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PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED APRIL 8, 1998)
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CPS AUTO GRANTOR TRUST 1998-2
$200,490,176
6.09% ASSET-BACKED CERTIFICATES, CLASS A
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 Norwest Bank Minnesota, National
Association, 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 6.09% 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 10.34% 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.
First Union Capital Markets, a division of Wheat First Securities, Inc.
('First Union Capital Markets' or, in its capacity as underwriter, the
'Underwriter') has agreed to purchase from the Seller all the Class A
Certificates at a purchase price equal to 99.99953% of the principal amount
thereof, plus interest at the Class A Pass-Through Rate from May 15, 1998,
subject to the terms and conditions set forth in the Underwriting Agreement
referred to herein under 'Underwriting'. The aggregate proceeds to the Seller,
after deducting expenses payable by the Seller estimated at $250,000, will be
$200,340,982.46 for the Class A Certificates.
The Underwriter proposes 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 1, 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.
Full and timely payment of the Class A Guaranteed Distribution 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').
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FOR A DISCUSSION OF CERTAIN FACTORS RELATING TO THE TRANSACTION, SEE 'RISK
FACTORS' AT PAGE S-14 HEREIN AND PAGE 10 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 Underwriter when, as and
if issued by the Seller, delivered to and accepted by the Underwriter 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 18, 1998 only through
The Depository Trust Company, Cedel Bank, societe anonyme and the Euroclear
System.
FIRST UNION CAPITAL MARKETS
The date of this Prospectus Supplement is May 13, 1998.
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AVAILABLE INFORMATION
CPS has filed with the Securities and Exchange Commission (the
'Commission') a Registration Statement (together with all amendments and
exhibits thereto, referred to herein as the 'Registration Statement') under the
Securities Act of 1933, as amended (the 'Securities Act') with respect to the
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) Annual Report on Form 10-K for the year ended December 31, 1997,
and
(b) Quarterly Report on Form 10-Q for the period ended March 31, 1998.
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
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the New York State Insurance Department to financial statements prepared in
accordance with generally accepted accounting principles in making such
determinations.
The Seller on behalf of the Trust hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the Trust's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act and each
filing of the financial statements of Financial Security included in or as an
exhibit to the annual report of Holdings filed pursuant to Section 13(a) or
15(d) of the Exchange Act that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
Class A 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 UNDERWRITER 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.
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.
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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 this
Summary are defined elsewhere in this Prospectus Supplement. An Index of Terms
appears at the end of this Prospectus Supplement.
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Trust............................... CPS Auto Grantor Trust 1998-2 (the 'Trust') to be formed pursuant to the
Pooling and Servicing Agreement, dated as of May 1, 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 18, 1998 (the 'Closing Date').
Description of the Securities
Offered........................... The Certificates consist of two classes, entitled 6.09% Asset-Backed
Certificates, Class A (the 'Class A Certificates') and 10.34% Asset-Backed
Certificates, Class B (the 'Class B Certificates' and, together with the
Class A Certificates, the 'Certificates'). The Class B Certificates are not
being offered hereby and the information herein with respect thereto is
provided only to permit a better understanding of the Class A 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.
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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 Class A 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 1, 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 the Purchase Agreements 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.
The Receivables..................... As of the Cutoff Date, the aggregate outstanding principal balance of the
Receivables was $211,042,291 (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 1, 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 92.12%, 5.53% and 2.35%, 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
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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 91.08% 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 the Originators 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 20.45%, the weighted
average remaining term to maturity of the Receivables was approximately
56.35 months and the weighted average original term to maturity of the
Receivables was approximately 57.46 months. As of the Cutoff Date, no
Receivable had a scheduled maturity later than May 2003.
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 6.09%
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 10.34% 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
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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. The final scheduled Distribution Date on the
Certificates will be the November 2003 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 31, 1998.
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;
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(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), 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, the Class B Interest Distributable
Amount (as defined herein) and any Class B Interest Carryover Shortfall (as
defined herein), 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, 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
(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
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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 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
15, 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
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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.
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 Seller
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 1,
1998 among CPS, the Standby Servicer and the Trustee (the 'Servicing
Assumption Agreement'). The Standby Servicer will receive a
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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 7.88% of the
aggregate principal balance of the Receivables as of the Cutoff Date, have
been originated by Samco or 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
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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 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.
Persons acquiring beneficial ownership interests in the Class A
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 Class A Certificates are book-entry Certificates, such Class A
Certificates will be evidenced by one or more Class A 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 Class A
Certificates will be issued in definitive form only under the limited
circumstances described herein. All references herein to 'holders' of the
Class A Certificates or 'Class A Certificateholders' shall reflect the
rights of beneficial owners of the Class A
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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.
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.
See 'ERISA Considerations' in this Prospectus Supplement.
Rating of the Certificates.......... 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 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
In addition to the other information contained in this Prospectus
Supplement and the Prospectus, 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 Certificates:
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 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.
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GEOGRAPHIC CONCENTRATION
As of the Cutoff Date, 18.43% 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 a 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 with respect to a Collection Period until the full
amount of interest on the Class A Certificates relating to such Collection
Period and any related Class A Interest Carryover Shortfall has been funded. The
Class B Certificateholders will not receive any distributions of 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 Carryover Shortfall 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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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 for 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 a Certificate Insurer Default, the Class A
Certificateholders must rely on amounts, if any, available in the Spread
Account, certain amounts 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 be held in one or more trust accounts established and
maintained by the Trustee pursuant to the Agreement, as described below; see
'Description of The Certificates -- Accounts'; (ii) the rights of the Seller
under the Purchase Agreements; (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
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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 October 1, 1991, CPS began its program of purchasing Contracts from
Dealers and selling them to institutional investors. Through March 31, 1998, CPS
had purchased $1.6 billion of Contracts from Dealers and sold $1.5 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 3,600
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 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
totaling $26.2
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million. In the three months ended March 31, 1998, Samco purchased 1,215
Contracts with original balances totalling $13.8 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 totalling $8.9 million. In the three months
ended March 31, 1998, Linc purchased 425 Contracts with original balances
totalling $5.5 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'). In addition, Samco offers IFCs, essentially the same programs that
CPS offers to Dealers, while Linc offers only its program (the 'Linc Program')
to Deposit Institutions. 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 Linc Program
guidelines are designed for applicants with slightly better credit than
applicants under the Alpha Program and include requirements such as higher
income and lower debt ratio as compared to the Alpha Program guidelines. 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 had significant credit. Applicants under the First Time Buyer Program
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, down payment, and collateral value with
regard to the loan, employment history, monthly income level,
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<PAGE>
<PAGE>
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 down payment required on the purchase of a vehicle is generally
10% to 15% of the purchase price. The down payment may be made in cash, and/or
with a trade-in car and, if available, a proven manufacturer's rebate. The cash
and trade-in value must equal at least 50% of the minimum down payment required,
with the proven manufacturer's rebate constituting the remainder of the down
payment. CPS believes that the relatively high down payment requirement will
result in higher collateral values as a percentage of the amount financed and
the selection of buyers with stronger commitment to the vehicle.
