Document:

Exhibit 10.113

 

EXECUTION COPY

 

 

MBIA
INSURANCE CORPORATION,

as Insurer

 

FIRST
INVESTORS SERVICING CORPORATION,

as Servicer

 

FIRST
INVESTORS FINANCIAL SERVICES, INC.

as Seller and as Administrator

 

FIRST
INVESTORS AUTO FUNDING CORPORATION,

as Depositor

 

FIRST
INVESTORS AUTO OWNER TRUST 2003-A,

as Issuer

 

DEUTSCHE
BANK TRUST COMPANY DELAWARE,

as Owner Trustee

 

WELLS
FARGO BANK MINNESOTA, NATIONAL ASSOCIATION,

as Back-up Servicer and Indenture Trustee

 

 

INSURANCE
AGREEMENT

 

First Investors Auto Owner Trust 2003-A

$139,661,000 2.58% Asset-Backed Class A Notes

 

Dated as of November 20, 2003

 

 

 

TABLE OF CONTENTS

 

	
  ARTICLE I

  
	
   

  	
   

  
	
  DEFINITIONS

  	
   

  
	
  ARTICLE II

  
	
  REPRESENTATIONS,
  WARRANTIES AND COVENANTS

  
	
   

  	
   

  
	
  Section 2.01.

  	
  Representations
  and Warranties of the Servicer, the Seller and the Depositor

  	
   

  
	
  Section 2.02.

  	
  Affirmative
  Covenants of the Servicer, the Seller and the Depositor

  	
   

  
	
  Section 2.03.

  	
  Negative
  Covenants of the Servicer, the Seller and the Depositor

  	
   

  
	
  Section 2.04.

  	
  Representations
  and Warranties of the Issuer

  	
   

  
	
  Section 2.05.

  	
  Affirmative
  Covenants of the Issuer

  	
   

  
	
  Section 2.06.

  	
  Negative Covenants of
  the Issuer

  	
   

  
	
  Section 2.07.

  	
  Representations,
  Warranties and Covenants of Indenture Trustee and Back-up Servicer

  	
   

  
	
  Section 2.08.

  	
  Representations,
  Warranties and Covenants of Owner Trustee

  	
   

  
	
  Section 2.09.

  	
  Negative
  Covenant of the Administrator

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
  THE POLICY; REIMBURSEMENT

  
	
   

  	
   

  
	
  Section 3.01.

  	
  Issuance
  of the Policy

  	
   

  
	
  Section 3.02.

  	
  Payment of Fees
  and Insurance Premium

  	
   

  
	
  Section 3.03.

  	
  Reimbursement
  and Additional Payment Obligation.

  	
   

  
	
  Section 3.04.

  	
  Indemnification;
  Limitation of Liability

  	
   

  
	
  Section 3.05.

  	
  Payment
  Procedure

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
  FURTHER
  AGREEMENTS

  
	
   

  	
   

  
	
  Section 4.01.

  	
  Effective
  Date; Term of the Insurance Agreement

  	
   

  
	
  Section 4.02.

  	
  Further
  Assurances and Corrective Instruments

  	
   

  
	
  Section 4.03.

  	
  Obligations
  Absolute

  	
   

  
	
  Section 4.04.

  	
  Assignments;
  Reinsurance; Third-Party Rights

  	
   

  
	
  Section 4.05.

  	
  Liability of the Insurer

  	
   

  
	
  Section 4.06.

  	
  Parties
  Will Not Institute Insolvency Proceedings

  	
   

  
	
  Section 4.07.

  	
  Indenture
  Trustee, Depositor, Back-up Servicer, Seller and Servicer To Join in
  Enforcement Action

  	
   

  

 

 

	
  Section 4.08.

  	
  Subrogation

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  
	
  DEFAULTS;
  REMEDIES

  
	
   

  	
   

  
	
  Section 5.01.

  	
  Defaults

  	
   

  
	
  Section 5.02.

  	
  Remedies; No Remedy
  Exclusive

  	
   

  
	
  Section 5.03.

  	
  Waivers

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  
	
  MISCELLANEOUS

  
	
   

  	
   

  
	
  Section 6.01.

  	
  Amendments,
  Etc

  	
   

  
	
  Section 6.02.

  	
  Notices

  	
   

  
	
  Section 6.03.

  	
  Severability

  	
   

  
	
  Section 6.04.

  	
  Governing
  Law

  	
   

  
	
  Section 6.05.

  	
  Consent
  to Jurisdiction

  	
   

  
	
  Section 6.06.

  	
  Consent
  of the Insurer

  	
   

  
	
  Section 6.07.

  	
  Counterparts

  	
   

  
	
  Section 6.08.

  	
  Headings

  	
   

  
	
  Section 6.09.

  	
  Trial
  by Jury Waived

  	
   

  
	
  Section 6.10.

  	
  Limited
  Liability

  	
   

  
	
  Section 6.11.

  	
  Entire
  Agreement

  	
   

  
	
  Section 6.12.

  	
  Limitation
  of Liability

  	
   

  
	
  Section 6.13.

  	
  Limited
  Recourse

  	
   

  
	
  Section 6.14.

  	
  Subordination

  	
   

  

 

ii

 

INSURANCE AGREEMENT

 

This INSURANCE
AGREEMENT (this “Insurance Agreement”), dated as of
November 20, 2003 by and among FIRST INVESTORS FINANCIAL SERVICES, INC.
as seller (together with its permitted successors and assigns, the “Seller”)
and as Administrator, FIRST INVESTORS SERVICING CORPORATION, as
Servicer (together with its permitted successors and assigns, the “Servicer”), FIRST
INVESTORS AUTO FUNDING CORPORATION, as Depositor (the “Depositor”), FIRST
INVESTORS AUTO OWNER TRUST 2003-A, as Issuer (the “Issuer” or the
“Trust”), DEUTSCHE
BANK TRUST COMPANY DELAWARE, as Owner Trustee (the “Owner Trustee”) MBIA
INSURANCE CORPORATION, as Insurer (the “Insurer”), WELLS FARGO
BANK MINNESOTA, NATIONAL ASSOCIATION, as Back-up Servicer (the
“Back-up Servicer”) and as Indenture Trustee (the “Indenture Trustee”).

 

WHEREAS, the
Indenture dated as of November 20, 2003 (the “Indenture”) relating to the
First Investors Auto Owner Trust 2003-A $139,661,000 2.58% Asset-Backed Class A
Notes (the “Obligations”), between the Issuer and the Indenture Trustee, in its
capacity as Indenture Trustee and Custodian, provides for, among other things,
the issuance of asset backed notes and the Insurer has issued its note guaranty
insurance policy (the “Policy”) that guarantees certain payments on the
Obligations;

 

WHEREAS, the
Insurer shall be paid an insurance premium pursuant to the Indenture, and the
details of such premium are set forth herein; and

 

WHEREAS, the
Servicer, the Seller, the Depositor and the Issuer have undertaken certain
obligations in consideration for the Insurer’s issuance of the Policy;

 

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

 

ARTICLE I

DEFINITIONS

 

The terms defined
in this Article I shall have the meanings provided herein for all purposes
of this Insurance Agreement, unless the context clearly requires otherwise, in
both singular and plural form, as appropriate. 
Unless the context clearly requires otherwise, all capitalized terms
used herein and not otherwise defined in this Article I shall have the
meanings assigned to them in the Indenture, the Sale and Allocation Agreement,
or the Servicing Agreement.  All words
used herein shall be construed to be of such gender or number as the
circumstances require.  This “Insurance
Agreement” shall mean this Insurance Agreement as a whole and as the same may,
from time to time hereafter, be amended, supplemented or modified.  The words “herein,” “hereby,” “hereof,”
“hereto,” “hereinabove” and “hereinbelow,” and words of similar import, refer
to this Insurance Agreement as a whole and not to any particular paragraph,
clause or other subdivision hereof, unless otherwise specifically noted.

 

 

“Administration Agreement” means the Administration Agreement dated
as of November 20, 2003, between the Administrator, the Issuer and the
Indenture Trustee as the same may be amended or supplemented from time to time
in accordance with the terms thereof.

 

“Administrator” means First Investors Financial
Services, Inc. or any successor Administrator under the Administration
Agreement.

 

“Adverse
Selection Procedure” means any method of selecting or identifying a
Contract eligible to be included in the Trust Estate, other than in accordance
with the Transaction Documents, that materially and adversely affects the
representative nature of the sample of Contracts so selected.

 

“Business Day” means any day other than (a) a Saturday
or a Sunday (b) a day 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
governmental decree to remain closed.

 

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

 

“Code” means the Internal Revenue Code of 1986,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended from time to time.

 

“Commission” means the Securities and Exchange
Commission.

 

“Contribution Agreement” means the Contribution Agreement dated
as of November 20, 2003 between the Seller and the Depositor.

 

“Date of Issuance” means the date on which the Policy is
issued as specified therein.

 

“Default” means any event which results, or which
with the giving of notice or the lapse of time or both would result, in an
Event of Default.

 

“Documents” shall have the meaning set forth in
section 2.01(k) hereof.

 

“Event of Default” means any event of default specified in
Section 5.01 hereof.

 

“FIFSG” means First Investors Financial Services
Group, Inc.

 

2

 

 “Financial Statements”  means, with respect to
FIFSG, the balance sheets and the statements of income, retained earnings and
cash flows and the notes thereto which have been provided to the Insurer.

 

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

 

“Guaranty” means the Guaranty entered into as of
November 20, 2003, by First Investors Financial Services, Inc., as
Guarantor, the Servicer, the Back-up Servicer 
and  the Indenture Trustee.

 

“Indemnification Agreement” means the Indemnification Agreement
dated as of November 13, 2003, among the Insurer, the Seller and the
Initial Purchaser.

 

 “Indenture” means the Indenture dated as of November 20, 2003 between the
Issuer and the Indenture Trustee and Custodian as the same may be amended or
supplemented from time to time in accordance with the terms thereof.

 

“Indenture Trustee” means Wells Fargo Bank Minnesota,
National Association, a national banking association, as Indenture Trustee
under the Indenture, and any successor Indenture Trustee under the Indenture.

 

“Initial Purchaser” means Wachovia Capital Markets, LLC.

 

“Insurance Premium” means the premium payable in accordance
with Section 3.02 hereof.

 

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

 

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

 

“Investment Company Act” means the Investment Company Act of 1940,
including, unless the context otherwise requires, the rules and regulations
thereunder, as amended.

 

3

 

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

 

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

 

“Losses” means (i) any actual out-of-pocket
loss paid by the Insurer or its respective parents, subsidiaries and affiliates
or any shareholder, director, officer, employee, agent or any “controlling
person” (as such term is used in the Securities Act) of any of the foregoing,
and (ii) any actual out-of-pocket costs and expenses paid by such party,
including reasonable fees and expenses of its counsel, to the extent not paid,
satisfied or reimbursed from funds provided by any other Person (provided that
the foregoing shall not create or imply any obligation to pursue recourse
against any such other Person).

 

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

 

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

 

“Obligations” shall have the meaning as defined in the
Policy.

 

“Obligor” means the original obligor under each
Contract, including any guarantor of such obligor and their respective
successors.

 

“Offering Document” means the offering memorandum dated
November 13, 2003 of the Issuer in respect of the Obligations (and any
amendment or supplement thereto) and any other offering document in respect of
the Obligations prepared by the Servicer, the Seller, Depositor or the Issuer
that makes reference to the Policy.

 

“Opinion Facts and Assumptions” means the facts and assumptions
contained in the insolvency opinions dated November 20, 2003 by Dechert
LLP under the heading “Facts and Assumptions” insofar as they relate to the
Seller, the Issuer and the Depositor.

 

“Owners” means registered holders of Obligations.

 

“Owner Trustee” means Deutsche Bank Trust Company
Delaware, not in its individual capacity, but solely as Owner Trustee of the
Issuer.

 

4

 

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

 

“Premium Percentage” shall have the meaning ascribed to such
term in Section 3.02 hereof.

 

“Premium Side Letter Agreement” means that certain Premium Letter dated
as of November 20, 2003 among the Seller, the Issuer, the Servicer, and
the Insurer specifying the up-front Insurance Premium payable on the Closing
Date and the monthly Insurance Premium payable to the Insurer pursuant to the
Indenture.

 

“Purchase Agreement” means the Purchase Agreement between the
Initial Purchaser and the Depositor with respect to the offer and sale of the
Obligations, as the same may be amended from time to time.

