[Execution Version]
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SALE AND SERVICING AGREEMENT
among
LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST 2002-A
Issuer
LONG BEACH ACCEPTANCE RECEIVABLES CORP.
Transferor
LONG BEACH ACCEPTANCE CORP.
Originator and Servicer
and
JPMORGAN CHASE BANK
Back-up Servicer, Custodian and Trust Collateral Agent
Dated as of August 1, 2002
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS ............................................................................................1
SECTION 1.1. Definitions.................................................................................1
SECTION 1.2. Other Definitional Provisions...............................................................1
SECTION 1.3. Calculations................................................................................2
SECTION 1.4. Action by or Consent of Noteholders.........................................................2
SECTION 1.5. Material Adverse Effect.....................................................................2
ARTICLE II CONVEYANCE OF RECEIVABLES..............................................................................3
SECTION 2.1. Conveyance of Receivables...................................................................3
SECTION 2.2. Transfer Intended as Sale; Precautionary Security Interest..................................4
SECTION 2.3. Assignment by Transferor....................................................................4
SECTION 2.4. The Legal Files Are Not "Financial Assets"..................................................4
SECTION 2.5. 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 of Representations and Warranties of the Transferor..................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
SECTION 4.19. Confidential Information..............................................................22
ARTICLE V ACCOUNTS; PAYMENTS; STATEMENTS TO NOTEHOLDERS..........................................................23
SECTION 5.1. Accounts; Lock-Box Account.................................................................23
SECTION 5.2. Collections................................................................................24
SECTION 5.3. Application of Collections.................................................................25
SECTION 5.4. Intentionally Omitted......................................................................25
SECTION 5.5. Additional Deposits........................................................................25
SECTION 5.6. Payments; Policy Claims....................................................................25
SECTION 5.7. Statements to Noteholders; Tax Returns.....................................................30
SECTION 5.8. Reliance on Information from the Servicer..................................................32
SECTION 5.9. Optional Deposits by the Note Insurer......................................................32
SECTION 5.10. Spread Account........................................................................33
SECTION 5.11. Withdrawals from Spread Account.......................................................33
SECTION 5.12. Simple Interest.......................................................................33
SECTION 5.13. Class B Reserve Account...............................................................34
SECTION 5.14. Securities Accounts...................................................................34
ARTICLE VI THE POLICY ...........................................................................................35
SECTION 6.1. Policy ....................................................................................35
SECTION 6.2. Claims Under Policy........................................................................35
SECTION 6.3. Preference Claims; Direction of Proceedings................................................36
SECTION 6.4. Surrender of Policy........................................................................37
ARTICLE VII THE TRANSFEROR.......................................................................................37
SECTION 7.1. Representations of the Transferor..........................................................37
SECTION 7.2. Liability of the Transferor................................................................39
SECTION 7.3. Merger or Consolidation of, or Assumption of the Obligations of, the Transferor............39
SECTION 7.4. Limitation on Liability of the Transferor and Others.......................................40
SECTION 7.5. Transferor May Own Notes...................................................................40
ARTICLE VIII THE SERVICER........................................................................................40
SECTION 8.1. Representations of Servicer................................................................40
SECTION 8.2. Indemnities of Servicer....................................................................42
SECTION 8.3. Merger or Consolidation of, or Assumption of the Obligations of, Servicer or
Back-up Servicer....................................................................44
SECTION 8.4. Limitation on Liability of Servicer and Others.............................................45
SECTION 8.5. Servicer and Back-up Servicer Not to Resign................................................46
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ARTICLE IX SERVICER TERMINATION EVENTS...........................................................................46
SECTION 9.1. Servicer Termination Events................................................................46
SECTION 9.2. Appointment of Successor...................................................................49
SECTION 9.3. Notification to Noteholders................................................................51
SECTION 9.4. Action Upon Certain Failures of the Servicer...............................................51
ARTICLE X THE TRUST COLLATERAL AGENT AND THE CUSTODIAN...........................................................51
SECTION 10.1. Duties of the Trust Collateral Agent and the Custodian................................51
SECTION 10.2. Trust Collateral Agent to Act for the Class A Noteholders and Note Insurer............54
SECTION 10.3. Certain Matters Affecting the Trust Collateral Agent and the Custodian................55
SECTION 10.4. Trust Collateral Agent, Back-up Servicer and Custodian Not Liable for Notes or
Receivables.........................................................................56
SECTION 10.5. Trust Collateral Agent, Back-up Servicer and Custodian May Own Notes..................57
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.................58
SECTION 10.8. Resignation or Removal of Trust Collateral Agent or Custodian.........................58
SECTION 10.9. Successor Trust Collateral Agent or Custodian.........................................59
SECTION 10.10. Merger or Consolidation of Trust Collateral Agent or Custodian........................60
SECTION 10.11. Co-Trustee; Separate Trustee..........................................................60
SECTION 10.12. Representations and Warranties of Trust Collateral Agent and the Custodian............62
SECTION 10.13. 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...............................................................................65
SECTION 12.3. Additional Information to be Furnished to the Issuer..................................65
SECTION 12.4. No Additional Compensation............................................................65
ARTICLE XIII MISCELLANEOUS PROVISIONS............................................................................65
SECTION 13.1. Amendment.............................................................................65
SECTION 13.2. Protection of Title...................................................................66
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..........................................................71
SECTION 13.10. No Joint Venture......................................................................71
SECTION 13.11. Nonpetition Covenant..................................................................71
SECTION 13.12. Third Party Beneficiaries.............................................................71
SECTION 13.13. Consent to Jurisdiction...............................................................72
SECTION 13.14. Headings..............................................................................73
SECTION 13.15. Trial by Jury Waived..................................................................73
SECTION 13.16. Entire Agreement......................................................................73
SECTION 13.17. Effect of Policy Expiration Date......................................................73
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
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SALE AND SERVICING AGREEMENT ("Agreement"), dated as of August 1, 2002,
among LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST 2002-A, 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 JPMORGAN CHASE 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 in accordance with the terms thereof and includes (in the case of
agreements or instruments) references to all attachments thereto and instruments
incorporated therein; references to a Person are also to its permitted
successors and assigns.
SECTION 1.3. Calculations. All calculations of the amount of the
Servicing Fee, the Back-up Servicer Fee, Custodian Fee and the Indenture Trustee
Fee shall be made on the basis of a 360-day year consisting of twelve 30-day
months. All references to the Principal Balance of a Receivable as of the last
day of a Collection Period shall refer to the close of business on such day.
SECTION 1.4. Action by or Consent of Noteholders. 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 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
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the Note Insurer (or any similar or analogous determination), such determination
shall be made by the Controlling Party in its sole discretion.
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. Conveyance of Receivables.
In consideration of the Issuer's delivery of the Certificate to or upon
the order of the Transferor on the Closing Date and the net proceeds from the
sale of the Notes and the other amounts to be distributed from time to time to,
or upon the order of, the Transferor in accordance with the terms of this
Agreement, the Transferor does hereby transfer, assign, set over and otherwise
convey to the Issuer, without recourse, all right, title and interest of the
Transferor in and to:
(i) the Receivables listed in Schedule A hereto, all monies received on
the Receivables after the Cutoff Date and, with respect to any Receivables
which are Precomputed Receivables, the related 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 an 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. Transfer Intended as Sale; Precautionary Security
Interest. The 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
security agreement under the UCC (as defined in the UCC as in effect in the
State of New York) and applicable law, and the Transferor hereby grants a
security interest to the Issuer in, to and under the property described in
Section 2.1 above and all proceeds thereof, for the benefit of the Noteholders
and the Note Insurer as their interests may appear herein, for the purpose of
securing the payment and performance of the Notes and the Certificate and the
repayment of amounts owed to the Issuer from the Transferor.
SECTION 2.3. Assignment by Transferor. The Transferor does hereby
transfer, assign and otherwise convey unto the Issuer, for the benefit of the
Noteholders, the Certificateholder 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 2.3 are intended to grant the Issuer a direct right against LBAC to
demand performance under the terms of the Purchase Agreement.
SECTION 2.4. 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 2.5. Further Encumbrance of Trust Assets.
(a) Immediately upon the conveyance to the Issuer by the Transferor of any
item of the Trust Assets pursuant to Section 2.1, 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
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Issuer, in accordance with the Trust Agreement and Sections 3802 and 3805 of the
Business Trust Statute (as defined in the Trust Agreement).
