Document:

Exhibit 4.3

                                                          FINANCIAL GUARANTY
                                                          INSURANCE POLICY

OBLIGOR:. Long Beach Acceptance Auto Receivables              Policy No.:51759-N
          Trust 2006-B
OBLIGATIONS: $100,000,000 5.37% Asset Backed Notes,   Date of Issuance: 09/28/06
             Class A-1
             $137,000,000 5.34% Asset Backed Notes, Class A-2
             $147,000,000 5.17% Asset Backed Notes, Class A-3
             $116,000,000 5.18% Asset Backed Notes, Class A-4

      FINANCIAL   SECURITY   ASSURANCE   INC.   ("Financial   Security"),    for
consideration  received,  hereby  UNCONDITIONALLY AND IRREVOCABLY  GUARANTEES to
each  Holder,  subject  only to the terms of this Policy  (which  includes  each
endorsement  hereto),  the full and complete payment by the Obligor of Scheduled
Payments of principal of, and interest on, the Obligations.

      For the further protection of each Holder,  Financial Security irrevocably
and unconditionally guarantees:

            (a) payment of the amount of any  distribution  of principal  of, or
      interest on, the  Obligations  made during the Term of this Policy to such
      Holder that is  subsequently  avoided in whole or in part as a  preference
      payment  under  applicable  law  (such  payment  to be made  by  Financial
      Security in accordance with Endorsement No. 1 hereto).

            (b)  payment of any amount  required to be paid under this Policy by
      Financial  Security  following  Financial  Security's receipt of notice as
      described in Endorsement No. 1 hereto.

      Financial  Security  shall be  subrogated  to the rights of each Holder to
receive payments under the Obligations to the extent of any payment by Financial
Security hereunder.

      Except to the extent  expressly  modified by an  endorsement  hereto,  the
following  terms  shall have the  meanings  specified  for all  purposes of this
Policy.  "Holder" means the  registered  owner of any Obligation as indicated on
the  registration  books  maintained  by or on  behalf of the  Obligor  for such
purpose or, if the Obligation is in bearer form,  the holder of the  Obligation.
"Scheduled  Payments"  means  payments which are scheduled to be made during the
Term of this Policy in  accordance  with the original  terms of the  Obligations
when  issued  and  without  regard  to any  amendment  or  modification  of such
Obligations  thereafter;  payments which become due on an accelerated basis as a
result of (a) a default by the  Obligor,  (b) an  election by the Obligor to pay
principal on an accelerated  basis or (c) any other cause,  shall not constitute
"Scheduled  Payments"  unless  Financial  Security  shall  elect,  in  its  sole
discretion,  to pay such principal due upon such acceleration  together with any
accrued interest to the date of  acceleration.  "Term of this Policy" shall have
the meaning set forth in Endorsement No. 1 hereto.

      This Policy sets forth in full the undertaking of Financial Security,  and
shall not be modified, altered or affected by any other agreement or instrument,
including any modification or amendment thereto, or by the merger, consolidation
or dissolution  of the Obligor.  Except to the extent  expressly  modified by an
endorsement   hereto,   the  premiums   paid  in  respect  of  this  Policy  are
nonrefundable for any reason whatsoever,  including payment,  or provision being
made for payment,  of the Obligations prior to maturity.  This Policy may not be
cancelled or revoked during the Term of this Policy.  THIS POLICY IS NOT COVERED
BY THE PROPERTY/CASUALTY  INSURANCE SECURITY FUND SPECIFIED IN ARTICLE 76 OF THE
NEW YORK INSURANCE LAW.

      In witness  whereof,  FINANCIAL  SECURITY  ASSURANCE  INC. has caused this
Policy to be executed on its behalf by its Authorized Officer.

                                               FINANCIAL SECURITY ASSURANCE INC.

                                               By    /s/ M. Douglas Watson Jr.
                                                  ------------------------------
                                                        Authorized Officer

A subsidiary of Financial Security Assurance Holdings Ltd.
31 West 52nd Street, New York, NY 10019                           (212) 826-0100
Form 100NY (5/89)

<PAGE>

                                ENDORSEMENT NO. 1
                     TO FINANCIAL GUARANTY INSURANCE POLICY

FINANCIAL SECURITY                                           31 West 52nd Street
ASSURANCE INC.                                          New York, New York 10019

OBLIGOR: LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST 2006-B

OBLIGATIONS:      $100,000,000 5.37% Asset Backed Notes, Class A-1
                  $137,000,000 5.34% Asset Backed Notes, Class A-2
                  $147,000,000 5.17% Asset Backed Notes, Class A-3
                  $116,000,000 5.18% Asset Backed Notes, Class A-4

Policy No.:       51759-N

Date of Issuance: September 28, 2006

      1. Definitions. For all purposes of this Policy, the terms specified below
shall have the meanings or constructions provided below.  Capitalized terms used
herein and not otherwise  defined herein shall have the meanings provided in the
Indenture unless the context shall otherwise require.

      "Business Day" means any day other than (i) a Saturday or Sunday or (ii) a
day on which banking  institutions  in the City of New York, New York, the State
of New Jersey,  the State of  Delaware,  the city in which the  Corporate  Trust
Office of the Trust Collateral  Agent or the Owner Trustee is relocated  subject
to prior written notice with respect to such address to the Class A Noteholders,
the  Servicer  and the Note  Insurer  or any  other  location  of any  successor
Servicer,  successor  Owner Trustee,  successor  Indenture  Trustee or successor
Trust  Collateral Agent are authorized or obligated by law or executive order to
be closed.

      "Class A Interest  Payment Amount" shall have the meaning set forth in the
Sale and Servicing Agreement.

      "Class A  Noteholder"  shall have the meaning set forth in the  Indenture;
provided,  however, that Class A Noteholder shall not include the Obligor or any
affiliates or successors thereof in the event the Obligor, or any such affiliate
or successor, is a registered or beneficial owner of a Class A Note.

      "Class A-1 Interest Carryover  Shortfall" shall have the meaning set forth
in the Sale and Servicing Agreement.

<PAGE>

Policy No. 51759-N                          Date of Issuance: September 28, 2006

      "Class A-2 Interest Carryover  Shortfall" shall have the meaning set forth
in the Sale and Servicing Agreement.

      "Class A-3 Interest Carryover  Shortfall" shall have the meaning set forth
in the Sale and Servicing Agreement.

      "Class A-4 Interest Carryover  Shortfall" shall have the meaning set forth
in the Sale and Servicing Agreement.

      "Final  Scheduled  Payment  Date"  shall have the meaning set forth in the
Sale and Servicing Agreement.

      "Financial  Security" means Financial  Security Assurance Inc., a New York
stock insurance company.

      "Indenture"  means the Indenture,  dated as of September 1, 2006,  between
Long Beach Acceptance Auto Receivables Trust 2006-B, as Issuer and Deutsche Bank
Trust Company Americas,  as Indenture  Trustee,  as amended from time to time in
accordance with its terms.

      "Indenture Trustee" means Deutsche Bank Trust Company Americas, a New York
banking  corporation,  in its capacity as Indenture  Trustee under the Indenture
and any successor in such capacity.

      "Noteholders'  Remaining Parity Deficit Amount" shall have the meaning set
forth in the Sale and Servicing Agreement.

      "Policy" means this Financial  Guaranty Insurance Policy and includes each
endorsement thereto.

      "Principal  Payment  Amount"  shall have the meaning set forth in the Sale
and Servicing Agreement.

      "Receipt" and "Received" mean actual delivery to Financial Security and to
the Fiscal Agent (as defined below),  if any, prior to 12:00 noon, New York City
time, on a Business Day; delivery either on a day that is not a Business Day, or
after 12:00 noon,  New York City time,  shall be deemed to be  "Receipt"  on the
next  succeeding  Business Day. If any notice or certificate  given hereunder by
the Trust Collateral  Agent is not in proper form or is not properly  completed,
executed  or  delivered,  it shall be  deemed  not to have  been  Received,  and
Financial  Security  or its  Fiscal  Agent  shall  promptly  so advise the Trust
Collateral Agent and the Trust Collateral Agent may submit an amended notice.

      "Sale and Servicing  Agreement"  means the Sale and  Servicing  Agreement,
dated as of  September  1,  2006,  among the  Obligor,  as  Issuer,  Long  Beach
Acceptance  Receivables  Corp., as Transferor,  Long Beach Acceptance  Corp., as
Originator,  Servicer and Custodian and Deutsche Bank Trust Company Americas, as
Back-up  Servicer and Trust  Collateral  Agent,  as amended from time to time in
accordance with its terms.

                                       2
<PAGE>

Policy No. 51759-N                          Date of Issuance: September 28, 2006

      "Scheduled  Payments"  means,  (i) with respect to each Payment Date,  the
distribution  to be made to Class A Noteholders in an aggregate  amount equal to
the Class A  Interest  Payment  Amount  and the  Noteholders'  Remaining  Parity
Deficit  Amount,  each as due and payable on such  Payment  Date,  and (ii) with
respect  to the  Final  Scheduled  Payment  Date  for any  Class of  Notes,  the
Principal  Payment  Amount of such Class on such Final  Scheduled  Payment Date,
after taking into account  reductions  on such Final  Scheduled  Payment Date of
such Principal  Payment Amount from all sources other than this Policy,  in each
case in accordance  with the original terms of the Class A Notes when issued and
without  regard to any  amendment  or  modification  of the  Class A Notes,  the
Indenture,   or  the  Sale  and  Servicing   Agreement   except   amendments  or
modifications  to which Financial  Security has given its prior written consent;
provided,  however, that Scheduled Payments shall not include (x) any portion of
the Class A Interest  Payment  Amount  due to Class A  Noteholders  because  the
appropriate  notice and  certificate  for  payment in proper form was not timely
Received  by  Financial  Security  or (y) any  portion  of the Class A  Interest
Payment Amount due to Class A Noteholders representing interest on any Class A-1
Interest Carryover Shortfall,  Class A-2 Interest Carryover Shortfall, Class A-3
Interest Carryover  Shortfall or Class A-4 Interest Carryover  Shortfall unless,
in each case,  Financial  Security elects,  in its sole discretion,  to pay such
amount in whole or in part.  Scheduled  Payments  do not include  payments  that
become due on an accelerated  basis as a result of (a) a default by the Obligor,
(b) an election by the Obligor to pay principal on an accelerated basis, (c) the
occurrence  of an Event of Default  under the  Indenture or (d) any other cause,
unless, in each case, Financial Security elects, in its sole discretion,  to pay
in whole or in part such  principal  due upon  acceleration,  together  with any
accrued  interest  to the date of  acceleration.  Scheduled  Payments  shall not
include  any  amounts  due in respect of the Class A Notes  attributable  to any
increase in interest rate, any penalty or any similar  additional sum payable by
the  Obligor  by reason of any  default  or event of  default  in respect of the
Obligations or by reason of any  deterioration  of the  creditworthiness  of the
Obligor.  Scheduled  Payments shall not include,  nor shall coverage be provided
under the Policy in respect of, any taxes,  withholding  or other charge imposed
by any  governmental  authority  due  in  connection  with  the  payment  of any
Scheduled Payment to a Class A Noteholder.

      "Term Of This  Policy"  means the period  from and  including  the Date of
Issuance to and  including  the latest of the date on which (i) the  outstanding
principal  amount  of the  Class A  Notes  has  been  reduced  to  zero  and all
distributions  of Class A Interest  Payment Amount have been paid on the Class A
Notes,  (ii) any period during which any payment on the Class A Notes could have
been  avoided  in  whole or in part as a  preference  payment  under  applicable
bankruptcy,  insolvency,  receivership or similar law has expired,  and (iii) if
any  proceedings  requisite  to  avoidance  as a  preference  payment  have been
commenced  prior to the  occurrence  of (i) and (ii), a final and  nonappealable
order in resolution of each such proceeding has been entered.

      "Trust Collateral Agent" means Deutsche Bank Trust Company Americas, a New
York banking  corporation,  in its capacity as Trust  Collateral Agent under the
Sale and Servicing Agreement and any successor in such capacity.

                                       3
<PAGE>

Policy No. 51759-N                          Date of Issuance: September 28, 2006

      2. Notices and  Conditions  to Payment in Respect of  Scheduled  Payments.
Following  Receipt by Financial  Security of a notice and  certificate  from the
Trust  Collateral  Agent in the form attached as Exhibit A to this  Endorsement,
Financial Security will pay any amount payable hereunder in respect of Scheduled
Payments on the Obligations out of the funds of Financial  Security on the later
to occur of (a) 12:00  noon,  New York City  time,  on the  third  Business  Day
following  such Receipt;  and (b) 12:00 noon, New York City time, on the Payment
Date to which such claim relates. Payments due hereunder in respect of Scheduled
Payments will be disbursed by wire transfer of  immediately  available  funds to
the Policy  Payments  Account  established  pursuant  to the Sale and  Servicing
Agreement or, if no such Policy Payments  Account has been  established,  to the
Trust Collateral Agent.

      Financial  Security  shall be  entitled  to pay any  amount  hereunder  in
respect of Scheduled Payments on the Obligations including any amount due on the
Obligations on an accelerated  basis,  whether or not any notice and certificate
shall have been  Received by  Financial  Security as provided  above;  provided,
however,  that by acceptance of this Policy the Trust Collateral Agent agrees to
provide to Financial  Security,  upon request by Financial Security to the Trust
Collateral  Agent a notice  of claim  and  certificate  in  respect  of any such
payments made by Financial Security. Financial Security shall be entitled to pay
hereunder any amount due on the  Obligations  that becomes due on an accelerated
basis at any time or from time to time after such amount  becomes  due, in whole
or in part, prior to the scheduled date of payment thereof.  Scheduled  Payments
insured  hereunder  shall not include  interest,  in respect of  principal  paid
hereunder  on an  accelerated  basis,  accruing  from and after the date of such
payment of principal.  Financial Security's  obligations hereunder in respect of
Scheduled  Payments  shall be  discharged  to the extent funds are  disbursed by
Financial  Security as provided  herein  whether or not such funds are  properly
applied by the Trust Collateral Agent.

      3.  Notices and  Conditions  to Payment in Respect of  Scheduled  Payments
Avoided  as  Preference  Payments.  If any  Scheduled  Payment  is  avoided as a
preference  payment under  applicable  bankruptcy,  insolvency,  receivership or
similar  law,  Financial  Security  will pay  such  amount  out of the  funds of
Financial  Security on the later of (a) the date when due to be paid pursuant to
the  Order  (as  defined  below)  or (b) the  first to  occur of (i) the  fourth
Business Day following  Receipt by Financial  Security from the Trust Collateral
Agent of (A) a certified  copy of the order (the  "Order") of the court or other
governmental  body which  exercised  jurisdiction to the effect that the Class A
Noteholder is required to return the amount of any Scheduled Payment distributed
with  respect to the  Obligations  during the Term Of This Policy  because  such
distributions were avoidable as preference payments under applicable  bankruptcy
law, (B) a certificate of the Class A Noteholder that the Order has been entered
and is not subject to any stay and (C) an assignment duly executed and delivered
by the Class A Noteholder,  in such form as is reasonably  required by Financial
Security  and  provided  to  the  Class  A  Noteholder  by  Financial  Security,
irrevocably assigning to Financial Security all rights and claims of the Class A
Noteholder relating to or arising under the Obligations against the debtor which
made such  preference  payment or  otherwise  with  respect  to such  preference
payment  or (ii)  the date of  Receipt  by  Financial  Security  from the  Trust
Collateral  Agent of the items referred to in clauses (A), (B) and (C) above if,
at least four

                                       4
<PAGE>

Policy No. 51759-N                          Date of Issuance: September 28, 2006

Business  Days  prior to such date of  Receipt,  Financial  Security  shall have
Received  written notice from the Trust Collateral Agent that such items were to
be  delivered  on such date and such date was  specified  in such  notice.  Such
payment shall be disbursed to the receiver, conservator, debtor-in-possession or
trustee in bankruptcy  named in the Order and not to the Trust  Collateral Agent
or any Class A Noteholder  directly  (unless a Class A Noteholder has previously
paid such amount to the receiver,  conservator,  debtor-in-possession or trustee
in bankruptcy  named in the Order, in which case such payment shall be disbursed
to the Trust  Collateral  Agent for distribution to such Class A Noteholder upon
proof  of such  payment  reasonably  satisfactory  to  Financial  Security).  In
connection with the foregoing, Financial Security shall have the rights provided
pursuant to Section 6.3 of the Sale and Servicing Agreement.

      4.  Governing  Law.  This Policy  shall be governed  by and  construed  in
accordance with the laws of the State of New York,  without giving effect to the
conflict of laws principles thereof.

      5. Fiscal  Agent.  At any time during the Term Of This  Policy,  Financial
Security may appoint a fiscal  agent (the  "Fiscal  Agent") for purposes of this
Policy by written  notice to the Trust  Collateral  Agent at the notice  address
specified in the Sale and  Servicing  Agreement  specifying  the name and notice
address of the Fiscal  Agent.  From and after the date of receipt of such notice
by the Trust Collateral Agent, (i) copies of all notices and documents  required
to be  delivered  to  Financial  Security  pursuant  to  this  Policy  shall  be
simultaneously delivered to the Fiscal Agent and to Financial Security and shall
not be deemed Received until Received by both and (ii) all payments  required to
be made by  Financial  Security  under  this  Policy  may be  made  directly  by
Financial Security or by the Fiscal Agent on behalf of Financial  Security.  The
Fiscal Agent is the agent of Financial  Security only and the Fiscal Agent shall
in no event be liable to any Class A Noteholder for any acts of the Fiscal Agent
or any  failure of  Financial  Security to  deposit,  or cause to be  deposited,
sufficient funds to make payments due under this Policy.

      6. Waiver of Defenses.  To the fullest extent permitted by applicable law,
Financial  Security agrees not to assert,  and hereby waives, for the benefit of
each  Class A  Noteholder,  all  rights  (whether  by  counterclaim,  setoff  or
otherwise) and defenses (including,  without limitation,  the defense of fraud),
whether  acquired by  subrogation,  assignment or otherwise,  to the extent that
such rights and defenses may be available to Financial Security to avoid payment
of its obligations  under this Policy in accordance with the express  provisions
of this  Policy.  Nothing  in this  paragraph  shall  be  construed  to limit or
otherwise impair Financial  Security's right to pursue recovery or claims (based
on  contractual  rights,  securities  law  violations,  fraud or other causes of
action)  against any person or entity,  or, except as provided in paragraph 3 of
this Endorsement,  to require payment by Financial  Security of any amounts that
have been  previously  paid or that are not otherwise due in accordance with the
express  provisions  of this Policy or the  Obligations.  Nothing in this Policy
shall be construed to require  payment to the extent any force  majeure event or
governmental  act prevents  Financial  Security from  performing its obligations
under this Policy or such performance is otherwise rendered impossible, in which
event Financial  Security agrees to (i) use commercially  reasonable  efforts to
perform its  obligations  under this Policy  notwithstanding  such force majeure

                                       5
<PAGE>

Policy No. 51759-N                          Date of Issuance: September 28, 2006

event,  governmental  act or  impossibility  of performance and (ii) perform its
obligations under this Policy promptly following cessation of such force majeure
event, governmental act or impossibility of performance.

      7. Notices.  All notices to be given hereunder shall be in writing (except
as otherwise  specifically  provided  herein) and shall be mailed by  registered
mail or personally delivered or telecopied to Financial Security as follows:

             Financial Security Assurance Inc.
             31 West 52nd Street
             New York, NY 10019
             Attention: Senior Vice President - Transaction Oversight
             Re: Long Beach Acceptance Auto Receivables Trust 2006-B
             Policy No. 51759-N
             Telecopy No.: (212) 339-3518
             Confirmation: (212) 826-0100

Financial  Security  may specify a  different  address or  addresses  by writing
mailed or delivered to the Trust Collateral Agent.

      8.  Priorities.  In the  event any term or  provision  of the face of this
Policy is inconsistent with the provisions of this  Endorsement,  the provisions
of this Endorsement shall take precedence and shall be binding.

      9. Exclusions From Insurance Guaranty Funds. This Policy is not covered by
the Property/Casualty Insurance Security Fund specified in Article 76 of the New
York Insurance Law. This Policy is not covered by the Florida Insurance Guaranty
Association  created under Part II of Chapter 631 of the Florida Insurance Code.
In the event  Financial  Security were to become  insolvent,  any claims arising
under  this  Policy are  excluded  from  coverage  by the  California  Insurance
Guaranty Association,  established pursuant to Article 14.2 of Chapter 1 of Part
2 of Division 1 of the California Insurance Code.

      10.  Surrender of Policy.  The Trust Collateral Agent shall surrender this
Policy to Financial  Security for  cancellation  upon  expiration of the Term Of
This Policy.

      IN WITNESS  WHEREOF,  FINANCIAL  SECURITY  ASSURANCE  INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.

                                               FINANCIAL SECURITY ASSURANCE INC.

                                               By ______________________________
                                                        Authorized Officer

                                       6
<PAGE>

Policy No. 51759-N                          Date of Issuance: September 28, 2006

                                                      Exhibit A To Endorsement 1

                         NOTICE OF CLAIM AND CERTIFICATE
                     (Letterhead of Trust Collateral Agent)

Financial Security Assurance Inc.
31 West 52nd Street
New York, NY 10019

      Re: Long Beach Acceptance Auto Receivables Trust 2006-B

      The undersigned,  a duly authorized officer of Deutsche Bank Trust Company
Americas  Association  (the  "Trust  Collateral  Agent"),  hereby  certifies  to
Financial  Security  Assurance Inc.  ("Financial  Security"),  with reference to
Financial  Guaranty  Insurance  Policy No. 51759-N dated September 28, 2006 (the
"Policy")  issued by Financial  Security in respect of the Long Beach Acceptance
Auto Receivables Trust 2006-B  $100,000,000 5.37% Asset Backed Notes, Class A-1,
$137,000,000  5.34% Asset  Backed  Notes,  Class A-2,  $147,000,000  5.17% Asset
Backed  Notes,  Class A-3,  $116,000,000  5.18% Asset  Backed  Notes,  Class A-4
(collectively, the "Class A Notes"), that:

            (i) The Trust  Collateral  Agent is the Trust Collateral Agent under
      the Sale and Servicing Agreement for the Class A Noteholders.

            (ii)  The sum of all  amounts  on  deposit  (or  scheduled  to be on
      deposit) in the Class A Note Account and available for distribution to the
      Class A Noteholders pursuant to the Sale and Servicing Agreement will be $
      _________ (the "Shortfall") less than the Scheduled  Payments with respect
      to the Payment Date occurring __________, ____.

            (iii) The Trust  Collateral Agent is making a claim under the Policy
      for the  Shortfall to be applied to  distributions  of Scheduled  Payments
      with respect to the Class A Notes.

            (iv) The Trust  Collateral Agent agrees that,  following  receipt of
      funds from Financial Security, it shall (a) hold such amounts in trust and
      apply the same  directly  to the  payment  of  Scheduled  Payments  on the
      Obligations when due; (b) not apply such funds for any other purpose;  (c)
      not  commingle  such funds with other  funds held by the Trust  Collateral
      Agent and (d) maintain an accurate record of such payments with respect to
      each Class A Note and the  corresponding  claim on the Policy and proceeds
      thereof  and,  if the  Class  A Note  is  required  to be  surrendered  or
      presented  for such  payment,  shall  stamp on each such  Class A Note the
      legend  "$[insert  applicable  amount] paid by Financial  Security and the

                                      A-1
<PAGE>

Policy No. 51759-N                          Date of Issuance: September 28, 2006

      balance hereof has been canceled and reissued" and then shall deliver such
      Class A Note to Financial Security.

            (v)  The  Trust   Collateral   Agent,  on  behalf  of  the  Class  A
      Noteholders,  hereby  assigns to Financial  Security (a) the rights of the
      Class A Noteholders with respect to the Class A Notes to the extent of any
      payments  under the  Policy,  and (b) any claims of and amounts due to the
      Class A Noteholders in respect of securities fraud or other claims arising
      out of or  relating  to the  offer  and  sale of the  Class A  Notes.  The
      foregoing assignments are in addition to, and not in limitation of, rights
      of  subrogation  otherwise  available to Financial  Security in respect of
      such payments.  Payments to Financial Security in respect of the foregoing
      assignments shall in all cases be subject to and subordinate to the rights
      of the Class A Noteholders to receive all Scheduled Payments in respect of
      the  Obligations.  The Trust  Collateral  Agent shall take such action and
      deliver such  instruments  as may be  reasonably  requested or required by
      Financial  Security to effectuate the purpose or provisions of this clause
      (v).

            (vi) The Trust Collateral  Agent, on its behalf and on behalf of the
      Class A  Noteholders,  hereby  appoints  Financial  Security  as agent and
      attorney-in-fact  for the Trust  Collateral  Agent  and each such  Class A
      Noteholder in any legal  proceeding with respect to the Class A Notes. The
      Trust  Collateral  Agent hereby agrees that Financial  Security may at any
      time during the  continuation  of any  proceeding by or against any debtor
      with respect to which a Preference Claim (as defined below) or other claim
      with  respect to the Class A Notes is  asserted  under the  United  States
      Bankruptcy   Code  or  any  other   applicable   bankruptcy,   insolvency,
      receivership,  rehabilitation or similar law (an "Insolvency  Proceeding")
      direct all  matters  relating  to such  Insolvency  Proceeding,  including
      without  limitation,  (A) all matters  relating to any claim in connection
      with an  Insolvency  Proceeding  seeking the  avoidance as a  preferential
      transfer  of any  payment  made  with  respect  to the  Class A  Notes  (a
      "Preference Claim"), (B) the direction of any appeal of any order relating
      to any Preference  Claim at the expense of Financial  Security but subject
      to  reimbursement  as  provided  in the  Insurance  Agreement  and (C) the
      posting of any surety,  supersedeas or  performance  bond pending any such
      appeal.  In  addition,  the Trust  Collateral  Agent  hereby  agrees  that
      Financial  Security shall be subrogated to, and the Trust Collateral Agent
      on its behalf and on behalf of each Class A Noteholder,  hereby  delegates
      and  assigns,  to the fullest  extent  permitted by law, the rights of the
      Trust  Collateral  Agent and each Class A Noteholder in the conduct of any
      Insolvency Proceeding,  including,  without limitation,  all rights of any
      party to an adversary proceeding or action with respect to any court order
      issued in connection with any such Insolvency Proceeding.

            (vii) Payment  should be made by wire transfer  directed to [Specify
      Account].

                                      A-2
<PAGE>

Policy No. 51759-N                          Date of Issuance: September 28, 2006

      Unless the  context  otherwise  requires,  capitalized  terms used in this
Notice of Claim and  Certificate  and not defined herein shall have the meanings
provided in the Policy.

                                      A-3
<PAGE>

Policy No. 51759-N                          Date of Issuance: September 28, 2006

      IN WITNESS WHEREOF,  the Trust Collateral Agent has executed and delivered
this  Notice of Claim and  Certificate  as of the ____ day of  ________________,
_____.

                                           DEUTSCHE BANK TRUST COMPANY AMERICAS
                                             not in its individual capacity but
                                             solely as Trust Collateral Agent

                                           By: _________________________________
                                           Title:

--------------------------------------------------------------------------------

For Financial Security or Fiscal Agent Use Only

Wire transfer sent on ___________________________ by ___________________________

Confirmation Number ____________________________

                                      A-4Exhibit 10.1

                                                                  Execution Copy

================================================================================

                          SALE AND SERVICING AGREEMENT

                                      among

               LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST 2006-B

                                     Issuer

                     LONG BEACH ACCEPTANCE RECEIVABLES CORP.

                                   Transferor

                           LONG BEACH ACCEPTANCE CORP.

