As filed with the Securities and Exchange Commission on April [ ], 1998
Registration No. ___________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
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CPS AUTO GRANTOR TRUSTS
(Issuer of the Certificates)
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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. |_|
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. |X|
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. |_|
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. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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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
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<S> <C> <C> <C> <C>
Asset Backed Certificates,
Class A $500,000,000 100% $500,000,000 $151,515.15
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Asset Backed Certificates,
Class B $0 100% $0 $0
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* Estimated solely for the purpose of calculating the registration fee.
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.
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INTRODUCTORY NOTE
This Registration Statement contains (i) a form of Prospectus relating
to the offering of Series of Asset Backed Certificates by various CPS Auto
Grantor Trusts created from time to time by Consumer Portfolio Services, Inc.,
(ii) a form of Prospectus Supplement relating to future offerings by a CPS Auto
Grantor Trust of a Series of Asset Backed Certificates described therein, and
(iii) a form of Prospectus Supplement relating to the offering by CPS Auto
Grantor Trust 1998-2 of the particular Series of Asset Backed Certificates
described therein. The forms of Prospectus Supplement relates only to the
securities described therein and are forms that may be used, among others, by
Consumer Portfolio Services, Inc. to offer Asset Backed Certificates under this
Registration Statement.
<PAGE>
PROSPECTUS
CPS Auto Grantor Trusts
Auto Receivables Backed Certificates Issuable in Series
CPS Receivables Corp.
Seller
Consumer Portfolio Services
Sponsor and Servicer
This Prospectus describes certain Auto Receivables Backed Certificates
(the "Certificates") 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 Certificates may include 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 Certificates (each,
a "Trust").
Each class of Certificates of any Series will evidence beneficial
ownership in a segregated pool of assets (the "Trust Assets"), 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 secured by new and
used automobiles, light trucks, vans and minivans financed thereby, or
participation interests therein, together with all monies received relating
thereto (the "Contracts"). The Trust Assets may 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" and, 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 Certificates 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,
a spread 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 Pooling and Servicing Agreements--Credit and Cash Flow
Enhancement". Except to the extent the Prospectus Supplement for a Series
provides for a pre-funding period, the Receivables in the Trust Assets for a
Series will have been originated or acquired by the Originators (as defined
herein) on or prior to the date of issuance of the related Certificates, as
described herein and in the related Prospectus Supplement. The Receivables
included in a Trust will be serviced by a servicer (the "Servicer") described in
the related Prospectus Supplement.
Each Series of Certificates may include one or more classes (each, a
"class"). The rights of one or more classes of Certificates of any Series may be
senior or subordinate to the rights of one or more of the other classes of
Certificates. A Series may include two or more classes of Certificates which may
differ as to the timing, order or priority of payment, pass-through rate or
amount of distributions of principal or interest or both. Information regarding
each class of Certificates 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 Certificates 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
Certificates in the manner described herein and in the related Prospectus
Supplement. See "Description of the Certificates".
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FACTORS SET FORTH UNDER "RISK
FACTORS" BEGINNING ON [PAGE 13] HEREIN AND IN THE RELATED PROSPECTUS SUPPLEMENT.
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 CERTIFICATES 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 CERTIFICATES 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 Certificates may be made through one or more different
methods, including offerings through underwriters as more fully described under
"Method of Distribution" herein and in the related Prospectus Supplement. Prior
to issuance, there will have been no market for the Certificates of any Series,
and there can be no assurance that a secondary market for the Certificates will
develop, or if it does develop, that it will continue.
Retain this Prospectus for future reference. This Prospectus may not be
used to consummate sales of Certificates unless accompanied by a Prospectus
Supplement.
The date of this Prospectus is April 8, 1998.
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PROSPECTUS SUPPLEMENT
The Prospectus Supplement relating to a Series of Certificates to be
offered hereunder, among other things, will set forth with respect to such
Series of Certificates: (i) a description of the class or classes of such
Certificates, (ii) the "Pass-Through Rate" or other applicable rate (or the
manner of determining such rate) and authorized denominations of each class of
such Certificates; (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 Certificates; (iv) the specified interest, if any, of each class of
Certificates 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 Certificates, if any; (vi) the payment date to
Certificateholders; (vii) information regarding the Servicer(s) for the related
Receivables; (viii) the circumstances, if any, under which the Trust may be
subject to early termination; (ix) information regarding tax considerations; and
(x) additional information with respect to the method of distribution of such
Certificates.
AVAILABLE INFORMATION
The Sponsor 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
Certificates 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.
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 Certificates
offered hereby and thereby, nor an offer of the Certificates to any person in
any state or other jurisdiction in which such offer would be unlawful. The
delivery of this Prospectus at any time does not imply that information herein
is correct as of any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
All documents subsequently filed by the Sponsor with respect to the
Registration Statement, either on its own behalf or on behalf of a Trust,
relating to any Series of Certificates 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 Certificates issued by the Trust, 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
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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 CERTIFICATEHOLDERS
So long as the Certificates of a Series are in book-entry form, monthly
and annual reports concerning the Certificates and the related Trust will be
sent by the Trustee to Cede & Co., as the nominee of DTC and as registered
holder of such Certificates pursuant to the related Pooling and Servicing
Agreement. DTC will supply such reports to Certificateholders in accordance with
its procedures. To the extent required by the Securities Exchange Act of 1934,
as amended, the Trust will provide financial information to the
Certificateholders 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 related to the Certificates to be issued by such Trust, to issue
the related Certificates and to acquire Subsequent Receivables, if available. No
Trust will have any assets or obligations prior to issuance of the Certificates
or 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 Certificates of any Series contained in the
related Prospectus Supplement to be prepared and delivered in connection with
the offering of such Certificates. Certain capitalized terms used in the summary
are defined elsewhere in this Prospectus on the pages indicated in the "Index of
Terms".
Issuer....................... With respect to any Series of Certificates, a
Trust formed pursuant to a pooling and servicing
agreement (a "Pooling and Servicing Agreement")
among the Seller, the Servicer and the Trustee for
such Trust.
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").
Originators................. The Seller will acquire Receivables, directly or
indirectly, from CPS or one or more institutions
affiliated with CPS (each an "Affiliated
Originator"; CPS and each Affiliated Originator
are each, in such capacity, an "Originator"). Each
Originator will be an entity generally in the
business of originating or acquiring Receivables,
or an affiliate of such entity. The Receivables
will be either (i) originated by the related
Originator, (ii) originated by various dealers
("Dealers"), independent finance companies
("IFCs") or deposit institutions, such as banks,
thrifts and credit unions ("Deposit
Institutions") and assigned to the Originator or
(iii) acquired by the related Originator from
other originators or owners of Receivables.
Trustee...................... The Trustee (the "Trustee") for each Series of
Certificates will be specified in the related
Prospectus Supplement.
The Certificates............. Each Series of Certificates will be issued
pursuant to the related Pooling and Servicing
Agreement. The related Prospectus Supplement will
specify which class or classes of Certificates of
the related Series are being offered thereby.
Each class of Certificates will have a stated
certificate balance (the "Certificate Balance")
and will accrue interest on such Certificate
Balance at a specified rate (with respect to each
class of Certificates the "Pass- Through Rate") as
set forth in the related Prospectus Supplement.
Each class of Certificates may have a different
Pass-Through Rate, which may be a fixed,
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variable or adjustable Pass-Through Rate, or any
combination of the foregoing. The related
Prospectus Supplement will specify the
Pass-Through Rate, or the method for determining
the applicable Pass-Through Rate, for each class
of Certificates.
A Series of Certificates may include two or more
classes of Certificates that differ as to timing
and priority of distributions, seniority,
allocations of losses, Pass-Through Rate or amount
of distributions in respect of principal or
interest. Additionally, distributions in respect
of principal or interest in respect of any such
class or classes may or may not be made upon the
occurrence of specified events or on the basis of
collections from designated portions of the
related Receivables Pool. If specified in the
related Prospectus Supplement, one or more classes
of Certificates ("Strip Certificates") 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. See "Description of the
Certificates--Distributions of Principal and
Interest".
Certificates will be available for purchase in the
minimum denomination specified in the related
Prospectus Supplement and will be available in
book- entry form unless otherwise specified in the
related Prospectus Supplement. Certificateholders
will be able to receive Definitive Certificates
only in the limited circumstances described herein
or in the related Prospectus Supplement. See
"Certain Information Regarding the
Certificates--Definitive Certificates".
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 Pooling and Servicing
Agreements--Termination", the Certificates 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
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include a Pre-Funding Account that will be used to
purchase additional Receivables after the
applicable Closing Date, one or more classes of
Certificates 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 Trust Assets............. The property of each Trust will include a pool of
simple interest or precomputed interest 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. On the date of
issuance of a Series of Certificates 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 Pooling 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 Pooling and Servicing Agreements--Trust
Accounts".
If the related Prospectus Supplement provides that
the property of a Trust will include monies
initially deposited into an account (a
"Pre-Funding Account") to purchase additional
Receivables after the Closing Date, the Seller
will be obligated pursuant to the Pooling and
Servicing Agreement to sell additional Receivables
(the "Subsequent Receivables") to the related
Trust, subject only to the availability thereof,
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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 such Pooling and Servicing Agreement)
from time to time during the period (the "Funding
Period") 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 one or more Originators and will
meet all of the credit and other criteria set
forth set forth herein and in the related
Prospectus Supplement. See "Risk Factors--Sales of
Subsequent Receivables", "The Receivables", and
"Description of the Pooling and Servicing
Agreements--Sale and Assignment of Receivables"
herein and "The Receivables Pool" in the related
Prospectus Supplement.
As used in this Prospectus, the term Receivables
will include the Receivables transferred to a
Trust on the related Closing Date (such
Receivables, the "Initial Receivables") as well as
any Subsequent Receivables transferred to such
Trust during the related Funding Period, if any.
Amounts on deposit in any Pre-Funding Account
during the related Funding Period will be invested
by the Trustee (as directed by the Servicer) in
Eligible Investments, and any resultant investment
income, less any related investment expenses
("Investment Income"), will be added, on the
Distribution 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 Certificates of the related
Series of Certificates, in the amounts and in
accordance with the payment priorities specified
in the related Prospectus Supplement. In no event
will a
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Funding Period continue for more than 90 days
after the related Closing Date. See "Risk
Factors--Pre-Funding Accounts", "--Sales of
Subsequent Receivables" and "Description of the
Pooling and Servicing Agreements--Trust
Accounts--Pre-Funding Accounts".
Credit and Cash Flow
Enhancement................ If and to the extent specified in the related
Prospectus Supplement, credit enhancement with
respect to a Trust or any class or classes of
Certificates may include any one or more of the
following: subordination of one or more other
classes of Certificates of the same Series,
reserve funds, spread accounts, surety bonds,
insurance policies, letters of credit, credit or
liquidity facilities, cash collateral accounts,
over-collateralization, guaranteed investment
contracts, swaps or other interest rate protection
agreements, repurchase obligations, other
agreements with respect to third party payments or
other support, cash deposits, or other
arrangements. To the extent specified in the
related Prospectus Supplement, a form of credit
enhancement with respect to a Trust or a class or
classes of Certificates may be subject to certain
limitations and exclusions from converge
thereunder.
Pooling and Servicing
Agreements................. The applicable Seller will transfer the related
Receivables to a Trust pursuant to a Pooling and
Servicing Agreement. The Servicer will agree with
each Trust to be responsible for servicing,
managing, maintaining custody of and making
collections on the Receivables, either directly or
indirectly through one or more Subservicers.
If so provided in the related Prospectus
Supplement, the Servicer will advance scheduled
payments under each Rule of 78s Receivable or
Actuarial Receivable that are not timely made (a
"Precomputed Advance") to the extent that the
Servicer, in its sole discretion, expects to
recoup such Precomputed Advance from subsequent
payments on or with respect to such Receivable or
from other Precomputed Receivables. If so provided
in the related Prospectus Supplement, with
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respect to Simple Interest Receivables, the
Servicer will advance any interest shortfall (a
"Simple Interest Advance"). As used herein,
"Advance" means any Precomputed Advance or Simple
Interest Advance. The Servicer will be entitled to
reimbursement of Advances from subsequent payments
on or with respect to the Receivables to the
extent described in the related Prospectus
Supplement.
Unless otherwise specified in the related
Prospectus Supplement, the Servicer will receive a
fee for servicing the Receivables of each Trust
equal to the percentage specified in the related
Prospectus Supplement of the aggregate outstanding
principal balance of the related Receivables Pool,
plus certain late fees, prepayment charges and
other administrative fees or similar charges. Fees
payable to any Subservicer as compensation for
performing certain servicing functions with
respect to all or a portion of the Receivables in
a Receivables Pool will be the responsibility of
the Servicer and will not be an additional expense
of the Trust. See "Description of the Pooling and
Servicing Agreements--Servicing Compensation and
Payment of Expenses" herein.
No Investment Companies...... None of CPS, any Seller or any Trust will register
as an "investment company" under the Investment
Company Act of 1940, as amended (the "Investment
Company Act").
Cross-Collateralization...... As described in the related Pooling and Servicing
Agreement and the related Prospectus Supplement,
the source of payment for Certificates of each
Series will be the assets of the related Trust
Assets only. However, as may be described in the
related Prospectus Supplement, a Series or class
of Certificates may include the right to receive
moneys from a common pool of Credit Enhancement
which may be available for more than one Series of
Certificates, such as a master reserve account,
master spread 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
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to the payment of Certificates issued by any other
Trust (except to the limited extent that certain
collections in excess of the amounts needed to pay
the related Certificates may be deposited in a
common master reserve account, common master
spread account or over-collateralization account
that provides credit enhancement for more than one
Series of Certificates issued pursuant to the
related Pooling and Servicing Agreement).
Registration of
Certificates................. Certificates may be represented by global
securities registered in the name of Cede & Co.
("Cede"), as nominee of The Sellery Trust Company
("DTC"), or another nominee. In such case,
Certificateholders will not be entitled to receive
definitive securities representing such
Certificateholders' interests, except in certain
circumstances described in the related Prospectus
Supplement. See "Description of the
Certificates--Book-Entry Registration" herein.
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 Certificates under the
circumstances and in the manner set forth herein
under "Description of The Pooling and Servicing
Agreement--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
Certificates by soliciting competitive bids for
the purchase of the Trust Assets or otherwise,
under other circumstances and in the manner
specified in "Description of The Pooling and
Servicing Agreement--Termination" and in the
related Prospectus Supplement.
Tax Considerations........... Certificates of each Series offered hereby will,
for federal income tax purposes, constitute
interests in a Trust treated as a grantor trust
under applicable provisions of the Code. The
Prospectus Supplement for each Series of
Certificates will summarize, subject to the
limitations stated therein, federal income tax
considerations relevant to the purchase, ownership
and
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disposition of such Certificates. Investors are
advised to consult their tax advisors and to
review "Certain Federal and State Income Tax
Consequences" in the related Prospectus
Supplement.
ERISA Considerations......... The Prospectus Supplement for each Series of
Certificates 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 Certificates by employee benefit
plans and individual retirement accounts. See
"ERISA Considerations" in the related Prospectus
Supplement.
Ratings...................... Each class of Certificates offered pursuant to
this Prospectus and the related Prospectus
Supplement will, unless otherwise specified in the
related Prospectus Supplement, be rated in one of
the four highest rating categories by one or more
"national statistical rating organizations", as
defined in 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 Trust will be able to make
timely payment of all amounts due on the related
Certificates in accordance with the terms thereof.
Such ratings will neither address any prepayment
or yield considerations applicable to any
Certificates nor constitute a recommendation to
buy, sell or hold any Certificates. The ratings
expected to be received with respect to any
Certificates will be set forth in the related
Prospectus Supplement.
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RISK FACTORS
Prospective Certificateholders should consider, among other things, the
following factors in connection with the purchase of Certificates:
Limited Liquidity. There can be no assurance that a secondary market
for the Certificates of any Series or class will develop or, if it does develop,
that it will provide Certificateholders with liquidity of investment or that it
will continue for the life of such Certificates. The Prospectus Supplement for
any Series of Certificates may indicate that an underwriter specified therein
intends to establish and maintain a secondary market in such Certificates;
however, no underwriter will be obligated to do so. The Certificates will not be
listed on any securities exchange.
Pre-Funding Accounts. 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. In no
event will the Pre-Funded Amount exceed 25% of the initial aggregate principal
amount of the Certificates of the related Series. 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 Originators 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 Distribution
Date pursuant to the payment priorities specified in the related Prospectus
Supplement. No Funding Period will end more than 90 days after the related
Closing Date.
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 Certificateholders on the Distribution 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 Certificates of the related Series. In addition, holders of the
related Certificates 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
Certificates.
Sales of Subsequent Receivables. If so provided in the related
Prospectus Supplement, the Seller will be obligated pursuant to the Pooling 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 Pooling and Servicing
Agreement and described in the related Prospectus Supplement. If the principal
amount of the eligible Subsequent Receivables acquired by the Seller from CPS
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 Certificates may receive a prepayment or
early distribution of principal at the end of the Funding Period as described
above under "Pre-Funding Accounts".
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<PAGE>
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 Pooling 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 Certificates; (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
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 or conditions subsequent 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 Repurchase 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--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 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".
Nature of 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.
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<PAGE>
Social, Economic and Other Factors. 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.
Ownership of Receivables. In connection with the issuance of any Series
of Certificates, one or more Originators will originate Receivables. CPS will
warrant in a Pooling 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 Certificateholders has
a valid security interest in such Receivables. As will be described in the
related Prospectus Supplement, the related Pooling and Servicing Agreement will
provide that the Trustee will be required to maintain possession of the 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 Receivable. 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 Receivables Purchase Agreement
or the Pooling 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 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
Certificates. If successful, such attempt could result in losses to the
Certificateholders or an acceleration of the repayment of the Certificates. 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.
Certain Legal Aspects. The transfer of the Receivables by the
applicable Seller to the Trustee pursuant to the related Pooling 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, no
action will be taken to perfect the rights of the Trustee in proceeds of any VSI
insurance policy (as hereinafter defined) 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 the Originators
to the Seller. Due to the administrative burden and expense, the certificates of
title to the Financed Vehicles will not be amended or reissued to reflect the
assignment to the Trust. In the absence of such an amendment or reissuance, the
Trust may not have a perfected security interest in the Financed Vehicles
securing the Receivables in some states. By virtue of the assignment of the
applicable Purchase Agreement to the related Trust, CPS will be obligated to
repurchase any Receivable sold to the Trust as to which there did not exist on
the Closing Date a perfected security interest in the name of CPS in the
Financed Vehicle, and the Servicer will be obligated to purchase any Receivable
sold to the Trust as to which it failed to
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<PAGE>
maintain a perfected security interest in the name of CPS 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 the 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, the 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 Financed
Vehicles". Federal and state consumer protection laws impose requirements upon
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
liable to the obligor thereon for any violation by the lender. Pursuant to the
applicable Purchase Agreement, CPS will be obligated to repurchase any
Receivable materially and adversely affected by the failure to comply with such
requirements. See "Certain Legal Aspects of the Receivables".
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 or an applicable Affiliated
Originator 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 or such applicable Affiliated
Originator. 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 or such
Affiliated Originator in a proceeding under any Insolvency Law. If a court were
to reach such a conclusion, then delays in distributions on the related
Certificates could occur or reductions in the amounts of such distributions
could result. See "The Seller and the Servicer".
CPS will warrant to the Seller in each Purchase Agreement to which it
is a party that the sale of the Receivables by it or the applicable Affiliated
Originator to the Seller is a valid sale of such Receivables to such Seller. In
addition, CPS or the applicable 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 the applicable Affiliated Originator were to become a
debtor in a bankruptcy case and a creditor or trustee-in-bankruptcy of such
debtor or such debtor itself were to take the position that the sale of
Receivables to the Seller should be recharacterized as a pledge of such
Receivables to secure a borrowing of such Seller, then delays in payments of
collections of Receivables to the Seller could occur or, should the court rule
in favor of any such trustee, debtor or creditor, reductions in the amount of
such payments could result. If the transfer of Receivables to the Seller is
recharacterized as a pledge, a tax or government lien on the property of CPS
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
Originator's bankruptcy estate and would not be available to the Originator's
creditors.
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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
an Originator bankruptcy, 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 Originator's bankruptcy estate and would be subject to claims of certain
creditors and delays and reductions in payments to the Certificateholders could
result. CPS will warrant in the Purchase Agreement to which it is a party that
the sale of the Receivables by the Originators to the Seller is a valid sale of
the Receivables to the Seller, and the Seller will warrant in the Pooling and
Servicing Agreement that the sale of the Receivables to the Trust is a valid
sale of the Receivables to the Trust.
Restrictions on 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 the Originators 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, the Servicer 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 Pooling and Servicing
Agreement), the Trust 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 Trust 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 Certificateholders may be subject to delays in
receiving payments and suffer loss of their investment in the Certificates.
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 or an Affiliated Originator is named as a loss payee.
Since the Obligors select their own insurers to provide the requisite coverage,
the specific terms and conditions of their policies vary.
In addition, although each Receivable generally gives CPS or the
Affiliated Originator 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 Affiliated Originator 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 Certificateholders could suffer a loss on
their investment.
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Delinquencies. 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.
Subordination; Limited Assets. To the extent specified in the related
Prospectus Supplement, distributions of interest and principal on one class of
Certificates of a Series may be subordinated in priority of payment to interest
and principal due on other classes of Certificates 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 Certificates
represent obligations solely of the related Trust or debt secured by the related
Trust Assets, and will not represent a recourse obligation to other assets of
CPS or the Seller. No Certificates of any Series will be insured or guaranteed
by CPS, the Seller, the Servicer, or the applicable Trustee. Consequently,
holders of the Certificates 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.
Book-Entry Registration. Issuance of the Certificates in book-entry
form may reduce the liquidity of such Certificates in the secondary trading
market since investors may be unwilling to purchase Certificates for which they
cannot obtain definitive physical securities representing such
Certificateholders' interests, except in certain circumstances described in the
related Prospectus Supplement.
Since transactions in Certificates 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 Certificateholder 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
Certificates, may be limited due to lack of a physical security representing the
Certificates.
Certificateholders may experience some delay in their receipt of
distributions of interest on and principal of the Certificates 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 Certificateholders either directly or indirectly through
Indirect Participants. See "Description of the Certificates--Book-Entry
Registration".
Security Rating. The rating of Certificates 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 Certificates
would likely result in a reduction in the rating of the Certificates.
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Maturity and Prepayment Considerations. 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 the Originator or CPS. (For this
purpose the term "prepayments" includes prepayments in full, certain partial
prepayments related to refunds of extended service contract costs and unearned
insurance premiums, liquidations due to default, as well as receipts of proceeds
from physical damage, credit life and credit accident and health insurance
policies and certain other Receivables repurchased for administrative reasons.)
The rate of prepayment on the Receivables may also be influenced by the
structure of the loan, the nature of the Obligors and the Financed Vehicles and
servicing decisions as discussed above. In addition, under certain
circumstances, CPS is obligated to repurchase Receivables as a result of
breaches of representations and warranties, and under certain circumstances the
Servicer is obligated to purchase Receivables pursuant to the Pooling 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 Certificateholders.
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.
Certificateholders should consider, in the case of Certificates
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 Certificates 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.
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.
Financial Condition of CPS. CPS is generally not obligated to make any
payments in respect of the Certificates or the Receivables of a specific Trust.
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 Certificateholders.
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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, Certificateholders of the applicable Trust may be subject to
delays in receiving payments and suffer loss of their investment in the
Certificates.
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, file 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".
FORMATION OF THE TRUST
With respect to each Series of Certificates, the Seller will establish
a separate Trust pursuant to a Pooling and Servicing Agreement for the
transactions described herein and in the related Prospectus Supplement. The
Seller will establish each Trust by selling and assigning the Trust Assets, as
described below, to the applicable Trustee in exchange for Certificates issued
by such Trust. Prior to such sale and assignment, the Trust will have no assets
or obligations or any operating history. The Trust will not engage in any
business. The Trust will hold the Receivables, issue the Certificates and
distribute payments on the Certificates.
The Servicer will initially service the Receivables comprising the
Trust Assets pursuant to the related Pooling and Servicing Agreement and will be
compensated for acting as the Servicer. See "Description of the Pooling and
Servicing Agreements--Servicing Compensation". The 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 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 Trustee as the new secured party.
See "Certain Legal Aspects of the Receivables".
No Trust will acquire any assets other than the Trust Assets, and it is
not anticipated that any Trust will have any need for additional capital
resources. Because a 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 Certificates and distributing payments on the Certificates,
no historical or pro forma financial statements or ratios of earnings to fixed
charges with respect to any Trust have been included herein.
THE TRUST ASSETS
Each Certificate issued by a Trust will represent a fractional
undivided interest in such Trust, other than interest received by the Trust in
excess of the applicable Pass-Through Rate for such Certificate, as specified in
the applicable Prospectus Supplement. 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") and, with respect
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to Rule of 78's Receivables, certain monies due thereunder after the applicable
Cutoff Date, and, with respect to Simple Interest Receivables, certain monies
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 Agreement; (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. If so specified in the related Prospectus Supplement, the Trust
Assets also will include the Credit Enhancement provided for the benefit of the
Certificateholders of such Trust. Any Payahead Account will be maintained with
the applicable Trustee for the benefit of the Obligors, but will not be part of
the Trust.
If so provided in the related Prospectus Supplement, the property of a
Trust may also include a Pre-Funded Amount, which the Seller will deposit to the
Pre-Funding Account on the Closing Date and which will be used by the Trust to
purchase Subsequent Receivables from the Seller during the related Funding
Period. Any Subsequent Receivables so conveyed to a Trust will also be assets of
such Trust.
If the protection provided to Certificateholders, if any, by any such
Credit Enhancement is insufficient, such Certificateholders 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 Certificates. 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. Certificateholders may thus be subject to delays in payment on, or
may incur losses on their investment in, such Certificates as a result of
defaults or delinquencies by Obligors and depreciation in the value of the
related Financed Vehicles. See "Description of the Pooling and Servicing
Agreements--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, IFCs or Deposit Institutions 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 by CPS, or an Affiliated Originator, 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.
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The Receivables included in the Trust Assets will be selected from
those Receivables held by CPS and each applicable Affiliated Originator based on
the criteria specified in the applicable Pooling and Servicing Agreement and
described herein or in the related Prospectus Supplement.
ACQUISITION OF RECEIVABLES BY THE SELLER
On or prior to each Closing Date, CPS and each applicable Affiliated
Originator will sell and assign to the Seller, without recourse, except as
provided in the 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 or the applicable Affiliated
Originator and the Seller (the "Purchase Agreement").
In each Purchase Agreement to which it is a party, CPS will represent
and warrant to the Seller, among other things, that (i) the information provided
with respect to the applicable Receivables (including Receivables sold to the
Seller by an Affiliated Originator (such Receivables "Affiliate Recivables")) is
correct in all material respects; (ii) at the date of issuance of the
Certificates, 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 Certificates, 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 Certificates, each of the
Receivables is or will be secured by a first-priority perfected security
interest in the Financed Vehicle in favor of CPS or the applicable Affiliated
Originator; and (v) each Receivable, at the time it was originated, complied
and, at the date of issuance of the Certificates, 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 Certificateholders, the Certificate Insurer 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 Cut-off Date.
If so provided in the related Prospectus Supplement, the Seller will be
obligated pursuant to the Pooling 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 Pooling and Servicing Agreement and described in the related
Prospectus Supplement. If the principal amount of the eligible Subsequent
Receivables acquired by the Seller from the 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
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the related Series of Certificates 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 Pooling 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 Certificates; (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
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 or conditions subsequent 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 Repurchase 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.
The Receivables
As specified in the related Prospectus Supplement, the Receivables may
consist of any combination of Rule of 78s Receivables, Actuarial Receivables or
Simple Interest Receivables. Generally, "Rule of 78s Receivables" provide for
fixed level monthly payments which will amortize the full amount of the
Receivable over its term. The Rule of 78s Receivables provide for allocation of
payments according to the "sum of periodic balances" or "sum of monthly
payments" method (the "Rule of 78s"). Each Rule of 78s 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 78s. Under the Rule of 78s, 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 78s Receivables may be
allocated on an actuarial or simple interest basis.
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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 78s 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 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 78s 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 78s Receivable calculated in accordance with the Rule of 78s 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 Certificateholders may not be affected by Rule of 78s rebates
under the Rule of 78s 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 or the applicable Affiliated
Originators' 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 or the applicable Affiliated
Originators' 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 or the applicable Affiliated
Originators' prior experience.
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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 Certificates.
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 Pooling and Servicing Agreement or Purchase Agreement as a result
of breaches of representations and warranties. Any reinvestment risks resulting
from a faster or slower amortization of the related Certificates which results
from prepayments will be borne entirely by the related Certificateholders.
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
Certificates, together with a description of any applicable prepayment
penalties.
CPS'S AUTOMOBILE CONTRACT PORTFOLIO
General
CPS was incorporated in the State of California on March 8, 1991. CPS
and its subsidiaries engage primarily in the business of purchasing, selling and
servicing retail automobile installment sales contracts ("Contracts") originated
by Dealers located primarily in California, Florida, Pennsylvania, Texas,
Illinois and Nevada. CPS specializes in Contracts with borrowers ("Sub-Prime
Borrowers") who generally would not be expected to qualify for traditional
financing such as that provided by commercial banks or automobile manufacturers'
captive finance companies. Sub-Prime Borrowers generally have limited credit
history, lower than average income or past credit problems.
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CPS purchases Contracts from Dealers with the intent to resell them.
Prior to the issuances of the Certificates, Contracts have been sold to
institutional investors either as bulk sales or as private placements 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, as well as information relating to any
applicable Affiliated Originator, 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 Certificates will be a seven-digit
decimal, which the Servicer will compute prior to each distribution with respect
to such class of Certificates, indicating the remaining outstanding principal
balance of such class of Certificates as of the applicable Distribution Date, as
a fraction of the initial outstanding principal balance of such class of
Certificates. 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 Certificates. A Certificateholder's portion of the aggregate
outstanding principal balance of the related class of Certificates is the
product of (i) the original aggregate purchase price of such Certificateholder's
Certificates and (ii) the applicable Pool Factor.
As more specifically described in the related Prospectus Supplement
with respect to each Series of Certificates, the related Certificateholders of
record will receive reports on or about each Distribution Date concerning the
payments received on the Receivables, the Pool Balance (as such term is defined
in the related Prospectus Supplement, the "Pool Balance"), each Pool Factor and
various other items of information. In addition, Certificateholders 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 Certificates 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. The Seller will use the portion of such proceeds paid to it for general
corporate purposes.
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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,
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 counsel 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 counsel 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
Certificates (and possible reductions in the amount of such distributions) could
occur. See "Special Considerations--Certain Legal Aspects".
CPS was incorporated in the State of California on March 8, 1991. On
October 22, 1992, CPS completed a public offering of 1,300,000 shares
(approximately 31% of the shares then outstanding) of its common stock at an
initial price of $5.00 per share. Prior to that time, 100% of the common stock
of CPS was owned by CPS Holdings, Inc., a holding company the majority of the
shares of which are owned by Charles E. Bradley, Sr. On March 6, 1995, CPS
completed a second public offering of 1,000,000 shares (approximately 18.5% of
the shares then outstanding) of its common stock at $14.75 per share. CPS and
its subsidiaries engage primarily in the business of purchasing, selling and
servicing Contracts originated by Dealers located primarily in California,
Florida, Pennsylvania, Texas, Illinois and Nevada. CPS specializes in Contracts
with Sub-Prime Borrowers who generally would not be expected to qualify for
traditional financing such as that
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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.
DESCRIPTION OF THE CERTIFICATES
General
Each Trust will, if so provided in the related Prospectus Supplement,
issue one or more classes of Certificates pursuant to a Pooling and Servicing
Agreement. A form of Pooling and Servicing Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus forms a part. The
following summary does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the provisions of the related
Certificates and Pooling and Servicing Agreement.
Unless otherwise specified in the related Prospectus Supplement and
except for the Certificates, if any, of a Series purchased by CPS, each class of
Certificates will initially be represented by one or more certificates
registered in the name of the Seller. Certificates will be available for
purchase in the minimum denominations specified in the related Prospectus
Supplement and, unless otherwise specified in the related Prospectus Supplement,
in book-entry form only. The Seller has been informed by DTC that DTC's nominee
will be Cede, unless another nominee is specified in the related Prospectus
Supplement. Accordingly, such nominee is expected to be the holder of record of
the Certificates of any Series that are not purchased by CPS. Unless and until
Definitive Certificates are issued under the limited circumstances described
herein or in the related Prospectus Supplement, no Certificateholder (other than
CPS) will be entitled to receive a physical certificate representing a
Certificate. All references herein and in the related Prospectus Supplement to
actions by Certificateholders refer to actions taken by DTC upon instructions
from the Participants, and all references herein and in the related Prospectus
Supplement to distributions, notices, reports and statements to
Certificateholders refer to distributions, notices, reports and statements to
DTC or its nominee, as the case may be, as the registered holder of the
Certificates, for distribution to Certificateholders in accordance with DTC's
procedures with respect thereto. See "Certain Information Regarding the
Certificates--Book-Entry Registration" and "--Definitive Certificates". Any
Certificate of a Series owned by CPS will be entitled to equal and proportionate
benefits under the applicable Pooling and Servicing Agreement, except that such
Certificates will be deemed not to be outstanding for the purpose of determining
whether the requisite percentage of Certificateholders has given any request,
demand, authorization, direction, notice, or consent or taken any other action
under the related Pooling and Servicing Agreement.
Distributions of Principal and Interest
The timing and priority of distributions, seniority, allocations of
losses, Pass-Through Rate and amount of or method of determining distributions
with respect to principal and interest on each class of Certificates of a Series
will be described in the related Prospectus Supplement. Distributions of
interest on such Certificates will be made on the dates specified in the related
Prospectus Supplement (the "Distribution Date") and, if so specified in the
related Prospectus
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Supplement, will be made prior to distributions with respect to principal of
such Certificates. To the extent provided in the related Prospectus Supplement,
a Series of Certificates may include one or more classes of Strip Certificates
entitled to (i) principal distributions with disproportionate, nominal or no
interest distributions or (ii) interest distributions with disproportionate,
nominal or no principal distributions. Each class of Certificates may have a
different Pass-Through Rate, which may be a fixed, variable or adjustable
Pass-Through Rate (and which may be zero for certain classes of Strip
Certificates) or any combination of the foregoing. The related Prospectus
Supplement will specify the Pass-Through Rate for each class of Certificates of
a Series or the method for determining such Pass-Through Rate.
In the case of a Series of Certificates that includes two or more
classes of Certificates, the timing, sequential order, priority of payment or
amount of distributions in respect of interest and principal, and any schedule
or formula or other provisions applicable to the determination thereof, of each
such class shall be as set forth in the related Prospectus Supplement.
Distributions in respect of interest on and principal of any class of
Certificates will be made on a pro rata basis among all holders of Certificates
of such class.
CERTAIN INFORMATION REGARDING THE CERTIFICATES
Fixed Rate Certificates
Each class of Certificates (other than certain classes of Strip Notes
or Strip Certificates) may bear interest at a fixed rate per annum ("Fixed Rate
Certificates") or at a variable or adjustable rate per annum ("Floating Rate
Certificates"), as more fully described below and in the applicable Prospectus
Supplement. Each class of Fixed Rate Certificates will bear interest at the
applicable per annum Pass-Through Rate specified in the applicable Prospectus
Supplement. Unless otherwise set forth in the applicable Prospectus Supplement,
interest on each class of Fixed Rate Certificates will be computed on the basis
of a 360-day year of twelve 30-day months.
Floating Rate Certificates
Each class of Floating Rate Certificates will bear interest for each
applicable Interest Reset Period (as such term is defined in the related
Prospectus Supplement with respect to a class of Floating Rate Certificates, the
"Interest Reset Period") at a rate per annum determined by reference to an
interest rate basis (the "Base Rate"), plus or minus the Spread, if any, or
multiplied by the Spread Multiplier, if any, in each case as specified in the
related Prospectus Supplement. The "Spread" is the number of basis points (one
basis point equals one one-hundredth of a percentage point) that may be
specified in the applicable Prospectus Supplement as being applicable to such
class, and the "Spread Multiplier" is the percentage that may be specified in
the applicable Prospectus Supplement as being applicable to such class.
The applicable Prospectus Supplement will designate one of the
following Base Rates as applicable to a given Floating Rate Certificate: (i)
LIBOR (a "LIBOR Certificate"), (ii) the Commercial Paper Rate (a "Commercial
Paper Rate Certificate"), (iii) the Treasury Rate (a "Treasury Rate
Certificate"), (iv) the Federal Funds Rate (a "Federal Funds Rate Certificate"),
(v) the CD Rate (a "CD Rate Certificate") or (vi) such other Base Rate as is set
forth in such Prospectus Supplement. The "Index Maturity" for any class of
Floating Rate Certificates is the period of maturity of the
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instrument or obligation from which the Base Rate is calculated. "H.15(519)"
means the publication entitled "Statistical Release H.15(519), Selected Interest
Rates", or any successor publication, published by the Board of Governors of the
Federal Reserve System. "Composite Quotations" means the daily statistical
release entitled "Composite 3:30 p.m. Quotations for U.S. Government Securities"
published by the Federal Reserve Bank of New York. "Interest Reset Date" will be
the first day of the applicable Interest Reset Period, or such other day as may
be specified in the related Prospectus Supplement with respect to a class of
Floating Rate Certificates.
As specified in the applicable Prospectus Supplement, Floating Rate
Certificates of a given class may also have either or both of the following (in
each case expressed as a rate per annum): (i) a maximum limitation, or ceiling,
on the rate at which interest may accrue during any interest period and (ii) a
minimum limitation, or floor, on the rate at which interest may accrue during
any interest period. In addition to any maximum interest rate that may be
applicable to any class of Floating Rate Certificates, the interest rate
applicable to any class of Floating Rate Certificates will in no event be higher
than the maximum rate permitted by applicable law, as the same may be modified
by United States law of general application.
Each Trust with respect to which a class of Floating Rate Certificates
will be issued will appoint, and enter into agreements with, a calculation agent
(each, a "Calculation Agent") to calculate interest rates on each such class of
Floating Rate Certificates issued with respect thereto. The applicable
Prospectus Supplement will set forth the identity of the Calculation Agent for
each such class of Floating Rate Certificates of a given Series, which may be
either the related Trustee or Indenture Trustee with respect to such Series. All
determinations of interest by the Calculation Agent shall, in the absence of
manifest error, be conclusive for all purposes and binding on the holders of
Floating Rate Certificates of a given class. All percentages resulting from any
calculation of the rate of interest on a Floating Rate Certificate will be
rounded, if necessary, to the nearest 1/100,000 of 1% (.0000001), with five
one-millionths of a percentage point rounded upward.
CD Rate Certificates. Each CD Rate Certificate will bear interest for
each Interest Reset Period at the interest rate calculated with reference to the
CD Rate and the Spread or Spread Multiplier, if any, specified in such Security
and in the applicable Prospectus Supplement.
The "CD Rate" for each Interest Reset Period shall be the rate as of
the second business day prior to the Interest Reset Date for such Interest Reset
Period (a "CD Rate Determination Date") for negotiable certificates of deposit
having the Index Maturity designated in the applicable Prospectus Supplement as
published in H.15(519) under the heading "Cds (Secondary Market)". In the event
that such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such CD Rate Determination
Date, then the "CD Rate" for such Interest Reset Period will be the rate on such
CD Rate Determination Date for negotiable certificates of deposit of the Index
Maturity designated in the applicable Prospectus Supplement as published in
Composite Quotations under the heading "Certificates of Deposit". If by 3:00
p.m., New York City time, on such Calculation Date such rate is not yet
published in either H.15(519) or Composite Quotations, then the CD Rate for such
Interest Reset Period will be calculated by the Calculation Agent for such CD
Rate Certificate and will be the arithmetic mean of the secondary market offered
rates as of 10:00 a.m., New York City time, on such CD Rate Determination Date,
of three leading nonbank dealers in negotiable U.S. dollar certificates of
deposit in The City of New York selected by the Calculation Agent for such CD
Rate Certificate for
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negotiable certificates of deposit of major United States money center banks of
the highest credit standing (in the market for negotiable certificates of
deposit) with a remaining maturity closest to the Index Maturity designated in
the related Prospectus Supplement in a denomination of $5,000,000; provided,
however, that if the dealers selected as aforesaid by such Calculation Agent are
not quoting offered rates as mentioned in this sentence, the CD Rate for such
Interest Reset Period will be the same as the CD Rate for the immediately
preceding Interest Reset Period.
The "Calculation Date" pertaining to any CD Rate Determination Date
shall be the first to occur of (a) the [tenth] calendar day after such CD Rate
Determination Date or, if such day is not a business day, the next succeeding
business day or (b) the [second] business day preceding the date any payment is
required to be made for any period following the applicable Interest Reset Date.
Commercial Paper Rate Certificates. Each Commercial Paper Rate
Certificate will bear interest for each Interest Reset Period at the interest
rate calculated with reference to the Commercial Paper Rate and the Spread or
Spread Multiplier, if any, specified in such Security and in the applicable
Prospectus Supplement.
The "Commercial Paper Rate" for each Interest Reset Period will be
determined by the Calculation Agent for such Commercial Paper Rate Certificate
as of the [second] business day prior to the Interest Reset Date for such
Interest Reset Period (a "Commercial Paper Rate Determination Date") and shall
be the Money Market Yield (as defined below) on such Commercial Paper Rate
Determination Date for the rate for commercial paper having the Index Maturity
specified in the applicable Prospectus Supplement, as such rate shall be
published in H.15(519) under the heading "Commercial Paper". In the event that
such rate is not published prior to 3:00 p.m., New York City time, on the
Calculation Date (as defined below) pertaining to such Commercial Paper Rate
Determination Date, then the "Commercial Paper Rate" for such Interest Reset
Period shall be the Money Market Yield on such Commercial Paper Rate
Determination Date for the rate for commercial paper of the specified Index
Maturity as published in Composite Quotations under the heading "Commercial
Paper". If by 3:00 p.m., New York City time, on such Calculation Date such rate
is not yet published in either H.15(519) or Composite Quotations, then the
"Commercial Paper Rate" for such Interest Reset Period shall be the Money Market
Yield of the arithmetic mean of the offered rates, as of 11:00 a.m., New York
City time, on such Commercial Paper Rate Determination Date of three leading
dealers of commercial paper in The City of New York selected by the Calculation
Agent for such Commercial Paper Rate Certificate for commercial paper of the
specified Index Maturity placed for an industrial issuer whose bonds are rated
"AA" or the equivalent by a nationally recognized rating agency; provided,
however, that if the dealers selected as aforesaid by such Calculation Agent are
not quoting offered rates as mentioned in this sentence, the "Commercial Paper
Rate" for such Interest Reset Period will be the same as the Commercial Paper
Rate for the immediately preceding Interest Reset Period.
"Money Market Yield" shall be a yield calculated in accordance with the
following formula:
D x 360
Money Market Yield = ----------------- x 100
360 - (D x M)
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where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the specified Index Maturity.
The "Calculation Date" pertaining to any Commercial Paper Rate
Determination Date shall be the first to occur of (a) the tenth calendar day
after such Commercial Paper Rate Determination Date or, if such day is not a
business day, the next succeeding business day or (b) the second business day
preceding the date any payment is required to be made for any period following
the applicable Interest Reset Date.
Federal Funds Rate Certificates. Each Federal Funds Rate Certificate
will bear interest for each Interest Reset Period at the interest rate
calculated with reference to the Federal Funds Rate and the Spread or Spread
Multiplier, if any, specified in such Security and in the applicable Prospectus
Supplement.
The "Federal Funds Rate" for each Interest Reset Period shall be the
effective rate on the Interest Reset Date for such Interest Reset Period (a
"Federal Funds Rate Determination Date") for Federal Funds as published in H.
15(519) under the heading "Federal Funds (Effective)". In the event that such
rate is not published prior to 3:00 p.m., New York City time, on the Calculation
Date (as defined below) pertaining to such Federal Funds Rate Determination
Date, the "Federal Funds Rate" for such Interest Reset Period shall be the rate
on such Federal Funds Rate Determination Date as published in Composite
Quotations under the heading "Federal Funds/Effective Rate". If by 3:00 p.m.,
New York City time, on such Calculation Date such rate is not yet published in
either H. 15(519) or Composite Quotations, then the "Federal Funds Rate" for
such Interest Reset Period shall be the rate on such Federal Funds Rate
Determination Date made publicly available by the Federal Reserve Bank of New
York which is equivalent to the rate which appears in H.15(519) under the
heading "Federal Funds (Effective)"; provided, however, that if such rate is not
made publicly available by the Federal Reserve Bank of New York by 3:00 p.m.,
New York City time, on such Calculation Date, the "Federal Funds Rate" for such
Interest Reset Period will be the same as the Federal Funds Rate in effect for
the immediately preceding Interest Reset Period. In the case of a Federal Funds
Rate Certificate that resets daily, the interest rate on such Security for the
period from and including a Monday to but excluding the succeeding Monday will
be reset by the Calculation Agent for such Certificate on such second Monday
(or, if not a business day, on the next succeeding business day) to a rate equal
to the average of the Federal Funds Rates in effect with respect to each such
day in such week.
The "Calculation Date" pertaining to any Federal Funds Rate
Determination Date shall be the next succeeding business day.
LIBOR Certificates. Each LIBOR Certificate will bear interest for each
Interest Reset Period at the interest rate calculated with reference to LIBOR
and the Spread or Spread Multiplier, if any, specified in such Certificate and
in the applicable Prospectus Supplement.
With respect to LIBOR indexed to the offered rates for U.S. dollar
deposits, "LIBOR" for each Interest Reset Period will be determined by the
Calculation Agent for any LIBOR Certificate as follows:
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(i) On the second London Banking Day prior to the Interest
Reset Date for such Interest Reset Period (a "LIBOR Determination
Date"), the Calculation Agent for such LIBOR Certificate will determine
the arithmetic mean of the offered rates for deposits in U.S. dollars
for the period of the Index Maturity specified in the applicable
Prospectus Supplement, commencing on such Interest Reset Date, which
appear on the Reuters Screen LIBO Page at approximately 11:00 a.m.,
London time, on such LIBOR Determination Date. For purposes of
calculating LIBOR, "London Banking Day" means any business day on which
dealings in deposits in United States dollars are transacted in the
London interbank market and "Reuters Screen LIBO Page" means the
display designated as page "LIBO" on the Reuters Monitor Money Rates
Service (or such other page as may replace the LIBO page on that
service for the purpose of displaying London interbank offered rates of
major banks). If at least two such offered rates appear on the Reuters
Screen LIBO Page, "LIBOR" for such Interest Reset Period will be the
arithmetic mean of such offered rates as determined by the Calculation
Agent for such LIBOR Certificate.
(ii) If fewer than two offered rates appear on the Reuters
Screen LIBO Page on such LIBOR Determination Date, the Calculation
Agent for such LIBOR Certificate will request the principal London
offices of each of four major banks in the London interbank market
selected by such Calculation Agent to provide such Calculation Agent
with its offered quotations for deposits in U.S. dollars for the period
of the specified Index Maturity, commencing on such Interest Reset
Date, to prime banks in the London interbank market at approximately
11:00 a.m., London time, on such LIBOR Determination Date and in a
principal amount equal to an amount of not less than $1,000,000 that is
representative of a single transaction in such market at such time. If
at least two such quotations are provided, "LIBOR" for such Interest
Reset Period will be the arithmetic mean of such quotations. If fewer
than two such quotations are provided, "LIBOR" for such Interest Reset
Period will be the arithmetic mean of rates quoted by three major banks
in The City of New York selected by the Calculation Agent for such
LIBOR Certificate at approximately 11:00 a.m., New York City time, on
such LIBOR Determination Date for loans in U.S. dollars to leading
European banks, for the period of the specified Index Maturity,
commencing on such Interest Reset Date, and in a principal amount equal
to an amount of not less than $1,000,000 that is representative of a
single transaction in such market at such time; provided, however, that
if the banks selected as aforesaid by such Calculation Agent are not
quoting rates as mentioned in this sentence, "LIBOR" for such Interest
Reset Period will be the same as LIBOR for the immediately preceding
Interest Reset Period.
Treasury Rate Certificates. Each Treasury Rate Certificate will bear
interest for each Interest Reset Period at the interest rate calculated with
reference to the Treasury Rate and the Spread or Spread Multiplier, if any,
specified in such Security and in the applicable Prospectus Supplement.
The "Treasury Rate" for each Interest Period will be the rate for the
auction held on the Treasury Rate Determination Date (as defined below) for such
Interest Reset Period of direct obligations of the United States ("Treasury
bills") having the Index Maturity specified in the applicable Prospectus
Supplement, as such rate shall be published in H.15(519) under the heading
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"U.S. Government Securities-Treasury bills-auction average (investment)" or, in
the event that such rate is not published prior to 3:00 p.m., New York City
time, on the Calculation Date (as defined below) pertaining to such Treasury
Rate Determination Date, the auction average rate (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) on such Treasury Rate Determination Date as otherwise
announced by the United States Department of the Treasury. In the event that the
results of the auction of Treasury bills having the specified Index Maturity are
not published or reported as provided above by 3:00 p.m., New York City time, on
such Calculation Date, or if no such auction is held on such Treasury Rate
Determination Date, then the "Treasury Rate" for such Interest Reset Period
shall be calculated by the Calculation Agent for such Treasury Rate Certificate
and shall be the yield to maturity (expressed as a bond equivalent on the basis
of a year of 365 or 366 days, as applicable, and applied on a daily basis) of
the arithmetic mean of the secondary market bid rates, as of approximately 3:30
p.m., New York City time, on such Treasury Rate Determination Date, of three
leading primary United States government securities dealers selected by such
Calculation Agent for the issue of Treasury bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if the dealers
selected as aforesaid by such Calculation Agent are not quoting bid rates as
mentioned in this sentence, then the "Treasury Rate" for such Interest Reset
Period will be the same as the Treasury Rate for the immediately preceding
Interest Reset Period.
The "Treasury Rate Determination Date" for each Interest Reset Period
will be the day of the week in which the Interest Reset Date for such Interest
Reset Period falls on which Treasury bills would normally be auctioned. Treasury
bills are normally sold at auction on Monday of each week, unless that day is a
legal holiday, in which case the auction is normally held on the following
Tuesday, except that such auction may be held on the preceding Friday. If, as
the result of a legal holiday, an auction is so held on the preceding Friday,
such Friday will be the Treasury Rate Determination Date pertaining to the
Interest Reset Period commencing in the next succeeding week. If an auction date
shall fall on any day that would otherwise be an Interest Reset Date for a
Treasury Rate Certificate, then such Interest Reset Date shall instead be the
business day immediately following such auction date.
The "Calculation Date" pertaining to any Treasury Rate Determination
Date shall be the first to occur of (a) the tenth calendar day after such
Treasury Rate Determination Date or, if such a day is not a business day, the
next succeeding business day or (b) the second business day preceding the date
any payment is required to be made for any period following the applicable
Interest Reset Date.
Book-Entry Registration
As may be described in the related Prospectus Supplement,
Certificateholders of a given Series may hold their Certificates 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 Certificates 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
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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 be effected in DTC in
accordance with DTC rules on behalf of the relevant European international
clearing system by its Depository; 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 Depository 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 Certificateholders 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, Certificates of such Series may do so only
through Participants and Indirect Participants. In addition, Certificateholders
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, Certificateholders 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
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Certificateholders. It is anticipated that the only "Certificateholder" in
respect of any Series will be Cede, as nominee of DTC. Certificateholders of a
given Series will not be recognized as Certificateholders of such Series, and
such Certificateholders will be permitted to exercise the rights of
Certificateholders 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 Certificates of a given Series among Participants on whose behalf it acts
with respect to such Certificates and to receive and transmit distributions of
principal of, and interest on, such Certificates. Participants and Indirect
Participants with which the Certificateholders of a given Series have accounts
with respect to such Certificates similarly are required to make book-entry
transfers and receive and transmit such payments on behalf of their respective
Certificateholders of such Series. Accordingly, although such Certificateholders
will not possess Certificates, 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
Certificateholder of a given Series to pledge Certificates of such Series to
persons or entities that do not participate in the DTC system, or to otherwise
act with respect to such Certificates, may be limited due to the lack of a
physical certificate for such Certificates.
DTC will advise the Trustee in respect of each Series that it will take
any action permitted to be taken by a Certificateholder of the related Series
only at the direction of one or more Participants to whose accounts with DTC the
Certificates of such Series are credited. DTC may take conflicting actions with
respect to other undivided interests to the extent that such actions are taken
on behalf of Participants whose holdings include such undivided interests.
CEDEL is incorporated under the laws of Luxembourg as a professional
depository. CEDEL holds securities for its participating organizations ("CEDEL
Participants") and facilitates the clearance and settlement of securities
transactions between CEDEL Participants through electronic book-entry changes in
accounts of CEDEL Participants, thereby eliminating the need for physical
movement of certificates. Transactions may be settled in CEDEL in any of 28
currencies, including United States dollars. CEDEL provides to its CEDEL
Participants, among other things, services for safekeeping, administration,
clearance and settlement of internationally traded securities and securities
lending and borrowing. CEDEL interfaces with domestic markets in several
countries. As a professional depository, CEDEL is subject to regulation by the
Luxembourg Monetary Institute. CEDEL Participants are recognized financial
institutions around the world, including underwriters, securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. Indirect access to CEDEL is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a CEDEL Participant, either directly or indirectly.
Euroclear was created in 1968 to hold securities for participants of
the Euroclear System ("Euroclear Participants") and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Transactions may now be settled in any of 28 currencies,
including United States dollars. The
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Euroclear System includes various other services, including securities lending
and borrowing and interfaces with domestic markets in several countries
generally similar to the arrangements for cross-market transfers with DTC
described above. Euroclear is operated by Morgan Guaranty Trust Company of New
York, Brussels, Belgium office, under contract with Euroclear Clearance System,
S.C., a Belgian cooperative corporation (the "Cooperative"). All operations are
conducted by the "Euroclear Operator" (as defined below), and all Euroclear
securities clearance accounts and Euroclear cash accounts are accounts with the
Euroclear Operator, not the Cooperative. The Cooperative establishes policy for
the Euroclear System on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the Underwriters.
Indirect access to the Euroclear System is also available to other firms that
clear through or maintain a custodial relationship with a Euroclear Participant,
either directly or indirectly.
The "Euroclear Operator" is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System and applicable Belgian
law (collectively, the "Terms and Conditions"). The Terms and Conditions govern
transfers of securities and cash within the Euroclear System, withdrawal of
securities and cash from the Euroclear System, and receipts of payments with
respect to securities in the Euroclear System. All securities in the Euroclear
System are held on a fungible basis without attribution of specific certificates
to specific securities clearance accounts. The Euroclear Operator acts under the
Terms and Conditions only on behalf of Euroclear Participants and has no record
of relationship with persons holding through Euroclear Participants.
Except as required by law, the Trustee in respect of a Series will not
have any liability for any aspect of the records relating to or payments made or
account of beneficial ownership interests of the related Certificates held by
Cede, as nominee for DTC, or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
Definitive Notes
Unless otherwise stated in the related Prospectus Supplement, the
Certificates of a Series will be issued in fully registered, certificated form
("Definitive Certificates") to Certificateholders 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 Certificates 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 Pooling and Servicing Agreement,
Certificateholders representing at least a majority of the outstanding principal
amount of such Certificates 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 Certificateholders' best interest.
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Upon the occurrence of any event described in the immediately preceding
paragraph, the applicable Trustee will be required to notify all such
Certificateholders through Participants of the availability of Definitive
Certificates. Upon surrender by DTC of the definitive certificates representing
such Certificates and receipt of instructions for re-registration, the
applicable Trustee will reissue such Certificates as Definitive Certificates to
such Certificateholders.
Distributions of principal of, and interest on, such Definitive
Certificates will thereafter be made by the applicable Trustee in accordance
with the procedures set forth in the related Pooling and Servicing Agreement
directly to holders of Definitive Certificates in whose names the Definitive
Certificates were registered at the close of business on the applicable Record
Date specified for such Certificates 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 Certificateholders.
Definitive Certificates in respect of a given Series of Certificates
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 Certificates. 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 Certificateholders
With respect to each Series of Certificates, on or prior to each
Distribution 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
Certificates 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 Certificateholders a statement containing the amounts described
in (ii) and (iii) above for that calendar year and any other information
required by applicable tax laws, for the purpose of the Certificateholders'
preparation of federal income tax returns.
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS
The following summary describes certain terms of each Pooling and
Servicing Agreement pursuant to which a Trust will be created and the related
Certificates in respect of such Trust will be issued. For purposes of this
Prospectus, the term "Pooling and Servicing Agreement" 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 Certificates. Forms of
the Pooling and Servicing Agreement have been filed as exhibits to the
Registration Statement of which the Prospectus forms a part. The summary does
not purport to be complete. It is qualified in its entirety by reference to the
provisions of the Pooling and Servicing Agreements.
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Sale and Assignment of Receivables
On or prior to the closing date specified with respect to any given
Series of Certificates (the "Closing Date"), CPS will sell and assign to a
Seller, without recourse, except as otherwise provided in the applicable
Purchase Agreement, its entire interest in the Receivables to be included in
such Trust, together with its security interests in the related Financed
Vehicles. At the time of issuance of the Certificates, such Seller will sell and
assign to the Trust, without recourse, except as provided in the applicable
Pooling and Servicing Agreement, its entire interest in such Receivables,
together with its security interests in the related Financed Vehicles. Each
Receivable will be identified in a schedule appearing as an exhibit to the
applicable Pooling and Servicing Agreement. The Trustee will concurrently with
such sale and assignment, execute, authenticate, and deliver the Certificates to
the applicable Seller in exchange for the Receivables. Certain Affiliated
Originators may also sell receivables to the Seller.
In each Purchase Agreement to which it is a party, CPS will represent
and warrant to the applicable Seller, among other things with respect to the
Receivables (including Affiliate Receivables) being sold and assigned therein,
that (i) the information provided with respect to the Receivables is correct in
all material respects: (ii) at the date of origination of each Receivable,
physical damage insurance covering the related Financed Vehicle is in effect in
accordance with CPS's normal requirements; (iii) at the applicable Cutoff Date,
the 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 applicable Cutoff Date, each of the
Receivables is or will be secured by a first-priority perfected security
interest in the Financed Vehicle in favor of CPS; and (v) each Receivable, at
the time it was originated, complied 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 applicable 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 applicable Seller who will purchase
from the applicable Trust for the Purchase Amount. The repurchase obligation
will constitute the sole remedy available to the Certificateholders, the Credit
Enhancer, a Seller or a Trustee for any such uncured breach.
On or prior to a Closing Date, the Contracts will be delivered to the
applicable Trustee as custodian, and such Trustee thereafter will maintain
physical possession of the Receivables except as may be necessary for the
servicing thereof by CPS. The Receivables will not be stamped to show the
ownership thereof by the applicable Trust. However, CPS's accounting records and
computer systems will reflect the sale and assignment of the Receivables to the
applicable Seller, and Uniform Commercial Code ("UCC") financing statements
reflecting such sales and assignments will be filed. See, "The Trust" and "Risk
Factors--Certain Legal Aspects--Security Interests in Financed Vehicles" in the
related Prospectus Supplement and "Certain Legal Aspects of the Receivables"
herein.
Pre-Funding Accounts
If so provided in the related Prospectus Supplement, the Seller will be
obligated pursuant to the Pooling 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 Pooling and Servicing Agreement and described in the related
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Prospectus Supplement. If the principal amount of the eligible Subsequent
Receivables acquired by the Seller from the CPS 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 Certificates may receive a prepayment or early distribution of
principal at the end of the Funding Period. See "Risk Factors--Pre-Funding
Accounts".
Amounts on deposit in a Pre-Funding Account during the Funding Period
will be invested by the Trustee in Eligible Investments and any Investment
Income thereon received during a Collection Period will be included in the
interest distribution amount on the following Distribution Date for the related
Series. See "--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 Pooling 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 Certificates; (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
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 or conditions subsequent 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 Repurchase 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.
Accounts
With respect to each Series of Certificates 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
Certificateholders, 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 Certificateholders, into which amounts
released from the Collection Account and the reserve account or other Credit
Enhancement, if any, for distribution to such Certificateholders will be
deposited and from which distributions to such Certificateholders will be made
(the "Distribution Account").
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Payahead Account. If so provided in the related Prospectus Supplement,
the Servicer will establish for each Series of Securities an additional account
(the "Payahead Account"), in the name of the related Trustee, into which, to the
extent required in the related Pooling and Servicing Agreement, early payments
made by or on behalf of Obligors on Actuarial Receivables or Rule of 78s
Receivables will be deposited until such time as such payments become due. Until
such time as payments are transferred from the Payahead Account to the
Collection Account, they will not constitute collected interest or collected
principal and will not be available for distribution to Certificateholders.
Pre-Funding Account. If so provided in the related Prospectus
Supplement, the Servicer will establish and maintain a Pre-Funding Account, in
the name of the related Trustee on behalf of the related Certificateholders,
into which the Seller will deposit the Pre-Funded Amount on the related Closing
Date. The Pre-Funded Amount will not exceed 25% of the initial aggregate
principal amount of the Notes and Certificates of the related Series. The
Pre-Funded Amount will be used by the related Trustee to purchase Subsequent
Receivables from the Seller from time to time during the Funding Period. The
amounts on deposit in the Pre-Funding Account during the Funding Period will be
invested by the Trustee in Eligible Investments. Any Investment Income received
on the Eligible Investments during a Collection Period will be included in the
interest distribution amount on the following Distribution Date. The Funding
Period, if any, for a Trust will begin on the related Closing Date and will end
on the date specified in the related Prospectus Supplement, which in no event
will be later than the date that is 90 days after the related Closing Date. Any
amounts remaining in the Pre-Funding Account at the end of the Funding Period
will be distributed to the related Certificateholders in the manner and priority
specified in the related Prospectus Supplement, as a prepayment of principal of
the related Certificates.
Other Accounts. Any other accounts to be established with respect to a
Trust, including any reserve account, will be described in the related
Prospectus Supplement.
Investments. For any Series of Certificates, funds in the Collection
Account, the Distribution 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 Pooling and
Servicing Agreement in Eligible Investments. "Eligible Investments" are
generally limited to investments acceptable to the Rating Agencies as being
consistent with the rating of such Certificates. 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 Distribution 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
Certificateholders could result, which could, in turn, increase the average life
of the Certificates 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
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Earnings"), shall be deposited in the applicable Collection Account on each
Distribution Date and shall be treated as collections of interest on the related
Receivables.
Eligible Deposit Accounts. 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 Trustee,
or (b) a depository institution organized under the laws of the United States of
America or any one of the states thereof or the District of Columbia (or any
domestic branch of a foreign bank), which (i) (A) has either (w) a long-term
unsecured debt rating acceptable to the Rating Agencies or (x) a short-term
unsecured debt rating or certificate of deposit rating acceptable to the Rating
Agencies or (B) the parent corporation of which has either (y) a long-term
unsecured debt rating acceptable to the Rating Agencies or (z) a short-term
unsecured debt rating or certificate of deposit rating acceptable to the Rating
Agencies and (ii) whose deposits are insured by the FDIC.
The Servicer
The Servicer under each Pooling 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 Pooling and Servicing Agreement. An uncured breach of such a
representation or warranty that in any respect materially and adversely affects
the interests of the Certificateholders will constitute a Event of Default (as
hereinafter defined) by the Servicer under the related Pooling and Servicing
Agreement.
A Pooling 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 Pooling and Servicing Agreement. A Standby Servicer will receive a fee on
each Distribution Date for agreeing to stand by as successor Servicer and for
performing certain other functions. If the Standby Servicer becomes the Servicer
under a Pooling and Servicing Agreement, it will receive compensation as a
Servicer in an amount set forth in such Pooling and Servicing Agreement.
Servicing Procedures
Each Pooling and Servicing Agreement will provide that the Servicer
shall follow its then-employed standards, or such more exacting standards as the
Servicer employs in the future, in
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servicing the Receivables that are part of the Trust. Each Pooling and Servicing
Agreement will provide that the Servicer shall 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 Pooling 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 Pooling 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 Scheduled Distribution Date under such Pooling and
Servicing Agreement. If the Servicer grants an extension with respect to a
Receivable other than in accordance with the aforementioned limitations, the
Servicer will be required to purchase the Receivable. Following any such
purchase of a Receivable by the Servicer, such Receivable will be released from
the Trust and conveyed to the Servicer. The Servicer may sell the Vehicle
securing the respective defaulted Receivable, if any, at a public or private
sale, or take any other action permitted by applicable law. See "Certain Legal
Aspects of the Receivables".
The material aspects of any particular Servicer's collections and other
relevant procedures will be set forth in the related Prospectus Supplement.
Payments On Receivables
With respect to each Series of Certificates, unless otherwise specified
in the related Prospectus Supplement, 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 Pooling and
Servicing Agreement relating to such Receivable. On each Business Day, the
Lock-Box Processor set forth in the Pooling and Servicing Agreement relating to
such Receivable will transfer any such payments received in the Post Office Box
to the applicable 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 Distribution 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 Certificate Account for distribution
to the Certificateholders 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. If the collections remaining after application to the scheduled
payment and late fees, if any, are insufficient to prepay the Rule of 78's
Receivable in full, such collections will be transferred to and kept in the
Payahead Account, until such later Collection Period as the collections may be
transferred to the Collection Account and applied either to the scheduled
payment or to prepay such Rule of 78's Receivable in full.
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Servicing Compensation
As may be described in the related Prospectus Supplement with respect
to any Series of Certificates issued by a Trust, the Servicer will be entitled
to receive a servicing fee on each Distribution 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 Distribution 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 "The
Servicer". 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 Certificateholders of the related Series.
The Servicing Fee and additional servicing compensation will compensate
the Servicer for performing the functions of a third party servicer of
automotive receivables as an agent for their beneficial owner, including
collecting and posting all payments, responding to inquiries of Obligors on the
Receivables that are part of the Trust, investigating delinquencies, sending
payment coupons to Obligors, reporting tax information to Obligors, paying costs
of disposition of defaults and policing the collateral. The Servicing Fee also
will compensate the Servicer for administering the Receivables that are part of
the Trust, including accounting for collections and furnishing monthly and
annual statements as required with respect to a Series of Certificates 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.
Certain Matters Regarding the Servicer
Each Pooling 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 Pooling 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 Pooling and Servicing Agreement.
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Each Pooling 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 Certificateholders of the related Series
for taking any action or for refraining from taking any action pursuant to such
Pooling 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 Pooling 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 applicable Pooling and Servicing Agreement
and that, in its opinion, may cause it to incur any expense or liability.
Under the circumstance specified in each Pooling 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
applicable Pooling and Servicing Agreement.
Distributions on Certificates
With respect to each Series of Certificates, beginning on the
Distribution 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 Certificates entitled thereto will be made 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 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 Certificates, on each Distribution Date
collections on the related Receivables will be withdrawn from the Collection
Account for distribution to Certificateholders to the extent provided in the
related Prospectus Supplement. Credit Enhancement 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.
Credit And Cash Flow Enhancement
The amounts and types of Credit Enhancement arrangements, if any, and
the provider thereof, if applicable, with respect to each class of Certificates
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
Certificates, reserve accounts, spread accounts, over-collateralization, 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 Certificates may cover one or more other
classes of Certificates of the same Series, and Credit Enhancement for a Series
of Certificates may cover one or more other Series of Certificates.
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The presence of Credit Enhancement for the benefit of any class or
Series of Certificates is intended to enhance the likelihood of receipt by the
Certificateholders or such class or Series of the full amount of principal and
interest due thereon and to decrease the likelihood that such Certificateholders
will experience losses. As more specifically provided in the related Prospectus
Supplement, the Credit Enhancement for a class or Series of Certificates will
not provide protection against all risks of loss and will 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, Certificateholders of any class or Series
will bear their allocable share of deficiencies, as described in the related
Prospectus Supplement. In addition, if a form of Credit Enhancement covers more
than one Series of Certificates, Certificateholders of any such Series will be
subject to the risk that such Credit Enhancement will be exhausted by the claims
of Certificateholders of other Series.
Statements To Trustees
Prior to each Distribution Date with respect to each Series of
Certificates, the Servicer will provide to 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
Certificateholders of such Series described under "Description of the
Certificates--Reports to Certificateholders".
Evidence As To Compliance
Each Pooling and Servicing Agreement will provide that a firm of
independent public accountants will furnish to the related 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 Pooling and Servicing Agreement will also provide for delivery to
the related Trustee and Credit Enhancer of a certificate signed by an officer of
the Servicer stating that the Servicer has fulfilled its obligations under such
Pooling 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 Trustee and Credit Enhancer
notice of certain Event of Defaults (as hereinafter defined) under the related
Pooling and Servicing Agreement.
Copies of such statements and certificates may be obtained by
Certificateholders by a request in writing addressed to the applicable Trustee.
Amendment
Unless otherwise provided in the related Prospectus Supplement, each of
the Pooling and Servicing Agreements may be amended by the parties thereto,
without the consent of the related Certificateholders, for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of such Pooling and Servicing Agreements or of modifying in any
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manner the rights of such Certificateholders; 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 Certificateholder and
subject to the approval of any Credit Enhancer. As may be described in the
related Prospectus Supplement, the Pooling and Servicing Agreements may also be
amended by CPS, the Servicer, and the applicable Trustee with the consent of the
holders of Certificates evidencing at least a majority 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 Pooling
and Servicing Agreements or of modifying in any manner the rights of such
Certificateholders; 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 Certificateholders without
the consent of each Certificateholder affected thereby or (ii) reduce the
aforesaid percentage of the Certificates of such Series which are required to
consent to any such amendment without the consent of the Certificateholders of
such Series.
List of Certificateholders
Upon written request of the Servicer, the Trustee of the applicable
Trust will provide to the Servicer within 15 days after receipt of such request
a list of the names and addresses of all Certificateholders of record, with
respect to the Series of Certificates issued by such Trust, as of the most
recent Record Date. Upon compliance by such Certificateholders with certain
provisions of the applicable Pooling and Servicing Agreement, the Trustee will
afford such Certificateholders access during business hours to the current list
of Certificateholders for purposes of communicating with other
Certificateholders with respect to their rights under such Pooling and Servicing
Agreement.
Termination
With respect to each Trust, the obligations of the Servicer, CPS, the
Seller and the applicable Trustee pursuant to the related Pooling and Servicing
Agreement will terminate upon such date as is specified in the related
Prospectus Supplement. As more fully described in the related Prospectus
Supplement, in order to avoid excessive administrative expense, the Servicer, or
its successor, will be permitted, at its option to purchase from the related
Trust, as of the last day of any month as of which the then outstanding Pool
Balance of the related Receivables Pool is less than a specified percentage (set
forth in the related Prospectus Supplement) of the original Pool Balance of such
Receivables Pool, all such 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 related Certificates. The Trustee will
give written notice of termination to each such Certificateholder of record. The
final distribution to any Certificateholder will be made only upon surrender and
cancellation of such holder's Certificate at the office or agency of the Trustee
specified in the notice of termination. Any funds remaining with the Trustee,
after the Trustee has taken certain measures to locate a Certificateholder and
such measures have failed, will be distributed to The American Red Cross.
