EXHIBIT 10.32
EXECUTION COPY
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MBIA INSURANCE CORPORATION,
as Surety
FIRST INVESTORS AUTO RECEIVABLES CORPORATION,
as Transferor
FIRST INVESTORS FINANCIAL SERVICES, INC.,
as Seller
TEXAS COMMERCE BANK NATIONAL ASSOCIATION,
as Collateral Agent
and
NATIONSBANK, N.A.,
as Reserve Account Agent
INSURANCE AGREEMENT
First Investors Auto Receivables Corporation Revolving
Automobile Receivables Financing Facility
Dated as of October 1, 1996
TABLE OF CONTENTS
(This Table of Contents is for convenience of reference only and shall
not be deemed to be a part of this Insurance Agreement.)
PAGE
ARTICLE I
DEFINITIONS
Section 1.01. General Definitions.............................................1
Section 1.02. Generic Terms...................................................3
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties of the Transferor,
the Seller, the Collateral Agent, and the Reserve
Account Agent.................................................4
Section 2.02. Affirmative Covenants of the Transferor, the Seller,
the Collateral Agent, and the Reserve Account Agent...........8
Section 2.03. Negative Covenants of the Transferor, the Collateral
Agent and the Seller.........................................13
ARTICLE III
THE SURETY BOND; SECURITY
Section 3.01. Agreement To Issue Surety Bond.................................14
Section 3.02. Conditions Precedent To Issuance of the Surety Bond............14
Section 3.03. Premium........................................................16
Section 3.04. Indemnification................................................16
Section 3.05. Payment Procedure..............................................19
Section 3.06. Subrogation....................................................19
Section 3.07. Reimbursement and Additional Payment Obligation................19
Section 3.08. Assignment by Transferor.......................................21
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01. Effective Date; Term of Agreement..............................21
Section 4.02. Waiver of Rights; Further Assurances and Corrective
Instruments..................................................21
Section 4.03. Obligations Absolute...........................................22
Section 4.04. Assignments; Reinsurance; Third-Party Rights...................22
ARTICLE V
DEFAULTS; REMEDIES
Section 5.01. Defaults.......................................................23
Section 5.02. Remedies; No Remedy Exclusive..................................24
Section 5.03. Waivers........................................................25
Section 5.04. No Insolvency Proceedings......................................25
ARTICLE VI
MISCELLANEOUS
Section 6.01. Amendments, Changes and Modifications..........................25
Section 6.02. Notices........................................................26
Section 6.03. Severability...................................................27
Section 6.04. Governing Law..................................................27
Section 6.05. Consent to Jurisdiction and Venue, Etc.........................27
Section 6.06. Consent of Surety..............................................28
Section 6.07. Counterparts...................................................28
Section 6.08. Recitals.......................................................28
Section 6.09. Headings.......................................................28
TESTIMONIUM
SIGNATURES
INSURANCE AGREEMENT
THIS INSURANCE AGREEMENT is made as of October 1, 1996 by and among MBIA
INSURANCE CORPORATION (the "Surety"), FIRST INVESTORS AUTO RECEIVABLES
CORPORATION, in its capacity as transferor (the "Transferor"), FIRST INVESTORS
FINANCIAL SERVICES, INC., in its capacity as seller (the "Seller"), TEXAS
COMMERCE BANK NATIONAL ASSOCIATION, in its capacity as Collateral Agent (the
"Collateral Agent"), and NATIONSBANK, N.A., in its capacity as Reserve Account
Agent (the "Reserve Account Agent").
RECITALS:
1. The Transferor, Enterprise Funding Corporation (the "Company"), the
Reserve Account Agent, the Collateral Agent, the Surety and the Seller have
entered into a Security Agreement (as defined herein) of even date herewith,
pursuant to which, among other things, the Transferor has granted a security
interest in the Collateral to the Collateral Agent for the benefit of the
Company and the Surety, to secure payments under the Note, the Security
Agreement, the Note Purchase Agreement and this Agreement.
2. The Transferor and the Seller have requested that the Surety issue
its Surety Bond (as defined below) to guarantee payment of Insured Amounts (as
defined in the Surety Bond), upon such terms and conditions as were mutually
agreed upon by the parties and subject to the terms and conditions of the Surety
Bond.
3. The parties hereto desire to specify the conditions precedent to the
issuance of the Surety Bond by the Surety, the indemnity and reimbursement to be
provided by the Transferor in respect of amounts paid by the Surety under the
Surety Bond, the security to be provided to the Surety by the Transferor as an
inducement for the Surety to deliver the Surety Bond and to provide for certain
other indemnities and for certain other matters.
NOW, THEREFORE, in consideration of the premises and of the agreements
herein contained, the Surety, the Transferor, the Seller, the Collateral Agent,
and the Reserve Account Agent agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. GENERAL DEFINITIONS. The terms defined in this Article I
shall have the meanings provided herein for all purposes of this Agreement,
unless the context clearly requires otherwise, in both singular and plural form,
as appropriate. Capitalized terms used in this Agreement but not otherwise
defined herein will have the meanings ascribed to such terms in the Security
Agreement.
"ADVERSE SELECTION PROCEDURE" means any method of selecting or
identifying a Receivable eligible to be included in the Collateral, other than
in accordance with the Transaction Documents,
that materially and adversely affects the representative nature of the sample of
Receivables so selected.
"AGREEMENT" means this Insurance Agreement dated as of October 1, 1996,
including any amendments or any supplements hereto as herein permitted.
"CLOSING DATE" means October 22, 1996.
"COMMITMENT" means the Commitment Letter dated as of October 17, 1996
between the Transferor, the Seller and the Surety.
"DATE OF ISSUANCE" means the date on which the Surety Bond is issued.
"EVENT OF DEFAULT" means any event of default set forth in Section 5.01
hereof.
"FIFSG" means First Investors Financial Services Group, Inc.
"FINANCIAL STATEMENTS" means the balance sheets and the statements of
income, retained earnings and cash flows and notes thereto of FIFSG prepared on
a consolidated basis and furnished on behalf of the Seller to the Surety
pursuant to Section 2.02(c) hereof.
"INSURED AMOUNTS" shall have the meaning assigned thereto in the Surety
Bond.
"LATE PAYMENT RATE" means the rate of interest as 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 2%. 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 law applicable to this Agreement limiting interest rates.
"MBIA PREMIUM" means the amount set forth in paragraph 1.a. of the
Commitment.
"MOODY'S" means Moody's Investors Service Inc., its successors and their
assigns, 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 Transferor with
the approval of the Surety.
"NOTE" means the promissory note issued by the Transferor to the Company
pursuant to the Note Purchase Agreement.
"NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement dated as of
October 22, 1996 between the Company and the Transferor.
"SECURITY AGREEMENT" means the Security Agreement dated as of October
22, 1996, among the Company, the Transferor, the Surety, the Seller, the Reserve
Account Agent and the Collateral Agent.
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"SERVICING AGREEMENT" shall have the meaning assigned thereto in the
Security Agreement.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division
of The McGraw-Hill Companies, its successors and their assigns and, if such
corporation shall for any reason no longer perform the functions of a securities
rating agency, "Standard & Poor's" shall be deemed to refer to any other
nationally recognized rating agency designated by the Transferor with the
approval of the Surety.
"STATE" means the State of New York.
"SURETY" means MBIA Insurance Corporation.
"SURETY BOND" means the Surety Bond issued with respect to the
Receivables.
"SURETY DEFAULT" means the occurrence and continuance of any failure of
the Surety to make payments under the Surety Bond in accordance with its terms.
"SURETY INSOLVENCY" means (i) the entry of a decree or order of a court
or agency having jurisdiction in respect of the Surety in an involuntary case
under any present or future Federal or state bankruptcy, insolvency or similar
law or appointing a conservator or receiver or liquidator or rehabilitator or
other similar official of the Surety or of any substantial part of its property,
or the entering of an order for the winding up or liquidation of the affairs of
the Surety and the continuance of any such decree or order undischarged or
unstayed and in force for a period of 90 consecutive days; (ii) the Surety shall
consent to the appointment of a conservator or receiver or liquidator or other
similar official in any insolvency, readjustment of debt, marshaling of assets
and liabilities, rehabilitation or similar proceedings of or relating to the
Surety or of or relating to all or substantially all of its property; or (iii)
the Surety shall admit in writing its inability to pay its debts generally as
they become due, file a petition to take advantage of or otherwise voluntarily
commence a case or proceeding under any applicable bankruptcy, insolvency,
reorganization or other similar statute, make an assignment for the benefit of
its creditors, or voluntarily suspend payment of its obligations.