Prior to purchasing any Contract, CPS verifies that the Obligor has
arranged for casualty insurance by reviewing documentary evidence of the policy
or by contacting the insurance company or agent. The policy must indicate that
CPS is the lien holder and loss payee. The insurance company's name and policy
expiration date are recorded in CPS' computerized system for ongoing monitoring.
As loss payee, CPS receives all correspondence relevant to renewals or
cancellations on the policy. Information from all such correspondence is updated
to the computerized records. In the event that a policy reaches its expiration
date without a renewal, or if CPS receives a notice that the policy has been
canceled prior to its expiration date, a letter is generated to advise the
borrower of its obligation to continue to provide insurance. If no action is
taken by the borrower to insure the vehicle, two successive and more forceful
letters are generated, after which the collection department will contact the
borrower telephonically to further counsel the borrower, including possibly
advising them that CPS has the right to repossess the vehicle if the borrower
refuses to obtain insurance. Although it has the right, CPS rarely repossesses
vehicles in such circumstances. In addition, CPS does not force place a policy
and add the premium to the borrower's outstanding obligation, although it also
has the right to do so. Rather in such circumstances the account is flagged as
not having insurance and continuing efforts are made to get the Obligor to
comply with the insurance requirement in the Contract. CPS believes that
handling non-compliance with insurance requirements in this manner ultimately
results in better portfolio performance because it believes that the increased
monthly payment obligation of the borrower which would result from force placing
insurance and adding the premium to the borrower's outstanding obligation would
increase the likelihood of delinquency or default by such borrower on future
monthly payments.
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<PAGE>
<PAGE>
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
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.
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
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<PAGE>
<PAGE>
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,
under the Alpha Program in April 1995, under the Linc Program in December 1996
and under the Super Alpha Program in December 1997. CPS has found that the
delinquency and net credit loss and repossession experience with respect to the
Delta Program is somewhat higher than under its Standard Program. CPS has found
that the delinquency and net credit loss and repossession experience with
respect to the Alpha Program, the Linc Program and the Super 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 somewhat higher than
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.
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<PAGE>
<PAGE>
CONSUMER PORTFOLIO SERVICES, INC.
DELINQUENCY EXPERIENCE
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996
------------------------ ------------------------ ------------------------
NUMBER NUMBER NUMBER
OF LOANS AMOUNT OF LOANS AMOUNT OF LOANS AMOUNT
-------- ------------ -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Portfolio(1)............. 14,235 $203,879,000 27,113 $355,965,000 47,187 $604,092,000
Period of Delinquency(2)
31-60..... 243 3,539,000 909 11,520,000 1,801 22,099,000
61-90..... 68 1,091,000 203 2,654,000 724 9,068,000
91+....... 56 876,000 272 3,899,000 768 9,906,000
-------- ------------ -------- ------------ -------- ------------
Total Delinquencies...... 367 5,506,000 1,384 18,073,000 3,293 41,073,000
Amount in
Repossession(3)........ 271 3,759,000 834 10,151,000 1,168 14,563,000
-------- ------------ -------- ------------ -------- ------------
Total Delinquencies and
Amount in
Repossession(4)........ 638 $ 9,265,000 2,218 $ 28,224,000 4,461 $ 55,636,000
-------- ------------ -------- ------------ -------- ------------
-------- ------------ -------- ------------ -------- ------------
Delinquencies as a
Percent of the
Portfolio.............. 2.58% 2.70% 5.10% 5.08% 6.98% 6.80%
Repo Inventory as Percent
of the Portfolio....... 1.90% 1.84% 3.08% 2.85% 2.48% 2.41%
-------- ------------ -------- ------------ -------- ------------
Total Delinquencies and
Amount in Repossession
as a Percent of
Portfolio.............. 4.48% 4.54% 8.18% 7.93% 9.45% 9.21%
-------- ------------ -------- ------------ -------- ------------
-------- ------------ -------- ------------ -------- ------------
<CAPTION>
DECEMBER 31, 1997 MARCH 31, 1997 MARCH 31, 1998
------------------------- ------------------------ --------------------------
NUMBER NUMBER NUMBER
OF LOANS AMOUNT OF LOANS AMOUNT OF LOANS AMOUNT
-------- -------------- -------- ------------ -------- --------------
<S> <C> <C> <C> <C> <C> <C>
Portfolio(1)............. 83,414 $1,031,573,000 54,212 $681,840,000 98,524 $1,207,938,000
Period of Delinquency(2)
31-60..... 3,092 36,609,000 1,661 20,524,000 2,067 24,591,000
61-90..... 1,243 15,303,000 711 8,752,000 954 11,640,000
91+....... 1,393 17,868,000 658 8,175,000 1,505 19,341,000
-------- -------------- -------- ------------ -------- --------------
Total Delinquencies...... 5,728 69,781,000 3,030 37,451,000 4,526 55,572,000
Amount in
Repossession(3)........ 1,977 24,463,000 1,612 16,648,000 2,329 28,800,000
-------- -------------- -------- ------------ -------- --------------
Total Delinquencies and
Amount in
Repossession(4)........ 7,705 $ 94,244,000 4,642 $ 54,099,000 6,855 $ 84,372,000
-------- -------------- -------- ------------ -------- --------------
-------- -------------- -------- ------------ -------- --------------
Delinquencies as a
Percent of the
Portfolio.............. 6.87% 6.76% 5.59% 5.49% 4.59% 4.60%
Repo Inventory as Percent
of the Portfolio....... 2.37% 2.37% 2.97% 2.44% 2.36% 2.38%
-------- -------------- -------- ------------ -------- --------------
Total Delinquencies and
Amount in Repossession
as a Percent of
Portfolio.............. 9.24% 9.14% 8.56% 7.93% 6.96% 6.98%
-------- -------------- -------- ------------ -------- --------------
-------- -------------- -------- ------------ -------- --------------
</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
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<PAGE>
CONSUMER PORTFOLIO SERVICES, INC.
