**Exhibit 10.116**

 

**EXECUTION COPY**

 

 

 

FIRST INVESTORS SERVICING CORPORATION

as Servicer,

 

FIRST INVESTORS AUTO FUNDING CORPORATION

as Depositor,

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

as Indenture Trustee and Securities Intermediary

 

and

 

FIRST INVESTORS AUTO OWNER TRUST 2005-A

as Issuer

 

 

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SALE AND ALLOCATION AGREEMENT

 

Dated as of May 5, 2005

 

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**TABLE OF CONTENTS**

 
| Article I     | Definitions                                                                       |   |
|--------------------|-----------------------------------------------------------------------------------|--------|
|               |                                                                              |
| Section 1.1.  | Definitions                                                                       |   |
| Section 1.2.  | Other Definitional Provisions                                                     |   |
|               |                                                                              |   |
| Article II    | Trust Property                                                                    |   |
|               |                                                                              |   |
| Section 2.1.  | Conveyance of Trust Property                                                      |   |
| Section 2.2.  | Representations and Warranties of the Depositor as  to the Contracts              |   |
| Section 2.3.  | Repurchase by Depositor for Breach                                                |   |
|               |                                                                              |   |
| Article III   | Distributions; Reserve Account; Statements to  Noteholders and Certificateholders |   |
|               |                                                                              |   |
| Section 3.1.  | Accounts                                                                          |   |
| Section 3.2.  | Collections                                                                       |   |
| Section 3.3.  | Application of Collections                                                        |   |
| Section 3.4.  | Application of Deposits                                                           |   |
| Section 3.5.  | Determination Date Calculations                                                   |   |
| Section 3.6.  | Reserve Account                                                                   |   |
| Section 3.7.  | Prefunding Account                                                                |   |
| Section 3.8.  | Statements to Noteholders                                                         |   |
| Section 3.9.  | Control of Securities Accounts;  The Securities Intermediary                      |   |
| Section 3.10. | Policy Matters                                                                    |   |
|               |                                                                              |   |
| Article IV    | The Depositor                                                                     |   |
|               |                                                                              |   |
| Section 4.1.  | Representations and Warranties of  the Depositor                                  |   |
| Section 4.2.  | Liability of Depositor;  Indemnities                                              |   |
| Section 4.3.  | Merger or Consolidation of, or  Assumption of the Obligations of, Depositor       |   |
| Section 4.4.  | Limitation on Liability of  Depositor and Others                                  |   |
| Section 4.5.  | Depositor May Own Class A  Notes                                        |   |
| Section 4.6.  | Covenants of the Depositor                                                        |   |
|               |                                                                              |   |
| Article V     | Miscellaneous                                                                     |   |
|               |                                                                              |   |
| Section 5.1.  | Amendment                                                                         |   |
| Section 5.2.  | Protection of Title of Trust                                                      |   |
| Section 5.3.  | Governing Law                                                                     |   |
| Section 5.4.  | Notices                                                                           |   |
| Section 5.5.  | Severability of Provisions                                                        |   |
| Section 5.6.  | Assignment                                                                        |   |
| Section 5.7.  | Further Assurances                                                                |   |
| Section 5.8.  | No Waiver; Cumulative Remedies                                                    |   |
| Section 5.9.  | Third-Party Beneficiaries                                                         |   |
| Section 5.10. | Actions by Noteholders                                                            |   |
|                    |                                                                                   |        |  |

 

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| Section 5.11. | Counterparts                                                    |   |
|--------------------|-----------------------------------------------------------------|--------|
| Section 5.12. | [Reserved]                                                      |   |
| Section 5.13. | No Bankruptcy                                                   |   |
| Section 5.14. | Limitation of Liability of Owner  Trustee and Indenture Trustee |   |
| Section 5.15. | Certain Rights of the Insurer                                   |   |
| Section 5.16. | Optional Redemption                                             |   |
| Section 5.17. | Subordination                                                   |   |
|               |                                                            |   |
| Exhibits           |                                                            |   |
|               |                                                            |   |
| Exhibit A     | Form of Monthly Servicer Report                            |   |
| Exhibit B     | [Reserved]                                                      |   |
| Exhibit C     | Credit Policy                                                   |   |
| Exhibit D     | [Reserved]                                                      |   |
| Exhibit E     | Form of Originator Agreement                               |   |
| Exhibit F     | Form of Additional Contract  Assignment                    |   |
|               |                                                            |   |
| Schedules          |                                                            |   |
|               |                                                            |   |
| Schedule 1    | Schedule of Initial Contracts                              |   |
| Schedule 2    | Location of Contract Files                                      |   |
| Schedule 3    | Perfection Representations,  Warranties and Covenants           |   |

 

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SALE AND ALLOCATION AGREEMENT, dated as of May 5,2005 (as amended, supplemented or otherwise modified and in effect from time totime, this “*Agreement*”), by and amongFIRST INVESTORS AUTO OWNER TRUST 2005-A, a Delaware statutory trust (the “*Trust*”), FIRST INVESTORS AUTOFUNDING CORPORATION, as depositor (the “*Depositor*”),WELLS FARGO BANK, NATIONAL ASSOCIATION, as Indenture Trustee (the “*Indenture Trustee*”) and assecurities intermediary (the “*Securities Intermediary*”)and FIRST INVESTORS SERVICING CORPORATION, a Delaware corporation, as servicer(together with its successors and assigns and in such capacity, either “*FISC*” or the “*Servicer*”).

 

WHEREAS, the Trust desires to purchase the Contractscontributed by the Seller to the Depositor pursuant to the ContributionAgreement;

 

WHEREAS, the Depositor is willing to sell theContracts to the Trust as of the date hereof; and

 

WHEREAS, FISC is willing to service such Contracts onbehalf of the Trust in accordance with the terms of the Servicing Agreement;

 

NOW, THEREFORE, in consideration of the mutualcovenants contained herein and other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the parties heretoagree as follows:

 

# **Article I**

# ** **

# **Definitions**

# ** **

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

##  

Whenever used in this Agreement, the following wordsand phrases, unless the context otherwise requires, whenever capitalized shallhave the following meanings:

 

Accounts: The Collection Account,the Reserve Account, the Prefunding Account, the Depositor Account, the Class ANote Payment Account and the Class B Note Payment Account.

 

Additional Contract: Any Contractpurchased by the Trust from the Depositor during the Prefunding Period fromproceeds available in the Prefunding Account.

 

Additional Contract Cutoff Date:With respect to any Additional Contract, the date that is two Business Daysprior to the related Additional Contract Purchase Date.

 

Additional Contract Purchase Date:Any Business Day during the Prefunding Period that is designated by theDepositor in writing to the Indenture Trustee and the Insurer as the date onwhich Additional Contracts will be purchased by the Trust from the Depositor.

 

Additional Conveyed Property:  With respect to any Additional Contracts, theproceeds, rights and other items described in Section 2.1(a)(ii) through(ix).

 

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Additional Note Interest:  For any Payment Date, with respect to the Class ANotes, the sum of (i) all accrued but unpaid Monthly Note Interest forprevious Payment Dates plus (ii) the sum of, to the extentpermitted by law, (A) interest at the applicable Note Rate on all accruedand unpaid interest on the Class A-1 Notes and (B) interest at theapplicable Note Rate on all accrued and unpaid interest on the Class A-2 Notes.

 

Additional Purchase Price:  With respect to any Additional Contract andthe related Additional Conveyed Property, 100% of the outstanding balance ofsuch Additional Contract as of the related Additional Contract Cutoff Date.

 

Additional Reserve Account Deposit:  As defined in Section 2.1(f)(iii).

 

Affiliate:  With respect to any Person, any other Persondirectly or indirectly controlling, controlled by or under direct or indirectcommon control with such Person.  Forpurposes of this definition, “control” when used with respect to any Personshall mean the power to direct the management and policies of such Person,directly or indirectly, whether through the ownership of voting securities, bycontract or otherwise.

 

Amount Financed:  With respect to any Contract, the aggregateamount advanced to the related Obligor under such Contract toward the purchaseprice of the Financed Vehicle and any related costs.

 

Applicable Tax State:  As of any date of determination, (i) anystate in which the Owner Trustee maintains the Corporate Trust Office, (ii) anystate in which the Owner Trustee maintains its principal executive offices and (iii) anystate in which the Servicer regularly conducts servicing and collectionactivities (other than purely ministerial activities) with respect to amaterial portion of the Contracts.

 

APR: With respect to any Contract, the annual percentage rate of intereststated in such Contract.

 

Available Funds:  For any Payment Date, (i) all Obligorpayments received with respect to the Contracts during the preceding CollectionPeriod, (ii) all Liquidation Proceeds and insurance proceeds received withrespect to the Contracts during the preceding Collection Period, (iii) allinterest earned on, and Eligible Investments of, funds on deposit in theCollection Account, the Reserve Account and the Prefunding Account during thepreceding Collection Period, (iv) the Purchase Amount for all Contractsthat became Purchased Contracts during the preceding Collection Period and (v) allprepayments received with respect to the Contracts during the precedingCollection Period attributable to any refunded item included in the AmountFinanced (including amounts received as a result of rebates of extendedwarranty contract costs and insurance premiums and proceeds received underphysical damage, credit life and credit disability insurance policies); provided,however, that Available Funds for any Payment Date shall not include anypayments or other amounts (including Liquidation Proceeds and insurance proceeds)received with respect to any Purchased Contract the Purchase Amount for whichwas included in Available Funds for a previous Payment Date.

 

Back-up Servicer:  Wells Fargo Bank, National Association, anational banking association, in its capacity as back-up servicer, and itssuccessors and assigns in such capacity.

 

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Business Day:  Any day other than a Saturday, a Sunday or aday on which banking institutions or trust companies in New York, New York;Wilmington, Delaware; Houston, Texas; Minneapolis, Minnesota or Atlanta,Georgia are authorized or obligated by law, executive order or governmentaldecree to remain closed.

 

Capitalized Interest Amount:  For the period from and including the ClosingDate to but excluding the first Payment Date, $184,327.80; for the period fromand including the first Payment Date to but excluding the second Payment Date,$160,316.32; and for the period from and including the second Payment Date tobut excluding the Prefunding Account Payout Date, $80,158.16; provided, however,on any day on which the amount on deposit in the Prefunding Account is zero andthe Prefunding Period has terminated, the Capitalized Interest Amount shall bezero.

 

Class A Monthly Note Principal: For any Payment Date, the lesser of (i) theClass A Note Balance as of the day preceding such Payment Date and (ii) theamount necessary to reduce the Class A Note Balance as of the daypreceding such Payment Date to the sum of (A) 95.75% of the Pool Balanceas of the last day of the related Collection Period and (B) prior to theend of the Prefunding Period and the distribution of the Excess PrefundingAmount, 97.0% of the Prefunding Account Balance as of the last day of therelated Collection Period; provided, however, that if suchPayment Date is the Final Note Payment Date for any Class of Class ANotes, the Class A Monthly Note Principal for such Payment Date shallequal the greater of (a) the amount determined above and (b) theoutstanding principal balance of such Class of Class A Notes as ofthe day preceding its Final Note Payment Date; provided, further,that for the purposes of determining Class A Monthly Note Principal, theunpaid balance of any Defaulted Contract or a Purchased Contract will be deemedzero on and after the last day of the Collection Period during which suchContract became a Defaulted Contract or a Purchased Contract.

 

Class A Note Parity Amount:  For any Payment Date: (i) if suchPayment Date is the Final Note Payment Date for the Class A-1 Notes, thegreater of: (A) the amount necessary to reduce the outstanding principalbalance of the Class A-1 Notes to zero and (B) the amount necessaryto reduce the Class A Note Balance (calculated after giving effect toprincipal payments made on the Class A Notes on the immediately precedingPayment Date) to the sum of the Pool Balance and 97.0% of the amount on depositin the Prefunding Account as of the last day of the related Collection Period; (ii) forthe Final Note Payment Date for the Class A-2 Notes, the amount necessaryto reduce the outstanding principal balance of the Class A-2 Notes tozero; and (iii) for any other Payment Date, the amount calculated pursuantto clause (i)(B) of the definition hereof.

 

Class A Note Balance:  At any time, as the context may require, (i) withrespect to all of the Class A Notes, an amount equal to, initially, theInitial Class A Note Balance and, thereafter, an amount equal to theInitial Class A Note Balance as reduced from time to time by all amountsallocable to principal previously distributed to each Class of Class ANoteholders or (ii) with respect to any Class A-1 Note and Class A-2Note, an amount equal to, initially, the initial denomination of such Class ANote and, thereafter, an amount equal to such initial denomination as reducedfrom time to time by all amounts allocable to principal previously distributedin respect of such Class A Note; provided, however, that indetermining whether the Holders of Class A Notes evidencing the requisite percentageof the Class A Note Balance have given any request, demand, authorization,direction, notice, consent or waiver hereunder or under any other

 

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Transaction Document, Class A Notes owned by theTrust, any other obligor upon the Class A Notes, the Depositor, theServicer or any Affiliate of any of the foregoing Persons shall be disregardedand deemed to be excluded from the Class A Note Balance (unless suchPersons own 100% of the Class A Note Balance), except that, in determiningwhether the Indenture Trustee or the Owner Trustee shall be protected inrelying on any such request, demand, authorization, direction, notice, consentor waiver, only Class A Notes that a Responsible Officer of the IndentureTrustee or the Owner Trustee, as applicable, actually knows to be so ownedshall be so disregarded; and, providedfurther, that Class ANotes that, to the actual knowledge of a Responsible Officer of the IndentureTrustee or the Owner Trustee, as applicable, have been pledged in good faithmay be regarded as included in the Class A Note Balance if the pledgeeestablishes to the satisfaction of the Indenture Trustee or the Owner Trustee,as applicable, the pledgee’s right so to act with respect to such Class ANotes and that the pledgee is not the Trust, any other obligor upon the Class ANotes, the Depositor, the Servicer or any Affiliate of any of the foregoingPersons.

 

Class A Note Payment Account:  The account established and maintained assuch pursuant to Section 3.1(b)(i).

 

Class A-1 Monthly Interest: Forthe initial Payment Date, $68,425.00, and for any Payment Date thereafter, 1/12of the product of: (i) 3.57% and the outstanding principal balance of the Class A-1Notes as of the preceding Payment Date (after giving effect to all principalpayments to the holders of the Class A-1 Notes on or before such date).

 

Class A-2 Monthly Interest: Forthe initial Payment Date, $125,129.28, and for any Payment Date thereafter,1/12 of the product of: (i) 4.23% and the outstanding principal balance ofthe Class A-2 Notes as of the preceding Payment Date (after giving effectto all principal payments to the holders of the Class A-2 Notes on orbefore such date).

 

Class B Monthly Note Principal:  For any Payment Date, the lesser of (i) theClass B Note Balance as of the day preceding such Payment Date and (ii) theamount necessary to reduce the Class B Note Balance as of the daypreceding such Payment Date to the sum of (A) 4.25% of the Pool Balance asof the last day of the related Collection Period and (B) prior to the endof the Prefunding Period and the distribution of the Excess Prefunding Amount,3.0% of the Prefunding Account Balance as of the last day of the relatedCollection Period; provided, however, that the Class BMonthly Note Principal for the Final Note Payment Date for the Class BNotes shall equal the principal balance of the Class B Notes as of the daypreceding such Final Note Payment Date; provided, further, thatfor the purposes of determining Class B Monthly Note Principal, the unpaidbalance of any Defaulted Contract or a Purchased Contract will be deemed zeroon and after the last day of the Collection Period during which such Contractbecame a Defaulted Contract or a Purchased Contract.

 

Class B Note Balance:  At any time, as the context may require, (i) withrespect to all of the Class B Notes, an amount equal to, initially, theInitial Class B Note Balance and, thereafter, an amount equal to theInitial Class B Note Balance as reduced from time to time by all amountsallocable to principal previously distributed to the Class B Noteholdersor (ii) with respect to any Class B Note, an amount equal to,initially, the initial denomination of such Class B Note and,

 

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thereafter, an amount equal to such initialdenomination as reduced from time to time by all amounts allocable to principalpreviously distributed in respect of such Class B Note.

 

Class B Note Payment Account:  The account established and maintained assuch pursuant to Section 3.1(b)(ii).

 

Closing Date:  May 5, 2005.

 

Collection Account:  The account established and maintained assuch pursuant to Section 3.1(a).

 

Collection Period:  Each calendar month during the term of thisAgreement or, in the case of the initial Collection Period, the period from butexcluding the Initial Cutoff Date to and including April 30, 2005.

 

Contract:  A retail installment sale contract orpromissory note and security agreement identified on the Contract Schedule (assuch contract may be amended, supplemented or otherwise modified and in effectfrom time to time).

 

Contract File:  With respect to any Contract:

 

#### (i)                                     thesole original executed counterpart of the retail installment contract orpromissory note and security agreement evidencing each such Contract and anyand all amendments thereto;

####  

#### (ii)                                  (a) theoriginal certificate of title or copies of correspondence to the appropriateState title registration agency, and all enclosures thereto, for issuance of theoriginal certificate of title or (b) if the appropriate State titleregistration agency issues a letter or other form of evidence of lien in lieuof a certificate of title, the original lien entry letter or other form ofevidence of lien in lieu of a certificate of title, the original lien entryletter or form or copies of correspondence to such State title registrationagency, and all enclosures thereto, for issuance of the original lien entryletter or form.

####  

Contract Schedule:  The list identifying the Contracts attachedas Schedule 1 to this Agreement (which list may be in the form ofan electronic file or compact disk), as such schedule may be amended fromtime to time.

 

Contribution Agreement: TheContribution Agreement, dated as of the date hereof, between First InvestorsFinancial Services, Inc., as Seller, and First Investors Auto FundingCorporation, as Depositor.

 

Corporate Trust Office:  As applicable, (i) the principal officeof the Indenture Trustee at which at any particular time its corporate trustbusiness shall be administered, which office at the date of the execution ofthis Agreement is located at Sixth Street and Marquette Avenue, MAC N9311-161,Minneapolis, Minnesota 55479, Attention: Corporate Trust Services Asset-BackedTrust Administration, or at such other address as the Indenture Trustee maydesignate from time to time by notice to the Noteholders, the Owner Trustee,the Depositor and the Seller, or the principal corporate trust office of anysuccessor Indenture Trustee at the address designated by such successorIndenture Trustee by notice to the Noteholders, the Owner Trustee, theDepositor

 

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and the Seller or (ii) the principal office ofthe Owner Trustee at which at any particular time its corporate trust businessshall be administered, which office at the date of the execution of thisAgreement is located at c/o Wells Fargo Delaware Trust Company, 919 NorthMarket Street, Suite 700, Wilmington, DE 19801, Attention: Corporate TrustAdministration or at such other address as the Owner Trustee may designate fromtime to time by notice to the Indenture Trustee, the Depositor and the Seller,or the principal corporate trust office of any successor Owner Trustee at theaddress designated by such successor Owner Trustee by notice to the IndentureTrustee, the Depositor and the Seller.

 

Credit Policy:  The credit policy of the Seller substantiallyin the form attached hereto as Exhibit C.

 

Cumulative Net Loss Rate:  The ratio of (i) cumulative Net Lossesfor the related Collection Period and all preceding Collection Periods to (ii) theexcess of (I) the sum of (a) the aggregate Principal Balances of all theContracts as of the Initial Cutoff Date and (b) the sum, for eachAdditional Contract Cutoff Date, of the aggregate Principal Balances of allContracts that became Additional Contracts on such Additional Contract CutoffDate over (II) the aggregate Principal Balance of each Purchased Contract as ofits related Cutoff Date.

 

Cutoff Date:  (i) With respect to the InitialContracts, the Initial Cutoff Date and (ii) with respect to any AdditionalContract, the Additional Contract Cutoff Date for such Contract.

 

Defaulted Contract:  Any Contract as to which the first of any ofthe following has occurred (i) a scheduled payment, or any portion thereofin excess of $10.00, is more than 120 days delinquent (or if the relatedObligor is insolvent or has sought protection under the United StatesBankruptcy Code and such Contract is more than 180 days delinquent), (ii) 90days have elapsed since the Servicer repossessed the Financed Vehicle, (iii) therelated Financed Vehicle has been repossessed and sold, or (iv) consistentwith the Servicer’s Collection Policy, has been or should be written off as uncollectible;provided, however, that any Contract which has become a PurchasedContract will not be deemed to be a Defaulted Contract.

 

Delinquent Contract:  Any Contract (other than a DefaultedContract) as to which more than $10.00 of any scheduled payment remains unpaidfor more than 30 days from the date at which it is contractually due andpayable.

 

Delinquency Ratio:  With respect to any date of determination,the ratio (expressed as a percentage) of (i) the Principal Balance of allContracts that were Delinquent Contracts at the end of the preceding CollectionPeriod to (ii) the Principal Balance of all Contracts at the end of suchpreceding Collection Period.

 

Depositor:  First Investors Auto Funding Corporation, aDelaware corporation.

 

Depositor Account:  The account established and maintained assuch pursuant to Section 3.1(c).

 

Determination Date:  The third Business Day preceding each PaymentDate commencing on May 11, 2005.

 

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Eligible Investments:  On any date of determination, book entrysecurities, negotiable instruments or securities represented by instruments inbearer or registered form with maturities not exceeding the next Payment Datewhich evidence:

 

#### (i)                                     directobligations of, and obligations fully guaranteed by, the United States ofAmerica or any agency or instrumentality thereof the obligations of which arebacked by the full faith and credit of the United States of America;

####  

#### (ii)                                  demanddeposits, time deposits, bankers’ acceptances or certificates of deposit of anydepository institution or trust company incorporated under the laws of theUnited States of America or any state thereof (or any domestic branch of aforeign bank) and subject to supervision and examination by federal or statebanking or depository institution authorities, including the Indenture Trusteeor the Owner Trustee, acting in their respective commercial capacities; provided,however, that, at the time of the investment or contractual commitmentto invest therein, such depository institution or trust company shall be ratedPrime-1 by Moody’s and A-1+ by S&P or any other deposit which is fullyinsured by the Federal Deposit Insurance Corporation;

####  

#### (iii)                               repurchaseobligations with respect to any security that is a direct obligation of, orfully guaranteed by, the United States of America or any agency orinstrumentality thereof the obligations of which are backed by the full faithand credit of the United States of America, in either case entered into with adepository institution or trust company (acting as principal) described in clause(ii) above;

####  

#### (iv)                              shortterm corporate securities bearing interest or sold at a discount issued by anycorporation incorporated under the laws of the United States of America or anystate thereof; the short term unsecured obligations of which are rated Prime-1by Moody’s and A-1 by S&P at the time of the investment; provided, howeverthat the total amount of debt from Issuers rated A-1 by S&P must (i) belimited to the investment of monthly principal and interest payments; (ii) representno more than 20% of the total Principal Balance; (iii) not mature beyond30 days; (iv) shall not have an ‘r’ suffix attached to its rating; (v) havea predetermined fixed dollar amount of principal due at its maturity thatcannot be fixed or variable; and (vi) be tied to a single interest rateindex plus a single fixed rate spread (if any) and move proportionately withthat index;

####  

#### (v)                                 commercialpaper, at the time of the investment or contractual commitment to investtherein, rated Prime-1 by Moody’s and A-1+ by S&P at the time of theinvestment;

####  

#### (vi)                              guaranteedinvestment contracts issued by an insurance company or other corporationacceptable to the Rating Agencies and the Insurer (provided that no InsurerDefault shall have occurred and be continuing);

####  

#### (vii)                           investmentsin money market funds having a rating of AAA-m by Moody’s and AAAm-G byS&P; and

####  

#### (viii)                        any otherinvestment approved in writing by the Insurer in advance with notice to theRating Agencies.

