Exhibit 10.2

EXECUTION VERSION

INSURANCE AND INDEMNITY AGREEMENT

Dated as of December 14, 2006

AMBAC ASSURANCE CORPORATION,

as Insurer,

UPFC AUTO RECEIVABLES TRUST 2006-B,

as Issuing Entity,

UNITED AUTO CREDIT CORPORATION,

as Servicer,

UPFC AUTO FINANCING CORPORATION,

as Seller,

and

DEUTSCHE BANK TRUST COMPANY AMERICAS,

as Indenture Trustee, Trust Collateral Agent and Backup Servicer

UPFC Auto Receivables Trust 2006-B

Class A Asset Backed Notes

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TABLE OF CONTENTS

 

          Page ARTICLE I DEFINITIONS

Section 1.1

   Defined Terms    3

Section 1.2

   Other Definitional Provisions    8 ARTICLE II REPRESENTATIONS, WARRANTIES AND
COVENANTS

Section 2.1

   Representations and Warranties of UACC, the Seller and the Trust    8

Section 2.2

   Representations and Warranties of the Seller    9

Section 2.3

   Representations and Warranties of the Insurer    9

Section 2.4

   Affirmative Covenants of UACC, the Seller and the Trust    10

Section 2.5

   Affirmative Covenants of the Seller    15

Section 2.6

   Negative Covenants of UACC, the Seller and the Trust    16 ARTICLE III THE
AMBAC POLICY; REIMBURSEMENT

Section 3.1

   Issuance of the Ambac Policy    17

Section 3.2

   Payment of Fees and Premium    18

Section 3.3

   Reimbursement Obligation    19

Section 3.4

   Indemnification    19

Section 3.5

   Payment Procedure    23

Section 3.6

   Subrogation    24 ARTICLE IV FURTHER AGREEMENTS

Section 4.1

   Effective Date; Term of the Insurance Agreement    24

Section 4.2

   Further Assurances and Corrective Instruments    24

Section 4.3

   Obligations Absolute    25

Section 4.4

   Assignments; Reinsurance; Third-Party Rights    26

Section 4.5

   Liability of the Insurer    27

Section 4.6

   Regulation AB    27

Section 4.7

   Rights and Remedies    28

 

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ARTICLE V DEFAULTS AND REMEDIES

Section 5.1

   Defaults    29

Section 5.2

   Remedies; No Remedy Exclusive    30

Section 5.3

   Waivers    31 ARTICLE VI MISCELLANEOUS

Section 6.1

   Amendments, Etc.    31

Section 6.2

   Notices    32

Section 6.3

   Severability    33

Section 6.4

   Governing Law    33

Section 6.5

   Consent to Jurisdiction    33

Section 6.6

   Consent of the Insurer    34

Section 6.7

   Counterparts    34

Section 6.8

   Headings    35

Section 6.9

   Trial by Jury Waived    35

Section 6.10

   Limited Liability    35

Section 6.11

   Entire Agreement; Facsimile Signatures    35

Section 6.12

   Indenture Trustee    35

Section 6.13

   Third Party Beneficiary    36

Section 6.14

   No Proceedings    36

Section 6.15

   Limitation of Owner Trustee Liability    36

Section 6.16

   Limitation of Indenture Trustee, Trust Collateral Agent and Backup Servicer
Liability    36

EXHIBITS

 

EXHIBIT A

   Form of Ambac Policy    A 1

 

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INSURANCE AND INDEMNITY AGREEMENT (as it may be amended, modified or
supplemented from time to time, this “Insurance Agreement”), dated as of
December 14, 2006, by and among AMBAC ASSURANCE CORPORATION, as Insurer (the
“Insurer”), UPFC AUTO RECEIVABLES TRUST 2006-B, as Issuing Entity (the “Issuing
Entity”), UNITED AUTO CREDIT CORPORATION (“UACC”), as Servicer (the “Servicer”),
UPFC AUTO FINANCING CORPORATION, as Seller (the “Seller”) and DEUTSCHE BANK
TRUST COMPANY AMERICAS, as Indenture Trustee (the “Indenture Trustee”), Trust
Collateral Agent and Backup Servicer.

PRELIMINARY STATEMENTS

A. The Indenture, dated as of December 1, 2006 (the “Indenture”), by and between
the Issuing Entity and Deutsche Bank Trust Company Americas, as Indenture
Trustee, provides for, among other things, the issuance of the UPFC Auto
Receivables Trust 2006-B Class A Asset Backed Notes.

B. The parties hereto desire that the Insurer issue the Ambac Policy to the
Indenture Trustee for the benefit of the Holders and to, among other things,
specify the conditions precedent thereto, the premium in respect thereof and the
indemnity, reimbursement, reporting and other obligations of the parties hereto
other than the Insurer in consideration thereof.

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

ARTICLE I

DEFINITIONS

Section 1.1 Defined Terms. Capitalized terms used in this Insurance Agreement
shall have the meanings set forth below. Unless the context clearly requires
otherwise, all capitalized terms used but not defined herein shall have the
respective meanings assigned to them in the Ambac Policy or, if not defined
therein, in the Indenture or, if not defined therein, in the Sale and Servicing
Agreement, or, if not defined therein, in the Spread Account Agreement, each as
described below.

“Affiliate” means, with respect to any specified Person, any other Person
controlling or controlled by or under common control with such specified Person.
For the purposes of this definition, “control” when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms “controlling” and “controlled” have
meanings correlative to the foregoing.

“Ambac” means Ambac Assurance Corporation, a Wisconsin domiciled stock insurance
corporation.

“Ambac Policy” means the Note Guaranty Insurance Policy No. AB1053BE, dated
December 14, 2006, including any endorsements thereto, issued by the Insurer to
the

 

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Indenture Trustee with respect to the Class A Notes, for the benefit of the
Holders, in the form attached as Exhibit A to this Insurance Agreement.

“Certificate” means the trust certificate evidencing the beneficial interest of
the Certificateholder in the Issuing Entity.

“Change in Control” means, with respect to UPFC, (1) (a) the sale or other
disposition, or the approval by the stockholders of UPFC of a sale or other
disposition, of all or substantially all of the assets of UPFC in the aggregate,
whether pursuant to a single transaction or pursuant to a series of transactions
to a person (the “Asset Buyer”) other than an Approved Purchaser (determined by
the Insurer); (b) any “person” (as defined in the Securities Exchange Act) other
than an Approved Purchaser becomes the “beneficial owner” (as defined in Rule
13d 3 under the Securities Exchange Act), directly or indirectly, of securities
of UPFC representing fifty one (51%) or more of the combined voting power of
UPFC’s then outstanding securities (such new beneficial owner, the “New Owner”);
(c) the stockholders of UPFC approve a merger or consolidation of UPFC with any
other corporation, other than a merger or consolidation with an Approved
Purchaser or a merger or consolidation which would result in the voting
securities of UPFC outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the combined voting power
of the voting securities of UPFC or such surviving entity outstanding
immediately after such merger or consolidation (the surviving entity being the
“Surviving Entity”); or (d) the stockholders of UPFC approve a plan of complete
liquidation of UPFC (the person receiving the liquidated assets being the
“Resulting Entity”) other than into an Approved Purchaser or a person or persons
who beneficially own, directly or indirectly, at least fifty percent (50%) or
more of the combined voting power of the outstanding voting securities of UPFC
immediately prior to the time of the liquidation; unless (2) the Asset Buyer,
UPFC, the Surviving Entity or the Resulting Entity (each a “Successor”), in
clause (1)(a), (b), (c) or (d) respectively and as the case may be, after giving
effect to the relevant transaction, (a) is an Approved Purchaser.

“Charter Documents” means, with respect to any Transaction Party, such entity’s
organizational documents, including its trust agreement, certificate of trust,
memorandum of association, articles of organization, certificate or articles of
incorporation, by laws and/or operating agreement.

“Class A Notes” means the Class A-1 Notes, the Class A-2 Notes and the Class A-3
Notes.

“Class A-1 Notes” means the Class A-1 5.34% Asset Backed Notes, issued pursuant
to the Indenture and substantially in the form attached as an Exhibit to the
Indenture.

“Class A-2 Notes” means the Class A-2 5.15% Asset Backed Notes, issued pursuant
to the Indenture and substantially in the form attached as an Exhibit to the
Indenture.

“Class A-3 Notes” means the Class A-3 5.01% Asset Backed Notes, issued pursuant
to the Indenture and substantially in the form attached as an Exhibit to the
Indenture.

“Closing Date” means December 14, 2006.

 

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“Credit and Collection Policy” means the Credit and Collection Policy of UACC as
outlined in the policies and procedures manual together with any amendments
approved by Insurer.

“Cut-off Date” means November 30, 2006.

“Event of Default” has the meaning specified in Section 5.1 hereof.

“Fee Letter” means that certain letter agreement dated as of the date hereof
between the Issuing Entity and the Insurer and acknowledged by the Indenture
Trustee setting forth certain fees and other matters referred to herein, as the
same may be amended or supplemented from time to time in accordance therewith
and with this Insurance Agreement.

“Holder” has the meaning given thereto in the Ambac Policy.

“Indemnified Party” has the meaning specified in Section 3.4 hereof.

“Indemnifying Party” has the meaning specified in Section 3.4 hereof.

“Indenture” means the Indenture dated as of December 1, 2006 between the Issuing
Entity and the Indenture Trustee, as the same may be amended and supplemented
from time to time.

“Information” has the meaning specified in Section 2.1(c) hereof.

“Insolvency Proceeding” means any proceeding by or against any person under any
applicable reorganization, bankruptcy, liquidation, rehabilitation, insolvency
or other similar law now or hereafter in effect or any proceeding in which a
receiver, liquidator, conservator, trustee or similar official shall have been,
or may be, appointed or requested for a person or any of its assets.

“Insurance Agreement” has the meaning given such term in the initial paragraph
hereof.

“Insurer” means Ambac and any successor thereto, as issuer of the Ambac Policy.

“Insurer Information” means the information furnished by the Insurer in writing
expressly for use in the Offering Document and is limited to the information
included under the headings “The Insurer” and “The Policy” in the Prospectus
Supplement.

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

“Late Payment Rate” means the lesser of (a) the greater of (i) the per annum
rate of interest publicly announced from time to time by Citibank, N.A. as its
prime or base lending rate (any change in such rate of interest to be effective
on the date such change is announced by

 

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Citibank, N.A.), plus 2% per annum and (ii) the then applicable highest rate of
interest on the Class A Notes and (b) the maximum rate permissible under
applicable usury or similar laws limiting interest rates. The Late Payment Rate
shall be computed on the basis of the actual number of days elapsed over a year
of 360 days.

“Material Adverse Effect” means, with respect to any event or circumstance, a
material adverse effect on (a) the business, financial condition, operations or
assets of the Issuing Entity (considered separately) or the Issuing Entity, the
Servicer and the Seller (taken as a whole), (b) the ability of any United Party
to perform its obligations under any Transaction Document to which it is a
party, (c) the validity, enforceability of, or collectibility of, amounts
payable by any United Party under any Transaction Document to which it is a
party, (d) the status, existence, perfection or priority of the interest of the
Issuing Entity or of the Indenture Trustee in the Trust Estate, (e) the
validity, enforceability or collectibility of all or any portion of the Trust
Estate with an aggregate value of at least $500,000 or (f) the ability of the
Insurer to monitor the performance of the Receivables and compliance of the
United Parties with the Transaction Documents unless such impediment results
from an action or omission on the part of the Insurer.