NET CREDIT LOSS/REPOSSESSION EXPERIENCE
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THREE MONTHS THREE MONTHS
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, ENDED ENDED
1994 1995 1996 1997 MARCH 31, 1997 MARCH 31, 1998
------------ ------------ ------------ ------------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Average Amount Outstanding
During the Period(1)...... $98,916,991 $221,926,489 $395,404,669 $703,100,136 $549,105,157 $1,003,980,163
Average Number of Loans
Outstanding During the
Period.................... 9,171 20,809 36,998 65,189 51,577 92,541
Number of Repossessions..... 669 2,018 3,145 6,007 1,219 2,435
Gross Charge-Offs(2)........ $ 3,166,408 $ 11,658,461 $ 23,296,775 $ 46,649,521 $ 8,631,291 $ 17,997,222
Recoveries(3)............... $ 347,519 $ 1,028,378 $ 2,969,143 $ 5,534,823 $ 1,158,029 $ 1,983,846
Net Losses.................. $ 2,818,889 $ 10,630,083 $ 20,327,632 $ 41,114,698 $ 7,473,262 $ 16,013,376
Annualized Repossessions as
a Percentage of Average
Number of Loans
Outstanding............... 7.29% 9.70% 8.50% 9.21% 9.45% 10.53%
Annualized Net Losses as a
Percentage of Average
Amount Outstanding........ 2.85% 4.79% 5.14% 5.85% 5.44% 6.38%
</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.
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
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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 the Originators' portfolio by several criteria,
including the following: each Receivable was originated, based on the billing
address of the Obligors, in the United States, has an original term of not more
than 60 months, provides for level monthly payments which fully amortize the
amount financed over the original term (except for the last payment, which may
be different from the level payment for various reasons, including late or early
payments during the term of the Contract), has a remaining maturity of 60 months
or less as of the Cutoff Date, has an outstanding principal balance of not more
than $28,884.02, is not more than 30 days past due as of the Cutoff Date and has
an annual percentage rate ('APR') of not less than 15.90%. 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 May, 2003.
As of the Cutoff Date, approximately 91.08% of the aggregate principal
balance of the Receivables Pool, constituting 92.97% 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
10.59% of the aggregate principal balance of the Receivables were originated
under the Delta Program, approximately 45.50% of the aggregate principal balance
of the Receivables were originated under the Alpha Program, approximately 8.53%
of the aggregate principal balance of the Receivables were originated under the
First Time Buyer Program, approximately 32.33% of the aggregate principal
balance of the Receivables were originated under the Standard Program,
approximately 0.71% of aggregate principal balance of the Receivables were
originated under the Super Alpha Program and approximately 2.35% of the
aggregate principal balance of the Receivables were originated under the Linc
Program. As of the Cutoff Date, approximately 5.53% of the aggregate principal
balance of the Receivables were Samco Receivables and 2.35% 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.
<TABLE>
<CAPTION>
COMPOSITION OF THE RECEIVABLES AS OF THE CUTOFF DATE
- -----------------------------------------------------------------------------------------------------------------
WEIGHTED
WEIGHTED AGGREGATE NUMBER OF AVERAGE AVERAGE WEIGHTED
AVERAGE APR OF PRINCIPAL RECEIVABLES PRINCIPAL REMAINING AVERAGE
RECEIVABLES BALANCE IN POOL BALANCE TERM ORIGINAL TERM
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
20.45% $211,042,291 16,831 $12,538.90 56.35 mos. 57.46 mos.
</TABLE>
S-24
<PAGE>
<PAGE>
GEOGRAPHIC DISTRIBUTION OF THE RECEIVABLES AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE PERCENT OF NUMBER OF NUMBER OF
STATE(1) PRINCIPAL BALANCE POOL BALANCE RECEIVABLES RECEIVABLES
- ------------------------------------------------------ ----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
California............................................ $ 38,892,156 18.43% 2,924 17.37%
Florida............................................... 14,608,663 6.92 1,195 7.10
Texas................................................. 13,765,389 6.52 1,036 6.16
North Carolina........................................ 13,462,969 6.38 1,028 6.11
Louisiana............................................. 11,846,030 5.61 925 5.50
Alabama............................................... 11,562,410 5.48 956 5.68
Michigan.............................................. 11,414,123 5.41 894 5.31
Pennsylvania.......................................... 10,723,494 5.08 866 5.15
Illinois.............................................. 9,852,782 4.67 839 4.98
Tennessee............................................. 7,423,124 3.52 619 3.68
Georgia............................................... 6,835,549 3.24 562 3.34
South Carolina........................................ 6,232,492 2.95 500 2.97
New York.............................................. 5,470,505 2.59 464 2.76
Maryland.............................................. 4,847,061 2.30 386 2.29
New Jersey............................................ 4,170,187 1.98 337 2.00
Hawaii................................................ 3,626,028 1.72 294 1.75
Mississippi........................................... 3,491,417 1.65 273 1.62
Indiana............................................... 3,358,638 1.59 283 1.68
Virginia.............................................. 3,325,633 1.58 270 1.60
Nevada................................................ 3,283,201 1.56 260 1.54
Ohio.................................................. 3,193,490 1.51 282 1.68
Washington............................................ 2,986,224 1.41 239 1.42
Minnesota............................................. 2,973,233 1.41 242 1.44
Kentucky.............................................. 2,599,996 1.23 232 1.38
All Others(2)......................................... 11,097,494 5.26 925 5.50
----------------- ------------ ----------- -----------
Total............................................ $ 211,042,291(3) 100.00%(4) 16,831 100.00%(4)
----------------- ------------ ----------- -----------
----------------- ------------ ----------- -----------
</TABLE>
- ---------------
(1) Based on billing address of Obligor.
