and every Person whopurchased or co-purchased a Financed Vehicle or any other person who owespayments under such Receivable.

 

Official Body:  Any government or political subdivision orany agency, authority, bureau, central bank, commission, department orinstrumentality of either, or any court, tribunal, grand jury or arbitrator, ineach case whether foreign or domestic.

 

Original Investment:  $59,322,154.20.

 

Originator:  A bank, finance company, car rental companyor factory authorized dealer or its affiliates or any other originator approvedin writing by the Surety Bond Provider which has entered into an OriginatorAgreement with the Seller.

 

Originator Agreement:  The agreement between the Seller and anOriginator relating to the purchase by the Seller of a Receivable.

 

PBGC:  The Pension Benefit Guaranty Corporation orany other entity succeeding to the functions currently performed by the PensionBenefit Guaranty Corporation.

 

Person:  Shall mean and include an individual, apartnership, a corporation (including a business trust), a joint stock company,a trust, an unincorporated association, a joint venture or other entity or agovernment or an agency or political subdivision thereof.

 

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Plan:  Any employee pension benefit plan that (a) isor has been maintained by the Debtor or any ERISA Affiliate of the Debtor, orto which contributions by any such Person are or have been required to be made,(b) is subject to the provisions of Title IV of ERISA and (c) is not aMultiemployer Plan.

 

Plan Event:  (a) the provisions of a notice of intent toterminate any Plan under Section 4041 of ERISA other than in a “standardtermination”, or the treatment of a Plan amendment as a distress terminationunder Section 4041 of ERISA, (b) the receipt of any notice by any Plan tothe effect that the PBGC intends to apply for the appointment of a trustee toadminister any Plan, (c) the termination of any Plan which may result in amaterial liability to the Debtor, (d) the withdrawal of the Debtor or any ERISAAffiliate of the Debtor from any Plan described in Section 4063 of ERISAwhich may result in a material liability of the Debtor, (e) the complete orpartial withdrawal of the Debtor or any ERISA Affiliate of the Debtor from anyMultiemployer Plan which may result in a material liability of the Debtor, (f)a “reportable event” described in Section 4043 of ERISA (other than a “reportableevent” not subject to the provision for 30-day notice to the PBGC) or an eventdescribed in Section 4068(f) of ERISA which may result in a materialliability of the Debtor, and (g) any other event or condition which under ERISAor the Code may constitute grounds for the imposition of a lien on the assetsof the Debtor in respect of any Plan or Multiemployer Plan which is notcorrected within thirty (30) days.

 

Potential Amortization Event:  An event which, but for the lapse of time orthe giving of notice, or both, would constitute an Amortization Event.

 

Potential Termination Event:  An event which but for the lapse of time orthe giving of notice, or both, would constitute a Termination Event.

 

Potential Wind-Down Event:  An event which, but for the lapse of time orthe giving of notice, or both, would constitute a Wind-Down Event.

 

Principal Balance:  Of a Receivable as of the close of businesson the last day of a Collection Period, means the Amount Financed minusall Collections collected by the Servicer to and including such day withrespect to such Receivable and applied by the Servicer in accordance with theServicer’s customary servicing procedures to reduce the principal balancethereof provided, however, that the Principal Balance of anyReceivable which is a “Defaulted Receivable” as defined herein shall be zero.

 

Principal Collections:  For any Remittance Date, the sum of thefollowing amounts with respect to the preceding Collection Period:  (i) that portion of all collections onReceivables allocable to principal, (ii) Liquidation Proceeds attributable toprincipal in accordance with the Servicer’s customary servicing procedures,(iii) partial prepayments of any refunded item included in the Amount Financed,such as extended warranty protection plan costs, or physical damage, creditlife, or disability insurance premiums, and (iv) the principal portion of theamount paid by the Debtor to reduce the principal balance of the Note andrelease the lien of the Secured Parties on each Receivable that became an IneligibleReceivable during the related Collection Period.

 

Program Fee:  A fee payable monthly to the Company by theDebtor, the terms of which are set forth in the Fee Letter.

 

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Purchase Agreement:  The Purchase Agreement, dated as of October 22,1996, between the Debtor, as purchaser thereunder, and the Seller, as sellerthereunder, as amended to the date hereof, including by the First OmnibusAmendment, as the same may be amended, modified and supplemented from time totime in accordance with the terms thereof and hereof.

 

Purchased Interest:  The interest in the Note acquired by theLiquidity Provider, if any.

 

Rapid Amortization Event:  A downgrade in the claims-paying rating ofthe Surety Bond Provider below “Aa” or “AA” by either Moody’s or S&P thatis not cured within thirty (30) days of such downgrade.

 

Receivable:  Any retail installment sales contract andinstallment loan contract listed on the attached Receivables Schedule andany indebtedness owed thereunder (including any Additional Amounts), whetherconstituting an account, chattel paper, instrument, mortgage, deed of trust orgeneral intangible, arising out of or in connection with the (i) sale of new orused cars, or new and used light trucks or (ii) the refinancing of a retailinstallment loan or contract arising out of or in connection with the sale ofnew or used cars or new or used light trucks, including in either case therendering of services by the Originator or any other party in connectiontherewith, under an Extended Service Agreement or otherwise, and including theright of payment of any finance charges and other obligations of the Obligorwith respect thereto.  Notwithstandingthe foregoing, once the Collateral Agent has released its security interest ina Receivable pursuant to Section 2.6 hereof, it shall no longerconstitute a Receivable hereunder.

 

Receivable Schedule:  The schedule of Receivables (which schedule maybe in the form of a computer file or microfiche) attached as Exhibit Bto this Agreement, as amended or modified from time to time pursuant to theterms of this Agreement.

 

Reference Bank:  Any bank, which furnishes information forpurposes of determining the Adjusted LIBOR Rate.

 

Reinstated Receivable:Any Receivable which previously became a Defaulted Receivable, the Obligor ofwhich has made payments on such Receivable sufficient to include all amountspreviously delinquent and unpaid.  AReceivable may only be determined to be a Reinstated Receivable once.

 

Relevant UCC State:  The States of New York and Texas.

 

Re-Liening Expense:  All expenses incurred by the Seller or theCollateral Agent for the purpose of re-titling the Financed Vehicles to namethe Collateral Agent as lienholder on the certificate of title thereto.

 

Re-Liening Trigger:  The occurrence and continuance of anyServicer Termination Event or Termination Event.

 

Remittance Date:  The 20th day of each month beginning November 20,1996, or, if such 20th day is not a Business Day, the next succeeding BusinessDay.

 

Removal Date:  As defined in Section 2.6 hereof.

 

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Required Reserve Account Balance:  The greater of (i) an amount equal to theproduct of (a) 1.00% and (b) the Borrowing Base and (ii) an amount equal to theproduct of (x) 0.50% and (y) the greatest Net Investment since the lastreduction of the Net Investment to zero; provided, however, thaton and after any Remittance Date occurring after the occurrence of aTermination Event, there shall be no maximum limit on the amount required to beon deposit in the Reserve Account; provided, further, however,on any day on which the Net Investment is zero, the Required Reserve AccountBalance shall be zero.

 

Requirements of Law:  For any Person shall mean the certificate ofincorporation or articles of association and by-laws or other organizational orgoverning documents of such Person, and any law, treaty, rule or regulation, ordetermination of an arbitrator or Governmental Authority, in each case applicableto or binding upon such Person or to which such Person is subject, whetherFederal, state or local (including, without limitation, usury laws, the FederalTruth in Lending Act and Regulation Z and Regulation B of the Board ofGovernors of the Federal Reserve System).

 

Reserve Account:  The account established pursuant to Section 5A.1hereof.

 

Reserve Account Agent:  Wachovia Capital Markets, LLC, in itscapacity as Reserve Account Agent under this Agreement and the InsuranceAgreement.

 

Revolving Period:  The period from and including the ClosingDate to, but not including, the Termination Date.

 

S&P:  Standard & Poor’s Ratings Group, aDivision of The McGraw-Hill Companies.

 

Secured Parties:  The Company and the Surety Bond Provider.

 

Securities Intermediary:  Wachovia Bank, National Association and anyother entity acting in the capacity of a “securities intermediary” as definedin Section 8-102(a)(14) of the UCC.

 

Securities Intermediary Securities Account:  A securities account maintained by the SecuritiesIntermediary in the name of Wachovia Bank, National Association for Wells FargoBank, National Association, as Collateral Agent for the Secured Parties.

 

Seller:  First Investors Financial Services, Inc.

 

Seller’s Participating Program:  The program for the purchase of Receivablesfrom an Originator or group of affiliated Originators, whereby the Receivablesare aggregated into pools from which the Originators are entitled to receive aportion of the aggregate yield for a specified period in exchange for theOriginator’s agreement to repurchase Defaulted Receivables from the pool duringsuch period.

 

Servicer:  FISC as servicer under the ServicingAgreement or any successor Servicer acceptable to the Surety Bond Provider.

 

Servicer Termination Event: As defined in the Servicing Agreement.

 

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Servicing Agreement:  The Servicing Agreement, dated as of March 31,1999, among the Servicer, the Debtor, and Wells Fargo, as Back-Up Servicer andas Collateral Agent, as amended to the date hereof, including by the FirstOmnibus Amendment, as the same may be amended, modified and supplemented fromtime to time in accordance with the terms thereof and hereof (but only with theconsent of the Surety Bond Provider).

 

Servicing Fee:  With respect to any Collection Period orportion thereof for which FISC is the Servicer, shall be equal to the sum, foreach day of such Collection Period for which FISC is the Servicer, of thequotient obtained by dividing an amount equal to 2.0% of the aggregatePrincipal Balance of the Receivables as of the beginning of such CollectionPeriod by 365 (or 366, as applicable) and with respect to any Collection Periodor portion thereof for which FISC is not the Servicer, shall be equal to thesum, for each day of such Collection Period for which FISC is not the Servicer,of the quotient obtained by dividing an amount equal to 2.5% of the aggregatePrincipal Balance of the Receivables as of the beginning of such CollectionPeriod by 365 (or 366, as applicable).

 

Servicing Transfer:  As defined in the Servicing Agreement.

 

Subsequent Funding:  As defined in the Note Purchase Agreement.

 

Subsidiary:  Any corporation more than 50% of theoutstanding voting securities of which shall at any time be owned orcontrolled, directly or indirectly, by the Debtor or by one or moreSubsidiaries, or any similar business organization which is so owned orcontrolled.

 

Surety Bond:  That certain surety bond, substantially inthe form annexed hereto as Exhibit J.

 

Surety Bond Premium:  As defined in the Insurance Agreement.

 

Surety Bond Provider:  MBIA Insurance Corporation, a New York stockinsurance company.

 

Targeted Monthly Principal Payment:  With respect to each Remittance Date, (i) solong as no Rapid Amortization Event has occurred, the amount necessary toreduce the Net Investment to the product of (a) the Noteholder’s Percentage and(b) the Borrowing Base or (ii) if a Rapid Termination event has occurred, anamount equal to the sum of (x) the amount calculated pursuant to clause (i) ofthis definition and (y) the amount that would otherwise be payable to theDebtor pursuant to subclause fourth of clause (xi) of Section 5.1(a).

 

Telerate Page 3750 Screen:  The display designated as “Page 3750” on theTelerate Service (or such other page as may replace Page 3750 on that serviceor such other service as may be nominated by the British Bankers’ Associationas the information vendor for the purposes of displaying British Bankers’Association Interest Settlement Rates for U.S. Dollar deposits).

 

Termination Date:  The earliest of (i) February 15, 2006unless such date shall be extended by the parties hereto pursuant to a writtendocument, (ii) the date of termination of the commitment of the LiquidityProvider under any Liquidity Agreement, (iii) the date of the termination ofthe commitment of the Credit Support Provider under any Credit SupportAgreement, (iv) the date designated by the Debtor as the date on which theRevolving Period shall terminate (which date shall be the last day of aCollection Period) following not less than thirty (30) Business Days’

 

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prior written notice to the Company and the Surety Bond Provider andthe Administrative Agent, and (v) the date on which any Termination Event hasoccurred.

 

Termination Event:  As defined in Section 6.1 hereof.

 

Transfer or Transferred:  When used with respect to EligibleInvestments held or to be held in the Reserve Account means:

 

(i)                                     withrespect to each Clearing Corporation Security, transfer to the Reserve AccountAgent will occur upon the latest of: (w) the making by the Clearing Corporationof appropriate entries on its books reducing the appropriate securities accountof the transferor and increasing the appropriate securities account of theSecurities Intermediary by the amount of such Clearing Corporation Security,(x) the sending of a confirmation to the Reserve Account Agent by theSecurities Intermediary of the purchase by the Reserve Account Agent of suchClearing Corporation Security and (y) the identification by book entry to theSecurities Intermediary Securities Account by the Securities Intermediary ofthe Clearing Corporation Securities as belonging to the Reserve Account Agent,acting for the Collateral Agent, on behalf of the Secured Parties;

 

#### (ii)                                  with respect to eachCertificated Security, transfer to the Reserve Account Agent will occur uponthe latest of (x) the sending of a confirmation by the Securities Intermediaryof the purchase by the Reserve Account Agent of such Certificated Security and(y) the identification by book-entry to the Securities Intermediary SecuritiesAccount by the Securities Intermediary of such Certificated Security asbelonging to the Reserve Account Agent, acting for the Collateral Agent, onbehalf of the Secured Parties;

####  

#### (iii)                               with respect to eachFederal Book-Entry Security, transfer to the Reserve Account Agent will occurupon the latest of (x) the making by the Federal Reserve Bank of Dallas ofappropriate entries transferring the Federal Book-Entry Security on its booksand records to the book-entry account of the Securities Intermediary at theFederal Reserve Bank of Dallas, (y) the sending of a confirmation by theSecurities Intermediary of the purchase by the Reserve Account Agent of suchFederal Book-Entry Security, and (z) the identification by book-entry to theSecurities Intermediary Securities Account by the Securities Intermediary ofsuch Federal Book-Entry Security as belonging to the Reserve Account Agent,acting for the Collateral Agent, on behalf of the Secured Parties;

####  

#### (iv)                              with respect toInstruments in the possession of the Bailee, in the State of Texas, the sendingof notice to the Bailee by the Reserve Account Agent of the security interestof the Reserve Account Agent, acting for the Collateral Agent, on behalf of theSecured Parties and the sending of an acknowledgment of such notice to theReserve Account Agent; and

####  

#### (v)                                 with respect to anyEligible Investment, by any method creating a perfected security interest infavor of the Reserve Account Agent, acting for the Collateral Agent, on behalfof the Secured Parties, provided that the Debtor shall have delivered anopinion of counsel to the Reserve Account Agent and the Collateral Agent to theeffect that the Reserve Account Agent acting for the Collateral Agent, onbehalf of

 

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#### the Secured Parties, has a valid perfectedfirst priority security interest in such Eligible Investment.

####  

Trust Officer:  Any officer in the Corporate Trust Office ofthe Collateral Agent responsible for the administration of this Agreement.

 

Uniform Commercial Codeor UCC:  The Uniform CommercialCode as adopted in the Relevant UCC State.

 

Unused Program Fee:  A fee payable monthly to the Company by theDebtor, the terms of which are set forth in the Fee Letter.

 

VFCC:  Variable Funding Capital Corporation, aDelaware corporation and its successors and assigns.

 

VSI Insurance:  The blanket collateral protection insurancepolicy or policies of insurance underwritten by Agricultural Excess and SurplusInsurance Company (or any other insurance company acceptable to the Company)covering each of the installment sales contracts held by the Debtor, includingthe Receivables, in the form attached hereto as Exhibit J.

 

WAC Requirement:  On any day, that the weighted average APR ofall Eligible Receivables is at least the following percentage:

 

| **Direct Loan Percentage** | ** ** | **WAC Requirement** | ** ** |
|----------------------------|------------|---------------------|------------|
| 70% or more                |       | 12.50               | %          |
| 60% to, but  excluding 70% |       | 12.75               | %          |
| 50% to, but  excluding 60% |       | 13.00               | %          |
| 45% to, but  excluding 50% |       | 13.35               | %          |
| 40% to, but  excluding 45% |       | 13.65               | %          |
| 35% to, but  excluding 40% |       | 14.00               | %          |
| 30% to, but  excluding 35% |       | 14.25               | %          |

 

Wachovia Capital Markets:  Wachovia Capital Markets, LLC, a Delawarelimited liability company.

 

Wells Fargo:  Wells Fargo Bank, National Association.

 

Wind-Down Event:  As defined in Section 6.2.

 

Yield Protection Provision:  The compensation of the Company by the Debtorwith respect to increased taxes, reserves and funding costs of the Company asdescribed in Section 4.2 of the Note Purchase Agreement.

