Document:

Exhibit 10.116

 

EXECUTION COPY

 

 

 

FIRST INVESTORS SERVICING CORPORATION

as Servicer,

 

FIRST INVESTORS AUTO FUNDING CORPORATION

as Depositor,

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

as Indenture Trustee and Securities Intermediary

 

and

 

FIRST INVESTORS AUTO OWNER TRUST 2005-A

as Issuer

 

 

 

SALE AND ALLOCATION AGREEMENT

 

Dated as of May 5, 2005

 

 

 

 

TABLE OF CONTENTS

 

	
  Article I

  	
  Definitions

  	
   

  
	
   

  	
   

  
	
  Section 1.1.

  	
  Definitions

  	
   

  
	
  Section 1.2.

  	
  Other Definitional Provisions

  	
   

  
	
   

  	
   

  	
   

  
	
  Article II

  	
  Trust Property

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
  Conveyance of Trust Property

  	
   

  
	
  Section 2.2.

  	
  Representations and Warranties of the Depositor as
  to the Contracts

  	
   

  
	
  Section 2.3.

  	
  Repurchase by Depositor for Breach

  	
   

  
	
   

  	
   

  	
   

  
	
  Article III

  	
  Distributions; Reserve Account; Statements to
  Noteholders and Certificateholders

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
  Accounts

  	
   

  
	
  Section 3.2.

  	
  Collections

  	
   

  
	
  Section 3.3.

  	
  Application of Collections

  	
   

  
	
  Section 3.4.

  	
  Application of Deposits

  	
   

  
	
  Section 3.5.

  	
  Determination Date Calculations

  	
   

  
	
  Section 3.6.

  	
  Reserve Account

  	
   

  
	
  Section 3.7.

  	
  Prefunding Account

  	
   

  
	
  Section 3.8.

  	
  Statements to Noteholders

  	
   

  
	
  Section 3.9.

  	
  Control of Securities Accounts;
  The Securities Intermediary

  	
   

  
	
  Section 3.10.

  	
  Policy Matters

  	
   

  
	
   

  	
   

  	
   

  
	
  Article IV

  	
  The Depositor

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
  Representations and Warranties of
  the Depositor

  	
   

  
	
  Section 4.2.

  	
  Liability of Depositor;
  Indemnities

  	
   

  
	
  Section 4.3.

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

  	
   

  
	
  Section 4.4.

  	
  Limitation on Liability of
  Depositor and Others

  	
   

  
	
  Section 4.5.

  	
  Depositor May Own Class A
  Notes

  	
   

  
	
  Section 4.6.

  	
  Covenants of the Depositor

  	
   

  
	
   

  	
   

  	
   

  
	
  Article V

  	
  Miscellaneous

  	
   

  
	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
  Amendment

  	
   

  
	
  Section 5.2.

  	
  Protection of Title of Trust

  	
   

  
	
  Section 5.3.

  	
  Governing Law

  	
   

  
	
  Section 5.4.

  	
  Notices

  	
   

  
	
  Section 5.5.

  	
  Severability of Provisions

  	
   

  
	
  Section 5.6.

  	
  Assignment

  	
   

  
	
  Section 5.7.

  	
  Further Assurances

  	
   

  
	
  Section 5.8.

  	
  No Waiver; Cumulative Remedies

  	
   

  
	
  Section 5.9.

  	
  Third-Party Beneficiaries

  	
   

  
	
  Section 5.10.

  	
  Actions by Noteholders

  	
   

  
				

 

i

 

	
  Section 5.11.

  	
  Counterparts

  	
   

  
	
  Section 5.12.

  	
  [Reserved]

  	
   

  
	
  Section 5.13.

  	
  No Bankruptcy

  	
   

  
	
  Section 5.14.

  	
  Limitation of Liability of Owner
  Trustee and Indenture Trustee

  	
   

  
	
  Section 5.15.

  	
  Certain Rights of the Insurer

  	
   

  
	
  Section 5.16.

  	
  Optional Redemption

  	
   

  
	
  Section 5.17.

  	
  Subordination

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibits

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Exhibit A

  	
  Form of Monthly Servicer Report

  	
   

  
	
  Exhibit B

  	
  [Reserved]

  	
   

  
	
  Exhibit C

  	
  Credit Policy

  	
   

  
	
  Exhibit D

  	
  [Reserved]

  	
   

  
	
  Exhibit E

  	
  Form of Originator Agreement

  	
   

  
	
  Exhibit F

  	
  Form of Additional Contract
  Assignment

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedules

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Schedule 1

  	
  Schedule of Initial Contracts

  	
   

  
	
  Schedule 2

  	
  Location of Contract Files

  	
   

  
	
  Schedule 3

  	
  Perfection Representations,
  Warranties and Covenants

  	
   

  

 

ii

 

SALE AND ALLOCATION AGREEMENT, dated as of May 5,
2005 (as amended, supplemented or otherwise modified and in effect from time to
time, this “Agreement”), by and among
FIRST INVESTORS AUTO OWNER TRUST 2005-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 and (B) interest at the
applicable Note Rate on all accrued and unpaid interest on the Class A-2 Notes.

 

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 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.