The Trustee
The Trustee for each Trust will be specified in the related Prospectus
Supplement. The Trustee's liability in connection with the issuance and sale of
the related Certificates is limited
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solely to the express obligations of such Trustee set forth in the related
Pooling and Servicing Agreement and Sale and Servicing Agreement or the related
Pooling and Servicing Agreement, as applicable. A Trustee may resign at any time
(subject to the conditions specified in the applicable Pooling and Servicing
Agreement), in which event the Servicer will be obligated to appoint a successor
trustee. The Servicer may also remove the Trustee if such Trustee ceases to be
eligible to continue as Trustee under the related Pooling and Servicing
Agreement or if the Trustee becomes insolvent. In such circumstances, the
Servicer will be obligated to appoint a successor trustee. Any resignation or
removal of a Trustee and appointment of a successor trustee will not become
effective until acceptance of the appointment by the successor trustee.
The principal offices of each Trustee will be specified in the
applicable Prospectus Supplement.
The Trustee under a Pooling and Servicing Agreement, in its individual
capacity or otherwise, may hold Certificates in its own name or as pledgee. For
the purpose of meeting the legal requirements of certain jurisdictions, the
Servicer and a Trustee acting jointly (or in some instances, the Trustee acting
alone) shall have the power to appoint co-trustees or separate trustees of all
or any part of the related Trust. In the event of such appointment, all rights,
powers, duties and obligations conferred or imposed upon the Trustee by the
related Pooling and Servicing Agreement shall be conferred or imposed upon the
Trustee and such separate trustee or co-trustee jointly, or, in any jurisdiction
in which the Trustee shall be incompetent or unqualified to perform certain
acts, singly upon such separate trustee or co-trustee who shall exercise and
perform such rights, powers, duties, and obligations solely at the direction of
the Trustee.
A Trustee may resign at any time, in which event the Servicer will be
obligated to appoint a successor trustee in accordance with the terms set forth
in the applicable Pooling and Servicing Agreement. See "The Trustee" in the
Prospectus Supplement." The Servicer may also remove a Trustee if the Trustee
ceases to be eligible to continue as such under the related Pooling and
Servicing Agreement, becomes legally unable to act, or becomes insolvent. In
such circumstances,the Servicer will be obligated to appoint a successor trustee
with the consent of any parties necessary to appoint a successor trustee. Any
resignation or removal of the Trustee and appointment of a successor trustee
will not become effective until acceptance of the appointment by the successor
trustee.
Each Pooling and Servicing Agreement will provide that the applicable
Trustee will be entitled to indemnification by the Servicer for and will be held
harmless against, any loss, liability, fee, disbursement, or expense incurred by
such Trustee not resulting from such Trustee's own willful misfeasance, bad
faith, or negligence (other than by reason of breach of any of its
representations or warranties set forth in the Pooling and Servicing Agreement).
Each Pooling and Servicing Agreement will further provide that the Servicer will
indemnify the applicable Trustee for certain taxes that may be asserted in
connection with the transaction.
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Duties of the Trustee
The Trustee will make no representations as to the validity or
sufficiency of a Pooling and Servicing Agreement, the Certificate relating
thereto (other than the authentication of such Certificates), or any Receivables
in the related Trust or related documents, and is not accountable for the use or
application by any Seller or Servicer of any funds paid to a Seller or Servicer
in respect of such Certificates or such Receivables, or the investment of any
monies received by the Servicer before such monies are deposited into the
applicable Collection Account. The Trustee will not independently verify the
Receivables that are a part of the related Trust. If no Event of Default (as
defined in the applicable Prospectus Supplement) has occurred, the Trustee is
required to perform only those duties specifically required of it under the
applicable Pooling and Servicing Agreement. Generally, those duties are limited
to the receipt of the various certificates, reports or other instruments
required to be furnished to the Trustee under such Pooling and Servicing
Agreement, in which case it is only required to examine them to determine
whether they conform to the requirements of the Pooling and Servicing Agreement.
The Trustee shall not be charged with knowledge of a failure by the Servicer to
perform its duties under the Pooling and Servicing Agreement which failure
constitutes an Event of Default (as defined in the applicable Prospectus
Supplement) unless the Trustee obtains actual knowledge of such failure as
specified in the Pooling and Servicing Agreement.
The Trustee will be under no obligation to exercise any of the rights
or powers vested in it by a Pooling and Servicing Agreement or to make any
investigation of matters arising thereunder or to institute, conduct, or defend
any litigation thereunder or in relation thereto at the request, order or
direction of any of the related Certificateholders, unless such
Certificateholders have offered to the Trustee reasonable security or indemnity
against the costs, expenses, and liabilities that may be incurred therein or
thereby. No Certificateholder will have any right under a Pooling and Servicing
Agreement to institute any proceeding with respect to such Pooling and Servicing
Agreement, unless certain conditions have been met (as set forth in the
applicable Pooling and Servicing Agreement). See "Duties of the Trustee" in the
Prospectus Supplement.
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES
Security Interest in 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 otherwise specified in the related Prospectus Supplement, each
Contract will name the applicable Originator as obligee or assignee and as the
secured party. Unless otherwise
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specified in the related Prospectus Supplement, such Originator 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 the
applicable 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. Unless otherwise specified in the related
Prospectus Supplement, the Obligors on the Contracts will not be notified of the
sale from CPS or the applicable 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 the applicable
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 applicable 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 Pooling and Servicing
Agreement. However, because of the administrative burden and expense, neither
CPS nor the applicable Affiliated Originator 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 Pooling and
Servicing Agreement is an effective conveyance of a security interest without
amendment of any lien noted on a vehicle's certificate of title, and the
assignee succeeds thereby to the assignor's rights as secured party. However, by
not identifying such Trust as the secured party on the certificate of title, the
security interest of such Trust in the vehicle could be defeated through fraud
or negligence.
Under the laws of most states, the perfected security interest in a
vehicle will continued 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 otherwise specified in the related Prospectus
Supplement, under each Pooling and Servicing Agreement, the Servicer will be
obligated to take appropriate steps, at the Servicer's expense, to maintain
perfection of security interests in the Financed Vehicles and will be obligated
to purchase the related Receivable if it fails to do so.
Under the laws of most states, liens for repairs performed on a motor
vehicle and liens for unpaid taxes take priority over even a perfected security
interest in a financed vehicle. The Code also grants priority to certain federal
tax liens over the lien of a secured party. The laws of certain states and
federal law permit the confiscation of vehicles by government authorities under
certain circumstances if used in unlawful activities, which may result in the
loss of a secured party's perfected security interest in the confiscated
vehicle.
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Repossession
In the event of default by vehicle purchasers, the holder of the motor
vehicle retail installment sale contract has all the remedies of a secured party
under the UCC, except where specifically limited by other state laws. Among the
UCC remedies, the secured party has the right to perform self-help repossession
unless such act would constitute a breach of the peace. Unless otherwise
specified in the related Prospectus Supplement, self-help is the most likely
method to be used by the Servicer and is accomplished simply by retaking
possession of the financed vehicle. In the event of default by the obligor, some
jurisdictions require that the obligor be notified of the default and be given a
time period within which he may cure the default prior to repossession.
Generally, the right of reinstatement may be exercised on a limited number of
occasions in any one-year period. In cases where the obligor objects or raises a
defense to repossession, or if otherwise required by applicable state law, a
court order must be obtained from the appropriate state court, and the vehicle
must then be repossessed in accordance with that order.
Notice of Sale; Redemption Rights
The UCC and other state laws require the secured party to provide the
obligor with reasonable notice of the date, time and place of any public sale
and/or the date after which any private sale of the collateral may be held. The
obligor has the right to redeem the collateral prior to actual sale by paying
the secured party the unpaid principal balance of the obligation plus reasonable
expenses for repossessing, holding and preparing the collateral for disposition
and arranging for its sale, plus, in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of delinquent installments or the unpaid
balance.
Deficiency Judgments and Excess Proceeds
The proceeds of resale of the vehicles generally will be applied first
to the expenses of resale and repossession and then to the satisfaction of the
indebtedness. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment can be sought in those states that do not
prohibit or limit such judgments. However, the deficiency judgment would be a
personal judgment against the obligor for the shortfall, and a defaulting
obligor can be expected to have very little capital or sources of income
available following repossession. Therefore, in many cases, it may not be useful
to seek a deficiency judgment or, if one is obtained, it may be settled at a
significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and
all indebtedness, there is a surplus of funds. In that case, the UCC requires
the creditor to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exits or there are remaining funds, the UCC
requires the creditor to remit the surplus to the former owner of the vehicle.
Consumer Protection Laws
Numerous federal and state consumer protection laws and related
regulations impose substantial requirements upon lenders and servicers involved
in consumer finance, including requirements regarding the adequate disclosure of
loan terms (including finance charges and deemed
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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 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
Pooling and Servicing Agreements--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
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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 Pooling and Servicing Agreements.
Under each Purchase Agreement to which it is a party, CPS will have
represented and warranted that each Receivable (including Affiliate Receivables)
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.
CERTAIN TAX CONSIDERATIONS
General
Set forth below is a discussion of certain federal income tax
consequences to original beneficial owners of a Series of Certificates that hold
such Certificates as capital assets under the Internal Revenue Code of 1986, as
amended (the "Code"). This discussion does not purport to deal with all aspects
of U.S. federal income taxation that may be relevant to Certificateholders of a
Series in light of their particular circumstances, nor to certain types of
Certificateholders subject to special treatment under the federal income tax
laws (for example, banks and life insurance companies). This discussion is based
upon present provisions of the Code, the regulations promulgated thereunder and
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judicial and ruling authorities, all of which are subject to change, which
change may be retroactive. Prospective investors are advised to consult their
own tax advisors with regard to the U.S. Federal tax consequences of the
purchase, ownership or disposition of interests in the certificates, as well as
the tax consequences arising under the laws of any state, foreign country or
other taxing jurisdiction. Prospective investors should note that no rulings
have been or will be sought from the Service with respect to any of the federal
income tax consequences discussed below, and no assurance can be given that the
Service will not take contrary positions.
Tax Characterization of the Trust
Mayer, Brown & Platt, special tax counsel to the Seller, will opine
that the Trust relating to a Series of Certificates will be classified as a
grantor trust and not as an association taxable as a corporation for federal
income tax purposes. Accordingly, subject to the discussion below, each
Certificateholder of the related Series will be treated as the owner of a pro
rata undivided interest in the Receivables that are in the Trust and related
other Trust Assets and ordinary income derived therefrom.
Income of Certificateholders
Each Certificateholder of a Series will be considered to own either (i)
an undivided interest in each of the Receivables that are part of the related
Trust and any other related Trust Assets or (ii) an undivided interest in a
single debt obligation held by the related Trust having, in the case of Class A
Certificates, a principal amount equal to the Class A Percentage (as set forth
in the related Prospectus Supplement) multiplied by the total stated principal
amount of the Receivables and an interest rate equal to the Class A Pass-Through
Rate (as set forth in the related Prospectus Supplement) or, in the case of
Class B Certificates, a principal amount equal to the Class B Percentage (as set
forth in the related Prospectus Supplement) multiplied by the total stated
principal amount of the Receivables that are in the related Trust and an
interest rate equal to the Class B Pass-Through Rate (as set forth in the
related Prospectus Supplement). In general (subject to the rules described below
relating to stripped bonds and original issue discount, and assuming
Certificateholders are considered to own an interest in the related Receivables
and other Trust Assets) a Certificateholder will be required to include
applicable Trust interest income as ordinary income in accordance with its usual
method of accounting.
If Certificateholders are considered to own undivided interests in the
related Receivables and other Trust Assets, a Certificateholder will be
considered to have incurred Trust expenses and, accordingly, will be entitled to
deduct, consistent with its method of accounting, its pro rata share of
reasonable servicing fees and other expenses paid or incurred by the applicable
Trust as provided in Section 162 or 212 of the Code. In general, a
Certificateholder who is an individual, estate or trust will be allowed
deductions for such expenses only to the extent that the sum of those expenses
and the holder's other miscellaneous itemized deductions exceeds 2% of such
holder's adjusted gross income. Moreover, a Certificateholder that is not a
corporation cannot deduct such expenses for purposes of the alternative minimum
tax (if applicable). The Servicer will not report to Certificateholders the
amount of income or deductions attributable to interest earned on collections
and certain other amounts (which are includible in gross income, but deduction
of which are subject to the foregoing limitations) and, accordingly, such a
Certificateholder will not have sufficient information from the report to
accurately reflect the Certificateholder's net taxable income.
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The Servicer will report to Certificateholders on the assumption that
they are considered to own an interest in the related Receivables and other
Trust Assets, and the remainder of this discussion assumes such treatment.
Stripped Bond Rules
Because the Receivables will represent stripped bonds, they will be
subject to the original issue discount ("OID") rules of the Code. Under Treasury
Regulations issued under Section 1286 of the Code (the "Section 1286
Regulations"), it appears that the portion of the interest on each stripped
Receivable payable to the related Certificateholders may be treated as
"qualified stated interest". As a result, the amount of OID on a Receivable (or
Receivables) will equal the amount, if any, by which the Certificateholder's
purchase price allocable to the holder's interest in such Receivable is less
than the undivided portion of the remaining principal balance of the Receivable
(or Receivables) allocable to the interest acquired by the Certificateholder.
OID on the Receivables held by the Trust will be calculated on an
aggregate basis and without the use of a prepayment assumption. Although there
is no clear authority, regulations issued under the OID provisions of the Code
suggest that all payments on the stripped Receivables allocable to the Class A
Certificates may be aggregated in determining whether the stripped Receivables
will be treated as having OID. In addition, it is not clear whether use of a
prepayment assumption is required in computing OID. If the Internal Revenue
Service were to require that OID be computed on a Receivable-by-Receivable
basis, or that a prepayment assumption be used, the character and timing of a
Certificateholder's income could be adversely affected. Because, under the
stripped bond rules, each sale of a Certificate results in a recalculation of
OID, a Certificateholder technically will not be subject to the market discount
provisions of the Code with respect to stripped Receivables.
The tax treatment of a Receivable (or Receivables in the aggregate)
will depend upon whether the amount of OID on the Receivable or Receivables is
less than a statutorily defined de minimis amount. In general, under the Section
1273 and the Section 1286 Regulations, the amount of OID on a Receivable will be
de minimis if it is less than 1/4 of one percent for each full year of weighted
average maturity remaining after the purchase date until the maturity of the
Receivable (although it is not clear whether expected prepayments are taken into
account). If the amount of OID is de minimis under this rule, a Receivable (or
Receivables) would not be treated as having OID. The actual amount of discount
on a Receivable would be includible in income as principal payments are received
on the Receivable, in the proportion that each principal payment bears to the
total principal amount of the Receivables.
If the OID on a Receivable (or Receivables) is not treated as being de
minimis, a Certificateholder will be required to include in income any OID as it
accrues on a daily basis, regardless of when cash payments are received, using a
method reflecting a constant yield to maturity on the Receivable (or
Receivables). Accrued OID would increase a Certificateholder's tax basis in the
Certificate (and the applicable Receivables). Distributions of principal and
other items attributable to accrued OID would reduce a Certificateholder's tax
basis. Application of the OID rules, particularly if a prepayment assumption is
required and the Receivables are not aggregated, would be complex and could
significantly affect the timing of inclusion of income on a Certificate.
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The Trustee intends to account for OID, if any, reportable by holders
of Certificates by reference to the price paid for a Certificate by an initial
purchaser, although the amount of OID will differ for subsequent purchasers.
Such subsequent purchasers should consult their tax advisers regarding the
proper calculation of OID on the interest in Receivables represented by a
Certificate.
Premium
In the event of a purchase of a Receivable (or Receivables) at a
premium (i.e., the portion of the Certificateholder's purchase price allocable
to the holder's undivided interest in the Receivable or Receivables exceeds the
portion of the remaining principal balance allocable to the Certificateholder),
such premium will be amortizable by the Certificateholder as an offset to
interest income (with a corresponding reduction in the Certificateholder's
basis) under a constant yield method over the term of the Receivable (or
Receivables) if an election under Section 171 of the Code is made or was
previously in effect. Any such election will also apply to debt instruments held
by the Certificateholder during the year in which the election is made and all
debt instruments acquired thereafter.
Rule of 78's Receivables
The annual statement regularly furnished to Certificateholders for U.S.
federal income tax purposes will include information based on the actuarial
method of accounting for interest and principal on the Receivables.
Certificateholders should generally be permitted to account for interest on the
Receivables using the actuarial method. However, some of the Receivables provide
that, upon a prepayment in full, the amount payable by the obligor will be
determined under the Rule of 78's. Prospective investors should consult their
tax advisors as to whether they may be required or permitted to use the Rule of
78's method to account for interest on the Rule of 78's Receivables. A
Certificateholder will be furnished information for U.S. federal income tax
purposes enabling the holder to report interest on the Receivables under the
Rule of 78's method of accounting only upon written request to the Trustee, and
payment of the actual costs of producing the information.
If a Rule of 78's Receivable is prepaid, any amount received by the
Trust upon prepayment in excess of the account balance using the actuarial
method would constitute income to a Certificateholder who had reported income
with respect to such Rule of 78's Receivable on the actuarial method, and an
amount equal to such excess will be paid to the Servicer and be deductible only
to the extent described above.
Subordination of Class B Certificate Owners
If the Class B Certificateholders receive distributions of less than
their share of the Trust's receipts of principal and interest (the "Shortfall
Amount") because of the subordination of the Class B Certificates, holders of
Class B Certificates would probably be treated for U.S. federal income tax
purposes as if they had received as distributions their full share of such
receipts, paid over to the Class A Certificateholders an amount equal to such
Shortfall Amount, and retained the right to reimbursement of such amounts to the
extent of future collections. Under this analysis, Class B Certificateholders
would be required to accrue as current income any interest of the Trust that was
a component of the Shortfall Amount, even though such amount was in fact paid to
the Class A Certificateholders; although not entirely clear, it appears that a
loss would only be allowed to the
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Class B Certificateholders when their right to receive reimbursement of such
Shortfall Amount became worthless (i.e., when it becomes clear that amount will
not be available from any source to reimburse such loss); and reimbursement of
such Shortfall Amount prior to such a claim of worthless would not be taxable
income to the Class B Certificateholders because such amount was previously
included in income. Those results should not significantly affect the inclusion
of income for Class B Certificateholders on the accrual method of accounting,
but could accelerate inclusion of income to Class B Certificateholders on the
cash method of accounting by, in effect, placing them on the accrual method.
Moreover, the character and timing of loss deductions is unclear. Class B
Certificateholders should consult their own tax advisors as to the treatment of
Shortfall Amounts.
Sale of a Certificate
If a Certificate is sold, gain or loss will be recognized equal to the
difference between the amount realized on the sale and the Certificateholder's
adjusted basis in the Receivables and any other assets held by the Trust. A
Certificateholder's adjusted basis will equal the Certificateholder's cost for
the Certificate, increased by any discount previously included in income, and
decreased by any deduction previously allowed for accrued premium and by the
amount of principal payments previously received on the Receivables. Any gain or
loss not attributable to accrued interest will be capital gain or loss if the
Certificate was held as a capital asset.
Foreign Certificateholders
Interest attributable to Receivables which is payable to a foreign
Certificateholder that is not engaged in a trade or business in the United
States will generally not be subject to the 30% U.S. withholding tax, provided
that such Certificateholder fulfills certain certification requirements. Under
such certification requirements, the Certificateholder must certify, under
penalties of perjury, that it is not a "United States person" and that it is the
beneficial owner of the Certificate, and must provide its name and address. For
this purpose, "United States person" means a citizen or resident of the United
States, a corporation, partnership, or other entity created or organized in or
under the laws of the United States or any political subdivision thereof, an
estate the income of which is includible in gross income for United States
Federal income tax purposes, regardless of its source or a trust that is not
treated as a "foreign trust" within the meaning of the Code.
Final regulations dealing with withholding tax on income paid to
foreign persons and related matters (the "New Withholding Regulations") were
issued by the Treasury Department on October 6, 1997. The New Withholding
Regulations will generally be effective for payments made after December 31,
1999, subject to certain transition rules. Prospective Certificateholders who
are not United States persons are strongly urged to consult their own tax
advisors with respect to the New Withholding Regulations.
Backup Withholding
Payments made on the Certificates and proceeds from the sale of
Certificates will not be subject to "backup" withholding of 31% unless the
Certificateholder fails to comply with certain reporting procedures and is not
an exempt recipient under applicable provisions of the Code.
The Prospectus Supplement for each Series of Certificates will
summarize, subject to the limitations stated therein, federal income tax
considerations relevant to the purchase, ownership and disposition of such
Certificates.
ERISA CONSIDERATIONS
The Prospectus Supplement for each Series of Certificates will
summarize, subject to the limitations discussed therein, considerations under
ERISA relevant to the purchase of such Certificates by employee benefit plans
and individual retirement accounts.
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METHODS OF DISTRIBUTION
The Certificates offered hereby and by the related Prospectus
Supplement will be offered in Series through one or more of the methods
described below. The Prospectus Supplement prepared for each Series will
describe the method of offering being utilized for that Series and will state
the public offering or purchase price of such Series and the net proceeds to CPS
from such sale.
CPS intends that Certificates will be offered through the following
methods from time to time and that offerings may be made concurrently through
more than one of these methods or that an offering of a particular Series of
Certificates may be made through a combination of two or more of these methods.
Such methods are as follows:
1. By negotiated firm commitment or best efforts underwriting and
public re-offering by underwriters;
2. By placements by CPS with institutional investors through
dealers;
3. By direct placements by CPS with institutional investors; and
4. By competitive bid.
In addition, if specified in the related Prospectus Supplement, a
Series of Certificates may be offered in whole or in part in exchange for the
Receivables (and other assets, if applicable) that would comprise the Trust
Assets in respect of such Certificates.
If underwriters are used in a sale of any Certificates (other than in
connection with an underwriting on a best efforts basis), such Certificates will
be acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated transactions, at
fixed public offering prices or at varying prices to be determined at the time
of sale or at the time of commitment therefor. The Certificates will be set
forth on the cover of the Prospectus Supplement relating to such Series and the
members of the underwriting syndicate, if any, will be named in such Prospectus
Supplement.
In connection with the sale of the Certificates, underwriters may
receive compensation from CPS or from purchasers of the Certificates in the form
of discounts, concessions or commissions. Underwriters and dealers participating
in the distribution of the Certificates may be deemed to be underwriters in
connection with such Certificates, and any discounts or commissions received by
them from CPS and any profit on the resale of Certificates by them may be deemed
to be underwriting discounts and commissions under the Securities Act. The
Prospectus Supplement will describe any such compensation paid by CPS.
It is anticipated that the underwriting agreement pertaining to the
sale of any Series of Certificates will provide that the obligations of the
underwriters will be subject to certain conditions precedent, that the
underwriters, jointly or severally (as specified in the applicable underwriting
agreement), will be obligated to purchase all such Certificates if any are
purchased (other than in connection with an underwriting on a best efforts
basis) and that CPS will indemnify the several underwriters and, in certain
limited circumstances, the underwriters will indemnify CPS against
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certain civil liabilities, including liabilities under the Securities Act or
will contribute to payments required to be made in respect thereof.
The Prospectus Supplement with respect to any Series offered by
placements through dealers will contain information regarding the nature of such
offering and any agreements to be entered into between CPS and purchasers of
Certificates of such Series.
Purchasers of Certificates, including dealers, may, depending on the
facts and circumstances of such purchases, be deemed to be "underwriters" within
the meaning of the Securities Act in connection with reoffers and sales by them
of Certificates. Holders of Certificates should consult with their legal
advisors in this regard prior to any such reoffer or sale.
LEGAL OPINIONS
Certain legal matters relating to the issuance of the Certificates of
any Series, including certain federal and state income tax consequences with
respect thereto, will be passed upon by Mayer, Brown & Platt, New York, New
York.
FINANCIAL INFORMATION
Certain specified Trust Assets will secure each Series of Certificates,
no Trust will engage in any business activities or have any assets or
obligations prior to the issuance of the related Series of Certificates.
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.
ADDITIONAL INFORMATION
This Prospectus, together with the Prospectus Supplement for each
Series of Certificates, 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 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.
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PROSPECTUS
TABLE OF CONTENTS
Page
PROSPECTUS SUPPLEMENT........................................................2
AVAILABLE INFORMATION........................................................2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................2
REPORTS TO CERTIFICATEHOLDERS................................................3
SUMMARY OF TERMS.............................................................4
RISK FACTORS................................................................12
FORMATION OF THE TRUST......................................................19
THE TRUST ASSETS............................................................19
ACQUISITION OF RECEIVABLES BY THE SELLER....................................21
THE RECEIVABLES.............................................................21
CPS'S AUTOMOBILE CONTRACT PORTFOLIO.........................................24
POOL FACTORS................................................................25
USE OF PROCEEDS.............................................................25
THE SELLER AND CPS..........................................................26
DESCRIPTION OF THE CERTIFICATES.............................................27
CERTAIN INFORMATION REGARDING THE CERTIFICATES..............................28
DESCRIPTION OF THE POOLING AND SERVICING AGREEMENTS.........................37
CERTAIN LEGAL ASPECTS OF THE RECEIVABLES....................................48
CERTAIN TAX CONSIDERATIONS..................................................52
ERISA CONSIDERATIONS........................................................56
METHODS OF DISTRIBUTION.....................................................57
LEGAL OPINIONS..............................................................58
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FINANCIAL INFORMATION.......................................................58
ADDITIONAL INFORMATION......................................................58
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.
-60-
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DEFINED TERMS
-------------
Page
----
"Actuarial Receivables".....................................................23
"Advance"....................................................................9
"Affiliate Receivables".....................................................21
"Affiliated Originator"..................................................4, 38
"APR".......................................................................22
"Base Rate".................................................................28
"Calculation Agent".........................................................29
"Calculation Date"..................................................30, 31, 33
"cash sale differential"....................................................51
"CD Rate Certificate".......................................................28
"CD Rate Determination Date"................................................29
"CD Rate"...................................................................29
"Cede"......................................................................10
"CEDEL Participants"........................................................35
"Certificate Balance"........................................................4
"Certificateholder".........................................................35
"Certificateholders"........................................................44
"Certificates"...............................................................1
"class"......................................................................1
"Closing Date"...........................................................6, 38
"Code"......................................................................52
"Collection Account"........................................................39
"Commercial Paper Rate Certificate".........................................28
"Commercial Paper Rate Determination Date"..................................30
"Commercial Paper Rate".....................................................30
"Commission".................................................................2
"Composite Quotations"......................................................29
"Contracts"..............................................................1, 24
"Cooperative"...............................................................36
"CPS"........................................................................4
"Credit Enhancement"........................................................17
"Credit Enhancer"...........................................................17
"Cutoff Date"................................................................6
"Dealer Agreements".........................................................20
"Dealers"................................................................4, 19
"Definitive Certificates"...................................................36
"Deposit Institutions".......................................................4
"Depositaries"..............................................................34
"Direct Participants".......................................................17
"Distribution Account"......................................................39
"Distribution Date".........................................................27
"DTC".......................................................................10
"Eligible Deposit Account"..................................................41
-61-
<PAGE>
"Eligible Institution"......................................................41
"Eligible Investments"......................................................40
"ERISA".....................................................................11
"Euroclear Operator"........................................................36
"Euroclear Participants"....................................................35
"Exchange Act"...............................................................2
"Federal Funds Rate Certificate"............................................28
"Federal Funds Rate Determination Date".....................................31
"Federal Funds Rate"........................................................31
"Financed Vehicles".......................................................1, 6
"Fixed Rate Certificates"...................................................28
"Floating Rate Certificates"................................................28
"FTC Rule"..................................................................51
"Funding Period".............................................................7
"H.15(519)".................................................................29
"IFCs".......................................................................4
"Index Maturity"............................................................28
"Indirect Participants".................................................17, 34
"Initial Receivables"........................................................7
"Insolvency Laws"...........................................................15
"Interest Reset Date".......................................................29
"Interest Reset Period".....................................................28
"Investment Company Act".....................................................9
"Investment Earnings".......................................................40
"Investment Income"..........................................................7
"LIBOR Certificate".........................................................28
"LIBOR Determination Date"..................................................32
"LIBOR".................................................................31, 32
"London Banking Day"........................................................32
"Money Market Yield"........................................................30
"Obligors"..................................................................19
"OID".......................................................................54
"Originator".................................................................4
"Participants"..............................................................33
"Pass-Through Rate"..........................................................4
"Payahead Account"..........................................................40
"Policy".....................................................................1
"Pool Balance"..............................................................25
"Pool Factor"...............................................................25
"Pooling and Servicing Agreement"........................................4, 37
"Pre-Funded Amount"..........................................................7
"Pre-Funding Account"........................................................6
"Precomputed Advance"........................................................8
"prepayments"...............................................................18
"Prospectus Supplement"......................................................1
"Purchase Agreement"........................................................21
"Purchase Amount"...........................................................21
"Rating Agencies"...........................................................11
"Receivables Pool"..........................................................19
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<PAGE>
"Receivables".............................................................1, 6
"Registration Statement".....................................................2
"Relief Act"................................................................18
"Reuters Screen LIBO Page"..................................................32
"Rule of 78s Receivables"...................................................22
"Rule of 78s"...............................................................22
"Rules".....................................................................35
"Section 1286 Regulations"..................................................54
"Securities Act".............................................................2
"Seller".....................................................................4
"Series".....................................................................1
"Servicer"................................................................1, 4
"Servicing Fee".............................................................43
"Shortfall Amount"..........................................................55
"Simple Interest Advance"....................................................9
"Simple Interest Receivables"...............................................23
"Sponsor"....................................................................4
"Spread Multiplier".........................................................28
"Spread"....................................................................28
"Standby Servicer"..........................................................41
"Strip Certificates".........................................................5
"Sub-Prime Borrowers"........................................................24
"Subsequent Receivables".....................................................6
"Subsequent Transfer Date"..........................................13, 22, 39
"Subservicer"................................................................4
"Terms and Conditions"......................................................36
"Treasury bills"............................................................32
"Treasury Rate Certificate".................................................28
"Treasury Rate Determination Date"..........................................33
"Treasury Rate".........................................................32, 33
"Trust Accounts"............................................................40
"Trust Assets"...............................................................1
"Trust"......................................................................1
"Trustee"....................................................................4
"UCC".......................................................................38
"United States person"......................................................56
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<PAGE>
Filed pursuant to Rule 424(b)(2)
Registration No. [ ]
FORM OF PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED [ ], 199[ ]
$[ ]
CPS Auto Grantor Trust 199[ ]-[ ]
$[ ] [ ]% Asset-Backed Certificates, Class A
$[ ] [ ]% Asset-Backed Certificates, Class B
CPS Receivables Corp.
(Seller)
Consumer Portfolio Services, Inc.
(Servicer)
The Asset-Backed Certificates will consist of two classes of
certificates, Class A (the "Class A Certificates") and Class B (the "Class B
Certificates" and, collectively, the "Certificates"), evidencing beneficial
ownership interests in a trust (the "Trust") to be formed pursuant to a Pooling
and Servicing Agreement among CPS Receivables Corp., as Seller (the "Seller"),
Consumer Portfolio Services, Inc., as Servicer (individually, "CPS", and in its
capacity as the Servicer, the "Servicer"), and [ ], as Trustee and Standby
Servicer (the "Trustee" and "Standby Servicer", respectively). The Class A
Certificates will evidence, in the aggregate, beneficial ownership of an
undivided [ ] percent ([ ]%) interest in the Trust Assets, other than interest
received by the Trust in excess of the Class A Pass-Through Rate of [ ]% per
annum, and the Class B Certificates will evidence, in the aggregate, beneficial
ownership of an undivided [ ] percent ([ ]%) interest in the Trust Assets, other
than interest received by the Trust in excess of the Class B Pass-Through Rate
of [ ]% per annum. The rights of the Class B Certificateholders to receive
distributions with respect to the Receivables are subordinated to the rights of
the holders of the Class A Certificates [and the Credit Enhancer] to the extent
described herein. Only the Class A Certificates are being offered hereby.
The Underwriters have agreed to purchase from the Seller the Class A
Certificates and the Class B Certificates at [ ]% and [ ]%, respectively, 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, before deducting expenses payable by the Seller
estimated at $[ ], will be $[ ] for the Class A Certificates plus accrued
interest at the Class A Pass-Through Rate from [ ], 199[ ] and $[ ] for the
Class B Certificates plus accrued interest at the Class B Pass-Through Rate from
[ ], 199[ ].
The Underwriters propose to offer the Securities from time to time in
negotiated transactions or otherwise, at prices 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.
The Trust Assets will include a pool of retail installment sale
contracts and all rights thereunder (collectively, the "Receivables"), certain
monies due or received thereunder after [ ], 199[ ], security interests in the
new and used automobiles, light trucks, vans and minivans securing the
Receivables, certain bank accounts and the proceeds thereof, [Credit
Enhancement] with respect to the Class A Certificates, and the right of the
Originators (as defined herein) to receive certain insurance proceeds and
certain other property, as more fully described herein. The Receivables will be
purchased by the Seller from the Originators on or prior to the date of the
issuance of the Certificates.
FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THE TRANSACTION, SEE
"RISK FACTORS" AT PAGE S-15 HEREIN AND PAGE [ ] IN THE ACCOMPANYING PROSPECTUS.
[Credit Enhancement (the "Credit Enhancement") with respect to the Class A
Certificates will be provided by [Credit Enhancer] on each Distribution Date.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT
INTEREST IN OR OBLIGATIONS OF THE SELLER, THE SERVICER OR ANY AFFILIATE THEREOF.
THE CERTIFICATES 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 REPRESENTA- TION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Certificates are offered hereby by the Underwriters when, as and if
issued by the Seller, delivered to and accepted by the Underwriters and subject
to its right to reject orders in whole or in part. It is expected that delivery
of the Certificates will be made on or about [ ], 199[ ] only through The
Depository Trust Company[, Cedel Bank, societe anonyme and the Euroclear
System].
[Underwriters]
The date of this Prospectus Supplement is [ ], 199[ ].
<PAGE>
(cover continued from previous 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
Certificates 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
Certificates, 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 Certificates 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 92618,
Attention: [ ]. Telephone requests for such copies should be directed to
Consumer Portfolio Services, Inc. at (714) 753-6800.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates 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. ("Cede"), as nominee
of The Depository Trust Company ("DTC") and registered holder of the
Certificates. 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-3
<PAGE>
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SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus. Certain capitalized terms used in the Summary are
defined elsewhere in this Prospectus Supplement. An Index of Terms appears at
the end of this Prospectus Supplement.
Trust............................. CPS Auto Grantor Trust 199[ ]-[ ] (the
"Trust") to be formed pursuant to the
Pooling and Servicing Agreement, dated as of
[ ], 199[ ] among the Seller, the Servicer
and the Trustee and Standby Servicer (the
"Agreement").
Seller............................ CPS Receivables Corp. (the "Seller"). See
"The Seller and CPS" in this Prospectus
Supplement.
Originators...................... Consumer Portfolio Services, Inc. ("CPS"), a
California corporation, Samco Acceptance
Corp. ("Samco"), a Delaware corporation, and
Linc Acceptance Company LLC ("Linc"), a
Delaware limited liability company [and one
or more other affiliates of CPS (each an
"Affiliated Originator")] (each, in such
capacity, an "Originator" and, together, the
"Originators"). CPS holds an 80% ownership
interest in each of Samco and Linc, [and an
[ ]% ownership interest in each Affiliated
Originator.]
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.
Trustee........................... [name and address].
[Credit Enhancer]................. [Credit Enhancer Information].
Closing Date...................... On or about [ ], 199[ ].
Description of the
Securities Offered................ The Certificates consist of two classes,
entitled [ ]% Asset-Backed Certificates,
Class A (the "Class A Certificates") and [
]% Asset- Backed Certificates, Class B (the
"Class B Certificates" and, together with
the Class A Certificates, the
"Certificates"). Each Certificate will
evidence beneficial ownership of an
undivided interest in the Trust. The Class A
Certificates will evidence, in the
aggregate, beneficial ownership of an
undivided interest in the Trust Assets equal
to the Class A Percentage of the Trust
Assets, but not including any interest
received by the Trust in excess of the Class
A Pass-Through Rate. The Class B
Certificates will evidence, in the
aggregate, beneficial ownership of an
undivided interest in the Trust Assets equal
to the Class B Percentage of the Trust
Assets, but not including any interest
received by the Trust in excess of the Class
B Pass-Through Rate.
The "Class A Percentage" as of any date of
determination will be [ ]%. The "Class B
Percentage" as of any date of determination
will be [ ]%.
The rights of the Class B Certificates to
receive distributions will be subordinated
to the rights of the Class A Certificates
[and the Credit Enhancer] to the extent
described herein.
The Certificates will be offered for
purchase in denominations of $1,000 and in
integral multiples thereof.
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S-4
<PAGE>
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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 Rule of
78's Receivables, all payments due thereon
after [ ], 199[ ] (the "Cutoff Date"), and,
with respect to Simple Interest Receivables,
all payments received thereunder after the
Cutoff Date, (iii) security interests in the
Financed Vehicles, (iv) certain bank
accounts and the proceeds thereof, (v) the
right of the Seller to receive proceeds from
claims under, or refunds of unearned
premiums from, certain insurance policies
and extended service contracts, (vi) all
right, title and interest of the Seller in
and to the Purchase Agreements (as defined
below), (vii) [Credit Enhancement] issued by
the [Credit Enhancer] with respect to the
Class A Certificates, and (viii) certain
other property, as more fully described
herein. See "Formation of the Trust" in this
Prospectus Supplement and "The Trust Assets"
in the Prospectus. The Receivables will be
purchased by the Seller from CPS or
Affiliated Originator pursuant to a Purchase
Agreement on or prior to the Closing Date.
The Receivables arise from loans originated
by automobile dealers, independent finance
companies ("IFCs") or Deposit Institutions
(as defined herein) for assignment to CPS,
Samco, Linc [or an Affiliated Originator]
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"). On the Closing Date, the
Receivables will be purchased pursuant to [
] purchase agreements, each dated as of [ ],
199[ ] (each, a "Purchase Agreement" and,
together, the "Purchase Agreements"),
between the respective Originators and the
Depositor. The Receivables sold by CPS,
Samco, Linc and [each Affiliated Originator]
(the "CPS Receivables", "Samco Receivables",
"Linc Receivables" and ["[Affiliated
Originator] Receivables"], respectively)
will represent approximately [ ]%, [ ]%, [
]% and [ ]%, respectively, of the Pool
Balance (as defined herein) as of the Cutoff
Date. The Trust, in turn, will purchase the
Receivables on the Closing Date from the
Depositor, and the Servicer will agree to
service the Receivables, pursuant to the
Pooling and Servicing Agreement. See "The
Receivables Pool" herein and "The
Receivables Pools" in the Prospectus. 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 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, IFCs or
Deposit Institutions for assignment to CPS,
Samco, Linc [or an Affiliated Originator]
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" in
this Prospectus Supplement and "Risk
Factors-Nature of Obligors" in the
Prospectus. The Receivables have been
selected from the contracts owned by CPS
based on the criteria specified in the
Agreement and described herein.
Each Receivable is a Rule of 78's Receivable
or a Simple Interest Receivable. As of the
Cutoff Date, the weighted average annual
percentage rate (the "APR") of the
Receivables was approximately [ ]%, the
weighted average remaining term to maturity
of the Receivables was approximately [ ]
months and the weighted
- --------------------------------------------------------------------------------
S-5
<PAGE>
- --------------------------------------------------------------------------------
average original term to maturity of the
Receivables was approximately [ ] months. As
of the Cutoff Date, no Receivable had a
scheduled maturity later than [ ].
Class A Certificate Balance....... The "Class A Certificate Balance" will
equal, initially, the Class A Percentage of
the Original Pool Balance as of the close of
business on the Cutoff Date, and thereafter
will equal the initial Class A Certificate
Balance reduced by all principal
distributions on the Class A Certificates.
Class A Pass-Through Rate......... Interest will accrue on the Class A
Certificate Balance at a rate of [ ]% per
annum, calculated on the basis of a 360-day
year consisting of twelve 30-day months (the
"Class A Pass-Through Rate").
Class B Certificate Balance....... The "Class B Certificate Balance" will
equal, initially, the Class B Percentage of
the Original Pool Balance as of the close of
business on the Cutoff Date, and thereafter
will equal the initial Class B Certificate
Balance reduced by all principal
distributions on the Class B Certificates.
Class B Pass-Through Rate......... Interest will accrue on the principal
balance of the Class B Certificates
outstanding from time to time at a rate of [
]% per annum, calculated on the basis of a
360-day year consisting of twelve 30-day
months (the "Class B Pass-Through Rate").
Interest.......................... On the 15th of each month (or the next
following Business Day) beginning [ ], 199[
] (each, a "Distribution Date"), the Trustee
will, to the extent there are funds
available from the sources described herein,
pass-through and (i) distribute pro rata to
the holders of record of the Class A
Certificates (the "Class A
Certificateholders") as of the related
Record Date thirty (30) days' of interest at
the Class A Pass-Through Rate on the Class A
Certificate Balance as of the close of
business on the last day of the related
Collection Period and (ii) distribute pro
rata to the holders of record of the Class B
Certificates (the "Class B
Certificateholders") as of the related
Record Date thirty (30) days' of interest at
the Class B Pass-Through Rate on the Class B
Certificate Balance as of the close of
business on the last day of the related
Collection Period; provided, however, that
on the first Distribution Date, the
Certificateholders will be entitled to
interest at the Class A Pass-Through Rate or
the Class B Pass-Through Rate, as
applicable, on the initial Class A
Certificate Balance or the initial Class B
Certificate Balance, as applicable, from and
including the Closing Date through and
including [ ]. The final scheduled
Distribution Date on the Certificates will
be the [ ] Distribution Date (the "Final
Scheduled Distribution Date").
Principal......................... On each Distribution Date, the Trustee will,
to the extent that there are funds available
from the sources described herein,
distribute to
- --------------------------------------------------------------------------------
S-6
<PAGE>
- --------------------------------------------------------------------------------
(a) the Class A Certificateholders as of the
related Record Date an amount equal to the
Class A Percentage of the Principal
Distributable Amount and (b) the Class B
Certificateholders as of the related Record
Date an amount equal to the Class B
Percentage of the Principal Distributable
Amount. The "Principal Distributable Amount"
for a Distribution Date shall equal the sum
of (a) the principal portion of all
Scheduled 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 (including prepayments in full
resulting from collections with respect to a
Receivable received during the preceding
Collection Period plus any amounts applied
from the Payahead Account with respect to
such Receivable) (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 (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 that shall have occurred during the
preceding Collection Period (without
duplication of amounts included in (a)
through (d) above). In addition, on the
Final Scheduled Distribution Date, to the
extent amounts are available therefor, the
principal required to be distributed to the
Class A Certificateholders will equal the
then outstanding Class A Certificate Balance
and the principal required to be distributed
to the Class B Certificateholders will equal
the then outstanding Class B Certificate
Balance.
A "Collection Period" with respect to a
Distribution Date will be the calendar month
preceding the month in which such
Distribution Date occurs; provided however,
that with respect to the first Distribution
Date, the "Collection Period" will be the
period from and excluding the Cutoff Date to
and including [ ], 199[ ].
Priority of Payments.............. On each Distribution Date, the Trustee shall
make the following distributions in the
following order of priority:
[(i) to the Servicer, the Servicing Fee and
all unpaid Servicing Fees; provided,
however, that as long as CPS is the Servicer
and [ ], is the Standby Servicer, the
Trustee will first pay to the Standby
Servicer out of the Servicing Fee otherwise
payable to CPS an amount equal to the
Standby Fee;
- --------------------------------------------------------------------------------
S-7
<PAGE>
- --------------------------------------------------------------------------------
(ii) in the event the Standby Servicer
becomes the successor Servicer, to the
Standby Servicer, reasonable transition
expenses (up to a maximum of $[ ]) incurred
in acting as successor Servicer;
(iii) to the Trustee, the Trustee Fee (as
defined herein) and other reasonable
expenses of the Trustee;
(iv) to the Collateral Agent (as defined
herein), all fees and expenses payable to
the Collateral Agent with respect to such
Distribution Date;
(v) to the Class A Certificateholders, the
Class A Interest Distributable Amount (as
defined herein) and any Class A Interest
Carryover Shortfall (as defined herein);
(vi) to the Class B Certificateholders, the
Class B Interest Distributable Amount (as
defined herein) and any Class B Interest
Carryover Shortfall (as defined herein);
(vii) to the Class A Certificateholders, the
Class A Principal Distributable Amount (as
defined herein) and any Class A Principal
Carryover Shortfall (as defined herein);
(viii) to the [Credit Enhancer], any amounts
due to the [Credit Enhancer] under the terms
of the Agreement and under the [Enhancement
Agreement] (as defined herein);
(ix) in the event any person other than the
Standby Servicer becomes the Servicer, to
such successor Servicer, reasonable
transition expenses (up to a maximum of $[
]) incurred in acting as successor Servicer;
(x) to the Class B Certificateholders, the
Class B Principal Distributable Amount (as
defined herein) and any Class B Principal
Carryover Shortfall (as defined herein); and
(xi) to the Collateral Agent, for deposit
into the Spread Account, the remaining Total
Distribution Amount, if any. See "The
Certificates -- Distributions on
Certificates - Priority of Distribution
Amounts" in this Prospectus Supplement.]
[Spread Account................... 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 Trustee on behalf
of the Class A Certificateholders. Any
portion of the Total Distribution Amount
remaining on any Distribution Date after
payment of all fees and expenses due on such
date to the Servicer, the Standby Servicer,
the Trustee, the Collateral Agent, the
[Credit Enhancer], any successor Servicer
and all principal and interest payments due
to the Certificateholders on such
Distribution Date, will be deposited in the
Spread Account and held by the Collateral
Agent for the benefit of the Trustee, on
behalf of the Class A Certificateholders,
and the [Credit Enhancer]. The Collateral
Agent [will] [will not] hold for the benefit
of the Class B Certificateholders the
amounts
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S-8
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on deposit in the Spread Account on any
Distribution 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 [Credit Enhancer] and the
Seller as a condition to the issuance of the
[Credit Enhancement] (such requisite amount,
the "Requisite Amount"). If on any
Distribution Date, the Total Distribution
Amount is insufficient (taking into account
the application of the Total Distribution
Amount to the payment of the Class B
Interest Distributable Amount and any Class
B Interest Carryover Shortfall) to pay all
distributions required to be made on such
day pursuant to priorities (i), (ii), (iii),
(iv), (v), (vii), (viii) and (ix) referred
to above in "Priority of Payments", amounts
on deposit in the Spread Account will be
applied to pay the amounts due on such
Distribution Date pursuant to such
priorities (i), (ii), (iii), (iv), (v),
(vii), (viii) and (ix). See "The
Certificates -- Distributions on
Certificates -- The Spread Account" in this
Prospectus Supplement.]
[Other Spread Account Arrangement]
Subordination..................... Distributions of interest on the Class B
Certificates will be subordinated in
priority of payment to interest due on the
Class A Certificates. Distributions of
principal on the Class B Certificates will
be subordinated in priority of payment to
interest and principal due on the Class A
Certificates. Accordingly, the Class A
Certificates will receive the benefit of
amounts otherwise due on the Class B
Certificates as credit enhancement. Funds
representing the interest of the Class B
Certificateholders in the Trust Assets will
be applied first to the payment of any
amounts due to the Class A
Certificateholders on account of the Class A
Interest Distributable Amount and any Class
A Interest Carryover Shortfall before any
portion thereof is paid to the Class B
Certificateholders and funds otherwise due
to pay principal of the Class B Certificates
will be applied first to the payment of the
Class A Principal Distributable Amount and
any Class A Principal Carryover Shortfall
before any portion thereof is paid to the
Class B Certificateholders.
Distribution and
Record Dates...................... A "Distribution Date" will be the 15th day
of each month (or if such 15th day is not a
business day, the next following business
day) commencing [ ], 199[ ]. The record date
applicable to each Distribution Date (each,
a "Record Date") will be the 10th day of the
calendar month in which such Distribution
Date occurs.
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S-9
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Repurchases and
Purchases of
Certain Receivables............... CPS has made certain representations and
warranties relating to the
Receivables(including the Samco Receivables,
the Linc Receivables and [the [Affiliated
Originator] 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 Agreement. The Trustee, as
acknowledged assignee of the repurchase
obligations of CPS under the Purchase
Agreement, will be entitled to require CPS
to repurchase any Receivable (including the
Samco Receivables, the Linc Receivables and
[the [Affiliated Originator] Receivables])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 following discovery by the Seller or
CPS or notice to the Seller and CPS.
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 Distribution
Date or fails to maintain a perfected
security interest in the Financed Vehicle.
See "Description of the Certificates -
Servicing Procedures" in this Prospectus
Supplement and "Description of the Pooling
and Servicing Agreements-- Servicing
Procedures" in the Prospectus.
The [Credit Enhancement].......... [Describe credit enhancement]
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 Trustee for
the benefit of the Certificateholders 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 Bank of
America (the "Lock-Box Bank"), in the name
of the Trustee for the benefit of the
Certificateholders 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 Lock-Box Account
to one or more accounts established with the
Trustee. See "The Certificates -- Accounts",
and "-- Payments on Receivables" in this
Prospectus Supplement.
Standby Servicer.................. [ ].
[If an Event of Default occurs and remains
unremedied, (1) provided no [Enhancement
Default] has occurred and is continuing,
then the [Credit Enhancer] in its sole and
absolute
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S-10
<PAGE>
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discretion, or (2) if an [Enhancement
Default] shall have occurred and be
continuing, then the Trustee or the holders
of Class A Certificates evidencing not less
than 25% of the Class A Certificate Balance,
may terminate the rights and obligations of
the Servicer under the 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 Agreement pursuant to a Servicing
Assumption Agreement dated as of [ ], 199[ ]
among CPS, the Standby Servicer and the
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
"Standby Servicer" in this Prospectus
Supplement.
Servicing Fee..................... The Servicing Fee for each Distribution Date
shall be equal to the sum of (i) the result
of one-twelfth times [ ]% of the Pool
Balance as of the close of business on the
last day of the second preceding Collection
Period plus (ii) the result of one-twelfth
times [ ]% of the aggregate outstanding
principal balance of the Certificates as of
the close of business on the last day of the
second preceding Collection Period;
provided, however, that with respect to the
first Distribution Date the Servicer will be
entitled to receive a Servicing Fee equal to
the sum of (i) the result of one-twelfth
times [ ]% of the original Pool Balance plus
(ii) the result of one-twelfth times [ ]% of
the aggregate outstanding principal balance
of the Certificates as of the Closing Date.
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.
Optional Purchase................. The Servicer may at its option purchase all
the Receivables as of the last day of any
month on or after which the aggregate
principal balance of the Receivables is
equal to [10%] or less of the Original Pool
Balance, at a purchase price equal to the
aggregate principal balance of the
Receivables, plus accrued interest at the
respective APRs; 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 under the [Credit
Enhancement] would occur or any amount owing
to the [Credit Enhancer] or the holders of
the Class A Certificates would remain
unpaid.
Certain Legal Aspects of
the Receivables; Purchase
Obligations....................... In connection with the sale of the
Receivables, security interests in the
Financed Vehicles securing the Receivables
will be assigned by the Originators to the
Seller pursuant to the Purchase Agreements
and by the
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<PAGE>
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Seller to the Trustee pursuant to the 1.
Agreement. Certain of the Receivables (the
"Affiliate Receivables"), representing
approximately [ ]% of the aggregate
principal balance of the Receivables as of
the Cutoff Date, have been originated by
affiliates of CPS including Samco, Linc and
[the Affiliated Orginators.] The
certificates of title to the Financed
Vehicles securing the Affiliate Receivables
show the applicable Originator as the
lienholder. Due to the administrative burden
and expense, the certificates of title to
the Financed Vehicles (including those
securing the Affiliate Receivables) will not
be amended or re-issued 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 the Seller 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, Samco, Linc [or the 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
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, Samco, Linc or [the Affiliated
Originator] is perfected, the Trustee will
have a prior claim over subsequent
purchasers of such Financed Vehicle and
holders of subsequently perfected security
interests. However, as against liens for
repairs of a Financed Vehicle or for unpaid
storage charges or for taxes unpaid by an
Obligor under a Receivable, or through
fraud, forgery or negligence or error, CPS,
Samco, Linc or [the 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.
Book-Entry
Certificates...................... The Certificates initially will be
represented by certificates 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 Certificates may elect to hold their
Certificates 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 Certificates
are book-entry Certificates, such
Certificates will be evidenced by one or
more Certificates registered in the name of
Cede, as the nominee of DTC or one of the
relevant depositories (collectively, the
"European Depositaries"). Crossmarket
transfers between persons holding directly
or indirectly through DTC, on the one hand,
and counterparties holding directly or
indirectly through CEDEL or Euroclear, on
the other, will be effected in DTC 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.] Certificates representing the
Certificates will be issued in definitive
form only under the limited circumstances
described herein. All references herein to
"holders" of the Certificates or
"Certificateholders" shall reflect the
rights of beneficial owners of the
Certificates ("Certificate Owners") as they
may indirectly exercise such rights through
DTC and participating members thereof,
except as otherwise specified herein. See
"Risk Factors" and "The Certificates--
Registration of Certificates" in this
Prospectus Supplement and "[Certain
Information Regarding the Certificates--
Book-Entry Registration]" in the Prospectus.
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S-12
<PAGE>
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Tax Status........................ In the opinion of special tax counsel to the
Seller, the Trust will be classified for
federal income tax purposes as a grantor
trust and not as an association taxable as a
corporation. Certificateholders must report
their respective allocable shares of income
earned on Trust Assets (other than any
amounts treated as "stripped coupons") and,
subject to certain limitations applicable to
individuals, estates and trusts, may deduct
their respective allocable shares of
reasonable servicing and other expenses. See
"Certain Federal Income Tax Consequences" in
this Prospectus Supplement. Prospective
investors should note that no rulings have
been or will be sought from the Internal
Revenue Service (the "Service") with respect
to any of the federal income tax
consequences discussed herein, and no
assurance can be given that the Service will
not take contrary positions. See "Certain
Federal Income Tax Consequences" in this
Prospectus Supplement and "Certain Tax
Considerations" in the Prospectus.
ERISA Considerations.............. As described herein, the Class A
Certificates may be purchased by employee
benefit plans that are subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"). Any benefit plan
fiduciary considering the purchase of Class
A Certificates should, among other things,
consult with its counsel in determining
whether all required conditions have been
satisfied.
The Class B Certificates may not be sold or
transferred to any employee benefit plan
under Section 3(3) of ERISA which is subject
to Title I of ERISA or comparable provisions
of state law, or Section 4975 of the
Internal Revenue Code of 1986, as amended
("Code"), or any fund, account or other
entity deemed to hold assets of any such
plan. Such plans, funds, accounts or other
entities will herein be referred to
collectively as "Employee Plans".
The foregoing restriction on Employee Plans,
however, for purposes of this offering will
not apply to prevent the initial sale of the
Class B Certificates to an insurance
company, insurance service, or insurance
organization that is qualified to do
business in a state (an "Insurer") and that
purchases Class B Certificates with funds
held in one or more of its general accounts,
provided that certain conditions are met.
None of the Servicer, the Seller, the
Trustee, the [Credit Enhancer], nor any of
their respective affiliates makes any
representations or express any opinion as to
whether an Insurer constitutes an Employee
Plan.
Fiduciaries of Employee Plans are required
to discharge their duties, including,
without limitation, their duty to invest
"plan assets", in accordance with the
fiduciary standards of ERISA. In addition, a
fiduciary may not engage or cause the
Employee Plan to engage in a "prohibited
transaction" under Section 406 of ERISA and
Section 4975 of the Code. If an Insurer is
determined to be an Employee Plan under
ERISA or to be a fiduciary with respect to
Employee Plan assets, the purchase of Class
B
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S-13
<PAGE>
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Certificates with "plan assets" would be
subject to these fiduciary requirements.
Insurers contemplating purchasing Class B
Certificates should consult their counsel
before making a purchase. See "ERISA
Considerations" in this Prospectus
Supplement.
Rating of the Certificates........ It is a condition of issuance that the Class
A Certificates be rated [investment grade by
at least one nationally recognized rating
agency.] 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.
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S-14
<PAGE>
RISK FACTORS
Prospective Certificateholders should consider the following factors,
as well as those matters discussed in "Risk Factors" in the Prospectus, in
connection with the purchase of the Certificates:
Subordination of Class B Certificates
Distributions of interest on the Class B Certificates will be
subordinated in priority of payment to interest due on the Class A Certificates.
Distributions of principal on the Class B Certificates will be subordinated in
priority of payment to interest and principal due on the Class A Certificates.
Accordingly, the Class A Certificates will, if necessary, receive the benefit of
amounts otherwise due on the Class B Certificates as credit enhancement. Funds
representing the interest of the Class B Certificateholders in the Trust Assets
will be applied first to the payment of any amounts due to the Class A
Certificateholders on account of the Class A Interest Distributable Amount and
any Class A Interest Carryover Shortfall before any portion thereof is paid to
the Class B Certificateholders and funds otherwise due to pay principal of the
Class B Certificates will be applied first to the payment of the Class A
Principal Distributable Amount and any Class A Principal Carryover Shortfall
before any portion thereof is paid to the Class B Certificateholders. See "The
Certificates -- Distributions on Certificates" in this Prospectus Supplement.
Sub-Prime Nature of Obligors; Servicing
The Originators purchase loans originated for assignment to the
Originators through automobile dealers, IFCs and Deposit Institutions (as
defined herein). The Originators' customers are generally "sub-prime borrowers"
who 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 average interest rate charged by CPS to such "sub-prime" borrowers
is generally higher than that charged by commercial banks, financing arms of
automobile manufacturers and other traditional sources of consumer credit, which
typically impose more stringent credit requirements. 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. As a result of the credit profile of the Obligors and the APRs of the
Receivables, the historical credit loss and delinquency rates on the Receivables
may be higher than those experienced by banks and the captive finance companies
of the automobile manufacturers. In the event of a default under a Receivable,
the only source of repayment may be liquidation proceeds from the related
Financed Vehicle. The Financed Vehicles securing the Receivables will consist
primarily of used vehicles which may not have a liquidation value sufficient to
pay in full the amount financed by the related Receivable.
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 an Event of Default 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
Agreement. See "The Certificates -- Rights Upon Event of Default" 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 "Standby Servicer" in this Prospectus Supplement.
The 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 Event of Default under the Agreement has occurred and (ii) no
event of default under the insurance and indemnity agreement among CPS, the
Seller and the [Credit Enhancer] (the "[Enhancement Agreement]") has occurred.
Limited Obligations of the Seller and CPS. The Certificates are
obligations of the Trust only, and neither the Seller nor any of the Originators
is obligated to make any payments on the Certificates. In connection with each
sale of Receivables by an Originator to the Seller, CPS 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 Certificates. If CPS fails to repurchase any
Receivable with respect to which it is in breach of a representation or
warranty, the Seller will have no obligation to purchase such Receivable from
the Trust.
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,
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<PAGE>
loan loss and repossession experience of the Trust with respect to the
Receivables. See "The Receivables Pool" in this Prospectus Supplement.
Ratings of the Certificates
It is a condition to the issuance of the Certificates that [they be
rated investment grade by a nationally recognized rating agency]. A rating is
not a recommendation to purchase, hold or sell the Certificates, 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 Certificateholders 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 Certificates are based primarily on the rating of the [Credit
Enhancer]. Upon an [Enhancement Default] the rating on the Class A Certificates
may be lowered or withdrawn entirely.] In the event that any rating initially
assigned to the Class A Certificates 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 the Class A Certificates. Any reduction or withdrawal of a
rating may have an adverse effect on the liquidity and market price of the Class
A Certificates.
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 Trustee on behalf of the
Certificateholders. The Certificates represent interests solely in the Trust and
the Certificates will not be insured or guaranteed by the Seller, the Servicer,
the Trustee or any other person or entity [except as described herein].
Distributions of interest and principal on the Class A Certificates
will be dependent primarily upon collections on the Receivables and amounts paid
pursuant to the [Credit Enhancement]. The Class B Certificateholders will not
receive any distributions of interest or principal with respect to a Collection
Period until the full amount of interest and principal on the Class A
Certificates relating to such Collection Period and any related Class A Interest
and Principal Carryover Shortfall has been funded. See "The Certificates --
Distributions on Certificates" in this Prospectus Supplement.
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, Linc's [and
each 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 Samco, Linc [and Affiliated Originators] will be
similar to that of CPS's existing portfolio.
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<PAGE>
FORMATION OF THE TRUST
The Seller and CPS will establish the Trust by selling and assigning
the Receivables and the other Trust Assets [(other than the Credit Enhancement)]
to the Trustee in exchange for the Certificates. Prior to such sale and
assignment, the Trust will have no assets or obligations or any operating
history. The Trust will not engage in any business. The Trust will hold the
Receivables, issue the Certificates and distribute payments on the Certificates.
The Servicer will initially service the Receivables pursuant to the
Agreement and will be compensated for acting as the Servicer. See "The
Certificates - Servicing Compensation" in this Prospectus Supplement. The
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
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 as the
new secured party. In the absence of amendments to the certificates of title,
the 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 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 Certificates and distributing payments on
the Certificates, no historical or pro forma financial statements or ratios of
earnings to fixed charges with respect to the Trust have been included herein.
The Seller also will take such steps as are necessary for the [Credit
Enhancer] to issue the [Credit Enhancement] to the Trustee for the benefit of
the Class A Certificateholders. In the event of an [Enhancement Default], the
Class A Certificateholders must rely on amounts, if any, available in the Spread
Account, the amount otherwise due on the Class B Certificates, the Obligors 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 Trustee's not having perfected security interests in some of 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
Class A Certificateholders on a current basis. See "Certain Legal Aspects of the
Receivables" in the Prospectus.
THE TRUST ASSETS
Each Certificate will represent a fractional undivided interest in the
Trust, other than interest received by the Trust in excess of the Class A
Pass-Through Rate or the Class B Pass-Through Rate, as applicable. The Trust
Assets include retail installment sale contracts between dealers (the
"Dealers"), IFCs or Deposit Institutions (as defined herein) in new and used
automobiles, light trucks, vans and minivans 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, IFCs or Deposit Institutions for
assignment to CPS or an Affiliated Originator. Pursuant to agreements between
the Dealers and CPS ("Dealer Agreements") or between the IFCs or Deposit
Institutions and Affiliated Originators, 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 Trustee pursuant to the
Agreement, as described below; see "The Certificates - Accounts"; (ii) the
rights of the Seller under the Purchase
S-17
<PAGE>
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 Certificateholders. The Payahead Account will be maintained with the
Trustee for the benefit of the Obligors, but will not be part of the Trust.
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, 1997, CPS had purchased $1.4 billion of
Contracts from Dealers and sold $1.3 billion of Contracts to institutional
investors. CPS continues to service all of the Contracts it has purchased,
including those it has re-sold.
CPS has relationships and is party to Dealer Agreements with over [ ]
dealerships located in [ ] states of the United States. CPS purchases Contracts
from Dealers at a fee ranging from $0 to $1,195 of the total amount financed
under the Contracts. 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 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, such as certain late fees,
prepayment charges and other administrative fees and similar charges, 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
S-18
<PAGE>
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.
The principal executive offices of CPS are located at 2 Ada, Irvine,
California 92618. CPS's telephone number is (714) 753-6800.
Samco employees call on IFCs primarily in the southeastern United
States and present them with financing programs that are essentially identical
to those which CPS markets directly to Dealers through its marketing
representatives. CPS believes that a typical rural IFC has relationships with
many local automobile purchasers as well as Dealers but, because of limitations
of financial resources or capital structure, such IFCs generally are unable to
provide 36, 48 or 60 month financing for an automobile. IFCs may offer Samco's
financing programs to borrowers directly or indirectly through local dealers.
Samco purchases contracts from the IFCs after its credit personnel have
performed all of the same underwriting and verification procedures and have
applied all the same credit criteria that CPS performs and applies for Contracts
that CPS purchases from Dealers. Samco purchases Contracts at a discount ranging
from 0% to 8% of the total amount financed under such Contracts. In addition,
Samco generally charges IFCs an acquisition fee to defray the direct
administrative costs associated with the processing of Contracts that are
ultimately purchased by Samco. Servicing and collection procedures on Contracts
owned by Samco are performed by CPS at its headquarters in Irvine, California.
For the year ended December 31, 1997, Samco purchased 2,306 Contracts with
original balances of $26.2 million.
In May 1996, CPS formed Linc, an 80 percent-owned subsidiary based in
Norwalk, Connecticut. Linc's business plan is to provide CPS's sub-prime auto
<PAGE>
finance products to deposit institutions such as banks, thrifts and credit
unions ("Deposit Institutions"). CPS believes that such Deposit Institutions do
not generally make loans to sub-prime borrowers even though they may have
relationships with automobile dealers who sell vehicles to sub-prime borrowers
and may have sub-prime borrowers as deposit customers.
Linc's employees call on various Deposit Institutions and present them
with a financing program that is similar to CPS's Alpha Program (as defined
below). The Linc program is intended to result in a slightly more creditworthy
borrower than CPS's Standard Program by requiring slightly higher income and
lower debt-to-income ratios than CPS requires under its Standard Program. Linc's
customers may offer its financing program to borrowers directly or to local
Dealers. Linc typically purchases Contracts at par, without a fee to the Deposit
Institution. Servicing and collection procedures on Contracts are performed
entirely by CPS using the same personnel, procedures and systems as CPS uses for
its own programs. For the year ended December 31, 1997, Linc purchased 678
Contracts with original balances of $8.9 million.
[General Information regarding Affiliated Originators]
Underwriting
CPS markets its services to Dealers under five 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") the CPS
Delta Program (the "Delta Program") and the CPS Super Alpha Program (the "Super
Alpha 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. The Super Alpha Program guidelines are more stringent than any
other CPS program in catagories such as advance rate, age of collateral, credit
history and stability. 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, downpayment, 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.
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 the underwriting standards used by CPS in its
normal course of business. Bulk purchases were made at a purchase price
approximately equal to a 7.0% discount from the aggregate principal balance of
the Contracts. CPS has not purchased any portfolios of Contracts in bulk since
July 31, 1995, but may consider doing so in the future.
Generally, the amount funded by CPS will not exceed, in the case of new
cars, 110% of the dealer invoice plus taxes, license fees, insurance and the
cost of the service contract, and in the case of used 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
S-19
<PAGE>
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' 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
cancelled prior to its expiration date, a letter is generated to advise the
borrower of its obligation to continue to provide insurance. If no action is
taken by the borrower to insure the vehicle, two successive and more forceful
letters are generated, after which the collection department will contact the
borrower telephonically to further counsel the borrower, including possibly
advising them that CPS has the right to repossess the vehicle if the borrower
refuses to obtain insurance. Although it has the right, CPS rarely repossesses
vehicles in such circumstances. In addition, CPS does not force place a policy
and add the premium to the borrower's outstanding obligation, although it also
has the right to do so. Rather in such circumstances the account is flagged as
not having insurance and continuing efforts are made to get the Obligor to
comply with the insurance requirement in the Contract. CPS believes that
handling non-compliance with insurance requirements in this manner ultimately
results in better portfolio performance because it believes that the increased
monthly payment obligation of the borrower which would result from force placing
insurance and adding the premium to the borrower's outstanding obligation would
increase the likelihood of delinquency or default by such borrower on future
monthly payments.
Samco offers financing programs to IFCs which are essentially identical
to those offered by CPS. The IFCs may offer Samco's financing programs to
borrowers directly or indirectly through local Dealers. Upon submission of
applications to Samco, Samco credit personnel, who have been trained by CPS, use
CPS's proprietary systems to evaluate the borrower and the proposed Contract
terms. Samco purchases Contracts from the IFC after its credit personnel have
performed all of the underwriting and verification procedures and have applied
all the same credit criteria that CPS performs and applies for Contracts it
purchases from Dealers. Prior to CPS purchasing a Contract from Samco, CPS
personnel perform procedures intended to verify that such Contract has been
underwritten and originated in conformity with the requirements applied by CPS
with respect to Contracts acquired by it directly from Dealers.
Linc offers to Deposit Institutions financing programs which are
similar to CPS's Alpha Program. Unlike Samco, which has employees who evaluate
applications and make decisions to purchase Contracts, applications for
Contracts to be purchased by Linc are submitted by the Deposit Institution
directly to CPS, where the approval, underwriting and purchase procedures are
performed by CPS staff who work with Linc as well as with the Dealers to which
CPS markets its programs.
[Information regarding Affiliated Originators]
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 loans owned
or originated by third parties, consist of collecting, accounting for and
posting of all payments received with respect to such Contracts or loans,
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 loan and
related collateral. CPS maintains sophisticated data processing and management
information systems to support its Contract and loan servicing activities.
Upon the sale of a portfolio of Contracts to an investor, or upon the
engagement of CPS by a loan portfolio owner for CPS's services, CPS mails to
borrowers monthly billing statements directing them to mail payments on the
Contracts or loans 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 loans.
S-20
<PAGE>
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 "The Certificates --
Servicing Procedures", CPS does not modify or rewrite delinquent Contracts.
On April 1, 1997 CPS established a satellite collection facility in
Chesapeake, Virginia. The 16,000 square foot facility was opened with 35 staff
dedicated solely to collections. As of December 31, 1997 the Chesapeake facility
had more than 100 collectors. The Chesapeake facility is on-line with CPS's
automated collection system at its headquarters in Irvine, California.
Chesapeake staff have been trained by Irvine collection management personnel at
both the Chesapeake facility and at CPS's headquarters. Irvine collection
management has the ability to allocate the collection workload between the two
facilities as well as monitor the effectiveness of the collection effort by
office and individual collector. CPS expects to add resources to both collection
locations as its servicing portfolio grows.
Servicing and collection procedures on Contracts owned by Samco, Linc
and [each Affiliated Originator] are performed by CPS at its headquarters in
Irvine, California and at its Chesapeake, Virginia collection facility. However,
Samco may solicit aid from the related IFC in collecting past due accounts with
respect to which repossession may be considered.
Delinquency and Loss Experience
Set forth on the following page is certain information concerning the
experience of CPS pertaining to retail new and used automobile, light truck, van
and minivan receivables, including those previously sold, which CPS continues to
service. Loans 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
comparable to that 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. Contracts were
first originated under the Super Alpha Program in [ ]. CPS has found that the
delinquency and net credit loss and repossession experience with respect to the
Super Alpha Program is [somewhat lower than that experienced under the Standard
Program].
