As filed with the Securities and Exchange Commission on July 23, 1997
Registration No. 333-25301
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3 TO
FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
CPS AUTO RECEIVABLES TRUSTS
(Issuer of the Securities)
CONSUMER PORTFOLIO SERVICES, INC.
(Originator of the Trust described herein)
(Exact name of registrant as specified in its charter)
California 33-0459135
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
2 Ada
Irvine, California 92618
(714) 753-6800
(Address, including zip code, and
telephone number, including area code,
of registrant's principal executive
offices)
Charles E. Bradley, Jr.
Consumer Portfolio Services, Inc.
2 Ada
Irvine, California 92618
(714) 753-6800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Laura A. DeFelice, Esq.
MAYER, BROWN & PLATT
1675 Broadway
New York, New York 10019
(212) 506-2500
Approximate date of commencement of
proposed sale to the public:
From time to time on or after the effective date of this registration
statement, as determined by market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. o
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. o
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act of 1933, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. o
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of securities to Amount to be Proposed maximum Proposed maximum Amount of
be registered registered offering price per certificate* aggregate offering price* registration fee
<S> <C> <C> <C> <C>
Asset Backed Notes,
Class A $750,000,000 100% $750,000,000 $227,272.73**
========================== ================== ================================== ============================ ===================
</TABLE>
* Estimated solely for the purpose of calculating the
registration fee.
** $227,272.73 of which has been previously paid as follows:
$344.83 was paid on April 16, 1997, $222,770.41 was paid on
July 11, 1997 and $4,199.29 was paid as described in the
following sentence. The amount of securities being carried
forward from Registration Statement No. 333-26355 pursuant to
Rule 429 is $13,857,654.82, and the Registrant previously paid
a filing fee with respect to such securities of $4,199.29
(calculated at the rate of 1/33 of 1% of the amount of
securities being registered, the rate in effect at the time
such Registration Statement was filed).
Pursuant to Rule 429 under the securities Act of 1933, the Prospectus
contained in this Amendment No. 3 to Registration Statement also relates to and
constitutes Post-Effective Amendment No. 2 to Registration Statement No.
333-26355, which became effective on May 20, 1997.
<PAGE>
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
INTRODUCTORY NOTE
This Registration Statement contains (i) a form of Prospectus
Supplement relating to future offerings by a CPS Auto Receivables Trust of a
Series of Asset Backed Securities described therein,, (ii) a Prospectus
Supplement relating to the offering by CPS Auto Receivables Trust 1997-3 of the
particular Series of Asset Backed Notes described therein and (iii) a form of
Prospectus relating to the offering of Series of Asset Backed Securities by
various CPS Auto Receivables Trusts created from time to time by Consumer
Portfolio Services, Inc. The forms of Prospectus Supplement relate only to the
securities described therein and are forms that may be used, among others, by
Consumer Portfolio Services, Inc. to offer Asset Backed Securities under this
Registration Statement.
<PAGE>
PART II
Item 14. Other Expenses of Issuance and Distribution
Registration Fee...............................................$ 227,272,73
Printing and Engraving...............................................40,000.00
Legal Fees and Expenses.............................................150,000.00
Accountants' Fees and Expenses.......................................20,000.00
Rating Agency Fees...................................................50,000.00
Miscellaneous Fees................................................. 10,000.00
---------
Total..............................................................$497,272.73
===========
Item 15. Indemnification of Directors and Officers
Indemnification. Under the laws which govern the organization of the
registrant, the registrant has the power and in some instances may be required
to provide an agent, including an officer or director, who was or is a party or
is threatened to be made a party to certain proceedings, with indemnification
against certain expenses, judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with such person's status as an
agent of Consumer Portfolio Services, Inc., if that person acted in good faith
and in a manner reasonably believed to be in the best interests of Consumer
Portfolio Services, Inc. and, in the case of a criminal proceeding, had no
reasonable cause to believe the conduct of that person was unlawful.
Article IV of the Articles of Incorporation and Section 2 of Article VI
of the Amended and Restated By-Laws of Consumer Portfolio Services, Inc.
provides that all officers and directors of the corporation shall be indemnified
by the corporation from and against all expenses, judgments, fines, settlements
and other amounts actually and reasonably incurred in connection with such
person's status as an agent of Consumer Portfolio Services, Inc., if that person
acted in good faith and in a manner reasonably believed to be in the best
interests of Consumer Portfolio Services, Inc. and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of that person was
unlawful.
The form of the Underwriting Agreement, to be filed as an exhibit to
this Registration Statement, will provide that Consumer Portfolio Services, Inc.
will indemnify and reimburse the underwriter(s) and each controlling person of
the underwriter with respect to certain expenses and liabilities, including
liabilities under the 1933 Act or other federal or state regulations or under
the common law, which arise out of or are based on certain material
misstatements or omissions in the Registration Statement. In addition, the
Underwriting Agreement will provide that the underwriter(s) will similarly
indemnify and reimburse Consumer Portfolio Services, Inc.
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<PAGE>
with respect to certain material misstatements or omissions in the Registration
Statement which are based on certain written information furnished by the
underwriter(s) for use in connection with the preparation of the Registration
Statement.
Insurance. As permitted under the laws which govern the organization of
the registrant, the registrant's Amended and Restated By-Laws permit the board
of directors to purchase and maintain insurance on behalf of the registrant's
agents, including its officers and directors, against any liability asserted
against them in such capacity or arising out of such agents' status as such,
whether or not the registrant would have the power to indemnify them against
such liability under applicable law.
II-2
<PAGE>
Item 16. Exhibits and Financial Statements
(a) Exhibits
1.1 --Form of Underwriting Agreement.
4.1 -- Form of Trust Agreement, and certain other related agreements as
Exhibits thereto.
4.2 --Form of Indenture, and certain other related agreement as Exhibits
thereto.
5.1 --Opinion of Mayer, Brown & Platt with respect to legality.
8.1 --Opinion of Mayer, Brown & Platt with respect to tax matters.
10.1 --Form of Sale and Servicing Agreement, and certain other related
agreements as Exhibits thereto.
10.2 --Form of Purchase Agreement.
10.3 --Form of Samco Purchase Agreement.
23.1 --Consent of Mayer, Brown & Platt (included in its opinions filed as
Exhibit 5.1 and Exhibit 8.1).
24.1 --Powers of Attorney.
(b) Financial Statements
All financial statements, schedules and historical financial
information have been omitted as they are not applicable.
II-3
<PAGE>
Item 17. Undertakings
A. Undertaking pursuant to Rule 415
The undersigned registrant hereby undertakes as follows:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(1) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(2) to reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(3) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change of such information in the
Registration Statement; provided, however, that paragraphs (1) and (2)
do not apply if the information required to be included in the
post-effective amendment is contained in periodic reports filed by the
Issuer pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. Undertaking pursuant to Rule 415
(a) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) under the
Securities Act shall be deemed to be part of this Registration Statement as of
the time it was declared effective.
(b) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement
II-4
<PAGE>
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Undertaking in respect of indemnification
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Securities Act") may be permitted to directors,
officers and controlling persons of the registrant pursuant to the provisions
described under Item 15 above, or otherwise, the registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the questions whether such indemnification by it is against public
policy as expressed in such Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment No. 3 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
capacities indicated.
CONSUMER PORTFOLIO SERVICES, INC.,
as sponsor and manager of the Trust (Registrant)
By: /s/ Jeffrey P. Fritz
---------------------
Name: Jeffrey P. Fritz
Title: Senior Vice President
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to Registration Statement has been signed on July 22, 1997 by
the following persons in the capacities indicated.
Signatures
Title
*
-------------------------------
Charles E. Bradley, Sr.
Director
/s/ Charles E. Bradley, Jr.
-------------------------------
Charles E. Bradley, Jr.
President and Director
*
-------------------------------
William B. Roberts
Director
*
-------------------------------
John G. Poole
Director
*
-------------------------------
Thomas L. Chrystie
Director
*
-------------------------------
Robert A. Simms
Director
II-6
<PAGE>
/s/ Jeffrey P. Fritz
-------------------------------
Jeffrey P. Fritz
Chief Financial Officer and Secretary
*By: /s/ Jeffrey P. Fritz
-------------------------------
Jeffrey P. Fritz
as attorney-in-fact
<PAGE>
EXHIBIT INDEX
1.1 -- Form of Underwriting Agreement.
4.1 -- Form of Trust Agreement, and certain other related agreements as
Exhibits thereto.
4.2 -- Form of Indenture, and certain other related agreements as
Exhibits thereto.
5.1 -- Opinion of Mayer, Brown & Platt with respect to legality.
8.1 -- Opinion of Mayer, Brown & Platt with respect to tax matters.
10.1 -- Form of Sale and Servicing Agreement, and certain other related
agreements in Exhibits thereto.
10.2 -- Form of Receivables Purchase Agreement.
10.3 -- Form of Samco Purchase Agreement.
23.1 -- Consent of Mayer, Brown & Platt (included in its opinions filed
as Exhibit 5.1 and Exhibit 8.1).
24.1 -- Powers of Attorney.
II-7
<PAGE>
Registration No. [ ]
Form of Prospectus Supplement
To Prospectus Dated [ ], 1997
[$ ]
CPS Auto Receivables Trust 199[ ]-[ ]
[$ ][ %] Asset-Backed Notes, Class A-1
[$ ][ %] Asset-Backed Notes, Class A-2
[$ ] Floating Rate Asset-Backed Notes, Class A-3
[$ ] [ %] Asset-Backed Notes, Class B
CPS Receivables Corp.
(Seller)
Consumer Portfolio Services, Inc.
(Servicer)
-------
CPS Auto Receivables Trust 199[ ]-[ ] (the "Trust") will be formed
pursuant to a Trust Agreement to be dated as of [ ] between CPS Receivables
Corp., as seller (the "Seller"), and [ ], as owner trustee (the "Owner
Trustee"). The [ %] Asset Backed Notes, Class A-1 (the "Class A-1 Notes"), the [
%] Asset-Backed Notes, Class A-2 (the "Class A-2 Notes") and the Floating Rate
Asset-Backed Notes, Class A-3 (the "Class A-3 Notes", and, together with the
Class A-1 Notes and Class A-2 Notes, the "Class A Notes") and the [ %]
Asset-Backed Notes, Class B (the "Class B Notes" and, together with the Class A
Notes, the "Notes"), will be issued pursuant to an Indenture (the "Indenture")
to be dated as of [ ] between the Trust and [ ], as indenture trustee (in such
capacity, the "Indenture Trustee"). The Trust also will issue [$ ] aggregate
principal amount of [ %] Asset Backed Certificates [which are not offered hereby
but will be retained initially by the Seller or an affiliate] (the
"Certificates" and, together with the Notes, the "Securities"). [The rights of
[identify subordinated classes of Securities] to receive payments of [principal]
and/or [interest] will be subordinated to the rights of [identify senior classes
of Securities] to the extent described herein.]
-------
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 new and used automobiles, light trucks,
vans and minivans securing the Receivables (as defined herein), certain bank
accounts and the proceeds thereof, the [Credit Enhancement] with respect to the
Notes, and the right of CPS to receive certain insurance proceeds and certain
other property, as more fully described herein. The Receivables will be
purchased by the Seller from CPS and from CPS's subsidiary, [Affiliated
Originator] on or prior to the date of the issuance of the Securities.
[It is intended that from time to time on or before [ ] the Trust will
purchase from the Seller (or an Affiliated Originator) additional retail
installment sale contracts having an aggregate principal balance of up to $[ ]
with funds on deposit in the Pre-Funding Account (as defined herein).]
The Underwriter has agreed to purchase from the Seller the Notes at a
purchase price equal to [ %] of the principal amount thereof, subject to the
terms and conditions set forth in the Underwriting Agreement referred to herein
under "Underwriting". The aggregate proceeds to the Seller, after deducting
expenses payable by the Seller, estimated at [$ ] will be [$ ].
-------
The Underwriter proposes to offer the 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.
-------
[Credit Enhancement] with respect to the Notes ["Credit Enhancement"]
will be provided by [Credit Enhancer] on each Payment Date.
-------
For a discussion of certain factors relating to the
transaction, see "Risk Factors" at page S-[ ]
herein and page [ ] in the accompanying
prospectus.
-------
THE NOTES REPRESENT OBLIGATIONS OF AND THE CERTIFICATES REPRESENT INTERESTS IN,
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.
[UNDERWRITER]
The date of this Prospectus
Supplement is [ ].
<PAGE>
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.
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 92718,
Attention: Jeffrey P. Fritz. Telephone requests for such copies should be
directed to Consumer Portfolio Services, Inc. at (714) 753-6800.
REPORTS TO SECURITYHOLDERS
Unless and until Definitive Securities 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 Securities. 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
S-2
<PAGE>
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.
S-3
<PAGE>
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.
Issuer................................ CPS Auto Receivables Trust 199[ ]-[ ]
(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..................... [Name and Address]
Owner Trustee......................... [Name and Address]
[Credit Enhancer]..................... [Name and Address]
Closing Date.......................... On or about [ ] (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 [ ] between the
Seller and the Owner Trustee (the "Trust
Agreement").
The Notes............................. The Trust will issue [ ]% Class A-1
Asset-Backed Notes (the "Class A- 1
Notes") in the aggregate original
principal amount of $[ ], [ ]% Class A-2
Asset-Backed Notes (the "Class A-2
Notes") in the original aggregate
principal amount of $[ ], Class A-3
Floating Rate Asset-Backed Notes (the
"Class A-3 Notes") in the original
aggregate principal amount of $[ ] and [
]% Class B Asset-Backed Notes (the
"Class B Notes") in the original
aggregate principal amount of $[ ]. The
Trust will also issue the Certificates.
The Notes and the Certificates are
referred to herein collectively as the
"Securities". The Notes will be issued
pursuant to an Indenture dated as of [ ]
(the "Indenture"). The Notes will be
offered for purchase in minimum
denominations of [$ ] and integral
multiples of $1,000 in excess thereof,
in book entry form only. See
"Description of the Securities Book
Entry Registration" in the Prospectus.
The Notes will be secured by the Trust
Assets as, and to the extent, provided
in the Indenture.
The Certificates...................... [The Trust will issue [ %] Asset-Backed
Certificates (the "Certificates") with
an aggregate initial Certificate Balance
(as defined herein) of [$ ]. The
Certificates will represent beneficial
interests in the Trust. The Certificates
will be issued pursuant to the Trust
Agreement. The Certificates will be
offered for purchase in
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<PAGE>
denominations of $1,000 and integral
multiples thereof in book-entry form
only. See "Certain Information Regarding
the Notes [and the Certificates] - Book
Entry Registration" and "- Definitive
Notes" in the Prospectus.]
Trust Assets.......................... The property of the Trust (the "Trust
Assets") will include (i) a pool of
retail installment sale contracts
consisting of the Initial Receivables
[and the Subsequent Receivables]
(collectively, the "Receivables")
secured by the new and used automobiles,
light trucks, vans and minivans financed
thereby (the "Financed Vehicles"), (ii)
with respect to Initial Receivables that
are Rule of 78's Receivables (as defined
herein), all payments due thereon after
[ ] (the "Cutoff Date"), and, with
respect to Initial Receivables that are
Simple Interest Receivables (as defined
herein), all payments received
thereunder after the Cutoff Date, (iii)
with respect to Subsequent Receivables
that are Rule of 78's Receivables, all
payments due thereon after the related
Subsequent Cutoff Date and, with respect
to Subsequent Receivables that are
Simple Interest Receivables, all
payments received thereunder after the
related Subsequent Cutoff Date, (iv)
security interests in the Financed
Vehicles, (v) certain bank accounts and
the proceeds thereof, (vi) the right of
the Seller to receive proceeds from
claims under, or refunds of unearned
premiums from, certain insurance
policies and extended service contracts,
(vii) all right, title and interest of
the Seller in and to the Purchase
Agreements, (viii) the [Credit
Enhancement] issued by the [Credit
Enhancer] with respect to the [Class A]
Notes, and (ix) certain other property,
as more fully described herein. See
"Formation of the Trust" in this
Prospectus Supplement and "The Trust
Assets" and "The Receivables" in the
Prospectus. Certain of the Receivables
will be purchased by the Seller from CPS
pursuant to the Purchase Agreement (such
Receivables, the "CPS Receivables") [and
certain of the Receivables will be
purchased by the Seller from CPS's
subsidiary, [Affiliated Originator],
pursuant to the [Affiliate Purchase
Agreement] (such Receivables, the
"[Affiliated Originator] Receivables")]
on or prior to the Closing Date [or each
Subsequent Closing Date (as defined
herein)]. 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....................... As of the Cutoff Date, the aggregate
outstanding principal balance of the
Initial Receivables was [$ ] (the
"Original Pool Balance"). The Initial
Receivables consist, and the Subsequent
Receivables will consist, of retail
installment sale contracts secured by
new and used 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 or related Subsequent Cutoff Date,
as applicable, and, with respect to
Simple Interest Receivables, the rights
to all payments received with respect to
such Receivables after the Cutoff Date
or related Subsequent Cutoff Date, as
applicable. As of the Cutoff Date,
approximately [ %] of the aggregate
principal balance of the Initial
Receivables represented financing of
used vehicles. The Receivables arise, or
will arise, from loans originated by
automobile dealers or independent
finance companies ("IFCs") for
S-5
<PAGE>
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 generally unable to obtain
credit from banks or other low-risk
lenders. See "CPS's Automobile Contract
Portfolio - General" and "- The
Receivables Pool" in this Prospectus
Supplement and "Risk Factors - Sub-Prime
Obligors" in the Prospectus. The
Receivables have been selected from the
contracts owned by CPS based on the
criteria specified in the Purchase
Agreement and described herein.
[Following the Closing Date, pursuant to
the Sale and Servicing Agreement, the
Seller will be obligated, subject only
to the availability thereof, to sell,
and the Trust will be obligated to
purchase, subject to the satisfaction of
certain conditions set forth therein,
additional Receivables originated by CPS
[or an Affiliated Originator] under its
auto loan programs and acquired by the
Seller from CPS [or an Affiliated
Originator] (the "Subsequent
Receivables") from time to time during
the Funding Period (as defined below)
having an aggregate Principal Balance
equal to approximately $[ ]. Subsequent
Receivables will be conveyed to the
Trust on dates specified by the Seller
(each date on which Subsequent
Receivables are conveyed being referred
to as a "Subsequent Closing Date")
occurring during the Funding Period.
After any Subsequent Closing Date, the
Trust Assets will include payments
[other than Credit Enhancement] received
with respect to the related Subsequent
Receivables after the cutoff date
designated by the Seller with respect to
such Subsequent Closing Date (such date
designated by the Seller, the
"Subsequent Cutoff Date" with respect to
the Subsequent Receivables conveyed to
the Trust on such Subsequent Closing
Date). See "Description of the Trust
Documents - Sale and Assignment of
Receivables; Subsequent Receivables"
herein. On each Subsequent Closing Date,
subject to the conditions set forth in
the Trust Documents, the Trustee shall
purchase from the Seller (or an
Affiliated Originator) the Subsequent
Receivables to be transferred to the
Trust on such Subsequent Closing Date.]
Pre-Funding Account................... [The Initial Receivables and the
Subsequent Receivables will be selected
from motor vehicle retail installment
sale contracts in CPS's portfolio based
on the criteria specified in the
Purchase Agreement and described in this
Prospectus Supplement. No Receivable
will have a scheduled maturity date
later than [ ].
Subsequent Receivables will be
originated under CPS's auto loan
programs [or through an Affiliated
Originator] but, as these programs are
modified from time to time by CPS due to
changes in market conditions or
otherwise in the judgment of CPS, such
Subsequent Receivables may be originated
using credit criteria different from the
criteria applied with respect to the
Initial Receivables and may be of a
different credit quality and seasoning.
However, CPS believes that the inclusion
of the Subsequent Receivables in the
pool of Receivables will not materially
adversely affect the performance or
other characteristics of the pool of
Receivables. In addition, following the
transfer of Subsequent Receivables to
the Trust, the characteristics of the
entire pool of Receivables included in
the Trust may vary from those of the
S-6
<PAGE>
Initial Receivables. See "Risk Factors
- Varying Characteristics of Subsequent
Receivables" and "The Receivables Pool"
herein.
On the Closing Date, the Seller will
deposit into the Pre-Funding Account (as
defined below), from the proceeds from
the sale of the Securities, the sum of
$[ ] (such amount, as reduced from time
to time by the aggregate Principal
Balances of all Subsequent Receivables
purchased by the Trust during the
Funding Period (the "Pre-Funded
Amount"). During the period (the
"Funding Period") from and including the
Closing Date until the earliest of (i)
the Record Date on which (a) the
Pre-Funded Amount is less than $100,000,
(b) an Event of Default has occurred
under the Indenture or a Servicer
Termination Event has occurred under the
Sale and Servicing Agreement, (c)
certain events of insolvency have
occurred with respect to the Seller or
the Servicer or (ii) the close of
business on the [ ] Payment Date, the
Pre-Funded Amount will be maintained as
an account in the name of the Indenture
Trustee (the "Pre-Funding Account"). The
Pre-Funded Amount is expected to
initially equal approximately $[ ] and,
during the Funding Period will be
reduced by the principal balance of
Subsequent Receivables purchased by the
Trust from time to time in accordance
with the Sale and Servicing Agreement.
The Seller expects that the Pre-Funded
Amount will be reduced to less than
$100,000 by the [ ] Payment Date. Any
Pre-Funded Amount remaining at the end
of the Funding Period will be payable to
the Noteholders [and Certificateholders]
pro rata in proportion to the respective
principal balances of each class of
Notes [and the Certificate Balance].]
Interest Reserve Account.............. [During the Funding Period, funds will
be held in an account (the "Interest
Reserve Account") to cover any
shortfalls due to investment earnings on
funds in the Pre-Funding Account being
less than the interest due on the Notes
[and the Certificates]. See "Description
of the Trust Documents - Accounts"].
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 [ ]. Payments will be
made to holders of record of the Notes
(the "Noteholders") as of the close of
business on the Record Date 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 Corporate Trust
Office 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
[Credit Enhancer] is located are
authorized or obligated by law,
executive order or governmental decree
to be closed.
B. Final Scheduled
Payment Dates................. [ ].
S-7
<PAGE>
C. Subordination of
[Class B Notes]................ [The Class B Notes 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 Class B Notes
will not receive any payment of
principal on a Payment Date until the
full amount of 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.]
D. Interest Rates................... The Class A-1 Notes will bear interest
at a rate equal to [ %] per annum (the
"Class A-1 Interest Rate"). The Class
A-2 Notes will bear interest at a rate
equal to [ %] per annum (the "Class A-2
Interest Rate"). The Class A-3 Notes
will bear interest at a rate equal to
[one month] [two month] [three month]
[six-month] LIBOR [other] plus [ %] (the
"Class A-3 Interest Rate"). The Class B
Notes will bear interest at a rate of [
]% per annum (the "Class B Interest
Rate"). [See "Description of the Notes -
Determination of LIBOR" in this
Prospectus Supplement.] [Additional
classes of Notes may be added.] Each
such interest rate for a Class of Notes
is referred to as an "Interest Rate".
Interest on the Notes, [other than the
Class A-1 Notes,] will be calculated on
the basis of a 360 day year consisting
of twelve 30 day months. [Interest on
the Class A-1 Notes will be calculated
on the basis of the actual number of
days in a 365-day year.]
E. Interest......................... [On each Payment Date, the holders of
record of the Class A-1 Notes (the
"Class A-1 Noteholders")] will be
entitled to receive, pro rata, interest
at the Class A-1 Interest Rate for the
number of days elapsed from and
including the most recent Payment Date
(or in the case of the initial Payment
Date, from and including the Closing
Date) to but excluding the current
Payment Date, 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. On each Payment Date,
the holders of record of the Class A-3
Notes (the "Class A-3 Noteholders") as
of the related Record Date will be
entitled to receive, pro rata, thirty
(30) days of interest at the Class A-3
Interest Rate on the outstanding
principal amount of the Class A-3 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 B Notes (the "Class B
Noteholders") as of the related Record
Date will be entitled to receive, pro
rata, thirty (30) days of interest at
the Class B Interest Rate on the
outstanding principal balance of the
Class B Notes at the close of business
on the last day of the related
Collection Period. [Additional classes
of Notes may be added]. 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
S-8
<PAGE>
such Class of Notes and (c) a fraction
(i) the numerator of which is the number
of days from and including the Closing
Date through and including [ ] 14, 199[
] 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 Notes - Payments of
Interest" in this Prospectus Supplement.
F. 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 product of (x)
the Class A Noteholders' Percentage of
the Principal Distributable Amount and
(y) any unpaid portion of the amount
described in clause (x) with respect to
a prior Payment Date. Principal of the
Class B Notes will be payable on each
Payment Date in an amount equal to the
Class B Noteholders' Principal
Distributable Amount for the related
Collection Period. The "Class B
Noteholders' Principal Distributable
Amount" is equal to the product of (a)
the Class B Noteholders' Percentage of
the Principal Distributable Amount and
(b) any unpaid portion of the amount
described in clause (a) with respect to
a prior Payment Date.
The "Class A Noteholders' Percentage"
will (a) on any Payment Date prior to
the Payment Date on which the principal
amount of the Class A-3 Notes is reduced
to zero, be [ %], (b) on the Payment
Date on which the principal amount of
the Class A-3 Notes is reduced to zero,
be the percentage equivalent of a
fraction, the numerator of which is the
principal amount of the Class A-3 Notes
immediately prior to such Payment Date,
and the denominator of which is the
Principal Distributable Amount and (c)
on any other Payment Date, be 0%.
The "Class B Noteholders' Percentage"
will (a) on any Payment Date prior to
the Payment Date on which the principal
amount of the Class A-3 Notes is reduced
to zero, be [ %], (b) on the Payment
Date on which the principal amount of
the Class A-3 Notes is reduced to zero,
be the percentage equivalent of a
fraction, the numerator of which is the
principal amount of the Class A-3 Notes
immediately prior to such Payment Date,
and the denominator of which is the
Principal Distributable Amount and (c)
on any other Payment Date, be 0%.
On each Payment Date, an amount equal to
the lesser of (i) the portion of the
Total Distribution Amount remaining
after application thereof to pay all
senior distributions as described in
"Priority of Payments" below and (ii)
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 Notes has been
reduced to zero, 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, then to the holders of
the Class A-3 Notes until the principal
balance of the Class A-3 Notes has been
reduced to zero, [additional classes of
Notes may be added]. On each Payment
Date, an amount equal to the lesser of
(i) the portion of the Total
Distribution Amount remaining after
S-9
<PAGE>
application thereof to pay all senior
distributions as described in "Priority
of Payments" below and (ii) the Class B
Noteholders' Principal Distributable
Amount will be applied to pay principal
of the Class B Notes until the principal
balance of the Class B Notes has been
reduced to zero.
The "Principal Distributable Amount" for
a Payment Date will equal the sum of (a)
the principal portion of all Scheduled
Receivable Payments received during the
preceding Collection Period on Rule of
78's Receivables and all payments of
principal received on Simple Interest
Receivables during the preceding
Collection Period; (b) the principal
portion of all prepayments in full
received during the preceding Collection
Period (including prepayments in full
resulting from collections with respect
to a Receivable received during the
preceding Collection Period (without
duplication of amounts included in (a)
above and (d) below)); (c) 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 [Credit Enhancer] 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) and (b) above); (d) 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) and (b) above); and (e) 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 (d)
above). 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 [ ].
G. Optional Redemption.............. 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
the unpaid principal amount of the
Notes, 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
[Credit Enhancer], but only if, after
giving effect thereto, a claim on the
[Credit Enhancement] would occur or any
amount owing to the [Credit Enhancer] or
the holders of the Notes would remain
unpaid. See "Description of the Notes -
Optional Redemption" in this Prospectus
Supplement.
H. Mandatory Redemption............. [Each class of Notes will be redeemed in
part on the Payment Date on or
immediately following the last day of
the Funding Period in the
S-10
<PAGE>
event that any portion of the Pre-Funded
Amount remains on deposit in the
Pre-Funding Account after giving effect
to the purchase of all Subsequent
Receivables, including any such purchase
on such date (a "Mandatory Redemption").
The aggregate principal amount of each
class of Notes to be redeemed will be an
amount equal to such class's pro rata
share (based on the respective current
principal balance of each class of
Notes) of the Pre-Funded Amount on such
date (such class's "Note Prepayment
Amount").
A limited recourse mandatory prepayment
premium (the "Note Prepayment Premium")
will be payable by the Trust to the
Noteholders if the Pre-Funded Amount at
the end of the Funding Period exceeds
$100,000. The Note Prepayment Premium
for each class of Notes will equal the
excess, if any, discounted as described
below, of (i) the amount of interest
that would have accrued on such class's
Note Prepayment Amount at the applicable
Interest Rate during the period
commencing on and including the Payment
Date on which such Note Prepayment
Amount is required to be distributed to
Noteholders of such class to but
excluding [ ], in the case of the Class
A-1 Notes, [ ], in the case of the Class
A-2 Notes, [ ] in the case of the Class
A-3 Notes, [ ] and in the case of the
Class B Notes, [ ], over (ii) the amount
of interest that would have accrued on
the applicable Note Prepayment Amount
over the same period at a per annum rate
of interest equal to the bond equivalent
yield to maturity on the Record Date
preceding such Payment Date on the
United States Treasury Bill due [ ], in
the case of the Class A-1 Notes, the [
]% United States Treasury Note due [ ],
in the case of the Class A-2 Notes, the
[ ]% United States Treasury Note due [
], in the case of the Class A-3 Notes,
the [ ]% United States Treasury Note due
[ ] and, in the case of the Class B
Notes, the [ ]% United States Treasury
Note due [ ]. Such excess shall be
discounted to present value to such
Payment Date at the applicable yield
described in clause (ii) above. The
Trust's obligation to pay the Note
Prepayment Premium shall be limited to
funds which are received from the Seller
under the Purchase Agreement [or an
Affiliate Purchase Agreement] as
liquidated damages for the failure to
deliver Subsequent Receivables. No other
assets of the Trust will be available
for the purpose of making such payment.
[The Credit Enhancement does not
guarantee payment of the Note Prepayment
Amounts or the Note Prepayment
Premiums.] In addition, the ratings
assigned to the Notes by the Rating
Agencies do not address the likelihood
that the Note Prepayment Amounts or the
Note Prepayment Premiums will be paid.]
The Notes may be accelerated and subject
to immediate payment at par upon the
occurrence of an Event of Default under
the Indenture. So long as no [Credit
Enhancement Default] shall have occurred
and be continuing, an Event of Default
under the Indenture will occur only upon
delivery by the [Credit Enhancer] to the
Indenture Trustee of notice of the
occurrence of certain events of default
under the [Credit Enhancement] Agreement
dated as of [ ]. In the case of such an
Event of Default, the Notes will
automatically be accelerated and subject
to immediate payment at par. See
"Description of the Trust Documents -
Events of Default" in this Prospectus
Supplement.
S-11
<PAGE>
Terms of the Certificates............. [The principal terms of the Certificates
will be as described below:
[A. Payment Dates.................... Distributions with respect to the
Certificates will be made on each
Payment Date, commencing [ ].
Distributions will be made to holders of
record of the Certificates (the
"Certificateholders" and, together with
the Noteholders, the "Securityholders")
as of the related Record Date.
B. Pass-Through Rate................. [ %] per annum (the "Pass-Through Rate")
payable monthly at one- twelfth of the
annual rate, calculated on the basis of
a 360-day year consisting of twelve 30
day months.
C. Subordination of
Certificates................... [The Certificates will not receive any
distribution with respect to a Payment
Date until the full amount of the
Noteholders' Distributable Amount with
respect to such Payment Date has been
deposited in the Distribution Account.]
D. Interest.......................... On each Payment Date, the Owner Trustee
will distribute to Certificateholders
their pro rata share of interest
distributable with respect to the
Certificates. Interest in respect of a
Payment Date will accrue from the
preceding Payment Date (or, in the case
of the first Payment Date, from the
Closing Date) or to but excluding the
current Payment Date. Interest on the
Certificates for any Payment Date due
but not paid on such Payment Date will
be due on the next Payment Date together
with interest on such amount at
one-twelfth of the Pass- Through Rate.
The amount of interest distributable on
the Certificates on each Payment Date
will equal 30 days' interest (or in the
case of the first Payment Date, interest
accrued from and including the Closing
Date to but excluding [ ]) at the
Pass-Through Rate on the Certificate
Balance as of the last day of the
related Collection Period (or, in the
case of the first Payment Date, as of
the Closing Date). [Distributions of
interest on the Certificates are
subordinated to payments of interest and
principal on the Notes, as described
above under "Subordination of
Certificates."] See "Description of the
Trust Documents - Distributions" herein.
E. Principal......................... On each Payment Date [on or after the
date on which the Notes have been paid
in full,] principal of the Certificates
will be payable in an amount equal to
the Certificateholders' Principal
Distributable Amount for the Monthly
period preceding such Payment Date. The
Certificateholders' Principal
Distributable Amount will equal the
Certificateholders' Percentage of the
Principal Distributable Amount for such
Payment Date. See "Description of the
Trust Documents - Distributions" herein.
The remaining Certificate Balance, if
any, will be payable in full on the
Final Scheduled Payment Date.
F. Optional Prepayment............... If the Seller or Servicer exercises its
option to purchase the Receivables,
which, subject to certain provisions in
the Sale and Servicing Agreement, can
occur after the aggregate Principal
Balance of the Receivables declines to
10% or less of the Original Pool
Balance,
S-12
<PAGE>
the Certificateholders will receive an
amount in respect of the Certificates
equal to the remaining Certificate
Balance together with accrued interest
at the Pass-Through Rate, and the
Certificates will be retired.
G. Mandatory Prepayment.............. The Certificates will be prepaid in
part, on a pro rata basis, on the
Payment Date on or immediately following
the last day of the Funding Period in
the event that any portion of the
Pre-Funded Amount remains on deposit in
the Pre-Funding Account after giving
effect to the purchase of all Subsequent
Receivables, including any such purchase
on such date (a "Mandatory Prepayment").
The aggregate principal amount of
Certificates to be prepaid will be an
amount equal to the Certificateholders'
pro rata share (based on the respective
current Principal Balance of each class
of Notes and the Certificate Balance) of
the Pre-Funded Amount (the "Certificate
Prepayment Amount").
A limited recourse mandatory prepayment
premium (the "Certificate Prepayment
Premium") will be payable by the Trust
to the Certificateholders if the
Pre-Funded Amount at the end of the
Funding Period exceeds $100,000. The
Certificate Prepayment Premium will
equal the excess, if any, discounted as
described below, of (i) the amount of
interest that would have accrued on the
Certificate Prepayment Amount at the
Pass-Through Rate during the period
commencing on and including the Payment
Date on which such Certificate
Prepayment Amount is required to be
distributed to Certificateholders to but
excluding [ ], over (ii) the amount of
interest that would have accrued on such
Certificate Prepayment Amount over the
same period at a per annum rate of
interest equal to the bond equivalent
yield to maturity on the Record Date
preceding such Payment Date on the [ ]%
United States Treasury Note due [ ].
Such excess shall be discounted to
present value to such Payment Date at
the yield described in clause (ii)
above. The Trust's obligation to pay the
Certificate Prepayment Premium shall be
limited to funds which are received from
the Seller under the Purchase Agreement
[or an Affiliate Purchase Agreement] as
liquidated damages for the failure to
deliver Subsequent Receivables. No other
assets of the Trust will be available
for the purpose of making such payment.
[The Credit Enhancement does not
guarantee payment of the Certificate
Prepayment Amount or the Certificate
Prepayment Premium.] In addition, the
ratings assigned to the Certificates by
the Rating Agencies do not address the
likelihood that the Certificate
Prepayment Amount or the Certificate
Prepayment Premium will be paid.]
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
[ ] 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;
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<PAGE>
(ii) in the event the Standby Servicer
or any other party becomes the successor
Servicer, to the Standby Servicer or
such other successor servicer,
reasonable transition expenses (up to a
maximum of [$ ] incurred in acting as
successor Servicer;
(iii) to the Indenture Trustee and the
Owner Trustee, pro rata, the Indenture
Trustee Fee (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
Notes - Payments of Interest";
(vi) to the Class B Noteholders, the
Class B Noteholders' Interest
Distributable Amount, to be distributed
as described under Description of the
Notes -- Payments of Interest";
(vii) to the Class A Noteholders, the
Class A Noteholders' Principal
Distributable Amount, to be distributed
as described under "Description of the
Notes - Payments of Principal";
(viii) to the [Credit Enhancer], any
amounts due to the [Credit Enhancer]
under the terms of the [Credit
Enhancement Agreement] (as defined
herein);
(ix) to the Class B Noteholders, the
Class B Noteholders' Principal
Distributable Amount, to be distributed
as described under Description of the
Notes -- Payments of Principal; and
(x) to the Certificateholders, or as
otherwise specified in the Trust
Documents, any remaining funds. See
"Description of the Trust Documents -
Distributions - Priority of Distribution
Amounts" in this Prospectus Supplement.]
Spread Account........................ [As part of the consideration for the
issuance of the [Credit Enhancement],
the Seller has agreed to cause the
Spread Account to be established with
the Collateral Agent for the benefit of
the [Credit Enhancer] and the Indenture
Trustee on behalf of the Noteholders.
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 [Credit Enhancer], any successor
Servicer and all principal and interest
payments due to the Noteholders 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
Noteholders, and the [Credit Enhancer].
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
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<PAGE>
accordance with certain portfolio
performance tests agreed upon by the
[Credit Enhancer] and the Seller as a
condition to the issuance of the [Credit
Enhancement] (such requisite amount, the
"Requisite Amount") will be released to
or at the direction of the Seller. See
"Description of the Trust Documents -
Distributions - The Spread Account" in
this Prospectus Supplement.]
[Describe any other Spread Account
arrangement.]
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.
Repurchases and Purchases of
Certain Receivables................... CPS has made certain representations and
warranties relating to the Receivables
to the Seller in the Purchase Agreement,
and the Seller has made such
representations and warranties for the
benefit of the Trust and the [Credit
Enhancer] in the Sale and Servicing
Agreement. The Indenture Trustee, as
acknowledged assignee of the repurchase
obligations of CPS under the Purchase
Agreement, will be entitled to require
CPS to repurchase any Receivable if such
Receivable is materially 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 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 "Description of the Trust
Documents - Servicing Procedures" in the
Prospectus.
Certain Legal Aspects
of the Receivables................... In connection with the sale of the
Receivables, security interests in the
Financed Vehicles securing the CPS
Receivables will be assigned by CPS to
the Seller pursuant to the Purchase
Agreement and by the Seller to the
Trustee pursuant to the Sale and
Servicing Agreement. Certain of the
Receivables (the "[Affiliated
Originator] Receivables"), representing
approximately [ %] of the aggregate
principal balance of the Receivables as
of the Cutoff Date, have been originated
by CPS's subsidiary, [Affiliated
Originator], and will be purchased by
the Seller from [Affiliated Originator]
pursuant to the [Affiliate Purchase
Agreement] and will be transferred by
the Seller to the Trust pursuant to the
Sale and Servicing Agreement.
[Additional Affiliated Originators may
be added.] The certificates of title to
the Financed Vehicles securing the
[Affiliated Originator] Receivables show
[Affiliated Originator] as the
lienholder. Due to the administrative
burden and expense, the certificates of
title to the Financed Vehicles securing
the
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[Affiliated Originator] Receivables will
not be amended or reissued to reflect
the assignment thereof to Seller, nor
will the certificates of title to any
Financed Vehicles (including those
securing the [Affiliated Originator]
Receivables) be amended or reissued to
reflect the assignment thereof to the
Trustee. In the absence of such an
amendment, the Trustee may not have a
perfected security interest in the
Financed Vehicles securing the
Receivables in some states.
The Seller will be obligated to purchase
any Receivable sold to the Trust as to
which there did not exist on the Closing
Date a perfected security interest in
the name of CPS or [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 [Affiliated Originator]
in the Financed Vehicle securing such
Receivable (which perfected security
interest has been assigned to, and is
for the benefit of, the Trustee) if, in
either case, such breach materially and
adversely affects the interest of the
Trust, the Indenture Trustee or the
[Credit Enhancer] 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 or [Affiliated
Originator] is perfected, the Trust will
have a prior claim over subsequent
purchasers of such Financed Vehicle and
holders of subsequently perfected
security interest. 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 or [Affiliated
Originator], and therefore the Trust,
could lose its prior perfected 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 "Risk Factors -
Certain Legal Aspects" in this
Prospectus Supplement and in the
Prospectus.
[Credit Enhancement].................. [Credit Enhancement to be described.]
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 [and each Subsequent
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 [Credit Enhancer] (the "Post Office
Box"). On each Business Day, [ ] 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 [ ]
(the "Lock-Box Bank") in the name of the
Indenture Trustee for the benefit of the
Noteholders and the [Credit Enhancer]
(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
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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...................... [Name and Address].
If a Servicer Termination Event occurs
and remains unremedied, (1) provided no
[Credit Enhancer] Default has occurred
and is continuing, then the [Credit
Enhancer] in its sole and absolute
discretion, or (2) if an [Credit
Enhancer] Default shall have occurred
and be continuing,] then the Indenture
Trustee shall, at the direction of the
Class A Note Majority) 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
[Credit Enhancer], [ ] (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 [ ], among CPS,
the 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 [ %] 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 product of one-twelfth
times [ %] (the "Servicing Fee Rate") of
the Pool Balance 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 product of one-twelfth
times [ %] of the Original Pool Balance.
As additional servicing compensation,
the Servicer will also be entitled to
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.
Book-Entry Registration............... 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.
Securities will be issued in definitive
form only under the limited
circumstances described herein. All
references herein to "holders" of the
Notes or Certificates or "Noteholders"
[or "Certificateholders"] shall reflect
the rights of beneficial owners of the
Notes (the "Note Owners") [or of the
Certificates (the "Certificate Owners")]
as they may indirectly exercise such
rights through DTC and participating
members thereof, except as otherwise
specified herein. See "Registration of
Notes [and the Certificates]" in this
Prospectus Supplement and "Certain
Information Regarding the Notes [and the
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<PAGE>
Certificates] - 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
will be characterized as debt, the Class
B Notes should be characterized as debt
(but if not characterized as debt, the
Class B Notes will be characterized as
interests in a partnership), 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 and each Certificateholder, by
the acceptance of a Certificate, will
agree to treat the Trust as a
partnership in which such
Certificateholder is a partner. 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.................. Subject to the conditions and
considerations discussed under "ERISA
Considerations" in this Prospectus
Supplement, the 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"). See "ERISA
Considerations" in this Prospectus
Supplement.
[The Certificates may not be acquired by
any employee benefit plan, individual
retirement account or Keogh Plan subject
to either Title I of ERISA or the
Internal Revenue Code of 1986, as
amended. See "ERISA Considerations" in
this Prospectus Supplement and in the
Prospectus.]
Legal Investment...................... [The Class A-1 Notes will be eligible
securities for purchase by money market
funds under Rule 2A-7 under the
Investment Company Act of 1940, as
amended.]
Rating of the
Notes and Certificates................ It is a condition of issuance that the
Class A Notes be rated [ ] [ ], on the
basis of the issuance of the [Credit
Enhancement] by the [Credit Enhancer]
and that the Class B Notes be rated at
least [ ] or higher by [ ] [and that the
Certificates be rated at least [ ] by [
]]. 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 [and the
Certificates]" in this Prospectus
Supplement.
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<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus Supplement and
the Prospectus, prospective Noteholders [and the Certificateholders] should
consider the following factors, as well as those matters discussed in "Risk
Factors" in the Prospectus, in evaluating an investment in the Notes [or the
Certificates]:
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 and through its
subsidiary, [Affiliated Originator]. 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 by the [Credit Enhancer] as
Servicer, 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
[Credit Enhancer] for successive 90-day periods. The [Credit Enhancer] 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
[Credit Enhancer] (the "Insurance Agreement") has occurred.
[Varying Characteristics of Subsequent Receivables
On the Closing Date, approximately $[ ] of Initial Receivables will be
transferred to the Trust by the Seller and the approximately $[ ] Pre-Funded
Amount will be deposited by the Trust in the Pre-Funding Account. If the
principal amount of eligible Receivables originated by CPS [or an Affiliated
Originator] during the Funding Period is less than the Pre-Funded Amount, the
Seller will have insufficient Receivables to sell to the Trust on the Subsequent
Transfer Dates, thereby resulting in a prepayment of principal to the
Noteholders [and the Certificateholders] as described in the following
paragraph. See "-Trust's Relationship to the Seller and CPS" below. In addition,
any conveyance of Subsequent Receivables is subject to the satisfaction, on or
before the related Subsequent Transfer Date, of the following conditions, among
others: (i) each such Subsequent Receivable satisfies the eligibility criteria
specified in the Purchase Agreement; (ii) [Credit Enhancer (so long as no
[Credit Enhancer] Default shall have occurred and be continuing) shall in its
sole and absolute discretion have approved the transfer of such Subsequent
Receivables to the Trust] (iii) as of the applicable Subsequent Cutoff Date, the
Receivables in the Trust, together with the Subsequent Receivables to be
conveyed by the Seller as of such Subsequent Cutoff Date, meet the following
criteria (computed based on the characteristics of the Initial Receivables on
the initial Cutoff Date and any Subsequent Receivables as of the related
Subsequent Cutoff Date): [specify conditions]; (iv) the Seller shall have
executed and delivered to the Trust (with a copy to the Indenture Trustee) a
written assignment (a "Subsequent Transfer Agreement") conveying such Subsequent
Receivables to the Trust (including a schedule identifying such Subsequent
Receivables); (v) the Seller shall have delivered certain
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<PAGE>
opinions of counsel to the Indenture Trustee, the Owner Trustee, [the Credit
Enhancer] and the Rating Agencies with respect to the validity of the conveyance
of all such Subsequent Receivables; and (vi) the Rating Agencies shall have
notified the Seller, the Owner Trustee, the Indenture Trustee and [the Credit
Enhancer] in writing that, following the addition of such Subsequent
Receivables, the Class A-1 Notes the Class A-2 Notes and the Class A-3 Notes
will each be rated [ ] by [ ] and the Class B Notes will be rated at least [ ]
by [ ] [and the Certificates will be rated [ ] by [ ]]. Such confirmation of the
ratings of the Notes [and the Certificates] may depend on factors other than the
characteristics of the Subsequent Receivables, including the delinquency,
repossession and net loss experience on the Receivables in the Receivables
Pool.]
[Distribution of Pre-Funded Amount - Effect on Yield and Maturity
To the extent that the Pre-Funded Amount has not been fully applied to
the purchase of Subsequent Receivables by the Trust during the Funding Period,
the Noteholders [and the Certificateholders] will receive, on the Payment Date
on or immediately following the last day of the Funding Period, a prepayment of
principal in an amount equal to their pro rata share (based on the current
principal balance of each class of Notes [and the Certificate Balance]) of any
remaining Pre-Funded Amount following the purchase of any Subsequent Receivables
on such Payment Date. It is anticipated that the principal amount of Subsequent
Receivables sold to the trust will not be exactly equal to the original
Pre-Funded Amount and, therefore, there will be at least a nominal amount of
principal prepaid to the Noteholders [and to the Certificateholders].
Each Subsequent Receivable must satisfy the eligibility criteria
specified in the Purchase Agreement. However, Subsequent Receivables may have
been originated using credit criteria different from the criteria applied with
respect to the Initial Receivables and may be of a different credit quality and
seasoning. See "The Receivables Pool" in this Prospectus Supplement.]
Trust Relationship to the Seller and CPS
Neither the Seller nor CPS is generally obligated to make any payments
in respect of the Notes[, the Certificates] or the Receivables. However, the
ability of the Seller to convey Subsequent Receivables on a Subsequent Transfer
Date is completely dependent upon the generation of additional receivables by
CPS [or an Affiliated Originator]. If, during the Funding Period, CPS [or an
Affiliated Originator] is unable to generate or does not transfer sufficient
Receivables to the Seller, the ability of the Seller to sell Subsequent
Receivables to the Trust would be adversely affected. There can be no assurance
that CPS [or an Affiliated Originator] will continue to generate receivables
that satisfy the criteria set forth in the Purchase Agreement at the same rate
as in recent months or that [Credit Enhancer], in its sole and absolute
discretion, will approve any such transfer of Subsequent Receivables. The
Trust's obligation to pay prepayment premiums on the Notes [and Certificates],
if required at the end of the Funding Period, is limited to amounts received
from the Seller for that purpose, and the Seller's obligation to pay such
amounts is limited to amounts received from the Seller for that purpose, and the
Seller's obligation to pay such amounts is limited to amounts received from CPS
as liquidated damages under the Purchase Agreement.
In connection with each sale of Receivables by CPS [or an Affiliated
Originator] 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, CPS is 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 [or the Certificates]. See
"Description of the Trust Documents - Sale and Assignment of the Receivables" in
the accompanying Prospectus.]
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 [Affiliated Originator] Receivables will
not be amended or reissued to reflect the assignment of such Receivables to the
Seller nor will the certificates of title to any of the Financed Vehicles
(including those
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<PAGE>
securing the [Affiliated Originator] 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 Agreement [or the Affiliate Purchase Agreement] to the related
Trust, CPS will be obligated to repurchase any Receivable sold to the Trust as
to which there did not exist on the Closing Date a perfected security interest
in the name of CPS or [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
[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 [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 [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" in this Prospectus Supplement and
"Certain Legal Aspects of the Receivables - Lack of Perfected Security Interests
in Financed Vehicles" in the Prospectus.
Geographic Concentration
As of the Cutoff Date, [ %] 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 [and the Certificateholders]. The Notes represent obligations solely
of, [and the Certificates represent interests solely in] 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 [Credit Enhancer]
pursuant to the [Credit Enhancement], as described herein. The Seller will take
such steps as are necessary for the [Credit Enhancer] to issue the [Credit
Enhancement] to the Indenture Trustee for the benefit of the Class A
Noteholders. Under the [Credit Enhancement], the [Credit Enhancer] will
unconditionally and irrevocably guarantee to the Class A Noteholders full and
complete payment of the scheduled payments on each Payment Date. In the event of
an [Credit Enhancer] Default, the [Class A] Noteholders [and Certificateholders]
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 Indenture Trustee 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 [or Certificateholders] on
a current basis.
[The Pre-Funding Account and the Interest Reserve Account] will only be
maintained until the Payment Date on or immediately following the last day of
the Funding Period. The Pre-Funded Amount on deposit in the Pre-Funding Account
will be used solely to purchase Subsequent Receivables and is not available to
cover losses on the Receivables. The Interest Reserve Account is designed to
cover obligations of the Trust relating to that portion of its assets not
invested in Receivables and is not designed to provide substantial protection
against losses on the Receivables. [Similarly, although the Credit Enhancement
will be available on each Payment Date to cover shortfalls in distributions of
the [Class A] Noteholders'
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Distributable Amount [and the Certificateholders' Distributable Amount] on such
Payment Date, if the Credit Enhancer defaults in its obligations under the
applicable [Credit Enhancement], the Trust will depend on current distribution
on the Receivables to make payments on the [Class A] Notes [and the
Certificates]. See "[Credit Enhancement]" and "[The Credit Enhancer]" herein.]
Distributions of interest and principal on the Notes [and the
Certificates] will be dependent primarily upon collections on the Receivables
and, with respect to the Class A Notes, amounts paid pursuant to the [Credit
Enhancement]. See "Description of the Notes" in this Prospectus Supplement.
Subordination of Class B Notes
[Distributions of interest and principal on the Class B Notes will be
subordinated in priority of payment to interest and principal due on the Class A
Notes. Consequently, the Class B Noteholders will not receive any distributions
with respect to a Collection Period until the full amount of interest payable on
the Class A Notes on such Payment Date has been deposited in the Distribution
Account. The Class B Noteholders will not receive any distributions of principal
with respect to a Collection Period until the full amount of interest and
principal payable on the Class A Notes on the related Payment Date has been
deposited in the Distribution Account.
If the Notes are accelerated following an Event of Default under the
Indenture, the Class A Notes must be paid in full prior to the distribution of
any amounts on the Class B Notes.]
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 [Affiliated Originator]'s
originations is limited, CPS expects that the delinquency and net credit loss
and repossession experience with respect to the Receivables originated by
[Affiliated Originator] will be similar to that of CPS's existing portfolio.
Ratings of the Notes [and the Certificates]
It is a condition to the issuance of the Notes that the Class A Notes
be rated [ ] by [ ] [on the basis of the issuance of the [Credit Enhancement] by
the [Credit Enhancer]] and it is a condition to the issuance of the Class B
Notes be rated at least [ ] by [ ] [and it is a condition to the issuance of the
Certificates that they be rated at least [ ] by [ ]]. 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 [Credit Enhancer].] Upon an
[Credit Enhancer] Default, the rating on the Notes may be lowered or withdrawn
entirely. [In the event that any rating initially assigned to the Notes were
subsequently lowered or withdrawn for any reason, including by reason of a
downgrading of the [Credit Enhancer], no person or entity will be obligated to
provide any additional credit enhancement with respect to any class of Notes [or
Certificates]. Any reduction or withdrawal of a rating may have an adverse
effect on the liquidity and market price of the Notes [or Certificates].
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<PAGE>
Final Scheduled Payment Dates of the Notes [and the Certificates]
The Final Scheduled Payment Date for each class of Notes [and
Certificates], which is specified at page S-2 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 [and Certificates] 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 applicable 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 [or the Certificates] 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 [or the Certificates] will be earlier than such
class's Final Scheduled Payment Date.
FORMATION OF THE TRUST
The Issuer, CPS Auto Receivables Trust 199[ ]-[ ], 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 of 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 [$ ] [and Certificates equal to such amount will be issued] to the Seller.
The equity of the Trust, together with the proceeds of the initial sale of the
Notes, will be used by the Trust to purchase the Receivables from the Seller.
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
[ ], the Owner Trustee under the Trust Agreement, is a Delaware banking
corporation and its principal offices are located at [ ]. 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.
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<PAGE>
The Indenture Trustee
[ ], a [ ], is the Indenture Trustee under the Indenture. The principal
offices of the Indenture Trustee are located at [ ]. The Indenture Trustee's
duties in connection with the Notes and the Certificates 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 in new and
used automobiles, light trucks, vans and minivans between dealers (the
"Dealers") or IFCs and retail purchasers (the "Obligors") and, with respect to
Rule of 78's Receivables, certain monies due thereunder after the Cutoff Date or
related Subsequent Cutoff Date, as applicable, and, with respect to Simple
Interest Receivables, certain monies received thereunder after the Cutoff Date
or related Subsequent Cutoff Date, as applicable. The Receivables were
originated by the Dealers or IFCs for assignment to CPS or [an Affiliated
Originator]. Pursuant to agreements between the Dealers and CPS ("Dealer
Agreements") or between the IFCs and [an Affiliated Originator], the Receivables
were purchased by CPS or [an Affiliated Originator] and, prior to the Closing
Date, evidenced financing made available by CPS or [an Affiliated Originator] 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 Indenture, as described below; see
"Description of the Trust Documents - Accounts" in this Prospectus Supplement;
(ii) the rights of the Seller under the Purchase 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. The Trust Assets also will include
the [Credit Enhancement] for the benefit of the [Class A] Noteholders [and the
Certificateholders].
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 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 December 31, 1996, CPS had purchased $729.1 million of
Contracts from Dealers and sold $713.0 million of Contracts to institutional
investors. CPS continues to service all of the Contracts it has purchased,
including those it has re-sold.
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<PAGE>
CPS has relationships and is party to Dealer Agreements with over 2,177
dealerships located in 41 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. Prior to the issuance of the Certificates, 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 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
excess servicing fees that represent collections on the Contracts in excess of
those required to pay principal and interest due to the investor and the base
servicing fee to CPS. 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. 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.
[Disclosure regarding Affiliated Originator, if any.]
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
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<PAGE>
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 13% 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 the
Company 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 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 down payment required on the purchase of a vehicle is
generally 10% to 15% of the purchase price. The down payment 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 down
payment required, with the proven manufacturer's rebate constituting the
remainder of the down payment. CPS believes that the relatively high down
payment 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' 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.
[Affiliated Originator] offers financing programs to IFCs which are
essentially identical to those offered by CPS. The IFCs may offer [Affiliated
Originator]'s financing programs to borrowers directly or
S-26
<PAGE>
indirectly through local Dealers. Upon submission of applications to [Affiliated
Originator], [Affiliated Originator] credit personnel, who have been trained by
CPS, use CPS's proprietary systems to evaluate the borrower and the proposed
Contract terms. [Affiliated Originator] 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 [or an affiliate]
purchasing a Contract from [Affiliated Originator], 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.
Servicing and Collections
CPS' 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 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' 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' 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.
Servicing and collection procedures on Contracts owned by [Affiliated
Originator] are performed by CPS at its headquarters in Irvine, California.
However, [Affiliated Originator] may solicit aid from the related IFC in
collecting past due accounts with respect to which repossession may be
considered.
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<PAGE>
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 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 [Affiliated Originator] in March 1996.
Although credit history on [Affiliated Originator]'s originations is limited,
CPS expects that the delinquency and net credit loss and repossession experience
with respect to the Receivables originated by [Affiliated Originator] 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' experience shown in the
following tables.
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<PAGE>
Consumer Portfolio Services, Inc.
Delinquency Experience
<TABLE>
<CAPTION>
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
(3)........................ 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%
==== ==== ==== ==== ==== ====
<FN>
- -----------
(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.
</FN>
</TABLE>
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<PAGE>
Consumer Portfolio Services, Inc.
Net Credit Loss/Repossession Experience
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1994 1995 1996
---- ---- ----
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 $20,327,632
Annualized Repossessions as a
Percentage of Average Number
of Loans Outstanding.................. 7.29% 9.70% 8.50%
Annualized Net Losses as a
Percentage of Average
Amount Outstanding.................... 2.85% 4.79% 5.14%
- -----------
(1) All amounts and percentages are based on the principal amount scheduled
to be paid on each Contract. The information in the table represents
all Contracts originated by CPS including sold Contracts which CPS
continues to service.
(2) Amount charged off includes the remaining principal balance, after the
application of the net proceeds from the liquidation of the vehicle,
excluding accrued and unpaid interest.
(3) Recoveries are reflected in the period in which they are realized and
may pertain to charge offs from prior periods.
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<PAGE>
THE RECEIVABLES POOL
The Receivables will include the Initial Receivables and the Subsequent
Receivables. No selection procedures believed by CPS or the Seller to be adverse
to Securityholders were or will be used in selecting the Receivables.
The Receivables Pool existing as of the Cutoff Date consists of the
Initial Receivables. The Initial Receivables have been, and the Subsequent
Receivables will be, selected from CPS's Portfolio by several criteria,
including the following: each Receivable was originated, based on the billing
address of the Obligors, in the United States, has an original term of not more
than 60 months, provides for level monthly payments which fully amortize the
amount financed over the original term (except for the last payment, which may
be different from the level payment for various reasons, including late or early
payments during the term of the Contract), has a remaining maturity of 60 months
or less as of the Cutoff Date or related Subsequent Cutoff Date, as applicable,
has an outstanding principal balance of not more than [$ ] as of the Cutoff
Date, is not more than 30 days past due as of the Cutoff Date or related
Subsequent Cutoff Date, as applicable, and has an APR of not less than [ %]. 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 Initial Receivable is not later than [ ].
In addition, the obligation of the Trust to purchase Subsequent
Receivables on a Subsequent Closing Date will be subject to the Receivables in
the Trust, taking account of the transfer of the Subsequent Receivables to be
conveyed on such Subsequent Closing Date, meeting the following criteria (based
on the characteristics of the Initial Receivables on the Cutoff Date and each
Subsequent Receivable on its related Subsequent Cutoff Date): [conditions to be
specified].
Except for the criteria described in the three paragraphs immediately
preceding, there will be no required characteristics of the Subsequent
Receivables. Therefore, following the transfer of Subsequent Receivables to the
Trust, the aggregate characteristics of the entire pool of Receivables,
including the data with respect to the composition of the Receivables set forth
in the tables below, may vary from those of the Initial Receivables.
As of the Cutoff Date, approximately [ %] of the aggregate principal
balance of the Initial Receivables, constituting [ %] of the number of
Contracts, represents financing of used vehicles; the remainder of the Initial
Receivables represent financing of new vehicles. Approximately [ %] of the
aggregate principal balance of the Initial Receivables were originated under the
Delta Program, approximately [ %] of the aggregate principal balance of the
Initial Receivables were originated under the Alpha Program, approximately [ %]
of the aggregate principal balance of the Initial Receivables were originated
under the First Time Buyer Program and approximately [ %] of the aggregate
principal balance of the Initial Receivables represent financing under the
Standard Program. As of the Cutoff Date, approximately [ %] of the aggregate
principal balance of the Initial Receivables were originated by unaffiliated
third parties and purchased by CPS in the ordinary course of its business. As of
the Cutoff Date, [ %] of the Principal Balance of the Initial Receivables were
[Affiliated Originator] 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 Initial Receivables as of the
Cutoff Date are set forth in the following tables.
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<PAGE>
Composition of the Initial Receivables as of the Cutoff Date
Weighted Aggregate Number of Average Weighted Weighted
Average APR Principal Receivables Principal Average Average
of Receivables Balance in Pool Balance Remaining Term Original Term
- -------------- ------- ------- ------- -------------- -------------
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<PAGE>
Geographic Distribution of the Initial Receivables as of the Cutoff Date
Percent of Percent of
Aggregate Aggregate Number of Number of
State(1) Principal Balance Principal Balance Receivables Receivables
- -------- ----------------- ----------------- ----------- -----------
all others(2)... % %
---------- ---------- ---------- ----------
TOTAL........... $ 100.00%(3) 100.00%(3)
========== ========== ========== ==========
- -----------
(1) Based on billing address of Obligor.
(2) No other state represents a percent 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.
Distribution of the Initial Receivables by APR as of the Cutoff Date
Percent of Percent of
APR Aggregate Aggregate Number of Number of
Range Principal Balance Principal Balance Receivables Receivables
- ----- ----------------- ----------------- ----------- -----------
all others(2)... % %
---------- ---------- ---------- ----------
TOTAL........... $ 100.00%(1) 100.00%(1)
========== ========== ========== ==========
- -----------
(1) Percentages may not add up to 100% because of rounding.
S-33
<PAGE>
Distribution of the Initial Receivables by Remaining Term to
Scheduled Maturity as of the Cutoff Date
Remaining Term Percent of Percent of
to Scheduled Aggregate Aggregate Number of Number of
Maturity Principal Balance Principal Balance Receivables Receivables
- -------- ----------------- ----------------- ----------- -----------
---------- ---------- ---------- ----------
TOTAL........... $ 100.00%(1) 100.00%(1)
========== ========== ========== ==========
- -----------
(1) Percentages may not add up to 100% because of rounding.
Distribution of the Initial Receivables by
Date of Origination as of the Cutoff Date
Percent of Percent of
Date of Aggregate Aggregate Number of Number of
Origination Principal Balance Principal Balance Receivables Receivables
- ----------- ----------------- ----------------- ----------- -----------
---------- ---------- ---------- ----------
TOTAL........... $ 100.00%(1) 100.00%(1)
========== ========== ========== ==========
- -----------
(1) Percentages may not add up to 100% because of rounding.
S-34
<PAGE>
Distribution of the Initial Receivables by Original Term to
Scheduled Maturity as of the Cutoff Date
Original Term Percent of Percent of
to Scheduled Aggregate Aggregate Number of Number of
Maturity Principal Balance Principal Balance Receivables Receivables
- -------- ----------------- ----------------- ----------- -----------
---------- ---------- ---------- ----------
TOTAL........... $ 100.00%(1) 100.00%(1)
========== ========== ========== ==========
- -----------
(1) Percentages may not add up to 100% because of rounding.
Distribution of the Initial Receivables by Model Year of Financed Vehicle
as of the Cutoff Date
Percent of Percent of
Aggregate Aggregate Number of Number of
Model Year Principal Balance Principal Balance Receivables Receivables
- ----------- ----------------- ----------------- ----------- -----------
---------- ---------- ---------- ----------
TOTAL........... $ 100.00%(1) 100.00%(1)
========== ========== ========== ==========
- -----------
(1) Percentages may not add up to 100% because of rounding.
S-35
<PAGE>
Distribution of the Initial Receivables by Original Principal Balance
as of the Cutoff Date
Range of
Original Percent of Percent of
Principal Aggregate Aggregate Number of Number of
Balances Principal Balance Principal Balance Receivables Receivables
- -------- ----------------- ----------------- ----------- -----------
---------- ---------- ---------- ----------
TOTAL........... $ 100.00%(1) 100.00%(1)
========== ========== ========== ==========
- -----------
(1) Percentages may not add up to 100% because of rounding.
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As of the Cutoff Date, approximately [ %] of the aggregate Principal
Balance of the Initial 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 [ %] of the aggregate Principal Balance of the
Initial 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, 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 generally will be less than the
remaining scheduled 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
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 - Sub-Prime
Obligors; Servicing" in this Prospectus Supplement. Any reinvestment risks
resulting from a faster or slower incidence of prepayment of Receivables will be
borne
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entirely by the Noteholders. See also "Description of the Notes - Optional
Redemption" in this Prospectus Supplement regarding the Servicer's option to
purchase the Receivables and redeem the Notes when the aggregate principal
balance of the Receivables is less than or equal to 10% 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 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.
An individual 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
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 "Class A-3 Pool Factor" is a seven-digit decimal
which the Servicer will compute each month indicating the principal balance of
the Class A-3 Notes as a fraction of the initial principal balance of the Class
A-3 Notes. The Class A-3 Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Class A- 3 Pool Factor will decline to reflect reductions in the
principal balance of the Class A-3 Notes. An individual Noteholder's share of
the principal balance of the Class A-3 Notes is the product of (i) the original
denomination of the Noteholder's Note and (ii) the Class A-3 Pool Factor. The
"Class B Pool Factor" is a seven-digit decimal which the Servicer will compute
each month indicating the principal balance of the Class B Notes as a fraction
of the initial principal balance of the Class B Notes. The Class B Pool Factor
will be 1.0000000 as of the Closing Date; thereafter, the Class B Pool Factor
will decline to reflect reductions in the principal balance of the Class B
Notes. An individual Noteholder's share of the principal balance of the Class B
Notes is the product of (i) the original denomination of the Noteholder's Note
and (ii) the Class B Pool Factor. [Other Classes to be added.] Pool Factors will
be made available on or about the eighth business day of each month.
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 Securityholders" in this Prospectus Supplement.
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of the
Notes will be applied to the purchase of the CPS Receivables from CPS and the
[Affiliated Originator] Receivables from [Affiliated Originator]. CPS will apply
the net proceeds received from the Seller to purchase new Contracts or to repay
debt incurred to purchase the Contracts.
THE SELLER AND CPS
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
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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. 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 2.12% per annum.
DESCRIPTION OF THE NOTES
General
The Notes will be issued pursuant to the terms of the Indenture, a form
of which has been filed as an exhibit to the Registration Statement.
The 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, interest at the Class A-1 Note Rate, on the outstanding
principal balance of the Class A-1 Notes as of the last day of the related
Collection Period, based on the number of days elapsed from and including the
preceding Payment Date (or, in the case of the initial Payment Date, from and
including the Closing Date) to but excluding the current Payment Date. 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 Class A-3 Notes (the "Class A-3 Noteholders") as of the related
Record Date will be entitled to receive, pro rata, thirty (30) days of interest
at the Class A-3 Interest Rate on the outstanding principal amount of the Class
A-3 Notes at the close of business on the last day of the related Collection
Period. [Additional classes, if any, to be added]. On each Payment Date, the
holders of record of the Class B Notes (the "Class B Noteholders") as of the
related Record Date will be entitled to receive, pro rata, thirty (30) days of
interest at the Class B Interest Rate on the outstanding principal amount of the
Class B Notes 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
through and including [ ] 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.
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Determination of LIBOR
Pursuant to the Indenture, the Indenture Trustee will determine LIBOR
for purposes of calculating the Interest Rate for the Class A-3 Notes for each
given Collection Period on the second business day prior to the commencement of
each Collection Period (each, a "LIBOR Determination Date"). For purposes of
calculating LIBOR, a business day means a Business Day and a day on which
banking institutions in the City of London, England are not required or
authorized by law to be closed.
"LIBOR" means, with respect to any Interest Period, the London
interbank offered rate for deposits in U.S. dollars having a maturity of one
month commencing on the related LIBOR Determination Date (the "Index Maturity")
which appears on Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR
Determination Date. If such rate does not appear on the Telerate Page 3750, the
rate for that day will be determined on the basis of the rates at which deposits
in U.S. dollars, having the Index Maturity and in a principal amount of not less
than U.S. $1,000,000, are offered at approximately 11:00 a.m., London time, on
such LIBOR Determination Date to prime banks in the London interbank market by
the Reference Banks. The Indenture Trustee will request the principal London
office of each of such Reference Banks to provide a quotation of its rate. If at
least two such quotations are provided, the rate for the day will be the
arithmetic mean, rounded upward, if necessary, to the nearest 1/100,000 of 1%
(0.0000001), with five one-millionths of a percentage point rounded upward, of
all such quotations. If fewer than two such quotations are provided, the rate
for that day will be the arithmetic mean, rounded upward, if necessary, to the
nearest 1/100,000 of 1% (0.0000001), with five one-millionths of a percentage
point rounded upward, of the offered per annum rates that one or more leading
banks in New York City, selected by the Indenture Trustee, are quoting as of
approximately 11:00 a.m., New York City time, on such LIBOR Determination Date
to leading European banks for United States dollar deposits for the Index
Maturity; provided that if the banks selected as aforesaid are not quoting as
mentioned in this sentence, LIBOR in effect for the applicable Interest Period
will be LIBOR in effect for the previous Interest Period.
"Telerate Page 3750" means the display page so designated on the Dow
Jones Telerate Service (or such other page as may replace that page on that
service for the purpose of displaying comparable rates or prices).
"Reference Banks" means four major banks in the London interbank market
selected by the Master Servicer.
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 product of (a) the Class A Noteholders' Percentage of
the Principal Distributable Amount and (b) any unpaid portion of the amount
described in clause (a) with respect to a prior Payment Date. Principal of the
Class B Notes will be payable on each Payment Date in an amount equal to the
Class B Noteholders' Principal Distributable Amount for the related Collection
Period. The "Class B Noteholders' Principal Distributable Amount" is equal to
the product of (a) the Class B Noteholders' Percentage of the Principal
Distributable Amount and (b) any unpaid portion of the amount described in
clause (a) 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 the
distributions described in clauses (i) through (iv) under "Description of the
Trust Documents -- Distributions" and (y) 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 Notes has been
reduced to zero, 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, then to the holders of
the Class A-3 Notes until the principal balance of the Class A-3 Notes has been
reduced to zero [additional classes of Notes may be added].
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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 the
distributions described in clauses (i) through (viii) under "Description of the
Trust Documents -- Distributions" and (y) the Class B Noteholders' Principal
Distributable Amount will be applied to pay principal of the Class B Notes until
the principal balance of the Class B Notes has been reduced to zero.
Mandatory Redemption
[Each class of Notes will be redeemed in part on the Payment Date on or
immediately following the last day of the Funding Period in the event that any
portion of the Pre-Funded Amount remains on deposit in the Pre-Funding Account
after giving effect to the purchase of all Subsequent Receivables, including any
such purchase on such date (a "Mandatory Redemption"). The aggregate principal
amount of each class of Notes to be redeemed will be an amount equal to such
class's pro rata share (based on the respective current Principal Balance of
each class of Notes) of the remaining Pre-Funded Amount on such date (such
class's "Note Prepayment Amount").]
[A Note Prepayment Premium will be payable by the Trust to the
Noteholders of each class if the Pre-Funded Amount at the end of the Funding
Period exceeds $100,000. The Note Prepayment Premium for a class of Notes will
equal the excess, if any, discounted as described below, of (i) the amount of
interest that would have accrued on such class's Note Prepayment Amount at the
Interest Rate borne by such class of Notes during the period commencing on and
including the Payment Date on which such class's Note Prepayment Amount is
required to be distributed to the Noteholders of such class to but excluding [
], in the case of the Class A-1 Notes, [ ], in the case of the Class A-2 Notes,
[ ], in the case of the Class A-3 Notes, [ ] in the case of the Class B Notes,
over (ii) the amount of interest that would have accrued on such class's Note
Prepayment Amount over the same period at a per annum rate of interest equal to
the bond equivalent yield to maturity on the Record Date preceding such Payment
Date on the United States Treasury Bill due [ ], in the case of the Class A-1
Notes, the [ ]% United States Treasury Note due [ ], in the case of the Class
A-2 Notes, the [ ]% United States Treasury Note due [ ], in the case of the
Class A-3 Notes, the [ ]% United States Treasury Note due [ ] and, in the case
of the Class B Notes, the [ ]% United States Treasury Note due [ ]. Such excess
shall be discounted to present value to such Payment Date at the applicable
yield described in clause (ii) above. The Trust's obligation to pay the Note
Prepayment Premiums shall be limited to funds which are received from the Seller
under the Sale and Servicing Agreement [or an Affiliate Purchase Agreement] as
liquidated damages for the failure to deliver Subsequent Receivables. No other
assets of the Trust will be available for the purpose of making such payment.
[The Credit Enhancement does not guarantee payment of the Note Prepayment
Premiums or the Note Prepayment Amounts, although the [Credit Enhancement] does
guarantee payment of the Class A Noteholders' Interest Distributable Amount and
the Class A Noteholders' Principal Distributable Amount on its respective Final
Scheduled Payment Date.] In addition, the ratings assigned to the Notes by the
Rating Agencies do not address the likelihood that the Note Prepayment Amounts
or the Note Prepayment Premiums will be paid.]
Optional Redemption
In order to avoid excessive administrative expense, the Servicer, or
its successor, is permitted at its option to purchase from the Trust (with the
consent of the [Credit Enhancer] if such purchase would result in a claim under
the [Credit Enhancement] or any amount owing to the [Credit Enhancer] or on the
Certificates would remain unpaid), as of the last day of any month as of which
the then outstanding Pool Balance is equal to 10% or less of the Original Pool
Balance, all remaining Receivables at a price equal to the aggregate of the
Purchase Amounts thereof as of such last day. Exercise of such right will effect
early retirement of the Notes. The Indenture Trustee will give written notice of
termination to each Noteholder 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
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remaining with the Indenture Trustee, after the Indenture Trustee has taken
certain measures to locate a Noteholder and such measures have failed, will be
distributed to The American Red Cross.
DESCRIPTION OF THE CERTIFICATES
General
The Certificates will be issued pursuant to the terms of the Trust
Agreement, a form of which has been filed as an exhibit to the Registration
Statement.
The Certificates initially will be represented by certificates
registered in the name of Cede as the nominee of 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
"Certificateholders" and to authorized denominations, when used with respect to
the Certificates, shall reflect the rights of beneficial owners of the
Certificates ("Certificate 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 and Certificates" in this
Prospectus Supplement.
On each Payment Date, the Certificateholders will, subject to the
availability of funds, be entitled to distributions (the "Certificateholders'
Interest Distributable Amount") in an amount equal to the amount of interest
accrued on the Certificate Balance at the Pass-Through Rate. Interest
distributable on a Payment Date will accrue from and including the preceding
Payment Date (or, in the case of the initial Payment Date, the Closing Date) to
but excluding the current Payment Date and will be calculated on the basis of a
360-day year consisting of twelve 30-day months. Interest distributions due on
any Payment Date but not distributed on such Payment Date will be due on the
next Payment Date, together with interest on such amount at the Pass-Through
Rate (to the extent permitted by law). See "Description of the Trust Documents -
Distributions" in this Prospectus Supplement.
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 product of (a) the Certificateholder's Percentage of the
Principal Distributable Amount and (b) any unpaid portion of the amount
described in clause (a) with respect to a prior Payment Date.
Mandatory Prepayment
[The Certificates will be prepaid in part, on a pro rata basis, on the
Payment Date on or immediately following the last day of the Funding Period in
the event that any portion of the Pre-Funded Amount remains on deposit in the
Pre-Funding Account after giving effect to the purchase of all Subsequent
Receivables, including any purchase on such date (a "Mandatory Prepayment"). The
aggregate principal amount of the Certificates to be prepaid will be an amount
equal to the Certificateholders' pro rata share (based on the respective current
Principal Balance of each class of Notes and the Certificate Balance) of the
remaining Pre-Funded Amount (the "Certificate Prepayment Amount").]
[The Certificate Prepayment Premium will be payable by the Trust to the
Certificateholders if the Pre-Funded Amount at the end of the funding Period
exceeds $100,000. The Certificate Prepayment Premium will equal the excess, if
any, discounted as described below, of (i) the amount of interest that would
have accrued on the certificate Prepayment Amount at the Pass-Through Rate
during the period commencing on and including the Payment Date on which such
Certificate Prepayment Amount is required to be distributed to
Certificateholders to but excluding [ ], over (ii) the amount of interest that
would have accrued on such Certificate Prepayment Amount over the same period at
a per annum rate of interest equal to the bond equivalent yield to maturity on
the Record Date preceding such Payment Date on the [ ]% United States Treasury
Note due [ ]. Such excess shall be discounted to present value to such Payment
Date at the yield described in clause (ii) above. The Trust's obligation to pay
the Certificate Prepayment Premium shall
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be limited to funds which are received from the Seller under the Sale and
Servicing Agreement [or an Affiliated Purchase Agreement] as liquidated damages
for the failure to deliver Subsequent Receivables. No other assets of the Trust
will be available for the purpose of making such payment. The [Credit
Enhancement] does not guarantee payment of the Certificate Prepayment Amount or
the Certificate Prepayment Premium, although the [Credit Enhancement] does
guarantee payment of the Certificateholders' Interest Distributable Amount and
the Certificateholders' Principal Distributable Amount on the Final Scheduled
Payment Date. In addition, the ratings assigned to the Certificates by the
Rating Agencies do not address the likelihood that the Certificate Prepayment
Amount or the Certificate Prepayment Premium will be paid.]
Optional Prepayment
If the Seller or the Servicer exercises its option to purchase the
Receivables when the aggregate Principal Balance declines to 10% or less of the
Original Pool Balance, Certificateholders will receive an amount in respect of
the Certificates equal to the outstanding Principal Balance of the Certificates
together with accrued interest at the Pass-Through Rate, which distribution will
effect early retirement of the Certificates. See "Description of the Trust
Documents - Termination" in the accompanying Prospectus.
Subordination of the Certificates
[No distribution of interest or principal will be made to
Certificateholders on any Payment Date until the Noteholders have been paid the
Noteholders' Interest Distributable Amount and the Noteholders' Principal
Distributable Amount for such Payment Date. This subordination is intended to
enhance the likelihood of timely receipt by the Noteholders of the full amount
of interest and principal distributable to them on each Payment Date and to
afford the Noteholders limited protection against losses in respect of the
Receivables.]
REGISTRATION OF NOTES AND CERTIFICATES
[The [Class A] Notes [and the Certificates] 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 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 "Certain Information Regarding
the Notes - Book-Entry Registration" in the Prospectus.]
DESCRIPTION OF THE TRUST DOCUMENTS
The following summary describes certain terms of the [Affiliate
Purchase Agreement], the Purchase 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. The 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.
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Sale and Assignment of Receivables; Subsequent Receivables
On or prior to the Closing Date, the Seller will purchase from
[Affiliated Originator] pursuant to an agreement (the "[Affiliate Purchase
Agreement]"), without recourse, except as provided in the [Affiliate Purchase
Agreement], [Affiliated Originator's] entire interest in the [Affiliated
Originator] Receivables, together with [Affiliated Originator]'s security
interests in the related Financed Vehicles. On or prior to the Closing Date, CPS
will, pursuant to the Purchase Agreement, 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 Securities, 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 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 Purchase Agreement, CPS will represent and warrant to the
Seller, among other things, that (i) the information provided in the Purchase
Agreement with respect to the Receivables (including, without limitation, the
[Affiliated Originator] 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 CPS's normal
requirements; (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 or IFCs 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 or [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 repurchase obligation will constitute the sole remedy
available to the Noteholders, the [Credit Enhancer], the Owner Trustee or the
Indenture Trustee for any such uncured breach.
[During the Funding Period, on each Subsequent Transfer Date, subject
to the conditions described below, the Seller will sell and assign to the Trust,
without recourse, the Seller's entire interest in the Subsequent Receivables
designated by the Seller as of the related Subsequent Cutoff Date and identified
in a schedule attached to a Subsequent Transfer Agreement relating to such
Subsequent Receivables executed on such date by the Seller. Upon the conveyance
of Subsequent Receivables to the Trust on a Subsequent Transfer Date, (i) the
aggregate Principal Balance will increase in an amount equal to the aggregate
principal balances of the Subsequent Receivables, (ii) the Class A-1 Holdback
Amount (described under "--Accounts" below), if any, for such Subsequent
Transfer Date will be withdrawn from the Pre-Funding Account and deposited in
the Class A-1 Holdback Subaccount (described under "--Accounts" below), and
(iii) an amount equal to the aggregate principal balances of such Subsequent
Receivables less the Class A-1 Holdback Amount will be paid to or upon the order
of the Seller.]
Any conveyance of Subsequent Receivables is subject to the
satisfaction, on or before the related Subsequent Transfer Date, of the
following conditions, among others: (i) each such Subsequent Receivable
satisfies the eligibility criteria specified in the Purchase Agreement; (ii)
[Credit Enhancer] (so long as no [Credit Enhancer] Default shall have occurred
and be continuing) shall in its absolute and sole discretion have approved the
transfer of such Subsequent Receivables to the Trust; (iii) as of each
applicable Subsequent Cutoff Date, the Receivables in the Trust together with
the Subsequent Receivables to be conveyed by the Seller as of such Subsequent
Cutoff Date, meet the following criteria (computed based on the characteristics
of the Initial Receivables on the Initial Cutoff Date and any Subsequent
Receivables on the related Subsequent Cutoff Date: [Conditions to be specified];
(iv) the Seller shall have executed and delivered to the
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Trust (with a copy to the Indenture Trustee) a Subsequent Transfer Agreement
conveying such Subsequent Receivables to the Trust (including a schedule
identifying such Subsequent Receivables); [(v) the Class A-1 Holdback Amount, if
any, shall have been deposited in the Class A-1 Holdback Subaccount (described
under "--Accounts" below);] (vi) the Seller shall have delivered certain
opinions of counsel to the Indenture Trustee, the Owner Trustee, [Credit
Enhancer] and the Rating Agencies with respect to the validity of the conveyance
of such Subsequent Receivables; and (vii) the Rating Agencies shall have each
notified the Seller, the Owner Trustee, the Indenture Trustee and [Credit
Enhancer] in writing that, following the addition of all such Subsequent
Receivables, the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes
will be rated [ ] by [ ] and the Class B Notes will be rated at least [ ] by [ ]
[and the Certificates will be rated [ ] by [ ]].
Subsequent Receivables may have been originated by CPS at a later date
using credit criteria different from the criteria applied with respect to the
Initial Receivables. See "Risk Factors - Varying Characteristics of Subsequent
Receivables" and "The Receivables Pool" herein.]
On or prior to the Closing Date [or each Subsequent 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 and [Affiliated Originator]'s accounting records and
computer systems will reflect each 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 [
] in the name of the Indenture Trustee for the benefit of the Noteholders[, the
Certificateholders] and the [Credit Enhancer], 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 [Credit Enhancer],
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"). Upon 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
on behalf of the Noteholders[, the Certificateholders] and the [Credit
Enhancer], from which all distributions with respect to the Securities and
payments to the [Credit Enhancer] will be made (the "Distribution Account").
[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. Monies on deposit in the Pre-Funding Account will not be available
to cover losses on or in respect of the Receivables. On the Closing Date, the
Pre-Funding Account will be funded with the initial Pre-Funded Amount from the
sale proceeds of the Notes [and the Certificates]. The Pre-Funded Amount will
initially equal $[ ] and, during the Funding Period, will be reduced by the
[Class A Percentage] of the Principal Balances of all Subsequent Receivables
purchased by the Trust from time to time in accordance with the provisions of
the Sale and Servicing Agreement.]
The Seller expects that the Pre-Funded Amount will be reduced to less
than $100,000 by the [ ] Payment Date, although no assurances can be given in
this regard. If any Pre-Funded Amount remains at the end of the Funding Period,
such amount will be distributed as a partial prepayment to the Noteholders [and
the Certificateholders] as described above under "-- Mandatory Prepayment" and
"--Mandatory Redemption".]
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[The Seller will also establish and maintain an account (the "Interest
Reserve Account") in the name of the Indenture Trustee on behalf of the
Noteholders [and the 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 each of the [ ] and [ ]
Payment Dates, 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 in accordance with the priorities set forth under the heading
"Description of the Trust Documents Distributions - Priority of Distribution
Amounts".]
[The "Requisite Reserve Amount" as of any date during the Funding
Period will equal the product of (i) the difference between (A) the weighted
average of the Interest Rates for each class of Notes [and the Pass-Through
Rate] (based on the outstanding principal amount of each class of Notes [and the
Certificate Balance] on such date) and (B) the assumed yield (2.5% per annum) of
investments of funds in the Pre-Funding Account, divided by 360, (ii) the
Pre-Funded Amount on such date and (iii) the number of days remaining until the
Payment Date in [ ].]
[In addition, on any Subsequent Transfer Date a "Class A-1 Holdback
Amount" (as defined in the Sale and Servicing Agreement, and determined by the
amount, if any, by which the actual Principal Balance of Subsequent Receivables
transferred to the Trust on or prior to such date is less than the amount set
forth in a schedule of assumed amounts), if any, will be withheld from funds in
the Pre-Funding Account that would otherwise be paid to the Seller on such
Subsequent Transfer Date and will be deposited into a subaccount (the "Class A-1
Holdback Subaccount") of the Spread Account. The Class A-1 Holdback Subaccount
is intended to ensure that, notwithstanding a slower than expected delivery of
Subsequent Receivables by the Seller during the Funding Period, sufficient funds
will be available to retire the Class A-1 Notes on the Class A-1 Final Scheduled
Payment Date. Any funds in the Class A-1 Holdback Subaccount (less the amount,
if any, required to be applied to reduce the principal balance of the Class A-1
Notes to zero on the Class A-1 Final Scheduled Payment Date) will be released to
CPS on the Payment Date on which the Class A-1 Notes are paid in full, and funds
in the Class A-1 Holdback Subaccount will not be available for any other
purpose.]
[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 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; 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 Pool Balance as of the Cutoff 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 [ %] 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
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 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,
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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
[Credit Enhancer] 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 Class B Noteholders'
Interest Distributable Amount, the Class B Noteholders' Principal Distributable
Amount [and the Certificateholders' Distribution 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.
Determination of Total Distribution Amount. The "Total Distribution
Amount" for a Payment Date (being the funds available for distribution to the
Securityholders with respect to such Payment Date in accordance with the
priorities described below) 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) any amount withdrawn from the Interest Reserve Account for
deposit in the Collection Account with respect to such Payment Date; and (v)
earnings on investments of funds in the Collection Account and the Pre-Funding
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.
"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 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
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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 Class A 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) the principal portion of all Scheduled
Receivable Payments received during the preceding Collection Period on Rule of
78's Receivables and all payments of principal received on Simple Interest
Receivables during the preceding Collection Period; (b) the principal portion of
all prepayments in full received during the preceding Collection Period
(including prepayments in full resulting from collections with respect to a
Receivable received during the preceding Collection Period (without duplication
of amounts included in (a) above and (d) below)); (c) 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 [Credit Enhancer] 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) and (b) above); (d) 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) and (b) above); and (e) 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 (d)
above) (the amounts set forth in (a) through (e), the "Principal Distributable
Amount"); (ii) the "Class A Noteholders' Interest Distributable Amount",
consisting of thirty (30) days' interest at the applicable Interest Rate on the
principal balance of each Class of Class A Notes as of the close of business on
the last day of the related Collection Period; provided, however, that on the
first Payment Date, the Class A Noteholders' Interest Distributable Amount will
include interest from and including the Closing Date through and including [ ]
14, 199[ ]; (iii) the Class A Noteholders' Principal Carryover Shortfall; (iv)
the Class A Noteholders' Interest Carryover Shortfall; (v) the "Class B
Noteholders' Principal Distributable Amount", consisting of the Class B
Noteholders' Percentage of the Principal Distributable Amount; (vi) the "Class B
Noteholders' Interest Distributable Amount", consisting of thirty (30) days'
interest at the Class B Interest Rate on the principal balance of the Class B
Notes as of the close of business on the last day of the related Collection
Period; provided, however, that on the first Payment Date, the Class B
Noteholders' Interest Distributable Amount will include interest from and
including the Closing Date through and including [ ] 14, 199[ ]; (vii) the Class
B Noteholders' Principal Carryover Shortfall; (viii) the Class B Noteholders'
Interest Carryover Shortfall;
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 Class B Noteholders' Principal Distributable Amount will
equal the then outstanding balance of the Class B Notes.
The "Class A Noteholders' Percentage" will (a) on any Payment Date
prior to the Payment Date on which the principal amount of the Class A-3 Notes
is reduced to zero, be [ %], (b) on the Payment Date on which the principal
amount of the Class A-3 Notes is reduced to zero, be the percentage equivalent
of a fraction, the numerator of which is the principal amount of the Class A-3
Notes immediately prior to such
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Payment Date, and the denominator of which is the Principal Distributable Amount
and (c) on any other Payment Date, be 0%.
The "Class B Noteholders' Percentage" will (a) on any Payment Date
prior to the Payment Date on which the principal amount of the Class B Notes is
reduced to zero, be [ %], (b) on the Payment Date on which the principal amount
of the Class B Notes is reduced to zero, be the percentage equivalent of a
fraction, the numerator of which is the principal amount of the Class B Notes
immediately prior to such Payment Date, and the denominator of which is the
Principal Distributable Amount and (c) on any other Payment Date, be 0%.
[On each Payment Date on or after the Notes have been paid in full, the
Certificateholders will be entitled to receive the "Certificateholders'
Distributable Amount". 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" in an amount equal to the
Certificateholders' Percentage of the Principal Distributable Amount for such
Payment Date; (ii) the "Certificateholders' Interest Distributable Amount",
consisting of 30 days interest at the Pass-Through Rate on the Certificate
Balance as of the last day of the related Collections Period; provided, however
that on the first Payment Date, the Certificateholders' Interest Distributable
Amount will include interest from and including the Closing Date through and
including [
] 14, 199[]; (iii) the Certificateholders' Principal Carryover Shortfall; plus
(iv) the Certificateholders' Interest Carryover Shortfall. Distributions to the
Certificateholders will be paid to the extent of the portion of the Total
Distribution Amount remaining after payment of items (i) through (vii) under
"-Priority of Distribution Amounts". See "- Distributions" herein.
On the Final Scheduled Payment Date, the Certificateholders' Principal
Distributable Amount will equal the then outstanding Certificate Balance.
The "Certificateholders' Percentage" will be [ %].]
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:
[specify priorities]
For purposes hereof, the following terms shall have the following
meanings:
"Class A Noteholders' Interest Carryover Shortfall" means, as of the
close of any Payment Date, the excess of the Class A Noteholders' Interest
Distributable Amount for such Payment Date, plus any outstanding Class A
Noteholders' Interest Carryover Shortfall from the preceding Payment Date, plus
interest on such outstanding Class A Noteholders' Interest Carryover Shortfall,
to the extent permitted by law, at the applicable Interest Rate from such
preceding Payment Date through the current Payment Date, over the amount of
interest distributed to the Class A Noteholders on such current Payment Date.
"Class A Noteholders' Principal Carryover Shortfall" means, as of the
close of any Payment Date, the excess of the Class A Noteholders' Principal
Distributable Amount plus any outstanding Class A Noteholders' Principal
Carryover Shortfall from the preceding Payment Date over the amount of principal
distributed to the Class A Noteholders on such current Payment Date.
"Class B Noteholders' Interest Carryover Shortfall" means, as of the
close of any Payment Date, the excess of the Class B Noteholders' Interest
Distributable Amount for such Payment Date, plus any outstanding Class B
Noteholders' Interest Carryover Shortfall from the preceding Payment Date, plus
interest on such outstanding Class B Noteholders' Interest Carryover Shortfall,
to the extent permitted by law, at the
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applicable Interest Rate from such preceding Payment Date through the current
Payment Date, over the amount of interest distributed to the Class B Noteholders
on such current Payment Date.
"Class B Noteholders' Principal Carryover Shortfall" means, as of the
close of any Payment Date, the excess of the Class B Noteholders' Principal
Distributable Amount plus any outstanding Class B Noteholders' Principal
Carryover Shortfall from the preceding Payment Date over the amount of principal
distributed to the Class B Noteholders on such current Payment Date.
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 and the Class B Noteholders' Distributable Amount.
[The Spread Account. As part of the consideration for the issuance of
the [Credit Enhancement], the Seller has agreed to cause to be established with
[ ] (in such capacity, the "Collateral Agent") an account (the "Spread Account")
for the benefit of the [Credit Enhancer] and the Indenture Trustee on behalf of
the Noteholders. 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 and the Collateral Agent
and all principal and interest payments due to the Noteholders on such Payment
Date, will be deposited in the Spread Account and held by the Collateral Agent
for the benefit of the [Credit Enhancer] and the Indenture Trustee on behalf of
the 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 (vii) 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 (vii).
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 the Certificateholders on
such Payment Date.
So long as a [Credit Enhancer] Default shall not have occurred and be
continuing, the [Credit Enhancer] will be entitled to exercise in its sole
discretion all rights under the master spread account agreement among the
Seller, the [Credit Enhancer], 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 [Credit
Enhancer] (so long as a [Credit Enhancer] 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). Because the Requisite Amount or the
existence of the Spread Account may be modified or terminated by the [Credit
Enhancer] as described above, there is no assurance that funds will be available
in the Spread Account to pay principal of or interest on the Notes in the event
that collections on the Receivables and other amounts available under the
Indenture are insufficient to make any distribution of principal of or interest
on the Notes on any Payment Date.
Events of Default
[Unless a [Credit Enhancer] Default shall have occurred and be
continuing, "Events of Default" under the Indenture will consist of those events
defined in the Insurance Agreement as [Credit Enhancement] Cross Defaults, and
will constitute an Event of Default under the Indenture only if the [Credit
Enhancer] 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. A "[Credit Enhancement] Cross Default"
may result from: (i) a demand for payment under the [Credit Enhancement]; (ii)
an Insolvency Event (as defined herein); (iii) the Trust becomes taxable as an
association (or publicly traded partnership) taxable as
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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 [Credit Enhancer] is less than the sum of the amounts described in clauses
(i) through (vii) 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 [Credit Enhancer].]
Upon the occurrence of an Event of Default, and so long as a [Credit
Enhancer] Default shall not have occurred and be continuing, the [Credit
Enhancer] 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 as the
[Credit Enhancer], in its sole discretion, shall elect, and to distribute the
proceeds of such liquidation in accordance with the terms of the Indenture. The
[Credit Enhancer] 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, unless such Event of Default arose from a claim being made on the [Credit
Enhancement] or from certain events of bankruptcy, insolvency, receivership or
liquidation of the Trust. Following the occurrence of any Event of Default, the
Indenture Trustee will continue to submit claims as necessary under the [Credit
Enhancement] for any shortfalls in the scheduled payments on the Class A Notes,
except that the [Credit Enhancer], in its sole discretion, may elect to pay all
or any portion of the outstanding amount of the Class A Notes, plus accrued
interest thereon. See ["Credit Enhancement"] herein.
Statements to Securityholders
On each Payment Date, the Indenture Trustee will include with each
distribution to each Securityholder of record as of the close of business on the
applicable Record Date and each Rating Agency that is currently rating the Notes
[or the Certificates] 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
the Notes; (ii) the amount of the distribution allocable to interest on the
Notes; (iii) the Pool Balance and the Pool Factor for each Class of Notes [or
the Certificates] 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
[or 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
Noteholders' Interest Carryover Shortfall, if applicable, the Class A
Noteholders' Principal Carryover Shortfall, if applicable, the Class B
Noteholders' Interest Carryover Shortfall, if applicable, and the Class B
Noteholders' 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 [Credit Enhancement] for such
Payment Date; (viii) the amount distributable to the [Credit Enhancer] 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 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; (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; and (xiii) the aggregate Principal Balance, weighted average APR and
weighted average remaining term to maturity of all Subsequent Receivables
transferred to the Trust during the relabeled 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.
S-51
<PAGE>
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 Securityholder and received any payment on
such holder's Securities, a statement (prepared by the Servicer) containing the
sum of the amounts described in (i), (ii) and (v) above for the purposes of such
Securityholder's preparation of federal income tax returns. See "Description of
the Notes [and Certificates] - Statements to Securityholders" and "Federal
Income Tax Consequences" in the Prospectus.
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 [Credit Enhancer] on or before July 31 of each year, beginning July 31,
[ ], 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 July 31, [ ]).
The Sale and Servicing Agreement will also provide for delivery to the
Indenture Trustee and the [Credit Enhancer], on or before July 31 of each year,
commencing July 31, [ ] 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 certificate, the period from
the Cutoff Date to July 31, [ ]). The Servicer has agreed to give the Indenture
Trustee and the [Credit Enhancer] notice of any Events of Default under the Sale
and Servicing Agreement.
Copies of such statements and certificates may be obtained by
Securityholders 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 [Credit Enhancer]. 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.
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.
S-52
<PAGE>
The Servicer is retained for an initial term commencing on the Closing
Date and ending on [ ], which term may be extended in ninety day increments by
the [Credit Enhancer]. In the absence of an Event of Default under the Sale and
Servicing Agreement, the [Credit Enhancer] has agreed to extend such term. See
"Description of the Notes [and the Certificates] - 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
any failure to deliver to the Indenture Trustee the annual accountants' report,
the annual statement as to compliance or the statement to the Securityholders,
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 which failure materially and
adversely affects the rights of the related Securityholders (without regard to
the availability of funds from the [Credit Enhancement]) 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 [Credit Enhancer] 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 [Credit Enhancer] by the holders of Class A
Notes evidencing not less than 25% of the outstanding principal balance of the
Class A Notes; or, after the Class A Notes have been paid in full, the holders
of Class B Notes evidencing not less than 25% of the outstanding principal
balance of the Class B Notes, (iii) certain events of insolvency, readjustment
of debt, marshaling of assets and liabilities, or similar proceedings 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 [Credit Enhancement]; or (v) the occurrence of an Event
of Default under the Insurance Agreement.
Rights Upon Servicer Termination Event
As long as a Servicer Termination Event remains unremedied, (x)
provided no [Credit Enhancer] Default shall have occurred and be continuing, the
[Credit Enhancer] in its sole and absolute discretion or (y) if an [Credit
Enhancer] Default shall have occurred and be continuing, then the Indenture
Trustee or the holders of Class A Notes evidencing not less than 25% of the
outstanding principal balance of the Class A Notes or, after the Class A Notes
have been paid in full, the holders of Class B Notes evidencing not less than
25% of the outstanding principal balance of the Class B 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 [Credit Enhancer] (or, if an [Credit
Enhancer] Default shall have occurred and be continuing, by the Indenture
Trustee, the Class A Noteholders or the Class B 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 Securityholder) based on any alleged action or inaction of the predecessor
Servicer as Servicer.
["Credit Enhancer Default" shall mean any one of the following events
shall have occurred and be continuing: (i) the [Credit Enhancer] fails to make a
payment required under the [Credit Enhancement] in accordance with its terms;
(ii) the [Credit Enhancer] (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
S-53
<PAGE>
and nonappealable order, judgment or decree (A) appointing a custodian, trustee,
agent or receiver for the [Credit Enhancer] 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 [Credit Enhancer] (or the taking of possession
of all or any material portion of the property of the [Credit Enhancer]).]
Waiver Of Past Defaults
With respect to the Trust, subject to the approval of the [Credit
Enhancer], 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 Class B Notes
evidencing more than 50% of the outstanding principal balance of the Class B
Notes (the "Class B Note Majority") may, on behalf of all Noteholders 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.
CREDIT ENHANCEMENT
[Description of Credit Enhancement]
THE CREDIT ENHANCER
[Description of Credit Enhancer]
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
In all states in which the Receivables have been originated, a security
interest in automobiles, light trucks, vans and minivans is perfected by
notation of the secured party's lien on the vehicles's certificate of title and
the filing of the certificate of title with the state motor vehicle department.
The Contracts representing the [Affiliated Originator] Receivables name
[Affiliated Originator] as obligee and as the secured party. [Affiliated
Originator] also takes all actions necessary under the laws of the state in
which the financed vehicle is located to perfect [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 and filed
with the state motor vehicle department.
Pursuant to the [Affiliated Purchase Agreement], [Affiliated
Originator] will sell and assign to the Seller its interests in the Financed
Vehicles securing the [Affiliated Originator] Receivables, and pursuant to the
Trust Agreement, the Seller will assign its interests in such Financed Vehicles
to the Trustee. However, because of the administrative burden and expense, the
certificates of title for the Financed Vehicles securing the [Affiliated
Originator] 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 (including those securing the [Affiliated Originator]
Receivables) be amended or reissued to identify the Trust as the new secured
party on the certificate of title relating to the Financed Vehicles. The
Indenture provides that the Indenture Trustee, however, will hold any
certificates of title relating to the Financed Vehicles in its possession
pursuant to the Indenture.
In most states, an assignment such as that under the Sale and Servicing
Agreement and such as that under the Purchase Agreement and [Affiliated Purchase
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. By not identifying the Seller
as the secured party on the certificates of title for the Financed Vehicles
securing the [Affiliated Originator] Receivables, the security interest of the
Seller (and, therefore, the security interest of the Trust) could be defeated
through fraud or negligence on the part of [Affiliated Originator]. Similarly,
by not identifying the Trust as the secured party
S-54
<PAGE>
on the certificate of title, the security interest of the Trust in the Financed
Vehicle could be defeated through fraud or negligence on the part of the
Servicer. In the absence of fraud or forgery by the vehicle owner, the Servicer
or (with respect to [Affiliated Originator] Receivables) [the Affiliated
Originator], or administrative error by state or local agencies, the notation of
[Affiliated Originator's] lien on the certificates of title for the Financed
Vehicles financed under the [Affiliated Originator] Receivables, and the
notation of CPS's lien on the certificates of title for all other Financed
Vehicles, will be sufficient to protect the Trust against the rights of
subsequent purchasers of a vehicle or subsequent lenders who take a security
interest in a vehicle securing a Receivable. If there are any Financed Vehicles
as to which CPS or [Affiliated Originator] failed to obtain and assign to the
Seller or the Trust a perfected security interest, the security interest of CPS
or [Affiliated Originator], as applicable, would be subordinate to, among
others, subsequent purchasers of such Financed Vehicles and holders of perfected
security interests therein. Such a failure, however, would constitute a breach
of the warranties of CPS under the Purchase Agreement and would create an
obligation of CPS to repurchase the related Receivables unless the breach is
cured. The Seller will assign its rights pursuant to the Sale and Servicing
Agreement to the Trust. See "Description of the Trust Documents - Sale and
Assignment of Receivables; Subsequent Receivables" in this Prospectus
Supplement.
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, the Class B Notes should be
characterized as debt (but if not characterized as debt, the Class B Notes will
be characterized as interests in a partnership), 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 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-2 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 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 Notes, including the reasonable expectation of purchasers of
Notes that the 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.