 

21

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# **Article II**

 

# **Grant of Security Interest**

 

## **Section 2.1****                                   Grantof Security Interest.**

 

As security for the prompt and completepayment of the Note and the performance of all of the Debtor’s obligationsunder the Note, the Note Purchase Agreement, the Insurance Agreement and thisAgreement, the Debtor hereby grants to the Collateral Agent, for the benefit ofthe Secured Parties, a security interest in and continuing Lien on all of theDebtor’s right, title and interest in, to and under (i) all Receivables listedon the date hereof in the Receivables Schedule attached hereto on ExhibitB and all Additional Receivables which become Receivables at any timefollowing the Cut-Off Date pursuant to Section 2.2, all monies dueor to become due with respect to Receivables, including Additional Receivables,on and after the Cut-Off Date or Addition Cut-Off Date, as applicable, whethersuch amounts are considered accounts, general intangibles or other property,and all monies, instruments, securities or investments of any type ordescription on deposit in or credited to the Collection Account at any time;(ii) the security interests in the Financed Vehicles granted by Obligorspursuant to the related Receivables and any accessions thereto; (iii) anyproceeds from claims on any physical damage, credit life, credit disability,VSI Insurance or other insurance policies covering Financed Vehicles orObligors and any other Liquidation Proceeds; (iv) any Interest Rate Cap,including the right to payment under any such Interest Rate Cap or otherhedging arrangement; and (v) the proceeds of any and all of the foregoing(collectively, the “*Collateral*”).  As security for the prompt and completepayment of the Note and the performance of all of Debtor’s obligations underthe Note, the Note Purchase Agreement, the Insurance Agreement and thisAgreement, the Debtor hereby grants to the Reserve Account Agent for thebenefit of the Collateral Agent for the benefit of the Secured Parties, asecurity interest in and continuing Lien on all of Debtor’s right, title andinterest in, to and under the Reserve Account and all Eligible Investments,securities, instruments and other financial assets (as defined in Section 8-102(a)(9)of the UCC) credited to the Reserve Account and the proceeds thereof.  In addition, the Debtor hereby assigns to theCollateral Agent all of its rights under the Purchase Agreement with respect tothe Receivables.  Notwithstanding theforegoing assignment, the Debtor does not assign its rights as to any retailinstallment sales contracts purchased thereunder other than the retailinstallment sales contracts and any other rights relating to Receivables.  The foregoing pledge does not constitute anassumption by the Collateral Agent of any obligations of the Debtor to Obligorsor any other Person in connection with the Collateral or under any agreementand instrument relating to the Collateral, including without limitation anyobligation to make future advances to or on behalf of such Obligors.

 

In connection with such pledge, the Debtoragrees to record and file, at its own expense, financing statements withrespect to the Collateral now existing and hereafter created for the transferof chattel paper, accounts and general intangibles (each as defined in Article 9of the UCC) meeting the requirements of applicable state law in such manner andin such jurisdictions as are necessary to perfect the first priority securityinterest of the Collateral Agent in the Collateral, and to deliver afile-stamped copy of such financing statements or other evidence of such filing(which may, for purposes of this Section 2.1, consist of telephoneconfirmation of such filing) to the Company on or prior to the ClosingDate.  In addition, the Debtor agrees to

 

22

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clearly and unambiguously mark its general ledger and all accounting recordsand documents and all computer tapes and records to show that the Receivableshave been pledged to the Collateral Agent hereunder.

 

In connection with the grant of the security interestpursuant to this Section 2.1, the Debtor agrees to direct FISC asServicer, on or prior to the Servicing Transfer, to indicate, on or prior tothe Servicing Transfer, clearly and unambiguously in its computer filesdescribed in the preceding paragraph that an undivided interest in theReceivables created in connection with the Receivables has been pledged to theCollateral Agent pursuant to this Agreement. The Debtor shall deliver to the Collateral Agent a computer file ormicrofiche list containing a true and complete list of all such Receivables,identified by account number and principal balance as of the end of theCollection Period ending immediately prior to the Servicing Transfer.  Such file or list shall be marked as theReceivable Schedule and Exhibit B to this Agreement, delivered tothe Collateral Agent as confidential and proprietary information, and is herebyincorporated into and made a part of this Agreement.  The Debtor agrees to deliver to theCollateral Agent at such times as requested by the Collateral Agent inconnection with a third-party’s request to review Exhibit B, as providedin the financing statement filed by the Collateral Agent under the UCC, acomputer file or microfiche list containing a true and complete list of all Receivables,including all Receivables created on or after the Cut-Off Date, in existence asof the later of (w) the last day of the prior Collection Period, (x) the mostrecent Addition Date or (y) the most recent Removal Date by account number andby Principal Balance as of such day or date. Such updated and revised file or list shall be marked as the Receivable Schedule andExhibit B to this Agreement, delivered to the Collateral Agent asconfidential and proprietary information, shall replace the previouslydelivered Receivable Schedule identified as Exhibit B, and shall beincorporated into and made a part of this Agreement.  The Debtor agrees to direct the Servicer, bythe end of each Collection Period to indicate clearly and unambiguously in itscomputer files that an undivided interest in the Receivables has been pledgedto the Collateral Agent pursuant to this Agreement.  The Secured Parties shall have the right torequest the Debtor to deliver or caused to be delivered to such parties a newperfection opinion with respect to the Collateral in the event of a change inthe law addressed pursuant to such opinion.

 

## **Section 2.2****           ****Additional Receivables****.**

##  

### (a)           At any time during the Revolving Period, the Debtor may designateadditional Eligible Receivables to be included as part of the Collateral (“*Additional Receivables*”); provided,however, that in the case of an addition done for a purpose other thanpreventing the sum of the Borrowing Base plus the amount on deposit in theReserve Account from declining below the Net Investment, the date of transfer(the “*Addition Date*”)shall be as of the opening of business on the first Business Day of theCollection Period immediately succeeding the Addition Cut-Off Date with respectto such Additional Receivables.  It shallbe a condition precedent to the pledge to the Collateral Agent of anyAdditional Receivables that (i) the Debtor shall have provided the CollateralAgent and the Surety Bond Provider reasonable access to all computer tapes,books, records, files and documentation relating to the Receivables and theretail installment sales contracts to be designated as Additional Receivables,(ii) the Debtor shall have entered into an Interest Rate Cap, an executed copyof which shall be delivered to the Surety Bond Provider promptly followingexecution thereof or any amendments thereto, which shall be in form andsubstance acceptable to the Surety Bond Provider, (iii) after giving effect tosuch

 

23

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### pledgeof Additional Receivables the Net Investment shall not be greater than theNoteholder’s Percentage of the Borrowing Base, (iv) the amount on deposit inthe Reserve Account shall at least equal the Required Reserve Account Balance(calculated as if such Additional Receivables shall have been pledged to theCollateral Agent), (v) if any Additional Receivables proposed to be pledged tothe Collateral Agent were acquired by the Seller in a bulk purchase, the SuretyBond Provider shall have consented in writing to the pledge of such AdditionalReceivables, and (vi) the weighted average original term to maturity of eachgroup of Additional Receivables that are not Direct Loans proposed to bepledged to the Collateral Agent shall be at least one (1) month greater thanthe weighted average remaining term to maturity of such group of AdditionalReceivables that are not Direct Loans.

###  

### (b)           Any addition of Receivables as part of the Collateral made under subsection (a)shall satisfy the following conditions:

###  

#### (i)            On or before the tenth Business Day (the “*Notice Date*”) prior to the AdditionDate, the Debtor shall give the Administrative Agent, the Surety Bond Providerand the Collateral Agent written notice that such Additional Receivables willbe included as Collateral as of the Addition Date and specifying the estimatedPrincipal Balance of such Additional Receivables as of the Addition Cut-OffDate;

####  

#### (ii)           On or prior to the Addition Closing Date, (x)the Servicer shall have caused its computer tapes and computer records to bemarked clearly and unambiguously to show that the Seller has sold theAdditional Receivables to the Debtor and (y) the Debtor shall have clearly andunambiguously marked (or caused to be marked) its general ledger and anycomputer tapes or other records to show that an undivided interest in theAdditional Receivables has been pledged to the Collateral Agent;

####  

#### (iii)          (x) None of aTermination Event, a Potential Termination Event or the Termination Date shallhave occurred and be continuing or would result from such increase, and (y) noAmortization Event has occurred or would result from such increase;

####  

#### (iv)          After giving effect to such increase, the Net Investment shall not exceedthe Facility Limit;

####  

#### (v)           The Surety Bond Provider, the AdministrativeAgent and the Collateral Agent shall have received an executed certification byan authorized officer of the Servicer substantially in the form of Exhibit N,showing, among other things, the calculations necessary to support thecalculation required pursuant to clause (iv) above and the items setforth in Section 2.2(a)(iii), (iv)and (vi) above;

####  

#### (vi)          (x) Each representation and warranty of theDebtor herein, in the Note Purchase Agreement and in any other TransactionDocument shall be true and correct with respect to the Debtor, (y) eachReceivable included in the Borrowing Base is an Eligible Receivable as of thedate of such Funding and (z) no selection procedures adverse to the interestsof the Secured Parties shall have been utilized in selecting the Additional Receivables;

 

24

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#### (vii)         The Debtor shall have deposited in theReserve Account, or shall have given irrevocable instructions to the Company towithhold from the proceeds of such Funding and to deposit in the ReserveAccount, an amount equal to the amount necessary to cause the amount on depositin the Reserve Account to be at least equal to the Required Reserve AccountBalance (calculated as if such increase shall have occurred);

####  

#### (viii)        The Surety Bond shall be in full force andeffect;

####  

#### (ix)           The Debtor shall have delivered on or priorto the related Addition Cut-Off Date to the Collateral Agent the sole original,executed Contracts evidencing the Receivables;

####  

#### (x)            The Debtor shall have delivered or caused tobe delivered to the Collateral Agent on or prior to the related AdditionCut-Off Date the documents described in Section 2.13 of the ServicingAgreement;

####  

#### (xi)           On or prior to the Addition Closing Date, theDebtor shall have directed the Servicer, on behalf of the Debtor, to deliver tothe Collateral Agent and Secured Parties (x) a computer file or microfiche listcontaining a true and complete list of all Additional Receivables identified byaccount number and by Principal Balance of such Additional Receivables as ofthe Addition Cut-Off Date, or (y) a true and complete list of all Receivables,including the Additional Receivables, identified by account number and byPrincipal Balance as of the Addition Cut-Off Date, which computer file ormicrofiche list shall be as of the Date of such Addition incorporated into andmade part of this Agreement;

####  

#### (xii)          [Reserved];

####  

#### (xiii)         The Debtor shall have delivered to theCollateral Agent, the Administrative Agent and the Surety Bond Provider (x)either (A) a certificate in the form attached hereto as Exhibit L to theeffect that the UCC filing described in Section 2.1 with respect tothe Additional Receivables have been made or (B) evidence of such UCC filings,and (y) an executed certification by an authorized officer of the Debtorsubstantially in the form of Exhibit O; or

####  

#### (xiv)        The conditions to Funding as set forth in Section 2.1(c)of the Note Purchase Agreement shall have been satisfied.

####  

## **Section 2.3****           ****Re-Liening Trigger****.**

##  

Upon the occurrence of a Re-Liening Trigger, the Sellershall take all steps necessary to cause the certificate of title or otherevidence of ownership of the related Financed Vehicle to be revised to name theCollateral Agent on behalf of the Secured Parties as lienholder.  Any costs associated with such revision ofthe Certificate of Title shall be paid by the Seller and to the extent suchcosts are not paid by the Seller such unpaid costs shall be recovered fromAvailable Funds as described in Section 5.1 hereof.

 

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In addition, no later than December 29, 2000and at any other time at which a state concentration level exceeds 10% of theaggregate Principal Balance of Receivables, the Seller shall be required todeliver a legal opinion satisfactory to the Surety Bond Provider and to S&Pas to the status of the security interest of the Collateral Agent, on behalf ofthe Secured Parties, in the related Financed Vehicles or cause the certificateof title or other evidence of ownership of the related Financed Vehicle to berevised to name the Collateral Agent on behalf of the Secured Parties aslienholder.

 

## **Section 2.4****           ****Subrogation****.**

##  

The parties hereto each acknowledge that, to theextent of any payment made under the Surety Bond, the Surety Bond Providershall be fully subrogated to the extent of such payment, to the rights of theNoteholder to any moneys paid or payable to such holder in respect of thecorresponding amounts due on such Note. The parties hereto each agree to such subrogation and each further agreesto execute such instruments and to take such actions as, in the sole judgmentof the Surety Bond Provider, are necessary to evidence such subrogation and toperfect the rights of the Surety Bond Provider to receive any moneys paid orpayable to the Surety Bond Provider under the Note, the Note PurchaseAgreement, the Insurance Agreement and this Agreement.

 

## **Section 2.5****           ****Increase of Note****.**

##  

The Debtor may increase the outstanding principalamount of the Note only upon satisfaction of the following conditions:

 

#### (i)            no Termination Event, no Amortization Event andno Wind-Down Event shall have occurred and be continuing;

####  

#### (ii)           the Debtor shall have entered into an InterestRate Cap;

####  

#### (iii)          after giving effect to any such increase, the NetInvestment shall not be greater than the Noteholder’s Percentage of theBorrowing Base;

####  

#### (iv)          after giving effect to any such increase, the NetInvestment would not exceed the Facility Limit;

####  

#### (v)           the amount on deposit in the Reserve Accountshall at least equal the Required Reserve Account Balance (calculated as ifsuch increase in the Note shall have occurred);

####  

#### (vi)          the Surety Bond Provider shall not have failedto make a payment required to be made under the Surety Bond; and

####  

#### (vii)         the Debtor shall have provided notice to theCollateral Agent and each of the Secured Parties ten Business Days prior tosuch increase.

 

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## **Section 2.6****           ****Release of Receivables****.**

##  

On any Business Day, provided that no TerminationEvent, Amortization Event or Wind-Down Event shall have occurred, the Debtorshall have the right to require the Collateral Agent to release all of theCollateral Agent’s right, title and interest in and to all or certain specifiedReceivables on the terms and conditions set forth herein (the effective date ofany such release, the “*Removal Date*”).  It shall be a condition precedent to any suchrelease that (i) after giving effect to any such release, the Net Investmentshall not exceed the Noteholder’s Percentage of the Borrowing Base, suchdetermination to be based on the most recent Monthly Debtor’s Certificatedelivered by the Debtor, (ii) such release does not result in a TerminationEvent, a Wind-Down Event or an Amortization Event, (iii) the Debtor shall (y)pay to the Collateral Agent for payment to the Noteholder on the day of receiptfrom the Debtor, an amount equal to the amount necessary, if any, to reduce theNet Investment such that the Net Investment does not exceed the Noteholder’sPercentage of the Borrowing Base after giving effect to such release and (z)pay to the Collateral Agent for payment to the Noteholder on the day of receiptfrom the Debtor, an amount equal to all unpaid Carrying Costs (includingCarrying Costs not yet accrued) to the extent reasonably determined by theAdministrative Agent to be attributable to that portion of the Net Investmentto be reduced as a result of the payment referred to in clause (y)above, (iv) the Debtor shall have given the Collateral Agent, the Surety BondProvider and the Administrative Agent at least five (5) days prior writtennotice of its intention to request the release of such Receivables, (v) allamounts due under the Note Purchase Agreement and the Insurance Agreement, tothe extent accrued to the date of such release or, at the option of theCollateral Agent, acting upon the written instructions of the Company and theSurety Bond Provider, acting separately, accrued to such date and to accruethereafter, shall have been reimbursed and (vi) such release shall not materiallyand adversely affect either Secured Party and (vii) such release shall includeat least $5,000,000 in Principal Balance of Receivables; provided, however,that there shall be no minimum release amount with respect to IneligibleReceivables.  It is the intention of theparties that, to the extent the Company is the Noteholder and the Company isfunding its interest in the Note through Commercial Paper, the Debtor shall payto the Collateral Agent such amounts as are required under this Section 2.6on the Business Day preceding the maturity date of the Commercial Paper issuedby the Company to fund its interest in the Note.

 

The Debtor shall also be obligated to pay to theCollateral Agent, the Company, the Surety Bond Provider and the Administrative Agentthe reasonable legal fees and expenses of the Collateral Agent, the Surety BondProvider, the Administrative Agent and the Company arising in connection withany such release.

 

Upon (i) the deposit to the Collection Account andthe payment to the respective parties of the amounts described in this Section,and (ii) the receipt by the Collateral Agent of a certificate of the Debtorstating that all conditions precedent contained in this Section 2.6have been satisfied, the Collateral Agent shall execute and deliver to theDebtor, at the Debtor’s expense, such documents or instruments as are necessaryto terminate the Collateral Agent’s interest in the applicable Receivables andthe proceeds thereof.  Any such documentsshall be prepared by or on behalf of the Debtor and shall specifically identify(by loan or account number and outstanding Principal Balance) the Receivablesin which the Collateral Agent’s security interest is to be released.

 

27

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The Debtor shall deliver to the Collateral Agent,the Surety Bond Provider and the Administrative Agent a computer file, microfichelist or printed list containing a true and complete list of all suchReceivables to be released, identified by account number and principal balanceas of the Cut-Off Date or Removal Date. Such file or list, when taken together with the list provided pursuantto Section 2.1 hereof shall constitute the Receivables Schedule asof such Removal Date after giving effect to such removal.

 

# **Article III**

#  

# **Representations, Warranties and Covenants of The Debtor**

#  

## **Section 3.1****           ****Representations andWarranties Concerning Receivables****.**

##  

The Debtor represents and warrants to and covenantswith the Collateral Agent and the Secured Parties as of the Closing Date and,except as otherwise provided herein, as of each Addition Date relating to theReceivables added to the Collateral on such Addition Date pursuant to Section 2.2,that:

 

### (a)           Immediately prior to the Closing Date or the related Addition Date, asapplicable, (each a “*Conveyance Date*”)the Seller had a valid and enforceable first priority security interest in therelated Financed Vehicle, and such security interest had been duly perfectedand was prior to all other present and future liens and security interests(except future tax liens and liens that, by statute, may be granted priorityover previously perfected security interests) that now exist or may hereafterarise, and the Seller had the full right to assign such security interest tothe Debtor.

###  

### (b)           On and after the related Conveyance Date, there shall exist under suchReceivable a valid, subsisting, and enforceable first priority perfectedsecurity interest in the related Financed Vehicle (other than, as to thepriority of such security interest, any statutory lien arising by operation oflaw after the related Conveyance Date which is prior to such interest) and,following the grant of all of the Debtor’s right, title and interest in and tosuch security interest to the Collateral Agent, at such time as enforcement ofsuch security interest is sought there shall exist in favor of the CollateralAgent a valid, subsisting, and enforceable first priority perfected securityinterest (other than, as to the priority of such security interest, any statutorylien arising by operation of law after the related Addition Date which is priorto such interest) in the related Financed Vehicle.