“Moody’s” means Moody’s Investors Service, Inc. and any successor thereto.

“Offering Document” means, taken together, the Prospectus Supplement, dated
December 6, 2006 (the “Prospectus Supplement”), and the Prospectus, dated
November 17, 2006, of the Issuing Entity, in respect of the offering and sales
of the Class A Notes, any amendment or supplement thereto, and any other
offering document in respect of the Class A Notes that makes reference to the
Ambac Policy.

“Person” means an individual, joint stock company, trust, unincorporated
association, joint venture, corporation, limited liability company, business or
owner trust, partnership or other organization or entity (whether governmental
or private).

“Premium” means the premium payable in accordance with the Fee Letter.

“Rating Agencies” means Moody’s and S&P.

“Responsible Officer” means any Vice President, Assistant Vice President,
Assistant Treasurer, Assistant Secretary or any other officer of the relevant
Transaction Party responsible for the performance of such Transaction Party’s
obligations under the Transaction Documents and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer’s knowledge of and familiarity with the particular subject.

“Sale Agreement” means the Sale Agreement, dated as of December 1, 2006, between
UACC, as the Seller and UPFC Auto Financing Corporation, as the Purchaser.

“Sale and Servicing Agreement” means the Sale and Servicing Agreement, dated as
of December 1, 2006, among the Issuing Entity, the Servicer, the Seller,
Deutsche Bank Trust Company Americas, as Trust Collateral Agent, Custodian and
Backup Servicer and Centerone Financial Services LLC, as Backup Subservicer, as
the same may be amended or supplemented from time to time.

 

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“Securities Act” means the Securities Act of 1933, including, unless the context
otherwise requires, the rules and regulations promulgated thereunder, as amended
from time to time.

“Securities Exchange Act” means the Securities Exchange Act of 1934, including,
unless the context otherwise requires, the rules and regulations promulgated
thereunder, as amended from time to time.

“Seller” has the meaning specified in the recitals hereof.

“Seller Information” means the information set forth in the Offering Document
describing the Seller, which information shall consist of the sections entitled
“Summary—The Seller” in the Prospectus Supplement.

“Servicer” has the meaning specified in the recitals hereof.

“Servicer Termination Event” has the meaning specified in Section 9.1 of the
Sale and Servicing Agreement.

“S&P” means Standard & Poor’s, a division of The McGraw Hill Companies, Inc.,
and any successor thereto.

“Spread Account Agreement” means the Spread Account Agreement, dated as of
December 14, 2006, among the Insurer, the Servicer and the Indenture Trustee.

“Transaction” means the transactions contemplated by the Transaction Documents.

“Transaction Documents” means this Agreement, the Underwriting Agreement, the
Sale and Servicing Agreement, the Certificate of Trust, the Trust Agreement, the
Sale Agreement, the Indenture, the Spread Account Agreement and all other
documents and certificates delivered in connection therewith except for the
Ambac Policy.

“Transaction Parties” means the United Parties and the Indenture Trustee.

“Trust Agreement” means the Trust Agreement dated as of November 17, 2006
between the Seller and the Owner Trustee, as amended and restated as of
December 14, 2006, as the same may be amended and supplemented from time to
time.

“Underwriter Information” means the information furnished by the Underwriter in
writing expressly for use in the Offering Document and included in the table
following the second paragraph of text and the third, fourth, fifth, sixth and
seventh paragraphs of text under the caption “Underwriting” in the Prospectus
Supplement.

“Underwriter” shall mean Deutsche Bank Securities.

 

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“Underwriting Agreement” means the Underwriting Agreement, dated December 6,
2006 between the Underwriter and the Seller with respect to the offer and sale
of the Class A Notes, as amended, modified or supplemented from time to time.

“United Party” means any of the Issuing Entity, UACC, the Servicer and the
Seller (collectively, the “United Parties”); provided, however, that solely with
respect to the definition of “United Party” as such term is used in the Ambac
Policy, “United Party” shall have the meaning as specified therein.

“UACC” means United Auto Credit Corporation, and its successors.

“UPFC” means United PanAm Financial Corporation, and its successors.

Section 1.2 Other Definitional Provisions. The words “hereof,” “herein” and
“hereunder” and words of similar import when used in this Insurance Agreement
shall refer to this Insurance Agreement as a whole and not to any particular
provision of this Insurance Agreement, and Section, subsection, Schedule and
Exhibit references are to this Insurance Agreement unless otherwise specified.
The meanings given to terms defined herein shall be equally applicable to both
the singular and plural forms of such terms. The words “include” and “including”
shall be deemed to be followed by the phrase “without limitation.” Where a
representation, warranty or covenant herein begins with the words “as to a
Person only,” such representation, warranty or covenant is given by and as to
such Person only.

ARTICLE II

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 2.1 Representations and Warranties of UACC, the Seller and the Issuing
Entity. Each of UACC, the Seller and the Issuing Entity hereby makes, to and for
the benefit of the Insurer, each of the representations and warranties made by
it in each of the Transaction Documents to which it is a party. Such
representations and warranties are incorporated herein by this reference as if
fully set forth herein, and may not be amended except by an amendment complying
with the terms of the last sentence of Section 6.1 hereof. In addition, each of
UACC, the Seller and the Issuing Entity represents and warrants as of the
Closing Date as follows:

(a) The offer and sale of the Class A Notes by the Issuing Entity comply in all
material respects with all requirements of law, including all registration
requirements of applicable securities laws and, without limiting the generality
of the foregoing, the Offering Document (other than the Underwriter Information,
the Seller Information and the Insurer Information) does not contain any untrue
statement of a material fact and does not omit to state a material fact
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading.

(b) The Indenture has been duly qualified under the Trust Indenture Act of 1939,
as amended; the Issuing Entity is not required to be registered as an
“investment company” under the Investment Company Act; and neither the offer nor
the sale of the Class A Notes by the Issuing Entity will be in violation of the
Securities Act or the Securities Exchange Act and the

 

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rules and regulations promulgated thereunder or any other federal or state
securities law. UACC, the Seller and the Issuing Entity shall each satisfy any
of the information reporting requirements of the Securities Exchange Act and the
rules and regulations promulgated thereunder arising out of the Transaction to
which it is subject.

(c) Neither the Transaction Documents nor any other information relating to the
Receivables, the Other Conveyed Property or any other asset in the Trust Estate,
the operations or financial condition of any of the United Parties
(collectively, the “Information”), as amended, supplemented or superseded,
furnished to the Insurer by such United Party contains any statement of a
material fact which was untrue or misleading in any material respect when made.
None of the United Parties has any knowledge of any circumstances that could
reasonably be expected to have a Material Adverse Effect. Since the furnishing
of the Information, there has been no change nor any development or event
involving a prospective change known to any of the United Parties that would
render any of the Transaction Documents untrue or misleading in any material
respect.

Section 2.2 Representations and Warranties of the Seller. The Seller hereby
makes, to and for the benefit of the Insurer, each of the representations and
warranties made by it in each of the Transaction Documents to which it is a
party. Such representations and warranties are incorporated herein by this
reference as if fully set forth herein, and may not be amended except by an
amendment complying with the terms of the last sentence of Section 6.1 hereof.
In addition, the Seller represents and warrants as of the Closing Date as
follows:

(a) The offer and sale of the Class A Notes by the Issuing Entity comply in all
material respects with all requirements of law, including all registration
requirements of applicable securities laws and, without limiting the generality
of the foregoing, the Seller Information does not contain any untrue statement
of a material fact and does not omit to state a material fact necessary to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.

(b) The Indenture has been duly qualified under the Trust Indenture Act of 1939,
as amended; the Issuing Entity is not required to be registered as an
“investment company” under the Investment Company Act; and neither the offer nor
the sale of the Class A Notes by the Issuing Entity will be in violation of the
Securities Act or any other federal or state securities law. The Seller shall
satisfy any of the information reporting requirements of the Securities Exchange
Act and the rules and regulations promulgated thereunder arising out of the
Transaction to which it or the Issuing Entity is subject.

Section 2.3 Representations and Warranties of the Insurer. The Insurer
represents and warrants to the Indenture Trustee (on behalf of the Holders), the
Issuing Entity and each other Transaction Party as follows:

(a) Organization and Licensing. The Insurer is a stock insurance corporation
duly organized, validly existing and in good standing under the laws of the
State of Wisconsin.

 

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(b) Corporate Power. The Insurer has the corporate power and authority to issue
the Ambac Policy and execute and deliver this Insurance Agreement and to perform
all of its obligations hereunder and thereunder.

(c) Authorization; Approvals. All proceedings legally required for the issuance
of the Ambac Policy and the execution, delivery and performance of this
Insurance Agreement have been taken and all licenses, orders, consents or other
authorizations or approvals of the Insurer’s Board of Directors or stockholders
or any governmental boards or bodies legally required for the enforceability of
the Ambac Policy have been obtained or are not material to the enforceability of
the Ambac Policy.

(d) Enforceability. The Ambac Policy, when issued, will constitute, and this
Insurance Agreement constitutes, legal, valid and binding obligations of the
Insurer, enforceable in accordance with their respective terms, subject to
insolvency, reorganization, moratorium, receivership and other similar laws
affecting creditors’ rights generally and by general principles of equity and
subject to principles of public policy limiting the right to enforce the
indemnification provisions contained therein and herein, insofar as such
provisions relate to indemnification for liabilities arising under federal
securities laws.

(e) No Conflict. The execution by the Insurer of this Insurance Agreement will
not, and the satisfaction of the terms hereof will not, conflict with or result
in a breach of any of the terms, conditions or provisions of the Certificate of
Incorporation or By-Laws of the Insurer, or any restriction contained in any
contract, agreement or instrument to which the Insurer is a party or by which it
is bound or constitute a default under any of the foregoing which would
materially and adversely affect its ability to perform its obligations under the
Ambac Policy or this Insurance Agreement.

(f) Accuracy of Information. The Insurer Information included in the Offering
Document is limited and does not purport to provide the scope of disclosure
required to be included in a prospectus with respect to a registrant in
connection with the offer and sale of securities of such registrant registered
under the Securities Act. Within such limited scope of disclosure, however, as
of the date of the Offering Document, the Insurer Information does not contain
an untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading.

Section 2.4 Affirmative Covenants of UACC, the Seller and the Issuing Entity.
Each of UACC, the Seller and the Issuing Entity hereby makes, to and for the
benefit of the Insurer, all of the covenants made by it in the Transaction
Documents to which it is a party. Such covenants are hereby incorporated herein
by this reference as if fully set forth herein, and may not be amended except by
an amendment complying with the terms of the last sentence of Section 6.1. In
addition, UACC, each of the Seller and the Issuing Entity hereby agrees that
during the term of this Insurance Agreement, unless the Insurer shall otherwise
expressly consent in writing:

(a) Compliance with Agreements and Applicable Laws. It shall comply with the
terms and conditions of and perform its obligations under the Transaction
Documents to which it is a party and shall comply with any law, rule or
regulation applicable to it, except where the failure to comply with any such
law, rule or regulation is not reasonably likely to have a Material Adverse
Effect.