"TERM OF THE AGREEMENT" shall be determined as provided in Section 4.01.
"TRANSACTION" means the transactions contemplated by the Transaction
Documents.
"TRANSACTION DOCUMENTS" means this Agreement, the Interest Rate Cap, the
Note Purchase Agreement, the Servicing Agreement, the Security Agreement, the
Purchase Agreement, any Originator Agreement and the Note.
Section 1.02. GENERIC TERMS. All words used herein shall be construed to
be of such gender or number as the circumstances require. This "Agreement" shall
mean this 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 Agreement as a whole and not to any particular paragraph, clause or other
subdivision hereof, unless otherwise specifically noted.
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ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR, THE
SELLER, THE COLLATERAL AGENT, AND THE RESERVE ACCOUNT AGENT. The Transferor, the
Seller, the Collateral Agent, and the Reserve Account Agent represent and
warrant to, and covenant with, the other parties hereto (in each case only as to
matters concerning itself) as follows:
(a) REPRESENTATIONS AND WARRANTIES OF TRANSFEROR, SELLER AND THE
COLLATERAL AGENT CONTAINED IN OTHER TRANSACTION DOCUMENTS. All of the
representations and warranties made by the Transferor, the Seller and
the Collateral Agent, as the case may be, as of the Closing Date in any
of the Transaction Documents (except with respect to the Originator
Agreements) are incorporated as if fully set forth herein for the
benefit of the Surety and are true and correct as of the Closing Date.
(b) DUE ORGANIZATION AND QUALIFICATION. Each of the Transferor
and the Seller is a corporation, duly organized, validly existing and in
good standing under the laws of its respective jurisdiction of
incorporation. The Collateral Agent is a national banking institution
duly organized, validly existing and in good standing under the laws of
the United States. Each of the Transferor, the Seller and the Collateral
Agent is duly qualified to do business, is in good standing and has
obtained all necessary licenses, permits, charters, registrations and
approvals (together, "approvals") required to be obtained by the
Transferor, the Seller and the Collateral Agent in each jurisdiction in
which the failure to obtain such approvals would render any portion of
the Transaction Documents unenforceable by the Transferor, the Seller or
the Collateral Agent or any other party to the Transaction Documents, as
the case may be, and would have a material adverse effect on the Surety.
(c) POWER AND AUTHORITY. Each of the Transferor, the Seller and
the Collateral Agent has all necessary corporate or institutional power
and authority to conduct its business as currently conducted and to
execute, deliver and perform its obligations under the Transaction
Documents and to consummate the Transaction.
(d) DUE AUTHORIZATION. The execution, delivery and performance of
the Transaction Documents by the Transferor, the Seller and the
Collateral Agent have been duly authorized by all necessary corporate or
institutional action, as the case may be, 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 Transferor's or the Seller's stockholders, which have not
previously been obtained or given by the Transferor, the Seller or the
Collateral Agent.
(e) NONCONTRAVENTION. Neither the execution and delivery of the
Transaction Documents by the Seller, the Transferor, the Collateral
Agent or the Reserve Account Agent, as the case may be, the consummation
of the transactions contemplated thereby nor the satisfaction of the
terms and conditions of the Transaction Documents:
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(i) conflicts with or results in any breach or violation
of any provision of the certificate of incorporation, bylaws or
other organizational document of the Seller, the Transferor or
the Collateral Agent or any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award currently in
effect having applicability to the Seller, the Transferor or the
Collateral Agent or any of their material properties, including
regulations issued by an administrative agency or other
governmental authority having supervisory powers over the Seller,
the Transferor or the Collateral Agent;
(ii) constitutes a default by the Seller, the Transferor
or the Collateral Agent under or a breach of any provision of any
loan agreement, mortgage, indenture or other agreement or
instrument which is material to the Seller, the Transferor or the
Collateral Agent to which the Seller, the Transferor or the
Collateral Agent is a party or by which any of its or their
respective properties, which are individually or in the aggregate
material to the Seller, the Transferor or the Collateral Agent,
is or may be bound or affected; or
(iii) except as contemplated by the Transaction Documents,
results in or requires the creation of any lien upon or in
respect of any assets of the Seller, the Transferor, the
Collateral Agent or the Reserve Account Agent.
(f) PENDING LITIGATION OR OTHER PROCEEDING. There is no pending
action or proceeding before any court, governmental or administrative
agency or arbitrator against or affecting the Transferor, the Seller,
the Collateral Agent or the Reserve Account Agent or any of its or their
subsidiaries or any properties or rights of the Transferor, the Seller,
the Collateral Agent or the Reserve Account Agent or any of its or their
subsidiaries or, to the Transferor's, the Seller's, the Collateral
Agent's or the Reserve Account Agent's knowledge, any investigation or
any threatened action or proceeding before any of the foregoing, which,
if decided adversely to the Transferor, the Seller, the Collateral Agent
or the Reserve Account Agent, would materially and adversely affect the
ability of the Transferor, the Seller, the Collateral Agent or the
Reserve Account Agent to perform their respective obligations under the
Transaction Documents or would have a material adverse effect on the
Surety.
(g) VALID AND BINDING OBLIGATIONS. The Transaction Documents to
which the Transferor, the Seller and the Collateral Agent, respectively,
is a party constitute, and when executed will constitute, the legal,
valid and binding agreements of the Transferor, the Seller and the
Collateral Agent, respectively, enforceable against the Transferor, the
Seller, and the Collateral Agent in accordance with their respective
terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or limiting creditors' rights generally or general equitable
principles, as such relate to the Transferor, the Seller and the
Collateral Agent. The Transferor, the Seller and the Collateral Agent
hereby agree and covenant that each will not at any time in the future,
deny that the Transaction Documents to which the Transferor, the Seller
and the Collateral Agent, respectively, is a party constitute the
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valid, legal and binding agreements of the Transferor, the Seller and
the Collateral Agent, respectively, subject to the aforesaid
limitations.
(h) FINANCIAL STATEMENTS. The Financial Statements of FIFSG,
copies of which the Seller has caused to be furnished to the Surety on
behalf of the Seller, (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 and
subject to year-end adjustments with respect to interim statements.
Since the date of the most recent Financial Statements, there has been
no material adverse change in such condition or operations. Except as
disclosed in the Financial Statements, the Seller, is 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 Seller.
(i) COMPLIANCE WITH LAW, REGULATIONS, ETC. None of the
Transferor, the Seller, the Collateral Agent or the Reserve Account
Agent has notice or any reason to believe that any practice, procedure
or policy employed by the Transferor, the Seller, the Collateral Agent
or the Reserve Account Agent in the conduct of its business violates any
law, regulation, judgment or agreement applicable to the Transferor, the
Seller, the Collateral Agent or the Reserve Account Agent which, if
enforced, would have a material adverse effect on the ability of the
Seller, the Transferor, the Collateral Agent or the Reserve Account
Agent, as the case may be, to perform its respective obligations under
the Transaction Documents. None of the Transferor, the Seller, the
Collateral Agent or the Reserve Account Agent is in breach of or in
default under any applicable law or administrative regulation of the
state of its respective 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 Transferor is a
party or is otherwise subject which, if enforced, would have a material
adverse effect on the ability of the Collateral Agent, the Reserve
Account Agent, the Transferor or the Seller, as the case may be, to
perform its respective obligations under the Transaction Documents.
(j) TAXES. Each of the Transferor and the Seller and its
respective 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 Transferor and the Seller.
(k) DELIVERY OF INFORMATION. Each of the Transferor and the
Seller represents and warrants that none of the Transaction Documents
nor any other information furnished in writing to the Surety by the
Transferor or the Seller, as the case may be, contain any statement of a
material fact by the Transferor or the Seller as the case may be, which
was untrue or misleading in any material respect when made. None of the
Transferor or the
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Seller has any knowledge of circumstances that could reasonably be
expected to cause a material adverse change with respect to the
Transferor or the Seller. Since the furnishing of such information by
the Transferor and the Seller, there has been no change nor any
development or event involving a prospective change which would render
any of the Transaction Documents or other information furnished to the
Surety untrue or misleading in a material respect.