###  

### (c)           If such Receivable was originated in a state in which notation of asecurity interest on the title document for the Financed Vehicle securing suchReceivable is required or permitted to perfect such security interest, thetitle document for such Financed Vehicle shows, or if a new or replacementtitle document is being applied for with respect to such Financed Vehicle the titledocument will show, the Seller as the sole holder of a security interest insuch Financed Vehicle.  If suchReceivable was originated in a state in which the filing of a financingstatement under the UCC is required to perfect a security interest in motorvehicles, such filings or recordings have been duly made and show the Seller asthe sole holder of a first priority security interest in such Financed Vehicle,and in either case the Debtor has the same rights as the Seller has or wouldhave (if the Seller were still the owner of a Receivable) against the Obligorand all creditors of the Obligor claiming an interest in such FinancedVehicles.

 

28

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### (d)           Immediately prior to the related Conveyance Date:  (i) such Receivable had not been sold,assigned, or pledged by the Seller to any Person; (ii) the Seller had good andmarketable title thereto free and clear of any encumbrance, equity, pledge,charge, claim or security interest; (iii) the Seller was the sole owner thereofand had full right to sell the Receivable to the Debtor and upon the salethereof to the Debtor, the Debtor will have good and marketable title theretoand will own such Receivables free and clear of any encumbrances.  Such Receivable was acquired by the Seller,either (i) from an Originator with which the Seller does business, pursuant toan Originator Agreement between the Seller and such Originator or (ii) from anApproved Subsidiary and such Approved Subsidiary acquired such Receivable froman Approved Third Party Originator with which the Approved Subsidiary doesbusiness, pursuant to an Approved Third Party Originator Agreement between theApproved Subsidiary and such Approved Third Party Originator.  Such Originator or Approved Subsidiary, asthe case may be, had full right to assign to the Seller such Receivable and thesecurity interest in the related Financed Vehicle, and if applicable, suchApproved Third Party Originator had full right to assign to the ApprovedSubsidiary such Receivable and the security interest in the related FinancedVehicle.  The Seller has full right tosell to the Debtor such Receivable and the security interest in the relatedFinanced Vehicle.  The Collateral Agent,for the benefit of the Secured Parties, has a valid and perfected firstpriority security interest in such Receivable and all proceeds thereof, freeand clear of all Liens, encumbrances, security interests and rights of others.

###  

### (e)           As of the related Conveyance Date, there is no lien against the relatedFinanced Vehicle for delinquent taxes.

###  

### (f)            Such Receivable, and the sale of the FinancedVehicle securing such Receivable, where applicable, complied, at the time itwas made, and now complies, in all material respects with applicable state andfederal laws (and regulations thereunder), including, without limitation,usury, disclosure and consumer protection laws, equal credit opportunity, faircredit reporting, truth-in-lending or other similar laws, the Federal TradeCommission Act, and applicable state laws regulating retail installment salescontracts in general and motor vehicle retail installment sales contracts andloans in particular, and the receipt of interest on, and the ownership of, suchReceivable by the Debtor will not violate any such laws and the related Obligorhas no right of rescission or cancellation, claims or defenses, set-offs, orcounterclaims of any kind whatsoever as to or against the contract evidencing arelated Receivable.

###  

### (g)           The Receivable constitutes the entire agreement between the Seller (asassignee of the related Originator or the related Approved Subsidiary, asapplicable) and the related Obligor.

###  

### (h)           At the time of origination of such Receivable, the proceeds of suchReceivable were fully disbursed, and there is no requirement for futureadvances thereunder, and all fees and expenses in connection with theorigination of such Receivable have been paid.

###  

### (i)            As of the related Conveyance Date, there isno default, breach, violation or event of acceleration existing under any suchReceivable and no event which, with the passage of time or with notice or withboth, would constitute a default, breach, violation or event of accelerationunder any such Receivable.  The Sellerhas not waived any such default, breach, violation or event of acceleration.

 

29

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### (j)            In connection with the purchase of suchReceivable, the Seller required the related Originator or Approved Subsidiary,as applicable, and the Approved Subsidiary required the related Approved ThirdParty Originator, if applicable, to furnish evidence that the related FinancedVehicle was covered by a comprehensive and collision insurance policy namingthe Seller as loss payee and insuring against loss and damage due to fire,theft, transportation, collision and other risks generally covered bycomprehensive and collision coverage in an amount equal to the actual cashvalue of the related Financed Vehicle.

###  

### (k)           Such Receivable contains customary and enforceable provisions such asto render the rights and remedies of the holder thereof adequate for therealization against the related Financed Vehicle of the benefits of thesecurity.

###  

### (l)            The collection practices used with respect tosuch Receivable have been in all material respects legal, proper, prudent andcustomary in the automobile installment sales contract or installment loanservicing business as applied with respect to obligors with credit standingscomparable to that of the Obligor.

###  

### (m)          Neither the Obligor on such Receivable nor any of its Affiliates is theObligor on a Receivable or Receivables with an aggregate principal amountgreater than $40,000 as of the Conveyance Date.

###  

### (n)           The related Obligor does not have any other motor vehicle retail salesinstallment contracts or installment loan contracts owing to the Seller whichare sixty (60) or more days contractually delinquent at the Conveyance Date.

###  

### (o)           No Receivable is due from an Obligor who has defaulted under a previousReceivable with the Seller.

###  

### (p)           As applicable, either (i) the Originator or Approved Subsidiary, asapplicable, that sold such Receivable to the Seller has entered into anOriginator Agreement or Assignment, as applicable and such Originator Agreementor Assignment, as applicable constitutes the entire agreement between theSeller and the related Originator or Approved Subsidiary, as applicable, withrespect to the sale of such Receivable to the Seller, such Originator Agreementor Assignment, as applicable, was at the time of the origination of suchReceivable or the sale thereof to the Seller, as applicable, in full force andeffect and is the legal, valid, binding and enforceable obligation of suchOriginator or Approved Subsidiary, as applicable (subject to applicablebankruptcy and insolvency laws and other similar laws affecting the enforcementof creditors’ rights generally and to principles of equity, regardless ofwhether enforcement is sought in a proceeding in equity or at law); there havebeen no material defaults by such Originator or Approved Subsidiary, asapplicable, or by the Seller under such Originator Agreement or Assignment, asapplicable; the Seller has fully performed all of its obligations under suchOriginator Agreement or Assignment, as applicable; the Seller has not made anystatements or representations to such Originator or Approved Subsidiary, asapplicable, inconsistent with any term of such Originator Agreement orAssignment, as applicable; the purchase price for such Receivable has been paidin full by the Seller, there is no other payment due to such Originator orApproved Subsidiary, as applicable, from the Seller for the purchase of suchReceivable, such Originator or Approved Subsidiary, as applicable, has noright, title or

 

30

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### interestin or to any Receivable; there is no prior course of dealing between suchOriginator or Approved Subsidiary, as applicable, and the Seller which willaffect the terms of such Originator Agreement or Assignment, as applicable; anyadditional payment that may be owed to such Originator or Approved Subsidiary,as applicable, by the Seller is a corporate obligation of the Seller or (ii)the Approved Third Party Originator that sold such Receivable to the ApprovedSubsidiary has entered into an Approved Third Party Originator Agreement andsuch Approved Third Party Originator Agreement constitutes the entire agreementbetween the Approved Subsidiary and the related Approved Third Party Originatorwith respect to the sale of such Receivable to the Approved Subsidiary, suchApproved Third Party Originator Agreement was, at the time of the originationof such Receivable, in full force and effect and is the legal, valid, bindingand enforceable obligation of such Approved Third Party Originator (subject toapplicable bankruptcy and insolvency laws and other similar laws affecting theenforcement of creditors’ rights generally and to principles of equity,regardless of whether enforcement is sought in a proceeding in equity or atlaw); there have been no material defaults by such Approved Third PartyOriginator or by the Approved Subsidiary under such Approved Third PartyOriginator Agreement; the Approved Subsidiary has fully performed all of itsobligations under such Approved Third Party Originator Agreement; the ApprovedSubsidiary has not made any statements or representations to such ApprovedThird Party Originator inconsistent with any term of such Approved Third PartyOriginator Agreement; the purchase price for such Receivable has been paid infull by the Approved Subsidiary, there is no other payment due to such ApprovedThird Party Originator from the Approved Subsidiary for the purchase of suchReceivable, such Approved Third Party Originator has no right, title orinterest in or to any Receivable; there is no prior course of dealing betweensuch Approved Third Party Originator and the Approved Subsidiary which willaffect the terms of such Approved Third Party Originator Agreement; anyadditional payment that may be owed to such Approved Third Party Originator bythe Approved Subsidiary is a corporate obligation of the Approved Subsidiary;such Receivables have been purchased by the Seller from such ApprovedSubsidiary and the purchase price for such Receivable has been paid in full bythe Seller, there is no other payment due to such Approved Subsidiary from theSeller for the purchase of such Receivable, such Approved Subsidiary has noright, title or interest in or to any Receivable.

###  

### (q)           The Seller has provided to the Collateral Agent the sole originalcounterpart of such Receivable as amended, and the related title document orthe application for title document, previously in the possession of the Seller.

###  

### (r)            Such Receivable constitutes “chattel paper”for purposes of Section 9-102(a)(11) of theUCC.  The Seller’s electronic ledgershave been marked as provided in Section 2.1 and 2.2 of thisAgreement with respect to such Receivable.

###  

### (s)           Such Receivable was not originated in, nor is it subject to the law of,any jurisdiction, the laws of which would make unlawful the sale, transfer orassignment of such document, under this Agreement, including any repurchase inaccordance with this Agreement.

###  

### (t)            Such Receivable is in full force and effectin accordance with its respective terms and neither the Seller nor the relatedObligor has suspended or reduced any payments or obligations due or to becomedue thereunder by reason of a default by the other party to such Receivable;there are no proceedings pending, or to the best of the Seller’s knowledge, 

 

31

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### threatened,asserting insolvency of the related Obligor, there has been no previous defaulton such Receivable that resulted in repossession of the related FinancedVehicle; and there are no proceedings pending, or to the best of the Seller’sknowledge, threatened, wherein the related Obligor or any governmental agencyhas alleged that such Receivable is illegal or unenforceable.

###  

### (u)           Each contract evidencing or assigning, as the case may be, a Receivablebeing acquired by the Debtor is substantially similar to one of the Seller’sstandard form contracts attached hereto as Exhibit K except forimmaterial modifications or deviations therefrom in accordance with state lawwhich will not have a material adverse effect on the Secured Parties and willnot reduce the scheduled payments thereunder or other payments due under theReceivables.

###  

### (v)           The Seller has duly fulfilled all obligations to be fulfilled on theSeller’s part under or in connection with the origination, acquisition anddisposition of such Receivable, including, without limitation, giving anynotices or consents necessary to effect the acquisition of such Receivables bythe Debtor, and has done nothing to impair the rights of the Collateral Agentor the Secured Parties in such Receivable or payments with respectthereto.  The Seller has obtained allnecessary licenses, permits and charters required to be obtained by the Seller,which failure to obtain would render any portion of the transaction documentunenforceable and would have a material adverse effect on the Secured Parties.

###  

### (w)          The Originator or Approved Third Party Originator that originated suchReceivable was selected by the Seller based on such Originator’s or ApprovedThird Party Originator’s financial and operating history.

###  

### (x)            As of the Cut-Off Date, the aggregatePrincipal Balance of all Receivables was $65,913,504.67.

###  

### (y)           The contract securing such Receivable arose from a bona fide sale inthe ordinary course of the Originator’s or Approved Third Party Originator’sbusiness, as applicable.

###  

### (z)            Such Receivable represents the sale of goodsdescribed in the contract evidencing the Receivable.

###  

### (aa)         Such Receivable is exclusive and contains allthe terms and conditions of the related contract.

###  

### (bb)         To the best of the Debtor’s knowledge, allsignatures, names, addresses, telephone numbers, figures and other statementsof fact set forth in the contract evidencing the Receivable are genuine, trueand correct.

###  

### (cc)         To the best of the Debtor’s knowledge, no part of the down payment, orany installment, has been loaned by the Originator or Approved Third PartyOriginator, as applicable, to the related Obligor.

###  

### (dd)         To the best of the Debtor’s knowledge, allcredit information provided to the Seller is true and correct and reported asreceived from the Obligor.

 

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### (ee)         To the best of the Debtor’s knowledge, theObligor is in fact the primary or sole operator of the related FinancedVehicle.

###  

### (ff)           Each Receivable constitutes an EligibleReceivable.

###  

### (gg)         The sale of the Extended Service Agreement tothe related Obligor complied at the time of such sale with all applicable stateand federal laws (and regulations thereunder), including without limitation,insurance, usury, disclosure and consumer protection laws, equal creditopportunity, fair credit reporting, truth-in-lending or other similar laws, theFederal Trade Commission Act, and applicable state laws regulating extendedservice agreements and insurance, and the ownership of such Extended ServiceAgreement will not violate any such laws.

###  

### (hh)         To the best of the Debtor’s knowledge, eachExtended Service Agreement and each credit life policy and accident and healthpolicy relating to a Financed Vehicle or an Obligor is the legal, valid andbinding obligation of each party thereto, and is enforceable in accordance withits terms.

###  

### (ii)           To the best of the Debtor’s knowledge, the Seller and any partyobligated to perform services under an Extended Service Agreement relating to aFinanced Vehicle, any credit life insurance policy or any accident and healthpolicy related to a Financed Vehicle or an Obligor have complied with alllicensing, insurance or other laws applicable to them in connection with theorigination, servicing, performance or administration thereof.

###  

### (jj)           The Collateral Agent will be entitled toreceive all amounts due to an Obligor or lienholder upon cancellation by anObligor of an Extended Service Agreement or any credit life insurance policyand accident and health insurance policy relating to a Financed Vehicle or anObligor;

###  

### (kk)         All rights (but not obligations) of theSeller under each Extended Service Agreement and any credit life insurancepolicy and accident and health insurance policy relating to a Financed Vehicleor an Obligor have been assigned by the Seller to the Debtor, and subsequentlyassigned by the Debtor to the Collateral Agent for the benefit of the SecuredParties; and

###  

### (ll)           The representations, warranties and covenantsof the Debtor contained in Exhibit F are hereby incorporated byreference herein.

###  

With respect to any Receivable for which anyrepresentation or warranty made by the Debtor set forth in Section 3.1above shall be or shall have been untrue as of the last day of the priorCollection Period (each, an “*IneligibleReceivable*”) the Debtor shall be obligated to pay to theCollateral Agent, for application in accordance with Section 5.1 asif such amounts constituted Available Collections for such Remittance Date, theprincipal balance plus accrued interest at the applicable APR on each suchIneligible Receivable.  Such paymentshall be made on the Business Day preceding the next Remittance Date.  After the payment of such amount in respect ofany Receivable, the lien of the Collateral Agent in any such Receivable shallbe released.

 

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## **Section 3.2****           ****Covenants of the Debtor****.**

##  

The Debtor hereby covenants to the Collateral Agentand the Secured Parties, so long as any amounts shall be outstanding under theNote, the Note Purchase Agreement or the Insurance Agreement or the Surety Bondis in effect, that:

 

### (a)           Corporate Existence.  TheDebtor will preserve and maintain its existence as a corporation duly organizedand existing under the laws of the jurisdiction of its incorporation and willremain duly qualified as a foreign corporation under the laws of each otherjurisdiction in which the failure to so qualify would have a material adverseeffect on the ability of the Debtor to perform its obligations under thisAgreement, the Note, the Note Purchase Agreement, the Insurance Agreement orthe Purchase Agreement.

###  

### (b)           Losses, Etc.  Inany suit, proceeding or action brought by the Collateral Agent or any SecuredParty for any sum owing thereto, the Debtor will save, indemnify and keep theCollateral Agent and the Secured Parties harmless from and against all expense,loss or damage suffered by reason of any defense, setoff, counterclaim,recoupment or reduction of liability whatsoever of the Obligor under suchReceivable, arising out of a breach by the Debtor of any obligation under therelated Receivable or arising out of any other agreement, indebtedness orliability at any time owing to or in favor of such Obligor or its successorfrom the Debtor, and all such obligations of the Debtor shall be and remainenforceable against and only against the Debtor and shall not be enforceableagainst the Collateral Agent or any Secured Party.

###  

### (c)           Compliance With Law.  TheDebtor will comply, in all material respects, with all acts, rules,regulations, orders, decrees and directions of any governmental authorityapplicable to the Receivables or any part thereof; provided, however,that the Debtor may contest any act, rule, regulation, order, decree ordirection in any reasonable manner which will not materially and adverselyaffect the rights of the Collateral Agent in the Receivables or thecollectability of the Receivables.

###  

### (d)           No Instruments.  TheDebtor will take no action to cause any Receivable to be evidenced by anyinstrument (as defined in the UCC).

###  

### (e)           No Liens.  Except for the conveyancescontemplated hereunder, the Debtor will not sell, pledge, assign or transfer toany other Person, or grant, create, incur, assume or suffer to exist any Lienon any Receivable or any interest therein; the Debtor will notify theCollateral Agent and the Surety Bond Provider of the existence of any Lien onany Receivable immediately upon discovery thereof; and the Debtor shall defendthe right, title and interest of the Collateral Agent on behalf of the SecuredParties in, to and under the applicable Receivables against all claims of thirdparties claiming through or under the Debtor; provided, however,that nothing in this Section 3.2(e) shall prevent or be deemed toprohibit the Debtor from suffering to exist upon any of the Receivables anyLiens for municipal or other local taxes and other governmental charges if suchtaxes or governmental charges shall not at the time be due and payable or ifthe Debtor shall currently be contesting the validity thereof in good faith byappropriate proceedings and shall have set aside on its books adequate reserveswith respect thereto.

