View:
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) July 15, 1998
CONSUMER PORTFOLIO SERVICES, INC.
(Exact Name of Registrant as Specified in its Charter)
California
(State or Other Jurisdiction of Incorporation)
333-25301 33-0459135
(Commission File Number) (I.R.S. Employer Identification No.)
2 Ada, Irvine, California 92718
(Address of Principal Executive Offices) (Zip Code)
(714) 753-6800
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
The Registrant is filing final forms of the exhibits listed in Item
7(c) below.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
Exhibit
No. Document Description
- ------- --------------------
1.1 Underwriting Agreement
4.1 Trust Agreement
4.2 Indenture
4.3 Sale and Servicing Agreement
10.1 Receivables Purchase Agreement
10.2 Receivables Purchase Agreement
10.3 Receivables Purchase Agreement
23.1 Consent of Accountants
-2-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CONSUMER PORTFOLIO SERVICES, INC.,
as Originator of the Trust (Registrant)
Dated: August 19, 1998 By: /s/ Charles E. Bradley, Jr.
Charles E. Bradley, Jr.
President
-3-
INDEX TO EXHIBITS
Sequential
Exhibit No. Document Description Page No.
- ----------- -------------------- --------
1.1 Underwriting Agreement 1
4.1 Trust Agreement 2
4.2 Indenture 3
4.3 Sale and Servicing Agreement 4
10.1 Receivables Purchase Agreement 5
10.2 Receivables Purchase Agreement 6
10.3 Receivables Purchase Agreement 7
23.1 Consent of Accountants 8
-4-
Exhibit 1.1
Underwriting Agreement
EXECUTION COPY
CPS AUTO RECEIVABLES TRUST 1998-3
$36,000,000 5.6375% Class A-1 Asset Backed Notes
$92,000,000 5.8550% Class A-2 Asset Backed Notes
$25,000,000 5.9950% Class A-3 Asset Backed Notes
$82,532,000 6.0800% Class A-4 Asset Backed Notes
UNDERWRITING AGREEMENT
July 27, 1998
Nomura Securities International, Inc.
Two World Financial Center
New York, New York 10281-1198
Ladies and Gentlemen:
CPS Receivables Corp. (the "Company"), a California corporation and
wholly-owned subsidiary of Consumer Portfolio Services, Inc., a California
corporation ("CPS"), proposes to sell to you in your capacity as the Underwriter
(the "Underwriter"), $36,000,000 aggregate principal amount of CPS Auto
Receivables Trust 1998-3 5.6375% Asset Backed Notes, Class A-1 (the "Class A-1
Notes"), $92,000,000 aggregate principal amount of 5.8550% Asset Backed Notes,
Class A-2 (the "Class A-2 Notes"), $25,000,000 aggregate principal amount of
5.9950% Asset Backed Notes, Class A-3 (the "Class A-3 Notes"), $82,532,000
aggregate principal amount of 6.0800% Asset Backed Notes, Class A-4 (the "Class
A-4 Notes" and; together with the Class A-1 Notes, the Class A-2 Notes and the
Class A-3 Notes, the "Notes"). The Notes will be issued by CPS Auto Receivables
Trust 1998-3 (the "Trust") pursuant to the Indenture (the "Indenture"), dated as
of July 15, 1998, among the Trust and Norwest Bank Minnesota, National
Association, as trustee (the "Trustee"). The assets of the Trust will include,
among other things, a pool of retail installment sale contracts and all rights
and obligations thereunder (the "Receivables"), all payments received thereon
after July 1, 1998 (the "Cutoff Date"), security interests in the new and used
automobiles, light trucks, vans and minivans securing the Receivables, certain
bank accounts and the proceeds thereof, and the right of the Company to receive
certain insurance proceeds and certain other property, all as more specifically
described in the Sale
and Servicing Agreement, dated as of July 15, 1998, among the Trust, CPS, as
servicer (in such capacity, the "Servicer"), the Company, as Seller and Norwest
Bank Minnesota, National Association, as trustee. The Company and CPS will also
undertake to cause the Note Insurer to issue the Policy for the benefit of the
Noteholders.
The Class A-1 Notes will be issued in an aggregate principal amount of
$36,000,000 and will bear interest at an annual rate equal to 5.6375% (the
"Class A-1 Interest Rate"). The Class A-2 Notes will be issued in an aggregate
principal amount of $92,000,000 and will bear interest at an annual rate equal
to 5.8550% (the "Class A-2 Interest Rate"). The Class A-3 Notes will be issued
in an aggregate principal amount of $25,000,000 and will bear interest at an
annual rate equal to 5.9950% (the "Class A-3 Interest Rate"). The Class A-4
Notes will be issued in an aggregate principal amount of $82,532,000 and will
bear interest at an annual rate equal to 6.0800% (the "Class A-4 Interest
Rate"). The aggregate principal amount of the Notes will equal 98% of the
aggregate principal balance of the Receivables as of the Cutoff Date.
Calculations of interest for each class of Notes will be in accordance with the
provisions of the Sale and Servicing Agreement.
The Certificates will be issued in an aggregate principal amount of
$4,807,160.19 which is equal to 2.00% of the aggregate principal balance of the
Receivables as of the Cutoff Date. The Certificates will not be underwritten by
the Underwriter pursuant to this Agreement.
To the extent not otherwise defined herein, capitalized terms used
herein shall have the meanings assigned to such terms in the Indenture or, if
not defined therein, in the Sale and Servicing Agreement.
As the Underwriter, you have advised the Company that (a) you are
authorized to enter into this Agreement and (b) you are willing to purchase the
aggregate principal amount of each class of Notes set forth in Schedule I
hereto.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY, CPS, SAMCO
AND LINC.
The Company (with respect to the Company), CPS (with respect to CPS,
the Company, Samco and Linc), Samco (with respect to Samco), and Linc (with
respect to Linc), and both the Company and CPS in all other instances, each
represents and warrants to, and agrees with the Underwriter, as of the date
hereof and as of the Issuance, that:
(a) CPS has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (File No. 333-25301),
including a Base Prospectus, for registration of the offering and sale of the
Notes under the Securities Act of
-2-
1933, as amended (the "1933 Act"), and the rules and regulations (the "1933 Act
Regulations") of the Commission thereunder which conforms with the requirements
of the 1933 Act and the 1933 Act Regulations and has become and remains
effective. CPS has complied, and is in compliance, with the conditions for the
use of a Registration Statement on Form S-3. The offering of the Notes is a
Delayed Offering and, although the Base Prospectus may not include all the
information with respect to the Notes and the offering thereof required by the
1933 Act and the 1933 Act Regulations to be included in the Final Prospectus,
the Base Prospectus includes all such information required by the 1933 Act and
the 1933 Act Regulations to be included therein as of the Effective Date. The
Company will hereafter file with the Commission pursuant to Rules 415 and
424(b), a final supplement to the Base Prospectus relating to the Notes and the
offering thereof. As filed, such final supplement shall include all required
information with respect to the Notes and, except to the extent the Underwriter
shall agree in writing to any modification thereof, shall be in all substantive
respects in the form furnished to the Underwriter prior to the Execution Time
or, to the extent not completed at the Execution Time, shall be in such form
with only such specific additional information and other changes (beyond that
contained in the Base Prospectus and any Preliminary Final Prospectus) as the
Company has advised the Underwriter, prior to the Execution Time, will be
included or made therein.
(b) On the Effective Date, the Registration Statement did, and when the
Final Prospectus is first filed (if required) in accordance with Rule 424(b) and
on the Closing Date (as defined below), the Final Prospectus (as supplemented
and amended as of the Closing Date) will, comply in all material respects with
the applicable requirements of the 1933 Act, the 1933 Act Regulations, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules and
regulations thereunder (the "1934 Act Regulations"); on the Effective Date, the
Registration Statement did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and, on the date thereof,
the date of any filing pursuant to Rule 424(b) and the Closing Date, the Final
Prospectus (as supplemented and amended in the case of the Closing Date) will
not, include any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading; provided,
however, that none of CPS, the Company, Samco or Linc makes any representations
or warranties as to the information contained in or omitted from the
Registration Statement or the Final Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with information specified in
Section 9(b) furnished in writing to the Company by the Underwriter specifically
for inclusion in the Registration Statement or the Final Prospectus (or any
supplement or amendment thereto) or the information regarding the Note Insurer
in or incorporated by reference in the Final Prospectus under the headings "The
Insurer" and "Incorporation of Certain Documents by Reference".
(c) The terms which follow, when used in this Agreement, shall have the
meanings indicated.
-3-
"Base Prospectus" shall mean the prospectus referred to in
Section 1(a) hereof contained in the Registration Statement at the
Effective Date.
"Delayed Offering" shall mean the offering of the Notes
pursuant to Rule 415 which does not commence promptly after the
effective date of the Registration Statement, with the result that only
information required pursuant to Rule 415 need be included in such
Registration Statement at the effective date thereof with respect to
the Notes.
"Effective Date" shall mean each date prior to the Execution
Time that the Registration Statement and any post-effective
amendment(s) thereto became effective and each date on and after the
date hereof on which a document incorporated by reference in the
Registration Statement is filed by the Company.
"Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.
"Final Prospectus" shall mean the prospectus supplement
relating to the Notes that is first filed pursuant to Rule 424(b) under
the 1933 Act after the Execution Time, together with the Base
Prospectus including all documents incorporated therein by reference,
exhibits, financial statements and notes thereto and related schedules
and other statistical and financial data and information included
therein, as amended at the Execution Time.
"Preliminary Final Prospectus" shall mean any preliminary
prospectus supplement to the Base Prospectus which describes the Notes
and the offering thereof and is used prior to filing of the Final
Prospectus.
"Prospectus" shall mean, collectively, the Base Prospectus,
any Preliminary Final Prospectus and the Final Prospectus.
"Registration Statement" shall mean (i) the Registration
Statement referred to in Section 1(a) hereof, including all documents
incorporated therein by reference, exhibits, financial statements and
notes thereto and related schedules and other statistical and financial
data and information included therein, as amended at the Execution
Time; (ii) in the event any post-effective amendment thereto becomes
effective prior to the Closing Date, such Registration Statement as so
amended; and (iii) in the event any Rule 462(b) Registration Statement
becomes effective prior to the Closing Date, such Registration
Statement as so modified by the Rule 462(b) Registration Statement,
from and after the effectiveness thereof. Such term shall include any
Rule 430A Information deemed to be included therein at the Effective
Date as provided by Rule 430A.
-4-
"Rule 415", "Rule 424", "Rule 430A" and "Regulation S-K" refer
to such rules or regulation under the 1933 Act.
"Rule 430A Information" means information with respect to the
Notes and the offering thereof permitted to be omitted from the
Registration Statement when it became effective pursuant to Rule 430A.
"Rule 462(b) Registration Statement" means the Registration
Statement filed pursuant to Rule 462(b) under the 1933 Act relating to
the offering covered by the Registration Statement (File No.
333-25301).
Any reference herein to the Registration Statement, the Base
Prospectus, any Preliminary Final Prospectus or the Final Prospectus shall be
deemed to refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the 1934 Act on or before
the Effective Date of the Registration Statement or the issue date of the Base
Prospectus, any Preliminary Final Prospectus or the Final Prospectus, as the
case may be; and any reference herein to the terms "amend", "amendment" or
"supplement" with respect to the Registration Statement, the Base Prospectus,
any Preliminary Final Prospectus or the Final Prospectus shall be deemed to
refer to and include the filing of any document under the 1934 Act after the
Effective Date of the Registration Statement or the issue date of the Base
Prospectus, any Preliminary Final Prospectus or the Final Prospectus, as the
case may be, deemed to be incorporated therein by reference.
(d) Each of the Company and CPS is a corporation duly organized,
validly existing and in good standing under the laws of the State of California
and is duly qualified to transact business as a foreign corporation in each
jurisdiction in which it is required to be so qualified and in which the failure
to so qualify, taken in the aggregate, would have a material adverse effect on
it.
(e) Samco Acceptance Corp. ("Samco") is a corporation duly organized,
validly existing and in good standing under the laws of Delaware and is duly
qualified to transact business as a foreign corporation in each jurisdiction in
which it is required to be so qualified and in which failure to so qualify,
taken in the aggregate, would have a material adverse effect on it.
(f) Linc Acceptance Company LLC ("Linc") is a limited liability company
duly formed, validly existing and in good standing under the laws of Delaware
and is duly qualified to transact business as a foreign entity in each
jurisdiction in which it is required to be so qualified and in which failure to
so qualify, taken in the aggregate, would have a material adverse effect on it.
(g) Since the respective dates as of which information is given in the
Registration Statement and the Final Prospectus, there has not been any material
adverse change, or any development which could reasonably be expected to result
in a material adverse change, in or
-5-
affecting the financial position, shareholders' equity, business or properties,
or results of operations of the Company, CPS, Samco or Linc or the Company's or
CPS's Samco's or Linc's ability to perform its obligations under this Agreement,
the Indenture, the Trust Agreement or the Sale and Servicing Agreement or any of
the other Basic Documents (as defined below), other than as set forth or
incorporated by reference in the Registration Statement or as set forth in the
Final Prospectus.
(h) Except for the registration of the Notes under the 1933 Act and
such consents, approvals, authorizations, registrations or qualifications as may
be required under the 1934 Act and applicable State securities or Blue Sky laws
in connection with the purchase and distribution of the Notes by the Underwriter
or the filing requirements of Rule 430A or Rule 424(b) under the 1933 Act, no
consent, approval, authorization or order of or declaration or filing with any
governmental authority is required for the issuance or sale of the Notes or the
consummation of the other transactions contemplated by this Agreement or the
Sale and Servicing Agreement or any of the other Basic Documents, except such as
have been duly made or obtained or as will be duly made or obtained on or before
the Closing Date.
(i) The Commission has not issued an order preventing or suspending the
use of any Prospectus relating to the proposed offering of the Notes, nor
instituted proceedings for that purpose (and no proceedings for such purpose
are, to the knowledge of the Company or CPS, contemplated). No injunction,
restraining order or order of any nature by a federal or state court of
competent jurisdiction has, to the knowledge of the Company or CPS, been issued
which would prevent the issuance of the Notes. The Registration Statement
contains, and the Final Prospectus together with any amendments or supplements
thereto will contain, all statements which are required to be stated therein by,
and conform to, the requirements of the 1933 Act and the 1933 Act Regulations.
(j) The documents (other than the financial statements of the Insurer,
as to which no representation is made by CPS or the Company) which are
incorporated by reference in the Registration Statement and the Final Prospectus
or from which information is so incorporated by reference, as of the dates
thereof and the dates they were filed with the Commission, complied in all
material respects with the requirements of the 1933 Act, the 1933 Act
Regulations, the 1934 Act and the 1934 Act Regulations, as applicable, and any
documents so filed and incorporated by reference subsequent to the Effective
Date shall, when they are filed with the Commission, conform in all material
respects with the requirements of the 1934 Act and the 1934 Act Regulations.
(k) Each of the Company, CPS, Linc and Samco confirms as of the date
hereof that it is in compliance with all provisions of Section 1 of Laws of
Florida, Chapter 92-198, An Act Relating to Disclosure of doing Business with
Cuba, and each of the Company, CPS, Linc and Samco further agrees that if it
commences engaging in business with the government of Cuba or with any person or
affiliate located in Cuba after the date the Registration Statement became
effective with the Commission or with the Florida Department of Banking and
Finance (the "Department"), whichever date is later, or if the information
-6-
included in the Final Prospectus, if any, concerning either the Company's,
CPS's, Linc's or Samco's business with Cuba or with any person or affiliate
located in Cuba changes in any material way, each of the Company, CPS, Linc and
Samco, as the case may be, will provide the Department notice of such business
or change, as appropriate, in a form acceptable to the Department.
(l) All representations and warranties of the Company, CPS, Linc and
Samco contained in each of the Basic Documents, including this Agreement, will
be true and correct in all material respects when delivered and as of the
Closing Date and are hereby incorporated by reference as if each such
representation and warranty were specifically made herein.
(m) Each of the Company, CPS, Linc and Samco has full power and
authority (corporate and other) to enter into and perform its obligations under
this Agreement, the Indenture, the Trust Agreement, the Sale and Servicing
Agreement, the CPS Purchase Agreement, the Samco Purchase Agreement, the Linc
Purchase Agreement, the Insurance Agreement, the Indemnification Agreement, the
Spread Account Agreement, the Lock-Box Agreement and the Servicing and Lockbox
Processing Assumption Agreement (collectively, the "Basic Documents"), and to
consummate the transactions contemplated hereby and thereby.
(n) On or before the Closing Date, the direction by the Company to the
Trustee to authenticate the Notes will have been duly authorized by the Company,
the Notes will have been duly executed and delivered by the Company and, when
authenticated by the Trustee in accordance with the Indenture and delivered and
paid for pursuant to this Agreement, will be duly issued and will entitle the
holder thereof to the benefits and security afforded by the Indenture.
(o) This Agreement and each Basic Document to which the Company, CPS,
Samco or Linc is a party has been duly authorized, executed and delivered by
each of the Company, CPS, Linc and Samco, as applicable, and constitutes a valid
and binding agreement of each of the Company, CPS, Linc and Samco, as
applicable, enforceable against the Company, CPS, Linc and Samco in accordance
with its terms, subject as to the enforcement of remedies (x) to applicable
bankruptcy, insolvency, reorganization, moratorium, and other similar laws
affecting creditors' rights generally, (y) to general principles of equity
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law) and (z) with respect to rights of indemnity
under this Agreement, to limitations of public policy under applicable
securities laws.
(p) None of the Company, CPS, Samco or Linc is in breach or violation
of its Articles of Incorporation, Charter or Certificate of Formation, as
applicable, or By-Laws or Limited Liability Company Agreement, as applicable, or
in default in the performance or observance of any credit or security agreement
or other agreement or instrument to which it is a party or by which it or its
properties may be bound, or in violation of any applicable
-7-
law, statute, regulation, order or ordinance of any governmental body having
jurisdiction over it, which breach or violation would have a material adverse
effect on the ability of the Company or CPS or Samco or Linc to perform its
obligations under any of the Basic Documents or the Notes.
(q) The issuance and delivery of the Notes, the consummation of any
other of the transactions contemplated herein or in the Indenture, the Trust
Agreement, the Sale and Servicing Agreement or in any of the other Basic
Documents or the fulfillment of the terms of this Agreement, the Indenture, the
Trust Agreement, or the Sale and Servicing Agreement or any of the other Basic
Documents, subject to the registration of the Notes under the 1933 Act and such
consents, approvals, authorizations, registrations or qualifications as may be
required under the 1934 Act and applicable State securities or Blue Sky laws in
connection with the purchase and distribution of the Notes by the Underwriter or
the filing requirements of Rule 430A or Rule 424(b) under the 1933 Act, do not
and will not conflict with or violate any term or provision of the Articles of
Incorporation, Charter or Certificate of Formation, as applicable, or By-Laws or
Limited Liability Company Agreement of the Company, CPS, Samco or Linc, any
statute, order or regulation applicable to the Company, CPS, Samco or Linc of
any court, regulatory body, administrative agency or governmental body having
jurisdiction over the Company, CPS, Samco or Linc and do not and will not
conflict with, result in a breach or violation or the acceleration of or
constitute a default under or result in the creation or imposition of any lien,
charge or encumbrance upon any of the property or assets of the Company, CPS,
Samco or Linc (other than in favor of the Trustee, the Owner Trustee or as
otherwise permitted under the Indenture or the Sale and Servicing Agreement)
pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company, CPS, Samco or Linc is a
party or by which the Company, CPS, Samco or Linc may be bound or to which any
of the property or assets of the Company, CPS, Samco or Linc may be subject
except for conflicts, violations, breaches, accelerations and defaults which
would not, individually or in the aggregate, be materially adverse to the
Company, CPS, Samco or Linc or materially adverse to the transactions
contemplated by this Agreement or the Basic Documents.
(r) Any taxes, fees and other governmental charges due on or prior to
the Closing Date (including, without limitation, sales taxes) in connection with
the execution, delivery and issuance of this Agreement, the Indenture, the Trust
Agreement, the Sale and Servicing Agreement, the other Basic Documents and the
Notes have been or will have been paid at or prior to the Closing Date.
(s) The CPS Receivables are chattel paper as defined in the Uniform
Commercial Code as in effect in the State of California, which is the State in
which the chief executive office of CPS is located. The Samco Receivables are
chattel paper as defined in the Uniform Commercial Code as in effect in the
State of Texas, which is the State in which the chief executive office of Samco
is located. The Linc Receivables are chattel paper as defined in the Uniform
Commercial Code as in effect in the State of Connecticut, which is the State in
which the chief executive office of Linc is located.
-8-
(t) Under generally accepted accounting principles, CPS will report its
transfer of the CPS Receivables to the Company pursuant to the CPS Purchase
Agreement as a sale of the CPS Receivables, Samco will report its transfer of
the Samco Receivables to the Company pursuant to the Samco Purchase Agreement as
a sale of the Samco Receivables Linc will report its transfer of the Linc
Receivables to the Company pursuant to the Linc Purchase Agreement as a sale of
the Linc Receivables and the Company will report its transfer of the Receivables
to the Trust pursuant to the Sale and Servicing Agreement as a sale of the
Receivables. Each of CPS and the Company has been advised by KPMG Peat Marwick,
Certified Public Accountants, that the transfers pursuant to the CPS Purchase
Agreement, the Samco Purchase Agreement, the Linc Purchase Agreement and the
Sale and Servicing Agreement will be so classified under generally accepted
accounting principles in accordance with Statement No. 77 of the Financial
Accounting Standards Board (December 1983) and with Statement No. 125 of the
Financial Accounting Standards Board (June 1996).
(u) Pursuant to the CPS Purchase Agreement, the Samco Purchase
Agreement and the Linc Purchase Agreement, CPS, Samco and Linc are transferring
to the Company ownership of the Receivables, the security interests in the
Financed Vehicles securing the Receivables, certain other property related to
the Receivables and the proceeds of each of the foregoing (collectively, the
"Trust Property"). Immediately prior to the transfer of any CPS Receivables to
the Company, CPS will be the sole owner of all right, title and interest in, and
will have good and marketable title to, the CPS Receivables. Immediately prior
to the transfer of any Samco Receivables to the Company, Samco will be the sole
owner of all right, title and interest in, and will have good and marketable
title to, the Samco Receivables. Immediately prior to the transfer of any Linc
Receivables to the Company, Linc will be the sole owner of all right, title and
interest in, and has good and marketable title to, the Linc Receivables. The
assignment of the Receivables, including all the other Conveyed Property
including the proceeds thereof, to the Company pursuant to the Purchase
Agreements, vests in the Company all interests which are purported to be
conveyed thereby, free and clear of any liens, security interests or
encumbrances.
(v) Immediately prior to the transfer of any Receivables to the Trust,
the Company will be the sole owner of all right, title and interest in, and has
good and marketable title to, the Receivables and the other Trust Property. The
assignment of the Receivables and the other Trust Property, including all the
proceeds thereof, to the Trust pursuant to the Sale and Servicing Agreement,
vests in the Trust all interests which are purported to be conveyed thereby,
free and clear of any liens, security interests or encumbrances.
(w) Immediately prior to the transfer of any Receivables to the Trust,
the Company's interest in such Receivables and the proceeds thereof shall have
been perfected, UCC-1 financing statements (the "Financing Statements") (i)
evidencing the transfer of the CPS Receivables to the Company shall have been
filed in the Office of the Secretary of State of the State of California (the
"CPS Financing Statement"), (ii) evidencing the transfer of the Samco
Receivables to the Company shall have been filed in the Office of the Secretary
of
-9-
State of the State of Texas (the "Samco Financing Statement"), (iii) evidencing
the transfer of the Linc Receivables to the Company shall have been filed in the
Office of the Secretary of State of the State of Connecticut (the "Linc
Financing Statement"), (iv) evidencing the transfer of the Receivables by the
Company to the Trust shall have been filed in the Office of the Secretary of
State of the State of California (the "Company Financing Statement"), and (v)
evidencing the pledge of the Receivables by the Trust to the Trustee shall have
been filed in the Office of the Secretary of State of the State of Delaware (the
"Trust Financing Statement") and there shall be no unreleased statements
affecting the Receivables filed in any such office other than the Financing
Statements.
(x) If a court concludes that (i) the transfer of the CPS Receivables
from CPS to the Company is a sale, then the interest of the Company in the CPS
Receivables and the proceeds thereof, will be perfected by virtue of the CPS
Financing Statement having been filed in the office of the Secretary of State of
the State of California, (ii) the transfer of the Samco Receivables from Samco
to the Company is a sale, then the interest of the Company in the Samco
Receivables and the proceeds thereof, will be perfected by virtue of the Samco
Financing Statement having been filed in the office of the Secretary of State of
the State of Texas or (iii) the transfer of the Linc Receivables from Linc to
the Company is a sale, then the interest of the Company in the Linc Receivables
and the proceeds thereof, will be perfected by virtue of the Linc Financing
Statement having been filed in the office of the Secretary of State of the State
of Connecticut.
(y) If a court concludes that (i) the transfer of the CPS Receivables
from CPS to the Company is not a sale, the CPS Purchase Agreement and the
transactions contemplated thereby constitute a grant by CPS to the Company of a
valid security interest in the CPS Receivables and the proceeds thereof, which
security interest will be a first priority perfected security interest by virtue
of the CPS Financing Statement having been filed in the office of the Secretary
of State of the State of California, (ii) the transfer of the Samco Receivables
from Samco to the Company is not a sale, the Samco Purchase Agreement and the
transactions contemplated thereby constitute a grant by Samco to the Company of
a valid security interest in the Samco Receivables and the proceeds thereof,
which security interest will be a first priority perfected security interest by
virtue of the Samco Financing Statement having been filed in the office of the
Secretary of State of the State of Texas and (iii) the transfer of the Linc
Receivables from Linc to the Company is not a sale, the Linc Purchase Agreement
and the transactions contemplated thereby constitute a grant by Linc to the
Company of a valid security interest in the Linc Receivables and the proceeds
thereof, which security interest will be a first priority perfected security
interest by virtue of the Linc Financing Statement having been filed in the
office of the Secretary of State of the State of Connecticut. No filing or other
action, other than the filing of the Financing Statements in the offices of the
Secretaries of State of the States of California, Texas and Connecticut referred
to above and the execution and delivery of the Purchase Agreements, is necessary
to perfect the interest or the security interest of the Company in the
Receivables and the proceeds thereof against third parties.
-10-
(z) If a court concludes that the transfer of the Receivables from the
Company to the Trust is a sale, then the interest of the Trust in the
Receivables, the other Trust Property and the proceeds thereof, will be a first
priority perfected security interest by virtue of the Company Financing
Statement having been filed in the office of the Secretary of State of the State
of California. If a court concludes that such transfer is not a sale, the Sale
and Servicing Agreement and the transactions contemplated thereby constitute a
grant by the Company to the Trust of a valid security interest in the
Receivables, the other Trust Property and the proceeds thereof, which security
interest will be a first priority perfected security interest by virtue of the
Company Financing Statement having been filed in the office of the Secretary of
State of the State of California. No filing or other action, other than the
filing of the Company Financing Statement in the office of the Secretary of
State of the State of California referred to above and the execution and
delivery of the Sale and Servicing Agreement, is necessary to perfect the
interest or the security interest of the Trust in the Receivables and the
proceeds thereof against third parties.
(aa) The security interest of the Trustee in the Receivables, the other
Trust Property and the proceeds thereof, will be a first priority perfected
security interest by virtue of the Trust Financing Statement having been filed
in the office of the Secretary of State of the State of Delaware. The Indenture
and the transactions contemplated thereby constitute a grant by the Trust to the
Trustee of a valid security interest in the Receivables, the other Trust
Property and the proceeds thereof, which security interest will be a first
priority perfected security interest by virtue of the Trust Financing Statement
having been filed in the office of the Secretary of State of the State of
Delaware. No filing or other action, other than the filing of the Trust
Financing Statement in the office of the Secretary of State of the State of
Delaware referred to above and the execution and delivery of the Indenture, is
necessary to perfect the security interest of the Trustee in the Receivables and
the proceeds thereof against third parties.
(bb) None of the Company, CPS, Samco, Linc, the Trustee or the Trust is
required to be registered as an "investment company" under the Investment
Company Act.
(cc) The Indenture has been duly qualified under the Trust Indenture
Act of 1939, as amended.
(dd) Except as disclosed in the Final Prospectus, there are no actions,
suits, proceedings or investigations pending or threatened against the Company,
CPS, Samco or Linc before any court, administrative agency or other tribunal
which would have a material adverse effect upon any of the Company, CPS, Samco
or Linc.
(ee) Each of the Company, CPS, Samco and Linc has all licenses, permits
and consents necessary to conduct its business as presently conducted and to
perform its obligations under this Agreement and the Basic Documents and none of
CPS, Samco, Linc or the Company has received notice of any pending or threatened
revocation thereof (except, in any case, to the extent that the failure to have
same is not reasonably likely to have a material adverse effect on
-11-
the ability of such party to so conduct its business or to perform its
obligations under this Agreement and the Basic Documents).
2. PURCHASE, SALE AND DELIVERY OF THE NOTES.
Subject to the terms and conditions and in reliance upon the
representations, warranties and covenants herein set forth, the Company agrees
to sell to the Underwriter, and the Underwriter agrees to purchase from the
Company, the initial principal amount of each class of the Notes as set forth in
Schedule I hereto, at the purchase price specified in Schedule I with respect to
each Class of Notes. Notwithstanding the foregoing, the Underwriter will retain
from the aggregate purchase price for the Notes the sum of $2,355,320 (the
"Holdback Amount"). The Underwriter shall be entitled to retain the Holdback
Amount until such time as the Underwriter sells all the Notes. To the extent
that, in order to sell all the Notes, the Underwriter is required to reduce the
aggregate sale price of the Notes below the aggregate sale price used by the
Underwriter to determine the purchase price set forth in Schedule I, the
Underwriter shall be entitled to retain the amount of such reduction from the
Holdback Amount. Any unapplied portion of the Holdback Amount remaining after
all the Notes have been sold by the Underwriter shall be promptly paid to the
Company. The Underwriter shall use commercially reasonable efforts to sell all
the Notes on or before July 31, 1998.
The Company will deliver against payment of the purchase price the
Notes in the form of one or more permanent global Notes in definitive form (the
"Global Notes") deposited with the Trustee as custodian for The Depository Trust
Company ("DTC") and registered in the name of Cede & Co., as nominee for DTC.
Interests in any Global Notes will be held only in book-entry form through DTC
except in the limited circumstances described in the Final Prospectus. Payment
for the Notes will be made by the Underwriter by wire transfer of same day funds
to an account previously designated to the Underwriter by the Company at the
offices of Mayer, Brown & Platt, 1675 Broadway, New York, New York 10019, at
9:30 a.m. (New York time) on July 28, 1998, or at such other time as is mutually
agreed (such time being herein referred to as the "Closing Date") against
delivery of the Global Notes representing all of the Notes. The Notes will be
made available for inspection at the above office of Mayer, Brown & Platt at
least 24 hours prior to the Closing Date.
As used herein, "business day" means a day on which the New York Stock
Exchange is open for trading and on which banks in New York, California and
Minnesota are open for business and are not permitted by law or executive order
to be closed.
3. OFFERING BY THE UNDERWRITER.
(a) The Company and CPS are advised by the Underwriter that it proposes
to make a public offering of the Notes, as set forth in the Final Prospectus,
from time to time as and when the Underwriter deems advisable after the
Execution Time. The Company
-12-
agrees that the Underwriter may, but is not obligated to, make a market in the
Notes and that any such market making by the Underwriter may be discontinued at
any time in the sole discretion of the Underwriter.
(b) The Underwriter may prepare and provide to prospective investors
certain Computational Materials, ABS Term Sheets or Collateral Term Sheets in
connection with its offering of the Notes, subject to the following conditions:
(i) The Underwriter shall comply with the requirements of the
No-Action Letter of May 20, 1994 issued by the Commission to Kidder,
Peabody Acceptance Corporation I and certain affiliates, as made
applicable to other issuers and underwriters by the Commission in
response to the request of the Public Securities Association dated May
24, 1994 (collectively, the "Kidder/PSA Letter"), and the requirements
of the No-Action Letter of February 17, 1995 issued by the Commission
to the Public Securities Association (the "PSA Letter" and, together
with the Kidder/PSA Letter, the "No-Action Letters").
(ii) For purposes hereof, "Computational Materials" shall have
the meaning given such term in the No-Action Letters, but shall include
only those Computational Materials that have been prepared or delivered
to prospective investors by the Underwriter. For purposes hereof, "ABS
Term Sheets" and "Collateral Term Sheets" shall have the meanings given
such terms in the PSA Letter but shall include only those ABS Term
Sheets or Collateral Term Sheets that have been prepared or delivered
to prospective investors by the Underwriter.
(iii) The Underwriter shall provide to CPS any Computational
Materials, ABS Term Sheets or Collateral Term Sheets which are provided
to investors no later than the second Business Day preceding the date
such Computational Materials, ABS Term Sheets or Collateral Term Sheets
are required to be filed pursuant to the applicable No-Action Letters.
The Underwriter may provide copies of the foregoing in a consolidated
or aggregated form including all information required to be filed.
(iv) In the event that CPS, the Company or the Underwriter
discovers an error in the Computational Materials, ABS Term Sheets or
Collateral Term Sheets, the Underwriter shall prepare corrected
Computational Materials, ABS Term Sheets or Collateral Term Sheets and
deliver it to CPS for filing pursuant to Section 4(n).
4. COVENANTS OF THE COMPANY AND CPS.
The Company, and CPS (if so stated), covenants and agrees with the
Underwriter that:
(a) CPS has caused the Registration Statement to become effective and,
as soon as reasonably practicable, shall prepare and timely file with the
Commission under Rule 424(b)
-13-
a Final Prospectus. Prior to the termination of the offering of the Notes
neither CPS nor the Company will file any amendment of the Registration
Statement or amendment or supplement (including the Final Prospectus or any
Preliminary Final Prospectus) to the Base Prospectus or any Rule 462(b)
Registration Statement unless CPS or the Company has furnished to the
Underwriter a copy for its review prior to filing and will not file any such
proposed amendment or supplement to which the Underwriter reasonably objects or
which is not in compliance with the 1933 Act Regulations. CPS or the Company
will promptly advise the Underwriter (i) when the Final Prospectus, and any
supplement thereto, shall have been filed with the Commission pursuant to Rule
424(b); (ii) when, prior to termination of the offering of the Notes, any
amendment to the Registration Statement shall have been filed or become
effective; (iii) of any request by the Commission for any amendment of the
Registration Statement or supplement to the Final Prospectus or for any other
additional information; (iv) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the institution of
any proceeding for that purpose; and (v) of the receipt by CPS or the Company of
any notification with respect to the suspension of the qualification of the
Notes for sale in any jurisdiction or the initiation of any proceeding for such
purpose. The Company will use its best efforts to prevent the issuance of any
such stop order or the suspension of any such qualification and, if issued or
suspended, to obtain as soon as possible the withdrawal thereof.
(b) Prior to the filing thereof with the Commission, the Company will
submit to the Underwriter, for its approval after reasonable notice thereof,
such approval not to be unreasonably withheld or delayed, a copy of any
post-effective amendment to the Registration Statement, any Rule 462(b)
Registration Statement proposed to be filed or a copy of any document proposed
to be filed under the 1934 Act before the termination of the offering of the
Notes by the Underwriter if such document would be deemed to be incorporated by
reference into the Registration Statement or Final Prospectus.
(c) The Company will deliver to, or upon the order of, the Underwriter
during the period when delivery of a Final Prospectus is required under the 1933
Act, as many copies of the Final Prospectus, or as thereafter amended or
supplemented, as the Underwriter may reasonably request. The Company will
deliver to the Underwriter at or before the Closing Date such number of copies
of the Registration Statement (including such number of copies of the exhibits
filed therewith that may reasonably be requested), including documents filed
under the 1934 Act and deemed to be incorporated by reference therein, and of
all amendments thereto, as the Underwriter may from time to time reasonably
request.
(d) The Company will, and will cause the Trust to, comply with the 1933
Act, the 1933 Act Regulations, the 1934 Act and the 1934 Act Regulations, so as
to permit the completion of the distribution of the Notes as contemplated in
this Agreement and the Final Prospectus. If during the period in which a
prospectus is required by law to be delivered by the Underwriter or dealer in
connection with the sale of any Notes, any event shall occur as a result of
which, in the judgment of the Company or in the reasonable opinion of the
Underwriter, it becomes necessary to amend or supplement the Final Prospectus in
order to
-14-
make the statements therein, in the light of the circumstances existing at the
time the Final Prospectus is delivered to a purchaser, not misleading, or, if it
is necessary at any time to amend or supplement the Final Prospectus to comply
with any law or to file under the 1934 Act any document which would be deemed to
be incorporated by reference in the Registration Statement to comply with the
1933 Act or the 1934 Act, the Company will promptly notify the Underwriter and
will promptly either (i) prepare and file, or cause to be prepared and filed,
with the Commission (at the expense of the Company) an appropriate amendment to
the Registration Statement or supplement to the Final Prospectus or (ii) prepare
and file, or cause to be prepared and filed, with the Commission (at the expense
of the Company) an appropriate filing under the 1934 Act which shall be
incorporated by reference in the Final Prospectus so that the Final Prospectus
as so amended or supplemented will not, in the light of the circumstances when
it is so delivered, be misleading, or so that the Final Prospectus will comply
with applicable law.
(e) The Company will cooperate with the Underwriter in endeavoring to
qualify the Notes for sale under the laws of such jurisdictions as the
Underwriter may designate and will maintain such qualifications in effect so
long as required for the distribution of the Notes, except that the Company will
not be obligated to qualify the Notes in any jurisdiction in which such
qualification would require the Company to qualify to do business as a foreign
corporation, file a general or unlimited consent to service of process or
subject itself to taxation in any such jurisdiction to which it is not subject.
The Company will, from time to time, prepare and file such statements, reports,
and other documents as are or may be required to continue such qualifications in
effect for so long a period as the Underwriter may reasonably request for
distribution of the Notes.
(f) The Company shall not invest, or otherwise use the proceeds
received by the Company from its sale of the Notes in such a manner as would
require the Company, CPS, the Trust or the Trustee to register as an investment
company under the 1940 Act.
(g) Until the retirement of the Notes, or until such time as the
Underwriter shall cease to maintain a secondary market in the Notes, whichever
occurs first, the Company will deliver to the Underwriter the annual statements
of compliance and the annual independent certified public accountant's reports
furnished to the Trustee pursuant to the Sale and Servicing Agreement, as soon
as such statements and reports are furnished to the Trustee.
(h) The Company, CPS, Linc and Samco shall, from the date hereof
through and including the Closing Date, furnish, or cause to be furnished, or
make available, or cause to be made available, to the Underwriter or its counsel
such additional documents and information regarding each of them and their
respective affairs as the Underwriter may from time to time reasonably request
and which the Company, CPS, Linc or Samco possesses or can acquire without
unreasonable effort or expense, including any and all documentation requested in
connection with the Underwriter's due diligence efforts regarding information in
the Registration Statement and the Final Prospectus and in order to evidence the
accuracy or completeness of any of the conditions contained in this Agreement;
and all actions taken by
-15-
the Company or CPS to authorize the sale of the Notes shall be reasonably
satisfactory in form and substance to the Underwriter.
(i) The Company will cause the Trust to make generally available to
Noteholders as soon as practicable, but no later than sixteen months after the
Effective Date, an earnings statement of the Trust covering a period of at least
twelve consecutive months beginning after such Effective Date and satisfying the
provisions of Section 11(a) of the Act (including Rule 158 promulgated
thereunder).
(j) So long as any of the Notes are outstanding, the Company will
furnish to the Underwriter copies of all reports or other communications
(financial or otherwise) furnished or made available to Noteholders, and deliver
to the Underwriter during such period, (i) as soon as they are available, copies
of any reports and financial statements filed by or on behalf of the Trust or
the Company with the Commission pursuant to the 1934 Act and (ii) such
additional information concerning the business and financial condition of the
Company, CPS, Samco and Linc as the Underwriter may from time to time reasonably
request.
(k) On or before the Closing Date, the Company, CPS, Linc and Samco
shall cause their respective computer records relating to the Receivables to be
marked to show the Trust's ownership of, and the Trustee's security interest in,
the Receivables, and from and after the Closing Date none of the Company, CPS,
Linc or Samco shall take any action inconsistent with the Trust's ownership of,
or the Trustee's security interest in, such Receivables, other than as expressly
permitted by the Sale and Servicing Agreement or any other Basic Document.
(l) To the extent, if any, that the ratings provided with respect to
the Notes by either of the Rating Agencies is conditional upon the furnishing of
documents or the taking of any other actions by the Company, CPS, Linc or Samco,
CPS shall, or shall cause the Company, Samco or Linc to, furnish such documents
and take any such other actions.
(m) On the Closing Date, the Company and CPS shall cause the Note
Insurer to issue the Policy to the Trustee for the benefit of the holders of the
Notes in form and substance satisfactory to the Underwriter.
(n) CPS shall file or cause to be filed with the Commission, in
accordance with the No-Action Letters, any Computational Materials, ABS Term
Sheets and Collateral Term Sheets provided that CPS has received such
Computational Materials, ABS Term Sheets and Collateral Term Sheets at least 2
Business Days prior to the time for filing same.
-16-
5. [RESERVED]
6. COSTS AND EXPENSES.
The Company and CPS will pay upon receipt of a written request therefor
all costs, expenses and fees incident to the performance of the obligations of
the Company and CPS under this Agreement and will, jointly and severally,
reimburse the Underwriter for all reasonable out-of-pocket expenses, including
reasonable fees and disbursements of counsel, reasonably incurred in connection
with investigating, marketing and proposing to market the Notes or in
contemplation of performing the Underwriter's obligations hereunder and
including, without limiting the generality of the foregoing, the following: (i)
accounting fees of the Company; (ii) the fees and disbursements of Mayer, Brown
& Platt; (iii) the cost of printing and delivering to, or as requested by, the
Underwriter copies of the Registration Statement, the Final Prospectus, this
Agreement, the Basic Documents, the Computational Materials and the listing
application in respect of the Notes; (iv) the filing fees of the Commission; (v)
any fees charged by the Rating Agencies for rating the Notes; (vi) the fees and
expenses of the Trustee, the Owner Trustee, the Collateral Agent and the Lockbox
Processor, including the fees and disbursements of counsel for the Trustee, the
Owner Trustee, the Collateral Agent and the Lockbox Processor, in connection
with the Notes, the Sale and Servicing Agreement and the other Basic Documents
to which any of the foregoing, as applicable, is a party and the expenses,
including the fees and disbursements of counsel for the Underwriter incurred in
qualifying the Notes under State securities or Blue Sky laws; and (vii) the
initial payment of Premium under the Policy. If this Agreement shall not be
consummated because the conditions in Section 7 hereof are not satisfied, or
because this Agreement is terminated by the Underwriter pursuant to Section 12
hereof, or by reason of any failure, refusal or inability on the part of the
Company, CPS, Samco or Linc to perform any undertaking or satisfy any condition
of this Agreement or to comply with any of the terms hereof on its part to be
performed, unless such failure to satisfy said condition or to comply with said
terms shall be due to the default of the Underwriter, then the Company and CPS,
jointly and severally, shall reimburse the Underwriter for reasonable
out-of-pocket expenses, including reasonable fees and disbursements of counsel,
reasonably incurred in connection with investigating, marketing and proposing to
market the Notes or in contemplation of performing their obligations hereunder
upon receipt of a written request therefor; but the Company shall not in any
event be liable to the Underwriter for damages on account of loss of anticipated
profits from the sale of the Notes. Except to the extent expressly set forth in
this Section 6, the Underwriter shall be responsible for its own costs and
expenses, including the fees and expenses of its counsel.
7. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITER.
The obligations of the Underwriter to purchase and pay for the Notes on
the Closing Date are subject to the accuracy in all material respects as of the
Closing Date of the representations and warranties of the Company, CPS, Linc and
Samco contained herein, to
-17-
the performance by the Company, CPS, Linc and Samco of their respective
covenants and obligations hereunder and to the following additional conditions
precedent:
(a) The Registration Statement shall be effective. The Final
Prospectus, and any such supplement, shall be filed within the applicable time
period prescribed for such filing by Rule 424(b), and any request of the
Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Underwriter and
complied with to its reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company, shall be contemplated by the Commission and no
injunction, restraining order, or order of any nature by a Federal or state
court of competent jurisdiction shall have been issued as of the Closing Date
which would prevent the issuance of the Notes.
(b) The Underwriter shall have received a letter or letters, dated as
of the date of the Computational Materials, as of July 27, 1998, and as of the
Closing Date, respectively, of KPMG Peat Marwick LLP, Certified Public
Accountants, substantially in the form of the drafts to which the Underwriter
has previously agreed and otherwise in form and substance satisfactory to the
Underwriter and its counsel.
(c) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting particularly the business or properties or
financial position of the Company, CPS or any Affiliate of the Company or CPS
which, in the judgment of the Underwriter, materially impairs the investment
quality of the Notes or the ability of CPS to act as Servicer or (ii) any
downgrading in the rating of any debt securities or preferred stock of the
Company, CPS or any Affiliate thereof by any "nationally recognized statistical
rating organization" (as defined for purposes of Rule 436(g) under the
Securities Act), or any public announcement that any such organization has under
surveillance or review its rating of any debt securities or preferred stock of
the Company, CPS or any Affiliate thereof (other than an announcement with
positive implications of a possible upgrading, and no implication of a possible
downgrading of such rating); (iii) any suspension or limitation of trading in
securities generally on the New York Stock Exchange, or any setting of minimum
prices for trading on such exchange, or any suspension of trading of any
securities of the Company or CPS or any Affiliate of the Company or CPS on any
exchange or in the over-the-counter market; (iv) any banking moratorium declared
by Federal, New York or California authorities; or (v) any outbreak or
escalation of major hostilities in which the United States is involved, any
declaration of war by Congress or any other substantial national or
international calamity, emergency or change in financial markets if, in the
judgment of the Underwriter, the effect of any such outbreak, escalation,
declaration, calamity, emergency or change makes it impractical or inadvisable
to market the Notes on the terms and in the manner set forth in the Final
Prospectus.
-18-
(d) The Company, CPS, Linc and Samco shall have furnished the
Underwriter with such number of conformed copies of such opinions, certificates,
letters and documents as it may reasonably request.
(e) On the Closing Date, each of the Basic Documents, the Notes and the
Certificates shall have been duly authorized, executed and delivered by the
parties thereto, shall be in full force and effect and no default shall exist
thereunder, and the Trustee shall have received a fully executed copy thereof
or, with respect to the Notes, a conformed copy thereof. The Basic Documents,
the Notes and the Certificates shall be substantially in the forms heretofore
provided to the Underwriter.
(f) The Underwriter shall have received evidence satisfactory to the
Underwriter that the Class A-1 Notes have been rated "A-1+" by Standard & Poor's
and "P-1" by Moody's and that the Class A-2 Notes, the Class A-3 Notes and the
Class A-4 Notes have been rated "Aaa" by Moody's and "AAA" by Standard & Poor's.
(g) The Underwriter shall have received from Mayer, Brown & Platt,
special counsel for CPS, Samco, Linc (with respect to New York law) and the
Company, opinions dated the Closing Date, addressed to the Underwriter, in a
form satisfactory to the Underwriter.
(h) The Underwriter shall have received from Pullman & Comley LLC,
special Connecticut counsel for Linc, opinions dated the Closing Date, addressed
to the Underwriter in a form satisfactory to the Underwriter.
(i) The Underwriter shall have received from Mayer, Brown & Platt,
special Federal tax counsel for the Company, an opinion dated the Closing Date,
addressed to the Underwriter, with respect to the status of the Trust for
federal income tax purposes.
(j) The Underwriter shall have received from Mayer, Brown & Platt, an
opinion dated the Closing Date, addressed to the Underwriter, with respect to
the validity of the Notes and such other related matters as the Underwriter
shall require and the Company or CPS shall have furnished or caused to be
furnished to such counsel such documents as they may reasonably request for the
purpose of enabling them to pass upon such matters.
(k) The Underwriter shall have received from counsel to the Trustee,
the Standby Servicer and the Collateral Agent (which counsel shall be reasonably
acceptable to the Underwriter), an opinion addressed to the Underwriter dated
the Closing Date, in form and substance satisfactory to the Underwriter and its
counsel.
(l) The Underwriter shall have received from counsel to the Owner
Trustee, which counsel shall be reasonably acceptable to the Underwriter, an
opinion addressed to the Underwriter, dated the Closing Date, in form and
substance satisfactory to the Underwriter and its counsel.
-19-
(m) The Underwriter shall have received from special Delaware counsel
to the Trust, which counsel shall be reasonably acceptable to the Underwriter,
an opinion addressed to the Underwriter, dated the Closing Date, in form and
substance satisfactory to the Underwriter and its counsel.
(n) The Underwriter shall have received from counsel to the Insurer,
which counsel shall be reasonably acceptable to the Underwriter, an opinion
addressed to the Underwriter, dated the Closing Date, in form and substance
satisfactory to the Underwriter and its counsel.
(o) At the Closing Date, the Underwriter shall have received any and
all opinions of counsel to the Company and CPS supplied to the Rating Agencies
and the Insurer relating to, among other things, the interest of the Trustee in
the Receivables and the other Trust Property and the proceeds thereof and
certain monies due or to become due with respect thereto, certain bankruptcy
issues and certain matters with respect to the Notes. Any such opinions shall be
addressed to the Underwriter or shall indicate that the Underwriter may rely on
such opinions as though they were addressed to the Underwriter, and shall be
dated the Closing Date.
(p) At the Closing Date, the Company, CPS, Linc and Samco shall have
furnished to the Underwriter a certificate, dated the Closing Date, of the
President, the Chief Financial Officer or any Vice President of the Company,
CPS, Linc or Samco, as the case may be, in which each such officer shall state
that: (i) the representations and warranties of the Company, CPS, Linc or Samco,
as applicable, in this Agreement are true and correct on and as of the Closing
Date; (ii) the Company, CPS, Linc or Samco, as applicable, has complied with all
agreements and satisfied all conditions on its part required to be performed or
satisfied hereunder and under each of the other Basic Documents at or prior to
the Closing Date; (iii) the representations and warranties of the Company, CPS,
Linc or Samco, as applicable, in each of the Basic Documents are true and
correct as of the dates specified therein; (iv) with respect to the certificate
delivered by CPS, the Registration Statement has become effective under the 1933
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or are, to
his or her knowledge, contemplated by the Commission; (v) with respect to the
certificates delivered by CPS and the Company, he or she has carefully examined
the Registration Statement and the Final Prospectus and, in his or her opinion,
as of the Effective Date of the Registration Statement, the statements contained
in the Registration Statement and the statements contained in the Final
Prospectus were true and correct, and as of the Closing Date the Registration
Statement and the Final Prospectus do not contain any untrue statement of a
material fact or omit to state a material fact with respect to the Company, CPS,
Linc or Samco necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and since the
Effective Date of the Registration Statement, no event has occurred with respect
to the Company, CPS, Linc or Samco which should have been set forth in a
supplement to or an amendment of the Final Prospectus which has not been so set
forth in such supplement or amendment; and (vi) with
-20-
respect to the certificate delivered by the Company and CPS, subsequent to the
respective dates as of which information is given in the Registration Statement
and the Final Prospectus, there has been no material adverse change, or any
development with respect to the Company, CPS, Linc or Samco which could
reasonably be expected to result in a material adverse change, in or affecting
particularly the business or properties of the Trust, the Company, CPS, Linc or
Samco except as contemplated by the Final Prospectus or as described in such
certificate.
(q) The Underwriter shall have received evidence satisfactory to the
Underwriter that the Insurer shall have issued the Policy to the Trustee for the
benefit of the Noteholders in form and substance satisfactory to the
Underwriter.
(r) The Underwriter shall have received evidence satisfactory to it
that, on or before the Closing Date, the Financing Statements have been filed in
(i) the office of the Secretary of State of the State of California reflecting
the sale and assignment of the CPS Receivables and the related other Trust
Property and the proceeds thereof to the Company, (ii) the office of the
Secretary of State of the State of Texas reflecting the sale and assignment of
the Samco Receivables and the related other Trust Property and the proceeds
thereof to the Company, (iii) the office of the Secretary of State of the State
of Connecticut reflecting the sale and assignment of the Linc Receivables and
the related other Trust Property and the proceeds thereof to the Company, (iv)
the office of the Secretary of State of California reflecting the sale and
assignment of the Receivables and the related other Trust Property and the
proceeds thereof to the Trust and (v) the office of the Secretary of State of
Delaware reflecting the grant of a security interest by the Trust in the
Receivables and the related other Trust Property and the proceeds thereof to the
Trustee.
(s) All proceedings in connection with the transactions contemplated by
this Agreement, the Sale and Servicing Agreement and each of the other Basic
Documents and all documents incident hereto or thereto shall be satisfactory in
form and substance to the Underwriter.
(t) The Company shall have furnished to the Underwriter such further
certificates and documents confirming the representations and warranties,
covenants and conditions contained herein and related matters as the Underwriter
may reasonably have requested.
(u) The Underwriter shall have received a certificate of the Owner
Trustee regarding the execution of the Notes. The Underwriter shall have
received a certificate of the Trustee regarding the acceptance and
authentication of the Notes.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects reasonably satisfactory to the Underwriter and to Thacher
Proffitt & Wood, counsel for the Underwriter.
-21-
If any of the conditions hereinabove provided for in this Section 7
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriter hereunder may be terminated by the
Underwriter by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date. In such event, the Company and the
Underwriter shall not be under any obligation to each other (except to the
extent provided in Sections 6 and 9 hereof).
8. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to sell and deliver the portion of the
Notes required to be delivered as and when specified in this Agreement are
subject to the condition that, at the Closing Date, no stop order suspending the
effectiveness of the Registration Statement shall have been issued and in effect
or proceedings therefor initiated or threatened.
9. INDEMNIFICATION.
(a) (i) The Company and CPS, jointly and severally, agree to indemnify
and hold harmless the Underwriter, its directors, officers, employees and agents
and each person, if any, who controls the Underwriter within the meaning of the
1933 Act or the 1934 Act, against any losses, claims, damages or liabilities to
which the Underwriter or any such other person may become subject under the 1933
Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon (A)
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, the Base Prospectus, the Final Prospectus, or any
amendment or supplement thereto (other than information contained therein under
the heading "the Insurer" and information incorporated by reference under such
heading), or (B) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made; and
will reimburse the Underwriter and each such person within 30 days of
presentation of a written request therefor for any legal or other expenses
reasonably incurred by the Underwriter in connection with investigating or
defending any such loss, claim, damage or liability, action or proceeding or in
responding to a subpoena or governmental inquiry related to the offering of the
Notes, whether or not the Underwriter or such person is a party to any action or
proceeding; provided, however, that neither the Company nor CPS will be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement,
or omission or alleged omission made in the Registration Statement, the Base
Prospectus, any Preliminary Final Prospectus, the Final Prospectus or any
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Company or CPS, as the case may be, by the
Underwriter specifically for use therein; provided, further, that neither the
Company nor CPS will be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission made in
any Computational Materials, ABS Term Sheets or Collateral Term Sheets, except
to the extent expressly provided in (ii) below. This
-22-
indemnity agreement will be in addition to any liability which the Company or
CPS may otherwise have. The indemnity agreement of the Company and CPS in this
Agreement is subject to the condition that, insofar as it relates to any untrue
statement, alleged untrue statement, omission or alleged omission made in the
Registration Statement, the Base Prospectus, any Preliminary Final Prospectus or
in the Final Prospectus, or any amendment or supplement thereto, such indemnity
agreement shall not inure to the benefit of the Underwriter if the Underwriter
failed to send or give a copy of the Final Prospectus (as amended or
supplemented, if the Company or CPS, as the case may be, shall have furnished
any amendment or supplement thereto to the Underwriter, which corrected such
untrue statement or omission that is the basis of the loss, liability, claim,
damage or expense for which indemnification is sought) to the person asserting
any such loss, liability, claim, damage or expense at such time as the Final
Prospectus, as so amended or supplemented, was required under the 1933 Act to be
delivered to such person.
(ii) The Company and CPS, jointly and severally, agree to
indemnify and hold harmless the Underwriter, its directors, officers, employees
and agents and each person, if any, who controls the Underwriter within the
meaning of the 1933 Act or the 1934 Act, to the same extent as the indemnity
from each of the Company and CPS contained in (i) above, against any losses,
claims, damages or liabilities to which such person may become subject under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of or are based upon
(A) any untrue statement or alleged untrue statement of any material fact
contained in the Computational Materials, any ABS Term Sheet or any Collateral
Term Sheet provided by the Underwriter or (B) the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances in
which they were made, not misleading (in each case, to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission
results from the failure of the Company Provided Information to be accurate in
all material respects); and will reimburse each such party within 30 days of
written request therefor for any legal or other expenses reasonably incurred by
such person in connection with investigating or defending any such loss, claim,
damage or liability, action or proceeding or in responding to a subpoena or
governmental inquiry related thereto, whether or not such person is a party to
any action or proceeding. The obligations of each of the Company and CPS under
this subsection (ii) shall be in addition to any other liability which such
party may otherwise have. "Company Provided Information" means the information
contained in the data tape delivered by CPS to the Underwriter on or about July
2, 1998 containing information with respect to the Receivables as of the Cutoff
Date.
(b) (i) The Underwriter will indemnify and hold harmless each of CPS,
Samco, Linc and the Company, each of their directors, officers, employees and
agents and each person, if any, who controls CPS, Samco, Linc or the Company
within the meaning of the 1933 Act or the 1934 Act, to the same extent as the
foregoing indemnity from each of the Company and CPS to the Underwriter, its
directors, officers, employees and agents and each
-23-
person who controls the Underwriter, but only with respect to untrue statements
or omissions or alleged untrue statements or omissions made in the Registration
Statement, the Base Prospectus, any Preliminary Final Prospectus, the Final
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company or CPS, as the case
may be, by the Underwriter specifically for use therein. This indemnity
agreement will be in addition to any liability which the Underwriter may
otherwise have. CPS, Samco, Linc, the Company and the Underwriter acknowledge
and agree that the only information furnished or to be furnished by the
Underwriter to the Company or CPS for inclusion in the Registration Statement,
the Base Prospectus, any Preliminary Final Prospectus or the Final Prospectus,
or any amendments or supplements thereto, consists of the information set forth
in the first sentence of the fourth paragraph on the front cover page and in the
last paragraph on the front cover page of the Final Prospectus concerning the
terms of the offering by the Underwriter (insofar as such information relates to
the Underwriter), and the information in the first and second sentences of the
third paragraph under the caption "Underwriting" in the Final Prospectus and in
the second sentence of the fourth paragraph under the caption "Underwriting" in
the Final Prospectus.
(ii) The Underwriter agrees to indemnify and hold harmless the
Company, CPS, Samco, Linc, the respective officers, directors, employees and
agents of any such party, and each person who controls the Company, CPS, Samco
or Linc within the meaning of the 1933 Act or the 1934 Act against any losses,
claims, damages or liabilities to which such person may become subject under the
1933 Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of or are based upon
(A) any untrue statement or alleged untrue statement of any material fact
contained in the Computational Materials, any ABS Term Sheet or any Collateral
Term Sheet distributed by the Underwriter or (B) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances in which they were made (except, in each case, to the extent that
such untrue statement or alleged untrue statement or omission or alleged
omission results from the failure of the Company Provided Information to be
accurate in all material respects); and will reimburse each such party within 30
days of written request therefor for any legal or other expenses reasonably
incurred by such person in connection with investigating or defending any such
loss, claim, damage or liability, action or proceeding or in responding to a
subpoena or governmental inquiry related thereto, whether or not such person is
a party to any action or proceeding. The obligations of the Underwriter under
this subsection (ii) shall be in addition to any other liability which the
Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 9, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. The failure to give such notice shall not
relieve the indemnifying party or parties from any liability which it
-24-
or they may have to the indemnified party for indemnity or contribution or
otherwise than on account of the provisions of Section 9(a) or (b), except and
only to the extent such omission so to notify shall have materially prejudiced
the indemnifying party under Section 9(a) or (b). In case any such proceeding
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party and
shall pay as incurred the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the right
to retain its own counsel at its own expense. Notwithstanding the foregoing, the
indemnifying party shall pay as incurred (or within 30 days of presentation of
an invoice) the fees and expenses of the counsel retained by the indemnified
party in the event (i) the indemnifying party and the indemnified party shall
have mutually agreed to the retention of such counsel, (ii) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be
legal defenses available to it or other indemnified parties that are different
from or in addition to those available to the indemnifying party, (iii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them or (iv) the indemnifying party shall have
failed to assume the defense and employ counsel acceptable to the indemnified
party within a reasonable period of time after notice of commencement of the
action. It is understood that the indemnifying party shall not, in connection
with any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees and expenses of more than one separate firm for all such
indemnified parties. Such firm shall be designated in writing by the Underwriter
in the case of parties indemnified pursuant to Section 9(a) and by the Company
in the case of parties indemnified pursuant to Section 9(b). The indemnifying
party shall not be liable for any settlement of any proceeding effected without
its written consent but if settled with such consent or if there is a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. In addition, the indemnifying party will not, without
the prior written consent of the indemnified party (which consent shall not be
unreasonably withheld or delayed), settle or compromise or consent to the entry
of any judgment in any pending or threatened claim, action or proceeding for
which indemnification may be sought hereunder (whether or not any indemnified
party is an actual or potential party to such claim, action or proceeding)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action
or proceeding.
(d) If the indemnification provided for in this Section 9 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 9(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect
-25-
the relative benefits received by the Company, CPS, Samco and Linc on the one
hand and the Underwriter on the other hand from the offering of the Notes. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company, CPS, Samco or Linc on the one hand and the Underwriter on
the other hand in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company, CPS, Samco and Linc on the one hand
and the Underwriter on the other hand shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriter (in each case as set forth on the cover
page of the Final Prospectus). The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, CPS, Samco or Linc on the one
hand or the Underwriter on the other hand and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, CPS, Samco, Linc and the Underwriter agree that it would
not be just and equitable if contributions pursuant to this Section 9(d) were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to above in this
Section 9(d). The amount paid or payable by an indemnified party as a result of
the losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this Section 9(d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim, subject to
the limitations set forth above. Notwithstanding the provisions of this Section
9(d), (i) the Underwriter shall not be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Notes
purchased by the Underwriter and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
(e) In any proceeding relating to the Registration Statement, the Base
Prospectus, any Preliminary Final Prospectus, the Final Prospectus, or any
supplement or amendment thereto, each party against whom contribution may be
sought under this Section 9 hereby consents to the jurisdiction of any court
having jurisdiction over any other contributing party, agrees that process
issuing from such court may be served upon it by any other contributing party
and consents to the service of such process and agrees that any other
contributing party may join it as an additional defendant in any such proceeding
in which such other contributing party is a party.
-26-
(f) Any losses, claims, damages, liabilities or expenses for which an
indemnified party is entitled to indemnification or contribution under this
Section 9 shall be paid by the indemnifying party to the indemnified party as
such losses, claims, damages, liabilities or expenses are incurred. The
obligations of the Company and CPS pursuant to Section 6, the indemnity and
contribution agreements contained in this Section 9 and the representations and
warranties of each of the Company, CPS, Samco and Linc set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of the Underwriter, the Company, CPS,
Samco, Linc, their respective directors, officers, employees or agents or any
persons controlling the Underwriter, CPS, Samco, Linc or the Company, (ii)
acceptance of any Notes and payment thereof or hereunder, and (iii) any
termination of this Agreement. A successor to the Underwriter, the Company,
Samco, Linc or CPS, their respective directors, officers, employees or agents,
or any person controlling the Underwriter, the Company, Samco, Linc or CPS,
shall be entitled to the benefits of the indemnity, contribution and
reimbursement agreements contained in this Section 9.
10. [RESERVED]
11. NOTICES.
All communications hereunder shall be in writing and, except as
otherwise provided herein, will be mailed, delivered, telecopied or telegraphed
and confirmed as follows:
if to the Underwriter, to the following address:
Nomura Securities International, Inc.
Two World Financial Center
New York, New York 10281-1198
Attention: Jeffrey Kramer
Fax: (212) 667-1925
if to the Company, at the following address:
CPS Receivables Corp.
2 Ada
Irvine, California 92618
Attention: Charles Bradley, Jr.
Facsimile No.: (714) 753-6805;
-27-
if to CPS, at the following address:
Consumer Portfolio Services, Inc.
2 Ada
Irvine, California 92618
Attention: Charles Bradley, Jr.
Facsimile No.: (714) 753-6805
if to Samco, at the following address:
Samco Acceptance Corp.
