EXECUTION COPY
Exhibit 10.13
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SALE AND SERVICING AGREEMENT
among
LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST 1999-1
Issuer
LONG BEACH ACCEPTANCE RECEIVABLES CORP.
Transferor
LONG BEACH ACCEPTANCE CORP.
Originator and Servicer
and
THE CHASE MANHATTAN BANK
Back-up Servicer, Custodian and Trust Collateral Agent
Dated as of August 1, 1999
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TABLE OF CONTENTS
Page
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.........................................................2
SECTION 1.5. Material Adverse Effect.....................................................................2
ARTICLE II CONVEYANCE OF RECEIVABLES..............................................................................3
SECTION 2.1. Conveyance of Receivables...................................................................3
SECTION 2.2. Intentionally Omitted.......................................................................4
SECTION 2.3. Transfer Intended as Sale; Precautionary Security Interest..................................4
SECTION 2.4. Assignment by Transferor....................................................................4
SECTION 2.5. The Legal Files Are Not "Financial Assets"..................................................4
SECTION 2.6. Further Encumbrance of Trust Assets.........................................................4
ARTICLE III THE RECEIVABLES.......................................................................................5
SECTION 3.1. Representations and Warranties of Transferor................................................5
SECTION 3.2. Repurchase upon Breach......................................................................5
SECTION 3.3. Delivery of Legal Files and Receivable Files................................................6
SECTION 3.4. Acceptance of Legal Files by Custodian......................................................7
SECTION 3.5. Access to Receivable Files and Legal Files; Servicer's
Duties with Respect to Receivable Files; Custodian's
Duties with Respect to Legal Files...................................................8
SECTION 3.6. Covenants of the Custodian..................................................................9
SECTION 3.7. Issuer's Certificate.......................................................................11
ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES...........................................................11
SECTION 4.1. Duties of the Servicer.....................................................................11
SECTION 4.2. Collection and Allocation of Receivable Payments...........................................12
SECTION 4.3. Realization upon Receivables...............................................................13
SECTION 4.4. Physical Damage Insurance; Other Insurance.................................................14
SECTION 4.5. Maintenance of Security Interests in Financed Vehicles.....................................14
SECTION 4.6. Additional Covenants of Servicer...........................................................16
SECTION 4.7. Purchase of Receivables Upon Breach........................................................16
SECTION 4.8. Servicing Fee..............................................................................16
SECTION 4.9. Servicer's Certificate.....................................................................17
SECTION 4.10. Annual Statement as to Compliance; Notice of Default.......................................17
SECTION 4.11. Annual Independent Certified Public Accountant's Report....................................18
SECTION 4.12. Servicer Expenses..........................................................................18
SECTION 4.13. Retention and Termination of Servicer......................................................18
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SECTION 4.14. Access to Certain Documentation and Information Regarding Receivables......................19
SECTION 4.15. Verification of Servicer's Certificate.....................................................19
SECTION 4.16. Fidelity Bond..............................................................................21
SECTION 4.17. Delegation of Duties.......................................................................21
SECTION 4.18. Delivery of Back-up Tapes of Back-up Servicer..............................................21
ARTICLE V ACCOUNTS; PAYMENTS; STATEMENTS TO NOTEHOLDERS..........................................................22
SECTION 5.1. Accounts; Lock-Box Account.................................................................22
SECTION 5.2. Collections................................................................................24
SECTION 5.3. Application of Collections.................................................................24
SECTION 5.4. Intentionally Omitted......................................................................24
SECTION 5.5. Additional Deposits........................................................................24
SECTION 5.6. Payments; Policy Claims....................................................................25
SECTION 5.7. Statements to Noteholders; Tax Returns.....................................................29
SECTION 5.8. Reliance on Information from the Servicer..................................................31
SECTION 5.9. Optional Deposits by the Note Insurer......................................................31
SECTION 5.10. Spread Account.............................................................................32
SECTION 5.11. Withdrawals from Spread Account............................................................32
SECTION 5.12. Simple Interest Excess.....................................................................32
SECTION 5.13. Class B Reserve Account....................................................................33
SECTION 5.14. Securities Accounts........................................................................33
ARTICLE VI THE NOTE POLICY.......................................................................................34
SECTION 6.1. Note Policy................................................................................34
SECTION 6.2. Claims Under Note Policy...................................................................34
SECTION 6.3. Preference Claims; Direction of Proceedings................................................35
SECTION 6.4. Surrender of Note Policy...................................................................36
ARTICLE VII THE TRANSFEROR.......................................................................................36
SECTION 7.1. Representations of the Transferor..........................................................36
SECTION 7.2. Liability of the Transferor; Indemnities...................................................38
SECTION 7.3. Merger or Consolidation of, or Assumption of the Obligations of, the Transferor............38
SECTION 7.4. Limitation on Liability of the Transferor and Others.......................................39
SECTION 7.5. Transferor May Own Notes...................................................................39
ARTICLE VIII THE SERVICER........................................................................................39
SECTION 8.1. Representations of Servicer................................................................39
SECTION 8.2. Indemnities of Servicer....................................................................41
SECTION 8.3. Merger or Consolidation of, or Assumption of the Obligations of, Servicer
or Back-up Servicer.......................................................................43
SECTION 8.4. Limitation on Liability of Servicer and Others.............................................44
SECTION 8.5. Servicer and Back-up Servicer Not to Resign................................................45
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ARTICLE IX SERVICER TERMINATION EVENTS...........................................................................45
SECTION 9.1. Servicer Termination Events................................................................45
SECTION 9.2. Appointment of Successor...................................................................49
SECTION 9.3. Notification to Noteholders................................................................50
SECTION 9.4. Action Upon Certain Failures of the Servicer...............................................50
ARTICLE X THE TRUST COLLATERAL AGENT AND THE CUSTODIAN...........................................................50
SECTION 10.1. Duties of the Trust Collateral Agent and the Custodian.....................................50
SECTION 10.2. Trust Collateral Agent to Act for the Noteholders and Note Insurer.........................54
SECTION 10.3. Certain Matters Affecting the Trust Collateral Agent and the Custodian.....................54
SECTION 10.4. Trust Collateral Agent, Back-up Servicer and Custodian Not Liable for
Notes or Receivables................................................................55
SECTION 10.5. Trust Collateral Agent, Back-up Servicer and Custodian May Own Notes.......................56
SECTION 10.6. Indemnity of Trust Collateral Agent, Back-up Servicer and Custodian........................57
SECTION 10.7. Eligibility Requirements for Trust Collateral Agent and the Custodian......................57
SECTION 10.8. Resignation or Removal of Trust Collateral Agent or Custodian..............................57
SECTION 10.9. Successor Trust Collateral Agent or Custodian..............................................59
SECTION 10.10. Merger or Consolidation of Trust Collateral Agent or Custodian.............................59
SECTION 10.11. Co-Trustee; Separate Trustee...............................................................60
SECTION 10.12. Representations and Warranties of Trust Collateral Agent and the Custodian.................61
SECTION 10.13. No Bankruptcy Petition.....................................................................61
SECTION 10.14. Rights of Note Insurer to Direct Trust Collateral Agent....................................62
ARTICLE XI TERMINATION...........................................................................................62
SECTION 11.1. Termination................................................................................62
ARTICLE XII ADMINISTRATIVE DUTIES OF THE SERVICER................................................................63
SECTION 12.1. Administrative Duties......................................................................63
SECTION 12.2. Records....................................................................................64
SECTION 12.3. Additional Information to be Furnished to the Issuer.......................................64
SECTION 12.4. No Additional Compensation.................................................................64
ARTICLE XIII MISCELLANEOUS PROVISIONS............................................................................65
SECTION 13.1. Amendment..................................................................................65
SECTION 13.2. Protection of Title to Issuer..............................................................65
SECTION 13.3. Limitation on Rights of Noteholders........................................................68
SECTION 13.4. Governing Law..............................................................................69
SECTION 13.5. Notices....................................................................................69
SECTION 13.6. Severability of Provisions.................................................................70
SECTION 13.7. Assignment to Indenture Trustee............................................................70
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SECTION 13.8. Limitation of Liability of Owner Trustee, Custodian and Trust Collateral Agent.............70
SECTION 13.9. Independence of the Servicer...............................................................70
SECTION 13.10. No Joint Venture...........................................................................70
SECTION 13.11. Nonpetition Covenant.......................................................................71
SECTION 13.12. Third Party Beneficiaries..................................................................71
SECTION 13.13. Consent to Jurisdiction....................................................................71
SECTION 13.14. Headings...................................................................................72
SECTION 13.15. Trial by Jury Waived.......................................................................72
SECTION 13.16. Entire Agreement...........................................................................72
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 Request for Transfer of Possession
Exhibit G Form of Custodial Letter
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 August
1, 1999, among LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST 1999-1, a Delaware
business 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") and as servicer (in such capacity, the "Servicer") and THE CHASE
MANHATTAN BANK, a
New York banking corporation, as back-up servicer, custodian
and trust collateral agent, ("Back-up Servicer", "Custodian" and "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 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 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. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Noteholders, such provision shall be deemed to refer to Noteholders of record as
of the Record Date immediately preceding the date on which such action is to be
taken, or consent given, by Noteholders. Solely for the purposes of any action
to be taken or consented to by Noteholders, 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 Note 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
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shall be made by the Note Insurer in its sole discretion, so long as no Note
Insurer Default shall have occurred and be continuing.
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. CONVEYANCE OF RECEIVABLES.
In consideration of the Issuer's delivery to or upon the order
of the Transferor on the Closing Date of the Certificate and the net proceeds
from the sale of the Notes and the other amounts to be distributed from time to
time to 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 and
to:
(i) the Receivables listed in Schedule A hereto, all monies
received on the Receivables after the Cutoff Date and, with respect to
Precomputed Receivables, payments remitted by the related Obligors
prior to the Cutoff Date in excess of the aggregate Scheduled
Receivable Payments, Servicer expenses and late fees, if any, with
respect to such Precomputed Receivables, retained by the Servicer in
accordance with its payment application procedures (the "Payahead
Amount") and all Liquidation Proceeds and Recoveries received with
respect to such Receivables;
(ii) the security interests in the related Financed Vehicles
granted by the related Obligors pursuant to the Receivables and any
other interest of the Transferor in such Financed Vehicles, including,
without limitation, 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 Receivable and that has been
acquired by or on behalf of the Issuer pursuant to the liquidation of
such Receivable;
(v) the Purchase Agreement and the Guarantee including,
without limitation, a direct right to cause LBAC to purchase
Receivables from the Issuer upon the occurrence of a breach of any of
the representations and warranties contained in Section 3.2(b) of the
Purchase Agreement or the failure of LBAC to timely comply with its
obligations pursuant to Section 5.5 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;
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(vii) the Legal Files and the Receivable Files related to each
Receivable and any and all other documents that LBAC keeps on file in
accordance with its customary procedures relating to the 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 Receivables;
(ix) any proceeds from recourse against Dealers (other than
any Chargeback Obligations), including, without limitation, any Dealer
Title Guaranties with respect to the Receivables, with respect to the
sale of the Receivables; and
(x) the proceeds of any and all of the foregoing.
SECTION 2.2. INTENTIONALLY OMITTED.
SECTION 2.3. TRANSFER INTENDED AS SALE; PRECAUTIONARY SECURITY
INTEREST. Each conveyance to the Issuer of the property set forth in Section 2.1
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 is held not to be a sale, this Agreement shall constitute a
grant of a security interest to the Issuer in the property described in Section
2.1 above, for the benefit of the Noteholders and the Note Insurer as their
interests may appear herein.
SECTION 2.4. ASSIGNMENT BY TRANSFEROR. The Transferor does
hereby transfer, assign and otherwise convey unto the Issuer, for the benefit of
the Noteholders 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 3.2 of the Purchase
Agreement or from the failure of LBAC to comply with its obligations pursuant to
Section 5.5 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. THE LEGAL FILES ARE NOT "FINANCIAL ASSETS". The
parties (for themselves, their successors, trustees, receivers and assigns)
acknowledge and agree that the Legal Files held pursuant to this Agreement are
not "financial assets" within the meaning of Section 8.102(a)(9) of the Texas
Business & Commerce Code (the "Texas UCC").
SECTION 2.6. 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, 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 Business
Trust Statute (as defined in the Trust Agreement).
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(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 the repayment of
the Notes. The Certificate shall represent the beneficial ownership interest in
the Trust Assets, and the Noteholders 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 the release
and discharge of the Indenture, all covenants of the Issuer under Article III of
the Indenture shall, until payment in full of the Certificate, remain as
covenants of the Issuer for the benefit of the Certificateholder, enforceable by
the 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 Certificateholder.
(d) The Trust Collateral Agent shall, at such time as there
are no Notes or Certificates outstanding, the Note 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 and (iii) the Trust Collateral Agent pursuant to this 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 3.2(b) of the Purchase 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 is
deemed to have relied on such representations and warranties in acquiring the
Receivables, the Note Insurer shall be deemed to have relied on such
representations and warranties in issuing the Note Policy, the Indenture Trustee
is deemed to have relied on such representations and warranties in issuing the
Notes and the Noteholders are deemed to have relied on such representations and
warranties in purchasing the Notes. Such representations and warranties speak as
of the execution and delivery of this Agreement and as of the Closing Date, 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 Note Insurer, the
Custodian, the Trust Collateral Agent or the Issuer, as the case may be, shall
inform the other parties to this Agreement 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 or the Insurer are
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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 remedy of the Issuer, the Trust
Collateral Agent, the Indenture Trustee or the Noteholders with respect to a
breach of representations and warranties pursuant to Section 3.1 shall be the
repurchase of Receivables pursuant to this Section, subject to the conditions
contained herein or to enforce the obligation of LBAC to the Transferor to
repurchase such Receivables 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.
In addition to the foregoing and notwithstanding whether the
related Receivable shall have been purchased by the Transferor, the Transferor
shall indemnify the Issuer, the Indenture Trustee, the Back-up Servicer, the
Trust Collateral Agent, the Collateral Agent, the Custodian, the Note Insurer,
their respective officers, directors, agents and employees, and the Noteholders
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.
(b) Pursuant to Section 2.1 of this Agreement, the Transferor
conveyed 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
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. DELIVERY OF LEGAL FILES AND RECEIVABLE FILES.
(a) On or prior to the Closing Date, the Transferor shall
transfer and deliver to the Custodian at the offices specified in Schedule B to
this Agreement the Legal Files with respect to each applicable Receivable.
(b) On or prior to the Closing Date, the Transferor shall
transfer and deliver to the Servicer with respect to each applicable Receivable
the following, either in hard copy or in an electronic format:
(i) a copy of the fully executed original of the Receivable
with a copy of the fully executed assignment from the related Dealer to
the Originator (together with copies of any agreements modifying the
Receivable, including, without limitation, any extension agreements);
(ii) a copy of the original credit application fully executed
by the Obligor;
(iii) a copy of the Lien Certificate or Title Package, as
applicable;
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(iv) all other documents listed on the Documentation Checklist
in effect on the Cutoff Date, relating to such Receivable, except that
the Receivable Files shall contain a copy of those documents the
original of which constitutes a part of the Legal File; and
(v) any and all other documents that the Servicer or the
Originator shall keep on file, in accordance with its customary
procedures, relating to a Receivable, an Obligor or a Financed Vehicle.
