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PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED OCTOBER 16, 1997
$90,925,000
[LOGO]
CPS AUTO RECEIVABLES TRUST 1997-5
$55,750,000 6.26% ASSET-BACKED NOTES, CLASS A-1
$35,175,000 6.40% ASSET-BACKED NOTES, CLASS A-2
CPS RECEIVABLES CORP.
(SELLER)
CONSUMER PORTFOLIO SERVICES, INC.
(SERVICER)
------------------------------
CPS Auto Receivables Trust 1997-5 (the 'Trust') will be formed pursuant to
a Trust Agreement to be dated as of December 2, 1997 as amended and restated as
of December 11, 1997 between CPS Receivables Corp., as depositor (the 'Seller'),
and Bankers Trust (Delaware), as owner trustee (the 'Owner Trustee'). The 6.26%
Asset-Backed Notes, Class A-1 (the 'Class A-1 Notes'), the 6.40% Asset-Backed
Notes, Class A-2 (the 'Class A-2 Notes' and, together with the Class A-1 Notes,
the 'Class A Notes' or the 'Notes'), will be issued pursuant to an Indenture
(the 'Indenture') to be dated as of December 1, 1997 between the Trust and
Norwest Bank Minnesota, National Association, as indenture trustee (in such
capacity, the 'Indenture Trustee'). The Trust will also issue Asset-Backed
Certificates (the 'Certificates' and, together with the Notes, the 'Securities')
bearing interest at a rate not to exceed 10.75%. The rights of the holders of
the Certificates to receive payments of principal and/or interest will be
subordinated to the rights of Class A Noteholders to the extent described
herein. Only the Class A Notes are offered hereby.
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The Trust Assets will include a pool of retail installment sale contracts
(including contracts representing obligations of Sub-Prime Borrowers (as defined
herein)) and all rights thereunder, certain monies due or received thereunder,
security interests in the used and new automobiles, light trucks, vans and
minivans securing the Receivables (as defined herein), certain bank accounts and
the proceeds thereof, the Policy with respect to the Class A Notes and the right
of Consumer Portfolio Services, Inc. ('CPS') or CPS's subsidiaries, Samco
Acceptance Corp. ('Samco') and Linc Acceptance Company LLC ('Linc'), to receive
certain insurance proceeds and certain other property, as more fully described
herein. The Receivables will be purchased by the Seller from CPS, Samco and
Linc, on or prior to the date of the issuance of the Securities.
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The Underwriters (as defined herein) have agreed to purchase from the
Seller the Class A-1 Notes at a purchase price equal to 99.99462% of the
principal amount of Class A-1 Notes and the Class A-2 Notes at a purchase price
equal to 99.97365% of the principal amount of Class A-2 Notes and in each case
subject to the terms and conditions set forth in the Underwriting Agreement
referred to herein under 'Underwriting'. The aggregate proceeds to the Seller,
after deducting expenses payable by the Seller, estimated at $320,000, will be
$90,592,732.
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The Underwriters propose to offer the Class A Notes from time to time in
negotiated transactions or otherwise, at varying prices to be determined at the
time of sale. For further information with respect to the plan of distribution
and any discounts, commissions or profits that may be deemed underwriting
discounts or commissions, see 'Underwriting' herein.
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Full and timely payment of the Scheduled Payments (as defined herein) in
respect of the Class A Notes on each Payment Date is unconditionally and
irrevocably guaranteed pursuant to a financial guaranty insurance policy (the
'Policy') to be issued by
[Logo]
FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THE TRANSACTION, SEE 'RISK
FACTORS' AT PAGE S-19 HEREIN AND PAGE 13 IN THE ACCOMPANYING PROSPECTUS.
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THE SECURITIES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND DO NOT REPRESENT
INTERESTS IN OR OBLIGATIONS OF THE SELLER, THE SERVICER OR ANY AFFILIATE
THEREOF. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The Class A Notes are offered hereby by the Underwriters when, as and if
issued by the Trust, delivered to and accepted by them and subject to the right
of the Underwriters to reject any order in whole or in part. It is expected that
delivery of the Class A Notes will be made on or about December 11, 1997, only
through The Depository Trust Company, Cedel Bank, societe anonyme and the
Euroclear System.
------------------------------
PAINEWEBBER INCORPORATED BLACK DIAMOND SECURITIES, LLC
------------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS DECEMBER 8, 1997.
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AVAILABLE INFORMATION
CPS has filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement (together with all amendments and
exhibits thereto, referred to herein as the 'Registration Statement') under the
Securities Act of 1933, as amended (the 'Securities Act') with respect to the
Notes offered pursuant to this Prospectus Supplement. For further information,
reference is made to the Registration Statement which may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; and at the Commission's regional
office at 500 West Madison, 14th Floor, Chicago, Illinois 60661 and Seven World
Trade Center, 13th Floor, New York, New York 10048. Copies of the Registration
Statement may be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains a web site at http://www.sec.gov containing reports,
proxy statements, information statements and other information regarding
registrants, including CPS, that file electronically with the Commission. The
Servicer, on behalf of the Trust, will also file or cause to be filed with the
Commission such periodic reports as may be required under the Securities
Exchange Act of 1934, as amended (the 'Exchange Act'), and the rules and
regulations of the Commission thereunder. Upon the receipt of a request by an
investor who has received an electronic Prospectus Supplement and Prospectus
from the Underwriters (as defined herein) or a request by such investor's
representative within the period during which there is an obligation to deliver
a Prospectus Supplement and Prospectus, CPS, the Seller or the Underwriters will
promptly deliver, or cause to be delivered, without charge, a paper copy of the
Prospectus Supplement and Prospectus.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents subsequently filed by CPS with the Registration Statement,
either on its own behalf or on behalf of the Trust, relating to the Notes, with
the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act, after the date of this Prospectus Supplement and prior to the termination
of the offering of the Notes offered hereby, shall be deemed to be incorporated
by reference in this Prospectus Supplement and to be a part of this Prospectus
Supplement from the date of the filing of such documents. Any statement
contained herein or in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus Supplement to the extent that a statement contained herein or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein, modifies or replaces such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
In addition to the documents described above and in the accompanying
Prospectus under 'Incorporation of Certain Documents by Reference', the
consolidated financial statements of Financial Security Assurance Inc. and its
Subsidiaries included in, or as exhibits to, the following documents, which have
been filed with the Commission by Financial Security Assurance Holdings Ltd.
('Holdings'), are hereby incorporated by reference in this Prospectus
Supplement:
(a) Annual Report on Form 10-K for the year ended December 31, 1996,
(b) Quarterly Report on Form 10-Q for the period ended March 31, 1997,
(c) Quarterly Report on Form 10-Q for the period ended June 30, 1997,
and
(d) Quarterly Report on Form 10-Q for the period ended September 30,
1997.
All financial statements of Financial Security Assurance Inc. ('Financial
Security') and Subsidiaries included in documents filed by Holdings pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus Supplement and prior to the termination of the offering of the
Notes shall be deemed to be incorporated by reference into this Prospectus
Supplement and to be a part hereof from the respective dates of filing of such
documents.
The New York State Insurance Department recognizes only statutory
accounting practices for determining and reporting the financial conditions and
results of operations of an insurance company, for determining its solvency
under the New York Insurance Law, and for determining whether its financial
condition warrants the payment of a dividend to its stockholders. No
consideration is given by
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the New York State Insurance Department to financial statements prepared in
accordance with generally accepted accounting principles in making such
determinations.
The Seller on behalf of the Trust hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the Trust's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act and each
filing of the financial statements of Financial Security included in or as an
exhibit to the annual report of Holdings filed pursuant to Section 13(a) or
15(d) of the Exchange Act that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
Class A Notes offered hereby, and the offering of such Class A Notes at that
time shall be deemed to be the initial bona fide offering thereof.
CPS will provide without charge to each person to whom this Prospectus
Supplement is delivered, on the written or oral request of such person, a copy
of any or all of the documents referred to above that have been or may be
incorporated by reference in this Prospectus Supplement (not including exhibits
to the information that is incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
Supplement incorporates). Written requests for such copies should be directed
to: Consumer Portfolio Services, Inc., 2 Ada, Irvine, California 92618,
Attention: Jeffrey P. Fritz. Telephone requests for such copies should be
directed to Consumer Portfolio Services, Inc. at (714) 753-6800.
REPORTS TO NOTEHOLDERS
Unless and until Definitive Notes are issued, periodic reports containing
information concerning the Receivables will be prepared by the Servicer and sent
on behalf of the Trust only to Cede & Co., as nominee of The Depository Trust
Company ('DTC') and registered holder of the Notes. Such reports will not
constitute financial statements prepared in accordance with generally accepted
accounting principles. The Servicer will file with the Commission such periodic
reports as are required under the Exchange Act, and the rules and regulations
thereunder and as are otherwise agreed to by the Commission. Copies of such
periodic reports may be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
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SUMMARY
This Summary is qualified in its entirety by reference to the more detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus. Certain capitalized terms used herein are defined
elsewhere in this Prospectus Supplement on the pages indicated in the 'Index of
Terms' or, to the extent not defined herein, have the meaning assigned to such
terms in the Prospectus.
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Issuer.................................... CPS Auto Receivables Trust 1997-5 (the 'Trust' or the 'Issuer').
Seller.................................... CPS Receivables Corp. (the 'Seller'). See 'The Seller and CPS' in
this Prospectus Supplement.
Servicer.................................. Consumer Portfolio Services, Inc. ('CPS' or, in its capacity as the
servicer, the 'Servicer'). See 'CPS's Automobile Contract Portfolio'
and 'The Seller and CPS' in this Prospectus Supplement.
Indenture Trustee......................... Norwest Bank Minnesota, National Association, a national banking
association, located at Sixth Street and Marquette Avenue,
Minneapolis, Minnesota.
Owner Trustee............................. Bankers Trust (Delaware), located at 1011 Centre Road, Suite 200,
Wilmington, Delaware 19805-1266.
Insurer................................... Financial Security Assurance Inc., a financial guaranty insurance
company incorporated under the laws of the State of New York (the
'Insurer'). See 'The Insurer' in this Prospectus Supplement.
Closing Date.............................. On or about December 11, 1997 (the 'Closing Date').
The Trust................................. The Trust will be a business trust established under the laws of the
State of Delaware. The activities of the Trust are limited by the
terms of the Trust Agreement dated as of December 2, 1997 as amended
and restated as of December 11, 1997 between the Seller, as
depositor, and the Owner Trustee (the 'Trust Agreement'). The Trust
will issue 6.26% Asset-Backed Notes, Class A-1 (the 'Class A-1
Notes') in the aggregate original principal amount of $55,750,000,
and 6.40% Asset-Backed Notes, Class A-2 (the 'Class A-2 Notes' and,
together with the Class A-1 Notes, the 'Class A Notes' or the
'Notes') in the aggregate original principal amount of $35,175,000.
The Trust will also issue Asset-Backed Certificates in the aggregate
original principal amount of $4,781,307 (the 'Certificates' and,
together with the Notes, the 'Securities') bearing interest at a rate
not to exceed 10.75%. The Notes will be issued pursuant to an
Indenture, dated as of December 1, 1997 (the 'Indenture'). The Class
A Notes will be offered for purchase in minimum denominations of
$1,000 and integral multiples of $1,000 in excess thereof, in book
entry form only. See 'Description of the Securities -- Book-Entry
Registration' in the Prospectus. The Notes and Certificates will be
secured by the Trust Assets as, and to the extent, provided in the
Indenture and the Trust Agreement.
Trust Assets.............................. The property of the Trust (the 'Trust Assets') will include (i) a
pool of retail installment sale contracts (each a 'Receivable' and
collectively, the 'Receivables Pool') secured by the used
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and new automobiles, light trucks, vans and minivans financed thereby
(the 'Financed Vehicles'), (ii) with respect to Receivables that are
Rule of 78's Receivables (as defined herein), all payments due
thereon after November 24, 1997 (the 'Cutoff Date') and, with respect
to Receivables that are Simple Interest Receivables (as defined
herein), all payments received thereunder after the Cutoff Date,
(iii) security interests in the Financed Vehicles, (iv) certain bank
accounts and the proceeds thereof, (v) the right of CPS, Samco or
Linc to receive proceeds from claims under, or refunds of unearned
premiums from, certain insurance policies and extended service
contracts, (vi) all right, title and interest of the Seller in and to
the Purchase Agreements (as defined below), (vii) the Policy issued
by the Insurer with respect to the Class A Notes and (viii) certain
other property, as more fully described herein. See 'The Trust
Assets' in this Prospectus Supplement and 'The Receivables' in the
Prospectus. Certain of the Receivables (the 'CPS Receivables') will
be purchased by the Seller from CPS pursuant to a purchase agreement
(the 'CPS Purchase Agreement'), certain of the Receivables (the
'Samco Receivables') will be purchased by the Seller from CPS's
subsidiary, Samco Acceptance Corp. ('Samco') pursuant to a purchase
agreement (the 'Samco Purchase Agreement') and certain of the
Receivables (the 'Linc Receivables') will be purchased by the Seller
from CPS's subsidiary, Linc Acceptance Company LLC ('Linc') pursuant
to a purchase agreement (the 'Linc Purchase Agreement' and, together
with the CPS Purchase Agreement and the Samco Purchase Agreement, the
'Purchase Agreements'). The Receivables arise from loans originated
by automobile dealers or IFCs (as defined herein) for assignment to
CPS or a subsidiary of CPS pursuant to CPS's auto loan programs.
The Receivables........................... On or prior to the Closing Date, pursuant to the Sale and Servicing
Agreement, dated as of December 1, 1997 (the 'Sale and Servicing
Agreement'), the Trust will purchase from the Seller Receivables (the
'Receivables') that, as of the Cutoff Date, had an aggregate
outstanding principal balance of $95,706,307 (the 'Original Pool
Balance'). The Receivables consist of retail installment sale
contracts secured by used and new automobiles, light trucks, vans and
minivans including, with respect to Rule of 78's Receivables, the
rights to all payments due with respect to such Receivables after the
Cutoff Date, and, with respect to Simple Interest Receivables, the
rights to all payments received with respect to such Receivables
after the Cutoff Date. As of the Cutoff Date, approximately 88.21% of
the aggregate principal balance of the Receivables represented
financing of used vehicles.
The Receivables arise from loans originated by automobile dealers or
independent finance companies ('IFCs') for assignment to CPS or a
subsidiary of CPS pursuant to CPS's auto loan programs. The auto loan
programs target automobile purchasers with marginal credit ratings
who are
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generally unable to obtain credit from banks or other low-risk
lenders. See 'CPS's Automobile Contract Portfolio -- General', 'The
Receivables Pool' and 'Risk Factors -- Sub-Prime Obligors; Servicing'
in this Prospectus Supplement and 'Risk Factors -- Sub-Prime
Obligors' in the Prospectus.
The Receivables have been selected from motor vehicle retail
installment sale contracts in CPS's, Samco's and Linc's portfolio
based on the criteria specified in the Purchase Agreements and
described in this Prospectus Supplement. No Receivable has a
scheduled maturity date later than December 6, 2002.
Terms of the Notes........................ The principal terms of the Notes will be as described below:
A. Payment Dates........................ Payments of interest and principal on the Notes will be made on the
15th day of each month or, if such 15th day is not a Business Day, on
the next following Business Day (each a 'Payment Date'), commencing
December 15, 1997. Payments will be made to holders of record of the
Notes (the 'Noteholders') as of the close of business on the Record
Date (as defined herein) applicable to such Payment Date. A 'Business
Day' is a day other than a Saturday, a Sunday or a day on which
banking institutions in the City of New York, New York, the State in
which the principal corporate trust office of the Indenture Trustee
is located, the State in which the principal corporate trust office
of the Owner Trustee is located, the State in which the executive
offices of the Servicer are located, or the State in which the
principal place of business of the Insurer is located are authorized
or obligated by law, executive order or governmental decree to be
closed.
B. Final Scheduled Payment
Date............................... The Final Scheduled Payment Date for the Class A-1 Notes will be the
August 2001 Payment Date and for the Class A-2 Notes will be the June
2003 Payment Date.
C. Interest Rates....................... The Class A-1 Notes will bear interest at a rate equal to 6.26% per
annum (the 'Class A-1 Interest Rate'). The Class A-2 Notes will bear
interest at a rate equal to 6.40% per annum (the 'Class A-2 Interest
Rate'). Each such interest rate for a class of Notes is referred to
as an 'Interest Rate'. Interest on the Notes will be calculated on
the basis of a 360 day year consisting of twelve 30 day months.
D. Interest............................. On each Payment Date, the holders of record of the Class A-1 Notes
(the 'Class A-1 Noteholders') as of the related Record Date will be
entitled to receive, pro rata, thirty (30) days of interest at the
Class A-1 Interest Rate on the outstanding principal amount of the
Class A-1 Notes at the close of business on the last day of the
related Collection Period. On each Payment Date, the holders of
record of the Class A-2 Notes (the 'Class A-2 Noteholders') as of the
related Record Date will be entitled to receive, pro rata, thirty
(30) days of interest at the Class A-2 Interest Rate on the
outstanding principal amount of the Class A-2 Notes at the close of
business on the last day of the related Collection Period.
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Notwithstanding the foregoing, on the first Payment Date, the
interest payable to the Noteholders of record of each class of Notes
will be an amount equal to the product of (a) the Interest Rate
applicable to such class of Notes, (b) the initial principal amount
of such class of Notes and (c) a fraction (i) the numerator of which
is the number of days from and including the Closing Date to and
including December 14, 1997 and (ii) the denominator of which is 360.
Interest on the Notes which is due but not paid on any Payment Date
will be payable on the next Payment Date together with, to the extent
permitted by law, interest on such unpaid amount at the applicable
Interest Rate. See 'Description of the Securities -- Payment of
Interest' in this Prospectus Supplement.
E. Principal............................ Principal of the Class A Notes will be payable on each Payment Date
in an amount equal to the Class A Noteholders' Principal
Distributable Amount for the related Collection Period. The 'Class A
Noteholders' Principal Distributable Amount' is equal to the sum of
(x) the Class A Noteholders' Percentage (as of each Payment Date) of
the Principal Distributable Amount and (y) any unpaid portion of the
amount described in clause (x) with respect to a prior Payment Date.
In addition, until the Target Payment Date (as defined herein) the
holders of the Class A Notes will be entitled to receive the portion
of the Total Distribution Amount remaining after payment of amounts
having a higher priority of payment have been made, as a further
payment in respect of principal. See 'Priority of Payments' below.
The 'Class A Noteholders' Percentage' will (a) on any Payment Date on
or prior to the Target Payment Date, be 95%, (b) on any Payment Date
after the Target Payment Date but prior to the Payment Date on which
the principal amount of the Class A-2 Notes is reduced to zero, be
91%, (c) on the Payment Date on which the principal amount of the
Class A-2 Notes is reduced to zero by applying clause (b) above, be
the percentage equivalent of a fraction, the numerator of which is
the principal amount of the Class A-2 Notes immediately prior to such
Payment Date, and the denominator of which is the sum of the then
outstanding principal amount of the Notes and the Certificates and
(d) on any other Payment Date, be 0%.
The 'Class A Target Amount' means, with respect to any Payment Date,
an amount equal to 90% of the aggregate Principal Balance of the
Receivables as of such Payment Date after giving effect to all
payments of principal on the Receivables received during the related
Collection Period.
The 'Target Payment Date' means the first Payment Date on which the
then outstanding principal amount of the Class A Notes equals or is
less than the Class A Target Amount after giving effect to payments
made on such Payment Date.
On each Payment Date, unless an Event of Default shall have occurred
and be continuing, amounts paid on account of the
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Class A Noteholders' Principal Distributable Amount will be applied
sequentially, to pay principal of the Class A-1 Notes until the
principal balance of the Class A-1 Notes has been reduced to zero,
and then to the holders of the Class A-2 Notes until the principal
balance of the Class A-2 Notes has been reduced to zero. On each
Payment Date on which an Event of Default is continuing, amounts
distributed on account of the Class A Noteholders' Principal
Distributable Amount will be applied, pro rata (based on the
outstanding principal amount of each class of Class A Notes), to the
payment of principal of each class of Class A Notes.
The 'Principal Distributable Amount' for a Payment Date will equal
the sum of (a); collections on Receivables (other than Liquidated
Receivables) allocable to principal including full and partial
prepayments (b) the portion of the Purchase Amount allocable to
principal of each Receivable that was repurchased by CPS or purchased
by the Servicer as of the last day of the related Collection Period
and, at the option of the Insurer, the Principal Balance of each
Receivable that was required to be but was not so purchased or
repurchased (without duplication of the amounts referred to in (a)
above); (c) the Principal Balance of each Receivable that first
became a Liquidated Receivable during the preceding Collection Period
(without duplication of the amounts included in (a) through (c)
above); (d) the aggregate amount of Cram Down Losses with respect to
the Receivables that shall have occurred during the preceding
Collection Period (without duplication of amounts included in (a)
through (c) above) and (e) any proceeds from the liquidation of the
Trust Assets pursuant to an acceleration of the Notes upon an Event
of Default. In addition, the outstanding principal amount of the
Notes of any class, to the extent not previously paid, will be
payable on the respective Final Scheduled Payment Date for such
class.
A 'Collection Period' with respect to a Payment Date will be the
calendar month preceding the month in which such Payment Date occurs;
provided, however, that with respect to the first Payment Date, the
'Collection Period' will be the period from and excluding the Cutoff
Date to and including December 31, 1997.
F. Optional Redemption.................. The Notes and the Certificates, to the extent still outstanding, may
be redeemed in whole, but not in part, on any Payment Date on which
the Servicer exercises its option to purchase all the Receivables on
or after the last day of any Collection Period on or after which the
aggregate Principal Balance of the Receivables is equal to 10% or
less of the Original Pool Balance, at a redemption price equal to at
least the unpaid principal amount of the Notes and the Certificates,
plus accrued and unpaid interest thereon; provided that the
Servicer's right to exercise such option will be subject to the prior
approval of the Insurer, but only if, after giving effect to such
sale and redemption, a claim on the Policy would occur
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or any amount owing to the Insurer or the holders of the Notes would
remain unpaid. See 'Description of the Securities -- Optional
Redemption' in this Prospectus Supplement.
G. Mandatory Redemption................. The Notes may be accelerated and subject to immediate payment at par
with accrued interest thereon upon the occurrence of an Event of
Default under the Indenture. So long as no Insurer Default shall have
occurred and be continuing, an Event of Default under the Indenture
will occur only upon delivery by the Insurer to the Indenture Trustee
of notice of the occurrence of certain events of default under the
Insurance Agreement, dated as of December 1, 1997. In the case of
such an Event of Default, the Notes will automatically be accelerated
and subject to immediate payment at par with accrued interest
thereon. The Policy does not guarantee payments of any amounts that
become due on an accelerated basis, unless the Insurer elects, in its
sole discretion to pay such amounts in whole or in part. See
'Description of the Trust Documents -- Events of Default' in this
Prospectus Supplement.
Terms of the Certificates................. The principal terms of the Certificates will be as described below:
A. Payment Dates........................ Payments of interest and principal on the Certificates will be made
on each Payment Date commencing December 15, 1997. Payments will be
made to holders of record of the Certificates (the
'Certificateholders' and, together with the Noteholders, the
'Securityholders') as of the close of business on the Record Date.
B. Final Scheduled Payment
Date............................... The Final Scheduled Payment Date for the Certificates will be the
June 2003 Payment Date.
C. Subordination of the Certificates.... The Certificates will not receive any payment of principal or
interest on a Payment Date until the full amount of the Class A
Noteholders' Interest Distributable Amount due to the Class A
Noteholders with respect to such Payment Date has been deposited in
the Distribution Account. The Certificates will not receive any
payment of principal on a Payment Date until the full amount of the
Class A Noteholders' Interest Distributable Amount and the Class A
Noteholders' Principal Distributable Amount due to the Class A
Noteholders with respect to such Payment Date has been deposited in
the Distribution Account. Upon the occurrence and during the
continuance of an Event of Default, the Certificates will not receive
any payment of principal or interest on a Payment Date until the full
amount of the Noteholders' Distributable Amount due to the Class A
Noteholders with respect to such Payment Date has been deposited in
the Distribution Account.
D. Pass-Through Rate.................... The Certificates will bear interest at a rate not to exceed 10.75%
per annum (the 'Pass-Through Rate'). Interest on the
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Certificates will be calculated on the basis of a 360 day year
consisting of twelve 30 day months.
E. Interest............................. On each Payment Date, the Certificateholders will be entitled to
receive, pro rata, thirty (30) days of interest at the Pass-Through
Rate on the outstanding principal amount of the Certificates at the
close of business on the last day of the related Collection Period.
Notwithstanding the foregoing, on the first Payment Date, the
interest payable to the Certificateholders of record will be an
amount equal to the product of (a) the Pass-Through Rate, (b) the
initial principal amount of Certificates and (c) a fraction (i) the
numerator of which is the number of days from and including the
Closing Date to and including December 14, 1997 and (ii) the
denominator of which is 360. Interest on the Certificates which is
due but not paid on any Payment Date will be payable on the next
Payment Date together with, to the extent permitted by law, interest
on such unpaid amount at the Pass-Through Rate. See 'Description of
the Securities -- Payment of Interest' in this Prospectus Supplement.
F. Principal............................ Principal of the Certificates will be payable on each Payment Date in
an amount equal to the Certificateholders' Principal Distributable
Amount for the related Collection Period. The 'Certificateholders'
Principal Distributable Amount' is equal to the sum of (x) the
Certificateholders' Percentage (as of each Payment Date) of the
Principal Distributable Amount and (y) any unpaid portion of the
amount described in clause (x) with respect to a prior Payment Date.
On each Payment Date an amount equal to the lesser of (x) the portion
of the Total Distribution Amount remaining after application thereof
to pay all senior distributions as described in 'Priority of
Payments' below and (y) the Certificateholders' Principal
Distributable Amount will be applied to pay principal of the
Certificates until the principal balance of the Certificates has been
reduced to zero.
The 'Certificateholders' Percentage' will (a) on any Payment Date
prior to the Payment Date on which the principal amount of the Class
A-2 Notes is reduced to zero, be 5.0%, (b) on the Payment Date on
which the principal amount of the Class A-2 Notes is reduced to zero
and each Payment Date thereafter until the principal amount of the
Certificates is reduced to zero, be 100%.
G. Optional Redemption.................. The Certificates and the Notes, to the extent still outstanding, may
be redeemed in whole, but not in part, on any Payment Date on which
the Servicer exercises its option to purchase all the Receivables as
of the last day of any Collection Period on or after which the
aggregate Principal Balance of the Receivables is equal to 10% or
less of the Original Pool Balance, at a redemption price equal to at
least the unpaid principal amount of the Certificates and the Notes,
plus accrued and unpaid interest thereon. See 'Description of the
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Securities -- Optional Redemption' in this Prospectus Supplement.
H. Mandatory Redemption................. If upon the occurrence of an Event of Default, the Notes are
accelerated, the Certificates will be subject to prepayment, to the
extent of amounts remaining after payment in full of the Notes in
connection with any liquidation of the Trust Assets. See 'Description
of the Trust Documents -- Events of Default' and 'Description of the
Securities -- Mandatory Redemption' in this Prospectus Supplement.
Priority of Payments...................... On each Payment Date, the Indenture Trustee shall make the following
distributions in the following order of priority:
(i) to the Servicer, the Servicing Fee and all unpaid Servicing Fees
from prior Collection Periods; provided, however, that as long as
CPS is the Servicer and Norwest Bank Minnesota, National
Association is the Standby Servicer, the Indenture Trustee will
first pay to the Standby Servicer out of the Servicing Fee
otherwise payable to CPS an amount equal to the Standby Fee;
(ii) in the event the Standby Servicer becomes the successor
Servicer, to the Standby Servicer, reasonable transition
expenses (up to a maximum of $50,000) incurred in acting as
successor Servicer;
(iii) to the Indenture Trustee and the Owner Trustee, pro rata, the
Trustee Fees (as defined herein) and reasonable out-of-pocket
expenses and all unpaid Trustee Fees and unpaid reasonable
out-of-pocket expenses from prior Collection Periods;
(iv) to the Collateral Agent, all fees and expenses payable to the
Collateral Agent with respect to such Payment Date;
(v) to the Class A Noteholders, the Class A Noteholders' Interest
Distributable Amount, to be distributed as described under
'Description of the Trust Documents -- Distributions';
(vi) unless an Event of Default has occurred and is continuing, to
the Certificateholders, the Certificateholders' Interest
Distributable Amount to be distributed as described under
'Description of the Trust Documents -- Distributions';
(vii) to the Class A Noteholders, the Class A Noteholders' Principal
Distributable Amount, to be distributed as described under
'Description of the Trust Documents -- Distributions';
(viii) to the Insurer, any amounts due to the Insurer under the terms
of the Insurance Agreement (as defined herein);
(ix) in the event any Person other than the Standby Servicer becomes
the successor Servicer, to such successor Servicer, from the
Total Distribution Amount (as such Total Distribution Amount has
been reduced by payments pursuant to clauses (i) through (viii)
above) to
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the extent not previously paid by the predecessor Servicer,
reasonable transition expenses (up to a maximum of $50,000 for
all such expenses) incurred in acting as successor Servicer;
(x) unless an Event of Default has occurred and is continuing, to the
Certificateholders, the Certificateholders' Principal
Distributable Amount to be distributed as described under
'Description of the Trust Documents -- Distributions';
(xi) until the Target Payment Date, the remaining Total Distribution
Amount, if any, to the holders of the then paying class of Class
A Notes as a payment of principal;
(xii) if an Event of Default shall have occurred and be continuing,
to the Certificateholders, the Certificateholders' Interest
Distributable Amount, to be distributed as described under
'Description of the Trust Documents Distributions';
(xiii) if an Event of Default shall have occurred and be continuing,
to the Certificateholders, the Certificateholders' Principal
Distributable Amount, to be distributed as described under
'Description of the Trust Documents Distributions'; and
(xiv) after the Target Payment Date, to the Collateral Agent, for
deposit into the Spread Account, the remaining Total
Distribution Amount, if any.
The Certificates will not receive any payment of principal or
interest on any Payment Date prior to the Target Payment Date if an
Event of Default is continuing on such Payment Date, and the
Certificates will not receive any payments of interest or principal
on any Payment Date after the Target Payment Date if an Event of
Default is continuing on such Payment Date until the full amount of
the Noteholders' Distributable Amount due to the Class A Noteholders
with respect to such Payment Date has been deposited in the
Distribution Account. See 'Description of the Trust
Documents -- Distributions -- Priority of Distribution Amounts' in
this Prospectus Supplement.
Record Dates.............................. The record date applicable to each Payment Date (each, a 'Record
Date') will be the 10th day of the calendar month in which such
Payment Date occurs.
The Policy................................ On the Closing Date, the Insurer will issue the Policy to the
Indenture Trustee for the benefit of the Class A Noteholders (the
'Policy'). Pursuant to the Policy, the Insurer will unconditionally
and irrevocably guarantee to the Class A Noteholders payment of the
Class A Noteholders' Interest Distributable Amount and the Class A
Noteholders' Principal Distributable Amount (collectively, the
'Scheduled Payments') on each Payment Date. The Certificates do not
have the benefit of the Policy.
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Spread Account............................ As part of the consideration for the issuance of the Policy, the
Seller has agreed to cause the Spread Account to be established with
the Collateral Agent for the benefit of the Insurer and the Indenture
Trustee on behalf of the Class A Noteholders. After the Target
Payment Date any portion of the Total Distribution Amount remaining
on any Payment Date after payment of all fees and expenses due on
such date to the Servicer, the Standby Servicer, the Indenture
Trustee, the Owner Trustee, the Collateral Agent, the Insurer, any
successor Servicer and all principal and interest payments due to the
Noteholders and Certificateholders on such Payment Date, will be
deposited in the Spread Account and held by the Collateral Agent for
the benefit of the Indenture Trustee, on behalf of the Class A
Noteholders, and the Insurer. Amounts on deposit in the Spread
Account on any Payment Date which (after all payments required to be
made on such date have been made) are in excess of the requisite
amount determined from time to time in accordance with certain
portfolio performance tests agreed upon by the Insurer and the Seller
as a condition to the issuance of the Policy (such requisite amount,
the 'Requisite Amount') will be released to or at the direction of
the Seller. Because the Requisite Amount or the existence of the
Spread Account may be modified or terminated by the Insurer prior to
the occurrence and continuation of an Insurer Default with the
written consent of CPS, the Seller and the Collateral Agent (but
without the consent of the Noteholders), Class A Noteholders should
not rely on amounts in the Spread Account for payments of principal
of or interest on the Class A Notes; provided, however, that the
Insurer will agree that it will not modify the terms of or terminate
the existence of the Spread Account such that the Class A Notes,
without the benefit of the Policy, would be rated less than 'BBB' by
Standard & Poor's or 'Baa2' by Moody's. See 'Description of the Trust
Documents -- Distributions -- The Spread Account' in this Prospectus
Supplement.
Repurchases and Purchases of
Certain Receivables.................. CPS has made certain representations and warranties relating to the
Receivables (including the Samco Receivables and the Linc
Receivables) to the Seller in the CPS Purchase Agreement, and the
Seller has made such representations and warranties for the benefit
of the Trust and the Insurer in the Sale and Servicing Agreement. The
Indenture Trustee, as acknowledged assignee of the repurchase
obligations of CPS under the CPS Purchase Agreement, will be entitled
to require CPS to repurchase any Receivable (including any Samco
Receivable or Linc Receivable) if such Receivable is materially and
adversely affected by a breach of any representation or warranty made
by CPS with respect to the Receivable and such breach has not been
cured as of the last day of the second (or, if CPS elects, the first)
month following discovery thereof by the Seller or CPS or notice to
the Seller
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or CPS. See 'Description of the Trust Documents -- Sale and
Assignment of Receivables' in the Prospectus.
The Servicer will be obligated to repurchase any Receivable if, among
other things, it extends the date for final payment by the Obligor of
such Receivable beyond the last day of the penultimate Collection
Period preceding the Final Scheduled Payment Date or fails to
maintain a perfected security interest in the Financed Vehicle. See
'Description of the Trust Documents -- Servicing Procedures' in this
Prospectus Supplement and in the Prospectus.
Servicing................................. The Servicer will be responsible for servicing, managing and making
collections on the Receivables. On or prior to the next billing
period after the Cutoff Date, the Servicer will notify each Obligor
to make payments with respect to the Receivables after the Cutoff
Date directly to a post office box in the name of the Indenture
Trustee for the benefit of the Noteholders and the Insurer (the 'Post
Office Box'). On each Business Day, Bank of America National Trust
and Savings Association, as the lock-box processor (the 'Lock-Box
Processor'), will transfer any such payments received in the Post
Office Box to a segregated lock-box account at Bank of America
National Trust and Savings Association (the 'Lock-Box Bank') in the
name of the Indenture Trustee for the benefit of the Noteholders and
the Insurer (the 'Lock-Box Account'). Within two Business Days of
receipt of funds into the Lock-Box Account, the Servicer is required
to direct the Lock-Box Bank to effect a transfer of funds from the
Lock-Box Account to one or more accounts established with the
Indenture Trustee. See 'Description of the Trust Documents --
Accounts' in this Prospectus Supplement and 'Description of the Trust
Documents -- Payments on Receivables' in the Prospectus.
Standby Servicer.......................... Norwest Bank Minnesota, National Association, a national banking
association, located at Sixth Street and Marquette Avenue,
Minneapolis, Minnesota.
If a Servicer Termination Event occurs and remains unremedied, (1)
provided no Insurer Default has occurred and is continuing, then the
Insurer in its sole and absolute discretion, or (2) if an Insurer
Default shall have occurred and be continuing, then the Indenture
Trustee may, with the consent of the Class A Note Majority (as
defined herein) or with the consent of the Certificate Majority (as
defined herein), if the Class A Notes have been paid in full
terminate the rights and obligations of the Servicer under the Sale
and Servicing Agreement. If such event occurs when CPS is the
Servicer, or if CPS resigns as Servicer or is terminated as Servicer
by the Insurer, Norwest Bank Minnesota, National Association (in such
capacity, the 'Standby Servicer') has agreed to serve as successor
Servicer under the Sale and Servicing Agreement pursuant to a
Servicing Assumption Agreement dated as of December 1, 1997 among
CPS, the
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Standby Servicer and the Indenture Trustee (the 'Servicing Assumption
Agreement'). The Standby Servicer will receive a portion of the
Servicing Fee (the 'Standby Fee') for agreeing to stand by as
successor Servicer and for performing other functions. If the Standby
Servicer or any other entity serving at the time as Standby Servicer
becomes the successor Servicer, it will receive compensation at a
Servicing Fee Rate not to exceed 3.00% per annum. See 'The Standby
Servicer' in this Prospectus Supplement.
Servicing Fee............................. The Servicer will be entitled to receive a Servicing Fee on each
Payment Date equal to the sum of (i) the product of one-twelfth times
2.00% (the 'Servicing Fee Rate') of the Pool Balance as of the close
of business on the last day of the second preceding Collection Period
plus (ii) the product of one-twelfth times 0.08% of the aggregate
principal balance of the Securities as of the close of business on
the last day of the second preceding Collection Period; provided,
however, that with respect to the first Payment Date the Servicer
will be entitled to receive a Servicing Fee equal to the sum of (i)
the product of (x) the number of days from the Closing Date to and
including December 14, 1997, (y) 1/360 and (z) 2.00% of the Original
Pool Balance plus (ii) the product of (x) the number of days from the
Closing Date to and including December 14, 1997, (y) 1/360 and (z)
0.08% of the aggregate principal balance of the Securities as of the
Closing Date. As additional servicing compensation, the Servicer will
also be entitled to receive certain late fees, prepayment charges and
other administrative fees or similar charges. For so long as CPS is
Servicer, a portion of the Servicing Fee, equal to the Standby Fee,
will be payable to the Standby Servicer.
Certain Legal Aspects of
the Receivables...................... In connection with the sale of the Receivables, security interests in
the Financed Vehicles securing the Receivables will be assigned by
CPS, Samco or Linc, as applicable, to the Seller pursuant to the
applicable Purchase Agreement and by the Seller to the Trustee
pursuant to the Sale and Servicing Agreement. The Receivables which
are Samco Receivables, representing approximately 4.07% of the
aggregate principal balance of the Receivables as of the Cutoff Date,
have been originated by CPS's 80% owned subsidiary, Samco, and will
be purchased by the Seller from Samco prior to consummation of the
transfer of Receivables contemplated in the Sale and Servicing
Agreement. The Receivables which are Linc Receivables, representing
approximately 6.80% of the aggregate principal balance of the
Receivables as of the Cutoff Date, have been originated by CPS's 80%
owned subsidiary, Linc and will be purchased by the Seller from Samco
prior to consummation of the transfer of Receivables contemplated in
the Sale and Servicing Agreement. The certificates of title to the
Financed Vehicles securing the CPS Receivables show CPS as the
lienholder, the certificates of title to Financed Vehicles securing
the Samco Receivables show Samco as the lienholder
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and the certificates of title to Financed Vehicles securing the Linc
Receivables show Linc as the lienholder. Due to the administrative
burden and expense, the certificates of title to the Financed
Vehicles securing the Receivables will not be amended or reissued to
reflect the assignment thereof to the Seller, nor will the
certificates of title to any Financed Vehicles be amended or reissued
to reflect the assignment thereof to the Trust. In the absence of
such an amendment, the Trust may not have a perfected security
interest in the Financed Vehicles securing the Receivables in some
states.
By virtue of the assignment of the Purchase Agreements to the Trust,
CPS and, pursuant to the Sale and Servicing Agreement, the Seller,
will be obligated to repurchase any Receivable (including any Samco
Receivable and any Linc Receivable) sold to the Trust by the Seller,
as to which there did not exist on the Closing Date a perfected
security interest in the name of CPS, Samco or Linc in the Financed
Vehicle securing such Receivable, and the Servicer will be obligated
to purchase any Receivable sold to the Trust as to which it failed to
maintain a perfected security interest in the name of CPS, Samco or
Linc in the Financed Vehicle securing such Receivable (which
perfected security interest has been assigned to, and is for the
benefit of, the Trust) if, in either case, such breach materially and
adversely affects the interests of the Trust, the Indenture Trustee
or the Insurer in such Receivable and if such failure or breach is
not cured by the last day of the second (or, if CPS or the Servicer,
as the case may be, elects, the first) month following the discovery
by or notice to CPS or the Servicer, as the case may be, of such
breach. To the extent the security interest of CPS, Samco or Linc is
perfected, the Trust will have a prior claim over subsequent
purchasers of such Financed Vehicle and holders of subsequently
perfected security interests. However, as against liens for repairs
of a Financed Vehicle or for unpaid storage charges or for taxes
unpaid by an Obligor under a Receivable, or through fraud, forgery or
negligence or error, CPS, Samco or Linc, and therefore the Trust,
could lose its prior perfected security interest in a Financed
Vehicle. None of CPS, the Seller or the Servicer will have any
obligation to purchase a Receivable as to which a lien for repairs of
a Financed Vehicle or for taxes unpaid by an Obligor under a
Receivable result in losing the priority of the security interest in
such Financed Vehicle after the Closing Date. See 'Risk
Factors -- Certain Legal Aspects -- Lack of Perfected Security
Interest in Financed Vehicles' in this Prospectus Supplement and in
the Prospectus.
Certain Legal Aspects Consumer
Protection Laws...................... Federal and state consumer protection laws impose requirements on
creditors in connection with extensions of credit and collections of
retail installment loans. Because of the consumer-oriented nature of
the non-prime automobile industry, uncertainty regarding the
application of certain of such laws to particular circumstances, as
well as the willingness
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of some courts and regulatory agencies to adopt novel interpretations
of such laws, participants in the non-prime automobile financing
business are frequently named as defendants in litigation involving
such laws. Any violation of such laws, or litigation alleging such a
violation, with respect to a Receivable could give rise to claims and
defenses by an Obligor against CPS, the Seller, the Depositor, the
Owner Trustee, the Trust or the Indenture Trustee, or subject them to
claims for damages or legal sanction. In some cases, substantial jury
verdicts have been upheld. In addition, an Obligor may be entitled to
assert against CPS, the Seller, the Depositor, the Owner Trustee, the
Trust and the Indenture Trustee claims or defenses which it had
against the seller of the Financed Vehicle. To the extent specified
herein, CPS will be obligated to purchase any Receivable sold to the
Trust that failed to comply with such legal requirements. See
'Certain Legal Aspects of the Receivables -- Consumer Protection
Laws' in the Prospectus.
Book-Entry Notes.......................... The Class A Notes initially will be represented by one or more notes
registered in the name of Cede & Co. ('Cede') as the nominee of The
Depository Trust Company ('DTC'), and will only be available in the
form of book-entries on the records of DTC and participating members
thereof. Persons acquiring beneficial ownership interests in the
Class A Notes may elect to hold their Class A Notes through DTC, in
the United States, or Centrale de Livraison de Valeurs Mobilieres
S.A. ('CEDEL') or the Euroclear System ('Euroclear'), in Europe.
