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SALE AND SERVICING AGREEMENT
among
LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST 2005-B
Issuer
LONG BEACH ACCEPTANCE RECEIVABLES CORP.
Transferor
LONG BEACH ACCEPTANCE CORP.
Originator, Servicer and Custodian
and
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION
Back-up Servicer and Trust Collateral Agent
Dated as of October 1, 2005
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TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS....................................................
1
SECTION 1.1.
Definitions............................................
1
SECTION 1.2.
Other Definitional Provisions..........................
1
SECTION 1.3.
Calculations...........................................
2
SECTION 1.4.
Action by or Consent of Noteholders or the Class C
Certificateholders.....................................
2
SECTION 1.5.
Material Adverse Effect................................
3
ARTICLE II CONVEYANCE OF
RECEIVABLES.....................................
3
SECTION 2.1.
Conveyance of Initial Receivables......................
3
SECTION 2.2.
Conveyance of Subsequent Receivables...................
4
SECTION 2.3.
Transfer Intended as Sale; Precautionary Security
Interest...............................................
9
SECTION 2.4.
Assignment by Transferor...............................
10
SECTION 2.5.
Further Encumbrance of Trust Assets....................
10
ARTICLE III THE
RECEIVABLES..............................................
11
SECTION 3.1.
Representations and Warranties of Transferor...........
11
SECTION 3.2.
Repurchase upon Breach of Representations and
Warranties of the Transferor...........................
11
SECTION 3.3.
Custody of Legal Files and Receivable Files............
12
SECTION 3.4.
Legal File Deficiencies................................
12
SECTION 3.5.
Access to Receivable Files; Servicer's Duties with
Respect to Receivable Files............................
13
SECTION 3.6.
Issuer's Certificate...................................
14
ARTICLE IV ADMINISTRATION AND SERVICING OF
RECEIVABLES...................
15
SECTION 4.1.
Duties of the Servicer.................................
15
SECTION 4.2.
Collection and Allocation of Receivable Payments.......
15
SECTION 4.3.
Realization upon Receivables...........................
16
SECTION 4.4.
Physical Damage Insurance; Other Insurance.............
18
SECTION 4.5.
Maintenance of Security Interests in Financed
Vehicles...............................................
18
SECTION 4.6.
Additional Covenants of Servicer.......................
20
SECTION 4.7.
Purchase of Receivables Upon Breach....................
20
SECTION 4.8.
Servicing Fee..........................................
21
SECTION 4.9.
Servicer's Certificate.................................
21
SECTION 4.10.
Annual Statement as to Compliance; Notice of Default...
21
SECTION 4.11.
Annual Independent Certified Public Accountant's
Report.................................................
22
SECTION 4.12.
Servicer Expenses......................................
23
SECTION 4.13.
Retention and Termination of Servicer..................
23
SECTION 4.14.
Access to Certain Documentation and Information
Regarding Receivables..................................
23
i
SECTION 4.15.
Verification of Servicer's Certificate.................
24
SECTION 4.16.
Fidelity Bond..........................................
25
SECTION 4.17.
Delegation of Duties...................................
25
SECTION 4.18.
Delivery of Back-up Tapes of Back-up Servicer..........
26
SECTION 4.19.
Confidential Information...............................
26
ARTICLE V ACCOUNTS; PAYMENTS; STATEMENTS TO
NOTEHOLDERS..................
27
SECTION 5.1.
Accounts; Lock-Box Account.............................
27
SECTION 5.2.
Collections............................................
29
SECTION 5.3.
Application of Collections.............................
29
SECTION 5.4.
Intentionally Omitted..................................
30
SECTION 5.5.
Additional Deposits....................................
30
SECTION 5.6.
Payments; Policy Claims................................
30
SECTION 5.7.
Statements to Noteholders and the Class C
Certificateholders; Tax Returns........................
36
SECTION 5.8.
Reliance on Information from the Servicer..............
38
SECTION 5.9.
Optional Deposits by the Note Insurer..................
38
SECTION 5.10.
Spread Account.........................................
39
SECTION 5.11.
Withdrawals from Supplemental Enhancement Account and
Spread Account.........................................
39
SECTION 5.12.
Supplemental Enhancement Account.......................
40
SECTION 5.13.
Pre-Funding Account....................................
40
SECTION 5.14.
Securities Accounts....................................
41
ARTICLE VI THE
POLICY....................................................
41
SECTION 6.1.
Policy.................................................
41
SECTION 6.2.
Claims Under Policy....................................
41
SECTION 6.3.
Preference Claims; Direction of Proceedings............
43
SECTION 6.4.
Surrender of Policy....................................
44
ARTICLE VII THE
TRANSFEROR...............................................
44
SECTION 7.1.
Representations of the Transferor......................
44
SECTION 7.2.
Liability of the Transferor............................
46
SECTION 7.3.
Merger or Consolidation of, or Assumption of the
Obligations of, the Transferor.........................
46
SECTION 7.4.
Limitation on Liability of the Transferor and Others...
47
SECTION 7.5.
Transferor May Own Notes...............................
47
ARTICLE VIII THE
SERVICER................................................
47
SECTION 8.1.
Representations of Servicer............................
47
SECTION 8.2.
Indemnities of Servicer................................
49
SECTION 8.3.
Merger or Consolidation of, or Assumption of the
Obligations of, Servicer or Back-up Servicer...........
51
SECTION 8.4.
Limitation on Liability of Servicer and Others.........
52
SECTION 8.5.
Servicer and Back-up Servicer Not to Resign............
53
ii
ARTICLE IX SERVICER TERMINATION
EVENTS...................................
53
SECTION 9.1.
Servicer Termination Events............................
53
SECTION 9.2.
Appointment of Successor...............................
57
SECTION 9.3.
Notification to Noteholders and the Class C
Certificateholders.....................................
58
SECTION 9.4.
Action Upon Certain Failures of the Servicer...........
58
ARTICLE X THE TRUST COLLATERAL
AGENT.....................................
59
SECTION 10.1.
Duties of the Trust Collateral Agent...................
59
SECTION 10.2.
Trust Collateral Agent to Act for the Class A
Noteholders, the Class C Certificateholders and Note
Insurer................................................
62
SECTION 10.3.
Certain Matters Affecting the Trust Collateral Agent...
62
SECTION 10.4.
Trust Collateral Agent and Back-up Servicer Not Liable
for Notes or Receivables...............................
63
SECTION 10.5.
Trust Collateral Agent and Back-up Servicer May Own
Notes..................................................
64
SECTION 10.6.
Indemnity of Trust Collateral Agent and Back-up
Servicer...............................................
64
SECTION 10.7.
Eligibility Requirements for Trust Collateral
Agent..................................................
65
SECTION 10.8.
Resignation or Removal of Trust Collateral Agent.......
65
SECTION 10.9.
Successor Trust Collateral Agent.......................
66
SECTION 10.10. Merger or Consolidation of Trust Collateral
Agent......
67
SECTION 10.11. Co-Trustee; Separate
Trustee...........................
67
SECTION 10.12. Representations and Warranties of Trust Collateral
Agent..................................................
69
SECTION 10.13. Rights of Note Insurer to Direct Trust Collateral
Agent..................................................
69
ARTICLE XI
TERMINATION...................................................
70
SECTION 11.1.
Termination............................................
70
ARTICLE XII ADMINISTRATIVE DUTIES OF THE
SERVICER........................
70
SECTION 12.1.
Administrative Duties..................................
70
SECTION 12.2.
Records................................................
72
SECTION 12.3.
Additional Information to be Furnished to the Issuer...
72
SECTION 12.4.
No Additional Compensation.............................
72
ARTICLE XIII MISCELLANEOUS
PROVISIONS....................................
72
SECTION 13.1.
Amendment..............................................
72
SECTION 13.2.
Protection of Title....................................
74
SECTION 13.3.
Limitation on Rights of Noteholders and the Class C
Certificateholders.....................................
76
SECTION 13.4.
Governing Law..........................................
77
SECTION 13.5.
Notices................................................
77
SECTION 13.6.
Severability of Provisions.............................
78
SECTION 13.7.
Assignment to Indenture Trustee........................
78
SECTION 13.8.
Limitation of Liability of Owner Trustee, Back-up
Servicer and Trust Collateral Agent....................
78
SECTION 13.9.
Independence of the Servicer...........................
79
SECTION 13.10. No Joint
Venture.......................................
79
iii
SECTION 13.11. Nonpetition
Covenant...................................
79
SECTION 13.12. Third Party
Beneficiaries..............................
79
SECTION 13.13. Consent to
Jurisdiction................................
80
SECTION 13.14.
Headings...............................................
80
SECTION 13.15. Trial by Jury
Waived...................................
81
SECTION 13.16. Entire
Agreement.......................................
81
SECTION 13.17. Effect of Policy Expiration
Date.......................
81
ANNEXES
Annex
A
Defined Terms
EXHIBITS
Exhibit
A-1
Form of Issuer's Certificate
Exhibit
A-2
Form of Issuer's Certificate
Exhibit
B-1
Form of Servicer's Certificate
Exhibit
B-2
Form of Loan Master File Layout
Exhibit
C
Intentionally Omitted
Exhibit
D
Payment Deferment and Due Date Change Policies
Exhibit
E
Documentation Checklist
Exhibit
F
Form of Transfer Agreement
SCHEDULES
Schedule
A
Schedule of Receivables
Schedule
B
Location of Receivable Files; Location of Legal Files
Schedule
C
Delivery Requirements
iv
SALE AND SERVICING AGREEMENT ("Agreement"), dated as of October 1,
2005, among LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST 2005-B, a
Delaware
statutory trust, as issuer (the "Issuer"), LONG BEACH ACCEPTANCE
RECEIVABLES
CORP., a Delaware corporation, as transferor (the "Transferor"),
LONG BEACH
ACCEPTANCE CORP., a Delaware corporation, as originator of the
receivables
("LBAC"), as servicer (in such capacity, the "Servicer") and as
custodian (in
such capacity, the "Custodian") and JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION, a
national banking association, as back-up servicer and trust
collateral agent,
(the "Back-up Servicer" and the "Trust Collateral Agent",
respectively).
WHEREAS the Issuer desires to acquire a portfolio of receivables
arising in connection with motor vehicle retail installment sale
contracts
acquired by LBAC through motor vehicle dealers;
WHEREAS the Transferor has purchased such receivables from LBAC and
Long Beach Acceptance Receivables Corp. Warehouse I (collectively,
the
"Sellers") and is willing to convey such receivables to the Issuer;
WHEREAS the Issuer desires to acquire, from time to time,
additional
receivables arising in connection with motor vehicle retail
installment sale
contracts to be acquired by LBAC;
WHEREAS the Transferor has agreed to purchase, from time to time,
such
additional receivables from the Sellers and is willing to convey
such
receivables to the Issuer; and
WHEREAS the Servicer is willing to service all such receivables.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Whenever used in this Agreement,
capitalized
terms used and not otherwise defined herein shall have the meanings
set forth in
Annex A attached hereto.
SECTION 1.2. Other Definitional Provisions.
(a) All terms defined in this Agreement (including Annex A hereto)
shall
have the defined meanings when used in any instrument governed
hereby and in any
certificate or other document made or delivered pursuant hereto
unless otherwise
defined therein.
(b) As used in this Agreement, in any instrument governed hereby
and in any
certificate or other document made or delivered pursuant hereto or
thereto,
accounting terms not defined in this Agreement (including Annex A
hereto) or in
any such instrument, certificate or other document, and accounting
terms partly
defined in this Agreement (including Annex A
hereto) or in any such instrument, certificate or other document to
the extent
not defined, shall have the respective meanings given to them under
generally
accepted accounting principles as in effect on the date of this
Agreement or any
such instrument, certificate or other document, as applicable. To
the extent
that the definitions of accounting terms in this Agreement
(including Annex A
hereto) or in any such instrument, certificate or other document
are
inconsistent with the meanings of such terms under generally
accepted accounting
principles, the definitions contained in this Agreement (including
Annex A
hereto) or in any such instrument, certificate or other document
shall control.
(c) The words "hereof," "herein," "hereunder" and words of similar
import
when used in this Agreement shall refer to this Agreement as a
whole and not to
any particular provision of this Agreement; Section, Schedule and
Exhibit
references contained in this Agreement are references to Sections,
Schedules and
Exhibits in or to this Agreement unless otherwise specified; and
the term
"including" shall mean "including without limitation."
(d) With respect to all terms in this Agreement, the singular
includes the
plural and the plural the singular; words importing any gender
include the other
genders; references to "writing" include printing, typing,
lithography, and
other means of reproducing words in a visible form; references to
agreements and
other contractual instruments include all subsequent amendments
thereto or
changes therein entered into in accordance with their respective
terms and not
prohibited by this Agreement; references to Persons include their
permitted
successors and assigns; and the term "including" means "including
without
limitation."
(e) Any agreement, instrument or statute defined or referred to
herein or
in any instrument or certificate delivered in connection herewith
means such
agreement, instrument or statute as from time to time amended,
modified or
supplemented in accordance with the terms thereof and includes (in
the case of
agreements or instruments) references to all attachments thereto
and instruments
incorporated therein; references to a Person are also to its
permitted
successors and assigns.
SECTION 1.3. Calculations. All calculations of the amount of the
Servicing Fee, the Back-up Servicer Fee, Custodian Fee and the
Indenture Trustee
Fee shall be made on the basis of a 360-day year consisting of
twelve 30-day
months. All references to the Principal Balance of a Receivable as
of the last
day of a Collection Period shall refer to the close of business on
such day.
