Execution Copy SALE AND SERVICING AGREEMENT among LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST 2007-A Issuer LONG BEACH ACCEPTANCE RECEIVABLES CORP. Transferor LONG BEACH ACCEPTANCE CORP. Originator, Servicer and Custodian and WELLS FARGO BANK, NATIONAL ASSOCIATION Back-up Servicer and Trust Collateral Agent Dated as of March 1, 2007 TABLE OF CONTENTS

 

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ARTICLE I DEFINITIONS				1
SECTION 1.1.		Definitions		1
SECTION 1.2.		Other Definitional Provisions		1
SECTION 1.3.		Calculations		2
SECTION 1.4.		Action by or Consent of Noteholders or the Class C Certificateholder		2
SECTION 1.5.		Material Adverse Effect		3
ARTICLE II CONVEYANCE OF RECEIVABLES				3
SECTION 2.1.		Conveyance of Initial Receivables.		3
SECTION 2.2.		Conveyance of Subsequent Receivables		4
SECTION 2.3.		Transfer Intended as Sale; Precautionary Security Interest.		9
SECTION 2.4.		Assignment by Transferor		9
SECTION 2.5.		Further Encumbrance of Trust Assets		10
ARTICLE III THE RECEIVABLES				10
SECTION 3.1.		Representations and Warranties of Transferor		10
SECTION 3.2.		Repurchase upon Breach of Representations and Warranties of the Transferor		11
SECTION 3.3.		Custody of Legal Files and Receivable Files		11
SECTION 3.4.		Legal File Deficiencies		12
SECTION 3.5.		Access to Receivable Files; Servicer's Duties with Respect to Receivable Files		13
SECTION 3.6.		Issuer’s Certificate		14
ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES				14
SECTION 4.1.		Duties of the Servicer		14
SECTION 4.2.		Collection and Allocation of Receivable Payments		15
SECTION 4.3.		Realization upon Receivables		16
SECTION 4.4.		Physical Damage Insurance; Other Insurance		17
SECTION 4.5.		Maintenance of Security Interests in Financed Vehicles		18
SECTION 4.6.		Additional Covenants of Servicer		19
SECTION 4.7.		Purchase of Receivables Upon Breach		19
SECTION 4.8.		Servicing Fee		20
SECTION 4.9.		Servicer's Certificate		20
SECTION 4.10.		Annual Statement as to Compliance; Notice of Default		21
SECTION 4.11.		Annual Independent Certified Public Accountant's Report		22
SECTION 4.12.		Servicer Expenses		22
SECTION 4.13.		Retention and Termination of Servicer		23
SECTION 4.14.		Access to Certain Documentation and Information Regarding Receivables		23

 

 

SECTION 4.15.		Verification of Servicer's Certificate		23
SECTION 4.16.		Fidelity Bond		25
SECTION 4.17.		Delegation of Duties		25
SECTION 4.18.		Delivery of Back-up Tapes of Back-up Servicer		26
SECTION 4.19.		Confidential Information		26
ARTICLE V ACCOUNTS; PAYMENTS; STATEMENTS TO NOTEHOLDERS				27
SECTION 5.1.		Accounts; Lock-Box Account		27
SECTION 5.2.		Collections		29
SECTION 5.3.		Application of Collections		29
SECTION 5.4.		Intentionally Omitted.		29
SECTION 5.5.		Additional Deposits		29
SECTION 5.6.		Payments; Policy Claims		30
SECTION 5.7.		Statements to Noteholders and the Class C Certificateholder; Tax Returns		35
SECTION 5.8.		Reliance on Information from the Servicer		38
SECTION 5.9.		Optional Deposits by the Note Insurer		38
SECTION 5.10.		Spread Account		38
SECTION 5.11.		Withdrawals from Supplemental Enhancement Account and Spread Account		39
SECTION 5.12.		Supplemental Enhancement Account		39
SECTION 5.13.		Pre-Funding Account		40
SECTION 5.14.		Securities Accounts		40
ARTICLE VI THE POLICY				41
SECTION 6.1.		Policy		41
SECTION 6.2.		Claims Under Policy		41
SECTION 6.3.		Preference Claims; Direction of Proceedings		42
SECTION 6.4.		Surrender of Policy		43
ARTICLE VII THE TRANSFEROR				43
SECTION 7.1.		Representations of the Transferor		43
SECTION 7.2.		Liability of the Transferor		45
SECTION 7.3.		Merger or Consolidation of, or Assumption of the Obligations of, the Transferor		45
SECTION 7.4.		Limitation on Liability of the Transferor and Others		46
SECTION 7.5.		Transferor May Own Notes		46
ARTICLE VIII THE SERVICER				46
SECTION 8.1.		Representations of Servicer		46
SECTION 8.2.		Indemnities of Servicer		48
SECTION 8.3.		Merger or Consolidation of, or Assumption of the Obligations of, Servicer or Back-up Servicer		50
SECTION 8.4.		Limitation on Liability of Servicer and Others		51
SECTION 8.5.		Servicer and Back-up Servicer Not to Resign		52

 

 

ARTICLE IX SERVICER TERMINATION EVENTS				52
SECTION 9.1.		Servicer Termination Events		52
SECTION 9.2.		Appointment of Successor		56
SECTION 9.3.		Notification to Noteholders and the Class C Certificateholder		58
SECTION 9.4.		Action Upon Certain Failures of the Servicer		58
ARTICLE X THE TRUST COLLATERAL AGENT				58
SECTION 10.1.		Duties of the Trust Collateral Agent		58
SECTION 10.2.		Trust Collateral Agent to Act for the Class A Noteholders, the Class C Certificateholder and Note Insurer		61
SECTION 10.3.		Certain Matters Affecting the Trust Collateral Agent		61
SECTION 10.4.		Trust Collateral Agent and Back-up Servicer Not Liable for Notes or Receivables		63
SECTION 10.5.		Trust Collateral Agent and Back-up Servicer May Own Notes		64
SECTION 10.6.		Indemnity of Trust Collateral Agent and Back-up Servicer		64
SECTION 10.7.		Eligibility Requirements for Trust Collateral Agent		64
SECTION 10.8.		Resignation or Removal of Trust Collateral Agent		64
SECTION 10.9.		Successor Trust Collateral Agent		66
SECTION 10.10.		Merger or Consolidation of Trust Collateral Agent		66
SECTION 10.11.		Co-Trustee; Separate Trustee.		66
SECTION 10.12.		Representations and Warranties of Trust Collateral Agent		68
SECTION 10.13.		Rights of Note Insurer to Direct Trust Collateral Agent		68
ARTICLE XI TERMINATION				69
SECTION 11.1.		Termination		69
ARTICLE XII ADMINISTRATIVE DUTIES OF THE SERVICER				69
SECTION 12.1.		Administrative Duties		69
SECTION 12.2.		Records		71
SECTION 12.3.		Additional Information to be Furnished to the Issuer		71
SECTION 12.4.		No Additional Compensation		71
ARTICLE XIII MISCELLANEOUS PROVISIONS				71
SECTION 13.1.		Amendment		71
SECTION 13.2.		Protection of Title		73
SECTION 13.3.		Limitation on Rights of Noteholders and the Class C Certificateholder		75
SECTION 13.4.		Governing Law		76
SECTION 13.5.		Notices		76
SECTION 13.6.		Severability of Provisions		77
SECTION 13.7.		Assignment to Indenture Trustee		77
SECTION 13.8.		Limitation of Liability of Owner Trustee, Back-up Servicer and Trust Collateral Agent		77
SECTION 13.9.		Independence of the Servicer		77
SECTION 13.10.		No Joint Venture		78

 

 

SECTION 13.11.		Nonpetition Covenant		78
SECTION 13.12.		Third Party Beneficiaries		78
SECTION 13.13.		Consent to Jurisdiction.		78
SECTION 13.14.		Headings		79
SECTION 13.15.		Trial by Jury Waived		79
SECTION 13.16.		Entire Agreement		80
SECTION 13.17.		Effect of Policy Expiration Date		80

ANNEXES

 

Annex

A

Defined Terms

 

EXHIBITS

 

Exhibit		A-1		Form of Issuer's Certificate
Exhibit		A-2		Form of Issuer's Certificate
Exhibit		B-1		Form of Servicer's Certificate
Exhibit		B-2		Form of Loan Master File Layout
Exhibit		C		Intentionally Omitted
Exhibit		D		Payment Deferment and Due Date Change Policies
Exhibit		E		Documentation Checklist
Exhibit		F		Form of Transfer Agreement
SCHEDULES
Schedule		A		Schedule of Receivables
Schedule		B		Location of Receivable Files; Location of Legal Files
Schedule		C		Delivery Requirements

 

 

SALE AND SERVICING AGREEMENT ("Agreement"), dated as of March 1, 2007, among LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST 2007-A, a Delaware statutory trust, as issuer (the "Issuer"), LONG BEACH ACCEPTANCE RECEIVABLES CORP., a Delaware corporation, as transferor (the "Transferor"), LONG BEACH ACCEPTANCE CORP., a Delaware corporation, as originator of the receivables ("LBAC"), as servicer (in such capacity, the "Servicer") and as custodian (in such capacity, the "Custodian") and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as back-up servicer and trust collateral agent, (the "Back-up Servicer" and the "Trust Collateral Agent", respectively).

 

WHEREAS the Issuer desires to acquire a portfolio of receivables arising in connection with motor vehicle retail installment sale contracts acquired by LBAC through motor vehicle dealers;

 

WHEREAS the Transferor has purchased such receivables from LBAC and Long Beach Acceptance Receivables Corp. Warehouse I (collectively, the "Sellers") and is willing to convey such receivables to the Issuer;

 

WHEREAS the Issuer desires to acquire, from time to time, additional receivables arising in connection with motor vehicle retail installment sale contracts to be acquired by LBAC;

 

WHEREAS the Transferor has agreed to purchase, from time to time, such additional receivables from the Sellers and is willing to convey such receivables to the Issuer; and

 

WHEREAS the Servicer is willing to service all such receivables.

 

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

 

ARTICLE I

DEFINITIONS

 

SECTION 1.1.   Definitions. Whenever used in this Agreement, capitalized terms used and not otherwise defined herein shall have the meanings set forth in Annex A attached hereto.

 

SECTION 1.2.   Other Definitional Provisions.

 

(a)  All terms defined in this Agreement (including Annex A hereto) shall have the defined meanings when used in any instrument governed hereby and in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

 

(b)  As used in this Agreement, in any instrument governed hereby and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement (including Annex A hereto) or in any such instrument, certificate or other document, and accounting terms partly defined in this Agreement (including Annex A hereto) or in any such instrument, certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles as in effect on the date of this Agreement or any such instrument, certificate or other document, as applicable. To the extent that the definitions of accounting terms in this Agreement (including Annex A hereto) or in any such instrument, certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement (including Annex A hereto) or in any such instrument, certificate or other document shall control.

 

 

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

 

(d)  With respect to all terms in this Agreement, the singular includes the plural and the plural the singular; words importing any gender include the other genders; references to "writing" include printing, typing, lithography, and other means of reproducing words in a visible form; references to agreements and other contractual instruments include all subsequent amendments thereto or changes therein entered into in accordance with their respective terms and not prohibited by this Agreement; references to Persons include their permitted successors and assigns; and the term "including" means "including without limitation."

 

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

 

SECTION 1.3.   Calculations. All calculations of the amount of the Servicing Fee, the Back-up Servicer Fee, Custodian Fee and the Indenture Trustee Fee shall be made on the basis of a 360-day year consisting of twelve 30-day months. All references to the Principal Balance of a Receivable as of the last day of a Collection Period shall refer to the close of business on such day.

 

SECTION 1.4.   Action by or Consent of Noteholders or the Class C Certificateholder. Whenever any provision of this Agreement refers to action to be taken, or consented to, by Noteholders or the Class C Certificateholder, such provision shall be deemed to refer to Noteholders or the Class C Certificateholder of record as of the Record Date immediately preceding the date on which such action is to be taken, or consent given, by Noteholders or the Class C Certificateholder. Solely for the purposes of any action to be taken or consented to by Noteholders or the Class C Certificateholder, any Note registered in the name of the Transferor, LBAC, the Servicer or any Affiliate thereof shall be deemed not to be outstanding and shall not be taken into account in determining whether the requisite interest necessary to effect any such action or consent has been obtained; provided, however, that, solely for the purpose of determining whether the Indenture Trustee or the Trust Collateral Agent is entitled to rely upon any such action or consent, only Notes which the Indenture Trustee or the Trust Collateral Agent actually knows to be so owned shall be so disregarded.

 

 

SECTION 1.5.   Material Adverse Effect. Whenever a determination is to be made under this Agreement as to whether a given event, action, course of conduct or set of facts or circumstances could or would have a material adverse effect on the Issuer or Noteholders (or any similar or analogous determination), such determination shall be made without taking into account the insurance provided by the Policy. Whenever a determination is to be made under this Agreement whether a breach of a representation, warranty or covenant has or could have a material adverse effect on a Receivable or the interest therein of the Issuer, the Noteholders or the Note Insurer (or any similar or analogous determination), such determination shall be made by the Controlling Party in its sole discretion.

 

ARTICLE II

CONVEYANCE OF RECEIVABLES

 

SECTION 2.1.   Conveyance of Initial Receivables.

 

In consideration of the Issuer's delivery of the Class R Certificate to or upon the order of the Transferor on the Closing Date and the net proceeds from the sale of the Notes and the other amounts to be distributed from time to time to, or upon the order of, the Transferor in accordance with the terms of this Agreement, the Transferor does hereby transfer, assign, set over and otherwise convey to the Issuer, without recourse, all right, title and interest of the Transferor in, to and under:

 

(i) the Initial Receivables listed in Schedule A hereto, all monies received on the Initial Receivables after the Initial Cutoff Date and, with respect to any Initial Receivables which are Precomputed Receivables, the related Payahead Amount, and all Liquidation Proceeds and Recoveries received with respect to such Initial Receivables;

 

(ii) the security interests in the related Financed Vehicles granted by the related Obligors pursuant to the Initial Receivables and any other interest of the Transferor in such Financed Vehicles, including the certificates of title and any other evidence of ownership with respect to such Financed Vehicles;

 

(iii) any proceeds from claims on any physical damage, credit life and credit accident and health insurance policies or certificates or the VSI Policy, if any, relating to the related Financed Vehicles or the related Obligors, including any rebates and premiums;

 

(iv) property (including the right to receive future Liquidation Proceeds) that secures an Initial Receivable and that has been acquired by or on behalf of the Transferor pursuant to the liquidation of such Initial Receivable;

 

(v) the Purchase Agreement including a direct right to cause LBAC to purchase Initial Receivables from the Issuer upon the occurrence of a breach of any of the representations and warranties contained in Section 3.03(b) of the Purchase Agreement or the failure of LBAC to timely comply with its obligations pursuant to Section 5.05 of the Purchase Agreement;

 

 

(vi) refunds for the costs of extended service contracts with respect to the related Financed Vehicles, refunds of unearned premiums with respect to credit life and credit accident and health insurance policies or certificates covering a related Obligor or Financed Vehicle or his or her obligations with respect to such Financed Vehicle and any recourse to Dealers for any of the foregoing;

 

(vii) the Legal Files and the Receivable Files related to each Initial Receivable and any and all other documents that LBAC keeps on file in accordance with its customary procedures relating to the Initial Receivables, the related Obligors or the related Financed Vehicles;

 

(viii) all amounts and property from time to time held in or credited to the Lock-Box Account, to the extent such amounts and property relate to the Initial Receivables;

 

(ix) any proceeds from recourse against Dealers (other than any Chargeback Obligations), including any Dealer Title Guaranties with respect to the Initial Receivables, with respect to the sale of the Initial Receivables; and

 

(x) the proceeds of any and all of the foregoing.

 

SECTION 2.2.   Conveyance of Subsequent Receivables.

 

(a)  Subject to the conditions set forth in Section 2.2(b) hereof and in the related Transfer Agreement, in consideration of the Issuer's delivery to or upon the order of the Transferor of the purchase price for the Subsequent Receivables, in each case as described below and set forth in the related Transfer Agreement, the Transferor shall on each Subsequent Transfer Date sell, transfer, assign, set over and otherwise convey to the Issuer, without recourse, all right, title and interest of the Transferor in, to and under:

 

(i) the Subsequent Receivables listed in Schedule A to the related Transfer Agreement, all monies received on such Subsequent Receivables after the related Subsequent Cutoff Date and, with respect to any such Subsequent Receivables which are Precomputed Receivables, the related Payahead Amount, and all Liquidation Proceeds and Recoveries received with respect to such Subsequent Receivables;

 

(ii) the security interests in the related Financed Vehicles granted by the related Obligors pursuant to such Subsequent Receivables and any other interest of the Transferor in such Financed Vehicles, including the certificates of title and any other evidence of ownership with respect to such Financed Vehicles;

 

(iii) any proceeds from claims on any physical damage, credit life and credit accident and health insurance policies or certificates or the VSI Policy, if any, relating to the related Financed Vehicles or the related Obligors, including any rebates and premiums;

 

 

(iv) property (including the right to receive future Liquidation Proceeds) that secures a Subsequent Receivable and that has been acquired by or on behalf of the Transferor pursuant to the liquidation of such Subsequent Receivable;

 

(v) each Transfer Agreement and the Purchase Agreement, including a direct right to cause LBAC to purchase Subsequent Receivables from the Issuer upon the occurrence of a breach of any of the representations and warranties contained in Section 4 of the related Transfer Agreement, or the failure of LBAC to timely comply with its obligations pursuant to Section 5.05 of the Purchase Agreement;

 

(vi) refunds for the costs of extended service contracts with respect to the related Financed Vehicles, refunds of unearned premiums with respect to credit life and credit accident and health insurance policies or certificates covering a related Obligor or the related Financed Vehicle or his or her obligations with respect to a related Financed Vehicle and any recourse to Dealers for any of the foregoing;

 

(vii) the Legal Files and the Receivable Files related to each such Subsequent Receivable and any and all other documents that LBAC keeps on file in accordance with its customary procedures relating to such Subsequent Receivables, the related Obligors or the related Financed Vehicles;

 

(viii) all amounts and property from time to time held in or credited to the Lock-Box Account, to the extent such amounts and property relate to such Subsequent Receivables;

 

(ix) any proceeds from recourse against Dealers (other than any Chargeback Obligations), including any Dealer Title Guaranties with respect to such Subsequent Receivables, with respect to the sale of such Subsequent Receivables; and

 

(x) the proceeds of any and all of the foregoing.

 

The purchase price to be paid by the Issuer on each Subsequent Transfer Date for the Subsequent Receivables so sold shall be set forth in the related Transfer Agreement and shall be paid from monies released from the Pre-Funding Account pursuant to Section 5.13(b). Such purchase price shall equal the aggregate Principal Balance of such Subsequent Receivables as of the related Subsequent Cutoff Date.