 

2

 

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, $184,327.80; for the period from
and including the first Payment Date to but excluding the second Payment Date,
$160,316.32; and for the period from and including the second Payment Date to
but excluding the Prefunding Account Payout Date, $80,158.16; provided, however,
on any day on which the amount on deposit in the Prefunding Account is zero 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) 95.75% of the Pool Balance
as of the last day of the related Collection Period and (B) prior to the
end of the Prefunding Period and the distribution of the Excess Prefunding
Amount, 97.0% 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
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, the
greater of: (A) the amount necessary to reduce the outstanding principal
balance of the Class A-1 Notes 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 97.0% 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-2 Notes, the amount necessary
to reduce the outstanding principal balance of the Class A-2 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 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 and Class A-2
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

 

3

 

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, $68,425.00, and for any Payment Date thereafter, 1/12
of the product of: (i) 3.57% and 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, $125,129.28, and for any Payment Date thereafter,
1/12 of the product of: (i) 4.23% and 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 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) 4.25% of the Pool Balance as
of the last day of the related Collection Period and (B) prior to the end
of the Prefunding Period and the distribution of the Excess Prefunding Amount,
3.0% of the Prefunding Account Balance as of the last day of the 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,

 

4

 

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:  May 5, 2005.

 

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 April 30, 2005.

 

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;

 

(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 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

 

5

 

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 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 May 11, 2005.

 

6

 

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 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 writing by the Insurer in advance with notice to the
Rating Agencies.

 

7

 

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.

 

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 May 5, 2005,
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.

 

8

 

Indenture Trustee Fee Letter:  The letter agreement dated May, 2005 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, $175,493,000.00, 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, $5,427,618.68 or (ii) with
respect to any Class B Note, an amount equal to the initial denomination
of such Class B Note.

 

Initial Contract Price:  $150,920,720.68.

 

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:  March 31, 2005.

 

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

 

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

 

9

 

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 and the Class A-2 Monthly Interest.

 

Monthly Remittance Condition:  As defined in Section 3.2.

 

Monthly Servicer Report:  As defined in the Servicing Agreement.

 

Monthly Servicing Fee:  The amount payable to the Servicer by 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.

 

10

 

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

 

Obligor:  The purchaser or co-purchasers of a new 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 April 27,
2005 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.

 

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 March 22,
2005 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 May 16,
2005.

 

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 May 5, 2005, issued by MBIA Insurance Corporation in favor
of the Indenture Trustee for the benefit of the Class A Noteholders.

 

11

 

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:  June 30, 2005.

 

Prefunding Account Payout Date:  July 15, 2005.

 

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 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) 97.0% 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.

 

12

 

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.

 

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 Payment Date, or, in the case of the first Payment
Date, the Closing Date), including, without limitation, all interest and other

 

13

 

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 April 2005 through December 2005; (ii) exceeds
5.25% during the period from January 2006 through May 2007; 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

  	
   

  
	
  April 2005

  	
   

  	
  0.20

  	
  %

  	
   

  
	
  May 2005

  	
   

  	
  0.20

  	
  %

  	
   

  
	
  June 2005

  	
   

  	
  0.40

  	
  %

  	
   

  
	
  July 2005

  	
   

  	
  0.85

  	
  %

  	
   

  
	
  August 2005

  	
   

  	
  0.85

  	
  %

  	
   

  
	
  September 2005

  	
   

  	
  1.60

  	
  %

  	
   

  
	
  October 2005

  	
   

  	
  1.60

  	
  %

  	
   

  
	
  November 2005

  	
   

  	
  2.30

  	
  %

  	
   

  
	
  December 2005

  	
   

  	
  2.30

  	
  %

  	
   

  
	
  January 2006

  	
   

  	
  3.00

  	
  %

  	
   

  
	
  February 2006

  	
   

  	
  3.00

  	
  %

  	
   

  
	
  March 2006

  	
   

  	
  3.60

  	
  %

  	
   

  
	
  April 2006

  	
   

  	
  3.60

  	
  %

  	
   

  
	
  May 2006

  	
   

  	
  3.60

  	
  %

  	
   

  
	
  June 2006

  	
   

  	
  4.20

  	
  %

  	
   

  
	
  July 2006

  	
   

  	
  4.20

  	
  %

  	
   

  
	
  August 2006

  	
   

  	
  4.20

  	
  %

  	
   

  
	
  September 2006

  	
   

  	
  4.70

  	
  %

  	
   

  
	
  October 2006

  	
   

  	
  4.70

  	
  %

  	
   

  
	
  November 2006

  	
   

  	
  4.70

  	
  %

  	
   

  
	
  December 2006

  	
   

  	
  5.15

  	
  %

  	
   

  
	
  January 2007

  	
   

  	
  5.15

  	
  %

  	
   

  
	
  February 2007

  	
   

  	
  5.15

  	
  %

  	
   

  
	
  March 2007

  	
   

  	
  5.55

  	
  %

  	
   

  
	
  April 2007

  	
   

  	
  5.55

  	
  %

  	
   

  
	
  May 2007

  	
   

  	
  5.55

  	
  %

  	
   

  
	
  June 2007

  	
   

  	
  5.80

  	
  %

  	
   

  
	
  July 2007

  	
   

  	
  5.80

  	
  %

  	
   

  
	
  August 2007

  	
   

  	
  5.80

  	
  %

  	
   

  
	
  September 2007

  	
   

  	
  6.10

  	
  %

  	
   

  
	
  October 2007

  	
   

  	
  6.10

  	
  %

  	
   