SECTION 1.4. Action by or Consent of Noteholders or the Class C
Certificateholders. Whenever any provision of this Agreement refers
to action to
be taken, or consented to, by Noteholders or the Class C
Certificateholders,
such provision shall be deemed to refer to Noteholders or the Class
C
Certificateholders of record as of the Record Date immediately
preceding the
date on which such action is to be taken, or consent given, by
Noteholders or
the Class C Certificateholders. Solely for the purposes of any
action to be
taken or consented to by Noteholders or the Class C
Certificateholders, 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
2
entitled to rely upon any such action or consent, only Notes which
the Indenture
Trustee or the Trust Collateral Agent actually knows to be so owned
shall be so
disregarded.
SECTION 1.5. Material Adverse Effect. Whenever a determination is
to
be made under this Agreement as to whether a given event, action,
course of
conduct or set of facts or circumstances could or would have a
material adverse
effect on the Issuer or Noteholders (or any similar or analogous
determination),
such determination shall be made without taking into account the
insurance
provided by the Policy. Whenever a determination is to be made
under this
Agreement whether a breach of a representation, warranty or
covenant has or
could have a material adverse effect on a Receivable or the
interest therein of
the Issuer, the Noteholders or the Note Insurer (or any similar or
analogous
determination), such determination shall be made by the Controlling
Party in its
sole discretion.
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. Conveyance of Initial Receivables.
In consideration of the Issuer's delivery of the Class R
Certificate
to or upon the order of the Transferor on the Closing Date and the
net proceeds
from the sale of the Notes and the other amounts to be distributed
from time to
time to, or upon the order of, the Transferor in accordance with
the terms of
this Agreement, the Transferor does hereby transfer, assign, set
over and
otherwise convey to the Issuer, without recourse, all right, title
and interest
of the Transferor in, to and under:
(i) the Initial Receivables listed in Schedule A hereto, all monies
received on the Initial Receivables after the Initial Cutoff Date,
all
monies received in respect of principal on the Initial Receivables
during
the month of September 2005 and, with respect to any Initial
Receivables
which are Precomputed Receivables, the related Payahead Amount, and
all
Liquidation Proceeds and Recoveries received with respect to such
Initial
Receivables;
(ii) the security interests in the related Financed Vehicles
granted
by the related Obligors pursuant to the Initial Receivables and any
other
interest of the Transferor in such Financed Vehicles, including the
certificates of title and any other evidence of ownership with
respect to
such Financed Vehicles;
(iii) any proceeds from claims on any physical damage, credit life
and
credit accident and health insurance policies or certificates or
the VSI
Policy, if any, relating to the related Financed Vehicles or the
related
Obligors, including any rebates and premiums;
(iv) property (including the right to receive future Liquidation
Proceeds) that secures an Initial Receivable and that has been
acquired by
or on behalf of the Transferor pursuant to the liquidation of such
Initial
Receivable;
(v) the Purchase Agreement including a direct right to cause LBAC
to
purchase Initial Receivables from the Issuer upon the occurrence of
a
breach of any of the
3
representations and warranties contained in Section 3.03(b) of the
Purchase
Agreement or the failure of LBAC to timely comply with its
obligations
pursuant to Section 5.05 of the Purchase Agreement;
(vi) refunds for the costs of extended service contracts with
respect
to the related Financed Vehicles, refunds of unearned premiums with
respect
to credit life and credit accident and health insurance policies or
certificates covering a related Obligor or Financed Vehicle or his
or her
obligations with respect to such Financed Vehicle and any recourse
to
Dealers for any of the foregoing;
(vii) the Legal Files and the Receivable Files related to each
Initial
Receivable and any and all other documents that LBAC keeps on file
in
accordance with its customary procedures relating to the Initial
Receivables, the related Obligors or the related Financed Vehicles;
(viii) all amounts and property from time to time held in or
credited
to the Lock-Box Account, to the extent such amounts and property
relate to
the Initial Receivables;
(ix) any proceeds from recourse against Dealers (other than any
Chargeback Obligations), including any Dealer Title Guaranties with
respect
to the Initial Receivables, with respect to the sale of the Initial
Receivables; and
(x) the proceeds of any and all of the foregoing.
SECTION 2.2. Conveyance of Subsequent Receivables.
(a) Subject to the conditions set forth in Section 2.2(b) hereof
and in the
related Transfer Agreement, in consideration of the Issuer's
delivery to or upon
the order of the Transferor of the purchase price for the
Subsequent
Receivables, in each case as described below and set forth in the
related
Transfer Agreement, the Transferor shall on each Subsequent
Transfer Date sell,
transfer, assign, set over and otherwise convey to the Issuer,
without recourse,
all right, title and interest of the Transferor in, to and under:
(i) the Subsequent Receivables listed in Schedule A to the related
Transfer Agreement, all monies received on such Subsequent
Receivables
after the related Subsequent Cutoff Date and, with respect to any
such
Subsequent Receivables which are Precomputed Receivables, the
related
Payahead Amount, and all Liquidation Proceeds and Recoveries
received with
respect to such Subsequent Receivables;
(ii) the security interests in the related Financed Vehicles
granted
by the related Obligors pursuant to such Subsequent Receivables and
any
other interest of the Transferor in such Financed Vehicles,
including the
certificates of title and any other evidence of ownership with
respect to
such Financed Vehicles;
(iii) any proceeds from claims on any physical damage, credit life
and
credit accident and health insurance policies or certificates or
the VSI
Policy, if any, relating to the related Financed Vehicles or the
related
Obligors, including any rebates and premiums;
4
(iv) property (including the right to receive future Liquidation
Proceeds) that secures a Subsequent Receivable and that has been
acquired
by or on behalf of the Transferor pursuant to the liquidation of
such
Subsequent Receivable;
(v) each Transfer Agreement and the Purchase Agreement, including a
direct right to cause LBAC to purchase Subsequent Receivables from
the
Issuer upon the occurrence of a breach of any of the
representations and
warranties contained in Section 4 of the related Transfer
Agreement, or the
failure of LBAC to timely comply with its obligations pursuant to
Section
5.05 of the Purchase Agreement;
(vi) refunds for the costs of extended service contracts with
respect
to the related Financed Vehicles, refunds of unearned premiums with
respect
to credit life and credit accident and health insurance policies or
certificates covering a related Obligor or the related Financed
Vehicle or
his or her obligations with respect to a related Financed Vehicle
and any
recourse to Dealers for any of the foregoing;
(vii) the Legal Files and the Receivable Files related to each such
Subsequent Receivable and any and all other documents that LBAC
keeps on
file in accordance with its customary procedures relating to such
Subsequent Receivables, the related Obligors or the related
Financed
Vehicles;
(viii) all amounts and property from time to time held in or
credited
to the Lock-Box Account, to the extent such amounts and property
relate to
such Subsequent Receivables;
(ix) any proceeds from recourse against Dealers (other than any
Chargeback Obligations), including any Dealer Title Guaranties with
respect
to such Subsequent Receivables, with respect to the sale of such
Subsequent
Receivables; and
(x) the proceeds of any and all of the foregoing.
The purchase price to be paid by the Issuer on each Subsequent
Transfer Date for the Subsequent Receivables so sold shall be set
forth in the
related Transfer Agreement and shall be paid from monies released
from the
Pre-Funding Account pursuant to Section 5.13(b). Such purchase
price shall equal
the aggregate Principal Balance of such Subsequent Receivables as
of the related
Subsequent Cutoff Date.
(b) The Transferor shall transfer to the Issuer the Subsequent
Receivables
and the other property and rights related thereto described in
Section 2.2(a)
only upon the prior written consent of the Note Insurer acting in
its sole and
absolute discretion and the satisfaction of each of the following
conditions on
or prior to the related Subsequent Transfer Date:
(i) the Transferor shall have provided the Indenture Trustee, the
Trust Collateral Agent, the Note Insurer, the Class C
Certificateholders
and each Rating Agency with an Addition Notice not later than five
Business
Days prior to the related Subsequent Transfer Date and shall also
have
provided the Indenture Trustee, the Trust Collateral Agent and the
Note
Insurer with an electronic transmission of the information on the
related
Subsequent Receivables set forth in such Addition Notice in a
format
5
acceptable to each of the Indenture Trustee, the Trust Collateral
Agent and
the Note Insurer no later than such fifth Business Day prior to the
related
Subsequent Transfer Date;
(ii) LBAC and LBARC-WI shall have each delivered to the Transferor,
a
written Subsequent Assignment, which shall include a list of the
Subsequent
Receivables so transferred attached thereto as Schedule A, and a
copy
thereof to the Note Insurer;
(iii) the Transferor, the Sellers, the Trust and the Trust
Collateral
Agent shall have executed a written Transfer Agreement, which shall
include
a list of the Subsequent Receivables so transferred attached
thereto as
Schedule A, and a copy thereof shall have been delivered to the
Note
Insurer;
(iv) the Transferor shall have caused the Servicer to deposit in
the
Collection Account all collections on or in respect of the
Subsequent
Receivables (to the extent conveyed to the Trust as specified in
Section
2.2(a)) received prior to the related Subsequent Transfer Date;
(v) the Transferor shall have deposited or caused to be deposited
the
related Subsequent Spread Account Deposit into the Spread Account
pursuant
to Section 5.10;
(vi) as of each Subsequent Transfer Date, none of the Sellers, the
Servicer and the Transferor will be insolvent nor will either of
them be
made insolvent by the related transfer nor shall any of them be
aware of
any pending insolvency;
(vii) the Funding Period shall not have terminated;
(viii) the Transferor shall have delivered to the Indenture
Trustee,
the Trust Collateral Agent, the Note Insurer, the Class C
Certificateholders and each Rating Agency an Officer's Certificate
confirming the satisfaction of each condition precedent specified
in this
Section 2.2(b) and in Section 5 of the related Transfer Agreement
and
certifying that:
(A) such conveyance of Subsequent Receivables by the Transferor
to the Trust on the related Subsequent Transfer Date was made in
good
faith for legitimate business purposes and was not made with intent
to
hinder, delay or defraud any Person to which the Transferor has
been,
is or will become, on or after the related Subsequent Transfer
Date,
indebted;
(B) the Transferor did not receive less than a reasonably
equivalent value in exchange for the conveyance of the Subsequent
Receivables by the Transferor to the Issuer on the related
Subsequent
Transfer Date pursuant to the related Transfer Agreement;
(C) the Transferor is not insolvent on the related Subsequent
Transfer Date and will not become insolvent as a result of the
conveyance of the Subsequent Receivables by the Transferor to the
Issuer on the related Subsequent Transfer Date pursuant to the
related
Transfer Agreement;
6
(D) the Transferor is not engaged in a business or transaction,
and is not about to engage in a business or transaction, for which
any
property remaining with the Transferor after such business or
transaction would be an unreasonably small amount of capital; and
(E) the Transferor has not incurred, and does not believe that it
will incur, debts that would be beyond the Transferor's ability to
pay
as such debts mature;
(ix) each Seller shall have delivered to the Indenture Trustee, the
Trust Collateral Agent, the Note Insurer, the Class C
Certificateholders
and each Rating Agency an Officer's Certificate confirming the
satisfaction
of each condition precedent specified in this Section 2.2(b) and in
Section
5 of the related Transfer Agreement and certifying that:
(A) such sale of Subsequent Receivables by such Seller to the
Transferor on the related Subsequent Transfer Date was made in good
faith for legitimate business purposes and was not made with intent
to
hinder, delay or defraud any Person to which such Seller has been,
is
or will become, on or after the related Subsequent Transfer Date,
indebted;
(B) such Seller did not receive less than a reasonably equivalent
value in exchange for the sale of the Subsequent Receivables by
such
Seller to the Transferor on the related Subsequent Transfer Date
pursuant to the Purchase Agreement and the related Subsequent
Assignment;
(C) such Seller is not insolvent on the related Subsequent
Transfer Date and will not become insolvent as a result of the sale
of
the Subsequent Receivables by such Seller to the Transferor on the
related Subsequent Transfer Date pursuant to the Purchase Agreement
and the related Subsequent Assignment;
(D) such Seller is not engaged in a business or transaction, and
is not about to engage in a business or transaction, for which any
property remaining with such Seller after such business or
transaction
would be an unreasonably small amount of capital; and
(E) such Seller has not incurred, and does not believe that it
will incur, debts that would be beyond such Seller's ability to pay
as
such debts mature;
(x) the Transferor shall have delivered to each Rating Agency, the
Note Insurer, the Indenture Trustee and the Trust Collateral Agent
Opinions
of Counsel with respect to the transfer of the Subsequent
Receivables
substantially in the form of the Opinions of Counsel delivered to
each
Rating Agency, the Note Insurer, the Indenture Trustee and the
Trust
Collateral Agent on the Closing Date regarding true sale,
non-consolidation, perfection, and other such matters satisfactory
in form
and substance to each of the Note Insurer, the Indenture Trustee
and the
Trust Collateral Agent in its sole discretion;
7
(xi) the Transferor shall have taken all action required to
maintain
the first priority perfected security interest (as defined in the
UCC) of
the Issuer in the Trust Assets;
(xii) no selection procedures believed by the Transferor or either
Seller to be adverse to the interests of the Noteholders or the
Note
Insurer shall have been utilized in selecting the Subsequent
Receivables;
(xiii) the conveyance of the Subsequent Receivables shall not
result
in a qualification, modification or withdrawal of the then-current
ratings
of the Notes; provided that written confirmation of such ratings
shall not
be required from the Rating Agencies;
(xiv) the Transferor shall have provided the Indenture Trustee and
the
Trust Collateral Agent with a supplement to the Schedule of
Receivables
setting forth the Subsequent Receivables to be transferred on such
Subsequent Transfer Date;
(xv) the Transferor shall have caused a firm of independent
accountants to deliver to the Indenture Trustee, the Trust
Collateral Agent
and the Note Insurer written confirmation that the Receivables,
including
the related Subsequent Receivables, meet the following criteria, as
of the
related Subsequent Cut-off Date:
(1) the weighted average remaining term of the Receivables will
be no more than 68 months and the weighted average original term
for
the Receivables will be no more than 72 months;
(2) each Receivable will have a minimum APR of 3.99%;
(3) each Receivable will have an original term of no more than 72
months;
(4) no more than 40.00%, 13.50% or 13.00% of the Receivables will
be originated in California, Florida or Arizona, respectively;
(5) the weighted average APR for the Receivables will be greater
than or equal to 11.36%;
(6) not less than 13.35% of the aggregate Principal Balance of
the Receivables will be Premium Receivables, not less than 22.10%
of
the aggregate Principal Balance of the Receivables will be Elite
Receivables, not less than 22.75% of the aggregate Principal
Balance
of the Receivables will be Superior Receivables, not less than
20.15%
of the aggregate Principal Balance of the Receivables will be
Preferred Receivables and not more than 15.40% of the aggregate
Principal Balance of the Receivables will be Classic Receivables;
and
(7) not more than 60% of the aggregate Principal Balance of the
Receivables will represent loans to finance the purchase of used
Financed Vehicles;
8
(xvi) the Transferor shall satisfy the document delivery
requirements
for such Subsequent Receivables as specified in Section 3.3;
(xvii) the representations and warranties made by the Transferor
and
the Servicer in Sections 7.1 and 8.1, respectively, shall be true
and
correct on and as of such Subsequent Transfer Date and the
representations
and warranties made by the Originator with respect to each such
Subsequent
Receivable being transferred to the Trust on such Subsequent
Transfer Date
in Section 4 of the related Transfer Agreement and Section 3.03(b)
of the
Purchase Agreement shall be true and correct as of such Subsequent
Transfer
Date;
(xviii) on or before such Subsequent Transfer Date, the Transferor
shall have provided any information reasonably requested by the
Rating
Agencies, the Note Insurer, the Indenture Trustee or the Trust
Collateral
Agent with respect to any Subsequent Receivables;
(xix) the Custodian shall confirm that it is in possession of a
Legal
File for each Subsequent Receivable identified in the supplement to
the
Schedule of Receivables attached as Schedule A to the related
Transfer
Agreement; and
(xx) the Servicer shall deliver the loan master file and history
information and the information required to be set forth in the
form
attached hereto as Exhibit B-2 as specified in Section 4.18.