CPS began servicing Contracts originated by Samco in March 1996, Linc
in November 1996 and [each Affiliated Originator in [ ], 19[ ]]. Although credit
history on Samco's, Linc's and [each 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 Samco, Linc and [each
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 or any other isolated group
of receivables from the CPS portfolio would be comparable to CPS's experience as
shown in the following tables. In particular, the information in the tables has
not been adjusted to eliminate the effect of the significant growth in the size
of CPS's loan portfolio during the periods shown.
S-21
<PAGE>
<TABLE>
<CAPTION>
Consumer Portfolio Services, Inc.
Delinquency Experience
December 31, 1994 December 31, 1995 December 31, 1996
--------------------------- -------------------------- --------------------------
Number of Amount Number of Amount Number of Amount
--------- ------ ---------- ------ ---------- ------
Loans Loans Loans
----- ----- -----
<S>
Portfolio(1) <C> <C> <C> <C> <C> <C>
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 638 $9,265,000 2,218 $28,224,000 4,461 $55,636,000
and Amount in
Repossession(4)
=================================================================================================
Delinquencies
as a Percent 2.58% 2.70% 5.10% 5.08% 6.98% 6.80%
of the Portfolio
Repo Inventory
as a Percent 1.90% 1.84% 3.08% 2.85% 2.48% 2.41%
of the Portfolio
Total
Delinquencies 4.48% 4.54% 8.18% 7.93% 9.45% 9.21%
and Amount in
Repossession
as a Percent
of Portfolio
</TABLE>
(1) All amounts and percentages are based on the full amount remaining to be
repaid on each Contract, including, for Rule of 78s Contracts, any unearned
finance charges. The information in the table represents all Contracts
originated by CPS including sold Contracts CPS continues to service.
(2) CPS considers a Contract delinquent when an obligor fails to make at least
90% of a contractually due payment by the due date. The period of
delinquency is based on the number of days payments are contractually past
due.
(3) Amount in Repossession represents Financed Vehicles which have been
repossessed but not yet liquidated.
(4) Amounts shown do not include Contracts which are less than 31 days
delinquent.
S-22
<PAGE>
Consumer Portfolio Services, Inc.
Delinquency Experience
December 31, 1997
----------------------------------------------
Number of Amount
---------- ------
Loans
-----
Portfolio(1) 83,414 1,031,573,000
Period of
Delinquency(2)
31-60 3,092 36,609,000
61-90 1,243 15,303,000
91+ 1,393 17,868,000
----------------------------------------------
Total 5,728 69,781,000
Delinquencies
Amount in 1,977 24,463,000
Repossession(3)
----------------------------------------------
Total 7,705 94,244,000
Delinquencies
and Amount in
Repossession(4)
==============================================
Delinquencies 6.87% 6.76%
as a Percent
of the Portfolio
Repo Inventory 2.37% 2.37%
as a Percent
of the Portfolio
Total 9.24% 9.14%
Delinquencies
and Amount in
Repossession
as a Percent
of Portfolio
<PAGE>
<TABLE>
<CAPTION>
Consumer Portfolio Services, Inc.
Net Credit Loss/Repossession Experience
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1994 1995 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Average Amount Outstanding $ 98,916,991 $ 221,926,489 $ 395,404,669 $ 703,100,136
During the Period (1)
Average Number of Loans 9,171 20,809 36,998 65,189
Outstanding During the Period
Number of Repossessions 669 2,018 3,145 6,007
Gross Charge-Offs (2) $ 3,166,408 $ 11,658,461 $ 23,296,775 $ 46,649,521
Recoveries (3) $ 347,519 $ 1,028,378 $ 2,969,143 $ 5,534,823
Net Losses $ 2,818,889 $ 10,630,083 $ 20,327,632 $ 41,114,698
Annualized Repossessions as a 7.29% 9.70% 8.50% 9.21%
Percentage of Average Number of
Loans Outstanding
Annualized Net Losses as a 2.85% 4.79% 5.14% 5.85%
Percentage of Average Amount
Outstanding
</TABLE>
(1) All amounts and percentages are based on the principal amount scheduled to
be paid on each Contract. The information in the table represents all
Contracts originated by CPS including sold Contracts which CPS continues to
service.
(2) Amount charged off includes the remaining principal balance, after the
application of the net proceeds from the liquidation of the vehicle,
excluding accrued and unpaid interest.
(3) Recoveries are reflected in the period in which they are realized and may
pertain to charge offs from prior periods.
S-23
<PAGE>
Recent Developments
On June 30, 1997, CPS was served with summons and counterclaim in the
bankruptcy court for the Northern District of Illinois in connection with the
Chapter 13 bankruptcy of obligors Madeline and Darryl Brownlee of Chicago,
Illinois. The obligors seek class-action treatment of their allegation that the
cost of an extended service contract on the automobile they purchased was
inadequately disclosed by Joe Cotton Ford of Carol Stream, Illinois, the
automobile dealer who sold them their car. The disclosure is alleged to be
violative of the Federal Truth in Lending Act and of Illinois consumer
protection statutes. The obligors' claim is directed against both the dealer for
making the allegedly improper disclosures and against CPS as holder of the
purchase contract. The relief sought is damages in an unspecified amount, plus
costs of suit and attorney's fees. The court has not yet ruled on the obligors'
request for class-action treatment.
In another proceeding, arising out of efforts to collect a deficiency
balance from Joseph Barrios of Chicago, Illinois, the debtor has brought suit
against CPS alleging defects in the notice given upon repossession of the
vehicle. This lawsuit was filed on February 18, 1998 in the circuit court of
Cook County, Illinois. Barrios, represented by the same law firm as the Brownlee
obligors, seeks class-action treatment of his allegation that notice of a
fifteen day period to reinstate his Contract was misleading, in that it did not
refer to an alleged right to redeem collateral up to the date of sale. The
relief sought is damages in an unspecified amount, plus costs of suit and
attorney's fees. As of the date of this filing, CPS has not been required to
respond to this litigation and has not yet done so.
Although the receivables relating to the above litigation matters are
not included in the Trust, if the request for class action status is granted in
either case, Receivables in the Trust could become subject to the litigation.
Furthermore, the existence of such litigation, or an adverse decision in such
litigation, could encourage similar actions to be brought involving Receivables
in the Trust. If an Obligor has a claim against the Trust as a result of a
violation of law relating to a Receivable and such claim materially and
adversely affects the Trust's interest in such Receivable, such a violation
<PAGE>
would constitute a breach of the representations and warranties of CPS and would
create an obligation of CPS to repurchase such Receivable unless the breach is
cured. In addition, CPS will be required to indemnify the Trustee, the
Certificate Insurer, the Trust and the Certificateholders against all costs,
losses, damages, claims and liabilities, including reasonable fees and expenses
of counsel which may be asserted against or incurred by any of them as a result
of a third-party claim arising out of events or facts giving rise to such
breach. See "The Certificates--Sale and Assignment of Receivables" herein.
CPS intends to dispute the above-described litigation vigorously and
believes that it has meritorious defenses to each claim made by those obligors.
Nevertheless, the outcome of any litigation is uncertain, and there is the
possibility that damages could be assessed against CPS in amounts that could be
material. It is management's opinion that the above-described litigation will
not have a material adverse effect on CPS's consolidated financial position,
results of operations or liquidity.
THE RECEIVABLES POOL
The Receivables Pool existing as of the Cutoff Date consists of
Contracts 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 [ ]
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 [ ]
months or less as of the Cutoff Date, has an outstanding principal balance of
not more than $[ ], is not more than 30 days past due as of the Cutoff Date and
has an annual percentage rate ("APR") of not less than [ ]%. On the Cutoff Date,
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 [ ], 200[ ].
As of the Cutoff Date, approximately [ ]% of the aggregate principal
balance of the Receivables Pool, constituting [ ]% of the number of Contracts,
represents financing of used vehicles; the remainder of the Receivables Pool
represents financing of new vehicles. As of the Cutoff Date, 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, approximately [ ]% of the aggregate principal balance of the
Receivables represent financing under the Standard Program and approximately [
]% of aggregate principal balance of the Receivables represent financing under
the Super Alpha Program. As of the Cutoff Date, approximately [ ]% of the
aggregate principal balance of the Receivables were Samco Receivables, [ ]% of
the aggregate principal balance of the Receivables were Linc Receivables and [[
]% of the aggregate principal balance of the Receivables were [Affiliated
Originator] Receivables]. The composition, geographic distribution, distribution
by APR, and distribution by remaining term 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
Aggregate Number of Average Weighted Weighted
Weighted Average APR Principal Receivables Principal Average Average
of Receivables Balance in Pool Balance Remaining Term Original Term
-------------- ------- ------- ------- -------------- -------------
<S> <C> <C> <C> <C> <C>
[ ]% $[ ] [ ] $[ ] [ ] mos. [ ] mos.
</TABLE>
S-24
<PAGE>
Geographic Distribution of the Receivables as of the Cutoff Date
<TABLE>
<CAPTION>
Percent of
Percent of Aggregate Aggregate
Number of Number of Principal Principal
State(1) Receivables Receivables Balance Balance
- -------- ----------- ----------- ------- -------
<S> <C> <C> <C> <C>
All Others(2)
----------- ----------- ----------- ----------
TOTAL 100.00%(3) 100.00%(3)
====== ======
</TABLE>
- -------------------------
(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.
S-25
<PAGE>
Distribution of the Receivables by APR as of the Cutoff Date
<TABLE>
<CAPTION>
Percent of Percent of
APR Number of Number of Aggregate Aggregate
Range Receivables Receivables Principal Balance Principal Balance
- ----- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
15.00% to
15.99%
16.00% to
16.99%
17.00% to
17.99%
18.00% to
18.99%
19.00% to
19.99%
20.00% to
20.99%
21.00% to
21.99%
22.00% to
22.99%
23.00% to
23.99%
24.00% to
24.99%
25.00% to
25.99%
26.00% and ---------------- ---------------- ---------------- ----------------
over
TOTAL 100.00%(1) 100.00%(1)
====== ======
</TABLE>
- -------------
(1) Percentages may not add up to 100% because of rounding.
S-26
<PAGE>
Distribution of Receivables by Remaining Term to
Scheduled Maturity as of the Cutoff Date
<TABLE>
<CAPTION>
Percent of
Remaining Term to Percent Aggregate
Scheduled Number of of Number of Aggregate Principal
Maturity Receivables Receivables Principal Balance Balance
-------- ----------- ----------- ----------------- -------
<S> <C> <C> <C> <C>
16-20 months
21-25 months
26-30 months
31-35 months
36-40 months
41-45 months
46-50 months
51-55 months
56-60 months ------------ ---------- -------------- ----------
TOTAL 100.00%(1) 100.00%(1)
====== ======
</TABLE>
- ---------------
(1) Percentages may not add up to 100% because of rounding.
S-27
<PAGE>
<TABLE>
<CAPTION>
Distribution of Receivables by Model Year of Financed Vehicle as of the Cutoff Date
Percent of
Aggregate
Number of Percent of Aggregate Principal
Model Year Receivables Number of Receivables Principal Balance Balance
- ---------- ----------- --------------------- ----------------- -------
<S> <C> <C> <C> <C>
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996 ------------ --------------- --------------- ----------
TOTAL 100.00%(1) 100.00%(1)
====== ======
</TABLE>
- ---------------
(1) Percentages may not add up to 100% because of rounding.
S-28
<PAGE>
<TABLE>
Distribution of Receivables by Original Principal Balance as of the Cutoff Date
<CAPTION>
Percent of
Aggregate Aggregate
Range of Original Number of Percent of Principal Principal
Principal Balances Receivables Number of Receivables Balance Balance
- ------------------ ----------- --------------------- ------- -------
<S> <C> <C> <C> <C>
$0 - 4,999
5,000 - 9,999
10,000 - 14,999
15,000 - 19,999
20,000 - 24,999
25,000 and above ----------- --------------------- --------- ----------
TOTAL 100.00%(1) 100.00%(1)
====== ======
</TABLE>
- ---------------
(1) Percentages may not add up to 100% because of rounding.
S-29
<PAGE>
As of the Cutoff Date, approximately [ ]% 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 Receivables in
the Receivables Pool in the Trust provide for allocation of payments according
to the "simple interest" method ("Simple Interest Receivables"). 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
Certificateholders but will be paid to the Servicer as additional servicing
compensation.
YIELD CONSIDERATIONS
On each Distribution Date, interest on the Receivables will be passed
through to the Certificateholders to the extent of thirty (30) days' interest at
the Class A Pass-Through Rate applied to the Class A Certificate Balance on the
last day of the preceding Collection Period and to the Class B
Certificateholders to the extent of thirty (30) days interest at the Class B
Pass-Through Rate applied to the Class B Certificate Balance on the last day of
the preceding Collection Period; provided, however, that on the first
Distribution Date, Certificateholders will be entitled to interest at the Class
A Pass-Through Rate or the Class B Pass-Through Rate, as applicable, on the
original Class A Certificate Balance or Class B Certificate Balance, as
applicable, from the Closing Date through and including [ ], 199[ ]. In the
event of prepayments on Receivables, Certificateholders will nonetheless be
entitled to receive interest for the full month on the Certificates.
S-30
<PAGE>
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 Certificateholders. See also "The Certificates -
Termination" in this Prospectus Supplement regarding the Servicer's option to
purchase the Receivables when the aggregate principal balance thereof is less
than or equal to 10% of the aggregate principal balance as of the Cutoff Date.
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 (other than Payaheads) 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 Pool Factor" is a
seven-digit decimal which the Servicer will compute each month indicating the
Class A Certificate Balance as a fraction of the initial Class A Certificate
Balance. The "Class B Pool Factor" is a seven-digit decimal which the Servicer
will compute each month indicating the Class B Certificate Balance as a fraction
of the initial Class B Certificate Balance. The Class A Pool Factor and the
Class B Pool Factor will be 1.0000000 as of the Closing Date; thereafter, the
Class A Pool Factor and the Class B Pool Factor will decline to reflect
reductions in the Class A Certificate Balance or Class B Certificate Balance, as
applicable. An individual Certificateholder's share of the Class A Certificate
Balance or Class B Certificate Balance, as applicable, is the product of (i) the
original denomination of the Certificateholder's Certificate and (ii) the Class
A Pool Factor or the Class B Pool Factor, as applicable. The Class A Pool Factor
and the Class B Pool Factor will be made available on or about the eighth
business day of each month.
Pursuant to the Agreement, the Certificateholders will receive monthly
reports concerning the payments received on the Receivables, the Pool Balance,
the Class A Pool Factor, the Class B Pool Factor and various other items of
information. Certificateholders of record during any calendar year will be
furnished information for tax reporting purposes not later than the latest date
permitted by law. See "The Certificates Statements to Certificateholders".
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of the
Certificates will be applied to the purchase of the Receivables from CPS. CPS
will apply the net proceeds received from the Seller to purchase new Contracts
or to repay debt incurred to purchase the Contracts.
S-31
<PAGE>
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 ORIGINATORS
In March 1996, CPS formed Samco, an 80 percent-owned subsidiary based
in Dallas, Texas. Samco's business plan is to provide CPS's sub-prime auto
finance products to rural areas through IFCs. CPS believes that many rural areas
are not adequately served by other industry participants due to their distance
from large metropolitan areas where a Dealer marketing representative is most
likely to be based. The principal executive offices of Samco are located at 8150
N. Central Expressway, Dallas, Texas 75206; telephone (800) 544-8802. In May
1996, CPS formed Linc, an 80 percent-owned subsidiary based in Norwalk,
Connecticut. Linc's business plan is to provide sub-prime auto finance products
to deposit institutions such as banks, thrifts and credit unions. CPS believes
that such institutions do not generally make loans to sub-prime borrowers even
though they may have relationships with automobile dealers who sell vehicles to
sub-prime borrowers and may have sub-prime borrowers as deposit customers. The
principal executive offices of Linc are located at One Selleck Street, Norwalk,
Connecticut 06855; telephone (203) 831-8300.
For information regarding CPS, see "CPS's Automobile Contract
Portfolio".
[Information regarding Affiliated Originators]
STANDBY SERVICER
If CPS is terminated or resigns as Servicer, [ ] (in such capacity, the
"Standby Servicer") will serve as successor Servicer. The Standby Servicer will
receive a fee on each Distribution 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 [ ]% per annum.
DESCRIPTION OF THE CERTIFICATES
General
Each of the Class A Certificates and the Class B Certificates initially
will be represented by certificates 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 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 Certificates" below.
In general, it is intended that the Class A Certificateholders receive,
on each Distribution Date, a distribution equal to the Class A Distributable
Amount and that the Class B Certificateholders receive, on each Distribution
Date, a distribution equal to the Class B Distributable Amount, as applicable.
See "- Distributions on Certificates" below.
Distributions of interest on the Class B Certificates will be
subordinated in priority of payment to interest due on the Class A Certificates.
Distributions of principal of the Class B Certificates will be subordinated in
priority of payment to interest and principal due on the Class A Certificates.
Accordingly, the Class A Certificates will receive, if necessary, the benefit of
amounts otherwise owing to the Class B Certificateholders as credit enhancement.
Funds representing the interest of the Class B Certificateholders in the Trust
Assets will be applied first to the payment of any amounts due to the Class A
Certificateholders on account of the Class A Interest Distributable Amount and
any Class A Interest Carryover Shortfall before any portion thereof is paid to
the Class B Certificateholders and funds otherwise due to pay principal of the
Class B Certificates will be applied first to the payment of the Class A
Principal Distributable Amount and any Class A Principal Carryover Shortfall
before any portion thereof is paid to the Class B Certificateholders.
Registration of Certificates
S-32
<PAGE>
Each of the Class A Certificates and the Class B 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 "Description of the Securities
- -- Book-Entry Registration" in the Prospectus.
Persons acquiring beneficial ownership interests in the Class A
Certificates may elect to hold their Class A Certificates through DTC in the
United States, or CEDEL or Euroclear (in Europe) if they are participants of
such systems, or indirectly through organizations which are participants in such
systems. The book-entry certificates will be issued in one or more certificates
which equal the aggregate principal balance of the Class A Certificates and will
initially be registered in the name of Cede, the nominee of DTC. CEDEL and
Euroclear will hold omnibus positions on behalf of their participants through
customers' securities accounts in CEDEL's and Euroclear's names on the books of
their respective depositories which in turn will hold such positions in
customers' securities accounts in the depositories' names on the books of DTC.
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 certificate 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 certificate will be recorded on the
records of DTC (or of a participating firm that acts as agent for the Financial
Intermediary, whose interest will in turn be recorded on the records of DTC, if
the beneficial owner's Financial Intermediary is not a DTC participant and on
the records of CEDEL or Euroclear, as appropriate).
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Class A Certificates 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.
Sale and Assignment of Receivables
On or prior to the Closing Date, each Originator will sell and assign
to the Seller, without recourse, except as provided in its respective Purchase
Agreement, its entire interest in the Receivables, together with its security
interests in the Financed Vehicles, pursuant to the Purchase Agreements. At the
time of issuance of the Certificates, the Seller will sell and assign to the
Trust, without recourse except as provided in the 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 Agreement. The Trustee will concurrently with such sale and
assignment, execute, authenticate, and deliver the Certificates to the Seller in
exchange for the Receivables. The Seller will sell the Certificates 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 with respect to
the Receivables (including the Affiliate Receivables) is correct in all material
respects; (ii) at the date of issuance of the Certificates, 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 Certificates, the
Receivables are free and clear of all security interests, liens, charges, and
encumbrances and no offsets, defenses, or counterclaims against Dealers, IFCs or
Deposit Institutions have been asserted or threatened; (iv) at the date of
issuance of the Certificates, each of the Receivables is or will be secured by a
first-priority perfected security interest in the Financed Vehicle in favor of
CPS, Samco, Linc or [the appropriate Affiliated Originator]; and (v) each
Receivable, at the time it was originated, complied and, at the date of issuance
of the Certificates, 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, any unless the breach is cured,
CPS will purchase such Receivable (including Affiliate 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 Certificateholders, the [Credit Enhancer] or
the Trustee for any such uncured breach.
On or prior to the Closing Date, the Contracts will be delivered to the
Trustee as custodian, and the 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 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.
S-33
<PAGE>
Accounts
A segregated lock-box account will be established and maintained with
Bank of America in the name of the Trustee for the benefit of 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 "-- Payments on Receivables" below. The
Trustee will also establish and maintain initially with itself one or more
accounts, in the name of the Trustee on behalf of the Certificateholders 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 Trustee will also establish and maintain initially
with itself one or more accounts, in the name of the Trustee on behalf of the
Certificateholders and the [Credit Enhancer], from which all distributions with
respect to the Certificates and payments to the [Credit Enhancer] will be made
(the "Certificate Account"). In addition, the Trustee will establish and
maintain initially with itself one or more accounts, in the name of the Trustee
on behalf of the Obligors, in which early payments with respect to Rule of 78's
Receivables by or on behalf of the Obligors which do not constitute current
scheduled payments, late fees or full repayments will be deposited until such
time as the payment falls due or until such funds are applied to shortfalls in
the scheduled payments with respect to Rule of 78's Receivables (the "Payahead
Account"). Until such time as payments are transferred from the Payahead Account
to the Certificate Account, they will not constitute collected interest or
collected principal, and will not be available for distribution to the
Certificateholders. The Collection Account, Certificate Account and Payahead
Account will be maintained with the Trustee so long as the Trustee's deposits
have a rating acceptable to the [Credit Enhancer] and the Rating Agencies. If
the deposits of the Trustee or its corporate parent no longer have such
acceptable rating, the Trustee shall cause such Accounts to be moved to a bank
acceptable to the [Credit Enhancer]. In addition, the Trustee may transfer the
Payahead Account at any time to any depository bank or trust company which is
acceptable to the [Credit Enhancer].
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 Procedures
The Servicer shall follow its currently employed standards, or such
more exacting standards as the Servicer employs in the future, in servicing the
Receivables. The Servicer will make reasonable efforts to collect all payments
due with respect to the Receivables and, in a manner consistent with the Pooling
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 not (i) grant more
than three extensions with respect to a Receivable, (ii) grant more than one
extension per calendar year with respect to a Receivable, or (iii) grant an
extension for more than one calendar month with respect to a Receivable, without
the consent of the Certificate Insurer. No such arrangement will, for purposes
of the 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 Scheduled Distribution
Date. 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 for the Purchase Amount. Following any such
purchase of a Receivable by the Servicer, such Receivable will be released from
the Trust and conveyed to the Servicer.
Payments on Receivables
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. On each Business Day, the Lock-Box Processor
will transfer any such payments received in the Post Office Box to 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 Lock-Box Account or the
Collection Account upon receipt. The Servicer will, within two Business Days
following the receipt of funds in the Lock-Box Account, direct the Lock-Box Bank
to transfer such funds to the Collection Account. Prior to the Distribution
Date, the Trustee, on the basis of instructions provided by the Servicer, will
transfer funds held in the Collection Account to the Payahead Account if such
payments constitute Payaheads or to the Certificate Account for distribution to
the Certificateholders.
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. If the collections remaining after application to the scheduled
payment and late fees, if any, are insufficient to prepay the Rule of 78's
Receivable in full, such collections (the "Payaheads") will be transferred to
and kept in the Payahead Account, until such later Collection Period as the
collections may be transferred to the Certificate Account and applied either to
the scheduled payment or to prepay such Rule of 78's Receivable in full.
Servicing Compensation
The Servicer will be entitled to receive the Servicing Fee on each
Distribution Date, equal to the sum of (i) the result of one-twelfth times [ ]%
of the Pool Balance as of the close of business on the last day of the second
preceding Collection Period plus (ii) the result of one-twelfth times [ ]% of
the aggregate outstanding principal balance of the Certificates as of the close
of business on the last day of the second preceding Collection Period; provided,
however, that with respect to the first Distribution Date the Servicer will be
entitled to receive a Servicing Fee equal to the sum of (i) the result of
one-twelfth times [ ]% of the original Pool Balance plus (ii) the result of
one-twelfth times [ ]% of the aggregate outstanding principal balance of the
Certificates as of the Closing Date (the "Servicing Fee"). So long as CPS is
Servicer, a portion of the Servicing Fee, equal to the Standby Fee, will be
payable to the Standby Servicer for agreeing to stand by as successor Servicer
and for performing certain other functions. If the Standby Servicer, or any
other entity serving at the time as Standby Servicer, becomes the successor
Servicer, it will receive compensation at a Servicing Fee Rate not to exceed [
]% per annum. See "Standby Servicer" in this 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 of 78's 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 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, 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 Certificateholders.
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, 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 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 on Certificates
No later than [ ] a.m., [ ] time, on each Determination Date, the
Servicer will inform the 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.
On or before each Distribution Date, the Trustee will cause to be
transferred from the Payahead Account to the Certificate Account the amounts
then on deposit in the Payahead Account that constitute scheduled payments due
during the related Collection Period or that may be applied to full prepayments
on the Rule of 78's Receivables.
The Servicer will determine prior to such Determination Date the Total
Distribution Amount, the Class A Interest Distributable Amount, the Class B
Interest Distributable Amount, the Class A Principal Distributable Amount, the
Class B Principal Distributable Amount, the Class A Distributable Amount and the
Class B Distributable Amount.
The "Determination Date" applicable to any Distribution Date will be
the earlier of (i) the seventh business day of the month of such Distribution
Date and (ii) the fifth business day preceding such Distribution Date.
Determination of Total Distribution Amount. The "Total Distribution
Amount" for a Distribution Date (being the funds available for distribution to
the Certificateholders with respect to such Distribution 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
(including amounts withdrawn from the Payahead Account but excluding amounts
deposited into the Payahead Account); (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; and (iv) 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 Collection Period, required to
prepay in full such Receivable under the terms thereof including interest to the
end of the month of purchase.
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"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 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.
"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 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 Agreement or any
rescheduling of payments in any insolvency or similar proceedings).
Calculation of Distribution Amounts. The Class A Certificateholders
will be entitled to receive, to the extent funds are available therefor, the
"Class A Distributable Amount" with respect to each Distribution Date. The
"Class A Distributable Amount" with respect to a Distribution Date will be an
amount equal to the sum of:
(i) the "Class A Principal Distributable Amount", consisting
of the Class A Percentage of the following:
(a) the principal portion of all Scheduled Payments
received during the preceding Collection Period on Rule of
78's Receivables and all payments of principal received on
Simple Interest Receivables during such Collection Period
(including amounts withdrawn from the Payahead Account but
excluding amounts deposited into the Payahead Account and
excluding Recoveries);
(b) the principal portion of all prepayments in full
received during the preceding Collection Period, including
amounts withdrawn from the Payahead Account with respect to
such Distribution Date but excluding amounts deposited in the
Payahead Account (except to the extent included in clauses (a)
or (d));
(c) the principal balance of each Receivable that was
repurchased by CPS or purchased by the Servicer in each case
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 (except to the extent included in (a)
and (b) above);
(d) the principal balance of each Liquidated
Receivable which became such during the preceding Collection
Period (except to the extent included in (a) and (b) above);
and
(e) the aggregate amount of Cram Down Losses that
occurred during the preceding Collection Period (a "Cram Down
Loss" means with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding has
issued an order reducing the amount owed on a Receivable or
otherwise modifying or restructuring the Scheduled Payments to
be made on a Receivable, an amount equal to such reduction in
Principal Balance of such Receivable or the net present value
(using as the discount rate the lower of
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the contract rate or the rate of interest specified by the
court in such order) of the Scheduled Payments as so modified;
a Cram Down Loss shall be deemed to have occurred on the date
of issuance of such order)(the amounts set forth in (a)
through (e), the "Principal Distributable Amount"); plus
(ii) the "Class A Interest Distributable Amount", consisting
of thirty (30) days' interest at the Class A Pass-Through Rate on the
Class A Certificate Balance as of the close of business on the last day
of the related Collection Period; provided, however, that on the first
Distribution Date, the Class A Interest Distributable Amount will
include interest from and including the Closing Date through and
including [ ], 199[ ].
The Class B Certificateholders will be entitled to receive, to the
extent funds are available therefor, the "Class B Distributable Amount" with
respect to each Distribution Date. The "Class B Distributable Amount" with
respect to a Distribution Date will be an amount equal to the sum of:
(i) the "Class B Principal Distributable Amount", consisting
of the Class B Percentage of the Principal Distributable Amount; plus
(ii) the "Class B Interest Distributable Amount", consisting
of thirty (30) days' interest at the Class B Pass-Through Rate on the
Class B Certificate Balance as of the close of business on the last day
of the related Collection Period; provided, however, that on the first
Distribution Date, the Class B Interest Distributable Amount will
include interest from and including the Closing Date through and
including [ ], 199[ ].
On the Final Scheduled Distribution Date, the Class A Principal
Distributable Amount and the Class B Principal Distributable Amount will equal
the then outstanding Class A Certificate Balance and Class B Certificate
Balance, respectively. In addition to the foregoing, the [Credit Enhancer] may
with respect to any Distribution Date exercise its option to make a [Credit
Enhancer] Optional Deposit, to be distributed in accordance with the direction
of the [Credit Enhancer].
"[Credit Enhancer] Optional Deposit" means, with respect to a
Distribution Date, an amount delivered by the [Credit Enhancer], at its sole
option, to the Trustee for deposit into the Collection Account for any of the
following purposes: (i) to provide funds in respect of the payment of fees or
expenses of any provider of services to the Trust with respect to such
Distribution Date; (ii) to distribute as a component of the Class A Principal
Distributable Amount to the extent that the Class A Certificate Balance as of
the Determination Date preceding such Distribution Date exceeds the Class A
Percentage of the Pool Balance as of such Determination Date; or (iii) to
include such amount as part of the Total Distribution Amount for such
Distribution Date to the extent that without such amount a draw would be
required to be made on the Policy.
Priority of Distribution Amounts. On each Determination Date, the
Servicer will calculate the amount to be distributed to the Certificateholders.
On each Distribution Date, the Trustee (based on the Servicer's
determination made on the related Determination Date) shall make the following
distributions in the following order of priority:
[(i) to the Servicer, from the Total Distribution Amount, the
Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods; provided, however, that as long as CPS is the Servicer and [
], is the Standby Servicer, the 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, 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 Agreement, reasonable transition
expenses (up to a maximum of $[ ]) incurred in acting as successor
Servicer;
(iii) to the 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 and expenses payable to the
Trustee for its services pursuant to the Agreement (the "Trustee Fee")
and reasonable out-of-pocket expenses of the Trustee, (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 Trustee pursuant to this clause (iii) and
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expenses payable to the Collateral Agent pursuant to clause (iv) below,
shall be limited to $[ ] 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 Distribution Date;
(v) to the Class A Certificateholders, 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
Interest Distributable Amount and any Class A Interest Carryover
Shortfall as of the close of the preceding Distribution Date (plus
interest on such Class A Interest Carryover Shortfall, to the extent
permitted by law, at the Class A Pass-Through Rate through the current
Distribution Date);
(vi) to the Class B Certificateholders, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (v) above) the Class B
Interest Distributable Amount and any Class B Interest Carryover
Shortfall as of the close of the preceding Distribution Date (plus
interest on such Class B Interest Carryover Shortfall, to the extent
permitted by law, at the Class B Pass-Through Rate through the current
Distribution Date);
(vii) to the Class A Certificateholders, 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
Principal Distributable Amount and any Class A Principal Carryover
Shortfall as of the close of the preceding Distribution Date with
respect to each 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 due to
the [Credit Enhancer] under the terms of the Agreement and under the
[Enhancement Agreement];
(ix) in the event any person other than the Standby Servicer
becomes the Servicer, to such, from the Total Distribution Amount (as
such Total Distribution Amount has been reduced by payments pursuant to
clauses (i) through (viii) above) and any amount deposited into the
Collection Account pursuant to the Agreement, to the extent not paid
pursuant to clause (ii) above, reasonable transition expenses (up to a
maximum of $[ ]) incurred in acting as successor Servicer;
(x) to the Class B Certificateholders, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (ix) above) the Class B
Principal Distributable Amount and any Class B Principal Carryover
Shortfall as of the close of the preceding Distribution Date; and
(xi) to the Collateral Agent, for deposit in to the Spread
Account, the remaining Total Distribution Amount, if any.]
The right of the Class B Certificateholders to receive distributions of
interest pursuant to clause (vi) above will be subordinated to the prior payment
in full of all amounts payable pursuant to clauses (i) through (v). The right of
the Class B Certificateholders to receive distributions of principal pursuant to
clause (x) above will be subordinated to the prior payment in full of all
amounts payable pursuant to clauses (i) through (ix).
For purposes hereof, the following terms shall have the following
meanings:
"Class A Interest Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Class A Interest Distributable Amount for
such Distribution Date, plus any outstanding Class A Interest Carryover
Shortfall from the preceding Distribution Date, over the amount of interest that
the Holders of the Class A Certificates actually received on such current
Distribution Date.
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"Class A Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Class A Principal Distributable Amount plus
any outstanding Class A Principal Carryover Shortfall from the preceding
Distribution Date over the amount of principal that the holders of the Class A
Certificates actually received on such current Distribution Date.
"Class B Interest Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Class B Interest Distributable Amount for
such Distribution Date, plus any outstanding Class B Interest Carryover
Shortfall from the preceding Distribution Date, over the amount of interest that
the holders of the Class B Certificates actually received on such current
Distribution Date.
"Class B Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Class B Principal Distributable Amount plus
any outstanding Class B Principal Carryover Shortfall from the preceding
Distribution Date over the amount of principal that the holders of the Class B
Certificates actually received on such current Distribution Date.
On the third business day prior to a Distribution Date, the 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 Agreement, to distribute the Class A Distributable Amount.
[The Spread Account. 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 Trustee on behalf of
the Class A Certificateholders. The Collateral Agent [will] [will not] hold the
Requisite Amount for the benefit of the Class B Certificateholders. Any portion
of the Total Distribution Amount remaining on any Distribution Date after
payment of all fees and expenses due on such date to the Servicer, the Standby
Servicer, the Trustee and the Collateral Agent and all principal and interest
payments due to the Certificateholders on such Distribution Date, will be
deposited in the Spread Account and held by the Collateral Agent for the benefit
of the [Credit Enhancer] and the Trustee on behalf of the Class A
Certificateholders. If on any Distribution Date, the Total Distribution Amount
is insufficient (taking into account the application of the Total Distribution
Amount to the payment of the Class B Interest Distributable Amount and any Class
B Interest Carryover Shortfall) to pay all distributions required to be made on
such day pursuant to priorities (i), (ii), (iii), (iv), (v), (vii), (viii) and
(ix) under " -- Priority of Distribution Amounts", then amounts on deposit in
the Spread Account will be applied to pay the amounts due on such Distribution
Date pursuant to such priorities (i), (ii), (iii), (iv), (v), (vii), (viii) and
(ix).]
Statements to Certificateholders
On each Distribution Date, the Trustee will include with each
distribution to each Certificateholder of record as of the close of business on
the applicable Record Date and each rating agency that is currently rating 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 Class A Certificates and the Class B Certificates, respectively;
(ii) the amount of the distribution allocable to interest on
the Class A Certificates and the Class B Certificates, respectively;
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(iii) the Pool Balance, the Class A Pool Factor and the Class
B Pool Factor as of the close of business on the last day of the
preceding Collection Period;
(iv) the aggregate Class A Certificate Balance as of the close
of business on the last day of the preceding Collection Period, after
giving effect to payments allocated to principal reported under (i)
above;
(v) the aggregate Class B Certificate Balance as of the close
of business on the last day of the preceding Collection Period, after
giving effect to payments allocated to principal reported under (i)
above;
(vi) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period and the Class A Percentage and
the Class B Percentage of the Servicing Fee (inclusive of the Standby
Fee), the amount of any unpaid Servicing Fees and the change in such
amount from that of the prior Distribution Date;
(vii) the amount of the Class A Interest Carryover Shortfall,
if applicable, and Class A Principal Carryover Shortfall, if
applicable, on such Distribution Date and the change in such amounts
from those on the prior Distribution Date;
(viii) the amount of the Class B Interest Carryover Shortfall,
if applicable, and Class B Principal Carryover Shortfall, if
applicable, on such Distribution Date and the change in such amounts
from those on the prior Distribution Date;
(ix) the amount paid to the Class A Certificateholders under
the [Credit Enhancement] for such Distribution Date;
(x) the amount distributable to the [Credit Enhancer] on such
Distribution Date;
(xi) the aggregate amount in the Payahead Account and the
Spread Account and the change in such amount from the previous
Distribution Date;
(xii) 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; and
(xiii) the number and the aggregate Purchase Amount of
Receivables repurchased by CPS or purchased by the Servicer.]
Each amount set forth pursuant to subclauses (i), (ii), (vi), (vii) and
(viii) above shall be expressed in the aggregate and as a dollar amount per
$1,000 of original principal balance of a Certificate.
Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of the Agreement, the Trustee will
mail to each person who at any time during such calendar year shall have been a
Certificateholder and received any payment on such holder's Certificates, a
statement (prepared by the Servicer) containing the sum of the amounts described
in (i), (ii) and (vi) above for the purposes of such Certificateholder's
preparation of federal income tax returns. See "The Certificates -- Statements
to Certificateholders" in this Prospectus Supplement. See "Certain Federal
Income Tax Consequences" in this Prospectus Supplement.
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Evidence as to Compliance
The Agreement will provide that a firm of independent certified public
accountants will furnish to the Trustee and the [Credit Enhancer] on or before
July 31 of each year, beginning [ ], 199[ ], 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 Closing Date to [ ], 199[ ]).
The Agreement will also provide for delivery to the Trustee and the
[Credit Enhancer], on or before July 31 of each year, commencing [ ], 199[ ] of
a certificate signed by an officer of the Servicer stating that the Servicer has
fulfilled its obligations under the 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 [ ], 199[ ]). The Servicer has
agreed to give the Trustee and the [Credit Enhancer] notice of any Events of
Default under the Agreement.
Copies of such statements and certificates may be obtained by
Certificateholders by a request in writing addressed to the Trustee.
Certain Matters Regarding the Servicer
The 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 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 Agreement.
The 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 Certificateholders for taking any action or for refraining from
taking any action pursuant to the 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 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 Agreement and that, in its opinion, may
cause it to incur any expense or liability.
Under the circumstances specified in the 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 Agreement.
The Servicer is retained for an initial term commencing on the Closing
Date and ending on [ ], 199[ ], which term may be extended in ninety day
increments by the [Credit Enhancer]. In the absence of an Event of Default under
the Agreement, the [Credit Enhancer] has agreed to extend such term. See "The
Certificates -- Certain Matters Regarding the Servicer" in the Prospectus.
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Events of Default
"Events of Default" under the Agreement will consist of (i) any failure
by the Servicer to deliver to the Trustee for distribution to the
Certificateholders any required payment, which failure continues unremedied for
two Business Days, or any failure to deliver to the Trustee the annual
accountants report, the annual statement as to compliance or the statement to
the Certificateholders, in each case, within [ ] days of the date it is due and
which shall comply with the requirements therefor; (ii) any failure by the
Servicer or the Seller, as the case may be, duly to observe or perform in any
material respect any other covenant or agreement in the Agreement which
continues unremedied for [ ] 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 Trustee, or (2) to the Servicer or the Seller, as the case
may be, and to the Trustee and the [Credit Enhancer] by the holders of Class A
Certificates evidencing not less than [ ] of the Class A Certificate Balance or,
after the Class A Certificates have been paid in full and all outstanding
amounts due to the [Credit Enhancer] have been paid in full, by the holders of
Class B Certificates evidencing not less than [ ] of the Class B Certificate
Balance; (iii) certain events of insolvency, readjustment of debt, marshalling
of assets and liabilities, or similar proceedings with respect to the Servicer
or the Seller, 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; or (iv) the
occurrence of an Event of Default under the [Enhancement Agreement].
Rights Upon Event of Default
As long as an Event of Default under the Agreement remains unremedied,
(x) provided no [Enhancement Default] shall have occurred and be continuing, the
[Credit Enhancer] in its sole and absolute discretion or (y) if an [Enhancement
Default] shall have occurred and be continuing, then the Trustee or the holders
of Class A Certificates evidencing not less than [ ] of the Class A Certificate
Balance or (z) if the Class A Certificates have been paid in full and either (i)
all outstanding amounts due to the [Credit Enhancer] have been paid in full or
(ii) an [Enhancement Default] shall have occurred and be continuing, then either
the Trustee or the holders of Class B Certificates evidencing not less than [ ]
of the Class B Certificate Balance, may terminate all the rights and obligations
of the Servicer under the Agreement, whereupon the Standby Servicer, or such
other successor Servicer as shall be or have been appointed by the [Credit
Enhancer] (or, if an [Enhancement Default] shall have occurred and be
continuing, by the Trustee or the Class A or Class B Certificateholders, as
described above) will succeed to all the responsibilities, duties and
liabilities of the Servicer under such 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 Certificateholder) based on any alleged action or inaction of the predecessor
Servicer as Servicer.
["[Enhancement 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 or other competent court or regulatory authority enters a final 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,
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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]).]
Termination
The obligations of the Servicer, the Seller and the Trustee pursuant to
the Agreement will terminate upon (i) the maturity or other liquidation of the
last Receivable and the disposition of any amounts received upon liquidation of
any remaining Receivables and (ii) the payment to Certificateholders of all
amounts required to be paid to them pursuant to the Agreement and the expiration
of any preference period related thereto.
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 Certificates. The Trustee will give written notice of
termination to each Certificateholder of record. The final distribution to any
Certificateholder will be made only upon surrender and cancellation of such
holder's Certificate at the office or agency of the Trustee specified in the
notice of termination. Any funds remaining with the Trustee, after the Trustee
has taken certain measures to locate a Certificateholder and such measures have
failed, will be distributed to The American Red Cross.
[THE CREDIT ENHANCEMENT]
[Description of the [Credit Enhancement]].
[CREDIT ENHANCER]
[Description of Credit Enhancer]
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
[In the opinion of Special Tax Counsel to the Seller, the Trust will be
classified for federal income tax purposes as a grantor trust and not as an
association taxable as a corporation. Certificateholders must report their
respective allocable shares of income earned on Trust Assets (other than any
amounts treated as "stripped coupons") and, subject to certain limitations
applicable to individuals, estates and trusts, may deduct their respective
allocable shares of reasonable servicing and other expenses. Prospective
investors should note that no rulings have been or will be sought from the
Service with respect to any of the federal income tax consequences discussed
herein, and no assurance can be given that the Service will not take contrary
positions. See "Certain Tax Considerations" in the Prospectus.]
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 subject to ERISA and an individual
retirement account (collectively, "Benefit Plans") from engaging in certain
transactions with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to the plan. ERISA also
imposes certain duties and certain prohibitions on persons who are fiduciaries
of plans subject to ERISA. Generally, any person who exercises any authority or
control
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<PAGE>
with respect to the management or disposition of the assets of a plan subject to
ERISA is considered to be a fiduciary of such plan. A violation of these
"prohibited transaction" rules may generate excise tax and other liabilities
under ERISA and the Code.
Pursuant to a regulation issued by the Department of Labor concerning
the definition of what constitutes the "plan assets" of a Benefit Plan, the
assets and properties of certain entities in which a Benefit Plan makes an
equity investment could be deemed to be assets of the Benefit Plan in certain
circumstances. Accordingly, if a Benefit Plan purchases a Certificate, the Trust
could be deemed to hold plan assets. If the assets of the Trust were deemed to
constitute plan assets of a Benefit Plan, the Benefit Plan's investment in the
Certificates might be deemed to constitute delegation under ERISA of the duty to
manage plan assets by the fiduciaries making the decision on behalf of the
Benefit Plan to make the investment, and transactions involving the Trust and
the Trust Assets might be viewed as transactions with the Benefit Plan for the
purpose of ERISA's fiduciary and prohibited transaction rules.
[The Department of Labor has granted [underwriter] an administrative
exemption (Prohibited Transaction Exemption [ ], [ ] Fed. Reg. [ ] (19[ ])) (the
"Exemption") from certain of the prohibited transaction rules of ERISA with
respect to the initial purchase, the purchase in the secondary market and the
holding and the subsequent resale by Benefit Plans of certificates in certain
trusts with respect to which [underwriter] is the sole underwriter or placement
agent or the managing or co-managing underwriter or placement agent in an
underwriting syndicate or selling group and that consist of certain receivables,
loans and other obligations that meet the conditions and requirements of the
Exemption. The obligations covered by the Exemption include retail installment
sale contracts such as the Receivables. The Exemption would apply to the
acquisition, holding and resale of the Class A Certificates by a Benefit Plan
only if specific conditions (certain of which are described below) are met. It
is not clear whether the Exemption applies to participant directed plans as
described in Section 404(c) of ERISA or plans that are subject to Section 4975
of the Code but that are not subject to Title I of ERISA, such as certain Keogh
plans and certain individual retirement accounts.
Among the conditions which must be satisfied for the Exemption to apply
to the acquisition by a Benefit Plan of the Class A Certificates are the
following:
(1) The acquisition of the Class A Certificates by a Benefit Plan is on
terms (including the price for the Class A Certificates) that are at
least as favorable to the Benefit Plan as they would be in an
arm's-length transaction with an unrelated party;
(2) The rights and interests evidenced by the Class A Certificates
acquired by the Benefit Plan are not subordinated to the rights and
interests evidenced by other certificates of the Trust;
(3) The Class A Certificates acquired by the Benefit Plan have a rating
at the time of such acquisition that is in one of the three highest
generic rating categories from Standard & Poor's Corporation, Moody's
Investors Service, Inc., Duff & Phelps Inc. or Fitch Investors Service,
Inc.;
(4) The sum of all payments made to the Underwriters in connection with
the distribution of the Class A Certificates represents not more than
reasonable compensation for placement of the Class A Certificates. The
sum of all payments made to and retained by the Seller pursuant to the
sale of the Receivables to the Trust represents not more than the fair
market value of such Receivables. The sum of all payments made to and
retained by the Servicer represents not more than reasonable
compensation for the Servicer's services under the Agreement and
reimbursement of the Servicer's reasonable expenses in connection
therewith;
(5) The Trustee is not an "affiliate" (as defined in the Exemption) of
the Seller, the Underwriters, the Servicer, the [Credit Enhancer] or
any "obligor" (as defined in the Exemption)
S-44
<PAGE>
with respect to Receivables included in the Trust constituting more
than 5% of the aggregate unamortized principal balance of the assets in
the Trust (including the Trustee, the "Restricted Group");
(6) The Benefit Plan investing in the Class A Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D
under the Securities Act; and
(7) The Trust satisfies the following requirements:
(a) the corpus of the Trust consists solely of assets of the
type which have been included in other investment pools,
(b) certificates in such other investment pools have been
rated in one of the three highest generic rating categories of
Standard & Poor's Corporation, Moody's Investors Service,
Inc., Duff & Phelps Inc. or Fitch Investors Service, Inc. for
at least one year prior to the Benefit Plan's acquisition of
Class A Certificates, and
(c) certificates evidencing interests in such other investment
pools have been purchased by investors other than Benefit
Plans for at least one year prior to any Benefit Plan's
acquisition of Class A Certificates.
The Exemption does not provide an exemption from ERISA Sections
406(a)(1)(E), 406(a)(2) or 407 for the purchase or holding of Class A
Certificates to any person who has discretionary authority or renders investment
advice to Benefit Plans sponsored by any member of the Restricted Group or any
affiliate of such person.]
Exemptive relief from the self-dealing/conflict of interest prohibited
transaction rules of ERISA is available to an obligor acting as a fiduciary with
respect to the investment of a Benefit Plan's assets in the Class A Certificates
(or such person's affiliate) only if, among other requirements (i) such
fiduciary (or its affiliate) is an obligor with respect to 5% percent or less of
the fair market value of the Trust Assets, (ii) a Benefit Plan's investment in
Class A Certificates does not exceed 25% of all of the Class A Certificates
outstanding at the time of the acquisition, (iii) immediately after the
acquisition, no more than 25% of the assets of the Benefit Plan are invested in
certificates representing an interest in trusts (including the Trust) containing
assets sold or serviced by the same entity, and (iv) in the case of the
acquisition of the Class A Certificates in connection with their initial
issuance, at least 50% of the Class A Certificates are acquired by persons
independent of the Restricted Group and at least 50% of the aggregate interest
in the Trust is acquired by persons independent of the Restricted Group.
The Exemption also applies to transactions in connection with the
servicing, management and operation of the Trust, provided that, in addition to
the general requirements described above, (a) such transactions are carried out
in accordance with the terms of a binding pooling and servicing agreement and
(b) the pooling and servicing agreement is provided to, or described in all
material respects in the prospectus or private placement memorandum provided to,
investing Benefit Plans before their purchase of certificates issued by the
Trust. The Agreement is a pooling and servicing agreement as defined in the
Exemption. All transactions relating to the servicing, management, and
operations of the Trust will be carried out in accordance with the Agreement.
See "The Certificates" in this Prospectus Supplement.
Any Benefit Plan fiduciary considering the purchase of Class A
Certificates should consult with its counsel with respect to the applicability
of the Exemption and other issues and determine on its own whether all
conditions have been satisfied and whether the Certificates are an appropriate
investment for a Benefit Plan under ERISA and the Code. By its purchase of a
Class A Certificate, each Benefit Plan purchaser shall be deemed to represent
and warrant that it is an "accredited investor" as defined in Rule 501(a)(1) of
Regulation D under the Securities Act, in accordance with condition (6) above.
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<PAGE>
The Class B Certificates may not be sold or transferred to a Benefit
Plan, a trustee of any Benefit Plan, or an entity, account or other pooled
investment fund the underlying assets of which include or are deemed to include
a Benefit Plan's assets by reason of a Benefit Plan's investment in the entity,
account or other pooled investment fund.
Generally, for purposes of ERISA, an insurance company, insurance
service, or insurance organization qualified to do business in a state (referred
to herein as an "Insurer") is not a Benefit Plan; therefore, the foregoing
restriction for sale or transfer to a Benefit Plan generally would not be
applicable to an Insurer. However, under John Hancock Mutual Life Insurance Co.
v. Harris Bank and Trust, 114 S.Ct. 517 (1993), certain assets held in an
Insurer's general account may be treated as Benefit Plan assets and thus the use
of such "plan assets" to purchase the Class B Certificates may be subject to the
fiduciary requirements of ERISA.
The Seller and the Servicer do not intend to preclude Insurers that are
otherwise qualified investors from purchasing the Class B Certificates;
therefore, for purposes of this offering, the restriction for sale or transfer
to a Benefit Plan will not be applied to prevent the transfer of Class B
Certificates to an Insurer if such Insurer purchases such Class B Certificates
with funds held in one or more of its general accounts, provided that the
Insurer confirms that Section III of Prohibited Transaction Class Exemption
95-60 (the "Class Exemption") applies to the Insurer's acquisition and holding
of such Class B Certificates. Neither the Servicer, the Seller, the Trustee, the
[Credit Enhancer], any Underwriter nor any of their respective affiliates makes
any representation or expresses any opinion as to whether an Insurer constitutes
a Benefit Plan or will be treated as managing Benefit Plan assets.]
UNDERWRITING
[Subject to the terms and conditions contained in the [Underwriting
Agreements], the Seller has agreed to sell to [Underwriters] (the
"Underwriters") and each Underwriter has agreed to purchase the principal amount
of Class A Certificates and Class B Certificates set forth opposite its name
below.
Underwriters Class A Certificates Class B Certificates
------------ Principal Amount Principal Amount
---------------- ----------------
[Underwriter] $ [ ] $ [ ]
[Underwriter] [ ] [ ]
------------ ------------
Total $ [ ] $
============ ============
CPS and the Seller have been advised by the Underwriters that they
propose to offer Class A Certificates and Class B Certificates from time to time
for sale in negotiated transactions or otherwise, at prices determined at the
time of sale. The Underwriters may effect such transactions by selling each of
the Class A Certificates and Class B Certificates 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
Certificates or Class B Certificates for whom they may act as agents. The
Underwriters and any dealers that participate with the Underwriters in the
distribution of each of the Class A Certificates and Class B Certificates may be
deemed to be underwriters, and any discounts or commissions received by them and
any profit on the resale of Class A Certificates or Class B Certificates by them
may be deemed to be underwriting discounts or commissions, under the Securities
Act of 1933, as amended.
S-46
<PAGE>
Each of the Class A Certificates and Class B Certificates are a new
issue of securities with no established trading market. The Underwriters have
advised CPS and the Seller that they intend to act as market makers for each of
the Class A Certificates and Class B Certificates. 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 Certificates or Class B Certificates.
CPS and the Seller have agreed to indemnify the Underwriters against
certain liabilities, including civil liabilities under the Securities Act, or
contribute to payments which the Underwriters may be required to make in respect
thereof.]
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be passed upon
for the Seller, the Servicer and the Underwriters by Mayer, Brown & Platt, New
York, New York. Certain legal matters related to the [Credit Enhancement] will
be passed upon for the [Credit Enhancer] by [ ].
S-47
<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.
Page
----
Actuarial Receivables........................................................30
Affiliate Receivables .......................................................12
Affiliated Originator.........................................................4
Affiliated Originator Receivables.............................................5
Agreement.....................................................................4
Alpha Program................................................................19
APR...........................................................................5
Benefit Plans................................................................43
Cede..............................................................3, 12, 32, 33
Certificate Account..........................................................34
Certificate Owners.......................................................12, 32
Certificates...............................................................1, 4
Class A Certificate Balance...................................................6
Class A Certificateholders....................................................6
Class A Certificates.......................................................1, 4
Class A Distributable Amount.................................................36
Class A Interest Carryover Shortfall.........................................38
Class A Interest Distributable Amount........................................37
Class A Pass-Through Rate.....................................................6
Class A Percentage............................................................4
Class A Pool Factor..........................................................31
Class A Principal Carryover Shortfall........................................39
Class A Principal Distributable Amount.......................................36
Class B Certificate Balance...................................................6
Class B Certificateholders....................................................6
Class B Certificates ......................................................1, 4
Class B Distributable Amount.................................................37
Class B Interest Carryover Shortfall.........................................39
Class B Interest Distributable Amount........................................37
Class B Pass-Through Rate.....................................................6
Class B Percentage............................................................4
Class B Pool Factor..........................................................31
Class B Principal Carryover Shortfall........................................39
Class B Principal Distributable Amount.......................................37
Class Exemption..............................................................46
Code.........................................................................13
Collateral Agent.............................................................39
Collection Account...........................................................34
Collection Period.............................................................7
Commission....................................................................2
Contracts....................................................................18
CPS........................................................................1, 4
CPS Receivables...............................................................5
Cram Down Loss...............................................................36
Credit Enhancement............................................................1
Credit Enhancer Optional Deposit............................................ 37
Cutoff Date...................................................................5
Dealer Agreements............................................................17
Dealers......................................................................17
Delta Program................................................................19
Deposit Institutions.........................................................19
Determination Date...........................................................35
Distribution Date..........................................................6, 9
DTC...................................................................3, 12, 32
Employee Plans...............................................................13
Enhancement Agreement........................................................15
Enhancement Default..........................................................42
ERISA....................................................................13, 43
Events of Default............................................................42
Exemption....................................................................44
Exchange Act..................................................................2
Final Scheduled Distribution Date.............................................6
Financed Vehicles.............................................................5
First Time Buyer Program.....................................................19
IFCs..........................................................................5
Insurer..................................................................13, 46
Linc......................................................................4, 18
Linc Receivables..............................................................5
S-48
<PAGE>
Page
Liquidated Receivable........................................................35
Liquidation Proceeds ........................................................35
Lock-Box Account.........................................................10, 34
Lock-Box Bank................................................................10
Lock-Box Processor...........................................................10
Obligors.....................................................................17
Original Pool Balance.........................................................5
Originator....................................................................4
Originators...................................................................4
Payahead Account.............................................................34
Payaheads....................................................................34
Pool Balance.................................................................31
Post Office Box..............................................................10
Principal Balance............................................................36
Principal Distributable Amount............................................7, 37
Purchase Agreement............................................................5
Purchase Agreements...........................................................5
Purchase Amount..........................................................33, 35
Receivables................................................................1, 5
Record Date...................................................................9
Recoveries...................................................................36
Registration Statement........................................................2
Requisite Amount..............................................................9
Restricted Group.............................................................45
Rule of 78's Receivables.....................................................30
Rule of 78's.................................................................30
Samco.........................................................................4
Samco Receivables.............................................................5
Scheduled Payment............................................................36
Securities Act................................................................2
Seller.....................................................................1, 4
Service......................................................................13
Servicer...................................................................1, 4
Servicing Assumption Agreement...............................................11
Servicing Fee................................................................34
Simple Interest Receivables..................................................30
Spread Account...............................................................39
Standard Program.............................................................19
Standby Fee..................................................................11
Standby Servicer..................................................1, 11, 15, 32
Sub-Prime Borrowers..........................................................18
Super Alpha Program..........................................................19
Total Distribution Amount....................................................35
Trust Assets..................................................................5
Trust......................................................................1, 4
Trustee Fee..................................................................37
Trustee.......................................................................1
UCC..........................................................................33
Underwriters.................................................................46
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<PAGE>
PROSPECTUS SUPPLEMENT
TO PROSPECTUS DATED APRIL 8, 1998
$[ ]
CPS Auto Grantor Trust 1998-2
$[ ] [ ]% Asset-Backed Certificates, Class A
$[ ] [ ]% Asset-Backed Certificates, Class B
CPS Receivables Corp.
(Seller)
Consumer Portfolio Services, Inc.
(Servicer)
The Asset-Backed Certificates will consist of two classes of
certificates, Class A (the "Class A Certificates") and Class B (the "Class B
Certificates" and, collectively, the "Certificates"), evidencing beneficial
ownership interests in a trust (the "Trust") to be formed pursuant to a Pooling
and Servicing Agreement among CPS Receivables Corp., as Seller (the "Seller"),
Consumer Portfolio Services, Inc., as Servicer (individually, "CPS", and in its
capacity as the Servicer, the "Servicer"), and [ ], as Trustee and Standby
Servicer (the "Trustee" and "Standby Servicer", respectively). The Class A
Certificates will evidence, in the aggregate, beneficial ownership of an
undivided ninety-five percent (95%) interest in the Trust Assets, other than
interest received by the Trust in excess of the Class A Pass-Through Rate of [
]% per annum, and the Class B Certificates will evidence, in the aggregate,
beneficial ownership of an undivided five percent (5%) interest in the Trust
Assets, other than interest received by the Trust in excess of the Class B
Pass-Through Rate of [ ]% per annum. The rights of the Class B
Certificateholders to receive distributions with respect to the Receivables are
subordinated to the rights of the holders of the Class A Certificates to the
extent described herein. Only the Class A Certificates are being offered hereby.
The Underwriters have agreed to purchase from the Seller the Class A
Certificates at [ ]% 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, before deducting expenses
payable by the Seller estimated at $[ ], will be $[ ] for the Class A
Certificates.
The Underwriters propose to offer the Securities from time to time in
negotiated transactions or otherwise, at 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.
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 after May [ ], 1998, 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 Policy (as
defined below) with respect to the Class A Certificates, and the right of the
Originators (as defined herein) to receive certain insurance proceeds and
certain other property, as more fully described herein. The Receivables will be
purchased by the Seller from the Originators on or prior to the date of the
issuance of the Certificates.
S-1
<PAGE>
Full and timely payment of the Class A Distributable Amount (as defined
herein) on each Distribution Date is unconditionally and irrevocably guaranteed
pursuant to a financial guaranty insurance policy (the "Policy") to be issued by
Financial Security Assurance Inc. (the "Certificate Insurer").
[FSA logo]
FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THE TRANSACTION, SEE
"RISK FACTORS" AT PAGE S-20 HEREIN AND PAGE [ ] IN THE ACCOMPANYING PROSPECTUS.
THE CERTIFICATES REPRESENT INTERESTS IN THE TRUST AND DO NOT REPRESENT
INTEREST IN OR OBLIGATIONS OF THE SELLER, THE SERVICER OR ANY AFFILIATE THEREOF.
THE CERTIFICATES 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 Certificates are offered hereby by the Underwriters when,
as and if issued by the Seller, delivered to and accepted by the Underwriters
and subject to its right to reject orders in whole or in part. It is expected
that delivery of the Certificates will be made on or about May [ ], 1998 only
through The Depository Trust Company[, Cedel Bank, societe anonyme and the
Euroclear System].
PaineWebber Incorporated Black Diamond Securities, LLC
The date of this Prospectus Supplement is May [ ], 1998.
S-2
<PAGE>
(cover continued from previous 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
Certificates 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
Certificates, 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 Certificates 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) Quarterly Report on Form 10-Q for the period ended March 31, 1997,
(b) Quarterly Report on Form 10-Q for the period ended June 30, 1997,
S-3
<PAGE>
(c) Quarterly Report on Form 10-Q for the period ended September 30,
1997, and
(d) Annual Report on Form 10-K for the year ended December 31, 1997.
All financial statements of Financial Security Assurance Inc. and its
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 Class A
Certificates shall be deemed to be incorporated by reference into this
Prospectus Supplement and to be a part hereof from the respective dates of
filing of such documents.
The New York State Insurance Department recognizes only statutory
accounting practices for determining and reporting the financial conditions and
results of operations of an insurance company, for determining its solvency
under the New York Insurance Law, and for determining whether its financial
condition warrants the payment of a dividend to its stockholders. No
consideration is given by the New York State Insurance Department to financial
statements prepared in accordance with generally accepted accounting principles
in making such determinations.
The Seller on behalf of the Trust hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
Trust's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act and
each filing of the financial statements of Financial Security included in or as
an exhibit to the annual report of Holdings filed pursuant to Section 13(a) or
15(d) of the Exchange Act that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
Class A Certificates offered hereby, and the offering of such Class A
Certificates 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.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
CERTIFICATES AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-4
<PAGE>
REPORTS TO CERTIFICATEHOLDERS
Unless and until Definitive Certificates 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. ("Cede"), as nominee
of The Depository Trust Company ("DTC") and registered holder of the Class A
Certificates. 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-5
<PAGE>
SUMMARY
This Summary is qualified in its entirety by reference to the detailed
information appearing elsewhere in this Prospectus Supplement and in the
accompanying Prospectus. Certain capitalized terms used in the Summary are
defined elsewhere in this Prospectus Supplement. An Index of Terms appears at
the end of this Prospectus Supplement.
Trust.............................. CPS Auto Grantor Trust 1998-2 (the "Trust")
to be formed pursuant to the Pooling and
Servicing Agreement, dated as of May [ ],
1998 among the Seller, the Servicer and the
Trustee and Standby Servicer (the
"Agreement").
Seller............................. CPS Receivables Corp. (the "Seller"). See
"The Seller and CPS" in this Prospectus
Supplement.
Originators........................ Consumer Portfolio Services, Inc. ("CPS"), a
California corporation, Samco Acceptance
Corp. ("Samco"), a Delaware corporation, and
Linc Acceptance Company LLC ("Linc"; Samco
and Linc are each an "Affiliated Originator"
and are, together, the "Affiliated
Originators"), a Delaware limited liability
company (each, in such capacity, an
"Originator" and, together, the
"Originators"). CPS holds an 80% ownership
interest in each of Samco and Linc.
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.
Trustee and Standby Servicer....... Norwest Bank Minnesota, National
Association, a national banking association
("Norwest" and in its capacity as trustee,
the "Trustee" and in its capacity as standby
servicer, the "Standby Servicer"), located
at Sixth Street and Marquette Avenue,
Minneapolis, Minnesota 55479-1054.
Certificate Insurer................ Financial Security Assurance Inc., a
financial guaranty insurance company
incorporated under the laws of the State of
New York (the "Certificate Insurer"). See
"The Certificate Insurer" in this Prospectus
Supplement..
Closing Date....................... On or about May [ ], 1998 (the "Closing
Date").
Description of the
Securities Offered................. The Certificates consist of two classes,
entitled [ ]% Asset-Backed Certificates,
Class A (the "Class A Certificates") and [
]% Asset- Backed Certificates, Class B (the
"Class B Certificates" and, together with
the Class A Certificates, the
"Certificates"). Each Certificate will
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evidence beneficial ownership of an
undivided interest in the Trust. The Class A
Certificates will evidence, in the
aggregate, beneficial ownership of an
undivided interest in the Trust Assets equal
to the Class A Percentage of the Trust
Assets, but not including any interest
received by the Trust in excess of the Class
A Pass-Through Rate. The Class B
Certificates will evidence, in the
aggregate, beneficial ownership of an
undivided interest in the Trust Assets equal
to the Class B Percentage of the Trust
Assets, but not including any interest
received by the Trust in excess of the Class
B Pass-Through Rate.
The "Class A Percentage" as of any date of
determination will be 95%. The "Class B
Percentage" as of any date of determination
will be 5%.
The rights of the Class B Certificates to
receive distributions will be subordinated
to the rights of the Class A Certificates
and the Certificate Insurer to the extent
described herein.
The Certificates will be offered for
purchase in denominations of $1,000 and in
integral multiples thereof.
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 Rule of
78's Receivables, all payments due thereon
after May [ ], 1998 (the "Cutoff Date"),
and, with respect to Simple Interest
Receivables, all payments received
thereunder after the Cutoff Date, (iii)
security interests in the Financed Vehicles,
(iv) certain bank accounts and the proceeds
thereof, (v) the right of the Seller to
receive proceeds from claims under, or
refunds of unearned premiums from, certain
insurance policies and extended service
contracts, (vi) all right, title and
interest of the Seller in and to the
Purchase Agreements (as defined below),
(vii) the Policy issued by the Certificate
Insurer with respect to the Class A
Certificates, and (viii) certain other
property, as more fully described herein.
See "Formation of the Trust" in this
Prospectus Supplement and "The Trust Assets"
in the Prospectus. The Receivables will be
purchased by the Seller from CPS, Samco or
Linc pursuant to a Purchase Agreement on or
prior to the Closing Date. The Receivables
arise from loans originated by automobile
dealers, independent finance companies
("IFCs") or Deposit Institutions (as defined
herein) for assignment to CPS, Samco or Linc
pursuant to CPS's auto loan programs.
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<PAGE>
The Receivables.................... As of the Cutoff Date, the aggregate
outstanding principal balance of the
Receivables was $[ ] (the "Original Pool
Balance"). On the Closing Date, the Seller
will purchase the Receivables from CPS,
Samco and Linc pursuant to three purchase
agreements, each dated as of May [ ], 1998
(the "CPS Purchase Agreement", "Samco
Purchase Agreement" and "Linc Purchase
Agreement", respectively, and each, a
"Purchase Agreement" and, together, the
"Purchase Agreements"), each between the
respective Originator and the Seller. The
Receivables sold by CPS, Samco and Linc (the
"CPS Receivables", "Samco Receivables" and
"Linc Receivables", respectively) will
represent approximately [ ]%, [ ]% and [ ]%,
respectively, of the Pool Balance (as
defined herein) as of the Cutoff Date. The
Trust, in turn, will purchase the
Receivables on the Closing Date from the
Seller, and the Servicer will agree to
service the Receivables, pursuant to the
Pooling and Servicing Agreement. See "The
Receivables Pool" herein and "The
Receivables Pools" in the Prospectus. 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 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,
independent finance companies ("IFCs") or
Deposit Institutions for assignment to CPS,
Samco or Linc 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" in this Prospectus
Supplement and "Risk Factors-Nature of
Obligors" in the Prospectus. The Receivables
have been selected from the contracts owned
by CPS based on the criteria specified in
the Agreement and described herein.
Each Receivable is a Rule of 78's Receivable
or a Simple Interest Receivable. As of the
Cutoff Date, the weighted average annual
percentage rate (the "APR") of the
Receivables was approximately [ ]%, the
weighted average remaining term to maturity
of the Receivables was approximately [ ]
months and the weighted average original
term to maturity of the Receivables was
approximately [ ]
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<PAGE>
months. As of the Cutoff Date, no Receivable
had a scheduled maturity later than [ ].
Class A Certificate Balance........ The "Class A Certificate Balance" will
equal, initially, the Class A Percentage of
the Original Pool Balance as of the close of
business on the Cutoff Date, and thereafter
will equal the initial Class A Certificate
Balance reduced by all principal
distributions on the Class A Certificates.
Class A Pass-Through Rate.......... Interest will accrue on the Class A
Certificate Balance at a rate of [ ]% per
annum, calculated on the basis of a 360-day
year consisting of twelve 30-day months (the
"Class A Pass-Through Rate").
Class B Certificate Balance........ The "Class B Certificate Balance" will
equal, initially, the Class B Percentage of
the Original Pool Balance as of the close of
business on the Cutoff Date, and thereafter
will equal the initial Class B Certificate
Balance reduced by all principal
distributions on the Class B Certificates.
Class B Pass-Through Rate.......... Interest will accrue on the principal
balance of the Class B Certificates
outstanding from time to time at a rate of [
]% per annum, calculated on the basis of a
360-day year consisting of twelve 30-day
months (the "Class B Pass-Through Rate").
Interest........................... On the 15th of each month (or the next
following Business Day) beginning June 15,
1998 (each, a "Distribution Date"), the
Trustee will, to the extent there are funds
available from the sources described herein,
pass-through and (i) distribute pro rata to
the holders of record of the Class A
Certificates (the "Class A
Certificateholders") as of the related
Record Date thirty (30) days' of interest at
the Class A Pass-Through Rate on the Class A
Certificate Balance as of the close of
business on the last day of the related
Collection Period and (ii) distribute pro
rata to the holders of record of the Class B
Certificates (the "Class B
Certificateholders") as of the related
Record Date thirty (30) days' of interest at
the Class B Pass-Through Rate on the Class B
Certificate Balance as of the close of
business on the last day of the related
Collection Period; provided, however, that
on the first Distribution Date, the
Certificateholders will be entitled to
interest at the Class A Pass-Through Rate or
the Class B Pass-Through Rate, as
applicable, on the initial Class A
Certificate Balance or the initial Class B
Certificate Balance, as applicable, from and
including the Closing Date through and
including June 14, 1998. The final scheduled
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<PAGE>
Distribution Date on the Certificates will
be the [ ] Distribution Date (the "Final
Scheduled Distribution Date").
Principal.......................... On each Distribution Date, the Trustee will,
to the extent that there are funds available
from the sources described herein,
distribute to
(a) the Class A Certificateholders as of the
related Record Date an amount equal to the
Class A Percentage of the Principal
Distributable Amount and (b) the Class B
Certificateholders as of the related Record
Date an amount equal to the Class B
Percentage of the Principal Distributable
Amount. The "Principal Distributable Amount"
for a Distribution Date shall equal the sum
of (a) the principal portion of all
Scheduled Payments (as defined herein) due
and 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 (including
prepayments in full resulting from
collections with respect to a Receivable
received during the preceding Collection
Period plus any amounts applied from the
Payahead Account with respect to such
Receivable) (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 (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 that
shall have occurred during the preceding
Collection Period (without duplication of
amounts included in (a) through (d) above).
In addition, on the Final Scheduled
Distribution Date, the principal required to
be distributed to the Class A
Certificateholders will equal the then
outstanding Class A Certificate Balance and
the principal required to be distributed to
the Class B Certificateholders will equal
the then outstanding Class B Certificate
Balance.
