Document:

Exhibit
10.126(u)

 

EXECUTION COPY

 

 

 

FIRST INVESTORS SERVICING
CORPORATION

as Servicer,

 

FIRST INVESTORS AUTO FUNDING
CORPORATION

as Depositor,

 

WELLS FARGO BANK, NATIONAL
ASSOCIATION

as Indenture Trustee and
Securities Intermediary

 

and

 

FIRST INVESTORS AUTO OWNER
TRUST 2006-A

as Issuer

 

 

 

SALE AND ALLOCATION AGREEMENT

 

Dated as of January 26,
2006

 

 

 

 

 

TABLE OF CONTENTS

 

	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Monthly Servicer Report

  	
   

  
	
  Exhibit B

  	
  [Reserved]

  	
   

  
	
  Exhibit C

  	
  Credit Policy

  	
   

  
	
  Exhibit D

  	
  [Reserved]

  	
   

  
	
  Exhibit E

  	
  Form of Originator Agreement

  	
   

  
	
  Exhibit F

  	
  Form of Additional Contract Assignment

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedules

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1

  	
  Schedule of Initial Contracts

  	
   

  
	
  Schedule 2

  	
  Location of Contract Files

  	
   

  
	
  Schedule 3

  	
  Perfection Representations, Warranties and
  Covenants

  	
   

  

 

iii

 

SALE AND ALLOCATION AGREEMENT, dated as of January 26,
2006 (as amended, supplemented or otherwise modified and in effect from time to
time, this “Agreement”), by and among
FIRST INVESTORS AUTO OWNER TRUST 2006-A, a Delaware statutory trust (the “Trust”), FIRST INVESTORS AUTO
FUNDING CORPORATION, as depositor (the “Depositor”),
WELLS FARGO BANK, NATIONAL ASSOCIATION, as Indenture Trustee (the “Indenture Trustee”) and as
securities intermediary (the “Securities Intermediary”)
and FIRST INVESTORS SERVICING CORPORATION, a Delaware corporation, as servicer
(together with its successors and assigns and in such capacity, either “FISC” or the “Servicer”).

 

WHEREAS, the Trust desires to purchase the Contracts  contributed by the Seller to the Depositor
pursuant to the Contribution Agreement;

 

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

 

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

 

NOW, THEREFORE, in consideration of the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

 

Article I

 

Definitions

 

Section 1.1.           Definitions.

 

Whenever used in this Agreement, the following words
and phrases, unless the context otherwise requires, whenever capitalized shall
have the following meanings:

 

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

 

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

 

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

 

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

 

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

 

 

Additional Note Interest:  For any Payment Date, with respect to the Class A
Notes, the sum of (i) all accrued but unpaid Monthly Note Interest for
previous Payment Dates plus (ii) the sum of, to the extent
permitted by law, (A) interest at the applicable Note Rate on all accrued
and unpaid interest on the Class A-1 Notes for previous Payment Dates, (B) interest
at the applicable Note Rate on all accrued and unpaid interest on the Class A-2
Notes for previous Payment Dates, (C) interest at the applicable Note Rate
on all accrued and unpaid interest on the Class A-3 Notes for previous
Payment Dates and (D) interest at the applicable Note Rate on all accrued
and unpaid interest on the Class A-4 Notes for previous Payment Dates.

 

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

 

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

 

Affiliate:  With respect to any Person, any other Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with such Person.  For
purposes of this definition, “control” when used with respect to any Person
shall mean the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise.

 

Amount Financed:  With respect to any Contract, the aggregate
amount advanced to the related Obligor under such Contract toward the purchase
price of the Financed Vehicle and any related costs.

 

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

 

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

 

Available Funds:  For any Payment Date, (i) all Obligor
payments received with respect to the Contracts during the preceding Collection
Period, (ii) all Liquidation Proceeds and insurance proceeds received with
respect to the Contracts during the preceding Collection Period, (iii) all
interest earned on, and Eligible Investments of, funds on deposit in the
Collection Account, the Reserve Account and the Prefunding Account during the
preceding Collection Period, (iv) the Purchase Amount for all Contracts that
became Purchased Contracts during the preceding Collection Period and (v) all
prepayments received with respect to the Contracts during the preceding
Collection Period attributable to any refunded item included in the Amount
Financed (including amounts received as a result of rebates of extended
warranty contract costs and insurance premiums and proceeds received under
physical damage, credit life and credit disability insurance policies); provided,
however, that Available Funds for any Payment Date shall not include any
payments or other amounts (including Liquidation Proceeds and insurance 

 

2

 

proceeds) received with respect to any Purchased
Contract the Purchase Amount for which was included in Available Funds for a
previous Payment Date.

 

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

 

Business Day:  Any day other than a Saturday, a Sunday or 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.

 

Capitalized Interest Amount:  For the period from and including the Closing
Date to but excluding the first Payment Date, $352,731.78; for the period from
and including the first Payment Date to but excluding the second Payment Date,
$272,319.67; and for the period from and including the second Payment Date to
but excluding the Prefunding Account Payout Date, $136,159.83; provided,
however, on any day on which the amount on deposit in the Prefunding
Account is zero and the Prefunding Period has terminated, the Capitalized
Interest Amount shall be zero.

 

Class A Monthly Note Principal:  For any Payment Date, the lesser of (i) the
Class A Note Balance as of the day preceding such Payment Date and (ii) the
amount necessary to reduce the Class A Note Balance as of the day
preceding such Payment Date to the sum of (A) 96.75% of the Pool Balance
as of the last day of the related Collection Period and (B) on or prior to
the Prefunding Account Payout Date and the distribution of the Excess Prefunding
Amount, 98.5% of the Prefunding Account Balance as of the last day of the
related Collection Period; provided, however, that if such
Payment Date is the Final Note Payment Date for any Class of Class A
Notes, the Class A Monthly Note Principal for such Payment Date shall
equal the greater of (a) the amount determined above and (b) the
outstanding principal balance of such Class of Class A Notes as of
the day preceding its Final Note Payment Date; provided, further,
that for the purposes of determining Class A Monthly Note Principal, the
unpaid balance of any Defaulted Contract or a Purchased Contract will be deemed
to be zero on and after the last day of the Collection Period during which such
Contract became a Defaulted Contract or a Purchased Contract.

 

Class A Note Parity Amount:  For any Payment Date: (i) if such
Payment Date is the Final Note Payment Date for the Class A-1 Notes, Class A-2
Notes or Class A-3 Notes, the greater of: (A) the amount necessary to
reduce the outstanding principal balance of the Class A-1 Notes, Class A-2
Notes or Class A-3 Notes, as applicable, to zero and (B) the amount
necessary to reduce the Class A Note Balance (calculated after giving
effect to principal payments made on the Class A Notes on the immediately
preceding Payment Date) to the sum of the Pool Balance and 98.5% of the amount
on deposit in the Prefunding Account as of the last day of the related
Collection Period; (ii) for the Final Note Payment Date for the Class A-4
Notes, the amount necessary to reduce the outstanding principal balance of the Class A-4
Notes to zero; and (iii) for any other Payment Date, the amount calculated
pursuant to clause (i)(B) of the definition hereof.

 

Class A Note Balance:  At any time, as the context may require, (i) with
respect to all of the Class A Notes, an amount equal to, initially, the
Initial Class A Note Balance and, thereafter, an 

 

3

 

amount equal to the Initial Class A Note Balance
as reduced from time to time by all amounts allocable to principal previously
distributed to each Class of Class A Noteholders or (ii) with
respect to any Class A-1 Note, Class A-2 Note, Class A-3 Note
and Class A-4 Note, an amount equal to, initially, the initial
denomination of such Class A Note and, thereafter, an amount equal to such
initial denomination as reduced from time to time by all amounts allocable to
principal previously distributed in respect of such Class A Note; provided,
however, that in determining whether the Holders of Class A Notes
evidencing the requisite percentage of the Class A Note Balance have given
any request, demand, authorization, direction, notice, consent or waiver
hereunder or under any other Transaction Document, Class A Notes owned by
the Trust, any other obligor upon the Class A Notes, the Depositor, the
Servicer or any Affiliate of any of the foregoing Persons shall be disregarded
and deemed to be excluded from the Class A Note Balance (unless such
Persons own 100% of the Class A Note Balance), except that, in determining
whether the Indenture Trustee or the Owner Trustee shall be protected in
relying on any such request, demand, authorization, direction, notice, consent
or waiver, only Class A Notes that a Responsible Officer of the Indenture
Trustee or the Owner Trustee, as applicable, actually knows to be so owned
shall be so disregarded; and, provided  further, that Class A
Notes that, to the actual knowledge of a Responsible Officer of the Indenture
Trustee or the Owner Trustee, as applicable, have been pledged in good faith
may be regarded as included in the Class A Note Balance if the pledgee
establishes to the satisfaction of the Indenture Trustee or the Owner Trustee,
as applicable, the pledgee’s right so to act with respect to such Class A
Notes and that the pledgee is not the Trust, any other obligor upon the Class A
Notes, the Depositor, the Servicer or any Affiliate of any of the foregoing
Persons.

 

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

 

Class A-1 Monthly Interest: For
the initial Payment Date, $81,217.78, and for any Payment Date thereafter, the
product of: (i) the actual number of days that have elapsed from and
including the prior Payment to but excluding the current Payment Date divided
by 360; (ii) 4.5685%; and (iii) the outstanding principal balance of
the Class A-1 Notes as of the preceding Payment Date (after giving effect
to all principal payments to the holders of the Class A-1 Notes on or
before such date).

 

Class A-2 Monthly Interest: For
the initial Payment Date, $120,803.06, and for any Payment Date thereafter,
1/12 of the product of: (i) 4.87% and (ii) the outstanding principal
balance of the Class A-2 Notes as of the preceding Payment Date (after
giving effect to all principal payments to the holders of the Class A-2
Notes on or before such date).

 

Class A-3 Monthly Interest: For
the initial Payment Date, $192,543.89, and for any Payment Date thereafter,
1/12 of the product of: (i) 4.93% and (ii) the outstanding principal
balance of the Class A-3 Notes as of the preceding Payment Date (after
giving effect to all principal payments to the holders of the Class A-3
Notes on or before such date).

 

Class A-4 Monthly Interest: For
the initial Payment Date, $95,158.33, and for any Payment Date thereafter, 1/12
of the product of: (i) 5.00% and (ii) the outstanding principal
balance of the Class A-4 Notes as of the preceding Payment Date (after
giving effect to all principal payments to the holders of the Class A-4
Notes on or before such date).

 

4

 

Class B Monthly Note Principal:  For any Payment Date, the lesser of (i) the
Class B Note Balance as of the day preceding such Payment Date and (ii) the
amount necessary to reduce the Class B Note Balance as of the day
preceding such Payment Date to the sum of (A) 3.25% of the Pool Balance as
of the last day of the related Collection Period and (B) on or prior to
the Prefunding Account Payout Date and the distribution of the Excess
Prefunding Amount, 1.50% of the Prefunding Account Balance as of the last day
of the related Collection Period; provided, however, that the Class B
Monthly Note Principal for the Final Note Payment Date for the Class B
Notes shall equal the principal balance of the Class B Notes as of the day
preceding such Final Note Payment Date; provided, further, that
for the purposes of determining Class B Monthly Note Principal, the unpaid
balance of any Defaulted Contract or a Purchased Contract will be deemed zero
on and after the last day of the Collection Period during which such Contract
became a Defaulted Contract or a Purchased Contract.

 

Class B Note Balance:  At any time, as the context may require, (i) with
respect to all of the Class B Notes, an amount equal to, initially, the
Initial Class B Note Balance and, thereafter, an amount equal to the
Initial Class B Note Balance as reduced from time to time by all amounts
allocable to principal previously distributed to the Class B Noteholders
or (ii) with respect to any Class B Note, an amount equal to,
initially, the initial denomination of such Class B Note and, thereafter,
an amount equal to such initial denomination as reduced from time to time by
all amounts allocable to principal previously distributed in respect of such Class B
Note.

 

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

 

Closing Date:  January 26, 2006.

 

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

 

Collection Period:  Each calendar month during the term of this
Agreement or, in the case of the initial Collection Period, the period from but
excluding the Initial Cutoff Date to and including January 31, 2006.

 

Contract:  A retail installment sale contract or
promissory note and security agreement identified on the Contract Schedule (as
such contract may be amended, supplemented or otherwise modified and in effect
from time to time).

 

Contract File:  With respect to any Contract:

 

(i)            the sole original executed
counterpart of the retail installment contract or promissory note and security
agreement evidencing each such Contract and any and all amendments thereto; and

 

(ii)           (a) the original certificate of
title or copies of correspondence to the appropriate State title registration
agency, and all enclosures thereto, for issuance of the original certificate of
title or (b) if the appropriate State title registration agency issues a
letter or other form of evidence of lien in lieu of a certificate of title, the
original lien entry letter or other form of evidence of lien in lieu of a
certificate of title, the original 

 

5

 

lien entry
letter or form or copies of correspondence to such State title registration agency,
and all enclosures thereto, for issuance of the original lien entry letter or
form.

 

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

 

Contribution Agreement: The
Contribution Agreement, dated as of the date hereof, between First Investors
Financial Services, Inc., as Seller, and First Investors Auto Funding
Corporation, as Depositor.

 

Corporate Trust Office:  As applicable, (i) the principal office
of the Indenture Trustee at which at any particular time its corporate trust
business shall be administered, which office at the date of the execution of
this Agreement is located at Sixth Street and Marquette Avenue, MAC N9311-161,
Minneapolis, Minnesota 55479, Attention: Corporate Trust Services Asset-Backed
Trust Administration, or at such other address as the Indenture Trustee may
designate from time to time by notice to the Noteholders, the Owner Trustee,
the Depositor and the Seller, or the principal corporate trust office of any
successor Indenture Trustee at the address designated by such successor
Indenture Trustee by notice to the Noteholders, the Owner Trustee, the
Depositor and the Seller or (ii) the principal office of the Owner Trustee
at which at any particular time its corporate trust business shall be
administered, which office at the date of the execution of this Agreement is
located at c/o Wells Fargo Delaware Trust Company, 919 North Market Street, Suite 700,
Wilmington, DE 19801, Attention: Corporate Trust Administration or at such
other address as the Owner Trustee may designate from time to time by notice to
the Indenture Trustee, the Depositor and the Seller, or the principal corporate
trust office of any successor Owner Trustee at the address designated by such
successor Owner Trustee by notice to the Indenture Trustee, the Depositor and
the Seller.

 

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

 

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

 

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

 

Defaulted Contract:  Any Contract as to which the first of any of
the following has occurred (i) a Scheduled Payment, or any portion thereof
in excess of $10.00, is more than 120 days delinquent (or if the related
Obligor is insolvent or has sought protection under the United States
Bankruptcy Code and such Contract is more than 180 days delinquent), (ii) 90
days have elapsed since the Servicer repossessed the Financed Vehicle, (iii) the
related Financed Vehicle has been repossessed and sold, or (iv) consistent
with the Servicer’s Collection Policy, has been or should 

 

6

 

be written off as uncollectible; provided, however,
that any Contract which has become a Purchased Contract will not be deemed to
be a Defaulted Contract.

 

Delinquent Contract:  Any Contract (other than a Defaulted
Contract) as to which more than $10.00 of any Scheduled Payment remains unpaid
for more than 30 days from the date at which it is contractually due and
payable.

 

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

 

Depositor:  First Investors Auto Funding Corporation, a
Delaware corporation.

 

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

 

Determination Date:  The third Business Day preceding each Payment
Date commencing on February 10, 2006.