(l) SOLVENCY. The Transferor and the Seller are solvent and will
not be rendered insolvent by the Transaction and, after giving effect to
the Transaction, neither of the Transferor or the Seller will be left
with an unreasonably small amount of capital with which to engage in its
business, nor does the Transferor or the Seller intend to incur, or
believe that it has incurred, debts beyond its ability to pay as they
mature. None of the Transferor or the Seller 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 Transferor or the Seller
or any of its respective assets.
(m) PRINCIPAL PLACE OF BUSINESS. The principal place of the
Collateral Agent is located in Texas and the principal place of business
of the Transferor is located in Texas. The principal place of business
of the Seller is located in Texas.
(n) REQUIREMENTS FOR RECEIVABLES. The Seller and the Transferor
represent and warrant with respect to each Receivable 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 Receivable; (b) the obligation created by the contract
evidencing each Receivable is a bonafide sale in the ordinary course of
the Originator's business; (c) the contract evidencing such Receivable
complies with all state and federal laws and regulations; (d) the
contract evidencing each Receivable, including, but not limited to,
description of the motor vehicle and/or services contained therein, is
in all respects complete, accurate and represents the entire agreement
between the Originator and the Obligor and complies with Federal
Consumer Credit Protection Act and all other applicable state and
federal laws and regulations.
Section 2.02. AFFIRMATIVE COVENANTS OF THE TRANSFEROR, THE SELLER, THE
COLLATERAL AGENT, AND THE RESERVE ACCOUNT AGENT. The Transferor, the Seller, the
Collateral Agent, and the Reserve Account Agent hereby covenant and agree that
during the term of this Agreement:
(a) COMPLIANCE WITH AGREEMENTS. The Transferor, the Seller, the
Collateral Agent and the Reserve Account Agent shall comply in all
material respects with the terms and conditions of the Transaction
Documents to which each, respectively, is a party and, so long as no
Surety Default or Surety Insolvency exists, unless the Surety shall
otherwise consent, none of the Transferor, the Seller, the Collateral
Agent or the Reserve Account Agent shall agree to any waiver, amendment
to or modification of the terms of any of the Transaction Documents to
which each, respectively, is a party, except with respect to the
Originator Agreements and except under the circumstances and in
accordance with the terms specifically set forth in the related
Transaction Document.
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(b) CORPORATE EXISTENCE. The Transferor, the Seller, the
Collateral Agent, and the Reserve Account Agent shall maintain their
respective existences and continue to be duly organized, duly qualified
and duly authorized under the laws of its respective jurisdiction of
incorporation or organization and shall conduct its business in
accordance with the terms of its certificate of incorporation and
bylaws, or other organization documents.
(c) THE SELLER TO PROVIDE FINANCIAL STATEMENTS; ACCOUNTANTS'
REPORTS; OTHER INFORMATION. The Seller shall keep or cause to be kept in
reasonable detail books and records of account of the Seller's books and
records relating to its obligations assumed under the Transaction
Documents, in accordance with its operating rules and procedures. The
Seller shall furnish or cause to be furnished to the Surety:
(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 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 the
FIFSG's independent accountants (which shall be a nationally
recognized independent public accounting firm) and by the
certificate specified in Section 2.02(e) hereof.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available,
and in any event within 90 days after each of the first three
fiscal quarters of each fiscal year of FIFSG, the unaudited
consolidated balance sheets of FIFSG and its subsidiaries as of
the end of such fiscal quarter and the related unaudited
consolidated statements of income, changes in shareholders'
equity and cash flows for such fiscal quarter, all in reasonable
detail and stating in comparative form the respective figures for
the corresponding date and period in the preceding fiscal year,
prepared in accordance with generally accepted accounting
principles, consistently applied, and accompanied by the
certificate specified in Section 2.02(e) hereof.
(iii) [Reserved.]
(iv) OTHER REPORTS AND INFORMATION. The Seller shall also
furnish, or cause to be furnished, with reasonable promptness,
such other financial data, financial reports relating to the
Seller or FIFSG prepared by third parties and other data relating
to the Seller or FIFSG which are commonly prepared and can be
provided without undue effort, as the Surety may reasonably
request.
(d) THE TRANSFEROR SHAREHOLDER MEETINGS. The Transferor shall
have annual shareholder meetings and at least annual board of director
meetings and shall prepare
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income and franchise tax returns as appropriate. Upon the request of the
Surety, the Transferor shall deliver to the Surety copies of the minutes
of such meetings and such tax returns promptly upon filing.
(e) CERTIFICATE OF COMPLIANCE. The Seller shall cause the
Transferor to deliver to the Surety concurrently with the delivery of
the Financial Statements required pursuant to paragraph (c) above any
statement required to be delivered under the Security Agreement.
(f) ACCESS TO RECORDS; DISCUSSIONS WITH OFFICERS AND ACCOUNTANTS.
The Transferor, the Seller, the Collateral Agent and the Reserve Account
Agent shall, upon the request of the Surety, permit the Surety, or its
authorized agent, at reasonable times and upon reasonable notice:
(i) to inspect such books and records of the Transferor,
the Seller and the Collateral Agent as the case may be, as they
may relate to the Receivables, the obligations of the Transferor,
the Seller and the Collateral Agent, as the case may be, under
the Transaction Documents and the transactions consummated in
connection herewith and to inspect the books and records of the
Reserve Account Agent as they may relate to the Reserve Account;
(ii) to discuss the affairs, finances and accounts of the
Transferor, the Seller and the Collateral Agent as such relate to
the performance by it of its obligations under the Transaction
Documents with an appropriate officer of the Transferor, the
Seller and the Collateral Agent, as the case may be; and to
discuss the affairs, finances and accounts of the Reserve Account
Agent as such may relate to the Reserve Account with an
appropriate officer of the Reserve Account Agent.
(iii) to discuss the affairs, finances and accounts of the
Transferor, the Seller and the Collateral Agent as such relate to
the performance by it of its obligations under the Transaction
Documents with the Transferor's, the Seller's and the Collateral
Agent's independent public accountants, as the case may be,
provided that an appropriate officer of the Transferor, the
Seller and the Collateral Agent, as the case may be, shall have
the right to be present during such discussions.
Such inspections and discussions shall be conducted upon the
request of the Surety and during normal business hours and shall not
unreasonably disrupt the business of the Transferor, the Seller, the
Collateral Agent or the Reserve Account Agent. The books and records of
the Transferor will be maintained at the address of the Transferor
designated herein for receipt of notices, unless the Transferor shall
otherwise advise the parties hereto in writing, the books and records of
the Collateral Agent will be maintained at the address of the Collateral
Agent designated herein for receipt of notices, unless the Collateral
Agent shall otherwise advise the parties hereto in writing, the books
and records of the Reserve Account Agent will be maintained at the
address of the Reserve Account Agent designated herein for receipt of
notices, unless the Reserve Account Agent shall
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otherwise advise the parties hereto in writing and the books and records
of the Seller will be maintained at the Seller's address designated
herein for receipt of notices, unless the Seller shall otherwise advise
the parties hereto in writing.
The Surety shall keep confidential all financial statements and
reports delivered to it, the Credit Guidelines and any matter of which
it becomes aware through such inspections or discussions, except as may
be otherwise required, by regulation, law or court order or requested by
appropriate governmental authorities or as necessary to enforce any of
the provisions of the Transaction Documents, provided that the foregoing
shall not limit the right of the Surety to make such information
available on a confidential basis, to its regulators, securities rating
agencies, reinsurers, credit and liquidity providers, counsel and
accountants. If the Surety is requested or required (by oral questions,
interrogatories, requests for information or documents subpoena, civil
investigative demand or similar process) to disclose any information of
which it becomes aware through such inspections or discussions, the
Surety will promptly notify the Seller of such request(s) so that the
Seller may seek an appropriate protective order and/or waive the
Surety's compliance with the provisions of this Insurance Agreement. If,
in the absence of a protective order or the receipt of a waiver
hereunder, the Surety is, nonetheless, in the opinion of its counsel,
compelled to disclose such information to any tribunal or else stand
liable for contempt or suffer other censure or significant penalty, the
Surety may disclose such information to such tribunal that the Surety is
compelled to disclose, provided that a copy of all information disclosed
is provided to the Seller promptly upon such disclosure.