 

“Sale  and Allocation Agreement” means the Sale
and Allocation Agreement dated as of November 20, 2003, among the
Servicer, the Indenture Trustee, the Securities Intermediary, and the Issuer as
the same may be amended or supplemented from time to time in accordance with
the terms thereof.

 

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

 

“Securities Exchange Act” means the Securities Exchange Act of
1934, including, unless the context otherwise requires, the rules and
regulations thereunder, as amended from time to time.

 

“Servicing
Agreement” means the Servicing Agreement dated as of
November 20, 2003 among the Servicer, the Back-up Servicer, and the
Issuer.

 

“S&P” means Standard & Poor’s Ratings
Services, a division of The McGraw-Hill Companies, Inc., and any successor
thereto, and, if such corporation shall for any reason no longer perform the
functions of a securities rating agency, “S&P” shall be deemed to refer to
any other nationally recognized rating agency designated by the Insurer.

 

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

 

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

 

“Transaction Documents” means this Insurance Agreement, the
Premium Side Letter Agreement, the Indenture, the Offering Document, the
Guaranty, the Trust Agreement, the Certificate of Trust, the Sale and
Allocation Agreement, the Contribution Agreement, the Servicing Agreement, the
Administration Agreement, the Purchase Agreement, and the Obligations.

 

5

 

“Trust” means the trust created pursuant to the
Indenture.

 

“Trust Agreement” means the Amended and Restated Trust
Agreement dated as of November 20, 2003 among the Depositor and the Owner
Trustee as the same may be amended or supplemented from time to time in accordance
with the terms thereof.

 

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

 

ARTICLE II

REPRESENTATIONS, WARRANTIES AND
COVENANTS

 

Section 2.01.  Representations and
Warranties of the Servicer, the Seller and the Depositor. 
The Servicer, the Seller and the Depositor represent, warrant and
covenant as of the Date of Issuance, each as to those matters relating to
itself, as follows:

 

(a)                                  Due Organization and Qualification. 
The Servicer, the Seller and the Depositor are each a corporation, duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation. 
Each of the Servicer, the Seller and the Depositor is duly qualified to
do business, is in good standing and has obtained all licenses, permits,
charters, registrations and approvals (together, “approvals”) necessary for the
conduct of its business as currently conducted and as described in the Offering
Document and the performance of its obligations under the Transaction
Documents, in each jurisdiction in which the failure to be so qualified or to
obtain such approvals would render any Transaction Document unenforceable in
any respect or would have a material adverse effect upon the Transaction, the
Owners or the Insurer.

 

(b)                                 Power and Authority.  Each of the
Servicer, the Seller and the Depositor has all necessary corporate power and
authority to conduct its business as currently conducted and, as described in
the Offering Document, to execute, deliver and perform its obligations under
the Transaction Documents and to consummate the Transaction.

 

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

 

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

 

6

 

(i)                                     conflicts with or results in any breach
or violation of any provision of the certificate of incorporation or bylaws of
the Servicer, the Seller or the Depositor or any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award currently in effect
having applicability to the Servicer, the Seller or the Depositor or any of
their material properties, including regulations issued by an administrative
agency or other governmental authority having supervisory powers over the
Servicer, the Seller or the Depositor;

 

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

 

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

 

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

 

(f)                                    Valid and Binding Obligations.  The
Obligations, when executed, authenticated and issued in accordance with the
Indenture, and the Transaction Documents (other than the Obligations), when
executed and delivered by the Servicer, the Seller and the Depositor, will
constitute the legal, valid and binding obligations of the Servicer, the
Seller, the Depositor and the Trust, as applicable, enforceable in accordance
with their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights generally and general equitable principles and
public policy considerations as to rights of indemnification for violations of
federal securities laws.  None of the
Servicer, the Seller or the Depositor will at any time in the future deny that
the Transaction Documents constitute the legal, valid and binding obligations
of the Servicer, the Seller, the Depositor or the Trust, as applicable.

 

(g)                                 Financial Statements.  The
Financial Statements of FIFSG, copies of which have been furnished to the
Insurer, (i) are, as of the dates and for the periods referred to therein,
complete and correct in all material respects, (ii) present fairly the
financial condition and results of operations of the companies reported therein
as of the dates and for the periods indicated and (iii) have been prepared
in accordance with generally accepted accounting principles consistently
applied, except as noted therein (subject as to interim statements to normal
year-end adjustments).  Since the date
of the

 

7

 

most recent Financial
Statements, there has been no Material Adverse Change in respect of the
Servicer or the Seller.  Except as
disclosed in the Financial Statements, the Servicer and the Seller are not
subject to any contingent liabilities or commitments that, individually or in
the aggregate, have a material possibility of causing a Material Adverse Change
in respect of the Servicer or the Seller.

 

(h)                                 Compliance With Law, Etc.  No practice,
procedure or policy employed, or proposed to be employed, by the Servicer, the
Seller or the Depositor in the conduct of its business violates any law,
regulation, judgment, agreement, order or decree applicable to any of them
that, if enforced, could reasonably be expected to result in a Material Adverse
Change with respect to the Servicer, the Seller or the Depositor.  The Servicer, the Seller and the Depositor
are not in breach of or in default under any applicable law or administrative
regulation of its respective jurisdiction of incorporation, or any department,
division, agency or instrumentality thereof or of the United States or any
applicable judgment or decree or any loan agreement, note, resolution,
certificate, agreement or other instrument to which the Servicer, the Seller or
the Depositor is a party or is otherwise subject which, if enforced, would have
a material adverse effect on the ability of the Servicer, the Seller or the
Depositor, as the case may be, to perform its respective obligations under the
Transaction Documents.

 

(i)                                     Taxes.  The Servicer, the Seller and
the Depositor and the Servicer’s, the Seller’s and the Depositor’s parent
company or companies have filed prior to the date hereof all federal and state
tax returns that are required to be filed and paid all taxes, including any
assessments received by them that are not being contested in good faith, to the
extent that such taxes have become due, except for any failures to file or pay
that, individually or in the aggregate, would not result in a Material Adverse
Change with respect to the Servicer, the Seller or the Depositor.

 

(j)                                     Accuracy of Information.  Neither the
Transaction Documents, nor other information relating to the Contracts, the
operations of the Servicer, the Seller or the Depositor (including servicing or
origination of loans) or the financial condition of the Servicer, the Seller or
the Depositor (collectively, the “Documents”), as amended, supplemented or
superseded, furnished to the Insurer by the Servicer, the Seller or the
Depositor contains any statement of a material fact by the Servicer, the Seller
or Depositor which was untrue or misleading in any material adverse respect
when made.  None of the Servicer, the
Seller or the Depositor has any knowledge of circumstances that could
reasonably be expected to cause a Material Adverse Change with respect to the
Servicer, the Seller or the Depositor. 
Since the furnishing of the Documents, there has been no change or any
development or event involving a prospective change known to the Servicer, the
Seller or the Depositor that would render any of the Documents untrue or
misleading in any material respect.

 

(k)                                  Compliance With Securities Laws. 
The offer and sale of the Obligations comply in all material respects
with all requirements of law, including all registration requirements of
applicable securities laws.  Without
limitation of the foregoing, the Offering Document does not contain any untrue
statement of a material fact and does not

 

8

 

omit to state a material
fact necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that no representation is made with respect to the information in the Offering
Document set forth under the heading “Description of the Insurer and the
Insurance Policy” or the consolidated financial statements of the Insurer
incorporated by reference in the Offering Document; and provided, further, that
no representation is made with respect to the statements set forth in the last
paragraph of the cover page of the Offering Document regarding the delivery of
the Obligations and the disclosure under the heading “Plan of Distribution” in
the Offering Document.  Neither the
offer nor the sale of the Obligations has been or will be in violation of the
Securities Act or any other federal or state securities laws.  The Issuer is not required to be registered
as an “investment company” under the Investment Company Act.

 

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

 

(m)                               Solvency, Fraudulent Conveyance. 
The Servicer, the Seller and the Depositor are solvent and will not be
rendered insolvent by the Transaction and, after giving effect to the
Transaction, none of the Servicer, the Seller or the Depositor will be left
with an unreasonably small amount of capital with which to engage in its
business, nor does the Servicer, the Seller or the Depositor intend to incur,
or believe that it has incurred, debts beyond its ability to pay as they
mature.  None of the Servicer, the
Seller or the Depositor contemplates the commencement of insolvency, bankruptcy,
liquidation or consolidation proceedings or the appointment of a receiver,
liquidator, conservator, trustee or similar official in respect of the
Servicer, the Seller or the Depositor or any of their assets.  The amount of consideration being received
by the Issuer upon the sale of the Obligations to the Initial Purchaser
constitutes reasonably equivalent value and fair consideration for the interest
in the Contracts evidenced by the Obligations. 
The Seller  is not transferring
the Contracts to the Issuer and the Issuer is not selling the Obligations to
any Initial Purchaser, as provided in the Transaction Documents, with any
intent to hinder, delay or defraud any of the Seller’s or the Depositor’s
creditors.

 

(n)                                 Principal Place of Business.

 

(i)                                     The principal place of business of the
Servicer is located in Atlanta, Georgia, and the Servicer is a corporation
organized under the laws of the State of Delaware.  “First Investors Servicing Corporation” is the correct legal name
of the Servicer indicated on the public records of the Servicer’s jurisdiction
of organization which shows the Servicer to be organized.

 

(ii)                                  The principal place of business of the
Seller is located in Houston, Texas, and the Seller is a corporation organized
under the laws of the State of Texas. 
“First Investors Financial Services, Inc.”  is the correct legal name of
the

 

9

 

Seller indicated on the
public records of the Seller’s jurisdiction of organization which shows the
Seller to be organized.

 

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

 

(o)                                 Opinion Facts and Assumptions.  The Opinion
Facts and Assumptions insofar as they relate to the Seller and the Depositor
are true and correct as of the Date of Issuance.

 

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

 

Section 2.02.  Affirmative
Covenants of the Servicer, the Seller and the Depositor. 
The Servicer, the Seller and the Depositor hereby agree that during the
Term of the Insurance Agreement, unless the Insurer shall otherwise expressly
consent in writing:

 

(a)                                  Compliance With Agreements and Applicable Laws. 
The Servicer, the Seller and the Depositor shall not be in default under
the Transaction Documents and shall comply with all material requirements of
any law, rule or regulation applicable to it. So long as no Insurer Default or
Insurer Insolvency exists, unless the Insurer shall otherwise consent, none of
the Servicer, the Seller or the Depositor shall agree to any amendment to or
modification of the terms of any Transaction Documents unless the Insurer shall
have given its prior written consent.

 

(b)                                 Corporate Existence.  The
Servicer, its successors and assigns, the Seller, its successors and assigns,
and the Depositor, its successors and assigns, shall maintain their corporate
existence and shall at all times continue to be duly organized under the laws
of their respective jurisdictions of incorporation and duly qualified and duly
authorized (as described in sections 2.01(a), (b) and (c) hereof) and shall
conduct its business in accordance with the terms of its certificate or
articles of incorporation and bylaws. 
The Seller, the Depositor and the Servicer shall notify the Insurer
within sixty (60) days prior to any change in its legal name as indicated on
the public records of the Servicer’s, the Seller’s or the Depositor’s
jurisdiction of organization which shows the

 

10

 

Servicer, the Seller, or
the Depositor to be organized, jurisdiction of organization, identity or
corporate structure.  The Seller, the
Servicer and the Depositor shall notify the Insurer within sixty (60) days prior
to any relocation of its principal office.

 

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

 

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

 

(ii)                                  Quarterly Financial Statements.  As
soon as available, and in any event within 90 days after each of the first
three fiscal quarters of each fiscal year of FIFSG, the unaudited consolidated
balance sheets of FIFSG and its subsidiaries as of the end of such fiscal
quarter and the related unaudited consolidated statements of income, changes in
shareholders’ equity and cash flows for such fiscal quarter, all in reasonable
detail and stating in comparative form the respective figures for the
corresponding date and period in the preceding fiscal year, prepared in
accordance with generally accepted accounting principles, consistently applied,
and accompanied by the certificate specified in Section 2.02(e) hereof.