 

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Each of the Eligible Investments may be purchased byor through the Indenture Trustee or an Affiliate thereof.

 

Eligible Institution:  The corporate trust department of theIndenture Trustee or the corporate trust department of any other depositoryinstitution organized under the laws of the United States of America or anystate thereof or the District of Columbia or any domestic branch of a foreignbank which at all times has either: (i) a long term unsecured debt ratingof at least Baa3 from Moody’s and a short term debt rating of A-2 by S&P;or (ii) a long term unsecured debt rating, a short term unsecured debtrating or a certificate of deposit rating acceptable to the Rating Agencies andthe Insurer (provided that no Insurer Default shall have occurred and becontinuing) and, in each case, whose deposits are insured by the FederalDeposit Insurance Corporation.

 

Event of Servicing Termination:  As defined in Section 5.01 of theServicing Agreement.

 

Extended Contract Rate:  A fraction (expressed as a percentage)calculated as of the last day of the related Collection Period, the numeratorof which is the number of Contracts extended during the related CollectionPeriod and the denominator of which is the number of all Contracts.

 

Fee Letters:  The Indenture Trustee Fee Letter and theOwner Trustee Fee Letter.

 

Final Order:  A final, non-appealable order of a courtexercising jurisdiction in a proceeding relating to an Insolvency Event withrespect to the Seller, the Servicer or the Depositor to the effect that all orany portion of any payment made to the Class A Noteholders must bereturned prior to the end of the Term (as defined in the Insurance Agreement)of the Insurance Agreement as a voidable preference under the United StatesBankruptcy Code (11 U.S.C.), as amended from time to time.

 

Financed Vehicle:  A new or used automobile or light-duty truck,together with all accessions thereto, securing an Obligor’s indebtedness undera Contract.

 

Fiscal Agent:  As defined in the Policy.

 

Holder:  A Noteholder.

 

Indenture:  The Indenture, dated as of May 5, 2005,between the Trust and Wells Fargo Bank, National Association, as IndentureTrustee and Custodian as the same may be amended, supplemented or otherwisemodified and in effect from time to time.

 

Indenture Trustee:  Wells Fargo Bank, National Association, notin its individual capacity but solely as Indenture Trustee under the Indenture,its successors in interest and any successor trustee under the Indenture.

 

Indenture Trustee Fee:  The amount payable by the Issuer to theIndenture Trustee on each Payment Date for the previous Collection Period equalto the greater of (A) the product of 0.015% per annum and the Pool Balanceas of the close of business on the first day of the related Collection Period;and (B) $750.

 

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Indenture Trustee Fee Letter:  The letter agreement dated May, 2005 betweenthe Seller and Wells Fargo Bank, National Association in its capacities asIndenture Trustee, Custodian and Back-up Servicer.

 

Initial Class A Note Balance:  As the context may require, (i) withrespect to all of the Class A Notes, $175,493,000.00, or (ii) withrespect to any Class A Note, an amount equal to the initial denominationof such Class A Note.

 

Initial Class B Note Balance:  As the context may require, (i) withrespect to all of the Class B Notes, $5,427,618.68 or (ii) withrespect to any Class B Note, an amount equal to the initial denominationof such Class B Note.

 

Initial Contract Price:  $150,920,720.68.

 

Initial Conveyed Property:  With respect to the Initial Contracts, theproceeds, rights and other items described in Section 2.1(a)(ii) through(ix).

 

Initial Cutoff Date:  March 31, 2005.

 

Initial Prefunding Account Amount:  $29,999,898.

 

Initial Reserve Account Deposit:  An amount equal to the sum of (i) 1.0%of the Principal Balance of the Initial Contracts as of the Initial Cutoff Dateand (ii) the Capitalized Interest Amount.

 

Insolvency Event:  With respect to any Person, (i) themaking by such Person of a general assignment for the benefit of creditors, (ii) thefiling by such Person of a voluntary petition in bankruptcy, (iii) suchPerson being adjudged bankrupt or insolvent, or having had entered against suchPerson an order for relief in any bankruptcy or insolvency proceeding, (iv) thefiling by such Person of a petition or answer seeking reorganization,arrangement, composition, readjustment, liquidation, dissolution or similarrelief under any statute, law or regulation, (v) the filing by such Personof an answer or other pleading admitting or failing to contest the materialallegations of a petition filed against such Person in any proceeding specifiedin clause (vii) below, (vi) seeking, consenting to oracquiescing in the appointment of a trustee, receiver or liquidator of suchPerson or of all or any substantial part of the assets of such Person or (vii) thefailure to obtain dismissal within 60 days of the commencement of any proceedingagainst such Person seeking reorganization, arrangement, composition,readjustment, liquidation, dissolution or similar relief under any statute, lawor regulation, or the entry of any order appointing a trustee, liquidator orreceiver of such Person of all or any substantial portion of the assets of suchPerson.

 

Insurance Agreement:  The Insurance Agreement, dated as of the datehereof by and among the Seller, the Servicer, the Administrator, the Depositor,the Trust, the Backup Servicer, the Owner Trustee, the Insurer and theIndenture Trustee as the same may be amended, supplemented or otherwisemodified and in effect from time to time.

 

Insurance Payment Amount:  For any Payment Date, the amount payable bythe Issuer to the Insurer specified in Section 3.5(a)(ix).

 

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Insurance Premium: As defined in theInsurance Agreement.

 

Insurer:  MBIA Insurance Corporation, a stock insurancecorporation incorporated under the laws of the State of New York.

 

Insurer Default:  The failure of the Insurer to make anyrequired payment under the Policy or the occurrence of an Insolvency Event withrespect to the Insurer.

 

Lien:  A security interest, lien, charge, pledge,equity or encumbrance of any kind, other than tax liens, mechanics’ ormaterialmen’s liens, judicial liens and any liens that may attach to a FinancedVehicle by operation of law.

 

Liquidation Proceeds:  All amounts received by the Servicer withrespect to any Defaulted Contract, net of the sum of (i) any reasonableexpenses incurred by the Servicer in connection with collection of suchContract and the disposition of the related Financed Vehicle (to the extentdeterminable by the Servicer and not previously reimbursed) plus (ii) anyamounts required by law to be remitted to the related Obligor.

 

Monthly Note Interest:  With respect to any Payment Date, the sum ofthe Class A-1 Monthly Interest and the Class A-2 Monthly Interest.

 

Monthly Remittance Condition:  As defined in Section 3.2.

 

Monthly Servicer Report:  As defined in the Servicing Agreement.

 

Monthly Servicing Fee:  The amount payable to the Servicer by theIssuer on each Payment Date for the preceding Collection Period equal to onetwelfth times the sum of (i) the Servicing Rate multiplied by theaggregate principal balance of the Contracts as of the beginning of the firstday of such Collection Period and (ii) the Servicing Rate multiplied bythe sum of the Principal Balances of each Contract purchased by the Issuerduring such Collection Period on the date of its purchase, but not listed onthe Contract Schedule, during such preceding Collection Period.

 

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

 

Net Losses:  With respect to any Collection Period, theexcess, if any, of (i) the aggregate Principal Balance of all Contractsthat became Defaulted Contracts during such Collection Period over (ii) theaggregate Liquidation Proceeds received by the Servicer during such CollectionPeriod.

 

Note Payment Accounts:  Collectively, the Class A Note PaymentAccount and the Class B Note Payment Account.

 

Note Factor:  With respect to each Class of Class ANotes, (i) as of the Closing Date, 1.0000000 and (ii) as of the closeof business on the last day of any Collection Period ending after the ClosingDate, a seven digit decimal figure equal to the outstanding principal balanceof such Class of Class A Notes as of such last day (after givingeffect to any reductions of the principal balance of such Class of Class ANotes to be made on the following Payment Date) divided by the initialprincipal balance of such Class of Class A Notes.

 

10

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Note Rate:  With respect to the Class A-1 Notes,3.57% per annum and with respect to the Class A-2 Notes, 4.23% per annum.

 

Obligor:  The purchaser or co-purchasers of a new orused automobile or light-duty truck purchased in whole or in part by theexecution and delivery of a Contract or any other Person who owes or may beliable for payments under a Contract.

 

Offering Memorandum:  That certain Offering Memorandum dated April 27,2005 relating to the Class A Notes.

 

Officer’s Certificate:  A certificate signed by the chairman, thepresident, any executive vice president, senior vice president, vice presidentor the treasurer of the Depositor, the Seller, the Trust or the Servicer, asthe case may be, and delivered to the Owner Trustee and the Indenture Trustee.

 

Originator:  Each Person from whom the Seller has acquireda Contract.

 

Originator Agreement:  An agreement substantially in the form of Exhibit Ehereto.

 

Other Assets: Any assets, orinterests therein, (other than the Trust Property) conveyed or purported to beconveyed by the Depositor to another Person or Persons other than the Trust,whether by way of a sale, capital contribution or by virtue of the granting ofa lien.

 

Owner Trust Estate:  As defined in the Trust Agreement.

 

Owner Trustee:  Wells Fargo Delaware Trust Company, not inits individual capacity but solely as Owner Trustee under the Trust Agreement,its successors in interest and any successor owner trustee under the TrustAgreement.

 

Owner Trustee Fee:  The fee payable by the Issuer to the OwnerTrustee, set forth in the Owner Trustee Fee Letter, payable annually in advanceon the Closing Date, and annually thereafter on each Payment Date in May inaccordance with Section 3.5(d) hereof.

 

Owner Trustee Fee Letter:  The letter agreement dated March 22,2005 between Wells Fargo Delaware Trust Company and the Seller, relating to thefees and expenses of Wells Fargo Delaware Trust Company in its capacity asOwner Trustee.

 

Payment Date:  The 15th day of each month or, if such 15thday is not a Business Day, the following Business Day, commencing on May 16,2005.

 

Person:  A legal person, including any individual,corporation, estate, partnership, joint venture, association, joint stockcompany, limited liability company, limited liability partnership, trust,unincorporated organization, or government or any agency or politicalsubdivision thereof, or any other entity of whatever nature.

 

Policy:  That certain financial guaranty insurancepolicy, dated May 5, 2005, issued by MBIA Insurance Corporation in favorof the Indenture Trustee for the benefit of the Class A Noteholders.

 

11

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Policy Claim Amount:  As defined in Section 3.5(c).

 

Pool Balance:  On any day, the aggregate Principal Balanceof the Contracts calculated as of the last day of the most recently endedCollection Period.

 

Prefunding Account:  The account established and maintained as suchpursuant to Section 3.7.

 

Prefunding Account Balance:  On any date of determination, the amount ondeposit in the Prefunding Account (including the proceeds of any EligibleInvestments therein).

 

Prefunding Account Ending Date:  June 30, 2005.

 

Prefunding Account Payout Date:  July 15, 2005.

 

Prefunding Period:  The period beginning on the Closing Date andending on the Prefunding Account Ending Date.

 

Prepayment Date:  As defined in Section 5.16.

 

Principal Balance:  With respect to any Contract as of any date,the Amount Financed under such Contract minus the sum of (i) that portionof all Scheduled Payments actually received on or prior to such date allocableto principal (to the extent collected) plus (ii) any rebates ofextended warranty contract costs or physical damage, credit life or creditdisability insurance premiums included in the Amount Financed plus (iii) anyfull or partial prepayment applied to reduce the unpaid principal balance ofsuch Contract; provided, however, that (A) the PrincipalBalance of a Defaulted Contract shall be zero as of the last day of theCollection Period during which it became a Defaulted Contract, (B) thePrincipal Balance of a Purchased Contract shall be zero as of the date on whichthe related Purchase Amount is remitted by the Depositor or the Servicer, and (C) thePrincipal Balance of a Contract that has been foreclosed upon by the IndentureTrustee at the direction of the Insurer pursuant to Section 5.4(a) ofthe Indenture shall be zero as of the date of such foreclosure.

 

Principal Deficit:  As of any Payment Date, the excess, if any,of (i) the Class A Note Balance as of such Payment Date (after givingeffect to all distributions of principal in reduction of the Class A NoteBalance) over (ii) the sum of (a) the Pool Balance as of the last dayof the related Collection Period and (b) 97.0% of the amounts on depositin the Prefunding Account.

 

Purchase Amount:  With respect to any Payment Date and anyContract to be repurchased by the Depositor or the Seller or purchased by theServicer on such Payment Date, an amount equal to the sum of (i) thePrincipal Balance of such Contract plus (ii) the amount of accruedbut unpaid interest on such Principal Balance at the related APR to butexcluding such Payment Date.

 

Purchase Price:  (i) With respect to the InitialContracts and the related Initial Conveyed Property, the Initial Contract Priceand (ii) with respect to any Additional Contract and the relatedAdditional Conveyed Property, the Additional Purchase Price.

 

12

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Purchased Contract:  A Contract as to which payment of thePurchase Amount has been made by the Depositor pursuant to Section 2.3hereof or by the Servicer pursuant to Section 2.02 or 2.28 of theServicing Agreement.

 

Purchase Date:  With respect to the Initial Contracts, theClosing Date and with respect to any Additional Contract, the applicableAdditional Contract Purchase Date.

 

Rating Agencies:  Moody’s and S&P and their respectivesuccessors; provided, however, that if no such organization orsuccessor is any longer in existence, Rating Agency shall mean a nationallyrecognized statistical rating organization or other comparable Persondesignated by the Trust and acceptable to the Insurer (provided that no InsurerDefault shall have occurred and is continuing), notice of which designationshall have been given to the Indenture Trustee, the Owner Trustee and theServicer.

 

Rating Agency Condition:  With respect to any action, that each RatingAgency shall have been given prior notice thereof and shall have notified theSeller, the Depositor, the Insurer, the Servicer, the Owner Trustee and theIndenture Trustee that such action will not result in a reduction or withdrawalof the then current rating of the Class A Notes, without giving effect tothe Policy.

 

Re-Liening Trigger:  The occurrence of any Event of Default.

 

Relevant UCC:  The Uniform Commercial Code as in effect fromtime to time in any relevant jurisdiction.

 

Required Payment Amount:  For any Payment Date, the meaning specifiedfor such Payment Date in Section 3.5(a).

 

Required Rating:  A short term unsecured debt rating of Prime-1by Moody’s and A-1+ by S&P.

 

Required Reserve Account Amount:  For the Closing Date, the Initial ReserveAccount Deposit and, thereafter, for any Payment Date, (i) if a ReserveAccount Increase Event has not occurred and is not continuing, an amount equalto the sum of (A) 2.0% of the aggregate initial Principal Balance of theContracts as of the applicable Cutoff Date for each such Contract and (B) theapplicable Capitalized Interest Amount, or (ii) if a Reserve AccountIncrease Event has occurred and is continuing, the sum of (A) the greaterof (x) 2.0% of the aggregate initial Principal Balance of the Contracts as ofthe applicable Cutoff Date for each such Contract, and (y) 6.0% of the PoolBalance as of the last day of the related Collection Period and (B) theapplicable Capitalized Interest Amount; provided, however, that ineither case the amount on deposit in the Reserve Account shall not at any timeexceed the Class A Note Balance.

 

Reserve Account:  The account established and maintained assuch pursuant to Section 3.6(a).

 

Reserve Account Amount:  For any Payment Date, the amount on depositin and available for withdrawal from the Reserve Account on such Payment Date(after giving effect to all deposits to and withdrawals from the ReserveAccount on the preceding Payment Date, or, in the case of the first PaymentDate, the Closing Date), including, without limitation, all interest and other

 

13

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income (net of losses and investment expenses) earnedon such amount during the preceding Collection Period.

 

Reserve Account Deficiency:  For any Payment Date, the meaning specifiedfor such Payment Date in Section 3.5(b).

 

Reserve Account Draw Amount:  As defined in Section 3.5(b).

 

Reserve Account Increase Event:  The occurrence of either of the following:

 

#### (i)                                     theaverage Delinquency Ratio for any three Collection Periods: (i) exceeds4.20% during the period from April 2005 through December 2005; (ii) exceeds5.25% during the period from January 2006 through May 2007; and (iii) exceeds6.25% thereafter; or

####  

#### (ii)                                  theCumulative Net Loss Rate for any Collection Period indicated in the followingtable exceeds the percentage corresponding thereto:

 

| **Collection Period**             | ** ** | **Cumulative Net Loss  Rate** | ** ** |
|-----------------------------------|------------|-------------------------------|------------|
| April 2005                   |       | 0.20                          | %          |   |
| May 2005                     |       | 0.20                          | %          |   |
| June 2005                    |       | 0.40                          | %          |   |
| July 2005                    |       | 0.85                          | %          |   |
| August 2005                  |       | 0.85                          | %          |   |
| September 2005               |       | 1.60                          | %          |   |
| October 2005                 |       | 1.60                          | %          |   |
| November 2005                |       | 2.30                          | %          |   |
| December 2005                |       | 2.30                          | %          |   |
| January 2006                 |       | 3.00                          | %          |   |
| February 2006                |       | 3.00                          | %          |   |
| March 2006                   |       | 3.60                          | %          |   |
| April 2006                   |       | 3.60                          | %          |   |
| May 2006                     |       | 3.60                          | %          |   |
| June 2006                    |       | 4.20                          | %          |   |
| July 2006                    |       | 4.20                          | %          |   |
| August 2006                  |       | 4.20                          | %          |   |
| September 2006               |       | 4.70                          | %          |   |
| October 2006                 |       | 4.70                          | %          |   |
| November 2006                |       | 4.70                          | %          |   |
| December 2006                |       | 5.15                          | %          |   |
| January 2007                 |       | 5.15                          | %          |   |
| February 2007                |       | 5.15                          | %          |   |
| March 2007                   |       | 5.55                          | %          |   |
| April 2007                   |       | 5.55                          | %          |   |
| May 2007                     |       | 5.55                          | %          |   |
| June 2007                    |       | 5.80                          | %          |   |
| July 2007                    |       | 5.80                          | %          |   |
| August 2007                  |       | 5.80                          | %          |   |
| September 2007               |       | 6.10                          | %          |   |
| October 2007                 |       | 6.10                          | %          |   |
| November 2007                |       | 6.10                          | %          |   |
| December 2007                |       | 6.30                          | %          |   |
| January 2008                 |       | 6.30                          | %          |   |
| February 2008                |       | 6.30                          | %          |   |
| March 2008                   |       | 6.50                          | %          |   |
| April 2008                   |       | 6.50                          | %          |   |
| May 2008                     |       | 6.50                          | %          |   |
| June 2008                    |       | 6.65                          | %          |   |
| July 2008                    |       | 6.65                          | %          |   |
| August 2008                  |       | 6.65                          | %          |   |
| September 2008               |       | 6.85                          | %          |   |
| October 2008                 |       | 6.85                          | %          |   |
| November 2008                |       | 6.85                          | %          |   |
| December 2008 and thereafter |       | 7.00                          | %          |   |

 

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Reserve Account Property:  All amounts, securities, investments,financial assets and other property deposited in or credited to the ReserveAccount from time to time.

 

Responsible Officer:  (i) in the case of the IndentureTrustee, any officer within the Corporate Trust Department of the IndentureTrustee with direct responsibility for the administration of the Indenture andalso, with respect to a particular matter, any other officer of the IndentureTrustee to whom such matter is referred because of such officer’s knowledge ofand familiarity with such matter or other similar matters and (ii) in thecase of the Owner Trustee, any officer within the Corporate Trust Office of theOwner Trustee with direct responsibility for the administration of the TrustAgreement or this Agreement and also, with respect to a particular matter, anyother officer of the Owner Trustee to whom such matter is referred because ofsuch officer’s knowledge of and familiarity with such matter or other similarmatters.

 

Scheduled Payment:  For any Contract, each payment required to bemade by the related Obligor in accordance with the terms of such Contract(after giving effect to any deferral of payments pursuant to the ServicingAgreement or any rescheduling of payments as a result of any Insolvency Eventwith respect to such Obligor).

 

Securities Intermediary:  As defined in Section 3.9.

 

Seller:  First Investors Financial Services, Inc.,a Texas corporation, in its capacity as seller of the Contracts under theContribution Agreement, and its successors and assigns in such capacity.

 

Servicer:  FISC, in its capacity as servicer of theContracts under the Servicing Agreement, and its successors and assigns(including, if applicable, the Back-up Servicer) in such capacity.

 

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Servicing Agreement:  That certain Servicing Agreement, dated as ofthe date hereof, among the Back-up Servicer, the Indenture Trustee, theServicer and the Trust.

 

Servicing Rate:  2.5% per annum or such other rate asdetermined in the Servicing Agreement; provided, however, that ifthe Back-up Servicer becomes the Successor Servicer, the Servicing Rate shallbe equal to the greater of (i) 2.5% per annum and (ii) the average ofthree bids obtained by the Back-up Servicer from third party servicers, who arequalified to act as servicers, selected by the Back-up Servicer and approved bythe Insurer.

 

S & P:  Standard & Poor’s Ratings Services,a division of The McGraw-Hill Companies, Inc., and its successors.

 

Total Available Funds:  For any Payment Date, the sum of (i) theAvailable Funds for such Payment Date plus (ii) the Reserve AccountDraw Amount, if any, for such Payment Date.

 

Total Note Interest:  For any Payment Date with respect to the Class ANotes, the sum of (i) the Monthly Note Interest for such Payment Date plus(ii) the Additional Note Interest for such Payment Date.

 

Total Servicing Fee:  For any Collection Period, the sum of (i) theMonthly Servicing Fee for such Collection Period plus (ii) allaccrued but unpaid Monthly Servicing Fees for previous Collection Periods.

 

Trust:  First Investors Auto Owner Trust 2005-A, aDelaware statutory trust.

 

Trust Agreement:  The Amended and Restated Trust Agreement,dated as of the date hereof, between the Depositor and the Owner Trustee, asthe same may be further amended, supplemented or otherwise modified and ineffect from time to time.