  
	
  November 2007

  	
   

  	
  6.10

  	
  %

  	
   

  
	
  December 2007

  	
   

  	
  6.30

  	
  %

  	
   

  
	
  January 2008

  	
   

  	
  6.30

  	
  %

  	
   

  
	
  February 2008

  	
   

  	
  6.30

  	
  %

  	
   

  
	
  March 2008

  	
   

  	
  6.50

  	
  %

  	
   

  
	
  April 2008

  	
   

  	
  6.50

  	
  %

  	
   

  
	
  May 2008

  	
   

  	
  6.50

  	
  %

  	
   

  
	
  June 2008

  	
   

  	
  6.65

  	
  %

  	
   

  
	
  July 2008

  	
   

  	
  6.65

  	
  %

  	
   

  
	
  August 2008

  	
   

  	
  6.65

  	
  %

  	
   

  
	
  September 2008

  	
   

  	
  6.85

  	
  %

  	
   

  
	
  October 2008

  	
   

  	
  6.85

  	
  %

  	
   

  
	
  November 2008

  	
   

  	
  6.85

  	
  %

  	
   

  
	
  December 2008 and thereafter

  	
   

  	
  7.00

  	
  %

  	
   

  

 

14

 

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.

 

15

 

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:  2.5% 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) 2.5% 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.

 

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 2005-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 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 and 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.

 

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.

 

16

 

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.

 

(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;

 

17

 

(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 purchase 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 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:

 

18

 

(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 (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”);

 

19

 

(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
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

 

20

 

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 opening 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, 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,

 

21

 

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 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) constitute
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.

 

22

 

(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 $55,000 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 84
months; provided, however, that as of the Prefunding Account
Ending Date, the weighted average remaining term to maturity of all Contracts
shall not exceed 57 months.

 

(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 13.20%.

 

(u)                                 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.

 

(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 July 31, 2011.

 

(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.

 

23

 

(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
54.0% 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 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

 

24

 

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.

 

(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,

 

25

 

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 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

 

26

 

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 (ii) or (iii) 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.

 

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;

 

27

 

(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 such
Payment Date and (B) the Reserve Account Amount for such Payment Date
(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 following 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 following
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))

 

28

 

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.

 

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.

 

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;

 

29

 

(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;

 

(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 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;

 

30

 

(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
Balance exceeds the sum of the Pool Balance and 97.0% 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.

 

(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.

 

31

 

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 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

 

32

 

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).

 

(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

 

33

 

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 five (5) 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.

 

(d)                                 On
the Prefunding Account Ending Date, upon direction from the Servicer, the
Indenture Trustee shall transfer 97.0% of the Excess Prefunding Amount to the Class A
Note Payment Account and the remaining 3.0% 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; 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;

 

34

 

(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 (c) 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;

 

(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,

 

35

 

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 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

 

36

 

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 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

 

37

 

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:

 

(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,

 

38

 

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, 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

 

39

 

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) 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

 

40

 

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.

 

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.

 

41

 

Section 4.6.                                Covenants of the Depositor.

 

The
Depositor hereby covenants and agree 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;

 

(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, shall conduct business
in its own name on its own stationary, invoices and checks, and shall 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 shall 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.

 

42

 

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 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 (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 Class A Notes, or the
Required Reserve Account Amount, without the consent of all adversely affected
Noteholders (ii) reduce the percentage required to consent to any such
amendment, without the consent of all adversely affected Noteholders or (iii) adversely
affect the rating of the Notes by the Rating Agencies without the consent of
the Holders of Notes evidencing not less than 66-2/3% of the Class A Note
Balance.

 

(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

 

43

 

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 be entitled to receive and 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 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.

 

44

 

(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 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

 

45

 

(ii)                                  within
ninety (90) days after the beginning of each calendar year (beginning with the
year 2006), 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 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.

 

46

 

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 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.

 

47

 

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 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

 

48

 

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 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 overdue 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

 

49

 

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.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

50

 

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

  2005-A

  
	
   

  	
   

  
	
   

  	
  By:

  	
  WELLS FARGO
  DELAWARE TRUST

  COMPANY, not in its individual capacity

  but solely as Owner Trustee

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIRST INVESTORS
  AUTO FUNDING CORPORATION, as Depositor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

 

Accepted and agreed:

 

WELLS FARGO BANK,
NATIONAL ASSOCIATION,

not in its individual
capacity but solely as Indenture Trustee and

Securities Intermediary

 

	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

 

Schedule 1

 

Contract Schedule

 

 

Schedule 2

 

Location of Contract Files

 

 

ABS Custody Vault

751 Kasota Avenue

MAC N9328-011

Minneapolis, MN 55414

 

 

Schedule 3

 

Perfection Representations, Warranties and Covenants

 

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

 

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.

 

3-2

 

Exhibit A

 

Form of Monthly Servicer Report

 

A-1

 

Exhibit B

 

[Reserved]

 

B-1

 

Exhibit C

 

Credit Policy

 

INDIRECT UNDERWRITING GUIDELINES

 

1.             Stability

 

A.            Residence

 

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

2.             Full
amount of rent/mortgage will be used when calculating applicant’s debt
ratio.  Rent can be split under the
following circumstances:

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

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

3.             A
minimum household allowance of $300.00 will be calculated for all applicants
who own their own home free and clear.

