Document:

EXECUTION COPY
Exhibit 10.5

 

ASSET REPRESENTATIONS REVIEW AGREEMENT

 

among

 

USAA AUTO OWNER TRUST 2016-1

as Issuer,

 

USAA FEDERAL SAVINGS BANK,

as Sponsor and Servicer

 

and

 

CLAYTON FIXED INCOME SERVICES LLC,

 

as Asset Representations Reviewer

 

Dated as of September 21, 2016

    	 

    	

    

Table
of Contents

 

	 	 	Page
	ARTICLE I USAGE AND DEFINITIONS	 	1
	Section 1.1. Usage and Definitions	 	1
	Section 1.2. Additional Definitions	 	1
	ARTICLE II ENGAGEMENT OF ASSET REPRESENTATIONS REVIEWER	 	2
	Section 2.1. Engagement; Acceptance	 	2
	Section 2.2. Confirmation of Scope	 	2
	ARTICLE III ASSET REPRESENTATIONS REVIEW PROCESS	 	2
	Section 3.1. Review Notices	 	2
	Section 3.2. Identification of Subject Receivables	 	3
	Section 3.3. Review Materials	 	3
	Section 3.4. Performance of Reviews	 	3
	Section 3.5. Review Reports	 	4
	Section 3.6. Limitations on Review Obligations	 	5
	Section 3.7. Dispute Resolution	 	5
	ARTICLE IV ASSET REPRESENTATIONS REVIEWER	 	5
	Section 4.1. Representations and Warranties	 	5
	Section 4.2. Covenants	 	6
	Section 4.3. Fees, Expenses and Indemnities	 	7
	Section 4.4. Limitation on Liability	 	8
	Section 4.5. Indemnification by Asset Representations Reviewer	 	8
	Section 4.6. Indemnification of Asset Representations Reviewer	 	8
	Section 4.7. Inspections of Asset Representations Reviewer	 	9
	Section 4.8. Delegation of Obligations	 	9
	Section 4.9. Confidential Information	 	9
	Section 4.10. Personally Identifiable Information	 	11
	ARTICLE V RESIGNATION AND REMOVAL; SUCCESSOR ASSET REPRESENTATIONS REVIEWER	 	13
	Section 5.1. Eligibility Requirements for Asset Representations Reviewer	 	13
	Section 5.2. Resignation and Removal of Asset Representations Reviewer	 	13
	Section 5.3. Successor Asset Representations Reviewer	 	13
	Section 5.4. Merger, Consolidation or Succession	 	14

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Table
of Contents

(continued)

 

	 	 	Page
	ARTICLE VI OTHER AGREEMENTS	 	14
	Section 6.1.  Independence of Asset Representations Reviewer	 	14
	Section 6.2.  No Petition	 	14
	Section 6.3. Limitation of Liability of Owner Trustee	 	15
	Section 6.4. Termination of Agreement	 	15
	ARTICLE VII MISCELLANEOUS PROVISIONS	 	15
	Section 7.1. Amendments	 	15
	Section 7.2. Assignment; Benefit of Agreement; Third Party Beneficiaries	 	16
	Section 7.3. Notices	 	16
	Section 7.4. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial	 	17
	Section 7.5. No Waiver; Remedies	 	17
	Section 7.6. Severability	 	17
	Section 7.7. Headings	 	17
	Section 7.8. Counterparts	 	17
	Schedule A Representations and Warranties, Review Materials and Tests	 	 

    	ii

    	

    

ASSET REPRESENTATIONS REVIEW AGREEMENT,
dated as of September 21, 2016 (this “Agreement”), among USAA AUTO OWNER TRUST 2016-1, a Delaware statutory
trust, as Issuer (the “Issuer”), USAA FEDERAL SAVINGS BANK, a federally chartered savings association (the “Bank”),
as Sponsor (the “Sponsor”) and Servicer (the “Servicer”), and CLAYTON FIXED INCOME SERVICES
LLC, a Delaware limited liability company, as Asset Representations Reviewer (the “Asset Representations Reviewer”).

 

WHEREAS, the Issuer desires to engage the
Asset Representations Reviewer to perform reviews of certain Receivables for compliance with the representations and warranties
made by the Bank, as seller, about the Receivables in the pool.

 

NOW, THEREFORE, in consideration of the
foregoing, other good and valuable consideration, and the mutual terms and conditions contained herein, the parties hereto agree
as follows.

 

ARTICLE
I

USAGE AND DEFINITIONS

 

Section 1.1. Usage and Definitions.
(a) Except as otherwise specified herein or if the context may otherwise require, capitalized terms not defined in this Agreement
shall have the respective meanings assigned such terms set forth in Appendix A to the Sale and Servicing Agreement, dated as of
the date hereof (the “Sale and Servicing Agreement”), by and among USAA Acceptance, LLC, as seller, the Servicer,
and the Issuer.

 

(b) 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,
amendments and restatements, and supplements 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; references to laws
include their amendments and supplements, the rules and regulations thereunder and any successors thereto; the term “including”
means “including without limitation;” and the term “or” is not exclusive.

 

Section 1.2. Additional Definitions. The following terms have the meanings given below:

 

“Asset Representations Review”
means the performance by the Asset Representations Reviewer of the testing procedures for each Test and each Subject Receivable
according to Section 3.4.

 

“Confidential Information”
has the meaning stated in Section 4.9(b).

 

“Information Recipients”
has the meaning stated in Section 4.9(a).

 

“Issuer PII” has the
meaning stated in Section 4.10(a).

 

“Personally Identifiable Information”
or “PII” has the meaning stated in Section 4.10(a).

    	 

    	

    

“Review Fee” has the
meaning stated in Section 4.3(b).

 

“Review Materials” means,
for an Asset Representations Review and a Subject Receivable, the documents and other materials for each Test listed under “Review
Materials” in Schedule A.

 

“Review Report” means,
for an Asset Representations Review, the report of the Asset Representations Reviewer prepared according to Section 3.5.

 

“Subject Receivables”
means, for any Asset Representations Review, all Receivables which are 60-Day Delinquent Receivables as of the related Review Satisfaction
Date; provided, that any Receivable repurchased by the Sponsor or the Servicer from the Issuer in accordance with the Transaction
Documents after the Review Satisfaction Date will no longer be a Subject Receivable.

 

“Test” has the meaning
stated in Section 3.4(a).

 

“Test Complete” has the
meaning stated in Section 3.4(c).

 

“Test Fail” has the meaning
stated in Section 3.4(a).

 

“Test Incomplete” has
the meaning stated in Section 3.4(a).

 

“Test Pass” has the meaning
stated in Section 3.4(a).

 

ARTICLE
II

ENGAGEMENT OF ASSET REPRESENTATIONS REVIEWER

 

Section 2.1. Engagement; Acceptance. The Issuer engages Clayton Fixed Income Services LLC to act as the Asset Representations
Reviewer for the Issuer. Clayton Fixed Income Services LLC accepts the engagement and agrees to perform the obligations of the
Asset Representations Reviewer on the terms in this Agreement.

 

Section 2.2. Confirmation of Scope. The parties confirm that the Asset Representations Reviewer is not responsible for (a) reviewing
the Receivables for compliance with the representations and warranties under the Transaction Documents, except as described in
this Agreement or (b) determining whether noncompliance with the representations or warranties constitutes a breach of the Transaction
Documents.

 

ARTICLE
III

ASSET REPRESENTATIONS REVIEW PROCESS

 

Section 3.1. Review Notices. On receipt of a Review Notice in accordance with Section 7.5 of the Indenture, the Asset Representations
Reviewer will commence an Asset Representations Review. The Asset Representations Reviewer will have no obligation to start an
Asset Representations Review until a Review Notice is received.

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Section 3.2. Identification of Subject
Receivables. Within ten (10) Business Days after receipt of a Review Notice, the Servicer will deliver to the Asset Representations
Reviewer a list of the Subject Receivables.

 

Section 3.3. Review Materials.

 

(a) Access to Review Materials. The Servicer will give the Asset Representations Reviewer access to the Review Materials
for all of the Subject Receivables within sixty (60) calendar days after receipt of the Review Notice in one or more of the following
ways in the Servicer’s reasonable discretion: (i) by electronic posting of Review Materials to a password-protected website
to which the Asset Representations Reviewer has access, (ii) by providing originals or photocopies of documents relating to the
Subject Receivables at one of the properties of the Servicer or (iii) in another manner agreed by the Servicer and the Asset Representations
Reviewer. The Servicer may redact or remove PII from the Review Materials so long as all information in the Review Materials necessary
for the Asset Representations Reviewer to complete the Asset Representations Review remains intact and unchanged.