 

Trust Officer:  (i) in the case of the IndentureTrustee, any officer within the Corporate Trust Department of the IndentureTrustee with direct responsibility for the administration of the Indenture andalso, with respect to a particular matter, any other officer of the IndentureTrustee to whom such matter is referred because of such officer’s knowledge ofand familiarity with such matter or other similar matters and (ii) in thecase of the Owner Trustee, any officer within the Corporate Trust Office of theOwner Trustee with direct responsibility for the administration of the TrustAgreement and this Agreement and also, with respect to a particular matter, anyother officer of the Owner Trustee to whom such matter is referred because ofsuch officer’s knowledge of and familiarity with such matter or other similarmatters.

 

Trust Property:  As of any date of determination, (i) theContracts and other related property sold, transferred, assigned and otherwiseconveyed by the Depositor to the Trust pursuant to Section 2.1(a) and(b), (ii) rights under this Agreement to cause the Depositor topurchase Contracts affected materially and adversely by breaches of therepresentations and warranties of the Depositor made in this Agreement, and (iii) allamounts, securities, financial assets, investments and other property depositedfrom time to time in or credited to the Collection Account, the PrefundingAccount, the Class A Note Payment Account, the Class B Note PaymentAccount and the Reserve Account.

 

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## **Section 1.2.**                                **Other Definitional Provisions**.

##  

### (a)                                  Capitalizedterms used herein and not otherwise defined herein have the meanings assignedto them in the Indenture or the Servicing Agreement.

###  

### (b)                                 Allterms defined in this Agreement shall have the defined meanings when used inany certificate or other document made or delivered pursuant hereto unlessotherwise defined therein.

###  

### (c)                                  Asused in this Agreement and in any certificate or other document made ordelivered pursuant hereto or thereto, accounting terms not defined in thisAgreement or in any such certificate or other document, and accounting termspartly defined in this Agreement or in any such certificate or other documentto the extent not defined, shall have the respective meanings assigned to themunder generally accepted accounting principles. To the extent that the definitions of accounting terms in this Agreementor in any such certificate or other document are inconsistent with the meaningsof such terms under generally accepted accounting principles, the definitionscontained in this Agreement or in any such certificate or other document shallcontrol.

###  

### (d)                                 Thewords “hereof,” “herein,” and “hereunder” and words of similar import when usedin this Agreement shall refer to this Agreement as a whole and not to anyparticular provision of this Agreement. Article, Section, Schedule and Exhibit references contained inthis Agreement are references to Articles, Sections, Schedules and Exhibits inor to this Agreement unless otherwise specified.  The term “including” shall mean “includingwithout limitation.”

###  

### (e)                                  Thedefinitions contained in this Agreement are applicable to the singular as wellas the plural forms of such terms and to the masculine as well as to thefeminine and neuter genders of such terms.

###  

### (f)                                    Anyagreement, instrument or statute defined or referred to herein or in anyinstrument or certificate delivered in connection herewith means suchagreement, instrument or statute as from time to time amended, modified orsupplemented and includes (in the case of agreements or instruments) referencesto all attachments thereto and instruments incorporated therein.  References to a Person are also to itspermitted successors and assigns.

###  

# **Article II**

# ** **

# **TrustProperty**

# ** **

## **Section 2.1.**                                **Conveyance of Trust Property**.

##  

### (a)                                  Subjectto Section 2.1(b), in consideration of the Trust’s delivery to theDepositor of the Purchase Price, the Depositor hereby agrees to sell, transfer,assign and otherwise convey to the Trust, without recourse (subject to theobligations herein), all right, title and interest of the Depositor, whethernow owned or hereafter acquired, in, to and under the following:

###  

#### (i)                                     theContracts;

 

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#### (ii)                                  allamounts received on or in respect of the Contracts after the applicable CutoffDate (except that interest accrued on the Contracts prior to the applicableCutoff Date and received after such Cutoff Date will be remitted by the Trustto the Seller);

####  

#### (iii)                               thesecurity interests in the Financed Vehicles;

####  

#### (iv)                              anyproceeds from claims on or refunds of premiums with respect to extendedwarranties or physical damage, theft, credit life and credit disabilityinsurance policies relating to the Financed Vehicles or the related Obligors;

####  

#### (v)                                 anyLiquidation Proceeds;

####  

#### (vi)                              theContract Files;

####  

#### (vii)                           rightsunder the Contribution Agreement to cause the Seller to purchase Contractsaffected materially and adversely by breaches of the representations andwarranties of the Seller made in the Contribution Agreement;

####  

#### (viii)                        rightsunder the Servicing Agreement to cause the Servicer to purchase Contractsaffected materially and adversely by breaches of the representations andwarranties of the Servicer made in the Servicing Agreement; and

####  

#### (ix)                                allpresent and future claims, demands, causes of action and choses in action inrespect of any or all of the foregoing and all payments on or under and allproceeds of every kind and nature whatsoever in respect of any or all of theforegoing, including all proceeds of the conversion thereof, voluntary orinvoluntary, into cash or other liquid property, all cash proceeds, accounts,accounts receivable, notes, drafts, acceptances, chattel paper, checks, depositaccounts, insurance proceeds, condemnation awards, rights to payment of any andevery kind and other forms of obligations and receivables, instruments andother property which at any time constitute all or part of or are included inthe proceeds of any of the foregoing.

####  

### (b)                                 Onthe Closing Date, subject to the terms and conditions of this Agreement, inconsideration of the Trust’s delivery of the Initial Contract Price, theDepositor hereby irrevocably sells, transfers, assigns and otherwise conveys tothe Trust and the Trust hereby purchases from the Depositor the InitialContracts and the Initial Conveyed Property. On each Additional Contract Purchase Date subject to the terms andconditions of this Agreement, in consideration of the Trust’s delivery of theAdditional Purchase Price, the Depositor will transfer, assign and otherwiseconvey and the Trust will purchase from the Depositor such Additional Contractsand Additional Conveyed Property as the Depositor may specify by written noticeto the Indenture Trustee, the Owner Trustee, the Rating Agencies and the Trust.

###  

### (c)                                  TheDepositor and the Trust intend that each transfer of Trust Propertycontemplated by Section 2.1(b) constitutes a sale of the TrustProperty, conveying good title to the related Trust Property, from theDepositor to the Trust.  Notwithstandingthe foregoing, in the event that the Contracts are held to be property of theDepositor, or if for any reason this Agreement is held or deemed to createindebtedness or a security interest in the Contracts and the other TrustProperty, then it is intended that:

 

18

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#### (i)                                     ThisAgreement shall be deemed to be a security agreement within the meaning ofArticles 8 and 9 of the Relevant UCC;

####  

#### (ii)                                  Thesale provided for in Section 2.1(b) shall be deemed to be agrant by the Depositor, and the Depositor hereby grants, to the Seller asecurity interest in all of its right (including the power to convey titlethereto), title and interest, whether now owned or hereafter acquired, in andto the Contracts and the other Trust Property, to secure such indebtedness andthe performance of the obligations of the Depositor hereunder;

####  

#### (iii)                               Thepossession by the Trust or the Custodian of the Contract Files and any otherproperty as constitute instruments, money, negotiable documents or chattelpaper shall be deemed to be “possession by the secured party” or possession bythe purchaser or a person designated by such purchaser, for purposes ofperfecting the security interest pursuant to the Relevant UCC; and

####  

#### (iv)                              Notificationsto persons holding such property, and acknowledgments, receipts orconfirmations from persons holding such property, shall be deemed to be notificationsto, or acknowledgments, receipts or confirmations from, bailees or agents (asapplicable) of the Trust for the purpose of perfecting such security interestunder the Relevant UCC.

####  

### (d)                                 Thesale, transfer, assignment and conveyance of the Trust Property made under Section 2.1(b) shallnot constitute and is not intended to result in an assumption by the Trust ofany obligation of the Depositor to the Obligors or any other Person inconnection with the Contracts and the other Trust Property or any agreement,document or instrument related thereto.

###  

### (e)                                  Uponeach of the transfers of the Trust Property pursuant to clause (b) ofthis Section 2.1, the Depositor shall clearly mark its files,documents, books and any other records (including computer records) in theDepositor’s control pertaining to the Trust Property, in order to indicate thatthe Trust Property has been transferred to the Trust.

###  

### (f)                                    TheTrust’s obligation to purchase Additional Contracts and Additional ConveyedProperty pursuant to clause (b) of this Section 2.1 issubject to satisfaction on or before the related Additional Contract PurchaseDate of the following conditions precedent:

###  

#### (i)                                     eachof the representations and warranties of the Depositor made pursuant to Section 2.2with respect to the Additional Contracts shall be true and correct as of theAdditional Contract Purchase Date;

####  

#### (ii)                                  theDepositor shall have executed and delivered to the Trust and the Trust shallhave executed and delivered to the Indenture Trustee, written assignments inthe form of Exhibit F hereto conveying such Additional Contractsand Additional Conveyed Property to the Trust and the Indenture Trustee,respectively;

####  

#### (iii)                               theTrust shall have deposited, or cause to be deposited, in the Reserve Account,an amount equal to 1.0% of the aggregate outstanding principal balance ofAdditional Contracts to be conveyed on such Additional Contract Purchase Date(the “*Additional Reserve Account Deposit*”);

 

19

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#### (iv)                              theTrust shall have received release letters and related UCC-3 terminationstatements and/or amendment statements (for each appropriate jurisdiction), torelease all security interests or similar rights of any Person in theAdditional Conveyed Property, including the security interests in the FinancedVehicles securing the Contracts and any proceeds of the foregoing;

####  

#### (v)                                 theTrust shall have received the prior written consent of the Insurer; and

####  

#### (vi)                              theTrust and the Insurer shall have each received such other documents as theTrust or the Insurer may have reasonably requested.

####  

### (g)                                 Itis explicitly agreed by the Depositor and the Trust that the Purchase Pricedelivered to the Depositor by the Trust pursuant to clause (b) ofthis Section 2.1 shall consist of the net proceeds from the sale ofthe Notes (minus the sum of the Initial Reserve Account Deposit and theAdditional Reserve Account Deposits) and that the remaining portion of thePurchase Price shall be deemed to constitute a capital contribution by the Sellerto the Depositor (it being understood that the Seller has a 100% ownershipinterest in the Depositor and that the Depositor has a 100% ownership interestin the Trust).

###  

## **Section 2.2.**                                **Representations and Warranties of the Depositor asto the Contracts**.

##  

The Depositor makes the following representations andwarranties as to the Contracts on which the Trust shall be deemed to haverelied in accepting the Contracts.  Therepresentations and warranties speak as of the execution and delivery of thisAgreement with respect to the Contracts transferred to the Trust on the ClosingDate and, with respect to any Additional Contracts, as of the relatedAdditional Contract Purchase Date, except, in each case, to the extentotherwise provided, but shall survive the sale, transfer, assignment andconveyance of the Contracts to the Trust pursuant to this Agreement and thepledge of the Contracts to the Indenture Trustee pursuant to the Indenture.

 

### (a)                                  Characteristicsof Contracts.  Each Contract (i) haseither (A) been purchased in a bona fide sale by the Seller from a dealer,bank, finance company or similar entity in the ordinary course of the Seller’sbusiness and was originated by such Person in connection with an advance madefor the sale or re-financing of a new or used automobile or light-duty truckand has been fully and properly executed by the parties thereto or (B) hasbeen originated by the Seller through direct marketing to consumers who wish torefinance loans obtained by a different lender and, in the case of each of (A) and(B) above, has been validly assigned by the Seller to the Depositorpursuant to, and in accordance with the terms of, the Contribution Agreement , (ii) hascreated a valid, binding and enforceable security interest in favor of theSeller in the related Financed Vehicle, which security interest has beenvalidly assigned by the Seller to the Depositor, by the Depositor to the Trustand which will be assigned by the Trust to the Indenture Trustee pursuant tothe Indenture, (iii) contains customary and enforceable provisions suchthat the rights and remedies of the holder thereof are adequate for realizationagainst the collateral of the benefits of the security, (iv) provides forlevel monthly payments that fully amortize the Amount Financed by maturity(except that the period between the date of such Contract and the date of thefirst Scheduled Payment may be less than or greater than one month and theamount

 

20

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### of the first and last Scheduled Payments may be less than or greaterthan the level payments, but not by a material amount) and yield interest atthe related APR, (v) provides for, in the event that such Contract isprepaid, a prepayment that fully pays the Principal Balance of such Contractwith interest at the related APR through the date of payment, (vi) wasselected by selection procedures believed by the Depositor not to be adverse tothe Trust and the Class A Noteholders and with respect to whichinformation provided to the Trust and its assigns pursuant to the TransactionDocuments is true and correct in all material respects, (vii) is securedby a new or used automobile or light-duty truck, (viii) relates to anObligor who has made a down payment under such Contract as of the applicableCutoff Date, if required, (ix) satisfies in all material respects therequirements under the Credit Policy and (x) requires the Obligor thereunder toobtain and maintain physical damage insurance covering the related FinancedVehicle in accordance with the Seller’s normal requirements.

###  

### (b)                                 ContractSchedule.  The information set forthin the Contract Schedule was true and correct in all material respects asof the opening of business on the applicable Cutoff Date, and no selectionprocedures believed to be adverse to the Trust or the Noteholders were utilizedin selecting the Contracts from those retail installment sale contracts orsecurity agreements and promissory notes which met the criteria containedherein.  The information set forth in thecompact disk or other listing regarding the Contracts made available to theTrust and its assigns (which compact disk or other listing is required to bedelivered as specified herein) is true and correct in all material respects.

###  

### (c)                                  Compliancewith Law.  Each Contract and the saleof the related Financed Vehicle complied, at the time such Contract wasoriginated and complies, as of the related Purchase Date, in all materialrespects with all requirements of applicable federal, state and local laws, andregulations thereunder, including, without limitation, usury laws, theTruth-in-Lending Act, the Equal Credit Opportunity Act, the Fair CreditReporting Act, the Fair Credit Billing Act, the Fair Debt Collection PracticesAct, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, theFederal Reserve Board’s Regulations B and Z, the Servicemembers Civil ReliefAct and state adaptations of the Uniform Consumer Credit Code.

###  

### (d)                                 BindingObligation.  Each Contract representsthe genuine, legal, valid and binding payment obligation in writing of therelated Obligor, enforceable by the holder thereof in accordance with itsterms, except as enforceability may be limited by bankruptcy, insolvency,reorganization or other similar laws affecting the enforcement of creditors’rights generally and by general principles of equity.

###  

### (e)                                  NoGovernment or Incorporated Obligor. No Contract is due from the United States of America or any statethereof or from any agency, department or instrumentality of the United Statesof America or any state thereof or from any incorporated entity.

###  

### (f)                                    SecurityInterest in Financed Vehicles. Immediately prior to the transfer of the Contracts by the Seller to theDepositor and by the Depositor to the Trust, each Contract was secured by avalid, binding and enforceable first priority perfected security interest infavor of the Seller in the related Financed Vehicle and, at such time asenforcement of such security interest is sought, there shall exist a valid,binding and enforceable first priority perfected security interest in suchFinanced Vehicle for the benefit of the Seller and the Trust, respectively,

 

21

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### which is subject to regulatory registration with aclear legal right of repossession in favor of the Seller and the Trust.

###  

### (g)                                 Contractsin Force.  No Contract has beensatisfied, subordinated or rescinded, nor has any Financed Vehicle beenreleased in whole or in part from the Lien granted by the related Contract.

###  

### (h)                                 NoWaiver.  No provision of a Contracthas been waived in such a manner that such Contract fails to meet all of therepresentations and warranties made by the Depositor in this Section 2.2with respect thereto and no provision of any Contract has been waived except asnoted in the Contract Files.

###  

### (i)                                     NoDefenses.  No Contract is subject toany right of rescission, setoff, counterclaim or defense, including the defenseof usury, and the operation of any of the terms of any Contract, or theexercise of any right thereunder, will not render such Contract unenforceablein whole or in part or subject to any right of rescission, setoff, counterclaimor defense, including the defense of usury, and the Depositor has not receivedwritten notice of the assertion of any such right of rescission, setoff,counterclaim or defense asserted with respect thereto.

###  

### (j)                                     NoLiens.  No liens or claims exist orhave been filed for work, labor or materials or unpaid state or federal taxesrelating to any Financed Vehicle that are prior to, or equal or coordinatewith, the security interest in such Financed Vehicle created by the relatedContract.

###  

### (k)                                  NoDefault; Repossession.  No default,breach, violation or event permitting acceleration under the terms of anyContract has occurred (other than payments that are not more than 30 days pastdue), no continuing condition that with notice or the lapse of time or bothwould constitute a default, breach, violation or event permitting accelerationunder the terms of any Contract has arisen and no Financed Vehicle has beenrepossessed as of the applicable Cutoff Date.

###  

### (l)                                     TrueSale.                                           TheDepositor intends that the transfer of the Contracts contemplated by Section 2.1(b) constitutea sale of the Contracts from the Depositor to the Trust and that the beneficialinterest in, and title to, the Contracts not be part of the Depositor’s estatein the event of the filing of a bankruptcy petition by or against the Depositorunder any bankruptcy law.  The Depositorhas not sold, transferred, assigned or pledged any Contract to any Person otherthan the Trust and such Contract has not been released.

###  

### (m)                               ValidAssignment.  No Contract has beenoriginated in, or is subject to the laws of, any jurisdiction under which thesale, transfer, assignment and conveyance of such Contract under this Agreementor the pledge of such Contract under the Indenture is unlawful, void orvoidable.  No Contract is subject to anyagreement with any account debtor that prohibits, restricts or conditions theassignment of the Contracts.

###  

### (n)                                 [Reserved]

###  

### (o)                                 [Reserved]

###  

### (p)                                 OneOriginal.  There is only one originalexecuted copy of each Contract.

 

22

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### (q)                                 PrincipalBalance.  Each Contract acquired bythe Issuer on the Closing Date had a Principal Balance as of the Initial CutoffDate of not more than $55,000 and each Contract acquired by the Issuer duringthe Prefunding Period had a Principal Balance as of the applicable Cutoff Dateof not more than $50,000.

###  

### (r)                                    NoBankrupt Obligors.  As of theapplicable Cutoff Date, no Contract was due from an Obligor that was thesubject of a proceeding under the Bankruptcy Code of the United States or wasbankrupt.

###  

### (s)                                  Termto Maturity.  As of the applicableCutoff Date, each Contract had an original term to maturity of not more than 84months; provided, however, that as of the Prefunding AccountEnding Date, the weighted average remaining term to maturity of all Contractsshall not exceed 57 months.

###  

### (t)                                    AnnualPercentage Rate.  Each Contract hasan APR of at least 5.0%; provided, however, that as of thePrefunding Account Ending Date, the weighted average APR of all Contracts shallnot be less than 13.20%.

###  

### (u)                                 Locationof Contract Files.  The ContractFiles are complete and have been delivered to the Custodian prior to theapplicable Purchase Date and are maintained at the location listed in Schedule 2to this Agreement; provided, however, that the Depositor shallhave 180 days after the date that the applicable Contract is transferred to theTrust to deliver to the Custodian any certificate of title or other evidence inlieu of a certificate of title reasonably acceptable to the Insurer containedin such Contract File.

###  

### (v)                                 NoDelinquent Contracts or Defaulted Contracts.  As of the applicable Cutoff Date, no Contractwas a Delinquent Contract or a Defaulted Contract.

###  

### (w)                               OfferingMemorandum Data.  The tabular andnumerical data contained in the Offering Memorandum relating to thecharacteristics of the Contracts is true and correct in all material respects.

###  

### (x)                                   NoDefaults.  No Contract is due from anObligor that has previously defaulted on a retail installment sales contract orpromissory note and security agreement purchased by the Seller.

###  

### (y)                                 FinalScheduled Payment Date.  As of theapplicable Cutoff Date, each Contract had a final scheduled payment date on orbefore July 31, 2011.

###  

### (z)                                   OriginatorAgreement.  Each Contract is subjectto an Originator Agreement with the Seller and which if acquired by the Sellerpursuant to a “bulk purchase” from another Originator has been approved by theInsurer; provided, however that receivables originated under theSeller’s direct origination program are evidenced by a promissory note.

###  

### (aa)                            Lockbox.  The Obligor with respect to each contract hasbeen instructed to make payments under the Contract to a Lockbox which is underthe control of the Servicer.

 

23

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### (bb)                          UnitedStates Obligor.  Each Contract is duefrom an Obligor which has provided as its most recent billing address anaddress located in the United States of America.

###  

### (cc)                            U.S.Dollars.  Each Contract is payable inthe lawful money of the United States of America.

###  

### (dd)                          NoWaiver or Modification.  No Contracthas been waived or modified as of the applicable Cutoff Date except aspermitted by the Servicing Agreement.

###  

### (ee)                            PerfectionRepresentations.  The perfectionrepresentations, warranties and covenants made by the Depositor and set forthon Schedule 3 hereto shall be a part of this Agreement for allpurposes.

###  

### (ff)                                DirectProgram Origination.  Not less than54.0% of the aggregate Principal Balance of the Contracts, after giving effectto the Prefunding Period, shall have been originated through the Seller’sdirect origination program.

###  

## **Section 2.3.**                                **Repurchase by Depositor for Breach**.

##  

TheSeller, the Insurer, the Depositor, the Servicer or the Trust, as the case maybe, shall inform the other parties to this Agreement and the Indenture Trusteepromptly, in writing, upon the discovery of any breach or failure to be true ofthe representations and warranties made by the Depositor pursuant to Section 2.2.  If such breach or failure shall not have beencured by the close of business on the last day of the Collection Period whichincludes the thirtieth (30th) day after the date on which the Depositor becomesaware of, or receives written notice from, the Servicer, the Insurer or theTrust of such breach or failure, and such breach or failure materially andadversely affects the interest of the Trust in a Contract, the Depositor shallrepurchase such Contract from the Trust on the Business Day preceding thePayment Date immediately following such Collection Period.  In consideration of the repurchase of aContract hereunder, the Depositor shall remit the Purchase Amount of suchContract in the manner specified in Section 3.4.  The sole remedy of the Trust, the OwnerTrustee, the Indenture Trustee and the Noteholders with respect to a breach orfailure to be true of the representations and warranties made by the Depositorpursuant to Section 2.2 shall be to require the Depositor torepurchase Contracts pursuant to this Section 2.3 or to enforce theobligation of the Seller to repurchase such Contacts pursuant to theContribution Agreement.  Neither theOwner Trustee nor the Indenture Trustee shall have any duty to conduct anaffirmative investigation as to the occurrence of any condition requiring therepurchase of any Contract pursuant to this Section 2.3 or theeligibility of any Contract for purposes of this Agreement.