SECTION 3.4. ACCEPTANCE OF LEGAL FILES BY CUSTODIAN. The
Custodian acknowledges receipt of files which the Transferor has represented are
the Legal Files relating to the Receivables. The Custodian shall hold the Legal
Files subject to the terms and conditions of this Agreement. The Custodian may
perform its duties in respect of custody of the Legal Files by or through its
agents or employees. The Custodian has reviewed the Legal Files relating to the
Receivables and has determined that it has received a file for each Receivable
identified in Schedule A to this Agreement. The Custodian declares that it holds
and will continue to hold such files and any amendments, replacements or
supplements thereto and all other Trust Assets as custodian, agent and bailee
for the Trust Collateral Agent in trust for the use and benefit of all present
and future Noteholders. The Custodian shall review each Legal File delivered to
it no later than the Closing Date to determine whether such Legal Files contain
the documents referred to in the definition of the term "Legal File" and shall
certify on the Closing Date to such effect. In addition, in the case of any
Legal File which does not contain either an original Lien Certificate or a
Dealer Title Guaranty for the related Financed Vehicle, the Custodian shall
certify that the related Dealer is listed on the Dealer Title Addendum. If the
Custodian finds during its review of the Legal Files 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 (if at such time the Trust Collateral Agent is not also the
Custodian hereunder), 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 preceding sentence). 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. The Custodian shall make a list of Receivables for
which an application for a certificate of title or a Dealer Title Guaranty but
not a Lien Certificate is included in the Legal File as of the date of its
review of the Legal Files and deliver a copy of
7
such list to the Servicer, the Trust Collateral Agent and the Note Insurer. On
the date which is 90 days following the Closing Date, or 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, 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 AND LEGAL FILES;
SERVICER'S DUTIES WITH RESPECT TO RECEIVABLE FILES; CUSTODIAN'S DUTIES WITH
RESPECT TO LEGAL FILES.
(a) The Servicer and the Custodian shall, upon reasonable
notice, permit the Originator, the Trust Collateral Agent, the Transferor, the
Issuer, and the Note Insurer access to the Receivable Files and the Legal Files,
respectively, at all reasonable times, upon reasonable notice and during the
Servicer's or the Custodian's normal business hours. In addition, the Servicer
and the Custodian shall provide such access to any Noteholder upon reasonable
notice at all reasonable times during the Servicer's or the Custodian's normal
business hours, as the case may be, in cases where the Noteholders shall be
required by applicable statutes or regulations to review such documentation;
PROVIDED, HOWEVER, that the Servicer or the Custodian 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 use its best efforts to
hold in confidence all Confidential Information in accordance with 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 or (d) in order to protect or enforce such Person's investment in any
Note.
(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. 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.
8
(c) The Custodian shall, within two Business Days of the
request of the Servicer, the Trust Collateral Agent or the Note Insurer, execute
such documents and instruments as are prepared by the Servicer, the Trust
Collateral Agent or the Note Insurer and delivered to the Custodian, as the
Servicer, the Trust Collateral Agent or the Note Insurer deems necessary to
permit the Servicer, in accordance with its customary servicing procedures, to
enforce the Receivable on behalf of the Issuer and any related insurance
policies (including the VSI Policy, if any) covering the Obligor, the Receivable
or Financed Vehicle. The Custodian shall not be obligated to release any
document from any Legal File unless it receives a request for transfer of
possession signed, or, if such request is transmitted electronically,
transmitted by a Servicing Officer in the form of Exhibit F to this Agreement
and a custodial letter signed, or, if such request is transmitted
electronically, transmitted by a Servicing Officer in the form of Exhibit G to
this Agreement (the "Custodial Letter"). Such Custodial Letter shall obligate
the Servicer to return such document(s) to the Custodian when the need therefor
no longer exists. At all times while any Legal File is in the Servicer's
possession, the Servicer shall hold such Legal File in trust on behalf of the
Issuer, the Indenture Trustee, the Trust Collateral Agent and the Note Insurer.
SECTION 3.6. COVENANTS OF THE CUSTODIAN.
(a) The Custodian, either directly or by acting through an
agent or nominee (which agent shall not be the Originator or any Affiliate
thereof, except as provided in Section 10.8(e) hereof), shall hold the Legal
File and all other documents relating to any Receivable that comes into its
possession for the exclusive use and benefit of the Issuer and shall make
disposition thereof only in accordance with the provisions of this Agreement.
The Custodian shall maintain continuous custody of the Legal File and such other
documents received by it in secure facilities in accordance with customary
standards for such custody and shall not release such documents or transfer such
documents to any other party, including any subcustodian, except as otherwise
expressly provided herein.
(b) The Custodian covenants and warrants to the Issuer, the
Trust Collateral Agent, the Servicer and the Note Insurer that to the knowledge
of its Responsible Officers, as of the related date on which the Custodian makes
the certification required under Section 3.4 with respect to the Legal Files, it
holds no adverse interest, by way of security or otherwise, in any Receivable.
(c) Instructions to the Custodian relating to this Agreement
will be carried out by the Custodian, in accordance with the terms and
provisions of this Agreement. The Custodian is authorized to conclusively rely
on any such instruction that it believes in good faith to have been given by the
Servicer pursuant to and in accordance with the terms and provisions of this
Agreement. The Custodian may record any such instructions given by telephone,
and any other telephone discussions with respect to this Agreement.
(d) The Custodian shall not by reason of this Agreement have a
fiduciary relationship in respect of the Servicer or LBAC or any Affiliate
thereof, and nothing in this Agreement, express or implied, is intended to or
shall be so construed so as to impose upon the Custodian any obligations in
respect of this Agreement except as expressly set forth in it. The Custodian,
acting as custodian, shall have no responsibility for (i) ascertaining or taking
action with respect
9
to exchanges, maturities, tenders or other matters relative to any Receivables,
whether or not the Custodian has or is deemed to have knowledge of such matters
or (ii) taking any necessary steps to preserve rights against any parties with
respect to any Receivables, except as otherwise expressly set forth herein in
its capacity as Custodian. The Custodian does not assume and shall have no
responsibility for, and makes no representations as to, monitoring the value of
the Receivables and the related Legal Files. The Custodian may rely upon the
validity of documents delivered to it, without investigation as to their
authority or legal effectiveness.
(e) Each of the Servicer, the Issuer, the Transferor and LBAC
acknowledges and agrees that the Custodian:
(i) shall not be responsible for any of the agreements set
forth in the Purchase Agreement or any other documents or instruments
other than this Agreement, including its Exhibits, but shall be
obligated only for the performance of such duties as are specifically
set forth in this Agreement;
(ii) shall not be under any obligation to exercise any of the
rights or powers vested in it by this Agreement, or to institute,
conduct, or defend any litigation under this Agreement or in relation
to this Agreement, at the request, order or direction of any of the
Noteholders or the Note Insurer pursuant to the provisions of this
Agreement, unless such Noteholders or the Note Insurer shall have
offered to the Custodian reasonable security or indemnity in form and
substance reasonably satisfactory to the Custodian, against the costs,
expenses and liabilities that may be incurred therein or thereby;
(iii) may rely and shall be protected in acting or refraining
from acting upon any resolution, Officer's Certificate, Servicer's
Certificate, certificate of auditors, or any other certificate,
statement, instrument, opinion, report, notice, request, consent,
order, appraisal, bond, or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties, and shall have no responsibility for determining the accuracy
thereof (except pursuant to Section 10.3(iv)); and
(iv) may consult with counsel, and any Opinion of Counsel
shall be full and complete authorization and protection in respect of
any action taken or suffered or omitted by it under this Agreement in
good faith and in accordance with such Opinion of Counsel.
(f) If the Custodian shall request instructions from the
Servicer or LBAC with respect to any act or action (including failure to act) in
connection with this Agreement, the Custodian shall be entitled to refrain from
such act or taking such action unless and until the Custodian shall have
received instructions from such Person; and the Custodian shall not incur
liability to such Person or any other Person by reason of so refraining. Without
limiting the foregoing, neither the Servicer, nor LBAC, nor any other Person
shall have any right of action whatsoever against the Custodian as a result of
the Custodian's acting or refraining from acting in accordance with the
Servicer's instructions hereunder, other than any such action arising out of the
Custodian's negligence, bad faith or willful misconduct in so acting or
refraining from acting.
10
(g) The Custodian shall physically segregate the Legal Files
for the Receivables from all other instruments similar in nature to such Legal
Files in its possession, and shall hold the Legal Files so as to reflect the
ownership of the Issuer. The Custodian shall ▇▇▇▇ its books, accounts and
records to reflect such fact. At its own expense, the Custodian shall maintain
at all times during which this Agreement is in effect, fidelity insurance in
amounts customary for similar transactions. Such insurance may be maintained by
the Custodian in the form of self-insurance.
SECTION 3.7. 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. 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 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
11
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 direction, take
steps to enforce such Receivable, including bringing suit in its name or the
name of the Noteholders. 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 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 in a manner
consistent with 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 ▇▇▇▇▇'▇ 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
12
(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 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 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 3.1, 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.
(i) The Servicer agrees that within 45 days from the Closing
Date it shall make such filings and effect such notices as are
necessary under Section 9-114(1) of the
New York UCC (or comparable
section of the UCC of any applicable state) to preserve its ownership
interest (or security interest, as the case may be) in any repossessed
Financed Vehicles delivered for sale to Dealers.
(ii) 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
13
referred to in (b)(1) 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 9-114(1) of the
New York UCC (or comparable
section of the applicable UCC) to preserve its 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 polices. 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
14
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 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 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 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 (unless a Note Insurer Default shall
have occurred and be continuing) 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.
15
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
Note 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, the Issuer or the Note Insurer
in such Receivables, (iii) the Servicer shall not modify a Receivable, except in
accordance with Section 4.2, and (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.
SECTION 4.7. PURCHASE OF RECEIVABLES UPON BREACH. The
Servicer, the Transferor, the Issuer, the Custodian 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. For purposes of this
Section, the Purchase Amount shall, whenever applicable, consist in part of a
release by the Servicer of all rights to receive Simple Interest Excess with
respect to the related Receivable. The sole remedy of the Trust Collateral
Agent, the Issuer, the Note Insurer 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 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. 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. The Servicing Fee shall in addition include all late fees,
prepayment charges including, in the case of a Precomputed Receivable that is
prepaid in full, to
16
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 and the Rating Agencies, a Servicer's Certificate containing
all information necessary to make the payments pursuant to Section 5.6
(including, if required, withdrawals from the Spread Account), 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 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 and (iv) whether to the knowledge of the Servicer an
Insurance Agreement Event of Default has occurred. 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) The Servicer shall deliver to the Issuer, the Trust
Collateral Agent, the Indenture Trustee, the Back-up Servicer, the Collateral
Agent, the Transferor, the Issuer and the Note Insurer, on or before March 31 of
each year beginning March 31, 2000, 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 all its obligations under this Agreement throughout such
year, or, if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. 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 Issuer, the Note Insurer and the Rating Agencies,
promptly after having obtained knowledge thereof, but in no event later
17
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.
SECTION 4.11. ANNUAL INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT'S REPORT. 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 Issuer, the
Noteholders, the Note Insurer and each Rating Agency on or before April 30 of
each year beginning April 30, 2000, 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,
and to the Trust Collateral Agent, the Back-up Servicer, the Collateral Agent,
the Issuer, the Transferor and the Note Insurer, to the effect that such firm
has audited the financial statements of the Servicer and issued its report
therefor and that such audit (a) 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; (b) included tests relating to automotive loans serviced for
others in accordance with the requirements of the Uniform Single Attestation
Program for Mortgage Bankers (the "Program"), to the extent the procedures in
the Program are applicable to the servicing obligations set forth in this
Agreement; (c) 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 (d) 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.
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, 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 September 30, 1999,
which term shall be extendible by the Note Insurer for successive quarterly
terms ending on each successive December 31, March 31, June 30 and September 30,
(or, pursuant to revocable written standing instructions from time to time
18
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.
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 in such cases where the Noteholders are
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
19
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
based on the Principal Balance of such 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 Class A-1 Payment
Amount, the Class A-1 Principal Payment Amount, the Class A-1 Interest
Payment Amount, the Class A-2 Payment Amount, the Class A-2 Principal
Payment Amount, the Class A-2 Interest Payment Amount, the Class A
Payment Amount, the Class A Principal Payment Amount, the Class A
Interest Payment Amount, the Class B Payment Amount, the Class B
Interest Payment Amount, the Class B Principal Payment Amount, the
Back-up Servicer Fee, the Servicing Fee, the Indenture Trustee Fee, the
Custodian Fee, the amount on deposit in the Class B Reserve Account,
the amount on deposit in the Spread 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
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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 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, which
loan master file and history
21
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 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 December 1999 (with
respect to the period from and including the 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.
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 Chase Texas entitled "Long Beach
Acceptance Corp., Chase Bank of Texas, National Association Agent Account--Auto
Loan Programs," account number 00100916395, and one established with Bank of
America National Trust and Savings Association entitled "Long Beach Acceptance
Corp., Chase Bank of Texas, National Association Agent Account--Auto Loan
Programs," account number 14572-02900; 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 which shall at all
times be an Eligible Account, initially established and maintained with Chase
Manhattan 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 and the Noteholders for
22
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 and funds on deposit in the Lock-Box Account shall be distributed by Chase
Manhattan, as agent for the beneficial owners of funds in the Lock-Box Account
at such time (including the Issuer), and Chase Manhattan 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, the Collection Account and the Note Account
in the name of the Issuer for the benefit of the Noteholders and the Note
Insurer, and the Policy Payments Account in the name of the Issuer for the
benefit of the Noteholders. The Collection Account, the Note Account and the
Policy Payments 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. On the Closing
Date, the Transferor shall deposit $163,322.59 into the Collection Account,
which amount shall be applied by the Trust Collateral Agent on the initial
Payment Date to fund the additional seven (7) days of interest on the Class A
Notes and Class B Notes for the initial accrual period.
All amounts held in the Collection Account shall be invested
by the Trust Collateral Agent at the written direction of the Transferor in
Eligible Investments in the name of the Trust Collateral Agent as trustee of the
Issuer and shall mature no later than one Business Day immediately preceding the
Payment Date next succeeding the date of such investment. In no event shall the
Trust Collateral Agent be liable for any insufficiency in the Collection 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
23
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). For purposes of this
paragraph, the Trust Collateral Agent will take delivery of the Eligible
Investments in accordance with Schedule C.
(c) The Trust Collateral Agent, pursuant to the Servicer's
written instruction, shall on or prior to each Payment Date (and prior to the
transfer from the Collection Account to the Note Account described in Section
5.6(a)) transfer from the Collection Account to the Servicer, as additional
servicing compensation, the amount, if any, required to be paid to the Servicer
pursuant to Section 5.12.
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
24
amounts to be paid under Section 11.1 and (iii) on or before each Draw Date, the
Trust Collateral Agent shall remit to the Collection Account any amounts
delivered to the Trust Collateral Agent by the Collateral Agent.
SECTION 5.6. PAYMENTS; POLICY CLAIMS.
(a) On each Payment Date, 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 from the Collection Account to the Note Account, in
immediately available funds, an amount equal to the excess of 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 over all funds transferred from the Collection
Account with respect to such Collection Period pursuant to Section 5.1(c).
(b) Prior to each Payment Date, the Servicer shall on the
related Determination Date calculate the Available Funds, the Class A-1 Payment
Amount, the Class A-1 Principal Payment Amount, the Class A-1 Interest Payment
Amount, the Class A-2 Payment Amount, the Class A-2 Principal Payment Amount,
the Class A-2 Interest Payment Amount, the Class A Payment Amount, the Class A
Principal Payment Amount, the Class A Interest Payment Amount, the Class B
Payment Amount, the Class B Interest Payment Amount, the Class B Principal
Payment Amount, the Monthly Dealer Participation Fee Payment Amount, the amount,
if any, required to be withdrawn from the Collection Account and paid to the
Servicer as additional servicing compensation or contributed to the Spread
Account on behalf of the Servicer, in each case pursuant to Section 5.12 and,
based on the Available Funds and the other amounts available for payment on such
Payment Date, determine the amount payable to the Noteholders.