 

(b) Missing or Insufficient Review Materials. The Asset Representations Reviewer will review the Review Materials to
determine if any Review Materials are missing or insufficient for the Asset Representations Reviewer to perform any Test. If the
Asset Representations Reviewer reasonably determines that any of the Review Materials are missing or insufficient for the Asset
Representations Reviewer to perform any Test, the Asset Representations Reviewer will notify the Servicer promptly, and in any
event no less than twenty (20) calendar days before completing the Review, and the Servicer will use reasonable efforts to provide
the Asset Representations Reviewer access to such missing Review Materials or other documents or information to correct the insufficiency
within fifteen (15) calendar days. If the missing or insufficient Review Materials have not been provided by the Servicer within
sixty (60) calendar days, the parties agree that the Subject Receivable will have a Test Incomplete for the related Test(s) and
the Review Report will indicate the reason for the Test Incomplete.

 

Section 3.4. Performance of Reviews.

 

(a) Test Procedures. For an Asset Representations Review, the Asset Representations Reviewer will perform for each Subject
Receivable the procedures listed under “Tests” in Schedule A for each representation and warranty (each, a “Test”),
using the Review Materials listed for each such Test in Schedule A. For each Test and Subject Receivable, the Asset Representations
Reviewer will determine in its reasonable judgment if the Test has been satisfied (a “Test Pass”), if the Test
has not been satisfied (a “Test Fail”) or if the Test could not be concluded as a result of missing or incomplete
Review Materials (a “Test Incomplete”). The Asset Representations Reviewer will use such determination for all
Subject Receivables that are subject to the same Test.

 

(b) Review Period. The Asset Representations Reviewer will complete the Asset Representations Review of all of the Subject
Receivables within sixty (60) calendar days after receiving access to the Review Materials under Section 3.3(a). However,
if missing or additional Review Materials are provided to the Asset Representations Reviewer under Section 3.3(b), the review
period will be extended for an additional thirty (30) calendar days.

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(c)  Completion of Review for Certain Subject Receivables. Following the delivery of the list of the Subject Receivables
and before the delivery of the Review Report by the Asset Representations Reviewer, the Servicer may notify the Asset Representations
Reviewer if a Subject Receivable is paid in full by the Obligor or purchased from the Issuer by the Bank according to the applicable
Transaction Document. On receipt of notice, the Asset Representations Reviewer will immediately terminate all Tests of such Receivables
and the Review of such Receivables will be considered complete (a “Test Complete”). In this case, the Review
Report will indicate a Test Complete for the Receivables and the related reason.

 

(d) Previously Reviewed Receivable. If a Subject Receivable was included in a prior Asset Representations Review, the
Asset Representations Reviewer will not conduct additional Tests on any such duplicate Subject Receivable unless such Subject Receivable
was deemed a Test Incomplete as a result of the failure of the Servicer to provide missing Review Material for such Subject Receivable
and the Servicer elects to have such Subject Receivable included in the current Asset Representations Review. The Asset Representations
Reviewer will include the previously reported Test results for any such duplicate Subject Receivable within the Review Report for
the current Asset Representations Review.

 

(e) Duplicative Tests. If the same Test is required for more than one representation or warranty listed on Schedule
A, the Asset Representations Reviewer will only perform the Test once for each Subject Receivable but will report the results
of the Test for each applicable representation or warranty on the Review Report.

 

(f) Termination of Review. If an Asset Representations Review is in process and all of the Notes will be paid in full
on the next Payment Date, the Servicer will notify the Asset Representations Reviewer and the Indenture Trustee no less than ten
(10) calendar days before that Payment Date. On receipt of notice, the Asset Representations Reviewer will terminate the Asset
Representations Review immediately and will have no obligation to deliver a Review Report.

 

Section 3.5. Review Reports. (a)
Within ten (10) calendar days after the end of the Asset Representations Review period under Section 3.4(b), the Asset
Representations Reviewer will deliver to the Issuer, the Sponsor, the Servicer and the Indenture Trustee a Review Report indicating
for each Subject Receivable whether there was a Test Pass, a Test Incomplete or a Test Fail for each Test, or whether the Subject
Receivable was a Test Complete and the related reason. The Review Report will contain a summary of the findings and conclusions
of the Asset Representations Reviewer with respect to the Asset Representations Review to be included in the Issuer’s Form
10-D report for the Collection Period in which the Review Report is received, including a description of each Test Fail and Test
Incomplete, if any, from the Asset Representations Review. The Asset Representations Reviewer will ensure that the Review Report
does not contain any Issuer PII. On the reasonable request of the Servicer, the Asset Representations Reviewer will provide additional
details on the Test results.

 

(b) Questions About Review. The Asset Representations Reviewer will make appropriate personnel available to respond in
writing to written questions or requests for clarification of any Review Report from the Servicer. The Asset Representations Reviewer
will have no obligation to respond to questions or requests for clarification from Noteholders or any

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Person other than the Servicer and will direct such Persons
to submit written questions or requests to the Servicer.

 

Section 3.6. Limitations on Review Obligations. The Asset Representations Reviewer will have no obligation:

 

(a) to determine whether a Delinquency Trigger has occurred or whether the required percentage of Noteholders has voted to direct
an Asset Representations Review under the Indenture, and may rely on the information in any Review Notice delivered by the Indenture
Trustee;

 

(b)  to determine which Receivables are Subject Receivables, and may rely on the lists of Subject Receivables provided by the
Servicer;

 

(c) to confirm the validity of the Review Materials and may rely on the accuracy and completeness of the Review Materials; or

 

(d) to take any action or cause any other party to take any action under any of the Transaction Documents or otherwise to enforce
any remedies against any Person for breaches of representations or warranties about the Subject Receivables.

 

Section 3.7. Dispute Resolution. The Asset Representations Reviewer acknowledges and agrees that any Review Report may be used
by the Issuer, the Seller or the Servicer in any dispute resolution proceeding related to the Subject Receivables. No additional
fees or reimbursement of expenses shall be paid to the Asset Representations Reviewer regarding the Issuer’s, the Seller’s
or the Servicer’s use of any Review Report; provided, that the Asset Representations Reviewer will be reimbursed for
its out-of-pocket expenses incurred in its participation in any dispute resolution proceeding.

 

ARTICLE
IV

ASSET REPRESENTATIONS REVIEWER

 

Section 4.1. Representations and Warranties. The Asset Representations Reviewer represents and warrants as of the Closing Date:

 

(a) Organization and Qualification. The Asset Representations Reviewer is duly organized and validly existing as a limited
liability company in good standing under the laws of the State of Delaware. The Asset Representations Reviewer is qualified as
a foreign limited liability company in good standing and has obtained all necessary licenses and approvals in all jurisdictions
in which the ownership or lease of its properties or the conduct of its activities requires the qualification, license or approval,
unless the failure to obtain the qualifications, licenses or approvals would not reasonably be expected to have a material adverse
effect on the Asset Representations Reviewer’s ability to perform its obligations under this Agreement.

 

(b) Power, Authority and Enforceability. The Asset Representations Reviewer has the power and authority to execute, deliver
and perform its obligations under this Agreement. The Asset Representations Reviewer has authorized the execution, delivery and
performance of this Agreement. This Agreement is the legal, valid and binding obligation of the Asset

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Representations Reviewer enforceable against the Asset Representations
Reviewer, except as may be limited by insolvency, bankruptcy, reorganization or other laws relating to the enforcement of creditors’
rights or by general equitable principles.

 

(c) No Conflicts and No Violation. The execution, delivery and performance by the Asset Representations Reviewer of the
transactions contemplated by this Agreement and the performance of the Asset Representations Reviewer’s obligations under
this Agreement will not (A) conflict with, or be a breach or default under, any indenture, mortgage, deed of trust, loan agreement,
guarantee or other agreement or instrument under which the Asset Representations Reviewer is a party, (B) result in the creation
or imposition of any Lien on any of the properties or assets of the Asset Representations Reviewer under the terms of any indenture,
mortgage, deed of trust, loan agreement, guarantee or other agreement or instrument, (C) violate the organizational documents of
the Asset Representations Reviewer or (D) violate any law or any order, rule or regulation of a federal or state court, regulatory
body, administrative agency or other governmental instrumentality having jurisdiction over the Asset Representations Reviewer or
its properties that applies to the Asset Representations Reviewer, which, in each case, would reasonably be expected to have a
material adverse effect on the Asset Representations Reviewer’s ability to perform its obligations under this Agreement.

 

(d) No Consent Required. No approval or authorization by, or filing with, any Governmental Authority is required in connection
with the execution, delivery and performance by the Asset Representations Reviewer of this Agreement other than (i) approvals and
authorizations that have previously been obtained and filings that have previously been made and (ii) approvals, authorizations
or filings which, if not obtained or made, would not have a material adverse effect on the ability of the Asset Representations
Reviewer to perform its obligations under this Agreement.

 

(e) No Proceedings. There are no proceedings or investigations pending or, to the knowledge of the Asset Representations
Reviewer, threatened in writing before a federal or state court, regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Asset Representations Reviewer or its properties (A) asserting the invalidity of this Agreement, (B)
seeking to prevent the completion of the transactions contemplated by this Agreement or (C) seeking any determination or ruling
that would reasonably be expected to have a material adverse effect on the Asset Representations Reviewer’s ability to perform
its obligations under, or the validity or enforceability of, this Agreement.