                       Originator, Servicer and Custodian

                                       and

                      DEUTSCHE BANK TRUST COMPANY AMERICAS

                   Back-up Servicer and Trust Collateral Agent

                          Dated as of September 1, 2006

================================================================================
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page

ARTICLE I DEFINITIONS 1

  SECTION 1.1.    Definitions ...............................................  1
  SECTION 1.2.    Other Definitional Provisions .............................  1
  SECTION 1.3.    Calculations ..............................................  2
  SECTION 1.4.    Action by or Consent of Noteholders .......................  2
  SECTION 1.5.    Material Adverse Effect ...................................  3

ARTICLE II CONVEYANCE OF RECEIVABLES ........................................  3

  SECTION 2.1.    Conveyance of Initial Receivables .........................  3
  SECTION 2.2.    Conveyance of Subsequent Receivables ......................  4
  SECTION 2.3.    Transfer Intended as Sale; Precautionary
                    Security Interest .......................................  9
  SECTION 2.4.    Assignment by Transferor ..................................  9
  SECTION 2.5.    Further Encumbrance of Trust Assets ....................... 10

ARTICLE III THE RECEIVABLES ................................................. 10

  SECTION 3.1.    Representations and Warranties of Transferor .............. 10
  SECTION 3.2.    Repurchase upon Breach of Representations and
                    Warranties of the Transferor ............................ 11
  SECTION 3.3.    Custody of Legal Files and Receivable Files ............... 11
  SECTION 3.4.    Legal File Deficiencies ................................... 12
  SECTION 3.5.    Access to Receivable Files; Servicer's Duties with
                    Respect to Receivable Files ............................. 13
  SECTION 3.6.    Issuer's Certificate ...................................... 14

ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES ...................... 14

  SECTION 4.1.    Duties of the Servicer .................................... 14
  SECTION 4.2.    Collection and Allocation of Receivable Payments .......... 15
  SECTION 4.3.    Realization upon Receivables .............................. 16
  SECTION 4.4.    Physical Damage Insurance; Other Insurance ................ 17
  SECTION 4.5.    Maintenance of Security Interests in Financed Vehicles .... 18
  SECTION 4.6.    Additional Covenants of Servicer .......................... 19
  SECTION 4.7.    Purchase of Receivables Upon Breach ....................... 20
  SECTION 4.8.    Servicing Fee ............................................. 20
  SECTION 4.9.    Servicer's Certificate .................................... 21
  SECTION 4.10.   Annual Statement as to Compliance; Notice of Default ...... 21
  SECTION 4.11.   Annual Independent Certified Public Accountant's Report ... 22
  SECTION 4.12.   Servicer Expenses ......................................... 23
  SECTION 4.13.   Retention and Termination of Servicer ..................... 23
  SECTION 4.14.   Access to Certain Documentation and Information
                    Regarding Receivables ................................... 23
  SECTION 4.15.   Verification of Servicer's Certificate .................... 24

                                       i
<PAGE>

  SECTION 4.16.   Fidelity Bond ............................................. 25
  SECTION 4.17.   Delegation of Duties ...................................... 25
  SECTION 4.18.   Delivery of Back-up Tapes of Back-up Servicer ............. 26
  SECTION 4.19.   Confidential Information .................................. 26

ARTICLE V ACCOUNTS; PAYMENTS; STATEMENTS TO NOTEHOLDERS ..................... 27

  SECTION 5.1.    Accounts; Lock-Box Account ................................ 27
  SECTION 5.2.    Collections ............................................... 29
  SECTION 5.3.    Application of Collections ................................ 29
  SECTION 5.4.    Intentionally Omitted ..................................... 30
  SECTION 5.5.    Additional Deposits ....................................... 30
  SECTION 5.6.    Payments; Policy Claims ................................... 30
  SECTION 5.7.    Statements to Noteholders; Tax Returns .................... 35
  SECTION 5.8.    Reliance on Information from the Servicer ................. 38
  SECTION 5.9.    Optional Deposits by the Note Insurer ..................... 38
  SECTION 5.10.   Spread Account ............................................ 38
  SECTION 5.11.   Withdrawals from Spread Account ........................... 39
  SECTION 5.12.   Demand Note ............................................... 39
  SECTION 5.13.   Pre-Funding Account ....................................... 40
  SECTION 5.14.   Securities Accounts ....................................... 41

ARTICLE VI THE POLICY ....................................................... 41

  SECTION 6.1.    Policy .................................................... 41
  SECTION 6.2.    Claims Under Policy ....................................... 41
  SECTION 6.3.    Preference Claims; Direction of Proceedings ............... 42
  SECTION 6.4.    Surrender of Policy ....................................... 43

ARTICLE VII THE TRANSFEROR .................................................. 43

  SECTION 7.1.    Representations of the Transferor ......................... 43
  SECTION 7.2.    Liability of the Transferor ............................... 45
  SECTION 7.3.    Merger or Consolidation of, or Assumption of the
                    Obligations of, the Transferor .......................... 46
  SECTION 7.4.    Limitation on Liability of the Transferor and Others ...... 46
  SECTION 7.5.    Transferor May Own Notes .................................. 46

ARTICLE VIII THE SERVICER ................................................... 47

  SECTION 8.1.    Representations of Servicer ............................... 47
  SECTION 8.2.    Indemnities of Servicer ................................... 49
  SECTION 8.3.    Merger or Consolidation of, or Assumption of the
                    Obligations of, Servicer or Back-up Servicer ............ 51
  SECTION 8.4.    Limitation on Liability of Servicer and Others ............ 52
  SECTION 8.5.    Servicer and Back-up Servicer Not to Resign ............... 52

ARTICLE IX SERVICER TERMINATION EVENTS ...................................... 53

  SECTION 9.1.    Servicer Termination Events ............................... 53

                                       ii
<PAGE>

  SECTION 9.2.    Appointment of Successor .................................. 57
  SECTION 9.3.    Notification to Noteholders ............................... 58
  SECTION 9.4.    Action Upon Certain Failures of the Servicer .............. 58

ARTICLE X THE TRUST COLLATERAL AGENT ........................................ 58

  SECTION 10.1.   Duties of the Trust Collateral Agent ...................... 58
  SECTION 10.2.   Trust Collateral Agent to Act for the Class A
                    Noteholders and Note Insurer ............................ 61
  SECTION 10.3.   Certain Matters Affecting the Trust Collateral Agent ...... 61
  SECTION 10.4.   Trust Collateral Agent and Back-up Servicer Not
                    Liable for Notes or Receivables ......................... 63
  SECTION 10.5.   Trust Collateral Agent and Back-up Servicer
                    May Own Notes ........................................... 64
  SECTION 10.6.   Indemnity of Trust Collateral Agent and
                    Back-up Servicer ........................................ 64
  SECTION 10.7.   Eligibility Requirements for Trust Collateral Agent ....... 64
  SECTION 10.8.   Resignation or Removal of Trust Collateral Agent .......... 65
  SECTION 10.9.   Successor Trust Collateral Agent .......................... 66
  SECTION 10.10.  Merger or Consolidation of Trust Collateral Agent ......... 66
  SECTION 10.11.  Co-Trustee; Separate Trustee .............................. 67
  SECTION 10.12.  Representations and Warranties of Trust
                    Collateral Agent ........................................ 68
  SECTION 10.13.  Rights of Note Insurer to Direct Trust
                    Collateral Agent ........................................ 68

ARTICLE XI TERMINATION ...................................................... 69

  SECTION 11.1.   Termination ............................................... 69

ARTICLE XII ADMINISTRATIVE DUTIES OF THE SERVICER ........................... 70

  SECTION 12.1.   Administrative Duties ..................................... 70
  SECTION 12.2.   Records ................................................... 71
  SECTION 12.3.   Additional Information to be Furnished to the Issuer ...... 71
  SECTION 12.4.   No Additional Compensation ................................ 71

ARTICLE XIII MISCELLANEOUS PROVISIONS ....................................... 71

  SECTION 13.1.   Amendment ................................................. 71
  SECTION 13.2.   Protection of Title ....................................... 73
  SECTION 13.3.   Limitation on Rights of Noteholders ....................... 75
  SECTION 13.4.   Governing Law ............................................. 76
  SECTION 13.5.   Notices ................................................... 76
  SECTION 13.6.   Severability of Provisions ................................ 77
  SECTION 13.7.   Assignment to Indenture Trustee ........................... 77
  SECTION 13.8.   Limitation of Liability of Owner Trustee, Back-up
                    Servicer and Trust Collateral Agent ..................... 78
  SECTION 13.9.   Independence of the Servicer .............................. 78
  SECTION 13.10.  No Joint Venture .......................................... 78
  SECTION 13.11.  Nonpetition Covenant ...................................... 78
  SECTION 13.12.  Third Party Beneficiaries ................................. 79
  SECTION 13.13.  Consent to Jurisdiction ................................... 79

                                       iii
<PAGE>

  SECTION 13.14.  Headings .................................................. 80
  SECTION 13.15.  Trial by Jury Waived ...................................... 80
  SECTION 13.16.  Entire Agreement .......................................... 80
  SECTION 13.17.  Effect of Policy Expiration Date .......................... 80
  SECTION 13.18.  Termination of Demand Note and/or Demand
                    Note Guarantee .......................................... 81

                                     ANNEXES

Annex     A     Defined Terms

                                    EXHIBITS

Exhibit   A-1   Form of Issuer's Certificate
Exhibit   A-2   Form of Issuer's Certificate
Exhibit   B-1   Form of Servicer's Certificate
Exhibit   B-2   Form of Loan Master File Layout
Exhibit   C     Intentionally Omitted

Exhibit   D     Payment Deferment and Due Date Change Policies
Exhibit   E     Documentation Checklist
Exhibit   F     Form of Transfer Agreement

                                    SCHEDULES

Schedule  A     Schedule of Receivables
Schedule  B     Location of Receivable Files; Location of Legal Files
Schedule  C     Delivery Requirements

                                       iv
<PAGE>

            SALE AND SERVICING AGREEMENT ("Agreement"), dated as of September 1,
2006,  among LONG BEACH  ACCEPTANCE AUTO  RECEIVABLES  TRUST 2006-B,  a Delaware
statutory  trust, as issuer (the "Issuer"),  LONG BEACH  ACCEPTANCE  RECEIVABLES
CORP., a Delaware  corporation,  as transferor  (the  "Transferor"),  LONG BEACH
ACCEPTANCE  CORP.,  a Delaware  corporation,  as originator  of the  receivables
("LBAC"),  as servicer (in such capacity,  the  "Servicer") and as custodian (in
such capacity,  the "Custodian") and DEUTSCHE BANK TRUST COMPANY AMERICAS, a New
York banking  corporation,  as back-up servicer and trust collateral agent, (the
"Back-up Servicer" and the "Trust Collateral Agent", respectively).

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

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

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

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

            WHEREAS the Servicer is willing to service all such receivables.

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

                                    ARTICLE I
                                   DEFINITIONS

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

                  SECTION 1.2. Other Definitional Provisions.

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

      (b) As used in this  Agreement,  in any instrument  governed hereby and in
any certificate or other document made or delivered  pursuant hereto or thereto,
accounting terms not defined in this Agreement  (including Annex A hereto) or in
any such instrument, certificate or
<PAGE>

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

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

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

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

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

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

                                       2
<PAGE>

Indenture  Trustee or the Trust  Collateral  Agent actually knows to be so owned
shall be so disregarded.

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

                                   ARTICLE II
                            CONVEYANCE OF RECEIVABLES

                  SECTION 2.1. Conveyance of Initial Receivables.

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

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

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

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

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

            (v) the Purchase Agreement including a direct right to cause LBAC to
      purchase  Initial  Receivables  from the Issuer upon the  occurrence  of a
      breach of any of the representations  and warranties  contained in Section
      3.03(b) of the Purchase Agreement or

                                       3
<PAGE>

      the  failure of LBAC to timely  comply  with its  obligations  pursuant to
      Section 5.05 of the Purchase Agreement;

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

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

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

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

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

                  SECTION 2.2. Conveyance of Subsequent Receivables.

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

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

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

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

                                       4
<PAGE>

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

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

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

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

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

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

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

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

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

            (i) the Transferor  shall have provided the Indenture  Trustee,  the
      Trust  Collateral  Agent,  the Note Insurer,  the Demand Note Provider and
      each Rating  Agency with an Addition  Notice not later than five  Business
      Days prior to the  related  Subsequent  Transfer  Date and shall also have
      provided the Indenture  Trustee,  the Trust  Collateral Agent and the Note
      Insurer with an electronic  transmission of the information on the related
      Subsequent  Receivables  set  forth in such  Addition  Notice  in a format
      acceptable

                                       5
<PAGE>

      to each of the Indenture Trustee,  the Trust Collateral Agent and the Note
      Insurer  no later  than  such  fifth  Business  Day  prior to the  related
      Subsequent Transfer Date;

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

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

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

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

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

            (vii) the Funding Period shall not have terminated;

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

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

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

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

                                       6
<PAGE>

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

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

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

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

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

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

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

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

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

                                       7
<PAGE>

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

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

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

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

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

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

                  (2) each Receivable will have a minimum APR of 4.90%;

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

                  (4) no more than 45%,  16% or 15% of the  Receivables  will be
            originated in California, Florida or Arizona, respectively;

                  (5) the  weighted  average  APR for  the  Receivables  will be
            greater than or equal to 12.70%;

                  (6) not less than 11.60% of the aggregate Principal Balance of
            the Receivables will be Premium Receivables, not less than 17.20% of
            the aggregate  Principal  Balance of the  Receivables  will be Elite
            Receivables, not less than 17.20% of the aggregate Principal Balance
            of the  Receivables  will be  Superior  Receivables,  not less  than
            18.35% of the aggregate Principal Balance of the Receivables will be
            Preferred  Receivables  and not more than  20.75%  of the  aggregate
            Principal  Balance of the Receivables  will be Classic  Receivables;
            and

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

                                       8
<PAGE>

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

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

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

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

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

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

                  SECTION 2.4.  Assignment by Transferor.  The  Transferor  does
hereby transfer, assign and otherwise convey unto the Issuer, for the benefit of
the Noteholders,  the  Certificateholder,  the Demand Note Provider and the Note
Insurer,  its right to any recourse to LBAC  resulting  from the occurrence of a
breach of any of their respective  representations  and warranties  contained in
Section 3.03 of the Purchase Agreement and Section 4 of each Transfer

                                       9
<PAGE>

Agreement or from the failure of LBAC to comply with its obligations pursuant to
Section 5.05 of the Purchase  Agreement.  The provisions of this Section 2.4 are
intended to grant the Issuer a direct right  against LBAC to demand  performance
under the terms of the Purchase Agreement.

                  SECTION 2.5. Further Encumbrance of Trust Assets.

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

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

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

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

                                  ARTICLE III
                                 THE RECEIVABLES

                  SECTION 3.1. Representations and Warranties of Transferor. The
Transferor hereby makes each of the  representations and warranties made by LBAC
in Section  3.03(b) of the  Purchase  Agreement  and Section 4 of each  Transfer
Agreement  with  respect  to the  Receivables  to the  same  extent  as if  such
representations and warranties were fully set forth herein. With respect to such
representations  and  warranties,  the Issuer  shall be deemed to have relied on
such  representations  and  warranties  in acquiring the  Receivables,  the Note
Insurer  is deemed to have  relied on such  representations  and  warranties  in
issuing the Policy, the Demand

                                       10
<PAGE>

                  Note Provider and the Demand Note Guarantor are deemed to have
      relied on such  representations  and warranties in issuing the Demand Note
      and the Demand Note  Guarantee,  respectively,  the  Indenture  Trustee is
      deemed  to  have  relied  on  such   representations   and  warranties  in
      authenticating  the Notes,  the  Noteholders  are deemed to have relied on
      such  representations and warranties in purchasing the Notes and the Owner
      Trustee is deemed to have relied on such representations and warranties in
      entering into the Trust  Agreement.  Such  representations  and warranties
      speak as of the  execution  and delivery of this  Agreement  and as of the
      Closing Date in the case of the Initial Receivables, and as of the related
      Subsequent  Transfer Date in the case of the Subsequent  Receivables,  but
      shall survive the transfer and assignment of the Receivables to the Issuer
      and the subsequent pledge thereof to the Indenture Trustee pursuant to the
      Indenture.

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

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

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

                  SECTION 3.3.  Custody of Legal Files and Receivable  Files. In
connection  with the sale,  transfer and assignment of the  Receivables  and the
other Transferred

                                       11
<PAGE>

Assets to the Trust  pursuant to Section  2.1 and Section 2.2 of this  Agreement
and  simultaneously  with the  execution  and  delivery of this  Agreement,  the
Custodian shall enter into the Custodial  Agreement with the Indenture  Trustee,
the Note  Insurer and the Issuer,  dated as of  September  1, 2006,  pursuant to
which the Custodian  shall agree to act as custodian for the Indenture  Trustee,
on behalf of the Noteholders,  the Demand Note Provider and the Note Insurer, of
the  following  documents  or  instruments  in its  possession  on or before the
Closing Date (with respect to each Initial Receivable) or the third Business Day
immediately preceding the related Subsequent Transfer Date (with respect to each
Subsequent Receivable), as applicable:

            (i) a copy of the fully executed  original of the Receivable  with a
      copy of the  fully  executed  assignment  from the  related  Dealer to the
      Originator   (together  with  copies  of  any  agreements   modifying  the
      Receivable, including, without limitation, any extension agreements);

            (ii) a copy of the original credit application fully executed by the
      Obligor;

            (iii)  a  copy  of  the  Lien  Certificate  or  Title  Package,   as
      applicable;

            (iv) all other documents  listed on the  Documentation  Checklist in
      effect on the  Cutoff  Date or the  related  Subsequent  Cutoff  Date,  as
      applicable, relating to such Receivable; and

            (v) any and all other  documents that the Servicer or the Originator
      shall keep on file, in accordance with its customary procedures,  relating
      to a Receivable, an Obligor or a Financed Vehicle;

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

                  SECTION 3.4. Legal File Deficiencies. The Custodian shall hold
the Legal Files subject to the terms and conditions of the Custodial  Agreement.
If the  Custodian  finds  during its review of the Legal  Files  required by the
Custodial Agreement or at any time thereafter that a Legal File for a Receivable
has not been received or that any of the documents referred to in the definition
of the term "Legal File" are not  contained  in a Legal File or, if  applicable,
the related  Dealer is not listed on the Dealer Title  Addendum,  the  Custodian
shall promptly inform the Trust  Collateral  Agent,  LBAC, the  Transferor,  the
Back-up Servicer and the Note Insurer  promptly,  in writing,  of the failure to
receive a Legal File with respect to such  Receivable  (or of the failure of any
of the aforementioned  documents to be included in the Legal File or the failure
of the related Dealer to be so listed) (it being understood that the Custodian's
obligation  to review  the  contents  of any  Legal  File and the  Dealer  Title
Addendum shall be limited as set forth in the Custodial  Agreement).  Unless any
such defect with  respect to such  Receivable  shall have been cured by the last
day  of  the  second  Collection  Period  following  discovery  thereof  by  the
Custodian,  LBAC shall  repurchase  any such  Receivable as of such last day. In
consideration  of the purchase of the Receivable,  LBAC shall remit the Purchase
Amount, in the manner specified in Section 5.5. The sole remedy of the Indenture
Trustee,  the Trust Collateral Agent, the Issuer or the Noteholders with respect
to a breach  pursuant to this  Section 3.4 shall be to require  LBAC to purchase
the Receivables pursuant to this Section 3.4.

                                       12
<PAGE>

Upon receipt of the Purchase Amount and written  instructions from the Servicer,
the Trust  Collateral  Agent shall cause the Custodian to release to LBAC or its
designee  the related  Legal File and shall  execute and deliver all  reasonable
instruments of transfer or assignment, without recourse, as are prepared by LBAC
and delivered to the Trust Collateral Agent and are necessary to vest in LBAC or
such designee the Issuer's right,  title and interest in the Receivable.  On the
date which is 90 days  following  the Closing Date (with  respect to the Initial
Receivables)  or the  related  Subsequent  Transfer  Date  (with  respect to the
Subsequent Receivables),  as applicable, or, if such date is not a Business Day,
on the next  succeeding  Business Day, the  Custodian  shall inform LBAC and the
other parties to this Agreement and the Note Insurer of any Receivable for which
the  related  Legal File on such date does not include a Lien  Certificate,  and
LBAC shall  repurchase any such  Receivable as of the last day of the Collection
Period in which the date,  which is 150 days  following  the Closing  Date (with
respect to the Initial  Receivables)  or the related  Subsequent  Transfer  Date
(with respect to the  Subsequent  Receivables),  as applicable,  occurs,  if the
related  Legal  File  does not  include  a Lien  Certificate  as of the close of
business on such 150th day. In consideration of the purchase of such Receivable,
LBAC shall remit the Purchase Amount in the manner specified in Section 5.5. The
Transferor  shall have no obligation to repurchase any Receivable  upon a breach
pursuant to this  Section 3.4. The  Transferor  shall have no liability  for any
action taken or omitted to be taken by LBAC pursuant to this Section 3.4.

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

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

                                       13
<PAGE>

otherwise, in accordance with the Federal Financial Privacy Law; provided, that,
prior to any such disclosure,  such Noteholder shall inform each such party that
receives  Confidential  Information of the foregoing  requirements and shall use
its commercially reasonable best efforts to cause such party to comply with such
requirements.

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

                  SECTION 3.6. Issuer's  Certificate.  Within five Business Days
after each  Payment Date on which  Receivables  shall be assigned to LBAC or the
Servicer, as applicable,  pursuant to this Agreement, based on amounts deposited
to the Collection  Account,  notices received pursuant to this Agreement and the
information  contained in the Servicer's  Certificate for the related Collection
Period, identifying the Receivables purchased by LBAC pursuant to Section 3.4 or
purchased by the Servicer  pursuant to Section 4.7, the Issuer shall  execute an
Issuer's  Certificate  (in the form of Exhibit A-1 or A-2, as  applicable),  and
shall deliver such Issuer's Certificate, accompanied by a copy of the Servicer's
Certificate for such Collection Period, to LBAC or the Servicer, as the case may
be, with a copy to the Note Insurer and the Demand Note  Provider.  The Issuer's
Certificate  submitted  with respect to such Payment Date shall  operate,  as of
such  Payment  Date,  as an  assignment,  without  recourse,  representation  or
warranty,  to LBAC or the  Servicer,  as the  case may be,  of all the  Issuer's
right,  title,  and  interest  in and to such  repurchased  Receivable,  and all
security and documents  relating  thereto,  such assignment  being an assignment
outright and not for security.

                                   ARTICLE IV
                   ADMINISTRATION AND SERVICING OF RECEIVABLES

                  SECTION 4.1.  Duties of the Servicer.  The Servicer,  as agent
for the Issuer (to the extent  provided  herein),  and in such  capacity,  shall
manage,  service,  administer  and  make  collections  on the  Receivables  with
reasonable  care,  using that degree of skill and attention  customary and usual
for  institutions  which  service  motor vehicle  retail  installment  contracts
similar to the Receivables  and, to the extent more exacting,  that the Servicer
exercises with respect to all comparable automotive receivables that it services
for itself or others. The Servicer's duties shall include collection and posting
of all  payments,  responding  to  inquiries  of Obligors  on such  Receivables,
investigating  delinquencies,  sending payment statements to Obligors, reporting
tax information to Obligors, accounting for collections,  furnishing monthly and
annual  statements to the Trust  Collateral  Agent, the Indenture  Trustee,  the
Back-up Servicer,  the Demand Note Provider and the Note Insurer with respect to
payments and complying  with the terms of the Lock-Box  Agreement.  The Servicer
shall also administer and enforce all rights and responsibilities of the holders
of the Receivables provided for in the Dealer Agreements to

                                       14
<PAGE>

the extent that such Dealer Agreements  relate to the Receivables,  the Financed
Vehicles or the Obligors.  Without limiting the generality of the foregoing, and
subject to the servicing standards set forth in this Agreement,  the Servicer is
authorized and empowered by the Trust  Collateral  Agent to execute and deliver,
on behalf of itself,  the Issuer,  the Noteholders,  or any of them, any and all
instruments  of  satisfaction  or  cancellation,  or partial or full  release or
discharge,   and  all  other  comparable  instruments,   with  respect  to  such
Receivables or to the Financed  Vehicles  securing such  Receivables  and/or the
certificates  of title or other  evidence  of  ownership  with  respect  to such
Financed Vehicles;  provided,  however, that notwithstanding the foregoing,  the
Servicer  shall not release an Obligor from  payment of any unpaid  amount under
any  Receivable  or waive  the  right  to  collect  the  unpaid  balance  of any
Receivable  from the  Obligor,  except (i)  pursuant to an order from a court of
competent  jurisdiction,  (ii) in accordance  with its  customary  procedures or
(iii) in  accordance  with Section 4.2. If the Servicer  shall  commence a legal
proceeding to enforce a Receivable, the Issuer shall thereupon be deemed to have
automatically assigned, solely for the purpose of collection, such Receivable to
the Servicer.  If in any enforcement  suit or legal  proceeding it shall be held
that the Servicer  may not enforce a Receivable  on the ground that it shall not
be a real party in interest or a holder entitled to enforce such Receivable, the
Trust Collateral Agent shall, at the Servicer's  expense and written  direction,
take steps to enforce such  Receivable,  including  bringing suit in its name or
the name of the  Noteholders.  The  Servicer  shall  prepare and furnish and the
Trust Collateral Agent shall execute, any powers of attorney and other documents
reasonably  necessary  or  appropriate  to enable the  Servicer to carry out its
servicing and administrative duties hereunder.

                  SECTION 4.2. Collection and Allocation of Receivable Payments.
Consistent  with  the  standards,  policies  and  procedures  required  by  this
Agreement,  the Servicer shall make  reasonable  efforts to collect all payments
called for under the terms and  provisions  of the  Receivables  as and when the
same shall become due and shall follow such collection  procedures as it follows
with  respect to all  comparable  automotive  receivables  that it services  for
itself or others; provided, however, that the Servicer shall notify each Obligor
prior to the Closing Date, in the case of the Initial Receivables,  and prior to
the related Subsequent Transfer Date, in the case of the Subsequent Receivables,
to make all payments with respect to the  Receivables  to the Lock-Box and shall
make  reasonable  efforts to cause  Obligors  to make all such  payments to such
Lock-Box.  The Servicer  will  provide each Obligor with a monthly  statement in
order to notify such  Obligors to make payments  directly to the  Lock-Box.  The
Servicer shall allocate collections between principal and interest in accordance
with  the  customary  servicing  procedures  it  follows  with  respect  to  all
comparable  automotive  receivables that it services for itself or others and in
accordance with the terms of this Agreement.  The Servicer,  for so long as LBAC
is the Servicer, may grant extensions, rebates or adjustments on a Receivable in
accordance  with the customary  servicing  procedures it follows with respect to
all comparable  automotive  receivables  that it services for itself which shall
not modify the original  due date of the  Scheduled  Receivable  Payments on any
Receivable other than (a) in accordance with the Payment  Deferment and Due Date
Change Policies, (b) in connection with a Deficient Liquidated  Receivable,  (c)
with the prior written  consent of the Note  Insurer,  with respect to any other
Liquidated   Receivable  or  (d)  as  otherwise   required  by  applicable  law.
Notwithstanding  anything contained herein to the contrary, the Servicer may, at
its option, repurchase up to 25 Receivables and shall remit the Purchase Amount,
in the  manner  specified  in  Section  5.5  hereof  and  any  such  repurchased
Receivable  (an "Optional  Repurchase  Receivable")  shall not be deemed to be a
Defaulted Receivable or a Liquidated Receivable. The Servicer shall not modify

                                       15
<PAGE>

the Payment  Deferment  and Due Date Change  Policies  without the prior written
consent  of  the  Note  Insurer.  The  Servicer  shall  notify  Moody's  of  any
modification  to the  Payment  Deferment  and Due Date Change  Policies.  If the
Servicer is not LBAC,  the Servicer  may not make any  extension on a Receivable
without the prior written  consent of the Note Insurer.  The Servicer may in its
discretion waive any late payment charge or any other fees that may be collected
in the ordinary course of servicing a Receivable if it would forgo collection of
such  amount  in  accordance  with  its  customary  procedures.  Notwithstanding
anything to the contrary  contained herein,  the Servicer (i) shall not agree to
any  alteration of the interest  rate on any  Receivable or of the amount of any
Scheduled Receivable Payment on any Receivable, except (a) as otherwise required
by applicable law, (b) with respect to a Deficient Liquidated Receivable and (c)
with the prior written  consent of the Note  Insurer,  with respect to any other
Liquidated  Receivable,  and (ii) shall not agree to any modification that would
result in a material  adverse  effect on a  Receivable  (other  than a Deficient
Liquidated  Receivable  and, with the prior written consent of the Note Insurer,
any other  Liquidated  Receivable)  or the interest  therein of the Issuer,  the
Noteholders,  the  Demand  Note  Provider  or  the  Note  Insurer  other  than a
modification  in  accordance  with the  Payment  Deferment  and Due Date  Change
Policies.

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

                  SECTION 4.3. Realization upon Receivables.

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

                                       16
<PAGE>

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

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

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

                  SECTION 4.4. Physical Damage Insurance; Other Insurance.

      (a) The  Servicer  shall  continue to  maintain  the VSI Policy or another
collateral  protection  insurance  policy  providing  physical damage  insurance
coverage  to at least the same  extent as the VSI  Policy  with  respect  to all
Financed  Vehicles,  unless the Servicer  shall have  received the prior written
consent

                                       17
<PAGE>

of the Note Insurer (and if a draw has been made on the Demand Note  pursuant to
Section 5.12(b) hereof at any time, with the prior written consent of the Demand
Note Provider) allowing the Servicer to no longer maintain any of such policies.
The Servicer,  in accordance  with the  servicing  procedures  and standards set
forth herein,  shall require that (i) each Obligor shall have obtained insurance
covering  the  Financed  Vehicle,  as of  the  date  of  the  execution  of  the
Receivable, insuring against loss and damage due to fire, theft, transportation,
collision  and other risks  generally  covered by  comprehensive  and  collision
coverage and each Receivable requires the Obligor to maintain such physical loss
and damage insurance naming LBAC and its successors and assigns as an additional
insured, (ii) each Receivable that finances the cost of premiums for credit life
and credit  accident and health  insurance is covered by an insurance  policy or
certificate  naming  LBAC  as  policyholder  (creditor)  and  (iii)  as to  each
Receivable  that  finances  the  cost  of  an  extended  service  contract,  the
respective  Financed  Vehicle  which  secures  the  Receivable  is covered by an
extended service contract.

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

                  SECTION  4.5.  Maintenance  of Security  Interests in Financed
      Vehicles.

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

      (b) Upon the occurrence of an Insurance  Agreement  Event of Default,  the
Note Insurer may (so long as a Note Insurer  Default shall not have occurred and
be  continuing)  instruct in writing the  Servicer to take or cause to be taken,
or, if a Note Insurer  Default shall have occurred and be  continuing,  upon the
occurrence of a Servicer Termination Event, either the Trust Collateral Agent or
the  Trust   Collateral   Agent   acting  at  the  written   direction   of  the
Majorityholders shall direct the Servicer to take and the Servicer shall take or
cause to be taken  such  action as may,  in the  opinion  of counsel to the Note
Insurer (or, if a Note Insurer  Default shall have  occurred and be  continuing,
the Trust Collateral Agent), which opinion shall not be an

                                       18
<PAGE>

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

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

            The  Servicer  hereby  makes,  constitutes  and  appoints  the Trust
Collateral Agent acting through its duly appointed  officers or any of them, its
true and lawful attorney, for it and in its name and on its behalf, for the sole
and  exclusive  purpose of  authorizing  said attorney to execute and deliver as
attorney-in-fact  or otherwise,  any and all documents and other instruments and
to do or accomplish  all other acts or things  necessary or  appropriate to show
the Trust  Collateral  Agent as  lienholder or secured party on the related Lien
Certificates  relating to a Financed  Vehicle  (provided  that such  appointment
shall not be construed as an obligation).