Transfers within DTC, CEDEL or Euroclear, as the case may be, will be
in accordance with the usual rules and operating procedures of the
relevant system. So long as the Class A Notes are book-entry Notes,
such Notes will be evidenced by one or more Class A Notes registered
in the name of Cede, as the nominee of DTC or one of the relevant
depositories (collectively, the 'European Depositaries'). Crossmarket
transfers between persons holding directly or indirectly through DTC,
on the one hand, and counterparties holding directly or indirectly
through CEDEL or Euroclear, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European
international clearing system by its European Depositary, and each
participating member of DTC. Class A Notes will be issued in
definitive form only under the limited circumstances described
herein. All references herein to 'holders' of the Class A Notes or
'Class A Noteholders' shall reflect the rights of beneficial owners
of the Class A Notes (the 'Note Owners') as they may indirectly
exercise such rights through DTC and participating members thereof,
except as otherwise specified herein. See 'Registration of Notes' in
this Prospectus Supplement and 'Description of the
Securities -- Book-Entry Registration' and ' -- Definitive Notes' in
the Prospectus.
Tax Status................................ In the opinion of Mayer, Brown & Platt ('Federal Tax Counsel'), for
Federal income tax purposes the Class A Notes
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will be characterized as debt and the Trust will not be characterized
as an association (or publicly traded partnership) taxable as a
corporation. Each Noteholder, by the acceptance of a Note, will agree
to treat the Notes as indebtedness for Federal income tax purposes.
See 'Federal Income Tax Consequences' in the Prospectus and 'Federal
Income Tax Consequences' in this Prospectus Supplement for additional
information concerning the application of Federal tax laws to the
Trust and the Notes.
ERISA Considerations...................... Subject to the conditions and considerations discussed under 'ERISA
Considerations' in this Prospectus Supplement, the Class A Notes are
eligible for purchase by pension, profit-sharing or other employee
benefit plans, as well as individual retirement accounts and certain
types of Keogh Plans (each, a 'Benefit Plan'). By its acquisition of
a Class A Note, each Benefit Plan shall be deemed to represent that
its purchase and holding of the Class A Note will not give rise to a
non-exempt prohibited transaction. See 'ERISA Considerations' in this
Prospectus Supplement.
Rating of the Notes....................... It is a condition of issuance that the Class A Notes be rated 'Aaa'
by Moody's Investors Service, Inc. ('Moody's') and 'AAA' by Standard
& Poor's Rating Services ('Standard & Poor's' and together with
Moody's, the 'Rating Agencies'), on the basis of the issuance of the
Policy by the Insurer. A security rating is not a recommendation to
buy, sell or hold securities and may be revised or withdrawn at any
time by the assigning Rating Agency. See 'Risk Factors Ratings of the
Notes' in this Prospectus Supplement.
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RISK FACTORS
In addition to the other information in this Prospectus Supplement and the
Prospectus, prospective Noteholders should consider the following factors, as
well as those matters discussed in 'Risk Factors' in the Prospectus, in
evaluating an investment in the Notes:
SUB-PRIME OBLIGORS; SERVICING
CPS purchases loans originated for assignment to CPS or a subsidiary
through automobile dealers or IFCs. CPS services its dealers through a network
of employee and independent marketing representatives, through its 80% owned
subsidiary, Samco Acceptance Corp. and through its 80% owned subsidiary, Linc
Acceptance Company LLC. CPS's customers are generally considered to have
marginal credit and fall into one of two categories: customers with moderate
income, limited assets and other income characteristics which cause difficulty
in borrowing from banks, captive finance companies of automakers or other
traditional sources of auto loan financing; and customers with a derogatory
credit record including a history of irregular employment, previous bankruptcy
filings, repossessions of property, charged-off loans and garnishment of wages.
The payment experience on Receivables of Obligors with marginal credit is likely
to be different than that on receivables of traditional auto financing sources
and is likely to be more sensitive to changes in the economic climate in the
areas in which such Obligors reside.
The servicing of receivables of customers with marginal credit requires
special skill and diligence. The Servicer believes that its credit loss and
delinquency experience reflects in part its trained staff and collection
procedures. If a Servicer Termination Event occurs and CPS is removed as
Servicer or, if CPS resigns or is terminated as Servicer by the Insurer, the
Standby Servicer has agreed to assume the obligations of successor Servicer
under the Sale and Servicing Agreement. See 'Description of the Trust
Documents -- Rights Upon Servicer Termination Event' in this Prospectus
Supplement. There can be no assurance, however, that collections with respect to
the Receivables will not be adversely affected by any change in Servicer. See
'The Standby Servicer' in this Prospectus Supplement.
The Sale and Servicing Agreement provides that the rights and obligations
of the Servicer terminate after 90 days unless renewed by the Insurer for
successive 90-day periods. The Insurer will agree to grant continuous renewals
so long as (i) no Servicer Termination Event under the Sale and Servicing
Agreement has occurred and (ii) no event of default under the insurance and
indemnity agreement among CPS, the Seller and the Insurer (the 'Insurance
Agreement') has occurred.
TRUST RELATIONSHIP TO THE SELLER AND CPS
In connection with each sale of Receivables by CPS, Samco or Linc to the
Seller and by the Seller to the Trust, each of CPS and the Seller will make
representations and warranties with respect to the characteristics of such
Receivables. In certain circumstances as set forth herein, CPS and the Seller
are required to repurchase Receivables with respect to which such
representations or warranties are not true as of the date made. Neither CPS nor
the Seller is otherwise obligated with respect to the Notes. See 'Description of
the Trust Documents -- Sale and Assignment of the Receivables' in this
Prospectus Supplement.
CERTAIN LEGAL ASPECTS -- LACK OF PERFECTED SECURITY INTERESTS IN FINANCED
VEHICLES
Due to the administrative burden and expense, the certificates of title to
the Financed Vehicles securing the Receivables will not be amended or reissued
to reflect the assignment of the Receivables to the Seller by CPS, Samco or
Linc, as applicable, nor will the certificates of title to any of the Financed
Vehicles (including those securing the Samco Receivables and the Linc
Receivables) be amended or reissued to reflect the assignment to the Trust. In
the absence of such an amendment or reissuance, the Trust may not have a
perfected security interest in the Financed Vehicles securing the Receivables in
some states. By virtue of the assignment of the Purchase Agreements to the
Trust, CPS, and pursuant to the Sale and Servicing Agreement, the Seller will be
obligated to repurchase any Receivable sold to the Trust by the Seller
(including any Samco Receivable or Linc Receivable) as to which there did not
exist on the Closing Date a perfected security interest in the name of CPS,
Samco or Linc in the Financed
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Vehicle securing such Receivable, and the Servicer will be obligated to purchase
any Receivable sold to the Trust as to which it failed to maintain a perfected
security interest in the name of CPS, Samco or Linc in the Financed Vehicle
securing such Receivable if, in either case, such breach materially and
adversely affects the interests of the Trust, the Indenture Trustee or the
Insurer in such Receivable and if such failure or breach is not cured prior to
the expiration of the applicable cure period. To the extent the security
interest of CPS, Samco or Linc is perfected, the Trust will have a prior claim
over subsequent purchasers of such Financed Vehicle and holders of subsequently
perfected security interests. However, as against liens for repairs of a
Financed Vehicle or for taxes unpaid by an Obligor under a Receivable, or
through fraud, forgery, negligence or error, CPS, Samco or Linc, and therefore
the Trust, could lose the priority of its security interest or its security
interest in a Financed Vehicle. None of CPS, the Seller nor the Servicer will
have any obligation to purchase a Receivable as to which a lien for repairs of a
Financed Vehicle or for taxes unpaid by an Obligor under a Receivable result in
losing the priority of the security interest in such Financed Vehicle after the
Closing Date. See 'Certain Legal Aspects of the Receivables -- Security Interest
in Vehicles' in the Prospectus.
GEOGRAPHIC CONCENTRATION
As of the Cutoff Date, 19.24% of the Receivables by Principal Balance had
Obligors residing in the State of California. Economic conditions in the State
of California may affect the delinquency, loan loss and repossession experience
of the Trust with respect to the Receivables. See 'The Receivables Pool' in this
Prospectus Supplement.
LIMITED ASSETS
The Trust does not have, nor is it permitted or expected to have, any
significant assets or sources of funds other than the Receivables and amounts on
deposit in certain accounts held by the Indenture Trustee on behalf of the
Noteholders. The Notes represent obligations solely of the Trust and are not
obligations of, and will not be insured or guaranteed by, the Seller, the
Servicer, the Indenture Trustee or any other person or entity except for the
guaranty provided with respect to the Class A Notes by the Insurer pursuant to
the Policy, as described herein. The Seller will take such steps as are
necessary for the Insurer to issue the Policy to the Indenture Trustee for the
benefit of the Class A Noteholders. Under the Policy, the Insurer will
unconditionally and irrevocably guarantee to the Class A Noteholders full and
complete payment of the Scheduled Payments on each Payment Date. Although the
Policy will be available on each Payment Date to cover shortfalls in
distributions of the Class A Noteholders' Distributable Amount on such Payment
Date, in the event of an Insurer Default, the Class A Noteholders must rely on
the collections on the Receivables, and the proceeds from the repossession and
sale of Financed Vehicles which secure defaulted Receivables. In such event,
certain factors, such as the Trust not having perfected security interests in
the Financed Vehicles, may affect the Trust's ability to realize on the
collateral securing the Receivables and thus may reduce the proceeds to be
distributed to Noteholders on a current basis. See 'Credit Enhancement',
'Description of the Securities -- Payment of Principal', ' -- Payment of
Interest' and 'The Insurer' herein.
RISK OF CHANGES IN DELINQUENCY AND LOAN LOSS EXPERIENCE
CPS began purchasing Contracts from Dealers in October 1991. Although CPS
has calculated and presented herein its net loss experience with respect to its
servicing portfolio, there can be no assurance that the information presented
will reflect actual experience with respect to the Receivables. In addition,
there can be no assurance that the future delinquency or loan loss experience of
the Trust with respect to the Receivables will be better or worse than that set
forth herein with respect to CPS's servicing portfolio. See 'CPS's Automobile
Contract Portfolio -- Delinquency and Loss Experience' in this Prospectus
Supplement. Although credit history on Samco's and Linc's originations is
limited, CPS expects that the delinquency and net credit loss and repossession
experience with respect to the Receivables originated by Samco and Linc will be
similar to that of CPS's existing portfolio.
S-20
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RATINGS OF THE NOTES
It is a condition to the issuance of the Class A Notes that the Class A
Notes be rated 'Aaa' by Moody's and 'AAA' by Standard & Poor's, on the basis of
the issuance of the Policy by the Insurer. A rating is not a recommendation to
purchase, hold or sell the Notes, inasmuch as such rating does not comment as to
market price or suitability for a particular investor. The Rating Agencies do
not evaluate, and the ratings do not address, the possibility that Noteholders
may receive a lower than anticipated yield. There is no assurance that a rating
will remain for any given period of time or that a rating will not be lowered or
withdrawn entirely by a Rating Agency if in its judgment circumstances in the
future so warrant. The ratings of the Class A Notes are based primarily on the
rating of the Insurer. Upon an Insurer Default the rating on the Class A Notes
may be lowered or withdrawn entirely. In the event that any rating initially
assigned to the Class A Notes were subsequently lowered or withdrawn for any
reason, including by reason of a downgrading of the Insurer's claims-paying
ability, no person or entity will be obligated to provide any additional credit
enhancement with respect to the Class A Notes. Any reduction or withdrawal of a
rating may have an adverse effect on the liquidity and market price of the Class
A Notes.
FINAL SCHEDULED PAYMENT DATES OF THE NOTES
The Final Scheduled Payment Date for each class of Notes which is specified
at page S-6 herein, is the date by which the principal thereof is required to be
fully paid. The Final Scheduled Payment Date for each class of Notes has been
determined so that distributions on the underlying Receivables will be
sufficient to retire each such class on or before its respective Final Scheduled
Payment Date without the necessity of a claim on the Policy. However, because
(i) some prepayments of the Receivables are likely and (ii) certain of the
Receivables have terms to maturity that are shorter than the term to maturity
assumed in calculating each class's Final Scheduled Payment Date, the actual
payment of any class of Notes likely will occur earlier, and could occur
significantly earlier, than such class's Final Scheduled Payment Date.
Nevertheless, there can be no assurance that the final distribution of principal
of any or all classes of Notes will be earlier than such class's Final Scheduled
Payment Date.
FORMATION OF THE TRUST
The Issuer, CPS Auto Receivables Trust 1997-5, is a business trust formed
under the laws of the State of Delaware pursuant to the Trust Agreement. Prior
to the sale and assignment of the Trust Assets to the Trust, the Trust will have
no assets or obligations or any operating history. The Trust will not engage in
any business other than (i) acquiring, holding and managing the Receivables, the
other assets of the Trust and any proceeds thereof, (ii) issuing the Notes and
the Certificates, (iii) making payments in respect of the Notes and the
Certificates and (iv) engaging in other activities that are necessary, suitable
or convenient to accomplish the foregoing or are incidental thereto.
The Servicer will initially service the Receivables pursuant to the Sale
and Servicing Agreement and will be compensated for acting as the Servicer. See
'Description of the Trust Documents -- Servicing Compensation' in this
Prospectus Supplement. The Indenture Trustee will be appointed custodian for the
Receivables and the certificates of title relating to the Financed Vehicles, and
the Receivables and such certificates of title will be delivered to and held in
physical custody by the Indenture Trustee. However, the Receivables will not be
marked or stamped to indicate that they have been sold to the Trust, and the
certificates of title to the Financed Vehicles will not be endorsed or otherwise
amended to identify the Trust or the Indenture Trustee as the new secured party.
In the absence of amendments to the certificates of title, the Indenture Trustee
may not have perfected security interests in the Financed Vehicles securing the
Receivables originated in some states. See 'Certain Legal Aspects of the
Receivables' in the Prospectus.
The Trust will initially be capitalized by the Seller with equity equal to
$10 and certificates with an aggregate original principal balance of $4,781,307
will be sold to third party investors. The equity of the Trust, together with
the proceeds of the initial sale of the Notes and the Certificates, will be used
by the Trust to purchase the Receivables from the Seller and to fund the
deposits into the Spread Account (described under 'Description of the Trust
Documents -- Accounts' in this Prospectus Supplement).
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The Trust will not acquire any assets other than the Trust Assets, and it is not
anticipated that the Trust will have any need for additional capital resources.
Because the Trust will have no operating history upon its establishment and will
not engage in any business other than acquiring and holding the Trust Assets,
issuing the Securities and distributing payments on the Securities, no
historical or pro forma financial statements or ratios of earnings to fixed
charges with respect to the Trust have been included herein.
THE OWNER TRUSTEE
Bankers Trust (Delaware), the Owner Trustee under the Trust Agreement, is a
Delaware banking corporation and its principal offices are located at 1011
Centre Road, Suite 200, Wilmington, Delaware 19805-1266. The Owner Trustee will
perform limited administrative functions under the Trust Agreement. The Owner
Trustee's duties in connection with the issuance and sale of the Securities is
limited solely to the express obligations of the Owner Trustee set forth in the
Trust Agreement and the Sale and Servicing Agreement.
THE INDENTURE TRUSTEE
Norwest Bank Minnesota, National Association, a national banking
association, is the Indenture Trustee under the Indenture. The principal offices
of the Indenture Trustee are located at Sixth Street and Marquette Avenue,
Minneapolis, Minnesota. The Indenture Trustee's duties in connection with the
Notes are limited solely to its express obligations under the Indenture and the
Sale and Servicing Agreement.
THE TRUST ASSETS
The Trust Assets include retail installment sale contracts on used and new
automobiles, light trucks, vans and minivans between dealers (the 'Dealers'),
IFCs or Deposit Institutions and retail purchasers (the 'Obligors') and, with
respect to Receivables that are Rule of 78's Receivables, certain monies due
thereunder after the Cutoff Date and with respect to Receivables that are Simple
Interest Receivables, certain monies received thereunder after the Cutoff Date.
The Receivables were originated by the Dealers, IFCs or Deposit Institutions for
assignment to CPS, Samco or Linc. Pursuant to agreements between the Dealers and
CPS ('Dealer Agreements'), between the IFCs and Samco or between Deposit
Institutions and Linc, the Receivables were purchased by CPS, Samco or Linc and,
prior to the Closing Date, evidenced financing made available by CPS, Samco or
Linc to the Obligors. The Trust Assets also include (i) such amounts as from
time to time may be held in one or more trust accounts established and
maintained by the Indenture Trustee pursuant to the Sale and Servicing
Agreement, as described below; see 'Description of the Trust
Documents -- Accounts' in this Prospectus Supplement; (ii) the rights of the
Seller under the Purchase Agreements; (iii) security interests in the Financed
Vehicles; (v) the rights of the Seller to receive any proceeds with respect to
the Receivables from claims on physical damage, credit life and credit accident
and health insurance policies covering the Financed Vehicles or the Obligors, as
the case may be; (vi) the rights of the Seller to refunds for the costs of
extended service contracts and to refunds of unearned premiums with respect to
credit life and credit accident and health insurance policies covering the
Financed Vehicles or Obligors, as the case may be; and (vii) any and all
proceeds of the foregoing. The Trust Assets also will include the Policy for the
benefit of the Class A Noteholders.
CPS'S AUTOMOBILE CONTRACT PORTFOLIO
GENERAL
CPS was incorporated in the State of California on March 8, 1991. CPS and
its subsidiaries engage primarily in the business of purchasing, selling and
servicing retail automobile installment sales contracts ('Contracts') originated
by Dealers located primarily in California, Florida, Pennsylvania, Texas,
Illinois and Nevada. CPS specializes in Contracts with borrowers ('Sub-Prime
Borrowers') who generally would not be expected to qualify for traditional
financing such as that provided by commercial
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banks or automobile manufacturers' captive finance companies. Sub-Prime
Borrowers generally have limited credit history, lower than average income or
past credit problems.
On May 31, 1991, CPS acquired 100% of the stock of G&A Financial Services,
Inc., a consumer loan servicing company, whose assets consisted primarily of
servicing contracts with respect to loan portfolios owned by third parties. G&A
Financial Services, Inc. has subsequently been dissolved. On September 1, 1991,
CPS was engaged to act as a servicer for loan portfolios aggregating $16.5
million by two companies who had purchased such portfolios from the Resolution
Trust Corp. As of December 31, 1994, CPS had terminated all such third-party
servicing arrangements. On October 1, 1991, CPS began its program of purchasing
Contracts from Dealers and selling them to institutional investors. Through
September 30, 1997, CPS had purchased $1.2 billion of Contracts from Dealers and
sold $1.1 billion of Contracts to institutional investors. CPS continues to
service all of the Contracts it has purchased, including those it has re-sold.
CPS has relationships and is party to Dealer Agreements with over 2,500
dealerships located in 42 states of the United States. CPS purchases Contracts
from Dealers for a fee ranging from $0 to $1,195. A Dealer Agreement does not
obligate a Dealer to submit Contracts for purchase by CPS, nor does it obligate
CPS to purchase Contracts offered by the Dealers.
CPS purchases Contracts from Dealers with the intent to resell them. CPS
also purchases Contracts from third parties that have been originated by others.
Contracts have been sold by CPS to institutional investors either as bulk sales
or as private placements or public offerings of securities collateralized by the
Contracts. Purchasers of the Contracts receive a pass-through rate of interest
set at the time of the sale, and CPS receives a base servicing fee for its
duties relating to the accounting for and collection of the Contracts. In
addition, CPS is entitled to certain late fees, prepayment charges and other
administrative fees and similar charges as excess servicing fees. Generally, CPS
sells the Contracts to such institutional investors at face value and without
recourse except that the representations and warranties made to CPS by the
Dealers are similarly made to the investors by CPS.
Samco employees call on IFCs primarily in the southeastern United States
and present them with financing programs that are essentially identical to those
which CPS markets directly to Dealers through its marketing representatives. CPS
believes that a typical rural IFC has relationships with many local automobile
purchasers as well as Dealers but, because of limitations of financial resources
or capital structure, such IFCs generally are unable to provide 36, 48 or 60
month financing for an automobile. IFCs may offer Samco's financing programs to
borrowers directly or indirectly through local dealers. Samco purchases
contracts from the IFCs after its credit personnel have performed all of the
same underwriting and verification procedures and have applied all the same
credit criteria that CPS performs and applies for Contracts that CPS purchases
from Dealers. Samco purchases Contracts at a discount ranging from 0% to 8% of
the total amount financed under such Contracts. In addition, Samco generally
charges IFCs an acquisition fee to defray the direct administrative costs
associated with the processing of Contracts that are ultimately purchased by
Samco. Servicing and collection procedures on Contracts owned by Samco are
performed by CPS at its headquarters in Irvine, California. As of September 30,
1997, Samco had purchased 6,989 Contracts with original balances of $20.6
million.
In May 1996, CPS formed Linc Acceptance Company LLC ('Linc'), an 80
percent-owned subsidiary based in Norwalk, Connecticut. Linc's business plan is
to provide CPS's sub-prime auto finance products to deposit institutions such as
banks, thrifts and credit unions ('Deposit Institutions'). CPS believes that
such Deposit Institutions do not generally make loans to sub-prime borrowers
even though they may have relationships with automobile dealers who sell
vehicles to sub-prime borrowers and may have sub-prime borrowers as deposit
customers.
Linc's employees call on various Deposit Institutions and present them with
a financing program that is similar to CPS's Alpha Program (as defined below).
The Linc program is intended to result in a slightly more creditworthy borrower
than CPS's Standard Program by requiring slightly higher income and lower
debt-to-income ratios than CPS requires under its Standard Program. Linc's
customers may offer its financing program to borrowers directly or to local
Dealers. Linc typically purchases Contracts at par, without a fee to the Deposit
Institution. Servicing and collection procedures on Contracts are performed
entirely by CPS using its same personnel, procedures and systems as CPS uses for
its own
S-23
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<PAGE>
programs. As of September 30, 1997, Linc had purchased 360 Contracts with
original balances aggregating $4.8 million.
The principal executive offices of CPS are located at 2 Ada, Irvine,
California 92618. CPS's telephone number is (714) 753-6800.
UNDERWRITING
CPS markets its services to Dealers under four programs: the CPS Standard
Program (the 'Standard Program'), the CPS First Time Buyer Program (the 'First
Time Buyer Program'), the CPS Alpha Program (the 'Alpha Program') and the CPS
Delta Program (the 'Delta Program'). CPS applies underwriting standards in
purchasing loans on new and used vehicles from Dealers based upon the particular
program under which the loan was submitted for purchase. The Alpha Program
guidelines are designed to accommodate applicants who meet all the requirements
of the Standard Program and exceed such requirements in respect of job
stability, residence stability, income level or the nature of the credit
history. The Delta Program guidelines are designed to accommodate applicants who
may not meet all of the requirements of the Standard Program but who are deemed
by CPS to be generally as creditworthy as Standard Program applicants. The First
Time Buyer Program guidelines are designed to accommodate applicants who have
not previously financed an automobile; such applicants must meet all the
requirements of the Standard Program, as well as slightly higher income and down
payment requirements. CPS uses the degree of the applicant's creditworthiness
and the collateral value of the financed vehicle as the basic criteria in
determining whether to purchase an installment sales contract from a Dealer.
Each credit application provides current information regarding the applicant's
employment and residence history, bank account information, debts, credit
references, and other factors that bear on an applicant's creditworthiness. Upon
receiving from the Dealer the completed application of a prospective purchaser
and a one-page Dealer summary of the proposed financing, generally by facsimile
copy, CPS obtains a credit report compiling credit information on the applicant
from three credit bureaus. The credit report summarizes the applicant's credit
history and paying habits, including such information as open accounts,
delinquent payments, bankruptcy, repossessions, lawsuits and judgments. At this
point a CPS loan officer will review the credit application, Dealer summary and
credit report and will either conditionally approve or reject the application.
Such conditional approval or rejection by the loan officer usually occurs within
one business day of receipt of the credit application. The loan officer
determines the conditions to his or her approval of a credit application based
on many factors such as the applicant's residential situation, down payment, and
collateral value with regard to the loan, employment history, monthly income
level, household debt ratio and the applicant's credit history. Based on the
stipulations of the loan officer, the Dealer and the applicant compile a more
complete application package which is forwarded to CPS and reviewed by a
processor for deficiencies. As part of this review, references are checked,
direct calls are made to the applicant and employment income and residence
verification is done. Upon the completion of his or her review, the processor
forwards the application package to an underwriter for further review. The
underwriter will confirm the satisfaction of any remaining deficiencies in the
application package. Finally, before the loan is funded, the application package
is checked for deficiencies again by a loan review officer. CPS conditionally
approves approximately 50% of the credit applications it receives and ultimately
purchases approximately 11% of the received applications.
CPS has purchased portfolios of Contracts in bulk from other companies that
had previously purchased the Contracts from Dealers. From July 1, 1994 to July
31, 1995, CPS made four such bulk purchases aggregating approximately $22.9
million. In considering bulk purchases, CPS carefully evaluates the credit
profile and payment history of each portfolio and negotiates the purchase price
accordingly. The credit profiles of the Contracts in each of the portfolios
purchased are consistent with those in the underwriting standards used by CPS in
its normal course of business. Bulk purchases were made at a purchase price
approximately equal to a 7.0% discount from the aggregate principal balance of
the Contracts. CPS has not purchased any portfolios of Contracts in bulk since
July 31, 1995, but may consider doing so in the future.
Generally, the amount funded by CPS will not exceed, in the case of new
cars, 110% of the dealer invoice plus taxes, license fees, insurance and the
cost of the service contract, and in the case of used
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cars, 115% of the value quoted in industry-accepted used car guides (such as the
Kelley Wholesale Blue Book) plus the same additions as are allowed for new cars.
The maximum amount that will be financed on any vehicle generally will not
exceed $25,000. The maximum term of the Contract depends primarily on the age of
the vehicle and its mileage. Vehicles having in excess of 80,000 miles will not
be financed.
The minimum downpayment required on the purchase of a vehicle is generally
10% to 15% of the purchase price. The downpayment may be made in cash, and/or
with a trade-in car and, if available, a proven manufacturer's rebate. The cash
and trade-in value must equal at least 50% of the minimum downpayment required,
with the proven manufacturer's rebate constituting the remainder of the
downpayment. CPS believes that the relatively high downpayment requirement will
result in higher collateral values as a percentage of the amount financed and
the selection of buyers with stronger commitment to the vehicle.
Prior to purchasing any Contract, CPS verifies that the Obligor has
arranged for casualty insurance by reviewing documentary evidence of the policy
or by contacting the insurance company or agent. The policy must indicate that
CPS is the lien holder and loss payee. The insurance company's name and policy
expiration date are recorded in CPS's computerized system for ongoing
monitoring.
As loss payee, CPS receives all correspondence relevant to renewals or
cancellations on the policy. Information from all such correspondence is updated
to the computerized records. In the event that a policy reaches its expiration
date without a renewal, or if CPS receives a notice that the policy has been
canceled prior to its expiration date, a letter is generated to advise the
borrower of its obligation to continue to provide insurance. If no action is
taken by the borrower to insure the vehicle, two successive and more forceful
letters are generated, after which the collection department will contact the
borrower telephonically to further counsel the borrower, including possibly
advising them that CPS has the right to repossess the vehicle if the borrower
refuses to obtain insurance. Although it has the right, CPS rarely repossesses
vehicles in such circumstances. In addition, CPS does not force place a policy
and add the premium to the borrower's outstanding obligation, although it also
has the right to do so. Rather in such circumstances the account is flagged as
not having insurance and continuing efforts are made to get the Obligor to
comply with the insurance requirement in the Contract. CPS believes that
handling non-compliance with insurance requirements in this manner ultimately
results in better portfolio performance because it believes that the increased
monthly payment obligation of the borrower which would result from force placing
insurance and adding the premium to the borrower's outstanding obligation would
increase the likelihood of delinquency or default by such borrower on future
monthly payments.
Samco offers financing programs to IFCs which are essentially identical to
those offered by CPS. The IFCs may offer Samco's financing programs to borrowers
directly or indirectly through local Dealers. Upon submission of applications to
Samco, Samco credit personnel, who have been trained by CPS, use CPS's
proprietary systems to evaluate the borrower and the proposed Contract terms.
Samco purchases contracts from the IFCs after its credit personnel have
performed all of the underwriting and verification procedures and have applied
all the same credit criteria that CPS performs and applies for Contracts it
purchases from Dealers. Prior to CPS purchasing a Contract from Samco, CPS
personnel perform procedures intended to verify that such Contract has been
underwritten and originated in conformity with the requirements applied by CPS
with respect to Contracts acquired by it directly from Dealers. Unlike Samco,
which has employees who evaluate applications and make decisions to purchase
Contracts, Linc applications for Contracts to be purchased by Linc are submitted
by the Deposit Institution directly to CPS, where the approval, underwriting and
purchase procedures will be performed by CPS staff who work with Linc as well as
with the Dealers to which CPS markets its programs.
SERVICING AND COLLECTIONS
CPS's servicing activities, both with respect to portfolios of Contracts
sold by it to investors and with respect to portfolios of other receivables
owned or originated by third parties, consist of collecting, accounting for and
posting of all payments received with respect to such Contracts or other
receivables, responding to borrower inquiries, taking steps to maintain the
security interest granted in the Financed Vehicle or other collateral,
investigating delinquencies, communicating with the borrower, repossessing
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and liquidating collateral when necessary, and generally monitoring each
Contract or other receivable and related collateral. CPS maintains sophisticated
data processing and management information systems to support its Contract and
other receivable servicing activities.
Upon the sale of a portfolio of Contracts to an investor, or upon the
engagement of CPS by another receivable portfolio owner for CPS's services, CPS
mails to borrowers monthly billing statements directing them to mail payments on
the Contracts or other receivables to a lock-box account which is unique for
each investor or portfolio owner. CPS engages an independent lock-box processing
agent to retrieve and process payments received in the lock-box account. This
results in a daily deposit to the investor or portfolio owner's account of the
day's lock-box account receipts and a simultaneous electronic data transfer to
CPS of the borrower payment data for posting to CPS's computerized records.
Pursuant to the various servicing agreements with each investor or portfolio
owner, CPS is required to deliver monthly reports reflecting all transaction
activity with respect to the Contracts or other receivables.
If an account becomes six days past due, CPS's collection staff typically
attempts to contact the borrower with the aid of a high-penetration auto-dialing
computer. A collection officer tries to establish contact with the customer and
obtain a promise by the customer to make the overdue payment within seven days.
If payment is not received by the end of such seven-day period, the customer is
called again through the auto dialer system and the collection officer attempts
to elicit a second promise to make the overdue payment within seven days. If a
second promise to make the overdue payment is not satisfied, the account
automatically is referred to a supervisor for further action. In most cases, if
payment is not received by the tenth day after the due date, a late fee of
approximately 5% of the delinquent payment is imposed. If the customer cannot be
reached by a collection officer, a letter is automatically generated and the
customer's references are contacted. Field agents (who are independent
contractors) often make calls on customers who are unreachable or whose payment
is thirty days or more delinquent. A decision to repossess the vehicle is
generally made after 30 to 90 days of delinquency or three unfulfilled promises
to make the overdue payment. Other than granting such limited extensions as are
described under the heading 'Description of the Trust Documents -- Servicing
Procedures' in the Prospectus, CPS does not modify or rewrite delinquent
Contracts.
On April 1, 1997 CPS established a satellite collection facility in
Chesapeake, Virginia. The 16,000 square foot facility was opened with 35 staff
dedicated solely to collections. The Chesapeake facility is on-line with CPS's
automated collection system at its headquarters in Irvine, California.
Chesapeake staff have been trained by Irvine collection management personnel at
both the Chesapeake facility and at CPS's headquarters. Irvine collection
management have the ability to allocate the collection workload between the two
facilities as well as monitor the effectiveness of the collection effort by
office and individual collector. CPS expects to add resources to both collection
locations as its servicing portfolio grows.
Servicing and collection procedures on Contracts owned by Samco and Linc
are performed by CPS at its headquarters in Irvine, California and its
Chesapeake, Virginia collection facility. However, Samco may solicit aid from
the related IFC in collecting past due accounts with respect to which
repossession may be considered.
DELINQUENCY AND LOSS EXPERIENCE
Set forth on the following page is certain information concerning the
experience of CPS pertaining to retail new and used automobile, light truck, van
and minivan receivables, including those previously sold, which CPS continues to
service. Contracts were first originated under the Delta Program in August 1994
and under the Alpha Program in April 1995. CPS has found that the delinquency
and net credit loss and repossession experience with respect to the Delta
Program is somewhat greater than under its Standard Program. CPS has found that
the delinquency and net credit loss and repossession experience with respect to
the Alpha Program is somewhat lower than that experienced under the Standard
Program. CPS has purchased Contracts representing financing for first-time
purchasers of automobiles since the inception of its Contract purchasing
activities in 1991. Prior to the establishment of the First Time Buyer Program
in July 1996, CPS purchased such Contracts under its Standard Program
guidelines. CPS expects that the delinquency and net credit loss and
repossession experience with
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respect to loans originated under the First Time Buyer Program will be similar
to that under the Standard Program. CPS began servicing Contracts originated by
Samco in March 1996 and by Linc in November 1996. Although credit history on
Samco's and Linc's originations is limited, CPS expects that the delinquency and
net credit loss and repossession experience with respect to the Receivables
originated by Samco and Linc will be similar to that of CPS's existing
portfolio. There can be no assurance, however, that the delinquency and net
credit loss and repossession experience on the Receivables will continue to be
comparable to CPS's experience shown in the following tables.
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CONSUMER PORTFOLIO SERVICES, INC.
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996
---------------------- ---------------------- ----------------------
NUMBER NUMBER NUMBER
OF LOANS AMOUNT OF LOANS AMOUNT OF LOANS AMOUNT
-------- ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Portfolio(1)............. 14,235 $203,879,000 27,113 $355,965,000 47,187 $604,092,000
Period of delinquency(2)
31-60................ 243 3,539,000 909 11,520,000 1,801 22,099,000
61-90................ 68 1,091,000 203 2,654,000 724 9,068,000
91+.................. 56 876,000 272 3,899,000 768 9,906,000
-------- ------------ -------- ------------ -------- ------------
Total
delinquencies.. 367 5,506,000 1,384 18,073,000 3,293 41,073,000
Amount in
repossession(4)........ 271 3,759,000 834 10,151,000 1,168 14,563,000
-------- ------------ -------- ------------ -------- ------------
Total
delinquencies
and amount in
repossession(4)... 638 $ 9,265,000 2,218 $ 28,224,000 4,461 $ 55,636,000
-------- ------------ -------- ------------ -------- ------------
-------- ------------ -------- ------------ -------- ------------
Delinquencies as a
percent of the
portfolio.............. 2.58% 2.70% 5.10% 5.08% 6.98% 6.80%
Repo Inventory as a
percent of the
portfolio.............. 1.90 1.84 3.08 2.85 2.48 2.41
-------- ------------ -------- ------------ -------- ------------
Total
delinquencies
and amount in
repossession as
a percent of
portfolio...... 4.48% 4.54% 8.18% 7.93% 9.45% 9.21%
-------- ------------ -------- ------------ -------- ------------
-------- ------------ -------- ------------ -------- ------------
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997
--------------------- ----------------------
NUMBER NUMBER
OF LOANS AMOUNT OF LOANS AMOUNT
-------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Portfolio(1)............. 41,758 $535,737,000 73,296 $917,499,000
Period of delinquency(2)
31-60................ 1,526 18,473,000 2,291 27,883,000
61-90................ 674 8,334,000 1,127 13,770,000
91+.................. 380 4,873,000 1,099 14,171,000
-------- ------------ -------- ------------
Total
delinquencies.. 2,580 31,680,000 4,517 55,824,000
Amount in
repossession(4)........ 1,319 14,523,000 1,509 19,126,000
-------- ------------ -------- ------------
Total
delinquencies
and amount in
repossession(4)... 3,899 $ 46,203,000 6,026 $ 74,950,000
-------- ------------ -------- ------------
-------- ------------ -------- ------------
Delinquencies as a
percent of the
portfolio.............. 6.18% 5.91% 6.16% 6.08%
Repo Inventory as a
percent of the
portfolio.............. 3.16 2.71 2.06 2.08
-------- ------------ -------- ------------
Total
delinquencies
and amount in
repossession as
a percent of
portfolio...... 9.34% 8.62% 8.22% 8.17%
-------- ------------ -------- ------------
-------- ------------ -------- ------------
</TABLE>
- ------------
(1) All amounts and percentages are based on the full amount remaining to be
repaid on each Contract, including, for Rule of 78's Contracts, any unearned
finance charges. The information in the table represents all Contracts
originated by CPS including sold Contracts CPS continues to service.
(2) CPS considers a Contract delinquent when an obligor fails to make at least
90% of a contractually due payment by the due date. The period of
delinquency is based on the number of days payments are contractually past
due.
(3) Amount in Repossession represents Financed Vehicles which have been
repossessed but not yet liquidated.
(4) Amounts shown do not include Contracts which are less than 31 days
delinquent.
S-28
<PAGE>
<PAGE>
CONSUMER PORTFOLIO SERVICES, INC.
NET CREDIT LOSS/REPOSSESSION EXPERIENCE
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------------------
1994 1995 1996
----------- ------------ ------------
<S> <C> <C> <C>
Average amount outstanding during the
period(1)............................. $98,916,991 $221,926,489 $395,404,669
Average number of loans outstanding
during the period..................... 9,171 20,809 36,998
Number of repossessions................. 669 2,018 3,145
Gross charge-offs(2).................... $ 3,166,408 $ 11,658,461 $ 23,296,775
Recoveries(3)........................... $ 347,519 $ 1,028,378 $ 2,969,143
Net losses.............................. $ 2,818,889 $ 10,630,083 $ 20,327,632
Annualized repossessions as a percentage
of average number of loans
outstanding........................... 7.29% 9.70% 8.50%
Annualized net losses as a percentage of
average amount outstanding............ 2.85% 4.79% 5.14%
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1996 1997
------------ ------------
<S> <C> <C>
Average amount outstanding during the
period(1)............................. $365,054,527 $650,038,380
Average number of loans outstanding
during the period..................... 34,200 60,209
Number of repossessions................. 2,147 3,868
Gross charge-offs(2).................... $ 15,558,601 $ 31,667,629
Recoveries(3)........................... $ 1,942,944 $ 3,656,833
Net losses.............................. $ 13,615,657 $ 28,010,796
Annualized repossessions as a percentage
of average number of loans
outstanding........................... 8.37% 8.57%
Annualized net losses as a percentage of
average amount outstanding............ 4.97% 5.75%
</TABLE>
- ------------
(1) All amounts and percentages are based on the principal amount scheduled to
be paid on each Contract. The information in the table represents all
Contracts originated by CPS including sold Contracts which CPS continues to
service.
(2) Amount charged off includes the remaining principal balance, after the
application of the net proceeds from the liquidation of the vehicle,
excluding accrued and unpaid interest.
(3) Recoveries are reflected in the period in which they are realized and may
pertain to charge offs from prior periods.
S-29
<PAGE>
<PAGE>
RECENT DEVELOPMENTS
On June 30, 1997, CPS was served with summons and counterclaim in the
bankruptcy court for the Northern District of Illinois in connection with the
Chapter 13 bankruptcy of obligors Madeline and Darryl Brownlee, of Chicago,
Illinois. The obligors seek class-action treatment of their allegation that the
cost of an extended service contract on the automobile they purchased was
inadequately disclosed by Joe Cotton Ford of Carol Stream, Illinois, the
automobile dealer who sold them their car. The disclosure is alleged to be
violative of the Federal Truth in Lending Act and of Illinois consumer
protection statutes. The obligors' claim is directed against both the dealer for
making the allegedly improper disclosures and against CPS as holder of the
purchase contract. The relief sought is damages in an unspecified amount, plus
costs of suit and attorney's fees. The court has not yet ruled on the obligors'
request for class-action treatment. Although the Receivable relating to the
litigation is not in the Receivables Pool, if the request for class action
status is granted, Receivables in the Receivables Pool could become subject to
the litigation. Furthermore, the existence of such litigation, or an adverse
decision in such litigation, could encourage similar actions to be brought
involving Receivables in the Receivables Pool. If an Obligor has a claim against
the Trust as a result of a violation of law relating to a Receivable and such
claim materially and adversely affects the Trust's interest in such Receivable,
such a violation would constitute a breach of the representations and warranties
of CPS and would create an obligation of CPS to repurchase such Receivable
unless the breach is cured. In addition, CPS will be required to indemnify the
Trustee, the Insurer, the Trust and the Securityholders against all costs,
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 a third party claim arising out of events or facts giving rise to such
breach. See 'Description of the Trust Documents -- Sale and Assignment of
Receivables' in this Prospectus Supplement.
CPS intends to defend the above-described litigation vigorously, and
believes that it has meritorious defenses to each claim made by the obligors.
Nevertheless, the outcome of any litigation is uncertain, and there is the
possibility that damages could be assessed against CPS in amounts that could be
material. It is management's opinion that the above-described litigation will
not have a material adverse effect on CPS's consolidated financial position,
results of operations or liquidity.
THE RECEIVABLES POOL
The pool of Receivables existing as of the Cutoff Date consists of
Receivables selected from CPS's Portfolio by several criteria, including the
following: each Receivable was originated, based on the billing address of the
Obligors, in the United States, has an original term of not more than 60 months,
provides for level monthly payments which fully amortize the amount financed
over the original term (except for the last payment, which may be different from
the level payment for various reasons, including late or early payments during
the term of the Contract), has a remaining maturity of 60 months or less as of
the Cutoff Date, has an outstanding principal balance of not more than $28,794
as of the Cutoff Date, is not more than 30 days past due as of the Cutoff Date
and has an annual percentage rate ('APR') of not less than 15.58%. As of the
date of each Obligor's application for the loan from which the related
Receivable arises, each Obligor (i) did not have any material past due credit
obligations or any repossessions or garnishments of property within one year
prior to the date of application, unless such amounts have been repaid or
discharged through bankruptcy, (ii) was not the subject of any bankruptcy or
insolvency proceeding that is not discharged, and (iii) had not been the subject
of more than one bankruptcy proceeding. As of the Cutoff Date, the latest
scheduled maturity of any Receivable is not later than December 6, 2002.
As of the Cutoff Date, approximately 88.21% of the aggregate principal
balance of the Receivables, constituting 90.74% of the number of Contracts,
represents financing of used vehicles; the remainder of the Receivables
represent financing of new vehicles. Approximately 7.30% of the aggregate
principal balance of the Receivables were originated under the Delta Program,
approximately 47.88% of the aggregate principal balance of the Receivables were
originated under the Alpha Program, approximately 14.91% of the aggregate
principal balance of the Receivables were originated under the First Time Buyer
Program and approximately 23.10% of the aggregate principal balance of the
Receivables represent financing under the Standard Program. As of the Cutoff
Date, 4.07% of the
S-30
<PAGE>
<PAGE>
Principal Balance of the Receivables were Samco Receivables and 6.80% of the
Receivables were Linc Receivables. The composition, geographic distribution,
distribution by APR, distribution by remaining term, distribution by date of
origination, distribution by original term, distribution by model year and
distribution by original principal balance of the Receivables as of the Cutoff
Date are set forth in the following tables.
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
WEIGHTED AGGREGATE NUMBER OF AVERAGE WEIGHTED WEIGHTED
AVERAGE APR PRINCIPAL RECEIVABLES PRINCIPAL AVERAGE AVERAGE
OF RECEIVABLES BALANCE IN POOL BALANCE REMAINING TERM ORIGINAL TERM
- --------------- ------------ ----------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C>
20.28% $95,706,307 7,556 $12,666 56 mos. 57 mos.