 

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### (f)            Notice to Collateral Agent.  TheDebtor will advise the Collateral Agent and the Surety Bond Provider promptly,in reasonable detail, (i) of any Lien asserted or claim made against any of theReceivables, (ii) of the occurrence of any breach by the Debtor of any of itsrepresentations, warranties and covenants contained herein and (iii) of theoccurrence of any other event which would have a material adverse effect on theCollateral Agent’s security interest on behalf of the Secured Parties in theReceivables or the collectability thereof, or which would have a materialadverse effect on the interests of the Secured Parties.

###  

### (g)           Books and Records.  TheCollateral Agent and the Secured Parties and their agents and representativesshall at all times have full and free access during normal business hours toall the computer tapes, books, correspondence and records of the Debtor insofaras they relate to the Receivables, and the Collateral Agent and its agents andrepresentatives and the Surety Bond Provider may examine the same, takeextracts therefrom and make photocopies thereof, and the Debtor agrees torender to the Collateral Agent and the Surety Bond Provider or its agents andrepresentatives, at the Debtor’s cost and expense, such clerical and other assistanceas may be reasonably requested with regard thereto.  The Debtor hereby assigns to the CollateralAgent and its agents and representatives and the Surety Bond Provider allrights the Debtor has or shall have to examine computer tapes, books, correspondenceand records relating to Receivables serviced by the Servicer or any successorservicer thereto.  Each of the CollateralAgent and the Surety Bond Provider acknowledges that in exercising the rightsand privileges conferred in this Section 3.2(g) it, or its agentsand representatives, may from time to time obtain knowledge of information andpractices set forth in such computer tapes, books, correspondence and records(whether in the possession of the Debtor or the Servicer) of a confidentialnature and in which the Debtor has a proprietary interest.  The Collateral Agent and the Secured Partiesagree that all such information, practices, books, correspondence and recordsare to be regarded as confidential information and that (i) it shall retain in strictconfidence and shall use its best efforts to ensure that its representativesretain in strict confidence and will not disclose without the prior writtenconsent of the Debtor any or all of such information, practices, books,correspondence and records furnished to them and (ii) it will not, and will useits best efforts to ensure that its agents and representatives will not, makeany use whatsoever (other than for the purposes contemplated by this Agreement)of any of such information, practices, computer tapes, books, correspondenceand records without the prior written consent of the Debtor, unless suchinformation (i) is generally available to the public, (ii) is required by lawto be disclosed or is requested by any Governmental Authority having authorityover the Surety Bond Provider, the Company, any Liquidity Provider or CreditSupport Provider or (iii) is requested by Moody’s or S&P in connection withtheir rating of the Commercial Paper or the implied rating of the facility.

###  

### (h)           Administrative Procedures.  TheDebtor will maintain and implement administrative operating procedures(including, without limitation, an ability to recreate records evidencing theReceivables in the event of the destruction of the originals thereof) and keepand maintain all documents, books, records and other information customarilymaintained in the servicing of sub-prime auto loans.

###  

### (i)            UCC Filings.  The Debtor shall execute andfile such continuation statements and any other documents requested by theCompany, the Surety Bond Provider or the Collateral Agent or which may berequired by law to fully preserve and protect the interest of the

 

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### Company, the Surety BondProvider, and the Collateral Agent hereunder in and to the Receivables.

###  

### (j)            Change of Location, Name.  TheDebtor will not, without providing thirty (30) days’ notice to the Company, theSurety Bond Provider, and the Collateral Agent and without filing suchamendments to any previously filed financing statements as the Collateral Agentor the Surety Bond Provider may require, (A) change its jurisdiction oforganization, (B) permit the documents and records evidencing the FinancedReceivables to be moved out of its jurisdiction of organization unless the Debtorshall have taken such action to maintain the title or ownership of the Debtorand any security interest of the Collateral Agent for the benefit of theSecured Parties in the Collateral at all times fully perfected and in fullforce and effect or (C) change its name, identity or corporate structure in anymanner which would, could or might make any financing statement or continuationstatement filed by the Debtor in accordance with this Agreement seriouslymisleading within the meaning of Section 9-506 of the UCC.

###  

### (k)           Further Assurances.  TheDebtor shall deliver to the Company, the Surety Bond Provider, and theCollateral Agent within ninety (90) days of the first anniversary of theClosing Date and each anniversary thereafter an opinion of independent counselto the Debtor, dated as of a date during such 90-day period, either (a) statingthat, in the opinion of such counsel, (1) such action has been taken withrespect to the recording, registering, filing, re-recording, re-registering andre-filing of financing statements, continuation statements or other instrumentsor documents as is necessary to preserve and protect the interest of theCollateral Agent and the Secured Parties in and to the Receivables and recitingthe details of such action or referring to prior opinions of counsel in whichsuch details are given, and (2) all financing statements, continuationstatements and any other necessary documents have been executed and filed thatare necessary fully to preserve and protect the perfected interest of theCollateral Agent and the Secured Parties in and to the Receivables, andreciting the details of such filings or referring to prior opinions of counselin which such details are given, or (b) stating that, in the opinion of suchcounsel, no such action is necessary to preserve and protect such interest.

###  

### (l)            Reporting.  The Debtor will furnish, orcause to be furnished to the Administrative Agent, the Surety Bond Provider,and the Collateral Agent (unless otherwise provided to the Collateral Agent):

###  

#### (i)            Notice of Termination Event, AmortizationEvent, Wind-Down Event, Potential Termination Events, Potential AmortizationEvent or Potential Wind-Down Event.  As soon as possible and in anyevent within five days of becoming aware of the occurrence of each TerminationEvent, Amortization Event, Wind-Down Event, or each Potential TerminationEvent, Potential Amortization Event or Potential Wind-Down Event hereunder, oreach Servicer Termination Event under the Servicing Agreement, a statement ofthe chief financial officer or chief accounting officer of the Debtor settingforth details of such Termination Event, Amortization Event, Wind-Down Event,Potential Termination Event, Potential Amortization Events or PotentialWind-Down Event or Servicer Termination Event and the action which the Debtorproposes to take with respect thereto.

 

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#### (ii)           Change in Credit Guidelines. Within 10 days after the date of any material change in or amendment tothe Credit Guidelines, a copy of the Credit Guidelines then in effectindicating such change or amendment.  Anychange that will materially and adversely affect the Surety Bond Provider shallbe approved in writing by the Surety Bond Provider.

####  

### (m)          The Debtor shall not, without the prior written consent of theCollateral Agent and the Surety Bond Provider,

###  

#### (i)            engage in any business or activity other thanthose set forth in Article III of the Debtor’s Certificate ofIncorporation;

####  

#### (ii)           incur any indebtedness, or assume or guaranty anindebtedness of any other entity, other than any indebtedness contemplated by Article IVof the Debtor’s Certificate of Incorporation, which indebtedness shall besubordinated to all other obligations of the Debtor;

####  

#### (iii)          without the affirmative vote of 100% of themembers of the Board of Directors of the Debtor, institute proceedings to beadjudicated bankrupt or insolvent, or consent to the institution of bankruptcyor insolvency proceedings against it, or file a petition seeking or consent toreorganization or relief under any applicable federal or state law relating tobankruptcy, or consent to the appointment of a receiver, liquidator, assignee,trustee, sequestrator (or other similar official) of the corporation or asubstantial part of its property, or make any assignment for the benefit ofcreditors, or admit in writing its inability to pay its debts generally as theybecome due, or take corporate action in furtherance of any such action.

####  

#### (iv)          The Debtor shall at all times (a) to theextent the Debtor’s office is located in the offices of the Seller or anyAffiliate of the Seller, pay fair market rent for its executive office spacelocated in the offices of the Seller or any Affiliate of the Seller, (b)maintain the Debtor’s books, financial statements, accounting records and othercorporate documents and records separate from those of the Seller or any otherentity, (c) not commingle the Debtor’s assets with those of the Seller or anyother entity (it being understood that certain Collections on Receivables ownedby the Debtor may be temporarily commingled with collections on otherreceivables serviced by the Seller); (d) act solely in its corporate name andthrough its own authorized officers and agents, (e) make investments directly orby brokers engaged and paid by the Debtor or its agents (provided that if anysuch agent is an Affiliate of the Debtor it shall be compensated at a fairmarket rate for its services), (f) separately manage the Debtor’s liabilitiesfrom those of the Seller or any Affiliates of the Seller and pay its ownliabilities, including all administrative expenses, from its own separateassets,  and (g) pay from the Debtor’sassets all obligations and indebtedness of any kind incurred by theDebtor.  The Debtor shall abide by allcorporate formalities, including the maintenance of current minute books, andthe Debtor shall cause its financial statements to be prepared in accordancewith generally accepted accounting principles in a manner that indicates theseparate existence of the Debtor and its assets and liabilities.  The Debtor shall (i) pay all its liabilities,(ii) not assume the liabilities of the Seller or any Affiliate of the Seller,and (iii)

 

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#### not guarantee the liabilities of the Seller or any Affiliate of theSeller.  The officers and directors ofthe Debtor (as appropriate) shall make decisions with respect to the businessand daily operations of the Debtor independent of and not dictated by anycontrolling entity.

####  

#### (v)           The Debtor shall only amend, alter, change orrepeal its Certificate of Incorporation as in effect on the date hereof withthe prior written consent of the Collateral Agent and the Surety Bond Provider.

####  

### (n)           The Debtor shall have at all times in effect an interest rate capagreement or agreements with respect to the Receivables with a financialinstitution or institutions (each institution, a “*Cap Counterparty*” and collectively, the “*Cap Counterparties*”) and consisting ofthe following requirements (each interest rate cap agreement meeting thefollowing requirements, an “*Interest RateCap*” and collectively, the “*InterestRate Caps*”): (i) any such Cap Counterparty shall be approved bythe Administrative Agent; (ii) each Interest Rate Cap shall be documented insubstantially in the form set forth hereto as Exhibit M; (iii) thestrike rate of any Interest Rate Cap shall be not more than 6.0%; (iv) allamounts payable by the Cap Counterparty thereunder shall be required to be paidby such counterparty directly to the Collection Account; (v) the notionalamount thereunder shall amortize according to the amortization of theReceivables funded on such Addition Closing Date assuming zero defaults, a1.25% ABS prepayment speed and a weighted average remaining term equal to thethen remaining term of the latest maturing Receivable being added; (vi) theInterest Rate Cap shall cover at least 100% of the Net Investment and must bein effect for at least as long as the latest maturing Receivable securing theNet Investment; and (vii) the effective date shall be no later than theAddition Closing Date.

###  

### (o)           Credit Guidelines.  TheDebtor shall not amend, modify or supplement its Credit Guidelines in anymanner which would materially and adversely affect the Surety Bond Provider.

###  

### (p)           Extended Service Agreements.  TheDebtor will not amend, and shall not permit any amendment to any ExtendedService Agreement relating to any Financed Vehicle which would adversely affectits ability and right to receive refunds under such contracts, or which wouldadversely affect the position of the Surety Bond Provider.

###  

### (q)           The Note.  The Debtor will not amend, andshall not permit any amendment to the Note, except in accordance with the NotePurchase Agreement, except with the consent of the Company and the Surety BondProvider.

###  

## **Section 3.3****           ****WAC Requirement****.**

##  

If on any day the WAC Requirement is not satisfied,then the Debtor shall on such day provide one or more Interest Rate Caps inaccordance with the provisions of Section 3.2(n) that have strikerates equal to (x) 5.00% minus (y) the excess of the WAC Requirement over theweighted average APR of all Eligible Receivables on such day and with anotional amount equal to the aggregate Principal Balance of all EligibleReceivables on such date.

 

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## **Section 3.4****           ****Covenants of the Seller****.**

##  

The Seller agrees not to use or permit any of itsAffiliates to use the Surety Bond Provider’s name in any public documentincluding, without limitation, a press release or presentation, announcement orforum without the Surety Bond Provider’s prior consent. In the event that theSeller or any of its Affiliates is advised by counsel that such party has alegal obligation to disclose the Surety Bond Provider’s name in any pressrelease, public announcement or other public document, such party shall providethe Surety Bond Provider with at least three (3) Business Days prior writtennotice of such party’s intent to use the Surety Bond Provider’s name togetherwith a copy of the proposed use of the Surety Bond Provider’s name and of anydescription of a transaction with the Surety Bond Provider and shall obtain theSurety Bond Provider’s prior consent as to the form and substance of theproposed use of the Surety Bond Provider’s name and any such description.  Notwithstanding the foregoing, neither theSeller nor any of its Affiliates shall be required to obtain the prior consentof the Surety Bond Provider for any financial statements or reports that theSeller or any of its Affiliates routinely files with the Securities andExchange Commission in which the Surety Bond Provider’s name is mentionedsolely in connection with the issuance of a policy insuring securities.

 

# **Article IV**

#  

# **Servicing and Administration**

#  

## **Section 4.1****           ****Servicing****.**

##  

### (a)           Pursuant to the Servicing Agreement, the Debtor has contracted withFirst Investors Servicing Corporation (“FISC”) to act as servicer tomanage, collect and administer each of the Receivables.  Until such time as FISC is terminated asservicer under the Servicing Agreement, references to the Servicer herein shallrefer to FISC as servicer under the terms of the Servicing Agreement.  In the event of a Servicer Termination Eventpursuant to Section 5.01 of the Servicing Agreement, the Debtor, shallupon the written direction of the Surety Bond Provider, or may, with theconsent of the Surety Bond Provider, terminate FISC as Servicer thereunder, butin any event shall notify Moody’s and S&P of such Servicer TerminationEvent.  Upon the termination of FISC asservicer of the Receivables pursuant to Section 5.01 of the ServicingAgreement, a successor servicer shall be appointed pursuant to the terms of theServicing Agreement and all references herein to the Servicer shall be deemed torefer to such successor servicer.

###  

### (b)           There shall be established on the Closing Date and maintained, for thebenefit of the Secured Parties, in the trust department of the CollateralAgent, a segregated account (the “*CollectionAccount*”), bearing a designation clearly indicating that all ofthe funds deposited therein are held for the benefit of the SecuredParties.  Funds on deposit in theCollection Account (other than investment earnings) shall be invested by theCollateral Agent at the direction of the Debtor in Eligible Investments thatwill mature so that such funds will be available prior to the next succeedingRemittance Date, except that in the case of funds representing Collections withrespect to a succeeding Collection Period, such Eligible Investments may matureso that such funds will be available no later than the Business Day prior tothe Remittance Date for such Collection Period. Any funds on deposit in the Collection 

 

39

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### Accountto be so invested shall be invested solely in Eligible Investments.  On each Remittance Date, all interest andearnings (net of losses and investment expenses) on funds on deposit in theCollection Account shall be available to make any payments required hereunderand shall be distributed pursuant to the priorities set forth in Section 5.1.

###  

### (c)           The Debtor shall cause the Servicer under the Servicing Agreement todeposit all Collections in the Collection Account no later than the close ofbusiness on the second Business Day following receipt thereof by the Servicer.

###  

## **Section 4.2****           ****Rights After Designation ofSuccessor Servicer****.**

##  

At any time following the designation of a Servicer(other than FISC) pursuant to Section 4.1 hereof and Section 2.01at the Servicing Agreement as a result of the occurrence of a ServicerTermination Event pursuant to Section 5.01 of the Servicing Agreement:

 

#### (i)            The Collateral Agent and the Surety BondProvider may direct that payment of all amounts payable under any Receivable bemade directly to the Collateral Agent or its designee.

####  

#### (ii)           The Debtor shall, at the Collateral Agent’sor the Surety Bond Provider’s request and at the Debtor’s expense, give noticeof the Collateral Agent’s interest in the Receivables to each Obligor anddirect that payments be made directly to the Collateral Agent or its designee.

####  

#### (iii)          The Debtor shall, at the Collateral Agent’sor the Surety Bond Provider’s request, (A) assemble all of the records relatingto the Collateral, including all Receivables files, and shall make the sameavailable to the Collateral Agent and the Surety Bond Provider at a placeselected by the Collateral Agent and the Surety Bond Provider or its designee,and (B) segregate all cash, checks and other instruments received by it from timeto time constituting collections of Collateral in a manner acceptable to theCollateral Agent and the Surety Bond Provider and shall, promptly upon receipt,remit all such cash, checks and instruments, duly endorsed or with dulyexecuted instruments of transfer, to the Collateral Agent or its designee.

####  

#### (iv)          The Debtor hereby authorizes the CollateralAgent to take any and all steps in the Debtor’s name and on behalf of theDebtor necessary or desirable, in the determination of the Collateral Agent, tocollect all amounts due under any and all of the Collateral with respectthereto, including, without limitation, endorsing the Debtor’s name on checksand other instruments representing Collections and enforcing the Receivables.

####  

## **Section 4.3****           ****Responsibilities of theDebtor****.**

##  

Anything herein to the contrary notwithstanding, theDebtor shall (i) perform all of its obligations under the Receivables to thesame extent as if a security interest in such Receivables had not been grantedhereunder and the exercise by the Collateral Agent of its rights hereundershall not relieve the Debtor from such obligations and (ii) pay when due anytaxes, including without limitation, any sales taxes payable in connection withthe Receivables and their creation

 

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and satisfaction.  Neither theCollateral Agent nor any Secured Party shall have any obligation or liabilitywith respect to any Receivable, nor shall any of them be obligated to performany of the obligations of the Debtor thereunder.