(g) INFORM SURETY OF MATERIAL EVENTS. Each of the Transferor,
the Seller and the Collateral Agent (each, as to matters relating to
itself) shall promptly inform the Surety in writing of the following:
(i) any default or any fact or event (of which, in the
case of the Collateral Agent, the Collateral Agent has actual
knowledge) which results, or which with notice or the passage of
time, or both, would result in an Event of Default, or Servicer
Event of Default, Termination Event, Wind-Down Event or
Amortization Event under any Transaction Document or would
constitute a material breach of a representation, warranty or
covenant by it under any Transaction Document;
(ii) the submission of any claim or the initiation of any
legal process, litigation or administrative or judicial
investigation against it in any federal, state or local court or
before any governmental body or agency, or before any arbitration
board, or any such proceedings threatened by any governmental
agency, (of which, in the case of the Collateral Agent, the
Collateral Agent has actual knowledge), which, if adversely
determined, would have a material adverse effect upon its ability
to perform its obligations under any Transaction Document;
(iii) except in the case of the Collateral Agent, the
submission of any claim or the initiation of any legal process,
litigation or administrative or judicial investigation in any
federal, state or local court or before any arbitration board, or
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any such proceeding threatened by any governmental agency
transferred, which, if adversely determined, would have a
material adverse effect on the Receivables;
(iv) the commencement of any proceedings under any
applicable bankruptcy, reorganization, liquidation, insolvency or
other similar law now or hereafter in effect or of any proceeding
in which a receiver, liquidator, trustee or other similar
official shall have been, or may be, appointed or requested;
(v) the receipt of notice from any agency or governmental
body having authority over the conduct of its business that it is
to cease and desist, or to undertake any, practice, program,
procedure or policy employed by it in the conduct of its
business, and such cessation or undertaking will materially
adversely affect its ability to perform its obligations under the
Transaction Documents; and
(vi) any change in the location of the Seller's, the
Transferor's or the Collateral Agent's principal offices or books
and records.
(h) FINANCING STATEMENTS AND FURTHER ASSURANCES. The Seller shall
cause the Transferor 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 Surety in the Receivables. The parties hereto shall,
upon the request of the Surety, 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. The parties hereto agree to fully cooperate with
the Surety, Standard & Poor's and Moody's in connection with any review
which may be undertaken by Standard & Poor's and/or Moody's after the
date hereof and to provide all information reasonably requested by
Standard & Poor's and/or Moody's.
(i) NOTICE OF AMENDMENTS. The Seller will provide the Surety with
written notice of any change or amendment to any Transaction Document
(except with respect to the Originator Agreements) as currently in
effect.
(j) THIRD-PARTY RIGHTS. Each of the Transferor, the Seller, the
Collateral Agent, and the Reserve Account Agent agrees that the Surety
shall have all of the rights of a third-party beneficiary of, and
pursuant to, its agreements under each Transaction Document (except with
respect to the Originator Agreements) to which the Transferor, the
Seller, the Collateral Agent, respectively, is a party, unless otherwise
expressly provided in the related Transaction Document.
(k) MAINTENANCE OF LOANS. On or before each April 15, beginning
in 1997, the Seller shall cause the Transferor to furnish to the Surety
an officer's certificate 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
11
maintain the interest of the Surety created by the Security Agreement
with respect to the Receivables and reciting the details of such action
or stating that no such action is necessary to maintain such interests.
Such officer's 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 Surety
in the Receivables until the date such next officer's certificate is
due. The Seller will use its best efforts to cause any necessary
recordings or filings to be made with respect to the Receivables.
(l) SELLER'S INDEMNITY. Notwithstanding anything in subsection
3.07(a) hereof, the Seller shall pay to the Surety an amount equal to
any amount paid by the Surety 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, 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.
(m) MAINTENANCE OF LICENSES. The Collateral Agent, the Seller and
the Transferor, respectively, or any successors thereof, shall maintain
all licenses, permits, charters and registrations which are material to
the conduct of its business.
(n) CLOSING DOCUMENTS. The Seller shall provide or cause to be
provided to the Surety an executed original copy of each document
executed in connection with the Transaction within 30 days after the
date of closing.
(o) NOTICES UNDER THE INTEREST RATE CAP AND THE NOTE PURCHASE
AGREEMENT. The Transferor shall promptly forward to the Surety a copy of
each notice or other communication received by the Transferor or sent by
the Transferor with respect to the Interest Rate Cap and the Note
Purchase Agreement.
(p) COLLATERAL AGENT TO ACT UPON DIRECTION OF SURETY; DELIVERY OF
NOTICES. The Collateral Agent agrees that so long as no Surety Default
has occurred and is continuing (i) the Collateral Agent shall not take
any action which the Collateral Agent is entitled to take pursuant to
the Servicing Agreement without the prior written consent of the Surety,
and (ii) following the Surety's written request or direction, it will
take or refrain from taking any action which the Collateral Agent is
entitled to take pursuant to the Servicing Agreement. The Collateral
Agent shall promptly forward to the Surety a copy of each notice or
other communication given or received by the Collateral Agent pursuant
to the Servicing Agreement.
Section 2.03. NEGATIVE COVENANTS OF THE TRANSFEROR, THE COLLATERAL AGENT
AND THE SELLER. The Transferor, the Collateral Agent and the Seller agree and
covenant with the Surety that at all times during the Term of the Agreement:
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(a) ADVERSE SELECTION PROCEDURE. The Transferor and the Seller
will not use any Adverse Selection Procedure in selecting the
Receivables that qualify under the Security Agreement for inclusion as
Collateral.
(b) IMPAIRMENT OF RIGHTS. The Transferor, the Collateral Agent
and the Seller each agree and covenant with the Surety that at all times
during the Term of the Agreement the Transferor, the Seller and the
Collateral Agent shall not take any action, or decline to take any
action if reasonably requested by the Surety at a time when no Surety
Default or Surety Insolvency exists, if such action or failure to take
action will interfere with the enforcement of any rights under any of
the Transaction Documents. The Transferor, the Collateral Agent and the
Seller shall give the Surety 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 Transferor, the Collateral Agent, and
the Seller shall furnish to the Surety all information requested by it
that is reasonably necessary to determine compliance with this
paragraph.
(c) AMENDMENT TO CERTIFICATE OF INCORPORATION. The Transferor
shall not amend its certificate of incorporation at a time when no
Surety Default or Surety Insolvency exists without the Surety's prior
written consent except in accordance with the terms thereof.
(d) LOAN AGREEMENTS; CHARGE-OFF POLICY. Except as otherwise
permitted in the Security Agreement, the Seller shall not, and shall not
permit the Servicer to, alter or amend any Receivable or their
respective charge-off policies in a manner that materially adversely
affects the Surety unless the Surety shall have previously given its
consent.
(e) INTEREST RATE CAP. The Transferor will not enter into the
Interest Rate Cap until the Interest Rate Cap has been approved in form
and substance by the Surety. The Transferor shall not agree to any
changes to the Interest Rate Cap unless the Surety shall have previously
given its consent. The Transferor shall take or refrain from taking any
action, and exercise or refrain from exercising any rights of the
Transferor under the Interest Rate Cap, in the manner directed by the
Surety.
ARTICLE III
THE SURETY BOND; SECURITY
Section 3.01. AGREEMENT TO ISSUE SURETY BOND. The Surety agrees, subject
to the conditions set forth in Section 3.02 hereof, to issue the Surety Bond.