 

B.            Employment

 

1.             All
applicants must have a one-year employment history at current job.  If less than one year on current job, they
must have been on their previous job for one year with no more than a 90 day
gap.

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

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

4.             All
employment must be verified.  If there
are no POI exceptions in the file, we will waive employment verification on all
Premier, Adv +, 1, and 2 deals.

5.             If POI
has been waived, only current employment will be verified regardless of time on
job.

 

 

6.             In the
case of married applicants, the residence and employment guidelines must apply
to at least the applicant with the majority of the income.

 

2.             Income

 

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

 

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

 

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

 

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

 

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

 

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

2.             No
bankruptcies, foreclosures, or repossessions within the past three years

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

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

 

F.             Acceptable
sources of income verification may included:

 

1.             Retirement
income – award letter, direct deposits or 1040.

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

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

4.             Disability
Income – must have a permanent disability and be verified by award letter or
settlement letter.

 

C-2

 

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

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

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

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

9.             Military
personnel must provide L.E.S. statement.

10.           Commissioned
sales person with less than 3 months on the job with similar experience
(selling the same type of product for another company). We should ask for a
current paystub (current employer) and a copy of the YTD paystub or W2 from the
previous employer proving similar income. (This will be the income that we use
to calculate the monthly income.) In some cases we may need the prior years
1040’s. These would be required on people in Real Estate, Insurance Sales,
etc.  These need to be reviewed by a
Funding Supervisor/Manager or a Credit Manager prior to funding.

 

a.             Commissioned
sales person with less than 3 months on the job, with no prior experience with
the type of product they are selling. 
These deals should be turned down. 
We have no way to estimate what type of commission they may or may not
make.  The only
exception to this rule is, if their base pay (before commission) is enough
for them to still meet our debt ratio requirements.

 

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

 

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

 

1)             Different
fonts or type settings

2)             Items
that don’t line up

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

4)             Unclear
print

5)             Math on
gross/net calculations that does not make sense

 

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

 

C-3

 

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

 

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

 

3.             Debt
Ratio

 

A.

 

	
   

  	
   

  	
  Tier

  	
   

  
	
  Monthly Income

  	
   

  	
  VIP Discount

  	
   

  	
  Advantage 4

  	
   

  	
  Advantage 3

  	
   

  	
  Advantage 2

  	
   

  	
  Adv Prem,+, 1

  	
   

  
	
   

  	
   

  	
  DTI

  	
   

  	
  PTI

  	
   

  	
  DTI

  	
   

  	
  PTI

  	
   

  	
  DTI

  	
   

  	
  PTI

  	
   

  	
  DTI

  	
   

  	
  PTI

  	
   

  	
  DTI

  	
   

  	
  PTI

  	
   

  
	
  $2400-$4499

  	
   

  	
  45

  	
   

  	
  15

  	
   

  	
  45

  	
   

  	
  15

  	
   

  	
  45

  	
   

  	
  18

  	
   

  	
  50

  	
   

  	
  20

  	
   

  	
  50

  	
   

  	
  20

  	
   

  
	
  $4500 or higher

  	
   

  	
  45

  	
   

  	
  15

  	
   

  	
  45

  	
   

  	
  20

  	
   

  	
  50

  	
   

  	
  20

  	
   

  	
  55

  	
   

  	
  20

  	
   

  	
  55

  	
   

  	
  20

  	
   

  

 

B.            Items
included in debt ratio:

 

1.             Mortgage
or rental expense minimum of $300 including applicants that live with
relatives.

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

3.             All
installment payments listed on credit bureaus and credit applications.

4.             All
revolving payments listed on credit bureaus and credit applications.

5.             Child
support or alimony payments.

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

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

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

9.             Physical
damage insurance is $125.00 for all applicants.

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

11.           Student
loans that do not indicate a payment will be calculated at 1.5% to determine
the payment.

 

C-4

 

C.            Items
excluded from debt ratio:

 

1.             Any debt
with less than 6 months remaining.

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

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

 

4.             Maximum
Loan/Payment Amount

 

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

 

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

 

5.             Credit
History

 

A.            All
applicants must have a credit file with either CSC, TRW or TU credit bureau
agencies for at least two years. 
Positive credit activity with the last 48 months is required unless the
applicant has a discharged bankruptcy.

 

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

 

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

 

D.            Applicants
currently enrolled in Consumer Credit Counseling Services (CCCS) must have
either written or verbal verification confirming that at least 50% of the
repayment schedule has been completed. 
All verbal verifications must be properly documented in the originations
system.

 

E.             No
second units for individual applicants w/o CCO approval.

No third units for married couples w/o CCO approval.  

If either of the above is indicated, dealer must provide proof of trade or
payoff.

 

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

 

F.             Minimum
of 48 months in file

 

G.            No
installment loans more than 3 times 30 in the past 12 months

 

H.            Revolving
balances must be less than $20,000

 

C-5

 

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

 

J.             Must
have paid as agreed installment in the past 24 months

 

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

 

L.             No
currently past due accounts of any type.

 

6.             Bankruptcy

 

A.            All
chapter 7 bankruptcies must be discharged or verified past date of creditor
objections with none filed. All Chapter 13 bankruptcies must be discharged or
confirmed completed and awaiting discharge. If Credit bureau does not indicate
the date of discharge, applicant must provide a copy of the discharge.