(b) Immediately upon the vesting of the Trust Assets in the Issuer, the
Issuer shall have the sole right to pledge or otherwise encumber, such Trust
Assets. Pursuant to the Indenture, the Issuer shall grant a security interest in
the Trust Assets to the Indenture Trustee to secure 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 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 Policy, the Indenture Trustee is
deemed to have relied on such representations and warranties in issuing the
Notes, the Noteholders are deemed to have relied on such representations and
warranties in purchasing the Notes and the Owner Trustee is deemed to have
relied on such representations and warranties in issuing the Certificate. 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
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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 Note Insurer are
materially and adversely affected by any such breach as of such date. In
consideration of and simultaneously with the repurchase of the Receivable, the
Transferor shall remit, or cause LBAC to remit, to the Collection Account the
Purchase Amount in the manner specified in Section 5.5 and the Issuer shall
execute such assignments and other documents reasonably requested by such person
in order to effect such repurchase. The sole remedies of the Issuer, the Trust
Collateral Agent, the Indenture Trustee or the Noteholders with respect to a
breach of representations and warranties pursuant to Section 3.1 shall be (i)
the repurchase of Receivables pursuant to this Section, subject to the
conditions contained herein, or (ii) to enforce the obligation of LBAC to the
Transferor to repurchase such Receivables or to indemnify for any such breach
pursuant to the Purchase Agreement. Neither the Owner Trustee, the Custodian,
the Trust Collateral Agent nor the Indenture Trustee shall have a duty to
conduct any affirmative investigation as to the occurrence of any conditions
requiring the repurchase of any Receivable pursuant to this Section.
(b) Pursuant to Section 2.1, the Transferor conveys to the Issuer all of
the Transferor's right, title and interest in its rights and benefits, but none
of its obligations or burdens, under the Purchase Agreement including the
Transferor's rights under the Purchase Agreement and the delivery requirements,
representations and warranties and the cure or repurchase and indemnity
obligations of LBAC thereunder. The Transferor hereby represents and warrants to
the Issuer that such assignment is valid, enforceable and effective to permit
the Issuer to enforce such obligations of LBAC and the Transferor under the
Purchase Agreement.
SECTION 3.3. 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 Receivable.
(b) On or prior to the Closing Date the Transferor shall transfer and
deliver to the Servicer with respect to each 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;
(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
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(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 hereby acknowledges that it 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 and, after the Notes are
retired and the Note Insurer has been paid all amounts due to it, for the
Certificateholder. 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, an
application for a certificate of title 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 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, if such date is not a Business Day, on
the next succeeding Business Day, the Custodian shall inform
7
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 occurs, if the related Legal File does not include a Lien Certificate as of
the close of business on such 150th day. In consideration of the purchase of
such Receivable, LBAC shall remit the Purchase Amount in the manner specified in
Section 5.5. The Transferor shall have no obligation to repurchase any
Receivable upon a breach pursuant to this Section 3.4. The Transferor shall have
no liability for any action taken or omitted to be taken by LBAC pursuant to
this Section 3.4.
SECTION 3.5. Access to Receivable Files 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, as the case may be. 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 hold in confidence all
Confidential Information in accordance with the Federal Financial Privacy Law
and, to the extent more exacting, its then customary procedures; provided that
nothing herein shall prevent any Noteholder from delivering copies of any
financial statements and other documents whether or not constituting
Confidential Information, and disclosing other information, whether or not
Confidential Information, to (i) its directors, officers, employees, agents and
professional consultants, (ii) any other institutional investor that holds
Notes, (iii) any prospective institutional investor transferee in connection
with the contemplated transfer of a Note or any part thereof or participation
therein who is subject to confidentiality arrangements at least substantially
similar hereto, (iv) any governmental authority, (v) the National Association of
Insurance Commissioners or any similar organization, (vi) any nationally
recognized rating agency in connection with the rating of the Notes by such
agency or (vii) any other Person to which such delivery or disclosure may be
necessary or appropriate (a) in compliance with any applicable law, rule,
regulation or order, (b) in response to any subpoena or other legal process, (c)
in connection with any litigation to which such Noteholder is a party, (d) in
order to enforce such Person's investment in any Note or (e) otherwise, in
accordance with the Federal Financial Privacy Law; provided, that, prior to any
such disclosure, such Noteholder shall inform each such party that receives
Confidential Information of the foregoing requirements and shall use its
commercially reasonable best efforts to cause such party to comply with such
requirements.
(b) Upon instruction from the Trust Collateral Agent, the Servicer shall
release any Receivable Files to the Trust Collateral Agent, the Trust Collateral
Agent's agent or the Trust Collateral Agent's designee, as the case may be, at
such place or places as the Trust Collateral Agent may designate, as soon as
practicable; provided, however, that such Receivable Files may
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be, at the discretion of the Servicer, in the form of electronic files or
reproduced copies of such electronic files. The Servicer shall not be
responsible for the safekeeping of such Receivable Files following such release
to the Trust Collateral Agent unless and until such Receivable Files are
returned to the Servicer.
(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.
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(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 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 Advice of such counsel 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 Advice or 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
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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.
(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
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satisfaction or cancellation, or partial or full release or discharge, and all
other comparable instruments, with respect to such Receivables or to the
Financed Vehicles securing such Receivables and/or the certificates of title or
other evidence of ownership with respect to such Financed Vehicles; provided,
however, that notwithstanding the foregoing, the Servicer shall not release an
Obligor from payment of any unpaid amount under any Receivable or waive the
right to collect the unpaid balance of any Receivable from the Obligor, except
(i) pursuant to an order from a court of competent jurisdiction, (ii) in
accordance with its customary procedures or (iii) in accordance with Section
4.2. If the Servicer shall commence a legal proceeding to enforce a Receivable,
the Issuer shall thereupon be deemed to have automatically assigned, solely for
the purpose of collection, such Receivable to the Servicer. If in any
enforcement suit or legal proceeding it shall be held that the Servicer may not
enforce a Receivable on the ground that it shall not be a real party in interest
or a holder entitled to enforce such Receivable, the Trust Collateral Agent
shall, at the Servicer's expense and 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
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amount in accordance with its customary procedures. Notwithstanding anything to
the contrary contained herein, the Servicer (i) shall not agree to any
alteration of the interest rate on any Receivable or of the amount of any
Scheduled Receivable Payment on any Receivable, except (a) as otherwise required
by applicable law, (b) with respect to a Deficient Liquidated Receivable and (c)
with the prior written consent of the Note Insurer, with respect to any other
Liquidated Receivable, and (ii) shall not agree to any modification that would
result in a material adverse effect on a Receivable (other than a Deficient
Liquidated Receivable and, with the prior written consent of the Note Insurer,
any other Liquidated Receivable) or the interest therein of the Issuer, the
Noteholders 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 4.1, which may include reasonable efforts
to realize upon any recourse to Dealers and selling the Financed Vehicle at
public or private sale. The foregoing shall be subject to the provision that, in
any case in which the Financed Vehicle shall have suffered damage, the Servicer
shall not expend funds in connection with the repair or the repossession of such
Financed Vehicle unless it shall determine in its discretion that such repair
and/or repossession will increase the proceeds ultimately recoverable with
respect to such Receivable by an amount greater than the amount of such
expenses. All Liquidation Proceeds and Recoveries received shall be remitted
directly by the Servicer to the Collection Account, without deposit into any
intervening account as soon as practicable, but in no event later than the
second Business Day after receipt thereof.
(b) The Servicer agrees that within 45 days from the Closing Date it shall
make such filings and effect such notices as are necessary under Section
9-324(b) 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.
13
(c) The Servicer agrees that at any time after 45 days from the Closing
Date there will be (a) no more than 25 repossessed Financed Vehicles in the
aggregate delivered for sale to any Dealer and (b) no more than 50 repossessed
Financed Vehicles in the aggregate delivered for the sale to all Dealers with
respect to which the actions referred to in (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 9-324(b) 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
14
continuation statements or instruments as are necessary to maintain the security
interest granted by Obligors under the respective Receivables. The Trust
Collateral Agent hereby authorizes the Servicer to take such steps as are
necessary to re-perfect or continue the perfection of such security interest on
behalf of the Issuer in the event of the relocation of a Financed Vehicle or for
any other reason.