 

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(b) Existence. Except as otherwise expressly provided by the Transaction
Documents, it shall maintain its corporate existence and shall at all times
continue to be duly organized under the laws of the place of its organization
and duly qualified and duly authorized thereunder. Additionally, it shall
conduct its business in accordance with the terms of its Charter Documents and
shall maintain all licenses, permits, charters and registrations, except for any
such license, permit, charter or registration the failure of which to maintain
is not reasonably likely to have a Material Adverse Effect.

(c) Notice of Material Events. It shall promptly (and, with respect to item
(ii) below, in any event not later than two (2) Business Days, and, with respect
to all other items not later than five (5) Business Days) following receipt of
actual knowledge by a Responsible Officer thereof inform the Insurer in writing
of the occurrence of any of the following:

(i) the submission of any claim or the initiation of any legal process,
litigation or administrative or judicial investigation, or disciplinary
proceeding by or against it that would be reasonably likely to have a Material
Adverse Effect or the promulgation of any proceeding or any proposed or final
ruling in connection with any such litigation, investigation or proceeding which
would reasonably likely to have a Material Adverse Effect;

(ii) the occurrence of any Event of Default hereunder, any Default or Event of
Default under the Indenture, any Servicer Termination Event or any Trigger
Event;

(iii) the commencement of any Insolvency Proceeding against any Transaction
Party;

(iv) the occurrence of a Change in Control (as defined in the Spread Account
Agreement); and

(v) the receipt of written notice that (a) any license, permit, charter,
registration or approval necessary and material for the conduct of its business
is to be, or may be, suspended or revoked and such suspension or revocation
would be reasonably likely to have a Material Adverse Effect or (b) it is to
cease and desist any practice, procedure or policy employed by it in the conduct
of its business, and such cessation would be reasonably likely to have a
Material Adverse Effect.

(d) Notice of Change. It shall give the Insurer not less than thirty (30) days’
prior written notice of any proposed change in its name, principal place of
business or jurisdiction of organization.

(e) Access to Records; Discussions with Officers and Accountants. Upon
reasonable prior written notice of the Insurer at any time, it shall permit the
Insurer or its authorized agents:

(i) to inspect its books and its records as they may relate to the Transaction,
the Receivables, the Other Conveyed Property or any other assets in the Trust
Estate, as the case may be, or its obligations under the Transaction Documents;

 

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(ii) to discuss its affairs, finances and accounts with its principal executive
officer and its principal financial officer; and

(iii) to discuss its affairs, finances and accounts with its independent
accountants, provided that one of its officers shall have the right to be
present during such discussions.

Such inspections and discussions shall be conducted during normal business hours
at UACC’s cost and expense and shall not unreasonably disrupt the business of
UACC, the Seller or the Issuing Entity, as the case may be. Absent an Event of
Default hereunder or under the Indenture, a Servicer Termination Event or a
Trigger Event, the Insurer shall not conduct such inspections or discussions
more often than annually, unless otherwise mutually agreed by the Insurer and
UACC. If, however, an Event of Default hereunder or under the Indenture, a
Servicer Termination Event or a Trigger Event has occurred and is continuing,
the Insurer may increase the frequency of such audits to semi-annual, quarterly,
or otherwise as it deems appropriate. Without limiting the foregoing, upon the
occurrence of a Trigger Event, an Event of Default hereunder or under the
Indenture or a Servicer Termination Event, UACC and the Seller shall make its
principal officers available to discuss the Transaction with representatives of
the Insurer within 15 days of receipt by UACC or the Seller of such a request
from the Insurer.

(f) Closing Documents. It shall provide or cause to be provided to the Insurer
an executed original copy of each Transaction Document executed by it in
connection with the closing of the Transaction within thirty (30) days of the
Closing Date.

(g) Financial Reporting. In the case of UACC, it shall provide or cause to be
provided to the Insurer the following:

(i) Annual and Periodic Financial Statements; Compliance Reports and Other
Reporting. Copies of the financial statements and compliance reports required to
be delivered pursuant to Sections 4.1, 4.10 and 4.11 of the Sale and Servicing
Agreement and such notices, certificates, reports and other information
delivered by UACC under the Transaction Documents, as and when required pursuant
to such sections or agreements, and any other reporting or financial information
required to be provided to the Insurer pursuant to the terms of the Transaction
Documents, including, without limitation, financial projections, as and when
required pursuant to such terms. Subsequent to a Change in Control as described
in (2)(b) of the definition thereof and for the purpose of determining that a
Successor continues to be a Net Worth Successor (as those terms are defined in
the definition of “Change in Control”), UACC will provide unaudited quarterly
financial statements, accompanied by the statement in the form of Exhibit C
hereto. Such statements will be provided no later than thirty (30) days
following each fiscal quarter.

 

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(ii) Compliance Certificate. Together with the financial statements and
compliance reports required under Sections 4.1, 4.10 and 4.11 of the Sale and
Servicing Agreement, a compliance certificate signed by its principal financial
officer stating that to the best of such person’s knowledge, (a) each United
Party is in compliance with its obligations hereunder and under the other
Transaction Documents, and (b) no Event of Default hereunder or under the
Indenture or Servicer Termination Event exists and no event which but for the
lapse of time or the giving of notice, or both, would constitute an Event of
Default hereunder or under the Indenture or Servicer Termination Event or
Trigger Event exists, or if an Event of Default hereunder or under the Indenture
or Servicer Termination Event or other such event exists, stating the nature and
status thereof (including all relevant financial and other information and
amounts used in determining whether such Event of Default hereunder or under the
Indenture or Servicer Termination Event or Trigger Event or other such event
exists).

(iii) S.E.C. Filings. Promptly after the filing thereof, copies of all
registration statements and annual, quarterly or other regular reports which it
or any subsidiary files with the Securities and Exchange Commission.

(iv) Shareholders Statements and Reports. Promptly after the furnishing thereof
to its shareholders, copies of all financial statements, reports and proxy
statements so furnished.

(v) Amendments to Credit and Collection Policy. Within ten (10) Business Days
after the date of any material change or amendment to its Credit and Collection
Policy, a true and complete copy of such change or amendment, and if requested
by the Insurer, a copy of the Credit and Collection Policy then in effect. No
such change or amendment shall become effective if the Insurer determines, in
its sole discretion, that such change or amendment will have a Material Adverse
Effect; provided that such change or amendment shall become effective and
continue to be effective if the Insurer has not objected to such change or
amendment within ten (10) Business Days of receipt of written notice thereof.

(vi) Credit and Collection Policy. Within ninety (90) days after the end of each
of its fiscal years, a true and complete copy of its Credit and Collection
Policy then in effect.

(h) Maintenance of Licenses. It shall maintain all licenses, permits, charters
and registrations, except for licenses, permits, charters and registrations the
failure of which to maintain is not reasonably likely to have a Material Adverse
Effect.

(i) Public Debt Ratings. UACC shall promptly, but in any event within five
(5) Business Days after the date of any change in its public debt ratings, if
any, a written certification of its public debt ratings after giving effect to
such change.

(j) Compliance with Securities Laws. It shall comply with the Securities Act and
the Securities Exchange Act and the regulations thereunder so as to permit the
completion of the offer and sale of the Class A Notes as contemplated by the
Underwriting Agreement.

 

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(k) Disclosure Document. Each Offering Document delivered with respect to the
Class A Notes shall clearly disclose that the insurance provided by the Ambac
Policy is not covered by the property/casualty insurance security fund specified
in Article 76 of the New York Insurance Law.

(l) Financial Statements. In the case of the Seller and the Issuing Entity, its
financial statements and books and records will reflect its separate existence
and will present fairly its financial position.

(m) Operation. In the case of the Seller and the Issuing Entity, it shall:

(i) manage its day to day business without the involvement of any other
Transaction Party except as required or permitted by the Transaction Documents;

(ii) act solely in its own name in the conduct of its business, including
business correspondence and other communications, and shall conduct its business
so as not to mislead others as to the identity of the entity with which they are
concerned;

(iii) ensure that, to the extent that it shares the same officers or other
employees as any of its Affiliates, the salaries of and the expenses related to
providing benefits to such officers and other employees shall be fairly
allocated among such entities, and each such entity shall bear its fair share of
the salary and benefit costs associated with all such common officers and
employees;

(iv) ensure that, to the extent that it jointly contracts with any of its
Affiliates to do business with vendors or service providers or to share overhead
expenses, the costs incurred in doing so shall be allocated fairly among such
entities, and each such entity shall bear its fair share of such costs. To the
extent that it contracts or does business with vendors or service providers when
the goods and services provided are partially for the benefit of any other
Person, the costs incurred in so doing shall be fairly allocated to or among
such entities for whose benefit the goods and services are provided, and each
such entity shall bear its fair share of such costs. All material transactions
between the other Transaction Parties and its Affiliates shall only be on an
arm’s-length basis;

(v) require that all of its full-time employees identify themselves as such and
not as employees of UACC or any other United Party (including, without
limitation, by means of providing appropriate employees with business or
identification cards identifying such employees as its employees); and

(vi) compensate all employees, consultants and agents directly, from its bank
accounts, for services provided to it by such employees, consultants and agents,
and, to the extent any of its employees, consultants or agents is also an
employee, consultant or agent of UACC (or any Affiliate thereof), allocate the
compensation of such employee, consultant or agent between itself and UACC (or
any Affiliate thereof) on a basis which reflects the services rendered to itself
and UACC (or such Affiliate thereof).

(n) Special Purpose Entity. In addition, the Seller shall:

(i) ensure that its capital is adequate for the business and undertakings of the
Seller;

 

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(ii) other than activities in connection with the Transaction, be restricted
from undertaking any activities other than purchasing automobile loans
receivables and transferring the proceeds to other special-purpose entities in
connection with the issuance of other asset backed securities;

(iii) have at least one director, manager or member that is a person who is not,
and will not be, a director, officer, employee or holder of any equity
securities of UACC or any of its affiliates or subsidiaries;

(iv) not commingle its funds and assets with the funds of any other person;

(v) maintain (A) correct and complete minute books and records of account, and
(B) minutes of the meetings and other proceedings of its board of managers, as
provided in its articles of incorporation.

(o) Other Information. It shall provide to the Insurer such other information
(including non financial information) in respect of the Receivables, the Other
Conveyed Property or the other assets in the Trust Estate, as the case may be,
the Transaction and the Transaction Documents and such other financial or
operating information in respect of itself, the Seller, the Issuing Entity or
any of their Affiliates, in each case, which the Insurer may from time to time
reasonably request.