A "Collection Period" with respect to a
Distribution Date will be the calendar month
preceding the month in which such
Distribution Date occurs; provided however,
that with respect to the first Distribution
Date, the "Collection Period" will be the
period from and excluding the Cutoff Date to
and including May [ ], 1998.
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<PAGE>
Priority of Payments............... On each Distribution Date, the Trustee shall
make the following distributions in the
Following order of priority:
(i) to the Servicer, the Servicing Fee and
all unpaid Servicing Fees; provided,
however, that as long as CPS is the Servicer
and Norwest, is the Standby Servicer, the
Trustee will first pay to the Standby
Servicer out of the Servicing Fee otherwise
payable to CPS an amount equal to the
Standby Fee;
(ii) in the event the Standby Servicer
becomes the successor Servicer, to the
Standby Servicer, reasonable transition
expenses (up to a maximum of $50,000)
incurred in becoming successor Servicer;
(iii) to the Trustee, the Trustee Fee (as
defined herein), to the extent not
previously paid by the Servicer, and other
reasonable expenses of the Trustee;
(iv) to the Collateral Agent (as defined
herein) all fees, to the extent not
previously paid by the Servicer, and
expenses payable to the Collateral Agent
with respect to such Distribution Date;
(v) to the Class A Certificateholders, the
Class A Interest Distributable Amount (as
defined herein) and any Class A Interest
Carryover Shortfall (as defined herein);
(vi) to the Class B Certificateholders, the
Class B Interest Distributable Amount (as
defined herein) and any Class B Interest
Carryover Shortfall (defined herein);
(vii) to the Class A Certificateholders, the
Class A Principal Distributable Amount (as
defined herein) and any Class A Principal
Carryover Shortfall (as defined herein);
(viii) to the Certificate Insurer, any
amounts due to the Certificate Insurer under
the terms of the Agreement and under the
Insurance Agreement (as defined herein);
(ix) in the event any person other than the
Standby Servicer becomes the Servicer, to
such successor Servicer, reasonable
transition expenses (up to a maximum of
$50,000) incurred in becoming successor
Servicer;
(x) to the Class B Certificateholders, the
Class B Principal Distributable Amount (as
defined herein) and any Class B Principal
Carryover Shortfall (as defined herein); and
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<PAGE>
(xi) to the Collateral Agent, for deposit
into the Spread Account, the remaining Total
Distribution Amount, if any. See "The
Certificates--Distributions on Certificates
Priority of Distribution Amounts" in this
Prospectus Supplement.
Spread Account..................... The Seller has agreed to cause the Spread
Account to be established with the
Collateral Agent for the benefit of the
Certificate Insurer and the Trustee on
behalf of the Class A Certificateholders.
Any portion of the Total Distribution Amount
remaining on any Distribution Date after
payment of all fees and expenses due on such
date to the Servicer, the Standby Servicer,
the Trustee, the Collateral Agent, the
Certificate Insurer, any successor Servicer
and all principal and interest payments due
to the Certificateholders on such
Distribution Date, will be deposited in the
Spread Account and held by the Collateral
Agent for the benefit of the Trustee, on
behalf of the Class A Certificateholders,
and the Certificate Insurer. The Collateral
Agent will not hold for the benefit of the
Class B Certificateholders the amounts on
deposit in the Spread Account on any
Distribution 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 Certificate Insurer and
the Seller as a condition to the issuance of
the Policy (such requisite amount, the
"Requisite Amount"). If on any Distribution
Date, the Total Distribution Amount is
insufficient (taking into account the
application of the Total Distribution Amount
to the payment of the Class B Interest
Distributable Amount and any Class B
Interest Carryover Shortfall) to pay all
distributions required to be made on such
day pursuant to priorities (i), (ii), (iii),
(iv), (v), (vii), (viii) and (ix) referred
to above in "Priority of Payments", amounts
on deposit in the Spread Account will be
applied to pay the amounts due on such
Distribution Date pursuant to such
priorities (i), (ii), (iii), (iv), (v),
(vii), (viii) and (ix). See "The
Certificates--Distributions on
Certificates--The Spread Account" in this
Prospectus Supplement.
Subordination...................... Distributions of interest on the Class B
Certificates will be subordinated in
priority of payment to interest due on the
Class A Certificates. Distributions of
principal on the Class B Certificates will
be subordinated in priority of payment to
interest and principal due on the Class A
Certificates. Accordingly, the Class A
Certificates will receive the benefit of
amounts otherwise due on the Class B
Certificates as credit enhancement. Funds
otherwise available to pay
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<PAGE>
interest on the Class B Certificates will be
applied first to the payment of any amounts
due on the Class A Certificates on account
of the Class A Interest Distributable Amount
and any Class A Interest Carryover Shortfall
before any portion thereof is paid to the
Class B Certificateholders and funds
otherwise available to pay principal of the
Class B Certificates will be applied first
to the payment of the Class A Interest
Distributable Amount, any Class A Interest
Carryover Shortfall, the Class A Principal
Distributable Amount and any Class A
Principal Carryover Shortfall before any
portion thereof is paid to the Class B
Certificateholders.
Distribution and
Record Dates....................... A "Distribution Date" will be the 15th day
of each month (or if such 15th day is not a
business day, the next following business
day) commencing June [ ], 1998. The record
date applicable to each Distribution Date
(each, a "Record Date") will be the 10th day
of the calendar month in which such
Distribution Date occurs.
Repurchases and
Purchases of
Certain Receivables................ CPS has made certain representations and
warranties relating to the Receivables
(including the Samco Receivables and the
Linc Receivables) to the Seller in the CPS
Purchase Agreement, and the Seller has made
such representations and warranties for the
benefit of the Trust and the Certificate
Insurer in the Agreement. The Trustee, as
acknowledged assignee of the repurchase
obligations of CPS under the Purchase
Agreement, will be entitled to require CPS
to repurchase any Receivable (including any
Samco Receivable or Linc 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 within the applicable cure period
following discovery by the Seller or CPS or
notice to the Seller and CPS.
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 Distribution
Date or fails to maintain a perfected
security interest in the Financed Vehicle.
See "Description of the Certificates
Servicing Procedures" in this Prospectus
Supplement and "Description of the Pooling
and Servicing Agreements--Servicing
Procedures" in the Prospectus.
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<PAGE>
The Policy......................... On the Closing Date, the Insurer will issue
the Policy to the Trustee for the benefit of
the Class A Certificateholders (the
"Policy"). Pursuant to the Policy, the
Insurer will unconditionally and irrevocably
guarantee to the Class A Certificateholders
payment of the Class A Certificateholders'
Interest Distributable Amount and the Class
A Certificateholders' Principal
Distributable Amount (collectively, the
"Class A Guaranteed Distribution Amount") on
each Distribution Date. The Class B
Certificates do not have the benefit of the
Policy.
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 Trustee for
the benefit of the Certificateholders and
the Certificate Insurer (the "Post Office
Box"). On each Business Day, [Bank of
America National Trust and Savings
Association], as the lock-box processor (the
"Lock-Box Processor"), will transfer any
such payments received in the Post Office
Box to a segregated lock-box account at
[Bank of America] (the "Lock-Box Bank"), in
the name of the Trustee for the benefit of
the Certificateholders and the Certificate
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
Trustee. See "The Certificates--Accounts",
and "--Payments on Receivables" in this
Prospectus Supplement.
Standby Servicer................... If an Event of Default occurs and remains
unremedied, (1) provided no Certificate
Insurer Default has occurred and is
continuing, then the Certificate Insurer in
its sole and absolute discretion, or (2) if
a Certificate Insurer Default shall have
occurred and be continuing, then the Trustee
or the holders of Class A Certificates
evidencing not less than 25% of the Class A
Certificate Balance, may terminate the
rights and obligations of the Servicer under
the Agreement. If such event occurs when CPS
is the Servicer, or, if CPS resigns as
Servicer or is terminated as Servicer by the
Certificate Insurer, Norwest (in such
capacity, the "Standby Servicer"), has
agreed to serve as successor Servicer under
the Agreement pursuant to a Servicing
Assumption Agreement dated as of May __,
1998 among CPS, the Standby Servicer and the
Trustee (the "Servicing
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<PAGE>
Assumption Agreement"). The Standby Servicer
will receive a portion of the Servicing Fee
(the "Standby Fee") for agreeing to stand by
as successor Servicer and for performing
other functions. If the Standby Servicer or
any other entity serving at the time as
Standby Servicer becomes the successor
Servicer, it will receive compensation at a
Servicing Fee Rate not to exceed 3.00% per
annum. See "Standby Servicer" in this
Prospectus Supplement.
Servicing Fee...................... The Servicing Fee for each Distribution Date
shall be equal to the sum of (i) the result
of one-twelfth times 2.00% of the Pool
Balance as of the close of business on the
last day of the second preceding Collection
Period plus (ii) the result of one-twelfth
times 0.08% of the aggregate outstanding
principal balance of the Certificates as of
the close of business on the last day of the
second preceding Collection Period;
provided, however, that with respect to the
first Distribution Date the Servicer will be
entitled to receive a Servicing Fee equal to
the sum of (i) the result of one-twelfth
times 2.00% of the original Pool Balance
plus (ii) the result of one-twelfth times
0.08% of the aggregate outstanding principal
balance of the Certificates as of the
Closing Date. 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.
Optional Purchase.................. The Servicer may at its option purchase all
the Receivables as of the last day of any
month on or after which the aggregate
principal balance of the Receivables is
equal to 10% or less of the Original Pool
Balance, at a purchase price equal to the
aggregate principal balance of the
Receivables, plus accrued interest at the
respective APRs; provided that the
Servicer's right to exercise such option
will be subject to the prior approval of the
Certificate Insurer if, after giving effect
thereto, a claim under the Policy would
occur or any amount owing to the Certificate
Insurer or the holders of the Class A
Certificates would remain unpaid.
Certain Legal Aspects of
the Receivables; Purchase
Obligations........................ In connection with the sale of the
Receivables, security interests in the
Financed Vehicles securing the Receivables
will be assigned by the Originators to the
Seller pursuant to the Purchase Agreements
and by the Seller to the Trustee pursuant to
the Agreement. Certain of the Receivables
(the "Affiliate Receivables"), representing
approximately [ ]% of
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<PAGE>
the aggregate principal balance of the
Receivables as of the Cutoff Date, have been
originated by Samco and Linc, affiliates of
CPS. The certificates of title to the
Financed Vehicles securing the Receivables
show the applicable Originator as the
lienholder. Due to the administrative burden
and expense, the certificates of title to
the Financed Vehicles (including those
securing the Affiliate Receivables) will not
be amended or re-issued 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 the Seller 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, Samco or Linc in the Financed Vehicle
securing such Receivable (which perfected
security interest has been assigned to, and
is for the benefit of, the Trustee) if, in
either case, such breach materially and
adversely affects the interest of the Trust,
the 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, Samco or Linc is perfected, the
Trustee will have a prior claim over
subsequent purchasers of such Financed
Vehicle and holders of subsequently
perfected security interests. However, as
against liens for repairs of a Financed
Vehicle or for unpaid storage charges or for
taxes unpaid by an Obligor under a
Receivable, or through fraud, forgery or
negligence or error, CPS, Samco or Linc, and
therefore the Trust could lose its prior
perfected security interest in a Financed
Vehicle. 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.
Book-Entry Certificates............ The Certificates initially will be
represented by certificates 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
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<PAGE>
acquiring beneficial ownership interests in
the Certificates may elect to hold their
Certificates 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 Certificates
are book-entry Certificates, such
Certificates will be evidenced by one or
more Certificates registered in the name of
Cede, as the nominee of DTC or one of the
relevant depositories (collectively, the
"European Depositaries"). Crossmarket
transfers between persons holding directly
or indirectly through DTC, on the one hand,
and counterparties holding directly or
indirectly through CEDEL or Euroclear, on
the other, will be effected in DTC 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. Certificates representing the
Certificates will be issued in definitive
form only under the limited circumstances
described herein. All references herein to
"holders" of the Certificates or
"Certificateholders" shall reflect the
rights of beneficial owners of the
Certificates ("Certificate Owners") as they
may indirectly exercise such rights through
DTC and participating members thereof,
except as otherwise specified herein. See
"Risk Factors" and "The
Certificates--Registration of Certificates"
in this Prospectus Supplement and "Certain
Information Regarding the
Certificates--Book-Entry Registration" in
the Prospectus.
Tax Status......................... In the opinion of Mayer, Brown & Platt, as
special tax counsel to the Seller, the Trust
will be classified for federal income tax
purposes as a grantor trust and not as an
association taxable as a corporation.
Certificateholders must report their
respective allocable shares of income earned
on Trust Assets (other than any amounts
treated as "stripped coupons") and, subject
to certain limitations applicable to
individuals, estates and trusts, may deduct
their respective allocable shares of
reasonable servicing and other expenses. See
"Certain Federal Income Tax Consequences" in
this Prospectus Supplement. Prospective
investors should note that no rulings have
been or will be sought from the Internal
Revenue Service (the "Service") with respect
to any of the federal income tax
consequences discussed herein, and no
assurance can be given that the Service will
not take contrary positions. See "Certain
Federal Income Tax Consequences" in this
Prospectus Supplement and "Certain Tax
Considerations" in the Prospectus.
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ERISA Considerations............... As described herein, the Class A
Certificates may be purchased by employee
benefit plans that are subject to the
Employee Retirement Income Security Act of
1974, as amended ("ERISA"). Any benefit plan
fiduciary considering the purchase of Class
A Certificates should, among other things,
consult with its counsel in determining
whether all required conditions have been
satisfied.
The Class B Certificates may not be sold or
transferred to any employee benefit plan
under Section 3(3) of ERISA which is subject
to Title I of ERISA or comparable provisions
of state law, or Section 4975 of the
Internal Revenue Code of 1986, as amended
("Code"), or any fund, account or other
entity deemed to hold assets of any such
plan. Such plans, funds, accounts or other
entities will herein be referred to
collectively as "Employee Plans".
The foregoing restriction on Employee Plans,
however, for purposes of this offering will
not apply to prevent the initial sale of the
Class B Certificates to an insurance
company, insurance service, or insurance
organization that is qualified to do
business in a state (an "Insurer") and that
purchases Class B Certificates with funds
held in one or more of its general accounts,
provided that certain conditions are met.
None of the Servicer, the Seller, the
Trustee, the Certificate Insurer, nor any of
their respective affiliates makes any
representations or express any opinion as to
whether an Insurer constitutes an Employee
Plan.
Fiduciaries of Employee Plans are required
to discharge their duties, including,
without limitation, their duty to invest
"plan assets", in accordance with the
fiduciary standards of ERISA. In addition, a
fiduciary may not engage or cause the
Employee Plan to engage in a "prohibited
transaction" under Section 406 of ERISA and
Section 4975 of the Code. If an Insurer is
determined to be an Employee Plan under
ERISA or to be a fiduciary with respect to
Employee Plan assets, the purchase of Class
B Certificates with "plan assets" would be
subject to these fiduciary requirements.
Insurers contemplating purchasing Class B
Certificates should consult their counsel
before making a purchase. See "ERISA
Considerations" in this Prospectus
Supplement.
Rating of the Certificate.......... It is a condition of issuance that the Class
A Certificates 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
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by the Certificate 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.
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RISK FACTORS
Prospective Certificateholders should consider the following factors,
as well as those matters discussed in "Risk Factors" in the Prospectus, in
connection with the purchase of the Certificates:
Subordination of Class B Certificates
Distributions of interest on the Class B Certificates will be
subordinated in priority of payment to interest due on the Class A Certificates.
Distributions of principal on the Class B Certificates will be subordinated in
priority of payment to interest and principal due on the Class A Certificates.
Accordingly, the Class A Certificates will, if necessary, receive the benefit of
amounts otherwise due on the Class B Certificates as credit enhancement. See
"The Certificates--Distributions on Certificates" in this Prospectus Supplement.
Sub-Prime Nature of Obligors; Servicing
The Originators purchase loans originated for assignment to the
Originators through automobile dealers, IFCs and Deposit Institutions (as
defined herein). The Originators' customers are generally "sub-prime borrowers"
who 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 average interest rate charged by CPS to such "sub-prime" borrowers
is generally higher than that charged by commercial banks, financing arms of
automobile manufacturers and other traditional sources of consumer credit, which
typically impose more stringent credit requirements. 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. As a result of the credit profile of the Obligors and the APRs of the
Receivables, the historical credit loss and delinquency rates on the Receivables
may be higher than those experienced by banks and the captive finance companies
of the automobile manufacturers. In the event of a default under a Receivable,
the only source of repayment may be liquidation proceeds from the related
Financed Vehicle. The Financed Vehicles securing the Receivables will consist
primarily of used vehicles which may not have a liquidation value sufficient to
pay in full the amount financed by the related Receivable.
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 an Event of Default occurs and CPS is removed as Servicer, or, if
CPS resigns or is terminated by the Certificate Insurer as Servicer, the Standby
Servicer has agreed to assume the obligations of successor Servicer under the
Agreement. See "The Certificates--Rights Upon Event of Default" 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 "Standby Servicer" in this Prospectus Supplement.
The Agreement provides that the rights and obligations of the Servicer
terminate each March 31, June 30, October 31 and December 31, unless renewed by
the Certificate Insurer for successive quarterly periods. The Certificate
Insurer will agree to grant continuous renewals so long as (i) no Event of
Default under the
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Agreement has occurred and (ii) no event of default under the insurance and
indemnity agreement among CPS, the Seller and the Certificate Insurer (the
"Insurance Agreement") has occurred.
Limited Obligations of the Seller and CPS
The Certificates are obligations of the Trust only, and neither the
Seller nor any of the Originators is obligated to make any payments on the
Certificates. In connection with each sale of Receivables by an Originator to
the Seller, CPS 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 Certificates. If CPS fails
to repurchase any Receivable with respect to which it is in breach of a
representation or warranty, the Seller will have no obligation to purchase such
Receivable from the Trust.
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.
Ratings of the Certificates
It is a condition to the issuance of the Class A Certificates that the
Class A Certificates be rated "Aaa" by Moody's and "AAA" by Standard & Poor's. A
rating is not a recommendation to purchase, hold or sell the Class A
Certificates, 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 Certificateholders 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 Certificates are based primarily on the
rating of the Certificate Insurer. Upon an Certificate Insurer Default the
rating on the Class A Certificates may be lowered or withdrawn entirely. In the
event that any rating initially assigned to the Class A Certificates is
subsequently lowered or withdrawn for any reason, including by reason of a
downgrading of the Certificate Insurer, no person or entity will be obligated to
provide any additional credit enhancement with respect to the Class A
Certificates. Any reduction or withdrawal of a rating may have an adverse effect
on the liquidity and market price of the Class A Certificates.
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 Trustee on behalf of the
Certificateholders. The Certificates represent interests solely in the Trust and
the Certificates will not be insured or guaranteed by the Seller, the Servicer,
the Trustee or any other person or entity except as described in this Prospectus
Supplement under "The Policy".
Distributions of interest and principal on the Class A Certificates
will be dependent primarily upon collections on the Receivables and amounts paid
pursuant to the Policy. The Class B Certificateholders will not receive any
distributions of interest or principal with respect to a Collection Period until
the full amount
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of interest and principal on the Class A Certificates relating to such
Collection Period and any related Class A Interest and Principal Carryover
Shortfall has been funded. See "The Certificates--Distributions on Certificates"
in this Prospectus Supplement.
Delinquency and Loan Loss Experience
CPS began purchasing Contracts from Dealers in October 1991. Although
CPS has calculated and presented herein its net loss experience with respect to
its servicing portfolio, there can be no assurance that the information
presented will reflect actual experience with respect to the Receivables. In
addition, there can be no assurance that the future delinquency or loan loss
experience of the Trust with respect to the Receivables will be better or worse
than that set forth herein with respect to CPS's servicing portfolio. See "CPS's
Automobile Contract Portfolio--Delinquency and Loss Experience" in this
Prospectus Supplement. Although credit history on Samco's and Linc's
originations is limited, CPS expects that the delinquency and net credit loss
and repossession experience with respect to the Receivables originated by Samco
and Linc will be similar to that of CPS's existing portfolio.
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<PAGE>
FORMATION OF THE TRUST
The Seller and CPS will establish the Trust by selling and assigning
the Receivables and the other Trust Assets (other than the Policy) to the
Trustee in exchange for the Certificates. Prior to such sale and assignment, the
Trust will have no assets or obligations or any operating history. The Trust
will not engage in any business. The Trust will hold the Receivables, issue the
Certificates and distribute payments on the Certificates.
The Servicer will initially service the Receivables pursuant to the
Agreement and will be compensated for acting as the Servicer. See "The
Certificates - Servicing Compensation" in this Prospectus Supplement. The
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
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 as the
new secured party. In the absence of amendments to the certificates of title,
the 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 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 Certificates and distributing payments on
the Certificates, no historical or pro forma financial statements or ratios of
earnings to fixed charges with respect to the Trust have been included herein.
The Seller also will take such steps as are necessary for the
Certificate Insurer to issue the Policy to the Trustee for the benefit of the
Class A Certificateholders. In the event of an Certificate Insurer Default, the
Class A Certificateholders must rely on amounts, if any, available in the Spread
Account, the amount otherwise due on the Class B Certificates, the Obligors 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 Trustee's not having perfected security interests in some of 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
Class A Certificateholders on a current basis. See "Certain Legal Aspects of the
Receivables" in the Prospectus.
THE TRUST ASSETS
Each Certificate will represent a fractional undivided interest in the
Trust, other than interest received by the Trust in excess of the Class A
Pass-Through Rate or the Class B Pass-Through Rate, as applicable. The Trust
Assets include retail installment sale contracts between dealers (the
"Dealers"), IFCs or Deposit Institutions (as defined herein) in new and used
automobiles, light trucks, vans and minivans 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, IFCs or Deposit Institutions for
assignment to CPS, Samco or Linc. Pursuant to agreements between the Dealers and
CPS ("Dealer Agreements") or between the IFCs or Deposit Institutions and an
Affiliated Originator, the Receivables were purchased by CPS, Samco or Linc and,
prior to the Closing Date, evidenced financing made available by CPS, Samco or
Linc to the Obligors. The Trust Assets also include (i) such amounts as from
time to time may
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be held in one or more trust accounts established and maintained by the Trustee
pursuant to the Agreement, as described below; see "The Certificates -
Accounts"; (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 Policy for the benefit of the Class A Certificateholders. The
Payahead Account will be maintained with the Trustee for the benefit of the
Obligors, but will not be part of the Trust.
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, 1997, CPS had purchased $1.4 billion of
Contracts from Dealers and sold $1.3 billion of Contracts to institutional
investors. CPS continues to service all of the Contracts it has purchased,
including those it has re-sold.
CPS has relationships and is party to Dealer Agreements with over
[3,100] dealerships located in [42] states of the United States. CPS purchases
Contracts from Dealers at a fee ranging from $0 to $1,195 of the total amount
financed under the Contracts. 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 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, such as certain late fees,
prepayment charges and other administrative fees and similar charges, 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
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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.
The principal executive offices of CPS are located at 2 Ada, Irvine,
California 92618. CPS's telephone number is (714) 753-6800.
Samco employees call on IFCs primarily in the southeastern United
States and present them with financing programs that are essentially identical
to those which CPS markets directly to Dealers through its marketing
representatives. CPS believes that a typical rural IFC has relationships with
many local automobile purchasers as well as Dealers but, because of limitations
of financial resources or capital structure, such IFCs generally are unable to
provide 36, 48 or 60 month financing for an automobile. IFCs may offer Samco's
financing programs to borrowers directly or indirectly through local dealers.
Samco purchases contracts from the IFCs after its credit personnel have
performed all of the same underwriting and verification procedures and have
applied all the same credit criteria that CPS performs and applies for Contracts
that CPS purchases from Dealers. Samco purchases Contracts at a discount ranging
from 0% to 8% of the total amount financed under such Contracts. In addition,
Samco generally charges IFCs an acquisition fee to defray the direct
administrative costs associated with the processing of Contracts that are
ultimately purchased by Samco. Servicing and collection procedures on Contracts
owned by Samco are performed by CPS at its headquarters in Irvine, California.
For the year ended December 31, 1997, Samco purchased 2,306 Contracts with
original balances of $26.2 million.
In May 1996, CPS formed Linc, an 80 percent-owned subsidiary based in
Norwalk, Connecticut. Linc's business plan is to provide CPS's sub-prime auto
finance products to deposit institutions such as banks, thrifts and credit
unions ("Deposit Institutions"). CPS believes that such Deposit Institutions do
not generally make loans to sub-prime borrowers even though they may have
relationships with automobile dealers who sell vehicles to sub-prime borrowers
and may have sub-prime borrowers as deposit customers.
Linc's employees call on various Deposit Institutions and present them
with a financing program that is similar to CPS's Alpha Program (as defined
below). The Linc program is intended to result in a slightly more creditworthy
borrower than CPS's Standard Program by requiring slightly higher income and
lower debt-to-income ratios than CPS requires under its Standard Program. Linc's
customers may offer its financing program to borrowers directly or to local
Dealers. Linc typically purchases Contracts at par, without a fee to the Deposit
Institution. Servicing and collection procedures on Contracts are performed
entirely by CPS using the same personnel, procedures and systems as CPS uses for
its own programs. For the year ended December 31, 1997, Linc purchased 678
Contracts with original balances of $8.9 million.
Underwriting
CPS markets its services to Dealers under five 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") the CPS
Delta Program (the "Delta Program") and the CPS Super Alpha Program (the "Super
Alpha 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
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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. The Super Alpha Program guidelines are more stringent than
any other CPS program in categories such as advance rate, age of collateral,
credit history and stability. 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, downpayment, and collateral value with regard to the
loan, employment history, monthly income level, household debt ratio and the
applicant's credit history. Based on the stipulations of the loan officer, the
Dealer and the applicant compile a more complete application package which is
forwarded to CPS and reviewed by a processor for deficiencies. As part of this
review, references are checked, direct calls are made to the applicant and
employment income and residence verification is done. Upon the completion of his
or her review, the processor forwards the application package to an underwriter
for further review. The underwriter will confirm the satisfaction of any
remaining deficiencies in the application package. Finally, before the loan is
funded, the application package is checked for deficiencies again by a loan
review officer. CPS conditionally approves approximately 50% of the credit
applications it receives and ultimately purchases approximately 11% of the
received applications.
CPS has purchased portfolios of Contracts in bulk from other companies
that had previously purchased the Contracts from Dealers. From July 1, 1994 to
July 31, 1995, CPS made four such bulk purchases aggregating approximately $22.9
million. In considering bulk purchases, CPS carefully evaluates the credit
profile and payment history of each portfolio and negotiates the purchase price
accordingly. The credit profiles of the Contracts in each of the portfolios
purchased are consistent with the underwriting standards used by CPS in its
normal course of business. Bulk purchases were made at a purchase price
approximately equal to a 7.0% discount from the aggregate principal balance of
the Contracts. CPS has not purchased any portfolios of Contracts in bulk since
July 31, 1995, but may consider doing so in the future.
Generally, the amount funded by CPS will not exceed, in the case of new
cars, 110% of the dealer invoice plus taxes, license fees, insurance and the
cost of the service contract, and in the case of used 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
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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' 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
cancelled prior to its expiration date, a letter is generated to advise the
borrower of its obligation to continue to provide insurance. If no action is
taken by the borrower to insure the vehicle, two successive and more forceful
letters are generated, after which the collection department will contact the
borrower telephonically to further counsel the borrower, including possibly
advising them that CPS has the right to repossess the vehicle if the borrower
refuses to obtain insurance. Although it has the right, CPS rarely repossesses
vehicles in such circumstances. In addition, CPS does not force place a policy
and add the premium to the borrower's outstanding obligation, although it also
has the right to do so. Rather in such circumstances the account is flagged as
not having insurance and continuing efforts are made to get the Obligor to
comply with the insurance requirement in the Contract. CPS believes that
handling non-compliance with insurance requirements in this manner ultimately
results in better portfolio performance because it believes that the increased
monthly payment obligation of the borrower which would result from force placing
insurance and adding the premium to the borrower's outstanding obligation would
increase the likelihood of delinquency or default by such borrower on future
monthly payments.
Samco offers financing programs to IFCs which are essentially identical
to those offered by CPS. The IFCs may offer Samco's financing programs to
borrowers directly or indirectly through local Dealers. Upon submission of
applications to Samco, Samco credit personnel, who have been trained by CPS, use
CPS's proprietary systems to evaluate the borrower and the proposed Contract
terms. Samco purchases Contracts from the IFC after its credit personnel have
performed all of the underwriting and verification procedures and have applied
all the same credit criteria that CPS performs and applies for Contracts it
purchases from Dealers. Prior to CPS purchasing a Contract from Samco, CPS
personnel perform procedures intended to verify that such Contract has been
underwritten and originated in conformity with the requirements applied by CPS
with respect to Contracts acquired by it directly from Dealers.
Linc offers to Deposit Institutions financing programs which are
similar to CPS's Alpha Program. Unlike Samco, which has employees who evaluate
applications and make decisions to purchase Contracts, applications for
Contracts to be purchased by Linc are submitted by the Deposit Institution
directly to CPS, where the approval, underwriting and purchase procedures are
performed by CPS staff who work with Linc as well as with the Dealers to which
CPS markets its programs.
Servicing and Collections
CPS's servicing activities, both with respect to portfolios of
Contracts sold by it to investors and with respect to portfolios of loans owned
or originated by third parties, consist of collecting, accounting for and
posting of all payments received with respect to such Contracts or loans,
responding to borrower inquiries, taking steps to maintain the security interest
granted in the Financed Vehicle or other collateral, investigating
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delinquencies, communicating with the borrower, repossessing and liquidating
collateral when necessary, and generally monitoring each Contract or loan and
related collateral. CPS maintains sophisticated data processing and management
information systems to support its Contract and loan servicing activities.
Upon the sale of a portfolio of Contracts to an investor, or upon the
engagement of CPS by a loan portfolio owner for CPS's services, CPS mails to
borrowers monthly billing statements directing them to mail payments on the
Contracts or loans 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 loans.
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 "The
Certificates--Servicing Procedures", CPS does not modify or rewrite delinquent
Contracts.
On April 1, 1997 CPS established a satellite collection facility in
Chesapeake, Virginia. The 16,000 square foot facility was opened with 35 staff
dedicated solely to collections. As of December 31, 1997 the Chesapeake facility
had more than 100 collectors. The Chesapeake facility is on-line with CPS's
automated collection system at its headquarters in Irvine, California.
Chesapeake staff have been trained by Irvine collection management personnel at
both the Chesapeake facility and at CPS's headquarters. Irvine collection
management has the ability to allocate the collection workload between the two
facilities as well as monitor the effectiveness of the collection effort by
office and individual collector. CPS expects to add resources to both collection
locations as its servicing portfolio grows.
Servicing and collection procedures on Contracts owned by Samco and
Linc and are performed by CPS at its headquarters in Irvine, California and at
its Chesapeake, Virginia collection facility. However, Samco may solicit aid
from the related IFC in collecting past due accounts with respect to which
repossession may be considered.
Delinquency and Loss Experience
Set forth on the following page is certain information concerning the
experience of CPS pertaining to retail new and used automobile, light truck, van
and minivan receivables, including those previously sold, which CPS continues to
service. Loans were first originated under the Delta Program in August 1994 and
S-28
<PAGE>
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
comparable to that 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. Contracts were
first originated under the Super Alpha Program in [ ]. CPS has found that the
delinquency and net credit loss and repossession experience with respect to the
Super Alpha Program is [somewhat lower than that experienced under the Standard
Program]. CPS began servicing Contracts originated by Samco in March 1996 and
Linc in November 1996. Although credit history on Samco's and Linc's
originations is limited, CPS expects that the delinquency and net credit loss
and repossession experience with respect to the Receivables originated by Samco
and Linc will be similar to that of CPS's existing portfolio. There can be no
assurance, however, that the delinquency and net credit loss and repossession
experience on the Receivables or any other isolated group of receivables from
the CPS portfolio would be comparable to CPS's experience as shown in the
following tables. In particular, the information in the tables has not been
adjusted to eliminate the effect of the significant growth in the size of CPS's
loan portfolio during the periods shown.
S-29
<PAGE>
<TABLE>
<CAPTION>
Consumer Portfolio Services, Inc.
Delinquency Experience
December 31, 1994 December 31, 1995 December 31, 1996
--------------------------- -------------------------- --------------------------
Number of Amount Number of Amount Number of Amount
--------- ------ ---------- ------ ---------- ------
Loans Loans Loans
----- ----- -----
<S>
Portfolio(1) <C> <C> <C> <C> <C> <C>
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 638 $9,265,000 2,218 $28,224,000 4,461 $55,636,000
and Amount in
Repossession(4)
=================================================================================================
Delinquencies
as a Percent 2.58% 2.70% 5.10% 5.08% 6.98% 6.80%
of the Portfolio
Repo Inventory
as a Percent 1.90% 1.84% 3.08% 2.85% 2.48% 2.41%
of the Portfolio
Total
Delinquencies 4.48% 4.54% 8.18% 7.93% 9.45% 9.21%
and Amount in
Repossession
as a Percent
of Portfolio
</TABLE>
(1) All amounts and percentages are based on the full amount remaining to be
repaid on each Contract, including, for Rule of 78s Contracts, any unearned
finance charges. The information in the table represents all Contracts
originated by CPS including sold Contracts CPS continues to service.
(2) CPS considers a Contract delinquent when an obligor fails to make at least
90% of a contractually due payment by the due date. The period of
delinquency is based on the number of days payments are contractually past
due.
(3) Amount in Repossession represents Financed Vehicles which have been
repossessed but not yet liquidated.
(4) Amounts shown do not include Contracts which are less than 31 days
delinquent.
S-30
<PAGE>
Consumer Portfolio Services, Inc.
Delinquency Experience
December 31, 1997
----------------------------------------------
Number of Amount
---------- ------
Loans
-----
Portfolio(1) 83,414 1,031,573,000
Period of
Delinquency(2)
31-60 3,092 36,609,000
61-90 1,243 15,303,000
91+ 1,393 17,868,000
----------------------------------------------
Total 5,728 69,781,000
Delinquencies
Amount in 1,977 24,463,000
Repossession(3)
----------------------------------------------
Total 7,705 94,244,000
Delinquencies
and Amount in
Repossession(4)
==============================================
Delinquencies 6.87% 6.76%
as a Percent
of the Portfolio
Repo Inventory 2.37% 2.37%
as a Percent
of the Portfolio
Total 9.24% 9.14%
Delinquencies
and Amount in
Repossession
as a Percent
of Portfolio
S-30 (Table continued)
<PAGE>
<TABLE>
<CAPTION>
Consumer Portfolio Services, Inc.
Net Credit Loss/Repossession Experience
Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
1994 1995 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Average Amount Outstanding $ 98,916,991 $ 221,926,489 $ 395,404,669 $ 703,100,136
During the Period (1)
Average Number of Loans 9,171 20,809 36,998 65,189
Outstanding During the Period
Number of Repossessions 669 2,018 3,145 6,007
Gross Charge-Offs (2) $ 3,166,408 $ 11,658,461 $ 23,296,775 $ 46,649,521
Recoveries (3) $ 347,519 $ 1,028,378 $ 2,969,143 $ 5,534,823
Net Losses $ 2,818,889 $ 10,630,083 $ 20,327,632 $ 41,114,698
Annualized Repossessions as a 7.29% 9.70% 8.50% 9.21%
Percentage of Average Number of
Loans Outstanding
Annualized Net Losses as a 2.85% 4.79% 5.14% 5.85%
Percentage of Average Amount
Outstanding
(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>
S-31
<PAGE>
Recent Developments
On June 30, 1997, CPS was served with summons and counterclaim in the
bankruptcy court for the Northern District of Illinois in connection with the
Chapter 13 bankruptcy of obligors Madeline and Darryl Brownlee of Chicago,
Illinois. The obligors seek class-action treatment of their allegation that the
cost of an extended service contract on the automobile they purchased was
inadequately disclosed by Joe Cotton Ford of Carol Stream, Illinois, the
automobile dealer who sold them their car. The disclosure is alleged to be
violative of the Federal Truth in Lending Act and of Illinois consumer
protection statutes. The obligors' claim is directed against both the dealer for
making the allegedly improper disclosures and against CPS as holder of the
purchase contract. The relief sought is damages in an unspecified amount, plus
costs of suit and attorney's fees. The court has not yet ruled on the obligors'
request for class-action treatment.
In another proceeding, arising out of efforts to collect a deficiency
balance from Joseph Barrios of Chicago, Illinois, the debtor has brought suit
against CPS alleging defects in the notice given upon repossession of the
vehicle. This lawsuit was filed on February 18, 1998 in the circuit court of
Cook County, Illinois. Barrios, represented by the same law firm as the Brownlee
obligors, seeks class-action treatment of his allegation that notice of a
fifteen day period to reinstate his Contract was misleading, in that it did not
refer to an alleged right to redeem collateral up to the date of sale. The
relief sought is damages in an unspecified amount, plus costs of suit and
attorney's fees. As of the date of this Prospectus Supplement, CPS has not been
required to respond to this litigation and has not yet done so.
Although the receivables relating to the above litigation matters are
not included in the Trust, if the request for class action status is granted in
either case, Receivables in the Trust could become subject to the litigation.
Furthermore, the existence of such litigation, or an adverse decision in such
litigation, could encourage similar actions to be brought involving Receivables
in the Trust. If an Obligor has a claim against the Trust as a result of a
violation of law relating to a Receivable and such claim materially and
adversely affects the Trust's interest in such Receivable, such a violation
would constitute a breach of the representations and warranties of CPS and would
create an obligation of CPS to repurchase such Receivable unless the breach is
cured. In addition, CPS will be required to indemnify the Trustee, the
Certificate Insurer, the Trust and the Certificateholders against all costs,
losses, damages, claims and liabilities, including reasonable fees and expenses
of counsel which may be asserted against or incurred by any of them as a result
of a third-party claim arising out of events or facts giving rise to such
breach. See "The Certificates--Sale and Assignment of Receivables" herein.
CPS intends to dispute the above-described litigation vigorously and
believes that it has meritorious defenses to each claim made by those obligors.
Nevertheless, the outcome of any litigation is uncertain, and there is the
possibility that damages could be assessed against CPS in amounts that could be
material. It is management's opinion that the above-described litigation will
not have a material adverse effect on CPS's consolidated financial position,
results of operations or liquidity.
THE RECEIVABLES POOL
The pool of Receivables existing as of the Cutoff Date consists of
Contracts 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
S-32
<PAGE>
during the term of the Contract), has a remaining maturity of [ ] months or less
as of the Cutoff Date, has an outstanding principal balance of not more than $[
], is not more than 30 days past due as of the Cutoff Date and has an annual
percentage rate ("APR") of not less than [ ]%. On the Cutoff Date, 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 [ ], 200[ ].
As of the Cutoff Date, approximately [ ]% of the aggregate principal
balance of the Receivables Pool, constituting [ ]% of the number of Contracts,
represents financing of used vehicles; the remainder of the Receivables Pool
represents financing of new vehicles. As of the Cutoff Date, 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, approximately [ ]% of the aggregate principal balance of the
Receivables represent financing under the Standard Program and approximately [
]% of aggregate principal balance of the Receivables represent financing under
the Super Alpha Program. As of the Cutoff Date, approximately [ ]% of the
aggregate principal balance of the Receivables were Samco Receivables and [ ]%
of the aggregate principal balance of the Receivables were Linc Receivables. The
composition, geographic distribution, distribution by APR, and distribution by
remaining term of the Receivables as of the Cutoff Date are set forth in the
following tables.
S-33
<PAGE>
<TABLE>
<CAPTION>
Composition of the Receivables as of the Cutoff Date
Aggregate Number of Average Weighted Weighted
Weighted Average APR Principal Receivables Principal Average Average
of Receivables Balance in Pool Balance Remaining Term Original Term
-------------- ------- ------- ------- -------------- -------------
<S> <C> <C> <C> <C> <C>
[ ]% $[ ] [ ] $[ ] [ ] mos. [ ] mos.
</TABLE>
S-34
<PAGE>
<TABLE>
<CAPTION>
Geographic Distribution of the Receivables as of the Cutoff Date
Percent of
Percent of Aggregate Aggregate
Number of Number of Principal Principal
State(1) Receivables Receivables Balance Balance
- -------- ----------- ----------- ------- -------
<S> <C> <C> <C> <C>
All Others(2)
----------- ----------- ----------- ----------
TOTAL 100.00%(3) 100.00%(3)
====== ======
</TABLE>
- -------------------------
(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.
S-35
<PAGE>
<TABLE>
<CAPTION>
Distribution of the Receivables by APR as of the Cutoff Date
Percent of Percent of
APR Number of Number of Aggregate Aggregate
Range Receivables Receivables Principal Balance Principal Balance
- ----- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
15.00% to
15.99%
16.00% to
16.99%
17.00% to
17.99%
18.00% to
18.99%
19.00% to
19.99%
20.00% to
20.99%
21.00% to
21.99%
22.00% to
22.99%
23.00% to
23.99%
24.00% to
24.99%
25.00% to
25.99%
26.00% and ---------------- ---------------- ---------------- ----------------
over
TOTAL 100.00%(1) 100.00%(1)
====== ======
</TABLE>
- -------------
(1) Percentages may not add up to 100% because of rounding.
S-36
<PAGE>
<TABLE>
<CAPTION>
Percent of
Remaining Term to Percent Aggregate
Scheduled Number of of Number of Aggregate Principal
Maturity Receivables Receivables Principal Balance Balance
-------- ----------- ----------- ----------------- -------
<S> <C> <C> <C> <C>
16-20 months
21-25 months
26-30 months
31-35 months
36-40 months
41-45 months
46-50 months
51-55 months
56-60 months ------------ ---------- -------------- ----------
TOTAL 100.00%(1) 100.00%(1)
====== ======
</TABLE>
- ---------------
(1) Percentages may not add up to 100% because of rounding.
S-37
<PAGE>
<TABLE>
Distribution of Receivables by Model Year of Financed Vehicle as of the Cutoff Date
Percent of Percent of
Number of Number of Aggregate Aggregate
Model Year Receivables Receivables Principal Balance Principal Balance
- ----------------------- --------------------- ----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Prior to 1990
1990
1991
1992
1993
1994
1995
1996
1997
1998
- ----------------------- --------------------- ----------------------- ----------------------- -----------------------
TOTAL 100.00%(1) 100.00%
============ ============
- ---------------------
(1) Percentages may not add up to 100% because of rounding.
</TABLE>
S-38
<PAGE>
<TABLE>
Distribution of Receivables by Original Principal Balance as of the Cutoff Date
Range of Original Percent of Percent of
Principal Number of Number of Aggregate Aggregate
Balances Receivables Receivables Principal Balance Principal Balance
- ----------------------- --------------------- ----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
$0 - 4,999
5,000 - 9,999
10,000 - 14,999
15,000 - 19,999
20,000 - 24,999
25,000 and above
- ----------------------- --------------------- ----------------------- ----------------------- -----------------------
TOTAL 100.00%(1) 100.00%(1)
============ ============
- ---------------------
(1) Percentages may not add up to 100% because of rounding.
</TABLE>
S-39
<PAGE>
As of the Cutoff Date, approximately [ ]% 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 Receivables in
the Receivables Pool in the Trust provide for allocation of payments according
to the "simple interest" method ("Simple Interest Receivables"). 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
Certificateholders but will be paid to the Servicer as additional servicing
compensation.
YIELD CONSIDERATIONS
On each Distribution Date, interest on the Receivables will be passed
through to the Certificateholders to the extent of thirty (30) days' interest at
the Class A Pass-Through Rate applied to the Class A Certificate Balance on the
last day of the preceding Collection Period and to the Class B
Certificateholders to the extent of thirty (30) days interest at the Class B
Pass-Through Rate applied to the Class B Certificate Balance on the last day of
the preceding Collection Period; provided, however, that on the first
Distribution Date, Certificateholders will be entitled to interest at the Class
A Pass-Through Rate or the Class B Pass-Through Rate, as applicable, on the
original Class A Certificate Balance or Class B Certificate Balance, as
applicable, from the Closing Date through and including May 14, 1998. In the
event
S-40
<PAGE>
of prepayments on Receivables, Certificateholders will nonetheless be entitled
to receive interest for the full month on the Certificates.
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 Certificateholders. See also "The Certificates
Termination" in this Prospectus Supplement regarding the Servicer's option to
purchase the Receivables when the aggregate principal balance thereof is less
than or equal to 10% of the aggregate principal balance as of the Cutoff Date.
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 (other than Payaheads) 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 Pool Factor" is a
seven-digit decimal which the Servicer will compute each month indicating the
Class A Certificate Balance as a fraction of the initial Class A Certificate
Balance. The "Class B Pool Factor" is a seven-digit decimal which the Servicer
will compute each month indicating the Class B Certificate Balance as a fraction
of the initial Class B Certificate Balance. The Class A Pool Factor and the
Class B Pool Factor will be 1.0000000 as of the Closing Date; thereafter, the
Class A Pool Factor and the Class B Pool Factor will decline to reflect
reductions in the Class A Certificate Balance or Class B Certificate Balance, as
applicable. An individual Certificateholder's share of the Class A Certificate
Balance or Class B Certificate Balance, as applicable, is the product of (i) the
original denomination of the Certificateholder's Certificate and (ii) the Class
A Pool Factor or the Class B Pool Factor, as applicable.
Pursuant to the Agreement, the Certificateholders will receive monthly
reports concerning the payments received on the Receivables, the Pool Balance,
the Class A Pool Factor, the Class B Pool Factor and various other items of
information. Certificateholders of record during any calendar year will be
furnished information for tax reporting purposes not later than the latest date
permitted by law. See "The Certificates Statements to Certificateholders".
S-41
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Seller from the sale of the
Certificates will be applied to the purchase of the Receivables from CPS. 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 ORIGINATORS
In March 1996, CPS formed Samco, an 80 percent-owned subsidiary based
in Dallas, Texas. Samco's business plan is to provide CPS's sub-prime auto
finance products to rural areas through IFCs. CPS believes that many rural areas
are not adequately served by other industry participants due to their distance
from large metropolitan areas where a Dealer marketing representative is most
likely to be based. The principal executive offices of Samco are located at 8150
N. Central Expressway, Dallas, Texas 75206; telephone (800) 544-8802.
In May 1996, CPS formed Linc, an 80 percent-owned subsidiary based in
Norwalk, Connecticut. Linc's business plan is to provide sub-prime auto finance
products to deposit institutions such as banks, thrifts and credit unions. CPS
believes that such institutions do not generally make loans to sub-prime
borrowers even though they may have relationships with automobile dealers who
sell vehicles to sub-prime borrowers and may have sub-prime borrowers as deposit
customers. The principal executive offices of Linc are located at One Selleck
Street, Norwalk, Connecticut 06855; telephone (203) 831-8300.
For information regarding CPS, see "CPS's Automobile Contract
Portfolio".
STANDBY SERVICER
If CPS is terminated or resigns as Servicer, Norwest (in such capacity,
the "Standby Servicer") will serve as successor Servicer. The Standby Servicer
will receive a fee on each Distribution Date for agreeing to stand by as
successor Servicer and for performing certain other functions. Such fee will be
payable to the Standby Servicer from the Servicing Fee payable to CPS. If the
Standby Servicer, or any other entity serving at the time as Standby Servicer,
becomes the successor Servicer, it will receive compensation at a Servicing Fee
Rate not to exceed 3.00% per annum.
S-42
<PAGE>
DESCRIPTION OF THE CERTIFICATES
General
The Class A Certificates initially will be represented by certificates
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 in denominations of $1,000.
All references to "holders" or "Certificateholders," and to authorized
denominations, when used with respect to the Class A Certificates, shall reflect
the rights of beneficial owners of the Class A 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 Class A Certificates" below.
In general, it is intended that the Class A Certificateholders receive,
on each Distribution Date, a distribution equal to the Class A Distributable
Amount and that the Class B Certificateholders receive, on each Distribution
Date, a distribution equal to the Class B Distributable Amount, as applicable.
See "Distributions on Certificates" below.
Distributions of interest on the Class B Certificates will be
subordinated in priority of payment to interest due on the Class A Certificates.
Distributions of principal of the Class B Certificates will be subordinated in
priority of payment to interest and principal due on the Class A Certificates.
Accordingly, the Class A Certificates will receive, if necessary, the benefit of
amounts otherwise owing to the Class B Certificateholders as credit enhancement.
Funds otherwise available to pay interest on the Class B Certificates will be
applied first to the payment of any amounts due on the Class A Certificates on
account of the Class A Interest Distributable Amount and any Class A Interest
Carryover Shortfall before any portion thereof is paid to the Class B
Certificateholders and funds otherwise available to pay principal of the Class B
Certificates will be applied first to the payment of the Class A Interest
Distributable Amount, any Class A Interest Carryover Shortfall, the Class A
Principal Distributable Amount and any Class A Principal Carryover Shortfall
before any portion thereof is paid to the Class B Certificateholders.
Registration of Class A Certificates
The Class A Certificates will initially be registered in the name of
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 "Description of the Securities--Book-Entry Registration" in the
Prospectus.
Persons acquiring beneficial ownership interests in the Class A
Certificates may elect to hold their Class A Certificates through DTC in the
United States, or CEDEL or Euroclear (in Europe) if they are participants of
such systems, or indirectly through organizations which are participants in such
systems. The book-entry certificates will be issued in one or more certificates
which equal the aggregate principal balance
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of the Class A Certificates and will initially be registered in the name of
Cede, the nominee of DTC. CEDEL and Euroclear will hold omnibus positions on
behalf of their participants through customers' securities accounts in CEDEL's
and Euroclear's names on the books of their respective depositories which in
turn will hold such positions in customers' securities accounts in the
depositories' names on the books of DTC. 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 certificate 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 certificate will be recorded on the
records of DTC (or of a participating firm that acts as agent for the Financial
Intermediary, whose interest will in turn be recorded on the records of DTC, if
the beneficial owner's Financial Intermediary is not a DTC participant and on
the records of CEDEL or Euroclear, as appropriate).
Although DTC, CEDEL and Euroclear have agreed to the foregoing
procedures in order to facilitate transfers of Class A Certificates 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.
Sale and Assignment of Receivables
On or prior to the Closing Date, each of CPS, Samco and Linc will sell
and assign to the Seller, without recourse, except as provided in its respective
Purchase Agreement, its entire interest in the Receivables, together with its
security interests in the Financed Vehicles, pursuant to, respectively, the CPS
Purchase Agreement, the Samco Purchase Agreement and the Linc Purchase
Agreement. At the time of issuance of the Certificates, the Seller will sell and
assign to the Trust, without recourse except as provided in the 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 Agreement. The Trustee will concurrently with such sale and
assignment, execute, authenticate, and deliver the Certificates to the Seller in
exchange for the Receivables. The Seller will sell the Certificates 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 with respect to
the Receivables (including the Affiliate Receivables) is correct in all material
respects; (ii) at the date of issuance of the Certificates, 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 Certificates, the
Receivables are free and clear of all security interests, liens, charges, and
encumbrances and no offsets, defenses, or counterclaims against Dealers, IFCs or
Deposit Institutions have been asserted or threatened; (iv) at the date of
issuance of the Certificates, each of the Receivables is or will be secured by a
first-priority perfected security interest in the Financed Vehicle in favor of
CPS, Samco or Linc; and (v) each Receivable, at the time it was originated,
complied and, at the date of issuance of the Certificates, 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
(including any Affiliate Receivable) from the Trust for
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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 Certificateholders, the Certificate Insurer and the
Trustee for any such uncured breach.
On or prior to the Closing Date, the Contracts will be delivered to the
Trustee as custodian, and the 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 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 Trustee for the benefit of the
Certificateholders and the Certificate 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 "--Payments on Receivables" below. The
Trustee will also establish and maintain initially with itself one or more
accounts, in the name of the Trustee on behalf of the Certificateholders and the
Certificate 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 Trustee will also establish and maintain initially
with itself one or more accounts, in the name of the Trustee on behalf of the
Certificateholders and the Certificate Insurer, from which all distributions
with respect to the Certificates and payments to the Certificate Insurer will be
made (the "Certificate Account"). In addition, the Trustee will establish and
maintain initially with itself one or more accounts, in the name of the Trustee
on behalf of the Obligors, in which early payments with respect to Rule of 78's
Receivables by or on behalf of the Obligors which do not constitute current
scheduled payments, late fees or full repayments will be deposited until such
time as the payment falls due or until such funds are applied to shortfalls in
the scheduled payments with respect to Rule of 78's Receivables (the "Payahead
Account"). Until such time as payments are transferred from the Payahead Account
to the Certificate Account, they will not constitute collected interest or
collected principal, and will not be available for distribution to the
Certificateholders. The Collection Account, Certificate Account and Payahead
Account will be maintained with the Trustee so long as the Trustee's deposits
have a rating acceptable to the Certificate Insurer and the Rating Agencies. If
the deposits of the Trustee or its corporate parent no longer have such
acceptable rating, the Trustee shall cause such Accounts to be moved to a bank
acceptable to the Certificate Insurer. In addition, the Trustee may transfer the
Payahead Account at any time to any depository bank or trust company which is
acceptable to the Certificate Insurer.
The Collateral Agent will establish the Spread Account as a segregated
trust account at its office or at another depository institution or trust
company.
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Servicing Procedures
The Servicer shall follow its currently employed standards, or such
more exacting standards as the Servicer employs in the future, in servicing the
Receivables. The Servicer will make reasonable efforts to collect all payments
due with respect to the Receivables and, in a manner consistent with the Pooling
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 not (i) grant more
than three extensions with respect to a Receivable, (ii) grant more than one
extension per calendar year with respect to a Receivable, or (iii) grant an
extension for more than one calendar month with respect to a Receivable, without
the consent of the Certificate Insurer. No such arrangement will, for purposes
of the 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 Scheduled Distribution
Date. 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 for the Purchase Amount. Following any such
purchase of a Receivable by the Servicer, such Receivable will be released from
the Trust and conveyed to the Servicer.
Payments on Receivables
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. On each Business Day, the Lock-Box Processor
will transfer any such payments received in the Post Office Box to 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 Lock-Box Account or the
Collection Account upon receipt. The Servicer will, within two Business Days
following the receipt of funds in the Lock-Box Account, direct the Lock-Box Bank
to transfer such funds to the Collection Account. Prior to the Distribution
Date, the Trustee, on the basis of instructions provided by the Servicer, will
transfer funds held in the Collection Account to the Payahead Account if such
payments constitute Payaheads or to the Certificate Account for distribution to
the Certificateholders.
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. If the collections remaining after application to the scheduled
payment and late fees, if any, are insufficient to prepay the Rule of 78's
Receivable in full, such collections (the "Payaheads") will be transferred to
and kept in the Payahead Account, until such later Collection Period as the
collections may be transferred to the Certificate Account and applied either to
the scheduled payment or to prepay such Rule of 78's Receivable in full.
Servicing Compensation
The Servicer will be entitled to receive the Servicing Fee on each
Distribution Date, equal to the sum of (i) the result of one-twelfth times 2.00%
of the Pool Balance as of the close of business on the last day of the second
preceding Collection Period plus (ii) the result of one-twelfth times 0.08% of
the aggregate outstanding principal balance of the Certificates as of the close
of business on the last day of the second preceding Collection Period; provided,
however, that with respect to the first Distribution Date the Servicer will be
entitled to receive a Servicing Fee equal to the sum of (i) the result of
one-twelfth times 2.00% of the original Pool Balance plus (ii) the result of
one-twelfth times 0.08% of the aggregate outstanding principal balance of the
Certificates as of the Closing Date (the "Servicing Fee"). So long as CPS is
Servicer, a portion
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of the Servicing Fee, equal to the Standby Fee, will be payable to the Standby
Servicer for agreeing to stand by as successor Servicer and for performing
certain other functions. If the Standby Servicer, or any other entity serving at
the time as Standby Servicer, becomes the successor Servicer, it will receive
compensation at a Servicing Fee Rate not to exceed 3.00% per annum. See "Standby
Servicer" in this 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 of 78's 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 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, 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 Certificateholders.
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 Trustee and the Certificate
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 on Certificates
No later than 10:00 a.m., Minneapolis time, on each Determination Date,
the Servicer will inform the 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.
On or before each Distribution Date, the Trustee will cause to be
transferred from the Payahead Account to the Certificate Account the amounts
then on deposit in the Payahead Account that constitute scheduled payments due
during the related Collection Period or that may be applied to full prepayments
on the Rule of 78's Receivables.
The Servicer will determine prior to such Determination Date the Total
Distribution Amount, the Class A Interest Distributable Amount, the Class B
Interest Distributable Amount, the Class A Principal Distributable Amount, the
Class B Principal Distributable Amount, the Class A Distributable Amount and the
Class B Distributable Amount.
The "Determination Date" applicable to any Distribution Date will be
the earlier of (i) the seventh business day of the month of such Distribution
Date and (ii) the fifth business day preceding such Distribution Date.
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Determination of Total Distribution Amount. The "Total Distribution
Amount" for a Distribution Date (being the funds available for distribution to
the Certificateholders with respect to such Distribution 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
(including amounts withdrawn from the Payahead Account but excluding amounts
deposited into the Payahead Account); (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; and (iv) 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 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 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 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.
"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 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 Agreement or any
rescheduling of payments in any insolvency or similar proceedings).
Calculation of Distribution Amounts. The Class A Certificateholders
will be entitled to receive, to the extent funds are available therefor, the
"Class A Distributable Amount" with respect to each Distribution Date. The
"Class A Distributable Amount" with respect to a Distribution Date will be an
amount equal to the sum of:
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(i) the "Class A Principal Distributable Amount", consisting
of the Class A Percentage of the following:
(a) the principal portion of all Scheduled Payments
due and received during the preceding Collection Period on
Rule of 78's Receivables and all payments of principal
received on Simple Interest Receivables during such Collection
Period (including amounts withdrawn from the Payahead Account
but excluding amounts deposited into the Payahead Account and
excluding Recoveries);
(b) the principal portion of all prepayments in full
received during the preceding Collection Period, including
amounts withdrawn from the Payahead Account with respect to
such Distribution Date but excluding amounts deposited in the
Payahead Account (except to the extent included in clauses (a)
or (d));
(c) the principal balance of each Receivable that was
repurchased by CPS or purchased by the Servicer in each case
as of the last day of the preceding Collection Period and at
the option of the Certificate Insurer, the Principal Balance
of each Receivable that was required to be but was not so
purchased or repurchased (except to the extent included in (a)
and (b) above);
(d) the principal balance of each Liquidated
Receivable which became such during the preceding Collection
Period (except to the extent included in (a) and (b) above);
and
(e) the aggregate amount of Cram Down Losses that
occurred during the preceding Collection Period (a "Cram Down
Loss" means with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding has
issued an order reducing the amount owed on a Receivable or
otherwise modifying or restructuring the Scheduled Payments to
be made on a Receivable, an amount equal to such reduction in
Principal Balance of such Receivable or 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; a Cram Down Loss shall
be deemed to have occurred on the date of issuance of such
order) (the amounts set forth in (a) through (e), the
"Principal Distributable Amount"); plus
(ii) the "Class A Interest Distributable Amount", consisting
of thirty (30) days' interest at the Class A Pass-Through Rate on the
Class A Certificate Balance as of the close of business on the last day
of the related Collection Period; provided, however, that on the first
Distribution Date, the Class A Interest Distributable Amount will
include interest from and including the Closing Date through and
including June 14, 1998.
The Class B Certificateholders will be entitled to receive, to the
extent funds are available therefor, the "Class B Distributable Amount" with
respect to each Distribution Date. The "Class B Distributable Amount" with
respect to a Distribution Date will be an amount equal to the sum of:
(i) the "Class B Principal Distributable Amount", consisting
of the Class B Percentage of the Principal Distributable Amount; plus
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(ii) the "Class B Interest Distributable Amount", consisting
of thirty (30) days' interest at the Class B Pass-Through Rate on the
Class B Certificate Balance as of the close of business on the last day
of the related Collection Period; provided, however, that on the first
Distribution Date, the Class B Interest Distributable Amount will
include interest from and including the Closing Date through and
including June 14, 1998.
On the Final Scheduled Distribution Date, the Class A Principal
Distributable Amount and the Class B Principal Distributable Amount will equal
the then outstanding Class A Certificate Balance and Class B Certificate
Balance, respectively. In addition to the foregoing, the Certificate Insurer may
with respect to any Distribution Date exercise its option to make a Certificate
Insurer Optional Deposit, to be distributed in accordance with the direction of
the Certificate Insurer.
"Certificate Insurer Optional Deposit" means, with respect to a
Distribution Date, an amount delivered by the Certificate Insurer, at its sole
option, to the Trustee for deposit into the Collection Account for any of the
following purposes: (i) to provide funds in respect of the payment of fees or
expenses of any provider of services to the Trust with respect to such
Distribution Date; (ii) to distribute as a component of the Class A Principal
Distributable Amount to the extent that the Class A Certificate Balance as of
the Determination Date preceding such Distribution Date exceeds the Class A
Percentage of the Pool Balance as of such Determination Date; or (iii) to
include such amount as part of the Total Distribution Amount for such
Distribution Date to the extent that without such amount a draw would be
required to be made on the Policy.
Priority of Distribution Amounts. On each Determination Date, the
Servicer will calculate the amount to be distributed to the Certificateholders.
On each Distribution Date, the Trustee (based on the Servicer's
determination made on the related Determination Date) shall make the following
distributions in the following order of priority:
(i) to the Servicer, from the Total Distribution Amount, the
Servicing Fee and all unpaid Servicing Fees from prior Collection
Periods; provided, however, that as long as CPS is the Servicer and
Norwest, is the Standby Servicer, the 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, 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 Agreement, reasonable transition
expenses (up to a maximum of $50,000) incurred in acting as successor
Servicer;
(iii) to the 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 and expenses payable to the
Trustee for its services pursuant to the Agreement (the "Trustee Fee"),
to the extent not previously paid by the Servicer, and reasonable
out-of-pocket expenses of the Trustee (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 Trustee
pursuant to this clause (iii) and expenses payable to the Collateral
Agent pursuant to clause (iv) below, shall be limited to $50,000 per
annum;
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(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, to the extent
not previously paid by the Servicer, and expenses payable to the
Collateral Agent with respect to such Distribution Date;
(v) to the Class A Certificateholders, 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
Interest Distributable Amount and any Class A Interest Carryover
Shortfall as of the close of the preceding Distribution Date (plus
interest on such Class A Interest Carryover Shortfall, to the extent
permitted by law, at the Class A Pass-Through Rate through the current
Distribution Date);
(vi) to the Class B Certificateholders, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (v) above) the Class B
Interest Distributable Amount and any Class B Interest Carryover
Shortfall as of the close of the preceding Distribution Date (plus
interest on such Class B Interest Carryover Shortfall, to the extent
permitted by law, at the Class B Pass-Through Rate through the current
Distribution Date);
(vii) to the Class A Certificateholders, 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
Principal Distributable Amount and any Class A Principal Carryover
Shortfall as of the close of the preceding Distribution Date with
respect to each Distribution Date;
(viii) to the Certificate Insurer, from the Total Distribution
Amount (as such Total Distribution Amount has been reduced by payments
made pursuant to clauses (i) through (vii) above), any amounts due to
the Certificate Insurer under the terms of the Agreement and under the
Insurance Agreement;
(ix) in the event any person other than the Standby Servicer
becomes the 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) and any
amount deposited into the Collection Account pursuant to the Agreement,
to the extent not paid pursuant to clause (ii) above, reasonable
transition expenses (up to a maximum of $50,000) incurred in acting as
successor Servicer;
(x) to the Class B Certificateholders, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (ix) above) the Class B
Principal Distributable Amount and any Class B Principal Carryover
Shortfall as of the close of the preceding Distribution Date; and
(xi) to the Collateral Agent, for deposit in to the Spread
Account, the remaining Total Distribution Amount, if any.
The right of the Class B Certificateholders to receive distributions of
interest pursuant to clause (vi) above will be subordinated to the prior payment
in full of all amounts payable pursuant to clauses (i) through (v). The right of
the Class B Certificateholders to receive distributions of principal pursuant to
clause (x) above will be subordinated to the prior payment in full of all
amounts payable pursuant to clauses (i) through (ix).
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For purposes hereof, the following terms shall have the following
meanings:
"Class A Interest Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Class A Interest Distributable Amount for
such Distribution Date, plus any outstanding Class A Interest Carryover
Shortfall from the preceding Distribution Date, over the amount of interest that
the Holders of the Class A Certificates actually received on such current
Distribution Date.
"Class A Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Class A Principal Distributable Amount plus
any outstanding Class A Principal Carryover Shortfall from the preceding
Distribution Date over the amount of principal that the holders of the Class A
Certificates actually received on such current Distribution Date.
"Class B Interest Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Class B Interest Distributable Amount for
such Distribution Date, plus any outstanding Class B Interest Carryover
Shortfall from the preceding Distribution Date, over the amount of interest that
the holders of the Class B Certificates actually received on such current
Distribution Date.
"Class B Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Class B Principal Distributable Amount plus
any outstanding Class B Principal Carryover Shortfall from the preceding
Distribution Date over the amount of principal that the holders of the Class B
Certificates actually received on such current Distribution Date.
On the third business day prior to a Distribution Date, the 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 Agreement, to distribute the Class A Distributable Amount.
The Spread Account. 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
Certificate Insurer and the Trustee on behalf of the Class A Certificateholders.
The Collateral Agent will not hold the Requisite Amount for the benefit of the
Class B Certificateholders. Any portion of the Total Distribution Amount
remaining on any Distribution Date after payment of all fees and expenses due on
such date to the Servicer, the Standby Servicer, the Trustee and the Collateral
Agent and all principal and interest payments due to the Certificateholders on
such Distribution Date, will be deposited in the Spread Account and held by the
Collateral Agent for the benefit of the Certificate Insurer and the Trustee on
behalf of the Class A Certificateholders. If on any Distribution Date, the Total
Distribution Amount is insufficient (taking into account the application of the
Total Distribution Amount to the payment of the Class B Interest Distributable
Amount and any Class B Interest Carryover Shortfall) to pay all distributions
required to be made on such day pursuant to priorities (i), (ii), (iii), (iv),
(v), (vii), (viii) and (ix) under "--Priority of Distribution Amounts", then
amounts on deposit in the Spread Account will be applied to pay the amounts due
on such Distribution Date pursuant to such priorities (i), (ii), (iii), (iv),
(v), (vii), (viii) and (ix).
Statements to Certificateholders
On each Distribution Date, the Trustee will include with each
distribution to each Certificateholder of record as of the close of business on
the applicable Record Date and each rating agency that is currently rating the
Certificates a statement (prepared by the Servicer) setting forth the following
information with respect to the preceding Collection Period, to the extent
applicable:
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(i) the amount of the distribution allocable to principal of
the Class A Certificates and the Class B Certificates, respectively;
(ii) the amount of the distribution allocable to interest on
the Class A Certificates and the Class B Certificates, respectively;
(iii) the Pool Balance, the Class A Pool Factor and the Class
B Pool Factor as of the close of business on the last day of the
preceding Collection Period;
(iv) the aggregate Class A Certificate Balance as of the close
of business on the last day of the preceding Collection Period, after
giving effect to payments allocated to principal reported under (i)
above;
(v) the aggregate Class B Certificate Balance as of the close
of business on the last day of the preceding Collection Period, after
giving effect to payments allocated to principal reported under (i)
above;
(vi) the amount of the Servicing Fee paid to the Servicer with
respect to the related Collection Period and the Class A Percentage and
the Class B Percentage of the Servicing Fee (inclusive of the Standby
Fee), the amount of any unpaid Servicing Fees and the change in such
amount from that of the prior Distribution Date;
(vii) the amount of the Class A Interest Carryover Shortfall,
if applicable, and Class A Principal Carryover Shortfall, if
applicable, on such Distribution Date and the change in such amounts
from those on the prior Distribution Date;
(viii) the amount of the Class B Interest Carryover Shortfall,
if applicable, and Class B Principal Carryover Shortfall, if
applicable, on such Distribution Date and the change in such amounts
from those on the prior Distribution Date;
(ix) the amount paid to the Class A Certificateholders under
the Policy for such Distribution Date;
(x) the amount distributable to the Certificate Insurer on
such Distribution Date;
(xi) the aggregate amount in the Payahead Account and the
Spread Account and the change in such amount from the previous
Distribution Date;
(xii) 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; and
(xiii) the number and the aggregate Purchase Amount of
Receivables repurchased by CPS or purchased by the Servicer.
Each amount set forth pursuant to subclauses (i), (ii), (vi), (vii) and
(viii) above shall be expressed in the aggregate and as a dollar amount per
$1,000 of original principal balance of a Certificate.
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Within the prescribed period of time for tax reporting purposes after
the end of each calendar year during the term of the Agreement, the Trustee will
mail to each person who at any time during such calendar year shall have been a
Certificateholder and received any payment on such holder's Certificates, a
statement (prepared by the Servicer) containing the sum of the amounts described
in (i), (ii) and (vi) above for the purposes of such Certificateholder's
preparation of federal income tax returns. See "The Certificates--Statements to
Certificateholders" in this Prospectus Supplement. See "Certain Federal Income
Tax Consequences" in this Prospectus Supplement.
Evidence as to Compliance
The Agreement will provide that a firm of independent certified public
accountants will furnish to the Trustee and the Certificate Insurer on or before
July 31 of each year, beginning July 31, 1999, 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 Closing Date to March 31, 1999).
The Agreement will also provide for delivery to the Trustee and the
Certificate Insurer, on or before July 31 of each year, commencing July 31, 1999
of a certificate signed by an officer of the Servicer stating that the Servicer
has fulfilled its obligations under the 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, 1999). The
Servicer has agreed to give the Trustee and the Certificate Insurer notice of
any Events of Default under the Agreement.
Copies of such statements and certificates may be obtained by
Certificateholders by a request in writing addressed to the Trustee.
Certain Matters Regarding the Servicer
The 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 Certificate Insurer. No such resignation will become
effective until a successor servicer has assumed the servicing obligations and
duties under the 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 Agreement.
The 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 Certificateholders for taking any action or for refraining from
taking any action pursuant to the 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 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 Agreement and that, in its opinion, may
cause it to incur any expense or liability.
Under the circumstances specified in the 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
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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
Agreement.
The Servicer is retained for an initial term commencing on the Closing
Date and ending on September 30, 1998, which term may be extended in quarterly
increments by the Certificate Insurer. In the absence of an Event of Default
under the Agreement and an event of default under the Insurance Agreement, the
Certificate Insurer has agreed to extend such term. See "The
Certificates--Certain Matters Regarding the Servicer" in the Prospectus.