(b) Upon the occurrence of an Insurance Agreement Event of Default, the
Note Insurer may (so long as a Note Insurer Default shall not have occurred and
be continuing) instruct 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
15
and to do or accomplish all other acts or things necessary or appropriate to
show the Trust Collateral Agent as lienholder or secured party on the related
Lien Certificates relating to a Financed Vehicle.
SECTION 4.6. Additional Covenants of Servicer. The Servicer hereby
makes the following covenants to the other parties hereto and the Note Insurer
on which the Trust Collateral Agent shall rely in accepting the Receivables in
trust and on which the Note Insurer shall rely in issuing the Policy: (i) the
Servicer shall not release the Financed Vehicle securing any Receivable from the
security interest granted by such Receivable in whole or in part except in the
event of payment in full by the Obligor thereunder or repossession or other
liquidation of such Financed Vehicle, (ii) the Servicer shall not impair the
rights of the Noteholders, 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
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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 the extent not
required by law to be remitted to the related Obligor, the difference between
the amounts received upon prepayment in full of such Precomputed Receivable and
the then outstanding Principal Balance of such Precomputed Receivable and
accrued interest thereon (calculated pursuant to the Simple Interest Method) and
other administrative fees or similar charges allowed by applicable law with
respect to Receivables, collected (from whatever source) on the Receivables.
SECTION 4.9. Servicer's Certificate.
(a) By 10:00 a.m., New York City time, on each Determination Date, the
Servicer shall deliver to the Issuer, the Trust Collateral Agent, the Indenture
Trustee, the Back-up Servicer, the Collateral Agent, the Transferor, the Note
Insurer, GCFP and the Rating Agencies, a Servicer's Certificate containing all
information necessary to make the payments pursuant to Section 5.6 (including,
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, 2003, 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.
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(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 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, 2003, 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
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Closing Date and ending on December 31, 2002 which term shall be extendible by
the Note Insurer for successive quarterly terms ending on each successive March
31, June 30, September 30 and December 31 (or, pursuant to revocable written
standing instructions from time to time to the Servicer and the Trust Collateral
Agent, for any specified number of terms greater than one), until the
termination of the Issuer. Each such notice (including each notice pursuant to
standing instructions, which shall be deemed delivered at the end of successive
quarterly terms for so long as such instructions are in effect) (a "Servicer
Extension Notice") shall be delivered by the Note Insurer to the Trust
Collateral Agent and the Servicer. The Servicer hereby agrees that, as of the
date hereof and upon its receipt of any such Servicer Extension Notice, the
Servicer shall become bound, for the initial term beginning on the date hereof
and for the duration of the term covered by such Servicer Extension Notice, to
continue as the Servicer subject to and in accordance with the other provisions
of this Agreement. Until such time as a Note Insurer Default shall have occurred
and be continuing, the Trust Collateral Agent agrees that if as of the fifteenth
day prior to the last day of any term of the Servicer, the Trust Collateral
Agent shall not have received any Servicer Extension Notice from the Note
Insurer, the Trust Collateral Agent will, within five days thereafter, give
written notice of such non-receipt to the Note Insurer, the Back-up Servicer (or
any alternate successor servicer appointed by the Note Insurer pursuant to
Section 8.5) and the Servicer and the Servicer's terms shall not be extended
unless a Servicer Extension Notice is received on or before the last day of such
term.
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
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reconciliation, the Servicer's Certificate shall control for the purpose of
calculations and payments with respect to the related Payment Date. In the event
that the Back-up Servicer and the Servicer are unable to reconcile discrepancies
with respect to a Servicer's Certificate by the related Payment Date, (i) the
Back-up Servicer will notify the Note Insurer and the Trust Collateral Agent,
and (ii) the Servicer shall cause a firm of independent certified public
accountants, at the Servicer's expense, to audit the Servicer's Certificate and,
prior to the fifth calendar day of the following month, reconcile the
discrepancies. The effect, if any, of such reconciliation shall be reflected in
the Servicer's Certificate for such next succeeding Determination Date. In
addition, the Servicer shall, if so requested by the Note Insurer (unless a Note
Insurer Default shall have occurred and be continuing) deliver to the Back-up
Servicer (i) within five (5) Business Days of demand therefor a computer tape
containing as of the close of business on the date of demand all of the data
maintained by the Servicer in computer format in connection with servicing the
Receivables and (ii) within fifteen (15) Business Days of demand therefor a copy
of such other information as is reasonably requested by the Note Insurer for the
purpose of reconciling such discrepancies. Other than the duties specifically
set forth in this Agreement, the Back-up Servicer shall have no obligations
hereunder, including, without limitation, to supervise, verify, monitor or
administer the performance of the Servicer. The Back-up Servicer shall have no
liability for any actions taken or omitted by the Servicer. The duties and
obligations of the Back-up Servicer shall be determined solely by the express
provisions of this Agreement and no implied covenants or obligations shall be
read into this Agreement against the Back-up Servicer.
(b) The Back-up Servicer shall review each Servicer's Certificate delivered
pursuant to Section 4.15(a) and shall, based upon the information provided from
the Servicer under Section 4.15(a):
(i) confirm that such Servicer's Certificate is complete on its face;
(ii) load the computer diskette (which shall be in a format acceptable
to the Back-up Servicer) received from the Servicer pursuant to Section
4.15(a) hereof, confirm that such computer diskette is in a readable form
and calculate the Principal Balance of each Receivable 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 Principal Payment Amount,
the Class A Principal Amount, the Class B Principal Payment Amount, the
Class A-1 Interest Payment Amount, the Class A-2 Interest Payment Amount,
the Class A-3 Interest Payment Amount, the Class A-4 Interest Payment
Amount, the Class B Interest Payment Amount, the Senior Strip, the Back-up
Servicer Fee, the Servicing Fee, the Senior Strip, the Indenture Trustee
Fee, the Custodian Fee, the amount on deposit in the Spread Account, the
amount on deposit in the Class B Reserve 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
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thereof to the Note Insurer. The Back-up Servicer's obligation shall be
limited to the mathematical recalculation of the amounts set forth in this
Section 4.15(b)(iii) based on the Servicer's Certificate.
SECTION 4.16. Fidelity Bond. The Servicer shall maintain a fidelity
bond in such form and amount as is customary for entities acting as custodian of
funds and documents in respect of consumer contracts on behalf of institutional
investors.
SECTION 4.17. Delegation of Duties. The Servicer may at any time
delegate duties under this Agreement to 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 September 2002 (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.
SECTION 4.19. Confidential Information. The Back-up Servicer, each
subservicer and any successor Servicer shall hold in confidence all Confidential
Information in accordance with the Federal Financial Privacy Law and, to the
extent more exacting, its then customary procedures; provided that nothing
herein shall prevent the Back-up Servicer, any subservicer or any successor
Servicer from delivering copies of any financial statements and other documents
whether or not constituting Confidential Information, and disclosing other
information, whether or not Confidential Information, to (i) its directors,
officers, employees, agents and professional consultants to the extent necessary
to carry on the Back-up Servicer's, such subservicer's or such successor
Servicer's business, as applicable, in the ordinary course, (ii) any Noteholder
or the Note Insurer to the extent that such Noteholder or the Note Insurer is
entitled to such information under this Agreement or any other Basic Document,
but not otherwise, (iii) any governmental authority which specifically requests
(or as to which applicable regulations require) such information, (iv) any
nationally recognized rating agency in connection with the rating of the Notes
by such agency, or (v) any other Person to which such delivery or disclosure may
be necessary or appropriate (a) in compliance with any applicable law, rule,
regulation or order, (b) in response to any subpoena or other legal process, (c)
in connection with any litigation to which the Back-up Servicer, such
subservicer or such successor Servicer, as applicable, is a party, (d) in order
to enforce the rights of the Noteholders, the Certificateholder and the Note
Insurer hereunder or under any other Basic Document, or (e) otherwise, in
accordance with the Federal Financial Privacy Law; provided, that, prior to any
such disclosure, the Back-up Servicer, such subservicer or such successor
Servicer, as applicable, shall inform each such party (other than any
Noteholder, the Note Insurer or any other party to the Basic Documents) that
receives Confidential Information of the foregoing requirements and shall use
its commercially reasonable best efforts to cause such party to comply with such
requirements.