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

                                       19
<PAGE>

vehicle  receivables  and (v) the Servicer  shall not modify any  Receivable  in
accordance  with the Payment  Deferment  and Due Date Change  Policies,  if as a
result  of such  modification,  there  would be  negative  amortization  of such
Receivable.

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

                  SECTION 4.8.  Servicing Fee. The Servicing Fee for the initial
Payment Date shall equal the product of (a)  one-twelfth  of the  Servicing  Fee
Rate and (b) the Original  Pool  Balance.  Thereafter,  the  Servicing Fee for a
Payment Date shall equal the product of (i)  one-twelfth  of the  Servicing  Fee
Rate  and  (ii) the Pool  Balance  as of the  last day of the  second  preceding
Collection  Period.  The Servicing Fee shall in addition  include all late fees,
deferment  fees,  prepayment  charges  including,  in the case of a  Precomputed
Receivable  that is prepaid in full,  to the  extent not  required  by law to be
remitted to the related  Obligor,  the difference  between the amounts  received
upon prepayment in full of such Precomputed  Receivable and the then outstanding
Principal  Balance of such  Precomputed  Receivable and accrued interest thereon
(calculated  pursuant to the Simple  Interest  Method) and other  administrative
fees or similar  charges  allowed by applicable law with respect to Receivables,
collected (from whatever source) on the Receivables.

                                       20
<PAGE>

                  SECTION 4.9. Servicer's Certificate.

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

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

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

      (a) The Servicer shall deliver to the Issuer,  the Trust Collateral Agent,
the  Indenture  Trustee,  the  Back-up  Servicer,   the  Collateral  Agent,  the
Transferor,  the Issuer,  the Demand Note Provider and the Note  Insurer,  on or
before March 31 of each year beginning March 31, 2007, an Officer's Certificate,
dated as of December  31 of the  preceding  calendar  year,  stating  that (i) a
review of the activities of the Servicer during such preceding calendar year and
of its  performance  under this  Agreement  has been made  under such  officer's
supervision  and (ii) to the  best of such  officer's  knowledge,  based on such
review,  the Servicer has fulfilled in all material respects all its obligations
under this  Agreement  throughout  such year, or, if there has been a failure to
fulfill any such  obligation  in any  material  respect,  identifying  each such
failure  known to such  officer and the nature and status of such  failure.  The
Trust  Collateral  Agent  shall  send a copy of such  certificate  to the Rating
Agencies.

                                       21
<PAGE>

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

      (c) The Servicer will deliver to the Issuer, on or before March 31 of each
year beginning on March 31, 2007, a report  regarding the Servicer's  assessment
of  compliance  with the Servicing  Criteria  during the  immediately  preceding
calendar year, as required under Rules 13a-18 and 15d-18 of the Exchange Act and
Item 1122 of Regulation AB.

      (d) Except as otherwise  set forth  herein,  none of the Trust  Collateral
Agent or the Back-up Servicer or the Indenture Trustee shall have any obligation
to prepare or file any reports or certificates required under Regulation AB.

                  SECTION 4.11. Annual Independent Certified Public Accountant's
      Report(a).

      (a) The Servicer shall cause a firm of nationally  recognized  independent
certified public accountants, who may also render other services to the Servicer
or to the Transferor,  to deliver to the Issuer, the Trust Collateral Agent, the
Indenture Trustee, the Back-up Servicer,  the Collateral Agent, the Noteholders,
the Note  Insurer  and each  Rating  Agency on or  before  March 31 of each year
beginning  March 31,  2007,  a report  dated as of December 31 of the  preceding
calendar year and  reviewing the  Servicer's  activities  during such  preceding
calendar  year,  addressed to the Board of Directors of the Servicer,  providing
such information as is required under Item 1122(b) of Regulation AB.

      (b) The Servicer shall cause a firm of nationally  recognized  independent
certified public accountants, who may also render other services to the Servicer
or to the  Transferor,  to deliver to the Trust  Collateral  Agent,  the Back-up
Servicer,  the Collateral  Agent,  the Issuer,  the Transferor,  the Demand Note
Provider  and the Note  Insurer,  on or before  March 31 of each year  beginning
March 31, 2007, a report dated as of December 31 of the preceding calendar year,
to the  effect  that such  firm has  audited  the  financial  statements  of the
Servicer  and  issued its  report  therefor  and that such audit (i) was made in
accordance with generally accepted auditing standards,  and accordingly included
such tests of the accounting records and such other auditing  procedures as such
firm considered necessary in the circumstances;  (ii) included tests relating to
automotive loans serviced for others in accordance with the Servicing  Criteria;
(iii) included an examination of the delinquency and loss statistics relating to
the  Servicer's  portfolio of automobile,  van, sport utility  vehicle and light
duty truck  installment  sales  contracts;  and (iv) except as  described in the
report, disclosed no exceptions or errors in the records relating to automobile,
van, sport utility  vehicle and light duty truck loans serviced for others that,
in  the  firm's  opinion,   the  Program  requires  such  firm  to  report.  The
accountant's  report shall further  state that (1) a review in  accordance  with
agreed  upon  procedures  was  made  of  three  randomly   selected   Servicer's
Certificates;  (2) except as disclosed in the report, no exceptions or errors in
the  Servicer's  Certificates  were  found;  and (3) the  delinquency  and  loss
information relating to the Receivables contained in the Servicer's Certificates
were found to be accurate.

                                       22
<PAGE>

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

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

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

                  SECTION  4.13.  Retention  and  Termination  of Servicer.  The
Servicer hereby  covenants and agrees to act as such under this Agreement for an
initial  term,  commencing  on the Closing  Date and ending on December 31, 2006
which term shall be  extendible  by the Note  Insurer for  successive  quarterly
terms ending on each successive  March 31, June 30, September 30 and December 31
(or,  pursuant to revocable  written standing  instructions from time to time to
the Servicer and the Trust  Collateral  Agent, for any specified number of terms
greater  than  one),  until the  termination  of the  Issuer.  Each such  notice
(including each notice pursuant to standing instructions,  which shall be deemed
delivered  at  the  end of  successive  quarterly  terms  for so  long  as  such
instructions are in effect) (a "Servicer  Extension  Notice") shall be delivered
by the Note Insurer to the Trust Collateral Agent and the Servicer. The Servicer
hereby  agrees  that,  as of the date  hereof  and upon its  receipt of any such
Servicer Extension Notice, the Servicer shall become bound, for the initial term
beginning  on the date hereof and for the  duration of the term  covered by such
Servicer  Extension  Notice,  to  continue  as the  Servicer  subject  to and in
accordance  with the other  provisions of this  Agreement.  Until such time as a
Note Insurer Default shall have occurred and be continuing, the Trust Collateral
Agent agrees that if as of the  fifteenth  day prior to the last day of any term
of the Servicer, the Trust Collateral Agent shall not have received any Servicer
Extension Notice from the Note Insurer,  the Trust Collateral Agent will, within
five  days  thereafter,  give  written  notice of such  non-receipt  to the Note
Insurer,  the Demand Note  Provider,  the  Back-up  Servicer  (or any  alternate
successor  servicer  appointed by the Note Insurer  pursuant to Section 8.5) and
the Servicer and the  Servicer's  terms shall not be extended  unless a Servicer
Extension Notice is received on or before the last day of such term. Following a
Note Insurer  Default,  this Section 4.13 shall no longer apply and the Servicer
shall be deemed to be retained for the term of this Agreement,  unless otherwise
removed pursuant to Article 9.

                  SECTION 4.14. Access to Certain  Documentation and Information
Regarding  Receivables.  The Servicer  shall provide to  representatives  of the
Indenture Trustee, the Trust Collateral Agent, the Collateral Agent, the Back-up
Servicer,  the  Transferor,  the Issuer,  the Demand Note  Provider and the Note
Insurer  reasonable access to documentation and computer systems and information
regarding the  Receivables  and shall provide such access to Noteholders in such
cases where the  Noteholders  are required by  applicable  law or  regulation to
review such  documentation.  In each case, such access shall be afforded without
charge but

                                       23
<PAGE>

only upon reasonable  request and during normal business hours.  Nothing in this
Section 4.14 shall  derogate from the  obligation of the Servicer to observe any
applicable law prohibiting disclosure of information regarding the Obligors, and
the failure of the  Servicer to provide  access as provided in this Section 4.14
as a result of such  obligation  shall not  constitute  a breach of this Section
4.14.

                  SECTION 4.15. Verification of Servicer's Certificate.

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

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

                                       24
<PAGE>

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

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

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

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

                  SECTION 4.17.  Delegation  of Duties.  The Servicer may at any
time  delegate  duties under this  Agreement to  sub-contractors  who are in the
business of servicing  automotive  receivables with the prior written consent of
the Controlling Party and notice to the Demand Note Provider; provided, however,
that no such  delegation  or  sub-contracting  of duties by the  Servicer  shall
relieve the Servicer of its  responsibility  with respect to such duties. In the
event the  Servicer  shall for any  reason  no  longer  be the  servicer  of the
Receivables  (including by reason of a Servicer  Termination Event), the Back-up
Servicer,  its designee or any successor Servicer shall assume all of the rights
and  obligations  of the  predecessor  Servicer  under one or more  subservicing
agreements that may have been entered into by the predecessor Servicer by giving
notice of such assumption to the related  subservicer or subservicers within ten
(10)  Business  Days of the  termination  of the  Servicer  as  servicer  of the
Receivables; provided, however, that the Back-up Servicer may elect to terminate
a subservicing  agreement with the prior written consent of the Note Insurer, so
long as no Note Insurer Default is then continuing. If the Back-up Servicer does
not elect to assume any subservicing agreement, any and all costs of termination
shall be at the predecessor  Servicer's expense. Upon the giving of such notice,
the Back-up Servicer,  its designee or the successor Servicer shall be deemed to
have  assumed all of the  predecessor  Servicer's  interest  therein and to have
replaced the predecessor  Servicer as a party to the  subservicing  agreement to
the same  extent  as if the  subservicing  agreement  had been  assigned  to the
assuming party except that the predecessor Servicer and the subservicer, if any,

                                       25
<PAGE>

shall not thereby be relieved of any liability or obligations  accrued up to the
date of the replacement of the Servicer under the subservicing agreement and the
subservicer, if any, shall not be relieved of any liability or obligation to the
predecessor  Servicer  that  survives  the  assignment  or  termination  of  the
subservicing  agreement.  The Back-up  Servicer shall notify each Rating Agency,
the Demand Note Provider and the Note Insurer if any  subservicing  agreement is
assumed by the Back-up  Servicer,  its designee or the successor  Servicer.  The
predecessor  Servicer shall,  upon request of the Trust  Collateral  Agent,  the
Back-up  Servicer  or  any  successor  Servicer,  but  at  the  expense  of  the
predecessor  Servicer,  deliver to the assuming  party all documents and records
relating to the  subservicing  agreement and the Receivables then being serviced
and an  accounting  of amounts  collected  and held by it and  otherwise use its
reasonable  efforts  to  effect  the  orderly  and  efficient  transfer  of  the
subservicing agreement to the assuming party.

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

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

      (b) In  addition  to  the  information  required  to be  delivered  by the
Servicer to the Back-up  Servicer or its designated agent on or before the fifth
Business  Day of each month  pursuant to Section  4.15(a) and on or prior to the
Closing Date and each Subsequent Transfer Date pursuant to Section 4.18(a),  the
Servicer  shall  deliver the loan master  file and  history  information  to the
Back-up Servicer or its designated agent on the Determination  Date occurring in
October 2006 (with respect to the period from and  including the Initial  Cutoff
Date to the last day of the related  Collection Period) and on the Determination
Date  occurring  every six  months  thereafter  in the form  attached  hereto as
Exhibit  B-2  in  writing  and  on a  computer  diskette  (or  other  electronic
transmission)  in a format  acceptable to the Back-up Servicer or its designated
agent, as the case may be, and as at such other times as may be requested by the
Note Insurer or the Back-up  Servicer upon prior written notice to the Servicer,
provided  that the Back-up  Servicer  shall deliver a copy of any such notice by
the Back-up  Servicer to the Note  Insurer  simultaneously  with its delivery of
such notice to the Servicer.

                  SECTION 4.19. Confidential Information.  The Back-up Servicer,
each subservicer,  any successor  Servicer and the Backup Servicer's  designated
agent shall hold in confidence all  Confidential  Information in accordance with
the Federal  Financial  Privacy Law and, to the extent more  exacting,  its then
customary procedures, and each represents and warrants that it has in place, and
will continue to maintain,  sufficient systems and procedures to do so; provided
that nothing herein shall prevent the Back-up  Servicer,  any  subservicer,  any
successor  Servicer or the Backup  Servicer's  designated  agent from delivering
copies of any

                                       26
<PAGE>

financial   statements  and  other   documents   whether  or  not   constituting
Confidential  Information,  and  disclosing  other  information,  whether or not
Confidential Information, to (i) its directors,  officers, employees, agents and
professional  consultants  to the  extent  necessary  to  carry  on the  Back-up
Servicer's,  such  subservicer's  or  such  successor  Servicer's  business,  as
applicable, in the ordinary course, (ii) any Noteholder,  Certificateholder, the
Demand  Note  Provider or the Note  Insurer to the extent that such  Noteholder,
Certificateholder,  the Demand Note  Provider or the Note Insurer is entitled to
such  information  under this  Agreement  or any other Basic  Document,  but not
otherwise,  (iii) any governmental  authority which specifically requests (or as
to which applicable  regulations require) such information,  (iv) any nationally
recognized  rating  agency in  connection  with the  rating of the Notes by such
agency,  or (v) any other  Person to which such  delivery or  disclosure  may be
necessary or  appropriate  (a) in  compliance  with any  applicable  law,  rule,
regulation or order, (b) in response to any subpoena or other legal process, (c)
in  connection  with  any  litigation  to  which  the  Back-up  Servicer,   such
subservicer or such successor Servicer, as applicable,  is a party, (d) in order
to enforce the rights of the Noteholders, the Certificateholder, the Demand Note
Provider and the Note Insurer  hereunder or under any other Basic  Document,  or
(e) otherwise,  in accordance with the Federal Financial Privacy Law;  provided,
that, prior to any such disclosure,  the Back-up  Servicer,  such subservicer or
such successor Servicer, as applicable, shall inform each such party (other than
any Noteholder, Certificateholder, the Demand Note Provider, the Note Insurer or
any other party to the Basic Documents) that receives  Confidential  Information
of the foregoing  requirements  and shall use its  commercially  reasonable best
efforts to cause such party to comply with such requirements.

                                    ARTICLE V
                               ACCOUNTS; PAYMENTS;
                            STATEMENTS TO NOTEHOLDERS

                  SECTION 5.1. Accounts; Lock-Box Account.

      (a) The Servicer  has  established  the  Lock-Box  Account as two Eligible
Accounts,  one  established  with Bank of  America  National  Trust and  Savings
Association  entitled  "Long  Beach  Acceptance  Corp.,  JPMorgan  Chase,  Agent
Account--Auto  Loan Programs,"  account number  1457202900,  and one established
with JPMorgan Chase entitled "Long Beach Acceptance Corp., JPMorgan Chase, Agent
Account -- Auto Loan Programs,"  account number  530097095;  provided,  that the
Servicer, with the prior written consent of the Note Insurer and prior notice to
the Demand Note  Provider,  may from time to time (a)  establish  additional  or
substitute  Lock-Box Accounts,  each of which shall be an Eligible Account,  and
(b) close or  terminate  the use of any of the  aforementioned  accounts  or any
subsequently  established accounts,  each of which accounts, at such time, shall
no longer be deemed to be a Lock-Box Account;  provided,  further, that pursuant
to the Lock-Box Agreement,  the Lock-Box Processor and no other person, save the
Trust Collateral Agent or the Servicer,  has authority to direct  disposition of
funds related to the Receivables on deposit in the Lock-Box  Account  consistent
with the  provisions  of this  Agreement and the Lock-Box  Agreement.  The Trust
Collateral Agent shall have no liability or  responsibility  with respect to the
Lock-Box Processor's or the Servicer's  directions or activities as set forth in
the preceding  sentence.  The Lock-Box Account shall be established  pursuant to
and maintained in accordance  with the Lock-Box  Agreement and shall be a demand
deposit account into which Obligors will be directed to make payments due under

                                       27
<PAGE>

Receivables  and which  shall at all  times be an  Eligible  Account,  initially
established  and  maintained  with JPMorgan Chase or, at the request of the Note
Insurer,  an Eligible Account  satisfying clause (i) of the definition  thereof.
The Servicer has  established and shall maintain the Lock-Box at a United States
Post  Office  Branch.  Notwithstanding  the  Lock-Box  Agreement  or  any of the
provisions  of  this  Agreement  relating  to  the  Lock-Box  and  the  Lock-Box
Agreement,  the  Servicer  shall  remain  obligated  and  liable  to  the  Trust
Collateral Agent, the Demand Note Provider and the Noteholders for servicing and
administering  the  Receivables  and the other Trust Assets in  accordance  with
provisions of this Agreement without  diminution of such obligation or liability
by virtue thereof.

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

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

                                       28
<PAGE>

Account.  The  Servicer  shall  promptly  notify  the  Rating  Agencies  and the
Transferor of any change in the location of any of the aforementioned accounts.

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

                  SECTION 5.2.  Collections.  The Servicer  shall use reasonable
efforts to cause the  Lock-Box  Processor to transfer any payments in respect of
the  Receivables  from or on behalf of Obligors  received in the Lock-Box to the
Lock-Box  Account on the  Business  Day on which  such  payments  are  received,
pursuant to the Lock-Box Agreement.  Within two Business Days of receipt of such
funds into the Lock-Box  Account,  the Servicer shall cause the Lock-Box Bank to
transfer available funds related to the Receivables from the Lock-Box Account to
the  Collection  Account,  and if such funds are not  available  funds,  as soon
thereafter  as they  clear  (i.e.,  become  available  for  withdrawal  from the
Lock-Box Account).  In addition,  the Servicer shall remit all payments by or on
behalf of the Obligors  received by the Servicer with respect to the Receivables
(other than Purchased  Receivables),  and all Liquidation Proceeds no later than
the second  Business Day  following  receipt  into the  Lock-Box  Account or the
Collection Account. Not less than eight (8) days prior to each Payment Date, the
Indenture  Trustee  shall give notice to each  Eligible  Institution  that holds
Eligible  Investments in money market deposit accounts in the Collection Account
or the Pre-Funding  Account that on such Payment Date the Indenture  Trustee may
be withdrawing all funds from such Account.

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

            With respect to each Receivable (other than a Purchased Receivable),
payments  actually  received  from or on behalf of the Obligor  shall be applied
hereunder,  first,  to interest  and  principal  in  accordance  with the Simple
Interest  Method to the  extent  necessary  to bring  such  Receivable  current,
second,  in  connection  with  the  redemption  of a  defaulted  Receivable,  to
reimburse  the Servicer for  reasonable  and  customary  out-of-pocket  expenses
incurred by the Servicer in connection with such Receivable, third, to late fees
and  fourth,  to  principal  in  accordance  with the  Simple  Interest  Method.
Notwithstanding anything herein to the contrary,

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<PAGE>

no amount  applied as interest  accrued on any  Precomputed  Receivable  for any
single  Collection Period will exceed 30 days' interest accrued thereon assuming
a 360-day year of twelve 30-day months.

                  SECTION 5.4. Intentionally Omitted.

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

                  SECTION 5.6. Payments; Policy Claims.

      (a) The Trust  Collateral Agent (based solely on the information set forth
in the Servicer's  Certificate for the related Payment Date upon which the Trust
Collateral Agent may conclusively rely) shall transfer,

            (i) on each Payment Date,  from the  Collection  Account to the Note
      Account, in immediately available funds, an amount equal to the sum of (a)
      all funds that were deposited in the Collection Account, plus (b) earnings
      on  investments  of funds in the  Collection  Account  pursuant to Section
      5.1(b), for the related Collection Period; and

            (ii) on each Payment Date during the Funding Period and on the Final
      Funding  Period  Payment Date,  from the  Pre-Funding  Account to the Note
      Account, in immediately  available funds, earnings on investments of funds
      in the  Pre-Funding  Account for the  related  Collection  Period,  to the
      extent required pursuant to Section 5.1(b).

      (b)  Prior  to each  Payment  Date,  the  Servicer  shall  on the  related
Determination  Date calculate the Available Funds, the Principal Payment Amount,
the Class A-1 Interest  Payment Amount,  the Class A-2 Interest  Payment Amount,
the Class A-3 Interest Payment Amount and the Class A-4 Interest Payment Amount,
the Demand Note Interest Payment Amount,  the Demand Note Supplemental  Interest
Payment  Amount,  if any, the Monthly Dealer  Participation  Fee Payment Amount,
and, based on the Available Funds and the other amounts available for

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<PAGE>

payment on such Payment Date,  determine the amount  payable to the  Noteholders
and the Class R Certificateholder.

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

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

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

            (iii) to the Class A-1 Noteholders,  the Class A-2 Noteholders,  the
      Class A-3 Noteholders and the Class A-4 Noteholders, pro rata based on the
      interest  due on each such class of Notes,  from the  Available  Funds (as
      such  Available  Funds have been  reduced by  payments  made  pursuant  to
      clauses  (i) and  (ii)  above),  an  amount  equal to the  Class  A-1 Note
      Interest, the Class A-2 Note Interest, the Class A-3 Note Interest and the
      Class A-4 Note  Interest  (calculated  (i) with  respect  to the Class A-1
      Notes on each  Payment  Date,  on the basis of the  actual  number of days
      elapsed  during such Accrual Period based on a 360 day year) and (ii) with
      respect  to the  Class  A-2  Notes,  the Class A-3 Notes and the Class A-4
      Notes on each Payment Date,  on the basis of a 360-day year  consisting of
      twelve 30-day months or, with respect to the first Payment Date, 17 days),
      respectively,   with  respect  to  such   Payment   Date  (plus   (without
      duplication) interest on

                                       31
<PAGE>

      any outstanding Class A-1 Interest Carryover Shortfall, Class A-2 Interest
      Carryover  Shortfall,  Class A-3 Interest Carryover Shortfall or Class A-4
      Interest  Carryover  Shortfall,   if  any,  to  the  extent  permitted  by
      applicable  law, at the Class A-1 Note Rate,  the Class A-2 Note Rate, the
      Class A-3 Note Rate or the Class A-4 Note  Rate,  as  applicable,  for the
      related Accrual Period (calculated (i) with respect to the Class A-1 Notes
      on each Payment  Date,  on the basis of the actual  number of days elapsed
      during such  Accrual  Period based on a 360 day year and (ii) with respect
      to the  Class  A-2  Notes,  the Class A-3 Notes and the Class A-4 Notes on
      each Payment  Date,  on the basis of a 360-day year  consisting  of twelve
      30-day months) and, if the Available  Funds are  insufficient  to pay such
      amounts,  the Class A Noteholders  will receive such  deficiency  from the
      following  sources  in the  following  order  of  priority:  (A)  from the
      remaining  portion of the  Deficiency  Claim  Amount with  respect to such
      Payment  Date,  if any,  from  amounts on  deposit  in the Spread  Account
      (including  the  Demand  Note),  to  the  extent  received  by  the  Trust
      Collateral  Agent from the Collateral  Agent,  after  application  thereof
      pursuant  to  clauses  (i) and (ii)  above and (B) from the  Policy  Claim
      Amount with respect to such Payment  Date,  if any,  received by the Trust
      Collateral Agent from the Note Insurer;

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

            (v) to the Note Insurer, from the Available Funds (as such Available
      Funds have been reduced by payments  made  pursuant to clauses (i) through
      (iv) above), an amount equal to the Reimbursement  Obligations (other than
      any  accrued  and  unpaid   Premium)  and,  if  the  Available  Funds  are
      insufficient to pay such Reimbursement Obligations, the Note Insurer shall
      receive such deficiency from the remaining portion of the Deficiency Claim
      Amount with respect to such Payment  Date, if any, from amounts on deposit
      in the Spread Account  (including the Demand Note), to the extent received
      by

                                       32
<PAGE>

      the Trust Collateral Agent from the Collateral  Agent,  after  application
      thereof pursuant to clauses (i) through (iv) above;

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

            (vii) to the Demand Note Provider, from the Available Funds (as such
      Available Funds have been reduced by payments made pursuant to clauses (i)
      through (vi) above), the Demand Note Interest Payment Amount;

            (viii) to the Demand Note Provider or the Demand Note Guarantor,  as
      applicable,  from the Available  Funds (as such Available  Funds have been
      reduced by payments  made  pursuant to clauses (i) through  (vii)  above),
      reimbursement  for any current and  previously  unreimbursed  draws on the
      Demand  Note or the Demand  Note  Guarantee,  as  applicable,  pursuant to
      Section 5.12(b) hereof; provided,  however, that if the Demand Note Spread
      Account has been funded in accordance  with Section 5.12(c) hereof and the
      Spread  Account  Agreement,   any  reimbursed  amounts  shall  instead  be
      distributed to the Collateral  Agent for deposit in the Demand Note Spread
      Account;

            (ix) first, to the Trust Collateral Agent, the Collateral Agent, the
      Indenture Trustee, the Back-up Servicer and the Custodian,  as applicable,
      from the  Available  Funds (as such  Available  Funds have been reduced by
      payments made pursuant to clauses (i) through (viii) above) all reasonable
      out-of-pocket  expenses  and  indemnity  amounts  of the Trust  Collateral
      Agent, the Collateral Agent, the Indenture  Trustee,  the Back-up Servicer
      and the Custodian (including,  but not limited to, reasonable counsel fees
      and expenses),  including, without limitation, costs and expenses required
      to be paid by the Servicer to the Back-up  Servicer under Section  9.2(a),
      to the  extent  not  paid  by the  Servicer,  and  all  unpaid  reasonable
      out-of-pocket  expenses  and  indemnity  amounts  of the Trust  Collateral
      Agent, the Collateral Agent, the Indenture  Trustee,  the Back-up Servicer
      and the Custodian (including,  but not limited to, reasonable counsel fees
      and expenses) from prior Collection  Periods,  and, if the Available Funds
      are  insufficient to pay such amounts,  such deficiency shall be paid from
      the remaining  portion of the Deficiency Claim Amount with respect to such
      Payment  Date,  if any,  from  amounts on  deposit  in the Spread  Account
      (including  the  Demand  Note),  to  the  extent  received  by  the  Trust
      Collateral  Agent from the Collateral  Agent,  after  application  thereof
      pursuant to clauses  (i)  through  (vi)  above;  provided,  however,  that
      expenses and indemnity  amounts payable to the Trust Collateral Agent, the
      Collateral  Agent,  the Indenture  Trustee,  the Back-up  Servicer and the
      Custodian pursuant to this subclause first of clause (ix) shall be limited
      to a combined  aggregate  amount of $50,000  per annum,  and second to the
      Back-up  Servicer,  from the Available Funds (as such Available Funds have
      been reduced by payments made pursuant to clauses (i) through (viii) above
      and subclause first of this

                                       33
<PAGE>

      clause (ix)),  in the event that the Back-up  Servicer  shall have assumed
      the  obligations  of Servicer  pursuant to Section 9.2(a) and the Servicer
      fails to pay the  Back-up  Servicer  for  system  conversion  expenses  as
      required by said section,  an aggregate  amount not to exceed  $100,000 in
      payment of such system conversion expenses;

            (x) to the  Collateral  Agent,  from the  Available  Funds  (as such
      Available Funds have been reduced by payments made pursuant to clauses (i)
      through  (ix) above),  for deposit in the Spread  Account,  the  remaining
      Available  Funds (as such  Available  Funds have been  reduced by payments
      pursuant to clauses (i) through (ix) above),  if any,  until the amount on
      deposit in the Spread  Account (not including the Demand Note) is equal to
      the Requisite Amount;

            (xi) from the  Available  Funds (as such  Available  Funds have been
      reduced by payments made pursuant to clauses (i) through (x) above), until
      the    Overcollateralization    Amount   is   equal   to   the    Required
      Overcollateralization  Target,  first,  to the Class A-1  Noteholders,  in
      reduction of the Class A-1 Note Balance,  until the Class A-1 Note Balance
      has been reduced to zero, second, once the Class A-1 Note Balance has been
      reduced to zero, to the Class A-2  Noteholders,  in reduction of the Class
      A-2 Note Balance,  third, once the Class A-2 Note Balance has been reduced
      to zero, to the Class A-3 Noteholders,  in reduction of the Class A-3 Note
      Balance,  and fourth,  once the Class A-3 Note Balance has been reduced to
      zero,  to the Class A-4  Noteholders,  in  reduction of the Class A-4 Note
      Balance, until the Class A-4 Note Balance has been reduced to zero;

            (xii) to the Demand Note Provider, from the Available Funds (as such
      Available Funds have been reduced by payments made pursuant to clauses (i)
      through (xi) above), the Demand Note Supplemental Interest Payment Amount;
      and

            (xiii) to the  Certificateholder,  any remaining Available Funds (as
      such  Available  Funds have been  reduced by  payments  made  pursuant  to
      clauses (i) through (xii) above).

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

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

                                       34
<PAGE>

            In  furtherance  of and  not in  limitation  of the  foregoing,  the
Certificateholder  by acceptance of its Certificate,  specifically  acknowledges
that no amounts  shall be received by it, nor shall it have any right to receive
any amounts,  unless and until such amounts  have been  distributed  pursuant to
Sections  5.6(c) and 5.6(d)  above for  payment to such  Certificateholder.  The
Certificateholder,  by its acceptance of its Certificate,  further  specifically
acknowledges  that it has no right to or interest in any moneys at any time held
in the Spread  Account  prior to the release of such moneys as  aforesaid,  such
moneys  being held in trust for the  benefit  of the  Indenture  Trustee,  Trust
Collateral Agent,  Backup Servicer,  Class A Noteholders and the Note Insurer as
their interests may appear prior to such release.