 

Eligible Investments:  On any date of determination, book entry
securities, negotiable instruments or securities represented by instruments in
bearer or registered form with maturities not exceeding the next Payment Date
which evidence:

 

(i)            direct obligations of, and
obligations fully guaranteed by, the United States of America or any agency or
instrumentality thereof the obligations of which are backed by the full faith
and credit of the United States of America;

 

(ii)           demand deposits, time deposits,
bankers’ acceptances or certificates of deposit of any depository institution
or trust company incorporated under the laws of the United States of America or
any State thereof (or any domestic branch of a foreign bank) and subject to
supervision and examination by federal or state banking or depository
institution authorities, including the Indenture Trustee or the Owner Trustee,
acting in their respective commercial capacities; provided, however,
that, at the time of the investment or contractual commitment to invest
therein, such depository institution or trust company shall be rated Prime-1 by
Moody’s and A-1+ by S&P or any other deposit which is fully insured by the
Federal Deposit Insurance Corporation;

 

(iii)          repurchase obligations with respect to
any security that is a direct obligation of, or fully guaranteed by, the United
States of America or any agency or instrumentality thereof the obligations of
which are backed by the full faith and credit of the United States of America,
in either case entered into with a depository institution or trust company
(acting as principal) described in clause (ii) above;

 

(iv)          short term corporate securities
bearing interest or sold at a discount issued by any corporation incorporated
under the laws of the United States of America or any state thereof; the short
term unsecured obligations of which are rated Prime-1 by Moody’s and A-1 by
S&P at the time of the investment; provided, however that the
total amount of debt from Issuers rated A-1 by S&P must (i) be limited
to the investment of 

 

7

 

monthly
principal and interest payments; (ii) represent no more than 20% of the
total Principal Balance; (iii) not mature beyond 30 days; (iv) shall
not have an ‘r’ suffix attached to its rating; (v) have a predetermined
fixed dollar amount of principal due at its maturity that cannot be fixed or
variable; and (vi) be tied to a single interest rate index plus a single
fixed rate spread (if any) and move proportionately with that index;

 

(v)           commercial paper, at the time of the
investment or contractual commitment to invest therein, rated Prime-1 by Moody’s
and A-1+ by S&P at the time of the investment;

 

(vi)          guaranteed investment contracts issued
by an insurance company or other corporation acceptable to the Rating Agencies
and the Insurer (provided that no Insurer Default shall have occurred and be
continuing);

 

(vii)         investments in money market funds
having a rating of AAA-m by Moody’s and AAAm-G by S&P; and

 

(viii)        any other investment approved in advance
in writing by the Insurer with notice to the Rating Agencies.

 

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

 

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

 

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

 

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

 

Fee Letters:  The Indenture Trustee Fee Letter and the
Owner Trustee Fee Letter.

 

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

 

8

 

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

 

Fiscal Agent:  As defined in the Policy.

 

Holder:  A Noteholder.

 

Indenture:  The Indenture, dated as of the date hereof,
between the Trust and Wells Fargo Bank, National Association, as Indenture
Trustee and Custodian as the same may be amended, supplemented or otherwise
modified and in effect from time to time.

 

Indenture Trustee:  Wells Fargo Bank, National Association, not
in its individual capacity but solely as Indenture Trustee under the Indenture,
its successors in interest and any successor trustee under the Indenture.

 

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

 

Indenture Trustee Fee Letter:  The letter agreement dated January 26,
2006 between the Seller and Wells Fargo Bank, National Association in its
capacities as Indenture Trustee, Custodian and Back-up Servicer.

 

Initial Class A Note Balance:  As the context may require, (i) with
respect to all of the Class A Notes, $189,060,000.00, or (ii) with
respect to any Class A Note, an amount equal to the initial denomination
of such Class A Note.

 

Initial Class B Note Balance:  As the context may require, (i) with
respect to all of the Class B Notes, $2,879,112.45 or (ii) with
respect to any Class B Note, an amount equal to the initial denomination
of such Class B Note.

 

Initial Contract Price:  $151,939,112.45.

 

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

 

Initial Cutoff Date:  December 31, 2005.

 

Initial Prefunding Account Amount:  $40,000,000.

 

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

 

Insolvency Event:  With respect to any Person, (i) the
making by such Person of a general assignment for the benefit of creditors, (ii) the
filing by such Person of a voluntary petition in bankruptcy, (iii) such
Person being adjudged bankrupt or insolvent, or having had entered 

 

9

 

against such Person an order for relief in any
bankruptcy or insolvency proceeding, (iv) the filing by such Person of a
petition or answer seeking reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any statute, law
or regulation, (v) the filing by such Person of an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against such Person in any proceeding specified in clause (vii) below,
(vi) seeking, consenting to or acquiescing in the appointment of a
trustee, receiver or liquidator of such Person or of all or any substantial
part of the assets of such Person or (vii) the failure to obtain dismissal
within 60 days of the commencement of any proceeding against such Person
seeking reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law or regulation, or the
entry of any order appointing a trustee, liquidator or receiver of such Person
of all or any substantial portion of the assets of such Person.

 

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

 

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

 

Insurance Premium: As defined in the
Insurance Agreement.

 

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

 

Insurer Default:  The failure of the Insurer to make any
required payment under the Policy or the occurrence of an Insolvency Event with
respect to the Insurer.

 

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

 

Liquidation Proceeds:  All amounts received by the Servicer with
respect to any Defaulted Contract, net of the sum of (i) any reasonable
expenses incurred by the Servicer in connection with collection of such
Contract and the disposition of the related Financed Vehicle (to the extent
determinable by the Servicer and not previously reimbursed) plus (ii) any
amounts required by law to be remitted to the related Obligor.

 

Monthly Note Interest:  With respect to any Payment Date, the sum of
the Class A-1 Monthly Interest, the Class A-2 Monthly Interest, the Class A-3
Monthly Interest and the Class A-4 Monthly Interest.

 

Monthly Remittance Condition:  As defined in Section 3.2.

 

Monthly Servicer Report:  As defined in the Servicing Agreement.

 

10

 

Monthly Servicing Fee:  The amount payable to the Servicer by the
Issuer on each Payment Date for the preceding Collection Period equal to one
twelfth times the sum of (i) the Servicing Rate multiplied by the
aggregate principal balance of the Contracts as of the beginning of the first
day of such Collection Period and (ii) the Servicing Rate multiplied by
the sum of the Principal Balances of each Contract purchased by the Issuer
during such Collection Period on the date of its purchase, but not listed on
the Contract Schedule, during such preceding Collection Period.

 

Moody’s:  Moody’s Investors Service, Inc., and its
successors.

 

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

 

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

 

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

 

Note Rate:  With respect to the Class A-1 Notes,
4.5685% per annum, with respect to the Class A-2 Notes, 4.87% per annum,
with respect to the Class A-3 Notes, 4.93% per annum and with respect to
the Class A-4 Notes, 5.00% per annum.

 

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

 

Offering Memorandum:  That certain Offering Memorandum dated January 10,
2006 relating to the Class A Notes.

 

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

 

Originator:  Each Person from whom the Seller has acquired
a Contract.

 

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

 

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

 

11

 

Owner Trust Estate:  As defined in the Trust Agreement.

 

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

 

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

 

Owner Trustee Fee Letter:  The letter agreement dated January 26,
2006 between Wells Fargo Delaware Trust Company and the Seller, relating to the
fees and expenses of Wells Fargo Delaware Trust Company in its capacity as
Owner Trustee.

 

Payment Date:  The 15th day of each month or, if such 15th
day is not a Business Day, the following Business Day, commencing on February 15,
2006.

 

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

 

Policy:  That certain financial guaranty insurance
policy, dated January 26, 2006, issued by MBIA Insurance Corporation in
favor of the Indenture Trustee for the benefit of the Class A Noteholders.

 

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

 

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

 

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

 

Prefunding Account Balance:  On any date of determination, the amount on
deposit in the Prefunding Account (including the proceeds of any Eligible
Investments therein).

 

Prefunding Account Ending Date:  April 4, 2006.

 

Prefunding Account Payout Date:  April 17, 2006.

 

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

 

Prepayment Date:  As defined in Section 5.16.

 

Principal Balance:  With respect to any Contract as of any date,
the Amount Financed under such Contract minus the sum of (i) that portion
of all Scheduled Payments actually received on or prior to such date allocable
to principal (to the extent collected) plus (ii) any rebates of
extended 

 

12

 

warranty contract costs or physical damage, credit
life or credit disability insurance premiums included in the Amount Financed plus
(iii) any full or partial prepayment applied to reduce the unpaid
principal balance of such Contract; provided, however, that (A) the
Principal Balance of a Defaulted Contract shall be zero as of the last day of
the Collection Period during which it became a Defaulted Contract, (B) the
Principal Balance of a Purchased Contract shall be zero as of the date on which
the related Purchase Amount is remitted by the Depositor or the Servicer, and (C) the
Principal Balance of a Contract that has been foreclosed upon by the Indenture
Trustee at the direction of the Insurer pursuant to Section 5.4(a) of
the Indenture shall be zero as of the date of such foreclosure.

 

Principal Deficit:  As of any Payment Date, the excess, if any,
of (i) the Class A Note Balance as of such Payment Date (after giving
effect to all distributions of principal in reduction of the Class A Note
Balance) over (ii) the sum of (a) the Pool Balance as of the last day
of the related Collection Period and (b) 98.5% of the amounts on deposit in
the Prefunding Account.

 

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

 

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

 

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

 

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

 

Rating Agencies:  Moody’s and S&P and their respective
successors; provided, however, that if no such organization or
successor is any longer in existence, Rating Agency shall mean a nationally
recognized statistical rating organization or other comparable Person
designated by the Trust and acceptable to the Insurer (provided that no Insurer
Default shall have occurred and is continuing), notice of which designation
shall have been given to the Indenture Trustee, the Owner Trustee and the
Servicer.

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

Reserve Account Amount:  For any Payment Date, the amount on deposit
in and available for withdrawal from the Reserve Account on such Payment Date
(after giving effect to all deposits to and withdrawals from the Reserve
Account on the preceding Additional Contract Purchase Date or Payment Date, or,
in the case of the first Payment Date, the Closing Date), including, without
limitation, all interest and other income (net of losses and investment expenses)
earned on such amount during the preceding Collection Period.

 

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

 

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

 

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

 

(i)            the average Delinquency Ratio for
any three Collection Periods: (i) exceeds 4.20% during the period from January 2006
through August 2006; (ii) exceeds 5.25% during the period from September 2006
through January 2008; and (iii) exceeds 6.25% thereafter; or

 

(ii)           the Cumulative Net Loss Rate for any
Collection Period indicated in the following table exceeds the percentage
corresponding thereto:

 

	
  Collection Period

  	
   

  	
  Cumulative Net Loss

  Rate

  	
   

  
	
  January 2006

  	
   

  	
  0.175

  	
  %

  
	
  February 2006

  	
   

  	
  0.25

  	
  %

  
	
  March 2006

  	
   

  	
  0.40

  	
  %

  
	
  April 2006

  	
   

  	
  0.60

  	
  %

  
	
  May 2006

  	
   

  	
  0.75

  	
  %

  

 

14

 

	
  Collection Period

  	
   

  	
  Cumulative
  Net Loss

  Rate

  	
   

  
	
  June 2006

  	
   

  	
  0.90

  	
  %

  
	
  July 2006

  	
   

  	
  1.00

  	
  %

  
	
  August 2006

  	
   

  	
  1.15

  	
  %

  
	
  September 2006

  	
   

  	
  1.40

  	
  %

  
	
  October 2006

  	
   

  	
  1.50

  	
  %

  
	
  November 2006

  	
   

  	
  1.75

  	
  %

  
	
  December 2006

  	
   

  	
  1.90

  	
  %

  
	
  January 2007

  	
   

  	
  2.00

  	
  %

  
	
  February 2007

  	
   

  	
  2.20

  	
  %

  
	
  March 2007

  	
   

  	
  2.40

  	
  %

  
	
  April 2007

  	
   

  	
  2.50

  	
  %

  
	
  May 2007

  	
   

  	
  2.75

  	
  %

  
	
  June 2007

  	
   

  	
  2.90

  	
  %

  
	
  July 2007

  	
   

  	
  3.00

  	
  %

  
	
  August 2007

  	
   

  	
  3.30

  	
  %

  
	
  September 2007

  	
   

  	
  3.50

  	
  %

  
	
  October 2007

  	
   

  	
  3.55

  	
  %

  
	
  November 2007

  	
   

  	
  3.80

  	
  %

  
	
  December 2007

  	
   

  	
  4.10

  	
  %

  
	
  January 2008

  	
   

  	
  4.20

  	
  %

  
	
  February 2008

  	
   

  	
  4.40

  	
  %

  
	
  March 2008

  	
   

  	
  4.50

  	
  %

  
	
  April 2008

  	
   

  	
  4.65

  	
  %

  
	
  May 2008

  	
   

  	
  4.80

  	
  %

  
	
  June 2008

  	
   

  	
  4.95

  	
  %

  
	
  July 2008

  	
   

  	
  5.10

  	
  %

  
	
  August 2008

  	
   

  	
  5.30

  	
  %

  
	
  September 2008

  	
   

  	
  5.50

  	
  %

  
	
  October 2008

  	
   

  	
  5.65

  	
  %

  
	
  November 2008

  	
   

  	
  5.80

  	
  %

  
	
  December 2008

  	
   

  	
  5.90

  	
  %

  
	
  January 2009

  	
   

  	
  6.00

  	
  %

  
	
  February 2009

  	
   

  	
  6.10

  	
  %

  
	
  March 2009

  	
   

  	
  6.15

  	
  %

  
	
  April 2009

  	
   

  	
  6.20

  	
  %

  
	
  May 2009

  	
   

  	
  6.30

  	
  %

  
	
  June 2009

  	
   

  	
  6.40

  	
  %

  
	
  July 2009

  	
   

  	
  6.50

  	
  %

  
	
  August 2009

  	
   

  	
  6.50

  	
  %

  
	
  September 2009

  	
   

  	
  6.50

  	
  %

  
	
  October 2009

  	
   

  	
  6.50

  	
  %

  
	
  November 2009

  	
   

  	
  6.50

  	
  %

  
	
  December 2009
  and thereafter

  	
   

  	
  6.50

  	
  %

  

 

15

 

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

 

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

 

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

 

Securities Intermediary:  As defined in Section 3.9.

 

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

 

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

 

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

 

Servicing Rate:  2.0% per annum or such other rate as
determined in the Servicing Agreement; provided, however, that if
the Back-up Servicer becomes the Successor Servicer, the Servicing Rate shall
be equal to the greater of (i) 2.0% per annum and (ii) the average of
three bids obtained by the Back-up Servicer from third party servicers, who are
qualified to act as servicers, selected by the Back-up Servicer and approved by
the Insurer.

 

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

 

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

 

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

 

16

 

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

 

Trust:  First Investors Auto Owner Trust 2006-A, a
Delaware statutory trust.

 

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

 

Trust Property:  As of any date of determination, (i) the
Contracts and other related property sold, transferred, assigned and otherwise
conveyed by the Depositor to the Trust pursuant to Section 2.1(a) and
(b), (ii) rights under this Agreement to cause the Depositor to
purchase Contracts affected materially and adversely by breaches of the
representations and warranties of the Depositor made in this Agreement, and (iii) all
amounts, securities, financial assets, investments and other property deposited
from time to time in or credited to the Collection Account, the Prefunding
Account, the Class A Note Payment Account, the Class B Note Payment
Account and the Reserve Account.

 

Section 1.2.           Other Definitional
Provisions.

 

(a)           Capitalized
terms used herein and not otherwise defined herein have the meanings assigned
to them in the Indenture or the Servicing Agreement.

 

(b)           All
terms defined in this Agreement shall have the defined meanings when used in
any certificate or other document made or delivered pursuant hereto unless
otherwise defined therein.

 

(c)           As
used in this Agreement and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in this
Agreement or in any such certificate or other document, and accounting terms
partly defined in this Agreement or in any such certificate or other document
to the extent not defined, shall have the respective meanings assigned to them
under generally accepted accounting principles. 
To the extent that the definitions of accounting terms in this Agreement
or in any such certificate or other document are inconsistent with the meanings
of such terms under generally accepted accounting principles, the definitions
contained in this Agreement or in any such certificate or other document shall
control.