Events of Default
"Events of Default" under the Agreement will consist of (i) any failure
by the Servicer to deliver to the Trustee for distribution to the
Certificateholders any required payment, which failure continues unremedied for
two Business Days, or any failure to deliver to the Trustee the annual
accountants report, the annual statement as to compliance or the statement to
the Certificateholders, in each case, within five days after the date it is due
and which shall comply with the requirements therefor; (ii) any failure by the
Servicer or the Seller, as the case may be, duly to observe or perform in any
material respect any other covenant or agreement in the Agreement which
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
Certificate Insurer or by the Trustee, or (2) to the Servicer or the Seller, as
the case may be, and to the Trustee and the Certificate Insurer by the holders
of Class A Certificates evidencing not less than 25% of the Class A Certificate
Balance or, after the Class A Certificates have been paid in full and all
outstanding amounts due to the Certificate Insurer have been paid in full, by
the holders of Class B Certificates evidencing not less than 25% of the Class B
Certificate Balance; (iii) certain events of insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings with respect to
the Servicer or the Seller, 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; or (iv)
the occurrence of an Event of Default under the Insurance Agreement.
Rights Upon Event of Default
As long as an Event of Default under the Agreement remains unremedied,
(x) provided no Certificate Insurer Default shall have occurred and be
continuing, the Certificate Insurer in its sole and absolute discretion or (y)
if a Certificate Insurer Default shall have occurred and be continuing, then the
Trustee or the holders of Class A Certificates evidencing not less than 25% of
the Class A Certificate Balance or (z) if the Class A Certificates have been
paid in full and either (i) all outstanding amounts due to the Certificate
Insurer have been paid in full or (ii) a Certificate Insurer Default shall have
occurred and be continuing, then either the Trustee or the holders of Class B
Certificates evidencing not less than 25% of the Class B Certificate Balance,
may terminate all the rights and obligations of the Servicer under the
Agreement, whereupon the Standby Servicer, or such other successor Servicer as
shall be or have been appointed by the Certificate Insurer (or, if a Certificate
Insurer Default shall have occurred and be continuing, by the Trustee, the Class
A Certificateholders or Class B Certificateholders, as described above) will
succeed to all the responsibilities, duties and liabilities of the Servicer
under such 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 Certificateholder) based
on any alleged action or inaction of the predecessor Servicer as Servicer.
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"Certificate Insurer Default" shall mean any one of the following
events shall have occurred and be continuing: (i) the Certificate Insurer fails
to make a payment required under the Policy in accordance with its terms; (ii)
the Certificate 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 or other competent court or regulatory authority enters a final and
nonappealable order, judgment or decree (A) appointing a custodian, trustee,
agent or receiver for the Certificate 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 Certificate Insurer (or the taking of
possession of all or any material portion of the property of the Certificate
Insurer).
Termination
The obligations of the Servicer, the Seller and the Trustee pursuant to
the Agreement will terminate upon (i) the maturity or other liquidation of the
last Receivable and the disposition of any amounts received upon liquidation of
any remaining Receivables and (ii) the payment to Certificateholders of all
amounts required to be paid to them pursuant to the Agreement and the expiration
of any preference period related thereto.
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 Certificate Insurer if such purchase would result in a claim
under the Policy or any amount owing to the Certificate Insurer or on the Class
A 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 Certificates. The Trustee will give written notice of
termination to each Certificateholder of record. The final distribution to any
Certificateholder will be made only upon surrender and cancellation of such
holder's Certificate at the office or agency of the Trustee specified in the
notice of termination. Any funds remaining with the Trustee, after the Trustee
has taken certain measures to locate a Certificateholder and such measures have
failed, will be distributed to The American Red Cross.
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 Certificates, the Certificate
Insurer will deliver the Policy to the Trustee for the benefit of each Class A
Certificateholder. Under the Policy, the Certificate Insurer unconditionally and
irrevocably guarantees to the Trustee for the benefit of each Class A
Certificateholder the full and complete payment of (i) the Class A Guaranteed
Distribution Amount with respect to the Class A Certificates and (ii) any Class
A Guaranteed Distribution Amount which subsequently is avoided in whole or in
part as a preference payment under applicable law.
"Class A Guaranteed Distribution Amount" means, with respect to each
Distribution Date, the distribution to be made to the Class A Certificateholders
in an amount equal to the Class A Interest
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Distributable Amount and the Class A Principal Distributable Amount due and
payable on such Distribution Date, in each case in accordance with the original
terms of the Class A Certificates when issued and without regard to any
amendment or modification of the Certificates or the Pooling and Servicing
Agreement which has not been consented to by the Certificate Insurer. The Class
A Guaranteed Distribution Amount shall not include, nor shall coverage be
provided under the Policy in respect of, any portion of a Class A Interest
Distributable Amount due to Class A Certificateholders because a notice and
certificate in proper form as required was not timely Received by Financial
Security, or any portion of a Class A Interest Distributable Amount due to Class
A Certificateholders representing interest on any Class A Interest Carryover
Shortfall accrued from and including the date of payment of the amount of such
Class A Interest Carryover Shortfall. The Class A Guaranteed Distribution Amount
shall not include any amounts due in respect of the Class A Certificates
attributable to any increase in interest rate, penalty or other sum payable by
the Trust by reason of any default or event of default in respect of the Class A
Certificates, or by reason of any deterioration of the creditworthiness of the
Trust, nor shall the Class A Guaranteed Distribution Amount include, nor shall
coverage be provided under the Policy in respect of, any taxes, withholding or
other charge with respect to any Class A Certificateholder imposed by any
governmental authority due in connection with any payments to a Class A
Certificateholder under the Policy.
Payment of claims on the Policy made in respect of the Class A
Guaranteed Distribution Amount will be made by the Certificate Insurer following
Receipt by the Certificate 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 Distribution Date on which such payment was due on the Class A
Certificates.
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 Certificate 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
Certificate Insurer from the 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 Certificateholder is required to return the amount
of any Class A Guaranteed Distribution Amount distributed with respect to the
Class A Certificates during the term of the Policy because such distributions
were avoidable as preference payments under applicable bankruptcy law, (ii) a
certificate of the Class A Certificateholder 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 Certificateholder, in such form as is reasonably required by the
Certificate Insurer and provided to the Class A Certificateholder by the
Certificate Insurer, irrevocably assigning to the Certificate Insurer all rights
and claims of the Class A Certificateholder relating to or arising under the
Class A Certificates against the debtor which made such preference payment or
otherwise with respect to such preference payment, or (b) the date of Receipt by
the Certificate Insurer from the 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 Certificate Insurer shall have received written notice from the
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 Trustee or any Class A Certificateholder directly (unless a Class
A Certificateholder 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 Trustee for distribution
to such Class A Certificateholder upon proof of such payment reasonably
satisfactory to the Certificate Insurer). In connection with the foregoing, the
Certificate Insurer shall have the rights provided pursuant to the Agreement.
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The terms "Receipt" and "Received" with respect to the Policy, shall
mean actual delivery to the Certificate 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 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 Certificate Insurer or its fiscal agent shall promptly so
advise the Trustee and the Trustee may submit an amended notice.
Under the Policy, "Business Day" means any day other than (i) a
Saturday or Sunday or (ii) a day on which banking institutions in the City of
New York, New York, Minneapolis, Minnesota, the State in which the principal
corporate trust office of the Trustee is located, or any other location of any
successor Trustee or successor Collateral Agent are authorized or obligated by
law or executive order to be closed.
The Certificate Insurer's obligations under the Policy in respect of
the Class A Guaranteed Distribution Amount shall be discharged to the extent
funds are transferred to the Trustee as provided in the Policy whether or not
such funds are properly applied by the Trustee.
The Certificate Insurer shall be subrogated to the rights of each Class
A Certificateholder to receive payments of principal and interest to the extent
of any payment by the Certificate Insurer under the Policy.
Claims under the Policy constitute direct, unsecured and unsubordinated
obligations of the Certificate Insurer ranking not less than pari passu with
other unsecured and unsubordinated indebtedness of the Certificate Insurer for
borrowed money. Claims against the Certificate Insurer under the Policy and
claims against the Certificate Insurer under each other financial guaranty
insurance policy issued thereby constitute pari passu claims against the general
assets of the Certificate 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 Class A Guaranteed Distribution Amounts with respect
to the Class A Certificates. 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.
In the absence of payments under the Policy, Class A Certificateholders
will bear directly the credit and other risks associated with their undivided
interest in the Trust.
THE CERTIFICATE INSURER
General
Financial Security Assurance Inc. (the "Certificate Insurer" and, for
purposes of this Section, "Financial Security") is a monoline insurance company
incorporated in 1984 under the laws of the State of New York. Financial Security
is licensed, to engage in financial guaranty insurance business in all 50
states, the District of Columbia and Puerto Rico.
Financial Security and its subsidiaries are engaged in the business of
writing financial guaranty insurance, principally in respect of securities
offered in domestic and foreign markets. In general, financial guaranty
insurance consists of the issuance of a guaranty of scheduled payments of an
issuer's securities thereby enhancing the credit rating of those securities in
consideration for the payment of a premium to the Certificate Insurer. Financial
Security and its subsidiaries principally insure asset-backed, collateralized
and
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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 Certificate Insurers 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.
Capitalization
The following table sets forth the capitalization of Financial Security
and its wholly owned subsidiaries on the basis of generally accepted accounting
principles as of September 30, 1997 (in thousands):
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September 30,1997
(Unaudited)
Deferred Premium Revenue (net of prepaid
reinsurance premiums).......................................... $402,891
Shareholder's Equity:
Common Stock................................................... 15,000
Additional Paid-In Capital..................................... 646,620
Unrealized Gain on Investments (net of deferred income
taxes)......................................................... 20,808
Accumulated Earnings........................................... 212,033
Total Shareholder's Equity..................................... 894,461
-------
Total Deferred Premium Revenue and Shareholder's
Equity......................................................... $1,297,352
For further information concerning Financial Security, see the
Consolidated Financial Statements of Financial Security Assurance Inc., and
Subsidiaries, and the Certificates 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 Certificate Insurer to financial
guaranty insurance and related lines, requires that each such Certificate
Insurer maintain a minimum surplus to policyholders, establishes contingency,
loss and unearned premium reserve requirements for each such Certificate
Insurer, and limits the size of individual transactions ("single risks") and the
volume of transactions ("aggregate risks") that may be underwritten by each such
Certificate 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.
Financial Security does not accept any responsibility for the accuracy
or completeness of this Prospectus Supplement or any information or disclosure
contained herein, or omitted herefrom, other than with respect to accuracy of
the information regarding Financial Security set forth under the heading "The
Certificate Insurer."
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Mayer, Brown & Platt, special tax counsel to the
Seller, the Trust will be classified for federal income tax purposes as a
grantor trust and not as an association taxable as a corporation.
Certificateholders must report their respective allocable shares of income
earned on Trust Assets (other than any amounts treated as "stripped coupons")
and, subject to certain limitations applicable to individuals, estates and
trusts, may deduct their respective allocable shares of reasonable servicing and
other expenses. Prospective investors should note that no rulings have been or
will be sought from the Service with respect to any of the federal income tax
consequences discussed herein, and no assurance can be given that the Service
will not take contrary positions. See "Certain Tax Considerations" in the
Prospectus.
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 subject to ERISA and an individual
retirement account (collectively, "Benefit Plans") from engaging in certain
transactions with persons that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to the plan. ERISA also
imposes certain duties and certain prohibitions on persons who are fiduciaries
of plans subject to ERISA. Generally, any person who exercises any authority or
control with respect to the management or disposition of the assets of a plan
subject to ERISA is considered to be a fiduciary of such plan. A violation of
these "prohibited transaction" rules may generate excise tax and other
liabilities under ERISA and the Code.
Pursuant to a regulation issued by the Department of Labor concerning
the definition of what constitutes the "plan assets" of a Benefit Plan, the
assets and properties of certain entities in which a Benefit Plan makes an
equity investment could be deemed to be assets of the Benefit Plan in certain
circumstances. Accordingly, if a Benefit Plan purchases a Certificate, the Trust
could be deemed to hold plan assets. If the assets of the Trust were deemed to
constitute plan assets of a Benefit Plan, the Benefit Plan's investment in the
Certificates might be deemed to constitute delegation under ERISA of the duty to
manage plan assets by the fiduciaries making the decision on behalf of the
Benefit Plan to make the investment, and transactions involving the Trust and
the Trust Assets might be viewed as transactions with the Benefit Plan for the
purpose of ERISA's fiduciary and prohibited transaction rules.
[The Department of Labor has granted PaineWebber Incorporated an
administrative exemption (Prohibited Transaction Exemption 90-36 (55 Fed. Reg.
25903, June 25, 1990), as amended, the "Exemption") from certain of the
prohibited transaction rules of ERISA with respect to the initial purchase, the
purchase in the secondary market and the holding and the subsequent resale by
Benefit Plans of certificates in certain trusts with respect to which
PaineWebber Incorporated is the sole underwriter or placement agent or the
managing or co-managing underwriter or placement agent in an underwriting
syndicate or selling group and that consist of certain receivables, loans and
other obligations that meet the conditions and requirements of the Exemption.
The obligations covered by the Exemption include retail installment sale
contracts such as the Receivables. The Exemption would apply to the acquisition,
holding and resale of the Class A Certificates by a Benefit Plan only if
specific conditions (certain of which are described below) are met. It is not
clear whether the Exemption applies to participant directed plans as described
in Section 404(c) of ERISA or plans that are subject to Section 4975 of the Code
but that are not subject to Title I of ERISA, such as certain Keogh plans and
certain individual retirement accounts.
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Among the conditions which must be satisfied for the Exemption to apply
to the acquisition by a Benefit Plan of the Class A Certificates are the
following:
(1) The acquisition of the Class A Certificates by a Benefit Plan is on
terms (including the price for the Class A Certificates) that are at
least as favorable to the Benefit Plan as they would be in an
arm's-length transaction with an unrelated party;
(2) The rights and interests evidenced by the Class A Certificates
acquired by the Benefit Plan are not subordinated to the rights and
interests evidenced by other certificates of the Trust;
(3) The Class A Certificates acquired by the Benefit Plan have a rating
at the time of such acquisition that is in one of the three highest
generic rating categories from Standard & Poor's Corporation, Moody's
Investors Service, Inc., Duff & Phelps Inc. or Fitch Investors Service,
Inc.;
(4) The sum of all payments made to the Underwriters in connection with
the distribution of the Class A Certificates represents not more than
reasonable compensation for placement of the Class A Certificates. The
sum of all payments made to and retained by the Seller pursuant to the
sale of the Receivables to the Trust represents not more than the fair
market value of such Receivables. The sum of all payments made to and
retained by the Servicer represents not more than reasonable
compensation for the Servicer's services under the Agreement and
reimbursement of the Servicer's reasonable expenses in connection
therewith;
(5) The Trustee is not an "affiliate" (as defined in the Exemption) of
the Seller, the Underwriters, the Servicer, the Certificate Insurer or
any "obligor" (as defined in the Exemption) with respect to Receivables
included in the Trust constituting more than 5% of the aggregate
unamortized principal balance of the assets in the Trust (including the
Trustee, the "Restricted Group");
(6) The Benefit Plan investing in the Class A Certificates is an
"accredited investor" as defined in Rule 501(a)(1) of Regulation D
under the Securities Act; and
(7) The Trust satisfies the following requirements:
(a) the corpus of the Trust consists solely of assets of the
type which have been included in other investment pools,
(b) certificates in such other investment pools have been
rated in one of the three highest generic rating categories of
Standard & Poor's Corporation, Moody's Investors Service,
Inc., Duff & Phelps Inc. or Fitch Investors Service, Inc. for
at least one year prior to the Benefit Plan's acquisition of
Class A Certificates, and
(c) certificates evidencing interests in such other investment
pools have been purchased by investors other than Benefit
Plans for at least one year prior to any Benefit Plan's
acquisition of Class A Certificates.
The Exemption does not provide an exemption from ERISA Sections
406(a)(1)(E), 406(a)(2) or 407 for the purchase or holding of Class A
Certificates to any person who has discretionary authority or renders investment
advice to Benefit Plans sponsored by any member of the Restricted Group or any
affiliate of such person.
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<PAGE>
Exemptive relief from the self-dealing/conflict of interest prohibited
transaction rules of ERISA is available to an obligor acting as a fiduciary with
respect to the investment of a Benefit Plan's assets in the Class A Certificates
(or such person's affiliate) only if, among other requirements (i) such
fiduciary (or its affiliate) is an obligor with respect to 5% percent or less of
the fair market value of the Trust Assets, (ii) a Benefit Plan's investment in
Class A Certificates does not exceed 25% of all of the Class A Certificates
outstanding at the time of the acquisition, (iii) immediately after the
acquisition, no more than 25% of the assets of the Benefit Plan are invested in
certificates representing an interest in trusts (including the Trust) containing
assets sold or serviced by the same entity, and (iv) in the case of the
acquisition of the Class A Certificates in connection with their initial
issuance, at least 50% of the Class A Certificates are acquired by persons
independent of the Restricted Group and at least 50% of the aggregate interest
in the Trust is acquired by persons independent of the Restricted Group.
The Exemption also applies to transactions in connection with the
servicing, management and operation of the Trust, provided that, in addition to
the general requirements described above, (a) such transactions are carried out
in accordance with the terms of a binding pooling and servicing agreement and
(b) the pooling and servicing agreement is provided to, or described in all
material respects in the prospectus or private placement memorandum provided to,
investing Benefit Plans before their purchase of certificates issued by the
Trust. The Agreement is a pooling and servicing agreement as defined in the
Exemption. All transactions relating to the servicing, management, and
operations of the Trust will be carried out in accordance with the Agreement.
See "The Certificates" in this Prospectus Supplement.
Any Benefit Plan fiduciary considering the purchase of Class A
Certificates should consult with its counsel with respect to the applicability
of the Exemption and other issues and determine on its own whether all
conditions have been satisfied and whether the Certificates are an appropriate
investment for a Benefit Plan under ERISA and the Code. By its purchase of a
Class A Certificate, each Benefit Plan purchaser shall be deemed to represent
and warrant that it is an "accredited investor" as defined in Rule 501(a)(1) of
Regulation D under the Securities Act, in accordance with condition (6) above.
The Class B Certificates may not be sold or transferred to a Benefit
Plan, a trustee of any Benefit Plan, or an entity, account or other pooled
investment fund the underlying assets of which include or are deemed to include
a Benefit Plan's assets by reason of a Benefit Plan's investment in the entity,
account or other pooled investment fund.
Generally, for purposes of ERISA, an insurance company, insurance
service, or insurance organization qualified to do business in a state (referred
to herein as an "Insurer") is not a Benefit Plan; therefore, the foregoing
restriction for sale or transfer to a Benefit Plan generally would not be
applicable to an Insurer. However, under John Hancock Mutual Life Insurance Co.
v. Harris Bank and Trust, 114 S.Ct. 517 (1993), certain assets held in an
Insurer's general account may be treated as Benefit Plan assets and thus the use
of such "plan assets" to purchase the Class B Certificates may be subject to the
fiduciary requirements of ERISA.
The Seller and the Servicer do not intend to preclude Insurers that are
otherwise qualified investors from purchasing the Class B Certificates;
therefore, for purposes of this offering, the restriction for sale or transfer
to a Benefit Plan will not be applied to prevent the transfer of Class B
Certificates to an Insurer if such Insurer purchases such Class B Certificates
with funds held in one or more of its general accounts, provided that the
Insurer confirms that Section III of Prohibited Transaction Class Exemption
95-60 (the "Class Exemption") applies to the Insurer's acquisition and holding
of such Class B Certificates. Neither the Servicer, the Seller, the Trustee, the
Certificate Insurer, any Underwriter nor any of their respective affiliates
S-63
<PAGE>
makes any representation or expresses any opinion as to whether an Insurer
constitutes a Benefit Plan or will be treated as managing Benefit Plan assets.]
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting
Agreement relating to the Class A Certificates (the "Underwriting Agreement"),
the Seller has agreed to sell to PaineWebber Incorporated and Black Diamond
Securities, LLC (the "Underwriters") and each Underwriter has agreed to purchase
the principal amount of Class A Certificates set forth opposite its name below.
Class A Certificates
Underwriters Principal Amount
PaineWebber Incorporated $ [ ]
Black Diamond Securities, LLC $ [ ]
Total $ [ ]
CPS and the Seller have been advised by the Underwriters that they
propose to offer Class A Certificates from time to time for sale in negotiated
transactions or otherwise, at prices determined at the time of sale. The
Underwriters may effect such transactions by selling the Class A Certificates 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 Certificates for whom they may act as agents. The
Underwriters and any dealers that participate with the Underwriters in the
distribution of the Class A Certificates may be deemed to be underwriters, and
any discounts or commissions received by them and any profit on the resale of
Class A Certificates by them may be deemed to be underwriting discounts or
commissions, under the Securities Act of 1933, as amended.
The Class A Certificates are a new issue of securities with no
established trading market. The Underwriters have advised CPS and the Seller
that they intend to act as market makers for the Class A Certificates. 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 Certificates.
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.
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<PAGE>
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be passed upon
for the Seller, the Servicer and the Underwriters by Mayer, Brown & Platt, New
York, New York. Certain legal matters related to the Policy will be passed upon
for the Certificate Insurer by Bruce E. Stern, Esq., General Counsel of the
Certificate Insurer.
S-65
<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.
Page
Actuarial Receivables........................................................40
Affiliate Receivables........................................................15
Affiliated Originator.........................................................6
Agreement.....................................................................6
Alpha Program................................................................25
APR.......................................................................8, 33
Benefit Plans................................................................61
Cede..................................................................5, 16, 43
Certificate Account..........................................................45
Certificate Insurer....................................................2, 6, 58
Certificate Owners.......................................................17, 43
Certificates...............................................................1, 6
Class A Certificate Balance...................................................9
Class A Certificateholders....................................................9
Class A Certificates.......................................................1, 6
Class A Distributable Amount.................................................48
Class A Interest Carryover Shortfall.........................................52
Class A Interest Distributable Amount........................................49
Class A Pass-Through Rate.....................................................9
Class A Percentage............................................................7
Class A Pool Factor..........................................................41
Class A Principal Carryover Shortfall........................................52
Class A Principal Distributable Amount.......................................49
Class B Certificate Balance...................................................9
Class B Certificateholders....................................................9
Class B Certificates.......................................................1, 6
Class B Distributable Amount.................................................49
Class B Interest Carryover Shortfall.........................................52
Class B Interest Distributable Amount........................................50
Class B Pass-Through Rate.....................................................9
Class B Percentage............................................................7
Class B Pool Factor..........................................................41
Class B Principal Carryover Shortfall........................................52
Class B Principal Distributable Amount.......................................49
Class Exemption..............................................................63
Code.........................................................................18
Collateral Agent.............................................................52
Collection Account...........................................................45
Collection Period............................................................10
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<PAGE>
Page
Commission....................................................................3
Contracts....................................................................24
CPS Receivables...............................................................8
CPS........................................................................1, 6
Cram Down Loss...............................................................49
Cutoff Date...................................................................7
Dealer Agreements ...........................................................23
Dealers......................................................................23
Delta Program................................................................25
Deposit Institutions.........................................................25
Determination Date...........................................................47
Distribution Date ........................................................9, 13
DTC...................................................................5, 16, 43
Employee Plans...............................................................18
ERISA....................................................................18, 61
Events of Default............................................................55
Exchange Act..................................................................3
Exemption....................................................................61
Final Scheduled Distribution Date............................................10
Financed Vehicles ............................................................7
First Time Buyer Program.....................................................25
IFCs.......................................................................7, 8
Insurance Agreement..........................................................21
Insurer..................................................................18, 63
Linc Receivables..............................................................8
Linc..........................................................................6
Liquidated Receivable........................................................48
Liquidation Proceeds.........................................................48
Lock-Box Account.........................................................14, 45
Lock-Box Bank................................................................14
Lock-Box Processor...........................................................14
Obligors.....................................................................23
Original Pool Balance.........................................................8
Originators...................................................................6
Originator....................................................................6
Payahead Account.............................................................45
Payaheads....................................................................46
Pool Balance.................................................................41
Post Office Box..............................................................14
Principal Balance............................................................48
Principal Distributable Amount...........................................10, 49
Purchase Agreements...........................................................8
Purchase Agreement............................................................8
Purchase Amount..........................................................45, 48
Rating Agencies..............................................................18
S-67
<PAGE>
Page
Receivables...................................................................7
Record Date..................................................................13
Recoveries...................................................................48
Registration Statement........................................................3
Requisite Amount.............................................................12
Restricted Group.............................................................62
Rule of 78's Receivables.....................................................40
Rule of 78's.................................................................40
Samco Receivables.............................................................8
Samco.........................................................................6
Scheduled Payment............................................................48
Securities Act................................................................3
Seller.....................................................................1, 6
Servicer...................................................................1, 6
Service......................................................................17
Servicing Assumption Agreement...............................................15
Servicing Fee................................................................46
Simple Interest Receivables..................................................40
Spread Account...............................................................52
Standard Program.............................................................25
Standby Fee..................................................................15
Standby Servicer.......................................1, 6, 14, 15, 20, 42, 47
Sub-Prime Borrowers..........................................................24
Super Alpha Program..........................................................25
Total Distribution Amount....................................................48
Trust Asset...................................................................7
Trustee Fee..................................................................50
Trustee....................................................................1, 6
Trust......................................................................1, 6
UCC..........................................................................45
Underwriters.................................................................64
Underwriting Agreement.......................................................64
S-68
<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 ByLaws 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. 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-1
<PAGE>
Item 16. Exhibits and Financial Statements
(a) Exhibits
1.1 --Form of Underwriting Agreement.
4.1 --Form of Pooling and Servicing Agreement, including the form of
Certificates 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 CPS Purchase Agreement.
10.2 --Form of Affiliated Originator 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-2
<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 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
II-3
<PAGE>
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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the capacities
indicated.
CONSUMER PORTFOLIO SERVICES, INC.
as originator 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
Registration Statement has been signed on April 8, 1998 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
/s/ Jeffrey P. Fritz
-------------------------------------
Jeffrey P. Fritz
Chief Financial Officer and Secretary
*By: /s/ Jeffrey P. Fritz
-------------------------------------
Jeffrey P. Fritz
as attorney-in-fact
II-6
<PAGE>
EXHIBIT INDEX
1.1 --Form of Underwriting Agreement.
4.1 --Form of Pooling and Servicing Agreement, 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 CPS Purchase Agreement.
10.2 --Form of Affiliated Originator 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
CPS AUTO GRANTOR TRUST 199[ ]-[ ]
$[ ] (approximate) [ %]
Class A Pass-Through Certificates
UNDERWRITING AGREEMENT
[ ], 199[ ]
[Underwriter[s]]
[Address[es]]
Ladies and Gentlemen:
CPS Receivables Corp. (the "Company"), a California corporation and
wholly-owned subsidiary of Consumer Portfolio Services, Inc., a California
corporation ("CPS"), proposes to issue and sell to you in your capacities as the
Underwriters (the "Underwriters"), [$ ] aggregate principal amount of CPS Auto
Grantor Trust 199[ ]-[ ] [ %] Asset-Backed Certificates, Class A (the
"Certificates"). The Certificates will be issued by CPS Auto Grantor Trust 199[
]-[ ](the "Trust") pursuant to the Pooling and Servicing Agreement (the "Pooling
and Servicing Agreement") dated as of [ ] [ ], 199[ ] among the Company, CPS, as
servicer (in such capacity, the "Servicer") and Norwest Bank Minnesota, National
Association, as trustee (the "Trustee"). Pursuant to the Pooling and Servicing
Agreement, the Trust will also issue approximately [$ ] (based on the expected
aggregate principal balance of the Cutoff Date) aggregate principal amount of
CPS Auto Grantor Trust 199[ ]-[ ] [ %] Asset-Backed Certificates, Class B (the
"Class B Certificates") which are not being offered pursuant to the Registration
Statement (as defined below) and are not the subject of this Agreement. The
Certificates will evidence, in the aggregate, beneficial ownership of an
undivided 95% interest in the Trust (other than interest received by the Trust
in excess of the Class A Pass-Through Rate). The Class B Certificates will
evidence, in the aggregate, beneficial ownership of an undivided 5% interest in
the Trust (other than interest received by the Trust in excess of the Class B
Pass-Through Rate). 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 [ ], 199[ ] (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 Class A
Certificateholders only) and the right of the Company to receive certain
insurance proceeds and certain other property, all as more specifically
described in the Pooling and Servicing Agreement.
<PAGE>
The Certificates will be issued in an aggregate principal amount of [$
] which is equal to 95% 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 "Class A Pass-Through Rate")
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<PAGE>
in accordance with the provisions of the Pooling and Servicing Agreement. The
Class B Certificates will be issued in an aggregate principal amount of [$ ]
which is equal to 5% of the aggregate principal balance of the Receivables as of
the Cutoff Date. The Class B Certificates will bear interest at an annual rate
equal to [ %] (the "Class B Pass-Through Rate") in accordance with the
provisions of the Pooling and Servicing Agreement.
To the extent not otherwise defined herein, capitalized terms used
herein shall have the meanings assigned to such terms in the Pooling 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 Certificates 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, CPS, with respect to CPS,
Samco, with respect to Samco, Linc, with respect to Linc 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. [ ]), including a
Base Prospectus, for registration of the offering and sale of the Certificates
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 Certificates is a Delayed Offering and, although the Base Prospectus may
not include all the information with respect to the Certificates 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 Certificates and the offering thereof. As filed, such
final supplement shall include all required information with respect to the
Certificates 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
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<PAGE>
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 Certificate Insurer set forth under
the heading "THE CERTIFICATE INSURER" in or incorporated by reference in the
Preliminary Final Prospectus and the Final Prospectus.
(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 Certificates
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 Certificates.
"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.
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"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 Certificates 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
Certificates 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.
"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
Certificates 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. [ ]).
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
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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) Linc Acceptance Company LLC ("Linc") is a limited liability company
duly formed, validly existing and in good standing under the laws of Delaware
and is duly qualified to transact business as a foreign entity 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.
(g) 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, Samco or Linc
or the Company's or CPS's or Samco's or Linc's ability to perform its
obligations under this Agreement or the Pooling 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.
(h) Except for the registration of the Certificates 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 Certificates 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 Certificates or the consummation of the other transactions contemplated by
this Agreement or the Pooling 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.
(i) The Commission has not issued an order preventing or suspending the
use of any Prospectus relating to the proposed offering of the Certificates, nor
instituted proceedings for
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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.
(j) The documents (other than the financial statements of the
Certificate 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.
(k) Each of the Company, CPS, Samco and Linc 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, Samco and Linc 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, Samco's or Linc's business with Cuba or with any person or
affiliate located in Cuba changes in any material way, each of the Company, CPS,
Samco and Linc, as the case may be, will provide the Department notice of such
business or change, as appropriate, in a form acceptable to the Department.
(l) All representations and warranties of the Company, CPS, Samco and
Linc contained in each of the Basic Documents, including this Agreement, will be
true and correct in all material respects as of the Closing Date and are hereby
incorporated by reference as if each such representation and warranty were
specifically made herein.
(m) Each of the Company, CPS, Samco and Linc has full power and
authority (corporate and other) to enter into and perform its obligations under
this Agreement, the Pooling and Servicing Agreement, the CPS Purchase Agreement,
the Samco Purchase Agreement, the Linc 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.
(n) On or before the Closing Date, the direction by the Company to the
Trustee to authenticate the Certificates will have been duly authorized by the
Company, the Certificates will have been duly executed and delivered by the
Company and, when authenticated by the Trustee in accordance with the Pooling
and Servicing Agreement and delivered and paid for pursuant to this Agreement,
will be duly issued and will entitle the holder thereof to the benefits
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and security afforded by the Pooling and Servicing Agreement, 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).
(o) This Agreement and each Basic Document to which the Company, CPS,
Samco or Linc is a party has been duly authorized, executed and delivered by
each of the Company, CPS, Samco and Linc, as applicable, and constitutes a valid
and binding agreement of each of the Company, CPS, Samco and Linc, as
applicable, enforceable against the Company, CPS, Samco and Linc 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.
(p) None of the Company, CPS, Samco or Linc is in breach or violation
of its Articles of Incorporation, Charter or Certificate of Formation, as
applicable, or its By-Laws or Limited Liability Company Agreement, as
applicable, 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, CPS, Samco or Linc to perform its
obligations under any of the Basic Documents or the Certificates.
(q) The issuance and delivery of the Certificates, the consummation of
any other of the transactions contemplated herein or in the Pooling and
Servicing Agreement or in any of the other Basic Documents or the fulfillment of
the terms of this Agreement or the Pooling and Servicing Agreement or any of the
other Basic Documents, subject to the registration of the Certificates 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 Certificates 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 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 Trustee or as otherwise permitted under the
Pooling 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,
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<PAGE>
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.
(r) 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 Pooling and
Servicing Agreement, the other Basic Documents and the Certificates have been or
will have been paid at or prior to the Closing Date.
(s) The Receivables are chattel paper as defined in the Uniform
Commercial Code as in effect in the State of California.
(t) 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, Linc will report its transfer of the Linc
Receivables to the Company pursuant to the Linc Purchase Agreement as a sale of
the Linc Receivables and the Company will report its transfer of the Receivables
to the Trust pursuant to the Pooling and Servicing Agreement as a sale of the
Receivables. Each of CPS and the Company has been advised by KPMG Peat Marwick
LLP, Certified Public Accountants, that the transfers pursuant to the CPS
Purchase Agreement, the Samco Purchase Agreement and the Linc 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).
(u) Pursuant to the CPS Purchase Agreement, the Samco Purchase
Agreement and the Linc Purchase Agreement, CPS, Samco and Linc 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 of any Receivables 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 Pooling 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.
(v) Immediately prior to the transfer of any Receivables to the Trust,
the Company's interest in such Receivables and the proceeds thereof shall have
been perfected, UCC-1 financing statements (the "Financing Statements") (i)
evidencing the transfer of the applicable CPS Receivables to the Company shall
have been filed in the Office of the Secretary of State of the State of
California, (ii) evidencing the transfer of the applicable Samco Receivables to
the Company shall have been filed in the Office of the Secretary of State of the
State of Texas, (iii) evidencing the transfer of the applicable Linc Receivables
to the Company shall have been filed in the Office of the Secretary of State of
the State of Connecticut, and (iv) evidencing the
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transfer of the applicable Receivables from the Company 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
such offices 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 Pooling 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, Texas and Connecticut referred to above and
the execution and delivery of the Pooling 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.
(w) The Pooling and Servicing Agreement is not required to be qualified
under the Trust Indenture Act.
(x) None of the Company, CPS, Samco, Linc or the Trust is required to
be registered as an "investment company" under the Investment Company Act.
2. PURCHASE, SALE AND DELIVERY OF THE CERTIFICATES.
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 initial principal amount of the
Certificates set forth opposite such Underwriter's name in Schedule I hereto, at
the purchase price specified in Schedule I.
The Company will deliver against payment of the purchase price the
Certificates in the form of one or more permanent global Certificates in
definitive form (the "Global Certificates") deposited with the 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 Certificates will be
held only in book-entry form through DTC except in the limited circumstances
described in the Final Prospectus. Payment for the Certificates 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 Certificates
representing all of the Certificates. The Global Certificates will be made
available for inspection at the above office of Mayer, Brown & Platt at least 24
hours prior to the Closing Date.
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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 and CPS are advised by the Underwriters that they propose
to make a public offering of the Certificates, 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 Certificates
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 Certificates, 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 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
Certificates, 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 Certificates 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.
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(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
Certificates 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 Certificates 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 Certificates, any event shall occur as a 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 Certificates 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
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Certificates, except that the Company will not be obligated to qualify the
Certificates 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 Certificates 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 Certificates.
(f) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Certificates 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 Certificates, or until such time as the
Underwriters shall cease to maintain a secondary market in the Certificates,
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 Trustee pursuant to the Pooling and
Servicing Agreement, as soon as such statements and reports are furnished to the
Trustee.
(h) The Company, CPS, Samco and Linc 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, Samco or Linc possess or 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 Certificates shall be reasonably satisfactory in form and substance to each
Underwriter.
(i) The Company will cause the Trust to make generally available to
Certificateholders 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 Certificates are outstanding, the Company
will furnish to the Underwriters copies of all reports or other communications
(financial or otherwise) furnished or made available to Certificateholders, 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
Underwriters may from time to time reasonably request.
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(k) On or before the Closing Date, the Company, CPS, Samco and Linc
shall cause the respective computer records of the Company, CPS, Samco and Linc
relating to the Receivables to be marked to show the Trustee's absolute
ownership of the Receivables, and from and after the Closing Date none of the
Company, CPS, Samco or Linc shall take any action inconsistent with the
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 Certificates by either of the Rating Agencies is conditional upon the
furnishing of documents or the taking of any other actions by the Company, CPS,
Samco or Linc, CPS shall, or shall cause the Company, Samco or Linc to, furnish
such documents and take any such other actions.
(m) On the Closing Date, the Company and CPS shall cause the
Certificate Insurer to issue the Policy to the Trustee for the benefit of the
holders of the Certificates in form and substance satisfactory to each
Underwriter.
5. [RESERVED]
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 Certificates 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 Certificates, 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 Certificates; and (vi) the fees and
expenses of the Trustee, including the fees and disbursements of counsel for the
Trustee, in connection with the Certificates, the Pooling and Servicing
Agreement and the other Basic Documents to which the 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 Certificates 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
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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 Certificates 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 Certificates. 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
Certificates 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, Samco and Linc contained herein, to the performance by the
Company, CPS, Samco and Linc of their respective covenants and obligations
hereunder and to the following additional conditions precedent:
(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
Certificates, 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 Certificates 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 Certificates.
(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 [ ], 199[ ], and as of the Closing Date, respectively, of KPMG Peat Marwick
LLP, 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
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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 Certificates 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, 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 proceed with completion of the private placement of the Certificates.
(d) The Company, CPS, Samco and Linc shall have furnished each
Underwriter with such number of conformed copies of such opinions, certificates,
letters and documents as it may reasonably request.
(e) On the Closing Date, each of the Basic Documents and the
Certificates 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 Trustee shall have received a fully executed copy thereof
or, with respect to the Certificates, a conformed copy thereof. The Basic
Documents and the Certificates shall be substantially in the forms heretofore
provided to each Underwriter.
(f) Each Underwriter shall have received a certificate of the Trustee,
as to the due authorization, execution and delivery of the Pooling and Servicing
Agreement by the Trustee.
(g) Each Underwriter shall have received evidence satisfactory to such
Underwriter that the Certificates have been rated "Aaa" by Moody's and "AAA" by
Standard & Poor's.
(h) Each Underwriter shall have received from Mayer, Brown & Platt,
special counsel for CPS, the Company, Samco (with respect to New York law) and
Linc (with respect to New York law), opinions dated the Closing Date, addressed
to such Underwriter, in a form satisfactory to such Underwriter.
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<PAGE>
(i) Each Underwriter shall have received from Pullman & Comley LLC,
special Connecticut counsel for Linc, opinions dated the Closing Date, addressed
to such Underwriter in a form satisfactory to such Underwriter.
(j) Each Underwriter shall have received from Mayer, Brown & Platt,
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.
(k) Each Underwriter shall have received from Mayer, Brown & Platt, an
opinion dated the Closing Date, addressed to such Underwriter, with respect to
the validity of the Certificates 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.
(l) Each Underwriter shall have received from counsel to the 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.
(m) Each Underwriter shall have received from counsel to the
Certificate 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.
(n) 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 Certificate Insurer relating to, among other things, the interest of the
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 Certificates. 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.
(o) At the Closing Date, the Company, CPS, Samco and Linc shall have
furnished to each Underwriter a certificate, dated the Closing Date, of the
President or any Vice President of the Company, CPS, Samco or Linc, as the case
may be, in which each such officer shall state that: (i) the representations and
warranties of the Company, CPS, Samco or Linc, as applicable, in this Agreement
are true and correct on and as of the Closing Date; (ii) the Company, CPS, Samco
or Linc, 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, Samco or Linc, 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
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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, Samco or Linc necessary in order to make the statements
therein, in light of the 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, Samco or Linc 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) 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, Samco or Linc 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, Samco or
Linc except as contemplated by the Final Prospectus or as described in such
certificate.
(p) Each Underwriter shall have received evidence satisfactory to such
Underwriter that the Certificate Insurer shall have issued the Policy to the
Trustee for the benefit of the Certificateholders in form and substance
satisfactory to such Underwriter.
(q) 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 the State of California reflecting
the sale and assignment of the interest of CPS in the CPS Receivables included
in the Receivables and the related other Trust Assets and the proceeds thereof
to the Company, (ii) the office of the Secretary of State of the State of Texas
reflecting the sale and assignment of the interest of Samco in the Samco
Receivables included in the Receivables and the related other Trust Assets and
the proceeds thereof to the Company, (iii) the office of the Secretary of State
of the State of Connecticut reflecting the sale and assignment of the interest
of Linc in the Linc Receivables included in the Receivables and the related
other Trust Assets and the proceeds thereof to the Company, and (iv) the office
of the Secretary of State of California reflecting the sale and assignment of
the interest of the Company in the Receivables and the related other Trust
Assets and the proceeds thereof to the Trustee.
(r) 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.
(s) 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.
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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).
8. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to sell and deliver the portion of the
Certificates 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 Certificate
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 Certificates, 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
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behalf of the Underwriters specifically for use in the preparation thereof;
provided, further, 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 Computational Materials (as defined below), except
to the extent expressly provided in (b) below. 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 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) 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.
i. 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
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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 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
Certificates, which information is not part of the
Prospectus. For purposes hereof, the term "Company
Provided Information" means the information contained
in the data tape delivered by CPS to the Underwriters
on or about [ ], 199[ ] containing information with
respect to the Receivables as of the Cutoff Date.
ii. 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 Certificates.
(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
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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 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
Certificates. 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
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<PAGE>
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 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 Certificates 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
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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 Certificates 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, any Underwriter shall fail to purchase and pay
for all or any portion of the Certificates 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, Samco or Linc), then the 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 Certificates which
the defaulting Underwriter failed to purchase. If during such 36 hours the
non-defaulting Underwriter shall not have procured one or more additional
Underwriters to purchase the Certificates agreed to be purchased by the
defaulting Underwriter, then (a) if the aggregate amount of Certificates with
respect to which such default shall occur does not exceed 10% of the
Certificates covered hereby, the non-defaulting Underwriter shall be obligated
to purchase the Certificates which such defaulting Underwriter failed to
purchase, or (b) if the aggregate principal balance of Certificates with respect
to which such default shall occur exceeds 10% of the principal balance of
Certificates covered hereby, the Company or the 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 such 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 the 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:
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if to the Underwriters, to each of the following addresses:
[Underwriter]
[Address]
Attention: [ ]
Fax: [( ) - ]
and
[Underwriter]
[Address]
Attention: [ ]
Fax: [( ) - ]
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;
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, the Company, Samco or Linc, 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'
-25-
<PAGE>
reasonable judgment, make it impracticable to market the Certificates or to
enforce contracts for the sale of the Certificates, (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.
13. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriters, CPS, the Company, Samco and Linc 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 Certificates 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 Certificates 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.
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<PAGE>
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, CPS, Samco and Linc 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.
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:
LINC ACCEPTANCE COMPANY LLC
By:
Name:
Title:
<PAGE>
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written:
[UNDERWRITER]
By:
Name:
Title:
[UNDERWRITER]
By:
Name:
Title:
<PAGE>
SCHEDULE I
Schedule of Underwriters
<TABLE>
<CAPTION>
Portion of
Initial Principal
Amount of the
Certificates to
Underwriter be Purchased Purchase Price
<S> <C> <C> <C>
----------------------
[Underwriter] [ %] [ ]
[Underwriter] [ %] [ ]
----------------------
Total [ %] [ ]
======================
</TABLE>
EXHIBIT 4.1
[ ]
Seller
and
Consumer Portfolio Services, Inc.
Servicer
and
[ ]
Trustee [and Standby Servicer]
POOLING AND SERVICING AGREEMENT
Dated as of [ ]
$[ ]
CPS Auto Grantor Trust 199[ ]-[ ]
$[ ], [ ]% Class A Certificates
$[ ], [ ]% Class B Certificates
<PAGE>
POOLING AND SERVICING AGREEMENT dated as of [ _______ ] (the
"Agreement") among [ ________ ], a [ ______ ], as seller (the "Seller"),
Consumer Portfolio Services, Inc., a California corporation ("CPS"), as servicer
(the "Servicer"), and [ ], a [ __________ ], as trustee [and standby servicer]
(the "Trustee" [and "Standby Servicer", respectively]).
WHEREAS the Seller has purchased a portfolio of receivables arising in
connection with motor vehicle retail installment sale contracts acquired by
Consumer Portfolio Services, Inc. [and Affiliated Originator],
In consideration of the premises and of the mutual agreements herein
contained, and other good and valuable consideration, the receipt of which is
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
Definitions
SECTION 1.1. Definitions. Whenever used in this Agreement, the
following words and phrases, unless the context otherwise requires, whenever
capitalized shall have the following meanings:
"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.
["[Affiliated Originator]" means an Affiliate of CPS, other than Samco
and Linc, that has originated certain of the Receivables.
"[Affiliated Originator] Purchase Agreement" means the Purchase
Agreement, dated as of [ ], 19[ ] by and between [Affiliated Originator] 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 [Affiliated Originator] Receivables by the Seller from [Affiliated
Originator].
"[Affiliated Originator] Receivables" shall have the meaning specified
in the [Affiliated Originator] Purchase Agreement.]
"Aggregate Pass-Through Rate" means the sum of the Class A Pass-Through
Rate and the Class B Pass-Through Rate.
"Aggregate Prepayment Reduction Amount" means for any Distribution
Date, the sum of the Prepayment Reduction Amounts for all Simple Interest
Receivables which were paid in full during the related Collection Period.
"Agreement" means this Pooling and Servicing Agreement, as the same may
be amended and supplemented from time to time.
"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, 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 rate
of finance charges stated in the Receivable.
<PAGE>
"Authenticating Agent" has the meaning assigned to such term in Section
6.2B.
"Basic Documents" means this Pooling and Servicing Agreement, the CPS
Purchase Agreement, the Samco Purchase Agreement, the Linc Purchase Agreement,
[the [Affiliated Originator] Purchase Agreement], the [Enhancement Agreement],
[the Spread Account Agreement] and [ ] thereto, [the Lock-Box Agreement] and
[the Servicing Assumption Agreement].
"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.
"Casualty" means, with respect to a Financed Vehicle, the total loss or
destruction of such Financed Vehicle.
"Certificate" means any one of the certificates executed by the Trustee
on behalf of the Trust and authenticated by the Trustee in substantially the
form set forth in Exhibit A or Exhibit B hereto.
"Certificate Account" means the account designated as such, established
and maintained pursuant to Section 4.1.
"Certificate Balance" as of any day, means the sum of the Class A
Certificate Balance on such day and the Class B Certificate Balance on such day.
"Certificate Register" and "Certificate Registrar" mean, respectively,
the register maintained and the Certificate Registrar appointed pursuant to
Section 6.3.
"Certificateholder" or "Holder" means the Person in whose name a
Certificate shall be registered in the Certificate Register, except that so long
as any Certificates are outstanding, solely for the purposes of giving any
consent, waiver, request or demand pursuant to this Agreement, the interest
evidenced by any Certificate registered in the name of the Seller, CPS or the
Servicer, or any Affiliate of either of them, shall not be taken into account in
determining whether the requisite percentage necessary to effect any such
consent, waiver, request or demand shall have been obtained.
"Certificates" means the Class A Certificates and the Class B
Certificates.
"Class A Certificate" means any one of the [ ]% Class A Certificates,
executed by the Trustee on behalf of the Trust and authenticated by the Trustee
in substantially the form set forth in Exhibit A hereto.
"Class A Certificate Balance" shall equal, initially, the Class A
Percentage of the Original Pool Balance and, thereafter, shall equal the initial
Class A Certificate Balance, reduced by all amounts previously distributed to
Class A Certificateholders and allocable to principal.
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<PAGE>
"Class A Certificateholder" means the Person in whose name a Class A
Certificate shall be registered in the Certificate Register.
"Class A Distributable Amount" means, for any Distribution Date, an
amount equal to the sum of the Class A Principal Distributable Amount for such
Distribution Date and the Class A Interest Distributable Amount for such
Distribution Date.
"Class A Guaranteed Distribution Amount" means, with respect to each
Distribution Date, the sum of the Class A Interest Distributable Amount for such
Distribution Date and the Class A Principal Distributable Amount for such
Distribution Date, in each case in accordance with the original terms of the
Class A Certificates when issued and without regard to any amendment or
modification of the Certificates or the Agreement which has not been consented
to by the [Credit Enhancer]; provided, however, the Class A Guaranteed
Distribution Amount shall not include, nor shall coverage be provided under [the
Credit Enhancement] in respect of, any taxes, withholding or other charge
imposed with respect to any Class A Certificateholder by any governmental
authority.
"Class A Interest Carryover Shortfall" means, as of the close of
business on any Distribution Date on which an [Enhancement Default] is
continuing, the excess of the Class A Interest Distributable Amount for such
Distribution Date and any outstanding Class A Interest Carryover Shortfall from
the preceding Distribution Date, over the amount of interest that the Holders of
the Class A Certificates actually received on such current Distribution Date.
"Class A Interest Distributable Amount" means, for any Distribution
Date, an amount equal to thirty (30) days of interest at the Class A
Pass-Through Rate on the Class A Certificate Balance as of the close of business
on the last day of the related Collection Period (calculated on the basis of a
360-day year consisting of twelve 30-day months); provided, however, that on the
first Distribution Date, the Class A Interest Distributable Amount will equal
interest at the Class A Pass-Through Rate on the Class A Certificate Balance
from and including the Closing Date through and including [ ______ ].
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<PAGE>
"Class A Pass-Through Rate" means [ ]% per annum.
"Class A Percentage" shall be [ ] percent ([ ]%).
"Class A Pool Factor" means, as of a Distribution Date, a seven-digit
decimal figure equal to the Class A Certificate Balance as of the close of
business on such Distribution Date divided by the initial Class A Certificate
Balance. The Class A Pool Factor will be 1.0000000 as of the Closing Date;
thereafter, the Class A Pool Factor will decline to reflect reductions in the
Class A Certificate Balance.
"Class A Principal Carryover Shortfall" means, as of the close of any
Distribution Date on which an [Enhancement Default] is continuing, the excess of
the Class A Principal Distributable Amount and any outstanding Class A Principal
Carryover Shortfall from the preceding Distribution Date, over the amount of
principal that the Holders of the Class A Certificates actually received on such
current Distribution Date.
"Class A Principal Distributable Amount" means, with respect to any
Distribution Date other than the Final Scheduled Distribution Date, the sum of
(a) the Class A Percentage of the Principal Distributable Amount plus (b) [the
portion of the [Credit Enhancer] Optional Deposit pursuant to Section 4.11(ii),
if any, allocable to principal for such Distribution Date]. In addition, on the
Final Scheduled Distribution Date, the Class A Principal Distributable Amount
will equal the Class A Certificate Balance as of the Final Scheduled
Distribution Date.
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<PAGE>
"Class B Certificate" means any one of the [ ]% Class B Certificates,
executed by the Trustee on behalf of the Trust and authenticated by the Trustee
in substantially the form set forth in Exhibit B hereto.
"Class B Certificate Balance" shall equal, initially, the Class B
Percentage of the Original Pool Balance and, thereafter, shall equal the initial
Class B Certificate Balance, reduced by all amounts previously distributed to
Class B Certificateholders and allocable to principal.
"Class B Certificateholder" means the Person in whose name a Class B
Certificate shall be registered in the Certificate Register.
"Class B Deficiency" shall have the meaning specified in Section
4.7(c).
"Class B Distributable Amount" means, for any Distribution Date, the
sum of the Class B Principal Distributable Amount and the Class B Interest
Distributable Amount.
"Class B Interest Distributable Amount" means, for any Distribution
Date, an amount equal to thirty (30) days of interest at the Class B
Pass-Through Rate on the Class B Certificate Balance as of the close of business
on the last day of the related Collection Period (calculated on the basis of a
360-day year consisting of twelve 30-day months); provided, however, that on the
first Distribution Date, the Class B Interest Distributable Amount will equal
interest at the Class B Pass-Through Rate on the Class B Certificate Balance
from and including the Closing Date through and including [ ].
"Class B Interest Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Class B Interest Distributable Amount for
such Distribution Date and any outstanding Class B Interest Carryover Shortfall
from the preceding Distribution Date, over the amount of interest that the
Holders of the Class B Certificates actually received pursuant to Section
4.6(c)(vi) on such current Distribution Date.
"Class B Pass-Through Rate" means [ ]% per annum.
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<PAGE>
"Class B Percentage" shall be [ ] percent ([ ]%).
"Class B Pool Factor" means, as of a Distribution Date, a seven-digit
decimal figure equal to the Class B Certificate Balance as of the close of
business on such Distribution Date divided by the initial Class B Certificate
Balance. 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
Class B Certificate Balance.
"Class B Principal Carryover Shortfall" means, as of the close of any
Distribution Date, the excess of the Class B Principal Distributable Amount and
any outstanding Class B Principal Carryover Shortfall from the preceding
Distribution Date, over the amount of principal that the Holders of the Class B
Certificates actually received.
"Class B Principal Distributable Amount" means, with respect to any
Distribution Date, the Class B Percentage of the Principal Distributable Amount.
In addition, on the Final Scheduled Distribution Date, the Class B Principal
Distributable Amount will equal the Class B Certificate Balance as of the Final
Scheduled Distribution Date.
"Closing Date" means [ ].
-7-
<PAGE>
"Code" shall have the meaning specified in Section 2.6.
["Collateral Agent" means, the [Collateral Agent] named in the [Spread
Account Agreement], and any successor thereto pursuant to the terms of [the
Spread Account Agreement].]
"Collateral Agent Fee" means [ ].
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 4.1.
"Collection Period" means each calendar month during the term of this
Agreement or, in the case of the initial Collection Period, the period from and
excluding the Cutoff Date to and including the last day of the month in which
the Cutoff Date occurred. Any amount stated "as of the close of business on 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: (1) all applications of
collections, (2) all current and previous Payaheads, (3) all applications of
Payahead Balances and (4) all distributions.
"Confidential Information" means, in relation to any Person, any
written information delivered or made available by or on 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.
"Corporate Trust Office" means the office of the Trustee at which its
corporate trust business shall be administered, which office at the date of this
Agreement is located at [ ________ ].
"CPS" means Consumer Portfolio Services, Inc., a California corporation
and its successors.
"CPS Purchase Agreement" means the Purchase Agreement dated as of [ ],
19[ ] 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" shall have the meaning specified in the CPS Purchase
Agreement.
"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.
-8-
<PAGE>
["[Credit Enhancer]" means [ ], a [ ] organized and created under the
laws of [ ], or its successors in interest.]
["Credit Enhancement" means [describe Credit Enhancement] issued by the
[Credit Enhancer] for the benefit of the Holders of the Class A Certificates
issued hereunder.]
["Credit Enhancement Account" means the segregated trust account
created by the Servicer under Section 4.1.]
"Cutoff Date" means [ ].
"Dealer" means, with respect to a Receivable, the seller of the related
Financed Vehicle, who originated and assigned such Receivable to CPS, Samco,
Linc or [Affiliated Originator], who in turn sold such Receivable to the Seller.
"Deficiency Claim Amount" shall have the meaning specified in Section
4.7(a).
"Deficiency Claim Date" means, with respect to any Distribution Date,
the fourth Business Day preceding such Distribution Date.
"Deficiency Notice" shall have the meaning specified in Section 4.7(a).
"Delivery" means, when used with respect to Transaction
Account Property:
(i) the perfection and priority of a security interest in such
Transaction Account Property which is governed by the law of a
jurisdiction which has adopted the 1978 Revision to Article 8 of the
UCC:
(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 (1) (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 (1) 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 (2) by delivery thereof to a "clearing
corporation" (as 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 Transaction 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 Transaction 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
holds such Transaction 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
Transaction Account Property to the Trustee or its nominee or
custodian, consistent with changes in applicable law or
regulations or the interpretation thereof; and
(c) with respect to any item of Transaction 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; or
(ii) the perfection and priority of a security interest in
such Transaction Account Property which is governed by the law of a
jurisdiction which has adopted the 1994 Revision to Article 8 of the
UCC:
(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(1)(i) of the UCC (other than certificated
securities) and are susceptible of physical delivery, transfer
thereof to the Trustee by physical delivery to the Trustee,
indorsed to, or registered in the name of, the Trustee or its
nominee or indorsed in blank and such additional or
alternative procedures as may hereafter become appropriate to
effect the complete transfer of ownership of any such
Transaction Account Property to the Trustee free and clear of
any adverse claims, consistent with changes in applicable law
or regulations or the interpretation thereof;
(b) with respect to a "certificated security" (as
defined in Section 8-102(a)(4) of the UCC), transfer thereof:
(1) by physical delivery of such
certificated security to the Trustee, provided that
if the certificated security is in registered form,
it shall be indorsed to, or registered in the name
of, the Trustee or indorsed in blank;
(2) by physical delivery of such
certificated security in registered form to a
"securities intermediary" (as defined in Section
8-102(a)(14) of the UCC) acting on behalf of the
Trustee if the certificated security has been
specially endorsed to the Trustee by an effective
endorsement;
(c) 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 property to an appropriate
book-entry account maintained with a Federal Reserve Bank by a
securities intermediary which is also a "depositary" pursuant
to applicable federal regulations and issuance by such
securities intermediary of a deposit advice or other written
confirmation of such book-entry registration to the Trustee of
the purchase by the securities intermediary on behalf of the
Trustee of such book-entry security; the making by such
securities 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 and indicating that such securities
intermediary holds such book-entry security solely as agent
for the Trustee; and such additional or alternative procedures
as may hereafter become appropriate to effect complete
transfer of ownership of any such Transaction Account Property
to the Trustee free of any adverse claims, consistent with
changes in applicable law or regulations or the interpretation
thereof;
(d) with respect to any item of Transaction Account
Property that is an "uncertificated security" (as defined in
Section 8-102(a)(18) of the UCC) and that is not governed by
clause (c) above, transfer thereof:
(1)(A) by registration to the Trustee as the
registered owner thereof, on the books and records of
the issuer thereof.
(B) by another Person (not a securities
intermediary) either becomes the registered owner of
the uncertificated security on behalf of the Trustee,
or having become the registered owner acknowledges
that it holds for the Trustee.
(2) the issuer thereof has agreed that it
will comply with instructions originated by the
Trustee without further consent of the registered
owner thereof.
(e) with respect to a "security entitlement" (as
defined in Section 8-102(a)(17) of the UCC):
(1) if a securities intermediary (A)
indicates by book entry that a "financial asset" (as
defined in Section 8-102(a)(9) of the UCC) has been
credited to the Trustee's "securities account" (as
defined in Section 8-501(a) of the UCC), (B) receives
a financial asset (as so defined) from the Trustee or
acquires a financial asset for the Trustee, and in
either case, accepts it for credit to the Trustee's
securities account (as so defined), (C) becomes
obligated under other law, regulation or rule to
credit a financial asset to the Trustee's securities
account, or (D) has agreed that it will comply with
"entitlement orders" (as defined in Section
8-102(a)(8) of the UCC) originated by the Trustee,
without further consent by the "entitlement holder"
(as defined in Section 8-102(a)(7) of the UCC), of a
confirmation of the purchase and the making by such
securities intermediary of entries on its books and
records identifying as belonging to the Trustee of
(I) a specific certificated security in the
securities intermediary's possession, (II) a quantity
of securities that constitute or are part of a
fungible bulk of certificated securities in the
securities intermediary's possession, or (III) a
quantity of securities that constitute or are part of
a fungible bulk of securities shown on the account of
the securities intermediary on the books of another
securities intermediary; and
(f) in each case of delivery contemplated pursuant to
clause(a) through (e) of subsection (ii) hereof, the Trustee
shall make appropriate notations on its records, and shall
cause the same to be made on the records of its nominees,
indicating that such Transaction Account Property which
constitutes a security is held in trust pursuant to and as
provided in this Agreement.
"Depository" means the initial Depository, The Depository Trust
Company, the nominee of which is Cede & Co., as the registered Holder of the
denomination specified herein, and any permitted successor depository. The
Depository shall at all times be a "clearing corporation" as defined in Section
8-102(5) of the Uniform Commercial Code of the State of New York.
"Depository Agreement" means the DTC Letter of Representations dated
the Closing Date by and between the Depositor, the Trustee and the Depository
Trust Company.
"Determination Date" means the earlier of (i) the seventh Business Day
of each calendar month and (ii) the fifth Business Day preceding the related
Distribution Date.
"Distribution Date" means, for each Collection Period, the 15th day of
the following month, or if the 15th day is not a Business Day, the next
following Business Day, commencing [ ].
"Eligible Account" means (i) a segregated trust account that is
maintained with a depository institution acceptable to the [Credit Enhancer] (so
long as an [Enhancement 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 Ratings Group and "P-1" by Moody's Investors
Service, Inc. and (so long as an [Enhancement Default] shall not have occurred
and be continuing) acceptable to the [Credit Enhancer].
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"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 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].
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Any Eligible Investments may be purchased by or through the Trustee or
any of its Affiliates.
["[Enhancement Agreement]" means the [Credit Enhancement Agreement]
among [ ] and the [Credit Enhancer], dated as of [ ].]
"[Enhancement Agreement] Event of Default" means an Event of Default as
defined in the [Enhancement Agreement].
"[Enhancement 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, the New York Department of Insurance Code or
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 or other competent
court or regulatory authority enters a final 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]).
"ERISA" shall have the meaning specified in Section 2.6.
"Event of Default" means an event specified in Section 9.1.
"Final Scheduled Distribution Date" shall be the [ ], 200[ ]
Distribution 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.
"Insolvency Proceeding" shall have the meaning specified in Section
9.5(b).
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"Lien" means a security interest, lien, charge, pledge, equity or
encumbrance of any kind, other than tax liens, mechanics' liens, and any liens
that may attach to a Financed Vehicle by operation of law.
"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 [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.
"Linc" means Linc Acceptance Company LLC and its successors.
"Linc Purchase Agreement" means the Purchase Agreement, dated as of
March 1, 1998 by and between Linc 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 Linc Receivables by the
Seller from Linc.
"Linc Receivables" shall have the meaning specified in the
Linc Purchase Agreement.
"Liquidation Proceeds" means all amounts realized with respect to a
Liquidated Receivable (other than amounts withdrawn from the Spread Account and
drawings under the Policy) 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.
"Lock-Box Account" means the segregated account designated as such,
established and maintained pursuant to Section 4.1.
"Lock-Box Agreement" means the [lock-box agreement], dated the Closing
Date, among the Servicer, the Lock-Box Processor, CPS Receivables Corp. and the
Trustee, as amended, modified or supplemented from time to time, unless such
Agreement shall be terminated in accordance with its terms or the terms hereof,
in which event "Lock-Box Agreement" shall mean such other agreement, in form and
substance acceptable to the [Credit Enhancer], among the Servicer, the Lock-Box
Processor and the Trustee.
"Lock-Box Bank" means, as of any date, a depository institution named
by the Servicer and acceptable to the [Credit Enhancer] at which the Lock-Box
Account is established and maintained as of such date.
"Lock-Box Processor" means initially [ ], and thereafter, its
successors or any replacement Lock-Box Processor acceptable to the [Credit
Enhancer] under the Lock-Box Agreement.
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"Moody's" means Moody's Investors Service, Inc., and any successors
thereof.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
related Financed Vehicle or any other Person who owes or may be liable for
payments under such Receivable.
"Officer's 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 any assistant treasurer, 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 Servicer, which counsel shall be reasonably
acceptable to the Trustee and (if such opinion or a copy thereof is required by
the provisions of this Agreement to be delivered to the [Credit Enhancer]) the
[Credit Enhancer] and which opinion shall be acceptable to the Trustee and (if
such opinion or a copy thereof is required by the provisions of this Agreement
to be delivered to the [Credit Enhancer]) the [Credit Enhancer] in form and
substance.
"Optional Purchase Percentage" means 10%.
"Original Class A Principal Balance" means the product of the Class A
Percentage and the Original Pool Balance.
"Original Class B Principal Balance" means the product of the Class B
Percentage and the Original Pool Balance.
"Original Pool Balance" means $[ ].
"Payahead" on a Rule of 78's Receivable means the amount, as of the
close of business on the last day of a Collection Period, determined in
accordance with Section 4.3 with respect to such Rule of 78's Receivable.
"Payahead Account" means the account designated as such, established
and maintained pursuant to Section 4.1. The Payahead Account shall be held by
the Trustee but shall be primarily for the benefit of the Obligors of Rule of
78's Receivables and shall not be part of the Trust.
"Payahead Balance" on a Rule of 78's Receivable means the sum, as of
the close of business on the last day of a Collection Period, of all Payaheads
made by or on behalf of the Obligor with respect to such Rule of 78's
Receivable, as reduced by applications of previous Payaheads with respect to
such Rule of 78's Receivable, pursuant to Sections 4.3 and 4.4.
"Paying Agent" has the meaning assigned to such term in Section 6.2A.
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"Person" means any individual, corporation, limited liability company,
estate, partnership, joint venture, association, joint stock company, trust
(including any beneficiary thereof), unincorporated organization, or government
or any agency or political subdivision thereof.
"Policy" means [the policy issued by the Credit Enhancer].
"Policy Claim Amount" with respect to a Distribution Date, means [ ].
"Policy Payments Amount" means the segregated trust account created by
the Servicer under Section 4.1.
"Pool Balance" as of the close of business on the last day of a
Collection Period means the aggregate Principal Balance of the Receivables
(excluding Liquidated Receivables and Purchased Receivables).
"Post-Office Box" means the separate post-office box in the name of the
Trustee for the benefit of the Certificateholders and the [Credit Enhancer],
established and maintained pursuant to Section 4.1.
"Preference Claim" shall have the meaning specified in Section 9.5(b).
"Premium" has the meaning specified in the Premium Side Letter.
"Premium Side Letter" means the letter agreement among CPS, the Trustee
and the [Credit Enhancer] referring to payment of the Premium.
"Prepayment Reduction Amount" means with respect to any Simple Interest
Receivable which has been paid in full during any Collection Period, an amount
equal to one twelfth of the excess of (a) the product of (i) the Aggregate
Pass-Through Rate and (ii) the Principal Balance of such Simple Interest
Receivable as of the first day of such Collection Period over (b) the product of
(i) a fraction (A) the numerator of which is the number of days from and
including the first day of such Collection Period to but excluding the date on
which such Simple Interest Receivable is paid in full and (B) the denominator of
which is 30 and (ii) the Aggregate Pass-Through Rate and (iii) the Principal
Balance of such Simple Interest Receivable as of the first day of such
Collection Period.
"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
Distribution Date, the sum of the following amounts: (i) the sum of (x) the
principal portion as calculated in accordance with Section 4.3 of all Scheduled
Payments received during the preceding Collection Period on Rule of 78's
Receivables (excluding Recoveries and any other amounts deposited into the
Payahead Account but including amounts transferred from the Payahead Account to
the Certificate Account to be applied to the principal portion of Scheduled
Payments) and (y) all payments of principal received on Simple Interest
Receivables during the preceding Collection Period; (ii) 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 plus the transfer of
the Payahead Balance with respect to such Receivable to the Certificate Account
pursuant to Section 4.6(a)(ii)) (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 Certificate Insurer, 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.
"Purchase Agreements" means the CPS Purchase Agreement, the Samco
Purchase Agreement, the Linc Purchase Agreement and [the [Affiliated Originator]
Purchase Agreement].
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"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
thereon to the end of the month of purchase.
"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 3.7 or by CPS pursuant to Section 2.6 or Section 2.8.
"Rating Agency" means [ ___________ ] and any successors thereof. If
such organization or successor is no longer in existence, "Rating Agency" shall
be such nationally recognized statistical rating organization or other
comparable Person designated by the [Credit Enhancer] (so long as no
[Enhancement Default] shall have occurred and be continuing), notice of which
designation shall be given to the Trustee and the Servicer.
"Receivable" means each retail installment sale contract for a Financed
Vehicle which shall appear on Schedule A to this Agreement (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.
"Receivable Files" means the documents specified in Section 2.7.
"Record Date" means the tenth day of the calendar month in which a
Distribution Date occurs.
"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.
["Reimbursement Obligations" means, with respect to each Distribution
Date, any amounts due to the [Credit Enhancer] under the terms hereof or under
the Enhancement Agreement and with respect to which the [Credit Enhancer] has
not been previously paid.]
"Requisite Amount" has the meaning specified in the [ ].
["Reserve Fund" means, the Reserve Fund established by the Seller
pursuant to the [Reserve Fund Agreement]. The Reserve Fund shall be held by the
[Reserve Fund Collateral Agent] and shall in no event be deemed part of the
Trust.]
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["Reserve Fund Agreement" means the Reserve Fund Agreement dated as of
[ ], among [ ] and [the Reserve Fund Collateral Agent].
["Reserve Fund Collateral Agent" means [ ] acting as Reserve Fund
Collateral Agent under the [Reserve Fund Agreement].]
"Residual Certificate" shall have the meaning set forth in Section 6.1
hereof.
"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. and its successors.
"Samco Purchase Agreement" means the Purchase Agreement, dated as of [
], 19[ ] 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" shall have the meaning specified in the Samco
Purchase Agreement.
"Scheduled 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 pursuant to Section 3.2 or any rescheduling of payments in any
insolvency or similar proceedings).
"Seller" means CPS Receivables Corp., as the seller of the Receivables
under this Agreement, and each of its successors pursuant to Section 7.3.
"Securities Act" shall have the meaning specified in Section 6.3(b).
"Servicer" means CPS as the servicer of the Receivables which were
purchased by the Seller, and each successor to CPS (in the same capacity)
pursuant to Section 8.3(a) or 9.2.
"Servicer's Certificate" means a certificate completed and executed by
a Servicing Officer pursuant to Section 3.9, substantially in the form of
Exhibit E-2.
["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 or supplemented in accordance with its terms.]
"Servicing Fee" means the fee payable to the Servicer for services
rendered during the respective Collection Period, determined pursuant to Section
3.8.
"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.
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"Servicing 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].
"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 any Receivable under which the
portion of a payment allocable to interest and the portion allocable to
principal is determined in accordance with the Simple Interest Method.
["Spread Account" means, with respect to the Trust and similar trusts
to be established by the Seller, the Spread Account established and maintained
pursuant to the Spread Account Agreement. The Spread Account shall be held by
the [Collateral Agent] and shall in no event be deemed part of the Trust.]
["Spread Account Agreement" means the Master Spread Account Agreement
among [ ] and [the Collateral Agent], as amended and restated as of [ ], as the
same may be amended, supplemented or otherwise modified in accordance with the
terms thereof.
"Standard & Poor's" means Standard & Poor's Ratings Group, Inc. and any
successors thereof.
["Standby Fee" means the fee payable to [the Standby Servicer] so long
as CPS is the Servicer, on each Distribution Date in an amount equal to [ ].
["Standby Servicer" means [ ], in its capacity as Standby Servicer
pursuant to the terms of [the Servicing Assumption Agreement] or such other
Person as may have been appointed Standby Servicer pursuant to Section 9.2(c).]