SECTION 2.3. Transfer Intended as Sale; Precautionary Security
Interest. Each conveyance to the Issuer of the property set forth
in Section 2.1
and Section 2.2 above is intended as a sale (for certain non-tax
purposes) free
and clear of all Liens, and it is intended that the property of the
Issuer shall
not be part of the Transferor's estate in the event of the filing
of a
bankruptcy petition by or against the Transferor under any
bankruptcy law. In
the event, however, that notwithstanding the intent of LBAC, the
Transferor and
the Issuer, any transfer under this Agreement and/or under any
Transfer
Agreement is held not to be a sale, this Agreement and/or under any
Transfer
Agreement shall constitute a security agreement under the UCC (as
defined in the
UCC as in effect in the State of New York) and applicable law, and
the
Transferor hereby grants a security interest to the Issuer in, to
and under the
property described in Section 2.1 and Section 2.2 above and all
proceeds
thereof, for the benefit of the Noteholders and the Note Insurer as
their
interests may appear herein, for the purpose of securing the
payment and
performance of the Notes and the Certificates and the repayment of
amounts owed
to the Issuer from the Transferor. The Transferor hereby authorizes
the Issuer
or its agents to file such financing statements and continuation
statements as
the Issuer may deem advisable in connection with the security
interest granted
by the Transferor pursuant to the preceding sentence.
SECTION 2.4. Assignment by Transferor. The Transferor does hereby
transfer, assign and otherwise convey unto the Issuer, for the
benefit of the
Noteholders, the Certificateholders and the Note Insurer, its right
to any
recourse to LBAC resulting from the occurrence of a breach of any
of their
respective representations and warranties contained in Section 3.03
of the
Purchase Agreement and Section 4 of each Transfer Agreement or from
the
9
failure of LBAC to comply with its obligations pursuant to Section
5.05 of the
Purchase Agreement. The provisions of this Section 2.4 are intended
to grant the
Issuer a direct right against LBAC to demand performance under the
terms of the
Purchase Agreement.
SECTION 2.5. Further Encumbrance of Trust Assets.
(a) Immediately upon the conveyance to the Issuer by the Transferor
of any
item of the Trust Assets pursuant to Section 2.1 or Section 2.2,
all right,
title and interest of the Transferor in and to such item of Trust
Assets shall
terminate, and all such right, title and interest shall vest in the
Issuer, in
accordance with the Trust Agreement and Sections 3802 and 3805 of
the Statutory
Trust Act (as defined in the Trust Agreement).
(b) Immediately upon the vesting of the Trust Assets in the Issuer,
the
Issuer shall have the sole right to pledge or otherwise encumber,
such Trust
Assets. Pursuant to the Indenture, the Issuer shall grant a
security interest in
the Trust Assets to the Indenture Trustee to secure its obligations
under the
Notes and the Class C Certificates and the payment of all amounts
due and owing
to the Note Insurer. The Class R Certificate shall represent the
beneficial
ownership interest in the Trust Assets, and the Noteholders and the
Class C
Certificateholders shall be entitled to receive payments with
respect thereto as
set forth herein and pursuant to the Indenture.
(c) Following the payment in full of the Notes and all amounts due
and
owing to the Note Insurer and the release and discharge of the
Indenture, all
covenants of the Issuer under Article III of the Indenture shall,
until payment
in full of each Certificate, remain as covenants of the Issuer for
the benefit
of the Certificateholders, enforceable by each Certificateholder to
the same
extent as such covenants were enforceable by the Noteholders prior
to the
discharge of the Indenture. Any rights of the Indenture Trustee
under Article
III of the Indenture, following the discharge of the Indenture,
shall vest in
the Certificateholders.
(d) The Trust Collateral Agent shall, at such time as there are no
Notes or
Certificates outstanding, the Policy has expired in accordance with
its terms
and all sums due to (i) the Note Insurer hereunder or pursuant to
the Insurance
Agreement, (ii) the Indenture Trustee pursuant to the Indenture,
(iii) the Trust
Collateral Agent pursuant to this Agreement and (iv) the Class C
Certificateholders pursuant to the Trust Agreement, have been paid,
release any
remaining portion of the Trust Assets to the Transferor.
ARTICLE III
THE RECEIVABLES
SECTION 3.1. Representations and Warranties of Transferor. The
Transferor hereby makes each of the representations and warranties
made by LBAC
in Section 3.03(b) of the Purchase Agreement and Section 4 of each
Transfer
Agreement with respect to the Receivables to the same extent as if
such
representations and warranties were fully set forth herein. With
respect to such
representations and warranties, the Issuer shall be deemed to have
relied on
such representations and warranties in acquiring the Receivables,
the Note
Insurer is deemed to have relied on such representations and
warranties in
issuing the Policy, the Indenture Trustee is deemed to have relied
on such
representations and warranties in issuing the Notes, the
10
Noteholders are deemed to have relied on such representations and
warranties in
purchasing the Notes, each Class C Certificateholder is deemed to
have relied on
such representations and warranties in purchasing a Class C
Certificate and the
Owner Trustee is deemed to have relied on such representations and
warranties in
entering into the Trust Agreement. Such representations and
warranties speak as
of the execution and delivery of this Agreement and as of the
Closing Date in
the case of the Initial Receivables, and as of the related
Subsequent Transfer
Date in the case of the Subsequent Receivables, but shall survive
the transfer
and assignment of the Receivables to the Issuer and the subsequent
pledge
thereof to the Indenture Trustee pursuant to the Indenture.
SECTION 3.2. Repurchase upon Breach of Representations and
Warranties
of the Transferor.
(a) The Transferor, the Servicer, the Note Insurer, the Custodian,
the
Trust Collateral Agent or the Issuer, as the case may be, shall
inform the other
parties to this Agreement promptly, by notice in writing, upon the
discovery of
any breach of the Transferor's representations and warranties made
pursuant to
Section 3.1. As of the last day of the second Collection Period
following the
discovery by the Transferor or receipt by the Transferor of notice
of such
breach, unless such breach is cured by such date, the Transferor
shall have an
obligation to repurchase any Receivable in which the interests of
the
Noteholders, the Class C Certificateholders or the Note Insurer are
materially
and adversely affected by any such breach as of such date. In
consideration of
and simultaneously with the repurchase of the Receivable, the
Transferor shall
remit, or cause LBAC to remit, to the Collection Account the
Purchase Amount in
the manner specified in Section 5.5 and the Issuer shall execute
such
assignments and other documents reasonably requested by such person
in order to
effect such repurchase. The sole remedies of the Issuer, the Trust
Collateral
Agent, the Indenture Trustee, the Class C Certificateholders or the
Noteholders
with respect to a breach of representations and warranties pursuant
to Section
3.1 shall be (i) the repurchase of Receivables pursuant to this
Section, subject
to the conditions contained herein, or (ii) to enforce the
obligation of LBAC to
the Transferor to repurchase such Receivables or to indemnify for
any such
breach pursuant to the Purchase Agreement. Neither the Owner
Trustee, the
Custodian, the Trust Collateral Agent nor the Indenture Trustee
shall have a
duty to conduct any affirmative investigation as to the occurrence
of any
conditions requiring the repurchase of any Receivable pursuant to
this Section.
(b) Pursuant to Section 2.1 and Section 2.2, the Transferor conveys
to the
Issuer all of the Transferor's right, title and interest in its
rights and
benefits, but none of its obligations or burdens, under the
Purchase Agreement
including the Transferor's rights under the Purchase Agreement and
the delivery
requirements, representations and warranties and the cure or
repurchase and
indemnity obligations of LBAC thereunder. The Transferor hereby
represents and
warrants to the Issuer that such assignment is valid, enforceable
and effective
to permit the Issuer to enforce such obligations of LBAC and the
Transferor
under the Purchase Agreement.
SECTION 3.3. Custody of Legal Files and Receivable Files. In
connection with the sale, transfer and assignment of the
Receivables and the
other Transferred Assets to the Trust pursuant to Section 2.1 and
Section 2.2 of
this Agreement and simultaneously with the execution and delivery
of this
Agreement, the Custodian shall enter into the Custodial Agreement
with the
Indenture Trustee, the Note Insurer and the Issuer, dated as of
October 1,
11
2005, pursuant to which the Custodian shall agree to act as
custodian for the
Indenture Trustee, on behalf of the Noteholders, the Class C
Certificateholders
and the Note Insurer, of the following documents or instruments in
its
possession on or before the Closing Date (with respect to each
Initial
Receivable) or the third Business Day immediately preceding the
related
Subsequent Transfer Date (with respect to each Subsequent
Receivable), as
applicable:
(i) a copy of the fully executed original of the Receivable 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 Initial Cutoff Date or the related Subsequent Cutoff
Date, as
applicable, relating to such Receivable; and
(v) any and all other documents that the Servicer or the Originator
shall keep on file, in accordance with its customary procedures,
relating
to a Receivable, an Obligor or a Financed Vehicle;
provided, however that the Receivable Files shall contain a copy of
those documents the original of which constitutes a part of the
Legal File.
SECTION 3.4. Legal File Deficiencies. The Custodian shall hold the
Legal Files subject to the terms and conditions of the Custodial
Agreement. If
the Custodian finds during its review of the Legal Files required
by the
Custodial Agreement or at any time thereafter that a Legal File for
a Receivable
has not been received or that any of the documents referred to in
the definition
of the term "Legal File" are not contained in a Legal File or, if
applicable,
the related Dealer is not listed on the Dealer Title Addendum, the
Custodian
shall promptly inform the Trust Collateral Agent, LBAC, the
Transferor, the
Back-up Servicer and the Note Insurer promptly, in writing, of the
failure to
receive a Legal File with respect to such Receivable (or of the
failure of any
of the aforementioned documents to be included in the Legal File or
the failure
of the related Dealer to be so listed) (it being understood that
the Custodian's
obligation to review the contents of any Legal File and the Dealer
Title
Addendum shall be limited as set forth in the Custodial Agreement).
Unless any
such defect with respect to such Receivable shall have been cured
by the last
day of the second Collection Period following discovery thereof by
the
Custodian, LBAC shall repurchase any such Receivable as of such
last day. In
consideration of the purchase of the Receivable, LBAC shall remit
the Purchase
Amount, in the manner specified in Section 5.5. The sole remedy of
the Indenture
Trustee, the Trust Collateral Agent, the Issuer or the Noteholders
with respect
to a breach pursuant to this Section 3.4 shall be to require LBAC
to purchase
the Receivables pursuant to this Section 3.4. Upon receipt of the
Purchase
Amount and written instructions from the Servicer, the Trust
Collateral Agent
shall cause the Custodian to release to LBAC or its designee the
related Legal
File and shall execute and deliver all reasonable instruments of
transfer or
assignment, without recourse, as are prepared by LBAC
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and delivered to the Trust Collateral Agent and are necessary to
vest in LBAC or
such designee the Issuer's right, title and interest in the
Receivable. On the
date which is 90 days following the Closing Date (with respect to
the Initial
Receivables) or the related Subsequent Transfer Date (with respect
to the
Subsequent Receivables), as applicable, or, if such date is not a
Business Day,
on the next succeeding Business Day, the Custodian shall inform
LBAC and the
other parties to this Agreement and the Note Insurer of any
Receivable for which
the related Legal File on such date does not include a Lien
Certificate, and
LBAC shall repurchase any such Receivable as of the last day of the
Collection
Period in which the date, which is 150 days following the Closing
Date (with
respect to the Initial Receivables) or the related Subsequent
Transfer Date
(with respect to the Subsequent Receivables), as applicable,
occurs, if the
related Legal File does not include a Lien Certificate as of the
close of
business on such 150th day. In consideration of the purchase of
such Receivable,
LBAC shall remit the Purchase Amount in the manner specified in
Section 5.5. The
Transferor shall have no obligation to repurchase any Receivable
upon a breach
pursuant to this Section 3.4. The Transferor shall have no
liability for any
action taken or omitted to be taken by LBAC pursuant to this
Section 3.4.