 

(f) Eligibility. The Asset Representations Reviewer meets the eligibility requirements in Section 5.1 and will
notify the Issuer and the Servicer promptly if it no longer meets, or reasonably expects that it will no longer meet, the eligibility
requirements in Section 5.1.

 

Section 4.2. Covenants. The Asset Representations Reviewer covenants and agrees that:

 

(a) Eligibility. It will notify the Issuer and the Servicer promptly if it no longer meets the eligibility requirements
in Section 5.1.

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(b)  Review Systems; Personnel. It will maintain business process management and/or other systems necessary to ensure
that it can perform each Test and, on execution of this Agreement, will load each Test into these systems. The Asset Representations
Reviewer will ensure that these systems allow for each Subject Receivable and the related Review Materials to be individually tracked
and stored as contemplated by this Agreement. The Asset Representations Reviewer will maintain adequate staff that is properly
trained to conduct Asset Representations Reviews as required by this Agreement.

 

(c) Maintenance of Review Materials. It will maintain copies of any Review Materials, Review Reports and other documents
relating to an Asset Representations Review, including internal correspondence and work papers, for a period of two years after
the termination of this Agreement or repayment of the Notes in full, whichever comes first.

 

Section 4.3. Fees, Expenses and Indemnities.

 

(a) Annual Fee. The Servicer will pay the Asset Representations Reviewer, as compensation for agreeing to act as the
Asset Representations Reviewer under this Agreement, an annual fee of $7,500. The annual fee will be payable by the Servicer on
the Closing Date and on each anniversary thereof until this Agreement is terminated, provided, that in the year in which
all public Notes are paid in full, the annual fee shall be reduced pro rata by an amount equal to the days of the year in which
the public Notes are no longer outstanding.

 

(b) Review Fee. Following the completion of an Asset Representations Review and the delivery to the Indenture Trustee,
the Issuer, the Sponsor and the Servicer of the Review Report, or the termination of an Asset Representations Review in accordance
with Section 3.4(f), and the delivery to the Servicer of a detailed invoice, the Asset Representations Reviewer will be
entitled to a fee of $200 for each Subject Receivable for which the Asset Representations Review was started (the “Review
Fee”), to be paid as agreed in Section 4.3(c). However, no Review Fee will be charged for any Tests that were
performed in a prior Asset Representations Review or for any Asset Representations Review in which no Tests were completed prior
to the Asset Representations Reviewer being notified of a termination of the Asset Representations Review in accordance with Section
3.4(f). The Servicer will pay the Review Fee to the Asset Representations Reviewer in accordance with the terms of the detailed
invoice from the Asset Representations Reviewer. If an Asset Representations Review is terminated in accordance with Section
3.4(f), the Asset Representations Reviewer must submit its invoice for the Review Fee for the terminated Asset Representations
Review no later than five Business Days before the final Payment Date in order to be reimbursed no later than the final Payment
Date.

 

(c) Payment of Fees and Indemnities. The Asset Representations Reviewer shall submit reasonably detailed invoices to
the Servicer for any amounts owed to it under this Agreement. To the extent not paid by the Servicer within sixty (60) calendar
days following the receipt of a detailed invoice on the due date therefor hereunder, the fees provided for in this Section 4.3
and the indemnities provided for in Section 4.6(a) shall be paid by the Issuer pursuant to the priority of payments set
forth in Section 4.4(a) of the Sale and Servicing Agreement; provided, that prior to any such payment pursuant to the Sale
and Servicing Agreement, the Asset Representations Reviewer shall notify the Servicer in writing that such payments have been outstanding
for at least sixty (60) calendar days.

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Section 4.4. Limitation on Liability.
The Asset Representations Reviewer will not be liable to any Person for any action taken, or not taken, in good faith under this
Agreement. However, the Asset Representations Reviewer will be liable for its willful misconduct, bad faith, breach of this Agreement
or negligence in performing its obligations under this Agreement. In no event will the Asset Representations Reviewer be liable
for special, indirect or consequential losses or damages (including lost profit), even if the Asset Representations Reviewer has
been advised of the likelihood of the loss or damage and regardless of the form of action.

 

Section 4.5. Indemnification by Asset Representations Reviewer. The Asset Representations Reviewer will indemnify each of the
Issuer, the Servicer, the Depositor, the Seller, the Sponsor, the Owner Trustee and the Indenture Trustee and their respective
directors, officers, employees and agents for all costs, expenses, losses, damages and liabilities (including any reasonable legal
fees and expenses incurred by an Indemnified Party in connection with the enforcement of any indemnification or other obligation
of the Asset Representations Reviewer) resulting from (a) the willful misconduct, bad faith or negligence of the Asset Representations
Reviewer in performing its obligations under this Agreement, (b) the Asset Representations Reviewer’s failure to comply with
the requirements of applicable federal, state or local laws and regulations in the performance of its duties hereunder or (c) the
Asset Representations Reviewer’s breach of any of its representations, warranties, covenants or other obligations in this
Agreement. The Asset Representations Reviewer’s obligations under this Section 4.5 will survive the termination of this Agreement,
the termination of the Issuer and the permitted resignation or removal of the Asset Representations Reviewer.

 

Section 4.6. Indemnification of Asset Representations Reviewer.

 

(a) Indemnification. The Servicer will indemnify the Asset Representations Reviewer and its officers, directors, employees
and agents (each, an “Indemnified Person”), for all costs, expenses, losses, damages and liabilities resulting
from the performance of its obligations under this Agreement (including the costs and expenses of defending itself against any
loss, damage or liability), but excluding any cost, expense, loss, damage or liability resulting from (i) the Asset Representations
Reviewer’s willful misconduct, bad faith or negligence, (ii) the Asset Representations Reviewer’s failure to comply
with the requirements of applicable federal, state and local laws and regulations in the performance of its duties hereunder or
(iii) the Asset Representations Reviewer’s breach of any of its representations, warranties, covenants or other obligations
in this Agreement.

 

(b) Proceedings. Promptly on receipt by an Indemnified Person of notice of a Proceeding against it, the Indemnified Person
will, if a claim is to be made under Section 4.6(a), notify the Servicer of the Proceeding. The Servicer may participate
in and assume the defense and settlement of a Proceeding at its expense. If the Servicer notifies the Indemnified Person of its
intention to assume the defense of the Proceeding, the Servicer will not be liable for legal expenses of counsel to the Indemnified
Person unless there is a conflict between the interests of the Servicer, and an Indemnified Person. If there is a conflict, the
Servicer will pay for the reasonable fees and expenses of separate counsel to the Indemnified Person. No settlement of a Proceeding
may be made without the approval of the Servicer and the Indemnified Person, which approval will not be unreasonably withheld.

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(c)  Survival of Obligations. The Servicer’s obligations under this Section 4.6 will survive the permitted
resignation or removal of the Asset Representations Reviewer and the termination of this Agreement.

 

(d) Repayment. If the Servicer makes any payment under this Section 4.6 and the Indemnified Person later collects
any of the amounts for which the payments were made to it from others, the Indemnified Person will promptly repay the amounts to
the Servicer.

 

Section 4.7. Inspections of Asset Representations Reviewer. The Asset Representations Reviewer agrees that, with reasonable prior
notice not more than once during any year, it will permit authorized representatives of the Issuer, the Servicer or the Sponsor,
during the Asset Representations Reviewer’s normal business hours, to examine and review the books of account, records, reports
and other documents and materials of the Asset Representations Reviewer relating to (a) the performance of the Asset Representations
Reviewer’s obligations under this Agreement, (b) payments of fees and expenses of the Asset Representations Reviewer for
its performance and (c) any claim made by the Asset Representations Reviewer under this Agreement. In addition, the Asset Representations
Reviewer will permit the Issuer’s, the Servicer’s or the Sponsor’s representatives to make copies and extracts
of any of those documents and to discuss them with the Asset Representations Reviewer’s officers and employees. Each of the
Issuer, the Servicer and the Sponsor will, and will cause its authorized representatives to, hold in confidence any proprietary
confidential information of the Asset Representations Reviewer except if disclosure may be required by law or if the Issuer, the
Servicer or the Sponsor reasonably determines that it is required to make the disclosure under this Agreement or the other Transaction
Documents. The Asset Representations Reviewer will maintain all relevant books, records, reports and other documents and materials
for a period of at least two years after the termination of its obligations under this Agreement.

 

Section 4.8. Delegation of Obligations. The Asset Representations Reviewer may not delegate or subcontract its obligations under
this Agreement to any Person without the consent of the parties to this Agreement.

 

Section 4.9. Confidential Information.

 

(a) Treatment. The Asset Representations Reviewer agrees to hold and treat Confidential Information given to it under
this Agreement in confidence and under the terms and conditions of this Section 4.9, and will implement and maintain safeguards
to further assure the confidentiality of the Confidential Information. The Confidential Information will not, without the prior
consent of the Issuer, the Sponsor and the Servicer, be disclosed or used by the Asset Representations Reviewer, or its officers,
directors, employees, agents, representatives or affiliates, including legal counsel (collectively, the “Information Recipients”)
other than for the purposes of performing Asset Representations Reviews of Subject Receivables or performing its obligations under
this Agreement. The Asset Representations Reviewer agrees that it will not, and will cause its Affiliates to not (i) purchase or
sell securities issued by the Bank or its Affiliates or special purpose entities on the basis of Confidential Information or (ii)
use the Confidential Information for the preparation of research reports, newsletters or other publications or similar communications.