"State" means any State of the United States of America, or the
District of Columbia.
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"Total Distribution Amount" shall mean, for each Distribution Date, the
sum of the following amounts with respect to the preceding Collection Period:
(i) all collections on Receivables (including amounts transferred from the
Payahead Account to the Certificate Account pursuant to Section 4.6(a)(ii) but
excluding amounts deposited into the Payahead Account); (ii) Liquidation
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; (iii) proceeds from Recoveries
with respect to Liquidated Receivables; (iv) the Purchase Amount of each
Receivable that became a Purchased Receivable as of the last day of the
Collection Period; and (v) [ ], and any earnings on investments of funds in the
Collection Account and the Payahead Account pursuant to Section 4.1(a).
"Transaction Account Property" means the Transaction Accounts, all
amounts and investments held from time to time in any Transaction Account
(whether in the form of deposit accounts, Physical Property, book-entry
securities, uncertificated securities or otherwise), and all proceeds of the
foregoing.
"Transaction Accounts" means the property set forth in item (vii) of
Section 2.2.
"Trigger Event" has the meaning specified in the Series
[ ] Supplement.
"Trust" means the trust created by this Agreement, the estate of which
shall consist of the Trust Assets.
"Trust Assets" means that property set forth in items (i) through
(viii) in Section 2.2 and [the Credit Enhancement] for the benefit of the Class
A Certificateholders.
"Trustee" means the Person acting as Trustee under this Agreement, its
successor in interest, and any successor trustee pursuant to Section 10.11.
"Trustee Fee" means the fee payable to the Trustee on each Distribution
Date in an amount equal to one-twelfth of [ ]% of the Certificate Balance on the
last day of the second preceding Collection Period; provided, however, that on
the first Distribution Date the Trustee will be entitled to receive an amount
equal to the product of (i) the percentage equivalent of a fraction the
numerator of which is the number days from the Closing Date to but excluding the
first Distribution Date and the denominator of which is 360, (ii) [ ]% and (iii)
the Certificate Balance as of the Closing Date.
"Trustee Officer" means 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.
"Trustee's Certificate" means a certificate completed and executed for
the Trustee by a Trustee Officer pursuant to Section 10.2, substantially in the
form of, in the case of an assignment to CPS, Exhibit C-1 and in the case of an
assignment to the Servicer, Exhibit C-2.
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"UCC" means the Uniform Commercial Code as in effect in the respective
jurisdiction.
SECTION 1.2. Usage of Terms. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other genders; references to "writing" include
printing, typing, lithography, and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the term "including"
means "including without limitation."
SECTION 1.3. Section References. All section references shall be to
Sections in this Agreement.
SECTION 1.4. Limitation on Trust Fund Activities. Notwithstanding any
other provision in this Agreement to the contrary, the Trustee shall have no
power to vary the investment of the Certificateholders within the meaning of
Treasury Department Regulation ss. 301.7701-4(c) or to engage in business unless
the Trustee and the [Credit Enhancer] shall have received an Opinion of Counsel
that such activity shall not cause the Trust to be an association taxable as a
corporation for federal income tax purposes.
SECTION 1.5. Calculations. All calculations of the amount of interest
accrued on the Certificates and all calculations of the amount of the Servicing
Fee, the Collateral Agent Fee, the Standby Fee and the Trustee Fee shall be made
on the basis of a 360-day year consisting of twelve 30-day months. All
references to the Principal Balance of a Receivable as of the last day of a
Collection Period shall refer to the close of business on such day.
SECTION 1.6. Action by or Consent of Certificateholders. Whenever any
provision of this Agreement refers to action to be taken, or consented to, by
Certificateholders, such provision shall be deemed to refer to
Certificateholders of record as of the Record Date immediately preceding the
date on which such action is to be taken, or consent given, by
Certificateholders. Solely for the purposes of any action to be taken, or
consented to, by Certificateholders, any Certificate registered in the name of
the Seller, CPS, the Servicer or any Affiliate thereof shall be deemed not to be
outstanding and shall not be taken into account in determining whether the
requisite interest necessary to effect any such action or consent has been
obtained; provided, however, that, solely for the purpose of determining whether
the Trustee is entitled to rely upon any such action or consent, only
Certificates which the Trustee knows to be so owned shall be so disregarded.
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SECTION 1.7. Material Adverse Effect. Whenever a determination is to be
made under this Agreement as to whether a given event, action, course of conduct
or set of facts or circumstances could or would have a material adverse effect
on the Trust or the Certificateholders (or any similar or analogous
determination), such determination shall be made without taking into account the
[Credit Enhancement].
ARTICLE II
The Trust and Trust Property
SECTION 2.1. Creation of Trust. Upon the execution of this Agreement by
the parties hereto, there is hereby created the CPS Auto Grantor Trust 199[ ]-[
].
SECTION 2.2. Conveyance of Receivables. In consideration of the
Trustee's delivery of Certificates in an aggregate principal amount equal to the
Original Pool Balance to or upon the written order of the Seller, the Seller
does hereby sell, transfer, assign, set over and otherwise convey to the
Trustee, in trust for the benefit of the Certificateholders, without recourse,
except as provided in Sections 2.5, 2.6 and 2.8 (subject to the obligations
herein):
(i) all right, title and interest of the Seller in and to the
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
Cutoff Date (including Scheduled Payments due after the Cutoff Date
(including principal prepayments relating to such Scheduled Payments)
but received by the Seller or CPS 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) 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;
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(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
Purchase Agreement, 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 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 Receivable;
(vii) all amounts and property from time to time held in or
credited to the Collection Account, the Lock-Box Account, [the Credit
Enhancement Account] or the Certificate Account; and
(viii) the proceeds of any and all of the foregoing.
In addition, the Seller shall cause [the Credit Enhancement] to be
issued to and delivered to the Trust for the benefit of the Certificateholders.
SECTION 2.3. Transfer Intended as Sale; Precautionary Security
Interest. The conveyance to the Trust of the property set forth in Section 2.2
above is intended as a sale free and clear of all Liens, and it is intended that
the property of the Trust 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, however, that notwithstanding the intent of CPS,
the Seller and the Trustee, the transfer under this Agreement is held not to be
a sale, this Agreement shall constitute a grant of a security interest in the
property described in Section 2.2 above, for the benefit of the
Certificateholders and the [Credit Enhancer] as their interests may appear
herein.
SECTION 2.4. Acceptance by Trustee. The Trustee does hereby accept all
consideration conveyed by the Seller pursuant to Section 2.2, and declares that
the Trustee shall hold such
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consideration upon the trusts herein set forth for the benefit of all present
and future Certificateholders, subject to the terms and provisions of this
Agreement.
SECTION 2.5. Representations and Warranties of Seller. The Seller makes
the following representations and warranties as to the Receivables to the
[Credit Enhancer] and to the Trustee, on which the [Credit Enhancer] relies in
executing and delivering [the Credit Enhancement], and on which the Trustee on
behalf of itself and the Certificateholders relies in accepting the items
specified in Section 2.2 in trust and executing and authenticating the
Certificates. Such representations and warranties speak as of the Closing Date,
but shall survive the sale, transfer, and assignment of the Receivables to the
Trustee.
(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, with respect to the Linc Receivables, Linc, and
[with respect to the [Affiliated Originator] Receivables, [Affiliated
Originator]]) 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, with respect to the Linc Receivables,
Linc, and [with respect to the [Affiliated Originator] Receivables,
[Affiliated Originator]]) in the Financed Vehicle, which security
interest has been assigned by CPS (or, with respect to the Samco
Receivables, Samco, with respect to the Linc Receivables, Linc, and
[with respect to the [Affiliated Originator] Receivables, [Affiliated
Originator]]) 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;
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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 were originated under the CPS First Time Buyer Program;
approximately [ ]% of the aggregate Principal Balance of the
Receivables were originated under the CPS Standard Program;
approximately [ ]% of the aggregate Principal Balance of the
Receivables were originated under the CPS Super Alpha Program;
approximately [ ]% of the aggregate Principal Balance of the
Receivables are Samco Receivables; approximately [ ]% of the aggregate
Principal Balance of the Receivables are Linc Receivables;
[approximately [ ]% of the aggregate Principal Balance of the
Receivables are [Affiliate Originator] Receivables; no Receivable shall
have a payment that is more than [30] days overdue as of the Cutoff
Date; [ ]% of the Receivables are Rule of 78's Receivables and [ ]% of
the Receivables are Simple Interest Receivables; each Receivable shall
have a final scheduled payment due no later than [ ], 200[ ]; each
Receivable has an original term to maturity not more than 60 months and
a weighted average remaining term to maturity of [ ] 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
Certificateholders 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 warranties or
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.
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(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 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. 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.
(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
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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.
(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 that each Receivable requires
the Obligor to obtain and maintain such insurance naming CPS (or, with
respect to the Samco Receivables, Samco, with respect to the Linc
Receivables, Linc, and with respect to the [Affiliated Originator]
Receivables, [Affiliated Originator]) 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, with respect to the
Linc Receivables, Linc, and with respect to the [Affiliated Originator]
Receivables, [Affiliated Originator]) 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 Certificateholders 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 Certificates shall be unlawful, void, or
voidable. The Seller has not entered into any agreement
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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 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 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, a copy thereof) will be received within [180] days and
will show, CPS (or, with respect to the Samco Receivables, Samco, with
respect to the Linc Receivables, Linc, and with respect to the
[Affiliated Originator] Receivables, [Affiliated Originator]) 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,
with respect to the Linc Receivables, Linc, and with respect to the
[Affiliated Originator] Receivables, [Affiliated Originator]) 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 has not yet
been returned from the Registrar of Titles, CPS (or, with respect to
the Samco Receivables, Samco, with respect to the Linc Receivables,
Linc, and with respect to the [Affiliated Originator] Receivables,
[Affiliated Originator]) has received written evidence from the related
Dealer that such title document showing CPS 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
deliver such contract and all other documents related
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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. Each Receivable has an origination date on
or after [ ].
(xxiii) Maturity of Receivables. Each Receivable has an
original term to maturity of not more than 60 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 $[ ], has 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 Receivables were originated in
California, approximately [ ]% of the Receivables were originated in
Florida, approximately [ ]% of the Receivables were originated in
Pennsylvania, approximately [ ]% of the Receivables were originated in
Texas and the remaining [ ]% of the Receivables were originated in all
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.
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(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 2.6. Repurchase Upon Breach. (a) The Seller, the Servicer, the
[Credit Enhancer] or the Trustee, as the case may be, shall inform the other
parties to this Agreement and the [Credit Enhancer] promptly, in writing, upon
the discovery of any breach of the Seller's representations and warranties made
pursuant to Section 2.5 (without regard to any limitation 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 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 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, 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 4.5. For purposes of this Section, the Purchase
Amount of a Receivable which is not consistent with the warranty pursuant to
Section 2.5(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 Trustee, the Trust, the Certificateholders or the [Credit
Enhancer] with respect to a breach of representations and warranties pursuant to
Section 2.5 shall be to enforce CPS's obligation to purchase such Receivables
pursuant to the Purchase Agreement; provided, however, that CPS shall indemnify
the Trustee, [the Standby Servicer], the [Collateral Agent], the [Credit
Enhancer], the Trust and the Certificateholders against all costs, expenses,
losses, damages, claims and liabilities, including reasonable fees and expenses
of
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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 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 ("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 2.5 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 rights under the Purchase Agreements and the delivery
requirements, representations and warranties and the cure or repurchase
obligations of CPS under the CPS Purchase Agreement. 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
CPS Purchase Agreement.
SECTION 2.7. Delivery of Receivable Files. On or prior to the Closing
Date, the Seller shall transfer and deliver to the Trustee at the offices
specified in Schedule B to this Agreement with respect to each Receivable the
following:
(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, with respect to the Linc
Receivables, Linc, and with respect to the [Affiliated Originator]
Receivables, [Affiliated Originator]) 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, with respect to the Linc Receivables, Linc, and
with respect to the [Affiliated Originator] Receivables, [Affiliated
Originator]) 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, with respect to the Linc Receivables, Linc, and
with respect to the [Affiliated Originator] Receivables, [Affiliated
Originator]) as secured party.
The Servicer shall hold all other documents with respect to the Receivables as
custodian for the Trust.
SECTION 2.8. 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
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Certificateholders. The Trustee agrees to review each file delivered to it no
later than [45] days after the Closing Date to determine whether such Receivable
Files contain the documents referred to in Section 2.7(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 2.7(i) or (ii) are
not contained in a Receivable File, the Trustee shall inform CPS, the Seller,
[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 4.5. The sole remedy of the Trustee, the Trust, or the
Certificateholders with respect to a breach pursuant to this Section 2.8 shall
be to require CPS to purchase the Receivables pursuant to this Section 2.8. 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 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 and the
[Credit Enhancer]. On the date which is [180] days following the Closing 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.
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SECTION 2.9. Access to Receivable Files. The Trustee shall permit the
Servicer, any Certificateholder and the [Credit Enhancer] 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
Certificateholder 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 Certificateholder) to permit such Certificateholder to
review the Receivable Files or (ii) if an [Enhancement Default] shall have
occurred and be continuing. In addition, the Trustee shall provide such access
to any Certificateholder 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 Certificateholder shall be deemed to have agreed by its acceptance
of a 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 Certificateholder 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
Certificates, (iii) any prospective institutional investor transferee in
connection with the contemplated transfer of a 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 Class A
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 Certificateholder
is a party, or (d) in order to protect or enforce such Person's investment in
any Certificate. The Trustee shall, within [two] Business Days of the request of
the Servicer or the [Credit Enhancer], execute such documents and instruments as
are prepared by the Servicer or the [Credit Enhancer] and delivered to the
Trustee, as the Servicer 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
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document from any Receivable File unless it receives a trust receipt signed by a
Servicing Officer in the form of Exhibit E-1 hereto (the "Trust Receipt"). Such
Trust Receipt shall obligate 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 E-2 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 III
Administration and Servicing of Receivables
SECTION 3.1. Duties of Servicer. The Servicer, as agent for the Trust,
the Certificateholders 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 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 Trustee to execute and deliver, on behalf of itself, the
Trust, the Certificateholders 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 Trustee 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 Trustee shall, at the Servicer's expense and
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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 to the Trustee and the 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 3.2. Collection and Allocation of Receivable Payments.
Consistent with the standards, policies and procedures required by this
Agreement, the Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Receivables as and when the
same shall become due and shall follow such collection procedures as it follows
with respect to all comparable automotive receivables that it services for
itself or others; provided, however, that the Servicer shall notify each Obligor
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 Distribution
Date, it shall promptly purchase the Receivable from the Trust in accordance
with the terms of Section 3.7 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 (i) to
any alteration of the interest rate on any Receivable or of the amount of any
Scheduled Payment on Receivables, and (ii) shall not agree to any modification
that would result in a "deemed exchange" of a receivable under Section 1001 of
the Internal Revenue Code of 1986, as amended, or would constitute reinvestment
adversely affecting the status of the
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Trust as not an association taxable as a corporation for Federal income tax
purposes.
SECTION 3.3. Realization Upon Receivables. On behalf of the Trust, the
Certificateholders 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 3.2, 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 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 3.4. Physical Damage Insurance; Other 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, with respect to the Linc Receivables, Linc, and with respect to the
[Affiliated Originator] Receivables, [Affiliated Originator]) 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, with respect to the Linc Receivables, Linc, and
with respect to the [Affiliated Originator] Receivables, [Affiliated
Originator]) 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.
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(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 3.4(a) which, but for the actions of the Servicer, would have been
covered thereunder. The Servicer, on behalf of the Trustee, 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 4.2.
SECTION 3.5. Maintenance of Security Interests in Financed Vehicles.
(a) Consistent with the policies and procedures required by this Agreement, the
Servicer shall take such steps as are necessary to maintain perfection of the
security interest created by each Receivable in the related Financed Vehicle
including but not limited to obtaining the execution by the Obligors and the
recording, registering, filing, re-recording, re-registering and refiling of all
security agreements, financing statements and continuation statements or
instruments as are necessary to maintain the security interest granted by
Obligors under the respective Receivables. The Trustee hereby authorizes the
Servicer, and the Servicer agrees, to take any and all steps as are necessary to
re-perfect or continue the perfection of such security interest on behalf of the
Trust in the event of the relocation of a Financed Vehicle or for any other
reason. In the event that the assignment of a Receivable to the Trustee 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 Trustee, the
Servicer hereby agrees that CPS's designation as the secured party on such
certificate of title is in its capacity as Servicer as agent of the Trustee.
(b) Upon the occurrence of an [Enhancement Agreement] Event of Default,
the [Credit Enhancer] may (so long as an [Enhancement Default] shall not have
occurred and be continuing) instruct the Trustee and the Servicer to take or
cause to be taken, or, if an [Enhancement Default] shall have occurred, upon the
occurrence of an Event of Default, 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 Trustee on behalf 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 [Credit Enhancer] or the Trustee (as
applicable), which opinion shall not be an expense of the Trustee, be necessary
or prudent. The Servicer hereby agrees to pay all expenses related to such
perfection or re-perfection and to take all action necessary therefor. In
addition, prior to the occurrence of an [Enhancement Agreement] Event of
Default, the [Credit Enhancer] may (unless an [Enhancement Default] shall have
occurred and be continuing) instruct the Trustee and the Servicer to take or
cause to be taken such action as may, in the opinion of counsel
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to the [Credit Enhancer], be necessary to perfect or re-perfect the security
interest in the Financed Vehicles securing the Receivables in the name of the
Trustee on behalf 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 [Credit Enhancer], be necessary or prudent; provided, however,
that if the [Credit Enhancer] requests (unless an [Enhancement Default] shall
have occurred and be continuing) that the title documents be amended prior to
the occurrence of an [Enhancement 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 [Credit
Enhancer].
SECTION 3.6. Additional Covenants 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 payment in
full by the Obligor thereunder or repossession, nor shall the Servicer impair
the rights of the Certificateholders in such Receivables, nor shall the Servicer
amend a Receivable, except that extensions may be granted in accordance with
Section 3.2.
SECTION 3.7. Purchase of Receivables Upon Breach. The Servicer or the
Trustee shall inform the other party and the [Credit Enhancer] promptly, in
writing, upon the discovery of any breach of Section 3.2, 3.4, 3.5 or 3.6;
provided, however, that the failure to give such notice shall not affect any
obligation of the Servicer hereunder. Unless the breach shall have been cured by
the last day of the second Collection Period following such discovery (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 4.5. The sole
remedy of the Trustee, the Trust, the [Credit Enhancer] or the
Certificateholders with respect to a breach of Section 3.2, 3.4, 3.5 or 3.6
shall be to require the Servicer to repurchase Receivables pursuant to this
Section 3.7; provided, however, that the Servicer, so long as the Servicer is
CPS, shall indemnify the Trustee, [the Standby Servicer], the [Collateral
Agent], the [Credit Enhancer], the Trust and the Certificateholders 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
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violation shall not be treated as a breach of Sections 3.2, 3.4, 3.5 or 3.6 if
not otherwise such a breach. The Seller shall have no obligation to repurchase
the Receivables upon a breach of Section 3.2, 3.4, 3.5 or 3.6. The Seller shall
have no liability for actions taken or omitted to be taken by the Servicer
pursuant to this Section 3.7.
SECTION 3.8. Servicing Fee. The Servicing Fee for each Distribution
Date shall be equal to the sum of (i) the result of one-twelfth times [ ]% of
the Pool Balance as of the close of business on the last day of the second
preceding Collection Period plus (ii) the result of one-twelfth times [ ]% of
the Certificate 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 Distribution Date the Servicer will be entitled to receive a Servicing Fee
equal to the sum of (i) the result of one-twelfth times [ ]% of the Original
Pool Balance plus (ii) the result of one-twelfth times [ ]% of the Certificate
Balance as of the Closing Date. The Servicing Fee shall also include all late
fees, prepayment charges including, in the case of a Rule of 78's 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 3.9. Servicer's Certificate. By 10:00 a.m., [ ] time, on each
Determination Date, the Servicer shall deliver to the Trustee, the [Credit
Enhancer], the Rating Agencies, a Servicer's Certificate containing all
information necessary to make the distributions pursuant to Section 4.6
(including, if required, withdrawals from or deposits to the Payahead Account
and 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 Certificateholders and the [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 3.10. Annual Statement as to Compliance: Notice of Default. (a)
The Servicer shall deliver to the Trustee, the Standby Servicer and the [Credit
Enhancer], on or before July 31 of each year beginning [ ], 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 [ ]) 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
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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 3.11 to the Rating Agencies.
The Trustee shall forward a copy of such certificate as well as the report
referred to in Section 3.11 to each Certificateholder.
(b) The Servicer shall deliver to the Trustee, the [Credit Enhancer]
and the Rating Agencies, promptly after having obtained knowledge thereof, but
in no event later than [2] Business Days thereafter, written notice in an
Officer's Certificate of any event which with the giving of notice or lapse of
time, or both, would become an Event of Default under Section 9.1.
The Seller shall deliver to the Trustee, the [Credit Enhancer] and the
Rating Agencies, promptly after having obtained knowledge thereof, but in no
event later than [5] Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time, or
both, would become an Event of Default under clause (ii) of Section 9.1.
The Trustee shall deliver to each Certificateholder a copy of each
notice delivered to it by the Servicer or the Seller pursuant to this Section
3.10(b).
SECTION 3.11. Annual Independent Certified Public Accountant's Report.
The Servicer shall cause a firm of nationally recognized independent certified
public accountants, who may also render other services to the Servicer or to the
Seller, to deliver to the Trustee, the Certificateholders and the [Credit
Enhancer] on or before July 31 of each year beginning [ ], a report dated as of
March 31 of such year 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 [ ]), addressed to the Board of Directors of the
Servicer and to the Trustee and 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
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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. In the event such firm requires the Trustee and/or
the Standby Servicer to agree to the procedures performed by such firm, the
Servicer shall direct the Trustee and/or the Standby Servicer, as applicable, in
writing to so agree; it being understood and agreed that the Trustee and/or the
Standby Servicer will deliver such letter of agreement in conclusive reliance
upon the direction of the Servicer, and neither the Trustee nor the Standby
Servicer shall make, or have any obligations to make, any independent inquiry or
investigation as to, and shall have no obligation or liability in respect of,
the sufficiency, validity or correctness of such procedures.
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 3.12. Reserved.
SECTION 3.13. Servicer Expenses. The Servicer shall be required to pay
all expenses incurred by it in connection with its activities hereunder,
including fees and disbursements of independent accountants, taxes imposed on
the Servicer, and expenses incurred in connection with distributions and reports
to Certificateholders.
[SECTION 3.14. 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
extendible by the [Credit Enhancer] for successive quarterly terms ending on
each successive March 31, June 30, September 30 and December 31 (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 such time as all amounts due
the Certificateholders have been paid and until the termination of the Trust.
Each such notice (including each notice pursuant to standing instructions, which
shall be deemed delivered at the end of successive terms for so long as such
instructions are in effect) (a "Servicer Extension Notice") shall be delivered
by [the Credit Enhancer] to the Trustee 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. At such time as the
Class A Certificates have been paid in full and all outstanding Reimbursement
Obligations and other amounts owed to
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[the Credit Enhancer] have been paid in full or an [Enhancement Default] has
occurred and is continuing, the term of the Servicer's appointment hereunder
shall be deemed to have been extended until the termination of the Trust or, in
the case of an [Enhancement Default], until such time, if any, as such Insurer
Default has been cured, unless such appointment is terminated sooner in
accordance with the terms of this Agreement. Until such time as an Insurer
Default shall have occurred and be continuing, the Trustee agrees that if as of
the fifteenth day prior to the last day of any term of the Servicer, the Trustee
shall not have received any Servicer Extension Notice from the Certificate
Insurer, the Trustee shall, within five days thereafter, give written notice of
such non-receipt to the Certificate Insurer.
SECTION 3.15. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Trustee, the
Certificateholders and the [Credit Enhancer] reasonable access to documentation
and computer systems and information regarding the Receivables. The Servicer
shall provide such access to any Certificateholder only (i) in such cases where
the Servicer is required by applicable statutes or regulations (whether
applicable to the Servicer or to such Certificateholder) to permit such
Certificateholder to review such materials and (ii) if an [Enhancement Default]
shall have occurred and be continuing. In each case, such access shall be
afforded without charge but only upon reasonable request and during normal
business hours. Nothing in this Section 3.15 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 3.15 as a result of such obligation shall not
constitute a breach of this Section 3.15.
SECTION 3.16. 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 3.16(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 Distribution 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 Distribution 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
Distribution Date, the Servicer shall cause a firm of independent certified
public accountants, at the Servicer's expense, to audit
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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].
(b) [the Standby Servicer] shall review each Servicer's Certificate
delivered pursuant to Section 3.16(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 3.16(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 Distribution Date;
(iii) confirm that the Total Distribution Amount, the Class A
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 [Standby Fee], the Servicing Fee,
the Trustee Fee and the amount on deposit in the Spread Account 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 3.17. Fidelity Bond. The Servicer shall maintain a fidelity
bond in such form and amount as is customary for entities acting as custodian of
funds and documents in respect of consumer contracts on behalf of institutional
investors.
SECTION 3.18. 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
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pursuant to Section 12.11 and (unless an [Enhancement Agreement Event of
Default] shall have occurred and be continuing or [ ] shall then be the
Servicer) the Holders of Class B Certificates evidencing more than [ ]% of the
Class B Certificate Balance; 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 Class B Certificate
Balance shall not be unreasonably withheld or delayed and shall be deemed to
have been given unless, on or before the Objection Date, the Trustee shall have
received Objection Notices from Holders of Class B Certificates representing
more than [ ]% of the Class B Certificate Balance. Upon written request of the
Servicer, the Trustee shall deliver to each Class B Certificateholder 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 Certificateholder 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.
ARTICLE IV
Distributions, Spread Account;
Statements to Certificateholders
SECTION 4.1. Accounts; Post-Office Box. (a) The Trustee shall establish
the Lock-Box Account in the name of the Trustee for the benefit of the
Certificateholders and [Credit Enhancer], provided that pursuant to the Lock-Box
Agreement, the Lock-Box Processor and no other person, save the Trustee and
pursuant to the standing instructions of the Trustee, which instructions may
only be modified in writing signed by the Trustee, the Servicer has authority to
direct disposition of funds on deposit in the Lock-Box Account consistent with
the provisions of this Agreement and the Lock-Box Agreement. The Trustee shall
have no liability or responsibility with respect to the Lock-Box Processor's
directions or activities as set forth in the preceding sentence. The Lock-Box
Account shall be established pursuant to and maintained in accordance with the
Lock-Box Agreement and shall be a demand deposit account initially established
and maintained with Bank of America, or at the request of the [Credit Enhancer]
(unless an [Enhancement 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
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written notice of any change made at the request of the [Credit Enhancer] in the
location of the Lock-Box 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 Certificateholders and the [Credit Enhancer].
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 Lock-Box
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 Lock-Box Agreement to the same extent as if
such Lock-Box 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 under such Lock-Box Agreement
and the successor Servicer shall not be liable for any obligations of the
outgoing Servicer arising out of a default by such outgoing Servicer. 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 Lock-Box Agreement and an accounting of amounts collected and
held by the Lock-Box Bank and otherwise use its best efforts to effect the
orderly and efficient transfer of any Lock-Box Agreement to the successor
Servicer. In the event that the [Credit Enhancer] (so long as an [Enhancement
Default] shall not have occurred and be continuing) or Holders of Certificates
evidencing more than [ ]% of the Class A Certificate Balance (if an [Enhancement
Default] shall have occurred and be continuing) shall elect to change the
identity of the Lock-Box Bank, the Servicer, at its expense, shall cause the
Lock-Box Bank to deliver, at the direction of the [Credit Enhancer] (so long as
an [Enhancement Default] shall not have occurred and be continuing) or Holders
of Certificates evidencing more than [ ]% of the Class A Certificate Balance (if
an [Enhancement Default] shall have occurred and be continuing) to the Trustee
or a successor Lock-Box Bank, all documents and records relating to the
Receivables and all amounts held (or thereafter received) by the Lock-Box Bank
(together with an accounting of such amounts) and shall otherwise use its best
efforts to effect the orderly and efficient transfer of the lock-box
arrangements.
In addition, the Trustee shall establish, with itself, the Collection
Account, [the Credit Enhancement Account], and the Certificate Account in the
name of the Trustee for the benefit of the Certificateholders. In addition, the
Trustee shall establish with itself the Payahead Account in the name of the
Trustee for the benefit of Obligors of Rule of 78's Receivables who make
payments thereon in excess of Scheduled Payments and applicable late fees and
for the benefit, to the extent of earnings on investments of funds in the
Payahead Account, of the Certificateholders. The Payahead Account shall not be
included
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in the Trust. Any amounts held on deposit in the Payahead Account and any
investment earnings thereon are owned by, and will be taxable to, CPS
Receivables for federal income tax purposes. The Collection Account, [the Credit
Enhancement Account], the Certificate Account and the Payahead Account shall be
Eligible Accounts initially established with the Trustee; provided, however, if
any of such accounts shall cease to be an Eligible Account, the Servicer, with
the consent of the [Credit Enhancer], within 5 Business Days shall, cause such
accounts to be moved to an institution so that such account meets the definition
of Eligible Account. The Servicer shall promptly notify the Rating Agencies of
any change in the location of any of the aforementioned accounts.
All amounts held in the Collection Account and the Payahead Account
shall be invested by the Trustee at the written direction of the Servicer in
Eligible Investments in the name of the Trustee as trustee of the Trust and
shall mature no later than one Business Day immediately preceding the
Distribution Date next succeeding the date of such investment. Such written
direction shall certify that any such investment is authorized by this Section.
No investment may be sold prior to its maturity. Amounts in [the Credit
Enhancement Account] and the Certificate Account shall not be invested. The
amount of earnings on investments of funds in the Collection and Payahead
Accounts during the Collection Period related to each Distribution Date shall be
deposited into the Certificate Account, on each Distribution Date, and shall be
available for distribution pursuant to Section 4.6(c). The Servicer shall not
direct the Trustee to make any investment of any funds held in any of the
Transaction Accounts unless the security interest granted and perfected in such
Transaction Account will continue to be perfected in such investment, in any
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. For purposes of this paragraph, the
Trustee will take delivery of the Eligible Investments in accordance with
Schedule C.
(b) The Trustee shall not in any way be held liable by reason of any
insufficiency in any of the Transaction 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 in its commercial capacity as
principal obligor and not as Trustee to make payments on Eligible Investments
issued by the Trustee in such commercial capacity as principal obligor and not
as Trustee, in accordance with their terms.
(c) If the Servicer shall have failed to give investment directions for
any funds on deposit in any of the Transaction Accounts to the Trustee by 2:00
p.m. Eastern Time (or such other time as may be determined by the Trustee) on
any Business Day, then the Trustee shall, to the fullest extent practicable,
invest and reinvest funds in such Transaction Accounts in one or more Eligible
Investments.
(d) The Trustee shall on or prior to each Distribution Date (and prior
to the transfer from the Collection Account to the Certificate Account described
in Section 4.6(a)) transfer from the Collection Account to the Payahead Account
all Payaheads as described in Section 4.3 received by the Servicer during
theCollection Period.
SECTION 4.2. Collections. On each Business Day, pursuant to the
Lock-Box Agreement, the Lock-Box Processor will transfer any payments from
Obligors received in the Post-Office Box to the Lock-Box Account. Within [two]
Business Days of receipt of funds into the Lock-Box Account, the Servicer shall
cause the Lock-Box Bank to transfer funds from the Lock-Box 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 Lock-Box Account or the Collection Account.
SECTION 4.3. Application of Collections. All collections for each
Collection Period shall be applied by the Servicer as follows:
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With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied hereunder, in the case
of a Rule of 78's Receivable, first, to the Scheduled Payment of such Rule of
78's Receivable with the principal portion of the Scheduled Payment being
allocated on an actuarial basis, 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. With respect to any Rule of 78's Receivable, any remaining excess shall
be added to the Payahead Balance, and shall be applied to prepay the Rule of
78's Receivable, but only if the sum of such excess and the previous Payahead
Balance shall be sufficient to prepay the Rule of 78's Receivable in full.
Otherwise, any such remaining excess payments with respect to a Rule of 78's
Receivable shall constitute a Payahead, and shall increase the Payahead Balance.
SECTION 4.4. Payaheads. As of the close of business on the last day of
each Collection Period, if the payments by or on behalf of the Obligor on a Rule
of 78's Receivable (other than a Purchased Receivable) shall be less than the
Scheduled Payment and accrued late fees with respect to such Receivable, the
Payahead Balance of an Obligor shall be applied by the Servicer to the extent of
the shortfall and such Payahead Balance shall be reduced accordingly.
SECTION 4.5. Additional Deposits. 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 Sections 3.7 and 11.2. 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 Distribution Date, the Trustee shall remit to the Collection Account any
amounts delivered to the Trustee by the [Collateral Agent] pursuant to Section
4.7.
SECTION 4.6. Distributions; [Credit Enhancement Claims]. (a) On each
Distribution Date, the Trustee shall cause to be made the following transfers
and distributions based solely on the amounts set forth in the Servicer's
Certificate for the related Distribution Date:
(i) From the Collection Account to the Certificate Account, in
immediately available funds, those funds that were deposited in the
Collection Account, plus earnings on investments of funds in the
Collection Account pursuant to Section 4.1(a), for the Collection
Period related to such Distribution Date.
(ii) From the Payahead Account, to the Certificate Account, in
immediately available funds, the aggregate
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previous Payaheads to be applied to Scheduled Payments on Rule of 78's
Receivables or prepayments for the related Collection Period pursuant
to Sections 4.3 and 4.4, plus earnings on investments of funds in the
Payahead Account, for the related Collection Period, pursuant to
Section 4.1 (a).
(b) Prior to each Distribution Date, the Servicer shall on the related
Determination Date calculate the Total Distribution Amount, the Class A
Distributable Amount, the Class A Interest Distributable Amount, the Class A
Principal Distributable Amount, the Class B Interest Distributable Amount and
the Class B Principal Distributable Amount, and, based on the Total Distribution
Amount, and the other distributions to be made on such Distribution Date,
determine the amount distributable to the Certificateholders of each class.
(c) On each Distribution Date, the Trustee (based on the information
contained in the Servicer's Certificate delivered on the related Determination
Date pursuant to Section 3.9) shall, subject to subsection (d) hereof, make the
following distributions in the following order of priority:
[(i) to the Servicer, from the Total Distribution Amount, any
amount deposited into the Collection Account pursuant to Section
4.7(a), and any amount deposited into the Collection Account pursuant
to Section 4.11(i) in respect of Servicing Fees, 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 Trustee shall first pay to [the Standby Servicer] out of
the Servicing Fee otherwise payable to CPS an amount equal to the
[Standby Fee];
(ii) in the event [the Standby Servicer] becomes the successor
Servicer, to [the Standby Servicer], from the Total Distribution Amount
(as such Total Distribution Amount has been reduced by payments
pursuant to clause (i) above) and any amount deposited into the
Collection Account pursuant to Section 4.7(a), to the extent not
previously paid by the predecessor Servicer pursuant to Section 9.2,
reasonable transition expenses (up to a maximum of $[ ]) incurred in
making the transition from Standby Servicer to successor Servicer;
(iii) to the Trustee, from the Total Distribution Amount (as
such Total Distribution Amount has been reduced by payments pursuant to
clauses (i) and (ii) above), any amount deposited into the Collection
Account pursuant to Section 4.7(a), and any amount deposited into the
Collection Account pursuant to Section 4.11(i) in respect of Trustee
Fees and reasonable out-of-pocket expenses of the Trustee,
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the Trustee Fee and all reasonable out-of-pocket expenses (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 Trustee pursuant to this clause (iii) and expenses payable to the
[Collateral Agent] pursuant to clause (iv) below, shall be limited to
$[ ] 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), any amount deposited into
the Collection Account pursuant to Section 4.7(a), and any amount
deposited into the Collection Account pursuant to Section 4.11(i) in
respect of fees and expenses of the [Collateral Agent], all fees and
expenses payable to the [Collateral Agent] with respect to such
Distribution Date pursuant to the Spread Account Agreement;
(v) to the Class A Certificateholders, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (iv) above) and any amount
deposited into the Collection Account pursuant to Section 4.7(a) and
4.11(iii), an amount equal to the sum of (x) the Class A Interest
Distributable Amount, (y) any Class A Interest Carryover Shortfall and
(z) interest on such outstanding Class A Interest Carryover Shortfall,
to the extent permitted by law, at the Class A Pass-Through Rate from
such preceding Distribution Date through the current Distribution Date
(calculated on the basis of a 360-day year consisting of twelve 30-day
months) in each case as of the close of business on the preceding
Distribution Date;
(vi) to the Class B Certificateholders, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (v) above) and any amount
deposited into the Collection Account pursuant to Sections 4.7(c) and
(d), an amount equal to the sum of (x) the Class B Interest
Distributable Amount, (y) any Class B Interest Carryover Shortfall and
(z) interest on such outstanding Class B Interest Carryover Shortfall,
to the extent permitted by law, at the Class B Pass-Through Rate from
such preceding Distribution Date through the current Distribution Date
(calculated on the basis of a 360-day year consisting of twelve 30-day
months), in each case as of the close of business on the preceding
Distribution Date;
(vii) to the Class A Certificateholders, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (vi) above), any amount
deposited into the Collection Account pursuant to Section 4.7(a), and
any amount deposited into the Collection Account pursuant to Section
4.11(ii) or (iii), an amount equal to the sum of the Class A Principal
Distributable Amount and any Class A Principal Carryover Shortfall as
of the close of business on the preceding Distribution Date with
respect to each Distribution Date;
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(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), and any amount
deposited into the Collection Account pursuant to Section 4.7(a), an
amount equal to the Reimbursement Obligations;
(ix) to any successor Servicer, from the Total Distribution
Amount (as such Total Distribution Amount has been reduced by payments
pursuant to clauses (i) through (viii) above) and any amount deposited
into the Collection Account pursuant to Section 4.7(a), to the extent
not previously paid by the predecessor Servicer pursuant to Section
9.2, or in the case of [the Standby Servicer], pursuant to clause (ii)
above, reasonable transition expenses (up to a maximum of $[ ])
incurred in making the transition from Standby Servicer to successor
Servicer;
(x) to the Class B Certificateholders, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (ix) above) and any amount
deposited into the Collection Account pursuant to Sections 4.7(c) and
(d), an amount equal to the sum of the Class B Principal Distributable
Amount and any Class B Principal Carryover Shortfall as of the close of
the preceding Distribution Date; and
(xi) to the [Collateral Agent], for deposit into the Spread
Account, the remaining Total Distribution Amount, if any.]
(d) The rights of the Class B Certificateholders to receive
distributions in respect of the Class B Certificates pursuant to Section
4.6(c)(vi) on a Distribution Date shall be and hereby are subordinated to the
payment of the amounts distributable pursuant to Sections 4.6(c)(i) through (v)
except to the extent of monies deposited in the Collection Account from [the
Reserve Fund] pursuant to Section 4.7(d) hereof and [the Reserve Fund
Agreement]. The rights of the Class B Certificateholders to receive
distributions in respect of the Class B Certificates pursuant to Section
4.6(c)(x) on a Distribution Date shall be and hereby are subordinated to the
payment of the amounts distributable pursuant to Sections 4.6(c)(i) through (ix)
except to the extent of monies deposited in the Collection Account from [the
Reserve Fund] pursuant to Section 4.7(d) hereof and [the Reserve Fund
Agreement]. At such time as the Class A Certificates are paid in full and the
[Credit Enhancer] has received payment in full for all outstanding Reimbursement
Obligations and any other amounts owed to the [Credit Enhancer], the Class B
Certificateholders shall be entitled to exercise all rights granted to the Class
A Certificateholders under this
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Agreement to the extent that the exercise of such rights does not conflict with
the provisions of the Spread Account Agreement. In no event shall the Class A
Certificateholders be entitled to any amounts deposited in the Collection
Account pursuant to Section 4.7(d) hereof and [the Reserve Fund Agreement].
(e) [mechanics for drawing on [the Credit Enhancement]]
(f) Subject to Section 11.1 respecting the final payment upon
retirement of each Certificate, the Servicer shall on each Distribution Date
instruct the Trustee to distribute 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 such Certificateholder is the Depository and such
Holder's Certificates in the aggregate evidence an original principal balance of
at least $[1,000,000], and if such Certificateholder shall have provided to the
Trustee appropriate instructions prior to the Record Date for such Distribution
Date, or if not, by check mailed to such Certificateholder at the address of
such Holder appearing in the Certificate Register, the amounts to be distributed
to such Certificateholder pursuant to such Holder's Certificates.
[SECTION 4.7. Withdrawals from [Spread Account] and [Reserve Fund]. (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
Total Distribution Amount to the payment required to be made on the related
Distribution Date pursuant to Section 4.6(c)(vi)) to make the payments required
to be made on the related Distribution Date pursuant to Section 4.6(c)(i), (ii),
(iii), (iv), (v), (vii), (viii) or (ix) (such deficiency being a "Deficiency
Claim Amount"), then on the [ ] Business Day immediately preceding the related
Distribution Date, the Trustee shall deliver to the [Collateral Agent], [the
Credit Enhancer], and the Servicer, by hand delivery, telex or facsimile
transmission, a written notice (a "Deficiency Notice") specifying the Deficiency
Claim Amount for such Distribution 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 4.6(c)(i), (ii), (iii), (iv), (v), (vii), (viii) and/or (ix), as
applicable.
(b) Any Deficiency Notice shall be delivered by [ ], on the [ ]
Business Day preceding such Distribution 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 4.5.
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(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 Determination Date is insufficient to make the payments required to be
made on the related Distribution Date pursuant to Section 4.6(c)(vi) or (x)
(such deficiency being a "Class B Deficiency"), then on the [ ] Business Day
immediately preceding the related Distribution Date, the Trustee shall deliver
to the [Collateral Agent] and the Servicer, by hand delivery, telex or facsimile
transmission, a written notice specifying the amount of the Class B Deficiency
for such Distribution 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 Distribution
Date) for deposit into the Collection Account and distribution pursuant to
Section 4.6(c)(vi) and/or Section 4.6(c)(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.
(d) In the event that there are insufficient funds to cure any Class B
Deficiency pursuant to subsection (c) above, the [Collateral Agent] shall
instruct the [Reserve Fund Collateral Agent] to withdraw an amount up to the
remaining Class B Deficiency from [the Reserve Fund] in accordance with the
terms of the [Reserve Fund Agreement] for deposit in the Collection Account and
distribution pursuant to Sections 4.6(c)(vi) and (x), as applicable.]
SECTION 4.8. Statements to Certificateholders; Tax Returns. (a) With
each distribution from the Certificate Account to the Certificateholders made on
a Distribution Date, the Servicer shall provide to the [Credit Enhancer] and to
the Trustee for the Trustee to forward to each Certificateholder of record a
statement (prepared by the Servicer) substantially in the form of Exhibit D
hereto setting forth at least the following information as to the Certificates
to the extent applicable:
(i) the amount of such distribution allocable to principal of
the Class A Certificates and the Class B Certificates, respectively;
(ii) the amount of such distribution allocable to interest on
the Class A Certificates and the Class B Certificates, respectively;
(iii) the Pool Balance, the Class A Pool Factor and the Class
B Pool Factor as of the close of business on the last day of the
preceding Collection Period;
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(iv) the Class A Certificate Balance and the Class B
Certificate Balance as of the close of business on the last day of the
preceding Collection Period, after giving effect to payments allocated
to principal reported under (i) above;
(v) 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, the Class A Percentage of the
Servicing Fee (inclusive of the [Standby Fee]), the Class B Percentage
of the Servicing Fee (inclusive of the [Standby Fee]) and the amount of
any unpaid Servicing Fees (inclusive of the [Standby Fee]) and the
change in such amount from that of the prior Distribution Date;
(vi) the amount of the Class A Interest Carryover Shortfall,
if applicable, on such Distribution Date and the Class A Principal
Carryover Shortfall, if applicable, on such Distribution Date, and the
change in such amounts from the prior Distribution Date;
(vii) the amount of the Class B Interest Carryover Shortfall,
if applicable, on such Distribution Date and the amount of the Class B
Principal Carryover Shortfall, if applicable, on such Distribution
Date, and the change in such amounts from the prior Distribution Date;
(viii) the amount paid, if any, to Class A Certificateholders
from funds received under [the Credit Enhancement] for such
Distribution Date;
(ix) the amount distributable to the [Credit Enhancer] on such
Distribution Date;
(x) the aggregate amount in each of the Payahead Account, the
[Spread Account] and [the Reserve Fund] and the change in each such
amount from the preceding Distribution Date;
(xi) 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;
(xii) the number and the aggregate Purchase Amount of
Receivables that became Purchased Receivables during the related
Collection Period and summary information as to losses and
delinquencies with respect to the Receivables; and
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(xiii) the cumulative amount of Liquidated Receivables net, of
Recoveries, since 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 as a dollar amount per $1,000 of original principal balance of a
Certificate.
(b) Within thirty days after the end of each calendar year, the Trustee
shall, provided it has received the necessary information from the Servicer,
furnish to each Person who at any time during such calendar year was a
Certificateholder of record and received any payment thereon (a) a report
(prepared by the Servicer) as to the aggregate of amounts reported pursuant to
(i), (ii) and (v) of this Section 4.8 for such calendar year or applicable
portion thereof during which such person was a Certificateholder, and (b) such
information as may be reasonably requested by the Certificateholders or required
by the Code and regulations thereunder, to enable such Holders to prepare their
Federal and State income tax returns. The obligation of the Trustee set forth in
this paragraph shall be deemed to have been satisfied to the extent that
substantially comparable information shall be provided by the Servicer pursuant
to any requirements of the Code.
(c) The Servicer, at its own expense, shall cause a firm of nationally
recognized accountants to prepare any tax returns required to be filed by the
Trust, and the Trustee shall execute and file such returns if requested to do so
by the Servicer. The Trustee upon request, will furnish the Servicer with all
such information known to the Trustee as may be reasonably required in
connection with the preparation of all tax returns of the Trust.
[SECTION 4.9. Credit Enhancement; Subrogation. (a) The Trustee shall
keep a complete and accurate record of the amount of payments made under [the
Credit Enhancement] in reduction of the Class A Certificate Balance and in
payment of the Class A Interest Distributable Amount and Class A Principal
Distributable Amount pursuant to [the Credit Enhancement]. The [Credit Enhancer]
shall have the right to inspect such records at reasonable times upon one
Business Day's prior notice to the Trustee.
(b) Subject to and conditioned upon payment of any interest or
principal with respect to the Class A Certificates by or on behalf of the
[Credit Enhancer], the Trustee on behalf of the Class A Certificateholders shall
assign, and the Class A Certificateholders, by reason of their acquisition and
holding of the Class A Certificates, are hereby deemed to have assigned to the
[Credit Enhancer] all rights to the payment of the Class A Interest
Distributable Amount and Class A Principal Distributable
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Amount which are then due for payment to the extent of all payments
made by the [Credit Enhancer]. The [Credit Enhancer] (for so long as no
[Enhancement Default] shall have occurred and be continuing) may exercise any
option, vote, right, power or the like with respect to the Class A Certificates
to the extent it has made a principal payment pursuant under [the Credit
Enhancement]. The Trustee and the Class A Certificateholders, by reason of their
acquisition and holding of the Class A Certificates, agree that the [Credit
Enhancer] shall be subrogated to all of the rights to payment of the Class A
Certificateholders or in relation thereto to the extent that any payment of
principal or interest was made to such Class A Certificateholders with payments
made under [the Credit Enhancement] by the [Credit Enhancer] in accordance with
the provisions hereof.]
SECTION 4.10. Reliance on Information from the Servicer.
Notwithstanding anything to the contrary contained in this Agreement, all
distributions from any of the accounts described in this Article IV and any
transfer of amounts between such accounts shall be made by the Trustee in
reliance on information provided to the Trustee by the Servicer in writing,
whether by way of a Servicer's Certificate or otherwise and the Trustee shall be
fully protected in relying on such information from the Servicer.
SECTION 4.11. [Optional Deposits by the [Credit Enhancer]. The [Credit
Enhancer] shall at any time, and from time to time, with respect to a
Distribution Date, have the option (but shall not be required, except as
provided in Section 4.6(e)) to deliver amounts to the Trustee for deposit into
the Collection Account for any of the following purposes: (i) to provide funds
in respect of the payment of fees or expenses of any provider of services to the
Trust with respect to such Distribution Date, (ii) to distribute as a component
of the Class A Principal Distributable Amount to the extent that the Class A
Certificate Balance as of the Determination Date preceding such Distribution
Date exceeds the Class A Percentage of the Pool Balance as of such Determination
Date, or (iii) to include such amount as part of the Total Distribution Amount
for such Distribution Date to the extent that without such amount a draw would
be required to be made on the Policy.
If the [Credit Enhancer] waives the satisfaction of any of the events
that might trigger an event of default under the [Enhancement Agreement] and so
notifies the Trustee in writing pursuant to Section 5.02(d) of the [Enhancement
Agreement], the Trustee shall notify [the applicable Rating Agency] of such
waiver].
ARTICLE V
Reserved.
ARTICLE VI
The Certificates
SECTION 6.1. The Certificates. The Trustee shall, upon written order or
request signed in the name of the Seller by one of its officers authorized to do
so and delivered to an Trustee Officer, execute on behalf of the Trust,
authenticate and deliver the Certificates to or upon the order of the Seller in
the aggregate principal amount and denominations as set forth in such written
order or request. The Class A Certificates shall be issuable in minimum
denominations of [$1,000] and integral multiples thereof. The Class B
Certificates shall be issuable in minimum denominations of [$1,000] and integral
multiples thereof; provided , however, that one Class A Certificate and one
Class B Certificate respectively, may be issued in a denomination that
represents the residual amount of the Original Class A Principal Balance and the
original Class B Principal Balance, respectively (each, a "Residual
Certificate"). Upon initial issuance, the Class A Certificates and the Class B
Certificates shall be substantially in the form of Exhibit A and
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Exhibit B, respectively, in an aggregate amount equal to the Original Class A
Principal Balance and the Original Class B Principal Balance, respectively. The
Certificates shall be executed on behalf of the Trust by manual or facsimile
signature of a Trustee Officer. 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, notwithstanding that
such individuals 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 such Certificates.
[SECTION 6.2A. Appointment of Paying Agent. The Trustee may act as or
appoint one or more paying agents (each, a "Paying Agent"). The Paying Agent
shall make distributions to Certificateholders from amounts delivered by the
Trustee to the Paying Agent from amounts on deposit in the Certificate Account
pursuant to Article IV. Either the Trustee or the [Credit Enhancer] may remove
the Paying Agent if such Person determines in its sole discretion that the
Paying Agent shall have failed to perform its obligations under this Agreement
in any material respect. The Paying Agent shall initially be the Trustee. A
co-paying agent may be chosen by the Trustee. Any co-paying agent or any
successor Paying Agent shall be permitted to resign as Paying Agent, co-paying
agent or successor Paying Agent, as the case may be, upon 30 days' written
notice to the Trustee, the Seller and the [Credit Enhancer]. In the event that
the Trustee, any co-paying agent or any successor Paying Agent shall no longer
be the Paying Agent, co-paying agent or successor Paying Agent, as the case may
be, the Trustee, with the [Credit Enhancer]'s reasonable consent, shall appoint
a successor to act as Paying Agent or co-paying agent. The Trustee shall cause
each Paying Agent and each successor Paying Agent or any additional Paying Agent
appointed by the Trustee (other than the Trustee, which hereby agrees) to
execute and deliver to the Trustee an instrument in which such Paying Agent,
successor Paying Agent or additional Paying Agent shall agree with the Trustee
that, as Paying Agent, such Paying Agent, successor Paying Agent or additional
Paying Agent will hold all sums, if any, held by it for payment to the
Certificateholders in trust for the benefit of the Certificateholders entitled
thereto in an Eligible Account (which may be maintained with such Paying Agent)
until such sums shall be paid to such Certificateholders and shall promptly
notify the Trustee of any default in making such payment. The Paying Agent shall
return all unclaimed funds to the Trustee and upon removal of a Paying Agent
shall also return all funds in its possession to the Trustee. The provisions of
Sections 10.4 and 10.5 shall apply to each Paying Agent in its role as Paying
Agent. The fees of any Paying Agent or co-paying agent shall be
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paid by the Trustee. Each Paying Agent and co-paying agent must be acceptable to
the Seller.]
[SECTION 6.2B. Authenticating Agent. (a) The Trustee may appoint one or
more authenticating agents with respect to the Certificates which shall be
authorized to act on behalf of the Trustee in authenticating the Certificates in
connection with the issuance, delivery, registration of transfer, exchange or
repayment of the Certificates (the "Authenticating Agent"). Whenever reference
is made in this Agreement to the authentication of Certificates by the Trustee
or the Trustee's certificate of authentication, such reference shall be deemed
to include authentication by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an Authenticating Agent.
Each Authenticating Agent must be acceptable to the Seller and the [Credit
Enhancer]. The Trustee is hereby appointed as the initial Authenticating Agent.
(b) Any institution succeeding to the corporate agency business of an
Authenticating Agent shall continue to be an Authenticating Agent without the
execution or filing of any paper or any further act on the part of the Trustee
or such Authenticating Agent.
(c) Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Seller. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving notice of
termination to such Authenticating Agent and to the Seller. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time an
Authenticating Agent shall cease to be acceptable to the Trustee or the Seller
or the [Credit Enhancer], the Trustee may appoint a successor Authenticating
Agent. Any successor Authenticating Agent upon acceptance of its appointment
hereunder shall become vested with all the rights, powers and duties of its
predecessor hereunder with like effect as if originally named as an
Authenticating Agent. No successor Authenticating Agent shall be appointed
unless acceptable to the Trustee, the Seller and the [Credit Enhancer].
[(d) The Trustee agrees to pay to each Authenticating Agent from its
own funds from time to time reasonable compensation for its services under this
Section 6.2B.
(e) The provisions of Sections 10.4 and 10.5 shall be applicable to any
Authenticating Agent.
(f) Pursuant to an appointment made under this Section 6.2B, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate of
authentication, an alternate certificate of authentication in substantially the
following form:
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This is one of the Certificates described in the Pooling and Servicing
Agreement.
[ ]
as Authenticating Agent for the Trustee,
By
Authorized Signatory]]
SECTION 6.2. Authentication of Certificates. The Trustee shall cause
the Certificates to be executed on behalf of the Trust, authenticated, and
delivered to or upon the written order of the Seller, signed by its chairman of
the board, its president, or any vice president, without further corporate
action by the Seller, in authorized denominations, pursuant to this Agreement.
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
or Exhibit B hereto or in Section 6.2B, as the case may be, executed by the
Trustee Officer by manual signature; such authentication shall constitute
conclusive evidence that such Certificate shall have been duly authenticated and
delivered hereunder. All Certificates issued on the Closing Date shall be dated
the Closing Date. All Certificates issued upon transfer or exchange thereafter
shall be dated the date of their authentication.
SECTION 6.3. Registration of Transfer and Exchange of Certificates. (a)
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 6.7, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Trustee shall
provide for the registration of Certificates and of transfers and exchanges of
Certificates as herein provided. The Trustee shall be the initial Certificate
Registrar.
[(b) No transfer of a Class B Certificate shall be made unless (i) the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and any applicable State securities laws are complied with,
(ii) such transfer is exempt from the registration requirements under said
Securities Act and laws or (iii) such transfer is made to a Person who the
transferor reasonably believes is a "qualified institutional buyer" (as defined
in Rule 144A of the Securities Act) that is purchasing such Class B Certificate
for its own account or the account of a qualified institutional buyer to whom
notice is given that the transfer is being made in reliance on said Rule 144A.
In the event that a transfer is to be made in reliance upon clause (ii) above,
the Class B Certificateholder desiring to effect such transfer and such Class B
Certificateholder's prospective transferee must each (x) certify in writing to
the Trustee the facts surrounding such transfer and (y) provide the Trustee with
a written opinion of counsel in form and substance satisfactory to the Seller
and the Trustee that such transfer may be made pursuant to an exemption from the
Securities Act or laws, which Opinion of Counsel shall not be an expense of the
Seller or the Trustee. In the event that a transfer is to be made in reliance
upon clause (iii) above, the prospective transferee shall have furnished to the
Trustee and the Seller a Transferee Certificate, signed by such transferee, in
the form of Exhibit F. Neither the Seller nor the Trustee is under any
obligation to register the Class B Certificates under said Securities Act or any
other securities law. The Certificate Registrar may request and shall receive in
connection with any transfer signature guarantees satisfactory to it in its sole
discretion.
In no event shall a Class B Certificate be transferred to an employee
benefit plan, trust annuity or account subject to ERISA or a plan described in
Section 4975(e)(1) of the Code (any such plan, trust or account including any
Keogh (HR-10) plans, individual retirement accounts or annuities and other
employee benefit plans subject to Section 406 of ERISA or Section 4975 of the
Code being referred to in this Section 6.3 as an "Employee Plan"), a trustee of
any Employee Plan, or an entity, account or other pooled investment fund the
underlying assets of which include or are deemed to include Employee Plan assets
by reason of an Employee Plan's investment in the entity, account or other
pooled investment fund. The foregoing restriction on sale or transfer to an
employee benefit plan shall not apply to prevent the initial issuance or sale or
subsequent transfer of the Class B Certificates to an insurance company,
insurance service, or insurance organization qualified to do business in a State
that purchases Class B Certificates with funds held in one or more of its
general accounts which is eligible for the exemptive relief afforded under
Section III of Prohibited Transaction Class Exemption 95-60. The Seller, CPS,
the Servicer, the Trustee, the Certificate Insurer and the Standby Servicer
shall not be responsible for confirming or otherwise investigating whether a
proposed purchaser is an employee benefit plan, trust or account subject to
ERISA, or described in Section 4975(e)(1) of the Code.
(c) Each Holder of Class B Certificates, by virtue of the acquisition
and holding thereof, will be deemed to have represented and agreed as follows:
(i) It is a qualified institutional buyer as defined in Rule
144A or an institutional accredited investor as defined in Regulation D
promulgated under the Securities Act and is acquiring the Class B
Certificates for its own institutional account or for the account of a
qualified institutional buyer or an institutional accredited investor
for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof, subject nevertheless to any
requirement of law that the disposition of the Purchaser's property
shall at all times be and remain within its control.
(ii) It understands that the Class B Certificates have been
offered in a transaction not involving any public offering within the
meaning of the Securities Act, and that, if in the future it decides to
resell, pledge or otherwise transfer any Class B Certificates, such
Class B Certificates may be resold, pledged or transferred only (a) to
a person whom the transferor reasonably believes is a qualified
institutional buyer (as defined in Rule 144A under the Securities Act)
that purchases for its own account or for the account of a qualified
institutional buyer to whom notice is given that the resale, pledge or
transfer is being made in reliance on Rule 144A, (b) pursuant to an
effective registration statement under the Securities Act or (c) in
reliance on another exemption under the Securities Act.
(iii) It understands that the Class B Certificates will bear a
legend substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY
PURCHASING THIS SECURITY, AGREES THAT THIS SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY (1) SO LONG AS THIS SECURITY IS
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON WHOM THE
TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT, PURCHASING
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, AND SUBJECT TO THE RECEIPT BY
THE TRUSTEE AND THE SELLER OF A CERTIFICATION OF THE TRANSFEREE, (2)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR (3) IN RELIANCE ON ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUBJECT TO THE RECEIPT BY THE
TRUSTEE OF A CERTIFICATION OF THE TRANSFEREE (SATISFACTORY TO THE
TRUSTEE) AND AN OPINION OF COUNSEL (SATISFACTORY TO THE TRUSTEE AND THE
SELLER) TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND IN COMPLIANCE
WITH THE TRANSFER REQUIREMENTS SET FORTH IN SECTION 6.3 OF THE
AGREEMENT.
IN NO EVENT SHALL THIS CLASS B CERTIFICATE BE TRANSFERRED TO
AN EMPLOYEE BENEFIT PLAN, TRUST ANNUITY OR ACCOUNT SUBJECT TO ERISA OR
A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE CODE, (ANY SUCH PLAN,
TRUST OR ACCOUNT BEING REFERRED TO AS AN "EMPLOYEE PLAN"), A TRUSTEE OF
ANY EMPLOYEE PLAN, OR AN ENTITY, ACCOUNT OR OTHER POOLED INVESTMENT
FUND THE UNDERLYING ASSETS OF WHICH INCLUDE OR ARE DEEMED TO INCLUDE
EMPLOYEE PLAN ASSETS BY REASON OF AN EMPLOYEE PLAN'S INVESTMENT IN THE
ENTITY, ACCOUNT OR OTHER POOLED INVESTMENT FUND. INCLUDED WITHIN THE
DEFINITION OF "EMPLOYEE PLANS" ARE, WITHOUT LIMITATION, KEOGH (HR-10)
PLANS, IRA'S (INDIVIDUAL RETIREMENT ACCOUNTS OR ANNUITIES) AND OTHER
EMPLOYEE BENEFIT PLANS, SUBJECT TO SECTION 406 OF ERISA OR SECTION 4975
OF THE CODE. THE FOREGOING RESTRICTION ON SALE OR TRANSFER TO AN
EMPLOYEE BENEFIT PLAN SHALL NOT APPLY TO PREVENT THE INITIAL ISSUANCE
OR SALE OR SUBSEQUENT TRANSFER OF THIS CLASS B CERTIFICATE TO AN
INSURANCE COMPANY, INSURANCE SERVICE, OR INSURANCE ORGANIZATION THAT IS
QUALIFIED TO DO BUSINESS IN A STATE IF SUCH INSURANCE COMPANY PURCHASES
THIS CLASS B CERTIFICATE WITH FUNDS HELD IN ONE OR MORE OF ITS GENERAL
ACCOUNTS WHICH IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AFFORDED UNDER
SECTION III OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60.
(iv) It has not acquired the Class B Certificates with the
assets of an Employee Plan, other than an insurance company, insurance
service or insurance organization qualified to do business in a State,
which represents that the source of funds from which its investment is
to be made is an "insurance company general account" of such buyer (as
such term is defined) under Section V of The United States Department
of Labor's Prohibited Transaction Class Exemption 95-60 ("PTCE
95-60")), and as of the date of the purchase of the Certificates, such
buyer satisfies all of the requirements for relief under Section I and
IV of PTCE 95- 60.]
(d) Upon surrender for registration of transfer of any Certificate at
the Corporate Trust Office, the Trustee shall execute, authenticate and the
Trustee shall deliver, in the name of the designated transferee or transferees,
one or more new Certificates in authorized denominations of a like aggregate
amount dated the date of authentication. At the option of a Holder, Certificates
may be exchanged for other Certificates in authorized denominations of a like
aggregate amount upon surrender of the Certificates to be exchanged at the
Corporate Trust Office.
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(e) 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 Trustee and the Certificate Registrar duly executed by
the Holder or his attorney duly authorized in writing. Each Certificate
surrendered for registration of transfer and exchange shall be canceled and
subsequently disposed of by the Trustee in accordance with its customary
procedures.
(f) No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Trustee 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 6.4. 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 Trustee and the [Credit Enhancer] 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 Trustee on behalf of the Trust shall execute,
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor and
denomination. If after the delivery of such new Certificate, a bona fide
purchaser of the original Certificate in lieu of which such new Certificate was
issued presents for payment such original Certificate, the Certificate Insurer
and the Trustee shall be entitled to recover such new Certificate from the
Person to whom it was delivered or any Person taking therefrom, 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 expenses incurred
by the Certificate Insurer or the Trustee or any agent of either of them in
connection therewith. In connection with the issuance of any new Certificate
under this Section 6.4, the Trustee and 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 6.4 shall constitute conclusive evidence of ownership
in the Trust, as if originally issued, whether or not the lost, stolen, or
destroyed Certificate shall be found at any time.
SECTION 6.5. Persons Deemed Owners. Prior to due presentation of a
Certificate for registration of transfer, the Trustee or the Certificate
Registrar may treat the Person in whose name any Certificate shall be registered
as the owner of such Certificate for the purpose of receiving distributions
pursuant to Section 4.6 and for all other purposes whatsoever, and neither the
Trustee nor the Certificate Registrar shall be bound by any notice to the
contrary.
SECTION 6.6. Access to List of Certificateholders' Names and Addresses.
The Trustee shall furnish or cause to be furnished to the Servicer or the
[Credit Enhancer], at the expense of the Trust, within 15 days after receipt by
the Trustee of a request therefor from the Servicer or the [Credit Enhancer],
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as the case may be, in writing, a list of the names and addresses of the
Certificateholders as of the most recent Record Date. If three or more Class A
Certificateholders, or one or more Holders of Class A Certificates evidencing
not less than [ ]% of the Class A Certificate Balance apply in writing to the
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 shall be accompanied by a copy of
the communication that such applicants propose to transmit, then the Trustee
shall, within [five] Business Days after the receipt for such application,
afford such applicants access during normal business hours to the current list
of Certificateholders. Each Holder, by receiving and holding a Certificate,
shall be deemed to have agreed to hold none of the Servicer, the [Credit
Enhancer] or the Trustee accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
SECTION 6.7. Maintenance of Office or Agency. The Trustee shall
maintain in [ ], 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 Trustee in respect of the Certificates and this
Agreement may be served. The Trustee initially designates its office located at
[ ], as its office for such purposes. The Trustee shall give prompt written
notice to the Servicer and to Certificateholders of any change in the location
of the Certificate Register or any such office or agency.
SECTION 6.8. Book-Entry Certificates. The Certificates, upon original
issuance (except for the Residual Certificate), will be issued in the form of
typewritten Certificates representing the Book-Entry Certificates, to be
delivered to The Depository Trust Company, the initial Clearing Agency, by, or
on behalf of, the Seller. The Certificates delivered to the Depository Trust
Company shall initially be registered on the Certificate Register in the name of
CEDE & Co., the nominee of the initial Clearing Agency, and no Certificate Owner
will receive a definitive certificate representing such Certificate Owner's
interest in the Certificates, except as provided in Section 6.10. Unless and
until definitive, fully registered Certificates (the "Definitive Certificates")
have been issued to Certificate Owners pursuant to Section 6.10;
(i) the provisions of this Section 6.8 shall be in full force
and effect;
(ii) the Seller, the Servicer, the Certificate Registrar, and
the Trustee may deal with the Clearing Agency for all purposes
(including the making of distributions on
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the Certificates) as the authorized representative of the Certificate
Owners;
(iii) to the extent that the provisions of this Section 6.8
conflict with any other provisions of this Agreement, the provisions of
this Section 6.8 shall control;
(iv) the rights of Certificate Owners shall be exercised only
through the Clearing Agency and shall be limited to those established
by law and agreements between such Certificate Owners and the Clearing
Agency and/or the Clearing Agency Participants. Pursuant to the
Depository Agreement, unless and until Definitive Certificates are
issued pursuant to Section 6.10, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and receive
and transmit distributions of principal and interest on the
Certificates to such Clearing Agency Participants; and
(v) whenever this Agreement requires or permits actions to be
taken based upon instructions or directions of Holders of Certificates
evidencing a specified percentage of the Class A Principal Balance or
Class B Principal Balance, as the case may be, the Clearing Agency
shall be deemed to represent such percentage only to the extent that it
has received instructions to such effect from Certificate Owners and/or
Clearing Agency Participants owning or representing, respectively, such
required percentage of the beneficial interest in Certificates and has
delivered such instructions to the Trustee.
(vi) each such Certificate registered in the name of the
Depository's nominee and shall bear the following legend:
"Unless this Certificate is presented by an
authorized representative of The Depository Trust Company, a
New York corporation ("DTC"), to the Trustee 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."
SECTION 6.9. Notices to Clearing Agency. Whenever notice or other
communication to the Certificateholders is required under this Agreement, other
than to the Holder of the Residual Certificate, unless and until Definitive
Certificates shall have been issued to Certificate Owners pursuant to Section
6.10, the Trustee and the Servicer shall give all such notices and
communications specified herein to be given to Holders of the Certificates to
the Clearing Agency.
SECTION 6.10. Definitive Certificates. If (i) (A) the Seller advises
the Trustee in writing that the Clearing Agency is no longer willing or able to
properly discharge its responsibilities under the Depository Agreement and (B)
the Trustee or the Seller is unable to locate a qualified successor, (ii) the
Seller 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, the Clearing Agency at the direction of Certificate
Owners representing beneficial interests aggregating not less than [ ]% of the
Class A Certificate Balance, advises the Trustee in writing that a
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continuation of a book-entry system through the Clearing Agency is no longer in
the best interests of the Certificate Owners, than the Trustee shall notify the
Clearing Agency and request that the Clearing Agency notify all Certificate
Owners of the occurrence of any such event and of the availability of Definitive
Certificates to Certificate Owners requesting the same. Upon surrender to the
Trustee of the Certificates by the Clearing Agency, accompanied by registration
instructions from the Clearing Agency for registration, the Trustee shall issue
the Definitive Certificates and deliver such Definitive Certificates in
accordance with the instructions of the Clearing Agency. None of the Seller, the
Certificate Registrar nor the Trustee shall be liable for any delay in delivery
of such instructions andy may conclusively rely on, and shall be protected in
relying on, such instructions. Upon the issuance of Definitive Certificates, the
Trustee shall be protected in relying on, such instructions. Upon the issuance
of Definitive Certificates, the Trustee shall recognize the Holders of the
Definitive Certificates as Certificateholders hereunder. The Trustee shall not
be liable if the Trustee or the Seller is unable to locate a qualified successor
Clearing Agency.
ARTICLE VII
The Seller
SECTION 7.1. Representations of Seller. The Seller makes the following
representations to the [Credit Enhancer] and the Trustee, on which the [Credit
Enhancer] relied in executing and delivering [the Credit Enhancement] and on
which the Trustee on behalf of itself and the Certificateholders relied in
accepting the Receivables in trust and executing and authenticating the
Certificates. The representations speak as of the execution and delivery of this
Agreement and shall survive the sale of the Receivables to the Trustee.
(i) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a [ ] in good standing under the
laws of [ ], with power and authority to execute, deliver and perform
its obligations under this Agreement.
(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
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approvals in all jurisdictions material to the performance of its
obligations under this Agreement.
(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 and deposited with the Trustee as part of
the Trust and has duly authorized such sale and assignment to the
Trustee by all necessary corporate action; and the execution, delivery,
and performance of this Agreement 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 Receivables and the other
property conveyed to the Trust pursuant to Section 2.2, 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 except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights generally and by
equitable limitations on the availability of specific remedies,
regardless of whether such enforceability is considered a proceeding in
equity or at law.