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ARTICLE V
ACCOUNTS; PAYMENTS;
STATEMENTS TO NOTEHOLDERS
SECTION 5.1. Accounts; Lock-Box Account.
(a) The Servicer has established the Lock-Box Account as two Eligible
Accounts, one established with Bank of America National Trust and Savings
Association entitled "Long Beach Acceptance Corp., JPMorgan Chase, Agent
Account--Auto Loan Programs," account number 1457202900, and one established
with JPMorgan Chase entitled "Long Beach Acceptance Corp., JPMorgan Chase, Agent
Account -- Auto Loan Programs," account number 530097095; provided, that the
Servicer, with the prior written consent of the Note Insurer, may from time to
time (a) establish additional or substitute Lock-Box Accounts, each of which
shall be an Eligible Account, and (b) close or terminate the use of any of the
aforementioned accounts or any subsequently established accounts, each of which
accounts, at such time, shall no longer be deemed to be a Lock-Box Account;
provided, further, that pursuant to the Lock-Box Agreement, the Lock-Box
Processor and no other person, save the Trust Collateral Agent or the Servicer,
has authority to direct disposition of funds related to the Receivables on
deposit in the Lock-Box Account consistent with the provisions of this Agreement
and the Lock-Box Agreement. The Trust Collateral Agent shall have no liability
or responsibility with respect to the Lock-Box Processor's or the Servicer's
directions or activities as set forth in the preceding sentence. The Lock-Box
Account shall be established pursuant to and maintained in accordance with the
Lock-Box Agreement and shall be a demand deposit account which shall at all
times be an Eligible Account, initially established and maintained with JPMorgan
Chase or, at the request of the Note Insurer, an Eligible Account satisfying
clause (i) of the definition thereof. The Servicer has established and shall
maintain the Lock-Box at a United States Post Office Branch. Notwithstanding the
Lock-Box Agreement or any of the provisions of this Agreement relating to the
Lock-Box and the Lock-Box Agreement, the Servicer shall remain obligated and
liable to the Trust Collateral Agent and the Noteholders for servicing and
administering the Receivables and the other Trust Assets in accordance with
provisions of this Agreement without diminution of such obligation or liability
by virtue thereof.
In the event the Servicer shall for any reason no longer be acting as
such, the Lock-Box Agreement shall terminate in accordance with its terms and
funds on deposit in the Lock-Box Account shall be distributed by JPMorgan Chase,
as agent for the beneficial owners of funds in the Lock-Box Account at such time
(including the Issuer), and JPMorgan Chase shall deposit any such funds relating
to the Receivables to such other account as shall be identified by the Back-up
Servicer or successor Servicer for deposit therein; provided, however, that the
outgoing Servicer shall not thereby be relieved of any liability or obligations
on the part of the outgoing Servicer to the Lock-Box Bank under such Lock-Box
Agreement. The outgoing Servicer shall, upon request of the Trust Collateral
Agent, but at the expense of the outgoing Servicer, deliver to the successor
Servicer all documents and records relating to the Lock-Box Agreement and an
accounting of amounts collected and held in the Lock-Box Account or held by the
Lock-Box Processor in respect of the Receivables and otherwise use its best
efforts to effect the orderly and efficient transfer of any Lock-Box Agreement
to the successor Servicer. In the event that the Lock-Box Account fails at any
time to qualify as an Eligible Account, the Servicer, at its expense, shall
cause the Lock-Box Bank to deliver, at the direction of the Controlling Party
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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.
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 on behalf of the Issuer
and shall mature no later than one Business Day immediately preceding the
Payment Date next succeeding the date of such investment. 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 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).
(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)(i))
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
24
Receivables (other than Purchased Receivables), and all Liquidation Proceeds no
later than the second Business Day following receipt into the Lock-Box Account
or the Collection Account.
SECTION 5.3. Application of Collections. All collections for each
Collection Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments actually received from or on behalf of the Obligor shall be applied
hereunder, first, to interest and principal in accordance with the Simple
Interest Method to the extent necessary to bring such Receivable current,
second, in connection with the redemption of a defaulted Receivable, to
reimburse the Servicer for reasonable and customary out-of-pocket expenses
incurred by the Servicer in connection with such Receivable, third, to late fees
and fourth, to principal in accordance with the Simple Interest Method.
Notwithstanding anything herein to the contrary, no amount applied as interest
accrued on any Precomputed Receivable for any single Collection Period will
exceed 30 days' interest accrued thereon assuming a 360-day year of twelve
30-day months.
SECTION 5.4. Intentionally Omitted.
SECTION 5.5. Additional Deposits. The following additional deposits
shall be made in immediately available funds on the dates indicated: (i) on the
Business Day immediately preceding each Determination Date, the Servicer or
LBAC, as the case may be, shall deposit or cause to be deposited in the
Collection Account the aggregate Purchase Amount with respect to Purchased
Receivables, (ii) on the Business Day immediately preceding each Determination
Date, the Trust Collateral Agent shall deposit in the Collection Account all
amounts to be paid under Section 11.1 and (iii) on or before each Draw Date, the
Trust Collateral Agent shall transfer to the Collection Account any amounts
transferred to the Trust Collateral Agent by the Collateral Agent from the
Spread Account.
SECTION 5.6. Payments; Policy Claims.
(a) The Trust Collateral Agent (based solely on the information set forth
in the Servicer's Certificate for the related Payment Date upon which the Trust
Collateral Agent may conclusively rely) shall transfer, on each Payment Date,
from the Collection Account to the Note Account, in immediately available funds,
an amount equal to the 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 Principal Payment Amount,
the Class A Principal Payment Amount, the Class B Principal Payment Amount, the
Class A-1 Payment Amount, the Class A-1 Interest Payment Amount, the Class A-2
Payment Amount, the Class A-2 Interest Payment Amount, the Class A-3 Payment
Amount, the Class A-3 Interest Payment Amount, the Class A-4 Payment Amount, the
Class A-4 Interest Payment Amount, the Class B Interest Payment Amount, the
Monthly Dealer Participation Fee Payment Amount, the Senior Strip, the amount,
if
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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, the Monthly Dealer Participation Fee Payment Amount
and all unpaid Monthly Dealer Participation Fee Payment Amounts from prior
Collection Periods, second, to the Servicer, from the Available Funds (as
such Available Funds have been reduced by payments made pursuant to
subclause first of this clause (i)), the Servicing Fee and all unpaid
Servicing Fees from prior Collection Periods and, if the Available Funds
are insufficient to pay such 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 such Deficiency
Claim Amount is received by the Trust Collateral Agent from the Collateral
Agent, and third, the Senior Strip (i) for application pursuant to clause
(vi) below, with any remainder of the Senior Strip being deposited in the
Class B Reserve Account, or (ii) if the Class B Note Balance has been
reduced to zero and all accrued interest has been paid thereon, to LBAC;
(ii) to the Indenture Trustee, the Custodian and the Back-up Servicer
from the Available Funds (as such Available Funds have been reduced by
payments made pursuant to clause (i) above), the Indenture Trustee Fee, the
Custodian Fee and the Back-up Servicer Fee, respectively, and all unpaid
Indenture Trustee Fees, Custodian Fees and Back-up Servicer Fees from prior
Collection Periods and, if the Available Funds are insufficient to pay such
amounts, the Indenture Trustee, the Custodian and the Back-up Servicer will
receive such deficiency from the remaining portion of the Deficiency Claim
Amount with respect to such Payment Date, if any, to the extent such
Deficiency Claim Amount is 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, the Class A-2 Noteholders, the
Class A-3 Noteholders and the Class A-4 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 made pursuant to clauses
(i) and (ii) above), an amount equal to the Class A-1 Note Interest, Class
A-2 Note Interest, the Class A-3 Note Interest and the Class A-4 Note
Interest, respectively, with respect to such Payment Date (plus (without
duplication) interest on any outstanding Class A-1 Interest Carryover
Shortfall, Class A-2 Interest Carryover Shortfall, Class A-3 Interest
Carryover Shortfall or Class A-4 Interest Carryover Shortfall, if any, to
the extent permitted by applicable law, at the Class A-1
26
Note Rate, the Class A-2 Note Rate, the Class A-3 Note Rate or the Class
A-4 Note Rate, as applicable, for the related Accrual Period (calculated
(i) with respect to the Class A-1 Notes on each Payment Date, on the basis
of the actual number of days elapsed during such Accrual Period based on a
360 day year and (ii) with respect to the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes on each Payment Date, on the basis of a
360-day year consisting of twelve 30-day months)) and, if the Available
Funds are insufficient to pay such amounts, the Class A Noteholders will
receive such deficiency from the following sources in the following order
of priority: (A) from the remaining portion of the Deficiency Claim Amount
with respect to such Payment Date, if any, to the extent such Deficiency
Claim Amount is 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 made 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 Principal Payment
Amount with respect to such Payment Date and any Principal Carryover
Shortfall as of the close of business on the preceding Payment Date,
second, to the Class A-2 Noteholders, after the Class A-1 Note Balance has
been reduced to zero, an amount equal to the sum of the remaining Principal
Payment Amount with respect to such Payment Date, if any, and the remaining
Principal Carryover Shortfall, if any, as of the close of business on the
preceding Payment Date, third, to the Class A-3 Noteholders, after the
Class A-1 Note Balance and the Class A-2 Note Balance have been reduced to
zero, an amount equal to the sum of the remaining Principal Payment Amount,
if any, with respect to such Payment Date and the remaining Principal
Carryover Shortfall, if any, as of the close of business on the preceding
Payment Date, and fourth, to the Class ------ A-4 Noteholders, after the
Class A-1 Note Balance, the Class A-2 Note Balance and the Class A-3 Note
Balance have been reduced to zero, an amount equal to the sum of the
remaining Principal Payment Amount, if any, with respect to such Payment
Date and the remaining Principal Carryover Shortfall, if any, 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 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
27
Custodian, as applicable, from the Available Funds (as such Available Funds
have been reduced by payments made 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 made 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; and
(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) and the Senior Strip, an amount equal to the Class B
Interest Payment Amount with respect to such Payment Date (plus (without
duplication) interest on any outstanding Class B Interest Carryover
Shortfall for the related Accrual Period (calculated on the basis of a
360-day year consisting of twelve 30-day months)) and, if the Senior Strip
and remaining Available Funds are insufficient to pay such amounts, the
Class B Noteholders will receive such deficiency from the Class B Reserve
Account Draw;
(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, for
application in accordance with provisions of the Spread Account Agreement.