(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 payments 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, from the Available Funds, 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 pursuant to subclause FIRST of this
clause (i)), the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods and, if the Available Funds are insufficient to pay
such Servicing Fee and such unpaid 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, to the extent
received by the Trust Collateral Agent from the Collateral Agent;
25
(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 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, to the extent received by
the Trust Collateral Agent from the Collateral Agent, after application
thereof pursuant to clause (i) above;
(iii) to the Class A-1 Noteholders and the Class A-2
Noteholders, PRO RATA based on the Note Interest due on each such class
of Notes, from the Available Funds (as such Available Funds have been
reduced by payments pursuant to clauses (i) and (ii) above), an amount
equal to the Class A-1 Note Interest and Class A-2 Note Interest,
respectively, with respect to such Payment Date (plus (without
duplication) interest on any outstanding Class A-1 or Class A-2
Interest Carryover Shortfall, if any, to the extent permitted by
applicable law, at the Class A-1 Note Rate or the Class A-2 Note Rate,
as applicable, from and including such preceding Payment Date to but
excluding the current Payment Date (calculated 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, to
the extent received by the Trust Collateral Agent from the Collateral
Agent, 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 pursuant to clauses (i) through (iii) above),
FIRST, to the Class A-1 Noteholders, until the Class A-1 Note Balance
has been reduced to zero, an amount equal to the sum of the Class A
Principal Payment Amount with respect to such Payment Date and any
Class A Principal Carryover Shortfall as of the close of business on
the preceding Payment Date, and SECOND, to the Class A-2 Noteholders,
after the Class A-1 Note Balance has been reduced to zero, until
the Class A-2 Note Balance has been reduced to zero, an amount equal to
the sum of the remaining Class A Principal Payment Amount with respect
to such Payment Date and the remaining Class A Principal Carryover
Shortfall as of the close of business on the preceding Payment Date,
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, 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) FIRST, 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 and, if the Available Funds are
26
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, to
the extent received by the Trust Collateral Agent from the Collateral
Agent, after application thereof pursuant to clauses (i) through (iv)
above, SECOND, 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
pursuant to clauses (i) through (iv) above and subclause FIRST of this
clause (v)), all reasonable out-of-pocket expenses of the Trust
Collateral Agent, the Indenture Trustee, the Back-up Servicer and
the Custodian (including 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 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 SECOND of clause (v) shall be limited to a combined
aggregate amount of $50,000 per annum, and THIRD to the
Back-up Servicer, from the Available Funds (as such Available Funds
have been reduced by payments pursuant to clauses (i) through (iv)
above and subclauses FIRST and SECOND of this clause (v)), 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;
(vi) to the Class B Noteholders, from the Available Funds (as
such Available Funds have been reduced by payments made pursuant to
clauses (i) through (v) above), an amount equal to the Class B Note
Interest with respect to such Payment Date (plus (without duplication)
interest on any Class B Interest Carryover Shortfall, to the extent
permitted by applicable law, at the Class B Note Rate from and
including, such preceding Payment Date to but excluding the current
Payment Date (calculated 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 B Noteholders will receive such deficiency
from the Class B Reserve Account Draw; and
(vii) 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 (vi) above),
if any.
(d) In addition, on each Payment Date, after giving effect to
the payments specified in clauses (i) through (vii) above, the Trust Collateral
Agent shall (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) pay the following amounts,
from the following sources and in the following order of priority:
27
(i) to the Collateral Agent for deposit in the Class B Reserve
Account, from amounts on deposit in the Spread Account, the Current
Spread Account Release Amount with respect to such Payment Date, if
any;
(ii) to the Class B Noteholders, until the Class B Note
Balance has been reduced to zero, from the Class B Reserve Account
Release Amount, if any, with respect to such Payment Date, an amount
equal to the Class B Principal Payment Amount with respect to such
Payment Date; and
(iii) to the Certificateholder, the remaining Class B Reserve
Account Release Amount (after making the payment required pursuant to
clause (ii) above), if any.
(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
Class B Noteholder by its acceptance of a Class B Note, specifically
acknowledges that (A) interest pursuant to clause (vi) above will be
subordinated to the prior payment in full of all amounts payable pursuant to
clauses (i) through (v) above (PROVIDED, that such Class B Note Interest may be
paid on each Payment Date using amounts on deposit, if any, in the Class B
Reserve Account) and (B) no amounts shall be applied as principal on the Class B
Notes, unless and until such amounts have been distributed pursuant to Section
5.6(d)(ii) above for payment to such Class B Noteholder pursuant to the
priorities set forth in Section 5.6(d) above.
In furtherance of and not in limitation of the foregoing, the
Certificateholder by acceptance of the 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
Section 5(d)(iii) above for payment to the Certificateholder pursuant to the
priorities set forth in Section 5.6(d) above. Each Class B Noteholder, by its
acceptance of a Class B Note and the Certificateholder, by its acceptance of the
Certificate, further specifically acknowledges that it has no right to or
interest in any moneys at any time held pursuant to the Spread Account Agreement
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 prior to such release. Notwithstanding the foregoing, in
the event that it is ever determined that any property held in the Spread
Account constitute 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 Certificateholder hereby grant to the
Collateral Agent and to the Trust Collateral Agent, respectively, a first
priority perfected security
28
interest in such amounts, to be applied as set forth in Section 3.03(b) of the
Spread Account Agreement. In addition, the Certificateholder, by acceptance of
its 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).
(f) 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 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 either the Class A or Class B Payment Amount to be paid to such
Class of Notes in accordance with the Servicer's Certificate.
SECTION 5.7. STATEMENTS TO NOTEHOLDERS; TAX RETURNS.
(a) With each payment from the Note Account to the Noteholders
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 forward to each Noteholder of record), the
Servicer's Certificate substantially in the form of Exhibit B-1 hereto setting
forth at least the following information as to the Notes to the extent
applicable:
(i) the amount of the payment allocable to principal of the
Class A-1 Notes, the Class A-2 Notes and the Class B Notes,
respectively;
(ii) the amount of the payment allocable to interest on the
Class A-1 Notes, the Class A-2 Notes and the Class B Notes,
respectively;
(iii) 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 and
the Class B Pool Factor as of the close of business on the last day of
the preceding Collection Period;
(iv) the Class A-1 Note Balance, the Class A-2 Note Balance
and the Class B Note Balance 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) above;
29
(v) 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;
(vi) the amount of the Class A-1 Interest Carryover Shortfall,
if applicable, the Class A-2 Interest Carryover Shortfall, if
applicable, and the Class A Principal Carryover Shortfall, if
applicable, on such Payment Date and the change in such amounts from
the prior Payment Date;
(vii) the amount of the Class B Interest Carryover Shortfall,
if applicable, on such Payment Date and the change in such amounts from
the prior Payment Date;
(viii) the amount paid, if any, to the Class A Noteholders
under the Note Policy for such Payment Date;
(ix) the amount paid to the Note Insurer on such Payment Date;
(x) the aggregate amount in each of the Spread Account and the
Class B Reserve Account;
(xi) 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 of twelve
30-day months), and the percentage of the aggregate principal amount
which such delinquencies represent;
(xii) the number and the aggregate Purchase Amount of
Receivables repurchased by the Originator or purchased by the Servicer
during the related Collection Period;
(xiii) the cumulative number and amount of Liquidated
Receivables, the cumulative amount of any Liquidation Proceeds and
Recoveries, since the 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;
(xiv) 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;
(xv) whether any Trigger Event has occurred as of such
Determination Date;
(xvi) 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;
30
(xvii) whether an Insurance Agreement Event of Default has
occurred; and
(xviii) 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.
Each amount set forth pursuant to subclauses (i), (ii) and (v)
above shall be expressed as a dollar amount per $1,000 of original principal
balance of a Note.
(b) No later than January 31 of each calendar year, commencing
January 31, 2000, 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 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) and (v)
of Section 5.7(a) for such preceding calendar year or applicable portion thereof
during which such person was a Noteholder, and (b) such information as may be
reasonably requested by the Noteholders or required by the Internal Revenue Code
and regulations thereunder, to enable such Holders to prepare their 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 Pool
Balance as of such Determination Date 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 Note Policy.
31
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. Although the Transferor as Certificateholder, has pledged the Spread
Account to the Collateral Agent and the Note Insurer 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 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 (iv) and
subclause first of clause (v) 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
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.
Any Deficiency Notice shall be delivered by 10:00 a.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.
SECTION 5.12. SIMPLE INTEREST. On each Determination Date, the
Servicer shall determine the amount, if any, of any Simple Interest Shortfall or
Simple Interest Excess for the related Collection Period. If the Servicer
determines that there is a Simple Interest Shortfall for such related Collection
Period, the Servicer shall make an advance (a "Simple Interest Advance") in the
amount of such Simple Interest Shortfall and deposit such Simple Interest
Advance into the Collection Account on or before the Business Day immediately
preceding the next succeeding Payment Date. If, however, the Servicer determines
that there is a Simple Interest Excess for such Collection Period, the Trust
Collateral Agent shall withdraw the amount of such Simple Interest Excess from
the Collection Account on the next Payment Date and pay the amount of such
Simple Interest Excess to the Servicer as additional servicing compensation.
Notwithstanding the immediately preceding sentence, to the extent that the
aggregate amount of Simple Interest Advances made by the Servicer with respect
to all prior Collection Periods does not exceed the aggregate amount of all
Simple Interest Excesses with respect to such prior Collection Periods, such
excess shall be deposited pursuant to Section 5.6(b) into the Spread Account and
shall be treated as a contribution to the Spread Account by the Servicer for the
benefit of the Certificateholder for federal income tax purposes. All references
in this Section 5.12 to the Servicer shall be deemed to refer to the Servicer
only so long as LBAC is acting in such capacity hereunder.
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SECTION 5.13. CLASS B RESERVE ACCOUNT. In order to effectuate
the subordination provided for herein and to enhance the amounts available to
make required payments to the Class B Noteholders, there shall be established
and maintained with the Trust Collateral Agent an Eligible Account entitled,
"Class B Reserve Account--Long Beach Acceptance Auto Receivables Trust 1999-1",
which will include the money and other property deposited and held therein
pursuant to Section 5.6(d)(i) and this Section 5.13.
(a) On the Closing Date, the Transferor shall deposit the
Initial Class B Reserve Account Deposit into the Class B Reserve Account.
(b) The amounts on deposit in the Class B Reserve Account
shall be available for payment in accordance with and subject to Section 5.6(d).
Upon termination of this Agreement and the Class B Noteholders having been paid
all amounts due under this Agreement, any remaining amounts in the Class B
Reserve Account will be distributed to the Certificateholder. Upon any such
payment to the Certificateholder, the Class B Noteholders will not have any
further rights in, or claims to, such amounts.
(c) Amounts held in the Class B Reserve Account shall be
invested in Eligible Investments which shall mature no later than the Business
Day immediately preceding the next Payment Date in accordance with written
instructions from the Transferor and such investments shall not be sold or
disposed of prior to their maturity. All income and gain recognition on such
investments shall be solely for the benefit of the Certificateholder. In no
event shall the Trust Collateral Agent be liable for any insufficiencies therein
resulting from an investment loss in any Eligible Investment.
(d) 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 are insufficient to pay the full amount described in clause (vi)
of Section 5.6(c), the Trust Collateral Agent shall withdraw the Class B Reserve
Account Draw from the Class B Reserve Account equal to such insufficiency and
deliver the amount so withdrawn to the Trust Collateral Agent for deposit in the
Note Account for application (in the order of priority provided by Section
5.6(c)) in respect of such insufficiency.
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 Trust
Collateral Agent acknowledges and agrees that (a) each item of property (whether
investment property, financial asset, security, instrument or cash) credited to
the Class B Reserve 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 order from the Indenture Trustee
directing transfer or redemption of any financial asset relating to the Class B
Reserve Account, the Trust Collateral Agent shall comply with such entitlement
order without further consent by LBAC or any other person.
33
ARTICLE VI
THE NOTE POLICY
SECTION 6.1. NOTE POLICY. The Originator agrees,
simultaneously with the execution and delivery of this Agreement, to cause the
Note Insurer to issue the Note Policy for the benefit of the Noteholders in
accordance with the terms thereof.
SECTION 6.2. CLAIMS UNDER NOTE 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) 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 Note Policy shall be deposited by the Trust Collateral Agent
into the Policy Payments Account and thereafter into the Note Account for
payment to Noteholders on the related Payment Date (or promptly following
payment on a later date as set forth in the Note 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 Note Policy and shall constitute a "Notice of Claim" under the
Note Policy. In accordance with the provisions of the Note 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 second Business Day (as defined in the Note Policy) following receipt on
a Business Day (as defined in the Note Policy) of the Notice of Claim, and (ii)
the applicable Payment Date. Any payment made by the Note Insurer under the Note
Policy shall be applied solely to the payment of the Notes, and for no other
purpose.
(c) The Trust Collateral Agent shall (i) receive as
attorney-in-fact of each 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 Note Policy shall not be considered
payment by the Issuer or from the Spread Account with respect to such 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 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 Notes by or on
34
behalf of the Note Insurer, each 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
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 Notes to the extent that it has made payment
pursuant to the Note 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 Noteholders upon
receipt from the Note Insurer of proof of payment by the Note Insurer of any
Interest Payment Amount or Principal Payment Amount.
(d) The Trust Collateral Agent shall be entitled, but not
obligated, to enforce on behalf of the Noteholders the obligations of the Note
Insurer under the Note Policy. Notwithstanding any other provision of this
Agreement, the 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 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 Note 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 Note
Policy to obtain payment by the Note Insurer, notify Holders of the Notes by
mail that, in the event that any Noteholder's payment is so recoverable, such
Noteholder will be entitled to payment pursuant to the terms of the Note Policy.
Pursuant to the terms of the Note Policy, the Note Insurer will make such
payment on behalf of the Noteholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order (as defined in
the Note Policy) and not to the Trust Collateral Agent or any Noteholder
directly (unless 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
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 Noteholders, thereby
appoints the Note Insurer as agent and attorney-in-fact for the Trust Collateral
Agent and each Noteholder in any legal proceeding with respect to the 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
Notes. Each Holder of Notes, by its purchase of 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
35
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 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 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 NOTE POLICY. The Trust Collateral
Agent shall surrender the Note 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 Note Policy and on which the Issuer
is deemed to have relied in acquiring the Receivables and on which the Indenture
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, 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.
36
(d) VALID SALE; BINDING OBLIGATION. This Agreement effects a
valid sale, transfer and assignment of the Receivables and the other property
conveyed to the Issuer pursuant to Section 2.1, 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, (B) seeking to prevent the issuance of the
Notes 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, (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 (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
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
obligation 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 or the Note Insurer.
37
(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 ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇.
SECTION 7.2. LIABILITY OF THE TRANSFEROR; INDEMNITIES.
(a) The Transferor shall be liable in accordance herewith 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.
The Transferor shall indemnify, defend, and hold harmless the Originator, the
Servicer, the Indenture Trustee, the Trust Collateral Agent, the Issuer, the
Owner Trustee, the Custodian, the Back-up Servicer, the Collateral Agent and the
Note Insurer and each of their respective officers, employees and directors from
and against any loss, liability or expense incurred by reason of (i) the
Transferor's willful misfeasance, bad faith, or negligence in the performance of
its duties under this Agreement, or by reason of reckless disregard of its
obligations and duties under this Agreement or (ii) the Transferor's violation
of Federal or State securities laws in connection with the sale of the Notes.