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

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

                  SECTION 5.7. Statements to Noteholders; Tax Returns.

      (a) With each payment from the Note Account to the  Noteholders  made on a
Payment Date,  the Servicer  shall provide to the Note Insurer,  the Demand Note
Provider,  the  Transferor,  the Indenture  Trustee,  each Rating Agency and the
Trust  Collateral  Agent (the Trust  Collateral  Agent to make available to each
Noteholder  of  record  on its  website  at  https://www.tss.db.com/invr.com  or
through such other means as the Trust  Collateral  Agent  believes will make the
distribution more convenient and/or accessible and the Trust Collateral

                                       35
<PAGE>

Agent  shall  provide  timely  and  adequate  notification  to  all  Noteholders
regarding any such changes) the Servicer's Certificate substantially in the form
of Exhibit B-1 hereto,  setting forth at least the following  information  as to
the Notes, to the extent applicable:

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

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

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

            (iv) the Class A-1 Note  Balance,  the Class A-2 Note  Balance,  the
      Class A-3 Note  Balance,  the Class A-4 Note Balance and the Note Balance,
      as of the close of  business on the last day of the  preceding  Collection
      Period,  after giving effect to payments  allocated to principal  reported
      under clause (i) above;

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

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

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

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

            (ix) the amount in the Spread Account;

            (x) the Demand Note Amount;

            (xi) the amount paid to the Demand Note  Provider  and/or the Demand
      Note  Guarantor,  as applicable,  in respect of any current and previously
      unreimbursed  draws on the Demand Note,  the Demand Note Interest  Payment
      Amount and the Demand Note Supplemental Interest Payment Amount;

                                       36
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

      (b) No later than January 31 of each calendar year, commencing January 31,
2007, the Servicer shall send to the Indenture  Trustee and the Trust Collateral
Agent, and the Trust

                                       37
<PAGE>

Collateral Agent shall,  provided it has received the necessary information from
the Servicer,  promptly thereafter furnish to each Person who at any time during
the preceding  calendar year was a Noteholder of record and received any payment
thereon (a) a report  (prepared by the  Servicer) as to the aggregate of amounts
reported  pursuant to subclauses  (i), (ii) and (iv) of Section  5.7(a) for such
preceding  calendar year or applicable  portion thereof during which such person
was a Noteholder, and (b) such information as may be reasonably requested by the
Noteholders or required by the Code and regulations  thereunder,  to enable such
Holders to prepare their Federal and State income tax returns. The obligation of
the Trust  Collateral  Agent set forth in this paragraph shall be deemed to have
been satisfied to the extent that substantially  comparable information shall be
provided by the Servicer pursuant to any requirements of the Code.

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

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

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

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

                                       38
<PAGE>

                  SECTION 5.11.  Withdrawals  from Spread Account.  In the event
that the Servicer's  Certificate  with respect to any  Determination  Date shall
state that the amount of the Available Funds with respect to such  Determination
Date are less than the sum of the amounts  payable on the related  Payment  Date
pursuant  to clauses  (i)  through  (vi) and  subclause  first of clause (ix) of
Section 5.6(c) (such deficiency  being a "Deficiency  Claim Amount") then on the
Deficiency  Claim  Date  immediately  preceding  such  Payment  Date,  the Trust
Collateral Agent shall deliver to the Collateral  Agent,  the Note Insurer,  the
Demand Note Provider, the Fiscal Agent (as such term is defined in the Insurance
Agreement),   if  any,  the  Servicer,  by  hand  delivery,   telex,   facsimile
transmission  or  another  mutually   acceptable  means,  a  written  notice  (a
"Deficiency  Notice")  specifying the  Deficiency  Claim Amount for such Payment
Date.  Such  Deficiency  Notice shall direct the Collateral  Agent to remit such
Deficiency  Claim Amount (to the extent of the funds available to be distributed
pursuant  to the Spread  Account  Agreement  to the Trust  Collateral  Agent for
deposit in the Collection  Account;  provided,  that no Deficiency  Claim Amount
shall be paid for any  principal  payable  pursuant  to clause  (iv) of  Section
5.6(c) unless the Overcollateralization Amount is less than zero or such Payment
Date is a Final Scheduled Payment Date for any class of Class A Notes.

            Any  Deficiency  Notice shall be  delivered by 10:00 a.m.,  New York
City time, on the related Deficiency Claim Date. The amounts  distributed by the
Collateral Agent to the Trust  Collateral Agent pursuant to a Deficiency  Notice
shall be deposited by the Trust  Collateral  Agent into the  Collection  Account
pursuant to Section 5.5 and 5.12.

                  SECTION 5.12. Demand Note.

      (a) On or before the Closing Date the Issuer shall deliver the Demand Note
to the Collateral  Agent for the benefit of the Trust  Collateral  Agent and the
Note  Insurer,  in an amount  equal to the Demand Note  Amount.  The Demand Note
shall be an Eligible  Investment of the Spread  Account.  Such Demand Note shall
remain  in full  force  and  effect  for so long as (i) this  Agreement  and the
Indenture  remain in full force and effect or (ii) until the Demand  Note Amount
is reduced to zero and all  amounts  due and owing to the Demand  Note  Provider
and/or  Demand  Note  Guarantor,  as  applicable,  have been paid in full.  Upon
termination  of the Demand  Note,  the Trust  Collateral  Agent shall direct the
Collateral Agent to surrender the Demand Note to the Demand Note Provider.

      (b) If on any  Determination  Date  (based on the  Servicer's  Certificate
delivered on such  Determination  Date by the Servicer  pursuant to Section 4.9,
upon  which the Trust  Collateral  Agent may  conclusively  rely) the  Available
Funds,  together with other amounts on deposit in the Spread Account (other than
the Demand Note),  are  insufficient to pay the full amount described in clauses
(i) through (vi) of Section 5.6(c),  the Trust Collateral Agent shall direct the
Collateral  Agent (i) to submit to the Demand Note Provider by 5:00 pm (New York
time) a completed demand certificate,  substantially in the form of Exhibit A to
the Demand Note,  demanding payment from the Demand Note Provider and the Demand
Note Guarantor,  by not later than 5:00 p.m. (New York time) on the Business Day
following  the  Business  Day on which the Demand Note  Provider  receives  such
demand certificate, of the Remaining Deficiency Claim Amount and (ii) to deliver
such Remaining Deficiency Claim Amount to the Trust Collateral Agent for deposit
in the Collection  Account,  for  application in respect of such  insufficiency;
provided,  that no  Deficiency  Claim  Amount  shall be paid  for any  principal
payable    pursuant   to   clause   (iv)   of   Section    5.6(c)   unless   the
Overcollateralization  Amount is less than zero or such  Payment Date is a Final
Scheduled  Payment  Date for any  class of Class A  Notes.  If the  Demand  Note
Provider

                                       39
<PAGE>

shall fail to make any payment when required  above,  the Demand Note  Guarantor
shall be  required  to make such  payment by 10:00  a.m.  (New York time) on the
Business  Day  following  the date such  payment  was due.  Notwithstanding  the
foregoing,  if the Demand Note Spread Account has been funded in accordance with
Section 5.12(c) or (e) and the Spread Account  Agreement,  the Trust  Collateral
Agent  shall  instead  direct the  Collateral  Agent to withdraw  the  Remaining
Deficiency Claim Amount from the Demand Note Spread Account.

      (c) If at any time while the Notes are outstanding,  the Applicable Demand
Note Person  shall  cease to be an Eligible  Person,  the Issuer  shall  (unless
otherwise  consented to in writing by the  Controlling  Party) within 10 days of
the date on which the Applicable Demand Note Person was downgraded,  replace the
existing Demand Note or Demand Note Guarantee, as applicable,  with a substitute
Demand Note or Demand Note Guarantee, as applicable, from an Eligible Person. If
the Issuer  shall fail to deliver  such  replacement  Demand Note or Demand Note
Guarantee,  as  applicable,  within 10 days of the date on which the  Applicable
Demand Note Person was  downgraded,  the  Collateral  Agent shall,  upon written
instructions from the Note Insurer, submit to the existing Demand Note or Demand
Note Guarantor, as applicable,  a completed demand certificate for the remaining
Demand  Note  Amount.  Any  amounts  received as a result of such claim shall be
deposited into the Series 2006-B Demand Note Spread Account to be distributed in
accordance with Section 5.6 hereof and with the Spread Account  Agreement.  Upon
receipt by the  Collateral  Agent of a  replacement  Demand  Note or Demand Note
Guarantee,  as  applicable,   in  accordance  with  this  Section  5.12(c),  the
Collateral  Agent shall  surrender  the original of the replaced  Demand Note or
Demand Note Guarantee, as applicable, to the issuer thereof.

      (d) The Demand Note and/or the Demand Note Guarantee  shall be returned to
the Demand Note Provider at the times and subject to the conditions described in
this Section 5.12.

      (e) If at any time  while the Notes are  outstanding  a Demand  Note Event
shall have occurred and be continuing,  the Collateral Agent shall, upon written
direction from the Note Insurer,  submit to the Demand Note Provider a completed
demand certificate for the remaining Demand Note Amount. Any amounts received as
a result of such claim shall be  deposited  into the Series  2006-B  Demand Note
Spread Account to be distributed in accordance  with Section 5.6 hereof and with
the Spread Account Agreement.

                  SECTION 5.13. Pre-Funding Account.

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

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

                                       40
<PAGE>

upon  satisfaction  of the  conditions  set forth in this  Agreement  and in the
related Transfer Agreement with respect to such transfer.

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

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

                                   ARTICLE VI
                                   THE POLICY

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

                  SECTION 6.2. Claims Under Policy.

      (a) In  the  event  that  the  Trust  Collateral  Agent  has  delivered  a
Deficiency Notice with respect to any  Determination  Date, the Trust Collateral
Agent shall determine on the related Draw Date whether the sum of (i) the amount
of  Available  Funds with respect to such  Determination  Date (as stated in the
Servicer's  Certificate with respect to such  Determination  Date) plus (ii) the
amount of the  Deficiency  Claim  Amount,  if any,  available to be  distributed
pursuant to the Spread Account  Agreement by the  Collateral  Agent to the Trust
Collateral Agent pursuant to a Deficiency  Notice delivered with respect to such
Payment  Date  (as  stated  in the  certificate  delivered  on  the  immediately
preceding  Deficiency  Claim Date by the  Collateral  Agent  pursuant to Section
3.03(a) of the Spread Account  Agreement)  would be  insufficient,  after giving
effect to the  payments  required  by  Section  5.6(c)(i)  and (ii),  to pay the
Scheduled  Payments for the related  Payment Date,  then in such event the Trust
Collateral  Agent shall furnish to the Note Insurer no later than 12:00 noon New
York  City time on the  related  Draw  Date a  completed  Notice of Claim in the
amount of the  shortfall in amounts so available to pay the  Scheduled  Payments
with respect to such Payment Date (the amount of any such shortfall

                                       41
<PAGE>

being hereinafter referred to as the "Policy Claim Amount"). Amounts paid by the
Note Insurer under the Policy shall be deposited by the Trust  Collateral  Agent
into the Policy  Payments  Account  and  thereafter  into the Note  Account  for
payment  to  Class A  Noteholders  on the  related  Payment  Date  (or  promptly
following payment on a later date as set forth in the Policy).

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

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

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

                  SECTION 6.3. Preference Claims; Direction of Proceedings.

      (a) In the event that the Trust  Collateral Agent has received a certified
copy of an order of the appropriate  court that any Scheduled  Payment paid on a
Class A Note has been avoided in whole or in part as a preference  payment under
applicable  bankruptcy law, the Trust  Collateral Agent shall so notify the Note
Insurer, shall comply with the provisions of the Policy to obtain payment by the
Note Insurer of such avoided payment, and shall, at the time it provides

                                       42
<PAGE>

notice to the Note Insurer,  comply with the  provisions of the Policy to obtain
payment by the Note Insurer,  notify  Holders of the Class A Notes by mail that,
in the event that any Class A Noteholder's payment is so recoverable, such Class
A  Noteholder  will be entitled to payment  pursuant to the terms of the Policy.
Pursuant to the terms of the Policy,  the Note Insurer will make such payment on
behalf   of   the   Class   A   Noteholder   to   the   receiver,   conservator,
debtor-in-possession  or trustee in bankruptcy named in the Order (as defined in
the  Policy)  and not to the Trust  Collateral  Agent or any Class A  Noteholder
directly  (unless a Class A Noteholder has  previously  paid such payment to the
receiver,  conservator,  debtor-in-possession or trustee in bankruptcy, in which
case the Note Insurer will make such payment to the Trust  Collateral  Agent for
payment, in accordance with the instructions to be provided by the Note Insurer,
to such Class A Noteholder upon proof of such payment reasonably satisfactory to
the Note Insurer).

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

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

                                  ARTICLE VII
                                 THE TRANSFEROR

                  SECTION 7.1. Representations of the Transferor. The Transferor
makes the following representations on which the Note Insurer shall be deemed to
have relied in executing  and  delivering  the Policy,  on which the Demand Note
Provider  shall be deemed to have  relied on in issuing  the Demand  Note and on
which the Issuer is deemed to have relied in acquiring  the  Receivables  and on
which the Indenture Trustee, the Owner Trustee, the Collateral

                                       43
<PAGE>

Agent, Trust Collateral Agent and Back-up Servicer may rely. The representations
speak as of the execution  and delivery of this  Agreement and as of the Closing
Date, in the case of the Initial  Receivables,  and as of the related Subsequent
Transfer Date, in the case of the Subsequent Receivables,  and shall survive the
conveyance of the Receivables to the Issuer and the subsequent pledge thereof to
the Indenture Trustee pursuant to the Indenture.

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

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

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

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

      (e)  No  Violation.  The  execution,   delivery  and  performance  by  the
Transferor  of this  Agreement  and the  other  Basic  Documents  to  which  the
Transferor  is a party and the  consummation  of the  transactions  contemplated
hereby and thereby and the  fulfillment  of the terms  hereof and thereof do not
conflict  with,  result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under, the

                                       44
<PAGE>

certificate  of  incorporation  or by-laws of the  Transferor,  or any  material
indenture,  agreement, mortgage, deed of trust, or other instrument to which the
Transferor  is a party or by which  it is  bound  or any of its  properties  are
subject;  nor result in the creation or imposition of any material lien upon any
of its  properties  pursuant  to the  terms  of any such  indenture,  agreement,
mortgage, deed of trust, or other instrument (other than the Basic Documents and
the Master Loan  Agreement);  nor violate any law,  order,  rule,  or regulation
applicable to the Transferor of any court or of any federal or state  regulatory
body,  administrative  agency,  or  other  governmental  instrumentality  having
jurisdiction over the Transferor or its properties.

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

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

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

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

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

                                       45
<PAGE>

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

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

                  SECTION 7.5.  Transferor May Own Notes. The Transferor and any
Person  controlling,  controlled by, or under common control with the Transferor
may in its

                                       46
<PAGE>

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

                                  ARTICLE VIII
                                  THE SERVICER

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

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

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

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

            (iv)  Binding  Obligation.   This  Agreement  and  the  other  Basic
      Documents  to which it is a party  constitute  legal,  valid  and  binding
      obligations of the Servicer

                                       47
<PAGE>

      enforceable  in  accordance   with  their   respective   terms  except  as
      enforceability may be limited by bankruptcy, insolvency, reorganization or
      other  similar  laws  affecting  the  enforcement  of  creditors'   rights
      generally and by equitable  limitations  on the  availability  of specific
      remedies,  regardless  of whether  such  enforceability  is  considered  a
      proceeding in equity or at law.

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

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

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

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

            (ix) Chief  Executive  Office.  The Servicer  hereby  represents and
      warrants to the Trust Collateral Agent that the Servicer's principal place
      of business and chief

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<PAGE>

      executive  office is, and for the four months  preceding  the date of this
      Agreement, has been, located at One Mack Centre Drive, Paramus, New Jersey
      07652.

                  SECTION 8.2. Indemnities of Servicer.

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

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

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

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

            (iv) The  Servicer  shall  indemnify,  defend and hold  harmless the
      Indenture  Trustee,  the Trust Collateral  Agent,  the Owner Trustee,  the
      Collateral Agent, the Back-up Servicer,  the Transferor,  the Issuer,  the
      Custodian, the Demand Note Provider, the Note

                                       49
<PAGE>

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

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

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

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

                                       50
<PAGE>

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

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

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

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

                                       51
<PAGE>

merger,  consolidation  or  succession  pursuant to this  Section  8.3(a) to the
Indenture Trustee, the Trust Collateral Agent, the Issuer, the Back-up Servicer,
the  Collateral  Agent,  the  Demand  Note  Provider,   the  Note  Insurer,  the
Noteholders  and each  Rating  Agency.  Notwithstanding  anything  herein to the
contrary,  the execution of the foregoing agreement of assumption and compliance
with clauses (i), (ii) or (iii) above shall be conditions to the consummation of
the transactions referred to in clause (a), (b) or (c) above.

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

                  SECTION 8.4. Limitation on Liability of Servicer and Others.

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

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

                  SECTION  8.5.  Servicer  and Back-up  Servicer  Not to Resign.
Subject to the  provisions of Section 8.3,  neither the Servicer nor the Back-up
Servicer  may resign from the  obligations  and duties  hereby  imposed on it as
Servicer or Back-up  Servicer,  as the case may be, under this Agreement  except
upon  determination  that by  reason  of a  change  in  legal  requirements  the
performance of its duties under this Agreement would cause it to be in violation
of such legal  requirements in a manner which would result in a material adverse
effect on the  Servicer  or Back-up  Servicer,  as the case may be, and the Note
Insurer  does not elect to waive the  obligations  of the  Servicer  or  Back-up
Servicer,  as the case may be, to  perform  the duties  which  render it legally
unable to act or does not elect to  delegate  those  duties to  another  Person.
Notice of any such  determination  permitting the resignation of the Servicer or
Back-up

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<PAGE>

Servicer,  as the case may be,  shall be  communicated  to the  Transferor,  the
Indenture Trustee, the Trust Collateral Agent, the Issuer, the Note Insurer, the
Demand Note Provider,  and each Rating Agency at the earliest  practicable  time
(and, if such communication is not in writing,  shall be confirmed in writing at
the earliest  practicable  time) and any such  determination  by the Servicer or
Back-up  Servicer,  as the case may be,  shall be  evidenced  by an  Opinion  of
Counsel to such effect  delivered to and  satisfactory  to the  Transferor,  the
Indenture  Trustee,  the Trust Collateral Agent, the Issuer and the Note Insurer
concurrently  with or promptly  after such notice.  No such  resignation  of the
Servicer shall become  effective  until a successor  servicer shall have assumed
the  responsibilities and obligations of LBAC in accordance with Section 9.2 and
the Servicing Assumption  Agreement,  if applicable.  No such resignation of the
Back-up Servicer shall become  effective until an entity  acceptable to the Note
Insurer shall have assumed the  responsibilities  and obligations of the Back-up
Servicer;  provided,  however,  that if no such entity  shall have  assumed such
responsibilities  and obligations of the Back-up Servicer within 120 days of the
resignation of the Back-up  Servicer,  the Back-up Servicer may petition a court
of  competent  jurisdiction  for the  appointment  of a successor to the Back-up
Servicer.

                                   ARTICLE IX
                           SERVICER TERMINATION EVENTS

                  SECTION 9.1. Servicer Termination Events.

      (a) If any one of the following  events  ("Servicer  Termination  Events")
shall occur and be continuing:

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

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

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

            (iv)  Failure on the part of LBAC,  the  Servicer or, for so long as
      LBAC is the Servicer, the Transferor,  as the case may be, duly to observe
      or to perform in any material respect any other covenants or agreements of
      LBAC, the Servicer, the Custodian or the

                                       53
<PAGE>

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

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

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

            (vii)  Any  representation,  warranty  or  statement  of LBAC or the
      Servicer or, for so long as LBAC is the Servicer, the Transferor,  made in
      this Agreement and, with respect to LBAC and the Transferor,  the Purchase
      Agreement  or any  Transfer  Agreement,  or in each case any  certificate,
      report  or other  writing  delivered  pursuant  hereto  shall  prove to be
      incorrect as of the time when the same shall have been made

                                       54
<PAGE>

      (excluding,  however,  any representation or warranty set forth in Section
      3.03(b) of the  Purchase  Agreement  or Section 4 of the related  Transfer
      Agreement),  and the  incorrectness  of such  representation,  warranty or
      statement has a material  adverse effect on the Issuer and, within 30 days
      after  written  notice  thereof  shall  have been  given (1) to LBAC,  the
      Servicer or the  Transferor  (as the case may be) by the Trust  Collateral
      Agent or the Note Insurer or (2) to LBAC,  the Servicer or the  Transferor
      (as the case may  be),  and to the  Trust  Collateral  Agent  and the Note
      Insurer  by the Class A  Noteholders  evidencing  not less than 25% of the
      Class A Note Balance,  if a Note Insurer Event of Default has occurred and
      is  continuing,  the  circumstances  or condition in respect of which such
      representation,  warranty or statement was  incorrect  shall not have been
      eliminated or otherwise cured; or

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

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

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

            then, and in each and every case, so long as a Servicer  Termination
      Event shall not have been remedied;  provided, (i) no Note Insurer Default
      shall have  occurred and be  continuing,  the Note Insurer in its sole and
      absolute discretion, or (ii) if a Note Insurer Default shall have occurred
      and be  continuing,  then either the Trust  Collateral  Agent or the Trust
      Collateral Agent acting at the written  direction of the  Majorityholders,
      by  notice  then  given  in  writing  to the  Servicer  (and to the  Trust
      Collateral Agent if given by the Note Insurer or by the Noteholders) or by
      the Note Insurer's failure to deliver a Servicer Extension Notice pursuant
      to Section 4.13,  may terminate all of the rights and  obligations  of the
      Servicer under this  Agreement.  The Servicer shall be entitled to its pro
      rata share of the Servicing  Fee for the number of days in the  Collection
      Period prior to the  effective  date of its  termination.  On or after the
      receipt by the Servicer of such written notice, all authority and power of
      the  Servicer  under this  Agreement,  whether  with respect to the Notes,
      Certificate or the Receivables or otherwise, shall without further action,
      pass to and be vested in (i) the Back-up  Servicer or (ii) such  successor
      Servicer as may be appointed under Section 9.2;  provided,  however,  that
      the  successor  Servicer  shall  have no  liability  with  respect  to any
      obligation which was required to be performed by the predecessor  Servicer
      prior to the date the successor Servicer becomes the Servicer or any claim
      of a third party  (including a Noteholder)  based on any alleged action or
      inaction of the predecessor Servicer as Servicer; and, without limitation,
      the Trust Collateral  Agent is hereby  authorized and empowered to execute
      and deliver, on behalf of the predecessor Servicer, as attorney-in-fact or
      otherwise,  any and all  documents  and  other  instruments,  and to do or
      accomplish all other acts or things necessary or appropriate to effect the
      purposes of such notice of  termination,  whether to complete the transfer
      and endorsement of the Receivables  and related  documents,  or otherwise.
      Notwithstanding  anything contained in this Agreement to the contrary, the
      Backup Servicer as successor  Servicer is authorized to accept and rely on
      all of the accounting,  records  (including  computer records) and work of
      the prior Servicer relating to the Notes (collectively, the

                                       55
<PAGE>

      "Predecessor   Servicer  Work   Product")   without  any  audit  or  other
      examination   thereof,  and  the  Backup  Servicer  shall  have  no  duty,
      responsibility,  obligation or liability for the acts and omissions of the
      prior Servicer. In the event that the Backup Servicer becomes aware of any
      error,  inaccuracy,  omission or  incorrect  or  non-standard  practice or
      procedure (collectively,  "Errors") exist in any Predecessor Servicer Work
      Product and such Errors make it  materially  more  difficult to service or
      should cause or  materially  contribute to the Backup  Servicer  making or
      continuing  any  Errors  (collectively,  "Continued  Errors"),  the Backup
      Servicer  shall,  with  the  prior  consent  of  the  Note  Insurer,   use
      commercially  reasonable  best efforts to  reconstruct  and reconcile such
      data to correct  such Errors and  Continued  Errors and to prevent  future
      Continued  Errors.  the Backup  Servicer  shall be entitled to recover its
      costs thereby expended in accordance with Section  5.6(c)(ix)  hereof. The
      predecessor  Servicer shall cooperate with the successor  Servicer and the
      Trust   Collateral   Agent   in   effecting   the   termination   of   the
      responsibilities  and  rights  of  the  predecessor  Servicer  under  this
      Agreement,   including  the  transfer  to  the   successor   Servicer  for
      administration by it of all cash amounts that shall at the time be held or
      should have been held by the  predecessor  Servicer for deposit,  or shall
      thereafter  be received  with respect to a Receivable  and the delivery to
      the successor Servicer of all files and records concerning the Receivables
      and a computer tape in readable form containing all information  necessary
      to enable the successor  Servicer to service the Receivables and the other
      property of the  Issuer.  All  reasonable  costs and  expenses  (including
      attorneys'  fees) incurred in connection with  transferring the Receivable
      Files to the  successor  Servicer and amending  this  Agreement to reflect
      such succession as Servicer  pursuant to this Section 9.1 shall be paid by
      the predecessor Servicer upon presentation of reasonable  documentation of
      such costs and  expenses.  In addition,  any successor  Servicer  shall be
      entitled to payment from the immediate predecessor Servicer for reasonable
      transition  expenses  incurred  in  connection  with  acting as  successor
      Servicer,  and in connection  with system  conversion  costs, an aggregate
      amount not to exceed for such  conversion  costs of  $100,000,  and to the
      extent  not so paid,  such  payment  shall  be made  pursuant  to  Section
      5.6(c)(ix)  hereof.  Upon receipt of written notice of the occurrence of a
      Servicer  Termination  Event, the Trust Collateral Agent shall give notice
      thereof  to the  Rating  Agencies,  the  Issuer  and the  Transferor.  The
      predecessor  Servicer  shall grant the  Transferor,  the Trust  Collateral
      Agent, the Back-up Servicer and the Note Insurer  reasonable access to the
      predecessor Servicer's premises,  computer files,  personnel,  records and
      equipment at the predecessor  Servicer's expense. If requested by the Note
      Insurer,  the Back-up  Servicer or successor  Servicer shall terminate any
      arrangements  relating to (i) the Lock-Box Account with the Lock-Box Bank,
      (ii) the Lock-Box or (iii) the Lock-Box Agreement, and direct the Obligors
      to make all payments under the Receivables directly to the Servicer at the
      predecessor  Servicer's  expense  (in which event the  successor  Servicer
      shall process such payments directly,  or, through a Lock-Box Account with
      a  Lock-Box  Bank  at  the  direction  of the  Note  Insurer).  The  Trust
      Collateral  Agent shall send copies of all notices given  pursuant to this
      Section 9.1 to the Note Insurer so long as no Note Insurer  Default  shall
      have  occurred and be  continuing,  to the  Noteholders  if a Note Insurer
      Default  shall have  occurred  and be  continuing  and to the Demand  Note
      Provider  so long as no Demand  Note  Event  shall  have  occurred  and be
      continuing.

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<PAGE>

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

                  SECTION 9.2. Appointment of Successor.

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

                                       57
<PAGE>

with this Section 9.2, then the Note Insurer,  in accordance with Section 9.2(c)
shall  appoint,  or  petition  a court of  competent  jurisdiction  to appoint a
successor to the Servicer under this Agreement.

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

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

                  SECTION 9.3. Notification to Noteholders. Upon any termination
of, or appointment of a successor to, the Servicer  pursuant to this Article IX,
the  Trust  Collateral  Agent  shall  give  prompt  written  notice  thereof  to
Noteholders at their respective  addresses appearing in the Note Register and to
the Demand Note Provider and each of the Rating Agencies.

                  SECTION 9.4. Action Upon Certain Failures of the Servicer.  In
the event that a Responsible  Officer of the Trust  Collateral  Agent shall have
knowledge  of any failure of the  Servicer  specified in Section 9.1 which would
give rise to a right of  termination  under  such  Section  upon the  Servicer's
failure to remedy the same after notice,  the Trust  Collateral Agent shall give
notice thereof to the Transferor, the Servicer, the Demand Note Provider and the
Note Insurer.  For all purposes of this Agreement,  the Trust  Collateral  Agent
shall  not be  deemed  to have  knowledge  of any  failure  of the  Servicer  as
specified in Section 9.1 unless  notified  thereof in writing by the Transferor,
the Servicer, the Note Insurer, the Demand Note Provider or by a Noteholder. The
Trust  Collateral  Agent shall be under no duty or obligation to  investigate or
inquire as to any potential failure of the Servicer specified in Section 9.1.

                                   ARTICLE X
                           THE TRUST COLLATERAL AGENT

                  SECTION 10.1. Duties of the Trust Collateral Agent.

      (a) The Trust  Collateral  Agent,  prior to the  occurrence of an Event of
Default  and after an Event of Default  shall  have been cured or waived,  shall
undertake  to perform such duties and only such duties as are  specifically  set
forth in this Agreement. If an Event of Default shall

                                       58
<PAGE>

have  occurred  and shall not have been  cured or waived,  the Trust  Collateral
Agent may,  and at the  written  direction  of the Note  Insurer  (or, if a Note
Insurer  Default shall have occurred and is  continuing,  the  Majorityholders),
shall  exercise such of the rights and powers vested in it by this Agreement and
shall  use the same  degree of care and  skill in their  exercise,  as a prudent
person would exercise or use under the  circumstances  in the conduct of its own
affairs.