 

# **Article III**

# ** **

# **Distributions;Reserve Account; Statements to Noteholders and Certificateholders**

# ** **

## **Section 3.1.**                                **Accounts**.

##  

### (a)                                  TheTrust shall establish, or shall cause to be established, on or before theClosing Date, and shall maintain in the name of the Indenture Trustee at anEligible Institution (which

 

24

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### shall initially be the Indenture Trustee) a segregated trust accountdesignated as the Collection Account (the “*Collection Account*”).  The Collection Account shall be held in trustfor the benefit of the Insurer and the Noteholders and shall be under the soledominion and control of the Indenture Trustee; provided, however,that the Servicer may make deposits to and direct the Indenture Trustee inwriting to make withdrawals from the Collection Account in accordance with thisAgreement and the Indenture.  All moniesdeposited from time to time in the Collection Account pursuant to thisAgreement shall be held by the Indenture Trustee as part of the Trust Propertyand shall be applied as provided in this Agreement.  All deposits to and withdrawals from theCollection Account shall be made only upon the terms and conditions of theTransaction Documents.

###  

If the Servicer is required to remit collections withintwo (2) Business Days pursuant to the first sentence of Section 3.2,all amounts held in the Collection Account shall, to the extent permitted byapplicable law, rules and regulations, be invested, as directed in writingby the Servicer, by the bank or trust company then maintaining the CollectionAccount in Eligible Investments that mature not later than the Business Daypreceding the Payment Date following the Collection Period to which suchamounts relate.  If the CollectionAccount is no longer to be maintained at the Indenture Trustee, the Servicershall, with the Indenture Trustee’s assistance as necessary, cause theCollection Account to be moved to an Eligible Institution within ten (10) BusinessDays (or such longer period not to exceed thirty (30) calendar days as to whicheach Rating Agency and the Insurer (provided that no Insurer Default shall haveoccurred and is continuing) may consent). The Servicer shall promptly notify the Indenture Trustee, the RatingAgencies, the Insurer (provided that no Insurer Default shall have occurred andis continuing) and the Owner Trustee of any change in the account number orlocation of the Collection Account.

 

### (b)                                 TheTrust shall establish, or shall cause to be established, on or before theClosing Date, and shall maintain in the name of the Indenture Trustee at anEligible Institution (which shall initially be the Indenture Trustee) thefollowing note payment accounts:

###  

#### (i)                                     asegregated trust account designated as the Class A Note Payment Account(the “*Class A Note Payment Account*”).  The Class A Note Payment Account shallbe held in trust for the benefit of the Class A Noteholders and theInsurer.  The Class A Note PaymentAccount shall be under the sole dominion and control of the Indenture Trustee; provided,however, that the Servicer may make deposits to and direct the IndentureTrustee in writing to make withdrawals from the Class A Note PaymentAccount in accordance with this Agreement and the Indenture.  All monies deposited from time to time in theClass A Note Payment Account pursuant to this Agreement and the Indentureshall be held by the Indenture Trustee as part of the Trust Property and shallbe applied as provided in this Agreement and the Indenture.  The amounts on deposit in the Class ANote Payment Account shall not be invested. If the Class A Note Payment Account is no longer to be maintainedat the Indenture Trustee, the Servicer shall, with the Indenture Trustee’sassistance as necessary, cause the Class A Note Payment Account to bemoved to an Eligible Institution within ten (10) Business Days (or suchlonger period not to exceed thirty (30) calendar days as to which each RatingAgency and the Insurer (provided that no Insurer Default shall have occurredand is continuing) may consent). The Servicer shall promptly notify theIndenture Trustee, the Rating Agencies,

 

25

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#### the Insurer and the OwnerTrustee of any change in the account number or location of the Class ANote Payment Account; and

####  

#### (ii)                                  asegregated trust account designated as the Class B Note Payment Account(the “*Class B Note Payment Account*”).  The Class B Note Payment Account shallbe held in trust for the benefit of the Class B Noteholders.  The Class B Note Payment Account shallbe under the sole dominion and control of the Indenture Trustee; provided,however, that the Servicer may make deposits to and direct the IndentureTrustee in writing to make withdrawals from the Class B Note PaymentAccount in accordance with this Agreement and the Indenture.  All monies deposited from time to time in theClass B Note Payment Account pursuant to this Agreement and the Indentureshall be held by the Indenture Trustee as part of the Trust Property and shallbe applied as provided in this Agreement and the Indenture.  The amounts on deposit in the Class BNote Payment Account shall not be invested. If the Class B Note Payment Account is no longer to be maintainedat the Indenture Trustee, the Servicer shall, with the Indenture Trustee’sassistance as necessary, cause the Class B Note Payment Account to bemoved to an Eligible Institution within ten (10) Business Days (or suchlonger period not to exceed thirty (30) calendar days as to which each RatingAgency and the Insurer (provided that no Insurer Default shall have occurredand is continuing) may consent). The Servicer shall promptly notify theIndenture Trustee, the Rating Agencies, the Insurer and the Owner Trustee ofany change in the account number or location of the Class B Note PaymentAccount.

####  

### (c)                                  TheTrust shall establish, or shall cause to be established, on or before theClosing Date, and shall maintain in the name of the Trust at an EligibleInstitution (which shall initially be the Owner Trustee or an affiliate of theOwner Trustee) a segregated trust account designated as the Depositor Account(the “*Depositor Account*”).  The Depositor Account shall be held in trustfor the benefit of the Certificateholder. The Depositor Account shall not constitute part of the TrustEstate.  The Servicer may direct theIndenture Trustee in writing to make deposits to the Depositor Account inaccordance with Section 3.5(d) of this Agreement.  All monies deposited from time to time in theDepositor Account pursuant to this Agreement shall be applied in accordancewith the terms of the Trust Agreement. The amounts on deposit in the Depositor Account shall not beinvested.  If the Depositor Account is nolonger to be maintained at the Owner Trustee or an affiliate of the OwnerTrustee, the Servicer shall, with the Owner Trustee’s assistance as necessary,cause the Depositor Account to be moved to an Eligible Institution within ten (10) BusinessDays (or such longer period not to exceed thirty (30) calendar days as to whicheach Rating Agency and the Insurer (provided that no Insurer Default shall haveoccurred and is continuing) may consent). The Servicer shall promptly notify the Indenture Trustee, the Insurer(provided that no Insurer Default shall have occurred and is continuing) andthe Owner Trustee of any change in the account number or location of theDepositor Account.

###  

## **Section 3.2.**                                **Collections**.

##  

The Servicer shall remit to the Collection Account allamounts received by the Servicer on or in respect of the Contracts (excludingpayments with respect to Purchased Contracts) as soon as practicable and in noevent after the close of business on the second Business Day after

 

26

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such receipt; provided, however, thatfor so long as (a) FISC is the Servicer, (b) no Event of ServicingTermination shall have occurred and be continuing and (c) (i) theshort term unsecured debt of FISC (for so long as it is Servicer) shall berated at least Prime-1 by Moody’s and at least A-1 by S&P or (ii) theRating Agency Condition shall have been satisfied and the written consent ofthe Insurer shall have been obtained (each, a “*MonthlyRemittance Condition*”), the Servicer may remit any such amountsreceived during any Collection Period to the Collection Account in immediatelyavailable funds on the Business Day preceding the Payment Date following suchCollection Period.  The Owner Trustee andthe Indenture Trustee shall not be deemed to have knowledge of any event orcircumstance under clause (ii) or (iii) of thedefinition of Monthly Remittance Condition that would require daily remittanceby the Servicer to the Collection Account (and shall be entitled to presume andbe fully protected in presuming that no such event or circumstance has occurredor exists) unless the Owner Trustee or the Indenture Trustee, as applicable,has received written notice of such event or circumstance from the Seller orthe Servicer in an Officer’s Certificate or written notice from the Insurer (ifno Insurer Default shall have occurred and be continuing), the Holders of Notesevidencing not less than 25% of the Class A Note Balance or a ResponsibleOfficer of the Owner Trustee or the Indenture Trustee, as applicable, hasactual knowledge of such event or circumstance.

 

## **Section 3.3.**                                **Application of Collections**.

##  

For purposes of this Agreement, all amounts receivedon or in respect of a Contract during any Collection Period (excluding paymentswith respect to Purchased Contracts) shall be applied by the Servicer, on thedate received, to interest and principal on such Contract in accordance withthe terms of such Contract.

 

## **Section 3.4.**                                **Application of Deposits**.

##  

The Depositor and the Servicer shall deposit or causeto be deposited in the Collection Account the aggregate Purchase Amount withrespect to Purchased Contracts pursuant to Section 2.3 hereof orSections 2.02 and 2.28 of the Servicing Agreement.  All such deposits with respect to aCollection Period shall be made in immediately available funds no later than5:00 p.m., New York City time, on the Business Day preceding the PaymentDate following such Collection Period.

 

## **Section 3.5.**                                **Determination Date Calculations**.

##  

### (a)                                  Oneach Determination Date, the Servicer shall calculate the following amounts:

###  

#### (i)                                     theAvailable Funds for the related Payment Date;

####  

#### (ii)                                  theTotal Servicing Fee for the related Payment Date;

####  

#### (iii)                               theTotal Note Interest for the related Payment Date;

####  

#### (iv)                              the Class AMonthly Note Principal for the related Payment Date;

####  

#### (v)                                 theInsurance Premium for the related Payment Date plus any overdue InsurancePremiums for previous Payment Dates;

 

27

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#### (vi)                              theaggregate amount of any unreimbursed payments under the Policy to the extentpayable to the Insurer under the Insurance Agreement plus accruedinterest on any unreimbursed payments under the Policy at the rate provided inthe Insurance Agreement plus any other amounts due the Insurer under theInsurance Agreement and the Policy;

####  

#### (vii)                           the Class ANote Parity Amount for the related Payment Date;

####  

#### (viii)                        the sum ofthe amounts described in clauses (ii), (iii) and (vii) above(the “*Required Payment Amount*”);

####  

#### (ix)                                thesum of the amounts described in clauses (v) and (vi) above(the “*Insurance Payment Amount*”);

####  

#### (x)                                   theClass B Monthly Note Principal for the related Payment Date; and

####  

#### (xi)                                anyunpaid or unreimbursed fees and expenses (including but not limited to,attorneys’ fees and transition expenses) due to the Back-up Servicer, theIndenture Trustee, the Custodian and the Owner Trustee.

####  

### (b)                                 Oneach Determination Date, the Servicer shall calculate the following amounts:

###  

#### (i)                                     thelesser of (A) the amount, if any, by which the sum of the Required PaymentAmount plus the Insurance Payment Amount exceeds the Available Funds for suchPayment Date and (B) the Reserve Account Amount for such Payment Date(before giving effect to any deposits to or withdrawals from the ReserveAccount on such Payment Date) (such lesser amount, the “*ReserveAccount Draw Amount*”);

####  

#### (ii)                                  thePolicy Claim Amount;

####  

#### (iii)                               theReserve Account Amount for the following Payment Date (after giving effect tothe withdrawal of the Reserve Account Draw Amount for such Payment Date); and

####  

#### (iv)                              theamount, if any, by which the Required Reserve Account Amount for the followingPayment Date exceeds the Reserve Account Amount for such Payment Date (aftergiving effect to the withdrawal of the Reserve Account Draw Amount for suchPayment Date) (such excess, the “*Reserve Account Deficiency*”).

####  

On each Payment Date, the Servicer shall instruct theIndenture Trustee to withdraw, and the Indenture Trustee upon receipt of suchinstructions shall withdraw, the Reserve Account Draw Amount, if any, for suchPayment Date from the Reserve Account and apply such amount in accordance with paragraph(e) of this Section 3.5.

 

### (c)                                  Ifthe Servicer determines on any Determination Date that the Available Funds forthe following Payment Date plus the Reserve Account Draw Amount (excluding thatportion attributable to clause (ii) of Section 3.5(a))for such Payment Date will be insufficient to pay in full the Required PaymentAmount (excluding that portion attributable to clause (ii) of Section 3.5(a))

 

28

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### for such Payment Date, the Servicer shall deliver to the IndentureTrustee, with a copy to the Insurer, the Owner Trustee and the Fiscal Agent, nolater than 2:00 p.m., New York City time, on such Determination Date, awritten notice specifying the Policy Claim Amount for such Payment Date.  The Indenture Trustee shall, no later than12:00 p.m., New York City time, on the second Business Day prior to suchPayment Date, make a claim under the Policy for such Policy Claim Amount bydelivering to the Insurer and the Fiscal Agent, with a copy to the Servicer, aNotice (as defined in the Policy) for such Policy Claim Amount.  In making any such claim, the IndentureTrustee shall comply with all the terms and conditions of the Policy.  The “*Policy Claim Amount*”with respect to a Payment Date shall equal the sum of the following amounts:

###  

#### (i)                                     theexcess, if any, of (A) the Total Note Interest for such Payment Date over (B) theportion of Total Available Funds for such Payment Date applied to the paymentthereof pursuant to Sections 3.5(d) and (e); and

####  

#### (ii)                                  thePrincipal Deficit; and

####  

#### (iii)                               onthe Final Note Payment Date for each Class of Class A Notes, theoutstanding principal balance of such Class of Class A Notes, aftergiving effect to all other distributions to the Class A Noteholders to bemade on such Final Note Payment Date.

####  

The Servicer shall instruct the Indenture Trustee todeposit, and the Indenture Trustee upon receipt of such instructions shalldeposit, the proceeds of any drawing under the Policy in respect of clauses(i), (ii) and (iii) above to the Class A Note PaymentAccount.

 

It is understood that this Section 3.5(c) shallhave no effect upon the Insurer’s obligations under the Policy, which aregoverned solely by the Policy.

 

### (d)                                 Oneach Payment Date, prior to any acceleration of the Notes after an Event ofDefault, the Servicer shall instruct the Indenture Trustee to apply theAvailable Funds for such Payment Date to make the following payments anddeposits in the following order of priority, and the Indenture Trustee shallapply as so instructed:

###  

#### (i)                                     tothe Back-up Servicer, the Indenture Trustee, the Custodian and the OwnerTrustee in its individual capacity, respectively, any unpaid or unreimbursedBack-up Servicer Fee, Indenture Trustee Fee and Owner Trustee Fee, asapplicable, and expenses (including, but not limited to, attorneys’ fees andtransition expenses) in accordance with the terms of the Fee Letters and theTransaction Documents; provided that any such expenses shall not exceed$50,000.00 in the aggregate per year and (A) prior to an Event ofServicing Termination, $100,000.00 in the total aggregate or (B) after anEvent of Servicing Termination, $200,000.00 in the total aggregate so long asthe Notes shall remain outstanding and the Policy has not been cancelled;

####  

#### (ii)                                  tothe Servicer, the Total Servicing Fee for the preceding Collection Period;

 

29

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#### (iii)                               tothe Class A Note Payment Account, for distribution to the Class ANoteholders in accordance with Section 2.8(b)(i) of the Indenture,the Total Note Interest for such Payment Date;

####  

#### (iv)                              unlessan Insurer Default has occurred and is continuing, to the Insurer, theInsurance Premium for such Payment Date plus any overdue Insurance Premiums forprevious Payment Dates;

####  

#### (v)                                 tothe Class A Note Payment Account, for distribution to the Class ANoteholders in accordance with Section 2.8(b)(i) of the Indenture, theClass A Monthly Note Principal for such Payment Date;

####  

#### (vi)                              tothe Insurer, the aggregate amount of any unreimbursed payments under the Policyto the extent payable to the Insurer under the Insurance Agreement plusaccrued interest on any unreimbursed payments under the Policy at the rateprovided in the Insurance Agreement plus any other amounts due theInsurer under the Insurance Agreement and the Policy;

####  

#### (vii)                           to theReserve Account, the Reserve Account Deficiency, if any, for such Payment Date;

####  

#### (viii)                        after theoccurrence of a Re-Liening Trigger, to the Servicer (if not First InvestorsServicing Corporation), any and all expenses incurred in connection withre-titling the Financed Vehicles, to the extent not previously paid;

####  

#### (ix)                                tothe Class B Note Payment Account for distribution to the Class BNoteholders in accordance with Section 2.8(b)(ii) of the Indenture,the Class B Monthly Note Principal for such Payment Date;

####  

#### (x)                                   otheramounts, if any, due the Owner Trustee in its individual capacity, theIndenture Trustee, the Custodian, the Back-up Servicer, the Servicer and theInsurer, respectively, pursuant to the Transaction Documents to the extent notpaid pursuant to clause (i); and

####  

#### (xi)                                tothe Depositor Account, any remaining Available Funds.

####  

On each Payment Date, the Servicer shall instruct theIndenture Trustee to make the payments described in Section 2.8(b) andSection 2.8(f) of the Indenture, as applicable, from the Note PaymentAccounts.

 

### (e)                                  Oneach Payment Date, the Servicer shall instruct the Indenture Trustee to apply,and the Indenture Trustee shall apply as so instructed, the amount, if any,withdrawn from the Reserve Account in respect of the Reserve Account DrawAmount in accordance with paragraph (b) of this Section 3.5to make the following payments and deposits after giving effect to amounts paidor deposited pursuant to Section 3.5(d) in the following orderof priority:

###  

#### (i)                                     tothe Servicer, the Total Servicing Fee for the preceding Collection Period;

 

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#### (ii)                                  tothe Class A Note Payment Account, the Total Note Interest for such PaymentDate, to be applied in accordance with Section 2.8(b)(i) of theIndenture;

####  

#### (iii)                               tothe Class A Note Payment Account, the Class A Monthly Note Principalfor such Payment Date (only if, and to the extent that, at such time the Class ABalance exceeds the sum of the Pool Balance and 97.0% of the amount on depositin the Prefunding Account as of the last day of the related Collection Period),to be applied in accordance with Section 2.8(b)(i) of the Indenture;

####  

#### (iv)                              ifsuch Payment Date is the Final Note Payment Date for any Class of Class ANotes, the outstanding principal balance of such Class of Class ANotes;

####  

#### (v)                                 unlessan Insurer Default has occurred and is continuing, to the Insurer, theInsurance Premium for such Payment Date plus any overdue Insurance Premiums forprevious Payment Dates; and

####  

#### (vi)                              tothe Insurer, the aggregate amount of any unreimbursed payments under the Policyto the extent payable to the Insurer under the Insurance Agreement plusaccrued interest on any unreimbursed payments under the Policy at the rateprovided in the Insurance Agreement plus any other amounts due the Insurerunder the Insurance Agreement and the Policy.

####  

### (f)                                    Onany Payment Date on or after which the Notes have been accelerated after anEvent of Default, the Servicer may, with the prior written consent (a copy ofwhich written consent shall be forwarded by the Servicer to the IndentureTrustee) of the Insurer, and shall, at the written direction (a copy of whichwritten direction shall be forwarded by the Servicer to the Indenture Trustee)of the Insurer (provided that no Insurer Default shall have occurred and becontinuing), instruct the Indenture Trustee to withdraw from the ReserveAccount, and the Indenture Trustee upon receipt of such instructions shallwithdraw from the Reserve Account, an amount up to the remainder of the Class ANote Balance after the application of all other amounts distributable to the Class ANoteholders on such Payment Date pursuant to Section 2.8(f)(i) and Section 5.4(b) ofthe Indenture and deposit such amount to the Class A Note PaymentAccount.  The Servicer may, with theprior written consent (a copy of which written consent shall be forwarded bythe Servicer to the Indenture Trustee) of the Insurer (provided that no InsurerDefault shall have occurred and be continuing), and shall, at the writtendirection (a copy of which written direction shall be forwarded by the Servicerto the Indenture Trustee) of the Insurer, instruct the Indenture Trustee toapply, and the Indenture Trustee shall apply, such amount to the payment ofprincipal on the Notes in accordance with Section 2.8(f)(i) and Section 5.4(b) ofthe Indenture.

###  

### (g)                                 Onany Payment Date on or after which the Class A Notes have been paid infull and all amounts due to the Insurer have been paid in full, after givingeffect to the Reserve Account Draw Amount for such Payment Date, if any, theIndenture Trustee shall withdraw from the Reserve Account an amount up to theoutstanding principal balance of the Class B Notes and deposit such amountto the Class B Note Payment Account, to be applied in accordance with Section 2.8(f)(ii) andSection 5.4(b) of the Indenture.

 

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## **Section 3.6.**                                **Reserve Account**.

##  

### (a)                                  TheTrust shall establish, or shall cause to be established, on or before theClosing Date, and shall maintain in the name of the Indenture Trustee at anEligible Institution (which shall initially be the Indenture Trustee) asegregated trust account designated as the Reserve Account (the “*Reserve Account*”).  The Reserve Account shall be held in trustfor the benefit of the Class A Noteholders, the Servicer and theInsurer.  The Reserve Account shall beunder the sole dominion and control of the Indenture Trustee; provided, however,that the Servicer may make deposits to and direct the Indenture Trustee inwriting to make withdrawals from the Reserve Account in accordance with this Agreementand the Indenture.  On the Closing Date,the Trust shall deposit the Initial Reserve Account Deposit into the ReserveAccount from the net proceeds of the sale of the Notes.  On each Additional Contract Purchase Date,the Reserve Account shall be funded by deposits from proceeds of the sale bythe Depositor of Additional Contracts to the Trust in an amount equal to 1.0%of the aggregate Principal Balance of the Additional Contracts as of theapplicable Cutoff Date.  Pursuant to theIndenture, the Trust will pledge all of its right, title and interest in, toand under the Reserve Account and the Reserve Account Property to the IndentureTrustee for the benefit of the Noteholders and the Insurer to secure itsobligations under the Notes and the Indenture.

###  

### (b)                                 TheReserve Account Property shall, to the extent permitted by applicable law, rules andregulations, be invested, as directed in writing by the Servicer, by the bankor trust company then maintaining the Reserve Account in Eligible Investments thatmature not later than the Business Day preceding the next Payment Date.  All such Eligible Investments shall be heldto maturity.  All interest and otherincome (net of losses and investment expenses) on funds on deposit in theReserve Account shall, at the written direction of the Servicer, be paid to theTrust on any Payment Date to the extent that funds on deposit therein, ascertified by the Servicer, exceed the Required Reserve Account Amount.  If the Reserve Account is no longer to bemaintained at the Indenture Trustee, the Servicer shall, with the IndentureTrustee’s assistance as necessary, cause the Reserve Account to be moved to anEligible Institution within ten (10) Business Days (or such longer periodnot to exceed thirty (30) calendar days as to which each Rating Agency and theInsurer (provided that no Insurer Default shall have occurred and iscontinuing) may consent).  The Servicershall promptly notify the Insurer (provided that no Insurer Default shall haveoccurred and is continuing) and the Indenture Trustee of any change in theaccount number or location of the Reserve Account.