 

## **Section 4.4****           ****Monthly Debtor’s Certificate****.**

##  

On each Determination Date, the Debtor shall deliveror cause the Servicer to deliver to the Administrative Agent, the Surety BondProvider and the Collateral Agent a certificate, signed by the Debtor and theServicer, in substantially the form of Exhibit A-1 to the Servicing Agreement(the “*Monthly Debtor’s Certificate*”)for the related Collection Period.  TheCompany shall provide (or cause the Administrative Agent to provide) to theDebtor, by the 10th day of the calendar month following the Collection Periodto which such Monthly Debtor’s Certificate relates, information relating to theamount of each obligation of the Company which comprises Carrying Costs forsuch Collection Period.  The Monthly Debtor’sCertificate shall specify whether a Termination Event, an Amortization Event orWind-Down Event is deemed to have occurred with respect to the CollectionPeriod preceding such Determination Date. Upon receipt of the Monthly Debtor’s Certificate, the Collateral Agentshall rely (and shall be fully protected in so relying) on the informationcontained therein for the purposes of making distributions and allocations asprovided for herein.

 

# **Article V**

#  

# **Allocation and Application of Collections; ReserveAccount**

#  

## **Section 5.1****           ****Collections****.**

##  

### (a)           On each Remittance Date, the Collateral Agent shall determine byreference to the Monthly Debtor’s Certificate the Available Collections for theprior Collection Period and shall withdraw such amount from the CollectionAccount and allocate and pay such amount in the following order of priority:

###  

#### (i)            first, to pay to the Collateral Agent all fees and expenses due pursuant to Section 7.2(a) hereof, second, to the Servicer the Servicing Fee due withrespect to the related Collection Period and an amount equal to the amount ofexpenses due to be reimbursed pursuant to this Section 5.1(a)(i) tothe Servicer as provided in Section 2.11(b) of the Servicing Agreement,and third to the successor Servicer an amount not in excess of $50,000in payment of any transition expenses of such successor Servicer under theServicing Agreement due to be reimbursed by the Debtor;

####  

#### (ii)           second, an amount equal to Carrying Costs for therelated Collection Period, the portion thereof to each Person entitled toreceive such portion pursuant to the definition of Carrying Costs;

####  

#### (iii)          third, to the Noteholder, to pay the TargetedMonthly Principal Payment;

####  

#### (iv)          fourth, to the Surety Bond Provider, the SuretyBond Premium, including any overdue Surety Bond Premium, accrued interestthereon plus any amounts owed under the Surety Bond or the Insurance Agreement;

 

41

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#### (v)           fifth, to the Surety Bond Provider, the aggregate amount of any previouslyunreimbursed draws on the Surety Bond, plus accrued interest thereon at therate provided in the Insurance Agreement;

####  

#### (vi)          sixth, to the Noteholder, an amount equal to theAccrued Interest for such Collection Period in excess of the Enhanced Yield forsuch Collection Period;

####  

#### (vii)         seventh, prior to the occurrence of a TerminationEvent, to the Reserve Account, the amount necessary to increase the amount ondeposit in the Reserve Account to the Required Reserve Account Balance;

####  

#### (viii)        eighth, to the Collateral Agent, first, the amount to be applied bythe Collateral Agent to pay any and all Re-Liening Expenses then due andpayable which have not been previously paid by or on behalf of the Debtor, and second,all amounts due the Collateral Agent pursuant to Section 7.2(b)hereof;

####  

#### (ix)           ninth, after the occurrence of a Termination Event or on any Remittance Dateon which the product of the Noteholder’s Percentage and the Borrowing Base isless than or equal to 5.0% of the Facility Limit, the remainder to the Noteholderto reduce the Net Investment;

####  

#### (x)            tenth, to the Noteholder or any other appropriate party, an amount equal toany other amounts owed thereto under the Note Purchase Agreement (other thanamounts due under the Note, with the exception of costs incurred in theenforcement of the Note), other amounts due thereto under this Agreement, andunreimbursed Carrying Costs with respect to prior Collection Periods; and

####  

#### (xi)           eleventh,  first, to the Servicerfor the payment of the Incentive Servicing Fee due with respect to the relatedCollection Period, and second, to the Servicer in payment of allexpenses of the Servicer under the Servicing Agreement due to be reimbursed bythe Debtor and not paid on such Remittance Date as a result of the limitationset forth in clause second of Section 5.1(a)(i), and third,to the successor Servicer all expenses of the successor Servicer due to bereimbursed and not paid under clause third of Section 5.1(a)(i),and fourth, all remaining amounts shall be distributed by the CollateralAgent to a bank account designated by the Debtor for further distribution.

####  

### (b)           If the Available Collections in respect of a Remittance Date areinsufficient to pay the sum of the amounts to be distributed on such RemittanceDate pursuant to clauses (i) through (iii) of Section 5.1(a)and clause (viii) of Section 5.1(a), the Debtor shall notifythe Reserve Account Agent of such shortfall and the Reserve Account Agent shallcause the withdrawal of the amount of such shortfall from the Reserve Account,to the extent of amounts on deposit therein, and remit the proceeds of suchwithdrawal to the Collateral Agent and the Collateral Agent shall apply suchamount to the payment of the items described in clauses (i), (ii),(iii) and (viii) of Section 5.1(a), on the relatedRemittance Date and in that order of priority. The Administrative Agent shall be entitled to direct the CollateralAgent to make a demand for payment upon the Debtor for shortfalls reasonablyexpected to occur in the amount available to be withdrawn from Reserve Accounton any Remittance Date pursuant to this Section 5.1(b),

 

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### provided,that any such demands shall be (i) based on the information contained in therelated Monthly Debtor’s Certificate and (ii) shall be made not more than fourBusiness Days prior to the scheduled maturity date of the Commercial Paper towhich such expected shortfall relates. The Debtor shall deposit to the credit of the Reserve Account, on theBusiness Day following any such demand, the amount of such requested payment.

###  

### (c)           If on any Remittance Date Available Collections and amounts availableto be withdrawn from the Reserve Account are insufficient to pay the sum of theamounts to be distributed pursuant to clauses (i), (ii), (iii) and (viii)of Section 5.1(a), the Administrative Agent shall review the termsof the Surety Bond, and if a demand for payment may be made thereunder for anysuch shortfall, the Administrative Agent shall make a demand thereunder in accordancewith the terms of the Surety Bond.

###  

## **Section 5.2****           ****Remittances to the SecuredParties****.**

##  

On each Remittance Date, the Collateral Agent shallremit Available Collections to each Secured Party in accordance with theprovisions of Section 5.1. The foregoing notwithstanding, the final remittance in respect of theNote shall be made in the applicable manner specified above only uponpresentation and surrender of the Note at the office of the Debtor specified byit in the notice of such final remittance or repurchase.

 

# **Article V-A**

#  

# **The Reserve Account and TheReserve Account Agent**

#  

## **Section 5A.1****        ****Establishment of the ReserveAccount****.**

##  

(a)           Appointment of Reserve Account Agent.  TheCollateral Agent on behalf of the Secured Parties hereby appoints Wachovia CapitalMarkets, LLC, to act as Reserve Account Agent on behalf of the Collateral Agenton behalf of the Secured Parties hereunder, and Wachovia Capital Markets, LLC,hereby accepts such appointment.

 

### (b)           Establishment of Reserve Account.  Onor before the Closing Date, the Debtor shall establish a segregated account,which shall be entitled “Reserve Account of Wachovia Capital Markets, LLC, asReserve Account Agent for the benefit of Wells Fargo Bank, National Associationas Collateral Agent for Enterprise Funding Corporation and MBIA InsuranceCorporation” (the “*Reserve Account*”).  Subject to the terms hereof, the ReserveAccount Agent for the benefit of the Collateral Agent for the benefit of theSecured Parties shall possess all right, title and interest in and to all fundsdeposited from time to time in the Reserve Account.  Notwithstanding the foregoing, the ReserveAccount Agent shall not withdraw any funds from, or otherwise exercise controlover, the Reserve Account except as provided in this Agreement and the ReserveAccount Agent acknowledges that all amounts on deposit in the Reserve Accountshall be held by the Reserve Account Agent for the benefit of the CollateralAgent for the benefit of the Secured Parties.

###  

### (c)           Deposits to and Withdrawals from the ReserveAccount.  On or prior to the Closing Date, the Debtorshall deposit or cause to be deposited in the Reserve Account, the RequiredReserve Account Balance.  The Debtorshall deposit into the Reserve Account all

 

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### amountswhich are required to be deposited therein by this Agreement.  The Reserve Account Agent shall promptlywithdraw from the Reserve Account all amounts required to be withdrawntherefrom pursuant to Section 5.1(b) hereof, and shall remit suchamounts to the Collateral Agent.

###  

Prior to the occurrence of a Termination Event andto the extent that amounts on deposit in the Reserve Account on any RemittanceDate, after giving effect to any required withdrawals therefrom on such day,exceed the Required Reserve Account Balance, such excess amounts shall bewithdrawn from the Reserve Account by the Reserve Account Agent and bedeposited by the Reserve Account Agent in the Collection Account and shallconstitute part of Available Funds for the next succeeding Remittance Date.

 

### (d)           Investment of Funds on Deposit in the ReserveAccount.

###  

#### (i)            Funds on deposit in the Reserve Account shallbe invested in Eligible Investments by or at the written direction of theDebtor, provided that if a Termination Event shall have occurred, suchinvestments shall be limited to the Eligible Investments set forth in items A,B and C of Exhibit D hereto.  Anysuch written directions shall specify the particular investment to be made andshall certify that such investment is an Eligible Investment and is permittedto be made under this Agreement.

####  

#### (ii)           All investments of amounts on deposit in theReserve Account shall be accomplished in a manner so as to cause suchinvestments to be Transferred to the Reserve Account Agent and, if required byapplicable law or any amendment thereto, to be maintained by the ReserveAccount Agent through continued registration of the Reserve Account Agent’sownership of such investments, so as to continously establish “control” (asdefined in Section 8-106 of the UCC) thereof by the Reserve Account Agent;provided that investments need not be Transferred to the Reserve Account Agentin accordance with each action set forth in the definition of “Transferred”, ifas a result of the effectiveness in the State of New York of the 1994 OfficialText of Article 8 of the Uniform Commercial Code, or otherwise, suchaction is no longer required to perfect the security interest of the ReserveAccount Agent.  The Reserve Account Agentagrees that, without the prior consent of the Surety Bond Provider, it shallnot accept for credit to the Reserve Account any investment as to which it hasknowledge of any adverse claim thereto. Wachovia Bank, National Association hereby agrees (and any otherSecurities Intermediary holding the Reserve Account shall so agree) to complywith all Entitlement Orders (as defined in Section 8-102(a)(8) of the UCC)received by it from the Reserve Account Agent.

####  

#### (iii)          Funds on deposit in the Reserve Account onthe Closing Date and thereafter shall be so invested in Eligible Investmentsthat mature not later than the Business Day prior to the next RemittanceDate.  No Eligible Investment may beliquidated or disposed of prior to its maturity.  All proceeds of any Eligible Investment shallbe deposited in the Reserve Account. Investments may be made on any date (provided such investments mature inaccordance with the preceding sentence), only after giving effect to depositsto and withdrawals from the Reserve Account on such date.  Not later than 5:00 p.m. (New York time) onthe Business Day prior to each Remittance Date,

 

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#### all interest and earnings (net of losses and investment expenses, ifany) accrued since the previous Remittance Date (or since the Closing Date inthe case of the first Remittance Date) on funds on deposit in the ReserveAccount shall be withdrawn by the Reserve Account Agent and remitted to theCollateral Agent to be applied pursuant to Section 5.1 of this Agreementin accordance with the Monthly Debtor’s Certificate.  Realized losses, if any, onamounts invested in Eligible Investments shall be charged against undistributedinvestment earnings on amounts on deposit in the Reserve Account.

####  

#### (iv)          The Debtor and the Surety Bond Provider shalleach provide the Reserve Account Agent on the date hereof and from time to timeupon request an incumbency certificate or the substantial equivalent withrespect to each officer of the Debtor and the Surety Bond Provider, respectively,that is authorized to provide instructions relating to investments in EligibleInvestments.

####  

## **Section 5A.2****        ****Maintenance of EligibleInvestments****.**

##  

Eligible Investments shall be maintained by theReserve Account Agent in such manner as may be necessary to maintain the firstpriority perfected security interest in favor of the Reserve Account Agent, asthe secured party on behalf of the Collateral Agent on behalf of the SecuredParties.  The Securities Intermediaryagrees that it shall not agree to comply with Entitlement Orders (as defined inSection 8-102(a)(8) of the Relevant UCC State)with respect to the Reserve Account given to it by any Person other than theReserve Account Agent.

 

All amounts or property credited to the ReserveAccount shall be subject to the lien of the Reserve Account Agent, for theCollateral Agent on behalf of the Secured Parties, until released or withdrawnfrom the Reserve Account.

 

## **Section 5A.3****        ****Termination of ReserveAccount; Release of Funds****.**

##  

If and to the extent that all amounts owed by theDebtor to the Secured Parties hereunder, under the Note Purchase Agreement, theInsurance Agreement and the Note have been paid in full,any amounts on deposit in the Reserve Account shall be released to theDebtor.  In the event that thereafter theDebtor shall request that the Noteholder increase its Net Investment, it shallbe a condition precedent thereto that the Reserve Account be funded in anamount equal to the Required Reserve Account Balance after giving effect to anyReceivables added to the Collateral in connection with such increase in the NetInvestment.

 

## **Section 5A.4****        ****Duties of the ReserveAccount Agent****.**

##  

The Reserve Account Agent, both prior to theoccurrence of a Termination Event, Amortization Event or Wind-Down Event hereunderand after an Amortization Event or Wind-Down Event shall have been cured orwaived, shall undertake to perform such duties and only such duties as arespecifically set forth in this Agreement. The Reserve Account Agent shall at all times after the occurrence of aTermination Event, Amortization Event or Wind-Down Event which has not beencured (except in the case of a Termination Event) or waived exercise such ofthe rights and powers vested in it pursuant to this Agreement using the samedegree of care and skill as a prudent person would exercise or use in theconduct of his or her own affairs.

 

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The Reserve Account Agent shall only resign if itshall (i) become incapable of acting as Reserve Account Agent in accordancewith the terms of this Agreement, (ii) be adjudicated insolvent or bankrupt orotherwise become subject to any bankruptcy, insolvency, reorganization orliquidation proceeding, (iii) be no longer qualified as the Reserve Account Agentas such term is defined in the agreement governing its responsibility asReserve Account Agent or otherwise be subject to replacement pursuant to orsuch agreement governing its responsibility as Reserve Account Agent or (iv)materially breach any of the provisions of this Agreement; provided, further,that, without the consent of the Company and the Surety Bond Provider, suchresignation shall not be effective until a successor Reserve Account Agentacceptable to the Surety Bond Provider shall have accepted appointment asReserve Account Agent hereunder and shall have agreed to be bound by the termsof this Agreement.

 

Except as otherwise provided herein, the ReserveAccount Agent shall not resign from the obligations and duties hereby imposedon it except upon determination that (i) the performance of its dutieshereunder is no longer permissible under applicable law and (ii) there is noreasonable action which the Reserve Account Agent could take to make theperformance of its duties hereunder permissible under applicable law.  Any such determination permitting theresignation of the Reserve Account Agent shall be evidenced as to clause (i)above by an opinion of counsel to such effect delivered to the SecuredParties.  No resignation of the ReserveAccount Agent shall become effective until a successor Reserve Account Agentapproved by the Secured Parties shall have assumed the responsibilities andobligations of the Reserve Account Agent hereunder.  In the event that the long-term debt ratingof the Reserve Account Agent assigned by Moody’s and S&P is reduced belowBaa3 and BBB-**,**respectively, theSurety Bond Provider may remove the Reserve Account Agent and appoint asuccessor Reserve Account Agent.

 

## **Section 5A.5****        ****Representations, Warrantiesand Covenants of the Reserve Account Agent****.**

##  

The Reserve Account Agent agrees to make thefollowing representations, warranties and covenants.

 

(i)            Organization and Good Standing.  TheReserve Account Agent is a national banking association duly organized, validlyexisting and in good standing under the laws of the United States of America,and has full corporate power, authority and legal right to conduct its businessas such business is presently conducted, and to execute, deliver and performits obligations under this Agreement and the Insurance Agreement.

 

#### (ii)           Due Authorization.  Theexecution, delivery, and performance of this Agreement and the InsuranceAgreement have been duly authorized by the Reserve Account Agent by allnecessary corporate action on the part of the Reserve Account Agent.

####  

#### (iii)          Binding Obligation.  ThisAgreement and the Insurance Agreement each constitutes a legal, valid andbinding obligation of the Reserve Account Agent, enforceable in accordance withits terms, except as enforceability may be limited by applicable bankruptcy,insolvency, reorganization, moratorium or other similar laws now

 

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#### or hereinafter in effect, affecting the enforcement of creditors’ rightsin general and except as such enforceability may be limited by generalprinciples of equity (whether considered in a proceeding at law or in equity).

####  

#### (iv)          No Conflict.  The execution and delivery ofthis Agreement and the Insurance Agreement by the Reserve Account Agent, andthe performance of the transactions contemplated hereby and thereby and thefulfillment of the terms hereof and thereof applicable to the Reserve AccountAgent, will not conflict with, violate, result in any breach of any of theterms and provisions of, or constitute (with or without notice or lapse of timeor both) a default under, any Requirement of Law applicable to the ReserveAccount Agent or any indenture, contract, agreement, mortgage, deed of trust orother instrument to which the Reserve Account Agent is a party or by which itis bound.

####  

## **Section 5A.6****        ****Liability of the ReserveAccount Agent****.**

##  

(a)           The Reserve Account Agent shall be liable inaccordance herewith only to the extent of the obligations specificallyundertaken by the Reserve Account Agent in such capacity herein.  No implied covenants or obligations shall beread into this Agreement against the Reserve Account Agent and, in the absenceof bad faith on the part of the Reserve Account Agent, the Reserve AccountAgent may conclusively rely on the truth of the statements and the correctnessof the opinions expressed in any certificates or opinions furnished to theReserve Account Agent and conforming to the requirements of this Agreement.