(b) Indemnification under this Section 7.2 shall include,
without limitation, reasonable fees and expenses of counsel and expenses of
litigation. If the Transferor shall have made any indemnity payments to the
Indenture Trustee, the Trust Collateral Agent, the Issuer, the Owner Trustee,
the Custodian, the Collateral Agent or the Back-up Servicer pursuant to this
Section and the Trust Collateral Agent or the Back-up Servicer thereafter shall
collect any of such amounts from others, the Indenture Trustee, the Trust
Collateral Agent, the Issuer, the Owner Trustee, the Custodian, the Collateral
Agent or the Back-up Servicer shall repay such amounts to the Transferor,
without interest.
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
38
either (A) stating that, in the opinion of such counsel, all financing
statements and continuation statements and amendments thereto have been executed
and 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 makes
the following representations on which the Note Insurer shall be deemed to have
relied in executing and delivering the Note 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 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.
39
(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
40
Basic Documents to which the Servicer is a party, the Notes or the
Certificate, (B) seeking to prevent the issuance of the Notes or the
Certificate or the consummation of any of the transactions contemplated
by this Agreement, the Notes, the Certificate, 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, the Certificate 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 the
Certificate 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 for the issuance or sale of the Notes 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
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
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, 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
41
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 Custodian, the Back-up Servicer, the
Transferor, the Note Insurer, the Issuer 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 Transferor, the Note Insurer, the Issuer
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 by reason of reckless disregard of its obligations and duties under
this Agreement.
(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
herein contained, 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 (except for errors in judgment)
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 hereunder, 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
42
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 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
43
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 executed and 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 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
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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. If any one of the
following events ("Servicer Termination Events") shall occur and be continuing:
(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 deposit in the Spread Account any proceeds or
payment required to be so delivered under the terms of the Notes, the
Purchase Agreement and 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
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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 Purchase 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 or, after the Class A Notes have been paid in full
and all outstanding Reimbursement Obligations and other amounts due to
the Note Insurer have been paid in full and the term of the Note Policy
(as set forth therein) has expired, by the Class B Noteholders,
evidencing not less than 25% of the Class B Note Balance; 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
46
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 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 3.2(b) of the Purchase
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, after the Class A Notes have
been paid in full and all outstanding Reimbursement Obligations and
other amounts due to the Note Insurer have been paid in full and the
term of the Note Policy (as set forth therein) has expired, by the
Class B Noteholders, evidencing not less than 25% of the Class B Note
Balance, 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 Note 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 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 by the Note Insurer's failure to deliver a Servicer
Extension Notice pursuant to Section 4.13, may terminate all of the
47
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 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. 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)(v) hereof. Upon receipt of 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 if a Note Insurer Default shall have occurred
and be continuing.
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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)(v) hereof; PROVIDED, HOWEVER, the payment of such amount pursuant to
Section 5.6(c)(v) 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, after the Class
A Notes have been paid in full, by the Class B Noteholders, evidencing not less
than 51% of the Class B Note Balance 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.
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(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.
SECTION 9.3. NOTIFICATION TO NOTEHOLDERS. Upon any termination
of, or appointment of a successor to, the Servicer pursuant to this Article IX,
the Trust Collateral Agent shall give prompt written notice thereof to
Noteholders at their respective addresses appearing in the Note Register and to
each of the Rating Agencies.
SECTION 9.4. ACTION UPON CERTAIN FAILURES OF THE SERVICER. In
the event that a Responsible Officer of the Trust Collateral Agent shall have
knowledge of any failure of the Servicer specified in Section 9.1 which would
give rise to a right of termination under such Section upon the Servicer's
failure to remedy the same after notice, the Trust Collateral Agent shall give
notice thereof to the Transferor, the Servicer and the Note Insurer. For all
purposes of this Agreement, the Trust Collateral Agent shall not be deemed to
have knowledge of any failure of the Servicer as specified in Section 9.1 unless
notified thereof in writing by the Transferor, the Servicer, the Note Insurer or
by a Noteholder. The Trust Collateral Agent shall be under no duty or obligation
to investigate or inquire as to any potential failure of the Servicer specified
in Section 9.1.
ARTICLE X
THE TRUST COLLATERAL AGENT AND THE CUSTODIAN
SECTION 10.1. DUTIES OF THE TRUST COLLATERAL AGENT AND THE
CUSTODIAN.
(a) The Trust Collateral Agent and the Custodian, both prior
to the occurrence of an Event of Default and after an Event of Default shall
have been cured or waived, shall undertake to perform such duties and only such
duties as are specifically set forth in this Agreement. If an Event of Default
shall have occurred and shall not have been cured or waived, the Trust
Collateral Agent and the Custodian may, and at the direction of the Note Insurer
(or, if a Note Insurer Default shall have occurred and is continuing, the
Majorityholders), shall exercise such of the rights and powers vested in it by
this Agreement and shall use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of its own affairs.
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(b) The Trust Collateral Agent and the Custodian, upon receipt
of all resolutions, certificates, statements, opinions, reports, documents,
orders or other instruments furnished to the Trust Collateral Agent and the
Custodian that shall be specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement; PROVIDED, HOWEVER, that, neither
the Trust Collateral Agent nor the Custodian shall be responsible for the
accuracy or content of any such resolution, certificate, statement, opinion,
report, document, order or other instrument. If any such instrument is found not
to conform in any material respect to the requirements of this Agreement, the
Trust Collateral Agent or the Custodian, as applicable, shall notify the Note
Insurer and the Noteholders of such instrument in the event that the Trust
Collateral Agent or the Custodian, after so requesting, does not receive a
satisfactorily corrected instrument.
(c) The Trust Collateral Agent shall take and maintain custody
of the Schedule of Receivables included as Schedule A to this Agreement and
shall retain copies of all Servicer's Certificates prepared hereunder.
(d) No provision of this Agreement shall be construed to
relieve the Trust Collateral Agent or the Custodian from liability for its own
negligent action, its own negligent failure to act, or its own bad faith;
PROVIDED, HOWEVER, that:
(i) Prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred, the duties and obligations of the Trust Collateral Agent and
the Custodian shall be determined solely by the express provisions of
this Agreement, neither the Trust Collateral Agent nor the Custodian
shall be liable except for the performance of such duties and
obligations as shall be specifically set forth in this Agreement, no
implied covenants or obligations shall be read into this Agreement
against the Trust Collateral Agent or the Custodian and, in the absence
of bad faith on the part of the Trust Collateral Agent or the
Custodian, the Trust Collateral Agent and the Custodian, as applicable,
may conclusively rely on the truth of the statements and the
correctness of the opinions expressed in any certificates or opinions
furnished to the Trust Collateral Agent or the Custodian and conforming
to the requirements of this Agreement;
(ii) Neither the Trust Collateral Agent nor the Custodian
shall be liable for an error of judgment made in good faith by a
Responsible Officer or officer of the Custodian, respectively, unless
it shall be proved that the Trust Collateral Agent or the Custodian,
respectively shall have been negligent in ascertaining the pertinent
facts;
(iii) Neither the Trust Collateral Agent nor the Custodian
shall be liable with respect to any action taken, suffered, or omitted
to be taken in good faith in accordance with this Agreement or at the
direction of the Note Insurer or, after a Note Insurer Default, the
Class A Noteholders evidencing not less than 25% of the Class A Note
Balance or, after the Class A Notes have been paid in full and all
outstanding Reimbursement Obligations and other amounts due to the Note
Insurer have been paid in full and the term of the Note Policy (as set
forth therein) has expired, by the Class B Noteholders, evidencing not
less than 25% of the Class B Note Balance, relating to the time,
method, and place of conducting any proceeding for any remedy available
to the
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Trust Collateral Agent or the Custodian, or exercising any trust or
power conferred upon the Trust Collateral Agent or the Custodian,
as applicable, under this Agreement;
(iv) Neither the Trust Collateral Agent nor the Custodian
shall be charged with knowledge of any Servicer Termination Event or
Event of Default, unless a Responsible Officer assigned to the Trust
Collateral Agent's Corporate Trust Office or an officer of the
Custodian receives written notice of such Servicer Termination Event or
Event of Default from the Servicer, the Transferor, the Note Insurer
or, after a Note Insurer Default, the Class A Noteholders evidencing
not less than 25% of the Class A Note Balance or, after the Class A
Notes have been paid in full and all outstanding Reimbursement
Obligations and other amounts due to the Note Insurer have been paid in
full and the term of the Note Policy (as set forth therein) has
expired, by the Class B Noteholders, evidencing not less than 25% of
the Class B Note Balance (such notice shall constitute actual knowledge
of a Servicer Termination Event or Event of Default by the Trust
Collateral Agent); and
(v) Neither the Trust Collateral Agent nor the Custodian shall
be liable for any action taken, suffered or omitted by it in good faith
and reasonably believed by it to be authorized or within the discretion
or rights or powers conferred upon it by this Agreement.
(e) The Trust Collateral Agent and the Custodian may, but
shall not be required to, expend or risk its own funds or otherwise incur
financial liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, unless it shall have been provided with
indemnity against such risk or liability in form and substance satisfactory to
the Trust Collateral Agent or Custodian, as applicable, and none of the
provisions contained in this Agreement shall in any event require the Trust
Collateral Agent or Custodian to perform, or be responsible for the manner of
performance of, any of the obligations of the Servicer under this Agreement
except during such time, if any, as the Trust Collateral Agent, in its capacity
as Back-up Servicer, shall be the successor to, and be vested with the rights,
duties, powers, and privileges of, the Servicer in accordance with the terms of
this Agreement.
(f) Except for actions expressly authorized by this Agreement,
neither the Trust Collateral Agent nor the Custodian shall take action
reasonably likely to impair the security interests created or existing under any
Receivable or Financed Vehicle or to impair the value of any Receivable or
Financed Vehicle.
(g) All information obtained by the Trust Collateral Agent or
the Custodian regarding the Obligors and the Receivables, whether upon the
exercise of its rights under this Agreement or otherwise, shall be maintained by
the Trust Collateral Agent or Custodian, as applicable, in confidence and shall
not be disclosed to any other Person; PROVIDED that, nothing herein shall
prevent the Trust Collateral Agent or Custodian from delivering copies of such
information 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 Trust Collateral Agent's or Custodian's business in the ordinary
course, (ii) any Noteholder or the Note Insurer to the extent that such
Noteholder or the Note Insurer is entitled to such information under this
Agreement, but not
52
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 Trust Collateral Agent or
Custodian is a party or (d) in order to protect or enforce the rights of the
Noteholders and the Note Insurer under the Issuer established hereunder.
(h) Money held in trust by the Trust Collateral Agent or the
Custodian need not be segregated from other funds except to the extent required
by law or the terms of this Agreement or the Indenture.
(i) Every provision of this Agreement relating to the conduct
or affecting the liability of or affording protection to the Trust Collateral
Agent or the Custodian shall be subject to the provisions of this Section 10.1.
(j) The Trust Collateral Agent and the Custodian each shall,
and each hereby agrees that it will, perform all of the obligations and duties
required of it under the
Sale and Servicing Agreement.
(k) The Trust Collateral Agent shall, and hereby agrees that
it will, hold the Note Policy in trust, and will hold any proceeds of any claim
on the Note Policy in trust, solely for the use and benefit of the Class A
Noteholders.
(l) Without limiting the generality of this Section 10.1, the
Trust Collateral Agent and the Custodian each shall have no duty (i) to see to
any recording, filing or depositing of this Agreement or any agreement referred
to herein or any financing statement evidencing a security interest in the
Financed Vehicles, or to see to the maintenance of any such recording or filing
or depositing or to any recording, refiling or redepositing of any thereof, (ii)
to see to any insurance of the Financed Vehicles or Obligors or to effect or
maintain any such insurance, (iii) to see to the payment or discharge of any
tax, assessment or other governmental charge or any Lien or encumbrance of any
kind owing with respect to, assessed or levied against any part of the Pledged
Property, (iv) to confirm or verify the contents of any reports or certificates
delivered to the Trust Collateral Agent or the Servicer pursuant to this
Agreement or the Trust Agreement believed by the Trust Collateral Agent or the
Custodian, as applicable, to be genuine and to have been signed or presented by
the proper party or parties, or (v) to inspect the Financed Vehicles at any time
or ascertain or inquire as to the performance of observance of any of the
Issuer's, the Transferor's or the Servicer's representations, warranties or
covenants or the Servicer's duties and obligations as servicer and as custodian
of the Receivable Files under the
Sale and Servicing Agreement.
(m) In no event shall The Chase Manhattan Bank, in any of its
capacities hereunder, be deemed to have assumed any duties of the Owner Trustee
under the Delaware Business Trust Statute, common law, or the Trust Agreement.
53
(n) Neither the Trust Collateral Agent nor the Custodian shall
be required to give any bond or surety in respect of the powers granted to it
under this Agreement.
SECTION 10.2. TRUST COLLATERAL AGENT TO ACT FOR THE
NOTEHOLDERS AND NOTE INSURER. Prior to the payment in full of the Notes and the
Reimbursement Obligations and the expiration of the term of the Note Policy, the
Trust Collateral Agent shall act solely for the benefit of the Noteholders and
the Note Insurer, as their interests may appear herein.
SECTION 10.3. CERTAIN MATTERS AFFECTING THE TRUST COLLATERAL
AGENT AND THE CUSTODIAN. Except as otherwise provided in the second paragraph of
Section 10.1:
(i) The Trust Collateral Agent and the Custodian may rely and
shall be protected in acting or refraining from acting upon any
resolution, Officer's Certificate, Servicer's Certificate, certificate
of auditors, or any other certificate, statement, instrument, opinion,
report, notice, request, consent, order, appraisal, bond, or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
(ii) The Trust Collateral Agent and the Custodian may consult
with counsel, and any written advice or Opinion of Counsel shall be
full and complete authorization and protection in respect of any action
taken or suffered or omitted by it under this Agreement in good faith
and in accordance with such written advice or Opinion of Counsel.
(iii) Neither the Trust Collateral Agent nor the Custodian
shall be under any obligation to exercise any of the rights or powers
vested in it by this Agreement, or to institute, conduct, or defend any
litigation under this Agreement or in relation to this Agreement, at
the request, order or direction of any of the Noteholders or the Note
Insurer pursuant to the provisions of this Agreement, unless such
Noteholders or the Note Insurer shall have offered to the Trust
Collateral Agent or the Custodian, as applicable, reasonable security
or indemnity in form and substance reasonably satisfactory to the Trust
Collateral Agent or the Custodian, as applicable, against the costs,
expenses and liabilities that may be incurred therein or thereby.
Nothing contained in this Agreement, however, shall relieve the Trust
Collateral Agent or the Custodian of the obligations, upon the
occurrence of a Servicer Termination Event or Event of Default (that
shall not have been cured or waived), to exercise such of the rights
and powers vested in it by this Agreement, and to use the same degree
of care and skill in their exercise as a prudent person would exercise
or use under the circumstances in the conduct of its own affairs.