 

(b)  The Transferor shall transfer to the Issuer the Subsequent Receivables and the other property and rights related thereto described in Section 2.2(a) only upon the prior written consent of the Note Insurer acting in its sole and absolute discretion and the satisfaction of each of the following conditions on or prior to the related Subsequent Transfer Date:

 

(i) the Transferor shall have provided the Indenture Trustee, the Trust Collateral Agent, the Note Insurer, the Class C Certificateholder and each Rating Agency with an Addition Notice not later than five Business Days prior to the related Subsequent Transfer Date and shall also have provided the Indenture Trustee, the Trust Collateral Agent and the Note Insurer with an electronic transmission of the information on the related Subsequent Receivables set forth in such Addition Notice in a format acceptable to each of the Indenture Trustee, the Trust Collateral Agent and the Note Insurer no later than such fifth Business Day prior to the related Subsequent Transfer Date;

 

 

(ii) LBAC and LBARC-WI shall have each delivered to the Transferor, a written Subsequent Assignment, which shall include a list of the Subsequent Receivables so transferred attached thereto as Schedule A, and a copy thereof to the Note Insurer;

 

(iii) the Transferor, the Sellers, the Trust and the Trust Collateral Agent shall have executed a written Transfer Agreement, which shall include a list of the Subsequent Receivables so transferred attached thereto as Schedule A, and a copy thereof shall have been delivered to the Note Insurer;

 

(iv) the Transferor shall have caused the Servicer to deposit in the Collection Account all collections on or in respect of the Subsequent Receivables (to the extent conveyed to the Trust as specified in Section 2.2(a)) received prior to the related Subsequent Transfer Date;

 

(v) the Transferor shall have deposited or caused to be deposited the related Subsequent Spread Account Deposit into the Spread Account pursuant to Section 5.10;

 

(vi) as of each Subsequent Transfer Date, none of the Sellers, the Servicer and the Transferor will be insolvent nor will either of them be made insolvent by the related transfer nor shall any of them be aware of any pending insolvency;

 

(vii) the Funding Period shall not have terminated;

 

(viii) the Transferor shall have delivered to the Indenture Trustee, the Trust Collateral Agent, the Note Insurer, the Class C Certificateholder and each Rating Agency an Officer's Certificate confirming the satisfaction of each condition precedent specified in this Section 2.2(b) and in Section 5 of the related Transfer Agreement and certifying that:

 

(A)  such conveyance of Subsequent Receivables by the Transferor to the Trust on the related Subsequent Transfer Date was made in good faith for legitimate business purposes and was not made with intent to hinder, delay or defraud any Person to which the Transferor has been, is or will become, on or after the related Subsequent Transfer Date, indebted;

 

(B)  the Transferor did not receive less than a reasonably equivalent value in exchange for the conveyance of the Subsequent Receivables by the Transferor to the Issuer on the related Subsequent Transfer Date pursuant to the related Transfer Agreement;

 

(C)  the Transferor is not insolvent on the related Subsequent Transfer Date and will not become insolvent as a result of the conveyance of the Subsequent Receivables by the Transferor to the Issuer on the related Subsequent Transfer Date pursuant to the related Transfer Agreement;

 

 

(D)  the Transferor is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which any property remaining with the Transferor after such business or transaction would be an unreasonably small amount of capital; and

 

(E)  the Transferor has not incurred, and does not believe that it will incur, debts that would be beyond the Transferor's ability to pay as such debts mature;

 

(ix) each Seller shall have delivered to the Indenture Trustee, the Trust Collateral Agent, the Note Insurer, the Class C Certificateholder and each Rating Agency an Officer's Certificate confirming the satisfaction of each condition precedent specified in this Section 2.2(b) and in Section 5 of the related Transfer Agreement and certifying that:

 

(A)  such sale of Subsequent Receivables by such Seller to the Transferor on the related Subsequent Transfer Date was made in good faith for legitimate business purposes and was not made with intent to hinder, delay or defraud any Person to which such Seller has been, is or will become, on or after the related Subsequent Transfer Date, indebted;

 

(B)  such Seller did not receive less than a reasonably equivalent value in exchange for the sale of the Subsequent Receivables by such Seller to the Transferor on the related Subsequent Transfer Date pursuant to the Purchase Agreement and the related Subsequent Assignment;

 

(C)  such Seller is not insolvent on the related Subsequent Transfer Date and will not become insolvent as a result of the sale of the Subsequent Receivables by such Seller to the Transferor on the related Subsequent Transfer Date pursuant to the Purchase Agreement and the related Subsequent Assignment;

 

(D)  such Seller is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which any property remaining with such Seller after such business or transaction would be an unreasonably small amount of capital; and

 

(E)  such Seller has not incurred, and does not believe that it will incur, debts that would be beyond such Seller's ability to pay as such debts mature;

 

(x) the Transferor shall have delivered to each Rating Agency, the Note Insurer, the Indenture Trustee and the Trust Collateral Agent Opinions of Counsel with respect to the transfer of the Subsequent Receivables substantially in the form of the Opinions of Counsel delivered to each Rating Agency, the Note Insurer, the Indenture Trustee and the Trust Collateral Agent on the Closing Date regarding true sale, non-consolidation, perfection, and other such matters satisfactory in form and substance to each of the Note Insurer, the Indenture Trustee and the Trust Collateral Agent in its sole discretion;

 

 

(xi) the Transferor shall have taken all action required to maintain the first priority perfected security interest (as defined in the UCC) of the Issuer in the Trust Assets;

 

(xii) no selection procedures believed by the Transferor or either Seller to be adverse to the interests of the Noteholders or the Note Insurer shall have been utilized in selecting the Subsequent Receivables;

 

(xiii) the conveyance of the Subsequent Receivables shall not result in a qualification, modification or withdrawal of the then-current ratings of the Notes; provided that written confirmation of such ratings shall not be required from the Rating Agencies;

 

(xiv) the Transferor shall have provided the Indenture Trustee and the Trust Collateral Agent with a supplement to the Schedule of Receivables setting forth the Subsequent Receivables to be transferred on such Subsequent Transfer Date;

 

(xv) the Transferor shall have caused a firm of independent accountants to deliver to the Indenture Trustee, the Trust Collateral Agent and the Note Insurer written confirmation that the Receivables, including the related Subsequent Receivables, meet the following criteria, as of the related Subsequent Cut-off Date:

 

(1)  the weighted average remaining term of the Receivables will be no more than 67 months and the weighted average original term for the Receivables will be no more than 69 months;

 

(2)  each Receivable will have a minimum APR of 3.0%;

 

(3)  each Receivable will have an original term of no more than 72 months;

 

(4)  no more than 44%, 13% or 13% of the Receivables will be originated in California, Arizona or Florida, respectively;

 

(5)  the weighted average APR for the Receivables will be greater than or equal to 12.23%;

 

(6)  not less than 15.10% of the aggregate Principal Balance of the Receivables will be Premium Receivables, not less than 19.74% of the aggregate Principal Balance of the Receivables will be Elite Receivables, not less than 17.86% of the aggregate Principal Balance of the Receivables will be Superior Receivables, not less than 18.90% of the aggregate Principal Balance of the Receivables will be Preferred Receivables and not more than 19.86% of the aggregate Principal Balance of the Receivables will be Classic Receivables; and

 

(7)  not more than 63% of the aggregate Principal Balance of the Receivables will represent loans to finance the purchase of used Financed Vehicles;

 

 

(xvi) the Transferor shall satisfy the document delivery requirements for such Subsequent Receivables as specified in Section 3.3;

 

(xvii) the representations and warranties made by the Transferor and the Servicer in Sections 7.1 and 8.1, respectively, shall be true and correct on and as of such Subsequent Transfer Date and the representations and warranties made by the Originator with respect to each such Subsequent Receivable being transferred to the Trust on such Subsequent Transfer Date in Section 4 of the related Transfer Agreement shall be true and correct as of such Subsequent Transfer Date;

 

(xviii) on or before such Subsequent Transfer Date, the Transferor shall have provided any information reasonably requested by the Rating Agencies, the Note Insurer, the Indenture Trustee or the Trust Collateral Agent with respect to any Subsequent Receivables;

 

(xix) the Custodian shall confirm that it is in possession of a Legal File for each Subsequent Receivable identified in the supplement to the Schedule of Receivables attached as Schedule A to the related Transfer Agreement; and

 

(xx) the Servicer shall deliver the loan master file and history information and the information required to be set forth in the form attached hereto as Exhibit B-2 as specified in Section 4.18.

 

SECTION 2.3.   Transfer Intended as Sale; Precautionary Security Interest. Each conveyance to the Issuer of the property set forth in Section 2.1 and Section 2.2 above is intended as a sale (for certain non-tax purposes) free and clear of all Liens, and it is intended that the property of the Issuer shall not be part of the Transferor's estate in the event of the filing of a bankruptcy petition by or against the Transferor under any bankruptcy law. In the event, however, that notwithstanding the intent of LBAC, the Transferor and the Issuer, any transfer under this Agreement and/or under any Transfer Agreement is held not to be a sale, this Agreement and/or under any Transfer Agreement shall constitute a security agreement under the UCC (as defined in the UCC as in effect in the State of New York) and applicable law, and the Transferor hereby grants a security interest to the Issuer in, to and under the property described in Section 2.1 and Section 2.2 above and all proceeds thereof, for the benefit of the Noteholders and the Note Insurer as their interests may appear herein, for the purpose of securing the payment and performance of the Notes and the Certificates and the repayment of amounts owed to the Issuer from the Transferor. The Transferor hereby authorizes the Issuer or its agents to file such financing statements and continuation statements as the Issuer may deem advisable in connection with the security interest granted by the Transferor pursuant to the preceding sentence.

 

SECTION 2.4.   Assignment by Transferor. The Transferor does hereby transfer, assign and otherwise convey unto the Issuer, for the benefit of the Noteholders, the Certificateholders and the Note Insurer, its right to any recourse to LBAC resulting from the occurrence of a breach of any of their respective representations and warranties contained in Section 3.03 of the Purchase Agreement and Section 4 of each Transfer Agreement or from the failure of LBAC to comply with its obligations pursuant to Section 5.05 of the Purchase Agreement. The provisions of this Section 2.4 are intended to grant the Issuer a direct right against LBAC to demand performance under the terms of the Purchase Agreement.

 

 

SECTION 2.5.   Further Encumbrance of Trust Assets.

 

(a)  Immediately upon the conveyance to the Issuer by the Transferor of any item of the Trust Assets pursuant to Section 2.1 or Section 2.2, all right, title and interest of the Transferor in and to such item of Trust Assets shall terminate, and all such right, title and interest shall vest in the Issuer, in accordance with the Trust Agreement and Sections 3802 and 3805 of the Statutory Trust Act (as defined in the Trust Agreement).

 

(b)  Immediately upon the vesting of the Trust Assets in the Issuer, the Issuer shall have the sole right to pledge or otherwise encumber, such Trust Assets. Pursuant to the Indenture, the Issuer shall grant a security interest in the Trust Assets to the Indenture Trustee to secure its obligations under the Notes and the Class C Certificate and the payment of all amounts due and owing to the Note Insurer. The Class R Certificate shall represent the beneficial ownership interest in the Trust Assets, and the Noteholders and the Class C Certificateholder shall be entitled to receive payments with respect thereto as set forth herein and pursuant to the Indenture.

 

(c)  Following the payment in full of the Notes and all amounts due and owing to the Note Insurer and the release and discharge of the Indenture, all covenants of the Issuer under Article III of the Indenture shall, until payment in full of each Certificate, remain as covenants of the Issuer for the benefit of the Certificateholders, enforceable by each Certificateholder to the same extent as such covenants were enforceable by the Noteholders prior to the discharge of the Indenture. Any rights of the Indenture Trustee under Article III of the Indenture, following the discharge of the Indenture, shall vest in the Certificateholders.

 

(d)  The Trust Collateral Agent shall, at such time as there are no Notes or Certificates outstanding, the Policy has expired in accordance with its terms and all sums due to (i) the Note Insurer hereunder or pursuant to the Insurance Agreement, (ii) the Indenture Trustee pursuant to the Indenture, (iii) the Trust Collateral Agent pursuant to this Agreement and (iv) the Class C Certificateholder pursuant to the Trust Agreement, have been paid, release any remaining portion of the Trust Assets to the Transferor.

 

ARTICLE III

THE RECEIVABLES

 

SECTION 3.1.   Representations and Warranties of Transferor. The Transferor hereby makes each of the representations and warranties made by LBAC in Section 3.03(b) of the Purchase Agreement and Section 4 of each Transfer Agreement with respect to the Receivables to the same extent as if such representations and warranties were fully set forth herein. With respect to such representations and warranties, the Issuer shall be deemed to have relied on such representations and warranties in acquiring the Receivables, the Note Insurer is deemed to have relied on such representations and warranties in issuing the Policy, the Indenture Trustee is deemed to have relied on such representations and warranties in issuing the Notes, the Noteholders are deemed to have relied on such representations and warranties in purchasing the Notes, the Class C Certificateholder is deemed to have relied on such representations and warranties in purchasing the Class C Certificate and the Owner Trustee is deemed to have relied on such representations and warranties in entering into the Trust Agreement. Such representations and warranties speak as of the execution and delivery of this Agreement and as of the Closing Date in the case of the Initial Receivables, and as of the related Subsequent Transfer Date in the case of the Subsequent Receivables, but shall survive the transfer and assignment of the Receivables to the Issuer and the subsequent pledge thereof to the Indenture Trustee pursuant to the Indenture.

 

 

SECTION 3.2.   Repurchase upon Breach of Representations and Warranties of the Transferor.

 

(a)  The Transferor, the Servicer, the Custodian, the Trust Collateral Agent or the Issuer, as the case may be, shall inform the other parties to this Agreement and the Note Insurer promptly, by notice in writing, upon the discovery of any breach of the Transferor's representations and warranties made pursuant to Section 3.1. As of the last day of the second Collection Period following the discovery by the Transferor or receipt by the Transferor of notice of such breach, unless such breach is cured by such date, the Transferor shall have an obligation to repurchase any Receivable in which the interests of the Noteholders, the Class C Certificateholder or the Note Insurer are materially and adversely affected by any such breach as of such date. In consideration of and simultaneously with the repurchase of the Receivable, the Transferor shall remit, or cause LBAC to remit, to the Collection Account the Purchase Amount in the manner specified in Section 5.5 and the Issuer shall execute such assignments and other documents reasonably requested by such person in order to effect such repurchase. The sole remedies of the Issuer, the Trust Collateral Agent, the Indenture Trustee, the Class C Certificateholder or the Noteholders with respect to a breach of representations and warranties pursuant to Section 3.1 shall be (i) the repurchase of Receivables pursuant to this Section, subject to the conditions contained herein, or (ii) to enforce the obligation of LBAC to the Transferor to repurchase such Receivables or to indemnify for any such breach pursuant to the Purchase Agreement. Neither the Owner Trustee, the Custodian, the Trust Collateral Agent nor the Indenture Trustee shall have a duty to conduct any affirmative investigation as to the occurrence of any conditions requiring the repurchase of any Receivable pursuant to this Section.

 

(b)  Pursuant to Section 2.1 and Section 2.2, the Transferor conveys to the Issuer all of the Transferor's right, title and interest in its rights and benefits, but none of its obligations or burdens, under the Purchase Agreement including the Transferor's rights under the Purchase Agreement and the delivery requirements, representations and warranties and the cure or repurchase and indemnity obligations of LBAC thereunder. The Transferor hereby represents and warrants to the Issuer that such assignment is valid, enforceable and effective to permit the Issuer to enforce such obligations of LBAC and the Transferor under the Purchase Agreement.

 

SECTION 3.3.   Custody of Legal Files and Receivable Files.  In connection with the sale, transfer and assignment of the Receivables and the other Transferred Assets to the Trust pursuant to Section 2.1 and Section 2.2 of this Agreement and simultaneously with the execution and delivery of this Agreement, the Custodian shall enter into the Custodial Agreement with the Indenture Trustee, the Note Insurer and the Issuer, dated as of March 1, 2007, pursuant to which the Custodian shall agree to act as custodian for the Indenture Trustee, on behalf of the Noteholders, the Class C Certificateholder and the Note Insurer, of the following documents or instruments in its possession on or before the Closing Date (with respect to each Initial Receivable) or the third Business Day immediately preceding the related Subsequent Transfer Date (with respect to each Subsequent Receivable), as applicable:

 

 

(i) a copy of the fully executed original of the Receivable; and

 

(ii) a copy of the Lien Certificate or Title Package, as applicable.

 

provided, however that the Receivable Files shall contain a copy of those documents the original of which constitutes a part of the Legal File.

 

SECTION 3.4.   Legal File Deficiencies. The Custodian shall hold the Legal Files subject to the terms and conditions of the Custodial Agreement. If the Custodian finds during its review of the Legal Files required by the Custodial Agreement or at any time thereafter that a Legal File for a Receivable has not been received or that any of the documents referred to in the definition of the term "Legal File" are not contained in a Legal File or, if applicable, the related Dealer is not listed on the Dealer Title Addendum, the Custodian shall promptly inform the Trust Collateral Agent, LBAC, the Transferor, the Back-up Servicer and the Note Insurer promptly, in writing, of the failure to receive a Legal File with respect to such Receivable (or of the failure of any of the aforementioned documents to be included in the Legal File or the failure of the related Dealer to be so listed) (it being understood that the Custodian's obligation to review the contents of any Legal File and the Dealer Title Addendum shall be limited as set forth in the Custodial Agreement). Unless any such defect with respect to such Receivable shall have been cured by the last day of the second Collection Period following discovery thereof by the Custodian, LBAC shall repurchase any such Receivable as of such last day. In consideration of the purchase of the Receivable, LBAC shall remit the Purchase Amount, in the manner specified in Section 5.5. The sole remedy of the Indenture Trustee, the Trust Collateral Agent, the Issuer or the Noteholders with respect to a breach pursuant to this Section 3.4 shall be to require LBAC to purchase the Receivables pursuant to this Section 3.4. Upon receipt of the Purchase Amount and written instructions from the Servicer, the Trust Collateral Agent shall cause the Custodian to release to LBAC or its designee the related Legal File and shall execute and deliver all reasonable instruments of transfer or assignment, without recourse, as are prepared by LBAC and delivered to the Trust Collateral Agent and are necessary to vest in LBAC or such designee the Issuer's right, title and interest in the Receivable. On the date which is 90 days following the Closing Date (with respect to the Initial Receivables) or the related Subsequent Transfer Date (with respect to the Subsequent Receivables), as applicable, or, if such date is not a Business Day, on the next succeeding Business Day, the Custodian shall inform LBAC and the other parties to this Agreement and the Note Insurer of any Receivable for which the related Legal File on such date does not include a Lien Certificate, and LBAC shall repurchase any such Receivable as of the last day of the Collection Period in which the date, which is 150 days following the Closing Date (with respect to the Initial Receivables) or the related Subsequent Transfer Date (with respect to the Subsequent Receivables), as applicable, occurs, if the related Legal File does not include a Lien Certificate as of the close of business on such 150th day. In consideration of the purchase of such Receivable, LBAC shall remit the Purchase Amount in the manner specified in Section 5.5. The Transferor shall have no obligation to repurchase any Receivable upon a breach pursuant to this Section 3.4. The Transferor shall have no liability for any action taken or omitted to be taken by LBAC pursuant to this Section 3.4.

 

 

SECTION 3.5.   Access to Receivable Files; Servicer's Duties with Respect to Receivable Files.

 

(a)  The Servicer shall, upon reasonable notice, permit the Originator, the Trust Collateral Agent, the Transferor, the Issuer and the Note Insurer access to the Receivable Files at all reasonable times, upon reasonable notice and during the Servicer's normal business hours. In addition, the Servicer shall provide such access to any Noteholder or the Class C Certificateholder upon reasonable notice at all reasonable times during the Servicer's normal business hours in cases where the Noteholders or the Class C Certificateholder shall be required by applicable statutes or regulations to review such documentation; provided, however, that the Servicer shall be entitled to rely upon an Opinion of Counsel as to such fact. In each case, such access shall be afforded without charge but only upon reasonable request. Each Noteholder shall be deemed to have agreed by its acceptance of a Note to hold in confidence all Confidential Information in accordance with the Federal Financial Privacy Law and, to the extent more exacting, its then customary procedures; provided that nothing herein shall prevent any Noteholder from delivering copies of any financial statements and other documents whether or not constituting Confidential Information, and disclosing other information, whether or not Confidential Information, to (i) its directors, officers, employees, agents and professional consultants, (ii) any other institutional investor that holds Notes, (iii) any prospective institutional investor transferee in connection with the contemplated transfer of a Note or any part thereof or participation therein who is subject to confidentiality arrangements at least substantially similar hereto, (iv) any governmental authority, (v) the National Association of Insurance Commissioners or any similar organization, (vi) any nationally recognized rating agency in connection with the rating of the Notes by such agency or (vii) any other Person to which such delivery or disclosure may be necessary or appropriate (a) in compliance with any applicable law, rule, regulation or order, (b) in response to any subpoena or other legal process, (c) in connection with any litigation to which such Noteholder is a party, (d) in order to enforce such Person's investment in any Note or (e) otherwise, in accordance with the Federal Financial Privacy Law; provided, that, prior to any such disclosure, such Noteholder shall inform each such party that receives Confidential Information of the foregoing requirements and shall use its commercially reasonable best efforts to cause such party to comply with such requirements.

 

(b)  Upon instruction from the Trust Collateral Agent, the Servicer shall release any Receivable Files to the Trust Collateral Agent, the Trust Collateral Agent's agent or the Trust Collateral Agent's designee, as the case may be, at such place or places as the Trust Collateral Agent may designate, as soon as practicable; provided, however, that such Receivable Files may be, at the discretion of the Servicer, in the form of electronic files or reproduced copies of such electronic files. The Servicer shall not be responsible for the safekeeping of such Receivable Files following such release to the Trust Collateral Agent unless and until such Receivable Files are returned to the Servicer.

 

 

SECTION 3.6.   Issuer’s Certificate.

 

Within five Business Days after each Payment Date on which Receivables shall be assigned to LBAC or the Servicer, as applicable, pursuant to this Agreement, based on amounts deposited to the Collection Account, notices received pursuant to this Agreement and the information contained in the Servicer's Certificate for the related Collection Period, identifying the Receivables purchased by LBAC pursuant to Section 3.4 or purchased by the Servicer pursuant to Section 4.7, the Issuer shall execute an Issuer's Certificate (in the form of Exhibit A-1 or A-2, as applicable), and shall deliver such Issuer's Certificate, accompanied by a copy of the Servicer's Certificate for such Collection Period, to LBAC or the Servicer, as the case may be, with a copy to the Note Insurer and the Class C Certificateholder. The Issuer's Certificate submitted with respect to such Payment Date shall operate, as of such Payment Date, as an assignment, without recourse, representation or warranty, to LBAC or the Servicer, as the case may be, of all the Issuer's right, title, and interest in and to such repurchased Receivable, and all security and documents relating thereto, such assignment being an assignment outright and not for security.