 

(d)           The
words “hereof,” “herein,” and “hereunder” and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. 
Article, Section, Schedule and Exhibit references contained in
this Agreement are references to Articles, Sections, Schedules and Exhibits in
or to this Agreement unless otherwise specified.  The term “including” shall mean “including
without limitation.”

 

(e)           The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such terms.

 

17

 

(f)            Any
agreement, instrument or statute defined or referred to herein or in any
instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as from time to time amended, modified or
supplemented and includes (in the case of agreements or instruments) references
to all attachments thereto and instruments incorporated therein.  References to a Person are also to its
permitted successors and assigns.

 

Article II

 

Trust
Property

 

Section 2.1.           Conveyance of Trust
Property.

 

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

 

(i)            the Contracts;

 

(ii)           all amounts received on or in respect
of the Contracts after the applicable Cutoff Date (except that interest accrued
on the Contracts prior to the applicable Cutoff Date and received after such
Cutoff Date will be remitted by the Trust to the Seller);

 

(iii)          the security interests in the Financed
Vehicles;

 

(iv)          any proceeds from claims on or refunds
of premiums with respect to extended warranties or physical damage, theft,
credit life and credit disability insurance policies relating to the Financed
Vehicles or the related Obligors;

 

(v)           any Liquidation Proceeds;

 

(vi)          the Contract Files;

 

(vii)         rights under the Contribution Agreement
to cause the Seller to repurchase Contracts affected materially and adversely
by breaches of the representations and warranties of the Seller made in the
Contribution Agreement;

 

(viii)        rights under the Servicing Agreement to
cause the Servicer to purchase Contracts affected materially and adversely by
breaches of the representations and warranties of the Servicer made in the
Servicing Agreement; and

 

(ix)           all present and future claims,
demands, causes of action and choses in action in respect of any or all of the
foregoing and all payments on or under and all proceeds of every kind and
nature whatsoever in respect of any or all of the foregoing, including all
proceeds of the conversion thereof, voluntary or involuntary, into cash or
other liquid property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and
other forms of obligations and 

 

18

 

receivables,
instruments and other property which at any time constitute all or part of or
are included in the proceeds of any of the foregoing.

 

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

 

(c)           The
Depositor and the Trust intend that each transfer of Trust Property
contemplated by Section 2.1(b) constitutes a sale of the Trust
Property, conveying good title to the related Trust Property, from the
Depositor to the Trust.  Notwithstanding
the foregoing, in the event that the Contracts are held to be property of the
Depositor, or if for any reason this Agreement is held or deemed to create
indebtedness or a security interest in the Contracts and the other Trust
Property, then it is intended that:

 

(i)            This Agreement shall be deemed to be
a security agreement within the meaning of Articles 8 and 9 of the Relevant
UCC;

 

(ii)           The sale provided for in Section 2.1(b) shall
be deemed to be a grant by the Depositor, and the Depositor hereby grants, to
the Seller a security interest in all of its right (including the power to
convey title thereto), title and interest, whether now owned or hereafter
acquired, in and to the Contracts and the other Trust Property, to secure such
indebtedness and the performance of the obligations of the Depositor hereunder;

 

(iii)          The possession by the Trust or the
Custodian of the Contract Files and any other property as constitute
instruments, money, negotiable documents or chattel paper shall be deemed to be
“possession by the secured party” or possession by the purchaser or a person
designated by such purchaser, for purposes of perfecting the security interest
pursuant to the Relevant UCC; and

 

(iv)          Notifications to persons holding such
property, and acknowledgments, receipts or confirmations from persons holding
such property, shall be deemed to be notifications to, or acknowledgments,
receipts or confirmations from, bailees or agents (as applicable) of the Trust
for the purpose of perfecting such security interest under the Relevant UCC.

 

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

 

(e)           Upon
each of the transfers of the Trust Property pursuant to clause (b) of
this Section 2.1, the Depositor shall clearly mark its files,
documents, books and any other records

 

19

 

(including computer records) in
the Depositor’s control pertaining to the Trust Property, in order to indicate
that the Trust Property has been transferred to the Trust.

 

(f)            The
Trust’s obligation to purchase Additional Contracts and Additional Conveyed
Property pursuant to clause (b) of this Section 2.1 is
subject to satisfaction on or before the related Additional Contract Purchase
Date of the following conditions precedent:

 

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

 

(ii)           the Depositor shall have executed and
delivered to the Trust and the Trust shall have executed and delivered to the
Indenture Trustee, written assignments in the form of Exhibit F
hereto conveying such Additional Contracts and Additional Conveyed Property to
the Trust and the Indenture Trustee, respectively;

 

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

 

(iv)          the Trust shall have received release
letters and related UCC-3 termination statements and/or amendment statements
(for each appropriate jurisdiction), to release all security interests or
similar rights of any Person in the Additional Conveyed Property, including the
security interests in the Financed Vehicles securing the Contracts and any
proceeds of the foregoing;

 

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

 

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

 

(g)           It
is explicitly agreed by the Depositor and the Trust that the Purchase Price
delivered to the Depositor by the Trust pursuant to clause (b) of
this Section 2.1 shall consist of the net proceeds from the sale of
the Notes (minus the sum of the Initial Reserve Account Deposit and the
Additional Reserve Account Deposits) and that the remaining portion of the
Purchase Price shall be deemed to constitute a capital contribution by the
Seller to the Depositor (it being understood that the Seller has a 100%
ownership interest in the Depositor and that the Depositor has a 100% ownership
interest in the Trust).

 

Section 2.2.           Representations and
Warranties of the Depositor as to the Contracts.

 

The Depositor makes the following representations and
warranties as to the Contracts on which the Trust shall be deemed to have
relied in accepting the Contracts.  The
representations and warranties speak as of the execution and delivery of this
Agreement with respect to the Contracts transferred to the Trust on the Closing
Date and, with respect to any Additional Contracts, as of the related
Additional Contract Purchase Date, except, in each case, to the extent 

 

20

 

otherwise
provided, but shall survive the sale, transfer, assignment and conveyance of
the Contracts to the Trust pursuant to this Agreement and the pledge of the
Contracts to the Indenture Trustee pursuant to the Indenture.

 

(a)           Characteristics
of Contracts.  Each Contract (i) has
either (A) been purchased in a bona fide sale by the Seller from a dealer,
bank, finance company or similar entity in the ordinary course of the Seller’s
business and was originated by such Person in connection with an advance made
for the sale or re-financing of a new or used automobile or light-duty truck
and has been fully and properly executed by the parties thereto or (B) has
been originated by the Seller through direct marketing to consumers who wish to
refinance loans obtained by a different lender and, in the case of each of (A) and
(B) above, has been validly assigned by the Seller to the Depositor
pursuant to, and in accordance with the terms of, the Contribution Agreement, (ii) has
created a valid, binding and enforceable security interest in favor of the
Seller in the related Financed Vehicle, which security interest has been
validly assigned by the Seller to the Depositor, by the Depositor to the Trust
and which will be assigned by the Trust to the Indenture Trustee pursuant to
the Indenture, (iii) contains customary and enforceable provisions such
that the rights and remedies of the holder thereof are adequate for realization
against the collateral of the benefits of the security, (iv) provides for
level monthly payments that fully amortize the Amount Financed by maturity
(except that the period between the date of such Contract and the date of the
first Scheduled Payment may be less than or greater than one month and the
amount of the first and last Scheduled Payments may be less than or greater
than the level payments, but not by a material amount) and yield interest at
the related APR, (v) provides for, in the event that such Contract is
prepaid, a prepayment that fully pays the Principal Balance of such Contract
with interest at the related APR through the date of payment, (vi) was
selected by selection procedures believed by the Depositor not to be adverse to
the Trust and the Class A Noteholders and with respect to which
information provided to the Trust and its assigns pursuant to the Transaction
Documents is true and correct in all material respects, (vii) is secured
by a new or used automobile or light-duty truck, (viii) relates to an
Obligor who has made a down payment under such Contract as of the applicable
Cutoff Date, if required, (ix) satisfies in all material respects the
requirements under the Credit Policy and (x) requires the Obligor thereunder to
obtain and maintain physical damage insurance covering the related Financed
Vehicle in accordance with the Seller’s normal requirements.

 

(b)           Contract
Schedule.  The information set forth
in the Contract Schedule was true and correct in all material respects as
of the close of business on the applicable Cutoff Date, and no selection
procedures believed to be adverse to the Trust or the Noteholders were utilized
in selecting the Contracts from those retail installment sale contracts or
security agreements and promissory notes which met the criteria contained
herein.  The information set forth in the
compact disk or other listing regarding the Contracts made available to the
Trust and its assigns (which compact disk or other listing is required to be
delivered as specified herein) is true and correct in all material respects.

 

(c)           Compliance
with Law.  Each Contract and the sale
of the related Financed Vehicle complied, at the time such Contract was
originated and complies, as of the related Purchase Date, in all material
respects with all requirements of applicable federal, state and local laws, and
regulations thereunder, including, without limitation, usury laws, the
Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit
Reporting Act, the Fair Credit Billing Act,

 

21

 

the Fair Debt Collection
Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty
Act, the Federal Reserve Board’s Regulations B and Z, the Servicemembers Civil
Relief Act and state adaptations of the Uniform Consumer Credit Code.

 

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

 

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

 

(f)            Security
Interest in Financed Vehicles. 
Immediately prior to the transfer of the Contracts by the Seller to the
Depositor and by the Depositor to the Trust, each Contract was secured by a
valid, binding and enforceable first priority perfected security interest in
favor of the Seller in the related Financed Vehicle and, at such time as
enforcement of such security interest is sought, there shall exist a valid,
binding and enforceable first priority perfected security interest in such
Financed Vehicle for the benefit of the Seller and the Trust, respectively,
which is subject to regulatory registration with a clear legal right of
repossession in favor of the Seller and the Trust.

 

(g)           Contracts
in Force.  No Contract has been
satisfied, subordinated or rescinded, nor has any Financed Vehicle been
released in whole or in part from the Lien granted by the related Contract.

 

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

 

(i)            No
Defenses.  No Contract is subject to
any right of rescission, setoff, counterclaim or defense, including the defense
of usury, and the operation of any of the terms of any Contract, or the
exercise of any right thereunder, will not render such Contract unenforceable
in whole or in part or subject to any right of rescission, setoff, counterclaim
or defense, including the defense of usury, and the Depositor has not received
written notice of the assertion of any such right of rescission, setoff,
counterclaim or defense asserted with respect thereto.

 

(j)            No
Liens.  No liens or claims exist or
have been filed for work, labor or materials or unpaid state or federal taxes
relating to any Financed Vehicle that are prior to, or equal or coordinate
with, the security interest in such Financed Vehicle created by the related
Contract.

 

(k)           No
Default; Repossession.  No default,
breach, violation or event permitting acceleration under the terms of any
Contract has occurred (other than payments that are not more than 30 days past
due), no continuing condition that with notice or the lapse of time or both
would constitute a default, breach, violation or event permitting acceleration
under the terms of 

 

22

 

any Contract has arisen and no
Financed Vehicle has been repossessed as of the applicable Cutoff Date.

 

(l)            True
Sale.              The Depositor intends
that the transfer of the Contracts contemplated by Section 2.1(b) constitutes
a sale of the Contracts from the Depositor to the Trust and that the beneficial
interest in, and title to, the Contracts not be part of the Depositor’s estate
in the event of the filing of a bankruptcy petition by or against the Depositor
under any bankruptcy law.  The Depositor
has not sold, transferred, assigned or pledged any Contract to any Person other
than the Trust and such Contract has not been released.

 

(m)          Valid
Assignment.  No Contract has been
originated in, or is subject to the laws of, any jurisdiction under which the
sale, transfer, assignment and conveyance of such Contract under this Agreement
or the pledge of such Contract under the Indenture is unlawful, void or
voidable.  No Contract is subject to any
agreement with any account debtor that prohibits, restricts or conditions the
assignment of the Contracts.

 

(n)           [Reserved]

 

(o)           [Reserved]

 

(p)           One
Original.  There is only one original
executed copy of each Contract.

 

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

 

(r)            No
Bankrupt Obligors.  As of the
applicable Cutoff Date, no Contract was due from an Obligor that was the
subject of a proceeding under the Bankruptcy Code of the United States or was
bankrupt.

 

(s)           Term
to Maturity.  As of the applicable
Cutoff Date, each Contract had an original term to maturity of not more than 72
payments; provided, however, that as of the Prefunding Account
Ending Date, the weighted average remaining term to maturity of all Contracts
shall not exceed 65 payments.

 

(t)            Annual
Percentage Rate.  Each Contract has
an APR of at least 5.0%; provided, however, that as of the
Prefunding Account Ending Date, the weighted average APR of all Contracts shall
not be less than 13.60%.

 

Location of Contract Files.  The Contract Files are complete and have been
delivered to the Custodian prior to the applicable Purchase Date and are
maintained at the location listed in Schedule 2 to this Agreement; provided,
however, that the Depositor shall have 180 days after the date that the
applicable Contract is transferred to the Trust to deliver to the Custodian any
certificate of title or other evidence in lieu of a certificate of title
reasonably acceptable to the Insurer contained in such Contract File.

 

23

 

(v)           No
Delinquent Contracts or Defaulted Contracts.  As of the applicable Cutoff Date, no Contract
was a Delinquent Contract or a Defaulted Contract.

 

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

 

(x)            No
Defaults.  No Contract is due from an
Obligor that has previously defaulted on a retail installment sales contract or
promissory note and security agreement purchased by the Seller.

 

(y)           Final
Scheduled Payment Date.  As of the
applicable Cutoff Date, each Contract had a final Scheduled Payment date on or
before March 31, 2012.

 

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

 

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

 

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

 

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

 

(dd)         No
Waiver or Modification.  No Contract
has been waived or modified as of the applicable Cutoff Date except as
permitted by the Servicing Agreement.

 

(ee)         Perfection
Representations.  The perfection
representations, warranties and covenants made by the Depositor and set forth
on Schedule 3 hereto shall be a part of this Agreement for all
purposes.

 

(ff)           Direct
Program Origination.  Not less than
65.0% of the aggregate Principal Balance of the Contracts, after giving effect
to the Prefunding Period, shall have been originated through the Seller’s
direct origination program.

 

Section 2.3.           Repurchase by Depositor
for Breach.

 

The Seller, the Insurer, the Depositor, the
Servicer or the Trust, as the case may be, shall inform the other parties to
this Agreement and the Indenture Trustee promptly, in writing, upon the
discovery of any breach or failure to be true of the representations and
warranties made by the Depositor pursuant to Section 2.2.  If such breach or failure shall not have been
cured by the close of business on the last day of the Collection Period which
includes the thirtieth (30th) day after the date on which the Depositor becomes
aware of, or receives 

 

24

 

written notice from, the
Servicer, the Insurer or the Trust of such breach or failure, and such breach
or failure materially and adversely affects the interest of the Trust in a
Contract, the Depositor shall repurchase such Contract from the Trust on the
Business Day preceding the Payment Date immediately following such Collection
Period.  In consideration of the
repurchase of a Contract hereunder, the Depositor shall remit the Purchase
Amount of such Contract in the manner specified in Section 3.4.  The sole remedy of the Trust, the Owner
Trustee, the Indenture Trustee and the Noteholders with respect to a breach or
failure to be true of the representations and warranties made by the Depositor
pursuant to Section 2.2 shall be to require the Depositor to
repurchase Contracts pursuant to this Section 2.3 or to enforce the
obligation of the Seller to repurchase such Contacts pursuant to the
Contribution Agreement.  Neither the
Owner Trustee nor the Indenture Trustee shall have any duty to conduct an
affirmative investigation as to the occurrence of any condition requiring the
repurchase of any Contract pursuant to this Section 2.3 or the
eligibility of any Contract for purposes of this Agreement.

 

Article III

Distributions; Reserve Account; Statements to Noteholders and
Certificateholders

 

Section 3.1.           Accounts.