(2) No other state represents a percentage of the Aggregate Principal Balance as
of the Cutoff Date in excess of one percent.
(3) Balances may not add up to total because of rounding.
(4) Percentages may not add up to 100% because of rounding.
S-25
<PAGE>
<PAGE>
DISTRIBUTION OF THE RECEIVABLES BY APR AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF
LESS AGGREGATE PERCENT OF NUMBER OF NUMBER OF
GREATER THAN OR EQUAL TO THAN PRINCIPAL BALANCE POOL BALANCE RECEIVABLES RECEIVABLES
- ----------------------------------------- -------- ----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
15.00%................................... 16.00% $ 30,079 0.01% 2 0.01%
16.00%................................... 17.00% 176,988 0.08 11 0.07
17.00%................................... 18.00% 7,618,134 3.61 511 3.04
18.00%................................... 19.00% 34,391,142 16.30 2,496 14.83
19.00%................................... 20.00% 36,217,745 17.16 2,666 15.84
20.00%................................... 21.00% 43,318,487 20.53 3,275 19.46
21.00%................................... 22.00% 47,645,179 22.58 3,977 23.63
22.00%................................... 23.00% 7,102,323 3.37 610 3.62
23.00%................................... 24.00% 14,399,487 6.82 1,314 7.81
24.00%................................... 25.00% 19,143,628 9.07 1,860 11.05
25.00%................................... 26.00% 706,261 0.33 72 0.43
26.00%................................... 292,838 0.14 37 0.22
----------------- ------------ ----------- -----------
Total............................... $ 211,042,291(1) 100.00%(2) 16,831 100.00%(2)
----------------- ------------ ----------- -----------
----------------- ------------ ----------- -----------
</TABLE>
- ---------------
(1) Balances may not add up to total because of rounding.
(2) Percentages may not add up to 100% because of rounding.
DISTRIBUTION OF RECEIVABLES BY REMAINING TERM TO
SCHEDULED MATURITY AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE PERCENT OF NUMBER OF NUMBER OF
REMAINING TERM TO SCHEDULED MATURITY PRINCIPAL BALANCE POOL BALANCE RECEIVABLES RECEIVABLES
- ------------------------------------------------------ ----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
15-20 months.......................................... $ 6,231 0.00% 1 0.01%
21-25 months.......................................... 410,833 0.19 77 0.46
26-30 months.......................................... 1,012,533 0.48 138 0.82
31-35 months.......................................... 3,798,515 1.80 472 2.80
36-40 months.......................................... 2,595,661 1.23 283 1.68
41-45 months.......................................... 3,477,629 1.65 362 2.15
46-50 months.......................................... 16,974,351 8.04 1,665 9.89
51-55 months.......................................... 14,256,546 6.76 1,195 7.10
56-60 months.......................................... 168,509,991 79.85 12,638 75.09
----------------- ------------ ----------- -----------
Total............................................ $ 211,042,291(1) 100.00%(2) 16,831 100.00%(2)
----------------- ------------ ----------- -----------
----------------- ------------ ----------- -----------
</TABLE>
- ---------------
(1) Balances may not add up to total because of rounding.
(2) Percentages may not add up to 100% because of rounding.
S-26
<PAGE>
<PAGE>
DISTRIBUTION OF RECEIVABLES BY ORIGINAL TERM
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE PERCENT OF NUMBER OF NUMBER OF
ORIGINAL TERM TO SCHEDULED MATURITY PRINCIPAL BALANCE POOL BALANCE RECEIVABLES RECEIVABLES
- ------------------------------------------------------ ----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
21-25 months.......................................... $ 411,124 0.19% 77 0.46%
26-30 months.......................................... 1,004,721 0.48 137 0.81
31-35 months.......................................... 6,444 0.00 1 0.01
36-40 months.......................................... 5,037,067 2.39 614 3.65
41-45 months.......................................... 4,292,581 2.03 451 2.68
46-50 months.......................................... 17,346,965 8.22 1,703 10.12
51-55 months.......................................... 14,155,656 6.71 1,189 7.06
56-60 months.......................................... 168,787,733 79.98 12,659 75.21
----------------- ------------ ----------- -----------
Total............................................ $ 211,042,291(1) 100.00%(2) 16,831 100.00%(2)
----------------- ------------ ----------- -----------
----------------- ------------ ----------- -----------
</TABLE>
- ---------------
(1) Balances may not add up to total because of rounding.
(2) Percentages may not add up to 100% because of rounding.
DISTRIBUTION OF RECEIVABLES BY DATE OF ORIGINATION
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE PERCENT OF NUMBER OF NUMBER OF
DATE OF ORIGINATION PRINCIPAL BALANCE POOL BALANCE RECEIVABLES RECEIVABLES
- ------------------------------------------------------ ----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
05/97................................................. $ 66,446 0.03% 5 0.03%
09/97................................................. 21,365 0.01 2 0.01
10/97................................................. 41,892 0.02 5 0.03
11/97................................................. 409,285 0.19 33 0.20
12/97................................................. 907,619 0.43 73 0.43
01/98................................................. 9,119,432 4.32 735 4.37
02/98................................................. 76,510,156 36.25 6,153 36.56
03/98................................................. 92,194,090 43.69 7,337 43.59
04/98 to Cutoff Date.................................. 31,772,006 15.05 2,488 14.78
----------------- ------------ ----------- -----------
Total............................................ $ 211,042,291(1) 100.00%(2) 16,831 100.00%(2)
----------------- ------------ ----------- -----------
----------------- ------------ ----------- -----------
</TABLE>
- ---------------
(1) Balances may not add up to total because of rounding.