8150 N. Central Expressway
Suite 600
Lock-Box 39
Dallas, Texas 75206
Attention: Alex B. Louis
Facsimile No.: (214) 691-2166
if to Linc, at the following address:
Linc Acceptance Company LLC
One Selleck Street
Norwalk, Connecticut 06855
Attention: Joe Gilbert
Facsimile No.: (203) 838-7390
12. TERMINATION.
This Agreement may be terminated by the Underwriter by notice to the
Company as follows:
(a) at any time prior to the Closing Date, if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Final Prospectus, any material adverse change or
any development involving a prospective material adverse change in the business,
properties, results of operations, financial condition or business prospects of
CPS, Samco, Linc or the Company, whether or not arising in the ordinary course
of business, (ii) any outbreak or escalation of hostilities or declaration of
war or national emergency or other national or international calamity or crisis
or change in economic or political conditions if the effect of such outbreak,
escalation, declaration, emergency, calamity, crisis or change on the financial
markets of the United States would, in the Underwriter's reasonable judgment,
make it impracticable to market the Notes or to enforce contracts for the sale
of the Notes, (iii) any suspension of trading in
-28-
securities generally on the New York Stock Exchange or the American Stock
Exchange or limitation on prices (other than limitations on hours or numbers of
days of trading) for securities on either such Exchange, (iv) the enactment,
publication, decree or other promulgation of any statute, regulation, rule or
order of any court or other governmental authority which in the Underwriter's
reasonable opinion materially and adversely affects or may materially and
adversely affect the business or operations of the Company or CPS, (v)
declaration of a banking moratorium by United States or New York State
authorities, (vi) any downgrading or the giving of notice of any intended or
potential downgrading in the rating of the Company's or CPS's debt securities by
any "nationally recognized statistical rating organization" (as defined for
purposes of Rule 436(g) under the 1934 Act), (vii) the suspension of trading of
the Common Stock by the Commission on the New York Stock Exchange or (viii) the
taking of any action by any governmental body or agency in respect of its
monetary or fiscal affairs which in the Underwriter's reasonable opinion has a
material adverse effect on the securities markets in the United States; or
(b) as provided in Section 7 of this Agreement.
13. SUCCESSORS.
This Agreement has been and is made solely for the benefit of the
Underwriter, CPS, Samco, Linc and the Company and their respective successors,
executors, administrators, heirs and assigns, and the respective affiliates,
officers, directors, employees, agents and controlling persons referred to
herein, and no other person will have any right or obligation hereunder. No
purchaser of any of the Notes from the Underwriter shall be deemed a successor
or assign merely because of such purchase.
14. MISCELLANEOUS.
The reimbursement, indemnification and contribution agreements
contained in this Agreement, the obligations of the Company and CPS under
Section 6 and the representations, warranties and covenants in this Agreement
shall remain in full force and effect regardless of (a) any termination of this
Agreement, (b) any investigation made by or on behalf of the Underwriter, the
Company or CPS, their respective directors, officers, employees or agents or any
controlling person of the Underwriter, the Company or CPS indemnified herein and
(c) delivery of and payment for the Notes under this Agreement.
The Underwriter agrees that, prior to the date which is one year and
one day after the payment in full of all securities issued by the Company or by
a trust for which the Company was the depositor, which securities were rated by
any nationally recognized statistical rating organization, it will not institute
against, or join any other person in instituting against, the Company any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other proceedings under any Federal or state bankruptcy or similar law.
-29-
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York without regard to the conflict of laws
provisions thereof. With respect to any claim arising out of this Agreement (i)
each party irrevocably submits to the exclusive jurisdiction of the courts of
the State of New York and the United States District Court for the Southern
District of New York, and (ii) each party irrevocably waives (1) any objection
which it may have at any time to the laying of venue of any suit, action or
proceeding arising out of or relating hereto brought in any such court, (2) any
claim that any such suit, action or proceeding brought in any such court has
been brought in any inconvenient forum and (3) the right to object, with respect
to such claim, suit, action or proceeding brought in any such court, that such
court does not have jurisdiction over such party. To the extent permitted by
applicable law, the Underwriter, the Company, Samco, Linc and CPS irrevocably
waive all right of trial by jury in any action, proceeding or counterclaim
arising out of or in connection with this Agreement or any matter arising
hereunder.
This Agreement supersedes all prior agreements and understandings
relating to the subject matter hereof.
Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the change, waiver, discharge or
termination is sought.
The headings in this Agreement are for purposes of reference only and
shall not limit or otherwise affect the meaning hereof.
Any provision of this Agreement which is prohibited, unenforceable or
not authorized in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions hereof or
affecting the validity, enforceability or legality of such provision in any
other jurisdiction.
[Rest of page intentionally left blank.]
-30-
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the
Underwriter in accordance with its terms.
Very truly yours,
CPS RECEIVABLES CORP.
By: /s/ Jeffrey P. Fritz
Title: Chief Financial Officer
CONSUMER PORTFOLIO SERVICES, INC.
By: /s/ Jeffrey P. Fritz
Title: Chief Financial Officer
SAMCO ACCEPTANCE CORP.
By: /s/ Todd Kesterson
Title: Chief Financial Officer
LINC ACCEPTANCE COMPANY LLC
By: /s/ W. Edward Burrell
Title: Executive Vice President
and Treasurer
The foregoing Underwriting Agreement is hereby confirmed and accepted as of the
date first above written:
NOMURA SECURITIES INTERNATIONAL, INC.
By: /s/ Robert Young
Title: Managing Director
SCHEDULE I
Principal Amount Purchase
Class to be Purchased Price
- ----- --------------- --------
A-1 $36,000,000 $36,000,000.00
A-2 92,000,000 $92,012,785.24
A-3 25,000,000 $25,003,923.25
A-4 82,532,000 $82,538,221.26
Total $235,532,000 $235,554,929.80
EXHIBIT 4.1
TRUST AGREEMENT
EXECUTION COPY
AMENDED AND RESTATED TRUST AGREEMENT
Dated as of July 15, 1998
between
CPS RECEIVABLES CORP., as Depositor
and
BANKERS TRUST (DELAWARE), as
Owner Trustee
TABLE OF CONTENTS
Page
ARTICLE I.
Definitions
SECTION 1.1. Capitalized Terms.........................................1
SECTION 1.2. Other Definitional Provisions.............................4
ARTICLE II.
Organization
SECTION 2.1. Name......................................................4
SECTION 2.2. Office....................................................5
SECTION 2.3. Purposes and Powers.......................................5
SECTION 2.4. Appointment of Owner Trustee..............................5
SECTION 2.5. Initial Capital Contribution of Trust Estate..............5
SECTION 2.6. Declaration of Trust......................................6
SECTION 2.7. Title to Trust Property...................................6
SECTION 2.8. Situs of Trust............................................6
SECTION 2.9. Representations and Warranties of the Depositor...........7
SECTION 2.10. Federal Income Tax Allocations............................8
SECTION 2.11. Covenants of the Depositor................................9
SECTION 2.12. Covenants of the Certificateholders......................10
ARTICLE III.
Certificates and Transfer of Interests
SECTION 3.1. Initial Ownership........................................11
SECTION 3.2. The Certificates.........................................11
SECTION 3.3. Authentication of Certificates...........................11
SECTION 3.4. Registration of Transfer and Exchange of Certificates....11
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates........15
SECTION 3.6. Persons Deemed Certificateholders........................15
SECTION 3.7. Access to List of Certificateholders' Names and
Addresses................................................15
SECTION 3.8. Maintenance of Office or Agency..........................16
SECTION 3.9. ERISA Restrictions.......................................16
Page
ARTICLE IV.
Voting Rights and Other Actions
SECTION 4.1. Prior Notice to Holders with Respect to Certain
Matters..................................................16
SECTION 4.2. Action by Certificateholders with Respect to Certain
Matters..................................................17
SECTION 4.3. Action by Certificateholders with Respect to
Bankruptcy...............................................17
SECTION 4.4. Restrictions on Certificateholders' Power................17
SECTION 4.5. Majority Control.........................................18
SECTION 4.6. Rights of Insurer........................................18
ARTICLE V.
Certain Duties
SECTION 5.1. Accounting and Records to the Noteholders,
Certificateholders, the Internal Revenue Service and
Others...................................................19
SECTION 5.2. Signature on Returns; Tax Matters Partner................19
SECTION 5.3. Underwriting Agreement...................................19
SECTION 5.4. Trust Accounts...........................................20
SECTION 5.5. Application of Funds in Certificate Distribution
Account..................................................20
ARTICLE VI.
Authority and Duties of Owner Trustee
SECTION 6.1. General Authority........................................22
SECTION 6.2. General Duties...........................................22
SECTION 6.3. Action upon Instruction..................................22
SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions.............................................23
SECTION 6.5. No Action Except under Basic Documents or
Instructions.............................................24
SECTION 6.6. Restrictions.............................................24
Page
ARTICLE VII.
Concerning the Owner Trustee
SECTION 7.1. Acceptance of Trusts and Duties..........................24
SECTION 7.2. Furnishing of Documents..................................25
SECTION 7.3. Representations and Warranties...........................26
SECTION 7.4. Reliance; Advice of Counsel..............................26
SECTION 7.5. Not Acting in Individual Capacity........................26
SECTION 7.6. Owner Trustee Not Liable for Certificates or
Receivables..............................................27
SECTION 7.7. Owner Trustee May Own Certificates and Notes.............27
SECTION 7.8. Payments from Owner Trust Estate.........................27
SECTION 7.9. Doing Business in other Jurisdictions....................27
ARTICLE VIII.
Compensation of Owner Trustee
SECTION 8.1. Owner Trustee's Fees and Expenses........................28
SECTION 8.2. Indemnification..........................................28
SECTION 8.3. Payments to the Owner Trustee............................28
SECTION 8.4. Non-recourse Obligations.................................29
ARTICLE IX.
Termination of Trust Agreement
SECTION 9.1. Termination of Trust Agreement...................29
ARTICLE X.
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1. Eligibility Requirements for Owner Trustee...............30
SECTION 10.2. Resignation or Removal of Owner Trustee..................31
SECTION 10.3. Successor Owner Trustee..................................31
SECTION 10.4. Merger or Consolidation of Owner Trustee.................32
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee............32
Page
ARTICLE XI.
Miscellaneous
SECTION 11.1. Supplements and Amendments...............................34
SECTION 11.2. No Legal Title to Owner Trust Estate in
Certificateholders.......................................35
SECTION 11.3. Limitations on Rights of Others..........................35
SECTION 11.4. Notices..................................................35
SECTION 11.5. Severability.............................................36
SECTION 11.6. Separate Counterparts....................................36
SECTION 11.7. Assignments; Insurer.....................................36
SECTION 11.8. No Petition..............................................36
SECTION 11.9. No Recourse..............................................36
SECTION 11.10. Headings.................................................37
SECTION 11.11. Governing Law............................................37
SECTION 11.12. Servicer.................................................37
ARTICLE XII.
Amendment and Restatement
SECTION 12.1. Amendment and Restatement................................37
EXHIBITS
Exhibit A Form of Certificate
Exhibit B Form of Certificate of Trust
Exhibit C Form of Transferee Certificate
AMENDED AND RESTATED TRUST AGREEMENT dated as of July 15, 1998 between
CPS RECEIVABLES CORP., a California corporation (the "Depositor") BANKERS TRUST
(DELAWARE), a Delaware banking corporation as Owner Trustee.
W I T N E S S E T H
WHEREAS , Depositor and Owner Trustee are parties to that certain trust
agreement dated as of July 8, 1998 (the "Original Agreement") and Depositor and
Owner Trustee desire to amend and restate the Original Agreement in its
entirety.
NOW THEREFORE, in consideration of the foregoing, other good and
valuable considerations, and the mutual terms and covenants contained herein,
the parties hereto agree as follows: ARTICLE I.
Definitions
SECTION 1.1. Capitalized Terms. Terms not defined in this Agreement
shall have the meaning set forth in the Sale and Servicing Agreement and if not
defined therein, shall have the meanings set forth in the Indenture. For all
purposes of this Agreement, the following terms shall have the meanings set
forth below:
"Agreement" shall mean the Original Agreement as amended and restated
by this Amended and Restated Trust Agreement, as the same may be further amended
or supplemented from time to time.
"Basic Documents" shall mean this Agreement, the Certificate of Trust,
the Sale and Servicing Agreement, the Purchase Agreements, the Spread Account
Agreement, the Spread Account Agreement Supplement, the Insurance Agreement, the
Indenture, the Lockbox Agreement, the Underwriting Agreement and the other
documents and certificates delivered in connection therewith.
"Benefit Plan" shall have the meaning assigned to such term in Section
3.10.
"Business Trust Statute" shall mean Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code ss.ss. 3801 et. seq. as the same may be amended from
time to time.
"Certificate" means a trust certificate evidencing the beneficial
interest of a Certificateholder in the Trust, substantially in the form of
Exhibit A attached hereto.
"Certificate Balance" means, as of any date of determination, the Pool
Balance as of such date minus the outstanding principal balance of the Notes as
of such date.
"Certificate of Trust" shall mean the Certificate of Trust in the form
of Exhibit B to be filed for the Trust pursuant to Section 3810(a) of the
Business Trust Statute.
"Certificate Register" and "Certificate Registrar" shall mean the
register mentioned and the registrar appointed pursuant to Section 3.4.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and Treasury Regulations promulgated thereunder.
"Corporate Trust Office" shall mean, with respect to the Owner Trustee,
the principal corporate trust office of the Owner Trustee located at 1011 Centre
Road, Suite 200, Wilmington, Delaware 19805-1266 with a copy of all notices and
other documents to Bankers Trust Company, 4 Albany Street, 10th Floor, New York,
New York 10006, Attention: Corporate Trust and Agency Group, or at such other
address as the Owner Trustee may designate by notice to the Certificateholders
and the Depositor, or the principal corporate trust office of any successor
Owner Trustee (the address of which the successor owner trustee will notify the
Certificateholders and the Depositor).
"Depositor" shall mean CPS Receivables Corp. in its capacity as
Depositor hereunder.
"ERISA" shall have the meaning assigned to such term in Section 3.10.
"Expenses" shall have the meaning assigned to such term in Section 8.2.
"Holder" or "Certificateholder" shall mean the Person in whose name a
Certificate is registered on the Certificate Register.
"Indemnified Parties" shall have the meaning assigned to such term in
Section 8.2.
"Indenture" shall mean the Indenture dated as of July 15, 1998, among
the Trust and Norwest Bank Minnesota, National Association, as Trustee, as the
same may be amended and supplemented from time to time.
"Initial Certificate Balance" means $4,807,160.19.
"Instructing Party" shall have the meaning assigned to such term in
Section 6.3(a).
"Insurer" shall mean Financial Security Assurance Inc., or its
successor in interest.
"Original Agreement" shall mean the trust agreement dated as of July 8,
1998 between the Depositor and the Owner Trustee.
"Owner Trust Estate" shall mean all right, title and interest of the
Trust in and to the property and rights assigned to the Trust pursuant to
Article II of the Sale and Servicing
2
Agreement, all funds on deposit from time to time in the Trust Accounts and all
other property of the Trust from time to time, including any rights of the Owner
Trustee and the Trust pursuant to the Sale and Servicing Agreement and the
Spread Account Agreement.
"Owner Trustee" shall mean Bankers Trust (Delaware), a Delaware banking
corporation, not in its individual capacity but solely as owner trustee under
this Agreement, and any successor Owner Trustee hereunder.
"Paying Agent" shall mean Bankers Trust Company.
"Record Date" shall mean with respect to any Payment Date, the close of
business on the 10th day of the calendar month of such Payment Date.
"Responsible Officer" when used with respect to the Owner Trustee, any
officer (or agent acting under a power of attorney) who is responsible for
administering the transactions contemplated by this Trust Agreement and also,
with respect to a particular matter, any other officer to whom such matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Sale and Servicing Agreement" shall mean the Sale and Servicing
Agreement among the Trust, the Depositor, Consumer Portfolio Services, Inc. and
the Trustee, dated as of July 15, 1998 as the same may be amended and
supplemented from time to time.
"Secretary of State" shall mean the Secretary of State of the State of
Delaware.
"Spread Account" shall mean the Spread Account established and
maintained pursuant to the Spread Account Agreement.
"Spread Account Agreement" shall mean the Master Spread Account
Agreement, amended and restated as of July 15, 1998, among the Depositor, the
Insurer, and the Trustee, as the same may be amended, supplemented or otherwise
modified in accordance with the terms thereof.
"Treasury Regulations" shall mean regulations, including proposed or
temporary regulations, promulgated under the Code. References herein to specific
provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury
Regulations.
"Trust" shall mean the trust established by this Agreement.
"Trustee" means the Person acting as Trustee under the Indenture, its
successors in interest and any successor trustee under the Indenture.
3
SECTION 1.2. Other Definitional Provisions. (a) Capitalized terms used
herein and not otherwise defined have the meanings assigned to them in the Sale
and Servicing Agreement or, if not defined therein, in the Spread Account
Agreement or in the Indenture.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(c) As used in this Agreement and in any certificate or other document
made or delivered pursuant hereto or thereto, accounting terms not defined in
this Agreement or in any such certificate or other document, and accounting
terms partly defined in this Agreement or in any such certificate or other
document to the extent not defined, shall have the respective meanings given to
them under generally accepted accounting principles as in effect on the date of
this Agreement or any such certificate or other document, as applicable. To the
extent that the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such terms
under generally accepted accounting principles, the definitions contained in
this Agreement or in any such certificate or other document shall control.
(d) The words "hereof," "herein," "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section and Exhibit
references contained in this Agreement are references to Sections and Exhibits
in or to this Agreement unless otherwise specified; and the term "including"
shall mean "including without limitation."
(e) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
ARTICLE II.
Organization
SECTION 2.1. Name. There is hereby formed a trust to be known as "CPS
Auto Receivables Trust 1998-3", in which name the Owner Trustee may conduct the
business of the Trust, make and execute contracts and other instruments on
behalf of the Trust and sue and be sued.
SECTION 2.2. Office. The office of the Trust shall be in care of the
Owner Trustee at the Corporate Trust Office or at such other address as the
Owner Trustee may designate by written notice to the Certificateholders and the
Depositor.
4
SECTION 2.3. Purposes and Powers. (a) The purpose of the Trust is, and
the Trust shall have the power and authority, to engage in the following
activities:
(i) to issue the Notes pursuant to the Indenture and the
Certificates pursuant to this Agreement;
(ii) to pay the organizational, start-up and transactional
expenses of the Trust pursuant to the Sale and Servicing Agreement;
(iii) to assign, grant, transfer, pledge, mortgage and convey
the Owner Trust Estate to the Trustee pursuant to the Indenture for the
benefit of the Insurer and the Noteholders and to hold, manage and
distribute to the Certificateholders and the Depositor pursuant to the
terms of the Sale and Servicing Agreement any portion of the Owner
Trust Estate released from the Lien of, and remitted to the Trust
pursuant to, the Indenture;
(iv) to enter into and perform its obligations under the Basic
Documents to which it is a party;
(v) to engage in those activities, including entering into
agreements, that are necessary, suitable or convenient to accomplish
the foregoing or are incidental thereto or connected therewith; and
(vi) subject to compliance with the Basic Documents, to engage
in such other activities as may be required in connection with the
conservation of the Owner Trust Estate and the making of distributions
to the Certificateholders and the Noteholders.
The Trust is hereby authorized to engage in the foregoing activities. The Trust
shall not engage in any activity other than in connection with the foregoing or
other than as required or authorized by the terms of this Agreement or the Basic
Documents.
SECTION 2.4. Appointment of Owner Trustee. The Depositor hereby
appoints the Owner Trustee as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein.
SECTION 2.5. Initial Capital Contribution of Trust Estate. The
Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner
Trustee, as of the date hereof, the sum of $10.00. The Owner Trustee hereby
acknowledges receipt of the foregoing contribution in trust from the Depositor,
as of the date hereof, which contribution shall constitute the initial Owner
Trust Estate. The Depositor shall pay organizational expenses of the Trust as
they may arise.
SECTION 2.6. Declaration of Trust. The Owner Trustee hereby declares
that it will hold the Owner Trust Estate in trust upon and subject to the
conditions set forth herein for the
5
use and benefit of the Certificateholders, subject to the conditions of the
Trust under the Basic Documents. It is the intention of the parties hereto that
the Trust constitute a business trust under the Business Trust Statute and that
this Agreement constitute the governing instrument of such business trust. It is
the intention of the parties hereto that (i) so long as the Depositor is the
Holder of 100 percent of the Certificates (either directly or indirectly through
wholly-owned non-corporate subsidiaries), for federal income tax purposes and to
the extent consistent with the laws of any other jurisdiction for which the
characterization of the Trust as an entity is relevant, the Trust shall be
treated solely as a security device and not as an entity separate from the
Depositor, and (ii) if the Depositor is not the Holder of 100 percent of the
Certificates (either directly or indirectly through wholly-owned non-corporate
subsidiaries), then for federal income tax purposes and for purposes of the laws
of any other jurisdiction for which the characterization of the Trust as an
entity is relevant, the Trust shall be treated as a partnership among the
Certificateholders and the Depositor and not as an association (or publicly
traded partnership) taxable as a corporation. The parties agree that, unless
otherwise required by appropriate tax authorities, the Trust will file or cause
to be filed annual or other necessary returns, reports and other forms, if any,
consistent with such characterization of the Trust. Effective as of the date
hereof, the Owner Trustee shall have all rights, powers and duties set forth
herein and to the extent not inconsistent herewith, in the Business Trust
Statute with respect to accomplishing the purposes of the Trust. The Owner
Trustee shall file the Certificate of Trust with the Secretary of State.
SECTION 2.7. Title to Trust Property. (a) Legal title to all the Owner
Trust Estate shall be vested at all times in the Trust as a separate legal
entity except where applicable law in any jurisdiction requires title to any
part of the Owner Trust Estate to be vested in a trustee or trustees, in which
case title shall be deemed to be vested in the Owner Trustee, a co-trustee
and/or a separate trustee, as the case may be.
(b) The Holders shall not have legal title to any part of the Owner
Trust Estate. The Holders shall be entitled to receive distributions in respect
of their undivided ownership interest therein only in accordance with Article
IX. No transfer, by operation of law or otherwise, of any right, title or
interest by any Certificateholder of its ownership interest in the Owner Trust
Estate shall operate to terminate this Agreement or the trusts hereunder or
entitle any transferee to an accounting or the transfer to it of legal title to
any part of the Owner Trust Estate.
SECTION 2.8. Situs of Trust. The Trust will be located and administered
in the State of Delaware or the State of New York. All bank accounts maintained
by the Owner Trustee on behalf of the Trust shall be located in the State of
Delaware, the State of New York or the State of Minnesota. Payments will be
received by the Trust only in Delaware, New York or Minnesota and payments will
be made by the Trust only from Delaware, New York or Minnesota. The Trust shall
not have any employees in any state other than Delaware or New York; provided,
however, that nothing herein shall restrict or prohibit the Owner Trustee or the
Servicer or any agent of the Trust from having employees within or without the
State of
6
Delaware and New York. The only office of the Trust will be at the Corporate
Trust Office in Delaware.
SECTION 2.9. Representations and Warranties of the Depositor. The
Depositor makes the following representations and warranties on which the Owner
Trustee relies in accepting the Owner Trust Estate in trust and issuing the
Certificates and upon which the Insurer relies in issuing the Note Policy.
(a) Organization and Good Standing. The Depositor is duly
organized and validly existing as a California corporation with power
and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted
and is proposed to be conducted pursuant to this Agreement and the
Basic Documents.
(b) Due Qualification. The Depositor is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals, in all jurisdictions in which the
ownership or lease of its property, the conduct of its business and the
performance of its obligations under this Agreement and the Basic
Documents requires such qualification.
(c) Power and Authority. The Depositor has the corporate power
and authority to execute and deliver this Agreement and to carry out
its terms; the Depositor has full power and authority to sell and
assign the property to be sold and assigned to, and deposited with, the
Trust and the Depositor has duly authorized such sale and assignment
and deposit to the Trust by all necessary corporate action; and the
execution, delivery and performance of this Agreement has been duly
authorized by the Depositor by all necessary corporate action.
(d) No Consent Required. No consent, license, approval or
authorization or registration or declaration with, any Person or with
any governmental authority, bureau or agency is required in connection
with the execution, delivery or performance of this Agreement and the
Basic Documents, except for such as have been obtained, effected or
made.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the fulfillment of the terms hereof
do not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the certificate of incorporation or by-laws of the
Depositor, or any material indenture, agreement or other instrument to
which the Depositor is a party or by which it is bound; nor result in
the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other
instrument (other than pursuant to the Basic Documents); nor violate
any law or, to the best of the Depositor's knowledge, any order, rule
or regulation applicable to the Depositor of any court or of any
Federal or state
7
regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Depositor or its
properties.
(f) No Proceedings. There are no proceedings or investigations
pending or, to its knowledge, threatened against it before any court,
regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over it or its
properties (A) asserting the invalidity of this Agreement or any of the
Basic Documents, (B) seeking to prevent the issuance of the
Certificates or the Notes or the consummation of any of the
transactions contemplated by this Agreement or any of the Basic
Documents, (C) seeking any determination or ruling that might
materially and adversely affect its performance of its obligations
under, or the validity or enforceability of, this Agreement or any of
the Basic Documents, or (D) seeking to adversely affect the federal
income tax or other federal, state or local tax attributes of the
Certificates.
SECTION 2.10. Federal Income Tax Allocations. (a) For purposes of the
laws of any jurisdiction for which the Trust is characterized as a partnership
(consistent with the characterization of the Trust described in Section 2.6
above), the following allocations shall apply for Federal income tax purposes.
Net income of the Trust for any month as determined for Federal income tax
purposes (and each item of income, gain, loss and deduction entering into the
computation thereof) shall be allocated among the Holders of Certificates as of
the close of business on the last day of such month, in proportion to their
ownership of the principal amount of the Certificates on such date. Net losses
of the Trust, if any, for any month as determined for Federal income tax
purposes (and each item of income, gain, loss and deduction entering into the
computation thereof) shall be allocated to the Depositor, to the extent it is
reasonably expected to bear the economic burden of such net losses, and any
remaining net losses shall be allocated among the other Holders of Certificates
as of the close of business on the last day of such month in proportion to their
ownership of principal amount of Certificates on such day. The Depositor is
authorized to modify the allocations in this paragraph if necessary or
appropriate, in its sole discretion, for the allocations to fairly reflect the
economic income, gain or loss to the Holders of Certificates, or as otherwise
required by the Code. Notwithstanding anything provided in this Section 2.10(a),
if all Certificates are held solely by the Depositor, the application of this
Section 2.10(a) shall be disregarded.
(b) One hundred percent of the "excess nonrecourse liabilities" of the
Trust represented by all outstanding Classes of Notes shall be allocated, for
purposes of Treasury Regulations section 1.752-3(3), to the Depositor.
SECTION 2.11. Covenants of the Depositor. The Depositor agrees and
covenants for the benefit of each Certificateholder, the Insurer and the Owner
Trustee, during the term of this Agreement, and to the fullest extent permitted
by applicable law, that:
8
(a) it shall not create, incur or suffer to exist any
indebtedness or engage in any business, except, in each case, as
permitted by its certificate of incorporation and the Basic Documents;
(b) it shall not, for any reason, institute proceedings for
the Trust to be adjudicated a bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against the Trust,
or file a petition seeking or consenting to reorganization or relief
under any applicable federal or state law relating to the bankruptcy of
the Trust, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Trust or a substantial part of the property of the Trust or cause or
permit the Trust to make any assignment for the benefit of creditors,
or admit in writing the inability of the Trust to pay its debts
generally as they become due, or declare or effect a moratorium on the
debt of the Trust or take any action in furtherance of any such action;
(c) it shall obtain from each counterparty to each Basic
Document to which it or the Trust is a party and each other agreement
entered into on or after the date hereof to which it or the Trust is a
party, an agreement by each such counterparty that prior to the
occurrence of the event specified in Section 9.1(e) such counterparty
shall not institute against, or join any other Person in instituting
against, it or the Trust, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States;
and
(d) it shall not, for any reason, withdraw or attempt to
withdraw from this Agreement, dissolve, institute proceedings for it to
be adjudicated a bankrupt or insolvent, or consent to the institution
of bankruptcy or insolvency proceedings against it, or file a petition
seeking or consenting to reorganization or relief under any applicable
federal or state law relating to bankruptcy, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of it or a substantial part of its
property, or make any assignment for the benefit of creditors, or admit
in writing its inability to pay its debts generally as they become due,
or declare or effect a moratorium on its debt or take any action in
furtherance of any such action.
SECTION 2.12. Covenants of the Certificateholders. Each
Certificateholder by its acceptance of a Certificate agrees:
(a) to be bound by the terms and conditions of the
Certificates of which such party is the record or beneficial owner and
of this Agreement, including any supplements or amendments hereto and
to perform the obligations of a Holder as set forth therein or herein,
in all respects as if it were a signatory hereto. This undertaking is
made for the benefit of the Trust, the Owner Trustee, the Insurer and
all other Holders present and future;
9
(b) to hereby appoint the Depositor as its agent and
attorney-in-fact to sign any federal income tax information return
filed on behalf of the Trust and agree that, if requested by the Trust,
it will sign such federal income tax information return in its capacity
as a Holder of an interest in the Trust. Each Holder also hereby agrees
that in its tax returns it will not take any position inconsistent with
those taken in any tax returns filed by the Trust;
(c) if such Holder is other than an individual or other entity
holding its Certificate through a broker who reports securities sales
on Form 1099-B, to notify the Owner Trustee of any transfer by it of a
Certificate or a beneficial interest in a Certificate in a taxable sale
or exchange, within 30 days of the date of the transfer; and
(d) until the completion of the events specified in Section
9.1(e), not to, for any reason, institute proceedings for the Trust or
the Depositor to be adjudicated a bankrupt or insolvent, or consent to
the institution of bankruptcy or insolvency proceedings against the
Trust, or file a petition seeking or consenting to reorganization or
relief under any applicable federal or state law relating to
bankruptcy, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the
Trust or a substantial part of its property, or cause or permit the
Trust to make any assignment for the benefit of its creditors, or admit
in writing its inability to pay its debts generally as they become due,
or declare or effect a moratorium on its debt or take any action in
furtherance of any such action.
ARTICLE III.
Certificates and Transfer of Interests
SECTION 3.1. Initial Ownership. Upon the formation of the Trust by the
contribution by the Depositor pursuant to Section 2.5 and until the issuance of
the Certificates, the Depositor shall be the sole beneficiary of the Trust.
SECTION 3.2. The Certificates. The Certificates shall be issued
initially to the Depositor with a Certificate Balance of $4,807,160.19.
Certificates shall be issued in minimum denominations of $1,000 and integral
multiples thereof (except for one Certificate which may be issued in a
denomination other than an integral multiple of $1,000). The Certificates shall
be executed on behalf of the Trust by manual or facsimile signature of an
authorized officer of the Owner Trustee. Certificates bearing the manual or
facsimile signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust, shall be
validly issued and entitled to the benefit of this Agreement, notwithstanding
that such individuals or any of them shall have ceased to be so authorized prior
to the authentication and delivery of such Certificates or did not hold such
offices at the date of authentication and delivery of such Certificates. A
transferee of a
10
Certificate shall become a Certificateholder, and shall be entitled to the
rights and subject to the obligations of a Certificateholder hereunder, upon due
registration of such Certificate in such transferee's name pursuant to Section
3.4.
SECTION 3.3. Authentication of Certificates. Concurrently with the
initial sale of the Receivables to the Trust pursuant to the Sale and Servicing
Agreement, the Owner Trustee shall cause the Certificates with an aggregate
Certificate Balance equal to $4,807,160.19 to be executed on behalf of the
Trust, authenticated and delivered upon the written order of the Depositor,
signed by its chairman of the board, its president or any vice president, its
treasurer or any assistant treasurer without further corporate action by the
Depositor, in authorized denominations. No Certificate shall entitle its holder
to any benefit under this Agreement, or shall be valid for any purpose, unless
there shall appear on such Certificate a certificate of authentication
substantially in the form set forth in Exhibit A, executed by the Owner Trustee
or the Owner Trustee's authentication agent, by manual signature; such
authentication shall constitute conclusive evidence that such Certificate shall
have been duly authenticated and delivered hereunder. All Certificates shall be
dated the date of their authentication. Bankers Trust Company shall be the
initial authentication agent of the Owner Trustee and all references herein to
the authentication of Certificates shall be deemed to include the authentication
agent.
SECTION 3.4. Registration of Transfer and Exchange of Certificates. (a)
The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 3.8, a Certificate Register in which,
subject to such reasonable regulations as it may prescribe, the Owner Trustee
shall provide for the registration of Certificates and of transfers and
exchanges of Certificates as herein provided. Bankers Trust Company shall be the
initial Certificate Registrar.
(b) The Certificate Registrar shall provide the Paying Agent with a
list of the names and addresses of the Certificateholders on the Closing Date in
the form in which such information is provided to the Certificate Registrar.
Upon any transfers of Certificates, the Certificate Registrar shall promptly
notify the Paying Agent (if other than the Certificate Registrar) of the name
and address of the transferee in writing, by facsimile.
(c) No transfer of a Certificate shall be made unless (i) the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and any applicable State securities laws are complied with,
(ii) such transfer is exempt from the registration requirements under said
Securities Act and laws or (iii) such transfer is made to a Person who the
transferor reasonably believes is a "qualified institutional buyer" (as defined
in Rule 144A of the Securities Act) that is purchasing such Certificate for its
own account or the account of a qualified institutional buyer to whom notice is
given that the transfer is being made in reliance on said Rule 144A. In the
event that a transfer is to be made in reliance upon clause (ii) above, the
Certificateholder desiring to effect such transfer and such Certificateholder's
prospective transferee must each (x) certify in writing to the Certificate
Registrar the facts surrounding such transfer and (y) provide the Certificate
Registrar with a written opinion of
11
counsel in form and substance satisfactory to the Depositor and the Certificate
Registrar that such transfer may be made pursuant to an exemption from the
Securities Act or laws, which Opinion of Counsel shall not be an expense of the
Depositor or the Certificate Registrar. In the event that a transfer is to be
made in reliance upon clause (iii) above, the prospective transferee shall have
furnished to the Certificate Registrar and the Depositor a Transferee
Certificate, signed by such transferee, in the form of Exhibit C. Neither the
Depositor nor the Certificate Registrar is under any obligation to register the
Certificates under said Securities Act or any other securities law. The
Certificate Registrar may request and shall receive in connection with any
transfer signature guarantees satisfactory to it in its sole discretion.
(d) In no event shall a Certificate be transferred to an employee
benefit plan, trust annuity or account subject to ERISA or a plan described in
Section 4975(e)(1) of the Code (any such plan, trust or account including any
Keogh (HR-10) plans, individual retirement accounts or annuities and other
employee benefit plans subject to Section 406 of ERISA or Section 4975 of the
Code being referred to in this Section 6.3 as an "Employee Plan"), a trustee of
any Employee Plan, or an entity, account or other pooled investment fund the
underlying assets of which include or are deemed to include Employee Plan assets
by reason of an Employee Plan's investment in the entity, account or other
pooled investment fund. The Seller, the Servicer, the Trustee, the Owner
Trustee, the Insurer and the Standby Servicer shall not be responsible for
confirming or otherwise investigating whether a proposed purchaser is an
employee benefit plan, trust or account subject to ERISA, or described in
Section 4975(e)(1) of the Code.
(e) Each Holder of a Certificate, except the Depositor, if the
Depositor is the Holder of a Certificate, by virtue of the acquisition and
holding thereof, will be deemed to have represented and agreed as follows:
(i) It is a qualified institutional buyer as defined in Rule
144A or an institutional accredited investor as defined in Regulation D
promulgated under the Securities Act and is acquiring the Certificates
for its own institutional account or for the account of a qualified
institutional buyer or an institutional accredited investor.
(ii) It understands that the Certificates have been offered in
a transaction not involving any public offering within the meaning of
the Securities Act, and that, if in the future it decides to resell,
pledge or otherwise transfer any Certificates, such Certificates may be
resold, pledged or transferred only (a) to a person whom the seller
reasonably believes is a qualified institutional buyer (as defined in
Rule 144A under the Securities Act) that purchases for its own account
or for the account of a qualified institutional buyer to whom notice is
given that the resale, pledge or transfer is being made in reliance on
Rule 144A, (b) pursuant to an effective registration statement under
the Securities Act or (c) in reliance on another exemption under the
Securities Act.
12
(iii) It understands that the Certificates will bear a legend
substantially to the following effect:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). THE
HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES THAT THIS
SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(1) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A, TO A PERSON WHOM THE TRANSFEROR REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING
OF RULE 144A UNDER THE SECURITIES ACT, PURCHASING FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER
TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, AND SUBJECT
TO THE RECEIPT BY THE CERTIFICATE REGISTRAR AND THE DEPOSITOR
OF A TRANSFEREE CERTIFICATE, (2) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (3) IN
RELIANCE ON ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUBJECT TO THE RECEIPT
BY THE CERTIFICATE REGISTRAR AND THE DEPOSITOR, OF A
CERTIFICATION OF THE TRANSFEREE (SATISFACTORY TO THE
CERTIFICATE REGISTRAR AND THE DEPOSITOR) AND AN OPINION OF
COUNSEL (SATISFACTORY TO THE CERTIFICATE REGISTRAR AND THE
DEPOSITOR) TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
AND IN COMPLIANCE WITH THE TRANSFER REQUIREMENTS SET FORTH IN
SECTION 3.4 OF THE TRUST AGREEMENT.
IN NO EVENT SHALL THIS SECURITY BE TRANSFERRED TO AN
EMPLOYEE BENEFIT PLAN, TRUST ANNUITY OR ACCOUNT SUBJECT TO
ERISA OR A PLAN DESCRIBED IN SECTION 4975(E)(1) OF THE CODE,
(ANY SUCH PLAN, TRUST OR ACCOUNT BEING REFERRED TO AS AN
"EMPLOYEE PLAN"), A TRUSTEE OF ANY EMPLOYEE PLAN, OR AN
ENTITY, ACCOUNT OR OTHER POOLED INVESTMENT FUND THE UNDERLYING
ASSETS OF WHICH INCLUDE OR ARE DEEMED TO INCLUDE EMPLOYEE PLAN
ASSETS BY REASON OF AN EMPLOYEE PLAN'S INVESTMENT IN THE
ENTITY, ACCOUNT OR OTHER POOLED INVESTMENT FUND. INCLUDED
WITHIN THE DEFINITION OF "EMPLOYEE PLANS" ARE, WITHOUT
LIMITATION, KEOGH (HR-10) PLANS, IRA's (INDIVIDUAL
13
RETIREMENT ACCOUNTS OR ANNUITIES) AND OTHER EMPLOYEE
BENEFIT PLANS, SUBJECT TO SECTION 406 OF ERISA OR
SECTION 4975 OF THE CODE.
(iv) It has not acquired the Certificates with the assets of
an Employee Plan.
(f) Upon surrender for registration of transfer of any Certificate at
the office or agency maintained pursuant to Section 3.8, the Owner Trustee shall
execute, authenticate and deliver (or shall cause its authenticating agent to
authenticate and deliver), in the name of the designated transferee or
transferees, one or more new Certificates in authorized denominations of a like
class and aggregate Certificate Balance dated the date of authentication by the
Owner Trustee or any authenticating agent. At the option of a Holder,
Certificates may be exchanged for other Certificates of the same class in
authorized denominations of a like aggregate Certificate Balance upon surrender
of the Certificates to be exchanged at the office or agency maintained pursuant
to Section 3.8.
(g) Every Certificate presented or surrendered for registration of
transfer or exchange shall be accompanied by a written instrument of transfer in
form satisfactory to the Owner Trustee and the Certificate Registrar duly
executed by the Certificateholder or his attorney duly authorized in writing,
with such signature guaranteed by an "eligible guarantor institution" meeting
the requirements of the Certificate Registrar, which requirements include
membership or participation in the Securities Transfer Agent's Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Certificate Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Exchange Act. Each Certificate surrendered for registration
of transfer or exchange shall be canceled and subsequently disposed of by the
Owner Trustee in accordance with its customary practice.
(h) No service charge shall be made for any registration of transfer or
exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer or exchange of Certificates.
SECTION 3.5. Mutilated, Destroyed, Lost or Stolen Certificates. If (a)
any mutilated Certificate shall be surrendered to the Certificate Registrar, or
if the Certificate Registrar shall receive evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Certificate Registrar, the Owner Trustee and (unless an Insurer Default
shall have occurred and be continuing) the Insurer, such security or indemnity
as may be required by them to save each of them harmless, then in the absence of
notice that such Certificate shall have been acquired by a bona fide purchaser,
the Owner Trustee on behalf of the Trust shall execute and the Owner Trustee, or
the Owner Trustee's authenticating agent, shall authenticate and deliver, in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate of like class, tenor and denomination. In
connection with the issuance of any new Certificate under this Section, the
Owner Trustee or the
14
Certificate Registrar may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Any duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Certificate shall be found
at any time.
SECTION 3.6. Persons Deemed Certificateholders. Every Person by virtue
of becoming a Certificateholder in accordance with this Agreement and the rules
and regulations of the Clearing Agency shall be deemed to be bound by the terms
of this Agreement. Prior to due presentation of a Certificate for registration
of transfer, the Owner Trustee, the Certificate Registrar and the Insurer and
any agent of the Owner Trustee, the Certificate Registrar and the Insurer, may
treat the Person in whose name any Certificate shall be registered in the
Certificate Register as the owner of such Certificate for the purpose of
receiving distributions pursuant to the Sale and Servicing Agreement and for all
other purposes whatsoever, and none of the Owner Trustee, the Certificate
Registrar or the Insurer nor any agent of the Owner Trustee, the Certificate
Registrar or the Insurer shall be bound by any notice to the contrary.
SECTION 3.7. Access to List of Certificateholders' Names and Addresses.
The Certificate Registrar shall furnish or cause to be furnished to the
Servicer, the Depositor or (unless an Insurer Default shall have occurred and be
continuing) the Insurer, within 15 days after receipt by the Certificate
Registrar of a request therefor from such Person in writing, a list, of the
names and addresses of the Certificateholders as of the most recent Record Date.
If three or more Holders of Certificates or one or more Holders of Certificates
evidencing not less than 25% of the Certificate Balance then outstanding apply
in writing to the Certificate Registrar, and such application states that the
applicants desire to communicate with other Certificateholders with respect to
their rights under this Agreement or under the Certificates and such application
is accompanied by a copy of the communication that such applicants propose to
transmit, then the Certificate Registrar shall, within five Business Days after
the receipt of such application, afford such applicants access during normal
business hours to the current list of Certificateholders. Each Holder, by
receiving and holding a Certificate or a beneficial interest therein, shall be
deemed to have agreed not to hold any of the Depositor, the Servicer, the Owner
Trustee, the Certificate Registrar or the Insurer or any agent thereof
accountable by reason of the disclosure of its name and address, regardless of
the source from which such information was derived.
SECTION 3.8. Maintenance of Office or Agency. The Trust shall maintain
in New York, an office or offices or agency or agencies where Certificates may
be surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trust in respect of the Certificates and the Basic
Documents may be served. The Trust initially designates Bankers Trust Company at
4 Albany Street, 10th Floor, New York, New York 10006 as its principal corporate
trust office for such purposes. The Owner Trustee shall give prompt written
notice to the Depositor, the Certificateholders and (unless an Insurer Default
shall have occurred and be continuing) the Insurer of any change in the location
of the Certificate Register or any such office or agency.
15
SECTION 3.9. ERISA Restrictions. The Certificates may not be acquired
by or for the account of (i) an employee benefit plan (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) that is subject to the provisions of Title I of ERISA, (ii) a plan
described in Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended, or (iii) any entity whose underlying assets include plan assets by
reason of a plan's investment in the entity (each, a "Benefit Plan"). By
accepting and holding its ownership interest in its Certificate, the Holder
thereof shall be deemed to have represented and warranted that it is not a
Benefit Plan.
ARTICLE IV.
Voting Rights and Other Actions
SECTION 4.1. Prior Notice to Holders with Respect to Certain Matters.
With respect to the following matters, the Owner Trustee shall not take action
unless at least 30 days before the taking of such action, the Owner Trustee
shall have notified the Certificateholders in writing of the proposed action and
the Certificateholders shall not have notified the Owner Trustee in writing
prior to the 30th day after such notice is given that such Certificateholders
have withheld consent or provided alternative direction:
(a) the election by the Trust to file an amendment to the
Certificate of Trust (unless such amendment is required to be filed
under the Business Trust Statute or unless such amendment would not
materially and adversely affect the interests of the Holders);
(b) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Certificateholder is
required;
(c) the amendment of the Indenture by a supplemental indenture
in circumstances where the consent of any Certificateholder is not
required and such amendment materially adversely affects the interest
of the Certificateholders; or
(d) except pursuant to Section 13.1(b) of the Sale and
Servicing Agreement, the amendment, change or modification of the Sale
and Servicing Agreement, except to cure any ambiguity or defect or to
amend or supplement any provision in a manner that would not materially
adversely affect the interests of the Certificateholders.
The Depositor shall notify the Certificateholders in writing of any appointment
of a successor Note Registrar, Trustee or Certificate Registrar within five
Business Days thereof.
SECTION 4.2. Action by Certificateholders with Respect to Certain
Matters. The Owner Trustee shall not have the power, except upon the direction
of the Certificateholders or the Insurer in accordance with the Basic Documents,
to (a) remove the Servicer under the
16
Sale and Servicing Agreement pursuant to Section 10.1 thereof or (b) except as
expressly provided in the Basic Documents, sell the Receivables after the
termination of the Indenture. The Owner Trustee shall take the actions referred
to in the preceding sentence only upon written instructions signed by the
Certificateholders and the furnishing of indemnification satisfactory to the
Owner Trustee by the Certificateholders.
SECTION 4.3. Action by Certificateholders with Respect to Bankruptcy.
The Owner Trustee shall not have the power to, and shall not, commence any
proceeding or other actions contemplated by Section 2.12(d) relating to the
Trust without the prior written consent of the Insurer (unless an Insurer
Default shall have occurred and be continuing) and the unanimous prior approval
of all Certificateholders and the delivery to the Owner Trustee by each
Certificateholder of a certificate signed by such Certificateholder, certifying
that such Certificateholder reasonably believes that the Trust is insolvent.
SECTION 4.4. Restrictions on Certificateholders' Power. (a) The
Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation
of the Trust or the Owner Trustee under this Agreement or any of the Basic
Documents or would be contrary to Section 2.3 nor shall the Owner Trustee be
obligated to follow any such direction, if given.
(b) No Certificateholder shall have any right by virtue or by availing
itself of any provisions of this Agreement to institute any suit, action, or
proceeding in equity or at law upon or under or with respect to this Agreement
or any Basic Document, unless the Certificateholders are the Instructing Party
pursuant to Section 6.3 and unless a Certificateholder previously shall have
given to the Owner Trustee a written notice of default and of the continuance
thereof, as provided in this Agreement, and also unless Certificateholders
evidencing not less than 25% of the Certificate Balance then outstanding shall
have made written request upon the Owner Trustee to institute such action, suit
or proceeding in its own name as Owner Trustee under this Agreement and shall
have offered to the Owner Trustee such reasonable indemnity as it may require
against the costs, expenses and liabilities to be incurred therein or thereby,
and the Owner Trustee, for 30 days after its receipt of such notice, request,
and offer of indemnity, shall have neglected or refused to institute any such
action, suit, or proceeding, and during such 30-day period no request or waiver
inconsistent with such written request has been given to the Owner Trustee
pursuant to and in compliance with this Section or Section 6.3; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the Owner Trustee, that
no one or more Holders of Certificates shall have any right in any manner
whatever by virtue or by availing itself or themselves of any provisions of this
Agreement to affect, disturb, or prejudice the rights of the Holders of any
other of the Certificates, or to obtain or seek to obtain priority over or
preference to any other such Holder, or to enforce any right under this
Agreement, except in the manner provided in this Agreement and for the equal,
ratable, and common benefit of all Certificateholders. For the protection and
enforcement of the provisions of this Section 4.4, each and every
17
Certificateholder and the Owner Trustee shall be entitled to such relief as can
be given either at law or in equity.
SECTION 4.5. Majority Control. No Certificateholder shall have any
right to vote or in any manner otherwise control the operation and management of
the Trust except as expressly provided in this Agreement. Except as expressly
provided herein, any action that may be taken by the Certificateholders under
this Agreement may be taken by the Holders of Certificates evidencing not less
than a majority of the aggregate Certificate Balance. Except as expressly
provided herein, any written notice of the Certificateholders delivered pursuant
to this Agreement shall be effective if signed by Certificateholders evidencing
not less than a majority of the Certificate Balance at the time of the delivery
of such notice.
SECTION 4.6. Rights of Insurer. Notwithstanding anything to the
contrary in the Basic Documents, without the prior written consent of the
Insurer (so long as no Insurer Default shall have occurred and be continuing),
the Owner Trustee shall not (i) remove the Servicer, (ii) initiate any claim,
suit or proceeding by the Trust or compromise any claim, suit or proceeding
brought by or against the Trust, other than with respect to the enforcement of
any Receivable or any rights of the Trust thereunder, (iii) authorize the merger
or consolidation of the Trust with or into any other business trust or other
entity (other than in accordance with Section 3.10 of the Indenture) or (iv)
amend the Certificate of Trust.
ARTICLE V.
Certain Duties
SECTION 5.1. Accounting and Records to the Noteholders,
Certificateholders, the Internal Revenue Service and Others. Subject to Sections
12.1(b)(iii) and 12.1(c) of the Sale and Servicing Agreement, the Depositor
shall (a) maintain (or cause to be maintained) the books of the Trust on a
calendar year basis on the accrual method of accounting, (b) deliver (or cause
to be delivered) to each Certificateholder, as may be required by the Code and
applicable Treasury Regulations, such information, if any, as may be required
(including, if appropriate consistent with the characterization of the Trust
pursuant to Section 2.6, Schedule K-1) to enable each Certificateholder to
prepare its Federal and state income tax returns, (c) file or cause to be filed
such tax returns, if any, relating to the Trust (including, if appropriate
consistent with the characterization of the Trust pursuant to Section 2.6, a
partnership information return on Internal Revenue Service Form 1065), and
direct the Servicer to make such elections as may from time to time be required
or appropriate under any applicable state or Federal statute or rule or
regulation thereunder so as to maintain the Trust's characterization pursuant to
Section 2.6 for Federal income and California franchise tax purposes and for
purposes of any other jurisdiction for which the characterization of the Trust
is relevant. In any period in which the Paying Agent receives written notice
that the Trust is not treated solely as a security device in accordance with the
provisions of Section 2.6, the Paying Agent will, in accordance with Section
1446 of the Code and Rev. Proc. 89-31, 1989-
18
1 C.B. 895 thereunder, collect or cause to be collected any withholding tax as
described in and in accordance with Section 5.5 with respect to income or
distributions to Certificateholders and the appropriate forms relating thereto.
The Depositor shall make all elections pursuant to this Section. The Depositor
shall have the power to sign all tax information returns filed pursuant to this
Section 5.1 and any other returns as may be required by law, to the extent it is
legally entitled to do so. In the event the Trust is treated as a partnership
for federal income tax purposes, the Depositor shall elect under Section 1278 of
the Code to include in income currently any market discount that accrues with
respect to the Receivables. None of the Trust, the Depositor nor any Person on
behalf of the Trust or the Depositor shall make the election provided under
Section 754 of the Code.
SECTION 5.2. Signature on Returns; Tax Matters Partner. (a) The
Depositor shall sign on behalf of the Trust the tax returns of the Trust, unless
applicable law requires a Certificateholder to sign such documents.
(b) In the event the Trust is treated as a partnership for federal
income tax purposes, the Depositor shall be the "tax matters partner" of the
Trust pursuant to the Code.
ARTICLE VI.
Authority and Duties of Owner Trustee
SECTION 6.1. General Authority. The Owner Trustee is authorized and
directed to execute and deliver the Basic Documents to which the Trust is named
as a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Trust is named as a party and
any amendment thereto, in each case, in such form as the Depositor shall approve
as evidenced conclusively by the Owner Trustee's execution thereof, and on
behalf of the Trust, to direct the Trustee to authenticate and deliver Class A-1
Notes in the aggregate principal amount of $36,000,000, Class A-2 Notes in the
aggregate principal amount of $92,000,000, Class A-3 Notes in the aggregate
principal amount of $25,000,000 and Class A-4 Notes in the aggregate principal
amount of $82,532,000. In addition to the foregoing, the Owner Trustee is
authorized but shall not be obligated, to take all actions required of the Trust
pursuant to the Basic Documents. The Owner Trustee is further authorized from
time to time to take such action as the Instructing Party recommends with
respect to the Basic Documents so long as such activities are consistent with
the terms of the Basic Documents.
SECTION 6.2. General Duties. It shall be the duty of the Owner Trustee
to discharge (or cause to be discharged) all of its responsibilities pursuant to
the terms of this Agreement and the Sale and Servicing Agreement and to
administer the Trust in the interest of the Holders, subject to the Basic
Documents and in accordance with the provisions of this Agreement.
Notwithstanding the foregoing, the Owner Trustee shall be deemed to have
discharged its duties and responsibilities hereunder and under the Basic
Documents to the
19
extent the Servicer has agreed in the Sale and Servicing Agreement to perform
any act or to discharge any duty of the Trust or the Owner Trustee hereunder or
under any Basic Document, and the Owner Trustee shall not be liable for the
default or failure of the Servicer to carry out its obligations under the Sale
and Servicing Agreement.
SECTION 6.3. Action upon Instruction. (a) Subject to Article IV and the
terms of the Spread Account Agreement, the Insurer (so long as an Insurer
Default shall not have occurred and be continuing) or the Certificateholders (if
an Insurer Default shall have occurred and be continuing) (the "Instructing
Party") shall have the exclusive right to direct the actions of the Owner
Trustee in the management of the Trust, so long as such instructions are not
inconsistent with the express terms set forth herein or in any Basic Document.
The Instructing Party shall not instruct the Owner Trustee in a manner
inconsistent with this Agreement or the Basic Documents.
(b) The Owner Trustee shall not be required to take any action
hereunder or under any Basic Document if the Owner Trustee shall have reasonably
determined, or shall have been advised by counsel, that such action is likely to
result in liability on the part of the Owner Trustee or is contrary to the terms
hereof or of any Basic Document or is otherwise contrary to law.
(c) Whenever the Owner Trustee is unable to decide between alternative
courses of action permitted or required by the terms of this Agreement or any
Basic Document, the Owner Trustee shall promptly give notice (in such form as
shall be appropriate under the circumstances) to the Instructing Party
requesting instruction as to the course of action to be adopted, and to the
extent the Owner Trustee acts in good faith in accordance with any written
instruction received from the Instructing Party, the Owner Trustee shall not be
liable on account of such action to any Person. If the Owner Trustee shall not
have received appropriate instruction within ten days of such notice (or within
such shorter period of time as reasonably may be specified in such notice or may
be necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action, not inconsistent with this Agreement or
the Basic Documents, as it shall deem to be in the best interests of the
Certificateholders, and shall have no liability to any Person for such action or
inaction.
(d) In the event that the Owner Trustee is unsure as to the application
of any provision of this Agreement or any Basic Document or any such provision
is ambiguous as to its application, or is, or appears to be, in conflict with
any other applicable provision, or in the event that this Agreement permits any
determination by the Owner Trustee or is silent or is incomplete as to the
course of action that the Owner Trustee is required to take with respect to a
particular set of facts, the Owner Trustee may give notice (in such form as
shall be appropriate under the circumstances) to the Instructing Party
requesting instruction and, to the extent that the Owner Trustee acts or
refrains from acting in good faith in accordance with any such instruction
received, the Owner Trustee shall not be liable, on account of such action or
inaction, to any Person. If the Owner Trustee shall not have received
appropriate instruction within 10 days of such notice (or within such shorter
period of time as reasonably
20
may be specified in such notice or may be necessary under the circumstances) it
may but shall be under no duty to, take or refrain from taking such action not
inconsistent with this Agreement or the Basic Documents as it shall deem to be
in the best interests of the Certificateholders, and shall have no liability to
any Person for such action or inaction.
SECTION 6.4. No Duties Except as Specified in this Agreement or in
Instructions. The Owner Trustee shall not have any duty or obligation to manage,
make any payment with respect to, register, record, sell, dispose of, or
otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from
taking any action under, or in connection with, any document contemplated hereby
to which the Owner Trustee is a party, except as expressly provided by the terms
of this Agreement or in any document or written instruction received by the
Owner Trustee pursuant to Section 6.3; and no implied duties or obligations
shall be read into this Agreement or any Basic Document against the Owner
Trustee. The Owner Trustee shall have no responsibility for filing any financing
or continuation statement in any public office at any time or to otherwise
perfect or maintain the perfection of any security interest or lien granted to
it hereunder or to prepare or file any United States Securities and Exchange
Commission filing for the Trust or to record this Agreement or any Basic
Document.
SECTION 6.5. No Action Except under Basic Documents or Instructions.
The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise
deal with any part of the Owner Trust Estate except (i) in accordance with the
powers granted to and the authority conferred upon the Owner Trustee pursuant to
this Agreement, (ii) in accordance with the Basic Documents and (iii) in
accordance with any document or instruction delivered to the Owner Trustee
pursuant to Section 6.3.
SECTION 6.6. Restrictions. The Owner Trustee shall not take any action
(a) that is inconsistent with the purposes of the Trust set forth in Section 2.3
or (b) that, to the actual knowledge of the Owner Trustee, would result in the
Trust's becoming taxable as a corporation for Federal income tax purposes or for
the purposes of any applicable state tax on corporations. The Certificateholders
shall not direct the Owner Trustee to take action that would violate the
provisions of this Section.
ARTICLE VII.
Concerning the Owner Trustee
SECTION 7.1. Acceptance of Trusts and Duties. The Owner Trustee accepts
the trusts hereby created and agrees to perform its duties hereunder with
respect to such trusts but only upon the terms of this Agreement. The Owner
Trustee also agrees to disburse all moneys actually received by it constituting
part of the Owner Trust Estate upon the terms of the Basic Documents and this
Agreement. The Owner Trustee shall not be answerable or accountable hereunder or
under any Basic Document under any circumstances, except (i) for
21
its own willful misconduct, bad faith or negligence, (ii) in the case of the
inaccuracy of any representation or warranty contained in Section 7.3 expressly
made by the Owner Trustee, (iii) for liabilities arising from the failure of the
Owner Trustee to perform obligations expressly undertaken by it in the last
sentence of Section 6.4 hereof, (iv) for any investments issued by the Owner
Trustee or any branch or affiliate thereof in its commercial capacity or (v) for
taxes, fees or other charges on, based on or measured by, any fees, commissions
or compensation received by the Owner Trustee. In particular, but not by way of
limitation (and subject to the exceptions set forth in the preceding sentence):
(a) the Owner Trustee shall not be liable for any error of
judgment made by a Responsible Officer of the Owner Trustee;
(b) the Owner Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in accordance with the
instructions of the Instructing Party, the Servicer or any
Certificateholder;
(c) no provision of this Agreement or any Basic Document shall
require the Owner Trustee to expend or risk funds or otherwise incur
any financial liability in the performance of any of its rights or
powers hereunder or under any Basic Document if the Owner Trustee shall
have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably
assured or provided to it;
(d) under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Basic
Documents, including the principal of and interest on the Notes;
(e) the Owner Trustee shall not be responsible for or in
respect of the validity or sufficiency of this Agreement or for the due
execution hereof by the Depositor or for the form, character,
genuineness, sufficiency, value or validity of any of the Owner Trust
Estate or for or in respect of the validity or sufficiency of the Basic
Documents, other than the certificate of authentication on the
Certificates, and the Owner Trustee shall in no event assume or incur
any liability, duty or obligation to the Insurer, Trustee, the
Collateral Agent, any Noteholder or to any Certificateholder, other
than as expressly provided for herein and in the Basic Documents;
(f) the Owner Trustee shall not be liable for the default or
misconduct of the Depositor, the Insurer, the Trustee or the Servicer
under any of the Basic Documents or otherwise and the Owner Trustee
shall have no obligation or liability to perform the obligations under
this Agreement or the Basic Documents that are required to be performed
by the Depositor under this Agreement, the Insurer or the Trustee under
the Note Policy, by the Trustee under the Indenture or the Trustee or
the Servicer under the Sale and Servicing Agreement; and
22
(g) the Owner Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Agreement, or to
institute, conduct or defend any litigation under this Agreement or
otherwise or in relation to this Agreement or any Basic Document, at
the request, order or direction of the Instructing Party or any of the
Certificateholders, unless such Instructing Party or Certificateholders
have offered to the Owner Trustee security or indemnity satisfactory to
it against the costs, expenses and liabilities that may be incurred by
the Owner Trustee therein or thereby. The right of the Owner Trustee to
perform any discretionary act enumerated in this Agreement or in any
Basic Document shall not be construed as a duty, and the Owner Trustee
shall not be answerable for other than its negligence, bad faith or
willful misconduct in the performance of any such act.
SECTION 7.2. Furnishing of Documents. The Owner Trustee shall furnish
to the Certificateholders promptly upon receipt of a written request therefor,
duplicates or copies of all reports, notices, requests, demands, certificates,
financial statements and any other instruments furnished to the Owner Trustee
under the Basic Documents.
SECTION 7.3. Representations and Warranties. The Owner Trustee hereby
represents and warrants to the Depositor, the Holders and the Insurer (which
shall have relied on such representations and warranties in issuing the Note
Policy), that:
(a) It is a banking corporation, duly organized and validly
existing in good standing under the laws of the State of Delaware. It
has all requisite corporate power and authority to execute, deliver and
perform its obligations under this Agreement.
(b) It has taken all corporate action necessary to authorize
the execution and delivery by it of this Agreement, and this Agreement
will be executed and delivered by one of its officers who is duly
authorized to execute and deliver this Agreement on its behalf.
(c) Neither the execution nor the delivery by it of this
Agreement, nor the consummation by it of the transactions contemplated
hereby nor compliance by it with any of the terms or provisions hereof
will contravene or constitute any default under its charter documents
or by-laws.
SECTION 7.4. Reliance; Advice of Counsel. (a) The Owner Trustee shall
incur no liability to anyone in acting upon any signature, instrument, notice,
resolution, request, consent, order, certificate, report, opinion, bond or other
document or paper believed by it to be genuine and believed by it to be signed
by the proper party or parties. The Owner Trustee may accept a certified copy of
a resolution of the board of directors or other governing body of any corporate
party as conclusive evidence that such resolution has been duly adopted by such
body and that the same is in full force and effect. As to any fact or matter the
method of the determination of which is not specifically prescribed herein, the
Owner Trustee may for all purposes hereof rely on a certificate, signed by the
president or any vice president or by
23
the treasurer, secretary or other authorized officers of the relevant party, as
to such fact or matter, and such certificate shall constitute full protection to
the Owner Trustee for any action taken or omitted to be taken by it in good
faith in reliance thereon.
(b) In the exercise or administration of the trusts hereunder and in
the performance of its duties and obligations under this Agreement or the Basic
Documents, the Owner Trustee (i) may act directly or through its agents or
attorneys pursuant to agreements entered into with any of them, and the Owner
Trustee shall not be liable for the conduct or misconduct of such agents or
attorneys if such agents or attorneys shall have been selected by the Owner
Trustee with reasonable care, and (ii) may consult with counsel, accountants and
other skilled persons to be selected with reasonable care and employed by it.
The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such
counsel, accountants or other such persons and according to such opinion not
contrary to this Agreement or any Basic Document.
SECTION 7.5. Not Acting in Individual Capacity. Except as provided in
this Article VII, in accepting the trusts hereby created Bankers Trust
(Delaware) acts solely as Owner Trustee hereunder and not in its individual
capacity and all Persons having any claim against the Owner Trustee by reason of
the transactions contemplated by this Agreement or any Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof.
SECTION 7.6. Owner Trustee Not Liable for Certificates or Receivables.
The recitals contained herein and in the Certificates (other than the signature
and countersignature of the Owner Trustee on the Certificates) shall be taken as
the statements of the Depositor and the Owner Trustee assumes no responsibility
for the correctness thereof. The Owner Trustee makes no representations as to
the validity or sufficiency of this Agreement, of any Basic Document or of the
Certificates (other than the signature and countersignature of the Owner Trustee
on the Certificates) or the Notes, or of any Receivable or related documents.
The Owner Trustee shall at no time have any responsibility or liability for or
with respect to the legality, validity and enforceability of any Receivable, or
the perfection and priority of any security interest created by any Receivable
in any Financed Vehicle or the maintenance of any such perfection and priority,
or for or with respect to the sufficiency of the Owner Trust Estate or its
ability to generate the payments to be distributed to Certificateholders under
this Agreement or the Noteholders under the Indenture, including, without
limitation: the existence, condition and ownership of any Financed Vehicle; the
existence and enforceability of any insurance thereon; the existence and
contents of any Receivable on any computer or other record thereof; the validity
of the assignment of any Receivable to the Trust or of any intervening
assignment; the completeness of any Receivable; the performance or enforcement
of any Receivable; the compliance by the Depositor, the Servicer or any other
Person with any warranty or representation made under any Basic Document or in
any related document or the accuracy of any such warranty or representation or
any action of the Trustee or the Servicer or any subservicer taken in the name
of the Owner Trustee.
24
SECTION 7.7. Owner Trustee May Own Certificates and Notes. The Owner
Trustee in its individual or any other capacity may become the owner or pledgee
of Certificates or Notes and may deal with the Depositor, the Trustee and the
Servicer in banking transactions with the same rights as it would have if it
were not Owner Trustee.
SECTION 7.8. Payments from Owner Trust Estate. All payments to be made
by the Owner Trustee under this Agreement or any of the Basic Documents to which
the Trust or the Owner Trustee is a party shall be made only from the income and
proceeds of the Owner Trust Estate and only to the extent that the Owner Trust
shall have received income or proceeds from the Owner Trust Estate to make such
payments in accordance with the terms hereof. Bankers Trust (Delaware), or any
successor thereto, in its individual capacity, will not be liable for any
amounts payable under this Agreement or any of the Basic Documents to which the
Trust or the Owner Trustee is a party.