 

(a)           The
Trust shall establish, or shall cause to be established, on or before the
Closing Date, and shall maintain in the name of the Indenture Trustee at an
Eligible Institution (which shall initially be the Indenture Trustee) a
segregated trust account designated as the Collection Account (the “Collection Account”).  The Collection Account shall be held in trust
for the benefit of the Insurer and the Noteholders and shall be under the sole
dominion and control of the Indenture Trustee; provided, however,
that the Servicer may make deposits to and direct the Indenture Trustee in
writing to make withdrawals from the Collection Account in accordance with this
Agreement and the Indenture.  All monies
deposited from time to time in the Collection Account pursuant to this
Agreement shall be held by the Indenture Trustee as part of the Trust Property
and shall be applied as provided in this Agreement.  All deposits to and withdrawals from the
Collection Account shall be made only upon the terms and conditions of the
Transaction Documents.

 

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

 

25

 

(b)           The
Trust shall establish, or shall cause to be established, on or before the
Closing Date, and shall maintain in the name of the Indenture Trustee at an
Eligible Institution (which shall initially be the Indenture Trustee) the
following note payment accounts:

 

(i)            a segregated trust account
designated as the Class A Note Payment Account (the “Class A
Note Payment Account”). 
The Class A Note Payment Account shall be held in trust for the
benefit of the Class A Noteholders and the Insurer.  The Class A Note Payment Account shall
be under the sole dominion and control of the Indenture Trustee; provided,
however, that the Servicer may make deposits to and direct the Indenture
Trustee in writing to make withdrawals from the Class A Note Payment
Account in accordance with this Agreement and the Indenture.  All monies deposited from time to time in the
Class A Note Payment Account pursuant to this Agreement and the Indenture
shall be held by the Indenture Trustee as part of the Trust Property and shall
be applied as provided in this Agreement and the Indenture.  The amounts on deposit in the Class A
Note Payment Account shall not be invested. 
If the Class A Note Payment Account is no longer to be maintained
at the Indenture Trustee, the Servicer shall, with the Indenture Trustee’s
assistance as necessary, cause the Class A Note Payment Account to be
moved to an Eligible Institution within ten (10) Business Days (or such
longer period not to exceed thirty (30) calendar days as to which each Rating
Agency and the Insurer (provided that no Insurer Default shall have occurred
and is continuing) may consent). The Servicer shall promptly notify the
Indenture Trustee, the Rating Agencies, the Insurer and the Owner Trustee of
any change in the account number or location of the Class A Note Payment
Account; and

 

(ii)           a segregated trust account designated
as the Class B Note Payment Account (the “Class B
Note Payment Account”). 
The Class B Note Payment Account shall be held in trust for the
benefit of the Class B Noteholders. 
The Class B Note Payment Account shall be under the sole dominion
and control of the Indenture Trustee; provided, however, that the
Servicer may make deposits to and direct the Indenture Trustee in writing to
make withdrawals from the Class B Note Payment Account in accordance with
this Agreement and the Indenture.  All
monies deposited from time to time in the Class B Note Payment Account
pursuant to this Agreement and the Indenture shall be held by the Indenture
Trustee as part of the Trust Property and shall be applied as provided in this
Agreement and the Indenture.  The amounts
on deposit in the Class B Note Payment Account shall not be invested.  If the Class B Note Payment Account is
no longer to be maintained at the Indenture Trustee, the Servicer shall, with
the Indenture Trustee’s assistance as necessary, cause the Class B Note
Payment Account to be moved to an Eligible Institution within ten (10) Business
Days (or such longer period not to exceed thirty (30) calendar days as to which
each Rating Agency and the Insurer (provided that no Insurer Default shall have
occurred and is continuing) may consent). The Servicer shall promptly notify
the Indenture Trustee, the Rating Agencies, the Insurer and the Owner Trustee
of any change in the account number or location of the Class B Note
Payment Account.

 

(c)           The
Trust shall establish, or shall cause to be established, on or before the
Closing Date, and shall maintain in the name of the Trust at an Eligible
Institution (which shall initially be the Owner Trustee or an affiliate of the
Owner Trustee) a segregated trust account designated

 

26

 

as the Depositor Account (the “Depositor Account”).  The Depositor Account shall be held in trust
for the benefit of the Certificateholder. 
The Depositor Account shall not constitute part of the Trust
Estate.  The Servicer may direct the
Indenture Trustee in writing to make deposits to the Depositor Account in
accordance with Section 3.5(d) of this Agreement.  All monies deposited from time to time in the
Depositor Account pursuant to this Agreement shall be applied in accordance
with the terms of the Trust Agreement. 
The amounts on deposit in the Depositor Account shall not be invested.  If the Depositor Account is no longer to be
maintained at the Owner Trustee or an affiliate of the Owner Trustee, the
Servicer shall, with the Owner Trustee’s assistance as necessary, cause the
Depositor Account to be moved to an Eligible Institution within ten (10) Business
Days (or such longer period not to exceed thirty (30) calendar days as to which
each Rating Agency and the Insurer (provided that no Insurer Default shall have
occurred and is continuing) may consent). 
The Servicer shall promptly notify the Indenture Trustee, the Insurer
(provided that no Insurer Default shall have occurred and is continuing) and
the Owner Trustee of any change in the account number or location of the
Depositor Account.

 

Section 3.2.           Collections.

 

The Servicer shall remit to the Collection Account all
amounts received by the Servicer on or in respect of the Contracts (excluding
payments with respect to Purchased Contracts) as soon as practicable and in no
event after the close of business on the second Business Day after such
receipt; provided, however, that for so long as (a) FISC is
the Servicer, (b) no Event of Servicing Termination shall have occurred
and be continuing and (c) (i) the short term unsecured debt of FISC
(for so long as it is Servicer) shall be rated at least Prime-1 by Moody’s and
at least A-1 by S&P or (ii) the Rating Agency Condition shall have
been satisfied and the written consent of the Insurer shall have been obtained
(each, a “Monthly Remittance Condition”),
the Servicer may remit any such amounts received during any Collection Period
to the Collection Account in immediately available funds on the Business Day
preceding the Payment Date following such Collection Period.  The Owner Trustee and the Indenture Trustee
shall not be deemed to have knowledge of any event or circumstance under clause
(b) or (c) of the definition of Monthly Remittance
Condition that would require daily remittance by the Servicer to the Collection
Account (and shall be entitled to presume and be fully protected in presuming
that no such event or circumstance has occurred or exists) unless the Owner
Trustee or the Indenture Trustee, as applicable, has received written notice of
such event or circumstance from the Seller or the Servicer in an Officer’s
Certificate or written notice from the Insurer (if no Insurer Default shall
have occurred and be continuing), the Holders of Notes evidencing not less than
25% of the Class A Note Balance or a Responsible Officer of the Owner
Trustee or the Indenture Trustee, as applicable, has actual knowledge of such
event or circumstance.

 

Section 3.3.           Application of Collections.

 

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

 

27

 

Section 3.4.           Application of Deposits.

 

The Depositor and the Servicer shall deposit or cause
to be deposited in the Collection Account the aggregate Purchase Amount with
respect to Purchased Contracts pursuant to Section 2.3 hereof or
Sections 2.02 and 2.28 of the Servicing Agreement.  All such deposits with respect to a
Collection Period shall be made in immediately available funds no later than
5:00 p.m., New York City time, on the Business Day preceding the Payment
Date following such Collection Period.

 

Section 3.5.           Determination Date
Calculations.

 

(a)           On
each Determination Date, the Servicer shall calculate the following amounts:

 

(i)            the Available Funds for the related
Payment Date;

 

(ii)           the Total Servicing Fee for the
related Payment Date;

 

(iii)          the Total Note Interest for the
related Payment Date;

 

(iv)          the Class A Monthly Note Principal
for the related Payment Date;

 

(v)           the Insurance Premium for the related
Payment Date plus any overdue Insurance Premiums for previous Payment Dates;

 

(vi)          the aggregate amount of any
unreimbursed payments under the Policy to the extent payable to the Insurer
under the Insurance Agreement plus accrued interest on any unreimbursed
payments under the Policy at the rate provided in the Insurance Agreement plus
any other amounts due the Insurer under the Insurance Agreement and the Policy;

 

(vii)         the Class A Note Parity Amount for
the related Payment Date;

 

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

 

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

 

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

 

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

 

(b)           On
each Determination Date, the Servicer shall calculate the following amounts:

 

(i)            the lesser of (A) the amount,
if any, by which the sum of the Required Payment Amount plus the Insurance
Payment Amount exceeds the Available Funds for the related Payment Date and (B) the
Reserve Account Amount for such Payment Date 

 

28

 

(before giving
effect to any deposits to or withdrawals from the Reserve Account on such
Payment Date) (such lesser amount, the “Reserve Account Draw
Amount”);

 

(ii)           the Policy Claim Amount;

 

(iii)          the Reserve Account Amount for the
related Payment Date (after giving effect to the withdrawal of the Reserve
Account Draw Amount for such Payment Date); and

 

(iv)          the amount, if any, by which the
Required Reserve Account Amount for the related Payment Date exceeds the
Reserve Account Amount for such Payment Date (after giving effect to the
withdrawal of the Reserve Account Draw Amount for such Payment Date) (such
excess, the “Reserve Account Deficiency”).

 

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

 

(c)           If
the Servicer determines on any Determination Date that the Available Funds for
the following Payment Date plus the Reserve Account Draw Amount (excluding that
portion attributable to clause (ii) of Section 3.5(a))
for such Payment Date will be insufficient to pay in full the Required Payment
Amount (excluding that portion attributable to clause (ii) of Section 3.5(a))
for such Payment Date, the Servicer shall deliver to the Indenture Trustee,
with a copy to the Insurer, the Owner Trustee and the Fiscal Agent, no later
than 2:00 p.m., New York City time, on such Determination Date, a written
notice specifying the Policy Claim Amount for such Payment Date.  The Indenture Trustee shall, no later than
12:00 p.m., New York City time, on the second Business Day prior to such
Payment Date, make a claim under the Policy for such Policy Claim Amount by
delivering to the Insurer and the Fiscal Agent, with a copy to the Servicer, a
Notice (as defined in the Policy) for such Policy Claim Amount.  In making any such claim, the Indenture
Trustee shall comply with all the terms and conditions of the Policy.  The “Policy Claim Amount”
with respect to a Payment Date shall equal the sum of the following amounts:

 

(i)            the excess, if any, of (A) the
Total Note Interest for such Payment Date over (B) the portion of Total
Available Funds for such Payment Date applied to the payment thereof pursuant
to Sections 3.5(d) and (e); and

 

(ii)           the Principal Deficit; and

 

(iii)          on the Final Note Payment Date for
each Class of Class A Notes, the outstanding principal balance of
such Class of Class A Notes, after giving effect to all other
distributions to the Class A Noteholders to be made on such Final Note
Payment Date and without duplication of the Principal Deficit.

 

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

 

29

 

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

 

(d)           On
each Payment Date, prior to any acceleration of the Notes after an Event of
Default, the Servicer shall instruct the Indenture Trustee to apply the
Available Funds for such Payment Date to make the following payments and
deposits in the following order of priority, and the Indenture Trustee shall
apply as so instructed:

 

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

 

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

 

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

 

(iv)          unless an Insurer Default has occurred
and is continuing, to the Insurer, the Insurance Premium for such Payment Date
plus any overdue Insurance Premiums for previous Payment Dates;

 

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

 

(vi)          to the Insurer, the aggregate amount
of any unreimbursed payments under the Policy to the extent payable to the
Insurer under the Insurance Agreement plus accrued interest on any
unreimbursed payments under the Policy at the rate provided in the Insurance
Agreement plus any other amounts due the Insurer under the Insurance
Agreement and the Policy;

 

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

 

(viii)        after the occurrence of a Re-Liening Trigger,
to the Servicer (if not First Investors Servicing Corporation), any and all
expenses incurred in connection with re-titling the Financed Vehicles, to the
extent not previously paid;

 

30

 

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

 

(x)            other amounts, if any, due the Owner
Trustee in its individual capacity, the Indenture Trustee, the Custodian, the
Back-up Servicer, the Servicer and the Insurer, respectively, pursuant to the
Transaction Documents to the extent not paid pursuant to clause (i); and

 

(xi)           to the Depositor Account, any
remaining Available Funds.

 

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

 

(e)           On
each Payment Date, the Servicer shall instruct the Indenture Trustee to apply,
and the Indenture Trustee shall apply as so instructed, the amount, if any,
withdrawn from the Reserve Account in respect of the Reserve Account Draw
Amount in accordance with paragraph (b) of this Section 3.5
to make the following payments and deposits after giving effect to and without
duplication of amounts paid or deposited pursuant to Section 3.5(d) in
the following order of priority:

 

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

 

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

 

(iii)          to the Class A Note Payment
Account, the Class A Monthly Note Principal for such Payment Date (only
if, and to the extent that, at such time the Class A Note Balance exceeds
the sum of the Pool Balance and 98.5% of the amount on deposit in the
Prefunding Account as of the last day of the related Collection Period), to be
applied in accordance with Section 2.8(b)(i) of the Indenture;

 

(iv)          if such Payment Date is the Final Note
Payment Date for any Class of Class A Notes, the outstanding
principal balance of such Class of Class A Notes;

 

(v)           unless an Insurer Default has
occurred and is continuing, to the Insurer, the Insurance Premium for such
Payment Date plus any overdue Insurance Premiums for previous Payment Dates;
and

 

(vi)          to the Insurer, the aggregate amount
of any unreimbursed payments under the Policy to the extent payable to the
Insurer under the Insurance Agreement plus accrued interest on any
unreimbursed payments under the Policy at the rate provided in the Insurance
Agreement plus any other amounts due the Insurer under the Insurance Agreement
and the Policy.

 

31

 

(f)            On
any Payment Date on or after which the Notes have been accelerated after an
Event of Default, the Servicer may, with the prior written consent (a copy of
which written consent shall be forwarded by the Servicer to the Indenture
Trustee) of the Insurer, and shall, at the written direction (a copy of which
written direction shall be forwarded by the Servicer to the Indenture Trustee)
of the Insurer (provided that no Insurer Default shall have occurred and be
continuing), instruct the Indenture Trustee to withdraw from the Reserve
Account, and the Indenture Trustee upon receipt of such instructions shall
withdraw from the Reserve Account, an amount up to the remainder of the Class A
Note Balance after the application of all other amounts distributable to the Class A
Noteholders on such Payment Date pursuant to Section 2.8(f)(i) and Section 5.4(b) of
the Indenture and deposit such amount to the Class A Note Payment Account.  The Servicer may, with the prior written consent
(a copy of which written consent shall be forwarded by the Servicer to the
Indenture Trustee) of the Insurer (provided that no Insurer Default shall have
occurred and be continuing), and shall, at the written direction (a copy of
which written direction shall be forwarded by the Servicer to the Indenture
Trustee) of the Insurer, instruct the Indenture Trustee to apply, and the
Indenture Trustee shall apply, such amount to the payment of principal on the
Notes in accordance with Section 2.8(f)(i) and Section 5.4(b) of
the Indenture.

 

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

 

Section 3.6.           Reserve Account.

 

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

 

(b)           The
Reserve Account Property shall, to the extent permitted by applicable law, rules and
regulations, be invested, as directed in writing by the Servicer, by the bank
or trust company then maintaining the Reserve Account in Eligible Investments
that mature not later 

 

32

 

than the Business Day preceding
the next Payment Date.  All such Eligible
Investments shall be held to maturity. 
All interest and other income (net of losses and investment expenses) on
funds on deposit in the Reserve Account shall, at the written direction of the
Servicer, be paid to the Trust on any Payment Date to the extent that funds on
deposit therein, as certified by the Servicer, exceed the Required Reserve
Account Amount.  If the Reserve Account
is no longer to be maintained at the Indenture Trustee, the Servicer shall,
with the Indenture Trustee’s assistance as necessary, cause the Reserve Account
to be moved to an Eligible Institution within ten (10) Business Days (or
such longer period not to exceed thirty (30) calendar days as to which each
Rating Agency and the Insurer (provided that no Insurer Default shall have
occurred and is continuing) may consent). 
The Servicer shall promptly notify the Insurer (provided that no Insurer
Default shall have occurred and is continuing) and the Indenture Trustee of any
change in the account number or location of the Reserve Account.