 

(iii)                               Initial and Continuing Reports. 
On or before the Closing Date, the Servicer will provide the Insurer a
copy of the magnetic tape to be delivered to the Indenture Trustee on the
Closing Date setting forth as to each Contract, the information required under
the definition of “Contract Schedule” in Section 1.1 of the Sale and
Allocation Agreement.  Thereafter, the
Servicer shall deliver to the Insurer not later than 12:00 noon,
New York City time, on each Determination Date the report required by
Section 3.8 of the Sale and Allocation Agreement.

 

(iv)                              Computer Diskette.  Beginning in December 2003, the
Servicer will deliver to the Insurer on a monthly basis, a computer diskette or
other electronic file in a format acceptable to the Insurer, containing the
information provided to the Insurer pursuant to clause (iii) of this
subsection 2.02(c) and also containing information similar to the
information provided in the Contract

 

11

 

Schedule delivered
to the Indenture Trustee pursuant to the Sale and Allocation Agreement and
described in Schedule 1 of the Sale and Allocation Agreement.

 

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

 

(vi)                              Other Information.  Promptly
upon receipt thereof, copies of all schedules, list of contracts, financial
statements or other similar reports delivered to or by the Servicer, the Seller
or the Depositor pursuant to the terms of the Transaction Documents and,
promptly upon request, such other data as the Insurer may reasonably
request.  The Seller agrees, in the
event of any merger, consolidation or asset transfer of the Seller as described
in Section 4.3 of the Sale and Allocation Agreement, to deliver the
certificates and opinions described therein to the Insurer.

 

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

 

(d)                                 The Depositor Shareholder Meetings.  The Depositor shall have annual shareholder meetings
and at least annual board of director meetings and shall prepare income and
franchise tax returns as appropriate. 
The Depositor shall deliver to the Insurer copies of the minutes of such
meetings no later than April 30 of each year and such tax returns promptly
upon filing but in no event later than August 31 of each year, beginning
in 2004.

 

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

 

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

 

(ii)                                  to the best of such individual’s
knowledge following reasonable inquiry, no Default or Event of Default has
occurred, or if a Default or Event of Default has occurred, specifying the
nature thereof and, if the Servicer has a right to cure pursuant to
Section 5.1 of the Indenture, stating in reasonable detail (including, if
applicable, any supporting calculations) the steps, if any, being taken by the
Servicer to cure such Default or Event of Default or to otherwise

 

12

 

comply with the terms of
the agreement to which such Default or Event of Default relates;

 

(iii)                               the attached financial statements
submitted in accordance with Sections 2.02(c)(i) or (ii) hereof, as the case
may be, are complete and correct in all material respects and present fairly
the financial condition and results of operations of FIFSG as of the dates and
for the periods indicated, in accordance with generally accepted accounting
principles consistently applied; and

 

(iv)                              the Servicer has in full force and effect
a blanket fidelity bond (or direct insurer bond) and an errors and omissions
insurance policy in accordance with the terms and requirements of
Section 2.25 of the Servicing Agreement.

 

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

 

(i)                                     to inspect, audit and make copies of
abstracts from, the books and records of the Servicer and of the Seller as they
may relate to the Obligations, the Contracts, the obligations of the Servicer
or of the Seller under the Transaction Documents, and the Transaction;

 

(ii)                                  to discuss the affairs, finances and accounts
of the Servicer or of the Seller with the chief operating officer and the chief
financial officer of the Servicer or of the Seller, as the case may be; and

 

(iii)                               with the Servicer’s or the Seller’s
consent, as applicable, which consent shall not be unreasonably withheld, to
discuss the affairs, finances and accounts of the Servicer or the Seller with
the Servicer’s or the Seller’s independent accountants, provided that an
officer of the Servicer or the Seller shall have the right to be present during
such discussions.

 

Such inspections
and discussions shall be conducted during normal business hours and shall not
unreasonably disrupt the business of the Servicer or the Seller.  The books and records of the Servicer shall
be maintained at the address of the Servicer designated herein for receipt of
notices, unless the Servicer shall otherwise advise the parties hereto in
writing, and the books and records of the Seller shall be maintained at the
address of the Seller designated herein for receipt of notices, unless the
Seller shall otherwise advise the parties hereto in writing.

 

The Insurer agrees
that it and its shareholders, directors, agents, accountants and attorneys
shall keep confidential any matter of which it becomes aware through such
inspections or discussions (unless readily available from public sources),
except as may be otherwise required by regulation, law or court order or
requested by appropriate governmental authorities or as necessary to preserve
its rights or security under or to

 

13

 

enforce the Transaction Documents, provided that the foregoing shall
not limit the right of the Insurer to make such information available to its
regulators, securities rating agencies, reinsurers, credit and liquidity
providers, counsel and accountants.

 

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

 

(i)                                     the submission of any claim or the
initiation or threat of any legal process, litigation or administrative or
judicial investigation, or rule making or disciplinary proceeding by or against
the Servicer, the Seller or the Depositor that (A) could be required to be
disclosed to the Commission or to the Servicer’s, the Seller’s or the
Depositor’s shareholders or (B) could result in a Material Adverse Change
with respect to the Servicer, the Seller or the Depositor, or the promulgation
of any proceeding or any proposed or final rule which would result in a
Material Adverse Change with respect to the Servicer, the Seller or the Depositor;

 

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

 

(iii)                               any change in the location of the
Servicer’s, the Seller’s or the Depositor’s principal office, jurisdiction of
organization, legal name as indicated on the public records of the Servicer’s,
the Seller’s or the Depositor’s jurisdiction of organization which shows the
Servicer, the Seller, or the Depositor to be organized, any change in the
location of the Servicer’s, the Seller’s or the Depositor’s books and records,
or any change in the location of the Corporate Trust Office (as defined in the
Sale and Allocation Agreement), or any change in the account number or location
of the Collection Account, the Note Payment Account, the Certificate Payment
Account or the Reserve Account;

 

(iv)                              the occurrence of any Event of Servicing
Termination, Default or Event of Default or of any Material Adverse Change;

 

(v)                                 the commencement of any proceedings by or
against the Servicer, the Seller or the Depositor under any applicable
bankruptcy, reorganization, liquidation, rehabilitation, insolvency or other
similar law now or hereafter in effect or of any proceeding in which a
receiver, liquidator, conservator, trustee or similar official shall have been,
or may be, appointed or requested for the Servicer, the Seller or the Depositor
or any of its or their assets; or

 

14

 

(vi)                              the receipt of notice that (A) the
Servicer, the Seller or the Depositor is being placed under regulatory
supervision, (B) any license, permit, charter, registration or approval
necessary for the conduct of the Servicer’s, the Seller’s or the Depositor’s
business is to be, or may be suspended or revoked, or (C) the Servicer,
the Seller or the Depositor is to cease and desist any practice, procedure or
policy employed by the Servicer, the Seller or the Depositor in the conduct of
its business, and such cessation may result in a Material Adverse Change with
respect to the Servicer, the Seller or the Depositor.

 

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

 

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

 

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

 

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

 

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

 

(l)                                     Servicing of Contracts.  The Servicer
shall perform such actions with respect to the Contracts as are required by or
provided for in the Servicing Agreement. 
The Servicer will provide the Insurer with written notice of any change
or amendment to any Transaction Document as currently in effect.

 

15

 

(m)                               Maintenance of Trust.  On or before
each March 31, beginning in 2005, so long as any of the Obligations are
outstanding, and promptly after the execution and delivery of each amendment to
any financing statement, the Servicer shall furnish to the Insurer and the
Indenture Trustee an officers’ certificate and an opinion of counsel as
described in Section 3.6(b) of the Indenture, either stating that such
action has been taken with respect to the recording, filing, rerecording and
refiling of any financing statements and continuation statements as is
necessary to maintain the interest of the Indenture Trustee created by the
Indenture with respect to the Trust and reciting the details of such action or
stating that no such action is necessary to maintain such interests.  Such officers’ certificate shall also
describe the recording, filing, rerecording and refiling of any financing
statements and continuation statements that will be required to maintain the
interest of the Indenture Trustee in the Trust until the date such next
officers’ certificate is due.  The
Servicer will use its best efforts to cause any necessary recordings or filings
to be made with respect to the Trust.

 

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

 

(o)                                 Closing Documents.  The
Servicer, the Seller and the Depositor shall provide or cause to be provided to
the Insurer a bound volume or volumes of the Transaction Documents and an
executed original copy of each document executed in connection with the Transaction
within 60 days after the date of closing. 
Upon the reasonable request of the Insurer, the Servicer, the Seller and
the Depositor shall provide or cause to be provided to the Insurer a copy of
each of the Transaction Documents on computer diskette, in a format acceptable
to the Insurer;  provided, however, that
the failure to so deliver shall not constitute (i) an Event of Default
hereunder or under the Indenture or (ii) an Event of Servicing Termination.

 

(p)                                 Preference Payments.  With respect
to any Preference Amount (as defined in the Policy), the Servicer shall provide
to the Insurer upon the request of the Insurer:

 

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

 

16

 

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

 

(iii)                               an assignment in such form as reasonably
required by the Insurer, irrevocably assigning to the Insurer all rights and
claims of the Servicer, the Indenture Trustee and any Owner relating to or
arising under the Contracts against the debtor which made such preference payment
or otherwise with respect to such preference amount; and

 

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

 

(q)                                 Seller To Hold Common Stock of Depositor.  The Seller shall hold, either directly or indirectly,
all of the common stock of the Depositor during the Term of the Insurance
Agreement.  The Seller shall not sell,
pledge or otherwise transfer such stock without the prior written consent of
the Insurer.

 

(r)                                    Reserved.

 

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

 

Section 2.03.  Negative Covenants
of the Servicer, the Seller and the Depositor.  The
Servicer, the Seller and the Depositor hereby agree that during the Term of the
Insurance Agreement, unless the Insurer shall otherwise expressly consent in
writing:

 

(a)                                  Impairment of Rights.  None of the
Servicer, the Seller or the Depositor shall take any action, or fail to take
any action, if reasonably requested by the Insurer at a time when no Insurer
Default or Insurer Insolvency exists or if such action or failure to take
action may result in a material adverse change as described in clause (ii)
of the definition of Material Adverse Change with respect to the Servicer, the
Seller or the Depositor, or may interfere with the enforcement of any rights of
the Insurer under or with respect to the Transaction Documents.  The Servicer, the Seller or the Depositor
shall give the Insurer written notice of any such action or failure to act on
the earlier of: (i) the date upon which any publicly available filing or
release is made with respect to such action or failure to act or
(ii) promptly prior to the date of consummation of such action or failure
to act.  The Servicer, the Seller and
the Depositor shall furnish to the Insurer all information requested by it that
is reasonably necessary to determine compliance with this Section (a).

 

(b)                                 Adverse Selection Procedure.  The Servicer,
the Seller and the Depositor will not use any Adverse Selection Procedure in
selecting Contracts to be transferred to

 

17

 

the Indenture Trustee
from the outstanding contracts that qualify under the Sale and Allocation
Agreement for inclusion in the Trust.

 

(c)                                  Waiver, Amendments, Assignments, Etc. 
Except as may be otherwise expressly set forth in the Transaction
Documents, none of the Servicer, the Seller or the Depositor shall waive,
modify or amend, or consent to any waiver, modification or amendment of, any of
the terms, provisions or conditions of any of the Transaction Documents without
the prior written consent of the Insurer; and (if no Insurer Default or Insurer
Insolvency exists) none of the Servicer, the Seller or the Depositor shall
assign any of the Transaction Documents to which it is a party without the
prior written consent of the Insurer.

 

(d)                                 Contracts; Charge-off Policy.  Except as
otherwise permitted in the Sale and Allocation Agreement or the Servicing
Agreement, the Servicer, the Seller and the Depositor shall not alter or amend
any Contract, their respective collection policies or their respective
charge-off policies in a manner that materially adversely affects the Insurer
unless the Insurer shall have previously given its consent, which consent shall
not be withheld unreasonably.

 

Section 2.04.  Representations and
Warranties of the Issuer.  As of the Date of Issuance, the Issuer
represents, warrants and covenants as follows:

 

(a)                                  Due Organization and Qualification. 
The Issuer is a statutory trust and is duly organized, validly existing
and in good standing under the laws of the State of Delaware.  The Issuer is duly qualified to do business,
is in good standing and has obtained all licenses, permits, charters,
registrations and approvals (together, “approvals”) necessary for the conduct
of its business as currently conducted and as described in the Offering
Document and the performance of its obligations under the Transaction Documents
to which it is a party, in each jurisdiction in which the failure to be so
qualified or to obtain such approvals would render any Transaction Document to
which it is a party unenforceable in any respect or would have a material
adverse effect upon the Transaction, the Owner or the Insurer.