(d) In addition, on each Payment Date, after giving effect to the payments
specified in clauses (i) through (vii) of Section 5.6(c), the Trust Collateral
Agent (based on the information contained in the Servicer's Certificate
delivered on the related Determination Date pursuant to Section 4.9 upon which
the Trust Collateral Agent may conclusively rely) shall pay the following
amounts, from the following sources and in the following order of priority:
(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 remaining Class B Reserve Account Release
Amount after reduction thereof pursuant to Section 5.6(c)(vi), if any, with
respect to such Payment
28
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.
(f) 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) of Section 5.6(c) will be subordinated to
the prior payment in full of all amounts payable pursuant to clauses (i) through
(v) of Section 5.6(c) (provided, that such Class B Note Interest may be paid on
each Payment Date using the Senior Strip and, if the Senior Strip is
insufficient, from amounts on deposit in the Class B Reserve Account, if any, on
each Payment Date) 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.
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 5.6(d) above for payment to the Certificateholder. 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.
(g) 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 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
29
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).
(h) 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 the Class A-1
Payment Amount, the Class A-2 Payment Amount, the Class A-3 Payment Amount, the
Class A-4 Payment Amount or the Class B Payment Amount, as applicable, to be
paid to such Class of Notes in accordance with the Servicer's Certificate.
SECTION 5.7. Statements to Noteholders; 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,
among 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, the Class A-3 Notes, the Class A-4 Notes and
the Class B Notes, respectively, and in the aggregate with respect to all
classes of Notes;
(ii) the amount of the payment allocable to interest on the Class A-1
Notes, the Class A-2 Notes, the Class A-3 Notes, the Class A-4 Notes and
the Class B Notes, respectively, and in the aggregate with respect to all
classes of Notes;
(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, the Class
A-3 Pool Factor , the Class A-4 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, the Class
A-3 Note Balance, the Class A-4 Note Balance, the Class B Note Balance and
the 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;
30
(v) the amount of the Monthly Dealer Participation Fee Payment Amount
paid to LBAC, the amount of the Senior Strip with respect to such Payment
Date, 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, the
Class A-3 Interest Carryover Shortfall, if applicable, the Class A-4
Interest Carryover Shortfall, if applicable, the Class B 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 paid, if any, to the Class A Noteholders under the
Policy for such Payment Date;
(viii) the amount paid to the Note Insurer on such Payment Date;
(ix) the amount in the Spread Account;
(x) the amount in 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 consisting 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;
31
(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;
(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), (v) and (vi)
above shall be expressed in the aggregate and 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,
2003, 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), (v)
and (vi) 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
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
32
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 Policy.
SECTION 5.10. Spread Account. The Transferor agrees, simultaneously
with the execution and delivery of this Agreement, to execute and deliver the
Spread Account Agreement and, pursuant to the terms thereof, to deposit the
Initial Spread Account Deposit in the Spread Account on the Closing Date.
Although the Transferor as Certificateholder, has pledged the Spread Account to
the Collateral Agent, pursuant to the Spread Account Agreement, the Spread
Account shall not under any circumstances be deemed to be a part of or otherwise
includible in the Issuer or the Trust Assets.
SECTION 5.11. Withdrawals from 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
33
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.
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 2002-A", which
will include the money and other property deposited and held therein pursuant to
Section 5.6(c)(i), Section 5.6(d)(i) and this Section 5.13.
(a) On the Closing Date, the Transferor shall deposit the 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 shall 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,
together with the Senior Strip, 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 respect of
such insufficiency. In addition, if on the Class B Final Scheduled Payment Date,
the Available Funds, together with the Senior Strip, are insufficient to retire
the Class B Notes, the Trust Collateral Agent shall withdraw the Class B Reserve
Account Draw from the Class B Reserve Account for deposit in the Note Account
for application 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.
34
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 entitlement 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.
ARTICLE VI
THE POLICY
SECTION 6.1. Policy. The Originator agrees, simultaneously with the
execution and delivery of this Agreement, to cause the Note Insurer to issue the
Policy for the benefit of the Class A Noteholders in accordance with the terms
thereof.
SECTION 6.2. Claims Under Policy.
(a) In the event that the Trust Collateral Agent has delivered a Deficiency
Notice with respect to any Determination Date, the Trust Collateral Agent shall
determine on the related Draw Date whether the sum of (i) the amount of
Available Funds, net of the Senior Strip, 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 Policy shall be deposited by the Trust Collateral Agent into
the Policy Payments Account and thereafter into the Note Account for payment to
Class A Noteholders on the related Payment Date (or promptly following payment
on a later date as set forth in the Policy).
(b) Any notice delivered by the Trust Collateral Agent to the Note Insurer
pursuant to Section 6.2(a) shall specify the Policy Claim Amount claimed under
the Policy and shall constitute a "Notice of Claim" under the Policy. In
accordance with the provisions of the Policy, the Note Insurer is required to
pay to the Trust Collateral Agent the Policy Claim Amount properly claimed
thereunder by 12:00 noon, New York City time, on the later of (i) the second
Business Day (as defined in the Policy) following receipt on a Business Day (as
defined in the Policy) of the Notice of Claim, and (ii) the applicable Payment
Date. Any payment made by the Note Insurer under the Policy shall be applied
solely to the payment of the Class A Notes, and for no other purpose.
35
(c) The Trust Collateral Agent shall (i) receive as attorney-in-fact of
each Class A Noteholder any Policy Claim Amount from the Note Insurer and (ii)
deposit the same in the Policy Payments Account for disbursement to the
Noteholders as set forth in clauses (iii) and (iv) of Section 5.6(c). Any and
all Policy Claim Amounts disbursed by the Trust Collateral Agent from claims
made under the Policy shall not be considered payment by the Issuer or from the
Spread Account with respect to such Class A Notes, and shall not discharge the
obligations of the Issuer with respect thereto. The Note Insurer shall, to the
extent it makes any payment with respect to the Class A Notes, become subrogated
to the rights of the recipients of such payments to the extent of such payments.