###  

### (c)                                  Withrespect to any Reserve Account Property:

###  

#### (i)                                     anyReserve Account Property that is a “financial asset” as defined in Section 8-102(a)(9) ofthe Relevant UCC shall be physically delivered to, or credited to an account inthe name of, the Eligible Institution maintaining the Reserve Account, inaccordance with such institution’s customary procedures such that suchinstitution establishes a “securities entitlement” in favor of the IndentureTrustee with respect thereto;

####  

#### (ii)                                  anyReserve Account Property that is held in deposit accounts shall be held solelyin the name of the Indenture Trustee at one or more depository institutionshaving the Required Rating and each such deposit account shall be subject tothe

 

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#### exclusive custody andcontrol of the Indenture Trustee and the Indenture Trustee shall have solesignature authority with respect thereto; and

####  

#### (iii)                               exceptfor any deposit accounts specified in clause (ii) above, theReserve Account shall only be invested in securities or in other assets whichthe Eligible Institution maintaining the Reserve Account agrees to treat as “financialassets” as defined in Section 8-102(a)(9) of the Relevant UCC.

####  

### (d)                                 Ifthe Reserve Account Amount for any Payment Date (after giving effect to thewithdrawal of the Reserve Account Draw Amount for such Payment Date) exceedsthe Required Reserve Account Amount for such Payment Date, the Servicer shall,unless an Event of Default has occurred and is continuing, instruct theIndenture Trustee in writing to distribute, and the Indenture Trustee uponreceipt of such instructions shall distribute, the amount of such excess to thePaying Agent for distribution to the Depositor in accordance with Section 5.2of the Trust Agreement.  The IndentureTrustee hereby releases, on each Payment Date, its security interest in, to andunder Reserve Account Property distributed to the Depositor pursuant to this Section 3.6.  If an Event of Default has occurred and iscontinuing, the Servicer shall instruct the Indenture Trustee to apply, and theIndenture Trustee upon receipt of such instructions shall apply, the amount ofsuch excess in the Reserve Account to the Collection Account for application toAvailable Funds pursuant to Section 3.5(d).

###  

### (e)                                  Ifthe Class A Note Balance and all other amounts owing or to be distributedhereunder or under the Indenture to the Class A Noteholders, the Insurerand the Class B Noteholders have been paid in full and the Trust has beenterminated, any remaining Reserve Account Property shall be distributed to theDepositor in accordance with Section 5.2 of the Trust Agreement.

###  

## **Section 3.7.**                                **Prefunding Account**.

##  

### (a)                                  TheTrust shall establish, or shall cause to be established, on or before theClosing Date, and shall maintain in the name of the Indenture Trustee at anEligible Institution (which shall initially be the Indenture Trustee) asegregated trust account designated as the Prefunding Account (the “*Prefunding Account*”).  The Prefunding Account shall be held in trustfor the benefit of the Insurer and the Noteholders.  The Prefunding Account shall be under thesole dominion and control of the Indenture Trustee; provided, however,that the Servicer may make deposits to and direct the Indenture Trustee inwriting to make withdrawals from the Prefunding Account in accordance with thisAgreement and the Indenture.  All moniesdeposited from time to time in the Prefunding Account pursuant to thisAgreement shall be held by the Indenture Trustee as part of the Trust Propertyand shall be applied as provided in this Agreement.  All deposits to and withdrawals from thePrefunding Account shall be made only upon the terms and conditions of theTransaction Documents.

###  

### (b)                                 Allamounts held in the Prefunding Account shall, to the extent permitted byapplicable law, rules and regulations, be invested, as directed in writingby the Servicer, by the bank or trust company then maintaining the PrefundingAccount in Eligible Investments that mature not later than the Business Daypreceding the Payment Date following the Collection Period to which suchamounts relate.  All such EligibleInvestments shall be held to maturity. If

 

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### the Prefunding Account is no longer to be maintained at the IndentureTrustee, the Servicer shall, with the Indenture Trustee’s assistance asnecessary, cause the Prefunding Account to be moved to an Eligible Institutionwithin ten (10) Business Days (or such longer period not to exceed thirty(30) calendar days as to which each Rating Agency and the Insurer (providedthat no Insurer Default shall have occurred and is continuing) mayconsent).  The Servicer shall promptlynotify the Indenture Trustee, the Insurer (provided that no Insurer Defaultshall have occurred and is continuing) and the Owner Trustee of any change inthe account number or location of the Prefunding Account.

###  

### (c)                                  Onthe Closing Date, the Trust will deposit an amount equal to the InitialPrefunding Account Amount from the aggregate proceeds of the sale of the Notesinto the Prefunding Account.  The Trustshall cause the Servicer to notify the Insurer and the Indenture Trustee five (5) BusinessDays prior to any proposed purchase of Additional Contracts, such notice tocontain (i) a Contract Schedule listing the relevant information forsuch Additional Contracts, (ii) the Additional Purchase Price and (iii) theproposed Additional Contract Purchase Date. During the Prefunding Period, unless the Indenture Trustee, on suchproposed Additional Contract Purchase Date, has actual knowledge of theoccurrence of a Default or Event of Default, the Indenture Trustee shalltransfer the Additional Purchase Price for such Additional Contracts from thePrefunding Account to such account as the Trust, through the Servicer, mayspecify.

###  

### (d)                                 Onthe Prefunding Account Ending Date, upon direction from the Servicer, theIndenture Trustee shall transfer 97.0% of the Excess Prefunding Amount to the Class ANote Payment Account and the remaining 3.0% of the Excess Prefunding Amount tothe Class B Note Payment Account. If the aggregate remaining amount in the Prefunding Account is: (i) $100,000or less on the Prefunding Account Ending Date, the portion of the ExcessPrefunding Amount payable to the Class A Notes shall be applied to reducethe outstanding principal amount of the Class of Class A Notes thenentitled to receive principal payments on the Class A Notes; and (ii) $100,000or greater, the portion of the Excess Prefunding Amount payable to Class ANotes shall be paid pro rata to each Class of Class A Notes based onthe outstanding principal balance of each Class of Class A Notesprior to giving effect to the payment of principal on that Payment Date.  Such amounts shall be paid in accordance withSection 2.8(b)(i) of the Indenture.

###  

## **Section 3.8.**                                **Statements to Noteholders**.

##  

### (a)                                  Onor prior to each Determination Date, the Servicer shall provide to theIndenture Trustee (with copies to the Insurer, the Rating Agencies and eachPaying Agent) for the Indenture Trustee to forward to each Noteholder of recordas of the most recent Record Date upon a written request from any suchNoteholder, a statement which shall set forth at least the followinginformation as to the Notes (to the extent applicable) with respect to thedistribution to be made on such Payment Date:

###  

#### (i)                                     theamount of such distribution allocable to Total Note Interest;

####  

#### (ii)                                  theamount of such distribution allocable to interest, overdue interest andinterest on overdue interest for each Class of Class A Notes;

 

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#### (iii)                               theamount of such distribution allocable to principal on each Class of Class ANotes and the Class B Notes;

####  

#### (iv)                              theTotal Servicing Fee for the preceding Collection Period;

####  

#### (v)                                 theClass A Note Balance and the Note Factor relating to each Class of Class ANotes, in each case as of the close of business on the last day of thepreceding Collection Period (after giving effect to payments allocated toprincipal reported under clause (c) above);

####  

#### (vi)                              thePool Balance as of the close of business on the last day of the precedingCollection Period;

####  

#### (vii)                           theReserve Account Amount on such Payment Date (after giving effect to alldeposits to or withdrawals from the Reserve Account on such Payment Date);

####  

#### (viii)                        theaggregate Purchase Amount of Purchased Contracts, if any, with respect to thepreceding Collection Period;

####  

#### (ix)                                thenumber and aggregate Principal Balance of Contracts that were 31-59 days, 60-89days or 90 days or more delinquent as of the last day of the precedingCollection Period;

####  

#### (x)                                   CumulativeNet Loss Rate information with respect to the preceding Collection Periods; and

####  

#### (xi)                                priorto the Prefunding Account Ending Date, the Prefunding Account Balance and theCapitalized Interest Amount.

####  

### (b)                                 Within150 days after the Closing Date and each Additional Contract Purchase Date, theServicer shall provide, or shall cause to be provided, to the Indenture Trusteeand the Insurer a notice indicating which Contract Files, if any, do notcontain a certificate of title or other evidence in lieu of a certificate oftitle.

###  

## **Section 3.9.**                                **Control of Securities Accounts; The SecuritiesIntermediary**.

##  

### (a)                                  WellsFargo Bank, National Association agrees to act as securities intermediaryhereunder (in such capacity, the “Securities Intermediary”) and theSecurities Intermediary represents, warrants and covenants as follows:

###  

#### (i)                                     Withrespect to any of the Collateral that is a book-entry security, such Collateralhas been credited to the Indenture Trustee’s securities account by accuratebook entry.

####  

#### (ii)                                  TheSecurities Intermediary will comply with all “Entitlement Orders” (as such termis defined in Section 8-102 of the Relevant UCC) of the Indenture Trustee,

 

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#### without further consentof the Trust, and shall not accept Entitlement Orders from any other personexcept as authorized by the Indenture Trustee.

####  

#### (iii)                               TheSecurities Intermediary has received no notice of, and has no knowledge of any “adverseclaim” (as such term is defined in the Relevant UCC) as to the Collateral.

####  

#### (iv)                              TheSecurities Intermediary waives any lien, claim or encumbrance in favor of theSecurities Intermediary in the Collateral.

####  

#### (v)                                 TheSecurities Intermediary is a “securities intermediary” as such term is definedin Section 8-102(a)(14) of the Relevant UCC and in the ordinary course ofits business maintains “securities accounts” for others, as such terms are usedin Section 8-501 of the Relevant UCC.

####  

#### (vi)                              TheSecurities Intermediary is not a “clearing corporation,” as such term isdefined in Section 8-102(a)(5) of the Relevant UCC.

####  

### (b)                                 Anysecurities intermediary hereunder shall be, and the Securities Intermediaryhereby represents and warrants that it is as of the date hereof and shall be,for so long as it is the Securities Intermediary hereunder, a corporation ornational banking association that in the ordinary course of its businessmaintains securities accounts for others and is acting in that capacityhereunder.  Any securities intermediaryhereunder shall, and the Securities Intermediary does, agree with the partieshereto that each Account shall be an account to which financial assets may becredited and undertake to treat the Indenture Trustee as entitled to exerciserights that comprise such financial assets. Any securities intermediary hereunder shall, and the Securities Intermediarydoes, agree with the parties hereto that each item of property credited to eachAccount shall be treated as a “financial asset” as defined in Section 8-102of the Relevant UCC.  Any securitiesintermediary hereunder shall, and the Securities Intermediary does, acknowledgethat the “securities intermediary’s jurisdiction” as defined in the RelevantUCC of the Securities Intermediary with respect to the Collateral, shall be theState of New York.  Any securitiesintermediary hereunder shall, and the Securities Intermediary does, representand covenant that it is not and will not be (as long as it is the SecuritiesIntermediary hereunder) a party to any agreement in respect of the Collateralthat is inconsistent with the provisions of this Agreement.  Any securities intermediary hereunder shall,and the Securities Intermediary does, covenant that it will not take actioninconsistent with the provisions of this Agreement applicable to it.  Any securities intermediary hereunder shall,and the Securities Intermediary does, agree that any item of property creditedto any Account shall not be subject to any security interest, lien, or right ofsetoff in favor of it or anyone claiming through it (other than the IndentureTrustee).

###  

### (c)                                  Itis the intent of the Indenture Trustee and the Trust that each of the ReserveAccount, the Collection Account and the Prefunding Account shall be asecurities account as to which the Indenture Trustee and not the Trust is the “entitlementholder” (within the meaning of Section 8-102(a)(7) of the RelevantUCC).  Nonetheless, (i) anysecurities intermediary hereunder shall agree to comply with entitlement ordersoriginated by the Indenture Trustee without further consent by the Trust, and (ii) theSecurities Intermediary agrees that so long as it

 

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### is the Securities Intermediary hereunder, it will comply withentitlement orders originated by the Indenture Trustee without further consentby the Trust.  Any securitiesintermediary hereunder shall covenant that it will not agree with any person orentity other than the Indenture Trustee that it will comply with entitlementorders originated by such person or entity, and the Securities Intermediaryhereby covenants that it will not agree with any person or entity other thanthe Indenture Trustee that it will comply with entitlement orders originated bysuch person or entity.

###  

### (d)                                 Nothingherein shall imply or impose upon the Securities Intermediary any duty orobligations other than those expressly set forth herein and those applicable toa securities intermediary under the Relevant UCC (and the SecuritiesIntermediary shall be entitled to all of the protections available to asecurities intermediary under the Relevant UCC).  Without limiting the foregoing, nothingherein shall imply or impose upon the Securities Intermediary any duties of afiduciary nature.

###  

### (e)                                  TheSecurities Intermediary may at any time resign by notice to the IndentureTrustee and may at any time be removed by notice from the Indenture Trustee; provided,however, that it shall be the responsibility of the Indenture Trustee toappoint a successor securities intermediary and to cause the Accounts to beestablished and maintained with such successor securities intermediary inaccordance with the terms hereof; and the responsibilities and duties of theretiring Securities Intermediary hereunder shall remain in effect until all ofthe Collateral credited to the Accounts held by such retiring SecuritiesIntermediary have been transferred to such successor.  Any corporation into which the SecuritiesIntermediary may be merged or converted or with which it may be consolidated,or any corporation resulting from such merger, consolidation or conversion towhich the Securities Intermediary shall be a party, shall be the successor ofthe Securities Intermediary hereunder, without the execution or filing of anyfurther act on the part of the parties hereto or such securities intermediaryor such successor corporation.

###  

## **Section 3.10.**                         **Policy Matters**.

##  

### (a)                                  TheIndenture Trustee hereby agrees on behalf of the Class A Noteholders (andeach Class A Noteholder, by its acceptance of its Class A Notes,shall agree) for the benefit of the Insurer, that the Indenture Trustee shallrecognize that to the extent the Insurer makes a payment under the Policy,either directly or indirectly (by paying through the Indenture Trustee) to the Class ANoteholders, the Insurer will be entitled to be subrogated to the rights of theClass A Noteholders to the extent of such payment made under the Policy.  Any rights of subrogation acquired by theInsurer as a result of any payment made under the Policy shall, in allrespects, be subordinate and junior in right of payment to the priorindefeasible payment in full of all amounts due under the Class A Notes.

###  

### (b)                                 TheIndenture Trustee, for itself and on behalf of the Noteholders, hereby agreesthat the Insurer may at any time during the continuation of any proceedingrelating to a Final Order, provided that no Insurer Default shall have occurredand be continuing, direct all matters relating to such Final Order, including,without limitation, the direction of any appeal of any order relating to suchFinal Order and the posting of any surety, supersedeas or performance bondpending any such appeal.  In addition andwithout limitation of the foregoing, the Insurer shall be subrogated, to theextent of any payments made under the Policy relating to a Final

 

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### Order, to the rights of the Depositor, the Servicer, the Seller, theTrust, the Indenture Trustee and the Class A Noteholders in the conduct ofany preference claim relating to a Final Order, including, without limitation,all rights of any party to any adversarial proceeding or action with respect toany court order issued in connection with any such preference claim; provided,that such subrogation rights shall remain subject to the last sentence of paragraph(a) of this Section 3.10.

###  

# **Article IV**

# ** **

# **TheDepositor**

# ** **

## **Section 4.1.**                                **Representations and Warranties of the Depositor**.

##  

The Depositor makes the following representations andwarranties on which the Trust shall be deemed to have relied in accepting theTrust Property.  The representations andwarranties speak as of the execution and delivery of this Agreement and as ofeach Additional Contract Purchase Date and shall survive the sale, transfer,assignment and conveyance of the Trust Property to the Trust pursuant to thisAgreement and the pledge of the Trust Property to the Indenture Trusteepursuant to the Indenture:

 

### (a)                                  Organizationand Good Standing.  The Depositor hasbeen duly organized and is validly existing as a corporation in good standingunder the laws of the State of Delaware, has the power, authority and legalright to own its properties and to conduct its business as such properties arecurrently owned and such business is currently conducted, and has the power,authority and legal right to acquire, own and sell the Contracts.

###  

### (b)                                 DueQualification.  The Depositor is dulyqualified to do business as a foreign corporation in good standing and hasobtained all necessary licenses and approvals in each jurisdiction in which thefailure to so qualify or to obtain such licenses and approvals would, in thereasonable judgment of the Depositor, materially and adversely affect theperformance by the Depositor of its obligations under, or the validity orenforceability of, this Agreement, the Indenture, the Trust Agreement, any ofthe other Transaction Documents, the Contracts or the Notes.

###  

### (c)                                  Powerand Authority.  The Depositor has thepower and authority to execute, deliver and perform its obligations under thisAgreement and the other Transaction Documents to which it is a party.  The Depositor has the power and authority tosell, assign, transfer and convey the property to be transferred to anddeposited with the Trust and has duly authorized such transfer and deposit byall necessary corporate action, and the execution, delivery and performance ofthis Agreement and the other Transaction Documents to which the Depositor is aparty have been duly authorized by the Depositor by all necessary corporateaction.

###  

### (d)                                 ValidTransfer; Binding Obligation.  ThisAgreement effects a valid sale, transfer, assignment and conveyance to theTrust of the Contracts and the other Trust Property enforceable againstcreditors of and purchasers from the Depositor. This Agreement and the other Transaction Documents to which theDepositor is a party constitute legal, valid and binding obligations of theDepositor, enforceable against the Depositor in accordance with their terms,

 

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### subject, as to enforceability, to applicable bankruptcy, insolvency,reorganization, conservatorship, receivership, liquidation and other similarlaws and to general equitable principles.

###  

### (e)                                  NoViolation.  The execution, deliveryand performance by the Depositor of this Agreement and the other TransactionDocuments to which the Depositor is a party, the consummation of thetransactions contemplated hereby and thereby and the fulfillment of the termshereof and thereof will not conflict with, result in a breach of any of theterms and provisions of or constitute (with or without notice or lapse of timeor both) a default under the certificate of incorporation or by-laws of theDepositor or any material indenture, agreement, mortgage, deed of trust orother instrument to which the Depositor is a party or by which the Depositor isbound or to which any of its properties are subject, or result in the creationor imposition of any lien upon any of its properties pursuant to the terms ofany such indenture, agreement, mortgage, deed of trust or other instrument(other than pursuant to this Agreement), or violate any law, order, rule orregulation applicable to the Depositor or its properties of any federal orstate regulatory body, court, administrative agency or other governmentalinstrumentality having jurisdiction over the Depositor or any of itsproperties.

###  

### (f)                                    NoProceedings.  There are no proceedingsor investigations pending, or, to the knowledge of the Depositor, threatened,against the Depositor before any court, regulatory body, administrative agencyor other tribunal or governmental instrumentality having jurisdiction over theDepositor or its properties (i) asserting the invalidity of thisAgreement, the Indenture, the Trust Agreement, any of the other TransactionDocuments to which the Depositor is a party, or the Notes, (ii) seeking toprevent the issuance of the Notes or the consummation of any of thetransactions contemplated by this Agreement, the Indenture, the Trust Agreementor any of the other Transaction Documents to which the Depositor is a party, (iii) seekingany determination or ruling that, in the reasonable judgment of the Depositor,would materially and adversely affect the performance by the Depositor of itsobligations under, or the validity or enforceability of, this Agreement, theIndenture, the Trust Agreement, any of the other Transaction Documents to whichthe Depositor is a party, the Contracts or the Notes, or (iv) that, in thereasonable judgment of the Depositor, would adversely affect the federal orApplicable Tax State income, excise, franchise or similar tax attributes of theNotes or the Trust.

###  

## **Section 4.2.**                                **Liability of Depositor; Indemnities**.

##  

### (a)                                  TheDepositor shall be liable in accordance herewith only to the extent of theobligations specifically undertaken by the Depositor under this Agreement.

###  

### (b)                                 Notwithstandingany other provision in any Transaction Document, the Depositor shall indemnify,defend and hold harmless the Trust, the Owner Trustee in its individualcapacity and the Indenture Trustee from and against any taxes that may at anytime be asserted against any such Person with respect to, and as of the dateof, the transfer of the Contracts and Additional Contracts to the Trust or theissuance and original sale of the Notes, including any sales, gross receipts,general corporation, tangible personal property, privilege or license taxes(but, in the case of the Trust, not including any taxes asserted with respectto ownership of the Contracts and Additional Contracts or federal or otherApplicable Tax State income taxes arising

 

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### out of the transactions contemplated by this Agreement and the otherTransaction Documents), and all costs and expenses in defending against suchtaxes.

###  

### (c)                                  Notwithstandingany other provision in any Transaction Document, the Depositor shall indemnify,defend and hold harmless the Trust, the Owner Trustee in its individualcapacity, the Indenture Trustee and the Noteholders from and against any loss,liability or expense incurred by reason of (i) the Depositor’s willfulmisfeasance, bad faith or negligence in the performance of its duties underthis Agreement or any other Transaction Document to which it is a party or byreason of a reckless disregard of its obligations and duties under thisAgreement or any other Transaction Document to which it is a party and (ii) theDepositor’s violation of federal or state securities laws in connection withthe registration or the sale of the Notes and (iii) any action taken, orfailed to be taken, by the Depositor in respect of any portion of the TrustProperty.

###  

### (d)                                 Notwithstandingany other provision in any Transaction Document, the Depositor shall indemnify,defend and hold harmless the Owner Trustee in its individual capacity and theIndenture Trustee and their respective officers, directors, employees andagents from and against all costs, expenses, unpaid fees, losses, claims,damages and liabilities arising out of or incurred in connection with theacceptance or performance of the trusts and duties contained herein and in theTrust Agreement, in the case of the Owner Trustee, and in the Indenture, in thecase of the Indenture Trustee, except to the extent that such cost, expense,loss, claim, damage or liability (i) shall be due to the willfulmisfeasance, bad faith or gross negligence (except for errors in judgment) ofthe Owner Trustee or the Indenture Trustee, as applicable, (ii) in thecase of the Owner Trustee, shall arise from the breach by the Owner Trustee ofany of its representations or warranties in its individual capacity set forthin the Trust Agreement, (iii) in the case of the Indenture Trustee, shallarise from the breach by the Indenture Trustee of any of its representationsand warranties set forth in the Indenture or (iv) relates to any tax otherthan the taxes with respect to which either the Depositor or the Servicer shallbe required to indemnify the Owner Trustee or the Indenture Trustee, asapplicable.

###  

### (e)                                  TheDepositor shall pay any and all taxes levied or assessed upon all or any partof the Owner Trust Estate.