 

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

 

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

 

18

 

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

 

(i)                                     conflicts with or results in any breach
or violation of any provision of the Trust Agreement or any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
currently in effect having applicability to the Issuer or any of its material
properties, including regulations issued by an administrative agency or other
governmental authority having supervisory powers over the Issuer;

 

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

 

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

 

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

 

(f)                                    Valid and Binding Obligations.  The
Obligations, when executed, authenticated and issued in accordance with the
Indenture and the Transaction Documents (other than the Obligations), when
executed and delivered by the Issuer, will constitute the legal, valid and
binding obligations of the Issuer enforceable in accordance with their
respective terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors’ rights generally and general equitable principles and public policy
considerations as to rights of indemnification for violations of federal
securities laws.  The Issuer will not at
any time in the future deny that the Transaction Documents constitute the
legal, valid and binding obligations of the Issuer.

 

(g)                                 Compliance With Law, Etc.  No practice,
procedure or policy employed, or proposed to be employed, by the Issuer in the
conduct of its business violates any law, regulation, judgment, agreement,
order or decree applicable to it that, if enforced, could reasonably be
expected to result in a Material Adverse Change with respect to the
Issuer.  The Issuer is not in breach of
or default under any applicable law or administrative regulation of its
respective jurisdiction or incorporation, or any department, division, agency
or instrumentality thereof or of the United States or any applicable
judgment or decree or any loan agreement, note, resolution, certificate,
agreement or other instrument to which the Issuer is a party or is otherwise
subject which, if enforced, would have a

 

19

 

material adverse effect
on the ability of the Issuer, to perform its obligations under the Transaction
Documents.

 

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

 

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

 

(j)                                     Transaction Documents.  Each of the
representations and warranties of the Issuer contained in the Transaction
Documents is true and correct in all material respects, and the Issuer hereby
makes each such representation and warranty to, and for the benefit of, the
Insurer as if the same were set forth in full herein; provided that the remedy
for any breach of this paragraph shall be limited to the remedies specified in
the related Transaction Document or in this Insurance Agreement.

 

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

 

(l)                                     Principal Place of Business.  The
principal place of business of the Issuer is located in Wilmington, Delaware
and the Issuer is a statutory trust organized under the laws of the State of
Delaware.  “First Investors Auto Owner
Trust 2003-A” is the correct legal name of the Issuer indicated on the public
records of the Issuer’s jurisdiction of organization which shows the Issuer to
be organized.

 

20

 

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

 

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

 

(o)                                 No Material Event of Default.  There is no
material event of default on the part of the Issuer under any agreement
involving financial obligations which would materially adversely impact the
financial conditions or operations of the Trust or its obligations under any
document associated with this Transaction.

 

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

 

Section 2.05.  Affirmative
Covenants of the Issuer.  The Issuer hereby agrees that
during the Term of the Insurance Agreement, unless the Insurer shall otherwise
expressly consent in writing:

 

(a)                                  Compliance With Agreements and Applicable Laws. 
The Issuer shall not be in default under the Transaction Documents and
shall comply with all material requirements of any law, rule or regulation
applicable to it.  Except in accordance
with the terms of the Transaction Documents, the Issuer shall not agree to or
consent to any waiver of, any material amendment to, or any modification of the
terms of any Transaction Documents unless the Insurer shall have given its
prior written consent; provided, however, that if an Insurer Default has occurred
and is continuing, the Issuer need not obtain the consent of the Insurer for
any waiver, amendment, or modification which is not materially adverse to the
Insurer.

 

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

 

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

 

21

 

(i)                                     the submission of any claim or the
initiation or threat of any legal process, litigation or administrative or
judicial investigation, or rule making or disciplinary proceeding by or against
the Issuer that (A) could be required to be disclosed to the Commission or
to the Issuer’s owners or 
(B) could result in a Material Adverse Change with respect to the
Issuer or  the promulgation of any
proceeding or any proposed or final rule which would result in a Material
Adverse Change with respect to the Issuer;

 

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

 

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

 

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

 

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

 

(d)                                 Financing Statements and Further Assurances. 
To the extent provided in the Indenture, the Issuer will cause to be
filed all necessary financing statements or other instruments, and any
amendments or continuation statements relating thereto, necessary to be kept
and filed in such manner and in such places as may be required by law to
preserve and protect fully the interest of the Indenture Trustee.  The Issuer shall, upon the request of the
Insurer, from time to time, execute, acknowledge and deliver, or cause to be
executed, acknowledged and delivered, within ten days of such request,
such amendments hereto and such further instruments and take such further
action as may be reasonably necessary to effectuate the intention, performance
and provisions of the Transaction Documents to which it is a party.  In addition, the Issuer agrees to cooperate
with S&P and Moody’s in connection with any review of the Transaction that
may be undertaken by S&P and Moody’s after the date hereof.

 

(e)                                  Maintenance of Licenses.  The Issuer,
or any successors thereof, shall maintain all licenses, permits, charters and
registrations which are material to the conduct of its business.

 

22

 

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

 

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

 

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

 

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

 

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

 

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

 

(iii)                               with the Issuer’s consent, as the case
may be, which consent shall not be unreasonably withheld, to discuss the
affairs, finances and accounts of the Issuer with the Issuer’s independent
accountants, provided that a representative of the Seller or the Issuer  shall have the right to be present during
such discussions.

 

Such inspections and discussions shall be
conducted during normal business hours and shall not unreasonably disrupt the
business of the Issuer.  The books and records of the Issuer will be
maintained at the address of the Issuer designated herein for receipt of
notices, unless the Issuer shall otherwise advise the parties hereto in
writing.

 

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

 

23

 

Section 2.06.  Negative Covenants
of the Issuer.  The Issuer hereby agrees that during the Term of the
Insurance Agreement, unless the Insurer shall otherwise expressly consent in
writing:

 

(a)                                  Impairment of Rights.  The Issuer
shall not take any action, or fail to take any action, if such action or
failure to take action may result in a material adverse change as described in
clause (ii) of the definition of Material Adverse Change with respect to
the Issuer, or may interfere with the enforcement of any rights of the Insurer
under or with respect to the Transaction Documents.  The Issuer shall give the Insurer written notice of any such
action or failure to act on the earlier of: (i) the date upon which any
publicly available filing or release is made with respect to such action or
failure to act or (ii) promptly prior to the date of consummation of such
action or failure to act.  The Issuer
shall furnish to the Insurer all information requested by it that is reasonably
necessary to determine compliance with this paragraph.

 

(b)                                 Waiver, Amendments, Etc.  Except upon
the prior written consent of the Insurer which consent shall not unreasonably
be withheld, the Issuer shall not allow the transfer, modification or
amendment, nor consent to any transfer, modification or amendment of the
Certificate of Trust unless such amendment is required under the Delaware
Business Trust Act.

 

(c)                                  Restrictions on Liens. 
The Issuer
shall not, except as contemplated by the Transaction Documents, (i) create,
incur or suffer to exist, or agree to create, incur or suffer to exist, or
consent to cause or permit in the future (upon the happening of a contingency
or otherwise) the creation, incurrence or existence of any lien of the
Contracts or (ii) sign or file under the Uniform Commercial Code of any
jurisdiction any financing statement which names the Issuer as a debtor, or
sign any security agreement authorizing any secured party thereunder to file
such financing statement, with respect to the Contracts.

 

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

 

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

 

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

 

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

 

24

 

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

 

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

 

(a)                                  Due Organization and Qualification. 
The Indenture Trustee and the Back-up Servicer are each a national
banking association or corporation, duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of
incorporation.  Each of the Indenture
Trustee and the Back-up Servicer is duly qualified to do business, is in good
standing and has obtained all licenses, permits, charters, registrations and
approvals (together, “approvals”) necessary for the conduct of its business as
currently conducted and as described in the Offering Document and the
performance of its obligations under the Transaction Documents, in each jurisdiction
in which the failure to be so qualified or to obtain such approvals would
render any Transaction Document unenforceable in any respect or would have a
material adverse effect upon the Transaction, the Owners or the Insurer.

 

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

 

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

 

(i)                                     conflicts with or results in any breach
or violation of any provision of the certificate or articles of incorporation
or bylaws of the Indenture Trustee or the Back-up Servicer or any law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award
currently in effect having applicability to the Indenture Trustee or the
Back-up Servicer or any of their material properties, including regulations
issued by an administrative agency or other governmental authority having
supervisory powers over the Indenture Trustee or the Back-up Servicer;

 

(ii)                                  constitutes a default by the Indenture
Trustee or the Back-up Servicer under or a breach of any provision of any loan
agreement, mortgage, indenture or other agreement or instrument to which the
Indenture Trustee or the Back-up Servicer is a party or by which any of their
respective properties, which

 

25

 

are individually or in
the aggregate material to the Indenture Trustee or the Back-up Servicer, is or
may be bound or affected; or

 

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

 

(d)                                 Legal Proceedings.  There is no
action, proceeding or investigation by or before any court, governmental or
administrative agency or arbitrator against or affecting the Indenture Trustee,
the Back-up Servicer, or any of their subsidiaries, or any properties or rights
of the Indenture Trustee, the Back-up Servicer or any of their subsidiaries,
pending or, to the Indenture Trustee’s or the Back-up Servicer’s knowledge
after reasonable inquiry, threatened, which, in any case, could reasonably be
expected to result in a Material Adverse Change with respect to the Indenture
Trustee or the Back-up Servicer.

 

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

 

(f)                                    Compliance With Law, Etc.  No practice,
procedure or policy employed, or proposed to be employed, by the Indenture
Trustee or the Back-up Servicer in the conduct of their business violates any
law, regulation, judgment, agreement, order or decree applicable to any the
Indenture Trustee or the Back-up Servicer that, if enforced, could reasonably
be expected to result in a Material Adverse Change with respect to the
Indenture Trustee or the Back-up Servicer. 
Neither the Indenture Trustee nor the Back-up Servicer is in breach of
or in default under any applicable law or administrative regulation of its
respective jurisdiction of organization, or any department, division, agency or
instrumentality thereof or of the United States or any applicable judgment or
decree or any loan agreement, note, resolution, certificate, agreement or other
instrument to which the Indenture Trustee or the Back-up Servicer is a party or
is otherwise subject which, if enforced, would have a material adverse effect
on the ability of the Indenture Trustee or the Back-up Servicer, as the case
may be, to perform their respective obligations under the Transaction
Documents.

 

(g)                                 Transaction Documents.  Each of the
representations and warranties of the Indenture Trustee and the Back-up
Servicer contained in the Transaction Documents is true and correct in all
material respects, and the Indenture Trustee and the Back-up 

 

26

 

Servicer hereby makes
each such representation and warranty to, and for the benefit of, the Insurer
as if the same were set forth in full herein.

 

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

 

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

 

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

 

(a)                                  Representations and Warranties.  As
of the Date of Issuance, each of the representations and warranties of the
Owner Trustee set forth in the Transaction Documents is true and correct in all
material respects and the Owner Trustee makes each such representation and
warranty to, and for the benefit of, the Insurer as if the same were set forth
in full herein.

 

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

 

(c)                                  Furnishing of Documents; Notices. 
The Owner Trustee hereby agrees to furnish to the Insurer the documents
described in Section 7.2 of the Trust Agreement to the same extent as
required with respect to the Depositor. 
The Owner Trustee shall provide the Insurer with prior written notice of
any merger, consolidation or asset transfer with respect to it as described in
Section 10.4 of the Trust Agreement.

 

Section 2.09.  Negative Covenant of
the Administrator.  The Administrator shall not remove the Owner
Trustee pursuant to Section 10.2 of the Trust Agreement unless it has
obtained the prior written consent of the Insurer if no Insurer Default or
Insurer Insolvency exists.