 

ARTICLE IV

ADMINISTRATION AND SERVICING OF RECEIVABLES

 

SECTION 4.1.   Duties of the Servicer. The Servicer, as agent for the Issuer (to the extent provided herein), and in such capacity, shall manage, service, administer and make collections on the Receivables with reasonable care, using that degree of skill and attention customary and usual for institutions which service motor vehicle retail installment contracts similar to the Receivables and, to the extent more exacting, that the Servicer exercises with respect to all comparable automotive receivables that it services for itself or others. The Servicer's duties shall include collection and posting of all payments, responding to inquiries of Obligors on such Receivables, investigating delinquencies, sending payment statements to Obligors, reporting tax information to Obligors, accounting for collections, furnishing monthly and annual statements to the Trust Collateral Agent, the Indenture Trustee, the Back-up Servicer and the Note Insurer with respect to payments and complying with the terms of the Lock-Box Agreement. The Servicer shall also administer and enforce all rights and responsibilities of the holders of the Receivables provided for in the Dealer Agreements to the extent that such Dealer Agreements relate to the Receivables, the Financed Vehicles or the Obligors. Without limiting the generality of the foregoing, and subject to the servicing standards set forth in this Agreement, the Servicer is authorized and empowered by the Trust Collateral Agent to execute and deliver, on behalf of itself, the Issuer, the Noteholders, the Class C Certificateholder or any of them, any and all instruments of satisfaction or cancellation, or partial or full release or discharge, and all other comparable instruments, with respect to such Receivables or to the Financed Vehicles securing such Receivables and/or the certificates of title or other evidence of ownership with respect to such Financed Vehicles; provided, however, that notwithstanding the foregoing, the Servicer shall not release an Obligor from payment of any unpaid amount under any Receivable or waive the right to collect the unpaid balance of any Receivable from the Obligor, except (i) pursuant to an order from a court of competent jurisdiction, (ii) in accordance with its customary procedures or (iii) in accordance with Section 4.2. If the Servicer shall commence a legal proceeding to enforce a Receivable, the Issuer shall thereupon be deemed to have automatically assigned, solely for the purpose of collection, such Receivable to the Servicer. If in any enforcement suit or legal proceeding it shall be held that the Servicer may not enforce a Receivable on the ground that it shall not be a real party in interest or a holder entitled to enforce such Receivable, the Trust Collateral Agent shall, at the Servicer's expense and written direction, take steps to enforce such Receivable, including bringing suit in its name or the name of the Noteholders or the Class C Certificateholder. The Servicer shall prepare and furnish and the Trust Collateral Agent shall execute, any powers of attorney and other documents reasonably necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder.

 

 

SECTION 4.2.   Collection and Allocation of Receivable Payments. Consistent with the standards, policies and procedures required by this Agreement, the Servicer shall make reasonable efforts to collect all payments called for under the terms and provisions of the Receivables as and when the same shall become due and shall follow such collection procedures as it follows with respect to all comparable automotive receivables that it services for itself or others; provided, however, that the Servicer shall notify each Obligor prior to the Closing Date, in the case of the Initial Receivables, and prior to the related Subsequent Transfer Date, in the case of the Subsequent Receivables, to make all payments with respect to the Receivables to the Lock-Box and shall make reasonable efforts to cause Obligors to make all such payments to such Lock-Box. The Servicer will provide each Obligor with a monthly statement in order to notify such Obligors to make payments directly to the Lock-Box. The Servicer shall allocate collections between principal and interest in accordance with the customary servicing procedures it follows with respect to all comparable automotive receivables that it services for itself or others and in accordance with the terms of this Agreement. The Servicer, for so long as LBAC is the Servicer, may grant extensions, rebates or adjustments on a Receivable in accordance with the customary servicing procedures it follows with respect to all comparable automotive receivables that it services for itself which shall not modify the original due date of the Scheduled Receivable Payments on any Receivable other than (a) in accordance with the Payment Deferment and Due Date Change Policies, (b) in connection with a Deficient Liquidated Receivable, (c) with the prior written consent of the Note Insurer, with respect to any other Liquidated Receivable or (d) as otherwise required by applicable law. Notwithstanding anything contained herein to the contrary, the Servicer may, at its option, repurchase up to 25 Receivables and shall remit the Purchase Amount, in the manner specified in Section 5.5 hereof and any such repurchased Receivable (an "Optional Repurchase Receivable") shall not be deemed to be a Defaulted Receivable or a Liquidated Receivable. The Servicer shall not modify the Payment Deferment and Due Date Change Policies without the prior written consent of the Note Insurer. The Servicer shall notify Moody's of any modification to the Payment Deferment and Due Date Change Policies. If the Servicer is not LBAC, the Servicer may not make any extension on a Receivable without the prior written consent of the Note Insurer. The Servicer may in its discretion waive any late payment charge or any other fees that may be collected in the ordinary course of servicing a Receivable if it would forgo collection of such amount in accordance with its customary procedures. Notwithstanding anything to the contrary contained herein, the Servicer (i) shall not agree to any alteration of the interest rate on any Receivable or of the amount of any Scheduled Receivable Payment on any Receivable, except (a) as otherwise required by applicable law, (b) with respect to a Deficient Liquidated Receivable and (c) with the prior written consent of the Note Insurer, with respect to any other Liquidated Receivable, and (ii) shall not agree to any modification that would result in a material adverse effect on a Receivable (other than a Deficient Liquidated Receivable and, with the prior written consent of the Note Insurer, any other Liquidated Receivable) or the interest therein of the Issuer, the Noteholders, the Class C Certificateholder or the Note Insurer other than a modification in accordance with the Payment Deferment and Due Date Change Policies.

 

 

On each Business Day, the Servicer shall prepare and transmit to the Trust Collateral Agent and the Back-up Servicer in a form acceptable to the Trust Collateral Agent and the Back-up Servicer, a record setting forth the aggregate amount of collections on the Receivables processed by the Servicer on the second preceding Business Day.

 

SECTION 4.3.   Realization upon Receivables.

 

(a)  On behalf of the Issuer, the Noteholders, the Class C Certificateholder and the Note Insurer, the Servicer shall use its best efforts, consistent with the servicing procedures set forth herein, to repossess or otherwise convert the ownership of the Financed Vehicle securing any Receivable as to which the Servicer shall have determined eventual payment in full is unlikely. The Servicer shall commence efforts to repossess or otherwise convert the ownership of a Financed Vehicle on or prior to the date that an Obligor has not paid at least 95% of a Scheduled Receivable Payment thereon for 120 consecutive days or more; provided, however, that the Servicer may elect not to commence such efforts within such time period if in its good faith judgment it determines either that it would be impracticable to do so or that the proceeds ultimately recoverable with respect to such Receivable would be increased by forbearance. The Servicer shall follow such customary and usual practices and procedures as it shall deem necessary or advisable in its servicing of automotive receivables, consistent with the standards of care set forth in Section 4.1, which may include reasonable efforts to realize upon any recourse to Dealers and selling the Financed Vehicle at public or private sale. The foregoing shall be subject to the provision that, in any case in which the Financed Vehicle shall have suffered damage, the Servicer shall not expend funds in connection with the repair or the repossession of such Financed Vehicle unless it shall determine in its discretion that such repair and/or repossession will increase the proceeds ultimately recoverable with respect to such Receivable by an amount greater than the amount of such expenses. All Liquidation Proceeds and Recoveries received shall be remitted directly by the Servicer to the Collection Account, without deposit into any intervening account as soon as practicable, but in no event later than the second Business Day after receipt thereof.

 

(b)  The Servicer agrees that within 45 days from the Closing Date or the related Subsequent Transfer Date, as applicable, it shall make such filings and effect such notices as are necessary under Section 9-324(b) and 9-324 (c) of the New York UCC (or comparable section of the UCC of any applicable state) to preserve the Trust’s interest (or security interest, as the case may be) in any repossessed Financed Vehicles delivered for sale to Dealers.

 

(c)  Consistent with the standards, policies and procedures required by this Agreement, the Servicer may use its best efforts to locate a third party purchaser that is not affiliated with the Servicer, the Transferor or the Issuer to purchase from the Issuer any Receivable that has become more than 60 days delinquent, and shall have the right to direct the Issuer to sell any such Receivable to the third-party purchaser; provided, that the Note Insurer shall have the right of first refusal to purchase such Receivables; provided further, that no more than 20% of the initial number of Initial Receivables and the Subsequent Receivables in the pool may be sold by the Issuer pursuant to this Section 4.3(c) in the aggregate; provided further, that the Servicer may elect not to direct the Issuer to sell a Receivable that has become more than 60 days delinquent if in its good faith judgment the Servicer determines that the proceeds ultimately recoverable with respect to such Receivable would be increased by forbearance. In selecting Receivables to be sold to a third party purchaser pursuant to this Section 4.3(c), the Servicer shall use commercially reasonable efforts to locate purchasers for the most delinquent Receivables first. In any event, the Servicer shall not use any procedure in selecting Receivables to be sold to third party purchasers which is materially adverse to the interest of the Noteholders, the Class C Certificateholder or the Note Insurer. The Issuer shall sell each Sold Receivable for the greatest market price possible; provided, however, that aggregate Sale Amounts received by the Issuer for all Receivables sold to a single third-party purchaser on a single date must be at least equal to the sum of the Minimum Sale Prices for all such Receivables. The Servicer shall remit or cause the third-party purchaser to remit all sale proceeds from the sale of Receivables directly to the Collection Account without deposit into any intervening account as soon as practicable, but in no event later than the Business Day after receipt thereof.

 

 

(d)  The Servicer agrees that at any time after 45 days from the Closing Date there will be (a) no more than 25 repossessed Financed Vehicles in the aggregate delivered for sale to any Dealer and (b) no more than 50 repossessed Financed Vehicles in the aggregate delivered for the sale to all Dealers with respect to which the actions referred to in paragraph (b) above have not been effected. The Servicer agrees that prior to delivering additional Financed Vehicles for sale to any such Dealer, it shall make such filings and effect such notices as are necessary under Section 9-324(b) and 9-324 (c) of the New York UCC (or comparable section of the applicable UCC) to preserve the Trust’s ownership interest (or security interest, as the case may be) in any such repossessed Financed Vehicle.

 

SECTION 4.4.   Physical Damage Insurance; Other Insurance.

 

(a)  The Servicer shall continue to maintain the VSI Policy or another collateral protection insurance policy providing physical damage insurance coverage to at least the same extent as the VSI Policy with respect to all Financed Vehicles, unless the Servicer shall have received the prior written consent of the Note Insurer allowing the Servicer to no longer maintain any of such policies. The Servicer, in accordance with the servicing procedures and standards set forth herein, shall require that (i) each Obligor shall have obtained insurance covering the Financed Vehicle, as of the date of the execution of the Receivable, insuring against loss and damage due to fire, theft, transportation, collision and other risks generally covered by comprehensive and collision coverage and each Receivable requires the Obligor to maintain such physical loss and damage insurance naming LBAC and its successors and assigns as an additional insured, (ii) each Receivable that finances the cost of premiums for credit life and credit accident and health insurance is covered by an insurance policy or certificate naming LBAC as policyholder (creditor) and (iii) as to each Receivable that finances the cost of an extended service contract, the respective Financed Vehicle which secures the Receivable is covered by an extended service contract.

 

 

(b)  To the extent applicable, the Servicer shall not take any action which would result in noncoverage under any of the insurance policies referred to in Section 4.4(a) which, but for the actions of the Servicer, would have been covered thereunder. The Servicer, on behalf of the Trust Collateral Agent, shall take such reasonable action as shall be necessary to permit recovery under any of the foregoing insurance policies. Any amounts collected by the Servicer under any of the foregoing insurance policies shall be deposited in the Collection Account pursuant to Section 5.2. In the event of the cancellation or non-renewal of the insurance referred to in Section 4.4(a)(i) above with respect to any Financed Vehicle, the Servicer will endeavor, in accordance with its customary servicing standards and procedures, to cause the related Obligor to obtain a replacement insurance policy. In no event shall the Servicer be required to force place insurance on a Financed Vehicle.

 

SECTION 4.5.   Maintenance of Security Interests in Financed Vehicles.

 

(a)  Consistent with the policies and procedures required by this Agreement, the Servicer shall take such steps as are necessary to maintain perfection of the security interest created in the name of LBAC by each Receivable in the related Financed Vehicle, including, but not limited to, obtaining the execution by the Obligors and the recording, registering, filing, re-recording, re-registering and refiling of all security agreements, financing statements and continuation statements or instruments as are necessary to maintain the security interest granted by Obligors under the respective Receivables. The Trust Collateral Agent hereby authorizes the Servicer to take such steps as are necessary to re-perfect or continue the perfection of such security interest on behalf of the Issuer in the event of the relocation of a Financed Vehicle or for any other reason.

 

(b)  Upon the occurrence of an Insurance Agreement Event of Default, the Note Insurer may (so long as a Note Insurer Default shall not have occurred and be continuing) instruct in writing the Trust Collateral Agent and the Servicer to take or cause to be taken, or, if a Note Insurer Default shall have occurred and be continuing, upon the occurrence of a Servicer Termination Event, either the Trust Collateral Agent or the Trust Collateral Agent acting at the written direction of the Majorityholders shall direct the Servicer to take and the Servicer shall take or cause to be taken such action as may, in the opinion of counsel to the Note Insurer (or, if a Note Insurer Default shall have occurred and be continuing, the Trust Collateral Agent), which opinion shall not be an expense of the Note Insurer or the Trust Collateral Agent (as applicable), be necessary to perfect or reperfect the security interests in the Financed Vehicles securing the Receivables in the name of the Trust Collateral Agent on behalf of the Issuer by amending the title documents of such Financed Vehicles to reflect the security interest of the Trust Collateral Agent in the related Financed Vehicles or by such other reasonable means as may, in the opinion of counsel to the Note Insurer or the Trust Collateral Agent (as applicable), which opinion shall not be an expense of the Note Insurer or the Trust Collateral Agent, be necessary or prudent. The Servicer hereby agrees to pay all expenses related to such perfection or reperfection and to take all action necessary therefor. In addition, prior to the occurrence of an Insurance Agreement Event of Default, the Note Insurer may (unless a Note Insurer Default shall have occurred and be continuing) instruct in writing the Trust Collateral Agent and the Servicer to take or cause to be taken such action as may, in the opinion of counsel to the Note Insurer, be necessary to perfect or reperfect the security interest in the Financed Vehicles securing the Receivables in the name of the Trust Collateral Agent on behalf of the Issuer, including by amending the title documents of such Financed Vehicles to reflect the security interest of the Trust Collateral Agent in the related Financed Vehicle or by such other reasonable means as may, in the opinion of counsel to the Note Insurer, be necessary or prudent; provided, however, that if the Note Insurer requests that the title documents be amended prior to the occurrence of an Insurance Agreement Event of Default, the out-of-pocket expenses of the Servicer or the Trust Collateral Agent in connection with such action shall be reimbursed to the Servicer or the Trust Collateral Agent, as applicable, by the Note Insurer.

 

 

In addition to the foregoing, in the event any of the Servicer Termination Events described in Section 9.1(iii) or (iv) shall have occurred, or in the event LBAC shall have been removed or replaced as Servicer pursuant to Section 8.3, Section 8.5, or otherwise pursuant to Section 9.1, then LBAC and/or the Servicer shall immediately cause each Lien Certificate for a Financed Vehicle to be marked to reflect the security interest of the Trust Collateral Agent in the Financed Vehicle at the expense of LBAC.

 

The Servicer hereby makes, constitutes and appoints the Trust Collateral Agent acting through its duly appointed officers or any of them, its true and lawful attorney, for it and in its name and on its behalf, for the sole and exclusive purpose of authorizing said attorney to execute and deliver as attorney-in-fact or otherwise, any and all documents and other instruments and to do or accomplish all other acts or things necessary or appropriate to show the Trust Collateral Agent as lienholder or secured party on the related Lien Certificates relating to a Financed Vehicle.

 

SECTION 4.6.   Additional Covenants of Servicer. The Servicer hereby makes the following covenants to the other parties hereto and the Note Insurer on which the Trust Collateral Agent shall rely in accepting the Receivables in trust and on which the Note Insurer shall rely in issuing the Policy: (i) the Servicer shall not release the Financed Vehicle securing any Receivable from the security interest granted by such Receivable in whole or in part except in the event of payment in full by the Obligor thereunder or repossession or other liquidation of such Financed Vehicle, (ii) the Servicer shall not impair the rights of the Noteholders or the Class C Certificateholder, the Issuer or the Note Insurer in such Receivables, (iii) the Servicer shall not modify a Receivable, except in accordance with Section 4.2, (iv) the Servicer shall service the Receivables as required by the terms of this Agreement and in material compliance with its current servicing procedures for servicing of all its other comparable motor vehicle receivables and (v) the Servicer shall not modify any Receivable in accordance with the Payment Deferment and Due Date Change Policies if, as a result of such modification, there would be negative amortization of such Receivable.

 

SECTION 4.7.   Purchase of Receivables Upon Breach. The Servicer, the Transferor, the Issuer or the Trust Collateral Agent shall inform the other parties hereto and the Note Insurer promptly, in writing, upon the discovery by the Servicer, the Transferor, the Issuer or a Responsible Officer of the Trust Collateral Agent or the Custodian, as the case may be, of any breach of the provisions of Section 4.2 relating to modifications of the Receivables, or any breach of Sections 4.4, 4.5 or 4.6; provided, however, that the failure to give such notice shall not affect any obligation of the Servicer hereunder. Unless the breach shall have been cured by the last day of the second Collection Period following such discovery by or notice to the Servicer of such breach, the Servicer shall purchase any Receivable with respect to which such breach has a material adverse effect on such Receivable or the interest therein of the Issuer, the Noteholders or the Note Insurer. In consideration of the purchase of such Receivable, the Servicer shall remit the Purchase Amount in the manner specified in Section 5.5. The sole remedy of the Trust Collateral Agent, the Issuer, the Note Insurer, the Class C Certificateholder or the Noteholders with respect to a breach of the provisions of Section 4.2 relating to modifications of the Receivables or any breach of Sections 4.4, 4.5 or 4.6 shall be to require the Servicer to repurchase Receivables pursuant to this Section 4.7; provided, however, that the Servicer shall indemnify the Trust Collateral Agent, the Indenture Trustee, the Collateral Agent, the Back-up Servicer, the Custodian, the Transferor, the Note Insurer, the Issuer, the Class C Certificateholder and the Noteholders and each of their respective officers, employees, directors, agents and representatives against all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel, which may be asserted against or incurred by any of them as a result of third party claims arising out of the events or facts giving rise to such breach. The Transferor shall have no obligation to repurchase the Receivables upon a breach of the provisions of Section 4.2 relating to modifications of the Receivables, or any breach of Sections 4.4, 4.5 or 4.6. The Transferor shall have no liability for actions taken or omitted to be taken by the Servicer pursuant to this Section 4.7.

 

 

SECTION 4.8.   Servicing Fee. The Servicing Fee for the initial Payment Date shall equal the product of (a) one-twelfth of the Servicing Fee Rate and (b) the Original Pool Balance plus, without duplication, the aggregate Principal Balance of any Subsequent Receivables (as of the related Subsequent Cutoff Date) purchased prior to the first Payment Date multiplied by the number of days during the related Collection Period that such Subsequent Receivables were owned by the Issuer divided by 360. Thereafter, the Servicing Fee for a Payment Date shall equal the product of (i) one-twelfth of the Servicing Fee Rate and (ii) the Pool Balance as of the last day of the second preceding Collection Period plus, without duplication, the aggregate Principal Balance of any Subsequent Receivables purchased since the immediately preceding Payment Date multiplied by the number of days during the related Collection Period that such Subsequent Receivables were owned by the Issuer divided by 360. The Servicing Fee shall in addition include all late fees, deferment fees, prepayment charges including, in the case of a Precomputed Receivable that is prepaid in full, to the extent not required by law to be remitted to the related Obligor, the difference between the amounts received upon prepayment in full of such Precomputed Receivable and the then outstanding Principal Balance of such Precomputed Receivable and accrued interest thereon (calculated pursuant to the Simple Interest Method) and other administrative fees or similar charges allowed by applicable law with respect to Receivables, collected (from whatever source) on the Receivables.

 

SECTION 4.9.   Servicer's Certificate.

 

(a)  By 10:00 a.m., New York City time, on each Determination Date, the Servicer shall deliver to the Issuer, the Trust Collateral Agent, the Indenture Trustee, the Back-up Servicer, the Collateral Agent, the Transferor, the Note Insurer, GCFP and the Rating Agencies, a Servicer's Certificate containing all information necessary to make the payments pursuant to Section 5.6 (including, (i) if required, the amount of withdrawals from the Spread Account and the Supplemental Enhancement Account and (ii) the remaining Pre-Funded Amount, if any), for the Collection Period preceding the date of such Servicer's Certificate and all information necessary for the Trust Collateral Agent to send statements to Noteholders, the Class C Certificateholder and the Note Insurer pursuant to Section 5.7. Receivables to be purchased by the Servicer or to be purchased by LBAC shall be identified by the Servicer by account number with respect to such Receivable (as specified in the Schedule of Receivables).

 

 

(b)  In addition to the information required by Section 4.9(a), the Servicer shall include in the copy of the Servicer's Certificate delivered to the Note Insurer (i) the Average Delinquency Ratio, the Cumulative Default Rate, and the Cumulative Loss Rate (as such terms are defined in the Spread Account Agreement), (ii) whether any Trigger Event (as such term is defined in the Spread Account Agreement) has occurred as of such Determination Date, (iii) whether any Trigger Event that may have occurred as of a prior Determination Date is Deemed Cured (as defined in the Spread Account Agreement) as of such Determination Date, (iv) whether to the knowledge of the Servicer an Insurance Agreement Event of Default has occurred, (v) the number and percentage of Receivables modified in accordance with the Loss Mitigation Program and the General Payment Deferment Policy as set forth on Exhibit D hereto and (vi) the Average Delinquency Ratio, the Cumulative Default Rate, and the Cumulative Loss Rate (as such terms are defined in the Spread Account Agreement), with respect to such modified Receivables. The Servicer shall in addition give notice of the occurrence of any Trigger Event or any Insurance Agreement Event of Default to each Rating Agency.