SECTION 3.5. Access to Receivable Files; Servicer's Duties with
Respect to Receivable Files.
(a) The Servicer shall, upon reasonable notice, permit the
Originator, the
Trust Collateral Agent, the Transferor, the Issuer and the Note
Insurer access
to the Receivable Files at all reasonable times, upon reasonable
notice and
during the Servicer's normal business hours. In addition, the
Servicer shall
provide such access to any Noteholder or any Class C
Certificateholder upon
reasonable notice at all reasonable times during the Servicer's
normal business
hours in cases where the Noteholders or any Class C
Certificateholder shall be
required by applicable statutes or regulations to review such
documentation;
provided, however, that the Servicer shall be entitled to rely upon
an Opinion
of Counsel as to such fact. In each case, such access shall be
afforded without
charge but only upon reasonable request. Each Noteholder shall be
deemed to have
agreed by its acceptance of a Note to hold in confidence all
Confidential
Information in accordance with the Federal Financial Privacy Law
and, to the
extent more exacting, its then customary procedures; provided that
nothing
herein shall prevent any Noteholder from delivering copies of any
financial
statements and other documents whether or not constituting
Confidential
Information, and disclosing other information, whether or not
Confidential
Information, to (i) its directors, officers, employees, agents and
professional
consultants, (ii) any other institutional investor that holds
Notes, (iii) any
prospective institutional investor transferee in connection with
the
contemplated transfer of a Note or any part thereof or
participation therein who
is subject to confidentiality arrangements at least substantially
similar
hereto, (iv) any governmental authority, (v) the National
Association of
Insurance Commissioners or any similar organization, (vi) any
nationally
recognized rating agency in connection with the rating of the Notes
by such
agency or (vii) any other Person to which such delivery or
disclosure may be
necessary or appropriate (a) in compliance with any applicable law,
rule,
regulation or order, (b) in response to any subpoena or other legal
process, (c)
in connection with any litigation to which such Noteholder is a
party, (d) in
order to enforce such Person's investment in any Note or (e)
otherwise, in
accordance with the Federal Financial Privacy Law; provided, that,
prior to any
such disclosure, such Noteholder shall inform each such party that
receives
Confidential Information of the foregoing requirements and shall
use its
commercially reasonable best efforts to cause such party to comply
with such
requirements.
13
(b) Upon instruction from the Trust Collateral Agent, the Servicer
shall
release any Receivable Files to the Trust Collateral Agent, the
Trust Collateral
Agent's agent or the Trust Collateral Agent's designee, as the case
may be, at
such place or places as the Trust Collateral Agent may designate,
as soon as
practicable; provided, however, that such Receivable Files may be,
at the
discretion of the Servicer, in the form of electronic files or
reproduced copies
of such electronic files. The Servicer shall not be responsible for
the
safekeeping of such Receivable Files following such release to the
Trust
Collateral Agent unless and until such Receivable Files are
returned to the
Servicer.
SECTION 3.6. Issuer's Certificate.
Within five Business Days after each Payment Date on which
Receivables shall be
assigned to LBAC or the Servicer, as applicable, pursuant to this
Agreement,
based on amounts deposited to the Collection Account, notices
received pursuant
to this Agreement and the information contained in the Servicer's
Certificate
for the related Collection Period, identifying the Receivables
purchased by LBAC
pursuant to Section 3.4 or purchased by the Servicer pursuant to
Section 4.7,
the Issuer shall execute an Issuer's Certificate (in the form of
Exhibit A-1 or
A-2, as applicable), and shall deliver such Issuer's Certificate,
accompanied by
a copy of the Servicer's Certificate for such Collection Period, to
LBAC or the
Servicer, as the case may be, with a copy to the Note Insurer and
the Class C
Certificateholders. 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,
14
on behalf of itself, the Issuer, the Noteholders, the Class C
Certificateholders
or any of them, any and all instruments of satisfaction or
cancellation, or
partial or full release or discharge, and all other comparable
instruments, with
respect to such Receivables or to the Financed Vehicles securing
such
Receivables and/or the certificates of title or other evidence of
ownership with
respect to such Financed Vehicles; provided, however, that
notwithstanding the
foregoing, the Servicer shall not release an Obligor from payment
of any unpaid
amount under any Receivable or waive the right to collect the
unpaid balance of
any Receivable from the Obligor, except (i) pursuant to an order
from a court of
competent jurisdiction, (ii) in accordance with its customary
procedures or
(iii) in accordance with Section 4.2. If the Servicer shall
commence a legal
proceeding to enforce a Receivable, the Issuer shall thereupon be
deemed to have
automatically assigned, solely for the purpose of collection, such
Receivable to
the Servicer. If in any enforcement suit or legal proceeding it
shall be held
that the Servicer may not enforce a Receivable on the ground that
it shall not
be a real party in interest or a holder entitled to enforce such
Receivable, the
Trust Collateral Agent shall, at the Servicer's expense and written
direction,
take steps to enforce such Receivable, including bringing suit in
its name or
the name of the Noteholders or the Class C Certificateholders. The
Servicer
shall prepare and furnish and the Trust Collateral Agent shall
execute, any
powers of attorney and other documents reasonably necessary or
appropriate to
enable the Servicer to carry out its servicing and administrative
duties
hereunder.
SECTION 4.2. Collection and Allocation of Receivable Payments.
Consistent with the standards, policies and procedures required by
this
Agreement, the Servicer shall make reasonable efforts to collect
all payments
called for under the terms and provisions of the Receivables as and
when the
same shall become due and shall follow such collection procedures
as it follows
with respect to all comparable automotive receivables that it
services for
itself or others; provided, however, that the Servicer shall notify
each Obligor
prior to the Closing Date, in the case of the Initial Receivables,
and prior to
the related Subsequent Transfer Date, in the case of the Subsequent
Receivables,
to make all payments with respect to the Receivables to the
Lock-Box and shall
make reasonable efforts to cause Obligors to make all such payments
to such
Lock-Box. The Servicer will provide each Obligor with a monthly
statement in
order to notify such Obligors to make payments directly to the
Lock-Box. The
Servicer shall allocate collections between principal and interest
in accordance
with the customary servicing procedures it follows with respect to
all
comparable automotive receivables that it services for itself or
others and in
accordance with the terms of this Agreement. The Servicer, for so
long as LBAC
is the Servicer, may grant extensions, rebates or adjustments on a
Receivable in
accordance with the customary servicing procedures it follows with
respect to
all comparable automotive receivables that it services for itself
which shall
not modify the original due date of the Scheduled Receivable
Payments on any
Receivable other than (a) in accordance with the Payment Deferment
and Due Date
Change Policies, (b) in connection with a Deficient Liquidated
Receivable, (c)
with the prior written consent of the Note Insurer, with respect to
any other
Liquidated Receivable or (d) as otherwise required by applicable
law.
Notwithstanding anything contained herein to the contrary, the
Servicer may, at
its option, repurchase up to 25 Receivables and shall remit the
Purchase Amount,
in the manner specified in Section 5.5 hereof and any such
repurchased
Receivable (an "Optional Repurchase Receivable") shall not be
deemed to be a
Defaulted Receivable or a Liquidated Receivable. The Servicer shall
not modify
the Payment Deferment and Due Date Change Policies without the
prior written
consent of the Note Insurer. The Servicer shall notify Moody's of
any
modification to the Payment Deferment
15
and Due Date Change Policies. If the Servicer is not LBAC, the
Servicer may not
make any extension on a Receivable without the prior written
consent of the Note
Insurer. The Servicer may in its discretion waive any late payment
charge or any
other fees that may be collected in the ordinary course of
servicing a
Receivable if it would forgo collection of such amount in
accordance with its
customary procedures. Notwithstanding anything to the contrary
contained herein,
the Servicer (i) shall not agree to any alteration of the interest
rate on any
Receivable or of the amount of any Scheduled Receivable Payment on
any
Receivable, except (a) as otherwise required by applicable law, (b)
with respect
to a Deficient Liquidated Receivable and (c) with the prior written
consent of
the Note Insurer, with respect to any other Liquidated Receivable,
and (ii)
shall not agree to any modification that would result in a material
adverse
effect on a Receivable (other than a Deficient Liquidated
Receivable and, with
the prior written consent of the Note Insurer, any other Liquidated
Receivable)
or the interest therein of the Issuer, the Noteholders, the Class C
Certificateholders or the Note Insurer other than a modification in
accordance
with the Payment Deferment and Due Date Change Policies.
On each Business Day, the Servicer shall prepare and transmit to
the
Trust Collateral Agent and the Back-up Servicer in a form
acceptable to the
Trust Collateral Agent and the Back-up Servicer, a record setting
forth the
aggregate amount of collections on the Receivables processed by the
Servicer on
the second preceding Business Day.
SECTION 4.3. Realization upon Receivables.
(a) On behalf of the Issuer, the Noteholders, the Class C
Certificateholders and the Note Insurer, the Servicer shall use its
best
efforts, consistent with the servicing procedures set forth herein,
to repossess
or otherwise convert the ownership of the Financed Vehicle securing
any
Receivable as to which the Servicer shall have determined eventual
payment in
full is unlikely. The Servicer shall commence efforts to repossess
or otherwise
convert the ownership of a Financed Vehicle on or prior to the date
that an
Obligor has not paid at least 95% of a Scheduled Receivable Payment
thereon for
120 consecutive days or more; provided, however, that the Servicer
may elect not
to commence such efforts within such time period if in its good
faith judgment
it determines either that it would be impracticable to do so or
that the
proceeds ultimately recoverable with respect to such Receivable
would be
increased by forbearance. The Servicer shall follow such customary
and usual
practices and procedures as it shall deem necessary or advisable in
its
servicing of automotive receivables, consistent with the standards
of care set
forth in Section 4.1, which may include reasonable efforts to
realize upon any
recourse to Dealers and selling the Financed Vehicle at public or
private sale.
The foregoing shall be subject to the provision that, in any case
in which the
Financed Vehicle shall have suffered damage, the Servicer shall not
expend funds
in connection with the repair or the repossession of such Financed
Vehicle
unless it shall determine in its discretion that such repair and/or
repossession
will increase the proceeds ultimately recoverable with respect to
such
Receivable by an amount greater than the amount of such expenses.
All
Liquidation Proceeds and Recoveries received shall be remitted
directly by the
Servicer to the Collection Account, without deposit into any
intervening account
as soon as practicable, but in no event later than the second
Business Day after
receipt thereof.
(b) The Servicer agrees that within 45 days from the Closing Date
or the
related Subsequent Transfer Date, as applicable, it shall make such
filings and
effect such notices as are
16
necessary under Section 9-324(b) and 9-324 (c) of the New York UCC
(or
comparable section of the UCC of any applicable state) to preserve
the Trust's
interest (or security interest, as the case may be) in any
repossessed Financed
Vehicles delivered for sale to Dealers.
(c) Consistent with the standards, policies and procedures required
by this
Agreement, the Servicer may use its best efforts to locate a third
party
purchaser that is not affiliated with the Servicer, the Transferor
or the Issuer
to purchase from the Issuer any Receivable that has become more
than 60 days
delinquent, and shall have the right to direct the Issuer to sell
any such
Receivable to the third-party purchaser; provided, that the Note
Insurer shall
have the right of first refusal to purchase such Receivables;
provided further,
that no more than 20% of the initial number of Initial Receivables
and the
Subsequent Receivables in the pool may be sold by the Issuer
pursuant to this
Section 4.3(c) in the aggregate; provided further, that the
Servicer may elect
not to direct the Issuer to sell a Receivable that has become more
than 60 days
delinquent if in its good faith judgment the Servicer determines
that the
proceeds ultimately recoverable with respect to such Receivable
would be
increased by forbearance. In selecting Receivables to be sold to a
third party
purchaser pursuant to this Section 4.3(c), the Servicer shall use
commercially
reasonable efforts to locate purchasers for the most delinquent
Receivables
first. In any event, the Servicer shall not use any procedure in
selecting
Receivables to be sold to third party purchasers which is
materially adverse to
the interest of the Noteholders, the Class C Certificateholders or
the Note
Insurer. The Issuer shall sell each Sold Receivable for the
greatest market
price possible; provided, however, that aggregate Sale Amounts
received by the
Issuer for all Receivables sold to a single third-party purchaser
on a single
date must be at least equal to the sum of the Minimum Sale Prices
for all such
Receivables. The Servicer shall remit or cause the third-party
purchaser to
remit all sale proceeds from the sale of Receivables directly to
the Collection
Account without deposit into any intervening account as soon as
practicable, but
in no event later than the Business Day after receipt thereof.