 

### (b)           The Reserve Account Agent shall not be liable for an error of judgmentmade in good faith unless it shall be proved that the Reserve Account Agentshall have been negligent in ascertaining the pertinent facts.

###  

### (c)           The Reserve Account Agent shall not be liable with respect to anyaction taken, suffered or omitted to be taken in good faith in accordance withthis Agreement or at the direction of the Collateral Agent or a Secured Partyrelating to the exercise of any power conferred upon the Reserve Account Agentunder this Agreement.

###  

### (d)           The Reserve Account Agent shall not be charged with knowledge of anyTermination Event, Wind-Down Event or Amortization Event unless an officerdirectly involved with the administration of the Reserve Account obtains actualknowledge of such event or the Reserve Account Agent receives written notice ofsuch event from the Debtor, the Company, the Surety Bond Provider or theAdministrative Agent, as the case may be.

###  

### (e)           The Reserve Account Agent shall not be required to expend or risk itsown funds or otherwise incur financial liability in the performance of any ofits duties hereunder, or in the exercise of any of its rights or powers, ifthere shall be reasonable ground for believing that the repayment of such fundsor adequate indemnity against such risk or liability shall not be reasonablyassured to it.

###  

### (f)            The Reserve Account Agent may rely and shallbe protected in acting or refraining from acting upon any resolution, officer’scertificate, any Monthly Debtor’s Certificate, certificate of auditors, or anyother certificate, statement, instrument, opinion, report,

 

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### notice,request, consent, order, appraisal, bond or other paper or document reasonablybelieved by it to be genuine and to have been signed or presented by the properparty or parties.

###  

### (g)           The Reserve Account Agent may consult with counsel and any opinion ofsuch counsel shall be full and complete authorization and protection in respectof any action taken or suffered or omitted by it under this Agreement in goodfaith and in accordance with such opinion of counsel.

###  

### (h)           The Reserve Account Agent shall be under no obligation to exercise anyof the rights or powers vested in it by this Agreement or to institute, conductor defend any litigation under this Agreement or in relation to this Agreement,at the request, order or direction of a Secured Party or the Collateral Agentpursuant to the provisions of this Agreement, unless a Secured Party shall haveoffered to the Reserve Account Agent reasonable security or indemnity againstthe costs, expenses and liabilities that may be incurred therein or thereby;nothing contained in this Agreement, however, shall relieve the Reserve AccountAgent of its obligations, upon the occurrence of a Termination Event, aWind-Down Event or Amortization Event (that shall not have been cured (exceptwith respect to a Termination Event) or waived), to exercise such of the rightsand powers vested in it by this Agreement, and to use the same degree of careand skill in their exercise as a prudent person would exercise or use under thecircumstances in the conduct of his or her own affairs.

###  

### (i)            The Reserve Account Agent shall not be liablefor any action taken, suffered or omitted by it in good faith and believed byit to be authorized or within the discretion or rights or powers conferred uponit by this Agreement.

###  

### (j)            Prior to the occurrence of a TerminationEvent, Wind-Down Event or Amortization Event and before the Reserve AccountAgent has received notice of such Termination Event, Wind-Down Event orAmortization Event and after the curing (except with respect to a TerminationEvent) or waiver of any Wind-Down Event or Amortization Event that may haveoccurred, the Reserve Account Agent shall not be bound to make anyinvestigation into the facts of matters stated in any resolution, certificate,statement, instrument, opinion, report, notice, request, consent, order,approval, bond or other paper or document, unless requested in writing so to doby a Secured Party; provided, however, that if the payment withina reasonable time to the Reserve Account Agent of the costs, expenses orliabilities likely to be incurred by it in the making of such investigationshall be, in the opinion of the Reserve Account Agent, not reasonably assuredby the Debtor, the Reserve Account Agent may require reasonable indemnityagainst such cost, expense or liability as a condition to so proceeding.  The reasonable expense of every suchexamination shall be paid by the Debtor or, if paid by the Reserve AccountAgent, shall be reimbursed by the Debtor upon demand from funds availablepursuant to Section 5.1(a)(x) hereof.

###  

## **Section 5A.7****        ****Limitation on Liability ofthe Reserve Account Agent and Others****.**

##  

The directors, officers, employees or agents of theReserve Account Agent shall not be under any liability to the Reserve AccountAgent, any Secured Party or any other Person hereunder or pursuant to anydocument delivered hereunder, it being expressly understood that all suchliability is expressly waived and released as a condition of, and asconsideration for, the

 

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execution of this Agreement; provided,however, that this provision shall not protect the directors, officers,employees and agents of the Reserve Account Agent against any liability whichwould otherwise be imposed by reason of willful misfeasance, bad faith or grossnegligence in the performance of duties or by reason of reckless disregard ofobligations and duties hereunder.  Exceptas provided in Section 5A.4, the Reserve Account Agent shall not beunder any liability to any Secured Party or any other Person for any actiontaken or for refraining from the taking of any action in its capacity asReserve Account Agent pursuant to this Agreement whether arising from expressor implied duties under this Agreement; provided, however, thatthis provision shall not protect the Reserve Account Agent against anyliability which would otherwise be imposed by reason of willful misfeasance,bad faith or gross negligence in the performance of duties or by reason ofreckless disregard of obligations and duties hereunder.  The Reserve Account Agent may rely in goodfaith on any document of any kind primafacie properly executedand submitted by any Person respecting any matters arising hereunder.  The Reserve Account Agent shall not be underany obligation to appear in, prosecute or defend any legal action which is notincidental to its duties to administer the Reserve Account in accordance withthis Agreement which in its reasonable opinion may involve it in any expense orliability.

 

# **ArticleVI**

 

# **Termination Events; ServicingTermination**

 

## **Section 6.1            Termination Events.**

 

The occurrenceof any one of the following events shall be a “*Termination Event*” under this Agreement:

 

### (a)           failure on the part of the Debtor topay or disburse when due the amounts provided for herein;

###  

### (b)           failure (i) by the Debtor, to observeor perform any term, covenant, condition or agreement set forth in Sections3.2(a), (d), (e), (f), (g), (h), (i),(j), (l), (m), and (n) of this Agreement or (ii) ofany representation or warranty of the Debtor, the Seller or the Servicercontained herein or, in the Note Purchase Agreement, the Purchase Agreement orthe Servicing Agreement to be true and correct in all material respects on anyday when made or deemed made hereunder, or (iii) by the Debtor to observe orperform any other term, covenant, condition or agreement provided for herein orin the Note, the Note Purchase Agreement, the Servicing Agreement, the PurchaseAgreement or the Interest Rate Cap (other than a term addressed in clause(i) above) which, in the case of clause (ii) above continues for aperiod of thirty (30) days after the earlier of (u) the date on which writtennotice of such breach shall have been given to the Debtor, the Seller or theServicer, by the Company, the Surety Bond Provider or the Collateral Agent, (v)the date on which the Debtor became aware of such breach or (w) the date onwhich the Debtor exercising reasonable care should have become aware of suchbreach, or which, in the case of clause (iii) above continues for aperiod of thirty (30) days after the earlier of (x) the date on which writtennotice of such failure shall have been given to the Debtor by the Company, theSurety Bond Provider, or the Collateral Agent, (y) the date on which the Debtor

 

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became aware of such failure or(z) the date on which the Debtor exercising reasonable care should have becomeaware of such failure;

###  

### (c)           the Debtor, the Seller or theServicer shall consent to the appointment of a conservator or receiver orliquidator in any insolvency, readjustment of debt, marshalling of assets andliabilities or similar proceedings of or relating to the Debtor, the Seller orthe Servicer, as the case may be, or of or relating to all or substantially allof its property, or a decree or order of a court or agency or supervisoryauthority having jurisdiction in the premises for the appointment of aconservator or receiver or liquidator in any insolvency, readjustment of debt,marshalling of assets and liabilities or similar proceedings, or for thewinding-up or liquidation of its affairs, shall have been entered against theDebtor, the Seller or the Servicer, as the case may be, and such decree ororder shall have remained in force undischarged or unstayed for a period ofsixty (60) days; or the Debtor, the Seller or the Servicer shall admit inwriting its inability to pay its debts generally as they become due, file apetition to take advantage of an applicable insolvency or reorganizationstatute, make any assignment for the benefit of its creditors or voluntarilysuspend payment of its obligations; or the Debtor, the Seller or the Servicer,as the case may be, shall become unable for any reason to pledge Collateral tothe Collateral Agent in accordance with the provisions of this Agreement;

###  

### (d)           (i) the Net Investment exceeds thesum of (x) 93.0% of the Borrowing Base and (y) the amount on deposit in theReserve Account for thirty (30) consecutive days; (ii) the Net Investmentequals or exceeds the Facility Limit or (iii) the Net Investment at any timeequals or exceeds the sum of the Borrowing Base plus the amount on deposit inthe Reserve Account;

###  

### (e)           the Debtor shall enter into anymerger, consolidation or conveyance transaction regardless of the survivingentity, or the Servicer shall enter into any merger, consolidation orconveyance transaction whereby it is not the surviving entity;

###  

### (f)            any material adverse change in theoperations of the Servicer which materially adversely affects the ability ofthe Servicer to service the Receivables or to perform its obligations under theServicing Agreement (or any other agreement pursuant to which the Servicer isacting as servicer of the Receivables);

###  

### (g)           there shall be an unwaived anduncured default by the Seller, the Servicer or the Debtor under any materialagreement for borrowed money to which the Seller, the Servicer or the Debtor isa party or there shall be a Servicer Termination Event under the ServicingAgreement;

###  

### (h)           the Delinquency Ratio averaged overany three consecutive Collection Periods shall equal or exceed 6.00%;

###  

### (i)            the Gross Default Ratio averagedover any three consecutive Collection Periods shall equal or exceed 12.00%;

###  

### (j)            the Collateral Agent shall fail forany reason to have a valid and perfected first priority security interest inthe Receivables and the proceeds thereof;

 

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### (k)           there shall be a material breach bythe Seller of its obligations under the Purchase Agreement;

###  

### (l)            beginning with the April 1997Determination Date, the annualized Net Default Ratio averaged over any three(3) consecutive Collection Periods is greater than or equal to 5.00%;

###  

### (m)          (i) a final judgment for the paymentof money in excess of $1,000,000 shall have been rendered against the Seller orany of its affiliates by a court of competent jurisdiction and the Seller orsuch affiliate(s) shall not have either: (1) discharged or provided for thedischarge of such judgment in accordance with its terms, or (2) perfected atimely appeal of such judgment and caused the execution thereof to be stayed(by supersedeas or otherwise) during the pendency of such appeal or (ii) theSeller or any of its affiliates shall have made payments of amounts in excessof $1,000,000 in settlement of any litigation;

###  

### (n)           the weighted average APR of theEligible Receivables is less than the WAC Requirement and the Debtor has failedto meet the requirements of Section 3.3;

###  

### (o)           The weighted average remaining termto maturity on the Receivables is greater than 66 months;

###  

### (p)           a draw is made under the Surety Bond;

###  

### (q)           the Surety Bond Provider shall havegiven notice that an event of default has occurred and is continuing under theInsurance Agreement;

###  

### (r)            the term of the Surety Bond is not ofthe term required by the Company (which term shall be at least equal to theterm of the latest maturing Receivable in the facility plus ninety (90) days);

###  

### (s)           [Reserved];

###  

### (t)            either (1) the long-term debt ratingof any provider of an Interest Rate Cap (A) from S&P is withdrawn or fallsbelow A or (B) from Moody’s is withdrawn or falls below A2 and, in either case,a successor to such provider acceptable to the Surety Bond Provider is not inplace or collateral acceptable to the Surety Bond Provider has not been posted,in each case, within ten (10) Business Days or (2) the long-term debt rating ofany provider of an Interest Rate Cap (A) from S&P is withdrawn or fallsbelow A- or (B) from Moody’s is withdrawn or falls below A3 and, in eithercase, a successor to such provider acceptable to the Surety Bond Provider isnot in place within ten (10) Business Days;

###  

### (u)           the outstanding principal balance ofReceivables originated under the Seller’s Participating Program exceeds 10% ofthe Borrowing Base;

###  

### (v)           the facility no longer carries ashadow rating of at least BBB- from S&P or at least Baa3 from Moody’s;

###  

### (w)          the occurrence of a Wind-Down Eventwhich is not cured within 35 days;

 

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### (x)            a Change of Control occurs;

###  

### (y)           First Investors Financial ServicesGroup, Inc.’s GAAP equity as a percentage of its on-balance portfolio fallsbelow 10% measured as of the end of each fiscal quarter of First InvestorsFinancial Services Group, Inc., beginning with the fiscal quarter ending July31, 1999; and

###  

### (z)            First Investors Financial ServicesGroup, Inc.’s EBITDA Coverage Ratio, measured on a rolling six-month basis asof the end of each fiscal quarter of First Investors Financial Services Group,Inc. (beginning with the fiscal quarter ending July 31, 1999), falls below 1.3to 1;

###  

### (aa)         the Monthly Extension Rate for theSeller’s total managed portfolio averaged over any three consecutive CollectionPeriods shall exceed 2.25%;

###  

### (bb)         a Servicer Termination Event shall haveoccurred and be continuing;

###  

### (cc)         As of the end of any of its fiscalquarters, First Investors Financial Services Group, Inc. (“*FIFSG*”) shareholder’s equity(determined in accordance with GAAP) is less than the sum of $24,120,545 and50% of the aggregate of the net income of FIFSG (determined in accordance withGAAP and without deduction for any net losses) for such fiscal quarter and allprior fiscal quarters ending after January 31, 2005; and

###  

### (dd)         the Direct Loan Percentage shall beless than 30% on any day.

 

## **Section 6.2            Wind-Down Events.**

 

The occurrenceand continuation of any one of the following events shall be a “*Wind-Down Event*” under this Agreement:

 

### (a)           the Liquidity Provider or the CreditSupport Provider shall have notified the Company that an event of default hasoccurred under the Liquidity Agreement or the Credit Support Agreement,respectively; or

###  

### (b)           the Company’s Commercial Paper shallno longer be rated at least “A-2”, in the case of S&P, and at least “P-2”,in the case of Moody’s.

###  

## **Section6.3            Amortization Events.**

 

The occurrenceand continuance of any one of the following events shall be an “*Amortization Event*” under thisAgreement:

 

### (a)           at any time the Net Investmentexceeds the sum of (i) 93.0% of the Borrowing Base and (ii) the amount ondeposit in the Reserve Account and such condition continues uncured;

###  

### (b)           The Seller fails to maintain aworking capital facility of at least $9,000,000;

 

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### (c)           the semi-annual due diligence by theSurety Bond Provider (or its designee) uncovers Receivables representing morethan 10% of the sample which display material adverse non-compliance with theSeller’s Credit Guidelines;

###  

### (d)           the departure of both Tommy Moore andBennie Duck from the Seller if replacements for such individuals acceptable tothe Surety Bond Provider are not appointed within ninety (90) days;

###  

### (e)           FISC, as Servicer, is no longerobligated to service new Loans originated by the Seller;

###  

### (f)            the Seller changes its existing loanverification procedures in any material respect and its new procedures are notacceptable to the Surety Bond Provider;

###  

### (g)           there occurs any material adversechange to the Seller’s Credit Guidelines, unless such change is approved by theSurety Bond Provider;

###  

### (h)           the Delinquency Ratio for the Seller’stotal managed portfolio averaged over any three consecutive Collection Periodsshall equal or exceed 8.5%;

###  

### (i)            on and after the Remittance Datenext following the fourth Collection Period after the Closing Date, theannualized Net Default Ratio for the Seller’s total managed portfolio averagedover any three consecutive Collection Periods is greater than or equal to 5.5%;and

###  

### (j)            the occurrence of an InsuranceAgreement Amortization Event.

 

## **Section 6.4            Remedies.**

 

If aTermination Event as specified in Section 6.1 shall have occurred, theCollateral Agent, at the written direction of Surety Bond Provider shall, orthe Company may, with the consent of the Surety Bond Provider, declare bywritten notice to the Debtor any date as the date upon which the Note shallbecome due and payable and, the Collateral Agent shall have all of the rightsand remedies provided to a secured creditor under the UCC by applicable law inrespect thereto.  In addition, theCompany shall have the right to cease issuing Commercial Paper.  The Company may, at its option, determinethat its Carrying Costs with respect to the Net Investment after the occurrenceof a Termination Event are calculated by reference to the Adjusted LIBOR Rate,if available and if the Surety Bond Provider has not failed to make a requiredpayment under the Surety Bond, otherwise, the Base Rate plus 2.0%.  There shall be no Subsequent Funding upon theoccurrence of any Termination Event or Potential Termination Event or duringthe continuance of any Wind-Down Event, Potential Wind-Down Event, AmortizationEvent or Potential Amortization Event. The payment by or on behalf of the Debtor to the Noteholder of an amountsuch that after such payment the Net Investment is below 89.0% of the sum ofthe Borrowing Base plus the amount on deposit in the Reserve Account shall cureany Amortization Event described in Section 6.3(a).  No waiver of any Termination Event, PotentialTermination Event, Wind-Down Event, Potential Wind-Down Event, AmortizationEvent or Potential Amortization Event shall be effective without the priorwritten consent of the Surety Bond Provider.