 

ARTICLE III

THE POLICY; REIMBURSEMENT

 

Section 3.01.  Issuance of the
Policy.  The Insurer agrees to issue the Policy on
the Closing Date subject to satisfaction of the conditions precedent set forth
below:

 

27

 

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

 

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

 

(c)                                  Certified Documents and Resolutions. 
The Insurer shall have received a copy of (i) the certificate or
articles of incorporation and bylaws of the Servicer, the Seller and the
Depositor and (ii) the resolutions of the Seller’s Board of Directors
authorizing the sale of the Contracts and (iii) the execution, delivery and
performance by the Servicer, the Seller and the Depositor of the Transaction
Documents and the Transaction contemplated thereby, certified by the Secretary
or an Assistant Secretary of the Servicer, the Seller and the Depositor (which
certificate shall state that such certificate or articles of incorporation,
bylaws and resolutions are in full force and effect without modification on the
Date of Issuance).

 

(d)                                 Incumbency Certificate.  The Insurer
shall have received a certificate of the Secretary or an Assistant Secretary of
the Servicer, the Seller and the Depositor certifying the names and signatures
of the officers of the Servicer, the Seller and the Depositor authorized to
execute and deliver the Transaction Documents and that shareholder consent to
the execution and delivery of such documents is not necessary.

 

(e)                                  Representations and Warranties; Certificate. 
The representations and warranties of the Servicer, the Seller and the
Depositor set forth or incorporated by reference in this Insurance Agreement
shall be true and correct in all material respects as of the Date of Issuance
as if made on the Date of Issuance and the Insurer shall have received a
certificate of appropriate officers of the Servicer, the Seller and the
Depositor to that effect.

 

(f)                                    Opinions of Counsel.

 

(i)                                     The law firm of Dechert LLP shall have
issued its favorable opinion, in form and substance reasonably acceptable to
the Insurer and its counsel, regarding and the validity and enforceability of
the Transaction Documents, other than the Trust Agreement, against the
Depositor, the Servicer, the Issuer and the Seller.

 

(ii)                                  The law firm of Dechert LLP shall have
issued its favorable opinions, in form and substance reasonably acceptable to
the Insurer  and its counsel, regarding
the transfer of the Contracts from the Seller to the Depositor

 

28

 

and from the Depositor to
the Issuer, and consolidation of the Depositor and the Seller and the Seller
and the Issuer in the event of the Seller’s bankruptcy.

 

(iii)                               The law firm of Richards, Layton &
Finger, P.A.  shall have issued its
favorable opinions, in form and substance reasonably acceptable to the Insurer
and its counsel, regarding the perfection of the Indenture Trustee’s interest
in the Trust Estate, including in the Reserve Account Property.

 

(iv)                              The law firm of Richards, Layton &
Finger, P.A. shall have issued its favorable opinion, in form and substance
reasonably acceptable to the Insurer and its counsel, regarding and the
validity and enforceability of the Trust Agreement.

 

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

 

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

 

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

 

(i)                                     Legality.  No statute,
rule, regulation or order shall have been enacted, entered or deemed applicable
by any government or governmental or administrative agency or court that would
make the Transaction contemplated by any of the Transaction Documents illegal
or otherwise prevent the consummation thereof.

 

(j)                                     Issuance of Ratings.  The Insurer
shall have received confirmation that the risk secured by the Policy
constitutes at least an investment grade risk by S&P and Moody’s, and that
the Obligations, when issued, will be rated “AAA” by S&P and “Aaa” by
Moody’s.

 

(k)                                  No Default.  No Default
or Event of Default shall have occurred.

 

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

 

29

 

(m)                               Conform to Documents.  The Insurer
and its counsel shall have determined that all documents, certificates and
opinions to be delivered in connection with the Obligations conform to the
terms of the Transaction Documents.

 

(n)                                 Satisfaction of Conditions of the Purchase Agreement. 
All conditions in the Purchase Agreement relating to the Initial
Purchaser’s obligation to purchase the Obligations shall have been satisfied.

 

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

 

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

 

Section 3.02.  Payment of Fees and
Insurance Premium.

 

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

 

(b)                                 Insurance Premium.  In
consideration of the issuance by the Insurer of the Policy, the Insurer shall
be entitled to receive the Insurance Premium, so long as no Insurer Default or
Insurer Insolvency has occurred,  as and
when due in accordance with the terms of the Premium Side Letter Agreement
(i) in the case of Insurance Premium due on or before the Date of
Issuance, directly from the Servicer or the Seller and (ii) in the case of
Insurance Premium due after the Date of Issuance, first, pursuant to the Sale
and Allocation Agreement, and second, to the extent the amounts in
subclause first
are not sufficient, directly from the Servicer.  For purposes of the Sale and Allocation
Agreement, the term “Premium Percentage” shall have the meaning set forth in
the Premium Side Letter Agreement. The Insurance Premium shall be calculated
according to the Premium Side Letter Agreement for the amount due on or before
the Date of Issuance and for the amount due on each Payment Date.  The Insurance Premium paid hereunder or
under the Sale and Allocation Agreement shall be nonrefundable without regard
to whether the Insurer makes any payment under the Policy or any other circumstances
relating to the Obligations or provision being made for payment of the
Obligations prior to maturity.  All
payments of Insurance Premium to be made to the Insurer shall be made by wire
transfer to an account designated from time to time by the Insurer by written
notice to the Servicer and the Indenture Trustee.

 

Section 3.03.  Reimbursement and
Additional Payment Obligation.

 

(a)                                  In accordance with the priorities
established in Section  3.5 of the Sale and Allocation Agreement, the
Insurer shall be entitled to (i) reimbursement for any payment

 

30

 

made by the Insurer under
the Policy, which reimbursement by the Issuer shall be due and payable on the
date that any amount is to be paid pursuant to a Notice (as defined in the
Policy), in an amount equal to the amount to be so paid and all amounts
previously paid that remain unreimbursed, together with interest on any and all
amounts remaining unreimbursed (to the extent permitted by law, if in respect
of any unreimbursed amounts representing interest) from the date such amounts
became due until paid in full (after as well as before judgment), at a rate of
interest equal to the Late Payment Rate, (ii) payment or reimbursement of
any other amounts owed to the Insurer under this Agreement together with
interest thereon at a rate equal to the Late Payment Rate and
(iii) reimbursement for any payments made by the Insurer with respect to
the fees and expenses of a successor Servicer or with respect to any transition
costs relating to the transfer of servicing from the Servicer to such successor
Servicer together with interest thereon at a rate equal to the Late Payment
Rate.

 

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

 

(c)                                  The Servicer and the Seller agree to pay
to the Insurer as follows: any and all charges, fees, costs and expenses that
the Insurer may reasonably pay or incur, including, but not limited to,
attorneys’ and accountants’ fees and expenses, in connection with (i) any
accounts established to facilitate payments under the Policy to the extent the
Insurer has not been immediately reimbursed on the date that any amount is paid
by the Insurer under the Policy, (ii) the enforcement, defense or
preservation of any rights in respect of any of the Transaction Documents,
including defending, monitoring or participating in any litigation or
proceeding (including any insolvency or bankruptcy proceeding  in respect of any Transaction participant or
any affiliate thereof) relating to any of the Transaction Documents, any party
to any of the Transaction Documents, in its capacity as such a party, or the
Transaction, (iii) any amendment, consent, waiver or other action with
respect to, or related to, any Transaction Document, whether or not executed or
completed, (iv) preparation of bound volumes of the Transaction Documents,
or (v) any reliening, any replacement servicer or any transition costs relating
to the transfer of servicing from the Servicer to a replacement servicer;
provided, however, that

 

31

 

the amounts recovered by
the Insurer from the Seller and the Servicer pursuant to this paragraph for the
items set forth in (v) above shall be limited to $250,000.00; provided,
further, that costs and expenses shall include a reasonable allocation of
compensation and overhead attributable to the time of employees of the Insurer
spent in connection with the actions described in clause (ii) above, and
the Insurer reserves the right to charge a reasonable fee as a condition to
executing any waiver or consent proposed in respect of any of the Transaction
Documents.  Notwithstanding anything
herein to the contrary, the Seller and the Servicer shall have no obligation to
pay any amounts representing (i) recourse for uncollectible Contracts and (ii)
any principal or interest on any Note.

 

(d)                                 The Servicer, the Seller and the
Depositor agree to pay to the Insurer as follows: interest on any and all
amounts described in subsections (b), (c), (e) and (f) of this
Section 3.03 from the date payable or paid by such party until payment
thereof in full, and interest on any and all amounts described in
Section 3.02 hereof from the date due until payment thereof in full, in
each case, payable to the Insurer at the Late Payment Rate per annum.

 

(e)                                  The Servicer, the Seller and the
Depositor agree to pay to the Insurer as follows: any payments made by the
Insurer on behalf of, or advanced to, the Servicer, the Seller or the
Depositor, respectively, including, without limitation, any amounts payable by
the Servicer, the Seller or the Depositor pursuant to the Transaction Documents
(other than the Obligations).

 

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

 

All such amounts are to be immediately due and payable without demand.

 

Section 3.04.  Indemnification;
Limitation of Liability.

 

(a)                                  In addition to any and all rights of
indemnification or any other rights of the Insurer pursuant hereto or under law
or equity, the Seller, the Servicer and any successors thereto agree to pay,
and to protect, indemnify and save harmless, the Insurer and its officers,
directors, shareholders, employees, agents, and each person, if any, who
controls the Insurer within the meaning of either Section 15 of the Securities
Act or Section 20 of the Securities Exchange Act from and against any and
all claims, Losses, liabilities (including penalties), actions, suits,
judgments, demands, damages, costs or reasonable expenses (including, without
limitation, reasonable fees and expenses of attorneys, consultants and auditors
and reasonable costs of investigations) or obligations whatsoever paid by the
Insurer (herein collectively referred to as “Liabilities”) of any nature
arising out of or relating to the Transaction contemplated by the Transaction
Documents by reason of:

 

32

 

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

 

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

 

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

 

(iv)                              the violation by the Depositor, the
Seller or the Servicer of any federal or state securities, banking or antitrust
laws, rules or regulations in connection with the issuance, offer and sale of
the Obligations or the Transaction contemplated by the Transaction Documents;

 

(v)                                 the violation by the Depositor, the
Seller or the Servicer of any federal or state laws, rules or regulations
relating to the Transaction, including without limitation the maximum amount of
interest permitted to be received on account of any loan of money or with
respect to the Contracts;

 

(vi)                              the breach by the Depositor, the Seller
or the Servicer of any of its obligations under this Insurance Agreement or any
of the other Transaction Documents; and

 

(vii)                           the breach by the Servicer, the Seller or
the Depositor of any representation or warranty on the part of the Servicer,
the Seller or the Depositor contained in the Transaction Documents or in any
certificate or report furnished or delivered to the Insurer thereunder.

 

33

 

This indemnity provision shall survive the termination of this
Insurance Agreement and shall survive until the statute of limitations has run
on any causes of action which arise from one of these reasons and until all
suits filed as a result thereof have been finally concluded.  Notwithstanding anything else in this
Section 3.04(a),  the Seller shall
have no obligation for amounts due under this Section 3.04(a) for acts or
omissions of or any liabilities attributable to the Depositor or the Issuer.

 

(b)                                 [Reserved]

 

(c)                                  Any party which proposes to assert the
right to be indemnified under this Section 3.04 will, promptly after
receipt of notice of commencement of any action, suit or proceeding against
such party in respect of which a claim is to be made against the Servicer, the
Seller or the Depositor under this Section 3.04, notify the Servicer, the
Seller or the Depositor of the commencement of such action, suit or proceeding,
enclosing a copy of all papers served. 
In case any action, suit or proceeding shall be brought against any
indemnified party and it shall notify the Servicer, the Seller or the Depositor
of the commencement thereof, the Servicer, the Seller or the Depositor shall be
entitled to participate in, and, to the extent that it shall wish, to assume
the defense thereof, with counsel satisfactory to such indemnified party, and
after notice from the Servicer, the Seller or the Depositor to such indemnified
party of its election so to assume the defense thereof, the Servicer, the
Seller or the Depositor shall not be liable to such indemnified party for any
legal or other expenses other than reasonable costs of investigation
subsequently incurred by such indemnified party in connection with the defense
thereof.  The indemnified party shall
have the right to employ its counsel in any such action the defense of which is
assumed by the Servicer, the Seller or the Depositor in accordance with the
terms of this subsection (c), but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless the employment of
counsel by such indemnified party has been authorized by the Servicer, the
Seller or the Depositor.  The Servicer,
the Seller or the Depositor shall not be liable for any settlement of any
action or claim effected without its consent.