Section 3.02. CONDITIONS PRECEDENT TO ISSUANCE OF THE SURETY BOND. The
Transferor and the Seller shall have complied with the terms and satisfied the
conditions precedent set forth below:
(i) Payment of the MBIA Premium in accordance with Section 3.03
hereof;
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(ii) Payment of or satisfactory arrangements for payment by the
Transferor of (a) rating agency fees of Standard & Poor's and Moody's;
and (b) the fees and expenses incurred by the Surety in connection with
the issuance of such Surety Bond, including reasonable fees and expenses
of counsel to the Surety and accountants for the Surety, all in
accordance with the terms of the Commitment. The fees for any other
rating agency shall be paid by the party requesting such other agency's
rating, unless such other agency is a substitute for Standard & Poor's
or Moody's in the event that Standard & Poor's or Moody's is no longer
rating securities, in which case the cost for such agency shall be paid
by the Transferor;
(iii) Receipt by the Surety of a fully executed copy of the
Transaction Documents (except for the Originator Agreements);
(iv) Receipt by the Surety of (A) the certificate of
incorporation and bylaws of the Transferor and (B) certified copies of
the resolutions of the board of directors of the Transferor authorizing
the execution and delivery and performance of the Transaction Documents
and the other matters contemplated thereby, and of all other documents
evidencing any other action of the Transferor necessary to enter into
the Transaction Documents, all in form and substance acceptable to the
Surety and its counsel;
(v) [Reserved.]
(vi) Receipt by the Surety of the following opinions of counsel:
(A) The law firm of Buck, Keenan & Owens shall have issued
its favorable opinion, in form and substance acceptable to the
Surety and its counsel, regarding and the validity and
enforceability of the Transaction Documents (except with respect
to the Originator Agreements) against the Transferor and the
Seller, the law firm of Skadden, Arps, Slate, Meagher & Flom
shall have issued its favorable opinion, in form and substance
acceptable to the Surety and its counsel, regarding and the
validity and enforceability of the Security Agreement and the
Insurance Agreement against the Reserve Account Agent, and the
law firm of Andrews & Kurth, L.L.P. shall have issued its
favorable opinion, in form and substance acceptable to the Surety
and its counsel, regarding and the validity and enforceability of
the Transaction Documents against the Collateral Agent.
(B) The law firm of Vinson & Elkins shall have issued its
favorable opinions, in form and substance acceptable to the
Surety and its counsel, regarding the sale of the Receivables
from the Seller to the Transferor, consolidation of the Seller
and the Transferor in the event of the Seller's bankruptcy.
(C) The law firm of Buck, Keenan & Owens shall have issued
its favorable opinions, in form and substance acceptable to the
Surety and its counsel, regarding the perfection of the
Collateral Agent's interest in the Receivables and the Reserve
Account Agent's interest in (i) the funds on deposit in, and (ii)
investments with respect to, the Reserve Account.
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(D) The Surety shall have received such other opinions of
counsel, in form and substance acceptable to the Surety and its
counsel, including tax opinions, addressing such other matters as
the Surety may reasonably request.
(vii) Receipt by the Surety of true and correct copies of all
approvals, licenses and consents, if any, including, without limitation,
any required approval of the shareholders of the parties hereto,
necessary for the transactions contemplated by the Transaction
Documents;
(viii) Receipt of confirmation from Standard & Poor's and Moody's
that the rating of the Facility without regard to the Surety Bond is at
least BBB- and Baa3, respectively;
(ix) The Surety shall have received a certificate of an
authorized officer of the Transferor, the Collateral Agent, the Seller
and the Reserve Account Agent certifying the name and true signatures of
the officers of the Transferor, the Collateral Agent, the Seller and the
Reserve Account Agent, executing the Transaction Documents;
(x) [Reserved.]
(xi) The representations and warranties of the parties hereto set
forth or incorporated by reference in this Agreement shall be true and
correct as of the Date of Issuance as if made on the Date of Issuance
and the Surety shall have received a certificate of appropriate officers
of each of the parties hereto to that effect.
(xii) The Seller will cause FIFSG to furnish a certificate to the
Surety to the effect that (i) the Financial Statements which have been
furnished to the Surety are, as of the date thereof, complete and
correct in all material respects; present fairly the financial condition
of FIFSG on a consolidated basis as of the date thereof; and have been
prepared in accordance with generally accepted accounting principles
consistently applied (except as noted therein and subject to year-end
adjustments for interim statements) and (ii) there has been no material
adverse change in such conditions or operations;
(xiii) Delivery of such other documents, customary closing
certificates, instruments, approvals or opinions as are reasonably
requested by the Surety;
(xiv) No suit, action or other proceeding, investigation or
injunction, or final judgment relating thereto, shall be pending or
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;
(xv) 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 transactions
contemplated by any of the Transaction Documents illegal or otherwise
prevent the consummation thereof;
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(xvi) No default or any fact or event which results, or which
with notice or the passage of time, or both, would result in a
Termination Event, Amortization Event, Wind- Down Event or Event of
Default shall have occurred;
(xvii) Compliance with all other terms, conditions and
requirements of the Commitment;
(xiii) The Surety and its counsel shall have determined that all
documents, certificates and opinions to be delivered in connection with
the Receivables conform to the terms of the Transaction Documents; and
(xix) The Surety shall have received such other documents,
instruments, approvals or opinions requested by the Surety as may be
reasonably necessary to effect the Transaction, including but not
limited to, evidence satisfactory to the Surety that the conditions
precedent, if any, in the Transaction Documents have been satisfied.
Issuance of such Surety Bond will be conclusive evidence of satisfaction or
waiver of any of the conditions set forth in this Section 3.02.
Section 3.03. PREMIUM. The MBIA Premium shall be payable in accordance
with the Security Agreement so long as no Surety Default or Surety Insolvency
has occurred. The MBIA Premium shall be nonrefundable without regard to whether
the Surety makes any payment under the Surety Bond.
Section 3.04. INDEMNIFICATION. (a) In addition to any and all rights of
indemnification or any other rights of the Surety pursuant hereto or under law
or equity, the Transferor, the Seller, the Reserve Account Agent (subject to
Section 3.04(g) hereof) and the Collateral Agent (subject to the provisions of
Section 3.04(g) hereof), and any successors thereto agree to pay, and to
protect, indemnify and save harmless, the Surety and its officers, directors,
shareholders, employees, agents, including each person, if any, who controls the
Surety within the meaning of either Section 15 of the Securities Act of 1933, as
amended, or Section 20 of the Securities and Exchange Act of 1934, as amended,
from and against any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or reasonable expenses
(including, without limitation, reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) or obligations
whatsoever (herein collectively referred to as "Liabilities") of any nature
arising out of or relating to the transactions contemplated by the Transaction
Documents by reason of:
(i) the misfeasance or malfeasance of, or gross negligence or
theft committed by, any director, officer, employee or agent of the
Transferor, the Seller, the Reserve Account Agent, the Servicer or the
Collateral Agent;
(ii) the violation by the Transferor or the Seller of any federal
or state laws, rules or regulations relating to the maximum amount of
interest permitted to be received on account of the loan of money or
with respect to the Receivables;
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(iii) the breach by the Transferor, the Seller or the Collateral
Agent of any of its material obligations under this Agreement or any of
the Transaction Documents;
(iv) the breach by the Reserve Account Agent or the Servicer
under any of the Transaction Documents to which it is a party, and such
breach is not cured within the applicable time period set forth in the
related Transaction Document;
(v) the breach by the Transferor, the Seller, the Reserve Account
Agent, the Servicer or the Collateral Agent of any representation or
warranty on the part of the Transferor, the Seller, the Reserve Account
Agent, the Servicer or the Collateral Agent contained in the Transaction
Documents or in any certificate furnished or delivered to the Surety
thereunder, and such breach is not cured within the applicable time
period set forth in the related Transaction Document; and
(vi) any state or federal tax liability imposed upon the
Transferor or in connection with the transactions contemplated by the
Transaction Documents.
(b) The Transferor and the Seller agree to pay, and to protect,
indemnify and save harmless, the Surety and its officers, directors,
shareholders, employees, agents, including each person, if any, who controls the
Surety within the meaning of either Section 15 of the Securities Act of 1933, as
amended, or Section 20 of the Securities and Exchange Act of 1934, as amended,
from and against any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or reasonable expenses
(including, without limitation, reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) or obligations
whatsoever (herein collectively referred to as "Liabilities") of any nature
arising out of or relating to the transactions contemplated by the Transaction
Documents by reason of any losses, damages or expenses of whatsoever kind or
nature, including reasonable attorney's fees, which the Surety may at any time
incur by reason of or in consequence of any Obligor making any legally proven
claim relating to an Originator's acts regarding each contract evidencing the
related Receivable purchased by the Seller or Transferor.