</TABLE>
S-31
<PAGE>
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
AGGREGATE AGGREGATE NUMBER OF NUMBER OF
STATE(1) PRINCIPAL BALANCE PRINCIPAL BALANCE RECEIVABLES RECEIVABLES
- -------------------------------------------------- ----------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
Alabama........................................... $ 3,922,453 4.10% 332 4.39%
California........................................ 18,412,968 19.24 1,356 17.95
Florida........................................... 6,545,217 6.84 510 6.75
Georgia........................................... 2,377,809 2.48 189 2.50
Hawaii............................................ 3,281,002 3.43 247 3.27
Illinois.......................................... 5,127,233 5.36 427 5.65
Indiana........................................... 1,466,127 1.53 136 1.80
Iowa.............................................. 1,023,484 1.07 87 1.15
Louisiana......................................... 4,709,446 4.92 357 4.72
Maryland.......................................... 3,038,967 3.18 239 3.16
Michigan.......................................... 4,697,004 4.91 378 5.00
Minnesota......................................... 1,100,539 1.15 89 1.18
Mississippi....................................... 1,460,660 1.53 110 1.46
Nevada............................................ 2,133,861 2.23 171 2.26
New Jersey........................................ 1,886,621 1.97 151 2.00
New York.......................................... 4,510,466 4.71 376 4.98
North Carolina.................................... 4,694,121 4.90 361 4.78
Ohio.............................................. 1,718,981 1.80 150 1.99
Pennsylvania...................................... 5,147,977 5.38 421 5.57
South Carolina.................................... 1,841,813 1.92 148 1.96
Tennessee......................................... 4,174,863 4.36 338 4.47
Texas............................................. 5,945,757 6.21 454 6.01
Virginia.......................................... 959,616 1.00 80 1.06
All others(2)..................................... 5,529,321 5.78 449 5.94
----------------- ------- ----------- -----------
Total................................... $95,706,307(4) 100.00%(3) 7,556 100.00%(3)
----------------- ------- ----------- -----------
----------------- ------- ----------- -----------
</TABLE>
- ------------
(1) Based on billing address of Obligor.
(2) No other state represents a percentage of the aggregate Principal Balance as
of the Cutoff Date in excess of one percent.
(3) Percentages may not add up to 100% because of rounding.
(4) Dollar amounts may not add up to $95,706,307 because of rounding.
S-32
<PAGE>
<PAGE>
DISTRIBUTION OF THE RECEIVABLES BY APR AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
AGGREGATE AGGREGATE NUMBER OF NUMBER OF
APR RANGE PRINCIPAL BALANCE PRINCIPAL BALANCE RECEIVABLES RECEIVABLES
- -------------------------------------------------- ----------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
Below 17.00%...................................... $ 84,982 0.09% 6 0.08%
17.00% to 17.99%.................................. 2,996,655 3.13 202 2.67
18.00% to 18.99%.................................. 22,708,162 23.73 1,675 22.17
19.00% to 19.99%.................................. 14,091,358 14.72 1,018 13.47
20.00% to 20.99%.................................. 18,290,632 19.11 1,352 17.89
21.00% to 21.99%.................................. 20,333,195 21.25 1,694 22.42
22.00% to 22.99%.................................. 2,783,524 2.91 239 3.16
23.00% to 23.99%.................................. 6,676,246 6.98 611 8.09
24.00% to 24.99%.................................. 7,251,470 7.58 705 9.33
25.00% to 25.99%.................................. 449,391 0.47 48 0.64
26.00% and over................................... 40,693 0.04 6 0.08
----------------- ------- ----------- -----------
Total................................... $95,706,307(2) 100.00%(1) 7,556 100.00%(1)
----------------- ------- ----------- -----------
----------------- ------- ----------- -----------
</TABLE>
- ------------
(1) Percentages may not add up to 100% because of rounding.
(2) Dollar amounts may not add up to $95,706,307 because of rounding.
DISTRIBUTION OF RECEIVABLES BY REMAINING TERM TO
SCHEDULED MATURITY AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
REMAINING TERM TO AGGREGATE AGGREGATE NUMBER OF NUMBER OF
SCHEDULED MATURITY PRINCIPAL BALANCE PRINCIPAL BALANCE RECEIVABLES RECEIVABLES
- -------------------------------------------------- ----------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
Fewer than 21 Months.............................. $ 4,526 0.00% 1 0.01%
21-25 Months...................................... 256,933 0.27 50 0.66
26-30 Months...................................... 507,528 0.53 70 0.93
31-35 Months...................................... 1,508,500 1.58 186 2.46
36-40 Months...................................... 1,517,228 1.59 184 2.44
41-45 Months...................................... 2,351,835 2.46 243 3.22
46-50 Months...................................... 10,427,992 10.90 1,002 13.26
51-55 Months...................................... 11,380,614 11.89 947 12.53
56-60 Months...................................... 67,751,152 70.79 4,873 64.49
----------------- ------- ----------- -----------
Total................................... $95,706,307(2) 100.00%(1) 7,556 100.00%(1)
----------------- ------- ----------- -----------
----------------- ------- ----------- -----------
</TABLE>
- ------------
(1) Percentages may not add up to 100% because of rounding.
(2) Dollar amounts may not add up to $95,706,307 because of rounding.
S-33
<PAGE>
<PAGE>
DISTRIBUTION OF RECEIVABLES BY
DATE OF ORIGINATION AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
AGGREGATE AGGREGATE NUMBER OF NUMBER OF
DATE OF ORIGINATION PRINCIPAL BALANCE PRINCIPAL BALANCE RECEIVABLES RECEIVABLES
- -------------------------------------------------- ----------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
Prior to January 1997............................. $ 138,414 0.14% 13 0.17%
January 1997...................................... 79,459 0.08 8 0.11
February 1997..................................... 236,609 0.25 20 0.26
March 1997........................................ 301,039 0.31 26 0.34
April 1997........................................ 303,917 0.32 24 0.32
May 1997.......................................... 218,034 0.23 18 0.24
June 1997......................................... 348,791 0.36 26 0.34
July 1997......................................... 1,250,362 1.31 96 1.27
August 1997....................................... 1,910,216 2.00 154 2.04
September 1997.................................... 12,310,793 12.86 956 12.65
October 1997...................................... 58,494,788 61.12 4,624 61.20
November 1997..................................... 20,113,885 21.02 1,591 21.06
----------------- ------- ----------- -----------
Total................................... $95,706,307(2) 100.00%(1) 7,556 100.00%(1)
----------------- ------- ----------- -----------
----------------- ------- ----------- -----------
</TABLE>
- ------------
(1) Percentages may not add up to 100% because of rounding.
(2) Dollar amounts may not add up to $95,706,307 because of rounding.
DISTRIBUTION OF RECEIVABLES BY ORIGINAL TERM TO
SCHEDULED MATURITY AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
ORIGINAL TERM TO AGGREGATE AGGREGATE NUMBER OF NUMBER OF
SCHEDULED MATURITY PRINCIPAL BALANCE PRINCIPAL BALANCE RECEIVABLES RECEIVABLES
- -------------------------------------------------- ----------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
Fewer than 21 Months.............................. $ 4,526 0.00% 1 0.01%
21-25 Months...................................... 256,933 0.27 50 0.66
26-30 Months...................................... 501,849 0.52 69 0.91
36-40 Months...................................... 2,754,784 2.88 341 4.51
41-45 Months...................................... 1,906,950 1.99 203 2.69
46-50 Months...................................... 10,912,950 11.40 1,050 13.90
51-55 Months...................................... 10,531,999 11.00 884 11.70
56-60 Months...................................... 68,836,316 71.92 4,958 65.62
----------------- ------- ----------- -----------
Total................................... $95,706,307(2) 100.00%(1) 7,556 100.00%(1)
----------------- ------- ----------- -----------
----------------- ------- ----------- -----------
</TABLE>
- ------------
(1) Percentages may not add up to 100% because of rounding.
(2) Dollar amounts may not add up to $95,706,307 because of rounding.
S-34
<PAGE>
<PAGE>
DISTRIBUTION OF RECEIVABLES BY MODEL YEAR OF FINANCED VEHICLE
AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
AGGREGATE AGGREGATE NUMBER OF NUMBER OF
MODEL YEAR PRINCIPAL BALANCE PRINCIPAL BALANCE RECEIVABLES RECEIVABLES
- -------------------------------------------------- ----------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
Prior to 1990..................................... $ 360,407 0.38% 58 0.77%
1990.............................................. 930,981 0.97 125 1.65
1991.............................................. 1,927,074 2.01 222 2.94
1992.............................................. 3,800,262 3.97 376 4.98
1993.............................................. 8,263,381 8.63 780 10.32
1994.............................................. 15,944,203 16.66 1,348 17.84
1995.............................................. 25,676,807 26.83 1,955 25.87
1996.............................................. 19,715,080 20.60 1,469 19.44
1997.............................................. 16,266,358 17.00 1,063 14.07
1998.............................................. 2,821,754 2.95 160 2.12
----------------- ------- ----------- -----------
Total................................... $95,706,307(2) 100.00%(1) 7,556 100.00%(1)
----------------- ------- ----------- -----------
----------------- ------- ----------- -----------
</TABLE>
- ------------
(1) Percentages may not add up to 100% because of rounding.
(2) Dollar amounts may not add up to $95,706,307 because of rounding.
DISTRIBUTION OF RECEIVABLES BY ORIGINAL PRINCIPAL BALANCE
AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
RANGE OF ORIGINAL AGGREGATE AGGREGATE NUMBER OF NUMBER OF
PRINCIPAL BALANCES PRINCIPAL BALANCE PRINCIPAL BALANCE RECEIVABLES RECEIVABLES
- -------------------------------------------------- ----------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
$0-4,999.......................................... $ 254,215 0.27% 61 0.81%
5,000-9,999....................................... 13,464,855 14.07 1,623 21.48
10,000-14,999..................................... 51,648,181 53.97 4,172 55.21
15,000-19,999..................................... 23,304,120 24.35 1,382 18.29
20,000-24,999..................................... 6,395,040 6.68 293 3.88
25,000 and over................................... 639,896 0.67 25 0.33
----------------- ------- ----------- -----------
Total................................... $95,706,307(2) 100.00%(1) 7,556 100.00%(1)
----------------- ------- ----------- -----------
----------------- ------- ----------- -----------
</TABLE>
- ------------
(1) Percentages may not add up to 100% because of rounding.
(2) Dollar amounts may not add up to $95,706,307 because of rounding.
S-35
<PAGE>
<PAGE>
As of the Cutoff Date, approximately 24.86% of the aggregate Principal
Balance of the Receivables in the Receivables Pool provide for allocation of
payments according to the 'sum of periodic balances' or 'sum of monthly
payments' method, similar to the 'Rule of 78's' ('Rule of 78's Receivables')
and, approximately 75.14% of the aggregate Principal Balance of the Receivables
in the Receivables Pool provide for allocation of payments according to the
'simple interest' method ('Simple Interest Receivables'). A Rule of 78's
Receivable provides for payment by the Obligor of a specified total amount of
payments, payable in equal monthly installments on each due date, which total
represents the principal amount financed and add-on interest in an amount
calculated on the basis of the stated APR for the term of the Receivable. The
rate at which such amount of add-on interest is earned and, correspondingly, the
amount of each fixed monthly payment allocated to reduction of the outstanding
principal are calculated in accordance with the 'Rule of 78's'. A Simple
Interest Receivable provides for the amortization of the amount financed under
the Receivable over a series of fixed level monthly payments. Each monthly
payment consists of an installment of interest which is calculated on the basis
of the outstanding principal balance of the Receivable multiplied by the stated
APR and further multiplied by the period elapsed (as a fraction of a calendar
year) since the preceding payment of interest was made. As payments are received
under a Simple Interest Receivable, the amount received is applied first to
interest accrued to the date of payment and the balance is applied to reduce the
unpaid principal balance. Accordingly, if an Obligor pays a fixed monthly
installment before its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be less
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly greater. Conversely, if an Obligor pays a fixed monthly
installment after its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be greater
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. In either case, the Obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance.
In the event of the prepayment in full (voluntarily or by acceleration) of
a Rule of 78's Receivable, under the terms of the contract, a 'refund' or
'rebate' will be made to the Obligor of the portion of the total amount of
payments then due and payable under the contract allocable to 'unearned' add-on
interest, calculated in accordance with a method equivalent to the Rule of 78's.
If a Simple Interest Receivable is prepaid, instead of receiving a rebate, the
Obligor is required to pay interest only to the date of prepayment. The amount
of a rebate under a Rule of 78's Receivable generally will be less than the
remaining Scheduled Receivable Payments of interest that would have been due
under a Simple Interest Receivable for which all payments were made on schedule.
The Trust will account for the Rule of 78's Receivables as if such
Receivables provided for amortization of the loan over a series of fixed level
payment monthly installments ('Actuarial Receivables'). Amounts received upon
prepayment in full of a Rule of 78's Receivable in excess of the then
outstanding Principal Balance of such Receivable and accrued interest thereon
(calculated pursuant to the actuarial method) will not be passed through to
Noteholders but will be paid to the Servicer as additional servicing
compensation.
YIELD CONSIDERATIONS
On each Payment Date, the Noteholders of record will be entitled to receive
thirty (30) days' interest at the applicable Interest Rate; provided, however,
that on the first Payment Date, the interest payable to the Noteholders of
record of each class of Notes will be an amount equal to the product of (a) the
Interest Rate applicable to such class of Notes, (b) the initial principal
amount of such class of Notes and (c) a fraction (i) the numerator of which is
the number of days from and including the Closing Date to and including December
14, 1997, and (ii) the denominator of which is 360.
On each Payment Rate, the Certificateholders of record will be entitled to
receive thirty (30) days' interest at the Pass-Through Rate; provided, however,
that on the first Payment Date, the interest payable to the Certificateholders
of record will be an amount equal to the product of (a) the Pass-Through Rate,
(b) the initial principal amount of the Certificates and (c) a fraction (i) the
numerator of
S-36
<PAGE>
<PAGE>
which is the number of days from and including the Closing Date to and including
December 14, 1997, and (ii) the denominator of which is 360.
All of the Receivables are prepayable at any time. (For this purpose
'prepayments' include prepayments in full, liquidations due to default, as well
as receipts of proceeds from physical damage, credit life and credit accident
and health insurance policies and certain other Receivables repurchased for
administrative reasons.) The rate of prepayments on the Receivables may be
influenced by a variety of economic, social, and other factors, including the
fact that an Obligor generally may not sell or transfer the Financed Vehicle
securing a Receivable without the consent of CPS. In addition, the rate of
prepayments on the Receivables may be affected by the nature of the Obligors and
the Financed Vehicles and servicing decisions. See 'Risk Factors -- Nature of
Obligors; Servicing' in this Prospectus Supplement. Any reinvestment risks
resulting from a faster or slower incidence of prepayment of Receivables will be
borne entirely by the Noteholders and Certificateholders. See also 'Description
of the Securities -- Optional Redemption' and 'Description of the
Securities -- Mandatory Redemption' in this Prospectus Supplement regarding the
Servicer's option to purchase the Receivables and redeem the Notes and the
Certificates when the aggregate Principal Balance of the Receivables is less
than or equal to 10% or less of the Original Pool Balance.
POOL FACTORS AND OTHER INFORMATION
The 'Pool Balance' at any time represents the aggregate principal balance
of the Receivables at the end of the preceding Collection Period, after giving
effect to all payments received from Obligors, all payments and Purchase Amounts
(as defined herein) remitted by CPS or the Servicer, as the case may be, all for
such Collection Period, all losses realized on Receivables liquidated during
such Collection Period and any Cram Down Losses with respect to such
Receivables. The Pool Balance is computed by allocating payments to principal
and to interest, with respect to Rule of 78's Receivables, using the constant
yield or actuarial method, and with respect to Simple Interest Receivables,
using the simple interest method. The 'Class A-1 Pool Factor' is a seven digit
decimal which the Servicer will compute each month indicating the principal
balance of the Class A-1 Notes as a fraction of the initial principal balance of
the Class A-1 Notes. The Class A-1 Pool Factor will be 1.0000000 as of the
Closing Date; thereafter, the Class A-1 Pool Factor will decline to reflect
reductions in the principal balance of the Class A-1 Notes. An individual Class
A-1 Noteholder's share of the principal balance of the Class A-1 Notes is the
product of (i) the original denomination of the Noteholder's Note and (ii) the
Class A-1 Pool Factor. The 'Class A-2 Pool Factor' is a seven-digit decimal
which the Servicer will compute each month indicating the principal balance of
the Class A-2 Notes as a fraction of the initial principal balance of the Class
A-2 Notes. The Class A-2 Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Class A-2 Pool Factor will decline to reflect reductions in the
principal balance of the Class A-2 Notes. An individual Class A-2 Noteholder's
share of the principal balance of the Class A-2 Notes is the product of (i) the
original denomination of the Noteholder's Note and (ii) the Class A-2 Pool
Factor. The 'Certificate Pool Factor' is a seven-digit decimal which the
Servicer will compute each month indicating the principal balance of the
Certificates as a fraction of the initial principal balance of the Certificates.
The Certificate Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Certificate Pool Factor will decline to reflect reductions in
the principal balance of the Certificates. An individual Certificateholder's
share of the principal balance of the Certificates is the product of (i) the
original denomination of the Certificateholder's Certificate and (ii) the
Certificate Pool Factor.
Pursuant to the Indenture, the Noteholders will receive monthly reports
concerning the payments received on the Receivables, the Pool Balance, the Pool
Factors and various other items of information. Noteholders of record during any
calendar year will be furnished information for tax reporting purposes not later
than the latest date permitted by law. See 'Description of the Trust
Documents -- Statements to Noteholders' in this Prospectus Supplement.
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USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of the Notes
and the Certificates will be applied to the purchase of the CPS Receivables from
CPS, the Samco Receivables from Samco and the Linc Receivables from Linc. CPS,
Samco and Linc will apply the net proceeds received from the Seller to purchase
new Contracts or to repay debt incurred to purchase the Contracts.
THE SELLER, CPS, SAMCO AND LINC
The Seller is a wholly-owned subsidiary of CPS. The Seller was incorporated
in the State of California in June of 1994. The Seller was organized for the
limited purpose of purchasing automobile installment sale contracts from CPS and
transferring such receivables to third parties and any activities incidental to
and necessary or convenient for the accomplishment of such purposes. The
principal executive offices of the Seller are located at 2 Ada, Irvine,
California 92618; telephone (714) 753-6800. In March 1996, CPS formed Samco, an
80 percent-owned subsidiary based in Dallas, Texas. Samco's business plan is to
provide CPS's sub-prime auto finance products to rural areas through IFCs. CPS
believes that many rural areas are not adequately served by other industry
participants due to their distance from large metropolitan areas where a Dealer
marketing representative is most likely to be based. The principal executive
offices of Samco are located at 8150 N. Central Expressway, Dallas, Texas 75206;
telephone (800) 544-8802. Linc's business plan is to provide sub-prime auto
finance products to deposit institutions such as banks, thrifts and credit
unions. CPS believes that such institutions do not generally make loans to
sub-prime borrowers even though they may have relationships with automobile
dealers who sell vehicles to sub-prime borrowers and may have sub-prime
borrowers as deposit customers. The principal executive offices of Linc are
located at One Selleck Street, Norwalk, Connecticut 06855; telephone (203)
831-8300. For further information regarding the Seller and CPS, see 'The Seller
and CPS' in the Prospectus.
THE STANDBY SERVICER
If CPS is terminated or resigns as Servicer, Norwest Bank Minnesota,
National Association (in such capacity, the 'Standby Servicer') will serve as
successor Servicer. The Standby Servicer will receive a fee on each Payment Date
for agreeing to stand by as successor Servicer and for performing certain other
functions. Such fee will be payable to the Standby Servicer from the Servicing
Fee payable to CPS. If the Standby Servicer, or any other entity serving at the
time as Standby Servicer, becomes the successor Servicer, it will receive
compensation at a Servicing Fee Rate not to exceed 3.0% per annum.
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DESCRIPTION OF THE SECURITIES
GENERAL
The Notes will be issued pursuant to the terms of the Indenture, and the
Certificates will be issued pursuant to the terms of the Trust Agreement, forms
of each of which have been filed as exhibits to the Registration Statement.
The Class A Notes initially will be represented by notes registered in the
name of Cede as the nominee of The Depository Trust Company ('DTC'), and will
only be available in the form of book-entries on the records of DTC and
participating members thereof in denominations of $1,000. All references to
'holders' or 'Noteholders' and to authorized denominations, when used with
respect to the Notes, shall reflect the rights of beneficial owners of the Notes
('Note Owners'), and limitations thereof, as they may be indirectly exercised
through DTC and its participating members, except as otherwise specified herein.
See 'Registration of Notes' in this Prospectus Supplement.
PAYMENT OF INTEREST
On each Payment Date, the holders of record of the Class A-1 Notes (the
'Class A-1 Noteholders') as of the related Record Date will be entitled to
receive, pro rata, 30 days of interest at the Class A-1 Interest Rate, on the
outstanding principal balance of the Class A-1 Notes as of the last day of the
related Collection Period. On each Payment Date, the holders of record of the
Class A-2 Notes (the 'Class A-2 Noteholders') as of the related Record Date will
be entitled to receive, pro rata, thirty (30) days of interest at the Class A-2
Interest Rate on the outstanding principal amount of the Class A-2 Notes at the
close of business on the last day of the related Collection Period. On each
Payment Date, the holders of record of the Certificates (the
'Certificateholders' and, together with the Noteholders, the 'Securityholders')
as of the related Record Date will be entitled to receive, pro rata, thirty (30)
days of interest at the Pass-Through Rate on the outstanding principal amount of
the Certificates at the close of business on the last day of the related
Collection Period. Notwithstanding the foregoing, on the first Payment Date, the
interest payable to the Noteholders of record of each class of Notes will be an
amount equal to the product of (a) the Interest Rate applicable to such class of
Notes, (b) the initial principal amount of such class of Notes and (c) a
fraction (i) the numerator of which is the number of days from and including the
Closing Date to and including December 14, 1997, and (ii) the denominator of
which is 360, and interest payable to the Certificateholders will be an amount
equal to the product of (a) the Pass-Through Rate, (b) the initial principal
amount of Certificates and (c) a fraction (i) the numerator of which is the
number of days from and including the Closing Date to and including December 14,
1997, and (ii) the denominator of which is 360. Interest on the Notes which is
due but not paid on any Payment Date will be payable on the next Payment Date
together with, to the extent permitted by law, interest on such unpaid amount at
the applicable Interest Rate, and interest on the Certificates which is due but
not paid on any Payment Date will be payable on the next Payment Date together
with, to the extent permitted by law, interest on such unpaid amount at the
Pass-Through Rate. See 'Description of the Trust Documents -- Distributions' in
this Prospectus Supplement.
PAYMENT OF PRINCIPAL
Principal of the Class A Notes will be payable on each Payment Date in an
amount equal to the Class A Noteholders' Principal Distributable Amount for the
related Collection Period. The 'Class A Noteholders' Principal Distributable
Amount' is equal to the sum of (a) the Class A Noteholders' Percentage (as of
each Payment Date) multiplied by the Principal Distributable Amount and (b) any
unpaid portion of the amount described in clause (a) with respect to a prior
Payment Date. In addition, until the Target Payment Date the Class A Notes will
be entitled to receive the remaining Total Distribution Amount after payments of
amounts having a higher priority of payment have been made, as a further payment
in respect of principal. See 'Description of the Trust
Documents -- Distributions -- Priority of Distribution Amounts.'
On each Payment Date, unless an Event of Default shall have occurred and be
continuing, the amounts distributed on account of the Class A Noteholders'
Principal Distributable Amount will be applied, sequentially, to pay principal
of the Class A-1 Notes until the principal balance of the Class A-1
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Notes has been reduced to zero and then to the holders of the Class A-2 Notes
until the principal balance of the Class A-2 Notes has been reduced to zero. On
each Payment Date on which an Event of Default is continuing, amounts
distributed on account of the Class A Noteholders' Principal Distributable
Amount will be applied, pro rata (based on the outstanding principal amount of
each class of Class A Notes), to the payment of principal of each class of Class
A Notes.
Principal of the Certificates will be payable on each Payment Date in an
amount equal to the Certificateholders' Principal Distributable Amount for the
related Collection Period. The 'Certificateholders' Principal Distributable
Amount' is equal to the sum of (x) the Certificateholders' Percentage (as of
each Payment Date) of the Principal Distributable Amount and (y) any unpaid
portion of the amount described in clause (x) with respect to a prior Payment
Date.
On each Payment Date, an amount equal to the lesser of (A) the portion of
the Total Distribution Amount remaining after the application thereof to pay the
distributions described in clause (i) through (ix) under 'Description of the
Trust Documents Distributions' and (B) the Certificateholders' Principal
Distributable Amount will be applied to pay principal of the Certificates until
the principal balance of the Certificates has been reduced to zero.
MANDATORY REDEMPTION
Upon the occurrence of an Event of Default, and so long as an Insurer
Default shall not have occurred and be continuing, the Notes shall become due
and payable at par with accrued interest thereon, the Insurer will have the
right, but not the obligation, to cause the Indenture Trustee to liquidate the
Trust Assets, in whole or in part, on any date or dates following the
acceleration of the Notes due to such Event of Default, and to distribute the
proceeds of such liquidation in accordance with the terms of the Indenture. The
Insurer may not, however, cause the Indenture Trustee to liquidate the Trust
Assets, in whole or in part, if the proceeds of such liquidation would not be
sufficient to pay all outstanding principal and accrued interest on the Notes
and the Certificates, unless it shall have received instruction to do so by
holders of at least 66 2/3% of the outstanding principal balance of each of the
Class A Notes and the Certificates, respectively. Following the occurrence of
any Event of Default, the Indenture Trustee will continue to submit claims as
necessary under the Policy for any shortfalls in the Scheduled Payments on the
Class A Notes, except that the Insurer, in its sole discretion, may elect to pay
all or any portion of the outstanding amount of the Class A Notes in excess
thereof, plus accrued interest thereon. See 'Description of the Trust
Documents -- Events of Default' and 'The Policy' herein.
OPTIONAL REDEMPTION
In order to avoid excessive administrative expense, the Servicer, or its
successor, is permitted at its option to purchase all remaining Receivables from
the Trust (with the consent of the Insurer if such purchase and redemption would
result in a claim under the Policy or any amount owing to the Insurer or on the
Notes would remain unpaid), on or after the last day of any month on or after
which the then outstanding Pool Balance is equal to 10% or less of the Original
Pool Balance, at a price equal to at least the aggregate of the unpaid principal
amount of the Notes and the Certificates, plus accrued and unpaid interest
thereon as of such last day. Exercise of such right will effect early retirement
of the Notes and the Certificates. Upon declaration of an optional redemption,
the Indenture Trustee will give written notice of termination to each Noteholder
and Certificateholder of record. The final distribution to any Noteholder will
be made only upon surrender and cancellation of such holder's Note at the office
or agency of the Indenture Trustee specified in the notice of termination. Any
funds remaining with the Indenture Trustee, after the Indenture Trustee has
taken certain measures to locate a Noteholder or Certificateholder, and such
measures have failed, will be distributed to The American Red Cross.
REGISTRATION OF NOTES
The Class A Notes will initially be registered in the name of Cede & Co.
('Cede'), the nominee of DTC. DTC is a limited-purpose trust company organized
under the laws of the State of New York, a member of the Federal Reserve System,
a 'clearing corporation' within the meaning of the New York Uniform Commercial
Code, and a 'clearing agency' registered pursuant to the provisions of Section
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17A of the Securities Exchange Act of 1934, as amended. DTC accepts securities
for deposit from its participating organizations ('Participants') and
facilitates the clearance and settlement of securities transactions between
Participants in such securities through electronic book-entry changes in
accounts of Participants, thereby eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks and
trust companies and clearing corporations and may include certain other
organizations. Indirect access to the DTC system is also available to others
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly. See 'Description of the Securities -- Book - Entry Registration' in
the Prospectus.
Persons acquiring beneficial ownership interests in the Class A Notes may
elect to hold their Class A Notes through DTC in the United States, or CEDEL or
Euroclear (in Europe) if they are participants of such systems, or indirectly
through organizations which are participants in such systems. The book-entry
notes will be issued in one or more notes which equal the aggregate principal
balance of the Class A Notes and will initially be registered in the name of
Cede, the nominee of DTC. CEDEL and Euroclear will hold omnibus positions on
behalf of their participants through customers' securities accounts in CEDEL's
and Euroclear's names on the books of their respective depositories which in
turn will hold such positions in customers' securities accounts in the
depositories' names on the books of DTC.
The beneficial owner's ownership of a book-entry note will be recorded on
the records of the brokerage firm, bank, thrift institution or other financial
intermediary (each, a 'Financial Intermediary') that maintains the beneficial
owner's account for such purpose. In turn the Financial Intermediary's ownership
of such book-entry note will be recorded on the records of DTC (or of a
participating firm that acts as agent for the Financial Intermediary, whose
interest will in turn be recorded on the records of DTC, if the beneficial
owner's Financial Intermediary is not a DTC participant and on the records of
CEDEL or Euroclear, as appropriate).
Although DTC, CEDEL and Euroclear have agreed to the foregoing procedures
in order to facilitate transfers of Class A Notes among participants of DTC,
CEDEL and Euroclear, they are under no obligation to perform or continue to
perform such procedures and such procedures may be discontinued at any time.
DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes certain terms of the Samco Purchase
Agreement, the Linc Purchase Agreement, the CPS Purchase Agreement, the Sale and
Servicing Agreement, the Indenture and the Trust Agreement (together, the 'Trust
Documents'). Forms of the Trust Documents have been filed as exhibits to the
Registration Statement. A copy of the Trust Documents will be filed with the
Commission following the issuance of the Securities. This summary does not
purport to be complete and is subject to, and qualified in its entirety by
reference to, all the provisions of the Trust Documents. The following summary
supplements, the description of the general terms and provisions of the Trust
Documents (as such terms are used in the accompanying Prospectus) set forth in
the accompanying Prospectus, to which description reference is hereby made.
SALE AND ASSIGNMENT OF RECEIVABLES
On or prior to the Closing Date, the Seller will purchase from Samco
pursuant to a purchase agreement (the 'Samco Purchase Agreement'), without
recourse, except as provided in the Samco Purchase Agreement, Samco's entire
interest in the Samco Receivables, together with Samco's security interests in
the related Financed Vehicles. On or prior to the Closing Date, the Seller will
purchase from Linc pursuant to a purchase agreement (the 'Linc Purchase
Agreement'), without recourse, except as provided in the Linc Purchase
Agreement, Linc's entire interest in the Linc Receivables, together with Linc's
security interests in the related Financed Vehicles. On or prior to the Closing
Date, CPS will, pursuant to a purchase agreement (the 'CPS Purchase Agreement'
and, together with the Samco
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Purchase Agreement and the Linc Purchase Agreement, the 'Purchase Agreements'),
sell and assign to the Seller, without recourse, except as provided in the
Purchase Agreement, its entire interest in the CPS Receivables, together with
its security interests in the related Financed Vehicles. At the time of issuance
of the Notes, the Seller will sell and assign to the Trust, without recourse
except as provided in the Sale and Servicing Agreement, its entire interest in
the Receivables, together with its security interests in the Financed Vehicles.
Each Receivable will be identified in a schedule appearing as an exhibit to the
related Purchase Agreement. The Indenture Trustee will, concurrently with such
sale and assignment, execute, authenticate, and deliver the Securities to the
Seller in exchange for the Receivables. The Seller will sell the Notes to the
Underwriters. See 'Underwriting' in this Prospectus Supplement.
In the CPS Purchase Agreement, CPS will represent and warrant to the
Seller, among other things, that (i) the information provided in the Purchase
Agreements with respect to the Receivables (including, without limitation, the
Samco Receivables and the Linc Receivables) is correct in all material respects;
(ii) at the dates of origination of the Receivables, physical damage insurance
covering each Financed Vehicle was in effect in accordance with the normal
requirements of CPS, Samco or Linc, as applicable; (iii) at the date of issuance
of the Securities, the Receivables are free and clear of all security interests,
liens, charges, and encumbrances and no offsets, defenses, or counterclaims
against Dealers, IFCs or Deposit Institutions have been asserted or threatened;
(iv) at the date of issuance of the Securities, each of the Receivables is or
will be secured by a first-priority perfected security interest in the related
Financed Vehicle in favor of CPS, Samco or Linc; and (v) each Receivable, at the
time it was originated, complied and, at the date of issuance of the Securities,
complies in all material respects with applicable federal and state laws,
including, without limitation, consumer credit, truth in lending, equal credit
opportunity and disclosure laws. As of the last day of the second (or, if CPS
elects, the first) month following the discovery by or notice to the Seller and
CPS of a breach of any representation or warranty that materially and adversely
affects the interest of the Trust, the Indenture Trustee or the Insurer, unless
the breach is cured, CPS will purchase such Receivable from the Trust for the
Purchase Amount. The repurchase obligation will constitute the sole remedy
available to the Securityholders, the Insurer, the Owner Trustee or the
Indenture Trustee for any such uncured breach; provided, however, that CPS will
be required to indemnify the Owner Trustee, the Indenture Trustee, the Insurer,
the Trust and the Securityholders against all costs, 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 events or facts giving rise to such breach.
On or prior to the Closing Date, the related Contracts will be delivered to
the Indenture Trustee as custodian, and the Indenture Trustee thereafter will
maintain physical possession of the Receivables except as may be necessary for
the servicing thereof by the Servicer. The Receivables will not be stamped to
show the ownership thereof by the Trust. However, CPS's, Samco's and Linc's
accounting records and computer systems will reflect the sale and assignment of
the Receivables to the Seller, and Uniform Commercial Code ('UCC') financing
statements reflecting such sales and assignments will be filed. See 'Formation
of the Trust' in this Prospectus Supplement and 'Certain Legal Aspects of the
Receivables' in the Prospectus.
ACCOUNTS
A segregated lock-box account will be established and maintained with Bank
of America Trust and Savings Association in the name of the Indenture Trustee
for the benefit of the Noteholders and the Insurer, into which all payments made
by Obligors on or with respect to the Receivables must be deposited by the
Lock-Box Processor (the 'Lock-Box Account'). See 'Description of the Trust
Documents Payments on Receivables' in the Prospectus. The Indenture Trustee will
also establish and maintain initially with itself one or more accounts, in the
name of the Indenture Trustee on behalf of the Noteholders and the Insurer, into
which all amounts previously deposited in the Lock-Box Account will be
transferred within two Business Days of the receipt of funds therein (the
'Collection Account'). On the first Business Day after receipt, the Servicer
will deposit all amounts received by it in respect of the Receivables in the
Lock-Box Account or the Collection Account. The Indenture Trustee will also
establish and maintain initially with itself one or more accounts, in the name
of the Indenture Trustee
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on behalf of the Noteholders and the Insurer, from which all distributions with
respect to the Securities and payments to the Insurer will be made (the
'Distribution Account').
The Collateral Agent will establish the Spread Account as a segregated
trust account at its office or at another depository institution or trust
company.
SERVICING COMPENSATION
The Servicer will be entitled to receive the Servicing Fee on each Payment
Date, equal to the sum of (i) the product of one-twelfth of the Servicing Fee
Rate and the Pool Balance as of the close of business on the last day of the
second preceding Collection Period plus (ii) the product of one-twelfth times
0.08% of the aggregate principal balance of the Securities as of the close of
business on the last day of the second preceding Collection Period; provided,
however, that with respect to the first Payment Date, the Servicing Fee will
equal the sum of (i) the product of (x) the number of days from the Closing Date
to and including December 14, 1997, (y) 1/360 and (z) the product of the
Servicing Fee Rate and the Original Pool Balance plus (ii) the product of (x)
the number of days from the Closing Date to and including December 14, 1997, (y)
1/360 and (z) 0.08% of the aggregate principal balance of the Securities as of
the Closing Date (the 'Servicing Fee'). So long as CPS is Servicer, a portion of
the Servicing Fee, equal to the Standby Fee, will be payable to the Standby
Servicer for agreeing to stand by as successor Servicer and for performing
certain other functions. If the Standby Servicer, or any other entity serving at
the time as Standby Servicer, becomes the successor Servicer, it will receive
compensation at a Servicing Fee Rate not to exceed 3.00% per annum. See 'The
Standby Servicer' in this Prospectus Supplement. The Servicer will also collect
and retain, as additional servicing compensation, any late fees, prepayment
charges and other administrative fees or similar charges allowed by applicable
law with respect to the Receivables, and amounts received upon payment in full
of Rule of 78's Receivables in excess of the then outstanding principal balance
of such Receivables and accrued interest thereon (calculated pursuant to the
actuarial method) and will be entitled to reimbursement from the Trust for
certain liabilities. Payments by or on behalf of Obligors will be allocated to
Scheduled Receivable Payments, late fees and other charges and principal and
interest in accordance with the Servicer's normal practices and procedures. The
Servicing Fee will be paid out of collections from the Receivables, prior to
distributions to Noteholders.
The Servicing Fee and additional servicing compensation will compensate the
Servicer for performing the functions of a third party servicer of automotive
receivables as an agent for their beneficial owner, including collecting and
posting all payments, responding to inquiries of Obligors on the Receivables,
investigating delinquencies, sending payment coupons to Obligors, reporting tax
information to Obligors, paying costs of disposition of defaults and policing
the collateral. The Servicing Fee also will compensate the Servicer for
administering the Receivables, including accounting for collections and
furnishing monthly and annual statements to the Indenture Trustee and the
Insurer with respect to distributions and generating federal income tax
information. The Servicing Fee also will reimburse the Servicer for certain
taxes, accounting fees, outside auditor fees, data processing costs and other
costs incurred in connection with administering the Receivables.
DISTRIBUTIONS
No later than 10:00 a.m., Minneapolis time, on each Determination Date, the
Servicer will inform the Indenture Trustee of the amount of aggregate
collections on the Receivables, and the aggregate Purchase Amount of Receivables
to be repurchased by CPS or to be purchased by the Servicer, in each case, with
respect to the related Collection Period.
The Servicer will determine prior to such Determination Date the Total
Distribution Amount, the Class A Noteholders' Interest Distributable Amount, the
Class A Noteholders' Principal Distributable Amount, the Certificateholders'
Interest Distributable Amount and the Certificateholders' Principal
Distributable Amount.
The 'Determination Date' applicable to any Payment Date will be the earlier
of (i) the seventh Business Day of the month of such Payment Date and (ii) the
fifth Business Day preceding such Payment Date.
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Determination of Total Distribution Amount. The 'Total Distribution Amount'
for a Payment Date will be the sum of the following amounts with respect to the
preceding Collection Period: (i) all collections on Receivables; (ii) all
proceeds received during the Collection Period with respect to Receivables that
became Liquidated Receivables during the Collection Period in accordance with
the Servicer's customary servicing procedures, net of the reasonable expenses
incurred by the Servicer in connection with such liquidation and any amounts
required by law to be remitted to the Obligor on such Liquidated Receivable
('Liquidation Proceeds') in accordance with the Servicer's customary servicing
procedures; (iii) proceeds from Recoveries with respect to Liquidated
Receivables; (iv) earnings on investments of funds in the Collection Account
during the related Collection Period; and (v) the Purchase Amount of each
Receivable that was repurchased by CPS or purchased by the Servicer as of the
last day of the related Collection Period.
'Cram Down Loss' means, with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
Scheduled Payments to be made on a Receivable, an amount equal to such reduction
in Principal Balance of such Receivable or the reduction in the net present
value (using as the discount rate the lower of the contract rate or the rate of
interest specified by the court in such order) of the Scheduled Payments as so
modified or restructured. A Cram Down Loss shall be deemed to have occurred on
the date such order is entered.
'Liquidated Receivable' means a Receivable (i) which has been liquidated by
the Servicer through the sale of the Financed Vehicle, or (ii) for which the
related Financed Vehicle has been repossessed and 90 days have elapsed since the
date of such repossession, or (iii) as to which an Obligor has failed to make
more than 90% of a Scheduled Receivable Payment of more than ten dollars for 120
or more days as of the end of a Collection Period, or (iv) with respect to which
proceeds have been received which, in the Servicer's judgment, constitute the
final amounts recoverable in respect of such Receivable.
'Purchase Amount' means, with respect to a Receivable, the amount, as of
the close of business on the last day of a Collection Period, required to prepay
in full such Receivable under the terms thereof including interest to the end of
the month of purchase.
'Principal Balance' of a Receivable, as of the close of business on the
last day of a Collection Period, means the amount financed minus the sum of the
following amounts without duplication: (i) in the case of a Rule of 78's
Receivable, that portion of all Scheduled Receivable Payments received on or
prior to such day allocable to principal using the actuarial or constant yield
method; (ii) in the case of a Simple Interest Receivable, that portion of all
Scheduled Receivable Payments received on or prior to such day allocable to
principal using the Simple Interest Method; (iii) any payment of the Purchase
Amount with respect to the Receivable allocable to principal; (iv) any Cram Down
Loss in respect of such Receivable; and (v) any prepayment in full or any
partial prepayment applied to reduce the Principal Balance of the Receivable.
'Recoveries' means, with respect to a Liquidated Receivable, the monies
collected from whatever source, during any Collection Period following the
Collection Period in which such Receivable became a Liquidated Receivable, net
of the reasonable costs of liquidation plus any amounts required by law to be
remitted to the Obligor.
'Scheduled Receivable Payment' means, for any Collection Period for any
Receivable, the amount indicated in such Receivable as required to be paid by
the Obligor in such Collection Period (without giving effect to deferments of
payments granted to Obligors by the Servicer pursuant to the Sale and Servicing
Agreement or any rescheduling of payments in any insolvency or similar
proceedings).
Calculation of Distribution Amounts. The Noteholders will be entitled to
receive the Noteholders' Distributable Amount with respect to each Payment Date.
The 'Noteholders' Distributable Amount' with respect to a Payment Date will be
an amount equal to the sum of: (i) the 'Class A Noteholders' Principal
Distributable Amount,' consisting of the Class A Noteholders' Percentage of the
following: (a) collections on Receivables (other than Liquidated Receivables)
allocable to principal including full and partial prepayments; (b) the portion
of the Purchase Amount allocable to principal of each Receivable that was
repurchased by CPS or purchased by the Servicer as of the last day of the
related
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Collection Period and, at the option of the Insurer the Principal Balance of
each Receivable that was required to be but was not so purchased or repurchased
(without duplication of the amounts referred to in (a) above); (c) the Principal
Balance of each Receivable that first became a Liquidated Receivable during the
preceding Collection Period (without duplication of the amounts included in (a)
above); (d) the aggregate amount of Cram Down Losses with respect to the
Receivables that shall have occurred during the preceding Collection Period
(without duplication of amounts included in (a) through (c) above); and (e) any
proceeds from the liquidation of the Trust Assets pursuant to an acceleration of
the Notes upon an Event of Default (the amounts set forth in (a) through (e),
the 'Principal Distributable Amount') (ii) the Class A Noteholders' Principal
Carryover Shortfall and (iii) the Class A Noteholders' Interest Distributable
Amount (as defined herein).