(2) Percentages may not add up to 100% because of rounding.
S-27
<PAGE>
<PAGE>
DISTRIBUTION OF RECEIVABLES BY MODEL YEAR OF
FINANCED VEHICLE AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE PERCENT OF NUMBER OF NUMBER OF
MODEL YEAR PRINCIPAL BALANCE POOL BALANCE RECEIVABLES RECEIVABLES
- ------------------------------------------------------ ----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Prior to 1990......................................... $ 10,533 0.00% 2 0.01%
1990.................................................. 976,854 0.46 135 0.80
1991.................................................. 2,018,773 0.96 259 1.54
1992.................................................. 5,285,675 2.50 585 3.48
1993.................................................. 11,621,775 5.51 1,152 6.84
1994.................................................. 27,963,064 13.25 2,461 14.62
1995.................................................. 56,407,428 26.73 4,502 26.75
1996.................................................. 48,426,404 22.95 3,704 22.01
1997.................................................. 43,013,104 20.38 3,102 18.43
1998.................................................. 15,266,896 7.23 926 5.50
1999.................................................. 51,784 0.02 3 0.02
----------------- ------------ ----------- -----------
Total............................................ $ 211,042,291(1) 100.00%(2) 16,831 100.00%(2)
----------------- ------------ ----------- -----------
----------------- ------------ ----------- -----------
</TABLE>
- ---------------
(1) Balances may not add up to total because of rounding.
(2) Percentages may not add up to 100% because of rounding.
DISTRIBUTION OF RECEIVABLES BY ORIGINAL PRINCIPAL BALANCE
AS OF THE CUTOFF DATE
<TABLE>
<CAPTION>
RANGE OF ORIGINAL PRINCIPAL BALANCES
- ----------------------------------------------------- PERCENT OF
LESS AGGREGATE PERCENT OF NUMBER OF NUMBER OF
GREATER THAN OR EQUAL TO THAN PRINCIPAL BALANCE POOL BALANCE RECEIVABLES RECEIVABLES
- -------------------------------------------- ------ ----------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 0..................................... 5,000 $ 388,928 0.18% 93 0.55%
5,000..................................... 10,000 30,732,229 14.56 3,694 21.95
10,000..................................... 15,000 116,093,502 55.01 9,433 56.05
15,000..................................... 20,000 49,851,479 23.62 2,972 17.66
20,000..................................... 25,000 13,055,679 6.19 603 3.58
25,000..................................... 920,473 0.44 36 0.21
----------------- ------------ ----------- -----------
Total.................................. $ 211,042,291(1) 100.00%(2) 16,831 100.00%(2)
----------------- ------------ ----------- -----------
----------------- ------------ ----------- -----------
</TABLE>
- ---------------
(1) Balances may not add up to total because of rounding.
(2) Percentages may not add up to 100% because of rounding.
S-28
<PAGE>
<PAGE>
As of the Cutoff Date, approximately 20.35% 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 79.65% 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. In the event 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 Sub -- Prime
Nature of Obligors; Servicing' in this
S-29
<PAGE>
<PAGE>
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'.
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-30
<PAGE>
<PAGE>
THE SELLER
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.
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
S-31
<PAGE>
<PAGE>
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 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
S-32
<PAGE>
<PAGE>
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 Class A Certificates to the Underwriter. 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 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 Seller 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
S-33
<PAGE>
<PAGE>
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.
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-
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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 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.
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
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with such liquidation and any amounts required by law to be remitted to the
Obligor on such Liquidated Receivable ('Liquidation Proceeds') in accordance
with the Servicer's customary servicing procedures; (iii) proceeds from
Recoveries with respect to Liquidated Receivables; (iv) 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; and (v) the amount of any
Certificate Insurer Optional Deposit (as defined below) into the Collection
Account with respect to such Distribution Date.
'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:
(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);
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(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.
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.
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 becoming the 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
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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;
(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
previously paid by the predecessor Servicer pursuant to the Agreement,
reasonable transition expenses (up to a maximum of $50,000) incurred in
becoming 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
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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:
(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;
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(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.
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.
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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 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,
marshaling 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
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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.
'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.
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<PAGE>
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 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
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<PAGE>
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.
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.
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<PAGE>
<PAGE>
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 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
IBCA, Inc., Japan Rating and Investment Information, 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 March 31, 1998 (in thousands):
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<TABLE>
<CAPTION>
MARCH 31, 1998
(UNAUDITED)
--------------
<S> <C>
Deferred Premium Revenue (net of prepaid reinsurance premiums).......................... $ 428,157
--------------
Shareholder's Equity:
Common Stock....................................................................... 15,000
Additional Paid-In Capital......................................................... 618,317
Unrealized Gain on Investments (net of deferred income taxes)...................... 24,700
Accumulated Earnings............................................................... 265,030
--------------
Total Shareholder's Equity.............................................................. 923,047
--------------
Total Deferred Premium Revenue and Shareholder's Equity................................. $1,351,204
--------------
--------------
</TABLE>
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.'
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
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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 First Union Capital Markets an
administrative exemption (Prohibited Transaction Exemption 96-22 (61 Fed. Reg.
14827, April 3, 1996), 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 First
Union Capital Markets 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 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');
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(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.
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 the Underwriter and the Underwriter has agreed to purchase
the Class A Certificates.
CPS and the Seller have been advised by the Underwriter that it proposes 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 Underwriter 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,
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concessions or commissions from the Underwriter and any purchasers of Class A
Certificates for whom they may act as agents. The Underwriter and any dealers
that participate with the Underwriter 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 Underwriter has advised CPS and the Seller that it intends
to act as a market maker for the Class A Certificates. However, the Underwriter
is not obligated to do so and may discontinue any market making at any time
without notice. No assurance can be given as to the liquidity of any trading
market for the Class A Certificates.