(c) The Transferor and the Seller agree to pay, and to protect,
indemnify and save harmless, the Surety and its officers, directors,
shareholders, employees, agents, including each person, if any, who controls the
Surety within the meaning of either Section 15 of the Securities Act of 1933, as
amended, or Section 20 of the Securities and Exchange Act of 1934, as amended,
from and against any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or reasonable expenses
(including, without limitation, reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) or obligations
whatsoever (herein collectively referred to as "Liabilities") of any nature
arising out of or relating to the occurrence of the events set forth in Section
4.1(a) through (g) of the Note Purchase Agreement.
(d) 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 Transferor, the Seller, the Reserve Account Agent or the
Collateral Agent under this Section 3.04, notify the
17
Transferor, the Collateral Agent, the Reserve Account Agent or the Seller 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 Transferor, the Collateral Agent, the
Reserve Account Agent or the Seller of the commencement thereof, the Transferor,
the Seller, the Reserve Account Agent or the Collateral Agent shall be entitled
to participate in, and, to the extent that it shall wish, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party, and
after notice from the Transferor, the Seller, the Reserve Account Agent or the
Collateral Agent to such indemnified party of its election so to assume the
defense thereof, the Transferor, the Seller, the Reserve Account Agent or the
Collateral Agent 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 Transferor, the Seller, the Reserve
Account Agent or the Collateral Agent in accordance with the terms of this
subsection (d), 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 Transferor, the Seller, the Reserve
Account Agent or the Collateral Agent. The Transferor, the Seller, the Reserve
Account Agent and the Collateral Agent shall not be liable for any settlement of
any action or claim effected without its consent.
(e) This indemnity provision shall survive the termination of this
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.
(f) Notwithstanding any provision or obligation to the contrary set
forth in this Agreement or any instrument now or hereafter securing, affecting
or relating to any obligation of the Transferor, the Seller, the Reserve Account
Agent or the Collateral Agent under this Agreement, including, without
limitation, the Security Agreement, no individual representative of the
Transferor, the Collateral Agent, the Reserve Account Agent or the Seller
(including, without limitation, employees, officers, directors and shareholders
thereof) shall have any personal liability under this Agreement including,
without limitation, any liability for the performance or observance or
nonperformance or nonobservance of any covenant or obligation of the Transferor,
the Collateral Agent, the Reserve Account Agent and the Seller or for breach of
any representation or warranty contained in this Agreement.
(g) Notwithstanding any other provision of this Section 3.04, (I) the
Collateral Agent shall be obligated under this Section 3.04 to pay, protect,
indemnify and save harmless any indemnified party hereunder from and against
Liabilities only with respect to any misfeasance or malfeasance of, or gross
negligence or theft committed by any director, officer, employee or agent of the
Collateral Agent, as specified in Section 3.04(a)(i), and any breach by the
Collateral Agent, as specified in Section 3.04(a)(iii) or (v); and (II) in
connection with its duties, representations, warranties, covenants and
obligations pursuant to the Security Agreement and this Agreement, the Reserve
Account Agent shall be obligated under this Section 3.04 to pay, protect,
indemnify, and save harmless any indemnified party hereunder from and against
Liabilities only with respect to any gross negligence by the Reserve Account
Agent or theft committed by any director, officer,
18
employee or agent of the Reserve Account Agent, as specified in Section
3.04(a)(i) and any breach by the Reserve Account Agent, as specified in Section
3.04(a)(iv) or (v).
Section 3.05. PAYMENT PROCEDURE. If the Surety makes any payment under
the Surety Bond, the Transferor, the Seller and the Collateral Agent shall
accept, except in the case of manifest error, a voucher or other evidence of
payment as prima facie evidence that such payment was properly made. In the
event of any payment by the Surety, the Transferor, the Seller and the
Collateral Agent agree to accept a voucher or other evidence of payment complete
on its face as prima facie evidence of the propriety thereof and the liability
therefor of the Surety except in the case of manifest error. All payments to be
made to the Surety under this Agreement shall be made to the Surety in lawful
currency of the United States of America in immediately available funds at the
notice address for the Surety as specified in Section 6.02 hereof on the date
when due. Payments to be made to the Surety under this Agreement shall bear
interest payable to the extent provided in this Agreement at the Late Payment
Rate from the date when due to the date paid.
Section 3.06. SUBROGATION. Upon any payment by the Surety pursuant to
the Surety Bond, the Surety shall be fully subrogated to the rights of the
Insured Party (as defined in the Surety Bond) to the extent of such payment,
pursuant to the priority set forth in Section 5.1 of the Security Agreement.
Each of the Transferor, the Seller, the Collateral Agent, and the Reserve
Account Agent acknowledges such subrogation and, further, agrees to execute such
instruments prepared by the Surety and to take such reasonable actions as, in
the sole judgment of the Surety, are necessary to evidence such subrogation and
to perfect the rights of the Surety to receive any moneys paid or payable under
the Security Agreement.
Section 3.07. REIMBURSEMENT AND ADDITIONAL PAYMENT OBLIGATION. (a) In
accordance with Section 5.1(a)(vi) of the Security Agreement, the Surety shall
be entitled to reimbursement for any payment made by the Surety under the Surety
Bond, which reimbursement shall be due and payable on the date that any amount
is to be paid pursuant to a Notice or a Remittance Date Notice (each as defined
in the Surety Bond), 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.
(b) The Seller agrees to pay to the Surety as follows: anything in
subsection 3.07(a) hereof to the contrary notwithstanding, the Surety shall be
entitled to reimbursement from the Seller (i) for payments made under the Surety
Bond arising as a result of the Transferor's failure to repurchase any
Receivable required to be repurchased pursuant to Section 3.1 of the Security
Agreement, or Section 3.02 of the Servicing Agreement, or the Seller's failure
to repurchase any Receivable required to be repurchased pursuant to Section 6.2
of the Purchase Agreement and (ii) for payments made under the Surety Bond,
arising as a result of the Servicer's failure to deposit into the Collection
Account any other amount required to be so deposited pursuant to the Security
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
19
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 Seller agrees to pay to the Surety as follows: any and all
charges, fees, costs and expenses that the Surety may reasonably pay or incur,
including, but not limited to, reasonable attorneys' and accountants' fees and
expenses, in connection with (i) any accounts established to facilitate payments
under the Surety Bond to the extent the Surety has not been immediately
reimbursed on the date that any amount is paid by the Surety under the Surety
Bond, (ii) the enforcement, defense or preservation of any rights in respect of
any of the Transaction Documents, including defending, monitoring or
participating in any litigation or proceeding (including any insolvency or
bankruptcy proceeding in respect of any Transaction participant or any affiliate
thereof) relating to any of the Transaction Documents, any party to any of the
Transaction Documents, in its capacity as such a party, or the Transaction, or
(iii) any amendment, waiver or other action with respect to, or related to, any
Transaction Document, whether or not executed or completed, and the Surety
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.
(d) The Reserve Account Agent agrees to pay the Surety as follows: any
and all charges, fees, costs and expenses that the Surety may reasonably pay or
incur, including, but not limited to, reasonable attorneys' fees and expenses,
in connection with the Reserve Account Agent's failure to perform in any respect
any of its obligations, covenants or agreements contained in the Security
Agreement and in this Agreement.
(e) The Seller and the Reserve Account Agent, as the case may be, and in
each case as to matters concerning itself, agree to pay to the Surety as
follows: with respect to the Seller, interest on any and all amounts described
in subclauses (b), (c), (f) and (g) and with respect to the Reserve Account
Agent, interest on any and all amounts described in subclause (d) of this
Section 3.07 from the date payable or paid by such party until payment thereof
in full, payable to the Surety at the Late Payment Rate per annum.
(f) The Collateral Agent, the Seller and the Transferor agree to pay to
the Surety as follows: any payments made by the Surety on behalf of, or advanced
to, the Collateral Agent the Seller or the Transferor, as the case may be,
consisting of any amounts payable by the Collateral Agent, the Seller or the
Transferor pursuant to the Transaction Documents.
(g) Following termination of the Security Agreement pursuant to Section
6.1 thereof, the Seller agrees to reimburse the Surety for any Insured Payments
required to be made pursuant to the Surety Bond subsequent to the date of such
termination.
Section 3.08. ASSIGNMENT BY TRANSFEROR. The Transferor hereby assigns to
the Surety all of its rights in and to any indemnification provided to the
Transferor by the Servicer under the Servicing Agreement, including, but not
limited to, the indemnification rights of the Transferor pursuant to Sections
3.07 and 7.02 of the Servicing Agreement.