The Certificateholders will be entitled to receive the Certificateholders'
Distributable Amount with respect to each Payment Date. The 'Certificateholders'
Distributable Amount' with respect to a Payment Date will be an amount equal to
the sum of; (i) the 'Certificateholders' Principal Distributable Amount',
consisting of the Certificateholders' Percentage of the Principal Distributable
Amount plus the Certificateholders' Principal Carryover Shortfall; and (ii) the
'Certificateholders' Interest Distributable Amount', consisting of thirty (30)
days' interest at the Pass-Through Rate on the principal balance of the
Certificates as of the close of business on the last day of the related
Collection Period plus the Certificateholders' Interest Carryover Shortfall,
provided, however, that on the first Payment Date, the Certificateholders'
Interest Distributable Amount will include interest from and including the
Closing Date to and including December 14, 1997.
On the Final Scheduled Payment Date, the Class A Noteholders' Principal
Distributable Amount will equal the then outstanding principal balance of the
Class A Notes and the Certificateholders' Principal Distributable Amount will
equal the then outstanding principal balance of the Certificates.
For the purposes hereof, the following terms shall have the following
meanings:
The 'Certificateholders' Percentage' will (a) on any Payment Date
prior to the Payment Date on which the principal amount of the Class A-2
Notes is reduced to zero, be 5.0%, (b) on the Payment Date on which the
principal amount of the Class A-2 Notes is reduced to zero and each Payment
Date thereafter until the principal amount of the Certificates is reduced
to zero, be 100%.
'Certificateholders' Interest Carryover Shortfall' means, with respect
to any Payment Date, the excess of the Certificateholders' Interest
Distributable Amount for the preceding Payment Date over the amount that
was actually deposited in the Distribution Account on such preceding
Payment Date on account of the Certificateholders' Interest Distributable
Amount, plus interest on the amount of interest due but not paid to the
Certificateholders on such preceding Payment Date, to the extent permitted
by law, at the Pass-Through Rate from such preceding Payment Date to but
excluding the current Payment Date.
'Certificateholders' Principal Carryover Shortfall' means, with
respect to any Payment Date, the excess of the Certificateholders'
Principal Distributable Amount for the preceding Payment Date over the
amount that was actually deposited in the Distribution Account on such
preceding Payment Date on account of the Certificateholders' Principal
Distributable Amount.
'Class A Noteholders' Interest Distributable Amount' means, with
respect to any Payment Date, the sum of (i) the Class A-1 Noteholders'
Interest Distributable Amount and (ii) the Class A-2 Noteholders' Interest
Distributable Amount.
The 'Class A Noteholders' Percentage' will (a) on any Payment Date on
or prior to the Target Payment Date, be 95%, (b) on any Payment Date after
the Target Payment Date but prior to the Payment Date on which the
principal amount of the Class A-2 Notes is reduced to zero, be 91%, (c) on
the Payment Date on which the principal amount of the Class A-2 Notes would
be reduced to zero by applying clause (b) above, be the percentage
equivalent of a fraction, the numerator of which is the principal amount of
the Class A-2 Notes immediately prior to such Payment Date, and the
denominator of which is the sum of the then outstanding principal amount of
the Notes and the Certificates and (d) on any other Payment Date, be 0%.
'Class A Noteholders' Principal Carryover Shortfall' means, with
respect to any Payment Date, the excess of the Class A Noteholders'
Principal Distributable Amount for the preceding
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Payment Date over the amount that was actually deposited in the
Distribution Account on such preceding Payment Date on account of the Class
A Noteholders' Principal Distributable Amount.
'Class A Target Amount' means, with respect to any Payment Date, an
amount equal to 90% of the aggregate Principal Balance of the Receivables
as of such Payment Date after giving effect to all payments of principal on
the Receivables received during the related Collection Period.
'Class A-1 Noteholders' Interest Carryover Shortfall' means, with
respect to any Payment Date, the excess of the Class A-1 Noteholders'
Interest Distributable Amount for the preceding Payment Date over the
amount that was actually deposited in the Distribution Account on such
preceding Payment Date on account of the Class A-1 Noteholders' Interest
Distributable Amount, plus interest on the amount of interest due but not
paid to Class A-1 Noteholders on the preceding Payment Date, to the extent
permitted by law, at the Class A-1 Interest Rate from such preceding
Payment Date to but excluding the current Payment Date.
'Class A-1 Noteholders' Interest Distributable Amount' means, with
respect to any Payment Date, the sum of the Class A-1 Noteholders' Monthly
Interest Distributable Amount for such Payment Date and the Class A-1
Noteholders' Interest Carryover Shortfall for such Payment Date.
'Class A-1 Noteholders' Monthly Interest Distributable Amount' means,
(a) for the first Payment Date, an amount equal to the product of (i) the
Class A-1 Interest Rate, (ii) the initial principal balance of the Class
A-1 Notes and (iii) a fraction, the numerator of which is the actual number
of days elapsed from and including the Closing Date to and including
December 14, 1997, and the denominator of which is 360 and (b) for any
Payment Date after the first Payment Date, an amount equal to the product
of (i) one-twelfth of the Class A-1 Interest Rate and (ii) the outstanding
principal balance of the Class A-1 Notes as of the close of the preceding
Payment Date (after giving effect to all distributions on account of
principal on such preceding Payment Date).
'Class A-2 Noteholders' Interest Carryover Shortfall' means, with
respect to any Payment Date, the excess of the Class A-2 Noteholders'
Interest Distributable Amount for the preceding Payment Date over the
amount that was actually deposited in the Distribution Account on such
preceding Payment Date on account of the Class A-2 Noteholders' Interest
Distributable Amount, plus interest on the amount of interest due but not
paid to Class A-2 Noteholders on the preceding Payment Date, to the extent
permitted by law, at the Class A-2 Interest Rate from such preceding
Payment Date to but excluding the current Payment Date.
'Class A-2 Noteholders' Interest Distributable Amount' means, with
respect to any Payment Date, the sum of the Class A-2 Noteholders' Monthly
Interest Distributable Amount for such Payment Date and the Class A-2
Noteholders' Interest Carryover Shortfall for such Payment Date.
'Class A-2 Noteholders' Monthly Interest Distributable Amount' means,
(a) for the first Payment Date, an amount equal to the product of (i) the
Class A-2 Interest Rate, (ii) the initial principal balance of the Class
A-2 Notes and (iii) a fraction, the numerator of which is the actual number
of days elapsed from and including the Closing Date to and including
December 14, 1997, and the denominator of which is 360 and (b) for any
Payment Date after the first Payment Date, an amount equal to the product
of (i) one-twelfth of the Class A-2 Interest Rate and (ii) the outstanding
principal balance of the Class A-2 Notes as of the close of the preceding
Payment Date (after giving effect to all distributions on account of
principal on such preceding Payment Date).
'Target Payment Date' means the first Payment Date on which the then
outstanding principal amount of the Class A Notes equals or is less than
the Class A Target Amount after giving effect to payments made on such
Payment Date.
Priority of Distribution Amounts. On each Determination Date, the
Servicer will calculate the amount to be distributed to the Noteholders.
On each Payment Date, the Indenture Trustee (based on the Servicer's
determination made on the related Determination Date) shall make the following
distributions in the following order of priority:
(i) to the Servicer, from the Total Distribution Amount, the Servicing
Fee and all unpaid Servicing Fees from prior Collection Periods; provided,
however, that as long as CPS is the Servicer and Norwest Bank Minnesota,
National Association, is the Standby Servicer, the Indenture Trustee
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will first pay to the Standby Servicer out of the Servicing Fee otherwise
payable to CPS an amount equal to the Standby Fee;
(ii) in the event the Standby Servicer becomes the successor Servicer,
to the Standby Servicer, from the Total Distribution Amount (as such Total
Distribution Amount has been reduced by payments pursuant to clause (i)
above), to the extent not previously paid by the predecessor Servicer
pursuant to the Sale and Servicing Agreement, reasonable transition
expenses (up to a maximum of $50,000) incurred in becoming successor
Servicer;
(iii) to the Indenture Trustee and the Owner Trustee, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced by
payments pursuant to clauses (i) and (ii) above), the fees payable thereto
for services pursuant to the Indenture and the Trust Agreement (the
'Trustee Fees') and reasonable out-of-pocket expenses thereof, (including
counsel fees and expenses) and all unpaid Trustee Fees and all unpaid
reasonable out-of-pocket expenses (including counsel fees and expenses)
from prior Collection Periods; provided, however, that unless an Event of
Default shall have occurred and be continuing, expenses payable to the
Indenture Trustee and Owner Trustee pursuant to this clause (iii) and
expenses payable to the Collateral Agent pursuant to clause (iv) below
shall be limited to a total of $50,000 per annum;
(iv) to the Collateral Agent, from the Total Distribution Amount (as
such Total Distribution Amount has been reduced by payments pursuant to
clauses (i) through (iii) above), all fees and expenses payable to the
Collateral Agent with respect to such Payment Date;
(v) to the Class A Noteholders, from the Total Distribution Amount (as
such Total Distribution Amount has been reduced by payments pursuant to
clauses (i) through (iv) above) the Class A Noteholders' Interest
Distributable Amount for such Payment Date;
(vi) unless an Event of Default has occurred and is continuing, to the
Certificateholders, from the Total Distribution Amount (as such Total
Distribution Amount has been reduced by payments pursuant to clauses (i)
through (v) above) the Certificateholders' Interest Distributable Amount
for such Payment Date;
(vii) to the Class A Noteholders, from the Total Distribution Amount
(as such Total Distribution Amount has been reduced by payments pursuant to
clauses (i) through (vi) above), the Class A Noteholders' Principal
Distributable Amount for such Payment Date to be distributed in accordance
with 'Description of the Securities -- Payment of Principal';
(viii) to the Insurer, from the Total Distribution Amount (as such
Total Distribution Amount has been reduced by payments made pursuant to
clauses (i) through (vii) above), any amounts due to the Insurer under the
terms of the Trust Agreement and under the Insurance Agreement;
(ix) in the event any Person other than the Standby Servicer becomes
the successor Servicer, to such successor Servicer, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced by
payments pursuant to clauses (i) through (viii) above) to the extent not
previously paid by the predecessor Servicer, reasonable transition expenses
(up to a maximum of $50,000 for all such expenses) incurred in acting as
successor Servicer;
(x) unless an Event of Default has occurred and is continuing, to the
Certificateholders, from the Total Distribution Amount (as such Total
Distribution Amount has been reduced by payments pursuant to clauses (i)
through (ix) above), the Certificateholders' Principal Distributable Amount
for such Payment Date;
(xi) until the Target Payment Date, the remaining Total Distribution
Amount, if any, to the holders of the then paying class of Class A Notes as
a payment of principal;
(xii) if an Event of Default shall have occurred and be continuing, to
the Certificateholders, from the Total Distribution Amount (as such Total
Distribution Amount has been reduced by payments pursuant to clauses (i)
through (xi) above), the Certificateholders' Interest Distributable Amount
for such Payment Date;
(xiii) if an Event of Default shall have occurred and be continuing,
to the Certificateholders, from the Total Distribution Amount (as such
Total Distribution Amount has been reduced by
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payments pursuant to clauses (i) through (xii) above) the
Certificateholders' Principal Distributable Amount for such Payment Date;
and
(xiv) after the Target Payment Date, to the Collateral Agent, for
deposit into the Spread Account, the remaining Total Distribution Amount,
if any.
The Certificates will not receive any payment of principal or interest on
any Payment Date prior to the Target Payment Date if an Event of Default is
continuing on such Payment Date and the Certificates will not receive any
payment of interest or principal on any Payment Date after the Target Payment
Date if an Event of Default is continuing on such Payment Date until the full
amount of the Noteholders' Distributable Amount due to the Class A Noteholders
with respect to such Payment Date has been deposited in the Distribution
Account.
On the third business day prior to a Payment Date, the Indenture Trustee
will determine, based on a certificate from the Servicer, whether there are
amounts sufficient, after payment of amounts as set forth in the priorities of
distribution in the Indenture, to distribute the Class A Noteholders'
Distributable Amount.
The Spread Account. As part of the consideration for the issuance of the
Policy, the Seller has agreed to cause to be established with Norwest Bank
Minnesota, National Association (in such capacity, the 'Collateral Agent') an
account (the 'Spread Account') for the benefit of the Insurer and the Indenture
Trustee on behalf of the Class A Noteholders. The Collateral Agent will not hold
the Requisite Amount for the Certificateholders. After the Target Payment Date
any portion of the Total Distribution Amount remaining on any Payment Date after
payment of all fees and expenses due on such date to the Servicer, the Standby
Servicer, the Indenture Trustee, the Owner Trustee, any successor Servicer and
the Collateral Agent and all amounts owing to the Insurer on such date and all
principal and interest payments due to the Noteholders and Certificateholders on
such Payment Date, will be deposited in the Spread Account and held by the
Collateral Agent for the benefit of the Insurer and the Indenture Trustee on
behalf of the Class A Noteholders. If on any Payment Date, the Total
Distribution Amount is insufficient to pay all distributions required to be made
on such day pursuant to priorities (i) through (v) and (vii) through (ix) under
' Priority of Distribution Amounts', then amounts on deposit in the Spread
Account will be applied to pay the amounts due on such Payment Date pursuant to
such priorities (i) through (v) and (vii) through (ix).
Amounts on deposit in the Spread Account on any Payment Date which (after
all payments required to be made on such Payment Date have been made) are in
excess of the Requisite Amount will be released to or at the direction of the
Seller on such Payment Date.
So long as an Insurer Default shall not have occurred and be continuing,
the Insurer will be entitled to exercise in its sole discretion all rights under
the master spread account agreement among the Seller, the Insurer, the Indenture
Trustee and the Collateral Agent (the 'Master Spread Account Agreement') with
respect to the Spread Account and any amounts on deposit therein and will have
no liability to the Indenture Trustee or the Noteholders for the exercise of
such rights. The Insurer (so long as an Insurer Default shall not have occurred
and be continuing) may, with the written consent of CPS, the Seller and the
Collateral Agent but without the consent of the Indenture Trustee or any
Noteholder, reduce the Requisite Amount or modify any term of the Master Spread
Account Agreement (including terminating the Master Spread Account Agreement and
releasing all funds on deposit in the Spread Account); provided, however, that
the Insurer will agree that it will not modify the terms of or terminate the
existence of the Spread Account such that the Class A Notes, without the benefit
of the Policy, would be rated less than 'BBB' by Standard & Poor's or 'Baa2' by
Moody's. Because the Requisite Amount or the existence of the Spread Account may
be modified or terminated by the Insurer as described above, Class A Noteholders
should not rely on amounts in the Spread Account for payments of principal or
interest on the Class A Notes.
EVENTS OF DEFAULT
Unless an Insurer Default shall have occurred and be continuing, 'Events of
Default' under the Indenture will consist of those events defined in the
Insurance Agreement as Insurance Agreement Indenture Cross Defaults, and will
constitute an Event of Default under the Indenture only if the
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Insurer shall have delivered to the Indenture Trustee a written notice
specifying that any such Insurance Agreement Indenture Cross Default constitutes
an Event of Default under the Indenture. An 'Insurance Agreement Indenture Cross
Default' may result from: (i) a demand for payment under the Policy; (ii) an
Insolvency Event (as defined herein); (iii) the Trust becoming taxable as an
association (or publicly traded partnership) taxable as a corporation for
federal or state income tax purposes; (iv) the sum of the Total Distribution
Amount with respect to any Payment Date plus the amount (if any) available from
certain collateral accounts maintained for the benefit of the Insurer is less
than the sum of the amounts described in clauses (i) through (viii) under
'Description of the Trust Documents -- Distributions' herein; and (v) any
failure to observe or perform in any material respect any other covenants,
representation, warranty or agreements of the Trust in the Indenture, any
certificate or other writing delivered in connection therewith, and such failure
continues for 30 days after written notice of such failure or incorrect
representation or warranty has been given to the Trust and the Indenture Trustee
by the Insurer.
Upon the occurrence of an Event of Default, and so long as an Insurer
Default shall not have occurred and be continuing, the Notes shall become due
and payable at par with accrued interest thereon, the Insurer will have the
right, but not the obligation, to cause the Indenture Trustee to liquidate the
Trust Assets, in whole or in part, on any date or dates following the
acceleration of the Notes due to such Event of Default, and to distribute the
proceeds of such liquidation in accordance with the terms of the Indenture. The
Insurer may not, however, cause the Indenture Trustee to liquidate the Trust
Assets, in whole or in part, if the proceeds of such liquidation would not be
sufficient to pay all outstanding principal and accrued interest on the Notes
and the Certificates, unless it shall have received instruction to do so by
holders of at least 66 2/3% of the outstanding principal balance of each of the
Class A Notes and the Certificates, respectively. Following the occurrence of
any Event of Default, the Indenture Trustee will continue to submit claims as
necessary under the Policy for any shortfalls in the Scheduled Payments on the
Class A Notes, except that the Insurer, in its sole discretion, may elect to pay
all or any portion of the outstanding amount of the Class A Notes in excess
thereof, plus accrued interest thereon. See 'The Policy' and 'Description of the
Securities -- Mandatory Prepayment' herein.
If an Insurer Default has occurred and is continuing, 'Events of Default'
will consist of the following events set forth in the Indenture: (i) a default
for five days or more in the payment of any interest on the Notes; (ii) a
default for five days or more in the payment of the principal of or any
installment of the principal of the Notes when the same becomes due and payable
on the Final Scheduled Payment Date; (iii) a default in the observance or
performance in any material respect of any covenant or agreement of the Trust
made in the Indenture, or any representation or warranty made by the Trust in
the Indenture or in any certificate delivered pursuant thereto or in connection
therewith having been incorrect as of the time made, and the continuation of any
such default or the failure to cure such breach of a representation or warranty
for a period of 30 days (or such longer period not in excess of 90 days as is
reasonably necessary to cure such default) after notice thereof is given to the
Trust by the Trustee or to the Trust and the Trustee by the holders of at least
25% in principal amount of the Notes then outstanding; or (iv) certain events of
bankruptcy, insolvency, receivership or liquidation of the Trust.
Upon the occurrence of an Event of Default, and so long as an Insurer
Default has occurred and is continuing the Trustee or the holders of Notes
representing at least a majority of the principal amount of the Notes then
outstanding may declare the principal of the Notes to be immediately due and
payable. Such declaration may, under certain circumstances, be rescinded by the
holders of Notes representing at least a majority of the principal amount of the
Notes then outstanding. The Trustee may also institute proceedings to collect
amounts due or foreclose on the Trust Property, exercise remedies as a secured
party, sell the related Receivables or elect to have the Trust maintain
possession of such Receivables and continue to apply collections on such
Receivables as if there had been no declaration of acceleration. The Trustee,
however, will be prohibited from selling the related Receivables following an
Event of Default unless (i) the holders of all the outstanding Notes consent to
such sale; (ii) the proceeds of such sale are sufficient to pay in full the
principal of and the accrued interest on such outstanding Notes at the date of
such sale; or (iii) the Trustee determines that the proceeds of the Receivables
would not be sufficient on an ongoing basis to make all payments of the Notes as
such payments would have become due if such obligations had not been declared
due and payable, and the
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Trustee obtains the consent of the holders of 66 2/3% of the aggregate
outstanding amount of the Notes. Following a declaration upon an Event of
Default that the Notes are immediately due and payable, Noteholders will be
entitled to (i) ratable repayment of principal on the basis of their respective
unpaid principal balances and (ii) ratable payment of unpaid interest, due and
payable on the Notes.
STATEMENTS TO NOTEHOLDERS
On each Payment Date, the Indenture Trustee will include with each
distribution to each Noteholder of record as of the close of business on the
applicable Record Date and each Rating Agency that is currently rating the Notes
a statement (prepared by the Servicer) setting forth the following information
with respect to the preceding Collection Period, to the extent applicable: (i)
the amount of the distribution allocable to principal of each class of Notes and
the Certificates; (ii) the amount of the distribution allocable to interest on
each class of Notes and the Certificates; (iii) the Pool Balance and the Pool
Factor for each class of Notes as of the close of business on the last day of
the preceding Collection Period; (iv) the aggregate principal balance of each
class of Notes and the Certificates 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 (i) above; (v) the amount of the Servicing Fee paid to
the Servicer with respect to the related Collection Period (inclusive of the
Standby Fee), the amount of any unpaid Servicing Fees and the change in such
amount from that of the prior Payment Date; (vi) the amount of the Class A-1
Noteholders' Interest Carryover Shortfall, Class A-2 Noteholders' Interest
Carryover Shortfall, and Certificateholders' Interest Carryover Shortfall, if
applicable, and Class A Noteholders' Principal Carryover Shortfall, and
Certificateholders' Principal Carryover Shortfall, if applicable, on such
Payment Date and the change in such amounts from those on the prior Payment
Date; (vii) the amount paid to the Class A Noteholders under the Policy for such
Payment Date; (viii) the amount distributable to the Insurer on such Payment
Date; (ix) the aggregate amount in the Spread Account and the change in such
amount from the previous Payment Date; (x) the number of Receivables and the
aggregate gross amount scheduled to be paid thereon, including unearned finance
and other charges, for which the related Obligors are delinquent in making
Scheduled Receivable Payments between 31 and 59 days and 60 days or more; (xi)
the number and the aggregate Purchase Amount of Receivables repurchased by CPS
or purchased by the Servicer; and (xii) the cumulative Principal Balance of all
Receivables that have become Liquidated Receivables, net of Recoveries, during
the period from the Cutoff Date to the last day of the related Collection
Period.
Each amount set forth pursuant to subclauses (i), (ii), (v) and (vi) above
shall be expressed in the aggregate and as a dollar amount per $1,000 of
original principal balance of a Note.
Within the prescribed period of time for tax reporting purposes after the
end of each calendar year during the term of the Sale and Servicing Agreement,
the Indenture Trustee will mail to each person who at any time during such
calendar year shall have been a Noteholder and received any payment on such
holder's Notes, a statement (prepared by the Servicer) containing the sum of the
amounts described in (i), (ii) and (v) above for the purposes of such
Noteholder's preparation of federal income tax returns. See 'Description of the
Trust Documents Statements to Noteholders' and 'Federal Income Tax Consequences'
in this Prospectus Supplement.
EVIDENCE AS TO COMPLIANCE
The Sale and Servicing Agreement will provide that a firm of independent
certified public accountants will furnish to the Indenture Trustee and the
Insurer on or before July 31 of each year, beginning July 31, 1998, a report as
to compliance by the Servicer during the preceding twelve months ended March 31
with certain standards relating to the servicing of the Receivables (or in the
case of the first such certificate, the period from the Cutoff Date to March 31,
1998).
The Sale and Servicing Agreement will also provide for delivery to the
Indenture Trustee and the Insurer, on or before July 31 of each year, commencing
July 31, 1998 of a certificate signed by an officer of the Servicer stating that
the Servicer has fulfilled its obligations under the Sale and Servicing
Agreement throughout the preceding twelve months ended March 31 or, if there has
been a default in the fulfillment of any such obligation, describing each such
default (or in the case of the first such
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certificate, the period from the Cutoff Date to March 31, 1998). The Servicer
has agreed to give the Indenture Trustee and the Insurer notice of any Events of
Default under the Sale and Servicing Agreement.
Copies of such statements and certificates may be obtained by Noteholders
by a request in writing addressed to the Indenture Trustee.
CERTAIN MATTERS REGARDING THE SERVICER
The Sale and Servicing Agreement will provide that the Servicer may not
resign from its obligations and duties as Servicer thereunder except upon
determination that its performance of such duties is no longer permissible under
applicable law and with the consent of the Insurer. No such resignation will
become effective until a successor servicer has assumed the servicing
obligations and duties under the Sale and Servicing Agreement. In the event CPS
resigns as Servicer or is terminated as Servicer, the Standby Servicer has
agreed pursuant to the Servicing Assumption Agreement to assume the servicing
obligations and duties under the Sale and Servicing Agreement; however, so long
as an Insurer Default shall not have occurred and be continuing, the Insurer in
its sole and absolute discretion may appoint a successor Servicer other than the
Standby Servicer.
The Sale and Servicing Agreement will further provide that neither the
Servicer nor any of its directors, officers, employees, and agents will be under
any liability to the Trust or the Noteholders for taking any action or for
refraining from taking any action pursuant to the Sale and Servicing Agreement,
or for errors in judgment; provided, however, that neither the Servicer nor any
such person will be protected against any liability that would otherwise be
imposed by reason of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of obligations and
duties thereunder. In addition, the Sale and Servicing Agreement will provide
that the Servicer is under no obligation to appear in, prosecute, or defend any
legal action that is not incidental to its servicing responsibilities under the
Sale and Servicing Agreement and that, in its opinion, may cause it to incur any
expense or liability.
Under the circumstances specified in the Sale and Servicing Agreement any
entity into which the Servicer may be merged or consolidated, or any entity
resulting from any merger or consolidation to which the Servicer is a party, or
any entity succeeding to the business of the Servicer which corporation or other
entity in each of the foregoing cases assumes the obligations of the Servicer,
will be the successor of the Servicer under the Sale and Servicing Agreement.
The Sale and Servicing Agreement provides that the rights and obligations
of the Servicer terminate after 90 days unless renewed by the Insurer for
successive 90-day periods. The Insurer will agree to grant continuous renewals
so long as (i) no Servicer Termination Event under the Sale and Servicing
Agreement has occurred and (ii) no event of default under the Insurance
Agreement has occurred. See 'Description of the Securities -- Certain Matters
Regarding the Servicer' in the Prospectus.
SERVICER TERMINATION EVENTS
Any of the following events will constitute a 'Servicer Termination Event'
under the Sale and Servicing Agreement: (i) any failure by the Servicer to
deliver to the Indenture Trustee for distribution to the Securityholders any
required payment, which failure continues unremedied for two Business Days (or,
in the case of a payment or deposit to be made no later than a Payment Date, the
failure to make such payment or deposit by such Payment Date), or any failure to
deliver to the Indenture Trustee the annual accountants' report, the annual
statement as to compliance or the statement to the Noteholders, in each case,
within five days of the date it is due; (ii) any failure by the Servicer duly to
observe or perform in any material respect any other covenant or agreement in
the Sale and Servicing Agreement and continues unremedied for 30 days after the
giving of written notice of such failure (1) to the Servicer or the Seller, as
the case may be, by the Insurer or by the Indenture Trustee, or (2) to the
Servicer or the Seller, as the case may be, and to the Indenture Trustee and the
Insurer by the holders of Notes evidencing not less than 25% of the outstanding
principal balance of the Notes; (iii) certain events of insolvency, readjustment
of debt, marshaling of assets and liabilities, or similar proceedings
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with respect to the Servicer or, so long as CPS is Servicer, of any of its
affiliates, and certain actions by the Servicer, the Seller or, so long as CPS
is Servicer, of any of its affiliates, indicating its insolvency, reorganization
pursuant to bankruptcy proceedings, or inability to pay its obligations; (iv) a
claim is made under the Policy; or (v) the occurrence of an event of default
under the Insurance Agreement.
RIGHTS UPON SERVICER TERMINATION EVENT
Following the occurrence of a Servicer Termination Event that remains
unremedied, (x) provided no Insurer Default shall have occurred and be
continuing, the Insurer in its sole and absolute discretion or (y) if an Insurer
Default shall have occurred and be continuing, then the Indenture Trustee or the
holders of Notes evidencing not less than 25% of the outstanding principal
balance of the Notes may terminate all the rights and obligations of the
Servicer under the Sale and Servicing Agreement, whereupon the Standby Servicer,
or such other successor Servicer as shall be or have been appointed by the
Insurer (or, if an Insurer Default shall have occurred and be continuing, by the
Indenture Trustee or the Noteholders, as described above) will succeed to all
the responsibilities, duties and liabilities of the Servicer under the Sale and
Servicing Agreement; provided, however, that such 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 such successor Servicer becomes
the Servicer or the claim of a third party (including a Noteholder) based on any
alleged action or inaction of the predecessor Servicer as Servicer.
'Insurer Default' shall mean any one of the following events shall have
occurred and be continuing: (i) the Insurer fails to make a payment required
under the Policy in accordance with its terms; (ii) the Insurer (A) files any
petition or commences any case or proceeding under any provision or chapter of
the United States Bankruptcy Code or any other similar federal or state law
relating to insolvency, bankruptcy, rehabilitation, liquidation or
reorganization, (B) makes a general assignment for the benefit of its creditors,
or (C) has an order for relief entered against it under the United States
Bankruptcy Code or any other similar federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization which is
final and nonappealable; or (iii) a court of competent jurisdiction, the New
York Department of Insurance or other competent regulatory authority enters a
final and nonappealable order, judgment or decree (A) appointing a custodian,
trustee, agent or receiver for the Insurer or for all or any material portion of
its property or (B) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Insurer (or the taking of possession of all or
any material portion of the property of the Insurer).
WAIVER OF PAST DEFAULTS
With respect to the Trust, subject to the approval of the Insurer, the
holders of Class A Notes evidencing more than 50% of the outstanding principal
balance of the Class A Notes (the 'Class A Note Majority') or, after the Class A
Notes have been paid in full, the holders of Certificates evidencing more than
50% of the outstanding principal balance of the Certificates (the 'Certificate
Majority') may, on behalf of all Securityholders waive any default by the
Servicer in the performance of its obligations under the Sale and Servicing
Agreement and its consequences, except a default in making any required deposits
to or payments from any of the Trust Accounts in accordance with the Sale and
Servicing Agreement. No such waiver shall impair the Noteholders' rights with
respect to subsequent defaults.
S-52
<PAGE>
<PAGE>
CREDIT ENHANCEMENT
THE POLICY
Concurrently with the issuance of the Securities, the Insurer will issue
the Policy to the Indenture Trustee for the benefit of the Class A Noteholders.
Under the Policy, the Insurer will unconditionally and irrevocably guarantee the
full, complete and timely payment of (i) the Class A Noteholders' Interest
Distributable Amount and (ii) the Class A Noteholders' Principal Distributable
Amount. See 'The Policy' in this Prospectus Supplement.
SUBORDINATION OF THE CERTIFICATES
No distribution of interest will be made to the Certificateholders on any
Payment Date until the Class A Notes have been paid the full amount of the Class
A Noteholders' Interest Distributable Amount and no distributions of principal
will be made to the Certificateholders on any Payment Date until the Class A
Notes have been paid the full amount of the Class A Noteholders' Interest
Distributable Amount and the Class A Noteholders' Principal Distributable Amount
for such Payment Date.
Upon the occurrence and during the continuance of an Event of Default,
distributions of interest on and principal of the Certificates will be
subordinated in priority of payment of the prior payment in full of all amounts
due on the Notes. This subordination of the Certificates is intended to enhance
the likelihood of timely receipt by the Class A Noteholders of the full amount
of interest and principal distributable to them on each Payment Date and to
afford the Class A Noteholders limited protection against losses in respect of
the Receivables.
THE POLICY
The following summary of the terms of the Policy does not purport to be
complete and is qualified in its entirety by reference to the Policy.
Simultaneously with the issuance of the Notes, the Insurer will deliver the
Policy to the Indenture Trustee for the benefit of each Class A Noteholder.
Under the Policy, the Insurer unconditionally and irrevocably guarantees to the
Indenture Trustee for the benefit of each Class A Noteholder the full and
complete payment of (i) Scheduled Payments (as defined below) on the Class A
Notes and (ii) any Scheduled Payment which subsequently is avoided in whole or
in part as a preference payment under applicable law.
'Scheduled Payments' means payments that are scheduled to be made on the
Class A Notes during the term of the Policy in an amount equal to the sum of (i)
the Class A Noteholders' Interest Distributable Amount and (ii) the Class A
Noteholders' Principal Distributable Amount on a Payment Date, 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 or the Indenture
which has not been consented to by the Insurer. Scheduled Payments do not
include payments which become due on an accelerated basis as a result of (a) a
default by the Issuer, (b) an election by the Issuer to pay principal on an
accelerated basis, (c) the occurrence of an Event of Default under the Indenture
or (d) any other cause, unless the Insurer 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. In the event the Insurer does not
so elect, the Policy will continue to guarantee Scheduled Payments due on the
Class A Notes in accordance with their original terms. Scheduled Payments shall
not include, nor shall coverage be provided under the Policy in respect of, (i)
any portion of a Class A Noteholders' Interest Distributable Amount due to Class
A Noteholders because a notice and certificate in proper form was not timely
Received by the Insurer, or (ii) any portion of the Class A Noteholders'
Interest Distributable Amount due to Class A Noteholders representing interest
on any Noteholders' Interest Carryover Shortfall accrued from and including the
date of payment of the amount of such Noteholders' Interest Carryover Shortfall
pursuant to the Policy. Scheduled Payments shall not include any amounts due in
respect of the Class A Notes attributable to any increase in interest rates,
penalties or other sums payable by the Trust by reason of a default or Event of
Default in respect of the Class A Notes, or by reason of a deterioration of the
creditworthiness of the Trust, nor shall Scheduled Payments include, nor shall
S-53
<PAGE>
<PAGE>
coverage be provided under the Policy in respect of, any taxes, withholding or
other charges with respect to any Class A Noteholder imposed by any governmental
authority due in connection with the payment of any Scheduled Payments to a
Class A Noteholder.
Payment of claims on the Policy made in respect of Scheduled Payments will
be made by the Insurer following Receipt by the Insurer of the appropriate
notice for payment on the later to occur of (a) 12:00 noon, New York City time,
on the third Business Day following Receipt of such notice for payment, and (b)
12:00 noon, New York City time, on the Payment Date on which such payment was
due on the Class A Notes.
If payment of any amount avoided as a preference under applicable
bankruptcy, insolvency, receivership or similar law is required to be made under
the Policy, the Insurer shall cause such payment to be made on the later of the
date when due to be paid pursuant to the Order referred to below or the first to
occur of (a) the fourth Business Day following Receipt by the Insurer from the
Indenture Trustee of (i) 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 Class A Notes during the term of the Policy
because such distributions were avoidable as preference payments under
applicable bankruptcy law, (ii) a certificate of the Noteholder that the Order
has been entered and is not subject to any stay, and (iii) an assignment duly
executed and delivered by the Class A Noteholder, in such form as is reasonably
required by the Insurer and provided to the Class A Noteholder by the Insurer,
irrevocably assigning to the Insurer all rights and claims of the Class A
Noteholder relating to or arising under the Class A Notes against the debtor
which made such preference payment or otherwise with respect to such preference
payment, or (b) the date of Receipt by the Insurer from the Indenture Trustee of
the items referred to in clauses (i), (ii) and (iii) above if, at least four
Business Days prior to such date of Receipt, the Insurer shall have received
written notice from the Indenture Trustee 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 Indenture Trustee 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 event, such payment shall be disbursed to the
Indenture Trustee for distribution to such Class A Noteholder upon proof of such
payment reasonably satisfactory to the Insurer). In connection with the
foregoing, the Insurer shall have the rights provided pursuant to the Indenture.
The terms 'Receipt' and 'Received' with respect to the Policy, shall mean
actual delivery to the Insurer and to its fiscal agent, 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 under the Policy by the Indenture Trustee is not in proper form or is not
properly completed, executed or delivered, it shall be deemed not to have been
Received, and the Insurer or its fiscal agent shall promptly so advise the
Indenture Trustee and the Indenture Trustee may submit an amended notice.
Under the Policy, '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, Minneapolis, Minnesota, the State in which the principal corporate trust
office of the Indenture Trustee is located, or any other location of any
successor Trustee or successor Collateral Agent are authorized or obligated by
law or executive order to be closed.
The Insurer's obligations under the Policy in respect of the Scheduled
Payments shall be discharged to the extent funds are transferred to the
Indenture Trustee as provided in the Policy whether or not such funds are
properly applied by the Indenture Trustee.
The Insurer shall be subrogated to the rights of each Class A Noteholder to
receive payments of principal and interest to the extent of any payment by the
Insurer under the Policy.
Claims under the Policy constitute direct, unsecured and unsubordinated
obligations of the Insurer ranking not less than pari passu with other unsecured
and unsubordinated indebtedness of the Insurer for borrowed money. Claims
against the Insurer under the Policy and claims against the Insurer under each
other financial guaranty insurance policy issued thereby constitute pari passu
claims against the
S-54
<PAGE>
<PAGE>
general assets of the Insurer. The terms of the Policy cannot be modified or
altered by any other agreement or instrument, or by the merger, consolidation or
dissolution of the Trust. The Policy may not be canceled or revoked prior to
distribution in full of all Scheduled Payments with respect to the Class A
Notes. The Policy is not covered by the Property/Casualty Insurance Security
Fund specified in Article 76 of the New York Insurance Law. The Policy is
governed by the laws of the State of New York.
THE INSURER
GENERAL
Financial Security Assurance Inc. (the 'Insurer' and, for purposes of this
Section, 'Financial Security') is a monoline insurance company incorporated in
1984 under the laws of the State of New York. Financial Security is licensed, to
engage in financial guaranty insurance business in all 50 states, the District
of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of an
issuer's securities thereby enhancing the credit rating of those securities in
consideration for the payment of a premium to the insurer. Financial Security
and its subsidiaries principally insure asset-backed, collateralized and
municipal securities. Asset-backed securities are generally supported by
residential mortgage loans, consumer or trade receivables, securities or other
assets having an ascertainable cash flow or market value. Collateralized
securities include public utility first mortgage bonds and sale/leaseback
obligation bonds. Municipal securities consist largely of general obligation
bonds, special revenue bonds and other special obligations of state and local
governments. Financial Security insures both newly issued securities sold in the
primary market and outstanding securities sold in the secondary market that
satisfy Financial Security's underwriting criteria.
Financial Security is a wholly-owned subsidiary of Financial Security
Assurance Holdings Ltd. ('Holdings'), a New York Stock Exchange listed company.
Major shareholders of Holdings include Fund American Enterprise Holdings, Inc.,
U S WEST Capital Corporation and The Tokio Marine and Fire Insurance Co., Ltd.
No shareholder of Holdings is obligated to pay any debt of Financial Security or
any claim under any insurance policy issued by Financial Security or to make any
additional contribution to the capital of Financial Security.
The principal executive offices of Financial Security are located at 350
Park Avenue, New York, New York 10022, and its telephone number at that location
is (212) 826-0100.
REINSURANCE
Pursuant to an intercompany agreement, liabilities on financial guaranty
insurance written or reinsured from third parties by Financial Security or any
of its domestic operating insurance company subsidiaries are reinsured among
such companies on an agreed-upon percentage substantially proportional to their
respective capital, surplus and reserves, subject to applicable statutory risk
limitations. In addition, Financial Security reinsures a portion of its
liabilities under certain of its financial guaranty insurance policies with
other reinsurers under various quota share treaties and on a
transaction-by-transaction basis. Such reinsurance is utilized by Financial
Security as a risk management device and to comply with certain statutory and
rating agency requirements; it does not alter or limit Financial Security's
obligations under any financial guaranty insurance policy.
RATING OF CLAIMS-PAYING ABILITY
Financial Security's claims-paying ability is rated 'Aaa' by Moody's
Investors Service, Inc. and 'AAA' by Standard & Poor's Ratings Services, Fitch
Investors Service, L.P., Nippon Investors Service Inc. and Standard & Poor's
(Australia) Pty. Ltd. Such ratings reflect only the views of the respective
rating agencies, are not recommendations to buy, sell or hold securities and are
subject to revision or withdrawal at any time by such rating agencies. See 'Risk
Factors -- Ratings of the Notes' in this Prospectus Supplement.
S-55
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Financial Security and
its wholly owned subsidiaries on the basis of generally accepted accounting
principles as of September 30, 1997 (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------
(UNAUDITED)
<S> <C>
Deferred premium revenue (net of prepaid reinsurance premiums)...................... $ 402,891
Shareholder's equity:
Common stock................................................................... 15,000
Additional paid-in capital..................................................... 646,620
Unrealized gain on investments (net of deferred income taxes).................. 20,808
Accumulated earnings........................................................... 212,033
------------------
Total shareholder's equity................................................ 894,461
------------------
Total deferred premium revenue and shareholder's equity................... $1,297,352
------------------
------------------
</TABLE>
For further information concerning Financial Security, see the Consolidated
Financial Statements of Financial Security Assurance Inc., and Subsidiaries, and
the notes thereto, incorporated by reference herein. Copies of the statutory
quarterly and annual statements filed with the State of New York Insurance
Department by Financial Security are available upon request to the State of New
York Insurance Department.
INSURANCE REGULATION
Financial Security is licensed and subject to regulation as a financial
guaranty insurance corporation under the laws of the State of New York, its
state of domicile. In addition, Financial Security and its insurance
subsidiaries are subject to regulation by insurance laws of the various other
jurisdictions in which they are licensed to do business. As a financial guaranty
insurance corporation licensed to do business in the State of New York,
Financial Security is subject to Article 69 of the New York Insurance Law which,
among other things, limits the business of each insurer to financial guaranty
insurance and related lines, requires that each such insurer maintain a minimum
surplus to policyholders, establishes contingency, loss and unearned premium
reserve requirements for each such insurer, and limits the size of individual
transactions ('single risks') and the volume of transactions ('aggregate risks')
that may be underwritten by each such insurer. Other provisions of the New York
Insurance Law, applicable to non-life insurance companies such as Financial
Security, regulate, among other things, permitted investments, payment of
dividends, transactions with affiliates, mergers, consolidations, acquisitions
or sales of assets and incurrence of liability for borrowings.
FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Federal Tax Counsel, for Federal income tax purposes the
Class A Notes will be characterized as debt, and the Trust will not be
characterized as an association (or publicly traded partnership) taxable as a
corporation. Each Noteholder, by the acceptance of a Note, will agree to treat
the Notes as indebtedness for Federal income tax purposes. See 'Federal Income
Tax Consequences' in the Prospectus for additional information concerning the
application of Federal income tax laws to the Trust and the Notes.
ERISA CONSIDERATIONS
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ('ERISA'), and Section 4975 of the Code prohibit a pension,
profit-sharing or other employee benefit plan, as well as an individual
retirement account and a Keogh plan (each a 'Benefit Plan'), from engaging in
certain transactions with persons that are 'parties in interest' under ERISA or
'disqualified persons' under the Code with respect to such Benefit Plan. A
violation of these 'prohibited transaction' rules may result in an excise tax or
other penalties and liabilities under ERISA and the Code for such persons or the
fiduciaries of the Benefit Plan. In addition, Title I of ERISA also requires
fiduciaries of a Benefit
S-56
<PAGE>
<PAGE>
Plan subject to ERISA to make investments that are prudent, diversified and in
accordance with the governing plan documents.
Certain transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased Class A Notes if assets of the Trust were deemed to be assets of
the Benefit Plan. Under a regulation issued by the United States Department of
Labor (the 'Regulation'), the assets of the Trust would be treated as plan
assets of a Benefit Plan for the purposes of ERISA and the Code only if the
Benefit Plan acquired an 'equity interest' in the Trust and none of the
exceptions contained in the Regulation was applicable. An equity interest is
defined under the Regulation as an interest other than an instrument which is
treated as indebtedness under applicable local law and which has no substantial
equity features. Although there is little guidance on the subject, the Seller
believes that, at the time of their issuance, the Class A Notes should be
treated as indebtedness of the Trust without substantial equity features for
purposes of the Regulation. This determination is based in part upon the
traditional debt features of the Class A Notes, including the reasonable
expectation of purchasers of Class A Notes that the Class A Notes will be repaid
when due, as well as the absence of conversion rights, warrants and other
typical equity features. The debt treatment of the Notes for ERISA purposes
could change if the Trust incurred losses.