 

SECTION 4.10.   Annual Statement as to Compliance; Notice of Default.

 

(a)  To the extent required by Section 1123 of Regulation AB, the Servicer shall deliver to the Issuer, the Trust Collateral Agent, the Indenture Trustee, the Back-up Servicer, the Collateral Agent, the Transferor and the Note Insurer, on or before March 31 of each year beginning March 31, 2008, an Officer's Certificate, dated as of December 31 of the preceding calendar year, stating that (i) a review of the activities of the Servicer during such preceding calendar year and of its performance under this Agreement has been made under such officer's supervision and (ii) to the best of such officer's knowledge, based on such review, the Servicer has fulfilled in all material respects all its obligations under this Agreement throughout such year, or, if there has been a failure to fulfill any such obligation in any material respect, identifying each such failure known to such officer and the nature and status of such failure. The Trust Collateral Agent shall send a copy of such certificate to the Rating Agencies.

 

(b)  The Servicer shall deliver to the Issuer, the Trust Collateral Agent, the Indenture Trustee, the Back-up Servicer, the Collateral Agent, the Transferor, the Note Insurer and the Rating Agencies, promptly after having obtained knowledge thereof, but in no event later than two (2) Business Days after having obtained such knowledge, written notice in an Officer's Certificate of any event which with the giving of notice or lapse of time, or both, would become a Servicer Termination Event under Section 9.1.

 

(c)  The Servicer will deliver to the Issuer, on or before March 31 of each year beginning on March 31, 2008, a report regarding the Servicer's assessment of compliance with the Servicing Criteria during the immediately preceding calendar year, as required under Rules 13a-18 and 15d-18 of the Exchange Act and Item 1122 of Regulation AB.

 

 

SECTION 4.11.   Annual Independent Certified Public Accountant's Report.

 

(a)  The Servicer shall cause a firm of nationally recognized independent certified public accountants, who may also render other services to the Servicer or to the Transferor, to deliver to the Issuer, the Trust Collateral Agent, the Indenture Trustee, the Back-up Servicer, the Collateral Agent, the Noteholders, the Note Insurer and each Rating Agency on or before March 31 of each year beginning March 31, 2008, a report dated as of December 31 of the preceding calendar year and reviewing the Servicer's activities during such preceding calendar year, addressed to the Board of Directors of the Servicer, providing such information as is required under Item 1122(b) of Regulation AB.

 

(b)  The Servicer shall cause a firm of nationally recognized independent certified public accountants, who may also render other services to the Servicer or to the Transferor, to deliver to the Trust Collateral Agent, the Back-up Servicer, the Collateral Agent, the Issuer, the Transferor and the Note Insurer, on or before March 31 of each year beginning March 31, 2008, a report dated as of December 31 of the preceding calendar year, to the effect that such firm has audited the consolidated financial statements of AmeriCredit and issued its report therefor and that such audit (i) was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as such firm considered necessary in the circumstances; (ii) included tests relating to automotive loans serviced for others in accordance with the Servicing Criteria; (iii) included an examination of the delinquency and loss statistics relating to the Servicer's portfolio of automobile, van, sport utility vehicle and light duty truck installment sales contracts; and (iv) except as described in the report, disclosed no exceptions or errors in the records relating to automobile, van, sport utility vehicle and light duty truck loans serviced for others that, in the firm's opinion, the Program requires such firm to report. The accountant's report shall further state that (1) a review in accordance with agreed upon procedures was made of three randomly selected Servicer's Certificates; (2) except as disclosed in the report, no exceptions or errors in the Servicer's Certificates were found; and (3) the delinquency and loss information relating to the Receivables contained in the Servicer's Certificates were found to be accurate.

 

The report will also indicate that the firm is independent of the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants.

 

The Servicer shall file, or cause to be filed, the reports furnished pursuant to Section 4.10 and this Section 4.11 as exhibits to the Issuer's annual report on Form 10-K.

 

SECTION 4.12.   Servicer Expenses. The Servicer shall be required to pay all expenses incurred by it in connection with its activities under this Agreement (including taxes imposed on the Servicer, expenses incurred by the Servicer in connection with payments and reports to Noteholders and the Class C Certificateholder, the Trust Collateral Agent and the Note Insurer and all other fees and expenses of the Issuer including taxes levied or assessed against the Issuer, and claims against the Issuer in respect of indemnification not expressly stated under this agreement to be for the account of the Issuer).

 

 

SECTION 4.13.   Retention and Termination of Servicer. The Servicer hereby covenants and agrees to act as such under this Agreement for an initial term, commencing on the Closing Date and ending on June 30, 2007 which term shall be extendible by the Note Insurer for successive quarterly terms ending on each successive September 30, December 31, March 31 and June 30, (or, pursuant to revocable written standing instructions from time to time to the Servicer and the Trust Collateral Agent, for any specified number of terms greater than one), until the termination of the Issuer. Each such notice (including each notice pursuant to standing instructions, which shall be deemed delivered at the end of successive quarterly terms for so long as such instructions are in effect) (a "Servicer Extension Notice") shall be delivered by the Note Insurer to the Trust Collateral Agent and the Servicer. The Servicer hereby agrees that, as of the date hereof and upon its receipt of any such Servicer Extension Notice, the Servicer shall become bound, for the initial term beginning on the date hereof and for the duration of the term covered by such Servicer Extension Notice, to continue as the Servicer subject to and in accordance with the other provisions of this Agreement. Until such time as a Note Insurer Default shall have occurred and be continuing, the Trust Collateral Agent agrees that if as of the fifteenth day prior to the last day of any term of the Servicer, the Trust Collateral Agent shall not have received any Servicer Extension Notice from the Note Insurer, the Trust Collateral Agent will, within five days thereafter, give written notice of such non-receipt to the Note Insurer, the Back-up Servicer (or any alternate successor servicer appointed by the Note Insurer pursuant to Section 8.5) and the Servicer and the Servicer's terms shall not be extended unless a Servicer Extension Notice is received on or before the last day of such term. Following a Note Insurer Default, this Section 4.13 shall no longer apply and the Servicer shall be deemed to be retained for the term of this Agreement, unless otherwise removed pursuant to Article 9.

 

SECTION 4.14.   Access to Certain Documentation and Information Regarding Receivables. The Servicer shall provide to representatives of the Indenture Trustee, the Trust Collateral Agent, the Collateral Agent, the Back-up Servicer, the Transferor, the Issuer and the Note Insurer reasonable access to documentation and computer systems and information regarding the Receivables and shall provide such access to Noteholders or the Class C Certificateholder, as the case may be, in such cases where the Noteholders or the Class C Certificateholder is required by applicable law or regulation to review such documentation. In each case, such access shall be afforded without charge but only upon reasonable request and during normal business hours. Nothing in this Section 4.14 shall derogate from the obligation of the Servicer to observe any applicable law prohibiting disclosure of information regarding the Obligors, and the failure of the Servicer to provide access as provided in this Section 4.14 as a result of such obligation shall not constitute a breach of this Section 4.14.

 

SECTION 4.15.   Verification of Servicer's Certificate.

 

(a)  On or before the fifth Business Day of each month, the Servicer will deliver to the Trust Collateral Agent and the Back-up Servicer a computer diskette (or other electronic transmission) in a format acceptable to the Trust Collateral Agent and the Back-up Servicer containing such information with respect to the Receivables as of the close of business on the last day of the preceding Collection Period as is necessary for preparation of the Servicer's Certificate. The Back-up Servicer shall use such computer diskette (or other electronic transmission) to verify the information specified in Section 4.15(b)(iii) contained in the Servicer's Certificate delivered by the Servicer, and the Back-up Servicer shall certify to the Note Insurer that it has verified the Servicer's Certificate in accordance with this Section 4.15 and shall notify the Servicer, the Note Insurer and the Trust Collateral Agent of any discrepancies, in each case, on or before the related Deficiency Claim Date. In the event that the Back-up Servicer reports any discrepancies, the Servicer and the Back-up Servicer shall attempt to reconcile such discrepancies prior to the related Deficiency Claim Date, but in the absence of a reconciliation, the Servicer's Certificate shall control for the purpose of calculations and payments with respect to the related Payment Date. In the event that the Back-up Servicer and the Servicer are unable to reconcile discrepancies with respect to a Servicer's Certificate by the related Payment Date, (i) the Back-up Servicer will notify the Note Insurer and the Trust Collateral Agent, and (ii) the Servicer shall cause a firm of independent certified public accountants, at the Servicer's expense, to audit the Servicer's Certificate and, prior to the fifth calendar day of the following month, reconcile the discrepancies. The effect, if any, of such reconciliation shall be reflected in the Servicer's Certificate for such next succeeding Determination Date. In addition, the Servicer shall, if so requested by the Note Insurer (unless a Note Insurer Default shall have occurred and be continuing) deliver to the Back-up Servicer (i) within five (5) Business Days of demand therefor a computer tape containing as of the close of business on the date of demand all of the data maintained by the Servicer in computer format in connection with servicing the Receivables and (ii) within fifteen (15) Business Days of demand therefor a copy of such other information as is reasonably requested by the Note Insurer for the purpose of reconciling such discrepancies. Other than the duties specifically set forth in this Agreement, the Back-up Servicer shall have no obligations hereunder, including, without limitation, to supervise, verify, monitor or administer the performance of the Servicer. The Back-up Servicer shall have no liability for any actions taken or omitted by the Servicer. The duties and obligations of the Back-up Servicer shall be determined solely by the express provisions of this Agreement and no implied covenants or obligations shall be read into this Agreement against the Back-up Servicer.

 

 

(b)  The Back-up Servicer shall review each Servicer's Certificate delivered pursuant to Section 4.15(a) and shall, based upon the information provided from the Servicer under Section 4.15(a):

 

(i) confirm that such Servicer's Certificate is complete on its face;

 

(ii) load the computer diskette (which shall be in a format acceptable to the Back-up Servicer) received from the Servicer pursuant to Section 4.15(a) hereof, confirm that such computer diskette is in a readable form and calculate the Principal Balance of each Receivable as of the preceding Payment Date (as set forth in such Servicer's Certificate) and the current principal payment for such Receivable (as set forth in such Servicer's Certificate) and compare such calculation to that set forth in the Servicer's Certificate (and give notice of any discrepancy to the Note Insurer); and

 

(iii) recalculate the Available Funds, the Principal Payment Amount, the Pre-Funding Amount, the Class A-1 Interest Payment Amount, the Class A-2 Interest Payment Amount, the Class A-3 Interest Payment Amount, the Class A-4 Interest Payment Amount, the Class C Interest Payment Amount, the Class C Principal Deficiency Amount, the Class C Interest Carryover Shortfall, if any, the Class C Supplemental Interest Payment Amount, if any, the Back-up Servicer Fee, the Servicing Fee, the Indenture Trustee Fee, the Custodian Fee, the amount on deposit in the Spread Account, the amount on deposit in the Supplemental Enhancement Account and the Premium in the Servicer's Certificate based solely on the balances and calculations specifically set forth in the Servicer's Certificate, compare such calculations to those set forth in the Servicer's Certificate. To the extent of any discrepancy, the Back-up Servicer shall give notice thereof to the Note Insurer. The Back-up Servicer's obligation shall be limited to the mathematical recalculation of the amounts set forth in this Section 4.15(b)(iii) based on the Servicer's Certificate.

 

 

SECTION 4.16.   Fidelity Bond. The Servicer shall maintain a fidelity bond in such form and amount as is customary for entities acting as custodian of funds and documents in respect of consumer contracts on behalf of institutional investors

 

SECTION 4.17.   Delegation of Duties. The Servicer may at any time delegate duties under this Agreement to any Affiliate of AmeriCredit or to sub-contractors who are in the business of servicing automotive receivables with the prior written consent of the Controlling Party; provided, however, that no such delegation or sub-contracting of duties by the Servicer shall relieve the Servicer of its responsibility with respect to such duties. In the event the Servicer shall for any reason no longer be the servicer of the Receivables (including by reason of a Servicer Termination Event), the Back-up Servicer, its designee or any successor Servicer shall assume all of the rights and obligations of the predecessor Servicer under one or more subservicing agreements that may have been entered into by the predecessor Servicer by giving notice of such assumption to the related subservicer or subservicers within ten (10) Business Days of the termination of the Servicer as servicer of the Receivables; provided, however, that the Back-up Servicer may elect to terminate a subservicing agreement with the prior written consent of the Note Insurer, so long as no Note Insurer Default is then continuing. If the Back-up Servicer does not elect to assume any subservicing agreement, any and all costs of termination shall be at the predecessor Servicer's expense. Upon the giving of such notice, the Back-up Servicer, its designee or the successor Servicer shall be deemed to have assumed all of the predecessor Servicer's interest therein and to have replaced the predecessor Servicer as a party to the subservicing agreement to the same extent as if the subservicing agreement had been assigned to the assuming party except that the predecessor Servicer and the subservicer, if any, shall not thereby be relieved of any liability or obligations accrued up to the date of the replacement of the Servicer under the subservicing agreement and the subservicer, if any, shall not be relieved of any liability or obligation to the predecessor Servicer that survives the assignment or termination of the subservicing agreement. The Back-up Servicer shall notify each Rating Agency and the Note Insurer if any subservicing agreement is assumed by the Back-up Servicer, its designee or the successor Servicer. The predecessor Servicer shall, upon request of the Trust Collateral Agent, the Back-up Servicer or any successor Servicer, but at the expense of the predecessor Servicer, deliver to the assuming party all documents and records relating to the subservicing agreement and the Receivables then being serviced and an accounting of amounts collected and held by it and otherwise use its reasonable efforts to effect the orderly and efficient transfer of the subservicing agreement to the assuming party.

 

 

SECTION 4.18.   Delivery of Back-up Tapes of Back-up Servicer.

 

(a)  In addition to the information to be delivered by the Servicer to the Back-up Servicer on or before the fifth Business Day of each month pursuant to Section 4.15(a), the Servicer shall deliver to the Back-up Servicer, or its designated agent, a computer diskette (or other electronic transmission), in a format acceptable to the Back-up Servicer or its designated agent, as the case may be, with the loan master file and history information in the form attached hereto as Exhibit B-2 on or prior to the Closing Date in the case of the Initial Receivables, and on or prior to the related Subsequent Transfer Date in the case of Subsequent Receivables, which loan master file and history information shall be sufficiently detailed to enable the Back-up Servicer to maintain records sufficient to assume the role of successor Servicer pursuant to this Agreement.

 

(b)  In addition to the information required to be delivered by the Servicer to the Back-up Servicer or its designated agent on or before the fifth Business Day of each month pursuant to Section 4.15(a) and on or prior to the Closing Date and each Subsequent Transfer Date pursuant to Section 4.18(a), the Servicer shall deliver the loan master file and history information to the Back-up Servicer or its designated agent on the Determination Date occurring in June 2007 (with respect to the period from and including the Initial Cutoff Date to the last day of the related Collection Period) and on the Determination Date occurring every six months thereafter in the form attached hereto as Exhibit B-2 in writing and on a computer diskette (or other electronic transmission) in a format acceptable to the Back-up Servicer or its designated agent, as the case may be, and as at such other times as may be requested by the Note Insurer or the Back-up Servicer upon prior written notice to the Servicer, provided that the Back-up Servicer shall deliver a copy of any such notice by the Back-up Servicer to the Note Insurer simultaneously with its delivery of such notice to the Servicer.

 

SECTION 4.19.   Confidential Information. The Back-up Servicer, each subservicer and any successor Servicer shall hold in confidence all Confidential Information in accordance with the Federal Financial Privacy Law and, to the extent more exacting, its then customary procedures, and each represents and warrants that it has in place, and will continue to maintain, sufficient systems and procedures to do so; provided that nothing herein shall prevent the Back-up Servicer, any subservicer or any successor Servicer from delivering copies of any financial statements and other documents whether or not constituting Confidential Information, and disclosing other information, whether or not Confidential Information, to (i) its directors, officers, employees, agents and professional consultants to the extent necessary to carry on the Back-up Servicer’s, such subservicer’s or such successor Servicer’s business, as applicable, in the ordinary course, (ii) any Noteholder, Certificateholder or the Note Insurer to the extent that such Noteholder, Certificateholder or the Note Insurer is entitled to such information under this Agreement or any other Basic Document, but not otherwise, (iii) any governmental authority which specifically requests (or as to which applicable regulations require) such information, (iv) any nationally recognized rating agency in connection with the rating of the Notes by such agency, or (v) any other Person to which such delivery or disclosure may be necessary or appropriate (a) in compliance with any applicable law, rule, regulation or order, (b) in response to any subpoena or other legal process, (c) in connection with any litigation to which the Back-up Servicer, such subservicer or such successor Servicer, as applicable, is a party, (d) in order to enforce the rights of the Noteholders, each Certificateholder and the Note Insurer hereunder or under any other Basic Document, or (e) otherwise, in accordance with the Federal Financial Privacy Law; provided, that, prior to any such disclosure, the Back-up Servicer, such subservicer or such successor Servicer, as applicable, shall inform each such party (other than any Noteholder, Certificateholder, the Note Insurer or any other party to the Basic Documents) that receives Confidential Information of the foregoing requirements and shall use its commercially reasonable best efforts to cause such party to comply with such requirements.

 

 

ARTICLE V

ACCOUNTS; PAYMENTS;

STATEMENTS TO NOTEHOLDERS

 

SECTION 5.1.   Accounts; Lock-Box Account.

 

(a)  The Servicer has established the Lock-Box Account as two Eligible Accounts, one established with Bank of America National Trust and Savings Association entitled "Long Beach Acceptance Corp., JPMorgan Chase, Agent Account--Auto Loan Programs," account number ###-###-####, and one established with JPMorgan Chase entitled "Long Beach Acceptance Corp., JPMorgan Chase, Agent Account -- Auto Loan Programs," account number 530097095; provided, that the Servicer, with the prior written consent of the Note Insurer, may from time to time (a) establish additional or substitute Lock-Box Accounts, each of which shall be an Eligible Account, and (b) close or terminate the use of any of the aforementioned accounts or any subsequently established accounts, each of which accounts, at such time, shall no longer be deemed to be a Lock-Box Account; provided, further, that pursuant to the Lock-Box Agreement, the Lock-Box Processor and no other person, save the Trust Collateral Agent or the Servicer, has authority to direct disposition of funds related to the Receivables on deposit in the Lock-Box Account consistent with the provisions of this Agreement and the Lock-Box Agreement. The Trust Collateral Agent shall have no liability or responsibility with respect to the Lock-Box Processor's or the Servicer's directions or activities as set forth in the preceding sentence. The Lock-Box Account shall be established pursuant to and maintained in accordance with the Lock-Box Agreement and shall be a demand deposit account into which Obligors will be directed to make payments due under Receivables and which shall at all times be an Eligible Account, initially established and maintained with JPMorgan Chase or, at the request of the Note Insurer, an Eligible Account satisfying clause (i) of the definition thereof. The Servicer has established and shall maintain the Lock-Box at a United States Post Office Branch. Notwithstanding the Lock-Box Agreement or any of the provisions of this Agreement relating to the Lock-Box and the Lock-Box Agreement, the Servicer shall remain obligated and liable to the Trust Collateral Agent, the Noteholders and the Class C Certificateholder for servicing and administering the Receivables and the other Trust Assets in accordance with provisions of this Agreement without diminution of such obligation or liability by virtue thereof.

 

In the event the Servicer shall for any reason no longer be acting as such, the Lock-Box Agreement shall terminate in accordance with its terms with respect to the Receivables or, upon the occurrence and continuance of a Servicer Termination Event, the Note Insurer may direct the Indenture Trustee in writing to terminate the Lock-Box Agreement with respect to the Receivables, and, in any such case, funds on deposit in the Lock-Box Account shall be distributed by JPMorgan Chase, as agent for the beneficial owners of funds in the Lock-Box Account at such time (including the Issuer), and JPMorgan Chase shall deposit any such funds relating to the Receivables to such other account as shall be identified by the Back-up Servicer or successor Servicer for deposit therein; provided, however, that the outgoing Servicer shall not thereby be relieved of any liability or obligations on the part of the outgoing Servicer to the Lock-Box Bank under such Lock-Box Agreement. The outgoing Servicer shall, upon request of the Trust Collateral Agent, but at the expense of the outgoing Servicer, deliver to the successor Servicer all documents and records relating to the Lock-Box Agreement and an accounting of amounts collected and held in the Lock-Box Account or held by the Lock-Box Processor in respect of the Receivables and otherwise use its best efforts to effect the orderly and efficient transfer of any Lock-Box Agreement to the successor Servicer. In the event that the Lock-Box Account fails at any time to qualify as an Eligible Account, the Servicer, at its expense, shall cause the Lock-Box Bank to deliver, at the direction of the Controlling Party to the Trust Collateral Agent or a successor Lock-Box Bank, all documents and records relating to the Receivables and all amounts held (or thereafter received) on deposit in the Lock Box Account or held by the Lock-Box Processor in respect of the Receivables (together with an accounting of such amounts) and shall otherwise use its best efforts to effect the orderly and efficient transfer of the lock-box arrangements, and the Servicer shall promptly notify the Obligors to make payments to any new Lock-Box.