###  

Indemnification under this Section 4.2shall survive the resignation or removal of the Owner Trustee or the IndentureTrustee and the termination of this Agreement and shall include reasonable feesand expenses of counsel and expenses of litigation.  If the Depositor shall have made anyindemnity payments pursuant to this Section 4.2 and the Person toor on behalf of whom such payments are made thereafter shall collect any ofsuch amounts from others, such Person shall promptly repay such amounts to theDepositor, without interest.

 

## **Section 4.3.**                                **Merger or Consolidation of, or Assumption of theObligations of, Depositor**.

##  

Any Person (a) into which the Depositor shall bemerged or consolidated, (b) resulting from any merger, conversion orconsolidation to which the Depositor shall be a party or (c) that shallsucceed by purchase and assumption to all or substantially all of the businessof the Depositor, which Person in any of the foregoing cases executes anagreement of assumption to

 

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perform every obligation of the Depositor under thisAgreement, shall be the successor to the Depositor under this Agreement withoutthe execution or filing of any other document or any further act on the part ofany of the parties to this Agreement; provided, however, that (i) theDepositor shall have delivered to the Owner Trustee and the Indenture Trusteean Officer’s Certificate and an Opinion of Counsel each stating that suchmerger, conversion, consolidation or succession and such agreement ofassumption comply with this Section 4.3 and (ii) the Depositorshall have delivered to the Owner Trustee and the Indenture Trustee an Opinionof Counsel either (A) stating that, in the opinion of such counsel, allfinancing statements and continuation statements and amendments thereto have beenauthorized and filed that are necessary to fully preserve and protect theinterest of the Trust and the Indenture Trustee, respectively, in the Contractsand the other Trust Property, and reciting the details of such filings, or (B) statingthat, in the opinion of such counsel, no such action shall be necessary tofully preserve and protect such interest. The Depositor shall provide notice of any merger, conversion,consolidation or succession pursuant to this Section 4.3 to theRating Agencies.  Notwithstandinganything herein to the contrary, the execution of the foregoing agreement ofassumption and compliance with clauses (i) and (ii) above shall beconditions to the consummation of the transactions referred to in clauses (a), (b) and(c) above.

 

## **Section 4.4.**                                **Limitation on Liability of Depositor and Others**.

##  

### (a)                                  Neitherthe Depositor nor any of the directors, officers, employees or agents of theDepositor shall be under any liability to the Trust or the Noteholders for anyaction taken or for refraining from the taking of any action pursuant to thisAgreement or for errors in judgment; provided, however, that thisprovision shall not protect the Depositor or any such Person against anyliability that would otherwise be imposed by reason of willful misfeasance orbad faith in the performance of duties or by reason of reckless disregard ofobligations and duties under this Agreement, or by reason of negligence in theperformance of duties under this Agreement (except for errors in judgment).  The Depositor, and its directors, officers,employees and agents, may rely in good faith on the advice of counsel or on anydocument of any kind primafacie properly executed and submittedby any Person in respect of any matters arising under this Agreement.

###  

### (b)                                 TheDepositor shall not be under any obligation to appear in, prosecute or defendany legal action that shall not be incidental to its obligations under thisAgreement and that in its opinion may involve it in any expense or liability.

###  

## **Section 4.5.**                                **DepositorMay Own Class A Notes**.

##  

The Depositor, and any Affiliate of the Depositor,may, in its individual or any other capacity, become the owner or pledgee of Class ANotes with the same rights as it would have if it were not the Depositor or anAffiliate of the Depositor, except as otherwise expressly provided herein(including in the definition of Class A Note Balance) or in the otherTransaction Documents.  Except asotherwise expressly provided herein (including the definition of Class ANote Balance) or in the other Transaction Documents, Class A Notes soowned by or pledged to the Depositor or such Affiliate shall have an equal andproportionate benefit under the provisions of this Agreement and the otherTransaction Documents, without preference, priority or distinction as among theClass A Notes.

 

41

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## **Section 4.6.**                                **Covenants of the Depositor**.

##  

TheDepositor hereby covenants and agree that, so long as any Note is outstanding,it shall:

 

### (a)                                  not commingle its assetswith those of any other Person;

###  

### (b)                                 maintainseparate records, financial statements and books of account from those of anyother Person;

###  

### (c)                                  holdmeetings as appropriate to authorize all action on behalf of the Depositor andobserve all of its other organizational formalities;

###  

### (d)                                 notbecome involved in the day to day management of any other Person;

###  

### (e)                                  operateso as not to be substantively consolidated with any other Person;

###  

### (f)                                    maintainits assets separately from any other Person (including through the maintenanceof a separate bank account);

###  

### (g)                                 holditself out as a separate entity from any other Person, shall conduct businessin its own name on its own stationary, invoices and checks, and shall correctany known misunderstanding regarding its separate identity;

###  

### (h)                                 exceptas is expressly set forth in the Administration Agreement, pay from its assetsall obligations and indebtedness of any kind incurred by it, and shall not payfrom its assets any obligations or indebtedness of any other Person;

###  

### (i)                                     paysalaries of its employees, if any, from its own funds, and fairly allocate anyexpenses shared with an Affiliate;

###  

### (j)                                     notguarantee or become obligated for the debts of any other Person or hold out itscredit as being available to satisfy the obligations of others;

###  

### (k)                                  notacquire obligations or securities of its members or its Affiliates;

###  

### (l)                                     allocatefairly and reasonably any overhead for shared office space;

###  

### (m)                               maintainadequate capital and a sufficient number of employees (which may be zero) inlight of its contemplated business activities; and

###  

### (n)                                 insurethat any financial transaction between the Depositor and any of its Affiliatesbe on arm’s length, commercially reasonable terms.

 

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# **Article V**

# ** **

# **Miscellaneous**

# ** **

## **Section 5.1.**                                **Amendment**.

##  

### (a)                                  ThisAgreement may be amended from time to time by the Seller, the Servicer, theDepositor and the Trust, with the consent of the Indenture Trustee and theInsurer (provided that no Insurer Default shall have occurred and becontinuing), but without the consent of any of the Noteholders, to cure anyambiguity, to correct or supplement any provision in this Agreement that may beinconsistent with any other provisions in this Agreement or any offering documentused in connection with the initial offer and sale of the Notes or to add,change or eliminate any other provisions with respect to matters or questionsarising under this Agreement that are not inconsistent with the provisions ofthis Agreement; provided, however, that such amendment shall not,as evidenced by an Opinion of Counsel, which may be based on an Officer’sCertificate of the Seller, the Servicer, the Depositor or the Trust deliveredto the Owner Trustee, the Indenture Trustee and the Insurer, materially andadversely affect the interests of any Noteholder.  Any such amendment shall be deemed not tomaterially and adversely affect the interests of any Noteholder if the RatingAgency Condition is satisfied or the Person requesting the amendment obtains anOpinion of Counsel satisfactory to the Indenture Trustee and the Owner Trusteeto that effect.

###  

### (b)                                 ThisAgreement may also be amended from time to time by the Seller, the Servicer,the Depositor, the Trust and the Insurer (provided that no Insurer Defaultshall have occurred and be continuing and if so, provided further that suchamendment shall not have a material adverse effect on the Insurer), with theconsent of the Indenture Trustee and the Holders of Notes evidencing not lessthan 51% of the Class A Note Balance, for the purpose of adding anyprovisions to or changing in any manner or eliminating any of the provisions ofthis Agreement, or of modifying in any manner the rights of the Noteholders; provided,however, that no such amendment shall (i) increase or reduce in anymanner the amount of, or accelerate or delay the timing of, or change theallocation or priority of, collections on or in respect of the Contracts ordistributions that are required to be made for the benefit of the Noteholdersor change the Note Rate of any Class of Class A Notes, or theRequired Reserve Account Amount, without the consent of all adversely affectedNoteholders (ii) reduce the percentage required to consent to any suchamendment, without the consent of all adversely affected Noteholders or (iii) adverselyaffect the rating of the Notes by the Rating Agencies without the consent ofthe Holders of Notes evidencing not less than 66-2/3% of the Class A NoteBalance.

###  

### (c)                                  Priorto the execution of any amendment or consent pursuant to Section 5.1(b),the Servicer shall provide written notification of the substance of suchamendment or consent to each Rating Agency and the Insurer.

###  

### (d)                                 Promptlyafter the execution of any amendment or consent pursuant to Section 5.1(b),the Trust shall furnish written notification of the substance of such amendmentor consent to the Indenture Trustee and each of the Rating Agencies.  It shall not be necessary for the consent ofthe Noteholders pursuant to Section 5.1(b) to approve theparticular form of any proposed amendment or consent, but it shall besufficient if such consent shall approve the

 

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### substance thereof.  The manner ofobtaining such consents (and any other consents of the Noteholders provided forin this Agreement) and of evidencing the authorization of the execution thereofby the Noteholders shall be subject to such reasonable requirements as theOwner Trustee and the Indenture Trustee may prescribe.

###  

### (e)                                  Priorto the execution of any amendment pursuant to this Section 5.1, theOwner Trustee and the Indenture Trustee shall be entitled to receive and relyupon (i) an Opinion of Counsel stating that the execution of suchamendment (A) is authorized or permitted by this Agreement, (B) willnot materially adversely affect the federal or any Applicable Tax State incomeor franchise taxation of any Outstanding Note or any Holder thereof and (C) willnot cause the Trust to be taxable as a corporation for federal or any ApplicableTax State income or franchise tax purposes and (ii) an Officer’sCertificate of the Servicer that all conditions precedent provided for in thisAgreement to the execution of such amendment have been complied with.  The Owner Trustee or the Indenture Trusteemay, but shall not be obligated to, enter into any such amendment which affectssuch Owner Trustee’s or Indenture Trustee’s own rights, duties or immunitiesunder this Agreement or otherwise.

###  

## **Section 5.2.**                                **Protection of Title of Trust**.

##  

### (a)                                  TheDepositor or the Servicer, or both, shall authorize and file such financingstatements and cause to be authorized and filed such continuation statements,all in such manner and in such places as may be required by law fully topreserve, maintain and protect the interest of the Trust and the IndentureTrustee for the benefit of the Noteholders and the Insurer in the Contracts andthe proceeds thereof.  The Depositor orthe Servicer, or both, shall deliver (or cause to be delivered) to the OwnerTrustee and the Indenture Trustee file-stamped copies of, or filing receiptsfor, any document filed as provided above as soon as available following suchfiling.

###  

### (b)                                 TheDepositor shall not change (i) its name, identity or corporate structurein any manner that would make any financing statement or continuation statementfiled against the Depositor by the Depositor or the Servicer in accordance withSection 5.2(a) seriously misleading within the meaning of Section 9-507of the Relevant UCC or (ii) its jurisdiction of organization, unless, ineach case, it shall have given the Owner Trustee and the Indenture Trustee atleast sixty (60) days’ prior written notice thereof and shall have promptlyfiled such amendments to previously filed financing statements or continuationstatements or such new financing statements as may be necessary to continue theperfection of the interest of the Trust and the Indenture Trustee for thebenefit of the Noteholders and the Insurer in the Contracts and the proceedsthereof.

###  

### (c)                                  TheDepositor and the Servicer shall give the Owner Trustee and the IndentureTrustee at least sixty (60) days’ prior written notice of any relocation of itsprincipal executive office or change of its jurisdiction of formation and shallpromptly file any such amendment, continuation statement or any new financingstatement.  The Servicer shall at alltimes maintain each office from which it shall service Contracts, and itsprincipal executive office, within the United States of America.

 

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### (d)                                 TheServicer shall maintain accounts and records as to each Contract accurately andin sufficient detail to permit (i) the reader thereof to know at any timethe status of such Contract, including payments and recoveries made and paymentsowing (and the nature of each) and (ii) reconciliation between payments orrecoveries on (or with respect to) each Contract and the amounts from time totime deposited in the Collection Account and the Reserve Account in respect ofsuch Contract.

###  

### (e)                                  TheServicer shall maintain its computer systems so that, from and after the timeof the transfer of the Contracts to the Trust pursuant to this Agreement, theServicer’s master computer records (including any back-up archives) that referto a Contract shall indicate clearly the interest of the Trust and theIndenture Trustee in such Contract and that such Contract is owned by the Trustand has been pledged to the Indenture Trustee pursuant to the Indenture.  Indication of the Trust’s and the Indenture Trustee’sinterest in a Contract shall be deleted from or modified on the Servicer’scomputer systems when, and only when, such Contract shall have been paid infull or repurchased by the Depositor or purchased by the Servicer.

###  

### (f)                                    Ifat any time the Depositor or the Servicer shall propose to sell, grant asecurity interest in or otherwise transfer any interest in any motor vehicleretail installment sale contract or security interest and promissory note toany prospective purchaser, lender or other transferee, the Servicer shall giveto such prospective purchaser, lender or other transferee computer tapes,compact disks, records or print-outs (including any restored from back-uparchives) that, if they shall refer in any manner whatsoever to any Contract, shallindicate clearly that such Contract has been sold and is owned by the Trust andhas been pledged to the Indenture Trustee (unless such Contract has been paidin full or repurchased by the Depositor or purchased by the Servicer).

###  

### (g)                                 TheServicer shall permit the Owner Trustee, the Indenture Trustee and theirrespective agents at any time during normal business hours to inspect, auditand make copies of and abstracts from the Servicer’s records regarding anyContract.

###  

### (h)                                 Uponrequest, the Servicer shall furnish to the Owner Trustee and the IndentureTrustee, within ten (10) Business Days, a list of all Contracts (bycontract number and name of Obligor) then held as part of the Trust, togetherwith a reconciliation of such list to the Contract Schedule and to each ofthe Monthly Servicer Reports furnished before such request indicating removalof Contracts from the Trust.

###  

### (i)                                     TheServicer shall deliver to the Owner Trustee and the Indenture Trustee:

###  

#### (i)                                     promptlyafter the execution and delivery of each amendment to any financing statement,an Opinion of Counsel either (A) stating that, in the opinion of suchCounsel, all financing statements and continuation statements have beenauthorized and filed that are necessary fully to preserve and protect the interestof the Trust and the Indenture Trustee in the Contracts, and reciting thedetails of such filings or referring to prior Opinions of Counsel in which suchdetails are given, or (B) stating that, in the opinion of such Counsel, nosuch action shall be necessary to preserve and protect such interest; and

 

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#### (ii)                                  withinninety (90) days after the beginning of each calendar year (beginning with theyear 2006), an Opinion of Counsel, dated as of a date during such 90-dayperiod, either (A) stating that, in the opinion of such counsel, allfinancing statements and continuation statements have been authorized and filedthat are necessary fully to preserve and protect the interest of the Trust andthe Indenture Trustee in the Contracts, and reciting the details of suchfilings or referring to prior Opinions of Counsel in which such details aregiven, or (B) stating that, in the opinion of such counsel, no such actionshall be necessary to preserve and protect such interest.

####  

Each Opinion of Counsel referred to in clause (i)(A) or(i)(B) above shall specify any action necessary (as of the date of suchopinion) to be taken in the following year to preserve and protect suchinterest.

 

## **Section 5.3.**                                **GoverningLaw**.

##  

This Agreement shall be construed in accordance withthe laws of the State of New York, without reference to its conflict of lawprovisions, and the obligations, rights and remedies of the parties under thisAgreement shall be determined in accordance with such laws.

 

## **Section 5.4.**                                **Notices**.

##  

All demands, notices and other communications underthis Agreement shall be in writing, personally delivered, sent by telecopier,overnight courier or mailed by certified mail, return receipt requested, andshall be deemed to have been duly given upon receipt (a) in the case ofthe Seller, at the following address: 675 Bering Drive, Suite 710,Houston, Texas 77057 Attention: Bennie Duck, (b) in the case of theDepositor, at the following address: 675 Bering Drive, Suite 710, Houston,Texas 77057 Attention: Bennie Duck, (c) in the case of the Servicer, atthe following address: 675 Bering Drive, Suite 710, Houston, Texas 77057,Attention: Bennie Duck, (d) in the case of the Owner Trustee, at therelated Corporate Trust Office, (e) in the case of the Indenture Trustee,at the related Corporate Trust Office, (f) in the case of Moody’s, at thefollowing address: Moody’s Investors Service, Inc., 99 Church Street, 4thFloor, New York, New York 10007, ServicerReports@moodys.com, Attn: Yan Yan,with an additional copy to Moody’s Investors Service, Inc., 99 ChurchStreet, 4th Floor, New York, New York 10007, Attn: ABS Monitoring Department,and (g) in the case of S&P, if available electronically, atServicer_reports@sandp.com, and if not available electronically, at thefollowing address: Standard & Poor’s Ratings Services, a division ofThe McGraw-Hill Companies, Inc., 55 Water Street, 43rd Floor, New York,New York 10041, Attention: ABS Surveillance Group, and (h) in the case ofthe Insurer, at the following address: MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504,Attention: Insured Portfolio Management, Structured Finance.

 

## **Section 5.5.**                                **Severability of Provisions**.

##  

If any one or more of the covenants, agreements,provisions or terms of this Agreement shall be for any reason whatsoever heldinvalid, then such covenants, agreements, provisions or terms shall be deemedseverable from the remaining covenants, agreements, provisions or terms of thisAgreement and shall in no way affect the validity or enforceability of theother provisions of this Agreement, or of the Notes, or the rights of theHolders thereof.

 

46

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## **Section 5.6.**                                **Assignment**.

##  

Notwithstanding anything to the contrary containedherein this Agreement may not be assigned by the Depositor or the Servicerwithout the prior written consent of the Trust, the Indenture Trustee and theHolders of Notes evidencing not less than 66-2/3% of the Class A NoteBalance.

 

## **Section 5.7.**                                **Further Assurances**.

##  

The Depositor and the Servicer agree to do andperform, from time to time, any and all acts and to execute any and all furtherinstruments required or reasonably requested by the Owner Trustee or theIndenture Trustee more fully to effect the purposes of this Agreement,including, without limitation, the execution of any financing statements orcontinuation statements relating to the Contracts for filing under theprovisions of the Relevant UCC of any applicable jurisdiction.

 

## **Section 5.8.**                                **No Waiver; Cumulative Remedies**.

##  

No failure to exercise and no delay in exercising, onthe part of the Owner Trustee, the Indenture Trustee, the Insurer or theNoteholders, any right, remedy, power or privilege hereunder, shall operate as awaiver thereof, nor shall any single or partial exercise of any right, remedy,power or privilege hereunder preclude any other or further exercise thereof orthe exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privilegesprovided in this Agreement are cumulative and not exhaustive of any rights,remedies, powers and privileges provided by law.

 

## **Section 5.9.**                                **Third-Party Beneficiaries**.

##  

This Agreement shall inure to the benefit of and bebinding upon the parties hereto, the Noteholders and their respectivesuccessors and permitted assigns.  Exceptas otherwise provided in Section 4.2 and this Article V,no other Person shall have any right or obligation hereunder.  The parties hereto hereby acknowledge andconsent to the pledge of this Agreement by the Trust to the Indenture Trusteefor the benefit of the Noteholders and the Insurer pursuant to theIndenture.  The Insurer is an expressthird party beneficiary of this Agreement and is entitled to enforce theprovisions hereof as if a party hereto.

 

## **Section 5.10.**                         **Actions by Noteholders**.

##  

### (a)                                  Whereverin this Agreement a provision is made that an action may be taken or a notice,demand or instruction given by the Noteholders, such action, notice orinstruction may be taken or given by any Noteholder, as applicable, unless suchprovision requires a specific percentage of the Noteholders.

###  

### (b)                                 Anyrequest, demand, authorization, direction, notice, consent, waiver or other actby a Noteholder shall bind such Noteholder and every subsequent Holder of suchNote issued upon the registration of transfer thereof or in exchange thereforor in lieu thereof in respect of anything done or omitted to be done by theOwner Trustee, the Indenture Trustee or the Servicer in reliance thereon,whether or not notation of such action is made upon such Note.

 

47

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## **Section 5.11.**                         **Counterparts**.

##  

For the purpose of facilitating the execution of thisAgreement and for other purposes, this Agreement may be executed simultaneouslyin any number of counterparts, each of which counterparts shall be deemed to bean original, and all of which counterparts shall constitute but one and thesame instrument.

 

## **Section 5.12.**                         **[Reserved]**.

##  

## **Section 5.13.**                         **No Bankruptcy**.

##  

### (a)                                  TheOwner Trustee, the Indenture Trustee and the Servicer each covenants and agreesthat, prior to the date which is one year and one day after the payment in fullof all securities issued by the Trust, which securities were rated by anynationally recognized statistical rating organization, it will not instituteagainst, or join any other Person in instituting against, or knowingly orintentionally cooperate or encourage any other Person in instituting against,the Depositor any bankruptcy, reorganization, arrangement, insolvency orliquidation proceedings or other proceedings under any federal or statebankruptcy or similar law.

###  

### (b)                                 TheOwner Trustee, the Indenture Trustee, the Servicer and the Depositor eachcovenants and agrees that, prior to the date which is one year and one dayafter the payment in full of all securities issued by the Trust, whichsecurities were rated by any nationally recognized statistical ratingorganization, it will not institute against, or join any other Person in institutingagainst, or knowingly or intentionally cooperate or encourage any other Personin instituting against, the Trust any bankruptcy, reorganization, arrangement,insolvency or liquidation proceedings or other proceedings under any federal orstate bankruptcy or similar law.

###  

### (c)                                  ThisSection 5.13 shall survive the resignation or removal of the OwnerTrustee under the Trust Agreement and the Indenture Trustee under the Indentureand shall survive the termination of the Trust Agreement and the Indenture.

###  

## **Section 5.14.**                         **Limitation of Liability of Owner Trustee andIndenture Trustee**.

##  

### (a)                                  Notwithstandinganything contained herein or contemplated hereby to the contrary, thisAgreement has been signed by the Owner Trustee not in its individual capacitybut solely in its capacity as Owner Trustee of the Trust, and in no event shallthe Owner Trustee in its individual capacity have any liability for therepresentations, warranties, covenants, agreements or other obligations of theTrust hereunder or in any of the certificates, notices or agreements deliveredpursuant hereto or contemplated hereby, as to all of which recourse shall behad solely to the assets of the Trust. For all purposes of this Agreement, the Owner Trustee (as such and inits individual capacity) shall be subject to, and entitled to the benefits of,the terms and provisions of the Trust Agreement.

###  

### (b)                                 Notwithstandinganything contained herein to the contrary, this Agreement has been accepted bythe Indenture Trustee not in its individual capacity but solely as IndentureTrustee, and in no event shall the Indenture Trustee in its individual capacityhave any liability for the representations, warranties, covenants, agreementsor other obligations of the Trust

 

48

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### hereunder or in any of the certificates, notices or agreementsdelivered pursuant hereto, as to all of which recourse shall be had solely tothe assets of the Trust.