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(b)  Definition. “Confidential Information” means oral, written and electronic materials (irrespective
of its source or form of communication) furnished before, on or after the date of this Agreement to the Asset Representations Reviewer,
including:

 

(i) lists of Subject Receivables and any related Review Materials;

 

(ii) origination and servicing guidelines, policies and procedures and form contracts; and

 

(iii) notes, analyses, compilations, studies or other documents or records prepared by the Sponsor or the Servicer, which contain
information supplied by or on behalf of the Sponsor or the Servicer or their representatives.

 

However, Confidential Information will not include information
that (A) is or becomes generally available to the public other than as a result of disclosure by the Information Recipients, (B)
was available to, or becomes available to, the Information Recipients on a non-confidential basis from a Person or entity other
than the Issuer, the Sponsor or the Servicer before its disclosure to the Information Recipients who, to the knowledge of the Information
Recipient is not bound by a confidentiality agreement with the Issuer, the Sponsor or the Servicer and is not prohibited from transmitting
the information to the Information Recipients, (C) is independently developed by the Information Recipients without the use of
the Confidential Information, as shown by the Information Recipients’ files and records or other evidence in the Information
Recipients’ possession or (D) the Issuer, the Sponsor or the Servicer provides permission to the applicable Information Recipients
to release.

 

(c) Protection. The Asset Representations Reviewer will use best efforts to protect the secrecy of and avoid disclosure
and unauthorized use of Confidential Information, including those measures that it takes to protect its own confidential information
and not less than a reasonable standard of care. The Asset Representations Reviewer acknowledges that Personally Identifiable Information
is also subject to the additional requirements in Section 4.10.

 

(d) Disclosure. If the Asset Representations Reviewer is required by applicable law, regulation, rule or order issued
by an administrative, governmental, regulatory or judicial authority to disclose part of the Confidential Information, it may disclose
the Confidential Information. However, before a required disclosure, the Asset Representations Reviewer, if permitted by law, regulation,
rule or order, will use its reasonable efforts to provide the Issuer, the Sponsor and the Servicer with notice of the requirement
and will cooperate, at the Sponsor’s expense, in the Issuer’s and the Sponsor’s pursuit of a proper protective
order or other relief for the disclosure of the Confidential Information. If the Issuer or the Sponsor is unable to obtain a protective
order or other proper remedy by the date that the information is required to be disclosed, the Asset Representations Reviewer will
disclose only that part of the Confidential Information that it is advised by its legal counsel it is legally required to disclose.

 

(e) Responsibility for Information Recipients. The Asset Representations Reviewer will be responsible for a breach of
this Section 4.9 by its Information Recipients.

 

(f) Violation. The Asset Representations Reviewer agrees that a violation of this Agreement may cause irreparable injury
to the Issuer, the Sponsor and the Servicer and the

    	10

    	

    

Issuer, the Sponsor and the Servicer may seek injunctive relief
in addition to legal remedies. If an action is initiated by the Issuer or the Servicer to enforce this Section 4.9, the
prevailing party will be entitled to reimbursement of costs and expenses, including reasonable attorney’s fees, incurred
by it for the enforcement.

 

Section 4.10. Personally Identifiable Information.

 

(a) Definitions. “Personally Identifiable Information” or “PII” means information
in any format about an identifiable individual, including, name, address, phone number, e-mail address, account number(s), identification
number(s), vehicle identification number(s) or “VIN(s)”, any other actual or assigned attribute associated with or
identifiable to an individual and any information that when used separately or in combination with other information could identify
an individual. “Issuer PII” means PII furnished by the Issuer, the Servicer or their Affiliates to the Asset
Representations Reviewer and PII developed or otherwise collected or acquired by the Asset Representations Reviewer in performing
its obligations under this Agreement.

 

(b) Use of Issuer PII. The Issuer does not grant the Asset Representations Reviewer any rights to Issuer PII. The Asset
Representations Reviewer will use Issuer PII only to perform its obligations under this Agreement or as specifically directed in
writing by the Issuer and will only reproduce Issuer PII to the extent necessary for these purposes. The Asset Representations
Reviewer must comply with all laws applicable to PII, Issuer PII and the Asset Representations Reviewer’s business, including
any legally required codes of conduct, including those relating to privacy, security and data protection. The Asset Representations
Reviewer will protect and secure Issuer PII. The Asset Representations Reviewer will implement privacy or data protection policies
and procedures that comply with applicable laws and regulations and this Agreement. The Asset Representations Reviewer will implement
and maintain reasonable and appropriate practices, procedures and systems, including administrative, technical and physical safeguards
to (i) protect the security, confidentiality and integrity of Issuer PII, (ii) ensure against anticipated threats or hazards to
the security or integrity of Issuer PII, (iii) protect against unauthorized access to or use of Issuer PII and (iv) otherwise comply
with its obligations under this Agreement. These safeguards include a written data security plan, employee training, information
access controls, restricted disclosures, systems protections (e.g., intrusion protection, data storage protection and data transmission
protection) and physical security measures.

 

(c) Additional Limitations. In addition to the use and protection requirements described in Section 4.10(b), the
Asset Representations Reviewer’s disclosure of Issuer PII is also subject to the following requirements:

 

(i) The Asset Representations Reviewer will not disclose Issuer PII to its personnel or allow its personnel access to Issuer
PII except (A) for the Asset Representations Reviewer personnel who require Issuer PII to perform an Asset Representations Review,
(B) with the prior consent of the Issuer or (C) as required by applicable law. When permitted, the disclosure of or access to Issuer
PII will be limited to the specific information necessary for the individual to complete the assigned task. The Asset Representations
Reviewer will inform personnel with access to Issuer PII of

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the confidentiality requirements in this Agreement
and train its personnel with access to Issuer PII on the proper use and protection of Issuer PII.

 

(ii) The Asset Representations Reviewer will not sell, disclose, provide or exchange Issuer PII with or to any third party without
the prior consent of the Issuer.

 

(d) Notice of Breach. The Asset Representations Reviewer will notify the Issuer promptly in the event of an actual or
reasonably suspected security breach, unauthorized access, misappropriation or other compromise of the security, confidentiality
or integrity of Issuer PII and, where applicable, immediately take action to prevent any further breach.

 

(e) Return or Disposal of Issuer PII. Except where return or disposal is prohibited by applicable law, promptly on the
earlier of the completion of the Asset Representations Review or the request of the Issuer, all Issuer PII in any medium in the
Asset Representations Reviewer’s possession or under its control will be (i) destroyed in a manner that prevents its recovery
or restoration or (ii) if so directed by the Issuer, returned to the Issuer without the Asset Representations Reviewer retaining
any actual or recoverable copies, in both cases, without charge to the Issuer. Where the Asset Representations Reviewer retains
Issuer PII, the Asset Representations Reviewer will limit the Asset Representations Reviewer’s further use or disclosure
of Issuer PII to that required by applicable law.

 

(f) Compliance; Modification. The Asset Representations Reviewer will cooperate with and provide information to the Issuer
regarding the Asset Representations Reviewer’s compliance with this Section 4.10. The Asset Representations Reviewer
and the Issuer agree to modify this Section 4.10 as necessary from time to time for either party to comply with applicable
law.

 

(g) Audit of Asset Representations Reviewer. The Asset Representations Reviewer will permit the Issuer and its authorized
representatives to audit the Asset Representations Reviewer’s compliance with this Section 4.10 during the Asset Representations
Reviewer’s normal business hours on reasonable advance notice to the Asset Representations Reviewer, and not more than once
during any year unless circumstances necessitate additional audits. The Issuer agrees to make reasonable efforts to schedule any
audit described in this Section 4.10(g) with the inspections described in Section 4.7. The Asset Representations
Reviewer will also permit the Issuer and its authorized representatives during normal business hours on reasonable advance written
notice to audit any service providers used by the Asset Representations Reviewer to fulfill the Asset Representations Reviewer’s
obligations under this Agreement.

 

(h) Affiliates and Third Parties. If the Asset Representations Reviewer processes the PII of the Issuer’s Affiliates
or a third party when performing an Asset Representations Review, and if such Affiliate or third party is identified to the Asset
Representations Reviewer, such Affiliate or third party is an intended third-party beneficiary of this Section 4.10, and
this Agreement is intended to benefit the Affiliate or third party. The Affiliate or third party will be entitled to enforce the
PII related terms of this Section 4.10 against the Asset Representations Reviewer as if each were a signatory to this Agreement.

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ARTICLE
V

RESIGNATION AND REMOVAL;

SUCCESSOR ASSET REPRESENTATIONS REVIEWER

 

Section 5.1. Eligibility Requirements for Asset Representations Reviewer. The Asset Representations Reviewer must be a Person
who (a) is not Affiliated with the Sponsor, the Depositor, the Servicer, the Indenture Trustee, the Owner Trustee or any of their
Affiliates and (b) was not, and is not Affiliated with a Person that was, engaged by the Sponsor or any underwriter to perform
any due diligence on the Receivables prior to the Closing Date.