Section 2.5 Affirmative Covenants of the Seller. The Seller hereby makes, to and
for the benefit of the Insurer, all of the covenants made by it in the
Transaction Documents to which it is a party. Such covenants are hereby
incorporated herein by this reference as if fully set forth herein, and may not
be amended except by an amendment complying with the terms of the last sentence
of Section 6.1. In addition, the Seller hereby agrees that during the term of
this Insurance Agreement, unless the Insurer shall otherwise expressly consent
in writing:

(a) Compliance with Agreements and Applicable Laws. It shall comply with the
terms and conditions of and perform its obligations under the Transaction
Documents to which it is a party and shall comply with any law, rule or
regulation applicable to it, except where the failure to comply with any such
law, rule or regulation is not reasonably likely to have a Material Adverse
Effect.

(b) Existence. Except as otherwise expressly provided by the Transaction
Documents, it shall maintain its corporate existence and shall at all times
continue to be duly organized under the laws of the place of its organization
and duly qualified and duly authorized thereunder. Additionally, it shall
conduct its business in accordance with the terms of its Charter Documents and
shall maintain all licenses, permits, charters and registrations, except for any
such license, permit, charter or registration the failure of which to maintain
is not reasonably likely to have a Material Adverse Effect.

 

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Section 2.6 Negative Covenants of UACC, the Seller and the Issuing Entity. each
of UACC, the Seller and the Issuing Entity hereby agrees that during the term of
this Insurance Agreement, unless the Insurer shall otherwise expressly consent
in writing:

(a) Impairment of Rights. It shall not take any action, or fail to take any
action, if such action or failure to take action (x) is reasonably likely to
have a Material Adverse Effect or (y) is reasonably likely to interfere with the
enforcement of any rights of the Insurer under or with respect to any of the
Transaction Documents. It shall give the Insurer written notice of any such
action or failure to act promptly prior to the date of consummation of such
action or failure to act. It shall furnish to the Insurer all information
requested by it that is reasonably necessary to determine compliance with this
paragraph.

(b) Amendments, Etc. It shall not modify, amend or waive, or consent to any
modification or amendment of, any of the terms, provisions or conditions of the
Transaction Documents to which it is a party or, in the case of the Seller and
the Issuing Entity, any of its Charter Documents, without the prior written
consent of the Insurer thereto.

(c) Limitation on Mergers, Etc. In the case of the Seller and the Issuing
Entity, it shall not consolidate with or merge with or into any Person or
liquidate or dissolve, or transfer all or substantially all of its assets to any
Person except, in the case of the Issuing Entity, by way of the grant of a lien
to the Indenture Trustee pursuant to the Transaction Documents, or, except as
expressly permitted by the Transaction Documents, transfer any of its assets to
any Person.

(d) Certain Other Limitations. In the case of the Seller and the Issuing Entity,
it shall:

(i) not be named as an insured on the insurance policy held by another United
Party or covering the property of any other United Party, except to the extent
it shall bear its allocable share of the expense thereof, or enter into an
agreement with the holder of such policy whereby in the event of a loss in
connection with property not owned by the Issuing Entity or the Seller, as the
case may be, proceeds are paid to it;

(ii) be restricted from undertaking activities in connection with the issuance
of the Class A Notes other than activities as set forth in its Charter
Documents;

(iii) not be involved in the day-to-day management of any of the other United
Parties except as required by or permitted by the Transaction Documents;

(iv) not incur, assume or guarantee any indebtedness except for such
indebtedness as may be incurred by the Issuing Entity in connection with the
issuance of the Class A Notes, or as otherwise expressly permitted by the
Insurer or the Transaction Documents;

(v) not commingle its deposit accounts (and funds therein) or other assets with
the deposit accounts (and funds therein) or other assets of any other entity;

(vi) not act as an agent of any other United Party; and

 

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(vii) not form, or cause to be formed, any subsidiaries; provided that the
Seller may form other special purpose entities in connection with the issuance
of other asset backed securities to the extent the Insurer acts as an insurer in
connection with such transactions.

ARTICLE III

THE AMBAC POLICY; REIMBURSEMENT

Section 3.1 Issuance of the Ambac Policy. The Insurer agrees to issue the Ambac
Policy on the Closing Date subject to satisfaction of the conditions precedent
set forth below:

(a) Payment of Expenses. The applicable parties shall have been paid their
related fees and expenses payable in accordance with Section 3.2(a) and (b);

(b) Receipt of Certain Documents. The Insurer shall have received a complete
copy of the Credit and Collection Policy then in effect certified by the
principal financial officer of UACC and of each Transaction Document fully
executed and delivered by each applicable Transaction Party;

(c) Representations and Warranties; Certificate. The representations and
warranties of the United Parties set forth or incorporated by reference in this
Insurance Agreement and the representations and warranties set forth by the
Indenture Trustee in the Indenture are true and correct on and as of the Closing
Date as if made on the Closing Date, and the Insurer has received a certificate
of appropriate officers of the related United Party to that effect;

(d) No Litigation, Etc. No suit, action or other proceeding, investigation or
injunction, or final judgment relating thereto, is pending or, to any
Transaction Party’s knowledge, threatened before any court, governmental or
administrative agency or arbitrator in which it is sought to restrain or
prohibit or to obtain damages or other relief in connection with any of the
Transaction Documents or the consummation of the Transaction;

(e) Legality. No statute, rule, regulation or order has been enacted, entered or
deemed applicable by any government or governmental or administrative agency or
court that would make the Transaction illegal or otherwise prevent the
consummation thereof;

(f) No Event of Default. No Event of Default hereunder, Default or Event of
Default under the Indenture, Trigger Event or Servicer Termination Event has
occurred;

(g) Satisfaction of Conditions of the Underwriting Agreement. All conditions in
the Underwriting Agreement relating to the Underwriter’s obligation to offer and
sell the Class A Notes have been fulfilled to the satisfaction of the Insurer,
with such satisfaction deemed to have occurred upon issuance of the Ambac
Policy. The Insurer has received copies of each of the documents, and shall be
entitled to rely on each of the documents, required to be delivered to the
Underwriter pursuant to the Underwriting Agreement;

 

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(h) Issuance of Ratings. The Insurer has received confirmation that the
Class A-1 Notes will be rated in the highest short term rating category by at
least two nationally recognized statistical rating agencies, that the Class A-2
Notes and the Class A-3 Notes will be rated in the highest long term rating
category by at least two nationally recognized statistical rating agencies and
that, without the benefit of the Ambac Policy, the Class A Notes will have a
shadow rating of at least BBB from S&P and Baa2 from Moody’s;

(i) Approvals, Etc. The Insurer has received true and correct copies of all
approvals, licenses and consents, if any, required in connection with the
Transaction;

(j) Fee Letter. The Insurer, the Indenture Trustee and the Issuing Entity have
executed the Fee Letter;

(k) Certified Copies. The Insurer has received an executed copy of each
Transaction Document;

(l) Opinions. The Insurer has received opinions of counsel concerning the
perfection of the Indenture Trustee’s security interest in the Trust Estate and
other matters under the laws of the United States, and has received copies of
any opinions delivered to the Rating Agencies, the Noteholders and the Indenture
Trustee, in each case addressed to, and in form and substance satisfactory to,
the Insurer;

(m) Satisfactory Documentation. The Insurer and its counsel have determined that
all documents, the Class A Notes and opinions to be delivered in connection with
the Class A Notes conform to the terms of the Transaction Documents; and

(n) Additional Items. The Insurer has received such other documents,
instruments, approvals or opinions in form and substance reasonably satisfactory
to the Insurer as are reasonably requested by the Insurer, including evidence
reasonably satisfactory to the Insurer that the conditions precedent, if any, in
the Transaction Documents have been satisfied.

Section 3.2 Payment of Fees and Premium.

(a) Legal and Accounting Fees. UACC shall pay or cause to be paid on the Closing
Date all reasonable legal fees, auditors’ fees and disbursements incurred by the
Insurer in connection with the issuance of the Ambac Policy and the Transaction
Documents through the Closing Date. Additional fees of the Insurer’s counsel or
auditors payable in connection with the Transaction Documents incurred after the
Closing Date shall be paid by UACC as provided in Section 3.3 below.

(b) Rating Agency Fees. UACC shall promptly pay the initial fees of the Rating
Agencies with respect to the Class A Notes and the transactions contemplated
hereby following receipt of a statement with respect thereto, and shall pay or
cause to be paid any subsequent fees of the Rating Agencies with respect to, and
directly allocable to, the Class A Notes. The Insurer shall not be responsible
for any fees or expenses of the Rating Agencies. The fees for any other rating
agency shall be paid by the party requesting such other rating agency’s rating.

 

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(c) Premium. In consideration of the issuance by the Insurer of the Ambac
Policy, the Issuing Entity shall pay or cause to be paid the Premiums to the
Insurer as set forth in the Fee Letter in accordance with the Indenture and this
Insurance Agreement and from the funds specified by Section 5.7 of the Sale and
Servicing Agreement, commencing on the day the Ambac Policy is issued, until the
Ambac Policy has been terminated in accordance with its terms. The Premium paid
pursuant to the Indenture and the Sale and Servicing Agreement shall be
nonrefundable without regard to whether any Notice (as defined in the Ambac
Policy) is delivered to the Insurer requiring the Insurer to make any payment
under the Ambac Policy or any other circumstances relating to the Class A Notes
or provision being made for payment of the Class A Notes prior to maturity.

Section 3.3 Reimbursement Obligation. (a) The Issuing Entity agrees absolutely
and unconditionally to reimburse the Insurer for any amounts paid by the Insurer
under the Ambac Policy, plus the amount of any other due and payable and unpaid
Reimbursement Amounts (as defined in the Ambac Policy), which reimbursement
shall be due and payable on the date that any such amount is paid thereunder
from amounts available for such payment under the Indenture and the Sale and
Servicing Agreement, in an amount equal to the amounts so paid and all amounts
previously paid that remain unreimbursed, together (without duplication) with
interest on any and all amounts remaining unreimbursed (to the extent permitted
by law, if in respect of any unreimbursed amounts representing interest) from
the date such amounts became due until paid in full (after as well as before
judgment), at a rate of interest equal to the Late Payment Rate.

(b) Each of the Issuing Entity, the Seller and UACC agrees, jointly and
severally, to pay to the Insurer, promptly, but in no event later than 30 days
after demand thereof, as follows: any and all charges, fees, costs and expenses,
including reasonable attorneys’ and accountants’ fees and expenses, that the
Insurer may pay or incur in connection with the Transaction Documents, including
(i) the enforcement, defense or preservation of any rights in respect of any of
the Transaction Documents, defending, monitoring or participating in any
litigation or proceeding (including any insolvency proceeding in respect of any
United Party or any Affiliate thereof) relating to any of the Transaction
Documents, any party to any of the Transaction Documents (in its capacity as
such a party) or the Transaction, the costs and fees of inspections by the
Insurer or audits or field examinations by accountants and the ongoing
administration of the Transaction pursuant to the Transaction Documents, or
(ii) any amendment, waiver or other similar action with respect to, or related
to, any Transaction Document, whether or not executed or completed.