However, without regard to whether the Class A Notes are treated as an
equity interest for purposes of the Regulation, the acquisition or holding of
Class A Notes by or on behalf of a Benefit Plan could be considered to give rise
to a prohibited transaction if the Trust, the Seller, the Servicer, the Owner
Trustee or the Indenture Trustee is or becomes a party in interest or a
disqualified person with respect to such Benefit Plan. Certain exemptions from
the prohibited transaction rules could be applicable to the purchase and holding
of Class A Notes by a Benefit Plan depending on the type and circumstances of
the plan fiduciary making the decision to acquire such Class A Notes. Included
among these exemptions are: Prohibited Transaction Class Exemption ('PTCE')
96-23, regarding transactions effected by 'in-house asset managers'; PTCE 95-60,
regarding investments by insurance company general accounts; PTCE 90-1,
regarding investments by insurance company pooled separate accounts; PTCE 91-38,
regarding investments by bank collective investment funds; and PTCE 84-14,
regarding transactions effected by 'qualified professional asset managers.' By
acquiring a Class A Note, each purchaser will be deemed to represent that either
(i) it is not acquiring the Class A Notes with the assets of a Benefit Plan; or
(ii) the acquisition and holding of the Class A Notes will not give rise to a
nonexempt prohibited transaction under Section 406(a) of ERISA or Section 4975
of the Code.
Employee benefit plans that are governmental plans (as defined in Section
3(32) of ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
are not subject to ERISA requirements, however governmental plans may be subject
to comparable state law restrictions.
A plan fiduciary considering the purchase of Class A Notes should consult
its legal advisors regarding whether the assets of the Trust would be considered
plan assets, the possibility of exemptive relief from the prohibited transaction
rules and other issues and their potential consequences.
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated December 8, 1997 (the 'Underwriting Agreement') among CPS, the
Seller, Samco, Linc and PaineWebber Incorporated and Black Diamond Securities,
LLC (the 'Underwriters'), the Seller has agreed to sell to the Underwriters, and
the Underwriters have agreed to purchase, Class A Notes in the following
amounts:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF
UNDERWRITERS CLASS A-1 NOTES CLASS A-2 NOTES
- ------------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
PaineWebber Incorporated..................................... $27,875,000 $17,587,500
Black Diamond Securities, LLC................................ $27,875,000 $17,587,500
------------------- -------------------
Total................................................... $55,750,000 $35,175,000
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all the Class A Notes offered hereby if any of such
Class A Notes are purchased.
S-57
<PAGE>
<PAGE>
CPS and the Seller have been advised by the Underwriters that the
Underwriters propose to offer the Class A Notes from time to time for sale in
negotiated transactions or otherwise, at varying prices to be determined at the
time of sale. The Underwriters may effect such transactions by selling the Class
A Notes to or through dealers and such dealers may receive compensation in the
form of underwriting discounts, concessions or commissions from the Underwriters
and any purchasers of Class A Notes for whom they may act as agent. The
Underwriters and any dealers that participate with the Underwriters in the
distribution of the Class A Notes may be deemed to be underwriters, and any
discounts or commissions received by them and any profit on the resale of Class
A Notes by them may be deemed to be underwriting discounts or commissions, under
the Securities Act.
The Class A Notes are a new issue of securities with no established trading
market. The Underwriters have advised CPS and the Seller that they intend to act
as market makers for the Class A Notes. However, the Underwriters are not
obligated to do so and may discontinue any market making at any time without
notice. No assurance can be given as to the liquidity of any trading market for
the Class A Notes.
Black Diamond Securities, LLC was registered as a broker-dealer as of
September 11, 1996 and is primarily engaged in the business of structuring,
underwriting and placing asset-backed securities, including those of the Issuer
and similar trusts sponsored by CPS.
CPS and the Seller have agreed to indemnify the Underwriters against
certain liabilities, including civil liabilities under the Securities Act, or
contribute to payments which the Underwriters may be required to make in respect
thereof.
LEGAL OPINIONS
Certain legal matters relating to the Securities will be passed upon for
the Seller and the Servicer by Mayer, Brown & Platt, New York, New York. Certain
legal matters related to the Policy will be passed upon for the Insurer by Bruce
E. Stern, Esq., General Counsel of the Insurer or an Associate General Counsel
of the Insurer.
EXPERTS
The consolidated balance sheets of Financial Security Assurance Inc. and
Subsidiaries as of December 31, 1996 and 1995 and the related consolidated
statements of income, changes in shareholder's equity and cash flows for each of
the three years in the period ended December 31, 1996, incorporated by reference
in this Prospectus Supplement, have been incorporated herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
S-58
<PAGE>
<PAGE>
INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus
Supplement and the pages on which the definitions of such terms may be found
herein.
<TABLE>
<S> <C>
Actuarial Receivables......................................................................... S-36
aggregate risks............................................................................... S-56
Alpha Program................................................................................. S-24
APR........................................................................................... S-30
Benefit Plan.................................................................................. S-18, S-56
Business Day.................................................................................. S-6, S-54
CEDEL......................................................................................... S-17
Cede.......................................................................................... S-17, S-40
Certificate Majority.......................................................................... S-52
Certificate Pool Factor....................................................................... S-37
Certificateholders............................................................................ S-9, S-39
Certificateholders' Distributable Amount...................................................... S-45
Certificateholders' Interest Carryover Shortfall.............................................. S-45
Certificateholders' Interest Distributable Amount............................................. S-45
Certificateholders' Percentage................................................................ S-10, S-45
Certificateholders' Principal Carryover Shortfall............................................. S-45
Certificateholders' Principal Distributable Amount............................................ S-10, S-40, S-45
Certificates.................................................................................. S-1, S-4
Class A Note Majority......................................................................... S-52
Class A Noteholders........................................................................... S-17
Class A Noteholders' Interest Distributable Amount............................................ S-45
Class A Noteholders' Percentage............................................................... S-7, S-45
Class A Noteholders' Principal Carryover Shortfall............................................ S-45
Class A Noteholders' Principal Distributable Amount........................................... S-7, S-39, S-44
Class A Notes................................................................................. S-1, S-4
Class A Target Amount......................................................................... S-7, S-46
Class A-1 Interest Rate....................................................................... S-6
Class A-1 Noteholders......................................................................... S-6, S-39
Class A-1 Noteholders' Interest Carryover Shortfall........................................... S-46
Class A-1 Noteholders' Interest Distributable Amount.......................................... S-46
Class A-1 Noteholders' Monthly Interest Distributable Amount.................................. S-46
Class A-1 Notes............................................................................... S-1, S-4
Class A-1 Pool Factor......................................................................... S-37
Class A-2 Interest Rate....................................................................... S-6
Class A-2 Noteholders......................................................................... S-6, S-39
Class A-2 Noteholders' Interest Carryover Shortfall........................................... S-46
Class A-2 Noteholders' Interest Distributable Amount.......................................... S-46
Class A-2 Noteholders' Monthly Interest Distributable Amount.................................. S-46
Class A-2 Notes............................................................................... S-1, S-4
Class A-2 Pool Factor......................................................................... S-37
Closing Date.................................................................................. S-4
Collateral Agent.............................................................................. S-48
Collection Account............................................................................ S-42
Collection Period............................................................................. S-8
Commission.................................................................................... S-2
Contracts..................................................................................... S-22
CPS Purchase Agreement........................................................................ S-5, S-41
CPS Receivables............................................................................... S-5
CPS........................................................................................... S-1, S-4
Cram Down Loss................................................................................ S-43
Cutoff Date................................................................................... S-5
</TABLE>
S-59
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Dealer Agreements............................................................................. S-22
Dealers....................................................................................... S-22
Delta Program................................................................................. S-24
Deposit Institutions.......................................................................... S-23
Determination Date............................................................................ S-43
Distribution Account.......................................................................... S-43
DTC........................................................................................... S-3, S-17, S-39
ERISA......................................................................................... S-56
Euroclear..................................................................................... S-17
European Depositaries......................................................................... S-17, S-41
Events of Default............................................................................. S-48, S-49
Exchange Act.................................................................................. S-2
Federal Tax Counsel........................................................................... S-17
Financed Vehicles............................................................................. S-5
Financial Intermediary........................................................................ S-41
Financial Security............................................................................ S-2, S-55
First Time Buyer Program...................................................................... S-24
holders....................................................................................... S-17, S-39
Holdings...................................................................................... S-2, S-55
IFCs.......................................................................................... S-5
Indenture Trustee............................................................................. S-1
Indenture..................................................................................... S-1, S-4
Insurance Agreement Indenture Cross Default................................................... S-49
Insurance Agreement........................................................................... S-19
Insurer Default............................................................................... S-52
Insurer....................................................................................... S-4, S-55
Interest Rate................................................................................. S-6
Issuer........................................................................................ S-4
Linc Purchase Agreement....................................................................... S-5, S-41
Linc Receivables.............................................................................. S-5
Linc.......................................................................................... S-1, S-5, S-23
Liquidated Receivable......................................................................... S-44
Liquidation Proceeds.......................................................................... S-44
Lock-Box Account.............................................................................. S-14, S-42
Lock-Box Bank................................................................................. S-14
Lock-Box Processor............................................................................ S-14
Master Spread Account Agreement............................................................... S-48
Moody's....................................................................................... S-18
Note Owners................................................................................... S-17, S-39
Noteholders................................................................................... S-6, S-39
Noteholders' Distributable Amount............................................................. S-44
Notes......................................................................................... S-1, S-4
Obligors...................................................................................... S-22
Order......................................................................................... S-54
Original Pool Balance......................................................................... S-5
Owner Trustee................................................................................. S-1
Participants.................................................................................. S-41
Pass-Through Rate............................................................................. S-9
Payment Date.................................................................................. S-6
Policy........................................................................................ S-1, S-12
Pool Balance.................................................................................. S-37
Post Office Box............................................................................... S-14
prepayments................................................................................... S-37
Principal Balance............................................................................. S-44
Principal Distributable Amount................................................................ S-8, S-45
</TABLE>
S-60
<PAGE>
<PAGE>
<TABLE>
<S> <C>
PTCE.......................................................................................... S-57
Purchase Agreements........................................................................... S-5, S-42
Purchase Amount............................................................................... S-44
Rating Agencies............................................................................... S-18
Receipt....................................................................................... S-54
Receivable.................................................................................... S-4
Receivables Pool.............................................................................. S-4
Receivables................................................................................... S-5
Received...................................................................................... S-54
Record Date................................................................................... S-12
Recoveries.................................................................................... S-44
Registration Statement........................................................................ S-2
Regulation.................................................................................... S-57
Relevant Depositary........................................................................... S-41
Requisite Amount.............................................................................. S-13
Rule of 78's Receivables...................................................................... S-36
Sale and Servicing Agreement.................................................................. S-5
Samco Purchase Agreement...................................................................... S-5, S-41
Samco Receivables............................................................................. S-5
Samco......................................................................................... S-1, S-5
Scheduled Payments............................................................................ S-12, S-53
Scheduled Receivable Payment.................................................................. S-44
Securities Act................................................................................ S-2
Securities.................................................................................... S-1, S-4
Securityholders............................................................................... S-9, S-39
Seller........................................................................................ S-1, S-4
Servicer Termination Event.................................................................... S-51
Servicer...................................................................................... S-4
Servicing Assumption Agreement................................................................ S-14
Servicing Fee Rate............................................................................ S-15
Servicing Fee................................................................................. S-43
Simple Interest Receivables................................................................... S-36
Single Risks.................................................................................. S-56
Spread Account................................................................................ S-48
Standard & Poor's............................................................................. S-18
Standard Program.............................................................................. S-24
Standby Fee................................................................................... S-14
Standby Servicer.............................................................................. S-14, S-38
Sub-Prime Borrowers........................................................................... S-22
Target Payment Date........................................................................... S-7, S-46
Total Distribution Amount..................................................................... S-44
Trust Agreement............................................................................... S-4
Trust Assets.................................................................................. S-4
Trust Documents............................................................................... S-41
Trustee Fees.................................................................................. S-47
Trust......................................................................................... S-1, S-4
UCC........................................................................................... S-42
Underwriters.................................................................................. S-57
Underwriting Agreement........................................................................ S-57
</TABLE>
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PROSPECTUS
CPS AUTO RECEIVABLES TRUSTS
AUTO RECEIVABLES BACKED NOTES AND CERTIFICATES ISSUABLE IN SERIES
CPS RECEIVABLES CORP.
Seller
CONSUMER PORTFOLIO SERVICES
Sponsor and Servicer
This Prospectus describes certain Auto Receivables Backed Notes (the
'Notes') and Auto Receivables Backed Certificates (the 'Certificates' and,
together with the Notes, the 'Securities') that may be sold from time to time in
one or more series (each a 'Series'), in amounts, at prices and on terms to be
determined at the time of sale and to be set forth in a supplement to this
Prospectus (each, a 'Prospectus Supplement'). Each Series of Securities may
include one or more classes of Notes and one or more classes of Certificates,
which will be issued by a trust to be formed by the Seller for the purpose of
issuing one or more Series of such Securities (each, a 'Trust'). A Trust issuing
Securities as described in this Prospectus and the related Prospectus Supplement
shall be referred to herein as the 'Issuer.'
Each class of Securities of any Series will evidence beneficial ownership
in a segregated pool of assets (the 'Trust Assets') (such Securities,
Certificates) or will represent indebtedness of the Issuer secured by the Trust
Assets (such Securities, Notes), as described herein and in the related
Prospectus Supplement. The Trust Assets may consist of any combination of retail
installment sales contracts between manufacturers, dealers or certain other
originators and retail purchasers including purchasers who are Sub-Prime
Borrowers (as defined herein). See 'CPS Automobile Contract Portfolio.' The
Trust Assets will be secured by new and used automobiles, light trucks, vans and
minivans financed thereby, and originated by CPS or an Affiliated Originator,
together with all moneys received relating thereto (the 'Contracts'). The Trust
Assets will also include a security interest in the underlying new and used
automobiles light trucks, vans and minivans and property relating thereto,
together with the proceeds thereof (the 'Financed Vehicles' together with the
Contracts, the 'Receivables'). If and to the extent specified in the related
Prospectus Supplement, credit enhancement with respect to the Trust Assets or
any class of Securities may include any one or more of the following: a
financial guaranty insurance policy (a 'Policy') issued by an insurer specified
in the related Prospectus Supplement, a reserve account, letters of credit,
credit or liquidity facilities, third party payments or other support, cash
deposits or other arrangements. In addition to or in lieu of the foregoing,
credit enhancement may be provided by means of subordination, cross-support
among the Receivables or over-collateralization. See 'Description of the Trust
Documents -- Credit and Cash Flow Enhancement.' Except to the extent that a
Prospectus Supplement for a series provides for a pre-funding period, the
Receivables included in the Trust Assets for a Series will have been originated
or acquired by CPS or an Affiliated Originator on or prior to the date of
issuance of the related Securities, as described herein and in the related
Prospectus Supplement. The Receivables included in a Trust will be serviced by a
servicer (the 'Servicer') as described in the related Prospectus Supplement.
Each Series of Securities may include one or more classes (each, a
'Class'). A Series may include one or more Classes of Securities entitled to
principal distributions, with disproportionate, nominal or no interest
distributions, or to interest distributions, with disproportionate, nominal or
no principal distributions. The rights of one or more Classes of Securities of
any Series may be senior or subordinate to the rights of one or more of the
other Classes of Securities. A Series may include two or more Classes of
Securities which may differ as to the timing, order or priority of payment,
interest rate or amount of distributions of principal or interest or both.
Information regarding each Class of Securities of a Series, together with
certain characteristics of the related Receivables, will be set forth in the
related Prospectus Supplement. The rate of payment in respect of principal of
the Securities of any Class will depend on the priority of payment of such Class
and the rate and timing of payments (including prepayments, defaults,
liquidations or repurchases of Receivables) on the related Receivables. A rate
of payment lower or higher than that anticipated may affect the weighted average
life of each Class of Securities in the manner described herein and in the
related Prospectus Supplement. See 'Description of the Securities.'
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER 'RISK
FACTORS' BEGINNING ON PAGE 13 HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
THE NOTES OF A GIVEN SERIES REPRESENT OBLIGATIONS OF THE ISSUER ONLY AND DO NOT
REPRESENT OBLIGATIONS OF CPS, ANY SELLER, ANY SERVICER OR ANY OF THEIR
RESPECTIVE AFFILIATES. THE CERTIFICATES OF A GIVEN SERIES REPRESENT BENEFICIAL
INTERESTS IN THE RELATED TRUST ONLY AND DO NOT REPRESENT INTERESTS IN OR
OBLIGATIONS OF CPS, ANY SELLER, ANY SERVICER OR ANY OF THEIR RESPECTIVE
AFFILIATES. NEITHER THE SECURITIES NOR THE UNDERLYING RECEIVABLES WILL BE
GUARANTEED OR INSURED BY ANY GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY CPS,
ANY SELLER, ANY SERVICER, ANY TRUSTEE OR ANY OF THEIR RESPECTIVE AFFILIATES,
EXCEPT AS SET FORTH IN THE RELATED PROSPECTUS SUPPLEMENT. THESE SECURITIES HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Offers of the Securities may be made through one or more different methods,
including offerings through underwriters as more fully described under 'Plan of
Distribution' herein and in the related Prospectus Supplement. Prior to
issuance, there will have been no market for the Securities of any Series, and
there can be no assurance that a secondary market for the Securities will
develop, or if it does develop, it will continue.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of Securities unless accompanied by a Prospectus
Supplement.
THE DATE OF THIS PROSPECTUS IS OCTOBER 16, 1997.
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PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Securities to be offered
hereunder, among other things, will set forth with respect to such Series of
Securities: (i) a description of the Class or Classes of such Securities, (ii)
the rate of interest, the 'Interest Rate' or other applicable rate (or the
manner of determining such rate) and authorized denominations of each Class of
such Securities; (iii) certain information concerning the Receivables and
insurance polices, cash accounts, letters of credit, financial guaranty
insurance policies, third party guarantees or other forms of credit enhancement,
if any, relating to one or more pools of Receivables or all or part of the
related Securities; (iv) the specified interest, if any, of each Class of
Securities in, and manner and priority of, the distributions from the Trust
Assets; (v) information as to the nature and extent of subordination with
respect to such Series of Securities, if any; (vi) the payment date to
Securityholders; (vii) information regarding the Servicer(s) for the related
Receivables; (viii) the circumstances, if any, under which the Trust Assets may
be subject to early termination; (ix) information regarding tax considerations;
and (x) additional information with respect to the method of distribution of
such Securities.
AVAILABLE INFORMATION
This Prospectus, together with the Prospectus Supplement for each Series of
Securities, contains a summary of the material terms of the applicable exhibits
to the Registration Statement and the documents referred to herein and therein.
Copies of such exhibits are on file at the offices of the Securities and
Exchange Commission (the 'Commission') in Washington, D.C., and may be obtained
at rates prescribed by the Commission upon request to the Commission and may be
inspected, without charge, at the Commission's offices.
The Sponsor has also filed with the Commission a Registration Statement
(together with all amendments and exhibits thereto, referred to herein as the
'Registration Statement') under the Securities Act of 1933, as amended (the
'Securities Act'), with respect to the Securities offered pursuant to this
Prospectus. For further information, reference is made to the Registration
Statement which may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549;
and at the Commission's regional offices at 500 West Madison, 14th Floor,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048. Copies of the Registration Statement may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The Commission also maintains a web site at
http://www.sec.gov containing reports, proxy statements, information statements
and other information regarding registrants, including CPS, that file
electronically with Commission.
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and any Prospectus
Supplement with respect hereto and, if given or made, such information or
representations must not be relied upon. This Prospectus and any Prospectus
Supplement with respect hereto do not constitute an offer to sell or a
solicitation of an offer to buy any securities other than the Securities offered
hereby and thereby, nor an offer of the Securities to any person in any state or
other jurisdiction in which such offer would be unlawful. The delivery of this
Prospectus at any time does not imply that information herein is correct as of
any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents subsequently filed by the Sponsor with respect to the
Registration Statement, either on its own behalf or on behalf of a Trust,
relating to any Series of Securities referred to in the accompanying Prospectus
Supplement, with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of
the Securities Exchange Act of 1934, as amended (the 'Exchange Act'), after the
date of this Prospectus and prior to the termination of any offering of the
Securities issued by the Issuer, shall be deemed to be incorporated by reference
in this Prospectus and to be a part of this Prospectus from the date of the
filing of such documents. Any statement contained herein or in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for
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purposes of this Prospectus to the extent that a statement contained herein (or
in the accompanying Prospectus Supplement) or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein,
modifies or replaces such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
REPORTS TO SECURITYHOLDERS
So long as the Securities of a Series are in book-entry form, monthly and
annual reports concerning the Securities and the Trust will be sent by the
applicable Trustee to Cede & Co., as the nominee of DTC and as registered holder
of the Securities pursuant to the related Indenture. DTC will supply such
reports to Securityholders in accordance with its procedures. To the extent
required by the Securities Exchange Act of 1934, as amended, each Trust will
provide financial information to the Securityholders which has been examined and
reported upon, with an opinion expressed by, an independent public accountant;
to the extent not so required, such financial information will be unaudited.
Each Trust will be formed to own the Receivables, hold and administer the
Pre-Funding Account, if any, to issue the Securities and to acquire the
Subsequent Receivables, if available. No Trust will have any assets or
obligations prior to issuance of the Securities and no Trust will engage in any
activities other than those described herein. Accordingly, no financial
statements with respect to the related Trust will be included in any Prospectus
Supplement.
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SUMMARY OF TERMS
The following summary is qualified in its entirety by reference to the
detailed information appearing elsewhere in this Prospectus and by reference to
the information with respect to the Securities of any Series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Securities. Certain capitalized terms used in the summary
are defined elsewhere in the Prospectus on the pages indicated in the 'Index of
Terms.'
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Issuer.................................... With respect to any Series of Securities, a trust (each, a 'Trust')
to be formed pursuant to a trust agreement (the 'Trust Agreement' )
between the Seller and the trustee for such trust. A Trust issuing
Securities pursuant to this Prospectus and the related Prospectus
Supplement shall be referred to herein as the 'Issuer' with respect
to the related Securities.
Seller.................................... CPS Receivables Corp. or another special-purpose subsidiary of CPS
(each, a 'Seller'). See 'The Seller and CPS.'
Sponsor................................... Consumer Portfolio Services, Inc. ('CPS' or the 'Sponsor'). See
'CPS's Automobile Contract Portfolio' and 'The Seller and CPS.'
Servicer.................................. The entity named as Servicer in the related Prospectus Supplement
(the 'Servicer'). Each Prospectus Supplement will specify whether the
Servicer will service the Receivables in the related Receivables Pool
directly or indirectly through one or more subservicers (each, a
'Subservicer').
Trustee................................... The Trustee for each Series of Securities will be specified in the
related Prospectus Supplement. In addition, a Trust may separately
enter into an Indenture and may issue Notes pursuant to such
Indenture; in any such case, the Trust and the Indenture will be
administered by separate, independent trustees as required by the
rules and regulations under the Trust Indenture Act of 1939 and the
Investment Company Act of 1940.
The Securities............................ Each Class of Securities of any Series will either evidence
beneficial interests in a segregated pool of assets (the 'Trust
Assets') (such Securities, 'Certificates') or will represent
indebtedness of the Trust secured by the Trust Assets (such
Securities, 'Notes'), as described herein and in the related
Prospectus Supplement.
With respect to Securities that represent debt issued by the Trust,
the Trust will enter into an indenture (each, an 'Indenture') by and
between the Trust and the trustee named in such Indenture (the
'Indenture Trustee' or 'Trustee'). Each Indenture will describe the
related pool of Receivables comprising the Trust Assets and securing
the debt issued by the related Issuer. The Receivables comprising the
Trust Assets will be serviced by the Servicer pursuant to a servicing
agreement (each, a 'Servicing Agreement') by and between the Servicer
and the related Issuer. In the case of the Trust Assets of any class
of Securities, the contractual arrangements relating to the
establishment of a Trust, if any, the servicing of the related
Receivables and the issuance of the related
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<S> <C>
Securities may be contained in a single agreement, or in several
agreements which combine certain aspects of the Trust Agreement, the
Servicing Agreement and the Indenture described above (for example, a
servicing and collateral management agreement). For purposes of this
Prospectus, the term 'Trust Documents' as used with respect to Trust
Assets means, collectively, and except as otherwise described in the
related Prospectus Supplement, any and all agreements relating to the
establishment of a Trust, if any, the servicing of the related
Receivables and the issuance of the related Securities. The term
'Trustee' means any and all persons acting as a trustee pursuant to a
Trust Agreement.
Securities Will Be Non-Recourse. The Securities will not be
obligations, either recourse or non-recourse, of CPS, any Seller, the
related Servicer or any person other than the related Issuer. The
Notes of a given Series represent obligations of the Issuer, and the
Certificates of a given Series represent beneficial interests in the
related Issuer only and do not represent interests in or obligations
of CPS, any Seller, the related Servicer or any of their respective
affiliates other than the related Issuer. In the case of Securities
that represent beneficial ownership interest in the related Issuer,
such Securities will represent the beneficial ownership interests in
such Issuer and the sole source of payment will be the assets of such
Issuer. In the case of Securities that represent debt issued by the
related Issuer, such Securities will be secured by assets in the
related Trust Assets. Notwithstanding the foregoing, and as to be
described in the related Prospectus Supplement, certain types of
credit enhancement, such as a letter of credit, financial guaranty
insurance policy or reserve fund may constitute a full recourse
obligation of the issuer of such credit enhancement.
General Payment Terms of Securities. As provided in the related Trust
Documents and as described in the related Prospectus Supplement, the
holders of the Securities ('Securityholders') will be entitled to
receive payments on their Securities on specified dates (each, a
'Payment Date'). Payment Dates with respect to Securities will occur
monthly, quarterly or semi-annually, as described in the related
Prospectus Supplement. The related Prospectus Supplement will
describe a date (the 'Record Date') preceding such Payment Date, as
of which the Trustee or its paying agent will fix the identity of the
Securityholders for the purpose of receiving payments on the next
succeeding Payment Date. As described in the related Prospectus
Supplement, the Payment Date will be a specified day of each month,
(or, in the case of quarterly-pay Securities, a specified day of
every third month; and in the case of semi-annual pay Securities, a
specified day of every sixth month) and the Record Date will be the
close of business as of a specified day preceding such Payment Date.
Each Indenture and Trust Agreement will describe a period (each, a
'Collection Period') preceding each Payment Date
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(for example, in the case of monthly-pay Securities, the calendar
month preceding the month in which a Payment Date occurs). As more
fully described in the related Prospectus Supplement, collections
received on or with respect to the related Receivables constituting
Trust Assets during a Collection Period will be required to be
remitted by the Servicer to the related Trustee prior to the related
Payment Date and will be used to fund payments to Securityholders on
such Payment Date. As may be described in the related Prospectus
Supplement, the related Trust Documents may provide that all or a
portion of the payments collected on or with respect to the related
Receivables may be applied by the related Trustee to the acquisition
of additional Receivables during a specified period (rather than be
used to fund payments of principal to Securityholders during such
period), with the result that the related Securities will possess an
interest-only period, also commonly referred to as a revolving
period, which will be followed by an amortization period. Any such
interest only or revolving period may, upon the occurrence of certain
events to be described in the related Prospectus Supplement,
terminate prior to the end of the specified period and result in the
earlier than expected amortization of the related Securities. In
addition, and as may be described in the related Prospectus
Supplement, the related Trust Documents may provide that all or a
portion of such collected payments may be retained by the Trustee
(and held in certain Eligible Investments, including Receivables) for
a specified period prior to being used to fund payments of principal
to Securityholders. Such retention and temporary investment by the
Trustee of such collected payments may be required by the related
Trust Documents for the purpose of (a) slowing the amortization rate
of the related Securities relative to the installment payment
schedule of the related Receivables, or (b) attempting to match the
amortization rate of the related Securities to an amortization
schedule established at the time such Securities are issued. Any such
feature applicable to any Securities may terminate upon the
occurrence of events to be described in the related Prospectus
Supplement, resulting in distributions to the specified
Securityholders and an acceleration of the amortization of such
Securities. As more fully specified in the related Prospectus
Supplement, neither the Securities nor the underlying Receivables
will be guaranteed or insured by any governmental agency or
instrumentality or CPS, any Seller, the related Servicer, any
Trustee, or any of their respective affiliates.
Each Series of Securities will be issued pursuant to the related
Indenture, in the case of the Notes, and pursuant to the related
Trust Agreement, in the case of the Certificates. The related
Prospectus Supplement will specify which Class or Classes of
Securities of the related Series are being offered thereby.
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<S> <C>
Each Class of Securities will have a stated security balance (the
'Security Balance') and will accrue interest on such Security Balance
at a specified rate (with respect to each Class of Securities the
'Interest Rate') as set forth in the related Prospectus Supplement.
Each Class of Securities may have a different Interest Rate, which
may be a fixed, variable or adjustable Interest Rate, or any
combination of the foregoing. The related Prospectus Supplement will
specify the Interest Rate, or the method for determining the
applicable Interest Rate, for each Class of Securities.
A Series of Securities may include two or more Classes of Securities
that differ as to timing and priority of distributions, seniority,
allocations of losses, Interest Rate or amount of distributions in
respect of principal or interest. Additionally, distributions in
respect of principal or interest in respect of any such Class or
Classes may or may not be made upon the occurrence of specified
events or on the basis of collections from designated portions of the
related Receivables Pool. If specified in the related Prospectus
Supplement, one or more Classes of Securities ('Strip Securities')
may be entitled to (i) principal distributions with disproportionate,
nominal or no interest distributions or (ii) interest distributions
with disproportionate, nominal or no principal distributions. If
specified in the related Prospectus Supplement a Series may include
one or more Classes of Securities ('Accrual Securities'), as to which
certain accrued interest will not be distributed but rather will be
added to the principal balance (or nominal balance, in the case of
Accrual Securities which are also Strip Securities) thereof on each
Payment Date or in the manner described in the related Prospectus
Supplement. If so provided in the related Prospectus Supplement, a
Series may include one or more other Classes of Securities
(collectively, the 'Senior Securities') that are senior to one or
more other Classes of Securities (collectively, the 'Subordinate
Securities') in respect of certain distributions of principal and
interest and allocations of losses on Receivables. In addition,
certain Classes of Senior (or Subordinate) Securities may be senior
to other Classes of Senior (or Subordinate) Securities in respect of
such distributions or losses. See 'Description of the
Securities -- General Payment Terms of the Securities.'
Securities will be available for purchase in the minimum denomination
specified in the related Prospectus Supplement and will be available
in book-entry form unless the related Prospectus Supplement provides
only for Definitive Securities. Securityholders will only be able to
receive Definitive Securities in the limited circumstances described
herein or in the related Prospectus Supplement. See 'Description of
the Securities -- Definitive Notes'.
If the Servicer or any Subservicer exercises its option to purchase
the Receivables of a Trust (or if not and, if and to the extent
provided in the related Prospectus Supplement, satisfactory bids for
the purchase of such Receivables are
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<TABLE>
<S> <C>
received), in the manner and on the respective terms and conditions
described under 'Description of the Trust Documents -- Termination,'
the Securities will be prepaid as set forth in the related Prospectus
Supplement. In addition, if the related Prospectus Supplement
provides that the property of a Trust will include a Pre-Funding
Account that will be used to purchase additional Receivables after
the applicable Closing Date, one or more Classes of Securities may be
subject to a partial prepayment of principal at or immediately
following the end of the period specified in such Prospectus
Supplement for the purchase of such additional Receivables, in the
manner and to the extent specified in the related Prospectus
Supplement.
The Residual Interest..................... With respect to each Trust, the 'Residual Interest' at any time
represents the rights to the related Trust Assets in excess of the
Securityholders' interest of all Series then outstanding that were
issued by such Trust. The Residual Interest in any Trust Assets will
fluctuate as the aggregate Pool Balance (as hereinafter defined) of
such Trust changes from time to time. A portion of the Residual
Interest in any Trust may be sold separately in one or more public or
private transactions.
Cross-Collateralization................... As described in the related Trust Documents and the related
Prospectus Supplement, the source of payment for Securities of each
Series will be the assets of the related Trust only. However, as may
be described in the related Prospectus Supplement, a Series or Class
of Securities may include the right to receive moneys from a common
pool of credit enhancement which may be available for more than one
Series of Securities, such as a master reserve account, master
insurance policy or a master collateral pool consisting of similar
Receivables. Notwithstanding the foregoing, and as described in the
related Prospectus Supplement, no payment received on any Receivable
held by any Trust may be applied to the payment of Securities issued
by any other Trust (except to the limited extent that certain
collections in excess of the amounts needed to pay the related
Securities may be deposited in a common master reserve account or an
overcollateralization account that provides credit enhancement for
more than one Series of Securities issued pursuant to the related
Trust Documents).
Trust Assets.............................. The property of each Trust will include a pool of simple interest or
Rule of 78's motor vehicle installment sale contracts or motor
vehicle installment loans secured by new and used automobiles, light
trucks, vans and minivans (the 'Receivables'), including the right to
receive payments received or due on or with respect to such
Receivables on or after the date or dates specified in the related
Prospectus Supplement (each, a 'Cutoff Date'), security interests in
the vehicles financed thereby (the 'Financed Vehicles'), and any
proceeds from claims under certain related insurance policies. See
'The Receivables -- The Receivables.' On the date of issuance of a
Series of Securities specified in the related
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Prospectus Supplement (the 'Closing Date' for such Series), the
applicable Seller will convey Receivables having the aggregate
principal balance specified in such Prospectus Supplement as of the
Cutoff Date specified therein to such Trust pursuant to a sale and
servicing agreement (the 'Sale and Servicing Agreement') among the
Seller, the Servicer and the Trustee of such Trust. The property of
each Trust also will include amounts on deposit in, or certain rights
with respect to, certain trust accounts, including the related
Collection Account, any Pre-Funding Account and any other account
identified in the applicable Prospectus Supplement. See 'Description
of the Trust Documents -- Accounts.'
If the related Prospectus Supplement provides that the property of a
Trust will include moneys, in any case not to exceed 34% of the
Trust's Assets or 25% of the Certificate Balance, if any, initially
deposited into an account (a 'Pre-Funding Account'), such moneys will
be used to purchase additional Receivables after the Closing Date,
the Seller will be obligated pursuant to the Sale and Servicing
Agreement to sell additional Receivables (the 'Subsequent
Receivables') to the related Trust, subject only to the availability
thereof, having an aggregate principal balance approximately equal to
the amount deposited to the Pre-Funding Account on the Closing Date
(the 'Pre-Funded Amount'), and the Trust will be obligated to
purchase such Subsequent Receivables (subject to the satisfaction of
certain conditions set forth in the related Trust Documents) from
time to time during the period (the 'Funding Period'), not to exceed
6 months, specified in such Prospectus Supplement for the purchase of
such Subsequent Receivables. Any Subsequent Receivables conveyed to a
Trust will have been acquired by the Seller, directly or indirectly,
from CPS or a subsidiary of CPS (such subsidiary, an 'Affiliated
Originator') and will meet all of the credit, underwriting and other
criteria set forth herein and in the related Prospectus Supplement.
Any funds on deposit in the Pre-Funding Account and not yet invested
in Subsequent Receivables will be invested in Permitted Investments.
See 'Risk Factors -- Varying Characteristics of Subsequent
Receivables,' 'The Receivables,' and 'Description of the Trust
Documents -- Sale and Assignment of Receivables' herein and 'The
Receivables Pool' in the related Prospectus Supplement.
As used in this Prospectus, the term Receivables will include the
Receivables transferred to a Trust on the related Closing Date (such
Receivables, the 'Initial Receivables') as well as any Subsequent
Receivables transferred to such Trust during the related Funding
Period, if any.
Amounts on deposit in any Pre-Funding Account during the related
Funding Period will be invested by the Trustee (as directed by the
Servicer) in Eligible Investments, and any resultant investment
income, less any related investment expenses ('Investment Income'),
will be added, on the
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Payment Date immediately following the date on which such Investment
Income is paid to the Trust, to interest collections on the
Receivables for the related Collection Period and distributed in the
manner specified in the related Prospectus Supplement. Any funds
remaining in a Pre-Funding Account at the end of the related Funding
Period will be distributed as a prepayment or early distribution of
principal to holders of one or more classes of the Securities of the
related Series of Securities, in the amounts and in accordance with
the payment priorities specified in the related Prospectus
Supplement. Such distribution may affect the yield realized by
Securityholders and Securityholders may not be able to reinvest those
funds in investments realizing comparable returns. See 'Risk
Factors -- Distribution of Pre-Funded Amount -- Effect on Yield and
Maturity.'
Registration of Securities................ Securities may be represented by global securities registered in the
name of Cede & Co. ('Cede'), as nominee of The Depository Trust
Company ('DTC'), or another nominee of DTC. In such case,
Securityholders will not be entitled to receive definitive securities
representing such Securityholders' interests. See 'Description of the
Securities -- Book-Entry Registration' herein.
Credit and Cash Flow
Enhancement............................. If and to the extent specified in the related Prospectus Supplement,
credit enhancement with respect to the Trust Assets or any Class of
Securities may include any one or more of the following:
subordination of one or more other classes of Securities of the same
Series, reserve funds, spread accounts, surety bonds, insurance
policies, letters of credit, credit or liquidity facilities, cash
collateral accounts, over-collateralization, guaranteed investment
contracts, swaps or other interest rate protection agreements,
repurchase obligations, other agreements with respect to third party
payments or other support, cash deposits, or other arrangements. To
the extent specified in the related Prospectus Supplement, a form of
credit enhancement with respect to a Trust or a Class or Classes of
Securities may be subject to certain limitations and exclusions from
coverage thereunder.
Repurchase Obligations and the Receivables
Acquisition Agreement................... As more fully described in the related Prospectus Supplement, CPS
will be obligated to acquire from the related Trust Assets any
Receivable which was transferred pursuant to a Sale and Servicing
Agreement or Purchase Agreement or pledged pursuant to an Indenture
if the interest of the Securityholders therein is materially
adversely affected by a breach of any representation or warranty made
by CPS with respect to such Receivable, which breach has not been
cured. In addition, if so specified in the related Prospectus
Supplement, CPS may from time to time reacquire certain Receivables
of the Trust Assets, subject to specified conditions set forth in the
related Trust Documents.
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Servicer's Compensation................... The Servicer shall be entitled to receive a fee for servicing the
Trust Assets equal to a specified percentage of the value of such
Trust Assets, as set forth in the related Prospectus Supplement. See
'Description of the Trust Documents -- Servicing Compensation' herein
and in the related Prospectus Supplement.
Optional Termination...................... The Servicer, CPS, or, if specified in the related Prospectus
Supplement, certain other entities may, at their respective options,
effect early retirement of a Series of Securities under the
circumstances and in the manner set forth herein under 'Description
of The Trust Documents -- Termination' and in the related Prospectus
Supplement.
Mandatory Termination..................... The Trustee, the Servicer or certain other entities specified in the
related Prospectus Supplement may be required to effect early
retirement of all or any portion of a Series of Securities by
soliciting competitive bids for the purchase of the Trust Assets or
otherwise, under the circumstances and in the manner specified in
'Description of The Trust Documents -- Termination' and in the
related Prospectus Supplement.
Tax Considerations........................ Upon the issuance of each series of Securities, unless the related
Prospectus Supplement does not so provide, Federal Tax Counsel to the
applicable Trust will deliver an opinion to the effect that, for
Federal income tax purposes: (i) either (x) the Notes of such series
will be characterized as debt or (y) the Notes of such series should
be characterized as debt (but if not characterized as debt, the Notes
of such series will be characterized as interests in a partnership)
and (ii) such Trust will not be characterized as an association (or
publicly traded partnership) taxable as a corporation. Each
Noteholder, by the acceptance of a Note of a given series, will agree
to treat such Note as indebtedness, and each Certificateholder, by
the acceptance of a Certificate of a given series, will agree to
treat the related Trust as a partnership in which such
Certificateholder is a partner, for Federal income tax purposes.
Alternative characterizations of such Trust and such Certificates are
possible, but would not result in materially adverse tax consequences
to Certificateholders. See 'Certain Federal Income Tax Consequences'
for additional information concerning the application of Federal
income tax laws to the Notes and Certificates of a series and to the
applicable Trust.
ERISA Considerations...................... The Prospectus Supplement for each Series of Securities will
summarize, subject to the limitations discussed therein, consid-
erations under the Employee Retirement Income Security Act of 1974,
as amended ('ERISA'), relevant to the purchase of such Securities by
employee benefit plans and individual retirement accounts. See 'ERISA
Considerations' in the related Prospectus Supplement.
Ratings................................... Each Class of Securities offered pursuant to this Prospectus and the
related Prospectus Supplement will be rated in one of the four
highest rating categories by one or more 'national statistical rating
organizations', as defined in the Securities
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Exchange Act of 1934, as amended (the 'Exchange Act'), and commonly
referred to as 'Rating Agencies.' Such ratings will address, in the
opinion of such Rating Agencies, the likelihood that the Issuer will
be able to make timely payment of all amounts due on the related
Securities in accordance with the terms thereof. Such ratings will
neither address any prepayment or yield considerations applicable to
any Securities nor constitute a recommendation to buy, sell or hold
any Securities. The ratings expected to be received with respect to
any Securities will be set forth in the related Prospectus Supple-
ment.
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RISK FACTORS
Prospective Securityholders should consider, among other things, the
following factors in connection with the purchase of the Securities:
Sub-Prime Obligors. The Obligors on the Receivables to be conveyed to a
Trust will include 'sub-prime' borrowers who have limited or adverse credit
histories, low income or past credit problems and, therefore, are unable to
obtain financing from traditional sources of consumer credit. The average
interest rate charged by CPS to such 'sub-prime' borrowers is generally higher
than that charged to more creditworthy customers. The payment experience on
receivables of obligors with this credit profile is likely to be different from
that on receivables of traditional auto financing sources in that default rates
are likely to be higher. In addition, the payment experience on such receivables
is likely to be more sensitive to changes in the economic climate in the areas
in which such obligors reside. As a result of the credit profile of the obligors
and the APRs of such receivables, the historical credit loss and delinquency
rates on such receivables are generally higher than those experienced by banks
and the captive finance companies of the automobile manufacturers.
Effect of Social, Economic and Other Factors on Losses. The ability of the
Obligors to make payments on the Receivables, as well as the prepayment
experience thereon, will be affected by a variety of social and economic
factors. Economic factors include interest rates, unemployment levels, the rate
of inflation and consumer perceptions of economic conditions generally. However,
the Seller is unable to determine and has no basis to predict whether or to what
extent economic or social factors will affect the Receivables.
Risk of Replacing CPS as Servicer. CPS Servicing receivables of sub-prime
obligors is more difficult than servicing receivables of prime obligors.
Officers and employees of CPS have many years of experience in this type of
servicing. If CPS were to cease acting as Servicer, delays in processing
payments on the Receivables and information in respect thereof could occur and
result in delays in payments to the Securityholders.