 

Section 5.2. Resignation and Removal of Asset Representations Reviewer.

 

(a) No Resignation of Asset Representations Reviewer. The Asset Representations Reviewer will not resign as Asset Representations
Reviewer unless the Asset Representations Reviewer no longer meets the eligibility requirements in Section 5.1. The Asset
Representations Reviewer will notify the Issuer and the Servicer of its resignation as soon as practicable after it determines
it is required to resign and stating the resignation date and including an Opinion of Counsel supporting its determination.

 

(b) Removal of Asset Representations Reviewer. If any of the following events occur, the Issuer, by notice to the Asset
Representations Reviewer, may, and in the case of clause (i) below, shall, remove the Asset Representations Reviewer and terminate
its rights and obligations under this Agreement:

 

(i) the Asset Representations Reviewer no longer meets the eligibility requirements in Section 5.1;

 

(ii) the Asset Representations Reviewer breaches of any of its representations, warranties, covenants or obligations in this
Agreement; or

 

(iii) an Insolvency Event of the Asset Representations Reviewer occurs.

 

(c) Notice of Resignation or Removal. The Issuer will notify the Servicer and the Indenture Trustee of any resignation
or removal of the Asset Representations Reviewer.

 

(d) Continue to Perform After Resignation or Removal. No resignation or removal of the Asset Representations Reviewer
will be effective, and the Asset Representations Reviewer will continue to perform its obligations under this Agreement, until
a successor Asset Representations Reviewer has accepted its engagement according to Section 5.3(b).

 

Section 5.3. Successor Asset Representations Reviewer.

 

(a) Engagement of Successor Asset Representations Reviewer. Following the resignation or removal of the Asset Representations
Reviewer, the Issuer will appoint a successor Asset Representations Reviewer who meets the eligibility requirements of Section
5.1.

 

(b) Effectiveness of Resignation or Removal. No resignation or removal of the Asset Representations Reviewer will be
effective until the successor Asset Representations Reviewer

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has executed and delivered to the Issuer and the Servicer an
agreement accepting its engagement and agreeing to perform the obligations of the Asset Representations Reviewer under this Agreement
or entered into a new agreement with the Issuer on substantially the same terms as this Agreement.

 

(c) Transition and Expenses. If the Asset Representations Reviewer resigns or is removed, the Asset Representations Reviewer
will cooperate with the Issuer and take all actions reasonably requested to assist the Issuer in making an orderly transition of
the Asset Representations Reviewer’s rights and obligations under this Agreement to the successor Asset Representations Reviewer.
The Asset Representations Reviewer will pay the reasonable expenses (including the fees and expenses of counsel) of transitioning
the Asset Representations Reviewer’s obligations under this Agreement and preparing the successor Asset Representations Reviewer
to take on such obligations on receipt of an invoice with reasonable detail of the expenses from the Issuer or the successor Asset
Representations Reviewer.

 

Section 5.4. Merger, Consolidation or Succession. Any Person (a) into which the Asset Representations Reviewer is merged or consolidated,
(b) resulting from any merger or consolidation to which the Asset Representations Reviewer is a party or (c) succeeding to the
business of the Asset Representations Reviewer, if that Person meets the eligibility requirements in Section 5.1, will be
the successor to the Asset Representations Reviewer under this Agreement. Such Person will execute and deliver to the Issuer and
the Servicer an agreement to assume the Asset Representations Reviewer’s obligations under this Agreement (unless the assumption
happens by operation of law).

 

ARTICLE
VI

OTHER AGREEMENTS

 

Section 6.1. Independence of Asset Representations Reviewer. The Asset Representations Reviewer will be an independent contractor
and will not be subject to the supervision of the Issuer, the Indenture Trustee or the Owner Trustee for the manner in which it
accomplishes the performance of its obligations under this Agreement. Nothing in this Agreement will make the Asset Representations
Reviewer nor the Issuer members of any partnership, joint venture or other separate entity or impose any liability as such on any
of them.

 

For the avoidance of doubt, neither the Indenture Trustee or the Owner Trustee shall be responsible for monitoring the
performance by the Asset Representations Reviewer of its obligations under this Agreement.

 

Section 6.2. No Petition. Each of the parties, by entering into this Agreement, agrees that, before the date that is one year
and one day (or, if longer, any applicable preference period) after payment in full of (a) all securities issued by the Depositor
or by a trust for which the Depositor was a depositor (including, without limitation, the Issuer) or (b) the Notes, it will not
start or pursue against, or join any other Person in starting or pursuing against (i) the Depositor or (ii) the Issuer, respectively,
any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other proceedings under any bankruptcy or
similar law. This Section 6.2 will survive the termination of this Agreement.

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Section 6.3. Limitation of Liability
of Owner Trustee. This Agreement has been signed on behalf of the Issuer by Wells Fargo Delaware Trust Company, National Association
not in its individual capacity but solely in its capacity as Owner Trustee of the Issuer. In no event will Wells Fargo Delaware
Trust Company, National Association in its individual capacity or a beneficial owner of the Issuer be liable for the Issuer’s
obligations under this Agreement. For all purposes under this Agreement, the Owner Trustee will be subject to, and entitled to
the benefits of, the Trust Agreement.

 

Section 6.4. Termination of Agreement. This Agreement will terminate, except for the obligations under Section 4.5 or as
otherwise stated in this Agreement, on the earlier of (a) the payment in full of all outstanding Notes and the satisfaction and
discharge of the Indenture and (b) the date the Issuer is terminated under the Trust Agreement.

 

ARTICLE
VII

MISCELLANEOUS PROVISIONS

 

Section 7.1. Amendments.

 

(a) Any term or provision of this Agreement may be amended by the Sponsor, the Servicer and the Asset Representations Reviewer
without the consent of the Indenture Trustee, any Noteholder, the Issuer, the Owner Trustee or any other Person subject to the
satisfaction of one of the following conditions:

 

(i) the Sponsor or the Servicer delivers to the Indenture Trustee (a) an Opinion of Counsel to the effect that such amendment
will not materially and adversely affect the interests of the Noteholders and (b) an Officer’s Certificate to the effect
that such amendment will not materially and adversely affect the interests of the Noteholders; or

 

(ii) the Rating Agency Condition is satisfied with respect to such amendment and the Sponsor or the Servicer notifies the Indenture
Trustee in writing that the Rating Agency Condition is satisfied with respect to such amendment.

 

(b) This Agreement may also be amended from time to time by the Sponsor, the Servicer and the Asset Representations Reviewer,
with the consent of the Noteholders evidencing not less than a majority of the Outstanding Note Balance of the Controlling Class,
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 Noteholders. It will not be necessary for the consent of Noteholders to approve the
particular form of any proposed amendment or consent, but it will be sufficient if such consent approves the substance thereof.
The manner of obtaining such consents (and any other consents of Noteholders provided for in this Agreement) and of evidencing
the authorization of the execution thereof by Noteholders will be subject to such reasonable requirements as the Indenture Trustee
may prescribe, including the establishment of record dates pursuant to the Depository Agreement.

 

(c) Prior to the execution of any amendment pursuant to this Section 7.1, the Servicer shall provide written notification
of the substance of such amendment to each Rating Agency; and promptly after the execution of any such amendment or consent, the
Servicer shall furnish a

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copy of such amendment or consent to each Rating Agency and
the Indenture Trustee. Notwithstanding anything to the contrary in this Section 7.1, any amendment that adversely affects
the Indenture Trustee’s or the Owner Trustee’s own rights or obligations under this Agreement shall require the consent
of the Indenture Trustee or the Owner Trustee, as the case may be.

 

Section 7.2. Assignment; Benefit of Agreement; Third Party Beneficiaries.

 

(a) Assignment. Except as stated in Section 5.4, this Agreement may not be assigned by the Asset Representations
Reviewer without the consent of the Servicer.

 

(b) Benefit of Agreement; Third-Party Beneficiaries. This Agreement is for the benefit of and will be binding on the
parties and their permitted successors and assigns. The Indenture Trustee, for the benefit of itself and the Noteholders, and the
Owner Trustee will be third-party beneficiaries of this Agreement and entitled to enforce this Agreement against the Asset Representations
Reviewer. No other Person will have any right or obligation under this Agreement.

 

Section 7.3. Notices.

 

(a) Delivery of Notices. All notices, requests, demands, consents, waivers or other communications to or from the parties
must be in writing and will be considered given:

 

(i) For overnight mail, on delivery or, for a letter mailed by registered first class mail, postage prepaid, three days after
deposit in the mail;

 

(ii) for a fax, when receipt is confirmed by telephone, reply email or reply fax from the recipient;

 

(iii) for an email, when receipt is confirmed by telephone or reply email from the recipient; and

 

(iv) for an electronic posting to a password-protected website to which the recipient has access, on delivery (without the requirement
of confirmation of receipt) of an email to that recipient stating that the electronic posting has occurred.