S-55
<PAGE>
However, without regard to whether the Notes are treated as an equity
interest for purposes of the Regulation, the acquisition or holding of 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 or the Owner 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 Notes by a Benefit Plan depending on
the type and circumstances of the plan fiduciary making the decision to acquire
such Notes. Included among these exemptions are: Prohibited Transaction Class
Exemption ("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 Note, each purchaser will be deemed
to represent that either (i) it is not acquiring the Notes with the assets of a
Benefit Plan; or (ii) the acquisition of the Notes will not give rise to a
nonexempt prohibited transaction under Section 406(a) of ERISA or Section 4975
of the Code.
[The Certificates may not be acquired by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
I of ERISA, (b) a plan described in Section 4975(e)(1) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity. By its acceptance of a Certificate, each
Certificateholder will be deemed to have represented and warranted that it is
not subject to the foregoing limitation. For additional information regarding
treatment of the Certificates under ERISA, see "ERISA Considerations" in the
accompanying Prospectus.
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 Notes should consult its
legal advisors regarding whether the assets of the related 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 [ ], (the "Underwriting Agreement") among CPS, the
Seller, and [ ] (the "Underwriter"), the Seller has agreed to cause the Seller
to sell to the Underwriter, and the Underwriter has agreed to purchase, Notes
[and Certificates] in the following respective amounts:
Underwriter Principal Amount
----------------
Total.................................................... ================
The Underwriting Agreement provides that the obligations of the
Underwriter are subject to certain conditions precedent and that the Underwriter
will purchase all the Notes offered hereby if any of such Notes are purchased.
CPS and the Seller have been advised by the Underwriter that the
Underwriter proposes to offer the Securities from time to time for sale in
negotiated transactions or otherwise, at varying prices to be determined at the
time of sale. The Underwriter may effect such transactions by selling the
Securities to or through dealers and such dealers may receive compensation in
the form of underwriting discounts,
S-56
<PAGE>
concessions or commissions from the Underwriter and any purchasers of Securities
for whom they may act as agents. The Underwriter and any dealers that
participate with the Underwriter in the distribution of the Securities may be
deemed to be underwriters, and any discounts or commissions received by them and
any profit on the resale of Securities by them may be deemed to be underwriting
discounts or commissions, under the Securities Act.
The Securities are a new issue of securities with no established
trading market. The Underwriter has advised CPS and the Seller that it intends
to act as a market maker for the Securities. However, the Underwriter is 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 Securities.
CPS and the Seller have agreed to indemnify the Underwriter against
certain liabilities, including civil liabilities under the Securities Act, or
contribute to payments which the Underwriter may be required to make in respect
thereof.
LEGAL OPINIONS
Certain legal matters relating to the Securities will be passed upon
for CPS and the Underwriter by Mayer, Brown & Platt, New York, New York.
S-57
<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.
"Actuarial Receivables"....................................................S-37
"Alpha Program" .........................................................S-25
"Benefit Plan" ...................................................S-18, S-55
"Business Day" ..........................................................S-7
"Cede" ...................................................S-17, S-43
"Certificate Owners".................................................S-17, S-42
"Certificate Prepayment Amount"......................................S-13, S-42
"Certificate Prepayment Premium"...........................................S-13
"Certificateholders' Distributable Amount".................................S-49
"Certificateholders' Interest Distributable Amount"........................S-42
"Certificateholders' Percentage"...........................................S-49
"Certificateholders' Principal Distributable Amount".................S-42, S-49
"Certificates" .....................................................S-1, S-4
"Class A Noteholders' Interest Distributable Amount".......................S-48
"Class A Noteholders' Principal Distributable Amount"...........S-9, S-40, S-48
"Class A Notes" ..........................................................S-1
"Class A-1 Interest Rate"...................................................S-8
"Class A-1 Noteholders"...............................................S-8, S-39
"Class A-1 Notes" ..........................................................S-1
"Class A-2 Interest Rate"...................................................S-8
"Class A-2 Noteholders".....................................................S-8
"Class A-2 Notes" ..........................................................S-1
"Class A-1 Holdback Amount"................................................S-46
"Class A-1 Pool Factor"....................................................S-38
"Class A-2 Pool Factor"....................................................S-38
"Class A-3 Interest Rate"...................................................S-8
"Class A-3 Noteholders"....................................................S-39
"Class A-3 Notes" .....................................................S-1, S-4
"Class A-3 Pool Factor"....................................................S-38
"Class B Noteholders".................................................S-8, S-39
"Class B Noteholders' Interest Distributable Amount".......................S-48
"Class B Noteholders' Principal Distributable Amount"...........S-9, S-40, S-48
"Class B Notes" .....................................................S-1, S-4
"Closing Date" ..........................................................S-4
"Collateral Agent".........................................................S-50
"Collection Account".......................................................S-45
"Collection Period"........................................................S-10
"Commission" ..........................................................S-2
"Contracts" .........................................................S-24
"CPS Receivables" ..........................................................S-5
"CPS" ..........................................................S-4
"Cutoff Date" ..........................................................S-5
"Dealer Agreements"........................................................S-24
"Dealers" .........................................................S-24
"Delta Program" .........................................................S-25
"Determination Date".......................................................S-47
"Distribution Account".....................................................S-45
"DTC" ..............................................S-2, S-17, S-39
S-i
<PAGE>
INDEX OF TERMS (cont.)
"ERISA" .........................................................S-55
"Events of Default"........................................................S-50
"Exchange Act" ..........................................................S-2
"Financed Vehicles".........................................................S-5
"First Time Buyer Program".................................................S-25
"Funding Period" ..........................................................S-7
"holders" .............................................S-17, S-39, S-42
"IFCs" ..........................................................S-5
"Indenture Trustee".........................................................S-1
"Indenture" .....................................................S-1, S-4
"Index Maturity" .........................................................S-40
"Insurance Agreement"......................................................S-19
"Interest Rate" ..........................................................S-8
"Interest Reserve Account"............................................S-7, S-46
"Issuer" ..........................................................S-4
"LIBOR Determination Date".................................................S-40
"Liquidated Receivable"....................................................S-47
"Liquidation Proceeds".....................................................S-47
"Lock-Box Account"...................................................S-16, S-45
"Lock-Box Bank" .........................................................S-16
"Lock-Box Processor".......................................................S-16
"Mandatory Prepayment"...............................................S-13, S-42
"Mandatory Redemption"...............................................S-11, S-41
"Master Spread Account Agreement"..........................................S-50
"Note Owners" ...................................................S-17, S-39
"Note Prepayment Amount".............................................S-11, S-41
"Note Prepayment Premium"..................................................S-11
"Noteholders" ..............................................S-7, S-17, S-39
"Noteholders' Distributable Amount"........................................S-48
"Notes" ..........................................................S-1
"Obligors" .........................................................S-24
"Original Pool Balance".....................................................S-5
"Owner Trustee" ..........................................................S-1
"Participants" .........................................................S-43
"Pass-Through Rate"........................................................S-12
"Payment Date" ..........................................................S-7
"Pool Balance" .........................................................S-38
"Post Office Box" .........................................................S-16
"prepayments" .........................................................S-37
"Pre-Funded Amount".........................................................S-7
"Pre-Funding Account".......................................................S-7
"Principal Balance"........................................................S-47
"Principal Distributable Amount".....................................S-10, S-48
"PTCE" .........................................................S-56
"Purchase Amount" .........................................................S-47
"Receivables" ..........................................................S-5
"Record Date" .........................................................S-15
"Recoveries" .........................................................S-48
"Reference Banks" .........................................................S-40
"Registration Statement"....................................................S-2
"Regulation" .........................................................S-55
S-ii
<PAGE>
INDEX OF TERMS (cont.)
"Requisite Amount".........................................................S-15
"Requisite Reserve Amount".................................................S-46
"Rule of 78's Receivables".................................................S-37
"Scheduled Receivable Payment".............................................S-48
"Securities Act" ..........................................................S-2
"Securities" .....................................................S-1, S-4
"Securityholders" .........................................................S-12
"Seller" .....................................................S-1, S-4
"Servicer Termination Event"...............................................S-53
"Servicer" ..........................................................S-4
"Servicing Assumption Agreement"...........................................S-17
"Servicing Fee Rate".......................................................S-17
"Servicing Fee" .........................................................S-46
"Simple Interest Receivables"..............................................S-37
"Spread Account" .........................................................S-50
"Standard Program".........................................................S-25
"Standby Fee" .........................................................S-17
"Standby Servicer"...................................................S-17, S-39
"Sub-Prime Borrowers"......................................................S-24
"Subsequent Closing Date"...................................................S-6
"Subsequent Cutoff Date"....................................................S-6
"Subsequent Receivables"....................................................S-6
"Subsequent Transfer Agreement"............................................S-19
"Telerate Page 3750".......................................................S-40
"Total Distribution Amount"................................................S-47
"Trust Agreement" ..........................................................S-4
"Trust Assets" ..........................................................S-5
"Trust" .....................................................S-1, S-4
"UCC" .........................................................S-45
"Underwriter" .........................................................S-56
"Underwriting Agreement"...................................................S-56
"[Affiliate Purchase Agreement]"...........................................S-44
"[Affiliated Originator] Receivables".................................S-5, S-15
"[Credit Enhancement] Cross Default".......................................S-50
S-iii
<PAGE>
===============================================
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.
-----------
S-iv
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Supplement
Available Information........................................................S-2
Incorporation of Certain Documents by Reference..............................S-2
Reports to Securityholders...................................................S-2
Summary ....................................................................S-4
Risk Factors................................................................S-19
Formation of the Trust......................................................S-23
The Trust Assets............................................................S-24
Cps's Automobile Contract Portfolio.........................................S-24
The Receivables Pool........................................................S-31
Yield Considerations........................................................S-37
Pool Factors and Other Information..........................................S-38
Use of Proceeds.............................................................S-38
The Seller and Cps..........................................................S-38
The Standby Servicer........................................................S-39
Description of the Notes....................................................S-39
Description of the Certificates.............................................S-42
Registration of Notes and Certificates......................................S-43
Description of the Trust Documents..........................................S-43
Credit Enhancement..........................................................S-54
the Credit Enhancer.........................................................S-54
Certain Legal Aspects of the Receivables....................................S-54
Federal Income Tax Consequences.............................................S-55
Erisa Considerations........................................................S-55
Underwriting................................................................S-56
Legal Opinions..............................................................S-57
Index of Terms...............................................................S-i
Prospectus
Prospectus Supplement.................................................... 2
Available Information.................................................... 2
Incorporation of Certain Documents by Reference.......................... 2
Reports to Noteholders................................................... 3
Summary of Terms......................................................... 4
Risk Factors............................................................. 10
Formation of the Trust................................................... 16
The Trust Assets......................................................... 16
Acquisition of Receivables by the Seller................................. 17
The Receivables.......................................................... 18
CPS's Automobile Contract Portfolio...................................... 20
Pool Factors............................................................. 20
Use of Proceeds.......................................................... 21
The Seller and CPS....................................................... 21
Description of the Certificates.......................................... 22
S-v
<PAGE>
Certain Information Regarding the Certificates........................... 23
Description of the Trust Documents....................................... 31
Certain Legal Aspects of the Receivables................................. 40
Federal Income Tax Consequences.......................................... 43
ERISA Considerations..................................................... 47
Methods of Distribution.................................................. 47
Legal Opinions........................................................... 48
Financial Information.................................................... 48
Additional Information................................................... 48
Defined Terms............................................................ 49
-----------
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Certificates 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.
[$ ]
CPS AUTO RECEIVABLES TRUST 199[ ]
[ %] ASSET-BACKED
NOTES
CPS RECEIVABLES CORP.
(SELLER)
CONSUMER PORTFOLIO
SERVICES, INC.
(SERVICER)
-
PROSPECTUS SUPPLEMENT
-
[UNDERWRITER]
[ ], 199[ ]
S-vi
<PAGE>
Prospectus Supplement
To Prospectus Dated August [ ], 1997
[$ ]
CPS Auto Receivables Trust 1997-3
[$ ][ %] Asset-Backed Notes, Class A-1
[$ ][ %] Asset-Backed Notes, Class A-2
[$ ][ %] Asset-Backed Notes, Class A-3
CPS Receivables Corp.
(Seller)
Consumer Portfolio Services, Inc.
(Servicer)
-------
CPS Auto Receivables Trust 1997-3 (the "Trust") will be formed pursuant
to a Trust Agreement to be dated as of August [ ], 1997 between CPS Receivables
Corp., as seller (the "Seller"), and [ ], as owner trustee (the "Owner
Trustee"). The [ %] Asset Backed Notes, Class A-1 (the "Class A-1 Notes"), the [
%] Asset-Backed Notes, Class A-2 (the "Class A-2 Notes") and the [ %]
Asset-Backed Notes, Class A-3 (the "Class A-3 Notes", and, together with the
Class A-1 Notes and Class A-2 Notes, the "Class A Notes") the Asset Backed
Notes, Class B (the "Class B Notes"), and, together with the Class A Notes and
the Class B Notes, the "Notes"), will be issued pursuant to an Indenture (the
"Indenture") to be dated as of August [ ], 1997 between the Trust and Norwest
Bank Minnesota, National Association, as indenture trustee (in such capacity,
the "Indenture Trustee"). The rights of Class B Noteholders 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.
-------
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 new and used automobiles, light trucks,
vans and minivans securing the Receivables (as defined herein), certain bank
accounts and the proceeds thereof, amounts on deposit in the Pre-Funding Account
(as defined herein) and the Interest Reserve Account (as defined herein) and the
proceeds thereof, the Policy with respect to the Notes, and the right of
Consumer Portfolio Services, Inc. ("CPS") to receive certain insurance proceeds
and certain other property, as more fully described herein. The Receivables will
be purchased by the Seller from CPS and from CPS's subsidiary, Samco Acceptance
Corp. ("Samco") on or prior to the date of the issuance of the Notes.
It is intended that from time to time on or before [ ] the Trust will
purchase from the Seller (or Samco) additional retail installment sale contracts
having an aggregate principal balance of up to $[ ] with funds on deposit in the
Pre-Funding Account (as defined herein).
______
The Underwriters have agreed to purchase from the Seller the Class A-1
Notes at a purchase price equal to [ %] of the principal amount of Class A-1
Notes, the Class A-2 Notes at a purchase price equal to [ %] of the principal
amount of Class A- 2 Notes and the Class A-3 Notes at a purchase price equal to
[ %] of the principal amount of Class A-2 Notes, in each case subject to the
terms and conditions set forth in the Underwriting Agreement referred to herein
under "Underwriting". The aggregate proceeds to the Seller, after deducting
expenses payable by the Seller, estimated at [$ ] will be [$ ].
-------
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.
-------
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:
[FSA Logo]
-------
For a discussion of certain factors relating to
the transaction, see "Risk Factors" at page
S-15 herein and page 15 in the accompanying
prospectus.
-------
THE NOTES REPRESENT OBLIGATIONS OF THE TRUST ONLY AND DO NOT REPRESENT INTERESTS
IN OR OBLIGATIONS OF THE SELLER, THE SERVICER OR ANY AFFILIATE THEREOF. THE
NOTES 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.
-------
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 August [ ], 1997, only
through The Depository Trust Company, Cedel Bank societe anonyme, and the
Euroclear System.
S-1
<PAGE>
PaineWebber Incorporated BlackDiamond Securities, LLC
The date of this Prospectus Supplement is August [ ], 1997.
S-2
<PAGE>
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 period ended December 31, 1996,
S-3
<PAGE>
(b) Quarterly Report on Form 10-Q for the period ended June 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 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.
S-4
<PAGE>
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.
Issuer...................... CPS Auto Receivables Trust 1997-3 (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............... [Name and Address]
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 August [ ], 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 August [ ], 1997 between the
Seller and the Owner Trustee (the "Trust
Agreement").
The Trust will issue [ ]% Class A-1 Asset
Backed Notes (the "Class A-1 Notes") in the
aggregate original principal amount of $[ ],
[ ]% Class A-2 Asset-Backed Notes (the
"Class A-2 Notes") in the aggregate original
principal amount of $[ ], [ ]% Class A-3
Asset-Backed Notes (the "Class A-3 Notes")
in the aggregate original principal amount
of $[ ] and [ ]% Class B Asset-Backed Notes
(the "Class B Notes") in the aggregate
original principal amount of $[ ].
S-5
<PAGE>
The Notes will be issued pursuant to an
Indenture dated as of August [ ], 1997 (the
"Indenture"). The 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 will be secured by the Trust
Assets as, and to the extent, provided in
the Indenture.
Trust Assets................ The property of the Trust (the "Trust
Assets") will include (i) a pool of retail
installment sale contracts (collectively,
the "Receivables") secured by the new and
used 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 [ ], 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
Pre-Funding Account and the Interest Reserve
Account and the proceeds thereof, (vi) the
right of the Seller to receive proceeds from
claims under, or refunds of unearned
premiums from, certain insurance policies
and extended service contracts, (vii) all
right, title and interest of the Seller in
and to the Purchase Agreements (as defined
below) (viii) the Policy issued by the
Insurer with respect to the Class A Notes,
and (ix) certain other property, as more
fully described herein. See "Formation of
the Trust" 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") and certain of the
Receivables (the "Samco Receivables") will
be purchased by the Seller from CPS's
subsidiary, Samco Acceptance Corp. pursuant
to a purchase agreement (the "Samco Purchase
Agreement" and, together with the CPS
Purchase Agreement, the "Purchase
Agreements") on or prior to the Closing
Date. 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............. As of the Cutoff Date, the aggregate
outstanding principal balance of the
Receivables was [$ ] (the "Original Pool
Balance"). The Receivables consist of retail
installment sale contracts secured by new
and used automobiles, light trucks, vans and
minivans including, with respect to Rule of
S-6
<PAGE>
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 [ %] 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 generally unable to obtain credit from
banks or other low-risk lenders. See "CPS's
Automobile Contract Portfolio - General" and
"The Receivables Pool" in this Prospectus
Supplement and "Risk Factors - Sub-Prime
Obligors" in the Prospectus. The Receivables
have been selected from the contracts owned
by CPS or Samco based on the criteria
specified in the Purchase Agreements and
described herein.
Following the Closing Date, pursuant to the
Sale and Servicing Agreement, the Seller
will be obligated, subject only to the
availability thereof, to sell, and the Trust
will be obligated to purchase, subject to
the satisfaction of certain conditions set
forth therein, additional Receivables
originated by CPS or Samco under its auto
loan programs and acquired by the Seller
from CPS or Samco (the "Subsequent
Receivables") from time to time during the
Funding Period (as defined below) having an
aggregate Principal Balance equal to
approximately $[ ]. Subsequent Receivables
will be conveyed to the Trust on dates
specified by the Seller (each date on which
Subsequent Receivables are conveyed being
referred to as a "Subsequent Closing Date")
occurring during the Funding Period. After
any Subsequent Closing Date, the Trust
Assets will include payments other than
payments under the Policy received with
respect to the related Subsequent
Receivables after the cutoff date designated
by the Seller with respect to such
Subsequent Closing Date (such date
designated by the Seller, the "Subsequent
Cutoff Date" with respect to the Subsequent
Receivables conveyed to the Trust on such
Subsequent Closing Date). See "Description
of the Trust Documents - Sale and Assignment
of Receivables; Subsequent Receivables"
herein. On each Subsequent Closing Date,
subject to the conditions set forth in the
Trust Documents (as defined herein), the
Trustee shall purchase from the Seller the
Subsequent Receivables to be transferred to
the Trust on such Subsequent Closing Date.
S-7
<PAGE>
Pre-Funding Account......... The Initial Receivables and the Subsequent
Receivables will be selected from motor
vehicle retail installment sale contracts in
CPS's and Samco's portfolio based on the
criteria specified in =========== the
Purchase Agreements and described in this
Prospectus ========== Supplement. No
Receivable will have a scheduled maturity
date later than [ ].
Subsequent Receivables will be originated
under CPS's auto loan programs or through
Samco but, as these programs are modified
from time to time by CPS due to changes in
market conditions or otherwise in the
judgment of CPS, such Subsequent Receivables
may be originated using credit criteria
different from the criteria applied with
respect to the Initial Receivables and may
be of a different credit quality and
seasoning. However, CPS believes that the
inclusion of the Subsequent Receivables in
the pool of Receivables will not materially
adversely affect the performance or other
characteristics of the pool of Receivables.
In addition, following the transfer of
Subsequent Receivables to the Trust, the
characteristics of the entire pool of
Receivables included in the Trust may vary
from those of the Initial Receivables. See
"Risk Factors - Varying Characteristics of
Subsequent Receivables" and "The Receivables
Pool" herein.
On the Closing Date, the Seller will deposit
into the Pre- Funding Account (as defined
below), from the proceeds from the sale of
the Notes, the sum of $[ ] (such amount, as
reduced from time to time by the aggregate
Principal Balances of all Subsequent
Receivables purchased by the Trust during
the Funding Period (the "Pre-Funded
Amount"). During the period (the "Funding
Period") from and including the Closing Date
until the earliest of (i) the Record Date on
which (a) the Pre-Funded Amount is less than
$100,000, (b) an Event of Default has
occurred under the Indenture or a Servicer
Termination Event has occurred under the
Sale and Servicing Agreement, (c) certain
events of insolvency have occurred with
respect to the Seller or the Servicer or
(ii) the close of business on the [ ]
Payment Date, the Pre-Funded Amount will be
maintained as an account in the name of the
Indenture Trustee (the "Pre-Funding
Account"). The Pre- Funded Amount is
expected to initially equal approximately $[
] and, during the Funding Period will be
reduced by the principal balance of
Subsequent Receivables purchased by the
Trust from time to time in accordance with
the Sale and Servicing Agreement. The Seller
expects that the Pre-Funded Amount will be
reduced to less than $100,000 by the [ ]
Payment Date. Any Pre-Funded Amount
remaining at the end of the Funding Period
will be payable to the Class A
S-8
<PAGE>
Noteholders pro rata in proportion to the
respective principal balances of each class
of Class A Notes.]
Interest.................... Reserve Account During the Funding Period,
funds will be held in an account (the
"Interest Reserve Account") to cover any
shortfalls due to investment earnings on
funds in the Pre-Funding Account being less
than the interest that would have been
earned had such funds been invested in
Receivables. See "Description of the Trust
Documents - Accounts".
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
September 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 Corporate Trust
Office 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 Dates....... [ ].
C. Subordination of the
Class B Notes........ The Class B Notes 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
Class B Notes will not receive any payment
of principal on a Payment Date until the
full amount of 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.
D. Interest Rates......... The Class A-1 Notes will bear interest at a
rate equal to [ %] per annum (the "Class A-1
Interest Rate"). The Class A-2 Notes will
bear interest at a rate equal to [ %] per
annum (the "Class A-2 Interest Rate"). The
Class A-3 Notes will bear interest at a rate
equal to [ %] per annum (the "Class A-3
Interest Rate"). The Class B Notes will bear
interest at a rate of [ ]% per annum (the
"Class B Interest Rate"). Each such interest
rate for a Class of Notes is referred to as
an
S-9
<PAGE>
"Interest Rate". Interest on the Notes,
other than the Class A-1 Notes, will be
calculated on the basis of a 360 day year
consisting of twelve 30 day months. Interest
on the Class A-1 Notes will be calculated on
the basis of the actual number of days in a
365-day year.
D. Interest............... On each Payment Date, the holders of record
of the Class A-1 Notes (the "Class A-1
Noteholders") will be entitled to receive,
pro rata, interest at the Class A-1 Interest
Rate for the number of days elapsed from and
including the most recent Payment Date (or
in the case of the initial Payment Date,
from and including the Closing Date) to but
excluding the current Payment Date, 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. On each Payment
Date, the holders of record of the Class A-3
Notes (the "Class A-3 Noteholders") as of
the related Record Date will be entitled to
receive, pro rata, thirty (30) days of
interest at the Class A-3 Interest Rate on
the outstanding principal amount of the
Class A-3 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 B Notes (the "Class B
Noteholders") as of the related Record Date
will be entitled to receive, pro rata,
thirty (30) days of interest at the Class B
Interest Rate on the outstanding principal
balance of the Class B Notes 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 through
and including September 14, 1997 and (ii)
the denominator of which is 360 (or, with
respect to the Class A-1 Notes only, 365).
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 Notes -
Payments 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'
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Principal Distributable Amount for the
related Collection Period. The "Class A
Noteholders' Principal Distributable Amount"
is equal to the product of (x) the Class A
Noteholders' Percentage of the Principal
Distributable Amount and (y) any unpaid
portion of the amount described in clause
(x) above with respect to a prior Payment
Date. Principal of the Class B Notes will be
payable on each Payment Date in an amount
equal to the Class B Noteholders' Principal
Distributable Amount for the related
Collection Period. The "Class B Noteholders'
Principal Distributable Amount" is equal to
the product of (a) the Class B Noteholders'
Percentage of the Principal Distributable
Amount and (b) any unpaid portion of the
amount described in clause (a) above with
respect to a prior Payment Date.
The "Class A Noteholders' Percentage" will
(a) on any Payment Date prior to the Payment
Date on which the principal amount of the
Class A-3 Notes is reduced to zero, be [ %],
(b) on the Payment Date on which the
principal amount of the Class A-3 Notes is
reduced to zero, be the percentage
equivalent of a fraction, the numerator of
which is the principal amount of the Class
A-3 Notes immediately prior to such Payment
Date, and the denominator of which is the
Principal Distributable Amount and (c) on
any other Payment Date, be 0%.
The "Class B Noteholders' Percentage" will
(a) on any Payment Date prior to the Payment
Date on which the principal amount of the
Class A-3 Notes is reduced to zero, be [ %],
(b) on the Payment Date on which the
principal amount of the Class A-3 Notes is
reduced to zero, be the percentage
equivalent of a fraction, the numerator of
which is the principal amount of the Class
A-3 Notes immediately prior to such Payment
Date, and the denominator of which is the
Principal Distributable Amount and (c) on
any other Payment Date, be 0%.
On each Payment Date, an amount equal to the
lesser of (i) the portion of the Total
Distribution Amount remaining after
application thereof to pay all senior
distributions as described in "Priority of
Payments" below and (ii) 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 Notes has
been reduced to zero, 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, then to the holders of the
Class A-3 Notes until the principal balance
of the Class A-3 Notes has been reduced to
zero. On each Payment Date, an amount equal
to the lesser
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of (i) the portion of the Total Distribution
Amount remaining after application thereof
to pay all senior distributions as described
in "Priority of Payments" below and (ii) the
Class B Noteholders' Principal Distributable
Amount will be applied to pay principal of
the Class B Notes until the principal
balance of the Class B Notes has been
reduced to zero.
The "Principal Distributable Amount" for a
Payment Date will equal the sum of (a) the
principal portion of all Scheduled
Receivable Payments received during the
preceding Collection Period on Rule of 78's
Receivables and all payments of principal
received on Simple Interest Receivables
during the preceding Collection Period; (b)
the principal portion of all prepayments in
full received during the preceding
Collection Period (including prepayments in
full resulting from collections with respect
to a Receivable received during the
preceding Collection Period (without
duplication of amounts included in (a) above
and (d) below)); (c) 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) and (b) above);
(d) 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) and (b) above); and (e) 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 (d) above). 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 September 14, 1997.
F. Optional
Redemption.............. 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
sum of (i) the Original Pool Balance plus
the
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aggregate Principal Balance of all
Subsequent Receivables transferred to the
Trust (as of their applicable Subsequent
Cutoff Dates), at a redemption price equal
to the unpaid principal amount of the Notes,
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 thereto, a claim on the
Policy would occur or any amount owing to
the Insurer or the holders of the Notes
would remain unpaid. See "Description of the
Notes - Optional Redemption" in this
Prospectus Supplement.
G. Mandatory
Redemption.............. Each class of Notes will be redeemed in part
on the Payment Date on or immediately
following the last day of the Funding Period
in the event that any portion of the
Pre-Funded Amount remains on deposit in the
Pre-Funding Account after giving effect to
the purchase of all Subsequent Receivables,
including any such purchase on such date (a
"Mandatory Redemption"). The aggregate
principal amount of each class of Notes to
be redeemed will be an amount equal to such
class' pro rata share (based on the
respective current principal balance of each
class of Notes) of the Pre-Funded Amount on
such date (such class' "Note Prepayment
Amount").
The Policy does not guarantee payment of the
Note Prepayment Amount. In addition, the
ratings assigned to the Notes by the Rating
Agencies do not address the likelihood that
the Note Prepayment Amount will be paid.
The Notes may be accelerated and subject to
immediate payment at par 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 [
]. In the case of such an Event of Default,
the Notes will automatically be accelerated
and subject to immediate payment at par. See
"Description of the Trust Documents - Events
of Default" 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
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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 or such other successor
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 Indenture Trustee Fee
(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) to the Class B Noteholders, the Class B
Noteholders' 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 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) to the Class B Noteholders, the Class B
Noteholders' Principal Distributable Amount,
to be distributed as described under
"Description of the Notes -- Payments of
Principal"; and
(xi) to the Collateral Agent, for deposit
into the Spread Account, the remaining Total
Distribution Amount, if any.
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<PAGE>
See "Description of the Notes -
Distributions on Notes Priority of
Distribution Amounts" in this Prospectus
Supplement;
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 Noteholders. 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 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 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 Owner
Trustee. See "Description of the Trust
Documents - Distributions - The Spread
Account" 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.
Repurchases and Purchases
of Certain Receivables...... CPS has made certain representations and
warranties relating to the Receivables
(including the Samco 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 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 or CPS. See
"Description of the Trust Documents -- Sale
and Assignment of Receivables" in the
Prospectus.
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<PAGE>
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 Notes -- Servicing
Procedures" in this Prospectus Supplement
and "Description of the Trust Documents --
Servicing Procedures" in the Prospectus.
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.
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], 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 (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 Notes --
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
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be continuing, then the Indenture Trustee
may, with the consent of the Insurer (so
long as an Insurer Default shall not have
occurred and be continuing) or shall, at the
direction of the Insurer (or, if an Insurer
Default shall have occurred and be
continuing, at the direction of the Note
Majority) 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
August [ ], 1997 among CPS, the 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 2.12% 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 product of one-twelfth times 2.12% (the
"Servicing Fee Rate") of the Pool Balance 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 product of one- twelfth times 2.12% of
the Original Pool Balance. As additional
servicing compensation, the Servicer will
also be entitled to 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 CPS
Receivables will be assigned by CPS to the
Seller pursuant to CPS Purchase Agreement
and by the Seller to the Trustee pursuant to
the Sale and Servicing Agreement. The Samco
Receivables, representing approximately [ %]
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
certificates of title to
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the Financed Vehicles securing the CPS
Receivables show CPS as the lienholder and
the certificates of title to the Samco
Receivables show Samco 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)
sold to the Trust by the Seller or Samco, as
to which there did not exist on the Closing
Date a perfected security interest in the
name of CPS or Samco 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 or Samco 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
interest of the Trust, the Indenture Trustee
or the Certificate 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 or Samco 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
or Samco, and therefore the Trust, could
lose its prior perfected 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 "Risk Factors --
Certain Legal Aspects - Lack of
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Perfected Security Interest in Financed
Vehicles" in this Prospectus Supplement and
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, n the
other, will be effected in DTC through Chase
Manhattan Bank, N.A. or Morgan Guaranty
Trust Company of New York, as depositories
of CEDEL or Euroclear, respectively, 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 "Description
of the Notes - 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 will be
characterized as debt, the Class B Notes
should 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
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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 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"). See "ERISA
Considerations" in this Prospectus
Supplement.
Legal Investment............ [The Class A-1 Notes will be eligible
securities for purchase by money market
funds under Rule 2A-7 under the Investment
Company Act of 1940, as amended.]
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 and through its 80% owned
subsidiary, Samco Acceptance Corp. ("Samco"). 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 and may be worse 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 Notes-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.
Varying Characteristics of Subsequent Receivables
On the Closing Date, approximately $[ ] of Initial Receivables will be
transferred to the Trust by the Seller and the approximately $[ ] Pre-Funded
Amount will be deposited by the Trust in the Pre-Funding Account. If the
principal amount of eligible Receivables originated by CPS or Samco during the
Funding Period is less than the Pre- Funded Amount, the Seller will have
insufficient Receivables to sell to the Trust on the Subsequent Transfer Dates,
thereby resulting in a prepayment of principal to the Noteholders as described
in the following paragraph. See "- Trust's Relationship to the Seller and CPS"
below. In addition, any conveyance of Subsequent Receivables is subject to the
satisfaction,
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on or before the related Subsequent Transfer Date, of the following conditions,
among others: (i) each such Subsequent Receivable satisfies the eligibility
criteria specified in the related Purchase Agreement; (ii) the Insurer (so long
as no Insurer Default shall have occurred and be continuing) shall in its sole
and absolute discretion have approved the transfer of such Subsequent
Receivables to the Trust (iii) as of the applicable Subsequent Cutoff Date, the
Receivables in the Trust, together with the Subsequent Receivables to be
conveyed by the Seller as of such Subsequent Cutoff Date, meet the following
criteria (computed based on the characteristics of the Initial Receivables on
the initial Cutoff Date and any Subsequent Receivables as of the related
Subsequent Cutoff Date): [specify conditions]; (iv) the Seller shall have
executed and delivered to the Trust (with a copy to the Indenture Trustee) a
written assignment (a "Subsequent Transfer Agreement") conveying such Subsequent
Receivables to the Trust (including a schedule identifying such Subsequent
Receivables); (v) the Seller shall have delivered certain opinions of counsel to
the Indenture Trustee, the Owner Trustee, the Insurer and the Rating Agencies
with respect to the validity of the conveyance of all such Subsequent
Receivables; and (vi) the Rating Agencies shall have notified the Seller, the
Owner Trustee, the Indenture Trustee and the Insurer in writing that, following
the addition of such Subsequent Receivables, the Class A-1 Notes the Class A-2
Notes and the Class A-3 Notes will each be rated [ ] by [ ] and the Class B
Notes will be rated at least [ ] by [ ]]. Such confirmation of the ratings of
the Notes may depend on factors other than the characteristics of the Subsequent
Receivables, including the delinquency, repossession and net loss experience on
the Receivables in the Receivables Pool.
Each Subsequent Receivable must satisfy the eligibility criteria
specified in the related Purchase Agreement. However, Subsequent Receivables may
have been originated using credit criteria different from the criteria applied
with respect to the Initial Receivables and may be of a different credit quality
and seasoning. See "The Receivables Pool" in this Prospectus Supplement.
Distribution of Pre-Funded Amount - Effect on Yield and Maturity
To the extent that the Pre-Funded Amount has not been fully applied to
the purchase of Subsequent Receivables by the Trust during the Funding Period,
the Class A Noteholders will receive, on the Payment Date on or immediately
following the last day of the Funding Period, a prepayment of principal in an
amount equal to their pro rata share (based on the current principal balance of
each class of Notes) of any remaining Pre-Funded Amount following the purchase
of any Subsequent Receivables on such Payment Date. It is anticipated that the
principal amount of Subsequent Receivables sold to the Trust will not be exactly
equal to the original Pre-Funded Amount and, therefore, there will be at least a
nominal amount of principal prepaid to the Class A Noteholders.
Trust's Relationship to the Seller and CPS
However, the ability of the Seller to convey Subsequent Receivables on
a Subsequent Transfer Date is completely dependent upon the generation of
additional receivables by CPS or Samco. If, during the Funding Period, CPS or
Samco is unable to generate or does not transfer sufficient Receivables to the
Seller, the ability of the Seller to sell Subsequent Receivables to the Trust
would be adversely affected. There can be no assurance that CPS or Samco will
continue to generate receivables that satisfy the criteria
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set forth in the related Purchase Agreement at the same rate as in recent months
or that the Insurer, in its sole and absolute discretion, will approve any such
transfer of Subsequent Receivables.
Neither the Seller nor CPS is generally obligated to make any payments
in respect of the Notes or the Receivables. In connection with each sale of
Receivables by CPS or Samco 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 is 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 the
accompanying Prospectus.
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 or
Samco, as applicable, nor will the certificates of title to any of the Financed
Vehicles (including those securing the Samco 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) as to which
there did not exist on the Closing Date a perfected security interest in the
name of CPS or Samco 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 or
Samco in the Financed Vehicle securing such Receivable if, in either case, such
breach materially and adversely affects the value of 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 Samco 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 Samco, 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" in this Prospectus Supplement and "Certain Legal Aspects of the
Receivables -- Security Interest in Vehicles" in the Prospectus.
Geographic Concentration
As of the Cutoff Date, [ %] 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.
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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. 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.
The Pre-Funding Account and the Interest Reserve Account will only be
maintained until the Payment Date on or immediately following the last day of
the Funding Period. The Pre-Funded Amount on deposit in the Pre-Funding Account
will be used solely to purchase Subsequent Receivables and is not available to
cover losses on the Receivables. The Interest Reserve Account is designed to
cover obligations of the Trust relating to that portion of its assets not
invested in Receivables and is not designed to provide substantial protection
against losses on the Receivables. Similarly, 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, if the Insurer
defaults in its obligations under the Policy, the Trust will depend on current
distribution on the Receivables to make payments on the Class A Notes.
See "Credit Enhancement" and "The Insurer" herein.
Distributions of interest and principal on the Notes will be dependent
primarily upon collections on the Receivables and amounts paid pursuant to the
Policy. See "Description of the Notes -- Payment of Principal - Payment of
Interest" in this Prospectus Supplement.
Subordination of Class B Notes
Distributions of interest and principal on the Class B Notes will be
subordinated in priority of payment to interest and principal due on the Class A
Notes. Consequently, the Class B Noteholders will not receive any distributions
of interest with respect to a Collection Period until the full amount of
interest payable on the Class A Notes on such Payment Date has been deposited in
the Distribution Account. The Class B Noteholders will not receive any
distributions of principal with respect to a Collection Period until the full
amount of interest and principal payable on the Class A Notes on the related
Payment Date has been deposited in the Distribution Account.
If the Notes are accelerated following an Event of Default under the
Indenture, the Class A Notes must be paid in full prior to the distribution of
any amounts on the Class B Notes.
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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 originations is
limited, CPS expects that the delinquency and net credit loss and repossession
experience with respect to the Receivables originated by Samco will be similar
to that of CPS's existing portfolio.
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 Class A 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
Class A 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.
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FORMATION OF THE TRUST
The Issuer, CPS Auto Receivables Trust 1997-3, 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 (as defined below), (iii) making payments
in respect of the Notes and the Certificates (as defined below) 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 Notes --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 of 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 [$ ] and certificates equal to such amount will be issued to the Seller (the
"Certificates"). The equity of the Trust, together with the proceeds of the
initial sale of the Notes, will be used by the Trust to purchase the Receivables
from the Seller. 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
[ ], the Owner Trustee under the Trust Agreement, is a Delaware banking
corporation and its principal offices are located at [ ]. 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
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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 new and
used automobiles, light trucks, vans and minivans between dealers (the
"Dealers") or IFCs and retail purchasers (the "Obligors") and, with respect to
Rule of 78's Receivables, certain monies due thereunder after the Cutoff Date,
and, with respect to Simple Interest Receivables, certain monies received
thereunder after the Cutoff Date. The Receivables were originated by the Dealers
or IFCs for assignment to CPS or Samco. Pursuant to agreements between the
Dealers and CPS ("Dealer Agreements") or between the IFCs and Samco, the
Receivables were purchased by CPS or Samco and, prior to the Closing Date,
evidenced financing made available by CPS or Samco 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
Notes -- Accounts" in this Prospectus Supplement; (ii) such amounts as from time
to time may be held in the Pre-Funding Account or the Interest Reserve Account,
(iii) the rights of the Seller under the Purchase Agreements; (iv) 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 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 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
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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 December 31, 1996, CPS had purchased $729.1 million of
Contracts from Dealers and sold $713.0 million 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 2,177
dealerships located in 41 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 excess servicing fees
that represent collections on the Contracts in excess of those required to pay
principal and interest due to the investor and the base servicing fee to CPS.
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. 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.
In March 1996, CPS formed Samco Acceptance Corp. ("Samco"), an 80
percent-owned subsidiary based in Dallas, Texas. Samco's business plan is to
provide the Company's sub-prime auto finance products to rural areas through
independently owned finance companies. 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.
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
it 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
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headquarters in Irvine, California. As of December 31, 1996, Samco had purchased
399 Contracts with original balances of $4.7 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 13% of the received applications.
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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 the
Company 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 servicer contract, and in the case of used 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
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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 [or an affiliate] 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.
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 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
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<PAGE>
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.
Servicing and collection procedures on Contracts owned by Samco are
performed by CPS at its headquarters in Irvine, California. 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 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. Although credit history
on Samco's originations is limited, CPS expects that the delinquency and net
credit loss and repossession experience with respect to the Receivables
originated by Samco 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.
S-32
<PAGE>
<TABLE>
<CAPTION>
Consumer Portfolio Services, Inc.
Delinquency Experience
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 (3)...... 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% %
-----------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
March 31, 1996 March 31, 1997
-------------- --------------
Number Number
of Loans Amount of Loans Amount
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Portfolio (1)................... $ $
Period of Delinquency (2)
31-60
61-90
91+.............................
Total Delinquencies.............
Amount in Repossession (3)......
Total Delinquencies and
Amount in Repossession (4)...... $ $
======== ====== ======== ======
Delinquencies as a Percent of
the Portfolio................... % % % %
Repo Inventory as a Percent
of the Portfolio................ % % %
--------- ------------- ------------ ------------
Total Delinquencies and
Amount in Repossession as a
Percent of Portfolio % % % %
--------- ------------- ------------ ------------
- -----------
(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.
</TABLE>
S-33
<PAGE>
S-34
<PAGE>
<TABLE>
<CAPTION>
Consumer Portfolio Services, Inc.
Net Credit Loss/Repossession Experience
Three Three
Year Ended Year Ended Year Ended Months Ended Months Ended
December 31, 1994 December 31, 1995 December 31, 1995 March 31, 1996 March 31, 1997
<S> <C> <C> <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 $20,327,632
Annualized Repossessions
as a Percentage of
Average Number of Loans
Outstanding......................... 7.29% 9.70% 8.50%
Annualized Net Losses as
a Percentage of
Average Amount Outstanding.......... 2.85% 4.79% 5.14%
- -----------
(1) All amounts and percentages are based on the principal amount scheduled
to be paid on each Contract. The information in the table represents
all Contracts originated by CPS including sold Contracts which CPS
continues to service.
(2) Amount charged off includes the remaining principal balance, after the
application of the net proceeds from the liquidation of the vehicle,
excluding accrued and unpaid interest.
(3) Recoveries are reflected in the period in which they are realized and
may pertain to charge offs from prior periods.
</TABLE>
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<PAGE>
THE RECEIVABLES POOL
The Receivables Pool existing as of the Cutoff Date consists of
Receivables selected from CPS's Portfolio by several criteria, including the
following: each Receivable was originated, based on the billing address of the
Obligors, in the United States, has an original term of not more than 60 months,
provides for level monthly payments which fully amortize the amount financed
over the original term (except for the last payment, which may be different from
the level payment for various reasons, including late or early payments during
the term of the Contract), has a remaining maturity of 60 months or less as of
the Cutoff Date, has an outstanding principal balance of not more than [$ ] as
of the Cutoff Date, is not more than 30 days past due as of the Cutoff Date and
has an APR of not less than [ %]. 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 [ ].
As of the Cutoff Date, approximately [ %] of the aggregate principal
balance of the Receivables, constituting [ %] of the number of Contracts,
represents financing of used vehicles; the remainder of the Receivables
represent financing of new vehicles. Approximately [ %] of the aggregate
principal balance of the Receivables were originated under the Delta Program,
approximately [ %] of the aggregate principal balance of the Receivables were
originated under the Alpha Program, approximately [ %] of the aggregate
principal balance of the Receivables were originated under the First Time Buyer
Program and approximately [ %] of the aggregate principal balance of the
Receivables represent financing under the Standard Program. As of the Cutoff
Date, approximately [ %] of the aggregate principal balance of the Receivables
were originated by unaffiliated third parties and purchased by CPS in the
ordinary course of its business. As of the Cutoff Date, [ %] of the Principal
Balance of the Receivables were Samco 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.
<TABLE>
<CAPTION>
Composition of the Receivables as of the Cutoff Date
<S> <C> <C> <C> <C> <C>
Weighted Aggregate Number of Average Weighted Weighted
Average APR Principal Receivables Principal Average Average
of Receivables Balance in Pool Balance Remaining Term Original Term
</TABLE>
S-36
<PAGE>
<TABLE>
<CAPTION>
Geographic Distribution of the Receivables as of the Cutoff Date
Percent of Percent of
Aggregate Aggregate Number of Number of
State(1) Principal Balance Principal Balance Receivables Receivables
<S> <C> <C> <C> <C>
----------------- ----------------- ----------- -----------
all others(2)................... % %
TOTAL........................... $
100.00%(3) 100.00%(3)
- -----------
(1) Based on billing address of Obligor.
(2) No other state represents a percent 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.
</TABLE>
<TABLE>
<CAPTION>
Distribution of the Receivables by APR as of the Cutoff Date
Percent of Percent of
APR Aggregate Aggregate Number of Number of
Range Principal Balance Principal Balance Receivables Receivables
<S> <C> <C> <C> <C>
all others(2)................... % %
TOTAL........................... $
100.00%(1) 100.00%(1)
- -----------
(1) Percentages may not add up to 100% because of rounding.
</TABLE>
S-37
<PAGE>
<TABLE>
<CAPTION>
Distribution of Receivables by Remaining Term to
Scheduled Maturity as of the Cutoff Date
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>
$
TOTAL........................... 100.00%(1) 100.00%(1)
================== ================= =========== ==========
- -----------
(1) Percentages may not add up to 100% because of rounding.
</TABLE>
<TABLE>
<CAPTION>
Distribution of Receivables by
Date of Origination as of the Cutoff Date
Percent of Percent of
Aggregate Aggregate Number of Number of
Date of Origination Principal Balance Principal Balance Receivables Receivables
<S> <C> <C> <C> <C>
$
TOTAL........................... 100.00%(1) 100.00%(1)
================== ================= =========== ==========
- -----------
(1) Percentages may not add up to 100% because of rounding.
</TABLE>
S-38
<PAGE>
<TABLE>
<CAPTION>
Distribution of Receivables by Original Term to
Scheduled Maturity as of the Cutoff Date
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>
$
TOTAL........................... 100.00%(1) 100.00%(1)
================== ================= =========== ==========
- -----------
(1) Percentages may not add up to 100% because of rounding.
</TABLE>
<TABLE>
<CAPTION>
Distribution of Receivables by Model Year of Financed Vehicle
as of the Cutoff Date
Percent of Percent of
Aggregate Aggregate Number of Number of
Model Year Principal Balance Principal Balance Receivables Receivables
<S> <C> <C> <C> <C>
$
TOTAL........................... 100.00%(1) 100.00%(1)
================== ================= =========== ==========
- -----------
(1) Percentages may not add up to 100% because of rounding.
</TABLE>
S-39
<PAGE>
<TABLE>
<CAPTION>
Distribution of Receivables by Original Principal Balance
as of the Cutoff Date
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>
$
TOTAL........................... 100.00%(1) 100.00%(1)
================== ================= =========== ==========
- -----------
(1) Percentages may not add up to because of rounding.
</TABLE>
S-40
<PAGE>
As of the Cutoff Date, approximately [ %] 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 [ %] 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.
S-41
<PAGE>
YIELD CONSIDERATIONS
On each Payment Date, interest will be paid to the Noteholders to the
extent of 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 through and including [ ]
14, 1997 and (ii) the denominator of which is 360 (or, with respect to the Class
A-1 Notes only, 365).
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. See also "Description of the Notes --
Optional Redemption" in this Prospectus Supplement regarding the Servicer's
option to purchase the Receivables and redeem the Notes when the aggregate
principal balance of the Receivables is less than or equal to 10% 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 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.
An individual 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
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 "Class A-3 Pool Factor" is a seven-digit decimal
which the Servicer will compute each month indicating the principal balance of
the Class A-3 Notes as a fraction of the initial principal balance of the Class
A-3 Notes. The Class A-3 Pool Factor will be 1.0000000
S-42
<PAGE>
as of the Closing Date; thereafter, the Class A-3 Pool Factor will decline to
reflect reductions in the principal balance of the Class A-3 Notes. An
individual Noteholder's share of the principal balance of the Class A-3 Notes is
the product of (i) the original denomination of the Noteholder's Note and (ii)
the Class A-3 Pool Factor. The "Class B Pool Factor" is a seven-digit decimal
which the Servicer will compute each month indicating the principal balance of
the Class B Notes as a fraction of the initial principal balance of the Class B
Notes. The Class B Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Class B Pool Factor will decline to reflect reductions in the
principal balance of the Class B Notes. An individual Noteholder's share of the
principal balance of the Class B Notes is the product of (i) the original
denomination of the Noteholder's Note and (ii) the Class B Pool Factor. Pool
Factors will be made available on or about the eighth business day of each
month.
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 Notes
- --Statements to Noteholders" in this Prospectus Supplement.
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of the
Notes will be applied to the purchase of the CPS Receivables from CPS and the
Samco Receivables from Samco and to fund the Pre-Funding Account. CPS will apply
the net proceeds received from the Seller to purchase new Contracts or to repay
debt incurred to purchase the Contracts.
THE SELLER AND CPS
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, Suite 100, Irvine, California 92718; telephone (714) 753-6800. 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 2.12% per annum.
S-43
<PAGE>
DESCRIPTION OF THE NOTES
General
The Notes will be issued pursuant to the terms of the Indenture, a form
of which has been filed as an exhibit 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 Certificates" below.
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, interest at the Class A-1 Note Rate, on the outstanding
principal balance of the Class A-1 Notes as of the last day of the related
Collection Period, based on the number of days elapsed from and including the
preceding Payment Date (or, in the case of the initial Payment Date, from and
including the Closing Date) to but excluding the current Payment Date. 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 Class A-3 Notes (the "Class A-3 Noteholders") as of the related
Record Date will be entitled to receive, pro rata, thirty (30) days of interest
at the Class A-3 Interest Rate on the outstanding principal amount of the Class
A-3 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 B Notes (the
"Class B Noteholders") as of the related Record Date will be entitled to
receive, pro rata, thirty (30) days of interest at the Class B Interest Rate on
the outstanding principal amount of the Class B Notes 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 through and including September 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 Notes - 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 product of (a) the
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<PAGE>
Class A Noteholders' Percentage of the Principal Distributable Amount and (b)
any unpaid portion of the amount described in clause (a) with respect to a prior
Payment Date. Principal of the Class B Notes will be payable on each Payment
Date in an amount equal to the Class B Noteholders' Principal Distributable
Amount for the related Collection Period. The "Class B Noteholders Principal
Distributable Amount" is equal to the product of (a) the Class B Noteholders'
Percentage of the Principal Distributable Amount and (b) any unpaid portion of
the amount described in clause (a) 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 the
distributions described in clauses (i) through (iv) under "Description of the
Trust Documents -- Distributions" and (y) 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 Notes has been
reduced to zero, 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, then to the holders of
the Class A-3 Notes until the principal balance of the Class A-3 Notes has been
reduced to zero.
On each Payment Date, an amount equal to the lesser of (x) the portion
of the Total Distribution Amount remaining after the application thereof to pay
the distributions described in clauses (i) through (viii) under 'Description of
the Trust Documents -- Distributions" and (y) the Class B Noteholders' Principal
Distributable Amount will be applied to pay principal of the Class B Notes until
the principal balance of the class B Notes has been reduced to zero.
Mandatory Redemption
Each class of Notes will be redeemed in part on the Payment Date on or
immediately following the last day of the Funding Period in the event that any
portion of the Pre-Funded Amount remains on deposit in the Pre-Funding Account
after giving effect to the purchase of all Subsequent Receivables, including any
such purchase on such date (a "Mandatory Redemption"). The aggregate principal
amount of each class of Notes to be redeemed will be an amount equal to such
class's pro rata share (based on the respective current Principal Balance of
each class of Notes) of the remaining Pre-Funded Amount on such date (such
class's "Note Prepayment Amount").
The Policy does not guarantee payment of the Note Prepayment Amounts,
although the Policy does guarantee payment of the Class A Noteholders' Interest
Distributable Amount and the Class A Noteholders' Principal Distributable Amount
on its respective Final Scheduled Payment Date. In addition, the ratings
assigned to the Notes by the Rating Agencies do not address the likelihood that
the Note Prepayment Amounts will be paid.
Optional Redemption
In order to avoid excessive administrative expense, the Servicer, or
its successor, is permitted at its option to purchase from the Trust (with the
consent of the Insurer if such purchase would result in a claim under the Policy
or any amount owing to the Insurer or on the Notes would remain unpaid), as of
the last day of any month as of which the then outstanding Pool Balance is equal
to 10% or less of the sum of (i) the Original Pool Balance and (ii) the
aggregate Principal Balance of all subsequent Receivables transferred to the
Trust (as of their applicable Subsequent Cutoff Dates), all remaining
Receivables at a price equal to the aggregate of the
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Purchase Amounts thereof as of such last day. Exercise of such right will effect
early retirement of the Notes. The Indenture Trustee will give written notice of
termination to each Noteholder 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 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 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 "Certain Information Regarding the Notes -- 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 int eh 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
Dede, 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. Chase Manhattan Bank, N.A. will act as
depositary for CEDEL and Morgan Guaranty Trust Company of New York will act as
depositary for Euroclear (in such capacities, individually the "Relevant
Depositary" and collectively the "European Depositaries").
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).
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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 CPS Purchase 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. The 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, CPS will,
pursuant to a purchase agreement (the "CPS Purchase Agreement" and, together
with the Samco 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) 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 CPS's normal requirements; (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 or IFCs 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 or Samco; 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
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(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 value of a Receivable, 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
Noteholders, the Insurer, the Owner Trustee or the Indenture Trustee for any
such uncured breach.
Any conveyance of Subsequent Receivables is subject to the
satisfaction, on or before the related Subsequent Transfer Date, of the
following conditions, among others: (i) each such Subsequent Receivable
satisfies the eligibility criteria specified in the related Purchase Agreement;
(ii) Insurer (so long as no Insurer Default shall have occurred and be
continuing) shall in its absolute and sole discretion have approved the transfer
of such Subsequent Receivables to the Trust; (iii) as of each applicable
Subsequent Cutoff Date, the Receivables in the Trust together with the
Subsequent Receivables to be conveyed by the Seller as of such Subsequent Cutoff
Date, meet the following criteria (computed based on the characteristics of the
Initial Receivables on the Initial Cutoff Date and any Subsequent Receivables on
the related Subsequent Cutoff Date: [Conditions to be specified]; (iv) the
Seller shall have executed and delivered to the Trust (with a copy to the
Indenture Trustee) a Subsequent Transfer Agreement conveying such Subsequent
Receivables to the Trust (including a schedule identifying such Subsequent
Receivables); (v) the Seller shall have delivered certain opinions of counsel to
the Indenture Trustee, the Owner Trustee, Insurer and the Rating Agencies with
respect to the validity of the conveyance of such Subsequent Receivables; and
(vi) the Rating Agencies shall have each notified the Seller, the Owner Trustee,
the Indenture Trustee and Insurer in writing that, following the addition of all
such Subsequent Receivables, the Class A-1 Notes, the Class A-2 Notes and the
Class A-3 Notes will be rated [ ] by [ ] and the Class B Notes will be rated at
least [ ] by [ ].
Subsequent Receivables may have been originated by CPS at a later date
using credit criteria different from the criteria applied with respect to the
Initial Receivables. See "Risk Factors - Varying Characteristics of Subsequent
Receivables" and "The Receivables Pool" herein.
On or prior to the Closing Date or each Subsequent 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 and Samco'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 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
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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"). Upon
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 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 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. Monies on deposit in the Pre-Funding Account will not be available
to cover losses on or in respect of the Receivables. On the Closing Date, the
Pre-Funding Account will be funded with the initial Pre-Funded Amount from the
sale proceeds of the Notes. The Pre-Funded Amount will initially equal $[ ] and,
during the Funding Period, will be reduced by the Principal Balances of all
Subsequent Receivables purchased by the Trust from time to time in accordance
with the provisions of the Sale and Servicing Agreement.
The Seller expects that the Pre-Funded Amount will be reduced to less
than $100,000 by the [ ] Payment Date, although no assurances can be given in
this regard. If any Pre- Funded Amount remains at the end of the Funding Period,
such amount will be distributed as a partial prepayment to the Noteholders as
described above under "-- Mandatory Prepayment" and "--Mandatory Redemption".
The Seller will also establish and maintain an account (the "Interest
Reserve Account") in the name of the Indenture Trustee on behalf of the
Noteholders. 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 each of the [ ] and [ ] Payment Dates, 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 in accordance
with the priorities set forth under the heading "Description of the Trust
Documents - Distributions - Priority of Distribution Amounts".
The "Requisite Reserve Amount" as of any date during the Funding Period
will equal the product of (i) the difference between (A) the weighted average of
the Interest Rates for each class of Notes (based on the outstanding principal
amount of each class of Notes on such date) and (B) the assumed yield (2.5% per
annum) of investments of funds in the Pre-Funding Account, divided by 360, (ii)
the Pre-Funded Amount on such date and (iii) the number of days remaining until
the Payment Date in [ ].
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 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; provided, however, that with
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respect to the first Payment Date, the Servicing Fee will equal the product of
one-twelfth of the Servicing Fee Rate and the Pool Balance as of the Cutoff 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 2.12% 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 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 Class B Noteholders'
Interest Distributable Amount and the Class B Noteholders' 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.
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
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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.
"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 Class A 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) the principal portion of all Scheduled
Receivable Payments received during the preceding Collection Period on Rule of
78's Receivables and all payments of principal received on Simple Interest
Receivables during the preceding Collection Period; (b) the principal portion of
all prepayments in full received during the preceding
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Collection Period (including prepayments in full resulting from collections with
respect to a Receivable received during the preceding Collection Period (without
duplication of amounts included in (a) above and (d) below)); (c) 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) and (b)
above); (d) 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) and (b) above); and (e) 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 (d) above) (the amounts set forth in (a) through (e),
the "Principal Distributable Amount") plus any Class A Noteholders' Principal
Carryover Shortfall; (ii) the Class A Noteholders' Interest Distributable
Amount; (iii) the "Class B Noteholders' Principal Distributable Amount",
consisting of the Class B Noteholders' Percentage of the Principal Distributable
Amount plus any Class B Noteholders' Principal Carryover Shortfall; (iv) the
"Class B Noteholders' Interest Distributable Amount", consisting of thirty (30)
days' interest at the Class B Interest Rate on the principal balance of the
Class B Notes as of the close of business on the last day of the related
Collection Period; plus the Class B Noteholders' Interest Carryover Shortfall,
provided, however, that on the first Payment Date, the Class B Noteholders'
Interest Distributable Amount will include interest from and including the
Closing Date through and including September 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 Class B Noteholders' Principal Distributable Amount will
equal the then outstanding balance of the Class B Notes.
The "Class A Noteholders' Percentage" will (a) on any Payment Date
prior to the Payment Date on which the principal amount of the Class A Notes is
reduced to zero, be [ %], (b) on the Payment Date on which the principal amount
of the Class A Notes is reduced to zero, be the percentage equivalent of a
fraction, the numerator of which is the principal amount of the Class A Notes
immediately prior to such Payment Date, and the denominator of which is the
Principal Distributable Amount and (c) on any other Payment Date, be 0%.
The "Class B Noteholders' Percentage" will (a) on any Payment Date
prior to the Payment Date on which the principal amount of the Class B Notes is
reduced to zero, be [ %], (b) on the Payment Date on which the principal amount
of the Class B Notes is reduced to zero, be the percentage equivalent of a
fraction, the numerator of which is the principal amount of the Class B Notes
immediately prior to such Payment Date, and the denominator of which is the
Principal Distributable Amount and (c) on any other Payment Date, be 0%.
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:
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(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 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 or such other successor 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 acting as 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 Fee") 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 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) to the Class B 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 B Noteholders'
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 (v) above), the Class A Noteholders'
Principal Distributable Amount for such Payment Date;
(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 (vi) above), any amounts due to the
Insurer under the terms of the Trust Agreement and under the Insurance
Agreement;
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(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) to the Class B Noteholders, from the Total Distribution
Amount (as such Total Distribution Amount has been reduced by payments
pursuant to clauses (i) through (viii) above), the Class B Noteholders'
Principal Distributable Amount for such Payment Date;
(xi) to the Collateral Agent, for deposit into the Spread
Account, the remaining Total Distribution Amount, if any.
For purposes hereof, the following terms shall have the following
meanings:
"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, (ii) the Class A-2 Noteholders' Interest Distributable
Amount and (iii) the Class A-3 Noteholders' Interest Distributable Amount.
"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 Note 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,
for any 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 preceding Payment Date (or, in the case of the first
Payment Date, the Closing Date) to but excluding the then current Payment Date,
and the denominator of which is 360.
"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 Note 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.
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"Class A-2 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-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 but excluding such first Payment Date,
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 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).
"Class A-3 Noteholders' Interest Carryover Shortfall" means, with
respect to any Payment Date, the excess of the Class A-3 Noteholders' Interest
Distributable Amount for the preceding Payment Date over the amount that was
actually deposited in the Note Distribution Account on such preceding Payment
Date on account of the Class A-3 Noteholders' Interest Distributable Amount,
plus interest on the amount of interest due but not paid to Class A-3
Noteholders on the preceding Payment Date, to the extent permitted by law, at
the Class A-3 Interest Rate from such preceding Payment Date to but excluding
the current Payment Date.
"Class A-3 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-3
Noteholders' Interest Carryover Shortfall for such Payment Date.
"Class A-3 Noteholders' Monthly Interest Distributable Amount" means,
(a) for the first Payment Date, an amount equal to the product of (i) the Class
A-3 Interest Rate, (ii) the initial principal balance of the Class A-3 Notes and
(iii) a fraction, the numerator of which is the actual number of days elapsed
from and including the Closing Date to but excluding such first Payment Date,
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-3
Interest Rate and (ii) the principal balance of the Class A-3 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 B Noteholders' Interest Carryover Shortfall" means, as of the
close of any Payment Date, the excess of the Class B Noteholders' Interest
Distributable Amount for such Payment Date, plus any outstanding Class B
Noteholders' Interest Carryover Shortfall from the preceding Payment Date, plus
interest on such outstanding Class B Noteholders' Interest Carryover Shortfall,
to the extent permitted by law, at the applicable Interest Rate from such
preceding Payment Date through the current Payment Date, over the amount of
interest distributed to the Class B Noteholders on such current Payment Date.
"Class B Noteholders' Principal Carryover Shortfall" means, as of the
close of any Payment Date, the excess of the Class B Noteholders' Principal
Distributable Amount plus any outstanding Class B Noteholders' Principal
Carryover Shortfall from the preceding Payment Date over the amount of principal
distributed to the Class B Noteholders on such current Payment Date.
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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 and the Class B 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 Noteholders. 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 and
the Collateral Agent and all principal and interest payments due to the
Noteholders 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 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 (vii) 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 (vii).
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 the Owner Trustee 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). Because the
Requisite Amount or the existence of the Spread Account may be modified or
terminated by the Insurer as described above, there is no assurance that funds
will be available in the Spread Account to pay principal of or interest on the
Notes in the event that collections on the Receivables and other amounts
available under the Indenture are insufficient to make any distribution of
principal of or interest on the Notes on any Payment Date.
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 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
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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 (vii) under "Description of the Notes -- 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
immediately 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 as the Insurer, in
its sole discretion, shall elect, 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, unless such Event of
Default arose from a claim being made on the Policy or from certain events of
bankruptcy, insolvency, receivership or liquidation of the Trust. 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 Notes, except that the Insurer, in its sole discretion, may
elect to pay all or any portion of the outstanding amount of the Notes in excess
thereof, plus accrued interest thereon. See "The Policy" herein.
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 the Notes; (ii) the
amount of the distribution allocable to interest on the Notes; (iii) the Pool
Balance and the Pool Factor 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 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 Noteholders' Interest Carryover Shortfall,
if applicable, and Noteholders' 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 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
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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
Notes-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 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
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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 outstanding, 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,
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readjustment of debt, marshaling of assets and liabilities, or similar
proceedings 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 a Servicer Termination Event 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 Class B Notes evidencing more than
50% of the outstanding principal balance of the Class B Notes (the "Class B Note
Majority") may, on behalf of all Noteholders waive any default by the Servicer
in the performance of its obligations under the Sale and Servicing Agreement and
its consequences,
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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.
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 Class B Notes
No distribution of interest will be made to Class B Noteholders on any
Payment Date until the Class A Notes have been paid the Noteholders' Interest
Distributable Amount and no distributions of principal will be made to Class B
Noteholders on any Payment Date until the Class A Notes have been paid the
Noteholders' Principal Distributable Amount for such Payment Date. This
subordination 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 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 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
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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. 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, (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, or (iii) any taxes,
withholding or other charge imposed with respect to any Class A Noteholder by
any governmental authority.
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.
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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 or Minneapolis, Minnesota, 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 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
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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 Certificates" in this Prospectus Supplement.
S-64
<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 [ ] (in thousands):
[ ]
(audited)
Deferred Premium Revenue (net of prepaid reinsurance premiums).........
Shareholder's Equity:
Common Stock........................................................
Additional Paid-In Capital..........................................
Unrealized Gain on Investments (net of deferred income taxes) ......
Accumulated Earnings................................................
Total Shareholder's Equity ............................................
Total Deferred Premium Revenue and Shareholder's Equity ...............
For further information concerning Financial Security, see the
Consolidated Financial Statements of Financial Security 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.
S-65
<PAGE>
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, the Class B Notes should be
characterized as debt (but if not characterized as debt, the Class B Notes will
be characterized as interests in a partnership), 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 Plan subject to ERISA to make investments that are
prudent, diversified and in accordance with the governing plan documents.
C ertain transactions involving the Trust might be deemed to constitute
prohibited transactions under ERISA and the Code with respect to a Benefit Plan
that purchased 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 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
Notes, including the reasonable expectation of purchasers of Notes that the
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 Notes are treated as an equity
interest for purposes of the Regulation, the acquisition or holding of 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 Notes by a
Benefit Plan depending on the
S-66
<PAGE>
type and circumstances of the plan fiduciary making the decision to acquire such
Notes. Included among these exemptions are: Prohibited Transaction Class
Exemption ("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 Note, each purchaser will be deemed
to represent that either (i) it is not acquiring the Notes with the assets of a
Benefit Plan; or (ii) the acquisition of the 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 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 [ ], 1997 (the "Underwriting Agreement") among CPS,
the Seller, and [
] (the "Underwriters"), the Seller has agreed to sell to the
Underwriters, and the Underwriters have agreed to purchase, Class A Notes in the
following respective amounts:
Underwriters Principal Amount
PaineWebber
BlackDiamond
Securities, LLC
Total.......................................................
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.
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 agents. 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
S-67
<PAGE>
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 a market maker 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.
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
Cer tain legal matters relating to the Securities will be passed upon
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.
EXPERTS
The consolidated balance sheets of the Insurer and Subsidiaries as of
December 31, 1996, 1995 and 1994 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-68
<PAGE>
INDEX OF TERMS (cont.)
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.
Alpha.......................................................................S-26
Actuarial Receivables.......................................................S-38
Alpha Program..............................................................S- 26
Benefit Plan..........................................................S-18, S-62
Business Day..........................................................S-8, S- 59
Cede.................................................................S- 17, S-43
Certificates................................................................S-24
Class A Noteholders........................................................S- 17
Class A Noteholders' Interest Distributable Amount.........................S- 50
Class A Noteholders' Principal Distributable Amount............S-9, S- 41, S- 48
Class A Notes................................................................S-1
Class A-1 Interest Rate......................................................S-8
Class A-1 Noteholders................................................S- 8, S- 41
Class A-2 Interest Rate......................................................S-8
Class A-2 Noteholders........................................................S-9
Class A-2 Notes..............................................................S-1
Class A-1 Pool Factor......................................................S-39
Class A-2 Pool Factor.......................................................S-39
Class A-3 Interest Rate......................................................S-8
Class A-3 Noteholders.......................................................S-41
Class A-3 Notes.........................................................S-1, S-4
Class A-3 Pool Factor.......................................................S-39
Class B Noteholders....................................................S-9, S-41
Class B Noteholders' Interest Distributable Amount..........................S-48
Class B Noteholders' Principal Distributable Amount....................S-9, S-48
Class B Notes...........................................................S-1, S-4
Closing Date.................................................................S-4
Collateral Agent............................................................S-52
Collection Account..........................................................S-45
Collection Period ..........................................................S-11
Commission...................................................................S-2
Contracts...................................................................S-25
CPS Purchase Agreement.................................................S-5, S-44
CPS Receivables..............................................................S-5
CPS.....................................................................S-1, S-4
Cutoff Date..................................................................S-5
Dealer Agreements...........................................................S-24
Dealers.....................................................................S-24
Delta Program...............................................................S-26
Determination Date..........................................................S-47
S-i
<PAGE>
INDEX OF TERMS (cont.)
Distribution Account.......................................................S- 45
DTC..............................................................S-3, S-17, S-41
ERISA.......................................................................S-62
Events of Default...........................................................S-53
Exchange Act.................................................................S-2
Financed Vehicles............................................................S-5
Financial Security.....................................................S-3, S-59
First Time Buyer Program....................................................S-26
Funding Period...............................................................S-7
holders...............................................................S-17, S-41
Holdings...............................................................S-2, S-60
IFCs.........................................................................S-6
Indenture Trustee............................................................S-1
Indenture...............................................................S-1, S-4
Insurance Agreement.........................................................S-19
Insurer Default.............................................................S-56
Insurer................................................................S-4, S-59
Interest Rate................................................................S-8
Interest Reserve Account...............................................S-7, S-46
Issuer.......................................................................S-4
Liquidated Receivable.......................................................S-47
Liquidation Proceeds........................................................S-47
Lock-Box Account......................................................S-15, S-45
Lock-Box Bank...............................................................S-15
Lock-Box Processor..........................................................S-15
Mandatory Redemption..................................................S-11, S-42
Master Spread Account Agreement.............................................S-52
Note Owners...........................................................S-17, S-41
Note Prepayment Amount................................................S-12, S-42
Noteholders............................................................S-8, S-41
Noteholders' Distributable Amount...........................................S-48
Notes........................................................................S-1
Obligors....................................................................S-24
Order.......................................................................S-58
Original Pool Balance........................................................S-5
Owner Trustee................................................................S-1
Participants................................................................S-43
Payment Date.................................................................S-8
Policy.................................................................S-1, S-14
Pool Balance................................................................S-39
Post Office Box.............................................................S-14
prepayments.................................................................S-39
Pre-Funded Amount ...........................................................S-7
Pre-Funding Account..........................................................S-7
S-ii
<PAGE>
INDEX OF TERMS (cont.)
Principal Balance ..........................................................S-48
Principal Distributable Amount........................................S-10, S-48
PTCE........................................................................S-62
Purchase Amount.............................................................S-47
Rating Agencies.............................................................S-18
Receipt.....................................................................S-58
Receivables..................................................................S-5
Received....................................................................S-58
Record Date.................................................................S-14
Recoveries..................................................................S-48
Registration Statement.......................................................S-2
Regulation..................................................................S-62
Requisite Amount............................................................S-13
Requisite Reserve Amount....................................................S-46
Rule of 78's Receivables....................................................S-38
Samco Purchase Agreement...............................................S-5, S-44
Samco Receivables ...........................................................S-5
Samco............................................................S-1, S-19, S-26
Scheduled Payments....................................................S-14, S-57
Scheduled Receivable Payment................................................S-48
Securities Act...............................................................S-2
Seller..................................................................S-1, S-4
Servicer Termination Event..................................................S-55
Servicer.....................................................................S-4
Servicing Assumption Agreement..............................................S-15
Servicing Fee Rate..........................................................S-15
Servicing Fee...............................................................S-46
Simple Interest Receivables.................................................S-38
Spread Account..............................................................S-52
Standard Program............................................................S-26
Standby Fee.................................................................S-15
Standby Servicer......................................................S-15, S-40
Sub-Prime Borrowers.........................................................S-25
Subsequent Closing Date......................................................S-6
Subsequent Cutoff Date.......................................................S-6
Subsequent Receivables.......................................................S-6
Subsequent Transfer Agreement...............................................S-20
Total Distribution Amount...................................................S-47
Trust Agreement..............................................................S-4
Trust Assets.................................................................S-5
Trustee Fee.................................................................S-49
Trust...................................................................S-1, S-4
UCC.........................................................................S-45
Underwriters................................................................S-63
S-iii
<PAGE>
INDEX OF TERMS (cont.)
Underwriting Agreement......................................................S-63
S-iv
<PAGE>
================================================================================
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.
-----------
S-v
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Supplement
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-23
The Trust Assets........................................................S-24
CPS's Automobile Contract Portfolio.....................................S-25
The Receivables Pool....................................................S-33
Yield Considerations....................................................S-39
Pool Factors and Other Information......................................S-39
Use of Proceeds.........................................................S-40
The Seller and CPS......................................................S-40
The Standby Servicer....................................................S-40
Description of the Notes................................................S-41
Registration of Notes...................................................S-43
Description of the Trust Documents......................................S-44
Credit Enhancement......................................................S-57
The Policy..............................................................S-57
The Insurer.............................................................S-59
Federal Income Tax Consequences.........................................S-62
ERISA Considerations....................................................S-62
Underwriting............................................................S-63
Legal Opinions..........................................................S-64
Experts ...............................................................S-64
Index of Terms...........................................................S-i
Prospectus
Prospectus Supplement......................................................2
Available Information......................................................2
Incorporation of Certain Documents by Reference............................2
Reports to Noteholders.....................................................3
Summary of Terms...........................................................4
Risk Factors..............................................................10
Formation of the Trust....................................................16
The Trust Assets..........................................................16
Acquisition of Receivables by the Seller..................................17
The Receivables...........................................................18
S-vi
<PAGE>
CPS's Automobile Contract Portfolio.......................................20
Pool Factors..............................................................20
Use of Proceeds...........................................................21
The Seller and CPS........................................................21
Description of the Certificates...........................................22
Certain Information Regarding the Certificates............................23
Description of the Trust Documents........................................31
Certain Legal Aspects of the Receivables..................................40
Federal Income Tax Consequences...........................................43
ERISA Considerations......................................................47
Methods of Distribution...................................................47
Legal Opinions............................................................48
Financial Information.....................................................48
Additional Information....................................................48
Defined Terms.............................................................49
-----------
Until 90 days after the date of this Prospectus Supplement, all dealers
effecting transactions in the Certificates 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.
[$ ]
CPS AUTO RECEIVABLES TRUST 1997-3
[ %] ASSET-BACKED
NOTES
CPS RECEIVABLES CORP.
(SELLER)
CONSUMER PORTFOLIO
SERVICES, INC.
(SERVICER)
-
PROSPECTUS SUPPLEMENT
-
PaineWebber Incorporated
Black Diamond Securities, LLC
S-vii
<PAGE>
August [ ], 1997
S-viii
<PAGE>
S-ix
<PAGE>
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 [ 15] 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 July 23, 1997.
<PAGE>
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.
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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 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."
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.
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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"). 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 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.
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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 (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
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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.
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
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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 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
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<PAGE>
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
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issuance of a Series of Securities specified
in the related 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
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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 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
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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.
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
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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, considerations
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 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 Supplement.
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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
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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.
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
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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 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
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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 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
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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, 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.
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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.
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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 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.
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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 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.
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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.
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
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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
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.
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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 the unpaid
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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.
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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 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
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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 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
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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.
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
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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
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
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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 or participations
in Receivables, the related Prospectus Supplement will describe the material
terms and conditions of such certificates or participations.
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 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
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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 with
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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.
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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 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
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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.
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
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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 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
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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 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.
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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
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
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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 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
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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 is not incidental to
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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
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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 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.
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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.
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
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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.
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.
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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 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.
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
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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.
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.
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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 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
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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 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 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
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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.
Foreign Holders. Interest paid (or accrued) to a Noteholder who is a
nonresident alien, foreign corporation or other non-United States person (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.
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
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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, 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 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
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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
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
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<PAGE>
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.
Section 708 Termination. Under Section 708 of the Code, the Trust will
be deemed to terminate for Federal income tax purposes if 50% or more of the
capital and profits interests in the Trust are sold or exchanged within a
12-month period. If such a termination occurs, the Trust will be considered to
distribute its assets to the partners, who would then be treated as
recontributing those assets to the Trust, as a new partnership. The Trust will
not comply with certain technical requirements that might apply when such a
constructive termination occurs. As a result, the Trust may be subject to
certain tax penalties and may incur additional expenses if it is required to
comply with those requirements. Furthermore, the Trust might not be able to
comply due to lack of data.
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).
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
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<PAGE>
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.
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.
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<PAGE>
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.
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
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<PAGE>
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.
No dealer, salesperson or other person has been authorized 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 the Seller
or the Underwriters. 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 in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. 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 herein is correct
as of any time subsequent to the date hereof or that there has been no change in
the affairs of the Trust or the Receivables since such date.
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<PAGE>
UNTIL (90 DAYS AFTER THE DATE OF THIS PROSPECTUS SUPPLEMENT), ALL
DEALERS EFFECTING TRANSACTIONS IN THE CERTIFICATES DESCRIBED IN THIS PROSPECTUS
SUPPLEMENT, 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.
$[ ]
CPS AUTO RECEIVABLES TRUST 1997- 3
[ ]% ASSET-BACKED CERTIFICATES, CLASS A
CPS RECEIVABLES CORP.
(SELLER)
CONSUMER PORTFOLIO SERVICES, INC.
(SERVICER)
PROSPECTUS SUPPLEMENT
PAINEWEBBER INCORPORATION
BLACK DIAMOND SECURITIES, LLC
, 1997
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<PAGE>
TABLE OF CONTENTS
Page
Prospectus Supplement......................................................2
Available Information......................................................2
Incorporation of Certain Documents by Reference............................3
Reports to Securityholders.................................................3
Summary of Terms...........................................................4
Risk Factors............................................................. 15
The Issuers............................................................. 22
The Trust Assets........................................................ 22
Acquisition of Receivables by the Seller................................. 23
The Receivables......................................................... 24
CPS's Automobile Contract Portfolio..................................... 27
Pool Factors............................................................. 27
Use of Proceeds.......................................................... 28
The Seller and Cps...................................................... 28
The Trustee............................................................. 29
Description of the Securities............................................ 29
Description of the Trust Documents....................................... 35
Certain Legal Aspects of the Receivables................................. 43
Federal Income Tax Consequences.......................................... 47
ERISA Considerations.................................................... 55
Plan of Distribution..................................................... 55
Legal Opinions........................................................... 55
Financial Information.................................................... 56
Index of Terms......................................................... ...i
-i-
<PAGE>
INDEX OF TERMS
Accrual Securities........................................................ 8
Actuarial Receivables.................................................... 25
Affiliate Purchase Agreement......................................... 23, 35
Affiliated Originator................................................ 10, 27
APR ....................................................... 25
Buyer's Guide ....................................................... 46
cash sale differential................................................... 46
Cede ....................................................... 11
CEDEL Participants................................................... 31, 33
Certificateholders....................................................... 39
Certificates .....................................................1, 4
chattel paper ....................................................... 19
Class .........................................................1
clearing agency ....................................................... 31
clearing corporation..................................................... 31
Closing Date ................................................... 10, 35
Collection Account....................................................... 36
Collection Period .........................................................6
Contracts ....................................................1, 27
Cooperative ....................................................... 33
CPS .........................................................4
Credit Enhancement....................................................... 21
Credit Enhancer ....................................................... 21
Cutoff Date ....................................................... 10
Dealer Agreements ....................................................... 22
Dealers ....................................................... 22
Definitive Securities.................................................... 34
Depositaries ....................................................... 31
Direct Participants...................................................... 21
Distribution Account..................................................... 36
DTC ....................................................... 11
Eligible Deposit Account................................................. 37
Eligible Institution..................................................... 37
Eligible Investments..................................................... 36
ERISA ....................................................... 13
Euroclear Operator....................................................... 33
Euroclear Participants................................................... 33
Event of Default ....................................................... 34
Exchange Act ....................................................3, 13
Federal Tax Counsel.............................................. 13, 47, 48
Financed Vehicles ....................................................1, 10
FTC Rule ....................................................... 46
Funding Period ....................................................... 10
Holder-in-Due-Course..................................................... 46
IFC's ....................................................... 27
Indenture .........................................................5
Indenture Trustee .........................................................5
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<PAGE>
INDEX OF TERMS (cont.)
Indirect Participants................................................ 21, 31
Initial Receivables...................................................... 11
Insolvency Event ....................................................... 41
Insolvency Laws ....................................................... 18
Interest Rate .....................................................2, 7
Investment Earnings...................................................... 36
Investment Income ....................................................... 11
Issuer .................................................1, 4, 22
Lock-Box Account ....................................................... 38
Lock-Box Processor....................................................... 38
national statistical rating organizations................................ 13
Noteholders ....................................................... 39
Notes .....................................................1, 4
Obligors ....................................................... 22
Participants ....................................................... 31
Payment Date .........................................................6
Policy .........................................................1
Pool Balance ....................................................... 28
Pool Factor ....................................................... 27
Post Office Box ....................................................... 38
Pre-Funded Amount ....................................................... 10
Pre-Funding Account...................................................... 10
prepayment ....................................................... 15
Prospectus Supplement......................................................1
Purchase Agreement....................................................... 23
Purchase Amount ....................................................... 24
Rating Agencies ....................................................... 13
Receivables .....................................................1, 9
Receivables Pool ....................................................... 22
Record Date .........................................................6
Registration Statement.....................................................2
Relief Act ....................................................... 21
Residual Interest ........................................................ 9
Rule of 78's ....................................................... 25
Rule of 78's Receivables................................................. 25
Rules ....................................................... 32
Sale and Servicing Agreement............................................. 23
Securities .........................................................1
Securities Act .........................................................2
Security Balance ........................................................ 7
Securityholder ....................................................6, 32
Securityholders .........................................................6
Seller .........................................................4
Senior Securities ........................................................ 8
Series ....................................................1, 29
Servicer ......................................................1, 4
Servicer Default ....................................................... 41
-ii-
<PAGE>
INDEX OF TERMS (cont.)
Servicing Agreement........................................................5
Servicing Fee ....................................................... 38
Simple Interest Receivables.............................................. 25
Sponsor .........................................................4
Standby Servicer ....................................................... 37
Strip Securities .........................................................8
sub-prime ....................................................... 15
Sub-Prime Borrowers...................................................... 27
Subordinate Securities.................................................... 8
Subsequent Receivables................................................... 10
Subsequent Transfer Date................................................. 17
Subservicer .........................................................4
sum of monthly payments.................................................. 25
sum of periodic balances................................................. 25
Terms and Conditions..................................................... 34
The Receivables Pool..................................................... 17
Trust ......................................................1, 4
Trust Accounts ....................................................... 36
Trust Agreement .........................................................4
Trust Assets .....................................................1, 4
Trust Documents ....................................................5, 35
Trustee .........................................................5
Underwriting Agreement................................................... 55
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CPS AUTO RECEIVABLES TRUST 199[ ]
[$ ] [ %] Class A-1 Asset Backed Notes
[$ ] [ %] Class A-2 Asset Backed Notes
[$ ] Floating Rate Class A-3 Asset Backed Notes
[[$ ] [ %] Class B Asset Backed Notes]
FORM OF UNDERWRITING AGREEMENT
[ ]
[UNDERWRITER]
Ladies and Gentlemen:
CPS Receivables Corp. (the "Company"), a California corporation and
wholly-owned subsidiary of Consumer Portfolio Services, Inc., a California
corporation ("CPS"), proposes to issue and sell to you in your capacities as the
Underwriter(s) (the "Underwriters"), $[ ] aggregate principal amount of CPS Auto
Receivables Trust 199[-] [ ]% Asset Backed Notes, Class A-1 (the "Class A-1
Notes"), $[ ] aggregate principal amount of [ ]% Asset Backed Notes, Class A-2
(the "Class A-2 Notes"), $[ ] aggregate principal amount of Floating Rate Asset
Backed Notes, Class A-3 (the "Class A-3 Notes" and together with the Class A-1
Notes and the Class A-2 Notes [the "Notes") and $[ ] aggregate principal amount
of [ ]% Asset Backed Notes, Class B (the "Class B Notes" and, together with the
Class A Notes,] the "Notes"). The Notes will be issued by CPS Auto Receivables
Trust 199[ ] (the "Trust") pursuant to the Indenture (the "Indenture") dated as
of [ ], 199[ ] among [the Company], and Norwest Bank Minnesota, National
Association, as trustee (the "Indenture Trustee"). The assets of the Trust will
include, among other things, a pool of retail installment sale contracts and all
rights and obligations thereunder (collectively, the "Receivables"), with
respect to Rule of 78's Receivables, all payments due thereunder after [ ], (the
"Cutoff Date"), with respect to Simple Interest Receivables, all payments
received thereunder after the Cutoff Date, security interests in the new and
used automobiles, light trucks, vans and minivans securing the Receivables,
certain bank accounts and the proceeds thereof, the Policy (for the benefit of
the Noteholders only) and the right of
<PAGE>
the Company to receive certain insurance proceeds and certain other property,
all as more specifically described in the Sale and Servicing Agreement, dated as
of [ ], among [the Trust, CPS, as servicer (in such capacity, the "Servicer")
the Company, as Seller and [Norwest Bank Minnesota National Association], as
trustee (the "Trustee").
The Class A-1 Notes will be issued in an aggregate principal amount of
$[ ] and will bear interest at an annual rate equal to [ ]% (the "Class A-1
Interest Rate"). The Class A-2 Notes will be issued in an aggregate principal
amount of $[ ] and will bear interest at an annual rate equal to [ ]% (the
"Class A-2 Interest Rate"). The Class A-3 Notes will be issued in an aggregate
principal amount of $[ ] and will bear interest at a rate equal to [one-month]
[two-month] [three-month] [six-month] LIBOR [other] plus [ ]% (the "Class A-3
Interest Rate"). The Class B Notes will be issued in an aggregate principal
amount of $[ ] and will bear interest at an annual rate equal to [ ]% (the
"Class B Interest Rate"). The aggregate principal amount of the Notes will equal
[ %] of the aggregate principal balance of the Receivables as of the Cutoff
Date. Calculations of interest for each class of Notes will be in accordance
with the provisions of the Sale and Servicing Agreement.
[The Certificates will be issued in an aggregate principal amount of $[
] which is equal to [ %] of the aggregate principal balance of the Receivables
as of the Cutoff Date. The Certificates will bear interest at an annual rate
equal to [ ]% (the "Pass-Through Rate") in accordance with the provisions of the
Trust Agreement].
To the extent not otherwise defined herein, capitalized terms used
herein shall have the meanings assigned to such terms in the Indenture or, if
not defined therein, in the Sale and Servicing Agreement.
As the Underwriters, each of you have advised the Company that (a) you
are authorized to enter into this Agreement and (b) each of you is willing,
acting severally and not jointly, to purchase the aggregate principal amount of
the Notes set forth opposite your respective names in Schedule I hereto.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company, with respect to the Company, and CPS, with respect to CPS,
and Samco, with respect to Samco, and both the Company and CPS in all other
instances, each represents and warrants to, and agrees with each Underwriter, as
of the date hereof and as of the Issuance, that:
(a) CPS has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (File No. 333-25301),
including a Base
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<PAGE>
Prospectus, for registration of the offering and sale of the Notes under the
Securities Act of 1933, as amended (the "1933 Act"), and the rules and
regulations (the "1933 Act Regulations") of the Commission thereunder which
conforms with the requirements of the 1933 Act and the 1933 Act Regulations. CPS
has complied with the conditions for the use of a Registration Statement on Form
S-3. CPS may have filed with the Commission one or more amendments to such
Registration Statement, and may have used a Preliminary Final Prospectus, each
of which has been previously furnished to each of the Underwriters. The offering
of the Notes is a Delayed Offering and, although the Base Prospectus may not
include all the information with respect to the Notes and the offering thereof
required by the 1933 Act and the 1933 Act Regulations to be included in the
Final Prospectus, the Base Prospectus includes all such information required by
the 1933 Act and the 1933 Act Regulations to be included therein as of the
Effective Date. The Company will hereafter file with the Commission pursuant to
Rules 415 and 424(b), a final supplement to the Base Prospectus relating to the
Notes and the offering thereof. As filed, such final supplement shall include
all required information with respect to the Notes and, except to the extent the
Underwriters shall agree in writing to any modification thereof, shall be in all
substantive respects in the form furnished to each of the Underwriters prior to
the Execution Time or, to the extent not completed at the Execution Time, shall
be in such form with only such specific additional information and other changes
(beyond that contained in the Base Prospectus and any Preliminary Final
Prospectus) as the Company has advised each of the Underwriters, prior to the
Execution Time, will be included or made therein.
(b) On the Effective Date, the Registration Statement did or will, and
when the Final Prospectus is first filed (if required) in accordance with Rule
424(b) and on the Closing Date (as defined below), the Final Prospectus (as
supplemented and amended as of the Closing Date) will, comply in all material
respects with the applicable requirements of the 1933 Act, the 1933 Act
Regulations, the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and the rules and regulations thereunder (the "1934 Act Regulations"); on the
Effective Date, the Registration Statement did not or will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading; and, on the Effective Date, the Final Prospectus, if not filed
pursuant to Rule 424(b), did not or will not, and on the date of any filing
pursuant to Rule 424(b) and on the Closing Date, the Final Prospectus (as
supplemented and amended in the case of the Closing Date) will not, include any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein not misleading; provided, however, that
each of CPS and the Company makes no representations or warranties as to the
information contained in or omitted from the Registration Statement or the Final
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with information specified in Section 9(b) furnished in writing to
the Company by or on behalf of any Underwriter specifically for inclusion in the
Registration Statement or the Final Prospectus (or any supplement or amendment
thereto) or the information regarding the Insurer set forth under the heading
"THE INSURER" in or incorporated by reference in the Preliminary Final
Prospectus and the Final Prospectus.
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(c) The terms which follow, when used in this Agreement, shall have the
meanings indicated.
"Base Prospectus" shall mean the prospectus referred to in
Section 1(a) hereof contained in the Registration Statement at the
Effective Date.
"Delayed Offering" shall mean the offering of the Notes
pursuant to Rule 415 which does not commence promptly after the
effective date of the Registration Statement, with the result that only
information required pursuant to Rule 415 need be included in such
Registration Statement at the effective date thereof with respect to
the Notes.
"Effective Date" shall mean each date that the Registration
Statement and any post-effective amendment(s) thereto became or become
effective and each date after the date hereof on which a document
incorporated by reference in the Registration Statement is filed by the
Company.
"Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.
"Final Prospectus" shall mean the prospectus supplement
relating to the Notes that is first filed pursuant to Rule 424(b) under
the 1933 Act after the Execution Time, together with the Base
Prospectus.
"Preliminary Final Prospectus" shall mean any preliminary
prospectus supplement to the Base Prospectus which describes the Notes
and the offering thereof and is used prior to filing of the Final
Prospectus.
"Prospectus" shall mean, collectively, the Base Prospectus,
any Preliminary Final Prospectus and the Final Prospectus.
"Registration Statement" shall mean (i) the Registration
Statement referred to in Section 1(a) hereof, including all documents
incorporated therein by reference, exhibits, financial statements and
notes thereto and related schedules and other statistical and financial
data and information included therein, as amended at the Execution Time
(or, if not effective at the Execution Time, in the form in which it
shall become effective); (ii) in the event any post-effective amendment
thereto becomes effective prior to the Closing Date, such Registration
Statement as so amended; and (iii) in the event any Rule 462(b)
Registration Statement becomes effective prior to the Closing Date,
such Registration Statement as so modified by the Rule 462(b)
Registration Statement, from and after the effectiveness thereof. Such
term shall include any Rule 430A Information deemed to be included
therein at the Effective Date as provided by Rule 430A.
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"Rule 415", "Rule 424", "Rule 430A" and "Regulation S-K" refer
to such rules or regulation under the 1933 Act.
"Rule 430A Information" means information with respect to the
Notes and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" means a Registration
Statement filed pursuant to Rule 462(b) under the 1933 Act relating to
the offering covered by the Registration Statement (File No.
333-25301).
Any reference herein to the Registration Statement, the Base
Prospectus, any Preliminary Final Prospectus or the Final Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the 1934 Act on or before
the Effective Date of the Registration Statement or the issue date of the Base
Prospectus, any Preliminary Final Prospectus or the Final Prospectus, as the
case may be; and any reference herein to the terms "amend", "amendment" or
"supplement" with respect to the Registration Statement, the Base Prospectus,
any Preliminary Final Prospectus or the Final Prospectus shall be deemed to
refer to and include the filing of any document under the 1934 Act after the
Effective Date of the Registration Statement or the issue date of the Base
Prospectus, any Preliminary Final Prospectus or the Final Prospectus, as the
case may be, deemed to be incorporated therein by reference.
(d) Each of the Company and CPS is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and is duly qualified to transact business as a foreign corporation in each
jurisdiction in which it is required to be so qualified and in which the failure
to so qualify, taken in the aggregate, would have a material adverse effect on
it.
(e) Samco Acceptance Corp. ("Samco") is a corporation duly organized,
validly existing and in good standing under the laws of Delaware and is duly
qualified to transact business as a foreign corporation in each jurisdiction in
which it is required to be so qualified and in which failure to so qualify,
taken in the aggregate, would have a material adverse affect on it.
(f) Since the respective dates as of which information is given in the
Registration Statement and the Final Prospectus, there has not been any material
adverse change, or any development which could reasonably be expected to result
in a material adverse change, in or affecting the financial position,
shareholders' equity or results of operations of the Company, CPS or Samco or
the Company's or CPS's or Samco's ability to perform its obligations under this
Agreement, the Indenture, the Trust Agreement or the Sale and Servicing
Agreement or any of the other Basic Documents (as defined below), other than as
set forth or incorporated by reference in the Registration Statement or as set
forth in the Final Prospectus.
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(g) Except for the registration of the Notes under the 1933 Act and
such consents, approvals, authorizations, registrations or qualifications as may
be required under the 1934 Act and applicable State securities or Blue Sky laws
in connection with the purchase and distribution of the Notes by the
Underwriters or the filing requirements of Rule 430A or Rule 424(b) under the
1933 Act, no consent, approval, authorization or order of or declaration or
filing with any governmental authority is required for the issuance or sale of
the Notes or the consummation of the other transactions contemplated by this
Agreement or the Sale and Servicing Agreement or any of the other Basic
Documents, except such as have been duly made or obtained or as will be duly
made or obtained on or before the Closing Date.
(h) The Commission has not issued an order preventing or suspending the
use of any Prospectus relating to the proposed offering of the Notes, nor
instituted proceedings for that purpose. The Registration Statement contains,
and the Final Prospectus together with any amendments or supplements thereto
will contain, all statements which are required to be stated therein by, and
will conform to, the requirements of the 1933 Act and the 1933 Act Regulations.
(i) The documents (other than the financial statements of the Insurer,
as to which no representation is made by CPS or the Company) which are
incorporated by reference in the Registration Statement and the Final Prospectus
or from which information is so incorporated by reference, as of the dates they
were filed with the Commission, complied in all material respects with the
requirements of the 1933 Act, the 1933 Act Regulations, the 1934 Act and the
1934 Act Regulations, as applicable, and any documents so filed and incorporated
by reference subsequent to the Effective Date shall, when they are filed with
the Commission, conform in all material respects with the requirements of the
1934 Act and the 1934 Act Regulations.
(j) Each of the Company, CPS and Samco confirms as of the date hereof
that it is in compliance with all provisions of Section 1 of Laws of Florida,
Chapter 92-198, An Act Relating to Disclosure of doing Business with Cuba, and
each of the Company, CPS and Samco further agrees that if it commences engaging
in business with the government of Cuba or with any person or affiliate located
in Cuba after the date the Registration Statement becomes or has become
effective with the Commission or with the Florida Department of Banking and
Finance (the "Department"), whichever date is later, or if the information
included in the Final Prospectus, if any, concerning either the Company's, CPS's
or Samco's business with Cuba or with any person or affiliate located in Cuba
changes in any material way, each of the Company, CPS and Samco, as the case may
be, will provide the Department notice of such business or change, as
appropriate, in a form acceptable to the Department.
(k) All representations and warranties of the Company and CPS and Samco
contained in each of the Basic Documents, including this Agreement, will be true
and correct in all material respects when delivered and as of the Closing Date
and are hereby
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incorporated by reference as if each such representation and warranty were
specifically made herein.
(l) Each of the Company and CPS and Samco has full power and authority
(corporate and other) to enter into and perform its obligations under this
Agreement, the Indenture, the Trust Agreement, the Sale and Servicing Agreement,
the CPS Purchase Agreement, the Samco Purchase Agreement, the Insurance
Agreement, the Indemnification Agreement, the Spread Account Agreement, the
Lock-Box Agreement and the Servicing Assumption Agreement (collectively, the
"Basic Documents"), and to consummate the transactions contemplated hereby and
thereby.
(m) On or before the Closing Date, the direction by the Company to the
Indenture Trustee to authenticate the Notes will have been duly authorized by
the Company, the Notes will have been duly executed and delivered by the Company
and, when authenticated by the Indenture Trustee in accordance with the
Indenture and delivered and paid for pursuant to this Agreement, will be duly
issued and will entitle the holder thereof to the benefits and security afforded
by the Indenture, subject as to the enforcement of remedies (x) to applicable
bankruptcy, insolvency, reorganization, moratorium, and other similar laws
affecting creditors' rights generally and (y) to general principles of equity
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law).
(n) This Agreement and each Basic Document to which the Company or CPS
or Samco is a party has been duly authorized, executed and delivered by each of
the Company and CPS and Samco, as applicable, and constitutes a valid and
binding agreement of each of the Company and CPS and Samco, as applicable,
enforceable against the Company and CPS and Samco in accordance with its terms,
subject as to the enforcement of remedies (x) to applicable bankruptcy,
insolvency, reorganization, moratorium, and other similar laws affecting
creditors' rights generally, (y) to general principles of equity (regardless of
whether the enforcement of such remedies is considered in a proceeding in equity
or at law) and (z) with respect to rights of indemnity under this Agreement, to
limitations of public policy under applicable securities laws.
(o) None of the Company, CPS or Samco is in breach or violation of its
Articles of Incorporation or Charter, as applicable, or By-Laws or in default in
the performance or observance of any credit or security agreement or other
agreement or instrument to which it is a party or by which it or its properties
may be bound, or in violation of any applicable law, statute, regulation, order
or ordinance of any governmental body having jurisdiction over it, which breach
or violation would have a material adverse effect on the ability of the Company
or CPS or Samco to perform its obligations under any of the Basic Documents or
the Notes.
(p) The issuance and delivery of the Notes, the consummation of any
other of the transactions contemplated herein or in the Indenture, the Trust
Agreement, the Sale and Servicing Agreement or in any of the other Basic
Documents or the fulfillment of the terms
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<PAGE>
of this Agreement, the Indenture, the Trust Agreement, or the Sale and Servicing
Agreement or any of the other Basic Documents, subject to the registration of
the Notes under the 1933 Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under the 1934 Act and
applicable State securities or Blue Sky laws in connection with the purchase and
distribution of the Notes by the Underwriters or the filing requirements of Rule
430A or Rule 424(b) under the 1933 Act, do not and will not conflict with or
violate any term or provision of the Articles of Incorporation or Charter, as
applicable, or By-Laws of the Company or CPS or Samco, any statute, order or
regulation applicable to the Company or CPS or Samco of any court, regulatory
body, administrative agency or governmental body having jurisdiction over the
Company or CPS or Samco and do not and will not conflict with, result in a
breach or violation or the acceleration of or constitute a default under or
result in the creation or imposition of any lien, charge or encumbrance upon any
of the property or assets of the Company or CPS or Samco (other than in favor of
the Indenture Trustee, the Indenture Trustee or as otherwise permitted under the
Indenture or the Sale and Servicing Agreement) pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or CPS or Samco is a party or by which the
Company or CPS or Samco may be bound or to which any of the property or assets
of the Company or CPS or Samco may be subject except for conflicts, violations,
breaches, accelerations and defaults which would not, individually or in the
aggregate, be materially adverse to the Company or CPS or Samco or materially
adverse to the transactions contemplated by this Agreement or the Basic
Documents.
(q) Any taxes, fees and other governmental charges due on or prior to
the Closing Date (including, without limitation, sales taxes) in connection with
the execution, delivery and issuance of this Agreement, the Indenture, the Trust
Agreement, the Sale and Servicing Agreement, the other Basic Documents and the
Notes have been or will have been paid at or prior to the Closing Date.
(r) The Receivables are chattel paper as defined in the Uniform
Commercial Code as in effect in the State of California.
(s) Under generally accepted accounting principles, CPS will report its
transfer of the CPS Receivables to the Company pursuant to the CPS Purchase
Agreement as a sale of the CPS Receivables, Samco will report its transfer of
the Samco Receivables to the Company pursuant to the Samco Purchase Agreement as
a sale of the Samco Receivables and the Company will report its transfer of the
Receivables to the Indenture Trustee pursuant to the Pooling and Servicing
Agreement as a sale of the Receivables. Each of CPS and the Company has been
advised by [ ], Certified Public Accountants, that the transfers pursuant to the
CPS Purchase Agreement and the Samco Purchase Agreement will be so classified
under generally accepted accounting principles in accordance with Statement No.
77 of the Financial Accounting Standards Board (December 1983) and with
Statement No. 125 of the Financial Accounting Standards Board (June 1996).
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<PAGE>
(t) Pursuant to the CPS Purchase Agreement and the Samco Purchase
Agreement, CPS and Samco are transferring to the Company ownership of the
Receivables, the security interests in the Financed Vehicles securing the
Receivables, certain other property related to the Receivables and the proceeds
of each of the foregoing (collectively, the "Trust Assets"), and, immediately
prior to the transfer thereof to the Trust, the Company will be the sole owner
of all right, title and interest in, and has good and marketable title to, the
Receivables and the other Trust Assets. The assignment of the Receivables and
the other Trust Assets, including all the proceeds thereof, to the Trust
pursuant to the Sale and Servicing Agreement, vests in the Trust all interests
which are purported to be conveyed thereby, free and clear of any liens,
security interests or encumbrances.
(u) Immediately prior to the transfer of the Receivables to the Trust,
the Company's interest in the Receivables and the proceeds thereof shall have
been perfected, UCC-1 financing statements (the "Financing Statements")
evidencing (i) the transfer of the CPS Receivables to the Seller shall have been
filed in the Office of the Secretary of State of the State of California, (ii)
the transfer of the Samco Receivables to the Seller shall have been filed in the
Office of the Secretary of State of the State of Texas and (iii) the transfer of
the Receivables to the Trust shall have been filed in the Office of the
Secretary of State of the State of California and there shall be no unreleased
statements affecting the Receivables filed in either such office other than the
Financing Statements. If a court concludes that the transfer of the Receivables
from the Company to the Trust is a sale, then the interest of the Trust in the
Receivables, the other Trust Assets and the proceeds thereof, will be perfected
by virtue of the Financing Statements having been filed in the office of the
Secretary of State of the State of California. If a court concludes that such
transfer is not a sale, the Sale and Servicing Agreement and the transactions
contemplated thereby constitute a grant by the Company to the Trust of a valid
security interest in the Receivables, the other Trust Assets and the proceeds
thereof, which security interest will be perfected by virtue of the Financing
Statements having been filed in the office of the Secretary of State of the
State of California. No filing or other action, other than the filing of the
Financing Statements in the offices of the Secretaries of State of the States of
California and Texas referred to above and the execution and delivery of the
Sale and Servicing Agreement, is necessary to perfect the interest or the
security interest of the Trust in the Receivables and the proceeds thereof
against third parties.