 

(c)           With
respect to any Reserve Account Property:

 

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

 

(ii)           any Reserve Account Property that is
held in deposit accounts shall be held solely in the name of the Indenture
Trustee at one or more depository institutions having the Required Rating and
each such deposit account shall be subject to the exclusive custody and control
of the Indenture Trustee and the Indenture Trustee shall have sole signature
authority with respect thereto; and

 

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

 

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

 

33

 

(e)           If
the Class A Note Balance and all other amounts owing or to be distributed
hereunder or under the Indenture to the Class A Noteholders, the Insurer
and the Class B Noteholders have been paid in full and the Trust has been
terminated, any remaining Reserve Account Property shall be distributed to the
Depositor in accordance with Section 5.2 of the Trust Agreement.

 

Section 3.7.           Prefunding Account.

 

(a)           The
Trust shall establish, or shall cause to be established, on or before the
Closing Date, and shall maintain in the name of the Indenture Trustee at an
Eligible Institution (which shall initially be the Indenture Trustee) a
segregated trust account designated as the Prefunding Account (the “Prefunding Account”).  The Prefunding Account shall be held in trust
for the benefit of the Insurer and the Noteholders.  The Prefunding Account shall be under the
sole dominion and control of the Indenture Trustee; provided, however,
that the Servicer may make deposits to and direct the Indenture Trustee in
writing to make withdrawals from the Prefunding Account in accordance with this
Agreement and the Indenture.  All monies
deposited from time to time in the Prefunding Account pursuant to this
Agreement shall be held by the Indenture Trustee as part of the Trust Property
and shall be applied as provided in this Agreement.  All deposits to and withdrawals from the
Prefunding Account shall be made only upon the terms and conditions of the
Transaction Documents.

 

(b)           All
amounts held in the Prefunding Account shall, to the extent permitted by
applicable law, rules and regulations, be invested, as directed in writing
by the Servicer, by the bank or trust company then maintaining the Prefunding
Account in Eligible Investments that mature not later than the Business Day
preceding the Payment Date following the Collection Period to which such
amounts relate.  All such Eligible Investments
shall be held to maturity.  If the
Prefunding Account is no longer to be maintained at the Indenture Trustee, the
Servicer shall, with the Indenture Trustee’s assistance as necessary, cause the
Prefunding Account to be moved to an Eligible Institution within ten (10) Business
Days (or such longer period not to exceed thirty (30) calendar days as to which
each Rating Agency and the Insurer (provided that no Insurer Default shall have
occurred and is continuing) may consent). 
The Servicer shall promptly notify the Indenture Trustee, the Insurer
(provided that no Insurer Default shall have occurred and is continuing) and
the Owner Trustee of any change in the account number or location of the
Prefunding Account.

 

(c)           On
the Closing Date, the Trust will deposit an amount equal to the Initial
Prefunding Account Amount from the aggregate proceeds of the sale of the Notes
into the Prefunding Account.  The Trust
shall cause the Servicer to notify the Insurer and the Indenture Trustee two (2) Business
Days prior to any proposed purchase of Additional Contracts, such notice to
contain (i) a Contract Schedule listing the relevant information for
such Additional Contracts, (ii) the Additional Purchase Price and (iii) the
proposed Additional Contract Purchase Date. 
During the Prefunding Period, unless the Indenture Trustee, on such
proposed Additional Contract Purchase Date, has actual knowledge of the
occurrence of a Default or Event of Default, the Indenture Trustee shall transfer
the Additional Purchase Price for such Additional Contracts from the Prefunding
Account to such account as the Trust, through the Servicer, may specify.

 

34

 

(d)           On
the Prefunding Account Ending Date, upon direction from the Servicer, the Indenture
Trustee shall transfer 98.5% of the Excess Prefunding Amount to the Class A
Note Payment Account and the remaining 1.5% of the Excess Prefunding Amount to
the Class B Note Payment Account. 
If the aggregate remaining amount in the Prefunding Account is: (i) $100,000
or less on the Prefunding Account Ending Date, the portion of the Excess
Prefunding Amount payable to the Class A Notes shall be applied to reduce
the outstanding principal amount of the Class of Class A Notes then
entitled to receive principal payments on the Class A Notes prior to
giving effect to the payment of principal on the immediately following Payment
Date; and (ii) $100,000 or greater, the portion of the Excess Prefunding
Amount payable to Class A Notes shall be paid pro rata to each Class of
Class A Notes based on the outstanding principal balance of each Class of
Class A Notes prior to giving effect to the payment of principal on that
Payment Date.  Such amounts shall be paid
in accordance with Section 2.8(b)(i) of the Indenture.

 

Section 3.8.           Statements to Noteholders.

 

(a)           On
or prior to each Determination Date, the Servicer shall provide to the
Indenture Trustee (with copies to the Insurer, the Rating Agencies and each
Paying Agent) for the Indenture Trustee to forward to each Noteholder of record
as of the most recent Record Date upon a written request from any such
Noteholder, a statement which shall set forth at least the following
information as to the Notes (to the extent applicable) with respect to the
distribution to be made on such Payment Date:

 

(i)            the amount of such distribution
allocable to Total Note Interest;

 

(ii)           the amount of such distribution
allocable to interest, overdue interest and interest on overdue interest for
each Class of Class A Notes;

 

(iii)          the amount of such distribution
allocable to principal on each Class of Class A Notes and the Class B
Notes;

 

(iv)          the Total Servicing Fee for the
preceding Collection Period;

 

(v)           the Class A Note Balance and the
Note Factor relating to each Class of Class A Notes, in each case as
of the close of business on the last day of the preceding Collection Period
(after giving effect to payments allocated to principal reported under clause
(iii) above);

 

(vi)          the Pool Balance as of the close of
business on the last day of the preceding Collection Period;

 

(vii)         the Reserve Account Amount on such
Payment Date (after giving effect to all deposits to or withdrawals from the
Reserve Account on such Payment Date);

 

(viii)        the aggregate Purchase Amount of
Purchased Contracts, if any, with respect to the preceding Collection Period;

 

35

 

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

 

(x)            Cumulative Net Loss Rate information
with respect to the preceding Collection Periods; and

 

(xi)           prior to the Prefunding Account
Ending Date, the Prefunding Account Balance and the Capitalized Interest
Amount.

 

(b)           Within
150 days after the Closing Date and each Additional Contract Purchase Date, the
Servicer shall provide, or shall cause to be provided, to the Indenture Trustee
and the Insurer a notice indicating which Contract Files, if any, do not
contain a certificate of title or other evidence in lieu of a certificate of
title.

 

Section 3.9.           Control of Securities
Accounts; The Securities Intermediary.

 

(a)           Wells
Fargo Bank, National Association agrees to act as securities intermediary
hereunder (in such capacity, the “Securities Intermediary”) and the
Securities Intermediary represents, warrants and covenants as follows:

 

(i)            With respect to any of the
Collateral that is a book-entry security, such Collateral has been credited to
the Indenture Trustee’s securities account by accurate book entry.

 

(ii)           The Securities Intermediary will
comply with all “Entitlement Orders” (as such term is defined in Section 8-102
of the Relevant UCC) of the Indenture Trustee, without further consent of the
Trust, and shall not accept Entitlement Orders from any other person except as
authorized by the Indenture Trustee.

 

(iii)          The Securities Intermediary has
received no notice of, and has no knowledge of any “adverse claim” (as such
term is defined in the Relevant UCC) as to the Collateral.

 

(iv)          The Securities Intermediary waives any
lien, claim or encumbrance in favor of the Securities Intermediary in the
Collateral.

 

(v)           The Securities Intermediary is a “securities
intermediary” as such term is defined in Section 8-102(a)(14) of the Relevant
UCC and in the ordinary course of its business maintains “securities accounts”
for others, as such terms are used in Section 8-501 of the Relevant UCC.

 

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

 

(b)           Any
securities intermediary hereunder shall be, and the Securities Intermediary
hereby represents and warrants that it is as of the date hereof and shall be,
for so long as it is the 

 

36

 

Securities Intermediary
hereunder, a corporation or national banking association that in the ordinary
course of its business maintains securities accounts for others and is acting
in that capacity hereunder.  Any securities
intermediary hereunder shall, and the Securities Intermediary does, agree with
the parties hereto that each Account shall be an account to which financial
assets may be credited and undertake to treat the Indenture Trustee as entitled
to exercise rights that comprise such financial assets.  Any securities intermediary hereunder shall,
and the Securities Intermediary does, agree with the parties hereto that each
item of property credited to each Account shall be treated as a “financial
asset” as defined in Section 8-102 of the Relevant UCC.  Any securities intermediary hereunder shall,
and the Securities Intermediary does, acknowledge that the “securities
intermediary’s jurisdiction” as defined in the Relevant UCC of the Securities
Intermediary with respect to the Collateral, shall be the State of New
York.  Any securities intermediary
hereunder shall, and the Securities Intermediary does, represent and covenant
that it is not and will not be (as long as it is the Securities Intermediary
hereunder) a party to any agreement in respect of the Collateral that is
inconsistent with the provisions of this Agreement.  Any securities intermediary hereunder shall,
and the Securities Intermediary does, covenant that it will not take action
inconsistent with the provisions of this Agreement applicable to it.  Any securities intermediary hereunder shall,
and the Securities Intermediary does, agree that any item of property credited
to any Account shall not be subject to any security interest, lien, or right of
setoff in favor of it or anyone claiming through it (other than the Indenture
Trustee).

 

(c)           It
is the intent of the Indenture Trustee and the Trust that each of the Reserve
Account, the Collection Account and the Prefunding Account shall be a
securities account as to which the Indenture Trustee and not the Trust is the “entitlement
holder” (within the meaning of Section 8-102(a)(7) of the Relevant
UCC).  Nonetheless, (i) any
securities intermediary hereunder shall agree to comply with entitlement orders
originated by the Indenture Trustee without further consent by the Trust, and (ii) the
Securities Intermediary agrees that so long as it is the Securities
Intermediary hereunder, it will comply with entitlement orders originated by
the Indenture Trustee without further consent by the Trust.  Any securities intermediary hereunder shall
covenant that it will not agree with any person or entity other than the
Indenture Trustee that it will comply with entitlement orders originated by
such person or entity, and the Securities Intermediary hereby covenants that it
will not agree with any person or entity other than the Indenture Trustee that
it will comply with entitlement orders originated by such person or entity.

 

(d)           Nothing
herein shall imply or impose upon the Securities Intermediary any duty or
obligations other than those expressly set forth herein and those applicable to
a securities intermediary under the Relevant UCC (and the Securities
Intermediary shall be entitled to all of the protections available to a
securities intermediary under the Relevant UCC).  Without limiting the foregoing, nothing
herein shall imply or impose upon the Securities Intermediary any duties of a
fiduciary nature.

 

(e)           The
Securities Intermediary may at any time resign by notice to the Indenture Trustee
and may at any time be removed by notice from the Indenture Trustee; provided,
however, that it shall be the responsibility of the Indenture Trustee to
appoint a successor securities intermediary and to cause the Accounts to be
established and maintained with such successor securities intermediary in
accordance with the terms hereof; and the responsibilities and duties of the
retiring Securities Intermediary hereunder shall remain in effect until all of
the 

 

37

 

Collateral credited to the
Accounts held by such retiring Securities Intermediary have been transferred to
such successor.  Any corporation into
which the Securities Intermediary may be merged or converted or with which it
may be consolidated, or any corporation resulting from such merger,
consolidation or conversion to which the Securities Intermediary shall be a
party, shall be the successor of the Securities Intermediary hereunder, without
the execution or filing of any further act on the part of the parties hereto or
such securities intermediary or such successor corporation.

 

Section 3.10.        Policy Matters.

 

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

 

(b)           The
Indenture Trustee, for itself and on behalf of the Noteholders, hereby agrees
that the Insurer may at any time during the continuation of any proceeding
relating to a Final Order, provided that no Insurer Default shall have occurred
and be continuing, direct all matters relating to such Final Order, including,
without limitation, the direction of any appeal of any order relating to such
Final Order and the posting of any surety, supersedeas or performance bond
pending any such appeal.  In addition and
without limitation of the foregoing, the Insurer shall be subrogated, to the
extent of any payments made under the Policy relating to a Final Order, to the
rights of the Depositor, the Servicer, the Seller, the Trust, the Indenture
Trustee and the Class A Noteholders in the conduct of any preference claim
relating to a Final Order, including, without limitation, all rights of any
party to any adversarial proceeding or action with respect to any court order
issued in connection with any such preference claim; provided, that such
subrogation rights shall remain subject to the last sentence of paragraph (a) of
this Section 3.10.

 

Article IV

 

The
Depositor

 

Section 4.1.           Representations and
Warranties of the Depositor.

 

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

 

38

 

(a)           Organization
and Good Standing.  The Depositor has
been duly organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware, has the power, authority and legal
right to own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and has the power,
authority and legal right to acquire, own and sell the Contracts.

 

(b)           Due
Qualification.  The Depositor is duly
qualified to do business as a foreign corporation in good standing and has
obtained all necessary licenses and approvals in each jurisdiction in which the
failure to so qualify or to obtain such licenses and approvals would, in the
reasonable judgment of the Depositor, materially and adversely affect the
performance by the Depositor of its obligations under, or the validity or
enforceability of, this Agreement, the Indenture, the Trust Agreement, any of
the other Transaction Documents, the Contracts or the Notes.

 

(c)           Power
and Authority.  The Depositor has the
power and authority to execute, deliver and perform its obligations under this
Agreement and the other Transaction Documents to which it is a party.  The Depositor has the power and authority to
sell, assign, transfer and convey the property to be transferred to and
deposited with the Trust and has duly authorized such transfer and deposit by
all necessary corporate action, and the execution, delivery and performance of
this Agreement and the other Transaction Documents to which the Depositor is a
party have been duly authorized by the Depositor by all necessary corporate
action.

 

(d)           Valid
Transfer; Binding Obligation.  This
Agreement effects a valid sale, transfer, assignment and conveyance to the
Trust of the Contracts and the other Trust Property enforceable against
creditors of and purchasers from the Depositor. 
This Agreement and the other Transaction Documents to which the
Depositor is a party constitute legal, valid and binding obligations of the
Depositor, enforceable against the Depositor in accordance with their terms,
subject, as to enforceability, to applicable bankruptcy, insolvency,
reorganization, conservatorship, receivership, liquidation and other similar
laws and to general equitable principles.

 

(e)           No
Violation.  The execution, delivery
and performance by the Depositor of this Agreement and the other Transaction
Documents to which the Depositor is a party, the consummation of the
transactions contemplated hereby and thereby and the fulfillment of the terms
hereof and thereof will not conflict with, result in a breach of any of the
terms and provisions of or constitute (with or without notice or lapse of time
or both) a default under the certificate of incorporation or by-laws of the
Depositor or any material indenture, agreement, mortgage, deed of trust or
other instrument to which the Depositor is a party or by which the Depositor is
bound or to which any of its properties are subject, or result in the creation
or imposition of any lien upon any of its properties pursuant to the terms of
any such indenture, agreement, mortgage, deed of trust or other instrument
(other than pursuant to this Agreement), or violate any law, order, rule or
regulation applicable to the Depositor or its properties of any federal or
state regulatory body, court, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or any of its
properties.