 

(b) Notice Addresses. Any notice, request, demand, consent, waiver or other communication will be delivered or addressed
to: (i) (a) in the case of the Sponsor and the Servicer, to USAA Federal Savings Bank, 10750 McDermott Freeway, San Antonio, TX
78288, (b) in the case of the Issuer or the Owner Trustee, to USAA Auto Owner Trust 2016-1, c/o Wells Fargo Delaware Trust Company,
National Association, 919 North Market Street, Suite 1600, Wilmington, Delaware 19801, Attention: Corporate Trust Services, (c)
in the case of the Indenture Trustee, to U.S. Bank National Association, 190 S. LaSalle Street, Chicago, IL 60603, Attention: Global
Structured Finance – USAA 2016-1, and (d) in the case of the Asset Representations Reviewer, to Clayton Fixed Income Services
LLC, 1700 Lincoln Street, Denver, CO 80203, Attention: SVP, Surveillance; with a copy to Clayton Fixed Income Services LLC, 100
Beard Sawmill Road, Ste. 200, Shelton, CT 06484, Attention: General Counsel or (ii) as to

    	16

    	

    

each party, at such other address or email
as shall be designated by such party in a written notice to each other party.

 

Section 7.4. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 

Each
of the parties hereto hereby submits to the exclusive jurisdiction of the United States District Court for the Southern District
of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating
to this Agreement or the transactions contemplated hereby. Each of the parties hereto hereby further irrevocably waives any claim
that any such courts lack jurisdiction over such party, and agrees not to plead or claim, in any legal action or proceeding with
respect to this Agreement in any of the aforesaid courts, that any such court lacks jurisdiction over such party. Each of the parties
hereto irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.

 

Each
party hereto hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect
of any litigation directly or indirectly arising out of, under or in connection with this agreement.

 

Section 7.5. No Waiver; Remedies. No party’s failure or delay in exercising a power, right or remedy under this Agreement
will operate as a waiver. No single or partial exercise of a power, right or remedy will preclude any other or further exercise
of the power, right or remedy or the exercise of any other power, right or remedy. The powers, rights and remedies under this Agreement
are in addition to any powers, rights and remedies under law.

 

Section 7.6. Severability. If a part of this Agreement is held invalid, illegal or unenforceable, then it will be deemed severable
from the remaining Agreement and will not affect the validity, legality or enforceability of the remaining Agreement.

 

Section 7.7. Headings. The headings in this Agreement are included for convenience and will not affect the meaning or interpretation
of this Agreement.

 

Section 7.8. Counterparts. This Agreement may be executed in multiple counterparts. Each counterpart will be an original and all
counterparts will together be one document.

    	17

    	

    

[Remainder of Page Left Blank]

    	18

    	

    

EXECUTED BY:

 

	 	USAA AUTO OWNER TRUST 2016-1,
 as Issuer
	 	 	 
	 	By: Wells Fargo Delaware Trust Company, National Association, not in its individual capacity, but solely as Owner Trustee
	 	 	 
	 	By:	 /s/ Rosemary Kennard
	 	 	Name: Rosemary Kennard
	 	 	Title:    Vice President
	 	 	 
	 	USAA FEDERAL SAVINGS BANK,
 as Sponsor and Servicer
	 	 	 
	 	By:	 /s/ Martha Leiper
	 	 	Name: Martha Leiper
	 	 	Title:    Senior Vice President, Treasurer
	 	 	 
	 	Clayton Fixed Income Services LLC,
 as Asset Representations Reviewer
	 	 	 
	 	By:	 /s/ Robert Harris
	 	 	Name: Robert Harris
	 	 	Title:    Secretary

 

[Signature Page to USAA 2016-1 Asset Representations Review Agreement]

    	 

    	

    

Schedule A

 

Representations and Warranties, Review Materials
and Tests

 

Representation

 

Characteristics of Receivables (a):
As of the Cut-Off Date (or such other date as may be specifically set forth below), each Receivable:

 

		(i)	as of the Closing Date, is secured by a first priority perfected security interest in the Financed Vehicle in favor of the
Originator, as secured party, or all necessary actions have been commenced that would result in a first priority perfected security
interest in the Financed Vehicle in favor of the Originator, as secured party, which security interest, in either case, is assignable
and has been so assigned (x) by the Bank to the Purchaser and (y) by the Purchaser to the Issuer;

 

		(ii)	contains provisions that permit the repossession and sale of the Financed Vehicle upon a default under the Receivable by the
Obligor;

 

		(iii)	provided, at origination, for level periodic payments which fully amortize the initial Outstanding Principal Balance over the
original term; provided, that the amount of the first and last payments may be different but in no event more than three
times the level monthly payment; and

 

		(iv)	was originated in the United States.

 

Documents

 

Retail Contract

 

Title Documents

 

Procedures to be Performed

 

		i.	First Priority Interest

 

		A.	Confirm that the Receivable contains security interest language in favor of USAA FSB in the Financed
Vehicle.

 

		B.	Confirm that the Title Documents report USAA FSB, or an acceptable variation of the name, as the
first lien holder, or that an appropriate application has been filed in the applicable state if the certificate of title is still
pending.

 

		C.	Confirm that the Obligor’s name, or an acceptable variation thereof, on the Contract matches
the name on the Title Documents.

    	 

    	

    

		D.	Confirm that the Vehicle Identification Number (VIN) on the Contract matches the VIN number on
the Title Documents.

 

		E.	Confirm that the Receivable has been assigned:

 

(x) by the
Bank to the Purchaser, and

 

(y) by the
Purchaser to the Issuer.

 

		ii.	Repossession

 

		A.	Observe the Contract and confirm it contains provisions that permit the repossession and sale of
the Financed Vehicle upon a default under the Receivable by the Obligor.

 

		iii.	Payment Schedule Structure

 

		A.	Confirm all payments are equivalent with the possible exception of the first and last month’s
payments which may differ by no more than three times the amount of the level monthly payment.

 

		B.	Confirm that the Number of Payments and the Amount of Payments, together with any first and last
month’s payment (if applicable), equals the Total of the Payments as stated within the Truth and Lending section of the Contract.

 

		iv.	United States Origination

 

		A.	Confirm the Contract reports an originator and Obligor located in the United States.

 

		v.	If steps (i) through (iv) are confirmed, then Test Pass.

    	 

    	

    

Representation

 

Individual Characteristics (b):
Each Receivable has the following individual characteristics as of the Cut-Off Date:

 

		(i)	the Receivable is secured by a new or used automobile or light-duty truck;

 

		(ii)	the Receivable has a Contract Rate of no less than 2.00%;

 

		(iii)	the Receivable had an original term to maturity of not more than 84 months, and the Receivable has a remaining term to maturity,
as of the Cut-Off Date, of not less than 1 month;

 

		(iv)	the Receivable has an Outstanding Principal Balance as of the Cut-Off Date of greater than or equal to $809.24;

 

		(v)	the Obligor on the Receivable has a FICO® score of no less than 600;

 

		(vi)	the Financed Vehicle related to the Receivable is a model year 2008 or newer;

 

		(vii)	the Receivable has a scheduled maturity date on or before March 27, 2023;

 

		(viii)	no Receivable was more than 30 days past due as of the Cut-Off Date;

 

		(ix)	the Receivable was not noted in the records of the Servicer as being the subject of any pending bankruptcy or insolvency Proceeding;

 

		(x)	the Receivable is a Simple Interest Receivable.

 

Documents

 

Retail Contract

 

System Screenprint

 

Procedures to be Performed

 

		i.	Financed Vehicle

 

		A.	Review the Contract and confirm that the Financed Vehicle is a new or used automobile or light-duty
truck.

 

		ii.	Contract Rate

 

		A.	Review the System Screenprint and confirm the Contract Rate is not less than the minimum allowable
Contract Rate.

    	 

    	

    

		iii.	Original Term

 

		A.	Review the Contract and confirm the Number of Payments (including first and last payments) does
not exceed the maximum allowable Contract Term of no more than 84 months.

 

		B.	Review the System Screenprint and confirm that the remaining term of the Contract is within the
allowable limits of no less than 1 month.

 

		iv.	Remaining Balance

 

		A.	Review the System Screenprint and confirm that the unpaid balance as of the Cut-Off Date is not
less than the minimum allowable Principal Balance.

 

		v.	FICO Score

 

		A.	Review the System Screenprint and confirm that the Obligor has a FICO® score of at least 600.

 

		vi.	Model Year

 

		A.	Review the System Screenprint and confirm that the Financed Vehicle related to the Receivable is
a model year 2008 or newer.

 

		vii.	Maturity Date

 

		A.	Review the System Screenprint and confirm that the Receivable has a Maturity Date on or before
March 27, 2023.

 

		viii.	Delinquency Status

 

		A.	Review the System Screenprint and confirm that the Receivable is not more than 30 days past due
as of the Cut-Off Date.

 

		ix.	Bankruptcy and Insolvency

 

		A.	Verify through the System Screenprint that there is no evidence the Receivable is the subject of
a Bankruptcy or insolvency proceeding.