(v) The Indenture is not required to be qualified under the Trust
Indenture Act.
(w) None of the Company, CPS, Samco or the Trust is required to be
registered as an "investment company" under the Investment Company Act.
2. PURCHASE, SALE AND DELIVERY OF THE NOTES.
Subject to the terms and conditions and in reliance upon the
representations, warranties and covenants herein set forth, the Company agrees
to sell to each Underwriter, and each Underwriter agrees, severally and not
jointly, to purchase from the Company the
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initial principal amount of the Notes set forth opposite such Underwriter's name
in Schedule I hereto, at the purchase price equal to [ ]% of such initial
principal amount.
The Company will deliver against payment of the purchase price the
Notes in the form of one or more permanent global Notes in definitive form (the
"Global Notes") deposited with the Indenture Trustee as custodian for The
Depository Trust Company ("DTC") and registered in the name of Cede & Co., as
nominee for DTC. Interests in any Global Notes will be held only in book-entry
form through DTC except in the limited circumstances described in the Final
Prospectus. Payment for the Notes will be made by the Underwriters by wire
transfer of same day funds to an account previously designated to the
Underwriters by the Company at the offices of Mayer, Brown & Platt, 1675
Broadway, New York, New York 10019, at 9:30 a.m. (New York time) on [ ], 199[ ],
or at such other time as is mutually agreed (such time being herein referred to
as the "Closing Date") against delivery of the Global Notes representing all of
the Notes. The Global Notes will be made available for checking at the above
office of Mayer, Brown & Platt at least 24 hours prior to the Closing Date.
As used herein, "business day" means a day on which the New York Stock
Exchange is open for trading and on which banks in New York, California and
Minnesota are open for business and are not permitted by law or executive order
to be closed.
3. OFFERING BY THE UNDERWRITERS.
The Company is advised by the Underwriters that they propose to make a
public offering of the Notes, as set forth in the Final Prospectus, from time to
time as and when the Underwriters deem advisable after the Registration
Statement becomes effective. The Company agrees that the Underwriters may, but
are not obligated to, make a market in the Notes and that any such market making
by an Underwriter may be discontinued at any time in the sole discretion of such
Underwriter.
4. COVENANTS OF THE COMPANY AND CPS.
The Company, and CPS (if so stated), covenants and agrees with the
several Underwriters that:
(a) The Company will use its best efforts to cause the Registration
Statement, if not effective at the Execution Time, and any amendment thereto, to
become effective as soon as reasonably practicable thereafter or, if the
procedure in Rule 430A is followed, prepare and timely file with the Commission
under Rule 424(b) a Final Prospectus containing information previously omitted
at the time of effectiveness of the Registration Statement in reliance upon Rule
430A. Prior to the termination of the offering of the Notes the Company will not
file any amendment of the Registration Statement or amendment or supplement
(including the Final Prospectus or any Preliminary Final Prospectus) to the Base
Prospectus
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or any Rule 462(b) Registration Statement unless the Company has furnished to
each of the Underwriters a copy for its review prior to filing and will not file
any such proposed amendment or supplement to which any of the Underwriters
reasonably objects and which is not in compliance with the 1933 Act Regulations.
The Company will promptly advise the Underwriters (i) when the Registration
Statement, if not effective at the Execution Time, and any amendment thereto,
shall have become effective; (ii) when the Final Prospectus, and any supplement
thereto, shall have been filed with the Commission pursuant to Rule 424(b);
(iii) when, prior to termination of the offering of the Notes, any amendment to
the Registration Statement shall have been filed or become effective; (iv) of
any request by the Commission for any amendment of the Registration Statement or
supplement to the Final Prospectus or for any other additional information; (v)
of the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the institution of any proceeding for that
purpose; and (vi) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Notes for sale in any jurisdiction
or the initiation of any proceeding for such purpose. The Company will use its
best efforts to prevent the issuance of any such stop order or the suspension of
any such qualification and, if issued or suspended, to obtain as soon as
possible the withdrawal thereof.
(b) Prior to the filing thereof with the Commission, the Company will
submit to each of the Underwriters, for its approval after reasonable notice
thereof, such approval not to be unreasonably withheld or delayed, a copy of any
post-effective amendment to the Registration Statement, any Rule 462(b)
Registration Statement proposed to be filed or a copy of any document proposed
to be filed under the 1934 Act before the termination of the offering of the
Notes by the Underwriters if such document would be deemed to be incorporated by
reference into the Registration Statement or Final Prospectus.
(c) The Company will deliver to, or upon the order of, the
Underwriters, from time to time, as many copies of any Preliminary Final
Prospectus as the Underwriters may reasonably request. The Company will deliver
to, or upon the order of, the Underwriters during the period when delivery of a
Final Prospectus is required under the 1933 Act, as many copies of the Final
Prospectus, or as thereafter amended or supplemented, as the Underwriters may
reasonably request. The Company will deliver to the Underwriters at or before
the Closing Date, two signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will deliver to
the Underwriters such number of copies of the Registration Statement (including
such number of copies of the exhibits filed therewith that may reasonably be
requested), including documents filed under the 1934 Act and deemed to be
incorporated by reference therein, and of all amendments thereto, as the
Underwriters may from time to time reasonably request.
(d) The Company will, and will cause the Trust to, comply with the 1933
Act, the 1933 Act Regulations, the 1934 Act and the 1934 Act Regulations, so as
to permit the completion of the distribution of the Notes as contemplated in
this Agreement and the Final Prospectus. If during the period in which a
prospectus is required by law to be delivered by an Underwriter or dealer in
connection with the sale of any Notes, any event shall occur as a
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result of which, in the judgment of the Company or in the reasonable opinion of
the Underwriters, it becomes necessary to amend or supplement the Final
Prospectus in order to make the statements therein, in the light of the
circumstances existing at the time the Final Prospectus is delivered to a
purchaser, not misleading, or, if it is necessary at any time to amend or
supplement the Final Prospectus to comply with any law or to file under the 1934
Act any document which would be deemed to be incorporated by reference in the
Registration Statement to comply with the 1933 Act or the 1934 Act, the Company
will promptly notify each of the Underwriters and will promptly either (i)
prepare and file, or cause to be prepared and filed, with the Commission an
appropriate amendment to the Registration Statement or supplement to the Final
Prospectus or (ii) prepare and file, or cause to be prepared and filed, with the
Commission (at the expense of the Company) an appropriate filing under the 1934
Act which shall be incorporated by reference in the Final Prospectus so that the
Final Prospectus as so amended or supplemented will not, in the light of the
circumstances when it is so delivered, be misleading, or so that the Final
Prospectus will comply with applicable law.
(e) The Company will cooperate with the Underwriters in endeavoring to
qualify the Notes for sale under the laws of such jurisdictions as the
Underwriters may designate and will maintain such qualifications in effect so
long as required for the distribution of the Notes, except that the Company will
not be obligated to qualify the Notes in any jurisdiction in which such
qualification would require the Company to qualify to do business as a foreign
corporation, file a general or unlimited consent to service of process or
subject itself to taxation in any such jurisdiction to which it is not subject
and will arrange for the determination of the legality of the Notes for purchase
by institutional investors. The Company will, from time to time, prepare and
file such statements, reports, and other documents as are or may be required to
continue such qualifications in effect for so long a period as the Underwriters
may reasonably request for distribution of the Notes.
(f) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Notes in such a manner as would
require the Company, CPS or the Trust to register as an investment company under
the 1940 Act.
(g) Until the retirement of the Notes, or until such time as the
Underwriters shall cease to maintain a secondary market in the Notes, whichever
occurs first, the Company will deliver to each Underwriter the annual statements
of compliance and the annual independent certified public accountant's reports
furnished to the Indenture Trustee pursuant to the Pooling and Servicing
Agreement, as soon as such statements and reports are furnished to the Indenture
Trustee.
(h) The Company, CPS and Samco shall, from the date hereof through and
including the Closing Date, furnish, or cause to be furnished, or make
available, or cause to be made available, to each Underwriter or its counsel
such additional documents and information regarding each of them and their
respective affairs as each Underwriter may from time to time reasonably request
and which the Company, CPS or Samco possesses or
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can acquire without unreasonable effort or expense, including any and all
documentation requested in connection with such Underwriter's due diligence
efforts regarding information in the Registration Statement and the Final
Prospectus and in order to evidence the accuracy or completeness of any of the
conditions contained in this Agreement; and all actions taken by the Company or
CPS to authorize the sale of the Notes shall be reasonably satisfactory in form
and substance to each Underwriter.
(i) The Company will cause the Trust to make generally available to
Noteholders as soon as practicable, but no later than sixteen months after the
Effective Date, an earnings statement of the Trust covering a period of at least
twelve consecutive months beginning after such Effective Date and satisfying the
provisions of Section 11(a) of the Act (including Rule 158 promulgated
thereunder).
(j) So long as any of the Notes are outstanding, the Company will
furnish to the Underwriters copies of all reports or other communications
(financial or otherwise) furnished or made available to Noteholders, and deliver
to the Underwriters during such period, (i) as soon as they are available,
copies of any reports and financial statements filed by or on behalf of the
Trust or the Company with the Commission pursuant to the Securities Exchange Act
of 1934, as amended, and (ii) such additional information concerning the
business and financial condition of the Company and CPS as the Underwriter may
from time to time reasonably request.
(k) On or before the Closing Date, the Company and CPS and Samco shall
cause the respective computer records of the Company and CPS and Samco relating
to the Receivables to be marked to show the Indenture Trustee's absolute
ownership of the Receivables, and from and after the Closing Date neither the
Company nor CPS nor Samco shall take any action inconsistent with the Indenture
Trustee's ownership of such Receivables, other than as expressly permitted by
the Pooling and Servicing Agreement.
(l) To the extent, if any, that the ratings provided with respect to
the Notes by either of the Rating Agencies is conditional upon the furnishing of
documents or the taking of any other actions by the Company, CPS or Samco, CPS
shall, or shall cause the Company or Samco to, furnish such documents and take
any such other actions.
(m) On the Closing Date, the Company and CPS shall cause the Insurer to
issue the Policy to the Indenture Trustee for the benefit of the holders of the
Notes in form and substance satisfactory to each Underwriter.
5. [RESERVED]
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6. COSTS AND EXPENSES.
The Company and CPS will pay upon receipt of a written request therefor
all costs, expenses and fees incident to the performance of the obligations of
the Company and CPS under this Agreement and will, jointly and severally,
reimburse the Underwriters for all reasonable out-of-pocket expenses, including
reasonable fees and disbursements of counsel, reasonably incurred in connection
with investigating, marketing and proposing to market the Notes or in
contemplation of performing the Underwriters' obligations hereunder and
including, without limiting the generality of the foregoing, the following: (i)
accounting fees of the Company; (ii) the fees and disbursements of Mayer, Brown
& Platt; (iii) the cost of printing and delivering to, or as requested by, the
Underwriters copies of the Registration Statement, Preliminary Final
Prospectuses, the Final Prospectus, this Agreement, the listing application in
respect of the Notes, the Blue Sky Survey, if any, and any supplements or
amendments thereto; (iv) the filing fees of the Commission; (v) any fees charged
by the Rating Agencies for rating the Notes; and (vi) the fees and expenses of
the Indenture Trustee, including the fees and disbursements of counsel for the
Indenture Trustee, in connection with the Notes, the Pooling and Servicing
Agreement and the other Basic Documents to which the Indenture Trustee is a
party and the expenses, including the fees and disbursements of counsel for the
Underwriters, incurred in connection with the qualification of the Notes under
State securities or Blue Sky laws. If this Agreement shall not be consummated
because the conditions in Section 7 hereof are not satisfied, or because this
Agreement is terminated by each of the Underwriters pursuant to Section 12
hereof (other than on the basis of a default by the Underwriters pursuant to
Section 10 hereof), or by reason of any failure, refusal or inability on the
part of the Company or CPS to perform any undertaking or satisfy any condition
of this Agreement or to comply with any of the terms hereof on its part to be
performed, unless such failure to satisfy said condition or to comply with said
terms be due to the default or omission of any Underwriter, then the Company and
CPS, jointly and severally, shall reimburse the Underwriters for reasonable
out-of-pocket expenses, including reasonable fees and disbursements of counsel,
reasonably incurred in connection with investigating, marketing and proposing to
market the Notes or in contemplation of performing their obligations hereunder
upon receipt of a written request therefor; but the Company shall not in any
event be liable to any of the Underwriters for damages on account of loss of
anticipated profits from the sale by them of the Notes. Except to the extent
expressly set forth in this Section 6, the Underwriters shall each be
responsible for their own costs and expenses, including the fees and expenses of
their counsel.
7. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS.
The several obligations of the Underwriters to purchase and pay for the
Notes on the Closing Date are subject to the accuracy in all material respects
as of the Closing Date of the representations and warranties of the Company, CPS
and Samco contained herein, to the performance by the Company, CPS and Samco of
their respective covenants and obligations hereunder and to the following
additional conditions precedent:
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(a) If the Registration Statement has not become effective prior to the
Execution Time, unless the Underwriters agree in writing to a later time, the
Registration Statement will become effective not later than (i) 5:30 p.m. New
York City time on the date of determination of the public offering price of the
Notes, if such determination occurred at or prior to 3:00 p.m. New York City
time on such date or (ii) 12:00 noon New York City time on the business day
following the day on which the public offering price of the Notes was
determined, if such determination occurred after 3:00 p.m. New York City time on
such date; if filing of the Final Prospectus, or any supplement thereto, is
required pursuant to Rule 424(b), the Final Prospectus, and any such supplement,
shall have been filed within the applicable time period prescribed for such
filing by Rule 424(b), and any request of the Commission for additional
information (to be included in the Registration Statement or otherwise) shall
have been disclosed to the Underwriters and complied with to their reasonable
satisfaction. No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued and no
proceedings for that purpose shall have been taken or, to the knowledge of the
Company, shall be contemplated by the Commission and no injunction, restraining
order, or order of any nature by a Federal or state court of competent
jurisdiction shall have been issued as of the Closing Date which would prevent
the issuance of the Notes.
(b) On or prior to the date of this Agreement and on or prior to the
Closing Date, each Underwriter shall have received a letter or letters, dated as
of [ ], and as of the Closing Date, respectively, of [ ], Certified Public
Accountants, substantially in the form of the drafts to which each of the
Underwriters has previously agreed and otherwise in form and substance
satisfactory to each Underwriter and
its counsel.
(c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business or properties of
the Company, CPS or any Affiliate of the Company or CPS which, in the judgment
of each Underwriter, materially impairs the investment quality of the Notes or
the ability of CPS to act as Servicer or (ii) any downgrading in the rating of
any debt securities or preferred stock of the Company, CPS or any Affiliate
thereof by any "nationally recognized statistical rating organization" (as
defined for purposes of Rule 436(g) under the Securities Act), or any public
announcement that any such organization has under surveillance or review its
rating of any debt securities or preferred stock of the Company, CPS or any
Affiliate thereof (other than an announcement with positive implications of a
possible upgrading, and no implication of a possible downgrading of such
rating); (iii) any suspension or limitation of trading in securities generally
on the New York Stock Exchange, or any setting of minimum prices for trading on
such exchange, or any suspension of trading of any securities of the Company or
CPS or any Affiliate of the Company or CPS on any exchange or in the
over-the-counter market; (iv) any banking moratorium declared by Federal, New
York or California authorities; or (v) any outbreak or escalation of major
hostilities in which the United States is involved, any declaration of war by
Congress or any other substantial national or international calamity,
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emergency or change in financial markets if, in the judgment of each
Underwriter, the effect of any such outbreak, escalation, declaration, calamity,
emergency or change makes it impractical or inadvisable to market the Notes on
the terms and in the manner set forth in the Final Prospectus.
(d) The Company, CPS and Samco shall have furnished each Underwriter
with such number of conformed copies of such opinions, Notes, letters and
documents as it may reasonably request.
(e) On the Closing Date, each of the Basic Documents and the Notes
shall have been duly authorized, executed and delivered by the parties thereto,
shall be in full force and effect and no default shall exist thereunder, and the
Indenture Trustee shall have received a fully executed copy thereof or, with
respect to the Notes, a conformed copy thereof. The Basic Documents and the
Notes shall be substantially in the forms heretofore provided to each
Underwriter.
(f) Each Underwriter shall have received a certificate of the Indenture
Trustee, as to the due authorization, execution and delivery of the Pooling and
Servicing Agreement by the Indenture Trustee.
(g) Each Underwriter shall have received evidence satisfactory to such
Underwriter that the Notes have been rated "Aaa" by Moody's and "AAA" by
Standard & Poor's.
(h) Each Underwriter shall have received from [
], special counsel for CPS, Samco and the Company, opinions dated the Closing
Date, addressed to such Underwriter, in a form satisfactory to such Underwriter.
(i) Each Underwriter shall have received from [ ], special Federal tax
counsel for the Company, an opinion dated the Closing Date, addressed to such
Underwriter, with respect to the status of the Trust for federal income tax
purposes.
(j) Each Underwriter shall have received from [ ], an opinion dated the
Closing Date, addressed to such Underwriter, with respect to the validity of the
Notes and such other related matters as such Underwriter shall require and the
Company or CPS shall have furnished or caused to be furnished to such counsel
such documents as they may reasonably request for the purpose of enabling them
to pass upon such matters.
(k) Each Underwriter shall have received from counsel to the Indenture
Trustee, the Standby Servicer and the Collateral Agent (which counsel shall be
reasonably acceptable to such Underwriter), an opinion addressed to such
Underwriter dated the Closing Date, in form and substance satisfactory to such
Underwriter and its counsel.
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(l) Each Underwriter shall have received from counsel to the Owner
Trustee, which counsel shall be reasonably acceptable to such Underwriter, an
opinion addressed to such Underwriter, dated the Closing Date, in form and
substance satisfactory to such Underwriter and its counsel.
(m) Each Underwriter shall have received from special Delaware counsel
to the Trust, which counsel shall be reasonably acceptable to such Underwriter,
an opinion addressed to such Underwriter, dated the Closing Date, in form and
substance satisfactory to such Underwriter and its counsel.
(n) Each Underwriter shall have received from counsel to the Insurer,
which counsel shall be reasonably acceptable to such Underwriter, an opinion
addressed to such Underwriter, dated the Closing Date, in form and substance
satisfactory to such Underwriter and its counsel.
(o) At the Closing Date, each Underwriter shall have received any and
all opinions of counsel to the Company and CPS supplied to the Rating Agencies
and the Insurer relating to, among other things, the interest of the Indenture
Trustee in the Receivables and the other Trust Assets and the proceeds thereof
and certain monies due or to become due with respect thereto, certain bankruptcy
issues and certain matters with respect to the Notes. Any such opinions shall be
addressed to each Underwriter or shall indicate that such Underwriter may rely
on such opinions as though they were addressed to such Underwriter, and shall be
dated the Closing Date.
(p) At the Closing Date, the Company, CPS and Samco shall have
furnished to each Underwriter a certificate, dated the Closing Date, of the
President, the Chief Financial Officer or any Vice President of the Company, CPS
or Samco, as the case may be, in which each such officer shall state that: (i)
the representations and warranties of the Company, CPS or Samco, as applicable,
in this Agreement are true and correct on and as of the Closing Date; (ii) the
Company, CPS or Samco, as applicable, has complied with all agreements and
satisfied all conditions on its part required to be performed or satisfied
hereunder and under each of the other Basic Documents at or prior to the Closing
Date; (iii) the representations and warranties of the Company, CPS or Samco, as
applicable, in each of the Basic Documents are true and correct as of the dates
specified therein; (iv) with respect to the certificate delivered by CPS, the
Registration Statement has become effective under the 1933 Act and no stop order
suspending the effectiveness of the Registration Statement has been issued, and
no proceedings for such purpose have been taken or are, to his or her knowledge,
contemplated by the Commission; (v) with respect to the certificates delivered
by CPS and the Company, he or she has carefully examined the Registration
Statement and the Final Prospectus and, in his or her opinion, as of the
Effective Date of the Registration Statement, the statements contained in the
Registration Statement were true and correct, and as of the Closing Date the
Registration Statement and the Final Prospectus do not contain any untrue
statement of a material fact or omit to state a material fact with respect to
the Company, CPS or Samco necessary in order to make the statements therein, in
light of the
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circumstances under which they were made, not misleading, and since the
Effective Date of the Registration Statement, no event has occurred with respect
to the Company, CPS or Samco which should have been set forth in a supplement to
or an amendment of the Final Prospectus which has not been so set forth in such
supplement or amendment; and (vi) with respect to the certificate delivered by
the Company and CPS, subsequent to the respective dates as of which information
is given in the Registration Statement and the Final Prospectus, there has been
no material adverse change, or any development with respect to the Company, CPS
or Samco which could reasonably be expected to result in a material adverse
change, in or affecting particularly the business or properties of the Trust,
the Company, CPS or Samco except as contemplated by the Final Prospectus or as
described in such certificate.
(q) Each Underwriter shall have received evidence satisfactory to such
Underwriter that the Insurer shall have issued the Policy to the Indenture
Trustee for the benefit of the Noteholders in form and substance satisfactory to
such Underwriter.
(r) Each Underwriter shall have received evidence satisfactory to it
that, on or before the Closing Date, the Financing Statements have been filed in
(i) the office of the Secretary of State of California reflecting the assignment
of the interest of CPS in the CPS Receivables and the related other Trust Assets
and the proceeds thereof to the Company, (ii) the office of the Secretary of
State of Texas reflecting the assignment of the interest of Samco in the Samco
Receivables and the related other Trust Assets and the proceeds thereof to the
Company and (iii) the office of the Secretary of State of California reflecting
the transfer of the interest of the Company in the Receivables and the other
Trust Assets and the proceeds thereof to the Indenture Trustee.
(s) All proceedings in connection with the transactions contemplated by
this Agreement, the Pooling and Servicing Agreement and each of the other Basic
Documents and all documents incident hereto or thereto shall be satisfactory in
form and substance to each Underwriter.
(t) The Company shall have furnished to the Underwriters such further
certificates and documents confirming the representations and warranties,
covenants and conditions contained herein and related matters as the
Underwriters may reasonably have requested.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects reasonably satisfactory to the Underwriters and to Mayer,
Brown & Platt, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 7
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Underwriters by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date. In such event, the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 6 and 9 hereof).
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8. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to sell and deliver the portion of the
Notes required to be delivered as and when specified in this Agreement are
subject to the condition that, at the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and in effect
or proceedings therefor initiated or threatened.
9. INDEMNIFICATION.
(a) The Company and CPS, jointly and severally, agree to indemnify and
hold harmless each Underwriter, its directors, officers, employees and agents
and each person, if any, who controls any Underwriter within the meaning of the
1933 Act or the 1934 Act, against any losses, claims, damages or liabilities to
which such Underwriter or any such other person may become subject under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, the Base Prospectus, any Preliminary
Final Prospectus, the Final Prospectus or any amendment or supplement thereto
(other than information contained therein under the heading "the Insurer" and
information incorporated by reference therein), or (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made; and will reimburse each Underwriter
and each such person within 30 days of presentation of a written request
therefor for any legal or other expenses reasonably incurred by such Underwriter
in connection with investigating or defending any such loss, claim, damage or
liability, action or proceeding or in responding to a subpoena or governmental
inquiry related to the offering of the Notes, whether or not such Underwriter or
such person is a party to any action or proceeding; provided, however, that
neither the Company nor CPS will be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement, or omission or alleged omission
made in the Registration Statement, the Base Prospectus, any Preliminary Final
Prospectus, the Final Prospectus, or any amendment or supplement thereto, in
reliance upon and in conformity with written information furnished to the
Company or CPS, as the case may be, by, through or on behalf of the Underwriters
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which the Company or CPS may otherwise have. The
indemnity agreement of the Company and CPS in this Agreement is subject to the
condition that, insofar as it relates to any untrue statement, alleged untrue
statement, omission or alleged omission made in the Registration Statement, the
Base Prospectus, any Preliminary Final Prospectus or in the Final Prospectus, or
any amendment or supplement thereto, such indemnity agreement shall not inure to
the benefit of any Underwriter if such Underwriter failed to send or give a copy
of the Final Prospectus (as amended or supplemented, if the Company or CPS, as
the case may be, shall have furnished any amendment or supplement thereto to
such Underwriter, which corrected such untrue statement or omission that is the
basis of the loss, liability, claim, damage or expense for
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which indemnification is sought) to the person asserting any such loss,
liability, claim, damage or expense at such time as the Final Prospectus, as so
amended or supplemented, was required under the 1933 Act to be delivered to such
person.
(b) (i) Each Underwriter, severally and not jointly, will indemnify and
hold harmless each of the Company and CPS, each of their directors, officers,
employees and agents and each person, if any, who controls the Company within
the meaning of the 1933 Act or the 1934 Act, to the same extent as the foregoing
indemnity from each of the Company and CPS to any Underwriter, its directors,
officers, employees and agents and each person who controls any such
Underwriter, but only with respect to untrue statements or omissions or alleged
untrue statements or omissions made in the Registration Statement, the Base
Prospectus, any Preliminary Final Prospectus, the Final Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company or CPS, as the case may be, by, through or
on behalf of such Underwriter specifically for use in the preparation of the
Registration Statement, the Base Prospectus, any Preliminary Final Prospectus,
the Final Prospectus or any amendment or supplement thereto. This indemnity
agreement will be in addition to any liability which such Underwriter may
otherwise have. The Company and the Underwriters acknowledge and agree that the
only information furnished or to be furnished by any Underwriter to the Company
for inclusion in the Registration Statement, the Base Prospectus, any
Preliminary Final Prospectus or the Final Prospectus, or any amendments or
supplements thereto, consists of the information set forth in the [last
paragraph on the front cover page] concerning the terms of the offering by the
Underwriters (insofar as such information relates to the Underwriters), legends
required by Item 502(d) of Regulation S-K under the 1933 Act and the information
under the caption "Methods of Distribution" in the Final Prospectus and under
the caption "Underwriting" in the Final Prospectus.
(ii) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, CPS, the other Underwriter; the
respective officers, directors, employees and agents of any such party, and each
person who controls the Company, CPS or such other Underwriter within the
meaning of the 1933 Act or the 1934 Act against any losses, claims, damages or
liabilities to which such person may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (a) any untrue
statement or alleged untrue statement of any material fact contained in the
Computational Materials (as defined below) provided by such indemnifying
Underwriter or (b) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances in which they were made, not
misleading (except, in each case, to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission results from the
failure of the Company Provided Information to be accurate in all material
respects); and will reimburse each such party within 30 days of written request
therefor for any legal or other expenses reasonably incurred by such person in
connection with investigating or defending any such loss, claim, damage or
liability, action or proceeding or in responding to a subpoena or governmental
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inquiry related thereto, whether or not such person is a party to any action or
proceeding. The obligations of each Underwriter under this subsection (ii) shall
be in addition to any other liability which such Underwriter may otherwise have.
For purposes hereof, the term "Computational Materials" means information
provided by an Underwriter to a prospective purchaser of Notes, which
information is not part of the Prospectus. For purposes hereof, the term
"Company Provided Information" means [the information contained in the table on
page [ ] of the Preliminary Final Prospectus dated [ ], 1997 as to the weighted
average APR of the Receivables, the weighted average remaining term of the
Receivables and the aggregate principal balance of the Receivables as of the
Preliminary Cutoff Date].
(iii) Each Underwriter shall, no later than the date on which
the Prospectus is required to be filed pursuant to Rule 424, provide to CPS for
filing with the Commission on Form 8-K a copy of any Computational Materials
delivered by such Underwriter to any prospective purchaser of Notes.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 9, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. The failure to give such notice shall not
relieve the indemnifying party or parties from any liability which it or they
may have to the indemnified party for indemnity or contribution or otherwise
than on account of the provisions of Section 9(a) or (b), except and only to the
extent such omission so to notify shall have materially prejudiced the
indemnifying party under Section 9(a) or (b). In case any such proceeding shall
be brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof, with
counsel reasonably satisfactory to such indemnified party and shall pay as
incurred the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel at its own expense. Notwithstanding the foregoing, the indemnifying
party shall pay as incurred (or within 30 days of presentation of an invoice)
the fees and expenses of the counsel retained by the indemnified party in the
event (i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel, (ii) the indemnified party has
reasonably concluded (based on advice of counsel) that there may be legal
defenses available to it or other indemnified parties that are different from or
in addition to those available to the indemnifying party, (iii) the named
parties to any such proceeding (including any impleaded parties) include both
the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them or (iv) the indemnifying party shall have
failed to assume the defense and employ counsel acceptable to the indemnified
party within a reasonable period of time after notice of commencement of the
action. It is understood that the indemnifying party shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees and expenses of more than one separate firm for all such
indemnified
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parties. Such firm shall be designated in writing by the Underwriters in the
case of parties indemnified pursuant to Section 9(a) and by the Company in the
case of parties indemnified pursuant to Section 9(b). The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final judgment
for the plaintiff, the indemnifying party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such settlement or
judgment. In addition, the indemnifying party will not, without the prior
written consent of the indemnified party (which consent shall not be
unreasonably withheld or delayed), settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action or proceeding of
which indemnification may be sought hereunder (whether or not any indemnified
party is an actual or potential party to such claim, action or proceeding)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action
or proceeding.
(d) If the indemnification provided for in this Section 9 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 9(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company and CPS
on the one hand and the Underwriters on the other from the offering of the
Notes. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company or CPS on the one hand and the Underwriters on
the other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Underwriters
(in each case as set forth in the table on the cover page of the Final
Prospectus). As between the Underwriters, the relative benefits received by
[Underwriter], on the one hand, and [Underwriter], on the other, shall be deemed
to be in the same proportion as the respective portions of the total
underwriting discounts and commissions received by each of them. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
on the one hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Company, CPS and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this Section 9(d) were determined by
pro rata allocation (even if
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the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this Section 9(d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) referred to above in this Section
9(d) shall be deemed to include any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim, subject to the limitations set forth above. Notwithstanding the
provisions of this Section 9(d), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Notes purchased by such Underwriter and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Underwriters' obligations in this Section
9(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement, the Base
Prospectus, any Preliminary Final Prospectus, the Final Prospectus, or any
supplement or amendment thereto, each party against whom contribution may be
sought under this Section 9 hereby consents to the jurisdiction of any court
having jurisdiction over any other contributing party, agrees that process
issuing from such court may be served upon it by any other contributing party
and consents to the service of such process and agrees that any other
contributing party may join it as an additional defendant in any such proceeding
in which such other contributing party is a party.
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 9 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
obligations of the Company and CPS pursuant to Section 6, the indemnity and
contribution agreements contained in this Section 9 and the representations and
warranties of each of the Company and CPS set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter, the Company or CPS, their
respective directors, officers, employees or agents or any persons controlling
any Underwriter or the Company, (ii) acceptance of any Notes and payment thereof
or hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter, the Company or CPS, their respective directors, officers, employees
or agents, or any person controlling any Underwriter, the Company or CPS, shall
be entitled to the benefits of the indemnity, contribution and reimbursement
agreements contained in this Section 9.
10. DEFAULT BY THE UNDERWRITERS.
If on the Closing Date, [defaulting Underwriter] shall fail to purchase
and pay for all or any portion of the Notes which such Underwriter has agreed to
purchase and pay for on such date (otherwise than by reason of any default on
the part of the Company, CPS or
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Samco), then [non-defaulting Underwriter] shall use reasonable efforts to
procure within 36 hours thereafter one or more additional Underwriters to
purchase from the Company such amounts as may be agreed upon and upon the terms
set forth herein, the Notes which the defaulting Underwriter failed to purchase.
If during such 36 hours [non-defaulting Underwriter] shall not have procured one
or more additional Underwriters to purchase the Notes agreed to be purchased by
the defaulting Underwriter, then (a) if the aggregate amount of Notes with
respect to which such default shall occur does not exceed 10% of the Notes
covered hereby, [non-defaulting Underwriter] shall be obligated to purchase the
Notes which [defaulting Underwriter] failed to purchase, or (b) if the aggregate
principal balance of Notes with respect to which such default shall occur
exceeds 10% of the principal balance of Notes covered hereby, the Company or
(provided [non-defaulting Underwriter] has not defaulted) [non-defaulting
Underwriter] will have the right, by written notice given within the next 36-
hour period to the parties to this Agreement, to terminate this Agreement
without liability on the part of the non-defaulting Underwriter or of the
Company except to the extent provided in Section 9 hereof. In the event of a
default by [defaulting Underwriter] as set forth in this Section 10, the Closing
Date may be postponed for such period, not exceeding seven days, as the
non-defaulting Underwriter may determine in order that the required changes in
the Registration Statement or in the Final Prospectus or in any other documents
or arrangements may be effected. For purposes of this Agreement, the term
"Underwriter" includes any person substituted for a defaulting Underwriter. Any
action taken under this Section 10 shall not relieve [defaulting Underwriter]
from liability in respect of any default of such Underwriter under this
Agreement.
11. NOTICES.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows:
if to the Underwriters, to each of the following addresses: [ ]
if to the Company, at the following address:
CPS Receivables Corp.
2 Ada
Irvine, California 92618
Attention: Charles Bradley, Jr.
Facsimile No.: (714) 753-6805;
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or, if sent to CPS at the following address:
Consumer Portfolio Services, Inc.
2 Ada
Irvine, California 92618
Attention: Charles Bradley, Jr.
Facsimile No.: (714) 753-6805
12. TERMINATION.
This Agreement may be terminated by the Underwriters by notice by each
of the Underwriters to the Company as follows:
(a) at any time prior to the Closing Date, if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Final Prospectus, any material adverse change or
any development involving a prospective material adverse change in the business,
properties, results of operations, financial condition or business prospects of
CPS, Samco or the Company, whether or not arising in the ordinary course of
business, (ii) any outbreak or escalation of hostilities or declaration of war
or national emergency or other national or international calamity or crisis or
change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in each of the Underwriters' reasonable
judgment, make it impracticable to market the Notes or to enforce contracts for
the sale of the Notes, (iii) any suspension of trading in securities generally
on the New York Stock Exchange or the American Stock Exchange or limitation on
prices (other than limitations on hours or numbers of days of trading) for
securities on either such Exchange, (iv) the enactment, publication, decree or
other promulgation of any statute, regulation, rule or order of any court or
other governmental authority which in each of the Underwriters' reasonable
opinion materially and adversely affects or may materially and adversely affect
the business or operations of the Company, (v) declaration of a banking
moratorium by United States or New York State authorities, (vi) any downgrading
or the giving of notice of any intended or potential downgrading in the rating
of the Company's debt securities by any "nationally recognized statistical
rating organization" (as defined for purposes of Rule 436(g) under the 1934
Act), (vii) the suspension of trading of the Common Stock by the Commission on
the New York Stock Exchange or (viii) the taking of any action by any
governmental body or agency in respect of its monetary or fiscal affairs which
in each of the Underwriters' reasonable opinion has a material adverse effect on
the securities markets in the United States; or
(b) as provided in Sections 7 and 10 of this Agreement.
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<PAGE>
13. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters, CPS, Samco and the Company and their respective successors,
executors, administrators, heirs and assigns, and the respective affiliates,
officers, directors, employees, agents and controlling persons referred to
herein, and no other person will have any right or obligation hereunder. No
purchaser of any of the Notes from any Underwriter shall be deemed a successor
or assign merely because of such purchase.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements
contained in this Agreement, the obligations of the Company and CPS under
Section 6 and the representations, warranties and covenants in this Agreement
shall remain in full force and effect regardless of (a) any termination of this
Agreement, (b) any investigation made by or on behalf of any Underwriter or the
Company, their respective directors, officers, employees or agents or any
controlling person of any Underwriter or the Company indemnified herein and (c)
delivery of and payment for the Notes under this Agreement.
Each Underwriter agrees that, prior to the date which is one year and
one day after the payment in full of all securities issued by the Company or by
a trust for which the Company was the depositor, which securities were rated by
any nationally recognized statistical rating organization, it will not institute
against, or join any other person in instituting against, the Company any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other proceedings under any Federal or state bankruptcy or similar law.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York without regard to the conflict of laws
provisions thereof. With respect to any claim arising out of this Agreement (i)
each party irrevocably submits to the exclusive jurisdiction of the courts of
the State of New York and the United States District Court for the Southern
District of New York, and (ii) each party irrevocably waives (1) any objection
which it may have at any time to the laying of venue of any suit, action or
proceeding arising out of or relating hereto brought in any such court, (2) any
claim that any such suit, action or proceeding brought in any such court has
been brought in any inconvenient forum and (3) the right to object, with respect
to such claim, suit, action or proceeding brought in any such court, that such
court does not have jurisdiction over such party. To the extent permitted by
applicable law, each Underwriter, the Company, Samco and CPS irrevocably waive
all right of trial by jury in any action, proceeding or counterclaim arising out
of or in connection with this Agreement or any matter arising hereunder.
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<PAGE>
This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof.
Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or
termination is sought.
The headings in this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
Any provision of this Agreement which is prohibited, unenforceable or
not authorized in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.
[Rest of page intentionally left blank.]
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<PAGE>
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the several
Underwriters in accordance with its terms.
Very truly yours,
CPS RECEIVABLES CORP.
By:
Name:
Title:
CONSUMER PORTFOLIO SERVICES, INC.
By:
Name:
Title:
SAMCO ACCEPTANCE CORP.
By:
Name:
Title:
<PAGE>
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written:
[ ]
By:
Name:
Title:
[ ]
By:
Name:
Title:
<PAGE>
SCHEDULE I
Schedule of Underwriters
Portion of Initial Principal
Amount of the Notes to be
Underwriter Purchased
[ ] $[ ]
[ ] [ ]
Total $[ ]
TRUST AGREEMENT
between
CPS RECEIVABLES CORP.,
[ LLC]
and
[ ]
Owner Trustee
Dated as of [ ]
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.
Definitions
SECTION 1.1. Capitalized Terms............................................1
SECTION 1.2. Other Definitional Provisions................................4
ARTICLE II.
Organization
SECTION 2.1. Name ................................................5
SECTION 2.2. Office ................................................5
SECTION 2.3. Purposes and Powers..........................................5
SECTION 2.4. Appointment of Owner Trustee.................................6
SECTION 2.5. Initial Capital Contribution of Trust Estate.................6
SECTION 2.6. Declaration of Trust.........................................7
SECTION 2.7. Liability of Depositor as Depositor..........................7
SECTION 2.8. Title to Trust Property......................................8
SECTION 2.9. Situs of Trust...............................................8
SECTION 2.10. Representations and Warranties of the Depositor..............9
SECTION 2.11. Federal Income Tax Allocations..............................10
SECTION 2.12. Covenants of the Depositor..................................12
SECTION 2.13. Covenants of the Owners.....................................13
ARTICLE III.
Certificates and Transfer of Interests
SECTION 3.1. Initial Ownership...........................................14
SECTION 3.2. The Certificates............................................14
SECTION 3.3. Authentication of Certificates..............................15
SECTION 3.4. Registration of Transfer and Exchange of Certificates.......15
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates...........16
SECTION 3.6. Persons Deemed Certificateholders...........................17
SECTION 3.7. Access to List of Certificateholders' Names and Addresses...17
SECTION 3.8. Maintenance of Office or Agency.............................17
SECTION 3.9. Disposition by the Depositor................................18
[SECTION 3.10. ERISA Restrictions........................................18
[SECTION 3.11. Book-Entry Certificates...................................18
[SECTION 3.12. Notices to Clearing Agency................................19
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Page
SECTION 3.13. Definitive Certificates....................................19
ARTICLE IV.
Voting Rights and Other Actions
SECTION 4.1. Prior Notice to Holders with Respect to Certain Matters.....20
SECTION 4.2. Action by Certificateholders with Respect to Certain
Matters.....................................................21
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy.....21
SECTION 4.4. Restrictions on Certificateholders' Power...................21
SECTION 4.5. Majority Control............................................22
SECTION 4.6. Rights of Insurer...........................................22
ARTICLE V.
Certain Duties
SECTION 5.1. Accounting and Records to the Noteholders,
Certificateholders, the Internal Revenue Service
and Others..................................................23
SECTION 5.2. Signature on Returns; Tax Matters Partner...................24
[SECTION 5.3. Underwriting Agreement......................................24
ARTICLE VI.
Authority and Duties of Owner Trustee
SECTION 6.1. General Authority...........................................24
SECTION 6.2. General Duties..............................................24
SECTION 6.3. Action upon Instruction.....................................25
SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions................................................26
SECTION 6.5. No Action Except under Specified Documents or
Instructions................................................26
SECTION 6.6. Restrictions ...............................................27
ARTICLE VII.
Concerning the Owner Trustee
SECTION 7.1. Acceptance of Trusts and Duties.............................27
SECTION 7.2. Furnishing of Documents.....................................29
SECTION 7.3. Representations and Warranties..............................29
SECTION 7.4. Reliance; Advice of Counsel.................................29
SECTION 7.5. Not Acting in Individual Capacity...........................30
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Page
SECTION 7.6. Owner Trustee Not Liable for Certificates or Receivables...30
SECTION 7.7. Owner Trustee May Own Certificates and Notes...............31
SECTION 7.8. Payments from Owner Trust Estate...........................31
SECTION 7.9. Doing Business in other Jurisdictions......................31
ARTICLE VIII.
Compensation of Owner Trustee
SECTION 8.1. Owner Trustee's Fees and Expenses..........................32
SECTION 8.2. Indemnification............................................32
SECTION 8.3. Payments to the Owner Trustee..............................32
SECTION 8.4. Non-recourse Obligations...................................32
ARTICLE IX.
Termination of Trust Agreement
SECTION 9.1. Termination of Trust Agreement.............................33
SECTION 9.2. Dissolution upon Bankruptcy of the Depositor...............34
ARTICLE X.
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1. Eligibility Requirements for Owner Trustee................35
SECTION 10.2. Resignation or Removal of Owner Trustee...................35
SECTION 10.3. Successor Owner Trustee...................................36
SECTION 10.4. Merger or Consolidation of Owner Trustee..................37
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee ............37
ARTICLE XI.
Miscellaneous
SECTION 11.1. Supplements and Amendments................................39
SECTION 11.2. No Legal Title to Owner Trust Estate in
Certificateholders........................................40
SECTION 11.3. Limitations on Rights of Others...........................41
SECTION 11.4. Notices ..............................................41
SECTION 11.5. Severability..............................................41
SECTION 11.6. Separate Counterparts.....................................42
SECTION 11.7. Assignments; Insurer......................................42
SECTION 11.8. No Petition ..............................................42
SECTION 11.9. No Recourse ..............................................42
SECTION 11.10. Headings ...............................................42
SECTION 11.11. GOVERNING LAW.............................................43
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Page
SECTION 11.12. Servicer ..............................................43
EXHIBITS
Exhibit A Form of Certificate
Exhibit B Form of Certificate of Trust
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<PAGE>
TRUST AGREEMENT dated as of [ ] between CPS RECEIVABLES CORP., a
California corporation (the "Depositor"), [ ], a [ ] limited liability company
("LLC"), and [ ], a Delaware banking corporation as Owner Trustee.
ARTICLE I.
Definitions
SECTION 1.1. Capitalized Terms. For all purposes of this Agreement, the
following terms shall have the meanings set forth below:
"Agreement" shall mean this Trust Agreement, as the same may be amended
and supplemented from time to time.
"Basic Documents" shall mean this Agreement, the Certificate of Trust,
the Sale and Servicing Agreement, the Spread Account Agreement, the Spread
Account Agreement Supplement, the Insurance Agreement, the Indenture and the
other documents and certificates delivered in connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in Section
3.10.
"Book Entry Certificates" means a beneficial interest in the
Certificates, ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 3.11.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss. 3801 et. seq. as the same may be amended from
time to time.
"Certificate" means a trust certificate evidencing the beneficial
interest of a Certificateholder in the Trust, substantially in the form of
Exhibit A attached hereto.
"Certificate Distribution Account" shall mean the account designated as
such as established and maintained pursuant to the Sale and Servicing Agreement.
"Certificate Percentage Interest" shall mean with respect to any
Certificate, the percentage interest of ownership in the Trust represented
thereby as set forth on the face thereof.
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<PAGE>
"Certificate of Trust" shall mean the Certificate of Trust in the form
of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the
register mentioned and the registrar appointed pursuant to Section 3.4.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee,
the principal corporate trust office of the Owner Trustee located at [ ], or at
such other address as the Owner Trustee may designate by notice to the
Certificateholders and the Depositor, or the principal corporate trust office of
any successor Owner Trustee (the address of which the successor owner trustee
will notify the Certificateholders and the Depositor).
"Definitive Certificates" shall mean either or both (as the context
requires) of (i) Book-Entry Certificates issued in certificated, fully
registered form as provided in Section 3.11 and (ii) Certificates issued in
certificated, fully registered form as provided in Section 3.13.
"Demand Note" shall have the meaning assigned to such term in Section
2.10(h).
"Depositor" shall mean the Depositor in its capacity as Depositor
hereunder.
"ERISA" shall have the meaning assigned to such term in Section 3.10.
"Expenses" shall have the meaning assigned to such term in Section 8.2.
"Holder" or "Certificateholder" shall mean the Person in whose name a
Certificate is registered on the Certificate Register.
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<PAGE>
"Indemnified Parties" shall have the meaning assigned to such term in
Section 8.2.
"Indenture" shall mean the Indenture dated as of [ ], among the Issuer
and [Norwest Bank Minnesota, National Association], as Trust Collateral Agent
and Trustee, as the same may be amended and supplemented from time to time.
"Minimum Net Worth" means at any time of determination, and with
respect to the Depositor, net worth equal to 10 percent of the sum of (i)
amounts paid to the Trust in respect of the issuance of Certificates and (ii)
amounts contributed to the capital of the Trust (including by sale of property
to the Trust for less than fair market value consideration). For the purpose of
the determination of Minimum Net Worth: (i) any Demand Note issued to the
Depositor shall be valued at par, (ii) assets subject to a lien shall be valued
at zero, (iii) Certificates or any interests in any entity taxable as a
partnership for federal income tax purposes shall be valued at zero, (iv)
investments shall be valued at their respective purchase prices plus accrued
interest, and (v) demand notes of CPS issued as contributions to the Depositor
in connection with its status as a Depositor of any other partnership formed
pursuant to trust agreements substantially similar to this Agreement shall be
valued at an amount equal to the excess, if any, of (a) the aggregate current
amount of all such demand notes over (b) 10% of the aggregate Certificate
Balance (as such terms are defined in the related trust agreement) of all
certificates issued by such partnerships, as of such date of determination.
"Owner" shall mean each Person who is the beneficial owner of a Book
Entry Certificate as reflected in the records of the Clearing Agency or if a
Clearing Agency Participant is not the Owner, then as reflected in records of a
Person maintaining an account with such Clearing Agency (directly or indirectly,
in accordance with the rules of such Clearing Agency).
"Owner Trust Estate" shall mean all right, title and interest of the
Trust in and to the property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing Agreement, all funds on deposit from time
to time in the Trust Accounts and the Certificate Distribution Account and all
other property of the Trust from time to time, including any rights of the Owner
Trustee and the Trust pursuant to the Sale and Servicing Agreement and the
Spread Account Agreement.
"Owner Trustee" shall mean [ ], a Delaware banking corporation, not in
its individual capacity but solely as owner trustee under this Agreement, and
any successor Owner Trustee hereunder.
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<PAGE>
"Record Date" shall mean with respect to any Payment Date, the close of
business on the last Business Day immediately preceding such Payment Date.
"Sale and Servicing Agreement" shall mean the Sale and Servicing
Agreement among the Trust, the Depositor, Consumer Portfolio Services, Inc. and
the Trust Collateral Agent, dated as of [ ], as the same may be amended and
supplemented from time to time.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Insurer" shall mean Financial Security Assurance Inc., or its
successor in interest.
"Spread Account" shall mean the Spread Account established and
maintained pursuant to the Spread Account Agreement.
"Spread Account Agreement" shall mean the Spread Account Agreement,
dated as of May 1, 1997, among the Depositor, the Insurer, and the Trust
Collateral Agent, as the same may be amended, supplemented or otherwise modified
in accordance with the terms thereof.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trust Collateral Agent" shall mean, initially, [Norwest Bank
Minnesota, National Association], in its capacity as collateral agent, including
its successors in interest, until and unless a successor Person shall have
become the Trust Collateral Agent pursuant to the Sale and Servicing Agreement,
and thereafter "Trust Collateral Agent" shall mean such successor Person.
SECTION 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined have the
meanings assigned to them in the Sale and Servicing Agreement or, if not defined
therein, in the Spread Account Agreement or in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document
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<PAGE>
made or delivered pursuant hereto unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles as in effect on the date of
this Agreement or any such certificate or other document, as applicable. To the
extent that the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
ARTICLE II.
Organization
SECTION 2.1. Name. There is hereby formed a trust to be known as "CPS
Auto Receivables Trust [ ]", in which name the Owner Trustee may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.
SECTION 2.2. Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address as the
Owner Trustee may designate by written notice to the Certificateholders and the
Depositor.
SECTION 2.3. Purposes and Powers. (a) The purpose of the Trust is, and
the Trust shall have the power and authority, to engage in the following
activities:
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<PAGE>
(i) to issue the Notes pursuant to the Indenture and the
Certificates pursuant to this Agreement, and to sell the Notes and the
Certificates;
(ii) with the proceeds of the sale of the Notes and the
Certificates, to fund the Pre-Funding Account, the Capitalized Interest
Account and the Spread Account and to pay the organizational, start-up
and transactional expenses of the Trust and to pay the balance to the
Depositor pursuant to the Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey
the Owner Trust Estate (other than the Certificate Distribution
Account) to the Trust Collateral Agent pursuant to the Indenture for
the benefit of the Insurer and the Indenture Trustee on behalf of the
Noteholders and to hold, manage and distribute to the
Certificateholders and the Depositor pursuant to the terms of the Sale
and Servicing Agreement any portion of the Owner Trust Estate released
from the Lien of, and remitted to the Trust pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage
in such other activities as may be required in connection with
conservation of the Owner Trust Estate and the making of distributions
to the Certificateholders and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.4. Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.5. Initial Capital Contribution of Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $99.00 and LLC hereby sells, assigns,
transfers, conveys and sets
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<PAGE>
over to the Owner Trustee, as of the date hereof, the sum of $1.00. The Owner
Trustee hereby acknowledges receipt of the foregoing contributions in trust from
the Depositor and LLC, as of the date hereof, which contribution shall
constitute the initial Owner Trust Estate and shall be deposited in the
Certificate Distribution Account. The Depositor shall pay organizational
expenses of the Trust as they may arise.
SECTION 2.6. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the use and benefit of the Owners, subject to
the conditions of the Trust under the Basic Documents. It is the intention of
the parties hereto that the Trust constitute a business trust under the Business
Statute and that this Agreement constitute the governing instrument of such
business trust. It is the intention of the parties hereto that (i) so long as
the Depositor is the Owner of 100 percent of the Certificates (either directly
or indirectly through wholly-owned non-corporate subsidiaries), for federal
income tax purposes and to the extent consistent with the laws of any other
jurisdiction other than California for which the characterization of the Trust
as an entity is relevant, the Trust shall be treated solely as a security device
and not as a separate entity, and (ii) if the Depositor is not the direct or
indirect Owner of 100 percent of the Certificates, then for federal income tax
purposes and for purposes of the laws of any other jurisdiction other than
California for which the characterization of the Trust as an entity is relevant,
and in all events for California franchise tax purposes, the Trust shall be
treated as a partnership and not as an association (or publicly traded
partnership) taxable as a corporation. The parties agree that, unless otherwise
required by appropriate tax authorities, the Trust will file or cause to be
filed annual or other necessary returns, reports and other forms, if any,
consistent with such characterization of the Trust. Effective as of the date
hereof, the Owner Trustee shall have all rights, powers and duties set forth
herein and to the extent not inconsistent herewith, in the Business Trust
Statute with respect to accomplishing the purposes of the Trust. The Owner
Trustee shall file the Certificate of Trust with the Secretary of State.
SECTION 2.7. Liability of Depositor as Depositor. (a) The Depositor
shall pay organizational expenses of the Trust as they may arise or shall upon
the request of the Owner Trustee, promptly reimburse the Owner Trustee for any
such expenses paid by the Owner Trustee. The Depositor shall also be liable
directly to and will indemnify each injured party for all losses, claims,
damages, liabilities and expenses of the Trust (including Expenses, to the
extent not paid out of the Owner Trust Estate) to the extent that the Depositor
would be liable if the Trust were a partnership under the Delaware Revised
Uniform Limited
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<PAGE>
Partnership Act in which the Depositor were a Depositor; provided, however, that
the Depositor shall not be liable for any losses incurred by a Holder in the
capacity of an investor in the Certificates or a Noteholder in the capacity of
an investor in the Notes; provided further, that the Depositor shall not be
liable to indemnify any injured party if such party has agreed that its recourse
against the Trust for any obligation or liability of the Trust to such party
shall be limited to the assets of the Trust. In addition, any third party
creditors of the Trust (other than in connection with the obligations described
in the preceding sentence for which the Depositor shall not be liable) shall be
deemed third party beneficiaries of this paragraph. The obligations of the
Depositor under this paragraph shall be evidenced by the Certificates described
in Section 3.9, which for separate purposes of the Business Trust Statute shall
be deemed to be a separate class of Certificates from all other Certificates
issued by the Trust.
(b) No Holder, other than to the extent set forth in clause (a), shall
have any personal liability for any liability or obligation of the Trust.
SECTION 2.8. Title to Trust Property. (a) Legal title to all the Owner
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction required title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in which
case title shall be deemed to be vested in the Owner Trustee, a co-trustee
and/or a separate trustee, as the case may be.
(b) The Holders shall not have legal title to any part of the
Trust Property. The Holders shall be entitled to receive distributions with
respect of their undivided ownership interest therein only in accordance with
Articles V and IX. No transfer, by operation of law or otherwise, of any right,
title or interest by any Certificateholder of its ownership interest in the
Owner Trust Estate shall operate to terminate this Agreement for the trusts
hereunder or entitle any transferee to an accounting or the transfer to it of
legal title to any part of the Trust Property.
SECTION 2.9. Situs of Trust. The Trust will be located and administered
in the State of Delaware. All bank accounts maintained by the Owner Trustee on
behalf of the Trust shall be located in the State of Delaware or the State of
Minnesota. Payments will be received by the Trust only in Delaware or Minnesota
and Payments will be made by the Trust only from Delaware or Minnesota. The
Trust shall not have any employees in any state other than Delaware; provided,
however, that nothing herein shall restrict or prohibit the Owner Trustee, the
Servicer or any agent of the Trust from having employees within or without
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<PAGE>
the State of Delaware. The only office of the Trust will be at the Corporate
Trust Office in Delaware.
SECTION 2.10. Representations and Warranties of the Depositor. The
Depositor makes the following representations and warranties on which the Owner
Trustee relies in accepting the Owner Trust Estate in trust and issuing the
Certificates and upon which the Insurer relies in issuing the Policy.
(a) Organization and Good Standing. The Depositor is duly organized and
validly existing as a California corporation with power and authority to own its
properties and to conduct its business as such properties are currently owned
and such business is presently conducted and is proposed to be conducted
pursuant to this Agreement and the Basic Documents.
(b) Due Qualification. The Depositor is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals, in all jurisdictions in which the ownership or lease of
its property, the conduct of its business and the performance of its obligations
under this Agreement and the Basic Documents requires such qualification.
(c) Power and Authority. The Depositor has the corporate power and
authority to execute and deliver this Agreement and to carry out its terms; the
Depositor has full power and authority to sell and assign the property to be
sold and assigned to and deposited with the Trust and the Depositor has duly
authorized such sale and assignment and deposit to the Trust by all necessary
corporate action; and the execution, delivery and performance of this Agreement
has been duly authorized by the Depositor by all necessary corporate action.
(d) No Consent Required. No consent, license, approval or authorization
or registration or declaration with, any Person or with any governmental
authority, bureau or agency is required in connection with the execution,
delivery or performance of this Agreement and the Basic Documents, except for
such as have been obtained, effected or made.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the certificate of
incorporation or by-laws of the Depositor, or any material indenture, agreement
or other instrument to which the Depositor is a party or by which it is bound;
nor result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than pursuant to
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the Basic Documents); nor violate any law or, to the best of the Depositor's
knowledge, any order, rule or regulation applicable to the Depositor of any
court or of any Federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Depositor or its
properties.
(f) No Proceedings. There are no proceedings or investigations pending
or, to its knowledge, threatened against it before any court, regulatory body,
administrative agency or other tribunal or governmental instrumentality having
jurisdiction over it or its properties (A) asserting the invalidity of this
Agreement or any of the Basic Documents, (B) seeking to prevent the issuance of
the Certificates or the Notes or the consummation of any of the transactions
contemplated by this Agreement or any of the Basic Documents, (C) seeking any
determination or ruling that might materially and adversely affect its
performance of its obligations under, or the validity or enforceability of, this
Agreement or any of the Basic Documents, or (D) seeking to adversely affect the
federal income tax or other federal, state or local tax attributes of the
Certificates.
(g) Minimum Net Worth. The Depositor has been duly capitalized such
that its aggregate net worth is not less than the Minimum Net Worth.
(h) Demand Note. If the Depositor is capitalized, in whole or in part
by the delivery of a demand note (a "Demand Note") from CPS, the proceeds of
such Demand Note will not be used to pay (i) any of the expenses of the
Depositor in connection with the transactions contemplated by the Basic
Documents or (ii) the purchase price for the Certificates purchased pursuant to
Section 3.9. Such Demand Note shall be enforceable against CPS, subject to its
terms, and subject to applicable bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization and similar laws now or hereafter in effect relating
to creditors' rights generally or the rights of creditors of banks the deposit
accounts of which are insured by the Federal Deposit Insurance Corporation and
subject to general principles of equity (whether applied in a proceeding at law
or in equity).
SECTION 2.11. Federal Income Tax Allocations. For purposes of the laws
of any jurisdiction for which the Trust is characterized as a partnership
(consistent with the characterization of the Trust described in Section 2.6
above), the following allocations shall apply for Federal income tax purposes.
If Principal Certificates are held by any person, interest payments on the
Principal Certificates at the Certificate Rate (including interest on amounts
previously due on the Principal Certificates but not yet distributed) shall be
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treated as "guaranteed payments" under Section 707(c) of the Code. Net income of
the Trust for any month as determined for Federal income tax purposes (and each
item of income, gain, loss and deduction entering into the computation thereof)
shall be allocated:
(a) among the holders of Principal Certificates as of the close of
business on the last day of such month, in proportion to their ownership of the
principal amount of Principal Certificates on such date, an amount of net income
up to the sum of: (i) the portion of the market discount on the Receivables
accrued during such month that is allocable to the excess, if any, of the
Initial Certificate Balance over their initial aggregate issue price, (ii)
Certificateholders' Prepayment Premium, if any, payable for such month and (iii)
any other amounts of income payable to the Certificateholders for such month;
and such sum of amounts specified in clauses (i) through (iii) of this sentence
shall be reduced by any amortization by the Trust of premium on Receivables that
corresponds to any excess of the issue price of Trust Certificates over their
principal amount; and
(b) to the Holders of Certificates, to the extent of any remaining net
income, in accordance with their respective interests therein.
If the net income of the Trust for any month is insufficient for the allocations
described in clause (a), subsequent net income shall first be allocated to make
up such shortfall before being allocated as provided in the preceding sentence.
Net losses of the Trust, if any, for any month as determined for Federal income
tax purposes (and each item of income, gain, loss and deduction entering into
the computation thereof) shall be allocated to the Holders of Certificates, to
the extent such holders are reasonably expected to bear the economic burden of
such net losses, and any remaining net losses shall be allocated among the
Holders of Principal Certificates as of the close of business on the last day of
such month in proportion to their ownership of principal amount of Principal
Certificates on such day. The Depositor is authorized to modify the allocations
in this paragraph if necessary or appropriate, in its sole discretion, for the
allocations to fairly reflect the economic income, gain or loss to the holders
of Certificates or Principal Certificates, or as otherwise required by the Code.
Notwithstanding anything provided in this Section 2.11, if Principal
Certificates are not held by any person and the Certificates are held solely
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by the Depositor, the application of this Section 2.11 shall be disregarded.
SECTION 2.12. Covenants of the Depositor. The Depositor agrees and
covenants for the benefit of each Owner, the Insurer and the Owner Trustee,
during the term of this Agreement, and to the fullest extent permitted by
applicable law, that:
(a) it shall not assign, sell, convey, pledge, transfer,
reconvey, cancel, forgive, compromise or otherwise dispose of any
Demand Note held by it, in whole or in part;
(b) it shall not sell, assign, transfer, give or encumber, by
operation of law or otherwise, in whole or in part, the interest
evidenced by its certificates acquired pursuant to Section 3.9 without
the consent of the Insurer;
(c) it shall not create, incur or suffer to exist any
indebtedness or engage in any business, except, in each case, as
permitted by its certificate of incorporation and the Basic Documents;
(d) it shall not, for any reason, institute proceedings for
the Trust to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Trust,
or file a petition seeking or consenting to reorganization or relief
under any applicable federal or state law relating to the bankruptcy of
the Trust, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Trust or a substantial part of the property of the Trust or cause or
permit the Trust to make any assignment for the benefit of creditors,
or admit in writing the inability of the Trust to pay its debts
generally as they become due, or declare or effect a moratorium on the
debt of the Trust or take any action in furtherance of any such action;
(e) it shall obtain from each counterparty to each Basic
Document to which it or the Trust is a party and each other agreement
entered into on or after the date hereof to which it or the Trust is a
party, an agreement by each such counterparty that prior to the
occurrence of the event specified in Section 9.1(e) such counterparty
shall not institute against, or join any other Person in instituting
against, it or the Trust, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States;
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(f) it shall not, for any reason, withdraw or attempt to
withdraw from this Agreement, dissolve, institute proceedings for it to
be adjudicated a bankrupt or insolvent, or consent to the institution
of bankruptcy or insolvency proceedings against it, or file a petition
seeking or consenting to reorganization or relief under any applicable
federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of it or a substantial part of its
property, or make any assignment for the benefit of creditors, or admit
in writing its inability to pay its debts generally as they become due,
or declare or effect a moratorium on its debt or take any action in
furtherance of any such action; and
(g) it shall not make any distribution other than to the Trust
or unless the aggregate net worth of the Depositor following such
distribution shall be at least equal to the Minimum Net Worth unless
the Depositor shall deliver to the Owner Trustee, the Trustee and the
Insurer an opinion of Counsel to the effect that the failure to
maintain such Minimum Net Worth shall not cause the Trust to be an
association taxable as a corporation or a publicly traded partnership
for California franchise tax purposes.
SECTION 2.13. Covenants of the Owners. Each Certificateholder and each
Owner by becoming a beneficial owner of the Book-Entry Certificate agrees:
(a) to be bound by the terms and conditions of the
Certificates of which such party is the record or beneficial owner and
of this Agreement, including any supplements or amendments hereto and
to perform the obligations of a Holder or Owner as set forth therein or
herein, in all respects as if it were a signatory hereto. This
undertaking is made for the benefit of the Trust, the Owner Trustee,
the Insurer and all other Holders and Owners present and future;
(b) to hereby appoint the Depositor as its agent and
attorney-in-fact to sign any federal income tax information return
filed on behalf of the Trust and agree that, if requested by the Trust,
it will sign such federal income tax information return in its capacity
as a Holder or Owner of an interest in the Trust. Each Holder and each
Owner also hereby agrees that in its tax returns it will not take any
position inconsistent with those taken in any tax returns filed by the
Trust;
(c) if such Holder or Owner is other than an individual or
other entity holding its Certificate through a broker who reports
securities sales on Form 1099-B, to
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notify the Owner Trustee of any transfer by it of a Certificate or a
beneficial interest in a Certificate in a taxable sale or exchange,
within 30 days of the date of the transfer; and
(d) until the completion of the events specified in Section
9.1(e), not to, for any reason, institute proceedings for the Trust or
the Depositor to be adjudicated a bankrupt or insolvent, or consent to
the institution of bankruptcy or insolvency proceedings against the
Trust, or file a petition seeking or consenting to reorganization or
relief under any applicable federal or state law relating to
bankruptcy, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Trust or a substantial part of its property, or cause or permit the
Trust to make any assignment for the benefit of its creditors, or admit
in writing its inability to pay its debts generally as they become due,
or declare or effect a moratorium on its debt or take any action in
furtherance of any such action.
ARTICLE III.
Certificates and Transfer of Interests
SECTION 3.1. Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor and LLC pursuant to Section 2.5 and until the
issuance of the Certificates, the Depositor and LLC shall be the sole
beneficiaries of the Trust.
SECTION 3.2. The Certificates. The Certificates shall be issued
initially to the Depositor in a Certificate Percentage Interest of 99% and to
LLC in a Certificate Percentage Interest of 1.00% [and the Principal
Certificates shall be issued in denominations of $1,000 and integral multiples
thereof]; [provided, however, that certificates may be issued to the Depositor
pursuant to Section 3.9 in such denominations as to represent at least 1% of the
initial Certificate Balance.] The Certificates shall be executed on behalf of
the Trust by manual or facsimile signature of an authorized officer of the Owner
Trustee. Certificates bearing the manual or facsimile signatures of individuals
who were, at the time when such signatures shall have been affixed, authorized
to sign on behalf of the Trust, shall be validly issued and entitled to the
benefit of this Agreement, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the authentication and delivery
of such Certificates or did not hold such offices at the date of authentication
and delivery of such Certificates. A transferee of a Certificate shall become a
Certificateholder, and shall be entitled to the rights and subject to the
obligations of
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a Certificateholder hereunder, upon due registration of such Certificate in such
transferee's name pursuant to Section 3.4.
SECTION 3.3. Authentication of Certificates. Concurrently with the
initial sale of the Receivables to the Trust pursuant to the Sale and Servicing
Agreement, the Owner Trustee shall cause the Certificates in an aggregate
Certificate Percentage Interest equal to 100% [and the Principal Certificates in
an aggregate Certificate Balance equal to [$ ]] to be executed on behalf of the
Trust, authenticated and delivered to or upon the written order of the
Depositor, signed by its chairman of the board, its president or any vice
president, its treasurer or any assistant treasurer without further corporate
action by the Depositor, in authorized denominations. No Certificate shall
entitle its holder to any benefit under this Agreement, or shall be valid for
any purpose, unless there shall appear on such Certificate a certificate of
authentication substantially in the form set forth in Exhibit A, executed by the
Owner Trustee or the Owner Trustee's authentication agent, by manual signature;
such authentication shall constitute conclusive evidence that such Certificate
shall have been duly authenticated and delivered hereunder. All Certificates
shall be dated the date of their authentication.
SECTION 3.4. Registration of Transfer and Exchange of Certificates. The
Certificate Registrar shall keep or cause to be kept, at the office or agency
maintained pursuant to Section 3.8, a Certificate Register in which, subject to
such reasonable regulations as it may prescribe, the Owner Trustee shall provide
for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. [ ] shall be the initial Certificate Registrar.
The Certificate Registrar shall provide the Trust Collateral Agent with
a list of the names and addresses of the Certificateholders on the Closing Date
in the form which such information is provided to the Certificate Registrar.
Upon any transfers of Certificates, the Certificate Registrar shall notify the
Trust Collateral Agent of the name and address of the transferee in writing, by
facsimile, on the day of such transfer.
Upon surrender for registration of transfer of any Certificate at the
office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver (or shall cause as its authenticating agent to
authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of a like
class and aggregate Certificate Percentage Interest [and face amount] dated the
date of authentication by the Owner Trustee or any authenticating agent. At the
option of a Holder, Certificates may be exchanged
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for other Certificates of the same class in authorized denominations of a like
aggregate Certificate Percentage Interest [or face amount] upon surrender of the
Certificates to be exchanged at the office or agency maintained pursuant to
Section 3.8.
Every Certificate presented or surrendered for registration of transfer
or exchange shall be accompanied by a written instrument of transfer in form
satisfactory to the Owner Trustee and the Certificate Registrar duly executed by
the Certificateholder or his attorney duly authorized in writing, with such
signature guaranteed by an "eligible guarantor institution" meeting the
requirements of the Certificate Registrar, which requirements include membership
or participation in the Securities Transfer Agent's Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Certificate Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Exchange Act. Each Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by the
Owner Trustee in accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate shall be surrendered to the Certificate Registrar, or
if the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Certificate Registrar, the Owner Trustee and (unless an Insurer Default
shall have occurred and be continuing) the Insurer, such security or indemnity
as may be required by them to save each of them harmless, then in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee, or
the Owner Trustee's authenticating agent, shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like class, tenor and denomination. In
connection with the issuance of any new Certificate under this Section, the
Owner Trustee or the Certificate Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Certificate issued pursuant to this Section
shall constitute conclusive evidence of an ownership interest in the Trust, as
if originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
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SECTION 3.6. Persons Deemed Certificateholders. Every Person by virtue
of becoming a Certificateholder or owner in accordance with this Agreement and
the rules and regulations of the Clearing Agency shall be deemed to be bound by
the terms of this Agreement. Prior to due presentation of a Certificate for
registration of transfer, the Owner Trustee, the Certificate Registrar and the
Insurer and any agent of the Owner Trustee, the Certificate Registrar and the
Insurer, may treat the Person in whose name any Certificate shall be registered
in the Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to the Sale and Servicing Agreement and for all
other purposes whatsoever, and none of the Owner Trustee, the Certificate
Registrar or the Insurer nor any agent of the Owner Trustee, the Certificate
Registrar or the Insurer shall be bound by any notice to the contrary.
SECTION 3.7. Access to List of Certificateholders' Names and Addresses.
The Owner Trustee shall furnish or cause to be furnished to the Servicer, the
Depositor or (unless an Insurer Default shall have occurred and be continuing)
the Insurer, within 15 days after receipt by the Owner Trustee of a request
therefor from such Person in writing, a list, of the names and addresses of the
Certificateholders as of the most recent Record Date. If three or more Holders
or Owners of Certificates or one or more Holders or Owners of Certificates
evidencing not less than 25% Certificate Percentage Interest [or Certificate
Balance] apply in writing to the Owner Trustee, and such application states that
the applicants desire to communicate with other Certificateholders with respect
to their rights under this Agreement or under the Certificates and such
application is accompanied by a copy of the communication that such applicants
propose to transmit, then the Owner Trustee shall, within five Business Days
after the receipt of such application, afford such applicants access during
normal business hours to the current list of Certificateholders. Each Holder or
Owner, by receiving and holding a Certificate or a beneficial interest therein,
shall be deemed to have agreed not to hold any of the Depositor LLC, the
Servicer, the Owner Trustee or the Insurer or any agent thereof accountable by
reason of the disclosure of its name and address, regardless of the source from
which such information was derived.
SECTION 3.8. Maintenance of Office or Agency. The Owner Trustee shall
maintain in New York, an office or offices or agency or agencies where
Certificates may be surrendered for registration of transfer or exchange and
where notices and demands to or upon the Owner Trustee in respect of the
Certificates and the Basic Documents may be served. The Owner Trustee initially
designates [ ] as its principal corporate trust office for such purposes. The
Owner Trustee shall give prompt written notice to the Depositor, the
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Certificateholders and (unless an Insurer Default shall have occurred and be
continuing) the Insurer of any change in the location of the Certificate
Register or any such office or agency.
SECTION 3.9. Disposition by the Depositor. On the Closing Date, the
Depositor shall purchase for adequate consideration and retain beneficial and
record ownership of Certificates representing not less than 1 percent of all
Certificates issued by the Trust, which Certificates issued to the Depositor
shall be issued in definitive form. Any attempted transfer of any Certificate,
and any purported issuance of any Certificate to any person, that would reduce
such interest of the Depositor to below 1 percent of all Certificates issued by
the Trust shall be void. The Owner Trustee shall cause any Certificate issued to
the Depositor to contain a legend stating "THIS CERTIFICATE IS NOT TRANSFERABLE,
EXCEPT UNDER THE LIMITED CONDITIONS SPECIFIED IN THE TRUST AGREEMENT".
[SECTION 3.10. ERISA Restrictions. The Certificates may not be acquired
by or for the account of (i) an employee benefit plan (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a plan
described in Section 4975(e)(1) of the Internal Revenue Code of 1985, as
amended, or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan"). By
accepting and holding its beneficial ownership interest in its Certificate, the
Owner thereof shall be deemed to have represented and warranted that it is not a
Benefit Plan.]
[SECTION 3.11. Book-Entry Certificates. The Certificates, upon original
issuance, will be issued in the form of a typewritten Certificate or
Certificates representing Book-Entry Certificates, to be delivered by or on
behalf of the Trust to The Depository Trust Company, the initial Clearing
Agency; provided, however, that one Definitive Certificate (as defined below)
may be issued to the Depositor, as Depositor pursuant to Section 3.9. Such
Book-Entry Certificate shall initially be registered on the Certificate Register
in the name of Cede & Co., the nominee of the initial Clearing Agency, and no
beneficial owner (other than the Depositor) will receive a definitive
Certificate representing such beneficial owner's interest in such Certificate,
except as provided in Section 3.13. Unless and until Definitive Certificates
have been issued to beneficial owners pursuant to Section 3.13:
(i) the provisions of this Section shall be in full force and
effect;
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(ii) the Certificate Registrar and the Owner Trustee shall be
entitled to deal with the Clearing Agency for all purposes of this
Agreement relating to the Book-Entry Certificates (including the
payment of principal of and interest on the Book-Entry Certificates and
the giving of instructions or directions to Owners of Book-Entry
Certificates) as the sole Certificateholder and shall have no
obligations to the Owners thereof;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Agreement, the provisions of
this Section shall control;
(iv) the rights of the owners of the Book-Entry Certificates
shall be exercised only through the Clearing Agency and shall be
limited to those established by law and agreements between such owners
and the Clearing Agency and/or the Clearing Agency Participants. Unless
and until Definitive Certificates are issued pursuant to Section 3.16,
the Clearing Agency will make book-entry transfers among the Clearing
Agency Participants and receive and transmit payments of principal of
and interest on the Book-Entry Certificates to such Clearing Agency
Participants; and
(v) whenever this Agreement requires or permits actions to be
taken based upon instructions or directions of Certificateholder
evidencing a specified percentage of the Certificate Balance, the
Clearing Agency shall be deemed to represent such percentage only to
the extent that it has received instructions to such effect from Owners
and/or Clearing Agency Participants owning or representing,
respectively, such required percentage of the beneficial interest in
the Book-Entry Certificates and has delivered such instructions in
writing to the Owner Trustee.]
[SECTION 3.12. Notices to Clearing Agency. Whenever a notice or other
communication to the owners is required under this Agreement, unless and until
Definitive Certificates shall have been issued to Owners pursuant to Section
3.13, the Owner Trustee shall give all such notices and communications specified
herein to be given to Owners to the Clearing Agency, and shall have no
obligations to the Owners, except to the Depositor.
SECTION 3.13. Definitive Certificates. If (i) the Servicer advises the
Owner Trustee in writing that the Clearing Agency is no longer willing or able
to properly discharge its responsibilities with respect to the Certificates, and
the Servicer is unable to locate a qualified successor, (ii) the Servicer at its
option advises the Owner Trustee in writing that it elects to terminate the
book-entry system through the Clearing Agency or (iii) after the occurrence of
an Event of Default,
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owners of Certificates representing beneficial interests aggregating at least a
majority of the Certificate Balance advise the Clearing Agency in writing that
the continuation of a book-entry system through the Clearing Agency is no longer
in the best interest of the Owners of Certificates, then the Clearing Agency
shall notify all Owners and the Owner Trustee of the occurrence of any such
event and of the availability of the Definitive Certificates to Owners
requesting the same. Upon surrender to the Owner Trustee of the typewritten
Certificate or Certificates representing the Book Entry Certificates by the
Clearing Agency, accompanied by registration instructions, the Owner Trustee
shall execute and authenticate the Definitive Certificates in accordance with
the instructions of the Clearing Agency. Neither the Certificate Registrar nor
the Owner Trustee shall be liable for any delay in delivery of such instructions
and may conclusively rely on, and shall be protected in relying on, such
instructions. Upon the issuance of Definitive certificates, the Owner Trustee
shall recognize the Holders of the Definitive Certificates as
Certificateholders. The Definitive Certificates shall be printed, lithographed
or engraved or may be produced in any other manner as is reasonably acceptable
to the Owner Trustee, as evidenced by its execution thereof.]
ARTICLE IV.
Voting Rights and Other Actions
SECTION 4.1. Prior Notice to Holders with Respect to Certain Matters.
With respect to the following matters, the Owner Trustee shall not take action
unless at least 30 days before the taking of such action, the Owner Trustee
shall have notified the Certificateholders in writing of the proposed action and
the Certificateholders shall not have notified the Owner Trustee in writing
prior to the 30th day after such notice is given that such Certificateholders
have withheld consent or provided alternative direction:
(a) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed
under the Business Trust Statute or unless such amendment would not
materially and adversely affect the interests of the Holders);
(b) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Noteholder is required;
(c) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any
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Noteholder is not required and such amendment materially adversely
affects the interest of the Certificateholders; or
(d) except pursuant to Section 13.1(b) of the Sale and
Servicing Agreement, the amendment, change or modification of the Sale
and Servicing Agreement, except to cure any ambiguity or defect or to
amend or supplement any provision in a manner that would not materially
adversely affect the interests of the Certificateholders.
The Owner Trustee shall notify the Certificateholders in writing of any
appointment of a successor Note Registrar, Trust Collateral Agent or Certificate
Registrar within five Business
Days thereof.
SECTION 4.2. Action by Certificateholders with Respect to Certain
Matters. The Owner Trustee shall not have the power, except upon the direction
of the Certificateholders or the Insurer in accordance with the Basic Documents,
to (a) remove the Servicer under the Sale and Servicing Agreement pursuant to
Section 8.1 thereof or (b) except as expressly provided in the Basic Documents,
sell the Receivables after the termination of the Indenture. The Owner Trustee
shall take the actions referred to in the preceding sentence only upon written
instructions signed by the Certificateholders and the furnishing of
indemnification satisfactory to the Owner Trustee by the Certificateholders.
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy.
The Owner Trustee shall not have the power to, and shall not, commence any
proceeding or other actions contemplated by Section 2.12(d) relating to the
Trust without the prior written consent of the Insurer (unless an Insurer
Default shall have occurred and be continuing) and the unanimous prior approval
of all Certificateholders and the delivery to the Owner Trustee by each such
Certificateholder of a certificate certifying that such Certificateholder
reasonably believes that the Trust is insolvent.
SECTION 4.4. Restrictions on Certificateholders' Power. (a) The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the Basic
Documents or would be contrary to Section 2.3 nor shall the Owner Trustee be
obligated to follow any such direction, if given.
(b) No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action, or
proceeding in equity or at law upon or under or with respect to this Agreement
or any Basic
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Document, unless the Certificateholders are the Instructing Party pursuant to
Section 6.3 and unless a Certificateholder previously shall have given to the
Owner Trustee a written notice of default and of the continuance thereof, as
provided in this Agreement, and also unless Certificateholders evidencing not
less than 25% Certificate Percentage Interest [or Certificate Balance] shall
have made written request upon the Owner Trustee to institute such action, suit
or proceeding in its own name as Owner Trustee under this Agreement and shall
have offered to the Owner Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby,
and the Owner Trustee, for 30 days after its receipt of such notice, request,
and offer of indemnity, shall have neglected or refused to institute any such
action, suit, or proceeding, and during such 30-day period no request or waiver
inconsistent with such written request has been given to the Owner Trustee
pursuant to and in compliance with this Section or Section 6.3; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Owner Trustee, that
no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb, or prejudice the rights of the Holders of any
other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this
Agreement, except in the manner provided in this Agreement and for the equal,
ratable, and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section 4.4, each and every
Certificateholder and the Owner Trustee shall be entitled to such relief as can
be given either at law or in equity. Nothing in this Agreement shall be
construed as giving the Certificateholders any right to make a claim under the
Certificate Policy.
SECTION 4.5. Majority Control. No Certificateholder shall have any
right to vote or in any manner otherwise control the operation and management of
the Trust except as expressly provided in this Agreement. Except as expressly
provided herein, any action that may be taken by the Certificateholders under
this Agreement may be taken by the Holders of Certificates evidencing not less
than a majority of the Certificate Percentage Interest [or Certificate Balance].
Except as expressly provided herein, any written notice of the
Certificateholders delivered pursuant to this Agreement shall be effective if
signed by Certificateholders evidencing not less than a majority of the
Certificate Balance at the time of the delivery of such notice.
SECTION 4.6. Rights of Insurer. Notwithstanding anything to the
contrary in the Basic Documents, without the prior written consent of the
Insurer (so long as no Insurer Default shall have
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occurred and be continuing), the Owner Trustee shall not (i) remove the
Servicer, (ii) initiate any claim, suit or proceeding by the Trust or compromise
any claim, suit or proceeding brought by or against the Trust, other than with
respect to the enforcement of any Receivable or any rights of the Trust
thereunder, (iii) authorize the merger or consolidation of the Trust with or
into any other business trust or other entity (other than in accordance with
Section 3.10 of the Indenture) or (iv) amend the Certificate of Trust.
ARTICLE V.
Certain Duties
SECTION 5.1. Accounting and Records to the Noteholders,
Certificateholders, the Internal Revenue Service and Others. Subject to Sections
12.1(b)(iii) and 12.1(c) of the Sale and Servicing Agreement, the Depositor
shall (a) maintain (or cause to be maintained) the books of the Trust on a
calendar year basis on the accrual method of accounting, (b) deliver (or cause
to be delivered) to each Certificateholder or Owner, as may be required by the
Code and applicable Treasury Regulations, such information, if any, as may be
required (including, if appropriate consistent with the characterization of the
Trust pursuant to Section 2.6, Schedule K-1) to enable each Certificateholder or
Owner to prepare its Federal and state income tax returns, (c) file or cause to
be filed such tax returns, if any, relating to the Trust (including, if
appropriate consistent with the characterization of the Trust pursuant to
Section 2.6, a partnership information return on Internal Revenue Service Form
1065), and direct the Owner Trustee to make such elections as may from time to
time be required or appropriate under any applicable state or Federal statute or
rule or regulation thereunder so as to maintain the Trust's characterization
pursuant to Section 2.6 for Federal income and California franchise tax purposes
and for purposes of any other jurisdiction for which the characterization of the
Trust is relevant and (d) collect or cause to be collected any withholding tax
as described in and in accordance with Section 5.9 of the Sale and Serving
Agreement with respect to income or distributions to Certificateholders and the
appropriate forms relating thereto. The Owner Trustee shall make all elections
pursuant to this Section as directed by the Depositor. The Owner Trustee shall
sign all tax information returns filed pursuant to this Section 5.1 and any
other returns as may be required by law, and in doing so shall rely entirely
upon, and shall have no liability for information provided by, or calculations
provided by, the Depositor. In the event the Trust is treated as a partnership
for federal income tax purposes, the Owner Trustee
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shall not make the election provided under Section 754 of the Code.
SECTION 5.2. Signature on Returns; Tax Matters Partner. (a)
Notwithstanding the provisions of Section 5.1, the Owner Trustee shall sign on
behalf of the Trust the tax returns of the Trust, unless applicable law requires
a Certificateholder or an Owner to sign such documents, in which case such
documents shall be signed by the Depositor.
(b) In the event the Trust is treated as a partnership for federal
income tax purposes, the Depositor shall be the "tax matters partner" of the
Trust pursuant to the Code.
[SECTION 5.3. Underwriting Agreement. The Servicer is hereby authorized
to execute and deliver the Underwriting Agreement with respect to the Notes and
the Certificates.]
ARTICLE VI.
Authority and Duties of Owner Trustee
SECTION 6.1. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is named
as a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is named as a party and
any amendment thereto, in each case, in such form as the Depositor shall approve
as evidenced conclusively by the Owner Trustee's execution thereof, and on
behalf of the Trust, to direct the Indenture Trustee to authenticate and deliver
Class A-1 Notes in the aggregate principal amount of [$ ], Class A-2 Notes in
the aggregate principal amount of [$ ] and Class A-3 Notes in the aggregate
principal amount of [$ ] and Class B Notes in the aggregate principal amount of
[$ ]. [Other Classes of Notes, if any to be added]. In addition to the
foregoing, the Owner Trustee is authorized but shall not be obligated, to take
all actions required of the Trust pursuant to the Basic Documents. The Owner
Trustee is further authorized from time to time to take such action as the
Instructing Party recommends with respect to the Basic Documents so long as such
activities are consistent with the terms of the Basic Documents.
SECTION 6.2. General Duties. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and the Sale and Servicing Agreement and to
administer the Trust in the interest of the Holders, subject to the Basic
Documents and in accordance with the provisions of this Agreement.
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Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the Basic
Documents to the extent the Servicer has agreed in the Sale and Servicing
Agreement to perform any act or to discharge any duty of the Trust or the Owner
Trustee hereunder or under any Basic Document, and the Owner Trustee shall not
be liable for the default or failure of the Servicer to carry out its
obligations under the Sale and Servicing Agreement.
SECTION 6.3. Action upon Instruction. (a) Subject to Article IV and the
terms of the Spread Account Agreement, the Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or the Certificateholders (if
an Insurer Default shall have occurred and be continuing) (the "Instructing
Party") shall have the exclusive right to direct the actions of the Owner
Trustee in the management of the Trust, so long as such instructions are not
inconsistent with the express terms set forth herein or in any Basic Document.
The Instructing Party shall not instruct the Owner Trustee in a manner
inconsistent with this Agreement or the Basic Documents.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or any
Basic Document, the Owner Trustee shall promptly give notice (in such form as
shall be appropriate under the circumstances) to the Instructing Party
requesting instruction as to the court of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction of the Instructing Party received, the Owner Trustee shall not be
liable on account of such action to any Person. If the Owner Trustee shall not
have received appropriate instruction within ten days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or may
be necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action, not inconsistent with this Agreement or
the Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
(d) In the event that the Owner Trustee is unsure as to the application
of any provision of this Agreement or any Basic Document or any such provision
is ambiguous as to its application, or is, or appears to be, in conflict with
any other
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applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give notice (in such form as
shall be appropriate under the circumstances) to the Instructing Party
requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may but shall be under no duty to, take or refrain
from taking such action not inconsistent with this Agreement or the Basic
Documents as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.3; and no implied duties or obligations
shall be read into this Agreement or any Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any Commission filing for the Trust or to
record this Agreement or any Basic Document. The Owner Trustee nevertheless
agrees that it will, at its own cost and expense, promptly take all action as
may be necessary to discharge any Liens on any part of the Owner Trust Estate
that result from actions by, or claims against, the Owner Trustee (solely in its
individual capacity) and that are not related to the ownership or the
administration of the Owner Trust Estate.
SECTION 6.5. No Action Except under Specified Documents or
Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of
or otherwise deal with any part of the Owner Trust Estate except (i) in
accordance with the powers granted to and the authority conferred upon the Owner
Trustee pursuant to this Agreement, (ii) in accordance with the Basic Documents
and (iii) in accordance with any document or instruction delivered to the Owner
Trustee pursuant to Section 6.3.
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SECTION 6.6. Restrictions. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section 2.3
or (b) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for Federal income tax purposes or for
the purposes of any applicable state tax on corporations. The Certificateholders
shall not direct the Owner Trustee to take action that would violate the
provisions of this Section.
ARTICLE VII.
Concerning the Owner Trustee
SECTION 7.1. Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all moneys actually received by it constituting
part of the Owner Trust Estate upon the terms of the Basic Documents and this
Agreement. The Owner Trustee shall not be answerable or accountable hereunder or
under any Basic Document under any circumstances, except (i) for its own willful
misconduct, bad faith or negligence, (ii) in the case of the inaccuracy of any
representation or warranty contained in Section 7.3 expressly made by the Owner
Trustee, (iii) for liabilities arising from the failure of the Owner Trustee to
perform obligations expressly undertaken by it in the last sentence of Section
6.4 hereof, (iv) for any investments issued by the Owner Trustee or any branch
or affiliate thereof in its commercial capacity or (v) for taxes, fees or other
charges on, based on or measured by, any fees, commissions or compensation
received by the Owner Trustee. In particular, but not by way of limitation (and
subject to the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment made by a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the
instructions of the Instructing Party, the Servicer or any
Certificateholder;
(c) no provision of this Agreement or any Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur
any financial liability in the performance of any of its rights or
powers hereunder or under any Basic Document if the Owner Trustee shall
have reasonable grounds for believing that repayment of such
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funds or adequate indemnity against such risk or liability is not
reasonably assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Basic
Documents, including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor or for the form, character,
genuineness, sufficiency, value or validity of any of the Owner Trust
Estate or for or in respect of the validity or sufficiency of the Basic
Documents, other than the certificate of authentication on the
Certificates, and the Owner Trustee shall in no event assume or incur
any liability, duty or obligation to the Insurer, Trustee, Trust
Collateral Agent, the Collateral Agent, any Noteholder or to any
Certificateholder, other than as expressly provided for herein and in
the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Depositor, the Insurer, the Trustee, the Trust
Collateral Agent or the Servicer under any of the Basic Documents or
otherwise and the Owner Trustee shall have no obligation or liability
to perform the obligations under this Agreement or the Basic Documents
that are required to be performed by the Depositor under this
Agreement, the Insurer or the Trust Collateral Agent under the
Certificate Policy, by the Trustee under the Indenture or the Trust
Collateral Agent or the Servicer under the Sale and Servicing
Agreement; and
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or
otherwise or in relation to this Agreement or any Basic Document, at
the request, order or direction of the Instructing Party or any of the
Certificateholders, unless such Instructing Party or Certificateholders
have offered to the Owner Trustee security or indemnity satisfactory to
it against the costs, expenses and liabilities that may be incurred by
the Owner Trustee therein or thereby. The right of the Owner Trustee to
perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee
shall not be answerable for other than its negligence, bad faith or
willful misconduct in the performance of any such act.
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SECTION 7.2. Furnishing of Documents. The Owner Trustee shall furnish
to the Certificateholders promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents.
SECTION 7.3. Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Depositor, the Holders and the Insurer (which
shall have relied on such representations and warranties in issuing the
Policies), that:
(a) It is a [ ], duly organized and validly existing in good
standing under the laws of the State of [ ]. It has all requisite
corporate power and authority to execute, deliver and perform its
obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement
will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene any federal or Delaware state law, governmental rule or
regulation governing the banking or trust powers of the Owner Trustee
or any judgment or order binding on it, or constitute any default under
its charter documents or by-laws or any indenture, mortgage, contract,
agreement or instrument to which it is a party or by which any of its
properties may be bound.
SECTION 7.4. Reliance; Advice of Counsel. (a) The Owner Trustee shall
incur no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper believed by it to be genuine and believed by it to be signed
by the proper party or parties. The Owner Trustee may accept a certified copy of
a resolution of the board of directors or other governing body of any corporate
party as conclusive evidence that such resolution has been duly adopted by such
body and that the same is in full force and effect. As to any fact or matter the
method of the determination of which is not specifically prescribed herein, the
Owner Trustee may for all purposes hereof rely on a certificate, signed by the
president or any vice president or by the treasurer, secretary or other
authorized officers of the relevant party, as to such fact or
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matter, and such certificate shall constitute full protection to the Owner
Trustee for any action taken or omitted to be taken by it in good faith in
reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and according to such opinion not
contrary to this Agreement or any Basic Document.
SECTION 7.5. Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created [ ] acts solely as
Owner Trustee hereunder and not in its individual capacity and all Persons
having any claim against the Owner Trustee by reason of the transactions
contemplated by this Agreement or any Basic Document shall look only to the
Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6. Owner Trustee Not Liable for Certificates or Receivables.
The recitals contained herein and in the Certificates (other than the signature
and countersignature of the Owner Trustee on the Certificates) shall be taken as
the statements of the Depositor and the Owner Trustee assumes no responsibility
for the correctness thereof. The Owner Trustee makes no representations as to
the validity or sufficiency of this Agreement, of any Basic Document or of the
Certificates (other than the signature and countersignature of the Owner Trustee
on the Certificates) or the Notes, or of any Receivable or related documents.
The Owner Trustee shall at no time have any responsibility or liability for or
with respect to the legality, validity and enforceability of any Receivable, or
the perfection and priority of any security interest created by any Receivable
in any Financed Vehicle or the maintenance of any such perfection and priority,
or for or with respect to the sufficiency of the Owner Trust Estate or its
ability to generate the payments to be distributed to Certificateholders under
this Agreement or the Noteholders under the Indenture, including, without
limitation: the existence, condition and ownership of any Financed Vehicle; the
existence and enforceability of any insurance thereon; the existence and
contents of any Receivable
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on any computer or other record thereof; the validity of the assignment of any
Receivable to the Trust or of any intervening assignment; the completeness of
any Receivable; the performance or enforcement of any Receivable; the compliance
by the Depositor, the Servicer or any other Person with any warranty or
representation made under any Basic Document or in any related document or the
accuracy of any such warranty or representation or any action of the Trustee or
the Servicer or any subservicer taken in the name of the Owner Trustee.
SECTION 7.7. Owner Trustee May Own Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates or Notes and may deal with the Depositor, the Trustee and the
Servicer in banking transactions with the same rights as it would have if it
were not Owner Trustee.
SECTION 7.8. Payments from Owner Trust Estate. All payments to be made
by the Owner Trustee under this Agreement or any of the Basic Documents to which
the Trust or the Owner Trustee is a party shall be made only from the income and
proceeds of the Owner Trust Estate and only to the extent that the Owner Trust
shall have received income or proceeds from the Owner Trust Estate to make such
payments in accordance with the terms hereof. [ ], or any successor thereto, in
its individual capacity, will not be liable for any amounts payable under this
Agreement or any of the Basic Documents to which the Trust or the Owner Trustee
is a party.
SECTION 7.9. Doing Business in other Jurisdictions. Notwithstanding
anything contained to the contrary, neither [ ] or any successor thereto, nor
the Owner Trustee shall be required to take any action in any jurisdiction other
than in the State of Delaware if the taking of such action will, even after the
appointment of a co-trustee or separate trustee in accordance with Section 10.5
hereof, (i) require the consent or approval or authorization or order of or the
giving of notice to, or the registration with or the taking of any other action
in respect of, any state or other governmental authority or agency of any
jurisdiction other than the State of Delaware; (ii) result in any fee, tax or
other governmental charge under the laws of the State of Delaware becoming
payable by [ ] (or any successor thereto); or (iii) subject [ ] (or any
successor thereto) to personal jurisdiction in any jurisdiction other than the
State of Delaware for causes of action arising from acts unrelated to the
consummation of the transactions by [ ] (or any successor thereto) or the Owner
Trustee, as the case may be, contemplated hereby.
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ARTICLE VIII.
Compensation of Owner Trustee
SECTION 8.1. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive as compensation for its services hereunder such fees as have been
separately agreed upon before the date hereof between CPS and the Owner Trustee,
and the Owner Trustee shall be entitled to be reimbursed by the Depositor for
its other reasonable expenses hereunder, including the reasonable compensation
expenses and disbursements of such agents, representatives, experts and counsel
as the Owner Trustee may employ in connection with the exercise and performance
of its rights and its duties hereunder and under the Basic Documents.
SECTION 8.2. Indemnification. The Depositor shall be liable as primary
obliger for, and shall indemnify the Owner Trustee and its officers, directors,
successors, assigns, agents and servants (collectively, the "Indemnified
Parties") from and against, any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever (collectively, "Expenses") which may at any time be
imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Agreement, the
Basic Documents, the Owner Trust Estate, the administration of the Owner Trust
Estate or the action or inaction of the Owner Trustee hereunder, except only
that the Depositor shall not be liable for or required to indemnify the Owner
Trustee from and against Expenses arising or resulting from any of the matters
described in the third sentence of Section 7.1. The indemnities contained in
this Section and the rights under Section 8.1 shall survive the resignation or
termination of the Owner Trustee or the termination of this Agreement. In any
event of any claim, action or proceeding for which indemnity will be sought
pursuant to this Section, the Owner Trustee's choice of legal counsel shall be
subject to the approval of the Depositor, which approval shall not be
unreasonably withheld.
SECTION 8.3. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
SECTION 8.4. Non-recourse Obligations. Notwithstanding anything in this
Agreement or any Basic Document, the Owner Trustee agrees in its individual
capacity and in its capacity as Owner Trustee for the Trust that all obligations
of the Trust to the Owner Trustee individually or as Owner Trustee for the Trust
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shall be recourse to the Owner Trust Estate only and specifically shall not be
recourse to the assets of any Owner.
ARTICLE IX.
Termination of Trust Agreement
SECTION 9.1. Termination of Trust Agreement. (a) This Agreement and the
Trust shall terminate and be of no further force or effect upon the latest of
(i) the maturity or other liquidation of the last Receivable (including the
purchase by the Servicer at its option of the corpus of the Trust as described
in Section 11.1 of the Sale and Servicing Agreement) and the subsequent
distribution of amounts in respect of such Receivables as provided in the Basic
Documents, (ii) the payment to Certificateholders of all amounts required to be
paid to them pursuant to this Agreement and the payment to the Insurer of all
amounts payable or reimbursable to it pursuant to the Sale and Servicing
Agreement, or (iii) at the time provided in Section 9.2; provided, however, that
the rights to indemnification under Section 8.2 and the rights under Section 8.1
shall survive the termination of the Trust. The Servicer shall promptly notify
the Owner Trustee and the Insurer of any prospective termination pursuant to
this Section 9.1. Except as provided in Section 9.2, the bankruptcy,
liquidation, dissolution, death or incapacity of any Certificateholder or Owner,
other than the Depositor as described in Section 9.2, shall not (x) operate to
terminate this Agreement or the Trust, nor (y) entitle such Certificateholder's
or Owner's legal representatives or heirs to claim an accounting or to take any
action or proceeding in any court for a partition or winding up of all or any
part of the Trust or Owner Trust Estate nor (z) otherwise affect the rights,
obligations and liabilities of the parties hereto.
(b) Except as provided in clause (a), neither the Depositor nor any
Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Payment Date
upon which the Certificateholders shall surrender their Certificates to the
Trust Collateral Agent for payment of the final distribution and cancellation,
shall be given by the Owner Trustee by letter to Certificateholders mailed
within five Business Days of receipt of notice of such termination from the
Servicer given pursuant to Section 11.1(c) of the Sale and Servicing Agreement,
stating (i) the Payment Date upon or with respect to which final payment of the
Certificates shall be made upon presentation and surrender of the Certificates
at the office of the Trust Collateral Agent therein designated (ii) the amount
of any such final payment, (iii) that the Record Date otherwise
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applicable to such Payment Date is not applicable, payments being made only upon
presentation and surrender of the Certificates at the office of the Trust
Collateral Agent therein specified and (iv) interest will cease to accrue on the
Certificates. The Owner Trustee shall give such notice to the Certificate
Registrar (if other than the Owner Trustee) and the Trust Collateral Agent at
the time such notice is given to Certificateholders. Upon presentation and
surrender of the Certificates, the Trust Collateral Agent shall cause to be
distributed to Certificateholders amounts distributable on such Payment Date
pursuant to Section 5.7 of the Sale and Servicing Agreement.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Owner Trustee shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Owner Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds and other assets that shall
remain subject to this Agreement. Any funds remaining in the Trust after
exhaustion of such remedies shall be distributed, subject to applicable escheat
laws, by the Owner Trustee to the Depositor and Holders shall look solely to the
Depositor for payment. As soon as practicable after the termination of the
Trust, the Owner Trustee shall surrender the Certificate Policy to the Insurer
for cancellation.
(d) Any funds remaining in the Trust after funds for final distribution
have been distributed or set aside for distribution shall be distributed by the
Owner Trustee to the Depositor.
(e) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Secretary of State in accordance with the
provisions of Section 3810 of the Business Trust Statute.
SECTION 9.2. Dissolution upon Bankruptcy of the Depositor. In the event
that an Insolvency Event shall occur with respect to the Depositor, this
Agreement shall be terminated in accordance with Section 9.1, 90 days after the
date of such Insolvency Event, unless, before the end of such 90-day period, the
Owner Trustee shall have received written instructions from Certificateholders
holding a majority of the Certificates (other than Certificates held by the
Depositor) to the effect that each such party disapproves of the liquidation of
the Receivables and
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termination of the Trust. Promptly after the occurrence of any Insolvency Event
with respect to the Depositor, (i) the Depositor shall give the Trustee, the
Owner Trustee and the Insurer written notice of such Insolvency Event, (ii) the
Owner Trustee shall, upon the receipt of such written notice from the Depositor,
give prompt written notice to the Certificateholders and the Trustee of the
occurrence of such event and (iii) the Trustee shall, upon receipt of written
notice of such Insolvency Event from the Owner Trustee or the Depositor, give
prompt written notice to the Noteholders of the occurrence of such event;
provided, however, that any failure to give a notice required by this sentence
shall not prevent or delay, in any manner, a termination of the Trust pursuant
to the first sentence of this Section 9.2. Upon a termination pursuant to this
Section, the Insurer or, if an Insurer Default has occurred and is continuing,
the Owner Trustee shall direct the Trustee promptly to sell the assets of the
Owner Trust Estate in a commercially reasonable manner and on commercially
reasonable terms. The proceeds of such a sale of the assets of the Trust shall
be treated as collections under the Sale and Servicing Agreement and shall be
distributed in accordance with Section 11.1(b) thereof.
ARTICLE X.
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation (i) satisfying the provisions of
Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise
corporate trust powers; (iii) having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or State
authorities; and (iv) acceptable to the Insurer in its sole discretion, so long
as an Insurer Default shall not have occurred and be continuing. If such
corporation shall publish reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purpose of this Section, the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. In case at any time the
Owner Trustee shall cease to be eligible in accordance with the provisions of
this Section, the Owner Trustee shall resign immediately in the manner and with
the effect specified in Section 10.2.
SECTION 10.2. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Depositor, the Insurer and the Servicer.
Upon receiving such notice of resignation, the Depositor shall promptly appoint
a
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successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee and one copy to the
successor Owner Trustee, provided that the Depositor shall have received written
confirmation from each of the Rating Agencies that the proposed appointment will
not result in an increased capital charge to the Insurer by either of the Rating
Agencies. If no successor Owner Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee or the Insurer may petition any court
of competent jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Depositor, or if at any time the Owner Trustee
shall be legally unable to act or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Depositor with the consent of the Insurer (so long as an
Insurer Default shall not have occurred and be continuing) may remove the Owner
Trustee. If the Depositor shall remove the Owner Trustee under the authority of
the immediately preceding sentence, the Depositor shall promptly appoint a
successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed, one copy
to the Insurer and one copy to the successor Owner Trustee and payment of all
fees owed to the outgoing Owner Trustee.
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this section shall
not become effective until acceptance of appointment by the successor Owner
Trustee pursuant to Section 10.3 and payment of all fees and expenses owed to
the outgoing Owner Trustee. The Depositor shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 10.3. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Depositor, the Servicer, the Insurer and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become effective
and such successor Owner Trustee, without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties and obligations of
its predecessor under this Agreement, with like effect as if originally named as
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Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and
expenses deliver to the successor Owner Trustee all documents and statements and
monies held by it under this Agreement; and the Depositor and the predecessor
Owner Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties and
obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this section, the Servicer shall mail notice of the successor of such Owner
Trustee to all Certificateholders, the Trustee, the Noteholders and the Rating
Agencies. If the Servicer shall fail to mail such notice within 10 days after
acceptance of appointment by the successor Owner Trustee, the successor Owner
Trustee shall cause such notice to be mailed at the expense of the Servicer.