 

(d)                                 In addition to any and all rights of
indemnification or any other rights of the Insurer pursuant hereto or under law
or equity, the Indenture Trustee agrees to pay, and to protect, indemnify and
save harmless, the Insurer and its officers, directors, shareholders,
employees, agents, including each person, if any, who controls the Insurer
within the meaning of either Section 15 of the Securities Act of 1933, as
amended, or Section 20 of the Securities and Exchange Act of 1934, as
amended, from and against any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or reasonable
expenses (including, without limitation, reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) or obligations
whatsoever of any nature arising out of the breach by the Indenture Trustee of
any of its obligations under this Insurance Agreement or the Indenture.  This indemnity provision shall survive the
termination of this Insurance Agreement and shall survive until the statute of
limitations has run on any causes of action which arise from one of these
reasons and until all suits filed as a result thereof have been finally concluded.

 

34

 

(e)                                  In addition to any and all rights of
indemnification or any other rights of the Insurer pursuant hereto or under law
or equity, the Back-up Servicer agrees to pay, and to protect, indemnify and
save harmless, the Insurer and its officers, directors, shareholders,
employees, agents, including each person, if any, who controls the Insurer
within the meaning of either Section 15 of the Securities Act of 1933, as
amended, or Section 20 of the Securities and Exchange Act of 1934, as
amended, from and against any and all claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or reasonable
expenses (including, without limitation, reasonable fees and expenses of
attorneys, consultants and auditors and reasonable costs of investigations) or
obligations whatsoever of any nature arising out of the breach by the Back-up
Servicer of any of its obligations under this Insurance Agreement or the
Servicing Agreement.  This indemnity
provision shall survive the termination of this Insurance Agreement and shall
survive until the statute of limitations has run on any causes of action which
arise from one of these reasons and until all suits filed as a result thereof
have been finally concluded.

 

Section 3.05.  Payment Procedure. 
In the event of any payment by the Insurer, the Indenture Trustee, the
Servicer, the Back-up Servicer, the Seller and the Depositor agree to accept
the voucher or other evidence of payment as prima facie evidence of the
propriety thereof and the liability therefor to the Insurer.  All payments to be made to the Insurer under
this Insurance Agreement shall be made to the Insurer in lawful currency of the
United States of America in immediately available funds at the notice
address for the Insurer as specified in Section 6.02 hereof on the date
when due or as the Insurer shall otherwise direct by written notice to the
other parties hereto.  In the event that
the date of any payment to the Insurer or the expiration of any time period
hereunder occurs on a day which is not a Business Day, then such payment or
expiration of time period shall be made or occur on the next succeeding
Business Day with the same force and effect as if such payment was made or time
period expired on the scheduled date of payment or expiration date.  Payments to be made to the Insurer under
this Insurance Agreement shall bear interest at the Late Payment Rate from the
date when due to the date paid.

 

ARTICLE IV

FURTHER AGREEMENTS

 

Section 4.01.  Effective Date; Term
of the Insurance Agreement.  This
Insurance Agreement shall take effect on the Date of Issuance and shall remain
in effect until the later of (a) such time as the Insurer is no longer
subject to a claim under the Policy and the Policy shall have been surrendered
to the Insurer for cancellation and (b) all amounts payable to the Insurer
by the Servicer, the Indenture Trustee, the Back-up Servicer, the Seller or the
Depositor or from any other source under the Transaction Documents and all
amounts payable under the Obligations have been paid in full; provided,
however, that the provisions of Sections 3.02, 3.03, 3.04 and 4.06 hereof
shall survive any termination of this Insurance Agreement.

 

35

 

Section 4.02.  Further Assurances
and Corrective Instruments.

 

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

 

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

 

Section 4.03.  Obligations Absolute.

 

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

 

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

 

(ii)                                  any exchange or release of any other
obligations hereunder;

 

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

 

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

 

(v)                                 any payment by the Insurer under the
Policy against presentation of a certificate or other document that does not
strictly comply with terms of the Policy;

 

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

 

(vii)                           any breach by the Servicer, the Indenture
Trustee, the Back-up Servicer, the Seller, the Issuer, the Owner Trustee or the
Depositor of any

 

36

 

representation, warranty
or covenant contained in any of the Transaction Documents.

 

(b)                                 The Servicer, the Indenture Trustee, the
Back-up Servicer, the Seller, the Depositor, the Issuer, the Owner Trustee and
any and all others who are now or may become liable for all or part of the
obligations of the Servicer, the Indenture Trustee, the Back-up Servicer, the
Seller, the Issuer, the Owner Trustee or the Depositor under this Insurance
Agreement agree to be bound by this Insurance Agreement and (i) to the
extent permitted by law, waive and renounce any and all redemption and
exemption rights and the benefit of all valuation and appraisement privileges
against the indebtedness and obligations evidenced by any Transaction Document
or by any extension or renewal thereof; (ii) waive presentment and demand
for payment, notices of nonpayment and of dishonor, protest of dishonor and
notice of protest; (iii) waive all notices in connection with the delivery
and acceptance hereof and all other notices in connection with the performance,
default or enforcement of any payment hereunder, except as required by the
Transaction Documents; (iv) waive all rights of abatement, diminution,
postponement or deduction, or any defense other than payment, or to any right
of setoff or recoupment arising out of any breach under any of the Transaction
Documents, by any party thereto or any beneficiary thereof, or out of any
obligation at any time owing to the Servicer, the Indenture Trustee, the
Back-up Servicer, the Seller, the Issuer, the Owner Trustee or the Depositor;
(v) agree that its liabilities hereunder shall, except as otherwise
expressly provided in this Section 4.03, be unconditional and without
regard to any setoff, counterclaim or the liability of any other Person for the
payment hereof; (vi) agree that any consent, waiver or forbearance
hereunder with respect to an event shall operate only for such event and not
for any subsequent event; (vii) consent to any and all extensions of time
that may be granted by the Insurer with respect to any payment hereunder or
other provisions hereof and to the release of any security at any time given
for any payment hereunder, or any part thereof, with or without substitution,
and to the release of any Person or entity liable for any such payment; and
(viii) consent to the addition of any and all other makers, endorsers,
guarantors and other obligors for any payment hereunder, and to the acceptance
of any and all other security for any payment hereunder, and agree that the
addition of any such obligors or security shall not affect the liability of the
parties hereto for any payment hereunder.

 

(c)                                  Nothing herein shall be construed as
prohibiting the Servicer, the Indenture Trustee, the Back-up Servicer, the
Seller, the Issuer, the Owner Trustee or the Depositor from pursuing any rights
or remedies it may have against any other Person in a separate legal
proceeding.

 

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

 

(a)                                  This Insurance Agreement shall be a
continuing obligation of the parties hereto and shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.  None of the
Servicer, the Indenture Trustee, the Back-up Servicer, the Seller, the Issuer,
the Owner Trustee nor the Depositor may assign its rights under this Insurance
Agreement, or delegate any of its duties hereunder,

 

37

 

without the prior written
consent of the Insurer.  Any assignment
made in violation of this Insurance Agreement shall be null and void.

 

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

 

(c)                                  In addition, the Insurer shall be
entitled to assign or pledge to any bank or other lender providing liquidity or
credit with respect to the Transaction or the obligations of the Insurer in
connection therewith any rights of the Insurer under the Transaction Documents
or with respect to any real or personal property or other interests pledged to
the Insurer, or in which the Insurer has a security interest, in connection
with the Transaction.

 

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

 

(e)                                  The Servicer, the Seller, the Depositor ,
the Back-up Servicer, the Issuer, the Owner Trustee and the Indenture Trustee
agree that the Insurer shall have all rights of a third-party beneficiary in
respect of the Indenture and each other Transaction Document to which it is not
a signing party and hereby incorporate and restate their representations,
warranties and covenants as set forth therein for the benefit of the Insurer.

 

Section 4.05.  Liability of the
Insurer.  Neither the Insurer nor any of its officers,
directors or employees shall be liable or responsible for: (a) the use
that may be made of the Policy by the Indenture Trustee or for any acts or
omissions of the Indenture Trustee in connection therewith; or (b) the
validity, sufficiency, accuracy or genuineness of documents delivered to the
Insurer (or its Fiscal Agent) in connection with any claim under the Policy, or
of any signatures thereon, even if such documents or signatures should in fact
prove to be in any or all respects invalid, insufficient, fraudulent or forged
(unless the Insurer shall have actual knowledge thereof).  In furtherance and not in limitation of the
foregoing, the Insurer (or its Fiscal Agent) may accept documents that appear
on their face to be in order, without responsibility for further investigation.

 

38

 

Section 4.06.  Parties Will Not
Institute Insolvency Proceedings.  So
long as this Agreement is in effect, and for one year following its
termination, none of the parties hereto will file any involuntary petition or
otherwise institute any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding or other proceedings under any federal or state
bankruptcy or similar law against the Depositor or the Issuer.

 

Section 4.07.  Indenture Trustee,
Depositor, Back-up Servicer, Seller and Servicer To Join in Enforcement Action.

 

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

 

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

 

(c)                                  The Indenture Trustee shall cooperate
with, and take such action as directed by, the Insurer (so long as no Insurer
Default has occurred and is continuting), including (without limitation)
entering into such agreements and settlements as the Insurer in its sole
discretion shall direct with respect to such court proceeding.  The Indenture Trustee shall not be liable to
the Insurer for any such action that conforms to the direction of the
Insurer.  The Indenture Trustee’s
reasonable out-of-pocket costs and expenses (including attorneys’ fees and
expenses) with respect to any such action shall be reimbursed pursuant to the
Sale and Allocation Agreement; provided, however, that if such costs and
expenses are not so reimbursed on the Payment Date immediately following the
date incurred, then the Insurer shall reimburse the Indenture Trustee for such
costs and expenses within 60 days of such nonpayment.

 

(d)                                 The Indenture Trustee hereby agrees to
provide to the Insurer prompt written notice of any action, proceeding or
investigation that names the Owner Trustee or the Issuer as a party or that
could adversely affect the Trust Estate or the rights or

 

39

 

obligations of the
Insurer hereunder or under the Policy or the other Transaction Documents,
including (without limitation) any insolvency or bankruptcy proceeding in
respect of the Servicer, Depositor, the Seller or any affiliate thereof.

 

(e)                                  Notwithstanding anything contained herein
or in any of the other Transaction Documents to the contrary, the Indenture
Trustee shall not, without the Insurer’s prior written consent or unless
directed by the Insurer (so long as no Insurer Default has occurred and is
continuting), undertake or join any litigation or agree to any settlement of
any action, proceeding or investigation affecting the Owner Trustee, the Issuer
or the Trust Estate or the rights or obligations of the Insurer hereunder or
under the Policy or the other Transaction Documents.

 

Section 4.08.  Subrogation.   To
the extent of any payments under the Policy, the Insurer shall be fully
subrogated to any remedies against the Depositor, the Seller or the Servicer or
in respect of the Contracts available to the Indenture Trustee under the
Indenture or Sale and Allocation Agreement. 
The Indenture Trustee acknowledges such subrogation and, further, agrees
to execute such instruments prepared by the Insurer and to take such reasonable
actions as, in the sole judgment of the Insurer, are necessary to evidence such
subrogation and to perfect the rights of the Insurer to receive any moneys paid
or payable under the Indenture or Sale and Allocation Agreement.

 

ARTICLE V

DEFAULTS; REMEDIES

 

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

 

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

 

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

 

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

 

(d)                                 The failure of the Seller, the Issuer or
the Depositor to comply with, or maintain the accuracy of, the Opinion Facts
and Assumptions, to the extent they are related to a date after the Closing
Date;

 

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

 

40

 

(f)                                    The departure of either of the following
executives from the Seller or its consolidated subsidiaries:  Tommy Moore or Bennie Duck, if a replacement
for such individuals(s) acceptable to the Insurer is not made within 90 days;

 

(g)                                 The Seller fails to maintain a minimum
GAAP Equity as a percentage of on-balance sheet portfolio of 10%.  Equity may include 50% of subordinated debt
with a maturity equal to or greater than five years, subject to MBIA review of
and satisfaction with the subordinated debt agreement;

 

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

 

(i)                                     The Seller fails to maintain a minimum
EBITDA Coverage of 1.1:1.0.  The test
shall be measured quarterly (coinciding with FIFS quarterly fiscal reporting)
on a rolling six months basis;

 

(j)                                     A Change in Control occurs;

 

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

 

(l)                                     As of the end of any of its fiscal
quarters, FIFSG shareholder’s equity (determined in accordance with GAAP) is
less than the sum of $25,250,000 and 50% of the aggregate of the net income of
FIFSG (determined in accordance with GAAP and without deduction for any net
losses) for such fiscal quarter and all prior fiscal quarters ending after
October 31, 2002; or

 

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

 

Section 5.02.  Remedies; No Remedy
Exclusive.