ARTICLE IV
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FURTHER AGREEMENTS
Section 4.01. EFFECTIVE DATE; TERM OF AGREEMENT. This Agreement shall
take effect on the Date of Issuance and shall remain in effect until such time
as the Surety is no longer subject to a claim under the Surety Bond and all
amounts payable by the Transferor, the Seller, the Collateral Agent or the
Reserve Account Agent hereunder or under any other Transaction Document have
been paid in full and any preference period applicable to any such payment has
expired and all other obligations of the Transferor, the Seller, the Collateral
Agent or the Reserve Account Agent hereunder or under any other Transaction
Document have been performed in full.
Section 4.02. WAIVER OF RIGHTS; FURTHER ASSURANCES AND CORRECTIVE
INSTRUMENTS. (a) Excepting at such times as a Surety Insolvency or a Surety
Default shall exist or shall have occurred and be continuing, none of the
Transferor, the Seller, the Collateral Agent or the Reserve Account Agent shall
grant any waiver of rights under any of the Transaction Documents (except with
respect to the Originator Agreements) to which any of them is a party without
the prior written consent of the Surety, and any amendment or supplement to the
Transaction Documents without the written consent of the Surety shall be null
and void and of no force or effect, unless otherwise expressly provided under
the terms of the related Transaction Document.
(b) Each of the Transferor, the Collateral Agent, the Reserve Account
Agent and the Seller agrees that it 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 Surety may
reasonably request and as may be reasonably required in the Surety's judgment to
effectuate the intention of or facilitate the performance of this Agreement.
Section 4.03. OBLIGATIONS ABSOLUTE. The obligations of the Transferor,
the Collateral Agent, the Reserve Account Agent and the Seller hereunder shall
be absolute and unconditional, and shall not be subject to, and the Transferor,
the Seller, the Collateral Agent, and the Reserve Account Agent hereby waive any
of their rights of, abatement, diminution, postponement or deduction, or to 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
Transferor, the Seller, the Collateral Agent or the Reserve Account Agent.
Nothing herein shall be construed as prohibiting the Transferor, the Seller, the
Collateral Agent or the Reserve Account Agent from pursuing any rights or
remedies they may have against any other person or entity in a separate legal
proceeding. The obligations of the Transferor, the Seller, the Collateral Agent
and the Reserve Account Agent are absolute and unconditional and will be paid or
performed strictly in accordance with this Agreement.
Section 4.04. ASSIGNMENTS; REINSURANCE; THIRD-PARTY RIGHTS. (a) This
Agreement shall be a continuing obligation of the Transferor, the Seller, the
Collateral Agent and the Reserve Account Agent and shall (i) be binding upon the
Transferor, the Seller, the Collateral Agent and the Reserve Account Agent and
their respective successors and assigns and (ii) inure to the benefit of and be
enforceable by the Surety and its successors, transferees and assigns. None of
the Transferor, the Seller, the Collateral Agent or the Reserve Account Agent
may assign this
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Agreement, or delegate any of its duties specifically set forth herein, without
the prior written consent of the Surety which consent shall not be unreasonably
withheld.
(b) The Surety shall have the right to give participations in its rights
under this Agreement and to enter into contracts of reinsurance with respect to
the Surety Bond and each such participant or reinsurer shall be entitled to the
benefit of any representation, warranty, covenant and obligation of the
Transferor, the Seller, the Collateral Agent and the Reserve Account Agent
hereunder as if such participant or Surety was a party hereto; provided that no
such grant of participation shall operate to relieve the Surety of liability on
the Surety Bond.
(c) Except as provided herein with respect to participants and
reinsurers, nothing in this Agreement shall confer any right, remedy or claim,
express or implied, upon any person, other than the Surety, against the
Transferor, the Seller, the Collateral Agent or the Reserve Account Agent, 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.
ARTICLE V
DEFAULTS; REMEDIES
Section 5.01. DEFAULTS. The occurrence of any of the following events
shall constitute an Event of Default:
(a) Any representation or warranty made by the Transferor, the
Seller, the Collateral Agent or the Reserve Account Agent (i) hereunder
which, if capable of being cured, is not cured within 15 days after
notice thereof is given to the Transferor, the Seller, the Collateral
Agent or the Reserve Account Agent or (ii) under the Transaction
Documents, or in any certificate furnished hereunder or under the
Transaction Documents, which is not cured within the applicable cure
period set forth in the related Transaction Document shall prove to be
untrue or incomplete in any material respect;
(b) (i) The Transferor, the Seller, the Reserve Account Agent or
the Collateral Agent shall fail to pay when due any amount payable by
the Transferor, the Seller, the Reserve Account Agent or the Collateral
Agent hereunder or (ii) a legislative body has enacted any law that
declares or a court of competent jurisdiction shall find or rule that
any of the Transaction Documents to which the related Person is a party
are not valid and binding on the Transferor, the Seller, the Collateral
Agent or the Reserve Account Agent;
(c) The occurrence and continuance of a Servicer Event of Default
under the Servicing Agreement (as defined therein) or a Termination
Event, a Wind-Down Event or Amortization Event under the Security
Agreement, which is not cured within the applicable cure period set
forth in the related Transaction Document (except with respect to a
Termination Event);
(d) Any failure on the part of the Transferor, the Seller, the
Collateral Agent or the Reserve Account Agent duly to observe or perform
in any material respect any other of the covenants or agreements on the
part of the Transferor, the Seller, the Collateral
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Agent or the Reserve Account Agent contained in this Agreement which
continues unremedied for 30 days, or in any other Transaction Document
which is not cured within the applicable cure period set forth in the
related Transaction Document after the date on which written notice of
such failure, requiring the same to be remedied, shall have been given
to the Transferor, the Seller, the Collateral Agent or the Reserve
Account Agent, as the case may be, by the Surety or by the Reserve
Account Agent or the Collateral Agent (with a copy to the Surety);
(e) Any material party thereto shall breach any material
representation or warranty or fail to observe any material covenant or
agreement contained in any Transaction Document (except for the
obligations described under paragraph (a) or (c) above), and such
failure shall continue for a period of 30 days after written notice
given to the Transferor and, if applicable, such other party; provided
that, if such failure shall be of a nature that it cannot be cured
within 30 days, such failure shall not constitute an Event of Default
hereunder if within such 30-day period the Transferor or such other
party shall have given notice to the Surety of corrective action it
proposes to take, which corrective action is agreed in writing by the
Surety to be satisfactory and the Transferor or such other party shall
thereafter pursue such corrective action diligently until such default
is cured;
(f) A decree or order of a court or agency or supervisory
authority having jurisdiction in the premises in an involuntary case
under any present or future federal or state bankruptcy, insolvency or
similar law or the appointment of a conservator or receiver or
liquidator or other similar official in any insolvency, readjustment of
debt, marshaling of assets and liabilities or similar proceedings, or
for the winding-up or liquidation of its affairs, shall have been
entered against the Transferor, the Seller, the Collateral Agent or the
Reserve Account Agent and such decree or order shall have remained in
force undischarged or unstayed for a period of 60 consecutive days;
(g) The Transferor, the Seller, the Collateral Agent or the
Reserve Account Agent shall consent to the appointment of a conservator
or receiver or liquidator or other similar official in any insolvency,
readjustment of debt, marshaling of assets and liabilities or similar
proceedings of or relating to the Transferor, the Seller, the Collateral
Agent or the Reserve Account Agent or of or relating to all or
substantially all of the property of any of them; or
(h) The Transferor, the Seller, the Collateral Agent or the
Reserve Account Agent shall admit in writing its inability to pay its
debts generally as they become due, file a petition to take advantage of
or otherwise voluntarily commence a case or proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar
statute, make an assignment for the benefit of its creditors or
voluntarily suspend payment of its obligations.