SECTION 10.4. Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided
further that the Owner Trustee shall mail notice of such merger or consolidation
to the Rating Agencies.
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal requirements of any jurisdiction in which any part
of the Owner Trust Estate or any Financed Vehicle may at the time be located,
the Servicer and the Owner Trustee acting jointly shall have the power and shall
execute and deliver all instruments to appoint one or more Persons approved by
the Owner Trustee and the Insurer to act as co-trustee, jointly with the Owner
Trustee, or separate trustee or separate trustees, of all or any part of the
owner Trust Estate, and to vest in such Person, in such capacity, such title to
the Trust, or any part thereof, and, subject to the other provisions of this
Section, such powers, duties, obligations,
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rights and trusts as the Servicer and the Owner Trustee may consider necessary
or desirable. If the Servicer shall not have joined in such appointment within
15 days after the receipt by it of a request so to do, the Owner Trustee
subject, unless an Insurer Default shall have occurred and be continuing, to the
approval of the Insurer (which approval shall not be unreasonably withheld)
shall have the power to make such appointment. No co-trustee or separate trustee
under this Agreement shall be required to meet the terms of eligibility as a
successor trustee pursuant to Section 10.1 and no notice of the appointment of
any co-trustee or separate trustee shall be required pursuant to Section 10.3.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee
is not authorized to act separately without the Owner Trustee joining
in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed,
the Owner Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Owner Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Servicer and the Owner Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this
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<PAGE>
Agreement, specifically including every provision of this Agreement relating to
the conduct of, affecting the liability of, or affording protection to, the
Owner Trustee. Each such instrument shall be filed with the Owner Trustee and a
copy thereof given to the Servicer and the Insurer.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
ARTICLE XI.
Miscellaneous
SECTION 11.1. Supplements and Amendments. (a) This Agreement may be
amended by the Depositor, LLC and the Owner Trustee, with the prior written
consent of the Insurer (so long as an Insurer Default shall not have occurred
and be continuing) and with prior written notice to the Rating Agencies, without
the consent of any of the Noteholders or the Certificateholders, (i) to cure any
ambiguity or defect or (ii) to correct, supplement or modify any provisions in
this Agreement; provided, however, that such action shall not, as evidenced by
an Opinion of Counsel which may be based upon a certificate of the Servicer,
adversely affect in any material respect the interests of any Noteholder or
Certificateholder.
(b) This Agreement may also be amended from time to time, with the
prior written consent of the Insurer (so long as an Insurer Default shall not
have occurred and be continuing) by the Depositor, LLC and the Owner Trustee,
with prior written notice to the Rating Agencies, to the extent such amendment
materially and adversely affects the interests of the Noteholders, with the
consent of the Noteholders evidencing not less than a majority of the
Outstanding Amount of the Notes and, the consent of the Certificateholders
evidencing not less than a majority of the Certificate Percentage Interest [or
Certificate Balance] (which consent of any Holder of a Certificate or Note given
pursuant to this Section or pursuant to any other provision of this Agreement
shall be conclusive and binding on such Holder and on all future Holders of such
Certificate or Note and of any Certificate or Note issued upon the transfer
thereof or in exchange thereof or in lieu thereof whether or not notation of
such consent is made upon the Certificate or Note) for the purpose of adding any
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<PAGE>
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; provided, however, that, subject to the express rights
of the Insurer under the Basic Documents, no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that shall be required
to be made for the benefit of the Noteholders or the Certificateholders or (b)
reduce the aforesaid percentage of the outstanding Amount of the Notes and the
Certificate Percentage Interest required to consent to any such amendment,
without the consent of the Holders of all the outstanding Notes and Holders of
all outstanding Certificates.
Promptly after the execution of any such amendment or consent, the
Owner Trustee shall furnish written notification of the substance of such
amendment or consent to each Certificateholder, the Trustee and each of the
Rating Agencies.
It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Trustee pursuant to this Section to approve the particular
form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe. Promptly after the execution of
any amendment to the Certificate of Trust, the Owner Trustee shall cause the
filing of such amendment with the Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent to
the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.
SECTION 11.2. No Legal Title to Owner Trust Estate in
Certificateholders. The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. The Certificateholders shall be entitled to
receive distributions with respect to their undivided ownership interest therein
only in accordance with Articles V and IX. No transfer, by operation of law or
otherwise, of any right, title or interest of the Certificateholders to and in
their ownership interest in the
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<PAGE>
Owner Trust Estate shall operate to terminate this Agreement or the trusts
hereunder or entitle any transferee to an accounting or to the transfer to it of
legal title to any part of the Owner Trust Estate.
SECTION 11.3. Limitations on Rights of Others. Except for Section 2.7,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, LLC, the Certificateholders, the Servicer and, to the
extent expressly provided herein, the Insurer, the Trustee and the Noteholders,
and nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in the
Owner Trust Estate or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 11.4. Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt personally delivered, delivered by overnight courier
or mailed first class mail or certified mail, in each case return receipt
requested, and shall be deemed to have been duly given upon receipt, if to the
Owner Trustee, addressed to the Corporate Trust Office; if to the Depositor,
addressed to CPS Receivables Corp., 2 Ada, Irvine, California 92618;; if to the
Credit Enhancer, addressed to [ ],(in each case in which notice or other
communication to the Credit Enhancer refers to an Event of Default, a claim on
the Policies or with respect to which failure on the part of Financial Security
to respond shall be deemed to constitute consent or acceptance, then a copy of
such notice or other communication should also be sent to the attention [ ]; or,
as to each party, at such other address as shall be designated by such party in
a written notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
SECTION 11.5. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
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<PAGE>
SECTION 11.6. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7. Assignments; Insurer. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Upon issuance of the Certificate Policy, this
Agreement shall also inure to the benefit of the Insurer for so long as an
Insurer Default shall not have occurred and be continuing. Without limiting the
generality of the foregoing, all covenants and agreements in this Agreement
which confer rights upon the Insurer shall be for the benefit of and run
directly to the Insurer, and the Insurer shall be entitled to rely on and
enforce such covenants, subject, however, to the limitations on such rights
provided in this Agreement and the Basic Documents. The Insurer may disclaim any
of its rights and powers under this Agreement (but not its duties and
obligations under the Policies) upon delivery of a written notice to the Owner
Trustee.
SECTION 11.8. No Petition. The Owner Trustee (not in its individual
capacity but solely as Owner Trustee), by entering into this Agreement, each
Certificateholder, by accepting a Certificate, and the Trustee and each
Noteholder by accepting the benefits of this Agreement, hereby covenants and
agrees that it will not at any time institute against the Depositor, or join in
any institution against the Depositor of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Certificates, the Notes, this Agreement or any
of the Basic Documents.
SECTION 11.9. No Recourse. Each Certificateholder and Owner by
accepting a Certificate or a beneficial interest therein acknowledges that such
Certificateholder's or Owner's Certificates represent beneficial interests in
the Trust only and do not represent interests in or obligations of the
Depositor, the Servicer, the Depositor, the Owner Trustee, the Trustee, the
Insurer or any Affiliate thereof and no recourse may be had against such parties
or their assets, except as may be expressly set forth or contemplated in this
Agreement, the Certificates or the Basic Documents.
SECTION 11.10. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
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<PAGE>
SECTION 11.11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.12. Servicer. The Servicer is authorized to prepare, or
cause to be prepared, execute and deliver on behalf of the Trust all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Trust or Owner Trustee to prepare, file or deliver pursuant
to the Basic Documents. Upon written request, the Owner Trustee shall execute
and deliver to the Servicer a limited power of attorney appointing the Servicer
the Trust's agent and attorney-in-fact to prepare, or cause to be prepared,
execute and deliver all such documents, reports, filings, instruments,
certificates and opinions.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized as of
the day and year first above written.
[ ]
Owner Trustee
By:
Name:
Title:
CPS RECEIVABLES CORP.
Depositor
By:
Name:
Title:
[ , LLC]
By:___________________________
Name:
Title:
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<PAGE>
EXHIBIT A
NUMBER $______________
R- CUSIP NO. _____
SEE REVERSE FOR CERTAIN DEFINITIONS
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE PRINCIPAL OF THIS CERTIFICATE IS DISTRIBUTABLE IN INSTALLMENTS AS
SET FORTH IN THE TRUST AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS
CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.]
[THIS CERTIFICATE IS NOT TRANSFERABLE]1/
------------------------------
ASSET BACKED CERTIFICATE
evidencing a beneficial ownership interest in certain distributions of the
Trust, as defined below, the property of which includes a pool of retail
installment sale contracts secured by new or used automobiles, vans or light
duty trucks and sold to the Trust by AFS Funding Corp.
(This Certificate does not represent an interest in or obligation of CPS
Receivables Corp. or any of its Affiliates, except to the extent described
below.)
- --------
1/ To be inserted on the Certificate to be held by the Depositor.
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<PAGE>
THIS CERTIFIES THAT ___________________ is the registered owner of [ %]
Certificate Percentage Interest nonassessable, fully-paid, beneficial interest
in certain distributions of CPS Auto Receivables Trust 199[ ] (the "Trust")
formed by CPS Receivables Corp., a California
corporation.
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Trust Agreement.
[ ]
not in its individual
capacity but solely or
as Owner Trustee
By:
[ ]
not in its individual
capacity but solely as
Owner Trustee
By: [ ]
Authenticating Agent
By:
The Trust was created pursuant to a Trust Agreement dated as of [ ]
(the "Trust Agreement"), between the Depositor, LLC and [ ], as owner trustee
(the "Owner Trustee"), a summary of certain of the pertinent provisions of which
is set forth below. To the extent not otherwise defined herein, the capitalized
terms used herein have the meanings assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates designated
as "Asset Backed Certificates" (herein called the "Certificates"). Also issued
under the Indenture dated as of [
], among the Trust, [Norwest Bank Minnesota, National Association], as
trustee and [ ] collateral agent, are three classes of Notes designated as
"Class A-1 [ ]% Asset Backed Notes" (the "Class A-1 Notes"), "Class A-2 [ %]
Asset Backed Notes (the "Class A-2 Notes"), "Class A-3 Floating Rate Asset
Backed Notes" (the "Class A-3 Notes", together with the Class A-2 Notes and the
Class A-1 Notes, (the "Class A Notes") and "Class B [%] Asset Backed Notes" (the
"Class B Notes" and, together with the Class A Notes, the "Notes"). This
Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the holder of this
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound. The property of the Trust includes a pool of retail installment sale
contracts secured by new and used automobiles, vans or light duty
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<PAGE>
trucks (the "Receivables"), all monies due thereunder on or after the Initial
Cutoff Date, security interests in the vehicles financed thereby, certain bank
accounts and the proceeds thereof, proceeds from claims on certain insurance
policies and certain other rights under the Trust Agreement and the Sale and
Servicing Agreement, all right, to and interest of the Depositor in and to the
Purchase Agreement dated as of [ ] between Consumer Portfolio Services, Inc. and
the Depositor and all proceeds of the foregoing.
Under the Trust Agreement, there will be distributed on the 15th day of
each month or, if such 15th day is not a Business Day, the next Business Day
(the "Payment Date"), commencing on [ ], to the Person in whose name this
Certificate is registered at the close of business on the Business Day preceding
such Payment Date (the "Record Date") such Certificateholder's Certificate
Percentage Interest in the amount to be distributed to Certificateholders on
such Payment Date.
The holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate are subordinated to the
rights of the Noteholders as described in the Sale and Servicing Agreement, the
Indenture and the Trust Agreement, as applicable.
It is the intent of the Depositor, Servicer, holder of the
Depositorship Interest and Certificateholders that, for purposes of Federal
income taxes, the Trust will be treated as a partnership and the
Certificateholders (including the Depositor) will be treated as partners in that
partnership. The Depositor and the other Certificateholders by acceptance of a
Certificate, agree to treat, and to take no action inconsistent with the
treatment of, the Certificates for such tax purposes as partnership interests in
the Trust. Each Certificateholder, by its acceptance of a Certificate, covenants
and agrees that such Certificateholder will not at any time institute against
the Trust or the Depositor, or join in any institution against the Trust or the
Depositor of, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any United States Federal or
state bankruptcy or similar law in connection with any obligations relating to
the Certificates, the Notes, the Trust Agreement or any of the Basic Documents.
Distributions on this Certificate will be made as provided in the Trust
Agreement by the Owner Trustee by wire transfer or check mailed to the
Certificateholder of record in the Certificate Register without the presentation
or surrender of this Certificate or the making of any notation hereon, except
that with respect to Certificates registered on the Record Date in the name of
the nominee of the Clearing Agency (initially,
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<PAGE>
such nominee to be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Except as
otherwise provided in the Trust Agreement and notwithstanding the above, the
final distribution on this Certificate will be made after due notice by the
Owner Trustee of the pendency of such distribution and only upon presentation
and surrender of this Certificate at the office or agency maintained for the
purpose by the Owner Trustee in the Borough of Manhattan, The City of New York.
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual signature,
this Certificate shall not entitle the holder hereof to any benefit under the
Trust Agreement or the Sale and Servicing Agreement or be valid for any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE IN ACCORDANCE
WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Certificate to be duly executed.
CPS AUTO RECEIVABLES TRUST 19[ ]
By: [ ], not in its
individual capacity but solely as
Owner Trustee
By: _______________________________
Name:
Title:
Date: ______________________
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<PAGE>
(Reverse of Certificate)
The Certificates do not represent an obligation of, or an interest in,
the Depositor, the Servicer, the Depositor, the Owner Trustee or any Affiliates
of any of them and no recourse may be had against such parties or their assets,
except as may be expressly set forth or contemplated herein or in the Trust
Agreement, the Indenture or the Basic Documents. In addition, this Certificate
is not guaranteed by any governmental agency or instrumentality and is limited
in right of payment to certain collections with respect to the Receivables and
payments under the Certificate Policy, all as more specifically set forth herein
and in the Sale and Servicing Agreement. A copy of each of the Sale and
Servicing Agreement and the Trust Agreement may be examined during normal
business hours at the principal office of the Depositor, and at such other
places, if any, designated by the Depositor, by any Certificateholder upon
written request.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Trust Agreement at
any time by the Depositor and the Owner Trustee with the consent of the holders
of the Notes and the Certificates evidencing not less than a majority of the
outstanding Notes and the Certificate Percentage Interest [or Certificate
Balance]. Any such consent by the holder of this Certificate shall be conclusive
and binding on such holder and on all future holders of this Certificate and of
any Certificate issued upon the transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent is made upon this Certificate.
The Trust Agreement also permits the amendment thereof, in certain limited
circumstances, without the consent of the holders of any of the Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Owner Trustee in the Borough of Manhattan, The City of New York, accompanied
by a written instrument of transfer in form satisfactory to the Owner Trustee
and the Certificate Registrar duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates in authorized denominations evidencing the same aggregate interest
in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is [ ].
Except for Certificates issued to the Depositor and the Depositor, the
Certificates are issuable only as registered
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<PAGE>
Certificates without coupons in denominations of $1,000 or integral multiples
thereof. As provided in the Trust Agreement and subject to certain limitations
therein set forth, Certificates are exchangeable for new Certificates in
authorized denominations evidencing the same aggregate denomination as requested
by the holder surrendering the same. No service charge will be made for any such
registration of transfer or exchange, but the Owner Trustee or the Certificate
Registrar may require payment of a sum sufficient to cover any tax or
governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar, the Insurer and any agent
of the Owner Trustee, the Certificate Registrar or the Insurer may treat the
person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Owner Trustee, the Certificate Registrar, the Insurer
nor any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement and
the Sale and Servicing Agreement and the disposition of all property held as
part of the Trust. The Servicer of the Receivables may at its option purchase
the corpus of the Trust at a price specified in the Sale and Servicing
Agreement, and such purchase of the Receivables and other property of the Trust
will effect early retirement of the Certificates; however, such right of
purchase is exercisable, subject to certain restrictions, only as of the last
day of any Collection Period as of which the Pool Balance is 10% or less of the
Original Pool Balance. The Certificates are also subject to mandatory
prepayment, pro rata on the basis of the initial Certificate Balance, on the
Payment Date on or immediately following the last day of the Funding Period in
the event that any portion of the Pre-Funded Amount remains on deposit in the
Pre-Funding Account after giving effect to the purchase of all Subsequent
Receivables, including any purchase of Subsequent Receivables on such date. The
aggregate principal amount of the Certificates to be prepaid will be an amount
equal to the Certificate Prepayment Amount.
The Certificates may not be acquired by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
I of ERISA, (b) a plan described in Section 4975(e) (1) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan"). By accepting and holding this
Certificate, the Holder hereof shall be deemed to have represented and warranted
that it is not a Benefit Plan.
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<PAGE>
The recitals contained herein shall be taken as the statements of the
Depositor, the Depositor or the Servicer, as the case may be, and the Owner
Trustee assumes no responsibility for the correctness thereof. The Owner Trustee
makes no representations as to the validity or sufficiency of this Certificate
or of any Receivable or related document.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee, by manual or facsimile
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
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ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers
unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
(Please print or type name and address, including postal zip code, of
assignee)
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
_______________________________ Attorney to transfer said Certificate on the
books of the Certificate Registrar, with full power of substitution in the
premises.
Dated:
*
Signature
Guaranteed:
*
- ----------
* NOTICE:
The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Certificate in
every particular, without alteration, enlargement or any change
whatever. Such signature must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Certificate Registrar,
which requirements include membership or participation in STAMP or such
other "signature guarantee program" as may be determined by the
Certificate Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.
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<PAGE>
EXHIBIT B
[FORM OF]
CERTIFICATE OF TRUST OF
CPS AUTO RECEIVABLES TRUST 199[ ]
This Certificate of Trust of CPS Auto Receivables Trust 199[ ] (the
"Trust"), dated as of ___________, 199_, is being duly executed and filed by
_______________________________, a ____________, and ______________, an
individual, as trustees, to form a business trust under the Delaware Business
Trust Act (12 Del. Code, ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is CPS Auto
Receivables Trust 199[ ].
2. This Certificate of Trust will be effective ______ __, 199_.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
[ ],
not in its individual
capacity but solely as
owner trustee of the Trust.
By:
Name:
Title:
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CPS AUTO RECEIVABLES TRUST 199[ ]
Class A-1 [ ]% Asset Backed Notes
Class A-2 [ ]% Asset Backed Notes
Class A-3 Floating Rate Asset Backed Notes
Class B [ ]% Asset Backed Notes
---------------------------------
INDENTURE
Dated as of [ ]
-----------------------------------
[NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION]
Trustee
- --------------------------------------------------------------------------------
Form of Indenture
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions.............................................3
SECTION 1.2. Incorporation by Reference of Trust
Indenture Act..........................................14
SECTION 1.3. Other Definitional Provisions..........................14
ARTICLE II
The Notes
SECTION 2.1. Form...................................................15
SECTION 2.2. Execution, Authentication and Delivery.................15
SECTION 2.3. Temporary Notes........................................16
SECTION 2.4. Registration; Registration of Transfer and
Exchange...............................................16
SECTION 2.5. Mutilated, Destroyed, Lost or Stolen
Notes..................................................18
SECTION 2.6. Persons Deemed Owner...................................19
SECTION 2.7. Payment of Principal and Interest;
Defaulted Interest.....................................19
SECTION 2.8. Cancellation...........................................20
SECTION 2.9. Release of Collateral..................................21
SECTION 2.10. Book-Entry Notes.......................................21
SECTION 2.11. Notices to Clearing Agency.............................22
SECTION 2.12. Definitive Notes.......................................22
ARTICLE III
Covenants
SECTION 3.1. Payment of Principal and Interest......................23
SECTION 3.2. Maintenance of Office or Agency........................23
SECTION 3.3. Money for Payments to be Held in Trust.................24
SECTION 3.4. Existence..............................................25
SECTION 3.5. Protection of Trust Estate.............................26
SECTION 3.6. Opinions as to Trust Estate............................26
SECTION 3.7. Performance of Obligations; Servicing of
Receivables............................................27
SECTION 3.8. Negative Covenants.....................................28
SECTION 3.9. Annual Statement as to Compliance......................29
SECTION 3.10. Issuer May Consolidate, Etc. Only on
Certain Terms..........................................29
SECTION 3.11. Successor or Transferee................................32
SECTION 3.12. No Other Business......................................32
SECTION 3.13. No Borrowing...........................................32
SECTION 3.14. Servicer's Obligations.................................33
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SECTION 3.15. Guarantees, Loans, Advances and Other
Liabilities............................................33
SECTION 3.16. Capital Expenditures...................................33
SECTION 3.17. Compliance with Laws...................................33
SECTION 3.18. Restricted Payments....................................33
SECTION 3.19. Notice of Events of Default............................33
SECTION 3.20. Further Instruments and Acts...........................34
SECTION 3.21. Amendments of Sale and Servicing Agreement
and Trust Agreement....................................34
SECTION 3.22. Income Tax Characterization............................34
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture................34
SECTION 4.2. Application of Trust Money.............................36
SECTION 4.3. Repayment of Moneys Held by
Paying Agent...........................................36
ARTICLE V
Remedies
SECTION 5.1. Events of Default......................................36
SECTION 5.2. Rights Upon Event of Default...........................38
SECTION 5.3. Collection of Indebtedness and Suits for
Enforcement by Trustee.................................39
SECTION 5.4. Remedies ..............................................43
SECTION 5.5. Optional Preservation of the Receivables...............44
SECTION 5.6. Priorities.............................................44
SECTION 5.7. Limitation of Suits....................................46
SECTION 5.8. Unconditional Rights of Noteholders To
Receive Principal and Interest.........................47
SECTION 5.9. Restoration of Rights and Remedies.....................47
SECTION 5.10. Rights and Remedies Cumulative.........................47
SECTION 5.11. Delay or Omission Not a Waiver.........................47
SECTION 5.12. Control by Noteholders.................................47
SECTION 5.13. Waiver of Past Defaults................................48
SECTION 5.14. Undertaking for Costs..................................49
SECTION 5.15. Waiver of Stay or Extension Laws.......................49
ARTICLE VI
The Trustee
SECTION 6.1. Duties of Trustee......................................49
SECTION 6.2. Rights of Trustee......................................51
SECTION 6.3. Individual Rights of Trustee...........................53
SECTION 6.4. Trustee's Disclaimer...................................53
SECTION 6.5. Notice of Defaults.....................................53
SECTION 6.6. Reports by Trustee to Holders..........................53
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SECTION 6.7. Compensation and Indemnity.............................53
SECTION 6.8. Replacement of Trustee.................................54
SECTION 6.9. Successor Trustee by Merger............................55
SECTION 6.10. Appointment of Co-Trustee or Separate
Trustee................................................56
SECTION 6.11. Eligibility: Disqualification..........................57
SECTION 6.12. Preferential Collection of Claims Against
Issuer.................................................58
SECTION 6.13. Appointment and Powers.................................58
SECTION 6.14. Performance of Duties..................................58
SECTION 6.15. Limitation on Liability................................59
SECTION 6.16. Reliance Upon Documents................................59
SECTION 6.17. Successor Trustee......................................59
SECTION 6.18. [Reserved].............................................61
SECTION 6.19. Representations and Warranties of the
Trustee................................................61
SECTION 6.20. Waiver of Setoffs......................................62
SECTION 6.21. Control by the Controlling Party.......................62
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1. Issuer To Furnish To Trustee Names and
Addresses of Noteholders..............................62
SECTION 7.2. Preservation of Information; Communications
to Noteholders........................................62
SECTION 7.3. Reports by Issuer......................................63
SECTION 7.4. Reports by Trustee.....................................63
ARTICLE VIII
Collection of Money and Releases of Trust Estate
SECTION 8.1. Collection of Money....................................64
SECTION 8.2. Release of Trust Estate................................64
SECTION 8.3. Opinion of Counsel.....................................64
ARTICLE IX
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of
Noteholders..........................................65
SECTION 9.2. Supplemental Indentures with Consent of
Noteholders..........................................66
SECTION 9.3. Execution of Supplemental Indentures...................68
SECTION 9.4. Effect of Supplemental Indenture.......................68
SECTION 9.5. Conformity With Trust Indenture Act....................69
SECTION 9.6. Reference in Notes to Supplemental
Indentures...........................................69
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ARTICLE X
Redemption of Notes
SECTION 10.1. Redemption.............................................69
SECTION 10.2. Form of Redemption Notice..............................70
SECTION 10.3. Notes Payable on Redemption Date.......................71
ARTICLE XI
Miscellaneous
SECTION 11.1. Compliance Certificates and Opinions,
etc....................................................71
SECTION 11.2. Form of Documents Delivered to Trustee.................73
SECTION 11.3. Acts of Noteholders....................................74
SECTION 11.4. Notices, etc., to Trustee, Issuer and
Rating Agencies........................................74
SECTION 11.5. Notices to Noteholders; Waiver.........................76
SECTION 11.6. Alternate Payment and Notice Provisions................76
SECTION 11.7. Conflict with Trust Indenture Act......................77
SECTION 11.8. Effect of Headings and Table
of Contents............................................77
SECTION 11.9. Successors and Assigns.................................77
SECTION 11.10. Severability...........................................77
SECTION 11.11. Benefits of Indenture..................................77
SECTION 11.12. Legal Holidays.........................................78
SECTION 11.13. GOVERNING LAW..........................................78
SECTION 11.14. Counterparts...........................................78
SECTION 11.15. Recording of Indenture.................................78
SECTION 11.16. Trust Obligation.......................................78
SECTION 11.17. No Petition............................................79
SECTION 11.18. Inspection.............................................79
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INDENTURE dated as of [ ], between CPS AUTO RECEIVABLES TRUST 199[], a
Delaware business trust (the "Issuer"), and [NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION], a national banking association, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Issuer's Class A-1 [ ]%
Asset Backed Notes (the "Class A-1 Notes"), Class A-2 [ ]% Asset Backed Notes
(the "Class A-2 Notes"), Class A-3 Floating Rate Asset Backed Notes (the "Class
A-3 Notes"), (the "Class A-3 Notes" and, together with the Class A-1 Notes and
Class A-2 Notes, the "Class A Notes") and Class B [ ]% Asset Backed Notes (the
"Class B Notes" and, together with the Class A Notes, the "Notes"):
As security for the payment and performance by the Issuer of its
obligations under this Indenture and the Notes, the Issuer has agreed to assign
the Collateral (as defined below) as collateral to the Trustee for the benefit
of the Noteholders.
[Financial Security Assurance Inc. (the "Insurer") has issued and
delivered a financial guaranty insurance policy, dated the Closing Date (with
endorsements, the "Note Policy"), pursuant to which the Insurer guarantees
Scheduled Payments, as defined in the Note Policy.
As an inducement to the Insurer to issue and deliver the Note Policy,
the Issuer and the Insurer have executed and delivered the Insurance and
Indemnity Agreement, dated as of [ ](as amended from time to time, the
"Insurance Agreement") among the Insurer, the Issuer, Consumer Portfolio
Services, Inc., and CPS Receivables Corp.]
As [an additional inducement to the Insurer to issue the Note Policy,
and as security for the performance by the Issuer of the Insurer Secured
Obligations and as] security for the performance by the Issuer of the Trustee
Secured Obligations, the Issuer has agreed to assign the Collateral (as defined
below) as collateral to the Trustee for the benefit of the Issuer Secured
Parties, as their respective interests may appear.
GRANTING CLAUSE
The Issuer hereby Grants to the Trustee at the Closing Date,
for the benefit of the Issuer Secured Parties,
(i) all right, title and interest of the Issuer in and to the
Initial Receivables listed in Schedule A hereto and, with respect to
Rule of 78's Receivables, all monies due or to become due thereon after
the Initial Cutoff Date (including Scheduled Payments due after the
Initial Cutoff Date (including principal prepayments relating to such
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<PAGE>
Scheduled Payments) but received by the Issuer or CPS on or before the
Initial Cutoff Date) and, with respect to Simple Interest Receivables,
all monies received thereunder after the Initial Cutoff Date and all
Liquidation Proceeds and Recoveries received with respect to such
Initial Receivables after the Initial Cutoff Date;
(ii) all right, title and interest of the Issuer in and to the
security interests in the Financed Vehicles granted by Obligors
pursuant to the Initial Receivables and any other interest of the
Issuer in such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to such Financed Vehicles in the
State of Michigan, all other evidence of ownership with respect to such
Financed Vehicles;
(iii) all right, title and interest of the Issuer in and to
any proceeds from claims on any physical damage, credit life and credit
accident and health insurance policies or certificates relating to the
Financed Vehicles or the Obligors;
(iv) all right, title and interest of the Issuer in and to the
Purchase Agreements, including a direct right to cause CPS to purchase
Receivables under certain circumstances;
(v) the Issuer's rights and benefits, but none of its
obligations or burdens, under the Sale and Servicing Agreement
(including all rights of the Seller under the Purchase Agreement), any
Subsequent Purchase Agreement and any Subsequent Transfer Agreement
assigned to the Issuer pursuant to the Sale and Servicing Agreement
assigned to the Issuer pursuant to the Sale and Servicing Agreement;
(vi) all right, title and interest of the Issuer in and to
refunds for the costs of extended service contracts with respect to
Financed Vehicles, refunds of unearned premiums with respect to credit
life and credit accident and health insurance policies or certificates
covering an Obligor or Financed Vehicle or his or her obligations with
respect to a Financed Vehicle and any recourse to Dealers for any of
the foregoing;
(vii) the Receivable File related to each Initial Receivable;
(viii) all amounts and property from time to time held in or
credited to the Collection Account, the Lock-Box Account, the Policy
Payments Account or the Certificate Account; and
(ix) the proceeds of any and all of the foregoing.
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<PAGE>
[In addition, the Issuer shall cause the Note Policy to be issued
for the benefit of the Noteholders.]
(collectively, the "Collateral").
The foregoing Grant is made in trust to the Trustee, for the benefit of
the Holders of the Notes and for the benefit of the Insurer. The Trustee hereby
acknowledges such Grant, accepts the trusts under this Indenture in accordance
with the provisions of this Indenture and agrees to perform its duties required
in this Indenture to the best of its ability to the end that the interests of
such parties, recognizing the priorities of their respective interests may be
adequately and effectively protected.
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions. Except as otherwise specified herein, the
following terms have the respective meanings set forth below for all purposes of
this Indenture and the definitions of such terms are equally applicable to both
the singular and plural forms of such terms and to each gender.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in the Sale and Servicing Agreement or, if
not defined therein, in the Trust Agreement.
"Act" has the meaning specified in Section 11.3(a).
"Affiliate" of any Person means any Person who directly or indirectly controls,
is controlled by, or is under direct or indirect common control with such
Person. For purposes of this definition of "Affiliate", the term "control"
(including the terms "controlling", "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause a direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"Amount Financed" with respect to a Receivable means the aggregate
amount originally advanced under the Receivable toward the purchase price of the
Financed Vehicle and any related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the annual rate
of finance charges stated in the Receivable.
"Authorized Officer" means, with respect to the Issuer and the
Servicer, any officer or agent acting pursuant to a power of
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<PAGE>
attorney of the Owner Trustee or the Servicer, as applicable, who is authorized
to act for the Owner Trustee or the Servicer, as applicable, in matters relating
to the Issuer and who is identified on the list of Authorized Officers delivered
by each of the Owner Trustee and the Servicer to the Trustee on the Closing Date
(as such list may be modified or supplemented from time to time thereafter).
"Basic Documents" means this Indenture, the Certificate of Trust, the
Trust Agreement, the Sale and Servicing Agreement, the Master Spread Account
Agreement, the Master Spread Account Agreement Supplement, the Insurance
Agreement and other documents and certificates delivered in connection
therewith.
"Book Entry Notes" means a beneficial interest in the Notes, ownership
and transfers of which shall be made through book entries by a Clearing Agency
as described in Section 2.10.
"Business Day" means (i) with respect to the Note Policy, any day other
than a Saturday, Sunday, legal holiday or other day on which commercial banking
institutions in Wilmington, Delaware, the City of New York, [Minneapolis,
Minnesota,] or any other location of any successor Servicer, successor Owner
Trustee or successor Trustee are authorized or obligated by law, executive order
or governmental decree to be closed and (ii) otherwise, a day other than a
Saturday, a Sunday or other day on which commercial banks located in the states
of Delaware, [Minnesota], California or New York are authorized or obligated to
be closed.
"Certificate of Trust" means the certificate of trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
"Class A-1 Interest Rate" means [ ]% per annum (computed on the basis
of the actual number of days elapsed in a 360-day year).
"Class A-1 Notes" means the Class A-1 [ ]% Asset Backed Notes,
substantially in the form of Exhibit A-1.
"Class A-1 Prepayment Amount" means, as of the Payment Date on or
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-1 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded Amount
as of such Payment Date.
"Class A-2 Interest Rate" means [ ]% per annum (computed on the basis
of a 360-day year of twelve 30-day months).
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<PAGE>
"Class A-2 Notes" means the Class A-2 [ ]% Asset Backed Notes,
substantially in the form of Exhibit A-2.
"Class A-2 Prepayment Amount" means, as of the Payment Date on or
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-2 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded Amount
as of such Payment Date.
"Class A-3 Interest Rate" means with respect to any Interest Period,
LIBOR plus [ ]%, subject to a maximum rate equal to [ ]% (computed on the basis
of the actual number of days elapsed in a 360-day year).
"Class A-3 Notes" means the Class A-3 Floating Rate Asset Backed Notes,
substantially in the form of Exhibit A-3.
"Class A-3 Prepayment Amount" means, as of the Payment Date on or
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class A-3 Noteholders' pro rata share (based on the respective current
outstanding principal balance of each class of Notes) of the Pre-Funded Amount
as of such Payment Date.
"Class B Interest Rate" means [ %] per annum (computed on the basis of
the actual number of days elapsed in a 360-day year.
"Class B Notes" means the Class B [ %] Asset Backed Notes,
substantially in the form of Exhibit B.
"Class B Prepayment Amount" means as of the Payment Date on or
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Class B Noteholders' pro rata share (based on the respective current outstanding
principal balance of each class of Notes) of the Pre-Funded Amount as of such
Payment Date.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act, or any successor provision
thereto. The initial Clearing Agency shall be The Depository Trust Company.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
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<PAGE>
"Closing Date" means [ ].
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting
Clause of this Indenture.
"Controlling Party" means the Insurer, so long as no Insurer Default
shall have occurred and be continuing, and the Trustee, for so long as an
Insurer Default shall have occurred and be continuing.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered
which office at date of the execution of this Agreement is located at [ ]
Attention: [ ] or at such other address as the Trustee may designate from time
to time by notice to the Noteholders, the Insurer, the Servicer and the Issuer,
or the principal corporate trust office of any successor Trustee (the address of
which the successor Trustee will notify the Noteholders and the Issuer).
"Default" means any occurrence that is, or with notice or the lapse of
time or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in
Section 2.10.
"Depositor" means each Certificateholder obligated to pay the expenses
of the Issuer pursuant to Section 2.7 of the Trust Agreement.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; and with respect to any partnership, any general partner
thereof.
"Grant" means to mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but
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<PAGE>
none of the obligations) of the Granting party thereunder, including the
immediate and continuing right to claim for, collect, receive and give receipt
for principal and interest payments in respect of the Collateral and all other
moneys payable thereunder, to give and receive notices and other communications,
to make waivers or other agreements, to exercise all rights and options, to
bring proceedings in the name of the Granting party or otherwise and generally
to do and receive anything that the Granting party is or may be entitled to do
or receive thereunder or with respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indebtedness" means, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should be, in accordance
with generally accepted accounting principles, recorded as capital leases; (c)
current liabilities of such Person in respect of unfunded vested benefits under
plans covered by Title IV of ERISA; (d) obligations issued for or liabilities
incurred on the account of such Person; (e) obligations or liabilities of such
Person arising under acceptance facilities; (f) obligations of such Person under
any guarantees, endorsements (other than for collection or deposit in the
ordinary course of business) and other contingent obligations to purchase, to
provide funds for payment, to supply funds to invest in any Person or otherwise
to assure a creditor against loss; (g) obligations of such Person secured by any
lien on property or assets of such Person, whether or not the obligations have
been assumed by such Person; or (h) obligations of such Person under any
interest rate or currency exchange agreement.
"Indenture" means this Indenture as amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"Independent" means, when used with respect to any specified Person,
that the person (a) is in fact independent of the Issuer, any other obliger upon
the Notes, the Seller and any Affiliate of any of the foregoing persons, (b)
does not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obliger, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obliger, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.
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<PAGE>
"Independent Certificate" means a certificate or opinion to be
delivered to the Trustee under the circumstances described in, and otherwise
complying with, the applicable requirements of Section 11.1, prepared by an
Independent appraiser or other expert appointed by an Issuer Order and approved
by the Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read the definition of "Independent"
in this Indenture and that the signer is Independent within the meaning thereof.
"Insurance Agreement Indenture Cross Default" has the meaning specified
therefor in the Insurance Agreement.
"Insurer Secured Obligations" means all amounts and obligations which
the Issuer may at any time owe to or on behalf of the Insurer under this
Indenture, the Insurance Agreement or any other Basic Document.
"Interest Rate" means, with respect to the (i) Class A-1 Notes, the
Class A-1 Interest Rate, (ii) Class A-2 Notes, the Class A-2 Interest Rate,
(iii) Class A-3 Notes, the Class A-3 Interest Rate and (iv) Class B Notes, the
Class B Interest Rate.
"Issuer" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the Notes.
"Issuer Order" and "Issuer Request" means a written order or request
signed in the name of the Issuer by any one of its Authorized Officers and
delivered to the Trustee.
"Issuer Secured Obligations" means the Insurer Secured Obligations and
the Trustee Secured obligations.
"Issuer Secured Parties" means each of the Trustees in respect of the
Trustee Secured Obligations and the Insurer in respect of the Insurer Secured
Obligations.
"LIBOR" means, with respect to any Interest Period, the London
interbank offered rate for deposits in U.S. dollars having a maturity of one
month commencing on the related LIBOR Determination Date (the "Index Maturity")
which appears on Telerate Page 3750 as of 11:00 a.m., London time, on such LIBOR
Determination Date. If such rate does not appear on Telerate Page 3750, the rate
for that day will be determined on the basis of the rates at which deposits in
U.S. dollars, having the Index Maturity and in a principal amount of not less
than U.S. $1,000,000, are offered at approximately 11:00 a.m., London time, on
such LIBOR Determination Date to prime banks in the London interbank market by
the Reference Banks. The Trustee will request the principal London office of
each of such Reference
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<PAGE>
Banks to provide a quotation of its rate. If at least two such quotations are
provided, the rate for that day will be the arithmetic mean, rounded upward, if
necessary to the nearest 1/100,000 of 1% (.0000001), with five one-millionths of
a percentage point rounded upward, of all such quotations. If fewer than two
such quotations are provided, the rate for that day will be the arithmetic mean,
rounded upward, if necessary to the nearest 1/100,000 of 1% (.0000001), with
five one-millionths of a percentage point rounded upward, of the offered per
annum rates one or more leading banks in New York City, selected by the Trustee,
are quoting as of approximately 11:00 a.m., New York City time, on such LIBOR
Determination Date to leading European banks for United States dollar deposits
for the Index Maturity; provided that if the banks selected as aforesaid are not
quoting as mentioned in this sentence, LIBOR in effect for the applicable
Interest Period will be LIBOR in effect for the previous Interest Period.
"LIBOR Determination Date" means, with respect to any Interest Period,
the day that is the second London Business Day prior to the commencement of such
Interest Period.
"London Business Day" means a Business Day and a day on which banking
institutions in the City of London, England are not required or authorized by
law to be closed.
"Note" means a Class A-1 Note, a Class A-2 Note, a Class A-3 Note or a
Class B Note.
"Note Owner" means, with respect to a Book-Entry Note, the person who
is the owner of such Book-Entry Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency (directly as a Clearing Agency Participant or as an indirect participant,
in each case in accordance with the rules of such Clearing Agency).
"Note Paying Agent" means the Trustee or any other Person that meets
the eligibility standards for the Trustee specified in Section 6.11 and is
authorized by the Issuer to make the payments to and distributions from the
Collection Account and the Note Distribution Account, including payment of
principal of or interest on the Notes on behalf of the Issuer.
"Note Policy" means the insurance policy issued by the Insurer with
respect to the Notes, including any endorsements thereto.
"Note Policy Claim Amount" has the meaning specified in the Sale and
Servicing Agreement.
"Note Register" and "Note Registrar" have the respective meanings
specified in Section 2.4.
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"Notice of Claim" has the meaning specified in the Sale and Servicing
Agreement.
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Owner Trustee, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1 and TIA
ss. 314, and delivered to the Trustee. Unless otherwise specified, any reference
in this Indenture to an Officer's Certificate shall be to an Officer's
Certificate of any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who
may, except as otherwise expressly provided in this Indenture, be employees of
or counsel to the Issuer and who shall be satisfactory to the Trustee and, if
addressed to the Insurer, satisfactory to the Insurer, and which shall comply
with any applicable requirements of Section 11.1, and shall be in form and
substance satisfactory to the Trustee, and if addressed to the Insurer,
satisfactory to the Insurer.
"Outstanding" means, as of the date of determination, all Notes
theretofore authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in
the necessary amount has been theretofore deposited with the Trustee or
any Paying Agent in trust for the Holders of such Notes (provided,
however, that if such Notes are to be redeemed, notice of such
redemption has been duly given pursuant to this Indenture, satisfactory
to the Trustee); and
(iii) Notes in exchange for or in lieu of other Notes which
have been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Trustee is presented that any such Notes are
held by a bona fide purchaser;
provided, however, that Notes which have been paid with proceeds of the Note
Policy shall continue to remain Outstanding for purposes of this Indenture until
the Insurer has been paid as subrogee hereunder or reimbursed pursuant to the
Insurance Agreement as evidenced by a written notice from the Insurer delivered
to the Trustee, and the Insurer shall be deemed to be the Holder thereof to the
extent of any payments thereon made by the Insurer; provided, further, that in
determining whether the Holders of the requisite outstanding Amount of the Notes
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder or under any Basic Document, Notes
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owned by the Issuer, any other obliger upon the Notes, the Seller or any
Affiliate of any of the foregoing Persons shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that a Responsible Officer of the Trustee
either actually knows to be so owned or has received written notice thereof
shall be so disregarded. Notes so owned that have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgees right so to act with respect to such Notes and that the
pledgee is not the Issuer, any other obliger upon the Notes, the Seller or any
Affiliate of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes,
or class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means [ ], and its successors.
"Payment Date" has the meaning specified in the Notes.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.5 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Preference Claim" has the meaning specified in the Sale and Servicing
Agreement.
"Proceeding" means any suit in equity, action at law or other judicial
or administrative proceeding.
"Rating Agency" means each of Moody's and Standard & Poor's, so long as
such Persons maintain a rating on the Notes; and if either Moody's or Standard &
Poor's no longer maintains a rating on the Notes, such other nationally
recognized statistical rating organization selected by the Seller and (so long
as an Insurer Default shall not have occurred and be continuing) acceptable to
the Insurer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Insurer, the
Trustee, the Owner Trustee and the Issuer in writing that such action will
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not result in a reduction or withdrawal of the then current rating of the Notes.
"Record Date" means, with respect to a Payment Date or Redemption Date,
the close of business on the Business Day immediately preceding such Payment
Date or Redemption Date.
"Redemption Date" means (a) in the case of a redemption of the Notes
pursuant to Section 10.1(a) or a payment to Noteholders pursuant to Section
10.1(b), the Payment Date specified by the Servicer or the Issuer pursuant to
Section 10.1(a) or (b) as applicable.
"Redemption Price" means (a) in the case of a redemption of the Notes
pursuant to Section 10.1(a), an amount equal to the unpaid principal amount of
each class of Notes being redeemed plus accrued and unpaid interest thereon to
but excluding the Redemption Date, or (b) in the case of a payment made to
Noteholders pursuant to Section 10.1(b), the amount on deposit in the Note
Distribution Account, but not in excess of the amount specified in clause (a)
above.
"Reference Banks" means the following banks: [ ].
"Responsible Officer" means, with respect to the Trustee, any officer
within the Corporate Trust Office of the Trustee, including any Vice President,
Assistant Vice President, Assistant Treasurer, Assistant Secretary, or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
dated as of [ ], among the Issuer, the Seller, the Servicer and the Trustee as
Backup Servicer and Trustee, as the same may be amended or supplemented from
time to time.
"Scheduled Payments" has the meaning specified in the Note Policy.
"SEC" means the United State Securities and Exchange Commission.
"State" means any one of the 50 states of the United States of America
or the District of Columbia.
"Successor Servicer" has the meaning specified in Section 3.7(e).
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"Termination Date" means the latest of (i) the expiration of the Note
Policy and the return of the Note Policy to the Insurer for cancellation, (ii)
the date on which the Insurer shall have received payment and performance of all
Insurer Secured Obligations and (iii) the date on which the Trustee shall have
received payment and performance of all Trustee Secured Obligations.
"Trust Estate" means all money, instruments, rights and other property
that are subject or intended to be subject to the lien and security interest of
this Indenture for the benefit of the Noteholders (including all property and
interests Granted to the Trustee), including all proceeds thereof.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939,
as amended and as in force on the date hereof, unless otherwise specifically
provided.
"Trustee" means [Norwest Bank Minnesota, National Association], a
national banking association, not in its individual capacity but as trustee
under this Indenture, or any successor trustee under this Indenture.
"Trustee Secured Obligations" means all amounts and obligations which
the Issuer may at any time owe to or on behalf of the Trustee for the benefit of
the Noteholders under this Indenture or the Notes.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
SECTION 1.2. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer.
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All other TIA terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by Commission rule have the
meaning assigned to them by such definitions.
SECTION 1.3. Other Definitional Provisions. Unless the context
otherwise requires:
(i) All references in this instrument to designated
"Articles," "Sections," "Subsections" and other subdivisions are to the
designated Articles, Sections, Subsections and other subdivisions of
this instrument as originally
executed.
(ii) The words "herein," "hereof," "hereunder" and other words
of similar import refer to this Indenture as a whole and not to any
particular Article, Section, Subsection or other subdivision.
(iii) an accounting term not otherwise defined herein has the
meaning assigned to it in accordance with generally accepted accounting
principles as in effect from time to time;
(iv) "or" is not exclusive; and
(v) "including" means including without limitation;
ARTICLE II
The Notes
SECTION 2.1. Form. (a) The Class A-1 Notes, the Class A-2 Notes, the
Class A-3 Notes and the Class B Notes, in each case together with the Trustee's
certificate of authentication, shall be in substantially the form set forth in
Exhibit A-1, A-2, A-3, and B, respectively, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any Note
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Note.
(b) The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
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(c) Each Note shall be dated the date of its authentication. The terms
of the Notes set forth in Exhibits A- 1, A-2, A-3 and B are part of the terms of
this Indenture.
SECTION 2.2. Execution, Authentication and Delivery. (a) The Notes
shall be executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
(b) Notes bearing the manual or facsimile signature of individuals who
were at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
(c) The Trustee shall upon receipt of the Note Policy and Issuer Order
authenticate and deliver Class A-1 Notes for original issue in an aggregate
principal amount of [ ], Class A-2 Notes for original issue in the aggregate
principal amount of [ ], Class A-3 Notes for original issue in the aggregate
principal amount of [ ] and Class B Notes for original issue in the aggregate
principal amount of [ ]. Class A-1 Notes, Class A-2 Notes, Class A-3 Notes and
Class B Notes outstanding at any time may not exceed such amounts except as
provided in Section 2.5.
(d) Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $[1,000]
and in integral multiples thereof (except for one Note of each class which may
be issued in a denomination other than an integral multiple of $[1,000]).
(e) No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein,
executed by the Trustee by the manual signature of one of its authorized
signatories, and such certificate upon any Note shall be conclusive evidence,
and the only evidence, that such Note has been duly authenticated and delivered
hereunder.
SECTION 2.3. Temporary Notes. (a) Pending the preparation of Definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Trustee
shall authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, of the tenor of the Definitive
Notes in lieu of which they are issued and with such variations not inconsistent
with the terms of this Indenture as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.
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(b) If temporary Notes are issued, the Issuer will cause Definitive
Notes to be prepared without unreasonable delay. After the preparation of
Definitive Notes, the temporary Notes shall be exchangeable for Definitive Notes
upon surrender of the temporary Notes at the office or agency of the Issuer to
be maintained as provided in Section 3.2, without charge to the Holder. Upon
surrender for cancellation of any one or more temporary Notes, the Issuer shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
like principal amount of Definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as Definitive Notes.
SECTION 2.4. Registration; Registration of Transfer and Exchange. (a)
The Issuer shall cause to be kept a register (the "Note Register") in which,
subject to such reasonable regulations as it may prescribe, the Issuer shall
provide for the registration of Notes and the registration of transfers of
Notes. The Trustee is hereby initially appointed "Note Registrar" for the
purpose of registering Notes and transfers of Notes as herein provided. Upon any
resignation or removal of any Note Registrar, the Issuer shall promptly appoint
a successor or, in the absence of such an appointment, assume the duties of Note
Registrar.
(b) If a Person other than the Trustee is appointed by the Issuer as
Note Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Register, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof, and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note Registrar by an Executive Officer thereof as to the names and addresses
of the Holders of the Notes and the principal amounts and number of such Notes.
(c) Subject to Sections 2.10 and 2.12 hereof, upon surrender for
registration of transfer of any Note at the office or agency of the Issuer to be
maintained as provided in Section 3.2, if the requirements of Section 8-401(l)
of the UCC are met the Issuer shall execute and upon its request the Trustee
shall authenticate and the Noteholder shall obtain from the Trustee, in the name
of the designated transferee or transferees, one or more new Notes, in any
authorized denominations, of the same class and a like aggregate principal
amount.
(d) At the option of the Holder, Notes may be exchanged for other Notes
in any authorized denominations, of the same class and a like aggregate
principal amount, upon surrender of the Notes to be exchanged at such office or
agency. Whenever any Notes are so surrendered for exchange, subject to Sections
2.10 and 2.12 hereof, if the requirements of Section 8-401(1) of the
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UCC are met the Issuer shall execute and upon its request the Trustee shall
authenticate and the Noteholder shall obtain from the Trustee, the Notes which
the Noteholder making the exchange is entitled to receive.
(e) All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
(f) Every Note presented or surrendered for registration of transfer or
exchange shall be (i) duly endorsed by, or accompanied by a written instrument
of transfer in the form attached to Exhibits A-1, A-2, A-3 and B duly executed
by, the Holder thereof or such Holder's attorney duly authorized in writing,
with such signature guaranteed by an "eligible guarantor institution" meeting
the requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the Trustee may
require.
(g) No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Note Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.3 or 9.6 not involving any transfer.
(h) The preceding provisions of this section notwithstanding, the
Issuer shall not be required to make and the Note Registrar shall not register
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to the
Note.
SECTION 2.5. Mutilated, Destroyed, Lost or Stolen Notes. (a) If (i) any
mutilated Note is surrendered to the Trustee, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Note, and (ii)
there is delivered to the Trustee and the Insurer (unless an Insurer Default
shall have occurred and be continuing) such security or indemnity as may be
required by it to hold the Issuer, the Trustee and the Insurer harmless, then,
in the absence of notice to the Issuer, the Note Registrar or the Trustee that
such Note has been acquired by a bona fide purchaser, and provided that the
requirements of Section 8-405 of the UCC are met, the Issuer shall execute and
upon its request the Trustee shall authenticate and deliver, in exchange for or
in lieu of any such mutilated,
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destroyed, lost or stolen Note, a replacement Note; provided, however, that if
any such destroyed, lost or stolen Note, but not a mutilated Note, shall have
become or within seven days shall be due and payable, or shall have been called
for redemption, instead of issuing a replacement Note, the Issuer may direct the
Trustee, in writing, to pay such destroyed, lost or stolen Note when so due or
payable or upon the Redemption Date without surrender thereof. If, after the
delivery of such replacement Note or payment of a destroyed, lost or stolen Note
pursuant to the proviso to the preceding sentence, a bona fide purchaser of the
original Note in lieu of which such replacement Note was issued presents for
payment such original Note, the Issuer, the Trustee and the Insurer shall be
entitled to recover such replacement Note (or such payment) from the Person to
whom it was delivered or any Person taking such replacement Note from such
Person to whom such replacement Note was delivered or any assignee of such
Person, except a bona fide purchaser, and shall be entitled to recover upon the
security or indemnity provided therefor to the extent of any loss, damage, cost
or expense incurred by the Issuer or the Trustee in connection therewith.
(b) Upon the issuance of any replacement Note under this Section, the
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Trustee) connected therewith.
(c) Every replacement Note issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Note shall constitute an
original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
(d) The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.6. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Trustee and any agent of
Issuer, the Trustee, the Insurer may treat the Person in whose name any Note is
registered (as of the applicable Record Date) as the owner of such Note for the
purpose of receiving payments of principal of and interest, if any on such Note
and for all other purposes whatsoever, whether or not such Note be overdue, and
none of the Issuer, the Insurer, the Trustee nor any agent of the Issuer or the
Trustee shall be affected by notice to the contrary.
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SECTION 2.7. Payment of Principal and Interest; Defaulted Interest. (a)
The Notes shall accrue interest as provided in the forms of the Class A-1 Note,
the Class A-2 Note, the Class A- 3 Note and the Class B Note set forth in
Exhibits A-1, A-2, A-3 and B, respectively, and such interest shall be payable
on each Payment Date as specified therein. Any installment of interest or
principal, if any, payable on any Note which is punctually paid or duly provided
for by the Issuer on the applicable Payment Date shall be paid to the Person in
whose name such Note (or one or more Predecessor Notes) is registered on the
Record Date, by check mailed first-class, postage prepaid, to such Person's
address as it appears on the Note Register on such Record Date, except that,
unless Definitive Notes have been issued pursuant to Section 2.12, with respect
to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payment will be made
by wire transfer in immediately available funds to the account designated by
such nominee and except for the final installment of principal payable with
respect to such Note on a Payment Date or on the Final Scheduled Payment Date
(and except for the Redemption Price for any Note called for redemption pursuant
to Section 10.1(a)) which shall be payable as provided below. The funds
represented by any such checks returned undelivered shall be held in accordance
with Section 3.3.
(b) The principal of each Note shall be payable in installments on each
Payment Date as provided in the forms of the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes and the Class B Notes set forth in Exhibits A-1, A-2,
A-3 and B, respectively. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable, if not previously paid,
on the date on which an Event of Default shall have occurred and be continuing,
if the Trustee or the Holders of the Notes representing not less than a majority
of the Outstanding Amount of the Notes have declared the Notes to be immediately
due and payable in the manner provided in Section 5.2. All principal payments on
each class of Notes shall be made pro rata to the Noteholders of such class
entitled thereto. Upon written notice from the Issuer, the Trustee shall notify
the Person in whose name a Note is registered at the close of business on the
Record Date preceding the Payment Date on which the Issuer expects that the
final installment of principal of and interest on such Note will be paid. Such
notice shall be mailed or transmitted by facsimile prior to such final Payment
Date and shall specify that such final installment will be payable only upon
presentation and surrender of such Note and shall specify the place where such
Note may be presented and surrendered for payment of such installment. Notices
in connection with redemptions of Notes shall be mailed to Noteholders as
provided in Section 10.2.
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(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate in any lawful manner. The
Issuer may pay such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Issuer shall fix or cause to be fixed any such
special record date and payment date, and, at least 15 days before any such
special record date, the Issuer shall mail to each Noteholder and the Trustee a
notice that states the special record date, the payment date and the amount of
defaulted interest to be paid.
(d) Promptly following the date on which all principal of and interest
on the Notes has been paid in full and the Notes have been surrendered to the
Trustee, the Trustee shall, if the Insurer has paid any amount in respect of the
Notes under the Note Policy or otherwise which has not been reimbursed to it,
deliver such surrendered Notes to the Insurer.
SECTION 2.8. Cancellation. Subject to Section 2.7(d), all Notes
surrendered for payment, registration of transfer, exchange or redemption shall,
if surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by the Trustee. Subject to Section 2.7(d), the
Issuer may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
canceled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. Subject to Section 2.7(d), all canceled Notes may
be held or disposed of by the Trustee in accordance with its standard retention
or disposal policy as in effect at the time unless the Issuer shall direct by an
Issuer Order that they be destroyed or returned to it; provided that such Issuer
Order is timely and the Notes have not been previously disposed of by the
Trustee.
SECTION 2.9. Release of Collateral. The Trustee shall, on or after the
Termination Date, release any remaining portion of the Trust Estate from the
lien created by this Indenture and deposit in the Collection Account any funds
then on deposit in any other Trust Account. The Trustee shall release property
from the lien created by this Indenture pursuant to this Section 2.9 only upon
receipt of an Issuer Request accompanied by an Officer's Certificate, an Opinion
of Counsel and (if required by the TIA) Independent Certificates in accordance
with TIA ss.ss. 314(c) and 314(d)(1) meeting the applicable requirements of
Section 11.1.
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SECTION 2.10. Book-Entry Notes. The Notes, upon original issuance, will
be issued in the form of typewritten Notes representing the Book-Entry Notes, to
be delivered to DTC, the initial Clearing Agency, by, or on behalf of, the
Issuer. Such Notes shall initially be registered on the Note Register in the
name of Cede & Co., the nominee of the initial Clearing Agency, and no Note
Owner will receive a Definitive Note representing such Note Owner's interest in
such Note, except as provided in Section 2.12. Unless and until definitive,
fully registered Notes (the "Definitive Notes") have been issued to Note Owners
pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Trustee shall be entitled to
deal with the Clearing Agency for all purposes of this Indenture
(including the payment of principal of and interest on the Notes and
the giving of instructions or directions hereunder) as the sole Holder
of the Notes, and shall have no obligation to the Note Owners;
(iii) to the extent that the provisions of this Section
conflict with any other provisions of this Indenture, the provisions of
this Section shall control;
(iv) the rights of Note Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law
and agreements between such Note Owners and the Clearing Agency and/or
the Clearing Agency Participants. Unless and until Definitive Notes are
issued pursuant to Section 2.12, the Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit payments of principal of and interest on the Notes to such
Clearing Agency Participants;
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such percentage
only to the extent that it has received instructions to such effect
from Note Owners and/or Clearing Agency Participants owning or
representing, respectively, such required percentage of the beneficial
interest in the Notes and has delivered such instructions to the
Trustee; and
(vi) Note Owners may receive copies of any reports sent to
Noteholders pursuant to this Indenture, upon written request, together
with a certification that they are Note Owners and payment of
reproduction and postage expenses
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associated with the distribution of such reports, from the Trustee at
the Corporate Trust Office.
SECTION 2.11. Notices to Clearing Agency. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Trustee shall give all such notices and communications specified
herein to be given to Holders of the Notes to the Clearing Agency, and shall
have no obligation to deliver such notices or communications to the Note Owners.
SECTION 2.12. Definitive Notes. If (i) the Servicer advises the Trustee
in writing that the Clearing Agency is no longer willing or able to properly
discharge its responsibilities with respect to the Notes, and the Servicer is
unable to locate a qualified successor, (ii) the Servicer at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the Clearing Agency or (iii) after the occurrence of an Event of Default, Note
Owners representing beneficial interests aggregating at least a majority of the
Outstanding Amount of the Notes advise the Trustee through the Clearing Agency
in writing that the continuation of a book entry system through the Clearing
Agency is no longer in the best interests of the Note Owners, then the Clearing
Agency shall notify all Note Owners and the Trustee of the occurrence of any
such event and of the availability of Definitive Notes to Note Owners requesting
the same. Upon surrender to the Trustee of the typewritten Note or Notes
representing the Book-Entry Notes by the Clearing Agency, accompanied by
registration instructions, the Issuer shall execute and the Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Notes, the Trustee shall recognize the Holders of the Definitive
Notes as Noteholders.
ARTICLE III
Covenants
SECTION 3.1. Payment of Principal and Interest. The Issuer will duly
and punctually pay the principal of and interest on the Notes in accordance with
the terms of the Notes and this Indenture. Without limiting the foregoing, the
Issuer will cause to be distributed all amounts on deposit in the Note
Distribution Account on a Payment Date deposited therein pursuant to the Sale
and Servicing Agreement (i) for the benefit of the Class A-1 Notes, to Class A-1
Noteholders, (ii) for the benefit of the
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Class A-2 Notes, to Class A-2 Noteholders, (iii) for the benefit of the Class
A-3 Notes, to Class A-3 Noteholders and (iv) for the benefit of the Class B
Notes, to Class B Noteholders. Amounts properly withheld under the Code by any
Person from a payment to any Noteholder of interest and/or principal shall be
considered as having been paid by the Issuer to such Noteholder for all purposes
of this Indenture.
SECTION 3.2. Maintenance of Office or Agency. The Issuer will maintain
in [Minneapolis, Minnesota], an office or agency where Notes may be surrendered
for registration of transfer or exchange, and where notices and demands to or
upon the Issuer in respect of the Notes and this Indenture may be served. The
Issuer hereby initially appoints the Trustee to serve as its agent for the
foregoing purposes. The Issuer will give prompt written notice to the Trustee of
the location, and of any change in the location, of any such office or agency.
If at any time the Issuer shall fail to maintain any such office or agency or
shall fail to furnish the Trustee with the address thereof, such surrenders,
notices and demands may be made or served at the Corporate Trust Office, and the
Issuer hereby appoints the Trustee as its agent to receive all such surrenders,
notices and demands.
SECTION 3.3. Money for Payments to be Held in Trust. (a) On or before
each Payment Date and Redemption Date, the Issuer shall deposit or cause to be
deposited in the Note Distribution Account from the Collection Account an
aggregate sum sufficient to pay the amounts then becoming due under the Notes,
such sum to be held in trust for the benefit of the Persons entitled thereto and
(unless the Paying Agent is the Trustee) shall promptly notify the Trustee of
its action or failure so to act.
(b) The Issuer will cause each Note Paying Agent other than the Trustee
to execute and deliver to the Trustee and the Insurer an instrument in which
such Note Paying Agent shall agree with the Trustee (and if the Trustee acts as
Note Paying Agent, it hereby so agrees), subject to the provisions of this
Section, that such Note Paying Agent will:
(i) hold all sums held by it for the payment of amounts due
with respect to the Notes in trust for the benefit of the Persons
entitled thereto until such sums shall be paid to such Persons or
otherwise disposed of as herein provided and pay such sums to such
Persons as herein provided;
(ii) give the Trustee notice of any default by the Issuer (or
any other obligor upon the Notes) of which it has actual knowledge in
the making of any payment required to be made with respect to the
Notes;
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(iii) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and forthwith pay to
the Trustee all sums held by it in trust for the payment of Notes if at
any time it ceases to meet the standards required to be met by a Paying
Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to
the withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
(c) The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Paying Agent to pay to the Trustee all sums held in trust by
such Paying Agent, such sums to be held by the Trustee upon the same trusts as
those upon which the sums were held by such Paying Agent; and upon such a
payment by any Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such money.
(d) Subject to applicable laws with respect to the escheat of funds,
any money held by the Trustee or any Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request with the consent of the Insurer
(unless an Insurer Default shall have occurred and be continuing) and shall be
deposited by the Trustee in the Collection Account; and the Holder of such Note
shall thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Trustee or such Paying Agent with respect to such trust
money shall thereupon cease; provided, however, that if such money or any
portion thereof had been previously deposited by the Insurer with the Trustee
for the payment of principal or interest on the Notes, to the extent any amounts
are owing to the Insurer, such amounts shall be paid promptly to the Insurer
upon receipt of a written request by the Insurer to such effect, and provided,
further, that the Trustee or such Paying Agent, before being required to make
any such repayment, shall at the expense of the Issuer cause to be published
once, in a newspaper published in the English language, customarily published on
each Business Day and of general circulation in The City of New York, notice
that such money remains unclaimed and that, after a date specified therein,
which
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shall not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining will be repaid to the Issuer. The Trustee
shall also adopt and employ, at the expense of the Issuer, any other reasonable
means of notification of such repayment (including, but not limited to, mailing
notice of such repayment to Holders whose Notes have been called but have not
been surrendered for redemption or whose right to or interest in moneys due and
payable but not claimed is determinable from the records of the Trustee or of
any Paying Agent, at the last address of record for each such Holder).
SECTION 3.4. Existence. Except as otherwise permitted by the provisions
of Section 3.10, the Issuer will keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of Delaware (unless
it becomes, or any successor Issuer hereunder is or becomes, organized under the
laws of any other state or of the United States of America, in which case the
Issuer will keep in full effect its existence, rights and franchises under the
laws of such other jurisdiction) and will obtain and preserve its qualification
to do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes, the Collateral and each other instrument or agreement included in the
Trust Estate.
SECTION 3.5. Protection of Trust Estate. The Issuer intends the
security interest Granted pursuant to this Indenture in favor of the Issuer
Secured Parties to be prior to all other liens in respect of the Trust Estate,
and the Issuer shall take all actions necessary to obtain and maintain, in favor
of the Trustee, for the benefit of the Issuer Secured Parties, a first lien on
and a first priority, perfected security interest in the Trust Estate. The
Issuer will from time to time prepare (or shall cause to be prepared), execute
and deliver all such supplements and amendments hereto and all such financing
statements, continuation statements, instruments of further assurance and other
instruments, and will take such other action necessary or advisable to:
(i) Grant more effectively all or any portion of the
Trust Estate;
(ii) maintain or preserve the lien and security interest (and
the priority thereof) in favor of the Trustee for the benefit of the
Issuer Secured Parties created by this Indenture or carry out more
effectively the purposes hereof;
(iii) perfect, publish notice of or protect the validity of
any Grant made or to be made by this Indenture;
(iv) enforce any of the collateral;
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(v) preserve and defend title to the Trust Estate and the
rights of the Trustee in such Trust Estate against the claims of all
persons and parties; and
(vi) pay all taxes or assessments levied or assessed upon the
Trust Estate when due.
The Issuer hereby designates the Trustee its agent and attorney-in-fact to
execute any financing statement, continuation statement or other instrument
required by the Trustee pursuant to this Section.
SECTION 3.6. Opinions as to Trust Estate. (a) On the Closing Date, the
Issuer shall furnish to the Trustee and the Insurer an Opinion of Counsel either
stating that, in the opinion of such counsel, such action has been taken with
respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements, as
are necessary to perfect and make effective the first priority lien and security
interest in favor of the Trustee, for the benefit of the Issuer Secured Parties,
created by this Indenture and reciting the details of such action, or stating
that, in the opinion of such counsel, no such action is necessary to make such
lien and security interest effective.
(b) Within 90 days after the beginning of each calendar year, beginning
with the first calendar year beginning more than three months after the Cutoff
Date, the Issuer shall furnish to the Trustee and the Insurer an Opinion of
Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording, filing, re-recording and refiling of
this Indenture, any indentures supplemental hereto and any other requisite
documents and with respect to the execution and filing of any financing
statements and continuation statements as are necessary to maintain the lien and
security interest created by this Indenture and reciting the details of such
action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe any action necessary (as of the date of such opinion) to be
taken in the following year to maintain the lien and security interest of this
Indenture.
SECTION 3.7. Performance of Obligations; Servicing of Receivables. (a)
The Issuer will not take any action and will use its best efforts not to permit
any action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of or impair the validity
or effectiveness of, any such
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instrument or agreement, except as ordered by any bankruptcy or other court or
as expressly provided in this Indenture, the Basic Documents or such other
instrument or agreement.
(b) The Issuer may contract with other Persons acceptable to the
Insurer (so long as no Insurer Default shall have occurred and be continuing) to
assist it in performing its duties under this Indenture, and any performance of
such duties by a Person identified to the Trustee and the Insurer in an
Officer's Certificate of the Issuer shall be deemed to be action taken by the
Issuer. Initially, the Issuer has contracted with the Servicer to assist the
Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its
obligations and agreements contained in this Indenture, the Basic Documents and
in the instruments and agreements included in the Trust Estate, including but
not limited to preparing (or causing to prepared) and filing (or causing to be
filed) all UCC financing statements and continuation statements required to be
filed by the terms of this Indenture and the Sale and Servicing Agreement in
accordance with and within the time periods provided for herein and therein.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Basic Document or any provision
thereof without the consent of the Trustee, the Insurer or the Holders of at
least a majority of the Outstanding Amount of the Notes.
(d) If a responsible officer of the Owner Trustee shall have actual
knowledge of the occurrence of a Servicer Termination Event under the Sale and
Servicing Agreement, the Issuer shall promptly notify the Trustee, the Insurer
and the Rating Agencies thereof in accordance with Section 11.4, and shall
specify in such notice the action, if any, the Issuer is taking in respect of
such default. If a Servicer Termination Event shall arise from the failure of
the Servicer to perform any of its duties or obligations under the Sale and
Servicing Agreement with respect to the Receivables, the Issuer shall take all
reasonable steps available to it to remedy such failure.
(e) The Issuer agrees that it will not waive timely performance or
observance by the Servicer or the Seller of their respective duties under the
Basic Documents (x) without the prior consent of the Insurer (unless an Insurer
Default shall have occurred and be continuing) or (y) if the effect thereof
would adversely affect the Holders of the Notes.
SECTION 3.8. Negative Covenants. So long as any Notes are
Outstanding, the Issuer shall not:
(i) except as expressly permitted by this Indenture or the
Basic Documents, sell, transfer, exchange or otherwise
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dispose of any of the properties or assets of the Issuer, including
those included in the Trust Estate, unless directed to do so by the
Controlling Party;
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Estate; or
(iii) (A) permit the validity or effectiveness of this
Indenture to be impaired, or permit the lien in favor of the Trustee
created by this Indenture to be amended, hypothecated, subordinated,
terminated or discharged, or permit any Person to be released from any
covenants or obligations with respect to the Notes under this Indenture
except as may be expressly permitted hereby, (B) permit any lien,
charge, excise, claim, security interest, mortgage or other encumbrance
(other than the lien of this Indenture) to be created on or extend to
or otherwise arise upon or burden the Trust Estate or any part thereof
or any interest therein or the proceeds thereof (other than tax liens,
mechanics' liens and other liens that arise by operation of law, in
each case on a Financed Vehicle and arising solely as a result of an
action or omission of the related Obligor), (C) permit the lien of this
Indenture not to constitute a valid first priority (other than with
respect to any such tax, mechanics' or other lien) security interest in
the Trust Estate or (D) amend, modify or fail to comply with the
provisions of the Basic Documents without the prior written consent of
the Controlling Party.
SECTION 3.9. Annual Statement as to Compliance. The Issuer will deliver
to the Trustee and the Insurer, on or before July 31 of each year, beginning
July 31, [ ], and otherwise in compliance with the requirements of TIA Section
314(a)(4) an Officer's Certificate, dated as of March 31 of such year, stating,
as to the Authorized Officer signing such Officer's Certificate, that
(i) a review of the activities of the Issuer during such year
and of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based
on such review, the Issuer has complied with all conditions and
covenants under this Indenture throughout such year, or, if there has
been a default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
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SECTION 3.10. Issuer May Consolidate, Etc. Only on Certain Terms. (a)
The Issuer shall not consolidate or merge with or into any other Person, unless
(i) the Person (if other than the Issuer) formed by or
surviving such consolidation or merger shall be a Person organized and
existing under the laws of the United States of America or any state
and shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the
Trustee and the Insurer (so long as no Insurer Default shall have
occurred and be continuing), the due and punctual payment of the
principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture on the
part of the Issuer to be performed or observed, all as provided herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Trustee and the Insurer (so
long as no Insurer Default shall have occurred and be continuing)) to
the effect that such transaction will not have any material adverse tax
consequence to the Trust, the Insurer, any Noteholder or any
Certificateholder;
(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with
this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Insurer written notice of
such conveyance or transfer at least [ ] Business Days prior to the
consummation of such action and shall have received the prior written
approval of the Insurer of such conveyance or transfer and the Issuer
or the Person (if other than the Issuer) formed by or surviving such
conveyance or transfer has a net worth, immediately
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after such conveyance or transfer, that is (a) greater than zero and
(b) not less than the net worth of the Issuer immediately prior to
giving effect to such conveyance or transfer.
(b) The Issuer shall not convey or transfer all or substantially all of
its properties or assets, including those included in the Trust Estate, to any
Person, unless
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of which
is hereby restricted shall (A) be a United States citizen or a Person
organized and existing under the laws of the United States of America
or any state, (B) expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to
the Trustee, and the Insurer (so long as no Insurer Default shall have
occurred and be continuing), the due and punctual payment of the
principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture and each
of the Basic Documents on the part of the Issuer to be performed or
observed, all as provided herein, (C) expressly agree by means of such
supplemental indenture that all right, title and interest so conveyed
or transferred shall be subject and subordinate to the rights of
Holders of the Notes, (D) unless otherwise provided in such
supplemental indenture, expressly agree to indemnify, defend and hold
harmless the Issuer against and from any loss, liability or expense
arising under or related to this Indenture and the Notes and (E)
expressly agree by means of such supplemental indenture that such
Person (or if a group of persons, then one specified Person) shall
prepare (or cause to be prepared) and make all filings with the
Commission (and any other appropriate Person) required by the Exchange
Act in connection with the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied
with respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Trustee and the Insurer (so
long as no Insurer Default shall have occurred and be continuing)) to
the effect that such transaction will not have any material adverse tax
consequence to the Trust, the Insurer, any Noteholder or any
Certificateholder;
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(v) any action as is necessary to maintain the lien and
security interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with this
Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Insurer written notice of
such conveyance or transfer at least 10 Business Days prior to the
consummation of such action and shall have received the prior written
approval of the Insurer of such consolidation or merger and the Issuer
or the Person (if other than the Issuer) formed by or surviving such
consolidation or merger has a net worth, immediately after such
consolidation or merger, that is (a) greater than zero and (b) not less
than the net worth of the Issuer immediately prior to giving effect to
such consolidation or merger.
SECTION 3.11. Successor or Transferee. (a) Upon any consolidation or
merger of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of
the Issuer pursuant to Section 3.10(b), CPS Auto Receivables Trust 19[ ] will be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Notes immediately upon
the delivery of written notice to the Trustee stating that CPS Auto Receivables
Trust 19[ ] is to be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the Basic Documents
and activities incidental thereto. After the Funding Period, the Issuer shall
not fund the purchase of any additional Receivables.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes (ii) obligations owing from time to time
to the Insurer under the
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Insurance Agreement and (iii) any other Indebtedness permitted by or arising
under the Basic Documents. The proceeds of the Notes and the Certificates shall
be used exclusively to fund the Issuer's purchase of the Receivables and the
other assets specified in the Sale and Servicing Agreement, to fund the Pre-
Funding Account, the Capitalized Interest Account and the Spread Account and to
pay the Issuer's organizational, transactional and start-up expenses.
SECTION 3.14. Servicer's Obligations. The Issuer shall cause the
Servicer to comply with Sections 4.9, 4.10, 4.11 and 5.11 of the Sale and
Servicing Agreement.
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. Except
as contemplated by the Sale and Servicing Agreement or this Indenture, the
Issuer shall not make any loan or advance or credit to, or guarantee (directly
or indirectly or by an instrument having the effect of assuring another's
payment or performance on any obligation or capability of so doing or
otherwise), endorse or otherwise become contingently liable, directly or
indirectly, in connection with the obligations, stocks or dividends of, or own,
purchase, repurchase or acquire (or agree contingently to do so) any stock,
obligations, assets or securities of, or any other interest in, or make any
capital contribution to, any other Person.
SECTION 3.16. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. Compliance with Laws. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
Basic Document.
SECTION 3.18. Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, distributions
to the Servicer, the Owner Trustee, the Trustee and the Certificateholders as
permitted by, and to the extent funds are available for such purpose under, the
Sale and Servicing Agreement or Trust Agreement. The Issuer will not, directly
or
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indirectly, make payments to or distributions from the Collection Account except
in accordance with this Indenture and the Basic Documents.
SECTION 3.19. Notice of Events of Default. Upon a responsible officer
of the Owner Trustee having actual knowledge thereof, the Issuer agrees to give
the Trustee, the Insurer and the Rating Agencies prompt written notice of each
Event of Default hereunder and each default on the part of the Servicer or the
Seller of its obligations under the Sale and Servicing Agreement.
SECTION 3.20. Further Instruments and Acts. Upon request of the Trustee
or the Insurer, the Issuer will execute and deliver such further instruments and
do such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 3.21. Amendments of Sale and Servicing Agreement and Trust
Agreement. The Issuer shall not agree to any amendment to Section 13.1 of the
Sale and Servicing Agreement or Section 13.1 of the Trust Agreement to eliminate
the requirements thereunder that the Trustee or the Holders of the Notes consent
to amendments thereto as provided therein.
SECTION 3.22. Income Tax Characterization. For purposes of federal
income, state and local income and franchise and any other income taxes, the
Issuer will treat the Notes as indebtedness of the Issuer and hereby instructs
the Trustee to treat the Notes as indebtedness of the Issuer for federal and
state tax reporting purposes.
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture. This Indenture
shall cease to be of further effect with respect to the Notes except as to (i)
rights of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8,
3.10, 3.12, 3.13, 3.20, 3.21 and 3.22, (v) the rights, obligations and
immunities of the Trustee hereunder (including the rights of the Trustee under
Section 6.7 and the obligations of the Trustee under Section 4.2) and (vi) the
rights of Noteholders as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them, and the Trustee, on
demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the
Notes, when
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(A) either
(1) all Notes theretofore authenticated and delivered
(other than (i) Notes that have been destroyed, lost or stolen
and that have been replaced or paid as provided in Section 2.5
and (ii) Notes for whose payment money has theretofore been
deposited in trust or segregated and held in trust by the
Issuer and thereafter repaid to the Issuer or discharged from
such trust, as provided in Section 3.3) have been delivered to
the Trustee for cancellation and the Note Policy has expired
and been returned to the Insurer for cancellation; or
(2) all Notes not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable at their
respective Final Scheduled Payment Dates within one
year, or
(iii) are to be called for redemption within
one year under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the
Trustee in the name, and at the expense, of the
Issuer,
and the Issuer, in the case of (i), (ii) or (iii) above, has
irrevocably deposited or caused to be irrevocably deposited
with the Trustee cash or direct obligations of or obligations
guaranteed by the United States of America (which will mature
prior to the date such amounts are payable), in trust for such
purpose, in an amount sufficient to pay and discharge the
entire indebtedness on such Notes not theretofore delivered to
the Trustee for cancellation when due to the Final Scheduled
Payment Date or Redemption Date (if Notes shall have been
called for redemption pursuant to Section 10.1(a)), as the
case may be;
(B) the Issuer has paid or caused to be paid all Insurer
Secured Obligations and all Trustee Secured Obligations; and
(C) the Issuer has delivered to the Trustee and the Insurer an
Officer's Certificate, an Opinion of Counsel and if required by the
TIA, the Trustee or the Insurer (so long as an Insurer Default shall
not have occurred and be continuing) an Independent Certificate from a
firm of certified public accountants, each meeting the applicable
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requirements of Section 11.1(a) and each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
SECTION 4.2. Application of Trust Money. All moneys deposited with the
Trustee pursuant to Section 4.1 hereof shall be held in trust and applied by it,
in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Paying Agent, as the Trustee may
determine, to the Holders of the particular Notes for the payment or redemption
of which such moneys have been deposited with the Trustee, of all sums due and
to become due thereon for principal and interest; but such moneys need not be
segregated from other funds except to the extent required herein or in the Sale
and Servicing Agreement or required by law.
SECTION 4.3. Repayment of Moneys Held by Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Paying Agent other than the Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Trustee to be held and applied according to Section
3.3 and thereupon such Paying Agent shall be released from all further liability
with respect to such moneys.
ARTICLE V
Remedies
SECTION 5.1. Events of Default. "Event of Default", wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when
the same becomes due and payable, and such default shall continue for a
period of five days (solely for purposes of this clause, a payment on
the Notes funded by the Insurer or the Collateral Agent pursuant to the
Master Spread Account Agreement shall be deemed to be a payment made by
the Issuer); or
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable (solely for purposes of this clause, a payment on the Notes
funded by the Insurer or the Collateral Agent pursuant to the Master
Spread Account
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Agreement, shall be deemed to be a payment made by the Issuer); or
(iii) so long as an Insurer Default shall not have occurred
and be continuing, an Insurance Agreement Indenture Cross Default shall
have occurred; provided, however, that the occurrence of an Insurance
Agreement Indenture Cross Default may not form the basis of an Event of
Default unless the Insurer shall, upon prior written notice to the
Rating Agencies, have delivered to the Issuer and the Trustee and not
rescinded a written notice specifying that such Insurance Agreement
Indenture Cross Default constitutes an Event of Default under the
Indenture; or
(iv) so long as an Insurer Default shall have occurred and be
continuing, default in the observance or performance of any covenant or
agreement of the Issuer made in this Indenture (other than a covenant
or agreement, a default in the observance or performance of which is
elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any material
respect as of the time when the same shall have been made, and such
default shall continue or not be cured, or the circumstance or
condition in respect of which such misrepresentation or warranty was
incorrect shall not have been eliminated or otherwise cured, for a
period of 30 days (or for such longer period, not in excess of 90 days,
as may be reasonably necessary to remedy such default; provided that
such default is capable of remedy within 90 days or less and the
Servicer on behalf of the Owner Trustee delivers an Officer's
Certificate to the Trustee to the effect that the Issuer has commenced,
or will promptly commence and diligently pursue, all reasonable efforts
to remedy such default) after there shall have been given, by
registered or certified mail, to the Issuer by the Trustee or to the
Issuer and the Trustee by the Holders of at least 25% of the
Outstanding Amount of the Notes, a written notice specifying such
default or incorrect representation or warranty and requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder; or
(v) so long as an Insurer Default shall have occurred and be
continuing, the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Estate in an involuntary case under any
applicable Federal or state bankruptcy, insolvency or other similar law
now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the
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Trust Estate, or ordering the winding-up or liquidation of the Issuer's
affairs, and such decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or
(vi) so long as an Insurer Default shall have occurred and be
continuing, the commencement by the Issuer of a voluntary case under
any applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or the consent by the Issuer to the
entry of an order for relief in an involuntary case under any such law,
or the consent by the Issuer to the appointment or taking possession by
a receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of the Issuer or for any substantial part of the Trust
Estate, or the making by the Issuer of any general assignment for the
benefit of creditors, or the failure by the Issuer generally to pay its
debts as such debts become due, or the taking of action by the Issuer
in furtherance of any of the foregoing.
The Issuer shall deliver to the Trustee and the Insurer, within five
days after the occurrence thereof, written notice in the form of an Officer's
Certificate of any event which with the giving of notice and the lapse of time
would become an Event of Default under clause (iii), its status and what action
the Issuer is taking or proposes to take with respect thereto.
SECTION 5.2. Rights Upon Event of Default. (a) If an Insurer Default
shall not have occurred and be continuing and an Event of Default shall have
occurred and be continuing, the Notes shall become immediately due and payable
at par, together with accrued interest thereon. If an Event of Default shall
have occurred and be continuing, the Controlling Party may exercise any of the
remedies specified in Section 5.4(a). In the event of any acceleration of any
Notes by operation of this Section 5.2, the Trustee shall continue to be
entitled to make claims under the Note Policy pursuant to the Sale and Servicing
Agreement for Scheduled Payments on the Notes. Payments under the Note Policy
following acceleration of any Notes shall be applied by the Trustee:
FIRST: to Noteholders for amounts due and unpaid on the Notes
for interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for interest; and
SECOND: to Noteholders for amounts due and unpaid on the Notes
for principal, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for principal.
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(b) In the event any Notes are accelerated due to an Event of Default,
the Insurer shall have the right (in addition to its obligation to pay Scheduled
Payments on the Notes in accordance with the Note Policy), but not the
obligation, to make payments under the Note Policy or otherwise of interest and
principal due on such Notes, in whole or in part, on any date or dates following
such acceleration as the Insurer, in its sole discretion, shall elect.
(c) If an Insurer Default shall have occurred and be continuing and an
Event of Default shall have occurred and be continuing, the Trustee in its
discretion may, or if so requested in writing by Holders holding Notes
representing not less than a majority of the Outstanding Amount of the Notes,
declare by written notice to the Issuer that the Notes become, whereupon they
shall become, immediately due and payable at par, together with accrued interest
thereon.
(d) If an Insurer Default shall have occurred and be continuing, then
at any time after such declaration of acceleration of maturity has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article V provided, the Holders of Notes
representing a majority of the Outstanding Amount of the Notes, by written
notice to the Issuer and the Trustee, may rescind and annul such declaration and
its consequences if:
(i) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay
(A) all payments of principal of and interest on all
Notes and all other amounts that would then be due hereunder
or upon such Notes if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and
counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such acceleration,
have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any
right consequent thereto.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee. (a) The Issuer covenants that if (i) default is made in the payment of
any interest on any Note when the same becomes due and payable, and such default
continues for
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a period of five days, or (ii) default is made in the payment of the principal
of or any installment of the principal of any Note when the same becomes due and
payable, the Issuer will, upon demand of the Trustee, pay to it, for the benefit
of the Holders of the Notes, the whole amount then due and payable on such Notes
for principal and interest, with interest upon the overdue principal, and, to
the extent payment at such rate of interest shall be legally enforceable, upon
overdue installments of interest, at the applicable Interest Rate and in
addition thereto such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel.
(b) Each Issuer Secured Party hereby irrevocably and unconditionally
appoints the Controlling Party as the true and lawful attorney-in-fact of such
Issuer Secured Party for so long as such Issuer Secured Party is not the
Controlling Party, with full power of substitution, to execute, acknowledge and
deliver any notice, document, certificate, paper, pleading or instrument and to
do in the name of the Controlling Party as well as in the name, place and stead
of such Issuer Secured Party such acts, things and deeds for or on behalf of and
in the name of such Issuer Secured Party under this Indenture (including
specifically under Section 5.4) and under the Basic Documents which such Issuer
Secured Party could or might do or which may be necessary, desirable or
convenient in such Controlling Party's sole discretion to effect the purposes
contemplated hereunder and under the Basic Documents and, without limitation,
following the occurrence of an Event of Default, exercise full right, power and
authority to take, or defer from taking, any and all acts with respect to the
administration, maintenance or disposition of the Trust Estate.
(c) If an Event of Default occurs and is continuing, the Trustee may in
its discretion but with the consent of the Controlling Party and shall, at the
direction of the Controlling Party (except as provided in Section 5.3(d) below),
proceed to protect and enforce its rights and the rights of the Noteholders by
such appropriate Proceedings as the Trustee or the Controlling Party shall deem
most effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Trustee by this Indenture or by law.
(d) Notwithstanding anything to the contrary contained in this
Indenture (including without limitation Sections 5.4(a), 5.12, 5.13 and [5.17])
and regardless of whether an Insurer Default shall have occurred and be
continuing, if the Issuer fails to perform its obligations under Section 10.1(b)
hereof
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when and as due, the Trustee may in its discretion (and without the consent of
the Controlling Party) proceed to protect and enforce its rights and the rights
of the Noteholders by such appropriate proceedings as the Trustee shall deem
most effective to protect and enforce any such rights, whether for specific
performance of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Trustee by this Indenture or by law;
provided that the Trustee shall only be entitled to take any such actions
without the consent of the Controlling Party to the extent such actions (x) are
taken only to enforce the Issuer's obligations to redeem the principal amount of
Notes and (y) are taken only against the portion of the Collateral, if any,
consisting of the Pre-Funding Account, the Capitalized Interest Account, any
investments therein and any proceeds thereof.
(e) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, proceedings under Title 11 of the United States Code or any
other applicable Federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obliger or Person,
or in case of any other comparable judicial proceedings relative to the Issuer
or other obliger upon the Notes, or to the creditors or property of the Issuer
or such other obliger, the Trustee, irrespective of whether the principal of any
Notes shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section, shall be entitled and empowered, by
intervention in such proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount
of principal and interest owing and unpaid in respect of the Notes and
to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee and each predecessor Trustee,
and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee, except as a
result of negligence, bad faith or willful misconduct) and of the
Noteholders allowed in such proceedings;
(ii) unless prohibited by applicable law and regulations, to
vote on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or person performing similar functions in any such
proceedings;
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(iii) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims
of the Trustee or the Holders of Notes allowed in any judicial
proceedings relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such proceeding is hereby authorized by each of such Noteholders to make
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to such Noteholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.
(f) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar person.
(g) All rights of action and of asserting claims under this Indenture,
the Master Spread Account Agreement or under any of the Notes, may be enforced
by the Trustee without the possession of any of the Notes or the production
thereof in any trial or other proceedings relative thereto, and any such action
or proceedings instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(h) In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture or the Master
Spread Account Agreement), the Trustee shall be held to represent all the
Holders of the Notes, and it shall not be necessary to make any Noteholder a
party to any such proceedings.
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SECTION 5.4. Remedies. (a) If an Event of Default shall have occurred
and be continuing, the Controlling Party may do one or more of the following
(subject to Section 5.5):
(i) institute Proceedings in its own name and as trustee of an
express trust for the collection of all amounts then payable on the
Notes or under this Indenture with respect thereto, whether by
declaration or otherwise, enforce any judgment obtained, and collect
from the Issuer and any other obligor upon such Notes moneys adjudged
due;
(ii) institute Proceedings from time to time for the complete
or partial foreclosure of this Indenture with respect to the Trust
Estate;
(iii) exercise any remedies of a secured party under the UCC
and take any other appropriate action to protect and enforce the rights
and remedies of the Trustee and the Holders of the Notes; and
(iv) direct the Trustee to sell the Trust Estate or any
portion thereof or rights or interest therein, at one or more public or
private sales called and conducted in any manner permitted by law;
provided, however, that
(A) if the Insurer is the Controlling Party, the
Insurer may not sell or otherwise liquidate the Trust Estate
following an Insurance Agreement Indenture Cross Default
unless
(I) such Insurance Agreement Indenture Cross
Default arises from a claim being made on the Note
Policy or from the insolvency of the Trust or the
Seller, or
(II) the proceeds of such sale or
liquidation distributable to the Noteholders are
sufficient to discharge in full all amounts then due
and unpaid upon such Notes for principal and
interest; or
(B) if the Trustee is the Controlling Party, the
Trustee may not sell or otherwise liquidate the Trust Estate
following an Event of Default unless
(I) such Event of Default is of the type
described in Section 5.1(i) or (ii), or
(II) either
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(x) the Holders of 100% of the
Outstanding Amount of the Notes consent
thereto,
(y) the proceeds of such sale or
liquidation distributable to the Noteholders
are sufficient to discharge in full all
amounts then due and unpaid upon such Notes
for principal and interest, or
(z) the Trustee determines that the
Trust Estate will not continue to provide
sufficient funds for the payment of
principal of and interest on the Notes as
they would have become due if the Notes had
not been declared due and payable, and the
Trustee provides prior written notice to the
Rating Agencies and obtains the consent of
Holders of 66-2/3% of the Outstanding Amount
of the Notes.
In determining such sufficiency or insufficiency with respect to clause
(y) and (z), the Trustee may, but need not, obtain and rely upon an opinion of
an Independent investment banking or accounting firm of national reputation as
to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
SECTION 5.5. Optional Preservation of the Receivables. If the Trustee
is the Controlling Party and if the Notes have been declared to be due and
payable under Section 5.2 following an Event of Default and such declaration and
its consequences have not been rescinded and annulled, the Trustee may, but need
not, elect to maintain possession of the Trust Estate. It is the desire of the
parties hereto and the Noteholders that there be at all times sufficient funds
for the payment of principal of and interest on the Notes, and the Trustee shall
take such desire into account when determining whether or not to maintain
possession of the Trust Estate. In determining whether to maintain possession of
the Trust Estate, the Trustee may, but need not, obtain and rely upon an opinion
of an Independent investment banking or accounting firm of national reputation
as to the feasibility of such proposed action and as to the sufficiency of the
Trust Estate for such purpose.
SECTION 5.6. Priorities.
(a) Following (1) the acceleration of the Notes pursuant to Section 5.2
or (2) if an Insurer Default shall have occurred and be continuing, the
occurrence of an Event of Default pursuant to Section 5.1(i), 5.1(ii), 5.1(iv),
5.1(v) or 5.1(vi) of this Indenture or (3) the receipt of Insolvency Proceeds
pursuant to
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Section 11.1(b) of the Sale and Servicing Agreement, the Distribution Amount,
including any money or property collected pursuant to Section 5.4 of this
Indenture and any such Insolvency Proceeds, shall be applied by the Trustee on
the related Payment Date in the following order of priority:
FIRST: amounts due and owing and required to be distributed to
the Servicer, the Owner Trustee, the Trustee, the Collateral Agent and
the Back Up Servicer, respectively, pursuant to priorities (i) and (ii)
of Section 5.7(b) of the Sale and Servicing Agreement and not
previously distributed, in the order of such priorities and without
preference or priority of any kind within such priorities;
SECOND: to Noteholders for amounts due and unpaid on the Notes
for interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for interest;
THIRD: to Class A Noteholders for amounts due and unpaid on
the Class A Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class A Notes for principal;
FOURTH: to Class B Noteholders for amounts due and unpaid on
the Class B Notes for principal, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Class B Notes for Principal;
FIFTH: amounts due and unpaid on the Certificates for interest
and principal, to the Owner Trustee for distribution to
Certificateholders in accordance with Section 5.9 of the Sale and
Servicing Agreement;
SIXTH: amounts due and owing and required to be distributed to
the Insurer pursuant to priority (vii) of Section 5.7(b) of the Sale
and Servicing Agreement and not previously distributed); and
SEVENTH: to the Collateral Agent to be applied as provided in
the Master Spread Account Agreement;
provided that any amounts collected from the Pre-Funding Account or the
Capitalized Interest Account shall be paid, first, for amounts due and unpaid on
the Notes for principal for distribution to Noteholders in accordance with
Section 10.1(b) and, second, for amounts due and unpaid on the Certificates for
principal, in accordance with Section 5.7(b) of the Sale and Servicing Agreement
and, third in accordance with priorities ONE through SEVENTH above.
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(b) The Trustee may fix a record date and payment date for any payment
to Noteholders pursuant to this Section. At least 15 days before such record
date the Issuer shall mail to each Noteholder and the Trustee a notice that
states the record date, the payment date and the amount to be paid.
SECTION 5.7. Limitation of Suits. No Holder of any Note shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding
Amount of the Notes have made written request to the Trustee to
institute such proceeding in respect of such Event of Default in its
own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee
indemnity reasonably satisfactory to it against the costs, expenses and
liabilities to be incurred in complying with such request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such
proceedings;
(v) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes; and
(vi) an Insurer Default shall have occurred and be continuing;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
In the event the Trustee shall receive conflicting or inconsistent
requests and indemnity from two or more groups of Holders of Notes, each
representing less than a majority of the Outstanding Amount of the Notes, the
Trustee in its sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture.
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SECTION 5.8. Unconditional Rights of Noteholders To Receive Principal
and Interest. Notwithstanding any other provisions of this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date) and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder.
SECTION 5.9. Restoration of Rights and Remedies. If the Controlling
Party or any Noteholder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Trustee or to
such Noteholder, then and in every such case the Issuer, the Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Noteholders shall continue as
though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Controlling Party or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not a Waiver. No delay or omission of
the Controlling Party or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Trustee or to the Noteholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Noteholders, as the
case may be.
SECTION 5.12. Control by Noteholders. If the Trustee is the Controlling
Party, the Holders of a majority of the Outstanding Amount of the Notes shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee with respect to the Notes or exercising
any trust or power conferred on the Trustee; provided that
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(i) such direction shall not be in conflict with any rule of
law or with this Indenture;
(ii) subject to the express terms of Section 5.4, any
direction to the Trustee to sell or liquidate the Trust Estate shall be
by the Holders of Notes representing not less than [100%] of the
Outstanding Amount of the Notes;
(iii) if the conditions set forth in Section 5.5 have been
satisfied and the Trustee elects to retain the Trust Estate pursuant to
such Section, then any direction to the Trustee by Holders of Notes
representing less than [100%] of the Outstanding Amount of the Notes to
sell or liquidate the Trust Estate shall be of no force and effect; and
(iv) the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.1, the Trustee need not take any
action that it determines might involve it in liability or might materially
adversely affect the rights of any Noteholders not consenting to such action.
SECTION 5.13. Waiver of Past Defaults. (a) If an Insurer Default shall
have occurred and be continuing, prior to the declaration of the acceleration of
the maturity of the Notes as provided in Section 5.4, the Holders of Notes of
not less than a majority of the Outstanding Amount of the Notes may waive any
past Default or Event of Default and its consequences except a Default (i) in
payment of principal of or interest on any of the Notes or (ii) in respect of a
covenant or provision hereof which cannot be modified or amended without the
consent of the Holder of each Note. In the case of any such waiver, the Issuer,
the Trustee and the Holders of the Notes shall be restored to their former
positions and rights hereunder, respectively; but no such waiver shall extend to
any subsequent or other Default or impair any right consequent thereto.
Upon any such waiver, such Default shall cease to exist and be deemed
to have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereto.
SECTION 5.14. Undertaking for Costs. All parties to this Indenture
agree, and each Holder of any Note by such Holder's acceptance thereof shall be
deemed to have agreed, that any court may in its discretion require, in any suit
for the enforcement of any right or remedy under this Indenture, or in any suit
against
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the Trustee for any action taken, suffered or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the costs of
such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to (a)
any suit instituted by the Trustee, (b) any suit instituted by any Noteholder,
or group of Noteholders, in each case holding in the aggregate more than 10% of
the Outstanding Amount of the Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on any Note on or
after the respective due dates expressed in such Note and in this Indenture (or,
in the case of redemption, on or after the Redemption Date).
SECTION 5.15. Waiver of Stay or Extension Laws. The Issuer covenants
(to the extent that it may lawfully do so) that it will not at any time insist
upon, or plead or in any manner whatsoever, claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture; and the Issuer (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power and any right of the
Issuer to take such action shall be suspended.
ARTICLE VI
The Trustee
SECTION 6.1. Duties of Trustee. (a) If an Event of Default has occurred
and is continuing, the Trustee shall exercise the rights and powers vested in it
by this Indenture and the Basic Documents and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the
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Trustee and conforming to the requirements of this Indenture; however,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform on their face to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.12.
(d) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Issuer.
(e) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law or the terms of this Indenture
or the Sale and Servicing Agreement.
(f) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties hereunder or in the exercise of any of its rights or
powers, if it shall have reasonable grounds to believe that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured to it.
(g) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
(h) The Trustee shall, upon one Business Day's prior notice to the
Trustee, permit any representative of the Insurer, during the Trustee's normal
business hours, to examine all books of account, records, reports and other
papers of the Trustee relating to the Notes, to make copies and extracts
therefrom and to discuss the Trustee's affairs and actions, as such affairs and
actions relate to the Trustee's duties with respect to the Notes,
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with the Trustee's officers and employees responsible for carrying out the
Trustee's duties with respect to the Notes.
(i) The Trustee shall, and hereby agrees that it will, perform all of
the obligations and duties required of it under the Sale and Servicing
Agreement.
(j) The Trustee shall, and hereby agrees that it will, hold the Note
Policy in trust, and will hold any proceeds of any claim on the Note Policy in
trust solely for the use and benefit of the Noteholders.
(k) In no event shall [Norwest Bank Minnesota, National Association],
in any of its capacities hereunder, be deemed to have assumed any duties of the
Owner Trustee under the Delaware Business Trust Statute, common law, or the
Trust Agreement.
(l) Except for actions expressly authorized by this Indenture, the
Trustee shall take no action reasonably likely to impair the security interests
created or existing under any Receivable or Financed Vehicle or to impair the
value of any Receivable or Financed Vehicle.
(m) All information obtained by the Trustee regarding the Obligors and
the Receivables, whether upon the exercise of its rights under this Agreement or
otherwise, shall be maintained by the Trustee in confidence and shall not be
disclosed to any other Person, unless such disclosure is required by this
Indenture or any applicable law or regulation.
SECTION 6.2. Rights of Trustee. (a) The Trustee may rely on any
document believed by it to be genuine and to have been signed or presented by
the proper person. The Trustee need not investigate any fact or matter stated in
the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officer's Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on the
Officer's Certificate or Opinion of Counsel.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Trustee shall not be responsible
for any misconduct or negligence on the part of, or for the supervision of
Consumer Portfolio Services, Inc., or any other such agent, attorney, custodian
or nominee appointed with due care by it hereunder.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the
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Trustee's conduct does not constitute wilful misconduct, negligence or bad
faith.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the Notes
shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to institute, conduct or
defend any litigation under this Indenture or in relation to this Indenture, at
the request, order or direction of any of the Holders of Notes or the
Controlling Party, pursuant to the provisions of this Indenture, unless such
Holders of Notes or the Controlling Party shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or thereby; provided, however, that the Trustee
shall, upon the occurrence of an Event of Default (that has not been cured),
exercise the rights and powers vested in it by this Indenture with reasonable
care and skill.
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing to do so by the Insurer (so long as no
Insurer Default shall have occurred and be continuing) or (if an insurer Default
shall have occurred and be continuing) by the Holders of Notes evidencing not
less than 25% of the Outstanding Amount thereof; provided, however, that if the
payment within a reasonable time to the Trustee of the costs, expenses or
liabilities likely to be incurred by it in the making of such investigation is,
in the opinion of the Trustee, not reasonably assured to the Trustee by the
security afforded to it by the terms of this Indenture or the Sale and Servicing
Agreement, the Trustee may require reasonable indemnity against such cost,
expense or liability as a condition to so proceeding; the reasonable expense of
every such examination shall be paid by the Person making such request, or, if
paid by the Trustee, shall be reimbursed by the Person making such request upon
demand.
SECTION 6.3. Individual Rights of Trustee. The Trustee in its
individual or any other capacity may become the owner or pledgee of Notes and
may otherwise deal with the Issuer or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Note Registrar,
co-registrar or co-paying agent may do the same with like rights. However, the
Trustee must comply with Sections 6.11 and 6.12.
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SECTION 6.4. Trustee's Disclaimer. The Trustee shall not be responsible
for and makes no representation as to the validity or adequacy of this
Indenture, the Trust Estate or the Notes, it shall not be accountable for the
Issuer's use of the proceeds from the Notes, and it shall not be responsible for
any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Trustee's
certificate of authentication.
SECTION 6.5. Notice of Defaults. If an Event of Default occurs and is
continuing and if it is either known by, or written notice of the existence
thereof has been delivered to, a Responsible Officer of the Trustee, the Trustee
shall mail to each Noteholder notice of the Default within 90 days after such
knowledge or notice occurs. Except in the case of a Default in payment of
principal of or interest on any Note (including payments pursuant to the
mandatory redemption provisions of such Note), the Trustee may withhold the
notice if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of Noteholders.
SECTION 6.6. Reports by Trustee to Holders. The Trustee shall on behalf
of the Issuer deliver to each Noteholder such information as may be reasonably
required to enable such Holder to prepare its Federal and state income tax
returns.
SECTION 6.7. Compensation and Indemnity. (a) Pursuant to Section 5.7(b)
of the Sale and Servicing Agreement, the Issuer shall, or shall cause the
Servicer to, pay to the Trustee from time to time compensation for its services.
The Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuer shall or shall cause the Servicer to
reimburse the Trustee, for all reasonable out-of-pocket expenses incurred or
made by it, including costs of collection, in addition to the compensation for
its services. Such expenses shall include the reasonable compensation and
expenses, disbursements and advances of the Trustee's agents, counsel,
accountants and experts. The Issuer shall or shall cause the Servicer to
indemnify the Trustee and its officers, directors, employees and agents against
any and all loss, liability or expense (including attorneys' fees and expenses)
incurred by the Trustee in connection with the acceptance or the administration
of this trust and the performance of its duties hereunder. The Trustee shall
notify the Issuer and the Servicer promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Issuer and the Servicer shall
not relieve the Issuer of its obligations hereunder or the Servicer of its
obligations under Article XII of the Sale and Servicing Agreement. The Issuer
shall or shall cause the Servicer to defend the claim. The Trustee may have
separate counsel and the Issuer shall or shall cause the Servicer to pay the
fees and expenses of such counsel. Neither the Issuer nor the Servicer
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need reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own wilful misconduct, negligence
or bad faith.
(b) The Issuer's payment obligations to the Trustee pursuant to this
Section shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 5.1(v) or (vi)
with respect to the Issuer, the expenses are intended to
SECTION 6.8. Replacement of Trustee. The Trustee may resign at any time
by so notifying the Issuer and the Insurer. The Issuer may, with the consent of
the Insurer, and, at the request of the Insurer, shall, remove the Trustee,
unless an Insurer Default shall have occurred and be continuing) if:
(i) the Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of the
Trustee in an involuntary case or proceeding under federal or state banking or
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law, shall have entered
a decree or order granting relief or appointing a receiver, liquidator,
assignee, custodian, trustee, conservator, sequestrator (or similar official)
for the Trustee or for any substantial part of the Trustee's property, or
ordering the winding-up or liquidation of the Trustee's affairs;
(iii)an involuntary case under the federal bankruptcy laws, as now or
hereafter in effect, or another present or future federal or state bankruptcy,
insolvency or similar law is commenced with respect to the Trustee and such case
is not dismissed within 60 days;
(iv) the Trustee commences a voluntary case under any federal
or state banking or bankruptcy laws, as now or hereafter constituted, or any
other applicable federal or state bankruptcy, insolvency or other similar law,
or consents to the appointment of or taking possession by a received,
liquidator, assignee, custodian, trustee, conservator or sequestrator (or other
similar official) for the Trustee or for any substantial part of the Trustee's
property, or makes any assignment for the benefit of creditors or fails
generally to pay its debts as such debts become due or takes any corporate
action in furtherances of any of the foregoing; or
(v) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the
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Issuer shall promptly appoint a successor Trustee acceptable to the Insurer (so
long as an Insurer Default shall not have occurred and be continuing). If the
Issuer fails to appoint such a successor Trustee, the Insurer may appoint a
successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee, the Insurer (provided that no Insurer
Default shall have occurred and be continuing) and the Issuer, whereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the retiring
Trustee under this Indenture, subject to satisfaction of the Rating Agency
Condition. The successor Trustee shall mail a notice of its succession to each
Noteholder. The retiring Trustee shall promptly transfer all property held by it
as Trustee to the successor Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of a majority in outstanding Amount of the Notes may petition any court
of competent jurisdiction for the appointment of a successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor, Trustee
pursuant to Section 6.8.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Issuer's and the Servicer's obligations under Section 6.7 shall
continue for the benefit of the retiring Trustee.
SECTION 6.9. Successor Trustee by Merger. (a) If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee. The Trustee shall provide the Rating
Agencies prior written notice of any such transaction.
(b) In case at the time such successor or successors to the Trustee by
merger, conversion or consolidation shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in
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the Notes or in this Indenture provided that the certificate of the Trustee
shall have.
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Trust may at the time be located, the Trustee with the consent of the
Insurer (so long as an Insurer Default shall not have occurred and be
continuing) shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Trust, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Trustee may consider necessary or desirable. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions and
conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Trustee shall be conferred or imposed upon and
exercised or performed by the Trustee and such separate trustee or
co-trustee jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the Trustee
joining in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed
the Trustee shall be incompetent or unqualified to perform such act or
acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Trustee;
(ii) no trustee hereunder shall be personally liable by reason
of any act or omission of any other trustee hereunder, including acts
or omissions of predecessor or successor trustees; and
(iii) the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
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(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VI. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, dissolve, become insolvent, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall
invest in and be exercised by the Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
SECTION 6.11. Eligibility: Disqualification. The Trustee shall at all
times satisfy the requirements of TIA ss. 310(a). The Trustee shall have a
combined capital and surplus of at least $50,000,000 as set forth in its most
recent published annual report of condition and subject to supervision or
examination by federal or state authorities; and having a rating, both with
respect to long-term and short-term unsecured obligations, of not less than
investment grade by the Rating Agencies. The Trustee shall provide copies of
such reports to the Insurer upon request. The Trustee shall comply with TIA ss.
310(b), including the optional provision permitted by the second sentence of TIA
ss. 310(b)(9); provided, however, that there shall be excluded from the
operation of TIA ss. 310(b)(1) any indenture or indentures under which other
securities of the Issuer are outstanding if the requirements for such exclusion
set forth in TIA ss. 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The
Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship
listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be
subject to TIA ss. 311(a) to the extent indicated.
SECTION 6.13. Appointment and Powers. Subject to the terms and
conditions hereof, each of the Issuer Secured Parties hereby appoints [Norwest
Bank Minnesota, National Association] as the
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Trustee with respect to the Collateral, and [Norwest Bank Minnesota, National
Association] hereby accepts such appointment and agrees to act as Trustee with
respect to the Collateral for the Issuer Secured Parties, to maintain custody
and possession of such Collateral (except as otherwise provided hereunder) and
to perform the other duties of the Trustee in accordance with the provisions of
this Indenture and the other Basic Documents. Each Issuer Secured Party hereby
authorizes the Trustee to take such action on its behalf, and to exercise such
rights, remedies, powers and privileges hereunder, as the Controlling Party may
direct and as are specifically authorized to be exercised by the Trustee by the
terms hereof, together with such actions, rights, remedies, powers and
privileges as are reasonably incidental thereto. The Trustee shall act upon and
in compliance with the written instructions of the Controlling Party delivered
pursuant to this Indenture promptly following receipt of such written
instructions; provided that the Trustee shall not act in accordance with any
instructions (i) which are not authorized by, or in violation of the provisions
of, this Indenture, (ii) which are in violation of any applicable law, rule or
regulation or (iii) for which the Trustee has not received reasonable indemnity.
Receipt of such instructions shall not be a condition to the exercise by the
Trustee of its express duties hereunder, except where this Indenture provides
that the Trustee is permitted to act only following and in accordance with such
instructions.
SECTION 6.14. Performance of Duties. The Trustee shall have no duties
or responsibilities except those expressly set forth in this Indenture and the
other Basic Documents to which the Trustee is a party or as directed by the
Controlling Party in accordance with this Indenture. The Trustee shall not be
required to take any discretionary actions hereunder except at the written
direction and with the indemnification of the Controlling Party. The Trustee
shall, and hereby agrees that it will, perform all of the duties and obligations
required of it under the Sale and Servicing Agreement.
SECTION 6.15. Limitation on Liability. Neither the Trustee nor any of
its directors, officers or employees shall be liable for any action taken or
omitted to be taken by it or them in good faith hereunder, or in connection
herewith, except that the Trustee shall be liable for its negligence, bad faith
or willful misconduct; nor shall the Trustee be responsible for the validity,
effectiveness, value, sufficiency or enforceability against the Issuer of this
Indenture or any of the Collateral (or any part thereof). Notwithstanding any
term or provision of this Indenture, the Trustee shall incur no liability to the
Issuer or the Issuer Secured Parties for any action taken or omitted by the
Trustee in connection with the Collateral, except for the negligence, bad faith
or willful misconduct on the part of the Trustee, and, further, shall incur no
liability to the Issuer
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Secured Parties except for negligence, bad faith or willful misconduct in
carrying out its duties to the Issuer Secured Parties. Subject to Section 6.16,
the Trustee shall be protected and shall incur no liability to any such party in
relying upon the accuracy, acting in reliance upon the contents, and assuming
the genuineness of any notice, demand, certificate, signature, instrument or
other document reasonably believed by the Trustee to be genuine and to have been
duly executed by the appropriate signatory, and (absent actual knowledge to the
contrary) the Trustee shall not be required to make any independent
investigation with respect thereto. The Trustee shall at all times be free
independently to establish to its reasonable satisfaction, but shall have no
duty to independently verify, the existence or nonexistence of facts that are a
condition to the exercise or enforcement of any right or remedy hereunder or
under any of the Basic Documents. The Trustee may consult with counsel, and
shall not be liable for any action taken or omitted to be taken by it hereunder
in good faith and in accordance with the written advice of such counsel. The
Trustee shall not be under any obligation to exercise any of the remedial rights
or powers vested in it by this Indenture or to follow any direction from the
Controlling Party unless it shall have received reasonable security or indemnity
satisfactory to the Trustee against the costs, expenses and liabilities which
might be incurred by it.
SECTION 6.16. Reliance Upon Documents. In the absence of negligence,
bad faith or willful misconduct on its part, the Trustee shall be entitled to
rely on any communication, instrument, paper or other document reasonably
believed by it to be genuine and correct and to have been signed or sent by the
proper Person or Persons and shall have no liability in acting, or omitting to
act, where such action or omission to act is in reasonable reliance upon any
statement or opinion contained in any such document or instrument.
SECTION 6.17. Successor Trustee.
(a) Merger. Any Person into which the Trustee may be converted or
merged, or with which it may be consolidated, or to which it may sell or
transfer its trust business and assets as a whole or substantially as a whole,
or any Person resulting from any such conversion, merger, consolidation, sale or
transfer to which the Trustee is a party, shall (provided it is otherwise
qualified to serve as the Trustee hereunder) be and become a successor Trustee
hereunder and be vested with all of the title to and interest in the Collateral
and all of the trusts, powers, descriptions, immunities, privileges and other
matters as was its predecessor without the execution or filing of any instrument
or any further act, deed or conveyance on the part of any of the parties hereto,
anything herein to the contrary notwithstanding, except to the extent, if any,
that any such action is necessary
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to perfect, or continue the perfection of, the security interest of the Issuer
Secured Parties in the Collateral; provided that any such successor shall also
be the successor Trustee under Section 6.9.
(b) Removal. The Trustee may be removed by the Controlling Party at any
time, with or without cause, by an instrument or concurrent instruments in
writing delivered to the Trustee, the other Issuer Secured Party and the Issuer.
A temporary successor may be removed at any time to allow a successor Trustee to
be appointed pursuant to subsection (d) below. Any removal pursuant to the
provisions of this subsection (c) shall take effect only upon the date which is
the latest of (i) the effective date of the appointment of a successor Trustee
and the acceptance in writing by such successor Trustee of such appointment and
of its obligation to perform its duties hereunder in accordance with the
provisions hereof, and (ii) receipt by the Controlling Party of an Opinion of
Counsel to the effect described in Section 3.6.
(c) Acceptance by Successor. The Controlling Party shall have the sole
right to appoint each successor Trustee. Every temporary or permanent successor
Trustee appointed hereunder shall execute, acknowledge and deliver to its
predecessor and to the Trustee, each Issuer Secured Party and the Issuer an
instrument in writing accepting such appointment hereunder and the relevant
predecessor shall execute, acknowledge and deliver such other documents and
instruments as will effectuate the delivery of all Collateral to the successor
Trustee, whereupon such successor, without any further act, deed or conveyance,
shall become fully vested with all the estates, properties, rights, powers,
duties and obligations of its predecessor. Such predecessor shall, nevertheless,
on the written request of either Issuer Secured Party or the Issuer, execute and
deliver an instrument transferring to such successor all the estates,
properties, rights and powers of such predecessor hereunder. In the event that
any instrument in writing from the Issuer or an Issuer Secured Party is
reasonably required by a successor Trustee to more fully and certainly vest in
such successor the estates, properties, rights, powers, duties and obligations
vested or intended to be vested hereunder in the Trustee, any and all such
written instruments shall at the request of the temporary or permanent successor
Trustee, be forthwith executed, acknowledged and delivered by the Trustee or the
Issuer, as the case may be. The designation of any successor Trustee and the
instrument or instruments removing any Trustee and appointing a successor
hereunder, together with all other instruments provided for herein, shall be
maintained with the records relating to the Collateral and, to the extent
required by applicable law, filed or recorded by the successor Trustee in each
place where such filing or recording is necessary to effect the transfer of the
Collateral to the successor Trustee or to protect or continue the perfection of
the security interests granted hereunder.
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SECTION 6.18. [Reserved]
SECTION 6.19. Representations and Warranties of the Trustee. The
Trustee represents and warrants to the Issuer and to each Issuer Secured Party
as follows:
(a) Due Organization. The Trustee is a national banking
association, duly organized, validly existing and in good standing
under the laws of the United States and is duly authorized and licensed
under applicable law to conduct its business as presently conducted.
(b) Corporate Power. The Trustee has all requisite
right, power and authority to execute and deliver this
Indenture and to perform all of its duties as Trustee
hereunder.
(c) Due Authorization. The execution and delivery by the
Trustee of this Indenture and the other Basic Documents to which it is
a party, and the performance by the Trustee of its duties hereunder and
thereunder, have been duly authorized by all necessary corporate
proceedings and no further approvals or filings, including any
governmental approvals, are required for the valid execution and
delivery by the Trustee, or the performance by the Trustee, of this
Indenture and such other Basic Documents.
(d) Valid and Binding Indenture. The Trustee has duly executed
and delivered this Indenture and each other Basic Document to which it
is a party, and each of this Indenture and each such other Basic
Document constitutes the legal, valid and binding obligation of the
Trustee, enforceable against the Trustee in accordance with its terms,
except as (i) such enforceability may be limited by bankruptcy,
insolvency, reorganization and similar laws relating to or affecting
the enforcement of creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable
principles of general applicability.
SECTION 6.20. Waiver of Setoffs. The Trustee hereby expressly waives
any and all rights of setoff that the Trustee may otherwise at any time have
under applicable law with respect to any Trust Account and agrees that amounts
in the Trust Accounts shall at all times be held and applied solely in
accordance with the provisions hereof.
SECTION 6.21. Control by the Controlling Party. The Trustee shall
comply with notices and instructions given by the Issuer only if accompanied by
the written consent of the Controlling Party, except that if any Event of
Default shall have occurred and be continuing, the Trustee shall act upon and
comply
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with notices and instructions given by the Controlling Party alone in the place
and stead of the Issuer.
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1. Issuer To Furnish To Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Trustee (a)
not more than five days after the earlier of (i) each Record Date and (ii) three
months after the last Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such Record
Date, (b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that so long as the Trustee is the Note Registrar,
no such list shall be required to be furnished. The Trustee or, if the Trustee
is not the Note Registrar, the Issuer shall furnish to the Insurer in writing on
an annual basis on each March 31 and at such other times as the Insurer may
request a copy of the list.
SECTION 7.2. Preservation of Information; Communications to
Noteholders. (a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of the Holders contained in the
most recent list furnished to the Trustee as provided in Section 7.1 and the
names and addresses of Holders received by the Trustee in its capacity as Note
Registrar. The Trustee may destroy any list furnished to it as provided in such
Section 7.1 upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Trustee and the Note Registrar shall have the
protection of TIA ss. 312(c).
SECTION 7.3. Reports by Issuer. (a) The Issuer shall:
(i) file with the Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies
of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Issuer may
be required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act;
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(ii) file with the Trustee and the Commission in accordance
with rules and regulations prescribed from time to time by the
Commission such additional information, documents and reports with
respect to compliance by the Issuer with the conditions and covenants
of this Indenture as may be required from time to time by such rules
and regulations; and
(iii) supply to the Trustee (and the Trustee shall transmit by
mail to all Noteholders described in TIA ss. 313(c)) such summaries of
any information, documents and reports required to be filed by the
Issuer pursuant to clauses (i) and (ii) of this Section 7.3(a) as may
be required by rules and regulations prescribed from time to time by
the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the
Issuer shall end on December 31 of each year.
SECTION 7.4. Reports by Trustee. (a) If required by TIA ss. 313(a),
within 60 days after each November 30, beginning with November 30, 1997, the
Trustee shall mail to each Noteholder as required by TIA ss. 313(c) a brief
report dated as of such date that complies with TIA ss. 313(a). The Trustee also
shall comply with TIA ss. 313(b).
(b) A copy of each report at the time of its mailing to Noteholders
shall be filed by the Trustee with the Commission and each stock exchange, if
any, on which the Notes are listed. The Issuer shall notify the Trustee if and
when the Notes are listed on any stock exchange.
ARTICLE VIII
Collection of Money and Releases of Trust Estate
SECTION 8.1. Collection of Money. Except as otherwise expressly
provided herein, the Trustee may demand payment or delivery of, and shall
receive and collect, directly and without intervention or assistance of any
fiscal agent or other intermediary, all money and other property payable to or
receivable by the Trustee pursuant to this Indenture and the Sale and Servicing
Agreement. The Trustee shall apply all such money received by it as provided in
this Indenture and the Sale and Servicing Agreement. Except as otherwise
expressly provided in this Indenture or in the Sale and Servicing Agreement, if
any default occurs in the making of any payment or performance under any
agreement or instrument that is part of the Trust Estate, the Trustee may take
such action as may be appropriate to enforce such payment or performance,
including the institution and prosecution of appropriate proceedings. Any such
action shall be
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without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.2. Release of Trust Estate. (a) Subject to the payment of its
fees and expenses pursuant to Section 6.7, the Trustee may, and when required by
the provisions of this Indenture shall, execute instruments to release property
from the lien of this Indenture, in a manner and under circumstances that are
not inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Trustee as provided in this Article VIII shall be
bound to ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(b) The Trustee shall, at such time as there are no Notes outstanding
and all sums due the Trustee pursuant to Section 6.7 have been paid, release any
remaining portion of the Trust Estate that secured the Notes from the lien of
this Indenture and release to the Issuer or any other Person entitled thereto
any funds then on deposit in the Trust Accounts. The Trustee shall release
property from the lien of this Indenture pursuant to this Section 8.2(b) only
upon receipt of an Issuer Request accompanied by an Officer's Certificate, an
Opinion of Counsel and (if required by the TIA) Independent Certificates in
accordance with TIA ss. 314(c) and ss. 314(d)(1) meeting the applicable
requirements of Section 11.1.
SECTION 8.3. Opinion of Counsel. The Trustee shall receive at least
seven days' notice when requested by the Issuer to take any action pursuant to
Section 8.2(a), accompanied by copies of any instruments involved, and the
Trustee shall also require as a condition to such action, an Opinion of Counsel
in form and substance satisfactory to the Trustee, stating the legal effect of
any such action, outlining the steps required to complete the same, and
concluding that all conditions precedent to the taking of such action have been
complied with and such action will not materially and security for the Notes or
the rights of the Noteholders in contravention of the provisions of this
Indenture; provided, however, that such Opinion of Counsel shall not be required
to express an opinion as to the fair value of the Trust Estate. Counsel
rendering any such opinion may rely, without independent investigation, on the
accuracy and validity of any certificate or other instrument delivered to the
Trustee in connection with any such action.
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ARTICLE IX
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of Noteholders.
(a) Without the consent of the Holders of any Notes but with the consent of the
Insurer (unless an Insurer Default shall have occurred and be continuing) and
with prior notice to the Rating Agencies by the Issuer, the Issuer and the
Trustee, when authorized by an Issuer Order, at any time and from time to time,
may enter into one or more indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act as in force at the date of the
execution thereof), in form satisfactory to the Trustee, for any of the
following purposes:
(i) to correct or amplify the description of any property at
any time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Trustee any property subject or required to
be subjected to the lien of this Indenture, or to subject to the lien
of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit
of the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Trustee;
(v) to cure any ambiguity, to correct or supplement any
provision herein or in any supplemental indenture which may be
inconsistent with any other provision herein or in any supplemental
indenture or to make any other provisions with respect to matters or
questions arising under this Indenture or in any supplemental
indenture; provided that such action shall not adversely affect the
interests of the Holders of the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
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(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained.
(b) The Issuer and the Trustee, when authorized by an Issuer Order,
may, also without the consent of any of the Holders of the Notes but with prior
notice to the Rating Agencies by the Issuer, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to, or
changing in any manner or eliminating any of the provisions of, this Indenture
or of modifying in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel, adversely affect in any material respect the interests of
any Noteholder.
SECTION 9.2. Supplemental Indentures with Consent of Noteholders. The
Issuer and the Trustee, when authorized by an Issuer Order, also may, with prior
notice to the Rating Agencies, with the consent of the Insurer (unless an
Insurer Default shall have occurred and be continuing) and with the consent of
the Holders of not less than a majority of the outstanding Amount of the Notes,
by Act of such Holders delivered to the Issuer and the Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that, subject to the express
rights of the Insurer under the Basic Documents, no such supplemental indenture
shall, without the consent of the Holder of each Outstanding Note affected
thereby:
(i) change the date of payment of any installment of principal
of or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect thereto,
change the provision of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the Trust Estate to
payment of principal of or interest on the Notes, or change any place
of payment where, or the coin or currency in which, any Note or the
interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds
available therefor, as provided in
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Article V, to the payment of any such amount due on the Notes on or
after the respective due dates thereof (or, in the case of redemption,
on or after the Redemption Date);
(iii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences provided
for in this Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(v) reduce the percentage of the Outstanding Amount of the
Notes required to direct the Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.4;
(vi) modify any provision of this Section except to increase
any percentage specified herein or to provide that certain additional
provisions of this Indenture or the Basic Documents cannot be modified
or waived without the consent of the Holder of each Outstanding Note
affected thereby;
(vii) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date (including
the calculation of any of the individual components of such
calculation) or as to affect the rights of the Holders of Notes to the
benefit of any provisions for the mandatory redemption of the Notes
contained herein; or
(viii) permit the creation of any lien ranking prior to or on
a parity with the lien of this Indenture with respect to any part of
the Trust Estate or, except as otherwise permitted or contemplated
herein or in any of the Basic Documents, terminate the lien of this
Indenture on any property at any time subject hereto or deprive the
Holder of any Note of the security provided by the lien of this
Indenture.
The Trustee may determine whether or not any Notes would be affected by
any supplemental indenture and any such determination shall be conclusive upon
the Holders of all Notes, whether theretofore or thereafter authenticated and
delivered hereunder. The Trustee shall not be liable for any such determination
made in good faith.
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It shall not be necessary for any Act of Noteholders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Trustee shall mail to the
Holders of the Notes to which such amendment or supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
SECTION 9.3. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Trustee shall be entitled to receive, and subject to
Sections 6.1 and 6.2, shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture that affects the Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indenture. Upon the execution of
any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith with
respect to the Notes affected thereby, and the respective rights, limitations of
rights, obligations, duties, liabilities and immunities under this Indenture of
the Trustee, the Issuer and the Holders of the Notes shall thereafter be
determined, exercised and enforced hereunder subject in all respects to such
modifications and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the terms and
conditions of this Indenture for any and all purposes.
SECTION 9.5. Conformity With Trust Indenture Act. Every amendment of
this Indenture and every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the Trust Indenture Act as then
in effect so long as this Indenture shall then be qualified under the Trust
Indenture Act.
SECTION 9.6. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Trustee shall, bear a
notation in form approved by the Trustee as to any matter provided for in such
supplemental
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indenture. If the Issuer or the Trustee shall so determine, new Notes so
modified as to conform, in the opinion of the Trustee and the Issuer, to any
such supplemental indenture may be prepared and executed by the Issuer and
authenticated and delivered by the Trustee in exchange for Outstanding Notes.
ARTICLE X
Redemption of Notes
SECTION 10.1. Redemption. (a) The Notes are subject to redemption in
whole, but not in part, at the direction of the Seller pursuant to Section
11.1(a) of the Sale and Servicing Agreement, on any Payment Date on which the
Servicer exercises its option to purchase the Trust Estate pursuant to said
Section 11.1(a), for a purchase price equal to the Redemption Price; provided,
however, that the Issuer has available funds sufficient to pay the Redemption
Price. The Servicer or the Issuer shall furnish the Insurer and the Rating
Agencies notice of such redemption. If the Notes are to be redeemed pursuant to
this Section 10.1(a), the Servicer or the Issuer shall furnish notice of such
election to the Trustee not later than 35 days prior to the Redemption Date and
the Issuer shall deposit with the Trustee in the Note Distribution Account the
Redemption Price of the Notes to be redeemed whereupon all such Notes shall be
due and payable on the Redemption Date upon the furnishing of a notice complying
with Section 10.2 to each Holder of Notes.
(b) In the event that on the Payment Date on or immediately following
the last day of the Funding Period, any portion of the Pre-Funded Amount remains
on deposit in the Pre-Funding Account after giving effect to the purchase of all
Subsequent Receivables, including any such purchase on such Redemption Date,
each Class of Notes will be redeemed in part, on a pro rata basis, in an
aggregate principal amount equal to the Class A-1 Prepayment Amount, the Class
A-2 Prepayment Amount, the Class A-3 Prepayment Amount and the Class B
Prepayment Amount.
(c) In the event that the assets of the Trust are sold pursuant to
Section 9.2 of the Trust Agreement, all amounts on deposit in the Note
Distribution Account shall be paid to the Noteholders up to the Outstanding
Amount of the Notes and all accrued and unpaid interest thereon. If amounts are
to be paid to Noteholders pursuant to this Section 10.1(c), the Servicer or the
Issuer shall, to the extent practicable, furnish notice of such event to the
Trustee not later than 25 days prior to the Redemption Date whereupon all such
amounts shall be payable on the Redemption Date.
SECTION 10.2. Form of Redemption Notice. (a) Notice of redemption under
Section 10.1(a) shall be given by the Trustee by
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facsimile or by first-class mail, postage prepaid, transmitted or mailed prior
to the applicable Redemption Date to each Holder of Notes, as of the close of
business on the Record Date preceding the applicable Redemption Date, at such
Holder's address appearing in the Note Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) that the Record Date otherwise applicable to such
Redemption Date is not applicable and that payments shall be made only
upon presentation and surrender of such Notes and the place where such
Notes are to be surrendered for payment of the Redemption Price (which
shall be the office or agency of the Issuer to be maintained as
provided in Section 3.2); and
(iv) that interest on the Notes shall cease to accrue on the
Redemption Date.
Notice of redemption of the Notes shall be given by the Trustee in the
name and at the expense of the Issuer. Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.1(b) is not required to
be given to Noteholders.
SECTION 10.3. Notes Payable on Redemption Date. The Notes to be
redeemed shall, following notice of redemption as required by Section 10.2 (in
the case of redemption pursuant to Section 10.1(a)), on the Redemption Date
become due and payable at the Redemption Price and (unless the Issuer shall
default in the payment of the Redemption Price) no interest shall accrue on the
Redemption Price for any period after the date to which accrued interest is
calculated for purposes of calculating the Redemption Price.
ARTICLE XI
Miscellaneous
SECTION 11.1. Compliance Certificates and Opinions, etc. (a) Upon any
application or request by the Issuer to the Trustee to take any action under any
provision of this Indenture, the Issuer shall furnish to the Trustee and to the
Insurer (i) an Officer's Certificate stating that all conditions precedent, if
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any, provided for in this Indenture relating to the proposed action have been
complied with, (ii) an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with and (iii)
(if required by the TIA) an Independent Certificate from a firm of certified
public accountants meeting the applicable requirements of this Section, except
that, in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as to
whether or not such covenant or condition has been complied with; and
(iv) a statement as to whether, in the opinion of each such
signatory such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Trustee that is to be made the basis for the release of any
property or securities subject to the lien of this Indenture, the Issuer shall,
in addition to any obligation imposed in Section 11.1(a) or elsewhere in this
Indenture, furnish to the Trustee and the Insurer an Officer's Certificate
certifying or stating the opinion of each person signing such certificate as to
the fair value (within 90 days of such deposit) to the Issuer of the Collateral
or other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Trustee
and the Insurer an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in clause (i)
above, the Issuer shall also deliver to the Trustee and the Insurer an
Independent Certificate as to the same matters, if the fair value to
the
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Issuer of the securities to be so deposited and of all other such
securities made the basis of any such withdrawal or release since the
commencement of the then-current fiscal year of the Issuer, as set
forth in the certificates delivered pursuant to clause (i) above and
this clause (ii) is 10% or more of the Outstanding Amount of the Notes,
but such a certificate need not be furnished with respect to any
securities so deposited, if the fair value thereof to the Issuer as set
forth in the related Officer's Certificate is less than $25,000 or less
than 1% percent of the Outstanding Amount of the Notes.
(iii) other than with respect to the release of any Purchased
Receivables or Liquidated Receivables, whenever any property or
securities are to be released from the lien of this Indenture, the
Issuer shall also furnish to the Trustee and the Insurer an Officer's
Certificate certifying or stating the opinion of each person signing
such certificate as to the fair value (within 90 days of such release)
of the property or securities proposed to be released and stating that
in the opinion of such person the proposed release will not impair the
security under this Indenture in contravention of the provisions
hereof.
(iv) Whenever the Issuer is required to furnish to the Trustee
and the Insurer an Officer's Certificate certifying or stating the
opinion of any signer thereof as to the matters described in clause
(iii) above, the Issuer shall also furnish to the Trustee and the
Insurer an Independent Certificate as to the same matters if the fair
value of the property or securities and of all other property other
than Purchased Receivables and Defaulted Receivables, or securities
released from the lien of this Indenture since the commencement of the
then current calendar year, as set forth in the certificates required
by clause (iii) above and this clause (iv), equals 10% or more of the
Outstanding Amount of the Notes, but such certificate need not be
furnished in the case of any release of property or securities if the
fair value thereof as set forth in the related Officer's Certificate is
less than $25,000 or less than 1 percent of the then Outstanding Amount
of the Notes.
(v) Notwithstanding Section 2.9 or any other provision of this
Section, the Issuer may (A) collect, liquidate, sell or otherwise
dispose of Receivables as and to the extent permitted or required by
the Basic Documents and (B) make cash payments out of the Trust
Accounts as and to the extent permitted or required by the Basic
Documents.
SECTION 11.2. Form of Documents Delivered to Trustee. (a) In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not
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necessary that all such matters be certified by, or covered by the opinion of,
only one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect to
some matters and one or more other such Persons as to other matters, and any
such Person may certify or give an opinion as to such matters in one or several
documents.
(b) Any certificate or opinion of an Authorized Officer of the Issuer
may be based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer, the Seller or the Issuer, stating that the information with
respect to such factual matters is in the possession of the Servicer, the Seller
or the Issuer, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
(c) Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
(d) Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof, it is intended that
the truth and accuracy, at the time of the granting of such application or at
the effective date of such certificate or report (as the case may be), of the
facts and opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall not, however, be
construed to affect the Trustee's right to rely upon the truth and accuracy of
any statement or opinion contained in any such document as provided in Article
VI.
SECTION 11.3. Acts of Noteholders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Noteholders may be embodied in and
evidenced by one or more instruments of substantially similar tenor signed by
such Noteholders in person or by agents duly appointed in writing; and except as
herein otherwise expressly provided such action shall
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become effective when such instrument or instruments are delivered to the
Trustee, and, where it is hereby expressly required, to the Issuer. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Noteholders
signing such instrument or instruments. Proof of execution of any such
instrument or of a writing appointing any such agent shall be sufficient for any
purpose of this Indenture and (subject to Section 6.1) conclusive in favor of
the Trustee and the Issuer, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any customary manner of the Trustee.
(c) The ownership of Notes shall be proved by the Note
Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Notes shall bind the Holder of every
Note issued upon the registration thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the
Trustee or the Issuer in reliance thereon, whether or not notation of such
action is made upon such Note.
SECTION 11.4. Notices, etc., to Trustee, Issuer and Rating Agencies.
(a) Any request, demand, authorization, direction, notice, consent, waiver or
Act of Noteholders or other documents provided or permitted by this Indenture to
be made upon, given or furnished to or filed with:
(i) the Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if personally delivered,
delivered by overnight courier or mailed certified mail, return receipt
requested and shall be deemed to have been duly given upon receipt to
the Trustee at its Corporate Trust Office, or
(ii) the Issuer by the Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if personally delivered,
delivered by overnight courier or mailed certified mail, return receipt
requested and shall deemed to have been duly given upon receipt to the
Issuer addressed to: CPS Auto Receivables Trust 199[ ], in care of [
],or at any other address previously furnished in writing to the
Trustee by the Issuer. The Issuer shall promptly transmit any notice
received by it from the Noteholders to the Trustee.
(iii) the Insurer by the Issuer or the Trustee shall be
sufficient for any purpose hereunder if in writing and
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mailed by registered mail or personally delivered or telexed or
telecopied to the recipient as follows:
To the Insurer:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Telex No.: (212) 688-3101
Confirmation: (212)826-0100
Telecopy Nos.: (212)339-3518 or
(212) 339-3529
(In each case in which notice or other communication to the Insurer
refers to an Event of Default, a claim on the Note Policy or with
respect to which failure on the part of the Insurer to respond shall be
deemed to constitute consent or acceptance, then a copy of such notice
or other communication should also be sent to the attention of the
General Counsel and the Head--Financial Guaranty Group "URGENT MATERIAL
ENCLOSED.")
(b) Notices required to be given to the Rating Agencies by the Issuer,
the Trustee or the Owner Trustee shall be in writing, personally delivered,
delivered by overnight courier or mailed certified mail, return receipt
requested to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., 99 Church Street, New York New York 10004 and (ii) in
the case of S&P, at the following address: Standard & Poor's Ratings Services,
26 Broadway (15th Floor), New York, New York 10004, Attention of Asset Backed
Surveillance Department; or as to each of the foregoing, at such other address
as shall be designated by written notice to the other parties.
SECTION 11.5. Notices to Noteholders; Waiver. (a) Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class, postage prepaid to each Noteholder affected by such
event, at his address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed for the giving
of such notice. In any case where notice to Noteholders is given by mail,
neither the failure to mail such notice nor any defect in any notice so mailed
to any particular Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in the manner here
in provided shall conclusively be presumed to have been duly given.
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<PAGE>
(b) Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
(c) In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
(d) Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
SECTION 11.6. Alternate Payment and Notice Provisions. Notwithstanding
any provision of this Indenture or any of the Notes to the contrary, the Issuer
may enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Trustee or any Paying Agent to such Holder, that is
different from the methods provided for in this Indenture for such payments or
notices, provided that such methods are reasonable and consented to by the
Trustee (which consent shall not be unreasonably withheld). The Issuer will
furnish to the Trustee a copy of each such agreement and the Trustee will cause
payments to be made and notices to be given in accordance with such agreements.
SECTION 11.7. Conflict with Trust Indenture Act. (a) If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
(b) The provisions of TIA ss. 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
SECTION 11.8. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
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<PAGE>
SECTION 11.9. Successors and Assigns. All covenants and agreements in
this Indenture and the Notes by the Issuer shall bind its successors and
assigns, whether so expressed or not. All agreements of the Trustee in this
Indenture shall bind its successors. All agreements of the Trustee in this
Indenture shall bind its successors.
SECTION 11.10. Severability. In case any provision in this Indenture or
in the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.11. Benefits of Indenture. The Insurer and its successors
and assigns shall be a third-party beneficiary to the provisions of this
Indenture, and shall be entitled to rely upon and directly to enforce such
provisions of this Indenture so long as no Insurer Default shall have occurred
and be continuing. Nothing in this Indenture or in the Notes, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Noteholders, and any other party secured
hereunder, and any other person with an ownership interest in any part of the
Trust Estate, any benefit or any legal or equitable right, remedy or claim under
this Indenture. The Insurer may disclaim any of its rights and powers under this
Indenture (in which case the Trustee may exercise such right or power
hereunder), but not its duties and obligations under the Note Policy, upon
delivery of a written notice to the Trustee.
SECTION 11.12. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. GOVERNING LAW. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. Counterparts. This Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at
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<PAGE>
its expense accompanied by an Opinion of Counsel (which may be counsel to the
Trustee or any other counsel reasonably acceptable to the Trustee and the
Insurer) to the effect that such recording is necessary either for the
protection of the Noteholders or any other person secured hereunder or for the
enforcement of any right or remedy granted to the Trustee under this Indenture
or to the Collateral Agent under the Master Spread Account Agreement.
SECTION 11.16. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Seller, the
Servicer, the Depositor, the Owner Trustee or the Trustee on the Notes or under
this Indenture or any certificate or other writing delivered in connection
herewith or therewith, against (i) the Seller, the Servicer, the Depositor, the
Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director, employee or agent of the Seller, the Servicer, the
Depositor, the Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Seller, the Servicer, the
Depositor, the Owner Trustee or the Trustee or of any successor or assign of the
Seller, the Servicer, the Depositor, the Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Trustee and the Owner Trustee have no such obligations
in their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity. For all purposes of this
Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article VI, VII and VIII of the Trust Agreement.
SECTION 11.17. No Petition. The Trustee, by entering into this
Indenture, and each Noteholder and Note Owner, by accepting a Note or a
beneficial interest therein, hereby covenant and agree that they will not at any
time institute against the Seller, the Depositor, or the Issuer, or join in any
institutional against the Seller, the Depositor, or the Issuer of, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any United States Federal or state bankruptcy or
similar law in connection with any obligations relating to the Notes, this
Indenture or any of the Basic Documents.
SECTION 11.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Trustee or of the Insurer,
during the Issuer's normal business hours, to examine all the books of account,
records, reports, and other papers of the Issuer, to make copies and extracts
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<PAGE>
therefrom, to cause such books to be audited by independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with the
Issuer's officers, employees, and independent certified public accountants, all
at such reasonable times and as often as may be reasonably requested. The
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Trustee may reasonably determine that such disclosure is
consistent with its Obligations hereunder.
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this
Indenture to be duly executed by their respective officers, hereunto duly
authorized, all as of the day and year first above written.
CPS AUTO RECEIVABLES TRUST 199[ ],
By: [ ],
not in its individual capacity
but solely as Owner Trustee,
By:
Title:
Name:
[NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION], not in its
individual capacity but solely
as Trustee
By:
Title:
Name:
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<PAGE>
[Form of Class A-1 Note] EXHIBIT A-1
REGISTERED $
No. R
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CPS AUTO RECEIVABLES TRUST 199[ ]
CLASS A-1 [ ]% ASSET BACKED NOTES
CPS Auto Receivables Trust 199[ ], a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of [ ] DOLLARS payable on each Payment
Date in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is $ [INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the
denominator of which is $ by (ii) the aggregate amount, if any, payable from the
Note Distribution Account in respect of principal on the Class A-1 Notes
pursuant to Section 3.1 of the Indenture and Section 5.8 of the Sale and
Servicing Agreement; provided, however, that the entire unpaid principal amount
of this Note shall be due and payable on the Payment Date (the "Final Scheduled
Payment Date"). The Issuer will pay interest on this Note at the rate per annum
shown above on each Payment Date until the principal of this Note is paid or
made available for payment, on the principal amount of this Note outstanding on
the preceding Payment Date (after giving effect to all payments of principal
made on the preceding Payment Date). Interest on this Note will accrue for each
Payment Date from the most recent Payment Date on which interest has been paid
to but excluding such Payment Date or, if no interest has yet been paid, from [
]. Interest will
A-1-1
<PAGE>
be computed on the basis of the actual number of days elapsed in a 360-day year.
Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Note Policy") issued by Financial Security Assurance Inc.
(the "Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Noteholders' Interest Distributable Amount and the Noteholders'
Principal Distributable Amount on each Payment Date, all as more fully set forth
in the Indenture.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
A-1-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
CPS AUTO RECEIVABLES TRUST 199[ ]
By: [ ], not
in its individual capacity but
solely as Owner Trustee under
the Trust Agreement
By:
Name:
Title:
A-1-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: [ ] [NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION], not in its
individual capacity but solely as
Trustee,
By
Authorized Signatory
A-1-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 [ ]% Asset Backed Notes (herein called the "Class
A-1 Notes"), all issued under an Indenture dated as of [ ] (such indenture, as
supplemented or amended, is herein called the "Indenture"), between the Issuer
and [Norwest Bank Minnesota, National Association], as trustee (the "Trustee",
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Trustee and the Holders of the Notes. The Notes are subject to all terms of the
Indenture. All terms used in this Note that are defined in the Indenture,
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class B Notes (together, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class A-1 Notes will be payable on each Payment Date
in an amount described on the face hereof. "Payment Date" means the twelfth day
of each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing [ ].
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Payment Date and
the Redemption Date, if any, pursuant to Section 10.1(a) or 10.1(c) of the
Indenture. As described above, a portion of the unpaid principal balance of this
Note shall be due and payable on the Redemption Date, if any, pursuant to
Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable (i) on the date on
which an Event of Default shall have occurred and be continuing so long as an
Insurer Default shall not have occurred and be continuing or (ii) if an Insurer
Default shall have occurred and be continuing, on the date on which an Event of
Default shall have occurred and be continuing and the Trustee or the Holders of
the Notes representing at least 66-2/3% of the Outstanding Amount of the Notes
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.2 of the Indenture. All principal payments on the Class A-1 Notes
shall be made pro rata to the Class A-1 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by
A-1-5
<PAGE>
check mailed to the Person whose name appears as the Holder of this Note (or one
or more Predecessor Notes) in the Note Register as of the close of business on
each Record Date, except that with respect to Notes registered on the Record
Date in the name of the nominee of the Clearing Agency (initially, such nominee
to be Cede & Co.), payments will be made by wire transfer in immediately
available funds to the account designated by such nominee. Such checks shall be
mailed to the Person entitled thereto at the address of such Person as it
appears on the Note Register as of the applicable Record Date without requiring
that this Note be submitted for notation of payment. Any reduction in the
principal amount of this Note (or any one or more Predecessor Notes) effected by
any payments made on any Payment Date shall be binding upon all future Holders
of this Note and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof, whether or not rated hereon. If funds are
expected to be available, as provided in the Indenture, for payment in full of
the then remaining unpaid principal amount of this Note on a Payment Date, then
the Trustee, in the name of and on behalf of the Issuer, will notify the Person
who was the Holder hereof as of the Record Date preceding such Payment Date by
notice mailed prior to such Payment Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Trustee's principal Corporate Trust Office or at the office of the Trustee's
agent appointed for such purposes located in [Minneapolis, Minnesota].
The Issuer shall pay interest on overdue installments of interest at
the Class A-1 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed (a) pursuant to
Section 10.1(a) of the Indenture, in whole, but not in part, at the option of
the Servicer (with the consent of the Insurer under certain circumstances), on
any Payment Date on or after the date on which the Pool Balance is less than or
equal to 10% of the Original Pool Balance, and (b) pursuant to Section 10.1(b)
of the Indenture, in part, on a pro rata basis, on the Payment Date on or
immediately following the last day of the Funding Period in the event that any
Pre-Funded Amount remains on deposit in the Pre-Funding Account after giving
effect to the purchase of all Subsequent Receivables, including any such
purchase on such Redemption Date.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the
A-1-6
<PAGE>
requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program ("Stamp") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the Trustee may
require, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Depositor, the Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Seller, the Servicer, the Depositor, the Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Seller, the Servicer, the Depositor, the Owner Trustee or the
Trustee or of any successor or assign of the Seller, the Servicer, the
Depositor, the Trustee or the Owner Trustee in its individual capacity, except
as any such Person may have expressly agreed (it being understood that the
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Depositor or the Issuer or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings, under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, the Indenture or the Basic Documents.
A-1-7
<PAGE>
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and the Insurer and any agent of the Issuer, the Trustee
or the Insurer may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one of more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to
A-1-8
<PAGE>
pay the principal of and interest on this Note at the times, place and rate, and
in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither [Owner Trustee] in its
individual capacity, any owner of a beneficial interest in the Issuer, nor any
of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Owner Trustee for the sole purposes of binding the interests of the Owner
Trustee in the assets of the Issuer. The Holder of this Note by the acceptance
hereof agrees that except as expressly provided in the Indenture or the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
A-1-9
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of
assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto (name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: 1/
Signature Guaranteed:
- --------
1/ NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever.
A-1-10
<PAGE>
[Form of Class A-2 Note] EXHIBIT A-2
REGISTERED $
No. R
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE, IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CPS AUTO RECEIVABLES TRUST 199[ ]
CLASS A-2 [ ]% ASSET BACKED NOTES
CPS Auto Receivables Trust 199[ ], a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of [ ] DOLLARS payable on each Payment
Date in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is $ [INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the
denominator of which is $ by (ii) the aggregate amount, if any, payable from the
Note Distribution Account in respect of principal on the Class A-2 Notes
pursuant to Section 3.1 of the Indenture and Section 5.8 of the Sale and
Servicing Agreement provided, however, that the entire unpaid principal amount
of this Note shall be due and payable on the __________ Payment Date (the "Final
Scheduled Payment Date"). The Issuer will pay interest on this Note at the rate
per annum shown above on each Payment Date until the principal of this Note is
paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Payment Date (after giving effect to all payments
of principal made on the preceding Payment Date). Interest on this Note will
accrue for each Payment Date from the most recent Payment Date on which interest
has been paid to but excluding such Payment Date or, if no interest has yet been
paid, from [ ]. Interest
A-2-1
<PAGE>
will be computed on the basis of the actual number of days elapsed in a 360-day
year. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Note Policy") issued by Financial Security Assurance Inc.
(the "Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Noteholders' Interest Distributable Amount and the Noteholders'
Principal Distributable Amount on each Payment Date, all as more fully set forth
in the Indenture.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
A-2-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
CPS AUTO RECEIVABLES TRUST 199[ ]
By: [ ], not
in its individual capacity
but solely as Owner Trustee
under the Trust Agreement
By:
Name:
Title:
A-2-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: [NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION], not in its
individual capacity but solely
as Trustee,
By:
Authorized Signatory
A-2-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 [ %] Asset Backed Notes (herein called the "Class
A-2 Notes"), all issued under an Indenture dated as of [ ] (such indenture, as
supplemented or amended, is herein called the "Indenture"), between the Issuer
and [Norwest Bank Minnesota, National Association], as trustee (the "Trustee",
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Trustee and the Holders of the Notes. The Notes are subject to all terms of the
Indenture. All terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class B Notes (together, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class A-2 Notes will be payable on each Payment Date
in an amount described on the face hereof. "Payment Date" means the [ ] day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing [ ].
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Payment Date and
the Redemption Date, if any, pursuant to Section 10.1(a) or 10.1(c) of the
Indenture. As described above, a portion of the unpaid principal balance of this
Note shall be due and payable on the Redemption Date, if any, pursuant to
Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable (i) on the date on
which an Event of Default shall have occurred and be continuing so long as an
Insurer Default shall not have occurred and be continuing or (ii) if an Insurer
Default shall have occurred and be continuing, on the date on which an Event of
Default shall have occurred and be continuing and the Trustee or the Holders of
the Notes representing at least 66-2/3% of the Outstanding Amount of the Notes
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.2 of the Indenture. All principal payments on the Class A-2 Notes
shall be made pro rata to the Class A-2 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by
A-2-5
<PAGE>
check mailed to the Person whose name appears as the Holder of this Note (or one
or more Predecessor Notes) in the Note Register as of the close of business on
each Record Date, except that with respect to Notes registered on the Record
Date in the name of the nominee of the Clearing Agency (initially, such nominee
to be Cede & Co.), payments will be made by wire transfer in immediately
available funds to the account designated by such nominee. Such checks shall be
mailed to the Person entitled thereto at the address of such Person as it
appears on the Note Register as of the applicable Record Date without requiring
that this Note be submitted for notation of payment. Any reduction in the
principal amount of this Note (or any one or more Predecessor Notes) effected by
any payments made on any Payment Date shall be binding upon all future Holders
of this Note and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are
expected to be available, as provided in the Indenture, for payment in full of
the then remaining unpaid principal amount of this Note on a Payment Date, then
the Trustee, in the name of and on behalf of the Issuer, will notify the Person
who was the Holder hereof as of the Record Date preceding such Payment Date by
notice mailed prior to such Payment Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Trustee's principal Corporate Trust Office or at the office of the Trustee's
agent appointed for such purposes located in [Minneapolis, Minnesota].
The Issuer shall pay interest on overdue installments of interest at
the Class A-2 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed (a) pursuant to
Section 10.1(a) of the Indenture, in whole, but not in part, at the option of
the Servicer (with the consent of the Insurer under certain circumstances), on
any Payment Date on or after the date on which the Pool Balance is less than or
equal to 10% of the Original Pool Balance, and (b) pursuant to Section 10.1(b)
of the Indenture, in part, on a pro rata basis, on the Payment Date on or
immediately following the last day of the Funding Period in the event that any
Pre-Funded Amount remains on deposit in the Pre-Funding Account after giving
effect to the purchase of all Subsequent Receivables, including any such
purchase on such Redemption Date.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the
A-2-6
<PAGE>
requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program ("Stamp") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the Trustee may
require, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Depositor, the Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Seller, the Servicer, the Depositor, the Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Seller, the Servicer, the Depositor, the Owner Trustee or the
Trustee or of any successor or assign of the Seller, the Servicer, the
Depositor, the Trustee or the Owner Trustee in its individual capacity, except
as any such Person may have expressly agreed (it being understood that the
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Depositor or the Issuer or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings, under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, the Indenture or the Basic Documents.
A-2-7
<PAGE>
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and the Insurer and any agent of the Issuer, the Trustee
or the Insurer may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one or more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to
A-2-8
<PAGE>
pay the principal of and interest on this Note at the times, place, and rate,
and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither [Owner Trustee] in its
individual capacity, any owner of a beneficial interest in the Issuer, nor any
of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Owner Trustee for the sole purposes of binding the interests of the Owner
Trustee in the assets of the Issuer. The Holder of this Note by the acceptance
hereof agrees that except as expressly provided in the Indenture or the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
A-2-9
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: (2)
Signature Guaranteed:
- -------
(2) NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever.
A-2-1
<PAGE>
[Form of Class A-3 Note] EXHIBIT A-3
REGISTERED $
No. R
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CPS AUTO RECEIVABLES TRUST 199[ ]
CLASS A-3 FLOATING RATE ASSET BACKED NOTES
CPS Auto Receivables Trust 199[ ], a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of [ ] DOLLARS payable on each Payment
Date in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is $ [INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the
denominator of which is $ by (ii) the aggregate amount, if any, payable from the
Note Distribution Account in respect of principal on the Class A-3 Notes
pursuant to Section 3.1 of the Indenture and Section 5.8 of the Sale and
Servicing Agreement provided, however, that the entire unpaid principal amount
of this Note shall be due and payable on the Payment Date (the "Final Scheduled
Payment Date"). The Issuer will pay interest on this Note at the rate per annum
shown above on each Payment Date until the principal of this Note is paid or
made available for payment, on the principal amount of this Note outstanding on
the preceding Payment Date (after giving effect to all payments of principal
made on the preceding Payment Date). Interest on this Note will accrue for each
Payment Date from the most recent Payment Date on which interest has been paid
to but excluding such Payment Date or, if no interest has yet been paid, from [
]. Interest will be computed on the
A-3-1
<PAGE>
basis of the actual number of days elapsed in a 360-day year. Such principal of
and interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty
insurance policy (the "Note Policy") issued by Financial Security Assurance Inc.
(the "Insurer"), pursuant to which the Insurer has unconditionally guaranteed
payments of the Noteholders' Interest Distributable Amount and the Noteholders'
Principal Distributable Amount on each Payment Date, all as more fully set forth
in the Indenture.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
A-3-2
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
CPS AUTO RECEIVABLES TRUST 199[ ],
By: [ ], not
in its individual capacity but
solely as Owner Trustee under
the Trust Agreement
By:
Name:
Title:
A-3-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: [NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION], not in its individual
capacity but solely as Trustee,
by
Authorized Signatory
A-3-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-3 [ %] Asset Backed Notes (herein called the "Class
A-3 Notes"), all issued under an Indenture dated as of [ ] (such indenture, as
supplemented or amended, is herein called the "Indenture"), between the Issuer
and [Norwest Bank Minnesota, National Association], as trustee (the "Trustee",
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Trustee and the Holders of the Notes. The Notes are subject to all terms of the
Indenture. All terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class B Notes (together, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
Principal of the Class A-3 Notes will be payable on each Payment Date
in an amount described on the face hereof. "Payment Date" means the twelfth day
of each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing [ ].
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Payment Date and
the Redemption Date, if any, pursuant to Section 10.1(a) or 10.1(c) of the
Indenture. As described above, a portion of the unpaid principal balance of this
Note shall be due and payable on the Redemption Date, if any, pursuant to
Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable (i) on the date on
which an Event of Default shall have occurred and be continuing so long as an
Insurer Default shall not have occurred and be continuing or (ii) if an Insurer
Default shall have occurred and be continuing, on the date on which an Event of
Default shall have occurred and be continuing and the Trustee or the Holders of
the Notes representing at least 66-2/3% of the Outstanding Amount of the Notes
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.2 of the Indenture. All principal payments on the Class A-3 Notes
shall be made pro rata to the Class A-3 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by
A-3-5
<PAGE>
check mailed to the Person whose name appears as the Holder of this Note (or one
or more Predecessor Notes) in the Note Register as of the close of business on
each Record Date, except that with respect to Notes registered on the Record
Date in the name of the nominee of the Clearing Agency (initially, such nominee
to be Cede & Co.), payments will be made by wire transfer in immediately
available funds to the account designated by such nominee. Such checks shall be
mailed to the Person entitled thereto at the address of such Person as it
appears on the Note Register as of the applicable Record Date without requiring
that this Note be submitted for notation of payment. Any reduction in the
principal amount of this Note (or any one or more Predecessor Notes) effected by
any payments made on any Payment Date shall be binding upon all future Holders
of this Note and of any Note issued upon the registration of transfer hereof or
in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are
expected to be available, as provided in the Indenture, for payment in full of
the then remaining unpaid principal amount of this Note on a Payment Date, then
the Trustee, in the name of and on behalf of the Issuer, will notify the Person
who was the Holder hereof as of the Record Date preceding such Payment Date by
notice mailed prior to such Payment Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Trustee's principal Corporate Trust Office or at the office of the Trustee's
agent appointed for such purposes located in [Minneapolis, Minnesota].
The Issuer shall pay interest on overdue installments of interest at
the Class A-3 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed (a) pursuant to
Section 10.1(a) of the Indenture, in whole, but not in part, at the option of
the Servicer (with the consent of the Insurer under certain circumstances), on
any Payment Date on or after the date on which the Pool Balance is less than or
equal to 10% of the Original Pool Balance, and (b) pursuant to Section 10.1(b)
of the Indenture, in part, on a pro rata basis, on the Payment Date on or
immediately following the last day of the Funding Period in the event that any
Pre-Funded Amount remains on deposit in the Pre-Funding Account after giving
effect to the purchase of all Subsequent Receivables, including any such
purchase on such Redemption Date.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the
A-3-6
<PAGE>
requirements of the Note Registrar which requirements include membership or
participation in Securities Transfer Agents Medallion Program ("Stamp") or such
other "signature guarantee program" as may be determined by the Note Registrar
in addition to, or in substitution for, Stamp, all in accordance with the
Exchange Act, and (ii) accompanied by such other documents as the Trustee may
require, and thereupon one or more new Notes of authorized denominations and in
the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of
transfer or exchange of this Note, but the transferor may be required to pay a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Depositor, the Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Seller, the Servicer, the Depositor, the Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
issuer, the Seller, the Servicer, the Depositor, the Owner Trustee or the
Trustee or of any successor or assign of the Seller, the Servicer, the
Depositor, the Trustee or the Owner Trustee in its individual capacity, except
as any such Person may have expressly agreed (it being understood that the
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Depositor or the Issuer or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings, under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Notes, the Indenture or the Basic Documents.
A-3-7
<PAGE>
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and the Insurer and any agent of the Issuer, the Trustee
or the Insurer may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one of more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to
A-3-8
<PAGE>
pay the principal of and interest on this Note at the times, place and rate, and
in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither [Owner Trustee] in its
individual capacity, any owner of a beneficial interest in the Issuer, nor any
of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Owner Trustee for the sole purposes of binding the interests of the Owner
Trustee in the assets of the Issuer. The Holder of this Note by the acceptance
hereof agrees that except as expressly provided in the Indenture or the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
A-3-9
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: 3/
Signature Guaranteed:
- ---------
(3) NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever.
A-3-10
<PAGE>
[Form of Class B Note] EXHIBIT B
REGISTERED $
No. R
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE, IS PAYABLE IN INSTALLMENTS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME
MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CPS AUTO RECEIVABLES TRUST 199[ ]
CLASS B [ ]% ASSET BACKED NOTES
CPS Auto Receivables Trust 199[ ], a business trust organized and
existing under the laws of the State of Delaware (herein referred to as the
"Issuer"), for value received, hereby promises to pay to CEDE & CO., or
registered assigns, the principal sum of [ ] DOLLARS payable on each Payment
Date in an amount equal to the result obtained by multiplying (i) a fraction the
numerator of which is $ [INSERT INITIAL PRINCIPAL AMOUNT OF NOTE] and the
denominator of which is $ by (ii) the aggregate amount, if any, payable from the
Note Distribution Account in respect of principal on the Class B Notes pursuant
to Section 3.1 of the Indenture and Section 5.8 of the Sale and Servicing
Agreement provided, however, that the entire unpaid principal amount of this
Note shall be due and payable on the __________ Payment Date (the "Final
Scheduled Payment Date"). The Issuer will pay interest on this Note at the rate
per annum shown above on each Payment Date until the principal of this Note is
paid or made available for payment, on the principal amount of
A-3-11
<PAGE>
this Note outstanding on the preceding Payment Date (after giving effect to all
payments of principal made on the preceding Payment Date). Interest on this Note
will accrue for each Payment Date from the most recent Payment Date on which
interest has been paid to but excluding such Payment Date or, if no interest has
yet been paid, from [ ]. Interest will be computed on the basis of the actual
number of days elapsed in a 360-day year. Such principal of and interest on this
Note shall be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
Reference is made to the further provisions of this Note set forth on
the reverse hereof, which shall have the same effect as though fully set forth
on the face of this Note.
Unless the certificate of authentication hereon has been executed by
the Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
A-3-12
<PAGE>
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
CPS AUTO RECEIVABLES TRUST 199[ ]
By: [ ], not
in its individual capacity
but solely as Owner Trustee
under the Trust Agreement
By:
Name:
Title:
A-3-13
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: [NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION], not in its
individual capacity but solely
as Trustee,
By:
Authorized Signatory
A-3-14
<PAGE>
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class B [ %] Asset Backed Notes (herein called the "Class B
Notes"), all issued under an Indenture dated as of [ ] (such indenture, as
supplemented or amended, is herein called the "Indenture"), between the Issuer
and [Norwest Bank Minnesota, National Association], as trustee (the "Trustee",
which term includes any successor Trustee under the Indenture), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of the Issuer, the
Trustee and the Holders of the Notes. The Notes are subject to all terms of the
Indenture. All terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them in or pursuant
to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class B Notes (together, the "Notes") are and will be equally and ratably
secured by the collateral pledged as security therefor as provided in the
Indenture.
The right of the Class B Noteholders to receive payments of principal
and interest are subordinated to the rights of the Class A Noteholders as and to
the extent provided in the Indenture.
Principal of the Class B Notes will be payable on each Payment Date in
an amount described on the face hereof. "Payment Date" means the [ ] day of each
month, or, if any such date is not a Business Day, the next succeeding Business
Day, commencing [ ].
As described above, the entire unpaid principal amount of this Note
shall be due and payable on the earlier of the Final Scheduled Payment Date and
the Redemption Date, if any, pursuant to Section 10.1(a) or 10.1(c) of the
Indenture. As described above, a portion of the unpaid principal balance of this
Note shall be due and payable on the Redemption Date, if any, pursuant to
Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable (i) on the date on
which an Event of Default shall have occurred and be continuing so long as an
Insurer Default shall not have occurred and be continuing or (ii) if an Insurer
Default shall have occurred and be continuing, on the date on which an Event of
Default shall have occurred and be continuing and the Trustee or the Holders of
the Notes representing at least 66-2/3% of the Outstanding Amount of the Notes
have declared the Notes to be immediately due and payable in the manner provided
in Section 5.2 of the Indenture. All
A-3-15
<PAGE>
principal payments on the Class A-2 Notes shall be made pro rata to the Class
A-2 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Holder of this Note (or one or more Predecessor Notes) in the
Note Register as of the close of business on each Record Date, except that with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more Predecessor Notes) effected by any payments made on any Payment Date
shall be binding upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu
hereof, whether or not noted hereon. If funds are expected to be available, as
provided in the Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the Trustee, in the name
of and on behalf of the Issuer, will notify the Person who was the Holder hereof
as of the Record Date preceding such Payment Date by notice mailed prior to such
Payment Date and the amount then due and payable shall be payable only upon
presentation and surrender of this Note at the Trustee's principal Corporate
Trust Office or at the office of the Trustee's agent appointed for such purposes
located in [Minneapolis, Minnesota].
The Issuer shall pay interest on overdue installments of interest at
the Class B Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed (a) pursuant to
Section 10.1(a) of the Indenture, in whole, but not in part, at the option of
the Servicer (with the consent of the Insurer under certain circumstances), on
any Payment Date on or after the date on which the Pool Balance is less than or
equal to 10% of the Original Pool Balance, and (b) pursuant to Section 10.1(b)
of the Indenture, in part, on a pro rata basis, on the Payment Date on or
immediately following the last day of the Funding Period in the event that any
Pre-Funded Amount remains on deposit in the Pre-Funding Account after giving
effect to the purchase of all Subsequent Receivables, including any such
purchase on such Redemption Date.
As provided in the Indenture and subject to certain limitations set
forth therein, the transfer of this Note may be registered on the Note Register
upon surrender of this Note for
A-3-16
<PAGE>
registration of transfer at the office or agency designated by the Issuer
pursuant to the Indenture, (i) duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Trustee duly executed by, the
Holder hereof or his attorney duly authorized in writing, with such signature
guaranteed by an "eligible guarantor institution" meeting the requirements of
the Note Registrar which requirements include membership or participation in
Securities Transfer Agents Medallion Program ("Stamp") or such other "signature
guarantee program" as may be determined by the Note Registrar in addition to, or
in substitution for, Stamp, all in accordance with the Exchange Act, and (ii)
accompanied by such other documents as the Trustee may require, and thereupon
one or more new Notes of authorized denominations and in the same aggregate
principal amount will be issued to the designated transferee or transferees. No
service charge will be charged for any registration of transfer or exchange of
this Note, but the transferor may be required to pay a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with any
such registration of transfer or exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Depositor, the Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Seller, the Servicer, the Depositor, the Trustee or the Owner
Trustee in its individual capacity, any holder of a beneficial interest in the
Issuer, the Seller, the Servicer, the Depositor, the Owner Trustee or the
Trustee or of any successor or assign of the Seller, the Servicer, the
Depositor, the Trustee or the Owner Trustee in its individual capacity, except
as any such Person may have expressly agreed (it being understood that the
Trustee and the Owner Trustee have no such obligations in their individual
capacity) and except that any such partner, owner or beneficiary shall be fully
liable, to the extent provided by applicable law, for any unpaid consideration
for stock, unpaid capital contribution or failure to pay any installment or call
owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note covenants and agrees that by
accepting the benefits of the Indenture that such Noteholder will not at any
time institute against the Depositor, or the Issuer or join in any institution
against the Depositor or the Issuer of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation
A-3-17
<PAGE>
proceedings, or other proceedings, under any United States Federal or state
bankruptcy or similar law in connection with any obligations relating to the
Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of this Note,
the Issuer, the Trustee and the Insurer and any agent of the Issuer, the Trustee
or the Insurer may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not this Note be
overdue, and neither the Issuer, the Trustee nor any such agent shall be
affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Insurer and of the Holders of Notes
representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one or more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
A-3-18
<PAGE>
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither [Owner Trustee] in its
individual capacity, any owner of a beneficial interest in the Issuer, nor any
of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Owner Trustee for the sole purposes of binding the interests of the Owner
Trustee in the assets of the Issuer. The Holder of this Note by the acceptance
hereof agrees that except as expressly provided in the Indenture or the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
A-3-19
<PAGE>
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns
and transfers unto
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: (2)
Signature Guaranteed:
- -------
(2) NOTE: The signature to this assignment must correspond with the name of
the registered owner as it appears on the face of the within Note in
every particular, without alteration, enlargement or any change
whatsoever.
A-3-1
July 11, 1997
To the Parties Listed on
Schedule I hereto
Re: Consumer Portfolio Services, Inc.
Registration Statement on Form S-3 (No. 333-25301)
Ladies and Gentlemen:
We have acted as special counsel to CPS Receivables Corp., a California
corporation (the "Seller"), and Consumer Portfolio Services, Inc., a California
corporation ("CPS"), in connection with the above-referenced Registration
Statement (together with the exhibits and any amendments thereto, the
"Registration Statement"), filed by CPS with the Securities and Exchange
Commission in connection with the registration of the Asset Backed Notes (the
"Notes") to be sold from time to time in one or more series in amounts to be
determined at the time of sale and to be set forth in one or more supplements
(each a "Prospectus Supplement") to the Prospectus (the "Prospectus") included
in the Registration Statement.
As described in the Registration Statement, the Notes of each series
will be issued pursuant to an Indenture (the "Indenture") by and among a trust
(the "Trust"), as issuer and Norwest Bank Minnesota, National Association, as
trustee (the "Trustee") with the Trust to be formed by the Seller pursuant to a
Trust Agreement (the "Trust Agreement") by and among the Seller as depositor and
the owner trustee. The Notes issued by the Trust will include one or more
classes of notes.
We are generally familiar with the proceedings required to be taken in
connection with the proposed authorization, issuance and sale of the Notes, and
in order to express the opinion hereinafter stated, we have examined copies of
the Registration Statement, including the form of Trust Agreement, the form of
Indenture and the form of Sale and Servicing Agreement included as exhibits to
the Registration Statement. We have examined such other documents and such
matters of law, and we have satisfied ourselves as to such matters of fact, as
we have considered relevant for purposes of this opinion.
<PAGE>
The Parties Listed on
Schedule I hereto
July 11, 1997
Page 2
On the basis of the foregoing, it is our opinion that the Notes, when,
as and if (i) the Registration Statement becomes effective pursuant to the
provisions of the Securities Act of 1933, as amended, (ii) the amount, price,
interest rate and other principal terms of such Notes have been duly approved by
the Board of Directors of the Seller, (iii) the Indenture, the Trust Agreement
and the Sale and Servicing Agreement relating thereto has been duly completed,
executed and delivered by the parties thereto substantially in the form we have
examined, duly reflecting the terms established as described above, and (iv)
such Notes have been duly issued by the applicable Trust and authenticated by
the applicable Trustee all in accordance with the terms and conditions of the
Indenture and sold by the Seller in the manner described in the Registration
Statement, such Notes will have been duly authorized by all necessary action of
the Trustee on behalf of the Trust and will have been legally issued, fully paid
and non-assessable and will be enforceable in accordance with their terms and
entitled to the benefits of the Indenture and the Sale and Servicing Agreement
except as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws affecting the enforcement of creditors' rights
generally (including, without limitation, the determination pursuant to 12 USC
ss. 1821(e) of any liability for the disaffirmance or repudiation of any
contract) or the relief of debtors, as may be in effect from time to time, or by
general principles of equity.
We do not find it necessary for the purposes of this opinion, and
accordingly we do not purport to cover herein, the application of securities or
"Blue Sky" laws of the various states to the offer of sale of the Notes.
We wish to advise you that we are members of the bar of the States and
California of New York and the opinions expressed herein are limited to the laws
of the States of New York and California and the Federal laws of the United
States.
<PAGE>
The Parties Listed on
Schedule I hereto
July 11, 1997
Page 3
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement, and to the reference to our firm in the Prospectus under
the caption "Legal Opinions".
Sincerely,
/s/ Mayer, Brown & Platt
------------------------
<PAGE>
Schedule I
Consumer Portfolio Services, Inc.
2 Ada
Irvine, California 92618
CPS Receivables Corp.
2 Ada
Irvine, California 92618
July 11, 1997
To the Parties Listed on
Schedule I hereto
Re: Consumer Portfolio Services, Inc.
Registration Statement on Form S-3 (No. 333-25301)
Ladies and Gentlemen:
We have acted as special counsel to CPS Receivables Corp., a California
corporation (the "Seller"), and Consumer Portfolio Services, Inc., a California
corporation (the "Servicer"), in connection with the above-referenced
Registration Statement (together with the exhibits and any amendments thereto,
the "Registration Statement") filed by the Servicer with the Securities and
Exchange Commission in connection with the registration by the Servicer of Asset
Backed Notes (the "Notes") to be sold from time to time in one or more series in
amounts to be determined at the time of sale and to be set forth in one or more
Supplements (each, a "Prospectus Supplement") to the Prospectus (the
"Prospectus") included in the Registration Statement.
In connection with our engagement, we have examined and relied upon (i)
the Prospectus, (ii) the forms of the Sale and Servicing Agreement, the Trust
Agreement and the Indenture filed as exhibits to the Registration Statement, and
(iii) such other documents as we have deemed necessary. In addition, we have
examined and considered executed originals or counterparts, or certified or
other copies identified to our satisfaction as being true copies of such
certificates, instruments, documents and other corporate records of the Seller
and such matters of fact and law as we have deemed necessary for the purposes of
the opinion expressed below. Capitalized terms used and not otherwise defined
herein have the meanings given to them in the Sale and Servicing Agreement.
In our examination we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, the conformity
to original documents of all documents submitted to us as certified or
photostatic copies, and the authenticity of the originals of such latter
documents. As to any facts material to the opinions expressed herein which were
not independently established or verified, we have relied upon statements and
representations of officers and representatives of the Seller, the Servicer, and
others.
<PAGE>
The Parties Listed on
Schedule I hereto
July 11, 1997
Page 2
In rendering our opinion, we have also considered and relied upon the
Internal Revenue Code of 1986, as amended, administrative rulings, judicial
decisions, regulations, and such other authorities, all in effect on the date
this opinion letter is delivered, as we have deemed appropriate. The statutory
provisions, regulations, interpretations and other authorities upon which our
opinion is based are subject to change, and such changes could apply
retroactively. In addition, there can be no assurance that positions contrary to
those stated in our opinion will not be taken by the Internal Revenue Service
("IRS"). No tax rulings will be sought from the IRS with respect to any of the
matters discussed herein.
We express no opinion as to the laws of any jurisdiction other than the
Federal laws of the United States of America to the extent specifically referred
to herein.
Based on and subject to the foregoing and assuming that the Sale and
Servicing Agreement, the Trust Agreement and the Indenture are executed and
delivered in form satisfactory to us, we hereby confirm that the statements in
the Prospectus under the heading "Federal Income Tax Consequences" that are
described to be the legal opinions that we will deliver prior to the issuance of
Securities will constitute our opinions as to the material federal income tax
consequences discussed therein. There can be no assurance, however, that the tax
conclusions presented therein will not be successfully challenged by the IRS, or
significantly altered by new legislation, changes in IRS positions or judicial
decisions, any of which challenges or alterations may be applied retroactively
with respect to completed transactions.
Except for the opinion expressed above, we express no opinion as to any
other tax consequences of the transaction under federal, state, local, or
foreign laws.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the use of our name under the heading "Federal Income
Tax Consequences" in the Prospectus.
Very truly yours,
/s/ Mayer, Brown & Platt
------------------------
<PAGE>
Schedule I
Consumer Portfolio Services, Inc.
2 Ada
Irvine, CA 92618
CPS Receivables Corp.
2 Ada
Irvine, CA 92618
----------------------------------------------------------------
SALE AND SERVICING
AGREEMENT
among
CPS AUTO RECEIVABLES TRUST 199[ ],
Issuer,
CPS RECEIVABLES CORP.,
Seller,
CONSUMER PORTFOLIO SERVICES, INC.,
Servicer
and
[NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION],
Standby Servicer and Trustee
Dated as of [ ]
----------------------------------------------------------------
<PAGE>
SALE AND SERVICING AGREEMENT dated as of [ ], among CPS AUTO
RECEIVABLES TRUST 199[ ], a Delaware business trust (the "Issuer"), CPS
RECEIVABLES CORP., a California corporation (the "Seller"), and CONSUMER
PORTFOLIO SERVICES, INC., a California corporation (the "Servicer"), and
[NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION,] a national banking association,
in its capacity as Standby Servicer and Trustee.
WHEREAS the Issuer desires to purchase a portfolio of receivables
arising in connection with motor vehicle retail installment sale contracts
acquired by Consumer Portfolio Services, Inc. or Samco Acceptance Corp. through
motor vehicle dealers and independent finance companies;
WHEREAS the Seller has purchased such receivables from Consumer
Portfolio Services, Inc. and Samco Acceptance Corp. and is willing to sell such
receivables to the Issuer;
WHEREAS the Issuer desires to purchase additional receivables arising
in connection with motor vehicle retail installment sale contracts to be
acquired by Consumer Portfolio Services, Inc. or Samco Acceptance Corp. through
motor vehicle dealers and independent finance companies;
WHEREAS the Seller has agreements to purchase such additional
receivables from Consumer Portfolio Services, Inc. and from Samco Acceptance
Corp. and is willing to sell such receivables to the Issuer;
WHEREAS the Servicer is willing to service all such receivables;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
"Accountants' Report" means the report of a firm of nationally
recognized independent accountants described in Section 4.11.
-1-
<PAGE>
"Accounting Date" means, with respect to a Payment Date, the last day
of the Collection Period immediately preceding such Payment Date.
"Addition Notice" means, with respect to any transfer of Subsequent
Receivables to the Trust pursuant to Section 2.2 of this Agreement, notice of
the Seller's election to transfer Subsequent Receivables to the Trust, such
notice to designate the related Subsequent Transfer Date and the approximate
principal amount of Subsequent Receivables to be transferred on such Subsequent
Transfer Date.
"Administrative Receivable" means, with respect to any Collection
Period, a Receivable which the Servicer is required to purchase pursuant to
Section 4.7 or which the Servicer has elected to purchase pursuant to Section
4.4(c) on the Determination Date with respect to such Collection Period.
"Affiliate" of any Person means any Person who directly or indirectly
controls, is controlled by, or is under direct or indirect common control with
such Person. For purposes of this definition, the term "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling", "controlled
by" and "under common control with" have meanings correlative to the foregoing.
"Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Receivables (other than
(i) any Receivable that became a Liquidated Receivable prior to the end of the
related Collection Period and (ii) any Receivable that became a Purchased
Receivable prior to the end of the related Collection Period) as of the date of
determination.
"Agreement" means this Sale and Servicing Agreement, as the same may be
amended and supplemented from time to time.
"Amount Financed" means, with respect to a Receivable, the aggregate
amount advanced under such Receivable toward the purchase price of the Financed
Vehicle and any related costs, including amounts advanced in respect of
accessories, insurance premiums, service and warranty contracts, other items
customarily financed as part of retail automobile installment sale contracts or
promissory notes, and related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
percentage rate of finance charges or service charges, as stated in the related
Contract.
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"Basic Documents" means this Agreement, the Certificate of Trust, the
Trust Agreement, the Indenture, the Master Spread Account Agreement, the Spread
Account Supplement and other documents and certificates delivered in connection
therewith.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which banking institutions in the City of New York, the State in which the
Corporate Trust Office 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 Credit Enhancer is located shall be authorized or obligated by law,
executive order, or governmental decree to be closed.
"Calendar Quarter" means the three-month period ending on the last day
of March, June, September or December.
"Certificate" means a Trust Certificate (as defined in the Trust
Agreement).
"Certificate Balance" equals, initially, $[ ] and thereafter equals the
initial Certificate Balance, reduced by all amounts allocable to principal
previously distributed to Certificateholders.]
"Certificateholder" has the meaning assigned to such term in the Trust
Agreement.
"Certificate Distribution Account" has the meaning assigned to such
term in Section 5.1(a) hereof.
["Certificateholders' Distributable Amount" means, with respect to any
Payment Date, the sum of the Certificateholders' Interest Distributable Amount
and the Certificateholders' Principal Distributable Amount.]
["Certificateholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Certificateholders' Monthly Interest
Distributable Amount for the preceding Payment Date and any outstanding
Certificateholders' Interest Carryover Shortfall on such preceding Payment Date,
over the amount in respect of interest at the Certificate Rate that was actually
deposited in the Certificate Distribution Account on such preceding Payment
Date, plus interest on such excess, to the extent permitted by law, at the
Certificate Rate from and including such preceding Payment Date to but excluding
the current Payment Date.]
["Certificateholders' Interest Distributable Amount" means, with
respect to any Payment Date, the sum of the Certificateholders' Monthly Interest
Distributable Amount for
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such Payment Date and the Certificateholders' Interest Carryover Shortfall for
such Payment Date.]
["Certificateholders' Monthly Interest Distributable Amount" means,
with respect to any Payment Date, interest accrued during the related Interest
Period (including the initial Interest Period which will consist of 30 days) at
the Certificate Rate on such Payment Date. Interest shall be computed on the
basis of a 360-day year of twelve 30-day months for purposes of this
definition.]
["Certificateholders' Monthly Principal Distributable Amount" means,
with respect to any Payment Date, the Certificateholders' Percentage of the
Principal Distributable Amount.]
["Certificateholders' Percentage" means (i) for each Payment Date prior
to the Payment Date on which the Class A-3 Notes are paid in full, zero, (ii) on
the Payment Date on which the Class A-3 Notes are paid in full, the percentage
equivalent of a fraction, the numerator of which is the excess, if any, of (x)
the Principal Distributable Amount for such Payment Date over (y) the
outstanding principal amount of the Class A-3 Notes immediately prior to such
Payment Date, and the denominator of which is the Principal Distributable Amount
for such Payment Date," and the denominator of which is the Principal
Distributable Amount for such Payment Date, and (iii) for each Payment Date
thereafter to and including the Payment Date on which the Certificate Balance is
reduced to zero, 100%.]
["Certificateholders' Principal Carryover Shortfall" means, as of the
close of any Payment Date, the excess of the Certificateholders' Monthly
Principal Distributable Amount and any outstanding Certificateholders' Principal
Carryover Shortfall from the preceding Payment Date, over the amount in respect
of principal that is actually deposited in the Certificate Distribution Account
on such current Payment Date.]
["Certificateholders' Principal Distributable Amount" means, with
respect to any Payment Date, the sum of the Certificateholders' Monthly
Principal Distributable Amount for such Payment Date and the Certificateholders'
Principal Carryover Shortfall as of the close of the preceding Payment Date;
provided, however, that the Certificateholders' Principal Distributable Amount
(i) shall not exceed the Certificate Balance and (ii) shall equal the
Certificate Balance on the Final Scheduled Distribution Date for the
Certificates.]
"Certificate Pool Factor" as of the close of business on a Payment Date
means a seven-digit decimal figure equal to the
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Certificate Balance as of such Payment Date divided by the initial Certificate
Balance.
"Certificate Rate" means [ ]% per annum.
"Class" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes or the Class B Notes as the context requires.
"Class A Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class A Noteholders' Interest
Distributable Amount for the preceding Payment Date and any outstanding Class A
Noteholders' Interest Carryover Shortfall on such preceding Payment Date, over
the amount that was actually deposited in the Note Distribution Account on such
preceding Payment Date on account of the Class A Noteholders' Interest
Distributable Amount, plus interest on the amount of interest due but not paid
to Class A Noteholders on the preceding Payment Date, to the extent permitted by
law, at the respective Interest Rate borne by each Class of the Class A Notes
from such preceding Payment Date to but excluding the current Payment Date.
"Class A Noteholders' Interest Distributable Amount" means, with
respect to any Payment Date, the sum of the Class A Noteholders' Monthly
Interest Distributable Amount for such Payment Date and the Class A Noteholders'
Interest Carryover Shortfall for such Payment Date. Interest shall be computed
on the basis of (i) the actual number of days elapsed in a 360-day year in the
case of the Class A-1 Notes and the Class A-2 Notes and (ii) a 360-day year of
twelve 30-day months in the case of the Class A-3 Notes.
"Class A Noteholders' Monthly Interest Distributable Amount" means,
with respect to any Payment Date, the product of (i)(A) in the case of the Class
A-1 Notes and the Class A-2 Notes, the product of the Interest Rate for such
Class and a fraction, the numerator of which is the number of days elapsed from
and including the prior Payment Date (or, in the case of the first Payment Date,
from and including the Closing Date) to but excluding such Payment Date and the
denominator of which is 360 and (B) in the case of the Class A-3 Notes,
one-twelfth of the Interest Rate for such Class (or in the case of the first
Payment Date, the Interest Rate for such Class multiplied by a fraction, the
numerator of which is the number of days elapsed from and including the Closing
Date to but excluding such Payment Date and the denominator of which is 360) and
(ii) the outstanding principal amount of the Notes of such Class immediately
preceding such Payment Date.
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"Class A Noteholders' Monthly Principal Distributable Amount" means,
with respect to any Payment Date, the Class A Noteholders' Percentage of the
Principal Distributable Amount.
"Class A Noteholders' Percentage" means with respect to any
Determination Date (i) relating to a Payment Date prior to the Payment Date on
which the principal amount of the Class A-3 Notes is reduced to zero, [ %]; (ii)
relating to the Payment Date on which the principal amount of the Class A-3
Notes is reduced to zero, the percentage equivalent of a fraction, the numerator
of which is the principal amount of the Class A-3 Notes immediately prior to
such Payment Date, and the denominator of which is the Principal Distributable
Amount; and (iii) relating to any other Payment Date, 0%.
"Class A Noteholders' Principal Carryover Shortfall" means, as of the
close of any Payment Date, the excess of the Class A Noteholders' Principal
Distributable Amount and any outstanding Class A Noteholders' Principal
Carryover Shortfall from the preceding Payment Date over the amount that was
actually paid to the Class A Noteholders [(other than from a claim on the Credit
Enhancement] on such Payment Date on account of the Class A Noteholders'
Principal Distributable Amount.
"Class A Noteholders' Principal Distributable Amount" means, with
respect to any Payment Date, (other than the Final Scheduled Payment Date for
any Class of Class A Notes), the sum of the Class A Noteholders' Monthly
Principal Distributable Amount for such Payment Date and the Noteholders'
Principal Carryover Shortfall as of the close of the preceding Payment Date. The
Class A Noteholders' Principal Distributable Amount on the Final Scheduled
Payment Date for any Class of Class A Notes will equal the sum of (i) the Class
A Noteholders' Monthly Principal Distributable Amount for such Payment Date,
(ii) the Class A Noteholders' Principal Carryover Shortfall as of the close of
the preceding Payment Date, and (iii) the excess of the outstanding principal
amount of such Class of Class A Notes, if any, over the amounts described in
clauses (i) and (ii).
"Class A Notes" means the Class A-1 Notes, the Class A-2 Notes and the
Class A-3 Notes.
"Class A-1 Final Scheduled Payment Date" means with respect to the
Class A-1 Notes, the [ ] Payment Date [(which shall be no later than 397 days
after the date on which the Notes are priced)].
"Class A-1 Notes" has the meaning assigned to such term in the
Indenture.
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"Class A-2 Notes" has the meaning assigned to such term in the
Indenture.
"Class A-3 Notes" has the meaning assigned to such term in the
Indenture.
"Class B Deficiency" shall have the meaning specified in Section
5.5(c).
"Class B Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class B Noteholders' Interest
Distributable Amount for the preceding Payment Date and any outstanding Class B
Noteholders' Interest Carryover Shortfall on such preceding Payment Date, over
the amount that was actually deposited in the Note Distribution Account on such
preceding Payment Date on account of the Class B Noteholders' Interest
Distributable Amount, plus interest on the amount of interest due but not paid
to Class B Noteholders on the preceding Payment Date, to the extent permitted by
law, at the applicable Interest Rate from such preceding Payment Date to but
excluding the current Payment Date.
"Class B Noteholders' Interest Distributable Amount" means, with
respect to any Payment Date, the sum of the Class B Noteholders' Monthly
Interest Distributable Amount for such Payment Date and the Class B Noteholders'
Interest Carryover Shortfall for such Payment Date. Interest shall be computed
on the basis of a 360-day year of twelve 30-day months.
"Class B Noteholders' Monthly Interest Distributable Amount" means,
with respect to any Payment Date, the product of (i)the product of the Interest
Rate for such Class and a fraction, the numerator of which is the number of days
elapsed from and including the prior Payment Date (or, in the case of the first
Payment Date, from and including the Closing Date) to but excluding such Payment
Date and the denominator of which is 360 and (ii) the outstanding principal
amount of the Class B Notes immediately preceding such Payment Date.
"Class B Noteholders' Monthly Principal Distributable Amount" means,
with respect to any Payment Date, the Class B Noteholders' Percentage of the
Principal Distributable Amount.
"Class B Noteholders' Percentage" means with respect to any
Determination Date (i) relating to a Payment Date prior to the Payment Date on
which the principal amount of the Class B Notes is reduced to zero, [ ]%; (ii)
relating to the Payment Date on which the principal amount of the Class B Notes
is reduced to zero, the percentage equivalent of a fraction, the numerator of
which is the principal amount of the Class B Notes immediately prior to such
Payment Date, and the denominator of which is the
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Class B Principal Distributable Amount; and (iii) relating to any other Payment
Date, 0%.
"Class B Noteholders' Principal Carryover Shortfall" means, as of the
close of any Payment Date, the excess of the Class B Noteholders' Principal
Distributable Amount and any outstanding Class B Noteholders' Principal
Carryover Shortfall from the preceding Payment Date over the amount that was
actually paid to the Class B Noteholders on such Payment Date on account of the
Class B Principal Distributable Amount.
"Class B Noteholders' Principal Distributable Amount" means, with
respect to any Payment Date, (other than the Final Scheduled Payment Date), the
sum of the Class B Noteholders' Monthly Principal Distributable Amount for such
Payment Date and the Class B Noteholders' Principal Carryover Shortfall as of
the close of the preceding Payment Date. The Class B Noteholders' Principal
Distributable Amount on the Final Scheduled Payment Date will equal the sum of
(i) the Class B Noteholders' Monthly Principal Distributable Amount for such
Payment Date, (ii) the Class B Noteholders' Principal Carryover Shortfall as of
the close of the preceding Payment Date, and (iii) the excess of the outstanding
principal amount the Class B Notes, if any, over the amounts described in
clauses (i) and (ii).
"Class B Notes" has the meaning assigned to such term in the Indenture.
"Closing Date" means [ ].
"Code" shall have the meaning specified in Section 3.2.
"Collateral Agent" means [Norwest Bank Minnesota, National
Association], in its capacity as Collateral Agent under the Master Spread
Account Agreement.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.1.
"Collection Period" means, with respect to the first Payment Date, the
period beginning on the close of business on the Initial Cutoff Date and ending
on the close of business on [
]. With respect to each subsequent Payment Date, the preceding
calendar month. Any amount stated "as of the close of business of the last day
of a Collection Period" shall give effect to the following calculations as
determined as of the end of the day on such last day: (i) all applications of
collections, and (ii) all distributions.
"Confidential Information" means, in relation to any Person, any
written information delivered or made available by or on
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behalf of CPS or the Seller to such Person in connection with or pursuant to
this Agreement or the transactions contemplated hereby which is proprietary in
nature and clearly marked or identified as being confidential information, other
than information (i) which was publicly known, or otherwise known to such
Person, at the time of disclosure (except pursuant to disclosure in connection
with this Agreement), (ii) which subsequently becomes publicly known through no
act or omission by such Person, or (iii) which otherwise becomes known to such
Person other than through disclosure by CPS or the Seller.
"Contract" means a motor vehicle retail installment sale contract.
"Controlling Party" shall be determined in accordance with the
provisions of Section 13.15.
"Corporate Trust Office" means (i) with respect to the Owner Trustee,
the principal corporate trust office of the Owner Trustee, which at the time of
execution of this agreement is [ ], and (ii) with respect to the Trustee and the
Collateral Agent, the principal corporate trust office of the Trustee, which at
the time of execution of this agreement is [ ].
"CPS" means Consumer Portfolio Services, Inc. a California corporation
and its successors.
"CPS Purchase Agreement" means the Purchase Agreement dated as of
[______] by and between the Seller and CPS, as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, relating to the purchase of the CPS Receivables by the Seller
from CPS.
"CPS Receivables" means a Receivable purchased by the Seller from CPS.
"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.
"Credit Enhancement" means [describe credit enhancement].
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"Credit Enhancement Agreement" means [ ].
"Credit Enhancement Agreement Event of Default" means and "Event of
Default" as defined in the Credit Enhancement Agreement.
"Credit Enhancer" means [ ]in its capacity as provider of the Credit
Enhancement.
"Credit Enhancer Default" means [ ].
"Cutoff Date" means the Initial Cutoff Date or the applicable
Subsequent Cutoff Date, as the context may require.
"Dealer" means, with respect to a Receivable, the seller of the related
Financed Vehicle, who originated and assigned such Receivable to CPS, who in
turn sold such Receivable to the Seller.
"Deficiency Claim Amount" shall have the meaning set forth in Section
5.5.
"Deficiency Claim Date" means, with respect to any Payment Date, the
fourth Business Day immediately preceding such Payment Date.
"Deficiency Notice" shall have the meaning set forth in Section 5.5.
["Delivery" when used with respect to Trust Account Property means:
(a) with respect to bankers' acceptances, commercial paper, negotiable
certificates of deposit and other obligations that constitute "instruments"
within the meaning of Section 9- 105(l)(i) of the UCC and are susceptible of
physical delivery, transfer thereof to the Trustee or its nominee or custodian
by physical delivery to the Trustee or its nominee or custodian endorsed to, or
registered in the name of, the Trustee or its nominee or custodian or endorsed
in blank, and, with respect to a certificated security (as defined in Section
8-102 of the UCC) transfer thereof (i) by delivery of such certificated security
endorsed to, or registered in the name of, the Trustee or its nominee or
custodian or endorsed in blank to a financial intermediary (as defined in
Section 8-313 of the UCC) and the making by such financial intermediary of
entries on its books and records identifying such certificated securities as
belonging to the Trustee or its nominee or custodian and the sending by such
financial intermediary of a confirmation of the purchase of such certificated
security by the Trustee or its nominee or custodian, or (ii) by delivery thereof
to a "clearing corporation" (as
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defined in Section 8-102(3) of the UCC) and the making by such clearing
corporation of appropriate entries on its books reducing the appropriate
securities account of the transferor and increasing the appropriate securities
account of a financial intermediary by the amount of such certificated security,
the identification by the clearing corporation of the certificated securities
for the sole and exclusive account of the financial intermediary, the
maintenance of such certificated securities by such clearing corporation or a
"custodian bank" (as defined in Section 8-102(4) of the UCC) or the nominee of
either subject to the clearing corporation's exclusive control, the sending of a
confirmation by the financial intermediary of the purchase by the Trustee or its
nominee or custodian of such securities and the making by such financial
intermediary of entries on its books and records identifying such certificated
securities as belonging to the Trustee or its nominee or custodian (all of the
foregoing, "Physical Property"), and, in any event, any such Physical Property
in registered form shall be in the name of the Trustee or its nominee or
custodian; and such additional or alternative procedures as may hereafter become
appropriate to effect the complete transfer of ownership of any such Trust
Account Property to the Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National Mortgage
Association that is a book-entry security held through the Federal Reserve
System pursuant to Federal book-entry regulations, the following procedures, all
in accordance with applicable law, including applicable Federal regulations and
Articles 8 and 9 of the UCC: book-entry registration of such Trust Account
Property to an appropriate book-entry account maintained with a Federal Reserve
Bank by a financial intermediary which is also a "depository" pursuant to
applicable Federal regulations and issuance by such financial intermediary of a
deposit advice or other written confirmation of such book-entry registration to
the Trustee or its nominee or custodian of the purchase by the Trustee or its
nominee or custodian of such book-entry securities; the making by such financial
intermediary of entries in its books and records identifying such book-entry
security held through the Federal Reserve System pursuant to Federal book-entry
regulations as belonging to the Trustee or its nominee or custodian and
indicating that such custodian folds such Trust Account Property solely as agent
for the Trustee or its nominee or custodian; and such additional or alternative
procedures as may hereafter become appropriate to effect complete transfer of
ownership of any such Trust Account Property to the Trustee or its nominee or
custodian, consistent with changes in applicable law or regulations or the
interpretation thereof; and
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(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not governed by
clause (b) above, registration on the books and records of the issuer thereof in
the name of the financial intermediary, the sending of a confirmation by the
financial intermediary of the purchase by the Trustee or its nominee or
custodian of such uncertificated security, the making by such financial
intermediary of entries on its books and records identifying such uncertificated
certificates as belonging to the Trustee or its nominee or custodian.]
"Depositor" shall mean the Seller in its capacity as Depositor under
the Trust Agreement.
"Determination Date" means the earlier of (i) the seventh Business Day
of each calendar month and (ii) the fifth Business Day preceding the related
Payment Date.
"Draw Date" means with respect to any Payment Date, the third Business
Day immediately preceding such Payment Date.
"Eligible Account" means (i) a segregated trust account that is
maintained with a depository institution acceptable to the Credit Enhancer (so
long as a Credit Enhancer Default shall not have occurred and be continuing), or
(ii) a segregated direct deposit account maintained with a depository
institution or trust company organized under the laws of the United States of
America, or any of the States thereof, or the District of Columbia, having a
certificate of deposit, short-term deposit or commercial paper rating of at
least "A-1" by Standard & Poor's and "P-1" by Moody's and (so long as a Credit
Enhancer Default shall not have occurred and be continuing) acceptable to the
Credit Enhancer..
"Eligible Investments" mean book-entry securities, negotiable
instruments or securities represented by instruments in bearer or registered
form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to the
full and timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any State thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by Federal or State
banking or depository institution authorities; provided, however, that at the
time of the investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a Person other than
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such depository institution or trust company) thereof shall be rated "A-1+" by
Standard & Poor's and "P-1" by Moody's;
(c) commercial paper that, at the time of the investment or contractual
commitment to invest therein, is rated "A-1+" by Standard & Poor's and "P-1" by
Moody's;
(d) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(e) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed as to the full and timely payment by,
the United States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the United
States of America, in either case entered into with (i) a depository institution
or trust company (acting as principal) described in clause (b) or (ii) a
depository institution or trust company whose commercial paper or other short
term unsecured debt obligations are rated "A-1+" by Standard & Poor's and "P-1"
by Moody's and long term unsecured debt obligations are rated "AAA" by Standard
& Poor's and "Aaa" by Moody's;
(f) with the prior written consent of the Credit Enhancer, money market
mutual funds registered under the Investment Company Act of 1940, as amended,
having a rating, at the time of such investment, from each of the Rating
Agencies in the highest investment category granted thereby; and
(g) any other investment as may be acceptable to the Credit Enhancer,
as evidenced by a writing to that effect, as may from time to time be confirmed
in writing to the Trustee by the Credit Enhancer.
Any of the foregoing Eligible Investments may be purchased by or
through the Owner Trustee or the Trustee or any of their respective Affiliates.
"ERISA" shall have the meaning specified in Section 3.2.
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Payment Date" means with respect to (i) the Class A-1
Notes, [ ] (the "Special A-1 Payment Date"), (ii) the Class A-2 Notes, the [ ]
Payment Date, (iii) the Class A-3 Notes, the [ ] Payment Date, and (v) the Class
B Notes, the [ ] Payment Date.
"Financed Vehicle" means a new or used automobile, light truck, van or
minivan, together with all accessions thereto, securing an Obligor's
indebtedness under a Receivable.
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"Funding Period" means the period beginning on and including the
Closing Date and ending on the first to occur of (a) the first date on which the
amount on deposit in the Pre-Funding Account (after giving effect to any
transfers therefrom in connection with the transfer of Subsequent Receivables to
the Issuer on such date) is less than $100,000, (b) the date on which an Event
of Default or a Servicer Termination Event occurs, (c) the date on which an
Insolvency Event occurs with respect to the Seller and (d) [ ].
"Indenture" means the Indenture dated as of [ ], among the Issuer and
[Norwest Bank Minnesota, National Association], as Trustee, as the same may be
amended and supplemented from time to time.
"Initial Cutoff Date" means [ ].
"Initial Receivables" means any Receivable conveyed to the Trust on the
Closing Date.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a petition against such Person or the entry of a decree or order for
relief by a court having jurisdiction in the premises in respect of such Person
or any substantial part of its property in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation or such Person's
affairs, and such petition, decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or (b) the commencement by such Person of a
voluntary case under any applicable federal or state bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by such Person to
the entry of an order for relief in an involuntary case under any such law, or
the consent by such Person to the appointment of or taking possession by, a
receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.
"Insurance Policy" means, with respect to a Receivable, any insurance
policy (including the insurance policies described in Section 4.4 hereof)
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the Obligor.
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"Interest Period" means, with respect to any Payment Date, the period
from and including the Closing Date (in the case of the first Payment Date) or
from and including the most recent Payment Date on which interest has been paid
to but excluding such Payment Date.
"Interest Rate" means, with respect to (i) the Class A-1 Notes, [ ]%
per annum (computed on the basis of the actual number of days elapsed in a
360-day year), (ii) the Class A-2 Notes, the London interbank offered rates for
one-month U.S. dollar deposits ("LIBOR") plus [ ]% (computed on the basis of the
actual number of days elapsed in a 360-day year), (iii) the Class A-3 Notes,
[one month] [two month] [three month] [six month] LIBOR [other] plus [ ]% per
annum (computed on the basis of a 360-day year of twelve 30-day months) and (iv)
the Class B Notes, [ ]% per annum (computed on the basis of a 360-day year of
twelve 30-day months).
"Interest Reserve Account" means the account designated as such,
established and maintained pursuant to Section 5.2.
"Interest Reserve Account Initial Deposit" means $[ ]
deposited on the Closing Date.
"Investment Earnings" means, with respect to any Payment Date and Trust
Account, the investment earnings on amounts on deposit in such Trust Account on
such Payment Date.
"Issuer" means CPS Auto Receivables Trust 19[ ].
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable by operation of law.
"Lien Certificate" means, with respect to a Financed Vehicle, an
original certificate of title, certificate of lien or other notification issued
by the Registrar of Titles of the applicable state ' to a secured party which
indicates that the lien of the secured party on the Financed Vehicle is recorded
on the original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the obligor, the term "Lien
certificate" shall mean only a certificate or notification issued to a secured
party.
"Liquidated Receivable" means any 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 Payment of more than ten dollars for
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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.
"Lockbox Account" means an account maintained on behalf of the Trustee
by the Lockbox Bank pursuant to Section 4.2(c).
"Lockbox Agreement" means the Tri-Party Remittance Processing
Agreement, dated as of _________ [ ], by and among the Lockbox Processor, the
Servicer and the Trustee, as such agreement may be amended or supplemented from
time to time, unless the Trustee shall cease to be a party thereunder, or such
agreement shall be terminated in accordance with its terms, in which event
"Lockbox Agreement" shall mean such other agreement, in form and substance
acceptable to the Controlling Party, among the Servicer, the Trustee and the
Lockbox Processor.
"Lockbox Bank" means as of any date a depository institution named by
the Servicer and acceptable to the Controlling Party at which the Lockbox
Account is established and maintained as of such date.
"Mandatory Redemption Date" means the earlier of (i) the Payment Date
in [ ], and (ii) if the last day of the Funding Period occurs on or prior to the
Determination Date in [ ], then [ ].
["Master Spread Account Agreement" means the Master Spread Account
Agreement dated as of [__________] among the Credit Enhancer, the Seller and the
Collateral Agent, as the same may be modified, supplemented or otherwise amended
in accordance with the terms thereof.]
["Monthly Interest Reserve Amount" means in the case of the [ ] Payment
Dates, an amount equal to the excess of (i) the product of (x) a fraction the
numerator of which is the actual number of days elapsed in the related Interest
Period and the denominator of which is 360, (y) the weighted average of each
Interest Rate and (z) the difference between (i) the sum of the aggregate
principal amount of the Notes immediately prior to the applicable Payment Date
and (ii) the Pool Balance as of the last day of the second preceding Collection
Period, or in the case of the [ ] Payment Date, as of the Closing Date over (ii)
the Pre-Funding Earnings for such Payment Date.]
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Net Liquidation Proceeds" means, with respect to a Liquidated
Receivable, all amounts realized with respect to such
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Receivable (other than amounts withdrawn from the Spread Account and drawings
under the Policies) net of (i) reasonable expenses incurred by the Servicer in
connection with the collection of such Receivable and the repossession and
disposition of the Financed Vehicle and (ii) amounts that are required to be
refunded to the obligor on such Receivable; provided, however, that the
Liquidation Proceeds with respect to any Receivable shall in no event be less
than zero.
"Note" shall have the meaning provided in Section 1.1 of the Indenture.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.1.
"Note Pool Factor" for each Class of Notes as of the close of business
on a Payment Date means a seven-digit decimal figure equal to the outstanding
principal amount of such Class of Notes divided by the original outstanding
principal amount of such Class of Notes.
"Note Prepayment Amount" means, as of the Payment Date on or
immediately following the last day of the Funding Period, after giving effect to
any transfer of Subsequent Receivables on such date, an amount equal to the
Noteholders' pro rata share (based on the respective current outstanding
principal balance of each Class of Notes and the current Certificate Balance) of
the Pre- Funded Amount as of such Payment Date; provided, that if the aggregate
remaining amount in the Pre-Funding Account is $100,000 or less, such amount
will be applied exclusively to reduce the outstanding principal balance of the
Class of Notes then entitled to receive distributions of principal.
"Notes" means the Class A Notes and the Class B Notes.
"Obligor" on a Receivable means the purchaser or co- purchasers of the
Financed Vehicle and any other Person who owes payments under the Receivable.
"Officers' Certificate" means a certificate signed by the chairman of
the board, the president, any vice chairman of the board, any vice president,
the treasurer, the controller or assistant treasurer or any assistant
controller, secretary or assistant secretary of CPS, the Seller or the Servicer,
as appropriate.
"Opinion of Counsel" means a written opinion of counsel who may but
need not be counsel to the Seller or the Servicer, which counsel shall be
reasonably acceptable to the Trustee and the Credit Enhancer and which opinion
shall be acceptable in form and substance to the Trustee and, if such opinion or
a copy thereof
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is required by the provisions of this Agreement to be delivered to the Credit
Enhancer, to the Credit Enhancer.
"Original Pool Balance" means the sum, as of any date, of the Pool
Balance as of the Initial Cutoff Date, plus the aggregate Principal Balance of
the Subsequent Receivables, if any, sold to the Trust, as of their respective
Subsequent Cutoff Dates.
"Other Conveyed Property" means all property conveyed by the Seller to
the Trust pursuant to Section 2.1(ii) through (viii) of this Agreement.
["Overfunded Interest Reserve Amount" means:
With respect to the [ ] Payment Date the excess of (a) the amount on
deposit in the Interest Reserve Account on such Payment Date (after giving
effect to the transfer of the Monthly Interest Reserve Amount to the Collection
Account on such date) over (b) the product of (i) 1/360, (ii) [ %] (iii) 30 and
(iv) the amount on deposit in the Pre-Funding Account (excluding Pre- Funding
Earnings) at the close of business on [ ].