Subject to and conditioned upon any payment with respect to the Class A Notes by
or on behalf of the Note Insurer, each Class A Noteholder shall be deemed,
without further action, to have directed the Trust Collateral Agent to assign to
the Note Insurer all rights to the payment of interest or principal with respect
to the Class A Notes which are then due for payment to the extent of all
payments made by the Note Insurer and the Note Insurer may exercise any option,
vote, right, power or the like with respect to the Class A Notes to the extent
that it has made payment pursuant to the Policy. Notwithstanding the foregoing,
the order of priority of payments to be made pursuant to Section 5.6(c) shall
not be modified by this clause (c). To evidence such subrogation, the Note
Registrar shall note the Note Insurer's rights as subrogee upon the register of
Class A Noteholders upon receipt from the Note Insurer of proof of payment by
the Note Insurer of any Class A Interest Payment Amount or Class A Principal
Payment Amount.
(d) The Trust Collateral Agent shall be entitled, but not obligated, to
enforce on behalf of the Class A Noteholders the obligations of the Note Insurer
under the Policy. Notwithstanding any other provision of this Agreement, the
Class A Noteholders are not entitled to institute proceedings directly against
the Note Insurer.
SECTION 6.3. Preference Claims; Direction of Proceedings.
(a) In the event that the Trust Collateral Agent has received a certified
copy of an order of the appropriate court that any Scheduled Payment paid on a
Class A Note has been avoided in whole or in part as a preference payment under
applicable bankruptcy law, the Trust Collateral Agent shall so notify the Note
Insurer, shall comply with the provisions of the Policy to obtain payment by the
Note Insurer of such avoided payment, and shall, at the time it provides notice
to the Note Insurer, comply with the provisions of the Policy to obtain payment
by the Note Insurer, notify Holders of the Class A Notes by mail that, in the
event that any Class A Noteholder's payment is so recoverable, such Class A
Noteholder will be entitled to payment pursuant to the terms of the Policy.
Pursuant to the terms of the Policy, the Note Insurer will make such payment on
behalf of the Class A Noteholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order (as defined in
the Policy) and not to the Trust Collateral Agent or any Class A Noteholder
directly (unless a Class A Noteholder has previously paid such payment to the
receiver, conservator, debtor-in-possession or trustee in bankruptcy, in which
case the Note Insurer will make such payment to the Trust Collateral Agent for
payment, in accordance with the instructions to be provided by the Note Insurer,
to such Class A Noteholder upon proof of such payment reasonably satisfactory to
the Note Insurer).
(b) Each Notice of Claim shall provide that the Trust Collateral Agent, on
its behalf and on behalf of the Class A Noteholders, thereby appoints the Note
Insurer as agent and
36
attorney-in-fact for the Trust Collateral Agent and each Class A Noteholder in
any legal proceeding with respect to the Class A Notes. The Trust Collateral
Agent shall promptly notify the Note Insurer of any proceeding or the
institution of any action (of which a Responsible Officer of the Trust
Collateral Agent has actual knowledge) seeking the avoidance as a preferential
transfer under applicable bankruptcy, insolvency, receivership, rehabilitation
or similar law (a "Preference Claim") of any payment made with respect to the
Class A Notes. Each Holder of Class A Notes, by its purchase of Class A Notes,
and the Trust Collateral Agent hereby agree that so long as a Note Insurer
Default shall not have occurred and be continuing, the Note Insurer may at any
time during the continuation of any proceeding relating to a Preference Claim
direct all matters relating to such Preference Claim including, without
limitation, (i) the direction of any appeal of any order relating to any
Preference Claim and (ii) the posting of any surety, supersedeas or performance
bond pending any such appeal at the expense of the Note Insurer, but subject to
reimbursement as provided in the Insurance Agreement. In addition, and without
limitation of the foregoing, as set forth in Section 6.2(c), the Note Insurer
shall be subrogated to, and each Class A Noteholder and the Trust Collateral
Agent hereby delegate and assign, to the fullest extent permitted by law, the
rights of the Trust Collateral Agent and each Class A Noteholder in the conduct
of any proceeding with respect to a Preference Claim, including, without
limitation, all rights of any party to an adversary proceeding action with
respect to any court order issued in connection with any such Preference Claim.
SECTION 6.4. Surrender of Policy. The Trust Collateral Agent shall
surrender the Policy to the Note Insurer for cancellation upon its expiration in
accordance with the terms thereof.
ARTICLE VII
THE TRANSFEROR
SECTION 7.1. Representations of the Transferor. The Transferor makes
the following representations on which the Note Insurer shall be deemed to have
relied in executing and delivering the Policy and on which the Issuer is deemed
to have relied in acquiring the Receivables and on which the Indenture Trustee,
the Owner Trustee, the Collateral Agent, Trust Collateral Agent and Back-up
Servicer may rely. The representations speak as of the execution and delivery of
this Agreement and as of the Closing Date 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
37
approval or qualification would not have a material adverse effect on the
ability of the Transferor to perform such obligations or on any Receivable or on
the interest therein of the Issuer, the Noteholders or the Note Insurer.
(c) Power and Authority. The Transferor has the corporate power and
authority to execute and deliver this Agreement and the other Basic Documents to
which it is a party and to carry out their respective terms; the Transferor has
full corporate power and authority to sell and assign the property sold and
assigned to and deposited with the Issuer and has duly authorized such sale and
assignment to the Issuer by all necessary corporate action; and the execution,
delivery, and performance of this Agreement and the other Basic Documents to
which it is a party have been duly authorized by the Transferor by all necessary
corporate action.
(d) Valid Sale; Binding Obligation. This Agreement effects a valid sale,
transfer and assignment of the 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
38
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.
(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 ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇.
(i) Transferor's Intention. The Receivables and other Transferred Property
are being transferred with the intention of removing them from the Transferor's
estate pursuant to ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Bankruptcy Code, as the same
may be amended from time to time.
SECTION 7.2. Liability of the Transferor. The Transferor shall be
liable only to the extent of the obligations specifically undertaken by the
Transferor under this Agreement and the representations made by the Transferor
in this Agreement.
SECTION 7.3. Merger or Consolidation of, or Assumption of the
Obligations of, the Transferor. Any Person (a) into which the Transferor may be
merged or consolidated, (b) which may result from any merger or consolidation to
which the Transferor shall be a party or (c) which may succeed to the properties
and assets of the Transferor substantially as a whole, which person in any of
the foregoing cases executes an agreement of assumption to perform every
obligation of the Transferor under this Agreement, shall be the successor to the
Transferor hereunder without the execution or filing of any document or any
further act by any of the parties to this Agreement; provided, however, as a
condition to the consummation of any of the transactions referred to in clauses
(a), (b) or (c) above, (i) immediately after giving effect to such transaction,
(x) no representation or warranty made pursuant to Section 7.1 would have been
breached (for purposes hereof, such representations and warranties shall speak
as of the date of the consummation of such transaction) and (y) no event that,
after notice or lapse of time, or both, would become a Servicer Termination
Event shall have happened and be continuing, (ii) the Transferor shall have
delivered to the Note Insurer, the Indenture Trustee, the Trust Collateral Agent
and the Issuer an Officer's Certificate and an Opinion of Counsel each stating
that such consolidation, merger, or succession and such agreement or assumption
comply with this Section 7.3 and that all conditions precedent, if any, provided
for in this Agreement relating to such transaction have been complied with,
(iii) the Transferor shall have delivered to the Note Insurer, the Indenture
Trustee, the Trust Collateral Agent and the Issuer an Opinion of Counsel either
(A) stating that, in the opinion of such counsel, all financing statements and
continuation statements and amendments thereto have been executed and filed that
are necessary fully to
39
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 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 and shall survive the conveyance of the Receivables to the
Issuer and the subsequent pledge thereof to the Indenture Trustee pursuant to
the Indenture.
(i) Organization and Good Standing. The Servicer is duly organized and
validly existing as a corporation in good standing under the laws of the
State of Delaware, with the corporate power and authority to own its
properties and to conduct its
40
business as such properties shall be currently owned and such business is
presently conducted, and had at all relevant times, and has, the corporate
power, authority, and legal right to acquire, own, sell and service the
Receivables and to hold the Receivable Files as custodian.