(d) The Servicer agrees that at any time after 45 days from the
Closing
Date there will be (a) no more than 25 repossessed Financed
Vehicles in the
aggregate delivered for sale to any Dealer and (b) no more than 50
repossessed
Financed Vehicles in the aggregate delivered for the sale to all
Dealers with
respect to which the actions referred to in paragraph (b) above
have not been
effected. The Servicer agrees that prior to delivering additional
Financed
Vehicles for sale to any such Dealer, it shall make such filings
and effect such
notices as are necessary under Section 9-324(b) and 9-324 (c) of
the New York
UCC (or comparable section of the applicable UCC) to preserve the
Trust's
ownership interest (or security interest, as the case may be) in
any such
repossessed Financed Vehicle.
SECTION 4.4. Physical Damage Insurance; Other Insurance.
(a) The Servicer shall continue to maintain the VSI Policy or
another
collateral protection insurance policy providing physical damage
insurance
coverage to at least the same extent as the VSI Policy with respect
to all
Financed Vehicles, unless the Servicer shall have received the
prior written
consent of the Note Insurer allowing the Servicer to no longer
maintain any of
such policies. The Servicer, in accordance with the servicing
procedures and
standards set forth herein, shall require that (i) each Obligor
shall have
obtained insurance covering the Financed Vehicle, as of the date of
the
execution of the Receivable, insuring against loss and damage due
to fire,
theft, transportation, collision and other risks generally covered
by
17
comprehensive and collision coverage and each Receivable requires
the Obligor to
maintain such physical loss and damage insurance naming LBAC and
its successors
and assigns as an additional insured, (ii) each Receivable that
finances the
cost of premiums for credit life and credit accident and health
insurance is
covered by an insurance policy or certificate naming LBAC as
policyholder
(creditor) and (iii) as to each Receivable that finances the cost
of an extended
service contract, the respective Financed Vehicle which secures the
Receivable
is covered by an extended service contract.
(b) To the extent applicable, the Servicer shall not take any
action which
would result in noncoverage under any of the insurance policies
referred to in
Section 4.4(a) which, but for the actions of the Servicer, would
have been
covered thereunder. The Servicer, on behalf of the Trust Collateral
Agent, shall
take such reasonable action as shall be necessary to permit
recovery under any
of the foregoing insurance policies. Any amounts collected by the
Servicer under
any of the foregoing insurance policies shall be deposited in the
Collection
Account pursuant to Section 5.2. In the event of the cancellation
or non-renewal
of the insurance referred to in Section 4.4(a)(i) above with
respect to any
Financed Vehicle, the Servicer will endeavor, in accordance with
its customary
servicing standards and procedures, to cause the related Obligor to
obtain a
replacement insurance policy. In no event shall the Servicer be
required to
force place insurance on a Financed Vehicle.
SECTION 4.5. Maintenance of Security Interests in Financed
Vehicles.
(a) Consistent with the policies and procedures required by this
Agreement,
the Servicer shall take such steps as are necessary to maintain
perfection of
the security interest created in the name of LBAC by each
Receivable in the
related Financed Vehicle, including, but not limited to, obtaining
the execution
by the Obligors and the recording, registering, filing,
re-recording,
re-registering and refiling of all security agreements, financing
statements and
continuation statements or instruments as are necessary to maintain
the security
interest granted by Obligors under the respective Receivables. The
Trust
Collateral Agent hereby authorizes the Servicer to take such steps
as are
necessary to re-perfect or continue the perfection of such security
interest on
behalf of the Issuer in the event of the relocation of a Financed
Vehicle or for
any other reason.
(b) Upon the occurrence of an Insurance Agreement Event of Default,
the
Note Insurer may (so long as a Note Insurer Default shall not have
occurred and
be continuing) instruct in writing the Trust Collateral Agent and
the Servicer
to take or cause to be taken, or, if a Note Insurer Default shall
have occurred
and be continuing, upon the occurrence of a Servicer Termination
Event, either
the Trust Collateral Agent or the Trust Collateral Agent acting at
the written
direction of the Majorityholders shall direct the Servicer to take
and the
Servicer shall take or cause to be taken such action as may, in the
opinion of
counsel to the Note Insurer (or, if a Note Insurer Default shall
have occurred
and be continuing, the Trust Collateral Agent), which opinion shall
not be an
expense of the Note Insurer or the Trust Collateral Agent (as
applicable), be
necessary to perfect or reperfect the security interests in the
Financed
Vehicles securing the Receivables in the name of the Trust
Collateral Agent on
behalf of the Issuer by amending the title documents of such
Financed Vehicles
to reflect the security interest of the Trust Collateral Agent in
the related
Financed Vehicles or by such other reasonable means as may, in the
opinion of
counsel to the Note Insurer or the Trust Collateral Agent (as
applicable), which
opinion shall
18
not be an expense of the Note Insurer or the Trust Collateral
Agent, be
necessary or prudent. The Servicer hereby agrees to pay all
expenses related to
such perfection or reperfection and to take all action necessary
therefor. In
addition, prior to the occurrence of an Insurance Agreement Event
of Default,
the Note Insurer may (unless a Note Insurer Default shall have
occurred and be
continuing) instruct in writing the Trust Collateral Agent and the
Servicer to
take or cause to be taken such action as may, in the opinion of
counsel to the
Note Insurer, be necessary to perfect or reperfect the security
interest in the
Financed Vehicles securing the Receivables in the name of the Trust
Collateral
Agent on behalf of the Issuer, including by amending the title
documents of such
Financed Vehicles to reflect the security interest of the Trust
Collateral Agent
in the related Financed Vehicle or by such other reasonable means
as may, in the
opinion of counsel to the Note Insurer, be necessary or prudent;
provided,
however, that if the Note Insurer requests that the title documents
be amended
prior to the occurrence of an Insurance Agreement Event of Default,
the
out-of-pocket expenses of the Servicer or the Trust Collateral
Agent in
connection with such action shall be reimbursed to the Servicer or
the Trust
Collateral Agent, as applicable, by the Note Insurer.
In addition to the foregoing, in the event any of the Servicer
Termination Events described in Section 9.1(iii) or (iv) shall have
occurred, or
in the event LBAC shall have been removed or replaced as Servicer
pursuant to
Section 8.3, Section 8.5, or otherwise pursuant to Section 9.1,
then LBAC and/or
the Servicer shall immediately cause each Lien Certificate for a
Financed
Vehicle to be marked to reflect the security interest of the Trust
Collateral
Agent in the Financed Vehicle at the expense of LBAC.
The Servicer hereby makes, constitutes and appoints the Trust
Collateral Agent acting through its duly appointed officers or any
of them, its
true and lawful attorney, for it and in its name and on its behalf,
for the sole
and exclusive purpose of authorizing said attorney to execute and
deliver as
attorney-in-fact or otherwise, any and all documents and other
instruments and
to do or accomplish all other acts or things necessary or
appropriate to show
the Trust Collateral Agent as lienholder or secured party on the
related Lien
Certificates relating to a Financed Vehicle.
SECTION 4.6. Additional Covenants of Servicer. The Servicer hereby
makes the following covenants to the other parties hereto and the
Note Insurer
on which the Trust Collateral Agent shall rely in accepting the
Receivables in
trust and on which the Note Insurer shall rely in issuing the
Policy: (i) the
Servicer shall not release the Financed Vehicle securing any
Receivable from the
security interest granted by such Receivable in whole or in part
except in the
event of payment in full by the Obligor thereunder or repossession
or other
liquidation of such Financed Vehicle, (ii) the Servicer shall not
impair the
rights of the Noteholders or the Class C Certificateholders, the
Issuer or the
Note Insurer in such Receivables, (iii) the Servicer shall not
modify a
Receivable, except in accordance with Section 4.2, (iv) the
Servicer shall
service the Receivables as required by the terms of this Agreement
and in
material compliance with its current servicing procedures for
servicing of all
its other comparable motor vehicle receivables and (v) the Servicer
shall not
modify any Receivable in accordance with the Payment Deferment and
Due Date
Change Policies if, as a result of such modification, there would
be negative
amortization of such Receivable.
19
SECTION 4.7. Purchase of Receivables Upon Breach. The Servicer, the
Transferor, the Issuer or the Trust Collateral Agent shall inform
the other
parties hereto and the Note Insurer promptly, in writing, upon the
discovery by
the Servicer, the Transferor, the Issuer or a Responsible Officer
of the Trust
Collateral Agent or the Custodian, as the case may be, of any
breach of the
provisions of Section 4.2 relating to modifications of the
Receivables, or any
breach of Sections 4.4, 4.5 or 4.6; provided, however, that the
failure to give
such notice shall not affect any obligation of the Servicer
hereunder. Unless
the breach shall have been cured by the last day of the second
Collection Period
following such discovery by or notice to the Servicer of such
breach, the
Servicer shall purchase any Receivable with respect to which such
breach has a
material adverse effect on such Receivable or the interest therein
of the
Issuer, the Noteholders or the Note Insurer. In consideration of
the purchase of
such Receivable, the Servicer shall remit the Purchase Amount in
the manner
specified in Section 5.5. The sole remedy of the Trust Collateral
Agent, the
Issuer, the Note Insurer, the Class C Certificateholders or the
Noteholders with
respect to a breach of the provisions of Section 4.2 relating to
modifications
of the Receivables or any breach of Sections 4.4, 4.5 or 4.6 shall
be to require
the Servicer to repurchase Receivables pursuant to this Section
4.7; provided,
however, that the Servicer shall indemnify the Trust Collateral
Agent, the
Indenture Trustee, the Collateral Agent, the Back-up Servicer, the
Custodian,
the Transferor, the Note Insurer, the Issuer, the Class C
Certificateholders and
the Noteholders and each of their respective officers, employees,
directors,
agents and representatives against all costs, expenses, losses,
damages, claims
and liabilities, including reasonable fees and expenses of counsel,
which may be
asserted against or incurred by any of them as a result of third
party claims
arising out of the events or facts giving rise to such breach. The
Transferor
shall have no obligation to repurchase the Receivables upon a
breach of the
provisions of Section 4.2 relating to modifications of the
Receivables, or any
breach of Sections 4.4, 4.5 or 4.6. The Transferor shall have no
liability for
actions taken or omitted to be taken by the Servicer pursuant to
this Section
4.7.
SECTION 4.8. Servicing Fee. The Servicing Fee for the initial
Payment
Date shall equal the product of (a) one-twelfth of the Servicing
Fee Rate and
(b) the Original Pool Balance. Thereafter, the Servicing Fee for a
Payment Date
shall equal the product of (i) one-twelfth of the Servicing Fee
Rate and (ii)
the Pool Balance as of the last day of the second preceding
Collection Period.
The Servicing Fee shall in addition include all late fees,
deferment fees,
prepayment charges including, in the case of a Precomputed
Receivable that is
prepaid in full, to the extent not required by law to be remitted
to the related
Obligor, the difference between the amounts received upon
prepayment in full of
such Precomputed Receivable and the then outstanding Principal
Balance of such
Precomputed Receivable and accrued interest thereon (calculated
pursuant to the
Simple Interest Method) and other administrative fees or similar
charges allowed
by applicable law with respect to Receivables, collected (from
whatever source)
on the Receivables.
SECTION 4.9. Servicer's Certificate.
(a) By 10:00 a.m., New York City time, on each Determination Date,
the
Servicer shall deliver to the Issuer, the Trust Collateral Agent,
the Indenture
Trustee, the Back-up Servicer, the Collateral Agent, the
Transferor, the Note
Insurer, GCFP and the Rating Agencies, a Servicer's Certificate
containing all
information necessary to make the payments pursuant to Section 5.6
(including,
(i) if required, the amount of withdrawals from the Spread Account
and
20
the Supplemental Enhancement Account and (ii) the remaining
Pre-Funded Amount,
if any), for the Collection Period preceding the date of such
Servicer's
Certificate and all information necessary for the Trust Collateral
Agent to send
statements to Noteholders, the Class C Certificateholders and the
Note Insurer
pursuant to Section 5.7. Receivables to be purchased by the
Servicer or to be
purchased by LBAC shall be identified by the Servicer by account
number with
respect to such Receivable (as specified in the Schedule of
Receivables).
(b) In addition to the information required by Section 4.9(a), the
Servicer
shall include in the copy of the Servicer's Certificate delivered
to the Note
Insurer (i) the Average Delinquency Ratio, the Cumulative Default
Rate, and the
Cumulative Loss Rate (as such terms are defined in the Spread
Account
Agreement), (ii) whether any Trigger Event (as such term is defined
in the
Spread Account Agreement) has occurred as of such Determination
Date, (iii)
whether any Trigger Event that may have occurred as of a prior
Determination
Date is Deemed Cured (as defined in the Spread Account Agreement)
as of such
Determination Date, (iv) whether to the knowledge of the Servicer
an Insurance
Agreement Event of Default has occurred, (v) the number and
percentage of
Receivables modified in accordance with the Loss Mitigation Program
and the
General Payment Deferment Policy as set forth on Exhibit D hereto
and (vi) the
Average Delinquency Ratio, the Cumulative Default Rate, and the
Cumulative Loss
Rate (as such terms are defined in the Spread Account Agreement),
with respect
to such modified Receivables. The Servicer shall in addition give
notice of the
occurrence of any Trigger Event or any Insurance Agreement Event of
Default to
each Rating Agency.
SECTION 4.10. Annual Statement as to Compliance; Notice of Default.