(c) Each of the Issuing Entity, the Seller and UACC agrees, jointly and
severally, to pay to the party to whom such amounts are owed on demand interest
at the Late Payment Rate on any and all amounts described in Sections 3.3(b) and
3.4 after the date such amounts become due and payable until payment thereof in
full.

Section 3.4 Indemnification. (a) In addition to any and all of the Insurer’s
rights of reimbursement, indemnification or subrogation, and to any other rights
of the Insurer pursuant hereto or under law or in equity, each of UACC and the
Seller agrees, jointly and severally, to pay, and to protect, indemnify and save
harmless, the Insurer and its officers, directors, shareholders, employees,
agents and each Person, if any, who controls the Insurer

 

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within the meaning of either Section 15 of the Securities Act or Section 20 of
the Securities Exchange Act from and against, any and all claims, losses,
liabilities (including penalties), actions, suits, judgments, demands, damages,
costs or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of any nature
arising out of or relating to the transactions contemplated by the Transaction
Documents by reason of:

(i) any statement, omission or action (other than of the Insurer with respect to
the Insurer Information, of the Underwriter with respect to the Underwriter
Information or of the Seller with respect to the Seller Information) in
connection with the offering, issuance, sale or delivery of any of the Class A
Notes;

(ii) the negligence, bad faith, willful misconduct, misfeasance, malfeasance or
theft committed by any director, officer, employee or agent of any United Party
in connection with the Transaction;

(iii) the violation by any United Party of any domestic or foreign law, rule or
regulation, or any judgment, order or decree applicable to them;

(iv) the breach by any United Party of any representation, warranty or covenant
under any of the Transaction Documents (without giving effect to any materiality
qualifier or limitation therein);

(v) the occurrence, in respect of UACC’s duties as the Servicer, under any of
the Transaction Documents of any Servicer Termination Event or any event which,
with the giving of notice or the lapse of time or both, would constitute any
Servicer Termination Event; or

(vi) any untrue statement or alleged untrue statement of a material fact
contained in the Offering Document or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as such claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or expenses
(including reasonable fees and expenses of attorneys, consultants and auditors
and reasonable costs of investigations) arise out of or are based upon any
untrue statement or omission in the Offering Document in the information with
respect to (x) the Insurer Information, (y) the Underwriter Information and
(z) the Seller Information.

(b) In addition to any and all of the Insurer’s rights of reimbursement,
indemnification or subrogation, and to any other rights of the Insurer pursuant
hereto or under law or in equity, the Seller agrees to pay, and to protect,
indemnify and save harmless, the Insurer and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls the
Insurer within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act from and against, any and all claims,
losses, liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including reasonable fees and expenses of attorneys,
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of any nature arising out of or relating to the transactions contemplated by the
Transaction Documents, including by reason of:

(i) the negligence, bad faith, willful misconduct, misfeasance, malfeasance or
theft committed by any director, officer, employee or agent of the Seller in
connection with the Transaction;

(ii) the violation by the Seller of any domestic or foreign law, rule or
regulation, or any judgment, order or decree applicable to them;

(iii) the breach by the Seller of any representation, warranty or covenant under
any of the Transaction Documents (without giving effect to any materiality
qualifier or limitation therein); or

(iv) any untrue statement or alleged untrue statement of a material fact
contained in the Seller Information or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.

(c) In addition to any and all of the Insurer’s rights of reimbursement,
indemnification or subrogation, and to any other rights of the Insurer pursuant
hereto or under law or in equity, the Issuing Entity agrees to pay, and to
protect, indemnify and save harmless, the Insurer and its officers, directors,
shareholders, employees, agents and each Person, if any, who controls the
Insurer within the meaning of either Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act from and against, any and all claims,
losses, liabilities (including penalties), actions, suits, judgments, demands,
damages, costs or expenses (including reasonable fees and expenses of attorneys,
consultants and auditors and reasonable costs of investigations) of any nature
arising out of or relating to the transactions contemplated by the Transaction
Documents, including by reason of:

(i) any statement, omission or action (other than of the Insurer with respect to
the Insurer Information, of the Underwriter with respect to the Underwriter
Information, or of the Seller with respect to the Seller Information) in
connection with the offering, issuance, sale or delivery of any of the Class A
Notes;

(ii) the negligence, bad faith, willful misconduct, misfeasance, malfeasance or
theft committed by any director, officer, employee or agent of any Transaction
Party in connection with the Transaction;

(iii) the violation by any Transaction Party of any domestic or foreign law,
rule or regulation, or any judgment, order or decree applicable to them;

(iv) the breach by any Transaction Party of any representation, warranty or
covenant under any of the Transaction Documents (without giving effect to any
materiality qualifier or limitation therein); or

(v) any untrue statement or alleged untrue statement of a material fact
contained in the Offering Document or any omission or alleged omission to state
therein

 

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a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except insofar as such claims, losses, liabilities (including
penalties), actions, suits, judgments, demands, damages, costs or expenses
(including reasonable fees and expenses of attorneys, consultants and auditors
and reasonable costs of investigations) arise out of or are based upon any
untrue statement or omission in the Offering Document in the information with
respect to (x) the Insurer Information, (y) the Underwriter Information and
(z) the Seller Information.

(d) The Insurer agrees to pay, and to protect, indemnify and save harmless each
of UACC, the Seller and the Issuing Entity, and their respective officers,
directors, shareholders, employees, agents and each Person, if any, who controls
UACC, the Seller and the Issuing Entity, within the meaning of either Section 15
of the Securities Act or Section 20 of the Securities Exchange Act from and
against, any and all claims, losses, liabilities (including penalties), actions,
suits, judgments, demands, damages, costs or expenses (including reasonable fees
and expenses of attorneys, consultants and auditors and reasonable costs of
investigations) of any nature arising out of or by reason of any untrue
statement or alleged untrue statement of a material fact contained in the
Insurer Information in any Offering Document or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading.

(e) The Insurer agrees to pay, and to protect, indemnify and save harmless, the
Seller and each of their officers, directors, shareholders, employees, agents
and each Person, if any, who controls the Seller within the meaning of either
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act
from and against, any and all claims, losses, liabilities (including penalties),
actions, suits, judgments, demands, damages, costs or expenses (including
reasonable fees and expenses of attorneys, consultants and auditors and
reasonable costs of investigations) of any nature arising out of or by reason of
any untrue statement of a material fact or an omission to state a material fact
required to be stated therein or necessary in order to make the statements
therein in light of the circumstances in which they were made not misleading
contained in the consolidated financial statements of Ambac Assurance
Corporation incorporated by reference into the Issuing Entity’s Regulation AB
periodic reports pursuant to Section 4.6 of this Agreement.

(f) If any action or proceeding (including any governmental investigation) shall
be brought or asserted against any Person (each, an “Indemnified Party”) in
respect of which the indemnity provided in Section 3.4(a), (b), (c) or (d) may
be sought from UACC, the Seller, the Issuing Entity or the Insurer, as the case
may be (the “Indemnifying Party”), each such Indemnified Party shall promptly
notify the Indemnifying Party in writing, and the Indemnifying Party shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all expenses and legal
fees; provided that failure to notify the Indemnifying Party shall not relieve
it from any liability it may have to such Indemnified Party except to the extent
that it shall be actually prejudiced thereby. The Indemnified Party shall have
the right to employ separate counsel in any such action and to participate in
the defense thereof at the expense of the Indemnified Party and may assume the
defense of any such action or claim in reasonable cooperation with, and with the
reasonable

 

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cooperation of, the Indemnifying Party; provided, however, that the fees and
expenses of separate counsel to the Indemnified Party in any such proceeding
shall be at the expense of the Indemnifying Party if (i) the Indemnifying Party
has agreed to pay such fees and expenses, (ii) the Indemnifying Party shall have
failed to assume the defense of such action or proceeding or employ counsel
reasonably satisfactory to the Indemnified Party in any such action or
proceeding within a reasonable time after the commencement of such action or
(iii) the named parties to any such action or proceeding (including any
impleaded parties) include both the Indemnified Party and the Indemnifying
Party, and the Indemnified Party shall have been advised by counsel that there
may be one or more legal defenses available to it which are different from or
additional to those available to the Indemnifying Party (in which case, if the
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of such action
or proceeding on behalf of such Indemnified Party, it being understood, however,
that the Indemnifying Party shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses of more than
one separate firm of attorneys at any time for the Indemnified Parties, which
firm shall be designated in writing by the Indemnified Party). The Indemnifying
Party shall not be liable for any settlement of any such action or proceeding
effected without its written consent to the extent that any such settlement
shall be prejudicial to the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed, but, if settled with its written consent, or
if there is a final judgment for the plaintiff in any such action or proceeding
with respect to which the Indemnifying Party shall have received notice in
accordance with this subsection (d), the Indemnifying Party agrees to indemnify
and hold the Indemnified Parties harmless from and against any loss or liability
by reason of such settlement or judgment.

(g) To provide for just and equitable contribution if the indemnification
provided by the Indemnifying Party is determined to be unavailable or
insufficient to hold harmless any Indemnified Party (other than due to
application of this Section), each Indemnifying Party shall contribute to the
losses incurred by the Indemnified Party on the basis of the relative fault of
the Indemnifying Party, on the one hand, and the Indemnified Party, on the other
hand. The relative fault of each Indemnifying Party, on the one hand, and each
Indemnified Party, on the other, shall be determined by reference to, among
other things, whether the breach or alleged breach is within the control of the
Indemnifying Party or the Indemnified Party, and the parties relative intent,
knowledge, access to information and opportunity to correct or prevent such
breach. No Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.

Section 3.5 Payment Procedure. In the event of any payment by the Insurer for
which reimbursement is sought under Section 3.3, the Issuing Entity, UACC, the
Seller and the Indenture Trustee agree to accept the voucher or other evidence
of payment as prima facie evidence of the propriety thereof and the liability,
if any, described in Section 3.3 therefor to the Insurer; provided, that with
respect to claims for reimbursement of amounts other than amounts paid by the
Insurer under the Ambac Policy and any interest thereon made to UACC under
Section 3.3(b), the Insurer will also provide appropriate supporting documents

 

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to UACC for such claims. All payments to be made to the Insurer under this
Insurance Agreement shall be made to the Insurer (to such account as shall be
specified by the Insurer in writing) by no later than 3:00 p.m. (New York time)
on the date when due in lawful currency of the United States of America in
immediately available funds or as the Insurer shall otherwise direct by written
notice to the party making such payment. In the event that the date of any
payment to the Insurer or the expiration of any time period hereunder occurs on
a day that is not a Business Day, then such payment or expiration of time period
shall be made or occur on the next succeeding Business Day with the same force
and effect as if such payment was made or time period expired on the scheduled
date of payment or expiration date.

Section 3.6 Subrogation. The parties hereto acknowledge that, to the extent of
any payment made by the Insurer pursuant to the Ambac Policy, the Insurer shall
be fully subrogated to the extent of such payment and any interest due thereon,
to the rights of the Noteholders to any moneys paid or payable in respect of the
Class A Notes under the Transaction Documents or otherwise subject to applicable
law. The parties hereto agree to such subrogation and further agree to execute
such instruments and to take such actions as, in the sole and reasonable
judgment of the Insurer, are necessary to evidence such subrogation and to
perfect the rights of the Insurer to receive any such moneys paid or payable in
respect of the Class A Notes, under the Transaction Documents or otherwise.