 

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

 

7.             Repossessions

 

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

 

B.            No
multiple repossessions.

 

8.             Foreclosures

 

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

 

9.             Child
Support

 

All
child support obligations must be current.

 

10.          Tax
Liens

 

All
tax liens in excess of $5000 less than 7 years old must be released or in
written repayment agreement with evidence that at least three payments have
been made.  If unreleased tax liens total
more than 20% of the applicants gross income; they must be

 

C-6

 

treated
as an exception, regardless of repayment agreement.  No exceptions will be made if repayment is
past due.

 

11.          Tax
Liabilities

 

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

 

12.          Judgments

 

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

 

13.          Down
Payment

 

See
current pricing guide.

 

14.          Home
Phone

 

All
applicants must have a verifiable home phone in their primary residence or cell
phone.  Home phones must have been
previously installed.  New phones
installed solely for the purpose of obtaining an auto loan will not be
accepted.  Cell phones must be on a
monthly or long term plan.  Pre-paid cell
phones are not acceptable.  When a phone
bill is required, there can not be a cut-off notice listed on the bill.  If a cut off notice is listed this will be a
funding exception. Cell phones should be in the applicant’s name, spouse’s
name, or part of a family plan.  For
verification of land lines and cell phones contacting the customer at the
number or getting a voicemail or answering machine that clearly identifies our
customers is sufficient verification.

 

15.          Exceptions

 

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

 

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

 

C-7

 

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

 

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

 

16.          Joint
Applicants

 

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

 

B.            One
licensed driver is acceptable as long as there is no suspension or revocation
of the other borrower’s license and there is only one open auto.

 

17.          Override
Policy

 

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

 

18.          Minimum
Beacon / Empirica / Fico

 

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

 

B.            530 for all other deals.

 

C.            620 for 620 Premier Pricing Program

 

19.          Advance

 

A.            See
pricing guide for advance limits.

 

B.            FIFS will
allow for cost of equipment added to new vehicles if the equipment is an
allowable add in the NADA Guide, and the equipment has been verified with the
customer.

 

20.          Vehicles

 

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

 

B.            No
vehicles that will be used for business will be financed.

 

C-8

 

C.            No
current model year vehicles with more than 30,000 miles will be accepted.

 

	
  Miles

  	
   

  	
  Advance

  
	
  1-6,000

  	
   

  	
   

  	
  See current pricing guide

  
	
  6,001-15,000

  	
   

  	
   

  	
  Reduce current pricing guide by 10%

  
	
  15,001-30,000

  	
   

  	
   

  	
  Reduce current pricing guide by 15%

  

 

D.            Terms

 

1.             See
current rate sheets.

 

C-9

 

DIRECT UNDERWRITING GUIDELINES

 

4.             Stability

 

C.            Residence

 

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

5.             Full amount of rent/mortgage will be used when calculating applicant’s
debt ratio.  Rent can be split under the
following circumstances:

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

c.             Applicant
can provide proof that they are not liable for the mortgage payment (or verbal
verification). (example: mortgage in spouse’s name only)

6.             A
minimum household allowance of $300.00 will be calculated for all applicants
who own their own home free and clear.

 

D.            Employment

 

7.             All
applicants must have a one-year employment history at current job.  If less than one year on current job, they
must have been on their previous job for one year with no more than a 90 day
gap.

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

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

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

11.           If POI has
been waived, only current employment will be verified regardless of time on
job.

12.           In the
case of married applicants, the residence and employment guidelines must apply
to at least the applicant with the majority of the income.

 

C-10

 

5.             Income

 

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

 

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

 

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

 

H.            No POI is
required on direct loan Tier A and Tier B deals unless the customer is
self-employed.

 

E.             If self
employed, POI can be waived on direct loan Tier A if the following conditions
are met:

 

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

2.             No
bankruptcies, foreclosures, or repossessions within the past three years

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

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

 

F.             On
Farragut Direct loans, spouses’ income will be used.  The spouse will be required to complete a
credit application and provide acceptable proof of income, but will not be
required to sign the contract.

 

G.            Acceptable
sources of income verification may included:

 

11.           Retirement
income – award letter, direct deposits or 1040.

12.          Social
Security – award statement, direct deposit, or most recent W2

13.          Alimony/child
support – Current bank statement clearly identifying an alimony or child
support deposit, a current stub or voucher from a state or local agency, or a
copy of the divorce decree and recent bank statement with a deposit amount that
matches court ordered amount.

 

C-11

 

14.           Disability
Income – must have a permanent disability and be verified by award letter or
settlement letter.

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

16.          Check
stubs – computer generated or typed which must identify the applicant by name
or social security number and provides enough data to reasonably calculate the
applicant’s monthly income.

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

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

19.           Military
personnel must provide L.E.S. statement.

20.           Commissioned
sales person with less than 3 months on the job with similar experience
(selling the same type of product for another company). We should ask for a
current paystub (current employer) and a copy of the YTD paystub or W2 from the
previous employer proving similar income. (This will be the income that we use
to calculate the monthly income.) In some cases we may need the prior years
1040’s. These would be required on people in Real Estate, Insurance Sales,
etc.  These need to be reviewed by a
Funding Supervisor/Manager or a Credit Manager prior to funding.