With respect to the [ ] Payment Date, the excess of (a) the amount on
deposit in the Interest Reserve Account on such Payment Date (after giving
effect to the transfer of the Monthly Interest Reserve Amount to the Collection
Account on such date) over (b) the product of (i) 1/360, (ii) [ %] (iii) 30 and
(iv) the amount on deposit in the Pre-Funding Account (excluding Pre-Funding
Earnings) at the close of business on [ ].]
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means [ ], not in its individual capacity but solely as
Owner Trustee under the Trust Agreement, its successors in interest or any
successor Owner Trustee under the Trust Agreement.
"Payment Date" means, with respect to each Collection Period, the 15th
day of the following calendar month, or if such day is not a Business Day, the
immediately following Business Day, commencing on [ ]. The term "Payment Date"
insofar as it relates to the Class A-1 Notes, shall be deemed to include the
Special A-1 Payment Date.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust (including any beneficiary
thereof), unincorporated
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organization or government or any agency or political subdivision thereof.
["Physical Property" has the meaning assigned to such term in the
definition of "Delivery" above.]
"Pool Balance" means, as of any date of determination, the aggregate
Principal Balance of the Receivables (excluding Purchased Receivables and
Liquidated Receivables).
"Post-Office Box" means the separate post-office box in the name of the
Trustee for the benefit of the Securityholders and the Credit Enhancer,
established and maintained pursuant to Section 4.1.
"Pre-Funded Amount" means, with respect to any Payment Date, the amount
on deposit in the Pre-Funding Account, (exclusive of Pre-Funding Earnings) which
initially shall be $[_____________].
"Pre-Funding Account" has the meaning specified in Section 5.1.
"Pre-Funding Earnings" means any Investment Earnings on amounts on
deposit in the Pre-Funding Account.
"Prepayment Amount" means the amount deposited in the Collection
Account from the Pre-Funding Account on the Mandatory Redemption Date pursuant
to Section 5.7(a)(ii) hereof.
"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 Payments actually 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
Payments actually 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.
"Principal Distributable Amount" means, with respect to any Payment
Date, the sum of (i)(x) the principal portion of all Scheduled Payments received
during the preceding Collection Period on Rule of 78's Receivables (excluding
Net Liquidation Proceeds) and (y) all payments of principal received on Simple
Interest Receivables during such preceding Collection Period; (ii) the principal
portion of all prepayments in full received
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during the preceding Collection Period (including prepayments in full resulting
from collections with respect to a Receivable received during the preceding
Collection Period (without duplication of amounts included in clause (i) above
and clause (iv) below); (iii) the portion of the Purchase Amount allocable to
principal of each Receivable that became a Purchased Receivable as of the last
day of the preceding Collection Period and, at the option of the Credit Enhancer
the Principal Balance of each Receivable that was required to be but was not so
purchased or repurchased (without duplication of amounts referred to in clauses
(i) and (ii) above); (iv) the Principal Balance of each Receivable that first
became a Liquidated Receivable during the preceding Collection Period (without
duplication of the amounts included in clauses (i) and (ii) above); and (v) the
aggregate amount of Cram Down Losses with respect to the Receivables that have
occurred during the preceding Collection Period; and (vi) following the
acceleration of the Notes pursuant to Section 5.2 of the Indenture, the amount
of money or property collected pursuant to Section 5.4 of the Indenture since
the preceding Determination Date by the Trustee or Controlling Party for
distribution pursuant to Section 5.7 hereof.
"Program" shall have the meaning specified in Section 4.11.
"Purchase Agreement" means the CPS Purchase Agreement and/or the Samco
Purchase Agreement.
"Purchase Amount" means, with respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Receivable, after giving
effect to the receipt of any moneys collected (from whatever source) on such
Receivable, if any.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
Section 4.7 or repurchased by the Seller or CPS pursuant to Section 3.2 or
Section 11.1(a).
"Rating Agency" means each of [Moody's and Standard & Poor's], and any
successors thereof. If no such organization or successor maintains a rating on
the Securities, "Rating Agency" shall be a nationally recognized statistical
rating organization or other comparable Person designated by the Credit Enhancer
(so long as a Credit Enhancer Default shall not have occurred and be
continuing), notice of which designation shall be given to the Trustee, the
Owner Trustee and the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given [ ] days' (or such shorter period as shall
be acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Credit
Enhancer, the
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Owner Trustee and the Trustee in writing that such action will not result in a
reduction or withdrawal of the then current rating of any Class of Notes or the
Certificates.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Net Liquidation
Proceeds to the extent allocable to principal.
"Receivable" means each retail installment sale contract for a Financed
Vehicle listed on Schedule A (which Schedule A may be in the form of microfiche)
and all rights and obligations thereunder except for Receivables that shall have
become Purchased Receivables, as such Schedule shall be amended to reflect the
transfer of Subsequent Receivables to the Trust.
"Receivable Files" means the documents specified in Section 3.3.
"Record Date" means, with respect to any Payment Date, the tenth day of
the calendar month in which such Payment Date occurs.
"Registrar of Titles" means, with respect to any state, the
governmental agency or body responsible for the registration of, and the
issuance of certificates of title relating to, motor vehicles and liens thereon.
"Rule of 78's Receivable" means any Receivable under which the portion
of a payment allocable to earned interest (which may be referred to in the
related retail installment sale contract as an add-on finance charge) and the
portion allocable to the Amount Financed is determined according to the method
commonly referred to as the "Rule of 78's" method or the "sum of the months'
digits" method or any equivalent method.
["Samco" means Samco Acceptance Corp., a subsidiary of CPS.]
["Samco Purchase Agreement" means the Purchase Agreement, dated as of [
] by and between Samco and the Seller, as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, relating to the purchase of the Samco Receivables by the Seller
from Samco.]
["Samco Receivables" means a Receivable purchased by the Seller from
Samco.]
"Schedule of Receivables" means the schedule of all retail installment
sales contracts and promissory notes originally held as part of the Trust which
is attached as Schedule A.
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"Scheduled Payment" means, with respect to any Collection Period for
any Receivable, the amount set forth in such Receivable as required to be paid
by the Obligor in such Collection Period (without giving effect to deferments of
payments pursuant to Section 4.2 or any rescheduling of payments in any
insolvency or similar proceedings).
"Securities" means the Notes and Certificates.
"Security Majority" means a majority by principal amount of the
Noteholders so long as the Notes are outstanding and a majority by principal
amount of the Certificateholders thereafter.
"Securityholder" means the Noteholders and the Certificateholders.
"Seller" means CPS Receivables Corp., a California corporation, and its
successors in interest to the extent permitted hereunder.
"Series [ ]Spread Account" means the account designated as such,
established and maintained pursuant to the Spread Account Supplement.
"Servicer" means Consumer Portfolio Services, Inc., as the servicer of
the Receivables, and each successor Servicer pursuant to Section 10.3.
"Servicer Termination Event" means an event specified in Section 10.1.
"Servicer's Certificate" means a certificate completed and executed by
a Servicing Officer and delivered pursuant to Section 4.9, substantially in the
form of Exhibit B.
"Servicing Assumption Agreement" means the Servicing Assumption
Agreement, dated as of [ ] among CPS, the Standby Servicer and the Trustee, as
the same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
"Servicing Fee" has the meaning specified in Section 4.8.
"Servicing Fee Rate" shall be [ %] per annum, payable monthly,
provided, however, that if the Standby Servicer becomes the successor Servicer,
the "Servicing Rate" shall be equal to a percentage per annum determined
pursuant to the Servicing Assumption Agreement not to exceed [ %] per annum.
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"Servicing Officer" means any Person whose name appears on a list of
Servicing Officers delivered to the Trustee and the Credit Enhancer, as the same
may be amended from time to time.
"Simple Interest Method" means the method of allocating a fixed level
payment between principal and interest, pursuant to which the portion of such
payment that is allocated to interest is equal to the product of the APR
multiplied by the unpaid balance multiplied by the period of time (expressed as
a fraction of a year, based on the actual number of days in the calendar month
and the actual number of days in the calendar year) elapsed since the preceding
payment of interest was made and the remainder of such payment is allocable to
principal.
"Simple Interest Receivable" means a Receivable under which the portion
of the payment allocable to interest and the portion allocable to principal is
determined in accordance with the Simple interest Method.
["Special A-1 Payment Date" means with respect to the Class A-1 Notes,
[ ] (which shall be no later than [ ] days after the date on which the Notes are
priced).]
"Specified Spread Account Requisite Amount" has the meaning specified
in the Spread Account Supplement.
"Spread Account Supplement" means the Series [ ] Supplement to the
Master Spread Account Agreement dated as of [ ] among the Credit Enhancer, the
Seller and the Collateral Agent, as the same may be modified, supplemented or
otherwise amended in accordance with the terms thereof.
"Standard & Poor's" means Standard & Poor's Ratings Services, or its
successor.
"Standby Fee" means the fee payable to the Standby Servicer so long as
CPS is the Servicer calculated in the same manner, on the same basis and for the
same period as the Servicing Fee is calculated pursuant to Section 3.8 based on
a rate of [ %] per annum rather than the Servicing Rate.
"Standby Servicer" means [Norwest Bank Minnesota, National
Association,] in its capacity as Standby Servicer pursuant to the terms of the
Servicing Assumption Agreement or such Person as shall have been appointed
Standby Servicer pursuant to Section 9.2(c).
"Subsequent Cutoff Date" means (i) the last day of the month preceding
the month in which particular Subsequent Receivables are conveyed to the Trust
pursuant to this Agreement or (ii) if
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any such Subsequent Receivable is originated in the month of the related
Subsequent Transfer Date, the date of origination.
"Subsequent Purchase Agreement" means an agreement by and between the
Seller and CPS or the Seller and Samco pursuant to which the Seller will acquire
Subsequent Receivables.
"Subsequent Receivables" means the Receivables transferred to the
Issuer pursuant to Section 2.2, which shall be listed on Schedule A to the
related Subsequent Transfer Agreement.
"Subsequent Spread Account Deposit" means, with respect to each
Subsequent Transfer Date, an amount equal to [ %] of the aggregate principal
balance of Subsequent Receivables as of the related Subsequent Cutoff Date
transferred to the Trust on such Subsequent Transfer Date from amounts released
from the Pre- Funding Account.
"Subsequent Transfer Agreement" means the agreement among the Issuer,
the Seller and the Servicer, substantially in the form of Exhibit A.
"Subsequent Transfer Date" means, with respect to Subsequent
Receivables, any date, occurring not more frequently than [ ] per month, during
the Funding Period on which Subsequent Receivables are to be transferred to the
Trust pursuant to this Agreement, and a Subsequent Transfer Agreement is
executed and delivered to the Trust.
"Total Distribution Amount" means, for each Payment Date, the sum of
the following amounts with respect to the preceding Collection Period: (i) all
collections on the Receivables, (ii) Net Liquidation Proceeds received during
the Collection Period with respect to Liquidated Receivables; (iii) all Purchase
Amounts deposited in the Collection Account during the related Collection
Period; (iv) Investment Earnings for the related Payment Date; (v) following the
acceleration of the Notes pursuant to Section 5.2 of the Indenture, the amount
of money or property collected pursuant to Section 5.7 of the Indenture since
the preceding Payment Date by the Trustee or Controlling Party for distribution
pursuant to Section 5.6 and Section 5.8 hereof, (vi) if such Payment Date is the
Mandatory Redemption Date, any Pre-Funded Amount to be deposited into the
Collection Account on such Payment Date pursuant to Section 5.7(a) hereof, and
(vii) the proceeds of any purchase or sale of the assets of the Trust described
in Section 11.1 hereof.
"Trigger Event" has the meaning assigned thereto in the Spread Account
Supplement.
"Trust" means the Issuer.
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"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.1.
"Trust Agreement" means the Trust Agreement dated as of [ ], between
the Seller and the Owner Trustee, as the same may be amended and supplemented
from time to time.
"Trustee" means the Person acting as Trustee under the Indenture, its
successors in interest and any successor trustee under the Indenture.
"Trust Officer" means, (i) in the case of the Trustee, any vice
president, any assistant vice president, any assistant secretary, any assistant
treasurer, any trust officer, or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject, and (ii) in the case of the Owner
Trustee, any officer in the corporate trust office of the Owner Trustee or any
agent of the Owner Trustee under a power of attorney with direct responsibility
for the administration of this Agreement or any of the Basic Documents on behalf
of the Owner Trustee.
"Trust Property" means the property and proceeds conveyed pursuant to
Section 2.1, together with certain monies paid on or after the Initial Cutoff
Date, the Policies, the Collection Account (including all Eligible Investments
therein and all proceeds therefrom), the Lockbox Account and certain other
rights under this Agreement. Although the Seller [and its Affiliate] has pledged
the Spread Account to the Trustee and the Credit Enhancer pursuant to the Master
Spread Account Agreement, the Spread Account shall not under any circumstances
be deemed to be a part of or otherwise includable in the Trust or the Trust
Property.
"Trust Receipt" has the meaning assigned thereto by Section 3.5.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction on the date of the Agreement.
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SECTION 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have
the meanings assigned to them in the Indenture or, if not defined therein, in
the Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein.
(c) Accounting terms used but not defined or partly defined in this
Agreement, in any instrument governed hereby or in any certificate or other
document made or delivered pursuant hereto, to the extent not defined, shall
have the respective meanings given to them under generally accepted accounting
principles as in effect on the date of this Agreement or any such instrument,
certificate or other document, as applicable. To the extent that the definitions
of accounting terms in this Agreement or in any such instrument, certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such instrument, certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.
(e) Section, Schedule and Exhibit references contained in this
Agreement are references to Sections, Schedules and Exhibits in or to this
Agreement unless otherwise specified; and the term "including" shall mean
"including without limitation."
(f) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(g) Any agreement, instrument or statute defined or referred to herein
or in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as the same may from time to time be amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments and instruments associated therewith; all
references to a Person include its permitted successors and assigns.
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ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. Conveyance of Initial Receivables. In consideration of the
Issuer's delivery to or upon the order of the Seller on the Closing Date of the
net proceeds from the sale of the Notes and the Certificates and the other
amounts to be distributed from time to time to the Seller in accordance with the
terms of this Agreement, the Seller does hereby sell, transfer, assign, set over
and otherwise convey to the Issuer, without recourse (subject to the obligations
set forth herein):
(a) all right, title and interest of the Seller in and to the
Initial Receivables listed in Schedule A hereto and, with respect to
Initial Receivables that are Rule of 78's Receivables, all monies due
or to become due thereon after the Initial Cutoff Date (including
Scheduled Payments due after the Initial Cutoff Date (including
principal prepayments relating to such Scheduled Payments) but received
by the Seller or CPS on or before the Initial Cutoff Date) and, with
respect to Initial Receivables that are Simple Interest Receivables,
all monies received thereunder after the Initial Cutoff Date and all
Net Liquidation Proceeds received with respect to such Initial
Receivables on or after the Initial Cutoff Date;
(b) all right, title and interest of the Seller in and to the
security interests in the Financed Vehicles granted by Obligors
pursuant to the Receivables and any other interest of the Seller in
such Financed Vehicles, including, without limitation, the certificates
of title or, with respect to such Financed Vehicles in the State of
Michigan, all other evidence of ownership with respect to such Financed
Vehicles;
(c) all right, title and interest of the Seller in and to any
proceeds from claims on any physical damage, credit life and credit
accident and health insurance policies or certificates relating to the
Financed Vehicles or the Obligors;
(d) all right, title and interest of the Seller in and to the
Purchase Agreements, including a direct right to cause CPS to purchase
Initial Receivables from the Trust under certain circumstances;
(e) all right, title and interest of the Seller in and to
refunds for the costs of extended service contracts with respect to
Financed Vehicles Securing Initial Receivables, refunds of unearned
premiums with respect to credit life and
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credit accident and health insurance policies or certificates covering
an Obligor or Financed Vehicle or his or her obligations with respect
to a Financed Vehicle and any recourse to Dealers for any of the
foregoing;
(f) the Receivable File related to each Initial Receivable;
(g) all amounts and property from time to time held in or
credited to the Collection Account or the Lockbox Account; and
(h) the proceeds of any and all of the foregoing.
It is the intention of the Seller that the transfer and assignment
contemplated by this Agreement shall constitute a sale of the Receivables and
other Trust Property from the Seller to the Issuer and the beneficial interest
in and title to the Receivables and the other Trust Property shall not be part
of the Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law. In the event that, notwithstanding
the intent of the Seller, the transfer and assignment contemplated hereby is
held not to be a sale, this Agreement shall constitute a grant of a security
interest in the property referred to in this Section 2.1 for the benefit of the
Securityholders and the Credit Enhancer.
SECTION 2.2. Conveyance of Subsequent Receivables.
(a) Subject to the conditions set forth in paragraph (b) below, in
consideration of the Issuer's delivery on each related Subsequent Transfer Date
to or upon the order of the Seller of the amount described in Section 5.10(a) to
be delivered to the Seller, the Seller does hereby sell, transfer, assign, set
over and otherwise convey to the Issuer without recourse (subject to the
obligations set forth herein), all right, title and interest of the Seller in
and to:
(i) all right, title and interest of the Seller in and to the
Subsequent Receivables listed in Schedule A to the related Subsequent
Transfer Agreement and, with respect to Subsequent Receivables that are
Rule of 78's Receivables, all monies due or to become due thereon after
the related Subsequent Cutoff Date (including Scheduled Payments due
after the related Subsequent Cutoff Date (including principal
prepayments relating to such Scheduled Payments) but received by the
Seller or CPS on or before the related Subsequent Cutoff Date) and,
with respect to Subsequent Receivables that are Simple Interest
Receivables, all monies received thereunder after the related
Subsequent Cutoff Date and all Liquidation Proceeds and Recoveries
received with
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respect to such Subsequent Receivables on or after the related
Subsequent Cutoff Date;
(ii) all right, title and interest of the Seller in and to the
security interests in the Financed Vehicles granted by Obligors
pursuant to the Subsequent Receivables and any other interest of the
Seller in such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to such Financed Vehicles in the
State of Michigan, all other evidence of ownership with respect to such
Financed Vehicles;
(iii) all right, title and interest of the Seller in and to
any proceeds from claims on any physical damage, credit life and credit
accident and health insurance policies or certificates relating to the
Financed Vehicles or the Obligors;
(iv) all right, title and interest of the Seller in and to the
Subsequent Purchase Agreements, including a direct right to cause CPS
to purchase Receivables from the Trust under certain circumstances;
(v) all right, title and interest of the Seller in and to
refunds for the costs of extended service contracts with respect to
Financed Vehicles securing Subsequent Receivables, refunds of unearned
premiums with respect to credit life and credit accident and health
insurance policies or certificates covering an Obligor or Financed
Vehicle or his or her obligations with respect to a Financed Vehicle
and any recourse to Dealers for any of the foregoing;
(vi) the Receivable File related to each Subsequent
Receivable;
(vii) all amounts and property from time to time held in or
credited to the Collection Account, the Lockbox Account or the
Certificate Account; and
(viii) the proceeds of any and all of the foregoing.
(b) The Seller shall transfer to the Issuer the Subsequent Receivables
and the other property and rights related thereto described in paragraph (a)
above only upon the satisfaction of each of the following conditions on or prior
to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee, the Owner
Trustee, the Credit Enhancer and the Rating Agencies with an Addition
Notice not later than five days prior to
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such Subsequent Transfer Date and shall have provided any information
reasonably requested by any of the foregoing with respect to the
Subsequent Receivables;
(ii) the Seller shall have delivered to the Owner Trustee and
the Trustee a duly executed Subsequent Transfer Agreement which shall
include supplements to Schedule A, listing the Subsequent Receivables;
(iii) the Seller shall, to the extent required by Section 4.2
of this Agreement, have deposited in the Collection Account all
collections in respect of the Subsequent Receivables;
(iv) as of each Subsequent Transfer Date, (A) the Seller shall
not be insolvent and shall not become insolvent as a result of the
transfer of Subsequent Receivables on such Subsequent Transfer Date,
(B) the Seller shall not intend to incur or believe that it shall incur
debts that would be beyond its ability to pay as such debts mature, (C)
such transfer shall not have been made with actual intent to hinder,
delay or defraud any Person and (D) the assets of the Seller shall not
constitute unreasonably small capital to carry out its business as
conducted;
(v) the Funding Period shall not have terminated;
(vi) after giving effect to any transfer of Subsequent
Receivables on a Subsequent Transfer Date, the Receivables transferred
to the Trust pursuant hereto shall meet the following criteria (based
on the characteristics of the Initial Receivables on the Initial Cutoff
Date and the Subsequent Receivables on the related Subsequent Cutoff
Dates): [ ];
(vii) each of the representations and warranties made by the
Seller pursuant to Section 3.1 with respect to the Subsequent
Receivables to be transferred on such Subsequent Transfer Date shall be
true and correct as of the related Subsequent Transfer Date, and the
Seller shall have performed all obligations to be performed by it
hereunder on or prior to such Subsequent Transfer Date;
(viii) the Seller shall, at its own expense, on or prior to
the Subsequent Transfer Date indicate in its computer files that the
Subsequent Receivables identified in the Subsequent Transfer Agreement
have been sold to the Trust pursuant to this Agreement;
(ix) the Seller shall have taken any action required to
maintain the first priority perfected ownership interest
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of the Trust in the Owner Trust Estate and the first priority perfected
security interest of the Trustee in the Collateral;
(x) no selection procedures adverse to the interests of the
Securityholders or the Credit Enhancer shall have been utilized in
selecting the Subsequent Receivables;
(xi) the addition of any such Subsequent Receivables shall not
result in a material adverse tax consequence to the Trust or the
Securityholders;
(xii) the Seller shall have delivered (A) to the Rating
Agencies and the Credit Enhancer an opinion of Counsel with respect to
the transfer of such Subsequent Receivables substantially in the form
of the Opinion of Counsel delivered to the Rating Agencies and the
Credit Enhancer on the Closing Date and (B) to the Trustee the opinion
of Counsel required by Section 13.2(i)(1);
(xiii) each Rating Agency shall have confirmed that the rating
on the Notes shall not be withdrawn or reduced as a result of the
transfer of such Subsequent Receivables to the Trust;
(xiv) the Credit Enhancer (so long as no Credit Enhancer
Default shall have occurred and be continuing), in its absolute and
sole discretion, shall have approved the transfer of such Subsequent
Receivables to the Trust and the Credit Enhancer shall have been
reimbursed for any fees and expenses incurred by the Credit Enhancer in
connection with the granting of such approval;
(xv) the Seller shall simultaneously transfer the Subsequent
Spread Account Deposit to the Collateral Agent with respect to the
Subsequent Receivables transferred on such Subsequent Transfer Date;
and
(xvi) the Seller shall have delivered to the Credit Enhancer
and the Trustee an Officers' Certificate confirming the satisfaction of
each condition precedent specified in this paragraph (b).
The Seller covenants that in the event any of the foregoing conditions
precedent are not satisfied with respect to any Subsequent Receivable on the
date required as specified above, the Seller will immediately repurchase such
Subsequent Receivable from the Trust, at a price equal to the Purchase Amount
thereof, in the manner specified in Section 4.7.
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SECTION 2.3. Further Encumbrance of Trust Property.
(a) Immediately upon the conveyance to the Trust by the Seller of any
item of the Trust Property pursuant to Section 2.1 or 2.2, all right, title and
interest of the Seller in and to such item of Trust Property shall terminate,
and all such right, title and interest shall vest in the Trust, in accordance
with the Trust Agreement and Sections 3802 and 3805 of the Business Trust
Statute (as defined in the Trust Agreement).
(b) Immediately upon the vesting of the Trust Property in the Trust,
the Trust shall have the sole right to pledge or otherwise encumber, such Trust
Property. Pursuant to the Indenture, the Trust shall grant a security interest
in the Trust Property to secure the repayment of the Notes. The Certificates
shall represent beneficial ownership interests in the Trust Property, and the
Certificateholders shall be entitled to receive distributions with respect
thereto as set forth herein.
(c) Following the payment in full of the Notes and the release and
discharge of the Indenture, all covenants of the Issuer under Article III of the
Indenture shall, until payment in full of the Certificates, remain as covenants
of the Issuer for the benefit of the Certificateholders, enforceable by the
Certificateholders to the same extent as such covenants were enforceable by the
Noteholders prior to the discharge of the Indenture. Any rights of the Trustee
under Article III of the Indenture, following the discharge of the Indenture,
shall vest in the Certificateholders.
(d) The Trustee shall, at such time as there are no Securities
outstanding and all sums due to the Trustee pursuant to the Indenture and this
Agreement, have been paid, release any remaining portion of the Trust Property
to the Certificateholders.
ARTICLE III
THE RECEIVABLES
SECTION 3.1. Representations and Warranties of Seller. The Seller makes
the following representations and warranties as to the Receivables to the Credit
Enhancer, the Issuer and to the Trustee on which the Issuer relies in acquiring
the Receivables and on which the Credit Enhancer relies in issuing the Policies.
Such representations and warranties speak as of the execution and delivery of
this Agreement and as of the Closing Date, in the case of the Initial
Receivables, and as of the related Subsequent Transfer Date, in case of the
Subsequent Receivables, but shall survive the sale, transfer and assignment of
the Receivables to
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the Issuer and the pledge thereof to the Trustee pursuant to the Indenture.
(i) Characteristics of Receivables. (A) Each Receivable (1)
has been originated in the United States of America by a Dealer for the
retail sale of a Financed Vehicle in the ordinary course of such
Dealer's business, has been fully and properly executed by the parties
thereto and has been purchased by CPS (or, with respect to the Samco
Receivables, Samco) in connection with the sale of Financed Vehicles by
the Dealers, (2) has created a valid, subsisting, and enforceable first
priority perfected security interest in favor of CPS (or, with respect
to the Samco Receivables, Samco) in the Financed Vehicle, which
security interest has been assigned by CPS (or, with respect to the
Samco Receivables, Samco) to the Seller, which in turn has assigned
such security interest to the Trustee, (3) contains customary and
enforceable provisions such that the rights and remedies of the holder
or assignee thereof shall be adequate for realization against the
collateral of the benefits of the security, (4) provides for level
monthly payments that fully amortize the Amount Financed over the
original term (except for the last payment, which may be different from
the level payment) and yield interest at the Annual Percentage Rate,
(5) has an Annual Percentage Rate of not less than [ ]%, (6) that is a
Rule of 78's Receivable provides for, in the event that such contract
is prepaid, a prepayment that fully pays the Principal Balance and
includes a full month's interest, in the month of prepayment, at the
Annual Percentage Rate, (7) is a Rule of 78's Receivable or a Simple
Interest Receivable, and (8) was originated by a Dealer and was sold by
the Dealer without any fraud or misrepresentation on the part of such
Dealer.
(B) Approximately [ ]% of the aggregate Principal Balance of
the Receivables, constituting [ ]% of the number of contracts, as of
the Cutoff Date, represents financing of used automobiles, light
trucks, vans or minivans; the remainder of the Receivables represent
financing of new automobiles, light trucks, vans or minivans;
approximately [ ]% of the aggregate Principal Balance of the
Receivables as of the Cutoff Date were originated in the State of
California; approximately [ ]% of the aggregate Principal Balance of
the Receivables as of the Cutoff Date were originated under the CPS
alpha program; approximately [ ]% of the aggregate Principal Balance of
the Receivables as of the Cutoff Date were originated under the CPS
delta program; approximately [ ]% of the aggregate Principal Balance of
the Receivables as of the Cutoff Date were originated under the CPS
first time buyer program; approximately [ ]% of the
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aggregate Principal Balance of the Receivables were originated under
the CPS standard program; the remaining [ ]% of the aggregate Principal
Balance of the Receivables as of the Cutoff Date were acquired by CPS
from unaffiliated parties; approximately [ ]% of the aggregate
Principal Balance of the Receivables are Samco Receivables; no
Receivable shall have a payment that is more than [ ] days overdue as
of the Cutoff Date; [ ]% of the aggregate Principal Balance of the
Receivables are Rule of 78's Receivables and [ ]% of the aggregate
Principal Balance of the Receivables are Simple Interest Receivables;
each Receivable shall have a final scheduled payment due no later than
[ ]; each Receivable has an original term to maturity of at least [ ]
months and not more than [ ] months and a remaining term to maturity of
not less than [ ] months nor greater than [ ] months; and each
Receivable was originated on or before the Cutoff Date.
(ii) Schedule of Receivables. The information with respect to
the Receivables set forth in Schedule A to this Agreement is true and
correct in all material respects as of the close of business on the
Cutoff Date, and no selection procedures adverse to the Securityholders
have been utilized in selecting the Receivables.
(iii) Compliance with Law. Each Receivable, the sale of the
Financed Vehicle and the sale of any physical damage, credit life and
credit accident and health insurance and any extended service contracts
complied at the time the related Receivable was originated or made and
at the execution of this Agreement complies in all material respects
with all requirements of applicable Federal, State, and local laws, and
regulations thereunder including, without limitation, usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the
Federal Reserve Board's Regulations B and Z, the Soldiers' and Sailors'
Civil Relief Act of 1940, the Texas Consumer Credit Code, the
California Automobile Sales Finance Act and State adaptations of the
National Consumer Act and of the Uniform Consumer Credit Code, and
other consumer credit laws and equal credit opportunity and disclosure
laws.
(iv) No Government Obligor. None of the Receivables are due
from the United States of America or any State or from any agency,
department, or instrumentality of the United States of America or any
State.
(v) Security Interest in Financed Vehicle. Immediately
subsequent to the sale, assignment and transfer thereof to
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the Trust, each Receivable shall be secured by a validly perfected
first priority security interest in the Financed Vehicle in favor of
the Trust as secured party, and such security interest is prior to all
other liens upon and security interests in such Financed Vehicle which
now exist or may hereafter arise or be created (except, as to priority,
for any tax liens or mechanics' liens which may arise after the Closing
Date).
(vi) Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released
from the lien granted by the related Receivable in whole or in part.
(vii) No Waiver. No provision of a Receivable has been waived.
(viii) No Amendments. No Receivable has been amended, except
as such Receivable may have been amended to grant extensions which
shall not have numbered more than (a) one extension of one calendar
month in any calendar year or (b) three such extensions in the
aggregate.
(ix) No Defenses. No right of rescission, setoff, counterclaim
or defense exists or has been asserted or threatened with respect to
any Receivable. The operation of the terms of any Receivable or the
exercise of any right thereunder will not render such Receivable
unenforceable in whole or in part or subject to any such right of
rescission, setoff, counterclaim, or defense.
(x) No Liens. As of the Cutoff Date there are no liens or
claims existing or which have been filed for work, labor, storage or
materials relating to a Financed Vehicle that shall be liens prior to,
or equal or coordinate with, the security interest in the Financed
Vehicle granted by the Receivable.
(xi) No Default; Repossession. Except for payment
delinquencies continuing for a period of not more than thirty days as
of the Cutoff Date, no default, breach, violation or event permitting
acceleration under the terms of any Receivable has occurred; and no
continuing condition that with notice or the lapse of time would
constitute a default, breach, violation or event permitting
acceleration under the terms of any Receivable has arisen; and the
Seller shall not waive and has not waived any of the foregoing; and no
Financed Vehicle shall have been repossessed as of the Cutoff Date.
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(xii) Insurance; Other. (A) Each Obligor has obtained
insurance covering the Financed Vehicle as of the execution of the
Receivable insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision coverage, and each Receivable requires the
Obligor to obtain and maintain such insurance naming CPS (or, with
respect to the Samco Receivables, Samco) and its successors and assigns
as an additional insured, (B) each Receivable that finances the cost of
premiums for credit life and credit accident and health insurance is
covered by an insurance policy or certificate of insurance naming CPS
(or with respect to the Samco Receivables, Samco) as policyholder
(creditor) under each such insurance policy and certificate of
insurance and (C) as to each Receivable that finances the cost of an
extended service contract, the respective Financed Vehicle which
secures the Receivable is covered by an extended service contract.
(xiii) Title. It is the intention of the Seller that the
transfer and assignment herein contemplated constitute a sale of the
Receivables from the Seller to the Trust and that the beneficial
interest in and title to such Receivables not be part of the Seller's
estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law. No Receivable has been
sold, transferred, assigned, or pledged by the Seller to any Person
other than the Trust. Immediately prior to the transfer and assignment
herein contemplated, the Seller had good and marketable title to each
Receivable and was the sole owner thereof, free and clear of all liens,
claims, encumbrances, security interests, and rights of others, and,
immediately upon the transfer thereof, the Trust for the benefit of the
Securityholders and the Credit Enhancer shall have good and marketable
title to each such Receivable and will be the sole owner thereof, free
and clear of all liens, encumbrances, security interests, and rights of
others, and the transfer has been perfected under the UCC.
(xiv) Lawful Assignment. No Receivable has been originated in,
or is subject to the laws of, any jurisdiction under which the sale,
transfer, and assignment of such Receivable under this Agreement or
pursuant to transfers of the Securities shall be unlawful, void, or
voidable. The Seller has not entered into any agreement with any
account debtor that prohibits, restricts or conditions the assignment
of any portion of the Receivables.
(xv) All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the
Trust a first priority perfected
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ownership interest in the Receivables and the proceeds thereof and the
other Conveyed Property have been made, taken or performed.
(xvi) Receivable File; One Original. CPS has delivered to the
Trustee a complete Receivable File with respect to each Receivable.
There is only one original executed copy of each Receivable.
(xvii) Chattel Paper. Each Receivable constitutes "chattel
paper" under the UCC.
(xviii) Title Documents. (A) If the Receivable was originated
in a State in which notation of a security interest on the title
document of the related Financed Vehicle is required or permitted to
perfect such security interest, the title document of the related
Financed Vehicle for such Receivable shows, or if a new or replacement
title document is being applied for with respect to such Financed
Vehicle the title document (or, with respect to Receivables originated
in the State of Michigan, all other evidence of ownership with respect
to such Financed Vehicle) will be received within 180 days and will
show, CPS (or, with respect to the Samco Receivables, Samco) named as
the original secured party under the related Receivable as the holder
of a first priority security interest in such Financed Vehicle, and (B)
if the Receivable was originated in a State in which the filing of a
financing statement under the UCC is required to perfect a security
interest in motor vehicles, such filings or recordings have been duly
made and show CPS (or, with respect to the Samco Receivables, Samco)
named as the original secured party under the related Receivable, and
in either case, the Trust has the same rights as such secured party has
or would have (if such secured party were still the owner of the
Receivable) against all parties claiming an interest in such Financed
Vehicle. With respect to each Receivable for which the title document
of the related Financed Vehicle has not yet been returned from the
Registrar of Titles, CPS has received written evidence from the related
Dealer that such title document showing CPS (or, with respect to the
Samco Receivables, Samco) as first lienholder has been applied for.
(xix) Valid and Binding Obligation of Obligor. Each Receivable
is the legal, valid and binding obligation of the Obligor thereunder
and is enforceable in accordance with its terms, except only as such
enforcement may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally, and all
parties to such contract had full legal capacity to execute and
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deliver such contract and all other documents related thereto and to
grant the security interest purported to be granted thereby.
(xx) Tax Liens. As of the Cutoff Date, there is no lien
against the related Financed Vehicle for delinquent taxes.
(xxi) Characteristics of Obligors. As of the date of each
Obligor's application for the loan from which the related Receivable
arises, such Obligor (a) did not have any material past due credit
obligations or any personal or real property repossessed or wages
garnished within one year prior to the date of such application, unless
such amounts have been repaid or discharged through bankruptcy, (b) was
not the subject of any Federal, State or other bankruptcy, insolvency
or similar proceeding pending on the date of application that is not
discharged, (c) had not been the subject of more than one Federal,
State or other bankruptcy, insolvency or similar proceeding, and (d)
was domiciled in the United States.
(xxii) Origination Date. Each Receivable has an origination
date on or after [ ].
(xxiii) Maturity of Receivables. Each Receivable has an
original term to maturity of not less than [ ] months and not more than
[ ] months; the weighted average original term to maturity of the
Receivables is [ ] months as of the Cutoff Date; the remaining term to
maturity of each Receivable was [ ] months or less as of the Cutoff
Date; the weighted average remaining term to maturity of the
Receivables was [ ] months as of the Cutoff Date.
(xxiv) Scheduled Payments. Each Receivable had an original
principal balance of not less than $[ ] nor more than $[ ] had an
outstanding principal balance as of the Cutoff Date of not less than $[
] nor more than $[ ] and has a first Scheduled Payment due on or prior
to [ ].
(xxv) Origination of Receivables. Based on the billing address
of the Obligors and the Principal Balances as of the Cutoff Date,
approximately [ ]% of the aggregate Principal Balance of the
Receivables represents Receivables that were originated in California,
approximately [ ]% of the aggregate Principal Balance of the
Receivables represents Receivables that were originated in
Pennsylvania, approximately [ ]% of the aggregate Principal Balance of
the Receivables represents Receivables that were originated in Texas,
approximately [ ]% of the
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aggregate Principal Balance of the Receivables represents Receivables
that were originated in New York and the remaining [ ]% of the
aggregate Principal Balance of the Receivables represents Receivables
that were originated in other States.
(xxvi) Post-Office Box. On or prior to the next billing period
after the Cutoff Date, CPS will notify each Obligor to make payments
with respect to its respective Receivables after the Cutoff Date
directly to the Post- Office Box, and will provide each Obligor with a
monthly statement in order to enable such Obligors to make payments
directly to the Post-Office Box.
(xxvii) Location of Receivable Files. A complete Receivable
File with respect to each Receivable has been or prior to the Closing
Date will be delivered to the Trustee at the location listed in
Schedule B.
(xxviii) Casualty. No Financed Vehicle has suffered a
Casualty.
(xxix) Principal Balance/Number of Contracts. As of the Cutoff
Date, the total aggregate principal balance of the Receivables was $[
]. The Receivables are evidenced by [ ] Contracts.
(xxx) Full Amount Advanced. The full amount of each Receivable
has been advanced to each Obligor, and there are no requirements for
future advances thereunder. The Obligor with respect to the Receivable
does not have any option under the Receivable to borrow from any person
additional funds secured by the Financed Vehicle.
SECTION 3.2. Repurchase upon Breach.
(a) The Seller, the Servicer, the Credit Enhancer, the Trustee or the
Owner Trustee, as the case may be, shall inform the other parties to this
Agreement promptly, in writing, upon the discovery of any breach of the Seller's
representations and warranties made pursuant to Section 3.1 (without regard to
any limitations therein as to the Seller's knowledge). Unless the breach shall
have been cured by the last day of the second Collection Period following the
discovery thereof by the Trustee or the Credit Enhancer or receipt by the
Trustee, the Owner Trustee and the Credit Enhancer of notice from the Seller or
the Servicer of such breach, CPS shall repurchase any Receivable if such
Receivable is materially and adversely affected by the breach as of the last day
of such second Collection Period (or, at CPS's option, the last day of the first
Collection Period following the discovery) and, in the event that the breach
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relates to a characteristic of the Receivables in the aggregate, and if the
interests of the Trust, the Noteholders or the Certificateholders are materially
and adversely affected by such breach, unless the breach shall have been cured
by the last day of such second Collection Period, CPS shall purchase such
aggregate Principal Balance of Receivables, such that following such purchase
such representation shall be true and correct with respect to the remainder of
the Receivables in the aggregate. In consideration of the purchase of the
Receivable, CPS shall remit the Purchase Amount, in the manner specified in
Section 5.6. For purposes of this Section, the Purchase Amount of a Receivable
which is not consistent with the warranty pursuant to Section 3.1(i)(A)(4) or
(A)(5) shall include such additional amount as shall be necessary to provide the
full amount of interest as contemplated therein. The sole remedy of the Issuer,
the Owner Trustee, the Trustee, the Trustee, the Noteholders, the
Certificateholders or the Credit Enhancer with respect to a breach of
representations and warranties pursuant to Section 3.1 shall be to enforce CPS's
obligation to purchase such Receivables pursuant to the CPS Purchase Agreement;
provided, however, that CPS shall indemnify the Trustee, the Standby Servicer,
the Collateral Agent, the Trustee, the Credit Enhancer, the Trust and the
Securityholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them as a result of third party claims
arising out of the events or facts giving rise to such breach. Upon receipt of
the Purchase Amount and written instructions from the Servicer, the Trustee
shall release to CPS or its designee the related Receivables File and shall
execute and deliver all reasonable instruments of transfer or assignment,
without recourse, as are prepared by the Seller and delivered to the Trustee and
necessary to vest in CPS or such designee title to the Receivable. If it is
determined that consummation of the transactions contemplated by this Agreement
and the other transaction documents referenced in this Agreement, the servicing
and operation of the Trust pursuant to this Agreement and such other documents,
or the ownership of a [Note or Certificate] by a Holder constitutes a violation
of the prohibited transaction rules of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or the Internal Revenue Code of 1986, as
amended (the "Code") or any successor statutes of similar impact, together with
the regulations thereunder, to which no statutory exception or administrative
exemption applies, such violation shall not be treated as a breach of the
Seller's representations and warranties made pursuant to Section 2.6 if not
otherwise such a breach.
(b) Pursuant to Section 2.1 of this Agreement, the Seller conveyed to
the Trust all of the Seller's right, title and interest in its rights and
benefits, but none of its obligations or burdens, under the Purchase Agreements
including the Seller's
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rights under the Purchase Agreements and the delivery requirements,
representations and warranties and the cure or repurchase obligations of CPS
thereunder. The Seller hereby represents and warrants to the Trust that such
assignment is valid, enforceable and effective to permit the Trust to enforce
such obligations of CPS under the Purchase Agreements.
SECTION 3.3. Custody of Receivables Files.
(a) In connection with the sale, transfer and assignment of the
Receivables and the other Conveyed Property to the Trust pursuant to this
Agreement the Trustee shall act as custodian of the following documents or
instruments in its possession which shall be delivered to the Trustee on or
before the Closing Date (with respect to each Receivable):
(i) The fully executed original of the Receivable (together
with any agreements modifying the Receivable, including without
limitation any extension agreements);
(ii) The original certificate of title in the name of CPS (or,
with respect to the Samco Receivables, Samco) or such documents that
CPS shall keep on file, in accordance with its customary procedures,
evidencing the security interest of CPS (or, with respect to the Samco
Receivables, Samco) in the Financed Vehicle or, if not yet received, a
copy of the application therefor showing CPS (or, with respect to the
Samco Receivables, Samco) as secured party.
(b) Upon payment in full of any Receivable, the Servicer will notify
the Trustee pursuant to a certificate of an officer of the Servicer (which
certificate shall include a statement to the effect that all amounts received in
connection with such payments which are required to be deposited in the
Collection Account pursuant to Section 4.1 have been so deposited) and shall
request delivery of the Receivable and Receivable File to the Servicer.
SECTION 3.4. Acceptance of Receivable Files by Trustee. The Trustee
acknowledges receipt of files which the Seller has represented are the
Receivable Files. The Trustee has reviewed the Receivable Files and has
determined that it has received a file for each Receivable identified in
Schedule A to this Agreement. The Trustee declares that it holds and will
continue to hold such files and any amendments, replacements or supplements
thereto and all other Trust Assets as Trustee in trust for the use and benefit
of all present and future Securityholders. The Trustee agrees to review each
file delivered to it no later than 45 days after the Closing Date or applicable
Subsequent Transfer Date to determine whether such Receivable Files contain the
documents referred to in
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Section 3.3(i) and (ii). If the Trustee has found or finds that a file for a
Receivable has not been received, or that a file is unrelated to the Receivables
identified in Schedule A to this Agreement or that any of the documents referred
to in Section 3.3(i) or (ii) are not contained in a Receivable File, the Trustee
shall inform CPS, the Seller, [the Owner Trustee], the [Trustee], the Standby
Servicer and the Credit Enhancer promptly, in writing, of the failure to receive
a file with respect to such Receivable (or of the failure of any of the
aforementioned documents to be included in the Receivable File) or shall return
to CPS as the Seller's designee any file unrelated to a Receivable identified in
Schedule A to this Agreement (it being understood that the Trustee's obligation
to review the contents of any Receivable File shall be limited as set forth in
the preceding sentence). Unless such defect with respect to such Receivable File
shall have been cured by the last day of the second Collection Period following
discovery thereof by the Trustee, CPS shall repurchase any such Receivable as of
such last day. In consideration of the purchase of the Receivable, CPS shall
remit the Purchase Amount, in the manner specified in Section 5.6. The sole
remedy of the Trustee, the Trust, or the Securityholders with respect to a
breach pursuant to this Section 3.4 shall be to require CPS to purchase the
applicable Receivables pursuant to this Section 3.4. Upon receipt of the
Purchase Amount and written instructions from the Servicer, the Trustee shall
release to CPS or its designee the related Receivable File and shall execute and
deliver all reasonable instruments of transfer or assignment, without recourse,
as are prepared by CPS and delivered to the Trustee and are necessary to vest in
CPS or such designee title to the Receivable. The Trustee shall make a list of
Receivables for which an application for a certificate of title but not an
original certificate of title or, with respect to Receivables originated in the
State of Michigan, a "Form RD108" stamped by the Department of Motor Vehicles,
is included in the Receivable File as of the date of its review of the
Receivable Files and deliver a copy of such list to the Servicer, the Owner
Trustee and the Credit Enhancer. On the date which is 180 days following the
Closing Date (or applicable Subsequent Transfer Date) or the next succeeding
Business Day, the Trustee shall inform CPS and the other parties to this
Agreement and the Credit Enhancer of any Receivable for which the related
Receivable File on such date does not include an original certificate of title
or, with respect to Financed Vehicles in the State of Michigan, for which the
related Receivable File on such date does not include a "Form RD108" stamped by
the Department of Motor Vehicles, and CPS shall repurchase any such Receivable
as of the last day of the current Collection Period.
SECTION 3.5. Access to Receivable Files. The Trustee shall permit the
Servicer, any Securityholder and the Credit Enhancer
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access to the Receivable Files at all reasonable times during the Trustee's
normal business hours; provided, however, that the Trustee shall provide such
access to any Securityholder only (i) in such cases where the Trustee is
required by applicable statutes or regulations (whether applicable to the
Trustee, the Servicer or to such Securityholder) to permit such Securityholder
to review the Receivable Files or (ii) if a Credit Enhancer Default shall have
occurred and be continuing. In addition, the Trustee shall provide such access
to any Securityholder at all reasonable times during the Trustee's normal
business hours if an Event of Default shall have occurred and be continuing. In
each case, such access shall be afforded without charge but only upon reasonable
request. Each Securityholder shall be deemed to have agreed by its acceptance of
a Note or Certificate to use its best efforts to hold in confidence all
Confidential Information in accordance with its then customary procedures;
provided that nothing herein shall prevent any Securityholder from delivering
copies of any financial statements and other documents whether or not
constituting Confidential Information, and disclosing other information, whether
or not Confidential Information, to (i) its directors, officers, employees,
agents and professional consultants, (ii) any other institutional investor that
holds Notes or Certificates, (iii) any prospective institutional investor
transferee in connection with the contemplated transfer of a Note or Certificate
or any part thereof or participation therein who is subject to confidentiality
arrangements at least substantially similar hereto, (iv) any governmental
authority, (v) the National Association of Insurance Commissioners or any
similar organization, (vi) any nationally recognized rating agency in connection
with the rating of the Certificates by such agency or (vii) any other Person to
which such delivery or disclosure may be necessary or appropriate (a) in
compliance with any applicable law, rule, regulation or order, (b) in response
to any subpoena or other legal process, (c) in connection with any litigation to
which such Securityholder is a party, or (d) in order to protect or enforce such
Person's investment in any Note Certificate. The Trustee shall, within two
Business Days of the request of the Servicer, the Owner Trustee or the Credit
Enhancer, execute such documents and instruments as are prepared by the
Servicer, the Owner Trustee or the Credit Enhancer and delivered to the Trustee,
as the Servicer, the Owner Trustee or the Credit Enhancer deems necessary to
permit the Servicer, in accordance with its customary servicing procedures, to
enforce the Receivable on behalf of the Trust and any related insurance policies
covering the Obligor, the Receivable or Financed Vehicle so long as such
execution in the Trustee's sole discretion does not conflict with this Agreement
and will not cause it undue risk or liability. The Trustee shall not be
obligated to release any document from any Receivable File unless it receives a
trust receipt signed by a Servicing Officer in the form of Exhibit C hereto (the
"Trust Receipt"). Such Trust Receipt shall obligate
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the Servicer to return such document(s) to the Trustee when the need therefor no
longer exists unless the Receivable shall be liquidated, in which case, upon
receipt of a certificate of a Servicing Officer substantially in the form of
Exhibit D hereto to the effect that all amounts required to be deposited in the
Collection Account with respect to such Receivable have been so deposited, the
Trust Receipt shall be released by the Trustee to the Servicer.
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 4.1. Duties of the Servicer. The Servicer, as agent for the
Trust, the Securityholders and the Credit Enhancer (to the extent provided
herein) shall manage, service, administer and make collections on the
Receivables with reasonable care, using that degree of skill and attention
customary and usual for institutions which service motor vehicle retail
installment contracts similar to the Receivables and, to the extent more
exacting, that the Servicer exercises with respect to all comparable automotive
receivables that it services for itself or others. The Servicer's duties shall
include collection and posting of all payments, responding to inquiries of
Obligors on such Receivables, investigating delinquencies, sending payment
statements to Obligors, reporting tax information to Obligors, accounting for
collections, furnishing monthly and annual statements to the Trustee, the
Trustee and the Credit Enhancer with respect to distributions. Without limiting
the generality of the foregoing, and subject to the servicing standards set
forth in this Agreement, the Servicer is authorized and empowered by the Trust
to execute and deliver, on behalf of itself, the Trust, the Securityholders or
any of them, any and all instruments of satisfaction or cancellation, or partial
or full release or discharge, and all other comparable instruments, with respect
to such Receivables or to the Financed Vehicles securing such Receivables and/or
the certificates of title or, with respect to Financed Vehicles in the State of
Michigan, other evidence of ownership with respect to such Financed Vehicles. If
the Servicer shall commence a legal proceeding to enforce a Receivable, the
Trust shall thereupon be deemed to have automatically assigned, solely for the
purpose of collection, such Receivable to the Servicer. If in any enforcement
suit or legal proceeding it shall be held that the Servicer may not enforce a
Receivable on the ground that it shall not be a real party in interest or a
holder entitled to enforce such Receivable, the Trust shall, at the Servicer's
expense and direction, take steps to enforce such Receivable, including bringing
suit in its name or the name of the Certificateholders. The Servicer shall
prepare and furnish and the Trustee and the
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Owner Trustee shall execute, any powers of attorney and other documents
reasonably necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder.
SECTION 4.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreements.
(a) Consistent with the standards, policies and procedures required by
this Agreement, the Servicer shall make reasonable efforts to collect all
payments called for under the terms and provisions of the Receivables as and
when the same shall become due and shall follow such collection procedures as it
follows with respect to all comparable automotive receivables that it services
for itself or others; provided, however, that the Servicer shall notify each
Obligor to make all payments with respect to the Receivables to the Post-Office
Box. The Servicer will provide each Obligor with a monthly statement in order to
notify such Obligors to make payments directly to the Post-Office Box. The
Servicer shall allocate collections between principal and interest in accordance
with the customary servicing procedures it follows with respect to all
comparable automotive receivables that it services for itself or others and in
accordance with the terms of this Agreement. Except as provided below, the
Servicer, for so long as CPS is the Servicer, may grant extensions on a
Receivable; provided, however, that the Servicer may not grant more than one
extension per calendar year with respect to a Receivable or grant an extension
with respect to a Receivable for more than one calendar month or grant more than
three extensions in the aggregate with respect to a Receivable without the prior
written consent of the Credit Enhancer and provided, further, that if the
Servicer extends the date for final payment by the Obligor of any Receivable
beyond the last day of the penultimate Collection Period preceding the Final
Scheduled Payment Date, it shall promptly purchase the Receivable from the Trust
in accordance with the terms of Section 4.7 hereof (and for purposes thereof,
the Receivable shall be deemed to be materially and adversely affected by such
breach). If the Servicer is not CPS, the Servicer may not make any extension on
a Receivable without the prior written consent of the Credit Enhancer. The
Servicer may in its discretion waive any late payment charge or any other fees
that may be collected in the ordinary course of servicing a Receivable.
Notwithstanding anything to the contrary contained herein, the Servicer shall
not agree to any alteration of the interest rate on any Receivable or of the
amount of any Scheduled Payment on Receivables.
(b) The Trustee shall establish the Lockbox Account in the name of the
Trustee for the benefit of the Securityholders and the Credit Enhancer, provided
that pursuant to the Lockbox
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Agreement, the Lockbox Processor and no other Person, save the Trustee, has
authority to direct disposition of funds on deposit in the Lockbox Account
consistent with the provisions of this Agreement and the Lockbox Agreement. The
Trustee shall have no liability or responsibility with respect to the Lockbox
Processor's directions or activities as set forth in the preceding sentence. The
Lockbox Account shall be established pursuant to and maintained in accordance
with the Lockbox Agreement and shall be a demand deposit account initially
established and maintained with Bank of America, or at the request of the
Certificate Credit Enhancer (unless a Credit Enhancer Default shall have
occurred and be continuing) an Eligible Account satisfying clause (i) of the
definition thereof; provided, however, that the Trustee shall give the Servicer
prior written notice of any change made at the request of the Credit Enhancer in
the location of the Lockbox Account. The Trustee shall establish and maintain
the Post-Office Box at a United States Post Office Branch in the name of the
Trustee for the benefit of the Securityholders and the Credit Enhancer.
(c) Notwithstanding any Lockbox Agreement, or any of the provisions of
this Agreement relating to the Lockbox Agreement, the Servicer shall remain
obligated and liable to the Trust, the Trustee and Securityholders for servicing
and administering the Receivables and the other Conveyed Property in accordance
with the provisions of this Agreement without diminution of such obligation or
liability by virtue thereof.
(d) In the event the Servicer shall for any reason no longer be acting
as such, the Standby Servicer or a successor Servicer shall thereupon assume all
of the rights and obligations of the outgoing Servicer under the Lockbox
Agreement. In such event, the successor Servicer shall be deemed to have assumed
all of the outgoing Servicer's interest therein and to have replaced the
outgoing Servicer as a party to the Lockbox Agreement to the same extent as if
such Lockbox Agreement had been assigned to the successor Servicer, except that
the outgoing Servicer shall not thereby be relieved of any liability or
obligations on the part of the outgoing Servicer to the Lockbox Bank under such
Lockbox Agreement. The outgoing Servicer shall, upon request of the Trustee, but
at the expense of the outgoing Servicer, deliver to the successor Servicer all
documents and records relating to the Lockbox Agreement and an accounting of
amounts collected and held by the Lockbox Bank and otherwise use its best
efforts to effect the orderly and efficient transfer of any Lockbox Agreement to
the successor Servicer. In the event that the Certificate Credit Enhancer (so
long as a Credit Enhancer Default shall not have occurred and be continuing) or
Holders of Class A Notes evidencing more than 50% of the outstanding principal
balance of the Class A Notes (if a Credit Enhancer Default shall have occurred
and be continuing) shall elect to change the identity of
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the Lockbox Bank, the Servicer, at its expense, shall cause the Lockbox Bank to
deliver, at the direction of the Certificate Credit Enhancer (so long as a
Credit Enhancer Default shall not have occurred and be continuing) or Holders of
Class A Notes evidencing more than 50% of the outstanding principal balance of
the Class A Notes (if a Credit Enhancer Default shall have occurred and be
continuing) to the Trustee or a successor Lockbox Bank, all documents and
records relating to the Receivables and all amounts held (or thereafter
received) by the Lockbox Bank (together with an accounting of such amounts) and
shall otherwise use its best efforts to effect the orderly and efficient
transfer of the Lockbox arrangements.
(e) On each Business Day, pursuant to the Lockbox Agreement, the
Lockbox Processor will transfer any payments from Obligors received in the
Post-Office Box to the Lockbox Account. Within two Business Days of receipt of
funds into the Lockbox Account, the Servicer shall cause the Lockbox Bank to
transfer funds from the Lockbox Account to the Collection Account. In addition,
the Servicer shall remit all payments by or on behalf of the Obligors received
by the Servicer with respect to the Receivables (other than Purchased
Receivables), and all Liquidation Proceeds no later than the Business Day
following receipt directly (without deposit into any intervening account) into
the Lockbox Account or the Collection Account.
SECTION 4.3. Realization Upon Receivables. On behalf of the Trust, the
Securityholders and the Credit Enhancer, the Servicer shall use its best
efforts, consistent with the servicing procedures set forth herein, to repossess
or otherwise convert the ownership of the Financed Vehicle securing any
Receivable as to which the Servicer shall have determined eventual payment in
full is unlikely. The Servicer shall commence efforts to repossess or otherwise
convert the ownership of a Financed Vehicle on or prior to the date that an
Obligor has failed to make more than 90% of a Scheduled Payment thereon in
excess of $10 for 120 days or more; provided, however, that the Servicer may
elect not to commence such efforts within such time period if in its good faith
judgment it determines either that it would be impracticable to do so or that
the proceeds ultimately recoverable with respect to such Receivable would be
increased by forbearance. The Servicer shall follow such customary and usual
practices and procedures as it shall deem necessary or advisable in its
servicing of automotive receivables, consistent with the standards of care set
forth in Section 4.2, which may include reasonable efforts to realize upon any
recourse to Dealers and selling the Financed Vehicle at public or private sale.
The foregoing shall be subject to the provision that, in any case in which the
Financed Vehicle shall have suffered damage, the Servicer shall not expend funds
in connection with the repair or the repossession of such Financed Vehicle
unless it shall
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determine in its discretion that such repair and/or repossession will increase
the proceeds ultimately recoverable with respect to such Receivable by an amount
greater than the amount of such expenses.
SECTION 4.4. Insurance.
(a) The Servicer, in accordance with the servicing procedures and
standards set forth herein, shall require that (i) each Obligor shall have
obtained insurance covering the Financed Vehicle, as of the date of the
execution of the Receivable, insuring against loss and damage due to fire,
theft, transportation, collision and other risks generally covered by
comprehensive and collision coverage and each Receivable requires the Obligor to
maintain such physical loss and damage insurance naming CPS (or, with respect to
the Samco Receivables, Samco) and its successors and assigns as an additional
insured, (ii) each Receivable that finances the cost of premiums for credit life
and credit accident and health insurance is covered by an insurance policy or
certificate naming CPS (or, with respect to the Samco Receivables, Samco) as
policyholder (creditor) and (iii) as to each Receivable that finances the cost
of an extended service contract, the respective Financed Vehicle which secures
the Receivable is covered by an extended service contract.
(b) To the extent applicable, the Servicer shall not take any action
which would result in noncoverage under any of the insurance policies referred
to in Section 4.4(a) which, but for the actions of the Servicer, would have been
covered thereunder. The Servicer, on behalf of the Trust, shall take such
reasonable action as shall be necessary to permit recovery under any of the
foregoing insurance policies. Any amounts collected by the Servicer under any of
the foregoing insurance policies shall be deposited in the Collection Account
pursuant to Section [5.4].
SECTION 4.5. Maintenance of Security Interests in Vehicles.
(a) Consistent with the policies and procedures required by this
Agreement, the Servicer shall take such steps on behalf of the Trust as are
necessary to maintain perfection of the security interest created by each
Receivable in the related Financed Vehicle, including but not limited to
obtaining the execution by the Obligors and the recording, registering, filing,
rerecording, re-filing, re-recording, re-registering and refiling of all
security agreements, financing statements and continuation statements or
instruments as are necessary to maintain the security interest granted by the
Obligors under the respective Receivables. The Trustee hereby authorizes the
Servicer, and the Servicer agrees, to take any and all steps necessary to re-
perfect or continue the perfection of such security interest on behalf of the
Trust as necessary because of the relocation of a
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Financed Vehicle or for any other reason. In the event that the assignment of a
Receivable to the Trust is insufficient, without a notation on the related
Financed Vehicle's certificate of title, or without fulfilling any additional
administrative requirements under the laws of the state in which the Financed
Vehicle is located, to perfect a security interest in the related Financed
Vehicle in favor of the Trust, the Servicer hereby agrees that CPS's designation
as the secured party on the certificate of title is in its capacity as Servicer
as agent of the Trust.
(b) Upon the occurrence of an Insurance Agreement Event of Default, the
Credit Enhancer may (so long as a Credit Enhancer Default shall not have
occurred and be continuing) instruct the Trustee and the Servicer to take or
cause to be taken, or, if a Credit Enhancer Default shall have occurred, upon
the occurrence of a Servicer Termination Event, the Trustee and the Servicer
shall take or cause to be taken such action as may, in the opinion of counsel to
the Trustee, which opinion shall not be an expense of the Trustee, be necessary
to perfect or re-perfect the security interests in the Financed Vehicles
securing the Receivables in the name of the Trust by amending the title
documents of such Financed Vehicles or by such other reasonable means as may, in
the opinion of counsel to the Trustee, which opinion shall not be an expense of
the Trustee, be necessary or prudent. CPS hereby agrees to pay all expenses
related to such perfection or reperfection and to take all action necessary
therefor. The Servicer hereby agrees to pay all expenses related to such
perfection or reperfection and to take all action necessary therefor. In
addition, prior to the occurrence of an Insurance Agreement Event of Default,
the Controlling Party may instruct the Trustee and the Servicer to take or cause
to be taken such action as may, in the opinion of counsel to the Controlling
Party, be necessary to perfect or re-perfect the security interest in the
Financed Vehicles underlying the Receivables in the name of the Trust, including
by amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Controlling Party, be
necessary or prudent; provided, however, that if the Controlling Party requests
(unless a Credit Enhancer Default shall have occurred and be continuing) that
the title documents be amended prior to the occurrence of an Insurance Agreement
Event of Default, the out-of-pocket expenses of the Servicer or the Trustee in
connection with such action shall be reimbursed to the Servicer or the Trustee,
as applicable, by the Controlling Party.
SECTION 4.6. Covenants, Representations, and Warranties of Servicer.
The Servicer shall not release the Financed Vehicle securing each Receivable
from the security interest granted by such Receivable in whole or in part except
in the event of
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payment in full by the Obligor thereunder or repossession, nor shall the
Servicer impair the rights of the Securityholders in such Receivables, nor shall
the Servicer amend a Receivable, except that extensions may be granted in
accordance with Section 4.2.
SECTION 4.7. Purchase of Receivables Upon Breach of Covenant. Upon
discovery by any of the Servicer, the Credit Enhancer, the Trustee, the Owner
Trustee or the Trustee of a breach of any of the covenants set forth in Section
4.2(a), 4.4, 4.5(a) or 4.6, the party discovering such breach shall give prompt
written notice to the others; provided, however, that the failure to give any
such notice shall not affect any obligation of the Servicer under this Section
4.7. Unless the breach shall have been cured by the last day of the second
Collection Period following such discovery (or, at the Servicer's election, the
last day of the first following Collection Period), the Servicer shall purchase
any Receivable materially and adversely affected by such breach. In
consideration of the purchase of such Receivable, the Servicer shall remit the
Purchase Amount in the manner specified in Section 5.6. The sole remedy of the
Trustee, the Trust, the Owner Trustee, the Credit Enhancer or the
Securityholders with respect to a breach of Section 4.2, 4.4, 4.5(a) or 4.6
shall be to require the Servicer to repurchase Receivables pursuant to this
Section 4.7; provided, however, that the Servicer shall indemnify the Trustee,
the Trustee, the Standby Servicer, the Collateral Agent, the Credit Enhancer,
the Owner Trustee the Trust and the Securityholders against all costs, expenses,
losses, damages, claims and liabilities, including reasonable fees and expenses
of counsel, which may be asserted against or incurred by any of them as a result
of third party claims arising out of the events or facts giving rise to such
breach. If it is determined that the management, administration and servicing of
the Receivables and operation of the Trust pursuant to this Agreement
constitutes a violation of the prohibited transaction rules of ERISA or the Code
to which no statutory exception or administrative exemption applies, such
violation shall not be treated as a breach of Section 4.2, 4.4, 4.5(a) or 4.6 if
not otherwise such a breach.
SECTION 4.8. Servicing Fee. (a) The Servicing Fee for the initial
Payment Date shall equal the product of (i) one twelfth of the Servicing Fee
Rate, (ii) the Original Pool Balance and (iii) a fraction, the numerator of
which is the number of days from and including the Closing Date to and including
the last day of the initial Collection Period and the denominator of which is
30. Thereafter, the Servicing Fee for a Payment Date shall equal the product of
(x) one twelfth of the Servicing Fee Rate and (y) the Pool Balance as of the
last day of the second preceding Collection Period. The Servicing Fee shall also
include all late fees, prepayment charges including, in the case of a Rule of
78's
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Receivable that is prepaid in full, to the extent not required by law to be
remitted to the related Obligor, the difference between the Principal Balance of
such Rule of 78's Receivable (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 Receivables, collected (from whatever source) on the
Receivables.
SECTION 4.9. Servicer's Certificate. By 10:00 a.m., Minneapolis time,
on each Determination Date, the Servicer shall deliver to the Trustee, the
Trustee, the Credit Enhancer, the Rating Agencies and the Seller a Servicer's
Certificate containing all information necessary to make the distributions
pursuant to Section 4.6 (including, if required, withdrawals from the Spread
Account) for the Collection Period preceding the date of such Servicer's
Certificate and all information necessary for the Trustee to send statements to
the Securityholders and the Certificate Credit Enhancer pursuant to Section 4.8.
Receivables to be purchased by the Servicer or to be purchased by CPS shall be
identified by the Servicer by account number with respect to such Receivable (as
specified in Schedule A).
SECTION 4.10. Annual Statement as to Compliance, Notice of Servicer
Termination Event.
(a) The Servicer shall deliver to the Trustee, the Owner Trustee, the
Trustee, the Standby Servicer, the Credit Enhancer and each Rating Agency, on or
before July 31 of each year beginning July 31, 199[ ], an Officer's Certificate,
dated as of March 31 of such year, stating that (i) a review of the activities
of the Servicer during the preceding 12-month period (or, in the case of the
first such certificate, the period from the Cutoff Date to March 31, 199[ ]) and
of its performance under this Agreement has been made under such officer's
supervision and (ii) to the best of such officer's knowledge, based on such
review, the Servicer has fulfilled all its obligations under this Agreement
throughout such year (or, in the case of the first such certificate, such
shorter period), or, if there has been a default in the fulfillment of any such
obligation, specifying each such default known to such officer and the nature
and status thereof. The Trustee shall send a copy of such certificate and the
report referred to in Section 4.11 to the Rating Agencies. The Trustee shall
forward a copy of such certificate as well as the report referred to in Section
4.11 to each Securityholder.
(b) The Servicer shall deliver to the Trustee, the Owner Trustee, the
Trustee, the Standby Servicer, the Credit Enhancer, the Collateral Agent, and
each Rating Agency, promptly after having obtained knowledge thereof, but in no
event later than two (2) Business Days thereafter, written notice in an
Officer's
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Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under Section 10.1.
SECTION 4.11. Annual Independent Accountants' Report. The Servicer
shall cause a firm of nationally recognized independent certified public
accountants (the "Independent Accountants"), who may also render other services
to the Servicer or to the Seller, to deliver to the Trustee, the Owner Trustee,
the Trustee, the Standby Servicer, the Credit Enhancer and each Rating Agency,
on or before July 31 of each year beginning July 31, [ ], a report dated as of
March 31 of such year (the "Accountants' Report") and reviewing the Servicer's
activities during the preceding 12-month period (or, in the case of the first
such report, the period from the Cutoff Date to March 31, [ ]), addressed to the
Board of Directors of the Servicer, to the Trustee, the Owner Trustee, the
Trustee, the Standby Servicer and to the Credit Enhancer, to the effect that
such firm has examined the financial statements of the Servicer and issued its
report therefor and that such examination (1) was made in accordance with
generally accepted auditing standards, and accordingly included such tests of
the accounting records and such other auditing procedures as such firm
considered necessary in the circumstances; (2) included tests relating to auto
loans serviced for others in accordance with the requirements of the Uniform
Single Audit Program for Mortgage Bankers (the "Program"), to the extent the
procedures in the Program are applicable to the servicing obligations set forth
in this Agreement; (3) included an examination of the delinquency and loss
statistics relating to the Servicer's portfolio of automobile and light truck
installment sales contracts; and (4) except as described in the report,
disclosed no exceptions or errors in the records relating to automobile and
light truck loans serviced for others that, in the firm's opinion, paragraph
four of the Program requires such firm to report. The accountant's report shall
further state that (1) a review in accordance with agreed upon procedures was
made of three randomly selected Servicer Certificates; (2) except as disclosed
in the report, no exceptions or errors in the Servicer Certificates were found;
and (3) the delinquency and loss information, relating to the Receivables
contained in the Servicer Certificates were found to be accurate.
The Report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Trustee, the
Owner Trustee, the Trustee, the Standby Servicer and the Credit Enhancer
reasonable access to the documentation regarding the Receivables. In each case,
such
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access shall be afforded without charge but only upon reasonable request and
during normal business hours. Nothing in this Section shall derogate from the
obligation of the Servicer to observe any applicable law prohibiting disclosure
of information regarding the Obligors, and the failure of the Servicer to
provide access as provided in this Section as a result of such obligation shall
not constitute a breach of this Section.
SECTION 4.13. Verification of Servicer's Certificate. (a) On or before
the fifth calendar day of each month, the Servicer will deliver to the Trustee
and the Standby Servicer a computer diskette (or other electronic transmission)
in a format acceptable to the Trustee and the Standby Servicer containing
information with respect to the Receivables as of the close of business on the
last day of the preceding Collection Period which information is necessary for
preparation of the Servicer's Certificate. The Standby Servicer shall use such
computer diskette (or other electronic transmission) to verify certain
information specified in Section 4.13(b) contained in the Servicer's Certificate
delivered by the Servicer, and the Standby Servicer shall notify the Servicer
and the Credit Enhancer of any discrepancies on or before the second Business
Day following the Determination Date. In the event that the Standby Servicer
reports any discrepancies, the Servicer and the Standby Servicer shall attempt
to reconcile such discrepancies prior to the second Business Day prior to the
related Payment Date, but in the absence of a reconciliation, the Servicer's
Certificate shall control for the purpose of calculations and distributions with
respect to the related Payment Date. In the event that the Standby Servicer and
the Servicer are unable to reconcile discrepancies with respect to a Servicer's
Certificate by the related Payment Date, the Servicer shall cause a firm of
independent certified public accountants, at the Servicer's expense, to audit
the Servicer's Certificate and, prior to the fifth calendar day of the following
month, reconcile the discrepancies. The effect, if any, of such reconciliation
shall be reflected in the Servicer's Certificate for such next succeeding
Determination Date. Other than the duties specifically set forth in this
Agreement, the Standby Servicer shall have no obligations hereunder, including,
without limitation, to supervise, verify, monitor or administer the performance
of the Servicer. The Standby Servicer shall have no liability for any actions
taken or omitted by the Servicer. The duties and obligations of the Standby
Servicer shall be determined solely by the express provisions of this Agreement
and no implied covenants or obligations shall be read into this Agreement
against the Standby Servicer.
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(b) The Standby Servicer shall review each Servicer's Certificate
delivered pursuant to Section 4.13(a) and shall:
(i) confirm that such Servicer's Certificate is complete on
its face;
(ii) load the computer diskette (which shall be in a format
acceptable to the Standby Servicer) received from the Servicer pursuant
to Section 4.13(a) hereof, confirm that such computer diskette is in a
readable form and calculate and confirm the Principal Balance of each
Receivable for the most recent Payment Date;
(iii) confirm that the Total Distribution Amount, the
Principal Distributable Amount, the Class A Noteholders' Distributable
Amount, the Class B Noteholders' Distributable Amount, the Class A
Principal Distributable Amount, the Class A Interest Distributable
Amount, the Class B Distributable Amount, the Class B Interest
Distributable Amount, the Class B Principal Distributable Amount, the
Certificateholders' Distributable Amount, the Certificateholders'
Interest Distributable Amount, the Certificateholders' Principal
Distributable Amount, the Standby Fee, the Servicing Fee, the Trustee
Fee, the amount on deposit in the Spread Account, and the Premium in
the Servicer's Certificate are accurate based solely on the
recalculation of the Servicer's Certificate; and
(iv) confirm the calculation of the performance tests set
forth in the Spread Account Agreement.
SECTION 4.14. Retention and Termination of Servicer. The Servicer
hereby covenants and agrees to act as such under this Agreement for an initial
term commencing on the Closing Date and ending on [ ], which term shall be
automatically extended by the Credit Enhancer for successive terms of ninety
(90) days each as specified in a writing delivered by the Credit Enhancer prior
to the expiration of each current term to the Servicer and the Trustee which
provides that the Servicer will be automatically extended for a succeeding
ninety (90) day term unless an Event of Default shall have occurred and be
continuing, in which case the Credit Enhancer may extend the Servicer in its
sole discretion (or, at the discretion of the Credit Enhancer exercised pursuant
to revocable written standing instructions from time to time to the Servicer and
the Trustee, for any specified number of terms greater than one), until the
Notes and the Certificates are paid in full. Each such notice (including each
notice pursuant to standing instructions, which shall be deemed delivered at
successive ninety (90) day intervals for so long as such instructions are in
effect) (a "Servicer Extension Notice") shall be delivered by the Credit
Enhancer to the Trustee
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and the Servicer. The Servicer hereby agrees that, upon its receipt of any such
Servicer Extension Notice, the Servicer shall become bound, for the duration of
the term covered by such Servicer Extension Notice, to continue as the Servicer
subject to and in accordance with the other provisions of this Agreement. If a
Credit Enhancer Default has occurred and is continuing, the term of the
Servicer's appointment hereunder shall be deemed to have been extended until
such time, if any, as such Credit Enhancer Default has been cured unless such
appointment is terminated sooner in accordance with the terms of this
Agreement).
SECTION 4.15. Fidelity Bond. The Servicer shall maintain a fidelity
bond in such form and amount as is customary for entities acting as custodian of
funds and documents in respect of consumer contracts on behalf of institutional
investors.
ARTICLE V
TRUST ACCOUNTS; DISTRIBUTIONS;
STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS
SECTION 5.1. Establishment of Trust Accounts.
(a) The Trustee, on behalf of the Securityholders and the Credit
Enhancer, shall establish and maintain in its own name an Eligible Account (the
"Collection Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Trustee on behalf of the
Securityholders and the Credit Enhancer.
(i) The Trustee, on behalf of the Noteholders, shall establish
and maintain in its own name an Eligible Account (the "Note Distribution
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Trustee on behalf of the Noteholders and
the Credit Enhancer. The Note Distribution Account shall initially be
established with the Trustee.
(ii) The Trustee, on behalf of the Certificateholders, shall
establish and maintain in its own name an Eligible Account (the "Certificate
Distribution Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Trustee on behalf of the
Certificateholders and the Credit Enhancer. The Certificate Distribution Account
shall initially be established with the Trustee.
(iii) The Trustee, on behalf of the Securityholders and the
Credit Enhancer, shall establish and maintain in its own name an Eligible
Account (the "Pre-Funding Account"), bearing a
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designation clearly indicating that the funds deposited therein are held for the
benefit of the Trustee on behalf of the Securityholders and the Credit Enhancer.
(b) Funds on deposit in the Collection Account, the Pre- Funding
Account, the Note Distribution Account, the Certificate Distribution Account and
the Interest Reserve Account (collectively, the "Trust Accounts") and the
Lockbox Accounts shall be invested by the Trustee (or any custodian with respect
to funds on deposit in any such account) in Eligible Investments selected in
writing by the Servicer (pursuant to standing instructions or otherwise). All
such Eligible Investments shall be held by or on behalf of the Trustee for the
benefit of the Noteholders and/or the Certificateholders and the Credit
Enhancer, as applicable. Other than as permitted by the Rating Agencies and the
Credit Enhancer, funds on deposit in any Account shall be invested in Eligible
Investments that will mature so that such funds will be available at the close
of business on the Business Day immediately preceding the following Payment
Date. Funds deposited in a Trust Account on the day immediately preceding a
Payment Date upon the maturity of any Eligible Investments are not required to
be invested overnight. All Eligible investments will be held to maturity.
(c) All investment earnings of moneys deposited in the Trust Accounts
shall be deposited (or caused to be deposited) by the Trustee in the Collection
Account for distribution pursuant to Section 5.7(b), and any loss resulting from
such investments shall be charged to such account. The Servicer will not direct
the Trustee to make any investment of any funds held in any of the Trust
Accounts unless the security interest granted and perfected in such account will
continue to be perfected in such investment, in either case without any further
action by any Person, and, in connection with any direction to the Trustee to
make any such investment, if requested by the Trustee, the Servicer shall
deliver to the Trustee an opinion of Counsel, acceptable to the Trustee, to such
effect.
(d) The Trustee shall not in any way be held liable by reason of any
insufficiency in any of the Trust Accounts resulting from any loss on any
Eligible Investment included therein except for losses attributable to the
Trustee's negligence or bad faith or its failure to make payments on such
Eligible Investments issued by the Trustee, in its commercial capacity as
principal obligor and not as trustee, in accordance with their terms.
(e) If (i) the Servicer shall have failed to give investment directions
for any funds on deposit in the Trust Accounts to the Trustee by 2:00 p.m.
Eastern Time (or such other time as may be agreed by the Issuer and Trustee) on
any Business
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Day; or (ii) a Default or Event of Default shall have occurred and be continuing
with respect to the Notes but the Notes shall not have been declared due and
payable, or, if such Notes shall have been declared due and payable following an
Event of Default, amounts collected or receivable from the Trust Property are
being applied as if there had not been such a declaration; then the Trustee
shall, to the fullest extent practicable, invest and reinvest funds in the Trust
Accounts in one or more Eligible Investments.
(f) The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Trust Accounts and in all proceeds
thereof (including all Investment Earnings on the Collection Account) and all
such funds, investments, proceeds and income shall be part of the Owner Trust
Estate. Except as otherwise provided herein, the Trust Accounts shall be under
the sole dominion and control of the Trustee for the benefit of the Noteholders
and the Certificateholders, as the case may be, and the Credit Enhancer. If at
any time any of the Trust Accounts ceases to be an Eligible Account, the
Servicer with the consent of the Credit Enhancer shall within five Business Days
establish a new Trust Account as an Eligible Account and shall transfer any cash
and/or any investments to such new Trust Account. The Servicer shall promptly
notify the Rating Agencies of any change in the location of any of the
aforementioned accounts. In connection with the foregoing, the Servicer agrees
that, in the event that any of the Trust Accounts are not accounts with the
Trustee, the Servicer shall notify the Trustee in writing promptly upon any of
such Trust Accounts ceasing to be an Eligible Account.
(i) With respect to the Trust Account Property, the Trustee agrees
that:
(A) any Trust Account Property or any property in
the Certificate Distribution Account that is held in deposit accounts shall be
held solely in the Eligible Accounts; and, except as otherwise provided herein,
each such Eligible Account shall be subject to the exclusive custody and control
of the Trustee, and the Trustee shall have sole signature authority with respect
thereto;
(B) any Trust Account Property that constitutes
Physical Property shall be delivered to the Trustee in accordance with paragraph
(a) of the definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Trustee or a financial intermediary (as such term is
defined in Section B- 313(4) of the UCC) acting solely for the Trustee;
(C) any Trust Account Property that is a book-
entry security held through the Federal Reserve System pursuant
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to Federal book-entry regulations shall be delivered in accordance with
paragraph (b) of the definition of "Delivery" and shall be maintained by the
Trustee, pending maturity or disposition, through continued book-entry
registration of such Trust Account Property as described in such paragraph; and
(D) any Trust Account Property that is an
"uncertificated security" under Article 8 of the UCC and that is not governed by
clause (C) above shall be delivered to the Trustee in accordance with paragraph
(c) of the definition of "Delivery" and shall be maintained by the Trustee,
pending maturity or disposition, through continued registration of the Trustee's
(or its nominees) ownership of such security.
(g) The Servicer shall have the power, revocable by the Credit Enhancer
or, with the consent of the Credit Enhancer by the Trustee or by the Owner
Trustee with the consent of the Trustee, to instruct the Trustee to make
withdrawals and payments from the Trust Accounts for the purpose of permitting
the Servicer and the Trustee to carry out its respective duties hereunder.
SECTION 5.2. Interest Reserve Account.
(a) The Servicer shall cause the Trustee to establish and maintain an
Eligible Account (the "Interest Reserve Account") with the Trustee, bearing a
designation clearly indicating that the funds deposited therein are held in
trust for the benefit of the Noteholders, Certificateholders and the Credit
Enhancer.
On or prior to the Closing Date, the Seller shall deposit an amount
equal to the Interest Reserve Account Initial Deposit into the Interest Reserve
Account.
(b) On the Payment Dates occurring in [ ] the Trustee shall withdraw
from the Interest Reserve Account the Monthly Interest Reserve Amount for such
Payment Date and deposit such amount in the Collection Account as further
provided in Section 5.7.
(i) on the Payment Dates occurring in [ ] the Servicer shall instruct
the Trustee to withdraw from the Interest Reserve Account and pay to the Seller
on such Payment Date an amount equal to the Overfunded Interest Reserve Amount
for such Payment Date. Any amounts remaining in the Interest Reserve Account on
the Payment Date which immediately follows the end of the Funding Period after
taking into account the transfer pursuant to Section 5.7(a)(i) shall be remitted
by the Trustee to the Seller. Upon any such distributions to the Seller, the
Noteholders, the Certificateholders and the Credit Enhancer will have no further
rights in, or claims to, such amounts.
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SECTION 5.3. Certain Reimbursements to the Servicer. The Servicer will
be entitled to be reimbursed from amounts on deposit in the Collection Account
with respect to a Collection Period for amounts previously deposited in the
Collection Account but later determined by the Servicer to have resulted from
mistaken deposits or postings or checks returned for insufficient funds. The
amount to be reimbursed hereunder shall be paid to the Servicer on the related
Payment Date pursuant to Section 5.7(b)(i) upon certification by the Servicer of
such amounts and the provision of such information to the Trustee and the Credit
Enhancer as may be necessary in the opinion of the Credit Enhancer to verify the
accuracy of such certification. In the event that the Credit Enhancer has not
received evidence satisfactory to it of the Servicer's entitlement to
reimbursement pursuant to this Section, the Credit Enhancer shall (unless a
Credit Enhancer Default shall have occurred and be continuing) give the Trustee
notice to such effect, following receipt of which the Trustee shall not make a
distribution to the Servicer in respect of such amount pursuant to Section 5.7,
or if the Servicer prior thereto has been reimbursed pursuant to Section 5.7,
the Trustee shall withhold such amounts from amounts otherwise distributable to
the Servicer on the next succeeding Payment Date.
SECTION 5.4. Application of Collections. All collections for each
Collection Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied, in the case of a Rule
of 78's Receivable, first, to the Scheduled Payment of such Rule of 78's
Receivable and, second, to any late fees accrued with respect to such Rule of
78's Receivable and, in the case of a Simple Interest Receivable, to interest
and principal in accordance with the Simple Interest Method.
SECTION 5.5. Withdrawals from Spread Account. (a) In the event that the
Servicer's Certificate with respect to any Determination Date shall state that
the Total Distribution Amount with respect to such Determination Date is
insufficient (taking into account the application of the Distribution Amount to
the payment required to be made on the related Payment Date pursuant to Section
5.7(b)(vi)) to make the payments required to be made on the related Payment Date
pursuant to Section 5.7(b)(i), (ii), (iii), (iv), (v), (vii) or (viii) (such
deficiency being a "Deficiency Claim Amount"), then on the fourth Business Day
immediately preceding the related Payment Date, the Trustee shall deliver to the
Collateral Agent, the Owner Trustee, the Credit Enhancer, and the Servicer, by
hand delivery, telex or facsimile transmission, a written notice (a "Deficiency
Notice") specifying
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the Deficiency Claim Amount for such Payment Date. Such Deficiency Notice shall
direct the Collateral Agent to remit such Deficiency Claim Amount (to the extent
of the funds available to be distributed pursuant to the Spread Account
Agreement) to the Trustee for deposit in the Collection Account and distribution
pursuant to Sections 5.7(b)(i), (ii), (iii), (iv), (v), (vii) and/or (viii), as
applicable.
(b) Any Deficiency Notice shall be delivered by 10:00 a.m., New York
City time, on the fourth Business Day preceding such Payment Date. The amounts
distributed by the Collateral Agent to the Trustee pursuant to a Deficiency
Notice shall be deposited by the Trustee into the Collection Account pursuant to
Section 5.6.
(c) In the event that the Servicer's Certificate with respect to any
Determination Date shall state that the Total Distribution Amount with respect
to such Payment Date is insufficient to make the payments required to be made on
the related Payment Date pursuant to Section 5.7(b)(vi) or (x) (such deficiency
being a "Class B Deficiency"), then on the fourth Business Day immediately
preceding the related Payment Date, the Trustee shall deliver to the Collateral
Agent, the Owner Trustee and the Servicer, by hand delivery, telex or facsimile
transmission, a written notice specifying the amount of the Class B Deficiency
for such Payment Date. Such notice shall direct the Collateral Agent to remit to
the Trustee an amount equal to such Class B Deficiency (but only to the extent
that, pursuant to the Spread Account Agreement, funds are required to be
released from the Spread Account to the Seller on the related Payment Date) for
deposit into the Collection Account and distribution pursuant to Section
5.7(b)(vi) and/or Section 5.7(b)(x), as applicable, and any funds so remitted to
the Trustee shall be deemed to have been released to the Seller and paid to the
Trustee at the direction of the Seller.
SECTION 5.6. Additional Deposits.
(a) The Servicer or CPS, as the case may be, shall deposit or cause to
be deposited in the Collection Account the aggregate Purchase Amount with
respect to Purchased Receivables and the Servicer shall deposit therein all
amounts to be paid under Section 4.8(b) or 11.1. All such deposits shall be
made, in immediately available funds, on the Business Day preceding the
Determination Date. On or before the third Business Day preceding each Payment
Date, the Trustee shall remit to the Collection Account any amounts delivered to
the Trustee by the Collateral Agent pursuant to Section 5.5.
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SECTION 5.7. Distributions.
(a) On each Payment Date, the Trustee shall (based solely on the
information contained in the Servicer's Certificate delivered on the related
Determination Date)cause to be made the following transfers and distributions in
the amounts set forth in the Servicer's Certificate for such Payment Date:
(i) During the Funding Period, from the Interest Reserve
Account to the Collection Account, in immediately available funds, the Monthly
Interest Reserve Amount for such Payment Date; and
(ii) If such Payment Date is the Mandatory Redemption Date,
from the Pre-Funding Account to the Collection Account, in immediately available
funds, the Pre-Funded Amount after giving effect to the purchase of Subsequent
Receivables, if any, on the Mandatory Redemption Date.
(b) On each Payment Date, the Trustee (based on the information
contained in the Servicer's Certificate delivered 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 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 or any other party
becomes the successor Servicer, to the Standby Servicer or such other
successor 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 acting as successor
Servicer;
(iii) to the 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 Fee") 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
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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 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 Total 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 Note Distribution Account, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant Total to clauses (i) through (iv) above, the Class
A Noteholders' Interest Distributable Amount for such Payment Date;
(vi) to the Note Distribution Account, from the Total
Distribution Amount (as such Distribution Amount has been reduced by
payments pursuant to clauses (i) through (v) above) the Class B
Noteholders' Interest Distributable
Amount for such Distribution Date;
(vii) to the Note Distribution Account, 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 plus, on the Mandatory
Redemption Date, the Class A Note Prepayment Amount for such
Distribution Date;
(viii) to the Credit Enhancer, 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 owing to
the Credit Enhancer under this Agreement and the Insurance Agreement
and not paid;
(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) incurred in acting as
successor Servicer;
(x) to the Note Distribution Account, from the Total
Distribution Amount (as such Total Distribution Amount has
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been reduced by payments pursuant to Clauses (i) through (ix) above,
the Class B Noteholders' Principal Distributable Amount for such
Payment Date;
(xi) to the Certificate Distribution Account, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (x) above, the
Certificateholders' Distributable Amount for such Payment Date;
(xii) to the Collateral Agent, for deposit into the Spread
Account, the remaining Total Distribution Amount, if any;
provided, however, that, (A) following an acceleration of the Notes or, (B) if a
Credit Enhancer Default shall have occurred and be continuing and an Event of
Default pursuant to Section 5.1(i), 5.1(ii), 5.1(iv), 5.1(v) or 5.1(vi) of the
Indenture shall have occurred and be continuing, or (C) the receipt of
Insolvency Proceeds pursuant to Section 11.1(b), amounts deposited in the Note
Distribution Account and the Certificate Distribution Account (including any
such Insolvency Proceeds) shall be paid to the Noteholders and the
Certificateholders, pursuant to Section 5.6 of the Indenture.]
(c) In the event that the Collection Account is maintained with an
institution other than the Trustee, the Servicer shall instruct and cause such
institution to make all deposits and distributions pursuant to Section 5.7(b) on
the related Payment Date.
SECTION 5.8. Note Distribution Account.
(a) On each Payment Date, the Trustee shall distribute all amounts on
deposit in the Note Distribution Account to Noteholders in respect of the Notes
to the extent of amounts due and unpaid on the Notes for principal and interest
in the following amounts and in the following order of priority:
(i) to the Holders of the Class A Notes the Class A Interest
Distributable Amount; provided that if there are not sufficient funds in the
Note Distribution Account to pay the entire then due on each Class of Class A
Notes, the amount in the Note Distribution Account shall be applied to the
payment of such interest on each Class of Class A Notes pro rata on the basis of
the amount of accrued and unpaid interest due on each Class of Class A Notes;
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(ii) to the Holders of the Class B Notes, the Class B
Noteholders' Interest Distributable Amount; provided that if there are not
sufficient funds remaining in the Note Distribution Account to pay the entire
Class B Interest Distributable Amount, the amount in the Note Distribution
Account shall be applied to the payment of such interest on the Class B Notes
pro rata on the basis of the amount of accrued and unpaid interest due on the
Class B Notes;
(iii) any amounts deposited in the Note Distribution Account
with respect to the Note Prepayment Amount, shall be distributed first to the
Holders of the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the
Class B Notes, respectively, based upon the pro rata share as represented by the
relative outstanding Amount of each Class of Notes;
(iv) to the Holders of the Class A-1 Notes, the Class A
Noteholders' Principal Distributable Amount until the outstanding principal
balance of the Class A-1 Notes is reduced to zero;
(v) to the Holders of the Class A-2 Notes, the Class A
Noteholders' Principal Distributable Amount until the outstanding principal
balance of the Class A-2 Notes is reduced to zero; and
(vi) to the Holders of the Class A-3 Notes, the Class A
Noteholders' Principal Distributable Amount until the outstanding principal
balance of the Class A-3 Notes is reduced
to zero.
(vii) to the holders of the Class B Notes, the Class B
Noteholders' Principal Distributable Amount until the outstanding principal
amount of the Class B Notes is reduced to zero.
(b) The rights of the Class B Noteholders to receive distributions in
respect of the Class B Notes pursuant to Section 5.8(a)(ii) on a Payment Date
shall be and hereby are subordinated to the payment of the amounts distributable
pursuant to Section 5.8(a)(i). The rights of the Class B Noteholders to receive
distributions in respect of the Class B Notes pursuant to Section 5.8(a)(vi) on
a Payment Date shall be and hereby are subordinated to the payment of the
amounts distributable pursuant to Sections 5.8(a)(i) through (v). At such time
as the Class A Notes are paid in full and the Credit Enhancer has received
payment in full for all amounts owed to the Credit Enhancer, the Class B
Noteholders shall be entitled to exercise all rights granted to the Class A
Noteholders under this Agreement to the extent that the exercise of such rights
does not conflict with the provisions of the Spread Account Agreement.
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(c) On each Payment Date, the Trustee shall send to each Noteholder the
statement provided to the Trustee by the Servicer pursuant to Section 5.11
hereof on such Payment Date.
(d) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Noteholder, such tax shall reduce the
amount otherwise distributable to the Noteholder in accordance with this
Section. The Trustee is hereby authorized and directed to retain from amounts
otherwise distributable to the Noteholders sufficient funds for the payment of
any tax that is legally owed by the Trust (but such authorization shall not
prevent the Trustee from contesting any such tax in appropriate proceedings, and
withholding payment of such tax, if permitted by law, pending the outcome of
such proceedings). The amount of any withholding tax imposed with respect to a
Noteholder shall be treated as cash distributed to such Noteholder at the time
it is withheld by the Trust and remitted to the appropriate taxing authority. If
there is a possibility that withholding tax is payable with respect to a
distribution (such as a distribution to a non-US Noteholder), the Trustee may in
its sole discretion withhold such amounts in accordance with this clause (f). In
the event that a Noteholder wishes to apply for a refund of any such withholding
tax, the Trustee shall reasonably cooperate with such Noteholder in making such
claim so long as such Noteholder agrees to reimburse the Trustee for any
out-of-pocket expenses incurred.
(e) Distributions required to be made to Noteholders on any Payment
Date shall be made to each Noteholder of record on the preceding Record Date
either by wire transfer, in immediately available funds, to the account of such
Holder at a bank or other entity having appropriate facilities therefor, if (i)
such Noteholder shall have provided to the Note Registrar appropriate written
instructions at least five Business Days prior to such Payment Date and such
Holder's Notes in the aggregate evidence a denomination of not less than
$1,000,000 or (ii) such Noteholder is the Seller, or an Affiliate thereof, or,
if not, by check mailed to such Noteholder at the address of such holder
appearing in the Note Register; provided, however, that, unless Definitive Notes
have been issued pursuant to Section 3.13 of the Trust Agreement, with respect
to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), distributions will
be made by wire transfer in immediately available funds to the account
designated by such nominee. Notwithstanding the foregoing, the final
distribution in respect of any Note (whether on the Final Scheduled Payment Date
or otherwise) will be payable only upon presentation and surrender of such Note
at the office or agency maintained for that purpose by the Note Registrar
pursuant to Section 2.4 of the Indenture.
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[SECTION 5.9. Certificate Distribution Account.
(a) On each Payment Date, the Trustee shall distribute all
amounts on deposit in the Certificate Distribution Account to Certificateholders
in respect of the Certificates to the extent of amounts due and unpaid on the
Certificates for principal and interest in the following amounts and in the
following order of priority:
(i) accrued and unpaid interest on the Certificates; provided that if
there are not sufficient funds in the Certificate Distribution Account to pay
the entire amount of accrued and unpaid interest then due on the Certificates,
the amount in the Certificate Distribution Account shall be applied to the
payment of such interest on the Certificates pro rata on the basis of the amount
of accrued and unpaid interest due on the Certificates;
(ii) to the Holders of the Certificates, the Certificateholders'
Principal Distributable Amount and the Accelerated Principal Amount until the
outstanding principal balance of the Certificates is reduced to zero.
(b) On each Payment Date, the Trustee shall send to each
Certificateholder the statement provided to the Trustee by the Servicer pursuant
to Section 5.11 hereof on such Payment Date.
(i) In the event that any withholding tax is imposed on the Trust's
payment (or allocations of income) to a Certificateholder, such tax shall reduce
the amount otherwise distributable to the Certificateholder in accordance with
this Section. The Trustee is hereby authorized and directed to retain from
amounts otherwise distributable to the Certificateholders sufficient funds for
the payment of any tax that is legally owed by the Trust (but such authorization
shall not prevent the Trustee from contesting any such tax in appropriate
proceedings, and withholding payment of such tax, if permitted by law, pending
the outcome of such proceedings). The amount of any withholding tax imposed with
respect to a Certificateholder shall be treated as cash distributed to such
Certificateholder at the time it is withheld by the Trust and remitted to the
appropriate taxing authority. If there is a possibility that withholding tax is
payable with respect to a distribution (such as a distribution to a non-US
Certificateholder), the Trustee may in its sole discretion withhold such amounts
in accordance with this clause (c). In the event that an Certificateholder
wishes to apply for a refund of any such withholding tax, the Trustee shall
reasonably cooperate with such Certificateholder in making such claim so long as
such Certificateholder agrees to reimburse the Trustee for any out-of-pocket
expenses incurred.]
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(c) Any funds remaining in the Certificate Distribution Account after
distribution of all amounts specified in this Section shall be distributed to
the Depositor.
(d) Distributions required to be made to Certificateholders on any
Payment Date shall be made to each Certificateholder of record on the preceding
Record Date either by wire transfer, in immediately available funds, to the
account of such Holder at a bank or other entity having appropriate facilities
therefor, if (i) such Certificateholder shall have provided to the Certificate
Registrar appropriate written instructions at least five Business Days prior to
such Payment Date and such Holder's certificates in the aggregate evidence a
denomination of not less than $1,000,000 or (ii) such Certificateholder is the
Depositor, or an Affiliate thereof, or, if not, by check mailed to such
Certificateholder at the address of such holder appearing in the Certificate
Register; provided, however, that, unless Definitive Certificates have been
issued pursuant to Section 3.13 of the Trust Agreement, with respect to
Certificates registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), distributions will
be made by wire transfer in immediately available funds to the account
designated by such nominee. Notwithstanding the foregoing, the final
distribution in respect of any Certificate (whether on the Final Scheduled
Payment Date or otherwise) will be payable only upon presentation and surrender
of such Certificate at the office or agency maintained for that purpose by the
Certificate Registrar pursuant to Section 3.8 of the Trust Agreement.
(i) Subject to Section 5.1 and this section, monies received by the
Trustee hereunder need not be segregated in any manner except to the extent
required by law and may be deposited under such general conditions as may be
prescribed by law, and the Trustee shall not be liable for any interest
thereon.]
SECTION 5.10. Pre-Funding Account.
(a) On the Closing Date, the Trustee will deposit, on behalf of the
Seller, in the Pre-Funding Account $[ ] from the proceeds of the sale of the
Notes and the Certificates. On each Subsequent Transfer Date, the Servicer shall
instruct the Trustee to withdraw from the Pre-Funding Account (i) an amount
equal to [ ]% of the Principal Balance of the Subsequent Receivables transferred
to the Issuer on such Subsequent Transfer Date and to distribute such amount to
or upon the order of the Seller upon satisfaction of the conditions set forth in
this Agreement with respect to such transfer and (ii) an amount equal to the
Subsequent Spread Account Deposit on such Subsequent
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Transfer Date upon satisfaction of the conditions set forth in this Agreement
with respect to such transfer.
(b) If the Pre-Funded Amount has not been reduced to zero on the date
on which the Funding Period ends after giving effect to any reductions in the
Pre-Funded Amount on such date, the Servicer shall instruct the Trustee to
withdraw from the Pre- Funding Account on the Mandatory Redemption Date the
Pre-Funded Amount (exclusive of any Pre-Funding Earnings) and deposit an amount
equal to the Note Prepayment Amount in the Note Distribution Account.
SECTION 5.11. Statements to Certificateholders and Noteholders.
Statements to Certificateholders and Noteholders. On or prior to each Payment
Date, the Servicer shall provide to the Trustee (with a copy to the Credit
Enhancer and the Rating Agencies) for the Trustee to forward to each Noteholder
of record, and to each Certificateholder of record, a statement setting forth at
least the following information as to the Notes and the Certificates to the
extent applicable:
(i) the amount of such distribution allocable to principal of each
Class of Notes and to the Certificate Balance of the Certificates;
(ii) the amount of such distribution allocable to interest on or with
respect to each Class of Notes [and to the Certificates];
(iii) the amount of such distribution payable out of amounts withdrawn
from the Spread Account or pursuant to a claim on the Credit Enhancement or the
Certificate Policy;
(iv) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
(v) the aggregate outstanding principal amount of each Class of Notes,
the Note Pool Factor for each such Class after giving effect to payments
allocated to principal reported under clause (i) above;
(vi) the amount of the Servicing Fee (inclusive of the Standby Fee paid
to the Standby Servicer) paid to the Servicer with respect to the related
Collection Period, and the amount of any unpaid Servicing Fees (inclusive of the
Standby Fee) and the change in such amount from that of the prior Payment Date;
(vii) the Class A Noteholders' Interest Carryover Shortfall, the Class
B Noteholders' Interest Carryover Shortfall, the Class A Noteholders' Principal
Carryover Shortfall, and the Class B Noteholders' Principal Carryover Shortfall;
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(viii) the amount distributable to the Certificate Credit Enhancer on
such Payment Date;
(ix) 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 payments between 31 and 59
days and 60 days or more;
(x) the amount of the aggregate Realized Losses, if any, for the second
preceding Collection Period;
(xi) the number and the aggregate Purchase Amounts for Receivables, if
any, that were repurchased in such period and summary information as to losses
and delinquencies with respect to the Receivables;
(xii) for Payment Dates during the Funding Period (if any), the
remaining Pre-Funded Amount; and
(xiii) for the final Subsequent Transfer Date, the amount of any
remaining Pre-Funded Amount that has not been used to fund the purchase of
Subsequent Receivables.
(xiv) the cumulative amount of Realized Losses, since the Initial
Cutoff Date to the last day of the related Collection Period.
Each amount set forth pursuant to paragraph (i), (ii), (iii), (vi), (vii), (xi)
and (xii) above shall be expressed as a dollar amount per $1,000 of the initial
principal balance of the Notes (or Class thereof) or the initial Certificate
Balance, as applicable.
ARTICLE VI
[CREDIT ENHANCEMENT]
ARTICLE VII
[Reserved]
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ARTICLE VIII
THE SELLER
SECTION 7.1. Representations of Seller. The Seller makes the following
representations on which the Credit Enhancer shall be deemed to have relied in
executing and delivering the Policies and on which the Issuer is deemed to have
relied in acquiring the Receivables. The representations speak as of the
execution and delivery of this Agreement and as of the Closing Date, in the case
of Initial Receivables, and as of the applicable subsequent Transfer Date, in
the case of Subsequent Receivables, and shall survive the sale of the
Receivables to the Issuer and the pledge thereof to the Trustee pursuant to the
Indenture.
(a) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of California, with power and authority to
own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at
all relevant times, and now has, power, authority and legal right to
acquire, own and sell the Receivables and the other Conveyed Property
transferred to the Trust.
(b) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business shall
require such qualifications.
(c) Power and Authority. The Seller has the power and
authority to execute and deliver this Agreement and the Basic Documents
to which it is a party and to carry out its terms and their terms,
respectively; the Seller has full power and authority to sell and
assign the Receivables and the Other Conveyed Property to be sold and
assigned to and deposited with the Trust by it and has duly authorized
such sale and assignment to the Trust by all necessary corporate
action; and the execution, delivery and performance of this Agreement
and the Basic Documents to which the Seller is a party have been duly
authorized by the Seller by all necessary corporate action.
(d) Valid Sale, Binding Obligations. This Agreement effects a
valid sale, transfer and assignment of the Receivables and the Other
Conveyed Property, enforceable against the Seller and creditors of and
purchasers from the Seller; and this Agreement and the Basic Documents
to which the Seller is a party, when duly executed and delivered,
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shall constitute legal, valid and binding obligations of the Seller
enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the Basic Documents and the
fulfillment of the terms of this Agreement and the Basic Documents
shall not conflict with, result in any breach of any of the terms and
provisions of or constitute (with or without notice, lapse of time or
both) a default under the certificate of incorporation or by-laws of
the Seller, or any indenture, agreement, mortgage, deed of trust or
other instrument to which the Seller is a party or by which it is
bound, or result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than this Agreement,
or violate any law, order, rule or regulation applicable to the Seller
of any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Seller or any of its properties.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller,
before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the
Seller or its properties (A) asserting the invalidity of this
Agreement, the Securities or any of the Basic Documents, (B) seeking to
prevent the issuance of the Securities or the consummation of any of
the transactions contemplated by this Agreement or any of the Basic
Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement
or any of the Basic Documents, or (D) relating to the Seller and which
might adversely affect the federal or state income, excise, franchise
or similar tax attributes of the Securities.