 

 

(b)  In addition to the Lock-Box Account, the Trust Collateral Agent shall establish, with itself, (i) the Collection Account and the Note Account, in the name of the Issuer for the benefit of the Indenture Trustee, the Trust Collateral Agent, the Noteholders and the Insurer, the Pre-Funding Account in the name of the Issuer for the benefit of the Noteholders, the Class C Certificateholder and the Note Insurer, (ii) the Policy Payments Account in the name of the Issuer for the benefit of the Noteholders and (iii) the Supplemental Enhancement Account in the name of the Issuer for the benefit of the Noteholders and the Class C Certificateholder. The Collection Account, the Note Account, the Pre-Funding Account, the Policy Payments Account and the Supplemental Enhancement Account, shall be Eligible Accounts initially established with the Trust Collateral Agent; provided, however, if any of such accounts shall cease to be an Eligible Account, the Servicer, with the consent of the Note Insurer (so long as no Note Insurer Default has occurred and is continuing), within five (5) Business Days shall, cause such accounts to be moved to an institution so that such account meets the definition of Eligible Account. The Servicer shall promptly notify the Rating Agencies and the Transferor of any change in the location of any of the aforementioned accounts.

 

All amounts held in the Collection Account, the Supplemental Enhancement Account and the Pre-Funding Account shall be invested by the Trust Collateral Agent at the written direction of the Transferor (or, in the case of the Supplemental Enhancement Account, at the direction of the Class C Certificateholder) in Eligible Investments in the name of the Trust Collateral Agent on behalf of the Issuer and shall mature no later than one Business Day immediately preceding the Payment Date next succeeding the date of such investment, or if such investment direction is given, such funds shall be retained uninvested. In no event shall the Trust Collateral Agent be liable for any insufficiency in the Collection Account and the Supplemental Enhancement Account resulting from any investment loss in any Eligible Account. Such written direction shall certify that any such investment is authorized by this Section. No investment may be sold prior to its maturity. Amounts in the Note Account and the Policy Payments Account shall not be invested. The amount of earnings on investments of funds in the Collection Account during the Collection Period related to each Payment Date shall be deposited into the Note Account on each Payment Date, and shall be available for payment pursuant to Section 5.6(c). The amount of earnings on investments of funds in the Supplemental Enhancement Account during the Collection Period related to each Payment Date shall be paid to the Class C Certificateholder as the Supplemental Enhancement Account Investment Earnings Amount on each Payment Date, pursuant to Section 5.6(c)(vii) hereof. For purposes of this paragraph, the Trust Collateral Agent will take delivery of the Eligible Investments in accordance with Schedule C.

 

 

SECTION 5.2.   Collections. The Servicer shall use reasonable efforts to cause the Lock-Box Processor to transfer any payments in respect of the Receivables from or on behalf of Obligors received in the Lock-Box to the Lock-Box Account on the Business Day on which such payments are received, pursuant to the Lock-Box Agreement. Within two Business Days of receipt of such funds into the Lock-Box Account, the Servicer shall cause the Lock-Box Bank to transfer available funds related to the Receivables from the Lock-Box Account to the Collection Account, and if such funds are not available funds, as soon thereafter as they clear (i.e., become available for withdrawal from the Lock-Box Account). In addition, the Servicer shall remit all payments by or on behalf of the Obligors received by the Servicer with respect to the Receivables (other than Purchased Receivables), and all Liquidation Proceeds no later than the second Business Day following receipt into the Lock-Box Account or the Collection Account.

 

SECTION 5.3.   Application of Collections. All collections for each Collection Period shall be applied by the Servicer as follows:

 

With respect to each Receivable (other than a Purchased Receivable), payments actually received from or on behalf of the Obligor shall be applied hereunder, first, to interest and principal in accordance with the Simple Interest Method to the extent necessary to bring such Receivable current, second, in connection with the redemption of a defaulted Receivable, to reimburse the Servicer for reasonable and customary out-of-pocket expenses incurred by the Servicer in connection with such Receivable, third, to late fees and fourth, to principal in accordance with the Simple Interest Method. Notwithstanding anything herein to the contrary, no amount applied as interest accrued on any Precomputed Receivable for any single Collection Period will exceed 30 days' interest accrued thereon assuming a 360-day year of twelve 30-day months.

 

SECTION 5.4.   Intentionally Omitted.

 

SECTION 5.5.   Additional Deposits. The following additional deposits shall be made in immediately available funds on the dates indicated: (i) on the Business Day immediately preceding each Determination Date, the Servicer or LBAC, as the case may be, shall deposit or cause to be deposited in the Collection Account the aggregate Purchase Amount with respect to Purchased Receivables, (ii) on the Business Day immediately preceding each Determination Date, the Trust Collateral Agent shall deposit in the Collection Account all amounts to be paid under Section 11.1, (iii) on the Determination Date immediately succeeding the date on which the Funding Period ends (or, if the Funding Period ends on or after the Determination Date immediately preceding the Final Funding Period Payment Date, on the date on which the Funding Period ends), the Trust Collateral Agent shall transfer the remaining Pre-Funded Amount on deposit in the Pre-Funding Account to the Note Account pursuant to Section 5.13(c), (iv) on or before each Draw Date, the Trust Collateral Agent shall, pursuant to the Servicer's written instructions, transfer to the Collection Account any amounts to be withdrawn from the Supplemental Enhancement Account in accordance with Section 5.12 and (v) on the Closing Date, LBAC shall deposit or cause to be deposited to the Collection Account the September Principal Collections Amount.

 

 

SECTION 5.6.   Payments; Policy Claims.

 

(a)  The Trust Collateral Agent (based solely on the information set forth in the Servicer's Certificate for the related Payment Date upon which the Trust Collateral Agent may conclusively rely) shall transfer, on each Payment Date, from the Collection Account to the Note Account, in immediately available funds, an amount equal to the sum of (a) all funds that were deposited in the Collection Account, plus (b) earnings on investments of funds in the Collection Account pursuant to Section 5.1(b), for the related Collection Period;

 

(b)  Prior to each Payment Date, the Servicer shall on the related Determination Date calculate the Available Funds, the Principal Payment Amount, the Class A-1 Payment Amount, the Class A-1 Interest Payment Amount, the Class A-2 Payment Amount, the Class A-2 Interest Payment Amount, the Class A-3 Payment Amount, the Class A-3 Interest Payment Amount, the Class A-4 Payment Amount, the Class A-4 Interest Payment Amount, the Class C Interest Payment Amount, the Class C Principal Deficiency Amount, the Supplemental Enhancement Account Investment Earnings Amount, the Class C Interest Carryover Shortfall, if any, the Class C Supplemental Interest Payment Amount, if any, the Monthly Dealer Participation Fee Payment Amount, and, based on the Available Funds and the other amounts available for payment on such Payment Date, determine the amount payable to the Noteholders, the Class C Certificateholder and the Class R Certificateholder.

 

(c)  On each Payment Date, the Trust Collateral Agent shall (x) distribute all amounts delivered by the Note Insurer to the Trust Collateral Agent for deposit into the Collection Account pursuant to Section 5.9 for payment in the amounts and priority as directed by the Note Insurer, and (y) (based on the information contained in the Servicer's Certificate delivered on the related Determination Date pursuant to Section 4.9 upon which the Trust Collateral Agent may conclusively rely) subject to subsection (e) hereof, make the following distributions from the Available Funds withdrawn from the Note Account and from the other sources described below in the following order of priority:

 

(i) first, to LBAC, the Monthly Dealer Participation Fee Payment Amount and all unpaid Monthly Dealer Participation Fee Payment Amounts from prior Collection Periods and second, to the Servicer, from the Available Funds (as such Available Funds have been reduced by payments made pursuant to subclause first of this clause (i)), the Servicing Fee, the Supplemental Servicing Fee and all unpaid Servicing Fees and Supplemental Servicing Fees from prior Collection Periods and, if the Available Funds are insufficient to pay such Servicing Fees and Supplemental Servicing Fees from prior Collection Periods, the Servicer will receive such deficiency from the Deficiency Claim Amount with respect to such Payment Date, if any, in the following order of priority, first, from amounts on deposit in the Spread Account, to the extent received by the Trust Collateral Agent from the Collateral Agent, and second, from amounts on deposit in the Supplemental Enhancement Account, to the extent withdrawn by the Trust Collateral Agent and deposited into the Collection Account;

 

 

(ii) to the Indenture Trustee, the Custodian and the Back-up Servicer from the Available Funds (as such Available Funds have been reduced by payments made pursuant to clause (i) above), the Indenture Trustee Fee, the Custodian Fee and the Back-up Servicer Fee, respectively, and all unpaid Indenture Trustee Fees, Custodian Fees and Back-up Servicer Fees from prior Collection Periods and, if the Available Funds are insufficient to pay such amounts, the Indenture Trustee, the Custodian and the Back-up Servicer will receive such deficiency from the remaining portion of the Deficiency Claim Amount with respect to such Payment Date, if any, in the following order of priority, first, from amounts on deposit in the Spread Account, to the extent received by the Trust Collateral Agent from the Collateral Agent, and second, from amounts on deposit in the Supplemental Enhancement Account, to the extent withdrawn by the Trust Collateral Agent and deposited into the Collection Account, after application thereof pursuant to clause (i) above;

 

(iii) to the Class A-1 Noteholders, the Class A-2 Noteholders, the Class A-3 Noteholders and the Class A-4 Noteholders, pro rata based on the interest due on each such class of Notes, from the Available Funds (as such Available Funds have been reduced by payments made pursuant to clauses (i) and (ii) above), an amount equal to the Class A-1 Note Interest, the Class A-2 Note Interest, the Class A-3 Note Interest and the Class A-4 Note Interest (calculated (i) with respect to the Class A-1 Notes on each Payment Date, on the basis of the actual number of days elapsed during such Accrual Period based on a 360 day year, or with respect to the first Payment Date, 30 days and (ii) with respect to the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes on each Payment Date, on the basis of a 360-day year consisting of twelve 30-day months, with respect to such Payment Date (plus (without duplication) interest on any outstanding Class A-1 Interest Carryover Shortfall, Class A-2 Interest Carryover Shortfall, Class A-3 Interest Carryover Shortfall or Class A-4 Interest Carryover Shortfall, if any, to the extent permitted by applicable law, at the Class A-1 Note Rate, the Class A-2 Note Rate, the Class A-3 Note Rate or the Class A-4 Note Rate, as applicable, for the related Accrual Period (calculated (i) with respect to the Class A-1 Notes on each Payment Date, on the basis of the actual number of days elapsed during such Accrual Period based on a 360 day year (or, with respect to the first Payment Date, 30 days) and (ii) with respect to the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes on each Payment Date, on the basis of a 360-day year consisting of twelve 30-day months and, if the Available Funds are insufficient to pay such amounts, the Class A Noteholders will receive such deficiency from the following sources in the following order of priority: (A) from the remaining portion of the Deficiency Claim Amount with respect to such Payment Date, if any, in the following order of priority, first, from amounts on deposit in the Spread Account, to the extent received by the Trust Collateral Agent from the Collateral Agent, and second, from amounts on deposit in the Supplemental Enhancement Account, to the extent withdrawn by the Trust Collateral Agent and deposited into the Collection Account, after application thereof pursuant to clauses (i) and (ii) above and (B) from the Policy Claim Amount with respect to such Payment Date, if any, received by the Trust Collateral Agent from the Note Insurer;

 

 

(iv) from the Available Funds (as such Available Funds have been reduced by payments made pursuant to clauses (i) through (iii) above) and, if such Payment Date is the Final Funding Period Payment Date, from the Mandatory Special Redemption, if any, first, to the Class A-1 Noteholders, until the Class A-1 Note Balance has been reduced to zero, an amount equal to the Principal Payment Amount with respect to such Payment Date, second, to the Class A-2 Noteholders, after the Class A-1 Note Balance has been reduced to zero, an amount equal to the remaining Principal Payment Amount with respect to such Payment Date, if any, third, to the Class A-3 Noteholders, after the Class A-2 Note Balance has been reduced to zero, an amount equal to the remaining Principal Payment Amount with respect to such Payment Date, if any, and fourth, to the Class A-4 Noteholders, after the Class A-3 Note Balance has been reduced to zero, an amount equal to the remaining Principal Payment Amount with respect to such Payment Date, if any, and, if the Available Funds are insufficient to pay such amounts, the Class A Noteholders will receive such deficiency from the following sources in the following order of priority: (A) from the remaining portion of the Deficiency Claim Amount with respect to such Payment Date, if any, in the following order of priority, first, from amounts on deposit in the Spread Account, to the extent received by the Trust Collateral Agent from the Collateral Agent, and second, from amounts on deposit in the Supplemental Enhancement Account, to the extent withdrawn by the Trust Collateral Agent and deposited into the Collection Account after application thereof pursuant to clauses (i) through (iii) above, plus, (B) the remaining portion of the Policy Claim Amount with respect to such Payment Date, if any, after application thereof pursuant to clause (iii) above;

 

(v) to the Note Insurer, from the Available Funds (as such Available Funds have been reduced by payments made pursuant to clauses (i) through (iv) above), an amount equal to the Reimbursement Obligations (other than any accrued and unpaid Premium) and, if the Available Funds are insufficient to pay such Reimbursement Obligations, the Note Insurer shall receive such deficiency from the remaining portion of the Deficiency Claim Amount with respect to such Payment Date, if any, in the following order of priority, first, from amounts on deposit in the Spread Account to the extent received by the Trust Collateral Agent from the Collateral Agent, and second, from amounts on deposit in the Supplemental Enhancement Account, to the extent withdrawn by the Trust Collateral Agent and deposited into the Collection Account, after application thereof pursuant to clauses (i) through (iv) above;

 

(vi) to the Note Insurer, from the Available Funds (as such Available Funds have been reduced by payments made pursuant to clauses (i) through (v) above), any accrued and unpaid Premium and, if the Available Funds are insufficient the Note Insurer shall receive such deficiency from the remaining portion of the Deficiency Claim Amount with respect to such Payment Date, if any, in the following order of priority, first, from amounts on deposit in the Spread Account to the extent received by the Trust Collateral Agent from the Collateral Agent, and second, from amounts on deposit in the Supplemental Enhancement Account, to the extent withdrawn by the Trust Collateral Agent and deposited into the Collection Account, after application thereof pursuant to clauses (i) through (v) above;

 

 

(vii)  to the Class C Certificateholder (a) from the Available Funds (as such Available Funds have been reduced by payments made pursuant to clauses (i) through (vi) above), an amount equal to the Class C Interest Payment Amount and (b) from the Supplemental Enhancement Account, the Supplemental Enhancement Account Investment Earnings Amount;

 

(viii) to the Collateral Agent, for deposit in the Supplemental Enhancement Account, from the Available Funds (as such Available Funds have been reduced by payments made pursuant to clauses (i) through (vii) above) reimbursement for any previous unreimbursed withdrawals from such account (other than (x) Supplemental Enhancement Account Investment Earnings Amounts distributed to the Class C Certificateholder pursuant to clause (vii) above on such Payment Date or prior Payment Dates and (y) Supplemental Enhancement Account Release Amounts distributed to the Class C Certificateholder pursuant to clause (xi) below on prior Payment Dates);

 

(ix) first, to the Trust Collateral Agent, the Indenture Trustee, the Back-up Servicer and the Custodian, as applicable, from the Available Funds (as such Available Funds have been reduced by payments made pursuant to clauses (i) through (viii) above) all reasonable out-of-pocket expenses of the Trust Collateral Agent, the Indenture Trustee, the Back-up Servicer and the Custodian (including, but not limited to, reasonable counsel fees and expenses), including, without limitation, costs and expenses required to be paid by the Servicer to the Back-up Servicer under Section 9.2(a), to the extent not paid by the Servicer, and all unpaid reasonable out-of-pocket expenses of the Trust Collateral Agent, the Indenture Trustee, the Back-up Servicer and the Custodian (including, but not limited to, reasonable counsel fees and expenses) from prior Collection Periods; provided, however, that unless an Event of Default shall have occurred and be continuing, expenses payable to the Trust Collateral Agent, the Indenture Trustee, the Back-up Servicer and the Custodian pursuant to this subclause first of clause (ix) shall be limited to a combined aggregate amount of $50,000 per annum, and second to the Back-up Servicer, from the Available Funds (as such Available Funds have been reduced by payments made pursuant to clauses (i) through (viii) above and subclause first of this clause (ix)), in the event that the Back-up Servicer shall have assumed the obligations of Servicer pursuant to Section 9.2(a) and the Servicer fails to pay the Back-up Servicer for system conversion expenses as required by said section, an aggregate amount not to exceed $100,000 in payment of such system conversion expenses;

 

(x) to the Collateral Agent, for deposit in the Spread Account, the remaining Available Funds (as such Available Funds have been reduced by payments pursuant to clauses (i) through (ix) above), if any; and

 

(xi) to the Class C Certificateholder, from the Supplemental Enhancement  Account Release Amount, until the Class C Certificate Balance is reduced to zero and (without duplication) any Class C Principal Deficiency Amount has been paid in full.

 

(d)  In addition, on each Payment Date, after giving effect to the payments specified in clauses (i) through (x) of Section 5.6(c), the Trust Collateral Agent (based on the information contained in the Servicer's Certificate delivered on the related Determination Date pursuant to Section 4.9 upon which the Trust Collateral Agent may conclusively rely) shall make the following payments, from the Spread Account Release Amount, if any, in the following order of priority:

 

(i)  first, to the Class A-1 Noteholders, until the Class A-1 Note Balance has been reduced to zero, second, to the Class A-2 Noteholders, after the Class A-1 Note Balance has been reduced to zero, third, to the Class A-3 Noteholders, after the Class A-2 Note Balance has been reduced to zero, and fourth, to the Class A-4 Noteholders, after the Class A-3 Note Balance has been reduced to zero, in reduction of the Class A-1 Note Balance, the Class A-2 Note Balance, the Class A-3 Note Balance and the Class A-4 Note Balance, as applicable, until the Overcollateralization Amount is equal to the Required Overcollateralization Target;

 

(ii) to the Class C Certificateholder, from the remaining Spread Account Release Amount (as such Spread Account Release Amount has been reduced by payments pursuant to clause (i) above), the Class C Interest Carryover Shortfall and any Class C Supplemental Interest;

 

(iii) if the Total Enhancement Amount exceeds the Required Total Enhancement Amount after the distributions pursuant to Sections 5.6(c)(i) through (xi) have been made first, to the Class C Certificateholder, from any remaining amounts, any amounts due and unpaid on the Class C Certificate, and second, to the Class R Certificateholder.

 

(e)  Each Noteholder, by its acceptance of its Note, will be deemed to have consented to the provisions of Sections 5.6(c) and 5.6(d) relating to the priority of payments, and will be further deemed to have acknowledged that no property rights in any amount or the proceeds of any such amount shall vest in such Noteholder until such amounts have been distributed to such Noteholder pursuant to such provisions; provided, that the foregoing shall not restrict the right of any Noteholder, upon compliance with the provisions hereof from seeking to compel the performance of the provisions hereof by the parties hereto. Each Noteholder, by its acceptance of its Note, will be deemed to have further agreed that withdrawals of funds by the Collateral Agent from the Spread Account for application hereunder, shall be made in accordance with the provisions of the Spread Account Agreement.

 

In furtherance of and not in limitation of the foregoing, each Certificateholder by acceptance of its Certificate, specifically acknowledges that no amounts shall be received by it, nor shall it have any right to receive any amounts, unless and until such amounts have been distributed pursuant to Sections 5.6(c), 5.6(d) and 5.12 (in the case of the Class C Certificateholder) above for payment to such Certificateholder. Each Certificateholder, by its acceptance of its Certificate, further specifically acknowledges that it has no right to or interest in any moneys at any time held in the Supplemental Enhancement Account or the Spread Account prior to the release of such moneys as aforesaid, such moneys being held in trust for the benefit of the Class A Noteholders and the Note Insurer as their interests may appear (other than any Supplemental Enhancement Account Investment Earnings Amounts, which are being held in trust for the exclusive benefit of the Class C Certificateholder) prior to such release.

 

 

(f)  Notwithstanding the foregoing, in the event that it is ever determined that any property held in the Spread Account constitutes a pledge of collateral, then the provisions of this Agreement and the Spread Account Agreement shall be considered to constitute a security agreement and the Transferor and the Class R Certificateholder hereby grant to the Collateral Agent and to the Trust Collateral Agent, respectively, a first priority perfected security interest in such amounts, to be applied as set forth in Section 3.03(b) of the Spread Account Agreement. In addition, the Class R Certificateholder, by acceptance of its Class R Certificate, hereby appoints the Transferor as its agent to pledge a first priority perfected security interest in the Spread Account, and any property held therein from time to time to the Collateral Agent for the benefit of the Trust Collateral Agent and the Note Insurer pursuant to the Spread Account Agreement and agrees to execute and deliver such instruments of conveyance, assignment, grant, confirmation, etc., as well as any financing statements, in each case as the Note Insurer shall consider reasonably necessary in order to perfect the Collateral Agent's Security Interest in the Collateral (as such terms are defined in the Spread Account Agreement).

 

(g)  Subject to Section 11.1 respecting the final payment upon retirement of each Note, the Servicer shall on each Payment Date instruct the Trust Collateral Agent in writing to distribute to each Noteholder of record on the preceding Record Date either (i) by wire transfer, in immediately available funds to the account of such Holder at a bank or other entity having appropriate facilities therefor, if such Noteholder is the Clearing Agency or such Holder's Notes in the aggregate evidence an original Note Balance of at least $1,000,000, and if such Noteholder shall have provided to the Trust Collateral Agent appropriate instructions prior to the Record Date for such Payment Date, or (ii) by check mailed to such Noteholder at the address of such Holder appearing in the Note Register, such Holder's pro rata share (based on the outstanding Note Balance) of (i) the Principal Payment Amount plus (ii) the Class A-1 Interest Payment Amount, the Class A-2 Interest Payment Amount, the Class A-3 Interest Payment Amount and the Class A-4 Interest Payment Amount, as applicable, to be paid to such Class of Notes in accordance with the Servicer's Certificate.