###  

## **Section 5.15.**                         **Certain Rights of the Insurer**.

##  

Solong as no Insurer Default shall have occurred and be continuing, the Insurershall have the right to exercise all rights, including voting rights, which theClass A Noteholders are entitled to exercise pursuant to this Sale andAllocation Agreement, without any consent of such Class A Noteholders; provided,however, that the foregoing shall not apply to the rights of the Class ANoteholders set forth in the proviso to paragraph (b) of Section 5.1of this Agreement.

 

## **Section 5.16.**                         **Optional Redemption.**

##  

If, asof the last day of any Collection Period, the Pool Balance is less than orequal to 15% of the sum of (a) the aggregate Principal Balances of all ofthe Contracts as of the Initial Cutoff Date and (b) the sum, for eachAdditional Contract Cutoff Date, of the Aggregate Principal Balances of allContracts that became Additional Contracts on such Additional Contract CutoffDate, the Depositor shall have the option to purchase from the Issuer, on thefollowing Payment Date, the Owner Trust Estate, other than the CollectionAccount, the Class A Note Payment Account, the Class B Note PaymentAccount, the Prefunding Account and the Reserve Account.  To exercise such option, the Depositor shallnotify in writing the Owner Trustee, the Indenture Trustee, the Issuer and theInsurer no later than fifteen (15) days prior to the Payment Date on which suchrepurchase is to be effected (the “*Prepayment Date*”)and shall deposit into the Collection Account on the Business Day precedingsuch Payment Date an amount equal to the aggregate Purchase Amount for theContracts, plus the appraised value of any other Trust Property, otherthan the Collection Account, the Class A Note Payment Account, the Class BNote Payment Account, the Prefunding Account or the Reserve Account, such valueto be determined by an appraiser mutually agreed upon by the Servicer, theTrust, the Indenture Trustee and the Insurer; provided, however,that the Depositor shall not be permitted to exercise such option unless theamount to be deposited in the Collection Account pursuant to this Section 5.16plus all amounts on deposit in the Collection Account, the Class A NotePayment Account, the Class B Note Payment Account, the Prefunding Accountand the Reserve Account are at least equal to the sum of the Class A NoteBalance and the Class B Note Balance plus all accrued but unpaid interest(including any overdue interest) on each Class of Class A Notes plusall amounts due the Insurer under the Insurance Agreement and the Policy plusall amounts due to the Owner Trustee, the Indenture Trustee, the Custodian, theServicer and the Back-up Servicer under the Transaction Documents (the “RedemptionPrice”).  Such amount shall be paidin accordance with Section 3.5(d). Such payment amount, plus, to the extent necessary, all amounts in the CollectionAccount, the Class A Note Payment Account, the Class B Note PaymentAccount, the Prefunding Account and the Reserve Account, shall be used to makepayments in full to the Noteholders and the Insurer in the manner set forth in Article IIIof this Agreement.

 

## **Section 5.17.****                         Subordination**.

##  

Anyobligations of the Depositor under this Agreement are obligations solely of theDepositor and will not constitute a claim against the Depositor to the extentthat the Depositor does not have funds sufficient to make payment of suchobligations.  In furtherance of and notin

 

49

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derogation of theforegoing, each party to this Agreement, by entering into or accepting thisAgreement, acknowledges and agrees that it has no right, title or interest inor to the Other Assets of the Depositor. To the extent that, notwithstanding the agreements and provisionscontained in the preceding sentence, any party to this Agreement either (i) assertsan interest or claim to, or benefit from, Other Assets, or (ii) is deemedto have any such interest, claim to, or benefit in or from Other Assets,whether by operation of law, legal process, pursuant to applicable provisionsof insolvency laws or otherwise (including by virtue of Section 1111(b) ofthe Bankruptcy Code or any successor provision having similar effect under theBankruptcy Code), then such party further acknowledges and agrees that any suchinterest, claim or benefit in or from Other Assets is and will be expresslysubordinated to the indefeasible payment in full, which, under the terms of therelevant documents relating to the securitization or conveyance of such OtherAssets, are entitled to be paid from, entitled to the benefits of, or otherwisesecured by such Other Assets (whether or not any such entitlement or securityinterest is legally perfected or otherwise entitled to a priority ofdistributions or application under applicable law, including insolvency laws,and whether or not asserted against the Depositor), including the payment ofpost-petition interest on such other obligations and liabilities.  This subordination provision will be deemed asubordination provision within the meaning of Section 510(a) of theBankruptcy Code.  Each party to thisAgreement further acknowledges and agrees that no adequate remedy at law existsfor a breach of this Section 5.17and the terms of this Section 5.17 may be enforced by an action forspecific performance.  The provisions ofthis Section 5.17 will be for the third party benefit of thoseentitled to rely thereon and will survive the termination of this Agreement.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties hereto have causedthis Sale and Allocation Agreement to be duly executed by their respectiveofficers, thereunto duly authorized, all as of the day and year first abovewritten.

 
|   | FIRST INVESTORS  SERVICING  CORPORATION, as Servicer    |
|--------|---------------------------------------------------------|
|   |                                                    |
|   |                                                    |
|   | By:                                                     |   |
|   | Name:                                                   |   |
|   | Title:                                                  |   |
|   |                                                    |
|   |                                                    |
|   | FIRST INVESTORS  AUTO OWNER TRUST  2005-A               |
|   |                                                    |
|   | By:                                                     | WELLS FARGO  DELAWARE TRUST  COMPANY, not in its individual capacity  but solely as Owner Trustee |
|   |                                                    |
|   | By:                                                     |   |
|   | Name:                                                   |   |
|   | Title:                                                  |   |
|   |                                                    |
|   |                                                    |
|   | FIRST INVESTORS  AUTO FUNDING CORPORATION, as Depositor |
|   |                                                    |
|   |                                                    |
|   | By:                                                     |   |
|   | Name:                                                   |   |
|   | Title:                                                  |   |

 

 

Accepted and agreed:

 

WELLS FARGO BANK,NATIONAL ASSOCIATION,

not in its individualcapacity but solely as Indenture Trustee andSecurities Intermediary

 
| By:    |   |   |
|--------|--------|--------|
| Name:  |   |   |
| Title: |   |   |

 

----

 

Schedule 1

 

Contract Schedule

 

----

 

Schedule 2

 

Location of Contract Files

 

 

ABS Custody Vault

751 Kasota Avenue

MAC N9328-011

Minneapolis, MN 55414

 

----

 

Schedule 3

 

Perfection Representations, Warranties and Covenants

 

Inaddition to the representations, warranties and covenants contained in thisAgreement, the Depositor hereby represents, warrants, and covenants to theTrust as follows on the Closing Date and on each Additional Contract PurchaseDate on which the Trust purchases Contracts, in each case only with respect tothe Collateral sold to the Trust on the Closing Date or the relevant AdditionalContract Purchase Date, as applicable:

 

**General**

 

1.             TheAgreement creates a valid and continuing security interest (as defined in theRelevant UCC Section 9-102) in the Collateral in favor of the Trust, whichsecurity interest is prior to all other Liens, except as set forth below and isenforceable as such against creditors of and purchasers from and assignees ofthe Trust.

 

2.             EachContract constitutes “tangible chattel paper” and not “electronic chattel paper”within the meaning of the Relevant UCC Section 9-102.

 

3.             TheDepositor has taken or will take all steps necessary actions with respect tothe Contracts to perfect the security interest of the Trust in the Contracts .

 

**Creation**

 

1.             TheDepositor owns and has good and marketable title to the Collateral, free andclear of any Lien, claim or encumbrance of any Person, excepting only taxliens, some mechanics’ liens and other liens that arise by the operation oflaw, in each case on any of the Financed Vehicles and arising solely as aresult of an action or omission of the related Obligor.

 

**Perfection**

 

1.             TheDepositor has caused the filing of all appropriate financing statements in theproper filing office in the appropriate jurisdictions under applicable law inorder to perfect the security interest in the Collateral granted to the Trusthereunder.

 

2.             Withrespect to Collateral that constitutes tangible chattel paper, such tangiblechattel paper is in the possession of the Custodian.  All financing statements filed or to be filedagainst the Depositor in favor of the Trust in connection with this Agreementdescribing the Collateral contain a statement to the following effect: “Apurchase of or security interest in any collateral described in this financingstatement will violate the rights of the Secured Party.”

 

**Priority**

 

1.             Otherthan the security interest granted to the Trust pursuant to this Agreement, theDepositor has not pledged, assigned, sold, granted a security interest in, orotherwise conveyed

 

3-1

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any of theCollateral.  Neither the Seller nor theDepositor has authorized the filing of, or is aware of any financing statementsagainst either the Seller or the Depositor that includes a description of theCollateral and proceeds related thereto other than any financing statement:  (i) relating to the transfer of theContracts by the Seller to the Depositor under the Contribution Agreement; (ii) relatingto the sale of the Contracts by the Depositor to the Trust under thisAgreement; (iii) relating to the security interest granted to theIndenture Trustee by the Trust under the Indenture; or (iv) that has beenterminated or amended to reflect a release of the Collateral.

 

2.             Neitherthe Seller nor the Depositor is aware of any judgment, ERISA or tax lienfilings against either the Seller or the Depositor.

 

3.             Noneof the tangible chattel paper that constitutes or evidences the Contracts hasany marks or notations indicating that it has been pledged, assigned orotherwise conveyed to any Person other than the Depositor, the Trust or theIndenture Trustee.

 

**Survival of Perfection Representations**

 

1.             Notwithstandingany other provision of this Agreement, the Contribution Agreement, theIndenture or any other Transaction Document, the Perfection Representations,Warranties and Covenants contained in this Schedule shall be continuing,and remain in full force and effect until such time as all obligations underthis Sale and Allocation Agreement, the Contribution Agreement and theIndenture have been finally and fully paid and performed.

 

**No Waiver**

 

1.             Theparties hereto: (i) shall not, without obtaining a confirmation of thethen-current rating of the Class A Notes (without giving effect to thePolicy), waive any of the Perfection Representations, Warranties or Covenants; (ii) shallprovide the Rating Agencies with prompt written notice of any breach of thePerfection Representations, Warranties or Covenants, and shall not, withoutobtaining a confirmation of the then-current rating of the Class A Notes(without giving effect to the Policy) as determined after any adjustment orwithdrawal of the ratings following notice of such breach) waive a breach ofany of the Perfection Representations, Warranties or Covenants.

 

3-2

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Exhibit A

 

Form of Monthly Servicer Report

 

A-1

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Exhibit B

 

[Reserved]

 

B-1

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**Exhibit C**

 

**Credit Policy**

 

**INDIRECT UNDERWRITING GUIDELINES**

 

**1.****             Stability**

 

A.            Residence

 

1.             Theresidence information may be obtained from the credit application or dealer.Verification can be obtained from the credit bureau or a direct check (phoneverification), or other form of electronic \(Internet) verification, if needed.

2.             Fullamount of rent/mortgage will be used when calculating applicant’s debtratio.  Rent can be split under thefollowing circumstances:

a.             Leaseagreement is provided proving our applicant is not the only person on the lease(or verbal verification).

b.             Applicantcan provide proof that they are not liable for the mortgage payment (or verbalverification). (example: mortgage in spouse’s name only)

3.             Aminimum household allowance of $300.00 will be calculated for all applicantswho own their own home free and clear.

 

B.            Employment

 

1.             Allapplicants must have a one-year employment history at current job.  If less than one year on current job, theymust have been on their previous job for one year with no more than a 90 daygap.

2.             Self-employedapplicants must have been in business for at least 3 years.  All self-employed applicants must provideprevious two-year professionally prepared tax returns with all applicableschedules.  Only income on line 31 willbe counted.  On an as needed basis, wewill add depreciation from schedules C & E to line 31.  Tax returns must be approved by the CCO orFunding Manager.

3.             Allmilitary personnel must rank E-6 or above. E-5’s are accepted with a minimum of 5 years of service.

4.             Allemployment must be verified.  If thereare no POI exceptions in the file, we will waive employment verification on allPremier, Adv +, 1, and 2 deals.

5.             If POIhas been waived, only current employment will be verified regardless of time onjob.

 

----

 

6.             In thecase of married applicants, the residence and employment guidelines must applyto at least the applicant with the majority of the income.

 

**2.****             Income**

 

A.            $2,500gross monthly income.  Only income fromthe primary job will be accepted unless applicant has been employed on thesecondary job for at least one year and is verified.  Permanent sources of income (pension, socialsecurity, etc.) may be included as part of the minimum requirement.  Non-permanent sources of income such as childsupport and alimony should be included in the minimum income calculation if thecustomer can prove it is received on a monthly basis.  (example: 6 consecutive bank statements with child support deposits ordocumentation that it is paid through a state or local agency)

 

B.            Formarried applicants, at least one must make a minimum of $1,500  income with a household minimum of $2,500.

 

C.            Allsources and amounts of income included in the budget analysis must be verified(ADV 1,2,3,4)

 

D.            No POI isrequired on indirect loans Premier +, Adv 1, and Adv 2 deals unless thecustomer is self-employed.

 

E.             If selfemployed, POI can be waived on indirect loans, premier and  + tiers if the following conditions are met:

 

1.             Fiveyears or more self-employed (must be able to validate using bureau)

2.             Nobankruptcies, foreclosures, or repossessions within the past three years

3.             Musthave open auto paid as agreed for past 24 months or auto paid out within last 6months that was paid as agreed over last 24 months of loan.

4.             New loanpayment is not more than 25% greater than most recent paid auto

 

F.             Acceptablesources of income verification may included:

 

1.             Retirementincome – award letter, direct deposits or 1040.

2.             SocialSecurity – Award statement, direct deposit, or most recent W2.

3.             Alimony/childsupport – Current bank statement clearly identifying an alimony or childsupport deposit, a current stub or voucher from a state or local agency, or acopy of the divorce decree and recent bank statement with a deposit amount thatmatches court ordered amount.

4.             DisabilityIncome – must have a permanent disability and be verified by award letter orsettlement letter.

 

C-2

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5.             RentalIncome – schedule E from tax returns. Copy of lease is not sufficient to substantiate rental income.

6.             Checkstubs – Computer generated or typed which identifies the applicant by name orsocial security number and provides enough data to reasonably calculate theapplicant’s monthly income

7.             W-2statements are acceptable through March 31st of each year.

8.             Taxreturns – we will only accept tax returns on self employed applicants.  See previous page for details.

9.             Militarypersonnel must provide L.E.S. statement.

10.           Commissionedsales person with less than 3 months on the job with similar experience(selling the same type of product for another company). We should ask for acurrent paystub (current employer) and a copy of the YTD paystub or W2 from theprevious employer proving similar income. (This will be the income that we useto calculate the monthly income.) In some cases we may need the prior years1040’s. These would be required on people in Real Estate, Insurance Sales,etc.  These need to be reviewed by aFunding Supervisor/Manager or a Credit Manager prior to funding.

 

a.             Commissionedsales person with less than 3 months on the job, with no prior experience withthe type of product they are selling. These deals should be turned down. We have no way to estimate what type of commission they may or may notmake.  *The onlyexception to this rule is, if their base pay (before commission) is enoughfor them to still meet our debt ratio requirements*.

 

b.             Commissionedsales person with more than 3 months on the job, but the paystub we are lookingat is from January, February or the middle of March.  We should ask these people for a copy of theprior years W2 (which will give us a more accurate reflection of their truemonthly average.)

 

G.            Handwrittenstubs, paystubs without identifying information, and paystubs over 45 days oldare not acceptable (see exception authority list).  On all accepted forms of POI we should beaware of potential fraud and investigate irregularities.  Following are some things to look at on astub that may be indicators of fraud:

 

1)             Differentfonts or type settings

2)             Itemsthat don’t line up

3)             Limitedinformation on the paystub with questionable verifications.  (example: verification only available by cell phone)

4)             Unclearprint

5)             Math ongross/net calculations that does not make sense

 

H.            Applicantsthat receive income on a net (versus gross) basis, i.e., social security orpermanent disability, will have their monthly income grossed up by 125% to

 

C-3

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estimatea gross income figure. e.g.: $1,500 monthly social security income would equal$1,875 gross income ($1,500 x 125% - $1,875). This is used for debt ratiocalculation only.

 

I.              If anapplicant states on their credit application that they make $2500.00 or above,but when the contract comes in for funding, the income verifies for less than$2500.00 but more than $2400.00, we will honor the original approval, tier,advance, rate and term.  The Loan Officerwill be required to make a note in the file.

 

**3.****             DebtRatio**

 

**A.**

 
| ** **         | ** ** | **Tier**         | ** ** |
|--------------------|------------|------------------|------------|
| **Monthly Income** | ** ** | **VIP Discount** | ** ** | **Advantage 4** | ** ** | **Advantage 3** | ** ** | **Advantage 2** | ** ** | **Adv Prem,+, 1** | ** ** |
|               |       | DTI              |       | PTI |   | DTI |   | PTI |   | DTI |   | PTI |   | DTI |   | PTI |   | DTI |   | PTI |   |
| $2400-$4499        |       | 45               |       | 15 |   | 45 |   | 15 |   | 45 |   | 18 |   | 50 |   | 20 |   | 50 |   | 20 |   |
| $4500 or higher    |       | 45               |       | 15 |   | 45 |   | 20 |   | 50 |   | 20 |   | 55 |   | 20 |   | 55 |   | 20 |   |

 

B.            Itemsincluded in debt ratio:

 

1.             Mortgageor rental expense minimum of $300 including applicants that live withrelatives.

2.             Anyapplicants that resides in a mobile home will be charged an additional $150.00for lot rent.

3.             Allinstallment payments listed on credit bureaus and credit applications.

4.             Allrevolving payments listed on credit bureaus and credit applications.

5.             Childsupport or alimony payments.

6.             Anyjudgments, tax liens, student loans, I-9’s or R-9’s that are in repayment.

7.             Estimatedpayment(s) equal to 2% of the outstanding balance of I-9, R-9, and judgementstotaling more than $5000 that are less than 4 years old and are not included inbankruptcy unless in a non-garnishment state (TX, NC, SC, and PA).

8.             Estimatedpayment(s) equal to 2% of the outstanding balance of liens and I-5 and I-9rated student loans totaling more than $5000 that are less than 7 years old andare not included in bankruptcy.

9.             Physicaldamage insurance is $125.00 for all applicants.

10.           In theevent our verifications department verifies the down payment was paid by acredit card, our loan officer will re-calculate the debt ratio by taking 3% ofthe down payment and add it to the debt ratio screen.

11.           Studentloans that do not indicate a payment will be calculated at 1.5% to determinethe payment.

 

C-4

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C.            Itemsexcluded from debt ratio:

 

1.             Any debtwith less than 6 months remaining.

2.             Any I-4accounts that have not been updated in two years, the exception are mortgagesand car loans, which require a direct check.

3.             Collections,R5, I5 and any charge offs with no activity in the last 24 months.  These will be excluded in non-garnishmentstates (TX, NC, SC, and PA) regardless of age.

 

**4.****             MaximumLoan/Payment Amount**

 

A.            $50,000new or used on Premier, Adv +, and 1 with CEO/CFO approval.

 

B.            $40,000new or used on all others, exceptions above $40,000 allowed with CEO/CFOapproval

 

**5.****             CreditHistory**

 

A.            Allapplicants must have a credit file with either CSC, TRW or TU credit bureauagencies for at least two years. Positive credit activity with the last 48 months is required unless theapplicant has a discharged bankruptcy.

 

B.            Positivecredit activity (at least one good trade line) can be accepted if included inthe credit bureau file or obtained by a direct check with a bank or creditunion.  Note lot dealer in-house financecompany direct checks are not acceptable.

 

C.            All openinstallment accounts must be rated I-1 at the time of loan approval.

 

D.            Applicantscurrently enrolled in Consumer Credit Counseling Services (CCCS) must haveeither written or verbal verification confirming that at least 50% of therepayment schedule has been completed. All verbal verifications must be properly documented in the originationssystem.

 

E.             Nosecond units for individual applicants w/o CCO approval.No third units for married couples w/o CCO approval.  If either of the above is indicated, dealer must provide proof of trade orpayoff.

 

FOR APPLICANTS WITH CREDIT BUREAU SCORES OF 620+ TOQUALIFY UNDER 620 PREMIER PROGRAM:

 

F.             Minimumof 48 months in file

 

G.            Noinstallment loans more than 3 times 30 in the past 12 months

 

H.            Revolvingbalances must be less than $20,000

 

C-5

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I.              Revolvingbalances must be less than 20% of annual net income

 

J.             Musthave paid as agreed installment in the past 24 months

 

K.            Must haveless than 6 inquiries in the past 6 months (excluding the past 7 days fromapplication date).  All auto inquiriesthat occur within 7 days of one another will count as one.  The inquiry must clearly be an auto inquiry.  If the inquiry is not recognizable as adealer or lender, it is not assumed to be an auto inquiry.  If there are more than 3 groupings of autoinquiries within the past 6 months, the deal will not qualify under the 620Premier Program.

 

L.             Nocurrently past due accounts of any type.

 

**6.****             Bankruptcy**

 

A.            Allchapter 7 bankruptcies must be discharged or verified past date of creditorobjections with none filed. All Chapter 13 bankruptcies must be discharged orconfirmed completed and awaiting discharge. If Credit bureau does not indicatethe date of discharge, applicant must provide a copy of the discharge.

 

B.            Dismissedbankruptcies will not be considered until 12 months after the dismissal date.

 

**7.****             Repossessions**

 

A.            Repossessionsmust be 18 months old or have 12 months of paid as agreed auto credit since thedate of the most recent repossession, unless included in bankruptcy.

 

B.            Nomultiple repossessions.

 

**8.****             Foreclosures**

 

Allforeclosures must be included in bankruptcy. If not included in bankruptcy, mustbe three years old or have no deficiency balance.

 

**9.****             ChildSupport**

 

Allchild support obligations must be current.

 

**10.****          TaxLiens**

 

Alltax liens in excess of $5000 less than 7 years old must be released or inwritten repayment agreement with evidence that at least three payments havebeen made.  If unreleased tax liens totalmore than 20% of the applicants gross income; they must be

 

C-6

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treatedas an exception, regardless of repayment agreement.  No exceptions will be made if repayment ispast due.

 

**11.****          TaxLiabilities**

 

Selfemployed customers who show taxes owed on 2 years most recent tax returns willbe required to prove paid or in repayment if they exceed $5000 annually.  If total tax liabilities each year exceed 20%of applicant’s gross income; they must be treated as an exception and approvedby the CCO, regardless of repayment agreement.

 

**12.****          Judgments**

 

Allapplicants with judgments that exceed 20% of their gross annual income must bepaid or included in bankruptcy unless in a non-garnishment state (TX, NC, SC,and PA). If less than 20% see Debt Ratio C. Item 6.