CPS and the Seller have agreed to indemnify the Underwriter against certain
liabilities, including civil liabilities under the Securities Act, or contribute
to payments which the Underwriter may be required to make in respect thereof.
LEGAL OPINIONS
Certain legal matters relating to the Certificates will be passed upon for
the Seller, the Servicer and the Underwriter 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.
EXPERTS
The consolidated balance sheets of Financial Security Assurance Inc. and
Subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of income, changes in shareholder's equity and cash flows for each of
the three years in the period ended December 31, 1997, incorporated by reference
in this Prospectus Supplement, have been incorporated herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
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INDEX OF TERMS
Set forth below is a list of the defined terms used in this Prospectus
Supplement and the pages on which the definitions of such terms may be found
herein.
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Actuarial Receivables................................................................................ 29
Affiliate Receivables................................................................................ 11
Affiliated Originator................................................................................ 4
Agreement............................................................................................ 4
Alpha Program........................................................................................ 18
APR.................................................................................................. 6
Benefit Plans........................................................................................ 46
Cede................................................................................................. 3, 12
CEDEL................................................................................................ 12
Certificate Account.................................................................................. 33
Certificate Insurer.................................................................................. 1, 4
Certificate Insurer Default.......................................................................... 42
Certificate Owners................................................................................... 13
Certificates......................................................................................... 1, 4
Class A Certificate Balance.......................................................................... 6
Class A Certificateholders........................................................................... 6
Class A Certificates................................................................................. 1, 4
Class A Distributable Amount......................................................................... 36
Class A Guaranteed Distribution Amount............................................................... 10
Class A Interest Carryover Shortfall................................................................. 38
Class A Interest Distributable Amount................................................................ 37
Class A Pass-Through Rate............................................................................ 6
Class A Percentage................................................................................... 5
Class A Pool Factor.................................................................................. 30
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.................................................................................. 30
Class B Principal Carryover Shortfall................................................................ 39
Class B Principal Distributable Amount............................................................... 37
Collateral Agent..................................................................................... 39
Collection Account................................................................................... 33
Collection Period.................................................................................... 7
Commission........................................................................................... 2
Contracts............................................................................................ 17
CPS.................................................................................................. 4
CPS Purchase Agreement............................................................................... 5
CPS Receivables...................................................................................... 5
Cram Down Loss....................................................................................... 37
Cutoff Date.......................................................................................... 5
Dealer Agreements.................................................................................... 16
Dealers.............................................................................................. 16
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Delta Program........................................................................................ 18
Deposit Institutions................................................................................. 18
Determination Date................................................................................... 35
Distribution Date.................................................................................... 6
DTC.................................................................................................. 3
ERISA................................................................................................ 13
Euroclear............................................................................................ 12
European Depositories................................................................................ 12
Events of Default.................................................................................... 41
Exchange Act......................................................................................... 2
Exemption............................................................................................ 47
Final Scheduled Distribution Date.................................................................... 7
Financed Vehicles.................................................................................... 5
First Time Buyer Program............................................................................. 18
First Union Capital Markets.......................................................................... 1
IFCs................................................................................................. 5
Insurance Agreement.................................................................................. 14
Linc................................................................................................. 4
Linc Program......................................................................................... 18
Linc Purchase Agreement.............................................................................. 5
Linc Receivables..................................................................................... 5
Liquidated Receivable................................................................................ 36
Liquidation Proceeds................................................................................. 36
Lock-Box Account..................................................................................... 10
Lock-Box Bank........................................................................................ 10
Lock-Box Processor................................................................................... 10
Moody's.............................................................................................. 13
Norwest.............................................................................................. 4
Obligors............................................................................................. 16
Original Pool Balance................................................................................ 5
Originator........................................................................................... 4
Originators.......................................................................................... 4
Payahead Account..................................................................................... 33
Payaheads............................................................................................ 34
Policy............................................................................................... 1, 10
Pool Balance......................................................................................... 30
Post Office Box...................................................................................... 10
Principal Balance.................................................................................... 36
Principal Distributable Amount....................................................................... 7
Purchase Agreement................................................................................... 5
Purchase Agreements.................................................................................. 5
Purchase Amount...................................................................................... 33
Rating Agencies...................................................................................... 13
Receivables.......................................................................................... 5
Record Date.......................................................................................... 9
Recoveries........................................................................................... 36
Registration Statement............................................................................... 2
Requisite Amount..................................................................................... 9
Restricted Group..................................................................................... 47
Rule of 78's......................................................................................... 29
Rule of 78's Receivables............................................................................. 29
Samco................................................................................................ 4
Samco Purchase Agreement............................................................................. 5
</TABLE>
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Samco Receivables.................................................................................... 5
Scheduled Payment.................................................................................... 36
Securities Act....................................................................................... 2
Seller............................................................................................... 1, 4
Service.............................................................................................. 13
Servicer............................................................................................. 1, 4
Servicing Assumption Agreement....................................................................... 10
Servicing Fee........................................................................................ 35
Simple Interest Receivables.......................................................................... 29
Spread Account....................................................................................... 39
Standard & Poor's.................................................................................... 13
Standard Program..................................................................................... 18
Standby Fee.......................................................................................... 10
Standby Servicer..................................................................................... 1, 4, 10
Sub-Prime Borrowers.................................................................................. 17
Super Alpha Program.................................................................................. 18
Total Distribution Amount............................................................................ 35
Trust................................................................................................ 1, 4
Trust Assets......................................................................................... 5
Trustee.............................................................................................. 1, 4
Trustee Fee.......................................................................................... 38
UCC.................................................................................................. 33
Underwriter.......................................................................................... 1
Underwriting Agreement............................................................................... 48
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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 10 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 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.
2
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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.
3
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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'.
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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, 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
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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 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,
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<S> <C>
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, 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 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,
</TABLE>
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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 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
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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 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 Seller 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 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
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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'.
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
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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.
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
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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 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
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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.
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
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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.