 

SECTION 5.7.   Statements to Noteholders and the Class C Certificateholder; Tax Returns.

 

(a)  With each payment from the Note Account to the Noteholders and Class C Certificateholder made on a Payment Date, the Servicer shall provide to the Note Insurer, the Transferor, the Indenture Trustee, each Rating Agency and the Trust Collateral Agent (the Trust Collateral Agent to make available to each Noteholder and the Class C Certificateholder of record on its website at www.CTSLink.com or through such other means as the Trust Collateral Agent believes will make the distribution more convenient and/or accessible with the consent of the Note Insurer (such consent not to be unreasonably withheld) and the Trust Collateral Agent shall provide timely and adequate notification to all Noteholders and the Class C Certificateholder regarding any such changes) the Servicer's Certificate substantially in the form of Exhibit B-1 hereto, setting forth, at least the following information as to the Notes and the Class C Certificate, to the extent applicable:

 

(i) the amount of the payment allocable to principal of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes, respectively, and in the aggregate with respect to all classes of Notes;

 

 

(ii) the amount of the payment, if any, allocable from the Supplemental Enhancement Account to principal of the Class C Certificate, including any Class C Principal Deficiency Amounts;

 

(iii) the amount of the payment allocable to interest on the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4 Notes, respectively, and in the aggregate with respect to each class of Notes;

 

(iv) the amount of the payment allocable to interest and any Supplemental Enhancement Account Investment Earnings Amounts on the Class C Certificate;

 

(v) the number of Receivables, the weighted average APR of the Receivables, the weighted average maturity of the Receivables, the Pool Balance, the Class A-1 Pool Factor, the Class A-2 Pool Factor, the Class A-3 Pool Factor and the Class A-4 Pool Factor, as of the close of business on the last day of the preceding Collection Period;

 

(vi) the Class A-1 Note Balance, the Class A-2 Note Balance, the Class A-3 Note Balance, the Class A-4 Note Balance, the Note Balance, the Class C Certificate Balance and the outstanding Class C Principal Deficiency Amount, if any, as of the close of business on the last day of the preceding Collection Period, after giving effect to payments allocated to principal reported under clause (i) or clause (ii) above;

 

(vii) the amount of the Monthly Dealer Participation Fee Payment Amount paid to LBAC, the amount of the Servicing Fee paid to the Servicer and the amount of the Back-up Servicer Fee paid to the Back-up Servicer with respect to the related Collection Period, the amount of any unpaid Servicing Fees and any unpaid Back-up Servicer Fees and the change in such amounts from the prior Payment Date;

 

(viii) the amount of the Class A-1 Interest Carryover Shortfall, if applicable, the Class A-2 Interest Carryover Shortfall, if applicable, the Class A-3 Interest Carryover Shortfall, if applicable, the Class A-4 Interest Carryover Shortfall, if applicable, the Class C Interest Carryover Shortfall, if applicable, and the Class C Supplemental Interest Payment Amount, if applicable, on such Payment Date and the change in such amounts from the prior Payment Date;

 

(ix) the amount paid, if any, to the Class A Noteholders under the Policy for such Payment Date;

 

(x) the amount paid to the Note Insurer on such Payment Date in respect of Premium and Reimbursement Obligations;

 

(xi) the amount in the Spread Account;

 

(xii) the amount in the Supplemental Enhancement Account;

 

(xiii) the number of Receivables and the aggregate outstanding principal amount scheduled to be paid thereon, for which the related Obligors are delinquent in making Scheduled Receivable Payments between 30 and 59 days, 60 and 89 days, 90 and 119 days and 120 days or more (in each case calculated on the basis of a 360-day year consisting of twelve 30-day months), and the percentage of the aggregate principal amount which such delinquencies represent;

 

 

(xiv) the number and the aggregate Purchase Amount of Receivables repurchased by the Originator or purchased by the Servicer during the related Collection Period;

 

(xv) the cumulative number and amount of Liquidated Receivables (including the cumulative number and amount of Sold Receivables), the cumulative amount of any Liquidation Proceeds and Recoveries, since the Initial Cutoff Date to the last day of the related Collection Period, the number and amount of Liquidated Receivables for the related Collection Period and the amount of Recoveries in the related Collection Period;

 

(xvi) the Average Delinquency Ratio, the Cumulative Default Rate and the Cumulative Loss Rate (as such terms are defined in the Spread Account Agreement) for such Payment Date;

 

(xvii) whether any Trigger Event has occurred as of such Determination Date;

 

(xviii) whether any Trigger Event that may have occurred as of a prior Determination Date is Deemed Cured (as such term is defined in the Spread Account Agreement) or otherwise waived as of such Determination Date;

 

(xix) whether an Insurance Agreement Event of Default has occurred;

 

(xx) the number and amount of Cram Down Losses, the number and dollar amount of repossessions, the aging of repossession inventory and the dollar amount of Recoveries;

 

(xxi) for Payment Dates occurring prior to the end of the Funding Period and on the Final Funding Period Payment Date, the amount withdrawn from the Pre-Funding Account to purchase Subsequent Receivables during the related Collection Period and the remaining Pre-Funded Amount on deposit in the Pre-Funding Account; and

 

(xxii) for the Final Funding Period Payment Date, the amount of any Mandatory Special Redemption distributed as a payment of principal to Noteholders on such Payment Date.

 

Each amount set forth pursuant to subclauses (i), (ii), (iii), (iv), (vii) and (viii) above shall be expressed in the aggregate and as a dollar amount per $1,000 of original principal balance of a Note or Certificate, as applicable.

 

(b)  No later than January 31 of each calendar year, commencing January 31, 2008, the Servicer shall send to the Indenture Trustee and the Trust Collateral Agent, and the Trust Collateral Agent shall, provided it has received the necessary information from the Servicer, promptly thereafter furnish to the Class C Certificateholder and each Person who at any time during the preceding calendar year was a Noteholder of record and received any payment thereon (a) a report (prepared by the Servicer) as to the aggregate of amounts reported pursuant to subclauses (i), (ii), (iii), (iv), (vii) and (viii) of Section 5.7(a) for such preceding calendar year or applicable portion thereof during which such person was a Noteholder or a Class C Certificateholder, and (b) such information as may be reasonably requested by the Noteholders or the Class C Certificateholder or as may be required by the Code and regulations thereunder, to enable such Holder to prepare its federal and state income tax returns. The obligation of the Trust Collateral Agent set forth in this paragraph shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Servicer pursuant to any requirements of the Code.

 

 

(c)  The Servicer, at its own expense, shall cause a firm of nationally recognized accountants to prepare any tax returns required to be filed by the Issuer, and the Issuer shall execute and file such returns if requested to do so by the Servicer. The Trust Collateral Agent, upon request, will furnish the Servicer with all such information actually known to the Trust Collateral Agent as may be reasonably requested by the Servicer in connection with the preparation of all tax returns of the Issuer.

 

SECTION 5.8.   Reliance on Information from the Servicer. Notwithstanding anything to the contrary contained in this Agreement, all payments from any of the accounts described in this Article V and any transfer of amounts between such accounts shall be made by the Trust Collateral Agent based on the information provided to the Trust Collateral Agent by the Servicer in writing, whether by way of a Servicer's Certificate or otherwise (upon which the Trust Collateral Agent may conclusively rely).

 

SECTION 5.9.   Optional Deposits by the Note Insurer. The Note Insurer shall at any time, and from time to time, with respect to a Payment Date, have the option to deliver amounts to the Trust Collateral Agent for deposit into the Collection Account for any of the following purposes: (i) to provide funds in respect of the payment of fees or expenses of any provider of services to the Issuer with respect to such Payment Date, (ii) to distribute as a component of the Principal Payment Amount to the extent that the Note Balance as of the Determination Date preceding such Payment Date exceeds the sum of the Pool Balance as of such Determination Date and the remaining Pre-Funded Amount or (iii) to include such amount as part of the Payment Amount for such Payment Date to the extent that without such amount a draw would be required to be made on the Policy.

 

SECTION 5.10.   Spread Account. The Transferor agrees, simultaneously with the execution and delivery of this Agreement, to execute and deliver the Spread Account Agreement and, pursuant to the terms thereof, to deposit the Initial Spread Account Deposit in the Spread Account on the Closing Date. In addition, on each Subsequent Transfer Date, pursuant to the terms of the Spread Account Agreement, the Transferor shall deposit the related Subsequent Spread Account Deposit in the Spread Account. Although the Transferor as Class R Certificateholder, has pledged the Spread Account to the Collateral Agent, pursuant to the Spread Account Agreement, the Spread Account shall not under any circumstances be deemed to be a part of or otherwise includible in the Issuer or the Trust Assets.

 

 

SECTION 5.11.   Withdrawals from Supplemental Enhancement Account and Spread Account.

 

(a)  In the event that the Servicer's Certificate with respect to any Determination Date shall state that the amount of the Available Funds with respect to such Determination Date are less than the sum of the amounts payable on the related Payment Date pursuant to clauses (i) through (vi) of Section 5.6(c) (such deficiency being a "Deficiency Claim Amount") then on the Deficiency Claim Date immediately preceding such Payment Date, the Trust Collateral Agent shall deliver to the Collateral Agent, the Note Insurer, the Fiscal Agent (as such term is defined in the Insurance Agreement), if any, the Servicer, by hand delivery, telex or facsimile transmission, a written notice (a "Deficiency Notice") specifying the Deficiency Claim Amount for such Payment Date. Such Deficiency Notice shall (i) direct the Collateral Agent to remit such Deficiency Claim Amount (to the extent of the funds available to be distributed pursuant to the Spread Account Agreement, to the Trust Collateral Agent for deposit in the Collection Account and (ii) if not sufficient, set forth the amount to be withdrawn by the Trust Collateral Agent from the Supplemental Enhancement Account pursuant to Section 5.12 hereof; provided, that no Deficiency Claim Amount shall be paid for any principal payable pursuant to clause (iv) of Section 5.6(c) unless the Overcollateralization Amount is less than zero or such Payment Date is a Final Scheduled Payment Date for any class of Class A Notes.

 

Any Deficiency Notice shall be delivered by 12:00 p.m., New York City time, on the related Deficiency Claim Date. The amounts distributed by the Collateral Agent to the Trust Collateral Agent pursuant to a Deficiency Notice shall be deposited by the Trust Collateral Agent into the Collection Account pursuant to Section 5.5 and 5.12.

 

SECTION 5.12.   Supplemental Enhancement Account. In order to enhance the amounts available to make required payments to the Class A Noteholders and to make principal payments to the holder of the Class C Certificate, there shall be established and maintained with the Trust Collateral Agent an Eligible Account entitled, "Supplemental Enhancement Account--Long Beach Acceptance Auto Receivables Trust 2007-A", which will include the money and other property deposited and held therein pursuant to Section 5.6(c)(viii), and this Section 5.12.

 

(a)  On the Closing Date, the Transferor shall deposit the Supplemental Enhancement Account Deposit into the Supplemental Enhancement Account.

 

(b)  The amounts on deposit in the Supplemental Enhancement Account shall be available for payment in accordance with and subject to Section 5.6(c) above and 5.12(c) below. Upon termination of this Agreement and the payment of all amounts due under this Agreement to the Class A Noteholders, any remaining amounts in the Supplemental Enhancement Account will be distributed to the Class C Certificateholder. Upon any such payment to the Class C Certificateholder, the Class A Noteholders shall not have any further rights in, or claims to, such amounts.

 

(c)  If on any Payment Date (based on the Servicer's Certificate delivered on the related Determination Date by the Servicer pursuant to Section 4.9, upon which the Trust Collateral Agent may conclusively rely) the Available Funds, together with amounts on deposit in the Spread Account, are insufficient to pay the full amount described in clauses (i) through (vi) of Section 5.6(c), the Trust Collateral Agent shall withdraw from the Supplemental Enhancement Account an amount equal to such insufficiency and deliver the amount so withdrawn to the Trust Collateral Agent for deposit in the Note Account for application in respect of such insufficiency; provided, that no Deficiency Claim Amount shall be paid for any principal payable pursuant to clause (iv) of Section 5.6(c) unless the Overcollateralization Amount is less than zero or such Payment Date is a Final Scheduled Payment Date for any class of Class A Notes. On any Payment Date (after making all distributions pursuant to Section 5.6(c)(i) through (x) on such Payment Date) on which the Total Enhancement Amount exceeds the Required Total Enhancement Amount, the Trust Collateral Agent shall withdraw the amount of such excess from the Supplemental Enhancement Account and distribute such amount to the Class C Certificateholder.

 

 

SECTION 5.13.   Pre-Funding Account.

 

(a)  Pursuant to Section 5.1(b), the Trust Collateral Agent shall establish and maintain the Pre-Funding Account as an Eligible Account in the name of the Trust for the benefit of the Noteholders, the Class C Certificateholder and the Note Insurer.

 

(b)  On the Closing Date, the Transferor will deposit in the Pre-Funding Account an amount equal to the Original Pre-Funded Amount from the proceeds of the sale of the Notes. On each Subsequent Transfer Date, the Servicer shall instruct the Trust Collateral Agent in writing to withdraw from the Pre-Funding Account an amount equal to the aggregate Principal Balance of the Subsequent Receivables (as of the related Subsequent Cutoff Date) conveyed to the Trust on such Subsequent Transfer Date and pay such amount to or upon the order of the Transferor upon satisfaction of the conditions set forth in this Agreement and in the related Transfer Agreement with respect to such transfer.

 

(c)  If (i) the Pre-Funded Amount has not been reduced to zero by the close of business on the last day of the Funding Period, after giving effect to any reductions in the Pre-Funded Amount on such last day of the Funding Period pursuant to Section 5.13(b), the Servicer shall instruct the Trust Collateral Agent in writing to withdraw such remaining portion of the Pre-Funded Amount from the Pre-Funding Account and deposit it in the Note Account on the Final Funding Period Payment Date to be applied as a partial redemption of the Notes, in addition to the payment of principal and interest that otherwise would be payable with respect to such Notes on such Payment Date, in accordance with Section 5.6(c)(iv).

 

SECTION 5.14.   Securities Accounts. The Trust Collateral Agent acknowledges that any account held by it hereunder is a "securities account" as defined in the Uniform Commercial Code as in effect in New York (the "New York UCC"), and that it shall be acting as a "securities intermediary" of the Indenture Trustee with respect to each such account held by it. The parties hereto agree that the Supplemental Enhancement Account shall be governed by the laws of the State of New York, and regardless of any provision in any other agreement, the "securities intermediary's jurisdiction" (within the meaning of Section 8-110 of the UCC) shall be the State of New York. The Trust Collateral Agent acknowledges and agrees that (a) each item of property (whether investment property, financial asset, security, instrument or cash) credited to the Supplemental Enhancement Account shall be treated as a "financial asset" within the meaning of Section 8-102(a)(9) of the New York UCC and (b) if at any time the Trust Collateral Agent shall receive any entitlement order from the Indenture Trustee directing transfer or redemption of any financial asset relating to the Supplemental Enhancement Account, the Trust Collateral Agent shall comply with such entitlement order without further consent by LBAC or any other person.

 

 

ARTICLE VI

THE POLICY

 

SECTION 6.1.   Policy. The Originator agrees, simultaneously with the execution and delivery of this Agreement, to cause the Note Insurer to issue the Policy for the benefit of the Class A Noteholders in accordance with the terms thereof.

 

SECTION 6.2.   Claims Under Policy.

 

(a)  In the event that the Trust Collateral Agent has delivered a Deficiency Notice with respect to any Determination Date, the Trust Collateral Agent shall determine on the related Draw Date whether the sum of (i) the amount of Available Funds with respect to such Determination Date (as stated in the Servicer's Certificate with respect to such Determination Date) plus (ii) the amount of the Deficiency Claim Amount, if any, available to be distributed pursuant to the Spread Account Agreement by the Collateral Agent to the Trust Collateral Agent pursuant to a Deficiency Notice delivered with respect to such Payment Date (as stated in the certificate delivered on the immediately preceding Deficiency Claim Date by the Collateral Agent pursuant to Section 3.03(a) of the Spread Account Agreement) plus (iii) the amount of the remaining Deficiency Claim Amount, if any, available to be withdrawn from the Supplemental Enhancement Amount would be insufficient, after giving effect to the payments required by Section 5.6(c)(i) and (ii), to pay the Scheduled Payments for the related Payment Date, then in such event the Trust Collateral Agent shall furnish to the Note Insurer no later than 12:00 noon New York City time on the related Draw Date a completed Notice of Claim in the amount of the shortfall in amounts so available to pay the Scheduled Payments with respect to such Payment Date (the amount of any such shortfall being hereinafter referred to as the "Policy Claim Amount"). Amounts paid by the Note Insurer under the Policy shall be deposited by the Trust Collateral Agent into the Policy Payments Account and thereafter into the Note Account for payment to Class A Noteholders on the related Payment Date (or promptly following payment on a later date as set forth in the Policy).

 

(b)  Any notice delivered by the Trust Collateral Agent to the Note Insurer pursuant to Section 6.2(a) shall specify the Policy Claim Amount claimed under the Policy and shall constitute a "Notice of Claim" under the Policy. In accordance with the provisions of the Policy, the Note Insurer is required to pay to the Trust Collateral Agent the Policy Claim Amount properly claimed thereunder by 12:00 noon, New York City time, on the later of (i) the third Business Day (as defined in the Policy) following receipt on a Business Day (as defined in the Policy) of the Notice of Claim, and (ii) the applicable Payment Date. Any payment made by the Note Insurer under the Policy shall be applied solely to the payment of the Class A Notes, and for no other purpose.

 

(c)  The Trust Collateral Agent shall (i) receive as attorney-in-fact of each Class A Noteholder any Policy Claim Amount from the Note Insurer and (ii) deposit the same in the Policy Payments Account for disbursement to the Noteholders as set forth in clauses (iii) and (iv) of Section 5.6(c). Any and all Policy Claim Amounts disbursed by the Trust Collateral Agent from claims made under the Policy shall not be considered payment by the Issuer or from the Spread Account with respect to such Class A Notes, and shall not discharge the obligations of the Issuer with respect thereto. The Note Insurer shall, to the extent it makes any payment with respect to the Class A Notes, become subrogated to the rights of the recipients of such payments to the extent of such payments. Subject to and conditioned upon any payment with respect to the Class A Notes by or on behalf of the Note Insurer, each Class A Noteholder shall be deemed, without further action, to have directed the Trust Collateral Agent to assign to the Note Insurer all rights to the payment of interest or principal with respect to the Class A Notes which are then due for payment to the extent of all payments made by the Note Insurer and the Note Insurer may exercise any option, vote, right, power or the like with respect to the Class A Notes to the extent that it has made payment pursuant to the Policy. Notwithstanding the foregoing, the order of priority of payments to be made pursuant to Section 5.6(c) shall not be modified by this clause (c). To evidence such subrogation, the Note Registrar shall note the Note Insurer's rights as subrogee upon the register of Class A Noteholders upon receipt from the Note Insurer of proof of payment by the Note Insurer of any Scheduled Payment for that class.

 

 

(d)  The Trust Collateral Agent shall be entitled, but not obligated, to enforce on behalf of the Class A Noteholders the obligations of the Note Insurer under the Policy. Notwithstanding any other provision of this Agreement, the Class A Noteholders are not entitled to institute proceedings directly against the Note Insurer.

 

SECTION 6.3.   Preference Claims; Direction of Proceedings.

 

(a)  In the event that the Trust Collateral Agent has received a certified copy of an order of the appropriate court that any Scheduled Payment paid on a Class A Note has been avoided in whole or in part as a preference payment under applicable bankruptcy law, the Trust Collateral Agent shall so notify the Note Insurer, shall comply with the provisions of the Policy to obtain payment by the Note Insurer of such avoided payment, and shall, at the time it provides notice to the Note Insurer, comply with the provisions of the Policy to obtain payment by the Note Insurer, notify Holders of the Class A Notes by mail that, in the event that any Class A Noteholder's payment is so recoverable, such Class A Noteholder will be entitled to payment pursuant to the terms of the Policy. Pursuant to the terms of the Policy, the Note Insurer will make such payment on behalf of the Class A Noteholder to the receiver, conservator, debtor-in-possession or trustee in bankruptcy named in the Order (as defined in the Policy) and not to the Trust Collateral Agent or any Class A Noteholder directly (unless a Class A Noteholder has previously paid such payment to the receiver, conservator, debtor-in-possession or trustee in bankruptcy, in which case the Note Insurer will make such payment to the Trust Collateral Agent for payment, in accordance with the instructions to be provided by the Note Insurer, to such Class A Noteholder upon proof of such payment reasonably satisfactory to the Note Insurer).