(iv) Neither the Trust Collateral Agent nor the Custodian
shall be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, approval, bond, or other paper
or document (other than for the duties of the Custodian pursuant to
Section 3.4), unless requested in writing to do so by the Note Insurer
(if no Note Insurer Default shall have occurred or be continuing), the
Transferor or the Class A Noteholders evidencing not less than 25% of
the Class A Note Balance or, after the Class A Notes have been paid in
full and all outstanding Reimbursement Obligations and other amounts
54
due to the Note Insurer have been paid in full and the term of the Note
Policy (as set forth therein) has expired, by the Class B Noteholders,
evidencing not less than 25% of the Class B Note Balance; PROVIDED,
HOWEVER, that, if the payment within a reasonable time to the Trust
Collateral Agent or the Custodian of the costs, expenses or liabilities
likely to be incurred by it in the making of such investigation shall
be, in the opinion of the Trust Collateral Agent or the Custodian, not
reasonably assured to the Trust Collateral Agent or the Custodian by
the security afforded to it by the terms of this Agreement, the Trust
Collateral Agent or the Custodian, as applicable, may require indemnity
in form and substance satisfactory to it against such cost, expense or
liability as a condition to so proceeding. The reasonable expense of
every such examination shall be paid by the Person making such request
or, if paid by the Trust Collateral Agent or the Custodian, shall be
reimbursed by the Person making such request upon demand.
(v) The Trust Collateral Agent and the Custodian may execute
any of the trusts or powers hereunder or perform any duties under this
Agreement either directly or by or through agents or attorneys. Neither
the Trust Collateral Agent nor the Custodian shall be responsible for
any misconduct or negligence of any such agent appointed with due care
by it hereunder, or of any agent of the Servicer in its capacity as
Servicer or custodian or otherwise.
(vi) Except as may be expressly required by Sections 3.4,
subsequent to the sale of the Receivables by the Transferor to the
Issuer, neither the Trust Collateral Agent nor the Custodian shall have
any duty of independent inquiry, and the Trust Collateral Agent and the
Custodian may rely upon the representations and warranties and
covenants of the Transferor and the Servicer contained in this
Agreement with respect to the Receivables and the Receivable Files.
(vii) The Trust Collateral Agent and the Custodian may rely,
as to factual matters relating to the Transferor or the Servicer, on an
Officer's Certificate of the Transferor or Servicer, respectively.
(viii) Neither the Trust Collateral Agent nor the Custodian
shall be required to take any action or refrain from taking any action
under this Agreement, or any related documents referred to herein, nor
shall any provision of this Agreement, or any such related document be
deemed to impose a duty on the Trust Collateral Agent or the Custodian
to take action, if the Trust Collateral Agent or the Custodian shall
have been advised by counsel that such action is contrary to (i) the
terms of this Agreement, (ii) any such related document or (iii) law.
SECTION 10.4. TRUST COLLATERAL AGENT, BACK-UP SERVICER AND
CUSTODIAN NOT LIABLE FOR NOTES OR RECEIVABLES. The recitals contained herein
shall be taken as the statements of the Issuer, the Transferor or the Servicer,
as the case may be, and neither the Trust Collateral Agent, the Back-up Servicer
nor the Custodian assumes any responsibility for the correctness thereof.
Neither the Trust Collateral Agent, the Back-up Servicer nor the Custodian shall
make any representations as to the validity or sufficiency of this Agreement or
of the Notes, or of any Receivable or related document. Neither the Trust
Collateral Agent, the Back-up Servicer nor the Custodian shall at any time have
any responsibility or liability for or with respect to the
55
legality, validity and enforceability of any security interest in any Financed
Vehicle or any Receivable, or the perfection and priority of such a security
interest or the maintenance of any such perfection and priority, or for or with
respect to the efficacy of the Issuer or its ability to generate the payments to
be distributed to Noteholders under this Agreement, including, without
limitation: the existence, condition, location, and ownership of any Financed
Vehicle; the existence and enforceability of any physical damage insurance
thereon; except as required by Section 3.4, the existence, contents and
completeness of any Receivable or any Receivable Files or any computer or other
record thereof; the validity of the assignment of any Receivable to the Issuer
or of any intervening assignment; except as required by Section 3.4, the
performance or enforcement of any Receivable; the compliance by the Transferor
or the Servicer with any warranty or representation made under this Agreement or
in any related document and the accuracy of any such warranty or representation
prior to the Trust Collateral Agent's, the Back-up Servicer's or Custodian's
receipt of notice or other actual knowledge by a Responsible Officer of any
noncompliance therewith or any breach thereof; any investment of monies by or at
the direction of the Servicer or the Note Insurer or any loss resulting
therefrom (it being understood that the Trust Collateral Agent, the Back-up
Servicer and the Custodian shall each remain responsible for any Trust Assets
that it may hold); the acts or omissions of the Issuer, the Transferor, the
Servicer, or any Obligor; any action of the Servicer taken in the name of the
Trust Collateral Agent or the Custodian; or any action by the Trust Collateral
Agent or the Custodian taken at the instruction of the Servicer; PROVIDED,
HOWEVER, that the foregoing shall not relieve either the Trust Collateral Agent,
the Back-up Servicer or the Custodian of its obligation to perform its duties
under this Agreement. Except with respect to a claim based on the failure of the
Trust Collateral Agent, the Back-up Servicer or the Custodian to perform its
duties under this Agreement or based on the Trust Collateral Agent's, the
Back-up Servicer's or the Custodian's negligence or willful misconduct, no
recourse shall be had for any claim based on any provision of this Agreement,
the Notes, or any Receivable or assignment thereof against the Trust Collateral
Agent, the Back-up Servicer or Custodian in their respective individual
capacities, neither the Trust Collateral Agent, the Back-up Servicer nor the
Custodian shall have any personal obligation, liability, or duty whatsoever to
any Noteholder or any other Person with respect to any such claim, and any such
claim shall be asserted solely against the Issuer or any indemnitor who shall
furnish indemnity as provided in this Agreement. Neither the Trust Collateral
Agent, the Back-up Servicer nor the Custodian shall be accountable for the use
or application by the Issuer of any of the Notes or of the proceeds of such
Notes, or for the use or application of any funds paid to the Servicer in
respect of the Receivables. The Issuer hereby certifies to the Trust Collateral
Agent, the Back-up Servicer and the Custodian that the Rating Agencies rating
the Notes are Standard & Poor's and Moody's and that their addresses are as set
forth in Section 13.5. The Trust Collateral Agent, the Back-up Servicer and the
Custodian may rely on the accuracy of such certification until it receives from
the Issuer an Officer's Certificate superseding such certification. All
references above to the Back-up Servicer shall be deemed to refer to the Back-up
Servicer only so long as it is acting in such capacity hereunder.
SECTION 10.5. TRUST COLLATERAL AGENT, BACK-UP SERVICER AND
CUSTODIAN MAY OWN NOTES. The Trust Collateral Agent, the Back-up Servicer and
the Custodian in their respective individual or any other capacities may become
the owner or pledgee of Notes and may deal with the Transferor and the Servicer
in banking transactions with the same rights as it would have if it were not
Trust Collateral Agent, Back-up Servicer or Custodian, as applicable.
56
SECTION 10.6. INDEMNITY OF TRUST COLLATERAL AGENT, BACK-UP
SERVICER AND CUSTODIAN. The Servicer shall indemnify the Trust Collateral Agent,
the Back-up Servicer, the Custodian and each officer, director and employee of
the Trust Collateral Agent, the Back-up Servicer and the Custodian for, and hold
each such Person harmless against, any loss, liability, or expense incurred
without willful misfeasance, negligence, or bad faith on its part, arising out
of or in connection with the acceptance or administration of this Agreement, the
performance of duties as Custodian of the Legal Files including the costs and
expenses of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties under this Agreement.
Additionally the Transferor, pursuant to Section 7.2, shall indemnify the Trust
Collateral Agent, the Back-up Servicer and the Custodian with respect to certain
matters, the Servicer, pursuant to Section 7.2, shall indemnify the Trust
Collateral Agent, the Back-up Servicer and the Custodian with respect to certain
matters, and Noteholders, pursuant to Section 10.3 shall, upon the circumstances
therein set forth, indemnify the Trust Collateral Agent and the Custodian under
certain circumstances. The provisions of this Section 10.6 shall survive the
termination of this Agreement or any resignation or removal of LBAC as Servicer.
SECTION 10.7. ELIGIBILITY REQUIREMENTS FOR TRUST COLLATERAL
AGENT AND THE CUSTODIAN. The Trust Collateral Agent and the Custodian under this
Agreement shall at all times be organized and doing business under the laws of
the United States of America, with respect to the Trust Collateral Agent or the
laws of the State of New York, with respect to the Custodian; authorized under
such laws to exercise corporate trust powers; having a combined capital and
surplus of at least $50,000,000 and subject to supervision or examination by
Federal or State authorities satisfactory to the Note Insurer; and having a
rating, both with respect to long-term and short-term unsecured obligations, of
not less than investment grade by each Rating Agency. If such corporation shall
publish reports of condition at least annually, pursuant to law or to the
requirements of the aforesaid supervising or examining authority, then for the
purpose of this Section 10.7, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Trust Collateral Agent or the Custodian shall cease to be eligible in accordance
with the provisions of this Section 10.7, the Trust Collateral Agent or the
Custodian shall resign immediately in the manner and with the effect specified
in Section 10.8.
SECTION 10.8. RESIGNATION OR REMOVAL OF TRUST COLLATERAL AGENT
OR CUSTODIAN.
(a) The Trust Collateral Agent and the Custodian may at any
time resign and be discharged from the trusts hereby created by giving 30 days'
prior written notice thereof to the Servicer. To the extent that the Trust
Collateral Agent and the Custodian resign hereunder, the Indenture Trustee shall
also resign under the Indenture and the Collateral Agent shall resign under the
Spread Account Agreement. Upon receiving such notice of resignation, with the
prior written consent of the Note Insurer (or, if a Note Insurer Default shall
have occurred or is continuing, the Class A Noteholders evidencing not less than
25% of the Class A Note Balance or, after the Class A Notes have been paid in
full and all outstanding Reimbursement Obligations and other amounts due to the
Note Insurer have been paid in full and the term of the Note Policy (as set
forth therein) has expired, by the Class B Noteholders, evidencing not less than
25% of the Class B Note Balance), the Servicer shall promptly appoint a
successor Trust Collateral
57
Agent or Custodian, as applicable, by written instrument, in duplicate, one
copy of which instrument shall be delivered to the resigning Trust Collateral
Agent or Custodian, as applicable, and one copy to the successor Trust
Collateral Agent or successor Custodian. If no successor Trust Collateral Agent
or successor Custodian shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of resignation, the
Note Insurer may appoint a successor Trust Collateral Agent or Custodian, as
applicable, by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Trust Collateral Agent or Custodian and one
copy to the successor Trust Collateral Agent or Custodian. If no successor Trust
Collateral Agent or Custodian shall have been so appointed and have accepted
appointment within 60 days after the giving of such notice of resignation, the
resigning Trust Collateral Agent or Custodian may petition any court of
competent jurisdiction for the appointment of a successor Trust Collateral Agent
or Custodian, as applicable. The Trust Collateral Agent or the Custodian may be
removed at any time by written demand of the Note Insurer delivered to the Trust
Collateral Agent or the Custodian, as applicable, and the Servicer.
(b) If at any time (i) the Trust Collateral Agent or the
Custodian shall cease to be eligible in accordance with the provisions of
Section 10.7 and shall fail to resign after written request therefor by the
Servicer, (ii) the Trust Collateral Agent or the Custodian, as applicable, shall
be legally unable to act, (iii) the Trust Collateral Agent and the Indenture
Trustee shall be the same Person and the Indenture Trustee shall have resigned
or been removed pursuant to Section 6.8 of the Indenture, or (iv) the Trust
Collateral Agent or the Custodian shall be adjudged bankrupt or insolvent, or a
receiver, conservator or liquidator of the Trust Collateral Agent, the Custodian
or of any of their respective property shall be appointed, or any public officer
shall take charge or control of the Trust Collateral Agent or Custodian or of
its property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Note Insurer shall (so long as no Note Insurer Default
shall have occurred and be continuing), or the Servicer may (if a Note Insurer
Default shall have occurred and be continuing) remove the Trust Collateral Agent
or Custodian. If the Note Insurer or the Servicer shall remove the Trust
Collateral Agent or Custodian under the authority of the immediately preceding
sentence, the Servicer or the Note Insurer, as the case may be, shall promptly
appoint a successor Trust Collateral Agent or Custodian, as applicable, by
written instrument, in duplicate, one copy of which instrument shall be
delivered to the Trust Collateral Agent or Custodian so removed and one copy to
the successor Trust Collateral Agent or successor Custodian, and pay all fees
and expenses owed to the outgoing Trustee, provided that any successor Trust
Collateral Agent or any successor Custodian appointed by the Servicer shall be
acceptable to the Note Insurer.
(c) Any resignation or removal of the Trust Collateral Agent
or the Custodian and appointment of a successor Trust Collateral Agent or
Custodian pursuant to any of the provisions of this Section 10.8 shall not
become effective until acceptance of appointment by the successor Trust
Collateral Agent or Custodian, as applicable, pursuant to Section 10.9 and
payment of all fees and expenses owed to the outgoing Trustee. The Servicer
shall provide notice of such resignation or removal of the Trust Collateral
Agent or Custodian to each of the Rating Agencies and the Transferor.
(d) If the Trust Collateral Agent and the Back-up Servicer
shall be the same Person and the rights and obligations of the Back-up Servicer
shall have been terminated pursuant to this Section 10.8, then the Note Insurer
(or, if a Note Insurer Default shall have occurred and be
58
continuing, the Majorityholders) shall have the option, by 60 days' prior notice
in writing to the Servicer and the Trust Collateral Agent, to remove the Trust
Collateral Agent, and the Note Insurer shall not have any liability to the Trust
Collateral Agent, LBAC, the Transferor, the Servicer, the Issuer or any
Noteholder in connection with such removal.
(e) At any time following the Closing Date the Servicer may
assume the duties of Custodian under this Agreement; PROVIDED, that (i) the Note
Insurer provides its prior written consent to the Trust Collateral Agent (which
consent shall be granted or withheld by the Note Insurer in its sole discretion)
and (ii) the Rating Agency Condition has been satisfied.
SECTION 10.9. SUCCESSOR TRUST COLLATERAL AGENT OR CUSTODIAN.
Any successor Trust Collateral Agent or Custodian appointed pursuant to Section
10.8 shall execute, acknowledge and deliver to the Transferor, the Servicer, the
Note Insurer and to its predecessor Trust Collateral Agent or predecessor
Custodian, as applicable, an instrument accepting such appointment under this
Agreement, and thereupon the resignation or removal of the predecessor Trust
Collateral Agent or predecessor Custodian shall become effective and such
successor Trust Collateral Agent or successor Custodian, without any further
act, deed or conveyance, shall become fully vested with all the rights, powers,
duties, and obligations of its predecessor under this Agreement, with like
effect as if originally named as Trust Collateral Agent or Custodian. The
predecessor Trust Collateral Agent or predecessor Custodian shall upon payment
of its fees and expenses deliver to the successor Trust Collateral Agent or
successor Custodian all documents and statements and monies held by it under
this Agreement; and the Servicer, the Note Insurer and the predecessor Trust
Collateral Agent or predecessor Custodian shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and
certainly vesting and confirming in the successor Trust Collateral Agent or
successor Custodian all such rights, powers, duties, and obligations.
No successor Trust Collateral Agent or successor Custodian
shall accept appointment as provided in this Section 10.9 unless at the time of
such acceptance such successor Trust Collateral Agent or successor Custodian
shall be eligible pursuant to Section 10.7.
Upon acceptance of appointment by a successor Trust Collateral
Agent or successor Custodian pursuant to this Section 10.9, the Servicer shall
mail notice of the successor of such Trust Collateral Agent or Custodian under
this Agreement to all Holders of Notes at their addresses as shown in the Note
Register, the Transferor, and to the Rating Agencies. If the Servicer shall fail
to mail such notice within ten (10) days after acceptance of appointment by the
successor Trust Collateral Agent, the successor Trust Collateral Agent or
successor Custodian shall cause such notice to be mailed at the expense of the
Servicer.