      (b)  The  Trust  Collateral   Agent,  upon  receipt  of  all  resolutions,
certificates,   statements,   opinions,  reports,  documents,  orders  or  other
instruments  furnished to the Trust  Collateral Agent that shall be specifically
required to be  furnished  pursuant to any  provision of this  Agreement,  shall
examine them to  determine  whether  they  conform to the  requirements  of this
Agreement;  provided,  however,  that, the Trust  Collateral  Agent shall not be
responsible  for the  accuracy or content of any such  resolution,  certificate,
statement,  opinion, report,  document,  order or other instrument.  If any such
instrument is found not to conform in any material  respect to the  requirements
of this Agreement,  the Trust Collateral Agent shall notify the Note Insurer and
the Noteholders of such instrument in the event that the Trust Collateral Agent,
after so requesting, does not receive a satisfactorily corrected instrument.

      (c) The Trust  Collateral  Agent  shall take and  maintain  custody of the
Schedule  of  Receivables  included as  Schedule A to this  Agreement  and shall
retain copies of all Servicer's Certificates prepared hereunder.

      (d) No provision of this Agreement shall be construed to relieve the Trust
Collateral Agent from liability for its own negligent action,  its own negligent
failure to act, or its own bad faith; provided, however, that:

            (i) Prior to the  occurrence  of an Event of  Default  and after the
      curing or waiving of all such  Events of Default  that may have  occurred,
      the  duties  and  obligations  of the  Trust  Collateral  Agent  shall  be
      determined solely by the express  provisions of this Agreement,  the Trust
      Collateral  Agent shall not be liable except for the  performance  of such
      duties  and  obligations  as  shall  be  specifically  set  forth  in this
      Agreement,  no implied  covenants or  obligations  shall be read into this
      Agreement  against the Trust  Collateral  Agent and, in the absence of bad
      faith on the part of the Trust  Collateral  Agent,  the  Trust  Collateral
      Agent,  may  conclusively  rely on the  truth  of the  statements  and the
      correctness  of the  opinions  expressed in any  certificates  or opinions
      furnished to the Trust Collateral Agent and conforming to the requirements
      of this Agreement;

            (ii) The Trust  Collateral Agent shall not be liable for an error of
      judgment  made in good faith by a Responsible  Officer  unless it shall be
      proved  that the Trust  Collateral  Agent  shall  have been  negligent  in
      ascertaining the pertinent facts;

            (iii) The Trust Collateral Agent shall not be liable with respect to
      any  action  taken,  suffered,  or  omitted  to be taken in good  faith in
      accordance  with this  Agreement  or at the written  direction of the Note
      Insurer  or,  after  a Note  Insurer  Default,  the  Class  A  Noteholders
      evidencing  not less than 25% of the Class A Note  Balance  and the Demand
      Note Provider,  relating to the time,  method, and place of conducting any
      proceeding  for any remedy  available to the Trust  Collateral  Agent,  or
      exercising any trust or power conferred upon the Trust  Collateral  Agent,
      under this Agreement;

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            (iv) The Trust  Collateral Agent shall not be charged with knowledge
      of  any  Servicer  Termination  Event  or  Event  of  Default,   unless  a
      Responsible  Officer  assigned to the Trust Collateral  Agent's  Corporate
      Trust Office receives written notice of such Servicer Termination Event or
      Event of Default from the Servicer,  the Transferor,  the Note Insurer or,
      after a Note Insurer Default, the Class A Noteholders  evidencing not less
      than 25% of the Class A Note  Balance and the Demand Note  Provider  (such
      notice shall constitute  actual knowledge of a Servicer  Termination Event
      or Event of Default by the Trust Collateral Agent); and

            (v) The Trust  Collateral  Agent  shall not be liable for any action
      taken,  suffered or omitted by it in good faith and reasonably believed by
      it to be authorized or within the discretion or rights or powers conferred
      upon it by this Agreement.

            (e) The Trust  Collateral  Agent may,  but shall not be required to,
      expend or risk its own funds or otherwise incur financial liability in the
      performance of any of its duties  hereunder,  or in the exercise of any of
      its rights or powers,  unless it shall have been provided  with  indemnity
      against such risk or liability in form and substance  satisfactory  to the
      Trust  Collateral  Agent  and  none of the  provisions  contained  in this
      Agreement  shall  in any  event  require  the  Trust  Collateral  Agent to
      perform,  or be responsible  for the manner of performance  of, any of the
      obligations of the Servicer under this Agreement.

            (f) Except for actions expressly  authorized by this Agreement,  the
      Trust Collateral Agent shall not take action  reasonably  likely to impair
      the  security  interests  created  or  existing  under any  Receivable  or
      Financed  Vehicle or to impair  the value of any  Receivable  or  Financed
      Vehicle.

            (g) All information obtained by the Trust Collateral Agent regarding
      the Obligors and the Receivables,  whether upon the exercise of its rights
      under  this  Agreement  or  otherwise,  shall be  maintained  by the Trust
      Collateral  Agent,  in confidence  and shall not be disclosed to any other
      Person, all in accordance with the Federal Financial Privacy Law; provided
      that,  nothing  herein  shall  prevent  the Trust  Collateral  Agent  from
      delivering  copies  of  such  information   whether  or  not  constituting
      Confidential Information, and disclosing other information, whether or not
      Confidential  Information,  to (i)  its  directors,  officers,  employees,
      agents and  professional  consultants to the extent  necessary to carry on
      the Trust Collateral  Agent's  business in the ordinary  course,  (ii) any
      Noteholder,  the Demand Note  Provider  or the Note  Insurer to the extent
      that such  Noteholder,  the Demand Note  Provider  or the Note  Insurer is
      entitled  to such  information  under this  Agreement  or any other  Basic
      Document,  but not  otherwise,  (iii)  any  governmental  authority  which
      specifically requests (or as to which applicable regulations require) such
      information,  (iv) any nationally  recognized  rating agency in connection
      with the rating of the Notes by such  agency,  or (v) any other  Person to
      which such delivery or disclosure may be necessary or  appropriate  (a) in
      compliance  with any  applicable  law, rule,  regulation or order,  (b) in
      response to any subpoena or other legal  process,  (c) in connection  with
      any  litigation  to which the Trust  Collateral  Agent is a party,  (d) in
      order to  enforce  the  rights  of the  Noteholders  and the Note  Insurer
      hereunder  or  under  any  other  Basic  Document,  or (e)  otherwise,  in
      accordance with the Federal Financial Privacy Law;  provided,  that, prior
      to any such disclosure,  the Trust Collateral Agent shall inform each such
      party  (other  than any  Noteholder,  the Demand Note  Provider,  the Note
      Insurer or any other party to the Basic

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      Documents)  that  receives  Confidential   Information  of  the  foregoing
      requirements  and shall use its  commercially  reasonable  best efforts to
      cause such party to comply with such requirements.

            (h) Money  held in trust by the Trust  Collateral  Agent need not be
      segregated  from other funds  except to the extent  required by law or the
      terms of this Agreement or the Indenture.

            (i) Every  provision  of this  Agreement  relating to the conduct or
      affecting the liability of or affording protection to the Trust Collateral
      Agent shall be subject to the provisions of this Section 10.1.

            (j) The Trust  Collateral  Agent  shall,  and hereby  agrees that it
      will,  perform all of the obligations and duties required of it under this
      Agreement.

            (k) The Trust  Collateral  Agent  shall,  and hereby  agrees that it
      will, hold the Policy in trust, and will hold any proceeds of any claim on
      the Policy in trust, solely for the use and benefit of the Noteholders.

            (l) Without  limiting the generality of this Section 10.1, the Trust
      Collateral Agent shall have no duty (i) to see to any recording, filing or
      depositing of this  Agreement or any  agreement  referred to herein or any
      financing  statement  evidencing  a  security  interest  in  the  Financed
      Vehicles,  or to see to the maintenance of any such recording or filing or
      depositing or to any recording,  refiling or  redepositing of any thereof,
      (ii) to see to any  insurance of the  Financed  Vehicles or Obligors or to
      effect or  maintain  any such  insurance,  (iii) to see to the  payment or
      discharge of any tax,  assessment or other governmental charge or any Lien
      or  encumbrance  of any kind owing with  respect  to,  assessed  or levied
      against  any part of the Pledged  Property,  (iv) to confirm or verify the
      contents of any reports or certificates  delivered to the Trust Collateral
      Agent or the Servicer  pursuant to this  Agreement or the Trust  Agreement
      believed  by the Trust  Collateral  Agent to be  genuine  and to have been
      signed or presented by the proper party or parties,  or (v) to inspect the
      Financed  Vehicles  at  any  time  or  ascertain  or  inquire  as  to  the
      performance or observance of any of the Issuer's,  the Transferor's or the
      Servicer's  representations,  warranties  or covenants  or the  Servicer's
      duties and  obligations  as servicer and as  custodian  of the  Receivable
      Files under this Agreement.

            (m) In no event shall Deutsche Bank Trust Company  Americas,  in any
      of its capacities  hereunder,  be deemed to have assumed any duties of the
      Owner Trustee under the Delaware  Statutory  Trust Act, common law, or the
      Trust Agreement.

            (n) The Trust  Collateral  Agent  shall not be  required to give any
      bond  or  surety  in  respect  of the  powers  granted  to it  under  this
      Agreement.

                  SECTION 10.2.  Trust  Collateral  Agent to Act for the Class A
Noteholders and Note Insurer.  Prior to the payment in full of the Class A Notes
and the Reimbursement  Obligations and the expiration of the term of the Policy,
the Trust  Collateral  Agent  shall act  solely  for the  benefit of the Class A
Noteholders,  the Demand Note Provider and the Note Insurer,  as their interests
may appear herein.

                  SECTION 10.3.  Certain Matters  Affecting the Trust Collateral
Agent. Except as otherwise provided in the second paragraph of Section 10.1:

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            (i) The Trust  Collateral  Agent may rely and shall be  protected in
      acting  or  refraining   from  acting  upon  any   resolution,   Officer's
      Certificate, Servicer's Certificate, certificate of auditors, or any other
      certificate,  statement,  instrument,  opinion,  report, notice,  request,
      consent, order, appraisal, bond, or other paper or document believed by it
      to be genuine and to have been signed or  presented by the proper party or
      parties.

            (ii) The Trust  Collateral  Agent may consult with counsel,  and any
      written   advice  or  Opinion  of  Counsel  shall  be  full  and  complete
      authorization and protection in respect of any action taken or suffered or
      omitted by it under this  Agreement in good faith and in  accordance  with
      such written advice or Opinion of Counsel.

            (iii) The Trust  Collateral  Agent shall not be under any obligation
      to exercise any of the rights or powers vested in it by this Agreement, or
      to institute, conduct, or defend any litigation under this Agreement or in
      relation to this Agreement,  at the request,  order or direction of any of
      the  Noteholders  or the Note Insurer  pursuant to the  provisions of this
      Agreement,  unless such Noteholders or the Note Insurer shall have offered
      to the Trust Collateral Agent reasonable security or indemnity in form and
      substance  reasonably  satisfactory to the Trust  Collateral Agent against
      the  costs,  expenses  and  liabilities  that may be  incurred  therein or
      thereby.  Nothing contained in this Agreement,  however, shall relieve the
      Trust  Collateral  Agent  of the  obligations,  upon the  occurrence  of a
      Servicer  Termination  Event or Event of Default (that shall not have been
      cured or waived),  to exercise  such of the rights and powers vested in it
      by this  Agreement,  and to use the same degree of care and skill in their
      exercise as a prudent person would exercise or use under the circumstances
      in the conduct of its own affairs.

            (iv)  The  Trust  Collateral  Agent  shall  not be bound to make any
      investigation  into  the  facts  or  matters  stated  in  any  resolution,
      certificate,  statement,  instrument,  opinion,  report, notice,  request,
      consent,  order,  approval,  bond,  or  other  paper  or  document  unless
      requested  in writing  to do so by the Note  Insurer  (if no Note  Insurer
      Default shall have occurred or be continuing), the Transferor or the Class
      A Noteholders evidencing not less than 25% of the Class A Note Balance and
      the Demand Note Provider; provided, however, that, if the payment within a
      reasonable time to the Trust  Collateral  Agent of the costs,  expenses or
      liabilities   likely  to  be   incurred  by  it  in  the  making  of  such
      investigation  shall be, in the opinion of the Trust Collateral Agent, not
      reasonably  assured to the Trust Collateral Agent by the security afforded
      to it by the  terms of this  Agreement,  the  Trust  Collateral  Agent may
      require  indemnity in form and substance  satisfactory  to it against such
      cost, expense or liability as a condition to so proceeding. The reasonable
      expense of every such examination  shall be paid by the Person making such
      request or, if paid by the Trust Collateral Agent,  shall be reimbursed by
      the Person making such request upon demand.

            (v) The Trust  Collateral  Agent may  execute  any of the  trusts or
      powers  hereunder  or perform  any  duties  under  this  Agreement  either
      directly or by or through agents or attorneys.  The Trust Collateral Agent
      shall not be  responsible  for any  misconduct  or  negligence of any such
      agent  appointed  with due care by it  hereunder,  or of any  agent of the
      Servicer in its capacity as Servicer or custodian or otherwise.

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<PAGE>

            (vi) Except as may be expressly required by Sections 3.4, subsequent
      to the sale of the Receivables by the Transferor to the Issuer,  the Trust
      Collateral Agent shall not have any duty of independent  inquiry,  and the
      Trust  Collateral Agent may rely upon the  representations  and warranties
      and  covenants  of the  Transferor  and  the  Servicer  contained  in this
      Agreement with respect to the Receivables and the Receivable Files.

            (vii) The Trust  Collateral  Agent may rely,  as to factual  matters
      relating to the Transferor or the Servicer, on an Officer's Certificate of
      the Transferor or Servicer, respectively.

            (viii) The Trust  Collateral Agent shall not be required to take any
      action or refrain  from  taking any action  under this  Agreement,  or any
      related  documents  referred to herein,  nor shall any  provision  of this
      Agreement,  or any such related document be deemed to impose a duty on the
      Trust Collateral Agent to take action, if the Trust Collateral Agent shall
      have been advised by counsel that such action is contrary to (i) the terms
      of this Agreement, (ii) any such related document or (iii) applicable law.

                  SECTION 10.4.  Trust Collateral Agent and Back-up Servicer Not
Liable for Notes or Receivables. The recitals contained herein shall be taken as
the statements of the Issuer,  the  Transferor or the Servicer,  as the case may
be, and neither the Trust  Collateral Agent nor the Back-up Servicer assumes any
responsibility for the correctness  thereof.  Neither the Trust Collateral Agent
nor the Back-up  Servicer shall make any  representations  as to the validity or
sufficiency of this  Agreement or of the Notes,  or of any Receivable or related
document.  Neither the Trust  Collateral Agent nor the Back-up Servicer shall at
any  time  have any  responsibility  or  liability  for or with  respect  to the
legality,  validity and  enforceability of any security interest in any Financed
Vehicle or any  Receivable,  or the  perfection  and priority of such a security
interest or the maintenance of any such perfection and priority,  or for or with
respect to the efficacy of the Issuer or its ability to generate the payments to
be  distributed  to  Noteholders  under  this  Agreement,   including,   without
limitation:  the existence,  condition,  location, and ownership of any Financed
Vehicle;  the  existence and  enforceability  of any physical  damage  insurance
thereon;  except as  required  by  Section  3.4,  the  existence,  contents  and
completeness of any Receivable or any Receivable  Files or any computer or other
record  thereof;  the validity of the assignment of any Receivable to the Issuer
or of any  intervening  assignment;  except as  required  by  Section  3.4,  the
performance or enforcement of any  Receivable;  the compliance by the Transferor
or the Servicer with any warranty or representation made under this Agreement or
in any related document and the accuracy of any such warranty or  representation
prior to the Trust  Collateral  Agent's  or the  Back-up  Servicer's  receipt of
written  notice  or other  actual  knowledge  by a  Responsible  Officer  of any
noncompliance therewith or any breach thereof; any investment of monies by or at
the  direction  of the  Servicer  or the  Note  Insurer  or any  loss  resulting
therefrom; the acts or omissions of the Issuer, the Transferor, the Servicer, or
any  Obligor;  any  action  of the  Servicer  taken  in the  name  of the  Trust
Collateral  Agent;  or any  action by the Trust  Collateral  Agent  taken at the
instruction of the Servicer;  provided,  however,  that the foregoing  shall not
relieve  either  the  Trust  Collateral  Agent or the  Back-up  Servicer  of its
obligation to perform its duties under this Agreement.  Except with respect to a
claim based on the failure of the Trust Collateral Agent or the Back-up Servicer
to perform  its duties  under this  Agreement  or based on the Trust  Collateral
Agent's or the Back-up Servicer's negligence or willful misconduct,  no recourse
shall be had for any claim based on any

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provision of this Agreement,  the Notes, or any Receivable or assignment thereof
against the Trust  Collateral  Agent or the Back-up Servicer in their respective
individual  capacities,  neither  the Trust  Collateral  Agent  nor the  Back-up
Servicer shall have any personal  obligation,  liability,  or duty whatsoever to
any Noteholder or any other Person with respect to any such claim,  and any such
claim shall be asserted  solely  against the Issuer or any  indemnitor who shall
furnish  indemnity as provided in this Agreement.  Neither the Trust  Collateral
Agent nor the Back-up  Servicer shall be accountable  for the use or application
by the Issuer of any of the Notes or of the  proceeds of such Notes,  or for the
use  or  application  of any  funds  paid  to the  Servicer  in  respect  of the
Receivables.  The Issuer hereby  certifies to the Trust Collateral Agent and the
Back-up Servicer that the Rating Agencies rating the Notes are Standard & Poor's
and Moody's and that their addresses are as set forth in Section 13.5. The Trust
Collateral  Agent and the  Back-up  Servicer  may rely on the  accuracy  of such
certification  until  it  receives  from the  Issuer  an  Officer's  Certificate
superseding  such  certification.  All references  above to the Back-up Servicer
shall be deemed to refer to the Back-up Servicer only so long as it is acting in
such capacity hereunder.

                  SECTION 10.5.  Trust Collateral Agent and Back-up Servicer May
Own  Notes.  The  Trust  Collateral  Agent  and the  Back-up  Servicer  in their
respective individual or any other capacities may become the owner or pledgee of
Notes and may deal with the Transferor and the Servicer in banking  transactions
with the same rights as it would have if it were not Trust  Collateral  Agent or
Back-up Servicer, as applicable.

                  SECTION 10.6.  Indemnity of Trust Collateral Agent and Back-up
Servicer.  The Servicer shall indemnify the Trust Collateral  Agent, the Back-up
Servicer and each officer,  director and employee of the Trust  Collateral Agent
and the Back-up  Servicer for, and hold each such Person harmless  against,  any
loss, liability, or expense incurred without willful misfeasance, negligence, or
bad faith on its part,  arising out of or in connection  with the  acceptance or
administration of this Agreement,  including the costs and expenses of defending
itself  against  any claim or  liability  in  connection  with the  exercise  or
performance of any of its powers or duties under this Agreement.  The provisions
of this  Section 10.6 shall  survive the  termination  of this  Agreement or any
resignation or removal of LBAC as Servicer.

                  SECTION 10.7.  Eligibility  Requirements  for Trust Collateral
Agent.  The Trust  Collateral  Agent under this Agreement  shall at all times be
organized  and doing  business  under the laws of the  United  States or a State
thereof; authorized under such laws to exercise corporate trust powers; having a
combined capital and surplus of at least  $50,000,000 and subject to supervision
or examination by Federal or State authorities satisfactory to the Note Insurer;
and having a rating,  both with respect to long-term  and  short-term  unsecured
obligations,  of not less than investment  grade by each Rating Agency.  If such
corporation  shall publish reports of condition at least  annually,  pursuant to
law or to the requirements of the aforesaid  supervising or examining authority,
then for the purpose of this Section 10.7,  the combined  capital and surplus of
such  corporation  shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so  published.  In case at any time
the Trust  Collateral  Agent shall cease to be eligible in  accordance  with the
provisions  of this  Section  10.7,  the Trust  Collateral  Agent  shall  resign
immediately in the manner and with the effect specified in Section 10.8.

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<PAGE>

                  SECTION  10.8.  Resignation  or  Removal  of Trust  Collateral
Agent.

      (a) The Trust  Collateral  Agent may at any time resign and be  discharged
from the trusts hereby  created by giving 30 days' prior written  notice thereof
to the  Servicer.  To  the  extent  that  the  Trust  Collateral  Agent  resigns
hereunder,  the Indenture  Trustee shall also resign under the Indenture and the
Collateral Agent shall resign under the Spread Account Agreement. Upon receiving
such notice of  resignation,  with the prior written consent of the Note Insurer
(or, if a Note Insurer Default shall have occurred or is continuing, the Class A
Noteholders  evidencing  not less than 25% of the Class A Note  Balance  and the
Demand Note  Provider),  the Servicer shall promptly  appoint a successor  Trust
Collateral  Agent  by  written  instrument,  in  duplicate,  one  copy of  which
instrument  shall be delivered to the resigning Trust  Collateral  Agent and one
copy to the successor Trust  Collateral  Agent. If no successor Trust Collateral
Agent shall have been so appointed and have accepted  appointment within 30 days
after the giving of such notice of resignation,  the Note Insurer (or, if a Note
Insurer  Default shall have occurred or is  continuing,  the Class A Noteholders
evidencing  not less than 25% of the Class A Note  Balance  and the Demand  Note
Provider) may appoint a successor Trust Collateral Agent by written  instrument,
in duplicate,  one copy of which  instrument shall be delivered to the resigning
Trust Collateral Agent and one copy to the successor Trust Collateral  Agent. If
no  successor  Trust  Collateral  Agent  shall have been so  appointed  and have
accepted  appointment  within  60  days  after  the  giving  of such  notice  of
resignation,  the  resigning  Trust  Collateral  Agent may petition any court of
competent  jurisdiction  for the  appointment  of a successor  Trust  Collateral
Agent.  The Trust  Collateral Agent may be removed at any time by written demand
of the Note Insurer delivered to the Trust Collateral Agent and the Servicer.

      (b) If at any  time  (i) the  Trust  Collateral  Agent  shall  cease to be
eligible in  accordance  with the  provisions  of Section 10.7 and shall fail to
resign after written request therefor by the Servicer, (ii) the Trust Collateral
Agent shall be legally unable to act, (iii) the Trust  Collateral  Agent and the
Indenture  Trustee shall be the same Person and the Indenture Trustee shall have
resigned or been removed  pursuant to Section 6.8 of the Indenture,  or (iv) the
Trust Collateral Agent shall be adjudged  bankrupt or insolvent,  or a receiver,
conservator  or  liquidator  of  the  Trust  Collateral  Agent  or of any of its
property shall be appointed,  or any public officer shall take charge or control
of the Trust  Collateral  Agent or of its property or affairs for the purpose of
rehabilitation,  conservation  or  liquidation,  then the Note Insurer shall (so
long as no Note Insurer Default shall have occurred and be  continuing),  or the
Servicer may (if a Note Insurer  Default shall have occurred and be  continuing)
remove the Trust  Collateral  Agent.  If the Note Insurer or the Servicer  shall
remove  the Trust  Collateral  Agent  under  the  authority  of the  immediately
preceding sentence,  the Servicer or the Note Insurer, as the case may be, shall
promptly appoint a successor Trust Collateral  Agent by written  instrument,  in
duplicate,  one  copy of  which  instrument  shall  be  delivered  to the  Trust
Collateral  Agent so  removed  and one copy to the  successor  Trust  Collateral
Agent,  and pay all fees and  expenses  owed to the  outgoing  Trust  Collateral
Agent,  provided  that any successor  Trust  Collateral  Agent  appointed by the
Servicer shall be acceptable to the Note Insurer.

      (c)  Any  resignation  or  removal  of  the  Trust  Collateral  Agent  and
appointment  of a  successor  Trust  Collateral  Agent  pursuant  to  any of the
provisions of this Section 10.8 shall not become  effective until  acceptance of
appointment by the successor Trust  Collateral  Agent,  pursuant to Section 10.9
and payment of all fees and expenses owed to the outgoing Trust

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Collateral  Agent. The Servicer shall provide written notice of such resignation
or removal of the Trust  Collateral  Agent to each of the Rating  Agencies,  the
Demand Note Provider and the Transferor.

      (d) If the Trust  Collateral  Agent and the Back-up  Servicer shall be the
same Person and the rights and  obligations  of the Back-up  Servicer shall have
been  terminated  pursuant to this Section 10.8, then the Note Insurer (or, if a
Note Insurer Default shall have occurred and be continuing, the Majorityholders)
shall have the option,  by 60 days' prior  notice in writing to the Servicer and
the Trust Collateral  Agent, to remove the Trust Collateral  Agent, and the Note
Insurer shall not have any liability to the Trust  Collateral  Agent,  LBAC, the
Transferor,  the Servicer,  the Issuer or any Noteholder in connection with such
removal.

                  SECTION 10.9.  Successor Trust Collateral Agent. Any successor
Trust  Collateral  Agent  appointed  pursuant  to Section  10.8  shall  execute,
acknowledge and deliver to the Transferor, the Servicer, the Note Insurer and to
its predecessor Trust Collateral Agent an instrument  accepting such appointment
under  this  Agreement,   and  thereupon  the  resignation  or  removal  of  the
predecessor  Trust  Collateral  Agent shall become  effective and such successor
Trust  Collateral  Agent,  without any further act,  deed or  conveyance,  shall
become fully vested with all the rights,  powers, duties, and obligations of its
predecessor  under this  Agreement,  with like effect as if originally  named as
Trust  Collateral  Agent.  The  predecessor  Trust  Collateral  Agent shall upon
payment of its fees and expenses deliver to the successor Trust Collateral Agent
all documents and statements and monies held by it under this Agreement; and the
Servicer,  the Note Insurer and the  predecessor  Trust  Collateral  Agent shall
execute and deliver such  instruments and do such other things as may reasonably
be required for fully and  certainly  vesting and  confirming  in the  successor
Trust Collateral Agent all such rights, powers, duties, and obligations.

            No successor  Trust  Collateral  Agent shall accept  appointment  as
provided  in this  Section  10.9  unless  at the  time of such  acceptance  such
successor Trust Collateral Agent shall be eligible pursuant to Section 10.7.

            Upon acceptance of appointment by a successor Trust Collateral Agent
pursuant to this Section 10.9,  the Servicer  shall mail notice of the successor
of such Trust  Collateral  Agent under this Agreement to all Holders of Notes at
their addresses as shown in the Note Register,  the Transferor,  the Demand Note
Provider and to the Rating  Agencies.  If the  Servicer  shall fail to mail such
notice  within ten (10) days after  acceptance of  appointment  by the successor
Trust  Collateral  Agent,  the successor Trust Collateral Agent shall cause such
notice to be mailed at the expense of the Servicer.

                  SECTION 10.10.  Merger or  Consolidation  of Trust  Collateral
Agent.  Any corporation  into which the Trust  Collateral Agent may be merged or
converted or with which it may be  consolidated,  or any  corporation  resulting
from any merger, conversion or consolidation to which the Trust Collateral Agent
shall be a party, or any corporation  succeeding to all or substantially  all of
the  corporate  trust  business  of the  Trust  Collateral  Agent  shall  be the
successor of the Trust  Collateral  Agent  hereunder,  provided such corporation
shall be eligible  pursuant to Section 10.7,  without the execution or filing of
any  instrument  or any further  act on the part of any of the  parties  hereto,
anything herein to the contrary notwithstanding.

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                  SECTION 10.11. Co-Trustee; Separate Trustee.

      (a) Notwithstanding  any other provisions of this Agreement,  at any time,
for the purpose of meeting any legal  requirements of any  jurisdiction in which
any part of the Issuer or any Financed  Vehicle may at the time be located,  the
Servicer,  the Note  Insurer  (provided a Note  Insurer  Default  shall not have
occurred and be continuing) and the Trust  Collateral Agent acting jointly shall
have the power and shall execute and deliver all  instruments  to appoint one or
more  persons  approved  by the  Trust  Collateral  Agent to act as  co-trustee,
jointly  with the Trust  Collateral  Agent,  or  separate  trustee  or  separate
trustees,  of all or any part of the Issuer, and to vest in such Person, in such
capacity and for the benefit of the  Noteholders,  such title to the Issuer,  or
any part thereof,  and,  subject to the other  provisions of this Section 10.11,
such powers, duties,  obligations,  rights, and trusts as the Servicer, the Note
Insurer and the Trust Collateral Agent may consider  necessary or desirable.  If
the  Servicer  and the Note  Insurer  shall not have joined in such  appointment
within  fifteen  (15) days after the  receipt by it of a request so to do, or in
the case an Event of Default  shall have occurred and be  continuing,  the Trust
Collateral  Agent  alone  shall  have the  power to make  such  appointment.  No
co-trustee or separate  trustee under this  Agreement  shall be required to meet
the terms of  eligibility  as a successor  Trust  Collateral  Agent  pursuant to
Section  10.7,  except that the  co-trustee  or its parent shall comply with the
rating  requirements  set forth  therein,  and no notice  of a  successor  Trust
Collateral  Agent  pursuant to Section 10.9 and no notice to  Noteholders of the
appointment of any co-trustee or separate trustee shall be required  pursuant to
Section 10.9.

      (b) Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:

            (i) All rights, powers, duties, and obligations conferred or imposed
      upon the Trust  Collateral  Agent shall be conferred upon and exercised or
      performed  by the Trust  Collateral  Agent and such  separate  trustee  or
      co-trustee  jointly (it being  understood  that such  separate  trustee or
      co-trustee  is  not  authorized  to  act  separately   without  the  Trust
      Collateral Agent joining in such act), except to the extent that under any
      law of any  jurisdiction  in which  any  particular  act or acts are to be
      performed  (whether as Trust  Collateral Agent under this Agreement or, in
      its capacity as Back-up Servicer,  as successor to the Servicer under this
      Agreement), the Trust Collateral Agent shall be incompetent or unqualified
      to perform such act or acts, in which event such rights,  powers,  duties,
      and  obligations  (including  the  holding  of title to the  Issuer or any
      portion thereof in any such jurisdiction) shall be exercised and performed
      singly by such separate trustee or co-trustee, but solely at the direction
      of the Trust Collateral Agent;

            (ii) No trustee under this Agreement  shall be personally  liable by
      reason of any act or omission of any other trustee  under this  Agreement;
      and

            (iii)  Provided no Note Insurer  Default  shall have occurred and be
      continuing, the Note Insurer may, and, in the event a Note Insurer Default
      shall have occurred and be  continuing,  then,  the Servicer and the Trust
      Collateral Agent acting jointly may, at any time accept the resignation of
      or remove any separate trustee or co-trustee.