ARTICLE IV

FURTHER AGREEMENTS

Section 4.1 Effective Date; Term of the Insurance Agreement. This Insurance
Agreement shall take effect on the Closing Date and shall remain in effect until
the later of (a) such time as the Insurer is no longer subject to a claim under
the Ambac Policy and such policy has been surrendered to the Insurer for
cancellation and (b) such time as all amounts payable to the Insurer by the
United Parties hereunder or under the Transaction Documents and the Class A
Notes have been irrevocably paid and redeemed in full and such Class A Notes
have been cancelled; provided, however, that the provisions of Sections 3.2, 3.3
and 3.4 hereof shall survive any termination of this Insurance Agreement.

Section 4.2 Further Assurances and Corrective Instruments. (a) Unless an Insurer
Event of Default has occurred and is continuing, or except as the Indenture
otherwise provides, none of the Indenture Trustee and none of the other
Transaction Parties shall grant any waiver of rights under any of the
Transaction Documents to which any of them is a party without the prior written
consent of the Insurer and any such waiver without prior written consent of the
Insurer shall be null and void and of no force or effect.

(b) Each of the parties hereto agrees that it will, from time to time, execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered,
such supplements hereto and such further instruments and agreements and take
such further actions as the Insurer may reasonably request and as may be
required in the Insurer’s reasonable judgment to effectuate the intent and
purpose of this Insurance Agreement and the other Transaction Documents. Without
limiting the foregoing, to the extent such authorization shall be required by
law, each United Party hereby authorizes the Indenture Trustee and the Insurer,
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the Issuing Entity, in the event the Issuing Entity has failed to do so upon
request (provided that no such request shall be required if there exists any
Insolvency Proceeding), to execute and file financing statements covering the
assets covered by any purchase or transfer pursuant to the Transaction Documents
or owned by the Issuing Entity in such jurisdictions as may be required to
confirm title thereto and perfect and maintain the lien thereon. In addition,
each of the parties hereto agrees to cooperate with the Rating Agencies in
connection with any review of the Transaction conducted during normal business
hours and in a manner that does not unreasonably disrupt the business of the
Transaction Parties, that may be undertaken by the Rating Agencies after the
date hereof upon prior written notice.

(c) None of the Transaction Parties shall cause or permit the Issuing Entity to
issue any notes or other evidences of indebtedness, or to otherwise incur any
indebtedness, other than the indebtedness represented by the Class A Notes or
other indebtedness expressly permitted under the Transaction Documents.

(d) Each Transaction Party shall concurrently provide the Insurer, as and when
delivery thereof is required to be made pursuant to the Transaction Documents,
with copies of all reports, notices, requests and demands delivered or required
to be delivered by it pursuant to the Transaction Documents.

Section 4.3 Obligations Absolute. (a) The obligations of the Transaction Parties
hereunder shall be absolute and unconditional and shall be paid or performed
strictly in accordance with this Insurance Agreement and the other Transaction
Documents under all circumstances irrespective of:

(i) any lack of validity or enforceability of, or any amendment or other
modifications of, or waiver with respect to, any of the Transaction Documents or
the Class A Notes;

(ii) any exchange or release of any other obligations hereunder;

(iii) the existence of any claim, setoff, defense, reduction, abatement or other
right that a Transaction Party which is a party to any of the Transaction
Documents may have at any time against the Insurer or any other Person;

(iv) any document presented in connection with the Ambac Policy proving to be
forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;

(v) any payment by the Insurer under the Ambac Policy against presentation of a
certificate or other document that does not strictly comply with the terms of
the Ambac Policy;

(vi) any failure of the Transaction Parties to receive the proceeds from the
sale of the Class A Notes;

(vii) any Insolvency Event with respect to any Transaction Party; and

 

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(viii) any other circumstances, other than payment in full, that might otherwise
constitute a defense available to, or discharge of, such party in respect of any
Transaction Document.

(b) The Transaction Parties and any and all others who are now or may become
liable for all or any part of the obligations of the Transaction Parties under
this Insurance Agreement agree to be bound by this Insurance Agreement and
(i) to the extent permitted by law, waive and renounce any and all redemption
and exemption rights and the benefit of all valuation and appraisement
privileges against the indebtedness and obligations evidenced by any Transaction
Document or by any extension or renewal thereof; (ii) waive presentment and
demand for payment, notices of nonpayment and of dishonor, protest of dishonor
and notice of protest; (iii) waive all notices in connection with the delivery
and acceptance hereof and all other notices in connection with the performance,
default or enforcement of any payment hereunder, except as required by the
Transaction Documents; (iv) waive all rights of abatement, diminution,
postponement or deduction, all defenses, other than payment, and all rights of
setoff or recoupment arising out of any breach under any of the Transaction
Documents, by any party thereto or any beneficiary thereof, or out of any
obligation at any time owing to any of the Transaction Parties; (v) agree that
their liabilities hereunder shall be unconditional and without regard to any
setoff, counterclaim or the liability of any other Persons for the payment
hereof; (vi) agree that any consent, waiver or forbearance hereunder with
respect to an event shall operate only for such event and not for any subsequent
event; (vii) consent to any and all extensions of time that may be granted by
the Insurer with respect to any payment hereunder or other provisions hereof and
to the release of any security at any time given for any payment hereunder, or
any part thereof, with or without substitution, and to the release of any Person
or entity liable for any such payment; and (viii) consent to the addition of any
and all other makers, endorsers, guarantors and other obligors for any payment
hereunder, and to the acceptance of any and all other security for any payment
hereunder, and agree that the addition of any such obligors or security shall
not affect the liability of the parties hereto for any payment hereunder.

(c) Nothing herein shall be construed as prohibiting any party hereto from
pursuing any rights or remedies it may have against any Person in a separate
legal proceeding.

Section 4.4 Assignments; Reinsurance; Third-Party Rights. (a) This Insurance
Agreement shall be a continuing obligation of the parties hereto and shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. None of the Transaction Parties may assign its
rights under this Insurance Agreement, or delegate any of its duties hereunder,
without the prior written consent of the Insurer. Any assignments made in
violation of this Insurance Agreement shall be null and void.

(b) The Insurer shall have the right to give participations in its rights under
this Insurance Agreement and to enter into contracts of reinsurance with respect
to the Ambac Policy upon such terms and conditions as the Insurer may in its
discretion determine; provided, however, that no such participation or
reinsurance agreement or arrangement shall relieve the Insurer of any of its
obligations hereunder or under the Ambac Policy, and provided, further, that any
reinsurer or participant will not have any rights against the Transaction
Parties or the Holders and that none of the Transaction Parties or the Holders
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any communication or relationship with any reinsurer or participant in order to
enforce the obligations of the Insurer hereunder and under the Ambac Policy.

(c) The Insurer shall be entitled to assign or pledge to any bank, other lender
or reinsurer providing liquidity or credit with respect to the Transaction or
the obligations of the Insurer in connection therewith, any rights of the
Insurer under the Transaction Documents or with respect to any real or personal
property or other interests pledged to the Insurer or in which the Insurer has a
security interest, in connection with the Transaction, subject in each case to
the liens granted pursuant to the Transaction Documents; provided that no such
bank or other lender shall thereby obtain any direct right against Transaction
Parties or the Holders, and further, provided; that no such assignment or pledge
shall give any assignee the right to exercise any discretionary authority that
the Transaction Documents provide shall be exercisable by the Insurer or relieve
the Insurer of any of its obligations hereunder or under the Ambac Policy.

(d) Except as provided herein with respect to participants and reinsurers,
nothing in this Insurance Agreement shall confer any right, remedy or claim,
express or implied, upon any Person not a party hereto, including any Holders,
other than the rights of the Insurer against the Transaction Parties and all the
terms, covenants, conditions, promises and agreements contained herein shall be
for the sole and exclusive benefit of the parties hereto and their successors
and permitted assigns. Neither the Indenture Trustee nor any Holders shall have
any right to payment from any Premiums paid or payable hereunder or under the
Indenture or from any amounts paid by the Issuing Entity or UACC pursuant to
Sections 3.2, 3.3 or 3.4 hereof.

Section 4.5 Liability of the Insurer. Neither the Insurer nor any of its
officers, directors or employees shall be liable or responsible for: (a) the use
that may be made of the Ambac Policy by the Indenture Trustee or any other party
or for any acts or omissions of the Indenture Trustee or any other party in
connection therewith; or (b) the validity, sufficiency, accuracy or genuineness
of documents delivered to the Insurer in connection with any claim under the
Ambac Policy, or of any signatures thereon, even if such documents or signatures
should in fact prove to be in any or all respects invalid, insufficient,
fraudulent or forged (unless the Insurer shall have actual knowledge thereof).
In furtherance and not in limitation of the foregoing, the Insurer may accept
documents that appear on their face to be in order, without responsibility for
further investigation.

Section 4.6 Regulation AB. The Insurer agrees that all consolidated financial
statements of Ambac Assurance Corporation and subsidiaries included in documents
filed by Ambac Financial Group, Inc. with the Securities and Exchange Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended, may be incorporated by reference into any Form 8-K, Form 10-D
or Form 10-K filed by the Seller, solely to the extent required under Regulation
AB. It is understood and agreed that, to the extent any consent letter of the
Insurer’s accountants is required by the Seller in connection with such filing,
the fees and expenses payable in respect thereof shall be paid by the UACC upon
demand.

The Insurer represents that, as of the date of the Prospectus Supplement and as
of each date that financial statements are to be incorporated by reference into
the Seller’s periodic filings, that it satisfies each of the conditions set
forth in Section 1100(c)(1) of Regulation AB (the “Section 1100(c)(1)
Conditions”); provided, however that to the extent that the Insurer does

 

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not in the future satisfy the Section 1100(c)(1) Conditions, the Insurer agrees
that it will promptly make its financial statements available in physical form
to the Seller promptly upon their becoming available. The Insurer also
represents that it will make available upon request of the Seller, any
information contemplated by Section 1119(a) of Regulation AB with regard to
affiliations that arise between it and the Trustee or any of its affiliates.