(a) The Servicer shall deliver to the Issuer, the Trust Collateral
Agent,
the Indenture Trustee, the Back-up Servicer, the Collateral Agent,
the
Transferor and the Note Insurer, on or before March 31 of each year
beginning
March 31, 2006, an Officer's Certificate, dated as of December 31
of the
preceding calendar year, stating that (i) a review of the
activities of the
Servicer during such preceding calendar year and of its performance
under this
Agreement has been made under such officer's supervision and (ii)
to the best of
such officer's knowledge, based on such review, the Servicer has
fulfilled all
its obligations under this Agreement throughout such year, or, if
there has been
a default in the fulfillment of any such obligation, specifying
each such
default known to such officer and the nature and status thereof.
The Trust
Collateral Agent shall send a copy of such certificate to the
Rating Agencies.
(b) The Servicer shall deliver to the Issuer, the Trust Collateral
Agent,
the Indenture Trustee, the Back-up Servicer, the Collateral Agent,
the
Transferor, the 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
Noteholders, the Note
Insurer and each Rating Agency on or before April 30 of each year
21
beginning April 30, 2006, 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 and
the Class C
Certificateholders, the Trust Collateral Agent and the Note Insurer
and all
other fees and expenses of the Issuer including taxes levied or
assessed against
the Issuer, and claims against the Issuer in respect of
indemnification not
expressly stated under this agreement to be for the account of the
Issuer).
SECTION 4.13. Retention and Termination of Servicer. The Servicer
hereby covenants and agrees to act as such under this Agreement for
an initial
term, commencing on the Closing Date and ending on December 31,
2005 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
22
occurred and be continuing, the Trust Collateral Agent agrees that
if as of the
fifteenth day prior to the last day of any term of the Servicer,
the Trust
Collateral Agent shall not have received any Servicer Extension
Notice from the
Note Insurer, the Trust Collateral Agent will, within five days
thereafter, give
written notice of such non-receipt to the Note Insurer, the Back-up
Servicer (or
any alternate successor servicer appointed by the Note Insurer
pursuant to
Section 8.5) and the Servicer and the Servicer's terms shall not be
extended
unless a Servicer Extension Notice is received on or before the
last day of such
term. Following a Note Insurer Default, this Section 4.13 shall no
longer apply
and the Servicer shall be deemed to be retained for the term of
this Agreement,
unless otherwise removed pursuant to Article 9.
SECTION 4.14. Access to Certain Documentation and Information
Regarding Receivables. The Servicer shall provide to
representatives of the
Indenture Trustee, the Trust Collateral Agent, the Collateral
Agent, the Back-up
Servicer, the Transferor, the Issuer and the Note Insurer
reasonable access to
documentation and computer systems and information regarding the
Receivables and
shall provide such access to Noteholders or any Class C
Certificateholder, as
the case may be, in such cases where the Noteholders or such Class
C
Certificateholder is required by applicable law or regulation to
review such
documentation. In each case, such access shall be afforded without
charge but
only upon reasonable request and during normal business hours.
Nothing in this
Section 4.14 shall derogate from the obligation of the Servicer to
observe any
applicable law prohibiting disclosure of information regarding the
Obligors, and
the failure of the Servicer to provide access as provided in this
Section 4.14
as a result of such obligation shall not constitute a breach of
this Section
4.14.
SECTION 4.15. Verification of Servicer's Certificate.
(a) On or before the fifth Business Day of each month, the Servicer
will
deliver to the Trust Collateral Agent and the Back-up Servicer a
computer
diskette (or other electronic transmission) in a format acceptable
to the Trust
Collateral Agent and the Back-up Servicer containing such
information with
respect to the Receivables as of the close of business on the last
day of the
preceding Collection Period as is necessary for preparation of the
Servicer's
Certificate. The Back-up Servicer shall use such computer diskette
(or other
electronic transmission) to verify the information specified in
Section
4.15(b)(iii) contained in the Servicer's Certificate delivered by
the Servicer,
and the Back-up Servicer shall certify to the Note Insurer that it
has verified
the Servicer's Certificate in accordance with this Section 4.15 and
shall notify
the Servicer, the Note Insurer and the Trust Collateral Agent of
any
discrepancies, in each case, on or before the related Deficiency
Claim Date. In
the event that the Back-up Servicer reports any discrepancies, the
Servicer and
the Back-up Servicer shall attempt to reconcile such discrepancies
prior to the
related Deficiency Claim Date, but in the absence of a
reconciliation, the
Servicer's Certificate shall control for the purpose of
calculations and
payments with respect to the related Payment Date. In the event
that the Back-up
Servicer and the Servicer are unable to reconcile discrepancies
with respect to
a Servicer's Certificate by the related Payment Date, (i) the
Back-up Servicer
will notify the Note Insurer and the Trust Collateral Agent, and
(ii) the
Servicer shall cause a firm of independent certified public
accountants, at the
Servicer's expense, to audit the Servicer's Certificate and, prior
to the fifth
calendar day of the following month, reconcile the discrepancies.
The effect, if
any, of such reconciliation shall be reflected in the Servicer's
Certificate for
such next succeeding Determination Date. In addition, the Servicer
shall, if so
requested by the Note Insurer (unless a
23
Note Insurer Default shall have occurred and be continuing) deliver
to the
Back-up Servicer (i) within five (5) Business Days of demand
therefor a computer
tape containing as of the close of business on the date of demand
all of the
data maintained by the Servicer in computer format in connection
with servicing
the Receivables and (ii) within fifteen (15) Business Days of
demand therefor a
copy of such other information as is reasonably requested by the
Note Insurer
for the purpose of reconciling such discrepancies. Other than the
duties
specifically set forth in this Agreement, the Back-up Servicer
shall have no
obligations hereunder, including, without limitation, to supervise,
verify,
monitor or administer the performance of the Servicer. The Back-up
Servicer
shall have no liability for any actions taken or omitted by the
Servicer. The
duties and obligations of the Back-up Servicer shall be determined
solely by the
express provisions of this Agreement and no implied covenants or
obligations
shall be read into this Agreement against the Back-up Servicer.
(b) The Back-up Servicer shall review each Servicer's Certificate
delivered
pursuant to Section 4.15(a) and shall, based upon the information
provided from
the Servicer under Section 4.15(a):
(i) confirm that such Servicer's Certificate is complete on its
face;
(ii) load the computer diskette (which shall be in a format
acceptable
to the Back-up Servicer) received from the Servicer pursuant to
Section
4.15(a) hereof, confirm that such computer diskette is in a
readable form
and calculate the Principal Balance of each Receivable as of the
preceding
Payment Date (as set forth in such Servicer's Certificate) and the
current
principal payment for such Receivable (as set forth in such
Servicer's
Certificate) and compare such calculation to that set forth in the
Servicer's Certificate (and give notice of any discrepancy to the
Note
Insurer); and
(iii) recalculate the Available Funds, the Principal Payment
Amount,
the Pre-Funding Amount, the Class A-1 Interest Payment Amount, the
Class
A-2 Interest Payment Amount, the Class A-3 Interest Payment Amount,
the
Class A-4 Interest Payment Amount, the Class C Interest Payment
Amount, the
Class C Principal Deficiency Amount, the Class C Interest Carryover
Shortfall, if any, the Class C Supplemental Interest Payment
Amount, if
any, the Back-up Servicer Fee, the Servicing Fee, the Indenture
Trustee
Fee, the Custodian Fee, the amount on deposit in the Spread
Account, the
amount on deposit in the Supplemental Enhancement Account and the
Premium
in the Servicer's Certificate based solely on the balances and
calculations
specifically set forth in the Servicer's Certificate, compare such
calculations to those set forth in the Servicer's Certificate. To
the
extent of any discrepancy, the Back-up Servicer shall give notice
thereof
to the Note Insurer. The Back-up Servicer's obligation shall be
limited to
the mathematical recalculation of the amounts set forth in this
Section
4.15(b)(iii) based on the Servicer's Certificate.
SECTION 4.16. Fidelity Bond. The Servicer shall maintain a fidelity
bond in such form and amount as is customary for entities acting as
custodian of
funds and documents in respect of consumer contracts on behalf of
institutional
investors.
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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 in the case
of the Initial
Receivables, and on or prior to the related Subsequent Transfer
Date in the case
of Subsequent Receivables, which loan master file and history
information shall
be sufficiently detailed to enable the Back-up Servicer to maintain
records
sufficient to assume the role of successor Servicer pursuant to
this Agreement.
(b) In addition to the information required to be delivered by the
Servicer
to the Back-up Servicer or its designated agent on or before the
fifth Business
Day of each month pursuant to Section 4.15(a) and on or prior to
the Closing
Date and each Subsequent Transfer
25
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 January 2005 (with respect to
the period
from and including the Initial Cutoff Date to the last day of the
related
Collection Period) and on the Determination Date occurring every
six months
thereafter in the form attached hereto as Exhibit B-2 in writing
and on a
computer diskette (or other electronic transmission) in a format
acceptable to
the Back-up Servicer or its designated agent, as the case may be,
and as at such
other times as may be requested by the Note Insurer or the Back-up
Servicer upon
prior written notice to the Servicer, provided that the Back-up
Servicer shall
deliver a copy of any such notice by the Back-up Servicer to the
Note Insurer
simultaneously with its delivery of such notice to the Servicer.
SECTION 4.19. Confidential Information. The Back-up Servicer, each
subservicer and any successor Servicer shall hold in confidence all
Confidential
Information in accordance with the Federal Financial Privacy Law
and, to the
extent more exacting, its then customary procedures, and each
represents and
warrants that it has in place, and will continue to maintain,
sufficient systems
and procedures to do so; provided that nothing herein shall prevent
the Back-up
Servicer, any subservicer or any successor Servicer from delivering
copies of
any financial statements and other documents whether or not
constituting
Confidential Information, and disclosing other information, whether
or not
Confidential Information, to (i) its directors, officers,
employees, agents and
professional consultants to the extent necessary to carry on the
Back-up
Servicer's, such subservicer's or such successor Servicer's
business, as
applicable, in the ordinary course, (ii) any Noteholder,
Certificateholder or
the Note Insurer to the extent that such Noteholder,
Certificateholder or the
Note Insurer is entitled to such information under this Agreement
or any other
Basic Document, but not otherwise, (iii) any governmental authority
which
specifically requests (or as to which applicable regulations
require) such
information, (iv) any nationally recognized rating agency in
connection with the
rating of the Notes by such agency, or (v) any other Person to
which such
delivery or disclosure may be necessary or appropriate (a) in
compliance with
any applicable law, rule, regulation or order, (b) in response to
any subpoena
or other legal process, (c) in connection with any litigation to
which the
Back-up Servicer, such subservicer or such successor Servicer, as
applicable, is
a party, (d) in order to enforce the rights of the Noteholders,
each
Certificateholder and the Note Insurer hereunder or under any other
Basic
Document, or (e) otherwise, in accordance with the Federal
Financial Privacy
Law; provided, that, prior to any such disclosure, the Back-up
Servicer, such
subservicer or such successor Servicer, as applicable, shall inform
each such
party (other than any Noteholder, Certificateholder, the Note
Insurer or any
other party to the Basic Documents) that receives Confidential
Information of
the foregoing requirements and shall use its commercially
reasonable best
efforts to cause such party to comply with such requirements.
ARTICLE V
ACCOUNTS; PAYMENTS;
STATEMENTS TO NOTEHOLDERS
SECTION 5.1. Accounts; Lock-Box Account.
(a) The Servicer has established the Lock-Box Account as two
Eligible
Accounts, one established with Bank of America National Trust and
Savings
Association entitled "Long Beach Acceptance Corp., JPMorgan Chase,
Agent
Account--Auto Loan Programs," account
26
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 into which Obligors will be directed to make
payments due under
Receivables and which shall at all times be an Eligible Account,
initially
established and maintained with JPMorgan Chase or, at the request
of the Note
Insurer, an Eligible Account satisfying clause (i) of the
definition thereof.
The Servicer has established and shall maintain the Lock-Box at a
United States
Post Office Branch. Notwithstanding the Lock-Box Agreement or any
of the
provisions of this Agreement relating to the Lock-Box and the
Lock-Box
Agreement, the Servicer shall remain obligated and liable to the
Trust
Collateral Agent, the Noteholders and the Class C
Certificateholders for
servicing and administering the Receivables and the other Trust
Assets in
accordance with provisions of this Agreement without diminution of
such
obligation or liability by virtue thereof.
In the event the Servicer shall for any reason no longer be acting
as
such, the Lock-Box Agreement shall terminate in accordance with its
terms with
respect to the Receivables or, upon the occurrence and continuance
of a Servicer
Termination Event, the Note Insurer may direct the Indenture
Trustee in writing
to terminate the Lock-Box Agreement with respect to the
Receivables, and, in any
such case, funds on deposit in the Lock-Box Account shall be
distributed by
JPMorgan Chase, as agent for the beneficial owners of funds in the
Lock-Box
Account at such time (including the Issuer), and JPMorgan Chase
shall deposit
any such funds relating to the Receivables to such other account as
shall be
identified by the Back-up Servicer or successor Servicer for
deposit therein;
provided, however, that the outgoing Servicer shall not thereby be
relieved of
any liability or obligations on the part of the outgoing Servicer
to the
Lock-Box Bank under such Lock-Box Agreement. The outgoing Servicer
shall, upon
request of the Trust Collateral Agent, but at the expense of the
outgoing
Servicer, deliver to the successor Servicer all documents and
records relating
to the Lock-Box Agreement and an accounting of amounts collected
and held in the
Lock-Box Account or held by the Lock-Box Processor in respect of
the Receivables
and otherwise use its best efforts to effect the orderly and
efficient transfer
of any Lock-Box Agreement to the successor Servicer. In the event
that the
Lock-Box Account fails at any time to qualify as an Eligible
Account, the
Servicer, at its expense, shall cause the Lock-Box Bank to deliver,
at the
direction of the Controlling Party to the Trust Collateral Agent or
a successor
Lock-Box Bank, all documents and records relating to the
Receivables and all
amounts held (or thereafter received) on deposit in the Lock Box
Account or held
by the Lock-Box Processor in respect of the Receivables (together
with an
accounting of such amounts) and shall otherwise use its best
efforts to effect
the orderly and
27
efficient transfer of the lock-box arrangements, and the Servicer
shall promptly
notify the Obligors to make payments to any new Lock-Box.