(ii) Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease
of property or the conduct of its business (including the servicing of the
Receivables as required by this Agreement and the performance of its other
obligations under this Agreement and the other Basic Documents to which it
is a party) shall require such qualifications.
(iii) Power and Authority. The Servicer has the power and authority to
execute and deliver this Agreement and the other Basic Documents to which
it is a party and to carry out their respective terms; and the execution,
delivery, and performance of this Agreement and the other Basic Documents
to which it is a party have been duly authorized by the Servicer by all
necessary corporate action.
(iv) Binding Obligation. This Agreement and the other Basic Documents
to which it is a party constitute legal, valid and binding obligations of
the Servicer enforceable in accordance with their respective terms except
as enforceability may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered a
proceeding in equity or at law.
(v) No Violation. The execution, delivery and performance by the
Servicer of this Agreement and the other Basic Documents to which the
Servicer is a party and the consummation of the transactions contemplated
hereby and thereby and the fulfillment of the terms hereof and thereof do
not conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time) a default
under, the certificate of incorporation or by-laws of the Servicer, or any
material indenture, agreement, mortgage, deed of trust, or other instrument
to which the Servicer is a party or by which it is bound or any of its
properties are subject; or result in the creation or imposition of any
material lien upon any of its properties pursuant to the terms of any
indenture, agreement, mortgage, deed of trust, or other instrument (other
than this Agreement); or violate any law, order, rule, or regulation
applicable to the Servicer of any court or of any Federal or State
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Servicer or its properties.
(vi) No Proceedings. There are no proceedings or investigations
pending, or to the Servicer's best knowledge, threatened, before any court,
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Servicer or its properties:
(A) asserting the invalidity of this Agreement or the other Basic Documents
to which the Servicer is a party, the Notes or 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
41
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 to be
obtained by the Servicer 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
Certificateholder, the Note Insurer, the Noteholders and the Transferor,
and their respective officers, directors, agents and employees from and
against any and all costs, expenses, losses, damages, claims, and
liabilities, arising out of or resulting from the use, ownership or
operation by the Servicer or any affiliate thereof of a Financed Vehicle.
(ii) The Servicer shall indemnify, defend and hold harmless the
Indenture Trustee, the Trust Collateral Agent, the Owner Trustee, the
Collateral Agent, the Back-up Servicer, the Custodian, the Issuer, the Note
Insurer and the Transferor, and their respective officers, directors,
agents and employees from and against any taxes (other than net income,
gross receipts, franchise or other similar taxes) that may at any time be
asserted against the Indenture Trustee, the Trust Collateral Agent, the
Owner Trustee, the Collateral Agent, the Back-up Servicer, the Custodian,
the Issuer, the Note Insurer or the Transferor, with respect to the
transactions contemplated herein, including, without limitation, any sales,
general corporation, tangible personal property, privilege, or license
taxes and costs and expenses in defending against the same.
42
(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, the Certificateholder and the Noteholders, and
their respective officers, directors, agents and employees from and against
any and all costs, expenses, losses, claims, damages and liabilities to the
extent that such cost, expense, loss, claim, damage or liability arose out
of, or was imposed upon the Indenture Trustee, the Trust Collateral Agent,
the Owner Trustee, the Collateral Agent, the Back-up Servicer, the
Custodian, the Issuer, the Transferor, the Note Insurer, 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 any other Basic
Document to which it is a party or by reason of reckless disregard of its
obligations and duties under this Agreement or any other Basic Document to
which it is a party.
(iv) The Servicer shall indemnify, defend and hold harmless the
Indenture Trustee, the Trust Collateral Agent, the Owner Trustee, the
Collateral Agent, the Back-up Servicer, the Transferor, the Issuer, the
Custodian, the Note Insurer and their respective officers, directors,
agents and employees from and against all costs, expenses, losses, claims,
damages and liabilities arising out of or incurred in connection with the
acceptance or performance of the trusts and duties contained herein or in
any other Basic Document to which it is a party, if any, except to the
extent that such cost, expense, loss, claim, damage or liability: (a) shall
be due to the willful misfeasance, bad faith, or negligence of the
Indenture Trustee, the Trust Collateral Agent, the Owner Trustee, the
Collateral Agent, the Back-up Servicer, the Transferor, the Issuer, the
Custodian or the Note Insurer, as applicable; (b) relates to any tax other
than the taxes with respect to which the Servicer shall be required to
indemnify the Indenture Trustee, the Trust Collateral Agent, the Owner
Trustee, the Collateral Agent, the Back-up Servicer, the Transferor, the
Issuer, the Custodian or the Note Insurer; or (c) shall arise from the
Trust Collateral Agent's breach of any of its representations or warranties
set forth in Section 10.12.
(v) The Servicer shall indemnify the Owner Trustee and WTC (as defined
in the Trust Agreement) and its officers, directors, successors, assigns,
agents and servants (collectively, the "Indemnified Parties") from and
against, any and all liabilities, obligations, losses, damages, taxes,
claims, actions and suits, and any and all reasonable costs, expenses and
disbursements (including reasonable legal fees and expenses) of any kind
and nature whatsoever (collectively, "Expenses") which may at any time be
imposed on, incurred by, or asserted against the Owner Trustee, WTC or any
Indemnified Party in any way relating to or arising out of this Agreement,
the Basic Documents, the Owner Trust Estate (as defined in the Trust
Agreement), the administration of the Owner Trust Estate or the action or
inaction of the Owner Trustee under the Trust Agreement, except only that
the Servicer shall not be liable for or required to indemnify the Owner
Trustee from and against Expenses arising or resulting from any of the
matters described in the third sentence of Section 6.1 of the Trust
Agreement. The indemnities contained in this Section shall survive the
resignation or termination of the Owner Trustee or the termination of the
Trust Agreement. In any event of any claim, action or proceeding for which
indemnity will be sought pursuant to this Section, the Owner Trustee's
choice of
43
legal counsel shall be subject to the approval of the Transferor which
approval shall not be unreasonably withheld.
(vi) Notwithstanding the foregoing, the Servicer shall not be obligated
to defend, indemnify, and hold harmless any Noteholder for any losses,
claims, damages or liabilities incurred by any Noteholders arising out of
claims, complaints, actions and allegations relating to Section 406 of
ERISA or Section 4975 of the Code as a result of the purchase or holding of
a Note by such Noteholder with the assets of a plan subject to such
provisions of ERISA or the Code or the servicing, management and operation
of the Issuer.
(b) For purposes of this Section, in the event of the termination of the
rights and obligations of a Servicer (or any successor thereto pursuant to
Section 8.3) as Servicer pursuant to Section 9.1, or a resignation by such
Servicer pursuant to this Agreement, such Servicer shall be deemed to be the
Servicer pending appointment of a successor Servicer pursuant to Section 9.2.
The provisions of this Section 8.2(b) shall in no way affect the survival
pursuant to Section 8.2(c) of the indemnification by the outgoing Servicer
provided by Section 8.2(a).
(c) Indemnification under this Section 8.2 shall survive the termination of
this Agreement and any resignation or removal of LBAC as Servicer and shall
include reasonable fees and expenses of counsel and expenses of litigation. If
the Servicer shall have made any indemnity payments pursuant to this Section 8.2
and the recipient thereafter collects any of such amounts from others, the
recipient shall promptly repay such amounts to the Servicer, without interest.
(d) In no event shall the Servicer be liable under this Agreement to any
Person for the acts or omissions of any successor Servicer, nor shall any
successor Servicer be liable under this Agreement to any Person for any acts or
omissions of a predecessor Servicer.
SECTION 8.3. Merger or Consolidation of, or Assumption of the
Obligations of, Servicer or Back-up Servicer.