Risk of CPS's Inability to Repurchase Receivables. In certain
circumstances, CPS will be required to acquire Receivables from the related
Trust with respect to which such representations and warranties have been
breached. In the event that CPS is incapable of complying with its repurchase
obligations and no other party is obligated to perform or satisfy such
obligations, Securityholders of the applicable Trust may be subject to delays in
receiving payments and suffer loss of their investment in the Securities.
The related Prospectus Supplement will set forth certain information
regarding CPS. In addition, CPS is subject to the information requirements of
the Exchange Act and, in accordance therewith, files reports and other
information with the Commission. For further information regarding CPS reference
is made to such reports and other information which are available as described
under 'Available Information.'
Effect of Prepayments on Yield and Maturity. All of the Receivables are
prepayable at any time. The rate of prepayments on the Receivables may be
influenced by a variety of economic, social and other factors, including the
fact that an Obligor generally may not sell or transfer the Financed Vehicle
securing a receivable without the consent of CPS. (For this purpose the term
'prepayments' includes prepayments in full, certain partial prepayments related
to refunds of extended service contract costs and unearned insurance premiums,
liquidations due to default, as well as receipts of proceeds from physical
damage, credit life and credit accident and health insurance policies and
certain other Receivables repurchased for administrative reasons.) The rate of
prepayment on the Receivables may also be influenced by the structure of the
loan, the nature of the Obligors and the Financed Vehicles and servicing
decisions as discussed above. In addition, under certain circumstances, CPS is
obligated to repurchase Receivables as a result of breaches of representations
and warranties, and under certain circumstances the Servicer is obligated to
purchase Receivables pursuant to the Sale and Servicing Agreement as a result of
breaches of certain covenants. Subject to certain conditions, the Servicer also
has the right to purchase the Receivables when the aggregate principal balance
thereof is 10% or less of the aggregate principal balance thereof on the Cutoff
Date. Any reinvestment risks resulting from a faster or slower incidence of
prepayment of Receivables will be borne entirely by the Securityholders.
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The rate of prepayments of Receivables cannot be predicted and is
influenced by a wide variety of economic, social, and other factors, including
prevailing interest rates, the availability of alternate financing and local and
regional economic conditions. Therefore, no assurance can be given as to the
level of prepayments that a Trust will experience.
Securityholders should consider, in the case of Securities purchased at a
discount, the risk that a slower than anticipated rate of prepayments on the
Receivables could result in an actual yield that is less than the anticipated
yield and, in the case of any Securities purchased at a premium, the risk that a
faster than anticipated rate of prepayments on the Receivables could result in
an actual yield that is less than the anticipated yield.
Distribution of Pre-Funded Amount -- Effect on Yield and Maturity. If so
provided in the related Prospectus Supplement, on the Closing Date the Seller
will deposit the Pre-Funded Amount specified in such Prospectus Supplement into
the Pre-Funding Account. The Pre-Funded Amount will be used to purchase
Subsequent Receivables from the Seller (which, in turn, will acquire such
Subsequent Receivables from CPS or an Affiliated Originator specified in the
related Prospectus Supplement) from time to time during the related Funding
Period. During the related Funding Period and until such amounts are applied by
the Trustee to purchase Subsequent Receivables, amounts on deposit in the
Pre-Funding Account will be invested by the Trustee (as instructed by the
Servicer) in Eligible Investments, and any investment income with respect
thereto (net of any related investment expenses) will be added to amounts
received on or in respect of the Receivables during the related Collection
Period and allocated to interest and will be distributed on the Payment Date
pursuant to the payment priorities specified in the related Prospectus
Supplement.
To the extent that the entire Pre-Funded Amount has not been applied to the
purchase of Subsequent Receivables by the end of the related Funding Period, any
amounts remaining in the Pre-Funding Account will be distributed as a prepayment
of principal to Securityholders on the Payment Date at or immediately following
the end of the Funding Period, in the amounts and pursuant to the priorities set
forth in the related Prospectus Supplement. Any such prepayment of principal
could have the effect of shortening the weighted average life of the Securities
of the related Series. In addition, holders of the related Securities will bear
the risk that they may be unable to reinvest any such principal prepayment at
yields at least equal to the yield on such Securities.
Varying Characteristics of Subsequent Receivables. If so provided in the
related Prospectus Supplement, the Seller will be obligated pursuant to the
Trust Documents to sell Subsequent Receivables to the Trust, and the Trust will
be obligated to purchase such Subsequent Receivables, subject only to the
satisfaction of certain conditions set forth in the Trust Documents and
described in the related Prospectus Supplement. If the principal amount of the
eligible Subsequent Receivables acquired by the Seller from CPS or an Affiliated
Originator during a Funding Period is less than the Pre-Funded Amount, the
Seller may have insufficient Subsequent Receivables to transfer to a Trust and
holders of one or more Classes of the related Series of Securities may receive a
prepayment or early distribution of principal at the end of the Funding Period
as described above under 'Pre-Funding Accounts.'
Any conveyance of Subsequent Receivables to a Trust is subject to the
satisfaction, on or before the related transfer date (each, a 'Subsequent
Transfer Date'), of the following conditions precedent, among others: (i) each
such Subsequent Receivable must satisfy the eligibility criteria specified in
the related Purchase Agreement; (ii) the Seller shall not have selected such
Subsequent Receivables in a manner that is adverse to the interests of holders
of the related Securities; (iii) as of the respective Cutoff Dates for such
Subsequent Receivables, all of the Receivables in the Trust, including the
Subsequent Receivables to be conveyed to the Trust as of such date, must satisfy
the parameters described under 'The Receivables Pools' herein and 'The
Receivables Pool' in the related Prospectus Supplement; and (iv) the Seller must
execute and deliver to such Trust a written assignment conveying such Subsequent
Receivables to such Trust. In addition, as and to the extent specified in the
related Prospectus Supplement, the conveyance of Subsequent Receivables to a
Trust is subject to the satisfaction of the condition precedent, among others,
that the Seller deliver certain legal opinions to the related Trustee with
respect to the validity of the conveyance of the Subsequent Receivables to the
Trust. If any such conditions precedent are not met with respect to any
Subsequent Receivables, CPS or
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the Seller, as specified in the related Prospectus Supplement, will be required
to repurchase such Subsequent Receivables from the related Trust, at a purchase
price equal to the related Purchase Amounts therefor.
Except as described herein and in the related Prospectus Supplement, there
will be no other required characteristics of Subsequent Receivables. Therefore,
the characteristics of the entire Receivables Pool included in any Trust may
vary significantly as Subsequent Receivables are conveyed to such Trust from
time to time during the Funding Period or Revolving Period. See 'The
Receivables' herein.
Certain Legal Aspects -- Lack of Perfected Security Interests in Financed
Vehicles. The transfer of the Receivables by the applicable Seller to the
Trustee pursuant to the related Sale and Servicing Agreement, perfection of the
security interests in the Receivables and the enforcement of rights to realize
on the Financed Vehicles as collateral for the Receivables are subject to a
number of federal and state laws, including the UCC as in effect in various
states. To the extent specified in a Prospectus Supplement, no action will be
taken to perfect the rights of the Trustee in proceeds of any VSI insurance
policy insurance policies covering individual Financed Vehicles or Obligors.
Therefore, the rights of a third party with an interest in such proceeds could
prevail against the rights of the Trust prior to the time such proceeds are
deposited by the Servicer into a Trust Account (as hereinafter defined). See
'Certain Legal Aspects of the Receivables.'
In connection with each sale of Receivables, security interests in the
Financed Vehicles securing the Receivables will be assigned by CPS and each
Affiliated Originator to the Seller. Due to the administrative burden and
expense of retitling each of the Financed Vehicles in the appropriate state, the
certificates of title to the Financed Vehicles will not be amended or reissued
to reflect the assignment to the Trust. In the absence of such an amendment or
reissuance, the Trust may not have a perfected security interest in the Financed
Vehicles securing the Receivables in some states. By virtue of the assignment of
the applicable Purchase Agreement to the related Trust, CPS will be obligated to
repurchase any Receivable sold to the Trust by CPS or an Affiliated Originator
as to which there did not exist on the Closing Date a perfected security
interest in the name of CPS or the relevant Affiliated Originator in the
Financed Vehicle, and the Servicer will be obligated to purchase any Receivable
sold to the Trust as to which it failed to maintain a perfected security
interest in the name of CPS or the relevant Affiliated Originator in the
Financed Vehicle securing such Receivable if, in either case, such breach
materially and adversely affects such Receivable and if such failure or breach
is not cured prior to the expiration of the applicable cure period. To the
extent the security interest of CPS or the Affiliated Originator is perfected,
the Trust will have a prior claim over subsequent purchasers of such Financed
Vehicle and holders of subsequently perfected security interests. However, as
against liens for repairs of a Financed Vehicle or for taxes unpaid by an
Obligor under a Receivable, or through fraud, forgery, negligence or error, CPS
or the Affiliated Originator, and therefore the Trust, could lose the priority
of its security interest or its security interest in a Financed Vehicle. Neither
CPS nor the Servicer will have any obligation to purchase a Receivable as to
which a lien for repairs of a Financed Vehicle or for taxes unpaid by an Obligor
under a Receivable result in losing the priority of the security interest in
such Financed Vehicle after the Closing Date. See 'Certain Legal Aspects of the
Receivables -- Security Interests in the Financed Vehicles.'
Consumer Protection Laws. Federal and state consumer protection laws impose
requirements on creditors in connection with extensions of credit and
collections of retail installment loans, and certain of these laws make an
assignee of such a loan (such as a Trust) liable to the obligor thereon for any
violation by the lender. To the extent specified herein and in the related
Prospectus Supplement, CPS will be obligated to repurchase any Receivable that
fails to comply with such legal requirements from the Seller and the Seller
shall be obligated to repurchase such Receivable from the Trust, and the Seller
and the Servicer will undertake to enforce such obligation on behalf of the
Trust. See 'Certain Legal Aspects of the Receivables -- Consumer Protection
Laws.'
Non-Consolidation. Each Seller has taken or will take steps in structuring
the transactions contemplated hereby that are intended to ensure that the
voluntary or involuntary application for relief by CPS under the United States
Bankruptcy Code or similar state laws ('Insolvency Laws') will not result in
consolidation of the assets and liabilities of the Seller with those of CPS.
These steps include
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the creation of each Seller as a separate, limited-purpose subsidiary pursuant
to articles of incorporation containing certain limitations (including
restrictions on the nature of the Seller's business and a restriction on the
Seller's ability to commence a voluntary case or proceeding under any Insolvency
Law without the prior unanimous affirmative vote of all of its directors).
However, there can be no assurance that the activities of a Seller would not
result in a court concluding that the assets and liabilities of such Seller
should be consolidated with those of CPS in a proceeding under any Insolvency
Law. If a court were to reach such a conclusion, then delays in distributions on
the related Securities could occur or reductions in the amounts of such
distributions could result. See 'The Seller and CPS.'
True Sale. CPS will warrant to the Seller in each Purchase Agreement that
the sale of the Receivables by it or an Affiliated Originator to the Seller is a
valid sale of such Receivables to such Seller. In addition, CPS, each Affiliated
Originator and each Seller will treat the transactions described herein as a
sale of the Receivables to the Seller, and each Seller has taken and will take
all actions that are required to perfect the Seller's ownership interest in the
Receivables. Notwithstanding the foregoing, if CPS or an Affiliated Originator
were to become a debtor in a bankruptcy case and a creditor or
trustee-in-bankruptcy of CPS (or such Affiliated Originator) or CPS (or such
Affiliated Originator) itself were to take the position that the sale of
Receivables to the Seller should be recharacterized as a pledge of such
Receivables to secure a borrowing of such Seller, then delays in payments of
collections of Receivables to the Seller could occur or, should the court rule
in favor of any such trustee, debtor or creditor, reductions in the amount of
such payments could result. If the transfer of Receivables to the Seller is
recharacterized as a pledge or a tax or government lien on the property of CPS
or an Affiliated Originator arising before the transfer of a Receivable to the
Seller may have priority over the Seller's interest in such Receivable. If the
transactions contemplated herein are treated as a sale, the Receivables would
not be part of the bankruptcy estate of CPS or the Affiliated Originator, as
applicable, and would not be available to creditors of CPS or the Affiliated
Originator, as applicable.
The U.S. Court of Appeals for the Tenth Circuit issued its opinion in
Octagon Gas Systems, Inc. v. Rimmer (In re Meridian Reserve, Inc.) (decided May
27, 1993) in which it concluded (noting that its position is in contrast to that
taken by another court) that accounts receivable sold by the debtor prior to the
filing for bankruptcy remain property of the debtor's bankruptcy estate.
Although the Receivables are likely to be viewed as 'chattel paper', as defined
under the Uniform Commercial Code, rather than as accounts, the rationale behind
the Octagon holding is equally applicable to chattel paper. The circumstances
under which the Octagon ruling would apply are not fully known, and the extent
to which the Octagon decision will be followed in other courts or outside of the
Tenth Circuit is not certain. If the holding in the Octagon case were applied in
a bankruptcy of CPS or an Affiliated Originator, however, even if the transfers
of Receivables to the Seller and to the Trust were treated as sales, the
Receivables would be part of the bankruptcy estate and would be subject to
claims of certain creditors and delays and reductions in payments to the
Securityholders could result. CPS will warrant in the Purchase Agreement that
the sale of the Receivables to the Seller (including Receivables sold by an
Affiliated Originator) is a valid sale of the Receivables to the Seller, and the
Seller will warrant in the Sale and Servicing Agreement that the sale of the
Receivables to the Trust is a valid sale of the Receivables to the Trust.
Risk of Changes in Delinquency Levels. There can be no assurance that the
historical levels of delinquencies and losses experienced by CPS on its
respective loan and vehicle portfolio will be indicative of the performance of
the Contracts included in the Trust or that such levels will continue in the
future. Delinquencies and losses could increase significantly for various
reasons, including changes in the federal income tax laws, changes in the local,
regional or national economies or due to other events. For a discussion and
analysis see 'CPS's Automobile Contract Portfolio -- Delinquency and Loss
Experience.'
Subordination; Limited Assets. To the extent specified in the related
Prospectus Supplement, distributions of interest and principal on one Class of
Notes of a Series may be subordinated in priority of payment to interest and
principal due on other Classes of Notes of a related Series. Moreover, each
Trust will not have, nor is it permitted or expected to have, any significant
assets or sources of funds other than the related Receivables and, to the extent
provided in the related Prospectus Supplement,
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the related reserve account, spread account, and any other Credit Enhancement.
The Securities represent beneficial interests in the related Trust only and will
not represent a recourse obligation to other assets of CPS or the Seller. No
Securities of any Series will be insured or guaranteed by CPS, the Seller, the
Servicer, or the applicable Trustee. Consequently, holders of the Securities of
any Series must rely for repayment primarily upon payments on the Receivables
and, if and to the extent available, any Credit Enhancement, all as specified in
the related Prospectus Supplement.
Limited Liquidity. There can be no assurance that a secondary market for
the Securities of any Series or Class will develop or, if it does develop, that
it will provide Securityholders with liquidity of investment or that it will
continue for the life of such Securities. The Prospectus Supplement for any
Series of Securities may indicate that an underwriter specified therein intends
to establish and maintain a secondary market in such Securities; however, no
underwriter will be obligated to do so. The Securities will not be listed on any
securities exchange.
Priority of Interest in Receivables. In connection with the issuance of any
Series of Securities, CPS will originate Receivables. The Seller will warrant in
a Sale and Servicing Agreement that the transfer of the Contracts to such Trust
is either a valid assignment, transfer and conveyance of the Receivables to the
Trust or the Trustee on behalf of the Securityholders has a valid security
interest in such Receivables. As will be described in the related Prospectus
Supplement, the related Trust Documents will provide that the Trustee will be
required to maintain possession of such original copies of all Receivables that
constitute chattel paper; provided that the Servicer may take possession of such
original copies as necessary for the enforcement of any Receivables. If the
Servicer, the Trustee or other third party, while in possession of any
Receivable, sells or pledges and delivers such Receivable to another party, in
violation of the Sale and Servicing Agreement, there is a risk that such other
party could acquire an interest in such Receivable having a priority over the
Trust's interest. Furthermore, if the Servicer or a third party, while in
possession of any Receivable, is rendered insolvent, such an event of insolvency
may result in competing claims to ownership or security interests in such
Receivable. Such an attempt, even if unsuccessful, could result in delays in
payments on the Securities. If successful, such attempt could result in losses
to the Securityholders or an acceleration of the repayment of the Securities.
CPS will be obligated to repurchase any Receivable if there is a breach of CPS's
representations and warranties that materially and adversely affects the
interests of the Trust in such Receivable and such breach has not been cured.
Limitations on the Amount of Recoveries. Unless specific limitations are
described on the related Prospectus Supplement with respect to specific
Receivables, all Receivables will provide that the obligations of the Obligors
thereunder are absolute and unconditional, regardless of any defense, set-off or
abatement which the Obligor may have against CPS or any other person or entity
whatsoever. CPS will warrant that no claims or defenses have been asserted or
threatened with respect to the Receivables and that all requirements of
applicable law with respect to the Receivables have been satisfied.
In the event that CPS or the Trustee must rely on repossession and
disposition of Financed Vehicles to recover scheduled payments due on Defaulted
Receivables (as defined in the related Sale and Servicing Agreement), the Issuer
may not realize the full amount due on a Receivable (or may not realize the full
amount on a timely basis). Other factors that may affect the ability of the
Issuer to realize the full amount due on a Receivable include whether amendments
to certificates of title relating to the Financed Vehicles had been filed,
depreciation, obsolescence, damage or loss of any financed Vehicle, and the
application of Federal and state bankruptcy and insolvency laws. As a result,
the Securityholders may be subject to delays in receiving payments and suffer
loss of their investment in the Securities.
Insurance on Financed Vehicles. Each Receivable generally requires the
Obligor to maintain insurance covering physical damage to the Financed Vehicle
in an amount not less than the unpaid principal balance of such Receivable
pursuant to which CPS is named as a loss payee. Since the Obligors select their
own insurers to provide the requisite coverage, the specific terms and
conditions of their policies vary.
In addition, although each Receivable generally gives CPS the right to
force place insurance coverage in the event the required physical damage
insurance on a Vehicle is not maintained by an Obligor, neither CPS nor the
Servicer is obligated to place such coverage. In the event insurance
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coverage is not maintained by Obligors and coverage is not force placed, then
insurance recoveries may be limited in the event of losses or casualties to
Financed Vehicles included in the Trust Assets, as a result of which
Securityholders could suffer a loss on their investment.
Security Rating. The rating of Securities credit enhanced by a letter of
credit, financial guaranty insurance policy, reserve fund, credit or liquidity
facilities, cash deposits or other forms of credit enhancement (collectively
'Credit Enhancement') will depend primarily on the creditworthiness of the
issuer of such external Credit Enhancement device (a 'Credit Enhancer'). Any
reduction in the rating assigned to the claims-paying ability of the related
Credit Enhancer to honor its obligations pursuant to any such Credit Enhancement
below the rating initially given to the Securities would likely result in a
reduction in the rating of the Securities.
Limitations Due to Book-Entry Registration. Issuance of the Securities in
book-entry form may reduce the liquidity of such Securities in the secondary
trading market since investors may be unwilling to purchase Securities for which
they cannot obtain definitive physical securities representing such
Securityholders' interests, except in certain circumstances described in the
related Prospectus Supplement.
Since transactions in Securities will, in most cases, be effected only
through DTC, direct or indirect participants in DTC's book-entry system ('Direct
Participants' or 'Indirect Participants') or certain banks, the ability of a
Securityholder to pledge a Security to persons or entities that do not
participate in the DTC system, or otherwise to take actions in respect to such
Securities, may be limited due to lack of a physical security representing the
Securities.
Securityholders may experience some delay in their receipt of distributions
of interest on and principal of the Securities since distributions may be
required to be forwarded by the Trustee to DTC and, in such case, DTC will be
required to credit such distributions to the accounts of its Participants which
thereafter will be required to credit them to the accounts of the applicable
Class of Securityholders either directly or indirectly through Indirect
Participants. See 'Description of the Securities -- Book-Entry Registration.'
Limitations on Interest Payments and Foreclosures. Generally, under the
terms of the Soldiers' and Sailors' Civil Relief Act of 1940, as amended (the
'Relief Act'), or similar state legislation, an Obligor who enters military
service after the origination of the related Receivable (including an Obligor
who is a member of the National Guard or is in reserve status at the time of the
origination of the Receivable and is later called to active duty) may not be
charged interest (including fees and charges) above an annual rate of 6% during
the period of such Obligor's active duty status, unless a court orders otherwise
upon application of the lender. It is possible that such action could have an
effect, for an indeterminate period of time, on the ability of the Servicer to
collect full amounts of interest on certain of the Receivables. In addition, the
Relief Act imposes limitations that would impair the ability of the Servicer to
foreclose on an affected Receivable during the Obligor's period of active duty
status. Thus, in the event that such a Receivable goes into default, there may
be delays and losses occasioned by the inability of the Servicer to realize upon
the Financed Vehicle in a timely fashion.
THE ISSUERS
With respect to each Series of Securities, the Seller will establish a
separate Trust that will issue such Securities pursuant to the related Trust
Documents. For purposes of this Prospectus and the related Prospectus
Supplement, the related Trust, if a Trust issues the related Securities, shall
be referred to as the 'Issuer' with respect to such Securities.
Upon the issuance of the Securities of a given Series, the proceeds from
such issuance will be used by CPS to originate Receivables. The Servicer will
service the related Receivables pursuant to a sale and servicing agreement (the
'Sale and Servicing Agreement'), and will be compensated for acting as the
Servicer. To facilitate servicing and to minimize administrative burden and
expense, the Servicer may be appointed custodian for the related Receivables by
each Trustee and CPS, as may be set forth in the related Prospectus Supplement.
If the protection provided to the Securityholders of a given class by the
subordination of another Class of Securities of such Series and by the
availability of the funds in the reserve account, if any, or
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any other Credit Enhancement for such Series is insufficient, the Trust must
rely solely on the payments from the Obligors on the related Contracts, and the
proceeds from the sale of Financed Vehicles which secure the Defaulted
Contracts. In such event, certain factors may affect such Trust's ability to
realize on the collateral securing such Contracts, and thus may reduce the
proceeds to be distributed to the Securityholders of such Series.
THE TRUST ASSETS
To the extent specified in the Prospectus Supplement for a Trust, the Trust
Assets of a Trust will include a pool (a 'Receivables Pool') of retail
installment sale contracts between dealers (the 'Dealers') in new and used
automobiles, light trucks, vans and minivans and retail purchasers (the
'Obligors') (including Sub-Prime Borrowers) and, with respect to Rule of 78's
Receivables, certain moneys due thereunder after the applicable Cutoff Date and,
with respect to Simple Interest Receivables, certain moneys received thereunder
after the applicable Cutoff Date. Pursuant to agreements between the Dealers and
CPS ('Dealer Agreements'), the Receivables will be purchased by CPS. As further
described in the related Prospectus Supplement, the Trust Assets of a Trust will
also include (i) such amounts as from time to time may be held in one or more
trust accounts established and maintained by the Trustee pursuant to the Trust
Agreement or Indenture; (ii) the rights of the Seller under the Sale and
Servicing Agreement; (iii) security interests in the Financed Vehicles; (iv) the
rights of the Seller to receive any proceeds with respect to the Receivables
from claims on physical damage, credit life and credit accident and health
insurance policies covering the Financed Vehicles or the Obligors, as the case
may be; (v) the rights of the Seller to refunds for the costs of extended
service contracts and to refunds of unearned premiums with respect to credit
life and credit accident and health insurance policies covering the Financed
Vehicles or Obligors, as the case may be; and (vi) any and all proceeds of the
foregoing. If so specified in the related Prospectus Supplement, the Trust
Assets also will include the Credit Enhancement provided for the benefit of
Securityholders of such Trust.
If so provided in the related Prospectus Supplement, the property of a
Trust may also include a Pre-Funded Amount, which the Seller will deposit to the
Pre-Funding Account on the Closing Date and which will be used by the Trust to
purchase Subsequent Receivables from the Seller during the related Funding
Period (not to exceed 6 months). Any Subsequent Receivables so conveyed to a
Trust will also be assets of such Trust. The Pre-Funded Amount will not exceed
34% of the Trust Assets nor 25% of the Certificate Balance, if any.
If the protection provided to Securityholders, if any, by any such Credit
Enhancement is insufficient, such Securityholders will have to look to payments
by or on behalf of Obligors on the related Receivables and the proceeds from the
repossession and sale of Financed Vehicles that secure defaulted Receivables for
distributions of principal and interest on the Securities. In such event,
certain factors, such as the applicable Trust's not having perfected security
interests in all of the Financed Vehicles, may limit the ability of a Trust to
realize on the collateral securing the related Receivables, or may limit the
amount realized to less than the amount due under the related Receivables.
Securityholders may thus be subject to delays in payment on, or may incur losses
on their investment in, such Securities as a result of defaults or delinquencies
by Obligors and depreciation in the value of the related Financed Vehicles. See
'Description of the Trust Documents -- Credit and Cash Flow Enhancement' and
'Certain Legal Aspects of the Receivables.'
The Receivables comprising the Trust Assets will, as specifically described
in the related Prospectus Supplement, be either (i) originated by CPS or an
Affiliated Originator, (ii) originated by various manufacturers (or their
captive finance companies) and acquired by CPS or an Affiliated Originator,
(iii) originated by various Dealers and acquired by CPS or an Affiliated
Originator or (iv) acquired by CPS or an Affiliated Originator from other
originators or owners of Receivables. Such Receivables will generally have been
originated or acquired by CPS or an Affiliated Originator in accordance with
CPS's specified underwriting criteria. The underwriting criteria applicable to
the Receivables included in any Trust will be described in all material respects
in the related Prospectus Supplement.
The Receivables included in the Trust Assets will be selected from those
Receivables held by CPS or an Affiliated Originator based on the criteria
specified in the applicable Purchase Agreement or Affiliate Purchase Agreement
and described herein or in the related Prospectus Supplement.
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ACQUISITION OF RECEIVABLES BY THE SELLER
On or prior to each Closing Date, CPS will, and an Affiliated Originator
may, sell and assign to the Seller, without recourse, except as provided in the
related Purchase Agreement, its entire interest in the applicable Receivables,
together with its security interests in the Financed Vehicles, pursuant to a
purchase agreement between CPS and the Seller (a 'Purchase Agreement') or
pursuant to a purchase agreement between an Affiliated Originator and the Seller
(an 'Affiliate Purchase Agreement').
In each Purchase Agreement, CPS will represent and warrant to the Seller,
among other things, that (i) the information provided with respect to the
applicable Receivables is correct in all material respects; (ii) at the date of
issuance of the Securities, physical damage insurance covering each Financed
Vehicle is in effect in accordance with CPS's normal requirements; (iii) at the
date of issuance of the applicable Securities, the related Receivables are free
and clear of all security interests, liens, charges, and encumbrances and no
offsets, defenses, or counterclaims against Dealers have been asserted or
threatened; (iv) at the date of issuance of the Securities, each of the
Receivables is or will be secured by a first-priority perfected security
interest in the Financed Vehicle in favor of CPS or the applicable Affiliated
Originator; and (v) each Receivable, at the time it was originated, complied
and, at the date of issuance of the Securities, complies in all material
respects with applicable federal and state laws, including, without limitation,
consumer credit, truth in lending, equal credit opportunity and disclosure laws.
As of the last day of the second (or, if CPS elects, the first) month following
the discovery by or notice to the Seller and CPS of a breach of any
representation or warranty that materially and adversely affects a Receivable,
unless the breach is cured, CPS will purchase such Receivable from the Trust for
the Purchase Amount. The 'Purchase Amount' equals the unpaid principal balance
owed by the Obligor plus interest thereon at the respective APR to the last day
of the month of repurchase. The repurchase obligation will constitute the sole
remedy available to the Securityholders, the Credit Enhancer (if any) or the
Trustee for any such uncured breach.
THE RECEIVABLES
RECEIVABLES POOLS
Information with respect to the Receivables in the related Receivables Pool
will be set forth in the related Prospectus Supplement, including, to the extent
appropriate, the composition of such Receivables and the distribution of such
Receivables by geographic concentration, payment frequency and current principal
balance as of the applicable Cutoff Date.
If so provided in the related Prospectus Supplement, the Seller will be
obligated pursuant to the Sale and Servicing Agreement to sell Subsequent
Receivables to the Trust, and the Trust will be obligated to purchase such
Subsequent Receivables, subject only to the satisfaction of certain conditions
set forth in the Sale and Servicing Agreement. If the principal amount of the
eligible Subsequent Receivables acquired by the Seller from CPS or an Affiliated
Originator during a Funding Period is less than the Pre-Funded Amount, the
Seller may have insufficient Subsequent Receivables to transfer to a Trust and
holders of one or more Classes of the related Series of Securities may receive a
prepayment or early distribution of principal at the end of the Funding Period
as described above under 'Risk Factors -- Pre-Funding Accounts.'
Any conveyance of Subsequent Receivables to a Trust is subject to the
satisfaction, on or before the related transfer date (each, a 'Subsequent
Transfer Date'), of the following conditions precedent, among others: (i) each
such Subsequent Receivable must satisfy the eligibility criteria specified in
the related Sale and Servicing Agreement; (ii) the Seller shall not have
selected such Subsequent Receivables in a manner that is adverse to the
interests of holders of the related Securities; (iii) as of the respective
Cutoff Dates for such Subsequent Receivables, all of the Receivables in the
Trust, including the Subsequent Receivables to be conveyed to the Trust as of
such date, must satisfy the parameters described under 'The Receivables Pool' in
the related Prospectus Supplement; and (iv) the Seller must execute and deliver
to such Trust a written assignment conveying such Subsequent Receivables to such
Trust. In addition, as and to the extent specified in the related Prospectus
Supplement, the conveyance of Subsequent Receivables to a Trust is subject to
the satisfaction of the condition subsequent, among others, which must be
satisfied within the applicable time period specified in the related Prospectus
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Supplement, that the Seller deliver certain legal opinions to the related
Trustee with respect to the validity of the conveyance of the Subsequent
Receivables to the Trust. If any such conditions precedent are not met with
respect to any Subsequent Receivables within the time period specified in the
related Prospectus Supplement, CPS or the Seller, as specified in the related
Prospectus Supplement, will be required to repurchase such Subsequent
Receivables from the related Trust, at a purchase price equal to the related
Purchase Amounts therefor.
Except as described herein and in the related Prospectus Supplement, there
will be no other required characteristics of Subsequent Receivables. Therefore,
the characteristics of the entire Receivables Pool included in any Trust may
vary from those described in the related Prospectus Supplement as Subsequent
Receivables are conveyed to such Trust from time to time during the Funding
Period or Revolving Period; provided that the Trust will not acquire any
Subsequent Receivable on a Subsequent Transfer Date if the addition of such
Subsequent Receivable (giving consideration to all other Subsequent Receivables
acquired by the Trust on or prior to such Subsequent Transfer Date) would result
in any characteristic of the related Receivables Pool varying by more than 5%
from the description of such characteristic in the related Prospectus Supplement
. The Sponsor will file each Subsequent Transfer Agreement with the Commission
on Form 8-K.
THE RECEIVABLES
As specified in the related Prospectus Supplement, the Receivables may
consist of any combination of Rule of 78's Receivables, Actuarial Receivables or
Simple Interest Receivables. Generally, 'Rule of 78's Receivables' provide for
fixed level monthly payments which will amortize the full amount of the
Receivable over its term. The Rule of 78's Receivables provide for allocation of
payments according to the 'sum of periodic balances' method (also referred to as
the 'sum of monthly payments' method) (the 'Rule of 78's'). Each Rule of 78's
Receivable provides for the payment by the Obligor of a specified total amount
of payments, payable in monthly installments on the related due date, which
total represents the principal amount financed and finance charges in an amount
calculated on the basis of a stated annual percentage rate ('APR') for the term
of such Receivable. The rate at which such amount of finance charges is earned
and, correspondingly, the amount of each fixed monthly payment allocated to
reduction of the outstanding principal balance of the related Receivable are
calculated in accordance with the Rule of 78's. Under the Rule of 78's, the
amount of interest earned in any period is equal to the total finance charge due
under the contract multiplied by a fraction the numerator of which is the
remaining number of periods of the contract and the denominator of which is the
sum of the digits for the term of the contract. For example, on a 36 month
contract in its 17th month, the numerator would be nineteen and the denominator
would be 666 (1+2+3+4....+36=666). Under the Rule of 78's, the portion of each
payment allocable to interest is higher during the early months of the term of a
Receivable and lower during later months than that under a constant yield method
for allocating payments between interest and principal. Notwithstanding the
foregoing, as specified in the related Prospectus Supplement, all payments
received by the Servicer on or in respect of the Rule of 78's Receivables may be
allocated on an actuarial or simple interest basis.
Generally, 'Actuarial Receivables' provide for monthly payments with a
final fixed value payment which is greater than the scheduled monthly payments.
An Actuarial Receivable provides for amortization of the amount financed over a
series of fixed level payment monthly installments, but also requires a final
fixed value payment due after payment of such monthly installments which may be
satisfied by (i) payment in full in cash of such amount, (ii) transfer of the
Financed Vehicle to CPS, provided certain conditions are satisfied or (iii)
refinancing the fixed value payment in accordance with certain conditions.
'Simple Interest Receivables' provide for the amortization of the amount
financed under the Receivable over a series of fixed level monthly payments.
However, unlike the monthly payment under Rule of 78's Receivables, each monthly
payment consists of an installment of interest which is calculated on the basis
of the outstanding principal balance of the receivable multiplied by the stated
APR and further multiplied by the period elapsed (as a fraction of a calendar
year) since the preceding payment of interest was made. As payments are received
under a Simple Interest Receivable, the amount received is applied first to
interest accrued to the date of payment and the balance is applied to reduce
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the unpaid principal balance. Accordingly, if an Obligor pays a fixed monthly
installment before its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be less
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly greater. Conversely, if an Obligor pays a fixed monthly
installment after its scheduled due date, the portion of the payment allocable
to interest for the period since the preceding payment was made will be greater
than it would have been had the payment been made as scheduled, and the portion
of the payment applied to reduce the unpaid principal balance will be
correspondingly less. In either case, the Obligor pays a fixed monthly
installment until the final scheduled payment date, at which time the amount of
the final installment is increased or decreased as necessary to repay the then
outstanding principal balance.
If an Obligor elects to prepay a Rule of 78's Receivable in full, it is
entitled to a rebate of the portion of the outstanding balance then due and
payable attributable to unearned finance charges. If a Simple Interest
Receivable is prepaid, rather than receive a rebate, the Obligor is required to
pay interest only to the date of prepayment. The amount of a rebate under a Rule
of 78's Receivable calculated in accordance with the Rule of 78's will always be
less than had such rebate been calculated on an actuarial basis and generally
will be less than the remaining scheduled payments of interest that would be due
under a Simple Interest Receivable for which all payments were made on schedule.
Distributions to Securityholders may not be affected by Rule of 78's rebates
under the Rule of 78's Receivable because, as specified in the related
Prospectus Supplement, such distributions may be determined using the actuarial
or simple interest method.
DELINQUENCIES, REPOSSESSIONS AND NET LOSSES
Certain information relating to CPS's delinquency, repossession and net
loss experience with respect to Receivables it has originated or acquired will
be set forth in each Prospectus Supplement. This information may include, among
other things, the experience with respect to all Receivables in CPS's portfolio
during certain specified periods. There can be no assurance that the
delinquency, repossession and net loss experience with respect to any Trust will
be comparable to CPS's prior experience.
MATURITY AND PREPAYMENT CONSIDERATIONS
As more fully described in the related Prospectus Supplement, if a
Receivable permits prepayment, such payment, together with accelerated payments
resulting from defaults, will shorten the weighted average life of the related
pool of Receivables and the weighted average life of the related Securities. The
rate of prepayments on the Receivables may be influenced by a variety of
economic, financial and other factors. In addition, under certain circumstances,
CPS will be obligated to acquire Receivables from the related Trust pursuant to
the applicable Purchase Agreement as a result of breaches of representations and
warranties. Any reinvestment risks resulting from a faster or slower
amortization of the related Securities which results from prepayments will be
borne entirely by the related Securityholders.
The related Prospectus Supplement will set forth certain additional
information with respect to the maturity and prepayment considerations
applicable to a particular pool of Receivables and the related Series of
Securities, together with a description of any applicable prepayment penalties.
CPS'S AUTOMOBILE CONTRACT PORTFOLIO
GENERAL
CPS was incorporated in the State of California on March 8, 1991. CPS and
its subsidiaries engage primarily in the business of purchasing, selling and
servicing retail automobile installment sales contracts ('Contracts') originated
by Dealers located primarily in California, Florida, Pennsylvania, Texas,
Illinois and Nevada. CPS specializes in Contracts with borrowers ('Sub-Prime
Borrowers') who generally would not be expected to qualify for traditional
financing such as that provided by commercial
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banks or automobile manufacturers' captive finance companies. Sub-Prime
Borrowers generally have limited credit history, lower than average income or
past credit problems.
CPS and certain of its subsidiaries (each such subsidiary, an 'Affiliated
Originator') purchase Contracts from Dealers or independent finance companies
('IFC's') with the intent to resell them. CPS and Affiliated Originators may
also purchase Contracts from third parties that have been originated by others.
Prior to the issuances of the Securities, Contracts have been sold to
institutional investors either as bulk sales or as private placements or public
offerings of securities collateralized by the Contracts. Purchasers of Contracts
receive a pass-through rate of interest set at the time of the sale, and CPS
receives a base servicing fee for its duties relating to the accounting for and
collection of the Contracts. In addition, CPS is entitled to certain excess
servicing fees that represent collection on the Contracts in excess of those
required to pay principal and interest due to the investor at face value and
without recourse except that the representations and warranties made to CPS by
the Dealers are similarly made to the investors by CPS. CPS has some credit risk
with respect to the excess servicing fees it receives in connection with the
sale of contracts to investors and its continued servicing function since the
receipt by CPS of such excess servicing fees is dependent upon the credit
performance of the Contracts. Additional information with respect to CPS's
automobile contract portfolio, including information regarding CPS's
underwriting criteria and servicing and collection procedures, will be set forth
in each Prospectus Supplement.
The principal executive offices of CPS are located at 2 Ada, Irvine,
California 92618. CPS's telephone number is (714) 753-6800.
For further information about CPS see 'CPS's Automobile Contract Portfolio'
in the Prospectus Supplement.
POOL FACTORS
The 'Pool Factor' for each Class of Securities will be a seven-digit
decimal, which the Servicer will compute prior to each distribution with respect
to such Class of Securities, indicating the remaining outstanding principal
balance of such Class of Securities as of the applicable Payment Date, as a
fraction of the initial outstanding principal balance of such Class of
Securities. Each Pool Factor will be initially 1.0000000, and thereafter will
decline to reflect reductions in the outstanding principal balance of the
applicable Class of Securities. A Securityholder's portion of the aggregate
outstanding principal balance of the related Class of Securities is the product
of (i) the original aggregate purchase price of such Securityholder's Securities
and (ii) the applicable Pool Factor.
As more specifically described in the related Prospectus Supplement with
respect to each Series of Securities, the related Securityholders of record will
receive reports on or about each Payment Date concerning the payments received
on the Receivables, the Pool Balance (as such term is defined in the related
Prospectus Supplement, the 'Pool Balance'), each Pool Factor and various other
items of information. In addition, Securityholders of record during any calendar
year will be furnished information for tax reporting purposes not later than the
latest date permitted by law.
USE OF PROCEEDS
Unless otherwise provided in the related Prospectus Supplement, the net
proceeds from the sale of the Securities of a Series will be applied by the
applicable Trust to the purchase of the Receivables from the applicable Seller
and to make the deposit of the Pre-Funded Amount, if any, to the Pre-Funding
Account. CPS will use the portion of such proceeds paid to it for general
corporate purposes.
THE SELLER AND CPS
Each Seller will be a wholly-owned subsidiary of CPS. CPS Receivables Corp.
was incorporated in the State of California in June of 1994. CPS Receivables
Corp. was, and each other Seller will be, organized for the limited purpose of
purchasing automobile installment sale contracts from CPS and transferring such
receivables to third parties and any activities incidental to and necessary or
convenient
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for the accomplishment of such purposes. The principal executive offices of CPS
Receivables Corp. are located at 2 Ada, Suite 100, Irvine, California 92618;
telephone (714) 753-6800.
The Seller has taken steps in structuring the transaction contemplated
hereby that are intended to make it unlikely that the voluntary or involuntary
petition for relief by CPS under any Insolvency Law will result in consolidation
of the assets and liabilities of the Seller or the Trust with those of CPS.
These steps include the creation of the Seller as a separate, limited-purpose
subsidiary pursuant to articles of incorporation containing certain limitations
(including restrictions on the nature of the Seller's business and a restriction
on the Seller's ability to commence a voluntary case or proceeding under any
Insolvency Law without the prior unanimous affirmative vote of all of its
directors). However, there can be no assurance that the activities of the Seller
would not result in a court concluding that the assets and liabilities of the
Seller should be consolidated with those of CPS in a proceeding under any
Insolvency Law.
The Seller has received the advice of Mayer, Brown & Platt to the effect
that, subject to certain facts, assumptions and qualifications, in a properly
presented case under current law, in the event that CPS becomes a debtor in a
case under the Bankruptcy Code, a United States Bankruptcy Court would not order
the substantive consolidation of the assets and liabilities of the Seller with
those of CPS. Among other things, it is assumed by Mayer, Brown & Platt that the
Seller will follow certain procedures in the conduct of its affairs, including
maintaining records and books of account separate from those of CPS, refraining
from commingling its assets with those of CPS and refraining from holding itself
out as having agreed to pay, or being liable for, the debts of CPS. The Seller
intends to follow and has represented to such counsel that it will follow these
and other procedures related to maintaining its separate corporate identity.
However, in the event that the Seller did not follow these procedures, and in
certain other circumstances, there can be no assurance that a court would not
conclude that the assets and liabilities of the Seller should be consolidated
with those of CPS. If a court were to reach such a conclusion, or a filing were
made to litigate any of the foregoing issues, delays in distributions on the
Securities (and possible reductions in the amount of such distributions) could
occur. See 'Risk Factors -- Non-Consolidation.'
CPS was incorporated in the State of California on March 8, 1991. On
October 22, 1992, CPS completed a public offering of 1,300,000 shares
(approximately 31% of the shares then outstanding) of its common stock at an
initial price of $5.00 per share. Prior to that time, 100% of the common stock
of CPS was owned by CPS Holdings, Inc., a holding company the majority of the
shares of which are owned by Charles E. Bradley, Sr. On March 6, 1995, CPS
completed a second public offering of 1,000,000 shares (approximately 18.5% of
the shares then outstanding) of its common stock at $14.75 per share. CPS and
its subsidiaries engage primarily in the business of purchasing, selling and
servicing Contracts originated by Dealers located primarily in California,
Florida, Pennsylvania, Texas, Illinois and Nevada. CPS specializes in Contracts
with Sub-Prime Borrowers who generally would not be expected to qualify for
traditional financing such as that provided by commercial banks or automobile
manufacturers' captive finance companies. Sub-Prime Borrowers generally have
limited credit history, lower than average income or past credit problems. CPS
also provides accounting and collection services to third party owners of
automobile loan portfolios that were not originated by CPS. CPS's executive
offices are located at 2 Ada, Irvine, California 92618; telephone (714)
753-6800.