(b) In addition to the Lock-Box Account, the Trust Collateral Agent
shall
establish, with itself, (i) the Collection Account and the Note
Account, the
Pre-Funding Account in the name of the Issuer for the benefit of
the
Noteholders, the Class C Certificateholders and the Note Insurer,
(ii) the
Policy Payments Account in the name of the Issuer for the benefit
of the
Noteholders and (iii) the Supplemental Enhancement Account in the
name of the
Issuer for the benefit of the Noteholders and the Class C
Certificateholders.
The Collection Account, the Note Account, the Pre-Funding Account,
the Policy
Payments Account and the Supplemental Enhancement Account, shall be
Eligible
Accounts initially established with the Trust Collateral Agent;
provided,
however, if any of such accounts shall cease to be an Eligible
Account, the
Servicer, with the consent of the Note Insurer (so long as no Note
Insurer
Default has occurred and is continuing), within five (5) Business
Days shall,
cause such accounts to be moved to an institution so that such
account meets the
definition of Eligible Account. The Servicer shall promptly notify
the Rating
Agencies and the Transferor of any change in the location of any of
the
aforementioned accounts.
All amounts held in the Collection Account, the Supplemental
Enhancement Account and the Pre-Funding Account shall be invested
by the Trust
Collateral Agent at the written direction of the Transferor (or, in
the case of
the Supplemental Enhancement Account, at the direction of 100% of
the Class C
Certificateholders) in Eligible Investments in the name of the
Trust Collateral
Agent on behalf of the Issuer and shall mature no later than one
Business Day
immediately preceding the Payment Date next succeeding the date of
such
investment, or if such investment direction is given, such funds
shall be
retained uninvested. In no event shall the Trust Collateral Agent
be liable for
any insufficiency in the Collection Account and the Supplemental
Enhancement
Account resulting from any investment loss in any Eligible Account.
Such written
direction shall certify that any such investment is authorized by
this Section.
No investment may be sold prior to its maturity. Amounts in the
Note Account and
the Policy Payments Account shall not be invested. The amount of
earnings on
investments of funds in the Collection Account during the
Collection Period
related to each Payment Date shall be deposited into the Note
Account on each
Payment Date, and shall be available for payment pursuant to
Section 5.6(c). The
amount of earnings on investments of funds in the Supplemental
Enhancement
Account during the Collection Period related to each Payment Date
shall be paid
to the Class C Certificateholders as the Supplemental Enhancement
Account
Investment Earnings Amount on each Payment Date, pursuant to
Section 5.6(c)(vii)
hereof. For purposes of this paragraph, the Trust Collateral Agent
will take
delivery of the Eligible Investments in accordance with Schedule C.
SECTION 5.2. Collections. The Servicer shall use reasonable efforts
to
cause the Lock-Box Processor to transfer any payments in respect of
the
Receivables from or on behalf of Obligors received in the Lock-Box
to the
Lock-Box Account on the Business Day on which such payments are
received,
pursuant to the Lock-Box Agreement. Within two Business Days of
receipt of such
funds into the Lock-Box Account, the Servicer shall cause the
Lock-Box Bank to
transfer available funds related to the Receivables from the
Lock-Box Account to
the Collection Account, and if such funds are not available funds,
as soon
thereafter as they clear (i.e., become available for withdrawal
from the
Lock-Box Account). In addition, the Servicer shall remit all
28
payments by or on behalf of the Obligors received by the Servicer
with respect
to the Receivables (other than Purchased Receivables), and all
Liquidation
Proceeds no later than the second Business Day following receipt
into the
Lock-Box Account or the Collection Account.
SECTION 5.3. Application of Collections. All collections for each
Collection Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased
Receivable),
payments actually received from or on behalf of the Obligor shall
be applied
hereunder, first, to interest and principal in accordance with the
Simple
Interest Method to the extent necessary to bring such Receivable
current,
second, in connection with the redemption of a defaulted
Receivable, to
reimburse the Servicer for reasonable and customary out-of-pocket
expenses
incurred by the Servicer in connection with such Receivable, third,
to late fees
and fourth, to principal in accordance with the Simple Interest
Method.
Notwithstanding anything herein to the contrary, no amount applied
as interest
accrued on any Precomputed Receivable for any single Collection
Period will
exceed 30 days' interest accrued thereon assuming a 360-day year of
twelve
30-day months.
SECTION 5.4. Intentionally Omitted.
SECTION 5.5. Additional Deposits. The following additional deposits
shall be made in immediately available funds on the dates
indicated: (i) on the
Business Day immediately preceding each Determination Date, the
Servicer or
LBAC, as the case may be, shall deposit or cause to be deposited in
the
Collection Account the aggregate Purchase Amount with respect to
Purchased
Receivables, (ii) on the Business Day immediately preceding each
Determination
Date, the Trust Collateral Agent shall deposit in the Collection
Account all
amounts to be paid under Section 11.1, (iii) on the Determination
Date
immediately succeeding the date on which the Funding Period ends
(or, if the
Funding Period ends on or after the Determination Date immediately
preceding the
Final Funding Period Payment Date, on the date on which the Funding
Period
ends), the Trust Collateral Agent shall transfer the remaining
Pre-Funded Amount
on deposit in the Pre-Funding Account to the Note Account pursuant
to Section
5.13(c), (iv) on or before each Draw Date, the Trust Collateral
Agent shall,
pursuant to the Servicer's written instructions, transfer to the
Collection
Account any amounts to be withdrawn from the Supplemental
Enhancement Account in
accordance with Section 5.12 and (v) on the Closing Date, LBAC
shall deposit or
cause to be deposited to the Collection Account the September
Principal
Collections Amount.
SECTION 5.6. Payments; Policy Claims.
(a) The Trust Collateral Agent (based solely on the information set
forth
in the Servicer's Certificate for the related Payment Date upon
which the Trust
Collateral Agent may conclusively rely) shall transfer, on each
Payment Date,
from the Collection Account to the Note Account, in immediately
available funds,
an amount equal to the sum of (a) all funds that were deposited in
the
Collection Account, plus (b) earnings on investments of funds in
the Collection
Account pursuant to Section 5.1(b), for the related Collection
Period;
29
(b) Prior to each Payment Date, the Servicer shall on the related
Determination Date calculate the Available Funds, the Principal
Payment Amount,
the Class A-1 Payment Amount, the Class A-1 Interest Payment
Amount, the Class
A-2 Payment Amount, the Class A-2 Interest Payment Amount, the
Class A-3 Payment
Amount, the Class A-3 Interest Payment Amount, the Class A-4
Payment Amount, the
Class A-4 Interest Payment Amount, the Class C Interest Payment
Amount, the
Class C Principal Deficiency Amount, the Supplemental Enhancement
Account
Investment Earnings Amount, the Class C Interest Carryover
Shortfall, if any,
the Class C Supplemental Interest Payment Amount, if any, the
Monthly Dealer
Participation Fee Payment Amount, and, based on the Available Funds
and the
other amounts available for payment on such Payment Date, determine
the amount
payable to the Noteholders, the Class C Certificateholders and the
Class R
Certificateholder.
(c) On each Payment Date, the Trust Collateral Agent shall (x)
distribute
all amounts delivered by the Note Insurer to the Trust Collateral
Agent for
deposit into the Collection Account pursuant to Section 5.9 for
payment in the
amounts and priority as directed by the Note Insurer, and (y)
(based on the
information contained in the Servicer's Certificate delivered on
the related
Determination Date pursuant to Section 4.9 upon which the Trust
Collateral Agent
may conclusively rely) subject to subsection (e) hereof, make the
following
distributions from the Available Funds withdrawn from the Note
Account and from
the other sources described below in the following order of
priority:
(i) first, to LBAC, the Monthly Dealer Participation Fee Payment
Amount and all unpaid Monthly Dealer Participation Fee Payment
Amounts from
prior Collection Periods and second, to the Servicer, from the
Available
Funds (as such Available Funds have been reduced by payments made
pursuant
to subclause first of this clause (i)), the Servicing Fee 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, in the following order
of
priority, first, from amounts on deposit in the Spread Account, to
the
extent received by the Trust Collateral Agent from the Collateral
Agent,
and second, from amounts on deposit in the Supplemental Enhancement
Account, to the extent withdrawn by the Trust Collateral Agent and
deposited into the Collection Account;
(ii) to the Indenture Trustee, the Custodian and the Back-up
Servicer
from the Available Funds (as such Available Funds have been reduced
by
payments made pursuant to clause (i) above), the Indenture Trustee
Fee, the
Custodian Fee and the Back-up Servicer Fee, respectively, and all
unpaid
Indenture Trustee Fees, Custodian Fees and Back-up Servicer Fees
from prior
Collection Periods and, if the Available Funds are insufficient to
pay such
amounts, the Indenture Trustee, the Custodian and the Back-up
Servicer will
receive such deficiency from the remaining portion of the
Deficiency Claim
Amount with respect to such Payment Date, if any, in the following
order of
priority, first, from amounts on deposit in the Spread Account, to
the
extent received by the Trust Collateral Agent from the Collateral
Agent,
and second, from amounts on deposit in the Supplemental Enhancement
Account, to the extent withdrawn by the Trust Collateral Agent and
deposited into the Collection Account, after application thereof
pursuant
to clause (i) above;
30
(iii) to the Class A-1 Noteholders, the Class A-2 Noteholders, the
Class A-3 Noteholders and the Class A-4 Noteholders, pro rata based
on the
interest due on each such class of Notes, from the Available Funds
(as such
Available Funds have been reduced by payments made pursuant to
clauses (i)
and (ii) above), an amount equal to the Class A-1 Note Interest,
the Class
A-2 Note Interest, the Class A-3 Note Interest and the Class A-4
Note
Interest (calculated (i) with respect to the Class A-1 Notes on
each
Payment Date, on the basis of the actual number of days elapsed
during such
Accrual Period based on a 360 day year, or with respect to the
first
Payment Date, 6 days and (ii) with respect to the Class A-2 Notes,
the
Class A-3 Notes and the Class A-4 Notes on each Payment Date, on
the basis
of a 360-day year consisting of twelve 30-day months or, with
respect to
the first Payment Date, 4 days), 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
Note
Rate, the Class A-2 Note Rate, the Class A-3 Note Rate or the Class
A-4
Note Rate, as applicable, for the related Accrual Period
(calculated (i)
with respect to the Class A-1 Notes on each Payment Date, on the
basis of
the actual number of days elapsed during such Accrual Period based
on a 360
day year (or, with respect to the first Payment Date, 6 days) and
(ii) with
respect to the Class A-2 Notes, the Class A-3 Notes and the Class
A-4 Notes
on each Payment Date, on the basis of a 360-day year consisting of
twelve
30-day months (or, with respect to the first payment date, 4 days))
and, if
the Available Funds are insufficient to pay such amounts, the Class
A
Noteholders will receive such deficiency from the following sources
in the
following order of priority: (A) from the remaining portion of the
Deficiency Claim Amount with respect to such Payment Date, if any,
in the
following order of priority, first, from amounts on deposit in the
Spread
Account, to the extent received by the Trust Collateral Agent from
the
Collateral Agent, and second, from amounts on deposit in the
Supplemental
Enhancement Account, to the extent withdrawn by the Trust
Collateral Agent
and deposited into the Collection Account, after application
thereof
pursuant to clauses (i) and (ii) above and (B) from the Policy
Claim Amount
with respect to such Payment Date, if any, received by the Trust
Collateral
Agent from the Note Insurer;
(iv) from the Available Funds (as such Available Funds have been
reduced by payments made pursuant to clauses (i) through (iii)
above) and,
if such Payment Date is the Final Funding Period Payment Date, from
the
Mandatory Special Redemption, if any, first, to the Class A-1
Noteholders,
until the Class A-1 Note Balance has been reduced to zero, an
amount equal
to the Principal Payment Amount with respect to such Payment Date,
second,
to the Class A-2 Noteholders, after the Class A-1 Note Balance has
been
reduced to zero, an amount equal to the remaining Principal Payment
Amount
with respect to such Payment Date, if any, third, to the Class A-3
Noteholders, after the Class A-2 Note Balance has been reduced to
zero, an
amount equal to the remaining Principal Payment Amount with respect
to such
Payment Date, if any, and fourth, to the Class A-4 Noteholders,
after the
Class A-3 Note Balance has been reduced to zero, an amount equal to
the
remaining Principal Payment Amount with respect to such Payment
Date, if
any, and, if the Available Funds are insufficient to pay such
amounts, the
Class A Noteholders will receive such deficiency from the following
sources
in the following order of priority: (A) from the remaining portion
of the
Deficiency Claim Amount with respect to such
31
Payment Date, if any, in the following order of priority, first,
from
amounts on deposit in the Spread Account, to the extent received by
the
Trust Collateral Agent from the Collateral Agent, and second, from
amounts
on deposit in the Supplemental Enhancement Account, to the extent
withdrawn
by the Trust Collateral Agent and deposited into the Collection
Account
after application thereof pursuant to clauses (i) through (iii)
above,
plus, (B) the remaining portion of the Policy Claim Amount with
respect to
such Payment Date, if any, after application thereof pursuant to
clause
(iii) above;
(v) to the Note Insurer, from the Available Funds (as such
Available
Funds have been reduced by payments made pursuant to clauses (i)
through