SECTION 10.10. MERGER OR CONSOLIDATION OF TRUST COLLATERAL
AGENT OR CUSTODIAN. Any corporation into which the Trust Collateral Agent or the
Custodian may be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or consolidation to which
the Trust Collateral Agent or the Custodian shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trust Collateral Agent or the Custodian, shall be the successor of the Trust
Collateral Agent or Custodian, as applicable, hereunder, provided such
corporation shall be eligible
59
pursuant to Section 10.7, without the execution or filing of any instrument or
any further act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding.
SECTION 10.11. CO-TRUSTEE; SEPARATE TRUSTEE.
(a) Notwithstanding any other provisions of this Agreement, at
any time, for the purpose of meeting any legal requirements of any jurisdiction
in which any part of the Issuer or any Financed Vehicle may at the time be
located, the Servicer, the Note Insurer (provided a Note Insurer Default shall
not have occurred and be continuing) and the Trust Collateral Agent acting
jointly shall have the power and shall execute and deliver all instruments to
appoint one or more persons approved by the Trust Collateral Agent to act as
co-trustee, jointly with the Trust Collateral Agent, or separate trustee or
separate trustees, of all or any part of the Issuer, and to vest in such Person,
in such capacity and for the benefit of the Noteholders, such title to the
Issuer, or any part thereof, and, subject to the other provisions of this
Section 10.11, such powers, duties, obligations, rights, and trusts as the
Servicer, the Note Insurer and the Trust Collateral Agent may consider necessary
or desirable. If the Servicer and the Note Insurer shall not have joined in such
appointment within fifteen (15) days after the receipt by it of a request so to
do, or in the case an Event of Default shall have occurred and be continuing,
the Trust Collateral Agent alone shall have the power to make such appointment.
No co-trustee or separate trustee under this Agreement shall be required to meet
the terms of eligibility as a successor Trust Collateral Agent pursuant to
Section 10.7, except that the co-trustee or its parent shall comply with the
rating requirements set forth therein, and no notice of a successor Trust
Collateral Agent pursuant to Section 10.9 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required pursuant to
Section 10.9.
(b) Each separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) All rights, powers, duties, and obligations conferred or
imposed upon the Trust Collateral Agent shall be conferred upon and
exercised or performed by the Trust Collateral Agent and such separate
trustee or co-trustee jointly (it being understood that such separate
trustee or co-trustee is not authorized to act separately without the
Trust Collateral Agent joining in such act), except to the extent that
under any law of any jurisdiction in which any particular act or acts
are to be performed (whether as Trust Collateral Agent under this
Agreement or, in its capacity as Back-up Servicer, as successor to the
Servicer under this Agreement), the Trust Collateral Agent shall be
incompetent or unqualified to perform such act or acts, in which event
such rights, powers, duties, and obligations (including the holding of
title to the Issuer or any portion thereof in any such jurisdiction)
shall be exercised and performed singly by such separate trustee or
co-trustee, but solely at the direction of the Trust Collateral Agent;
(ii) No trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) Provided no Note Insurer Default shall have occurred and
be continuing, the Note Insurer may, and, in the event a Note Insurer
Default shall have occurred and be
60
continuing, then, the Servicer and the Trust Collateral Agent acting
jointly may, at any time accept the resignation of or remove any
separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trust
Collateral Agent shall be deemed to have been given to each of the other then
separate trustees and co-trustees, as effectively as if given to each of them.
Every instrument appointing any separate trustee or co-trustee shall refer to
this Agreement and the conditions of this Article X. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Trust Collateral Agent or separately, as may be provided
therein, subject to all the provisions of this Agreement, specifically including
every provision of this Agreement relating to the conduct of, affecting the
liability of, or affording protection to, the Trust Collateral Agent. Each such
instrument shall be filed with the Trust Collateral Agent and a copy thereof
given to the Servicer.
(d) Any separate trustee or co-trustee may at any time appoint
the Trust Collateral Agent, its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in
respect of this Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be removed, all
of its estates, properties, rights, remedies and trusts shall vest in and be
exercised by the Trust Collateral Agent, to the extent permitted by law, without
the appointment of a new or successor Trust Collateral Agent.
SECTION 10.12. REPRESENTATIONS AND WARRANTIES OF TRUST
COLLATERAL AGENT AND THE CUSTODIAN. The Custodian and the Trust Collateral Agent
shall make the following representations and warranties with respect to itself
on which the Transferor, the Servicer, the Originator, the Issuer, the Note
Insurer and Noteholders shall rely:
(i) The Custodian and the Trust Collateral Agent are a New
York banking corporation, duly organized, validly existing, and in good
standing under the laws of the State of New York and have the corporate
power, authority and legal right to hold the Legal Files.
(ii) The Custodian and the Trust Collateral Agent have full
corporate power authority and legal right to execute, deliver, and
perform this Agreement and shall have taken all necessary action to
authorize the execution, delivery and performance by it of this
Agreement.
(iii) This Agreement has been duly executed and delivered by
the Trust Collateral Agent and the Custodian and constitutes a legal,
valid and binding obligation of the Trust Collateral Agent and the
Custodian, enforceable in accordance with its terms, subject to (x)
applicable bankruptcy, insolvency, reorganization, moratorium and other
similar laws affection creditor's rights generally and (y) general
principals of equity.
SECTION 10.13. NO BANKRUPTCY PETITION. The Trust Collateral
Agent covenants and agrees that prior to the date which is one year and one day
after the payment in full of all securities issued by the Transferor or the
Issuer it will not institute against, or join any other Person in instituting
against, the Transferor or the Issuer any bankruptcy, reorganization,
61
arrangement, insolvency or liquidation proceedings, or other proceedings under
any Federal or State bankruptcy or similar law.
SECTION 10.14. RIGHTS OF NOTE INSURER TO DIRECT TRUST
COLLATERAL AGENT. Subject to clause (iii) of Section 10.3, unless a Note Insurer
Default shall have occurred and be continuing, the Note Insurer, after giving
written notice to the Trust Collateral Agent, shall have the right to direct the
time, method and place at or by which the Trust Collateral Agent conducts any
proceeding for any remedy available to the Trust Collateral Agent, or exercises
any such trust or power conferred upon the Trust Collateral Agent; PROVIDED,
HOWEVER, that subject to Section 10.1, the Trust Collateral Agent shall have the
right to decline to follow any such direction of the Note Insurer if the Trust
Collateral Agent, being advised by counsel, determines that the action so
directed may not lawfully be taken, or if the Trust Collateral Agent in good
faith shall, by a Responsible Officer of the Trust Collateral Agent, determine
that the proceedings so directed would be in violation of any Basic Document or
involve it in personal liability against which its has not been provided
indemnity in form and substance satisfactory to it or be unduly prejudicial to
the rights of Noteholders; PROVIDED, that nothing in this Agreement shall impair
the right of the Trust Collateral Agent to take any action deemed proper by the
Trust Collateral Agent and which is not inconsistent with such direction of the
Note Insurer.
ARTICLE XI
TERMINATION
SECTION 11.1. TERMINATION.
(a) The respective obligations and responsibilities of LBAC,
the Transferor, the Issuer, the Servicer, the Custodian and the Trust Collateral
Agent created hereby shall terminate upon the payment to Noteholders and the
Certificateholder of all amounts required to be paid to them pursuant to this
Agreement, the Indenture and the Trust Agreement, satisfaction of all
Reimbursement Obligations, and the expiration of any preference period related
thereto and the disposition of all property held as part of the Issuer;
PROVIDED, HOWEVER, in any case there shall be delivered to the Trust Collateral
Agent and the Note Insurer an Opinion of Counsel that all applicable preference
periods under federal, state and local bankruptcy, insolvency and similar laws
have expired with respect to the payments pursuant to this Section 11.1. The
Servicer shall promptly notify the Trust Collateral Agent, the Transferor, the
Issuer, each Rating Agency and the Note Insurer of any prospective termination
pursuant to this Section 10.1.
(b) Upon any sale of the assets of the Issuer pursuant to
Section 8.1 of the Trust Agreement, the Servicer shall instruct the Trust
Collateral Agent to deposit the proceeds from such sale after all payments and
reserves therefrom (including the expenses of such sale) have been made (the
"Insolvency Proceeds") in the Collection Account.
(c) Notice of any termination of the Issuer shall be given by
the Servicer to the Owner Trustee, the Trust Collateral Agent, the Collateral
Agent, the Back-up Servicer, the Indenture Trustee, the Note Insurer and the
Rating Agencies as soon as practicable after the Servicer has received notice
thereof.
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(d) Following the satisfaction and discharge of the Indenture
and the payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder.
ARTICLE XII
ADMINISTRATIVE DUTIES OF THE SERVICER
SECTION 12.1. ADMINISTRATIVE DUTIES.
(a) DUTIES WITH RESPECT TO THE INDENTURE. The Servicer shall
take all necessary action that is the duty of the Issuer to take pursuant to the
Indenture, pursuant to Sections 2.9 (with respect to the notice provisions
contained therein), 3.4, 3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 8.3, 9.1, 9.2, 9.3,
11.1 and 11.13 of the Indenture (in each case, excluding any duty to make
payments to the Noteholders and the Note Insurer). In addition, the Servicer
shall consult with the Owner Trustee as the Servicer deems appropriate regarding
the duties of the Issuer under the Indenture. The Servicer shall monitor the
performance of the Issuer and shall advise the Owner Trustee when action is
necessary to comply with the Issuer's duties under the Indenture. The Servicer
shall prepare for execution by the Issuer or shall cause the preparation by
other appropriate Persons of all such documents, reports, filings, instruments,
certificates and opinions as it shall be the duty of the Issuer to prepare, file
or deliver pursuant to the Indenture.
(b) DUTIES WITH RESPECT TO THE ISSUER.
(i) In addition to the duties of the Servicer set forth in
this Agreement or any of the Basic Documents, the Servicer shall
perform such calculations and shall prepare for execution by the Issuer
or the Owner Trustee or shall cause the preparation by other
appropriate Persons of all such documents, reports, filings,
instruments, certificates and opinions as it shall be the duty of the
Issuer or the Owner Trustee to prepare, file or deliver pursuant to
this Agreement or any of the Basic Documents or under state and federal
tax and securities laws, and at the request of the Owner Trustee shall
take all appropriate action that it is the duty of the Issuer to take
pursuant to this Agreement. In accordance with the directions of the
Issuer or the Owner Trustee, the Servicer shall administer, perform or
supervise the performance of such other activities in connection with
the Trust Assets (including the Basic Documents) as are not covered by
any of the foregoing provisions and as are expressly requested by the
Issuer or the Owner Trustee and are reasonably within the capability of
the Servicer.
(ii) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into
transactions with or otherwise deal with any of its Affiliates;
PROVIDED, HOWEVER, that the terms of any such transactions or dealings
shall be in accordance with any directions received from the Issuer and
shall be, in the Servicer's opinion, no less favorable to the Issuer in
any material respect.
(c) NON-MINISTERIAL MATTERS. With respect to matters that in
the reasonable judgment of the Servicer are non-ministerial, the Servicer shall
not take any action pursuant to this Article XII unless within a reasonable time
before the taking of such action, the Servicer shall have notified the Owner
Trustee , the Note Insurer and the Trust Collateral Agent of the proposed
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action and the Owner Trustee and, with respect to items (i), (ii), (iii) and
(iv) below, the Trust Collateral Agent shall not have withheld consent or
provided an alternative direction. For the purpose of the preceding sentence,
"non-ministerial matters" shall include:
(i) the amendment of or any supplement to the Indenture;
(ii) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against
the Issuer (other than in connection with the collection of the
Receivables);
(iii) the amendment, change or modification of this Agreement
or any of the Basic Documents;
(iv) the appointment of successor Note Registrars, successor
Note Paying Agents and successor Indenture Trustees pursuant to the
Indenture or the appointment of Successor Servicers or the consent to
the assignment by the Note Registrar, Paying Agent or Trustee of its
obligations under the Indenture; and
(v) the removal of the Trust Collateral Agent or the Indenture
Trustee.
(d) EXCEPTIONS. Notwithstanding anything to the contrary in
this Agreement, except as expressly provided herein or in the other Basic
Documents, the Servicer, in its capacity hereunder, shall not be obligated to,
and shall not, (1) make any payments to the Noteholders under the Basic
Documents, (2) sell the Pledged Property pursuant to Section 5.5 of the
Indenture, (3) take any other action that the Issuer directs the Servicer not to
take on its behalf or (4) in connection with its duties hereunder assume any
indemnification obligation of any other Person.
SECTION 12.2. RECORDS. The Servicer shall maintain appropriate
books of account and records relating to services performed under this
Agreement, which books of account and records shall be accessible for inspection
by the Issuer at any time during normal business hours.
SECTION 12.3. ADDITIONAL INFORMATION TO BE FURNISHED TO THE
ISSUER. The Servicer shall furnish to the Issuer from time to time such
additional information regarding the Trust Assets as the Issuer shall reasonably
request.
SECTION 12.4. NO ADDITIONAL COMPENSATION. The Servicing Fee
payable to the Servicer pursuant to Section 5.6(c)(i) and the Simple Interest
Excess, if any, payable to the Servicer, so long as LBAC is the Servicer,
pursuant to Section 5.12 shall be the only amounts payable to the Servicer for
its services hereunder.
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ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1. AMENDMENT.
(a) This Agreement may be amended from time to time by the
Issuer, the Transferor, the Originator, the Servicer, the Trust Collateral
Agent, the Back-up Servicer and the Custodian and, (i) so long as no Note
Insurer Default has occurred and is continuing, with the prior written consent
of the Note Insurer and, (ii) if a Note Insurer Default has occurred and is
continuing with the consent of the Majorityholders, which consent given pursuant
to this Section or pursuant to any other provision of this Agreement shall be
conclusive and binding on such Holders and on all future Holders of such Notes
and of any Notes issued upon the transfer thereof or in exchange thereof or in
lieu thereof whether or not notation of such consent is made upon the Notes, for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Agreement, or of modifying in any manner the
rights of the Holders of Notes; PROVIDED, HOWEVER, that no such amendment shall
(a) increase or reduce in any manner the amount of, or accelerate or delay the
timing of, or change the allocation or priority of, collections of payments on
Receivables or payments that shall be required to be made on any Note or the
Certificate or change the applicable Note Rate without the consent of each
Noteholder and Certificateholder affected thereby, (b) reduce the aforesaid
percentage of the Note Balance required to consent to any such amendment,
without the consent of the Holders of all Notes then outstanding or eliminate
the right of the Noteholder or the Certificateholder to consent to any change
described in clause (a) affecting the Noteholder or the Certificateholder
without the consent of the Noteholder or the Certificateholder, as applicable,
or (c) result in a downgrade or withdrawal of the then current rating of the
Notes by either of the Rating Agencies without the consent of all the
Noteholders.
(b) The Trust Collateral Agent shall furnish prior notice of
any such proposed amendment to each Rating Agency and promptly after the
execution of any such amendment or consent, the Trust Collateral Agent shall
furnish a copy of such amendment or consent to each Noteholder, each of the
Rating Agencies and the Lock-Box Processor.
(c) Prior to the execution of any amendment to this Agreement,
the Trust Collateral Agent shall be entitled to receive and rely upon an Opinion
of Counsel stating that the execution of such amendment is authorized or
permitted by this Agreement and the Opinion of Counsel referred to in Section
13.2(i)(1). The Trust Collateral Agent may, but shall not be obligated to, enter
into any such amendment which affects the Trust Collateral Agent's own rights,
duties or immunities under this Agreement or otherwise.
SECTION 13.2. PROTECTION OF TITLE TO ISSUER.