THE TRUSTEE
The Trustee for each Series of Securities will be specified in the related
Prospectus Supplement. The Trustee's liability in connection with the issuance
and sale of the related Securities is limited solely to the express obligations
of such Trustee set forth in the related Trust Documents.
With respect to each Series of Securities, the procedures for the
resignation or removal of the Trustee and the appointment of a successor Trustee
shall be specified in the related Prospectus Supplement.
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DESCRIPTION OF THE SECURITIES
GENERAL
The Securities will be issued in series (each a 'Series'). Each Series of
Securities (or, in certain instances, two or more Series of Securities) will be
issued pursuant to a Trust Agreement and, if Notes are issued, an Indenture. The
following summaries (together with additional summaries under 'The Description
of the Trust Documents' below) describe all material terms and provisions
relating to the Securities common to each Trust Agreement and Indenture. The
summaries do not purport to be complete and are subject to, and are qualified in
their entirety by reference to, all of the provisions of the Trust Documents for
the related Securities and the related Prospectus Supplement.
All of the Securities offered pursuant to this Prospectus and the related
Prospectus Supplement will be rated in one of the four highest rating categories
by one or more Rating Agencies.
The Securities may either represent beneficial ownership interests in the
related Receivables held by the related Trust or debt secured by certain assets
of the related Trust.
Each Series or Class of Securities offered pursuant to this Prospectus may
have a different Interest Rate, which may be a fixed or adjustable interest
rate. The related Prospectus Supplement will specify the Interest Rate for each
Series or Class of Securities described therein, or the initial interest rate
and the method for determining subsequent changes to the Interest Rate.
A Series may include one or more Classes of Strip Securities entitled (i)
to principal distributions, with disproportionate, nominal or no interest
distributions, or (ii) to interest distributions, with disproportionate, nominal
or no principal distributions. In addition, a Series of Securities may include
two or more Classes of Securities that differ as to timing, sequential order,
priority of payment, Interest Rate or amount of distribution of principal or
interest or both, or as to which distributions of principal or interest or both
on any Class may be made upon the occurrence of specified events, in accordance
with a schedule or formula, or on the basis of collections from designated
portions of the related pool of Receivables. Any such Series may include one or
more Classes of Accrual Securities, as to which certain accrued interest will
not be distributed but rather will be added to the principal balance (or nominal
balance, in the case of Accrual Securities which are also Strip Securities)
thereof on each Payment Date, as hereinafter defined, or in the manner described
in the related Prospectus Supplement.
If so provided in the related Prospectus Supplement, a Series may include
one or more other Classes of Senior Securities that are senior to one or more
other Classes of Subordinate Securities in respect of certain distributions of
principal and interest and allocations of losses on Receivables.
In addition, certain Classes of Senior (or Subordinate) Securities may be
senior to other Classes of Senior (or Subordinate) Securities in respect of such
distributions or losses.
GENERAL PAYMENT TERMS OF SECURITIES
As provided in the related Trust Documents and as described in the related
Prospectus Supplement, Securityholders will be entitled to receive payments on
their Securities on the specified Payment Dates. Payment Dates with respect to
the Securities will occur monthly, quarterly or semi-annually, as described in
the related Prospectus Supplement.
The related Prospectus Supplement will describe the Record Date preceding
such Payment Date, as of which the Trustee or its paying agent will fix the
identity of the Securityholders for the purpose of receiving payments on the
next succeeding Payment Date. As more fully described in the related Prospectus
Supplement, the Payment Date will be a specified day of each month (or, in the
case of quarterly-pay Securities, a specified day of every third month; and in
the case of semi-annual pay Securities, a specified day of every sixth month)
and the Record Date will be the close of business as of a specified day
preceding such Payment Date.
Each Trust Agreement and Indenture will describe a Collection Period
preceding each Payment Date (for example, in the case of monthly-pay Securities,
the calendar month preceding the month in which a Payment Date occurs). As more
fully provided in the related Prospectus Supplement, collections received on or
with respect to the related Receivables held by a Trust during a Collection
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Period will be required to be remitted by the Servicer to the related Trustee
prior to the related Payment Date and will be used to fund payments to
Securityholders on such Payment Date. As may be described in the related
Prospectus Supplement, the related Trust Documents may provide that all or a
portion of the payments collected on or with respect to the related Receivables
may be applied by the related Trustee to the acquisition of additional
Receivables during a specified period (rather than be used to fund payments of
principal to Securityholders during such period) with the result that the
related Securities will possess an interest-only period, also commonly referred
to as a revolving period, which will be followed by an amortization period. Any
such interest only or revolving period may, upon the occurrence of certain
events to be described in the related Prospectus Supplement, terminate prior to
the end of the specified period and result in the earlier than expected
amortization of the related Securities.
In addition, and as may be described in the related Prospectus Supplement,
the related Trust Documents may provide that all or a portion of such collected
payments may be retained by the Trustee (and held in certain Eligible
Investments, including Receivables) for a specified period prior to being used
to fund payments of principal to Securityholders. 'Eligible Investments' are
generally limited to investments acceptable to the Rating Agencies as being
consistent with the rating of such Securities. Subject to certain conditions,
Eligible Investments may include securities issued by CPS, the Servicer or their
respective affiliates or other trusts created by CPS or its affiliates. See
'Description of the Trust Documents -- Accounts.'
Such retention and temporary investment by the Trustee of such collected
payments may be required by the related Trust Documents for the purposes of (a)
slowing the amortization rate of the related Securities relative to the
installment payment schedule of the related Receivables, or (b) attempting to
match the amortization rate of the related Securities to an amortization
schedule established at the time such Securities are issued. Any such feature
applicable to any Securities may terminate upon the occurrence of events to be
described in the related Prospectus Supplement, resulting in distributions to
the specified Securityholders and an acceleration of the amortization of such
Securities.
Neither the Securities nor the underlying Receivables will be guaranteed or
insured by any governmental agency or instrumentality or CPS, any Seller, the
Servicer, any Trustee or any of their respective affiliates unless specifically
set forth in the related Prospectus Supplement.
As may be described in the related Prospectus Supplement, Securities of
each Series will either evidence specified beneficial ownership interests in the
Trust Assets or represent debt secured by the related Trust Assets. To the
extent that any Trust Assets include certificates of interest in Receivables,
the related Prospectus Supplement will describe the material terms and
conditions of such certificates.
BOOK-ENTRY REGISTRATION
As specified in the related Prospectus Supplement, Securityholders of a
given Series may hold their Securities through DTC (in the United States) or
CEDEL or Euroclear (in Europe) if they are participants of such systems, or
indirectly through organizations that are participants in such systems.
Cede, as nominee for DTC, will hold the global Securities in respect of a
given Series. CEDEL and Euroclear will hold omnibus positions on behalf of the
CEDEL Participants (as defined below) and the Euroclear Participants (as defined
below) (collectively, the 'Participants'), respectively, through customers'
securities accounts in CEDEL's and Euroclear's names on the books of their
respective depositaries (collectively, the 'Depositaries') which in turn will
hold such positions in customers' securities accounts in the Depositaries' names
on the books of DTC.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a 'clearing
corporation' within the meaning of the New York UCC and a 'clearing agency'
registered pursuant to Section 17A of the Exchange Act. DTC was created to hold
securities for its Participants and to facilitate the clearance and settlement
of securities transactions between Participants through electronic book-entries,
thereby eliminating the need for physical movement of notes or certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations. Indirect access to the DTC system also is available to
others
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such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly ('Indirect Participants').
Transfers between DTC Participants will occur in accordance with DTC rules.
Transfers between CEDEL Participants and Euroclear Participants will occur in
the ordinary way in accordance with their applicable rules and operating
procedures.
Cross-market transfers between persons holding directly or indirectly
through DTC, on the one hand, and directly or indirectly through CEDEL
Participants or Euroclear Participants, on the other, will be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depositary; however, such cross-market transactions will
require delivery of instructions to the relevant European international clearing
system by the counterparty in such system in accordance with its rules and
procedures and within its established deadlines (European time). The relevant
European international clearing system will, if the transaction meets its
settlement requirements, deliver instructions to its Depositary to take action
to effect final settlement on its behalf by delivering or receiving securities
in DTC, and making or receiving payment in accordance with normal procedures for
same-day funds settlement applicable to DTC. CEDEL Participants and Euroclear
Participants may not deliver instructions directly to the Depositaries.
Because of time-zone differences, credits of securities in CEDEL or
Euroclear as a result of a transaction with a DTC Participant will be made
during the subsequent securities settlement processing, dated the business day
following the DTC settlement date, and such credits or any transactions in such
securities settled during such processing will be reported to the relevant CEDEL
Participant or Euroclear Participant on such business day. Cash received in
CEDEL or Euroclear as a result of sales of securities by or through a CEDEL
Participant or a Euroclear Participant to a DTC Participant will be received
with value on the DTC settlement date but will be available in the relevant
CEDEL or Euroclear cash account only as of the business day following settlement
in DTC.
The Securityholders of a given Series that are not Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, Securities of such Series may do so only through
Participants and Indirect Participants. In addition, Securityholders of a given
Series will receive all distributions of principal and interest through the
Participants who in turn will receive them from DTC. Under a book-entry format,
Securityholders of a given Series may experience some delay in their receipt of
payments, since such payments will be forwarded by the applicable Trustee to
Cede, as nominee for DTC. DTC will forward such payments to its Participants,
which thereafter will forward them to Indirect Participants or such
Securityholders. Unless the related Prospectus Supplement provides for
Definitive Securities it is anticipated that the only 'Securityholder' in
respect of any Series will be Cede, as nominee of DTC, or another nominee of
DTC. Securityholders of a given Series will not be recognized as Securityholders
of such Series, and such Securityholders will be permitted to exercise the
rights of Securityholders of such Series only indirectly through DTC and its
Participants.
Under the rules, regulations and procedures creating and affecting DTC and
its operations (the 'Rules'), DTC is required to make book-entry transfers of
Securities of a given Series among Participants on whose behalf it acts with
respect to such Securities and to receive and transmit distributions of
principal of, and interest on, such Securities. Participants and Indirect
Participants with which the Securityholders of a given Series have accounts with
respect to such Securities similarly are required to make book-entry transfers
and receive and transmit such payments on behalf of their respective
Securityholders of such Series. Accordingly, although such Securityholders will
not possess Securities, the Rules provide a mechanism by which Participants will
receive payments and will be able to transfer their interests.
Because DTC can only act on behalf of Participants, who in turn act on
behalf of Indirect Participants and certain banks, the ability of a
Securityholder of a given Series to pledge Securities of such Series to persons
or entities that do not participate in the DTC system, or to otherwise act with
respect to such Securities, may be limited due to the lack of a physical
certificate for such Securities.
DTC will advise the Trustee in respect of each Series that it will take any
action permitted to be taken by a Securityholder of the related Series only at
the direction of one or more Participants to whose accounts with DTC the
Securities of such Series are credited. DTC may take conflicting actions
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with respect to other undivided interests to the extent that such actions are
taken on behalf of Participants whose holdings include such undivided interests.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ('CEDEL
Participants') and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of the
Euroclear System ('Euroclear Participants') and to clear and settle transactions
between Euroclear Participants through simultaneous electronic book-entry
delivery against payment, thereby eliminating the need for physical movement of
certificates and any risk from lack of simultaneous transfers of securities and
cash. Transactions may now be settled in any of 28 currencies, including United
States dollars. The Euroclear System includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries generally similar to the arrangements for cross-market transfers with
DTC described above. Euroclear is operated by Morgan Guaranty Trust Company of
New York, Brussels, Belgium office, under contract with Euroclear Clearance
System, S.C., a Belgian cooperative corporation (the 'Cooperative'). All
operations are conducted by the 'Euroclear Operator' (as defined below), and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for the Euroclear System on behalf of Euroclear Participants. Euroclear
Participants include banks (including central banks), securities brokers and
dealers and other professional financial intermediaries and may include the
Underwriters. Indirect access to the Euroclear System is also available to other
firms that clear through or maintain a custodial relationship with a Euroclear
Participant, either directly or indirectly.
The 'Euroclear Operator' is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear Operator
are governed by the Terms and Conditions Governing Use of Euroclear and the
related Operating Procedures of the Euroclear System and applicable Belgian law
(collectively, the 'Terms and Conditions'). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of relationship with persons holding through Euroclear Participants.
Except as required by law, the Trustee in respect of a Series will not have
any liability for any aspect of the records relating to or payments made or
account of beneficial ownership interests of the related Securities held by
Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
DEFINITIVE NOTES
Except to the extent that the related Prospectus Supplement provides for
book-entry Securities, the Securities will be issued in fully registered,
certificated form ('Definitive Securities') to the
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Securityholders of a given Series or their nominees, rather than to DTC or its
nominee, only if (i) the Trustee in respect of the related Series advises in
writing that DTC is no longer willing or able to discharge properly its
responsibilities as depository with respect to such Securities and such Trustee
is unable to locate a qualified successor, (ii) such Trustee, at its option,
elects to terminate the book-entry-system through DTC or (iii) after the
occurrence of an 'Event of Default' under the related Indenture or a default by
the Servicer under the related Trust Documents, Securityholders representing at
least a majority of the outstanding principal amount of such Securities advise
the applicable Trustee through DTC in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no longer in such
Securityholders' best interest.
Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable Trustee will be required to notify all such
Securityholders through Participants of the availability of Definitive
Securities. Upon surrender by DTC of the definitive certificates representing
such Securities and receipt of instructions for re-registration, the applicable
Trustee will reissue such Securities as Definitive Securities to such
Securityholders.
Distributions of principal of, and interest on, such Securities will
thereafter be made by the applicable Trustee in accordance with the procedures
set forth in the related Indenture or Trust Agreement directly to holders of
Definitive Securities in whose names the Definitive Securities were registered
at the close of business on the applicable Record Date specified for such
Securities in the related Prospectus Supplement. Such distributions will be made
by check mailed to the address of such holder as it appears on the register
maintained by the applicable Trustee. The final payment on any such Security,
however, will be made only upon presentation and surrender of such Security at
the office or agency specified in the notice of final distribution to the
applicable Securityholders.
Definitive Securities in respect of a given Series of Securities will be
transferable and exchangeable at the offices of the applicable Trustee or of a
certificate registrar named in a notice delivered to holders of such Definitive
Securities. No service charge will be imposed for any registration of transfer
or exchange, but the applicable Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge imposed in connection therewith.
REPORTS TO SECURITYHOLDERS
With respect to each Series of Securities, on or prior to each Payment Date
for such Series, the Servicer or the related Trustee will forward or cause to be
forwarded to each holder of record of such class of Securities a statement or
statements with respect to the related Trust Assets setting forth the
information specified in the related Prospectus Supplement.
In addition, within the prescribed period of time for tax reporting
purposes after the end of each calendar year, the applicable Trustee will
provide to the Securityholders a statement containing information required by
applicable tax laws, for the purpose of the Securityholders' preparation of
federal income tax returns.
DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes certain terms of the Trust Documents
pursuant to which a Trust will be created and the related Securities in respect
of such Trust will be issued. For purposes of this Prospectus, the term 'Trust
Documents' as used with respect to a Trust means, collectively, and except as
otherwise specified, any and all agreements relating to the establishment of the
related Trust, the servicing of the related Receivables and the issuance of the
related Securities, including without limitation the Indenture, (i.e. pursuant
to which any Notes shall be issued). A form of the Trust Agreement has been
filed as an exhibit to the Registration Statement of which this Prospectus forms
a part. This summary does not purport to be complete. It is qualified in its
entirety by reference to the provisions of the Trust Documents.
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SALE AND ASSIGNMENT OF RECEIVABLES
On or prior to the closing date specified with respect to any given Series
of securities ( the 'Closing Date'), CPS or an Affiliated Originator will sell
and assign to a Seller, without recourse, except as otherwise provided in the
applicable Purchase Agreement or Affiliate Purchase Agreement, its entire
interest in the Receivables to be included in such Trust, together with its
security interests in the Financed Vehicles. At the time of issuance of the
Securities, such Seller will either transfer such Receivables to a Trust
pursuant to a Sale and Servicing Agreement. The obligations of the Seller and
the Servicer under the related Sale and Servicing Agreement include those
specified below and in the related Prospectus Supplement.
As more fully described in the related Prospectus Supplement, CPS will be
obligated to acquire from the related Trust its interest in any Receivable
transferred to a Trust or pledged to a Trustee on behalf of Securityholders if
the interest of the Securityholders therein is materially adversely affected by
a breach of any representation or warranty made by CPS with respect to such
Receivable, which breach has not been cured following the discovery by or notice
to CPS of the breach. In addition, if so specified in the related Prospectus
Supplement, CPS may from time to time reacquire certain Receivables or
substitute other Receivables for such Receivable subject to specified conditions
set forth in the related Purchase Agreement.
ACCOUNTS
With respect to each Series of Securities issued by a Trust, the Servicer
will establish and maintain with the applicable Trustee one or more accounts, in
the name of such Trustee on behalf of the related Securityholders, into which
all payments made on or with respect to the related Receivables will be
deposited (the 'Collection Account'). The Servicer will also establish and
maintain with such Trustee separate accounts, in the name of such Trustee on
behalf of such Securityholders, in which amounts released from the Collection
Account and the reserve account or other Credit Enhancement, if any, for
distribution to such Securityholders will be deposited and from which
distributions to such Securityholders will be made (the 'Distribution Account').
If the related Prospectus Supplement so provides, the Pre-Funding Account
will be maintained with the Indenture Trustee and is intended solely to hold
funds to be applied by the Indenture Trustee during the Funding Period to pay to
the Seller the purchase price for Subsequent Receivables and any Permitted
Investments purchased with funds not yet invested in Subsequent Receivables.
Monies on deposit in the Pre-Funding Account will not be available to cover
losses on or in respect of the Receivables and any Permitted Investments
purchased with funds not yet invested in Subsequent Receivables. On the Closing
Date, the Pre-Funding Account will be funded with the initial Pre-Funded Amount
from the sale proceeds of the Securities.
If the related Prospectus Supplement so provides the Seller will establish
and maintain an account (the 'Interest Reserve Account') in the name of the
Indenture Trustee on behalf of the Noteholders and Certificateholders. On the
Closing Date, the Seller will deposit an amount equal to the Requisite Reserve
Amount (as described below) as of the Closing Date in the Interest Reserve
Account. On certain Payment Dates to be specified in the related Prospectus
Supplement, funds on deposit in the Interest Reserve Account which are in excess
of the Requisite Reserve Amount for such Payment Date will be withdrawn from the
Interest Reserve Account and deposited in the Distribution Account for
distribution.
Any other accounts to be established with respect to a Trust, including any
other reserve account, yield supplement account or negative arbitrage account,
will be described in the related Prospectus Supplement.
For any Series of Securities, funds in the Collection Account, the
Distribution Account, any Pre-Funding Account, any reserve account and other
accounts identified as such in the related Prospectus Supplement (collectively,
the 'Trust Accounts') shall be invested as provided in the related Trust
Agreement or Indenture in Eligible Investments. 'Eligible Investments' are
generally limited to investments acceptable to the Rating Agencies as being
consistent with the rating of such Securities. Subject to certain conditions,
Eligible Investments may include securities issued by CPS, the Servicer or
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their respective affiliates or other trusts created by CPS or its affiliates.
Except as described below or in the related Prospectus Supplement, Eligible
Investments are limited to obligations or securities that mature not later than
the business day immediately preceding the related Payment Date. However,
subject to certain conditions, funds in the reserve account may be invested in
securities that will not mature prior to the date of the next distribution and
will not be sold to meet any shortfalls. Thus, the amount of cash in any reserve
account at any time may be less than the balance of such reserve account. If the
amount required to be withdrawn from any reserve account to cover shortfalls in
collections on the related Receivables exceeds the amount of cash in such
reserve account a temporary shortfall in the amounts distributed to the related
Securityholders could result, which could, in turn, increase the average life of
the Securities of such Series. Except as otherwise specified in the related
Prospectus Supplement, investment earnings on funds deposited in the applicable
Trust Accounts, net of losses and investment expenses (collectively, 'Investment
Earnings'), shall be deposited in the applicable Collection Account on each
Payment Date and shall be treated as collections of interest on the related
Receivables.
The Trust Accounts will be maintained as Eligible Deposit Accounts.
'Eligible Deposit Account' means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any domestic branch of a foreign bank), having corporate trust powers and
acting as trustee for funds deposited in such account, so long as any of the
securities of such depository institution has a credit rating from each Rating
Agency in one of its generic rating categories which signifies investment grade.
'Eligible Institution' means, with respect to a Trust, (a) the corporate trust
department of the related Indenture Trustee or the related Trustee, as
applicable, or (b) a depository institution organized under the laws of the
United States of America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), which (i) (A) has either
(w) a long-term unsecured debt rating acceptable to the Rating Agencies or (x) a
short-term unsecured debt rating or certificate of deposit rating acceptable to
the Rating Agencies or (B) the parent corporation of which has either (y) a
long-term unsecured debt rating acceptable to the Rating Agencies or (z) a
short-term unsecured debt rating or certificate of deposit rating acceptable to
the Rating Agencies and (ii) whose deposits are insured by the FDIC.
THE SERVICER
The Servicer under each Sale and Servicing Agreement will be named in the
related Prospectus Supplement. The entity serving as Servicer may be CPS or an
affiliate of CPS and may have other business relationships with CPS or CPS's
affiliates. The Servicer with respect to each Series will service the
Receivables contained in the Trust for such Series. Any Servicer may delegate
its servicing responsibilities to one or more subservicers, but will not be
relieved of its liabilities with respect thereto.
The Servicer will make certain representations and warranties regarding its
authority to enter into, and its ability to perform its obligations under, the
related Sale and Servicing Agreement. An uncured breach of such a representation
or warranty that in any respect materially and adversely affects the interests
of the Securityholders will constitute a default by the Servicer under the
related Sale and Servicing Agreement.
A Sale and Servicing Agreement may contain provisions providing for a
standby servicer ('Standby Servicer') to serve as successor servicer in the
event the Servicer is terminated or resigns as Servicer pursuant to the terms of
such Sale and Servicing Agreement. A Standby Servicer will receive a fee on each
Payment Date for agreeing to stand by as successor Servicer and for performing
certain other functions. If the Standby Servicer becomes the Servicer under a
Sale and Servicing Agreement, it will receive compensation as a Servicer in an
amount set forth in such Sale and Servicing Agreement.
SERVICING PROCEDURES
Each Sale and Servicing Agreement will provide that the Servicer will
follow its then-employed standards, or such more exacting standards as the
Servicer employs in the future, in servicing the Receivables that are part of
the Trust. Each Sale and Servicing Agreement will provide that the Servicer
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will make reasonable efforts to collect all payments due with respect to the
Receivables that are part of the Trust and, in a manner consistent with such
Sale and Servicing Agreement, will continue such collection procedures as it
follows with respect to automotive retail installment sale contracts it services
for itself and others. Consistent with its normal procedures, the Servicer may,
in its sole discretion, arrange with the Obligor on a Receivable to extend the
payment schedule; provided, however, that the Servicer may be limited as to the
number of times an extension may be granted and as to the timing of such
extensions. No such arrangement will, for purposes of a Sale and Servicing
Agreement, modify the original due dates or the amount of the scheduled
payments, or extend the final payment date on any Receivable beyond the last day
of the penultimate Collection Period before the Final Schedule Payment Date
under the related Trust Documents. If the Servicer grants an extension with
respect to a Receivable other than in accordance with the aforementioned
limitations, the Servicer will be required to purchase the Receivable. Following
any such purchase of a Receivable by the Servicer, such Receivable will be
released from the Trust and conveyed to the Servicer. The Servicer may sell the
Vehicle securing the respective defaulted Receivable, if any, at a public or
private sale, or take any other action permitted by applicable law. See 'Certain
Legal Aspects of the Receivables.'
The material aspects of any particular Servicer's collections and other
relevant procedures will be set forth in the related Prospectus Supplement.
PAYMENTS ON RECEIVABLES
With respect to each Series of Securities, unless the related Prospectus
Supplement does not so provide, the Servicer will notify each Obligor that
payments made by such Obligor after the Cutoff Date with respect to a Receivable
must be mailed directly to the Post Office Box set forth in the Sale and
Servicing Agreement relating to such Receivable. On each Business Day, the
Lock-Box Processor set forth in the Sale and Servicing Agreement relating to
such Receivable (the 'Lock-Box Processor') will transfer any such payments
received in the applicable post office box in the name of the applicable Trustee
for the benefit of the Securityholders and the related Credit Enhancer (if any)
(the 'Post Office Box') to the applicable segregated lock-box account in the
name of the applicable Trustee for the benefit of the Securityholders and the
related Credit Enhancer (if any) (the 'Lock-Box Account'). Any payments received
by the Servicer from an Obligor or from a source other than an Obligor must be
deposited in the applicable Lock-Box Account or the applicable Collection
Account upon receipt. The Servicer will, following the receipt of funds in such
Lock-Box Account, direct the Lock-Box Bank to transfer such funds to the
applicable Collection Account. Prior to the applicable Payment Date, the
applicable Trustee, on the basis of instructions provided by the Servicer, will
transfer funds held in such Collection Account to the applicable Payahead
Account if such payments constitute Payaheads or to the applicable Distribution
Account for distribution to, the Securityholders of the related Series.
Collections on a Rule of 78's Receivable made during a Collection Period
will be applied first, to the scheduled payment on such Rule of 78's Receivable,
and second, to any late fees accrued with respect to such Rule of 78's
Receivable.
SERVICING COMPENSATION
As will be described in the related Prospectus Supplement with respect to
any Series of Securities issued by a Trust, the Servicer will be entitled to
receive a servicing fee on each Payment Date (the 'Servicing Fee'), equal to the
product of one-twelfth of the specified percentage per annum and the Pool
Balance (each as set forth in the related Prospectus Supplement) as of the close
of business on the last day of the second preceding Collection Period; provided,
however, that with respect to the first Payment Date, the Servicing Fee will
equal the product of one-twelfth of the Servicing Fee Rate and the original Pool
Balance. So long as CPS is Servicer, a portion of the Servicing Fee will be
payable to the Standby Servicer, if any (as set forth in the related Prospectus
Supplement), for agreeing to stand by as successor Servicer and for performing
certain other functions. If the Standby Servicer, or any other entity serving at
the time as Standby Servicer, becomes the successor Servicer, it will receive
compensation for acting in such capacity. See 'Standby Servicer' in the related
Prospectus Supplement. The Servicer will also collect and retain, as additional
servicing compensation, any late fees, prepayment charges, including, in the
case of a Rule 78's Receivable that is part of the Trust and that is prepaid in
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full, to the extent not required by law to be remitted to the related Obligor,
the difference between the principal balance of such Receivable computed on an
actuarial basis plus accrued interest to the date of prepayment and the
principal balance of such Receivable computed according to the Rule of 78's, and
other administrative fees or similar charges allowed by applicable law with
respect to the Receivables that are part of the Trust, and will be entitled to
reimbursement from the Trust for certain liabilities. Payments by or on behalf
of Obligors will be allocated to scheduled payments, late fees and other charges
and principal and interest in accordance with the Servicer's normal practices
and procedures. The Servicing Fee will be paid out of collections from the
Receivables, prior to distributions to Securityholders of the related Series.
The Servicing Fee and additional servicing compensation will compensate the
Servicer for performing the functions of a third party servicer of automotive
receivables as an agent for their beneficial owner, including collecting and
posting all payments, responding to inquiries of Obligors on the Receivables
that are part of the Trust, investigating delinquencies, sending payment coupons
to Obligors, reporting tax information to Obligors, paying costs of disposition
of defaults and policing the collateral. The Servicing Fee also will compensate
the Servicer for administering the Receivables that are part of the Trust,
including accounting for collections and furnishing monthly and annual
statements as required with respect to a Series of Securities regarding
distributions and generating federal income tax information. The Servicing Fee
also will reimburse the Servicer for certain taxes, accounting fees, outside
auditor fees, data processing costs and other costs incurred in connection with
administering the Receivables that are part of the Trust.
DISTRIBUTIONS
With respect to each Series of Securities, beginning on the Payment Date
specified in the related Prospectus Supplement, distributions of principal and
interest (or, where applicable, of principal or interest only) on each Class of
such Securities entitled thereto will be made by the applicable Indenture
Trustee to the holders of Notes (the 'Noteholders') and by the applicable
Trustee to the holders of Certificates (the 'Certificateholders') of such
Series. The timing, calculation , allocation, order, source, priorities of and
requirements for each class of Noteholders and all distributions to each class
of Certificateholders of such Series will be set forth in the related Prospectus
Supplement.
With respect to each Series of Securities, on each Payment Date collections
on the related Receivables will be transferred from the Collection Account to
the Distribution Account for distribution to Securityholders, respectively, to
the extent provided in the related Prospectus Supplement. Credit Enhancement,
such as a reserve account, may be available to cover any shortfalls in the
amount available for distribution on such date, to the extent specified in the
related Prospectus Supplement. As more fully described in the related Prospectus
Supplement, and unless not provided for therein, distributions in respect of
principal of a Class of Securities of a given Series will be subordinate to
distributions in respect of interest on such Class, and distributions in respect
of the Certificates of such Series will be subordinate to payments in respect of
the Notes of such Series.
CREDIT AND CASH FLOW ENHANCEMENTS
The amounts and types of Credit Enhancement arrangements, if any, and the
provider thereof, if applicable, with respect to each class of Securities of a
given Series will be set forth in the related Prospectus Supplement. If and to
the extent provided in the related Prospectus Supplement, credit enhancement may
be in the form of a Policy, subordination of one or more Classes of Securities,
reserve accounts, overcollateralization, letters of credit, credit or liquidity
facilities, third party payments or other support, surety bonds, guaranteed cash
deposits or such other arrangements as may be described in the related
Prospectus Supplement or any combination of two or more of the foregoing. If
specified in the applicable Prospectus Supplement, Credit Enhancement for a
Class of Securities may cover one or more other Classes of Securities of the
same Series, and Credit Enhancement for a Series of Securities may cover one or
more other Series of Securities.
The presence of Credit Enhancement for the benefit of any Class or Series
of Securities is intended to enhance the likelihood of receipt by the
Securityholders or such Class or Series of the full amount of
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principal and interest due thereon and to decrease the likelihood that such
Securityholders will experience losses. As more specifically provided in the
related Prospectus Supplement, the credit enhancement for a Class or Series of
Securities may not provide protection against all risks of loss and may not
guarantee repayment of the entire principal balance and interest thereon. If
losses occur which exceed the amount covered by any Credit Enhancement or which
are not covered by any Credit Enhancement, Securityholders of any Class or
Series will bear their allocable share of deficiencies, as described in the
related Prospectus Supplement. In addition, if a form of Credit Enhancement
covers more than one Series of Securities, Securityholders of any such Series
will be subject to the risk that such Credit Enhancement will be exhausted by
the claims of Securityholders of other Series.
STATEMENTS TO INDENTURE TRUSTEES AND TRUSTEES
Prior to each Payment Date with respect to each Series of Securities, the
Servicer will provide to the applicable Indenture Trustee and/or the applicable
Trustee and Credit Enhancer as of the close of business on the last day of the
preceding related Collection Period a statement setting forth substantially the
same information as is required to be provided in the periodic reports provided
to Securityholders of such Series described under 'Description of the
Securities -- Reports to Securityholders.'
EVIDENCE AS TO COMPLIANCE
Each Sale and Servicing Agreement will provide that a firm of independent
public accountants will furnish to the related Trust and/or the applicable
Indenture Trustee and Credit Enhancer, annually, a statement as to compliance by
the Servicer during the preceding twelve months (or, in the case of the first
such certificate, the period from the applicable Closing Date) with certain
standards relating to the servicing of the Receivables.
Each Sale and Servicing Agreement will also provide for delivery to the
related Trust and the applicable Indenture Trustee of a certificate signed by an
officer of the Servicer stating that the Servicer either has fulfilled its
obligations under such Sale and Servicing Agreement in all material respects
throughout the preceding 12 months (or, in the case of the first such
certificate, the period from the applicable Closing Date) or, if there has been
a default in the fulfillment of any such obligation in any material respect,
describing each such default. The Servicer also will agree to give each
Indenture Trustee and each Trustee notice of certain Servicer Termination Events
(as hereinafter defined) under the related Sale and Servicing Agreement.
Copies of such statements and certificates may be obtained by
Securityholders by a request in writing addressed to the applicable Indenture
Trustee or the applicable Trustee.
CERTAIN MATTERS REGARDING THE SERVICERS
Each Sale and Servicing Agreement will provide that the Servicer may not
resign from its obligations and duties as Servicer thereunder except upon
determination that its performance of such duties is no longer permissible under
applicable law and under certain other circumstances. No such resignation will
become effective until a successor servicer has assumed the servicing
obligations and duties under the applicable Sale and Servicing Agreement. In the
event CPS resigns as Servicer or is terminated as Servicer, the Standby
Servicer, if any, will agree to assume the servicing obligations and duties
under the Sale and Servicing Agreement.
Each Sale and Servicing Agreement will further provide that neither the
Servicer nor any of its directors, officer, employees, and agents will be under
any liability to the Trust or the Securityholders of the related Series for
taking any action or for refraining from taking any action pursuant to such Sale
and Servicing Agreement, or for errors in judgment; provided, however, that
neither the Servicer nor any such person will be protected against any liability
that would otherwise be imposed by reason of willful misfeasance, bad faith or
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties thereunder. In addition, each Sale and Servicing
Agreement will provide that the Servicer is under no obligation to appear in,
prosecute, or defend any legal action that
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is not incidental to its servicing responsibilities under the applicable Sale
and Servicing Agreement and that, in its opinion, may cause it to incur any
expense or liability.
Under the circumstances specified in each Sale and Servicing Agreement any
entity into which the Servicer may be merged or consolidated, or any entity
resulting from any merger or consolidation to which the Servicer is a party, or
any entity succeeding to the business of the Servicer, which corporation or
other entity in each of the foregoing cases assumes the obligations of the
Servicer, will be the successor to the Servicer under the applicable Sale and
Servicing Agreement.
SERVICER TERMINATION EVENT
Except as otherwise provided in the related Prospectus Supplement,
'Servicer Termination Event' under the related Trust Documents will include (i)
any failure by the Servicer to deliver to the applicable Trustee for deposit in
any of the related Trust Accounts any required payment or to direct such Trustee
to make any required distributions therefrom, which failure continues unremedied
for more than three (3) Business Days after written notice from such Trustee is
received by the Servicer or after discovery by the Servicer; (ii) any failure by
the Servicer duly to observe or perform in any material respect any other
covenant or agreement in such Trust Documents, which failure materially and
adversely affects the rights of the related Securityholders and which continues
unremedied for more than thirty (30) days after the giving of written notice of
such failure (1) to the Servicer by the applicable Trustee or (2) to the
Servicer, and to the applicable Trustee by holders of the related Securities, as
applicable, evidencing not less than 50% of the voting rights of such
outstanding Securities; (iii) any Insolvency Event; and (iv) any claim being
made on a Policy issued as Credit Enhancement. An 'Insolvency Event' shall mean
financial insolvency, readjustment of debt, marshaling of assets and
liabilities, or similar proceedings with respect to the Servicer and certain
actions by the Servicer indicating its insolvency, reorganization pursuant to
bankruptcy proceedings, or inability to pay its obligations.
RIGHTS UPON SERVICER TERMINATION EVENT
As more fully described and except as otherwise provided in the related
Prospectus Supplement, as long as a Servicer Termination Event under the related
Trust Documents remains unremedied, the applicable Trustee, Credit Enhancer or
holders of Notes of the related Series evidencing not less than 50% of the
voting rights of such then outstanding Notes or, after the Notes have been paid
in full, holders of Certificates of the related Series evidencing not less than
50% of the voting rights of such then outstanding Certificates may terminate all
the rights and obligations of the Servicer, if any, under such Sale and
Servicing Agreement, whereupon a successor servicer appointed by such Trustee or
such Trustee will succeed to all the responsibilities, duties and liabilities of
the Servicer under such Trust Documents and will be entitled to similar
compensation arrangements. If, however, a bankruptcy trustee or similar official
has been appointed for the Servicer, and no Servicer Termination Event other
than such appointment has occurred, such bankruptcy trustee or official may have
the power to prevent the applicable Trustee or such Securityholders from
effecting a transfer of servicing.
WAIVER OF PAST DEFAULTS
With respect to each Trust, except as otherwise provided in the related
Prospectus Supplement and subject to the approval of any Credit Enhancer, the
holders of Notes evidencing at least a majority of the voting rights of such
then outstanding Securities may, on behalf of all Securityholders of the related
Securities, waive any default by the Servicer in the performance of its
obligations under the related Trust Documents and its consequences, except a
default in making any required deposits to or payments from any of the Trust
Accounts in accordance with such Trust Documents. No such waiver shall impair
the Securityholders' rights with respect to subsequent defaults.
AMENDMENTS
As more fully described in, and unless not provided for by, the related
Prospectus Supplement, each of the Trust Documents may be amended by the parties
thereto, without the consent of the related
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Securityholders, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of such Trust Documents or of
modifying in any manner the rights of such Securityholders; provided that such
action will not, in the opinion of counsel satisfactory to the applicable
Trustee, materially and adversely affect the interests of any such
Securityholder and subject to the approval of any Credit Enhancer. As may be
described in the related Prospectus Supplement, the Trust Documents may also be
amended by CPS, the Servicer, and the applicable Trustee with the consent of the
holders of Notes evidencing at least a majority of the voting rights of such
then outstanding Notes or, after the Notes have been paid in full, holders of
Certificates of the related Series evidencing not less than 50% of the voting
rights of such then outstanding Certificates for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
such Trust Documents or of modifying in any manner the rights of such
Securityholders; provided, however, that no such amendment may (i) increase or
reduce in any manner the amount or priority of, or accelerate or delay the
timing of, collections of payments on the related Receivables or distributions
that are required to be made for the benefit of such Securityholders or (ii)
reduce the aforesaid percentage of the Securities of such Series which are
required to consent to any such amendment, without the consent of the
Securityholders of such Series.
TERMINATION
With respect to each Trust, the obligations of the Servicer, CPS and the
applicable Trustee pursuant to the related Trust Documents will terminate upon
the earlier to occur of (i) the maturity or other liquidation of the last
related Receivable and the disposition of any amounts received upon liquidation
of any such remaining Receivables and (ii) the payment to Securityholders of the
related Series of all amounts required to be paid to them pursuant to such Trust
Documents. As more fully described in the related Prospectus Supplement, in
order to avoid excessive administrative expense, the Servicer will be permitted
in respect of the applicable Trust Assets, unless the related Prospectus
Supplement does not so provide, at its option to purchase from such Trust
Assets, as of the end of any Collection Period immediately preceding a Payment
Date, if the Pool Balance of the related Contracts is less than 10% of the
initial Pool Balance in respect of such Trust Assets, all such remaining
Receivables at a price equal to the aggregate of the Purchase Amounts thereof as
of the end of such Collection Period. The related Securities will be redeemed
following such purchase.
If and to the extent provided in the related Prospectus Supplement, any
outstanding Notes of the related Series will be redeemed concurrently with the
events specified above and the subsequent distribution to the related
Securityholders of all amounts required to be distributed to them pursuant to
the applicable Trust Documents may effect the prepayment of the Certificates of
such Series.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
GENERAL
The transfer of Receivables by the Seller to the Trust pursuant to the
related Sale and Servicing Agreement, the perfection of the security interests
in the Receivables and the enforcement of rights to realize on the Financed
Vehicles as collateral for the Receivables are subject to a number of federal
and state laws, including the UCC as in effect in various states. As specified
in each Prospectus Supplement, the Servicer will take such action as is required
to perfect the rights of the Trustee in the Receivables. If, through
inadvertence or otherwise, a third party were to purchase (including the taking
of a security interest in) a Receivable for new value in the ordinary course of
its business, without actual knowledge of the Trust's interest, and take
possession of a Receivable, the purchaser would acquire an interest in such
Receivable superior to the interest of the Trust. Unless specified in a
Prospectus Supplement, no action will be taken to perfect the rights of the
Trustee in proceeds of any insurance policies covering individual Financed
Vehicles or Obligors. Therefore, the rights of a third party with an interest in
such proceeds could prevail against the rights of the Trust prior to the time
such proceeds are deposited by the Servicer into a Trust Account.
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SECURITY INTERESTS IN THE FINANCED VEHICLES
In states in which retail installment sale contracts such as the
Receivables evidence the credit sale of automobiles, light trucks, vans and
minivans by dealers to Obligors, the contracts also constitute personal property
security agreements and include grants of security interests in the vehicles
under the applicable UCC. Perfection of security interests in the financed
automobiles, light trucks, vans and minivans is generally governed by the motor
vehicle registration laws of the state in which the vehicle is located. In all
states in which the Receivables have been originated, a security interest in
automobiles, light trucks, vans and minivans is perfected by obtaining the
certificate of title to the Financed Vehicle or notation of the secured party's
lien on the vehicles' certificate of title (in addition, in Louisiana, a copy of
the installment sale contract must be filed with the appropriate governmental
recording office).
Unless the related Prospectus Supplement does not so provide, each Contract
will name CPS or the applicable Affiliated Originator as obligee or assignee and
as the secured party. Unless the related Prospectus Supplement does not so
provide, CPS will have represented and warranted that it has taken all actions
necessary under the laws of the state in which the Financed Vehicle is located
to perfect CPS's or such Affiliated Originator's security interest in the
Financed Vehicle, including, where applicable, having a notation of its lien
recorded on such vehicle's certificate of title. The Obligors on the Contracts
will not be notified of the sale from CPS or an Affiliated Originator, directly
or indirectly, to the Seller, or the sale from the Seller to the Trust, and no
action will be taken to record the transfer of the security interest from CPS or
such Affiliated Originator, directly or indirectly, to the Seller or from the
Seller to the Trust by amendment of the certificates of title for the Financed
Vehicles or otherwise.
CPS or the related Affiliated Originator will transfer and assign its
security interest in the related Financed Vehicles directly or indirectly to the
Seller, and the Seller will transfer and assign its security interest in such
Financed Vehicles to the related Trust pursuant to a Sale and Servicing
Agreement. However, because of the administrative burden and expense, neither
CPS nor the Seller will amend the certificates of title of such Financed
Vehicles to identify the related Trust as the new secured party.
In most states, an assignment such as that under each Sale and Servicing
Agreement is an effective conveyance of a security interest without amendment of
any lien noted on a vehicle's certificate of title, and the assignee succeeds
thereby to the assignor's rights as secured party. However, by not identifying
such Trust as the secured party on the certificate of title, the security
interest of such Trust in the vehicle could be defeated through fraud or
negligence.
Under the laws of most states, the perfected security interest in a vehicle
continues for four months after the vehicle is moved to a state other than the
state in which it is initially registered and thereafter until the owner thereof
re-registers the vehicle in the new state. A majority of states generally
require surrender of a certificate of title to re-register a vehicle.