 

		x.	Interest Method

 

		A.	Review the Contract and confirm that the Receivable is amortized using the Simple Interest Method.

 

		xi.	If steps (i) through (x) are confirmed, then Test Pass.

    	 

    	

    

Representation

 

Compliance with Law (c):
The Receivable complied at the time it was originated or made in all material respects with all requirements of law in effect
at that time and applicable to such Receivable.

 

Documents

 

Retail Contract

 

List of Approved Contract Forms

 

System Screenprint

 

Procedures to be Performed

 

		i.	Observe the Contract and confirm the form number and revision date are on the List of Approved Contract Forms.

 

		ii.	Confirm the following disclosures are included in the Contract:

		a.	Prepayment disclosure
		b.	Late payment policy including the late charge amount (or calculation)
		c.	Security Interest Disclosure
		d.	Contract Reference
		e.	Insurance Requirements

 

		iii.	Review the System Screenprint and confirm that there is no evidence of any judgment against USAA FSB indicating that the Contract
was originated in violation of applicable law.

 

		iv.	Review the System Screenprint and confirm that there is no evidence of any Obligor(s) alleging non-compliance.

 

		v.	If steps (i) through (iv) are confirmed, then Test Pass.

    	 

    	

    

Representation

 

Binding Obligation (d): The
Receivable constitutes the legal and binding payment obligation in writing of the Obligor, enforceable in all material respects
by the holder thereof in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, liquidation or
other similar laws and equitable principles, consumer protection laws and the Servicemembers Civil Relief Act.

 

Documents

 

Retail Contract

 

List of Approved Forms

 

Procedures to be Performed

 

		i.	Confirm that the Contract form number and revision date are on the List of Approved Contract Forms.

 

		ii.	Confirm that the Obligor(s) signed the Contract.

 

		iii.	If steps (i) and (ii) are confirmed, then Test Pass.

    	 

    	

    

Representation

 

Receivable in Force (e): As of the Cut-Off Date, neither the Banks’ records nor the Receivable Files indicate
that the Receivable was satisfied, subordinated or rescinded nor has the related Financed Vehicle been released from the lien granted
by the Receivable in whole or in part.

 

Documents

 

Title Documents

 

System Screenprint

 

Procedures to be Performed

 

		i.	Confirm there is no indication within the Title Documents or the System Screenprint that the Receivable
was satisfied prior to the Cut-Off Date.

 

		ii.	Confirm there is no indication within the Title Documents or the System Screenprint that the Receivable
was subordinated or rescinded prior to the Cut-Off date.

 

		iii.	Confirm there is no indication within the Title Documents or the System Screenprint that the Financed
Vehicle has been released from the Lien in whole or in part prior to the Cut-Off Date.

 

		iv.	Confirm that the Receivable is noted as “active” within the System Screenprint.

 

		v.	If steps (i) through (iii) are confirmed, then Test Pass.

    	 

    	

    

Representation

 

No Waiver (f): As of the Cut-Off
Date, no provision of a Receivable has been expressly waived in writing in any material respect, except by instruments or documents
identified in the related Receivable File.

 

Documents

 

Retail Contract

 

System Screenprint

 

Procedures to be Performed

 

		i.	Compare the System Screenprint to the Contract and confirm that there is no indication of modifications
or amendments to the Contract terms.

 

		ii.	If modifications or amendments are observed, review the System Screenprint and confirm modifications
and amendments were noted.

 

		iii.	If steps (i) or (ii) are confirmed, then Test Pass.

    	 

    	

    

Representation

 

No Default (g): Except for
payment delinquencies continuing for a period of not more than 30 days as of the Cut-Off Date, the records of the Servicer did
not disclose any payment defaults under the terms of the Receivable existed as of the Cut-Off Date.

 

Documents

 

System Screenprint

 

Procedures to be Performed

 

		i.	Observe the System Screenprint and confirm the Receivable was not more than 30 days delinquent
as of the Cut-Off Date.

 

		ii.	If step (i) is confirmed, then Test Pass.

    	 

    	

    

Representation

 

Insurance (h): Under the terms
of each Receivable, the Obligor is required to maintain physical damage insurance covering the related Financed Vehicle.

 

Documents

 

Retail Contract

 

Procedures to be Performed

 

		i.	Confirm the Contract contains language that requires the Obligor(s) to obtain and maintain physical
damage insurance covering the Financed Vehicle.

 

		ii.	If step (i) is confirmed, then Test Pass.

    	 

    	

    

Representation

 

No Government Obligor (i):
The Obligor on each Receivable is not the United States of America or any state thereof or any local government, or any agency,
department, political subdivision or instrumentality of the United States of America or any state thereof or any local government.

 

Documents

 

Retail Contract

 

Procedures to be Performed

 

		i.	Confirm the Buyer section of the Contract includes the name of a natural person.

 

		ii.	If the Buyer section of the Contract does not report a natural person’s name, confirm internet
search results show no indication the Buyer is the United States of America or any State, or any agency, department or instrumentality
of the United States of America or any State.

 

		iii.	If step (i) or (ii) is confirmed, then Test Pass.

    	 

    	

    

Representation

 

Assignment (j): The terms
of the Receivable do not limit the right of the owner of the Receivable to sell and assign the Receivable.

 

Documents

 

Retail Contract

 

List of Approved Forms

 

Procedures to be Performed

 

		i.	Confirm that the Contract form number and revision date are included on the List of Approved Forms.

 

		ii.	Confirm that the Contract does not contain language that limits the sale or transfer of the Receivable.

 

		iii.	If (i) and (ii) are confirmed, then Test Pass.

    	 

    	

    

Representation

 

Good Title (k): As of the
Closing Date and immediately prior to the sale and transfer contemplated in the Receivables Purchase Agreement, the Bank had good
and marketable title to and was the sole owner of each Receivable free and clear of all Liens (other than Permitted Liens or any
which will be released prior to assignment of such Receivable hereunder), and, immediately upon the sale and transfer thereof,
the Issuer will have good and marketable title to each Receivable, free and clear of all Liens (other than Permitted Liens).

 

Documents

 

Retail Contract

 

Title Documents

 

Procedures to be Performed

 

		i.	Review the Contract and confirm that the Receivable has not been assigned to any party other than
USAA FSB (or an acceptable variation of the name).

 

		ii.	Observe the Title Documents and confirm they report USAA FSB, or an acceptable variation of its
name, as the first lien holder.

 

		iii.	If steps (i) and (ii) are confirmed, then Test Pass.

    	 

    	

    

Representation

 

One Original (l): There is
only one executed original, electronically authenticated original or authoritative copy of the Contract (in each case within the
meaning of the UCC) related to each Receivable.

Documents

 

Retail Contract

 

Procedures to be Performed

 

		i.	Confirm there is a signature of the appropriate Obligor(s) on the Contract.

 

		ii.	Confirm that the Contract either constitutes an electronically authenticated original, or is marked
“Authoritative Copy.”

 

		iii.	If steps (i) and (ii) are confirmed, then Test Pass.

    	 

    	

    

Representation

 

No Defenses (m): The Bank’s
electronic records related to the Receivable do not reflect any right of rescission, set-off, counterclaim or defense has been
asserted or threatened in writing by an Obligor with respect to any Receivable.

 

Documents

 

System Screenprint

 

Procedures to be Performed

 

		i.	Review the System Screenprint and confirm there is no evidence of litigation or other attorney
involvement as of the Cut-Off Date.

 

If step (i) is confirmed, then Test Pass.Exhibit 10.1

 

SUBORDINATED PROMISSORY NOTE

 

	$4,377,432.00	September 19, 2016

 

FOR VALUE RECEIVED, XCel Brands, Inc. and
its successors (the “Company”) hereby promise to pay to the order of IM Ready-Made, LLC, a New York limited
liability company, or its permitted assigns (“Holder”), the principal sum of Four Million, Three Hundred Seventy-Seven
Thousand Four Hundred Thirty-Two and 00/100 Dollars ($4,377,432.00), in accordance with the provisions of this note (“Note”).

 

This Note amends, restates and supersedes
that certain promissory note issued on December 24, 2013 (the “Original Note”), which Original Note amended and restated
that certain promissory note issued on September 29, 2011 pursuant to that certain Asset Purchase Agreement, dated as of May 19,
2011, as amended, by and among the Company and IM Brands, LLC (collectively the “Buyers”) and Holder (the “Purchase
Agreement”), pursuant to which Buyers acquired certain assets and licensing operations of Holder (the “Business”)
and constitutes the “Promissory Note” as defined in the Purchase Agreement.  This Note replaces the Original
Note and evidences the absolute and unconditional obligation of the Company, subject only to the rights of off set as specified
in Section 7 hereof.