SECTION 7.9. Doing Business in other Jurisdictions. Notwithstanding
anything herein contained to the contrary, neither Bankers Trust (Delaware) nor
any successor thereto, nor the Owner Trustee shall be required to take any
action in any jurisdiction other than in the State of Delaware if the taking of
such action will, even after the appointment of a co-trustee or separate trustee
in accordance with Section 10.5 hereof, (i) require the consent or approval or
authorization or order of or the giving of notice to, or the registration with
or the taking of any other action in respect of, any state or other governmental
authority or agency of any jurisdiction other than the State of Delaware; (ii)
result in any fee, tax or other governmental charge under the laws of the State
of Delaware becoming payable by Bankers Trust (Delaware) (or any successor
thereto); or (iii) subject Bankers Trust (Delaware) (or any successor thereto)
to personal jurisdiction in any jurisdiction other than the State of Delaware
for causes of action arising from acts unrelated to the consummation of the
transactions by Bankers Trust (Delaware) (or any successor thereto) or the Owner
Trustee, as the case may be, contemplated hereby.
ARTICLE VIII.
Compensation of Owner Trustee
SECTION 8.1. Owner Trustee's Fees and Expenses. The Owner Trustee shall
receive at the direction of the Depositor as compensation for its services
hereunder such fees as have been separately agreed upon before the date hereof
between CPS and the Owner Trustee, and the Owner Trustee shall be entitled to be
reimbursed by the Depositor for its other reasonable expenses hereunder,
including the reasonable compensation, expenses and disbursements of such
agents, representatives, experts and counsel as the Owner Trustee may employ in
connection with the exercise and performance of its rights and its duties
hereunder and under the Basic Documents.
25
SECTION 8.2. Indemnification. The Depositor shall be liable as primary
obligor for, and shall indemnify the Owner Trustee and its officers, directors,
successors, assigns, agents and servants (collectively, the "Indemnified
Parties") from and against, any and all liabilities, obligations, losses,
damages, taxes, claims, actions and suits, and any and all reasonable costs,
expenses and disbursements (including reasonable legal fees and expenses) of any
kind and nature whatsoever (collectively, "Expenses") which may at any time be
imposed on, incurred by, or asserted against the Owner Trustee or any
Indemnified Party in any way relating to or arising out of this Agreement, the
Basic Documents, the Owner Trust Estate, the administration of the Owner Trust
Estate or the action or inaction of the Owner Trustee hereunder, except only
that the Depositor shall not be liable for or required to indemnify the Owner
Trustee from and against Expenses arising or resulting from any of the matters
described in the third sentence of Section 7.1. The indemnities contained in
this Section 8.2 and the rights under Section 8.1 shall survive the resignation
or termination of the Owner Trustee or the termination of this Agreement.
SECTION 8.3. Payments to the Owner Trustee. Any amounts paid to the
Owner Trustee pursuant to this Article VIII shall be deemed not to be a part of
the Owner Trust Estate immediately after such payment.
SECTION 8.4. Non-recourse Obligations. Notwithstanding anything in this
Agreement or any Basic Document, the Owner Trustee agrees in its individual
capacity and in its capacity as Owner Trustee for the Trust that all obligations
of the Trust to the Owner Trustee individually or as Owner Trustee for the Trust
shall be recourse to the Owner Trust Estate only and specifically shall not be
recourse to the assets of any Certificateholder.
ARTICLE IX.
Termination of Trust Agreement
SECTION 9.1. Termination of Trust Agreement. (a) This Agreement and the
Trust shall terminate and be of no further force or effect upon the latest of
(i) the maturity or other liquidation of the last Receivable (including the
purchase by the Servicer at its option of the corpus of the Trust as described
in Section 11.1 of the Sale and Servicing Agreement) and the subsequent
distribution of amounts in respect of such Receivables as provided in the Basic
Documents, or (ii) the payment to Certificateholders of all amounts required to
be paid to them pursuant to this Agreement and the Sale and Servicing Agreement
and the payment to the Insurer of all amounts payable or reimbursable to it
pursuant to the Sale and Servicing Agreement; provided, however, that the rights
to indemnification under Section 8.2 and the rights under Section 8.1 shall
survive the termination of the Trust. The Servicer shall promptly notify the
Owner Trustee and the Insurer of any prospective termination pursuant to this
Section 9.1. The bankruptcy, liquidation, dissolution, death or incapacity of
any Certificateholder shall not (x) operate to terminate this Agreement or the
Trust, nor (y) entitle such Certificateholder's legal representatives or heirs
to claim an accounting or to take any
26
action or proceeding in any court for a partition or winding up of all or any
part of the Trust or Owner Trust Estate nor (z) otherwise affect the rights,
obligations and liabilities of the parties hereto.
(b) Except as provided in clause (a), neither the Depositor nor any
Certificateholder shall be entitled to revoke or terminate the Trust.
(c) Notice of any termination of the Trust, specifying the Payment Date
upon which the Certificateholders shall surrender their Certificates to the
Paying Agent for payment of the final distribution and cancellation, shall be
given by the Paying Agent by letter to Certificateholders mailed within five
Business Days of receipt of notice of such termination from the Servicer given
pursuant to Section 11.1(c) of the Sale and Servicing Agreement, stating (i) the
Payment Date upon or with respect to which final payment of the Certificates
shall be made upon presentation and surrender of the Certificates at the office
of the Paying Agent therein designated (ii) the amount of any such final payment
and (iii) that the Record Date otherwise applicable to such Payment Date is not
applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Paying Agent therein specified. The Paying
Agent shall give such notice to the Certificate Registrar (if other than the
Paying Agent) at the time such notice is given to Certificateholders. Upon
presentation and surrender of the Certificates, if any, the Paying Agent shall
cause to be distributed to Certificateholders amounts distributable on such
Payment Date pursuant to Section 5.7 of the Sale and Servicing Agreement and
Section 5.5 hereof.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above mentioned written notice, the Paying Agent shall give a second
written notice to the remaining Certificateholders to surrender their
Certificates for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the Certificates shall
not have been surrendered for cancellation, the Paying Agent may take
appropriate steps, or may appoint an agent to take appropriate steps, to contact
the remaining Certificateholders concerning surrender of their Certificates, and
the cost thereof shall be paid out of the funds and other assets that shall
remain subject to this Agreement. Any funds remaining in the Trust after
exhaustion of such remedies shall be distributed, subject to applicable escheat
laws, by the Paying Agent to the Depositor and Holders shall look solely to the
Depositor for payment.
(d) Any funds remaining in the Trust after funds for final distribution
have been distributed or set aside for distribution and all amounts owed to the
Owner Trustee pursuant to this Agreement have been paid shall be distributed by
the Paying Agent to the Depositor.
(e) Upon the winding up of the Trust and its termination, the Owner
Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation presented to the Owner Trustee in execution form by
the Servicer with the Secretary of State in accordance with the provisions of
Section 3810 of the Business Trust Statute.
27
ARTICLE X.
Successor Owner Trustees and Additional Owner Trustees
SECTION 10.1. Eligibility Requirements for Owner Trustee. The Owner
Trustee shall at all times be a corporation (i) satisfying the provisions of
Section 3807(a) of the Business Trust Statute; (ii) authorized to exercise
corporate trust powers; (iii) having a combined capital and surplus of at least
$50,000,000 and subject to supervision or examination by Federal or State
authorities; and (iv) acceptable to the Insurer in its sole discretion, so long
as an Insurer Default shall not have occurred and be continuing. If such
corporation shall publish reports of condition at least annually, pursuant to
law or to the requirements of the aforesaid supervising or examining authority,
then for the purpose of this Section 10.1, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. In case at any time
the Owner Trustee shall cease to be eligible in accordance with the provisions
of this Section 10.1, the Owner Trustee shall resign immediately in the manner
and with the effect specified in Section 10.2.
SECTION 10.2. Resignation or Removal of Owner Trustee. The Owner
Trustee may at any time resign and be discharged from the trusts hereby created
by giving written notice thereof to the Depositor, the Insurer and the Servicer.
Upon receiving such notice of resignation, the Depositor shall promptly appoint
a successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the resigning Owner Trustee and one copy to the
successor Owner Trustee, provided that the Depositor shall have received written
confirmation from each of the Rating Agencies that the proposed appointment will
not result in an increased capital charge to the Insurer by either of the Rating
Agencies. If no successor Owner Trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Owner Trustee or the Insurer may petition any court
of competent jurisdiction for the appointment of a successor Owner Trustee.
If at any time the Owner Trustee shall cease to be eligible in
accordance with the provisions of Section 10.1 and shall fail to resign after
written request therefor by the Depositor, or if at any time the Owner Trustee
shall be legally unable to act or shall be adjudged bankrupt or insolvent, or a
receiver of the Owner Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or
liquidation, then the Depositor with the consent of the Insurer (so long as an
Insurer Default shall not have occurred and be continuing) may remove the Owner
Trustee. If the Depositor shall remove the Owner Trustee under the authority of
the immediately preceding sentence, the Depositor shall promptly appoint a
successor Owner Trustee by written instrument, in duplicate, one copy of which
instrument shall be delivered to the outgoing Owner Trustee so removed, one copy
to the Insurer and one copy to the successor Owner Trustee and payment of all
fees owed to the outgoing Owner Trustee.
28
Any resignation or removal of the Owner Trustee and appointment of a
successor Owner Trustee pursuant to any of the provisions of this Section 10.2
shall not become effective until acceptance of appointment by the successor
Owner Trustee pursuant to Section 10.3 and payment of all fees and expenses owed
to the outgoing Owner Trustee. The Depositor shall provide notice of such
resignation or removal of the Owner Trustee to each of the Rating Agencies.
SECTION 10.3. Successor Owner Trustee. Any successor Owner Trustee
appointed pursuant to Section 10.2 shall execute, acknowledge and deliver to the
Depositor, the Servicer, the Insurer and to its predecessor Owner Trustee an
instrument accepting such appointment under this Agreement, and thereupon the
resignation or removal of the predecessor Owner Trustee shall become effective
and such successor Owner Trustee, without any further act, deed or conveyance,
shall become fully vested with all the rights, powers, duties and obligations of
its predecessor under this Agreement, with like effect as if originally named as
Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and
expenses deliver to the successor Owner Trustee all documents and statements and
monies held by it under this Agreement; and the Depositor and the predecessor
Owner Trustee shall execute and deliver such instruments and do such other
things as may reasonably be required for fully and certainly vesting and
confirming in the successor Owner Trustee all such rights, powers, duties and
obligations.
No successor Owner Trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 10.1.
Upon acceptance of appointment by a successor Owner Trustee pursuant to
this section, the Servicer shall mail notice of the successor of such Owner
Trustee to all Certificateholders, the Trustee, the Noteholders and the Rating
Agencies. If the Servicer shall fail to mail such notice within 10 days after
acceptance of appointment by the successor Owner Trustee, the successor Owner
Trustee shall cause such notice to be mailed at the expense of the Servicer.
SECTION 10.4. Merger or Consolidation of Owner Trustee. Any corporation
into which the Owner Trustee may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Owner Trustee shall be a party, or any corporation
succeeding to all or substantially all of the corporate trust business of the
Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided
such corporation shall be eligible pursuant to Section 10.1, without the
execution or filing of any instrument or any further act on the part of any of
the parties hereto, anything herein to the contrary notwithstanding; provided
further that the Owner Trustee shall mail notice of such merger or consolidation
to the Rating Agencies.
SECTION 10.5. Appointment of Co-Trustee or Separate Trustee.
Notwithstanding any other provisions of this Agreement, at any time, for the
purpose of meeting any legal
29
requirements of any jurisdiction in which any part of the Owner Trust Estate or
any Financed Vehicle may at the time be located, the Servicer and the Owner
Trustee acting jointly shall have the power and shall execute and deliver all
instruments to appoint one or more Persons approved by the Owner Trustee and the
Insurer to act as co-trustee, jointly with the Owner Trustee, or separate
trustee or separate trustees, of all or any part of the owner Trust Estate, and
to vest in such Person, in such capacity, such title to the Trust, or any part
thereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Servicer and the Owner Trustee may
consider necessary or desirable. If the Servicer shall not have joined in such
appointment within 15 days after the receipt by it of a request so to do, the
Owner Trustee subject, unless an Insurer Default shall have occurred and be
continuing, to the approval of the Insurer (which approval shall not be
unreasonably withheld) shall have the power to make such appointment. No
co-trustee or separate trustee under this Agreement shall be required to meet
the terms of eligibility as a successor trustee pursuant to Section 10.1 and no
notice of the appointment of any co-trustee or separate trustee shall be
required pursuant to Section 10.3.
Each separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or
imposed upon the Owner Trustee shall be conferred upon and exercised or
performed by the Owner Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or co-trustee
is not authorized to act separately without the Owner Trustee joining
in such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be performed,
the Owner Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion thereof in
any such jurisdiction) shall be exercised and performed singly by such
separate trustee or co-trustee, but solely at the direction of the
Owner Trustee;
(ii) no trustee under this Agreement shall be personally
liable by reason of any act or omission of any other trustee under this
Agreement; and
(iii) the Servicer and the Owner Trustee acting jointly may at
any time accept the resignation of or remove any separate trustee or
co-trustee.
Any notice, request or other writing given to the Owner Trustee shall
be deemed to have been given to each of the then separate trustees and
co-trustees, as effectively as if given to each of them. Every instrument
appointing any separate trustee or co-trustee shall refer to this Agreement and
the conditions of this Article X. Each separate trustee and co-trustee, upon its
acceptance of the trusts conferred, shall be vested with the estates or property
specified in its instrument of appointment, either jointly with the Owner
Trustee or separately, as may be provided therein, subject to all the provisions
of this Agreement, specifically including every provision of this Agreement
relating to the conduct of, affecting the liability
30
of, or affording protection to, the Owner Trustee. Each such instrument shall be
filed with the Owner Trustee and a copy thereof given to the Servicer and the
Insurer.
Any separate trustee or co-trustee may at any time appoint the Owner
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the
Owner Trustee, to the extent permitted by law, without the appointment of a new
or successor trustee.
ARTICLE XI.
Miscellaneous
SECTION 11.1. Supplements and Amendments. (a) This Agreement may be
amended by the Depositor and the Owner Trustee, with the prior written consent
of the Insurer (so long as an Insurer Default shall not have occurred and be
continuing) and with prior written notice to the Rating Agencies and the
Trustee, without the consent of any of the Noteholders or the
Certificateholders, (i) to cure any ambiguity or defect or (ii) to correct,
supplement or modify any provisions in this Agreement; provided, however, that
such action shall not, as evidenced by an Opinion of Counsel which may be based
upon a certificate of the Servicer, adversely affect in any material respect the
interests of any Noteholder or Certificateholder.
(b) This Agreement may also be amended from time to time, with the
prior written consent of the Insurer (so long as an Insurer Default shall not
have occurred and be continuing) by the Depositor and the Owner Trustee, with
prior written notice to the Rating Agencies and the Trustee and the consent of
the Certificateholders evidencing not less than a majority by aggregate
Certificate Balance and, to the extent such amendment materially and adversely
affects the interests of the Noteholders, with the consent of Noteholders
evidencing not less than a majority of the aggregate outstanding principal
amount of the Notes (which consent of any Holder of a Certificate or Note given
pursuant to this Section or pursuant to any other provision of this Agreement
shall be conclusive and binding on such Holder and on all future Holders of such
Certificate or Note and of any Certificate or Note issued upon the transfer
thereof or in exchange thereof or in lieu thereof whether or not notation of
such consent is made upon the Certificate or Note) for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement or of modifying in any manner the rights of the Noteholders or
the Certificateholders; provided, however, that, subject to the express rights
of the Insurer under the Basic Documents, no such amendment shall (a) increase
or reduce in any manner the amount of, or accelerate or delay the timing of,
collections of payments on Receivables or distributions that shall be required
to be made for the benefit of the Noteholders or the Certificateholders or (b)
reduce the
31
aforesaid percentage of the aggregate outstanding principal amount of the Notes
and the Certificate Balance required to consent to any such amendment, without
the consent of the Holders of all the outstanding Notes and Holders of all
outstanding Certificates.
For purposes of determining the extent to which an amendment does not
have a material adverse effect on the Noteholders, the Owner Trustee may rely on
an Opinion of Counsel, which may be based upon a certificate of the Servicer.
Promptly after the execution of any such amendment or consent, the
Servicer shall furnish written notification of the substance of such amendment
or consent to each Certificateholder, the Trustee and each of the Rating
Agencies.
It shall not be necessary for the consent of Certificateholders, the
Noteholders or the Trustee pursuant to this Section to approve the particular
form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such
consents (and any other consents of Certificateholders provided for in this
Agreement or in any other Basic Document) and of evidencing the authorization of
the execution thereof by Certificateholders shall be subject to such reasonable
requirements as the Owner Trustee may prescribe. Promptly after the execution of
any amendment to the Certificate of Trust, the Owner Trustee shall cause the
filing of such amendment with the Secretary of State.
Prior to the execution of any amendment to this Agreement or the
Certificate of Trust, the Owner Trustee shall be entitled to receive and rely
upon an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Agreement and that all conditions precedent to
the execution and delivery of such amendment have been satisfied. The Owner
Trustee may, but shall not be obligated to, enter into any such amendment which
affects the Owner Trustee's own rights, duties or immunities under this
Agreement or otherwise.
SECTION 11.2. No Legal Title to Owner Trust Estate in
Certificateholders. The Certificateholders shall not have legal title to any
part of the Owner Trust Estate. The Certificateholders shall be entitled to
receive distributions with respect to their undivided ownership interest therein
only in accordance with Article IX. No transfer, by operation of law or
otherwise, of any right, title or interest of the Certificateholders to and in
their ownership interest in the Owner Trust Estate shall operate to terminate
this Agreement or the trusts hereunder or entitle any transferee to an
accounting or to the transfer to it of legal title to any part of the Owner
Trust Estate.
SECTION 11.3. Limitations on Rights of Others. Except for Section 2.7,
the provisions of this Agreement are solely for the benefit of the Owner
Trustee, the Depositor, the Certificateholders, the Servicer and, to the extent
expressly provided herein, the Insurer, the Trustee and the Noteholders, and
nothing in this Agreement, whether express or implied, shall be construed to
give to any other Person any legal or equitable right, remedy or claim in
32
the Owner Trust Estate or under or in respect of this Agreement or any
covenants, conditions or provisions contained herein.
SECTION 11.4. Notices. (a) Unless otherwise expressly specified or
permitted by the terms hereof, all notices shall be in writing and shall be
deemed given upon receipt personally delivered, delivered by overnight courier
or mailed first class mail or certified mail, in each case return receipt
requested, and shall be deemed to have been duly given upon receipt, if to the
Owner Trustee, addressed to the Corporate Trust Office; if to the Depositor,
addressed to CPS Receivables Corp., 2 Ada, Irvine, California 92718; if to the
Insurer, addressed to Financial Security Assurance Inc., 350 Park Avenue, New
York, New York 10022, Attention: Senior Vice President Surveillance (Telecopy:
(212) 339-3547); (in each case in which notice or other communication to the
Insurer refers to an Event of Default, a claim on the Note Policy or with
respect to which failure on the part of the Insurer to respond shall be deemed
to constitute consent or acceptance, then a copy of such notice or other
communication should also be sent to the attention of the General Counsel and
the Head-Financial Guaranty Group "URGENT MATERIAL ENCLOSED"); or, as to each
party, at such other address as shall be designated by such party in a written
notice to each other party.
(b) Any notice required or permitted to be given to a Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Holder as shown in the Certificate Register. Any notice so mailed within the
time prescribed in this Agreement shall be conclusively presumed to have been
duly given, whether or not the Certificateholder receives such notice.
SECTION 11.5. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 11.6. Separate Counterparts. This Agreement may be executed by
the parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 11.7. Assignments; Insurer. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Upon issuance of the Note Policy, this
Agreement shall also inure to the benefit of the Insurer for so long as an
Insurer Default shall not have occurred and be continuing. Without limiting the
generality of the foregoing, all covenants and agreements in this Agreement
which confer rights upon the Insurer shall be for the benefit of and run
directly to the Insurer, and the Insurer shall be entitled to rely on and
enforce such covenants, subject, however, to the limitations on such rights
provided in this Agreement and the Basic Documents. The Insurer
33
may disclaim any of its rights and powers under this Agreement (but not its
duties and obligations under the Policies) upon delivery of a written notice to
the Owner Trustee.
SECTION 11.8. No Petition. The Owner Trustee (not in its individual
capacity but solely as Owner Trustee), by entering into this Agreement, each
Certificateholder, by accepting a Certificate, and the Trustee and each
Noteholder by accepting the benefits of this Agreement, hereby covenants and
agrees that it will not at any time institute against the Depositor, or join in
any institution against the Depositor of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other proceedings under
any United States Federal or state bankruptcy or similar law in connection with
any obligations relating to the Certificates, the Notes, this Agreement or any
of the Basic Documents.
SECTION 11.9. No Recourse. Each Certificateholder, by accepting a
Certificate, acknowledges that such Certificateholder's Certificates represent
beneficial interests in the Trust only and do not represent interests in or
obligations of the Depositor, the Servicer, the Owner Trustee, the Trustee, the
Noteholders, the Insurer or any Affiliate thereof and no recourse may be had
against such parties or their assets, except as may be expressly set forth or
contemplated in this Agreement, the Certificates or the Basic Documents.
SECTION 11.10. Headings. The headings of the various Articles and
Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof.
SECTION 11.11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.12. Servicer. The Servicer is authorized to prepare, or
cause to be prepared, execute and deliver on behalf of the Trust all such
documents, reports, filings, instruments, certificates and opinions as it shall
be the duty of the Trust or Owner Trustee to prepare, file or deliver pursuant
to the Basic Documents. Upon written request, the Owner Trustee shall execute
and deliver to the Servicer a limited power of attorney appointing the Servicer
the Trust's agent and attorney-in-fact to prepare, or cause to be prepared,
execute and deliver all such documents, reports, filings, instruments,
certificates and opinions.
34
ARTICLE XII.
Amendment and Restatement
SECTION 12.1. Amendment and Restatement. The parties hereby agree that
this Amended and Restated Trust Agreement replaces and supersedes the Original
Agreement.
35
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed by their respective officers hereunto duly authorized as of
the day and year first above written.
BANKERS TRUST (DELAWARE), as
Owner Trustee
By: /s/ Patricia M.F. Russo
Title: Vice President
CPS RECEIVABLES CORP., as
Depositor
By: /s/ Jeffrey P. Fritz
Title: Chief Financial Officer
36
EXHIBIT A
NUMBER Initial Certificate Balance:
R-1 $4,807,160.19
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING THIS
SECURITY, AGREES THAT THIS SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (1) SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON WHOM THE TRANSFEROR REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT,
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, AND SUBJECT TO THE RECEIPT BY THE CERTIFICATE
REGISTRAR AND THE DEPOSITOR OF A TRANSFEREE CERTIFICATE, (2) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (3) IN RELIANCE ON
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
SUBJECT TO THE RECEIPT BY THE CERTIFICATE REGISTRAR AND THE DEPOSITOR, OF A
CERTIFICATION OF THE TRANSFEREE (SATISFACTORY TO THE CERTIFICATE REGISTRAR AND
THE DEPOSITOR) AND AN OPINION OF COUNSEL (SATISFACTORY TO THE CERTIFICATE
REGISTRAR AND THE DEPOSITOR) TO THE EFFECT THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES AND IN COMPLIANCE WITH THE
TRANSFER REQUIREMENTS SET FORTH IN SECTION 3.4 OF THE TRUST AGREEMENT.
IN NO EVENT SHALL THIS SECURITY BE TRANSFERRED TO AN EMPLOYEE BENEFIT
PLAN, TRUST ANNUITY OR ACCOUNT SUBJECT TO ERISA OR A PLAN DESCRIBED IN SECTION
4975(E)(1) OF THE CODE, (ANY SUCH PLAN, TRUST OR ACCOUNT BEING REFERRED TO AS AN
"EMPLOYEE PLAN"), A TRUSTEE OF ANY EMPLOYEE PLAN, OR AN ENTITY, ACCOUNT OR OTHER
POOLED INVESTMENT FUND THE UNDERLYING ASSETS OF WHICH INCLUDE OR ARE DEEMED TO
INCLUDE EMPLOYEE PLAN ASSETS BY REASON OF AN EMPLOYEE PLAN'S INVESTMENT IN THE
ENTITY, ACCOUNT OR OTHER POOLED INVESTMENT FUND. INCLUDED WITHIN THE DEFINITION
OF "EMPLOYEE PLANS" ARE, WITHOUT LIMITATION, KEOGH (HR-10) PLANS, IRA's
(INDIVIDUAL
RETIREMENT ACCOUNTS OR ANNUITIES) AND OTHER EMPLOYEE BENEFIT PLANS, SUBJECT TO
SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE.
THE PRINCIPAL OF THIS CERTIFICATE IS DISTRIBUTABLE IN INSTALLMENTS AS
SET FORTH IN THE TRUST AGREEMENT. ACCORDINGLY, THE OUTSTANDING PRINCIPAL OF THIS
CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
------------------------------
ASSET BACKED CERTIFICATE
evidencing a beneficial ownership interest in certain distributions of the
Trust, as defined below, the property of which includes a pool of retail
installment sale contracts secured by new or used automobiles, vans or light
duty trucks and sold to the Trust by CPS Receivables Corp.
(This Certificate does not represent an interest in or obligation of CPS
Receivables Corp. or any of its Affiliates, except to the extent described
below.)
2
THIS CERTIFIES THAT CPS RECEIVABLES CORP. is the registered owner of
FOUR MILLION EIGHT HUNDRED SEVEN THOUSAND ONE HUNDRED SIXTY AND 19/100 DOLLARS
nonassessable, fully-paid, beneficial interest in certain distributions of CPS
Auto Receivables Trust 1998-3 (the "Trust") formed by CPS Receivables Corp., a
California corporation.
OWNER TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Certificates referred to in the within-mentioned
Trust Agreement.
BANKERS TRUST (DELAWARE) BANKERS TRUST (DELAWARE)
not in its individual not in its individual
capacity but solely or capacity but solely as
as Owner Trustee Owner Trustee
By: By: Bankers Trust Company
Authenticating Agent
By:________________________
Date:______________________
The Trust was created pursuant to a Trust Agreement dated as of July 8,
1998, between the Depositor and Bankers Trust (Delaware), as Owner Trustee (the
"Owner Trustee") as amended by an amendment, dated as of July 15, 1998, between
the Depositor and the Owner Trustee (the "Trust Agreement"), a summary of
certain of the pertinent provisions of which is set forth below. To the extent
not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Trust Agreement.
This Certificate is one of the duly authorized Certificates designated
as "Asset Backed Certificates" (herein called the "Certificates"). Issued under
the Indenture, dated as of July 15, 1998 between the Trust and Norwest Bank
Minnesota, National Association, as Trustee and collateral agent, are four
classes of Notes designated as "Class A-1 5.6375% Asset Backed Notes" (the
"Class A-1 Notes"), "Class A-2 5.8550% Asset Backed Notes" (the "Class A-2
Notes"), "Class A-3 5.9950% Asset Backed Notes" (the "Class A-3 Notes") and
"Class A-4 6.0800% Asset Backed Notes" (the "Class A-4 Notes", and together with
the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes, the "Notes").
This Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the holder of this
Certificate by virtue of the acceptance hereof assents and by which such holder
is bound. The property of the Trust includes a pool of retail installment sale
contracts secured by new and used automobiles, vans or light duty trucks (the
"Receivables"), all monies received thereunder after the Cutoff Date, security
interests in the vehicles financed thereby, certain bank accounts and the
proceeds thereof, proceeds from
3
claims on certain insurance policies and certain other rights under the Trust
Agreement and the Sale and Servicing Agreement, all right, to and interest of
the Depositor in and to the Purchase Agreement dated as of July 15, 1998 between
Consumer Portfolio Services, Inc. and the Depositor, all right to and interest
of the Depositor in and to the Purchase Agreement dated as of July 15, 1998
between Samco Acceptance Corp. and the Depositor, all right to and interest of
the Depositor in and to the Purchase Agreement dated as of July 15, 1998 between
Linc Acceptance Company LLC and the Depositor, and all proceeds of the
foregoing.
Under the Trust Agreement, there will be distributed on the 15th day of
each month or, if such 15th day is not a Business Day, the next Business Day
(the "Payment Date"), commencing on August 15, 1998, to the Person in whose name
this Certificate is registered at the close of business on the 10th day of the
calendar month of such Payment Date (the "Record Date") such Certificateholder's
fractional undivided interest in the amount to be distributed to
Certificateholders on such Payment Date.
The holder of this Certificate acknowledges and agrees that its rights
to receive distributions in respect of this Certificate are subordinated to the
rights of the Noteholders as described in the Sale and Servicing Agreement, the
Indenture and the Trust Agreement, as applicable.
It is the intent of the Depositor, Servicer, and Certificateholders
that, in the event that Certificates are held by any person other than the
Depositor, for purposes of Federal income taxes, the Trust will be treated as a
partnership and the Certificateholders (including the Depositor) will be treated
as partners in that partnership. In such event, the Depositor and such other
Certificateholders, by acceptance of a Certificate, agree to treat, and to take
no action inconsistent with the treatment of, the Certificates for such tax
purposes as partnership interests in the Trust. Each Certificateholder, by its
acceptance of a Certificate, covenants and agrees that such Certificateholder
will not at any time institute against the Trust or the Depositor, or join in
any institution against the Trust or the Depositor of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Certificates, the Notes, the
Trust Agreement or any of the Basic Documents.
Distributions on this Certificate will be made as provided in the Trust
Agreement by the Owner Trustee or its agent by wire transfer or check mailed to
the Certificateholder of record in the Certificate Register without the
presentation or surrender of this Certificate or the making of any notation
hereon. Except as otherwise provided in the Trust Agreement and notwithstanding
the above, the final distribution on this Certificate will be made after due
notice by the Owner Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency
maintained for the purpose by the Owner Trustee in the Borough of Manhattan, The
City of New York.
4
Reference is hereby made to the further provisions of this Certificate
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon shall have been
executed by an authorized officer of the Owner Trustee or its agent, by manual
signature, this Certificate shall not entitle the holder hereof to any benefit
under the Trust Agreement or the Sale and Servicing Agreement or be valid for
any purpose.
THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE IN ACCORDANCE
WITH SUCH LAWS.
IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Trust and not
in its individual capacity, has caused this Certificate to be duly executed.
CPS AUTO RECEIVABLES TRUST 1998-3
By: BANKERS TRUST (DELAWARE), not in
its individual capacity, but solely
as Owner Trustee
By: _______________________________
Name:
Title:
Date: July 28, 1998
5
(Reverse of Certificate)
The Certificates do not represent an obligation of, or an interest in
the Servicer, the Depositor, the Owner Trustee or any Affiliates of any of them
and no recourse may be had against such parties or their assets, except as may
be expressly set forth or contemplated herein or in the Trust Agreement, the
Indenture or the Basic Documents. In addition, this Certificate is not
guaranteed by any governmental agency or instrumentality and is limited in right
of payment to certain collections with respect to the Receivables, all as more
specifically set forth herein and in the Sale and Servicing Agreement. A copy of
each of the Sale and Servicing Agreement and the Trust Agreement may be examined
during normal business hours at the principal office of the Depositor, and at
such other places, if any, designated by the Depositor, by any Certificateholder
upon written request.
The Trust Agreement permits, with certain exceptions therein provided,
the amendment thereof and the modification of the rights and obligations of the
Depositor and the rights of the Certificateholders under the Trust Agreement at
any time by the Depositor and the Owner Trustee with the consent of the holders
of the Notes and the Certificates evidencing not less than a majority of the
outstanding principal balance of the Notes and the Certificate Balance. Any such
consent by the holder of this Certificate shall be conclusive and binding on
such holder and on all future holders of this Certificate and of any Certificate
issued upon the transfer hereof or in exchange hereof or in lieu hereof whether
or not notation of such consent is made upon this Certificate. The Trust
Agreement also permits the amendment thereof, in certain limited circumstances,
without the consent of the holders of any of the Certificates.
As provided in the Trust Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registerable in the
Certificate Register upon surrender of this Certificate for registration of
transfer at the offices or agencies of the Certificate Registrar maintained by
the Owner Trustee in the Borough of Manhattan, The City of New York, accompanied
by a written instrument of transfer in form satisfactory to the Owner Trustee
and the Certificate Registrar duly executed by the holder hereof or such
holder's attorney duly authorized in writing, and thereupon one or more new
Certificates in authorized denominations evidencing the same aggregate interest
in the Trust will be issued to the designated transferee. The initial
Certificate Registrar appointed under the Trust Agreement is Bankers Trust
Company.
Except for Certificates issued to the Depositor, the Certificates are
issuable only as registered Certificates without coupons in denominations of
$1,000 or integral multiples thereof. As provided in the Trust Agreement and
subject to certain limitations therein set forth, Certificates are exchangeable
for new Certificates in authorized denominations evidencing the same aggregate
denomination as requested by the holder surrendering the same. No service charge
will be made for any such registration of transfer or exchange, but the Owner
Trustee or the Certificate Registrar may require payment of a sum sufficient to
cover any tax or governmental charge payable in connection therewith.
The Owner Trustee, the Certificate Registrar, the Insurer and any agent
of the Owner Trustee, the Certificate Registrar or the Insurer may treat the
person in whose name this Certificate is registered as the owner hereof for all
purposes, and none of the Owner Trustee, the Certificate Registrar, the Insurer
nor any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Trust Agreement and
the Trust created thereby shall terminate upon the payment to Certificateholders
of all amounts required to be paid to them pursuant to the Trust Agreement and
the Sale and Servicing Agreement and the disposition of all property held as
part of the Trust. The Servicer of the Receivables may at its option purchase
all remaining Receivables from the Trust on or after 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.
The Certificates may not be acquired by (a) an employee benefit plan
(as defined in Section 3(3) of ERISA) that is subject to the provisions of Title
I of ERISA, (b) a plan described in Section 4975(e) (1) of the Code or (c) any
entity whose underlying assets include plan assets by reason of a plan's
investment in the entity (each, a "Benefit Plan"). By accepting and holding this
Certificate, the Holder hereof shall be deemed to have represented and warranted
that it is not a Benefit Plan.
The recitals contained herein shall be taken as the statements of the
Depositor or the Servicer, as the case may be, and the Owner Trustee assumes no
responsibility for the correctness thereof. The Owner Trustee makes no
representations as to the validity or sufficiency of this Certificate or of any
Receivable or related document.
-2-
ASSIGNMENT
FOR VALUE RECEIVED the undersigned hereby sells, assigns
and transfers unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or type name and address, including postal zip code, of assignee)
- --------------------------------------------------------------------------------
the within Certificate, and all rights thereunder, hereby irrevocably
constituting and appointing
_______________________________ Attorney to transfer said Certificate on the
books of the Certificate Registrar, with full power of substitution in the
premises.
Dated:
__________________*
Signature
Guaranteed:
__________________*
- ----------
* NOTICE: The signature to this assignment must correspond with the name
of the registered owner as it appears on the face of the within
Certificate in every particular, without alteration, enlargement or any
change whatever. Such signature must be guaranteed by an "eligible
guarantor institution" meeting the requirements of the Certificate
Registrar, which requirements include membership or participation in
STAMP or such other "signature guarantee program" as may be determined
by the Certificate Registrar in addition to, or in substitution for,
STAMP, all in accordance with the Securities Exchange Act of 1934, as
amended.
EXHIBIT B
[FORM OF]
CERTIFICATE OF TRUST OF
CPS AUTO RECEIVABLES TRUST 1998-3
This Certificate of Trust of CPS Auto Receivables Trust 1998-3 (the
"Trust"), dated as of ___________, 199_, is being duly executed and filed by
_______________________________, a ____________, and ______________, an
individual, as trustee, to form a business trust under the Delaware Business
Trust Act (12 Del. Code, ss. 3801 et seq.).
1. Name. The name of the business trust formed hereby is CPS Auto
Receivables Trust 1998-3.
2. This Certificate of Trust will be effective ______ __, 199_.
IN WITNESS WHEREOF, the undersigned, being the sole trustee of the
Trust, has executed this Certificate of Trust as of the date first above
written.
BANKERS TRUST (DELAWARE),
not in its individual capacity,
but solely as Owner Trustee of the
Trust.
By:
Name:
Title:
Exhibit C to
Trust Agreement
Transferee Certificate
Pursuant to Section 3.4 of
the Trust Agreement
In connection with the transfer of $________________ aggregate
principal amount of CPS Auto Receivables Trust 1998-3 [ ]% Asset Backed
Certificates (the "Transferred Certificates"), __________________________, the
undersigned transferee (the "Transferee"), pursuant to Section 3.4 of the Trust
Agreement (as defined below), hereby notifies the Trustee and the Seller and
certifies, represents and warrants to each of them that it is a "qualified
institutional buyer" (as defined in Rule 144A promulgated under the Securities
Act of 1933, as amended), that it is purchasing such Transferred Certificates
for its own account or the account of a qualified institutional buyer to whom
notice has been given that the transfer is to be made in reliance of Rule 144A,
and acknowledges that it has received such information regarding the Trust and
the Transferred Certificates as it has requested and that it is aware that the
transferor is relying upon the foregoing certification to claim the exemption
from registration provided by Rule 144A and the Transferee represents and
warrants that it has delivered an executed copy of this certificate to the
Trustee and the Seller prior to the transfer of any Transferred Certificates
discussed herein.
In no event shall a Certificate be transferred to an employee benefit
plan, trust annuity or account subject to ERISA or a plan described in Section
4975(e)(1) of the Code (any such plan, trust or account including any Keogh
(HR-10) plans, individual retirement accounts or annuities and other employee
benefit plans subject to Section 406 of ERISA or Section 4975 of the Code being
referred to herein as an "Employee Plan"), a trustee of any Employee Plan, or an
entity, account or other pooled investment fund, the underlying assets of which
include or are deemed to include Employee Plan assets by reason of an Employee
Plan's investment in the entity, account or other pooled investment fund. The
Seller, Servicer, Trustee and Standby Servicer shall not be responsible for
confirming or otherwise investigating whether a proposed transferee is an
employee benefit plan, trust or account subject to ERISA, or described in
Section 4975(e)(1) of the Code.
Terms used herein and not otherwise defined have the meanings assigned
to them in the Trust Agreement amended and restated as of July 15, 1998, between
CPS Receivables Corp. and Bankers Trust (Delaware), as Owner Trustee.
[TRANSFEREE]
By:
Name:
Title:
-2-
EXHIBIT 4.2
INDENTURE
EXECUTION COPY
- --------------------------------------------------------------------------------
CPS AUTO RECEIVABLES TRUST 1998-3
Class A-1 5.6375% Asset-Backed Notes
Class A-2 5.8550% Asset-Backed Notes
Class A-3 5.9950% Asset-Backed Notes
Class A-4 6.0800% Asset-Backed Notes
---------------------------------
INDENTURE
Dated as of July 15, 1998
-----------------------------------
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
Trustee
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions......................................................3
SECTION 1.2. Incorporation by Reference of Trust Indenture Act...............11
SECTION 1.3. Other Definitional Provisions...................................11
ARTICLE II
The Notes
SECTION 2.1. Form...........................................................12
SECTION 2.2. Execution, Authentication and Delivery.........................12
SECTION 2.3. Temporary Notes................................................13
SECTION 2.4. Registration; Registration of Transfer and Exchange............13
SECTION 2.5. Mutilated, Destroyed, Lost or Stolen Notes.....................15
SECTION 2.6. Persons Deemed Owner...........................................15
SECTION 2.7. Payment of Principal and Interest; Defaulted Interest..........16
SECTION 2.8. Cancellation...................................................17
SECTION 2.9. Release of Collateral..........................................17
SECTION 2.10. Book-Entry Notes...............................................17
SECTION 2.11. Notices to Clearing Agency.....................................18
SECTION 2.12. Definitive Notes...............................................18
ARTICLE III
Covenants
SECTION 3.1. Payment of Principal and Interest..............................19
SECTION 3.2. Maintenance of Office or Agency................................19
SECTION 3.3. Money for Payments to be Held in Trust.........................19
SECTION 3.4. Existence......................................................21
SECTION 3.5. Protection of Trust Estate.....................................21
SECTION 3.6. Opinions as to Trust Estate....................................22
SECTION 3.7. Performance of Obligations; Servicing of Receivables...........22
SECTION 3.8. Negative Covenants.............................................23
SECTION 3.9. Annual Statement as to Compliance..............................24
SECTION 3.10. Issuer May Consolidate, Etc. Only on Certain Terms.............24
-i-
SECTION 3.11. Successor or Transferee........................................27
SECTION 3.12. No Other Business..............................................27
SECTION 3.13. No Borrowing...................................................27
SECTION 3.14. Servicer's Obligations.........................................27
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities..............27
SECTION 3.16. Capital Expenditures...........................................27
SECTION 3.17. Compliance with Laws...........................................27
SECTION 3.18. Restricted Payments............................................28
SECTION 3.19. Notice of Events of Default....................................28
SECTION 3.20. Further Instruments and Acts...................................28
SECTION 3.21. Amendments of Sale and Servicing Agreement and Trust
Agreement......................................................28
SECTION 3.22. Income Tax Characterization....................................28
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture........................29
SECTION 4.2. Application of Trust Money.....................................29
SECTION 4.3. Repayment of Moneys Held by Note Paying Agent..................30
ARTICLE V
Remedies
SECTION 5.1. Events of Default..............................................30
SECTION 5.2. Rights Upon Event of Default...................................31
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement
by Trustee...................................................33
SECTION 5.4. Remedies.......................................................35
SECTION 5.5. Optional Preservation of the Receivables.......................36
SECTION 5.6. Priorities.....................................................36
SECTION 5.7. Limitation of Suits............................................37
SECTION 5.8. Unconditional Rights of Noteholders To Receive Principal and
Interest.......................................................38
SECTION 5.9. Restoration of Rights and Remedies.............................38
SECTION 5.10. Rights and Remedies Cumulative.................................39
SECTION 5.11. Delay or Omission Not a Waiver.................................39
SECTION 5.12. Control by Noteholders.........................................39
SECTION 5.13. Waiver of Past Defaults........................................40
SECTION 5.14. Undertaking for Costs..........................................40
SECTION 5.15. Waiver of Stay or Extension Laws...............................40
-ii-
ARTICLE VI
The Trustee
SECTION 6.1. Duties of Trustee..............................................41
SECTION 6.2. Rights of Trustee..............................................42
SECTION 6.3. Individual Rights of Trustee...................................43
SECTION 6.4. Trustee's Disclaimer...........................................44
SECTION 6.5. Notice of Defaults.............................................44
SECTION 6.6. Reports by Trustee to Holders..................................44
SECTION 6.7. Compensation and Indemnity.....................................44
SECTION 6.8. Replacement of Trustee.........................................45
SECTION 6.9. Successor Trustee by Merger....................................46
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee..................46
SECTION 6.11. Eligibility: Disqualification..................................48
SECTION 6.12. Preferential Collection of Claims Against Issuer...............48
SECTION 6.13. Appointment and Powers.........................................48
SECTION 6.14. Performance of Duties..........................................48
SECTION 6.15. Limitation on Liability........................................49
SECTION 6.16. Reserved.......................................................49
SECTION 6.17. Successor Trustee..............................................49
SECTION 6.18. [Reserved].....................................................50
SECTION 6.19. Representations and Warranties of the Trustee..................50
SECTION 6.20. Waiver of Setoffs..............................................51
SECTION 6.21. Control by the Controlling Party...............................51
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1. Issuer To Furnish To Trustee Names and Addresses of
Noteholders....................................................51
SECTION 7.2. Preservation of Information; Communications to Noteholders.....52
SECTION 7.3. Reports by Issuer..............................................52
SECTION 7.4. Reports by Trustee.............................................53
ARTICLE VIII
Collection of Money and Releases of Trust Estate
SECTION 8.1. Collection of Money............................................53
SECTION 8.2. Release of Trust Estate........................................53
SECTION 8.3. Opinion of Counsel.............................................54
-iii-
ARTICLE IX
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of Noteholders........54
SECTION 9.2. Supplemental Indentures with Consent of Noteholders...........55
SECTION 9.3. Execution of Supplemental Indentures..........................57
SECTION 9.4. Effect of Supplemental Indenture..............................57
SECTION 9.5. Conformity With Trust Indenture Act...........................57
SECTION 9.6. Reference in Notes to Supplemental Indentures.................57
ARTICLE X
Redemption of Notes
SECTION 10.1. Redemption....................................................58
SECTION 10.2. Form of Redemption Notice.....................................58
SECTION 10.3. Notes Payable on Redemption Date..............................58
ARTICLE XI
Miscellaneous
SECTION 11.1. Compliance Certificates and Opinions, etc.....................59
SECTION 11.2. Form of Documents Delivered to Trustee........................61
SECTION 11.3. Acts of Noteholders...........................................61
SECTION 11.4. Notices, etc., to Trustee, Issuer and Rating Agencies.........62
SECTION 11.5. Notices to Noteholders; Waiver................................63
SECTION 11.6. Alternate Payment and Notice Provisions.......................64
SECTION 11.7. Conflict with Trust Indenture Act.............................64
SECTION 11.8. Effect of Headings and Table of Contents......................64
SECTION 11.9. Successors and Assigns........................................64
SECTION 11.10. Severability..................................................64
SECTION 11.11. Benefits of Indenture.........................................64
SECTION 11.12. Legal Holidays................................................65
SECTION 11.13. Governing Law.................................................65
SECTION 11.14. Counterparts..................................................65
SECTION 11.15. Recording of Indenture........................................65
SECTION 11.16. Trust Obligation..............................................65
SECTION 11.17. No Petition...................................................66
SECTION 11.18. Inspection....................................................66
24296275
-iv-
Exhibit A-1 Form of Class A-1 Note
Exhibit A-2 Form of Class A-2 Note
Exhibit A-3 Form of Class A-3 Note
Exhibit A-4 Form of Class A-4 Note
Exhibit B Form of Depository Agreement
-v-
INDENTURE dated as of July 15, 1998, between CPS AUTO RECEIVABLES TRUST
1998-3, a Delaware business trust (the "Issuer"), and NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION, a national banking association, as trustee (the
"Trustee").
Each party agrees as follows for the benefit of the other party and for the
equal and ratable benefit of the Holders of the Issuer's Class A-1 5.6375%
Asset-Backed Notes (the "Class A-1 Notes"), Class A-2 5.8550% Asset-Backed Notes
(the "Class A-2 Notes"), Class A-3 5.9950% Asset-Backed Notes (the "Class A-3
Notes") and Class A-4 6.0800% Asset-Backed Notes (the "Class A-4 Notes" and,
together with the Class A-1 Notes, the Class A-2 Notes and the Class A-3 Notes,
the "Class A Notes" or "Notes"):
As security for the payment and performance by the Issuer of its
obligations under this Indenture and the Notes, the Issuer has agreed to assign
the Collateral (as defined below) as collateral to the Trustee for the benefit
of the Noteholders.
Financial Security Assurance Inc. (the "Note Insurer") has issued and
delivered a financial guaranty insurance policy, dated the Closing Date (with
endorsements, the "Note Policy"), pursuant to which the Note Insurer guarantees
Scheduled Payments, as defined in the Note Policy.
As an inducement to the Note Insurer to issue and deliver the Note Policy,
the Issuer and the Note Insurer have executed and delivered the Insurance and
Indemnity Agreement, dated as of July 15, 1998 (as amended from time to time,
the "Insurance Agreement") among the Note Insurer, the Issuer, Consumer
Portfolio Services, Inc., and CPS Receivables Corp.
As an additional inducement to the Note Insurer to issue the Note Policy,
and as security for the performance by the Issuer of the Insurer Secured
Obligations (as defined below) and as security for the performance by the Issuer
of the Trustee Secured Obligations, the Issuer has agreed to assign the
Collateral (as defined below) as collateral to the Trustee for the benefit of
the Issuer Secured Parties, as their respective interests may appear.
GRANTING CLAUSE
The Issuer hereby Grants to the Trustee at the Closing Date, for the
benefit of the Issuer Secured Parties,
(i) all right, title and interest of the Issuer in and to the
Receivables listed in Schedule A to the Sale and Servicing Agreement,
all monies received thereon after the Cutoff Date and all Net
Liquidation Proceeds received with respect thereto after the Cutoff
Date;
-1-
(ii) all right, title and interest of the Issuer in and to the
security interests in the Financed Vehicles granted by Obligors
pursuant to the Receivables and any other interest of the Issuer in
such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to such Financed Vehicles in
the State of Michigan, all other evidence of ownership with respect to
such Financed Vehicles;
(iii) all right, title and interest of the Issuer in and to any
proceeds from claims on any physical damage, credit life and credit
accident and health insurance policies or certificates relating to the
Financed Vehicles or the Obligors;
(iv) all right, title and interest of the Issuer in and to the
Purchase Agreements, including a direct right to cause CPS to purchase
Receivables from the Trust pursuant to the CPS Purchase Agreement
under the circumstances specified therein;
(v) the Issuer's rights and benefits, but none of its obligations
or burdens, under the Sale and Servicing Agreement (including all
rights of the Seller under the Purchase Agreements);
(vi) all right, title and interest of the Issuer in and to
refunds for the costs of extended service contracts with respect to
Financed Vehicles, refunds of unearned premiums with respect to credit
life and credit accident and health insurance policies or certificates
covering an Obligor or Financed Vehicle or his or her obligations with
respect to a Financed Vehicle and any recourse to Dealers for any of
the foregoing;
(vii) the Receivable File related to each Receivable;
(viii) all amounts and property from time to time held in or
credited to the Collection Account, the Lockbox Account and the Note
Distribution Account; and
(ix) all present and future claims, demands, causes and choses in
action in respect of any or all of the foregoing and all payments on
or under and all proceeds of every kind and nature whatsoever in
respect of any or all of the foregoing, including all proceeds of the
conversion, voluntary or involuntary, into cash or other liquid
property, all cash proceeds, accounts, accounts receivable, notes,
drafts, acceptances, chattel paper, checks, deposit accounts,
insurance proceeds, condemnation awards, rights to payment of any and
every kind and other forms of obligations and receivables, instruments
and other property which at any time constitute all or part of or are
included in the proceeds of any of the foregoing (collectively, the
"Collateral").
In addition, the Issuer shall cause the Note Policy to be issued for the benefit
of the Class A Noteholders.
-2-
The foregoing Grant is made in trust to the Trustee, for the benefit of the
Holders of the Notes and for the benefit of the Note Insurer. The Trustee hereby
acknowledges such Grant, accepts the trusts under this Indenture in accordance
with the provisions of this Indenture and agrees to perform its duties as
required in this Indenture to the best of its ability to the end that the
interests of such parties, recognizing the priorities of their respective
interests may be adequately and effectively protected.
ARTICLE I
Definitions and Incorporation by Reference
SECTION 1.1. Definitions. Except as otherwise specified herein, the
following terms have the respective meanings set forth below for all purposes of
this Indenture and the definitions of such terms are equally applicable to both
the singular and plural forms of such terms and to each gender.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to them in the Sale and Servicing Agreement or, if not
defined therein, in the Trust Agreement.
"Act" has the meaning specified in Section 11.3(a).
"Affiliate" of any Person means any Person who directly or indirectly
controls, is controlled by, or is under direct or indirect common control with
such Person. For purposes of this definition of "Affiliate", the term "control"
(including the terms "controlling", "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause a direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
"Amount Financed" with respect to a Receivable shall have the meaning
specified in the Sale and Servicing Agreement.
"Annual Percentage Rate" or "APR" of a Receivable means the annual rate of
finance charges stated in the Receivable.
"Authorized Officer" means, with respect to the Issuer and the Servicer,
any officer or agent acting pursuant to a power of attorney of the Owner Trustee
or the Servicer, as applicable, who is authorized to act for the Owner Trustee
or the Servicer, as applicable, in matters relating to the Issuer and who is
identified on the list of Authorized Officers delivered by each of the Owner
Trustee and the Servicer to the Trustee on the Closing Date (as such list may be
modified or supplemented from time to time thereafter).
-3-
"Basic Documents" means this Indenture, the Certificate of Trust, the Trust
Agreement, the Sale and Servicing Agreement, the Master Spread Account
Agreement, the Spread Account Supplement, the Insurance Agreement, the
Indemnification Agreement, the Lockbox Agreement and other documents and
certificates delivered in connection therewith.
"Book Entry Notes" means a beneficial interest in the Notes, ownership and
transfers of which shall be made through book entries by a Clearing Agency as
described in Section 2.10.
"Business Day" means (i) with respect to the Note Policy, any day other
than a Saturday, Sunday, legal holiday or other day on which commercial banking
institutions in Wilmington, Delaware, the City of New York, Minneapolis,
Minnesota, or the state in which the principal Corporate Trust Office of the
Trustee is located or any other location of any successor Servicer, successor
Owner Trustee or successor Trustee are authorized or obligated by law, executive
order or governmental decree to be closed and (ii) otherwise, a day other than a
Saturday, a Sunday or other day on which commercial banks located in the states
of Delaware, Minnesota, California or New York are authorized or obligated to be
closed.
"Certificate of Trust" means the certificate of trust of the Issuer
substantially in the form of Exhibit B to the Trust Agreement.
"Class A-1 Interest Rate" means 5.6375% per annum.
"Class A-1 Notes" means the Class A-1 5.6375% Asset-Backed Notes,
substantially in the form of Exhibit A-1.
"Class A-2 Interest Rate" means 5.8550% per annum.
"Class A-2 Notes" means the Class A-2 5.8550% Asset-Backed Notes,
substantially in the form of Exhibit A-2.
"Class A-3 Interest Rate" means 5.9950% per annum.
"Class A-3 Notes" means the Class A-3 5.9950% Asset-Backed Notes,
substantially in the form of Exhibit A-3.
"Class A-4 Interest Rate" means 6.0800% per annum.
"Class A-4 Notes" means the Class A-4 6.0800% Asset-Backed Notes,
substantially in the form of Exhibit A-4.
"Clearing Agency" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act, or any successor provision thereto.
The initial Clearing Agency shall be The Depository Trust Company.
-4-
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time a Clearing Agency effects
book-entry transfers and pledges of securities deposited with the Clearing
Agency.
"Closing Date" means July 28, 1998.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and Treasury Regulations promulgated thereunder.
"Collateral" has the meaning specified in the Granting Clause of this
Indenture.
"Commission" means the United State Securities and Exchange Commission.
"Corporate Trust Office" means the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered which
office at date of the execution of this Agreement is located at Sixth Street and
Marquette Avenue, Minneapolis, Minnesota 55479-0070, Attention: Corporate Trust
Services--Asset-Backed Administration, or at such other address as the Trustee
may designate from time to time by notice to the Noteholders, the Note Insurer,
the Servicer and the Issuer, or the principal corporate trust office of any
successor Trustee (the address of which the successor Trustee will notify the
Noteholders and the Issuer).
"Default" means any occurrence that is, or with notice or the lapse of time
or both would become, an Event of Default.
"Definitive Notes" has the meaning specified in Section 2.10.
"Depositor" means the Seller, in its capacity as such under the Trust
Agreement.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Executive Officer" means, with respect to any corporation, the Chief
Executive Officer, Chief Operating Officer, Chief Financial Officer, President,
Executive Vice President, any Vice President, the Secretary or the Treasurer of
such corporation; with respect to any limited liability company, the manager;
and with respect to any partnership, any general partner thereof.
"Grant" means to mortgage, pledge, bargain, sell, warrant, alienate,
remise, release, convey, assign, transfer, create, grant a lien upon and a
security interest in and right of set-off against, deposit, set over and confirm
pursuant to this Indenture. A Grant of the Collateral or of any other agreement
or instrument shall include all rights, powers and options (but none of the
obligations) of the granting party thereunder, including the immediate and
continuing right to
-5-
claim for, collect, receive and give receipt for principal and interest payments
in respect of the Collateral and all other moneys payable thereunder, to give
and receive notices and other communications, to make waivers or other
agreements, to exercise all rights and options, to bring proceedings in the name
of the granting party or otherwise and generally to do and receive anything that
the granting party is or may be entitled to do or receive thereunder or with
respect thereto.
"Holder" or "Noteholder" means the Person in whose name a Note is
registered on the Note Register.
"Indebtedness" means, with respect to any Person at any time, (a)
indebtedness or liability of such Person for borrowed money whether or not
evidenced by bonds, debentures, notes or other instruments, or for the deferred
purchase price of property or services (including trade obligations); (b)
obligations of such Person as lessee under leases which should be, in accordance
with generally accepted accounting principles, recorded as capital leases; (c)
current liabilities of such Person in respect of unfunded vested benefits under
plans covered by Title IV of ERISA; (d) obligations issued for or liabilities
incurred on the account of such Person; (e) obligations or liabilities of such
Person arising under acceptance facilities; (f) obligations of such Person under
any guarantees, endorsements (other than for collection or deposit in the
ordinary course of business) and other contingent obligations to purchase, to
provide funds for payment, to supply funds to invest in any Person or otherwise
to assure a creditor against loss; (g) obligations of such Person secured by any
lien on property or assets of such Person, whether or not the obligations have
been assumed by such Person; or (h) obligations of such Person under any
interest rate or currency exchange agreement.
"Indenture" means this Indenture as amended, supplemented or otherwise
modified from time to time in accordance with its terms.
"Independent" means, when used with respect to any specified Person, that
the person (a) is in fact independent of the Issuer, any other obliger upon the
Notes, the Seller and any Affiliate of any of the foregoing persons, (b) does
not have any direct financial interest or any material indirect financial
interest in the Issuer, any such other obligor, the Seller or any Affiliate of
any of the foregoing Persons and (c) is not connected with the Issuer, any such
other obliger, the Seller or any Affiliate of any of the foregoing Persons as an
officer, employee, promoter, underwriter, trustee, partner, director or Person
performing similar functions.
"Independent Certificate" means a certificate or opinion to be delivered to
the Trustee under the circumstances described in, and otherwise complying with,
the applicable requirements of Section 11.1, prepared by an Independent
appraiser or other expert appointed by an Issuer Order and approved by the
Trustee in the exercise of reasonable care, and such opinion or certificate
shall state that the signer has read the definition of "Independent" in this
Indenture and that the signer is Independent within the meaning thereof.
-6-
"Insurance Agreement Indenture Cross Default" has the meaning specified
therefor in the Insurance Agreement.
"Insurer Secured Obligations" means all amounts and obligations which the
Issuer may at any time owe to or on behalf of the Note Insurer under this
Indenture, the Insurance Agreement or any other Basic Document.
"Interest Rate" means, with respect to the (i) Class A-1 Notes, the Class
A-1 Interest Rate, (ii) Class A-2 Notes, the Class A-2 Interest Rate, (iii)
Class A-3 Notes, the Class A-3 Interest Rate and (iv) Class A-4 Notes, the Class
A-4 Interest Rate.
"Issuer" means the party named as such in this Indenture until a successor
replaces it and, thereafter, means the successor and, for purposes of any
provision contained herein and required by the TIA, each other obligor on the
Notes.
"Issuer Order" and "Issuer Request" means a written order or request signed
in the name of the Issuer by any one of its Authorized Officers and delivered to
the Trustee.
"Issuer Secured Obligations" means the Insurer Secured Obligations and the
Trustee Secured obligations.
"Issuer Secured Parties" means each of the Trustee, in respect of the
Trustee Secured Obligations, and the Note Insurer, in respect of the Insurer
Secured Obligations.
"Note" means a Class A-1 Note, a Class A-2 Note, a Class A-3 Note or a
Class A-4 Note.
"Note Owner" means, with respect to a Book-Entry Note, the person who is
the owner of such Book-Entry Note, as reflected on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such Clearing
Agency (directly as a Clearing Agency Participant or as an indirect participant,
in each case in accordance with the rules of such Clearing Agency).
"Note Paying Agent" means the Trustee or any other Person that meets the
eligibility standards for the Trustee specified in Section 6.11 and is
authorized by the Issuer to make the payments to and distributions from the
Collection Account and the Note Distribution Account, including payment of
principal of or interest on the Notes on behalf of the Issuer.
"Note Policy" means the insurance policy issued by the Note Insurer with
respect to the Notes, including any endorsements thereto.
"Note Register" and "Note Registrar" have the respective meanings specified
in Section 2.4.
-7-
"Officer's Certificate" means a certificate signed by any Authorized
Officer of the Owner Trustee, under the circumstances described in, and
otherwise complying with, the applicable requirements of Section 11.1 and TIA
ss. 314, and delivered to the Trustee. Unless otherwise specified, any reference
in this Indenture to an Officer's Certificate shall be to an Officer's
Certificate of any Authorized Officer of the Issuer.
"Opinion of Counsel" means one or more written opinions of counsel who may,
except as otherwise expressly provided in this Indenture, be employees of or
counsel to the Issuer and who shall be satisfactory to the Trustee and, if
addressed to the Note Insurer, satisfactory to the Note Insurer, and which shall
comply with any applicable requirements of Section 11.1, and shall be in form
and substance satisfactory to the Trustee, and if addressed to the Note Insurer,
satisfactory to the Note Insurer.
"Outstanding" means, as of the date of determination, all Notes theretofore
authenticated and delivered under this Indenture except:
(i) Notes theretofore canceled by the Note Registrar or delivered
to the Note Registrar for cancellation;
(ii) Notes or portions thereof the payment for which money in the
necessary amount has been theretofore deposited with the Trustee or
any Note Paying Agent in trust for the Holders of such Notes
(provided, however, that if such Notes are to be redeemed, notice of
such redemption has been duly given pursuant to this Indenture,
satisfactory to the Trustee); and
(iii) Notes in exchange for or in lieu of other Notes which have
been authenticated and delivered pursuant to this Indenture unless
proof satisfactory to the Trustee is presented that any such Notes are
held by a bona fide purchaser;
provided, however, that Notes which have been paid with proceeds of the Note
Policy shall continue to remain Outstanding for purposes of this Indenture until
the Note Insurer has been paid as subrogee hereunder or reimbursed pursuant to
the Insurance Agreement as evidenced by a written notice from the Note Insurer
delivered to the Trustee, and the Note Insurer shall be deemed to be the Holder
thereof to the extent of any payments thereon made by the Note Insurer;
provided, further, that in determining whether the Holders of the requisite
Outstanding Amount of the Notes have given any request, demand, authorization,
direction, notice, consent or waiver hereunder or under any Basic Document,
Notes owned by the Issuer, any other obliger upon the Notes, the Seller or any
Affiliate of any of the foregoing Persons shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that a Responsible Officer of the Trustee
either actually knows to be so owned or has received written notice thereof
shall be so disregarded. Notes so owned that have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
-8-
Trustee the pledgees right so to act with respect to such Notes and that the
pledgee is not the Issuer, any other obliger upon the Notes, the Seller or any
Affiliate of any of the foregoing Persons.
"Outstanding Amount" means the aggregate principal amount of all Notes, or
class of Notes, as applicable, Outstanding at the date of determination.
"Owner Trustee" means Bankers Trust (Delaware), and its successors.
"Payment Date" has the meaning specified in the Notes.
"Predecessor Note" means, with respect to any particular Note, every
previous Note evidencing all or a portion of the same debt as that evidenced by
such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 2.5 in lieu of a mutilated, lost,
destroyed or stolen Note shall be deemed to evidence the same debt as the
mutilated, lost, destroyed or stolen Note.
"Proceeding" means any suit in equity, action at law or other judicial or
administrative proceeding.
"Rating Agency" means each of Moody's and Standard & Poor's, so long as
such Persons maintain a rating on the Notes; and if either Moody's or Standard &
Poor's no longer maintains a rating on the Notes, such other nationally
recognized statistical rating organization selected by the Seller and (so long
as an Insurer Default shall not have occurred and be continuing) acceptable to
the Note Insurer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 10 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Note Insurer,
the Trustee, the Owner Trustee and the Issuer in writing that such action will
not result in a reduction or withdrawal of the then current rating of the Notes.
"Record Date" means, with respect to a Payment Date or Redemption Date, the
tenth day of the calendar month in which such Payment Date or Redemption Date
occurs.
"Redemption Date" means, in the case of a redemption of the Notes pursuant
to Section 10.1, the Payment Date specified by the Servicer or the Issuer
pursuant to Section 10.1.
"Redemption Price" means, in the case of a redemption of the Notes pursuant
to Section 10.1, an amount equal to the unpaid principal amount of each class of
Notes being redeemed plus accrued and unpaid interest thereon to but excluding
the Redemption Date.
-9-
"Responsible Officer" means, with respect to the Trustee, any officer
within the Corporate Trust Office of the Trustee, including any Vice President,
Assistant Vice President, Assistant Treasurer, Assistant Secretary, or any other
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also, with respect to a
particular matter, any other officer to whom such matter is referred because of
such officer's knowledge of and familiarity with the particular subject.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement dated
as of July 15, 1998, among the Issuer, the Seller, the Servicer and the Trustee
as Standby Servicer and Trustee, as the same may be amended or supplemented from
time to time.
"Scheduled Payments" has the meaning specified in the Note Policy.
"State" means any one of the 50 states of the United States of America or
the District of Columbia.
"Termination Date" means the latest of (i) the expiration of the Note
Policy and the return of the Note Policy to the Note Insurer for cancellation,
(ii) the date on which the Note Insurer shall have received payment and
performance of all Insurer Secured Obligations and (iii) the date on which the
Trustee shall have received payment and performance of all Trustee Secured
Obligations.