(v) No Violation. The execution, delivery and performance by
the Seller of this Agreement and the consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms of this
Agreement 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 or both) a default under, the articles of incorporation
or by-laws of the Seller, or any material indenture, agreement,
mortgage, deed of trust, or other instrument to which the Seller is a
party or by which it is bound or any of its properties are subject; nor
result in the creation or imposition of any material lien upon any of
its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust, or other instrument (other than this
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
tribunal or governmental instrumentality having jurisdiction over the
Seller or its properties: (A) asserting the invalidity of this
Agreement or the Certificates, (B) seeking to prevent the issuance of
the Certificates or the consummation of any of the transactions
contemplated by this Agreement, (C) seeking any determination or ruling
that might materially and adversely
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affect the performance by the Seller of its obligations under, or the
validity or enforceability of, this Agreement or the Certificates, or
(D) relating to the Seller and which might adversely affect the Federal
or State income, excise, franchise or similar tax attributes of the
Certificates.
(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 Certificates or the
consummation of the other transactions contemplated by this Agreement,
except such as have been duly made or obtained.
(viii) 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.
(ix) The Seller hereby represents and warrants to the Trustee
that the Seller'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: [ ].
SECTION 7.2. 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 and the representations made by
the Seller in this Agreement. The Seller shall indemnify, defend, and hold
harmless the Trustee and [the Standby Servicer] from and against any loss,
liability or expense incurred by reason of (a) 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 or (b) the Seller's violation of Federal or State securities laws in
connection with the sale of the Certificates.
Indemnification under this Section 7.2 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation.
If the Seller shall have made any indemnity payments to the Trustee or [the
Standby Servicer] pursuant to this Section and the Trustee or [the Standby
Servicer] thereafter shall collect any of such amounts from others, the Trustee
or [the Standby Servicer] shall repay such amounts to the Seller, without
interest.
SECTION 7.3. 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
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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) immediately after giving
effect to such transaction, no event that, after notice or lapse of time, or
both, would become an Event of Default shall have happened and be continuing,
(ii) the Seller shall have delivered to the [Credit Enhancer] and the Trustee an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger, or succession and such agreement or assumption comply
with this Section 7.3 and that all conditions precedent, if any, provided for in
this Agreement relating to such transaction have been complied with, (iii) the
Seller shall have delivered to the [Credit Enhancer] and the Trustee an Opinion
of Counsel either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements and amendments thereto have
been executed and filed that are necessary fully to preserve and protect the
interest of the Trustee in the Receivables, and reciting the details of such
filings, or (B) stating that, in the opinion of such counsel, no such action
shall be necessary to preserve and protect such interest and (iv) immediately
after giving effect to such transaction, no [Enhancement Agreement Event of
Default] and no event that, after notice or lapse of time, or both, would become
an [Enhancement Agreement Event of Default] shall have happened and be
continuing. The Seller shall provide notice of any merger, consolidation or
succession pursuant to this Section 7.3 to each Rating Agency and shall have
received confirmation from each Rating Agency that the then current rating of
the Class A Certificates or the Class B Certificates will not be downgraded as a
result of such merger, consolidation or succession. Notwithstanding anything
herein to the contrary, the execution of the foregoing agreement of assumption
and compliance with clause (i), (ii), (iii) or (iv) above shall be conditions to
the consummation of the transactions referred to in clause (a), (b) or (c)
above.
SECTION 7.4. Limitation on Liability of 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
hereunder. 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 7.5. Seller May Own Certificates. The Seller and any Person
controlling, controlled by, or under common control
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with the Seller may in its individual or any other capacity become the owner or
pledgee of Certificates with the same rights as it would have if it were not the
Seller or an affiliate thereof, except as otherwise provided in the definition
of "Certificateholder" specified in Section 1.1 and in Section 1.6. Certificates
so owned by or pledged to the Seller or such controlling or commonly controlled
Person shall have an equal and proportionate benefit under the provisions of
this Agreement, without preference, priority, or distinction as among all of the
Certificates except as otherwise provided herein or by the definition of
Certificateholder.
ARTICLE VIII
The Servicer
SECTION 8.1. Representations of Servicer. The Servicer makes the
following representations to the [Credit Enhancer] and the Trustee, on which the
[Credit Enhancer] relies in executing and delivering [the Credit Enhancement],
and on which the Trustee on behalf of itself and the Certificateholders relies
in accepting the Receivables in trust and executing and authenticating the
Certificates. The representations speak as of the execution and delivery of this
Agreement and shall survive the sale of the Receivables to the Trustee.
(i) Organization and Good Standing. The initial Servicer 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 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) shall require such qualifications.
(iii) Power and Authority. The Servicer 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; and the execution, delivery, and performance of this
Agreement and the basic documents to which it is a party has been duly
authorized by the Servicer by all necessary corporate action.
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(iv) Binding Obligation. This Agreement and the Basic
Documents to which the Servicer is a party shall constitute legal,
valid and binding obligation 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.
(v) No Violation. The execution, delivery and performance by
the Servicer of this Agreement and the consummation of the transactions
contemplated by this Agreement and the Basic Documents to which 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 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 or by-laws 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; 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
Basic Documents; nor violate any law, order, rule, or regulation
applicable to the Servicer of any court or of any Federal or State
regulatory body, administrative agency, or other governmental
instrumentality having jurisdiction over the Servicer or its
properties.
(vi) No Proceedings. There are no proceedings or
investigations pending, or to the initial Servicer's best knowledge,
threatened against the initial Servicer, before any court, regulatory
body, administrative agency, or other trubunal or governmental
instrumentality having jurisdiction over the Servicer or its
properties: (A) asserting the invalidity of this Agreement or the
Certificates or any of the Basic Documents to which it is a party, (B)
seeking to prevent the issuance of the Certificates or the consummation
of any of the transactions contemplated by this Agreement or any of the
Basic Documents to which it is a party, (C) seeking any determination
or ruling that might materially and adversely affect the performance by
the initial Servicer of its obligations under, or the validity or
enforceability of, this Agreement or the Certificates or any of the
Basic Documents to which it is a party, or (D) relating to the initial
Servicer and which might adversely affect the Federal or State income,
excise, franchise or similar tax attributes of the Certificates.
(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 Certificates or the
consummation of the other transactions contemplated by this Agreement,
except such as have been duly made or obtained.
(viii) Taxes. The Servicer has filed on a timely basis all tax
returns required to be filed by it and paid all taxes, to the extent
that such taxes have become due.
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(ix) Chief Executive Office. The initial 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 92618.
SECTION 8.2. Indemnities of Servicer. (a) The Servicer shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by the Servicer under this Agreement and the representations made by
the Servicer herein.
(i) The initial Servicer shall defend, indemnify, and hold
harmless the Trustee, [the Standby Servicer], the [Collateral Agent],
the Trust, the [Credit Enhancer], the Certificateholders and the
Seller, from and against any and all costs, expenses, losses, damages,
claims, and liabilities, arising out of or resulting from the use,
ownership, or operation by the Servicer or any affiliate thereof of a
Financed Vehicle.
(ii) The initial Servicer shall indemnify, defend and hold
harmless the Trustee, [the Standby Servicer], the [Collateral Agent],
the Trust, the [Credit Enhancer] and the Seller from and against any
taxes that may at any time be asserted against the Trustee, [the
Standby Servicer], the [Collateral Agent], the Trust, the [Credit
Enhancer] or the Seller, 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.
(iii) The initial Servicer shall indemnify, defend, and hold
harmless the Trustee, [the Standby Servicer], the [Collateral Agent],
the Seller, the [Credit Enhancer], the Trust and the Certificateholders
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 Trustee,
[the Standby Servicer], the [Collateral Agent], the Seller, the Trust
or the Certificateholders 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 initial 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
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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; (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]; or (c) shall arise from the Trustee's breach of any of its
representations or warranties set forth in Section 10.13.
(v) Notwithstanding the foregoing, the Servicer shall not be
obligated to defend, indemnify, and hold harmless any Certificateholder
for any losses, claims, damages or liabilities incurred by any
Certificateholders 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 Certificate by such
Certificateholder with the assets of a plan subject to such provisions
of ERISA or the Code or the servicing, management and operation of the
Trust.
(b) For purposes of this Section, in the event of the termination of
the rights and obligations of the Servicer (or any successor thereto pursuant to
Section 8.3) as Servicer pursuant to Section 9.1, or a resignation by the
Servicer pursuant to this Agreement, such Servicer shall be deemed to continue
to be the Servicer pending appointment of a successor Servicer pursuant to
Section 9.2. The provisions of this Section 8.2(b) shall in no way affect the
survival pursuant to Section 8.2(c) of the indemnification by the outgoing
Servicer provided by Section 8.2(a).
(c) Indemnification by the initial Servicer under this Section 8.2
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, Servicer or Standby Servicer. (a) Any Person (i) into which the
Servicer may be merged or consolidated, (ii) which may result from any merger or
consolidation to which the Servicer shall be a party, or (iii) which may succeed
to the properties and assets of the Servicer substantially as a whole, shall
execute an agreement of assumption to perform every obligation of the Servicer
hereunder, and whether or not such assumption agreement is executed, shall be
the successor to the
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Servicer under this Agreement without further act on the part of any of the
parties to this Agreement; provided, however, that (w) immediately after giving
effect to such transaction, no Event of Default, and no event which, after
notice or lapse of time, or both, would become an Event of Default shall have
happened and be continuing, (x) the Servicer shall have delivered to the
Trustee 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 8.3 and that all conditions
precedent provided for in this Agreement relating to such transaction have been
complied with, (y) the Servicer shall have delivered to the Trustee and the
[Credit Enhancer] an Opinion of Counsel either (A) stating that, in the opinion
of such counsel, all financing statements and continuation statements and
amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Trustee in the Receivables and reciting
the details of such filings, or (B) stating that, in the opinion of such
counsel, no such action shall be necessary to preserve and protect such interest
and (z) nothing herein shall be deemed to release the Servicer from any
obligation. Notwithstanding anything herein to the contrary, the execution of
the foregoing agreement of assumption and compliance with clauses (i), (ii) or
(iii) above shall be conditions to the consummation of the transactions referred
to in clause (a), (b) or (c) above.
(b) Any Person (i) into which [the Standby Servicer] may be merged or
consolidated, (ii) which may result from any merger or consolidation to which
[the Standby Servicer] shall be a party, or (iii) which may succeed to the
properties and assets of [the Standby Servicer] substantially as a whole, shall
execute an agreement of assumption to perform every obligation of the Servicer
hereunder, and whether or not such assumption agreement is executed, shall be
the successor to [the Standby Servicer] under this Agreement without further act
on the part of any of the parties to this Agreement; provided, however, that
nothing herein shall be deemed to release [the Standby Servicer] from any
obligation.
SECTION 8.4. Limitation on Liability of Servicer and Others. Neither
the Servicer nor any of the directors or officers or employees or agents of the
Servicer shall be under any liability to the Trust or the Certificateholders,
except as provided under this Agreement, for any action taken or for refraining
from the taking of any action pursuant to this Agreement; provided, however,
that this provision shall not protect the Servicer or any such person against
any liability that would otherwise be imposed by reason of a breach of this
Agreement or willful misfeasance, bad faith, or negligence in the performance of
duties or by reason of reckless disregard of obligations and duties under this
Agreement. The Servicer and
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any director or officer or employee or agent of the Servicer may rely in good
faith on any document of any kind prima facie properly executed and submitted by
any Person respecting any matters arising under this Agreement.
Except as provided in this Agreement, the Servicer shall not be under
any obligation to appear in, prosecute, or defend any legal action that shall
not be incidental to its duties to service the Receivables in accordance with
this Agreement, and that in its opinion may involve it in any expense or
liability.
SECTION 8.5. Servicer and Standby Servicer Not to Resign. Subject to
the provisions of Section 8.3, neither the Servicer nor [the Standby Servicer]
may resign from the obligations and duties hereby imposed on it as Servicer or
Standby Servicer, as applicable, under this Agreement except upon determination
that by reason of a change in legal requirements the performance of its duties
under this Agreement would cause it to be in violation of such legal
requirements in a manner which would result in a material adverse effect on the
Servicer or [the Standby Servicer], as the case may be, and the [Credit
Enhancer] 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 does not elect to delegate those duties to another
Person. Notice of any such determination permitting the resignation of the
Servicer or [the Standby Servicer], as the case may be, shall be communicated to
the Trustee and the [Credit Enhancer] at the earliest practicable time (and, if
such communication is not in writing, shall be confirmed in writing at the
earliest practicable time) and any such determination shall be evidenced by an
Opinion of Counsel to such effect delivered to and satisfactory to the Trustee
and the [Credit Enhancer] concurrently with or promptly after such notice. No
such resignation of the Servicer shall become effective until a successor
servicer shall have assumed the responsibilities and obligations of CPS in
accordance with Section 9.2 and [the Servicing Assumption Agreement], if
applicable. No such resignation of [the Standby Servicer] shall become effective
until an entity acceptable to the [Credit Enhancer] shall have assumed the
responsibilities and obligations of [the Standby Servicer]; provided, however,
that if no such entity shall have assumed such responsibilities and obligations
of [the Standby Servicer] within [60] days of the resignation of [the Standby
Servicer], [the Standby Servicer] may petition a court of competent jurisdiction
for the appointment of a successor to [the Standby Servicer].
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ARTICLE IX
Default
SECTION 9.1. Events of Default. If any one of the following events
("Events of Default") shall occur and be continuing:
(i) Any failure by the Servicer to deliver to the Trustee for
distribution to Certificateholders any proceeds or payment required to
be so delivered under the terms of the Certificates and this Agreement
that shall continue unremedied for a period of [two] Business Days (or,
in the case of a payment or deposit to be made no later than a
Distribution Date, the failure to make such payment or deposit by such
Distribution Date); or the certificate required by Section 3.9, the
statement required by Section 3.10, or the report required by Section
3.11 shall not have been delivered within [five (5)] days after the
date such certificates or statements or reports, as the case may be,
are required to be delivered; or
(ii) Failure on the part of CPS, the Servicer, or the Seller,
as the case may be, duly to observe or to perform in any material
respect any other covenants or agreements of CPS, the Servicer or the
Seller (as the case may be) set forth in the Certificates, the Purchase
Agreements or in this Agreement, which failure shall continue
unremedied for a period of [30] days after the date on which written
notice of such failure requiring the same to be remedied, shall have
been given (1) to CPS, the Servicer or the Seller (as the case may be),
by the [Credit Enhancer] or the Trustee, or (2) to the Servicer or the
Seller, (as the case may be), and to the Trustee and the [Credit
Enhancer] by the Holders of Class A Certificates evidencing not less
than [ ]% of the Class A Certificate Balance or, after the Class A
Certificates 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 Certificates evidencing not
less than [ ]% of the Class B Certificate Balance; or
(iii) 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 CPS, 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
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(iv) The consent by CPS, 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
(v) The occurrence of an [Enhancement Agreement] Event of
Default;
then, and in each and every case, so long as an Event of Default shall not have
been remedied, provided (i) no [Enhancement Default] shall have occurred and be
continuing, the [Credit Enhancer] in its sole and absolute discretion, or (ii)
if an [Enhancement Default] shall have occurred and be continuing, then either
the Trustee or the Holders of Class A Certificates evidencing not less than [ ]%
of the Class A Certificate Balance or (iii) if the Class A Certificates have
been paid in full and either (A) all outstanding Reimbursement Obligations and
other amounts due to the [Credit Enhancer] have been paid in full or (B) an
[Enhancement Default] shall have occurred and be continuing, then either the
Trustee or the Holders of Class B Certificates evidencing not less than [ ]% of
the Class B Certificate Balance, by notice then given in writing to the Servicer
(and to the Trustee if given by the [Credit Enhancer] or by the
Certificateholders) may terminate all of the rights and obligations of the
Servicer under this Agreement. The Servicer shall be entitled to its pro rata
share of the Servicing Fee for the number of days in the Collection Period prior
to the effective date of its termination. On or after the receipt by the
Servicer of such written notice, all authority and power of the Servicer under
this Agreement, whether with respect to the Certificates or the Receivables or
otherwise, shall, without further action, pass to and be vested in (i) [the
Standby Servicer] or (ii) such successor Servicer as may be appointed under
Section 9.2; provided, however, that the successor Servicer shall have no
liability with respect to any obligation which was required to be performed by
the predecessor Servicer prior to the date the successor Servicer becomes the
Servicer or any claim of a third party (including a Certificateholder) based on
any alleged action or inaction of the predecessor Servicer as Servicer; and,
without limitation, the Trustee is hereby
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authorized and empowered to execute and deliver, on behalf of the predecessor
Servicer, as attorney-in-fact or otherwise, any and all documents and other
instruments, and to do or accomplish all other acts or things necessary or
appropriate to effect the purposes of such notice of termination, whether to
complete the transfer and endorsement of the Receivables and related documents,
or otherwise. The predecessor Servicer shall cooperate with the successor
Servicer and the Trustee in effecting the termination of the responsibilities
and rights of the predecessor Servicer under this Agreement, including the
transfer to the successor Servicer for administration by it of all cash amounts
that shall at the time be held or should have been held by the predecessor
Servicer for deposit, or shall thereafter be received with respect to a
Receivable and the delivery to the successor Servicer of all files and records
concerning the Receivables and a computer tape in readable form containing all
information necessary to enable the successor Servicer to service the
Receivables and the other property of the Trust. All reasonable costs and
expenses (including attorneys' fees) incurred in connection with transferring
the Receivable Files to the successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section 9.1 shall be paid
by the predecessor Servicer upon presentation of reasonable documentation of
such costs and expenses. In addition, any successor Servicer shall be entitled
to payment from the immediate predecessor Servicer for reasonable transition
expenses incurred in connection with acting as successor Servicer, and to the
extent not so paid, such payment shall be made pursuant to Section 4.6(c)
hereof. Upon receipt of notice of the occurrence of an Event of Default, the
Trustee shall give notice thereof to the Rating Agencies. The predecessor
Servicer shall grant the Trustee, [the Standby Servicer] and the [Credit
Enhancer] reasonable access to the predecessor Servicer's premises at the
predecessor Servicer's expense. If requested by the [Credit Enhancer], [the
Standby Servicer] or successor Servicer shall terminate any arrangements
relating to (i) the Lock-Box Account with the Lock-Box Bank, (ii) the
Post-Office Box or (iii) the Lock-Box Agreement, and direct the Obligors to make
all payments under the Receivables directly to the Servicer at the predecessor
Servicer's expense (in which event the successor Servicer shall process such
payments directly, or, through a Lock-Box Account with a Lock-Box Bank at the
direction of the [Credit Enhancer]).
SECTION 9.2. Appointment of Successor. (a) Upon the Servicer's receipt
of notice of termination pursuant to Section 9.1, the Servicer's resignation in
accordance with the terms of this Agreement or expiration or non-renewal of the
term of the Servicer hereunder in accordance with Section 3.14, the predecessor
Servicer shall continue to perform its functions as Servicer under this
Agreement, in the case of termination, only
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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, [ ], 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 9.2(c),
such Person shall assume the obligations of Servicer hereunder 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 other 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 other predecessor Servicer arising on or before the
Assumption Date under Sections 3.7, 4.4 or 8.2 of this Agreement, regardless of
when the liability, duty, responsibility or obligation of CPS or any other
predecessor Servicer theretofore arose, whether provided by the terms of this
Agreement, arising by operation of law or otherwise. In addition, if [the
Standby Servicer] shall be legally unable to act as Servicer and an [Enhancement
Default] shall have occurred and be continuing, [the Standby Servicer], the
Trustee or Class A Certificateholders holding Class A Certificates evidencing
not less than [ ]% of the Class A Certificate Balance (or, if the Class A
Certificates have been paid in full, Class B Certificateholders holding Class B
Certificates evidencing not less than [ ]% of the Class B Certificate Balance)
may petition a court of competent jurisdiction to appoint any 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 predecessor Servicer shall continue to act as Servicer until
a successor has been appointed and accepted such appointment. In the event that
a successor Servicer has not been appointed at the time when the predecessor
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Servicer has ceased to act as Servicer in accordance with this Section 9.2, then
the [Credit Enhancer], in accordance with Section 9.2(c) shall appoint, or
petition a court of competent jurisdiction to appoint a successor to the
Servicer under this Agreement.
(b)Upon appointment, the successor Servicer shall be the successor in
all respects to the predecessor Servicer and shall be subject to all the
responsibilities, duties, and liabilities arising thereafter relating thereto
placed on the predecessor Servicer, and shall be entitled to the Servicing Fee
and all of the rights granted to the predecessor Servicer, by the terms and
provisions of this Agreement.
(c) Subject to Section 12.11, the [Credit Enhancer] may exercise at any
time its right to appoint as Standby Servicer or as successor Servicer a Person
other than the Person serving as Standby Servicer at the time, and shall have no
liability to the Trustee, CPS, the Seller, the Person then serving as Standby
Servicer, any Certificateholder or any other person if it does so. Subject to
Section 8.5, 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 9.1 or resignation of the
Servicer pursuant to Section 8.5. If upon any such resignation or termination,
the [Credit Enhancer] appoints a successor Servicer other than [the Standby
Servicer], [the Standby Servicer] shall not be relieved of its duties as Standby
Servicer hereunder.
SECTION 9.3. Reserved.
SECTION 9.4. Notification to Certificateholders. Upon any termination
of, or appointment of a successor to, the Servicer pursuant to this Article IX,
the Trustee shall give prompt written notice thereof to Certificateholders at
their respective addresses appearing in the Certificate Register and to each of
the Rating Agencies.
[SECTION 9.5. Direction of Insolvency Proceedings by [Credit Enhancer].
(a) In the event that the Trustee has received a certified copy of an order of
the appropriate court that any Class A Guaranteed Distribution Amount paid on a
Class A Certificate has been avoided in whole or in part as a preference payment
under applicable bankruptcy law, the Trustee shall so notify the [Credit
Enhancer], shall comply with the provisions of [the Credit Enhancement] to
obtain payment by the [Credit Enhancer] of such avoided Class A Guaranteed
Distribution Amount payment, and shall, at the time it provides notice to the
[Credit Enhancer], notify Holders of the Class A Certificates by mail that, in
the event that any Class A Certificateholder's payment
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is so recoverable, such Class A Certificateholder will be entitled to payment
pursuant to the terms of [the Credit Enhancement]. Pursuant to the terms of [the
Credit Enhancement], the [Credit Enhancer] will make such payment on behalf of
the Class A Certificateholder to the receiver, conservator, debtor-
in-possession or trustee in bankruptcy named in the order and not to the Trustee
or any Class A Certificateholder directly (unless a Class A Certificateholder
has previously paid such payment to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy, in which case the [Credit
Enhancer] will make such payment to the Trustee for distribution to such Class A
Certificateholder upon proof of such payment reasonably satisfactory to the
[Credit Enhancer]).
(b) Upon knowledge of any of the following events, the Trustee shall
promptly notify the [Credit Enhancer] of (i) the commencement of any of CPS, the
events or proceedings described in Section 9.1 (iii) or (iv) in respect of the
Seller or the Servicer or any such event or proceedings applicable to an Obligor
under a Receivable (any such event or proceedings, an "Insolvency Proceeding")
and (ii) the making of any claim in connection with any Insolvency Proceeding
seeking the avoidance as a preferential transfer (a "Preference Claim") with
regard to any payment of principal of, or interest on a Class A Certificate.
Each Class A Certificateholder, by its purchase of Class A Certificates, and the
Trustee hereby agree that, the [Credit Enhancer] may, provided an [Enhancement
Default] has not occurred, at any time during the continuation of an Insolvency
Proceeding direct all matters relating to such Insolvency Proceeding, including,
without limitation, (i) all matters relating to any Preference Claim, (ii) the
direction of any appeal of any order relating to any Preference Claim and (iii)
the posting of any surety, supersedeas or performance bond pending any such
appeal at the expense of the [Credit Enhancer], but subject to reimbursement as
provided in the [Enhancement Agreement]. In addition, and without limitation of
the foregoing, as set forth in Section 4.9, the [Credit Enhancer] shall be
subrogated to, and each Class A Certificateholder and the Trustee hereby
delegate and assign, to the fullest extent permitted by law, the rights of the
Trustee and each Class A Certificateholder in the conduct of any proceeding with
respect to a Preference Claim, including, without limitation, all rights of any
party to an adversary proceeding action with respect to any court order issued
in connection with any such Preference Claim.]
SECTION 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 9.1 which would give rise to a right of termination under such
Section upon the Servicer's failure to remedy the same after notice, the Trustee
shall give
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notice thereof to the Servicer and the [Credit Enhancer]. For all purposes of
this Agreement, the Trustee shall not be deemed to have knowledge of any failure
of the Servicer as specified in Section 9.1 unless notified thereof in writing
by the Servicer, the [Credit Enhancer] or by a Certificateholder. The Trustee
shall be under no duty or obligation to investigate or inquire as to any
potential failure of the Servicer specified in Section 9.1.
ARTICLE X
The Trustee
SECTION 10.1. Duties of Trustee. The Trustee, both prior to the
occurrence of an Event of Default and after an Event of Default shall have been
cured or waived, shall undertake to perform such duties and only such duties as
are specifically set forth in this Agreement. If an Event of Default shall have
occurred and shall not have been cured or waived, the Trustee shall exercise
such of the rights and powers vested in it by this Agreement and shall use the
same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
The Trustee, upon receipt of all resolutions, certificates, statements,
opinions, reports, documents, orders or other instruments furnished to the
Trustee that shall be specifically required to be furnished pursuant to any
provision of this Agreement, shall examine them to determine whether they
conform to the requirements of this Agreement.
The Trustee shall take and maintain custody of the Receivable Files
(except as otherwise provided herein) and the Schedule of Receivables included
as an exhibit to this Agreement and shall retain copies of all Servicer's
Certificates prepared hereunder.
No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own bad faith; provided, however, that:
(i) Prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred, the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Agreement, the Trustee shall
not be liable except for the performance of such duties and obligations
as shall be specifically set forth in this Agreement, no implied
covenants or obligations shall be read
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into this Agreement against the Trustee and, in the absence of bad
faith on the part of the Trustee, the Trustee may conclusively rely on
the truth of the statements and the correctness of the opinions
expressed in any certificates or opinions furnished to the Trustee and
conforming to the requirements of this Agreement;
(ii) The Trustee shall not be liable for an error of judgment
made in good faith by a Trustee Officer, unless it shall be proved that
the Trustee shall have been negligent in ascertaining the pertinent
facts;
(iii) The Trustee shall not be liable with respect to any
action taken, suffered, or omitted to be taken in good faith in
accordance with this Agreement or at the direction of the [Credit
Enhancer] or, after an [Enhancement Default], the Holders of Class A
Certificates evidencing not less than [ ]% of the Class A Certificate
Balance or, after the Class A Certificates have been paid in full and
either (A) all outstanding Reimbursement Obligations and other amounts
due to the [Credit Enhancer] have been paid in full or (B) an
[Enhancement Default] shall have occurred and be continuing, the
Holders of Class B Certificates evidencing not less than [ ]% of the
Class B Certificate Balance, relating to the time, method, and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Agreement;
(iv) The Trustee shall not be charged with knowledge of any
Event of Default, unless a Trustee Officer assigned to the Trustee's
Corporate Trust Office receives written notice of such Event of Default
from CPS, the Servicer or the Seller, as the case may be, the [Credit
Enhancer] or, after an [Enhancement Default], the Holders of Class A
Certificates evidencing not less than [ ]% of the Class A Certificate
Balance or, after the Class A Certificates have been paid in full and
either (A) all outstanding Reimbursement Obligations and other amounts
due to the [Credit Enhancer] have been paid in full or (B) an
[Enhancement Default] shall have occurred and be continuing, the
Holders of Class B Certificates evidencing not less than [ ]% of the
Class B Certificate Balance (such notice shall constitute actual
knowledge of an Event of Default by the Trustee); and
(v) The Trustee shall not be liable for any action taken,
suffered or omitted by it in good faith and reasonably believed by it
to be authorized or within the discretion or rights or powers conferred
upon it by this Agreement.
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The Trustee shall not be required to expend or risk its own funds or
otherwise incur financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if there shall be
reasonable grounds for believing that the repayment of such funds or adequate
indemnity against such risk or liability shall not be reasonably assured to it,
and none of the provisions contained in this Agreement shall in any event
require the Trustee to perform, or be responsible for the manner of performance
of, any of the obligations of the Servicer under this Agreement except during
such time, if any, as the Trustee, in its capacity as Standby Servicer, shall be
the successor to, and be vested with the rights, duties, powers, and privileges
of, the Servicer in accordance with the terms of this Agreement.
Except for actions expressly authorized by this Agreement, 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.
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
Agreement or any applicable law or regulation.
SECTION 10.2. Trustee's Certificate. On or as soon as practicable after
each Distribution Date on which Receivables shall be assigned to CPS or the
Servicer, as applicable, pursuant to this Agreement, based on amounts deposited
to the Collection Account, notices received pursuant to this Agreement and the
information contained in the Servicer's Certificate for the related Collection
Period, identifying the Receivables purchased by CPS pursuant to Section 2.6 or
2.8 or purchased by the Servicer pursuant to Section 3.7 or 11.2, the Trustee
shall execute a Trustee's Certificate (in the form of Exhibit C-1 or C-2, as
applicable), and shall deliver such Trustee's Certificate, accompanied by a copy
of the Servicer's Certificate for such Collection Period to CPS or the Servicer,
as the case may be. The Trustee's Certificate submitted with respect to such
Distribution Date shall operate, as of such Distribution Date, as an assignment,
without recourse, representation, or warranty, to CPS or the Servicer, as the
case may be, of all the Trustee's right, title, and interest in and to such
repurchased Receivable, and all security and documents relating thereto, such
assignment being an assignment outright and not for security.
SECTION 10.3. Reserved.
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SECTION 10.4. Certain Matters Affecting Trustee. Except as otherwise
provided in Section 10.1:
(i) The Trustee may rely and shall be fully protected in
acting or refraining from acting upon any resolution, Officer's
Certificate, Servicer's Certificate, certificate of auditors, or any
other certificate, statement, instrument, opinion, report, notice,
request, consent, order, appraisal, bond, or other paper or document
believed by it to be genuine and to have been signed or presented by
the proper party or parties.
(ii) The Trustee may consult with counsel, and any Opinion of
Counsel shall be full and complete authorization and protection in
respect of any action taken or suffered or omitted by the Trustee under
this Agreement in good faith and in accordance with such Opinion of
Counsel.
(iii) The 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 in
relation to this Agreement, at the request, order or direction of any
of the Certificateholders or the [Credit Enhancer] pursuant to the
provisions of this Agreement, unless such Certificateholders or the
[Credit Enhancer] shall have offered to the Trustee reasonable (in the
Trustee's judgment) security or indemnity against the costs, expenses,
and liabilities that may be incurred therein or thereby; nothing
contained in this Agreement, however, shall relieve the Trustee of the
obligations, upon the occurrence of an Event of Default (that shall not
have been cured or waived), to exercise such of the rights and powers
vested in it by this Agreement, with 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 his or her own affairs.
(iv) Prior to the occurrence of an Event of Default and after
the curing or waiving of all Events of Default that may have occurred,
the Trustee shall not be bound to make any investigation into the facts
of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond, or other paper or document (other than for its duties pursuant to
Section 2.8), unless requested in writing to do so by the [Credit
Enhancer] or Holders of Class A Certificates evidencing not less than [
]% of the Class A Certificate Balance or, after the Class A
Certificates have been paid in full and either (A) all outstanding
Reimbursement Obligations and other amounts due to the [Credit
Enhancer] have been paid in full or (B) an
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[Enhancement Default] shall have occurred and be continuing, the
Holders of Class B Certificates evidencing not less that [ ]% of the
Class B Certificate Balance; 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 shall be, in the opinion of the Trustee, not reasonably
assured to the Trustee by the security afforded to it by the terms of
this 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. Nothing in
this clause (iv) shall affect the obligation of the Servicer to observe
any applicable law prohibiting disclosure of information regarding the
Obligors.
(v) The Trustee may execute any of the trusts or powers
hereunder or perform any duties under this Agreement either directly or
by or through agents or attorneys or a custodian. The Trustee shall not
be responsible for any misconduct or negligence of any such agent or
custodian appointed with due care by it hereunder or of the Servicer in
its capacity as Servicer or custodian.
(vi) Except as may be required by Sections 2.8 and 10.1,
subsequent to the sale of the Receivables by the Seller to the Trust,
the Trustee shall have no duty of independent inquiry, and the Trustee
may rely upon the representations and warranties and covenants of the
Seller and the Servicer contained in this Agreement with respect to the
Receivables and the Receivable Files.
(vii) The Trustee may rely, and shall be fully protected in so
relying, as to factual matters relating to the Seller or the Servicer,
on an Officer's Certificate of the Seller or Servicer, respectively.
(viii) The Trustee shall not be required to take any action or
refrain from taking any action under this Agreement, or any related
documents referred to herein, nor shall any provision of this
Agreement, or any such related document be deemed to impose a duty on
the Trustee to take action, if the Trustee shall have been advised by
counsel that such action is contrary to (i) the terms of this
Agreement, (ii) any such related document or (iii) law.
SECTION 10.5. Trustee Not Liable for Certificates or Receivables. The
recitals contained herein and in the Certificates (other than the certificate of
authentication on the Certificates) shall be taken as the statements of the
Seller or
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the Servicer, as the case may be, and the Trustee assumes no responsibility for
the correctness thereof. The Trustee shall make no representations as to the
validity or sufficiency of this Agreement or of the Certificates (other than the
certificate of authentication on the Certificates), or of any Receivable or
related document. The Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity, and enforceability of
any security interest in any Financed Vehicle or any Receivable, or the
perfection and priority of such a security interest or the maintenance of any
such perfection and priority, or for or with respect to the efficacy of the
Trust or its ability to generate the payments to be distributed to
Certificateholders under this Agreement, including, without limitation: the
existence, condition, location, and ownership of any Financed Vehicle; the
existence and enforceability of any physical damage insurance thereon; except as
required by Section 2.8, the existence, contents and completeness of any
Receivable or any Receivable File or any computer or other record thereof; the
validity of the assignment of any Receivable to the Trust or of any intervening
assignment; except as required by Section 2.8, the performance or enforcement of
any Receivable; the compliance by the Seller or the Servicer with any warranty
or representation made under this Agreement or in any related document and the
accuracy of any such warranty or representation prior to the Trustee's receipt
of notice or other discovery of any noncompliance therewith or any breach
thereof; any investment of monies by or at the direction of the Servicer or the
[Credit Enhancer] or any loss resulting therefrom (it being understood that the
Trustee shall remain responsible for any Trust Assets or Transaction Account
Property that it may hold); the acts or omissions of the Seller, the Servicer,
or any Obligor; any action of the Servicer taken in the name of the Trustee; or
any action by the Trustee taken at the instruction of the Servicer; provided,
however, that the foregoing shall not relieve the Trustee of its obligation to
perform its duties under this Agreement. Except with respect to a claim based on
the failure of the Trustee to perform its duties under this Agreement or based
on the Trustee's negligence or willful misconduct, no recourse shall be had for
any claim based on any provision of this Agreement, the Certificates, or any
Receivable or assignment thereof against the Trustee in its individual capacity,
the Trustee shall not have any personal obligation, liability, or duty
whatsoever to any Certificateholder or any other Person with respect to any such
claim, and any such claim shall be asserted solely against the Trust or any
indemnitor who shall furnish indemnity as provided in this Agreement. The
Trustee shall not be accountable for the use or application by the Seller of any
of the Certificates or of the proceeds of such Certificates, or for the use or
application of any funds paid to the Servicer in respect of the Receivables. The
Seller hereby certifies to the Trustee that the Rating Agencies rating the Class
A Certificates are [ ] and [the Rating Agency rating the Class B Certificates is
[ ]] and that
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their addresses are as set forth in Section 12.5. The Trustee may rely on the
accuracy of such certification until it receives from the Seller an Officer's
Certificate superseding such certification.
SECTION 10.6. Trustee May Own Certificates. The Trustee in its
individual or any other capacity may become the owner or pledgee of Certificates
and may deal with the Seller and the Servicer in banking transactions with the
same rights as it would have if it were not Trustee.
SECTION 10.7. Indemnity of Trustee. CPS as Servicer shall indemnify the
Trustee for, and hold it harmless against any loss, liability, or expense
incurred without willful misfeasance, negligence, or bad faith on the Trustee's
part, arising out of or in connection with the acceptance or administration of
the Trust, or the Trustee's performance of its duties hereunder including the
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of any of its powers or duties under
this Agreement. Additionally the Seller, pursuant to Section 7.2, shall
indemnify the Trustee with respect to certain matters, the Servicer, pursuant to
Section 8.2, shall indemnify the Trustee with respect to certain matters, and
Certificateholders, pursuant to Section 10.4 shall, upon the circumstances
therein set forth, indemnify the Trustee under certain circumstances. The
provisions of this Section 10.7 shall survive the termination of this Agreement
or any resignation or removal of CPS as Servicer.
SECTION 10.8. Eligibility Requirements for Trustee. The Trustee under
this Agreement shall at all times be organized and doing business under the laws
of the United States of America; authorized under such laws to exercise
corporate trust powers; having a combined capital and surplus of at least $[ ]
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. If such
corporation shall publish reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purpose of this Section 10.8, 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 Trustee shall cease to be eligible in accordance with the provisions of this
Section 10.8, the Trustee shall resign immediately in the manner and with the
effect specified in Section 10.9.
SECTION 10.9. Resignation or Removal of Trustee. The Trustee may at any
time resign and be discharged from the trusts hereby created by giving [30]
days' prior written notice thereof
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to the Servicer. Upon receiving such notice of resignation, with the prior
written consent of (a) the [Credit Enhancer] and the Holders of Class A
Certificates evidencing not less than [ ]% of the Class A Certificate Balance or
(b) if the Class A Certificates have been paid in full and all outstanding
Reimbursement Obligations and other amounts owing to the [Credit Enhancer] have
been paid in full, with the prior written consent of the Holders of Class B
Certificates evidencing not less than [ ]% of the Class B Certificate Balance,
the Servicer shall promptly appoint a successor Trustee by written instrument,
in duplicate, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor Trustee. If no successor Trustee shall
have been so appointed and have accepted appointment within [30] days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee. The
Trustee may be removed at any time by written demand of the [Credit Enhancer]
delivered to the Trustee and the Servicer; [provided that, if an [Enhancement
Default] has occurred which is continuing, such right of the [Credit Enhancer]
shall be inoperative during the period of such [Enhancement Default] and shall
instead vest in the Trustee acting at the direction of the Holders of Class A
Certificates evidencing not less than [ ] of the Class A Certificate Balance or,
from and after such time as the Class A Certificates have been paid in full and
all outstanding Reimbursement Obligations and other amounts due to the [Credit
Enhancer] have been paid in full, the Holders of Class B Certificates evidencing
not less than [ ] of the Class B Certificate Balance, in each case, in
accordance with Section 12.11.]
If at any time the Trustee shall cease to be eligible in accordance
with the provisions of Section 10.8 and shall fail to resign after written
request therefor by the Servicer, or if at any time the Trustee shall be legally
unable to act, or shall be adjudged bankrupt or insolvent, or a receiver,
conservator or liquidator of the Trustee or of its property shall be appointed,
or any public officer shall take charge or control of the Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Servicer may remove the Trustee. If the Servicer shall
remove the Trustee under the authority of the immediately preceding sentence,
the Servicer shall promptly appoint a successor Trustee by written instrument,
in duplicate, one copy of which instrument shall be delivered to the Trustee so
removed and one copy to the successor Trustee, and pay all fees and expenses
owed to the outgoing Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section 10.9 shall
not become effective until acceptance of appointment by the successor Trustee
pursuant to Section 10.10 and payment of all fees and expenses owed to the
outgoing Trustee. The Servicer shall provide notice of such resignation or
removal of the Trustee to each of the Rating Agencies.
SECTION 10.10. Successor Trustee. Any successor Trustee appointed
pursuant to Section 10.9 shall execute, acknowledge, and deliver to the
Servicer, the [Credit Enhancer] and to its predecessor Trustee an instrument
accepting such appointment under this Agreement, and thereupon the resignation
or removal of the predecessor Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall
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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
Trustee. The predecessor Trustee shall upon payment of its fees and expenses
deliver to the successor Trustee all documents and statements and monies held by
it under this Agreement; and the Servicer [Credit Enhancer] and the predecessor
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 Trustee all such rights, powers, duties, and obligations.
No successor Trustee shall accept appointment as provided in this
Section 10.10 unless at the time of such acceptance such successor Trustee shall
be eligible pursuant to Section 10.8.
Upon acceptance of appointment by a successor Trustee pursuant to this
Section 10.10, the Servicer shall mail notice of the successor of such Trustee
under this Agreement to all Holders of Certificates at their addresses as shown
in the Certificate Register and to the Rating Agencies. If the Servicer shall
fail to mail such notice within [10] days after acceptance of appointment by the
successor Trustee, the successor Trustee shall cause such notice to be mailed at
the expense of the Servicer.
SECTION 10.11. Merger or Consolidation of Trustee. Any corporation into
which the 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 Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be eligible pursuant to Section 10.8, 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 Trustee shall mail notice of such merger or consolidation to the Rating
Agencies.
SECTION 10.12. Co-Trustee; 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 Trust or any Financed
Vehicle may at the time be located, the Servicer, the [Credit Enhancer]
(provided no [Enhancement Default] shall have occurred and be continuing) and
the Trustee acting jointly shall have the power and shall execute and deliver
all instruments to appoint one or more persons approved by the Trustee to act as
co-trustee, jointly with the Trustee, or separate trustee or separate trustees,
of all or any part of the Trust, and to vest in such Person, in such capacity
and for the benefit of the Certificateholders, such title to the Trust, or any
part thereof,
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and, subject to the other provisions of this Section 10.12, such powers, duties,
obligations, rights, and trusts as the Servicer, the [Credit Enhancer] and the
Trustee may consider necessary or desirable. If the Servicer and the [Credit
Enhancer] shall not have joined in such appointment within [15] days after the
receipt by it of a request so to do, or in the case an Event of Default shall
have occurred and be continuing, the Trustee alone shall have the power to make
such appointment. No co-trustee or separate trustee under this Agreement shall
be required to meet the terms of eligibility as a successor trustee pursuant to
Section 10.8, except that the co-trustee or its parent shall comply with the
rating requirements set forth therein, and no notice of a successor trustee
pursuant to Section 10.10 and no notice to Certificateholders of the appointment
of any co-trustee or separate trustee shall be required pursuant to Section
10.10.
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 Trustee shall be conferred 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 (whether as
Trustee under this Agreement or, in its capacity as Standby Servicer,
as successor to the Servicer under this Agreement), 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 under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) Provided no [Enhancement Default] shall have occurred
and be continuing, the [Credit Enhancer] may, and, in the event an
[Enhancement Default] shall have occurred and be continuing, then, the
Servicer and the 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 Trustee shall be
deemed to have been given to each of the other then
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separate trustees and co-trustees, as effectively as if given to each of them.
Every instrument appointing any separate trustee or co-trustee shall refer to
this Agreement and the conditions of this Article X. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be vested with
the estates or property specified in its instrument of appointment, either
jointly with the Trustee or separately, as may be provided therein, subject to
all the provisions of this Agreement, specifically including every provision of
this Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Each such instrument shall be filed with
the Trustee and a copy thereof given to the Servicer.
Any separate trustee or co-trustee may at any time appoint 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,
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
Trustee, to the extent permitted by law, without the appointment of a new or
successor trustee.
SECTION 10.13. Representations and Warranties of Trustee. The Trustee
shall make the following representations and warranties on which the Seller, the
[Credit Enhancer] and Certificateholders shall rely:
(i) The Trustee is a banking corporation [or association] duly
organized, validly existing, and in good standing under the laws of the
United States of America.
(ii) The Trustee has full corporate power authority and legal
right to execute, deliver, and perform this Agreement and shall have
taken all necessary action to authorize the execution, delivery and
performance by it of this Agreement.
(iii) This Agreement shall have been duly executed and
delivered by the Trustee and this Agreement constitutes a legal, valid
and binding obligation of the Trustee enforceable in accordance with
its terms, subject to (x) applicable bankruptcy, insolvency,
reorganization, moratorium, and other similar laws affecting creditor's
rights generally and (y) general principles of equity.
SECTION 10.14. No Bankruptcy Petition. The Trustee covenants and agrees
that prior to the date which is one year and one day after the payment in full
of all securities issued by the Seller or by a trust for which the Seller was
the depositor it will not institute against, or join any other Person in
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instituting against, the Seller or the Trust any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any Federal or State bankruptcy or similar law.
SECTION 10.15. Trustee May Enforce Claims Without Possession of
Certificates. All rights of action and claims under this Agreement or the
Certificates may be prosecuted and enforced by the Trustee without the
possession of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as Trustee. Any recovery of judgment shall,
after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Certificateholders in respect of which such judgment has
been obtained.
SECTION 10.16. Rights of [Credit Enhancer] to Direct Trustee; Class B
Certificateholder's Right of First Refusal. (a) The [Credit Enhancer], after
giving written notice to the Trustee, shall have the right to direct the time,
method and place at or by which the Trustee conducts any proceeding for any
remedy available to the Trustee, or exercises any such trust or power conferred
upon the Trustee.
(b) [Notwithstanding anything to the contrary contained in subsection
(a) above, the Trustee shall not exercise any remedy involving a sale of the
Receivables unless it shall have received instruction to do so by Holders of at
least [ ]% of each of the Class A Certificate Balance and the Class B
Certificate Balance.]
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(c) Notwithstanding anything to the contrary contained in subsections
(a) or (b) above, the Trustee shall have the right to decline to follow any such
direction of the [Credit Enhancer] if the Trustee, being advised by counsel,
determines that the action so directed may not lawfully be taken, or if the
Trustee in good faith shall, by a responsible officer of the Trustee, determine
that the proceedings so directed would be illegal or involve it in personal
liability or be unduly prejudicial to the rights of Certificateholders;
provided, that nothing in this Agreement shall impair the right of the Trustee
to take any action deemed proper by the Trustee and which is not inconsistent
with such direction of the [Credit Enhancer].
ARTICLE XI
Termination
SECTION 11.1. Termination of the Trust. The respective obligations and
responsibilities of CPS, the Seller, the Servicer, and the Trustee created
hereby and the Trust created by this Agreement shall terminate upon the payment
to Certificateholders of all amounts required to be paid to them pursuant to
this Agreement or [the Credit Enhancement] (including all amounts required to
reduce the Class A Certificate Balance to zero and to pay in full any unpaid
Class A Interest Distributable Amount), satisfaction of all Reimbursement
Obligations, and the expiration of any preference period related thereto and the
disposition of all property held as part of the Trust; provided, however, that
in no event shall the trust created by this Agreement continue beyond the
expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States of America to the
Court of St. James, living on the date of this Agreement. The Servicer shall
promptly notify the Trustee and the [Credit Enhancer] of any prospective
termination pursuant to this Section 11.1.
Notice of any termination, specifying the Distribution Date upon which
the Certificateholders may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be given promptly by
the Trustee by letter to Certificateholders mailed not earlier than the 15th day
and not later than the 25th day of the month next preceding the specified
Distribution Date stating (A) the Distribution Date upon which final payment of
the Certificates shall be made upon presentation and surrender of the
Certificates at the office of the Trustee therein designated, (B) the amount of
any such final payment, and (C) if applicable, that the Record Date otherwise
applicable to such Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Certificates at the office of the Trustee
therein specified. The
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Trustee shall give such notice to the Certificate Registrar (if other than the
Trustee) at the time such notice is given to Certificateholders. Upon
presentation and surrender of the Certificates, the Trustee shall cause to be
distributed to Certificateholders amounts distributable on such Distribution
Date pursuant to Section 4.6.
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 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 Trustee shall 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 or, if none, from CPS. Any funds remaining in the
Trust after exhaustion of such remedies shall be distributed by the Trustee to
the American Red Cross.
SECTION 11.2. Optional Purchase of All Receivables. On the last day of
any Collection Period as of which the Pool Balance shall be less than or equal
to the Optional Purchase Percentage multiplied by the Original Pool Balance, the
Servicer shall have the option to purchase the corpus of the Trust (with the
consent of the [Credit Enhancer], if such purchase would result in a claim under
[the Credit Enhancement] or would result in any amount owing to the [Credit
Enhancer] or to the Holders of the Class A Certificates remaining unpaid);
provided, however, that the Servicer may not effect any such purchase unless the
Trustee shall have received an Opinion of Counsel to the effect that such
purchase would not constitute a fraudulent conveyance. To exercise such option
the Servicer (or the [Credit Enhancer], if applicable) shall deposit pursuant to
Section 4.5 in the Collection Account an amount equal to the aggregate Purchase
Amount for the Receivables (including defaulted Receivables), plus the appraised
value of any other property held by the Trust, such value to be determined by an
appraiser mutually agreed upon
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by the Servicer, the [Credit Enhancer] and the Trustee, and shall succeed to all
interests in and to the Trust. For purposes of this Section, the Purchase Amount
shall not be less than the sum of the Class A Certificate Balance and the Class
B Certificate Balance.
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 Insurer Default has occurred and is continuing) but
without the consent of any of the Certificateholders, to cure any error, defect
or 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 [Enhancement
Agreement]; provided, however, that such action shall not, as evidenced by an
Opinion of Counsel delivered to the Trustee, adversely affect in any material
respect the interests of any Certificateholder; provided further that if an
[Enhancement Default] has occurred and is continuing, such action shall not
materially adversely affect the interests of the [Credit Enhancer].
(b) This Agreement may be amended from time to time by the Seller, the
Servicer, and the Trustee with the consent of the [Credit Enhancer] and with the
consent (which consent of any Holder of a Certificate 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 and of
any Certificate 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) of the Holders of Class A Certificates evidencing not less than [
]% of the Class A Certificate Balance and the Holders of Class B Certificates
evidencing not less than [ ]% of the Class B 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
Holders of Certificates; provided, however, that no such amendment shall (a)
increase or reduce in any manner the amount of, or accelerate or delay the
timing of, or change the allocation or priority of, collections of payments on
Receivables or distributions that shall be required to be made on any
Certificate or change the Class A Pass-Through Rate or the Class B Pass-Through
Rate without the consent of each Certificateholder affected thereby, (b) reduce
the aforesaid percentage of the Class A Certificate Balance or Class B
Certificate Balance required to consent to any such amendment, without the
consent of the Holders of all Certificates of the applicable class then
outstanding, (c) result in a downgrade or withdrawal of the then current rating
of the Class A Certificates by either of the Rating Agencies without the consent
of all the Class A Certificateholders or (d) result in a downgrade or withdrawal
of the then current rating of the Class B Certificates by either of the Rating
Agencies without the consent of all the Class B Certificateholders.
Promptly after the execution of any such amendment or consent, the
Trustee shall furnish a copy of such amendment or consent to each
Certificateholder and each of the Rating Agencies.
It shall not be necessary for the consent of Certificateholders
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) and of evidencing
the authorization of any action by Certificateholders shall be subject to such
reasonable requirements as the Trustee may prescribe.
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Prior to the execution of any amendment to this Agreement, 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 12.2(i)(1). The Trustee may, but
shall not be obligated to, enter into any such amendment which affects the
Trustee's own rights, duties or immunities under this Agreement or otherwise.
SECTION 12.2. Protection of Title to Trust. (a) Each of the Seller, as
to itself, or Servicer, as to itself, 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 Certificateholders and the Trustee in
its interest in the Receivables and the other Trust Assets and in the proceeds
thereof. Each of the Seller, as to itself, or Servicer, as to itself, shall
deliver (or cause to be delivered) to 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 ss. 9-402(7) of
the UCC, unless it shall have given the Trustee and the [Credit Enhancer] at
least [five] days' prior written notice thereof, shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements and shall have delivered an Opinion of Counsel (A)
stating that, in the opinion of such counsel, all amendments to all previously
filed financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of the
Trustee in the Receivables and the other Trust Assets, and reciting the details
of such filings, or (B) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interest.
(c) Each of the Seller and the Servicer shall have an obligation to
give the Trustee and the [Credit Enhancer] at least [60] days' prior written
notice of any relocation of its principal executive office 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, shall promptly file any such amendment and shall
deliver an Opinion of Counsel (A) stating that, in the opinion of such counsel,
all amendments to all previously filed financing statements and continuation
statements have been executed and filed that are necessary fully to preserve and
protect the interest of the Trustee in the
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Receivables, and reciting the details of such filings, or (B) stating that, in
the opinion of such counsel, no such action shall be necessary to preserve and
protect such interest. The Servicer shall at all times maintain each office from
which it shall service Receivables, and its principal executive office, within
the United States of America.
(d) The Servicer shall maintain accounts and records as to each
Receivable accurately and in sufficient detail to permit (i) the reader thereof
to know at any time the status of such Receivable, including payments and
recoveries made and payments owing (and the nature of each) and (ii)
reconciliation between payments or recoveries on (or with respect to) each
Receivable and the amounts from time to time deposited in the Certificate
Account and Payahead 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 Trustee,
the Servicer's master computer records (including any back-up archives) that
refer to a Receivable shall indicate clearly the interest of CPS Auto Grantor
Trust 199[ ]-[ ] in such Receivable and that such Receivable is owned by the
Trust. Indication of the Trust's ownership of a Receivable shall be deleted from
or modified on the Servicer's computer systems when, and only when, such
Receivable shall have been paid in full or repurchased.
(f) If at any time the 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 back-up
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold to 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 Trustee, [the
Standby Servicer] or to the [Credit Enhancer], 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.
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(i) The Servicer shall deliver to the Trustee and the [Credit
Enhancer:
(1) promptly after the execution and delivery of this
Agreement and of each amendment hereto and after the execution and
delivery of each amendment to any financing statement, an Opinion of
Counsel either (A) stating that, in the opinion of such counsel, all
financing statements and continuation statements have been executed and
filed that are necessary fully to preserve and protect the interest of
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) stating that, in the opinion of such counsel, no such
action shall be necessary to preserve and protect such interest; and
(2) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Cutoff Date, an Opinion of Counsel, dated as of a date during
such 90-day period either (A) stating that, in the opinion of such
counsel, all financing statements and continuation statements have been
executed and filed that are necessary fully to preserve and protect the
interest of 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) stating that, in the opinion of such counsel,
no such action shall be necessary to preserve and protect such
interest.
Each Opinion of Counsel referred to in clause (i) (1) or (i) (2) above
shall specify any action necessary (as of the date of such opinion) to be taken
in the following year to preserve and protect such interest.
(j) For the purpose of facilitating the execution of this Agreement and
for other purposes, this Agreement may be executed simultaneously in any number
of counterparts, each of which counterparts shall be deemed to be an original,
and all of which counterparts shall constitute but one and the same instrument.
(k) In the event any of the events described in Section 9.1 (iii) or
(iv) shall have occurred, or in the event CPS shall have been removed or
replaced as Servicer for any reason, then CPS and/or the Servicer shall
immediately cause each Certificate of Title for a Financed Vehicle to be marked
to reflect the security interest of the Trustee in the Financed Vehicle, and CPS
hereby appoints the Trustee its attorney-in-fact to effect such marking, and the
Trustee hereby accepts such appointment. The appointment of the Trustee
hereunder shall not operate to relieve CPS and/or the Servicer of its
obligations to mark each Certificate of Title
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under this provision. CPS shall be liable for all costs, fees and expenses
incurred under this Section 12.2(k).
SECTION 12.3. Limitation on Rights of Certificateholders. The death or
incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations and liabilities of the parties to
this Agreement or any of them.
No Certificateholder shall have any right to vote (except as
specifically provided herein including in Section 12.1) or in any manner
otherwise control the operation and management of the Trust, or the obligations
of the parties to this Agreement, nor shall anything in this Agreement set
forth, or contained in the terms of the Certificates, be construed so as to
constitute the Certificateholders from time to time as partners or members of an
association; nor shall any Certificateholder be under any liability to any third
person by reason of any action taken pursuant to any provision of this
Agreement.
No Class A 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, unless such Holder previously shall have given to the Trustee a
written notice of default and of the continuance thereof, and unless also the
Holders of Class A Certificates evidencing not less than [ ]% of the Class A
Certificate Balance shall have made written request upon the Trustee to
institute such action, suit or proceeding in its own name as Trustee under this
Agreement and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses, and liabilities to be incurred therein
or thereby and the 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 Trustee
pursuant to this Section or Section 9.5; no one or more Holders of Class A
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 Class A
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 Class A Certificateholders. For the protection and enforcement of the
provisions of this Section 12.3, each Class A
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Certificateholder and the 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 Class A Certificateholders any direct right to make a claim under
[the Credit Enhancement].
No Class B Certificateholder shall have any right by virtue or by
availing itself of any provisions of the Agreement to institute any suit,
action, proceeding in equity or at law upon or under or with respect to this
Agreement, unless it has the prior written consent of the [Credit Enhancer] and,
if any Class A Certificate shall remain outstanding, the prior written consent
of the Holders of Class A Certificates evidencing not less than[ ]% of the Class
A Certificate Balance; provided that, this sentence shall be inoperative from
and after such time as the Class A Certificates have been paid in full and all
outstanding Reimbursement Obligations and other amounts due to the [Credit
Enhancer] have been paid in full.
SECTION 12.4. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS,
AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
SECTION 12.5. Notices. All demands, notices, and communications upon or
to the Seller, the Servicer, the Trustee, the [Credit Enhancer], [the rating
agency] under this Agreement shall be in writing, and delivered (a) personally,
(b) by certified mail, return receipt requested, (c) by Federal Express or
similar overnight courier service or (d) by telecopy, and shall be deemed to
have been duly given upon receipt (a) in the case of the Seller, to the agent
for service as specified in this Agreement, at the following address: [ ], or at
such other address as shall be designated by the Seller in a written notice to
the Trustee, (b) in the case of the Servicer, to Secretary, 2 Ada, Irvine,
California 92618 (Telecopy: 714-753-3951), (c) in the case of the Trustee, at [
], (d) in the case of [rating agency], at the following address: [ ], (e) in the
case of [rating agency] at [ ]; and (f) in the case of [Credit Enhancer], at the
following address: [ ]. Any notice required or permitted to be mailed to a
Certificateholder shall be given by Federal Express or similar overnight courier
service, 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 shall receive such notice.
The Trustee shall give prompt written notice to each of the Rating
Agencies and each Class A Certificateholder of (i) any
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amendments to the [Enhancement Agreement] or [the Credit Enhancement] (upon
receipt of written notice of any such amendments from CPS, the Seller or the
Servicer), (ii) any change in the identity of the Paying Agent and (iii) any
failure to make payment under [the Credit Enhancement].
SECTION 12.6. Severability of Provisions. If any one or more of the
covenants, agreements, provisions, or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions, or
terms shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or of the
Certificates or the rights of the Holders thereof.
SECTION 12.7. Assignment. Notwithstanding anything to the contrary
contained herein, except as provided in Sections 7.3 and 8.3 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 [Credit Enhancer], CPS, the Trustee and the Holders
of Certificates evidencing not less than [ ]% of the Pool Balance, the Holders
of Class A Certificates evidencing not less than [ ]% of the Class A Certificate
Balance and the Holders of Class B Certificates evidencing not less than [ ]% of
the Class B Certificate Balance.
SECTION 12.8. Certificates Nonassessable and Fully Paid.
Certificateholders shall not be personally liable for obligations of the Trust.
The interests represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and upon
authentication thereof by the Trustee pursuant to Section 6.2 or 6.3,
Certificates shall be deemed fully paid.
SECTION 12.9. Nonpetition Covenant. (a) None of the Seller, the
Servicer, the Trustee, [the Standby Servicer] or CPS shall petition or otherwise
invoke the process of any court or government authority for the purpose of
commencing or sustaining a case against the Trust or the Seller 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 Trust or the Seller or any substantial part of its property, or ordering
the winding up or liquidation of the affairs of the Trust or the Seller.
(b) The Servicer shall not, nor cause the Seller to, petition or
otherwise invoke the process of commencing or sustaining a case against the
Seller under any Federal or State bankruptcy, insolvency or similar law or
appointing a receiver,
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liquidator, 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 12.10. Third Party Beneficiaries. Except as otherwise
specifically provided herein with respect to Certificateholders, the parties to
this Agreement hereby manifest their intent that no third party other than the
[Credit Enhancer] and the [Collateral Agent] with respect to the indemnification
provisions set forth herein, shall be deemed a third party beneficiary of this
Agreement, and specifically that the Obligors are not third party beneficiaries
of this Agreement.
[SECTION 12.11. [The Credit Enhancer] as Controlling Party. Each
Certificateholder by purchase of the Certificates 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 [Enhancement Default] shall have occurred and be
continuing. So long as an [Enhancement 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 [Enhancement Default] and such right shall
instead vest in the Trustee acting at the direction of the Holders of Class A
Certificates evidencing, unless otherwise specified, not less than [ ]% of the
Class A Certificate Balance. From and after such time as the Class A
Certificates have been paid in full and all outstanding Reimbursement
Obligations and other amounts due to the [Credit Enhancer] have been paid in
full, any provision giving the [Credit Enhancer] or the Class A
Certificateholders 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
Certificates evidencing, unless otherwise specified, not less than [ ]% of the
Class B Certificate Balance. [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 Trustee. [The
Credit Enhancer] may give or withhold any consent hereunder in its sole and
absolute discretion.]
SECTION 12.12. [Agent for Service. The agent for service for the Seller
shall be [ ]. The Seller hereby designates CT Corporation System, 1633 Broadway,
New York, New York 10019 (212) 644-1666 as agent for service of process in all
matters pertaining to the Seller in New York.]
[SECTION 12.13. Rule 144A Information. For so long as any of the
Certificates are "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act, each of CPS, the Seller, the Trustee and the Servicer
agrees to cooperate with each other to provide to any Certificateholder and to
any prospective purchaser of Certificates designated by such a
Certificateholder, upon the request of such Certificateholder or prospective
purchaser, any information required to be provided to such holder or prospective
purchaser to satisfy the condition set forth in Rule 144A(d)(4) under the
Securities Act.]
-97-
<PAGE>
IN WITNESS WHEREOF, the Seller, the Servicer, the Trustee and [the
Standby Servicer] have caused this Pooling and Servicing Agreement to be duly
executed by their respective officers as of the day and year first above
written.
[ ],
as Seller
By:__________________________________________
Name:
Title:
CONSUMER PORTFOLIO SERVICES, INC.,
as Servicer
By:__________________________________________
Name:
Title:
[ ]
as Trustee [and Standby Servicer]
By:__________________________________________
Name:
Title:
<PAGE>
TABLE OF CONTENTS
Section Page
ARTICLE I
Definitions
1.1. Definitions........................................... 2
1.2. Usage of Terms........................................ 19
1.3. Section References.................................... 19
1.4. Limitation on Trust Fund Activities................... 19
1.5. Calculations.......................................... 19
1.6. Action by or Consent of Certificateholders............ 19
1.7. Material Adverse Effect............................... 20
ARTICLE II
The Trust and Trust Property
2.1. Creation of Trust..................................... 20
2.2. Conveyance of Receivables............................. 20
2.3. Transfer Intended as Sale; Precautionary
Security Interest................................ 21
2.4. Acceptance by Trustee................................. 21
2.5. Representations and Warranties of Seller.............. 22
2.6. Repurchase Upon Breach................................ 28
2.7. Delivery of Receivable Files.......................... 29
2.8. Acceptance of Receivable Files by Trustee............. 29
2.9. Access to Receivable Files............................ 31
ARTICLE III
Administration and Servicing of Receivables
3.1. Duties of Servicer.................................... 32
3.2. Collection and Allocation of Receivable
Payments......................................... 33
3.3. Realization Upon Receivables.......................... 34
3.4. Physical Damage Insurance; Other Insurance............ 34
3.5. Maintenance of Security Interests in
Financed Vehicles................................ 35
3.6. Additional Covenants of Servicer...................... 36
3.7. Purchase of Receivables Upon Breach................... 36
3.8. Servicing Fee......................................... 37
3.9. Servicer's Certificate................................ 37
3.10. Annual Statement as to Compliance: Notice
of Default....................................... 37
3.11. Annual Independent Certified Public
Accountant's Report.............................. 38
<PAGE>
Section Page
3.12. Reserved............................................. 39
3.13. Servicer Expenses.................................... 39
3.14. Retention and Termination of Servicer................ 39
3.15. Access to Certain Documentation and
Information Regarding Receivables............... 40
3.16. Verification of Servicer's Certificate............... 40
3.17. Fidelity Bond........................................ 41
3.18. Delegation of Duties................................. 41
ARTICLE IV
Distributions, Spread Account;
Statements to Certificateholders
4.1. Accounts; Post-Office Box............................ 42
4.2. Collections.......................................... 44
4.3. Application of Collections........................... 44
4.4. Payaheads............................................ 45
4.5. Additional Deposits.................................. 45
4.6. Distributions; [Credit Enhancement Claims]........... 45
4.7. Withdrawals from [Spread Account] and
[Reserve Fund].................................. 49
4.8. Statements to Certificateholders; Tax
Returns......................................... 50
4.9. Credit Enhancement; Subrogation...................... 52
4.10. Reliance on Information from the Servicer............ 53
4.11. Reserved............................................. 53
ARTICLE V
Reserved.
ARTICLE VI
The Certificates
6.1. The Certificates..................................... 53
6.2A. Appointment of Paying Agent.......................... 54
6.2B. Authenticating Agent................................. 55
6.2. Authentication of Certificates....................... 56
6.3. Registration of Transfer and Exchange of
Certificates.................................... 56
6.4. Mutilated, Destroyed, Lost or Stolen
Certificates.................................... 57
6.5. Persons Deemed Owners................................ 57
6.6. Access to List of Certificateholders' Names
and Addresses................................... 57
-ii-
<PAGE>
Section Page
6.7. Maintenance of Office or Agency.................... 58
6.8. Book-Entry Certificates............................ 58
6.9. Notices to Clearing Agency......................... 59
6.10. Definitive Certificates............................ 59
ARTICLE VII
The Seller
7.1. Representations of Seller.......................... 60
7.2. Liability of Seller; Indemnities................... 62
7.3. Merger or Consolidation of, or Assumption
of the Obligations of, Seller................. 62
7.4. Limitation on Liability of Seller and
Others........................................ 63
7.5. Seller May Own Certificates........................ 63
ARTICLE VIII
The Servicer
8.1. Representations of Servicer........................ 64
8.2. Indemnities of Servicer............................ 66
8.3. Merger or Consolidation of, or Assumption
of the Obligations of, Servicer or Standby
Servicer...................................... 67
8.4. Limitation on Liability of Servicer and
Others........................................ 68
8.5. Servicer and Standby Servicer Not to
Resign........................................ 69
ARTICLE IX
Default
9.1. Events of Default.................................. 70
9.2. Appointment of Successor........................... 72
9.3. Reserved........................................... 74
9.4. Notification to Certificateholders................. 74
9.5. Direction of Insolvency Proceedings by
[Credit Enhancer]............................. 74
9.6. Action Upon Certain Failures of the
Servicer...................................... 75
ARTICLE X
The Trustee
10.1. Duties of Trustee.................................. 76
-iii-
<PAGE>
Section Page
10.2. Trustee's Certificate............................... 78
10.3. Reserved............................................ 78
10.4. Certain Matters Affecting Trustee................... 79
10.5. Trustee Not Liable for Certificates or
Receivables.................................... 80
10.6. Trustee May Own Certificates........................ 82
10.7. Indemnity of Trustee................................ 82
10.8. Eligibility Requirements for Trustee................ 82
10.9. Resignation or Removal of Trustee................... 82
10.10. Successor Trustee................................... 83
10.11. Merger or Consolidation of Trustee.................. 84
10.12. Co-Trustee; Separate Trustee........................ 84
10.13. Representations and Warranties of Trustee........... 86
10.14. No Bankruptcy Petition.............................. 86
10.15. Trustee May Enforce Claims Without
Possession of Certificates..................... 87
10.16. Rights of [Credit Enhancer] to Direct
Trustee; Class B Certificateholder's
Right of First Refusal......................... 87
ARTICLE XI
Termination
11.1. Termination of the Trust............................ 88
11.2. Optional Purchase of All Receivables................ 89
ARTICLE XII
Miscellaneous Provisions
12.1. Amendment........................................... 90
12.2. Protection of Title to Trust........................ 91
12.3. Limitation on Rights of
Certificateholders............................. 94
12.4. Governing Law....................................... 95
12.5. Notices............................................. 95
12.6. Severability of Provisions.......................... 96
12.7. Assignment.......................................... 96
12.8. Certificates Nonassessable and Fully Paid........... 96
12.9. Nonpetition Covenant................................ 96
12.10. Third Party Beneficiaries........................... 97
12.11. [The Credit Enhancer] as Controlling Party.......... 97
12.12. Agent for Service................................... 97
12.13. Rule 144A Information............................... 97
-iv-
<PAGE>
EXHIBITS
Exhibit A Form of Class A Certificate
Exhibit B Form of Class B Certificate
Exhibit C-1 Form of Trustee's Certificate
Exhibit C-2 Form of Trustee's Certificate
Exhibit D Form of Monthly Certificateholder Statement
Exhibit E-1 Form of Trust Receipt
Exhibit E-2 Form of Servicing Officer's Certificate
SCHEDULES
Schedule A Schedule of Receivables
Schedule B Location of Receivables
-v-
<PAGE>
Exhibit A to the
Pooling and Servicing
Agreement
FORM OF CLASS A CERTIFICATE SEE REVERSE FOR
CERTAIN
DEFINITIONS
UNLESS THIS CERTIFICATE IS PRESENTED By AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, 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 REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, 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.
CPS AUTO GRANTOR TRUST 199[ ]
[ ] ASSET BACKED CERTIFICATE
CLASS A
evidencing a beneficial ownership interest in the Trust, as defined below, the
property of which includes a pool of retail installment sale contracts secured
by new and used automobiles, light trucks, vans and minivans and sold to the
Trust by [Seller].
(This Certificate does not represent an interest in or obligation of [Seller],
Consumer Portfolio Services, Inc., the Trustee or any of their respective
affiliates, except to the extent described below.)
NUMBER R-[ ] CUSIP No. [ ]
$[ ] Final Scheduled Distribution Date: [ ]
THIS CERTIFIES THAT CEDE & CO. is the registered owner of a [ ] dollar
nonassessable, fully-paid, fractional undivided ownership interest in the CPS
Auto Grantor Trust 199[ ]-[ ] (the "Trust") formed by Consumer Portfolio
Services, Inc. (the "Servicer"). The Trust was created pursuant to a Pooling and
Servicing Agreement dated as of [ ] (the "Agreement") among the Seller, Consumer
Portfolio Services, Inc., as servicer (the "Servicer"), and [ ] as trustee (the
"Trustee") [and Standby Servicer], a summary of
<PAGE>
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 Agreement. This Certificate is one of the duly
authorized Certificates designated as "[ ]% Asset Backed Certificates, Class A"
(herein called the "Class A Certificates"). Also issued under the Agreement are
Certificates designated as "[ ]% Asset Backed Certificates, Class B" (the "Class
B Certificates"). The Class B Certificates and the Class A Certificates are
hereinafter collectively called the "Certificates". The aggregate beneficial
ownership interests in the Trust evidenced by all Class A Certificates is [ ]%.