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      (c) Any notice,  request or other  writing  given to the Trust  Collateral
Agent  shall be  deemed to have been  given to each of the other  then  separate
trustees and  co-trustees,  as  effectively  as if given to each of them.  Every
instrument  appointing  any separate  trustee or co-trustee  shall refer to this
Agreement  and the  conditions  of this  Article X. Each  separate  trustee  and
co-trustee,  upon its acceptance of the trusts  conferred,  shall be vested with
the estates or property  specified  in its  instrument  of  appointment,  either
jointly  with the  Trust  Collateral  Agent or  separately,  as may be  provided
therein, subject to all the provisions of this Agreement, specifically including
every  provision of this  Agreement  relating to the conduct of,  affecting  the
liability of, or affording  protection to, the Trust Collateral Agent. Each such
instrument  shall be filed with the Trust  Collateral  Agent and a copy  thereof
given to the Servicer.

      (d) Any separate  trustee or co-trustee  may at any time appoint the Trust
Collateral Agent, its agent or  attorney-in-fact  with full power and authority,
to the extent not prohibited by law, to do any lawful act under or in respect of
this  Agreement  on its  behalf  and in its name.  If any  separate  trustee  or
co-trustee shall die, become incapable of acting,  resign or be removed,  all of
its  estates,  properties,  rights,  remedies  and  trusts  shall vest in and be
exercised by the Trust Collateral Agent, to the extent permitted by law, without
the appointment of a new or successor Trust Collateral Agent.

                  SECTION  10.12.   Representations   and  Warranties  of  Trust
Collateral   Agent.   The  Trust  Collateral  Agent  shall  make  the  following
representations  and warranties  with respect to itself on which the Transferor,
the Servicer,  the  Originator,  the Issuer,  the Note Insurer,  the Demand Note
Provider and the Noteholders shall rely:

            (i) The Trust  Collateral  Agent is a New York banking  corporation,
      duly organized,  validly existing,  and in good standing under the laws of
      the State of New York.

            (ii) The Trust  Collateral  Agent has full corporate power authority
      and legal right to execute,  deliver, and perform this Agreement and shall
      have taken all necessary  action to authorize the execution,  delivery and
      performance by it of this Agreement.

            (iii) This  Agreement  has been duly  executed and  delivered by the
      Trust  Collateral  Agent  and  constitutes  a  legal,  valid  and  binding
      obligation of the Trust Collateral  Agent,  enforceable in accordance with
      its   terms,   subject   to   (x)   applicable   bankruptcy,   insolvency,
      reorganization,  moratorium  and other similar laws  affecting  creditors'
      rights generally and (y) general principals of equity.

                  SECTION  10.13.   Rights  of  Note  Insurer  to  Direct  Trust
Collateral Agent. Subject to clause (iii) of Section 10.3, unless a Note Insurer
Default shall have occurred and be  continuing,  the Note Insurer,  after giving
written notice to the Trust Collateral Agent,  shall have the right to direct in
writing  the time,  method and place at or by which the Trust  Collateral  Agent
conducts any proceeding for any remedy available to the Trust Collateral  Agent,
or exercises any such trust or power conferred upon the Trust Collateral  Agent;
provided,  however,  that subject to Section 10.1,  the Trust  Collateral  Agent
shall have the right to decline to follow any such direction of the Note Insurer
if the Trust  Collateral  Agent,  being advised by counsel,  determines that the
action so directed may not lawfully be taken, or if the Trust

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Collateral  Agent in good faith  shall,  by a  Responsible  Officer of the Trust
Collateral  Agent,  determine  that  the  proceedings  so  directed  would be in
violation  of any Basic  Document  or involve it in personal  liability  against
which it has not been provided  indemnity in form and substance  satisfactory to
it or be unduly prejudicial to the rights of Noteholders; provided, that nothing
in this Agreement shall impair the right of the Trust  Collateral  Agent to take
any  action  deemed  proper  by the  Trust  Collateral  Agent  and  which is not
inconsistent with such direction of the Note Insurer.

                                   ARTICLE XI
                                   TERMINATION

                  SECTION 11.1. Termination.

      (a)  The  respective   obligations  and   responsibilities  of  LBAC,  the
Transferor,  the Issuer,  the Servicer,  the Custodian and the Trust  Collateral
Agent created hereby shall  terminate  upon the payment to  Noteholders  and the
Certificateholder  of all amounts  required to be paid to them  pursuant to this
Agreement,   the  Indenture  and  the  Trust  Agreement,   satisfaction  of  all
Reimbursement  Obligations  and all  amounts  due and owing to the  Demand  Note
Provider and the Demand Note  Guarantor  hereunder,  and the  expiration  of any
preference  period related  thereto and the  disposition of all property held as
part of the  Trust  Assets;  provided,  however,  in any  case  there  shall  be
delivered  to the Trust  Collateral  Agent and the Note  Insurer  an  Opinion of
Counsel that all applicable  preference  periods under federal,  state and local
bankruptcy,  insolvency  and  similar  laws have  expired  with  respect  to the
payments  pursuant to this Section 11.1. The Servicer shall promptly  notify the
Trust Collateral  Agent,  the Transferor,  the Issuer,  each Rating Agency,  the
Demand  Note  Provider  and the  Note  Insurer  of any  prospective  termination
pursuant to this Section 11.1.

      (b) Upon any sale of the assets of the Issuer  pursuant  to Section 8.1 of
the Trust  Agreement,  the Servicer shall instruct the Trust Collateral Agent in
writing to deposit the  proceeds  from such sale after all payments and reserves
therefrom  (including the expenses of such sale) have been made (the "Insolvency
Proceeds") in the Collection Account.

      (c) Written notice of any  termination of the Issuer shall be given by the
Servicer to the Owner Trustee, the Trust Collateral Agent, the Collateral Agent,
the Back-up Servicer,  the Indenture Trustee, the Demand Note Provider, the Note
Insurer and the Rating  Agencies as soon as  practicable  after the Servicer has
received notice thereof.

      (d)  Following  the  satisfaction  and  discharge of the Indenture and the
payment  in  full  of  the   principal  of  and  interest  on  the  Notes,   the
Certificateholder will succeed to the rights of the Noteholders hereunder.

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                                  ARTICLE XII
                      ADMINISTRATIVE DUTIES OF THE SERVICER

                  SECTION 12.1. Administrative Duties.

      (a) Duties with  Respect to the  Indenture.  The  Servicer  shall take all
necessary  action  that  is the  duty of the  Issuer  to  take  pursuant  to the
Indenture,  pursuant  to  Sections  2.9 (with  respect to the notice  provisions
contained  therein),  3.4, 3.5, 3.6, 3.7, 3.9, 3.10,  3.17, 3.19, 6.8, 7.1, 7.3,
8.3, 9.1, 9.2, 9.3, 11.1 and 11.14 of the Indenture (in each case, excluding any
duty to make payments to the Noteholders,  the Demand Note Provider and the Note
Insurer). In addition,  the Servicer shall consult with the Owner Trustee as the
Servicer  deems  appropriate  regarding  the  duties  of the  Issuer  under  the
Indenture.  The Servicer  shall monitor the  performance of the Issuer and shall
advise the Owner  Trustee  when action is  necessary to comply with the Issuer's
duties under the  Indenture.  The Servicer  shall  prepare for  execution by the
Issuer or shall cause the preparation by other  appropriate  Persons of all such
documents, reports, filings, instruments,  certificates and opinions as it shall
be the duty of the Issuer to prepare, file or deliver pursuant to the Indenture.

      (b) Duties with Respect to the Issuer.

            (i) In  addition  to the  duties of the  Servicer  set forth in this
      Agreement or any of the Basic  Documents,  the Servicer shall perform such
      calculations  and shall  prepare for  execution by the Issuer or the Owner
      Trustee or shall cause the preparation by other appropriate Persons of all
      such documents, reports, filings,  instruments,  certificates and opinions
      as it shall be the duty of the  Issuer or the Owner  Trustee  to  prepare,
      file or deliver  pursuant to this Agreement or any of the Basic  Documents
      or under state and federal tax and  securities  laws,  including,  without
      limitation the Sarbanes-Oxley Act of 2002, and at the request of the Owner
      Trustee  shall  take  all  appropriate  action  that it is the duty of the
      Issuer  to take  pursuant  to  this  Agreement.  In  accordance  with  the
      directions  of the  Issuer  or  the  Owner  Trustee,  the  Servicer  shall
      administer,  perform or supervise the performance of such other activities
      in connection with the Trust Assets (including the Basic Documents) as are
      not  covered  by any  of the  foregoing  provisions  and as are  expressly
      requested by the Issuer or the Owner Trustee and are reasonably within the
      capability of the Servicer.

            (ii)  In  carrying  out the  foregoing  duties  or any of its  other
      obligations under this Agreement, the Servicer may enter into transactions
      with or otherwise deal with any of its Affiliates; provided, however, that
      the terms of any such transactions or dealings shall be in accordance with
      any  directions  received from the Issuer and shall be, in the  Servicer's
      opinion, no less favorable to the Issuer in any material respect.

      (c)  Non-Ministerial   Matters.  With  respect  to  matters  that  in  the
reasonable judgment of the Servicer are non-ministerial,  the Servicer shall not
take any action  pursuant to this Article XII unless  within a  reasonable  time
before the taking of such  action,  the Servicer  shall have  notified the Owner
Trustee,  the Note Insurer,  the Demand Note  Provider and the Trust  Collateral
Agent of the proposed  action and the Owner  Trustee and,  with respect to items
(i), (ii), (iii) and

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(iv)  below,  the Trust  Collateral  Agent  shall not have  withheld  consent or
provided an alternative  direction.  For the purpose of the preceding  sentence,
"non-ministerial matters" shall include:

            (i) the amendment of or any supplement to the Indenture;

            (ii) the  initiation  of any claim or  lawsuit by the Issuer and the
      compromise  of any  action,  claim or lawsuit  brought  by or against  the
      Issuer (other than in connection with the collection of the Receivables);

            (iii) the amendment, change or modification of this Agreement or any
      of the Basic Documents;

            (iv) the  appointment of successor Note  Registrars,  successor Note
      Paying Agents and successor  Indenture  Trustees pursuant to the Indenture
      or the appointment of Successor Servicers or the consent to the assignment
      by the Note Registrar,  Paying Agent or Trustee of its  obligations  under
      the Indenture; and

            (v) the  removal  of the  Trust  Collateral  Agent or the  Indenture
      Trustee.

      (d)  Exceptions.   Notwithstanding   anything  to  the  contrary  in  this
Agreement,  except as expressly provided herein or in the other Basic Documents,
the Servicer,  in its capacity  hereunder,  shall not be obligated to, and shall
not, (1) make any payments to the  Noteholders  under the Basic  Documents,  (2)
sell the Pledged Property pursuant to Section 5.5 of the Indenture, (3) take any
other  action that the Issuer  directs the Servicer not to take on its behalf or
(4)  in  connection  with  its  duties  hereunder  assume  any   indemnification
obligation of any other Person.

                  SECTION 12.2. Records. The Servicer shall maintain appropriate
books  of  account  and  records  relating  to  services  performed  under  this
Agreement, which books of account and records shall be accessible for inspection
by the Issuer at any time during normal business hours.

                  SECTION 12.3.  Additional  Information  to be Furnished to the
Issuer.  The  Servicer  shall  furnish  to the  Issuer  from  time to time  such
additional information regarding the Trust Assets as the Issuer shall reasonably
request.

                  SECTION 12.4. No  Additional  Compensation.  The Servicing Fee
payable to the Servicer  pursuant to Section  5.6(c)(i) shall be the only amount
payable to the Servicer for its services hereunder.

                                  ARTICLE XIII
                            MISCELLANEOUS PROVISIONS

                  SECTION 13.1. Amendment.

      (a) This  Agreement  may be amended  from time to time by the Issuer,  the
Transferor,  the  Originator,  the Servicer,  the Trust  Collateral  Agent,  the
Back-up  Servicer and the Custodian  and, (i) unless a Note Insurer  Default has
occurred and is continuing or the Policy Expiration

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<PAGE>

Date has occurred,  with the prior written consent of the Note Insurer and, (ii)
if a Note  Insurer  Default  has  occurred  and  is  continuing  or  the  Policy
Expiration  Date has  occurred  with the consent of the  Majorityholders,  which
consent  given  pursuant to this  Section or pursuant to any other  provision of
this Agreement  shall be conclusive and binding on all Holders and on all future
Holders  of Notes  and of any  Notes  issued  upon the  transfer  thereof  or in
exchange  thereof or in lieu thereof  whether or not notation of such consent is
made upon the Notes,  for the purpose of adding any provisions to or changing in
any  manner  or  eliminating  any of the  provisions  of this  Agreement,  or of
modifying in any manner the rights of the Holders of Notes;  provided,  however,
that, in the case of either clause (i) or (ii) above,  no such  amendment  shall
(a) increase or reduce in any manner the amount of, or  accelerate  or delay the
timing of, or change the  allocation or priority of,  collections of payments on
Receivables  or  payments  that shall be  required to be made on any Note or the
Certificate  or change the  applicable  Note Rate  without  the  consent of each
Noteholder or Certificateholder, as applicable, affected thereby, (b) reduce the
aforesaid  percentage  of the  Note  Balance  required  to  consent  to any such
amendment,  without the consent of the Holders of all Notes then  outstanding or
eliminate the right of the Noteholder or the Certificateholder to consent to any
change described in clause (a) affecting the Noteholder or the Certificateholder
without the consent of the Noteholder or the  Certificateholder,  as applicable;
or (c) result in a downgrade or  withdrawal  of the then  current  rating of the
Notes  by  either  of the  Rating  Agencies  without  the  consent  of  all  the
Noteholders;  provided,  further  that in the case of clause  (ii)  above,  this
Agreement may be amended from time to time by the Issuer,  the  Transferor,  the
Originator,  the Servicer,  the Trust Collateral Agent, the Back-up Servicer and
the Custodian, with the prior written consent of the Note Insurer (unless a Note
Insurer Default has occurred and is continuing or the Policy Expiration Date has
occurred) for any of the following purposes:

            (x) to correct or amplify  the  description  of any  property at any
      time conveyed to the Issuer hereunder or under any Transfer Agreement,  or
      better to assure,  convey and confirm unto the property  conveyed pursuant
      hereto or pursuant to any Transfer Agreement;

            (y) to add to the covenants of the Transferor, the Originator or the
      Servicer,  for the  benefit  of the  Holders  of the  Notes  and the  Note
      Insurer; or

            (z) to cure any  ambiguity,  to correct or supplement  any provision
      herein or in any Transfer  Agreement  which may be  inconsistent  with any
      other provision  herein or in any Transfer  Agreement or to make any other
      provisions  with  respect  to  matters  or  questions  arising  under this
      Agreement  or under any  Transfer  Agreement;  provided  that such  action
      pursuant to this subclause (z) shall not adversely  affect in any material
      respect  the  interests  of the  Holders of the  Notes,  as  evidenced  by
      satisfaction of the Rating Agency Condition with respect to such amendment

      (b) None of Article II or Sections  4.4,  4.5,  4.6,  5.6 (as such Section
relates to  payments to be made to the Demand  Note  Provider),  5.12 or 5.14 of
this Agreement shall be amended or modified without the prior written consent of
the Demand Note Provider (for so long as the Demand Note is outstanding  and all
amounts due and owing to the Demand Note Provider  hereunder  have not been paid
in full),  which consent shall not be unreasonably  withheld,  unless the Demand
Note Provider has received an opinion of counsel addressed to the Demand Note

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<PAGE>

Provider from Dewey  Ballantine LLP,  Thacher Proffitt & Wood LLP, Sidley Austin
LLP or Weil, Gotshal & Manges LLP, (which opinion shall not be at the expense of
the Demand Note Provider, the Indenture Trustee, the Trust Collateral Agent, the
Note Insurer or the Owner Trustee) that such amendment or modification  will not
have a material adverse affect on the Demand Note Provider.  Notwithstanding the
foregoing,  no provision of this  Agreement nor any provision of any other Basic
Document shall be amended or modified  without the prior written  consent of the
Demand  Note  Provider  (for so long as the Demand Note is  outstanding  and all
amounts due and owing to the Demand Note Provider  hereunder  have not been paid
in full),  if the result of such amendment or  modification  is (a) to reduce or
change the priority of payments  payable to or by the Demand Note Provider;  (b)
to accelerate or postpone the  scheduled  date of payments  payable to or by the
Demand Note  Provider or (c) to  accelerate  or postpone  the date of any notice
with respect to any payments payable to or by the Demand Note Provider.

      (c) The Trust  Collateral  Agent shall  furnish  prior  notice of any such
proposed  amendment  to each  Rating  Agency and the Demand  Note  Provider  and
promptly  after  the  execution  of any such  amendment  or  consent,  the Trust
Collateral  Agent shall  furnish a copy of such  amendment  and/or  consent,  if
applicable,  to each  Noteholder,  each of the Rating  Agencies and the Lock-Box
Processor.

      (d) Prior to the execution of any amendment to this  Agreement,  the Trust
Collateral  Agent  shall be  entitled  to  receive  and rely upon an  Opinion of
Counsel  stating that the execution of such amendment is authorized or permitted
by this Agreement and the Opinion of Counsel referred to in Section  13.2(i)(1).
The Trust  Collateral  Agent may, but shall not be obligated  to, enter into any
such amendment which affects the Trust Collateral Agent's own rights,  duties or
immunities under this Agreement or otherwise.

                  SECTION 13.2. Protection of Title.

      (a) Each of the Transferor,  as to itself, and the Servicer, as to itself,
shall file such  financing  statements  and cause to be filed such  continuation
statements,  all in such  manner and in such  places as may be  required  by law
fully to preserve,  maintain,  and protect the interest of the Indenture Trustee
on behalf of the  Noteholders,  the Trust  Collateral  Agent,  the  Demand  Note
Provider and the Note Insurer in its interest in the  Receivables  and the other
Trust Assets and in the proceeds thereof. Each of the Transferor,  as to itself,
and the Servicer,  as to itself, shall deliver (or cause to be delivered) to the
Trust Collateral Agent, the Owner Trustee, the Demand Note Provider and the Note
Insurer  file-stamped  copies of, or filing  receipts for, any document filed as
provided above, as soon as available following such filing.

      (b)  Neither  the  Transferor  nor the  Servicer  shall  change  its name,
identity or corporate  structure in any manner that would,  could, or might make
any financing  statement or  continuation  statement  filed in  accordance  with
paragraph (a) above seriously  misleading  within the meaning of ss. 9-507(c) of
the UCC,  unless  it shall  have  given the Trust  Collateral  Agent,  the Owner
Trustee,  the Note  Insurer  and the other  party at least  thirty  days'  prior
written notice thereof,  shall have promptly filed appropriate amendments to all
previously filed financing statements or continuation  statements and shall have
delivered  an  Opinion of  Counsel  (A)  stating  that,  in the  opinion of such
counsel,  all  amendments  to all  previously  filed  financing  statements  and
continuation statements have been filed that are necessary fully to preserve and
protect the

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interest of the Trust  Collateral  Agent in the  Receivables and the other Trust
Assets,  and reciting the details of such  filings or (B) stating  that,  in the
opinion of such  counsel,  no such action  shall be  necessary  to preserve  and
protect such interest.

      (c) Each of the  Transferor  and the Servicer  shall have an obligation to
give the Trust Collateral Agent, the Owner Trustee, the Note Insurer, the Demand
Note Provider and the other party at least thirty days' prior written  notice of
any change in its state of  incorporation  if, as a result of such relocation or
change,  the  applicable  provisions  of the UCC would require the filing of any
amendment of any previously filed financing or continuation  statement or of any
new  financing  statement,  shall  promptly  file any such  amendment  and shall
deliver an Opinion of Counsel (A) stating  that, in the opinion of such counsel,
all amendments to all previously  filed  financing  statements and  continuation
statements  have been filed that are necessary fully to preserve and protect the
interest of the Trust  Collateral  Agent in the  Receivables,  and  reciting the
details of such filings or (B) stating that, in the opinion of such counsel,  no
such action  shall be  necessary  to preserve  and protect  such  interest.  The
Servicer  shall at all times  maintain  each office from which it shall  service
Receivables,  and its principal  executive  office,  within the United States of
America.

      (d) The Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient  detail to permit (i) the reader thereof to know at
any time the status of such Receivable,  including  payments and recoveries made
and  payments  owing  (and the nature of each) and (ii)  reconciliation  between
payments or recoveries on (or with respect to) each  Receivable  and the amounts
from  time to time  deposited  in the  Collection  Account  in  respect  of such
Receivable.

      (e) The Servicer  shall  maintain its computer  systems so that,  from and
after the time of  conveyance  under this  Agreement of the  Receivables  to the
Issuer,  the Servicer's master computer records (including any back-up archives)
that refer to a  Receivable  shall  indicate  clearly the interest of Long Beach
Acceptance  Auto  Receivables  Trust  2006-B  in such  Receivable  and that such
Receivable  is owned by the Issuer.  Indication  of the Issuer's  ownership of a
Receivable shall be deleted from or modified on the Servicer's  computer systems
when,  and  only  when,  such  Receivable  shall  have  been  paid  in  full  or
repurchased.

      (f) If at any time the  Transferor or the Servicer  shall propose to sell,
grant a security  interest in, or otherwise  transfer any interest in automotive
receivables to any  prospective  purchaser,  lender,  or other  transferee,  the
Servicer shall give to such prospective  purchaser,  lender, or other transferee
computer  tapes,  records,  or printouts  (including  any restored  from back-up
archives) that, if they shall refer in any manner  whatsoever to any Receivable,
shall indicate clearly that such Receivable has been conveyed to and is owned by
the Issuer.

      (g) The Servicer shall, upon reasonable notice, permit the Transferor, the
Trust Collateral Agent, the Back-up Servicer, the Owner Trustee, the Demand Note
Provider and the Note Insurer and its agents at any time during normal  business
hours to inspect,  audit,  and make copies of and abstracts  from the Servicer's
records regarding any Receivable.

      (h) Upon request, the Servicer shall furnish to the Transferor,  the Trust
Collateral  Agent,  the  Back-up  Servicer,  the  Owner  Trustee  or to the Note
Insurer, within five Business

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Days, a list of all  Receivables  (by contract  number and name of Obligor) then
held as part of the Issuer,  together with a reconciliation  of such list to the
Schedule of  Receivables  and to each of the Servicer's  Certificates  furnished
before such request indicating removal of Receivables from the Issuer.

      (i) The Servicer shall deliver to the Trust  Collateral  Agent,  the Owner
Trustee and the Note Insurer:

                  (1)  promptly   after  the  execution  and  delivery  of  this
            Agreement and of each  amendment  hereto and after the execution and
            delivery of each amendment to any financing statement, an Opinion of
            Counsel either (A) stating that, in the opinion of such counsel, all
            financing  statements and  continuation  statements  have been filed
            that are necessary fully to preserve and protect the interest of the
            Trust Collateral Agent in the Receivables,  and reciting the details
            of such filings or  referring to prior  Opinions of Counsel in which
            such details are given or (B) stating  that,  in the opinion of such
            counsel,  no such action  shall be necessary to preserve and protect
            such interest; and

                  (2) within 90 days after the  beginning of each  calendar year
            beginning  with the first  calendar year  beginning  more than three
            months after the Initial  Cutoff Date, an Opinion of Counsel,  dated
            as of a date during such 90-day  period  either (A) stating that, in
            the  opinion  of  such  counsel,   all  financing   statements   and
            continuation  statements have been filed that are necessary fully to
            preserve and protect the interest of the Trust  Collateral  Agent in
            the  Receivables,  and  reciting  the  details  of such  filings  or
            referring  to prior  Opinions  of Counsel in which such  details are
            given or (B) stating that,  in the opinion of such counsel,  no such
            action shall be necessary to preserve and protect such interest.

Each  Opinion of Counsel  referred  to in clause (i) (1) or (i) (2) above  shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.

      (j) For the purpose of  facilitating  the execution of this  Agreement and
for other purposes,  this Agreement may be executed simultaneously in any number
of counterparts,  each of which  counterparts shall be deemed to be an original,
and all of which counterparts shall constitute but one and the same instrument.

                  SECTION 13.3. Limitation on Rights of Noteholders.

      (a) The  death or  incapacity  of any  Noteholder  shall  not  operate  to
terminate  this  Agreement  or the Issuer,  nor  entitle  such  Noteholder's  or
Certificateholder's  legal representatives or heirs to claim an accounting or to
take any action or  commence  any  proceeding  in any court for a  partition  or
winding up of the  Issuer,  nor  otherwise  affect the rights,  obligations  and
liabilities of the parties to this Agreement or any of them.

      (b) No  Noteholder  shall have any right to vote  (except as  specifically
provided herein  including in Section 13.1) or in any manner  otherwise  control
the operation and management of the Issuer, or the obligations of the parties to
this Agreement, nor shall anything in this

                                       75
<PAGE>

Agreement  set forth,  or contained in the terms of the Notes be construed so as
to  constitute  the  Noteholders  from time to time as partners or members of an
association; nor shall any Noteholder be under any liability to any third person
by reason of any action taken pursuant to any provision of this Agreement.

      (c) So long as no Note Insurer  Default has  occurred  and is  continuing,
except as otherwise  specifically  provided herein,  whenever Noteholder action,
consent or approval is required under this  Agreement,  such action,  consent or
approval  shall be deemed to have been taken or given on behalf of, and shall be
binding upon, all  Noteholders if the Note Insurer agrees to take such action or
give such consent or approval.

      (d) If a Note Insurer  Default shall have occurred and be  continuing,  no
Noteholder  shall  have  any  right  by  virtue  or by  availing  itself  of any
provisions  of this  Agreement to institute any suit,  action,  or proceeding in
equity or at law upon or under or with  respect to this  Agreement,  unless such
Holder  previously  shall  have  given to the Trust  Collateral  Agent a written
notice of default and of the  continuance  thereof,  and unless also the Class A
Noteholders  evidencing not less than 25% of the Class A Note Balance shall have
made written request upon the Trust  Collateral  Agent to institute such action,
suit or  proceeding  in its own name as Trustee  under this  Agreement and shall
have offered to the Trust Collateral  Agent such reasonable  indemnity as it may
require against the costs,  expenses,  and liabilities to be incurred therein or
thereby and the Trust  Collateral  Agent,  for 30 days after its receipt of such
notice,  request,  and offer of  indemnity,  shall have  neglected or refused to
institute any such action,  suit or proceeding  and during such 30-day period no
request or waiver  inconsistent  with such written request has been given to the
Trust  Collateral  Agent pursuant to this Section or Section 8.4; no one or more
Holders of Notes  shall have any right in any  manner  whatever  by virtue or by
availing  itself or  themselves of any  provisions of this  Agreement to affect,
disturb, or prejudice the rights of the Holders of any other of the Notes, or to
obtain or seek to obtain  priority  over or preference to any other such Holder,
or to enforce any right,  under this Agreement  except in the manner provided in
this  Agreement  and  for  the  equal,   ratable,  and  common  benefit  of  all
Noteholders.  For the  protection  and  enforcement  of the  provisions  of this
Section 13.3, each Noteholder and the Trust  Collateral  Agent shall be entitled
to such  relief as can be given  either  at law or in  equity.  Nothing  in this
Agreement  shall be construed as giving the Noteholders any direct right to make
a claim on the Policy.

                  SECTION 13.4. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN  ACCORDANCE  WITH,  AND THIS  AGREEMENT  AND ALL  MATTERS  ARISING  OUT OF OR
RELATING  IN ANY WAY TO THIS  AGREEMENT  SHALL BE  GOVERNED  BY, THE LAWS OF THE
STATE OF NEW YORK,  WITHOUT REGARD TO CONFLICT OF LAWS  PRINCIPLES  (EXCEPT WITH
REGARD TO THE UCC).

                  SECTION 13.5. Notices.

      (a) All demands, notices, instructions, directions and communications upon
or to the Issuer, the Transferor,  the Servicer, the Trust Collateral Agent, the
Note Insurer,  the Demand Note Provider,  the Demand Note Guarantor,  Standard &
Poor's or Moody's under this  Agreement  shall be in writing,  and delivered (i)
personally,  (ii) by certified mail, return receipt requested,  (iii) by Federal
Express or similar overnight courier service, (iv) by telecopy (with telephone

                                       76
<PAGE>

confirmation)  or (v) with respect to Standard and Poor's  only,  by  electronic
delivery,  and shall be deemed to have been duly given upon  receipt  (A) in the
case of the Issuer, in care of the Owner Trustee at the following address:  1100
North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration (Telecopy: (302) 651-8882), (B) in the case of the Transferor, at
the  following  address:  One Mack  Centre  Drive,  Paramus,  New  Jersey  07652
(Telecopy: (201) 262-6868), Attention: General Counsel, or at such other address
as shall be  designated  by the  Transferor  in a  written  notice  to the Trust
Collateral  Agent,  (C) in the case of the  Servicer  or the  Custodian,  at the
following address:  One Mack Centre Drive,  Paramus, New Jersey 07652 (Telecopy:
(201)  262-6868),  Attention:  General  Counsel,  (D) in the  case of the  Trust
Collateral  Agent,  at the applicable  Corporate Trust Office  (Telecopy:  (212)
553-2461), (E) in the case of Standard & Poor's, with respect to all information
available    in    electronic    format,    via    electronic     delivery    to
Servicer_reports@sandp.com and, with respect to any information not available in
electronic  format, at the following address:  44 Water Street,  40th Floor, New
York, New York 10041, Attention:  Asset Backed Surveillance  Department,  (F) in
the case of Moody's,  at the following address:  99 Church Street, New York, New
York 10007,  Attention:  ABS  Monitoring  Department (G) in the case of the Note
Insurer,  at the  following  address:  31 West 52nd Street,  New York,  New York
10019,  Attention:   Transaction  Oversight,  Re:  Long  Beach  Acceptance  Auto
Receivables  Trust 2006-B,  (H) in the case of the Demand Note Provider,  at the
following address:  CGMRC, 388 Greenwich Street,  38th Floor, New York, New York
10013,  Attention:  Treasurer (Telecopy:  (212) 723-8855) and (I) in the case of
the Demand Note Guarantor,  at the following  address:  Citigroup Global Markets
Holdings  Inc.,  388 Greenwich  Street,  38th Floor,  New York,  New York 10013,
Attention:   Treasurer  (Telecopy:  (212)  723-8855).  Any  notice  required  or
permitted to be mailed to a Noteholder  or shall be given by Federal  Express or
similar  overnight  courier  service,  postage  prepaid,  at the address of such
Holder as shown in the Note Register or the Certificate Register, as applicable.
Any  notice so mailed  within the time  prescribed  in this  Agreement  shall be
conclusively  presumed  to have been duly given,  whether or not the  Noteholder
shall receive such notice.