 

c.             Commissioned
sales person with less than 3 months on the job, with no prior experience with
the type of product they are selling. 
These deals should be turned down. 
We have no way to estimate what type of commission they may or may not
make.  The only
exception to this rule is, if their base pay (before commission) is enough
for them to still meet our debt ratio requirements.

 

d.             Commissioned
sales person with more than 3 months on the job, but the paystub we are looking
at is from January, February or the middle of March.  We should ask these people for a copy of the
prior years W2 (which will give us a more accurate reflection of their true
monthly average.

 

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

 

1)            Different
fonts or type settings

2)            Items
that don’t line up

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

4)            Unclear
print

 

C-12

 

5)            Math on
gross/net calculations that don’t make sense

 

3.             A.
Debt Ratio

 

	
   

  	
   

  	
  Farr D Tier

  	
   

  	
  Farr C Tier

  	
   

  	
  Farr B Tier

  	
   

  	
  Farr A Tier

  	
   

  
	
  Monthly Income

  	
   

  	
  DTI

  	
   

  	
  PTI

  	
   

  	
  DTI

  	
   

  	
  PTI

  	
   

  	
  DTI

  	
   

  	
  PTI

  	
   

  	
  DTI

  	
   

  	
  PTI

  	
   

  
	
  $2400-$4499

  	
   

  	
  45

  	
   

  	
  20

  	
   

  	
  50

  	
   

  	
  20

  	
   

  	
  50

  	
   

  	
  20

  	
   

  	
  50

  	
   

  	
  20

  	
   

  
	
  $4500 or higher

  	
   

  	
  45

  	
   

  	
  20

  	
   

  	
  50

  	
   

  	
  20

  	
   

  	
  55

  	
   

  	
  20

  	
   

  	
  55

  	
   

  	
  20

  	
   

  

 

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

 

1.             Current
estimated or verified rate on the loan to be refinance is 16% or greater

2.             Income
of at least $2500 monthly

3.             PTI of
15% or less

 

E.             Items
included in debt ratio:

 

12.           Mortgage
or rental expense minimum of $300 including applicants that live with
relatives.

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

14.           All
installment payments listed on credit bureaus and credit applications.

15.           All
revolving payments listed on credit bureaus and credit applications.

16.           Child
support or alimony payments.

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

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

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

20.           Physical
damage insurance is $125.00 for all applicants.

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

22.           Student
loans that do not indicate a payment will be calculated at 1.5% to determine
the payment.

 

F.             Items
excluded from debt ratio:

 

21.           Any debt
with less than 6 months remaining.

 

C-13

 

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

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

24.           Maximum
Loan/Payment Amount

 

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

 

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

 

25.          Credit
History

 

F.             All
applicants must have a credit file with either CSC, TRW or TU credit bureau
agencies for at least two years. 
Positive credit activity with the last 48 months is required unless the
applicant has a discharged bankruptcy.

 

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

 

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

 

I.              Applicants
currently enrolled in Consumer Credit Counseling Services (CCCS) must have
either written or verbal verification confirming that at least 50% of the
repayment schedule has been completed. 
All verbal verifications must be properly documented in the originations
system.

 

J.             Second
units for individuals and third units for married couples are acceptable if
they are replacing an open auto.

 

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

 

26.          Bankruptcy

 

A.            All
chapter 7 bankruptcies must be discharged or verified past date of creditor
objections with none filed. All Chapter 13 bankruptcies must be discharged or
confirmed completed and awaiting discharge. If Credit bureau does not indicate
the date of discharge, applicant must provide a copy of the discharge.

 

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

 

C-14

 

27.          Repossessions

 

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

 

D.            No
multiple repossessions.

 

28.          Foreclosures

 

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

 

29.          Child
Support

 

All
child support obligations must be current.

 

30.          Tax
Liens

 

All
tax liens in excess of $5000 less than 7 years old must be released or in
written repayment agreement with evidence that at least three payments have
been made.  If unreleased tax liens total
more than 20% of the applicants gross income; they must be treated as an
exception, regardless of repayment agreement. 
No exceptions will be made if repayment is past due.

 

31.          Tax
Liabilities

 

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

 

32.          Judgments

 

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

 

33.          Down
Payment

 

See
current pricing guide.

 

34.          Home
Phone

 

All
applicants must have a verifiable home phone in their primary residence or cell
phone.  Home phones must have been
previously installed.  New phones installed
solely

 

C-15

 

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

 

35.          Exceptions

 

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

 

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

 

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

 

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

 

36.          Joint
Applicants

 

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

 

B.            One
licensed driver is acceptable as long as there is no suspension or revocation
of the other borrower’s license and there is only one open auto.

 

37.          Override
Policy

 

Lowside-  Any applicant that has a Custom Score below
160 or Beacon/Emperica/Fico score below 530 can only be approved by the
CCO.  In order to be approved, the
applicant has to meet either the Credit Bureau Score or the Custom Score, but
cannot fail both.  These applicants will
be priced at the lowest tier available These deals will be limited to 5% of
total monthly fundings and they will be monitored in Asset Quality to insure
adequate performance.