 

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

 

(i)                                     exercise any rights and remedies under
the Transaction Documents in accordance with the terms of the Transaction
Documents or direct the Indenture Trustee to exercise such remedies in
accordance with the terms of the Transaction Documents; or

 

(ii)                                  take whatever action at law or in equity
as may appear necessary or desirable in its judgment to collect the amounts
then due under the Transaction Documents or to enforce performance and
observance of any obligation, agreement or covenant of the Servicer, the
Indenture Trustee, the Back-up Servicer, the Seller, the Issuer, the Owner Trustee
or the Depositor under the Transaction Documents.

 

41

 

(b)                                 Unless otherwise expressly provided, no
remedy herein conferred upon or reserved is intended to be exclusive of any
other available remedy, but each remedy shall be cumulative and shall be in
addition to other remedies given under the Transaction Documents or existing at
law or in equity.  No delay or omission
to exercise any right or power accruing under the Transaction Documents upon
the happening of any event set forth in Section 5.01 hereof shall impair
any such right or power or shall be construed to be a waiver thereof, but any
such right and power may be exercised from time to time and as often as may be
deemed expedient.  In order to entitle
the Insurer to exercise any remedy reserved to the Insurer in this Article, it
shall not be necessary to give any notice, other than such notice as may be
required in this Article V.

 

Section 5.03.  Waivers.

 

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

 

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

 

ARTICLE VI

 

MISCELLANEOUS

 

Section 6.01.  Amendments, Etc. 
This Insurance Agreement may be amended, modified or terminated only by
written instrument or written instruments signed by the parties hereto.  The Servicer agrees to promptly provide a
copy of any amendment to this Insurance Agreement to the Indenture Trustee,
S&P and Moody’s.  No act or course
of dealing shall be deemed to constitute an amendment, modification or
termination hereof.

 

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

 

42

 

(a)                                  To the Insurer:

 

MBIA Insurance Corporation

113 King Street

Armonk, NY  10504

Attention:    Insured
Portfolio Management-Structured Finance (IPM-SF)

(First Investors Auto Owner Trust 2003-A)

Telecopy No.:  (914) 765-3810

Confirmation:  (914) 273-4545

 

(in each case in which notice or other communication
to the Insurer refers to an Event of Default, a claim on the Policy or with
respect to which failure on the part of the Insurer to respond shall be deemed
to constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of each of the general
counsel and the Insurer and shall be marked to indicate “URGENT MATERIAL
ENCLOSED.”)

 

(b)                                 To the Seller and Administrator:

 

First Investors Financial Services, Inc.

Suite 710

675 Bering Drive

Houston, TX  77057

Attention:  Tommy A. Moore, Jr.

Telecopy No.:  (713) 977-0657

Confirmation:  (713) 977-2600

 

(c)                                  To the Servicer:

 

First Investors Servicing Corporation

380 Interstate North Parkway

Sixth Floor

Atlanta, GA 30339

Attention:  Tommy A. Moore, Jr.

 

(d)                                 To the Indenture Trustee:

 

Wells Fargo Bank Minnesota, National
Association

MAC N9311-161

Sixth and Marquette Streets

 

43

 

Minneapolis, MN 55479

Attention: Corporate Trust Services — Asset-Backed Administration

 

(e)                                  To the Depositor:

 

First Investors Auto Funding Corporation

675 Bering Drive

Houston, TX  77057

Attention: Tommy A. Moore, Jr.

Telecopy No.:  (713) 977-0657

Confirmation:  (713) 977-2600

 

(f)                                    To the Issuer:

 

First Investors Auto Owner Trust 2003-A

c/o Deutsche Bank Trust Company Delaware

1011 Centre Road

Suite 200

Wilmington, DE 19805-1266

Attention: Corporate Trust

 

(g)                                 To the Owner Trustee:

 

Deutsche Bank Trust Company Delaware

1011 Centre Road

Suite 200

Wilmington, DE 19805-1266

Attention: Corporate Trust

 

With a copy to:

 

Deutsche Bank Trust Company Americas

Structured Finance Services

60 Wall Street, 26th floor

New York NY 10005

Attention:
                      

Telecopy: (212) 797-8606

Confirmation: (212) 250-8522

 

44

 

(h)                                 To the Back-up Servicer:

 

Wells Fargo Bank Minnesota, National Association

Sixth and Marquette Streets

Minneapolis, MN 55479-0070

Attention: Asset-Backed Trust Administration

 

A party may
specify an additional or different address or addresses by writing mailed or
delivered to the other parties as aforesaid. 
All such notices and other communications shall be effective upon
receipt.

 

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

 

Section 6.04.  Governing Law. 
This Insurance Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to
the conflict of law provisions thereof.

 

Section 6.05.  Consent to
Jurisdiction.

 

(a)                                  The parties hereto hereby irrevocably
submit to the jurisdiction of the United States District Court for the Southern
District of New York and any court in the State of New York located
in the City and County of New York, and any appellate court from any
thereof, in any action, suit or proceeding brought against it and to or in
connection with any of the Transaction Documents or the Transaction
contemplated thereunder or for recognition or enforcement of any judgment, and
the parties hereto hereby irrevocably and unconditionally agree that all claims
in respect of any such action or proceeding may be heard or determined in such
New York state court or, to the extent permitted by law, in such federal
court.  The parties hereto agree that a
final judgment in any such action, suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.  To the extent
permitted by applicable law, the parties hereto hereby waive and agree not to
assert by way of motion, as a defense or otherwise in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such courts, that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that the
related documents or the subject matter thereof may not be litigated in or by
such courts.

 

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

 

45

 

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

 

Section 6.06.  Consent of the
Insurer.  In the event that the consent of the Insurer
is required under any of the Transaction Documents, the determination whether
to grant or withhold such consent shall be made by the Insurer in its sole
discretion without any implied duty towards any other Person.

 

Section 6.07.  Counterparts. 
This Insurance Agreement may be executed in counterparts by the parties
hereto, and all such counterparts shall constitute one and the same instrument.

 

Section 6.08.  Headings. 
The headings of Articles and Sections and the Table of Contents
contained in this Insurance Agreement are provided for convenience only.  They form no part of this Insurance
Agreement and shall not affect its construction or interpretation.  Unless otherwise indicated, all references
to Articles and Sections in this Insurance Agreement refer to the corresponding
Articles and Sections of this Insurance Agreement.

 

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

 

Section 6.10.  Limited Liability. 
No recourse under any Transaction Document shall be had against, and no
personal liability shall attach to, any officer, employee, director, affiliate
or shareholder of any party hereto, as such, by the enforcement of any
assessment or by any legal or equitable proceeding, by virtue of any statute or
otherwise in respect of any of the Transaction Documents, the Obligations or
the Policy, it being expressly agreed and understood that each Transaction
Document is solely a corporate obligation of each party hereto, and that any
and all personal liability, either at common law or in equity, or by statute or
constitution, of every such officer, employee, director, affiliate or
shareholder for breaches by any party hereto of any obligations under any
Transaction Document is hereby expressly waived as a condition of and in
consideration for the execution and delivery of this Insurance Agreement.

 

Section 6.11.  Entire Agreement. 
The Transaction Documents and the Policy set forth the entire agreement
between the parties with respect to the subject matter thereof, and this
Insurance Agreement supersedes and replaces any agreement or understanding that
may have existed between the parties prior to the date hereof in respect of
such subject matter.

 

46

 

Section 6.12.  Limitation of
Liability.  Notwithstanding any other provision herein
or elsewhere, this Insurance Agreement has been executed and delivered by
Deutsche Bank Trust Company Delaware, not in its individual capacity, but
solely in its capacity as Owner Trustee of the Issuer, in no event shall
Deutsche Bank Trust Company Delaware or the Owner Trustee have any liability in
respect of the representation, warranties or obligations of the Issuer
hereunder or under any other  documents,
as to all of which recourse shall be solely to the assets of the Issuer, and
for all purposes of this Insurance Agreement and each other document, the Owner
Trustee and Deutsche Bank Trust Company Delaware shall be entitled to the
benefits of the Trust Agreement.

 

Section 6.13.  Limited Recourse. 
Notwithstanding any other provision contained herein or in any of the
Transaction Documents, the liability of the Issuer to the Insurer hereunder is
limited in recourse to the Collateral, when and as applied in accordance with
the priority of payments set forth in Section 3.5 of the Sale and
Allocation Agreement, and to the extent such proceeds of the Collateral are
insufficient to meet the obligations of the Issuer hereunder in full, the
Issuer shall have no further liability in respect of any such outstanding
obligations, it being agreed between the parties that, upon realization of the
Collateral and its reduction to zero, all claims arising out of or in
connection with this Agreement against the Issuer shall thereupon extinguish
and shall not thereafter revive.

 

Section 6.14.  Subordination. 
Any obligations of the Depositor under this Agreement are obligations
solely of the Depositor and will not constitute a claim against the Depositor
to the extent that the Depositor does not have funds sufficient to make payment
of such obligations.  In furtherance of
and not in derogation of the foregoing, the parties hereto (other that the
Depositor), by entering into or accepting this Agreement, each acknowledges and
agrees that it has no right, title, or interest in or to the Other Assets of
the Depositor.  To the extent that,
notwithstanding the agreements and provisions contained in the preceding
sentence, any party hereto either (i) asserts an interest or claim to, or
benefit from, Other Assets, or (ii) is deemed to have any such interest, claim
to, or benefit in or from Other Assets, whether by operation of law, legal
process, pursuant ot applicable provisions of insolvency laws or otherwise
(including by virtue of Section 1111(b) of the Bankruptcy Code or any
successor provision having similar effect under the Bankruptcy Code), then such
party further acknowledges and agrees that any such interest, claim or benefit
in or from Other Assets is and will be expressly subordinated to the
indefeasible payment in full, which, under the terms of the relevant documents
relating to the securitization or conveyance of such Other Assets, are entitled
to be paid from, entitled to the benefits of, or otherwise secured by such
Other Assets (whether or not any such entitlement or security interest is
legally perfected or otherwise entitled to a priority of distributions or
application under applicable law, including insolvency laws, and whether or not
asserted against the Depositor), including the payment of post-petition
interest on such other obligations and liabilities.  This subordination provision will be deemed a subordination
provision within the meaning of Section 510(a) of the Bankruptcy
Code.  Each party hereto (other than the
Depositor) further acknowledges and agrees that no adequate remedy at law
exists for a breach of this Section 6.14 and the terms of this
Section 6.14 may be enforced by an action for specific performance.  The provisions of the Section 6.14 will
be for the third party benefit of those entitled to rely thereon and will
survive the termination of this Agreement.

 

47

 

[REMAINDER OF PAGE INTENTIONALLY BLANK;  SIGNATURE PAGE FOLLOWS]

 

48

 

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

 

	
   

  	
  MBIA INSURANCE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Assistant Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIRST INVESTORS SERVICING

  
	
   

  	
  CORPORATION,  as Servicer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Title

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIRST INVESTORS FINANCIAL SERVICES,

  INC.,  as Seller and as Administrator

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Title

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIRST INVESTORS AUTO FUNDING

  CORPORATION,  as Depositor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Title

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK MINNESOTA,

  NATIONAL ASSOCIATION, as Back-up Servicer

  and Indenture Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Title

  	
   

  
				

 

 

	
   

  	
  FIRST INVESTORS AUTO OWNER TRUST

  2003-A, as Issuer,

  
	
   

  	
   

  
	
   

  	
  By:   DEUTSCHE BANK TRUST COMPANY

  DELAWARE, not in its individual capacity,

  but solely as Owner Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Title

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  DEUTSCHE BANK TRUST COMPANY

  DELAWARE, not in its individual capacity, but

  solely as Owner Trustee and in its individual

  capacity solely for the purposes of Section 2.08 (c)

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  TitleExhibit
10.30

 

NON-STATUTORY STOCK OPTION
AGREEMENT

 

THIS AGREEMENT is entered into and effective as of
this       day of
              ,
      (the “Date of Grant”), by and between Fargo
Electronics, Inc. (the “Company”) and
          (the “Optionee”).