Section 4.7 Rights and Remedies. Each party (other than the Indenture Trustee)
to this Insurance Agreement has acknowledged and agreed to and hereby confirms
its acknowledgement and agreement to, and the Indenture Trustee has acknowledged
and hereby confirms its acknowledgement of, the collateral sale and assignment
by UACC to the Seller, by the Seller to the Issuing Entity, and each party to
this Insurance Agreement has acknowledged and agreed to and hereby confirms its
acknowledgement and agreement to the pledge by the Issuing Entity to the
Indenture Trustee, of all of its right, title and interest in, to and under the
Trust Estate, and the Transaction Documents and all of the Issuing Entity’s
rights, remedies, powers and privileges and all claims of the Issuing Entity or
the Seller, as the case may be, against UACC, of the Issuing Entity or the
Seller, as the case may be, and of the Issuing Entity against the Seller, under
or with respect to the Transaction Documents (whether arising pursuant to the
terms thereof or otherwise available at law or in equity), including without
limitation (whether or not any of a Default or Event of Default under the
Indenture, an Event of Default hereunder, a Servicer Termination Event or a
Trigger Event has occurred and is continuing) (i) the right of the Issuing
Entity at any time to enforce the Transaction Documents against the Servicer,
the Seller or UACC and the obligations of the Servicer, the Seller, and UACC
thereunder and (ii) the right at any time to give or withhold any and all
consents, requests, notices, directions, approvals, demands, extensions or
waivers under or with respect to any Transaction Document or the obligations in
respect of the Issuing Entity, the Servicer, the Seller or UACC thereunder, all
of which rights, remedies, powers, privileges and claims may, notwithstanding
any provision to the contrary by any of the Transaction Documents, be exercised
and/or enforced by the Indenture Trustee in lieu of and in the place and stead
of the Seller and the Issuing Entity to the same extent as the Seller or the
Issuing Entity would otherwise do, and except to the extent a Transaction
Document provides that the Insurer shall not have such a right upon an Insurer
Default that has occurred and is continuing, neither the Seller nor the Issuing
Entity may exercise any of the foregoing rights without the prior written
consent of the Insurer. Each party hereto further acknowledges and agrees that,
unless an Insurer Default has occurred and is continuing, the Indenture Trustee
will take or refrain from taking any action, and exercise or refrain from
exercising any rights under the Transaction Documents in its capacity as
Indenture Trustee pursuant to the written direction of the Insurer; provided,
however, that the obligations of the Indenture Trustee to take or refrain from
taking, or to exercise or refrain from exercising, any such action or rights
shall not apply to routine administrative tasks required to be performed by the
Indenture Trustee pursuant to the Transaction Documents and shall be limited to
those actions and rights that can be exercised or taken (or not exercised or
taken, as the case may be) in full compliance with the provisions of the
Transaction Documents and with applicable law.

 

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ARTICLE V

DEFAULTS AND REMEDIES

Section 5.1 Defaults. The occurrence of any of the following events shall
constitute an “Event of Default” hereunder:

(a) Any representation or warranty made by any of the Transaction Parties
hereunder or under the Transaction Documents, or in any certificate furnished
hereunder or under the Transaction Documents, prove to be untrue or misleading
in any material respect; provided, however, that if such Transaction Party
effectively cures any such defect in any representation or warranty under any
Transaction Document or certificate or report furnished under any Transaction
Document, within the time period specified in the related Transaction Document
as the cure period therefor, such defect shall not in and of itself constitute
an Event of Default;

(b) (i) Any Transaction Party fails to pay or deposit when due any amount
required to be paid or deposited by it hereunder or under any other Transaction
Document and such failure has continued for a period of at least two
(2) Business Days or, if so specified in the applicable Transaction Document,
the applicable grace period set forth herein, or (ii) a legislative body has
enacted any law that declares or a court of competent jurisdiction finds or
rules that this Insurance Agreement or any other Transaction Document is not
valid and binding on the Transaction Parties hereto or thereto;

(c) The occurrence and continuance of an Event of Default under the Indenture or
Servicer Termination Event under the Sale and Servicing Agreement;

(d) Any failure on the part of any Transaction Party duly to observe or perform
in any material respect any other of the covenants or agreements on the part of
such Transaction Party contained in this Insurance Agreement or in any other
Transaction Document which continues unremedied beyond any cure period provided
therein, or, in the case of this Insurance Agreement, for a period of 30 days
after the earlier of the date on which written notice of such failure, requiring
the same to be remedied, has been given to UACC by the Insurer (with a copy to
the Indenture Trustee) or by the Indenture Trustee (with a copy to the Insurer),
or a Responsible Officer of such Transaction Party has actual knowledge thereof;

(e) The entry of a decree or order by a court or agency or supervisory authority
having jurisdiction in the premises for appointment of a conservator, receiver
or liquidator or similar official for any Transaction Party which is a party to
any Transaction Document in any bankruptcy, insolvency, readjustment of debt,
marshaling of assets and liabilities or similar proceedings or for the winding
up or liquidation of its respective affairs, and the continuance of any such
decree or order unstayed and in effect for a period of 30 consecutive days;

(f) The consent by any Transaction Party to the appointment of a conservator or
receiver or liquidator or similar official in any bankruptcy, insolvency,
readjustment of debt, marshaling of assets and liabilities, or similar
proceedings of or relating to such Transaction Party or relating to all or
substantially all of its respective property; or any such Transaction

 

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Party admits in writing its inability to pay its debts generally as they become
due, files a petition to take advantage of any applicable bankruptcy, insolvency
or reorganization statute, make an assignment for the benefit of its creditors
or voluntarily suspends payment of its obligations;

(g) Ray Thousand is not the Chief Executive Officer of United PanAm Financial
Corporation, and the replacement Chief Executive Officer has not been approved
by the Insurer;

(h) The shadow rating of the notes provided by S&P or Moody’s shall fall below
“BBB” or “Baa2,” respectively;

(i) Failure by the Servicer to (x) deliver the Servicer’s Certificate by the
Determination Date, (y) to deposit to the Collection Account any amount required
to be deposited therein or (z) to purchase any Receivable required to be
purchased by it in accordance with the Sale and Servicing Agreement in the case
of any of (x), (y) or (z), after the earlier to occur of (1) written notice of
such failure having been received by the Servicer from the Indenture Trustee,
the Issuing Entity, the Insurer or the Majority Noteholders; or (2) discovery of
such failure by an officer of the Servicer;

(j) A claim is made under the Policy;

(k) There is a Change in Control;

(l) UACC changes its credit and collection policy with respect to the
Receivables without the prior written consent of the Insurer;

(m) The Issuing Entity becoming taxable as an association or a publicly traded
partnership taxable as a corporation for federal or state tax purposes;

(n) A Level 3 Trigger Event shall have occurred;

(o) The Servicer realizes a net loss as determined in accordance with generally
accepted accounting principles in each of two consecutive fiscal quarters;

(p) A final, non-appealable judgment shall be entered against, or settlements by
any of the Transaction Parties by a court of competent jurisdiction assessing
monetary damages in excess of $10 million and, in the case of a judgment, such
judgment shall not have been discharged or stayed within 60 days;

(q) Except as permitted by the Basic Documents, UPFC, the Seller or the Servicer
shall make any assignment of any of its rights or obligations under the Basic
Documents or any attempt to make such an assignment without the express written
consent of the Insurer; or

(r) UPFC or any of their affiliates or subsidiaries is in default under any
indebtedness having an outstanding principal amount of $1 million or more.

Section 5.2 Remedies; No Remedy Exclusive. (a) Upon the occurrence of an Event
of Default hereunder, the Insurer may take whatever action at law or in equity
as may appear necessary or desirable in its judgment to collect the amounts, if
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Insurance Agreement or any other Transaction Document or to enforce performance
and observance of any obligation, agreement or covenant of the Transaction
Parties under this Insurance Agreement or any other Transaction Document, either
in its own capacity or as Controlling Party.

(b) Unless otherwise expressly provided, no remedy herein conferred or reserved
is intended to be exclusive of any other available remedy, but each remedy shall
be cumulative and shall be in addition to other remedies given under this
Insurance Agreement or any other Transaction Document, or existing at law or in
equity. No delay or omission to exercise any right or power accruing under this
Insurance Agreement or any other Transaction Document upon the happening of any
event set forth in Section 5.1 shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised
from time to time and as often as may be deemed expedient. In order to entitle
the Insurer to exercise any remedy reserved to the Insurer in this Article, it
shall not be necessary to give any notice, other than such notice as may be
required by this Article.

(c) Each party to this Insurance Agreement hereby agrees that, in addition to
any other rights or remedies existing in its favor, it shall be entitled to
specific performance and/or injunctive relief in order to enforce any of its
rights or any obligation owed to it under the Transaction Documents.

Section 5.3 Waivers. (a) No failure by the Insurer to exercise, and no delay by
the Insurer in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by the Insurer of any right hereunder shall not preclude
the exercise of any other right, and the remedies provided herein to the Insurer
are declared in every case to be cumulative and not exclusive of any remedies
provided by law or equity.

(b) The Insurer shall have the right, to be exercised in its complete
discretion, to waive any Event of Default hereunder, by a writing setting forth
the terms, conditions and extent of such waiver signed by the Insurer and
delivered to UACC and the Indenture Trustee. Unless such writing expressly
provides to the contrary, any waiver so granted shall extend only to the
specific event or occurrence which gave rise to the Event of Default so waived
and not to any other similar event or occurrence which occurs subsequent to the
date of such waiver.

ARTICLE VI

MISCELLANEOUS

Section 6.1 Amendments, Etc. This Insurance Agreement may be amended, modified,
supplemented or terminated only by written instrument or written instruments
signed by the parties hereto. No consent of any reinsurer or participant
contracted with by the Insurer pursuant to Section 4.4(b) hereof shall be
required for any amendment, modification, supplement or termination hereof. UACC
agrees to provide a copy of any amendment to this Insurance Agreement promptly
to the Rating Agencies. No act or course of dealing shall be deemed to
constitute an amendment, modification, supplement or termination hereof. Unless
an Insurer Event of Default has occurred and is continuing, the other
Transaction Documents may be amended, modified or supplemented only with the
prior written consent of the Insurer and any amendment, modification or
supplement without such consent shall be null and void and of no force and
effect.

 

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Section 6.2 Notices. All demands, notices and other communications to be given
hereunder shall be in writing (except as otherwise specifically provided herein)
and shall be (i) mailed by prepaid registered or certified mail, return receipt
requested, or (ii) personally delivered by messenger or overnight courier (with
confirmation of receipt) and in either case telecopied to the recipient as
follows:

(a) To the Insurer:

 

Ambac Assurance Corporation    One State Street Plaza    New York, New York
10004    Attention: Structured Finance Department – ABS    Telecopy No.:
212-208-3547    Confirmation: 212-668-0340    with a copy to the attention of:
   Michael Babick, Vice President    Telecopy No.: 212-363-1459    Confirmation:
212-208-3407

(in each case in which notice or other communication to the Insurer refers to a
Servicer Termination Event, an Event of Default hereunder, a Default or Event of
Default under the Indenture or a Trigger Event, a claim on the Ambac Policy or
any event with respect to which failure on the part of the Insurer to respond
shall be deemed to constitute consent or acceptance, then a copy of such notice
or other communication shall also be sent to the attention of the general
counsel of each of the Insurer and the Indenture Trustee and shall be marked to
indicate “URGENT MATERIAL ENCLOSED.”)