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 Asset. 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.
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,
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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.
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.
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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 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
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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.
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 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 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
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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 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.
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.
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'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.
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.
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CPS'S AUTOMOBILE CONTRACT PORTFOLIO
GENERAL
CPS was incorporated in the State of California on March 8, 1991. CPS and
its subsidiaries engage primarily in the business of purchasing, selling and
servicing retail automobile installment sales contracts ('Contracts') originated
by Dealers located primarily in California, Florida, Pennsylvania, Texas,
Illinois and Nevada. CPS specializes in Contracts with borrowers ('Sub-Prime
Borrowers') who generally would not be expected to qualify for traditional
financing such as that provided by commercial banks or automobile manufacturers'
captive finance companies. Sub-Prime Borrowers generally have limited credit
history, lower than average income or past credit problems.
CPS 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 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
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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 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
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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 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 maybe 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
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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 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)
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.
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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:
(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
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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 '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.
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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 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 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
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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 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.
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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 CERTIFICATES
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.
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
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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.
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.
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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
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').
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
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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
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
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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 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
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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.
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
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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.
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.
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
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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 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
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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 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,
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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.
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 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
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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.
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
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the secured party the unpaid principal balance of the obligation plus reasonable
expenses for repossessing, holding and preparing the collateral for disposition
and arranging for its sale, plus, in some jurisdictions, reasonable attorneys'
fees, or, in some states, by payment of delinquent installments or the unpaid
balance.
DEFICIENCY JUDGMENTS AND EXCESS PROCEEDS
The proceeds of resale of the vehicles generally will be applied first to
the expenses of resale and repossession and then to the satisfaction of the
indebtedness. While some states impose prohibitions or limitations on deficiency
judgments if the net proceeds from resale do not cover the full amount of the
indebtedness, a deficiency judgment can be sought in those states that do not
prohibit or limit such judgments. However, the deficiency judgment would be a
personal judgment against the obligor for the shortfall, and a defaulting
obligor can be expected to have very little capital or sources of income
available following repossession. Therefore, in many cases, it may not be useful
to seek a deficiency judgment or, if one is obtained, it may be settled at a
significant discount.
Occasionally, after resale of a vehicle and payment of all expenses and all
indebtedness, there is a surplus of funds. In that case, the UCC requires the
creditor to remit the surplus to any holder of a lien with respect to the
vehicle or if no such lienholder exits or there are remaining funds, the UCC
requires the creditor to remit the surplus to the former owner of the vehicle.
CONSUMER PROTECTION LAWS
Numerous federal and state consumer protection laws and related regulations
impose substantial requirements upon lenders and servicers involved in consumer
finance, including requirements regarding the adequate disclosure of loan terms
(including finance charges and deemed finance charges), and limitations on loan
terms (including the permitted finance charge or deemed finance charge),
collection practices and creditor remedies. The application of these laws to
particular circumstances is not always certain and some courts and regulatory
authorities have shown a willingness to adopt novel interpretations of such
laws. These laws include the Truth-in-Lending Act, the Equal Credit Opportunity
Act, the Federal Trade Commission Act, the Fair Credit Billing Act, the Fair
Credit Reporting Act, the Fair Debt Collection Procedures Act, the Magnuson-Moss
Warranty Act, the Federal Reserve Board's Regulations B and Z, the Solders' and
Sailors' Civil Relief Act of 1940, state adoptions of the National Consumer Act
and the Uniform Consumer Credit Code, and state motor vehicle retail installment
sales act, retail installment sales acts and other similar laws. Also, state
laws impose finance charge ceilings and other restrictions on consumer
transactions and require contract disclosures in addition to those required
under federal law. These requirements impose specific 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
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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 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
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upon present provisions of the Code, the regulations promulgated thereunder and
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.
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
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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.
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
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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 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.
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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.
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
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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 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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DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Actuarial Receivables................................................................................ 18
Advance.............................................................................................. 7
Affiliate Receivables................................................................................ 17
Affiliated Originator................................................................................ 4
APR.................................................................................................. 18
Base Rate............................................................................................ 23
Calculation Agent.................................................................................... 23
Calculation Date..................................................................................... 24-26
cash sale differential............................................................................... 40
CD Rate Certificate.................................................................................. 23
CD Rate Determination Date........................................................................... 23
CD Rate.............................................................................................. 23
CEDEL Participants................................................................................... 28
Cede................................................................................................. 8
Certificate Balance.................................................................................. 4
Certificateholders................................................................................... 35
Certificates......................................................................................... 1
class................................................................................................ 1
Closing Date......................................................................................... 5, 30
Code................................................................................................. 41
Collection Account................................................................................... 31
Commercial Paper Rate Certificate.................................................................... 23
Commercial Paper Rate Determination Date............................................................. 24
Commercial Paper Rate................................................................................ 24
Commission........................................................................................... 2
Composite Quotations................................................................................. 23
Contracts............................................................................................ 1, 20
Cooperative.......................................................................................... 28
CPS.................................................................................................. 4
Credit Enhancement................................................................................... 4
Credit Enhancer...................................................................................... 4
Cutoff Date.......................................................................................... 5
Dealer Agreements.................................................................................... 16
Dealers.............................................................................................. 4
Definitive Certificates.............................................................................. 29
Deposit Institutions................................................................................. 4
Depositaries......................................................................................... 27
Direct Participants.................................................................................. 14
Distribution Account................................................................................. 31
Distribution Date.................................................................................... 22
DTC.................................................................................................. 8
Eligible Deposit Account............................................................................. 32
Eligible Institution................................................................................. 32
Eligible Investments................................................................................. 32
ERISA................................................................................................ 8
Euroclear Operator................................................................................... 28
Euroclear Participants............................................................................... 28
Exchange Act......................................................................................... 2
Federal Funds Rate Certificate....................................................................... 23