(iv) above), an amount equal to the Reimbursement Obligations
(other than
any accrued and unpaid Premium) and, if the Available Funds are
insufficient to pay such Reimbursement Obligations, the Note
Insurer shall
receive such deficiency from the remaining portion of the
Deficiency Claim
Amount with respect to such Payment Date, if any, in the following
order of
priority, first, from amounts on deposit in the Spread Account to
the
extent received by the Trust Collateral Agent from the Collateral
Agent,
and second, from amounts on deposit in the Supplemental Enhancement
Account, to the extent withdrawn by the Trust Collateral Agent and
deposited into the Collection Account, after application thereof
pursuant
to clauses (i) through (iv) above;
(vi) to the Note Insurer, from the Available Funds (as such
Available
Funds have been reduced by payments made pursuant to clauses (i)
through
(v) above), any accrued and unpaid Premium and, if the Available
Funds are
insufficient the Note Insurer shall receive such deficiency from
the
remaining portion of the Deficiency Claim Amount with respect to
such
Payment Date, if any, in the following order of priority, first,
from
amounts on deposit in the Spread Account to the extent received by
the
Trust Collateral Agent from the Collateral Agent, and second, from
amounts
on deposit in the Supplemental Enhancement Account, to the extent
withdrawn
by the Trust Collateral Agent and deposited into the Collection
Account,
after application thereof pursuant to clauses (i) through (v)
above;
(vii) to the Class C Certificateholders, pro rata, (a) from the
Available Funds (as such Available Funds have been reduced by
payments made
pursuant to clauses (i) through (vi) above), an amount equal to the
Class C
Interest Payment Amount and (b) from the Supplemental Enhancement
Account,
the Supplemental Enhancement Account Investment Earnings Amount;
(viii) to the Collateral Agent, for deposit in the Supplemental
Enhancement Account, from the Available Funds (as such Available
Funds have
been reduced by payments made pursuant to clauses (i) through (vii)
above)
reimbursement for any previous unreimbursed withdrawals from such
account
(other than (x) Supplemental Enhancement Account Investment
Earnings
Amounts distributed to the Class C Certificateholders pursuant to
clause
(vii) above on such Payment Date or prior Payment Dates and (y)
Supplemental Enhancement Account Release Amounts distributed to the
Class C
Certificateholders pursuant to clause (xi) below on prior Payment
Dates);
32
(ix) first, to the Trust Collateral Agent, the Indenture Trustee,
the
Back-up Servicer and the Custodian, as applicable, from the
Available Funds
(as such Available Funds have been reduced by payments made
pursuant to
clauses (i) through (viii) above) all reasonable out-of-pocket
expenses of
the Trust Collateral Agent, the Indenture Trustee, the Back-up
Servicer and
the Custodian (including, but not limited to, reasonable counsel
fees and
expenses), including, without limitation, costs and expenses
required to be
paid by the Servicer to the Back-up Servicer under Section 9.2(a),
to the
extent not paid by the Servicer, and all unpaid reasonable
out-of-pocket
expenses of the Trust Collateral Agent, the Indenture Trustee, the
Back-up
Servicer and the Custodian (including, but not limited to,
reasonable
counsel fees and expenses) from prior Collection Periods; provided,
however, that unless an Event of Default shall have occurred and be
continuing, expenses payable to the Trust Collateral Agent, the
Indenture
Trustee, the Back-up Servicer and the Custodian pursuant to this
subclause
first of clause (ix) shall be limited to a combined aggregate
amount of
$50,000 per annum, and second to the Back-up Servicer, from the
Available
Funds (as such Available Funds have been reduced by payments made
pursuant
to clauses (i) through (viii) above and subclause first of this
clause
(ix)), in the event that the Back-up Servicer shall have assumed
the
obligations of Servicer pursuant to Section 9.2(a) and the Servicer
fails
to pay the Back-up Servicer for system conversion expenses as
required by
said section, an aggregate amount not to exceed $100,000 in payment
of such
system conversion expenses;
(x) to the Collateral Agent, for deposit in the Spread Account, the
remaining Available Funds (as such Available Funds have been
reduced by
payments pursuant to clauses (i) through (ix) above), if any; and
(xi) to the Class C Certificateholders, pro rata, from the
Supplemental Enhancement Account Release Amount, until the Class C
Certificate
Balance is reduced to zero and (without duplication) any Class C
Principal
Deficiency Amount has been paid in full.
(d) In addition, on each Payment Date, after giving effect to the
payments
specified in clauses (i) through (x) of Section 5.6(c), the Trust
Collateral
Agent (based on the information contained in the Servicer's
Certificate
delivered on the related Determination Date pursuant to Section 4.9
upon which
the Trust Collateral Agent may conclusively rely) shall make the
following
payments, from the Spread Account Release Amount, if any, in the
following order
of priority:
(i) first, to the Class A-1 Noteholders, until the Class A-1 Note
Balance has been reduced to zero, second, to the Class A-2
Noteholders,
after the Class A-1 Note Balance has been reduced to zero, third,
to the
Class A-3 Noteholders, after the Class A-2 Note Balance has been
reduced to
zero, and fourth, to the Class A-4 Noteholders, after the Class A-3
Note
Balance has been reduced to zero, in reduction of the Class A-1
Note
Balance, the Class A-2 Note Balance, the Class A-3 Note Balance and
the
Class A-4 Note Balance, as applicable, until the
Overcollateralization
Amount is equal to the Required Overcollateralization Target;
(ii) to the Class C Certificateholders, pro rata, from the
remaining
Spread Account Release Amount (as such Spread Account Release
Amount has
been reduced by
33
payments pursuant to clause (i) above), the Class C Interest
Carryover
Shortfall and any Class C Supplemental Interest;
(iii) if the Total Enhancement Amount exceeds the Required Total
Enhancement Amount after the distributions pursuant to Sections
5.6(c)(i)
through (xi) have been made first, to the Class C
Certificateholders, pro
rata, from any remaining amounts, any amounts due and unpaid on the
Class C
Certificates, and second, to the Class R Certificateholder.
(e) Each Noteholder, by its acceptance of its Note, will be deemed
to have
consented to the provisions of Sections 5.6(c) and 5.6(d) relating
to the
priority of payments, and will be further deemed to have
acknowledged that no
property rights in any amount or the proceeds of any such amount
shall vest in
such Noteholder until such amounts have been distributed to such
Noteholder
pursuant to such provisions; provided, that the foregoing shall not
restrict the
right of any Noteholder, upon compliance with the provisions hereof
from seeking
to compel the performance of the provisions hereof by the parties
hereto. Each
Noteholder, by its acceptance of its Note, will be deemed to have
further agreed
that withdrawals of funds by the Collateral Agent from the Spread
Account for
application hereunder, shall be made in accordance with the
provisions of the
Spread Account Agreement.
In furtherance of and not in limitation of the foregoing, each
Certificateholder by acceptance of its Certificate, specifically
acknowledges
that no amounts shall be received by it, nor shall it have any
right to receive
any amounts, unless and until such amounts have been distributed
pursuant to
Sections 5.6(c), 5.6(d) and 5.12 (in the case of the Class C
Certificateholders)
above for payment to such Certificateholder. Each
Certificateholder, by its
acceptance of its Certificate, further specifically acknowledges
that it has no
right to or interest in any moneys at any time held in the
Supplemental
Enhancement Account or the Spread Account prior to the release of
such moneys as
aforesaid, such moneys being held in trust for the benefit of the
Class A
Noteholders and the Note Insurer as their interests may appear
(other than any
Supplemental Enhancement Account Investment Earnings Amounts, which
are being
held in trust for the exclusive benefit of the Class C
Certificateholders) prior
to such release.
(f) Notwithstanding the foregoing, in the event that it is ever
determined
that any property held in the Spread Account constitutes a pledge
of collateral,
then the provisions of this Agreement and the Spread Account
Agreement shall be
considered to constitute a security agreement and the Transferor
and the Class R
Certificateholder hereby grant to the Collateral Agent and to the
Trust
Collateral Agent, respectively, a first priority perfected security
interest in
such amounts, to be applied as set forth in Section 3.03(b) of the
Spread
Account Agreement. In addition, the Class R Certificateholder, by
acceptance of
its Class R Certificate, hereby appoints the Transferor as its
agent to pledge a
first priority perfected security interest in the Spread Account,
and any
property held therein from time to time to the Collateral Agent for
the benefit
of the Trust Collateral Agent and the Note Insurer pursuant to the
Spread
Account Agreement and agrees to execute and deliver such
instruments of
conveyance, assignment, grant, confirmation, etc., as well as any
financing
statements, in each case as the Note Insurer shall consider
reasonably necessary
in order to perfect the Collateral Agent's Security Interest in the
Collateral
(as such terms are defined in the Spread Account Agreement).
34
(g) Subject to Section 11.1 respecting the final payment upon
retirement of
each Note, the Servicer shall on each Payment Date instruct the
Trust Collateral
Agent in writing to distribute to each Noteholder of record on the
preceding
Record Date either (i) by wire transfer, in immediately available
funds to the
account of such Holder at a bank or other entity having appropriate
facilities
therefor, if such Noteholder is the Clearing Agency or such
Holder's Notes in
the aggregate evidence an original Note Balance of at least
$1,000,000, and if
such Noteholder shall have provided to the Trust Collateral Agent
appropriate
instructions prior to the Record Date for such Payment Date, or
(ii) by check
mailed to such Noteholder at the address of such Holder appearing
in the Note
Register, such Holder's pro rata share (based on the outstanding
Note Balance)
of (i) the Principal Payment Amount plus (ii) the Class A-1
Interest Payment
Amount, the Class A-2 Interest Payment Amount, the Class A-3
Interest Payment
Amount and the Class A-4 Interest Payment Amount, as applicable, to
be paid to
such Class of Notes in accordance with the Servicer's Certificate.
SECTION 5.7. Statements to Noteholders and the Class C
Certificateholders; Tax Returns.
(a) With each payment from the Note Account to the Noteholders and
Class C
Certificateholders made on a Payment Date, the Servicer shall
provide to the
Note Insurer, the Transferor, the Indenture Trustee, each Rating
Agency and the
Trust Collateral Agent (the Trust Collateral Agent to make
available to each
Noteholder and each Class C Certificateholder of record on its
website at
www.jpmorgan.com/sfr or through such other means as the Trust
Collateral Agent
believes will make the distribution more convenient and/or
accessible and the
Trust Collateral Agent shall provide timely and adequate
notification to all
Noteholders and Class C Certificateholders regarding any such
changes) the
Servicer's Certificate substantially in the form of Exhibit B-1
hereto, setting
forth, at least the following information as to the Notes and the
Class C
Certificates, to the extent applicable:
(i) the amount of the payment allocable to principal of the Class
A-1
Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4
Notes,
respectively, and in the aggregate with respect to all classes of
Notes;
(ii) the amount of the payment, if any, allocable from the
Supplemental Enhancement Account to principal of the Class C
Certificates,
including any Class C Principal Deficiency Amounts;
(iii) the amount of the payment allocable to interest on the Class
A-1
Notes, the Class A-2 Notes, the Class A-3 Notes and the Class A-4
Notes,
respectively, and in the aggregate with respect to each class of
Notes;
(iv) the amount of the payment allocable to interest and any
Supplemental Enhancement Account Investment Earnings Amounts on the
Class C
Certificates;
(v) the number of Receivables, the weighted average APR of the
Receivables, the weighted average maturity of the Receivables, the
Pool
Balance, the Class A-1 Pool Factor, the Class A-2 Pool Factor, the
Class
A-3 Pool Factor and the Class A-4 Pool Factor, as of the close of
business
on the last day of the preceding Collection Period;
35
(vi) the Class A-1 Note Balance, the Class A-2 Note Balance, the
Class
A-3 Note Balance, the Class A-4 Note Balance, the Note Balance, the
Class C
Certificate Balance and the outstanding Class C Principal
Deficiency
Amount, if any, as of the close of business on the last day of the
preceding Collection Period, after giving effect to payments
allocated to
principal reported under clause (i) or clause (ii) above;
(vii) the amount of the Monthly Dealer Participation Fee Payment
Amount paid to LBAC, the amount of the Servicing Fee paid to the
Servicer
and the amount of the Back-up Servicer Fee paid to the Back-up
Servicer
with respect to the related Collection Period, the amount of any
unpaid
Servicing Fees and any unpaid Back-up Servicer Fees and the change
in such
amounts from the prior Payment Date;
(viii) the amount of the Class A-1 Interest Carryover Shortfall, if
applicable, the Class A-2 Interest Carryover Shortfall, if
applicable, the
Class A-3 Interest Carryover Shortfall, if applicable, the Class
A-4
Interest Carryover Shortfall, if applicable, the Class C Interest
Carryover
Shortfall, if applicable, and the Class C Supplemental Interest
Payment
Amount, if applicable, on such Payment Date and the change in such
amounts
from the prior Payment Date;
(ix) the amount paid, if any, to the Class A Noteholders under the
Policy for such Payment Date;
(x) the amount paid to the Note Insurer on such Payment Date in
respect of Premium and Reimbursement Obligations;
(xi) the amount in the Spread Account;
(xii) the amount in the Supplemental Enhancement Account;
(xiii) the number of Receivables and the aggregate outstanding
principal amount scheduled to be paid thereon, for which the
related
Obligors are delinquent in making Scheduled Receivable Payments
between 30
and 59 days, 60 and 89 days, 90 and 119 days and 120 days or more
(in each
case calculated on the basis o