      (b) The Trust Collateral Agent shall give prompt written notice to each of
the  Transferor,  the  Rating  Agencies,  the  Demand  Note  Provider  and  each
Noteholder of (i) any amendments to the Insurance  Agreement or the Policy (upon
receipt of written  notice of any such  amendments  from LBAC or the  Servicer),
(ii) any change in the  identity of the Note Paying  Agent and (iii) any failure
to make payment under the Policy.

                  SECTION 13.6.  Severability of Provisions.  If any one or more
of the covenants,  agreements,  provisions,  or terms of this Agreement shall be
for any  reason  whatsoever  held  invalid,  then  such  covenants,  agreements,
provisions,  or terms shall be deemed  severable  from the remaining  covenants,
agreements,  provisions,  or terms of this  Agreement and shall in no way affect
the validity or  enforceability  of the other provisions of this Agreement or of
the Notes or the rights of the Holders thereof.

                  SECTION 13.7.  Assignment to Indenture Trustee. The Transferor
hereby acknowledges and consents to any mortgage,  pledge,  assignment and grant
of a security  interest by the Issuer to the Indenture  Trustee  pursuant to the
Indenture for the benefit of the  Noteholders,  the Demand Note Provider and the
Note Insurer of all right, title and interest of the Issuer in, to and under the
Receivables  and/or  the  assignment  of any or all of the  Issuer's  rights and
obligations hereunder to the Indenture Trustee.

                                       77
<PAGE>

                  SECTION  13.8.  Limitation  of  Liability  of  Owner  Trustee,
Back-up Servicer and Trust Collateral Agent.

      (a)  Notwithstanding  anything  contained  herein  to the  contrary,  this
Agreement  has  been  countersigned  by  Wilmington  Trust  Company  not  in its
individual  capacity but solely in its  capacity as Owner  Trustee of the Issuer
and in no event shall  Wilmington  Trust Company in its individual  capacity or,
except as expressly provided in the Trust Agreement,  as Owner Trustee, have any
liability for the representations,  warranties,  covenants,  agreements or other
obligations of the Issuer  hereunder or in any of the  certificates,  notices or
agreements of the Issuer delivered  pursuant hereto, as to all of which recourse
shall be had  solely  to the  assets of the  Issuer.  For all  purposes  of this
Agreement,  in the performance of its duties or obligations  hereunder or in the
performance  of any duties or  obligations  of the Issuer  hereunder,  the Owner
Trustee  shall be subject  to, and  entitled to the  benefits  of, the terms and
provisions of the Trust Agreement.

      (b)  Notwithstanding  anything  contained  herein  to the  contrary,  this
Agreement  has  been  executed  and  delivered  by  Deutsche  Bank,  not  in its
individual  capacity but solely as Back-up  Servicer and Trust  Collateral Agent
and in no event shall Deutsche Bank have any liability for the  representations,
warranties,  covenants,  agreements or other obligations of the Issuer hereunder
or in any of the  certificates,  notices or agreements  of the Issuer  delivered
pursuant  hereto,  as to all of which recourse shall be had solely to the assets
of the Issuer.

                  SECTION 13.9.  Independence of the Servicer.  For all purposes
of this Agreement, the Servicer shall be an independent contractor and shall not
be subject to the supervision of the Issuer,  the Trust  Collateral  Agent,  the
Back-up  Servicer or the Owner  Trustee  with  respect to the manner in which it
accomplishes  the performance of its  obligations  hereunder.  Unless  expressly
authorized by this Agreement, the Servicer shall have no authority to act for or
represent  the Issuer or the Owner Trustee in any way and shall not otherwise be
deemed an agent of the Issuer or the Owner Trustee.

                  SECTION  13.10.  No Joint Venture.  Nothing  contained in this
Agreement  (i) shall  constitute  the  Servicer  and either of the Issuer or the
Owner  Trustee  as  members  of any  partnership,  joint  venture,  association,
syndicate,  unincorporated  business  or other  separate  entity,  (ii) shall be
construed  to  impose  any  liability  as such on any of them or (iii)  shall be
deemed to confer on any of them any  express,  implied or apparent  authority to
incur any obligation or liability on behalf of the others.

                  SECTION 13.11.  Nonpetition Covenant.  None of the Transferor,
the Servicer,  the Trust Collateral Agent, the Custodian,  the Back-up Servicer,
the Demand Note Provider or LBAC shall,  prior to the date which is one year and
one day after the  termination  of this  Agreement with respect to the Issuer or
the  Transferor,  petition  or  otherwise  invoke  the  process  of any court or
government  authority for the purpose of commencing or sustaining a case against
the Issuer or the Transferor under any Federal or State  bankruptcy,  insolvency
or  similar  law  or  appointing  a  receiver,  liquidator,  assignee,  trustee,
custodian,  sequestrator  or  other  similar  official  of  the  Issuer  or  the
Transferor or any substantial  part of its property,  or ordering the winding up
or liquidation of the affairs of the Issuer or the Transferor.

                                       78
<PAGE>

                  SECTION 13.12. Third Party Beneficiaries.  Except as otherwise
specifically   provided   herein   with   respect   to   Noteholders   and   the
Certificateholder,  the parties to this Agreement  hereby  manifest their intent
that no third party other than the Note  Insurer,  the Demand Note  Provider and
the Owner  Trustee  with  respect to the  indemnification  provisions  set forth
herein,  shall be  deemed  a third  party  beneficiary  of this  Agreement,  and
specifically  that  the  Obligors  are not  third  party  beneficiaries  of this
Agreement.  Each of the  Note  Insurer,  the  Demand  Note  Provider  and  their
respective  successors  and assigns  shall be a third-party  beneficiary  to the
provisions  of this  Agreement,  and shall be entitled to rely upon and directly
enforce such  provisions of this Agreement so long as no Note Insurer Default or
Demand Note Event, as applicable, shall have occurred and be continuing.  Except
as expressly stated otherwise herein or in the Basic Documents, any right of the
Note Insurer or the Demand Note Provider to direct, appoint, consent to, approve
of or take any action under this  Agreement,  shall be a right  exercised by the
Note  Insurer  or the  Demand  Note  Provider,  as  applicable,  in its sole and
absolute  discretion.  Each of the Note Insurer and the Demand Note Provider may
disclaim any of its rights and powers under this  Agreement  (but not its duties
and  obligations  under the  Policy or the  Demand  Note,  as  applicable)  upon
delivery of a written notice to the Trust Collateral Agent.

                  SECTION 13.13. Consent to Jurisdiction.

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

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

                                       79
<PAGE>

      (c) Each of LBAC and the  Transferor  hereby agree that until such time as
the Notes, the Demand Note and the  Reimbursement  Obligations have been paid in
full and the Policy has expired in accordance  with its terms,  each of LBAC and
the  Transferor  shall have  appointed,  with prior  written  notice to the Note
Insurer,  an agent  registered  with the  Secretary of State of the State of New
York,  with an office in the County of New York in the State of New York, as its
true and lawful attorney and duly authorized  agent for acceptance of service of
legal process (which as of the date hereof is National Registered Agents,  Inc.,
whose address is 105 Chambers  Street,  New York, New York 10007).  Each of LBAC
and the  Transferor  agrees that  service of such process upon such Person shall
constitute personal service of such process upon it.

                  SECTION 13.14. Headings. The headings of articles and sections
and  the  table  of  contents  contained  in this  Agreement  are  provided  for
convenience  only.  They form no part of this Agreement and shall not affect its
construction or interpretation.  Unless otherwise  indicated,  all references to
articles and sections in this Agreement refer to the corresponding  articles and
sections of this Agreement.

                  SECTION 13.15. Trial by Jury Waived.  EACH PARTY HERETO HEREBY
WAIVES,  TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO A TRIAL BY JURY IN
RESPECT OF ANY  LITIGATION  ARISING  DIRECTLY OR INDIRECTLY  OUT OF, UNDER OR IN
CONNECTION WITH ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTION.  EACH PARTY
HERETO (A)  CERTIFIES  THAT NO  REPRESENTATIVE,  AGENT OR  ATTORNEY OF ANY PARTY
HERETO HAS REPRESENTED,  EXPRESSLY OR OTHERWISE, THAT IT WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
HAS BEEN INDUCED TO ENTER INTO THE TRANSACTION  DOCUMENTS TO WHICH IT IS A PARTY
BY, AMONG OTHER THINGS, THIS WAIVER.

                  SECTION 13.16. Entire Agreement. This Agreement sets forth the
entire agreement  between the parties with respect to the subject matter hereof,
and this Agreement  supersedes and replaces any agreement or understanding  that
may have existed between the parties prior to the date hereof in respect of such
subject matter.

                  SECTION   13.17.    Effect   of   Policy    Expiration   Date.
Notwithstanding anything to the contrary set forth herein, all references to any
right of the Note Insurer to direct,  appoint,  consent to, accept,  approve of,
take or omit to take any action under this Agreement or any other Basic Document
shall be inapplicable at all times after the Policy  Expiration Date, and (i) if
such reference provides for another party or parties to take or omit to take any
such action following a Note Insurer  Default,  such party or parties shall also
be entitled to take or omit to take such action following the Policy  Expiration
Date and (ii) if such reference does not provide for another party or parties to
take or omit to take any such action following a Note Insurer Default,  then the
Indenture Trustee acting at the written direction of the  Majorityholders  shall
have the  right to take or omit to take any such  action  following  the  Policy
Expiration Date. In addition, any other provision of this Agreement or any other
Basic  Document  which is operative  based in whole or in part on whether a Note
Insurer  Default  has or has not  occurred  shall,  at all times on or after the
Policy  Expiration  Date,  be  deemed  to refer  to  whether  or not the  Policy
Expiration Date has occurred.

                                       80
<PAGE>

                  SECTION  13.18.  Termination of Demand Note and/or Demand Note
Guarantee.  All rights to notice,  consent or waiver of the Demand Note Provider
or the Demand Note Guarantor, as applicable, under this Agreement shall cease to
be  effective  upon  payment in full of all  amounts due and owing to the Demand
Note Provider and the Demand Note  Guarantor  hereunder and  termination  of the
Demand Note or Demand Note  Guarantee,  as  applicable,  in accordance  with its
terms.

                                       81
<PAGE>

            IN WITNESS WHEREOF, the Issuer, the Transferor,  the Originator, the
Servicer,  the Trust  Collateral  Agent,  the Back-up Servicer and the Custodian
have  caused  this Sale and  Servicing  Agreement  to be duly  executed by their
respective officers as of the day and year first above written.

                                  LONG BEACH ACCEPTANCE RECEIVABLES CORP.,
                                  as Transferor

                                  By:___________________________________________
                                     Name:
                                     Title:

                                  LONG BEACH ACCEPTANCE CORP.,
                                  as Originator, Servicer and Custodian

                                  By:___________________________________________
                                     Name:
                                     Title:

                                  DEUTSCHE BANK TRUST COMPANY AMERICAS,
                                  as Back-up Servicer and Trust Collateral Agent

                                  By:___________________________________________
                                     Name:
                                     Title:

                                  By:___________________________________________
                                     Name:
                                     Title:

                                  LONG BEACH ACCEPTANCE AUTO
                                  RECEIVABLES TRUST 2006-B, as Issuer

                                  By: Wilmington Trust Company, not in its
                                      individual capacity, but solely as Owner
                                      Trustee

                                  By:___________________________________________
                                     Name:
                                     Title:

                         [Sale and Servicing Agreement]
<PAGE>

                                                                         ANNEX A

                                  DEFINED TERMS

                           Refer to Tab 6 (Indenture)

                                     Annex A
<PAGE>

                                                                     EXHIBIT A-1

                              Issuer's Certificate
                             pursuant to Section 3.4
                            of the Sale and Servicing
                                    Agreement

Reference is made to the Sale and Servicing  Agreement (the "Agreement"),  dated
as of September 1, 2006, among Long Beach  Acceptance  Receivables  Corp.,  Long
Beach Acceptance  Corp., as originator,  as servicer and as custodian,  Deutsche
Bank Trust Company Americas,  as trust collateral agent and back-up servicer and
Long Beach Acceptance Auto Receivables  Trust 2006-B,  as issuer (the "Issuer").
The Issuer does hereby sell,  transfer,  assign,  and otherwise  convey to LBAC,
without recourse, representation, or warranty, all of the Issuer's right, title,
and  interest in and to all of the  Receivables  (as  defined in the  Agreement)
identified in the attached  Servicer's  Certificate as "Purchased  Receivables,"
which are to be  repurchased  by LBAC pursuant to Section 3.6 of the  Agreement,
and all security and documents relating thereto.

IN WITNESS WHEREOF I have hereunto set my hand this __ day of ____________, ___.

                                     ___________________________________________

                                     A-1-1
<PAGE>

                                                                     EXHIBIT A-2

                              Issuer's Certificate
                             pursuant to Section 3.6
                            of the Sale and Servicing
                                    Agreement

Reference is made to the Sale and Servicing  Agreement (the "Agreement"),  dated
as of September 1, 2006, among Long Beach  Acceptance  Receivables  Corp.,  Long
Beach Acceptance  Corp., as originator,  as servicer and as custodian,  Deutsche
Bank Trust Company Americas,  as trust collateral agent and back-up servicer and
Long Beach Acceptance Auto Receivables  Trust 2006-B,  as issuer (the "Issuer").
The Issuer does hereby  sell,  transfer,  assign,  and  otherwise  convey to the
Servicer,  without recourse,  representation,  or warranty,  all of the Issuer's
right,  title,  and interest in and to all of the Receivables (as defined in the
Agreement)  identified  in the attached  Servicer's  Certificate  as  "Purchased
Receivables,"  which are to be purchased by the Servicer pursuant to Section 3.6
of the Agreement, and all security and documents relating thereto.

IN WITNESS WHEREOF I have hereunto set my hand this __ day of ___________, ____.

                                     ___________________________________________

                                     A-2-1
<PAGE>

                                                                     EXHIBIT B-1

                             SERVICER'S CERTIFICATE
               LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST 2006-B
                       5.37% ASSET-BACKED NOTES, CLASS A-1
                       5.34% ASSET-BACKED NOTES, CLASS A-2
                       5.17% ASSET-BACKED NOTES, CLASS A-3
                       5.18% ASSET-BACKED NOTES, CLASS A-4

                                     B-1-1
<PAGE>

                                                                     EXHIBIT B-2

                         Form of Loan Master File Layout

                                     B-2-1
<PAGE>

                                                                       EXHIBIT C

                              Intentionally Omitted

                                       C-1
<PAGE>

                                                                       EXHIBIT D

                            PAYMENT DEFERMENT POLICY

A. Loss Mitigation Program

This program,  which involves  temporary payment  modifications,  is intended to
assist Obligors who are experiencing  temporary  financial  hardships that would
otherwise lead to voluntary surrenders of their vehicles and resulting losses to
LBAC.  In order to be  eligible  for this  program,  an Obligor  must first have
indicated  an intent  to  surrender  his or her  vehicle.  LBAC  will  determine
individual  Obligor  eligibility  for and the  viability  of this  program as an
effective  loss  mitigation  option on a  case-by-case  basis.  Any  arrangement
between an Obligor  and LBAC for a  temporary  payment  modification  under this
program must be approved by LBAC's President or an Executive Vice President.

      o     LBAC may agree to a temporary  payment  modification,  provided that
            the  modified  payment  amount  may  not  be  less  than  60% of the
            contractual  payment amount.  The  contractual  interest rate of the
            Receivable must remain unchanged.

      o     The total  number of  payments  modified  may not  exceed 9 over the
            entire term of the Receivable.

      o     The terms of any payment modification must be set forth in a written
            modification  agreement  between  the  Obligor  and  LBAC,  and  the
            agreement must be included in the Legal File for the Receivable.

      o     The modification  agreement must specify that contractual arrearages
            resulting  from the payment  modification  will be  satisfied by the
            Obligor either by making a balloon  payment due on the maturity date
            of the  Receivable or by making  additional  payments  following the
            maturity date, resulting in a term extension, provided that any term
            extension may not exceed 6 months  beyond the current  maturity date
            of the Receivable.

      o     Prior to allowing any payment modification under this program,  LBAC
            must  conduct a financial  analysis of each  candidate  to determine
            whether  there is a  reasonable  probability  that the Obligor  will
            satisfy the terms and  conditions  of the  arrangement  and that the
            Receivable   will  be  viable  at  the  expiration  of  the  payment
            modification period.

      o     No  deferments  or due date  adjustments  may be granted  during the
            modification period.

      o     Payment  modification  arrangements  which  do not  meet  the  above
            criteria may be agreed to on an exception basis by LBAC's  President
            or an Executive Vice President.

      o     As of September 1, 2006,  and the first day of each  calendar  month
            thereafter,  the aggregate  number of Receivables the terms of which
            are currently  modified under this program may not exceed one - half
            of one percent (0.5%) of the number of Receivables transferred as of
            the Closing Date.

                                      D-1
<PAGE>

B. General Payment Deferment Policy

In addition to its Loss  Mitigation  Program,  LBAC may defer  certain  payments
under the following conditions and circumstances.

o     LBAC may grant a payment deferment provided that the deferment period does
      not exceed 1 month (2 months if 12 or more  payments have been made and if
      the deferment is granted in writing by the  President,  an Executive  Vice
      President or a Regional Manager).

o     Not more than 1 deferment  event (which may consist of a 2 month deferment
      according to the exceptions  included in the policy) may be granted during
      any 12-month period.

o     The aggregate of all deferment periods during the term of a Receivable may
      not exceed the lesser of 8 months or 50% of the  weighted  average life of
      the original term of the  Receivable  (including  deferments  granted both
      before and after the related Cutoff Date).

o     At least 6 payments must be made before a deferment may be granted.

o     A request for a deferment must be made in writing.

o     The deferment must bring the account current,  so that after the deferment
      is processed no payment is then due.

o     Except as otherwise set forth in this policy,  deferments  must be granted
      in writing by the Collection Manager or someone of equal or higher rank.

o     Deferments  which do not meet the above criteria may be granted in writing
      on an exception basis (e.g.,  when required by law) by the President or an
      Executive Vice President.

o     As of  January  1,  2007,  and  the  first  day of each  calendar  quarter
      thereafter,  the aggregate  number of Receivables  the terms of which have
      been extended during the preceding calendar quarter shall not exceed 4% of
      the number of  Receivables  at the  beginning  of the  preceding  calendar
      quarter.

o     No deferment may extend the date for final payment of a Receivable  beyond
      the last day of the record Collection Period preceding the Class A-4 Final
      Scheduled Payment Date.

                                      D-2
<PAGE>

                             DUE DATE CHANGE POLICY

In addition to its Payment  Deferment  Policy,  LBAC may grant due date  changes
under the following conditions and circumstances.

o     LBAC may grant a due date change, provided that the new due date is within
      20 days of the current due date.

o     Not  more  than 2 due  date  changes  may be  granted  over  the term of a
      Receivable.

o     If 2 due date changes are  granted,  the total number of days by which the
      maturity date is extended may not exceed 20.

o     A request for a due date change must be made in writing.

o     The account must be current at the time the request is granted.

o     Due date  changes must be granted in writing by the  Assistant  Collection
      Manager or someone of equal or higher rank.

o     No due date  change  may be  granted  if the  aggregate  of all  deferment
      periods and the  requested  due date change  would  exceed the lesser of 8
      months or 50% of the original term of the Receivable.

                                      D-3
<PAGE>

                                                                       EXHIBIT E

                             Documentation Checklist

CUSTOMER:_______________________________________________________________________

ACCOUNT NUMBER:_________________________________________________________________

This funding package contains the following initialed items:

      1.    Installment contract with proper authentications  1.________________
            and Dealer endorsements

      2.    Copy of authenticated credit application          2.________________

      3.    References   as   described   in   the   Program  3.________________
            Guidelines

      4.    Proof of  income  as  described  in the  Program  4.________________
            Guidelines

      5.    Title  information   (application  and  copy  of  5.________________
            existing  title,  receipt  of  registration,  or
            title copy already  received) with lien notation
            thereon, or Dealer Title Guaranty

      6.    Invoice  or copy  of  computer  screen  printout  6.________________
            showing  NADA  value,  NADA  book  page,  Kelley
            printout or Kelley Blue Book page

      7.    In the case of a used Financed Vehicle, odometer  7.________________
            statement (if not on title info)

      8.    Agreement to provide  insurance and verification  8.________________
            paper or other documentation allowable under the
            definition of "Legal Files."

      9.    Service contract or warranty papers               9.________________

      10.   Life, accident,  health and GAP insurance policy  10._______________
            copies, as applicable

      11.   Authenticated  purchase  order  from  dealer  to  11._______________
            customer

                                      E-1
<PAGE>

                                                                       EXHIBIT F

                           FORM OF TRANSFER AGREEMENT

            TRANSFER  NO.  __________  OF  SUBSEQUENT  RECEIVABLES,  dated as of
___________,  200_, among LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST 2006-B, a
Delaware  statutory  trust (the  "Issuer"),  LONG BEACH  ACCEPTANCE  RECEIVABLES
CORP., a Delaware corporation (the "Transferor"), LONG BEACH ACCEPTANCE CORP., a
Delaware  corporation  ("LBAC"  or  the  "Originator"),  LONG  BEACH  ACCEPTANCE
RECEIVABLES  CORP.  WAREHOUSE I  ("LBARC-WI")  and DEUTSCHE  BANK TRUST  COMPANY
AMERICAS,  a New York banking  corporation  (the "Trust  Collateral  Agent),  as
back-up  servicer and trust  collateral agent pursuant to the Sale and Servicing
Agreement referred to below.

                              W I T N E S S E T H:

            WHEREAS,  LBAC, the Transferor,  the Issuer and the Trust Collateral
Agent are parties to the Sale and Servicing Agreement,  dated as of September 1,
2006 (the "Sale and Servicing Agreement");

            WHEREAS,  LBAC,  LBARC-WI  and the  Transferor  are  parties  to the
Purchase Agreement, dated as of September 1, 2006 (the "Purchase Agreement");

            WHEREAS,  pursuant  to the  Purchase  Agreement  and the  Subsequent
Assignment, LBAC and LBARC-WI desire to convey certain Subsequent Receivables to
the  Transferor  and  pursuant  to the Sale  and  Servicing  Agreement  and this
Agreement the Transferor  desires to convey such  Subsequent  Receivables to the
Issuer; and

            WHEREAS,  the Issuer is willing to accept such conveyance subject to
the terms and conditions hereof.

            NOW,  THEREFORE,  the Issuer,  the Transferor,  the Trust Collateral
Agent, LBARC-WI and LBAC hereby agree as follows:

Section 1. Defined Terms.  Capitalized  terms used herein that are not otherwise
defined  shall have the  meanings  ascribed  thereto  in the Sale and  Servicing
Agreement.

            "Agreement" means this Transfer  Agreement and all amendments hereof
and supplements hereto.

            "Subsequent  Cutoff  Date"  means,  with  respect to the  Subsequent
Receivables  conveyed  hereby,  the  close  of  business  of the last day of the
calendar month immediately preceding the Subsequent Transfer Date, which date is
_______________.

            "Subsequent  Receivables"  means the  Receivables  identified on the
supplement to the Schedule of Receivables attached as Schedule A hereto.

                                      F-1
<PAGE>

            "Subsequent Receivables Purchase Price" means $__________.

            "Subsequent Spread Account Deposit" means $__________.

            "Subsequent  Transfer  Date" means,  with respect to the  Subsequent
Receivables conveyed hereby, _________________.

            "Subsequent  Transferred  Property" shall have the meaning specified
in Section 2.3(a) of the Purchase Agreement.

Section 2. Schedule of Subsequent Receivables. Annexed hereto as Schedule A is a
supplement to the Schedule of Receivables listing the Subsequent  Receivables to
be conveyed by the  Transferor to the Issuer  pursuant to this Agreement and the
Sale and Servicing Agreement on the Subsequent Transfer Date.

Section 3. Conveyance of Subsequent  Receivables.  Subject to the conditions set
forth in Section 5 hereof,  in  consideration  of the payment of the  Subsequent
Receivables  Purchase Price to or upon the written order of the Transferor,  the
Transferor does hereby sell, transfer,  assign, set over and otherwise convey to
the  Issuer,  in trust  for the  benefit  of the  Indenture  Trustee,  the Trust
Collateral Agent, the Noteholders and the Note Insurer,  without  recourse,  all
right, title and interest of the Transferor in and to:

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

            (2) the security  interests in the Financed  Vehicles granted by the
related Obligors  pursuant to the Subsequent  Receivables and any other interest
of the Transferor in such Financed Vehicles,  including, without limitation, the
certificates  of title and any other  evidence of ownership with respect to such
Financed Vehicles;

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

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

            (5) this Agreement and the Purchase  Agreement,  including,  without
limitation, a direct right to cause LBAC to purchase Subsequent Receivables from
the Issuer upon the  occurrence  of a breach of any of the  representations  and
warranties  contained  in Section 4 of this  Agreement or the failure of LBAC to
timely  comply with its  obligations  pursuant  to Section  5.5 of the  Purchase
Agreement;

                                      F-2
<PAGE>

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

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

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

            (9) any proceeds from recourse  against the Dealers  (other than any
Chargeback  Obligations),   including,  without  limitation,  any  Dealer  Title
Guaranties with respect to the Subsequent Receivables,  with respect to the sale
of the Subsequent Receivables; and

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

            The   Transferor   represents   and  warrants  that  the  Subsequent
Receivables  and  other  Transferred  Property  are being  transferred  with the
intention of removing them from the Transferor's  estate pursuant to Section 541
of the Bankruptcy Code, as the same may be amended from time to time.

Section 4.  Representations  and  Warranties of the  Originator.  The Originator
makes  the  following  representations  and  warranties  as  to  the  Subsequent
Receivables and the other  Transferred  Property  relating  thereto on which the
Transferor  relies  in  accepting  the  Subsequent  Receivables  and  the  other
Transferred Property relating thereto and on which the Note Insurer will rely in
issuing  the  Policy.  Such  representations  and  warranties  speak  as of  the
execution and delivery of this Agreement,  but shall survive the sale, transfer,
and assignment of the Subsequent  Receivables and the other Transferred Property
relating  thereto to the Transferor  and the subsequent  assignment and transfer
pursuant to the Sale and Servicing Agreement:

            (1) Origination Date. Each Subsequent  Receivable has an Origination
Date on or after __________________.

            (2)  Principal  Balance/Number  of Contracts.  As of the  Subsequent
Cutoff Date, the total aggregate Principal Balance of the Subsequent Receivables
was $_______________. The Subsequent Receivables are evidenced by _______ retail
installment sale contracts.

            (3) Maturity of Subsequent  Receivables.  Each Subsequent Receivable
has an original  term to maturity of not less than [__] months and not more than
[__] months;  the weighted  average  original term to maturity of the Subsequent
Receivables is [___] months as of the Subsequent Cutoff Date; the remaining term
to  maturity  of each  Subsequent  Receivable  was __  months  or less as of the
Subsequent  Cutoff Date; the weighted average  remaining term to maturity of the
Subsequent Receivables was [___] months as of the Subsequent Cutoff Date.