(g) No Consents. No consent, approval, authorization or order
of or declaration or filing with any governmental authority is required
for the issuance or sale of the Securities or the consummation of the
other transactions
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contemplated by this Agreement, except such as have been duly made or
obtained.
(h) The Seller has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such
taxes have become due.
(i) Chief Executive Office. The chief executive office of the
Seller is at 2 Ada, Irvine, California 92618.
SECTION 7.2. [Reserved].
SECTION 7.3. Liability of Seller; Indemnities. The Seller shall be
liable in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Trust, the Credit Enhancer and the Trustee from and
against any taxes that may at any time be asserted against any such Person with
respect to the transactions contemplated in this Agreement and any of the Basic
Documents (except any income taxes arising out of fees paid to the Owner
Trustee, the Trustee and the Credit Enhancer and except any taxes to which the
Owner Trustee, or the Trustee may otherwise be subject to), including any sales,
gross receipts, general corporation, tangible personal property, privilege or
license taxes (but, in the case of the Issuer, not including any taxes asserted
with respect to, federal or other income taxes arising out of distributions on
the Certificates and the Notes) and costs and expenses in defending against the
same.
(b) The Seller shall indemnify, defend and hold harmless the Issuer,
the Owner Trustee, the Trustee, the Credit Enhancer, the Certificateholders and
the Noteholders from and against any loss, liability or expense incurred by
reason of (i) the Seller's willful misfeasance, bad faith or negligence in the
performance of its duties under this Agreement, or by reason of reckless
disregard of its obligations and duties under this Agreement and (ii) the
Seller's or the Issuer's violation of Federal or state securities laws in
connection with the offering and sale of the Notes and the Certificates.
(c) The Seller shall indemnify, defend and hold harmless the Owner
Trustee, the Trustee, and the Standby Servicer and its officers, directors,
employees and agents from and against any and all costs, expenses, losses,
claims, damages and liabilities arising out of, or incurred in connection with
the acceptance or performance of the trusts and duties set forth herein and in
the Basic Documents except to the extent that such cost, expense, loss, claim,
damage or liability shall be due to the willful
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misfeasance, bad faith or negligence (except for errors in judgment) of the
Owner Trustee.
Indemnification under this Section shall survive the resignation or
removal of the Owner Trustee or the Trustee and the termination of this
Agreement or the Indenture or the Trust Agreement, as applicable, and shall
include reasonable fees and expenses of counsel and other expenses of
litigation. If the Seller shall have made any indemnity payments pursuant to
this Section and the Person to or on behalf of whom such payments are made
thereafter shall collect any of such amounts from others, such Person shall
promptly repay such amounts to the Seller, without interest.
SECTION 7.4. Merger or Consolidation of, or Assumption of the
Obligations of, Seller. Any Person (a) into which the Seller may be merged or
consolidated, (b) which may result from any merger or consolidation to which the
Seller shall be a party or (c) which may succeed to the properties and assets of
the Seller substantially as a whole, which Person in any of the foregoing cases
executes an agreement of assumption to perform every obligation of the Seller
under this Agreement, shall be the successor to the Seller hereunder without the
execution or filing of any document or any further act by any of the parties to
this Agreement; provided, however, that (i) the Seller shall have received the
written consent of the Credit Enhancer prior to entering into any such
transaction, (ii) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 3.1 shall have been breached
and no Servicer Termination Event, and no event which, after notice or lapse of
time, or both, would become a Servicer Termination Event shall have happened and
be continuing, (iii) the Seller shall have delivered to the Owner Trustee, the
Trustee and the Credit Enhancer an Officers' Certificate and an Opinion of
Counsel each stating that such consolidation, merger or succession and such
agreement of assumption comply with this Section and that all conditions
precedent, if any, provided for in this Agreement relating to such transaction
have been complied with, (iv) the Rating Agency Condition shall have been
satisfied with respect to such transaction and (v) the Seller shall have
delivered to the Owner Trustee, the Trustee and the Credit Enhancer an Opinion
of Counsel stating that, in the opinion of such counsel, either (A) all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary fully to preserve and protect the
interest of the Owner Trustee and the Trustee, respectively, in the Receivables
and reciting the details of such filings or (B) no such action shall be
necessary to preserve and protect such interest. Notwithstanding anything herein
to the contrary, the execution of the foregoing agreement of assumption and
compliance with clauses (i), (ii), (iii), (iv) and (v) above shall be conditions
to the
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consummation of the transactions referred to in clauses (a), (b) or (c) above.
SECTION 7.5. Limitation on Liability of Seller and Others. The Seller
and any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under any Basic Document. The Seller shall not be under any obligation to appear
in, prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 7.6. Seller May Own Certificates or Notes. The Seller and any
Affiliate thereof may in its individual or any other capacity become the ,owner
or pledgee of Certificates or Notes with the same rights as it would have if it
were not the Seller or an Affiliate thereof, except as expressly provided herein
or in any Basic Document. Notes or Certificates so owned by the Seller or such
Affiliate shall have an equal and proportionate benefit under the provisions of
the Basic Documents, without preference, priority, or distinction as among all
of the Notes or Certificates; provided, however, that any Notes or Certificates
owned by the Seller or any Affiliate thereof during the time such Notes or
Certificates are owned by them, shall be without voting rights for any purpose
set forth in the Basic Documents and All not be entitled to the benefits of the
Policies. The Seller shall notify the Owner Trustee, the Trustee and the Credit
Enhancer promptly after it or any of its Affiliates become the owner of a
Certificate or a Note.
ARTICLE VIII
THE SERVICER
SECTION 8.1. Representations of Servicer. The Servicer makes the
following representations on which the Credit Enhancer shall be deemed to have
relied in executing and delivering the Policies and on which the Issuer is
deemed to have relied in acquiring the Receivables. The representations speak as
of the execution and delivery of this Agreement and as of the Closing Date, in
the case of the Initial Receivables, and as of the applicable Subsequent
Transfer Date, in the case of the Subsequent Receivables, and shall survive the
sale of the Receivables to the Issuer and the pledge thereof to the Trustee
pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer has been duly
organized and is validly existing and in good standing under the laws
of its jurisdiction of organization,
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with power, authority and legal right to own its properties and to
conduct its business as such properties are currently owned and such
business is presently conducted, and had at all relevant times, and
shall have, power, authority and legal right to acquire, own and
service the Receivables;
(b) Due Qualification. The Servicer is duly qualified to do
business as a foreign corporation in good standing and has obtained all
necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of property or the conduct of its business
(including the servicing of the Receivables as required by this
Agreement) requires or shall require such qualification;
(c) Power and Authority. The Servicer has the power and
authority to execute and deliver this Agreement and its Basic Documents
and to carry out its terms and their terms, respectively, and the
execution, delivery and performance of this Agreement and the
Servicer's Basic Documents have been duly authorized by the Servicer by
all necessary corporate action;
(d) Binding Obligation. This Agreement and the Basic Documents
to which to the Servicer is a party shall constitute legal, valid and
binding obligations of the Servicer enforceable in accordance with
their respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or other similar laws affecting
the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of
whether such enforceability is considered in a proceeding in equity or
at law;
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the Basic Documents to which to the
Servicer is a party, and the fulfillment of the terms of this Agreement
and the Basic Documents to which the Servicer is a party, shall not
conflict with, result in any breach of any of the terms and provisions
of, or constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or bylaws of the Servicer, or any
indenture, agreement, mortgage, deed of trust or other instrument to
which the Servicer is a party or by which it is bound or any of its
properties are subject, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument,
other than this Agreement, or violate any law, order, rule or
regulation applicable to the Servicer of any court or of any federal or
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state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Servicer or any of its
properties;
(f) No Proceedings. There are no proceedings or investigations
pending or, to the Servicer's knowledge, threatened against the
Servicer, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality having jurisdiction over
the Servicer or its properties (A) asserting the invalidity of this
Agreement or any of the Basic Documents, (B) seeking to prevent the
issuance of the Securities or the consummation of any of the
transactions contemplated by this Agreement or any of the Basic
Documents, or (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Servicer of its
obligations under, or the validity or enforceability of, this
Agreement, the Securities or any of the Basic Documents or (D) relating
to the Servicer and which might adversely affect the federal or state
income, excise, franchise or similar tax attributes of the Securities;
(g) No Consents. No consent, approval, authorization or order
of or declaration or filing with any governmental authority is required
for the issuance or sale of the Securities or the consummation of the
other transactions contemplated by this Agreement, except such as have
been duly made or obtained.
(h) Taxes. The Servicer has filed on a timely basis all tax
returns required to be filed by it and paid all taxes, to the extent
that such taxes have become due.
(i) Chief Executive Office. The Servicer hereby represents and
warrants to the Trustee that the Servicer's principal place of business
and chief executive office is, and for the four months preceding the
date of this Agreement has been, located at: 2 Ada, Irvine, California.
SECTION 8.2. Liability of Servicer; Indemnities.
(a) The Servicer (in its capacity as such) shall be liable hereunder
only to the extent of the obligations in this Agreement specifically undertaken
by the Servicer and the representations made by the Servicer.
(i) The Servicer shall defend, indemnify and hold harmless the
Trust, the Trustee, the Owner Trustee, the Standby Servicer, the Credit
Enhancer, and the Securityholders from and against any and all costs, expenses,
losses, damages, claims and liabilities, arising out of or resulting from the
use, ownership
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or operation by the Servicer or any Affiliate thereof of any Financed Vehicle;
(ii) The Servicer shall indemnify, defend and hold harmless
the Trust, the Trustee, the Owner Trustee, the Standby Servicer, the Credit
Enhancer, and the Securityholders from and against any taxes that may at any
time be asserted against any of such parties with respect to the transactions
contemplated in this Agreement, including, without limitation, any sales, gross
receipts, general corporation, tangible personal property, privilege or license
taxes (but not including any federal or other income taxes, including franchise
taxes asserted with respect to, and as of the date of, the sale of the
Receivables and the Other Conveyed Property to the Trust or the issuance and
original sale of the Securities) and costs and expenses in defending against the
same;
(iii) The Servicer shall indemnify, defend and hold harmless
the Trust, the Trustee, the Owner Trustee, the Standby Servicer, the Credit
Enhancer, their respective officers, directors, agents and employees and the
Securityholders from and against any and all costs, expenses, losses, claims,
damages, and liabilities to the extent that such cost, expense, loss, claim,
damage, or liability arose out of, or was imposed upon the Trust, the Trustee,
the Standby Servicer, the Credit Enhancer or the Securityholders through the
negligence, willful misfeasance or bad faith of the Servicer in the performance
of its duties under this Agreement or by reason of reckless disregard of its
obligations and duties under this Agreement.
(iv) The Servicer shall indemnify, defend, and hold harmless
the Trustee, the Standby Servicer and the Collateral Agent from and against all
costs, expenses, losses, claims, damages, and liabilities arising out of or
incurred in connection with the acceptance or performance of the trusts and
duties herein contained, if any, except to the extent that such cost, expense,
loss, claim, damage or liability: (A) shall be due to the willful misfeasance,
bad faith, or negligence (except for errors in judgment) of the Trustee, the
Standby Servicer or Collateral Agent, as applicable or (B) relates to any tax
other than the taxes with respect to which the Servicer shall be required to
indemnify the Trustee, the Standby Servicer or the Collateral Agent.
(b) Notwithstanding the foregoing, the Servicer shall not be obligated
to defend, indemnify, and hold harmless any Securityholder for any losses,
claims, damages or liabilities incurred by any Securityholders arising out of
claims, complaints, actions and allegations relating to Section 406 of ERISA or
Section 4975 of the Code as a result of the purchase or holding of a Security by
such Securityholder with the assets of a
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plan subject to such provisions of ERISA or the Code or the servicing,
management and operation of the Trust.
(c) For purposes of this Section 9.2, in the event of the termination
of the rights and obligations of the Servicer (or any successor thereto pursuant
to Section 9.3) as Servicer pursuant to Section 10.1, or a resignation by such
Servicer pursuant to this Agreement, such Servicer shall be deemed to be the
Servicer pending appointment of a successor Servicer pursuant to Section 10.2.
The provisions of this Section 9.2(b) shall in no way affect the survival
pursuant to Section 9.2(c) of the indemnification by the Servicer provided by
Section 9.2(a).
(d) Indemnification under this Section 9.2 shall survive the
termination of this Agreement and any resignation or removal of CPS as Servicer
and shall include reasonable fees and expenses of counsel and expenses of
litigation. If the Servicer shall have made any indemnity payments pursuant to
this Section and the recipient thereafter collects any of such amounts from
others, the recipient shall promptly repay such amounts to the Servicer, without
interest.
SECTION 8.3. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Standby Servicer.
(a) CPS shall not merge or consolidate with any other person, convey,
transfer or lease substantially all its assets as an entirety to another Person,
or permit any other Person to become the successor to CPS's business unless,
after the merger, consolidation, conveyance, transfer, lease or succession, the
successor or surviving entity shall be capable of fulfilling the duties of CPS
contained in this Agreement and shall be acceptable to the Controlling Party,
and, if a Credit Enhancer Default shall have occurred and be continuing, shall
be an Eligible Servicer. Any corporation (i) into which CPS may be merged or
consolidated, (ii) resulting from any merger or consolidation to which CPS shall
be a party, (iii) which acquires by conveyance, transfer, or lease substantially
all of the assets of CPS, or (iv) succeeding to the business of CPS, in any of
the foregoing cases shall execute an agreement of assumption to perform every
obligation of CPS under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to CPS under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; provided, however, that nothing contained herein shall be
deemed to release CPS from any obligation. CPS shall provide notice of any
merger, consolidation or succession pursuant to this Section to the Owner
Trustee, the Trustee, the Securityholders, the Credit Enhancer and each Rating
Agency. Notwithstanding the foregoing, CPS shall not merge or consolidate
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with any other Person or permit any other Person to become a successor to CPS's
business, unless (x) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 4.6 shall have been breached
(for purposes hereof, such representations and warranties shall speak as of the
date of the consummation of such transaction) and no event that, after notice or
lapse of time, or both, would become an Insurance Agreement Event of Default
shall have occurred and be continuing, (y) CPS shall have delivered to the Owner
Trustee, the Trustee, the Rating Agencies and the Credit Enhancer an officer's
Certificate and an Opinion of Counsel each stating that such consolidation,
merger or succession and such agreement of assumption comply with this Section
and that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, and (z) CPS shall have
delivered to the Owner Trustee, the Trustee, the Rating Agencies and the Credit
Enhancer an opinion of Counsel, stating in the opinion of such counsel, either
(A) all financing statements and continuation statements and amendments thereto
have been executed and filed that are necessary to preserve and protect the
interest of the Trust in the Receivables and the Other Conveyed Property and
reciting the details of the filings or (B) no such action shall be necessary to
preserve and protect such interest.
(b) Any corporation (i) into which the Standby Servicer may be merged
or consolidated, (ii) resulting from any merger or consolidation to which the
Standby Servicer shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Standby Servicer, or (iv)
succeeding to the business of the Standby Servicer, in any of the foregoing
cases shall execute an agreement of assumption to perform every obligation of
the Standby Servicer under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Standby Servicer under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, anything in this Agreement to the
contrary notwithstanding; provided, however, that nothing contained herein shall
be deemed to release the Standby Servicer from any obligation.
SECTION 8.4. Limitation on Liability of Servicer, Standby Servicer and
Others.
Neither the Servicer, the Standby Servicer nor any of the directors or
officers or employees or agents of the Servicer or Standby Servicer shall be
under any liability to the Trust or the Securityholders, except as provided in
this Agreement, for any action taken or for refraining from the taking of any
action pursuant to this Agreement; provided, however, that this provision shall
not protect the Servicer, the Standby Servicer or
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any such person against any liability that would otherwise be imposed by reason
of a breach of this Agreement or willful misfeasance, bad faith or negligence in
the performance of duties. CPS, the Standby Servicer and any director, officer,
employee or agent of CPS or Standby Servicer may rely in good faith on the
written advice of counsel or on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising under this
Agreement.
SECTION 8.5. Delegation of Duties. The Servicer may at any time
delegate duties under this Agreement to sub-contractors who are in the business
of servicing automotive receivables with the prior written consent of the
controlling party as determined pursuant to Section 13.15 and (unless an
Insurance Agreement Event of Default shall have occurred and be continuing or
Norwest Bank Minnesota, National Association shall then be the Servicer) the
Holders of Class B Notes evidencing more than 50% of the outstanding principal
balance of the Class B Notes; provided, however, that no such delegation or
sub-contracting of duties by the Servicer shall relieve the Servicer of its
responsibility with respect to such duties; and provided further, that the
consent of the Holders of the requisite percentage of the outstanding principal
balance of the Class B Notes shall not be unreasonably withheld or delayed and
shall be deemed to have been given unless, on or before the Objection Date (as
defined below), the Trustee shall have received Objection Notices (as defined
below) from Holders of Class B Notes representing more than 50% of the
outstanding principal balance of the Class B Notes. Upon written request of the
Servicer, the Trustee shall deliver to each Class B Noteholder of record as of
the most recent Record Date a notice (a "Delegation Notice") prepared by the
Servicer (i) specifying the duties the Servicer proposes to delegate, (ii)
identifying the sub-contractor to whom it proposes to delegate such duties and
(iii) informing such Class B Noteholder that if it wishes to object to the
proposed delegation of duties, it must deliver a written notice of objection
(specifying in reasonable detail the reasons for its objection; such notice of
objection an "Objection Notice") on or before the date specified in such
Delegation Notice (the "Objection Date"), which Objection Date shall be a date
which is not more than 10 Business Days after the date the Servicer delivers
such Delegation Notice to the Trustee.
SECTION 8.6. Servicer and Standby Servicer Not to Resign. Subject to
the provisions of Section 9.3, neither the Servicer nor the Standby Servicer
shall resign from the obligations and duties imposed on it by this Agreement as
Servicer or Standby Servicer except upon a determination that by reason of a
change in legal requirements the performance of its duties under this Agreement
would cause it to be in violation of such legal requirements in a manner which
would have a material adverse effect on the Servicer or the Standby Servicer, as
the case may
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be, and the Credit Enhancer (so long as a Credit Enhancer Default shall not have
occurred and be continuing) or a Security Majority (if a Credit Enhancer Default
shall have occurred and be continuing) does not elect to waive the obligations
of the Servicer or the Standby Servicer, as the case may be, to perform the
duties which render it legally unable to act or to delegate those duties to
another Person. Any such determination permitting the resignation of the
Servicer or Standby Servicer shall be evidenced by an opinion of Counsel to such
effect delivered and acceptable to the Trustee, the Owner Trustee and the
Security Credit Enhancer (unless a Credit Enhancer Default shall have occurred
and be continuing). No resignation of the Servicer shall become effective until,
so long as no Credit Enhancer Default shall have occurred and be continuing, the
Standby Servicer or an entity acceptable to the Security Credit Enhancer shall
have assumed the responsibilities and obligations of the Servicer or, if a
Credit Enhancer Default shall have occurred and be continuing, the Standby
Servicer or a successor Servicer that is an Eligible Servicer shall have assumed
the responsibilities and obligations of the Standby Servicer. No resignation of
the Standby Servicer shall become effective until, so long as no Credit Enhancer
Default shall have occurred and be continuing, an entity acceptable to the
Security Credit Enhancer shall have assumed the responsibilities and obligations
of the Standby Servicer or, if a Credit Enhancer Default shall have occurred and
be continuing a Person that is an Eligible Servicer shall have assumed the
responsibilities and obligations of the Standby Servicer; provided, however,
that in the event a successor Standby Servicer is not appointed within 60 days
after the Standby Servicer has given notice of its resignation and has provided
the Opinion of Counsel required by this Section 9.6, the Standby Servicer may
petition a court for its removal.
ARTICLE IX
DEFAULT
SECTION 9.1. Servicer Termination Event. For purposes of this
Agreement, each of the following shall constitute a "Servicer Termination
Event":
(a) Any failure by the Servicer to deliver to the Trustee for
distribution to Securityholders any proceeds or payment required to be so
delivered under the terms of this Agreement that continues unremedied for a
period of two Business Days (one Business Day with respect to payment of
Purchase Amounts) after written notice is received by the Servicer from the
Trustee or (unless a Credit Enhancer Default shall have occurred and be
continuing) the Credit Enhancer or after discovery of such failure by a
Responsible officer of the Servicer;
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(b) Failure by the Servicer to deliver to the Trustee and (so long as a
Credit Enhancer Default shall not have occurred and be continuing) the Credit
Enhancer the Servicer's Certificate within five days after the date on which
such Servicer's Certificate is required to be delivered, or failure on the part
of the Servicer to observe its covenants and agreements set forth in Section
9.3(a);
(c) Failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement, which
failure (i) materially and adversely affects the rights of Securityholders
(determined without regard to the availability of funds under the Policy), or of
the Credit Enhancer (unless a Credit Enhancer Default shall have occurred and be
continuing), and (ii) continues unremedied for a period of 30 days after the
date on which written notice of such failure, requiring the same to be remedied,
shall have been given (1) to the Servicer by the Trustee or the Credit Enhancer
or (2) to the Servicer and to the Trustee and the Credit Enhancer by the Holders
of Class A Notes evidencing not less than 25% of the outstanding principal
balance of the Class A Notes or, after the Class A Notes have been paid in full
and all outstanding Reimbursement Obligations and other amounts due to the
Credit Enhancer have been paid in full, by the Holders of Class B Notes
evidencing not less than 25% of the outstanding principal balance of the Class B
Notes;
(d) The entry of a decree or order by a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
conservator, receiver, or liquidator for the Servicer or the Seller (or, so long
as CPS is Servicer, any of the Servicer's Affiliates) in any bankruptcy,
insolvency, readjustment of debt, marshalling of assets and liabilities, or
similar proceedings, or for the winding up or liquidation of its affairs, and
the continuance of any such decree or order unstayed and in effect for a period
of 60 consecutive days; or
(e) The consent by the Servicer or the Seller (or, so long as CPS is
Servicer, any of the Servicer's Affiliates) to the appointment of a conservator,
trustee, receiver or liquidator in any bankruptcy, insolvency, readjustment of
debt, marshalling of assets and liabilities, or similar proceedings of or
relating to the Servicer or the Seller (or, so long as CPS is Servicer, any of
the Servicer's Affiliates) of or relating to substantially all of its property;
or the Servicer or the Seller (or, so long as CPS is Servicer, any of the
Servicer's Affiliates) shall admit in writing its inability to pay its debts
generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its obligations; or
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(f) Any representation, warranty or statement of the Servicer made in
this Agreement or any certificate, report or other writing delivered pursuant
hereto shall prove to be incorrect in any material respect as of the time when
the same shall have been made, and the incorrectness of such representation,
warranty or statement has a material adverse effect on the Trust or the
Securityholders and, within 30 days after written notice thereof shall have been
given (1) to the Servicer by the Trustee or the Credit Enhancer or (2) to the
Servicer and to the Trustee and the Credit Enhancer by the Holders of Class A
Notes evidencing not less than 25% of the outstanding principal balance of the
Class A Notes or, after the Class A Notes have been paid in full and all
outstanding Reimbursement Obligations and other amounts due to the Credit
Enhancer have been paid in full, by the Holders of Class B Notes evidencing not
less than 25% of the outstanding principal balance of the Class B Notes, the
circumstances or condition in respect of which such representation, warranty or
statement was incorrect shall not have been eliminated or otherwise cured; or
(g) So long as a Credit Enhancer Default shall not have occurred and be
continuing, the Credit Enhancer shall not have delivered a Servicer Extension
Notice pursuant to Section 4.14; or
(h) So long as a Credit Enhancer Default shall not have occurred and be
continuing, an Insurance Agreement Event of Default or under any other Insurance
and Indemnity Agreement relating to any Series an Event of Default thereunder
shall have occurred; or
(i) A claim is made under the Credit Enhancement.
SECTION 9.2. Consequences of a Servicer Termination Event. If a
Servicer Termination Event shall occur and be continuing, the Credit Enhancer
(or, if a Credit Enhancer Default shall have occurred and be continuing either
the Trustee or (to the extent it has knowledge thereof) a Security Majority), by
notice given in writing to the Servicer (and to the Trustee if given by the
Credit Enhancer or the Securityholders) or by non-extension of the term of the
Servicer as referred to in Section 4.14 may terminate all of the rights and
obligations of the Servicer under this Agreement. The Servicer shall be entitled
to its pro rata share of the Servicing Fee for the number of days in the
Collection Period prior to the effective date of its termination. On or after
the receipt by the Servicer of such written notice or upon termination of the
term of the Servicer, all authority, power, obligations and responsibilities of
the Servicer under this Agreement, whether with respect to the Notes, the
Certificates or the Other Conveyed Property or otherwise, automatically shall
pass to, be vested in and become obligations
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and responsibilities of the Standby Servicer (or such other successor Servicer
appointed by the Controlling Party under Section 10.3); provided, however, that
the successor Servicer shall have no liability with respect to any obligation
which was required to be performed by the terminated Servicer prior to the date
that the successor Servicer becomes the Servicer or any claim of a third party
based on any alleged action or inaction of the terminated Servicer. The
successor Servicer is authorized and empowered by this Agreement to execute and
deliver, on behalf of the terminated Servicer, as attorney-in-fact or otherwise,
any and all documents and other instruments and to do or accomplish all other
acts or things necessary or appropriate to effect the purposes of such notice of
termination, whether to complete the transfer and endorsement of the Receivables
and the other Conveyed Property and related documents to show the Trust as
lienholder or secured party on the related Lien Certificates, or otherwise. The
terminated Servicer agrees to cooperate with the successor Servicer in effecting
the termination of the responsibilities and rights of the terminated Servicer
under this Agreement, including, without limitation, the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the terminated Servicer for deposit, or have been deposited
by the terminated Servicer, in the Collection Account or thereafter received
with respect to the Receivables and the delivery to the successor Servicer of
all Receivable Files and a computer tape in readable form as of the most recent
Business Day containing all information necessary to enable the successor
Servicer or a successor Servicer to service the Receivables and the Other
Conveyed Property. All reasonable costs and expenses (including attorneys' fees)
incurred in connection with transferring the Receivable Files to the successor
Servicer and amending this Agreement to reflect such succession as Servicer
pursuant to this Section 10.1 shall be paid by the predecessor Servicer upon
presentation of reasonable documentation of such costs and expenses. In
addition, any successor Servicer shall be entitled to payment from the immediate
predecessor Servicer for reasonable transition expenses incurred in connection
with acting as successor Servicer, and to the extent not so paid, such payment
shall be made pursuant to Section 5.7(b) hereof. Upon receipt of notice of the
occurrence of Servicer Termination Event, the Trustee shall give notice thereof
to the Rating Agencies. If requested by the Controlling Party, the successor
Servicer shall terminate the Lockbox Agreement and direct the Obligors to make
all payments under the Receivables directly to the successor Servicer (in which
event the successor Servicer shall process such payments in accordance with
Section 4.2(e)), or to a lockbox established by the successor Servicer at the
direction of the Controlling Party, at the successor Servicer's expense. The
terminated Servicer shall grant the Trustee, the successor Servicer and the
Controlling
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Party reasonable access to the terminated Servicer's premises at the terminated
Servicer's expense.
SECTION 9.3. Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 10.2, upon non-extension of the servicing term as referred
to in Section 4.14, or upon the resignation of the Servicer pursuant to Section
9.6, the predecessor Servicer shall continue to perform its functions as
Servicer under this Agreement, in the case of termination, only until the date
specified in such termination notice or, if no such date is specified in a
notice of termination, until receipt of such notice and, in the case of
expiration and non-renewal of the term of the Servicer upon the expiration of
such term, and, in the case of resignation, until the later of (x) the date 45
days from the delivery to the Trustee of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
unable to act as Servicer, as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of termination of the Servicer,
Norwest Bank Minnesota, National Association, as Standby Servicer, shall assume
the obligations of Servicer hereunder on the date specified in such written
notice (the "Assumption Date") pursuant to the Servicing Assumption Agreement
or, in the event that the Credit Enhancer shall have determined that a Person
other than the Standby Servicer shall be the successor Servicer in accordance
with Section 10.2, on the date of the execution of a written assumption
agreement by such Person to serve as successor Servicer. Notwithstanding the
Standby Servicer's assumption of, and its agreement to perform and observe, all
duties, responsibilities and obligations of CPS as Servicer under this Agreement
arising on and after the Assumption Date, the Standby Servicer shall not be
deemed to have assumed or to become liable for, or otherwise have any liability
for, any duties, responsibilities, obligations or liabilities of CPS or any
predecessor Servicer arising on or before the Assumption Date, whether provided
for by the terms of this Agreement, arising by operation of law or otherwise,
including, without limitation, any liability for, any duties, responsibilities,
obligations or liabilities of CPS or any predecessor Servicer arising on or
before the Assumption Date under Section 4.7 or 9.2 of this Agreement,
regardless of when the liability, duty, responsibility or obligation of CPS or
any predecessor Servicer therefore arose, whether provided by the terms of this
Agreement, arising by operation of law or otherwise. Notwithstanding the above,
if the Standby Servicer shall be legally unable or unwilling to act as Servicer,
and a Credit Enhancer Default shall have occurred and be continuing, the Standby
Servicer, the Trustee or a Security Majority may petition a court of competent
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jurisdiction to appoint any Eligible Servicer as the successor to the Servicer.
Pending appointment pursuant to the preceding sentence, the Standby Servicer
shall act as successor Servicer unless it is legally unable to do so, in which
event the outgoing Servicer shall continue to act as Servicer until a successor
has been appointed and accepted such appointment. Subject to Section 9.6, no
provision of this Agreement shall be construed as relieving the Standby Servicer
of its obligation to succeed as successor Servicer upon the termination of the
Servicer pursuant to Section 10.2, the resignation of the Servicer pursuant to
Section 9.6 or the non-extension of the servicing term of the Servicer, as
referred to in Section 4.14. If upon the termination of the Servicer pursuant to
Section 10.2 or the resignation of the Servicer pursuant to Section 9.6, the
Controlling Party appoints a successor Servicer other than the Standby Servicer,
the Standby Servicer shall not be relieved of its duties as Standby Servicer
hereunder.
(b) Any successor Servicer shall be entitled to such compensation
(whether payable out of the Collection Account or otherwise) as the Servicer
would have been entitled to under this Agreement if the Servicer had not
resigned or been terminated hereunder. [If any successor Servicer is appointed
as a result of the Standby Servicer's refusal (in breach of the terms of this
Agreement) to act as Servicer although it is legally able to do so, the Credit
Enhancer and such successor Servicer may agree on reasonable additional
compensation to be paid to such successor Servicer by the Standby Servicer,
which additional compensation shall be paid by such breaching Standby Servicer
in its individual capacity and solely out of its own funds. If any successor
Servicer is appointed for any reason other than the Standby Servicer's refusal
to act as Servicer although legally able to do so the Credit Enhancer and such
successor Servicer may agree on additional compensation to be paid to such
successor Servicer, which additional compensation shall be payable as provided
in the Master Spread Account Agreement and shall in no event exceed $150,000. In
addition, any successor Servicer shall be entitled, as provided in the Master
Spread Account Agreement, to reasonable transition expenses incurred in acting
as successor Servicer.]
SECTION 9.4. Notification to Noteholders and Certificateholders. Upon
any termination of, or appointment of a successor to, the Servicer, the Trustee
shall give prompt written notice thereof to each Securityholder and to the
Rating Agencies.
SECTION 9.5. Waiver of Past Defaults. So long as no Credit Enhancer
Default shall have occurred and be continuing, the Credit Enhancer (or, if a
Credit Enhancer Default shall have occurred and be continuing, the Security
Majority) may, on behalf of all Noteholders and Certificateholders, waive any
default by
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the Servicer in the performance of its obligations hereunder and its
consequences. Upon any such waiver of a past default, such default shall cease
to exist, and any Servicer Termination Event arising therefrom shall be deemed
to have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent
thereto.
SECTION 9.6. Action Upon Certain Failures of the Servicer. In the event
that the Trustee shall have knowledge of any failure of the Servicer specified
in Section 10.1 which would give rise to a right of termination under such
Section upon the Servicer's failure to remedy the same after notice, the Trustee
shall give notice thereof to the Servicer and the Credit Enhancer. For all
purposes of this Agreement (including, without limitation, Section 6.2(b) and
this Section 10.6), the Trustee shall not be deemed to have knowledge of any
failure of the Servicer as specified in Section 10.1 unless notified thereof in
writing by the Servicer, the Credit Enhancer or by a Securityholder. The Trustee
shall be under no duty or obligation to investigate or inquire as to any
potential failure of the Servicer specified in Section 10.1.
ARTICLE X
TERMINATION
SECTION 10.1. Optional Purchase of All Receivables.
(a) On the last day of any Collection Period as of which the Pool
Balance shall be less than or equal to 10% of the original Pool Balance, the
Servicer and the Seller each shall have the option to purchase the Owner Trust
Estate, other than the Trust Accounts (with the consent of the Credit Enhancer
if such purchase would result in a claim on the Credit Enhancement or would
result in any amount owing to the Credit Enhancer under the Insurance Agreement
remaining unpaid); provided, however, that the amount to be paid for such
purchase (as set forth in the following sentence) shall be sufficient to pay the
full amount of principal, premium, if any, and interest then due and payable on
the Notes and the Certificates. To exercise such option, the Servicer or the
Seller, as the case may be, shall deposit pursuant to Section 5.6 in the
Collection Account an amount equal to the aggregate Purchase Amount for the
Receivables (including Liquidated Receivables), plus the appraised value of any
other property held by the Trust, such value to be determined by an appraiser
mutually agreed upon by the Servicer, the Credit Enhancer and the Trustee, and
shall succeed to all interests in and to the Trust.
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(b) Upon any sale of the assets of the Trust pursuant to Section 9.2 of
the Trust Agreement, the Servicer shall instruct the Trustee to deposit the
proceeds from such sale after all payments and reserves therefrom (including the
expenses of such sale) have been made (the "Insolvency Proceeds") in the
Collection Account.
(c) Notice of any termination of the Trust shall be given by the
Servicer to the Owner Trustee, the Trustee, the Trustee, the Credit Enhancer and
the Rating Agencies as soon as practicable after the Servicer has received
notice thereof.
(d) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Trustee to this Agreement.
ARTICLE XI
ADMINISTRATIVE DUTIES OF THE SERVICER
SECTION 11.1. Administrative Duties.
(a) Duties with Respect to the Indenture. The Servicer shall perform
all its duties and the duties of the Issuer under the Indenture. In addition,
the Servicer shall consult with the Owner Trustee as the Servicer deems
appropriate regarding the duties of the Issuer under the Indenture. The Servicer
shall monitor the performance of the Issuer and shall advise the Owner Trustee
when action is necessary to comply with the Issuer's duties under the Indenture.
The Servicer shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Servicer shall take all necessary action that is the duty of
the Issuer to take pursuant to the Indenture, including, without limitation,
pursuant to Sections 2.7, 3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 5.1, 5.4, 7.3, 8.3,
9.2, 9.3, 11.1 and 11.15 of the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth in
this Agreement or any of the Basic Documents, the Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner Trustee
or shall cause the preparation by other appropriate Persons of all such
documents,
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reports, filings, instruments, certificates and opinions as it shall be the duty
of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to this
Agreement or any of the Basic Documents or under state and federal tax and
securities laws, and at the request of the Owner Trustee shall take all
appropriate action that it is the duty of the Issuer to take pursuant to this
Agreement or any of the Basic Documents, including, without limitation, pursuant
to Sections 2.6 and 2.11 of the Trust Agreement. In accordance with the
directions of the Issuer or the Owner Trustee, the Servicer shall administer,
perform or supervise the performance of such other activities in connection with
the Collateral (including the Basic Documents) as are not covered by any of the
foregoing provisions and as are expressly requested by the Issuer or the Owner
Trustee and are reasonably within the capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of the
Basic Documents to the contrary, the servicer shall be responsible for promptly
notifying the Owner Trustee and the Trustee in the event that any withholding
tax is imposed on the Issuer's payments (or allocations of income) to an owner
(as defined in the Trust Agreement) as contemplated this Agreement. Any such
notice shall be in writing and specify the amount of any withholding tax
required to be withheld by the Owner Trustee or the Trustee pursuant to such
provision.
(iii) Notwithstanding anything in this Agreement or the Basic
Documents to the contrary, the Servicer shall be responsible for performance of
the duties of the Issuer or the Seller set forth in Section 5.6(a), (b), (c) and
(d) of the Trust Agreement with respect to, among other things, accounting and
reports to owners (as defined in the Trust Agreement); provided, however, that
once prepared by the Servicer the Owner Trustee shall retain responsibility for
the distribution of the Schedule K-1s necessary to enable each Certificateholder
to prepare its federal and state income tax returns.
(iv) The Servicer shall perform the duties of the Servicer
specified in Section 10.2 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Owner Trustee, and any other
duties expressly required to be performed by the Servicer under this Agreement
or any of the Basic Documents.
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into transactions with
or otherwise deal with any of its Affiliates; provided, however, that the terms
of any such transactions or dealings shall be in accordance with any directions
received from the Issuer and shall be, in the
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Servicer's opinion, no less favorable to the Issuer in any material respect.
(c) Tax Matters. The Servicer shall prepare and file, on behalf of the
Seller, all tax returns, tax elections, financial statements and such annual or
other reports of the Issuer as are necessary for preparation of tax reports as
provided in Article V of the Trust Agreement, including without limitation forms
1099 and 1066. All tax returns will be signed by the Seller.
(d) Non-Ministerial Matters. With respect to matters that in the
reasonable judgment of the Servicer are non-ministerial, the Servicer shall not
take any action pursuant to this Article XII unless within a reasonable time
before the taking of such action, the Servicer shall have notified the Owner
Trustee and the Trustee of the proposed action and the Owner Trustee and, with
respect to items (A), (B), (C) and (D) below, the Trustee shall not have
withheld consent or provided an alternative direction. For the purpose of the
preceding sentence, "non- ministerial matters" shall include:
(i) the amendment of or any supplement to the
Indenture;
(ii) the initiation of any claim or lawsuit by the Issuer and
the compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Receivables);
(iii) the amendment, change or modification of this
Agreement or any of the Basic Documents;
(iv) the appointment of successor Note Registrars, successor
Paying Agents and successor Trustees pursuant to the Indenture or the
appointment of Successor Servicers or the consent to the assignment by the Note
Registrar, Paying Agent or Trustee of its obligations under the Indenture; and
(v) the removal of the Trustee or the Trustee.
(e) Exceptions. Notwithstanding anything to the contrary in this
Agreement except as expressly provided herein or in the other Basic Documents,
the Servicer, in its capacity hereunder, shall not be obligated to, and shall
not, (1) make any payments to the Noteholders or Certificateholders under the
Basic Documents, (2) sell the Indenture Trust Property pursuant to Section 5.5
of the Indenture, (3) take any other action that the Issuer directs the Servicer
not to take on its behalf or (4) in connection with its duties hereunder assume
any indemnification obligation of any other Person.
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(f) Limitation of Standby Servicer's Obligations. The Standby Servicer
or any successor Servicer shall not be responsible for any obligations or duties
of the servicer under Section 12.1.
SECTION 11.2. Records. The Servicer shall maintain appropriate books of
account and records relating to services performed under this Agreement, which
books of account and records shall be accessible for inspection by the Issuer at
any time during normal business hours.
SECTION 11.3. Additional Information to be Furnished to the Issuer. The
Servicer shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1. Amendment.
(a) This Agreement may be amended from time to time by the parties
hereto, with the consent of the Trustee (which consent may not be unreasonably
withheld), with the prior written consent of the Credit Enhancer (so long as no
Credit Enhancer Default has occurred and is continuing) but without the consent
of any of the Noteholders or the Certificateholders, to cure any ambiguity, to
correct or supplement any provisions in this Agreement, to comply with any
changes in the Code, or to make any other provisions with respect to matters or
questions arising under this Agreement which shall not be inconsistent with the
provisions of this Agreement or the Insurance Agreement; provided, however, that
such action shall not, as evidenced by an Opinion of Counsel delivered to Owner
Trustee and the Trustee, adversely affect in any material respect the interests
of any Noteholder or Certificateholder; provided further that if a Credit
Enhancer Default has occurred and is continuing, such action shall not
materially adversely affect the interests of the Credit Enhancer.
This Agreement may also be amended from time to time by the parties
hereto, with the consent of the Credit Enhancer, the consent of the Trustee, the
consent of the Holders of Notes evidencing not less than a majority of the
outstanding principal amount of the Notes and the consent of the Holders (as
defined in the Trust Agreement) of Certificates evidencing not less than a
majority of the Certificate Percentage Interest [or Certificate Balance] for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Agreement or of modifying in any manner the rights of
the
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Noteholders or the Certificateholders; provided, however, that no such amendment
shall (a) increase or reduce in any manner the amount of, or accelerate or delay
the timing of, collections of payments on Receivables or distributions that
shall be required to be made for the benefit of the Noteholders or the
Certificateholders or (b) reduce the aforesaid percentage of the outstanding
principal amount of the Notes and the Certificate Balance, the Holders of which
are required to consent to any such amendment, without the consent of the
Holders of all the outstanding Notes and the Holders (as defined in the Trust
Agreement) of all the outstanding Certificates, of each class affected thereby;
provided further, that if a Credit Enhancer Default has not occurred and is
continuing, such action shall not materially adversely affect the interest of
the Credit Enhancer.
Promptly after the execution of any such amendment or consent, the
Trustee shall furnish written notification of the substance of such amendment or
consent to each Securityholder and the Rating Agencies.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of Noteholders or Certificateholders provided for in this
Agreement) and of evidencing the authorization of any action by Noteholders or
Certificateholders shall be subject to such reasonable requirements as the
Trustee or the Owner Trustee, as applicable, may prescribe.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and the Opinion of Counsel referred to in Section 13.2(i)(1)
has been delivered. The Owner Trustee, the Trustee, the Standby Servicer and the
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Issuer's, the Owner Trustee's, the Trustee's, the Standby Servicer's
or the Trustee's, as applicable, own rights, duties or immunities under this
Agreement or otherwise.
[(b) Notwithstanding anything to the contrary contained in Section
13.1(a) above, the provisions of the Agreement relating to (i) the Spread
Account Supplement, the Spread Account, the Specified Spread Account Requisite
Amount, a Trigger Event or any component definition of a Trigger Event and (ii)
any additional sources of funds which may be added to the Spread Account or uses
of funds on deposit in the Spread Account may be amended in any respect by the
Seller, the Servicer, the Credit Enhancer and the
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Collateral Agent (the consent of which shall not be withheld or delayed with
respect to any amendment that does not adversely affect the Collateral Agent)
without the consent of, or notice to, the Noteholders or the
Certificateholders.]
SECTION 12.2. Protection of Title to Trust.
(a) The Seller or Servicer or both shall execute and file such
financing statements and cause to be executed and filed such continuation
statements, all in such manner and in such places as may be required by law
fully to preserve, maintain and protect the interest of the Issuer and the
interests of the Trustee in the Receivables and in the proceeds thereof. The
Seller shall deliver (or cause to be delivered) to the Credit Enhancer, the
Owner Trustee and the Trustee file-stamped copies of, or filing receipts for,
any document filed as provided above, as soon as available following such
filing.
(b) Neither the Seller nor the Servicer shall change its name, identity
or corporate structure in any manner that would, could or might make any
financing statement or continuation statement filed in accordance with paragraph
(a) above seriously misleading within the meaning of section 9-402(7) of the
UCC, unless it shall have given the Credit Enhancer, the Owner Trustee, the
Trustee and the Trustee at least five days' prior written notice thereof and
shall have promptly filed appropriate amendments to all previously filed
financing statements or continuation statements. Promptly upon such filing, the
Seller or the Servicer, as the case may be, shall deliver an Opinion of Counsel
in form and substance reasonably satisfactory to the Credit Enhancer, stating
either (A) all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the interest
of the Trust and the Trustee in the Receivables, and reciting the details of
such filings or referring to prior opinions of Counsel in which such details are
given, or (B) no such action shall be necessary to preserve and protect such
interest.
(c) Each of the Seller and the Servicer shall have an obligation to
give the Credit Enhancer, the Owner Trustee, the Trustee and the Trustee at
least 60 days' prior written notice of any relocation of its principal executive
office if, a; a result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall promptly file
any such amendment. The Servicer shall at all times maintain each office from
which it shall service Receivables, and its principal executive office, within
the United States of America.
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(d) The servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Collection Account
in respect of such Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables to the Issuer,
the Servicer's master computer records (including any backup archives) that
refer to a Receivable shall indicate clearly the interest of the Trust in such
Receivable and that such Receivable is owned by the Trust. Indication of the
Trust's interest in a Receivable shall be deleted from or modified on the
Servicer's computer systems when, and only when, the related Receivable shall
have been paid in full or repurchased.
(f) If at any time the Seller or the Servicer shall propose to sell,
grant a security interest in or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Trust.
(g) The Servicer shall permit the Trustee, the Standby Servicer and the
Credit Enhancer and its agents at any time during normal business hours to
inspect, audit, and make copies of and abstracts from the Servicer's records
regarding any Receivable.
(h) Upon request, the Servicer shall furnish to the Credit Enhancer,
the Owner Trustee or to the Trustee, within five Business Days, a list of all
Receivables (by contract number and name of Obligor) then held as part of the
Trust, together with a reconciliation of such list to the Schedule of
Receivables and to each of the Servicer's Certificates furnished before such
request indicating removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Credit Enhancer, the Owner
Trustee and the Trustee:
(i) promptly after the execution and delivery of the Agreement
and, if required pursuant to Section 13.1, of each amendment, an opinion of
Counsel stating that, in the opinion of such Counsel, in form and substance
reasonably satisfactory to
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the Credit Enhancer, either (A) all financing statements and continuation
statements have been executed and filed that are necessary fully to preserve and
protect the interest of the Trust and the Trustee in the Receivables, and
reciting the details of such filings or referring to prior opinions of Counsel
in which such details are given, or (B) no such action shall be necessary to
preserve and protect such interest; and
(ii) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months after
the Cutoff Date, an Opinion of Counsel, dated as of a date during such 90-day
period, stating that, in the opinion of such counsel, either (A) all financing
statements and continuation statements have been executed and filed that are
necessary fully to preserve and protect the interest of the Trust and the
Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of counsel in which such details are given, or (B)
no such action shall be necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (i) or (ii) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
SECTION 12.3. Notices. All demands, notices and communications upon or
to the Seller, the Servicer, the Owner Trustee, the Trustee or the Rating
Agencies under this Agreement shall be in writing, personally delivered, or
mailed by certified mail, return receipt requested, and shall be deemed to have
been duly given upon receipt (a) in the case of the Seller to CPS Receivables
Funding Corp., 2 Ada, Irvine, California 92618, (b) in the case of the Servicer
to Consumer Portfolio Services, Inc., 2 Ada, Irvine, California, Attention:
Chief Financial officer, (c) in the case of the Issuer or the Owner Trustee, at
the Corporate Trust Office of the Owner Trustee, (d) in the case of the Trustee
or the Collateral Agent, at the Corporate Trust office, (e) in the case of the
Credit Enhancer, to [ ] (in each case in which notice or other communication to
the Credit Enhancer refers to a Servicer Termination Event, a claim on a Policy,
a Deficiency Notice pursuant to Section 5.5 of this Agreement or with respect to
which failure on the part of the Credit Enhancer to respond shall be deemed to
constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to [ ]; (f) in the case of Moody's, to Moody's
Investors Service, Inc., ABS Monitoring Department, 99 Church Street, New York,
New York 10007; and (g) in the case of Standard & Poor's, to Standard & Poor's
Ratings Group, 25 Broadway, 15th Floor, New York, New York 10004, Attention:
Asset Backed Surveillance Department. Any notice
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required or permitted to be mailed to a Noteholder or Certificateholder shall be
given by first class mail, postage prepaid, at the address of such Holder as
shown in the Certificate Register or Note Register, as applicable. Any notice so
mailed within the time prescribed in the Agreement shall be conclusively
presumed to have been duly given, whether or not the Certificateholder or
Noteholder shall receive such notice.
SECTION 12.4. Assignment. This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
permitted assigns. Notwithstanding anything to the contrary contained herein,
except as provided ln Sections 8.4 and 9.3 and as provided in the provisions of
this Agreement concerning the resignation of the Servicer, this Agreement may
not be assigned by the Seller or the Servicer without the prior written consent
of the Owner Trustee, the Trustee, the Standby Servicer, the Trustee and the
Credit Enhancer (or if a Credit Enhancer Default shall have occurred and be
continuing the Holders of Notes evidencing not less than 66% of the principal
amount of the outstanding Notes and the Holders of Certificates evidencing not
less than 66% of the Certificate Balance).
SECTION 12.5. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the parties hereto and for the benefit
of the Certificateholders (including the Seller), the Trustee and the
Noteholders, as third-party beneficiaries. The Credit Enhancer and its
successors and assigns shall be a third-party beneficiary to the provisions of
this Agreement, and shall be entitled to rely upon and directly enforce such
provisions of this Agreement so long as no Credit Enhancer Default shall have
occurred and be continuing. Except as expressly stated otherwise, any right of
the Credit Enhancer to direct, appoint, consent to, approve of, or take any
action under this Agreement, shall be a right exercised by the Credit Enhancer
in its sole and absolute discretion. The Credit Enhancer may disclaim any of its
rights and powers under this Agreement (but not its duties and obligations under
the Credit Enhancement) upon delivery of a written notice to the Owner Trustee.
Nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in the
Owner Trust Estate or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein.
SECTION 12.6. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
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unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 12.7. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 12.8. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 12.9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 12.10. Assignment to Trustee. The Seller hereby acknowledges
and consents to any mortgage, pledge, assignment and grant of a security
interest by the Issuer to the Trustee pursuant to the Indenture for the benefit
of the Noteholders of ail right, title and interest of the Issuer in, to and
under the Receivables and/or the assignment of any or all of the Issuer's rights
and obligations hereunder to the Trustee.
SECTION 12.11. Nonpetition Covenants.
(a) Notwithstanding any prior termination of this Agreement, the
Servicer and the Seller shall not, prior to the date which is one year and one
day after the termination of this Agreement with respect to the Issuer,
acquiesce, petition or otherwise invoke or cause the Issuer to invoke the
process of any court or government authority for the purpose of commencing or
sustaining a case against the Issuer under any federal or state bankruptcy,
insolvency or similar law or appointing a receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official of the Issuer or any
substantial part of its property, or ordering the winding up or liquidation of
the affairs of the Issuer.
(b) Notwithstanding any prior termination of this Agreement, the
Servicer shall not, prior to the date that is one year and one day after the
termination of this Agreement with respect to the Seller, acquiesce to, petition
or otherwise invoke or cause the Seller to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Seller under any federal or state bankruptcy, insolvency or similar law,
appointing a receiver, liquidator,
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assignee, trustee, custodian, sequestrator, or other similar official of the
Seller or any substantial part of its property, or ordering the winding up or
liquidation of the affairs of the Seller.
SECTION 12.12. Limitation of Liability of Owner Trustee and Trustee.
(a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by [ ] not in its individual capacity but
solely in its capacity as Owner Trustee of the Issuer and in no event shall [ ]
in its individual capacity or, except as expressly provided in the Trust
Agreement, as Owner Trustee have any liability for the representations,
warranties, covenants, agreements or other obligations of the Issuer hereunder
or in any of the certificates, notices or agreements delivered pursuant hereto,
as to all of which recourse shall be had solely to the assets of the Issuer. For
all purposes of this Agreement, in the performance of its duties or obligations
hereunder or in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Articles VI, VII and VIII of the Trust
Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been executed and delivered by [Norwest Bank Minnesota, National
Association], not in its individual capacity but solely as Trustee and Standby
Servicer and in no event shall [Norwest Bank Minnesota, National Association],
have any liability for the representations, warranties, covenants, agreements or
other obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse shall be
had solely to the assets of the Issuer.
(c) In no event shall [Norwest Bank Minnesota, National Association],
in any of its capacities hereunder, be deemed to have assumed any duties of the
Owner Trustee under the Delaware Business Trust Statute, common law, or the
Trust Agreement.
SECTION 12.13. Independence of the Servicer. For all purposes of this
Agreement, the Servicer shall be an independent contractor and shall not be
subject to the supervision of the Issuer, the Trustee and Standby Servicer or
the Owner Trustee with respect to the manner in which it accomplishes the
performance of its obligations hereunder. Unless expressly authorized by this
Agreement, the Servicer shall have no authority to act for or represent the
Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee.
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SECTION 12.14. No Joint Venture. Nothing contained in this Agreement
(i) shall constitute the Servicer and either of the Issuer or the Owner Trustee
as members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
[SECTION 12.15. Credit Enhancer as Controlling Party. Each Noteholder
by purchase of the Notes held by it acknowledges that the Trustee, as partial
consideration of the issuance of the Credit Enhancement, has agreed that the
Credit Enhancer shall have certain rights hereunder for so long as no Credit
Enhancer Default shall have occurred and be continuing. So long as a Credit
Enhancer Default has occurred and is continuing, any provision giving the Credit
Enhancer the right to direct, appoint or consent to, approve of, or take any
action under this Agreement shall be inoperative during the period of such
Credit Enhancer Default and such right shall instead vest in the Trustee acting
at the direction of the holders of Class A Notes evidencing, unless otherwise
specified, more than 50% of the principal balance of the Class A Notes. From and
after such time as the Class A Notes have been paid in full and all outstanding
amounts due to the Credit Enhancer have been paid in full, any provision giving
the Credit Enhancer or the Class A Noteholders the right to direct, appoint or
consent to, approve of, or take any action under this Agreement shall be
inoperative and such right shall instead vest in the Trustee acting at the
direction of the Holders of Class B Notes evidencing, unless otherwise
specified, more than 50% of the principal balance of the Class B Notes. From and
after such time as the Class A Notes and Class B Notes have been paid in full,
any provision giving the Credit Enhancer or the Class A Noteholders the right to
direct, appoint or consent to, approve of, or take any action under this
Agreement shall be inoperative and such right shall instead vest in the Trustee
acting at the direction of the holders of the Certificates evidencing, unless
otherwise specified, more than 50% of the Certificate Percentage Interest [or
Certificate Balance]. The Credit Enhancer may disclaim any of its rights and
powers under this Agreement (but not its duties and obligations under the
Policy) upon delivery of a written notice to the Trustee. The Credit Enhancer
may give or withhold any consent hereunder in its sole and absolute discretion.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the day and the year first above written.
CPS AUTO RECEIVABLES
TRUST 1997-[ ]
By
[ ]
not in its individual
capacity, but solely as Owner
Trustee on behalf of the Trust
By ___________________________
Name:
Title:
CPS RECEIVABLES CORP., Seller
By ___________________________
Name:
Title:
CONSUMER PORTFOLIO SERVICES, INC.,
Servicer
By ___________________________
Name:
Title:
[NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,]
not in its individual
capacity, but solely as
Standby Servicer and Trustee,
By ___________________________
Name:
Title:
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SCHEDULE A
SCHEDULE OF RECEIVABLES
<PAGE>
EXHIBIT A
SUBSEQUENT TRANSFER AGREEMENT
TRANSFER No. OF SUBSEQUENT Receivables pursuant to a Sale and Servicing
Agreement dated as of [ ], among THE CPS AUTO RECEIVABLES TRUST [ ], a Delaware
business trust (the "Issuer"), CPS RECEIVABLES CORP., a California corporation
(the "Seller"), CONSUMER PORTFOLIO SERVICES, INC. a California corporation (the
"Servicer"), and [NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION], a national
banking association (the "Trustee").
W I T N E S S E T H:
WHEREAS pursuant to the Sale and Servicing Agreement, the Seller wishes
to convey the Subsequent Receivables to the Issuer; and
WHEREAS, the Issuer is willing to accept such conveyance subject to the
terms and conditions hereof.
NOW, THEREFORE, the Issuer, the Seller, the Servicer and the Trustee
hereby agree as follows:
1. Defined Terms. Capitalized terms used herein shall have the meanings
ascribed to them in the Sale and Servicing Agreement unless otherwise defined
herein.
"Subsequent Cutoff Date" shall mean, with respect to the Subsequent
Receivables conveyed hereby, [ ].
"Subsequent Transfer Date" shall mean, with respect to the Subsequent
Receivables conveyed hereby, [ ].
2. Schedule of Receivables. Annexed hereto is a supplement to Schedule
A to the Sale and Servicing Agreement listing the Receivables that constitute
the Subsequent Receivables to be conveyed pursuant to this Agreement on the
Subsequent Transfer Date.
3. Conveyance of Subsequent Receivables. In consideration of the
Issuer's delivery to or upon the order of the Seller of $____________, the
Seller does hereby sell, transfer, assign, set over and otherwise convey to the
Issuer, without recourse (except as expressly provided in the Sale and Servicing
Agreement), all right, title and interest of the Seller in and to:
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(i) all right, title and interest of the Seller in and to the
Subsequent Receivables listed in Schedule A to the related Subsequent
Transfer Agreement and, with respect to Subsequent Receivables that are
Rule of 78's Receivables, all monies due or to become due thereon after
the Subsequent Cutoff Date (including Scheduled Payments due after the
Subsequent Cutoff Date (including principal prepayments relating to
such Scheduled Payments) but received by the Seller or CPS on or before
the Subsequent Cutoff Date) and, with respect to Subsequent Receivables
that are Simple Interest Receivables, all monies received thereunder
after the Subsequent Cutoff Date and all Liquidation Proceeds and
Recoveries received with respect to such Subsequent Receivables on or
after the Subsequent Cutoff Date;
(ii) all right, title and interest of the Seller in and to the
security interests in the Financed Vehicles granted by Obligors
pursuant to the Subsequent Receivables and any other interest of the
Seller in such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to such Financed Vehicles in the
State of Michigan, all other evidence of ownership with respect to such
Financed Vehicles;
(iii) all right, title and interest of the Seller in and to
any proceeds from claims on any physical damage, credit life and credit
accident and health insurance policies or certificates relating to the
Financed Vehicles or the Obligors;
(iv) all right, title and interest of the Seller in and to the
Subsequent Purchase Agreements, including a direct right to cause CPS
to purchase Receivables from the Trust under certain circumstances;
(v) all right, title and interest of the Seller in and to
refunds for the costs of extended service contracts with respect to
Financed Vehicles securing Subsequent Receivables, refunds of unearned
premiums with respect to credit life and credit accident and health
insurance policies or certificates covering an Obligor or Financed
Vehicle or his or her obligations with respect to a Financed Vehicle
and any recourse to Dealers for any of the foregoing;
(vi) the Receivable File related to each Subsequent
Receivable;
(vii) all amounts and property from time to time held in or
credited to the Collection Account, the Lockbox Account or the
Certificate Account; and
A-2
<PAGE>
(viii) the proceeds of any and all of the foregoing.
4. Representations and Warranties of the Seller. The Seller hereby
represents and warrants to the Issuer as of the date of this Agreement and as of
the Subsequent Transfer Date that:
(a) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of California, with power and authority to
own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at
all relevant times, and now has, power, authority and legal right to
acquire, own and sell the Receivables and the other Conveyed Property
transferred to the Trust.
(b) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business shall
require such qualifications.
(c) Power and Authority. The Seller has the power and
authority to execute and deliver this Agreement and the Basic Documents
to which it is a party and to carry out its terms and their terms,
respectively; the Seller has full power and authority to sell and
assign the Receivables and the Other Conveyed Property to be sold and
assigned to and deposited with the Trust by it and has duly authorized
such sale and assignment to the Trust by all necessary corporate
action; and the execution, delivery and performance of this Agreement
and the Basic Documents to which the Seller is a party have been duly
authorized by the Seller by all necessary corporate action.
(d) Valid Sale, Binding Obligations. This Agreement effects a
valid sale, transfer and assignment of the Receivables and the Other
Conveyed Property, enforceable against the Seller and creditors of and
purchasers from the Seller; and this Agreement and the Basic Documents
to which the Seller is a party, when duly executed and delivered, shall
constitute legal, valid and binding obligations of the Seller
enforceable in accordance with their respective terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization
or other similar laws affecting the enforcement of creditors' rights
generally and by equitable limitations on the availability of specific
remedies, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
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<PAGE>
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the Basic Documents and the
fulfillment of the terms of this Agreement and the Basic Documents
shall not conflict with, result in any breach of any of the terms and
provisions of or constitute (with or without notice, lapse of time or
both) a default under the certificate of incorporation or by-laws of
the Seller, or any indenture, agreement, mortgage, deed of trust or
other instrument to which the Seller is a party or by which it is
bound, or result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than this Agreement,
or violate any law, order, rule or regulation applicable to the Seller
of any court or of any federal or state regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Seller or any of its properties.
(f) No Proceedings. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller,
before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the
Seller or its properties (A) asserting the invalidity of this
Agreement, the Securities or any of the Basic Documents, (B) seeking to
prevent the issuance of the Securities or the consummation of any of
the transactions contemplated by this Agreement or any of the Basic
Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement
or any of the Basic Documents, or (D) relating to the Seller and which
might adversely affect the federal or state income, excise, franchise
or similar tax attributes of the Securities.
(g) No Consents. No consent, approval, authorization or order
of or declaration or filing with any governmental authority is required
for the issuance or sale of the Securities or the consummation of the
other transactions contemplated by this Agreement, except such as have
been duly made or obtained.
(h) The Seller has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such
taxes have become due.
(i) Chief Executive Office. The chief executive office of the
Seller is at 2 Ada, Irvine, California 92618.
A-4
<PAGE>
(j) Principal Balance. The aggregate Principal Balance of the
Receivables listed on the supplement to Schedule A annexed hereto and
conveyed to the Issuer pursuant to this Agreement as of the Subsequent
Cutoff Date is $____________.
5. Conditions Precedent. The obligation of the Issuer to acquire the
Receivables hereunder is subject to the satisfaction, on or prior to the
Subsequent Transfer Date, of the following conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Seller in Section 4 of this
Agreement and in Section 6.1 of the Sale and Servicing Agreement shall
be true and correct as of the date of this Agreement and as of the
Subsequent Transfer Date.
(b) Sale and Servicing Agreement Conditions. Each of the
conditions set forth in Section 2.2(b) of the Sale and Servicing
Agreement shall have been satisfied.
(c) Additional Information. The Seller shall have delivered to
the Issuer such information as was reasonably requested by the Issuer
to satisfy itself as to (i) the accuracy of the representations and
warranties set forth in Section 4 of this Agreement and in Section 6.1
of the Sale and Servicing Agreement and (ii) the satisfaction of the
conditions set forth in this Section 5.
6. Ratification of Agreement. As supplemented by this Agreement, the
Sale and Servicing Agreement is in all respects ratified and confirmed and the
Sale and Servicing Agreement as so supplemented by this Agreement shall be read,
taken and construed as one and the same instrument.
7. Counterparts. This Agreement may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
instrument.
8. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW
PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER
SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
A-5
<PAGE>
IN WITNESS WHEREOF, the Issuer, the Seller and the Servicer have caused this
Agreement to be duly executed and delivered by their respective duly authorized
officers as of day and the year first above written.
CPS AUTO RECEIVABLES
TRUST [ ]
by [ ]
not in its individual capacity
but solely as Owner Trustee on
behalf of the Trust,
by ___________________________
Name:
Title:
CPS RECEIVABLES CORP., Seller,
by ___________________________
Name:
Title:
CONSUMER PORTFOLIO SERVICES, INC.,
Servicer,
by ___________________________
Name:
Title:
Acknowledged and Accepted:
[NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,]
not in its individual
capacity but solely as
Trustee
by ___________________________
Name:
Title:
A-6
<PAGE>
EXHIBIT B
SERVICER'S CERTIFICATE
<PAGE>
EXHIBIT C
FORM OF TRUST RECEIPT
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions..................................................1
SECTION 1.2. Other Definitional Provisions...............................24
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. Conveyance of Initial Receivables...........................25
SECTION 2.2. Conveyance of Subsequent Receivables........................26
SECTION 2.3. Further Encumbrance of Trust Property.......................30
ARTICLE III
THE RECEIVABLES
SECTION 3.1. Representations and Warranties of Seller....................31
SECTION 3.2. Repurchase upon Breach......................................38
SECTION 3.3. Custody of Receivables Files................................39
SECTION 3.4. Acceptance of Receivable Files by Trustee...................40
SECTION 3.5. Access to Receivable Files..................................41
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 4.1. Duties of the Servicer......................................42
SECTION 4.2. Collection of Receivable Payments; Modifications
of Receivables; Lockbox Agreements..........................43
SECTION 4.3. Realization Upon Receivables................................45
SECTION 4.4. Insurance...................................................46
SECTION 4.5. Maintenance of Security Interests in Vehicles...............47
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TABLE OF CONTENTS
(continued)
Page
SECTION 4.6. Covenants, Representations, and Warranties of Servicer......48
SECTION 4.7. Purchase of Receivables Upon Breach of Covenant.............48
SECTION 4.8. Servicing Fee...............................................49
SECTION 4.9. Servicer's Certificate......................................49
SECTION 4.10. Annual Statement as to Compliance, Notice of
Servicer Termination Event..................................49
SECTION 4.11. Annual Independent Accountants' Report......................50
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TABLE OF CONTENTS
(continued)
Page
SECTION 4.12. Access to Certain Documentation and Information
Regarding Receivables......................................51
SECTION 4.13. Verification of Servicer's Certificate.....................51
SECTION 4.14. Retention and Termination of Servicer......................52
SECTION 4.15. Fidelity Bond..............................................53
ARTICLE V
TRUST ACCOUNTS; DISTRIBUTIONS;
STATEMENTS TO CERTIFICATEHOLDERS AND NOTEHOLDERS
SECTION 5.1. Establishment of Trust Accounts.............................53
SECTION 5.2. Interest Reserve Account....................................56
SECTION 5.3. Certain Reimbursements to the Servicer......................57
SECTION 5.4. Application of Collections..................................57
SECTION 5.5. Withdrawals from Spread Account.............................58
SECTION 5.6. Additional Deposits.........................................59
SECTION 5.7. Distributions...............................................59
SECTION 5.8. Note Distribution Account...................................61
SECTION 5.9. Pre-Funding Account.........................................64
SECTION 5.10. Statements to Certificateholders and Noteholders............64
ARTICLE VI
[CREDIT ENHANCEMENT]
SECTION 6.1. [Credit Enhancement Provisions to be added]..................66
ARTICLE VII
THE SELLER
SECTION 7.1. Representations of Seller...................................66
(a) Organization and Good Standing.......................66
(b) Due Qualification....................................66
(c) Power and Authority..................................66
(d) Valid Sale, Binding Obligations......................67
(e) No Violation.........................................67
(f) No Proceedings.......................................67
(g) No Consents..........................................68
(h) .....................................................68
(i) Chief Executive Office...............................68
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TABLE OF CONTENTS
(continued)
Page
SECTION 7.2. [Reserved].................................................68
SECTION 7.3. Liability of Seller; Indemnities...........................68
SECTION 7.4. Merger or Consolidation of, or Assumption of the
Obligations of, Seller.....................................69
SECTION 7.5. Limitation on Liability of Seller and Others...............70
SECTION 7.6. Seller May Own Certificates or Notes.......................70
ARTICLE VIII
THE SERVICER
SECTION 8.1. Representations of Servicer................................71
(a) Organization and Good Standing......................71
(b) Due Qualification...................................71
(c) Power and Authority.................................71
(d) Binding Obligation..................................71
(e) No Violation........................................72
(f) No Proceedings......................................72
(g) No Consents.........................................72
(h) Taxes...............................................73
(i) Chief Executive Office..............................73
SECTION 8.2. Liability of Servicer; Indemnities.........................73
SECTION 8.3. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Standby Servicer...........74
SECTION 8.4. Limitation on Liability of Servicer, Standby
Servicer and Others........................................76
SECTION 8.5. Delegation of Duties.......................................76
SECTION 8.6. Servicer and Standby Servicer Not to Resign................77
ARTICLE IX
DEFAULT
SECTION 9.1. Servicer Termination Event.................................78
SECTION 9.2. Consequences of a Servicer Termination Event...............80
SECTION 9.3. Appointment of Successor...................................81
SECTION 9.4. Notification to Noteholders and Certificateholders.........83
SECTION 9.5. Waiver of Past Defaults....................................83
SECTION 9.6. Action Upon Certain Failures of the Servicer...............83
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TABLE OF CONTENTS
(continued)
Page
ARTICLE X
TERMINATION
SECTION 10.1. Optional Purchase of All Receivables.......................84
ARTICLE XI
ADMINISTRATIVE DUTIES OF THE SERVICER
SECTION 11.1. Administrative Duties......................................85
(a) Duties with Respect to the Indenture................85
(b) Duties with Respect to the Issuer...................85
(c) Tax Matters.........................................86
(d) Non-Ministerial Matters.............................86
(e) Exceptions..........................................87
(f) Limitation of Standby Servicer's Obligations........87
SECTION 11.2. Records....................................................87
SECTION 11.3. Additional Information to be Furnished to the Issuer.......87
ARTICLE XII
MISCELLANEOUS PROVISIONS
SECTION 12.1. Amendment..................................................88
SECTION 12.2. Protection of Title to Trust...............................89
SECTION 12.3. Notices....................................................92
SECTION 12.4. Assignment.................................................92
SECTION 12.5. Limitations on Rights of Others............................93
SECTION 12.6. Severability...............................................93
SECTION 12.7. Separate Counterparts......................................93
SECTION 12.8. Headings...................................................93
SECTION 12.9. Governing Law..............................................93
SECTION 12.10. Assignment to Trustee......................................94
SECTION 12.11. Nonpetition Covenants......................................94
SECTION 12.12. Limitation of Liability of Owner Trustee
and Trustee..................................94
SECTION 12.13. Independence of the Servicer..............................95
SECTION 12.14. No Joint Venture..........................................95
[SECTION 12.15. Credit Enhancer as Controlling Party......................95
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TABLE OF CONTENTS
(continued)
Page
SCHEDULES
Schedule A - Schedule of Receivables
EXHIBITS
Exhibit A - Form of Subsequent Transfer Agreement
Exhibit B - Form of Servicer's Certificate
Exhibit C - Form of Trust Receipt
ASSIGNMENT
For value received, in accordance with the Purchase Agreement dated as
of May 1, 1997 between the undersigned (the "Seller") and CPS Receivables Corp.
(the "Purchaser") (the "CPS Purchase Agreement"), the undersigned does hereby
sell, transfer, assign and otherwise convey unto the Purchaser, without recourse
(subject to the obligations in the Purchase Agreement and the Initial Sale and
Servicing Agreement), all right, title and interest of the Seller in and to (i)
the CPS Receivables listed in the Schedule of CPS Receivables and, with respect
to Rule of 78's Receivables, all monies due or to become due thereon after the
Cutoff Date (including Scheduled Payments due after the Cutoff Date (including
principal prepayments relating to such Scheduled Payments) but received by the
Seller on or before the Cutoff Date) and, with respect to Simple Interest
Receivables, all monies received thereunder after the Cutoff Date and all
Liquidation Proceeds and Recoveries received with respect to such Receivables;
(ii) the security interests in the Financed Vehicles granted by Obligors
pursuant to the Initial CPS Receivables and any other interest of the Seller in
such Financed Vehicles, including, without limitation, the certificates of title
or, with respect to Financed Vehicles in the State of Michigan, other evidence
of ownership with respect to such Financed Vehicles; (iii) any proceeds from
claims on any physical damage, credit life and credit accident and health
insurance policies or certificates relating to the Financed Vehicles securing
the Initial CPS Receivables; (iv) refunds for the costs of extended service
contracts with respect to Financed Vehicles securing the Initial CPS
Receivables, refunds of unearned premiums with respect to credit life and credit
accident and health insurance policies or certificates covering an Obligor or
Financed Vehicle or his or her obligations with respect to a Financed Vehicle
related to an Initial CPS Receivable and any recourse to Dealers for any of the
foregoing; (v) the Receivable File related to each Initial CPS Receivable; and
(vi) the proceeds of any and all of the foregoing. The foregoing sale does not
constitute and is not intended to result in any assumption by the Purchaser of
any obligation of the undersigned to the Obligors, insurers or any other Person
in connection with the Initial CPS Receivables, the related Receivable Files,
any insurance policies or any agreement or instrument relating to any of them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the CPS
Purchase Agreement and is to be governed by the CPS Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the CPS Purchase Agreement.
THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of [ ].
CONSUMER PORTFOLIO SERVICES, INC.
By:
Name:
Title:
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PURCHASE AGREEMENT dated as of this [ ] 1, 199[ ], by and between
CONSUMER PORTFOLIO SERVICES, INC., a California corporation (the "Seller"),
having its principal executive office at 2 Ada, Irvine, California 92618, and
CPS RECEIVABLES CORP., a California corporation (the "Purchaser"), having its
principal executive office at 2 Ada, Irvine, California 92618.
WHEREAS, in the regular course of its business, the Seller purchases
and services through its auto loan programs certain motor vehicle retail
installment sale contracts secured by new and used automobiles, light trucks,
vans or minivans acquired from motor vehicle dealers.
WHEREAS, the Seller and the Purchaser wish to set forth the terms
pursuant to which the CPS Receivables (as hereinafter defined), are to be sold
by the Seller to the Purchaser, which CPS Receivables together with the Samco
Receivables will be transferred by the Purchaser, pursuant to the Sale and
Servicing Agreement (as hereinafter defined), to CPS Auto Receivables Trust [ ]
to be created thereunder, which Trust will issue notes under the Indenture (as
hereinafter defined) representing indebtedness of the Trust (the "Class A Notes"
and the "Class B Notes" and, together with the Class A Notes, the "Notes") [and
certificates under the Trust Agreement (as hereinafter defined) representing
beneficial interests in the Trust (the "Certificates" and, together with the
Notes, the "Securities")].
NOW, THEREFORE, in consideration of the foregoing, other good and
valuable consideration, and the mutual terms and covenants contained herein, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Terms not defined in this Agreement shall have the meaning set forth in
the Sale and Servicing Agreement and if not defined therein, shall have the
meanings set forth in the Indenture. As used in this Agreement, the following
terms shall, unless the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms of the
terms defined):
"Agreements" means, collectively, this Purchase Agreement and each
Subsequent Purchase Agreement and the Assignments.
"Assignment" means the Initial Assignment and/or any Subsequent
Assignment.
"Base Prospectus" means the Prospectus dated [ ] with respect to CPS
Auto Grantor Trusts and any amendment or supplement thereto.
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[" Certificate Purchase Agreement" means the Certificate Purchase
Agreement dated [ ] among certain investors, CPS and the Purchaser relating to
the Certificates.]
"Closing Date" means the Initial Closing Date and/or any Subsequent
Closing Date.
"CPS" means Consumer Portfolio Services, Inc., a California corporation
and its successors and assigns.
"CPS Receivables" means the Initial CPS Receivables and the Subsequent
CPS Receivables.
"Indenture" means the Indenture dated as of [ ], between CPS Auto
Receivables Trust [ ], as issuer, and [Norwest Bank Minnesota, National
Association], as trustee.
"Initial Assignment" means the Initial CPS Assignment and/or the
Initial Samco Assignment.
"Initial Closing Date" means [ ], 199[ ].
"Initial CPS Assignment" means the assignment dated [ ], by the Seller
to the Purchaser, relating to the purchase of the CPS Receivables and certain
other property related thereto by the Purchaser from the Seller pursuant to this
Agreement, which shall be in substantially the form attached hereto as Exhibit
A.
"Initial CPS Receivables" means each retail installment sale contract
for a Financed Vehicle that appears on the Initial Schedule of CPS Receivables
and all rights thereunder.
"Initial Receivables" means an Initial Samco Receivable and/or an
Initial CPS Receivable.
"Initial Receivables Purchase Price" means $[ ].
"Initial Samco Assignment" means the assignment substantially in the
form of Exhibit A to the Samco Purchase Agreement.
"Initial Samco Receivable" means each retail installment sale contract
for a Financed Vehicle that appears on the Initial Schedule of Samco Receivables
and all rights thereunder.
"Initial Schedule of CPS Receivables" means the list of CPS Receivables
annexed hereto as Exhibit B.
"Initial Schedule of Samco Receivables" means the list of Initial Samco
Receivables annexed as Exhibit B to the Samco Purchase Agreement.
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"Initial Transferred CPS Property" shall have the meaning specified in
Section 2.1(a) hereof.
"Initial Transferred Property" shall have the meaning specified in
Section 2.1(a) hereof.
"Initial Transferred Samco Property" shall have the meaning specified
in the Samco Purchase Agreement.
["Note Purchase Agreement" means the Note Purchase Agreement, dated [ ]
among certain investors, CPS and the Purchaser relating to the Class B Notes.]
"Obligor(s)" means the purchaser or co-purchasers of a Financed Vehicle
or any other Person who owes or may be liable for payments under a Receivable.
"Offering Documents" means the Prospectus Supplement, the Base
Prospectus and the [Private Placement Memorandum.]
["Private Placement Memorandum" means the Private Placement Memorandum,
dated [ ], relating to the private placement of the Class B Notes and any
amendment or supplement thereto.]
"Prospectus Supplement" means the Prospectus Supplement dated [ ],
relating to the public offering of the [Class A] Notes and any amendment or
supplement thereto.
"Purchase Agreement" means this Purchase Agreement, as this agreement
may be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.
"Purchaser" means CPS Receivables Corp., a California corporation, and
its successors and assigns.
"Receivables" means, collectively, the CPS Receivables and the Samco
Receivables.
"Repurchase Event" shall have the meaning specified in Section 6.2
hereof.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
dated as of [ ], among CPS Auto Receivables Trust [ ] as issuer, CPS Receivables
Corp., as seller, Consumer Portfolio Services, Inc., as originator of the
Receivables and servicer, and [Norwest Bank Minnesota, National Association], as
trustee and standby servicer, as such agreement may be amended, supplemented or
otherwise modified from time to time in accordance with the terms thereof.
"Samco" means Samco Acceptance Corp., a Texas corporation, and its
successors and assigns.
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"Samco Purchase Agreement" means the Purchase Agreement dated as of [
], between Samco Acceptance Corp., as seller, and CPS Receivables Corp., as
purchaser, as such agreement may be amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof.
"Samco Receivable" shall have the meaning specified in the Samco
Purchase Agreement.
"Schedule of CPS Receivables" means the list of Initial CPS Receivables
annexed hereto as Exhibit B as supplemented by each Schedule of Subsequent CPS
Receivables.
"Schedule of Receivables" means, collectively, the Schedule of CPS
Receivables and the Schedule of Samco Receivables.
"Schedule of Samco Receivables" means the list of Initial Samco
Receivables annexed as Exhibit B to the Samco Purchase Agreement as supplemented
by each Schedule of Subsequent Samco Receivables.
"Schedule of Subsequent CPS Receivables" means the schedule of all CPS
Receivables sold and transferred to the Purchaser pursuant to a Subsequent CPS
Purchase Agreement, which schedule shall be deemed to supplement the Schedule of
CPS Receivables and shall be attached to the related Subsequent Assignment (and
may be in the form of microfiche).
"Schedule of Subsequent Samco Receivables" means the schedule of all
Samco Receivables sold and transferred to the Purchaser pursuant to a Subsequent
Samco Purchase Agreement, which schedule shall be deemed to supplement the
Schedule of Samco Receivables and shall be attached to the related Subsequent
Assignment delivered under the Samco Purchase Agreement (and may be in the form
of microfiche).
"Seller" means Consumer Portfolio Services, Inc., a California
corporation, in its capacity as seller of the CPS Receivables and the other CPS
Transferred Property relating thereto, and its successors and assigns.
"Servicer" means Consumer Portfolio Services, Inc., a California
corporation, in its capacity as Servicer of the Receivables, and its successors
and assigns.
"Subsequent Assignment" means an assignment substantially in the form
of Exhibit A to the form of Subsequent Purchase Agreement attached as Exhibit C
hereto.
"Subsequent Closing Date" means any day on which Subsequent CPS
Receivables or Subsequent Samco Receivables are sold to the Purchaser pursuant
to a Subsequent Purchase Agreement.
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"Subsequent CPS Purchase Agreement" means a subsequent purchase
agreement which shall be in substantially the form of Exhibit C to this Purchase
Agreement by which the Seller will transfer Subsequent CPS Receivables.
"Subsequent CPS Receivable" means each Receivable transferred to the
Purchaser pursuant to a Subsequent CPS Assignment which shall be listed on the
Schedule of Subsequent CPS Receivables attached to the related Subsequent
Assignment.
"Subsequent Purchase Agreement" means the Subsequent CPS Purchase
Agreement and/or the Subsequent Samco Purchase Agreement.
"Subsequent Receivables" means a Subsequent CPS Receivable and/or a
Subsequent Samco Receivable.
"Subsequent Samco Purchase Agreement" means a subsequent purchase
agreement which shall be in substantially the form of Exhibit C to the Samco
Purchase Agreement by which the Seller will transfer Subsequent Samco
Receivables.
"Subsequent Samco Receivable" shall have the meaning specified in the
Samco Purchase Agreement
"Subsequent Transferred CPS Property" shall have the meaning specified
in each Subsequent CPS Purchase Agreement.
"Subsequent Transferred Property" shall have the meaning specified in
Section 2.2(a).
"Transferred CPS Property" means the Initial Transferred CPS Property
and/or the Subsequent Transferred CPS Property.
"Transferred Property" means the Transferred CPS Property and the
Transferred Samco Property.
"Transferred Samco Property" shall have the meaning specified in the
Samco Purchase Agreement.
"Trust" means the CPS Auto Receivables Trust [ ] created by the Trust
Agreement.
"Trust Agreement" means the Trust Agreement dated as of [ ], between
CPS Receivables Corp. and [Owner Trustee].
"UCC" means the Uniform Commercial Code, as in effect from time to time
in the relevant jurisdictions.
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"Underwriters" means [Underwriter[s]].
"Underwriting Agreement" means the Underwriting Agreement, dated [ ],
among the Underwriters, CPS and the Purchaser relating to the [Class A] Notes.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1. Purchase and Sale of Receivables. On the Initial Closing Date,
subject to the terms and conditions of this Purchase Agreement, the Seller
agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the
Seller, without recourse (subject to the obligations in this Purchase Agreement,
each Subsequent Purchase Agreement and the Sale and Servicing Agreement), all of
the Seller's right, title and interest in, to and under the Initial CPS
Receivables and the other Initial Transferred CPS Property relating thereto. The
conveyance to the Purchaser of the Initial CPS Receivables and other Initial
Transferred CPS Property relating thereto is intended as a sale free and clear
of all liens and it is intended that the Initial Transferred CPS Property and
other property of the Purchaser shall not be part of the Seller's estate in the
event of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law.
(a) Transfer of Receivables. On the Initial Closing Date and
simultaneously with the transactions to be consummated pursuant to the Trust
Agreement, the Indenture and the Sale and Servicing Agreement, the Seller shall
sell, transfer, assign, grant, set over and otherwise convey to the Purchaser,
without recourse (subject to the obligations herein and in the Sale and
Servicing Agreement), all right, title and interest of the Seller in and to (i)
the Initial CPS Receivables listed in the Initial Schedule of CPS Receivables
and, with respect to Rule of 78's Receivables, all monies due or to become due
thereon after the Cutoff Date (including Scheduled Payments due after the Cutoff
Date (including principal prepayments relating to such Scheduled Payments) but
received by the Seller on or before the Cutoff Date) and, with respect to Simple
Interest Receivables, all monies received thereunder after the Cutoff Date and
all Liquidation Proceeds and Recoveries received with respect to such Initial
CPS Receivables; (ii) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Initial CPS Receivables and any other interest of the
Seller in such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to Financed Vehicles in the State of
Michigan, other evidence of ownership with respect to such Financed Vehicles;
(iii) any proceeds from claims on any physical damage, credit life and credit
accident and health insurance policies or certificates relating to the Financed
Vehicles securing the Initial CPS Receivables or the Obligors thereunder; (iv)
refunds for the costs of extended service contracts with respect to Financed
Vehicles securing the Initial CPS Receivables, refunds of unearned premiums with
respect to credit life and credit accident and health insurance policies or
certificates covering an Obligor under an Initial CPS Receivable or Financed
Vehicle securing an Initial CPS Receivable or his or her obligations with
respect
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to a Financed Vehicle and any recourse to Dealers for any of the foregoing; (v)
the Receivable File related to each Initial CPS Receivable; and (vi) the
proceeds of any and all of the foregoing (collectively, the "Initial Transferred
CPS Property" and together with the Initial Transferred Samco Property, the
"Initial Transferred Property").
(b) Receivables Purchase Price. In consideration for the
Initial CPS Receivables and other Initial Transferred Property described in
Section 2.1(a), the Purchaser shall, on the Initial Closing Date, pay to the
Seller the Initial Receivables Purchase Price. An amount equal to $[ ] of the
Initial Receivables Purchase Price shall be paid to the Seller in cash. The
remaining $[ ] of the Initial Receivables Purchase Price shall be deemed paid
and returned to the Purchaser and be considered a contribution to capital. The
portion of the Initial Receivables Purchase Price to paid in cash be by federal
wire transfer (same day) funds.
2.2. Purchase and Sale of Subsequent Receivables. On the related
Subsequent Closing Date, subject to the terms and conditions of the related
Subsequent CPS Purchase Agreement, the Seller agrees to sell to the Purchaser,
and the Purchaser agrees to purchase from the Seller, without recourse (subject
to the obligations in this Purchase Agreement, each Subsequent CPS Purchase
Agreement and the Sale and Servicing Agreement), all of the Seller's right,
title and interest in, to and under the Subsequent CPS Receivables and the other
Subsequent Transferred CPS Property relating thereto. The conveyance to the
Purchaser of the Subsequent CPS Receivables and other Subsequent Transferred CPS
Property relating thereto is intended as a sale free and clear of all liens and
it is intended that the Subsequent Transferred CPS Property and other property
of the Purchaser shall not be part of the Seller's estate in the event of the
filing of a bankruptcy petition by or against the Seller under any bankruptcy
law.
(a) Transfer of Subsequent Receivables. On the related
Subsequent Closing Date the Seller shall sell, transfer, assign, grant, set over
and otherwise convey to the Purchaser, without recourse (subject to the
obligations herein and in the Sale and Servicing Agreement), all right, title
and interest of the Seller in and to (i) the Subsequent CPS Receivables listed
in the related Schedule of Subsequent CPS Receivables and, with respect to Rule
of 78's Receivables, all monies due or to become due thereon after the related
Subsequent Cutoff Date (including Scheduled Payments due after the related
Subsequent Cutoff Date (including principal prepayments relating to such
Scheduled Payments) but received by the Seller on or before the related
Subsequent Cutoff Date) and, with respect to Simple Interest Receivables, all
monies received thereunder after the related Subsequent Cutoff Date and all
Liquidation Proceeds and Recoveries received with respect to such Subsequent CPS
Receivables; (ii) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Subsequent CPS Receivables and any other interest of
the Seller in such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to Financed Vehicles in the State of
Michigan, other evidence of ownership with respect to Financed Vehicles; (iii)
any proceeds from claims on any physical damage, credit life and credit accident
and health insurance policies or certificates relating to the Financed
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Vehicles securing the Subsequent CPS Receivables or the Obligors thereunder;
(iv) refunds for the costs of extended service contracts with respect to
Financed Vehicles securing the Subsequent CPS Receivables, refunds of unearned
premiums with respect to credit life and credit accident and health insurance
policies or certificates covering an Obligor or Financed Vehicle securing the
Subsequent CPS Receivables or his or her obligations with respect to such a
Financed Vehicle and any recourse to Dealers for any of the foregoing; (v) the
Receivable File related to each Subsequent CPS Receivable; and (vi) the proceeds
of any and all of the foregoing (collectively, the "Subsequent Transferred CPS
Property" and together with any Subsequent Transferred Samco Property, the
"Subsequent Transferred Property").
(b) The Seller shall transfer to the Issuer the Subsequent CPS
Receivables and the Subsequent Transferred CPS Property as described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Closing Date:
(i) the Seller shall have provided the Trustee, the Owner
Trustee, the Credit Enhancer and the Rating Agencies with an Addition
Notice not later than five days prior to such Subsequent Closing Date
and shall have provided any information reasonably requested by any of
the foregoing with respect to the Subsequent CPS Receivables;
(ii) the Seller shall have delivered to the Owner Trustee and
the Trustee a duly executed Subsequent CPS Purchase Agreement,
substantially in the form of Exhibit C, which shall include supplements
to the Schedule of CPS Receivables, listing the Subsequent CPS
Receivables;
(iii) the Seller shall, to the extent required by Section 4.2
of the Sale and Servicing Agreement, have deposited in the Collection
Account all collections in respect of the Subsequent CPS Receivables;
(iv) as of each Subsequent Closing Date, (A) the Seller shall
not be insolvent and shall not become insolvent as a result of the
transfer of Subsequent CPS Receivables on such Subsequent Closing Date,
(B) the Seller shall not intend to incur or believe that it shall incur
debts that would be beyond its ability to pay as such debts mature, (C)
such transfer shall not have been made with actual intent to hinder,
delay or defraud any Person and (D) the assets of the Seller shall not
constitute unreasonably small capital to carry out its business as
conducted;
(v) the Funding Period shall not have terminated;
(vi) after giving effect to any transfer of Subsequent CPS
Receivables on a Subsequent Closing Date (and any Subsequent Samco
Receivables transferred to the Purchaser on such Subsequent Closing
Date), the Receivables shall meet the following criteria (based on the
characteristics of the Initial Receivables on the Initial Cutoff Date
and the Subsequent Receivables on the related Subsequent Cutoff Dates):
[ ];
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(vii) each of the representations and warranties made by the
Seller pursuant to Section 3.2 with respect to the Subsequent
Receivables to be transferred on such Subsequent Closing Date shall be
true and correct as of the related Subsequent Closing Date, and the
Seller shall have performed all obligations to be performed by it
hereunder on or prior to such Subsequent Closing Date;
(viii) the Seller shall, at its own expense, on or prior to
the Subsequent Closing Date indicate in its computer files that the
Subsequent Receivables identified in the Subsequent Purchase Agreement
have been sold to the Purchaser pursuant to the related Subsequent
Purchase Agreement and subsequently to the Trust pursuant to the Sale
and Servicing Agreement;
(ix) the Seller shall have taken any action required to
maintain the first priority perfected ownership interest of the Trust
in the Owner Trust Estate and the first priority perfected security
interest of the Trustee in the Collateral;
(x) no selection procedures adverse to the interests of the
Securityholders or the Credit Enhancer shall have been utilized in
selecting the Subsequent CPS Receivables;
(xi) the addition of any such Subsequent CPS Receivables shall
not result in a material adverse tax consequence to the Trust or the
Securityholders;
(xii) the Seller shall have delivered (A) to the Rating
Agencies and the Credit Enhancer an opinion of Counsel with respect to
the transfer of such Subsequent CPS Receivables substantially in the
form of the Opinion of Counsel delivered to the Rating Agencies and the
Credit Enhancer on the related Subsequent Closing Date and (B) to the
Trustee the opinion of Counsel required by Section 13.2(i)(1) of the
Sale and Servicing Agreement;
(xiii) each Rating Agency shall have confirmed that the rating
on the Notes shall not be withdrawn or reduced as a result of the
transfer of such Subsequent CPS Receivables to the Trust;
(xiv) all conditions precedent specified in the Sale and
Servicing Agreement with respect to the transfer of such Subsequent CPS
Receivables to the Trust by the Purchaser shall have been satisfied;
and
(xv) the Seller shall have delivered to the Credit Enhancer
and the Trustee an Officers' Certificate confirming the satisfaction of
each condition precedent specified in this paragraph (b).
The Seller covenants that in the event any of the foregoing conditions
precedent are not satisfied with respect to any Subsequent Receivable on the
date required as specified above, the Seller will immediately repurchase such
Subsequent Receivable from the Trust, at
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a price equal to the Purchase Amount thereof, in the manner specified in Section
6.2 of the Sale and Servicing Agreement.
2.3. The Closing. The sale and purchase of the Initial CPS Receivables
shall take place at a closing (the "Closing") at the offices of Mayer, Brown &
Platt, 1675 Broadway, New York, New York 10019-5820 on the Closing Date,
simultaneously with the closings under: (a) the Samco Purchase Agreement
pursuant to which Samco Acceptance Corp. will sell the Initial Samco Receivables
to CPS Receivables Corp., (b) the Sale and Servicing Agreement pursuant to which
the Purchaser will assign all of its right, title and interest in and to the
Initial Receivables and the other Initial Transferred Property to the Trust for
the benefit of the Securityholders, (c) the Trust Agreement pursuant to which
the Trust shall be formed and the Certificates issued, (d) the Indenture
pursuant to which the Trust will issue the Notes, (e) the Underwriting Agreement
pursuant to which the Trust shall sell the Class A Notes [and Class B Notes] to
the Underwriters, [(f) the Note Purchase Agreement pursuant to which the
Purchaser shall sell the Class B Notes to one or more investors, and (g) the
Certificate Purchase Agreement pursuant to which the Purchaser shall sell
Certificates to one or more investors].
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Seller as of the date hereof and as of
each Closing Date (which representations and warranties shall survive such
Closing Date):
(a) Organization and Good Standing. The Purchaser has been
duly organized and is validly existing as a corporation in good standing under
the laws of the State of California, with power and authority to own its
properties and to conduct its business as such properties shall be currently
owned and such business is presently conducted, and had at all relevant times,
and shall have, power, authority and legal right to acquire and own the
Receivables.
(b) Due Qualification. The Purchaser is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
(c) Power and Authority. The Purchaser has the power and
authority to execute and deliver the Agreements and to carry out its terms and
the execution, delivery and performance of the Agreements have been duly
authorized by the Purchaser by all necessary corporate action.
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(d) Binding Obligation. The Agreements shall constitute a
legal, valid and binding obligation of the Purchaser enforceable in accordance
with its terms.
(e) No Violation. The execution, delivery and performance by
the Purchaser of the Agreements and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not conflict
with, result in a breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time) a default under, the articles of
incorporation or by-laws of the Purchaser, or any indenture, agreement,
mortgage, deed of trust, or other instrument to which the Purchaser is a party
or by which it is bound or to which any of its properties are subject; nor
result in the creation or imposition of any lien upon any of its properties
pursuant to the terms of any indenture, agreement, mortgage, deed of trust, or
other instrument (other than the Sale and Servicing Agreement); nor violate any
law, order, rule or regulation applicable to the Purchaser of any court or of
any Federal or State regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Purchaser or its
properties.
(f) No Proceedings. There are no proceedings or investigations
pending, or to the Purchaser's best knowledge, threatened, before any court,
regulatory body, administrative agency or other governmental instrumentality
having jurisdiction over the Purchaser or its properties: (A) asserting the
invalidity of the Agreements or the Securities; (B) seeking to prevent the
issuance of the Securities or the consummation of any of the transactions
contemplated by the Agreements; (C) seeking any determination or ruling that
might materially and adversely affect the performance by the Purchaser of its
obligations under, or the validity or enforceability of, the Agreements or the
Securities; or (D) relating to the Purchaser and which might adversely affect
the Federal or State income, excise, franchise or similar tax attributes of the
Securities.
(g) No Consents. No consent, approval, authorization or order
of or declaration or filing with any governmental authority is required to be
obtained by the Purchaser for the issuance or sale of the Securities or the
consummation of the other transactions contemplated by the Agreements, the Trust
Agreement, the Indenture or the Sale and Servicing Agreement, except such as
have been duly made or obtained.
3.2. Representations and Warranties of the Seller. (a) The
Seller hereby represents and warrants to the Purchaser as of the date
hereof and as of the Closing Date:
(i) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of California, with power and authority to
own its properties and to conduct its business as such properties shall
be currently owned and such business is presently conducted and had at
all relevant times, and shall have, power, authority and legal right to
acquire, own and service the Receivables.
(ii) Due Qualification. The Seller is duly qualified to do
business as
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a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the
origination and the servicing of the Receivables as required by the
Sale and Servicing Agreement) shall require such qualifications.
(iii) Power and Authority. The Seller has the power and
authority to execute and deliver the Agreements and to carry out their
terms; the Seller has full power and authority to sell and assign the
property sold and assigned to the Purchaser and has duly authorized
such sale and assignment to the Purchaser by all necessary corporate
action; and the execution, delivery and performance of the Agreements
have been duly authorized by the Seller by all necessary corporate
action.
(iv) Valid Sale; Binding Obligation. This Purchase Agreement
effects a valid sale, transfer and assignment of the CPS Receivables
and the other Transferred CPS Property conveyed to the Purchaser
pursuant to Section 2.1, enforceable against creditors of and
purchasers from the Seller; and this Agreement shall constitute a
legal, valid and binding obligation of the Seller enforceable in
accordance with its terms.
(v) No Violation. The execution, delivery and performance by
the Seller of the Agreements and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default
under, the articles of incorporation, as amended, or by-laws of the
Seller, or any indenture, agreement, mortgage, deed of trust, or other
instrument to which the Seller is a party or by which it is bound or to
which any of its properties are subject; nor result in the creation or
imposition of any lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust, or other
instrument (other than the Agreements and the Sale and Servicing
Agreement); nor violate any law, order, rule or regulation applicable
to the Seller of any court or of any Federal or State regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(vi) No Proceedings. There are no proceedings or
investigations pending, or to the Seller's best knowledge, threatened,
before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Seller or its
properties: (A) asserting the invalidity of the Agreements or the
Securities; (B) seeking to prevent the issuance of the Securities or
the consummation of any of the transactions contemplated by the
Agreements; (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, the Agreements
or the Securities; or (D) relating to the Seller and which might
adversely affect the Federal or State income, excise, franchise or
similar tax attributes of the Securities.
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(vii) No Consents. No consent, approval, authorization or
order of or declaration or filing with any governmental authority is
required for the issuance or sale of the Securities or the consummation
of the other transactions contemplated by the Agreements, the Trust
Agreement, the Indenture or the Sale and Servicing Agreement, except
such as have been duly made or obtained.
(viii) Financial Condition. The Seller has a positive net
worth and is able to and does pay its liabilities as they mature. The
Seller is not in default under any obligation to pay money to any
Person except for matters being disputed in good faith which do not
involve an obligation of the Seller on a promissory note. The Seller
will not use the proceeds from the transactions contemplated by the
Agreements to give any preference to any creditor or class of
creditors, and this transaction will not leave the Seller with
remaining assets which are unreasonably small compared to its ongoing
operations.
(ix) Fraudulent Conveyance. The Seller is not selling the CPS
Receivables to the Purchaser with any intent to hinder, delay or
defraud any of its creditors; the Seller will not be rendered insolvent
as a result of the sale of the CPS Receivables to the Purchaser.
(b) The Seller makes the following representations and
warranties as to the Receivables (including the Samco Receivables) and the other
Transferred Property relating thereto on which the Purchaser relies in accepting
the Receivables and the other Transferred Property relating thereto. Such
representations and warranties speak with respect to each Receivable as of the
Initial Closing Date or Subsequent Closing Date on which such Receivable is
transferred to the Purchaser and shall survive the sale, transfer, and
assignment of the Receivables and the other Transferred Property relating
thereto to the Purchaser and the subsequent assignment and transfer pursuant to
the Sale and Servicing Agreement:
(i) Origination Date. Each Receivable has an origination date
on or after [ ].
(ii) Principal Balance/Number of Contracts. As of the Cutoff
Date, the total aggregate principal balance of the Receivables was $[
]. The Receivables are evidenced by [ ] Contracts.
(iii) Maturity of Receivables. Each Receivable has an original
term to maturity of not less than [ ] months and not more than [ ]
months; the weighted average original term to maturity of the
Receivables is [ ] months as of the Cutoff Date; the remaining term to
maturity of each Receivable was [ ] months or less as of the Cutoff
Date; the weighted average remaining term to maturity of the
Receivables was [ ] months as of the Cutoff Date.
(iv) Characteristics of Receivables. (a) Each Receivable (1)
has been
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originated in the United States of America by a Dealer for the retail
sale of a Financed Vehicle in the ordinary course of such Dealer's
business, has been fully and properly executed by the parties thereto
and has been purchased by the Seller (or, with respect to the Samco
Receivables, Samco) in connection with the sale of Financed Vehicles by
the Dealers, (2) has created a valid, subsisting, and enforceable first
priority security interest in favor of the Seller (or, with respect to
the Samco Receivables, Samco) in the Financed Vehicle, which security
interest has been assigned by the Seller (or, with respect to the Samco
Receivables, Samco) to the Purchaser, which in turn has assigned such
security interest to the Trustee pursuant to the Pooling and Servicing
Agreement, (3) contains customary and enforceable provisions such that
the rights and remedies of the holder or assignee thereof shall be
adequate for realization against the collateral of the benefits of the
security, (4) provides for level monthly payments that fully amortize
the Amount Financed over the original term (except for the last
payment, which may be different from the level payment) and yield
interest at the Annual Percentage Rate, (5) has an Annual Percentage
Rate of not less than [ ]%, (6) that is a Rule of 78's Receivable
provides for, in the event that such Receivable is prepaid, a
prepayment that fully pays the Principal Balance and includes a full
month's interest, in the month of prepayment, at the Annual Percentage
Rate, (7) is a Rule of 78's Receivable or a Simple Interest Receivable,
and (8) was originated by a Dealer and was sold by the Dealer without
any fraud or misrepresentation on the part of such Dealer.
(v) Approximately [ ]% of the aggregate Principal Balance of
the Receivables, constituting [ ]% of the number of Receivables, as of
the Cutoff Date, represents financing of used automobiles, light
trucks, vans or minivans; the remainder of the Receivables represent
financing of new automobiles, light trucks, vans or minivans;
approximately [ ]% of the aggregate Principal Balance of the
Receivables as of the Cutoff Date were originated in the State of
California; approximately [ ]% of the aggregate Principal Balance of
the Receivables as of the Cutoff Date were originated under the CPS
alpha program; approximately [ ]% of the aggregate Principal Balance of
the Receivables as of the Cutoff Date were originated under the CPS
delta program; approximately [ ]% of the aggregate Principal Balance of
the Receivables as of the Cutoff Date were originated under the CPS
first time buyer program; and approximately [ ]% of the aggregate
Principal Balance of the Receivables were originated under the CPS
standard program; the remaining [ ]% of the aggregate Principal Balance
of the Receivables were acquired by CPS from an unaffiliated party;
approximately [ ]% of the aggregate Principal Balance of the
Receivables are Samco Receivables; no Receivable shall have a payment
that is more than 30 days overdue as of the Cutoff Date; [ ]% of the
aggregate Principal Balance of the Receivables are Rule of 78's
Receivables and [ ]% of the aggregate Principal Balance of the
Receivables are Simple Interest Receivables; each Receivable shall have
a final scheduled payment due no later than [ ]; each Receivable has an
original term to maturity of at least [ ] months and not more than [ ]
months and a remaining term to maturity of
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not less than [ ] months nor greater than [ ] months; and each
Receivable was originated on or before the Cutoff Date.
(vi) Scheduled Payments. Each Receivable had an original
principal balance of not less than $[ ] nor more than $[ ] has an
outstanding principal balance as of the Cutoff Date of not less than $[
] and not more than $[ ] and has a first Scheduled Payment due on or
prior to [ ].