(a) Each of the Transferor, as to itself, and the Servicer, as
to itself, shall execute and file such financing statements and cause to be
executed and filed such continuation statements, all in such manner and in such
places as may be required by law fully to preserve, maintain, and protect the
interest of the Indenture Trustee on behalf of the Noteholders, the Trust
Collateral Agent and the Note Insurer in its interest in the Receivables and the
other Trust Assets and in the proceeds thereof. Each of the Transferor, as to
itself, and the Servicer, as to itself, shall deliver
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(or cause to be delivered) to the Trust Collateral Agent, the Owner Trustee and
the Note Insurer file-stamped copies of, or filing receipts for, any document
filed as provided above, as soon as available following such filing.
(b) Neither the Transferor nor the Servicer shall change its
name, identity or corporate structure in any manner that would, could, or might
make any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the meaning of ss. 9-402(7) of
the UCC, unless it shall have given the Trust Collateral Agent, the Owner
Trustee, the Note Insurer and the other party at least thirty days' prior
written notice thereof, shall have promptly filed appropriate amendments to all
previously filed financing statements or continuation statements and shall have
delivered an Opinion of Counsel (A) stating that, in the opinion of such
counsel, all amendments to all previously filed financing statements and
continuation statements have been executed and filed that are necessary fully to
preserve and protect the interest of the Trust Collateral Agent in the
Receivables and the other Trust Assets, 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.
(c) Each of the Transferor and the Servicer shall have an
obligation to give the Trust Collateral Agent, the Owner Trustee, the Note
Insurer and the other party at least thirty days' prior written notice of any
relocation of its principal executive office if, as a result of such relocation,
the applicable provisions of the UCC would require the filing of any amendment
of any previously filed financing or continuation statement or of any new
financing statement, shall promptly file any such amendment and shall deliver an
Opinion of Counsel (A) stating that, in the opinion of such counsel, all
amendments to all previously filed financing statements and continuation
statements have been executed and filed that are necessary fully to preserve and
protect the interest of the Trust Collateral Agent 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. The Servicer shall at all times maintain each office from which it
shall service Receivables, and its principal executive office, within the United
States of America.
(d) The Servicer shall maintain accounts and records as to
each Receivable accurately and in sufficient detail to permit (i) the reader
thereof to know at any time the status of such Receivable, including payments
and recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that,
from and after the time of conveyance under this Agreement of the Receivables to
the Issuer, the Servicer's master computer records (including any back-up
archives) that refer to a Receivable shall indicate clearly the interest of Long
Beach Acceptance Auto Receivables Trust 1999-1 in such Receivable and that such
Receivable is owned by the Issuer. Indication of the Issuer's ownership of a
Receivable shall be deleted from or modified on the Servicer's computer systems
when, and only when, such Receivable shall have been paid in full or
repurchased.
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(f) If at any time the Transferor or the Servicer shall
propose to sell, grant a security interest in, or otherwise transfer any
interest in automotive receivables to any prospective purchaser, lender, or
other transferee, the Servicer shall give to such prospective purchaser, lender,
or other transferee computer tapes, records, or printouts (including any
restored from back-up archives) that, if they shall refer in any manner
whatsoever to any Receivable, shall indicate clearly that such Receivable has
been conveyed to and is owned by the Issuer.
(g) The Servicer shall, upon reasonable notice, permit the
Transferor, the Trust Collateral Agent, the Back-up Servicer, the Owner Trustee
and the Note Insurer and its agents at any time during normal business hours to
inspect, audit, and make copies of and abstracts from the Servicer's records
regarding any Receivable.
(h) Upon request, the Servicer shall furnish to the
Transferor, the Trust Collateral Agent, the Back-up Servicer, the Owner Trustee
or to the Note Insurer, within five Business Days, a list of all Receivables (by
contract number and name of Obligor) then held as part of the Issuer, together
with a reconciliation of such list to the Schedule of Receivables and to each of
the Servicer's Certificates furnished before such request indicating removal of
Receivables from the Issuer.
(i) The Servicer shall deliver to the Trust Collateral Agent,
the Owner Trustee and the Note Insurer:
(1) promptly after the execution and delivery of this
Agreement and of each amendment hereto and after the execution
and delivery of each amendment to any financing statement, an
Opinion of Counsel either (A) stating that, in the opinion of
such counsel, all financing statements and continuation
statements have been executed and filed that are necessary
fully to preserve and protect the interest of the Trust
Collateral Agent in the Receivables, and reciting the details
of such filings or referring to prior Opinions of Counsel in
which such details are given or (B) stating that, in the
opinion of such counsel, no such action shall be necessary to
preserve and protect such interest; and
(2) within 90 days after the beginning of each
calendar year beginning with the first calendar year beginning
more than three months after the Cutoff Date, an Opinion of
Counsel, dated as of a date during such 90-day period either
(A) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and
protect the interest of the Trust Collateral Agent in the
Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details
are given or (B) stating that, in the opinion of such counsel,
no such action shall be necessary to preserve and protect such
interest.
Each Opinion of Counsel referred to in clause (i) (1) or (i) (2) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
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(j) For the purpose of facilitating the execution of this
Agreement and for other purposes, this Agreement may be executed simultaneously
in any number of counterparts, each of which counterparts shall be deemed to be
an original, and all of which counterparts shall constitute but one and the same
instrument.
SECTION 13.3. LIMITATION ON RIGHTS OF NOTEHOLDERS.
(a) The death or incapacity of any Noteholder shall not
operate to terminate this Agreement or the Issuer, nor entitle such Noteholder's
legal representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the
Issuer, nor otherwise affect the rights, obligations and liabilities of the
parties to this Agreement or any of them.
(b) No Noteholder shall have any right to vote (except as
specifically provided herein including in Section 13.1) or in any manner
otherwise control the operation and management of the Issuer, or the obligations
of the parties to this Agreement, nor shall anything in this Agreement set
forth, or contained in the terms of the Notes, be construed so as to constitute
the Noteholders from time to time as partners or members of an association; nor
shall any Noteholder be under any liability to any third person by reason of any
action taken pursuant to any provision of this Agreement.
(c) So long as no Note Insurer Default has occurred and is
continuing, except as otherwise specifically provided herein, whenever
Noteholder action, consent or approval is required under this Agreement, such
action, consent or approval shall be deemed to have been taken or given on
behalf of, and shall be binding upon, all Noteholders if the Note Insurer agrees
to take such action or give such consent or approval.
(d) If a Note Insurer Default shall have occurred and be
continuing, no Noteholder shall have any right by virtue or by availing itself
of any provisions of this Agreement to institute any suit, action, or proceeding
in equity or at law upon or under or with respect to this Agreement, unless such
Holder previously shall have given to the Trust Collateral Agent a written
notice of default and of the continuance thereof, and unless also the Class A
Noteholders evidencing not less than 25% of the Class A Note Balance or, after
the Class A Notes have been paid in full and all outstanding Reimbursement
Obligations and other amounts due to the Note Insurer have been paid in full and
the term of the Note Policy (as set forth therein) has expired, by the Class B
Noteholders, evidencing not less than 25% of the Class B Note Balance shall have
made written request upon the Trust Collateral Agent to institute such action,
suit or proceeding in its own name as Trustee under this Agreement and shall
have offered to the Trust Collateral Agent such reasonable indemnity as it may
require against the costs, expenses, and liabilities to be incurred therein or
thereby and the Trust Collateral Agent, for 30 days after its receipt of such
notice, request, and offer of indemnity, shall have neglected or refused to
institute any such action, suit or proceeding and during such 30-day period no
request or waiver inconsistent with such written request has been given to the
Trust Collateral Agent pursuant to this Section or Section 8.4; no one or more
Holders of Notes shall have any right in any manner whatever by virtue or by
availing itself or themselves of any provisions of this Agreement to affect,
disturb, or prejudice the rights of the Holders of any other of the Notes, or to
obtain or seek to obtain priority over or preference to any other such Holder,
or to enforce any right, under this
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Agreement except in the manner provided in this Agreement and for the equal,
ratable, and common benefit of all Noteholders. For the protection and
enforcement of the provisions of this Section 13.3, each Noteholder and the
Trust Collateral Agent shall be entitled to such relief as can be given either
at law or in equity. Nothing in this Agreement shall be construed as giving the
Noteholders any direct right to make a claim on the Note Policy.
SECTION 13.4. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS,
RIGHTS, AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES (EXCEPT
WITH REGARD TO THE UCC).
SECTION 13.5. NOTICES.
(a) All demands, notices and communications upon or to the
Issuer, the Transferor, the Servicer, the Trust Collateral Agent, the Note
Insurer, Standard & Poor's or Moody's under this Agreement shall be in writing,
and delivered (i) personally, (ii) by certified mail, return receipt requested,
(iii) by Federal Express or similar overnight courier service or (iv) by
telecopy, and shall be deemed to have been duly given upon receipt (a) in the
case of the Issuer, in care of the Owner Trustee at the following address:
▇▇▇▇▇▇ Square North, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: Corporate Trust Administration (Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇), (b) in the
case of the Transferor, at the following address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇), Attention: General
Counsel, or at such other address as shall be designated by the Transferor in a
written notice to the Trust Collateral Agent, (c) in the case of the Servicer,
at the following address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
(Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇), Attention: General Counsel, (d) in the case of the
Trust Collateral Agent, at the Corporate Trust Office (Telecopy: (212)
946-3916), (e) in the case of the Custodian, at the Corporate Trust Office
(Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇), (f) in the case of Standard & Poor's, at the
following address: ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: Asset Backed Surveillance Department, (g) in the case of Moody's, at
the following address: ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention:
ABS Monitoring Department and (h) in the case of the Note Insurer, at the
following address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: Senior
Vice President, Transaction Oversight, Re: Long Beach Acceptance Auto
Receivables Trust 1999-1. Any notice required or permitted to be mailed to a
Noteholder shall be given by Federal Express or similar overnight courier
service, postage prepaid, at the address of such Holder as shown in the Note
Register. Any notice so mailed within the time prescribed in this Agreement
shall be conclusively presumed to have been duly given, whether or not the
Noteholder shall receive such notice.
(b) The Trust Collateral Agent shall give prompt written
notice to each of the Transferor, the Rating Agencies and each Noteholder of (i)
any amendments to the Insurance Agreement or the Note Policy (upon receipt of
written notice of any such amendments from LBAC or the Servicer), (ii) any
change in the identity of the Note Paying Agent and (iii) any failure to make
payment under the Note Policy.
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SECTION 13.6. SEVERABILITY OF PROVISIONS. If any one or more
of the covenants, agreements, provisions, or terms of this Agreement shall be
for any reason whatsoever held invalid, then such covenants, agreements,
provisions, or terms shall be deemed severable from the remaining covenants,
agreements, provisions, or terms of this Agreement and shall in no way affect
the validity or enforceability of the other provisions of this Agreement or of
the Notes or the rights of the Holders thereof.
SECTION 13.7. ASSIGNMENT TO INDENTURE TRUSTEE. The Transferor
hereby acknowledges and consents to any mortgage, pledge, assignment and grant
of a security interest by the Issuer to the Indenture Trustee pursuant to the
Indenture for the benefit of the Noteholders and the Note Insurer of all right,
title and interest of the Issuer in, to and under the Receivables and/or the
assignment of any or all of the Issuer's rights and obligations hereunder to the
Indenture Trustee.
SECTION 13.8. LIMITATION OF LIABILITY OF OWNER TRUSTEE,
CUSTODIAN AND TRUST COLLATERAL AGENT.
(a) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee, have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements of the Issuer delivered pursuant hereto, as to all of which recourse
shall be had solely to the assets of the Issuer. For all purposes of this
Agreement, in the performance of its duties or obligations hereunder or in the
performance of any duties or obligations of the Issuer hereunder, the Owner
Trustee shall be subject to, and entitled to the benefits of, the terms and
provisions of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary,
this Agreement has been executed and delivered by Chase Manhattan, not in its
individual capacity but solely as Back-up Servicer, Custodian and Trust
Collateral Agent and in no event shall Chase Manhattan have any liability for
the representations, warranties, covenants, agreements or other obligations of
the Issuer hereunder or in any of the certificates, notices or agreements of the
Issuer delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer.
SECTION 13.9. INDEPENDENCE OF THE SERVICER. For all purposes
of this Agreement, the Servicer shall be an independent contractor and shall not
be subject to the supervision of the Issuer, the Trust Collateral Agent, the
Back-up Servicer or the Owner Trustee with respect to the manner in which it
accomplishes the performance of its obligations hereunder. Unless expressly
authorized by this Agreement, the Servicer shall have no authority to act for or
represent the Issuer or the Owner Trustee in any way and shall not otherwise be
deemed an agent of the Issuer or the Owner Trustee.
SECTION 13.10. NO JOINT VENTURE. Nothing contained in this
Agreement (i) shall constitute the Servicer and either of the Issuer or the
Owner Trustee as members of any partnership, joint venture, association,
syndicate, unincorporated business or other separate entity, (ii) shall be
construed to impose any liability as such on any of them or (iii) shall be
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deemed to confer on any of them any express, implied or apparent authority to
incur any obligation or liability on behalf of the others.
SECTION 13.11. NONPETITION COVENANT. None of the Transferor,
the Servicer, the Trust Collateral Agent, the Custodian, the Back-up Servicer or
LBAC shall, prior to the date which is one year and one day after the
termination of this Agreement with respect to the Issuer or the Transferor,
petition or otherwise invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against the Issuer or the
Transferor under any Federal or State bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or
other similar official of the Issuer or the Transferor or any substantial part
of its property, or ordering the winding up or liquidation of the affairs of the
Issuer or the Transferor.
SECTION 13.12. THIRD PARTY BENEFICIARIES. Except as otherwise
specifically provided herein with respect to Noteholders, the parties to this
Agreement hereby manifest their intent that no third party other than the Note
Insurer, the Owner Trustee and the Custodian with respect to the indemnification
provisions set forth herein, shall be deemed a third party beneficiary of this
Agreement, and specifically that the Obligors are not third party beneficiaries
of this Agreement. The Note Insurer and its successors and assigns shall be a
third-party beneficiary to the provisions of this Agreement, and shall be
entitled to rely upon and directly enforce such provisions of this Agreement so
long as no Note Insurer Default shall have occurred and be continuing. Except as
expressly stated otherwise herein or in the Basic Documents, any right of the
Note Insurer to direct, appoint, consent to, approve of or take any action under
this Agreement, shall be a right exercised by the Note Insurer in its sole and
absolute discretion. The Note Insurer may disclaim any of its rights and powers
under this Agreement (but not its duties and obligations under the Note Policy)
upon delivery of a written notice to the Trust Collateral Agent.
SECTION 13.13. CONSENT TO JURISDICTION.
(a) TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY COURT IN THE
STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND ANY APPELLATE
COURT FROM ANY THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT AGAINST IT AND
TO OR IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTION OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH NEW YORK STATE COURT OR
IN SUCH FEDERAL COURT. THE PARTIES HERETO AGREE THAT A FINAL JUDGMENT IN ANY
SUCH ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HERETO HEREBY WAIVE AND
AGREE NOT TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH
SUIT,
71
ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE
JURISDICTION OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN
AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS
IMPROPER OR THAT THE RELATED DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE
LITIGATED IN OR BY SUCH COURTS.
(b) To the extent permitted by applicable law, the parties
hereto shall not seek and hereby waive the right to any review of the judgment
of any such court by any court of any other nation or jurisdiction which may be
called upon to grant an enforcement of such judgment.