Accordingly, a secured party must surrender possession if it holds the
certificate of title to the vehicle or, in the case of a vehicle registered in a
state providing for the notation of a lien on the certificate of title but not
possession by the secured party, the secured party will receive notice of
surrender if the security interest is noted on the certificate of title. Thus,
the secured party will have the opportunity to re-perfect its security interest
in the vehicle in the state of relocation. In states that do not require a
certificate of title for registration of a motor vehicle, re-registration could
defeat perfection. Unless the related Prospectus Supplement does not so provide,
under each Sale and Servicing Agreement, the Servicer will be obligated to take
appropriate steps, at the Servicer's expense, to maintain perfection of security
interests in the Financed Vehicles and will be obligated to purchase the related
Receivable if it fails to do so.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a financed vehicle. The Code also grants priority to certain federal
tax liens over the lien of a secured party. The laws of certain states and
federal law permit the confiscation of vehicles by government authorities under
certain circumstances if used in unlawful activities, which may result in the
loss of a secured party's perfected security interest in the confiscated
vehicle.
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REPOSSESSION
In the event of default by vehicle purchasers, the holder of the motor
vehicle retail installment sale contract has all the remedies of a secured party
under the UCC, except where specifically limited by other state laws. Among the
UCC remedies, the secured party has the right to perform self-help repossession
unless such act would constitute a breach of the peace. Unless otherwise
specified in the related Prospectus Supplement, self-help is the most likely
method to be used by the Servicer and is accomplished simply by retaking
possession of the financed vehicle. In the event of default by the obligor, some
jurisdictions require that the obligor be notified of the default and be given a
time period within which he may cure the default prior to repossession.
Generally, the right of reinstatement may be exercised on a limited number of
occasions in any one-year period. In cases where the obligor objects or raises a
defense to repossession, or if otherwise required by applicable state law, a
court order must be obtained from the appropriate state court, and the vehicle
must then be repossessed in accordance with that order.
NOTICE OF SALE; REDEMPTION RIGHTS
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. The
obligor has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation plus reasonable
expenses for repossessing, holding and preparing the collateral for disposition
and arranging for its sale, plus, in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of delinquent installments or the unpaid
balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment can be sought in those states that do not
prohibit or limit such judgments. However, the deficiency judgment would be a
personal judgment against the obligor for the shortfall, and a defaulting
obligor can be expected to have very little capital or sources of income
available following repossession. Therefore, in many cases, it may not be useful
to seek a deficiency judgment or, if one is obtained, it may be settled at a
significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exits or there are remaining funds, the UCC
requires the creditor to remit the surplus to the former owner of the vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance, including requirements regarding the adequate disclosure of loan terms
(including finance charges and deemed finance charges), and limitations on loan
terms (including the permitted finance charge or deemed finance charge),
collection practices and creditor remedies. The application of these laws to
particular circumstances is not always certain and some courts and regulatory
authorities have shown a willingness to adopt novel interpretations of such
laws. These laws include the Truth-in-Lending Act, the Equal Credit Opportunity
Act, the Federal Trade Commission Act, the Fair Credit Billing Act, the Fair
Credit Reporting Act, the Fair Debt Collection Procedures Act, the Magnuson-Moss
Warranty Act, the Federal Reserve Board's Regulations B and Z, the Solders' and
Sailors' Civil Relief Act of 1940, state adoptions of the National Consumer Act
and the Uniform Consumer Credit Code, and state motor vehicle retail installment
sales act, retail installment sales acts and other similar laws. Also, state
laws impose finance charge ceilings and other restrictions on consumer
transactions and require contract disclosures in addition to those required
under federal law. These requirements impose specific
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statutory liabilities upon creditors who fail to comply with their provisions.
In some cases, this liability could affect an assignee's ability to enforce
consumer finance contracts such as the Receivables or result in the imposition
of penalties in excess of amounts owing on the Receivables. In some instances,
particularly in actions based upon fraud or unfair and deceptive practices,
damage awards have been large. If the Trust were obligated to pay any such
damages, its assets would be directly reduced, resulting in a potential loss to
the Securityholders.
Under the laws of certain states, finance charges with respect to motor
vehicle retail installment contracts may include the additional amount, if any,
that a purchaser pays as part of the purchase price for a vehicle solely because
the purchaser is buying on credit rather than for cash (a 'cash sale
differential'). If a dealer charges such a differential, applicable finance
charge ceilings could be exceeded.
To so-called 'Holder-in-Due-Course' Rule of the Federal Trade Commission
(the 'FTC Rule'), the provisions of which are generally duplicated by the
Uniform Consumer Credit Code, other statutes or the common law, has the effect
of subjecting an assignee of a seller of goods in a consumer credit transaction
(and certain related creditors) to all claims and defenses that the obligor in
the transaction could assert against the seller of the goods. Liability under
the FTC Rule is limited to the amounts paid by the obligor under the contract
and the holder of the contract may also be unable to collect any balance
remaining due thereunder from the obligor.
Most of the Receivables will be subject to the requirements of the FTC
Rule. Accordingly, each Trust, as holder of the related Receivables, will be
subject to any claims or defenses that the purchaser of the applicable Financed
Vehicle may assert against the seller of the Financed Vehicle. Such claims are
limited to a maximum liability equal to the amounts paid by the Obligor on the
Receivable. If an Obligor were successful in asserting any such claim or
defense, such claim or defense would constitute a breach of CPS's warranties
under the related Purchase Agreement and would create an obligation of CPS to
repurchase the Receivable unless the breach is cured. See 'Description of the
Trust Documents -- Sale and Assignment of Receivables.'
Courts have applied general equitable principles to secured parties
pursuing repossession and litigation involving deficiency balances. These
equitable principles may have the effect of relieving an obligor from some or
all of the legal consequences of a default.
In several cases, consumers have asserted that the self-help remedies of
secured parties under the UCC and related laws violate the due process
protections provided under the 14th Amendment to the Constitution of the United
States. Courts have generally upheld the notice provisions of the UCC and
related laws as reasonable or have found that the repossession and resale by the
creditor do not involve sufficient state action to afford constitutional
protection to borrowers.
Under most state vehicle dealer licensing laws, sellers of automobiles,
light trucks, vans and minivans are required to be licensed to sell vehicles at
retail sale. In addition, with respect to used vehicles, the Federal Trade
Commission's Rule on Sale of Used Vehicles requires that all sellers of used
vehicles prepare, complete and display a 'Buyer's Guide' which explains the
warranty coverage for such vehicles. Furthermore, Federal Odometer Regulations
promulgated under the Motor Vehicle Information and Cost Savings Act and the
motor vehicle title laws of most states require that all sellers of used
vehicles furnish a written statement signed by the seller certifying the
accuracy of the odometer reading. If a seller is not properly licensed or if
either a Buyer's Guide or Odometer Disclosure Statement was not provided to the
purchaser of a Financed Vehicle, the Obligor may be able to assert a defense
against the seller of the Financed Vehicle. If an Obligor on a Receivable were
successful in asserting any such claim or defense, the Servicer would pursue on
behalf of the related Trust any reasonable remedies against the seller or the
manufacturer of the vehicle, subject to certain limitations as to the expense of
any such action to be specified in the related Sale and Servicing Agreements.
Under each Purchase Agreement, CPS will have represented and warranted that
each Receivable complies with all requirements of law in all material respects.
Accordingly, if an Obligor has a claim against a Trust for violation of any law
and such claim materially and adversely affects such Trust's interest in a
Receivable, such violation would constitute a breach of the warranties of CPS
and would create an obligation of CPS to repurchase the Receivable unless the
breach is cured.
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OTHER LIMITATIONS
In addition to the laws limiting or prohibiting deficiency judgments,
numerous other statutory provisions, including federal bankruptcy laws and
related state laws, may interfere with or affect the ability of a secured party
to realize upon collateral or to enforce a deficiency judgment. For example, in
a Chapter 13 proceeding under the federal bankruptcy law, a court may prevent a
creditor from repossession a vehicle and, as part of the rehabilitation plan,
may reduce the amount of the secured indebtedness to the market value of the
vehicle at the time of bankruptcy (as determined by the court), leaving the
creditor as a general unsecured creditor for the remainder of the indebtedness.
A bankruptcy court may also reduce the monthly payments due under a contract or
change the rate of interest and time of repayment of the indebtedness.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the material Federal income tax
consequences of the purchase, ownership and disposition of the Notes and the
Certificates. However, the summary does not purport to deal with Federal income
tax consequences applicable to all categories of holders, some of which may be
subject to special rules. For example, it does not discuss the tax treatment of
Noteholders or Certificateholders that are insurance companies, regulated
investment companies or dealers in securities. This discussion is directed to
prospective purchasers who purchase Notes or Certificates in the initial
distribution thereof and who hold the Notes or Certificates as 'capital assets'
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended (the 'Code'). Prospective investors are urged to consult their own tax
advisors in determining the Federal, state, local, foreign and any other tax
consequences to them of the purchase, ownership and disposition of the Notes and
the Certificates.
The following summary is based upon current provisions of the Code, the
Treasury regulations promulgated thereunder, judicial authority, and ruling
authority, all of which are subject to change, which change may be retroactive.
Each Trust will be provided with an opinion of Mayer, Brown & Platt, special
Federal tax counsel to such Trust ('Federal Tax Counsel'), regarding certain
Federal income tax matters discussed below. An opinion of Federal Tax Counsel,
however, is not binding on the Internal Revenue Service (the 'IRS') or the
courts. Moreover, there are no cases or IRS rulings on similar transactions
involving both debt and equity interests issued by a trust with terms similar to
those of the Notes and the Certificates. As a result, the IRS may disagree with
all or a part of the discussion below. No ruling on any of the issues discussed
below will be sought from the IRS. For purposes of the following summary,
references to the Trust, the Notes, the Certificates and related terms, parties
and documents shall be deemed to refer, unless otherwise specified herein, to
each Trust and the Notes, Certificates and related terms, parties and documents
applicable to such Trust.
TAX CHARACTERIZATION OF THE TRUST
Prior to the issuance of Securities by the related Trust, Federal Tax
Counsel will deliver its opinion that the Trust will not be an association (or
publicly traded partnership) taxable as a corporation for Federal income tax
purposes. This opinion will be based on the assumption that the terms of the
Trust Documents will be complied with, and on counsel's conclusions that the
nature of the income of the Trust will exempt it from the rule that certain
publicly traded partnerships are taxable as corporations.
If the Trust were taxable as a corporation for Federal income tax purposes,
the Trust would be subject to corporate income tax on its taxable income. The
Trust's taxable income would include all its income on the Receivables, possibly
reduced by its interest expense on the Notes. Any such corporate income tax
could materially reduce cash available to make payments on the Notes and
distributions on the Certificates, and Certificateholders could be liable for
any such tax that is unpaid by the Trust.
TAX CONSEQUENCES TO HOLDERS OF THE NOTES
Treatment of the Notes as Indebtedness. The Seller will agree, and the
Noteholders will agree by their purchase of Notes, to treat the Notes as debt
for Federal, state and local income and franchise tax purposes. Prior to the
sale of Securities by the related Trust, Federal Tax Counsel will deliver its
opinion
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to the Trust with respect to each series of Notes that either (i) the Notes of
such series will be characterized as debt for Federal income tax purposes or
(ii) the Notes of such series should be characterized as debt for Federal income
tax purposes, but if such Notes are not characterized as debt, such Notes will
be characterized as interests in a partnership. Except as described below under
the heading ' -- Possible Alternative Treatment of the Notes,' below, the
discussion below assumes that the characterization of the Notes as debt for
Federal income tax purposes is correct.
OID, Indexed Securities, etc. The discussion below assumes that all
payments on the Notes are denominated in U.S. dollars, and that the Notes are
not Indexed Securities or Strip Notes (the Federal income tax consequences for
which will be described in the applicable Prospectus Supplement). Moreover, the
discussion assumes that the interest formula for the Notes meets the
requirements for 'qualified stated interest' under Treasury regulations (the
'OID Regulations') relating to debt instruments issued with original issue
discount ('OID'), and that any OID on the Notes (i.e., any excess of the
principal amount of the Notes over their issue price) is de minimis (i.e., less
than 1/4% of their principal amount multiplied by the weighted average maturity
of the Notes), all within the meaning of the OID Regulations. If these
conditions are not satisfied with respect to any given series of Notes and as a
result the Notes are treated as issued with OID, additional tax considerations
with respect to such Notes will be disclosed in the applicable Prospectus
Supplement.
Interest Income on the Notes. Based on the above assumptions, except as
discussed below, the Notes will not be considered issued with OID. The stated
interest thereon generally will be taxable to a Noteholder as ordinary interest
income when received or accrued in accordance with such Noteholder's method of
tax accounting. Under the OID Regulations, a holder of a Note issued with a de
minimis amount of OID generally must include such OID in income, on a pro rata
basis, as principal payments are made on the Note. It is believed that any
prepayment premium paid as a result of a mandatory redemption will be taxable as
contingent interest when it becomes fixed and unconditionally payable. A
purchaser who buys a Note for more or less than its principal amount will
generally be subject, respectively, to the premium amortization or market
discount rules of the Code.
A holder of a Note that has a fixed maturity date of not more than one year
from the issue date of such Note (a 'Short-Term Note') may be subject to special
rules. Under the OID Regulations, all stated interest will be treated as OID. An
accrual basis holder of a Short-Term Note (and certain cash basis holders,
including regulated investment companies, as set forth in Section 1281 of the
Code) generally would be required to report interest income as OID accrues on a
straight-line basis over the term of each interest period. Other cash basis
holders of a Short-Term Note would, in general, be required to report interest
income as interest is paid (or, if earlier, upon the taxable disposition of the
Short-Term Note). However, a cash basis holder of a Short-Term Note reporting
interest income as it is paid may be required to defer a portion of any interest
expense otherwise deductible on indebtedness incurred to purchase or carry the
Short-Term Note until the taxable disposition of the Short-Term Note. A cash
basis taxpayer may elect under Section 1281 of the Code to accrue interest
income on all nongovernment debt obligations with a term of one year or less, in
which case the taxpayer would include OID on the Short-Term Note in income as it
accrues, but would not be subject to the interest expense deferral rule referred
to in the preceding sentence. Certain special rules apply if a Short-Term Note
is purchased for more or less than its principal amount.
Sale or Other Disposition. If a Noteholder sells a Note, the holder will
recognize gain or loss in an amount equal to the difference between the amount
realized on the sale and the holder's adjusted tax basis in the Note. The
adjusted tax basis of a Note to a particular Noteholder will equal the holder's
cost for the Note, increased by any market discount, OID and gain previously
included by such Noteholder in income with respect to the Note and decreased by
the amount of premium (if any) previously amortized and by the amount of
principal payments previously received by such Noteholder with respect to such
Note. Any such gain or loss will be capital gain or loss, except for gain
representing accrued interest and accrued market discount not previously
included in income. Capital losses generally may be used by a corporate taxpayer
only to offset capital gains, and by an individual taxpayer only to the extent
of capital gains plus $3,000 of other income. Recent legislation, the Taxpayer
Relief Act of 1997, reduced the rate of tax imposed on capital gains from the
sale or exchange of assets
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held for more than 18 months, effective for amounts properly taken into account
after May 6, 1997. The legislation did not modify the rate of tax imposed on
gains of a comparable taxpayer.
Foreign Holders. Interest paid (or accrued) to a Noteholder who is a
nonresident alien, foreign corporation or other person other than a United
States person as defined in the Code and Treasury Regulations (a 'foreign
person') generally will be considered 'portfolio interest,' and generally will
not be subject to United States Federal income tax and withholding tax, if the
interest is not effectively connected with the conduct of a trade or business
within the United States by the foreign person and the foreign person (i) is not
actually or constructively a '10 percent shareholder' of the Trust or the Seller
(including a holder of 10% of the outstanding Certificates) or a 'controlled
foreign corporation' with respect to which the Trust or the Seller is a 'related
person' within the meaning of the Code and (ii) provides the Trustee or other
person who is otherwise required to withhold U.S. tax with respect to the Notes
with an appropriate statement (on Form W-8 or a similar form), signed under
penalties of perjury, certifying that the beneficial owner of the Note is a
foreign person and providing the foreign person's name and address. If the
information provided in this statement changes, the foreign person must inform
the Trust within 30 days of such change. If a Note is held through a securities
clearing organization or certain other financial institutions, the organization
or institution may provide the relevant signed statement to the withholding
agent; in that case, however, the signed statement must be accompanied by a Form
W-8 or substitute form provided by the foreign person that owns the Note. If
such interest is not portfolio interest, then it will be subject to United
States Federal income and withholding tax at a rate of 30%, unless reduced or
eliminated pursuant to an applicable tax treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a Note by a foreign person will be exempt from United
States Federal income and withholding tax; provided that (i) such gain is not
effectively connected with the conduct of a trade or business in the United
States by the foreign person and (ii) in the case of an individual foreign
person, the foreign person is not present in the United States for 183 days or
more in the taxable year.
Final regulations dealing with withholding tax on income paid to foreign
persons and related matters (the 'New Withholding Regulations') were issued by
the Treasury Department on October 6, 1997. The New Withholding Regulations will
generally be effective for payments made after December 31, 1998, subject to
certain transition rules. Prospective Noteholders who are foreign persons are
strongly urged to consult their own tax advisors with respect to the New
Withholding Regulations.
Backup Withholding. Each holder of a Note (other than an exempt holder such
as a corporation, tax-exempt organization, qualified pension and profit-sharing
trust, individual retirement account or nonresident alien who provides
certification as to status as a nonresident) will be required to provide, under
penalties of perjury, a certificate containing the holder's name, address,
correct Federal taxpayer identification number and a statement that the holder
is not subject to backup withholding. Should a nonexempt Noteholder fail to
provide the required certification, the Trust will be required to withhold 31%
of the amount otherwise payable to the holder, and remit the withheld amount to
the IRS as a credit against the holder's Federal income tax liability.
Possible Alternative Treatment of the Notes. In the opinion of Federal Tax
Counsel, in the event that any series of Notes were not treated as debt for
Federal income tax purposes, such series of Notes would be characterized for
Federal income tax purposes as interests in a partnership. If any series of the
Notes did constitute interests in such a partnership, it is expected that stated
interest payments on such Notes would be treated either as guaranteed payments
under section 707(c) of the Code or as a preferential allocation of net income
of the Trust (with all other items of Trust income, gain, loss, deduction and
credit being allocated to the holders of the Certificates). Although the Federal
income tax treatment of such Notes for most accrual basis taxpayers should not
differ materially under such characterization from the treatment of such Notes
as debt, such characterization could result in adverse effects for certain
holders of Notes. For example, holders of Notes treated as interests in a
partnership could be subject to tax on income equal to the entire amount of the
stated interest payments on the Notes (plus possibly certain other items) even
though the Trust might not have sufficient cash to make current cash
distributions of such amount. Thus, cash basis holders would in effect be
required to report income in respect of such Notes on the accrual basis and
holders of such Notes could become liable for taxes on Trust income even if they
have not received cash from the Trust to pay such taxes. Moreover,
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income allocable to a holder of a Note treated as a partnership interest that is
a pension, profit-sharing or employee benefit plan or other tax-exempt entity
(including an individual retirement account) would constitute 'unrelated
debt-financed income' generally taxable to such a holder under the Code, non-
U.S. persons holding such Notes could be subject to withholding or required to
file a U.S. Federal income tax return and to pay U.S. Federal income tax (and,
in the case of a corporation, branch profits tax) on their share of accruals of
guaranteed payments and Trust income, and individuals holding such Notes might
be subject to certain limitations on their ability to deduct their share of
Trust expenses.
TAX CONSEQUENCES TO HOLDERS OF THE CERTIFICATES
Treatment of the Trust as a Partnership. The Seller and the Servicer will
agree, and the Certificateholders will agree by their purchase of Certificates,
to treat the Trust as a partnership for purposes of Federal and state income
tax, franchise tax and any other tax measured in whole or in part by income,
with the assets of the partnership being the assets held by the Trust, the
partners of the partnership being the Certificateholders (including the Seller
in its capacity as recipient of distributions from the Spread Account and any
other account specified in the related Prospectus Supplement in which the Seller
has an interest), and the Notes being debt of the partnership. However, the
proper characterization of the arrangement involving the Trust, the
Certificates, the Notes, the Seller and the Servicer is not clear because there
is no authority on transactions closely comparable to that contemplated herein.
A variety of alternative characterizations are possible. For example,
because the Certificates may have certain features characteristic of debt, the
Certificates might be considered debt of the Seller or the Trust. Any such
characterization should not result in materially adverse tax consequences to
Certificateholders as compared to the consequences from treatment of the
Certificates as equity in a partnership, described below. The following
discussion assumes that the Certificates represent equity interests in a
partnership.
Indexed Securities, etc. The following discussion assumes that all payments
on the Certificates are denominated in U.S. dollars, none of the Certificates
are Indexed Securities or Strip Certificates and a series of Securities includes
a single class of Certificates. If these conditions are not satisfied with
respect to any given series of Certificates, additional tax considerations with
respect to such Certificates will be disclosed in the applicable Prospectus
Supplement.
Partnership Taxation. As a partnership, the Trust will not be subject to
Federal income tax. Rather, each Certificateholder will be required to
separately take into account such holder's accruals of guaranteed payments from
the Trust and its allocated share of other income, gains, losses, deductions and
credits of the Trust. The Trust's income will consist primarily of interest and
finance charges earned on the Receivables (including appropriate adjustments for
market discount, OID and premium) and any gain upon collection or disposition of
Receivables. The Trust's deductions will consist primarily of interest accruing
with respect to the Notes, guaranteed payments on the Certificates, servicing
and other fees, and losses or deductions upon collection or disposition of
Receivables.
Under the Trust Agreement, stated interest payments on the Certificates
(including interest on amounts previously due on the Certificates but not yet
distributed) will be treated as 'guaranteed payments' under Section 707(c) of
the Code. Guaranteed payments are payments to partners for the use of their
capital and, in the present circumstances, are treated as deductible to the
Trust and ordinary income to the Certificateholders. The Trust will have a
calendar year tax year and will deduct the guaranteed payments under the accrual
method of accounting. Certificateholders with a calendar year tax year are
required to include the accruals of guaranteed payments in income in their
taxable year that corresponds to the year in which the Trust deducts the
payments, and Certificateholders with a different taxable year are required to
include the payments in income in their taxable year that includes the December
31 of the Trust year in which the Trust deducts the payments. It is possible
that guaranteed payments will not be treated as interest for all purposes of the
Code.
In addition, the Trust Agreement will provide, in general, that the
Certificateholders will be allocated taxable income of the Trust for each
Collection Period equal to the sum of (i) any Trust income attributable to
discount on the Receivables that corresponds to any excess of the principal
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amount of the Certificates over their initial issue price; (ii) prepayment
premium, if any, payable to the Certificateholders for such month and (iii) any
other amounts of income payable to the Certificateholders for such month. Such
allocation will be reduced by any amortization by the Trust of premium on
Receivables that corresponds to any excess of the issue price of Certificates
over their principal amount. All remaining items of income, gain, loss and
deduction of the Trust will be allocated to the Seller.
Based on the economic arrangement of the parties, this approach for
accruing guaranteed payments and allocating Trust income should be permissible
under applicable Treasury regulations, although no assurance can be given that
the IRS would not require a greater amount of income to be allocated to
Certificateholders. Moreover, even under the foregoing method of allocation,
Certificateholders may be subject to tax on income equal to the entire amount of
stated interest payments on the Certificates plus the other items described
above even though the Trust might not have sufficient cash to make current cash
distributions of such amount. Thus, cash basis holders will in effect be
required to report income from the Certificates on the accrual basis and
Certificateholders may become liable for taxes on Trust income even if they have
not received cash from the Trust to pay such taxes. In addition, because tax
allocations and tax reporting will be done on a uniform basis for all
Certificateholders but Certificateholders may be purchasing Certificates at
different times and at different prices, Certificateholders may be required to
report on their tax returns taxable income that is greater or less than the
amount reported to them by the Trust.
Most of the guaranteed payments and taxable income allocated to a
Certificateholder that is a pension, profit-sharing or employee benefit plan or
other tax-exempt entity (including an individual retirement account) will
constitute 'unrelated debt-financed income' generally taxable to such a holder
under the Code.
An individual taxpayer's share of expenses of the Trust (including fees to
the Servicer but not interest expense) would be miscellaneous itemized
deductions. Such deductions might be disallowed to the individual in whole or in
part and might result in such holder being taxed on an amount of income that
exceeds the amount of cash actually distributed to such holder over the life of
the Trust. It is not clear whether these rules would be applicable to a
Certificateholder accruing guaranteed payments.
The Trust intends to make all tax calculations relating to income and
allocations to Certificateholders on an aggregate basis. If the IRS were to
require that such calculations be made separately for each Receivable, the Trust
might be required to incur additional expense but it is believed that there
would not be a material adverse effect on Certificateholders.
Discount and Premium. The purchase price paid by the Trust for the
Receivables may be greater or less than the remaining principal balance of the
Receivables at the time of purchase. If so, the Receivables will have been
acquired at a premium or discount, as the case may be. (As indicated above, the
Trust will make this calculation on an aggregate basis, but might be required to
recompute it on a Receivable-by-Receivable basis.)
If the Trust acquires the Receivables at a market discount or premium, the
Trust will elect to include any such discount in income currently as it accrues
over the life of the Receivables or to offset any such premium against interest
income on the Receivables. As indicated above, a portion of such market discount
income or premium deduction may be allocated to Certificateholders.
Disposition of Certificates. Generally, capital gain or loss will be
recognized on a sale of Certificates in an amount equal to the difference
between the amount realized and the seller's tax basis in the Certificates sold.
A Certificateholder's tax basis in a Certificate will generally equal the
holder's cost increased by the holder's share of Trust income and accruals of
guaranteed payments (includible in income) and decreased by any distributions
received with respect to such Certificate. In addition, both the tax basis in
the Certificates and the amount realized on a sale of a Certificate would
include the holder's share of the Notes and other liabilities of the Trust. A
holder acquiring Certificates at different prices may be required to maintain a
single aggregate adjusted tax basis in such Certificates, and, upon sale or
other disposition of some of the Certificates, allocate a pro rata portion of
such aggregate tax basis to the Certificates sold (rather than maintaining a
separate tax basis in each Certificate for purposes of computing gain or loss on
a sale of that Certificate).
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Any gain on the sale of a Certificate attributable to the holder's share of
unrecognized accrued market discount on the Receivables would generally be
treated as ordinary income to the holder and would give rise to special tax
reporting requirements. The Trust does not expect to have any other assets that
would give rise to such special reporting requirements. Thus, to avoid those
special reporting requirements, the Trust will elect to include market discount
in income as it accrues.
If a Certificateholder is required to recognize an aggregate amount of
income (not including income attributable to disallowed itemized deductions
described above) over the life of the Certificates that exceeds the aggregate
cash distributions with respect thereto, such excess will generally give rise to
a capital loss upon the retirement of the Certificates.
Allocations Between Transferors and Transferees. In general, the Trust's
taxable income and losses will be determined monthly and the tax items and
accruals of guaranteed payments for a particular calendar month will be
apportioned among the Certificateholders in proportion to the principal amount
of Certificates owned by them as of the close of the last day of such month. As
a result, a holder purchasing Certificates may be allocated tax items and
accruals of guaranteed payments (which will affect its tax liability and tax
basis) attributable to periods before the actual transaction.
The use of such a monthly convention may not be permitted by existing
regulations. If a monthly convention is not allowed (or only applies to
transfers of less than all of the partner's interest), taxable income or losses
and accruals of guaranteed payments of the Trust might be reallocated among the
Certificateholders. The Company is authorized to revise the Trust's method of
allocation between transferors and transferees to conform to a method permitted
by future regulations.
Section 754 Election. In the event that a Certificateholder sells its
Certificates at a profit (loss), the purchasing Certificateholder will have a
higher (lower) basis in the Certificates than the selling Certificateholder had.
The tax basis of the Trust's assets will not be adjusted to reflect that higher
(or lower) basis unless the Trust were to file an election under Section 754 of
the Code. In order to avoid the administrative complexities that would be
involved in keeping accurate accounting records, as well as potentially onerous
information reporting requirements, the Trust will not make such election. As a
result, Certificateholders might be allocated a greater or lesser amount of
Trust income than would be appropriate based on their own purchase price for
Certificates.
Administrative Matters. The Trustee is required to keep or have kept
complete and accurate books of the Trust. Such books will be maintained for
financial reporting and tax purposes on an accrual basis and the fiscal year of
the Trust will be the calendar year. The Trustee will file a partnership
information return (IRS Form 1065) with the IRS for each taxable year of the
Trust issuing Certificates and will report each Certificateholder's accruals of
guaranteed payments and allocable share of items of Trust income and expense to
holders and the IRS on Schedule K-1. The Trust will provide the Schedule K-1
information to nominees that fail to provide the Trust with the information
statement described below and such nominees will be required to forward such
information to the beneficial owners of the Certificates. Generally, holders
must file tax returns that are consistent with the information return filed by
the Trust or be subject to penalties unless the holder notifies the IRS of all
such inconsistencies.
Under Section 6031 of the Code, any person that holds Certificates as a
nominee at any time during a calendar year is required to furnish the Trust with
a statement containing certain information on the nominee, the beneficial owners
and the Certificates so held. Such information includes (i) the name, address
and taxpayer identification number of the nominee and (ii) as to each beneficial
owner (x) the name, address and taxpayer identification number of such person,
(y) whether such person is a United States person, a tax-exempt entity or a
foreign government, an international organization, or any wholly-owned agency or
instrumentality of either of the foregoing and (z) certain information on
Certificates that were held, bought or sold on behalf of such person throughout
the year. In addition, brokers and financial institutions that hold Certificates
through a nominee are required to furnish directly to the Trust information as
to themselves and their ownership of Certificates. A clearing agency registered
under Section 17A of the Exchange Act is not required to furnish any such
information statement to the Trust. The information referred to above for any
calendar year must be furnished to the Trust on or before the following January
31. Nominees, brokers and financial institutions that fail to provide the Trust
with the information described above may be subject to penalties.
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The Seller will be designated as the tax matters partner in the Trust
Agreement and, as such, will be responsible for representing the
Certificateholders in any dispute with the IRS. The Code provides for
administrative examination of a partnership as if the partnership were a
separate and distinct taxpayer. Generally, the statute of limitations for
partnership items does not expire before three years after the date on which the
partnership information return is filed. Any adverse determination following an
audit of the return of the Trust by the appropriate taxing authorities could
result in an adjustment of the returns of the Certificateholders, and, under
certain circumstances, a Certificateholder may be precluded from separately
litigating a proposed adjustment to the items of the Trust. An adjustment could
also result in an audit of a Certificateholder's returns and adjustments of
items not related to the income and losses of the Trust.
Tax Consequences to Foreign Certificateholders. It is not clear whether the
Trust would be considered to be engaged in a trade or business in the United
States for purposes of Federal withholding taxes with respect to non-U.S.
persons because there is no clear authority dealing with that issue under facts
substantially similar to those described herein. Although it is not expected
that the Trust would be engaged in a trade or business in the United States for
such purposes, the Trust will withhold as if it were so engaged in order to
protect the Trust from possible adverse consequences of a failure to withhold.
The Trust expects to withhold on the portion of its taxable income that is
allocable to foreign Certificateholders pursuant to Section 1446 of the Code, as
if such income were effectively connected to a U.S. trade or business, at a rate
of 35% for foreign holders that are taxable as corporations and 39.6% for all
other foreign holders. Subsequent adoption of Treasury regulations or the
issuance of other administrative pronouncements may require the Trust to change
its withholding procedures. In determining a holder's nonforeign status, the
Trust may rely on IRS Form W-8, IRS Form W-9 or the holder's certification of
nonforeign status signed under penalties of perjury.
Each foreign holder might be required to file a U.S. individual or
corporate income tax return and pay U.S. income tax on the amount computed
therein (including, in the case of a corporation, the branch profits tax) on its
share of accruals of guaranteed payments and the Trust's income. Each foreign
holder must obtain a taxpayer identification number from the IRS and submit that
number to the Trust on Form W-8 in order to assure appropriate crediting of the
taxes withheld. A foreign holder generally would be entitled to file with the
IRS a claim for refund with respect to taxes withheld by the Trust, taking the
position that no taxes were due because the Trust was not engaged in a U.S.
trade or business. However, the IRS may assert that additional taxes are due,
and no assurance can be given as to the appropriate amount of tax liability.
Backup Withholding. Distributions made on the Certificates and proceeds
from the sale of the Certificates will be subject to a 'backup' withholding tax
of 31% if, in general, the Certificateholder fails to comply with certain
identification procedures, unless the holder is an exempt recipient under
applicable provisions of the Code. See 'Tax Consequences to Holders of the
Notes -- Backup Withholding.'
ERISA CONSIDERATIONS
The Prospectus Supplement for each Series of Securities will summarize,
subject to the limitations discussed therein, considerations under ERISA
relevant to the purchase of such Securities by employee benefit plans and
individual retirement accounts.
PLAN OF DISTRIBUTION
CPS may sell Securities (i) through underwriters or dealers: (ii) directly
to one or more purchasers: or (iii) through agents. The related Prospectus
Supplement in respect of a Series offered hereby will set forth the terms of the
offering of such Securities, including the name or names of any underwriters,
the purchase price of such Securities and the proceeds to CPS from such sale,
any underwriting discounts and other items constituting underwriters'
compensation, any initial offering price and any discounts or concessions
allowed or reallowed or paid to dealers. Only underwriters so named in such
Prospectus Supplement shall be deemed to be underwriters in connection with the
Securities offered thereby.
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Subject to the terms and conditions set forth in an underwriting agreement
(an 'Underwriting Agreement') to be entered into with respect to each Series of
Securities, CPS will agree to sell to each of the underwriters named therein and
in the related Prospectus Supplement, and each of such underwriters will
severally agree to purchase from CPS, the principal amount of Securities set
forth therein and in the related Prospectus Supplement (subject to proportional
adjustment on the terms and conditions set forth in the related Underwriting
Agreement in the event of an increase or decrease in the aggregate amount of
Securities offered hereby and by the related Prospectus Supplement).
In each Underwriting Agreement, the several underwriters will agree,
subject to the terms and conditions set forth therein, to purchase all the
Securities offered hereby and by the related Prospectus Supplement if any of
such Securities are purchased. In the event of a default by any underwriter,
each Underwriting Agreement will provide that, in certain circumstances,
purchase commitments of the nondefaulting underwriters may be increased or the
Underwriting Agreement may be terminated.
Each Underwriting Agreement will provide that CPS will indemnify the
related underwriters and, in certain limited circumstances, the underwriters
will indemnify CPS against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
The place and time of delivery for any Series of Securities in respect of
which this Prospectus is delivered will be set forth in the accompanying
Prospectus Supplement.
LEGAL OPINIONS
Certain legal matters relating to the issuance of the Securities of any
Series, including certain federal and state income tax consequences with respect
thereto and certain Bankruptcy matters, will be passed upon by Mayer, Brown &
Platt, New York, New York, or other counsel specified in the related Prospectus
Supplement.
FINANCIAL INFORMATION
Certain specified Trust Assets will secure each Series of Securities, no
Trust will engage in any business activities or have any assets or obligations
prior to the issuance of the related Series of Securities. Accordingly, no
financial statements with respect to any Trust Assets will be included in this
Prospectus or in the related Prospectus Supplement.
A Prospectus Supplement may contain the financial statements of the related
Credit Enhancer, if any.
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INDEX OF TERMS
<TABLE>
<S> <C>
Accrual Securities................................................................................... 7
Actuarial Receivables................................................................................ 21
Affiliate Purchase Agreement......................................................................... 20
Affiliated Originator................................................................................ 9, 23
APR.................................................................................................. 21
cash sale differential............................................................................... 39
Cede................................................................................................. 10
CEDEL Participants................................................................................... 28
Certificateholders................................................................................... 33
Certificates......................................................................................... 1, 4
Class................................................................................................ 1
Closing Date......................................................................................... 9, 30
Code................................................................................................. 40
Collection Account................................................................................... 30
Collection Period.................................................................................... 5
Commission........................................................................................... 2
Contracts............................................................................................ 1, 22
Cooperative.......................................................................................... 28
CPS.................................................................................................. 4
Credit Enhancement................................................................................... 18
Credit Enhancer...................................................................................... 18
Cutoff Date.......................................................................................... 8
Dealer Agreements.................................................................................... 19
Dealers.............................................................................................. 19
Definitive Securities................................................................................ 28
Depositaries......................................................................................... 26
Direct Participants.................................................................................. 18
Distribution Account................................................................................. 30
DTC.................................................................................................. 10
Eligible Deposit Account............................................................................. 31
Eligible Institution................................................................................. 31
Eligible Investments................................................................................. 26, 30
ERISA................................................................................................ 11
Euroclear Operator................................................................................... 28
Euroclear Participants............................................................................... 28
Exchange Act......................................................................................... 2, 12
Federal Tax Counsel.................................................................................. 40
Financed Vehicles.................................................................................... 1, 8
foreign person....................................................................................... 42
FTC Rule............................................................................................. 39
Funding Period....................................................................................... 9
IFC's................................................................................................ 23
Indenture............................................................................................ 4
Indenture Trustee.................................................................................... 4
Indirect Participants................................................................................ 18, 27
Initial Receivables.................................................................................. 9
Insolvency Event..................................................................................... 35
Insolvency Laws...................................................................................... 15
Interest Rate........................................................................................ 2, 7
Interest Reserve Account............................................................................. 30
Investment Earnings.................................................................................. 31
Investment Income.................................................................................... 9
IRS.................................................................................................. 40
</TABLE>
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<TABLE>
<S> <C>
Issuer............................................................................................... 1, 4, 18
Lock-Box Account..................................................................................... 32
Lock-Box Processor................................................................................... 32
national statistical rating organizations............................................................ 11
New Withholding Regulations.......................................................................... 42
Noteholders.......................................................................................... 33
Notes................................................................................................ 1, 4
Obligors............................................................................................. 19
OID.................................................................................................. 41
OID Regulations...................................................................................... 41
Participants......................................................................................... 26
Payment Date......................................................................................... 5
Policy............................................................................................... 1
Pool Balance......................................................................................... 23
Pool Factor.......................................................................................... 23
Post Office Box...................................................................................... 32
Pre-Funded Amount.................................................................................... 9
Pre-Funding Account.................................................................................. 9
prepayments.......................................................................................... 13
Prospectus Supplement................................................................................ 1
Purchase Agreement................................................................................... 20
Purchase Amount...................................................................................... 20
Rating Agencies...................................................................................... 12
Receivables.......................................................................................... 1, 8
Receivables Pool..................................................................................... 19
Record Date.......................................................................................... 5
Registration Statement............................................................................... 2
Relief Act........................................................................................... 18
Residual Interest.................................................................................... 8
Rule of 78's......................................................................................... 21
Rule of 78's Receivables............................................................................. 21
Rules................................................................................................ 27
Sale and Servicing Agreement......................................................................... 9, 18
Securities........................................................................................... 1
Securities Act....................................................................................... 2
Security Balance..................................................................................... 7
Securityholders...................................................................................... 5
Seller............................................................................................... 4
Senior Securities.................................................................................... 7
Series............................................................................................... 1, 25
Servicer............................................................................................. 1, 4
Servicer Termination Event........................................................................... 35
Servicing Agreement.................................................................................. 4
Servicing Fee........................................................................................ 32
Short-Term Note...................................................................................... 41
Simple Interest Receivables.......................................................................... 21
Sponsor.............................................................................................. 4
Standby Servicer..................................................................................... 31
Strip Securities..................................................................................... 7
sub-prime............................................................................................ 13
Sub-Prime Borrowers.................................................................................. 22
Subordinate Securities............................................................................... 7
Subsequent Receivables............................................................................... 9
Subsequent Transfer Date............................................................................. 14, 20
Subservicer.......................................................................................... 4
sum of monthly payments.............................................................................. 21
</TABLE>
49
<PAGE>
<PAGE>
<TABLE>
<S> <C>
sum of periodic balances............................................................................. 21
Terms and Conditions................................................................................. 28
Trust................................................................................................ 1, 4
Trust Accounts....................................................................................... 30
Trust Agreement...................................................................................... 4
Trust Assets......................................................................................... 1, 4
Trust Documents...................................................................................... 5, 29
Trustee.............................................................................................. 4, 5
Underwriting Agreement............................................................................... 47
</TABLE>
50
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_______________________________ ______________________________
_______________________________ ______________________________
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CPS, THE
SELLER OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................................................................... S-2
Incorporation of Certain Documents by Reference........................................................................... S-2
Reports to Noteholders.................................................................................................... S-3
Summary................................................................................................................... S-4
Risk Factors.............................................................................................................. S-19
Formation of the Trust.................................................................................................... S-21
The Trust Assets.......................................................................................................... S-22
CPS's Automobile Contract Portfolio....................................................................................... S-22
The Receivables Pool...................................................................................................... S-30
Yield Considerations...................................................................................................... S-36
Pool Factors and Other Information........................................................................................ S-37
Use of Proceeds........................................................................................................... S-38
The Seller, CPS, Samco and Linc........................................................................................... S-38
The Standby Servicer...................................................................................................... S-38
Description of the Securities............................................................................................. S-39
Registration of Notes..................................................................................................... S-40
Description of the Trust Documents........................................................................................ S-41
Credit Enhancement........................................................................................................ S-53
The Policy................................................................................................................ S-53
The Insurer............................................................................................................... S-55
Federal Income Tax Consequences........................................................................................... S-56
ERISA Considerations...................................................................................................... S-56
Underwriting.............................................................................................................. S-57
Legal Opinions............................................................................................................ S-58
Experts................................................................................................................... S-58
Index of Terms............................................................................................................ S-59
PROSPECTUS
Prospectus Supplement..................................................................................................... 2
Available Information..................................................................................................... 2
Incorporation of Certain Documents by Reference........................................................................... 2
Reports to Securityholders................................................................................................ 3
Summary of Terms.......................................................................................................... 4
Risk Factors.............................................................................................................. 13
The Issuers............................................................................................................... 18
The Trust Assets.......................................................................................................... 19
Acquisition of Receivables by the Seller.................................................................................. 20
The Receivables........................................................................................................... 20
CPS's Automobile Contract Portfolio....................................................................................... 22
Pool Factors.............................................................................................................. 23
Use of Proceeds........................................................................................................... 23
The Seller and CPS........................................................................................................ 23
The Trustee............................................................................................................... 24
Description of the Securities............................................................................................. 25
Description of the Trust Documents........................................................................................ 29
Certain Legal Aspects of the Receivables.................................................................................. 36
Federal Income Tax Consequences........................................................................................... 40
ERISA Considerations...................................................................................................... 46
Plan of Distribution...................................................................................................... 46
Legal Opinions............................................................................................................ 47
Financial Information..................................................................................................... 47
Index of Terms............................................................................................................ 48
</TABLE>
------------------------
UNTIL 90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT, ALL DEALERS
EFFECTING TRANSACTIONS IN THE CLASS A NOTES OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS
TO DELIVER THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
$90,925,000
[LOGO]
CPS AUTO RECEIVABLES
TRUST 1997-5
6.26% ASSET-BACKED
NOTES, CLASS A-1
6.40% ASSET-BACKED
NOTES, CLASS A-2
CPS RECEIVABLES CORP.
(SELLER)
CONSUMER PORTFOLIO
SERVICES, INC.
(SERVICER)
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
PAINEWEBBER INCORPORATED
BLACK DIAMOND SECURITIES, LLC
DECEMBER 8, 1997
_______________________________ ______________________________
_______________________________ ______________________________
