INSURANCE AGREEMENT

 

Table of Contents

 

			Page
ARTICLE I
DEFINITIONS			1
ARTICLE II
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01.		Representations and Warranties of the Servicer, the Seller and the Depositor	6
Section 2.02.		Affirmative Covenants of the Servicer, the Seller and the Depositor	10
Section 2.03.		Negative Covenants of the Servicer, the Seller and the Depositor	17
Section 2.04.		Representations and Warranties of the Issuer	18
Section 2.05.		Affirmative Covenants of the Issuer	21
Section 2.06.		Negative Covenants of the Issuer	24
Section 2.07.		Representations, Warranties and Covenants of Indenture Trustee and Back-up Servicer	25
Section 2.08.		Representations, Warranties and Covenants of Owner Trustee	27
Section 2.09.		Negative Covenant of the Administrator	28
ARTICLE III
THE POLICY; REIMBURSEMENT
Section 3.01.		Issuance of the Policy	28
Section 3.02.		Payment of Fees and Insurance Premium	30
Section 3.03.		Reimbursement and Additional Payment Obligation	31
Section 3.04.		Indemnification; Limitation of Liability	32
Section 3.05.		Payment Procedure	35
ARTICLE IV
FURTHER AGREEMENTS
Section 4.01.		Effective Date; Term of the Insurance Agreement	35
Section 4.02.		Further Assurances and Corrective Instruments	36
Section 4.03.		Obligations Absolute	36
Section 4.04.		Assignments; Reinsurance; Third-Party Rights	38
Section 4.05.		Liability of the Insurer	38
Section 4.06.		Parties Will Not Institute Insolvency Proceedings	39
Section 4.07.		Indenture Trustee, Depositor, Back-up Servicer, Seller and Servicer To Join in Enforcement Action	39

 

 

Section 4.08.		Subrogation	40
ARTICLE V
DEFAULTS; REMEDIES
Section 5.01.		Defaults	40
Section 5.02.		Remedies; No Remedy Exclusive	41
Section 5.03.		Waivers	42
ARTICLE VI
MISCELLANEOUS
Section 6.01.		Amendments, Etc	42
Section 6.02.		Notices	43
Section 6.03.		Severability	44
Section 6.04.		Governing Law	45
Section 6.05.		Consent to Jurisdiction	45
Section 6.06.		Consent of the Insurer	45
Section 6.07.		Counterparts	45
Section 6.08.		Headings	45
Section 6.09.		Trial by Jury Waived	46
Section 6.10.		Limited Liability	46
Section 6.11.		Entire Agreement	46
Section 6.12.		Limitation of Liability	46
Section 6.13.		Limited Recourse	46
Section 6.14.		Subordination	47

 

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INSURANCE AGREEMENT

 

This INSURANCE AGREEMENT (this “Insurance Agreement”), dated as of January 26, 2006 by and among FIRST INVESTORS FINANCIAL SERVICES, INC. as seller (together with its permitted successors and assigns, the “Seller”) and as Administrator, FIRST INVESTORS SERVICING CORPORATION, as Servicer (together with its permitted successors and assigns, the “Servicer”), FIRST INVESTORS AUTO FUNDING CORPORATION, as Depositor (the “Depositor”), FIRST INVESTORS AUTO OWNER TRUST 2006-A, as Issuer (the “Issuer” or the “Trust”), WELLS FARGO DELAWARE TRUST COMPANY, as Owner Trustee (the “Owner Trustee”) MBIA INSURANCE CORPORATION, as Insurer (the “Insurer”), WELLS FARGO BANK, NATIONAL ASSOCIATION, as Back-up Servicer (the “Back-up Servicer”) and as Indenture Trustee (the “Indenture Trustee”).

 

WHEREAS, the Indenture dated as of January 26, 2006 (the “Indenture”) relating to the First Investors Auto Owner Trust 2006-A $32,000,000 4.5685% Class A-1 Asset-Backed Notes (the “Class A-1 Notes”), $47,000,000 4.87% Class A-2 Asset-Backed Notes (the “Class A-2 Notes”), $74,000,000 4.93% Class A-3 Asset-Backed Notes (the “Class A-3 Notes”) and $36,060,000 5.00% Class A-4 Asset-Backed Notes (the “Class A-4 Notes” and, together with the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes, the “Obligations”), between the Issuer and the Indenture Trustee, in its capacity as Indenture Trustee and Custodian, provides for, among other things, the issuance of asset backed notes and the Insurer has issued its note guaranty insurance policy (the “Policy”) that guarantees certain payments on the Obligations;

 

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

 

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

 

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

 

ARTICLE I

DEFINITIONS

 

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

 

 

of similar import, refer to this Insurance Agreement as a whole and not to any particular paragraph, clause or other subdivision hereof, unless otherwise specifically noted.

 

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

 

“Administration Agreement” means the Administration Agreement dated as of January 26, 2006, between the Administrator, the Issuer and the Indenture Trustee as the same may be amended or supplemented from time to time in accordance with the terms thereof.

 

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

 

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

 

“Business Day” means any day other than (a) a Saturday or a Sunday or (b) a day on which banking institutions or trust companies in New York, New York; Wilmington, Delaware; Houston, Texas; Minneapolis, Minnesota; or Atlanta, Georgia are authorized or obligated by law, executive order or governmental decree to remain closed.

 

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

 

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

 

“Commission” means the Securities and Exchange Commission.

 

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

 

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

 

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

 

“Documents” shall have the meaning set forth in Section 2.01(j) hereof.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Guaranty” means the Guaranty entered into as of January 26, 2006, by First Investors Financial Services, Inc., as Guarantor, the Servicer, the Back-up Servicer and  the Indenture Trustee.

 

“Indemnification Agreement” means the Indemnification Agreement dated as of January 10, 2006, among the Insurer, the Seller and the Initial Purchaser.

 

“Indenture” means the Indenture dated as of January 26, 2006 between the Issuer and the Indenture Trustee and Custodian as the same may be amended or supplemented from time to time in accordance with the terms thereof.

 

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

 

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“Initial Purchaser” means Wachovia Capital Markets, LLC.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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