 

(f)            No
Proceedings.  There are no
proceedings or investigations pending, or, to the knowledge of the Depositor,
threatened, against the Depositor before any court, regulatory body,

 

39

 

administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the Depositor
or its properties (i) asserting the invalidity of this Agreement, the
Indenture, the Trust Agreement, any of the other Transaction Documents to which
the Depositor is a party, or the Notes, (ii) seeking to prevent the
issuance of the Notes or the consummation of any of the transactions
contemplated by this Agreement, the Indenture, the Trust Agreement or any of
the other Transaction Documents to which the Depositor is a party, (iii) seeking
any determination or ruling that, in the reasonable judgment of the Depositor,
would materially and adversely affect the performance by the Depositor of its
obligations under, or the validity or enforceability of, this Agreement, the
Indenture, the Trust Agreement, any of the other Transaction Documents to which
the Depositor is a party, the Contracts or the Notes, or (iv) that, in the
reasonable judgment of the Depositor, would adversely affect the federal or
Applicable Tax State income, excise, franchise or similar tax attributes of the
Notes or the Trust.

 

Section 4.2.           Liability of Depositor;
Indemnities.

 

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

 

(b)           Notwithstanding
any other provision in any Transaction Document, the Depositor shall indemnify,
defend and hold harmless the Trust, the Owner Trustee in its individual
capacity and the Indenture Trustee from and against any taxes that may at any
time be asserted against any such Person with respect to, and as of the date
of, the transfer of the Contracts and Additional Contracts to the Trust or the
issuance and original sale of the Notes, including any sales, gross receipts,
general corporation, tangible personal property, privilege or license taxes
(but, in the case of the Trust, not including any taxes asserted with respect
to ownership of the Contracts and Additional Contracts or federal or other
Applicable Tax State income taxes arising out of the transactions contemplated
by this Agreement and the other Transaction Documents), and all costs and
expenses in defending against such taxes.

 

(c)           Notwithstanding
any other provision in any Transaction Document, the Depositor shall indemnify,
defend and hold harmless the Trust, the Owner Trustee in its individual
capacity, the Indenture Trustee and the Noteholders from and against any loss,
liability or expense incurred by reason of (i) the Depositor’s willful
misfeasance, bad faith or negligence in the performance of its duties under
this Agreement or any other Transaction Document to which it is a party or by
reason of a reckless disregard of its obligations and duties under this
Agreement or any other Transaction Document to which it is a party and (ii) the
Depositor’s violation of federal or state securities laws in connection with
the registration or the sale of the Notes and (iii) any action taken, or
failed to be taken, by the Depositor in respect of any portion of the Trust
Property.

 

(d)           Notwithstanding
any other provision in any Transaction Document, the Depositor shall indemnify,
defend and hold harmless the Owner Trustee in its individual capacity and the
Indenture Trustee and their respective officers, directors, employees and
agents from and against all costs, expenses, unpaid fees, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties contained herein and in the
Trust Agreement, in the case of the Owner Trustee, and in the Indenture, in the
case of the Indenture Trustee, except to the extent that such cost, expense,
loss, claim, damage or liability (i)

 

40

 

shall be due to the willful
misfeasance, bad faith or gross negligence (except for errors in judgment) of
the Owner Trustee or the Indenture Trustee, as applicable, (ii) in the
case of the Owner Trustee, shall arise from the breach by the Owner Trustee of
any of its representations or warranties in its individual capacity set forth
in the Trust Agreement, (iii) in the case of the Indenture Trustee, shall
arise from the breach by the Indenture Trustee of any of its representations
and warranties set forth in the Indenture or (iv) relates to any tax other
than the taxes with respect to which either the Depositor or the Servicer shall
be required to indemnify the Owner Trustee or the Indenture Trustee, as
applicable.

 

(e)           The
Depositor shall pay any and all taxes levied or assessed upon all or any part
of the Owner Trust Estate.

 

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

 

Section 4.3.           Merger or Consolidation
of, or Assumption of the Obligations of, Depositor.

 

Any Person (a) into which the Depositor shall be
merged or consolidated, (b) resulting from any merger, conversion or
consolidation to which the Depositor shall be a party or (c) that shall
succeed by purchase and assumption to all or substantially all of the business
of the Depositor, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the Depositor under this
Agreement, shall be the successor to the Depositor under this Agreement without
the execution or filing of any other document or any further act on the part of
any of the parties to this Agreement; provided, however, that (i) the
Depositor shall have delivered to the Owner Trustee and the Indenture Trustee
an Officer’s Certificate and an Opinion of Counsel each stating that such
merger, conversion, consolidation or succession and such agreement of
assumption comply with this Section 4.3 and (ii) the Depositor
shall have delivered to the Owner Trustee and the Indenture Trustee an Opinion
of Counsel either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements and amendments thereto have
been authorized and filed that are necessary to fully preserve and protect the
interest of the Trust and the Indenture Trustee, respectively, in the Contracts
and the other Trust Property, and reciting the details of such filings, or (B) stating
that, in the opinion of such counsel, no such action shall be necessary to
fully preserve and protect such interest. 
The Depositor shall provide notice of any merger, conversion, consolidation
or succession pursuant to this Section 4.3 to the Rating
Agencies.  Notwithstanding anything
herein to the contrary, the execution of the foregoing agreement of assumption
and compliance with clauses (i) and (ii) above shall be conditions to
the consummation of the transactions referred to in clauses (a), (b) and (c) above.

 

41

 

Section 4.4.           Limitation on Liability of
Depositor and Others.

 

(a)           Neither
the Depositor nor any of the directors, officers, employees or agents of the
Depositor shall be under any liability to the Trust or the Noteholders for any
action taken or for refraining from the taking of any action pursuant to this
Agreement or for errors in judgment; provided, however, that this
provision shall not protect the Depositor or any such Person against any
liability that would otherwise be imposed by reason of willful misfeasance or
bad faith in the performance of duties or by reason of reckless disregard of
obligations and duties under this Agreement, or by reason of negligence in the
performance of duties under this Agreement (except for errors in
judgment).  The Depositor, and its
directors, officers, employees and agents, may rely in good faith on the advice
of counsel or on any document of any kind prima  facie properly
executed and submitted by any Person in respect of any matters arising under
this Agreement.

 

(b)           The
Depositor shall not be under any obligation to appear in, prosecute or defend
any legal action that shall not be incidental to its obligations under this
Agreement and that in its opinion may involve it in any expense or liability.

 

Section 4.5.           Depositor May Own Class A
Notes.

 

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

 

Section 4.6.           Covenants of the Depositor.

 

The Depositor hereby covenants and agrees
that, so long as any Note is outstanding, it shall:

 

(a)           not commingle its assets with
those of any other Person;

 

(b)           maintain
separate records, financial statements and books of account from those of any
other Person;

 

(c)           hold
meetings as appropriate to authorize all action on behalf of the Depositor and
observe all of its other organizational formalities;

 

(d)           not
become involved in the day to day management of any other Person;

 

(e)           operate
so as not to be substantively consolidated with any other Person;

 

42

 

(f)            maintain
its assets separately from any other Person (including through the maintenance
of a separate bank account);

 

(g)           hold
itself out as a separate entity from any other Person, conduct business in its
own name on its own stationary, invoices and checks, and correct any known
misunderstanding regarding its separate identity;

 

(h)           except
as is expressly set forth in the Administration Agreement, pay from its assets
all obligations and indebtedness of any kind incurred by it, and not pay from
its assets any obligations or indebtedness of any other Person;

 

(i)            pay
salaries of its employees, if any, from its own funds, and fairly allocate any
expenses shared with an Affiliate;

 

(j)            not
guarantee or become obligated for the debts of any other Person or hold out its
credit as being available to satisfy the obligations of others;

 

(k)           not
acquire obligations or securities of its members or its Affiliates;

 

(l)            allocate
fairly and reasonably any overhead for shared office space;

 

(m)          maintain
adequate capital and a sufficient number of employees (which may be zero) in
light of its contemplated business activities; and

 

(n)           insure
that any financial transaction between the Depositor and any of its Affiliates
be on arm’s length, commercially reasonable terms.

 

Article V

 

Miscellaneous

 

Section 5.1.           Amendment.

 

(a)           This
Agreement may be amended from time to time by the Seller, the Servicer, the
Depositor and the Trust, with the consent of the Indenture Trustee and the
Insurer (provided that no Insurer Default shall have occurred and be
continuing), but without the consent of any of the Noteholders, to cure any
ambiguity, to correct or supplement any provision in this Agreement that may be
inconsistent with any other provisions in this Agreement or any offering
document used in connection with the initial offer and sale of the Notes or to
add, change or eliminate any other provisions with respect to matters or
questions arising under this Agreement that are not inconsistent with the
provisions of this Agreement; provided, however, that such
amendment shall not, as evidenced by an Opinion of Counsel, which may be based
on an Officer’s Certificate of the Seller, the Servicer, the Depositor or the
Trust delivered to the Owner Trustee, the Indenture Trustee and the Insurer,
materially and adversely affect the interests of any Noteholder.  Any such amendment shall be deemed not to
materially and adversely affect the interests of any Noteholder if the Rating
Agency Condition is satisfied or the Person requesting 

 

43

 

the amendment obtains an
Opinion of Counsel satisfactory to the Indenture Trustee and the Owner Trustee
to that effect.

 

(b)           This
Agreement may also be amended from time to time by the Seller, the Servicer,
the Depositor, the Trust and the Insurer (provided that no Insurer Default
shall have occurred and be continuing and if so, provided further that such
amendment shall not have a material adverse effect on the Insurer), with the
consent of the Indenture Trustee and the Holders of Notes evidencing not less
than 51% of the Class A Note Balance, for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, or of modifying in any manner the rights of the Noteholders; provided,
however, that no such amendment shall, without the consent of the
holders of all of the outstanding Notes, (i) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, or change the
allocation or priority of, collections on or in respect of the Contracts or
distributions that are required to be made for the benefit of the Noteholders
or change the Note Rate of any Class of Notes, (ii) reduce the
percentage required to consent to any such amendment or (iii) adversely
affect the rating of the Notes by the Rating Agencies.

 

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

 

(d)           Promptly
after the execution of any amendment or consent pursuant to Section 5.1(b),
the Trust shall furnish written notification of the substance of such amendment
or consent to the Indenture Trustee and each of the Rating Agencies.  It shall not be necessary for the consent of
the Noteholders pursuant to Section 5.1(b) to approve the
particular form of any proposed amendment or consent, but it shall be sufficient
if such consent shall approve the substance thereof.  The manner of obtaining such consents (and
any other consents of the Noteholders provided for in this Agreement) and of
evidencing the authorization of the execution thereof by the Noteholders shall be
subject to such reasonable requirements as the Owner Trustee and the Indenture
Trustee may prescribe.

 

(e)           Prior
to the execution of any amendment pursuant to this Section 5.1, the
Owner Trustee and the Indenture Trustee shall receive and be entitled to rely
upon (i) an Opinion of Counsel stating that the execution of such
amendment (A) is authorized or permitted by this Agreement, (B) will
not materially adversely affect the federal or any Applicable Tax State income
or franchise taxation of any Outstanding Note or any Holder thereof and (C) will
not cause the Trust to be taxable as a corporation for federal or any
Applicable Tax State income or franchise tax purposes and (ii) an Officer’s
Certificate of the Servicer that all conditions precedent provided for in this
Agreement to the execution of such amendment have been complied with.  The Owner Trustee or the Indenture Trustee
may, but shall not be obligated to, enter into any such amendment which affects
such Owner Trustee’s or Indenture Trustee’s own rights, duties or immunities
under this Agreement or otherwise.

 

Section 5.2.           Protection of Title of
Trust.

 

(a)           The
Depositor or the Servicer, or both, shall authorize and file such financing
statements and cause to be authorized and filed such continuation statements,
all in such manner 

 

44

 

and in such places as may be
required by law fully to preserve, maintain and protect the interest of the
Trust and the Indenture Trustee for the benefit of the Noteholders and the
Insurer in the Contracts and the proceeds thereof.  The Depositor or the Servicer, or both, shall
deliver (or cause to be delivered) to the Owner Trustee and the Indenture
Trustee file-stamped copies of, or filing receipts for, any document filed as
provided above as soon as available following such filing.

 

(b)           The
Depositor shall not change (i) its name, identity or corporate structure
in any manner that would make any financing statement or continuation statement
filed against the Depositor by the Depositor or the Servicer in accordance with
Section 5.2(a) seriously misleading within the meaning of Section 9-507
of the Relevant UCC or (ii) its jurisdiction of organization, unless, in
each case, it shall have given the Owner Trustee and the Indenture Trustee at
least sixty (60) days’ prior written notice thereof and shall have promptly
filed such amendments to previously filed financing statements or continuation
statements or such new financing statements as may be necessary to continue the
perfection of the interest of the Trust and the Indenture Trustee for the
benefit of the Noteholders and the Insurer in the Contracts and the proceeds
thereof.

 

(c)           The
Depositor and the Servicer shall give the Owner Trustee and the Indenture
Trustee at least sixty (60) days’ prior written notice of any relocation of its
principal executive office or change of its jurisdiction of formation and shall
promptly file any such amendment, continuation statement or any new financing
statement.  The Servicer shall at all
times maintain each office from which it shall service Contracts, and its
principal executive office, within the United States of America.

 

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

 

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

 

(f)            If
at any time the Depositor or the Servicer shall propose to sell, grant a
security interest in or otherwise transfer any interest in any motor vehicle
retail installment sale contract or security interest and promissory note to
any prospective purchaser, lender or other transferee, the Servicer shall give
to such prospective purchaser, lender or other transferee computer tapes,
compact disks, records or print-outs (including any restored from back-up
archives) that, if they shall refer in any manner whatsoever to any Contract,
shall indicate clearly that such Contract 

 

45

 

has been sold and is owned by
the Trust and has been pledged to the Indenture Trustee (unless such Contract
has been paid in full or repurchased by the Depositor or purchased by the
Servicer).

 

(g)           The
Servicer shall permit the Owner Trustee, the Indenture Trustee and their
respective agents at any time during normal business hours to inspect, audit
and make copies of and abstracts from the Servicer’s records regarding any
Contract.

 

(h)           Upon
request, the Servicer shall furnish to the Owner Trustee and the Indenture
Trustee, within ten (10) Business Days, a list of all Contracts (by
contract number and name of Obligor) then held as part of the Trust, together
with a reconciliation of such list to the Contract Schedule and to each of
the Monthly Servicer Reports furnished before such request indicating removal
of Contracts from the Trust.

 

(i)            The
Servicer shall deliver to the Owner Trustee and the Indenture Trustee:

 

(i)            promptly after the execution and
delivery of each amendment to any financing statement, an Opinion of Counsel
either (A) stating that, in the opinion of such Counsel, all financing
statements and continuation statements have been authorized and filed that are
necessary fully to preserve and protect the interest of the Trust and the
Indenture Trustee in the Contracts, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or (B) stating
that, in the opinion of such Counsel, no such action shall be necessary to
preserve and protect such interest; and

 

(ii)           within ninety (90) days after the
beginning of each calendar year (beginning with the year 2007), an Opinion of
Counsel, dated as of a date during such 90-day period, either (A) stating
that, in the opinion of such counsel, all financing statements and continuation
statements have been authorized and filed that are necessary fully to preserve
and protect the interest of the Trust and the Indenture Trustee in the
Contracts, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (B) stating that,
in the opinion of such counsel, no such action shall be necessary to preserve
and protect such interest.

 

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

 

Section 5.3.           Governing Law.

 

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

 

Section 5.4.           Notices.