 

(b)  Each Notice of Claim shall provide that the Trust Collateral Agent, on its behalf and on behalf of the Class A Noteholders, thereby appoints the Note Insurer as agent and attorney-in-fact for the Trust Collateral Agent and each Class A Noteholder in any legal proceeding with respect to the Class A Notes. The Trust Collateral Agent shall promptly notify the Note Insurer of any proceeding or the institution of any action (of which a Responsible Officer of the Trust Collateral Agent has actual knowledge) seeking the avoidance as a preferential transfer under applicable bankruptcy, insolvency, receivership, rehabilitation or similar law (a "Preference Claim") of any payment made with respect to the Class A Notes. Each Holder of Class A Notes, by its purchase of Class A Notes, and the Trust Collateral Agent hereby agree that so long as a Note Insurer Default shall not have occurred and be continuing, the Note Insurer may at any time during the continuation of any proceeding relating to a Preference Claim direct all matters relating to such Preference Claim including, without limitation, (i) the direction of any appeal of any order relating to any Preference Claim and (ii) the posting of any surety, supersedeas or performance bond pending any such appeal at the expense of the Note Insurer, but subject to reimbursement as provided in the Insurance Agreement. In addition, and without limitation of the foregoing, as set forth in Section 6.2(c), the Note Insurer shall be subrogated to, and each Class A Noteholder and the Trust Collateral Agent hereby delegate and assign, to the fullest extent permitted by law, the rights of the Trust Collateral Agent and each Class A Noteholder in the conduct of any proceeding with respect to a Preference Claim, including, without limitation, all rights of any party to an adversary proceeding action with respect to any court order issued in connection with any such Preference Claim.

 

 

SECTION 6.4.   Surrender of Policy. The Trust Collateral Agent shall surrender the Policy to the Note Insurer for cancellation upon its expiration in accordance with the terms thereof.

 

ARTICLE VII

THE TRANSFEROR

 

SECTION 7.1.   Representations of the Transferor. The Transferor makes the following representations on which the Note Insurer shall be deemed to have relied in executing and delivering the Policy, on which the Class C Certificateholder shall be deemed to have relied on in purchasing the Class C Certificate and on which the Issuer is deemed to have relied in acquiring the Receivables and on which the Indenture Trustee, the Owner Trustee, the Collateral Agent, Trust Collateral Agent and Back-up Servicer may rely. The representations speak as of the execution and delivery of this Agreement and as of the Closing Date, in the case of the Initial Receivables, and as of the related Subsequent Transfer Date, in the case of the Subsequent Receivables, and shall survive the conveyance of the Receivables to the Issuer and the subsequent pledge thereof to the Indenture Trustee pursuant to the Indenture.

 

(a)  Organization and Good Standing. The Transferor has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with the corporate power and authority to conduct its business as such business is presently conducted and to execute, deliver and perform its obligations under this Agreement and the other Basic Documents to which it is a party.

 

(b)  Due Qualification. The Transferor is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions required for the performance of its obligations under this Agreement and the other Basic Documents to which it is a party other than where the failure to obtain such license or approval or qualification would not have a material adverse effect on the ability of the Transferor to perform such obligations or on any Receivable or on the interest therein of the Issuer, the Noteholders or the Note Insurer.

 

 

(c)  Power and Authority. The Transferor has the corporate power and authority to execute and deliver this Agreement and the other Basic Documents to which it is a party and to carry out their respective terms; the Transferor has full corporate power and authority to sell and assign the property sold and assigned to and deposited with the Issuer and has duly authorized such sale and assignment to the Issuer by all necessary corporate action; and the execution, delivery, and performance of this Agreement and the other Basic Documents to which it is a party have been duly authorized by the Transferor by all necessary corporate action.

 

(d)  Valid Sale; Binding Obligation. This Agreement effects a valid sale, transfer and assignment of the Initial Receivables and the other property conveyed to the Issuer pursuant to Section 2.1, and upon execution of the related Transfer Agreement and satisfaction of the conditions set forth in Section 2.2(b) hereof and in such Transfer Agreement, this Agreement, and the related Transfer Agreement will effect a valid sale, transfer and assignment of the related Subsequent Receivables and the other related property to be conveyed to the Issuer pursuant to Section 2.2 on the related Subsequent Transfer Date, in each case, enforceable against creditors of and purchasers from the Transferor; and this Agreement and the other Basic Documents to which the Transferor is a party shall constitute legal, valid and binding obligations of the Transferor enforceable in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law.

 

(e)  No Violation. The execution, delivery and performance by the Transferor of this Agreement and the other Basic Documents to which the Transferor is a party and the consummation of the transactions contemplated hereby and thereby and the fulfillment of the terms hereof and thereof do not conflict with, result in any breach of any of the terms and provisions of, nor constitute (with or without notice or lapse of time) a default under, the certificate of incorporation or by-laws of the Transferor, or any material indenture, agreement, mortgage, deed of trust, or other instrument to which the Transferor is a party or by which it is bound or any of its properties are subject; nor result in the creation or imposition of any material lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust, or other instrument (other than the Basic Documents and the Credit and Security Agreement); nor violate any law, order, rule, or regulation applicable to the Transferor of any court or of any federal or state regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over the Transferor or its properties.

 

(f)  No Proceedings. There are no proceedings or investigations pending, or to the Transferor's best knowledge, threatened, before any court, regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over the Transferor or its properties: (A) asserting the invalidity of this Agreement or the other Basic Documents to which the Transferor is a party or the Notes or any Certificates, (B) seeking to prevent the issuance of the Notes or any Certificates or the consummation of any of the transactions contemplated by this Agreement or the other Basic Documents to which the Transferor is a party, (C) seeking any determination or ruling that might materially and adversely affect the performance by the Transferor of its obligations under, or the validity or enforceability of, this Agreement or the other Basic Documents to which the Transferor is a party or the Notes or any Certificates, (D) relating to the Transferor and which might adversely affect the federal or state income, excise, franchise or similar tax attributes of the Notes or any Certificates or (E) that could have a material adverse effect on the Receivables.

 

 

(g)  No Consents. No consent, approval, authorization or order of or declaration or filing with any governmental authority is required to be obtained by the Transferor for the issuance or sale of the Notes or the Certificates or the consummation of the other transactions contemplated by this Agreement and the other Basic Documents to which the Transferor is a party, except such as have been duly made or obtained or where the failure to obtain such consent, approval, authorization, order or declaration, or to make such filing, would not have a material adverse effect on the ability of the Transferor to perform its obligations under the Basic Documents to which it is a party and would not have a material adverse effect on any Receivable or the interest therein of the Issuer, the Noteholders, the Class C Certificateholder or the Note Insurer.

 

(h)  Chief Executive Office. The Transferor hereby represents and warrants to the Trust Collateral Agent that the Transferor's principal place of business and chief executive office is, and for the four months preceding the date of this Agreement, has been, located at One Mack Centre Drive, Paramus, New Jersey 07652.

 

(i)  Transferor's Intention. The Initial Receivables and other Transferred Property are being transferred, and the Subsequent Receivables and other Subsequent Transferred Property will be transferred, with the intention of removing them from the Transferor's estate pursuant to Section 541 of the United States Bankruptcy Code, as the same may be amended from time to time.

 

SECTION 7.2.   Liability of the Transferor. The Transferor shall be liable only to the extent of the obligations specifically undertaken by the Transferor under this Agreement and the representations made by the Transferor in this Agreement.

 

SECTION 7.3.   Merger or Consolidation of, or Assumption of the Obligations of, the Transferor. Any Person (a) into which the Transferor may be merged or consolidated, (b) which may result from any merger or consolidation to which the Transferor shall be a party or (c) which may succeed to the properties and assets of the Transferor substantially as a whole, which person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Transferor under this Agreement, shall be the successor to the Transferor hereunder without the execution or filing of any document or any further act by any of the parties to this Agreement; provided, however, as a condition to the consummation of any of the transactions referred to in clauses (a), (b) or (c) above, (i) immediately after giving effect to such transaction, (x) no representation or warranty made pursuant to Section 7.1 would have been breached (for purposes hereof, such representations and warranties shall speak as of the date of the consummation of such transaction) and (y) no event that, after notice or lapse of time, or both, would become a Servicer Termination Event shall have happened and be continuing, (ii) the Transferor shall have delivered to the Note Insurer, the Indenture Trustee, the Trust Collateral Agent and the Issuer an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, merger, or succession and such agreement or assumption comply with this Section 7.3 and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, (iii) the Transferor shall have delivered to the Note Insurer, the Indenture Trustee, the Trust Collateral Agent and the Issuer an Opinion of Counsel either (A) stating that, in the opinion of such counsel, all financing statements and continuation statements and amendments thereto have been filed that are necessary fully to preserve and protect the interest of the Issuer in the Receivables, and reciting the details of such filings, or (B) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such interest, (iv) immediately after giving effect to such transaction, no Insurance Agreement Event of Default and no event that, after notice or lapse of time, or both, would become an Insurance Agreement Event of Default shall have happened and be continuing, (v) the organizational documents of the Person surviving or resulting from such transaction shall contain provisions similar to those of the Transferor's certificate of incorporation in respect of the issuance of debt, independent directors and bankruptcy remoteness and (vi) the Transferor shall have received confirmation from each Rating Agency that the then current rating of the Notes will not be downgraded as a result of such merger, consolidation or succession. A copy of such confirmation shall be provided to the Trust Collateral Agent. Notwithstanding anything herein to the contrary, the execution of the foregoing agreement of assumption and compliance with clause (i), (ii), (iii) or (iv) above shall be conditions to the consummation of the transactions referred to in clause (a), (b) or (c) above.

 

 

SECTION 7.4.   Limitation on Liability of the Transferor and Others. The Transferor and any director or officer or employee or agent of the Transferor may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Transferor shall not be under any obligation to appear in, prosecute or defend any legal action that shall not be incidental to its obligations under this Agreement, and that in its opinion may involve it in any expense or liability.

 

SECTION 7.5.   Transferor May Own Notes. The Transferor and any Person controlling, controlled by, or under common control with the Transferor may in its individual or any other capacity become the owner or pledgee of Notes with the same rights as it would have if it were not the Transferor or an affiliate thereof, except as otherwise provided in the definition of "Noteholder" set forth in Annex A hereto and as specified in Section 1.4. Notes so owned by or pledged to the Transferor or such controlling or commonly controlled Person shall have an equal and proportionate benefit under the provisions of this Agreement, without preference, priority, or distinction as among all of the Notes except as otherwise provided herein or by the definition of Noteholder.

 

ARTICLE VIII

THE SERVICER

 

SECTION 8.1.   Representations of Servicer. The Servicer, in its capacity as Servicer and Custodian (each reference to “Servicer” in this Section 8.1 includes the Servicer in its capacity as Custodian) makes the following representations on which the Note Insurer shall be deemed to have relied in executing and delivering the Policy and on which the Issuer is deemed to have relied in acquiring the Receivables and on which the Indenture Trustee is deemed to have relied on in accepting the pledge of the Receivables. The representations speak as of the execution and delivery of this Agreement and as of the Closing Date, in the case of the Initial Receivables, and as of the related Subsequent Transfer Date, in the case of the Subsequent Receivables, and shall survive the conveyance of the Receivables to the Issuer and the subsequent pledge thereof to the Indenture Trustee pursuant to the Indenture.

 

 

(i) Organization and Good Standing. The Servicer is duly organized and validly existing as a corporation in good standing under the laws of the State of Delaware, with the corporate power and authority to own its properties and to conduct its business as such properties shall be currently owned and such business is presently conducted, and had at all relevant times, and has, the corporate power, authority, and legal right to acquire, own, sell and service the Receivables and to hold the Receivable Files as custodian.

 

(ii) Due Qualification. The Servicer is duly qualified to do business as a foreign corporation in good standing, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Receivables as required by this Agreement and the performance of its other obligations under this Agreement and the other Basic Documents to which it is a party) shall require such qualifications.

 

(iii) Power and Authority. The Servicer has the power and authority to execute and deliver this Agreement and the other Basic Documents to which it is a party and to carry out their respective terms; and the execution, delivery, and performance of this Agreement and the other Basic Documents to which it is a party have been duly authorized by the Servicer by all necessary corporate action.

 

(iv) Binding Obligation. This Agreement and the other Basic Documents to which it is a party constitute legal, valid and binding obligations of the Servicer enforceable in accordance with their respective terms except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors' rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered a proceeding in equity or at law.

 

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

 

 

(vi) No Proceedings. There are no proceedings or investigations pending, or to the Servicer's best knowledge, threatened, before any court, regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over the Servicer or its properties: (A) asserting the invalidity of this Agreement or the other Basic Documents to which the Servicer is a party, the Notes or any Certificates, (B) seeking to prevent the issuance of the Notes or any Certificates or the consummation of any of the transactions contemplated by this Agreement, the Notes, any Certificates, or the other Basic Documents to which the Servicer is a party, (C) seeking any determination or ruling that might materially and adversely affect the performance by the Servicer of its obligations under, or the validity or enforceability of, this Agreement, the Notes, any Certificates or the other Basic Documents to which the Servicer is a party, (D) relating to the Servicer and which might adversely affect the Federal or State income, excise, franchise or similar tax attributes of the Notes or any Certificates or (E) that could have a material adverse effect on the Receivables.

 

(vii) No Consents. No consent, approval, authorization or order of or declaration or filing with any governmental authority is required to be obtained by the Servicer for the issuance or sale of the Notes or the Certificates or the consummation of the other transactions contemplated by this Agreement and the other Basic Documents to which the Servicer is a party, except such as have been duly made or obtained.

 

(viii) Taxes. The Servicer has filed on a timely basis all tax returns required to be filed by it and paid all taxes, to the extent that such taxes have become due.

 

(ix) Chief Executive Office. The Servicer hereby represents and warrants to the Trust Collateral Agent that the Servicer's principal place of business and chief executive office is, and for the four months preceding the date of this Agreement, has been, located at One Mack Centre Drive, Paramus, New Jersey 07652.

 

SECTION 8.2.   Indemnities of Servicer.

 

(a)  The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Servicer under this Agreement and the representations made by the Servicer herein.

 

(i) The Servicer shall defend, indemnify and hold harmless the Indenture Trustee, the Trust Collateral Agent, the Owner Trustee, the Collateral Agent, the Back-up Servicer, the Custodian, the Issuer, each Certificateholder, the Note Insurer, the Noteholders and the Transferor, and their respective officers, directors, agents and employees from and against any and all costs, expenses, losses, damages, claims, and liabilities, arising out of or resulting from the use, ownership or operation by the Servicer or any affiliate thereof of a Financed Vehicle.

 

(ii) The Servicer shall indemnify, defend and hold harmless the Indenture Trustee, the Trust Collateral Agent, the Owner Trustee, the Collateral Agent, the Back-up Servicer, the Custodian, the Issuer, the Note Insurer and the Transferor, and their respective officers, directors, agents and employees from and against any taxes (other than net income, gross receipts, franchise or other similar taxes) that may at any time be asserted against the Indenture Trustee, the Trust Collateral Agent, the Owner Trustee, the Collateral Agent, the Back-up Servicer, the Custodian, the Issuer, the Note Insurer or the Transferor, with respect to the transactions contemplated herein, including, without limitation, any sales, general corporation, tangible personal property, privilege, or license taxes and costs and expenses in defending against the same.

 

 

(iii) The Servicer shall indemnify, defend and hold harmless the Indenture Trustee, the Trust Collateral Agent, the Owner Trustee, the Collateral Agent, the Back-up Servicer, the Transferor, the Note Insurer, the Issuer, each Certificateholder and the Noteholders, and their respective officers, directors, agents and employees from and against any and all costs, expenses, losses, claims, damages and liabilities to the extent that such cost, expense, loss, claim, damage or liability arose out of, or was imposed upon the Indenture Trustee, the Trust Collateral Agent, the Owner Trustee, the Collateral Agent, the Back-up Servicer, the Custodian, the Issuer, the Transferor, the Note Insurer or the Noteholders, and their respective officers, directors, agents and employees through the negligence, willful misfeasance or bad faith of the Servicer in the performance of its duties under this Agreement or any other Basic Document to which it is a party or by reason of reckless disregard of its obligations and duties under this Agreement or any other Basic Document to which it is a party.

 

(iv) The Servicer shall indemnify, defend and hold harmless the Indenture Trustee, the Trust Collateral Agent, the Owner Trustee, the Collateral Agent, the Back-up Servicer, the Transferor, the Issuer, the Custodian, the Note Insurer and their respective officers, directors, agents and employees from and against all costs, expenses, losses, claims, damages and liabilities arising out of or incurred in connection with the acceptance or performance of the trusts and duties contained herein or in any other Basic Document to which it is a party, if any, except to the extent that such cost, expense, loss, claim, damage or liability: (a) shall be due to the willful misfeasance, bad faith, or negligence of the Indenture Trustee, the Trust Collateral Agent, the Owner Trustee, the Collateral Agent, the Back-up Servicer, the Transferor, the Issuer, the Custodian or the Note Insurer, as applicable; (b) relates to any tax other than the taxes with respect to which the Servicer shall be required to indemnify the Indenture Trustee, the Trust Collateral Agent, the Owner Trustee, the Collateral Agent, the Back-up Servicer, the Transferor, the Issuer, the Custodian or the Note Insurer; or (c) shall arise from the Trust Collateral Agent's breach of any of its representations or warranties set forth in Section 10.12.

 

(v) The Servicer shall indemnify the Owner Trustee and WTC (as defined in the Trust Agreement) and its officers, directors, successors, assigns, agents and servants (collectively, the "Indemnified Parties") from and against, any and all liabilities, obligations, losses, damages, taxes, claims, actions and suits, and any and all reasonable costs, expenses and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever (collectively, "Expenses") which may at any time be imposed on, incurred by, or asserted against the Owner Trustee, WTC or any Indemnified Party in any way relating to or arising out of this Agreement, the Basic Documents, the Owner Trust Estate (as defined in the Trust Agreement), the administration of the Owner Trust Estate or the action or inaction of the Owner Trustee under the Trust Agreement, except only that the Servicer shall not be liable for or required to indemnify the Owner Trustee from and against Expenses arising or resulting from any of the matters described in the third sentence of Section 6.1 of the Trust Agreement. The indemnities contained in this Section shall survive the resignation or termination of the Owner Trustee or the termination of the Trust Agreement. In any event of any claim, action or proceeding for which indemnity will be sought pursuant to this Section, the Owner Trustee's choice of legal counsel shall be subject to the approval of the Transferor which approval shall not be unreasonably withheld.

 

(vi) Notwithstanding the foregoing, the Servicer shall not be obligated to defend, indemnify, and hold harmless any Noteholder for any losses, claims, damages or liabilities incurred by any Noteholders arising out of claims, complaints, actions and allegations relating to Section 406 of ERISA or Section 4975 of the Code as a result of the purchase or holding of a Note by such Noteholder with the assets of a plan subject to such provisions of ERISA or the Code or the servicing, management and operation of the Issuer.

 

 

(b)  For purposes of this Section, in the event of the termination of the rights and obligations of a Servicer (or any successor thereto pursuant to Section 8.3) as Servicer pursuant to Section 9.1, or a resignation by such Servicer pursuant to this Agreement, such Servicer shall be deemed to be the Servicer pending appointment of a successor Servicer pursuant to Section 9.2. The provisions of this Section 8.2(b) shall in no way affect the survival pursuant to Section 8.2(c) of the indemnification by the outgoing Servicer provided by Section 8.2(a).

 

(c)  Indemnification under this Section 8.2 shall survive the termination of this Agreement and any resignation or removal of LBAC as Servicer and shall include reasonable fees and expenses of counsel and expenses of litigation. If the Servicer shall have made any indemnity payments pursuant to this Section 8.2 and the recipient thereafter collects any of such amounts from others, the recipient shall promptly repay such amounts to the Servicer, without interest.

 

(d)  In no event shall the Servicer be liable under this Agreement to any Person for the acts or omissions of any successor Servicer, nor shall any successor Servicer be liable under this Agreement to any Person for any acts or omissions of a predecessor Servicer.

 

SECTION 8.3.   Merger or Consolidation of, or Assumption of the Obligations of, Servicer or Back-up Servicer.

 

(a)  The Servicer shall not merge or consolidate with any other Person, convey, transfer or lease substantially all its assets as an entirety to another Person, or permit any other Person to become the successor to the Servicer's business unless, after the merger, consolidation, conveyance, transfer, lease or succession, the successor or surviving entity shall be an Eligible Servicer and shall be capable of fulfilling the duties of the Servicer contained in this Agreement and the other Basic Documents to which the Servicer is a party. Any Person (a) into which the Servicer may be merged or consolidated, (b) which may result from any merger or consolidation to which the Servicer shall be a party, (c) which may succeed to the properties and assets of the Servicer substantially as a whole or (d) or succeeding to the business of the Servicer shall execute an agreement of assumption to perform every obligation of the Servicer hereunder, and whether or not such assumption agreement is executed, shall be the successor to the Servicer under this Agreement without further act on the part of any of the parties to this Agreement; provided, however, that nothing contained herein shall be deemed to release the Servicer from any obligation hereunder; provided, further, however, that (i) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 8.1 hereof or made by the Servicer in the Purchase Agreement shall have been breached (for purposes hereof, such representations and warranties shall speak as of the date of the consummation of such transaction), no Servicer Termination Event or Insurance Agreement Event of Default, and no event which, after notice or lapse of time, or both, would become a Servicer Termination Event or Insurance Agreement Event of Default shall have occurred and be continuing, (ii) the Servicer shall have delivered to the Indenture Trustee, the Trust Collateral Agent and the Note Insurer an Officer's Certificate and an Opinion of Counsel in form and substance satisfactory to the Indenture Trustee, the Trust Collateral Agent and the Note Insurer each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section 8.3 and that all conditions precedent provided for in this Agreement relating to such transaction have been complied with, (iii) the Servicer shall have delivered to the Indenture Trustee, the Trust Collateral Agent and the Note Insurer an Opinion of Counsel either (A) stating that, in the opinion of such counsel, all financing statements and continuation statements and amendments thereto have been filed that are necessary fully to preserve and protect the interest of the Issuer in the Receivables and reciting the details of such filings or (B) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such interest and (iv) nothing herein shall be deemed to release the Servicer from any obligation. The Servicer shall provide written notice of any merger, consolidation or succession pursuant to this Section 8.3(a) to the Indenture Trustee, the Trust Collateral Agent, the Issuer, the Back-up Servicer, the Collateral Agent, the Note Insurer, the Noteholders and each Rating Agency. Notwithstanding anything herein to the contrary, the execution of the foregoing agreement of assumption and compliance with clauses (i), (ii) or (iii) above shall be conditions to the consummation of the transactions referred to in clause (a), (b) or (c) above.