(a) The Servicer shall not merge or consolidate with any other Person,
convey, transfer or lease substantially all its assets as an entirety to another
Person, or permit any other Person to become the successor to the Servicer's
business unless, after the merger, consolidation, conveyance, transfer, lease or
succession, the successor or surviving entity shall be an Eligible Servicer and
shall be capable of fulfilling the duties of the Servicer contained in this
Agreement and the other Basic Documents to which the Servicer is a party. Any
Person (a) into which the Servicer may be merged or consolidated, (b) which may
result from any merger or consolidation to which the Servicer shall be a party,
(c) which may succeed to the properties and assets of the Servicer substantially
as a whole or (d) or succeeding to the business of the Servicer shall execute an
agreement of assumption to perform every obligation of the Servicer hereunder,
and whether or not such assumption agreement is executed, shall be the successor
to the Servicer under this Agreement without further act on the part of any of
the parties to this Agreement; provided, however, that nothing contained herein
shall be deemed to release the Servicer from any obligation hereunder; provided,
further, however, that (i) immediately after giving effect to such transaction,
no representation or warranty made pursuant to Section 8.1 hereof or made by
44
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
45
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 or this Agreement (including deposits of Purchase
Amounts) that shall continue unremedied for a period of two Business Days
after written notice is received by the Servicer from the Trust Collateral
Agent or the
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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 Policy Expiration Date, 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 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,
47
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
Policy Expiration Date, 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 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 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
48
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.
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
49
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.
(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.
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(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.
(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
51
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
Policy Expiration Date, 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 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
52
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 Policy Expiration Date, 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 the Custodian, as applicable, in confidence and shall not be
disclosed to any other Person, all in accordance with the Federal Financial
Privacy Law; 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 the 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 or any
other Basic Document, but not otherwise, (iii) any governmental authority which
specifically requests (or as to which applicable regulations require) such
information, (iv) any nationally recognized rating agency in connection with the
rating of the Notes by such agency, or (v) any other Person to which such
delivery or disclosure may be necessary or appropriate (a) in compliance with
any applicable law, rule, regulation or order, (b) in response to any subpoena
or other legal process, (c) in connection with any litigation to which the Trust
Collateral Agent or the Custodian is a party, (d) in order to enforce the rights
of the Noteholders and the Note Insurer hereunder or under any other Basic
Document, or (e) otherwise, in accordance with the Federal Financial Privacy
Law; provided, that, prior to any such disclosure, the Trust Collateral Agent or
the Custodian, as applicable, shall inform each
53
such party (other than any Noteholder, the Note Insurer or any other party to
the Basic Documents) that receives Confidential Information of the foregoing
requirements and shall use its commercially reasonable best efforts to cause
such party to comply with such requirements.
(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 this Agreement.
(k) The Trust Collateral Agent shall, and hereby agrees that it will, hold
the Policy in trust, and will hold any proceeds of any claim on the Policy in
trust, solely for the use and benefit of the 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 or 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 this Agreement.
(m) In no event shall The JPMorgan Chase 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.
(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 Class A Noteholders
and Note Insurer. Prior to the payment in full of the Class A Notes and the
Reimbursement Obligations and the expiration of the term of the Policy, the
Trust Collateral Agent shall act solely for the benefit of the Class A
Noteholders and the Note Insurer, as their interests may appear herein.
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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 Policy Expiration Date, 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
55
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) applicable 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 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
56
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.
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.
The provisions of this Section 10.6 shall survive the termination of this
Agreement or any resignation or removal of LBAC as Servicer.
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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 State
of New York; 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 Policy Expiration Date, 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 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
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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 Trust Collateral Agent or Custodian, 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 Trust Collateral Agent or Custodian. 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 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.
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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 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
60
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 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
61
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 New York banking
corporations, 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
affecting creditors' rights generally and (y) general principals of equity.
SECTION 10.13. 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 it 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
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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 Trust Assets; 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 11.1.
(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.
(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, 3.19, 6.8, 7.1, 7.3,
8.3, 9.1, 9.2, 9.3, 11.1 and 11.14 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
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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 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.
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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.
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 or the Policy Expiration Date has not occurred,
with the prior written consent of the Note Insurer and, (ii) if a Note Insurer
Default has occurred and is continuing or the Policy Expiration Date has
occurred 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 all Holders and on all future Holders of 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, in the case of either clause (i)
or (ii) above, 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; provided, further that in the case of clause
(ii) above, 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, for any of the following purposes:
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(x) to correct or amplify the description of any property at any time
conveyed to the Issuer hereunder, or better to assure, convey and confirm
unto the property conveyed pursuant hereto;
(y) to add to the covenants of the Transferor, the Originator or the
Servicer, for the benefit of the Holders of the Notes and the Note Insurer;
or
(z) to cure any ambiguity, to correct or supplement any provision
herein or to make any other provisions with respect to matters or questions
arising under this Agreement; provided that such action pursuant to this
subclause (z) shall not adversely affect in any material respect the
interests of the Holders of the Notes, as evidenced by satisfaction of the
Rating Agency Condition with respect to such amendment.
(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 and/or consent, if applicable, 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.
(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 (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 (Section) 9-507(C) 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,
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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 or change in its state of incorporation if, as a
result of such relocation or change, 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 2002-A 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.
(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
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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.
(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
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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 Policy Expiration Date, 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
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 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,
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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: (201)
262-6868), Attention: General Counsel, (d) in the case of the Trust Collateral
Agent, at the Corporate Trust Office (Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇), (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 2002-A. 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 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 Policy.
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
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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 JPMorgan Chase, not in its
individual capacity but solely as Back-up Servicer, Custodian and Trust
Collateral Agent and in no event shall JPMorgan Chase 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 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 and the
Certificateholder, 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
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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 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, 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
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.
SECTION 13.17. Effect of Policy Expiration Date. Notwithstanding
anything to the contrary set forth herein, all references to any right of the
Note Insurer to direct, appoint, consent to, accept, approve of, take or omit to
take any action under this Agreement or any other Basic Document shall be
inapplicable at all times after the Policy Expiration Date, and (i) if such
reference provides for another party or parties to take or omit to take any such
action following a Note Insurer Default, such party or parties shall also be
entitled to take or omit to take such action following the Policy Expiration
Date and (ii) if such reference does not provide for another party or parties to
take or omit to take any such action following a Note Insurer Default, then the
Indenture Trustee acting at the direction of the Majorityholders shall have the
right to take or omit to take any such action following the Policy Expiration
Date. In addition, any other provision of this Agreement or any other Basic
Document which is operative based in whole or in part on whether a Note Insurer
Default has or has not occurred shall, at all times on or after the Policy
Expiration Date, be deemed to refer to whether or not the Policy Expiration Date
has occurred.
73
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: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
LONG BEACH ACCEPTANCE CORP.,
as Originator and Servicer
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Executive Vice President
JPMORGAN CHASE BANK,
as Back-up Servicer, Custodian and Trust
Collateral Agent
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
LONG BEACH ACCEPTANCE AUTO
RECEIVABLES TRUST 2002-A, as Issuer
By: Wilmington Trust Company, not in its
individual capacity, but solely as Owner Trustee
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Senior Financial Services Officer
[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, 2002, among Long Beach Acceptance Receivables Corp., Long Beach
Acceptance Corp., as originator and as servicer, JPMorgan Chase Bank, as trust
collateral agent, custodian and back-up servicer and Long Beach Acceptance Auto
Receivables Trust 2002-A, 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, 2002, among Long Beach Acceptance Receivables Corp., Long Beach
Acceptance Corp., as originator and as servicer, JPMorgan Chase Bank, as trust
collateral agent, custodian and back-up servicer and Long Beach Acceptance Auto
Receivables Trust 2002-A, 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 2002-A
1.840% ASSET-BACKED NOTES, CLASS A-1
2.470% ASSET-BACKED NOTES, CLASS A-2
3.175% ASSET-BACKED NOTES, CLASS A-3
3.983% ASSET-BACKED NOTES, CLASS A-4
8.500% 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 Cutoff 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 December 1, 2002, 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 Class A-4 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]
___________, 20__
JPMorgan Chase Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Capital Markets Fiduciary Services
Telephone: ___________
Telecopy: ____________
Ladies and Gentlemen:
Reference is made to the Sale and Servicing Agreement, dated as of August 1,
2002 (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 2002-A, a Delaware business trust, as issuer (the
"Issuer"), JPMORGAN CHASE 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]
___________, 20__
JPMorgan Chase Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Capital Markets Fiduciary Services
Telephone: ___________
Telecopy: ____________
Ladies and Gentlemen:
Reference is made to the Sale and Servicing Agreement, dated as of August 1,
2002 (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 2002-A, a Delaware business trust, as issuer (the
"Issuer"), JPMORGAN CHASE 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,
2002 (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 2002-A, a Delaware business trust, as issuer (the
"Issuer"), JPMORGAN CHASE 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,
JPMORGAN CHASE 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 2002-A
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