 

All demands, notices and other communications under
this Agreement shall be in writing, personally delivered, sent by telecopier,
overnight courier or mailed by certified mail, return 

 

46

 

receipt requested, and shall be
deemed to have been duly given upon receipt (a) in the case of the Seller,
at the following address: 675 Bering Drive, Suite 710, Houston, Texas
77057 Attention: Bennie Duck, (b) in the case of the Depositor, at the
following address: 675 Bering Drive, Suite 710, Houston, Texas 77057
Attention: Bennie Duck, (c) in the case of the Servicer, at the following
address: 675 Bering Drive, Suite 710, Houston, Texas 77057, Attention:
Bennie Duck, (d) in the case of the Owner Trustee, at the related
Corporate Trust Office, (e) in the case of the Indenture Trustee, at the
related Corporate Trust Office, (f) in the case of Moody’s, at the
following address: Moody’s Investors Service, Inc., 99 Church Street, 4th
Floor, New York, New York 10007, ServicerReports@moodys.com, Attn: Yan Yan,
with an additional copy to Moody’s Investors Service, Inc., 99 Church
Street, 4th Floor, New York, New York 10007, Attn: ABS Monitoring Department,
and (g) in the case of S&P, if available electronically, at
Servicer_reports@sandp.com, and if not available electronically, at the
following address: Standard & Poor’s Ratings Services, a division of
The McGraw-Hill Companies, Inc., 55 Water Street, 43rd Floor, New York,
New York 10041, Attention: ABS Surveillance Group, and (h) in the case of
the Insurer, at the following address: 
MBIA Insurance Corporation, 113 King Street, Armonk, New York 10504,
Attention: Insured Portfolio Management, Structured Finance.

 

Section 5.5.           Severability of Provisions.

 

If any one or more of the covenants, agreements,
provisions or terms of this Agreement shall be for any reason whatsoever held
invalid, then such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this
Agreement and shall in no way affect the validity or enforceability of the
other provisions of this Agreement, or of the Notes, or the rights of the
Holders thereof.

 

Section 5.6.           Assignment.

 

Notwithstanding anything to the contrary contained
herein this Agreement may not be assigned by the Depositor or the Servicer
without the prior written consent of the Trust, the Indenture Trustee and the
Holders of Notes evidencing not less than 66-2/3% of the Class A Note
Balance.

 

Section 5.7.           Further Assurances.

 

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

 

Section 5.8.           No Waiver; Cumulative
Remedies.

 

No failure to exercise and no delay in exercising, on
the part of the Owner Trustee, the Indenture Trustee, the Insurer or the
Noteholders, any right, remedy, power or privilege hereunder, shall operate as
a waiver thereof, nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and 

 

47

 

privileges provided in this
Agreement are cumulative and not exhaustive of any rights, remedies, powers and
privileges provided by law.

 

Section 5.9.           Third-Party Beneficiaries.

 

This Agreement shall inure to the benefit of and be
binding upon the parties hereto, the Noteholders and their respective
successors and permitted assigns.  Except
as otherwise provided in Section 4.2 and this Article V,
no other Person shall have any right or obligation hereunder.  The parties hereto hereby acknowledge and
consent to the pledge of this Agreement by the Trust to the Indenture Trustee
for the benefit of the Noteholders and the Insurer pursuant to the
Indenture.  The Insurer is an express
third party beneficiary of this Agreement and is entitled to enforce the
provisions hereof as if a party hereto.

 

Section 5.10.        Actions by Noteholders.

 

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

 

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

 

Section 5.11.        Counterparts.

 

For the purpose of facilitating the execution of this
Agreement and for other purposes, this Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and all of which counterparts shall constitute but one and the
same instrument.

 

Section 5.12.        [Reserved].

 

Section 5.13.        No Bankruptcy.

 

(a)           The
Owner Trustee, the Indenture Trustee and the Servicer each covenants and agrees
that, prior to the date which is one year and one day after the payment in full
of all securities issued by the Trust, which securities were rated by any
nationally recognized statistical rating organization, it will not institute
against, or join any other Person in instituting against, or knowingly or
intentionally cooperate or encourage any other Person in instituting against,
the Depositor any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other proceedings under any federal or state
bankruptcy or similar law.

 

(b)           The Owner Trustee, the Indenture
Trustee, the Servicer and the Depositor each covenants and agrees that, prior
to the date which is one year and one day after the payment in full of all
securities issued by the Trust, which securities were rated by any nationally
recognized

 

48

 

statistical
rating organization, it will not institute against, or join any other Person in
instituting against, or knowingly or intentionally cooperate or encourage any
other Person in instituting against, the Trust any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other proceedings under
any federal or state bankruptcy or similar law.

 

(c)           This
Section 5.13 shall survive the resignation or removal of the Owner
Trustee under the Trust Agreement and the Indenture Trustee under the Indenture
and shall survive the termination of the Trust Agreement and the Indenture.

 

Section 5.14.       Limitation
of Liability of Owner Trustee and Indenture Trustee.

 

(a)           Notwithstanding
anything contained herein or contemplated hereby to the contrary, this
Agreement has been signed by the Owner Trustee not in its individual capacity
but solely in its capacity as Owner Trustee of the Trust, and in no event shall
the Owner Trustee in its individual capacity have any liability for the
representations, warranties, covenants, agreements or other obligations of the
Trust hereunder or in any of the certificates, notices or agreements delivered
pursuant hereto or contemplated hereby, as to all of which recourse shall be
had solely to the assets of the Trust. 
For all purposes of this Agreement, the Owner Trustee (as such and in
its individual capacity) shall be subject to, and entitled to the benefits of,
the terms and provisions of the Trust Agreement.

 

(b)           Notwithstanding
anything contained herein to the contrary, this Agreement has been accepted by
the Indenture Trustee not in its individual capacity but solely as Indenture
Trustee, and in no event shall the Indenture Trustee in its individual capacity
have any liability for the representations, warranties, covenants, agreements
or other obligations of the Trust hereunder or in any of the certificates,
notices or agreements delivered pursuant hereto, as to all of which recourse
shall be had solely to the assets of the Trust.

 

Section 5.15.       Certain
Rights of the Insurer.

 

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

 

Section 5.16.        Optional
Redemption.

 

If, as of the last day of any Collection Period,
the Pool Balance is less than or equal to 15% of the sum of (a) the
aggregate Principal Balances of all of the Contracts as of the Initial Cutoff
Date and (b) the sum, for each Additional Contract Cutoff Date, of the
Aggregate Principal Balances of all Contracts that became Additional Contracts
on such Additional Contract Cutoff Date, the Depositor shall have the option to
purchase from the Issuer, on the following Payment Date, the Owner Trust
Estate, other than the Collection Account, the Class A Note Payment
Account, the Class B Note Payment Account, the Prefunding Account and the
Reserve Account.  To exercise such
option, the Depositor shall notify in writing the Owner Trustee, the Indenture
Trustee, the Issuer and the Insurer no later than fifteen (15) days prior to 

 

49

 

the Payment Date on which such
repurchase is to be effected (the “Prepayment Date”)
and shall deposit into the Collection Account on the Business Day preceding
such Payment Date an amount equal to the aggregate Purchase Amount for the
Contracts, plus the appraised value of any other Trust Property, other
than the Collection Account, the Class A Note Payment Account, the Class B
Note Payment Account, the Prefunding Account or the Reserve Account, such value
to be determined by an appraiser mutually agreed upon by the Servicer, the
Trust, the Indenture Trustee and the Insurer; provided, however,
that the Depositor shall not be permitted to exercise such option unless the
amount to be deposited in the Collection Account pursuant to this Section 5.16
plus all amounts on deposit in the Collection Account, the Class A Note
Payment Account, the Class B Note Payment Account, the Prefunding Account
and the Reserve Account are at least equal to the sum of the Class A Note
Balance and the Class B Note Balance plus all accrued but unpaid interest
(including any Additional Note Interest) on each Class of Class A
Notes plus all amounts due the Insurer under the Insurance Agreement and
the Policy plus all amounts due to the Owner Trustee, the Indenture Trustee,
the Custodian, the Servicer and the Back-up Servicer under the Transaction
Documents (the “Redemption Price”). 
Such amount shall be paid in accordance with Section 3.5(d).  Such payment amount, plus, to the extent
necessary, all amounts in the Collection Account, the Class A Note Payment
Account, the Class B Note Payment Account, the Prefunding Account and the
Reserve Account, shall be used to make payments in full to the Noteholders and
the Insurer in the manner set forth in Article III of this
Agreement.

 

Section 5.17.        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, each party to this Agreement, by entering into or accepting this
Agreement, 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 to this Agreement 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 to 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 to this
Agreement further acknowledges and agrees that no adequate remedy at law exists
for a breach of this Section 5.17 and the terms of this Section 5.17
may be enforced by an action for specific performance.  The provisions of this Section 5.17
will be for the third party benefit of those entitled to rely thereon and will
survive the termination of this Agreement.

 

50

 

[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]

 

51

 

IN WITNESS WHEREOF, the parties hereto have
caused this Sale and Allocation Agreement to be duly executed by their
respective officers, thereunto duly authorized, all as of the day and year
first above written.

 

	
   

  	
  FIRST
  INVESTORS SERVICING CORPORATION, as Servicer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIRST
  INVESTORS AUTO OWNER TRUST

  2006-A

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  WELLS
  FARGO DELAWARE TRUST 

  COMPANY, not in its individual capacity 

  but solely as Owner Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIRST
  INVESTORS AUTO FUNDING 

  CORPORATION, as Depositor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

 

Accepted
and agreed:

 

WELLS
FARGO BANK, NATIONAL ASSOCIATION,

not
in its individual capacity but solely as Indenture Trustee and

Securities
Intermediary

 

	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

 

Schedule 1

 

Schedule of Initial
Contracts

 

Schedule 1

 

Schedule 2

 

Location of Contract
Files

 

ABS
Custody Vault

751
Kasota Avenue

MAC
N9328-011

Minneapolis,
MN 55414

 

Schedule 2

 

Schedule 3

 

Perfection
Representations, Warranties and Covenants

 

In addition to the representations, warranties
and covenants contained in this Agreement, the Depositor hereby represents,
warrants, and covenants to the Trust as follows on the Closing Date and on each
Additional Contract Purchase Date on which the Trust purchases Contracts, in
each case only with respect to the Collateral sold to the Trust on the Closing
Date or the relevant Additional Contract Purchase Date, as applicable:

 

General

 

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

 

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

 

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

 

Creation

 

1.             The Depositor owns and has good and
marketable title to the Collateral, free and clear of any Lien, claim or
encumbrance of any Person, excepting only tax liens, some mechanics’ liens and
other liens that arise by the operation of law, in each case on any of the
Financed Vehicles and arising solely as a result of an action or omission of
the related Obligor.

 

Perfection

 

1.             The Depositor has caused the filing
of all appropriate financing statements in the proper filing office in the
appropriate jurisdictions under applicable law in order to perfect the security
interest in the Collateral granted to the Trust hereunder.

 

2.             With respect to Collateral that
constitutes tangible chattel paper, such tangible chattel paper is in the
possession of the Custodian.  All
financing statements filed or to be filed against the Depositor in favor of the
Trust in connection with this Agreement describing the Collateral contain a
statement to the following effect: “A purchase of or security interest in any
collateral described in this financing statement will violate the rights of the
Secured Party.”

 

Priority

 

1.             Other than the security interest
granted to the Trust pursuant to this Agreement, the Depositor has not pledged,
assigned, sold, granted a security interest in, or otherwise conveyed 

 

Schedule 3-1

 

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

 

2.             Neither the Seller nor the
Depositor is aware of any judgment, ERISA or tax lien filings against either
the Seller or the Depositor.

 

3.             None of the tangible chattel paper
that constitutes or evidences the Contracts has any marks or notations
indicating that it has been pledged, assigned or otherwise conveyed to any
Person other than the Depositor, the Trust or the Indenture Trustee.

 

Survival of Perfection
Representations

 

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

 

No Waiver

 

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

 

Schedule 3-2

 

Exhibit A

 

Form of Monthly
Servicer Report

 

Exhibit A-1

 

Exhibit B

 

[Reserved]

 

Exhibit B-1

 

Exhibit C

 

Credit Policy

 

[See Attached]

 

 

Exhibit D

 

[Reserved]

 

Exhibit D-1

 

Exhibit E

 

Form of Originator
Agreement

 

Exhibit E-1

 

Exhibit F

 

Form of Additional
Contract Assignment

 

For value received, in accordance with the Sale
and Allocation Agreement (the “Sale and Allocation
Agreement”), dated as of January 26, 2006, by and among
First Investors Financial Services, Inc., First Investors Servicing
Corporation, First Investors Auto Funding Corporation, Wells Fargo Bank,
National Association and First Investors Auto Owner Trust 2006-A (the “Purchaser”) the undersigned does
hereby sell, transfer, assign and otherwise convey unto the Purchaser, without
recourse (subject to the obligations in the Sale and Allocation Agreement) all
right, title and interest of the Seller in and to (i) the Additional
Contracts listed on Schedule 1 hereto, (ii) all amounts
received on or in respect of such Additional Contracts after the Additional
Cutoff Date related thereto (except that interest accrued on the Additional
Contracts prior to the Additional Cutoff Date related thereto and received
after such Additional Cutoff Date will be remitted by the Trust to the Seller);
(iii) the security interests in the Financed Vehicles related thereto; (iv) any
proceeds from claims on or refunds of premiums with respect to extended
warranties or physical damage, theft, credit life and credit disability
insurance policies relating to the Financed Vehicles or the related Obligors
with respect to such Additional Contracts; (v) any Liquidation Proceeds
with respect to such Additional Contracts; (vi) the Contract Files with
respect to such Additional Contracts; (vii) rights under the Contribution
Agreement to cause the Seller to purchase such Additional Contracts affected
materially and adversely by breaches of the representations and warranties of
the Seller made in the Contribution Agreement; (viii) rights under the
Servicing Agreement to cause the Servicer to purchase such Additional Contracts
affected materially and adversely by breaches of the representations and
warranties of the Servicer made in the Servicing Agreement; and (ix) and
all present and future claims, demands, causes of action and choses in action
in respect of any or all of the foregoing and all payments on or under and all
proceeds of every kind and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion thereof, voluntary or
involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit
accounts, insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments and
other property which at any time constitute all or part of or are included in
the proceeds of any of the foregoing.

 

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

 

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

 

Exhibit F-1

 

The Depositor does hereby make each of the
representations and warranties referred to in Section 2.2 of the Sale and
Allocation Agreement with respect to this Agreement with full force and effect
as if fully set forth herein.  The
Depositor does hereby certify that each of the conditions precedent set forth
in Section 2.1(f) of the Sale and Allocation Agreement has been
satisfied.

 

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

 

IN WITNESS WHEREOF, the undersigned has caused
this Additional Contract Assignment to be executed by its officer thereunto
duly authorized, as of             ,
200[  ].

 

	
   

  	
  FIRST
  INVESTORS FINANCIAL SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  

 

Exhibit F -2

 

Schedule 1

to

Additional Contract
Assignment

Dated

, 200[  ]

 

List of Additional
Contracts

 

Exhibit F -3

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Article I

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 1.1.

  	
  Definitions

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 1.2.

  	
  Other
  Definitional Provisions

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  Article II

  	
  Trust
  Property

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.1.

  	
  Conveyance
  of Trust Property

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.2.

  	
  Representations
  and Warranties of the Depositor as to the Contracts.

  	
  20

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 2.3.

  	
  Repurchase
  by Depositor for Breach

  	
  24

  
	
   

  	
   

  	
   

  
	
  Article III

  	
  Distributions;
  Reserve Account; Statements to Noteholders and Certificateholders

  	
  25

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 3.1.

  	
  Accounts

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.2.

  	
  Collections

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.3.

  	
  Application
  of Collections

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.4.

  	
  Application
  of Deposits

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.5.

  	
  Determination
  Date Calculations

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.6.

  	
  Reserve
  Account

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.7.

  	
  Prefunding
  Account

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.8.

  	
  Statements
  to Noteholders

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.9.

  	
  Control
  of Securities Accounts; The Securities Intermediary

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 3.10.

  	
  Policy
  Matters

  	
  38

  
	
   

  	
   

  	
   

  
	
  Article IV

  	
  The
  Depositor

  	
  38

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 4.1.

  	
  Representations
  and Warranties of the Depositor

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.2.

  	
  Liability
  of Depositor; Indemnities

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.3.

  	
  Merger
  or Consolidation of, or Assumption of the Obligations of, Depositor

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.4.