 

 

(b)  Any Person (a) into which the Back-up Servicer may be merged or consolidated, (b) which may result from any merger or consolidation to which the Back-up Servicer shall be a party, (c) which may succeed to the properties and assets of the Back-up Servicer substantially as a whole or (d) succeeding to the business of the Back-up Servicer, shall execute an agreement of assumption to perform every obligation of the Back-up Servicer hereunder, and whether or not such assumption agreement is executed, shall be the successor to the Back-up Servicer under this Agreement without further act on the part of any of the parties to this Agreement; provided, however, that nothing herein shall be deemed to release the Back-up Servicer from any obligation.

 

SECTION 8.4.   Limitation on Liability of Servicer and Others.

 

(a)  Neither the Servicer nor any of the directors or officers or employees or agents of the Servicer shall be under any liability to the Indenture Trustee, the Trust Collateral Agent, the Owner Trustee, the Collateral Agent, the Back-up Servicer, the Custodian, the Issuer, the Note Insurer, the Transferor or the Noteholders, except as provided under this Agreement, for any action taken or for refraining from the taking of any action pursuant to this Agreement; provided, however, that this provision shall not protect the Servicer or any such person against any liability that would otherwise be imposed by reason of a breach of this Agreement or willful misfeasance, bad faith, or negligence in the performance of duties or by reason of reckless disregard of obligations and duties under this Agreement. The Servicer and any director or officer or employee or agent of the Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising under this Agreement.

 

 

(b)  Except as provided in this Agreement, the Servicer shall not be under any obligation to appear in, prosecute or defend any legal action that shall not be incidental to its duties to service the Receivables in accordance with this Agreement, and that in its opinion may involve it in any expense or liability.

 

SECTION 8.5.   Servicer and Back-up Servicer Not to Resign. Subject to the provisions of Section 8.3, neither the Servicer nor the Back-up Servicer may resign from the obligations and duties hereby imposed on it as Servicer or Back-up Servicer, as the case may be, under this Agreement except upon determination that by reason of a change in legal requirements the performance of its duties under this Agreement would cause it to be in violation of such legal requirements in a manner which would result in a material adverse effect on the Servicer or Back-up Servicer, as the case may be, and the Note Insurer does not elect to waive the obligations of the Servicer or Back-up Servicer, as the case may be, to perform the duties which render it legally unable to act or does not elect to delegate those duties to another Person. Notice of any such determination permitting the resignation of the Servicer or Back-up Servicer, as the case may be, shall be communicated to the Transferor, the Indenture Trustee, the Trust Collateral Agent, the Issuer, the Note Insurer, and each Rating Agency at the earliest practicable time (and, if such communication is not in writing, shall be confirmed in writing at the earliest practicable time) and any such determination by the Servicer or Back-up Servicer, as the case may be, shall be evidenced by an Opinion of Counsel to such effect delivered to and satisfactory to the Transferor, the Indenture Trustee, the Trust Collateral Agent, the Issuer and the Note Insurer concurrently with or promptly after such notice. No such resignation of the Servicer shall become effective until a successor servicer shall have assumed the responsibilities and obligations of LBAC in accordance with Section 9.2 and the Servicing Assumption Agreement, if applicable. No such resignation of the Back-up Servicer shall become effective until an entity acceptable to the Note Insurer shall have assumed the responsibilities and obligations of the Back-up Servicer; provided, however, that if no such entity shall have assumed such responsibilities and obligations of the Back-up Servicer within 120 days of the resignation of the Back-up Servicer, the Back-up Servicer may petition a court of competent jurisdiction for the appointment of a successor to the Back-up Servicer.

 

ARTICLE IX

 

SERVICER TERMINATION EVENTS

 

SECTION 9.1.   Servicer Termination Events. 

 

 

(i) Any failure by the Servicer or, for so long as LBAC is the Servicer, the Transferor, to deliver to the Trust Collateral Agent for payment to Noteholders or Certificateholders or deposit in the Spread Account or the Supplemental Enhancement Account any proceeds or payment required to be so delivered under the terms of the Notes, the Certificates, the Purchase Agreement, any Transfer Agreement or this Agreement (including deposits of Purchase Amounts) that shall continue unremedied for a period of two Business Days after written notice is received by the Servicer from the Trust Collateral Agent or the Note Insurer or after discovery of such failure by the Servicer (but in no event later than the five Business Days after the Servicer is required to make such delivery or deposit); or

 

(ii) The Servicer's Certificate required by Section 4.9 shall not have been delivered to the Trust Collateral Agent and the Note Insurer within one Business Day of the date such Servicer's Certificate is required to be delivered; or the statement required by Section 4.10 or the report required by Section 4.11 shall not have been delivered within five (5) days after the date such statement or report, as the case may be, is required to be delivered; or

 

(iii) Failure on the part of the Servicer to observe its covenants and agreements set forth in Section 8.3 or, for so long as LBAC is the Servicer, failure on the part of the Transferor to observe its covenants and agreements set forth in Section 7.3; or

 

(iv) Failure on the part of LBAC, the Servicer or, for so long as LBAC is the Servicer, the Transferor, as the case may be, duly to observe or to perform in any material respect any other covenants or agreements of LBAC, the Servicer or the Transferor (as the case may be) set forth in the Notes, the Certificates, the Purchase Agreement, any Transfer Agreement or in this Agreement, which failure shall continue unremedied for a period of 30 days after the date on which written notice of such failure requiring the same to be remedied, shall have been given (1) to LBAC, the Servicer or the Transferor (as the case may be), by the Note Insurer or the Trust Collateral Agent, or (2) to LBAC, the Servicer or the Transferor (as the case may be), and to the Trust Collateral Agent and the Note Insurer by the Class A Noteholders evidencing not less than 25% of the Class A Note Balance, if a Note Insurer Event of Default has occurred and is continuing; or

 

(v) The entry of a decree or order for relief by a court or regulatory authority having jurisdiction in respect of LBAC or the Servicer (or, so long as LBAC is the Servicer, the Transferor, or any of the Servicer's other Affiliates, if the Servicer's ability to service the Receivables is adversely affected thereby) in an involuntary case under the federal bankruptcy laws, as now or hereafter in effect, or another present or future, federal or state, bankruptcy, insolvency or similar law, or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of LBAC, the Servicer (or the Transferor or any other Affiliate of LBAC, if applicable) or of any substantial part of their respective properties or ordering the winding up or liquidation of the affairs of LBAC or the Servicer (or the Transferor or any other Affiliate of LBAC, if applicable) or the commencement of an involuntary case under the federal or state bankruptcy, insolvency or similar laws, as now or hereafter in effect, or another present or future, federal or state bankruptcy, insolvency or similar law with respect to LBAC or the Servicer (or the Transferor or any other Affiliate of LBAC, if applicable) and such case is not dismissed within 60 days; or

 

 

(vi) The commencement by LBAC or the Servicer (or, so long as LBAC is the Servicer, the Transferor or any of the Servicer's other Affiliates, if the Servicer's ability to service the Receivables is adversely affected thereby) of a voluntary case under the federal bankruptcy laws, as now or hereafter in effect, or any other present or future, federal or state, bankruptcy, insolvency or similar law, or the consent by LBAC or the Servicer (or the Transferor or any other Affiliate of LBAC, if applicable) to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of LBAC or the Servicer (or the Transferor or any other Affiliate of LBAC, if applicable) or of any substantial part of its property or the making by LBAC or the Servicer (or the Transferor or any other Affiliate of LBAC, if applicable) of an assignment for the benefit of creditors or the failure by LBAC or the Servicer (or the Transferor or any other Affiliate of LBAC, if applicable) generally to pay its debts as such debts become due or the taking of corporate action by LBAC or the Servicer (or the Transferor or any other Affiliate of LBAC, if applicable) in furtherance of any of the foregoing; or

 

(vii) Any representation, warranty or statement of LBAC or the Servicer or, for so long as LBAC is the Servicer, the Transferor, made in this Agreement and, with respect to LBAC and the Transferor, the Purchase Agreement or any Transfer Agreement, or in each case any certificate, report or other writing delivered pursuant hereto shall prove to be incorrect as of the time when the same shall have been made (excluding, however, any representation or warranty set forth in Section 3.03(b) of the Purchase Agreement or Section 4 of the related Transfer Agreement), and the incorrectness of such representation, warranty or statement has a material adverse effect on the Issuer and, within 30 days after written notice thereof shall have been given (1) to LBAC, the Servicer or the Transferor (as the case may be) by the Trust Collateral Agent or the Note Insurer or (2) to LBAC, the Servicer or the Transferor (as the case may be), and to the Trust Collateral Agent and the Note Insurer by the Class A Noteholders evidencing not less than 25% of the Class A Note Balance or the Class C Certificateholder, the circumstances or condition in respect of which such representation, warranty or statement was incorrect shall not have been eliminated or otherwise cured; or

 

(viii) The occurrence of an Insurance Agreement Event of Default; or

 

(ix) A claim is made under the Policy; or

 

(x) So long as a Note Insurer Default shall not have occurred and be continuing, the Note Insurer shall not have delivered a Servicer Extension Notice pursuant to Section 4.13;

 

 

then, and in each and every case, so long as a Servicer Termination Event shall not have been remedied; provided, (i) no Note Insurer Default shall have occurred and be continuing, the Note Insurer in its sole and absolute discretion, or (ii) if a Note Insurer Default shall have occurred and be continuing, then either the Trust Collateral Agent or the Trust Collateral Agent acting at the written direction of the Majorityholders, by notice then given in writing to the Servicer (and to the Trust Collateral Agent if given by the Note Insurer or by the Noteholders or the Class C Certificateholder) or by the Note Insurer's failure to deliver a Servicer Extension Notice pursuant to Section 4.13, may terminate all of the rights and obligations of the Servicer under this Agreement. The Servicer shall be entitled to its pro rata share of the Servicing Fee for the number of days in the Collection Period prior to the effective date of its termination. On or after the receipt by the Servicer of such written notice, all authority and power of the Servicer under this Agreement, whether with respect to the Notes, Certificates or the Receivables or otherwise, shall without further action, pass to and be vested in (i) the Back-up Servicer or (ii) such successor Servicer as may be appointed under Section 9.2; provided, however, that the successor Servicer shall have no liability with respect to any obligation which was required to be performed by the predecessor Servicer prior to the date the successor Servicer becomes the Servicer or any claim of a third party (including a Noteholder) based on any alleged action or inaction of the predecessor Servicer as Servicer; and, without limitation, the Trust Collateral Agent is hereby authorized and empowered to execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement of the Receivables and related documents, or otherwise. Notwithstanding anything contained in this Agreement to the contrary, Wells Fargo as successor Servicer is authorized to accept and rely on all of the accounting, records (including computer records) and work of the prior Servicer relating to the Notes (collectively, the “Predecessor Servicer Work Product”) without any audit or other examination thereof, and Wells Fargo shall have no duty, responsibility, obligation or liability for the acts and omissions of the prior Servicer. In the event that Wells Fargo becomes aware that any errors, inaccuracies, omissions or incorrect or non-standard practices or procedures (collectively, “Errors”) exist in any Predecessor Servicer Work Product and such Errors make it materially more difficult to service or could reasonably cause or materially contribute to Wells Fargo making or continuing any Errors (collectively, “Continued Errors”), Wells Fargo shall, with prior notice to and consent of the Note Insurer, use its best efforts to reconstruct and reconcile such data as are commercially reasonable to correct such Errors and Continued Errors and to prevent future Continued Errors. Wells Fargo shall be entitled to recover its costs thereby expended in accordance with Section 5.6(c)(ix) hereof. The predecessor Servicer shall cooperate with the successor Servicer and the Trust Collateral Agent in effecting the termination of the responsibilities and rights of the predecessor Servicer under this Agreement, including the transfer to the successor Servicer for administration by it of all cash amounts that shall at the time be held or should have been held by the predecessor Servicer for deposit, or shall thereafter be received with respect to a Receivable and the delivery to the successor Servicer of all files and records concerning the Receivables and a computer tape in readable form containing all information necessary to enable the successor Servicer to service the Receivables and the other property of the Issuer. All reasonable costs and expenses (including attorneys' fees) incurred in connection with transferring the Receivable Files to the successor Servicer and amending this Agreement to reflect such succession as Servicer pursuant to this Section 9.1 shall be paid by the predecessor Servicer upon presentation of reasonable documentation of such costs and expenses. In addition, any successor Servicer shall be entitled to payment from the immediate predecessor Servicer for reasonable transition expenses incurred in connection with acting as successor Servicer, and in connection with system conversion costs, an aggregate amount not to exceed for such conversion costs of $100,000, and to the extent not so paid, such payment shall be made pursuant to Section 5.6(c)(ix) hereof. Upon receipt of written notice of the occurrence of a Servicer Termination Event, the Trust Collateral Agent shall give notice thereof to the Rating Agencies, the Issuer and the Transferor. The predecessor Servicer shall grant the Transferor, the Trust Collateral Agent, the Back-up Servicer and the Note Insurer reasonable access to the predecessor Servicer's premises, computer files, personnel, records and equipment at the predecessor Servicer's expense. If requested by the Note Insurer, the Back-up Servicer or successor Servicer shall terminate any arrangements relating to (i) the Lock-Box Account with the Lock-Box Bank, (ii) the Lock-Box or (iii) the Lock-Box Agreement, and direct the Obligors to make all payments under the Receivables directly to the Servicer at the predecessor Servicer's expense (in which event the successor Servicer shall process such payments directly, or, through a Lock-Box Account with a Lock-Box Bank at the direction of the Note Insurer). The Trust Collateral Agent shall send copies of all notices given pursuant to this Section 9.1 to the Note Insurer so long as no Note Insurer Default shall have occurred and be continuing, and to the Noteholders and the Class C Certificateholder if a Note Insurer Default shall have occurred and be continuing.

 

 

(b) In the event that the Custodian is acting as Servicer and the Servicer is terminated pursuant to this Section 9.1, the Custodian may also be terminated in accordance with the terms of the Custodial Agreement.

 

SECTION 9.2.   Appointment of Successor.

 

(a)  Upon the Servicer's receipt of notice of termination pursuant to Section 9.1 or the Servicer's resignation in accordance with the terms of this Agreement, the predecessor Servicer shall continue to perform its functions as Servicer under this Agreement, in the case of termination, only until the date specified in such termination notice or, if no such date is specified in a notice of termination, until receipt of such notice, and, in the case of resignation, until the later of (x) the date 45 days from the delivery to the Trust Collateral Agent of written notice of such resignation (or written confirmation of such notice) in accordance with the terms of this Agreement and (y) the date upon which the predecessor Servicer shall become unable to act as Servicer, as specified in the notice of resignation and accompanying Opinion of Counsel. In the event of termination of the Servicer, the Back-up Servicer, shall assume the obligations of Servicer hereunder on the date specified in such written notice (the "Assumption Date") pursuant to the Servicing Assumption Agreement or, in the event that the Note Insurer shall have determined that a Person other than the Back-up Servicer shall be the successor Servicer in accordance with Section 9.2(c), on the date of the execution of a written assumption agreement by such Person to serve as successor Servicer. In the event of assumption of the duties of Servicer by the Back-up Servicer, the Back-up Servicer shall be entitled to be paid by the Servicer for the system conversion costs, an amount not to exceed $100,000. In the event that such amount shall not have been timely paid by the Servicer, such amount shall be paid under Section 5.6(c)(ix) hereof; provided, however, the payment of such amount pursuant to Section 5.6(c)(ix) shall not relieve the Servicer of any obligation or liability to pay such amount. Notwithstanding the Back-up Servicer's assumption of, and its agreement to perform and observe, all duties, responsibilities and obligations of LBAC as Servicer under this Agreement arising on and after the Assumption Date, the Back-up Servicer shall not be deemed to have assumed or to become liable for, or otherwise have any liability for, any duties, responsibilities, obligations or liabilities of LBAC, the Transferor or any predecessor Servicer arising on or before the Assumption Date, whether provided for by the terms of this Agreement, arising by operation of law or otherwise, including, without limitation, any liability for, any duties, responsibilities, obligations or liabilities of LBAC, the Transferor or any predecessor Servicer arising on or before the Assumption Date under Sections 4.7 or 8.2 of this Agreement, regardless of when the liability, duty, responsibility or obligation of LBAC, the Transferor or any predecessor Servicer therefor arose, whether provided by the terms of this Agreement, arising by operation of law or otherwise. In addition, if the Back-up Servicer shall be legally unable to act as Servicer or shall have delivered a notice of resignation pursuant to Section 8.5 hereof and a Note Insurer Default shall have occurred and be continuing, the Back-up Servicer, the Trust Collateral Agent or the Class A Noteholders evidencing not less than 66-2/3% of the Class A Note Balance or the Class C Certificateholder may petition a court of competent jurisdiction to appoint any successor to the Servicer. Pending appointment pursuant to the preceding sentence, the Back-up Servicer shall act as successor Servicer unless it is legally unable to do so, in which event the predecessor Servicer shall continue to act as Servicer until a successor has been appointed and accepted such appointment. In the event that a successor Servicer has not been appointed at the time when the predecessor Servicer has ceased to act as Servicer in accordance with this Section 9.2, then the Note Insurer, in accordance with Section 9.2(c) shall appoint, or petition a court of competent jurisdiction to appoint a successor to the Servicer under this Agreement.

 

 

(b)  Upon appointment, the successor Servicer shall be the successor in all respects to the predecessor Servicer and shall be subject to all the responsibilities, duties, and liabilities arising thereafter relating thereto placed on the predecessor Servicer, and shall be entitled to the Servicing Fee and all of the rights granted to the predecessor Servicer, by the terms and provisions of this Agreement.

 

(c)  So long as no Note Insurer Default has occurred and is continuing, the Note Insurer may exercise at any time its right to appoint as Back-up Servicer or as successor Servicer a Person other than the Person serving as Back-up Servicer at the time, and shall have no liability to the Trust Collateral Agent, the Issuer, LBAC, the Transferor, the Person then serving as Back-up Servicer, any Noteholder or any other person if it does so. Subject to Section 8.5, no provision of this Agreement shall be construed as relieving the Back-up Servicer of its obligation to succeed as successor Servicer upon the termination of the Servicer pursuant to Section 9.1 or resignation of the Servicer pursuant to Section 8.5. If upon any such resignation or termination, the Note Insurer appoints a successor Servicer other than the Back-up Servicer, the Back-up Servicer shall not be relieved of its duties as Back-up Servicer hereunder.

 

 

	1.	Installment contract with proper authentications and Dealer endorsements		1. _________________
	2.	Copy of authenticated credit application		2. _________________
	3.	References as described in the Program Guidelines		3. _________________
	4.	Proof of income as described in the Program Guidelines		4. _________________
	5.	Title information (application and copy of existing title, receipt of registration, or title copy already received) with lien notation thereon, or Dealer Title Guaranty		5. _________________
	6.	Invoice or copy of computer screen printout showing NADA value, NADA book page, Kelley printout or Kelley Blue Book page		6. _________________
	7.	In the case of a used Financed Vehicle, odometer statement (if not on title info)		7. _________________
	8.	Agreement to provide insurance and verification paper or other documentation allowable under the definition of “Legal Files.”		8. _________________
	9.	Service contract or warranty papers		10. ________________
	10.	Life, accident, health and GAP insurance policy copies, as applicable		11. ________________
	11.	Authenticated purchase order from dealer to customer		12. ________________

(22) Insurance; Other. (A) Each Obligor has obtained insurance covering the Financed Vehicle as of the execution of the Subsequent Receivable insuring against loss and damage due to fire, theft, transportation, collision and other risks generally covered by comprehensive and collision coverage which is in an amount at least equal to the lesser of (x) its maximum insurable value or (y) the principal amount due from the Obligor under the related Subsequent Receivable and names LBAC and its successors and assigns as loss payee and each Subsequent Receivable requires the Obligor to obtain and maintain such insurance naming LBAC and its successors and assigns as an additional insured, (B) each Subsequent Receivable that finances the cost of premiums for credit life and credit accident or health insurance is covered by an insurance policy and certificate of insurance naming LBAC as policyholder (creditor) under each such insurance policy and certificate of insurance and (C) as to each Subsequent Receivable that finances the cost of an extended service contract, the respective Financed Vehicle which secures the Subsequent Receivable is covered by an extended service contract.