Section 5.02. REMEDIES; NO REMEDY EXCLUSIVE. (a) Upon the occurrence of
an Event of Default, the Surety may exercise any one or more of the rights and
remedies set forth below against the party in default:
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(i) declare all indebtedness of every type or description owed by
such party to the Surety with respect to the transactions contemplated
by the Transaction Documents to be immediately due and payable, and the
same shall thereupon be immediately due and payable;
(ii) exercise any rights and remedies under any of the
Transaction Documents in accordance with the terms of such Transaction
Document; or
(iii) take whatever action at law or in equity as may appear
necessary or desirable in its judgment to collect the amounts then due
and thereafter to become due under any of the Transaction Documents or
to enforce performance and observance of any obligation, agreement or
covenant of the Transferor, the Seller, the Collateral Agent or the
Reserve Account Agent, as the case may be, under any of the Transaction
Documents.
(b) Unless otherwise expressly provided, no remedy herein conferred upon
or reserved to the Surety 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 any of the Transaction Documents or existing at law or in
equity. No delay or omission to exercise any right or power accruing under any
of 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 Surety
to exercise any remedy reserved to the Surety in this Article, it shall not be
necessary to give any notice, other than such notice as may be required in this
Article.
Section 5.03. WAIVERS. (a) No failure by the Surety to exercise, and no
delay by the Surety in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by the Surety of any right hereunder shall not preclude
the exercise of any other right, and the remedies provided herein to the Surety
are declared in every case to be cumulative and not exclusive of any remedies
provided by law or equity.
(b) The Surety 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 Surety and
delivered to the Transferor, the Seller, the Collateral Agent, and the Reserve
Account Agent. 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.
Section 5.04. NO INSOLVENCY PROCEEDINGS. So long as this Agreement is in
effect, no party hereto will file any involuntary petition or otherwise
institute any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other proceeding under any federal or state bankruptcy or similar
law against the Transferor; provided, however, the Surety may take whatever
action it deems necessary to realize on the Receivables to the extent of any
payments under the Surety Bond.
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ARTICLE VI
MISCELLANEOUS
Section 6.01. AMENDMENTS, CHANGES AND MODIFICATIONS. This Agreement may
be amended, changed, modified, altered or terminated only by written instrument
or written instruments signed by the parties hereto. The Seller agrees to cause
the Transferor to provide prior written notification to both Moody's and
Standard & Poor's of any amendment to this Agreement.
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 telexed or telecopied to the recipient as follows:
To the Surety: MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
Attention: Insured Portfolio Management-SF
Telecopy No.: (914) 765-3810
Confirmation: (914) 765-3781
To the Seller: First Investors Financial Services
Group, Inc.
Suite 710
675 Bering Drive
Houston, TX 77057
Attention: Tommy A. Moore, Jr.
Telecopy No.: (713) 977-0657
Confirmation: (713) 977-2600
To the Collateral Agent: Texas Commerce Bank National Association
Corporate Trust Department
601 Travis Street
8th Floor
Houston, TX 77002
Attention: Global Trust Services/First
Investors Auto Receivables
Corporation
Telecopy No.: (713) 216-4880
Confirmation: (713) 216-4181
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To the Reserve
Account Agent: NationsBank, N.A.
NationsBank Corporate Center
10th Floor
100 N. Tryon Street
Charlotte, NC 28255
Attention: Michelle Heath
Telecopy No.: (704) 388-9169
Confirmation: (704) 386-7922
To the Transferor: First Investors Auto Receivables Corporation
Suite 710
675 Bering Drive
Houston, TX 77057
Attention: Tommy A. Moore, Jr.
Telecopy No.: (713) 977-0657
Confirmation: (713) 977-2600
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 delivery, except when telexed
or telecopied, in which case, effective upon telex or telecopy against receipt
of answerback or written confirmation.
An affidavit by any Person representing or acting on behalf of any party
hereto, as to such mailing, having the registry receipt attached, shall be
conclusive evidence of the mailing of such demand, notice or communication.
Section 6.03. SEVERABILITY. In the event any provision of this 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
the Surety hereunder is unavailable or unenforceable shall not affect in any way
the ability of the Surety to pursue any other remedy available to it.
Section 6.04. GOVERNING LAW. This Agreement shall be construed, and the
obligations, rights and remedies of the parties hereunder shall be determined,
in accordance with the laws of the State of New York.
Section 6.05. CONSENT TO JURISDICTION AND VENUE, ETC. The Transferor,
the Seller, the Collateral Agent and the Reserve Account Agent each irrevocably
(a) agrees that any suit, action or other legal proceeding arising out of or
relating to this Agreement, the Security Agreement or any of the other
Transaction Documents may be brought in a court of record in the State of New
York or in the Courts of the United States of America located in such state, (b)
consents to the jurisdiction of each such court in any such suit, action or
proceeding and (c) waives any objection which they may have to the laying of
venue of any such suit, action or proceeding in any of such courts and any claim
that any such suit, action or proceeding has been brought in an
26
inconvenient forum. The Transferor, the Seller and the Collateral Agent each
hereby irrevocably appoints CT Corporation System, Suite 1301, 116 John Street,
New York, New York 10038, as its agent to receive on behalf of the Transferor,
the Seller and the Collateral Agent, as the case may be, and their respective
properties service of copies of the summons and complaint and other process
which may be served in any such suit, action or proceeding (the "Process
Agent"). Such service may be made by mailing or delivering a copy of such
process to the Transferor, the Seller or the Collateral Agent, as the case may
be, in care of the Process Agent at the applicable address above, and the
Transferor, the Seller and the Collateral Agent each hereby irrevocably
authorizes and directs the Process Agent to accept such service on their behalf.
The Reserve Account Agent hereby irrevocably consents to the service of any and
all process in any such suit, action or proceeding described in clause (a) above
by the mailing of copies of such process to its New York office located at 767
Fifth Avenue, New York, NY 10153, with a copy to the Reserve Account Agent at
its address provided in Section 6.02 hereof. The Surety agrees to mail to the
Transferor, the Seller or the Collateral Agent as the case may be, at its
address provided in Section 6.02 hereof a copy of any summons, complaint or
other process mailed or delivered by it to the Process Agent. As an alternative
method of service, the Transferor, the Seller and the Collateral Agent each also
irrevocably consents to the service of any and all process in any such action or
proceeding described in clause (a) above by the mailing of copies of such
process to the Transferor, the Seller and the Collateral Agent, as the case may
be, at its address provided in Section 6.02 hereof. The Transferor, the Seller,
the Collateral Agent and the Reserve Account Agent each agrees that a final,
nonappealable judgment in any such suit, action or proceeding shall be
conclusive and may be enforced in other jurisdictions by execution on the
judgment or in any other manner provided by law. All mailings under this Section
6.05 shall be by certified mail, return receipt requested.
Nothing in this Section 6.05 shall affect the right of the Surety to
serve legal process in any other manner permitted by law or affect the right of
the Surety to bring any suit, action or proceeding against the Transferor, the
Seller, the Collateral Agent or the Reserve Account Agent or their respective
property in the courts of any other jurisdiction.
Section 6.06. CONSENT OF SURETY. In the event that the Surety's consent
is required under the terms hereof or any term of any other Transaction
Document, it is understood and agreed that the determination whether to grant or
withhold such consent shall be made solely by the Surety in its absolute
discretion. The Surety hereby agrees that it will respond to any request for
consent in a timely manner, taking into consideration the business of the
Transferor, the Seller, the Collateral Agent and the Reserve Account Agent.
Section 6.07. COUNTERPARTS. This Agreement may be executed in
counterparts by the parties hereto, and each such counterpart shall be
considered an original and all such counterparts shall constitute one and the
same instrument.
Section 6.08. RECITALS. All of the recitals hereinabove set forth are
incorporated in this Agreement by reference.
Section 6.09. HEADINGS. The headings of sections contained in this
Agreement are provided for convenience only. They form no part of this Agreement
and shall not affect its
27
construction or interpretation. All references to sections or subsections of
this Agreement refer to the corresponding sections or subsections of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, all
as of the day and year first above mentioned.
MBIA INSURANCE CORPORATION
By
FIRST INVESTORS AUTO RECEIVABLES
CORPORATION, as Transferor
By /s/ TOMMY A. MOORE JR.
Tommy A. Moore Jr.
FIRST INVESTORS FINANCIAL SERVICES,
INC., as Seller
By /s/ TOMMY A. MOORE JR.
Tommy A. Moore Jr.
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, as Collateral Agent
By
NATIONSBANK, N.A., as Reserve
Account Agent
By /s/ MICHELLE HEATH
Michelle Heath
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