  	
  Limitation
  on Liability of Depositor and Others

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.5.

  	
  Depositor
  May Own Class A Notes

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 4.6.

  	
  Covenants
  of the Depositor

  	
  42

  
	
   

  	
   

  	
   

  
	
  Article V

  	
  Miscellaneous

  	
  43

  
	
   

  	
   

  	
   

  
	
   

  	
  Section 5.1.

  	
  Amendment

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.2.

  	
  Protection
  of Title of Trust

  	
  44

  
						

 

i

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.3.

  	
  Governing
  Law

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.4.

  	
  Notices

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.5.

  	
  Severability
  of Provisions

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.6.

  	
  Assignment

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.7.

  	
  Further
  Assurances

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.8.

  	
  No
  Waiver; Cumulative Remedies

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.9.

  	
  Third-Party
  Beneficiaries

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.10.

  	
  Actions
  by Noteholders

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.11.

  	
  Counterparts

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.12.

  	
  [Reserved]

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.13.

  	
  No
  Bankruptcy

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.14.

  	
  Limitation
  of Liability of Owner Trustee and Indenture Trustee

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.15.

  	
  Certain
  Rights of the Insurer

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.16.

  	
  Optional
  Redemption

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Section 5.17.

  	
  Subordination

  	
  50

  

 

iiExhibit 10.127(u)

 

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 2006-A,

as Issuer

 

WELLS
FARGO DELAWARE TRUST COMPANY,

as Owner Trustee

 

WELLS
FARGO BANK, NATIONAL ASSOCIATION,

as Back-up Servicer and
Indenture Trustee

 

 

INSURANCE
AGREEMENT

 

First Investors Auto Owner
Trust 2006-A

$32,000,000 4.5685% Class A-1
Asset-Backed Notes

$47,000,000 4.87% Class A-2
Asset-Backed Notes

$74,000,000 4.93% Class A-3
Asset-Backed Notes

$36,060,000 5.00% Class A-4
Asset-Backed Notes

 

Dated as of January 26,
2006

 

 

 

 

Table
of Contents

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  DEFINITIONS

  	
   

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
   

  
	
  REPRESENTATIONS, WARRANTIES AND
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
   

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

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.02.

  	
   

  	
  Affirmative Covenants
  of the Servicer, the Seller and the Depositor

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.03.

  	
   

  	
  Negative Covenants of
  the Servicer, the Seller and the Depositor

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.04.

  	
   

  	
  Representations and
  Warranties of the Issuer

  	
  18

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.05.

  	
   

  	
  Affirmative Covenants
  of the Issuer

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.06.

  	
   

  	
  Negative Covenants of
  the Issuer

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.07.

  	
   

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

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.08.

  	
   

  	
  Representations,
  Warranties and Covenants of Owner Trustee

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.09.

  	
   

  	
  Negative Covenant of
  the Administrator

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
   

  
	
  THE POLICY; REIMBURSEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
   

  	
  Issuance of the Policy

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.02.

  	
   

  	
  Payment of Fees and
  Insurance Premium

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.03.

  	
   

  	
  Reimbursement and
  Additional Payment Obligation

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.04.

  	
   

  	
  Indemnification;
  Limitation of Liability

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.05.

  	
   

  	
  Payment Procedure

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
   

  
	
  FURTHER AGREEMENTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
   

  	
  Effective Date; Term of
  the Insurance Agreement

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.02.

  	
   

  	
  Further Assurances and
  Corrective Instruments

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.03.

  	
   

  	
  Obligations Absolute

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.04.

  	
   

  	
  Assignments;
  Reinsurance; Third-Party Rights

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.05.

  	
   

  	
  Liability of the
  Insurer

  	
  38

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.06.

  	
   

  	
  Parties Will Not Institute
  Insolvency Proceedings

  	
  39

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.07.

  	
   

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

  	
  39

  

 

 

	
  Section 4.08.

  	
   

  	
  Subrogation

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
   

  
	
  DEFAULTS; REMEDIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
   

  	
  Defaults

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.02.

  	
   

  	
  Remedies; No Remedy
  Exclusive

  	
  41

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.03.

  	
   

  	
  Waivers

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
   

  
	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
   

  	
  Amendments, Etc

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.02.

  	
   

  	
  Notices

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.03.

  	
   

  	
  Severability

  	
  44

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.04.

  	
   

  	
  Governing Law

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.05.

  	
   

  	
  Consent to Jurisdiction

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.06.

  	
   

  	
  Consent of the Insurer

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.07.

  	
   

  	
  Counterparts

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.08.

  	
   

  	
  Headings

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.09.

  	
   

  	
  Trial by Jury Waived

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.10.

  	
   

  	
  Limited Liability

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.11.

  	
   

  	
  Entire Agreement

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.12.

  	
   

  	
  Limitation of Liability

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.13.

  	
   

  	
  Limited Recourse

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.14.

  	
   

  	
  Subordination

  	
  47

  

 

ii

 

INSURANCE AGREEMENT

 

This INSURANCE AGREEMENT
(this “Insurance Agreement”), dated as of January 26, 2006 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 2006-A, as Issuer (the “Issuer”
or the “Trust”), WELLS FARGO DELAWARE TRUST COMPANY, as
Owner Trustee (the “Owner Trustee”) MBIA INSURANCE
CORPORATION, as Insurer (the “Insurer”), WELLS FARGO
BANK, NATIONAL ASSOCIATION, as Back-up Servicer (the “Back-up
Servicer”) and as Indenture Trustee (the “Indenture Trustee”).

 

WHEREAS, the Indenture dated as of January 26, 2006 (the “Indenture”)
relating to the First Investors Auto Owner Trust 2006-A $32,000,000 4.5685% Class A-1
Asset-Backed Notes (the “Class A-1 Notes”), $47,000,000 4.87% Class A-2
Asset-Backed Notes (the “Class A-2 Notes”), $74,000,000 4.93% Class A-3
Asset-Backed Notes (the “Class A-3 Notes”) and $36,060,000 5.00% Class A-4
Asset-Backed Notes (the “Class A-4 Notes” and, together with the Class A-1
Notes, the Class A-2 Notes and the Class A-3 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.

 

“Adjusted Net Income” means, for
any period and any Person, such Person’s consolidated net income (or loss)
determined in accordance with GAAP, but excluding: (a) the income of any
other Person (other than its Subsidiaries) in which such Person or any of its
Subsidiaries has an ownership interest, unless received by such Person or its
Subsidiary in a cash distribution; (b) any after-tax gains or losses
attributable to an asset disposition other than in the ordinary course of
business; and (c) to the extent not included in clause (a) and clause
(b) above, any after-tax extraordinary, non-cash or nonrecurring gains or
losses.

 

“Administration Agreement” means
the Administration Agreement dated as of January 26, 2006, 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 or (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 January 26, 2006 between the Seller and
the Depositor.

 

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

 

2

 

“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(j) hereof.

 

“EBITDA” means, for any period
and any Person, the total of the following (calculated without duplication) for
such Person on a consolidated basis for such period: (a) Adjusted Net
Income; plus (b) any provision for (or less any benefit from) income or
franchise taxes deducted in determining Net Adjusted Income; plus (c) Interest
Expense deducted in determining Adjusted Net Income; plus amortization and
depreciation expense deducted in determining Adjusted Net Income, plus (e) other
noncash charges deducted in determining Net Adjusted Income and no already
deducted in accordance with clause (d) above or clause (b) and clause
(c) of the definition of Adjusted Net Income; minus (f) noncash
credits included in determining consolidated Adjusted Net Income and not
already excluded in accordance with the definitions of Adjusted Net Income.

 

“EBIDTA Coverage Ratio”  means the ratio of EBITDA
to Interest Expense.

 

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

 

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

 

 “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 by FIFSG.

 

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

 

“GAAP” means generally accepted
accounting principles of the United States as in effect from time to time.

 

“Guaranty” means the Guaranty
entered into as of January 26, 2006, 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 January 10, 2006, among the
Insurer, the Seller and the Initial Purchaser.

 

“Indenture” means the Indenture dated
as of January 26, 2006 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, National Association, a national banking association, as Indenture
Trustee under the Indenture, and any successor Indenture Trustee under the
Indenture.

 

3

 

“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.

 

“Interest Expense” means, for any
period and any Person, interest expense of such Person calculated without
duplication on a consolidated basis for such period in accordance with GAAP.

 

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

 

“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.

 

“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.

 

4

 

“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 January 10, 2006 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 January 26,
2006 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 Wells Fargo
Delaware Trust Company, not in its individual capacity, but solely as Owner
Trustee of the Issuer.

 

“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 January 26, 2006, 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 dated as of January 10, 2006, among the Initial
Purchaser, the Seller, the Depositor and the Issuer 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 January 26, 2006, among the Servicer, the Indenture Trustee, the
Depositor, 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.

 

5

 

“Servicing Agreement”
means the Servicing Agreement dated as of January 26, 2006 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
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.

 

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

 

“Trust Agreement” means the
Amended and Restated Trust Agreement dated as of January 26, 2006 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.  Each of the
Servicer, the Seller and the Depositor is 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.

 

6

 

(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:

 

(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 the
Depositor.

 

(f)            Valid and Binding Obligations.  The Obligations, when executed, authenticated
and issued in accordance with the Indenture, and the Transaction

 

7

 

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 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. 
None of the Servicer, the Seller and the Depositor is 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.

 

8

 

(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 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 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 each of 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. None of 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

 

9

 

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 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 or refinancing in the ordinary course of the
Originator’s business; (c) the contract evidencing such Contract complies
with all applicable 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 the 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, each as to itself, that during the Term of the Insurance
Agreement, unless the Insurer shall otherwise expressly consent in writing:

 

10

 

(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
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

 

11

 

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 electronic
file 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 February 2006,
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 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 2006.

 

12

 

(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 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 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

 

13

 

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
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

 

14

 

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

 

(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.

 

15

 

(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.

 

(m)          Maintenance of Trust.  On or before each January 31, beginning
in 2007, 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

 

16

 

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”);

 

(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)            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:

 

17

 

(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 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 and the Seller shall not, and the Depositor shall not cause the
Servicer or the Seller to, alter or amend any Contract or, with regard to the
Servicer, alter or amend its Collection Policy or, with regard to the Seller,
prior to the day following the Prefunding Account End Date, alter or amend its
Credit Policy, in any case 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

 

18

 

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.

 

(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

 

19

 

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
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

 

20

 

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 2006-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.

 

(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

 

21

 

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:

 

(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.

 

22

 

(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.

 

(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

 

23

 

(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.

 

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 Statutory 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) file under the Uniform Commercial Code of any jurisdiction any
financing statement which names the Issuer as a debtor, or sign any security
agreement

 

24

 

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.

 

(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.

 

25

 

(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 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.

 

26

 

(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 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.

 

27

 

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:

 

(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.

 

28

 

(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 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 Class A-1 Notes, when issued
will be rated “A-1+” by S&P and “Prime-1” by Moody’s, and the remaining
Obligations, when issued, will be rated “AAA” by S&P and “Aaa” by Moody’s.

 

29

 

(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.

 

(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

 

30

 

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 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

 

31

 

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, or (iv) 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 the amounts
recovered by the Insurer from the Seller and the Servicer pursuant to this
paragraph for the items set forth in (iv) 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, severally but not jointly 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)           (i)            The
Servicer and the Seller agree to pay to the Insurer as follows: any payments
made by the Insurer on behalf of, or advanced to, the Servicer or the Seller,
respectively, including, without limitation, any amounts payable by the
Servicer or the Seller pursuant to the Transaction Documents (other than the
Obligations).

 

(ii)           The Depositor agrees to pay to the
Insurer as follows: any payments made by the Insurer on behalf of, or advanced
to, the Depositor, including, without limitation, any amounts payable by 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

 

32

 

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:

 

(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;

 

33

 

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

 

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
(i) acts or omissions of or any liabilities attributable to the Depositor
or the Issuer or (ii) for any failure of the Servicer to provide
indemnification 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 or Section 20
of the

 

34

 

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 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.

 

(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 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 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

 

35

 

(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.

 

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;

 

36

 

(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 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

 

37

 

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, 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

 

38

 

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.

 

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 continuing), 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

 

39

 

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 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 continuing), 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;

 

40

 

(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;

 

(f)            The departure of both Tommy Moore
and Bennie Duck from the Seller or its consolidated subsidiaries, if
replacement for such individuals 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 7.0%.  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 1.3:1.0.  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 $24,120,545 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 January 31,
2005; 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

 

41

 

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.

 

(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

 

42

 

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:

 

	
  (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 2006-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:
  Bennie H. Duck

  
	
   

  	
   

  	
  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:
  Bennie H. Duck

  

 

43

 

	
  (d)

  	
   

  	
  To the Indenture Trustee:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Wells Fargo
  Bank, National Association

  
	
   

  	
   

  	
  MAC N9311-161

  
	
   

  	
   

  	
  Sixth and
  Marquette Streets

  
	
   

  	
   

  	
  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:
  Bennie H. Duck

  
	
   

  	
   

  	
  Telecopy
  No.: (713) 977-0657

  
	
   

  	
   

  	
  Confirmation:
  (713) 977-2600

  
	
   

  	
   

  	
   

  
	
  (f)

  	
   

  	
  To the Issuer:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  First
  Investors Auto Owner Trust 2006-A

  
	
   

  	
   

  	
  c/o Wells
  Fargo Delaware Trust Company

  
	
   

  	
   

  	
  919 N.
  Market Street, Suite 700

  
	
   

  	
   

  	
  Wilmington,
  DE 19801

  
	
   

  	
   

  	
  Attention:
  Corporate Trust Administration

  
	
   

  	
   

  	
   

  
	
  (g)

  	
   

  	
  To the Owner Trustee:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Wells Fargo
  Delaware Trust Company

  
	
   

  	
   

  	
  919 N.
  Market Street, Suite 700

  
	
   

  	
   

  	
  Wilmington,
  DE 19801

  
	
   

  	
   

  	
  Attention:
  Corporate Trust

  
	
   

  	
   

  	
   

  
	
  (h)

  	
   

  	
  To the Back-up Servicer:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Wells Fargo
  Bank, 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.

 

44

 

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.

 

(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

 

45

 

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.

 

Section 6.12.        No
Recourse.  It is
expressly understood and agreed to by the parties hereto that (a) this
Insurance Agreement is executed and delivered by Wells Fargo Delaware Trust
Company, not individually or personally but solely as trustee of the Issuer, in
the exercise of the powers and authority conferred and vested in it, (b) each
of the representations, undertakings and agreements herein made on the part of
the Issuer or the Trust is made and intended not as personal representations,
undertakings and agreements by Wells Fargo Delaware Trust Company but is made
and intended for the purpose of binding only the Issuer or the Owner Trustee,
as applicable, (c) nothing herein contained shall be construed as creating
any liability on the part of Wells Fargo Delaware Trust Company, individually
or personally, to perform any covenant either expressed or implied contained
herein, all such liability, if any, being expressly waived by the parties
hereto and by any Person claiming by, through or under the parties hereto and (d) under
no circumstances should Wells Fargo Delaware Trust Company be personally liable
for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Issuer or the Trust under this Insurance
Agreement or any other Transaction Documents.

 

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

 

46

 

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 than 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 to
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 this Section 6.14
will be for the third party benefit of those entitled to rely thereon and will
survive the termination of this Agreement.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK; 
SIGNATURE PAGE FOLLOWS]

 

47

 

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, NATIONAL

  ASSOCIATION, as Back-up Servicer and Indenture

  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Title

  	
   

  
				

 

 

	
   

  	
  FIRST INVESTORS AUTO OWNER TRUST

  2006-A, as Issuer,

  
	
   

  	
   

  
	
   

  	
  By: WELLS FARGO DELAWARE TRUST

  COMPANY, not in its individual capacity, but

  solely as Owner Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Title

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO DELAWARE TRUST

  COMPANY, not in its individual capacity, but

  solely as Owner Trustee

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
  Title

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