Federal Funds Rate................................................................................... 25
Financed Vehicles.................................................................................... 1, 5
Fixed Rate Certificates.............................................................................. 22
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Floating Rate Certificates........................................................................... 22
FTC Rule............................................................................................. 40
Funding Period....................................................................................... 6
IFCs................................................................................................. 4
Index Maturity....................................................................................... 23
Indirect Participants................................................................................ 14, 27
Initial Receivables.................................................................................. 6
Insolvency Laws...................................................................................... 12
Interest Reset Date.................................................................................. 23
Investment Company Act............................................................................... 8
Investment Earnings.................................................................................. 32
Investment Income.................................................................................... 6
LIBOR Certificate.................................................................................... 23
LIBOR................................................................................................ 25
London Banking Day................................................................................... 25
Money Market Yield................................................................................... 24
Obligors............................................................................................. 16
OID.................................................................................................. 42
Originator........................................................................................... 4
Participants......................................................................................... 27
Pass-Through Rate.................................................................................... 4
Payahead Account..................................................................................... 31
Policy............................................................................................... 1
Pool Balance......................................................................................... 20
Pool Factor.......................................................................................... 20
Pooling and Servicing Agreement...................................................................... 4
Pre-Funded Amount.................................................................................... 6
Pre-Funding Account.................................................................................. 6
Precomputed Advance.................................................................................. 7
prepayments.......................................................................................... 14
Prospectus Supplement................................................................................ 1
Purchase Agreement................................................................................... 17
Purchase Amount...................................................................................... 17
Rating Agencies...................................................................................... 9
Receivables Pool..................................................................................... 16
Receivables.......................................................................................... 1, 5
Registration Statement............................................................................... 2
Relief Act........................................................................................... 15
Reuters Screen LIBO Page............................................................................. 25
Rule of 78s Receivables.............................................................................. 18
Rule of 78s.......................................................................................... 18
Rules................................................................................................ 28
Section 1286 Regulations............................................................................. 42
Securities Act....................................................................................... 2
Seller............................................................................................... 4
Series............................................................................................... 1
Servicer............................................................................................. 1, 4
Servicing Fee........................................................................................ 34
Shortfall Amount..................................................................................... 44
Simple Interest Advance.............................................................................. 7
Simple Interest Receivables.......................................................................... 18
Sponsor.............................................................................................. 4
Spread Multiplier.................................................................................... 23
</TABLE>
48
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----------
<S> <C>
Spread............................................................................................... 23
Standby Servicer..................................................................................... 33
Strip Certificates................................................................................... 5
Sub-Prime Borrowers.................................................................................. 20
Subsequent Receivables............................................................................... 6
Subsequent Transfer Date............................................................................. 18
Subservicer.......................................................................................... 4
Terms and Conditions................................................................................. 29
Treasury bills....................................................................................... 26
Treasury Rate Certificate............................................................................ 23
Treasury Rate Determination Date..................................................................... 26
Treasury Rate........................................................................................ 26
Trust Accounts....................................................................................... 32
Trust Assets......................................................................................... 1
Trustee.............................................................................................. 4
Trust................................................................................................ 1
UCC.................................................................................................. 30
United States person................................................................................. 44
</TABLE>
49
<PAGE>
<PAGE>
_______________________________ ______________________________
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CPS, THE
SELLER OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................................................................... S-2
Incorporation of Certain Documents by Reference........................................................................... S-2
Reports to Certificateholders............................................................................................. S-3
Summary................................................................................................................... S-4
Risk Factors.............................................................................................................. S-14
Formation of the Trust.................................................................................................... S-16
The Trust Assets.......................................................................................................... S-16
CPS's Automobile Contract Portfolio....................................................................................... S-17
The Receivables Pool...................................................................................................... S-24
Yield Considerations...................................................................................................... S-29
Pool Factors and Other Information........................................................................................ S-30
Use of Proceeds........................................................................................................... S-30
The Seller................................................................................................................ S-31
The Originators........................................................................................................... S-31
The Standby Servicer...................................................................................................... S-31
Description of the Certificates........................................................................................... S-31
The Policy................................................................................................................ S-43
The Certificate Insurer................................................................................................... S-45
Certain Federal Income Tax Consequences................................................................................... S-46
ERISA Considerations...................................................................................................... S-46
Underwriting.............................................................................................................. S-48
Legal Opinions............................................................................................................ S-49
Experts................................................................................................................... S-49
Index of Terms............................................................................................................ S-50
PROSPECTUS
Prospectus Supplement..................................................................................................... 2
Available Information..................................................................................................... 2
Incorporation of Certain Documents by Reference........................................................................... 2
Reports to Certificateholders............................................................................................. 3
Summary of Terms.......................................................................................................... 4
Risk Factors.............................................................................................................. 10
Formation of the Trust.................................................................................................... 15
The Trust Assets.......................................................................................................... 16
Acquisition of Receivables by the Seller.................................................................................. 17
The Receivables........................................................................................................... 17
CPS's Automobile Contract Portfolio....................................................................................... 20
Pool Factors.............................................................................................................. 20
Use of Proceeds........................................................................................................... 20
The Seller and CPS........................................................................................................ 21
Description of the Certificates........................................................................................... 21
Certain Information Regarding the Certificates............................................................................ 22
Description of the Pooling and Servicing Agreements....................................................................... 30
Certain Legal Aspects of the Receivables.................................................................................. 38
Certain Tax Considerations................................................................................................ 41
Erisa Considerations...................................................................................................... 45
Methods of Distribution................................................................................................... 45
Legal Opinions............................................................................................................ 46
Financial Information..................................................................................................... 46
Additional Information.................................................................................................... 46
Defined Terms............................................................................................................. 47
</TABLE>
------------------------
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.
$200,490,176
[LOGO]
CPS AUTO GRANTOR
TRUST 1998-2
$200,490,176
6.09% ASSET-BACKED
CERTIFICATES, CLASS A
CPS RECEIVABLES CORP.
(SELLER)
CONSUMER PORTFOLIO
SERVICES, INC.
(SERVICER)
------------------------------
PROSPECTUS SUPPLEMENT
------------------------------
FIRST UNION CAPITAL MARKETS
MAY 13, 1998
_______________________________ ______________________________