(vii) Characteristics of Obligors. As of the date of each
Obligor's application for the loan from which the related Receivable
arises, each Obligor on any Receivable (a) did not have any material
past due credit obligations or any personal or real property
repossessed or wages garnished within one year prior to the date of
such application, unless such amounts have been repaid or discharged
through bankruptcy, (b) was not the subject of any Federal, State or
other bankruptcy, insolvency or similar proceeding pending on the date
of application that is not discharged, (c) had not been the subject of
more than one Federal, State or other bankruptcy, insolvency or similar
proceeding, and (d) was domiciled in the United States.
(viii) Origination of Receivables. Based on the billing
address of the Obligors and the Principal Balances as of the Cutoff
Date, approximately [ ]% of the Receivables were originated in
California, approximately [ ]% of the Receivables were originated in
Pennsylvania, approximately [ ]% of the Receivables were originated in
Texas, [ ]% were originated in New York and the remaining [ ]% of the
Receivables were originated in all other States.
(ix) Post-Office Box. On or prior to the next billing period
after the Cutoff Date, the Seller will notify each Obligor to make
payments with respect to its respective Receivables after the Cutoff
Date directly to the Post-Office Box, and will provide each Obligor
with a monthly statement in order to enable such Obligors to make
payments directly to the Post-Office Box.
(x) Location of Receivable Files; One Original. A complete
Receivable File with respect to each Receivable has been or prior to
the Closing Date will be delivered to the Trustee at the location
listed in Schedule B to the Sale and Servicing Agreement. There is only
one original executed copy of each Receivable.
(xi) Schedule of Receivables; Selection Procedures. The
information with respect to the Receivables set forth in the Schedule
of CPS Receivables and the Schedule of Samco Receivables is true and
correct in all material respects as of the close of business on the
Cutoff Date, and no selection procedures adverse to the Securityholders
have been utilized in selecting the Receivables.
(xii) Compliance with Law. Each Receivable, the sale of the
Financed Vehicle and the sale of any physical damage, credit life and
credit accident and health
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insurance and any extended service contracts complied at the time the
related Receivable was originated or made and at the execution of this
Agreement complies in all material respects with all requirements of
applicable Federal, State and local laws, and regulations thereunder
including, without limitation, usury laws, the Federal Truth-in-Lending
Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act,
the Fair Debt Collection Practices Act, the Federal Trade Commission
Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board's
Regulations B and Z, the Soldiers' and Sailors' Civil Relief Act of
1940, the Texas Consumer Credit Code, the California Automobile Sales
Finance Act, and state adaptations of the National Consumer Act and of
the Uniform Consumer Credit Code, and other consumer credit laws and
equal credit opportunity and disclosure laws.
(xiii) Binding Obligation. Each Receivable represents the
genuine, legal, valid and binding payment obligation in writing of the
Obligor, enforceable by the holder thereof in accordance with its
terms.
(xiv) No Government Obligor. None of the Receivables are due
from the United States of America or any State or from any agency,
department, or instrumentality of the United States of America or any
State.
(xv) Security Interest in Financed Vehicle. Immediately prior
to the sale, assignment, and transfer thereof, each Receivable shall be
secured by a validly perfected first priority security interest in the
Financed Vehicle in favor of the Seller (or, with respect to the Samco
Receivables, Samco) as secured party, and such security interest is
prior to all other liens upon and security interests in such Financed
Vehicle which now exist or may hereafter arise or be created (except,
as to priority, for any tax liens or mechanics' liens which may arise
after the Closing Date).
(xvi) Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released
from the lien granted by the related Receivable in whole or in part.
(xvii) No Waiver. No provision of a Receivable has been
waived.
(xviii) No Amendments. No Receivable has been amended, except
as such Receivable may have been amended to grant extensions which
shall not have numbered more than (a) one extension of one calendar
month in any calendar year or (b) three such extensions in the
aggregate.
(xix) No Defenses. As of the Closing Date, no right of
rescission, setoff, counterclaim or defense exists or has been asserted
or threatened with respect to any Receivable. The operation of the
terms of any Receivable or the exercise of any right thereunder will
not render such Receivable unenforceable in whole or in part or subject
to any such right of rescission, setoff, counterclaim, or defense.
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(xx) No Liens. As of the Cutoff Date, there are no liens or
claims existing or which have been filed for work, labor, storage or
materials relating to a Financed Vehicle that shall be liens prior to,
or equal or coordinate with, the security interest in the Financed
Vehicle granted by the Receivable.
(xxi) No Default; Repossession. Except for payment
delinquencies continuing for a period of not more than thirty days as
of the Cutoff Date, no default, breach, violation or event permitting
acceleration under the terms of any Receivable has occurred; and no
continuing condition that with notice or the lapse of time would
constitute a default, breach, violation, or event permitting
acceleration under the terms of any Receivable has arisen; and neither
the Seller nor Samco shall waive and neither has waived any of the
foregoing; and no Financed Vehicle shall have been repossessed as of
the Cutoff Date.
(xxii) Insurance; Other. (A) Each Obligor has obtained
insurance covering the Financed Vehicle as of the execution of the
Receivable insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision coverage and each Receivable requires the
Obligor to obtain and maintain such insurance naming the Seller (or,
with respect to the Samco Receivables, Samco) and its successors and
assigns as an additional insured, (B) each Receivable that finances the
cost of premiums for credit life and credit accident or health
insurance is covered by an insurance policy and certificate of
insurance naming the Seller (or, with respect to the Samco Receivables,
Samco) as policyholder (creditor) under each such insurance policy and
certificate of insurance and (C) as to each Receivable that finances
the cost of an extended service contract, the respective Financed
Vehicle which secures the Receivable is covered by an extended service
contract.
(xxiii) Title. It is the intention of the Seller that the
transfer and assignment herein contemplated constitute a sale of the
CPS Receivables from the Seller to the Purchaser and that the
beneficial interest in and title to such CPS Receivables not be part of
the debtor's estate in the event of the filing of a bankruptcy petition
by or against the Seller under any bankruptcy law. No CPS Receivable
has been sold, transferred, assigned, or pledged by the Seller to any
Person other than the Purchaser or any such pledge has been released on
or prior to the Closing Date. Immediately prior to the transfer and
assignment herein contemplated, the Seller had good and marketable
title to each CPS Receivable, and was the sole owner thereof, free and
clear of all liens, claims, encumbrances, security interests, and
rights of others and, immediately upon the transfer thereof, the
Purchaser shall have good and marketable title to each such CPS
Receivable, and will be the sole owner thereof, free and clear of all
liens, encumbrances, security interests, and rights of others, and the
transfer has been perfected under the UCC.
(xxiv) Lawful Assignment. No Receivable has been originated
in, or
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is subject to the laws of, any jurisdiction under which the sale,
transfer, and assignment of such Receivable under this Agreement or the
Samco Purchase Agreement shall be unlawful, void, or voidable. Neither
the Seller nor Samco has entered into any agreement with any account
debtor that prohibits, restricts or conditions the assignment of any
portion of the Receivables.
(xxv) All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the
Purchaser a first priority perfected ownership interest in the
Receivables and the other Transferred CPS Property have been made,
taken or performed.
(xxvi) Chattel Paper. Each Receivable constitutes "chattel
paper" under the applicable UCC.
(xxvii) Valid and Binding Obligation of Obligor. Each
Receivable is the legal, valid and binding obligation of the Obligor
thereunder and is enforceable in accordance with its terms, except only
as such enforcement may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally, and all
parties to such contract had full legal capacity to execute and deliver
such contract and all other documents related thereto and to grant the
security interest purported to be granted thereby.
(xxviii) Tax Liens. As of the Cutoff Date, there is no lien
against any Financed Vehicle for delinquent taxes.
(xxix) Title Documents. (A) If the Receivable was originated
in a State in which notation of a security interest on the title
document of the related Financed Vehicle is required or permitted to
perfect such security interest, the title document for such Receivable
shows, or if a new or replacement title document is being applied for
with respect to such Financed Vehicle the title document (or, with
respect to Receivables originated in the State of Michigan, all other
evidence of ownership with respect to such Financed Vehicle) will be
received within 180 days and will show, the Seller (or, with respect to
the Samco Receivables, Samco) named as the original secured party under
the related Receivable as the holder of a first priority security
interest in such Financed Vehicle, and (B) if the Receivable was
originated in a State in which the filing of a financing statement
under the UCC is required to perfect a security interest in motor
vehicles, such filings or recordings have been duly made and show the
Seller (or, with respect to the Samco Receivables, Samco) named as the
original secured party under the related Receivable, and in either
case, the Trustee has the same rights as such secured party has or
would have (if such secured party were still the owner of the
Receivable) against all parties claiming an interest in such Financed
Vehicle. With respect to each Receivable for which the title document
of the related Financed Vehicle has not yet been returned from the
Registrar of Titles, the Seller has received written evidence from the
related
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Dealer that such title document showing the Seller (or, with respect to
the Samco Receivables, Samco) as first lienholder has been applied for.
(xxx) Casualty. No Financed Vehicle has suffered a Casualty.
(xxxi) Obligation to Dealers or Others. The Purchaser and its
assignees will assume no obligation to Dealers or other originators or
holders of the Receivables (including, but not limited to under dealer
reserves) as a result of the purchase of the Receivables.
(xxxii) Full Amount Advanced. The full amount of each
Receivable has been advanced to each Obligor, and there are no
requirements for future advances thereunder. No Obligor has any option
under a Receivable to borrow from any Person additional funds secured
by the related Financed Vehicle.
(c) The representations and warranties contained in this
Agreement shall not be construed as a warranty or guaranty by the Seller as to
the future payments by any Obligor. The sale of the CPS Receivables pursuant to
this Agreement shall be "without recourse" except for the representations,
warranties and covenants made by the Seller in this Agreement or the Sale and
Servicing Agreement.
ARTICLE IV
CONDITIONS
4.1. Conditions to Obligation of the Purchaser. On the applicable
Closing Date, the obligation of the Purchaser to purchase the CPS Receivables is
subject to the satisfaction of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Seller hereunder shall be true and correct on the related
Closing Date with the same effect as if then made, and the Seller shall have
performed all obligations to be performed by it hereunder on or prior to such
Closing Date.
(b) Computer Files Marked. The Seller shall, at its own expense, on or
prior to the Related Closing Date, indicate in its computer files that the CPS
Receivables have been sold to the Purchaser pursuant to this Purchase Agreement
and shall deliver to the Purchaser the Schedule of CPS Receivables certified by
the Chairman, the President, the Vice President or the Treasurer of the Seller
to be true, correct and complete.
(c) Receivable Files Delivered. The Seller shall, at its own expense,
deliver the related Receivable Files to the Trustee at the offices specified in
Schedule B to the Pooling and Servicing Agreement on or prior to the related
Closing Date.
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(d) Documents to be delivered by the Seller at the Closing.
(i) The Assignment. On each Closing Date, the Seller will
execute and deliver the applicable Assignment. The Initial Assignment
shall be substantially in the form of Exhibit A hereto and any
Subsequent Assignment shall be substantially in the form of Exhibit A
to the Form of Subsequent Purchase Agreement attached as Exhibit C
hereto.
(ii) Evidence of UCC-1 Filing. On or prior to the related
Closing Date, the Seller shall record and file, at its own expense, a
UCC-1 financing statement in each jurisdiction in which required by
applicable law, executed by the Seller, as seller or debtor, and naming
the Purchaser, as purchaser or secured party, naming the CPS
Receivables and the other Transferred CPS Property conveyed hereafter
as collateral, meeting the requirements of the laws of each such
jurisdiction and in such manner as is necessary to perfect the sale,
transfer, assignment and conveyance of such CPS Receivables to the
Purchaser. The Seller shall deliver a file- stamped copy, or other
evidence satisfactory to the Purchaser of such filing, to the Purchaser
on or prior to such Closing Date.
(iii) Evidence of UCC-2 Filing. On or prior to the related
Closing Date, the Seller shall cause to be recorded and filed, at its
own expense, appropriate UCC-2 termination statements executed by
General Electric Capital Corporation ("GECC") [and Redwood] in each
jurisdiction in which required by applicable law, meeting the
requirements of the laws of each such jurisdiction and in such manner
as is necessary to release GECC's interest in the Receivables,
including without limitation, the security interests in the Financed
Vehicles securing the Receivables and any proceeds of such security
interests or the Receivables. The Seller shall deliver a file-stamped
copy, or other evidence satisfactory to the Purchaser of such filing,
to the Purchaser on or prior to such Closing Date.
(iv) Other Documents. On or prior to the related Closing Date,
the Seller shall deliver such other documents as the Purchaser may
reasonably request.
(e) Other Transactions. The transactions contemplated by the Trust
Agreement, the Indenture, the Sale and Servicing Agreement, the Samco Purchase
Agreement, the Underwriting Agreement [and Note Purchase Agreement and
Certificate Purchase Agreement] shall be consummated on the Initial Closing
Date.
4.2. Conditions to Obligation of the Seller. The obligation of the
Seller to sell the Receivables to the Purchaser is subject to the satisfaction
of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Purchaser hereunder shall be true and correct on the Closing
Date with the same effect as if then made, and the Seller shall have performed
all obligations to be
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performed by it hereunder on or prior to the Closing Date.
(b) Receivables Purchase Price. At the Closing Date, the Purchaser will
deliver to the Seller the CPS Receivables Purchase Price as provided in Section
2.1(b). The Seller hereby directs the Purchaser to wire $[ ] of the Initial
Receivables Purchase Price to Bank of America, ABA: 121000358, Account
#1458425131, Consumer Portfolio Services, Inc. pursuant to wire instructions to
be delivered to the Purchaser on or prior to the Initial Closing Date.
ARTICLE V
COVENANTS OF THE SELLER
The Seller agrees with the Purchaser as follows; provided, however,
that to the extent that any provision of this ARTICLE V conflicts with any
provision of the Sale and Servicing Agreement, the Sale and Servicing Agreement
shall govern:
5.1. Protection of Right, Title and Interest.
(a) Filings. The Seller shall cause all financing statements and
continuation statements and any other necessary documents covering the right,
title and interest of the Purchaser in and to the Receivables and the other
Transferred Property to be promptly filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places as may be required
by law fully to preserve and protect the right, title and interest of the
Purchaser hereunder to the Receivables and the other Transferred Property. The
Seller shall deliver to the Purchaser file stamped copies of, or filing receipts
for, any document recorded, registered or filed as provided above, as soon as
available following such recordation, registration or filing. The Purchaser
shall cooperate fully with the Seller in connection with the obligations set
forth above and will execute any and all documents reasonably required to
fulfill the intent of this Section 5.1(a). In the event the Seller fails to
perform its obligations under this subsection, the Purchaser or the Trustee may
do so at the expense of the Seller.
(b) Name and Other Changes. At least 60 days prior to the date the
Seller makes any change in its name, identity or corporate structure which would
make any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the applicable provisions of the
UCC or any title statute, the Seller shall give the Trustee, the Insurer (so
long as an Insurer Default shall not have occurred and be continuing) and the
Purchaser written notice of any such change and no later than five days after
the effective date thereof, shall file appropriate amendments to all previously
filed financing statements or continuation statements. At least 60 days prior to
the date of any relocation of its principal executive office, the Seller shall
give the Trustee, the Insurer (so long as an Insurer Default shall not have
occurred and be continuing) and the
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Purchaser written notice thereof if, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement and the Seller shall within five days after the effective date
thereof, file any such amendment or new financing statement. The Seller shall at
all times maintain each office from which it shall service Receivables, and its
principal executive office, within the United States of America.
(c) Accounts and Records. The Seller shall maintain accounts and
records as to each CPS Receivable accurately and in sufficient detail to permit
the reader thereof to know at any time the status of such CPS Receivable,
including payments and recoveries made and payments owing (and the nature of
each).
(d) Maintenance of Computer Systems. The Seller shall maintain its
computer systems so that, from and after the time of sale hereunder of the CPS
Receivables to the Purchaser, the Seller's master computer records (including
any back-up archives) that refer to a CPS Receivable shall indicate clearly the
interest of the Purchaser in such CPS Receivable and that such CPS Receivable is
owned by the Purchaser. Indication of the Purchaser's ownership of a CPS
Receivable shall be deleted from or modified on the Seller's computer systems
when, and only when, the CPS Receivable shall have been paid in full or
repurchased.
(e) Sale of Other Receivables. If at any time the Seller shall propose
to sell, grant a security interest in, or otherwise transfer any interest in any
automobile or light- duty truck receivables (other than the CPS Receivables) to
any prospective purchaser, lender, or other transferee, the Seller shall give to
such prospective purchaser, lender, or other transferee computer tapes, records,
or print-outs (including any restored from back-up archives) that, if they shall
refer in any manner whatsoever to any CPS Receivable, shall indicate clearly
that such CPS Receivable has been sold and is owned by the Purchaser unless such
CPS Receivable has been paid in full or repurchased.
(f) Access to Records. The Seller shall permit the Purchaser and its
agents at any time during normal business hours to inspect, audit, and make
copies of and abstracts from the Seller's records regarding any Receivable.
(g) List of Receivables. Upon request, the Seller shall furnish to the
Purchaser, within five Business Days, a list of all CPS Receivables (by contract
number and name of Obligor) then owned by the Purchaser, together with a
reconciliation of such list to the Schedule of CPS Receivables.
5.2. Other Liens or Interests. Except for the conveyances hereunder and
pursuant to the Sale and Servicing Agreement, the Seller will not sell, pledge,
assign or transfer to any other Person, or grant, create, incur, assume or
suffer to exist any lien on any interest therein, and the Seller shall defend
the right, title, and interest of the Purchaser in, to and under the Receivables
against all claims of third parties claiming through or under the Seller
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(or, with respect to the Samco Receivables, Samco).
5.3. Chief Executive Office. During the term of the Receivables, the
Seller will maintain its chief executive office in one of the United States,
except Louisiana or Vermont.
5.4. Costs and Expenses. The Seller agrees to pay all reasonable costs
and disbursements in connection with the perfection, as against all third
parties, of the Purchaser's right, title and interest in and to the CPS
Receivables.
5.5. Delivery of Receivable Files. On or prior to the Closing Date, the
Seller shall deliver the Receivable Files to the Trustee at the location
specified in Schedule B to the Sale and Servicing Agreement. The Seller shall
have until the last day of the second Collection Period following receipt from
the Trustee of notification, pursuant to Section 2.8 of the Sale and Servicing
Agreement, that there has been a failure to deliver a file with respect to a
Receivable (including a Samco Receivable) or that a file is unrelated to the
Receivables identified in Schedule A to the Sale and Servicing Agreement or that
any of the documents referred to in Section 2.7 of the Sale and Servicing
Agreement are not contained in a Receivable File, to deliver such file or any of
the aforementioned documents required to be included in such Receivable File to
the Trustee. Unless such defect with respect to such Receivable File shall have
been cured by the last day of the second Collection Period following discovery
thereof by the Trustee, the Seller hereby agrees to repurchase any such
Receivable from the Trust as of such last day. In consideration of the purchase
of the Receivable, the Seller shall remit the Purchase Amount in the manner
specified in Section 4.5 of the Sale and Servicing Agreement. The sole remedy
hereunder of the Trustee, the Trust or the Securityholders with respect to a
breach of this Section 5.5, shall be to require the Seller to repurchase the
Receivable pursuant to this Section 5.5. Upon receipt of the Purchase Amount,
the Trustee shall release to the Seller or its designee the related Receivable
File and shall execute and deliver all instruments of transfer or assignment,
without recourse, as are prepared by the Seller and delivered to the Trustee and
are necessary to vest in the Seller or such designee title to the Receivable.
5.6. Indemnification. (a) The Seller shall indemnify the Purchaser for
any liability as a result of the failure of a Receivable to be originated in
compliance with all requirements of law and for any breach of any of its
representations and warranties contained herein.
(b) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all costs, expenses, losses, damages, claims, and
liabilities, arising out of or resulting from the use, ownership, or operation
by the Seller or any Affiliate thereof of a Financed Vehicle.
(c) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all taxes, except for taxes on the net income of the
Purchaser, that may at any time be asserted against the Purchaser with respect
to the transactions contemplated herein, including, without limitation, any
sales, gross receipts, general
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corporation, tangible personal property, privilege, or license taxes and costs
and expenses in defending against the same.
(d) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all costs, expenses, losses, damages, claims and
liabilities to the extent that such cost, expense, loss, damage, claim or
liability arose out of, or was imposed upon the Purchaser through, the
negligence, willful misfeasance, or bad faith of the Seller in the performance
of its duties under the Agreement, or by reason of reckless disregard of the
Seller's obligations and duties under the Agreement.
(e) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against all costs, expenses, losses, damages, claims and liabilities
arising out of or incurred in connection with the acceptance or performance of
the Seller's trusts and duties as Servicer under the Sale and Servicing
Agreement, except to the extent that such cost, expense, loss, damage, claim or
liability shall be due to the willful misfeasance, bad faith, or negligence
(except for errors in judgment) of the Purchaser.
Indemnification under this Section 5.6 shall include reasonable fees
and expenses of litigation and shall survive payment of the Notes and
Certificates. These indemnity obligations shall be in addition to any obligation
that the Seller may otherwise have.
5.7. Sale. The Seller agrees to treat this conveyance for all purposes
(including without limitation tax and financial accounting purposes) as a sale
on all relevant books, records, tax returns, financial statements and other
applicable documents.
5.8. Non-Petition. In the event of any breach of a representation and
warranty made by the Purchaser hereunder, the Seller covenants and agrees that
it will not take any action to pursue any remedy that it may have hereunder, in
law, in equity or otherwise, until a year and a day have passed since the date
on which all certificates issued by the Trust or a similar trust formed by the
Purchaser have been paid in full. The Purchaser and the Seller agree that
damages will not be an adequate remedy for such breach and that this covenant
may be specifically enforced by the Purchaser or by the Trust.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1. Obligations of Seller. The obligations of the Seller under this
Agreement shall not be affected by reason of any invalidity, illegality or
irregularity of any Receivable.
6.2. Repurchase Events. The Seller hereby covenants and agrees with the
Purchaser for the benefit of the Purchaser, the Trustee, the Insurer and the
Securityholders, that (i) the occurrence of a breach of any of the Seller's
representations and warranties
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contained in Section 3.2(b) hereof (without regard to any limitations regarding
the Seller's knowledge) and (ii) the failure of the Seller to timely comply with
its obligations pursuant to Section 5.5 hereof, shall constitute events
obligating the Seller to repurchase the affected Receivables (including any
affected Samco Receivables) hereunder ("Repurchase Events"), at the Purchase
Amount from the Trust. Unless the breach of any of the Seller's representations
and warranties shall have been cured by the last day of the second Collection
Period following the discovery thereof by or notice to the Purchaser and the
Seller of such breach, the Seller shall repurchase any Receivable if such
Receivable is materially and adversely affected by the breach as of the last day
of such second Collection Period (or, at the Seller's option, the last day of
the first Collection Period following the discovery) and, in the event that the
breach relates to a characteristic of the Receivables in the aggregate, and if
the Trust is materially and adversely affected by such breach, unless the breach
shall have been cured by such second Collection Period, the Seller shall
purchase such aggregate Principal Balance of Receivables, such that following
such purchase such representation shall be true and correct with respect to the
remainder of the Receivables in the aggregate. The provisions of this Section
6.2 are intended to grant the Trustee a direct right against the Seller to
demand performance hereunder, and in connection therewith the Seller waives any
requirement of prior demand against the Purchaser and waives any defaults it
would have against the Purchaser with respect to such repurchase obligation. Any
such purchase shall take place in the manner specified in Section 5.6 of the
Sale and Servicing Agreement. For purposes of this Section 6.2, the Purchase
Amount of a Receivable which is not consistent with the warranty pursuant to
Section 3.2(b)(iv)(a)(5) or (iv)(a)(6) shall include such additional amount as
shall be necessary to provide the full amount of interest as contemplated
therein. The sole remedy hereunder of the Securityholders, the Trust, the
Insurer, the Trustee or the Purchaser against the Seller with respect to any
Repurchase Event shall be to enforce the Seller's obligation to repurchase such
Receivables pursuant to this Agreement; provided, however, that the Seller shall
indemnify the Trustee, the Insurer, the Trust and the Securityholders against
all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them, as a result of third party claims arising out of the
events or facts giving rise to such breach. Upon receipt of the Purchase Amount,
the Purchaser shall cause the Trustee to release the related Receivables File to
the Seller and to execute and deliver all instruments of transfer or assignment,
without recourse, as are necessary to vest in the Seller title to the
Receivable. Notwithstanding the foregoing, if it is determined that consummation
of the transactions contemplated by the Sale and Servicing Agreement, the
Indentures and the other transaction documents referenced in such Agreement,
servicing and operation of the Trust pursuant to Trust Agreement and such other
documents, or the ownership of a Security by a Holder constitutes a violation of
the prohibited transaction rules of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), or the Internal Revenue Code of 1986, as amended
("Code") for which no statutory exception or administrative exemption applies,
such violation shall not be treated as a Repurchase Event.
6.3. Seller's Assignment of Purchased Receivables. With respect to all
Receivables repurchased by the Seller pursuant to this Agreement, the Purchaser
shall assign, without
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recourse except as provided herein, representation or warranty, to the Seller
all the Purchaser's right, title and interest in and to such Receivables, and
all security and documents relating thereto.
6.4. Conveyance as Sale of Receivables Not Financing. The parties
hereto intend that the conveyance hereunder be a sale of the CPS Receivables and
the other Transferred CPS Property from the Seller to the Purchaser and not a
financing secured by such assets; and the beneficial interest in and title to
the CPS Receivables and the other Transferred CPS Property shall not be part of
the Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law. In the event that any conveyance
hereunder is for any reason not considered a sale, the parties intend that this
Agreement constitute a security agreement under the UCC (as defined in the UCC
as in effect in the State of California) and applicable law, and the Seller
hereby grants to the Purchaser a first priority perfected security interest in,
to and under the CPS Receivables and the other Transferred CPS Property being
delivered to the Purchaser on the Closing Date, and other property conveyed
hereunder and all proceeds of any of the foregoing for the purpose of securing
payment and performance of the Securities and the repayment of amounts owed to
the Purchaser from the Seller.
6.5. Trust. The Seller acknowledges that the Purchaser will, pursuant
to the Sale and Servicing Agreement, sell the Receivables to the Trust and
assign its rights under this Purchase Agreement and the Samco Purchase Agreement
to the Trust, and that the representations and warranties contained in this
Agreement and the rights of the Purchaser under this Purchase Agreement,
including under Sections 6.2 and 6.4 hereof are intended to benefit such Trust
and the Securityholders. The Seller also acknowledges that the Trustee on behalf
of the Securityholders as assignee of the Purchaser's rights hereunder may
directly enforce, without making any prior demand on the Purchaser, all the
rights of the Purchaser hereunder including the rights under Section 6.2 and 6.4
hereof. The Seller hereby consents to such sale and assignment.
6.6. Amendment. This Purchase Agreement may be amended from time to
time by a written amendment duly executed and delivered by the Seller and the
Purchaser with the consent of the Insurer; provided, however, that (i) any such
amendment that materially adversely affects the rights of the Class A
Noteholders under the Sale and Servicing Agreement must be consented to by the
holders of Class A Notes representing 51% or more of the outstanding principal
amounts Class A Notes, (ii) any such amendment that materially adversely affects
the rights of the Class B Noteholders under the Sale and Servicing Agreement
must be consented to by the holders of Class B Notes representing 51% or more of
the outstanding principal amounts Class B Notes and (iii) any amendment that
materially adversely affects the rights of the Certificateholders under the Sale
and Servicing Agreement must be consented to by the holders of Certificates
representing 51% or more of the Certificate Balance.
6.7. Accountants' Letters. (a) [ ] will review the characteristics of
the
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Receivables and will compare those characteristics to the information with
respect to the Receivables contained in the Offering Documents; (b) The Seller
will cooperate with the Purchaser and [ ] in making available all information
and taking all steps reasonably necessary to permit such accountants to complete
the review set forth in Section 6.7(a) above and to deliver the letters required
of them under the Underwriting Agreement; and (c) [ ] will deliver to the
Purchaser a letter, dated the initial Closing Date, in the form previously
agreed to by the Seller and the Purchaser, with respect to the financial and
statistical information contained in the Offering Documents under the captions
"CPS's Automobile Contract Portfolio -- Delinquency and Loss Experience" and
"The Receivables Pool", certain information relating to the Receivables on
magnetic tape obtained from the Seller and the Purchaser and with respect to
such other information as may be agreed in the form of letter.
6.8. Waivers. No failure or delay on the part of the Purchaser in
exercising any power, right or remedy under the Agreements shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other or further exercise thereof or the exercise
of any other power, right or remedy.
6.9. Notices. All communications and notices pursuant hereto to either
party shall be in writing or by telegraph or telex and addressed or delivered to
it at its address (or in case of telex, at its telex number at such address)
shown in the opening portion of this Purchase Agreement or at such other address
as may be designated by it by notice to the other party and, if mailed or sent
by telegraph or telex, shall be deemed given when mailed, communicated to the
telegraph office or transmitted by telex.
6.10. Costs and Expenses. The Seller will pay all expenses incident to
the performance of its obligations under this Purchase Agreement and the Seller
agrees to pay all reasonable out-of-pocket costs and expenses of the Purchaser,
excluding fees and expenses of counsel, in connection with the perfection as
against third parties of the Purchaser's right, title and interest in and to the
CPS Receivables and security interests in the Financed Vehicles and the
enforcement of any obligation of the Seller hereunder.
6.11. Representations of the Seller and the Purchaser. The respective
agreements, representations, warranties and other statements by the Seller and
the Purchaser set forth in or made pursuant to this Purchase Agreement shall
remain in full force and effect and will survive the closing under Section 2.2
hereof.
6.12. Confidential Information. The Purchaser agrees that it will
neither use nor disclose to any Person the names and addresses of the Obligors,
except in connection with the enforcement of the Purchaser's rights hereunder,
under the CPS Receivables, under the Sale and Servicing Agreement or as required
by law.
6.13. Headings and Cross-References. The various headings in this
Agreement are included for convenience only and shall not affect the meaning or
interpretation of any
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provision of this Purchase Agreement. References in this Purchase Agreement to
Section names or numbers are to such Sections of this Purchase Agreement.
6.14. Third Party Beneficiaries. The parties hereto hereby expressly
agree that each of the Trustee for the benefit of the Securityholders and the
Insurer shall be third party beneficiaries with respect to this Purchase
Agreement, provided, however, that no third party other than the Trustee for the
benefit of the Securityholders and the Credit Enhancer shall be deemed a third
party beneficiary of this Purchase Agreement.
6.15. Governing Law. THIS PURCHASE AGREEMENT AND THE ASSIGNMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
6.16. Counterparts. This Purchase Agreement may be executed in two or
more counterparts and by different parties on separate counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
[Rest of page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereby have caused this Purchase
Agreement to be executed by their respective officers thereunto duly authorized
as of the date and year first above written.
CPS RECEIVABLES CORP.
By:
Name:
Title:
CONSUMER PORTFOLIO SERVICES, INC.
By:
Name:
Title:
<PAGE>
Exhibit A
ASSIGNMENT
For value received, in accordance with the Purchase Agreement dated as
of [ ], between the undersigned (the "Seller") and CPS Receivables Corp. (the
"Purchaser") (the "CPS Purchase Agreement"), the undersigned does hereby sell,
transfer, assign and otherwise convey unto the Purchaser, without recourse
(subject to the obligations in the Purchase Agreement and the Sale and Servicing
Agreement), all right, title and interest of the Seller in and to (i) the
Initial CPS Receivables listed in the Schedule of CPS Receivables and, with
respect to Rule of 78's Receivables, all monies due or to become due thereon
after the Cutoff Date (including Scheduled Payments due after the Cutoff Date
(including principal prepayments relating to such Scheduled Payments) but
received by the Seller on or before the Cutoff Date) and, with respect to Simple
Interest Receivables, all monies received thereunder after the Cutoff Date and
all Liquidation Proceeds and Recoveries received with respect to such
Receivables; (ii) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Initial CPS Receivables and any other interest of the
Seller in such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to Financed Vehicles in the State of
Michigan, other evidence of ownership with respect to such Financed Vehicles;
(iii) any proceeds from claims on any physical damage, credit life and credit
accident and health insurance policies or certificates relating to the Financed
Vehicles securing the Initial CPS Receivables; (iv) refunds for the costs of
extended service contracts with respect to Financed Vehicles securing the
Initial CPS Receivables, refunds of unearned premiums with respect to credit
life and credit accident and health insurance policies or certificates covering
an Obligor or Financed Vehicle or his or her obligations with respect to a
Financed Vehicle related to an Initial CPS Receivable and any recourse to
Dealers for any of the foregoing; (v) the Receivable File related to each
Initial CPS Receivable; and (vi) the proceeds of any and all of the foregoing.
The foregoing sale does not constitute and is not intended to result in any
assumption by the Purchaser of any obligation of the undersigned to the
Obligors, insurers or any other Person in connection with the Initial CPS
Receivables, the related Receivable Files, any insurance policies or any
agreement or instrument relating to any of them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the CPS
Purchase Agreement and is to be governed by the CPS Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the CPS Purchase Agreement.
THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.
A-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of [ ].
CONSUMER PORTFOLIO SERVICES, INC.
By:
Name:
Title:
A-2
<PAGE>
Exhibit B
Schedule of CPS Receivables
See Following Page
A-1
<PAGE>
EXHIBIT C
FORM OF SUBSEQUENT PURCHASE AGREEMENT
THIS SUBSEQUENT PURCHASE AGREEMENT (the "Subsequent Agreement") is made
and entered into as of , by and between CONSUMER PORTFOLIO SERVICES, INC., a
California corporation (the "Seller"), and CPS RECEIVABLES CORP., a California
corporation (together with its successors and assigns, the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Purchaser, as purchaser, has agreed to purchase from the
Seller, as seller, and the Seller, pursuant to the Receivables Purchase
Agreement (the "Receivables Purchase Agreement") dated as of [ ], between the
Purchaser and the Seller, is transferring to the Purchaser the Subsequent CPS
Receivables listed on the Schedule of Subsequent CPS Receivables annexed hereto
as Exhibit A (the "Subsequent CPS Receivables") and Subsequent Transferred CPS
Property.
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter contained, and for other good and valuable consideration,
the receipt of which is acknowledged, the Purchaser and the Seller, intending to
be legally bound, hereby agree as follows:
Definitions
SECTION 1. Capitalized terms used herein without definition shall have
the respective meanings assigned to such terms in the CPS Purchase Agreement.
SECTION 2. Conveyance of Subsequent Receivables. For value received, in
accordance with the CPS Purchase Agreement, the Seller does hereby sell, assign,
transfer and otherwise convey unto the Purchaser, without recourse (but without
limitation of its obligations under the CPS Purchase Agreement), all right,
title and interest of the Seller in and to: (i) the Subsequent CPS Receivables
listed in the related Schedule of Subsequent CPS Receivables and, with respect
to Rule of 78's Receivables, all monies due or to become due thereon after the
related Subsequent Cutoff Date (including Scheduled Payments due after the
related Subsequent Cutoff Date (including principal prepayments relating to such
Scheduled Payments) but received by the Seller on or before the related
Subsequent Cutoff Date) and, with respect to Simple Interest Receivables, all
monies received thereunder after the related Subsequent Cutoff Date and all
Liquidation Proceeds and Recoveries received with respect to such Subsequent CPS
Receivables; (ii) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Subsequent CPS Receivables and any other interest of
the Seller in such Financed Vehicles, including, without limitation, the
certificates of title or, with
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respect to Financed Vehicles in the State of Michigan, other evidence of
ownership with respect to Financed Vehicles; (iii) any proceeds from claims on
any physical damage, credit life and credit accident and health insurance
policies or certificates relating to the Financed Vehicles securing the
Subsequent CPS Receivables or the Obligors thereunder; (iv) refunds for the
costs of extended service contracts with respect to Financed Vehicles securing
the Subsequent CPS Receivables, refunds of unearned premiums with respect to
credit life and credit accident and health insurance policies or certificates
covering an Obligor or Financed Vehicle securing the Subsequent CPS Receivables
or his or her obligations with respect to such a Financed Vehicle and any
recourse to Dealers for any of the foregoing; (v) the Receivable File related to
each Subsequent CPS Receivable; and (vi) the proceeds of any and all of the
foregoing (collectively, the "Subsequent Transferred CPS Property" and together
with any Subsequent Transferred Samco Property, the "Subsequent Transferred
Property").
SECTION 3. Consideration for Subsequent Transferred Property. In
consideration for the Subsequent CPS Receivables and other Subsequent
Transferred CPS Property, subject to the terms and conditions hereof, the
purchase price for the Subsequent CPS Receivables, in the amount of [$ ], shall
be paid by the Purchaser on the Subsequent Closing Date as follows: (i) $[ ] in
cash shall be paid to the Seller and (ii) $[ ] which shall be deemed paid and
returned to the Purchaser as a contribution to capital.
SECTION 4. Representations and Warranties of the Seller. This Agreement
is made pursuant to and upon the representations, warranties, covenants and
agreements on the part of the Seller contained in the CPS Purchase Agreement and
is to be governed by the CPS Purchase Agreement. All of such representations,
warranties, covenants and agreements are hereby incorporated herein and are in
full force and effect as though specifically set forth herein.
SECTION 5. Representations and Warranties of the Purchaser. This
Agreement is made pursuant to and upon the representations, warranties,
covenants and agreements on the part of the Purchaser contained in the CPS
Purchase Agreement and is to be governed by the CPS Purchase Agreement. All of
such representations, warranties, covenants and agreements are hereby
incorporated herein and are in full force and effect as though specifically set
forth herein.
C-2
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed this __ day of _________, but effective as of the date and year
first written above.
CONSUMER PORTFOLIO SERVICES, INC.,
as Seller
By:
Name:
Title:
CPS RECEIVABLES CORP.,
as Purchaser
By:
Name:
Title:
C-3
<PAGE>
EXHIBIT A TO SUBSEQUENT CPS PURCHASE AGREEMENT
FORM OF SUBSEQUENT CPS ASSIGNMENT
For value received, in accordance with the Purchase Agreement dated as
of [ ], 1997, as heretofore amended, supplemented or otherwise modified (the
"CPS Purchase Agreement"), among the undersigned, as Seller, and CPS
Receivables, Corp. (the "Purchaser"), the undersigned does hereby transfer,
assign, grant, set over and otherwise convey to the Purchaser, without recourse
(subject to the obligations in the CPS Purchase Agreement and the Sale and
Servicing Agreement) all right, title and interest of the Seller in and to: (i)
the Subsequent CPS Receivables listed in the related Schedule of Subsequent CPS
Receivables and, with respect to Rule of 78's Receivables, all monies due or to
become due thereon after the related Subsequent Cutoff Date (including Scheduled
Payments due after the related Subsequent Cutoff Date (including principal
prepayments relating to such Scheduled Payments) but received by the Seller on
or before the related Subsequent Cutoff Date) and, with respect to Simple
Interest Receivables, all monies received thereunder after the related
Subsequent Cutoff Date and all Liquidation Proceeds and Recoveries received with
respect to such Subsequent CPS Receivables; (ii) the security interests in the
Financed Vehicles granted by Obligors pursuant to the Subsequent CPS Receivables
and any other interest of the Seller in such Financed Vehicles, including,
without limitation, the certificates of title or, with respect to Financed
Vehicles in the State of Michigan, other evidence of ownership with respect to
Financed Vehicles; (iii) any proceeds from claims on any physical damage, credit
life and credit accident and health insurance policies or certificates relating
to the Financed Vehicles securing the Subsequent CPS Receivables or the Obligors
thereunder; (iv) refunds for the costs of extended service contracts with
respect to Financed Vehicles securing the Subsequent CPS Receivables, refunds of
unearned premiums with respect to credit life and credit accident and health
insurance policies or certificates covering an Obligor or Financed Vehicle
securing the Subsequent CPS Receivables or his or her obligations with respect
to such a Financed Vehicle and any recourse to Dealers for any of the foregoing;
(v) the Receivable File related to each Subsequent CPS Receivable; and (vi) the
proceeds of any and all of the foregoing (collectively, the "Subsequent
Transferred CPS Property" and together with any Subsequent Transferred CPS
Property, the "Subsequent Transferred Property").
The foregoing assignment, transfer and conveyance does not constitute
and is not intended to result in any assumption by the Purchaser of any
obligation of the undersigned to the Obligors, insurers or any other person in
connection with the Subsequent CPS Receivables, the Receivable Files, any
insurance policies or any agreement or instrument relating to any of them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of each of the undersigned contained in
the CPS Purchase Agreement and is to be governed by the CPS Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings
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assigned to them in the CPS Purchase Agreement.
This Assignment shall be governed by and construed in accordance with
the internal laws of the State of New York, without regard to principles of
conflicts of law.
IN WITNESS WHEREOF, the undersigned have caused this Assignment to be
duly executed as of [ ].
CONSUMER PORTFOLIO SERVICES, INC.
By:
Name:
Title:
C-5
ASSIGNMENT
For value received, in accordance with the Purchase Agreement dated as
of May 1, 1997 between the undersigned (the "Seller") and Samco Acceptance Corp.
(the "Purchaser") (the "Samco Purchase Agreement"), the undersigned does hereby
sell, transfer, assign and otherwise convey unto the Purchaser, without recourse
(subject to the obligations in the Samco Purchase Agreement and the Sale and
Servicing Agreement), all right, title and interest of the Seller in and to (i)
the Initial Samco Receivables listed in the Schedule of Samco Receivables and,
with respect to Rule of 78's Receivables, all monies due or to become due
thereon after the Cutoff Date (including Scheduled Payments due after the Cutoff
Date (including principal prepayments relating to such Scheduled Payments) but
received by the Seller on or before the Cutoff Date) and, with respect to Simple
Interest Receivables, all monies received thereunder after the Cutoff Date and
all Liquidation Proceeds and Recoveries received with respect to such
Receivables; (ii) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Initial Samco Receivables and any other interest of the
Seller in such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to Financed Vehicles in the State of
Michigan, other evidence of ownership with respect to Financed Vehicles; (iii)
any proceeds from claims on any physical damage, credit life and credit accident
and health insurance policies or certificates relating to the Financed Vehicles
securing the Initial Samco Receivables; (iv) refunds for the costs of extended
service contracts with respect to Financed Vehicles securing the Initial Samco
Receivables, refunds of unearned premiums with respect to credit life and credit
accident and health insurance policies or certificates covering an Obligor or
Financed Vehicle securing the Initial Samco Receivables or his or her
obligations with respect to such a Financed Vehicle and any recourse to Dealers
for any of the foregoing; (v) the Receivable File related to each Initial Samco
Receivable; and (vi) the proceeds of any and all of the foregoing. The foregoing
sale does not constitute and is not intended to result in any assumption by the
Purchaser of any obligation of the undersigned to the Obligors, insurers or any
other Person in connection with the Initial Samco Receivables, the Receivable
Files, any insurance policies or any agreement or instrument relating to any of
them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Samco
Purchase Agreement and is to be governed by the Samco Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Samco Purchase Agreement.
THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of [ ].
SAMCO ACCEPTANCE CORP.
By:
Name:
Title:
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<PAGE>
PURCHASE AGREEMENT dated as of this [ ], 1997, by and between SAMCO
ACCEPTANCE CORP., a Delaware corporation (the "Seller"), having its principal
executive office at 8150 North Central Expressway, Suite 600, Lock-Box 39,
Dallas, Texas, and CPS RECEIVABLES CORP., a California corporation (the
"Purchaser"), having its principal executive office at 2 Ada, Irvine, California
92618.
WHEREAS, in the regular course of its business, the Seller purchases
and services through its auto loan programs certain motor vehicle retail
installment sale contracts secured by new and used automobiles, light trucks,
vans or minivans acquired from motor vehicle dealers.
WHEREAS, the Seller and the Purchaser wish to set forth the terms
pursuant to which the Samco Receivables (as hereinafter defined), are to be sold
by the Seller to the Purchaser, which Samco Receivables together with the CPS
Receivables will be transferred by the Purchaser, pursuant to the Sale and
Servicing Agreement (as hereinafter defined), to CPS Auto Receivables Trust [ ]
to be created thereunder, which Trust will issue notes under the Indenture (as
hereinafter defined) representing indebtedness of the Trust (the "Class A Notes"
and the "Class B Notes" and, together with the Class A Notes, the "Notes") [and
certificates under the Trust Agreement (as hereinafter defined) representing
beneficial interests in the Trust (the "Certificates" and, together with the
Notes, the "Securities")] .
NOW, THEREFORE, in consideration of the foregoing, other good and
valuable consideration, and the mutual terms and covenants contained herein, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Terms not defined in this Purchase Agreement shall have the meaning set
forth in the Sale and Servicing Agreement and, if not defined therein, shall
have the meaning set forth in the Indenture. As used in this Purchase Agreement,
the following terms shall, unless the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular and
plural forms of the terms defined):
"Agreements" means, collectively, this Purchase Agreement and each
Subsequent Purchase Agreement and the Assignments.
"Assignment" means the Initial Assignment and/or any Subsequent
Assignment.
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<PAGE>
"Base Prospectus" means the Prospectus dated [ ] with respect to CPS
Auto Grantor Trusts and any amendment or supplement thereto.
["Certificate Purchase Agreement" means the Certificate Purchase
Agreement, dated [ ] among certain investors, CPS and the Purchaser relating to
the Certificates.]
"Closing Date" means the Initial Closing Date and/or each Subsequent
Closing Date.
"CPS" means Consumer Portfolio Services, Inc., a California
corporation, and its successors and assigns.
"CPS Initial Transferred Property" shall have the meaning specified in
the CPS Purchase Agreement
"CPS Purchase Agreement" means the purchase agreement dated as of [ ]
between Consumer Portfolio Services, Inc., as seller, and CPS Receivables Corp.,
as purchaser, as such agreement may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"CPS Receivable" shall have the meaning specified in the CPS Purchase
Agreement.
"Indenture" means the Indenture dated as of [ ] between CPS Auto
Receivables Trust [ ], as issuer and [Norwest Bank Minnesota, National
Association], as trustee.
"Initial Closing Date" means [ ], 199[ ].
"Initial CPS Receivables" shall have the meaning specified in the CPS
Purchase Agreement.
"Initial Receivables" means an Initial Samco Receivable and/or an
Initial CPS Receivable.
"Initial Samco Assignment" means the assignment dated [ ], by the
Seller to the Purchaser, relating to the purchase of the Initial Samco
Receivables and certain other property related thereto by the Purchaser from the
Seller pursuant to this Purchase Agreement which shall be substantially in the
form of Exhibit A to this Purchase Agreement.
"Initial Samco Receivable" means each retail installment sale contract
for a Financed Vehicle that appears on the Initial Schedule of Samco Receivables
and all rights thereunder.
"Initial Schedule of Samco Receivables" means the list of Initial Samco
Receivables annexed hereto as Exhibit B.
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<PAGE>
"Initial Schedule of CPS Receivables" means the list of CPS Receivables
annexed as Exhibit B to the CPS Purchase Agreement.
"Initial Transferred CPS Property" shall have the meaning specified in
the CPS Purchase Agreement.
"Initial Transferred Property" shall have the meaning specified in
Section 2.1(a) hereof.
"Initial Transferred Samco Property" shall have the meaning specified
in Section 2.1(a) hereof.
["Note Purchase Agreement" means the Note Purchase Agreement, dated [ ]
among one or more investors, CPS and the Purchaser relating to the Class B
Notes.]
"Obligor(s)" means the purchaser or co-purchasers of a Financed Vehicle
or any other Person who owes or may be liable for payments under a Receivable.
"Offering Documents" means the Prospectus Supplement, the Base
Prospectus and the [Private Placement Memorandum].
["Private Placement Memorandum" means the Private Placement Memorandum,
dated [ ], relating to the private placement of the Class B Notes and any
amendment or supplement thereto.]
"Prospectus Supplement" means the Prospectus Supplement dated [ ],
relating to the public offering of the Class A Notes and any amendment or
supplement thereto.
"Purchase Agreement" means this Purchase Agreement, as this agreement
may be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.
"Purchaser" means CPS Receivables Corp., a California corporation, and
its successors and assigns.
"Receivable" shall have the meaning specified in the Pooling and
Servicing Agreement.
"Receivables Purchase Price" means $[ ].
"Repurchase Event" shall have the meaning specified in Section 6.2
hereof.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
dated as of [ ], among CPS Auto Receivables Trust [ ], CPS Receivables Corp., as
seller, Consumer
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<PAGE>
Portfolio Services, Inc., as originator of the Receivables and servicer, and
[Norwest Bank Minnesota, National Association], as Trustee and standby servicer,
as such agreement may be amended, supplemented or otherwise modified from time
to time in accordance with the terms thereof.
"Samco" means Samco Acceptance Corp., a Delaware corporation, and its
successors and assigns.
"Samco Assignments " means the Initial Assignment and any Subsequent
Assignment.
"Samco Purchase Agreement" means this Purchase Agreement, as this
agreement may be amended, supplemented or otherwise modified from time to time
in accordance with the terms hereof.
"Samco Receivables" means an Initial Samco Receivable and/or a
Subsequent Samco Receivable.
"Schedule of Receivables" means the Schedule of Samco Receivables
and/or the CPS Schedule of Receivables.
"Schedule of Samco Receivables" means the list of Initial Samco
Receivables annexed hereto as Exhibit B, as supplemented by each Schedule of
Subsequent Samco Receivables.
"Schedule of Subsequent Samco Receivables" means the schedule of all
motor vehicle retail financing agreements sold and transferred to the Purchaser
pursuant to a Subsequent Purchase Agreement, which schedule shall be deemed to
supplement the Schedule of Receivables and shall be attached to the related
Subsequent Assignment (and may be in the form of microfiche).
"Seller" means Samco Acceptance Corp., a Delaware corporation, in its
capacity as seller of the Samco Receivables and the other Transferred Samco
Property relating thereto, and its successors and assigns.
"Servicer" means Consumer Portfolio Services, Inc., a California
corporation, in its capacity as Servicer of the Receivables, and its successors
and assigns.
"Subsequent Purchase Agreement" means a subsequent purchase agreement
which shall be in substantially the form of Exhibit C to this Purchase Agreement
by which the Seller will transfer Subsequent Samco Receivables.
"Subsequent Assignment" means an assignment substantially in the form
of Exhibit A to the form of Subsequent Purchase Agreement attached as Exhibit C
hereto.
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<PAGE>
"Subsequent Closing Date" means any day on which Subsequent Samco
Receivables are sold to the Purchaser pursuant to a Subsequent Purchase
Agreement.
"Subsequent Receivables" means a Subsequent CPS Receivable and/or a
Subsequent Samco Receivable.
"Subsequent Samco Receivable" means each Receivable transferred to the
Purchaser pursuant to a Subsequent Samco Assignment which shall be listed on the
Schedule of Subsequent Receivables attached to the related Subsequent
Assignment.
"Subsequent Transferred Property" shall have the meaning specified in
Section 2.2(a).
"Subsequent Transferred Samco Property" shall have the meaning
specified in each Subsequent Purchase Agreement.
"Transferred Property" means the Transferred CPS Property and the
Transferred Samco Property.
"Transferred Samco Property" means the Initial Transferred Samco
Property and/or the Subsequent Transferred Samco Property.
"Trust" means the CPS Auto Receivables Trust [ ] created by the Trust
Agreement.
"Trust Agreement" means the Trust Agreement between CPS Receivables
Corp. and [Owner Trustee].
"UCC" means the Uniform Commercial Code, as in effect from time to time
in the relevant jurisdictions.
"Underwriters" means [Underwriter[s]].
"Underwriting Agreement" means the Underwriting Agreement, dated [ ],
among the Underwriters, CPS and the Purchaser relating to the [Class A] Notes
[and the Class B Notes].
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1. Purchase and Sale of Receivables. On the Initial Closing Date,
subject to the terms and conditions of this Purchase Agreement, the Seller
agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the
Seller, without recourse (subject to the obligations in this Purchase Agreement,
each Subsequent Purchase Agreement and the Sale and Servicing Agreement), all of
the Seller's right, title and interest in, to and under the
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<PAGE>
Initial Samco Receivables and the other Initial Transferred Samco Property
relating thereto. The conveyance to the Purchaser of the Initial Samco
Receivables and other Initial Transferred Samco Property relating thereto is
intended as a sale free and clear of all liens and it is intended that the
Initial Transferred Samco Property and other property of the Purchaser shall not
be part of the Seller's estate in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law.
(a) Transfer of Initial Receivables. On the Initial Closing
Date and simultaneously with the transactions to be consummated pursuant to the
Trust Agreement, the Indenture and the Sale and Servicing Agreement, the Seller
shall sell, transfer, assign, grant, set over and otherwise convey to the
Purchaser, without recourse (subject to the obligations herein and in the Sale
and Servicing Agreement), all right, title and interest of the Seller in and to
(i) the Initial Samco Receivables listed in the Schedule of Samco Receivables
and, with respect to Rule of 78's Receivables, all monies due or to become due
thereon after the Cutoff Date (including Scheduled Payments due after the Cutoff
Date (including principal prepayments relating to such Scheduled Payments) but
received by the Seller on or before the Cutoff Date) and, with respect to Simple
Interest Receivables, all monies received thereunder after the Cutoff Date and
all Liquidation Proceeds and Recoveries received with respect to such Initial
Samco Receivables; (ii) the security interests in the Financed Vehicles granted
by Obligors pursuant to the Samco Receivables and any other interest of the
Seller in such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to Financed Vehicles in the State of
Michigan, other evidence of ownership with respect to Financed Vehicles; (iii)
any proceeds from claims on any physical damage, credit life and credit accident
and health insurance policies or certificates relating to the Financed Vehicles
securing the Initial Samco Receivables or the Obligors thereunder; (iv) refunds
for the costs of extended service contracts with respect to Financed Vehicles
securing the Initial Samco Receivables, refunds of unearned premiums with
respect to credit life and credit accident and health insurance policies or
certificates covering an Obligor or Financed Vehicle securing the Initial Samco
Receivables or his or her obligations with respect to such a Financed Vehicle
and any recourse to Dealers for any of the foregoing; (v) the Receivable File
related to each Initial Samco Receivable; and (vi) the proceeds of any and all
of the foregoing (collectively, the "Initial Transferred Samco Property" and
together with the Initial Transferred CPS Property, the "Initial Transferred
Property").
(b) Receivables Purchase Price. In consideration for the
Initial Samco Receivables and other Initial Transferred Samco Property described
in Section 2.1(a), the Purchaser shall, on the Initial Closing Date, pay to the
Seller the Receivables Purchase Price by federal wire transfer (same day) funds.
2.2. Purchase and Sale of Subsequent Receivables. On the related
Subsequent Closing Date, subject to the terms and conditions of the related
Subsequent Purchase Agreement, the Seller agrees to sell to the Purchaser, and
the Purchaser agrees to purchase from the Seller, without recourse (subject to
the obligations in this Purchase Agreement, each Subsequent Purchase Agreement
and the Sale and Servicing Agreement), all of the Seller's
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<PAGE>
right, title and interest in, to and under the Subsequent Samco Receivables and
the other Subsequent Transferred Samco Property relating thereto. The conveyance
to the Purchaser of the Subsequent Samco Receivables and other Subsequent
Transferred Samco Property relating thereto is intended as a sale free and clear
of all liens and it is intended that the Subsequent Transferred Samco Property
and other property of the Purchaser shall not be part of the Seller's estate in
the event of the filing of a bankruptcy petition by or against the Seller under
any bankruptcy law.
(a) Transfer of Subsequent Receivables. On the related
Subsequent Closing Date the Seller shall sell, transfer, assign, grant, set over
and otherwise convey to the Purchaser, without recourse (subject to the
obligations herein and in the Sale and Servicing Agreement), all right, title
and interest of the Seller in and to (i) the Subsequent Samco Receivables listed
in the related Schedule of Subsequent Samco Receivables and, with respect to
Rule of 78's Receivables, all monies due or to become due thereon after the
related Subsequent Cutoff Date (including Scheduled Payments due after the
related Subsequent Cutoff Date (including principal prepayments relating to such
Scheduled Payments) but received by the Seller on or before the related
Subsequent Cutoff Date) and, with respect to Simple Interest Receivables, all
monies received thereunder after the related Subsequent Cutoff Date and all
Liquidation Proceeds and Recoveries received with respect to such Subsequent
Samco Receivables; (ii) the security interests in the Financed Vehicles granted
by Obligors pursuant to the Subsequent Samco Receivables and any other interest
of the Seller in such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to Financed Vehicles in the State of
Michigan, other evidence of ownership with respect to Financed Vehicles; (iii)
any proceeds from claims on any physical damage, credit life and credit accident
and health insurance policies or certificates relating to the Financed Vehicles
securing the Subsequent Samco Receivables or the Obligors thereunder; (iv)
refunds for the costs of extended service contracts with respect to Financed
Vehicles securing the Subsequent Samco Receivables, refunds of unearned premiums
with respect to credit life and credit accident and health insurance policies or
certificates covering an Obligor or Financed Vehicle securing the Subsequent
Samco Receivables or his or her obligations with respect to such a Financed
Vehicle and any recourse to Dealers for any of the foregoing; (v) the Receivable
File related to each Subsequent Samco Receivable; and (vi) the proceeds of any
and all of the foregoing (collectively, the "Subsequent Transferred Samco
Property" and together with any Subsequent Transferred CPS Property, the
"Subsequent Transferred Property").
(b) The Seller shall transfer to the Issuer the Subsequent
Samco Receivables and the Subsequent Transferred Samco Property as described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Closing Date:
(i) the Seller shall have provided the Trustee, the Owner
Trustee, the Credit Enhancer and the Rating Agencies with an Addition
Notice not later than five days prior
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to such Subsequent Closing Date and shall have provided any information
reasonably requested by any of the foregoing with respect to the
Subsequent Samco Receivables;
(ii) the Seller shall have delivered to the Owner Trustee and
the Trustee a duly executed Subsequent Purchase Agreement,
substantially in the form of Exhibit C, which shall include supplements
to the Schedule of Samco Receivables, listing the Subsequent Samco
Receivables;
(iii) the Seller shall, to the extent required by Section 4.2
of the Sale and Servicing Agreement, have deposited in the Collection
Account all collections in respect of the Subsequent Samco Receivables;
(iv) as of each Subsequent Closing Date, (A) the Seller shall
not be insolvent and shall not become insolvent as a result of the
transfer of Subsequent Samco Receivables on such Subsequent Closing
Date, (B) the Seller shall not intend to incur or believe that it shall
incur debts that would be beyond its ability to pay as such debts
mature, (C) such transfer shall not have been made with actual intent
to hinder, delay or defraud any Person and (D) the assets of the Seller
shall not constitute unreasonably small capital to carry out its
business as conducted;
(v) the Funding Period shall not have terminated;
(vi) after giving effect to any transfer of Subsequent Samco
Receivables on a Subsequent Closing Date, the Samco Receivables shall
meet the following criteria (based on the characteristics of the
Initial Receivables on the Initial Cutoff Date and the Subsequent
Receivables on the related Subsequent Cutoff Dates): [ ];
(vii) each of the representations and warranties made by the
Seller pursuant to Section 3.2 with respect to the Subsequent Samco
Receivables to be transferred on such Subsequent Closing Date shall be
true and correct as of the related Subsequent Closing Date, and the
Seller shall have performed all obligations to be performed by it
hereunder on or prior to such Subsequent Closing Date;
(viii) the Seller shall, at its own expense, on or prior to
the Subsequent Closing Date indicate in its computer files that the
Subsequent Samco Receivables identified in the Subsequent Purchase
Agreement have been sold to the Purchaser pursuant to the related
Subsequent Purchase Agreement and subsequently to the Trust pursuant to
the Sale and Servicing Agreement;
(ix) the Seller shall have taken any action required to
maintain the first priority perfected ownership interest of the Trust
in the Owner Trust Estate and the first priority perfected security
interest of the Trustee in the Collateral;
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(x) no selection procedures adverse to the interests of the
Securityholders or the Credit Enhancer shall have been utilized in
selecting the Subsequent Samco Receivables;
(xi) the addition of any such Subsequent Samco Receivables
shall not result in a material adverse tax consequence to the Trust or
the Securityholders;
(xii) the Seller shall have delivered (A) to the Rating
Agencies and the Credit Enhancer an opinion of Counsel with respect to
the transfer of such Subsequent Samco Receivables substantially in the
form of the Opinion of Counsel delivered to the Rating Agencies and the
Credit Enhancer on the related Closing Date and (B) to the Trustee the
opinion of Counsel required by Section 13.2(i)(1) of the Sale and
Servicing Agreement;
(xiii) each Rating Agency shall have confirmed that the rating
on the Notes shall not be withdrawn or reduced as a result of the
transfer of such Subsequent Samco Receivables to the Trust;
(xiv) all conditions precedent specified in the Sale and
Servicing Agreement with respect to the transfer of such Subsequent CPS
Receivables to the Trust by the Purchaser shall have been satisfied;
and
(xv) the Seller shall have delivered to the Credit Enhancer
and the Trustee an Officers' Certificate confirming the satisfaction of
each condition precedent specified in this paragraph (b).
The Seller covenants that in the event any of the foregoing conditions
precedent are not satisfied with respect to any Subsequent Receivable on the
date required as specified above, the Seller will immediately repurchase such
Subsequent Receivable from the Trust, at a price equal to the Purchase Amount
thereof, in the manner specified in Section 6.2 of the Sale and Servicing
Agreement.
2.3. The Closing. The sale and purchase of the Initial Samco
Receivables shall take place at a closing (the "Closing") at the offices of
Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019-5820 on the
Initial Closing Date, simultaneously with the closings under: (a) the CPS
Purchase Agreement pursuant to which CPS will sell the Initial CPS Receivables
to CPS Receivables Corp., (b) the Sale and Servicing Agreement pursuant to which
the Purchaser will assign all of its right, title and interest in and to the
Initial Receivables and the other Initial Transferred Property to the Trust for
the benefit of the Securityholders, (c) the Trust Agreement pursuant to which
the Trust shall be formed and the Certificates issued, (d) the Indenture
pursuant to which the Trust will issue the Notes, (e) the Underwriting Agreement
pursuant to which the Trust shall sell the Class A Notes [and Class B Notes] to
the Underwriters and [(f) the Note Purchase Agreement pursuant to which the
Purchaser shall sell the Class B Notes to one or more investors [and (g) the
Certificate Purchase Agreement pursuant to which the Purchaser shall sell the
Certificates to one or more investors]].
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Seller as of the date hereof and as of
each Closing Date (which representations and warranties shall survive such
Closing Date):
(a) Organization and Good Standing. The Purchaser has been
duly organized and is validly existing as a corporation in good standing under
the laws of the State of California, with power and authority to own its
properties and to conduct its business as such properties shall be currently
owned and such business is presently conducted, and had at all relevant times,
and shall have, power, authority and legal right to acquire and own the Samco
Receivables.
(b) Due Qualification. The Purchaser is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business shall require such
qualifications.
(c) Power and Authority. The Purchaser has the power and
authority to execute and deliver the Agreements and to carry out its terms and
the execution, delivery and performance of the Agreements has been duly
authorized by the Purchaser by all necessary corporate action.
(d) Binding Obligation. The Agreements shall constitute a
legal, valid and binding obligation of the Purchaser enforceable in accordance
with its terms.
(e) No Violation. The execution, delivery and performance by
the Purchaser of the Agreements and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not conflict
with, result in a breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time) a default under, the articles of
incorporation or by-laws of the Purchaser, or any indenture, agreement,
mortgage, deed of trust, or other instrument to which the Purchaser is a party
or by which it is bound or to which any of its properties are subject; nor
result in the creation or imposition of any lien upon any of its properties
pursuant to the terms of any indenture, agreement, mortgage, deed of trust, or
other instrument (other than the Sale and Servicing Agreement); nor violate any
law, order, rule or regulation applicable to the Purchaser of any court or of
any Federal or State regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Purchaser or its
properties.
(f) No Proceedings. There are no proceedings or investigations
pending, or to the Purchaser's best knowledge, threatened, before any court,
regulatory body,
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administrative agency or other governmental instrumentality having jurisdiction
over the Purchaser or its properties: (A) asserting the invalidity of the
Agreements or the Securities; (B) seeking to prevent the issuance of the
Securities or the consummation of any of the transactions contemplated by the
Agreements; (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Purchaser of its obligations under, or
the validity or enforceability of, the Agreements or the Securities; or (D)
relating to the Purchaser and which might adversely affect the Federal or State
income, excise, franchise or similar tax attributes of the Securities.
(g) No Consents. No consent, approval, authorization or
order of or declaration or filing with any governmental authority is required to
be obtained by the Purchaser for the issuance or sale of the Securities or the
consummation of the other transactions contemplated by the Agreements, the Trust
Agreement, the Indenture or the Sale and Servicing Agreement, except such as
have been duly made or obtained.
3.2. Representations and Warranties of the Seller. (a) The Seller
hereby represents and warrants to the Purchaser as of the date hereof and as of
each Closing Date:
(i) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware, with power and authority to
own its properties and to conduct its business as such properties shall
be currently owned and such business is presently conducted and had at
all relevant times, and shall have, power, authority and legal right to
acquire, and own the Samco Receivables.
(ii) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business
(including the origination of the Samco Receivables as required by the
Sale and Servicing Agreement) shall require such qualifications.
(iii) Power and Authority. The Seller has the power and
authority to execute and deliver this Agreement and to carry out its
terms; the Seller has full power and authority to sell and assign the
property sold and assigned to the Purchaser and has duly authorized
such sale and assignment to the Purchaser by all necessary corporate
action; and the execution, delivery and performance of the Agreements
has been duly authorized by the Seller by all necessary corporate
action.
(iv) Valid Sale; Binding Obligation. This Agreement effects a
valid sale, transfer and assignment of the Initial Samco Receivables
and the other Initial Transferred Samco Property conveyed to the
Purchaser pursuant to Section 2.1, enforceable against creditors of and
purchasers from the Seller; and this Agreement shall constitute a
legal, valid and binding obligation of the Seller enforceable in
accordance with its terms.
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(v) No Violation. The execution, delivery and performance by
the Seller of the Agreements and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default
under, the articles of incorporation, as amended, or by-laws of the
Seller, or any indenture, agreement, mortgage, deed of trust, or other
instrument to which the Seller is a party or by which it is bound or to
which any of its properties are subject; nor result in the creation or
imposition of any lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust, or other
instrument (other than the Agreements and the Sale and Servicing
Agreement); nor violate any law, order, rule or regulation applicable
to the Seller of any court or of any Federal or State regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties.
(vi) No Proceedings. There are no proceedings or
investigations pending, or to the Seller's best knowledge, threatened,
before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Seller or its
properties: (A) asserting the invalidity of the Agreements or the
Securities; (B) seeking to prevent the issuance of the Securities or
the consummation of any of the transactions contemplated by the
Agreements; (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, the Agreements
or the Securities; or (D) relating to the Seller and which might
adversely affect the Federal or State income, excise, franchise or
similar tax attributes of the Securities.
(vii) No Consents. No consent, approval, authorization or
order of or declaration or filing with any governmental authority is
required for the issuance or sale of the Securities or the consummation
of the other transactions contemplated by the Agreements, the Trust
Agreement, the Indenture or the Sale and Servicing Agreement, except
such as have been duly made or obtained.
(viii) Financial Condition. The Seller has a positive net
worth and is able to and does pay its liabilities as they mature. The
Seller is not in default under any obligation to pay money to any
Person except for matters being disputed in good faith which do not
involve an obligation of the Seller on a promissory note. The Seller
will not use the proceeds from the transactions contemplated by this
Agreement to give any preference to any creditor or class of creditors,
and this transaction will not leave the Seller with remaining assets
which are unreasonably small compared to its ongoing operations.
(ix) Fraudulent Conveyance. The Seller is not selling the
Initial Samco Receivables to the Purchaser with any intent to hinder,
delay or defraud any of
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its creditors; the Seller will not be rendered insolvent as a result of
the sale of the Initial Samco Receivables to the Purchaser.
(b) The Seller makes the following representations and
warranties as to the Samco Receivables and the other Transferred Samco Property
relating thereto on which the Purchaser relies in accepting the Samco
Receivables and the other Transferred Samco Property relating thereto. Such
representations and warranties speak with respect to each Samco Receivable as of
the Initial Closing Date or Subsequent Closing Date on which such Samco
Receivable is transferred to the Purchaser and shall survive the sale, transfer,
and assignment of the Samco Receivables and the other Transferred Samco Property
relating thereto to the Purchaser and the subsequent assignment and transfer
pursuant to the Sale and Servicing Agreement:
(i) Location of Receivable Files; One Original. A complete
Receivable File with respect to each Samco Receivable has been or prior
to the Closing Date will be delivered to the Trustee at the location
listed in Schedule B to the Sale and Servicing Agreement. There is only
one original executed copy of each Samco Receivable.
(ii) Schedule of Receivables; Selection Procedures. The
information with respect to the Samco Receivables set forth in the
Schedule of Samco Receivables as the same may be amended by subsequent
Schedules of Samco Receivables is true and correct in all material
respects as of the close of business on the related Cutoff Date, and no
selection procedures adverse to the Securityholders have been utilized
in selecting the Samco Receivables.
(iii) Security Interest in Financed Vehicle. Immediately prior
to the sale, assignment, and transfer thereof, each Samco Receivable
shall be secured by a validly perfected first security interest in the
related Financed Vehicle in favor of the Seller as secured party, and
such security interest is prior to all other liens upon and security
interests in such Financed Vehicle which now exist or may hereafter
arise or be created (except, as to priority, for any tax liens or
mechanics' liens which may arise after each Closing Date).
(iv) Samco Receivables in Force. No Samco Receivable has been
satisfied, subordinated or rescinded, nor has any Financed Vehicle been
released from the lien granted by the related Samco Receivable in whole
or in part.
(v) No Waiver. No provision of a Samco Receivable has been
waived.
(vi) No Amendments. No Samco Receivable has been amended,
except as such Samco Receivable may have been amended to grant
extensions which
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shall not have numbered more than (a) one extension of one calendar
month in any calendar year or (b) three such extensions in the
aggregate.
(vii) No Default; Repossession. Except for payment
delinquencies continuing for a period of not more than thirty days as
of the Cutoff Date, no default, breach, violation or event permitting
acceleration under the terms of any Initial Samco Receivable has
occurred; and no continuing condition that with notice or the lapse of
time would constitute a default, breach, violation, or event permitting
acceleration under the terms of any Initial Samco Receivable has
arisen; and the Seller shall not waive and has not waived any of the
foregoing; and no Financed Vehicle securing a Initial Samco Receivable
shall have been repossessed as of the Cutoff Date.
(viii) Title. It is the intention of the Seller that the
transfer and assignment herein contemplated constitute a sale of the
Samco Receivables from the Seller to the Purchaser and that the
beneficial interest in and title to such Samco Receivables not be part
of the debtor's estate in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law. No Samco
Receivable has been sold, transferred, assigned, or pledged by the
Seller to any Person other than the Purchaser or any such pledge has
been released on or prior to the related Closing Date. Immediately
prior to any transfer and assignment herein contemplated, the Seller
had good and marketable title to each Samco Receivable, and was the
sole owner thereof, free and clear of all liens, claims, encumbrances,
security interests, and rights of others and, immediately upon the
transfer thereof, the Purchaser shall have good and marketable title to
each such Samco Receivable, and will be the sole owner thereof, free
and clear of all liens, encumbrances, security interests, and rights of
others, and the transfer has been perfected under the UCC.
(ix) Lawful Assignment. No Samco Receivable has been
originated in, or is subject to the laws of, any jurisdiction under
which the sale, transfer, and assignment of such Samco Receivable under
the Agreements shall be unlawful, void, or voidable. The Seller has not
entered into any agreement with any account debtor that prohibits,
restricts or conditions the assignment of any portion of the Samco
Receivables.
(x) All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the
Purchaser a first priority perfected ownership interest in the Samco
Receivables and the other Transferred Samco Property have been made,
taken or performed.
(xi) Casualty. No Financed Vehicle related to a Samco
Receivable has suffered a Casualty.
(xii) Obligation to Dealers or Others. The Purchaser and its
assignees will assume no obligation to Dealers or other originators or
holders of the
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Samco Receivables (including, but not limited to under dealer reserves)
as a result of the purchase of the Samco Receivables.
(xiii) Full Amount Advanced. The full amount of each Samco
Receivable has been advanced to each Obligor, and there are no
requirements for future advances thereunder. No Obligor with respect to
a Samco Receivable has any option under the Samco Receivable to borrow
from any Person additional funds secured by the related Financed
Vehicle.
(c) The representations and warranties contained in this
Agreement shall not be construed as a warranty or guaranty by the
Seller as to the future payments by any Obligor. The sale of the
Initial Samco Receivables pursuant to this Agreement shall be "without
recourse" to the Seller except for the representations, warranties and
covenants made by the Seller in this Purchase Agreement.
ARTICLE IV
CONDITIONS
4.1. Conditions to Obligation of the Purchaser. On the applicable
Closing Date, the obligation of the Purchaser to purchase the Samco Receivables
is subject to the satisfaction of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Seller hereunder shall be true and correct on the related
Closing Date with the same effect as if then made, and the Seller shall have
performed all obligations to be performed by it hereunder on or prior to such
Closing Date.
(b) Computer Files Marked. The Seller shall, at its own expense, on or
prior to the Closing Date, indicate in its computer files that the Samco
Receivables have been sold to the Purchaser pursuant to the Agreements and shall
deliver to the Purchaser the Schedule of Samco Receivables certified by the
Chairman, the President, the Vice President or the Treasurer of the Seller to be
true, correct and complete.
(c) Receivable Files Delivered. The Seller shall, at its own expense,
deliver the related Receivable Files to the Trustee at the offices specified in
Schedule B to the Sale and Servicing Agreement on or prior to the related
Closing Date.
(d) Documents to be delivered by the Seller on each Closing Date.
(i) The Assignment. On each Closing Date, the Seller will
execute and deliver the applicable Assignment. The Initial Assignment
shall be substantially in the form of Exhibit A hereto and any
Subsequent Assignment shall be
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in the form of Exhibit A to the form of Subsequent Purchase Agreement
attached as Exhibit C hereto.
(ii) Evidence of UCC-1 Filing. On or prior to the related
Closing Date, the Seller shall record and file, at its own expense, a
UCC-1 financing statement in each jurisdiction in which required by
applicable law, executed by the Seller, as seller or debtor, and naming
the Purchaser, as purchaser or secured party, naming the Samco
Receivables and the other Transferred Samco Property conveyed hereafter
as collateral, meeting the requirements of the laws of each such
jurisdiction and in such manner as is necessary to perfect the sale,
transfer, assignment and conveyance of such Samco Receivables to the
Purchaser. The Seller shall deliver a file-stamped copy, or other
evidence satisfactory to the Purchaser of such filing, to the Purchaser
on or prior to such Closing Date.
(iii) Other Documents. On or prior to the Closing Date, the
Seller shall deliver such other documents as the Purchaser may
reasonably request.
(e) Other Transactions. The transactions contemplated by the Trust
Agreement, the Indenture, the Sale and Servicing Agreement the Initial CPS
Purchase Agreement, the Underwriting Agreement [,the Note Purchase Agreement and
the Certificate Purchase Agreement] shall be consummated on the Initial Closing
Date.
4.2. Conditions to Obligation of the Seller. The obligation of the
Seller to sell the Samco Receivables to the Purchaser is subject to the
satisfaction of the following conditions on each Closing Date:
(a) Representations and Warranties True. The representations and
warranties of the Purchaser hereunder shall be true and correct on the Closing
Date with the same effect as if then made, and the Seller shall have performed
all obligations to be performed by it hereunder on or prior to the Closing Date.
(b) Receivables Purchase Price. The Purchaser will deliver to the
Seller the purchase price for the related Samco Receivables (on the Initial
Closing Date as provided in Section 2.1(b)). The Seller hereby directs the
Purchaser to wire such purchase price pursuant to wire instructions to be
delivered to the Purchaser on or prior to the Closing Date.
ARTICLE V
COVENANTS OF THE SELLER
The Seller agrees with the Purchaser as follows:
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5.1. Protection of Right, Title and Interest.
(a) Filings. The Seller shall cause all financing statements and
continuation statements and any other necessary documents covering the right,
title and interest of the Purchaser in and to the Samco Receivables and the
other Transferred Samco Property to be promptly filed, and at all times to be
kept recorded, registered and filed, all in such manner and in such places as
may be required by law fully to preserve and protect the right, title and
interest of the Purchaser hereunder to the Samco Receivables and the other
Transferred Samco Property. The Seller shall cause to be delivered to the
Purchaser file stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recordation, registration or filing. The Purchaser shall cooperate fully with
the Seller in connection with the obligations set forth above and will execute
any and all documents reasonably required to fulfill the intent of this Section
5.1(a). In the event the Seller fails to perform its obligations under this
subsection, the Purchaser or the Trustee may do so at the expense of the Seller.
(b) Name and Other Changes. At least 60 days prior to the
date the Seller makes any change in its name, identity or corporate structure
which would make any financing statement or continuation statement filed in
accordance with paragraph (a) above seriously misleading within the applicable
provisions of the UCC or any title statute, the Seller shall give the Trustee,
the Insurer (so long as an Insurer Default shall not have occurred and be
continuing) and the Purchaser written notice of any such change and no later
than five days after the effective date thereof, shall file appropriate
amendments to all previously filed financing statements or continuation
statements. At least 60 days prior to the date of any relocation of its
principal executive office, the Seller shall give the Trustee, the Insurer (so
long as an Insurer Default shall not have occurred and be continuing) and the
Purchaser written notice thereof if, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement and the Seller shall within five days after the effective date
thereof, file any such amendment or new financing statement. The Seller shall at
all times maintain each office from which it shall service Receivables, and its
principal executive office, within the United States of America.
(c) Maintenance of Computer Systems. The Seller shall
maintain its computer systems so that, from and after the time of sale to the
Purchaser of the Samco Receivables hereunder, the Seller's master computer
records (including any back-up archives) that refer to a Samco Receivable shall
indicate clearly the interest of the Purchaser in such Samco Receivable and that
such Samco Receivable is owned by the Purchaser. Indication of the Purchaser's
ownership of a Samco Receivable shall be deleted from or modified on the
Seller's computer systems when, and only when, the Samco Receivable shall have
been paid in full or repurchased.
(d) Sale of Other Receivables. If at any time the Seller
shall propose to sell, grant a security interest in, or otherwise transfer any
interest in any automobile or light- duty truck receivables (other than the
Samco Receivables) to any prospective purchaser, lender, or other transferee,
the Seller shall give to such prospective purchaser, lender, or other transferee
computer tapes, records, or print-outs (including any restored from back-up
archives) that, if they shall refer in any manner whatsoever to any Samco
Receivable, shall indicate clearly that such Samco Receivable has been sold and
is owned by the Purchaser unless such Samco Receivable has been paid in full or
repurchased.
(e) Access to Records. The Seller shall permit the Purchaser
and its agents at any time during normal business hours to inspect, audit, and
make copies of and abstracts from the Seller's records regarding any Samco
Receivable.
(f) List of Receivables. Upon request, the Seller shall
furnish to the Purchaser, within five Business Days, a list of all Samco
Receivables (by contract number and name of Obligor) then owned by the
Purchaser, together with a reconciliation of such list to the Schedule of Samco
Receivables.
5.2. Other Liens or Interests. Except for the conveyances hereunder and
pursuant to the Sale and Servicing Agreement, the Seller will not sell, pledge,
assign or transfer to any other Person, or grant, create, incur, assume or
suffer to exist any lien on any interest therein, and the Seller shall defend
the right, title, and interest of the Purchaser in, to and under the Samco
Receivables against all claims of third parties claiming through or under the
Seller.
5.3. Chief Executive Office. During the term of the Samco Receivables,
the Seller will maintain its chief executive office in one of the United States,
except Louisiana or Vermont.
5.4. Costs and Expenses. The Seller agrees to pay all reasonable costs
and disbursements in connection with the perfection, as against all third
parties, of the Purchaser's right, title and interest in and to the Samco
Receivables.
5.5. Delivery of Receivable Files. On or prior to the Closing Date, the
Seller shall cause to be delivered to the Trustee at the location specified in
Schedule B to the Sale and Servicing Agreement the Receivables Files relating to
the Samco Receivables. The Seller shall have until the last day of the second
Collection Period following receipt of notification that there has been a
failure to deliver a file with respect to a Samco Receivable or that a file is
unrelated to the Receivables identified in Schedule A to the Sale and Servicing
Agreement or that any of the documents referred to in Section 3.3 of the Sale
and Servicing Agreement are not contained in a Receivable File, to deliver such
file or any of the aforementioned documents required to be included in such
Receivable File to the Trustee. Unless such defect with respect to such
Receivable File shall have been cured by the last day of the second Collection
Period following discovery thereof by the Trustee and notice thereof to Samco,
the Seller hereby agrees to repurchase any such Receivable from the Trust as of
such last day. In consideration of the purchase of the Receivable, the Seller
shall remit the
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Purchase Amount in the manner specified in Section 4.5 of the Sale and Servicing
Agreement. The sole remedy hereunder of the Trustee, the Trust or the
Securityholders with respect to a breach of this Section 5.5, shall be to
require the Seller to repurchase the Receivable pursuant to this Section 5.5.
Upon receipt of the Purchase Amount, the Trustee shall release to the Seller or
its designee the related Receivable File and shall execute and deliver all
instruments of transfer or assignment, without recourse, as are prepared by the
Seller and delivered to the Trustee and are necessary to vest in the Seller or
such designee title to the Receivable.
5.6. Indemnification. (a) The Seller shall indemnify the Purchaser for
any liability as a result of the failure of a Samco Receivable to be originated
in compliance with all requirements of law and for any breach of any of its
representations and warranties contained herein.
(b) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all costs, expenses, losses, damages, claims, and
liabilities, arising out of or resulting from the use, ownership, or operation
by the Seller or any Affiliate thereof of a Financed Vehicle related to a Samco
Receivable.
(c) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all taxes, except for taxes on the net income of the
Purchaser, that may at any time be asserted against the Purchaser with respect
to the transactions contemplated herein, including, without limitation, any
sales, gross receipts, general corporation, tangible personal property,
privilege, or license taxes and costs and expenses in defending against the
same.
(d) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all costs, expenses, losses, damages, claims and
liabilities to the extent that such cost, expense, loss, damage, claim or
liability arose out of, or was imposed upon the Purchaser through, the
negligence, willful misfeasance, or bad faith of the Seller in the performance
of its duties under the Agreements, or by reason of reckless disregard of the
Seller's obligations and duties under the Agreements.
Indemnification under this Section 5.6 shall include reasonable fees
and expenses of litigation and shall survive payment of the Notes and
Certificates. These indemnity obligations shall be in addition to any obligation
that the Seller may otherwise have.
5.7. Sale. The Seller agrees to treat this conveyance for all purposes
(including without limitation tax and financial accounting purposes) as a sale
on all relevant books, records, tax returns, financial statements and other
applicable documents.
5.8. Non-Petition. In the event of any breach of a representation and
warranty made by the Purchaser hereunder, the Seller covenants and agrees that
it will not take any action to pursue any remedy that it may have hereunder, in
law, in equity or otherwise, until
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a year and a day have passed since the date on which all certificates issued by
the Trust or a similar trust formed by the Purchaser have been paid in full. The
Purchaser and the Seller agree that damages will not be an adequate remedy for
such breach and that this covenant may be specifically enforced by the Purchaser
or by the Trust.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1. Obligations of Seller. The obligations of the Seller under the
Agreements shall not be affected by reason of any invalidity, illegality or
irregularity of any Samco Receivable.
6.2. Repurchase Events. The Seller hereby covenants and agrees with the
Purchaser for the benefit of the Purchaser, the Trustee, the Insurer and the
Securityholders, that (i) the occurrence of a breach of any of the Seller's
representations and warranties contained in Section 3.2(b) hereof (without
regard to any limitations regarding the Seller's knowledge) and (ii) the failure
of the Seller to timely comply with its obligations pursuant to Section 5.5
hereof, shall constitute events obligating the Seller to repurchase the affected
Samco Receivables hereunder ("Repurchase Events"), at the Purchase Amount from
the Trust. Unless the breach of any of the Seller's representations and
warranties shall have been cured by the last day of the second Collection Period
following the discovery thereof by or notice to the Purchaser and the Seller of
such breach, the Seller shall repurchase any Samco Receivable if such Samco
Receivable is materially and adversely affected by the breach as of the last day
of such second Collection Period (or, at the Seller's option, the last day of
the first Collection Period following the discovery) and, in the event that the
breach relates to a characteristic of the Samco Receivables in the aggregate,
and if the Trust is materially and adversely affected by such breach, unless the
breach shall have been cured by such second Collection Period, the Seller shall
purchase such aggregate Principal Balance of Samco Receivables, such that
following such purchase such representation shall be true and correct with
respect to the remainder of the Samco Receivables in the aggregate. The
provisions of this Section 6.2 are intended to grant the Trustee a direct right
against the Seller to demand performance hereunder, and in connection therewith
the Seller waives any requirement of prior demand against the Purchaser and
waives any defaults it would have against the Purchaser with respect to such
repurchase obligation. Any such purchase shall take place in the manner
specified in Section 5.6 of the Sale and Servicing Agreement. The sole remedy
hereunder of the Securityholders, the Trust, the Insurer, the Trustee or the
Purchaser against the Seller with respect to any Repurchase Event shall be to
enforce the Seller's obligation to repurchase such Samco Receivables pursuant to
this Agreement; provided, however, that the Seller shall indemnify the Trustee,
the Insurer, the Trust and the Securityholders against all costs, expenses,
losses, damages, claims and liabilities, including reasonable fees and expenses
of counsel, which may be asserted against or incurred by any of them, as a
result of third party claims arising out of the events or facts giving rise to
such
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breach. Upon receipt of the Purchase Amount, the Purchaser shall cause the
Trustee to release the related Receivables File to the Seller and to execute and
deliver all instruments of transfer or assignment, without recourse, as are
necessary to vest in the Seller title to the Samco Receivable. Notwithstanding
the foregoing, if it is determined that consummation of the transactions
contemplated by the Sale and Servicing Agreement and the other transaction
documents referenced in such Agreement, servicing and operation of the Trust
pursuant to such Agreement and such other documents, or the ownership of a
Security by a Holder constitutes a violation of the prohibited transaction rules
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or
the Internal Revenue Code of 1986, as amended ("Code") for which no statutory
exception or administrative exemption applies, such violation shall not be
treated as a Repurchase Event.
6.3. Seller's Assignment of Purchased Receivables. With respect to all
Samco Receivables repurchased by the Seller pursuant to the Agreements, the
Purchaser shall assign, without recourse except as provided herein,
representation or warranty, to the Seller all the Purchaser's right, title and
interest in and to such Samco Receivables, and all security and documents
relating thereto.
6.4. Conveyance as Sale of Receivables Not Financing. The parties
hereto intend that each conveyance under the Agreements be a sale of the Samco
Receivables and the other Transferred Samco Property from the Seller to the
Purchaser and not a financing secured by such assets; and the beneficial
interest in and title to the Samco Receivables and the other Transferred Samco
Property shall not be part of the Seller's estate in the event of the filing of
a bankruptcy petition by or against the Seller under any bankruptcy law. In the
event that any conveyance hereunder is for any reason not considered a sale, the
parties intend that this Agreement constitute a security agreement under the UCC
(as defined in the UCC as in effect in the State of Texas) and applicable law,
and the Seller hereby grants to the Purchaser a first priority perfected
security interest in, to and under the Samco Receivables and the other
Transferred Samco Property being delivered to the Purchaser on the Closing Date,
and other property conveyed hereunder and all proceeds of any of the foregoing
for the purpose of securing payment and performance of the Securities and the
repayment of amounts owed to the Purchaser from the Seller.
6.5. Trust. The Seller acknowledges that the Purchaser will, pursuant
to the Sale and Servicing Agreement, sell the Receivables to the Trust and
assign its rights under this Purchase Agreement and the CPS Purchase Agreement
to the Trustee for the benefit of the Securityholders, and that the
representations and warranties contained in this Agreement and the rights of the
Purchaser under this Purchase Agreement, including under Sections 6.2 and 6.4
hereof are intended to benefit such Trust and the Securityholders. The Seller
also acknowledges that the Trustee on behalf of the Securityholders as assignee
of the Purchaser's rights hereunder may directly enforce, without making any
prior demand on the Purchaser, all the rights of the Purchaser hereunder
including the rights under Section 6.2 and 6.4 hereof. The Seller hereby
consents to such sale and assignment.
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<PAGE>
6.6. Amendment. This Agreement may be amended from time to time by a
written amendment duly executed and delivered by the Seller and the Purchaser
with the consent of the Insurer; provided, however, that (i) any such amendment
that materially adversely affects the rights of the Class A Noteholders under
the Sale and Servicing Agreement must be consented to by the holders of Class A
Notes representing 51% or more of the outstanding principal amount Class A
Notes, (ii) any such amendment that materially adversely affects the rights of
the Class B Noteholders under the Sale and Servicing Agreement must be consented
to by the holders of Class B Notes representing 51% or more of the outstanding
principal amount Class B Notes and (iii) any amendment that materially adversely
affects the rights of the Certificateholders under the Sale and Servicing
Agreement must be consented to by the holders of Certificates representing 51%
or more of the Certificate Balance.
6.7. Waivers. No failure or delay on the part of the Purchaser in
exercising any power, right or remedy under the Agreements shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other or further exercise thereof or the exercise
of any other power, right or remedy.
6.8. Notices. All communications and notices pursuant hereto to either
party shall be in writing or by telegraph or telex and addressed or delivered to
it at its address (or in case of telex, at its telex number at such address)
shown in the opening portion of this Agreement or at such other address as may
be designated by it by notice to the other party and, if mailed or sent by
telegraph or telex, shall be deemed given when mailed, communicated to the
telegraph office or transmitted by telex.
6.9. Costs and Expenses. The Seller will pay all expenses incident to
the performance of its obligations under this Purchase Agreement.
6.10. Representations of the Seller and the Purchaser. The respective
agreements, representations, warranties and other statements by the Seller and
the Purchaser set forth in or made pursuant to this Purchase Agreement shall
remain in full force and effect and will survive each closing hereunder.
6.11. Confidential Information. The Purchaser agrees that it will
neither use nor disclose to any Person the names and addresses of the Obligors,
except in connection with the enforcement of the Purchaser's rights hereunder,
under the Samco Receivables, under the Sale and Servicing Agreement or as
required by law.
6.12. Headings and Cross-References. The various headings in this
Purchase Agreement are included for convenience only and shall not affect the
meaning or interpretation of any provision of this Purchase Agreement.
References in this Purchase Agreement to Section names or numbers are to such
Sections of this Purchase Agreement.
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<PAGE>
6.13. Third Party Beneficiaries. The parties hereto hereby expressly
agree that each of the Trustee for the benefit of the Securityholders and the
Insurer shall be third party beneficiaries with respect to this Purchase
Agreement, provided, however, that no third party other than the Trustee for the
benefit of the Securityholders and the Insurer shall be deemed a third party
beneficiary of this Purchase Agreement.
6.14. Governing Law. THIS PURCHASE AGREEMENT AND THE ASSIGNMENTS SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
6.15. Counterparts. This Agreement may be executed in two or more
counterparts and by different parties on separate counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
[Rest of page intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
and year first above written.
CPS RECEIVABLES CORP.
By:
Name:
Title:
SAMCO ACCEPTANCE CORP.
By:
Name:
Title:
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<PAGE>
Exhibit A
ASSIGNMENT
For value received, in accordance with the Purchase Agreement dated as
of May 1, 1997 between the undersigned (the "Seller") and CPS Receivables Corp.
(the "Purchaser") (the "Samco Purchase Agreement"), the undersigned does hereby
sell, transfer, assign and otherwise convey unto the Purchaser, without recourse
(subject to the obligations in the Samco Purchase Agreement and the Pooling and
Servicing Agreement), all right, title and interest of the Seller in and to (i)
the Initial Samco Receivables listed in the Schedule of Samco Receivables and,
with respect to Rule of 78's Receivables, all monies due or to become due
thereon after the Cutoff Date (including Scheduled Payments due after the Cutoff
Date (including principal prepayments relating to such Scheduled Payments) but
received by the Seller on or before the Cutoff Date) and, with respect to Simple
Interest Receivables, all monies received thereunder after the Cutoff Date and
all Liquidation Proceeds and Recoveries received with respect to such
Receivables; (ii) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Initial Samco Receivables and any other interest of the
Seller in such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to Financed Vehicles in the State of
Michigan, other evidence of ownership with respect to Financed Vehicles; (iii)
any proceeds from claims on any physical damage, credit life and credit accident
and health insurance policies or certificates relating to the Financed Vehicles
securing the Initial Samco Receivables; (iv) refunds for the costs of extended
service contracts with respect to Financed Vehicles securing the Initial Samco
Receivables, refunds of unearned premiums with respect to credit life and credit
accident and health insurance policies or certificates covering an Obligor or
Financed Vehicle securing the Initial Samco Receivables or his or her
obligations with respect to such a Financed Vehicle and any recourse to Dealers
for any of the foregoing; (v) the Receivable File related to each Initial Samco
Receivable; and (vi) the proceeds of any and all of the foregoing. The foregoing
sale does not constitute and is not intended to result in any assumption by the
Purchaser of any obligation of the undersigned to the Obligors, insurers or any
other Person in connection with the Initial Samco Receivables, the Receivable
Files, any insurance policies or any agreement or instrument relating to any of
them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Samco
Purchase Agreement and is to be governed by the Samco Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Samco Purchase Agreement.
THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.
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<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of [ ].
SAMCO ACCEPTANCE CORP.
By:
Name:
Title:
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<PAGE>
Exhibit B
Schedule of Samco Receivables
See Following Page
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<PAGE>
EXHIBIT C
FORM OF SUBSEQUENT PURCHASE AGREEMENT
THIS SUBSEQUENT PURCHASE AGREEMENT (the "Subsequent Agreement") is made
and entered into as of by and between SAMCO ACCEPTANCE CORP., a Delaware
corporation (the "Seller"), and CPS RECEIVABLES CORP., a California corporation
(together with its successors and assigns, the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Purchaser, as purchaser, has agreed to purchase from the
Seller, as seller, and the Seller, pursuant to the Samco Purchase Agreement (the
"Samco Purchase Agreement") dated as of [ ], between the Purchaser and the
Seller, is transferring to the Purchaser the Subsequent Samco Receivables listed
on the Schedule of Subsequent Samco Receivables annexed hereto as Exhibit A (the
"Subsequent Samco Receivables") and Subsequent Transferred Samco Property.
NOW THEREFORE, in consideration of the premises and the mutual
agreements hereinafter contained, and for other good and valuable consideration,
the receipt of which is acknowledged, the Purchaser and the Seller, intending to
be legally bound, hereby agree as follows:
Definitions
SECTION 1. Capitalized terms used herein without definition shall have
the respective meanings assigned to such terms in the Samco Purchase Agreement.
SECTION 2. Conveyance of Subsequent Receivables. For value received, in
accordance with the Samco Purchase Agreement, the Seller does hereby sell,
assign, transfer and otherwise convey unto the Purchaser, without recourse (but
without limitation of its obligations under the Samco Purchase Agreement), all
right, title and interest of the Seller in and to: (i) the Subsequent Samco
Receivables listed in the related Schedule of Subsequent Samco Receivables and,
with respect to Rule of 78's Receivables, all monies due or to become due
thereon after the related Subsequent Cutoff Date (including Scheduled Payments
due after the related Subsequent Cutoff Date (including principal prepayments
relating to such Scheduled Payments) but received by the Seller on or before the
related Subsequent Cutoff Date) and, with respect to Simple Interest
Receivables, all monies received thereunder after the related Subsequent Cutoff
Date and all Liquidation Proceeds and Recoveries received with respect to such
Subsequent Samco Receivables; (ii) the security interests in the Financed
Vehicles granted by Obligors pursuant to the Subsequent Samco Receivables and
any other interest of the Seller in such Financed Vehicles, including, without
limitation, the
C-1
<PAGE>
certificates of title or, with respect to Financed Vehicles in the State of
Michigan, other evidence of ownership with respect to Financed Vehicles; (iii)
any proceeds from claims on any physical damage, credit life and credit accident
and health insurance policies or certificates relating to the Financed Vehicles
securing the Subsequent Samco Receivables or the Obligors thereunder; (iv)
refunds for the costs of extended service contracts with respect to Financed
Vehicles securing the Subsequent Samco Receivables, refunds of unearned premiums
with respect to credit life and credit accident and health insurance policies or
certificates covering an Obligor or Financed Vehicle securing the Subsequent
Samco Receivables or his or her obligations with respect to such a Financed
Vehicle and any recourse to Dealers for any of the foregoing; (v) the Receivable
File related to each Subsequent Samco Receivable; and (vi) the proceeds of any
and all of the foregoing (collectively, the "Subsequent Transferred Samco
Property" and together with any Subsequent Transferred CPS Property, the
"Subsequent Transferred Property").
SECTION 3. Consideration for Subsequent Transferred Property. In
consideration for the Subsequent Samco Receivables and other Subsequent
Transferred Samco Property, subject to the terms and conditions hereof, the
purchase price for the Subsequent Samco Receivables, in the amount of [$ ],
shall be paid by the Purchaser in cash to the Seller on the Subsequent Closing
Date.
SECTION 4. Representations and Warranties of the Seller. This Agreement
is made pursuant to and upon the representations, warranties, covenants and
agreements on the part of the Seller contained in the Samco Purchase Agreement
and is to be governed by the Samco Purchase Agreement. All of such
representations, warranties, covenants and agreements are hereby incorporated
herein and are in full force and effect as though specifically set forth herein.
SECTION 5. Representations and Warranties of the Purchaser. This
Agreement is made pursuant to and upon the representations, warranties,
covenants and agreements on the part of the Purchaser contained in the Samco
Purchase Agreement and is to be governed by the Samco Purchase Agreement. All of
such representations, warranties, covenants and agreements are hereby
incorporated herein and are in full force and effect as though specifically set
forth herein.
C-2
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Agreement to be
duly executed this __ day of _________, but effective as of the date and year
first written above.
SAMCO ACCEPTANCE CORP., as Seller
By:
Name:
Title:
CPS RECEIVABLES CORP.,
as Purchaser
By:
Name:
Title:
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<PAGE>
EXHIBIT A TO SUBSEQUENT SAMCO PURCHASE AGREEMENT
FORM OF SUBSEQUENT SAMCO ASSIGNMENT
For value received, in accordance with the Purchase Agreement dated as of [
], 1997, as heretofore amended, supplemented or otherwise modified (the "Samco
Purchase Agreement"), among the undersigned, as Seller, and CPS Receivables,
Corp. (the "Purchaser"), the undersigned does hereby transfer, assign, grant,
set over and otherwise convey to the Purchaser, without recourse (subject to the
obligations in the Samco Purchase Agreement and the Sale and Servicing
Agreement) all right, title and interest of the Seller in and to: (i) the
Subsequent Samco Receivables listed in the related Schedule of Subsequent Samco
Receivables and, with respect to Rule of 78's Receivables, all monies due or to
become due thereon after the related Subsequent Cutoff Date (including Scheduled
Payments due after the related Subsequent Cutoff Date (including principal
prepayments relating to such Scheduled Payments) but received by the Seller on
or before the related Subsequent Cutoff Date) and, with respect to Simple
Interest Receivables, all monies received thereunder after the related
Subsequent Cutoff Date and all Liquidation Proceeds and Recoveries received with
respect to such Subsequent Samco Receivables; (ii) the security interests in the
Financed Vehicles granted by Obligors pursuant to the Subsequent Samco
Receivables and any other interest of the Seller in such Financed Vehicles,
including, without limitation, the certificates of title or, with respect to
Financed Vehicles in the State of Michigan, other evidence of ownership with
respect to Financed Vehicles; (iii) any proceeds from claims on any physical
damage, credit life and credit accident and health insurance policies or
certificates relating to the Financed Vehicles securing the Subsequent Samco
Receivables or the Obligors thereunder; (iv) refunds for the costs of extended
service contracts with respect to Financed Vehicles securing the Subsequent
Samco Receivables, refunds of unearned premiums with respect to credit life and
credit accident and health insurance policies or certificates covering an
Obligor or Financed Vehicle securing the Subsequent Samco Receivables or his or
her obligations with respect to such a Financed Vehicle and any recourse to
Dealers for any of the foregoing; (v) the Receivable File related to each
Subsequent Samco Receivable; and (vi) the proceeds of any and all of the
foregoing (collectively, the "Subsequent Transferred Samco Property" and
together with any Subsequent Transferred CPS Property, the "Subsequent
Transferred Property").
The foregoing assignment, transfer and conveyance does not constitute and
is not intended to result in any assumption by the Purchaser of any obligation
of the undersigned to the Obligors, insurers or any other person in connection
with the Subsequent Samco Receivables, the Receivable Files, any insurance
policies or any agreement or instrument relating to any of them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of each of the undersigned contained in
the Samco Purchase Agreement and is to be governed by the Samco Purchase
Agreement.
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<PAGE>
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Samco Purchase Agreement.
This Assignment shall be governed by and construed in accordance with the
internal laws of the State of New York, without regard to principles of
conflicts of law.
IN WITNESS WHEREOF, the undersigned have caused this Assignment to be duly
executed as of [ ].
SAMCO ACCEPTANCE CORP.
By:
Name:
Title:
A-2
CONSUMER PORTFOLIO SERVICES, INC.
Power of Attorney
Each of the undersigned persons, in his or her capacity as an officer
or director, or both, of Consumer Portfolio Services, Inc. ("CPS"), hereby
appoints Jeffrey P. Fritz as his or her attorney-in-fact and agent for the
following purposes:
1. To sign for him or her, in his or her name and in his or
her capacity as an officer or director, or both, of the Bank, a
Registration Statement on Form S-3 and any amendments and
post-effective amendments thereto (collectively, the "Registration
Statement"), for the registration under the Securities Act of 1933, as
amended (the "Act"), of asset backed notes (the "Notes") representing
debt of, and certificates (the "Certificates" and, together with the
Notes, the "Securities") representing undivided interests in, a trust,
the property of which includes automobile receivables originated or
acquired by CPS;
2. To file or cause to be filed such Registration Statement
with the Securities and Exchange Commission;
3. To take all such other action as any such attorney-in-fact,
or his or her substitute, may deem necessary or desirable in order to
effect and maintain the registration of the Certificates; and
4. To sign for him or her, in his or her name and in his or
her capacity as an officer or director, or both, of CPS, all such
documents and instruments as any such attorney-in-fact, or his or her
substitute, may deem necessary or advisable in connection with the
registration, qualification or exemption of the Securities under the
securities laws of any state or other jurisdiction.
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<PAGE>
This power of attorney shall be effective as of April [ ], 1997 and
shall continue in full force and effect until revoked by the undersigned in a
writing filed with the Secretary of the Bank.
/s/ Charles E. Bradley, Sr.
Charles E. Bradley, Sr.
/s/ Charles E. Bradley, Jr
Charles E. Bradley, Jr.
/s/ William B. Roberts
William B. Roberts
/s/ John G. Poole
John G. Poole
/s/ Thomas L. Chrystie
Thomas L. Chrystie
/s/ Robert A. Simms
Robert A. Simms
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