"Trust Estate" means all money, instruments, rights and other property that
are subject or intended to be subject to the lien and security interest of this
Indenture for the benefit of the Noteholders (including all property and
interests Granted to the Trustee), including all proceeds thereof.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939, as
amended and as in force on the date hereof, unless otherwise specifically
provided.
"Trustee" means Norwest Bank Minnesota, National Association, a national
banking association, not in its individual capacity but as trustee under this
Indenture, or any successor trustee under this Indenture.
"Trustee Secured Obligations" means all amounts and obligations which the
Issuer may at any time owe to or on behalf of the Trustee for the benefit of the
Noteholders under this Indenture or the Notes.
"UCC" means, unless the context otherwise requires, the Uniform Commercial
Code, as in effect in the relevant jurisdiction, as amended from time to time.
-10-
SECTION 1.2. Incorporation by Reference of Trust Indenture Act. Whenever
this Indenture refers to a provision of the TIA, the provision is incorporated
by reference in and made a part of this Indenture. The following TIA terms used
in this Indenture have the following meanings:
"Commission" means the Securities and Exchange Commission.
"indenture securities" means the Notes.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Issuer.
All other TIA terms used in this Indenture that are defined by the TIA, defined
by TIA reference to another statute or defined by Commission rule have the
meaning assigned to them by such definitions.
SECTION 1.3. Other Definitional Provisions. Unless the context otherwise
requires:
(i) All references in this instrument to designated "Articles,"
"Sections," "Subsections" and other subdivisions are to the designated
Articles, Sections, Subsections and other subdivisions of this
instrument as originally executed.
(ii) The words "herein," "hereof," "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section, Subsection or other subdivision.
(iii) an accounting term not otherwise defined herein has the
meaning assigned to it in accordance with generally accepted
accounting principles as in effect from time to time;
(iv) "or" is not exclusive; and
(v) "including" means including without limitation.
-11-
ARTICLE II
The Notes
SECTION 2.1. Form. (a) The Class A-1 Notes, the Class A-2 Notes, the Class
A-3 Notes and the Class A-4 Notes, in each case together with the Trustee's
certificate of authentication, shall be in substantially the form set forth in
Exhibits A-1, A-2, A-3 and A-4, respectively, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may,
consistently herewith, be determined by the officers executing such Notes, as
evidenced by their execution of the Notes. Any portion of the text of any Note
may be set forth on the reverse thereof, with an appropriate reference thereto
on the face of the Note.
(b) The Definitive Notes shall be typewritten, printed, lithographed or
engraved or produced by any combination of these methods (with or without steel
engraved borders), all as determined by the officers executing such Notes, as
evidenced by their execution of such Notes.
(c) Each Note shall be dated the date of its authentication. The terms of
the Notes set forth in Exhibits A-1, A-2, A-3 and A-4 are part of the terms of
this Indenture.
SECTION 2.2. Execution, Authentication and Delivery. (a) The Notes shall be
executed on behalf of the Issuer by any of its Authorized Officers. The
signature of any such Authorized Officer on the Notes may be manual or
facsimile.
(b) Notes bearing the manual or facsimile signature of individuals who were
at any time Authorized Officers of the Issuer shall bind the Issuer,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
(c) The Trustee shall upon receipt of the Note Policy and Issuer Order
authenticate and deliver Class A-1 Notes for original issue in an aggregate
principal amount of $36,000,000, Class A-2 Notes for original issue in an
aggregate principal amount of $92,000,000, Class A-3 Notes for original issue in
an aggregate principal amount of $25,000,000 and Class A-4 Notes for original
issue in an aggregate principal amount of $82,532,000. Class A-1 Notes, Class
A-2 Notes, Class A-3 Notes and Class A-4 Notes outstanding at any time may not
exceed such amounts except as provided in Section 2.5.
(d) Each Note shall be dated the date of its authentication. The Notes
shall be issuable as registered Notes in the minimum denomination of $1,000 and
in integral multiples thereof (except for one Note of each class which may be
issued in a denomination other than an integral multiple of $1,000).
-12-
(e) No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Note a
certificate of authentication substantially in the form provided for herein,
executed by the Trustee by the manual signature of one of its authorized
signatories, and such certificate upon any Note shall be conclusive evidence,
and the only evidence, that such Note has been duly authenticated and delivered
hereunder.
SECTION 2.3. Temporary Notes. (a) Pending the preparation of Definitive
Notes, the Issuer may execute, and upon receipt of an Issuer Order the Trustee
shall authenticate and deliver, temporary Notes which are printed, lithographed,
typewritten, mimeographed or otherwise produced, of the tenor of the Definitive
Notes in lieu of which they are issued and with such variations not inconsistent
with the terms of this Indenture as the officers executing such Notes may
determine, as evidenced by their execution of such Notes.
(b) If temporary Notes are issued, the Issuer will cause Definitive Notes
to be prepared without unreasonable delay. After the preparation of Definitive
Notes, the temporary Notes shall be exchangeable without charge to the Holder
for Definitive Notes upon surrender of the temporary Notes at the office or
agency of the Issuer to be maintained as provided in Section 3.2. Upon surrender
for cancellation of any one or more temporary Notes, the Issuer shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of Definitive Notes of authorized denominations. Until so
exchanged, the temporary Notes shall in all respects be entitled to the same
benefits under this Indenture as Definitive Notes.
SECTION 2.4. Registration; Registration of Transfer and Exchange. (a) The
Issuer shall cause to be kept a register (the "Note Register") in which, subject
to such reasonable regulations as it may prescribe, the Issuer shall provide for
the registration of Notes and the registration of transfers of Notes. The
Trustee is hereby initially appointed "Note Registrar" for the purpose of
registering Notes and transfers of Notes as herein provided. Upon any
resignation or removal of any Note Registrar, the Issuer shall promptly appoint
a successor or, in the absence of such an appointment, assume the duties of Note
Registrar.
(b) If a Person other than the Trustee is appointed by the Issuer as Note
Registrar, the Issuer will give the Trustee prompt written notice of the
appointment of such Note Registrar and of the location, and any change in the
location, of the Note Register, and the Trustee shall have the right to inspect
the Note Register at all reasonable times and to obtain copies thereof, and the
Trustee shall have the right to rely upon a certificate executed on behalf of
the Note Registrar by an Executive Officer thereof as to the names and addresses
of the Holders of the Notes and the principal amounts and number of such Notes.
(c) Subject to Sections 2.10 and 2.12 hereof, upon surrender for
registration of transfer of any Note at the office or agency of the Issuer to be
maintained as provided in Section 3.2, if the requirements of Section 8-401(l)
of the UCC are met, the Issuer shall execute, and upon request by the Issuer the
Trustee shall authenticate, and the Noteholder shall obtain from the
-13-
Trustee, in the name of the designated transferee or transferees, one or more
new Notes in any authorized denominations of the same class and a like aggregate
principal amount.
(d) At the option of the Holder, Notes may be exchanged for other Notes in
any authorized denominations, of the same class and a like aggregate principal
amount, upon surrender of the Notes to be exchanged at such office or agency.
Whenever any Notes are so surrendered for exchange, subject to Sections 2.10 and
2.12 hereof, if the requirements of Section 8-401(1) of the UCC are met the
Issuer shall execute, and upon request by the Issuer the Trustee shall
authenticate, and the Noteholder shall obtain from the Trustee, the Notes which
the Noteholder making the exchange is entitled to receive.
(e) All Notes issued upon any registration of transfer or exchange of Notes
shall be the valid obligations of the Issuer, evidencing the same debt, and
entitled to the same benefits under this Indenture, as the Notes surrendered
upon such registration of transfer or exchange.
(f) Every Note presented or surrendered for registration of transfer or
exchange shall be (i) duly endorsed by, or accompanied by a written instrument
of transfer in the form attached to Exhibits A-1, A-2, A-3 and A-4 and duly
executed by, the Holder thereof or such Holder's attorney, duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Exchange Act and (ii) accompanied by such other documents as
the Trustee may require.
(g) Each Noteholder by its acquisition of any Notes (or a beneficial
interest therein) shall be deemed to have represented and warranted for the
benefit of the Issuer, the Trustee, the Indenture Trustee and the Noteholders,
that either (i) it is not acquiring any Notes with the assets of any "employee
benefit plan" as defined in Section 3(3) of ERISA which is subject to Title I of
ERISA or any "plan" as defined in Section 4875 of the Internal Revenue Code or
(ii) the acquisition of the Notes will not give rise to a nonexempt prohibited
transaction under Section 406(a) of ERISA or Section 4975 of the Code.
(h) No service charge shall be made to a Holder for any registration of
transfer or exchange of Notes, but the Note Registrar may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Section 2.3 or 9.6 not involving any transfer.
(i) The preceding provisions of this Section 2.4 notwithstanding, the
Issuer shall not be required to make and the Note Registrar shall not register
transfers or exchanges of Notes selected for redemption or of any Note for a
period of 15 days preceding the due date for any payment with respect to the
Note.
-14-
SECTION 2.5. Mutilated, Destroyed, Lost or Stolen Notes. (a) If (i) any
mutilated Note is surrendered to the Trustee, or the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Note, and (ii)
there is delivered to the Trustee and the Note Insurer (unless an Insurer
Default shall have occurred and be continuing) such security or indemnity as may
be required by it to hold the Issuer, the Trustee and the Note Insurer harmless,
then, in the absence of notice to the Issuer, the Note Registrar or the Trustee
that such Note has been acquired by a bona fide purchaser, and, provided that
the requirements of Section 8-405 of the UCC are met, the Issuer shall execute,
and upon request by the Issuer, the Trustee shall authenticate and deliver in
exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a
replacement Note; provided, however, that if any such destroyed, lost or stolen
Note, but not a mutilated Note, shall have become, or within seven days shall
be, due and payable or shall have been called for redemption, instead of issuing
a replacement Note, the Issuer may direct the Trustee, in writing, to pay such
destroyed, lost or stolen Note when so due or payable or upon the Redemption
Date without surrender thereof. If, after the delivery of such replacement Note
or payment of a destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a bona fide purchaser of the original Note in lieu of which
such replacement Note was issued, presents for payment such original Note, the
Issuer, the Trustee and the Note Insurer shall be entitled to recover such
replacement Note (or such payment) from the Person to whom it was delivered or
any Person taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person, except a bona
fide purchaser, and shall be entitled to recover upon the security or indemnity
provided therefor to the extent of any loss, damage, cost or expense incurred by
the Issuer or the Trustee in connection therewith.
(b) Upon the issuance of any replacement Note under this Section, the
Issuer may require the payment by the Holder of such Note of a sum sufficient to
cover any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable expenses (including the fees and expenses of
the Trustee) connected therewith.
(c) Every replacement Note issued pursuant to this Section in replacement
of any mutilated, destroyed, lost or stolen Note shall constitute an original
additional contractual obligation of the Issuer, whether or not the mutilated,
destroyed, lost or stolen Note shall be at any time enforceable by anyone, and
shall be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued hereunder.
(d) The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Notes.
SECTION 2.6. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, the Issuer, the Trustee, the Note Insurer
and any agent of the Issuer, the Trustee or the Note Insurer may treat the
Person in whose name any Note is registered (as of the applicable Record Date)
as the owner of such Note for the purpose of receiving payments of principal of
and interest, if any, on such Note, for all other purposes whatsoever and
whether or
-15-
not such Note be overdue, and none of the Issuer, the Note Insurer, the Trustee
nor any agent of the Issuer, the Note Insurer or the Trustee shall be affected
by notice to the contrary.
SECTION 2.7. Payment of Principal and Interest; Defaulted Interest. (a) The
Notes shall accrue interest as provided in the forms of the Class A-1 Note, the
Class A-2 Note, the Class A-3 Note and the Class A-4 Note set forth in Exhibits
A-1, A-2, A-3 and A-4, respectively, and such interest shall be payable on each
Payment Date as specified therein. Any installment of interest or principal, if
any, payable on any Note which is punctually paid or duly provided for by the
Issuer on the applicable Payment Date shall be paid to the Person in whose name
such Note (or one or more Predecessor Notes) is registered on the Record Date,
by check mailed first-class, postage prepaid, to such Person's address as it
appears on the Note Register on such Record Date, except that, unless Definitive
Notes have been issued pursuant to Section 2.12, with respect to Notes
registered on the Record Date in the name of the nominee of the Clearing Agency
(initially, such nominee to be Cede & Co.), payment will be made by wire
transfer in immediately available funds to the account designated by such
nominee, except for the final installment of principal payable with respect to
such Note on a Payment Date or on the Final Scheduled Payment Date (and except
for the Redemption Price for any Note called for redemption pursuant to Section
10.1), which shall be payable as provided below. The funds represented by any
such checks returned undelivered shall be held in accordance with Section 3.3.
(b) The principal of each Note shall be payable in installments on each
Payment Date as provided in the forms of the Class A-1 Notes, the Class A-2
Notes, the Class A-3 Notes and the Class A-4 Notes set forth in Exhibits A-1,
A-2, A-3 and A-4 respectively. Notwithstanding the foregoing, the entire unpaid
principal amount of the Notes shall be due and payable, if not previously paid,
on the date on which an Event of Default shall have occurred and be continuing
in the manner and under the circumstances provided in Section 5.2. All principal
payments on each class of Notes shall be made pro rata to the Noteholders of
such class entitled thereto. Upon written notice from the Issuer, the Trustee
shall notify the Person in whose name a Note is registered at the close of
business on the Record Date preceding the Payment Date on which the Issuer
expects that the final installment of principal of and interest on such Note
will be paid. Such notice shall be mailed or transmitted by facsimile prior to
such final Payment Date and shall specify that such final installment will be
payable only upon presentation and surrender of such Note and shall specify the
place where such Note may be presented and surrendered for payment of such
installment. Notices in connection with redemptions of Notes shall be mailed to
Noteholders as provided in Section 10.2.
(c) If the Issuer defaults in a payment of interest on the Notes, the
Issuer shall pay defaulted interest (plus interest on such defaulted interest to
the extent lawful) at the applicable Interest Rate in any lawful manner. The
Issuer may pay such defaulted interest to the Persons who are Noteholders on a
subsequent special record date, which date shall be at least five Business Days
prior to the payment date. The Issuer shall fix or cause to be fixed any such
ispecial record date and payment date, and, at least 15 days before any such
special record date,
-16-
the Issuer shall mail to each Noteholder and the Trustee a notice that states
the special record date, the payment date and the amount of defaulted interest
to be paid.
(d) Promptly following the date on which all principal of and interest on
the Notes has been paid in full and the Notes have been surrendered to the
Trustee, the Trustee shall, if the Note Insurer has paid any amount in respect
of the Notes under the Note Policy or otherwise which has not been reimbursed to
it, deliver such surrendered Notes to the Note Insurer.
SECTION 2.8. Cancellation. Subject to Section 2.7(d), all Notes surrendered
for payment, registration of transfer, exchange or redemption shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by the Trustee. Subject to Section 2.7(d), the
Issuer may at any time deliver to the Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the Issuer may have
acquired in any manner whatsoever, and all Notes so delivered shall be promptly
canceled by the Trustee. No Notes shall be authenticated in lieu of or in
exchange for any Notes canceled as provided in this Section, except as expressly
permitted by this Indenture. Subject to Section 2.7(d), all canceled Notes may
be held or disposed of by the Trustee in accordance with its standard retention
or disposal policy as in effect at the time unless the Issuer shall direct by an
Issuer Order that they be destroyed or returned to it; provided that such Issuer
Order is timely and the Notes have not been previously disposed of by the
Trustee.
SECTION 2.9. Release of Collateral. The Trustee shall, on or after the
Termination Date, release any remaining portion of the Trust Estate from the
lien created by this Indenture and deposit in the Collection Account any funds
then on deposit in any other Trust Account. The Trustee shall release property
from the lien created by this Indenture pursuant to this Section 2.9 only upon
receipt of an Issuer Request accompanied by an Officer's Certificate, an Opinion
of Counsel and (if required by the TIA) Independent Certificates in accordance
with TIA ss. 314(c) and 314(d)(1) meeting the applicable requirements of Section
11.1.
SECTION 2.10. Book-Entry Notes. The Notes, upon original issuance, will be
issued in the form of typewritten Notes representing the Book-Entry Notes, to be
delivered to DTC or to the Trustee as custodian for the initial Clearing Agency,
by, or on behalf of, the Issuer. Such Notes shall initially be registered on the
Note Register in the name of Cede & Co., the nominee of the initial Clearing
Agency, and no Note Owner will receive a Definitive Note representing such Note
Owner's interest in such Note, except as provided in Section 2.12. Unless and
until definitive, fully registered Notes (the "Definitive Notes") have been
issued to Note Owners pursuant to Section 2.12:
(i) the provisions of this Section shall be in full force and
effect;
(ii) the Note Registrar and the Trustee shall be entitled to deal
with the Clearing Agency for all purposes of this Indenture (including
the payment of principal of and
-17-
interest on the Notes and the giving of instructions or directions
hereunder) as the sole Holder of the Notes, and shall have no
obligation to the Note Owners;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Indenture, the provisions of this
Section shall control;
(iv) the rights of Note Owners shall be exercised only through
the Clearing Agency and shall be limited to those established by law
and agreements between such Note Owners and the Clearing Agency and/or
the Clearing Agency Participants. Unless and until Definitive Notes
are issued pursuant to Section 2.12, the Clearing Agency will make
book-entry transfers among the Clearing Agency Participants and
receive and transmit payments of principal of and interest on the
Notes to such Clearing Agency Participants;
(v) whenever this Indenture requires or permits actions to be
taken based upon instructions or directions of Holders of Notes
evidencing a specified percentage of the Outstanding Amount of the
Notes, the Clearing Agency shall be deemed to represent such
percentage only to the extent that it has received instructions to
such effect from Note Owners and/or Clearing Agency Participants
owning or representing, respectively, such required percentage of the
beneficial interest in the Notes and has delivered such instructions
to the Trustee; and
(vi) Note Owners may receive copies of any reports sent to
Noteholders pursuant to this Indenture, upon written request, together
with a certification that they are Note Owners and payment of
reproduction and postage expenses associated with the distribution of
such reports, from the Trustee at the Corporate Trust Office.
SECTION 2.11. Notices to Clearing Agency. Whenever a notice or other
communication to the Class A Noteholders is required under this Indenture,
unless and until Definitive Notes shall have been issued to Note Owners pursuant
to Section 2.12, the Trustee shall give all such notices and communications
specified herein to be given to Holders of the Notes to the Clearing Agency and
shall have no obligation to deliver such notices or communications to the Note
Owners.
SECTION 2.12. Definitive Notes. If (i) the Servicer advises the Trustee in
writing that the Clearing Agency is no longer willing or able to properly
discharge its responsibilities with respect to the Notes, and the Servicer is
unable to locate a qualified successor, (ii) the Servicer at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the Clearing Agency or (iii) after the occurrence of an Event of Default, Note
Owners representing beneficial interests aggregating at least a majority of the
Outstanding Amount of the Notes advise the Trustee through the Clearing Agency
in writing that the continuation of a book entry system through the Clearing
Agency is no longer in the best interests of the Note Owners, then the Clearing
Agency shall notify all Note Owners and the Trustee of the occurrence of any
-18-
such event and of the availability of Definitive Notes to Note Owners requesting
the same. Upon surrender to the Trustee of the typewritten Note or Notes
representing the Book-Entry Notes by the Clearing Agency, accompanied by
registration instructions, the Issuer shall execute and the Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Notes, the Trustee shall recognize the Holders of the Definitive
Notes as Class A Noteholders.
ARTICLE III
Covenants
SECTION 3.1. Payment of Principal and Interest. The Issuer will duly and
punctually pay the principal of and interest on the Notes in accordance with the
terms of the Notes and this Indenture. Without limiting the foregoing, the
Issuer will cause to be distributed on each Payment Date all amounts deposited
in the Note Distribution Account pursuant to the Sale and Servicing Agreement
(i) for the benefit of the Class A-1 Notes, to the Class A-1 Noteholders, (ii)
for the benefit of the Class A-2 Notes, to the Class A-2 Noteholders, (iii) for
the benefit of the Class A-3 Notes, to the Class A-3 Noteholders and (iv) for
the benefit of the Class A-4 Notes, to the Class A-4 Noteholders. Amounts
properly withheld under the Code by any Person from a payment to any Noteholder
of interest and/or principal shall be considered as having been paid by the
Issuer to such Noteholder for all purposes of this Indenture.
SECTION 3.2. Maintenance of Office or Agency. The Issuer will maintain in
Minneapolis, Minnesota, an office or agency where Notes may be surrendered for
registration of transfer or exchange, and where notices and demands to or upon
the Issuer in respect of the Notes and this Indenture may be served. The Issuer
hereby initially appoints the Trustee to serve as its agent for the foregoing
purposes. The Issuer will give prompt written notice to the Trustee of the
location, and of any change in the location, of any such office or agency. If at
any time the Issuer shall fail to maintain any such office or agency or shall
fail to furnish the Trustee with the address thereof, such surrenders, notices
and demands may be made or served at the Corporate Trust Office, and the Issuer
hereby appoints the Trustee as its agent to receive all such surrenders, notices
and demands.
SECTION 3.3. Money for Payments to be Held in Trust. (a) On or before each
Payment Date and Redemption Date, the Issuer shall deposit or cause to be
deposited in the Note Distribution Account from the Collection Account an
aggregate sum sufficient to pay the amounts then becoming due under the Notes,
such sum to be held in trust for the benefit of the Persons entitled thereto and
(unless the Note Paying Agent is the Trustee) shall promptly notify the Trustee
of its action or failure so to act.
-19-
(b) The Issuer shall cause each Note Paying Agent other than the Trustee to
execute and deliver to the Trustee and the Note Insurer an instrument in which
such Note Paying Agent shall agree with the Trustee (and if the Trustee acts as
Note Paying Agent, it hereby so agrees), subject to the provisions of this
Section, that such Note Paying Agent shall:
(i) hold all sums held by it for the payment of amounts due with
respect to the Notes in trust for the benefit of the Persons entitled
thereto until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and pay such sums to such Persons as
herein provided;
(ii) give the Trustee notice of any default by the Issuer (or any
other obligor upon the Notes) of which it has actual knowledge in the
making of any payment required to be made with respect to the Notes;
(iii) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee
all sums so held in trust by such Note Paying Agent;
(iv) immediately resign as a Note Paying Agent and forthwith pay
to the Trustee all sums held by it in trust for the payment of Notes
if at any time it ceases to meet the standards required to be met by a
Note Paying Agent at the time of its appointment; and
(v) comply with all requirements of the Code with respect to the
withholding from any payments made by it on any Notes of any
applicable withholding taxes imposed thereon and with respect to any
applicable reporting requirements in connection therewith.
(c) The Issuer may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, by Issuer
Order direct any Note Paying Agent to pay to the Trustee all sums held in trust
by such Note Paying Agent, such sums to be held by the Trustee upon the same
trusts as those upon which the sums were held by such Note Paying Agent; and
upon such a payment by any Note Paying Agent to the Trustee, such Note Paying
Agent shall be released from all further liability with respect to such money.
(d) Subject to applicable laws with respect to the escheat of funds, any
money held by the Trustee or any Note Paying Agent in trust for the payment of
any amount due with respect to any Note and remaining unclaimed for two years
after such amount has become due and payable shall be discharged from such trust
and be paid to the Issuer on Issuer Request with the consent of the Note Insurer
(unless an Insurer Default shall have occurred and be continuing) and shall be
deposited by the Trustee in the Collection Account; and the Holder of such Note
shall thereafter, as an unsecured general creditor, look only to the Issuer for
payment thereof (but only to the extent of the amounts so paid to the Issuer),
and all liability of the Trustee or such Note Paying Agent with respect to such
trust money shall thereupon cease; provided, however, that if
-20-
such money or any portion thereof had been previously deposited by the Note
Insurer with the Trustee for the payment of principal or interest on the Notes,
to the extent any amounts are owing to the Note Insurer, such amounts shall be
paid promptly to the Note Insurer upon receipt of a written request by the Note
Insurer to such effect, and provided, further, that the Trustee or such Note
Paying Agent, before being required to make any such repayment, shall at the
expense of the Issuer cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the City of New York, notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Issuer. The Trustee shall also adopt and employ,
at the expense of the Issuer, any other reasonable means of notification of such
repayment (including, but not limited to, mailing notice of such repayment to
Holders whose Notes have been called but have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not
claimed is determinable from the records of the Trustee or of any Note Paying
Agent, at the last address of record for each such Holder).
SECTION 3.4. Existence. Except as otherwise permitted by the provisions of
Section 3.10, the Issuer will keep in full effect its existence, rights and
franchises as a business trust under the laws of the State of Delaware (unless
it becomes, or any successor Issuer hereunder is or becomes, organized under the
laws of any other state or of the United States of America, in which case the
Issuer will keep in full effect its existence, rights and franchises under the
laws of such other jurisdiction) and will obtain and preserve its qualification
to do business in each jurisdiction in which such qualification is or shall be
necessary to protect the validity and enforceability of this Indenture, the
Notes, the Collateral and each other instrument or agreement included in the
Trust Estate.
SECTION 3.5. Protection of Trust Estate. The Issuer intends the security
interest Granted pursuant to this Indenture in favor of the Issuer Secured
Parties to be prior to all other liens in respect of the Trust Estate, and the
Issuer shall take all actions necessary to obtain and maintain, in favor of the
Trustee, for the benefit of the Issuer Secured Parties, a first lien on and a
first priority, perfected security interest in the Trust Estate. The Issuer will
from time to time prepare (or shall cause to be prepared), execute and deliver
all such supplements and amendments hereto and all such financing statements,
continuation statements, instruments of further assurance and other instruments,
and will take such other action necessary or advisable to:
(i) Grant more effectively all or any portion of the Trust
Estate;
(ii) maintain or preserve the lien and security interest (and the
priority thereof) in favor of the Trustee for the benefit of the
Issuer Secured Parties created by this Indenture or carry out more
effectively the purposes hereof;
-21-
(iii) perfect, publish notice of or protect the validity of any
Grant made or to be made by this Indenture;
(iv) enforce any of the collateral;
(v) preserve and defend title to the Trust Estate and the rights
of the Trustee in such Trust Estate against the claims of all persons
and parties; and
(vi) pay all taxes or assessments levied or assessed upon the
Trust Estate when due.
The Issuer hereby designates the Trustee its agent and attorney-in-fact to
execute any financing statement, continuation statement or other instrument
required by the Trustee pursuant to this Section.
SECTION 3.6. Opinions as to Trust Estate. (a) On the Closing Date, the
Issuer shall furnish to the Trustee and the Note Insurer an Opinion of Counsel
either stating that, in the opinion of such counsel, such action has been taken
with respect to the recording and filing of this Indenture, any indentures
supplemental hereto, and any other requisite documents, and with respect to the
execution and filing of any financing statements and continuation statements, as
are necessary to perfect and make effective the first priority lien and security
interest in favor of the Trustee, for the benefit of the Issuer Secured Parties,
created by this Indenture and reciting the details of such action, or stating
that, in the opinion of such counsel, no such action is necessary to make such
lien and security interest effective.
(b) Within 90 days after the beginning of each calendar year, beginning
with the first calendar year beginning more than three months after the Cutoff
Date, the Issuer shall furnish to the Trustee and the Note Insurer an Opinion of
Counsel either stating that, in the opinion of such counsel, such action has
been taken with respect to the recording, filing, re-recording and refiling of
this Indenture, any indentures supplemental hereto and any other requisite
documents and with respect to the execution and filing of any financing
statements and continuation statements as are necessary to maintain the lien and
security interest created by this Indenture and reciting the details of such
action or stating that in the opinion of such counsel no such action is
necessary to maintain such lien and security interest. Such Opinion of Counsel
shall also describe any action necessary (as of the date of such opinion) to be
taken in the following year to maintain the lien and security interest of this
Indenture.
SECTION 3.7. Performance of Obligations; Servicing of Receivables. (a) The
Issuer will not take any action and will use its best efforts not to permit any
action to be taken by others that would release any Person from any of such
Person's material covenants or obligations under any instrument or agreement
included in the Trust Estate or that would result in the amendment,
hypothecation, subordination, termination or discharge of or impair the validity
or effectiveness of, any such instrument or agreement, except as ordered by any
bankruptcy or other court or as
-22-
expressly provided in this Indenture, the Basic Documents or such other
instrument or agreement.
(b) The Issuer may contract with other Persons acceptable to the Note
Insurer (so long as no Insurer Default shall have occurred and be continuing) to
assist it in performing its duties under this Indenture, and any performance of
such duties by a Person identified to the Trustee and the Note Insurer in an
Officer's Certificate of the Issuer shall be deemed to be action taken by the
Issuer. Initially, the Issuer has contracted with the Servicer to assist the
Issuer in performing its duties under this Indenture.
(c) The Issuer will punctually perform and observe all of its obligations
and agreements contained in this Indenture, the Basic Documents and in the
instruments and agreements included in the Trust Estate, including but not
limited to preparing (or causing to prepared) and filing (or causing to be
filed) all UCC financing statements and continuation statements required to be
filed by the terms of this Indenture and the Sale and Servicing Agreement in
accordance with and within the time periods provided for herein and therein.
Except as otherwise expressly provided therein, the Issuer shall not waive,
amend, modify, supplement or terminate any Basic Document or any provision
thereof without the consent of the Trustee, the Note Insurer or the Holders of
at least a majority of the Outstanding Amount of the Notes.
(d) If a responsible officer of the Owner Trustee shall have written notice
or actual knowledge of the occurrence of a Servicer Termination Event under the
Sale and Servicing Agreement, the Issuer shall promptly notify the Trustee, the
Note Insurer and the Rating Agencies thereof in accordance with Section 11.4,
and shall specify in such notice the action, if any, the Issuer is taking in
respect of such default. If a Servicer Termination Event shall arise from the
failure of the Servicer to perform any of its duties or obligations under the
Sale and Servicing Agreement with respect to the Receivables, the Issuer shall
take all reasonable steps available to it to remedy such failure.
(e) The Issuer agrees that it will not waive timely performance or
observance by the Servicer or the Seller of their respective duties under the
Basic Documents (x) without the prior consent of the Note Insurer (unless an
Insurer Default shall have occurred and be continuing) or (y) if the effect
thereof would adversely affect the Holders of the Notes.
SECTION 3.8. Negative Covenants. So long as any Notes are Outstanding, the
Issuer shall not:
(i) except as expressly permitted by this Indenture or the Basic
Documents, sell, transfer, exchange or otherwise dispose of any of the
properties or assets of the Issuer, including those included in the
Trust Estate, unless directed to do so by the Controlling Party;
-23-
(ii) claim any credit on, or make any deduction from the
principal or interest payable in respect of, the Notes (other than
amounts properly withheld from such payments under the Code) or assert
any claim against any present or former Noteholder by reason of the
payment of the taxes levied or assessed upon any part of the Trust
Estate; or
(iii) (A) permit the validity or effectiveness of this Indenture
to be impaired, or permit the lien in favor of the Trustee created by
this Indenture to be amended, hypothecated, subordinated, terminated
or discharged, or permit any Person to be released from any covenants
or obligations with respect to the Notes under this Indenture except
as may be expressly permitted hereby, (B) permit any lien, charge,
excise, claim, security interest, mortgage or other encumbrance (other
than the lien of this Indenture) to be created on or extend to or
otherwise arise upon or burden the Trust Estate or any part thereof or
any interest therein or the proceeds thereof (other than tax liens,
mechanics' liens and other liens that arise by operation of law, in
each case on a Financed Vehicle and arising solely as a result of an
action or omission of the related Obligor), (C) permit the lien of
this Indenture not to constitute a valid first priority (other than
with respect to any such tax, mechanics' or other lien) security
interest in the Trust Estate or (D) amend, modify or fail to comply
with the provisions of the Basic Documents without the prior written
consent of the Controlling Party.
SECTION 3.9. Annual Statement as to Compliance. The Issuer will deliver to
the Trustee and the Note Insurer, on or before July 31 of each year, beginning
July 31, 1999 and otherwise in compliance with the requirements of TIA Section
314(a)(4) an Officer's Certificate, dated as of March 31 of such year, stating,
as to the Authorized Officer signing such Officer's Certificate, that
(i) a review of the activities of the Issuer during such year and
of performance under this Indenture has been made under such
Authorized Officer's supervision; and
(ii) to the best of such Authorized Officer's knowledge, based on
such review, the Issuer has complied with all conditions and covenants
under this Indenture throughout such year, or, if there has been a
default in the compliance of any such condition or covenant,
specifying each such default known to such Authorized Officer and the
nature and status thereof.
SECTION 3.10. Issuer May Consolidate, Etc. Only on Certain Terms. (a) The
Issuer shall not consolidate or merge with or into any other Person, unless
(i) the Person (if other than the Issuer) formed by or surviving
such consolidation or merger shall be a Delaware Business Trust
organized and existing under the laws of the United States of America
or any state and shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to
the
-24-
Trustee and the Note Insurer (so long as no Insurer Default shall have
occurred and be continuing), the due and punctual payment of the
principal of and interest on all Notes and the performance or
observance of every agreement and covenant of this Indenture on the
part of the Issuer to be performed or observed, all as provided
herein;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Trustee and the Note
Insurer (so long as no Insurer Default shall have occurred and be
continuing)) to the effect that such transaction will not have any
material adverse tax consequence to the Trust, the Note Insurer, any
Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken;
(vi) the Issuer shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel each stating that such
consolidation or merger and such supplemental indenture comply with
this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Note Insurer written
notice of such conveyance or transfer at least 20 Business Days prior
to the consummation of such action and shall have received the prior
written approval of the Note Insurer of such conveyance or transfer
and the Issuer or the Person (if other than the Issuer) formed by or
surviving such conveyance or transfer has a net worth, immediately
after such conveyance or transfer, that is (a) greater than zero and
(b) not less than the net worth of the Issuer immediately prior to
giving effect to such conveyance or transfer.
(b) The Issuer shall not convey or transfer all or substantially all of its
properties or assets, including those included in the Trust Estate, to any
Person, unless
(i) the Person that acquires by conveyance or transfer the
properties and assets of the Issuer the conveyance or transfer of
which is hereby restricted shall (A) be a Delaware Business Trust
organized and existing under the laws of the United States of America
or any state, (B) expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form satisfactory to
the Trustee, and the Note
-25-
Insurer (so long as no Insurer Default shall have occurred and be
continuing), the due and punctual payment of the principal of and
interest on all Notes and the performance or observance of every
agreement and covenant of this Indenture and each of the Basic
Documents on the part of the Issuer to be performed or observed, all
as provided herein, (C) expressly agree by means of such supplemental
indenture that all right, title and interest so conveyed or
transferred shall be subject and subordinate to the rights of Holders
of the Notes, (D) unless otherwise provided in such supplemental
indenture, expressly agree to indemnify, defend and hold harmless the
Issuer against and from any loss, liability or expense arising under
or related to this Indenture and the Notes and (E) expressly agree by
means of such supplemental indenture that such Person (or if a group
of persons, then one specified Person) shall prepare (or cause to be
prepared) and make all filings with the Commission (and any other
appropriate Person) required by the Exchange Act in connection with
the Notes;
(ii) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing;
(iii) the Rating Agency Condition shall have been satisfied with
respect to such transaction;
(iv) the Issuer shall have received an Opinion of Counsel (and
shall have delivered copies thereof to the Trustee and the Note
Insurer (so long as no Insurer Default shall have occurred and be
continuing)) to the effect that such transaction will not have any
material adverse tax consequence to the Trust, the Note Insurer, any
Noteholder or any Certificateholder;
(v) any action as is necessary to maintain the lien and security
interest created by this Indenture shall have been taken; and
(vi) the Issuer shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel each stating that such
conveyance or transfer and such supplemental indenture comply with
this Article III and that all conditions precedent herein provided for
relating to such transaction have been complied with (including any
filing required by the Exchange Act); and
(vii) so long as no Insurer Default shall have occurred and be
continuing, the Issuer shall have given the Note Insurer written
notice of such conveyance or transfer at least 20 Business Days prior
to the consummation of such action and shall have received the prior
written approval of the Note Insurer of such consolidation or merger
and the Issuer or the Person (if other than the Issuer) formed by or
surviving such consolidation or merger has a net worth, immediately
after such consolidation or merger, that is (a) greater than zero and
(b) not less than the net worth of the Issuer immediately prior to
giving effect to such consolidation or merger.
-26-
SECTION 3.11. Successor or Transferee. (a) Upon any consolidation or merger
of the Issuer in accordance with Section 3.10(a), the Person formed by or
surviving such consolidation or merger (if other than the Issuer) shall succeed
to, and be substituted for, and may exercise every right and power of, the
Issuer under this Indenture with the same effect as if such Person had been
named as the Issuer herein.
(b) Upon a conveyance or transfer of all the assets and properties of the
Issuer pursuant to Section 3.10(b), CPS Auto Receivables Trust 1998-3 will be
released from every covenant and agreement of this Indenture to be observed or
performed on the part of the Issuer with respect to the Notes immediately upon
the delivery of written notice to the Trustee stating that CPS Auto Receivables
Trust 1998-3 is to be so released.
SECTION 3.12. No Other Business. The Issuer shall not engage in any
business other than financing, purchasing, owning, selling and managing the
Receivables in the manner contemplated by this Indenture and the Basic Documents
and activities incidental thereto. After the Closing Date, the Issuer shall not
fund the purchase of any additional Receivables.
SECTION 3.13. No Borrowing. The Issuer shall not issue, incur, assume,
guarantee or otherwise become liable, directly or indirectly, for any
Indebtedness except for (i) the Notes (ii) obligations owing from time to time
to the Note Insurer under the Insurance Agreement and (iii) any other
Indebtedness permitted by or arising under the Basic Documents. The proceeds of
the Notes shall be used exclusively to fund the Issuer's purchase of the
Receivables and the other assets specified in the Sale and Servicing Agreement,
to fund the Spread Account and to pay the Issuer's organizational, transactional
and start-up expenses.
SECTION 3.14. Servicer's Obligations. The Issuer shall cause the Servicer
to comply with Sections 4.9, 4.10, 4.11 and 5.11 of the Sale and Servicing
Agreement.
SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities. Except as
contemplated by the Sale and Servicing Agreement or this Indenture, the Issuer
shall not make any loan or advance or credit to, or guarantee (directly or
indirectly or by an instrument having the effect of assuring another's payment
or performance on any obligation or capability of so doing or otherwise),
endorse or otherwise become contingently liable, directly or indirectly, in
connection with the obligations, stocks or dividends of, or own, purchase,
repurchase or acquire (or agree contingently to do so) any stock, obligations,
assets or securities of, or any other interest in, or make any capital
contribution to, any other Person.
SECTION 3.16. Capital Expenditures. The Issuer shall not make any
expenditure (by long-term or ioperating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17. Compliance with Laws. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate,
-27-
materially and adversely affect the ability of the Issuer to perform its
obligations under the Notes, this Indenture or any Basic Document.
SECTION 3.18. Restricted Payments. The Issuer shall not, directly or
indirectly, (i) pay any dividend or make any distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, to the Owner Trustee or any owner of a beneficial interest in the
Issuer or otherwise with respect to any ownership or equity interest or security
in or of the Issuer or to the Servicer, (ii) redeem, purchase, retire or
otherwise acquire for value any such ownership or equity interest or security or
(iii) set aside or otherwise segregate any amounts for any such purpose;
provided, however, that the Issuer may make, or cause to be made, distributions
to the Servicer, the Owner Trustee, the Trustee and the Certificateholders as
permitted by, and to the extent funds are available for such purpose under, the
Sale and Servicing Agreement or the Trust Agreement. The Issuer will not,
directly or indirectly, make payments to or distributions from the Collection
Account except in accordance with this Indenture and the Basic Documents.
SECTION 3.19. Notice of Events of Default. Upon a responsible officer of
the Owner Trustee having notice or actual knowledge thereof, the Issuer agrees
to give the Trustee, the Note Insurer and the Rating Agencies prompt written
notice of each Event of Default hereunder and each default on the part of the
Servicer or the Seller of its obligations under the Sale and Servicing
Agreement.
SECTION 3.20. Further Instruments and Acts. Upon request of the Trustee or
the Note Insurer, the Issuer will execute and deliver such further instruments
and do such further acts as may be reasonably necessary or proper to carry out
more effectively the purpose of this Indenture.
SECTION 3.21. Amendments of Sale and Servicing Agreement and Trust
Agreement. The Issuer shall not agree to any amendment to Section 13.1 of the
Sale and Servicing Agreement or Section 11.1 of the Trust Agreement to eliminate
the requirements thereunder that the Trustee or the Holders of the Notes consent
to amendments thereto as provided therein.
SECTION 3.22. Income Tax Characterization. For purposes of federal income
tax, state and local income tax franchise tax and any other income taxes, the
Issuer will treat the Notes as indebtedness of the Issuer and hereby instructs
the Trustee to treat the Notes as indebtedness of the Issuer for federal and
state tax reporting purposes.
-28-
ARTICLE IV
Satisfaction and Discharge
SECTION 4.1. Satisfaction and Discharge of Indenture. This Indenture shall
cease to be of further effect with respect to the Notes except as to (i) rights
of registration of transfer and exchange, (ii) substitution of mutilated,
destroyed, lost or stolen Notes, (iii) rights of Noteholders to receive payments
of principal thereof and interest thereon, (iv) Sections 3.3, 3.4, 3.5, 3.8,
3.10, 3.12, 3.13, 3.20, 3.21 and 3.22, (v) the rights, obligations and
immunities of the Trustee hereunder (including the rights of the Trustee under
Section 6.7 and the obligations of the Trustee under Section 4.2) and (vi) the
rights of Noteholders as beneficiaries hereof with respect to the property so
deposited with the Trustee payable to all or any of them, and the Trustee, on
demand of and at the expense of the Issuer, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture with respect to the
Notes, when
(A) all Notes theretofore authenticated and delivered (other
than (i) Notes that have been destroyed, lost or stolen and that
have been replaced or paid as provided in Section 2.5 and (ii)
Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Issuer and
thereafter repaid to the Issuer or discharged from such trust, as
provided in Section 3.3) have been delivered to the Trustee for
cancellation and the Note Policy has expired and been returned to
the Note Insurer for cancellation;
(B) the Issuer has paid or caused to be paid all Insurer
Secured Obligations and all Trustee Secured Obligations; and
(C) the Issuer has delivered (i) to the Trustee and the Note
Insurer an Officer's Certificate, an Opinion of Counsel and (ii)
if required by the TIA, to the Trustee or the Note Insurer (so
long as an Insurer Default shall not have occurred and be
continuing) an Independent Certificate from a firm of certified
public accountants, each meeting the applicable requirements of
Section 11.1(a) and each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of
this Indenture have been complied with.
SECTION 4.2. Application of Trust Money. All moneys deposited with the
Trustee pursuant to Section 4.1 hereof shall be held in trust and applied by it,
in accordance with the provisions of the Notes and this Indenture, to the
payment, either directly or through any Note Paying Agent, as the Trustee may
determine, to the Holders of the particular Notes for the payment or redemption
of which such moneys have been deposited with the Trustee, of all sums due and
to become due thereon for principal and interest; but such moneys need not be
segregated from other funds except to the extent required herein or in the Sale
and Servicing Agreement or required by law.
-29-
SECTION 4.3. Repayment of Moneys Held by Note Paying Agent. In connection
with the satisfaction and discharge of this Indenture with respect to the Notes,
all moneys then held by any Note Paying Agent other than the Trustee under the
provisions of this Indenture with respect to such Notes shall, upon demand of
the Issuer, be paid to the Trustee to be held and applied according to Section
3.3 and thereupon such Note Paying Agent shall be released from all further
liability with respect to such moneys.
ARTICLE V
Remedies
SECTION 5.1. Events of Default. (a) "Event of Default", wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be voluntary or involuntary or be effected
by operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(i) default in the payment of any interest on any Note when the
same becomes due and payable, and such default shall continue for a
period of five days (solely for purposes of this clause, a payment on
the Notes funded by the Note Insurer or the Collateral Agent pursuant
to the Master Spread Account Agreement shall be deemed to be a payment
made by the Issuer); or
(ii) default in the payment of the principal of or any
installment of the principal of any Note when the same becomes due and
payable and such default shall continue for a period of five days
(solely for purposes of this clause, a payment on the Notes funded by
the Note Insurer or the Collateral Agent pursuant to the Master Spread
Account Agreement, shall be deemed to be a payment made by the
Issuer); or
(iii) so long as an Insurer Default shall not have occurred and
be continuing, an Insurance Agreement Indenture Cross Default shall
have occurred; provided, however, that the occurrence of an Insurance
Agreement Indenture Cross Default may not form the basis of an Event
of Default unless the Note Insurer shall, upon prior written notice to
the Rating Agencies, have delivered to the Issuer and the Trustee and
not rescinded a written notice specifying that such Insurance
Agreement Indenture Cross Default constitutes an Event of Default
under the Indenture; or
(iv) so long as an Insurer Default shall have occurred and be
continuing, default in the observance or performance of any covenant
or agreement of the Issuer made in this Indenture (other than a
covenant or agreement, a default in the observance or performance of
which is elsewhere in this Section specifically dealt with), or any
representation or warranty of the Issuer made in this Indenture or in
any certificate or
-30-
other writing delivered pursuant hereto or in connection herewith
proving to have been incorrect in any material respect as of the time
when the same shall have been made, and such default shall continue or
not be cured, or the circumstance or condition in respect of which
such misrepresentation or warranty was incorrect shall not have been
eliminated or otherwise cured, for a period of 30 days (or for such
longer period, not in excess of 90 days, as may be reasonably
necessary to remedy such default; provided that such default is
capable of remedy within 90 days or less and the Servicer on behalf of
the Owner Trustee delivers an Officer's Certificate to the Trustee to
the effect that the Issuer has commenced, or will promptly commence
and diligently pursue, all reasonable efforts to remedy such default)
after there shall have been given, by registered or certified mail, to
the Issuer by the Trustee or to the Issuer and the Trustee by the
Holders of at least 25% of the Outstanding Amount of the Notes, a
written notice specifying such default or incorrect representation or
warranty and requiring it to be remedied and stating that such notice
is a "Notice of Default" hereunder; or
(v) so long as an Insurer Default shall have occurred and be
continuing, the filing of a decree or order for relief by a court
having jurisdiction in the premises in respect of the Issuer or any
substantial part of the Trust Estate in an involuntary case under any
applicable Federal or state bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of the
Issuer or for any substantial part of the Trust Estate, or ordering
the winding-up or liquidation of the Issuer's affairs, which decree or
order shall remain unstayed and in effect for a period of 60
consecutive days; or
(vi) so long as an Insurer Default shall have occurred and be
continuing, the commencement by the Issuer of a voluntary case under
any applicable Federal or state bankruptcy, insolvency or other
similar law now or hereafter in effect, or the consent by the Issuer
to the entry of an order for relief in an involuntary case under any
such law, or the consent by the Issuer to the appointment or taking
possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Issuer or for any substantial
part of the Trust Estate, or the making by the Issuer of any general
assignment for the benefit of creditors, or the failure by the Issuer
generally to pay its debts as such debts become due, or the taking of
action by the Issuer in furtherance of any of the foregoing.
(b) The Issuer shall deliver to the Trustee and the Note Insurer, within
five days after the occurrence thereof, written notice in the form of an
Officer's Certificate of any event which with the giving of notice and the lapse
of time would become an Event of Default under clause (iii), its status and what
action the Issuer is taking or proposes to take with respect thereto.
SECTION 5.2. Rights Upon Event of Default. (a) If an Insurer Default shall
not have occurred and be continuing and an Event of Default shall have occurred
and be continuing, the Notes shall become immediately due and payable at par,
together with accrued interest thereon.
-31-
If an Event of Default shall have occurred and be continuing, the Controlling
Party may exercise any of the remedies specified in Section 5.4(a). In the event
of any acceleration of any Notes by operation of this Section 5.2, the Trustee
shall continue to be entitled to make claims under the Note Policy pursuant to
the Sale and Servicing Agreement for Scheduled Payments on the Notes. Payments
under the Note Policy following acceleration of any Notes shall be applied by
the Trustee:
FIRST: to Noteholders for amounts due and unpaid on the Notes for
interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for interest;
SECOND: to Class A-1 Noteholders for amounts due and unpaid on
the Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the A-1 Notes
for principal;
THIRD: to Class A-2 Noteholders for amounts due and unpaid on the
Notes for principal, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Class A-2 Notes
for principal;
FOURTH: to Class A-3 Noteholders for amounts due and unpaid on
the Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class A-3
Notes for principal; and
FIFTH: to Class A-4 Noteholders for amounts due and unpaid on the
Notes for principal, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Class A-4 Notes
for principal.
(b) In the event any Notes are accelerated due to an Event of Default, the
Note Insurer shall have the right (in addition to its obligation to pay
Scheduled Payments on the Notes in accordance with the Note Policy), but not the
obligation, to make payments under the Note Policy or otherwise of interest and
principal due on such Notes, in whole or in part, on any date or dates following
such acceleration as the Note Insurer, in its sole discretion, shall elect.
(c) If an Insurer Default shall have occurred and be continuing and an
Event of Default shall have occurred and be continuing, the Trustee in its
discretion may, or if so requested in writing by Holders holding Notes
representing not less than a majority of the Outstanding Amount of the Notes,
declare by written notice to the Issuer that the Notes become, whereupon they
shall become, immediately due and payable at par, together with accrued interest
thereon.
(d) If an Insurer Default shall have occurred and be continuing, then at
any time after such declaration of acceleration of maturity has been made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article V
-32-
provided, the Holders of Notes representing a majority of the Outstanding Amount
of the Notes, by written notice to the Issuer and the Trustee, may rescind and
annul such declaration and its consequences if:
(i) the Issuer has paid or deposited with the Trustee a sum
sufficient to pay
(A) all payments of principal of and interest on all Notes
and all other amounts that would then be due hereunder or upon
such Notes if the Event of Default giving rise to such
acceleration had not occurred; and
(B) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances
of the Trustee and its agents and counsel; and
(ii) all Events of Default, other than the nonpayment of the
principal of the Notes that has become due solely by such
acceleration, have been cured or waived as provided in Section 5.12.
No such rescission shall affect any subsequent default or impair any right
consequent thereto.
SECTION 5.3. Collection of Indebtedness and Suits for Enforcement by
Trustee. (a) The Issuer covenants that if (i) default is made in the payment of
any interest on any Note when the same becomes due and payable, and such default
continues for a period of five days, or (ii) default is made in the payment of
the principal of or any installment of the principal of any Note when the same
becomes due and payable and such default continues for a period of five days,
the Issuer will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of the Notes, the whole amount then due and payable on such Notes for
principal and interest, with interest upon the overdue principal, and, to the
extent payment at such rate of interest shall be legally enforceable, upon
overdue installments of interest, at the applicable Interest Rate and in
addition thereto such further amount as shall be sufficient to cover the costs
and expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee and its agents and counsel.
(b) Each Issuer Secured Party hereby irrevocably and unconditionally
appoints the Controlling Party as the true and lawful attorney-in-fact of such
Issuer Secured Party for so long as such Issuer Secured Party is not the
Controlling Party, with full power of substitution, to execute, acknowledge and
deliver any notice, document, certificate, paper, pleading or instrument and to
do in the name of the Controlling Party as well as in the name, place and stead
of such Issuer Secured Party such acts, things and deeds for or on behalf of and
in the name of such Issuer Secured Party under this Indenture (including
specifically under Section 5.4) and under the Basic Documents which such Issuer
Secured Party could or might do or which may be necessary, desirable or
convenient in such Controlling Party's sole discretion to effect the
-33-
purposes contemplated hereunder and under the Basic Documents and, without
limitation, following the occurrence of an Event of Default, exercise full
right, power and authority to take, or defer from taking, any and all acts with
respect to the administration, maintenance or disposition of the Trust Estate.
(c) If an Event of Default occurs and is continuing, the Trustee may in its
discretion subject to the consent of the Controlling Party and shall, at the
direction of the Controlling Party (except as provided in Section 5.3(d) below),
proceed to protect and enforce its rights and the rights of the Noteholders by
such appropriate Proceedings as the Trustee or the Controlling Party shall deem
most effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy or
legal or equitable right vested in the Trustee by this Indenture or by law.
(d) [Reserved].
(e) In case there shall be pending, relative to the Issuer or any other
obligor upon the Notes or any Person having or claiming an ownership interest in
the Trust Estate, proceedings under Title 11 of the United States Code or any
other applicable Federal or state bankruptcy, insolvency or other similar law,
or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Issuer or its property or such other obligor or Person,
or in case of any other comparable judicial proceedings relative to the Issuer
or other obligor upon the Notes, or to the creditors or property of the Issuer
or such other obligor, the Trustee, irrespective of whether the principal of any
Notes shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand
pursuant to the provisions of this Section, shall be entitled and empowered, by
intervention in such proceedings or otherwise:
(i) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Notes and to
file such other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for
reasonable compensation to the Trustee and each predecessor Trustee,
and their respective agents, attorneys and counsel, and for
reimbursement of all expenses and liabilities incurred, and all
advances made, by the Trustee and each predecessor Trustee, except as
a result of negligence, bad faith or willful misconduct) and of the
Noteholders allowed in such proceedings;
(ii) unless prohibited by applicable law and regulations, to vote
on behalf of the Holders of Notes in any election of a trustee, a
standby trustee or person performing similar functions in any such
proceedings;
-34-
(iii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute all amounts
received with respect to the claims of the Noteholders and of the
Trustee on their behalf; and
(iv) to file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the
Trustee or the Holders of Notes allowed in any judicial proceedings
relative to the Issuer, its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar official in
any such proceeding is hereby authorized by each of such Noteholders to make
payments to the Trustee, and, in the event that the Trustee shall consent to the
making of payments directly to such Noteholders, to pay to the Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Trustee,
each predecessor Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances made, by the
Trustee and each predecessor Trustee except as a result of negligence or bad
faith.
(f) Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or vote for or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such proceeding
except, as aforesaid, to vote for the election of a trustee in bankruptcy or
similar person.
(g) All rights of action and of asserting claims under this Indenture, the
Master Spread Account Agreement or under any of the Notes, may be enforced by
the Trustee without the possession of any of the Notes or the production thereof
in any trial or other proceedings relative thereto, and any such action or
proceedings instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the Trustee, each
predecessor Trustee and their respective agents and attorneys, shall be for the
ratable benefit of the Holders of the Notes.
(h) In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture or the Master
Spread Account Agreement), the Trustee shall be held to represent all the
Holders of the Notes, and it shall not be necessary to make any Noteholder a
party to any such proceedings.
SECTION 5.4. Remedies. If an Event of Default shall have occurred and be
continuing, the Controlling Party may do one or more of the following (subject
to Section 5.5):
(i) institute or direct the Trustee to institute Proceedings in its
own name and as trustee of an express trust for the collection of all
amounts then payable on the Notes or under this Indenture with respect
thereto, whether by declaration or otherwise, enforce
-35-
any judgment obtained, and collect from the Issuer and any other obligor
upon such Notes moneys adjudged due;
(ii) institute or direct the Trustee to institute Proceedings from
time to time for the complete or partial foreclosure of this Indenture with
respect to the Trust Estate;
(iii) exercise or direct the Trustee to exercise any remedies of a
secured party under the UCC and take any other appropriate action to
protect and enforce the rights and remedies of the Trustee and the Holders
of the Notes; and
(iv) sell or direct the Trustee to sell the Trust Estate or any
portion thereof or rights or interest therein, at one or more public oir
private sales called and conducted in any manner permitted by law;
provided, however, that if the Trustee is the Controlling Party, the
Trustee may not sell or otherwise liquidate the Trust Estate following an
Event of Default unless
(A) such Event of Default is of the type described in Section
5.1(i) or (ii), or
(B) either
(x) the Holders of 100% of the Outstanding Amount of
the Notes consent thereto, or
(y) the proceeds of such sale or liquidation
distributable to the Noteholders are sufficient to discharge
in full all amounts then due and unpaid upon such Notes for
principal and interest.
In determining such sufficiency or insufficiency with respect to clause
(y), the Trustee may, but need not, obtain and rely upon an opinion of an
Independent investment banking or accounting firm of national reputation as to
the feasibility of such proposed action and as to the sufficiency of the Trust
Estate for such purpose.
SECTION 5.5. Optional Preservation of the Receivables. If the Trustee is
the Controlling Party and if the Notes have been declared to be due and payable
under Section 5.2 following an Event of Default and such declaration and its
consequences have not been rescinded and annulled, the Trustee may, but need
not, elect to maintain possession of the Trust Estate. It is the desire of the
parties hereto and the Noteholders that there be at all times sufficient funds
for the payment of principal of and interest on the Notes, and the Trustee shall
take such desire into account when determining whether or not to maintain
possession of the Trust Estate. In determining whether to maintain possession of
the Trust Estate, the Trustee may, but need not, obtain and rely upon an opinion
of an Independent investment banking or
-36-
accounting firm of national reputation as to the feasibility of such proposed
action and as to the sufficiency of the Trust Estate for such purpose.
SECTION 5.6. Priorities.
(a) Following (1) the acceleration of the Notes pursuant to Section 5.2 or
(2) if an Insurer Default shall have occurred and be continuing, the occurrence
of an Event of Default pursuant to Section 5.1(i), 5.1(ii), 5.1(iv), 5.1(v) or
5.1(vi) of this Indenture the Total Distribution Amount, including any money or
property collected pursuant to Section 5.4 of this Indenture shall be applied by
the Trustee on the related Payment Date in the following order of priority:
FIRST: amounts due and owing and required to be distributed to
the Servicer, the Standby Servicer, the Owner Trustee, the Trustee and
the Collateral Agent, respectively, pursuant to priorities (i) through
(v) of Section 5.7(b) of the Sale and Servicing Agreement and not
previously distributed, in the order of such priorities and without
preference or priority of any kind within such priorities;
SECOND: to Noteholders for amounts due and unpaid on the Notes
for interest, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Notes for interest;
THIRD: to Class A-1 Noteholders for amounts due and unpaid on the
Notes for principal, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Class A-1 Notes
for principal;
FOURTH: to Class A-2 Noteholders for amounts due and unpaid on
the Notes for principal, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Class A-2
Notes for principal;
FIFTH: to Class A-3 Noteholders for amounts due and unpaid on the
Notes for principal, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Class A-3 Notes
for principal;
SIXTH: to Class A-4 Noteholders for amounts due and unpaid on the
Notes for principal, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Class A-4 Notes
for principal;
SEVENTH: amounts due and owing and required to be distributed to
the Note Insurer pursuant to priority (viii) of Section 5.7(b) of the
Sale and Servicing Agreement and not previously distributed);
EIGHTH: in the event any Person other than the Standby Servicer
becomes the successor Servicer, to such successor Servicer, to the
extent not previously paid by the
-37-
predecessor Servicer pursuant to the Sale and Servicing Agreement,
reasonable transition expenses (up to a maximum of $50,000 for all
such expenses) incurred in becoming the successor Servicer; and
NINTH: to the Collateral Agent to be applied as provided in the
Master Spread Account Agreement.
(b) The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section. At least 15 days before such record date
the Issuer shall mail to each Noteholder and the Trustee a notice that states
such record date, the payment date and the amount to be paid.
SECTION 5.7. Limitation of Suits. No Holder of any Note shall have any
right to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless:
(i) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(ii) the Holders of not less than 25% of the Outstanding Amount
of the Notes have made written request to the Trustee to institute
such proceeding in respect of such Event of Default in its own name as
Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee
indemnity reasonably satisfactory to it against the costs, expenses
and liabilities to be incurred in complying with such request;
(iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute such
proceedings;
(v) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority of the Outstanding Amount of the Notes; and
(vi) an Insurer Default shall have occurred and be continuing;
it being understood and intended that no one or more Holders of Notes shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other
Holders of Notes or to obtain or to seek to obtain priority or preference over
any other Holders or to enforce any right under this Indenture, except in the
manner herein provided.
-38-
In the event the Trustee shall receive conflicting or inconsistent requests
and indemnity from two or more groups of Holders of Notes, each representing
less than a majority of the Outstanding Amount of the Notes, the Trustee in its
sole discretion may determine what action, if any, shall be taken,
notwithstanding any other provisions of this Indenture.
SECTION 5.8. Unconditional Rights of Noteholders To Receive Principal and
Interest. Notwithstanding any other provisions of this Indenture, the Holder of
any Note shall have the right, which is absolute and unconditional, to receive
payment of the principal of and interest, if any, on such Note on or after the
respective due dates thereof expressed in such Note or in this Indenture (or, in
the case of redemption, on or after the Redemption Date) and to institute suit
for the enforcement of any such payment, and such right shall not be impaired
without the consent of such Holder.
SECTION 5.9. Restoration of Rights and Remedies. If the Controlling Party
or any Noteholder has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason or has been determined adversely to the Trustee or to such
Noteholder, then and in every such case the Issuer, the Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Noteholders shall continue as
though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Controlling Party or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not a Waiver. No delay or omission of the
Controlling Party or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Trustee or to the Noteholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Noteholders, as the
case may be.
SECTION 5.12. Control by Noteholders. If the Trustee is the Controlling
Party, the Holders of a majority of the Outstanding Amount of the Notes shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee with respect to the Notes or exercising
any trust or power conferred on the Trustee; provided that
-39-
(i) such direction shall not be in conflict with any rule of law
or with this Indenture;
(ii) subject to the express terms of Section 5.4, any direction
to the Trustee to sell or liquidate the Trust Estate shall be by the
Holders of Notes representing not less than 100% of the Outstanding
Amount of the Notes;
(iii) if the conditions set forth in Section 5.5 have been
satisfied and the Trustee elects to retain the Trust Estate pursuant
to such Section, then any direction to the Trustee by Holders of Notes
representing less than 100% of the Outstanding Amount of the Notes to
sell or liquidate the Trust Estate shall be of no force and effect;
and
(iv) the Trustee may take any other action deemed proper by the
Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.1, the Trustee need not take any
action that it determines might involve it in liability or might materially
adversely affect the rights of any Noteholders not consenting to such action.
SECTION 5.13. Waiver of Past Defaults. (a) If an Insurer Default shall have
occurred and be continuing, prior to the declaration of the acceleration of the
maturity of the Notes as provided in Section 5.4, the Holders of Notes of not
less than a majority of the Outstanding Amount of the Notes may waive any past
Default or Event of Default and its consequences except a Default or Event of
Default (i) in payment of principal of or interest on any of the Notes or (ii)
in respect of a covenant or provision hereof which cannot be modified or amended
without the consent of the Holder of each Note. In the case of any such waiver,
the Issuer, the Trustee and the Holders of the Notes shall be restored to their
former positions and rights hereunder, respectively; but no such waiver shall
extend to any subsequent or other Default or Event of Default or impair any
right consequent thereto.
Upon any such waiver, such Default or Event of Default shall cease to exist
and be deemed to have been cured and not to have occurred, and any Event of
Default arising therefrom shall be deemed to have been cured and not to have
occurred, for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereto.
SECTION 5.14. Undertaking for Costs. All parties to this Indenture agree,
and each Holder of any Note by such Holder's acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good
-40-
faith of the claims or defenses made by such party litigant; but the provisions
of this Section shall not apply to (a) any suit instituted by the Trustee, (b)
any suit instituted by any Noteholder, or group of Noteholders, in each case
holding in the aggregate more than 10% of the Outstanding Amount of the Notes or
(c) any suit instituted by any Noteholder for the enforcement of the payment of
principal of or interest on any Note on or after the respective due dates
expressed in such Note and in this Indenture (or, in the case of redemption, on
or after the Redemption Date).
SECTION 5.15. Waiver of Stay or Extension Laws. The Issuer covenants (to
the extent that it may lawfully do so) that it will not at any time insist upon,
or plead or in any manner whatsoever, claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time hereafter in
force, that may affect the covenants or the performance of this Indenture; and
the Issuer (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power and any right of the Issuer to take
such action shall be suspended.
ARTICLE VI
The Trustee
SECTION 6.1. Duties of Trustee. (a) If an Event of Default has occurred and
is continuing, the Trustee shall exercise the rights and powers vested in it by
this Indenture and the Basic Documents and use the same degree of care and skill
in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture; however, the Trustee shall examine the certificates
and opinions to determine whether or not they conform on their face to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own wilful misconduct, except
that:
-41-
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.12.
(d) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Issuer.
(e) Money held in trust by the Trustee need not be segregated from other
funds except to the extent required by law or the terms of this Indenture or the
Sale and Servicing Agreement.
(f) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur financial liability in the performance of
any of its duties hereunder or in the exercise of any of its rights or powers,
if it shall have reasonable grounds to believe that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
it.
(g) Every provision of this Indenture relating to the conduct or affecting
the liability of or affording protection to the Trustee shall be subject to the
provisions of this Section and to the provisions of the TIA.
(h) The Trustee shall permit any representative of the Note Insurer, during
the Trustee's normal business hours, to examine all books of account, records,
reports and other papers of the Trustee relating to the Notes, to make copies
and extracts therefrom and to discuss the Trustee's affairs and actions, as such
affairs and actions relate to the Trustee's duties with respect to the Notes,
with the Trustee's officers and employees responsible for carrying out the
Trustee's duties with respect to the Notes.
(i) The Trustee shall, and hereby agrees that it will, perform all of the
obligations and duties required of it under the Sale and Servicing Agreement.
(j) The Trustee shall, and hereby agrees that it will, hold the Note Policy
in trust, and will hold any proceeds of any claim on the Note Policy in trust
solely for the use and benefit of the Noteholders.