(b) To UACC:

United Auto Credit Corporation

3990 Westerly Place, Suite 200

Newport Beach, California 92660

Attention: Garland Koch, CFO

Telephone: 949-224-1917

Facsimile: 949-224-1910

(c) To the Seller:

UPFC Auto Financing Corporation

3990 Westerly Place, Suite 200

Newport Beach, California 92660

Attention: Arash Khazei

Telephone: 949-224-1917

Facsimile: 949-224-1910

 

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(d) To the Issuing Entity:

 

UPFC Auto Receivables Trust 2006-B    in care of:    Wells Fargo Delaware Trust
Company,    as Owner Trustee    919 N. Market Street    Suite 700    Wilmington,
Delaware 19801    Attention: Corporate Trust                      Services   
Telephone: (302) 575-2004    Facsimile: (302) 575-2006 with a copy to the
attention of:    United Auto Credit Corporation    3990 Westerly Place, Suite
200    Newport Beach, California 92660    Attention: Garland Koch, CFO   
Telephone: 949-224-1917    Facsimile: 949-224-1910

(e) To the Indenture Trustee:

Deutsche Bank Trust Company Americas

Corporate Trust and Agency Services

60 Wall Street, 26th Floor

New York, NY 10005

Attention: Structured Finance Services

Phone: (212) 250-4772

Facsimile: (212) 797-8606

A party may specify an additional or different address or addresses by writing
mailed or delivered to the other parties as aforesaid. All such notices and
other communications shall be effective upon receipt.

Section 6.3 Severability. In the event that any provision of this Insurance
Agreement is held invalid or unenforceable by any court of competent
jurisdiction, the parties hereto agree that such holding shall not invalidate or
render unenforceable any other provision hereof. The parties hereto further
agree that the holding by any court of competent jurisdiction that any remedy
pursued by any party hereto is unavailable or unenforceable shall not affect in
any way the ability of such party to pursue any other remedy available to it.

Section 6.4 Governing Law. This Insurance Agreement shall be governed by and
construed in accordance with the laws of the State of New York without regard to
conflicts of laws provisions.

Section 6.5 Consent to Jurisdiction. (a) THE PARTIES HERETO HEREBY IRREVOCABLY
SUBMIT TO THE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND ANY

 

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COURT IN THE STATE OF NEW YORK LOCATED IN THE CITY AND COUNTY OF NEW YORK, AND
ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION, SUIT OR PROCEEDING BROUGHT
AGAINST IT AND TO OR IN CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE
TRANSACTION OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT RELATING THERETO,
AND THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREE THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING SHALL BE HEARD OR DETERMINED
IN SUCH NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL
COURT. THE PARTIES AGREE THAT A FINAL NONAPPEALABLE JUDGMENT IN ANY SUCH ACTION,
SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY WAIVE AND AGREE NOT
TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE IN ANY SUCH SUIT, ACTION
OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION
OF SUCH COURTS, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER
OR THAT THE RELATED DOCUMENTS OR THE SUBJECT MATTER THEREOF MAY NOT BE LITIGATED
IN OR BY SUCH COURTS.

(b) To the extent permitted by applicable law, the parties shall not seek and
hereby waive the right to any review of the judgment of any such court by any
court of any other nation or jurisdiction which may be called upon to grant an
enforcement of such judgment.

(c) Service on any party hereto may be made by mailing or delivering copies of
the summons and complaint and other process which may be served in any suit,
action or proceeding to such party at its address listed in Section 6.2 herein.
Such address may be changed by the applicable party or parties by written notice
to each of the other parties hereto.

(d) Nothing contained in this Insurance Agreement shall limit or affect any
party’s right to serve process in any other manner permitted by law or to start
legal proceedings relating to any of the Transaction Documents against any other
party or its properties in the courts of any jurisdiction.

Section 6.6 Consent of the Insurer. In the event that the consent of the Insurer
is required under any of the Transaction Documents, the determination whether to
grant or withhold such consent shall be made by the Insurer in writing and in
its sole discretion except to the extent such consent of the Insurer pursuant to
the terms of the applicable Transaction Document may not be unreasonably
withheld, and without any implied duty towards any other Person.

Section 6.7 Counterparts. This Insurance Agreement may be executed in
counterparts by the parties hereto, and all such counterparts shall constitute
one and the same instrument.

 

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Section 6.8 Headings. The headings of Articles and Sections and the Table of
Contents contained in this Insurance Agreement are provided for convenience
only. They form no part of this Insurance Agreement and shall not affect its
construction or interpretation.

Section 6.9 Trial by Jury Waived. Each party hereby waives, to the fullest
extent permitted by law, any right to a trial by jury in respect of any
litigation arising directly or indirectly out of, under or in connection with
any of the Transaction Documents or any of the transactions contemplated
thereunder. Each party hereto (a) certifies that no representative, agent or
attorney of any party hereto has represented, expressly or otherwise, that it
would not, in the event of litigation, seek to enforce the foregoing waiver and
(b) acknowledges that it has been induced to enter into the Transaction
Documents to which it is a party by, among other things, this waiver.

Section 6.10 Limited Liability. No recourse under any Transaction Document shall
be had against, and no personal liability shall attach to, any officer,
employee, director, affiliate or shareholder of the Insurer or any other party
hereto, as such, by the enforcement of any assessment or by any legal or
equitable proceeding, by virtue of any statute or otherwise in respect of any of
the Transaction Documents (including the Class A Notes and the Ambac Policy), it
being expressly agreed and understood that each Transaction Document is solely a
corporate obligation of each party hereto, and that any and all personal
liability, either at common law or in equity, or by statute or constitution, of
every such officer, employee, director, affiliate or shareholder for breaches of
any party hereto of any obligations under any Transaction Document is hereby
expressly waived as a condition of and in consideration for the execution and
delivery of this Insurance Agreement.

Section 6.11 Entire Agreement; Facsimile Signatures. This Insurance Agreement,
the Fee Letter and the Ambac Policy set forth the entire agreement between the
parties with respect to the subject matter hereof and thereof, and supersede and
replace any agreement or understanding that may have existed between the parties
prior to the date hereof in respect of such subject matter. Execution and
delivery of this Insurance Agreement by facsimile signature shall constitute
execution and delivery of this Insurance Agreement for all purposes hereof with
the same force and effect as execution and delivery of a manually signed copy
hereof.

Section 6.12 Indenture Trustee. (a) Deutsche Bank Trust Company Americas, as the
Indenture Trustee, Trust Collateral Agent and Backup Servicer hereby
acknowledges and agrees to perform all its obligations and duties pursuant to
the Transaction Documents to which it is a party thereto.

(b) In order to comply with laws, rules, regulations and executive orders in
effect from time to time applicable to banking institutions, including those
relating to the funding of terrorist activities and money laundering
(“Applicable Law”), the Indenture Trustee is required to obtain, verify and
record certain information relating to individuals and entities which maintain a
business relationship with the Indenture Trustee. Accordingly, each of the
parties agrees to provide to the Indenture Trustee upon its request from time to
time such identifying information and documentation as may be available for such
party in order to enable the Indenture Trustee to comply with Applicable Law.

 

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Section 6.13 Third Party Beneficiary. Subject to the provisions of the
Transaction Documents, each of the parties hereto agrees that the Insurer shall
have all rights of an intended third party beneficiary in respect of each of the
Transaction Documents, including the right to enforce the respective obligations
of the parties thereunder.

Section 6.14 No Proceedings. Each of the parties hereto agrees that it will not
institute against the Issuing Entity or the Seller any involuntary proceeding or
otherwise institute any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding or other proceeding under any federal or state bankruptcy
or similar law until the date which is one year and one day or, if longer, the
then applicable preference period plus one day, since the last day on which any
Class A Notes shall have been outstanding and all amounts payable to the Insurer
hereunder shall have been paid in full.

Section 6.15 Limitation of Owner Trustee Liability. It is expressly understood
and agreed by the parties hereto that (a) this document is executed and
delivered by Wells Fargo Delaware Trust Company, not individually or personally,
but solely as Owner Trustee, in the exercise of the powers and authority
conferred and vested in it, pursuant to the Trust Agreement for UPFC Auto
Receivables Trust 2006-B, (b) each of the representations, undertakings and
agreements herein made on the part of the Issuing Entity is made and intended
not as personal representations, undertakings and agreements by Wells Fargo
Delaware Trust Company but is made and intended for the purpose for binding only
the Issuing Entity, (c) nothing herein contained shall be construed as creating
any liability on Wells Fargo Delaware Trust Company, individually or personally,
to perform any covenant either expressed or implied contained herein, all such
liability, if any, being expressly waived by the parties hereto and by any
person claiming by, through or under the parties hereto, and (d) under no
circumstances shall Wells Fargo Delaware Trust Company be personally liable for
the payment of any indebtedness or expenses of the Issuing Entity or be liable
for the breach or failure of any obligation, representation, warranty or
covenant made or undertaken by the Issuing Entity under this Agreement or any
other related documents.

Section 6.16 Limitation of Indenture Trustee, Trust Collateral Agent and Backup
Servicer Liability. In no event shall the Indenture Trustee, the Trust
Collateral Agent and the Backup Servicer be liable for any indirect, special,
punitive or consequential loss or damage of any kind whatsoever, including but
not limited to, lost profits, even if the Indenture Trustee, the Trust
Collateral Agent or the Backup Servicer has been advised of such loss or damage
and regardless of the form of action.

In no event shall the Indenture Trustee, the Trust Collateral Agent and the
Backup Servicer be liable for any failure or delay in the performance of its
obligations hereunder because of circumstances beyond its control, including but
not limited to, acts of God, flood, war (whether declared or undeclared),
terrorism, fire, riot, embargo, government action, including any laws,
ordinances, regulations, governmental action or the like which delay, restrict
or prohibit the providing of the services contemplated by this Insurance
Agreement.

ANY PERSON WHO KNOWINGLY AND WITH INTENT TO DEFRAUD ANY INSURANCE COMPANY OR
OTHER PERSON FILES AN APPLICATION FOR INSURANCE OR STATEMENT OF CLAIM CONTAINING
ANY MATERIALLY FALSE

 

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INFORMATION, OR CONCEALS FOR THE PURPOSE OF MISLEADING, INFORMATION CONCERNING
ANY FACT MATERIAL THERETO, COMMITS A FRAUDULENT INSURANCE ACT, WHICH IS A CRIME
AND SHALL ALSO BE SUBJECT TO A CIVIL PENALTY NOT TO EXCEED FIVE THOUSAND DOLLARS
AND THE STATED VALUE OF THE CLAIM FOR EACH SUCH VIOLATION.

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IN WITNESS WHEREOF, the parties hereto have executed this Insurance Agreement,
all as of the day and year first above mentioned.

 

AMBAC ASSURANCE CORPORATION, as Insurer By:       

Name:

Title:

UPFC AUTO RECEIVABLES TRUST 2006-B, as Issuing Entity By:   WELLS FARGO DELAWARE
TRUST COMPANY, not in its individual capacity, but solely as Owner Trustee By:  
    

Name:

Title:

UPFC AUTO FINANCING CORPORATION, as Seller By:       

Name:

Title:

UNITED AUTO CREDIT CORPORATION, as Servicer By:       

Name:

Title:

 

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DEUTSCHE BANK TRUST COMPANY AMERICAS not in its individual capacity, but solely
as Indenture Trustee, Trust Collateral Agent and Backup Servicer By:       

Name:

Title:

By:       

Name:

Title:

 

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EXHIBIT A

FORM OF AMBAC POLICY

 

A-1