 

**13.****          DownPayment**

 

Seecurrent pricing guide.

 

**14.****          HomePhone**

 

Allapplicants must have a verifiable home phone in their primary residence or cellphone.  Home phones must have beenpreviously installed.  New phonesinstalled solely for the purpose of obtaining an auto loan will not beaccepted.  Cell phones must be on amonthly or long term plan.  Pre-paid cellphones are not acceptable.  When a phonebill is required, there can not be a cut-off notice listed on the bill.  If a cut off notice is listed this will be afunding exception. Cell phones should be in the applicant’s name, spouse’sname, or part of a family plan.  Forverification of land lines and cell phones contacting the customer at thenumber or getting a voicemail or answering machine that clearly identifies ourcustomers is sufficient verification.

 

**15.****          Exceptions**

 

Thereare 3 levels of exceptions – Low, medium, and high.  Low-risk exceptions would be allowed on anunlimited basis.  2 lows are equal to 1medium and must be reviewed by someone with medium level authority (seeexception authority list).  High-riskexceptions would be limited to 1 per app/contract.  A combination of 1 medium risk and 1high-risk exception per app/contract would be acceptable.  A total of 3 exceptions or more must beapproved by someone with high level authority (see exception list).

 

•              Low-riskexceptions would be exceptions that do not impact advance, or the customer’sstability or ability to repay the loan.

 

C-7

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•              Medium-riskexceptions would be exceptions that have marginal impact on advance, or thecustomer’s stability or ability to repay the loan.

 

•              High-riskexceptions would be any exception that materially impacts advance, or thecustomer’s stability or ability to repay the loan.

 

**16.****          JointApplicants**

 

A.            Allapplicants of legal age will be given the same consideration when applyingjointly for an auto loan, regardless of marital status, shared last name,gender or prior joint credit history.

 

B.            Onelicensed driver is acceptable as long as there is no suspension or revocationof the other borrower’s license and there is only one open auto.

 

**17.****          OverridePolicy**

 

Lowside-  Any applicant that has a Custom Score below170Bk/170NBk core, 160Bk/160NBk Farragut or Beacon/Emperica/Fico score below530 can only be approved by the CCO.  Inorder to be approved, the applicant has to meet either the Credit Bureau Scoreor the Custom Score, but cannot fail both. These applicants will be priced at the lowest tier available on eitherthe Bk or the Non Bk scorecard.  Thesedeals will be limited to 5% of total monthly fundings and they will bemonitored in Asset Quality to insure adequate performance.

 

**18.****          MinimumBeacon / Empirica / Fico**

 

A.            **450** for VIP Discount deals.  Must have a prior BK to qualify.

 

B.            **530** for all other deals.

 

C.            **620 for 620 Premier Pricing Program**

 

**19.****          Advance**

 

A.            Seepricing guide for advance limits.

 

B.            FIFS willallow for cost of equipment added to new vehicles if the equipment is anallowable add in the NADA Guide, and the equipment has been verified with thecustomer.

 

**20.****          Vehicles**

 

A.            Onindirect loans, vehicles up to 5 model years old only.

 

B.            Novehicles that will be used for business will be financed.

 

C-8

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C.            Nocurrent model year vehicles with more than 30,000 miles will be accepted.

 
| **Miles**     | ** ** | **Advance** |
|---------------|------------|-------------|
| 1-6,000       |       |        | See current pricing guide |
| 6,001-15,000  |       |        | Reduce current pricing guide by 10% |
| 15,001-30,000 |       |        | Reduce current pricing guide by 15% |

 

D.            Terms

 

1.             Seecurrent rate sheets.

 

C-9

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**DIRECT UNDERWRITING GUIDELINES**

 

**4.****             Stability**

 

C.            Residence

 

4.             Theresidence information may be obtained from the credit application or dealer.Verification can be obtained from the credit bureau or a direct check (phoneverification), or other form of electronic (Internet) verification, if needed.

5.             **Full amount of rent/mortgage will be used when calculating applicant’sdebt ratio.  Rent can be split under thefollowing circumstances:**

**a.****             Leaseagreement is provided proving our applicant is not the only person on the lease(or verbal verification).**

**c.****             Applicantcan provide proof that they are not liable for the mortgage payment (or verbalverification). (example: mortgage in spouse’s name only)**

6.             Aminimum household allowance of $300.00 will be calculated for all applicantswho own their own home free and clear.

 

D.            Employment

 

7.             Allapplicants must have a one-year employment history at current job.  If less than one year on current job, theymust have been on their previous job for one year with no more than a 90 daygap.

8.             Self-employedapplicants must have been in business for at least 3 years.  All self-employed applicants must provideprevious two-year professionally prepared tax returns with all applicableschedules.  Only income on line 31 willbe counted.  On an as needed basis, wewill add depreciation from schedules C & E to line 31.  Tax returns must be approved by the CCO orFunding Manager.

9.             Allmilitary personnel must rank E-6 or above. E-5’s are accepted with a minimum of 5 years of service.

10.           Allemployment must be verified.  If thecustomer has more than 12 months on their job and there are no POI exceptionsin the file, we will waive employment verification on all Tier A and B.

11.           If POI hasbeen waived, only current employment will be verified regardless of time onjob.

12.           In thecase of married applicants, the residence and employment guidelines must applyto at least the applicant with the majority of the income.

 

C-10

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**5.****             Income**

 

E.             **$2,500 gross monthly income**. Only income from the primary job will be accepted unless applicant hasbeen employed on the secondary job for at least one year and is verified.  Permanent sources of income (pension, socialsecurity, etc.) may be included as part of the minimum requirement.  Non-permanent sources of income such as childsupport and alimony should be included in the minimum income calculation if thecustomer can prove it is received on a monthly basis.  (example: 6 consecutive bank statements with child support deposits ordocumentation that it is paid through a state or local agency)

 

F.             Formarried applicants, at least one must make a minimum of $1,500  income with a household minimum of $1,500.

 

G.            Allsources and amounts of income included in the budget analysis must be verified(Tier C & D)

 

H.            No POI isrequired on direct loan Tier A and Tier B deals unless the customer isself-employed.

 

**E.****             If selfemployed, POI can be waived on direct loan Tier A if the following conditionsare met:**

 

**1.****             Fiveyears or more self-employed (must be able to validate using bureau)**

**2.****             Nobankruptcies, foreclosures, or repossessions within the past three years**

**3.****             Musthave open auto paid as agreed for past 24 months or auto paid out within last 6months that was paid as agreed over last 24 months of loan.**

**4.****             Newloan payment is not more than 25% greater than most recent paid auto**

 

F.             OnFarragut Direct loans, spouses’ income will be used.  The spouse will be required to complete acredit application and provide acceptable proof of income, but will not berequired to sign the contract.

 

G.            Acceptablesources of income verification may included:

 

11.           Retirementincome – award letter, direct deposits or 1040.

**12.****          SocialSecurity – award statement, direct deposit, or most recent W2**

**13.****          Alimony/childsupport – Current bank statement clearly identifying an alimony or childsupport deposit, a current stub or voucher from a state or local agency, or acopy of the divorce decree and recent bank statement with a deposit amount thatmatches court ordered amount.**

 

C-11

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14.           DisabilityIncome – must have a permanent disability and be verified by award letter orsettlement letter.

15.           RentalIncome – schedule E from tax returns. Copy of lease is not sufficient to substantiate rental income.

**16.****          Checkstubs – computer generated or typed which must identify the applicant by nameor social security number and provides enough data to reasonably calculate theapplicant’s monthly income.**

17.           W-2statements are acceptable through March 31st of each year.

18.           Taxreturns – we will only accept tax returns on self employed applicants.  See previous page for details.

19.           Militarypersonnel must provide L.E.S. statement.

20.           Commissionedsales person with less than 3 months on the job with similar experience(selling the same type of product for another company). We should ask for acurrent paystub (current employer) and a copy of the YTD paystub or W2 from theprevious employer proving similar income. (This will be the income that we useto calculate the monthly income.) In some cases we may need the prior years1040’s. These would be required on people in Real Estate, Insurance Sales,etc.  These need to be reviewed by aFunding Supervisor/Manager or a Credit Manager prior to funding.

 

c.             Commissionedsales person with less than 3 months on the job, with no prior experience withthe type of product they are selling. These deals should be turned down. We have no way to estimate what type of commission they may or may notmake.  *The onlyexception to this rule is, if their base pay (before commission) is enoughfor them to still meet our debt ratio requirements*.

 

d.             Commissionedsales person with more than 3 months on the job, but the paystub we are lookingat is from January, February or the middle of March.  We should ask these people for a copy of theprior years W2 (which will give us a more accurate reflection of their truemonthly average.

 

**H.****            Handwrittenstubs, paystubs without identifying information, and paystubs over 45 days oldare not acceptable (see exception authority list).  On all accepted forms of POI we should beaware of potential fraud and investigate irregularities.  Following are some things to look at on a stubthat may be indicators of fraud:**

 

**1)****            Differentfonts or type settings**

**2)****            Itemsthat don’t line up**

**3)****            Limitedinformation on the paystub with questionable verifications. (example:verification only available by cell phone)**

**4)****            Unclearprint**

 

C-12

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**5)****            Math ongross/net calculations that don’t make sense**

 

**3.****             A.Debt Ratio**

 
| ** **      | ** ** | **Farr D Tier** | ** ** | **Farr C Tier** | ** ** | **Farr B Tier** | ** ** | **Farr A Tier** | ** ** |
|-----------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|-----------------|------------|
| Monthly Income  |       | DTI             |       | PTI             |       | DTI             |       | PTI             |       | DTI |   | PTI |   | DTI |   | PTI |   |
| $2400-$4499     |       | 45              |       | 20              |       | 50              |       | 20              |       | 50 |   | 20 |   | 50 |   | 20 |   |
| $4500 or higher |       | 45              |       | 20              |       | 50              |       | 20              |       | 55 |   | 20 |   | 55 |   | 20 |   |

 

**B.****            Add 10%to DTI cap above if application meets following three conditions:**

 

**1.****             Currentestimated or verified rate on the loan to be refinance is 16% or greater**

**2.****             Incomeof at least $2500 monthly**

**3.****             PTI of15% or less**

 

E.             Itemsincluded in debt ratio:

 

12.           Mortgageor rental expense minimum of $300 including applicants that live withrelatives.

13.           Anyapplicants that resides in a mobile home will be charged an additional $150.00for lot rent.

14.           Allinstallment payments listed on credit bureaus and credit applications.

15.           Allrevolving payments listed on credit bureaus and credit applications.

16.           Childsupport or alimony payments.

17.           Anyjudgments, tax liens, student loans, I-9’s or R-9’s that are in repayment.

18.           Estimatedpayment(s) equal to 2% of the outstanding balance of I-9, R-9, and judgementstotaling more than $5000 that are less than 4 years old and are not included inbankruptcy unless in a non-garnishment state (TX, NC, SC, and PA).

19.           Estimatedpayment(s) equal to 2% of the outstanding balance of liens and I-5 and I-9rated student loans totaling more than $5000 that are less than 7 years old andare not included in bankruptcy.

20.           Physicaldamage insurance is $125.00 for all applicants.

21.           In theevent our Verifax department verifies the down payment was paid by a creditcard, our loan officer will re-calculate the debt ratio by taking 3% of thedown payment and add it to the debt ratio screen.

22.           Studentloans that do not indicate a payment will be calculated at 1.5% to determinethe payment.

 

F.             Itemsexcluded from debt ratio:

 

21.           Any debtwith less than 6 months remaining.

 

C-13

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22.           Any I-4accounts that have not been updated in two years, the exception are mortgagesand car loans, which require a direct check.

23.           Collections,R5, I5 and any charge offs with no activity in the last 24 months.  These will be excluded in non-garnishmentstates (TX, NC, SC, and PA) regardless of age.

24.           MaximumLoan/Payment Amount

 

C.            $50,000new or used on Tier A & B with CEO/CFO approval.

 

D.            $40,000new or used on all others, exceptions above $40,000 allowed with CEO/CFOapproval

 

**25.****          CreditHistory**

 

F.             Allapplicants must have a credit file with either CSC, TRW or TU credit bureauagencies for at least two years. Positive credit activity with the last 48 months is required unless theapplicant has a discharged bankruptcy.

 

G.            Positivecredit activity (at least one good trade line) can be accepted if included inthe credit bureau file or obtained by a direct check with a bank or creditunion.  Note lot dealer in-house financecompany direct checks are not acceptable.

 

H.            All openinstallment accounts must be rated I-1 at the time of loan approval.

 

I.              Applicantscurrently enrolled in Consumer Credit Counseling Services (CCCS) must haveeither written or verbal verification confirming that at least 50% of therepayment schedule has been completed. All verbal verifications must be properly documented in the originationssystem.

 

J.             Secondunits for individuals and third units for married couples are acceptable ifthey are replacing an open auto.

 

K.            If theapplicant has a 620+ beacon score, there will be no minimum custom score.  The deal will score as a Tier A.

 

**26.****          Bankruptcy**

 

A.            Allchapter 7 bankruptcies must be discharged or verified past date of creditorobjections with none filed. All Chapter 13 bankruptcies must be discharged orconfirmed completed and awaiting discharge. If Credit bureau does not indicatethe date of discharge, applicant must provide a copy of the discharge.

 

B.            Dismissedbankruptcies will not be considered until 12 months after the dismissal date.

 

C-14

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**27.****          Repossessions**

 

C.            Repossessionsmust be 18 months old or have 12 months of paid as agreed auto credit since thedate of the most recent repossession, unless included in bankruptcy.

 

D.            Nomultiple repossessions.

 

**28.****          Foreclosures**

 

Allforeclosures must be included in bankruptcy. If not included in bankruptcy,must be three years old or have no deficiency balance.

 

**29.****          ChildSupport**

 

Allchild support obligations must be current.

 

**30.****          TaxLiens**

 

Alltax liens in excess of $5000 less than 7 years old must be released or inwritten repayment agreement with evidence that at least three payments havebeen made.  If unreleased tax liens totalmore than 20% of the applicants gross income; they must be treated as anexception, regardless of repayment agreement. No exceptions will be made if repayment is past due.

 

**31.****          TaxLiabilities**

 

Selfemployed customers who show taxes owed on 2 years most recent tax returns willbe required to prove paid or in repayment if they exceed $5000 annually.  If total tax liabilities each year exceed 20%of applicant’s gross income; they must be treated as an exception and approvedby the CCO, regardless of repayment agreement.

 

**32.****          Judgments**

 

Allapplicants with judgments that exceed 20% of their gross annual income must bepaid or included in bankruptcy unless in a non-garnishment state (TX, NC, SC,and PA). If less than 20% see Debt Ratio C. Item 6.

 

**33.****          DownPayment**

 

Seecurrent pricing guide.

 

**34.****          HomePhone**

 

Allapplicants must have a verifiable home phone in their primary residence or cellphone.  Home phones must have beenpreviously installed.  New phones installedsolely

 

C-15

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forthe purpose of obtaining an auto loan will not be accepted.  Cell phones must be on a monthly or long termplan.  Pre-paid cell phones are notacceptable.  When a phone bill is required,there can not be a cut-off notice listed on the bill.  If a cut off notice is listed this will be afunding exception. Cell phones should be in the applicant’s name, spouse’sname, or part of a family plan.  Forverification of land lines and cell phones contacting the customer at thenumber or getting a voicemail or answering machine that clearly identifies ourcustomers is sufficient verification.

 

**35.****          Exceptions**

 

Thereare 3 levels of exceptions – Low, medium, and high.  Low-risk exceptions would be allowed on anunlimited basis.  2 lows are equal to 1medium and must be reviewed by someone with medium level authority (seeexception authority list).  High-riskexceptions would be limited to 1 per app/contract.  A combination of 1 medium risk and 1 high-riskexception per app/contract would be acceptable. A total of 3 exceptions or more must be approved by someone with highlevel authority (see exception list).

 

•              Low-riskexceptions would be exceptions that do not impact advance, or the customer’sstability or ability to repay the loan.

 

•              Medium-riskexceptions would be exceptions that have marginal impact on advance, or thecustomer’s stability or ability to repay the loan.

 

•              High-riskexceptions would be any exception that materially impacts advance, or thecustomer’s stability or ability to repay the loan.

 

**36.****          JointApplicants**

 

A.            Allapplicants of legal age will be given the same consideration when applyingjointly for an auto loan, regardless of marital status, shared last name,gender or prior joint credit history.

 

B.            Onelicensed driver is acceptable as long as there is no suspension or revocationof the other borrower’s license and there is only one open auto.

 

**37.****          OverridePolicy**

 

Lowside-  Any applicant that has a Custom Score below160 or Beacon/Emperica/Fico score below 530 can only be approved by theCCO.  In order to be approved, theapplicant has to meet either the Credit Bureau Score or the Custom Score, butcannot fail both.  These applicants willbe priced at the lowest tier available These deals will be limited to 5% oftotal monthly fundings and they will be monitored in Asset Quality to insureadequate performance.

 

C-16

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**38.****          Advance**

 

C.            If thecurrent advance is 155% or less of the current value the application wouldqualify without validating the original line 5 advance (tests show that 97% ofcurrent advances within this range originally had a 130% or < original line5 advance).

 

B.            Ifcurrent advance is 156% to 190% of the current value, the application willqualify without validating the original line 5 advance if the application meetsthe following two conditions:

 

**1.****             Currentestimated or verified rate on the loan to be refinanced is 16% or greater**

**2.****             Customerhas a bureau score of 620 or higher**

 

E.             If thecurrent advance is 156% to 209% of the current value then the original line 5advance will be calculated.

 

•              Ifthe original line 5 advance is 130% or less the application would qualify.

 

•              Ifthe original line 5 advance is > 130% the application would not qualify.

 

•              Asample test showed that there is a 91% correlation coefficient between line 5and line 3 advances.

 

F.             If thecurrent advance is 210% or more of the current value the application would notqualify.

 

**39.****          Vehicles**

 

E.             Vehiclesup to 5 model years old are acceptable. On an exception basis, 6 & 7-year-oldvehicles are acceptable as long as there is no mileage deduction.  These must be approved by the Chief CreditOfficer.

 

F.             Novehicles that will be used for business will be financed.

 

**G.****            Mileagecaps as follows:**

 
| **Curr  Model (not in book)** | ** ** | ** ** | **30,000 max** |
|-------------------------------|------------|------------|----------------|
| **1 and 2  year old**         | ** ** | ** ** | **60,000 max** |
| **3 and 4  year old**         | ** ** | ** ** | **75,000 max** |
| **5 year  old**               | ** ** | ** ** | **90,000 max** |

 

H.            Nocurrent model year vehicles with more than 30,000 miles will be accepted.

 

I.              Terms

 

C-17

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Direct loans qualify fora term equal to the remaining term on original loan. The Loan Officer canapprove 3-month extensions.  Anadditional 3-month extension (6 months total) can be approved by the CCO on anexception basis.  Any term extensionsbeyond 6 months would require CEO/CFO.

 

C-18

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Exhibit D

 

[Reserved]

 

D-1

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Exhibit E

 

Form of Originator Agreement

 

E-1

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Exhibit F

 

Form Of Additional Contract Assignment

 

For value received, in accordance with the Sale andAllocation Agreement (the “*Sale and AllocationAgreement*”), dated as of May 5, 2005, by and among FirstInvestors Financial Services, Inc., First Investors Servicing Corporation,First Investors Auto Funding Corporation, Wells Fargo Bank, NationalAssociation and First Investors Auto Owner Trust 2005-A (the “*Purchaser*”) the undersigned doeshereby sell, transfer, assign and otherwise convey unto the Purchaser, withoutrecourse (subject to the obligations in the Sale and Allocation Agreement) allright, title and interest of the Seller in and to (i) the AdditionalContracts listed on Schedule 1 hereto, (ii) all amountsreceived on or in respect of such Additional Contracts after the AdditionalCutoff Date related thereto; (iii) the security interests in the FinancedVehicles related thereto; (iv) any proceeds from claims on or refunds ofpremiums with respect to extended warranties or physical damage, theft, creditlife and credit disability insurance policies relating to the Financed Vehiclesor the related Obligors with respect to such Additional Contracts; (v) anyLiquidation Proceeds with respect to such Additional Contracts; (vi) theContract Files with respect to such Additional Contracts; (vii) rightsunder the Contribution Agreement to cause the Seller to purchase suchAdditional Contracts affected materially and adversely by breaches of therepresentations and warranties of the Seller made in the ContributionAgreement; (viii) rights under the Servicing Agreement to cause theServicer to purchase such Additional Contracts affected materially andadversely by breaches of the representations and warranties of the Servicermade in the Servicing Agreement; and (ix) and all present and futureclaims, demands, causes of action and choses in action in respect of any or allof the foregoing and all payments on or under and all proceeds of every kindand nature whatsoever in respect of any or all of the foregoing, including allproceeds of the conversion thereof, voluntary or involuntary, into cash orother liquid property, all cash proceeds, accounts, accounts receivable, notes,drafts, acceptances, chattel paper, checks, deposit accounts, insuranceproceeds, condemnation awards, rights to payment of any and every kind andother forms of obligations and receivables, instruments and other propertywhich at any time constitute all or part of or are included in the proceeds ofany of the foregoing.

 

All provisions of the Sale and Allocation Agreementare incorporated herein by reference. All capitalized terms not defined herein shall have the meanings setforth in the Sale and Allocation Agreement.

 

In consideration for the conveyance of the AdditionalContracts to the Purchaser, Purchaser shall pay to the Seller,contemporaneously with the execution of this Additional Contract Assignment,cash in the amount of $                 .

 

The Depositor does hereby make each of therepresentations and warranties referred to in Section 2.2 of the Sale andAllocation Agreement with respect to this Agreement with full force and effectas if fully set forth herein.  TheDepositor does hereby certify that each of the

 

F-1

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conditions precedent set forth in Section 2.1(f) ofthe Sale and Allocation Agreement has been satisfied.

 

This Additional Contract Assignment shall be governedby, and construed in accordance with, the laws of the State of New York,without giving effect to the conflicts of laws principles thereof.

 

IN WITNESS WHEREOF, the undersigned has caused thisAdditional Contract Assignment to be executed by its officer thereunto dulyauthorized, as of                             ,200[  ].

 
|   | FIRST INVESTORS  FINANCIAL SERVICES, INC. |
|--------|-------------------------------------------|
|   |                                      |
|   | By:                                       |   |   |
|   | Name:                                     |   |   |
|   | Title:                                    |   |   |

 

F-2

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Schedule 1

to

Additional Contract Assignment

Dated

          , 200[  ]

 

List of Additional Contracts

 

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