 

A.            The Company has
adopted the Fargo Electronics, Inc. 2003 Stock Incentive Plan (the “Plan”)
authorizing the Board of Directors of the Company, or a committee as provided
for in the Plan (the Board or such a committee to be referred to as the
“Committee”), to grant Non-Statutory Stock Options to employees (including
officers and directors who are also employees) and non-employee directors of
the Company and its Subsidiaries (as defined in the Plan).

 

B.            The Company desires to
give the Optionee an inducement to acquire a proprietary interest in the
Company and an added incentive to advance the interests of the Company by
granting to the Optionee an option to purchase shares of common stock of the
Company pursuant to the Plan.

 

Accordingly, the parties agree as follows:

 

1.             Grant of Option.

 

The Company hereby grants to the Optionee the right,
privilege, and option (the “Option”) to purchase
           shares (the
“Option Shares”) of the Company’s common stock, $0.01 par value (the “Common Stock”),
according to the terms and subject to the conditions hereinafter set forth and
as set forth in the Plan.  The Option is
not an “incentive stock option,” as that term is used in Section 422 of the
Internal Revenue Code of 1986, as amended (the “Code”).

 

2.             Option Exercise
Price.

 

The per share price to be paid by Optionee in the
event of an exercise of the Option will be
$      .

 

3.             Duration of Option
and Time of Exercise.

 

3.1           Initial
Period of Exercisability.  The
Option will become exercisable with respect to the Option Shares in four
installments.  The following table sets
forth the initial dates of exercisability of each installment and the number of
Option Shares as to which this Option will become exercisable on such dates:

 

	
  Initial
  Date of

  Exercisability

  	
   

  	
  Number of
  Option Shares

  Available for Exercise

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

 

The foregoing rights to exercise this Option will be
cumulative with respect to the Option Shares becoming exercisable on each such
date, but in no event will this Option be exercisable after, and this Option
will become void and expire as to all unexercised Option Shares at 5:00 p.m.
(Minneapolis, Minnesota time) on        
(the “Time of Termination”).

 

3.2           Termination
of Directorship.

 

(a)           Termination Due to
Death, Disability or Retirement.

 

(i)            In the event the
Optionee’s service as a Director with the Company and all Subsidiaries is
terminated by reason of death or Disability (as defined in the Plan), this
Option will become immediately exercisable in full and remain exercisable for a
period of one year after such termination (but in no event after the Time of
Termination).

 

(ii)           In the event the
Optionee’s service as a Director with the Company and all Subsidiaries is
terminated by reason of Retirement (as defined in the Plan), this Option will
remain exercisable, to the extent exercisable as of the date of such
termination, for a period of three months after such termination (but in no
event after the Time of Termination).  
To the extent this Option is not exercisable as of the date of such
termination, this Option will be terminated.

 

(iii)          Termination for
Reasons Other Than Death, Disability or Retirement.  In the event that the Optionee’s service as
a Director with the Company and all Subsidiaries is terminated for any reason
other than death, Disability or Retirement, all rights of the Optionee under
the Plan and this Agreement will immediately terminate without notice of any
kind, and this Option will no longer be exercisable; provided, however, that if
such termination is due to any reason other than termination by the Company or
any Subsidiary for “Cause” (as defined in the Plan), this Option will remain
exercisable to the extent exercisable as of such termination for a period of
three months after such termination (but in no event after the Time of
Termination).  To the extent this Option
is not exercisable as of the date of such termination, this Option will be
terminated.  The Company may defer the
exercise of this Option for a period of up to forty-five (45) days in order for
the Committee to make any determination as to the existence of Cause.

 

3.3           Change
in Control.

 

(a)           Impact of Change in
Control.  If a Change in Control (as
defined in the Plan) of the Company occurs, this Option will become immediately
exercisable in full and will remain exercisable until the Time of Termination,
regardless of whether the Optionee remains as a Director of the Company or any
Subsidiary.  In addition, if a

 

2

 

Change in Control of the
Company occurs, the Committee, in its sole discretion and without the consent
of the Optionee, may determine that the Optionee will receive, with respect to
some or all of the Option Shares, as of the effective date of any such Change
in Control of the Company, cash in an amount equal to the excess of the Fair
Market Value (as defined in the Plan) of such Option Shares immediately prior
to the effective date of such Change in Control of the Company over the option
exercise price per share of this Option.

 

(b)           Limitation on Change
in Control Payments. 
Notwithstanding anything in this Section 3.3 to the contrary, if,
with respect to the Optionee, acceleration of the vesting of this Option or the
payment of cash in exchange for all or part of the Option Shares as provided
above (which acceleration or payment could be deemed a “payment” within the
meaning of Section 280G(b)(2) of the Code), together with any other
payments which the Optionee has the right to receive from the Company or any
corporation which is a member of an “affiliated group” (as defined in
Section 1504(a) of the Code without regard to Section 1504(b) of the
Code) of which the Company is a member, would constitute a “parachute payment”
(as defined in Section 280G(b)(2) of the Code), the payments to the Optionee as
set forth herein will be reduced to the largest amount as will result in no
portion of such payments being subject to the excise tax imposed by
Section 4999 of the Code; provided, however, that if the Optionee is
subject to a separate agreement with the Company or a Subsidiary that expressly
addresses the potential application of Sections 280G or 4999 of the Code
(including, without limitation, that “payments” under such agreement or
otherwise will be reduced, that the Optionee will have the discretion to
determine which “payments” will be reduced, that such “payments” will not be
reduced or that such “payments” will be “grossed up” for tax purposes), then
this Section 3.3(b) will not apply, and any “payments” to the Optionee pursuant
to Section 3.3(a) of this Agreement will be treated as “payments” arising under
such separate agreement.

 

4.             Manner of Option
Exercise.

 

4.1           Notice.  This Option may be exercised by the Optionee
in whole or in part from time to time, subject to the conditions contained in
the Plan and in this Agreement, by delivery, in person, by facsimile or
electronic transmission or through the mail, to the Company at its principal
executive office in Eden Prairie, Minnesota (Attention: Paul W.B. Stephenson)
of a written notice of exercise.  Such
notice must be in a form satisfactory to the Committee, must identify the
Option, must specify the number of Option Shares with respect to which the
Option is being exercised, and must be signed by the person or persons so exercising
the Option.  Such notice must be
accompanied by payment in full of the total purchase price of the Option Shares
purchased.  In the event that the Option
is being exercised, as provided by the Plan and Section 5.3 below, by any
person or persons other than the Optionee, the notice must be accompanied by
appropriate proof of right of such person or persons to exercise the
Option.  As soon as practicable after
the effective exercise of the Option, the Optionee will be recorded on the
stock transfer books of the Company as the owner of the Option Shares
purchased, and the Company will deliver to the Optionee one or more duly issued
stock certificates evidencing such ownership.

 

3

 

4.2           Payment.  At the time of exercise of this Option, the
Optionee must pay the total purchase price of the Option Shares to be purchased
entirely in cash (including a check, bank draft or money order, payable to the
order of the Company); provided, however, that the Committee, in its sole
discretion, may allow such payment to be made, in whole or in part, by a Broker
Exercise Notice, by tender, or attestation as to ownership of Previously
Acquired Shares (as such terms are defined in the Plan) that have been held for
the period of time necessary to avoid a charge to the Company’s earnings for
financial reporting purposes and that are otherwise acceptable to the
Committee, or by a combination of such methods.  In the event the Optionee is permitted to pay the total purchase
price of this Option in whole or in part with Previously Acquired Shares, the
value of such shares will be equal to their Fair Market Value on the date of
exercise of this Option.

 

5.             Rights of
Optionee; Transferability.

 

5.1           
Service as a Director.  Nothing in this
Agreement will interfere with or limit in any way the right of the Company to
terminate the service of the Optionee as a Director at any time, nor confer
upon the Optionee any right to continue in the service of the Company as a
Director for any particular period of time.

 

5.2           Rights
as a Shareholder.  The Optionee will
have no rights as a shareholder unless and until all conditions to the
effective exercise of this Option (including, without limitation, the
conditions set forth in Sections 4 and 6 of this Agreement) have been satisfied
and the Optionee has become the holder of record of such shares.  No adjustment will be made for dividends or
distributions with respect to this Option as to which there is a record date
preceding the date the Optionee becomes the holder of record of such shares,
except as may otherwise be provided in the Plan or determined by the Committee
in its sole discretion.

 

5.3           Restrictions
on Transfer.  Except pursuant to
testamentary will or the laws of descent and distribution or as otherwise
expressly permitted by the Plan, no right or interest of the Optionee in this
Option prior to exercise may be assigned or transferred, or subjected to any
lien, during the lifetime of the Optionee, either voluntarily or involuntarily,
directly or indirectly, by operation of law or otherwise.  The Optionee will, however, be entitled to
designate a beneficiary to receive this Option upon such Optionee’s death, and,
in the event of the Optionee’s death, exercise of this Option (to the extent
permitted pursuant to Section 3.2(a) of this Agreement) may be made by the
Optionee’s legal representatives, heirs and legatees.

 

6.             Securities Law and
Other Restrictions.

 

Notwithstanding any other provision of the Plan or
this Agreement, the Company will not be required to issue, and the Optionee may
not sell, assign, transfer or otherwise dispose of, any Option Shares, unless
(a) there is in effect with respect to the Option Shares a registration
statement under the Securities Act of 1933, as amended, and any applicable
state or foreign securities laws or an exemption from such registration, and
(b) there has been obtained any other consent, approval or permit from any
other regulatory body which the Committee, in its sole discretion, deems
necessary or advisable.  The Company may
condition such issuance, sale or transfer upon the receipt of any
representations or agreements from the parties involved, and the placement of
any legends on certificates representing Option Shares, as may be deemed

 

4

 

necessary or advisable by the Company in order to
comply with such securities law or other restrictions.

 

7.             Adjustments.

 

In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock dividend,
stock split, combination of shares, rights offering, divestiture or
extraordinary dividend (including a spin-off), or any other change in the
corporate structure or shares of the Company, the Committee (or, if the Company
is not the surviving corporation in any such transaction, the board of
directors of the surviving corporation), in order to prevent dilution or
enlargement of the rights of the Optionee, will make appropriate adjustment
(which determination will be conclusive) as to the number and kind of
securities or other property (including cash) subject to, and the exercise
price of, this Option.

 

8.             Subject to Plan.

 

The Option and the Option Shares granted and issued
pursuant to this Agreement have been granted and issued under, and are subject
to the terms of, the Plan.  The terms of
the Plan are incorporated by reference in this Agreement in their entirety, and
the Optionee, by execution of this Agreement, acknowledges having received a
copy of the Plan.  The provisions of
this Agreement will be interpreted as to be consistent with the Plan, and any
ambiguities in this Agreement will be interpreted by reference to the
Plan.  In the event that any provision
of this Agreement is inconsistent with the terms of the Plan, the terms of the
Plan will prevail.

 

9.             Miscellaneous.

 

9.1           Binding
Effect.  This Agreement will be
binding upon the heirs, executors, administrators and successors of the parties
to this Agreement.

 

9.2           Governing
Law.  This Agreement and all rights
and obligations under this Agreement will be construed in accordance with the
Plan and governed by the laws of the State of Minnesota, without regard to
conflicts of laws provisions.  Any legal
proceeding related to this Agreement will be brought in an appropriate Minnesota
court, and the parties to this Agreement consent to the exclusive jurisdiction
of the court for this purpose.

 

9.3           Entire
Agreement.  This Agreement and the
Plan set forth the entire agreement and understanding of the parties to this
Agreement with respect to the grant and exercise of this Option and the
administration of the Plan and supersede all prior agreements, arrangements,
plans and understandings relating to the grant and exercise of this Option and
the administration of the Plan.

 

9.4           Amendment
and Waiver.  Other than as provided
in the Plan, this Agreement may be amended, waived, modified or canceled only
by a written instrument executed by the parties to this

 

9.5           Agreement
or, in the case of a waiver, by the party waiving compliance.

 

5

 

The parties to this Agreement have executed this
Agreement effective the day and year first above written.

 

	
   

  	
  FARGO ELECTRONICS, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
   

  
	
  By execution of this
  Agreement,

  the Optionee acknowledges having

  received a copy of the Plan.

  	
  OPTIONEE

  
	
   

  	
  (Signature)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  (Name and Address)

  
	
   

  	
   

  
	
   

  	
   

  

 

6

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