 

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If the Note isdeclared due and payable in accordance with this Section 6.4, theCollateral Agent shall, at the direction of the Surety Bond Provider, and may,with the consent of the Surety Bond Provider, do any one or more of thefollowing:

 

### (a)           take all necessary action toforeclose upon the Collateral;

###  

### (b)           retain in satisfaction of any amountsowing from the Debtor all amounts otherwise payable to the Debtor pursuant tothis Agreement to the extent necessary to pay in full all amounts (includingprincipal and interest) (i) due and payable under the Note, (ii) due andpayable by the Debtor under the Note Purchase Agreement, and (iii) all amountsdue and payable by the Debtor under the Insurance Agreement;

###  

### (c)           pursue any available remedy byproceeding at law or in equity including complete or partial foreclosure of thelien upon the Collateral and sale of the Collateral or any portion thereof orrights or interest therein as may appear necessary or desirable (i) to collectamounts owed pursuant to the Note and any other payments then due andthereafter to become due under the Note or (ii) to enforce the performance andobservance of any obligation, covenant, agreement or provision contained inthis Agreement to be observed or performed by the Debtor; or

###  

### (d)           exercise any remedies of a securedparty under the Uniform Commercial Code and take any other appropriate actionto protect and enforce the rights and remedies of the Collateral Agent onbehalf of the Secured Parties.

 

## **Section 6.5            Proceeds.**

 

The proceedsfrom the sale, disposition or liquidation of the Receivables pursuant to Section6.4 above shall be treated as Collections on the Receivables and shall beallocated and deposited in accordance with the provisions governing allocationsset forth herein.

 

# **ArticleVII**

 

# **The Collateral Agent**

 

## **Section7.1            Duties of the CollateralAgent.**

 

The SecuredParties hereby appoint Wells Fargo Bank, National Association to act solely ontheir behalf as Collateral Agent hereunder, and Wells Fargo Bank, NationalAssociation hereby accepts such appointment. The Collateral Agent, both prior to the occurrence of a TerminationEvent, Amortization Event or Wind-Down Event hereunder and after anAmortization Event or Wind-Down Event shall have been cured or waived, shallundertake to perform such duties and only such duties as are specifically setforth in this Agreement.  The CollateralAgent shall at all times after the occurrence of a Termination Event,Amortization Event or Wind-Down Event which has not been cured (except in thecase of a Termination Event) or waived exercise such of the rights and powersvested in it pursuant to this Agreement using the same degree of care and skillas a prudent person would exercise or use in the conduct of his or her ownaffairs.  All Collections received by theCollateral Agent from the Servicer or otherwise will, pending remittance to theSecured Party entitled thereto, be held in trust by the

 

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Collateral Agent for thebenefit of the Secured Parties and together with all other payment obligationsof the Debtor hereunder owing to the Secured Parties shall be payable to theSecured Parties in accordance with the provisions of Article V hereof.

 

The CollateralAgent shall only resign if it shall (i) become incapable of acting asCollateral Agent in accordance with the terms of this Agreement, (ii) beadjudicated insolvent or bankrupt or otherwise become subject to anybankruptcy, insolvency, reorganization or liquidation proceeding, (iii) be nolonger qualified as the Collateral Agent as such term is defined in theagreement governing its responsibility as Collateral Agent or otherwise besubject to replacement pursuant to or such agreement governing itsresponsibility as Collateral Agent or (iv) materially breach any of theprovisions of this Agreement such Agreement or provided, further,that, without the consent of the Company and the Surety Bond Provider, suchresignation shall not be effective until a successor Collateral Agentacceptable to the Surety Bond Provider shall have accepted appointment as CollateralAgent hereunder and shall have agreed to be bound by the terms of thisAgreement.

 

Except asotherwise provided herein, the Collateral Agent shall not resign from theobligations and duties hereby imposed on it except upon determination that (i)the performance of its duties hereunder is no longer permissible underapplicable law and (ii) there is no reasonable action which the CollateralAgent could take to make the performance of its duties hereunder permissibleunder applicable law.  Any such determinationpermitting the resignation of the Collateral Agent shall be evidenced as to clause(i) above by an opinion of counsel to such effect delivered to the SecuredParties. Notwithstanding the foregoing, the Collateral Agent may resign if,after demand therefor, it does not receive payment of any compensation due fromthe Debtor pursuant to the letter agreement described in Section 7.2.  No resignation of the Collateral Agent shallbecome effective until a successor Collateral Agent approved by the SecuredParties shall have assumed the responsibilities and obligations of theCollateral Agent hereunder.

 

This Agreementshall be administered in the Corporate Trust Office of the CollateralAgent.  The Collateral Agent shallmaintain fidelity bond coverage insuring against losses through wrongdoing ofits officers and employees who are involved in the administration ofCollections covering such actions and in such amounts as the Collateral Agentbelieves to be reasonable in light of industry standards from time to time.

 

## **Section7.2            Compensation andIndemnification of Collateral Agent.**

 

### (a)   The Collateral Agent shall be compensated forits activities hereunder and reimbursed for reasonable out-of-pocket expenses(including (i) securities transaction charges not waived due to the CollateralAgent’s receipt of a payment from a financial institution with respect tocertain Eligible Investments, as specified by the Debtor and (ii) thecompensation and expenses of its counsel and agents) pursuant to a separate letteragreement between the Collateral Agent and the Debtor.  All such amounts shall be payable from fundsavailable therefor in accordance with Section 5.1(a)(i) hereof with anyincrease in such amounts to be approved by the Surety Bond Provider.  Subject to the terms of such letteragreement, the Collateral Agent shall be required to pay the expenses incurredby it in connection with its activities hereunder from its own account.  Notwithstanding any other provisions in thisAgreement, the Collateral Agent shall not be liable for any liabilities, costsor expenses of the Debtor arising under any tax

 

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law, including withoutlimitation any Federal, state or local income or franchise taxes or any othertax imposed on or measured by income (or any interest or penalties with respectthereto or from a failure to comply therewith).

###  

### (b)           The Debtor shall indemnify theCollateral Agent, its officers, directors, employees and agents for, and holdit harmless against any loss, liability or expense incurred without willfulmisconduct, gross negligence or bad faith on its part, arising out of or inconnection with (i) the acceptance or administration of this Agreement,including the costs and expenses of defending itself against any claim orliability in connection with the exercise or performance of any of its powersor duties under this Agreement and (ii) the negligence, willful misconduct orbad faith of the Debtor in the performance of its duties hereunder.  All such amounts shall be payable inaccordance with Section 5.1(a)(viii) hereof.  The provisions of this Section 7.2shall survive the termination of this Agreement.

###  

## **Section7.3            Representations,Warranties and Covenants of the Collateral Agent.**

 

The CollateralAgent agrees to make the following representations, warranties and covenants,and further agrees that the Secured Parties shall be deemed to have relied uponsuch representations, warranties and covenants in accepting their interest inthe Receivables.

 

### (a)           Organization and Good Standing.  The Collateral Agent is a national bankingassociation duly organized, validly existing and in good standing under thelaws of the United States of America, and has full corporate power, authorityand legal right to own its properties and conduct its business as suchproperties are presently owned and such business is presently conducted, and toexecute, deliver and perform its obligations under this Agreement.

###  

### (b)           Due Authorization.  The execution, delivery, and performance ofthis Agreement have been duly authorized by the Collateral Agent by allnecessary corporate action on the part of the Collateral Agent.

###  

### (c)           Binding Obligation.  This Agreement constitutes a legal, valid andbinding obligation of the Collateral Agent, enforceable in accordance with itsterms, except as enforceability may be limited by applicable bankruptcy,insolvency, reorganization, moratorium or other similar laws now or hereinafterin effect, affecting the enforcement of creditors’ rights in general and exceptas such enforceability may be limited by general principles of equity (whetherconsidered in a proceeding at law or in equity).

###  

### (d)           No Conflict.  The execution and delivery of this Agreementby the Collateral Agent, and the performance of the transactions contemplatedby this Agreement and the fulfillment of the terms hereof applicable to theCollateral Agent, will not conflict with, violate, result in any breach of anyof the terms and provisions of, or constitute (with or without notice or lapseof time or both) a default under, any Requirement of Law applicable to theCollateral Agent or any indenture, contract, agreement, mortgage, deed of trustor other instrument to which the Collateral Agent is a party or by which it isbound.

###  

## **Section7.4            Liability of theCollateral Agent.**

 

### (a)           The Collateral Agent shall be liablein accordance herewith only to the extent of the obligations specificallyundertaken by the Collateral Agent in such capacity herein.  No implied covenants or obligations shall beread into this Agreement against the Collateral Agent

 

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and, in the absence of badfaith on the part of the Collateral Agent, the Collateral Agent mayconclusively rely on the truth of the statements and the correctness of theopinions expressed in any certificates or opinions furnished to the CollateralAgent and conforming to the requirements of this Agreement.

###  

### (b)           The Collateral Agent shall not beliable for an error of judgment made in good faith by a Trust Officer, unlessit shall be proved that the Collateral Agent shall have been negligent inascertaining the pertinent facts.

###  

### (c)           The Collateral Agent shall not beliable with respect to any action taken, suffered or omitted to be taken ingood faith in accordance with this Agreement or at the direction of a SecuredParty relating to the exercise of any power conferred upon the Collateral Agentunder this Agreement.

###  

### (d)           The Collateral Agent shall not becharged with knowledge of any Termination Event, Wind-Down Event orAmortization Event unless a Trust Officer assigned to the Collateral Agent’sCorporate Trust Office obtains actual knowledge of such event or the CollateralAgent receives written notice of such event from the Debtor, the Company, theSurety Bond Provider or the Administrative Agent, as the case may be.

###  

### (e)           Without limiting the generality ofthis Section 7.4, the Collateral Agent shall have no duty (i) to see toany recording, filing or depositing of this Agreement or any agreement referredto herein or any financing statement or continuation statement evidencing asecurity interest in the Receivables or the Financed Vehicles, or to see to themaintenance of any such recording or filing or depositing or to any recording,refiling or redepositing of any thereof, (ii) to see to any insurance of theFinanced Vehicles or Obligors or to effect or maintain any such insurance,(iii) to see to the payment or discharge of any tax, assessment or othergovernmental charge or any Lien or encumbrance of any kind owing with respectto, assessed or levied against, any part of the Receivables, (iv) to confirm orverify the contents of any reports or certificates of the Servicer or theDebtor delivered to the Collateral Agent pursuant to this Agreement believed bythe Collateral Agent to be genuine and to have been signed or presented by theproper party or parties or (v) to inspect the Financed Vehicles at any time orascertain or inquire as to the performance or observance of any of the Debtor’sor the Servicer’s representations, warranties or covenants or the Servicer’sduties and obligations as Servicer and as custodian of books, records, filesand computer records relating to the Receivables under the Servicing Agreement.

###  

### (f)            The Collateral Agent shall not berequired to expend or risk its own funds or otherwise incur financial liabilityin the performance of any of its duties hereunder, or in the exercise of any ofits rights or powers, if there shall be reasonable ground for believing thatthe repayment of such funds or adequate indemnity against such risk orliability shall not be reasonably assured to it, and none of the provisionscontained in this Agreement shall in any event require the Collateral Agent toperform, or be responsible for the manner of performance of, any of theobligations of the Servicer under this Agreement.

###  

### (g)           The Collateral Agent may rely andshall be protected in acting or refraining from acting upon any resolution,officer’s certificate, any Monthly Debtor’s Certificate, certificate ofauditors, or any other certificate, statement, instrument, opinion, report,notice, request, consent,

 

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order, appraisal, bond or otherpaper or document reasonably believed by it to be genuine and to have beensigned or presented by the proper party or parties.

###  

### (h)           The Collateral Agent may consult withcounsel and any opinion of such counsel shall be full and completeauthorization and protection in respect of any action taken or suffered oromitted by it under this Agreement in good faith and in accordance with suchopinion of counsel.

###  

### (i)            The Collateral Agent shall be underno obligation to exercise any of the rights or powers vested in it by thisAgreement or to institute, conduct or defend any litigation under thisAgreement or in relation to this Agreement, at the request, order or directionof the Company pursuant to the provisions of this Agreement, unless the Companyshall have offered to the Collateral Agent reasonable security or indemnityagainst the costs, expenses and liabilities that may be incurred therein orthereby; nothing contained in this Agreement, however, shall relieve theCollateral Agent of its obligations, upon the occurrence of a TerminationEvent, a Wind-Down Event or Amortization Event (that shall not have been curedor waived), to exercise such of the rights and powers vested in it by thisAgreement, and to use the same degree of care and skill in their exercise as aprudent person would exercise or use under the circumstances in the conduct ofhis or her own affairs.

###  

### (j)            The Collateral Agent shall not beliable for any action taken, suffered or omitted by it in good faith andbelieved by it to be authorized or within the discretion or rights or powersconferred upon it by this Agreement.

###  

### (k)           Prior to the occurrence of aTermination Event, Wind-Down Event or Amortization Event and before theCollateral Agent has received notice of such Termination Event, Wind-Down Eventor Amortization Event and after the curing (except with respect to aTermination Event) or waiver of any Termination Event, Wind-Down Event orAmortization Event that may have occurred, the Collateral Agent shall not bebound to make any investigation into the facts of matters stated in any resolution,certificate, statement, instrument, opinion, report, notice, request, consent,order, approval, bond or other paper or document, unless requested in writingso to do by a Secured Party; provided, however, that if thepayment within a reasonable time to the Collateral Agent of the costs, expensesor liabilities likely to be incurred by it in the making of such investigationshall be, in the opinion of the Collateral Agent, not reasonably assured by theDebtor, the Collateral Agent may require reasonable indemnity against suchcost, expense or liability as a condition to so proceeding.  The reasonable expense of every suchexamination shall be paid by the Debtor or, if paid by the Collateral Agent,shall be reimbursed by the Debtor upon demand.

###  

### (l)            The Collateral Agent may execute anyof the trusts or powers hereunder or perform any duties under this Agreementeither directly or by or through agents or attorneys or a custodian. TheCollateral Agent shall not be responsible for any misconduct or negligence ofany such agent or custodian appointed with due care by it hereunder.

 

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## **Section7.5            Merger or Consolidationof, or Assumption of the Obligations of, the Collateral Agent.**

 

The CollateralAgent shall not consolidate with or merge into any other corporation or conveyor transfer its properties and assets substantially as an entirety to anyPerson, unless:

 

#### (i)            the corporation formed by suchconsolidation or into which the Collateral Agent is merged or the Person whichacquires by conveyance or transfer the properties and assets of the CollateralAgent substantially as an entirety shall be a corporation organized andexisting under the laws of the United States of America or any State or theDistrict of Columbia and, if the Collateral Agent is not the surviving entity,shall expressly assume, by an agreement supplemental hereto, executed anddelivered to the Secured Parties in form satisfactory to the Secured Parties,the performance of every covenant and obligation of the Collateral Agenthereunder; and

####  

#### (ii)           the Collateral Agent has delivered tothe Secured Parties an officer’s certificate and an opinion of counsel eachstating that such consolidation, merger, conveyance or transfer and suchsupplemental agreement comply with this Section 7.5 and that allconditions precedent herein provided for relating to such transaction have beencomplied with.

####  

## **Section7.6            Limitation on Liabilityof the Collateral Agent and Others.**

 

The directors,officers, employees or agents of the Collateral Agent shall not be under anyliability to the Collateral Agent, any Secured Party or any other Personhereunder or pursuant to any document delivered hereunder, it being expresslyunderstood that all such liability is expressly waived and released as acondition of, and as consideration for, the execution of this Agreement; provided,however, that this provision shall not protect the directors, officers,employees and agents of the Collateral Agent against any liability which would otherwisebe imposed by reason of willful misfeasance, bad faith or gross negligence inthe performance of duties or by reason of reckless disregard of obligations andduties hereunder.  Except as provided in Section7.4, the Collateral Agent shall not be under any liability to any SecuredParty or any other Person for any action taken or for refraining from thetaking of any action in its capacity as Collateral Agent pursuant to thisAgreement whether arising from express or implied duties under this Agreement; provided,however, that this provision shall not protect the Collateral Agentagainst any liability which would otherwise be imposed by reason of willfulmisfeasance, bad faith or gross negligence in the performance of duties or byreason of reckless disregard of obligations and duties hereunder.  The Collateral Agent may rely in good faithon any document of any kind primafacie properly executed andsubmitted by any Person respecting any matters arising hereunder.  The Collateral Agent shall not be under anyobligation to appear in, prosecute or defend any legal action which is notincidental to its duties to administer the Collections and the CollectionAccount in accordance with this Agreement which in its reasonable opinion mayinvolve it in any expense or liability.

 

## **Section7.7            Indemnification of theSecured Parties.**

 

The CollateralAgent shall indemnify and hold harmless the Company from and against any loss,liability, expense, damage or injury suffered or sustained by reason of willful

 

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misfeasance, bad faith, orgross negligence in the performance of the duties of the Collateral Agent or byreason of reckless disregard of obligations and duties of the Collateral Agenthereunder or by reason of the acts, omissions or alleged acts or omissions ofthe Collateral Agent pursuant to this Agreement.  The provisions of this indemnity shall rundirectly to and be enforceable by an injured party subject to the limitationshereof.