 

C-16

 

38.          Advance

 

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

 

B.            If
current advance is 156% to 190% of the current value, the application will
qualify without validating the original line 5 advance if the application meets
the following two conditions:

 

1.             Current
estimated or verified rate on the loan to be refinanced is 16% or greater

2.             Customer
has a bureau score of 620 or higher

 

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

 

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

 

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

 

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

 

F.             If the
current advance is 210% or more of the current value the application would not
qualify.

 

39.          Vehicles

 

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

 

F.             No
vehicles that will be used for business will be financed.

 

G.            Mileage
caps as follows:

 

	
  Curr
  Model (not in book)

  	
   

  	
   

  	
  30,000 max

  
	
  1 and 2
  year old

  	
   

  	
   

  	
  60,000 max

  
	
  3 and 4
  year old

  	
   

  	
   

  	
  75,000 max

  
	
  5 year
  old

  	
   

  	
   

  	
  90,000 max

  

 

H.            No
current model year vehicles with more than 30,000 miles will be accepted.

 

I.              Terms

 

C-17

 

Direct loans qualify for
a term equal to the remaining term on original loan. The Loan Officer can
approve 3-month extensions.  An
additional 3-month extension (6 months total) can be approved by the CCO on an
exception basis.  Any term extensions
beyond 6 months would require CEO/CFO.

 

C-18

 

Exhibit D

 

[Reserved]

 

D-1

 

Exhibit E

 

Form of Originator Agreement

 

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 May 5, 2005, 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 2005-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; (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 $                 .

 

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

 

F-1

 

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:

  	
   

  	
   

  

 

F-2

 

Schedule 1

to

Additional Contract Assignment

Dated

          , 200[  ]

 

List of Additional ContractsExhibit 10.117

 

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 2005-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 2005-A

$69,000,000 3.57% Class A-l Asset-Backed Notes

$106,493,000 4.23% Class A-2 Asset-Backed Notes

 

Dated as of May 5,
2005

 

 

 

	
   

  	
   

  	
  TABLE OF CONTENTS

  	
   

  

 

	
   

  	
   

  	
  ARTICLE I

  	
   

  
	
  DEFINITIONS

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE II

  	
   

  
	
   

  	
   

  	
  REPRESENTATIONS,
  WARRANTIES AND COVENANTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.01.

  	
   

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

  	
   

  
	
  Section 2.02.

  	
   

  	
  Affirmative Covenants of the Servicer,
  the Seller and the Depositor

  	
   

  
	
  Section 2.03.

  	
   

  	
  Negative Covenants of the Servicer, the
  Seller and the Depositor

  	
   

  
	
  Section 2.04.

  	
   

  	
  Representations and Warranties of the
  Issuer

  	
   

  
	
  Section 2.05.

  	
   

  	
  Affirmative Covenants of the Issuer

  	
   

  
	
  Section 2.06.

  	
   

  	
  Negative Covenants of the
  Issuer

  	
   

  
	
  Section 2.07.

  	
   

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

  	
   

  
	
  Section 2.08.

  	
   

  	
  Representations,
  Warranties and Covenants of Owner Trustee

  	
   

  
	
  Section 2.09.

  	
   

  	
  Negative Covenant
  of the Administrator

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE III

  	
   

  
	
   

  	
   

  	
  THE
  POLICY; REIMBURSEMENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01.

  	
   

  	
  Issuance of the Policy

  	
   

  
	
  Section 3.02.

  	
   

  	
  Payment of Fees and
  Insurance Premium

  	
   

  
	
  Section 3.03.

  	
   

  	
  Reimbursement and
  Additional Payment Obligation

  	
   

  
	
  Section 3.04.

  	
   

  	
  Indemnification;
  Limitation of Liability

  	
   

  
	
  Section 3.05.

  	
   

  	
  Payment Procedure

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE IV

  	
   

  
	
   

  	
   

  	
  FURTHER
  AGREEMENTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01.

  	
   

  	
  Effective Date; Term of
  the Insurance Agreement

  	
   

  
	
  Section 4.02.

  	
   

  	
  Further Assurances and
  Corrective Instruments

  	
   

  
	
  Section 4.03.

  	
   

  	
  Obligations
  Absolute

  	
   

  
	
  Section 4.04.

  	
   

  	
  Assignments;
  Reinsurance; Third-Party Rights

  	
   

  
	
  Section 4.05.

  	
   

  	
  Liability of the
  Insurer

  	
   

  
	
  Section 4.06.

  	
   

  	
  Parties
  Will Not Institute Insolvency Proceedings

  	
   

  
	
  Section 4.07.

  	
   

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

  	
   

  

 

 

	
  Section 4.08.

  	
   

  	
  Subrogation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE V

  	
   

  
	
   

  	
   

  	
  DEFAULTS;
  REMEDIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01.

  	
   

  	
  Defaults

  	
   

  
	
  Section 5.02.

  	
   

  	
  Remedies; No Remedy
  Exclusive

  	
   

  
	
  Section 5.03.

  	
   

  	
  Waivers

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ARTICLE VI

  	
   

  
	
   

  	
   

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.01.

  	
   

  	
  Amendments, Etc

  	
   

  
	
  Section 6.02.

  	
   

  	
  Notices

  	
   

  
	
  Section 6.03.

  	
   

  	
  Severability

  	
   

  
	
  Section 6.04.

  	
   

  	
  Governing Law

  	
   

  
	
  Section 6.05.

  	
   

  	
  Consent to
  Jurisdiction

  	
   

  
	
  Section 6.06.

  	
   

  	
  Consent of the Insurer

  	
   

  
	
  Section 6.07.

  	
   

  	
  Counterparts

  	
   

  
	
  Section 6.08.