This Class A Certificate is issued under and is subject to the terms,
provisions, and conditions of the Agreement, to which Agreement the Holder of
this Class A Certificate by virtue of the acceptance hereof assents and by which
such Holder is bound. The property of the Trust includes (i) a pool of retail
installment sale contracts for new and used automobiles, light trucks, vans and
minivans (the "Receivables"), with respect to Rule of 78's Receivables, all
monies due or to become due thereon after [ ] (the "Cutoff Date") and, with
respect to Simple Interest Receivables, all amounts received with respect
thereto after the Cutoff Date, security interests in the vehicles financed
thereby, proceeds from claims on certain insurance policies and certain other
rights under the Agreement, certain bank accounts and the proceeds thereof, all
right, title and interest of the Seller in and to the Purchase Agreement, all
right, title and interest of the Seller in and to certain refunds, the
Receivable File related to each Receivable and the proceeds of any or all of the
foregoing; and (ii) [Credit Enhancement] issued for the benefit of the Class A
Certificateholders by [Credit Enhancer] [(the "Credit Enhancement"].
Under the Agreement, there will be distributed on the 15th day of each
month or, if such [ ] day is not a Business Day, the next Business Day (the
"Distribution Date"), commencing on [ ], to the person in whose name this Class
A Certificate is registered at the close of business on the [ ] day of the
calendar month in which such Distribution Date occurs (the "Record Date"), such
Class A Certificateholder's percentage interest (determined by dividing the
denominations of this Class A Certificate by the aggregate original denomination
of all Class A Certificates) in the amounts distributed to Class A
Certificateholders pursuant to the Agreement.
[Credit Enhancement is provided pursuant to the Enhancement Agreement.]
Distributions on this Class A Certificate will be made by the Trustee
by check or money order mailed to the Class A Certificateholder of record in the
Certificate Register without the presentation or surrender of this Class A
Certificate or the making of any notation hereon except that with respect to
Class A Certificates registered in the name of Cede & Co., the nominee for the
Clearing Agency, distributions will be made in the form of immediately available
funds. Except as otherwise provided in the Agreement and notwithstanding the
<PAGE>
above, the final distribution on this Class A Certificate will be made after due
notice by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Class A Certificate at the office or agency
maintained for that purpose by the Trustee in the Borough of Manhattan, The City
of New York. The Record Date otherwise applicable to such distribution shall not
be applicable.
Reference is hereby made to the further provisions of this Class A
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 Trustee, by manual signature, this
Class A Certificate shall not entitle the Holder hereof to any benefit under the
Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee on behalf of the Trust and not in its
individual capacity has caused this Class A Certificate to be duly executed.
CPS AUTO GRANTOR TRUST 199[ ]-[ ]
By: [ ]
not in its individual
capacity but solely in its
capacity as Trustee
By:/s/__________________________
Authorized Signatory
Dated: [ ]
<PAGE>
This is one of the Class A Certificates
referred to in the within-mentioned Agreement.
[ ]
not in its individual capacity but
solely in its capacity as Trustee
By:/s/ ___________________________
Authorized Signatory
<PAGE>
[REVERSE OF CERTIFICATE]
The Certificates do not represent an obligation of, or an interest in,
the Seller, the Servicer, the Trustee or any affiliate of any of them. The
Certificates are limited in right of payment to certain collections and
recoveries respecting the Receivables [and claims made under the [Credit
Enhancement], all as more specifically set forth in the Agreement. A copy of the
Agreement may be examined during normal business hours at the principal office
of the Seller, and at such other places, if any, designated by the Seller, by
any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller and the rights of the Certificateholders under the Agreement at any time
by the Seller, the Servicer and the Trustee with the consent of the [Credit
Enhancer] and with the consent of the Holders of Certificates evidencing not
less than [ ]% of the Class A Certificate Balance and [ ]% of the Class B
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.
As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by the Trustee in its capacity as
Certificate Registrar, or by any successor Certificate Registrar, accompanied by
a written instrument of transfer in form satisfactory to the 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
of authorized denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee.
The Class A Certificates are issuable only as registered Certificates
without coupons in minimum denominations of $1,000 and integral multiples
thereof; however, one certificate may be issued in the residual amount. As
provided in the Agreement and subject to certain limitations set forth therein,
Certificates are exchangeable for new Certificates of 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 Trustee may require payment of a sum sufficient
to cover any tax or governmental charges payable in connection therewith.
<PAGE>
The Trustee, the Certificate Registrar, and any agent of the Trustee or
the Authenticating Agent may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Trustee, the
Certificate Registrar, nor any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the 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 Agreement, the payment
of all Reimbursement Obligations, and the expiration of any preference period
with respect thereto 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 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 only as of the last
day of any Collection Period as of which the Pool Balance is less than or equal
to 10% of the original aggregate principal balance of the Receivables.
<PAGE>
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 typewrite 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:
__________________________________*
__________________________________*
_______________
* NOTICE: The signature to this assignment must correspond with the name as
it appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever.
<PAGE>
Exhibit B to the
Pooling and Servicing
Agreement
FORM OF CLASS B CERTIFICATE
SEE REVERSE FOR
CERTAIN
DEFINITIONS
UNLESS THIS CERTIFICATE IS PRESENTED By AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, 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 REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, 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.
CPS AUTO GRANTOR TRUST 199[ ]
[ ] ASSET BACKED CERTIFICATE
CLASS B
evidencing a beneficial ownership interest in the Trust, as defined below, the
property of which includes a pool of retail installment sale contracts secured
by new and used automobiles, light trucks, vans and minivans and sold to the
Trust by [Seller].
(This Certificate does not represent an interest in or obligation of [Seller],
Consumer Portfolio Services, Inc., the Trustee or any of their respective
affiliates, except to the extent described below.)
NUMBER R-[ ] CUSIP No. [ ]
$[ ] Final Scheduled Distribution Date: [ ]
THIS CERTIFIES THAT CEDE & CO. is the registered owner of a [ ] dollar
nonassessable, fully-paid, fractional undivided ownership interest in the CPS
Auto Grantor Trust 199[ ]-[ ] (the "Trust") formed by Consumer Portfolio
Services, Inc. (the "Servicer"). The Trust was created pursuant to a Pooling and
Servicing Agreement dated as of [ ] (the "Agreement") among the Seller, Consumer
Portfolio Services, Inc., as servicer (the "Servicer"), and [ ] as trustee (the
"Trustee") [and Standby Servicer], a summary
<PAGE>
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 Agreement. This Certificate is one of the duly
authorized Certificates designated as "[ ]% Asset Backed Certificates, Class B"
(herein called the "Class B Certificates"). Also issued under the Agreement are
Certificates designated as "[ ]% Asset Backed Certificates, Class A" (the "Class
B Certificates"). The Class B Certificates and the Class A Certificates are
hereinafter collectively called the "Certificates". The aggregate beneficial
ownership interests in the Trust evidenced by all Class B Certificates is [ ]%.
This Class B Certificate is issued under and is subject to the terms,
provisions, and conditions of the Agreement, to which Agreement the Holder of
this Class B Certificate by virtue of the acceptance hereof assents and by which
such Holder is bound. The property of the Trust includes (i) a pool of retail
installment sale contracts for new and used automobiles, light trucks, vans and
minivans (the "Receivables"), with respect to Rule of 78's Receivables, all
monies due or to become due thereon after [ ] (the "Cutoff Date") and, with
respect to Simple Interest Receivables, all amounts received with respect
thereto after the Cutoff Date, security interests in the vehicles financed
thereby, proceeds from claims on certain insurance policies and certain other
rights under the Agreement, certain bank accounts and the proceeds thereof, all
right, title and interest of the Seller in and to the Purchase Agreement, all
right, title and interest of the Seller in and to certain refunds, the
Receivable File related to each Receivable and the proceeds of any or all of the
foregoing; and (ii) [Credit Enhancement] issued for the benefit of the Class A
Certificateholders by [Credit Enhancer] [(the "Credit Enhancement"].
Under the Agreement, there will be distributed on the 15th day of each
month or, if such [ ] day is not a Business Day, the next Business Day (the
"Distribution Date"), commencing on [ ], to the person in whose name this Class
B Certificate is registered at the close of business on the [ ] day of the
calendar month in which such Distribution Date occurs (the "Record Date"), such
Class B Certificateholder's percentage interest (determined by dividing the
denominations of this Class B Certificate by the aggregate original denomination
of all Class B Certificates) in the amounts distributed to Class B
Certificateholders pursuant to the Agreement.
Distributions on this Class B Certificate will be made by the Trustee
by check or money order mailed to the Class B Certificateholder of record in the
Certificate Register without the presentation or surrender of this Class B
Certificate or the making of any notation hereon except that with respect to
Class B Certificates registered in the name of Cede & Co., the nominee for the
Clearing Agency, distributions will be made in the form
<PAGE>
of immediately available funds. Except as otherwise provided in the Agreement
and notwithstanding the above, the final distribution on this Class B
Certificate will be made after due notice by the Trustee of the pendency of such
distribution and only upon presentation and surrender of this Class B
Certificate at the office or agency maintained for that purpose by the Trustee
in the Borough of Manhattan, The City of New York. The Record Date otherwise
applicable to such distribution shall not be applicable.
Reference is hereby made to the further provisions of this Class B
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 Trustee, by manual signature, this
Class B Certificate shall not entitle the Holder hereof to any benefit under the
Agreement or be valid for any purpose.
<PAGE>
IN WITNESS WHEREOF, the Trustee on behalf of the Trust and not in its
individual capacity has caused this Class B Certificate to be duly executed.
CPS AUTO GRANTOR TRUST 199[ ]-[ ]
By: [ ]
not in its individual capacity
but solely in its capacity as
Trustee
By: ______________________________
Authorized Signatory
Dated: [ ]
<PAGE>
This is one of the Class B Certificates
referred to in the within-mentioned
Agreement.
[ ]
not in its individual capacity but
solely in its capacity as Trustee
By:___________________________
Authorized Signatory
<PAGE>
[REVERSE OF CERTIFICATE]
The Certificates do not represent an obligation of, or an interest in,
the Seller, the Servicer, the Trustee or any affiliate of any of them. The
Certificates are limited in right of payment to certain collections and
recoveries respecting the Receivables [and claims made under the [Credit
Enhancement], all as more specifically set forth in the Agreement. A copy of the
Agreement may be examined during normal business hours at the principal office
of the Seller, and at such other places, if any, designated by the Seller, by
any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Seller and the rights of the Certificateholders under the Agreement at any time
by the Seller, the Servicer and the Trustee with the consent of the [Credit
Enhancer] and with the consent of the Holders of Certificates evidencing not
less than [ ]% of the Class A Certificate Balance and [ ]% of the Class B
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.
As provided in the Agreement and subject to certain limitations set
forth therein, the transfer of this Certificate is registrable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies maintained by the Trustee in its capacity as
Certificate Registrar, or by any successor Certificate Registrar, accompanied by
a written instrument of transfer in form satisfactory to the 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
of authorized denominations evidencing the same aggregate interest in the Trust
will be issued to the designated transferee.
The Class B Certificates are issuable only as registered Certificates
without coupons in minimum denominations of $1,000 and integral multiples
thereof; however, one certificate may be issued in the residual amount. As
provided in the Agreement and subject to certain limitations set forth therein,
Certificates are exchangeable for new Certificates of 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 Trustee may require payment of a sum sufficient
to cover any tax or governmental charges payable in connection therewith.
<PAGE>
The Trustee, the Certificate Registrar, and any agent of the Trustee or
the Authenticating Agent may treat the person in whose name this Certificate is
registered as the owner hereof for all purposes, and neither the Trustee, the
Certificate Registrar, nor any such agent shall be affected by any notice to the
contrary.
The obligations and responsibilities created by the 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 Agreement, the payment
of all Reimbursement Obligations, and the expiration of any preference period
with respect thereto 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 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 only as of the last
day of any Collection Period as of which the Pool Balance is less than or equal
to 10% of the original aggregate principal balance of the Receivables.
<PAGE>
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 typewrite 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:
__________________________________*
__________________________________*
______________
* NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever.
<PAGE>
Exhibit C-1 to
Pooling and Servicing
Agreement
Trustee's Certificate
Pursuant to Section 10.2 of
the Pooling and Servicing Agreement
[ ], as trustee (the "Trustee") of the CPS Auto Grantor Trust 199[ ]-[
] created pursuant to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of [ ], among [ ], as Seller, Consumer Portfolio
Services, Inc., as Servicer, and [ ], as Trustee [and Standby Servicer], does
hereby sell, transfer, assign, and otherwise convey to Consumer Portfolio
Services, Inc., without recourse, representation, or warranty, all of the
Trustee's right, title, and interest in and to all of the Receivables (as
defined in the Pooling and Servicing Agreement) identified in the attached
Servicer's Certificate as "Purchased Receivables," which are to be repurchased
by Consumer Portfolio Services, Inc. pursuant to Section 2.6 and all security
and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this __ day of ____, 19__.
By:
_____________________________________
Name:
Title:
<PAGE>
Exhibit C-2 to
Pooling and Servicing
Agreement
Trustee's Certificate
Pursuant to Section 10.2 of
the Pooling and Servicing Agreement
[ ], as trustee (the "Trustee") of the CPS Auto Grantor Trust 199[ ]-[
] created pursuant to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of [ ], among [ ], as Seller, [ ], as Servicer
(the "Servicer"), and [ ], as Trustee [and Standby Servicer], does hereby sell,
transfer, assign, and otherwise convey to the Servicer, without recourse,
representation, or warranty, all of the Trustee's right, title, and interest in
and to all of the Receivables (as defined in the Pooling and Servicing
Agreement) identified in the attached Servicer's Certificate as "Purchased
Receivables," which are to be repurchased by the Servicer pursuant to Section
3.7 and all security and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this __ day of ____,
19__.
By:
_____________________________________
Name:
Title:
<PAGE>
Exhibit D to
Pooling and Servicing
Agreement
Form of Monthly
Certificateholder Statement
[To be delivered by Servicer at Closing]
<PAGE>
Exhibit E-1 to
Pooling and Servicing
Agreement
Trust Receipt
Pursuant to Section 2.9 of
the Pooling and Servicing Agreement
[ ], as Servicer (the "Servicer") of the CPS Auto Grantor Trust 199[
]-[ ] created pursuant to the Pooling and Servicing Agreement (the "Pooling and
Servicing Agreement"), dated as of [ ], among [ ], as Seller, [ ], the Servicer,
and [ ], as Trustee [and Standby Servicer], does hereby acknowledge receipt of
the documents relating to Receivables, each of which documents and the
Receivables they related to are listed on the attached Schedule 1 hereto.
Servicer furthermore agrees to return such documents to the Trustee in
accordance with the terms of the Pooling and Servicing Agreement.
IN WITNESS WHEREOF I have hereunto set my hand this __ day of ____, 19__.
[ ],
as Servicer
By:
_____________________________________
Name:
Title:
Acknowledged By:
[ ],
as Trustee
By:
--------------------------------
Name:
Title:
<PAGE>
Exhibit E-2 to
Pooling and Servicing
Agreement
Form of Servicing
Officer's Certificate
[To be delivered by Servicer at Closing]
April 8, 1998
To the Parties Listed on
Schedule I hereto
Re: Consumer Portfolio Services, Inc.
Registration Statement on Form S-3
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 dated April 8, 1998 (together with the exhibits and any amendments
thereto, the "Registration Statement"), to be filed by CPS with the Securities
and Exchange Commission in connection with the registration of the Asset Backed
Certificates (the "Certificates") 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 Certificates of each
series will be issued by a trust (the "Trust") to be formed by the Seller
pursuant to a Pooling and Servicing Agreement (the "Pooling and Servicing
Agreement") by and among the Seller, as seller, CPS, as servicer, and Norwest
Bank Minnesota, National Association, as trustee (the "Trustee") and standby
servicer. The Certificates issued by the Trust will include one or more classes
of certificates.
We are generally familiar with the proceedings required to be taken in
connection with the proposed authorization, issuance and sale of the
Certificates, and in order to express the opinion hereinafter stated, we have
examined copies of the Registration Statement, including the form of Pooling and
Servicing Agreement included as an exhibit 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
April 8, 1998
Page 2
On the basis of the foregoing, it is our opinion that the Certificates,
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 Certificates have been duly
approved by the Board of Directors of the Seller, (iii) the Pooling 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
Certificates have been duly issued by the applicable Trust and authenticated by
the applicable Trustee all in accordance with the terms and conditions of the
Pooling and Servicing Agreement and sold by the Seller in the manner described
in the Registration Statement, such Certificates 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 Pooling 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 Securities.
We wish to advise you that we are members of the bar of the State of
New York and the opinions expressed herein are limited to the laws of the State
of New York and the Federal laws of the United States.
<PAGE>
The Parties Listed on
Schedule I hereto
April 8, 1998
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
April 8, 1998
To the Parties Listed on
Schedule I hereto
Re: Consumer Portfolio Services, Inc.
Registration Statement on Form S-3
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 the Servicer with the Securities and Exchange
Commission in connection with the registration by the Servicer of Asset Backed
Certificates (the "Certificates") 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 form of Pooling and Servicing Agreement filed as an
exhibit to the Registration Statement (the "Pooling and Servicing Agreement"),
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 Pooling 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, CPS, and others.
<PAGE>
The Parties Listed on
Schedule I hereto
April 8, 1998
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 Pooling and
Servicing Agreement is executed and delivered in substantially the form we have
examined, we hereby confirm that the statements described to be our legal
opinions in the Prospectus under the heading "Certain Federal Income Tax
Consequences" 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 to any party 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 "Certain
Federal Income Tax Consequences" in the Prospectus.
Very truly yours,
/s/ Mayer, Brown & Platt
<PAGE>
Schedule I
Consumer Portfolio Services, Inc.
2 Ada
Irvine, California 92618
CPS Receivables Corp.
2 Ada
Irvine, California 92618
EXHIBIT 10.1
<PAGE>
[FORM OF CPS PURCHASE AGREEMENT]
PURCHASE AGREEMENT dated as of this [ ] 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 Receivables (as hereinafter defined), are to be sold by
the Seller to the Purchaser, which CPS Receivables together with the Samco
Receivables, Linc Receivables and [Affiliated Originator] Receivables (as
hereinafter defined) will be transferred by the Purchaser, pursuant to the
Pooling and Servicing Agreement (as hereinafter defined) to CPS Auto Trust 199[
]-[ ] to be created thereunder, which Trust will issue certificates representing
beneficial ownership interests in the Receivables and the other property of the
Trust (the "Class A Certificates" and the "Class B Certificates", together, the
"Certificates").
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 Pooling and Servicing Agreement. 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):
"[Affiliated Originator]" means an affiliate of CPS [other than Samco
and Linc] that originates Receivables.
"[Affiliated Originator] Assignment" means the assignment substantially
in the form of Exhibit A to the [Affiliated Originator] Purchase Agreement.
"[Affiliated Originator] Purchase Agreement" means the purchase
agreement dated as of [ ], 19[ ], between [Affiliated Originator], as seller,
and the Purchaser, as purchaser, as such agreement may be amended, supplemented
or otherwise modified from time to time in accordance with the terms thereof.
"[Affiliated Originator] Receivable" shall have the meaning specified
in the [Affiliated Originator] Purchase Agreement.]
"Agreement" means this Purchase Agreement and the CPS Assignment.
"Assignment" means the CPS Assignment, Samco Assignment, Linc
Assignment and/or [[Affiliated Originator] Assignment.]
"Base Prospectus" means the Prospectus dated [ ], 1997 with respect to
CPS Auto Receivable Trusts, with the Purchaser as Seller, and any amendment or
supplement thereto.
"Basic Documents" means the Pooling and Servicing Agreement, the CPS
Purchase Agreement, the Samco Purchase Agreement, the Linc Purchase Agreement,
[the [Affiliated Originator] Purchase Agreement], the [Enhancement Agreement],
[the Spread Account Agreement] and [ ] thereto, [the Lock-Box Agreement] and
[the Servicing Assumption Agreement].
"Closing Date" means [ ], [ ].
"CPS" means Consumer Portfolio Services, Inc., a California corporation
and its successors and assigns.
"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.
"CPS Information" means (1) any information contained in the Prospectus
Supplement or contained in or incorporated by reference in the Private Placement
Memorandum other than the [Underwriter] Information, the Placement Agent
Information, the Purchaser Information and the [Credit Enchancer] Information,
(2) the Rule 144A Information other than the Purchaser Information therein, (3)
any amendment or supplement to the Prospectus Supplement or the Private
Placement Memorandum that in each case specified in this clause (3) the Seller
certifies in writing as constituting "CPS Information."
"CPS Receivable" means each retail installment sale contract for a
Financed Vehicle that appears on the Schedule of CPS Receivables and all rights
thereunder.
"CPS Receivables Purchase Price" means $[ ].
["[Credit Enhancer]" means [ ], a [ ] organized and created under the
laws of [ ], or its successors in interest.]
["[Credit Enhancer] Information" means any information contained in the
Prospectus Supplement and the Private Placement Memorandum under the heading
"The [Credit Enhancer]".]
<PAGE>
"Cutoff Date" means [ ], [ ].
"Distribution Date" means, for each Collection Period, the 15th day of
the following month or, if such 15th day is not a Business Day, the next
succeeding Business Day.
["[Enhancement Areement]" means the [Credit Enhancement Agreement]
among [ ] and the [Credit Enhancer], dated as of [ ].]
"Linc" means Linc Acceptance Company LLC, a Delaware limited liability
company and its successors and assigns.
"Linc Assignment" means the assignment substantially in the form of
Exhibit A to the Linc Purchase Agreement.
"Linc Purchase Agreement" means the purchase agreement dated as of [ ],
199 [ ], between Linc, as seller, and the Purchaser, as purchaser, as such
agreement may be amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof.
"Linc Receivable" shall have the meaning specified in the Linc Purchase
Agreement.
["Lock-Box Agreement" means the [lock-box agreement] dated the Closing
Date, among the Servicer, the Lock-Box Processor, CPS Receivables Corp. and the
Trustee, as amended, modified or supplemented from time to time, unless such
Agreement shall be terminated in accordance with its terms or the terms of the
Pooling and Servicing Agreement, in which event the "Lock-Box Agreement" shall
mean such other agreement, in form and substance acceptable to the [Credit
Enhancer], among the Servicer, the Lock-Box Processor and the Trustee.]
"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 and related Base
Prospectus and the Private Placement Memorandum.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement dated as of [ ] among CPS Receivables Corp., as seller, Consumer
Portfolio Services, Inc., as originator of the CPS Receivables and servicer, and
[ ] as trustee and standby servicer.
"Private Placement Memorandum" means the Private Placement Memorandum,
dated [ ], relating to the private placement of the Class B Certificates and any
amendment or supplement thereto.
"Prospectus Supplement" means the Prospectus Supplement dated [ ], [ ],
relating to the public offering of the Class A Certificates 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, its
successors and assigns.
"Purchaser Information" means (1) the information regarding the
Purchaser in the Prospectus Supplement in each case contained in the sections
entitled "Summary -- Issuer," "-- Seller," "-- Tax Status" and "--ERISA
Considerations" and "The Seller" therein, (2) the information contained in the
Base Prospectus, (3) the information in the Prospectus Supplement under the
heading "ERISA Considerations," (4) the information contained in the Private
Placement Memorandum under the headings "Certain Federal Income Tax
Consequences," "ERISA Considerations," "Notice to Investors" and "Placement" and
the information incorporated by reference in the Private Placement Memorandum
from the Base Prospectus and (5) information provided by the Purchaser for use
in Rule 144A Information.
"Receivable" means, collectively, the CPS Receivables, the Samco
Receivables, the Linc Receivables and [the [Affiliated Originator] Receivables].
"Repurchase Event" shall have the meaning specified in Section 6.2
hereof.
"Rule 144A Information" means any information provided to any holder or
prospective purchaser of Certificates pursuant to Section 12.13 of the Pooling
and Servicing Agreement.
"Samco" means Samco Acceptance Corp., a Delaware corporation, and its
successors and assigns.
"Samco Assignment" means the assignment substantially in the form of
Exhibit A to the Samco Purchase Agreement.
"Samco Purchase Agreement" means the Purchase Agreement dated as of [
], [ ], between Samco Acceptance Corp., as seller, and the Purchaser, 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 [Affiliated Originator] Receivables" means the list of
[Affiliated Originator] Receivables annexed to the [Affiliated Originator]
Purchase Agreement as Exhibit B.
"Schedule of CPS Receivables" means the list of CPS Receivables annexed
hereto as Exhibit B.
"Schedule of Linc Receivables" means the list of Linc Receivables
annexed as Exhibit B to the Linc Purchase Agreement.
"Schedule of Receivables" means, collectively, the Schedule of CPS
Receivables, the Schedule of Linc Receivables and the Schedule of Samco
Receivables.
"Schedule of Samco Receivables" means the list of Samco Receivables
annexed as Exhibit B to the Samco Purchase Agreement
"Seller" means Consumer Portfolio Services, Inc., a California
corporation, in its capacity as seller of the 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, its successors and
assigns.
2
<PAGE>
["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 or supplemented in accordance with its terms.]
["Spread Account Agreement" means the Master Spread Account Agreement
among [ ] and [the Collateral Agent], as amended and restated as of [ ], as the
same may be amended, supplemented or otherwise modified in accordance with the
terms thereof.]
"Transferred Property" means, collectively, the Transferred CPS
Property, the Transferred Linc Property, the Transferred Samco Property, and
[the Transferred [Affiliated Originator] Property].
["Transferred [Affiliated Originator] Property" shall have the meaning
specified in [Affiliated Originator] Purchase Agreement.]
"Transferred CPS Property" shall have the meaning specified in Section
2.1(a) hereof.
"Transferred Linc Property" shall have the meaning specified in the
Linc Purchase Agreement.
"Transferred Property" shall have the meaning specified in Section
2.1(a) hereof.
"Transferred Samco Property" shall have the meaning specified in the
Samco Purchase Agreement.
"Trust" means the CPS Auto Grantor Trust 199[ ]-[ ] created by the
Pooling and Servicing Agreement.
"Trustee" means [ ], in its capacity as trustee under the Pooling and
Servicing Agreement, and any successor trustee thereunder.
"UCC" means the Uniform Commercial Code, as in effect from time to time
in the relevant jurisdictions.
"Underwriter" means [ ].
"Underwriting Agreements" means the (a) Underwriting Agreement, dated
[] among the Underwriter, CPS, Samco, Linc and the [Affiliated Originator] and
the Purchaser relating to the Class A Certificates and (b) the Certificate
Purchase Agreement, dated [ ] among the Underwriter, CPS, Samco, Linc and the
[Affiliated Originator] and the Purchaser relating to the Class B Certificates.
"[Underwriter] Information" means the information in the penultimate
paragraph of the cover page of the Prospectus Supplement and in the section
entitled "Underwriting" in the Prospectus Supplement.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1. Purchase and Sale of Receivables. On the 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 and the Pooling
and Servicing Agreement), all of the Seller's right, title and interest in, to
and under the CPS Receivables and the other Transferred CPS Property relating
thereto. The conveyance to the Purchaser of the CPS Receivables and other
Transferred Property relating thereto is intended as a sale free and clear of
all liens and it is intended that the 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 Closing Date and simultaneously
with the transactions to be consummated pursuant to the Pooling 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 Pooling and Servicing Agreement), (i) all right, title and
interest of the Seller in and to 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 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) all right, title and interest of the Seller in and to the
security
-3-
<PAGE>
interests in the Financed Vehicles granted by Obligors pursuant to the CPS
Receivables and any other interest of the Seller in the Financed Vehicles,
including, without limitation, the certificates of title or, with respect to
Financed Vehicles in the State of Michigan, such other evidence of ownership
with respect to 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 securing the CPS Receivables or the Obligors thereunder;
(iv) 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 the 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 CPS Receivables or his or her obligations with
respect to a Financed Vehicle and any recourse to Dealers for any of the
foregoing; (v) the Receivable File related to each CPS Receivable; and (vi) the
proceeds of any and all of the foregoing (collectively, the "Transferred CPS
Property").
(b) CPS Receivables Purchase Price. In consideration for the CPS
Receivables and other CPS Transferred Property described in Section 2.1(a), the
Purchaser shall, on the Closing Date, pay to the Seller the CPS Receivables
Purchase Price by federal wire transfer (same day) funds.
2.2. The Closing. The sale and purchase of the CPS Receivables shall
take place at a closing (the "Closing") at the offices of Mayer, Brown & Platt,
1675 Broadway, New York, New York 10019 on the Closing Date, simultaneously with
the closings under: (a) the Samco Purchase Agreement pursuant to which Samco
will sell the Samco Receivables and other Transferred Samco Property to the
Purchaser, (b) the Linc Purchase Agreement pursuant to which Linc will sell the
Linc Receivables and other Transferred Linc Property to the Purchaser, (c) [the
[Affiliated Originator] Purchase Agreement pursuant to which [Affiliated
Originator] will sell the [Affiliated Originator] Receivables and other
Transferred [Affiliated Originator] Property to the Purchaser, (d) the Pooling
and Servicing Agreement pursuant to which (i) the Purchaser will assign all of
its right, title and interest in and to the Receivables and the other
Transferred Property to the Trustee for the benefit of the Certificateholders
and (ii) the Trust will issue and deliver to the Purchaser in exchange for the
Transferred Property the Certificates and (e) the Underwriting Agreements
pursuant to which the Underwriters shall purchase the Class A Certificates and
the Class B Certificates from the Purchaser.
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 the
Closing Date (which representations and warranties shall survive the 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
-4-
<PAGE>
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 execute and deliver this Agreement and perform its
obligations hereunder.
(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 material to the performance of its
obligations under this Agreement.
(c) Power and Authority. The Purchaser has the power and authority to
execute and deliver this Agreement and to carry out its terms and the execution,
delivery and performance of this Agreement have been duly authorized by the
Purchaser by all necessary corporate action.
(d) Binding Obligation. This Agreement shall constitute a legal, valid
and binding obligation of the Purchaser enforceable in accordance with its
terms, subject to the effect of any applicable bankruptcy, insolvency,
moratorium, receivership, reorganization, liquidation and other similar laws
affecting creditors' rights and the effect of general principles of equity
including (without limitation) concepts of materiality, reasonableness, good
faith, fair dealing (regardless of whether considered and applied in a
proceeding in equity or at law), and also to the possible unavailability of
specific performance or injunctive relief.
(e) No Violation. The execution, delivery and performance by the
Purchaser of this Agreement 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 Basic Documents); 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 this Agreement or the Certificates; (B) seeking to prevent the issuance of
the Certificates or the consummation of any of the transactions contemplated by
this Agreement; (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, this Agreement or the Certificates; or (D)
relating to Purchaser and which might adversely affect the Federal or State
income, excise, franchise or similar tax attributes of the Certificates.
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(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 Certificates or the
consummation of the other transactions contemplated by this Agreement or the
Pooling and Servicing Agreement and other Basic Documents, 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 (which representations and warranties shall survive 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 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 Pooling 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 this Agreement
have 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 CPS Receivables and the
other Transferred CPS Property conveyed to the Purchaser pursuant to
the CPS Assignment, 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, subject to the effect of any applicable bankruptcy, insolvency,
moratorium, receivership, reorganization, liquidation and other similar
laws affecting creditors' rights and the effect of general principles
of equity including (without limitation) concepts of materiality,
reasonableness, good faith, fair dealing (regardless of whether
considered and applied in a proceeding in equity or at law), and also
to the possible unavailability of specific performance or injunctive
relief.
(v) No Violation. The execution, delivery and performance by
the Seller of this Agreement 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
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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 the Basic Documents); 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 this Agreement or the
Certificates; (B) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by this
Agreement; (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 the Certificates; or (D) relating to the Seller and which might
adversely affect the Federal or State income, excise, franchise or
similar tax attributes of the Certificates.
(vii) No Consents. No consent, approval, authorization or
order of or declaration or filing with any governmental authority is
required to be obtained by the Seller for the issuance or sale of the
Certificates or the consummation of the other transactions contemplated
by this Agreement and the other Basic Documents, 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
Receivables to the Purchaser with any intent to hinder,
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delay or defraud any of its creditors; the Seller will not be rendered
insolvent as a result of the sale of the Receivables to the Purchaser.
(x) Disclosure. The CPS Information contains no untrue
statement of a material fact or omits to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(x) Certificates, Statements and Reports. The officers'
certificates, statements, reports and other documents prepared by the
Seller and furnished by the Seller to the Purchaser or to the
Underwriter pursuant to this Agreement and in connection with the
transactions contemplated hereby, when taken as a whole, do not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained herein or therein not
misleading.
(xii) Advice of Legal Counsel and Accountants. The Seller has
consulted with its own legal counsel and independent accountants to the
extent it has deemed necessary regarding the tax, accounting and
regulatory consequences of the transactions contemplated hereby, and
the Seller is not participating in such transactions in reliance on any
representations of the Purchaser or its affiliates, or their counsel
with respect to tax, accounting and regulatory matters.
(b) The Seller makes the following representations and warranties as to
the Receivables including the Samco Receivables, the Linc Receivables and [the
[Affiliated Originator] 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 Closing Date, but 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 Pooling 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 more than 60 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 60
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 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, with respect to the Linc Receivables, Linc,
and [with respect to the [Affiliated Originator] Receivables,
[Affiliated Originator]]) 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, with respect to the
Linc Receivables, Linc, and [with respect to the [Affiliated
Originator] Receivables, [Affiliated Originator]]) in the Financed
Vehicle, which security interest has been assigned by the Seller (or,
with respect to the Samco Receivables, Samco, with respect to the Linc
Receivables, Linc, and [with respect to the [Affiliated Originator]
Receivables, [Affiliated Originator]]) to the Purchaser, which in turn
has assigned such security interest to the Trust pursuant to the
Pooling and Servicing Agreement which will in turn assign 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
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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.
(v) As of the Cutoff Date, approximately [ %] of the aggregate
Principal Balance of the Receivables, constituting [ %] of the number
of Receivables, represent 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 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 Principal Balance of the Receivables were
originated under the CPS Standard Program; approximately [ %] of the
aggregate Principal Balance of the Receivables were originated under
the CPS Super Alpha Program; approximately [ %] of the aggregate
Principal Balance of the Receivables are Samco Receivables;
approximately [ %] of the aggregate Principal Balance of the
Receivables are Linc Receivables; [approximately [ %] of the aggregate
Principal Balance of the Receivables are [Affiliated Originator]
Receivables; no Receivable shall have a payment that is more than 30
days overdue as of the Cutoff Date; [ %] of the Receivables are Rule of
78's Receivables and [ %] 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
not more than 60 months and an average original term to maturity of [ ]
months and a remaining term to maturity of not more than [ ] months
[and an average remaining term to maturity of [ ] 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 [$ ] and, 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.
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(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
Florida, approximately [ %] of the Receivables were originated in
Pennsylvania, approximately [ %] of the Receivables were originated in
Texas 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 Receivable 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 their
payments directly to the Post-Office Box.
(x) 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
to the Pooling and Servicing Agreement.
(xi) Schedule of Receivables; Selection Procedures. The
information with respect to the Receivables set forth in the Schedule
of CPS Receivables, Schedule of Samco Receivables, Schedule of Linc
Receivables and [Schedule of [Affiliated Originator] 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
Certificateholders 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 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
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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 security interest in the Financed
Vehicle in favor of the Seller (or, with respect to the Samco
Receivables, Samco, with respect to the Linc Receivables, Linc, and
[with respect to the [Affiliated Originator] Receivables, [Affiliated
Originator]]) 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.
(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 none of
the Seller, Samco, Linc nor [Affiliate Originator] shall waive and none
of them has waived any of the foregoing; and no Financed Vehicle shall
be in repossession as of the Cutoff Date.
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(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 that each Receivable requires
the Obligor to obtain and maintain such insurance naming the Seller
(or, with respect to the Samco Receivables, Samco, with respect to the
Linc Receivables, Linc, and [with respect to the [Affiliated
Originator] Receivables, [Affiliated Originator]]) 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, with respect to the Linc Receivables, Linc, and [with respect to
the [Affiliated Originator] Receivables, [Affiliated Originator]]) 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 and other Transferred CPS Property from the Seller to
the Purchaser and that the beneficial interest in and title to such CPS
Receivables and other Transferred CPS Property 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 or
other Transferred CPS Property 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
other Transferred CPS Property, 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 other Transferred CPS Property, 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 is subject to the laws of, any jurisdiction under which the
sale, transfer, and assignment of such Receivable under this Agreement
the Samco Purchase Agreement, the Linc Purchase Agreement or [the
[Affiliated Originator] Purchase Agreement shall be unlawful, void, or
voidable. None of the Seller, Samco, Linc or [Affiliated Originator]
has entered into any agreement with any account debtor that prohibits,
restricts or conditions the assignment of any portion of the
Receivables or other Transferred Property.
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(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 Property have been made, taken or
performed.
[(xxvi) Receivable File; One Original. The Seller has
delivered to the Trustee a complete Receivable File with respect to
each Receivable. There is only one original executed copy of each
Receivable.]
(xxvii) Chattel Paper. Each Receivable constitutes "chattel
paper" under the UCC.
(xxviii) 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 Receivable 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; the terms
of such Receivable have not been waived or modified in any respect.
(xxix) Tax Liens. As of the Cutoff Date, there is no lien
against the related Financed Vehicle for delinquent taxes.
(xxx) Title Documents. (A) If the Receivable was originated in
a State in which notation of security interest on the title document of
the related Financed Vehicle is required or permitted to perfect such
security interest, the title document for such 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 Financial Vehicle) will be received
within 180 days and will show, the Seller (or, with respect to the
Samco Receivables, Samco, with respect to the Linc Receivables, Linc,
and [with respect to the [Affiliated Originator] Receivables,
[Affiliated Originator]]) 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, with respect to the Linc Receivables,
Linc, and [with respect to the [Affiliated Originator] Receivables,
[Affiliated Originator]]) 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 (or, with
respect to the Samco Receivables, Samco, with respect to the Linc
Receivables, Linc, and [with respect to the [Affiliated Originator]
Receivables, [Affiliated Originator]]) and received written evidence
from the related Dealer that such
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title document showing the Seller as first lienholder has been applied
for.
(xxxi) Casualty. No Financed Vehicle related to a Receivable
has suffered a Casualty.
(xxxii) 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 its purchase of the Receivables.
(xxxiii) 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.
(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 and other Transferred
CPS Property pursuant to this Agreement shall be "without recourse" except for
the representations, warranties and covenants made by the Seller in this
Agreement or the Pooling and Servicing Agreement.
ARTICLE IV
CONDITIONS
4.1. Conditions to Obligation of the Purchaser. The obligation of the
Purchaser to purchase the Receivables on the Closing Date 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 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) Computer Files Marked. The Seller shall, at its own expense, on or
prior to the Closing Date, indicate in its computer files that the 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 Closing
Date.
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(d) Documents to be delivered by the Seller at the Closing.
(i) The CPS Assignment. On the Closing Date, the Seller will
execute and deliver the CPS Assignment which shall be substantially in
the form of Exhibit A hereto.
(ii) Evidence of UCC-1 Filing. On or prior to the 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 other Transferred CPS Property and the other
Transferred 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 and other Transferred CPS Property
relating thereto 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 the Closing Date.
(iii) Evidence of UCC-2 Filing. On the Closing Date, the
Seller shall cause to be recorded and filed, at its own expense,
appropriate UCC-2 termination statements (or UCC-3 termination
statements, as applicable in the relevant UCC jurisdiction executed by
General Electric Capital Corporation ("GECC") or First Union National
Bank ("First Union"), as applicable, 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
the interest of GECC or First Union, as applicable, 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 copy of each
such filing, to the Purchaser on or prior to the Closing Date.
(iv) 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 Pooling
and Servicing Agreement, the Samco Purchase Agreement, the Linc Purchase
Agreement, [the [Affiliated Originator] Purchase Agreement] and the Underwriting
Agreements shall be consummated on the Closing Date.
4.2. Conditions to Obligation of the Seller. The obligation of the
Seller to sell the CPS 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 Purchaser shall have
performed all obligations to be performed by it hereunder on or prior to the
Closing Date.
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(b) Receivables Purchase Price. On 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 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; provided, however,
that to the extent that any provision of this ARTICLE V conflicts with any
provision of the Pooling and Servicing Agreement, the Pooling 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 [Credit
Enhancer] (so long as an [Enhancement 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 [Credit
Enhancer] (so long as an [Enhancement Default] shall not have occurred and be
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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) 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 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, light-duty truck, van or mini-van receivables (other than the
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;
provided, however, that the Seller's obligations under this Section 5.1(f) shall
terminate upon termination of the Trust pursuant to the Pooling and Servicing
Agreement.
(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 Pooling 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
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lien on any interest therein, and the Seller shall defend the right, title, and
interest of the Purchaser in, to and under such Receivables against all claims
of third parties claiming through or under the Seller (or, with respect to the
Samco Receivables, Samco, with respect to the Linc Receivables, Linc, and [with
respect to the [Affiliated Originator] Receivables, [Affiliated Originator]]);
provided, however, sthat the Seller's obligations under this Section 5.2 shall
terminate upon the termination of the Trust pursuant to the Pooling and
Servicing Agreement.
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 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 Pooling 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 Pooling and
Servicing Agreement, that there has been a failure to deliver a file with
respect to a Receivable (including a Samco Receivable, Linc Receivable or
[[Affiliated Originator] Receivable] or that a file is unrelated to the
Receivables identified in Schedule A to the Pooling and Servicing Agreement or
that any of the documents referred to in Section 2.7 of the Pooling 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 Pooling and
Servicing Agreement. The sole remedy hereunder of the Trustee, the Trust or the
Certificateholders 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.
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(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 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 Pooling 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 shall include reasonable fees and
expenses of litigation and shall survive payment of the Certificates of the
payment of the 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
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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 [Credit Enhancer]
and the Certificateholders, 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 Receivables (including any affected Samco Receivable, Linc
Receivable or [[Affiliated Originator] Receivable]) 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 4.5 of the Pooling and Servicing Agreement. The sole remedy hereunder of
the Certificateholders, the Trust, the [Credit Enhancer], 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
[Credit Enhancer], the Trust and the Certificateholders against all costs,
expenses, losses, damages, claims and liabilities, including reasonable fees and
expenses of counsel, which may be asserted against or incurred by
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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 Pooling and Servicing Agreement and the
other transaction documents referenced in such Agreement, servicing and
operation of the Trust pursuant to the Pooling and Servicing Agreement and such
other documents, or the ownership of a 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 ("Code") for which no statutory exception or administrative
exemption applies, such violation shall not be treated as a Repurchase Event.
6.3. Reassignment of Purchased Receivables. With respect to all
Receivables repurchased by the Seller pursuant to this Agreement, the Purchaser
shall assign, without recourse, 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 Receivables and the
other Transferred Property from the Seller to the Purchaser and not a financing
secured by such assets; and the beneficial interest in and title to the
Receivables and the other Transferred 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 Receivables and the other Transferred 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 Certificates 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 Pooling and Servicing Agreement, sell the Receivables to the Trust and
assign its rights under this Purchase Agreement, the Samco Purchase Agreement,
the Linc Purchase Agreement and [the [Affiliated Originator] Purchase Agreement]
to the Trustee for the benefit of the Certificateholders, and that the
representations and warranties contained in this Agreement and the rights of the
Purchaser under this Agreement, including under Sections 6.2 and 6.3 hereof are
intended to benefit such Trust and the Certificateholders. The
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Seller also acknowledges that the Trustee on behalf of the Certificateholders as
assignee of the Purchaser's rights hereunder maydirectly enforce, without making
any prior demand on the Purchaser, all the rights of the Purchaser hereunder
including the rights under Section 6.2 and 6.3 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 [Credit Enhancer]; provided, however, that (i)
any such amendment that materially adversely affects the rights of the Class A
Certificateholders under the Pooling and Servicing Agreement must be consented
to by the holders of Class A Certificates representing more than [ %] of the
Class A Certificate Balance and (ii) any such amendment that materially
adversely affects the rights of the Class B Certificateholders under the Pooling
and Servicing Agreement must be consented to by the holders of Certificates
representing more than [ %] of the Class B Certificate Balance.
6.7. Accountants' Letters. (a) [Accountants] will review the
characteristics of the Receivables and will compare those characteristics to the
information with respect to the Receivables contained in the Preliminary
Memorandum and the Final Memorandum; (b) The Seller will cooperate with the
Purchaser and [accountants] 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 Agreements; and (c) [accountants] will deliver to the Purchaser
a letter, dated the 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" 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 this Agreement 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
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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
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 Receivables, under the Pooling 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 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 Certificateholders and the
[Credit Enhancer] shall be third party beneficiaries with respect to this
Agreement, provided, however, that no third party other than the Trustee for the
benefit of the Certificateholders and the [Credit Enhancer] shall be deemed a
third-party beneficiary of this 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 left intentionally blank.]
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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:
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Exhibit A
ASSIGNMENT
For value received, in accordance with the Purchase Agreement dated as
of [ ] between the undersigned 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 CPS Purchase Agreement and the Pooling and Servicing
Agreement), all right, title and interest of the Seller in and to (i) the
Receivables listed in the Schedule of CPS Receivables and, with respect to
Receivables which are 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 before the Cutoff Date) and, with respect to Receivables
which are 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 Receivables and any other interest of the
Seller in the Financed Vehicles, including, without limitation, the certificates
of title or, with respect to Financed Vehicles in the State of Michigan, such
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 CPS Receivables; (iv) refunds for the costs of extended service
contracts with respect to Financed Vehicles securing the CPS Receivables,
refunds of unearned premiums with respect to credit life and credit accident and
health insurance policies or certificates covering an Obligor under a Receivable
or Financed Vehicle or his or her obligations with respect to a Financed Vehicle
related to a CPS Receivable and any recourse to Dealers for any of the
foregoing; (v) the Receivable File related to each 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 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 the undersigned contained in the CPS
Purchase Agreement and is to be governed by the CPS Purchase Agreement.
<PAGE>
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 LAWS
PRINCIPLES.
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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Exhibit B
Schedule of Receivables
[To be specified at Closing]
[FORM OF [AFFILIATED ORIGINATOR] PURCHASE AGREEMENT]
PURCHASE AGREEMENT dated as of this [ ], 19[ ], by and between
[AFFILIATED ORIGINATOR], a [ ] corporation (the "Seller"), having its principal
executive office at [ ], 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 [Affiliated Originator] Receivables (as hereinafter
defined), are to be sold by the Seller to the Purchaser, which [Affiliated
Originator] Receivables together with the CPS Receivables will be transferred by
the Purchaser, pursuant to the Pooling and Servicing Agreement (as hereinafter
defined), to CPS Grantor Trust 19[___]-[___] to be created thereunder, which
Trust will issue certificates representing beneficial ownership interests in the
Receivables and the other property of the Trust (the "Class A Certificates" and
the "Class B Certificates", together, the "Certificates").
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 Pooling and Servicing Agreement. 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):
"[Affiliated Originator]" means [Affiliated Originator], a
[_____________] corporation, and its successors and assigns.
"[Affiliated Originator] Assignment" means the assignment dated
[_____________], 19[___], by the Seller to the Purchaser, relating to the
purchase of the [Affiliated Originator] Receivables and certain other property
related thereto by the Purchaser from the Seller
<PAGE>
pursuant to this Purchase Agreement which shall be substantially in the form of
Exhibit A to this Purchase Agreement.
"[Affiliated Originator] Receivable" means each retail installment sale
contract for a Financed Vehicle that appears on the Schedule of [Affiliated
Originator] Receivables and all rights thereunder.
"[Affiliated Originator] Receivables Purchase Price" means
$[_______________].
"Agreement" means this Purchase Agreement and the [Affiliated
Originator] Assignment.
"Assignment" means the [Affiliated Originator] Assignment and/or the
CPS Assignment.
"Basic Documents" means the [Affiliated Originator] Purchase Agreement,
the CPS Purchase Agreement, the Pooling and Servicing Agreement, the
[Enhancement Agreement], [the Spread Account Agreement] and [ ] thereto, [the
Lock-Box Agreement] and [the Servicing Assumption Agreement].
"Base Prospectus" means the Prospectus dated [_____________________],
19[___], with respect to Auto Receivables Trusts, with the Purchaser as Seller,
and any amendment or supplement thereto.
"Closing Date" means [___________________], 19[__].
"CPS" means Consumer Portfolio Services, Inc., a California
corporation, and its successors and assigns.
"CPS Assignment" means the assignment substantially in the form of
Exhibit A to the CPS Purchase Agreement.
"CPS Purchase Agreement" means the purchase agreement dated as of
[______________], 19[__], between Consumer Portfolio Services, Inc., as seller,
and the Purchaser, 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.
["[Credit Enhancer]" means [ ], a [ ] organized and created under the
laws of [ ], or its successors in interest.]
["[Enhancement Agreement]" means the [Credit Enhancement Agreement]
among [ ]
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and the [Credit Enhancer], dated as of [ ].]
["Lock-Box Agreement" means the [lock-box agreement], dated the Closing
Date, among the Servicer, the Lock-Box Processor, CPS Receivables Corp. and the
Trustee, as amended, modified or supplemented from time to time, unless such
Agreement shall terminate in accordance with its terms or the terms of the
Pooling and Servicing Agreement, in which event the "Lock-Box Agreement" shall
mean such other agreement, in form and substance acceptable to the [Credit
Enhancer] among the Servicer, the Lock-box Processor and the Trustee.]
"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.
"Pooling and Servicing Agreement" means the Pooling and Servicing
Agreement dated as of [______________], 19[__], among the Purchaser, as Seller,
Consumer Portfolio Services, Inc., as originator of the CPS Receivables and as
servicer, and [_______________________________], as trustee and standby
servicer, as such agreement may be amended, supplemented or otherwise modified
from time to time in accordance with its terms.
"Private Placement Memorandum" means the Private Placement Memorandum,
dated [_____________], 19[___], relating to the private placement of the Class B
Certificates and any amendment or supplement thereto.
"Prospectus Supplement" means the Prospectus Supplement dated
[_______________], 19[___], relating to the public offering of the Class A
Certificates 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
[Affiliated Originator] Receivables.
"Repurchase Event" shall have the meaning specified in Section 6.2
hereof.
"Rule 144A Information" means any information provided to any holder or
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prospective purchaser of Certificates pursuant to Section 12.13 of the Pooling
and Servicing Agreement.
"Schedule of CPS Receivables" means the list of CPS Receivables annexed
as Exhibit B to the CPS Purchase Agreement.
"Schedule of Receivables" means the Schedule of [Affiliated Originator]
Receivables and/or the CPS Schedule of Receivables.
"Schedule of [Affiliated Originator] Receivables" means the list of
[Affiliated Originator] Receivables annexed hereto as Exhibit B.
"Seller" means [Affiliated Originator], a [____________] corporation,
in its capacity as seller of the [Affiliated Originator] Receivables and the
other Transferred [Affiliated Originator] 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.
["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 or supplemented in accordance with its terms.]
["Spread Account Agreement" means the Master Spread Account Agreement
among [ ] and [the Collateral Agent], as amended and restated as of [ ], as the
same may be amended, supplemented or otherwise modified in accordance with the
terms thereof.]
"Transferred [Affiliated Originator] Property" shall have the meaning
specified in Section 2.1(a) hereof.
"Transferred CPS Property" shall have the meaning specified in the CPS
Purchase Agreement.
"Transferred Property" shall have the meaning specified in Section
2.1(a) hereof.
"Trust" means the CPS Grantor Trust 19[___]-[__] created by the Pooling
and Servicing Agreement.
"Trustee" means [______________________________], in its capacity as
trustee under the Pooling and Servicing Agreement, and any successor trustee
thereunder.
"UCC" means the Uniform Commercial Code, as in effect from time to time
in the relevant jurisdictions.
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"Underwriter" means [____________________________].
"Underwriting Agreements" means the (a) Underwriting Agreement, dated
[_______], 19[__], among the Underwriter, CPS, [Affiliated Originator] and the
Purchaser relating to the Class A Certificates, and (b) The Certificate Purchase
Agreement, dated [__________], 19[___], among The Underwriter, CPS, [Affiliated
Originator] and the Purchaser relating to the Class B Certificates.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1. Purchase and Sale of Receivables. On the 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 and the Pooling
and Servicing Agreement), all of the Seller's right, title and interest in, to
and under the [Affiliated Originator] Receivables and the other Transferred
[Affiliated Originator] Property relating thereto. The conveyance to the
Purchaser of the [Affiliated Originator] Receivables and other Transferred
[Affiliated Originator] Property relating thereto is intended as a sale free and
clear of all liens and it is intended that the Transferred [Affiliated
Originator] 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 Closing Date and simultaneously
with the transactions to be consummated pursuant to the Pooling 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 Pooling and Servicing Agreement), all right, title and
interest of the Seller in and to (i) the [Affiliated Originator] Receivables
listed in the Schedule of [Affiliated Originator] 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 [Affiliated
Originator] Receivables; (ii) the security interests in the Financed Vehicles
granted by Obligors pursuant to the [Affiliated Originator] 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 [Affiliated Originator] Receivables or the
Obligors thereunder; (iv) refunds for the costs of extended service contracts
with respect to Financed Vehicles securing
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the [Affiliated Originator] 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 [Affiliated
Originator] 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 [Affiliated Originator] Receivable; and (vi) the
proceeds of any and all of the foregoing (collectively, the "Transferred
[Affiliated Originator] Property" and together with the Transferred CPS
Property, the "Transferred Property").
(b) [Affiliated Originator] Receivables Purchase Price. In
consideration for the [Affiliated Originator] Receivables and other Transferred
[Affiliated Originator] Property described in Section 2.1(a), the Purchaser
shall, on the Closing Date, pay to the Seller the [Affiliated Originator]
Receivables Purchase Price by federal wire transfer (same day) funds.
2.2. The Closing. The sale and purchase of the [Affiliated Originator]
Receivables and other Transferred [Affiliated Originator] Property 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 CPS Purchase Agreement pursuant to which CPS will
sell the CPS Receivables and other Transferred CPS Property to the Purchaser,
(b) the Pooling and Servicing Agreement pursuant to which the Purchaser will
assign all of its right, title and interest in and to the Receivables and the
other Transferred Property to the Trustee for the benefit of the
Certificateholders and the Trust will issue and deliver the Certificates to the
Purchaser in exchange for the Transferred Property, and (c) the Underwriting
Agreements pursuant to which the Underwriter shall purchase the Class A
Certificates and the Class B Certificates from the Purchaser.
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 the
Closing Date (which representations and warranties shall survive the 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 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 execute and deliver this Agreement and
perform its obligations hereunder.
(b) Due Qualification. The Purchaser is duly qualified to do business
as a
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foreign corporation in good standing, and has obtained all necessary licenses
and approvals in all jurisdictions material to the performance of its
obligations under this Agreement.
(c) Power and Authority. The Purchaser has the power and authority to
execute and deliver this Agreement and to carry out its terms and the execution,
delivery and performance of this Agreement have been duly authorized by the
Purchaser by all necessary corporate action.
(d) Binding Obligation. This Agreement shall constitute a legal, valid
and binding obligation of the Purchaser enforceable in accordance with its
terms, subject to the effect of any applicable bankruptcy, insolvency,
moratorium, receivership, reorganization, liquidation and other similar laws
affecting creditors' rights and the effect of general principles of equity
including (without limitation) concepts of materiality, reasonableness, good
faith, fair dealing (regardless of whether considered and applied in a
proceeding in equity or at law), and also to the possible unavailability of
specific performance or injunctive relief.
(e) No Violation. The execution, delivery and performance by the
Purchaser of this Agreement 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 certificate 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 Basic Documents); 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 this Agreement or the Certificates; (B) seeking to prevent the issuance of
the Certificates or the consummation of any of the transactions contemplated by
this Agreement; (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, this Agreement or the Certificates; or (D)
relating to the Purchaser and which might adversely affect the Federal or State
income, excise, franchise or similar tax attributes of the Certificates.
(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 Certificates or the
consummation of the other
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transactions contemplated by this Agreement, the Pooling and Servicing Agreement
and the other Basic Documents, 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 (which representations and warranties shall survive 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 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 [Affiliated Originator] 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 [Affiliated Originator] Receivables
as required by the Pooling 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 this Agreement
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 [Affiliated Originator]
Receivables and the other Transferred [Affiliated Originator] Property
conveyed to the Purchaser pursuant to the [Affiliated Originator]
Assignment, 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,
subject to the effect of any applicable bankruptcy, insolvency,
moratorium, receivership, reorganization, liquidation and other similar
laws affecting creditors' rights and the effect of general principles
of equity including (without limitation) concepts of materiality,
reasonableness, good faith, fair dealing (regardless of whether
considered and applied in a proceeding in equity or at law), and also
to the possible unavailability of specific performance or injunctive
relief.
(v) No Violation. The execution, delivery and performance by
the Seller of this Agreement and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not
conflict with, result in any
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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 Basic Documents); 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 this Agreement or the
Certificates; (B) seeking to prevent the issuance of the Certificates
or the consummation of any of the transactions contemplated by this
Agreement; (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 the Certificates; or (D) relating to the Seller and which might
adversely affect the Federal or State income, excise, franchise or
similar tax attributes of the Certificates.
(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 Certificates or the
consummation of the other transactions contemplated by this Agreement,
the Pooling and Servicing Agreement and the other Basic Documents,
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
[Affiliated Originator] 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 [Affiliated
Originator] Receivables to the Purchaser.
(x) Certificates, Statements and Reports. The officers'
certificates,
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statements, reports and other documents prepared by the Seller and
furnished by the Seller to the Purchaser or to the Underwriter pursuant
to this Agreement and in connection with the transactions contemplated
hereby, when taken as a whole, do not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
(xi) Advice of Legal Counsel and Accountants. The Seller has
consulted with its own legal counsel and independent accountants to the
extent it has deemed necessary regarding the tax, accounting and
regulatory consequences of the transactions contemplated hereby, and
the Seller is not participating in such transactions in reliance on any
representations of the Purchaser or its affiliates, or their counsel
with respect to tax, accounting and regulatory matters.
(b) The Seller makes the following representations and warranties as to
the [Affiliated Originator] Receivables and the other Transferred [Affiliated
Originator] Property relating thereto on which the Purchaser relies in accepting
the [Affiliated Originator] Receivables and the other Transferred [Affiliated
Originator] Property relating thereto. Such representations and warranties speak
with respect to each [Affiliated Originator] Receivable as of the Closing Date
and shall survive the sale, transfer, and assignment of the [Affiliated
Originator] Receivables and the other Transferred [Affiliated Originator]
Property relating thereto to the Purchaser and the subsequent assignment and
transfer pursuant to the Pooling and Servicing Agreement:
(i) Location of Receivable Files; One Original. A complete
Receivable File with respect to each [Affiliated Originator] Receivable
has been or prior to the Closing Date will be delivered to the Trustee
at the location listed in Schedule B to the Pooling and Servicing
Agreement. There is only one original executed copy of each [Affiliated
Originator] Receivable.
(ii) Schedule of Receivables; Selection Procedures. The
information with respect to the [Affiliated Originator] Receivables set
forth in the Schedule of [Affiliated Originator] 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
Certificateholders have been utilized in selecting the [Affiliated
Originator] Receivables.
(iii) Security Interest in Financed Vehicle. Immediately prior
to the sale, assignment, and transfer thereof, each [Affiliated
Originator] 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).
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(iv) [Affiliated Originator] Receivables in Force. No
[Affiliated Originator] Receivable has been satisfied, subordinated or
rescinded, nor has any Financed Vehicle been released from the lien
granted by the related [Affiliated Originator] Receivable in whole or
in part.
(v) No Waiver. No provision of a [Affiliated Originator]
Receivable has been waived.
(vi) No Amendments. No [Affiliated Originator] Receivable has
been amended, except as such [Affiliated Originator] 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.
(vii) No Default; Repossession. Except for payment
delinquencies continuing for a period of not more than thirty (30) days
as of the Cutoff Date, no default, breach, violation or event
permitting acceleration under the terms of any [Affiliated Originator]
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 [Affiliated
Originator] Receivable has arisen; and the Seller shall not waive and
has not waived any of the foregoing; and no Financed Vehicle securing a
[Affiliated Originator] Receivable shall be in repossession 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
[Affiliated Originator] Receivables and other Transferred [Affiliated
Originator] Property from the Seller to the Purchaser and that the
beneficial interest in and title to such [Affiliated Originator]
Receivables and other Transferred [Affiliated Originator] Property 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 [Affiliated Originator] Receivable or other Transferred [Affiliated
Originator] Property 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 [Affiliated Originator]
Receivable and other Transferred [Affiliated Originator] Property, 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 [Affiliated Originator] Receivable and other
Transferred [Affiliated Originator] Property, 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.
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(ix) Lawful Assignment. No [Affiliated Originator] Receivable
has been originated in, or is subject to the laws of, any jurisdiction
under which the sale, transfer, and assignment of such [Affiliated
Originator] Receivable under this Agreement 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 [Affiliated Originator] Receivables or other
Transferred [Affiliated Originator] Property.
(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
[Affiliated Originator] Receivables and the other Transferred
[Affiliated Originator] Property have been made, taken or performed.
(xi) Casualty. No Financed Vehicle related to a [Affiliated
Originator] 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 [Affiliated Originator] Receivables (including, but not
limited to under dealer reserves) as a result of the purchase of the
[Affiliated Originator] Receivables.
(xiii) Full Amount Advanced. The full amount of each
[Affiliated Originator] Receivable has been advanced to each Obligor,
and there are no requirements for future advances thereunder. No
Obligor with respect to a [Affiliated Originator] Receivable has any
option under the [Affiliated Originator] 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 [Affiliated Originator] Receivables and
the other Transferred [Affiliated Originator] Property 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. The obligation of the
Purchaser to purchase the [Affiliated Originator] Receivables on the Closing
Date is subject to the satisfaction of the following conditions:
(a) Representations and Warranties True. The representations and
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warranties of the Seller 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) Computer Files Marked. The Seller shall, at its own expense, on or
prior to the Closing Date, indicate in its computer files that the [Affiliated
Originator] Receivables have been sold to the Purchaser pursuant to this
Agreement and shall deliver to the Purchaser the Schedule of [Affiliated
Originator] 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 Closing
Date.
(d) Documents to be delivered by the Seller on the Closing Date.
(i) The [Affiliated Originator] Assignment. On the Closing
Date, the Seller will execute and deliver the [Affiliated Originator]
Assignment. The [Affiliated Originator] Assignment shall be
substantially in the form of Exhibit A hereto.
(ii) Evidence of UCC-1 Filing. On or prior to the 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 [Affiliated
Originator] Receivables and the other Transferred [Affiliated
Originator] 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 [Affiliated Originator] Receivables and other
Transferred [Affiliated Originator] Property relating thereto 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 the 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 Pooling
and Servicing Agreement, the CPS Purchase Agreement and the Underwriting
Agreements shall be consummated on the Closing Date.
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4.2. Conditions to Obligation of the Seller. The obligation of the
Seller to sell the [Affiliated Originator] 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 Purchaser 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 [Affiliated Originator] Receivables Purchase Price on the 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:
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 [Affiliated Originator]
Receivables and the other Transferred [Affiliated Originator] 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
[Affiliated Originator] Receivables and the other Transferred [Affiliated
Originator] 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 [Credit
Enhancer] (so long as an [Enhancement Default] (as such term is defined in the
Pooling and Servicing Agreement) shall not have occurred and
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<PAGE>
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 [Credit
Enhancer] (so long as an [Enhancement 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 [Affiliated Originator] Receivables hereunder, the Seller's master computer
records (including any back-up archives) that refer to a [Affiliated Originator]
Receivable shall indicate clearly the interest of the Purchaser in such
[Affiliated Originator] Receivable and that such [Affiliated Originator]
Receivable is owned by the Purchaser. Indication of the Purchaser's ownership of
a [Affiliated Originator] Receivable shall be deleted from or modified on the
Seller's computer systems when, and only when, the [Affiliated Originator]
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, light truck, van or minivan receivables (other than the [Affiliated
Originator] 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
[Affiliated Originator] Receivable, shall indicate clearly that such [Affiliated
Originator] Receivable has been sold and is owned by the Purchaser unless such
[Affiliated Originator] 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 [Affiliated
Originator] Receivable; provided, however, that the Seller's obligations under
this Section 5.1(e) shall terminate upon the termination of the Trust pursuant
to the Pooling and Servicing Agreement.
(f) List of Receivables. Upon request, the Seller shall furnish to the
Purchaser, within five Business Days, a list of all [Affiliated Originator]
Receivables (by contract number and name of Obligor) then owned by the
Purchaser, together with a reconciliation of such list to the Schedule of
[Affiliated Originator] Receivables.
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<PAGE>
5.2. Other Liens or Interests. Except for the conveyances hereunder and
pursuant to the Pooling 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 [Affiliated
Originator] Receivables against all claims of third parties claiming through or
under the Seller; provided, however, that the Seller's obligations under this
Section 5.2 shall terminate upon the termination of the Trust pursuant to the
Pooling and Servicing Agreement.
5.3. Chief Executive Office. During the term of the [Affiliated
Originator] 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 [Affiliated
Originator] 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 Pooling and Servicing Agreement the Receivables Files relating
to the [Affiliated Originator] 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 [Affiliated Originator]
Receivable or that a file is unrelated to the Receivables identified in Schedule
A to the Pooling and Servicing Agreement or that any of the documents referred
to in Section 2.7 of the Pooling 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 [Affiliated Originator], 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 Pooling and
Servicing Agreement. The sole remedy hereunder of the Trustee, the Trust or the
Certificateholders 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 [Affiliated Originator] Receivable
to be originated in compliance with all requirements of law and for any breach
of any of its representations and warranties contained herein.
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<PAGE>
(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
[Affiliated Originator] 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 this Agreement, or by reason of reckless disregard of the
Seller's obligations and duties under this Agreement.
Indemnification under this Section 5.6 shall include reasonable fees
and expenses of litigation and shall survive payment of the 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, at
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 [Affiliated Originator] Receivable.
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<PAGE>
6.2. Repurchase Events. The Seller hereby covenants and agrees with the
Purchaser for the benefit of the Purchaser, the Trustee, the [Credit Enhancer]
and the Certificateholders, 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 [Affiliated Originator] 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
[Affiliated Originator] Receivable if such [Affiliated Originator] 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 [Affiliated Originator] 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 [Affiliated
Originator] Receivables, such that following such purchase such representation
shall be true and correct with respect to the remainder of the [Affiliated
Originator] 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 4.5 of the
Pooling and Servicing Agreement. The sole remedy hereunder of the
Certificateholders, the Trust, the [Credit Enhancer], 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 [Affiliated Originator]
Receivables pursuant to this Agreement; provided, however, that the Seller shall
indemnify the Trustee, the [Credit Enhancer], the Trust and the
Certificateholders 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 [Affiliated Originator] Receivable.
Notwithstanding the foregoing, if it is determined that consummation of the
transactions contemplated by the Pooling and Servicing Agreement and the other
transaction documents referenced in such Agreement, servicing and operation of
the Trust pursuant to the Pooling and Servicing Agreement and such other
documents, or the ownership of a 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 ("Code"), for which no statutory exception or administrative exemption
applies, such violation shall not be treated as a Repurchase Event.
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<PAGE>
6.3. Reassignment of Purchased Receivables. With respect to all
[Affiliated Originator] Receivables repurchased by the Seller pursuant to this
Agreement, 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 [Affiliated Originator] Receivables, and all
security and documents relating thereto.
6.4. Conveyance as Sale of Receivables Not Financing. The parties
hereto intend that the conveyance under this Agreement be a sale of the
[Affiliated Originator] Receivables and the other Transferred [Affiliated
Originator] Property from the Seller to the Purchaser and not a financing
secured by such assets; and the beneficial interest in and title to the
[Affiliated Originator] Receivables and the other Transferred [Affiliated
Originator] 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 [Affiliated
Originator] Receivables and the other Transferred [Affiliated Originator]
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 Certificates 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 Pooling 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 Certificateholders, 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 Certificateholders. The Seller
also acknowledges that the Trustee on behalf of the Certificateholders 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 Sections 6.2 and 6.4 hereof. The Seller
hereby consents to such sale and assignment.
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 [Credit Enhancer]; provided, however, that (i) any such
amendment that materially adversely affects the rights of the Class A
Certificateholders under the Pooling and Servicing Agreement must be consented
to by the holders of Class A Certificates representing more than [___]% of the
Class A Certificate Balance and (ii) any amendment that materially adversely
affects the rights of the Class B Certificateholders under the Pooling and
Servicing Agreement must be consented to by the holders of Class B Certificates
representing more than [___]% of the Class B Certificate Balance.
6.7. Waivers. No failure or delay on the part of the Purchaser in
exercising any
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<PAGE>
power, right or remedy under this Agreement 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 the closing under Section 2.2
hereof.
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 [Affiliated Originator] Receivables, under the Pooling 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.
6.13. Third Party Beneficiaries. The parties hereto hereby expressly
agree that each of the Trustee for the benefit of the Certificateholders and the
[Credit Enhancer] shall be third party beneficiaries with respect to this
Agreement, provided, however, that no third party other than the Trustee for the
benefit of the Certificateholders and the [Credit Enhancer] shall be deemed a
third party beneficiary of this 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:
[AFFILIATED ORIGINATOR]
By:_____________________________
Name:
Title:
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<PAGE>
Exhibit A
ASSIGNMENT
For value received, in accordance with the Purchase Agreement (the
"[Affiliated Originator] Purchase Agreement") dated as of [____________],
19[____], between the undersigned (the "Seller") and Financial Asset Securities
Corp. (the "Purchaser"), the undersigned does hereby sell, transfer, assign and
otherwise convey unto the Purchaser, without recourse (subject to the
obligations in the [Affiliated Originator] Purchase Agreement and the Pooling
and Servicing Agreement), all right, title and interest of the Seller in and to
(i) the [Affiliated Originator] Receivables listed in the Schedule of
[Affiliated Originator] 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
[Affiliated Originator] 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
[Affiliated Originator] Receivables; (iv) refunds for the costs of extended
service contracts with respect to Financed Vehicles securing the [Affiliated
Originator] 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 [Affiliated Originator] 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 [Affiliated Originator] 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 [Affiliated
Originator] 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
[Affiliated Originator] Purchase Agreement and is to be governed by the
[Affiliated Originator] Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the [Affiliated Originator] Purchase Agreement.
THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK
<PAGE>
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of [____________] [_____].
[AFFILIATED ORIGINATOR]
By:
Name:
Title:
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<PAGE>
Exhibit B
Schedule of [Affiliated Originator] Receivables
[To be specified at Closing]
EXHIBIT 24.1
<PAGE>
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. (the "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 CPS, 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 certificates (the "Certificates") representing
undivided interests in a trust, the property of which includes
automobile receivables originated or acquired by CPS or a subsidiary of
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 Certificates 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 1, 1998 and
shall continue in full force and effect until revoked by the undersigned in a
writing filed with the Secretary of CPS.
/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
-3-