(k) In no event shall Norwest Bank Minnesota, National Association, in any
of its capacities hereunder, be deemed to have assumed any duties of the Owner
Trustee under the Delaware Business Trust Statute, common law, or the Trust
Agreement.
-42-
(l) Except for actions expressly authorized by this Indenture, the Trustee
shall take no action reasonably likely to impair the security interests created
or existing under any Receivable or Financed Vehicle or to impair the value of
any Receivable or Financed Vehicle.
(m) All information obtained by the Trustee regarding the Obligors and the
Receivables, whether upon the exercise of its rights under this Indenture or
otherwise, shall be maintained by the Trustee in confidence and shall not be
disclosed to any other Person, other than the Trustee's attorneys, accountants
and agents unless such disclosure is required by this Indenture or any
applicable law or regulation.
SECTION 6.2. Rights of Trustee. (a) Subject to Sections 6.1 and 6.2, the
Trustee shall be protected and shall incur no liability to the Issuer or any
Issuer Secured Party in relying upon the accuracy, acting in reliance upon the
contents, and assuming the genuineness of any notice, demand, certificate,
signature, instrument or other document reasonably believed by the Trustee to be
genuine and to have been duly executed by the appropriate signatory, and, except
to the extent the Trustee has actual knowledge to the contrary or as required
pursuant to Section 6.1 or Section 6.2(g) the Trustee shall not be required to
make any independent investigation with respect thereto.
(b) Before the Trustee acts or refrains from acting, it may require an
Officer's Certificate. Subject to Section 6.1(c), the Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on the
Officer's Certificate.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys or a custodian or nominee, and the Trustee shall not be responsible
for any misconduct or negligence on the part of, or for the supervision of
Consumer Portfolio Services, Inc., or any other such agent, attorney, custodian
or nominee appointed with due care by it hereunder.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers; provided, however, that the Trustee's conduct does not constitute wilful
misconduct, negligence or bad faith.
(e) The Trustee may consult with counsel, and the advice or opinion of
counsel with respect to legal matters relating to this Indenture and the Notes
shall be full and complete authorization and protection from liability in
respect to any action taken, omitted or suffered by it hereunder in good faith
and in accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to institute, conduct or
defend any litigation under this Indenture or in relation to this Indenture, at
the request, order or direction of any of the Holders of Notes or the
Controlling Party, pursuant to the provisions of this Indenture, unless such
Holders of Notes or the Controlling Party shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that may be incurred therein or
-43-
thereby; provided, however, that the Trustee shall, upon the occurrence of an
Event of Default (that has not been cured), exercise the rights and powers
vested in it by this Indenture in accordance with Section 6.1.
(g) The Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond or other paper
or document, unless requested in writing to do so by the Note Insurer (so long
as no Insurer Default shall have occurred and be continuing) or (if an Insurer
Default shall have occurred and be continuing) by the Holders of Notes
evidencing not less than 25% of the Outstanding Amount thereof; provided,
however, that if the payment within a reasonable time to the Trustee of the
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture or the
Sale and Servicing Agreement, the Trustee may require reasonable indemnity
against such cost, expense or liability as a condition to so proceeding; the
reasonable expense of every such examination shall be paid by the Person making
such request, or, if paid by the Trustee, shall be reimbursed by the Person
making such request upon demand.
SECTION 6.3. Individual Rights of Trustee. The Trustee in its individual or
any other capacity may become the owner or pledgee of Notes and may otherwise
deal with the Issuer or its Affiliates with the same rights it would have if it
were not the Trustee. Any Note Paying Agent, Note Registrar, co-registrar or
co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 6.11 and 6.12.
SECTION 6.4. Trustee's Disclaimer. The Trustee shall not be responsible for
and makes no representation as to the validity or adequacy of this Indenture,
the Trust Estate, the Collateral or the Notes, it shall not be accountable for
the Issuer's use of the proceeds from the Notes, and it shall not be responsible
for any statement of the Issuer in the Indenture or in any document issued in
connection with the sale of the Notes or in the Notes other than the Trustee's
certificate of authentication.
SECTION 6.5. Notice of Defaults. If an Event of Default occurs and is
continuing and if it is either known by, or written notice of the existence
thereof has been delivered to, a Responsible Officer of the Trustee, the Trustee
shall mail to each Noteholder notice of the Default within 30 days after such
knowiledge or notice occurs. Except in the case of a Default in payment of
principal of or interest on any Note (including payments pursuant to the
mandatory redemption provisions of such Note, if any), the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of Noteholders.
SECTION 6.6. Reports by Trustee to Holders. The Trustee shall on behalf of
the Issuer deliver to each Noteholder such information as may be reasonably
required to enable such Holder to prepare its Federal and state income tax
returns.
-44-
SECTION 6.7. Compensation and Indemnity. (a) Pursuant to Section 5.7(b) of
the Sale and Servicing Agreement, the Issuer shall pay to the Trustee from time
to time compensation for its services. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuer
shall reimburse the Trustee, pursuant to Section 5.7(b) of the Sale and
Servicing Agreement, for all reasonable out-of-pocket expenses incurred or made
by it, including costs of collection, in addition to the compensation for its
services. Such expenses shall include the reasonable compensation and expenses,
disbursements and advances of the Trustee's agents, counsel, accountants and
experts. The Issuer shall or shall cause the Servicer to indemnify the Trustee
against any and all loss, liability or expense incurred by the Trustee without
willful misfeasance, negligence or bad faith on its part arising out of or in
connection with the acceptance or the administration of this trust and the
performance of its duties hereunder, including the costs and expenses of
defending itself against any claim or liability in connection therewith. The
Trustee shall notify the Issuer and the Servicer promptly of any claim for which
it may seek indemnity. Failure by the Trustee to so notify the Issuer and the
Servicer shall not relieve the Issuer of its obligations hereunder or the
Servicer of its obligations under Article XII of the Sale and Servicing
Agreement. The Trustee may have separate counsel and the Issuer shall or shall
cause the Servicer to pay the fees and expenses of such counsel. Neither the
Issuer nor the Servicer need reimburse any expense or indemnify against any
loss, liability or expense incurred by the Trustee through the Trustee's own
wilful misconduct, negligence or bad faith.
(b) The Issuer's payment obligations to the Trustee pursuant to this
Section shall survive the discharge of this Indenture. When the Trustee incurs
expenses after the occurrence of a Default specified in Section 5.1(v) or (vi)
with respect to the Issuer, the expenses are intended to constitute expenses of
administration under Title 11 of the United States Code or any other applicable
Federal or state bankruptcy, insolvency or similar law. Notwithstanding anything
else set forth in this Indenture or the Basic Documents, the recourse of the
Trustee hereunder and under the Basic Documents shall be to the Trust Estate
only and specifically shall not be recourse to the assets of the Depositor or
any Noteholder. In addition, the Trustee agrees that its recourse to the Issuer,
the Trust Estate, the Seller and amounts held pursuant to the Master Spread
Account Agreement shall be limited to the right to receive the distributions
referred to in Section 5.7(b) of the Sale and Servicing Agreement.
SECTION 6.8. Replacement of Trustee. The Issuer may, with the consent of
the Note Insurer, and at the request of the Note Insurer (unless an Insurer
Default shall have occurred and be continuing), shall, remove the Trustee if:
(i) the Trustee fails to comply with Section 6.11;
(ii) a court having jurisdiction in the premises in respect of the Trustee
in an involuntary case or proceeding under federal or state banking or
bankruptcy laws, as now or hereafter constituted, or any other applicable
federal or state bankruptcy, insolvency or other similar law, shall have entered
a decree or order granting relief or appointing a receiver,
-45-
liquidator, assignee, custodian, trustee, conservator, sequestrator (or similar
official) for the Trustee or for any substantial part of the Trustee's property,
or ordering the winding-up or liquidation of the Trustee's affairs;
(iii) an involuntary case under the federal bankruptcy laws, as now or
hereafter in effect, or another present or future federal or state bankruptcy,
insolvency or similar law is commenced with respect to the Trustee and such case
is not dismissed within 60 days;
(iv) the Trustee commences a voluntary case under any federal or state
banking or bankruptcy laws, as now or hereafter constituted, or any other
applicable federal or state bankruptcy, insolvency or other similar law, or
consents to the appointment of or taking possession by a received, liquidator,
assignee, custodian, trustee, conservator or sequestrator (or other similar
official) for the Trustee or for any substantial part of the Trustee's property,
or makes any assignment for the benefit of creditors or fails generally to pay
its debts as such debts become due or takes any corporate action in furtherances
of any of the foregoing; or
(v) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason (the Trustee in such event being referred to herein as
the retiring Trustee), the Issuer shall promptly appoint a successor Trustee
acceptable to the Note Insurer (so long as an Insurer Default shall not have
occurred and be continuing). If the Issuer fails to appoint such a successor
Trustee, the Note Insurer may appoint a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee, the Note Insurer (provided that no Insurer Default
shall have occurred and be continuing) and the Issuer, whereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the retiring
Trustee under this Indenture, subject to satisfaction of the Rating Agency
Condition. The successor Trustee shall mail a notice of its succession to each
Noteholder. The retiring Trustee shall promptly transfer all property held by it
as Trustee to the successor Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the
Holders of a majority in outstanding Amount of the Notes may petition any court
of competent jurisdiction for the appointment of a successor Trustee.
Any resignation or removal of the Trustee and appointment of a successor
Trustee pursuant to any of the provisions of this Section shall not become
effective until acceptance of appointment by the successor Trustee pursuant to
Section 6.8.
Notwithstanding the replacement of the Trustee pursuant to this Section,
the Issuer's and the Servicer's obligations under Section 6.7 shall continue for
the benefit of the retiring Trustee.
-46-
SECTION 6.9. Successor Trustee by Merger. (a) If the Trustee consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee. The Trustee shall provide the Rating
Agencies prior written notice of any such transaction.
(b) In case at the time such successor or successors to the Trustee by
merger, conversion or consolidation shall succeed to the trusts created by this
Indenture any of the Notes shall have been authenticated but not delivered, any
such successor to the Trustee may adopt the certificate of authentication of any
predecessor trustee, and deliver such Notes so authenticated; and in case at
that time any of the Notes shall not have been authenticated, any successor to
the Trustee may authenticate such Notes either in the name of any predecessor
hereunder or in the name of the successor to the Trustee; and in all such cases
such certificates shall have the full force which it is anywhere in the Notes or
in this Indenture provided that the certificate of the Trustee shall have.
SECTION 6.10. Appointment of Co-Trustee or Separate Trustee. (a)
Notwithstanding any other provisions of this Indenture, at any time, for the
purpose of meeting any legal requirement of any jurisdiction in which any part
of the Trust may at the time be located, the Trustee with the consent of the
Note Insurer (so long as an Insurer Default shall not have occurred and be
continuing) shall have the power and may execute and deliver all instruments to
appoint one or more Persons to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the Trust, and to vest in
such Person or Persons, in such capacity and for the benefit of the Noteholders,
such title to the Trust, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations, rights and trusts
as the Trustee may consider necessary or desirable. No co-trustee or separate
trustee hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 6.11 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be required under
Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the extent permitted by
law, be appointed and act subject to the following provisions and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed the Trustee shall be incompetent
or unqualified to perform such act or acts, in which event such rights,
powers, duties and obligations (including the holding of title to the Trust
or any portion thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but solely at the
direction of the Trustee;
-47-
(ii) no trustee hereunder shall be personally liable by reason of any
act or omission of any other trustee hereunder, including acts or omissions
of predecessor or successor trustees; and
(iii) the Trustee may at any time accept the resignation of or remove
any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VI. Each separate trustee and co-trustee, upon its acceptance of
the trusts conferred, shall be vested with the estates or property specified in
its instrument of appointment, either jointly with the Trustee or separately, as
may be provided therein, subject to all the provisions of this Indenture,
specifically including every provision of this Indenture relating to the conduct
of, affecting the liability of, or affording protection to, the Trustee. Every
such instrument shall be filed with the Trustee.
(d) Any separate trustee or co-trustee may at any time constitute the
Trustee, its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this
Agreement on its behalf and in its name. If any separate trustee or co-trustee
shall die, dissolve, become insolvent, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and trusts shall
invest in and be exercised by the Trustee, to the extent permitted by law,
without the appointment of a new or successor trustee.
SECTION 6.11. Eligibility: Disqualification. The Trustee shall at all times
satisfy the requirements of TIA ss. 310(a). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition and subject to supervision or examination
by federal or state authorities; and having a rating, both with respect to
long-term and short-term unsecured obligations, of not less than investment
grade by the Rating Agencies. The Trustee shall provide copies of such reports
to the Note Insurer upon request. The Trustee shall comply with TIA ss. 310(b),
including the optional provision permitted by the second sentence of TIA ss.
310(b)(9); provided, however, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other securities of
the Issuer are outstanding if the requirements for such exclusion set forth in
TIA ss. 310(b)(1) are met.
SECTION 6.12. Preferential Collection of Claims Against Issuer. The Trustee
shall comply with TIA ss. 311(a), excluding any creditor relationship listed in
TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to
TIA ss. 311(a) to the extent indicated.
SECTION 6.13. Appointment and Powers. Subject to the terms and conditions
hereof, each of the Issuer Secured Parties hereby appoints Norwest Bank
Minnesota, National
-48-
Association as the Trustee with respect to the Collateral, and Norwest Bank
Minnesota, National Association hereby accepts such appointment and agrees to
act as Trustee with respect to the Collateral for the Issuer Secured Parties, to
maintain custody and possession of such Collateral (except as otherwise provided
hereunder) and to perform the other duties of the Trustee in accordance with the
provisions of this Indenture and the other Basic Documents. Each Issuer Secured
Party hereby authorizes the Trustee to take such action on its behalf, and to
exercise such rights, remedies, powers and privileges hereunder, as the
Controlling Party may direct and as are specifically authorized to be exercised
by the Trustee by the terms hereof, together with such actions, rights,
remedies, powers and privileges as are reasonably incidental thereto. The
Trustee shall act upon and in compliance with the written instructions of the
Controlling Party delivered pursuant to this Indenture promptly following
receipt of such written instructions; provided that the Trustee shall not act in
accordance with any instructions (i) which are not authorized by, or in
violation of the provisions of, this Indenture, (ii) which are in violation of
any applicable law, rule or regulation or (iii) for which the Trustee has not
received reasonable indemnity. Receipt of such instructions shall not be a
condition to the exercise by the Trustee of its express duties hereunder, except
where this Indenture provides that the Trustee is permitted to act only
following and in accordance with such instructions.
SECTION 6.14. Performance of Duties. The Trustee shall have no duties or
responsibilities except those expressly set forth in this Indenture and the
other Basic Documents to which the Trustee is a party or as directed by the
Controlling Party in accordance with this Indenture. The Trustee shall not be
required to take any discretionary actions hereunder except at the written
direction and with the indemnification of the Controlling Party and as provided
in Section 5.12. The Trustee shall, and hereby agrees that it will, perform all
of the duties and obligations required of it under the Sale and Servicing
Agreement.
SECTION 6.15. Limitation on Liability. Neither the Trustee nor any of its
directors, officers or employees shall be liable for any action taken or omitted
to be taken by it or them in good faith hereunder, or in connection herewith,
except that the Trustee shall be liable for its negligence, bad faith or willful
misconduct. Notwithstanding any term or provision of this Indenture, the Trustee
shall incur no liability to the Issuer or the Issuer Secured Parties for any
action taken or omitted by the Trustee in connection with the Collateral, except
for the negligence, bad faith or willful misconduct on the part of the Trustee,
and, further, shall incur no liability to the Issuer Secured Parties except for
negligence, bad faith or willful misconduct in carrying out its duties to the
Issuer Secured Parties. The Trustee shall at all times be free independently to
establish to its reasonable satisfaction, but shall have no duty to
independently verify, the existence or nonexistence of facts that are a
condition to the exercise or enforcement of any right or remedy hereunder or
under any of the Basic Documents. The Trustee may consult with counsel, and
shall not be liable for any action taken or omitted to be taken by it hereunder
in good faith and in accordance with the written advice of such counsel. The
Trustee shall not be under any obligation to exercise any of the remedial rights
or powers vested in it by this Indenture or to follow any direction from the
Controlling Party unless it shall have received
-49-
reasonable security or indemnity satisfactory to the Trustee against the costs,
expenses and liabilities which might be incurred by it.
SECTION 6.16. Reserved.
SECTION 6.17. Successor Trustee.
(a) Merger. Any Person into which the Trustee may be converted or merged,
or with which it may be consolidated, or to which it may sell or transfer its
trust business and assets as a whole or substantially as a whole, or any Person
resulting from any such conversion, merger, consolidation, sale or transfer to
which the Trustee is a party, shall (provided it is otherwise qualified to serve
as the Trustee hereunder) be and become a successor Trustee hereunder and be
vested with all of the title to and interest in the Collateral and all of the
trusts, powers, descriptions, immunities, privileges and other matters as was
its predecessor without the execution or filing of any instrument or any further
act, deed or conveyance on the part of any of the parties hereto, anything
herein to the contrary notwithstanding, except to the extent, if any, that any
such action is necessary to perfect, or continue the perfection of, the security
interest of the Issuer Secured Parties in the Collateral; provided that any such
successor shall also be the successor Trustee under Section 6.9.
(b) Removal. The Trustee may be removed by the Note Insurer (or, if an
Insurer Default has occurred and is continuing, by Holders of Notes evidencing
more than 50% of the principal balance of the Notes) at any time, with or
without cause, by an instrument or concurrent instruments in writing delivered
to the Trustee, the other Issuer Secured Party and the Issuer. A temporary
successor may be removed at any time to allow a successor Trustee to be
appointed pursuant to subsection (c) below. Any removal pursuant to the
provisions of this subsection (b) shall take effect only upon the date which is
the latest of (i) the effective date of the appointment of a successor Trustee
and the acceptance in writing by such successor Trustee of such appointment and
of its obligation to perform its duties hereunder in accordance with the
provisions hereof, and (ii) receipt by the Controlling Party of an Opinion of
Counsel to the effect described in Section 3.6.
(c) Acceptance by Successor. The Controlling Party shall have the sole
right to appoint each successor Trustee. Every temporary or permanent successor
Trustee appointed hereunder shall execute, acknowledge and deliver to its
predecessor and to the Trustee, each Issuer Secured Party and the Issuer an
instrument in writing accepting such appointment hereunder and the relevant
predecessor shall execute, acknowledge and deliver such other documents and
instruments as will effectuate the delivery of all Collateral to the successor
Trustee, whereupon such successor, without any further act, deed or conveyance,
shall become fully vested with all the estates, properties, rights, powers,
duties and obligations of its predecessor. Such predecessor shall, nevertheless,
on the written request of either Issuer Secured Party or the Issuer, execute and
deliver an instrument transferring to such successor all the estates,
properties, rights and powers of such predecessor hereunder. In the event that
any instrument in writing
-50-
from the Issuer or an Issuer Secured Party is reasonably required by a successor
Trustee to more fully and certainly vest in such successor the estates,
properties, rights, powers, duties and obligations vested or intended to be
vested hereunder in the Trustee, any and all such written instruments shall at
the request of the temporary or permanent successor Trustee, be forthwith
executed, acknowledged and delivered by the Trustee or the Issuer, as the case
may be. The designation of any successor Trustee and the instrument or
instruments removing any Trustee and appointing a successor hereunder, together
with all other instruments provided for herein, shall be maintained with the
records relating to the Collateral and, to the extent required by applicable
law, filed or recorded by the successor Trustee in each place where such filing
or recording is necessary to effect the transfer of the Collateral to the
successor Trustee or to protect or continue the perfection of the security
interests granted hereunder.
SECTION 6.18. [Reserved]
SECTION 6.19. Representations and Warranties of the Trustee. The Trustee
represents and warrants to the Issuer and to each Issuer Secured Party as
follows:
(a) Due Organization. The Trustee is a national banking association,
duly organized, validly existing and in good standing under the laws of the
United States and is duly authorized and licensed under applicable law to
conduct its business as presently conducted.
(b) Corporate Power. The Trustee has all requisite right, power and
authority to execute and deliver this Indenture and to perform all of its
duties as Trustee hereunder.
(c) Due Authorization. The execution and delivery by the Trustee of
this Indenture and the other Basic Documents to which it is a party, and
the performance by the Trustee of its duties hereunder and thereunder, have
been duly authorized by all necessary corporate proceedings and no further
approvals or filings, including any governmental approvals, are required
for the valid execution and delivery by the Trustee, or the performance by
the Trustee, of this Indenture and such other Basic Documents.
(d) Valid and Binding Indenture. The Trustee has duly executed and
delivered this Indenture and each other Basic Document to which it is a
party, and each of this Indenture and each such other Basic Document
constitutes the legal, valid and binding obligation of the Trustee,
enforceable against the Trustee in accordance with its terms, except as (i)
such enforceability may be limited by bankruptcy, insolvency,
reorganization and similar laws relating to or affecting the enforcement of
creditors' rights generally and (ii) the availability of equitable remedies
may be limited by equitable principles of general applicability.
SECTION 6.20. Waiver of Setoffs. The Trustee hereby expressly waives any
and all rights of setoff that the Trustee may otherwise at any time have under
applicable law with
-51-
respect to any Trust Account and agrees that amounts in the Trust Accounts shall
at all times be held and applied solely in accordance with the provisions
hereof.
SECTION 6.21. Control by the Controlling Party. The Trustee shall comply
with notices and instructions given by the Issuer only if accompanied by the
written consent of the Controlling Party, except that if any Event of Default
shall have occurred and be continuing, the Trustee shall act upon and comply
with notices and instructions given by the Controlling Party alone in the place
and stead of the Issuer.
ARTICLE VII
Noteholders' Lists and Reports
SECTION 7.1. Issuer To Furnish To Trustee Names and Addresses of
Noteholders. The Issuer will furnish or cause to be furnished to the Trustee (a)
not more than five days after the earlier of (i) each Record Date and (ii) three
months after the last Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such Record
Date, (b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that so long as the Trustee is the Note Registrar,
no such list shall be required to be furnished. The Trustee or, if the Trustee
is not the Note Registrar, the Issuer shall furnish to the Note Insurer in
writing on an annual basis on each March 31 and at such other times as the Note
Insurer may request a copy of the list.
SECTION 7.2. Preservation of Information; Communications to Noteholders.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of the Holders contained in the most recent
list furnished to the Trustee as provided in Section 7.1 and the names and
addresses of Holders received by the Trustee in its capacity as Note Registrar.
The Trustee may destroy any list furnished to it as provided in such Section 7.1
upon receipt of a new list so furnished.
(b) Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or under the
Notes.
(c) The Issuer, the Trustee and the Note Registrar shall have the
protection of TIA ss. 312(c).
SECTION 7.3. Reports by Issuer. (a) The Issuer shall:
(i) file with the Trustee, within 15 days after the Issuer is
required to file the same with the Commission, copies of the annual
reports and of the information,
-52-
documents and other reports (or copies of such portions of any of the
foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Issuer may be required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act;
(ii) file with the Trustee and the Commission in accordance with
rules and regulations prescribed from time to time by the Commission
such additional information, documents and reports with respect to
compliance by the Issuer with the conditions and covenants of this
Indenture as may be required from time to time by such rules and
regulations; and
(iii) supply to the Trustee (and the Trustee shall transmit by
mail to all Noteholders described in TIA ss. 313(c)) such summaries of
any information, documents and reports required to be filed by the
Issuer pursuant to clauses (i) and (ii) of this Section 7.3(a) as may
be required by rules and regulations prescribed from time to time by
the Commission.
(b) Unless the Issuer otherwise determines, the fiscal year of the Issuer
shall end on December 31 of each year.
SECTION 7.4. Reports by Trustee. (a) If required by TIA ss. 313(a), within
60 days after each November 30, beginning with November 30, 1997, the Trustee
shall mail to each Noteholder as required by TIA ss. 313(c) a brief report dated
as of such date that complies with TIA ss. 313(a). The Trustee also shall comply
with TIA ss. 313(b).
(b) A copy of each report at the time of its mailing to Noteholders shall
be filed by the Trustee with the Commission and each stock exchange, if any, on
which the Notes are listed. The Issuer shall notify the Trustee if and when the
Notes are listed on any stock exchange.
ARTICLE VIII
Collection of Money and Releases of Trust Estate
SECTION 8.1. Collection of Money. Except as otherwise expressly provided
herein, the Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by the
Trustee pursuant to this Indenture and the Sale and Servicing Agreement. The
Trustee shall apply all such money received by it as provided in this Indenture
and the Sale and Servicing Agreement. Except as otherwise expressly provided in
this Indenture or in the Sale and Servicing Agreement, if any default occurs in
the making of any payment or performance under any agreement or instrument that
is part of the Trust Estate, the Trustee may take such action as may be
appropriate to enforce such payment or performance, including the
-53-
institution and prosecution of appropriate proceedings. Any such action shall be
without prejudice to any right to claim a Default or Event of Default under this
Indenture and any right to proceed thereafter as provided in Article V.
SECTION 8.2. Release of Trust Estate. (a) Subject to the payment of its
fees and expenses pursuant to Section 6.7, the Trustee may, and when required by
the provisions of this Indenture shall, execute instruments to release property
from the lien of this Indenture, in a manner and under circumstances that are
not inconsistent with the provisions of this Indenture. No party relying upon an
instrument executed by the Trustee as provided in this Article VIII shall be
bound to ascertain the Trustee's authority, inquire into the satisfaction of any
conditions precedent or see to the application of any moneys.
(b) The Trustee shall, at such time as there are no Notes outstanding and
all sums due the Trustee pursuant to Section 6.7 have been paid, release any
remaining portion of the Trust Estate that secured the Notes from the lien of
this Indenture and release to the Issuer or any other Person entitled thereto
any funds then on deposit in the Trust Accounts. The Trustee shall release
property from the lien of this Indenture pursuant to this Section 8.2(b) only
upon receipt of an Issuer Request accompanied by an Officer's Certificate, an
Opinion of Counsel and (if required by the TIA) Independent Certificates in
accordance with TIA ss. 314(c) and ss. 314(d)(1) meeting the applicable
requirements of Section 11.1.
SECTION 8.3. Opinion of Counsel. The Trustee shall receive at least seven
days' notice when requested by the Issuer to take any action pursuant to Section
8.2(a), accompanied by copies of any instruments involved, and the Trustee shall
also require as a condition to such action, an Opinion of Counsel in form and
substance satisfactory to the Trustee, stating the legal effect of any such
action, outlining the steps required to complete the same, and concluding that
all conditions precedent to the taking of such action have been complied with
and such action will not materially and adversely affect the security for the
Notes or the rights of the Noteholders in contravention of the provisions of
this Indenture; provided, however, that such Opinion of Counsel shall not be
required to express an opinion as to the fair value of the Trust Estate. Counsel
rendering any such opinion may rely, without independent investigation, on the
accuracy and validity of any certificate or other instrument delivered to the
Trustee in connection with any such action.
ARTICLE IX
Supplemental Indentures
SECTION 9.1. Supplemental Indentures Without Consent of Noteholders. (a)
Without the consent of the Holders of any Notes but with the consent of the Note
Insurer (unless an Insurer Default shall have occurred and be continuing) and
with prior notice to the Rating Agencies by the Issuer, the Issuer and the
Trustee, when authorized by an Issuer Order, at any
-54-
time and from time to time, may enter into one or more indentures supplemental
hereto (which shall conform to the provisions of the Trust Indenture Act as in
force at the date of the execution thereof), in form satisfactory to the
Trustee, for any of the following purposes:
(i) to correct or amplify the description of any property at any
time subject to the lien of this Indenture, or better to assure,
convey and confirm unto the Trustee any property subject or required
to be subjected to the lien of this Indenture, or to subject to the
lien of this Indenture additional property;
(ii) to evidence the succession, in compliance with the
applicable provisions hereof, of another person to the Issuer, and the
assumption by any such successor of the covenants of the Issuer herein
and in the Notes contained;
(iii) to add to the covenants of the Issuer, for the benefit of
the Holders of the Notes, or to surrender any right or power herein
conferred upon the Issuer;
(iv) to convey, transfer, assign, mortgage or pledge any
property to or with the Trustee;
(v) to cure any ambiguity, to correct or supplement any provision
herein or in any supplemental indenture which may be inconsistent with
any other provision herein or in any supplemental indenture or to make
any other provisions with respect to matters or questions arising
under this Indenture or in any supplemental indenture; provided that
such action shall not adversely affect the interests of the Holders of
the Notes;
(vi) to evidence and provide for the acceptance of the
appointment hereunder by a successor trustee with respect to the Notes
and to add to or change any of the provisions of this Indenture as
shall be necessary to facilitate the administration of the trusts
hereunder by more than one trustee, pursuant to the requirements of
Article VI; or
(vii) to modify, eliminate or add to the provisions of this
Indenture to such extent as shall be necessary to effect the
qualification of this Indenture under the TIA or under any similar
federal statute hereafter enacted and to add to this Indenture such
other provisions as may be expressly required by the TIA.
The Trustee is hereby authorized to join in the execution of any such
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained not inconsistent with the foregoing.
(b) The Issuer and the Trustee, when authorized by an Issuer Order, may,
also without the consent of any of the Holders of the Notes but with prior
notice to the Rating Agencies by the Issuer, enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to, or
changing in any manner or eliminating any of the provisions of, this
-55-
Indenture or of modifying in any manner the rights of the Holders of the Notes
under this Indenture; provided, however, that such action shall not, as
evidenced by an Opinion of Counsel, adversely affect the interests of any
Noteholder.
SECTION 9.2. Supplemental Indentures with Consent of Noteholders. The
Issuer and the Trustee, when authorized by an Issuer Order, also may, with prior
notice to the Rating Agencies, with the consent of the Note Insurer (unless an
Insurer Default shall have occurred and be continuing) and with the consent of
the Holders of not less than a majority of the outstanding Amount of the Notes,
by Act of such Holders delivered to the Issuer and the Trustee, enter into an
indenture or indentures supplemental hereto for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or of modifying in any manner the rights of the Holders of
the Notes under this Indenture; provided, however, that, subject to the express
rights of the Note Insurer under the Basic Documents, no such supplemental
indenture shall, without the consent of the Holder of each Outstanding Note
affected thereby:
(i) change the date of payment of any installment of principal of
or interest on any Note, or reduce the principal amount thereof, the
interest rate thereon or the Redemption Price with respect thereto,
change the provision of this Indenture relating to the application of
collections on, or the proceeds of the sale of, the Trust Estate to
payment of principal of or interest on the Notes, or change any place
of payment where, or the coin or currency in which, any Note or the
interest thereon is payable;
(ii) impair the right to institute suit for the enforcement of
the provisions of this Indenture requiring the application of funds
available therefor, as provided in Article V, to the payment of any
such amount due on the Notes on or after the respective due dates
thereof (or, in the case of redemption, on or after the Redemption
Date);
(iii) reduce the percentage of the Outstanding Amount of the
Notes, the consent of the Holders of which is required for any such
supplemental indenture, or the consent of the Holders of which is
required for any waiver of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences
provided for in this Indenture;
(iv) modify or alter the provisions of the proviso to the
definition of the term "Outstanding";
(v) reduce the percentage of the Outstanding Amount of the Notes
required to direct the Trustee to direct the Issuer to sell or
liquidate the Trust Estate pursuant to Section 5.4;
(vi) modify any provision of this Section except to increase any
percentage specified herein or to provide that certain additional
provisions of this Indenture or the
-56-
Basic Documents cannot be modified or waived without the consent of
the Holder of each Outstanding Note affected thereby;
(vii) modify any of the provisions of this Indenture in such
manner as to affect the calculation of the amount of any payment of
interest or principal due on any Note on any Payment Date (including
the calculation of any of the individual components of such
calculation) or as to affect the rights of the Holders of Notes to the
benefit of any provisions for the mandatory redemption of the Notes
contained herein; or
(viii) permit the creation of any lien ranking prior to or on a
parity with the lien of this Indenture with respect to any part of the
Trust Estate or, except as otherwise permitted or contemplated herein
or in any of the Basic Documents, terminate the lien of this Indenture
on any property at any time subject hereto or deprive the Holder of
any Note of the security provided by the lien of this Indenture.
It shall not be necessary for any Act of Noteholders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
Promptly after the execution by the Issuer and the Trustee of any
supplemental indenture pursuant to this Section, the Trustee shall mail to the
Holders of the Notes to which such amendment or supplemental indenture relates a
notice setting forth in general terms the substance of such supplemental
indenture. Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
SECTION 9.3. Execution of Supplemental Indentures. In executing, or
permitting the additional trusts created by, any supplemental indenture
permitted by this Article IX or the modifications thereby of the trusts created
by this Indenture, the Trustee shall be entitled to receive, and subject to
Sections 6.1 and 6.2, shall be fully protected in relying upon, an Opinion of
Counsel stating that the execution of such supplemental indenture is authorized
or permitted by this Indenture. The Trustee may, but shall not be obligated to,
enter into any such supplemental indenture that affects the Trustee's own
rights, duties, liabilities or immunities under this Indenture or otherwise.
SECTION 9.4. Effect of Supplemental Indenture. Upon the execution of any
supplemental indenture pursuant to the provisions hereof, this Indenture shall
be and be deemed to be modified and amended in accordance therewith with respect
to the Notes affected thereby, and the respective rights, limitations of rights,
obligations, duties, liabilities and immunities under this Indenture of the
Trustee, the Issuer and the Holders of the Notes shall thereafter be determined,
exercised and enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such supplemental
indenture shall be and be deemed to be part of the terms and conditions of this
Indenture for any and all purposes.
-57-
SECTION 9.5. Conformity With Trust Indenture Act. Every amendment of this
Indenture and every supplemental indenture executed pursuant to this Article IX
shall conform to the requirements of the Trust Indenture Act as then in effect
so long as this Indenture shall then be qualified under the Trust Indenture Act.
SECTION 9.6. Reference in Notes to Supplemental Indentures. Notes
authenticated and delivered after the execution of any supplemental indenture
pursuant to this Article IX may, and if required by the Issuer shall, bear a
notation in form approved by the Issuer as to any matter provided for in such
supplemental indenture. If the Issuer shall so determine, new Notes so modified
as to conform, in the opinion of the Issuer, to any such supplemental indenture
may be prepared and executed by the Issuer and authenticated and delivered by
the Trustee in exchange for Outstanding Notes.
ARTICLE X
Redemption of Notes
SECTION 10.1. Redemption. The Notes are subject to redemption in whole, but
not in part, at the direction of the Servicer pursuant to Section 11.1(a) of the
Sale and Servicing Agreement, on any Payment Date on which the Servicer
exercises its option to purchase the Trust Estate pursuant to said Section
11.1(a), for a purchase price equal to the Redemption Price; provided, however,
that the Issuer has available funds sufficient to pay the Redemption Price. The
Servicer or the Issuer shall furnish the Note Insurer and the Rating Agencies
notice of such redemption. If the Notes are to be redeemed pursuant to this
Section 10.1, the Servicer or the Issuer shall furnish notice of such election
to the Trustee not later than 35 days prior to the Redemption Date and the
Issuer shall deposit with the Trustee in the Note Distribution Account the
Redemption Price of the Notes to be redeemed, whereupon all such Notes shall be
due and payable on the Redemption Date upon the furnishing of a notice complying
with Section 10.2 to each Holder of Notes.
SECTION 10.2. Form of Redemption Notice. Notice of redemption under Section
10.1 shall be given by the Trustee by facsimile or by first-class mail, postage
prepaid, transmitted or mailed prior to the applicable Redemption Date to each
Holder of Notes, as of the close of business on the Record Date preceding the
applicable Redemption Date, at such Holder's address appearing in the Note
Register.
All notices of redemption shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
-58-
(iii) that the Record Date otherwise applicable to such
Redemption Date is not applicable and that payments shall be made only
upon presentation and surrender of such Notes and the place where such
Notes are to be surrendered for payment of the Redemption Price (which
shall be the office or agency of the Issuer to be maintained as
provided in Section 3.2); and
(iv) that interest on the Notes shall cease to accrue on the
Redemption Date.
Notice of redemption of the Notes shall be given by the Trustee in the name
and at the expense of the Issuer. Failure to give notice of redemption, or any
defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
SECTION 10.3. Notes Payable on Redemption Date. The Notes to be redeemed
shall, following notice of redemption as required by Section 10.2 (in the case
of redemption pursuant to Section 10.1), on the Redemption Date become due and
payable at the Redemption Price and (unless the Issuer shall default in the
payment of the Redemption Price) no interest shall accrue on the Redemption
Price for any period after the date to which accrued interest is calculated for
purposes of calculating the Redemption Price.
ARTICLE XI
Miscellaneous
SECTION 11.1. Compliance Certificates and Opinions, etc. (a) Upon any
application or request by the Issuer to the Trustee to take any action under any
provision of this Indenture, the Issuer shall furnish to the Trustee and to the
Note Insurer (i) an Officer's Certificate stating that all conditions precedent,
if any, provided for in this Indenture relating to the proposed action have been
complied with, (ii) an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with and (iii)
(if required by the TIA) an Independent Certificate from a firm of certified
public accountants meeting the applicable requirements of this Section, except
that, in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such certificate or
opinion has read or has caused to be read such covenant or condition
and the definitions herein relating thereto;
-59-
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such signatory,
such signatory has made such examination or investigation as is
necessary to enable such signatory to express an informed opinion as
to whether or not such covenant or condition has been complied with;
and
(iv) a statement as to whether, in the opinion of each such
signatory such condition or covenant has been complied with.
(b) (i) Prior to the deposit of any Collateral or other property or
securities with the Trustee that is to be made the basis for the release of any
property or securities subject to the lien of this Indenture, the Issuer shall,
in addition to any obligation imposed in Section 11.1(a) or elsewhere in this
Indenture, furnish to the Trustee and the Note Insurer an Officer's Certificate
certifying or stating the opinion of each person signing such certificate as to
the fair value (on the date of such deposit) to the Issuer of the Collateral or
other property or securities to be so deposited.
(ii) Whenever the Issuer is required to furnish to the Trustee
and the Note Insurer an Officer's Certificate certifying or stating
the opinion of any signer thereof as to the matters described in
clause (i) above, the Issuer shall also deliver to the Trustee and the
Note Insurer an Independent Certificate as to the same matters, if the
fair value to the Issuer of the securities to be so deposited and of
all other such securities made the basis of any such withdrawal or
release since the commencement of the then-current fiscal year of the
Issuer, as set forth in the certificates delivered pursuant to clause
(i) above and this clause (ii) is 10% or more of the Outstanding
Amount of the Notes, but such a certificate need not be furnished with
respect to any securities so deposited, if the fair value thereof to
the Issuer as set forth in the related Officer's Certificate is less
than $25,000 or less than 1% percent of the Outstanding Amount of the
Notes.
(iii) other than with respect to the release of any Purchased
Receivables or Liquidated Receivables, whenever any property or
securities are to be released from the lien of this Indenture, the
Issuer shall also furnish to the Trustee and the Note Insurer an
Officer's Certificate certifying or stating the opinion of each person
signing such certificate as to the fair value (within 90 days of such
release) of the property or securities proposed to be released and
stating that in the opinion of such person the proposed release will
not impair the security under this Indenture in contravention of the
provisions hereof.
(iv) Whenever the Issuer is required to furnish to the Trustee
and the Note Insurer an Officer's Certificate certifying or stating
the opinion of any signer thereof as to
-60-
the matters described in clause (iii) above, the Issuer shall also
furnish to the Trustee and the Note Insurer an Independent Certificate
as to the same matters if the fair value of the property or securities
and of all other property other than Purchased Receivables and
Defaulted Receivables, or securities released from the lien of this
Indenture since the commencement of the then current calendar year, as
set forth in the certificates required by clause (iii) above and this
clause (iv), equals 10% or more of the Outstanding Amount of the
Notes, but such certificate need not be furnished in the case of any
release of property or securities if the fair value thereof as set
forth in the related Officer's Certificate is less than $25,000 or
less than 1 percent of the then Outstanding Amount of the Notes.
(v) Notwithstanding Section 2.9 or any provision of this Section,
the Issuer may (A) collect, liquidate, sell or otherwise dispose of
Receivables as and to the extent permitted or required by the Basic
Documents and (B) make cash payments out of the Trust Accounts as and
to the extent permitted or required by the Basic Documents.
SECTION 11.2. Form of Documents Delivered to Trustee. (a) In any case where
several matters are required to be certified by, or covered by an opinion of,
any specified Person, it is not necessary that all such matters be certified by,
or covered by the opinion of, only one such Person, or that they be so certified
or covered by only one document, but one such Person may certify or give an
opinion with respect to some matters and one or more other such Persons as to
other matters, and any such Person may certify or give an opinion as to such
matters in one or several documents.
(b) Any certificate or opinion of an Authorized Officer of the Issuer may
be based, insofar as it relates to legal matters, upon a certificate or opinion
of, or representations by, counsel, unless such officer knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his or her certificate or
opinion is based are erroneous. Any such certificate of an Authorized Officer or
Opinion of Counsel may be based, insofar as it relates to factual matters, upon
a certificate or opinion of, or representations by, an officer or officers of
the Servicer, the Seller or the Issuer, stating that the information with
respect to such factual matters is in the possession of the Servicer, the Seller
or the Issuer, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
(c) Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
(d) Whenever in this Indenture, in connection with any application or
certificate or report to the Trustee, it is provided that the Issuer shall
deliver any document as a condition of the granting of such application, or as
evidence of the Issuer's compliance with any term hereof,
-61-
it is intended that the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or report (as the case
may be), of the facts and opinions stated in such document shall in such case be
conditions precedent to the right of the Issuer to have such application granted
or to the sufficiency of such certificate or report. The foregoing shall not,
however, be construed to affect the Trustee's right to rely upon the truth and
accuracy of any statement or opinion contained in any such document as provided
in Article VI.
SECTION 11.3. Acts of Noteholders. (a) Any request, demand, authorization,
direction, notice, consent, waiver or other action provided by this Indenture to
be given or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders in person
or by agents duly appointed in writing; and except as herein otherwise expressly
provided such action shall become effective when such instrument or instruments
are delivered to the Trustee, and, where it is hereby expressly required, to the
Issuer. Such instrument or instruments (and the action embodied therein and
evidenced thereby) are herein sometimes referred to as the "Act" of the
Noteholders signing such instrument or instruments. Proof of execution of any
such instrument or of a writing appointing any such agent shall be sufficient
for any purpose of this Indenture and (subject to Section 6.1) conclusive in
favor of the Trustee and the Issuer, if made in the manner provided in this
Section.
(b) The fact and date of the execution by any person of any such instrument
or writing may be proved in any customary manner of the Trustee.
(c) The ownership of Notes shall be proved by the Note Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other action by the Holder of any Notes shall bind the Holder of every Note
issued upon the registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by the Trustee or
the Issuer in reliance thereon, whether or not notation of such action is made
upon such Note.
SECTION 11.4. Notices, etc., to Trustee, Issuer and Rating Agencies. (a)
Any request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other documents provided or permitted by this Indenture to be
made upon, given or furnished to or filed with:
(i) the Trustee by any Noteholder or by the Issuer shall be
sufficient for every purpose hereunder if personally delivered,
delivered by overnight courier or mailed certified mail, return
receipt requested and shall be deemed to have been duly given upon
receipt to the Trustee at its Corporate Trust Office, or
(ii) the Issuer by the Trustee or by any Noteholder shall be
sufficient for every purpose hereunder if personally delivered,
delivered by overnight courier or mailed certified mail, return
receipt requested and shall deemed to have been duly given upon
-62-
receipt to the Issuer addressed to: CPS Auto Receivables Trust 1998-3,
in care of Bankers Trust (Delaware), 1011 Centre Street, Suite 200,
Wilmington, Delaware 19805- 1266 with a copy of all notices and other
documents to Bankers Trust Company, 4 Albany Street, 10th Floor, Attn:
Corporate Trust and Agency Group, New York, New York 10006, or at such
other address previously furnished in writing to the Trustee by the
Issuer. The Issuer shall promptly transmit any notice received by it
from the Noteholders to the Trustee.
(iii) the Note Insurer by the Issuer or the Trustee shall be
sufficient for any purpose hereunder if in writing and mailed by
registered mail or personally delivered or telexed or telecopied to
the recipient as follows:
To the Note Insurer:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Surveillance Department
Telex No.: (212) 688-3101
Confirmation: (212) 826-0100
Telecopy Nos.: (212) 339-3518 or
(212) 339-3529
(In each case in which notice or other communication to the Note
Insurer refers to an Event of Default, a claim on the Note Policy or
with respect to which failure on the part of the Note Insurer to
respond shall be deemed to constitute consent or acceptance, then a
copy of such notice or other communication should also be sent to the
attention of the General Counsel and the Head--Financial Guaranty
Group "URGENT MATERIAL ENCLOSED.")
(b) Notices required to be given to the Rating Agencies by the Issuer, the
Trustee or the Owner Trustee shall be in writing, personally delivered,
delivered by overnight courier or mailed certified mail, return receipt
requested to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., 99 Church Street, New York New York 10004 and (ii) in
the case of S&P, at the following address: Standard & Poor's Ratings Group, a
Division of The McGraw Hill Companies, 26 Broadway (15th Floor), New York, New
York 10004, Attention: Asset-Backed Surveillance Department; or as to each of
the foregoing, at such other address as shall be designated by written notice to
the other parties.
SECTION 11.5. Notices to Noteholders; Waiver. (a) Where this Indenture
provides for notice to Noteholders of any event, such notice shall be
sufficiently given (unless otherwise expressly provided herein) if in writing
and mailed, first-class, postage prepaid to each
-63-
Noteholder affected by such event, at his address as it appears on the Note
Register, not later than the latest date, and not earlier than the earliest
date, prescribed for the giving of such notice. In any case where notice to
Noteholders is given by mail, neither the failure to mail such notice nor any
defect in any notice so mailed to any particular Noteholder shall affect the
sufficiency of such notice with respect to other Noteholders, and any notice
that is mailed in the manner herein provided shall conclusively be presumed to
have been duly given.
(b) Where this Indenture provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Trustee but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such a waiver.
(c) In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or similar activity, it shall be impractical
to mail notice of any event to Noteholders when such notice is required to be
given pursuant to any provision of this Indenture, then any manner of giving
such notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
(d) Where this Indenture provides for notice to the Rating Agencies,
failure to give such notice shall not affect any other rights or obligations
created hereunder, and shall not under any circumstance constitute a Default or
Event of Default.
SECTION 11.6. Alternate Payment and Notice Provisions. Notwithstanding any
provision of this Indenture or any of the Notes to the contrary, the Issuer may
enter into any agreement with any Holder of a Note providing for a method of
payment, or notice by the Trustee or any Note Paying Agent to such Holder, that
is different from the methods provided for in this Indenture for such payments
or notices, provided that such methods are reasonable and consented to by the
Trustee (which consent shall not be unreasonably withheld). The Issuer will
furnish to the Trustee a copy of each such agreement and the Trustee will cause
payments to be made and notices to be given in accordance with such agreements.
SECTION 11.7. Conflict with Trust Indenture Act. (a) If any provision
hereof limits, qualifies or conflicts with another provision hereof that is
required to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such required provision shall control.
(b) The provisions of TIA ss. 310 through 317 that impose duties on any
person (including the provisions automatically deemed included herein unless
expressly excluded by this Indenture) are a part of and govern this Indenture,
whether or not physically contained herein.
-64-
SECTION 11.8. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
SECTION 11.9. Successors and Assigns. All covenants and agreements in this
Indenture and the Notes by the Issuer shall bind its successors and assigns,
whether so expressed or not. All agreements of the Trustee in this Indenture
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 11.10. Severability. In case any provision in this Indenture or in
the Notes shall be invalid, illegal or unenforceable, the validity, legality,
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
SECTION 11.11. Benefits of Indenture. The Note Insurer and its successors
and assigns shall be a third-party beneficiary to the provisions of this
Indenture, and shall be entitled to rely upon and directly to enforce such
provisions of this Indenture so long as no Insurer Default shall have occurred
and be continuing. Nothing in this Indenture or in the Notes, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, and the Noteholders, and any other party secured
hereunder, and any other person with an ownership interest in any part of the
Trust Estate, any benefit or any legal or equitable right, remedy or claim under
this Indenture. The Note Insurer may disclaim any of its rights and powers under
this Indenture (in which case the Trustee may exercise such right or power
hereunder), but not its duties and obligations under the Note Policy, upon
delivery of a written notice to the Trustee.
SECTION 11.12. Legal Holidays. In any case where the date on which any
payment is due shall not be a Business Day, then (notwithstanding any other
provision of the Notes or this Indenture) payment need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the date on which nominally due, and no interest shall
accrue for the period from and after any such nominal date.
SECTION 11.13. Governing Law. THIS INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.14. Counterparts. This Indenture may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all such counterparts shall together constitute but one and the same
instrument.
SECTION 11.15. Recording of Indenture. If this Indenture is subject to
recording in any appropriate public recording offices, such recording is to be
effected by the Issuer and at its expense accompanied by an Opinion of Counsel
(which may be counsel to the Trustee or any
-65-
other counsel reasonably acceptable to the Trustee and the Note Insurer) to the
effect that such recording is necessary either for the protection of the
Noteholders or any other person secured hereunder or for the enforcement of any
right or remedy granted to the Trustee under this Indenture or to the Collateral
Agent under the Master Spread Account Agreement.
SECTION 11.16. Trust Obligation. No recourse may be taken, directly or
indirectly, with respect to the obligations of the Issuer, the Seller, the
Servicer, the Depositor, the Owner Trustee or the Trustee on the Notes or under
this Indenture or any certificate or other writing delivered in connection
herewith or therewith, against (i) the Seller, the Servicer, the Depositor, the
Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a
beneficial interest in the Issuer or (iii) any partner, owner, beneficiary,
agent, officer, director, employee or agent of the Seller, the Servicer, the
Depositor, the Trustee or the Owner Trustee in its individual capacity, any
holder of a beneficial interest in the Issuer, the Seller, the Servicer, the
Depositor, the Owner Trustee or the Trustee or of any successor or assign of the
Seller, the Servicer, the Depositor, the Trustee or the Owner Trustee in its
individual capacity, except as any such Person may have expressly agreed (it
being understood that the Trustee and the Owner Trustee have no such obligations
in their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity. For all purposes of this
Indenture, in the performance of any duties or obligations of the Issuer
hereunder, the Owner Trustee shall be subject to, and entitled to the benefits
of, the terms and provisions of Article VI, VII and VIII of the Trust Agreement.
SECTION 11.17. No Petition. The Trustee, by entering into this Indenture,
and each Noteholder and Note Owner, by accepting a Note or a beneficial interest
therein, hereby covenant and agree that they will not at any time institute
against the Seller, the Depositor, or the Issuer, or join in any institutional
against the Seller, the Depositor, or the Issuer of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any United States Federal or state bankruptcy or similar law
in connection with any obligations relating to the Notes, this Indenture or any
of the Basic Documents.
SECTION 11.18. Inspection. The Issuer agrees that, on reasonable prior
notice, it will permit any representative of the Trustee or of the Note Insurer,
during the Issuer's normal business hours, to examine all the books of account,
records, reports, and other papers of the Issuer, to make copies and extracts
therefrom, to cause such books to be audited by independent certified public
accountants, and to discuss the Issuer's affairs, finances and accounts with the
Issuer's officers, employees, and independent certified public accountants, all
at such reasonable times and as often as may be reasonably requested. The
Trustee shall and shall cause its representatives to hold in confidence all such
information except to the extent disclosure may be required by law (and all
reasonable applications for confidential treatment are unavailing) and except to
the extent that the Trustee may reasonably determine that such disclosure is
consistent with its Obligations hereunder.
-66-
IN WITNESS WHEREOF, the Issuer and the Trustee have caused this Indenture
to be duly executed by their respective officers, hereunto duly authorized, all
as of the day and year first above written.
CPS AUTO RECEIVABLES TRUST 1998-3,
By: BANKERS TRUST (DELAWARE),
not in its individual capacity,
but solely as Owner Trustee
By: /s/ Patricia M.F. Russo
Title: Vice President
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By: /s/ Shana Stephens-Murray
Title: Corporate Trust Officer
-67-
EXHIBIT A-1
[Form of Class A-1 Note]
REGISTERED $36,000,000
No. R-1
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 12615WAM3
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CPS AUTO RECEIVABLES TRUST 1998-3
CLASS A-1 5.6375% ASSET-BACKED NOTES
CPS Auto Receivables Trust 1998-3, a business trust organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer"),
for value received, hereby promises to pay to CEDE & CO., or registered assigns,
the principal sum of THIRTY-SIX MILLION DOLLARS payable on each Payment Date in
an amount equal to the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-1 Notes pursuant to
Section 3.1 of the Indenture and Section 5.8 of the Sale and Servicing
Agreement; provided, however, that the entire unpaid principal amount of this
Note shall be due and payable on the August 1999 Payment Date (the "Class A-1
Final Scheduled Payment Date"). The Issuer will pay interest on this Note at the
rate per annum shown above on each Payment Date until the principal of this Note
is paid or made available for payment, on the principal amount of this Note
outstanding on the preceding Payment Date (after giving effect to all payments
of principal made on the preceding Payment Date). Interest on this Note will
accrue for each Payment Date from and including the most recent Payment Date on
which interest has been paid to but excluding such current Payment Date or, if
no interest has yet been paid, from and including July 28, 1998. Interest will
be computed on the basis of a 360-day year of twelve
A-1-1
30-day months and the actual number of days elapsed. Such principal of and
interest on this Note shall be paid in the manner specified on the reverse
hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Note Insurer"), pursuant to which the Note Insurer has unconditionally
guaranteed payments of the Class A Noteholders' Interest Distributable Amount
and the Class A Noteholders' Principal Distributable Amount on each Payment
Date, all as more fully set forth in the Indenture.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
A-1-2
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
CPS AUTO RECEIVABLES TRUST 1998-3
By: BANKERS TRUST (DELAWARE), not in
its individual capacity, but solely as Owner
Trustee
By:______________________________________
Name:
Title:
A-1-3
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: July 28, 1998 NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its
individual capacity, but solely as Trustee
By_________________________________________
Authorized Signatory
A-1-4
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-1 5.6375% Asset-Backed Notes (herein called the "Class
A-1 Notes"), all issued under an Indenture dated as of July 15, 1998 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Norwest Bank Minnesota, National Association, as trustee
(the "Trustee", which term includes any successor Trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights and obligations thereunder of the
Issuer, the Trustee and the Holders of the Notes. The Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, supplemented or amended, shall have the meanings assigned to them in
or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class
A-4 Notes (together, the "Notes") are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-1 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the fifteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing August 15, 1998.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Class A-1 Final Scheduled Payment Date
and the Redemption Date, if any, pursuant to Section 10.1 of the Indenture.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable (i) on the date on which an Event of Default shall have
occurred and be continuing so long as an Insurer Default shall not have occurred
and be continuing or (ii) if an Insurer Default shall have occurred and be
continuing, on the date on which an Event of Default shall have occurred and be
continuing and the Trustee or the Holders of the Notes representing at least a
majority of the Outstanding Amount of the Notes have declared the Notes to be
immediately due and payable in the manner provided in Section 5.2 of the
Indenture. All principal payments on the Class A-1 Notes shall be made pro rata
to the Class A-1 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Holder of this Note (or one or more Predecessor Notes) in the
Note Register as of the close of business on each Record Date, except that with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more
A-1-5
Predecessor Notes) effected by any payments made on any Payment Date shall be
binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not rated hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Payment Date, then the Trustee, in the name of and on behalf of
the Issuer, will notify the Person who was the Holder hereof as of the Record
Date preceding such Payment Date by notice mailed prior to such Payment Date and
the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Trustee's principal Corporate Trust Office or at
the office of the Trustee's agent appointed for such purposes located in
Minneapolis, Minnesota.
The Issuer shall pay interest on overdue installments of interest at the
Class A-1 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
10.1 of the Indenture, in whole, but not in part, at the option of the Servicer
(with the consent of the Note Insurer under certain circumstances), on any
Payment Date on or after the date on which the Pool Balance is less than or
equal to 10% of the Original Pool Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Exchange Act, and (ii) accompanied by such other documents
as the Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Depositor, the Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Issuer, the Seller, the Servicer, the Depositor, the Trustee or
the Owner Trustee in its individual capacity, any holder of a beneficial
interest in the Issuer, the Seller, the Servicer, the Depositor, the Owner
Trustee or
A-1-6
the Trustee or of any successor or assign of the Issuer, the Seller, the
Servicer, the Depositor, the Trustee or the Owner Trustee in its individual
capacity, except as any such Person may have expressly agreed (it being
understood that the Trustee and the Owner Trustee have no such obligations in
their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees by accepting
the benefits of the Indenture that such Noteholder will not at any time
institute against the Depositor or the Issuer or join in any institution against
the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings, under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Trustee and the Note Insurer and any agent of the Issuer, the
Trustee or the Note Insurer may treat the Person in whose name this Note (as of
the day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Issuer, the Trustee nor any such agent
shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Note Insurer and of the Holders of
Notes representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one of more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
A-1-7
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither the Owner Trustee in
its individual capacity, any owner of a beneficial interest in the Issuer, nor
any of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Owner Trustee for the sole purposes of binding the interests of the Owner
Trustee in the assets of the Issuer. The Holder of this Note by the acceptance
hereof agrees that except as expressly provided in the Indenture or the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
A-1-8
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ________________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:_____________________ ___________________________1/
Signature Guaranteed:
- --------
1/ NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
A-1-9
EXHIBIT A-2
[Form of Class A-2 Note]
REGISTERED $92,000,000
No. R-1
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 12615WAN1
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CPS AUTO RECEIVABLES TRUST 1998-3
CLASS A-2 5.8550% ASSET-BACKED NOTES
CPS Auto Receivables Trust 1998-3, a business trust organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer"),
for value received, hereby promises to pay to CEDE & CO., or registered assigns,
the principal sum of NINETY-TWO MILLION DOLLARS payable on each Payment Date in
an amount equal to the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-2 Notes pursuant to
Section 3.1 of the Indenture and Section 5.8 of the Sale and Servicing Agreement
provided, however, that the entire unpaid principal amount of this Note shall be
due and payable on the October 2001 Payment Date (the "Class A-2 Final Scheduled
Payment Date"). The Issuer will pay interest on this Note at the rate per annum
shown above on each Payment Date until the principal of this Note is paid or
made available for payment, on the principal amount of this Note outstanding on
the preceding Payment Date (after giving effect to all payments of principal
made on the preceding Payment Date). Interest on this Note will accrue for each
Payment Date from the most recent Payment Date on which interest has been paid
to but excluding such current Payment Date; provided that for the August 1998
Payment
A-2-1
Date interest will accrue for the number of days from and including July 28,
1998 to and including August 14, 1998 (assuming that there are 30 days in each
month of the year). Interest will be computed on the basis of a 360-day year of
twelve 30-day months. Such principal of and interest on this Note shall be paid
in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Note Insurer"), pursuant to which the Note Insurer has unconditionally
guaranteed payments of the Class A Noteholders' Interest Distributable Amount
and the Class A Noteholders' Principal Distributable Amount on each Payment
Date, all as more fully set forth in the Indenture.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
A-2-2
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
CPS AUTO RECEIVABLES TRUST 1998-3
By: BANKERS TRUST (DELAWARE), not
in its individual capacity,
but solely as Owner Trustee
By:____________________________________
Name:
Title:
A-2-3
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: July 28, 1998 NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its
individual capacity, but solely
as Trustee
By:________________________________
Authorized Signatory
A-2-4
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-2 5.8550% Asset-Backed Notes (herein called the "Class
A-2 Notes"), all issued under an Indenture dated as of July 15, 1998 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Norwest Bank Minnesota, National Association, as trustee
(the "Trustee", which term includes any successor Trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights and obligations thereunder of the
Issuer, the Trustee and the Holders of the Notes. The Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, as supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class
A-4 Notes (together, the "Notes") are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-2 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the fifteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing August 15, 1998.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Class A-2 Final Scheduled Payment Date
and the Redemption Date, if any, pursuant to Section 10.1 of the Indenture.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable (i) on the date on which an Event of Default shall have
occurred and be continuing so long as an Insurer Default shall not have occurred
and be continuing or (ii) if an Insurer Default shall have occurred and be
continuing, on the date on which an Event of Default shall have occurred and be
continuing and the Trustee or the Holders of the Notes representing at least a
majority of the Outstanding Amount of the Notes have declared the Notes to be
immediately due and payable in the manner provided in Section 5.2 of the
Indenture. All principal payments on the Class A-2 Notes shall be made pro rata
to the Class A-2 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Holder of this Note (or one or more Predecessor Notes) in the
Note Register as of the close of business on each Record Date, except that with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more
A-2-5
Predecessor Notes) effected by any payments made on any Payment Date shall be
binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Payment Date, then the Trustee, in the name of and on behalf of
the Issuer, will notify the Person who was the Holder hereof as of the Record
Date preceding such Payment Date by notice mailed prior to such Payment Date and
the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Trustee's principal Corporate Trust Office or at
the office of the Trustee's agent appointed for such purposes located in
Minneapolis, Minnesota.
The Issuer shall pay interest on overdue installments of interest at the
Class A-2 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
10.1 of the Indenture, in whole, but not in part, at the option of the Servicer
(with the consent of the Note Insurer under certain circumstances), on any
Payment Date on or after the date on which the Pool Balance is less than or
equal to 10% of the Original Pool Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Exchange Act, and (ii) accompanied by such other documents
as the Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Depositor, the Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Issuer, the Seller, the Servicer, the Depositor, the Trustee or
the Owner Trustee in its individual capacity, any holder of a beneficial
interest in the Issuer, the Seller, the Servicer, the Depositor, the Owner
Trustee or
A-2-6
the Trustee or of any successor or assign of the Issuer, the Seller, the
Servicer, the Depositor, the Trustee or the Owner Trustee in its individual
capacity, except as any such Person may have expressly agreed (it being
understood that the Trustee and the Owner Trustee have no such obligations in
their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees by accepting
the benefits of the Indenture that such Noteholder will not at any time
institute against the Depositor or the Issuer or join in any institution against
the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings, under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Trustee and the Note Insurer and any agent of the Issuer, the
Trustee or the Note Insurer may treat the Person in whose name this Note (as of
the day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Issuer, the Trustee nor any such agent
shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Note Insurer and of the Holders of
Notes representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one or more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
A-2-7
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither the Owner Trustee in
its individual capacity, any owner of a beneficial interest in the Issuer, nor
any of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Owner Trustee for the sole purposes of binding the interests of the Owner
Trustee in the assets of the Issuer. The Holder of this Note by the acceptance
hereof agrees that except as expressly provided in the Indenture or the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
A-2-8
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ____________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:____________________ _________________________1/
Signature Guaranteed:
_________________________ ___________________________
- --------
1/ NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
A-2-9
EXHIBIT A-3
[Form of Class A-3 Note]
REGISTERED $25,000,000
No. R-1
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 12615WAP6
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CPS AUTO RECEIVABLES TRUST 1998-3
CLASS A-3 5.9950% ASSET-BACKED NOTES
CPS Auto Receivables Trust 1998-3, a business trust organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer"),
for value received, hereby promises to pay to CEDE & CO., or registered assigns,
the principal sum of TWENTY-FIVE MILLION DOLLARS payable on each Payment Date in
an amount equal to the aggregate amount, if any, payable from the Note
Distribution Account in respect of principal on the Class A-3 Notes pursuant to
Section 3.1 of the Indenture and Section 5.8 of the Sale and Servicing Agreement
provided, however, that the entire unpaid principal amount of this Note shall be
due and payable on the June 2002 Payment Date (the "Class A-3 Final Scheduled
Payment Date"). The Issuer will pay interest on this Note at the rate per annum
shown above on each Payment Date until the principal of this Note is paid or
made available for payment, on the principal amount of this Note outstanding on
the preceding Payment Date (after giving effect to all payments of principal
made on the preceding Payment Date). Interest on this Note will accrue for each
Payment Date from the most recent Payment Date on which interest has been paid
to but excluding such current Payment Date; provided that for the August 1998
Payment Date interest
A-3-1
will accrue for the number of days from and including July 28, 1998 to and
including August 14, 1998 (assuming that there are 30 days in each month of the
year). Interest will be computed on the basis of a 360-day year of twelve 30-day
months. Such principal of and interest on this Note shall be paid in the manner
specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Note Insurer"), pursuant to which the Note Insurer has unconditionally
guaranteed payments of the Class A Noteholders' Interest Distributable Amount
and the Class A Noteholders' Principal Distributable Amount on each Payment
Date, all as more fully set forth in the Indenture.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
A-3-2
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
CPS AUTO RECEIVABLES TRUST 1998-3
By: BANKERS TRUST (DELAWARE), not
in its individual capacity,
but solely as Owner Trustee
By:__________________________________
Name:
Title:
A-3-3
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: July 28, 1998 NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its
individual capacity, but solely
as Trustee
By:________________________________
Authorized Signatory
A-3-4
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-3 5.9950% Asset-Backed Notes (herein called the "Class
A-3 Notes"), all issued under an Indenture dated as of July 15, 1998 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Norwest Bank Minnesota, National Association, as trustee
(the "Trustee", which term includes any successor Trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights and obligations thereunder of the
Issuer, the Trustee and the Holders of the Notes. The Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, as supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class
A-4 Notes (together, the "Notes") are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-3 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the fifteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing August 15, 1998.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Class A-3 Final Scheduled Payment Date
and the Redemption Date, if any, pursuant to Section 10.1 of the Indenture.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable (i) on the date on which an Event of Default shall have
occurred and be continuing so long as an Insurer Default shall not have occurred
and be continuing or (ii) if an Insurer Default shall have occurred and be
continuing, on the date on which an Event of Default shall have occurred and be
continuing and the Trustee or the Holders of the Notes representing at least a
majority of the Outstanding Amount of the Notes have declared the Notes to be
immediately due and payable in the manner provided in Section 5.2 of the
Indenture. All principal payments on the Class A-3 Notes shall be made pro rata
to the Class A-3 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Holder of this Note (or one or more Predecessor Notes) in the
Note Register as of the close of business on each Record Date, except that with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more
A-3-5
Predecessor Notes) effected by any payments made on any Payment Date shall be
binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Payment Date, then the Trustee, in the name of and on behalf of
the Issuer, will notify the Person who was the Holder hereof as of the Record
Date preceding such Payment Date by notice mailed prior to such Payment Date and
the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Trustee's principal Corporate Trust Office or at
the office of the Trustee's agent appointed for such purposes located in
Minneapolis, Minnesota.