 

1.           
Scheduled Payments

 

(a)                  
Payments. Subject to Section 7 of this Note, principal and interest on this Note shall be payable on the following dates
(each a “Payment Date”) as follows:

 

	Date	 	Interest	 	 	Principal	 	 	Total Payment of Principal and Interest	 
	9/30/2016	 	$	-	 	 	$	750,000	 	 	$	750,000	 
	3/31/2017	 	 	40,555	 	 	 	709,445	 	 	 	750,000	 
	9/30/2017	 	 	32,624	 	 	 	717,376	 	 	 	750,000	 
	3/31/2018	 	 	24,603	 	 	 	725,397	 	 	 	750,000	 
	9/30/2018	 	 	16,493	 	 	 	733,507	 	 	 	750,000	 
	3/31/2019	 	 	8,292	 	 	 	741,708	 	 	 	750,000	 

 

Each of the foregoing payments shall be subject to any optional
prepayment under Section 1(c) and any Pending Indemnification Claims pursuant to Section 7.  For the avoidance of doubt,
the unpaid principal amount shall refer to the balance of the Note after any reduction of the principal of this Note whether by
optional prepayment or offset made in accordance with Section 7 of this Note.

 

    -1- 

     

    

 

 

(b)                 
Interest.  The Note shall accrue interest at a rate equal to 2.236% per annum and shall be payable as a portion
of the payments due on each Payment Date, including March 31, 2019 (the “Maturity Date”), as set forth in Section 1(a).  Upon
the occurrence of an Event of Default, the Note shall accrue interest at the rate of fifteen percent (15%) per annum above the
current rate of interest.  Interest shall be calculated on the basis of twelve (12) months of thirty (30) days per month
and a year of 360 days.

 

(c)                  
 Optional Prepayments.  The Company may at any time prepay, without premium or penalty, all or any portion
of the Company’s obligations under this Note as provided for under Paragraph 2 herein.

 

2.           
Payment of Note. All payments and prepayments of principal and interest on this Note shall be made to the Holder in lawful
money of the United States of America by wire transfer of immediately available funds (“Immediately Available Funds”)
to a United States bank account designated in writing by the Holder (or at such other place as the holder hereof shall notify the
Company in writing).

 

3.           
Event of Default; Consequences.  Upon the occurrence of any one or more of the following events (each, an “Event
of Default”), the Holder may, by notice of default and acceleration given to the Company, accelerate the Maturity Date
and declare the entire outstanding principal amount of the Note, together with all accrued and unpaid interest thereon, immediately
due and payable.

 

(a)                  
Subject to the Company’s right of offset pursuant to Section 7 below, if the Company fails to pay when due any amount (whether
interest, principal or other amount) then payable under the Note;

 

(b)                 
If, pursuant to or within the meaning of the United States Bankruptcy Code or any other federal or state law relating to insolvency
or relief of debtors (each, a “Bankruptcy Law”), the Company shall: (i) commence a voluntary case or proceeding;
(ii) consent to the entry of an order for relief against it in an involuntary case; (iii) consent to the appointment of a trustee,
receiver, assignee, liquidator or similar official; (iv) make an assignment for the benefit of its creditors; (v) be unable to
pay its debts as they become due; or (vi) be insolvent by any other measure.

 

(c)                  
If a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (i) is for relief against the Company
in an involuntary case; (ii) appoints a trustee, receiver, assignee, liquidator or similar official of the Company or substantially
all of the Company’s properties; or (iii) orders the liquidation of the Company, and in each case the order or decree is
not dismissed within sixty (60) days;

 

    -2- 

     

    

  

(d)                 
The liquidation, dissolution or winding up of the Company; and

 

(e)                  
Any of the following: (i) a merger or consolidation to which the Company is a party (other than one in which the stockholders of
the Company prior to the event own a majority of the voting power of the surviving or resulting corporation), (ii) a sale, lease,
transfer, exclusive license or other disposition of all or substantially all of the assets of the Company, or (iii) a sale or transfer
by the Company’s stockholders of voting control, in a single transaction or a series of transactions.

 

4.           
Waiver.  The rights and remedies of the Holder under the Note shall be cumulative and not alternative.  No
waiver by the Holder of any right or remedy under the Note shall be effective unless signed by the Holder.   No
failure or delay of the Holder in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other right or power.  Except as provided herein,
the Company hereby waives presentment for payment, demand, protest, and notice of demand, protest and nonpayment, and any other
notice that might be required by law, and consents to any and all renewals or extensions that might be made by the Holder as to
the time of payment of the Note from time to time.

 

5.           
Replacement and Cancellation.

 

(a)                  
Replacement of Lost Note.  Upon receipt of evidence reasonably satisfactory to the Company (an affidavit of the
Holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of the Note and, in the case of any
such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company (provided that, if the holder
is a financial institution or other institutional investor, its own agreement shall be satisfactory), or, in the case of any such
mutilation, upon the surrender of such Note to the Company at its principal office, the Company shall (at the Holder’s expense)
execute and deliver, in lieu thereof, a new Note of the same class and representing the same rights represented by such lost, stolen,
destroyed or mutilated Note and dated so that there will be no loss of interest on such Note.  Any Note in lieu of which
any such new Note has been so executed and delivered by the Company shall not be deemed to be an outstanding Note.

 

(b)                 
Cancellation.  After all principal, accrued interest and all other amounts at any time owed on the Note have been
paid in full, the Note shall be surrendered to the Company for cancellation.

 

    -3- 

     

    

  

6.           
Business Days. If any payment is due, or any time period for giving notice or taking action expires, on a day which is not
a business day in the State of New York the payment shall be due and payable on, and the time period shall automatically be extended
to, the next business day immediately following, and interest shall continue to accrue at the required rate hereunder until any
such payment is made.

 

7.       Indemnification
Claims.  In the event that on or prior to the Maturity Date a Buyer Indemnified Party is entitled to indemnification
from the Seller under Article XI of the Purchase Agreement (a “Resolved Claim”), the Company shall have the right to
off-set the amount of the Resolved Claim against the principal balance of the Note, subject to the terms and conditions of Article
XI of the Purchase Agreement.  If on the Maturity Date, a Buyer Indemnified Party has asserted a claim for indemnification
in accordance with Article XI of the Purchase Agreement, but the Seller has not agreed to the validity or amount of the claim (a
“Pending Indemnification Claim”), then on the Maturity Date the Company shall: (i) pay all accrued and unpaid interest
to the Holder in accordance with Section 2(a) of the Note; (ii) make a principal payment to the Holder pursuant to Section 2 of
the Note equal to (x) the outstanding principal amount, less (y) the amount asserted as the Pending Indemnification Claim; and
(iii) pay a cash amount equal to the amount asserted as the Pending Indemnification Claim to an escrow agent reasonably acceptable
to the Company and the Holder.  Upon resolution of the Pending Indemnification Claim in accordance with the Purchase
Agreement, the Company and the Holder shall direct the escrow agent to disburse to the Company such amount (if any) to which the
Company is entitled to as a result of the Pending Indemnification Claim and to disburse the balance (if any) to the Holder.

 

8.       .Purchase
Agreement. The Note amends, restates and supersedes the Original Note which was executed and delivered pursuant to and in accordance
with the terms and conditions of the Purchase Agreement (as defined herein).  Capitalized terms used in the Note without
separate definition shall have the respective meanings given to them in the Purchase Agreement.

 

9.       Subordination.
The Holder acknowledges and agrees that the payment obligations under the Note shall unconditionally be subordinate to the obligations
of the Company or Buyers to its lenders under any loan, convertible debt, or other debt facility (the “Lenders”).  This
Note is subject to the terms of that certain Subordination Agreement dated July 31, 2013, between the parties hereto and Bank Hapoalim
B.M.  The Company agrees that it shall not enter into any agreement after the date this Note is issued that will prevent
the Company from paying all amounts owing under the Note in cash on the Maturity Date.

 

10.       Governing
Law. The Note shall be governed by and construed in accordance with the internal laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State of New York.

 

    -4- 

     

    

  

11.       Successors
and Assigns.  The Note may not be assigned or transferred by the Company or the Holder except by operation of law
or any assignment by the Holder to its members.  The Note may not be pledged, hypothecated or otherwise encumbered by
the Holder.  Any transfer or assignment in violation of this Section 11 shall be void, and the Company shall not recognize
such purported transferee as a holder of the Note.

 

12.       Amendments.   No
supplement, modification or amendment of any term, provision or condition of the Note shall be binding or enforceable unless executed
in writing by the Company and the Holder.

 

13.        Costs
and Expenses.  The Company agrees to pay on demand any and all costs and expenses (including reasonable counsel fees
and expenses) in connection with the enforcement of the Note.

 

[SIGNATURE PAGE FOLLOWS]

   

 

    -5- 

     

    

 

IN WITNESS WHEREOF, the undersigned has duly
executed and delivered this Promissory Note as of the date first written above.

 

	 	XCEL BRANDS, INC.
	 	 
	 	By:	/s/ Robert D’Loren
	 	Name: 	Robert W. D’Loren
	 	Title: 	Chief Executive Officer and President

 

	Accepted and agreed to by:
	 
	IM READY-MADE, LLC
	 
	By:	/s/ Isaac Mizrahi	 
	Name: 	Isaac Mizrahi
	Title: 	Partner   

 

 

 

[Signature Page to Promissory Note]

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