  	
   

  	
  Headings

  	
   

  
	
  Section 6.09.

  	
   

  	
  Trial by Jury Waived

  	
   

  
	
  Section 6.10.

  	
   

  	
  Limited Liability

  	
   

  
	
  Section 6.11.

  	
   

  	
  Entire Agreement

  	
   

  
	
  Section 6.12.

  	
   

  	
  Limitation of Liability

  	
   

  
	
  Section 6.13.

  	
   

  	
  Limited Recourse

  	
   

  
	
  Section 6.14.

  	
   

  	
  Subordination

  	
   

  

 

ii

 

INSURANCE
AGREEMENT

 

This INSURANCE
AGREEMENT (this “Insurance Agreement”), dated as of May 5, 2005
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 2005-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 May 5, 2005 (the “Indenture”)
relating to the First Investors Auto Owner Trust 2005-A $69,000,000 3.57% Class A-l
Asset-Backed Notes and $106,493,000 4.23% Class A-2 Asset-Backed 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 May 5, 2005, 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 May 5,
2005 between the Seller and the Depositor.

 

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

 

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

 

2

 

“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 claus (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 May 5,
2005, 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 April 27, 2005, among the Insurer,
the Seller and the Initial Purchaser.

 

“Indenture”
means the Indenture
dated as of May 5, 2005 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.

 

“Initial Purchaser” means Wachovia Capital Markets, LLC.

 

3

 

“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.

 

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

 

4

 

“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 April 27, 2005 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 May 5,
2005 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 May 5, 2005 among the Seller, the
Issuer, the Servicer, and the Insurer specifying the up-front Insurance Premium
payable on the Closing Date and the monthly Insurance Premium payable to the
Insurer pursuant to the Indenture.

 

“Purchase
Agreement” means the
Purchase Agreement between among the Initial Purchaser, the Seller 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 May 5, 2005, 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.

 

“Servicing
Agreement” means the
Servicing Agreement dated as of May 5, 2005 among the Servicer, the
Back-up Servicer, and the Issuer.

 

5

 

“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 May 5, 2005 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, registration and approvals (together, “approvals”)
necessary for the conduct of its business as currently conducted and as described
in the Offering Document and the performance of its obligations under the Transaction
Documents, in each jurisdiction in which the failure to be so qualified or to obtain
such approvals would render any Transaction Document unenforceable in any respect
or would have a material adverse effect upon the Transaction, the Owners or the
Insurer.

 

(b)                                Power and Authority.  Each of the Servicer, the Seller and the Depositor has all necessary
corporate power and authority to conduct its business as currently

 

6

 

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 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

 

7

 

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.

 

(j)                                    Accuracy of Information. Neither the Transaction Documents, nor other
information relating to the Contracts, the operations of the Servicer, the
Seller or the

 

8

 

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 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

 

9

 

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:

 

(a)                                 Compliance With Agreements
and Applicable Laws. The
Servicer, the Seller and the Depositor shall not be in default under the
Transaction Documents and

 

10

 

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 year, prepared in accordance
with generally accepted accounting principles,

 

11

 

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 May 2005, 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
2005.

 

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 March 31, beginning in
2006, 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 2005-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.

 

(f)                                   Opinions of Counsel.

 

28

 

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

 

(d)                                The Servicer, the Seller and the Depositor
agree to pay, 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
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 Securities Exchange Act from and against any and all claims, losses,
liabilities (including penalties), actions, suits, judgments, demands, damages,
costs or reasonable expenses

 

34

 

(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 (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

 

35

 

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;

 

(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;

 

36

 

(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 Depositor from pursuing any rights or remedies
it may have against any other Person in a separate legal proceeding.

 

37

 

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 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

 

38

 

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 continuting), including (without limitation) entering into
such agreements and settlements as the Insurer in its sole discretion shall
direct with respect to such court proceeding. The Indenture Trustee shall not
be liable to the Insurer for any such action that conforms to the direction of
the Insurer. The Indenture Trustee’s reasonable out-of-pocket costs and expenses
(including attorneys’ fees and expenses) with respect to any such action shall
be reimbursed pursuant to the Sale and Allocation Agreement; provided, however,
that if such costs and expenses are not so reimbursed on the Payment Date
immediately following the date incurred, then the Insurer shall reimburse the
Indenture Trustee for such costs and expenses within 60 days of such
nonpayment.

 

39

 

(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;

 

(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;

 

40

 

(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 10%. Equity may include
50% of subordinated debt with a maturity equal to or greater than five years,
subject to MBIA review of and satisfaction with the subordinated debt
agreement;

 

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

 

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

 

(j)                                    A Change in Control occurs;

 

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

 

(l)                                    As of the end of any of its fiscal quarters,
FIFSG shareholder’s equity (determined in accordance with GAAP) is less than
the sum of $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 Trustee to exercise such remedies in accordance with
the terms of the Transaction Documents; or

 

41

 

(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 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.

 

42

 

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 2005-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

 

(d)                                To the Indenture Trustee:

 

Wells Fargo Bank, National Association

MAC N9311-161

 

43

 

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 2005-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:

 

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

 

[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 2005-A

Insurance
Agreement

Signature Page

Kutak Rock - Firm
Library-4830-8254-2336.5

 

 

	 
	
   

  	
  FIRST
  INVESTORS AUTO OWNER TRUST

  2005-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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