The Issuer shall pay interest on overdue installments of interest at the
Class A-3 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
10.1 of the Indenture, in whole, but not in part, at the option of the Servicer
(with the consent of the Note Insurer under certain circumstances), on any
Payment Date on or after the date on which the Pool Balance is less than or
equal to 10% of the Original Pool Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Exchange Act, and (ii) accompanied by such other documents
as the Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Depositor, the Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Issuer, the Seller, the Servicer, the Depositor, the Trustee or
the Owner Trustee in its individual capacity, any holder of a beneficial
interest in the Issuer, the Seller, the Servicer, the Depositor, the Owner
Trustee or
A-3-6
the Trustee or of any successor or assign of the Issuer, the Seller, the
Servicer, the Depositor, the Trustee or the Owner Trustee in its individual
capacity, except as any such Person may have expressly agreed (it being
understood that the Trustee and the Owner Trustee have no such obligations in
their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees by accepting
the benefits of the Indenture that such Noteholder will not at any time
institute against the Depositor or the Issuer or join in any institution against
the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings, under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Trustee and the Note Insurer and any agent of the Issuer, the
Trustee or the Note Insurer may treat the Person in whose name this Note (as of
the day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Issuer, the Trustee nor any such agent
shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Note Insurer and of the Holders of
Notes representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one or more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
A-3-7
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither the Owner Trustee in
its individual capacity, any owner of a beneficial interest in the Issuer, nor
any of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Owner Trustee for the sole purposes of binding the interests of the Owner
Trustee in the assets of the Issuer. The Holder of this Note by the acceptance
hereof agrees that except as expressly provided in the Indenture or the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
A-3-8
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _________________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated:______________ ________________________1/
Signature Guaranteed:
____________________ __________________________
- --------
1/ NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
A-3-9
EXHIBIT A-4
[Form of Class A-4 Note]
REGISTERED $82,532,000
No. R-1
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 12615WAQ4
Unless this Note is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Issuer or its
agent for registration of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to
such other entity as is requested by an authorized representative of DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE
LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
CPS AUTO RECEIVABLES TRUST 1998-3
CLASS A-4 6.0800% ASSET-BACKED NOTES
CPS Auto Receivables Trust 1998-3, a business trust organized and existing
under the laws of the State of Delaware (herein referred to as the "Issuer"),
for value received, hereby promises to pay to CEDE & CO., or registered assigns,
the principal sum of EIGHTY-TWO MILLION FIVE HUNDRED THIRTY-TWO DOLLARS payable
on each Payment Date in an amount equal to the aggregate amount, if any, payable
from the Note Distribution Account in respect of principal on the Class A-4
Notes pursuant to Section 3.1 of the Indenture and Section 5.8 of the Sale and
Servicing Agreement provided, however, that the entire unpaid principal amount
of this Note shall be due and payable on the October 2003 Payment Date (the
"Class A-4 Final Scheduled Payment Date"). The Issuer will pay interest on this
Note at the rate per annum shown above on each Payment Date until the principal
of this Note is paid or made available for payment, on the principal amount of
this Note outstanding on the preceding Payment Date (after giving effect to all
payments of principal made on the preceding Payment Date). Interest on this Note
will accrue for each Payment Date from the most recent Payment Date on which
interest has been paid to but excluding such current Payment Date; provided that
for the August 1998
A-4-1
Payment Date interest will accrue for the number of days from and including July
28, 1998 to and including August 14, 1998 (assuming that there are 30 days in
each month of the year). Interest will be computed on the basis of a 360-day
year of twelve 30-day months. Such principal of and interest on this Note shall
be paid in the manner specified on the reverse hereof.
The principal of and interest on this Note are payable in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. All payments made by the Issuer
with respect to this Note shall be applied first to interest due and payable on
this Note as provided above and then to the unpaid principal of this Note.
The Notes are entitled to the benefits of a financial guaranty insurance
policy (the "Note Policy") issued by Financial Security Assurance Inc. (the
"Note Insurer"), pursuant to which the Note Insurer has unconditionally
guaranteed payments of then Class A Noteholders' Interest Distributable Amount
and the Class A Noteholders' Principal Distributable Amount on each Payment
Date, all as more fully set forth in the Indenture.
Reference is made to the further provisions of this Note set forth on the
reverse hereof, which shall have the same effect as though fully set forth on
the face of this Note.
Unless the certificate of authentication hereon has been executed by the
Trustee whose name appears below by manual signature, this Note shall not be
entitled to any benefit under the Indenture referred to on the reverse hereof,
or be valid or obligatory for any purpose.
A-4-2
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed,
manually or in facsimile, by its Authorized Officer as of the date set forth
below.
CPS AUTO RECEIVABLES TRUST 1998-3
By: BANKERS TRUST (DELAWARE), not
in its individual capacity,
but solely as Owner Trustee
By: __________________________________
Name:
Title:
A-4-3
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in the
within-mentioned Indenture.
Date: July 28, 1998 NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, not in its
individual capacity, but solely
as Trustee
By: ______________________________
Authorized Signatory
A-4-4
[REVERSE OF NOTE]
This Note is one of a duly authorized issue of Notes of the Issuer,
designated as its Class A-4 6.0800% Asset-Backed Notes (herein called the "Class
A-4 Notes"), all issued under an Indenture dated as of July 15, 1998 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Norwest Bank Minnesota, National Association, as trustee
(the "Trustee", which term includes any successor Trustee under the Indenture),
to which Indenture and all indentures supplemental thereto reference is hereby
made for a statement of the respective rights and obligations thereunder of the
Issuer, the Trustee and the Holders of the Notes. The Notes are subject to all
terms of the Indenture. All terms used in this Note that are defined in the
Indenture, as supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes and the Class
A-4 Notes (together, the "Notes") are and will be equally and ratably secured by
the collateral pledged as security therefor as provided in the Indenture.
Principal of the Class A-4 Notes will be payable on each Payment Date in an
amount described on the face hereof. "Payment Date" means the fifteenth day of
each month, or, if any such date is not a Business Day, the next succeeding
Business Day, commencing August 15, 1998.
As described above, the entire unpaid principal amount of this Note shall
be due and payable on the earlier of the Class A-4 Final Scheduled Payment Date
and the Redemption Date, if any, pursuant to Section 10.1 of the Indenture.
Notwithstanding the foregoing, the entire unpaid principal amount of the Notes
shall be due and payable (i) on the date on which an Event of Default shall have
occurred and be continuing so long as an Insurer Default shall not have occurred
and be continuing or (ii) if an Insurer Default shall have occurred and be
continuing, on the date on which an Event of Default shall have occurred and be
continuing and the Trustee or the Holders of the Notes representing at least a
majority of the Outstanding Amount of the Notes have declared the Notes to be
immediately due and payable in the manner provided in Section 5.2 of the
Indenture. All principal payments on the Class A-4 Notes shall be made pro rata
to the Class A-4 Noteholders entitled thereto.
Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full
payment of this Note, shall be made by check mailed to the Person whose name
appears as the Holder of this Note (or one or more Predecessor Notes) in the
Note Register as of the close of business on each Record Date, except that with
respect to Notes registered on the Record Date in the name of the nominee of the
Clearing Agency (initially, such nominee to be Cede & Co.), payments will be
made by wire transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person entitled thereto at
the address of such Person as it appears on the Note Register as of the
applicable Record Date without requiring that this Note be submitted for
notation of payment. Any reduction in the principal amount of this Note (or any
one or more
A-4-5
Predecessor Notes) effected by any payments made on any Payment Date shall be
binding upon all future Holders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid principal amount of
this Note on a Payment Date, then the Trustee, in the name of and on behalf of
the Issuer, will notify the Person who was the Holder hereof as of the Record
Date preceding such Payment Date by notice mailed prior to such Payment Date and
the amount then due and payable shall be payable only upon presentation and
surrender of this Note at the Trustee's principal Corporate Trust Office or at
the office of the Trustee's agent appointed for such purposes located in
Minneapolis, Minnesota.
The Issuer shall pay interest on overdue installments of interest at the
Class A-4 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed pursuant to Section
10.1 of the Indenture, in whole, but not in part, at the option of the Servicer
(with the consent of the Note Insurer under certain circumstances), on any
Payment Date on or after the date on which the Pool Balance is less than or
equal to 10% of the Original Pool Balance.
As provided in the Indenture and subject to certain limitations set forth
therein, the transfer of this Note may be registered on the Note Register upon
surrender of this Note for registration of transfer at the office or agency
designated by the Issuer pursuant to the Indenture, (i) duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing, with such signature guaranteed by an "eligible guarantor institution"
meeting the requirements of the Note Registrar which requirements include
membership or participation in Securities Transfer Agents Medallion Program
("STAMP") or such other "signature guarantee program" as may be determined by
the Note Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Exchange Act, and (ii) accompanied by such other documents
as the Trustee may require, and thereupon one or more new Notes of authorized
denominations and in the same aggregate principal amount will be issued to the
designated transferee or transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the transferor may be
required to pay a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection with any such registration of transfer or
exchange.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees that no
recourse may be taken, directly or indirectly, with respect to the obligations
of the Issuer, the Owner Trustee or the Trustee on the Notes or under the
Indenture or any certificate or other writing delivered in connection therewith,
against (i) the Seller, the Servicer, the Depositor, the Trustee or the Owner
Trustee in its individual capacity, (ii) any owner of a beneficial interest in
the Issuer or (iii) any partner, owner, beneficiary, agent, officer, director or
employee of the Issuer, the Seller, the Servicer, the Depositor, the Trustee or
the Owner Trustee in its individual capacity, any holder of a beneficial
interest in the Issuer, the Seller, the Servicer, the Depositor, the Owner
Trustee or
A-4-6
the Trustee or of any successor or assign of the Issuer, the Seller, the
Servicer, the Depositor, the Trustee or the Owner Trustee in its individual
capacity, except as any such Person may have expressly agreed (it being
understood that the Trustee and the Owner Trustee have no such obligations in
their individual capacity) and except that any such partner, owner or
beneficiary shall be fully liable, to the extent provided by applicable law, for
any unpaid consideration for stock, unpaid capital contribution or failure to
pay any installment or call owing to such entity.
Each Noteholder or Note Owner, by acceptance of a Note or, in the case of a
Note Owner, a beneficial interest in a Note covenants and agrees by accepting
the benefits of the Indenture that such Noteholder will not at any time
institute against the Depositor or the Issuer or join in any institution against
the Depositor or the Issuer of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings, under any United
States Federal or state bankruptcy or similar law in connection with any
obligations relating to the Notes, the Indenture or the Basic Documents.
Prior to the due presentment for registration of transfer of this Note, the
Issuer, the Trustee and the Note Insurer and any agent of the Issuer, the
Trustee or the Note Insurer may treat the Person in whose name this Note (as of
the day of determination or as of such other date as may be specified in the
Indenture) is registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Issuer, the Trustee nor any such agent
shall be affected by notice to the contrary.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of the Notes under the Indenture at any
time by the Issuer with the consent of the Note Insurer and of the Holders of
Notes representing a majority of the Outstanding Amount of all Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
Notes representing specified percentages of the Outstanding Amount of the Notes,
on behalf of the Holders of all the Notes, to waive compliance by the Issuer
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Note (or any one or more Predecessor Notes) shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange hereof or in lieu hereof
whether or not notation of such consent or waiver is made upon this Note. The
Indenture also permits the Trustee to amend or waive certain terms and
conditions set forth in the Indenture without the consent of Holders of the
Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the Issuer
under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances, to
merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
A-4-7
The Notes are issuable only in registered form in denominations as provided
in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the laws
of the State of New York, without reference to its conflict of law provisions,
and the obligations, rights and remedies of the parties hereunder and thereunder
shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, place, and rate, and in the coin or currency herein prescribed.
Anything herein to the contrary notwithstanding, except as expressly
provided in the Indenture or the Basic Documents, neither the Owner Trustee in
its individual capacity, any owner of a beneficial interest in the Issuer, nor
any of their respective partners, beneficiaries, agents, officers, directors,
employees or successors or assigns shall be personally liable for, nor shall
recourse be had to any of them for, the payment of principal of or interest on,
or performance of, or omission to perform, any of the covenants, obligations or
indemnifications contained in this Note or the Indenture, it being expressly
understood that said covenants, obligations and indemnifications have been made
by the Owner Trustee for the sole purposes of binding the interests of the Owner
Trustee in the assets of the Issuer. The Holder of this Note by the acceptance
hereof agrees that except as expressly provided in the Indenture or the Basic
Documents, in the case of an Event of Default under the Indenture, the Holder
shall have no claim against any of the foregoing for any deficiency, loss or
claim therefrom; provided, however, that nothing contained herein shall be taken
to prevent recourse to, and enforcement against, the assets of the Issuer for
any and all liabilities, obligations and undertakings contained in the Indenture
or in this Note.
A-4-8
ASSIGNMENT
Social Security or taxpayer I.D. or other identifying number of assignee
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________________________________
(name and address of assignee)
the within Note and all rights thereunder, and hereby irrevocably constitutes
and appoints, attorney, to transfer said Note on the books kept for registration
thereof, with full power of substitution in the premises.
Dated: ___________________ ________________________1/
Signature Guaranteed:
- --------
1/ NOTE: The signature to this assignment must correspond with the name of the
registered owner as it appears on the face of the within Note in every
particular, without alteration, enlargement or any change whatsoever.
A-4-9
EXHIBIT B
Form of Depository Agreement
See Following Page
B-10
Exhibit 4.3
Sale and Servicing Agreement
EXECUTION COPY
----------------------------------------------------------------
SALE AND SERVICING
AGREEMENT
among
CPS AUTO RECEIVABLES TRUST 1998-3, as
Issuer,
CPS RECEIVABLES CORP., as
Seller,
CONSUMER PORTFOLIO SERVICES, INC., as
Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Standby Servicer and Trustee
Dated as of July 15, 1998
----------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions......................................................1
SECTION 1.2. Other Definitional Provisions...................................23
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. Conveyance of Receivables.......................................24
SECTION 2.2. [RESERVED] .....................................................25
SECTION 2.3. Further Encumbrance of Trust Property...........................25
ARTICLE III
THE RECEIVABLES
SECTION 3.1. Representations and Warranties of Seller........................26
SECTION 3.2. Repurchase upon Breach..........................................32
SECTION 3.3. Custody of Receivables Files....................................33
SECTION 3.4. Acceptance of Receivable Files by Trustee.......................33
SECTION 3.5. Access to Receivable Files......................................34
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 4.1. Duties of the Servicer..........................................35
SECTION 4.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreements...............................36
SECTION 4.3. Realization Upon Receivables....................................37
SECTION 4.4. Insurance .....................................................38
SECTION 4.5. Maintenance of Security Interests in Vehicles...................39
SECTION 4.6. Additional Covenants of Servicer................................39
SECTION 4.7. Purchase of Receivables Upon Breach of Covenant.................40
SECTION 4.8. Servicing Fee...................................................40
SECTION 4.9. Servicer's Certificate..........................................40
SECTION 4.10. Annual Statement as to Compliance, Notice of Servicer
Termination Event.............................................41
-i-
TABLE OF CONTENTS
(continued)
Page
SECTION 4.11. Annual Independent Accountants' Report..........................41
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables...................................................42
SECTION 4.13. Verification of Servicer's Certificate..........................42
SECTION 4.14. Retention and Termination of Servicer...........................43
SECTION 4.15. Fidelity Bond...................................................44
ARTICLE V
TRUST ACCOUNTS; DISTRIBUTIONS;
STATEMENTS TO SECURITYHOLDERS
SECTION 5.1. Establishment of Trust Accounts.................................44
SECTION 5.2. [RESERVED] .....................................................47
SECTION 5.3. Certain Reimbursements to the Servicer..........................47
SECTION 5.4. Application of Collections......................................47
SECTION 5.5. Withdrawals from Spread Account.................................47
SECTION 5.6. Additional Deposits.............................................48
SECTION 5.7. Distributions...................................................48
SECTION 5.8. Note Distribution Account.......................................50
SECTION 5.9. [RESERVED] .....................................................52
SECTION 5.10. [RESERVED] .....................................................52
SECTION 5.11. Statements to Securityholders...................................52
SECTION 5.12. Optional Deposits by the Note Insurer; Notice of Waivers........53
ARTICLE VI
THE NOTE POLICY
SECTION 6.1. Claims Under Note Policy........................................53
SECTION 6.2. Preference Claims...............................................55
SECTION 6.3. Surrender of Note Policy........................................56
ARTICLE VII
[RESERVED]
-ii-
TABLE OF CONTENTS
(continued)
Page
ARTICLE VIII
THE SELLER
SECTION 8.1. Representations of Seller.......................................56
(a) Organization and Good Standing.............................56
(b) Due Qualification..........................................56
(c) Power and Authority........................................56
(d) Valid Sale, Binding Obligations............................56
(e) No Violation...............................................57
(f) No Proceedings.............................................57
(g) No Consents................................................57
(h) Tax Returns................................................57
(i) Chief Executive Office.....................................57
SECTION 8.2. [RESERVED] .....................................................58
SECTION 8.3. Liability of Seller; Indemnities................................58
SECTION 8.4. Merger or Consolidation of, or Assumption of the Obligations
of Seller.....................................................58
SECTION 8.5. Limitation on Liability of Seller and Others....................59
SECTION 8.6. Seller May Own Certificates or Notes............................59
ARTICLE IX
THE SERVICER
SECTION 9.1. Representations of Servicer.....................................60
(a) Organization and Good Standing..............................60
(b) Due Qualification...........................................60
(c) Power and Authority.........................................60
(d) Binding Obligation..........................................60
(e) No Violation................................................60
(f) No Proceedings..............................................61
(g) No Consents.................................................61
(h) Taxes.......................................................61
(i) Chief Executive Office......................................61
SECTION 9.2. Liability of Servicer; Indemnities..............................62
SECTION 9.3. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Standby Servicer..............63
SECTION 9.4. Limitation on Liability of Servicer, Standby Servicer
and Others....................................................64
SECTION 9.5. Delegation of Duties............................................64
SECTION 9.6. Servicer and Standby Servicer Not to Resign.....................64
-iii-
TABLE OF CONTENTS
(continued)
Page
ARTICLE X
DEFAULT
SECTION 10.1. Servicer Termination Event.....................................65
SECTION 10.2. Consequences of a Servicer Termination Event...................67
SECTION 10.3. Appointment of Successor.......................................68
SECTION 10.4. Notification to Noteholders and Certificateholders.............69
SECTION 10.5. Waiver of Past Defaults........................................69
SECTION 10.6. Action Upon Certain Failures of the Servicer...................69
ARTICLE XI
TERMINATION
SECTION 11.1. Optional Purchase of All Receivables...........................70
ARTICLE XII
ADMINISTRATIVE DUTIES OF THE SERVICER
SECTION 12.1. Administrative Duties..........................................70
(a) Duties with Respect to the Indenture......................70
(b) Duties with Respect to the Issuer.........................71
(c) Tax Matters...............................................72
(d) Non-Ministerial Matters...................................72
(e) Exceptions................................................72
(f) Limitation of Standby Servicer's Obligations..............73
SECTION 12.2. Records........................................................73
SECTION 12.3. Additional Information to be Furnished to the Issuer...........73
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1. Amendment ....................................................73
SECTION 13.2. Protection of Title to Trust...................................74
SECTION 13.3. Notices ....................................................76
SECTION 13.4. Assignment ....................................................77
SECTION 13.5. Limitations on Rights of Others................................77
SECTION 13.6. Severability...................................................77
SECTION 13.7. Separate Counterparts..........................................77
-iv-
TABLE OF CONTENTS
(continued)
Page
SECTION 13.8. Headings ....................................................78
SECTION 13.9. Governing Law..................................................78
SECTION 13.10. Assignment to Trustee..........................................78
SECTION 13.11. Nonpetition Covenants..........................................78
SECTION 13.12. Limitation of Liability of Owner Trustee and Trustee...........78
SECTION 13.13. Independence of the Servicer...................................79
SECTION 13.14. No Joint Venture...............................................79
SECTION 13.15. Note Insurer as Controlling Party..............................79
-v-
TABLE OF CONTENTS
(continued)
SCHEDULES
Schedule A - Schedule of Receivables
EXHIBITS
Exhibit A - Form of Servicer's Certificate
Exhibit B - Form of Trust Receipt
Exhibit C - Form of Servicing Officer's Certificate
Exhibit D - Form of Monthly Securityholder Statement
Exhibit E - Form of Trustee's Certificate
-vi-
SALE AND SERVICING AGREEMENT dated as of July 15, 1998, among CPS AUTO
RECEIVABLES TRUST 1998-3, a Delaware business trust (the "Issuer"), CPS
RECEIVABLES CORP., a California corporation (the "Seller"), CONSUMER PORTFOLIO
SERVICES, INC., a California corporation (the "Servicer"), and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking association, in its capacity
as Standby Servicer and Trustee.
WHEREAS the Issuer desires to purchase a portfolio of receivables arising
in connection with motor vehicle retail installment sale contracts acquired by
Consumer Portfolio Services, Inc., Samco Acceptance Corp. or Linc Acceptance
Company LLC through motor vehicle dealers and independent finance companies;
WHEREAS the Seller has purchased such receivables from Consumer Portfolio
Services, Inc., Samco Acceptance Corp. and Linc Acceptance Company LLC and is
willing to sell such receivables to the Issuer;
WHEREAS the Servicer is willing to service all such receivables;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Whenever used in this Agreement, the following
words and phrases shall have the following meanings:
"Accountants' Report" means the report of a firm of nationally recognized
independent accountants described in Section 4.11.
"Administrative Receivable" means, with respect to any Collection Period, a
Receivable which the Servicer is required to purchase pursuant to Section 4.7
with respect to such Collection Period.
"Affiliate" of any Person means any Person who directly or indirectly
controls, is controlled by, or is under direct or indirect common control with
such Person. For purposes of this definition, the term "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling", "controlled
by" and "under common control with" have meanings correlative to the foregoing.
"Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Receivables (other than
(i) any Receivable that became a
-1-
Liquidated Receivable prior to the end of the related Collection Period and (ii)
any Receivable that became a Purchased Receivable prior to the end of the
related Collection Period) as of the date of determination.
"Agreement" means this Sale and Servicing Agreement, as the same may be
amended and supplemented from time to time.
"Amount Financed" means, with respect to a Receivable, the aggregate amount
advanced under such Receivable toward the purchase price of the Financed Vehicle
and any related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
percentage rate of finance charges or service charges, as stated in the related
Contract.
"Assumption Date" shall have the meaning specified in Section 10.3(a).
"Bank of America" means Bank of America National Trust and Savings
Association and its successors.
"Basic Documents" means this Agreement, the Certificate of Trust, the Trust
Agreement, the Indenture, each Purchase Agreement, the Master Spread Account
Agreement, the Spread Account Supplement, the Insurance Agreement, the
Indemnification Agreement, the Lockbox Agreement and other documents and
certificates delivered in connection therewith.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions in the City of New York, the State in which the
Corporate Trust Office is located, the State in which the executive offices of
the Servicer are located and the State in which the principal place of business
of the Note Insurer is located shall be authorized or obligated by law,
executive order, or governmental decree to be closed.
"Casualty" means, with respect to a Financed Vehicle, the total loss or
destruction of such Financed Vehicle.
"Certificate" has the meaning assigned to such term in the Trust Agreement.
"Certificate Balance" has the meaning assigned to such term in the Trust
Agreement.
"Certificate Deficiency" shall have the meaning assigned to such term in
Section 5.5(c).
"Certificate Distribution Account" has the meaning assigned to such term in
the Trust Agreement.
-2-
"Certificate Pool Factor" as of the close of business on any Payment Date
means a seven-digit decimal figure equal to the outstanding principal amount of
the Certificates divided by the original outstanding principal amount of the
Certificates.
"Certificateholder" has the meaning assigned to such term in the Trust
Agreement.
"Class" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes
or the Class A-4 Notes, as the context requires.
"Class A Noteholders' Interest Distributable Amount" means, with respect to
any Payment Date, the sum of (i) the Class A-1 Noteholders' Interest
Distributable Amount, (ii) the Class A-2 Noteholders' Interest Distributable
Amount, (iii) the Class A-3 Noteholders' Interest Distributable Amount and (iv)
the Class A-4 Noteholders' Interest Distributable Amount.
"Class A Noteholders' Percentage" will be 98% on the initial Payment Date
and on any Payment Date after the initial Payment Date will be the percentage
equivalent of a fraction, the numerator of which is the principal amount of the
Notes as of the close of the preceding Payment Date and the denominator of which
is the Pool Balance as of such Payment Date.
"Class A Noteholders' Principal Carryover Shortfall" means, with respect to
any Payment Date, the excess of the Class A Noteholders' Principal Distributable
Amount for the preceding Payment Date over the amount that was actually
deposited in the Note Distribution Account on such Payment Date on account of
the Class A Noteholders' Principal Distributable Amount.
"Class A Noteholders' Principal Distributable Amount" means, with respect
to any Payment Date (other than the Final Scheduled Payment Date for any Class
of Notes), the Class A Noteholders' Percentage of the Principal Distributable
Amount. The Class A Noteholders' Principal Distributable Amount on the Final
Scheduled Payment Date for any Class of Notes will equal the outstanding
principal amount of such Class of Notes.
"Class A Target Amount" means, with respect to any Payment Date, an amount
equal to 90% of the Pool Balance as of such Payment Date after giving effect to
all payments of principal on the Receivables received during the related
Collection Period.
"Class A-1 Interest Period" means, for each Payment Date, the actual number
of days elapsed from and including the most recent preceding Payment Date on
which interest has been paid (or, in the case of the first Payment Date, from
and including the Closing Date) to, but excluding, such current Payment Date.
"Class A-1 Interest Rate" means 5.6375% per annum.
"Class A-1 Final Scheduled Payment Date" means the August 1999 Payment
Date.
-3-
"Class A-1 Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class A-1 Noteholders' Interest
Distributable Amount for the preceding Payment Date over the amount that was
actually deposited in the Note Distribution Account on such preceding Payment
Date on account of the Class A-1 Noteholders' Interest Distributable Amount.
"Class A-1 Noteholders' Interest Distributable Amount" means, with respect
to any Payment Date, the sum of the Class A-1 Noteholders' Monthly Interest
Distributable Amount for such Payment Date and the Class A-1 Noteholders'
Interest Carryover Shortfall for such Payment Date, plus interest on such Class
A-1 Noteholder's Interest Carryover Shortfall, to the extent permitted by law,
at the Class A-1 Interest Rate to, but excluding, the current Payment Date.
"Class A-1 Noteholders' Monthly Interest Distributable Amount" means an
amount equal to the product of (i) the Class A-1 Interest Rate, (ii) the
outstanding principal balance of the Class A-1 Notes as of the close of the
preceding Payment Date (or, in the case of the initial Payment Date, as of the
Closing Date) after giving effect to all distributions on account of principal
on such preceding Payment Date and (iii) a fraction, the numerator of which is
the actual number of days elapsed in the applicable Class A-1 Interest Period
and the denominator of which is 360.
"Class A-1 Notes" has the meaning assigned to such term in the Indenture.
"Class A-2 Interest Rate" means 5.8550% per annum.
"Class A-2 Final Scheduled Payment Date" means the October 2001 Payment
Date.
"Class A-2 Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class A-2 Noteholders' Interest
Distributable Amount for the preceding Payment Date over the amount that was
actually deposited in the Note Distribution Account on such preceding Payment
Date on account of the Class A-2 Noteholders' Interest Distributable Amount.
"Class A-2 Noteholders' Interest Distributable Amount" means, with respect
to any Payment Date, the sum of the Class A-2 Noteholders' Monthly Interest
Distributable Amount for such Payment Date and the Class A-2 Noteholders'
Interest Carryover Shortfall for such Payment Date, plus interest on such Class
A-2 Noteholder's Interest Carryover Shortfall, to the extent permitted by law,
at the Class A-2 Interest Rate to, but excluding, the current Payment Date.
"Class A-2 Noteholders' Monthly Interest Distributable Amount" means, (a)
for the first Payment Date, an amount equal to the product of (i) the Class A-2
Interest Rate, (ii) the initial principal balance of the Class A-2 Notes and
(iii) a fraction, the numerator of which is the number of days from and
including the Closing Date to and including August 14, 1998
-4-
(assuming that there are 30 days in each month of the year) and the denominator
of which is 360 and (b) for any Payment Date after the first Payment Date, an
amount equal to the product of (i) one-twelfth of the Class A-2 Interest Rate
and (ii) the principal balance of the Class A-2 Notes as of the close of the
preceding Payment Date (after giving effect to all distributions on account of
principal on such preceding Payment Date).
"Class A-2 Notes" has the meaning assigned to such term in the Indenture.
"Class A-3 Final Scheduled Payment Date" means the June 2002 Payment Date.
"Class A-3 Interest Rate" means 5.9950% per annum.
"Class A-3 Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class A-3 Noteholders' Interest
Distributable Amount for the preceding Payment Date over the amount that was
actually deposited in the Note Distribution Account on such preceding Payment
Date on account of the Class A-3 Noteholders' Interest Distributable Amount.
"Class A-3 Noteholders' Interest Distributable Amount" means, with respect
to any Payment Date, the sum of the Class A-3 Noteholders' Monthly Interest
Distributable Amount for such Payment Date and the Class A-3 Noteholders'
Interest Carryover Shortfall for such Payment Date, plus interest on such Class
A-3 Noteholder's Interest Carryover Shortfall, to the extent permitted by law,
at the Class A-3 Interest Rate to, but excluding, the current Payment Date.
"Class A-3 Noteholders' Monthly Interest Distributable Amount" means, (a)
for the first Payment Date, an amount equal to the product of (i) the Class A-3
Interest Rate, (ii) the initial principal balance of the Class A-3 Notes and
(iii) a fraction, the numerator of which is the number of days from and
including the Closing Date to and including August 14, 1998 (assuming that there
are 30 days in each month of the year) and the denominator of which is 360 and
(b) for any Payment Date after the first Payment Date, an amount equal to the
product of (i) one-twelfth of the Class A-3 Interest Rate and (ii) the principal
balance of the Class A-3 Notes as of the close of the preceding Payment Date
(after giving effect to all distributions on account of principal on such
preceding Payment Date).
"Class A-3 Notes" has the meaning assigned to such term in the Indenture.
"Class A-4 Final Scheduled Payment Date" means the October 2003 Payment
Date.
"Class A-4 Interest Rate" means 6.0800% per annum.
"Class A-4 Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class A-4 Noteholders' Interest
Distributable Amount for the preceding Payment Date over the amount that was
actually deposited in the Note Distribution
-5-
Account on such preceding Payment Date on account of the Class A-4 Noteholders'
Interest Distributable Amount.
"Class A-4 Noteholders' Interest Distributable Amount" means, with respect
to any Payment Date, the sum of the Class A-4 Noteholders' Monthly Interest
Distributable Amount for such Payment Date and the Class A-4 Noteholders'
Interest Carryover Shortfall for such Payment Date, plus interest on such Class
A-4 Noteholder's Interest Carryover Shortfall, to the extent permitted by law,
at the Class A-4 Interest Rate to, but excluding, the current Payment Date.
"Class A-4 Noteholders' Monthly Interest Distributable Amount" means, (a)
for the first Payment Date, an amount equal to the product of (i) the Class A-4
Interest Rate, (ii) the initial principal balance of the Class A-4 Notes and
(iii) a fraction, the numerator of which is the number of days from and
including the Closing Date to and including August 14, 1998 (assuming that there
are 30 days in each month of the year) and the denominator of which is 360 and
(b) for any Payment Date after the first Payment Date, an amount equal to the
product of (i) one-twelfth of the Class A-4 Interest Rate and (ii) the principal
balance of the Class A-4 Notes as of the close of the preceding Payment Date
(after giving effect to all distributions on account of principal on such
preceding Payment Date).
"Class A-4 Notes" has the meaning assigned to such term in the Indenture.
"Closing Date" means July 28, 1998.
"Code" shall have the meaning specified in Section 3.2.
"Collateral" shall have the meaning assigned to such term in the Indenture.
"Collateral Agent" means Norwest Bank Minnesota, National Association, in
its capacity as Collateral Agent under the Master Spread Account Agreement.
"Collateral Agent Fee" means the fee payable to the Collateral Agent on
each Payment Date in an amount equal to one-twelfth of 0.0075% of the aggregate
outstanding principal amount of the Securities on the last day of the second
preceding Collection Period; provided, however, that on the first Payment Date
the Collateral Agent will be entitled to receive an amount equal to the product
of (i) the percentage equivalent of a fraction the numerator of which is the
number of days from the Closing Date to but excluding the first Payment Date and
the denominator of which is 360, (ii) 0.0075% and (iii) the aggregate
outstanding principal amount of the Securities as of the Closing Date.
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 5.1.
-6-
"Collection Period" means, with respect to the first Payment Date, the
period beginning on the close of business on the Cutoff Date and ending on the
close of business on July 31, 1998. With respect to each subsequent Payment
Date, the preceding calendar month. Any amount stated "as of the close of
business of the last day of a Collection Period" shall give effect to the
following calculations as determined as of the end of the day on such last day:
(i) all applications of collections, and (ii) all distributions.
"Contract" means a motor vehicle retail installment sale contract.
"Controlling Party" shall be determined in accordance with the provisions
of Section 13.15.
"Corporate Trust Office" means (i) with respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee, which at the time of
execution of this agreement is 1011 Centre Road, Suite 200, Wilmington, Delaware
19805-1266 with a copy to Bankers Trust Company, 4 Albany Street, 10th Floor,
New York, New York 10006, Attention: Corporate Trust and Agency Group, and (ii)
with respect to the Trustee and the Collateral Agent, the principal corporate
trust office of the Trustee, which at the time of execution of this agreement is
Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070.
"CPS" means Consumer Portfolio Services, Inc., a California corporation and
its successors.
"CPS Purchase Agreement" means the Purchase Agreement dated as of July 15,
1998 by and between the Seller and CPS, as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, relating to the purchase of the CPS Receivables by the Seller
from CPS.
"CPS Receivables" shall have the meaning specified in the CPS Purchase
Agreement.
"Cram Down Loss" means, with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
Scheduled Receivable Payments to be made on a Receivable, an amount equal to
such reduction in Principal Balance of such Receivable or the reduction in the
net present value (using as the discount rate the lower of the contract rate or
the rate of interest specified by the court in such order) of the Scheduled
Receivable Payments as so modified or restructured. A "Cram Down Loss" shall be
deemed to have occurred on the date such order is entered.
"Cutoff Date" means July 1, 1998.
-7-
"Dealer" means, with respect to a Receivable, the seller of the related
Financed Vehicle, who originated and assigned such Receivable to CPS, Samco or
Linc, who in turn sold such Receivable to the Seller.
"Deficiency Claim Amount" shall have the meaning set forth in Section
5.5(a).
"Deficiency Claim Date" means, with respect to any Payment Date, the fourth
Business Day immediately preceding such Payment Date.
"Deficiency Notice" shall have the meaning set forth in Section 5.5(a).
"Delegation Notice" shall have the meaning specified in Section 9.5.
"Delivery" means, when used with respect to Trust Account Property:
(i) the perfection and priority of a security interest in such Trust
Account Property which is governed by the law of a jurisdiction which has
adopted the 1978 Revision to Article 8 of the UCC:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105 (1) (i)
of the UCC and are susceptible of physical delivery, transfer thereof
to the Trustee or its nominee or custodian by physical delivery to the
Trustee or its nominee or custodian endorsed to, or registered in the
name of, the Trustee or its nominee or custodian or endorsed in blank,
and, with respect to a certificated security (as defined in Section
8-102 of the UCC), transfer thereof (1) by delivery of such
certificated security endorsed to, or registered in the name of, the
Trustee or its nominee or custodian or endorsed in blank to a
financial intermediary (as defined in Section 8-313 of the UCC) and
the making by such financial intermediary of entries on its books and
records identifying such certificated securities as belonging to the
Trustee or its nominee or custodian and the sending by such financial
intermediary of a confirmation of the purchase of such certificated
security by the Trustee or its nominee or custodian, or (2) by
delivery thereof to a "clearing corporation" (as defined in Section
8-102 (3) of the UCC) and the making by such clearing corporation of
appropriate entries on its books reducing the appropriate securities
account of the transferor and increasing the appropriate securities
account of a financial intermediary by the amount of such certificated
security, the identification by the clearing corporation of the
certificated securities for the sole and exclusive account of the
financial intermediary, the maintenance of such certificated
securities by such clearing corporation or a "custodian bank" (as
defined in Section 8-102(4) of the UCC) or the nominee of either
subject to the clearing corporation's exclusive control, the sending
of a confirmation by the financial intermediary of the purchase by the
Trustee or its nominee or custodian of such securities and the making
by such financial intermediary of entries on its books and records
identifying such certificated securities as belonging to the Trustee
or its nominee or
-8-
custodian (all of the foregoing, "Physical Property"), and, in any
event, any such Physical Property in registered form shall be in the
name of the Trustee or its nominee or custodian; and such additional
or alternative procedures as may hereafter become appropriate to
effect the complete transfer of ownership of any such Trust Account
Property to the Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation
thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National
Mortgage Association that is a book-entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations, the
following procedures, all in accordance with applicable law, including
applicable Federal regulations and Articles 8 and 9 of the UCC:
book-entry registration of such Trust Account Property to an
appropriate book-entry account maintained with a Federal Reserve Bank
by a financial intermediary which is also a "depository" pursuant to
applicable Federal regulations and issuance by such financial
intermediary of a deposit advice or other written confirmation of such
book-entry registration to the Trustee or its nominee or custodian of
the purchase by the Trustee or its nominee or custodian of such
book-entry securities; the making by such financial intermediary of
entries in its books and records identifying such book-entry security
held through the Federal Reserve System pursuant to Federal book-entry
regulations as belonging to the Trustee or its nominee or custodian
and indicating that such custodian holds such Trust Account Property
solely as agent for the Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust
Account Property to the Trustee or its nominee or custodian,
consistent with changes in applicable law or regulations or the
interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the financial intermediary, the
sending of a confirmation by the financial intermediary of the
purchase by the Trustee or its nominee or custodian of such
uncertificated security, the making by such financial intermediary of
entries on its books and records identifying such uncertificated
certificates as belonging to the Trustee or its nominee or custodian;
or
(ii) the perfection and priority of a security interest in such Trust
Account Property which is governed by the law of a jurisdiction which has
adopted the 1994 Revision to Article 8 of the UCC:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the UCC (other than certificated securities) and are susceptible of
physical delivery, transfer thereof to the Trustee by physical
delivery to the Trustee, indorsed to, or registered in the name of,
the Trustee or its nominee or indorsed
-9-
in blank and such additional or alternative procedures as may
hereafter become appropriate to effect the complete transfer of
ownership of any such Trust Property to the Trustee free and clear of
any adverse claims, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to a "certificated security" (as defined in
Section 8-102(a)(4) of the UCC), transfer thereof:
(1) by physical delivery of such certificated security to
the Trustee, provided that if the certificated security is in
registered form, it shall be indorsed to, or registered in the
name of, the Trustee or indorsed in blank;
(2) by physical delivery of such certificated security in
registered form to a "securities intermediary" (as defined in
Section 8-102(a)(14) of the UCC) acting on behalf of the Trustee
if the certificated security has been specially endorsed to the
Trustee by an effective endorsement.
(c) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National
Mortgage Association that is a book-entry security held through the
Federal Reserve System pursuant to Federal book entry regulations, the
following procedures, all in accordance with applicable law, including
applicable federal regulations and Articles 8 and 9 of the UCC:
book-entry registration of such property to an appropriate book-entry
account maintained with a Federal Reserve Bank by a securities
intermediary which is also a "depositary" pursuant to applicable
federal regulations and issuance by such securities intermediary of a
deposit advice or other written confirmation of such book-entry
registration to the Trustee of the purchase by the securities
intermediary on behalf of the Trustee of such book-entry security; the
making by such securities intermediary of entries in its books and
records identifying such book-entry security held through the Federal
Reserve System pursuant to Federal book-entry regulations as belonging
to the Trustee and indicating that such securities intermediary holds
such book-entry security solely as agent for the Trustee; and such
additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust
Property to the Trustee free of any adverse claims, consistent with
changes in applicable law or regulations or the interpretation
thereof;
(d) with respect to any item of Trust Property that is an
"uncertificated security" (as defined in Section 8-102(a)(18) of the
UCC) and that is not governed by clause (c) above, transfer thereof:
(1)(A) by registration to the Trustee as the registered
owner thereof, on the books and records of the issuer thereof.
-10-
(B) by another Person (not a securities intermediary) who
either becomes the registered owner of the uncertificated
security on behalf of the Trustee, or having become the
registered owner acknowledges that it holds for the Trustee.
(2) the issuer thereof has agreed that it will comply with
instructions originated by the Trustee without further consent of
the registered owner thereof.
(e) with respect to a "security entitlement" (as defined in
Section 8-102(a)(17) of the UCC)
(1) if a securities intermediary (A) indicates by book entry
that a "financial asset" (as defined in Section 8-102(a)(9) of
the UCC) has been credited to the Trustee's "securities account"
(as defined in Section 8-501(a) of the UCC), (B) receives a
financial asset (as so defined) from the Trustee or acquires a
financial asset for the Trustee, and in either case, accepts it
for credit to the Trustee's securities account (as so defined),
(C) becomes obligated under other law, regulation or rule to
credit a financial asset to the Trustee's securities account, or
(D) has agreed that it will comply with "entitlement orders" (as
defined in Section 8-102(a)(8) of the UCC) originated by the
Trustee, without further consent by the "entitlement holder" (as
defined in Section 8-102(a)(7) of the UCC), of a confirmation of
the purchase and the making by such securities intermediary of
entries on its books and records identifying as belonging to the
Trustee of (I) a specific certificated security in the securities
intermediary's possession, (II) a quantity of securities that
constitute or are part of a fungible bulk of certificated
securities in the securities intermediary's possession, or (III)
a quantity of securities that constitute or are part of a
fungible bulk of securities shown on the account of the
securities intermediary on the books of another securities
intermediary.
(f) in each case of delivery contemplated pursuant to clause(a)
through (e) of subsection (ii) hereof, the Trustee shall make
appropriate notations on its records, and shall cause the same to be
made on the records of its nominees, indicating that such Trust
Property which constitutes a security is held in trust pursuant to and
as provided in this Agreement.
"Depositor" shall mean the Seller in its capacity as Depositor under the
Trust Agreement.
"Determination Date" means the earlier of (i) the seventh Business Day of
each calendar month and (ii) the fifth Business Day preceding the related
Payment Date.
"Draw Date" means with respect to any Payment Date, the third Business Day
immediately preceding such Payment Date.
-11-
"Eligible Account" means (i) a segregated trust account that is maintained
with a depository institution acceptable to the Note Insurer (so long as an
Insurer Default shall not have occurred and be continuing), or (ii) a segregated
direct deposit account maintained with a depository institution or trust company
organized under the laws of the United States of America, or any of the States
thereof, or the District of Columbia, having a certificate of deposit,
short-term deposit or commercial paper rating of at least "A-1" by Standard &
Poor's and "P-1" by Moody's and (so long as an Insurer Default shall not have
occurred and be continuing) acceptable to the Note Insurer.
"Eligible Investments" mean book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
(a) direct obligations of, and obligations fully guaranteed as to the full
and timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any State thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by Federal or State
banking or depository institution authorities; provided, however, that at the
time of the investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a Person other than
such depository institution or trust company) thereof shall be rated "A-1+" by
Standard & Poor's and "P-1" by Moody's;
(c) commercial paper that, at the time of the investment or contractual
commitment to invest therein, is rated "A-1+" by Standard & Poor's and "P-1" by
Moody's;
(d) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(e) repurchase obligations with respect to any security that is a direct
obligation of, or fully guaranteed as to the full and timely payment by, the
United States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the United
States of America, in either case entered into with (i) a depository institution
or trust company (acting as principal) described in clause (b) or (ii) a
depository institution or trust company whose commercial paper or other short
term unsecured debt obligations are rated "A-1+" by Standard & Poor's and "P-1"
by Moody's and long term unsecured debt obligations are rated "AAA" by Standard
& Poor's and "Aaa" by Moody's;
(f) with the prior written consent of the Note Insurer, money market mutual
funds registered under the Investment Company Act of 1940, as amended, having a
rating, at the time of such investment, from each of the Rating Agencies in the
highest investment category granted thereby; and
-12-
(g) any other investment as may be acceptable to the Note Insurer, as
evidenced by a writing to that effect, as may from time to time be confirmed in
writing to the Trustee by the Note Insurer.
Any of the foregoing Eligible Investments may be purchased by or through
the Owner Trustee or the Trustee or any of their respective Affiliates.
"ERISA" shall have the meaning specified in Section 3.2.
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Payment Date" means with respect to the Class A-1 Notes,
the Class A- 1 Final Scheduled Payment Date, with respect to the Class A-2
Notes, the Class A-2 Final Scheduled Payment Date, with respect to the Class A-3
Notes, the Class A-3 Final Scheduled Payment Date and with respect to the Class
A-4 Notes, the Class A-4 Final Scheduled Payment Date.
"Financed Vehicle" means a new or used automobile, light truck, van or
minivan, together with all accessions thereto, securing an Obligor's
indebtedness under a Receivable.
"First Target Date" means the first Payment Date on which the principal
balance of the Notes is equal to or less than the Class A Target Amount.
"Holder" shall have the meaning specified in the Indenture.
"Indemnification Agreement" means the Indemnification Agreement among the
Note Insurer, CPS, the Seller and the Underwriter, dated as of July 15, 1998, as
such agreement may be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof.
"Indenture" means the Indenture dated as of July 15, 1998, between the
Issuer and Norwest Bank Minnesota, National Association, as Trustee, as the same
may be amended and supplemented from time to time.
"Initial Spread Account Deposit" shall have the meaning specified in the
Spread Account Supplement.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a petition against such Person or the entry of a decree or order for
relief by a court having jurisdiction in the premises in respect of such Person
or any substantial part of its property in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation or such Person's
affairs, and such petition, decree or order shall
-13-
remain unstayed and in effect for a period of 60 consecutive days; or (b) the
commencement by such Person of a voluntary case under any applicable federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect, or
the consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by, a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.
"Insurance Agreement" means the Insurance and Indemnity Agreement among the
Trust, CPS, the Seller, and the Note Insurer, dated as of July 15, 1998, as such
agreement may be amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof.
"Insurance Agreement Event of Default" means an "Event of Default" as
defined in the Insurance Agreement.
"Insurance Policy" means, with respect to a Receivable, any insurance
policy (including the insurance policies described in Section 4.4 hereof)
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the Obligor.
"Insurer Default" shall mean any one of the following events shall have
occurred and be continuing:
(i) the Note Insurer fails to make a payment required under the
Policy in accordance with its terms;
(ii) the Note Insurer (A) files any petition or commences any
case or proceeding under any provision or chapter of the United States
Bankruptcy Code, the New York Department of Insurance Code or similar
Federal or State law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization, (B) makes a general
assignment for the benefit of its creditors or (C) has an order for
relief entered against it under the United States Bankruptcy Code or
any other similar Federal or State law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization which is
final and nonappealable; or
(iii) a court of competent jurisdiction, the New York Department
of Insurance or other competent regulatory authority enters a final
and nonappealable order, judgment or decree (A) appointing a
custodian, trustee, agent or receiver for the Note 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 Note
Insurer (or the taking of possession of all or any material portion of
the property of the Note Insurer).
-14-
"Interest Period" means, with respect to any Payment Date, the period from
and including the Closing Date (in the case of the first Payment Date) or from
and including the most recent Payment Date on which interest has been paid to
but excluding such Payment Date.
"Interest Rate" means the Class A-1 Interest Rate, the Class A-2 Interest
Rate, the Class A-3 Interest Rate or the Class A-4 Interest Rate, as applicable.
"Investment Earnings" means, with respect to any Payment Date and Trust
Account, the investment earnings on amounts on deposit in such Trust Account on
such Payment Date.
"Issuer" means CPS Auto Receivables Trust 1998-3.
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable by operation of law.
"Lien Certificate" means, with respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the obligor, the term "Lien
certificate" shall mean only a certificate or notification issued to a secured
party.
"Linc" means Linc Acceptance Company LLC and its successors.
"Linc Purchase Agreement" means the Purchase Agreement, dated as of July
15, 1998 by and between Linc and the Seller, as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, relating to the purchase of the Linc Receivables by the Seller
from Linc.
"Linc Receivables" shall have the meaning specified in the Linc Purchase
Agreement.
"Liquidated Receivable" means any Receivable (i) which has been liquidated
by the Servicer through the sale of the Financed Vehicle or (ii) for which the
related Financed Vehicle has been repossessed and 90 days have elapsed since the
date of such repossession or (iii) as to which an Obligor has failed to make
more than 90% of a Scheduled Receivable Payment of more than ten dollars for 120
(or, if the related Financed Vehicle has been repossessed, 210) or more days as
of the end of a Collection Period or (iv) with respect to which proceeds have
been received which, in the Servicer's judgment, constitute the final amounts
recoverable in respect of such Receivable.
"Lockbox Account" means an account maintained on behalf of the Trustee by
the Lockbox Bank pursuant to Section 4.2(c).
-15-
"Lockbox Agreement" means the Three Party Agreement Relating to Lockbox
Services, dated as of July 16, 1998, by and among the Lockbox Processor, the
Servicer, the Seller and the Trustee, as such agreement may be amended or
supplemented from time to time, unless the Trustee shall cease to be a party
thereunder, or such agreement shall be terminated in accordance with its terms,
in which event "Lockbox Agreement" shall mean such other agreement, in form and
substance acceptable to the Controlling Party, among the Servicer, the Trustee
and the Lockbox Processor.
"Lockbox Bank" means as of any date a depository institution named by the
Servicer and acceptable to the Controlling Party at which the Lockbox Account is
established and maintained as of such date.
"Lockbox Processor" means Bank of America and its successors and assigns.
"Master Spread Account Agreement" means the Master Spread Account Agreement
amended and restated as of July 15, 1998 among the Note Insurer, the Seller and
the Collateral Agent, as the same may be modified, supplemented or otherwise
amended in accordance with the terms thereof.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Net Liquidation Proceeds" means, with respect to a Liquidated Receivable,
all amounts realized with respect to such Receivable (other than amounts
withdrawn from the Spread Account and drawings under the Note Policy) net of (i)
reasonable expenses incurred by the Servicer in connection with the collection
of such Receivable and the repossession and disposition of the Financed Vehicle
and (ii) amounts that are required to be refunded to the Obligor on such
Receivable; provided, however, that the Net Liquidation Proceeds with respect to
any Receivable shall in no event be less than zero.
"Note" shall have the meaning provided in Section 1.1 of the Indenture.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.1.
"Note Insurer" means Financial Security Assurance Inc., a stock insurance
company organized and created under the laws of the State of New York, or its
successors in interest.
"Note Policy" means the Financial Guaranty Insurance Policy issued by the
Note Insurer for the benefit of the Holders of the Notes issued under the
Indenture, including any endorsements thereto.
"Note Policy Claim Amount" with respect to any Distribution Date, has the
meaning specified in Section 6.1.
-16-
"Note Pool Factor" for each Class of Notes as of the close of business on
any Payment Date means a seven-digit decimal figure equal to the outstanding
principal amount of such Class of Notes divided by the original outstanding
principal amount of such Class of Notes.
"Noteholder" shall have the meaning specified in the Indenture.
"Notes" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes
and the Class A-4 Notes.
"Objection Date" shall have the meaning specified in Section 9.5.
"Objection Notice" shall have the meaning specified in Section 9.5.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Receivable.
"Officer's Certificate" means a certificate signed by the chairman of the
board, the president, any vice chairman of the board, any vice president, the
treasurer, the controller or assistant treasurer or any assistant controller,
secretary or assistant secretary of CPS, the Seller or the Servicer, as
appropriate.
"Opinion of Counsel" means a written opinion of counsel who may but need
not be counsel to the Seller or the Servicer, which counsel shall be reasonably
acceptable to the Trustee and the Note Insurer and which opinion shall be
acceptable in form and substance to the Trustee and, if such opinion or a copy
thereof is required by the provisions of this Agreement to be delivered to the
Note Insurer, to the Note Insurer.
"Original Pool Balance" means the Pool Balance as of the Cutoff Date.
"Other Conveyed Property" means all property conveyed by the Seller to the
Trust pursuant to Section 2.1(b) through (h) of this Agreement.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means Bankers Trust (Delaware), not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, its successors
in interest or any successor Owner Trustee under the Trust Agreement.
"Payment Date" means, with respect to each Collection Period, the 15th day
of the following calendar month, or if such day is not a Business Day, the
immediately following Business Day, commencing on August 15, 1998.
"Person" means any individual, corporation, estate, partnership, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary
-17-
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Physical Property" has the meaning assigned to such term in the definition
of "Delivery" above.
"Pool Balance" means, as of any date of determination, the aggregate
Principal Balance of the Receivables (excluding Purchased Receivables and
Liquidated Receivables).
"Post-Office Box" means the separate post-office box in the name of the
Trustee for the benefit of the Securityholders and the Note Insurer, established
and maintained pursuant to Section 4.1.
"Preference Claim" shall have the meaning specified in Section 6.2(b).
"Principal Balance" of a Receivable, as of the close of business on the
last day of a Collection Period means the Amount Financed minus the sum of the
following amounts without duplication: (i) in the case of a Rule of 78's
Receivable, that portion of all Scheduled Receivable Payments actually received
on or prior to such day allocable to principal using the actuarial or constant
yield method; (ii) in the case of a Simple Interest Receivable, that portion of
all Scheduled Receivable Payments actually received on or prior to such day
allocable to principal using the Simple Interest Method; (iii) any payment of
the Purchase Amount with respect to the Receivable allocable to principal; (iv)
any Cram Down Loss in respect of such Receivable; and (v) any prepayment in full
or any partial prepayment applied to reduce the Principal Balance of the
Receivable.
"Principal Distributable Amount" means, with respect to any Payment Date,
the sum of (i) collections on Receivables (other than Liquidated Receivables)
allocable to principal including full and partial prepayments; (ii) the portion
of the Purchase Amount allocable to principal of each Receivable that became a
Purchased Receivable as of the last day of the preceding Collection Period and,
at the option of the Note Insurer the Principal Balance of each Receivable that
was required to be but was not so purchased or repurchased (without duplication
of amounts referred to in clause (i) above); (iii) the Principal Balance of each
Receivable that first became a Liquidated Receivable during the preceding
Collection Period (without duplication of the amounts included in clause (i)
above); (iv) the aggregate amount of Cram Down Losses with respect to the
Receivables that have occurred during the preceding Collection Period (without
duplication of amounts referred to in clauses (i) through (iii) above); and (v)
following the acceleration of the Notes pursuant to Section 5.2 of the
Indenture, the amount of money or property collected pursuant to Section 5.4 of
the Indenture since the preceding Determination Date by the Trustee or
Controlling Party for distribution pursuant to Section 5.7 hereof.
"Program" shall have the meaning specified in Section 4.11.
-18-
"Purchase Agreement" means the CPS Purchase Agreement, the Samco Purchase
Agreement and/or the Linc Purchase Agreement.
"Purchase Amount" means, with respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Receivable, after giving
effect to the receipt of any moneys collected (from whatever source) on such
Receivable, if any.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
Section 4.7 or repurchased by the Seller or CPS pursuant to Section 3.2 or
Section 11.1(a).
"Rating Agency" means each of Moody's and Standard & Poor's, and any
successors thereof. If no such organization or successor maintains a rating on
the Securities, "Rating Agency" shall be a nationally recognized statistical
rating organization or other comparable Person designated by the Note Insurer
(so long as an Insurer Default shall not have occurred and be continuing),
notice of which designation shall be given to the Trustee, the Owner Trustee and
the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 3 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Note Insurer,
the Owner Trustee and the Trustee in writing that such action will not result in
a reduction or withdrawal of the then current rating of any Class of Notes.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Net Liquidation Proceeds to the extent allocable to principal.
"Receivable" means each retail installment sale contract for a Financed
Vehicle listed on Schedule A (which Schedule A may be in the form of microfiche)
and all rights and obligations thereunder except for Receivables that shall have
become Purchased Receivables.
"Receivable Files" means the documents specified in Section 3.3.
"Record Date" means, with respect to any Payment Date, the tenth day of the
calendar month in which such Payment Date occurs.
"Registrar of Titles" means, with respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
"Responsible Officer" shall have the meaning specified in the Trust
Agreement.
-19-
"Rule of 78's Receivable" means any Receivable under which the portion of a
payment allocable to earned interest (which may be referred to in the related
retail installment sale contract as an add-on finance charge) and the portion
allocable to the Amount Financed is determined according to the method commonly
referred to as the "Rule of 78's" method or the "sum of the months' digits"
method or any equivalent method.
"Samco" means Samco Acceptance Corp., a subsidiary of CPS.
"Samco Purchase Agreement" means the Purchase Agreement, dated as of July
15, 1998 by and between Samco and the Seller, as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, relating to the purchase of the Samco Receivables by the Seller
from Samco.
"Samco Receivables" shall have the meaning specified in the Samco Purchase
Agreement.
"Schedule of Receivables" means the schedule of all retail installment
sales contracts and promissory notes originally held as part of the Trust which
is attached hereto as Schedule A, as amended from time to time.
"Scheduled Receivable Payment" means, with respect to any Collection Period
for any Receivable, the amount set forth in such Receivable as required to be
paid by the Obligor in such Collection Period (without giving effect to
deferments of payments pursuant to Section 4.2 or any rescheduling of payments
in any insolvency or similar proceedings).
"Securities" means the Notes and the Certificates.
"Security Majority" means a majority by principal amount of the Noteholders
so long as the Notes are outstanding and a majority by Certificate Balance of
the Certificateholders thereafter.
"Securityholders" means the Noteholders and the Certificateholders.
"Seller" means CPS Receivables Corp., a California corporation, and its
successors in interest to the extent permitted hereunder.
"Series 1998-3 Spread Account" means the account designated as such,
established and maintained pursuant to the Spread Account Supplement.
"Servicer" means Consumer Portfolio Services, Inc., as the servicer of the
Receivables, and each successor Servicer pursuant to Section 10.3.
"Servicer Termination Event" means an event specified in Section 10.1.
-20-
"Servicer's Certificate" means a certificate completed and executed by a
Servicing Officer and delivered pursuant to Section 4.9, substantially in the
form of Exhibit B.
"Servicing and Lockbox Processing Assumption Agreement" means the Servicing
and Lockbox Processing Assumption Agreement, dated as of July 15, 1998 among
CPS, the Standby Servicer and the Trustee, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.
"Servicing Fee" has the meaning specified in Section 4.8.
"Servicing Officer" means any Person whose name appears on a list of
Servicing Officers delivered to the Trustee and the Note Insurer, as the same
may be amended from time to time.
"Simple Interest Method" means the method of allocating a fixed level
payment between principal and interest, pursuant to which the portion of such
payment that is allocated to interest is equal to the product of the APR
multiplied by the unpaid balance multiplied by the period of time (expressed as
a fraction of a year, based on the actual number of days in the calendar month
and the actual number of days in the calendar year) elapsed since the preceding
payment of interest was made and the remainder of such payment is allocable to
principal.
"Simple Interest Receivable" means a Receivable under which the portion of
the payment allocable to interest and the portion allocable to principal is
determined in accordance with the Simple Interest Method.
"Specified Spread Account Requisite Amount" has the meaning specified in
the Spread Account Supplement.
"Spread Account Supplement" means the Series 1998-3 Supplement to the
Master Spread Account Agreement dated as of July 15, 1998 among the Note
Insurer, the Seller and the Collateral Agent, as the same may be modified,
supplemented or otherwise amended in accordance with the terms thereof.
"Standard & Poor's" means Standard & Poor's Ratings Group, a division of
The McGraw-Hill Companies, or its successor.
"Standby Fee" means the fee payable to the Standby Servicer so long as CPS
is the Servicer, on each Payment Date in an amount equal to one-twelfth of
0.025% of the aggregate outstanding principal amount of the Securities on the
last day of the second preceding Collection Period; provided, however, that on
the first Payment Date the Standby Servicer will be entitled to receive an
amount equal to the product of (i) the percentage equivalent of a fraction the
numerator of which is the number days from the Closing Date to but excluding the
first Payment Date and the denominator of which is 360, (ii) 0.025% and (iii)
the aggregate outstanding principal amount of the Securities as of the Closing
Date.
-21-
"Standby Servicer" means Norwest Bank Minnesota, National Association, in
its capacity as Standby Servicer pursuant to the terms of the Servicing and
Lockbox Processing Assumption Agreement or such Person as shall have been
appointed Standby Servicer pursuant to Section 9.2(c).
"Total Distribution Amount" means, for each Payment Date, the sum of the
following amounts with respect to the preceding Collection Period: (i) all
collections on the Receivables, (ii) Net Liquidation Proceeds received during
the Collection Period with respect to Liquidated Receivables; (iii) all Purchase
Amounts deposited in the Collection Account during the related Collection
Period; (iv) Investment Earnings for the related Payment Date; (v) following the
acceleration of the Notes pursuant to Section 5.2 of the Indenture, the amount
of money or property collected pursuant to Section 5.7 of the Indenture since
the preceding Payment Date by the Trustee or Controlling Party for distribution
pursuant to Section 5.6 and Section 5.8 hereof; and (vi) the proceeds of any
purchase or sale of the assets of the Trust described in Section 11.1 hereof.
"Trigger Event" has the meaning assigned thereto in the Spread Account
Supplement.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.1.
"Trust Agreement" means the Trust Agreement dated as of July 8, 1998, as
amended and restated as of July 15, 1998, between the Seller, as Depositor, and
the Owner Trustee, as the same may be further amended or supplemented from time
to time.
"Trust Officer" means, (i) in the case of the Trustee, any vice president,
any assistant vice president, any assistant secretary, any assistant treasurer,
any trust officer, or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject, and (ii) in the case of the Owner
Trustee, any officer in the corporate trust office of the Owner Trustee or any
agent of the Owner Trustee under a power of attorney with direct responsibility
for the administration of this Agreement or any of the Basic Documents on behalf
of the Owner Trustee.
"Trust Property" means the property and proceeds conveyed pursuant to
Section 2.1, together with certain monies received after the Cutoff Date, the
Insurance Policies, the Collection Account (including all Eligible Investments
therein and all proceeds therefrom), the
-22-
Lockbox Account and certain other rights under this Agreement. Although the
Seller has pledged the Spread Account to the Trustee and the Note Insurer
pursuant to the Master Spread Account Agreement, the Spread Account shall not
under any circumstances be deemed to be a part of or otherwise includable in the
Trust or the Trust Property.
"Trust Receipt" has the meaning assigned thereto by Section 3.5.
"Trustee" means the Person acting as Trustee under the Indenture, its
successors in interest and any successor trustee under the Indenture.
"Trustee Fee" means (A) the fee payable to the Trustee on each Payment
Date in an amount equal to one-twelfth of 0.0075% of the aggregate outstanding
principal amount of the Securities on the last day of the second preceding
Collection Period; provided, however, that on the first Payment Date the Trustee
will be entitled to receive an amount equal to the product of (i) the percentage
equivalent of a fraction the numerator of which is the number days from the
Closing Date to but excluding the first Payment Date and the denominator of
which is 360, (ii) 0.0075% and (iii) the aggregate outstanding principal amount
of the Securities as of the Closing Date and/or (B) any amounts payable to the
Owner Trustee pursuant to Section 4.11 of the Trust Agreement, as applicable.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction on the date of the Agreement.
SECTION 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Indenture or, if not defined therein, in the
Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein.
(c) Accounting terms used but not defined or partly defined in this
Agreement, in any instrument governed hereby or in any certificate or other
document made or delivered pursuant hereto, to the extent not defined, shall
have the respective meanings given to them under generally accepted accounting
principles as in effect on the date of this Agreement or any such instrument,
certificate or other document, as applicable. To the extent that the definitions
of accounting terms in this Agreement or in any such instrument, certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such instrument, certificate or other document shall control.
-23-
(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement.
(e) Section, Schedule and Exhibit references contained in this Agreement
are references to Sections, Schedules and Exhibits in or to this Agreement
unless otherwise specified; and the term "including" shall mean "including
without limitation."
(f) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(g) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as the same may from time to time be amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments and instruments associated therewith; all
references to a Person include its permitted successors and assigns.