(c) Each of LBAC and the Transferor hereby agree that until
such time at the Notes and the Reimbursement Obligations have been paid in full
and the Note Policy has expired in accordance with its terms, each of LBAC and
the Transferor shall have appointed, with prior written notice to the Note
Insurer, an agent registered with the Secretary of State of the State of New
York, with an office in the County of New York in the State of New York, as its
true and lawful attorney and duly authorized agent for acceptance of service of
legal process (which as of the date hereof is National Registered Agents, Inc.,
whose address is ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ 10007). Each of LBAC
and the Transferor agrees that service of such process upon such Person shall
constitute personal service of such process upon it.
SECTION 13.14. HEADINGS. The headings of articles and sections
and the table of contents contained in this Agreement are provided for
convenience only. They form no part of this Agreement and shall not affect its
construction or interpretation. Unless otherwise indicated, all references to
articles and sections in this Agreement refer to the corresponding articles and
sections of this Agreement.
SECTION 13.15. TRIAL BY JURY WAIVED. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION ARISING DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN
CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTION. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT IT WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY
BY, AMONG OTHER THINGS, THIS WAIVER.
SECTION 13.16. ENTIRE AGREEMENT. This Agreement sets forth the
entire agreement between the parties with respect to the subject matter hereof,
and this Agreement supersedes and replaces any agreement or understanding that
may have existed between the parties prior to the date hereof in respect of such
subject matter.
72
IN WITNESS WHEREOF, the Issuer, the Transferor, the
Originator, the Servicer, the Trust Collateral Agent, the Back-up Servicer and
the Custodian have caused this
Sale and Servicing Agreement to be duly executed
by their respective officers as of the day and year first above written.
LONG BEACH ACCEPTANCE
RECEIVABLES CORP., as Transferor
By:
--------------------------------------------
Name:
Title:
LONG BEACH ACCEPTANCE CORP.,
as Originator and Servicer
By:
--------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK,
as Back-up Servicer, Custodian and Trust
Collateral Agent
By:
--------------------------------------------
Name:
Title:
LONG BEACH ACCEPTANCE AUTO
RECEIVABLES TRUST 1999-1, as Issuer
By: Wilmington Trust Company, not in its
individual capacity, but solely as Owner
Trustee
By:
--------------------------------------------
Name:
Title:
[
Sale and Servicing Agreement]
ANNEX A
DEFINED TERMS
Annex A
EXHIBIT A-1
Issuer's Certificate
pursuant to Section 3.4
of the
Sale and Servicing
Agreement
Reference is made to the
Sale and Servicing Agreement (the "Agreement"), dated
as of August 1, 1999, among Long Beach Acceptance Receivables Corp., Long Beach
Acceptance Corp., as originator and as servicer, The Chase Manhattan Bank, as
trust collateral agent, custodian and back-up servicer and Long Beach Acceptance
Auto Receivables Trust 1999-1, as issuer (the "Issuer"). The Issuer does hereby
sell, transfer, assign, and otherwise convey to LBAC, without recourse,
representation, or warranty, all of the Issuer's right, title, and interest in
and to all of the Receivables (as defined in the Agreement) identified in the
attached Servicer's Certificate as "Purchased Receivables," which are to be
repurchased by LBAC pursuant to Section 3.4 of the Agreement, and all security
and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this __ day of ________________,
___.
---------------------------------------
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
Issuer's Certificate
pursuant to Section 4.7
of the
Sale and Servicing
Agreement
Reference is made to the
Sale and Servicing Agreement (the "Agreement"), dated
as of August 1, 1999, among Long Beach Acceptance Receivables Corp., Long Beach
Acceptance Corp., as originator and as servicer, The Chase Manhattan Bank, as
trust collateral agent, custodian and back-up servicer and Long Beach Acceptance
Auto Receivables Trust 1999-1, as issuer (the "Issuer"). The Issuer does hereby
sell, transfer, assign, and otherwise convey to the Servicer, without recourse,
representation, or warranty, all of the Issuer's right, title, and interest in
and to all of the Receivables (as defined in the Agreement) identified in the
attached Servicer's Certificate as "Purchased Receivables," which are to be
purchased by the Servicer pursuant to Section 4.7 of the Agreement, and all
security and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this __ day of ________________,
____.
------------------------------------
▇-▇-▇
▇▇▇▇▇▇▇ ▇-▇
SERVICER'S CERTIFICATE
LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST 1999-1
6.71% ASSET-BACKED NOTES, CLASS A-1
7.38% ASSET-BACKED NOTES, CLASS A-2
12.00% ASSET-BACKED NOTES, CLASS B
B-1-1
EXHIBIT B-2
Form of Loan Master File Layout
B-2-1
EXHIBIT C
INTENTIONALLY OMITTED
C-1
EXHIBIT D
PAYMENT DEFERMENT POLICY
o LBAC may grant a payment deferment provided that the deferment period
does not exceed 1 month (2 months if 12 or more payments have been made
and if the deferment is granted in writing by the President, or an
Executive Vice President, or the National Collections Manager, or a
Regional Manager).
o Not more than 1 deferment event (which may consist of a 2 month
deferment according to the exceptions included in the policy) may be
granted during any 12-month period.
o The aggregate of all deferment periods during the term of a Receivable
may not exceed the lesser of 8 months or 50% of the weighted average
life of the original term of the Receivable (including deferments
granted both before and after the related Cut-Off Date).
o At least 6 payments must be made before a deferment may be granted.
o A request for a deferment must be made in writing.
o The deferment must bring the account current, so that after the
deferment is processed no payment is then due.
o Except as otherwise set forth in this policy, deferments must be
granted in writing by the Collection Manager or someone of equal or
higher rank.
o A deferment fee will be collected for each deferment if allowed by
applicable law and may be waived or deferred only by the President, or
an Executive Vice President, or the National Collections Manager, or a
Regional Manager; PROVIDED, HOWEVER, that no deferment will be granted
unless the Servicer believes in good faith that the account probably
would default in the reasonably foreseeable future if a deferment is
not approved.
o Deferments which do not meet the above criteria may be granted in
writing on an exception basis (e.g., when required by law) by the
President, or an Executive Vice President, or the National Collections
Manager, or a Regional Manager.
o As of January 1, 2000, and the first day of each calendar quarter
thereafter, the aggregate number of Receivables the terms of which have
been extended during the preceding calendar quarter shall not exceed 4%
of the number of Receivables at the beginning of the preceding calendar
quarter.
o No deferment may extend the date for final payment of a Receivable
beyond the last day of the record Collection Period preceding the Final
Scheduled Payment Date.
D-1
DUE DATE CHANGE POLICY
o LBAC may grant a due date change, PROVIDED that the new due date is
within 20 days of the current due date.
o Not more than 2 due date changes may be granted over the term of a
Receivable.
o If 2 due date changes are granted, the total number of days by which
the maturity date is extended may not exceed 20.
o A request for a due date change must be made in writing.
o The account must be current at the time the request is received.
o Due date changes must be granted in writing by the Collection Manager
or someone of equal or higher rank.
o No due date change may be granted if the aggregate of all deferment
periods and the requested due date change would exceed the lesser of 8
months or 50% of the original term of the Receivable.
D-2
EXHIBIT E
DOCUMENTATION CHECKLIST
CUSTOMER:
-----------------------------------------------------------------------
ACCOUNT NUMBER:
-----------------------------------------------------------------
This funding package contains the following initialed items:
1. Installment contract with proper signatures
and Dealer endorsements 1.__________________
2. Copy of signed credit application 2.__________________
3. References as described in the Program
Guidelines 3.__________________
4. Proof of income as described in the
Program Guidelines 4.__________________
5. Copy of driver's license for all
licensed signors 5.__________________
6. Title information (application and copy
of existing title, receipt of registration,
or title copy already received) with lien
notation thereon, or Dealer Title
Guaranty 6.__________________
7. Invoice or copy of computer screen
printout showing NADA value, NADA book
page, ▇▇▇▇▇▇ printout or ▇▇▇▇▇▇ Blue Book
page 7.__________________
8. In the case of a used Financed Vehicle,
odometer statement (if not on title info) 8.__________________
9. Signed agreement to provide insurance
and verification paper or other evidence
of verification of insurance coverage 9.__________________
10. Notice to cosignor, if required 10._________________
11. Service contract or warranty papers 11._________________
12. Life, accident, health and GAP insurance
policy copies, as applicable 12._________________
13. Signed purchase order from dealer to
customer 13._________________
E-1
EXHIBIT F
[Form of Request for Transfer of Possession]
___________, 19__
The Chase Manhattan Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Capital Markets Fiduciary Services
Attention: __________
Telephone: ___________
Telecopy: ____________
Ladies and Gentlemen:
Reference is made to the Sale and Servicing Agreement, dated as of August 1,
1999 (the "Sale and Servicing Agreement"), among LONG BEACH ACCEPTANCE
RECEIVABLES CORP., a Delaware corporation, as transferor, LONG BEACH ACCEPTANCE
CORP., a Delaware corporation, as originator and servicer, LONG BEACH ACCEPTANCE
AUTO RECEIVABLES TRUST 1999-1, a Delaware business trust, as issuer (the
"Issuer"), THE CHASE MANHATTAN BANK, a New York banking corporation, as trust
collateral agent, back-up servicer and custodian (in such capacity, the
"Custodian"). Capitalized terms used but not defined in this letter have the
meanings set forth in the Sale and Servicing Agreement.
The Servicer hereby requests that the Custodian transfer possession of the Legal
Files, or such portion of the Legal Files as is identified herein, relating to
the Receivables listed in Annex A hereto to [the Servicer] [________________ as
subservicer (the "Subservicer") for the Servicer] [for purposes of collection or
presentation, renewal or registration of transfer (unless the related
Receivables' Owner objects to this request to the Custodian (i) by 5:00 PM on
the same Business Day this request is made if it is made by 1:00 PM or (ii) by
11:00 AM on the next Business Day if this request is made after 1:00 PM] [for
purposes of correcting deficiencies in the Legal Files], the possession of which
is transferred pursuant to this request will be transferred subject to a
Custodial Letter duly executed by [the Servicer] [the Subservicer] and a
Transfer Notice duly executed by the Custodian. [The portion of the Legal Files
requested for transfer of possession hereunder is ___________.]
Very truly yours,
LONG BEACH ACCEPTANCE CORP.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
F-1
EXHIBIT G
[Form of Custodial Letter]
___________, 19__
The Chase Manhattan Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Capital Markets Fiduciary Services
Attention: __________
Telephone: ___________
Telecopy: ____________
Ladies and Gentlemen:
Reference is made to the Sale and Servicing Agreement, dated as of August 1,
1999 (the "Sale and Servicing Agreement"), among LONG BEACH ACCEPTANCE
RECEIVABLES CORP., a Delaware corporation, as transferor, LONG BEACH ACCEPTANCE
CORP., a Delaware corporation, as originator and servicer, LONG BEACH ACCEPTANCE
AUTO RECEIVABLES TRUST 1999-1, a Delaware business trust, as issuer (the
"Issuer"), THE CHASE MANHATTAN BANK, a New York banking corporation, as trust
collateral agent, custodian and back-up servicer. Capitalized terms used but not
defined in this letter have the meanings set forth in the Sale and Servicing
Agreement.
[The Servicer] [_____________________, as Subservicer (the "Subservicer") for
the Servicer] acknowledges that the Issuer is owner of all Receivables (and
their proceeds). The Agreement provides that the Servicer, or the Subservicer,
may request from time to time that possession of all or a portion of the Legal
Files delivered to and held by the Custodian pursuant to the Sale and Servicing
Agreement be transferred to [the Servicer] [the Subservicer] [for purposes of
collection, or presentation, renewal or registration of transfer] [for purposes
of correcting deficiencies in the Legal Files]. Subject to the terms of the Sale
and Servicing Agreement, the Custodian is authorized to so transfer possession
of such Legal Files, or portion thereof, such transfer of possession to be
accomplished pursuant to a Transfer Notice substantially in the form of Annex A
to this Custodial Letter.
[The Servicer] [The Subservicer] hereby agrees as follows:
(a) [The Servicer] [The Subservicer] acknowledges that the possession of any
such Legal Files will be so transferred subject to this Custodial Letter and
that they are and will continue to be the sole property of the Issuer.
(b) [The Servicer] [The Subservicer] agrees that such Legal Files will be
returned to the Custodian immediately upon notice by the Custodian or the Trust
Collateral Agent that sixty (60) days have elapsed from the date of such
transfer; PROVIDED, that instead of sixty (60) days, the time limit applicable
to any certificate of title is one hundred twenty (120) days.
G-1
(c) The Legal Files will not be used for any purpose other than that for which
[the Servicer] [the Subservicer] hereby requests such transfer of possession.
(d) At all times while the Legal Files are in [the Servicer's] [the
Subservicer's] possession, [the Servicer] [the Subservicer] will hold the Legal
Files IN TRUST for the Indenture Trustee, the Issuer, the Noteholders and the
Note Insurer.
(e) [The Servicer] [The Subservicer] will include this Custodial Letter and each
Transfer Notice in its business records.
(f) [The Servicer] [The Subservicer] will not deliver the Legal Files to any
person other than the Custodian except with the prior written consent of the
Trust Collateral Agent.
This Custodial Letter shall be governed by and construed in accordance with the
laws of the State of Texas.
LONG BEACH ACCEPTANCE CORP.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
[SUBSERVICER'S NAME]
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
G-2
EXHIBIT G - ANNEX A to Custodial Letter
[Form of Transfer Notice]
[Long Beach Acceptance Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇]
[Subservicer (the "Subservicer")
Address
Address
Telecopy:_______________________]
Ladies and Gentlemen:
Reference is made to the Sale and Servicing Agreement, dated as of August 1,
1999 (the "Sale and Servicing Agreement"), among LONG BEACH ACCEPTANCE
RECEIVABLES CORP., a Delaware corporation, as transferor, LONG BEACH ACCEPTANCE
CORP., a Delaware corporation, as originator and servicer, LONG BEACH ACCEPTANCE
AUTO RECEIVABLES TRUST 1999-1, a Delaware business trust, as issuer (the
"Issuer"), THE CHASE MANHATTAN BANK, a New York banking corporation, as trust
collateral agent, back-up servicer and custodian. Capitalized terms used but not
defined in this letter have the meanings set forth in the Sale and Servicing
Agreement.
The possession of the Legal Files relating to the Receivables listed in Annex A
is transferred to you IN TRUST for the Issuer, the Indenture Trustee, the Note
Holders and the Note Insurer, subject to the terms and provisions of the Sale
and Servicing Agreement, and subject to the Custodial Letter you executed
pursuant to Section 3.5(c) of the Sale and Servicing Agreement.
Very truly yours,
THE CHASE MANHATTAN BANK
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
G-3
EXHIBIT G - ANNEX A to Transfer Notice
Receivable Amount of Name of
Number Receivable Receivable Borrower
------ ---------- -------------------
G-4
SCHEDULE A
SCHEDULE OF RECEIVABLES
-----------------------
Schedule A-1
SCHEDULE B
Location of Receivable Files
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Location of Legal Files
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Document
Custody - Long Beach Acceptance
Auto Receivables Trust 1999-1
- or -
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Loan Document
Custody - Long Beach Acceptance
Auto Receivables Trust 1999-1
Schedule B-1
SCHEDULE C
Delivery Requirements
The Trust Collateral Agent shall have sole control over each such investment and
the income thereon, and any certificate or other instrument evidencing any such
investment, if any shall, except for clearing corporation securities, be
delivered directly to the Trust Collateral Agent or its agent, together with
each document of transfer, if any, necessary to transfer title to such
investment to the Trust Collateral Agent in a manner that complies with this
Agreement and the requirements of the definition of Eligible Investments.
Schedule C-1