                                      F-3
<PAGE>

            (4) Characteristics of Subsequent  Receivables.  (A) Each Subsequent
Receivable  (1) has been  originated in the United States of America by a Dealer
for the  retail  sale of a  Financed  Vehicle  in the  ordinary  course  of such
Dealer's  business,  such  Dealer  had all  necessary  licenses  and  permits to
originate  such  Subsequent  Receivables  in the State  where  such  Dealer  was
located,  has been fully and  properly  executed by the parties  thereto and has
been purchased by LBAC from such Dealer under an existing Dealer  Agreement with
LBAC, in connection with the sale of Financed  Vehicles by the Dealers,  and was
validly  assigned by such Dealer to LBAC in accordance  with its terms,  (2) has
created a valid,  subsisting and enforceable first priority security interest in
favor of LBAC in the Financed Vehicle, which security interest is assignable and
has been  validly  assigned  by LBAC to the  Transferor  (or, in the case of the
LBARC-WI  Receivables,  by LBAC to LBARC-WI and  subsequently by LBARC-WI to the
Transferor),  which in turn has been validly  pledged by the  Transferor  to the
Issuer  pursuant  to the Sale and  Servicing  Agreement,  which in turn has been
validly  assigned  by  the  Issuer  to the  Indenture  Trustee  pursuant  to the
Indenture,  (3) contains  customary  and  enforceable  provisions  such that the
rights and  remedies of the holder or  assignee  thereof  shall be adequate  for
realization against the collateral of the benefits of the security, (4) provides
for level  monthly  payments  that fully  amortize the Amount  Financed over the
original  term  (except for the first or last  payment,  which may be  minimally
different from the level  payment) and yield  interest at the Annual  Percentage
Rate,  (5) has an Annual  Percentage  Rate of not less than [____]%,  (6) in the
case of a Subsequent Receivable that is a Precomputed  Receivable,  in the event
that such Subsequent Receivable is prepaid, provides for a prepayment that fully
pays the Principal Balance and includes,  unless prohibited by applicable law, a
full month's  interest,  in the month of  prepayment,  at the Annual  Percentage
Rate, (7) is a Precomputed  Receivable or a Simple Interest Receivable,  and (8)
was  originated  by a Dealer to an  Obligor  and was sold by the  Dealer to LBAC
without any fraud or misrepresentation on the part of such Dealer or on the part
of the Obligor; and (B) approximately [ ]% of the aggregate Principal Balance of
the Subsequent Receivables,  constituting [ ]% of the number of contracts, as of
the Subsequent  Cutoff Date,  represents  financing of used  automobiles,  vans,
sport utility  vehicles or light duty trucks;  the  remainder of the  Subsequent
Receivables represent financing of new automobiles, vans, sport utility vehicles
or light duty trucks;  approximately [ ]% of the aggregate  Principal Balance of
the  Subsequent  Receivables as of the  Subsequent  Cutoff Date were  originated
under the LBAC Premium  program;  approximately  []% of the aggregate  Principal
Balance of the  Subsequent  Receivables  as of the  Subsequent  Cutoff Date were
originated  under the LBAC Elite  program;  approximately  [ ]% of the aggregate
Principal Balance of the Subsequent Receivables as of the Subsequent Cutoff Date
were  originated  under the LBAC  Superior  program;  approximately  [ ]% of the
aggregate  Principal Balance of the Subsequent  Receivables as of the Subsequent
Cutoff Date were originated under the LBAC Preferred program; approximately [ ]%
of the  aggregate  Principal  Balance of the  Subsequent  Receivables  as of the
Subsequent  Cutoff  Date were  originated  under the LBAC  Classic  program;  no
Subsequent  Receivable  shall have a payment  that is more than 29 days  overdue
(calculated  on the basis of a 360-day year of twelve  30-day  months) as of the
Subsequent  Cutoff  Date; [ ]% of the  Subsequent  Receivables  are  Precomputed
Receivables  and  [  ]%  of  the  Subsequent  Receivables  are  Simple  Interest
Receivables; each Subsequent Receivable shall have a final scheduled payment due
no  later  than  _____________,   200__;  and  each  Subsequent  Receivable  was
originated on or before the Subsequent Cutoff Date.

                                      F-4
<PAGE>

            (5) Scheduled Payments.  Each Subsequent  Receivable had an original
Principal  Balance of not less than  $______ nor more than  $__________,  has an
outstanding  Principal Balance as of the Subsequent Cutoff Date of not less than
$_______ and not more than $__________ and has a first Scheduled Payment due, in
the case of  Precomputed  Receivables,  or a scheduled  due date, in the case of
Simple Interest Receivables, on or prior to ____________, ____.

            (6)  No  Bankruptcies.  No  Obligor  was  bankrupt  at the  time  of
origination  of  the  related  Subsequent  Receivable  and  no  Obligor  on  any
Subsequent  Receivable as of the Subsequent Cutoff Date was noted in the related
Receivable  File  as  having  filed  for  bankruptcy  since  origination  of the
Subsequent Receivable and neither discharged, dismissed nor reaffirmed.

            (7) Origination of Subsequent Receivables.  Based on the location of
the  Dealers  and the  Principal  Balances  as of the  Subsequent  Cutoff  Date,
approximately [ ]% of the Subsequent  Receivables  were originated in California
and the remaining [ ]% of the Subsequent  Receivables  were  originated in other
States.

            (8) Lockbox.  Prior to the Subsequent  Transfer Date, the Transferor
will  notify  each  Obligor to make  payments  with  respect  to its  respective
Subsequent  Receivable after the Subsequent Cutoff Date directly to the Lockbox,
and will provide  each Obligor with a monthly  statement in order to enable such
Obligor to make payments directly to the Lockbox.

            (9) Location of Legal Files;  One  Original.  A complete  Legal File
with respect to each Subsequent Receivable is in the possession of the Custodian
at the location  listed in the Custodial  Agreement.  There is only one original
executed  copy of each  Subsequent  Receivable.  The  Custodian has stamped each
Subsequent  Receivable to state that "This  contract has been sold or pledged to
"Secured Party"  identified on the attached  allonge (deemed a part hereof).  Do
not accept  delivery of this contract in violation of the rights of the "Secured
Party.  " The  Custodian has attached an allonge to each  Subsequent  Receivable
specifying the contract to which it relates by date,  name of seller and name of
customer and indicating that such contract is subject to a security  interest in
favor of the Indenture Trustee. The foregoing stamp,  together with the allonge,
is  effective  under the  provisions  of the UCC to give  notice to third  party
purchasers,  including  "bona  fide  purchasers  for value"  that the  Indenture
Trustee has a security  interest in such  Subsequent  Receivable  and such third
party's attempt to claim an interest in such Subsequent Receivable would violate
the Indenture Trustee's rights therein.

            (10) Schedule of Subsequent Receivables;  Selection Procedures.  The
information with respect to the Subsequent Receivables set forth in the Schedule
A to this Agreement is true and correct in all material respects as of the close
of business on the Subsequent Cutoff Date and the Subsequent  Transfer Date, and
no selection  procedures  adverse to the Issuer,  the Noteholders or to the Note
Insurer have been utilized in selecting the Subsequent Receivables. The computer
tape or other listing regarding the Subsequent Receivables made available to the
Transferor and its assigns is true and correct as of the Subsequent  Cutoff Date
and the Subsequent  Transfer Date in all respects.  By the  Subsequent  Transfer
Date, LBAC will have caused the portions of LBAC's servicing records relating to
the Subsequent  Receivables to be clearly and unambiguously  marked to show that
the Subsequent

                                      F-5
<PAGE>

Receivables  constitute  part of the Trust Assets and are owned by the Issuer in
accordance with the terms of the Sale and Servicing Agreement.

            (11) Compliance with Law. Each  Subsequent  Receivable,  the sale of
the Financed Vehicle and the sale of any physical damage, credit life and credit
accident and health insurance and any extended service contracts complied at the
time  the  related  Subsequent  Receivable  was  originated  or made  and at the
execution  of  this  Agreement  complies  in  all  material  respects  with  all
requirements  of  applicable  Federal,  State and local  laws,  and  regulations
thereunder   including,    without   limitation,   usury   laws,   the   Federal
Truth-in-Lending  Act,  the  Equal  Credit  Opportunity  Act,  the  Fair  Credit
Reporting  Act,  the Fair Debt  Collection  Practices  Act,  the  Federal  Trade
Commission  Act, the  Magnuson-Moss  Warranty Act, the Federal  Reserve  Board's
Regulations  B and Z (including  amendments  to the Federal  Reserve's  Official
Staff Commentary to Regulation Z effective  October 1, 1998 concerning  negative
equity loans),  the Servicemembers  Civil Relief Act, the California  Automobile
Sales Finance Act, and state adaptations of the National Consumer Act and of the
Uniform Consumer Credit Code, and all other applicable  consumer credit laws and
equal credit opportunity and disclosure laws.

            (12) Binding Obligation.  Each Subsequent  Receivable represents the
genuine,  legal, valid and binding payment obligation in writing of the Obligor,
enforceable by the holder thereof in accordance  with its terms,  except only as
such  enforcement  may be  limited by  bankruptcy,  insolvency  or similar  laws
affecting the enforcement of creditors' rights generally and all parties to each
Subsequent  Receivable  had full legal  capacity  to execute  and  deliver  such
Subsequent  Receivable and all other documents  related thereto and to grant the
security interest purported to be granted thereby.

            (13)  No  Government,  Corporate  or  Fleet  Obligor.  None  of  the
Subsequent  Receivables is due from the United States of America or any State or
from any agency,  department, or instrumentality of the United States of America
or any State.  All of the Subsequent  Receivables  are due from Obligors who are
natural persons or, if any Obligor is not a natural  person,  (a) such entity is
an obligor with respect to five or fewer  Financed  Vehicles and (b) the related
Subsequent Receivable or Subsequent Receivables have the benefit of the personal
guaranty  of a natural  person or persons.  No  Subsequent  Receivable  has been
included in a "fleet" sale (i.e., a sale to any single Obligor of more than five
Financed Vehicles).

            (14) Security Interest in Financed Vehicle. Immediately prior to the
sale,  assignment,  and transfer  thereof,  each Subsequent  Receivable shall be
secured by a validly  perfected first priority security interest in the Financed
Vehicle in favor of LBAC as secured party,  and such security  interest is prior
to all other liens upon and security  interests in such  Financed  Vehicle which
now exist or may hereafter arise or be created (except, as to priority,  for any
lien for taxes,  labor or materials  affecting  such  Financed  Vehicle  arising
subsequent to the Subsequent  Transfer  Date),  and either (i) all necessary and
appropriate actions have been taken that would result in the valid perfection of
a first priority  security  interest in the Financed Vehicle in favor of LBAC as
secured party, and the Lien Certificate for each Financed Vehicle shows, or if a
new or replacement Lien Certificate is being applied for such new or replacement
Lien  Certificate  will be received  within 150 days of the Subsequent  Transfer
Date and will show  LBAC  named as the  original  secured  party  under any such
Subsequent  Receivable and the holder of a first priority  security  interest in
such Financed Vehicle, or (ii) a Dealer Title Guaranty has

                                      F-6
<PAGE>

been  obtained  with  respect to such  Financed  Vehicle.  With  respect to each
Subsequent  Receivable for which the Lien Certificate has not yet been submitted
to, or returned  from,  the  Registrar of Titles,  LBAC has received  either (i)
written evidence from the related Dealer that such Lien Certificate showing LBAC
as the first  lienholder  has been applied for or (ii) a Dealer  Title  Guaranty
with respect to such Financed Vehicle.  Immediately after the sale, transfer and
assignment thereof to the Issuer, each Subsequent  Receivable will be secured by
an enforceable first priority security interest in the Financed Vehicle in favor
of the Issuer as secured party,  which  security  interest is prior to all other
liens upon and security  interests in such  Financed  Vehicle which now exist or
may hereafter arise or be created (except,  as to priority,  for the lien of the
Indenture and for any lien for taxes, labor or materials affecting such Financed
Vehicle arising subsequent to the Subsequent Transfer Date).

            (15) Subsequent  Receivables in Force. No Subsequent  Receivable has
been  satisfied,  subordinated or rescinded,  nor has any Financed  Vehicle been
released from the lien granted by the related Subsequent  Receivable in whole or
in part. No provisions of any Subsequent  Receivable have been waived,  altered,
amended or modified in any respect since its origination,  except by instruments
or documents  identified  in the related Legal File on the  Subsequent  Transfer
Date.

            (16) No Waiver.  No provision of a  Subsequent  Receivable  has been
waived.

            (17) No Amendments. No Subsequent Receivable has been amended except
to the extent  reflected in the related  Legal File on the  Subsequent  Transfer
Date.

            (18) Monthly  Dealer  Participation  Fee  Receivables.  [None of the
Subsequent Receivables are of Monthly Dealer Participation Fee Receivables].

            (19) No Defenses.  As of the  Subsequent  Transfer Date, no right of
rescission,  setoff,  counterclaim  or defense  exists or has been  asserted  or
threatened with respect to any Subsequent Receivable. The operation of the terms
of any Subsequent  Receivable or the exercise of any right  thereunder  will not
render such Subsequent  Receivable  unenforceable in whole or in part or subject
to any such right of rescission, setoff, counterclaim or defense.

            (20) No Liens.  As of the  Subsequent  Transfer  Date,  there are no
liens or claims  existing  or which  have been filed for work,  labor,  storage,
materials or taxes relating to a Financed  Vehicle that shall be liens prior to,
or equal or  coordinate  with,  the security  interest in the  Financed  Vehicle
granted by the Subsequent Receivable.

            (21) No  Default;  Repossession.  Except for  payment  delinquencies
continuing  for a period of not more than  twenty-nine  days  (calculated on the
basis of a 360-day year of twelve 30-day  months),  as of the Subsequent  Cutoff
Date, no default,  breach,  violation or event permitting acceleration under the
terms of any  Subsequent  Receivable  has  occurred  and not been cured;  and no
continuing  condition  that with notice or the lapse of time would  constitute a
default, breach,  violation, or event permitting acceleration under the terms of
any  Subsequent  Receivable  has  arisen;  and LBAC  shall not waive and has not
waived any of the foregoing; and no Financed Vehicle shall have been repossessed
as of the Subsequent Cutoff Date.

                                      F-7
<PAGE>

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

            (23) Title. It is the intention of each Seller that the transfer and
assignment of the Subsequent Receivables  contemplated in the Purchase Agreement
constitute  a  sale  of the  Subsequent  Receivables  from  such  Seller  to the
Transferor  and that the  beneficial  interest  in and title to such  Subsequent
Receivables  not be part of the debtor's  estate in the event of the filing of a
bankruptcy  petition by or against LBAC or LBARC-WI,  as  applicable,  under any
bankruptcy law. No Subsequent Receivable has been sold,  transferred,  assigned,
or pledged by LBAC or  LBARC-WI,  as  applicable,  to any Person  other than the
Transferor or by the  Transferor to any Person other than the Issuer except with
respect to any such pledge that has been released on or prior to the  Subsequent
Transfer  Date.  Immediately  prior  to  the  transfer  and  assignment  of  the
Subsequent Receivables contemplated in the Purchase Agreement, LBAC or LBARC-WI,
as applicable,  had good and marketable title to each Subsequent Receivable, and
was the sole owner thereof,  free and clear of all Liens, claims,  encumbrances,
security  interests,  and rights of others and,  immediately  upon the  transfer
thereof,  the  Transferor  shall  have  good and  marketable  title to each such
Subsequent Receivable, and will be the sole owner thereof, free and clear of all
Liens,  encumbrances,  security  interests,  and rights of others other than the
Lien of the Indenture,  and each such transfer has been perfected under the UCC.
Immediately prior to the transfer and assignment by the Transferor to the Issuer
contemplated  by this  Agreement  and the  Sale  and  Servicing  Agreement,  the
Transferor shall have good and marketable  title to each Subsequent  Receivable,
and  shall be the sole  owner  thereof,  free and  clear of all  Liens,  claims,
encumbrances,  security  interests,  and rights of others other than the Lien of
the  Indenture  and,  immediately  upon the  transfer  thereof  pursuant to this
Agreement and the Sale and Servicing  Agreement,  the Issuer shall have good and
marketable title to each such Subsequent Receivable,  and will be the sole owner
thereof,  free and clear of all  Liens,  encumbrances,  security  interests  and
rights of others other than the Lien of the  Indenture,  and each such  transfer
has been perfected under the UCC.  Immediately prior to the pledge by the Issuer
to the Indenture  Trustee  contemplated by the Indenture,  the Issuer shall have
good and marketable title to each Subsequent  Receivable,  and shall be the sole
owner  thereof,  free and clear of all  Liens,  claims,  encumbrances,  security
interests,  and rights of others and such  pledge has been  perfected  under the
UCC. Without limiting the generality of the foregoing,  no Dealer has any right,
title  or  interest  in  respect  of  any  Subsequent  Receivable.  None  of the
Transferor,  LBAC or  LBARC-WI  has taken any  action to convey any right to any
Person that would result in such Person having a

                                      F-8
<PAGE>

right  to  payments  received  under  any  insurance  policies  related  to  the
Subsequent Receivables or the Financed Vehicles or the related Dealer Agreements
or to payments due under such Subsequent Receivables.

            (24) Lawful Assignment. No Subsequent Receivable has been originated
in,  or is  subject  to the laws of,  any  jurisdiction  under  which  the sale,
transfer,  and  assignment  of such  Subsequent  Receivable  under the  Purchase
Agreement,  this Agreement or the other Basic Documents shall be unlawful, void,
voidable or shall render such Receivable unenforceable in any respect or subject
to  rescission.  Neither  Seller has entered into any agreement with any account
debtor that prohibits,  restricts or conditions the assignment of any portion of
the Subsequent Receivables.

            (25) All Filings Made. All filings  (including,  without limitation,
UCC filings) necessary in any jurisdiction to give the Indenture Trustee a first
priority  perfected  security  interest in the  Subsequent  Receivables  and the
proceeds  thereof and the other  Transferred  Property  (other than the Financed
Vehicles) have been made.

            (26) Chattel  Paper.  Each  Subsequent  Receivable  (A)  constitutes
"tangible  chattel  paper"  under  the UCC and (B)  shall be  maintained  in its
original  "tangible"  form,  unless the Note Insurer has consented in writing to
such chattel paper being maintained in another form or medium.

            (27)  Valid and  Binding  Obligation  of  Obligor.  Each  Subsequent
Receivable is the legal,  valid and binding obligation of the Obligor thereunder
and is enforceable in accordance with its terms, except only as such enforcement
may  be  limited  by  bankruptcy,  insolvency  or  similar  laws  affecting  the
enforcement of creditors' rights generally, and all parties to such contract had
full legal capacity to execute and deliver such contract and all other documents
related  thereto  and to grant the  security  interest  purported  to be granted
thereby.

            (28) Tax Liens. As of the Subsequent Transfer Date, there is no lien
or claims existing or which have been filed against the related Financed Vehicle
for delinquent taxes.

            (29) Title Documents.  (A) If a Subsequent Receivable was originated
in a State in which  notation of security  interest on the title document of the
related  Financed  Vehicle is required or  permitted  to perfect  such  security
interest,  the title document for such Subsequent  Receivable shows, or if a new
or replacement title document is being applied for with respect to such Financed
Vehicle,  the title  document  will be received  within 150 days  following  the
Subsequent  Transfer  Date and will show,  LBAC named as the secured party under
the related  Subsequent  Receivable as the holder of a first  priority  security
interest in such  Financed  Vehicle  and (B) if the  Subsequent  Receivable  was
originated in a State in which the filing of a financing statement under the UCC
is required to perfect a security  interest in motor  vehicles,  such filings or
recordings have been duly made and show LBAC or LBARC-WI,  as applicable,  named
as the  secured  party under the related  Subsequent  Receivable,  and in either
case, the Issuer has the same rights as such secured party has or would have (if
such secured party were still the owner of the  Subsequent  Receivable)  against
all parties claiming an interest in such Financed Vehicle.  With respect to each
Subsequent  Receivable for which the relevant  Dealer is  temporarily  unable to
furnish either an original Lien  Certificate or  satisfactory  evidence that the
appropriate lien has

                                      F-9
<PAGE>

been  recorded on the related  certificate  of title or  documentation  has been
submitted to the appropriate  state motor vehicle  authority to record such lien
on such  certificate  of title,  LBAC has  received  the  related  Dealer  Title
Guaranty.

            (30) Casualty. As of the Subsequent Cutoff Date, no Financed Vehicle
related to a Subsequent Receivable has suffered a Casualty.

            (31)  Obligation  to  Dealers  or  Others.  The  Transferor  and its
assignees  will assume no obligation to Dealers or other  originators or holders
of the  Subsequent  Receivables  (including,  but not  limited  to under  dealer
reserves) as a result of its purchase of the Subsequent Receivables.

            (32) Full Amount Financed Advanced. The full Amount Financed of each
Subsequent  Receivable  has been advanced to or on behalf of each  Obligor,  and
there are no  requirements  for future  advances  thereunder.  The Obligor  with
respect  to the  Subsequent  Receivable  does  not  have any  option  under  the
Subsequent  Receivable to borrow from any person additional funds secured by the
Financed Vehicle.

            (33) No  Impairment.  Neither of the Sellers nor the  Transferor has
done anything to convey any right to any Person that would result in such Person
having a right to payments due under the Subsequent  Receivables or otherwise to
impair the rights of the Issuer, the Noteholders,  the  Certificateholder or the
Note Insurer in any Subsequent Receivable or the proceeds thereof.

            (34) Subsequent Receivables Not Assumable.  No Subsequent Receivable
is  assumable  by another  Person in a manner  which  would  release the Obligor
thereof from such Obligor's obligations to the Transferor, LBAC or LBARC-WI with
respect to such Subsequent Receivable.

            (35) Servicing.  The servicing of each Subsequent Receivable and the
collection  practices  relating  thereto have been lawful and in accordance with
the standards set forth in the Sale and Servicing Agreement; other than LBAC and
any Back-up Servicer arrangement that has been entered into, no other person has
the right to service any Subsequent Receivable.

            (36)  Illinois  Subsequent  Receivables.  (a) Neither  Seller owns a
substantial  interest in the business of a Dealer within the meaning of Illinois
Sales Finance Agency Act Rules and Regulations,  Section 160.230(l) and (b) with
respect to each Subsequent Receivable  originated in the State of Illinois,  (i)
the  printed  or typed  portion of the  related  Form of  Subsequent  Receivable
complies with the requirements of 815 ILCS 375/3(b) and (ii) Neither Seller has,
and for so long as such  Subsequent  Receivable is outstanding  shall,  place or
cause to be placed on the related  Financed  Vehicle any  collateral  protection
insurance in violation of 815 ILCS 180/10.

            (37) California Subsequent  Receivables.  Each Subsequent Receivable
originated in the State of California has been, and at all times during the term
of the  Sale and  Servicing  Agreement  will be,  serviced  by the  Servicer  in
compliance  with Cal.  Civil Code ss.

                                      F-10
<PAGE>

2981, et seq. Each Subsequent  Receivable  originated in the State of California
on or after July 1, 2006 will be originated in  compliance  with the  California
Car Buyer's Bill of Rights (2005 Cal. Stat. Chp. 128).

            (38) No Negative  Amortization.  The Payment  Deferment and Due Date
Change Policies,  as set forth on Exhibit D to the Sale and Servicing Agreement,
will not  result in the  negative  amortization  of any  Subsequent  Receivables
modified in accordance with such Payment Deferment and Due Date Change Policies.

Section 5.  Conditions  Precedent.  The  obligation of the Issuer to acquire the
Subsequent Receivables hereunder is subject to the satisfaction,  on or prior to
the Subsequent Transfer Date, of the following conditions precedent:

            (a) Representations and Warranties.  (i) Each of the representations
      and warranties  made by LBAC in Section 3.2 of the Purchase  Agreement and
      Section  4 of this  Agreement  and (ii)  each of the  representations  and
      warranties made by the Transferor in Section 3.1 of the Sale and Servicing
      Agreement  and Section 3.1 of the  Purchase  Agreement,  shall be true and
      correct as of the date of this Agreement and as of the Subsequent Transfer
      Date.

            (b) Sale and Servicing Agreement Conditions.  Each of the conditions
      set forth in Section 2.2(b) to the Sale and Servicing Agreement shall have
      been satisfied.

            (c) Purchase Agreement Conditions. LBAC shall have complied with the
      requirements  of  Section  4.1 of the  Purchase  Agreement  and shall have
      delivered all documents  required to be delivered  pursuant to Section 5.5
      of the Purchase Agreement.

            (d) Security Interest Perfection.  In connection with the conveyance
      contemplated by this Agreement,  the Transferor agrees to record and file,
      at its own expense,  a financing  statement with respect to the Subsequent
      Receivables  now  existing and  hereafter  created for the sale of chattel
      paper (as  defined  in the UCC as in  effect  in the State of New  Jersey)
      meeting  the  requirements  of  applicable  state law in such manner as is
      sufficient  to  perfect  the  sale  and  assignment  of  such   Subsequent
      Receivables to the Issuer,  and the proceeds thereof (and any continuation
      statements  as are  required by  applicable  state law),  and to deliver a
      file-stamped  copy of  each  such  financing  statement  (or  continuation
      statement) or other  evidence of such filings  (which may, for purposes of
      this Section,  consist of telephone  confirmation  of such filing with the
      file  stamped  copy  of each  such  filing  to be  provided  to the  Trust
      Collateral  Agent in due  course),  as soon as is  practicable  after  the
      Transferor's receipt thereof.

            In connection with such conveyance,  the Transferor  further agrees,
      at its own expense,  on or prior to the  Subsequent  Transfer  Date (i) to
      annotate  and  indicate  in  its  computer   files  that  the   Subsequent
      Receivables  have been  transferred to the Issuer pursuant to the Sale and
      Servicing  Agreement  and this  Agreement and (ii) to deliver to the Trust
      Collateral  Agent a computer file printed or microfiche  list containing a
      true and complete list of all such Subsequent  Receivables,  identified by
      account number and by the Principal Balance of each Subsequent  Receivable
      as of the Subsequent Cutoff Date.

                                      F-11
<PAGE>

            (e) Additional  Information.  The Transferor shall have delivered or
      caused  to be  delivered  to the Trust  Collateral  Agent on behalf of the
      Noteholders  and the  Note  Insurer  such  information  as was  reasonably
      requested by the Issuer on behalf of the  Noteholders  or the Note Insurer
      to  satisfy  itself  as to (i) the  accuracy  of the  representations  and
      warranties set forth in Section 4 of this Agreement and Section 7.1 of the
      Sale and Servicing  Agreement and (ii) the  satisfaction of the conditions
      set forth in this Section.

            (f) Deposits to  Accounts.  On or prior to the  Subsequent  Transfer
      Date, the Transferor shall deposit or cause to be deposited:

                  (1) the  Subsequent  Spread  Account  Deposit  into the Spread
            Account; and

                  (2) $__________, which represents all monies received pursuant
            to clause (1) of Section 3 hereof (other than  Liquidation  Proceeds
            and Recoveries), into the Collection Account.

Section 6.  Ratification of Agreement.  As  supplemented by this Agreement,  the
Sale and Servicing  Agreement is in all respects  ratified and confirmed and the
Sale and Servicing Agreement as so supplemented by this Agreement shall be read,
taken and construed as one and the same instrument.

Section 7. Third Party Beneficiaries.  Except as otherwise specifically provided
herein  with  respect  to  Noteholders,  the  parties to this  Agreement  hereby
manifest  their intent that no third party other than the Note Insurer  shall be
deemed a third party  beneficiary of this Agreement,  and specifically  that the
Obligors are not third party  beneficiaries of this Agreement.  The Note Insurer
and its  successors  and  assigns  shall  be a  third-party  beneficiary  to the
provisions  of this  Agreement,  and shall be entitled to rely upon and directly
enforce the  provisions  of this  Agreement so long as no Note  Insurer  Default
shall have  occurred and be  continuing.  Except as expressly  stated  otherwise
herein  or in the Basic  Documents,  any right of the Note  Insurer  to  direct,
appoint, consent to, approve of, or take any action under this Agreement,  shall
be a right  exercised by the Note  Insurer in its sole and absolute  discretion.
The Note Insurer may disclaim any of its rights and powers under this  Agreement
(but not its duties and obligations under the Policy) upon delivery of a written
notice to the Trust Collateral Agent.

Section 8. Governing Law. THIS AGREEMENT  SHALL BE CONSTRUED IN ACCORDANCE  WITH
THE LAWS OF THE STATE OF NEW YORK, AND THE  OBLIGATIONS,  RIGHTS AND REMEDIES OF
THE PARTIES UNDER THIS  AGREEMENT  SHALL BE  DETERMINED IN ACCORDANCE  WITH SUCH
LAWS WITHOUT  REGARD TO CONFLICT OF LAWS  PRINCIPLES  (EXCEPT WITH REGARD TO THE
UCC).

Section 9.  Amendments.  This  Agreement  may be amended  from time to time by a
written amendment duly executed and delivered by the Issuer, LBAC, LBARC-WI, the
Transferor and the Trust  Collateral Agent with the prior written consent of the
Note Insurer.

                                      F-12
<PAGE>

            IN WITNESS WHEREOF, the Issuer,  LBAC, LBARC-WI,  the Transferor and
the Trust  Collateral  Agent have caused this  Agreement to be duly executed and
delivered by their  respective  duly  authorized  officers as of the day and the
year first above written.

                             LONG BEACH ACCEPTANCE AUTO RECEIVABLES TRUST
                                2006-B, as Issuer
                             By: Wilmington Trust Company, not in its individual
                                 capacity, but solely as Owner Trustee

                             By:________________________________________________
                                Name:
                                Title:

                             LONG BEACH ACCEPTANCE CORP.

                             By:________________________________________________
                                Name:
                                Title:

                             LONG BEACH ACCEPTANCE RECEIVABLES CORP. WAREHOUSE I

                             By:________________________________________________
                                Name:
                                Title:

                             LONG BEACH ACCEPTANCE RECEIVABLES CORP.

                             By:________________________________________________
                                Name:
                                Title:

                             DEUTSCHE BANK TRUST COMPANY AMERICAS
                                as Trust Collateral Agent.

                             By:________________________________________________
                                Name:
                                Title:

               Signature Page to the Sale and Servicing Agreement

                                      F-13
<PAGE>

                                                                      SCHEDULE A

                             SCHEDULE OF RECEIVABLES

                                  Schedule A-1
<PAGE>

                                                                      SCHEDULE B

Location of Receivable Files

One Mack Centre Drive
Paramus, New Jersey 07652

Location of Legal Files

One Mack Centre Drive
Paramus, New Jersey 07652

                                  Schedule B-1
<PAGE>

                                                                      SCHEDULE C

                              Delivery Requirements

The Trust Collateral Agent shall have sole control over each such investment and
the income thereon, and any certificate or other instrument  evidencing any such
investment,  if any  shall,  except  for  clearing  corporation  securities,  be
delivered  directly to the Trust  Collateral  Agent or its agent,  together with
each  document  of  transfer,  if  any,  necessary  to  transfer  title  to such
investment  to the Trust  Collateral  Agent in a manner that  complies with this
Agreement and the requirements of the definition of Eligible Investments.

                                  Schedule C-1

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