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. Conveyance of Receivables. In consideration of the Issuer's
delivery to or upon the order of the Seller on the Closing Date of the net
proceeds from the sale of the Notes and the Certificates and the other amounts
to be distributed from time to time to the Seller in accordance with the terms
of this Agreement, the Seller does hereby sell, transfer, assign, set over and
otherwise convey to the Issuer, without recourse (subject to the obligations set
forth herein):
(a) all right, title and interest of the Seller in and to the
Receivables listed in Schedule A hereto, all monies received thereon after
the Cutoff Date and all Net Liquidation Proceeds received with respect
thereto after the Cutoff Date;
(b) all right, title and interest of the Seller in and to the security
interests in the Financed Vehicles granted by Obligors pursuant to the
Receivables and any other interest of the Seller in such Financed Vehicles,
including, without limitation, the certificates of title or, with respect
to such Financed Vehicles in the State of Michigan, all other evidence of
ownership with respect to such Financed Vehicles;
(c) all right, title and interest of the Seller in and to any proceeds
from claims on any physical damage, credit life and credit accident and
health insurance policies or certificates relating to the Financed Vehicles
or the Obligors;
-24-
(d) all right, title and interest of the Seller in and to the Purchase
Agreements, including a direct right to cause CPS to purchase Receivables
from the Trust pursuant to the CPS Purchase Agreement under the
circumstances specified therein;
(e) all right, title and interest of the Seller in and to refunds for
the costs of extended service contracts with respect to Financed Vehicles
securing Receivables, refunds of unearned premiums with respect to credit
life and credit accident and health insurance policies or certificates
covering an Obligor or Financed Vehicle or his or her obligations with
respect to a Financed Vehicle and any recourse to Dealers for any of the
foregoing;
(f) the Receivable File related to each Receivable;
(g) all amounts and property from time to time held in or credited to
the Collection Account, the Lockbox Account or the Note Distribution
Account;
(h) the proceeds of any and all of the foregoing; and
(i) all present and future claims, demands, causes and choses in
action in respect of any or all of the foregoing and all payments on or
under and all proceeds of every kind and nature whatsoever in respect of
any or all of the foregoing, including all proceeds of the conversion,
voluntary or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, insurance proceeds, condemnation
awards, rights to payment of any and every kind and other forms of
obligations and receivables, instruments and other property which at any
time constitute all or part of or are included in the proceeds of any of
the foregoing.
It is the intention of the Seller that the transfer and assignment
contemplated by this Agreement shall constitute a sale of the Receivables and
other Trust Property from the Seller to the Issuer and the beneficial interest
in and title to the Receivables and the other Trust Property shall not be part
of the Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law. In the event that, notwithstanding
the intent of the Seller, the transfer and assignment contemplated hereby is
held not to be a sale, this Agreement shall constitute a grant of a security
interest in the property referred to in this Section 2.1 for the benefit of the
Securityholders and the Note Insurer.
SECTION 2.2. [RESERVED].
-25-
SECTION 2.3. Further Encumbrance of Trust Property.
(a) Immediately upon the conveyance to the Trust by the Seller of any item
of the Trust Property pursuant to Section 2.1, all right, title and interest of
the Seller in and to such item of Trust Property shall terminate, and all such
right, title and interest shall vest in the Trust, in accordance with the Trust
Agreement and Sections 3802 and 3805 of the Business Trust Statute (as defined
in the Trust Agreement).
(b) Immediately upon the vesting of the Trust Property in the Trust, the
Trust shall have the sole right to pledge or otherwise encumber, such Trust
Property. Pursuant to the Indenture, the Trust shall grant a security interest
in the Trust Property to secure the repayment of the Notes. The Certificates
shall represent beneficial ownership interests in the Trust Property, and the
Certificateholders shall be entitled to receive distributions with respect
thereto as set forth herein.
(c) Following the payment in full of the Notes and the release and
discharge of the Indenture, all covenants of the Issuer under Article III of the
Indenture shall, until all amounts due in respect of the Certificates have been
paid in full, remain as covenants of the Issuer for the benefit of the
Certificateholders, enforceable by the Certificateholders to the same extent as
such covenants were enforceable by the Noteholders prior to the discharge of the
Indenture. Any rights of the Trustee under Article III of the Indenture,
following the discharge of the Indenture, shall vest in the Certificateholders.
(d) The Trustee shall, at such time as there are no Securities outstanding
and all sums due to the Trustee pursuant to the Indenture and this Agreement,
have been paid, release any remaining portion of the Trust Property to the
Certificateholders.
ARTICLE III
THE RECEIVABLES
SECTION 3.1. Representations and Warranties of Seller. The Seller makes the
following representations and warranties as to the Receivables to the Note
Insurer, the Issuer and to the Trustee for the benefit of the Noteholders on
which the Issuer relies in acquiring the Receivables and on which the Note
Insurer relies in issuing the Note Policy. Such representations and warranties
speak as of the execution and delivery of this Agreement and as of the Closing
Date, but shall survive the sale, transfer and assignment of the Receivables to
the Issuer and the pledge thereof to the Trustee pursuant to the Indenture.
(i) Characteristics of Receivables. (A) Each Receivable (1) has been
originated in the United States of America by a Dealer for the retail sale
of a Financed Vehicle in the ordinary course of such Dealer's business, has
been fully and properly executed by the parties thereto and has been
purchased by CPS (or, with respect to the Samco
-26-
Receivables, Samco and, with respect to the Linc Receivables, Linc) in
connection with the sale of Financed Vehicles by the Dealers, (2) has
created a valid, subsisting, and enforceable first priority perfected
security interest in favor of CPS (or, with respect to the Samco
Receivables, Samco and, with respect to the Linc Receivables, Linc) in the
Financed Vehicle, which security interest has been assigned by CPS (or,
with respect to the Samco Receivables, Samco and, with respect to the Linc
Receivables, Linc) to the Seller, which in turn has assigned such security
interest to the Trust which has assigned such security interest to the
Trustee, (3) contains customary and enforceable provisions such that the
rights and remedies of the holder or assignee thereof shall be adequate for
realization against the collateral of the benefits of the security, (4)
provides for level monthly payments that fully amortize the Amount Financed
over the original term (except for the last payment, which may be different
from the level payment) and yield interest at the Annual Percentage Rate,
(5) has an Annual Percentage Rate of not less than 15.95%, (6) that is a
Rule of 78's Receivable provides for, in the event that such contract is
prepaid, a prepayment that fully pays the Principal Balance and includes a
full month's interest, in the month of prepayment, at the Annual Percentage
Rate, (7) is a Rule of 78's Receivable or a Simple Interest Receivable, and
(8) was originated by a Dealer and was sold by the Dealer without any fraud
or misrepresentation on the part of such Dealer.
(B) Approximately 90.86% of the aggregate Principal Balance of the
Receivables, constituting 92.73% of the number of contracts, as of the
Cutoff Date, represents financing of used automobiles, light trucks, vans
or minivans; the remainder of the Receivables represent financing of new
automobiles, light trucks, vans or minivans; approximately 49.96% of the
aggregate Principal Balance of the Receivables as of the Cutoff Date were
originated under the CPS Alpha Program; approximately 8.81% of the
aggregate Principal Balance of the Receivables as of the Cutoff Date were
originated under the CPS Delta Program; approximately 7.25% of the
aggregate Principal Balance of the Receivables as of the Cutoff Date were
originated under the CPS First Time Buyer Program; approximately 31.14% of
the aggregate Principal Balance of the Receivables as of the Cutoff Date
were originated under the CPS Standard Program; approximately 1.08% of the
aggregate Principal Balance of the Receivables as of the Cutoff Date were
originated under the CPS Super Alpha Program; approximately 1.78% of the
aggregate Principal Balance of the Receivables as of the Cutoff Date were
originated under the Linc Program; approximately 5.35% of the aggregate
Principal Balance of the Receivables as of the Cutoff Date are Samco
Receivables; approximately 1.78% of the Receivables as of the Cutoff Date
are Linc Receivables; no Receivable shall have a payment that is more than
30 days overdue as of the Cutoff Date; 19.05% of the aggregate Principal
Balance of the Receivables as of the Cutoff Date are Rule of 78's
Receivables and 80.95% of the aggregate Principal Balance of the
Receivables as of the Cutoff Date are Simple Interest Receivables; each
Receivable shall have a final scheduled payment due no later than July 11,
2003; and each Receivable was originated on or before the Cutoff Date.
-27-
(ii) Schedule of Receivables. The information with respect to the
Receivables set forth in Schedule A to this Agreement is true and correct
in all material respects as of the close of business on the Cutoff Date,
and no selection procedures adverse to the Noteholders have been utilized
in selecting the Receivables.
(iii) Compliance with Law. Each Receivable, the sale of the Financed
Vehicle and the sale of any physical damage, credit life and credit
accident and health insurance and any extended warranties or service
contracts complied at the time the related Receivable was originated or
made and at the execution of this Agreement complies in all material
respects with all requirements of applicable Federal, State, and local
laws, and regulations thereunder including, without limitation, usury laws,
the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations B and Z, the Soldiers' and Sailors' Civil
Relief Act of 1940, the Texas Consumer Credit Code, the California
Automobile Sales Finance Act and State adaptations of the National Consumer
Act and of the Uniform Consumer Credit Code, and other consumer credit laws
and equal credit opportunity and disclosure laws.
(iv) No Government Obligor. None of the Receivables are due from the
United States of America or any State or from any agency, department, or
instrumentality of the United States of America or any State.
(v) Security Interest in Financed Vehicle. Immediately subsequent to
the sale, assignment and transfer thereof to the Trust, each Receivable
shall be secured by a validly perfected first priority security interest in
the Financed Vehicle in favor of the Trust as secured party, and such
security interest is prior to all other liens upon and security interests
in such Financed Vehicle which now exist or may hereafter arise or be
created (except, as to priority, for any tax liens or mechanics' liens
which may arise after the Closing Date).
(vi) Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released from
the lien granted by the related Receivable in whole or in part.
(vii) No Waiver. No provision of a Receivable has been waived.
(viii) No Amendments. No Receivable has been amended, except as such
Receivable may have been amended to grant extensions which shall not have
numbered more than (a) one extension of one calendar month in any calendar
year or (b) three such extensions in the aggregate.
(ix) No Defenses. No right of rescission, setoff, counterclaim or
defense exists or has been asserted or threatened with respect to any
Receivable. The operation of the
-28-
terms of any Receivable or the exercise of any right thereunder will not
render such Receivable unenforceable in whole or in part or subject to any
such right of rescission, setoff, counterclaim, or defense.
(x) No Liens. As of the Cutoff Date there are no liens or claims
existing or which have been filed for work, labor, storage or materials
relating to a Financed Vehicle that shall be liens prior to, or equal or
coordinate with, the security interest in the Financed Vehicle granted by
the Receivable.
(xi) No Default; Repossession. Except for payment delinquencies
continuing for a period of not more than thirty days as of the Cutoff Date,
no default, breach, violation or event permitting acceleration under the
terms of any Receivable has occurred; and no continuing condition that with
notice or the lapse of time would constitute a default, breach, violation
or event permitting acceleration under the terms of any Receivable has
arisen; and the Seller shall not waive and has not waived any of the
foregoing; and no Financed Vehicle shall have been repossessed as of the
Cutoff Date.
(xii) Insurance; Other. (A) Each Obligor has obtained insurance
covering the Financed Vehicle as of the execution of the Receivable
insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage, and each Receivable requires the Obligor to obtain and maintain
such insurance naming CPS (or, with respect to the Samco Receivables,
Samco, and with respect to the Linc Receivables, Linc) and its successors
and assigns as an additional insured, (B) each Receivable that finances the
cost of premiums for credit life and credit accident and health insurance
is covered by an insurance policy or certificate of insurance naming CPS
(or with respect to the Samco Receivables, Samco and, with respect to the
Linc Receivables, Linc) as policyholder (creditor) under each such
insurance policy and certificate of insurance and (C) as to each Receivable
that finances the cost of an extended service contract, the respective
Financed Vehicle which secures the Receivable is covered by an extended
service contract.
(xiii) Title. It is the intention of the Seller that the transfer and
assignment herein contemplated constitute a sale of the Receivables from
the Seller to the Trust and that the beneficial interest in and title to
such Receivables not be part of the Seller's estate in the event of the
filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. No Receivable has been sold, transferred, assigned, or
pledged by the Seller to any Person other than the Trust. Immediately prior
to the transfer and assignment herein contemplated, the Seller had good and
marketable title to each Receivable and was the sole owner thereof, free
and clear of all liens, claims, encumbrances, security interests, and
rights of others, and, immediately upon the transfer thereof, the Trust for
the benefit of the Noteholders and the Note Insurer shall have good and
marketable title to each such Receivable and will be the sole owner
thereof, free and clear of all liens, encumbrances, security interests, and
rights of others, and the transfer has been perfected under the UCC.
-29-
(xiv) Lawful Assignment. No Receivable has been originated in, or is
subject to the laws of, any jurisdiction under which the sale, transfer,
and assignment of such Receivable under this Agreement or pursuant to
transfers of the Securities shall be unlawful, void, or voidable. The
Seller has not entered into any agreement with any account debtor that
prohibits, restricts or conditions the assignment of any portion of the
Receivables.
(xv) All Filings Made. All filings (including, without limitation, UCC
filings) necessary in any jurisdiction to give the Trust a first priority
perfected ownership interest in the Receivables and the proceeds thereof
and the Other Conveyed Property have been made, taken or performed.
(xvi) Receivable File; One Original. CPS has delivered to the Trustee
a complete Receivable File with respect to each Receivable. There is only
one original executed copy of each Receivable.
(xvii) Chattel Paper. Each Receivable constitutes "chattel paper"
under the UCC.
(xviii) Title Documents. (A) If the Receivable was originated in a
State in which notation of a security interest on the title document of the
related Financed Vehicle is required or permitted to perfect such security
interest, the title document of the related Financed Vehicle for such
Receivable shows, or if a new or replacement title document is being
applied for with respect to such Financed Vehicle the title document (or,
with respect to Receivables originated in the State of Michigan, a "Form
RD108" stamped by the Department of Motor Vehicles) will be received within
180 days and will show, CPS (or, with respect to the Samco Receivables,
Samco and, with respect to the Linc Receivables, Linc) named as the
original secured party under the related Receivable as the holder of a
first priority security interest in such Financed Vehicle, and (B) if the
Receivable was originated in a State in which the filing of a financing
statement under the UCC is required to perfect a security interest in motor
vehicles, such filings or recordings have been duly made and show CPS (or,
with respect to the Samco Receivables, Samco and, with respect to the Linc
Receivables, Linc) named as the original secured party under the related
Receivable, and in either case, the Trust has the same rights as such
secured party has or would have (if such secured party were still the owner
of the Receivable) against all parties claiming an interest in such
Financed Vehicle. With respect to each Receivable for which the title
document has not yet been returned from the Registrar of Titles, CPS (or,
with respect to the Samco Receivables, Samco and, with respect to the Linc
Receivables, Linc) has received written evidence from the related Dealer
that such title document showing CPS, Samco or Linc (as applicable) as
first lienholder has been applied for.
(xix) Valid and Binding Obligation of Obligor. Each Receivable is the
legal, valid and binding obligation in writing of the Obligor thereunder
and is enforceable in accordance with its terms, except only as such
enforcement may be limited by
-30-
bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally, and all parties to such contract had full
legal capacity to execute and deliver such contract and all other documents
related thereto and to grant the security interest purported to be granted
thereby.
(xx) Tax Liens. As of the Cutoff Date, there is no lien against the
related Financed Vehicle for delinquent taxes.
(xxi) Characteristics of Obligors. As of the date of each Obligor's
application for the loan from which the related Receivable arises, such
Obligor (a) did not have any material past due credit obligations or any
personal or real property repossessed or wages garnished within one year
prior to the date of such application, unless such amounts have been repaid
or discharged through bankruptcy, (b) was not the subject of any Federal,
State or other bankruptcy, insolvency or similar proceeding pending on the
date of application that is not discharged, (c) had not been the subject of
more than one Federal, State or other bankruptcy, insolvency or similar
proceeding, and (d) was domiciled in the United States.
(xxii) Origination Date. Each Receivable has an origination date on or
after May 2, 1997.
(xxiii) Maturity of Receivables. Each Receivable has an original term
to maturity of not more than 60 months; the weighted average original term
to maturity of the Receivables was 57.6 months as of the Cutoff Date; the
remaining term to maturity of each Receivable was 60 months or less as of
the Cutoff Date; the weighted average remaining term to maturity of the
Receivables was 56.7 months as of the Cutoff Date.
(xxiv) Scheduled Receivable Payments. Each Receivable had an original
principal balance of not less than $2,597 nor more than $27,849 had an
outstanding principal balance as of the Cutoff Date of not less than $1,045
nor more than $27,493.
(xxv) Origination of Receivables. Based on the billing address of the
Obligors and the Principal Balances as of the Cutoff Date, approximately
19.0% of the aggregate Principal Balance of the Receivables represents
Receivables that were originated in California.
(xxvi) Post-Office Box. On or prior to the next billing period after
the Cutoff Date, CPS will notify each Obligor to make payments with respect
to its respective Receivables after the Cutoff Date directly to the
Post-Office Box, and will provide each Obligor with a monthly statement in
order to enable such Obligors to make payments directly to the Post-Office
Box.
-31-
(xxvii) Location of Receivable Files. A complete Receivable File with
respect to each Receivable has been or prior to the Closing Date will be
delivered to the Trustee at the location listed in Schedule B.
(xxviii) Casualty. No Financed Vehicle has suffered a Casualty.
(xxix) Principal Balance/Number of Contracts. As of the Cutoff Date,
the total aggregate principal balance of the Receivables was
$240,339,160.19. The Receivables are evidenced by 18,847 Contracts.
(xxx) Full Amount Advanced. The full amount of each Receivable has
been advanced to each Obligor, and there are no requirements for future
advances thereunder. The Obligor with respect to the Receivable does not
have any option under the Receivable to borrow from any person additional
funds secured by the Financed Vehicle.
SECTION 3.2. Repurchase upon Breach.
(a) The Seller, the Servicer, the Note Insurer, the Trustee or (upon actual
knowledge of a Responsible Officer thereof) the Owner Trustee, as the case may
be, shall inform the other parties to this Agreement promptly, in writing, upon
the discovery of any breach of the Seller's representations and warranties made
pursuant to Section 3.1 (without regard to any limitations therein as to the
Seller's knowledge). Unless the breach shall have been cured by the last day of
the second Collection Period following the discovery thereof by the Trustee or
the Note Insurer or receipt by the Trustee, the Owner Trustee and the Note
Insurer of notice from the Seller or the Servicer of such breach, CPS (pursuant
to the CPS Purchase Agreement) shall repurchase any Receivable if the value of
such Receivable is materially and adversely affected by the breach as of the
last day of such second Collection Period (or, at CPS's option, the last day of
the first Collection Period following the discovery) and, in the event that the
breach relates to a characteristic of the Receivables in the aggregate, and if
the interests of the Trust, the Noteholders or the Certificateholders are
materially and adversely affected by such breach, unless the breach shall have
been cured by the last day of such second Collection Period, CPS (pursuant to
the CPS Purchase Agreement) shall purchase such aggregate Principal Balance of
Receivables, such that following such purchase such representation shall be true
and correct with respect to the remainder of the Receivables in the aggregate.
In consideration of the purchase of the Receivable, CPS shall remit the Purchase
Amount, in the manner specified in Section 5.6. For purposes of this Section,
the Purchase Amount of a Receivable which is not consistent with the warranty
pursuant to Section 3.1(i)(A)(4) or (A)(5) shall include such additional amount
as shall be necessary to provide the full amount of interest as contemplated
therein. The sole remedy of the Issuer, the Owner Trustee, the Trustee, the
Securityholders or the Note Insurer with respect to a breach of representations
and warranties pursuant to Section 3.1 shall be to enforce CPS's obligation to
purchase such Receivables pursuant to the CPS Purchase Agreement; provided,
however, that CPS shall indemnify the Trustee, the Owner Trustee, the Standby
Servicer, the Collateral Agent, the Note Insurer, the Trust and the
Securityholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and
-32-
expenses of counsel, which may be asserted against or incurred by any of them as
a result of third party claims arising out of the events or facts giving rise to
such breach. Upon receipt of the Purchase Amount and written instructions from
the Servicer, the Trustee shall release to CPS or its designee the related
Receivables File and shall execute and deliver all reasonable instruments of
transfer or assignment, without recourse, as are prepared by the Seller and
delivered to the Trustee and necessary to vest in CPS or such designee title to
the Receivable including a Trustee's Certificate in the form of Exhibit E-1. If
it is determined that consummation of the transactions contemplated by this
Agreement and the other transaction documents referenced in this Agreement, the
servicing and operation of the Trust pursuant to this Agreement and such other
documents, or the ownership of a Note or Certificate by a Holder constitutes a
violation of the prohibited transaction rules of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the Internal Revenue Code of
1986, as amended (the "Code") or any successor statutes of similar impact,
together with the regulations thereunder, to which no statutory exception or
administrative exemption applies, such violation shall not be treated as a
breach of the Seller's representations and warranties made pursuant to Section
3.1 if not otherwise such a breach.
(b) Pursuant to Section 2.1 of this Agreement, the Seller has conveyed to
the Trust all of the Seller's right, title and interest in its rights and
benefits, but none of its obligations or burdens, under the Purchase Agreements
including the Seller's rights under the Purchase Agreements and the delivery
requirements, representations and warranties and the cure or repurchase
obligations of CPS under the CPS Purchase Agreement. The Seller hereby
represents and warrants to the Trust that such assignment is valid, enforceable
and effective to permit the Trust to enforce such obligations of CPS under the
CPS Purchase Agreement.
SECTION 3.3. Custody of Receivables Files.
(a) In connection with the sale, transfer and assignment of the Receivables
and the other Conveyed Property to the Trust pursuant to this Agreement the
Trustee shall act as custodian of the following documents or instruments in its
possession which shall be delivered to the Trustee on or before the Closing Date
(with respect to each Receivable):
(i) The fully executed original of the Receivable (together with any
agreements modifying the Receivable, including without limitation any
extension agreements);
(ii) The original certificate of title in the name of CPS (or, with
respect to the Samco Receivables, Samco and, with respect to the Linc
Receivables, Linc) or such documents that CPS shall keep on file, in
accordance with its customary procedures, evidencing the security interest
of CPS (or, with respect to the Samco Receivables, Samco and, with respect
to the Linc Receivables, Linc) in the Financed Vehicle or, if not yet
received, a copy of the application therefor showing CPS (or, with respect
to the Samco Receivables, Samco and, with respect to the Linc Receivables,
Linc) as secured party.
-33-
(b) Upon payment in full of any Receivable, the Servicer will notify the
Trustee pursuant to a certificate of an officer of the Servicer (which
certificate shall include a statement to the effect that all amounts received in
connection with such payments which are required to be deposited in the
Collection Account pursuant to Section 4.2 have been so deposited) and shall
request delivery of the Receivable and Receivable File to the Servicer.
SECTION 3.4. Acceptance of Receivable Files by Trustee. The Trustee
acknowledges receipt of files which the Seller has represented are the
Receivable Files. The Trustee has reviewed the Receivable Files and has
determined that it has received a file for each Receivable identified in
Schedule A to this Agreement. The Trustee declares that it holds and will
continue to hold such files and any amendments, replacements or supplements
thereto and all other Trust Assets as Trustee in trust for the use and benefit
of all present and future Securityholders. The Trustee agrees to review each
file delivered to it no later than 45 days after the Closing Date to determine
whether such Receivable Files contain the documents referred to in Section
3.3(i) and (ii). If the Trustee has found or finds that a file for a Receivable
has not been received, or that a file is unrelated to the Receivables identified
in Schedule A to this Agreement or that any of the documents referred to in
Section 3.3(i) or (ii) are not contained in a Receivable File, the Trustee shall
inform CPS, the Seller, the Owner Trustee and the Note Insurer promptly, in
writing, of the failure to receive a file with respect to such Receivable (or of
the failure of any of the aforementioned documents to be included in the
Receivable File) or shall return to CPS as the Seller's designee any file
unrelated to a Receivable identified in Schedule A to this Agreement (it being
understood that the Trustee's obligation to review the contents of any
Receivable File shall be limited as set forth in the preceding sentence). Unless
such defect with respect to such Receivable File shall have been cured by the
last day of the second Collection Period following discovery thereof by the
Trustee, CPS shall repurchase any such Receivable as of such last day. In
consideration of the purchase of the Receivable, CPS shall remit the Purchase
Amount, in the manner specified in Section 5.6. The sole remedy of the Trustee,
the Trust, or the Securityholders with respect to a breach pursuant to this
Section 3.4 shall be to require CPS to purchase the applicable Receivables
pursuant to this Section 3.4; provided, however, that CPS shall indemnify the
Trustee, the Owner Trustee, the Standby Servicer, the Collateral Agent, the Note
Insurer, the Trust and the Securityholders against all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel, which may be asserted against or incurred by any of them as a result of
third party claims arising out of the events or facts giving rise to such
breach. Upon receipt of the Purchase Amount and written instructions from the
Servicer, the Trustee shall release to CPS or its designee the related
Receivable File and shall execute and deliver all reasonable instruments of
transfer or assignment, without recourse, as are prepared by CPS and delivered
to the Trustee and are necessary to vest in CPS or such designee title to the
Receivable including a Trustee's Certificate in the form of Exhibit E-1. The
Trustee shall make a list of Receivables for which an application for a
certificate of title but not an original certificate of title or, with respect
to Receivables originated in the State of Michigan, a "Form RD108" stamped by
the Department of Motor Vehicles, is included in the Receivable File as of the
date of its review of the Receivable Files and deliver a copy of such list to
the Servicer, the Owner Trustee and the Note Insurer. On the date which is 180
days following the Closing Date or the next succeeding Business Day, the Trustee
shall inform CPS and the other
-34-
parties to this Agreement and the Note Insurer of any Receivable for which the
related Receivable File on such date does not include an original certificate of
title or, with respect to Financed Vehicles in the State of Michigan, for which
the related Receivable File on such date does not include a "Form RD108" stamped
by the Department of Motor Vehicles, and CPS shall repurchase any such
Receivable as of the last day of the current Collection Period.
SECTION 3.5. Access to Receivable Files. The Trustee shall permit the
Servicer and the Note Insurer access to the Receivable Files at all reasonable
times during the Trustee's normal business hours. The Trustee shall, within two
Business Days of the request of the Servicer, the Owner Trustee or the Note
Insurer, execute such documents and instruments as are prepared by the Servicer,
the Owner Trustee or the Note Insurer and delivered to the Trustee, as the
Servicer, the Owner Trustee or the Note Insurer deems necessary to permit the
Servicer, in accordance with its customary servicing procedures, to enforce the
Receivable on behalf of the Trust and any related insurance policies covering
the Obligor, the Receivable or Financed Vehicle so long as such execution in the
Trustee's sole discretion does not conflict with this Agreement and will not
cause it undue risk or liability. The Trustee shall not be obligated to release
any document from any Receivable File unless it receives a trust receipt signed
by a Servicing Officer in the form of Exhibit B hereto (the "Trust Receipt").
Such Trust Receipt shall obligate the Servicer to return such document(s) to the
Trustee when the need therefor no longer exists unless the Receivable shall be
liquidated, in which case, upon receipt of a certificate of a Servicing Officer
substantially in the form of Exhibit C hereto to the effect that all amounts
required to be deposited in the Collection Account with respect to such
Receivable have been so deposited, the Trust Receipt shall be released by the
Trustee to the Servicer.
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 4.1. Duties of the Servicer. The Servicer, as agent for the Trust,
the Securityholders and the Note Insurer (to the extent provided herein) shall
manage, service, administer and make collections on the Receivables with
reasonable care, using that degree of skill and attention customary and usual
for institutions which service motor vehicle retail installment contracts
similar to the Receivables and, to the extent more exacting, that the Servicer
exercises with respect to all comparable automotive receivables that it services
for itself or others. The Servicer's duties shall include collection and posting
of all payments, responding to inquiries of Obligors on such Receivables,
investigating delinquencies, sending payment statements to Obligors, reporting
tax information to Obligors, accounting for collections, furnishing monthly and
annual statements to the Trustee, the Owner Trustee and the Note Insurer with
respect to distributions. Without limiting the generality of the foregoing, and
subject to the servicing standards set forth in this Agreement, the Servicer is
authorized and empowered by the Trust to execute and deliver, on behalf of
itself, the Trust or the Securityholders, any and all instruments of
satisfaction or cancellation, or partial or full release or discharge, and all
other comparable instruments, with respect to such Receivables or to the
Financed Vehicles securing
-35-
such Receivables and/or the certificates of title or, with respect to Financed
Vehicles in the State of Michigan, other evidence of ownership with respect to
such Financed Vehicles. If the Servicer shall commence a legal proceeding to
enforce a Receivable, the Trust shall thereupon be deemed to have automatically
assigned, solely for the purpose of collection, such Receivable to the Servicer.
If in any enforcement suit or legal proceeding it shall be held that the
Servicer may not enforce a Receivable on the ground that it shall not be a real
party in interest or a holder entitled to enforce such Receivable, the Trust
shall, at the Servicer's expense and direction, take steps to enforce such
Receivable, including bringing suit in its name or the name of the
Securityholders. The Servicer shall prepare and furnish, and the Trustee and the
Owner Trustee shall execute, any powers of attorney and other documents
reasonably necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder.
SECTION 4.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreements.
(a) Consistent with the standards, policies and procedures required by this
Agreement, the Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Receivables as and when the
same shall become due and shall follow such collection procedures as it follows
with respect to all comparable automotive receivables that it services for
itself or others; provided, however, that promptly after the Closing Date the
Servicer shall notify each Obligor to make all payments with respect to the
Receivables to the Post-Office Box. The Servicer will provide each Obligor with
a monthly statement in order to notify such Obligors to make payments directly
to the Post-Office Box. The Servicer shall allocate collections between
principal and interest in accordance with the customary servicing procedures it
follows with respect to all comparable automotive receivables that it services
for itself or others and in accordance with the terms of this Agreement. Except
as provided below, the Servicer, for so long as CPS is the Servicer, may grant
extensions on a Receivable; provided, however, that the Servicer may not grant
more than one extension per calendar year with respect to a Receivable or grant
an extension with respect to a Receivable for more than one calendar month or
grant more than three extensions in the aggregate with respect to a Receivable
without the prior written consent of the Note Insurer and provided, further,
that if the Servicer extends the date for final payment by the Obligor of any
Receivable beyond the last day of the penultimate Collection Period preceding
the Class A-4 Final Scheduled Payment Date, it shall promptly purchase the
Receivable from the Trust in accordance with the terms of Section 4.7 hereof
(and for purposes thereof, the Receivable shall be deemed to be materially and
adversely affected by such breach). If the Servicer is not CPS, the Servicer may
not make any extension on a Receivable without the prior written consent of the
Note Insurer. The Servicer may in its discretion waive any late payment charge
or any other fees that may be collected in the ordinary course of servicing a
Receivable. Notwithstanding anything to the contrary contained herein, the
Servicer shall not agree to any alteration of the interest rate on any
Receivable or of the amount of any Scheduled Receivable Payment on Receivables.
(b) The Trustee shall establish the Lockbox Account in the name of the
Seller for the benefit of the Trustee for the further benefit of the
Securityholders and the Note Insurer.
-36-
Pursuant to the Lockbox Agreement, the Trustee has authorized the Servicer to
direct dispositions of funds on deposit in the Lockbox Account to the Collection
Account (but not to any other account), and no other Person, save the Lockbox
Processor and the Trustee, has authority to direct disposition of funds on
deposit in the Lockbox Account. The Trustee shall have no liability or
responsibility with respect to the Lockbox Processor's directions or activities
as set forth in the preceding sentence. The Lockbox Account shall be established
pursuant to and maintained in accordance with the Lockbox Agreement and shall be
a demand deposit account initially established and maintained with Bank of
America, or at the request of the Note Insurer (unless an Insurer Default shall
have occurred and be continuing) an Eligible Account satisfying clause (i) of
the definition thereof; provided, however, that the Trustee shall give the
Servicer prior written notice of any change made at the request of the Note
Insurer in the location of the Lockbox Account. The Trustee shall establish and
maintain the Post-Office Box at a United States Post Office Branch in the name
of the Seller for the benefit of the Securityholders and the Note Insurer.
(c) Notwithstanding any Lockbox Agreement, or any of the provisions of this
Agreement relating to the Lockbox Agreement, the Servicer shall remain obligated
and liable to the Trust, the Trustee and Securityholders for servicing and
administering the Receivables and the Other Conveyed Property in accordance with
the provisions of this Agreement without diminution of such obligation or
liability by virtue thereof.
(d) In the event the Servicer shall for any reason no longer be acting as
such, the Standby Servicer or a successor Servicer shall thereupon assume all of
the rights and obligations of the outgoing Servicer under the Lockbox Agreement.
In such event, the successor Servicer shall be deemed to have assumed all of the
outgoing Servicer's interest therein and to have replaced the outgoing Servicer
as a party to the Lockbox Agreement to the same extent as if such Lockbox
Agreement had been assigned to the successor Servicer, except that the outgoing
Servicer shall not thereby be relieved of any liability or obligations on the
part of the outgoing Servicer to the Lockbox Bank under such Lockbox Agreement.
The outgoing Servicer shall, upon request of the Trustee, but at the expense of
the outgoing Servicer, deliver to the successor Servicer all documents and
records relating to the Lockbox Agreement and an accounting of amounts collected
and held by the Lockbox Bank and otherwise use its best efforts to effect the
orderly and efficient transfer of any Lockbox Agreement to the successor
Servicer. In the event that the Note Insurer (so long as an Insurer Default
shall not have occurred and be continuing) or Holders of Notes evidencing more
than 50% of the outstanding principal balance of the Notes (if an Insurer
Default shall have occurred and be continuing) shall elect to change the
identity of the Lockbox Bank, the Servicer, at its expense, shall cause the
Lockbox Bank to deliver, at the direction of the Note Insurer (so long as an
Insurer Default shall not have occurred and be continuing) or Holders of Notes
evidencing more than 50% of the outstanding principal balance of the Notes (if
an Insurer Default shall have occurred and be continuing) to the Trustee or a
successor Lockbox Bank, all documents and records relating to the Receivables
and all amounts held (or thereafter received) by the Lockbox Bank (together with
an accounting of such amounts) and shall otherwise use its best efforts to
effect the orderly and efficient transfer of the Lockbox arrangements.
-37-
(e) On each Business Day, pursuant to the Lockbox Agreement, the Lockbox
Processor will transfer any payments from Obligors received in the Post-Office
Box to the Lockbox Account. Within two Business Days of receipt of funds into
the Lockbox Account, the Servicer shall cause the Lockbox Bank to transfer funds
from the Lockbox Account to the Collection Account. In addition, the Servicer
shall remit all payments by or on behalf of the Obligors received by the
Servicer with respect to the Receivables (other than Purchased Receivables), and
all Liquidation Proceeds no later than the Business Day following receipt
directly (without deposit into any intervening account) into the Lockbox Account
or the Collection Account.
SECTION 4.3. Realization Upon Receivables. On behalf of the Trust, the
Securityholders and the Note Insurer, the Servicer shall use its best efforts,
consistent with the servicing procedures set forth herein, to repossess or
otherwise convert the ownership of the Financed Vehicle securing any Receivable
as to which the Servicer shall have determined eventual payment in full is
unlikely. The Servicer shall commence efforts to repossess or otherwise convert
the ownership of a Financed Vehicle on or prior to the date that an Obligor has
failed to make more than 90% of a Scheduled Receivable Payment thereon in excess
of $10 for 120 days or more; provided, however, that the Servicer may elect not
to commence such efforts within such time period if in its good faith judgment
it determines either that it would be impracticable to do so or that the
proceeds ultimately recoverable with respect to such Receivable would be
increased by forbearance. The Servicer shall follow such customary and usual
practices and procedures as it shall deem necessary or advisable in its
servicing of automotive receivables, consistent with the standards of care set
forth in Section 4.2, which may include reasonable efforts to realize upon any
recourse to Dealers and selling the Financed Vehicle at public or private sale.
The foregoing shall be subject to the provision that, in any case in which the
Financed Vehicle shall have suffered damage, the Servicer shall not expend funds
in connection with the repair or the repossession of such Financed Vehicle
unless it shall determine in its discretion that such repair and/or repossession
will increase the proceeds ultimately recoverable with respect to such
Receivable by an amount greater than the amount of such expenses.
SECTION 4.4. Insurance.
(a) The Servicer, in accordance with the servicing procedures and standards
set forth herein, shall require that (i) each Obligor shall have obtained
insurance covering the Financed Vehicle, as of the date of the execution of the
Receivable, insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage and each Receivable requires the Obligor to maintain such physical loss
and damage insurance naming CPS (or, with respect to the Samco Receivables,
Samco and, with respect to the Linc Receivables, Linc) and its successors and
assigns as an additional insured, (ii) each Receivable that finances the cost of
premiums for credit life and credit accident and health insurance is covered by
an insurance policy or certificate naming CPS (or, with respect to the Samco
Receivables, Samco and, with respect to the Linc Receivables, Linc) as
policyholder (creditor) and (iii) as to each Receivable that finances the cost
of an extended service contract,
-38-
the respective Financed Vehicle which secures the Receivable is covered by an
extended service contract.
(b) To the extent applicable, the Servicer shall not take any action which
would result in noncoverage under any of the insurance policies referred to in
Section 4.4(a) which, but for the actions of the Servicer, would have been
covered thereunder. The Servicer, on behalf of the Trust, shall take such
reasonable action as shall be necessary to permit recovery under any of the
foregoing insurance policies. Any amounts collected by the Servicer under any of
the foregoing insurance policies shall be deposited in the Collection Account
pursuant to Section 5.2.
SECTION 4.5. Maintenance of Security Interests in Vehicles.
(a) Consistent with the policies and procedures required by this Agreement,
the Servicer shall take such steps on behalf of the Trust as are necessary to
maintain perfection of the security interest created by each Receivable in the
related Financed Vehicle, including but not limited to obtaining the execution
by the Obligors and the recording, registering, filing, re-recording, refiling,
re-recording, re-registering and refiling of all security agreements, financing
statements and continuation statements or instruments as are necessary to
maintain the security interest granted by the Obligors under the respective
Receivables. The Trustee hereby authorizes the Servicer, and the Servicer
agrees, to take any and all steps necessary to re-perfect or continue the
perfection of such security interest on behalf of the Trust as necessary because
of the relocation of a Financed Vehicle or for any other reason. In the event
that the assignment of a Receivable to the Trust is insufficient, without a
notation on the related Financed Vehicle's certificate of title, or without
fulfilling any additional administrative requirements under the laws of the
state in which the Financed Vehicle is located, to perfect a security interest
in the related Financed Vehicle in favor of the Trust, the Servicer hereby
agrees that CPS's designation as the secured party on the certificate of title
is in its capacity as Servicer as agent of the Trust.
(b) Upon the occurrence of an Insurance Agreement Event of Default, the
Note Insurer may (so long as an Insurer Default shall not have occurred and be
continuing) instruct the Trustee and the Servicer to take or cause to be taken,
or, if an Insurer Default shall have occurred, upon the occurrence of a Servicer
Termination Event, the Trustee and the Servicer shall take or cause to be taken
such action as may, in the opinion of counsel to the Trustee, which opinion
shall not be an expense of the Trustee, be necessary to perfect or re-perfect
the security interests in the Financed Vehicles securing the Receivables in the
name of the Trust by amending the title documents of such Financed Vehicles or
by such other reasonable means as may, in the opinion of counsel to the Trustee,
which opinion shall not be an expense of the Trustee, be necessary or prudent.
CPS hereby agrees to pay all expenses related to such perfection or
re-perfection and to take all action necessary therefor. The Servicer hereby
agrees to pay all expenses related to such perfection or re-perfection and to
take all action necessary therefor. In addition, prior to the occurrence of an
Insurance Agreement Event of Default, the Controlling Party may instruct the
Trustee and the Servicer to take or cause to be taken such action as may, in the
opinion of counsel to the Controlling Party, be necessary to perfect or
re-perfect the security interest in the Financed Vehicles underlying the
Receivables in the name of
-39-
the Trust, including by amending the title documents of such Financed Vehicles
or by such other reasonable means as may, in the opinion of counsel to the
Controlling Party, be necessary or prudent; provided, however, that if the
Controlling Party requests (unless an Insurer Default shall have occurred and be
continuing) that the title documents be amended prior to the occurrence of an
Insurance Agreement Event of Default, the out-of-pocket expenses of the Servicer
or the Trustee in connection with such action shall be reimbursed to the
Servicer or the Trustee, as applicable, by the Controlling Party.
SECTION 4.6. Additional Covenants of Servicer. The Servicer shall not
release the Financed Vehicle securing each Receivable from the security interest
granted by such Receivable in whole or in part except in the event of payment in
full by the Obligor thereunder or repossession, nor shall the Servicer impair
the rights of the Securityholders in such Receivables, nor shall the Servicer
amend a Receivable, except that extensions may be granted in accordance with
Section 4.2.
SECTION 4.7. Purchase of Receivables Upon Breach of Covenant. Upon
discovery by any of the Servicer, the Note Insurer, the Owner Trustee or the
Trustee of a breach of any of the covenants set forth in Section 4.2(a), 4.4,
4.5 or 4.6, the party discovering such breach shall give prompt written notice
to the others; provided, however, that the failure to give any such notice shall
not affect any obligation of the Servicer under this Section 4.7. Unless the
breach shall have been cured by the last day of the second Collection Period
following such discovery (or, at the Servicer's election, the last day of the
first following Collection Period), the Servicer shall purchase any Receivable
materially and adversely affected by such breach. In consideration of the
purchase of such Receivable, the Servicer shall remit the Purchase Amount in the
manner specified in Section 5.6. The sole remedy of the Trustee, the Trust, the
Owner Trustee, the Note Insurer or the Securityholders with respect to a breach
of Section 4.2(a), 4.4, 4.5 or 4.6 shall be to require the Servicer to
repurchase Receivables pursuant to this Section 4.7; provided, however, that the
Servicer shall indemnify the Trustee, the Standby Servicer, the Collateral
Agent, the Note Insurer, the Owner Trustee, the Trust and the Securityholders
against all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to such breach. If it is determined that the
management, administration and servicing of the Receivables and operation of the
Trust pursuant to this Agreement constitutes a violation of the prohibited
transaction rules of ERISA or the Code to which no statutory exception or
administrative exemption applies, such violation shall not be treated as a
breach of Section 4.2(a), 4.4, 4.5 or 4.6 if not otherwise such a breach.
SECTION 4.8. Servicing Fee. The "Servicing Fee" for each Payment Date shall
be equal to 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;
provided, however, that with respect to the first Payment Date the Servicer will
be entitled to receive a Servicing Fee equal to the result of one-twelfth times
2.00% of the Original Pool Balance. The Servicing Fee shall also include all
late fees, prepayment charges including, in the case of a Rule of 78's
Receivable that is prepaid in full, to the extent not required by law to be
remitted to the related Obligor, the
-40-
difference between the Principal Balance of such Rule of 78's Receivable (plus
accrued interest to the date of prepayment) and the principal balance of such
Receivable computed according to the "Rule of 78's", and other administrative
fees or similar charges allowed by applicable law with respect to Receivables,
collected (from whatever source) on the Receivables. If the Standby Servicer
becomes the successor Servicer, the "Servicing Fee" payable to the Standby
Servicer as successor Servicer shall be determined in accordance with the
Servicing and Lockbox Processing Assumption Agreement.
SECTION 4.9. Servicer's Certificate. By 10:00 a.m., Minneapolis time, on
each Determination Date, the Servicer shall deliver to the Trustee, the Owner
Trustee, the Note Insurer, the Rating Agencies and the Seller a Servicer's
Certificate containing all information necessary to make the distributions
pursuant to Section 5.7 (including, if required, withdrawals from the Spread
Account) for the Collection Period preceding the date of such Servicer's
Certificate and all information necessary for the Trustee to send statements to
the Noteholders and the Note Insurer pursuant to Sections 5.8(b) and for the
Owner Trustee to send statements to Certificateholders pursuant to Section
5.5(c) of the Trust Agreement. Receivables to be purchased by the Servicer or to
be purchased by CPS shall be identified by the Servicer by account number with
respect to such Receivable (as specified in Schedule A).
SECTION 4.10. Annual Statement as to Compliance, Notice of Servicer
Termination Event.
(a) The Servicer shall deliver to the Owner Trustee, the Trustee, the
Standby Servicer, the Note Insurer and each Rating Agency, on or before July 31
of each year beginning July 31, 1999, an Officer's Certificate, dated as of
March 31 of such year, stating that (i) a review of the activities of the
Servicer during the preceding 12-month period (or, in the case of the first such
certificate, the period from the Cutoff Date to March 31, 1999) and of its
performance under this Agreement has been made under such officer's supervision
and (ii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement throughout such
year (or, in the case of the first such certificate, such shorter period), or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. The Trustee shall send a copy of such certificate and the report
referred to in Section 4.11 to the Rating Agencies. The Trustee shall forward a
copy of such certificate as well as the report referred to in Section 4.11 to
each Noteholder and the Owner Trustee shall forward a copy to each
Certificateholder.
(b) The Servicer shall deliver to the Owner Trustee, the Trustee, the
Standby Servicer, the Note Insurer, the Collateral Agent, and each Rating
Agency, promptly after having obtained knowledge thereof, but in no event later
than two (2) Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under Section 10.1.
-41-
SECTION 4.11. Annual Independent Accountants' Report. The Servicer shall
cause a firm of nationally recognized independent certified public accountants
(the "Independent Accountants"), who may also render other services to the
Servicer or to the Seller, to deliver to the Trustee, the Owner Trustee, the
Standby Servicer, the Note Insurer and each Rating Agency, on or before July 31
of each year beginning July 31, 1999, a report dated as of March 31 of such year
(the "Accountants' Report") and reviewing the Servicer's activities during the
preceding 12-month period (or, in the case of the first such report, the period
from the Cutoff Date to March 31, 1999), addressed to the Board of Directors of
the Servicer, to the Owner Trustee, the Trustee, the Standby Servicer and to the
Note Insurer, to the effect that such firm has examined the financial statements
of the Servicer and issued its report therefor and that such examination (1) was
made in accordance with generally accepted auditing standards, and accordingly
included such tests of the accounting records and such other auditing procedures
as such firm considered necessary in the circumstances; (2) included tests
relating to auto loans serviced for others in accordance with the requirements
of the Uniform Single Audit Program for Mortgage Bankers (the "Program"), to the
extent the procedures in the Program are applicable to the servicing obligations
set forth in this Agreement; (3) included an examination of the delinquency and
loss statistics relating to the Servicer's portfolio of automobile and light
truck installment sales contracts; and (4) except as described in the report,
disclosed no exceptions or errors in the records relating to automobile and
light truck loans serviced for others that, in the firm's opinion, paragraph
four of the Program requires such firm to report. The accountant's report shall
further state that (1) a review in accordance with agreed upon procedures was
made of three randomly selected Servicer Certificates; (2) except as disclosed
in the report, no exceptions or errors in the Servicer Certificates were found;
and (3) the delinquency and loss information relating to the Receivables and the
stated amount of Liquidated Receivables, if any, contained in the Servicer
Certificates were found to be accurate. In the event such firm requires the
Trustee, the Owner Trustee and/or the Standby Servicer to agree to the
procedures performed by such firm, the Servicer shall direct the Trustee, the
Owner Trustee and/or the Standby Servicer, as applicable, in writing to so
agree; it being understood and agreed that the Trustee, the Owner Trustee and/or
the Standby Servicer will deliver such letter of agreement in conclusive
reliance upon the direction of the Servicer, and neither the Trustee, the Owner
Trustee nor the Standby Servicer makes any independent inquiry or investigation
as to, and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures.
The Report will also indicate that the firm is independent of the Servicer
within the meaning of the Code of Professional Ethics of the American Institute
of Certified Public Accountants.
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Trustee, the
Owner Trustee, the Standby Servicer and the Note Insurer reasonable access to
the documentation regarding the Receivables. In each case, such access shall be
afforded without charge but only upon reasonable request and during normal
business hours. Nothing in this Section shall derogate from the obligation of
the Servicer to observe any applicable law prohibiting disclosure of
-42-
information regarding the Obligors, and the failure of the Servicer to provide
access as provided in this Section as a result of such obligation shall not
constitute a breach of this Section.
SECTION 4.13. Verification of Servicer's Certificate. (a) On or before the
fifth calendar day of each month, the Servicer will deliver to the Trustee and
the Standby Servicer a computer diskette (or other electronic transmission) in a
format acceptable to the Trustee and the Standby Servicer containing information
with respect to the Receivables as of the close of business on the last day of
the preceding Collection Period which information is necessary for preparation
of the Servicer's Certificate. The Standby Servicer shall use such computer
diskette (or other electronic transmission) to verify certain information
specified in Section 4.13(b) contained in the Servicer's Certificate delivered
by the Servicer, and the Standby Servicer shall notify the Servicer and the Note
Insurer of any discrepancies on or before the second Business Day following the
Determination Date. In the event that the Standby Servicer reports any
discrepancies, the Servicer and the Standby Servicer shall attempt to reconcile
such discrepancies prior to the second Business Day prior to the related Payment
Date, but in the absence of a reconciliation, the Servicer's Certificate shall
control for the purpose of calculations and distributions with respect to the
related Payment Date. In the event that the Standby Servicer and the Servicer
are unable to reconcile discrepancies with respect to a Servicer's Certificate
by the related Payment Date, the Servicer shall cause a firm of independent
certified public accountants, at the Servicer's expense, to audit the Servicer's
Certificate and, prior to the fifth calendar day of the following month,
reconcile the discrepancies. The effect, if any, of such reconciliation shall be
reflected in the Servicer's Certificate for such next succeeding Determination
Date. Other than the duties specifically set forth in this Agreement, the
Standby Servicer shall have no obligations hereunder, including, without
limitation, to supervise, verify, monitor or administer the performance of the
Servicer. The Standby Servicer shall have no liability for any actions taken or
omitted by the Servicer. The duties and obligations of the Standby Servicer
shall be determined solely by the express provisions of this Agreement and no
implied covenants or obligations shall be read into this Agreement against the
Standby Servicer.
(b) The Standby Servicer shall review each Servicer's Certificate delivered
pursuant to Section 4.13(a) and shall:
(i) confirm that such Servicer's Certificate is complete on its face;
(ii) load the computer diskette (which shall be in a format acceptable
to the Standby Servicer) received from the Servicer pursuant to Section
4.13(a) hereof, confirm that such computer diskette is in a readable form
and calculate and confirm the Principal Balance of each Receivable for the
most recent Payment Date;
(iii) confirm that the Total Distribution Amount, the Principal
Distributable Amount, the Class A Noteholders' Principal Distributable
Amount, the Class A-1 Noteholders' Interest Distributable Amount, the Class
A-2 Noteholders' Interest Distributable Amount, the Class A-3 Noteholders'
Interest Distributable Amount, the Class A-4 Noteholders' Interest
Distributable Amount, the Certificateholders' Principal
-43-
Distributable Amount, the Standby Fee, the Servicing Fee, the Trustee Fee,
the Collateral Agent Fee, the amount on deposit in the Spread Account, and
the Premium in the Servicer's Certificate are accurate based solely on the
recalculation of the Servicer's Certificate; and
(iv) confirm the calculation of the performance tests set forth in the
Spread Account Agreement.
SECTION 4.14. Retention and Termination of Servicer. The Servicer hereby
covenants and agrees to act as such under this Agreement for an initial term
commencing on the Closing Date and ending on September 30 , 1998, which term
shall be extendible by the Note Insurer for successive quarterly terms ending on
each successive March 31, June 30, September 30 and December 31 (or, at the
discretion of the Note Insurer exercised pursuant to revocable written standing
instructions from time to time to the Servicer and the Trustee, for any
specified number of terms greater than one), until such time as the Notes have
been paid in full, all amounts due to the Certificateholders have been paid and
until the Termination of the Trust. Each such notice (including each notice
pursuant to standing instructions, which shall be deemed delivered at the end of
successive terms for so long as such instructions are in effect) (a "Servicer
Extension Notice") shall be delivered by the Note Insurer to the Trustee and the
Servicer. The Servicer hereby agrees that, upon its receipt of any such Servicer
Extension Notice, the Servicer shall become bound, for the duration of the term
covered by such Servicer Extension Notice, to continue as the Servicer subject
to and in accordance with the other provisions of this Agreement. If an Insurer
Default has occurred and is continuing, the term of the Servicer's appointment
hereunder shall be deemed to have been extended until such time, if any, as such
Insurer Default has been cured unless such appointment is terminated sooner in
accordance with the terms of this Agreement). Until such time as an Insurer
Default shall have occurred and be continuing, the Trustee agrees that if as of
the fifteenth day prior to the last day of any term of the Servicer, the Trustee
shall not have received any Servicer Extension Notice from the Note Insurer, the
Trustee shall, within five days thereafter, give written notice of such
non-receipt to the Note Insurer.
SECTION 4.15. Fidelity Bond. The Servicer shall maintain a fidelity bond in
such form and amount as is customary for entities acting as custodian of funds
and documents in respect of consumer contracts on behalf of institutional
investors.
-44-
ARTICLE V
TRUST ACCOUNTS; DISTRIBUTIONS;
STATEMENTS TO SECURITYHOLDERS
SECTION 5.1. Establishment of Trust Accounts.
(a) (i) The Trustee, on behalf of the Securityholders and the Note Insurer,
shall establish and maintain in its own name an Eligible Account (the
"Collection Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Trustee on behalf of the
Securityholders and the Note Insurer.
(ii) The Trustee, on behalf of the Noteholders, shall establish
and maintain in its own name an Eligible Account (the "Note Distribution
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Trustee on behalf of the Noteholders and
the Note Insurer. The Note Distribution Account shall initially be established
with the Trustee.
(b) Funds on deposit in the Collection Account and the Note Distribution
Account (collectively, the "Trust Accounts") shall be invested by the Trustee
(or any custodian with respect to funds on deposit in any such account) in
Eligible Investments selected in writing by the Servicer (pursuant to standing
instructions or otherwise). All such Eligible Investments shall be held by or on
behalf of the Trustee for the benefit of the Noteholders and/or the
Certificateholders and the Note Insurer, as applicable. Other than as permitted
by the Rating Agencies and the Note Insurer, funds on deposit in any Trust
Account shall be invested in Eligible Investments that will mature so that such
funds will be available at the close of business on the Business Day immediately
preceding the following Payment Date. Funds deposited in a Trust Account on the
day immediately preceding a Payment Date upon the maturity of any Eligible
Investments are not required to be invested overnight. All Eligible Investments
will be held to maturity.
(c) All investment earnings of moneys deposited in the Trust Accounts shall
be deposited (or caused to be deposited) by the Trustee in the Collection
Account for distribution pursuant to Section 5.7(b), and any loss resulting from
such investments shall be charged to such account. The Servicer will not direct
the Trustee to make any investment of any funds held in any of the Trust
Accounts unless the security interest granted and perfected in such account will
continue to be perfected in such investment, in either case without any further
action by any Person, and, in connection with any direction to the Trustee to
make any such investment, if requested by the Trustee, the Servicer shall
deliver to the Trustee an Opinion of Counsel, acceptable to the Trustee, to such
effect.
(d) The Trustee shall not in any way be held liable by reason of any
insufficiency in any of the Trust Accounts resulting from any loss on any
Eligible Investment included therein except for losses attributable to the
Trustee's negligence or bad faith or its failure to make payments on
-45-
such Eligible Investments issued by the Trustee, in its commercial capacity as
principal obligor and not as trustee, in accordance with their terms.
(e) If (i) the Servicer shall have failed to give investment directions for
any funds on deposit in the Trust Accounts to the Trustee by 2:00 p.m. Eastern
Time (or such other time as may be agreed by the Issuer and Trustee) on any
Business Day; or (ii) a Default or Event of Default shall have occurred and be
continuing with respect to the Notes but the Notes shall not have been declared
due and payable, or, if such Notes shall have been declared due and payable
following an Event of Default, amounts collected or receivable from the Trust
Property are being applied as if there had not been such a declaration; then the
Trustee shall, to the fullest extent practicable, invest and reinvest funds in
the Trust Accounts in one or more Eligible Investments.
(f) The Trustee shall possess all right, title and interest in all funds on
deposit from time to time in the Trust Accounts and in all proceeds thereof
(including all Investment Earnings on the Trust Accounts) and all such funds,
investments, proceeds and income shall be part of the Trust Property. Except as
otherwise provided herein, the Trust Accounts shall be under the sole dominion
and control of the Trustee for the benefit of the Noteholders and/or the
Certificateholders, as the case may be, and the Note Insurer. If at any time any
of the Trust Accounts ceases to be an Eligible Account, the Servicer with the
consent of the Note Insurer shall within five Business Days establish a new
Trust Account as an Eligible Account and shall transfer any cash and/or any
investments to such new Trust Account. The Servicer shall promptly notify the
Rating Agencies and the Owner Trustee of any change in the location of any of
the aforementioned accounts. In connection with the foregoing, the Servicer
agrees that, in the event that any of the Trust Accounts are not accounts with
the Trustee, the Servicer shall notify the Trustee in writing promptly upon any
of such Trust Accounts ceasing to be an Eligible Account.
(g) With respect to the Trust Account Property, the Trustee agrees that:
(A) any Trust Account Property that is held in deposit accounts
shall be held solely in Eligible Accounts; and, except as otherwise
provided herein, each such Eligible Account shall be subject to the
exclusive custody and control of the Trustee and the Trustee shall
have sole signature authority with respect thereto;
(B) any Trust Account Property that constitutes Physical Property
or "certificated securities" shall be delivered to the Trustee in
accordance with paragraph (i)(a) or (ii)(b), as applicable, of the
definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Trustee or a financial intermediary (as
such term is defined in Section 8-313(4) of the UCC) acting solely for
the Trustee;
(C) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations shall be delivered in accordance with paragraph (i)(b) or
(ii)(c), as applicable, of the definition of "Delivery" and shall be
maintained by the Trustee, pending maturity or disposition, through
-46-
continued book-entry registration of such Trust Account Property as
described in such paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by
clause (C) above shall be delivered to the Trustee in accordance with
paragraph (i)(c) or (ii)(d), as applicable, of the definition of
"Delivery" and shall be maintained by the Trustee, pending maturity or
disposition, through continued registration of the Trustee's (or its
nominee's) ownership of such security.
(E) The Servicer shall have the power, revocable by the Note
Insurer or, with the consent of the Note Insurer by the Trustee or by
the Owner Trustee with the consent of the Trustee, to instruct the
Trustee to make withdrawals and payments from the Trust Accounts for
the purpose of permitting the Servicer and the Trustee to carry out
its respective duties hereunder.
SECTION 5.2. [RESERVED].
SECTION 5.3. Certain Reimbursements to the Servicer. The Servicer will be
entitled to be reimbursed from amounts on deposit in the Collection Account with
respect to a Collection Period for amounts previously deposited in the
Collection Account but later determined by the Servicer to have resulted from
mistaken deposits or postings or checks returned for insufficient funds. The
amount to be reimbursed hereunder shall be paid to the Servicer on the related
Payment Date pursuant to Section 5.7(b)(i) upon certification by the Servicer of
such amounts and the provision of such information to the Trustee and the Note
Insurer as may be necessary in the opinion of the Note Insurer to verify the
accuracy of such certification. In the event that the Note Insurer has not
received evidence satisfactory to it of the Servicer's entitlement to
reimbursement pursuant to this Section, the Note Insurer shall (unless an
Insurer Default shall have occurred and be continuing) give the Trustee notice
to such effect, following receipt of which the Trustee shall not make a
distribution to the Servicer in respect of such amount pursuant to Section 5.7,
or if the Servicer prior thereto has been reimbursed pursuant to Section 5.7,
the Trustee shall withhold such amounts from amounts otherwise distributable to
the Servicer on the next succeeding Payment Date.
SECTION 5.4. Application of Collections. All collections for each
Collection Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied, in the case of a Rule
of 78's Receivable, first, to the Scheduled Receivable Payment of such Rule of
78's Receivable and, second, to any late fees accrued with respect to such Rule
of 78's Receivable and, in the case of a Simple Interest Receivable, to interest
and principal in accordance with the Simple Interest Method.
-47-
SECTION 5.5. Withdrawals from Spread Account. (a) In the event that the
Servicer's Certificate with respect to any Determination Date shall state that
the Total Distribution Amount with respect to such Determination Date is
insufficient to make the payments required to be made on the related Payment
Date pursuant to Section 5.7(b)(i) through (viii) (such deficiency being a
"Deficiency Claim Amount"), then on the fourth Business Day immediately
preceding the related Payment Date, the Trustee shall deliver to the Collateral
Agent, the Owner Trustee, the Note Insurer, and the Servicer, by hand delivery,
telex or facsimile transmission, a written notice (a "Deficiency Notice")
specifying the Deficiency Claim Amount for such Payment Date. Such Deficiency
Notice shall direct the Collateral Agent to remit such Deficiency Claim Amount
(to the extent of the funds available to be distributed pursuant to the Spread
Account Agreement) to the Trustee for deposit in the Collection Account and
distribution pursuant to Sections 5.7(b)(i) through (viii), as applicable.
(b) Any Deficiency Notice shall be delivered by 10:00 a.m., New York City
time, on the fourth Business Day preceding such Payment Date. The amounts
distributed by the Collateral Agent to the Trustee pursuant to a Deficiency
Notice shall be deposited by the Trustee into the Collection Account pursuant to
Section 5.6.
SECTION 5.6. Additional Deposits.
(a) The Servicer or CPS, as the case may be, shall deposit or cause to be
deposited in the Collection Account the aggregate Purchase Amount with respect
to Purchased Receivables and the Servicer shall deposit or cause to be deposited
therein all amounts to be paid under Section 4.8(b) or 11.1. All such deposits
shall be made, in immediately available funds, on the Business Day preceding the
Determination Date. On or before the third Business Day preceding each Payment
Date, the Trustee shall remit to the Collection Account any amounts delivered to
the Trustee by the Collateral Agent pursuant to Section 5.5.
SECTION 5.7. Distributions.
(a) RESERVED
(b) On each Payment Date, the Trustee (based on the information contained
in the Servicer's Certificate delivered on the related Determination Date) shall
make the following distributions in the following order of priority:
(i) to the Standby Servicer, from the Total Distribution Amount, any
amount deposited in the Collection Account pursuant to Section 5.5(a) and
any amount deposited in the Collection Amount pursuant to Section 5.12(a)
in respect of Standby Fees, so long as CPS is the Servicer and Norwest Bank
Minnesota, National Association is the Standby Servicer, the Standby Fee
and all unpaid Standby Fees from prior Collection Periods;
(ii) to the Servicer, from the Total Distribution Amount (as such
Total Distribution Amount has been reduced by payments pursuant to clause
(i) above), any
-48-
amount deposited in the Collection Account pursuant to Section 5.5(a) and
any amount deposited in the Collection Amount pursuant to Section 5.12(a)
in respect of Servicing Fees, the Servicing Fee and all unpaid Servicing
Fees from prior Collection Periods;
(iii) 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
clauses (i) and (ii) above), any amount deposited in the Collection Account
pursuant to Section 5.5(a) and any amount deposited in the Collection
Account pursuant to Section 5.12(a) in respect of Servicing Fees, to the
extent not previously paid by the predecessor Servicer pursuant to this
Agreement, reasonable transition expenses (up to a maximum of $50,000 for
all such expenses) incurred in becoming the successor Servicer;
(iv) to the Trustee and the Owner Trustee, pro rata, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced by
payments pursuant to clauses (i) through (iii) above), any amount deposited
in the Collection Account pursuant to Section 5.5(a) and any amount
deposited in the Collection Account pursuant to Section 5.12(a) in respect
of Trustee Fees, the Trustee Fees and reasonable out-of-pocket expenses
thereof (including counsel fees and expenses) and all unpaid Trustee Fees
and 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 and the Owner Trustee pursuant to this clause (iv) and expenses
payable to the Collateral Agent pursuant to clause (v) below shall be
limited to a total of $50,000 per annum;
(v) to the Collateral Agent, from the Total Distribution Amount (as
such Total Distribution Amount has been reduced by payments pursuant to
clauses (i) through (iv) above), any amount deposited in the Collection
Account pursuant to Section 5.5(a) and any amount deposited in the
Collection Account pursuant to Section 5.12(a) in respect of fees and
expenses of the Collateral Agent, all fees and expenses payable to the
Collateral Agent with respect to such Payment Date;
(vi) to the Note Distribution Account, from the Total Distribution
Amount (as such Total Distribution Amount has been reduced by payments
pursuant to clauses (i) through (v) above) and any amount deposited in the
Collection Account pursuant to Section 5.5(a) and Section 5.12(a)(iii), the
Class A Noteholders' Interest Distributable Amount for such Payment Date;
(vii) to the Note Distribution Account from the Total Distribution
Amount (as such Total Distribution Amount has been reduced by payments
pursuant to clauses (i) through (vi) above) and any amount deposited in the
Collection Account pursuant to Section 5.5(a) and Section 5.12(a)(ii) and
(iii), the Class A Noteholders' Principal Distributable Amount plus the
Class A Noteholders' Principal Carryover Shortfall, if any;
-49-
(viii) to the Note Insurer, from the Total Distribution Amount (as
such Total Distribution Amount has been reduced by payments made pursuant
to clauses (i) through (vii) above) and any amount deposited in the
Collection Account pursuant to Section 5.5(a), any amounts owing to the
Note Insurer under this Agreement and the Insurance Agreement and not paid;
(ix) on any Payment Date prior to the First Target Date, to the
Collateral Agent for deposit in the Spread Account, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced by
payments pursuant to clauses (i) through (viii) above) the amount by which
the Initial Spread Account Deposit exceeds the amount in the Spread Account
on such Payment Date;
(x) on any Payment Date on which the principal balance of the Notes
(after giving effect to the payment described in (vii) above) exceeds the
Class A Target Amount for such Payment Date, to the Noteholders, from the
Total Distribution Amount (as such Total Distribution Amount has been
reduced by payments pursuant to clauses (i) through (ix) above) and any
amount deposited in the Collection Account pursuant to Section 5.12(a)(ii),
an amount equal to the lesser of (a) the portion of the Total Distribution
Amount remaining after making the payments described in clauses (i) through
(ix) above and (b) the excess of the principal balance of the Notes (after
giving effect to the payment described in (vii) above) over the Class A
Target Amount;
(xi) in the event any Person other than the Standby Servicer becomes
the successor Servicer, to such successor Servicer, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced by
payments pursuant to clauses (i) through (x) above) to the extent not
previously paid by the predecessor Servicer pursuant to this Agreement,
reasonable transition expenses (up to a maximum of $50,000 for all such
expenses) incurred in becoming the successor Servicer; and
(xii) to the Collateral Agent, for deposit into the Spread Account,
the remaining Total Distribution Amount, if any;
provided, however, that, (A) following an acceleration of the Notes or, (B) if
an Insurer Default shall have occurred and be continuing and an Event of Default
pursuant to Section 5.1(i), 5.1(ii), 5.1(iv), 5.1(v) or 5.1(vi) of the Indenture
shall have occurred and be continuing, the Total Distribution Amount shall be
paid pursuant to Section 5.6(a) of the Indenture.