 

## **Section7.8            Documents Held by theCollateral Agent; Indication of Debtor Ownership; Inspection and Release ofReceivable Files.**

 

### (a)           The Collateral Agent, effective uponthe Servicing Transfer, is hereby irrevocably appointed as agent of the SecuredParties to hold and maintain physical possession of the Custodian Files inaccordance with this Agreement and the Servicing Agreement and the CollateralAgent hereby accepts such appointment. The Custodian Files are to be delivered to the Collateral Agent by or onbehalf of the Debtor within two (2) Business Days preceding the ServicingTransfer or date of a Subsequent Funding, as the case may be, with respect toeach Receivable on the date of the Servicing Transfer or the date of aSubsequent Funding, provided, however, that if application hasbeen made for the issuance of the original certificate of title or otherevidence of lien and such original certificate of title or other evidence oflien has not yet been issued at the time the Custodian Files are delivered tothe Collateral Agent, there shall be delivered as part of the Custodian Filescopies of all correspondence with the appropriate State title registrationagency, and all enclosures thereto for the issuance of the original certificateof title or other evidence of lien for the related Financed Vehicle, and theoriginal certificate of tile or other evidence of lien shall be delivered tothe Collateral Agent promptly upon receipt thereof by the Seller but in noevent later than 120 days (or 150 days with respect to any certificate of titleor other evidence of lien relating to any Financed Vehicle relating to anyReceivables originated pursuant to the Seller’s refinancing program) followingthe date of the  Servicing Transfer orthe date of the applicable Subsequent Funding, and provided, further,that the failure to so deliver the original certificate of title or otherdocument evidencing the Seller’s status as lienholder shall be considered abreach of the representation and warranty set forth in Section 3.1(q)hereof as of such 120th day (or 150th day with respect toany certificate of title or other evidence of lien relating to any FinancedVehicle relating to any Receivables originated pursuant to the Seller’srefinancing program) and the Debtor shall make the payments in respect of therelated Receivable as required by the last paragraph of Section 3.1.

###  

### (b)           [Reserved].

###  

### (c)           The Collateral Agent shall withinfive (5) Business Days after receipt, review 100% of the Custodian Files toverify the presence of the original retail installment sale or loan contractand an original Certificate of Title with respect to each Receivable. In theevent that the Collateral Agent discovers an exception to any of the aboveitems, the Collateral Agent shall within five (5) Business Days after eachCollection Period with respect to each of the foregoing inspections performedby the Collateral Agent during such Collection Period, deliver a written noticeto the Rating Agencies, the Back-Up Servicer, the Seller, the Debtor and theSurety Bond Provider, specifying which of the above items have not beenreceived by the Collateral Agent with respect to each Receivable added to theCollateral during such Collection Period and any preceding CollectionPeriod.  With respect to any Receivablefor which any of the foregoing documents has not been delivered to theCollateral Agent or corrected before delivery by the

 

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Collateral Agent of a writtennotice with respect to such Custodian File, the Debtor shall remove or causethe removal of the related Receivable from the Collateral, and the Debtor shallcause the Seller to acquire and repurchase, respectively, such Receivable fromthe Collateral and deposit the Repurchase Price in the Collection Account.  Other than the reviews set forth in thisparagraph, the Collateral Agent shall have no duty or obligation to review anyof the Custodian Files.

###  

### (d)           The Collateral Agent agrees tomaintain the Custodian Files which are delivered to it at the Corporate TrustOffices of the Collateral Agent as shall from time to time be identified to theSurety Bond Provider and the Noteholder by written notice delivered promptlybut in no event later than 20 days after any change in location.  Subject to the foregoing, the CollateralAgent may temporarily move individual Custodian Files or any portion thereofwithout notice as necessary to allow the Servicer to conduct collection andother servicing activities in accordance with its customary practices andprocedures.  The Debtor shall cause theServicer and each successor Servicer to take whatever actions are requiredsubject to the other provisions of this Agreement, including, but not limitedto, the filing of financing statements, as a result of relocating the CustodianFiles, if any, to maintain the perfection of the Collateral Agent’s right,title and interest in and to the Receivables and the Custodian Files.

###  

### (e)           The Collateral Agent shall have andperform the following powers and duties:

###  

#### (i)            hold the Custodian Files for thebenefit of the Secured Parties, and maintain a current inventory thereof;

####  

#### (ii)           carry out such policies andprocedures in accordance with its customary actions with respect to thehandling and custody of the Custodian Files so that the integrity and physicalpossession of the Custodian Files will be maintained; and

####  

#### (iii)          promptly release the original retailinstallment sale or loan contract evidencing a Receivable or the originalcertificate of title to a Financed Vehicle then held by it to the Servicer uponreceipt of a written request for release of documents certified by an officerof the Servicer, substantially in the form of Exhibit C to the ServicingAgreement, with respect to the matters therein; provided, howeverthat the Collateral Agent shall be deemed to have received proper instructionswith respect to the Custodian Files upon its receipt of written instructionsfrom the Servicer in the form of Exhibit C to the Servicing Agreement.

####  

# **ArticleVIII**

 

# **Miscellaneous**

 

## **Section 8.1            Notices, etc.**

 

Except wheretelephonic instructions or notices are authorized herein to be given, allnotices, demands, instructions and other communications required or permittedto be given to or made upon any party hereto shall be in writing and shall besent by facsimile transmission with a confirmation of the receipt thereof andshall be deemed to be given for purposes of this Agreement on the day that thereceipt of such facsimile transmission is confirmed in accordance

 

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with the provisions of this Section8.1.  Unless otherwise specified in anotice sent or delivered in accordance with the foregoing provisions of this Section8.1, notices, demands, instructions and other communications in writingshall be given to or made upon the respective parties hereto at theirrespective addresses indicated below, and, in the case of telephonicinstructions or notices, by calling the telephone number or numbers indicatedfor such party below:

 

If to the Company:

 

Variable Funding Capital Corporation

c/o Wachovia Capital Markets, LLC

301 South College Street, TW-10

Charlotte, North Carolina 28288

Attention:      ConduitAdministration

Telephone:    (704)383-9343

Telecopy:      (704)383-6036

 

With a copy to:

 

Lord Securities Corporation

48 Wall Street, 27th Floor

New York, New York 10005

Attention:      VicePresident

Telephone:    (212)346-9008

Telecopy:      (212)346-9012

 

If to the Debtor:

 

First Investors Auto Receivables Corporation

675 Bering Drive

Suite 710

Houston, Texas  77057

Attention:  Tommy A. Moore, Jr.

Telephone:  (713) 977-2600

Telecopy:  (713) 977-0657

 

If to the Collateral Agent:

 

Wells Fargo Bank, National Association

MAC N9311-161

Sixth & Marquette

Minneapolis, Minnesota 55479-0070

Attention:  Corporate TrustServices - Asset-Backed Administration

Telecopy: (612) 667-3539

Confirmation:  (612) 667-8058

 

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If to the Administrative Agent:

 

Wachovia Capital Markets, LLC

301 South College Street, TW-10

Charlotte, North Carolina 28288

Attention:      JustinZakocs

Telephone:    (704)715-8184

Telecopy:      (704)383-9106

 

If to the Surety Bond Provider:

 

MBIA Insurance Corporation

113 King Street

Armonk, New York  10504

Attention:  Insured PortfolioManagement - SF

Telephone:  (914) 273-4545

Telecopy:  (914) 765-3810

 

## **Section8.2            Successors and Assigns.**

 

This Agreementshall be binding upon the Debtor, the Collateral Agent, the Secured Parties,the Seller and their respective successors and assigns and shall inure to thebenefit of the Debtor, the Servicer, the Collateral Agent, the Secured Parties,the Seller and the Company and their respective successors and permittedassigns including any Liquidity Provider; provided that the Debtor shallnot assign any of its rights or obligations hereunder without the prior writtenconsent of the Collateral Agent acting upon written instruction of each of theSecured Parties.  The Debtor and theCollateral Agent hereby acknowledge that the Company has granted a securityinterest in all of its rights hereunder to the Liquidity Provider.  Except as expressly permitted hereunder or inthe agreements establishing the Company’s commercial paper program, the Companyshall not assign any of its rights or obligations hereunder without the priorwritten consent of the Debtor.

 

## **Section8.3            Severability Clause.**

 

Any provisionsof this Agreement which are prohibited or unenforceable in any jurisdictionshall, as to such jurisdiction, be ineffective to the extent of suchprohibition or unenforceability without invalidating the remaining provisionshereof, and any such prohibition or unenforceability in any jurisdiction shallnot invalidate or render unenforceable such provision in any otherjurisdiction.

 

## **Section8.4            Amendments; GoverningLaw.**

 

**ThisAgreement and the rights and obligations of the parties hereunder (i) may notbe changed orally but only by an instrument in writing signed by the partyagainst which enforcement is sought and (ii) shall be construed in accordancewith and governed by the laws of the State of New York.  The parties hereunder agree that they willnot amend, modify, waive, or terminate any provision of this Agreement withoutthe written consent of each party.**

 

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## **Section8.5            No Bankruptcy PetitionAgainst the Company or the Debtor.**

 

The Debtor andeach of the other parties hereto covenant and agree that, and each such Personagrees that they shall cause any successor Servicer appointed pursuant to Section4.1 to covenant and agree that, prior to the date which is one year and oneday after the payment in full of all Commercial Paper issued by the Company itwill not institute against, or join any other Person in instituting against,the Company any bankruptcy, reorganization, arrangement, insolvency orliquidation proceedings, or other proceedings under any federal or statebankruptcy or similar law.  The Company,the Secured Parties, the Seller and the Collateral Agent hereby agree that theyshall not institute against, or join any other Person in instituting against, theDebtor any bankruptcy, reorganization, arrangement, insolvency or liquidationproceedings, or other proceedings under any federal or state bankruptcy orsimilar law unless one year and one day has passed following the final paymenton the Note.

 

## **Section 8.6            Setoff.**

 

The Debtorhereby irrevocably and unconditionally waives all right of setoff that it mayhave under contract (including this Agreement), applicable law or otherwisewith respect to any funds or monies of the Debtor at any time held by or in thepossession of the Collateral Agent or Reserve Account Agent.

 

## **Section 8.7            No Recourse.**

 

Except asotherwise expressly provided in this Agreement, it is understood and agreedthat the Debtor shall not be liable for amounts due under this Agreement, the Note,the Insurance Agreement or the Note Purchase Agreement, except to the extent ofthe Collateral.  The preceding sentenceshall not relieve the Debtor from any liability hereunder with respect to itsrepresentations, warranties, covenants and other payment and performanceobligations herein described.

 

## **Section 8.8            Further Assurances.**

 

The Debtoragrees to do such further acts and things and to execute and deliver to theSecured Parties, the Administrative Agent or the Collateral Agent suchadditional assignments, agreements, powers and instruments as are required bythe Collateral Agent or the Surety Bond Provider to carry into effect thepurposes of this Agreement or to better assure and confirm unto the CollateralAgent or the Surety Bond Provider its rights, powers and remedies hereunder.

 

## **Section8.9            Other Costs, Expensesand Related Matters.**

 

### (a)           The Debtor agrees, upon receipt of awritten invoice, to pay or cause to be paid, and to save the Collateral Agentand the Secured Parties harmless against liability for the payment of, allreasonable out-of-pocket expenses (including, without limitation, attorneys’,accountant’s and other third parties’ fees and expenses, any filing fees andexpenses incurred by officers or employees of the Collateral Agent) incurred byor on behalf of the Collateral Agent (i) in connection with the negotiation,execution, delivery and preparation of this Agreement and any documents orinstruments delivered pursuant hereto and the transactions contemplated hereby(including, without limitation, the perfection or protection of the CollateralAgent’s

 

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interest in the Collateral) and(ii) from time to time (a) relating to any amendments, waivers or consentsunder this Agreement, (b) arising in connection with the Collateral Agent’s orthe Secured Parties’ or their agent’s enforcement or preservation of rights(including, without limitation, the perfection and protection of the CollateralAgent’s security interest in the Collateral under this Agreement), or (c)arising in connection with any audit, dispute, disagreement, litigation orpreparation for litigation involving this Agreement.

###  

## **Section8.10         Exercise of Rights bySurety Bond Provider.**

 

All rightsgranted to the Surety Bond Provider pursuant to this Agreement shall terminateduring the pendency of a payment default by the Surety Bond Provider under theSurety Bond or during the pendency of a Surety Insolvency (as defined in theInsurance Agreement as in effect on the date hereof) and during such time theSurety Bond Provider’s rights may be exercised by the Company, provided,however, the Surety Bond Provider’s rights shall be reinstated in full,immediately upon the cure of such default.

 

## **Section 8.11         Counterparts.**

 

This Agreementmay be executed in any number of copies, and by the different parties hereto onthe same or separate counterparts, each of which shall be deemed to be anoriginal instrument.

 

## **Section 8.12         Headings**

 

Sectionheadings used in this Agreement are for convenience of reference only and shallnot affect the construction or interpretation of this Agreement.

 

## **Section8.13         No Recourse AgainstCertain Persons.**

 

### (a)           No recourse under or with respect toany obligation, covenant or agreement (including, without limitation, thepayment of any fees or any other obligations) of any Secured Party as containedin this Agreement or any other agreement, instrument or document entered intoby it pursuant hereto or in connection herewith shall be had against anyadministrator of such Secured Party or any incorporator, affiliate,stockholder, officer, employee or director of such Secured Party or of any suchadministrator, as such, by the enforcement of any assessment or by any legal orequitable proceeding, by virtue of any statute or otherwise; itbeingexpresslyagreedandunderstood that the agreementsof such Secured Party contained in this Agreement and all of the otheragreements, instruments and documents entered into by it pursuant hereto or inconnection herewith are, in each case, solely the corporate obligations of suchSecured Party, and that no personal liability whatsoever shall attach to or beincurred by any administrator of such Secured Party or any incorporator,stockholder, affiliate, officer, employee or director of such Secured Party orof any such administrator, as such, or any other of them, under or by reason ofany of obligations, covenants or agreements of such Secured Party contained inthis Agreement or in any other such instruments, documents or agreements, orthat are implied therefrom, and that any and all personal liability of everysuch administrator of such Secured Party and each incorporator, stockholder,affiliate, officer, employee or director of such Secured Party or of any suchadministrator, or any of them, for breaches by such Secured Party or any suchobligations, covenants or agreements, which liability may arise either atcommon law or at

 

65

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equity, by statute orconstitution or otherwise, is hereby expressly waived as a condition of and inconsideration for the execution of this Agreement.  The provisions of this Section 5.9shall survive the termination of this Agreement.

###  

### (b)           Notwithstanding anything in thisAgreement to the contrary, the Company shall not have any obligation to pay anyamount required to be paid by it hereunder in excess of any amount available tothe Company after paying or making provision for the payment of its CommercialPaper.  All payment obligations of theCompany hereunder are contingent on the availability of funds in the excess ofamounts necessary to pay its Commercial Paper and each of the other partieshereto agrees that it will not have a claim under Section 101(5) of theBankruptcy Code if and to the extent that any such payment obligation owed toit by the Company exceeds the amount available to the Company to pay suchamount after paying or making the provision for the payment of its CommercialPaper.

###  

## **Section8.14         Amendment and Restatementof Prior Agreement; No Novation.**

 

This Agreementamends and restates in full the Security Agreement, dated as of October 22,1996, by and among First Investors Auto Receivables Corporation, EnterpriseFunding Corporation, Texas Commerce Bank National Association, MBIA InsuranceCorporation, NationsBank, N.A. and First Investors Financial Services, Inc., asamended (the “*Prior Agreement*”).  Nothing herein contained shall be construed(a) to be a novation of the obligations secured under the Prior Agreement or(b) to release, cancel, terminate or otherwise impair the status or priority ofthe liens or security for the obligations secured by the Prior Agreement.  Further, the Debtor acknowledges and agreesthat this Agreement shall not be considered a new contract, and that allrights, titles, powers, liens, security interests and estates created by orunder the Prior Agreement or other agreement executed in connection with thetransactions contemplated hereby and by the Prior Agreement or securing theobligations of the Debtor under the Note shall continue without interruption infull force and effect.

 

[Signature pages to follow]

 

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IN WITNESSWHEREOF, each of the parties hereto has caused this Agreement to be executed bytheir respective officers thereunto duly authorized as of the day and yearfirst above written.

 
|   | FIRST INVESTORS AUTO RECEIVABLES         |
|--------|------------------------------------------|
|   | CORPORATION                              |
|   | as Debtor                                |
|   |                                     |
|   | By:                                      |   |   |
|   |                                     | Name: |
|   |                                     | Title: |
|   |                                     |
|   | FIRST INVESTORS FINANCIAL SERVICES, INC. |
|   | as Seller                                |
|   |                                     |
|   | By:                                      |   |   |
|   |                                     | Name: |
|   |                                     | Title: |
|   |                                     |
|   | FIRST INVESTORS SERVICING CORPORATION.   |
|   | as Servicer                              |
|   |                                     |
|   | By:                                      |   |   |
|   |                                     | Name: |
|   |                                     | Title: |
|   |                                     |
|   | VARIABLE FUNDING CAPITAL CORPORATION,    |
|   | as Company                               |
|   |                                     |
|   |                                     | By Wachovia Capital Markets, LLC, |
|   |                                     | as attorney-in-fact |
|   |                                     |
|   |                                     |
|   |                                     |
|   | By:                                      |   |   |
|   |                                     | Name: |
|   |                                     | Title: |
|   |                                     |
|   | WACHOVIA CAPITAL MARKETS, LLC,           |
|   | as Administrative Agent                  |
|   |                                     |
|   | By:                                      |   |   |
|   |                                     | Name: |
|   |                                     | Title: |

 

 

*[additional signatures to follow]*

 

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|   | MBIA INSURANCE CORPORATION |
|--------|----------------------------|
|   | as Surety Bond Provider    |
|   |                       |
|   | By:                        |   |   |
|   |                       | Name: |
|   |                       | Title: |
|   |                       |
|   | WELLS FARGO BANK, NATIONAL |
|   | ASSOCIATION,               |
|   | as Collateral Agent        |
|   |                       |
|   | By:                        |   |   |
|   |                       | Name: |
|   |                       | Title: |

 

 

Agreed to this 18th day of February, 2005

 
| WACHOVIA BANK, NATIONAL ASSOCIATION,                                                   |
|----------------------------------------------------------------------------------------|
| as liquidity agent and sole Liquidity Provider under the Liquidity  Purchase Agreement |
|                                                                                   |
|                                                                                   |
| By:                                                                                    |   |   |
| Name:                                                                                  |
| Title:                                                                                 |

 

 

*[end of signatures]*

 

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