(c) In the event that the Collection Account is maintained with an
institution other than the Trustee, the Servicer shall instruct and cause such
institution to make all deposits and distributions pursuant to Section 5.7(b) on
the related Payment Date.
-50-
SECTION 5.8. Note Distribution Account.
(a) On each Payment Date, the Trustee shall distribute all amounts on
deposit in the Note Distribution Account to Noteholders in respect of the Notes
to the extent of amounts due and unpaid on the Notes for principal and interest
in the following amounts and in the following order of priority:
(i) to the Holders of the Notes (pro rata to each class of Notes on
the basis of the accrued and unpaid interest thereon) the Class A Interest
Distributable Amount; provided that if there are not sufficient funds in the
Note Distribution Account to pay the entire amount then due on each Class of
Notes, the amount in the Note Distribution Account shall be applied to the
payment of such interest on each Class of Notes pro rata on the basis of the
amount of accrued and unpaid interest due on each Class of Notes;
(ii) to the Holders of the Class A-1 Notes, the Class A Noteholders'
Principal Distributable Amount until the outstanding principal balance of the
Class A-1 Notes is reduced to zero;
(iii) to the Holders of the Class A-2 Notes, the Class A Noteholders'
Principal Distributable Amount (as reduced by any distribution on such Payment
Date pursuant to clause (ii) above) until the outstanding principal balance of
the Class A-2 Notes is reduced to zero;
(iv) to the Holders of the Class A-3 Notes, the Class A Noteholders'
Principal Distributable Amount (as reduced by any distribution pursuant to
clauses (ii) and (iii) above) until the outstanding principal balance of the
class A-3 Notes is reduced to zero; and
(v) to the Holders of the Class A-4 Notes, the Class A Noteholders'
Principal Distributable Amount (as reduced by any distribution on such Payment
Date pursuant to clause (ii) above) until the outstanding principal balance of
the Class A-4 Notes is reduced to zero.
(b) On each Payment Date, the Trustee shall send to each Noteholder the
statement provided to the Trustee by the Servicer pursuant to Section 5.11
hereof on such Payment Date.
(c) In the event that any withholding tax is imposed on the Trust's payment
(or allocations of income) to a Noteholder, such tax shall reduce the amount
otherwise distributable to the Noteholder in accordance with this Section 5.8.
The Trustee is hereby authorized and directed to retain from amounts otherwise
distributable to the Noteholders sufficient funds for the payment of any tax
that is legally owed by the Trust (but such authorization shall not prevent the
Trustee from contesting any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to a
Noteholder shall be treated as cash distributed to such Noteholder at the time
it is withheld by the Trust and remitted to the appropriate taxing authority.
If, after consultations with experienced counsel, the Trustee determines that
there is a reasonable likelihood that withholding tax is payable with respect to
a distribution (such as a
-51-
distribution to a non-US Noteholder), the Trustee may in its sole discretion
withhold such amounts in accordance with this clause (c). In the event that a
Noteholder wishes to apply for a refund of any such withholding tax, the Trustee
shall reasonably cooperate with such Noteholder in making such claim so long as
such Noteholder agrees to reimburse the Trustee for any out-of-pocket expenses
incurred.
(d) Distributions required to be made to Noteholders on any Payment Date
shall be made to each Noteholder of record on the preceding Record Date either
by wire transfer, in immediately available funds, to the account of such Holder
at a bank or other entity having appropriate facilities therefor, if (i) such
Noteholder shall have provided to the Note Registrar appropriate written
instructions at least five Business Days prior to such Payment Date and such
Holder's Notes in the aggregate evidence a denomination of not less than
$1,000,000 or (ii) such Noteholder is the Seller, or an Affiliate thereof, or,
if not, by check mailed to such Noteholder at the address of such holder
appearing in the Note Register; provided, however, that, unless Definitive Notes
have been issued pursuant to Section 2.12 of the Indenture, with respect to
Notes registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such nominee to be Cede & Co.), distributions will be made by
wire transfer in immediately available funds to the account designated by such
nominee. Notwithstanding the foregoing, the final distribution in respect of any
Note (whether on the Final Scheduled Payment Date or otherwise) will be payable
only upon presentation and surrender of such Note at the office or agency
maintained for that purpose by the Note Registrar pursuant to Section 2.4 of the
Indenture.
SECTION 5.9. [RESERVED].
SECTION 5.10. [RESERVED].
SECTION 5.11. Statements to Securityholders. On or prior to each Payment
Date, the Servicer shall provide to the Trustee and the Owner Trustee (with a
copy to the Note Insurer and the Rating Agencies) for the Trustee and Owner
Trustee to forward to each Securityholder of record a statement setting forth at
least the following information as to the Notes and the Certificates to the
extent applicable:
(i) the amount of such distribution allocable to principal of each
Class of Notes and the Certificates;
(ii) the amount of such distribution allocable to interest on or with
respect to each Class of Notes;
(iii) the amount of such distribution payable out of amounts withdrawn
from the Spread Account or pursuant to a claim on the Note Policy;
(iv) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
-52-
(v) the aggregate outstanding principal amount of each Class of Notes
and the Certificates, the Note Pool Factor for each such Class and the
Certificate Pool Factor after giving effect to payments allocated to principal
reported under clause (i) above;
(vi) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period, and the amount of any unpaid Servicing Fees
and the change in such amount from that of the prior Payment Date;
(vii) the amount of each of the Standby Fee, the Trustee Fee and the
Collateral Agent Fee paid to the Standby Servicer, the Trustee and the
Collateral Agent, as applicable, with respect to the related Collection Period,
and the amount of any unpaid Standby Fees, Trustee Fees and Collateral Agent
Fees and the change in such amount from the prior Payment Date;
(viii) the Class A-1 Noteholders' Interest Carryover Shortfall, the
Class A-2 Noteholders' Interest Carryover Shortfall, the Class A-3 Noteholders'
Interest Carryover Shortfall, the Class A-4 Noteholders' Interest Carryover
Shortfall, the Class A Noteholders' Principal Carryover Shortfall, and the
Certificateholders' Principal Carryover Shortfall;
(ix) the number of Receivables and the aggregate gross amount
scheduled to be paid thereon, including unearned finance and other charges, for
which the related Obligors are delinquent in making scheduled payments between
31 and 59 days and 60 days or more;
(x) the amount of the aggregate Realized Losses, if any, for the
second preceding Collection Period;
(xi) the amount of any payments made with respect to the related
Payment Date pursuant to Section 5.12(a)(i), (ii) and (iii), respectively;
(xii) the number and the aggregate Purchase Amounts for Receivables,
if any, that were repurchased in such period and summary information as to
losses and delinquencies with respect to the Receivables; and
(xiii) the cumulative amount of Realized Losses, since the Cutoff Date
to the last day of the related Collection Period.
Each amount set forth pursuant to paragraph (i), (ii), (iii), (vi), (vii),
(viii) and (xi) above shall be expressed as a dollar amount per $1,000 of the
initial principal balance of the Notes (or Class thereof) or Certificates, as
applicable.
SECTION 5.12. Optional Deposits by the Note Insurer; Notice of Waivers. (a)
The Note Insurer shall at any time, and from time to time, with respect to a
Payment Date, have the option (but shall not be required, except as provided in
Section 6.1(a)) to deliver amounts to the Trustee for deposit into the
Collection Account for any of the following purposes: (i) to provide funds in
respect of the payment of fees or expenses of any provider of services to the
Trust with
-53-
respect to such Payment Date, (ii) to distribute as a component of the Class A
Noteholders' Principal Distributable Amount to the extent that the principal
balance of the Notes as of the Determination Date preceding such Payment Date
exceeds the Class A Noteholders' 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 Payment Date to the extent that without such amount
a draw would be required to be made on the Policy.
(b) If the Note Insurer waives the satisfaction of any of the events that
might trigger an event of default under the Insurance Agreement and so notifies
the Trustee in writing pursuant to Section 5.02(d) of the Insurance Agreement,
the Trustee shall notify Moody's of such waiver.
ARTICLE VI
THE NOTE POLICY
SECTION 6.1. Claims Under Note Policy.
(a) In the event that the Trustee has delivered a Deficiency Notice with
respect to any Determination Date pursuant to Section 5.5 hereof, the Trustee
shall on the related Draw Date determine whether the application of funds in
accordance with Section 5.7(b), together with any Note Insurer Optional Deposit
pursuant to Section 5.12 and the application of any Deficiency Claim Amount
pursuant to Section 5.5 would result in a shortfall in amounts distributable
pursuant to Sections 5.7(b)(vi) and 5.7(b)(vii) on any Payment Date (any such
shortfall, a "Note Policy Claim Amount"). If the Note Policy Claim Amount for
such Payment Date is greater than zero, the Trustee shall furnish to the Note
Insurer no later than 12:00 noon New York City time on the related Draw Date a
completed Notice of Claim (as defined in clause (b) below) in the amount of the
Note Policy Claim Amount. Amounts paid by the Note Insurer pursuant to a claim
submitted under this Section 6.1. shall be deposited by the Trustee into the
Note Distribution Account for payment to Noteholders on the related Payment
Date.
(b) Any notice delivered by the Trustee to the Note Insurer pursuant to
Section 6.1(a) shall specify the Note Policy Claim Amount claimed under the Note
Policy and shall constitute a "Notice of Claim" (as defined in the Note Policy)
under the Note Policy. In accordance with the provisions of the Note Policy, the
Note Insurer is required to pay to the Trustee the Note Policy Claim Amount
properly claimed thereunder by 12:00 noon, New York City time, on the later of
(i) the third Business Day (as defined in the Note Policy) following receipt on
a Business Day of the Notice of Claim, and (ii) the applicable Payment Date. Any
payment made by the Note Insurer under the Note Policy shall be applied solely
to the payment of the Notes, and for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each Noteholder
any Note Policy Claim Amount from the Note Insurer and (ii) deposit the same in
the Note Distribution Account for distribution to Noteholders. Any and all Note
Policy Claim Amounts disbursed by the
-54-
Trustee from claims made under the Note Policy shall not be considered payment
by the Trust or from the Series 1998-3 Spread Account with respect to such
Notes, and shall not discharge the obligations of the Trust with respect
thereto. The Note Insurer shall, to the extent it makes any payment with respect
to the Notes, become subrogated to the rights of the recipients of such payments
to the extent of such payments. Subject to and conditioned upon any payment with
respect to the Notes by or on behalf of the Note Insurer, the Trustee and the
Noteholders shall assign to the Note Insurer all rights to the payment of
interest or principal with respect to the Notes which are then due for payment
to the extent of all payments made by the Note Insurer, and the Note Insurer may
exercise any option, vote, right, power or the like with respect to the Notes to
the extent that it has made payment pursuant to the Note Policy. To evidence
such subrogation, the Note Registrar (as defined in the Indenture) shall note
the Note Insurer's rights as subrogee upon the register of Noteholders upon
receipt from the Note Insurer of proof of payment by the Note Insurer of any
Noteholders' Interest Distributable Amount or Noteholders' Principal
Distributable Amount. The foregoing subrogation shall in all cases be subject to
the rights of the Noteholders to receive all Scheduled Payments (as defined in
the Note Policy) in respect of the Notes.
(d) The Trustee shall keep a complete and accurate record of all funds
deposited by the Note Insurer into the Note Distribution Account and the
allocation of such funds to payment of interest on and principal paid in respect
of any Note. The Note Insurer shall have the right to inspect such records at
reasonable times upon one Business Day's prior notice to the Trustee.
(e) The Trustee shall be entitled to enforce on behalf of the Noteholders
the obligations of the Note Insurer under the Note Policy. Notwithstanding any
other provision of this Agreement or any Basic Documents, the Noteholders are
not entitled to make any claims under the Note Policy or institute proceedings
directly against the Note Insurer.
SECTION 6.2. Preference Claims.
(a) In the event that the Trustee has received a certified copy of an order
of the appropriate court that any Scheduled Payment (as defined in the Note
Policy) paid on a Note has been avoided in whole or in part as a preference
payment under applicable bankruptcy law, the Trustee shall so notify the Note
Insurer, shall comply with the provisions of the Note Policy to obtain payment
by the Note Insurer of such avoided payment, and shall, at the time it provides
notice to the Note Insurer, notify Holders of the Notes by mail that, in the
event that any Noteholder's payment is so recoverable, such Noteholder will be
entitled to payment pursuant to the terms of the Note Policy. The Trustee shall
furnish to the Note Insurer its records evidencing the payments of principal of
and interest on Notes, if any, which have been made by the Trustee and
subsequently recovered from Noteholders, and the dates on which such payments
were made. Pursuant to the terms of the Note Policy, the Note Insurer will make
such payment on behalf of the Noteholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the order (as defined in
the Note Policy) and not to the Trustee or any Noteholder directly (unless a
Noteholder has previously paid such payment to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy, in which case the Note Insurer
will
-55-
make such payment to the Trustee for distribution to such Noteholder upon proof
of such payment reasonably satisfactory to the Note Insurer).
(b) The Trustee shall promptly notify the Note Insurer of any proceeding or
the institution of any action (of which the Trustee has actual knowledge)
seeking the avoidance as a preferential transfer under applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (a "Preference Claim")
of any distribution made with respect to the Notes. Each Holder, by its purchase
of Notes, and the Trustee hereby agree that so long as an Insurer Default shall
not have occurred and be continuing, the Note Insurer may at any time during the
continuation of any proceeding relating to a Preference Claim direct all matters
relating to such Preference Claim including, without limitation, (i) the
direction of any appeal of any order relating to any Preference Claim and (ii)
the posting of any surety, supersedeas or performance bond pending any such
appeal at the expense of the Note Insurer, but subject to reimbursement as
provided in the Insurance Agreement. In addition, and without limitation of the
foregoing, as set forth in Section 6.1(c), the Note Insurer shall be subrogated
to, and each Noteholder and the Trustee hereby delegate and assign, to the
fullest extent permitted by law, the rights of the trustee and each Noteholder
in the conduct of any proceeding with respect to a Preference Claim, including,
without limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such Preference
Claim.
SECTION 6.3. Surrender of Note Policy. The Trustee shall surrender the Note
Policy to the Note Insurer for cancellation upon the expiration of such policy
in accordance with the terms thereof.
ARTICLE VII
[RESERVED]
ARTICLE VIII
THE SELLER
SECTION 8.1. Representations of Seller. The Seller makes the following
representations on which the Note Insurer shall be deemed to have relied in
executing and delivering the Note Policy and on which the Issuer is deemed to
have relied in acquiring the Receivables. The representations speak as of the
execution and delivery of this Agreement and as of the Closing Date, and shall
survive the sale of the Receivables to the Issuer and the pledge thereof to the
Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Seller has been duly organized
and is validly existing as a corporation in good standing under the laws of
the State of California, with power and authority to own its properties and
to conduct its business as
-56-
such properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power, authority and
legal right to acquire, own and sell the Receivables and the Other Conveyed
Property transferred to the Trust.
(b) Due Qualification. The Seller is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease
of property or the conduct of its business shall require such
qualifications.
(c) Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and the Basic Documents to which it is a
party and to carry out its terms and their terms, respectively; the Seller
has full power and authority to sell and assign the Receivables and the
Other Conveyed Property to be sold and assigned to and deposited with the
Trust by it and has duly authorized such sale and assignment to the Trust
by all necessary corporate action; and the execution, delivery and
performance of this Agreement and the Basic Documents to which the Seller
is a party have been duly authorized by the Seller by all necessary
corporate action.
(d) Valid Sale, Binding Obligations. This Agreement effects a valid
sale, transfer and assignment of the Receivables and the Other Conveyed
Property, enforceable against the Seller and creditors of and purchasers
from the Seller; and this Agreement and the Basic Documents to which the
Seller is a party, when duly executed and delivered, shall constitute
legal, valid and binding obligations of the Seller enforceable in
accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether
such enforceability is considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the Basic Documents and the fulfillment of the terms of
this Agreement and the Basic Documents shall not conflict with, result in
any breach of any of the terms and provisions of or constitute (with or
without notice, lapse of time or both) a default under the certificate of
incorporation or by-laws of the Seller, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Seller is a party
or by which it is bound, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other
than the Basic Documents, or violate any law, order, rule or regulation
applicable to the Seller of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Seller or any of its properties.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the Seller's knowledge, threatened against the Seller, before any
court, regulatory body,
-57-
administrative agency or other tribunal or governmental instrumentality
having jurisdiction over the Seller or its properties (A) asserting the
invalidity of this Agreement, the Securities or any of the Basic Documents,
(B) seeking to prevent the issuance of the Securities or the consummation
of any of the transactions contemplated by this Agreement or any of the
Basic Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement or
any of the Basic Documents, or (D) relating to the Seller and which might
adversely affect the federal or state income, excise, franchise or similar
tax attributes of the Securities.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Securities or the consummation of the other
transactions contemplated by this Agreement, except such as have been duly
made or obtained.
(h) Tax Returns. The Seller has filed on a timely basis all tax
returns required to be filed by it and paid all taxes, to the extent that
such taxes have become due.
(i) Chief Executive Office. The chief executive office of the Seller
is at 2 Ada, Irvine, California 92718.
SECTION 8.2. [RESERVED].
SECTION 8.3. Liability of Seller; Indemnities. The Seller shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Note Insurer, the Standby Servicer and the Trustee from and
against any taxes that may at any time be asserted against any such Person with
respect to the transactions contemplated in this Agreement and any of the Basic
Documents (except any income taxes arising out of fees paid to the Owner
Trustee, the Trustee, the Standby Servicer and the Note Insurer and except any
taxes to which the Owner Trustee, or the Trustee may otherwise be subject),
including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the Issuer, not
including any taxes asserted with respect to federal or other income taxes
arising out of distributions on the Notes and the Certificates) and costs and
expenses in defending against the same.
(b) The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Trustee, the Note Insurer and the Securityholders from and
against any loss, liability or expense incurred by reason of (i) the Seller's
willful misfeasance, bad faith or negligence in the performance of its duties
under this Agreement, or by reason of reckless disregard of its obligations and
duties under this Agreement and (ii) the Seller's or the Issuer's violation of
-58-
Federal or state securities laws in connection with the offering and sale of the
Notes and the Certificates.
(c) The Seller shall indemnify, defend and hold harmless the Owner Trustee,
the Trustee, and the Standby Servicer and its officers, directors, employees and
agents from and against any and all costs, expenses, losses, claims, damages and
liabilities arising out of, or incurred in connection with the acceptance or
performance of the trusts and duties set forth herein and in the Basic Documents
except to the extent that such cost, expense, loss, claim, damage or liability
shall be due to the willful misfeasance, bad faith or negligence (except for
errors in judgment) of the Owner Trustee.
Indemnification under this Section shall survive the resignation or removal
of the Owner Trustee or the Trustee and the termination of this Agreement or the
Indenture or the Trust Agreement, as applicable, and shall include reasonable
fees and expenses of counsel and other expenses of litigation. If the Seller
shall have made any indemnity payments pursuant to this Section and the Person
to or on behalf of whom such payments are made thereafter shall collect any of
such amounts from others, such Person shall promptly repay such amounts to the
Seller, without interest.
SECTION 8.4. Merger or Consolidation of, or Assumption of the Obligations
of, Seller. Any Person (a) into which the Seller may be merged or consolidated,
(b) which may result from any merger or consolidation to which the Seller shall
be a party or (c) which may succeed to the properties and assets of the Seller
substantially as a whole, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the Seller under this
Agreement, shall be the successor to the Seller hereunder without the execution
or filing of any document or any further act by any of the parties to this
Agreement; provided, however, that (i) the Seller shall have received the
written consent of the Note Insurer prior to entering into any such transaction,
(ii) immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 3.1 shall have been breached and no Servicer
Termination Event, and no event which, after notice or lapse of time, or both,
would become a Servicer Termination Event shall have occurred and be continuing,
(iii) the Seller shall have delivered to the Owner Trustee, the Trustee and the
Note Insurer an Officers' Certificate and an Opinion of Counsel each stating
that such consolidation, merger or succession and such agreement of assumption
comply with this Section and that all conditions precedent, if any, provided for
in this Agreement relating to such transaction have been complied with, (iv) the
Rating Agency Condition shall have been satisfied with respect to such
transaction and (v) the Seller shall have delivered to the Owner Trustee, the
Trustee and the Note Insurer an Opinion of Counsel stating that, in the opinion
of such counsel, either (A) all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and the Trustee,
respectively, in the Receivables and the Other Conveyed Property and reciting
the details of such filings or (B) no such action shall be necessary to preserve
and protect such interest. Notwithstanding anything herein to the contrary, the
execution of the foregoing agreement of assumption and compliance
-59-
with clauses (i), (ii), (iii), (iv) and (v) above shall be conditions to the
consummation of the transactions referred to in clause (a), (b) or (c) above.
SECTION 8.5. Limitation on Liability of Seller and Others. The Seller and
any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under any Basic Document. The Seller shall not be under any obligation to appear
in, prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 8.6. Seller May Own Certificates or Notes. The Seller and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates or Notes with the same rights as it would have if it
were not the Seller or an Affiliate thereof, except as expressly provided herein
or in any Basic Document. Notes or Certificates so owned by the Seller or such
Affiliate shall have an equal and proportionate benefit under the provisions of
the Basic Documents, without preference, priority or distinction as among all of
the Notes or Certificates; provided, however, that any Notes owned by the Seller
or any Affiliate thereof, during the time such Notes are so owned by them, shall
be without voting rights for any purpose set forth in the Basic Documents and
the Notes shall not be entitled to the benefits of the Note Policy. The Seller
shall notify the Owner Trustee, the Trustee and the Note Insurer promptly after
it or any of its Affiliates become the owner of a Certificate or a Note.
ARTICLE IX
THE SERVICER
SECTION 9.1. Representations of Servicer. The Servicer makes the following
representations on which the Note Insurer shall be deemed to have relied in
executing and delivering the Note Policy and on which the Issuer is deemed to
have relied in acquiring the Receivables. The representations speak as of the
execution and delivery of this Agreement and as of the Closing Date and shall
survive the sale of the Receivables to the Issuer and the pledge thereof to the
Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer has been duly
organized and is validly existing as a corporation and in good standing
under the laws of the State of California, with power, authority and legal
right to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted, and had at
all relevant times, and shall have, power, authority and legal right to
acquire, own and service the Receivables;
(b) Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing and has obtained all necessary
licenses and approvals, in all
-60-
jurisdictions in which the ownership or lease of property or the conduct of
its business (including the servicing of the Receivables as required by
this Agreement) requires or shall require such qualification;
(c) Power and Authority. The Servicer has the power and authority to
execute and deliver this Agreement and the Basic Documents to which it is a
party and to carry out its terms and their terms, respectively, and the
execution, delivery and performance of this Agreement and the Basic
Documents to which it is a party have been duly authorized by the Servicer
by all necessary corporate action;
(d) Binding Obligation. This Agreement and the Basic Documents to
which the Servicer is a party shall constitute legal, valid and binding
obligations of the Servicer enforceable in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the Basic Documents to which to the Servicer is a party,
and the fulfillment of the terms of this Agreement and the Basic Documents
to which the Servicer is a party, shall not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Servicer is a
party or by which it is bound or any of its properties are subject, or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of
trust or other instrument, other than the Basic Documents, or violate any
law, order, rule or regulation applicable to the Servicer of any court or
of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or any
of its properties;
(f) No Proceedings. There are no proceedings or investigations pending
or, to the Servicer's knowledge, threatened against the Servicer, before
any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Servicer or its
properties (A) asserting the invalidity of this Agreement or any of the
Basic Documents, (B) seeking to prevent the issuance of the Securities or
the consummation of any of the transactions contemplated by this Agreement
or any of the Basic Documents, or (C) seeking any determination or ruling
that might materially and adversely affect the performance by the Servicer
of its obligations under, or the validity or enforceability of, this
Agreement, the Securities or any of the Basic Documents or (D) relating to
the Servicer and which might adversely affect the federal or state income,
excise, franchise or similar tax attributes of the Securities;
-61-
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Securities or the consummation of the other
transactions contemplated by this Agreement, except such as have been duly
made or obtained.
(h) Taxes. The Servicer has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such
taxes have become due.
(i) Chief Executive Office. The Servicer hereby represents and
warrants to the Trustee that the Servicer's principal place of business and
chief executive office is, and for the four months preceding the date of
this Agreement has been, located at: 2 Ada, Irvine, California 92718.
(j) Year 2000 Compliance. The Servicer covenants that its computer and
other systems used in servicing the Receivables will be modified to operate
in a manner such that on and after January 1, 2000 (i) the Servicer can
service the Receivables in accordance with the terms of this Agreement and
(ii) the Servicer can operate its business in substantially the same manner
as it is operating on the date hereof. The Servicer shall certify in
writing to the Standby Servicer no later than June 30, 1999 that it is in
compliance with this Section 9.1(j).
SECTION 9.2. Liability of Servicer; Indemnities.
(a) The Servicer (in its capacity as such) shall be liable hereunder only
to the extent of the obligations in this Agreement specifically undertaken by
the Servicer and the representations made by the Servicer.
(i) The Servicer shall defend, indemnify and hold harmless the Trust,
the Trustee, the Owner Trustee, the Standby Servicer, the Note Insurer, and
the Securityholders from and against any and all costs, expenses, losses,
damages, claims and liabilities, arising out of or resulting from the use,
ownership, repossession or operation by the Servicer or any Affiliate
thereof of any Financed Vehicle;
(ii) The Servicer shall indemnify, defend and hold harmless the Trust,
the Trustee, the Owner Trustee, the Standby Servicer, the Note Insurer, and
the Securityholders from and against any taxes that may at any time be
asserted against any of such parties with respect to the transactions
contemplated in this Agreement, including, without limitation, any sales,
gross receipts, general corporation, tangible personal property, privilege
or license taxes (but not including any federal or other income taxes,
including franchise taxes asserted with respect to, and as of the date of,
the sale of the Receivables and the Other Conveyed Property to the Trust or
the issuance and original sale of the Securities) and costs and expenses in
defending against the same;
-62-
(iii) The Servicer shall indemnify, defend and hold harmless the
Trust, the Trustee, the Owner Trustee, the Standby Servicer, the Note
Insurer, their respective officers, directors, agents and employees and the
Securityholders from and against any and all costs, expenses, losses,
claims, damages, and liabilities to the extent that such cost, expense,
loss, claim, damage, or liability arose out of, or was imposed upon the
Trust, the Trustee, the Owner Trustee, the Standby Servicer, the Note
Insurer or the Securityholders through the negligence, willful misfeasance
or bad faith of the Servicer in the performance of its duties under this
Agreement or by reason of reckless disregard of its obligations and duties
under this Agreement.
(iv) The Servicer shall indemnify, defend, and hold harmless the
Trustee, the Owner Trustee, the Standby Servicer and the Collateral Agent
from and against all costs, expenses, losses, claims, damages, and
liabilities arising out of or incurred in connection with the acceptance or
performance of the trusts and duties herein contained or in the Trust
Agreement, if any, except to the extent that such cost, expense, loss,
claim, damage or liability: (A) shall be due to the willful misfeasance,
bad faith, or negligence (except for errors in judgment) of the Trustee,
the Owner Trustee, the Standby Servicer or the Collateral Agent, as
applicable or (B) relates to any tax other than the taxes with respect to
which the Servicer shall be required to indemnify the Trustee, the Owner
Trustee, the Standby Servicer or the Collateral Agent.
(b) Notwithstanding the foregoing, the Servicer shall not be obligated to
defend, indemnify, and hold harmless any Securityholders for any losses, claims,
damages or liabilities incurred by any Securityholders arising out of claims,
complaints, actions and allegations relating to Section 406 of ERISA or Section
4975 of the Code as a result of the purchase or holding of a Security by such
Securityholder with the assets of a plan subject to such provisions of ERISA or
the Code or the servicing, management and operation of the Trust.
(c) For purposes of this Section 9.2, in the event of the termination of
the rights and obligations of the Servicer (or any successor thereto pursuant to
Section 9.3) as Servicer pursuant to Section 10.1, or a resignation by such
Servicer pursuant to this Agreement, such Servicer shall be deemed to be the
Servicer pending appointment of a successor Servicer pursuant to Section 10.2.
The provisions of this Section 9.2(c) shall in no way affect the survival
pursuant to Section 9.2(d) of the indemnification by the Servicer provided by
Section 9.2(a).
(d) Indemnification under this Section 9.2 shall survive the termination of
this Agreement and any resignation or removal of CPS as Servicer and shall
include reasonable fees and expenses of counsel and expenses of litigation. If
the Servicer shall have made any indemnity payments pursuant to this Section and
the recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts to the Servicer, without interest.
-63-
SECTION 9.3. Merger or Consolidation of, or Assumption of the Obligations
of, the Servicer or Standby Servicer.
(a) CPS shall not merge or consolidate with any other person, convey,
transfer or lease substantially all its assets as an entirety to another Person,
or permit any other Person to become the successor to CPS's business unless,
after the merger, consolidation, conveyance, transfer, lease or succession, the
successor or surviving entity shall be capable of fulfilling the duties of CPS
contained in this Agreement. Any corporation (i) into which CPS may be merged or
consolidated, (ii) resulting from any merger or consolidation to which CPS shall
be a party, (iii) which acquires by conveyance, transfer, or lease substantially
all of the assets of CPS, or (iv) succeeding to the business of CPS, in any of
the foregoing cases shall execute an agreement of assumption to perform every
obligation of CPS under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to CPS under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; provided, however, that nothing contained herein shall be
deemed to release CPS from any obligation. CPS shall provide notice of any
merger, consolidation or succession pursuant to this Section to the Owner
Trustee, the Trustee, the Securityholders, the Note Insurer and each Rating
Agency. Notwithstanding the foregoing, CPS shall not merge or consolidate with
any other Person or permit any other Person to become a successor to CPS's
business, unless (x) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 9.1 shall have been breached
(for purposes hereof, such representations and warranties shall be deemed made
as of the date of the consummation of such transaction) and no event that, after
notice or lapse of time, or both, would become an Insurance Agreement Event of
Default shall have occurred and be continuing, (y) CPS shall have delivered to
the Owner Trustee, the Trustee, the Rating Agencies and the Note Insurer an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption comply with
this Section and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, and (z) CPS
shall have delivered to the Owner Trustee, the Trustee, the Rating Agencies and
the Note Insurer an Opinion of Counsel, stating in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and protect
the interest of the Owner Trustee and the Trustee, respectively, in the
Receivables and the Other Conveyed Property and reciting the details of the
filings or (B) no such action shall be necessary to preserve and protect such
interest.
(b) Any corporation (i) into which the Standby Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Standby Servicer shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Standby Servicer, or (iv)
succeeding to the business of the Standby Servicer, in any of the foregoing
cases shall execute an agreement of assumption to perform every obligation of
the Standby Servicer under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Standby Servicer under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, anything in this
-64-
Agreement to the contrary notwithstanding; provided, however, that nothing
contained herein shall be deemed to release the Standby Servicer from any
obligation.
SECTION 9.4. Limitation on Liability of Servicer, Standby Servicer and
Others.
Neither the Servicer, the Standby Servicer nor any of the directors or
officers or employees or agents of the Servicer or Standby Servicer shall be
under any liability to the Trust or the Securityholders, except as provided in
this Agreement, for any action taken or for refraining from the taking of any
action pursuant to this Agreement; provided, however, that this provision shall
not protect the Servicer, the Standby Servicer or any such person against any
liability that would otherwise be imposed by reason of a breach of this
Agreement or willful misfeasance, bad faith or negligence in the performance of
duties. CPS, the Standby Servicer and any director, officer, employee or agent
of CPS or the Standby Servicer may rely in good faith on the written advice of
counsel or on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under this Agreement.
SECTION 9.5. Delegation of Duties. The Servicer may at any time delegate
duties under this Agreement to sub-contractors who are in the business of
servicing automotive receivables with the prior written consent of the
Controlling Party as determined pursuant to Section 13.15; provided, however,
that no such delegation or sub-contracting of duties by the Servicer shall
relieve the Servicer of its responsibility with respect to such duties.
SECTION 9.6. Servicer and Standby Servicer Not to Resign. Subject to the
provisions of Section 9.3, neither the Servicer nor the Standby Servicer shall
resign from the obligations and duties imposed on it by this Agreement as
Servicer or Standby Servicer except upon a determination that by reason of a
change in legal requirements the performance of its duties under this Agreement
would cause it to be in violation of such legal requirements in a manner which
would have a material adverse effect on the Servicer or the Standby Servicer, as
the case may be, and the Note Insurer (so long as an Insurer Default shall not
have occurred and be continuing) or a Security Majority (if an Insurer Default
shall have occurred and be continuing) does not elect to waive the obligations
of the Servicer or the Standby Servicer, as the case may be, to perform the
duties which render it legally unable to act or to delegate those duties to
another Person. Any such determination permitting the resignation of the
Servicer or Standby Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered and acceptable to the Trustee, the Owner Trustee and the Note
Insurer (unless an Insurer Default shall have occurred and be continuing). No
resignation of the Servicer shall become effective until, so long as no Insurer
Default shall have occurred and be continuing, the Standby Servicer or an entity
acceptable to the Note Insurer shall have assumed the responsibilities and
obligations of the Servicer or, if an Insurer Default shall have occurred and be
continuing, the Standby Servicer or a successor Servicer that is an Eligible
Servicer shall have assumed the responsibilities and obligations of the Standby
Servicer. No resignation of the Standby Servicer shall become effective until,
so long as no Insurer Default shall have occurred and be continuing, an entity
acceptable to the Note Insurer shall have assumed the responsibilities and
obligations of the Standby Servicer or, if an Insurer Default shall have
occurred and be continuing a Person that is
-65-
an Eligible Servicer shall have assumed the responsibilities and obligations of
the Standby Servicer; provided, however, that in the event a successor Standby
Servicer is not appointed within 60 days after the Standby Servicer has given
notice of its resignation and has provided the Opinion of Counsel required by
this Section 9.6, the Standby Servicer may petition a court for its removal.
ARTICLE X
DEFAULT
SECTION 10.1. Servicer Termination Event. For purposes of this Agreement,
each of the following shall constitute a "Servicer Termination Event":
(a) Any failure by the Servicer to deliver to the Trustee for distribution
to Securityholders any proceeds or payment required to be so delivered under the
terms of this Agreement that continues unremedied for a period of two Business
Days (one Business Day with respect to payment of Purchase Amounts) after
written notice is received by the Servicer from the Trustee or the Note Insurer
(unless an Insurer Default shall have occurred and be continuing) or after
discovery of such failure by a Responsible officer of the Servicer;
(b) Failure by the Servicer to deliver to the Trustee and the Note Insurer
(so long as an Insurer Default shall not have occurred and be continuing), the
Servicer's Certificate within five days after the date on which such Servicer's
Certificate is required to be delivered, or failure on the part of the Servicer
to observe its covenants and agreements set forth in Section 9.3(a);
(c) Failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement, which
failure (i) materially and adversely affects the rights of Securityholders
(determined without regard to the availability of funds under the Policy), or of
the Note Insurer (unless an Insurer Default shall have occurred and be
continuing), and (ii) continues unremedied for a period of 30 days after the
date on which written notice of such failure, requiring the same to be remedied,
shall have been given (1) to the Servicer by the Trustee or the Note Insurer or
(2) to the Servicer and to the Trustee and the Note Insurer by the Holders of
Class A Notes evidencing not less than 25% of the outstanding principal balance
of the Notes or, after the Class A Notes have been paid in full and all
outstanding Reimbursement Obligations and other amounts due to the Note Insurer
have been paid in full, by the Holders of Certificates evidencing not less than
25% of the outstanding principal balance of the Certificates;
(d) The entry of a decree or order by a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
conservator, receiver, or liquidator for the Servicer or the Seller (or, so long
as CPS is Servicer, any of the Servicer's Affiliates) in any bankruptcy,
insolvency, readjustment of debt, marshaling of assets and liabilities, or
similar
-66-
proceedings, or for the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; or
(e) The consent by the Servicer or the Seller (or, so long as CPS is
Servicer, any of the Servicer's Affiliates) to the appointment of a conservator,
trustee, receiver or liquidator in any bankruptcy, insolvency, readjustment of
debt, marshalling of assets and liabilities, or similar proceedings of or
relating to the Servicer or the Seller (or, so long as CPS is Servicer, any of
the Servicer's Affiliates) of or relating to substantially all of its property;
or the Servicer or the Seller (or, so long as CPS is Servicer, any of the
Servicer's Affiliates) or the Seller shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its obligations; or
(f) Any representation, warranty or statement of the Servicer made in this
Agreement or any certificate, report or other writing delivered pursuant hereto
shall prove to be incorrect in any material respect as of the time when the same
shall have been made, and the incorrectness of such representation, warranty or
statement has a material adverse effect on the Trust or the Securityholders and,
within 30 days after written notice thereof shall have been given (1) to the
Servicer by the Trustee or the Note Insurer or (2) to the Servicer and to the
Trustee and the Note Insurer by the Holders of Notes evidencing not less than
25% of the outstanding principal balance of the Notes or, after the Class A
Notes have been paid in full and all outstanding Reimbursement Obligations and
other amounts due to the Note Insurer have been paid in full, by the Holders of
Certificates evidencing not less than 25% of the outstanding principal balance
of the Certificates, the circumstances or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured; or
(g) So long as an Insurer Default shall not have occurred and be
continuing, the Note Insurer shall not have delivered a Servicer Extension
Notice pursuant to Section 4.14; or
(h) So long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Event of Default shall have occurred; or
(i) A claim is made under the Note Policy.
SECTION 10.2. Consequences of a Servicer Termination Event. If a Servicer
Termination Event shall occur and be continuing, the Note Insurer (or, if an
Insurer Default shall have occurred and be continuing either the Trustee (to the
extent it has knowledge thereof) or Holders of Notes evidencing not less than
25% of the outstanding principal amount of the Notes, by notice given in writing
to the Servicer (and to the Trustee if given by the Note Insurer or the
Securityholders) or by non-extension of the term of the Servicer as referred to
in Section 4.14 may terminate all of the rights and obligations of the Servicer
under this Agreement. The Servicer shall be entitled to its pro rata share of
the Servicing Fee for the number of days in the Collection Period prior to the
effective date of its termination. On or after the receipt by the Servicer of
such written notice or upon termination of the term of the Servicer, all
authority,
-67-
power, obligations and responsibilities of the Servicer under this Agreement,
whether with respect to the Notes, the Certificates or the Other Conveyed
Property or otherwise, automatically shall pass to, be vested in and become
obligations and responsibilities of the Standby Servicer (or such other
successor Servicer appointed by the Controlling Party under Section 10.3);
provided, however, that the successor Servicer shall have no liability with
respect to any obligation which was required to be performed by the terminated
Servicer prior to the date that the successor Servicer becomes the Servicer or
any claim of a third party based on any alleged action or inaction of the
terminated Servicer. The successor Servicer is authorized and empowered by this
Agreement to execute and deliver, on behalf of the terminated Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivables and the Other Conveyed Property and related
documents to show the Trust as lienholder or secured party on the related Lien
Certificates, or otherwise. The terminated Servicer agrees to cooperate with the
successor Servicer in effecting the termination of the responsibilities and
rights of the terminated Servicer under this Agreement, including, without
limitation, the transfer to the successor Servicer for administration by it of
all cash amounts that shall at the time be held by the terminated Servicer for
deposit, or have been deposited by the terminated Servicer, in the Collection
Account or thereafter received with respect to the Receivables and the delivery
to the successor Servicer of all Receivable Files and a computer tape in
readable form as of the most recent Business Day containing all information
necessary to enable the successor Servicer or a successor Servicer to service
the Receivables and the Other Conveyed Property. All reasonable costs and
expenses (including attorneys' fees) incurred in connection with transferring
the Receivable Files to the successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section 10.1 shall be paid
by the predecessor Servicer upon presentation of reasonable documentation of
such costs and expenses. In addition, any successor Servicer shall be entitled
to payment from the immediate predecessor Servicer for reasonable transition
expenses incurred in connection with acting as successor Servicer, and to the
extent not so paid, such payment shall be made pursuant to Section 5.7(b)
hereof. Upon receipt of notice of the occurrence of Servicer Termination Event,
the Trustee shall give notice thereof to the Rating Agencies. If requested by
the Controlling Party, the successor Servicer shall terminate the Lockbox
Agreement and direct the Obligors to make all payments under the Receivables
directly to the successor Servicer (in which event the successor Servicer shall
process such payments in accordance with Section 4.2(e)), or to a lockbox
established by the successor Servicer at the direction of the Controlling Party,
at the successor Servicer's expense. The terminated Servicer shall grant the
Trustee, the successor Servicer and the Controlling Party reasonable access to
the terminated Servicer's premises at the terminated Servicer's expense.
SECTION 10.3. Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 10.2, upon non-extension of the servicing term as referred
to in Section 4.14, or upon the resignation of the Servicer pursuant to Section
9.6, the predecessor Servicer shall continue to perform its functions as
Servicer under this Agreement, in the case of termination, only until the
-68-
date specified in such termination notice or, if no such date is specified in a
notice of termination, until receipt of such notice and, in the case of
expiration and non-renewal of the term of the Servicer upon the expiration of
such term, and, in the case of resignation, until the later of (x) the date 45
days from the delivery to the Trustee of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
unable to act as Servicer, as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of termination of the Servicer,
Norwest Bank Minnesota, National Association, as Standby Servicer, shall assume
the obligations of Servicer hereunder on the date specified in such written
notice (the "Assumption Date") pursuant to the Servicing Assumption Agreement
or, in the event that the Note Insurer shall have determined that a Person other
than the Standby Servicer shall be the successor Servicer in accordance with
Section 10.2, on the date of the execution of a written assumption agreement by
such Person to serve as successor Servicer. Notwithstanding the Standby
Servicer's assumption of, and its agreement to perform and observe, all duties,
responsibilities and obligations of CPS as Servicer under this Agreement arising
on and after the Assumption Date, the Standby Servicer shall not be deemed to
have assumed or to become liable for, or otherwise have any liability for, any
duties, responsibilities, obligations or liabilities of CPS or any predecessor
Servicer arising on or before the Assumption Date, whether provided for by the
terms of this Agreement, arising by operation of law or otherwise, including,
without limitation, any liability for, any duties, responsibilities, obligations
or liabilities of CPS or any predecessor Servicer arising on or before the
Assumption Date under Section 4.7 or 9.2 of this Agreement, regardless of when
the liability, duty, responsibility or obligation of CPS or any predecessor
Servicer therefore arose, whether provided by the terms of this Agreement,
arising by operation of law or otherwise. Notwithstanding the above, if the
Standby Servicer shall be legally unable or unwilling to act as Servicer, and an
Insurer Default shall have occurred and be continuing, the Standby Servicer, the
Trustee or a Security Majority may petition a court of competent jurisdiction to
appoint any Eligible Servicer as the successor to the Servicer. Pending
appointment pursuant to the preceding sentence, the Standby Servicer shall act
as successor Servicer unless it is legally unable to do so, in which event the
outgoing Servicer shall continue to act as Servicer until a successor has been
appointed and accepted such appointment. Subject to Section 9.6, no provision of
this Agreement shall be construed as relieving the Standby Servicer of its
obligation to succeed as successor Servicer upon the termination of the Servicer
pursuant to Section 10.2, the resignation of the Servicer pursuant to Section
9.6 or the non-extension of the servicing term of the Servicer, as referred to
in Section 4.14. If upon the termination of the Servicer pursuant to Section
10.2 or the resignation of the Servicer pursuant to Section 9.6, the Controlling
Party appoints a successor Servicer other than the Standby Servicer, the Standby
Servicer shall not be relieved of its duties as Standby Servicer hereunder.
(b) Any successor Servicer shall be entitled to such compensation (whether
payable out of the Collection Account or otherwise) as the Servicer would have
been entitled to under this Agreement if the Servicer had not resigned or been
terminated hereunder.
-69-
SECTION 10.4. Notification to Noteholders and Certificateholders. Upon any
termination of, or appointment of a successor to, the Servicer, the Trustee
shall give prompt written notice thereof to each Securityholder, the Owner
Trustee and to the Rating Agencies.
SECTION 10.5. Waiver of Past Defaults. Subject to the approval of the Note
Insurer (unless an Insurer Default shall have occurred and be continuing), the
Holders of Notes evidencing more than 50% of the outstanding principal balance
of the Notes, may on behalf of all the Noteholders and Certificateholders, waive
any default be the Servicer in the performance of its obligations under this
Agreement and the consequences thereof (except a default in making any required
deposits to or payments from any of the Trust Accounts in accordance with the
terms of this Agreement. Upon any such waiver of a past default, such default
shall cease to exist, and any Servicer Termination Event arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto.
SECTION 10.6. Action Upon Certain Failures of the Servicer. In the event
that the Trustee shall have knowledge of any failure of the Servicer specified
in Section 10.1 which would give rise to a right of termination under such
Section upon the Servicer's failure to remedy the same after notice, the Trustee
shall give notice thereof to the Servicer and the Note Insurer. For all purposes
of this Agreement (including, without limitation, Section 6.2(b) and this
Section 10.6), the Trustee shall not be deemed to have knowledge of any failure
of the Servicer as specified in Section 10.1(c) though (i) unless notified
thereof in writing by the Servicer, the Note Insurer or by a Securityholder. The
Trustee shall be under no duty or obligation to investigate or inquire as to any
potential failure of the Servicer specified in Section 10.1.
ARTICLE XI
TERMINATION
SECTION 11.1. Optional Purchase of All Receivables.
(a) (i) On the last day of any Collection Period as of which the Pool
Balance shall be less than or equal to 10% of the Original Pool Balance, the
Servicer shall have the option to purchase the Owner Trust Estate, other than
the Trust Accounts (with the consent of the Note Insurer if such purchase would
result in a claim on the Note Policy or would result in any amount owing to the
Note Insurer under the Insurance Agreement remaining unpaid). To exercise such
option, the Servicer or the Seller, as the case may be, shall (subject to the
proviso below deposit pursuant to Section 5.6 in the Collection Account an
amount equal to the aggregate Purchase Amount for the Receivables (including
Liquidated Receivables), plus the appraised value of any other property held by
the Trust, such value to be determined by an appraiser mutually agreed upon by
the Servicer, the Note Insurer and the Trustee, and shall succeed to all
interests in and to the Trust provided, however, that the amount to be paid for
such purchase (as set forth in the following
-70-
sentence) shall be sufficient to pay the full amount of principal and interest,
if any, then due and payable on the Securities.
(b) Notice of any termination of the Trust shall be given by the Servicer,
which notice shall include, among other things, the items specified in Section
9.1(c) of the Trust Agreement, to the Owner Trustee, the Trustee, the Note
Insurer and the Rating Agencies as soon as practicable after the Servicer has
received notice thereof.
(c) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Trustee to this Agreement.
ARTICLE XII
ADMINISTRATIVE DUTIES OF THE SERVICER
SECTION 12.1. Administrative Duties.
(a) Duties with Respect to the Indenture. The Servicer shall perform all
its duties and the duties of the Issuer under the Indenture. In addition, the
Servicer shall consult with the Owner Trustee as the Servicer deems appropriate
regarding the duties of the Issuer under the Indenture. The Servicer shall
monitor the performance of the Issuer and shall advise the Owner Trustee when
action is necessary to comply with the Issuer's duties under the Indenture. The
Servicer shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Servicer shall take all necessary action that is the duty of
the Issuer to take pursuant to the Indenture, including, without limitation,
pursuant to Sections 2.7, 3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 5.1(b), 7.3, 8.3, 9.2,
9.3, 11.1 and 11.15 of the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth in this
Agreement or any of the Basic Documents, the Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner
Trustee or shall cause the preparation by other appropriate Persons of all
such documents, reports, filings, instruments, certificates and opinions as
it shall be the duty of the Issuer or the Owner Trustee to prepare, file or
deliver pursuant to this Agreement or any of the Basic Documents or under
state and federal tax and securities laws, and at the request of the Owner
Trustee shall take all appropriate action that it is the duty of the Issuer
to take pursuant to this Agreement or any of the Basic Documents,
including, without limitation, pursuant to Sections 2.6 and 2.11 of the
Trust Agreement. In accordance with the directions of the Issuer or the
Owner Trustee, the Servicer shall administer, perform or supervise
-71-
the performance of such other activities in connection with the Collateral
(including the Basic Documents) as are not covered by any of the foregoing
provisions and as are expressly requested by the Issuer or the Owner
Trustee and are reasonably within the capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of the Basic
Documents to the contrary, the Servicer shall be responsible for promptly
notifying the Owner Trustee and the Trustee in the event that any
withholding tax is imposed on the Issuer's payments (or allocations of
income) to a Noteholder as contemplated this Agreement. Any such notice
shall be in writing and specify the amount of any withholding tax required
to be withheld by the Owner Trustee or the Trustee pursuant to such
provision.
(iii) Notwithstanding anything in this Agreement or the Basic
Documents to the contrary, the Servicer shall be responsible for
performance of the duties of the Issuer or the Seller set forth in Section
5.1 of the Trust Agreement with respect to, among other things, accounting
and reports to Certificateholders; provided, however, that once prepared by
the Servicer the Owner Trustee shall retain responsibility for the
distribution of the Schedule K-1s necessary to enable each
Certificateholder to prepare its federal and state income tax returns.
(iv) The Servicer shall perform the duties of the Servicer specified
in Section 10.2 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Owner Trustee, and any
other duties expressly required to be performed by the Servicer under this
Agreement or any of the Basic Documents.
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into transactions
with or otherwise deal with any of its Affiliates; provided, however, that
the terms of any such transactions or dealings shall be in accordance with
any directions received from the Issuer and shall be, in the Servicer's
opinion, no less favorable to the Issuer in any material respect.
(c) Tax Matters. The Servicer shall prepare and file, on behalf of the
Seller, all tax returns, tax elections, financial statements and such annual or
other reports of the Issuer as are necessary for preparation of tax reports as
provided in Article V of the Trust Agreement, including without limitation forms
1099 and 1066. All tax returns will be signed by the Seller.
(d) Non-Ministerial Matters. With respect to matters that in the reasonable
judgment of the Servicer are non-ministerial, the Servicer shall not take any
action pursuant to this Article XII unless within a reasonable time before the
taking of such action, the Servicer shall have notified the Owner Trustee and
the Trustee of the proposed action and the Owner Trustee and, with respect to
items (i), (ii), (iii) and (iv) below, the Trustee shall not have withheld
consent or provided an alternative direction. For the purpose of the preceding
sentence, "non-ministerial matters" shall include:
(i) the amendment of or any supplement to the Indenture;
-72-
(ii) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Receivables);
(iii) the amendment, change or modification of this Agreement or any
of the Basic Documents;
(iv) the appointment of successor Note Registrars, successor Paying
Agents and successor Trustees pursuant to the Indenture or the appointment
of Successor Servicers or the consent to the assignment by the Note
Registrar, Paying Agent or Trustee of its obligations under the Indenture;
and
(v) the removal of the Trustee.
(e) Exceptions. Notwithstanding anything to the contrary in this Agreement
except as expressly provided herein or in the other Basic Documents, the
Servicer, in its capacity hereunder, shall not be obligated to, and shall not,
(1) make any payments to the Noteholders or Certificateholders under the Basic
Documents, (2) sell the Indenture Trust Property pursuant to Section 5.5 of the
Indenture, (3) take any other action that the Issuer directs the Servicer not to
take on its behalf or (4) in connection with its duties hereunder assume any
indemnification obligation of any other Person.
(f) Limitation of Standby Servicer's Obligations. The Standby Servicer or
any successor Servicer shall not be responsible for any obligations or duties of
the Servicer under Section 12.1.
SECTION 12.2. Records. The Servicer shall maintain appropriate books of
account and records relating to services performed under this Agreement, which
books of account and records shall be accessible for inspection by the Issuer,
the Trustee and the Note Insurer at any time during normal business hours.
SECTION 12.3. Additional Information to be Furnished to the Issuer. The
Servicer shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1. Amendment.
(a) This Agreement may be amended from time to time by the parties hereto,
with the consent of the Trustee (which consent may not be unreasonably
withheld), with the prior written consent of the Note Insurer (so long as no
Insurer Default has occurred and is continuing) but
-73-
without the consent of any of the Noteholders or the Certificateholders, to cure
any ambiguity, to correct or supplement any provisions in this Agreement, to
comply with any changes in the Code, or to make any other provisions with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement or the Insurance Agreement;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Owner Trustee and the Trustee, adversely affect in any
material respect the interests of any Noteholder or Certificateholder; provided
further that if an Insurer Default has occurred and is continuing, such action
shall not materially adversely affect the interests of the Note Insurer.
This Agreement may also be amended from time to time by the parties hereto,
with the consent of the Note Insurer, the consent of the Trustee, the consent of
the Holders of Notes evidencing not less than a majority of the outstanding
principal amount of the Notes and the consent of the Holders (as defined in the
Trust Agreement) of Certificates evidencing not less than a majority of the
Certificate Balance for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that shall be required to be made for
the benefit of the Noteholders or the Certificateholders or (b) reduce the
aforesaid percentage of the outstanding principal amount of each Class of Notes
or the Certificates, the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all the outstanding Notes and
the Holders (as defined in the Trust Agreement) of all the outstanding
Certificates, of each Class affected thereby; provided further, that if an
Insurer Default has occurred and is continuing, such action shall not materially
adversely affect the interest of the Note Insurer.
Promptly after the execution of any such amendment or consent, the Trustee
shall furnish written notification of the substance of such amendment or consent
to each Securityholder and the Rating Agencies.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of Noteholders or Certificateholders provided for in this
Agreement) and of evidencing the authorization of any action by Noteholders or
Certificateholders shall be subject to such reasonable requirements as the
Trustee or the Owner Trustee, as applicable, may prescribe.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and the Opinion of Counsel referred to in Section 13.2(i)(1)
has been delivered. The Owner Trustee, the Standby Servicer and the Trustee may,
but shall not be obligated to, enter into any such amendment
-74-
which affects the Issuer's, the Owner Trustee's, the Standby Servicer's or the
Trustee's, as applicable, own rights, duties or immunities under this Agreement
or otherwise.
(b) Notwithstanding anything to the contrary contained in Section 13.1(a)
above, the provisions of this Agreement relating to (i) the Spread Account
Supplement, the Spread Account, the Requisite Amount (as defined in the Master
Spread Account Agreement), a Trigger Event or any component definition of a
Trigger Event and (ii) any additional sources of funds which may be added to the
Spread Account or uses of funds on deposit in the Spread Account may be amended
in any respect by the Seller, the Servicer, the Note Insurer and the Collateral
Agent (the consent of which shall not be withheld or delayed with respect to any
amendment that does not adversely affect the Collateral Agent) without the
consent of, or notice to, the Noteholders or the Certificateholders.
SECTION 13.2. Protection of Title to Trust.
(a) The Seller or Servicer or both shall execute and file such financing
statements and cause to be executed and filed such continuation statements, all
in such manner and in such places as may be required by law fully to preserve,
maintain and protect the interest of the Issuer and the interests of the Trustee
in the Receivables and in the proceeds thereof. The Seller shall deliver (or
cause to be delivered) to the Note Insurer, the Owner Trustee and the Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name, identity or
corporate structure in any manner that would, could or might make any financing
statement or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of section 9-402(7) of the UCC, unless
it shall have given the Note Insurer, the Owner Trustee and the Trustee at least
five days' prior written notice thereof and shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements. Promptly upon such filing, the Seller or the Servicer,
as the case may be, shall deliver an Opinion of Counsel to the Issuer, the Owner
Trustee, the Trustee and the Note Insurer, in form and substance reasonably
satisfactory to the Note Insurer, stating either (A) all financing statements
and continuation statements have been executed and filed that are necessary
fully to preserve and protect the interest of the Trust and the Trustee in the
Receivables, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (B) no such action shall
be necessary to preserve and protect such interest.
(c) Each of the Seller and the Servicer shall have an obligation to give
the Note Insurer, the Owner Trustee and the Trustee at least 60 days' prior
written notice of any relocation of its principal executive office if, as a
result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and shall promptly file any such
amendment. The Servicer shall at all times maintain each office from which it
shall service Receivables, and its principal executive office, within the United
States of America.
-75-
(d) The Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Receivable, including payments and recoveries made
and payments owing (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Receivable and the amounts
from time to time deposited in the Collection Account in respect of such
Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables to the Issuer,
the Servicer's master computer records (including any backup archives) that
refer to a Receivable shall indicate clearly the interest of the Trust in such
Receivable and that such Receivable is owned by the Trust. Indication of the
Trust's interest in a Receivable shall be deleted from or modified on the
Servicer's computer systems when, and only when, the related Receivable shall
have been paid in full or repurchased.
(f) If at any time the Seller or the Servicer shall propose to sell, grant
a security interest in or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Trust.
(g) The Servicer shall permit the Trustee, the Standby Servicer and the
Note Insurer and its agents at any time during normal business hours to inspect,
audit, and make copies of and abstracts from the Servicer's records regarding
any Receivable.
(h) Upon request, the Servicer shall furnish to the Note Insurer, the Owner
Trustee or to the Trustee, within five Business Days, a list of all Receivables
(by contract number and name of Obligor) then held as part of the Trust,
together with a reconciliation of such list to the Schedule of Receivables and
to each of the Servicer's Certificates furnished before such request indicating
removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Note Insurer, the Owner Trustee and
the Trustee:
(i) promptly after the execution and delivery of the Agreement and, if
required pursuant to Section 13.1, of each amendment, an Opinion of Counsel
stating that, in the opinion of such counsel, in form and substance
reasonably satisfactory to the Note Insurer, either (A) all financing
statements and continuation statements have been executed and filed that
are necessary fully to preserve and protect the interest of the Trust and
the Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(B) no such action shall be necessary to preserve and protect such
interest; and
(ii) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Cutoff Date, an Opinion of
-76-
Counsel, dated as of a date during such 90-day period, stating that, in the
opinion of such counsel, either (A) all financing statements and
continuation statements have been executed and filed that are necessary
fully to preserve and protect the interest of the Trust and the Trustee in
the Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) no such
action shall be necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (i) or (ii) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
SECTION 13.3. Notices. All demands, notices and communications upon or to
the Seller, the Servicer, the Owner Trustee, the Trustee or the Rating Agencies
under this Agreement shall be in writing, personally delivered, or mailed by
certified mail, return receipt requested, and shall be deemed to have been duly
given upon receipt (a) in the case of the Seller to CPS Receivables Funding
Corp., 2 Ada, Irvine, California 92718, (b) in the case of the Servicer to
Consumer Portfolio Services, Inc., 2 Ada, Irvine, California 92718, Attention:
Chief Financial officer, (c) in the case of the Issuer or the Owner Trustee, at
the Corporate Trust Office of the Owner Trustee, (d) in the case of the Trustee
or the Collateral Agent, at the Corporate Trust Office, (e) in the case of the
Note Insurer, to 350 Park Avenue, New York, New York 10022 Attention: Senior
Vice President, Surveillance (Telecopy: (212) 339-3547); (f) in the case of
Moody's, to Moody's Investors Service, Inc., ABS Monitoring Department, 99
Church Street, New York, New York 10007; and (g) in the case of Standard &
Poor's Ratings Group, to Standard & Poor's, a Division of The McGraw Hill
Companies, 25 Broadway, 15th Floor, New York, New York 10004, Attention: Asset
Backed Surveillance Department. Any notice required or permitted to be mailed to
a Noteholder or Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register or
Note Register, as applicable. Any notice so mailed within the time prescribed in
the Agreement shall be conclusively presumed to have been duly given, whether or
not the Certificateholder or Noteholder shall receive such notice.
SECTION 13.4. Assignment. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns. Notwithstanding anything to the contrary contained herein, except as
provided ln Sections 8.4 and 9.3 and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not be
assigned by the Seller or the Servicer without the prior written consent of the
Owner Trustee, the Trustee, the Standby Servicer, the Trustee and the Note
Insurer (or if an Insurer Default shall have occurred and be continuing the
Holders of Notes evidencing not less than 66% of the principal amount of the
outstanding Notes and the Holders of Certificates, the aggregate Certificate
Balance of which is not less than 66%.
SECTION 13.5. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the parties hereto and for the benefit
of the Owner Trustee and the Certificateholders (including the Seller), the
Trustee and the Noteholders, as third-party
-77-
beneficiaries. The Note Insurer and its successors and assigns shall be a
third-party beneficiary to the provisions of this Agreement, and shall be
entitled to rely upon and directly enforce such provisions of this Agreement so
long as no Insurer Default shall have occurred and be continuing. Except as
expressly stated otherwise, any right of the Note Insurer to direct, appoint,
consent to, approve of, or take any action under this Agreement, shall be a
right exercised by the Note Insurer in its sole and absolute discretion. The
Note Insurer may disclaim any of its rights and powers under this Agreement (but
not its duties and obligations under the Note Policy) upon delivery of a written
notice to the Owner Trustee and the Trustee. Nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person any legal or
equitable right, remedy or claim in the Owner Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
SECTION 13.6. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 13.7. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 13.8. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 13.9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 13.10. Assignment to Trustee. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to the Trustee pursuant to the Indenture for the benefit of the
Noteholders of all right, title and interest of the Issuer in, to and under the
Receivables and/or the assignment of any or all of the Issuer's rights and
obligations hereunder to the Trustee.
SECTION 13.11. Nonpetition Covenants.
(a) Notwithstanding any prior termination of this Agreement, the Servicer
and the Seller shall not, prior to the date which is one year and one day after
the termination of this Agreement with respect to the Issuer, acquiesce,
petition or otherwise invoke or cause the Issuer to invoke the process of any
court or government authority for the purpose of commencing or sustaining a
-78-
case against the Issuer under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
its property, or ordering the winding up or liquidation of the affairs of the
Issuer.
(b) Notwithstanding any prior termination of this Agreement, the Servicer
shall not, prior to the date that is one year and one day after the termination
of this Agreement with respect to the Seller, acquiesce to, petition or
otherwise invoke or cause the Seller to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Seller under any federal or state bankruptcy, insolvency or similar law,
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator,
or other similar official of the Seller or any substantial part of its property,
or ordering the winding up or liquidation of the affairs of the Seller.
SECTION 13.12. Limitation of Liability of Owner Trustee and Trustee.
(a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Bankers Trust (Delaware) not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Bankers Trust (Delaware) in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been executed and delivered by Norwest Bank Minnesota, National
Association, not in its individual capacity but solely as Trustee and Standby
Servicer and in no event shall Norwest Bank Minnesota, National Association,
have any liability for the representations, warranties, covenants, agreements or
other obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse shall be
had solely to the assets of the Issuer.
(c) In no event shall Norwest Bank Minnesota, National Association, in any
of its capacities hereunder, be deemed to have assumed any duties of the Owner
Trustee under the Delaware Business Trust Statute, common law, or the Trust
Agreement.
SECTION 13.13. Independence of the Servicer. For all purposes of this
Agreement, the Servicer shall be an independent contractor and shall not be
subject to the supervision of the Issuer, the Trustee and Standby Servicer or
the Owner Trustee with respect to the manner in which it accomplishes the
performance of its obligations hereunder. Unless expressly authorized
-79-
by this Agreement, the Servicer shall have no authority to act for or represent
the Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee.
SECTION 13.14. No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Servicer and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
SECTION 13.15. Note Insurer as Controlling Party. Each Noteholder by
purchase of the Notes held by it acknowledges that the Trustee, as partial
consideration of the issuance of the Note Policy, has agreed that the Note
Insurer shall have certain rights hereunder for so long as no Insurer Default
shall have occurred and be continuing. So long as an Insurer Default has
occurred and is continuing, any provision giving the Note Insurer the right to
direct, appoint or consent to, approve of, or take any action under this
Agreement shall be inoperative during the period of such Insurer Default and
such right shall instead vest in the Trustee acting at the direction of the
holders of Notes evidencing, unless otherwise specified, more than 50% of the
principal balance of the Notes. From and after such time as the Notes have been
paid in full, any provision giving the Note Insurer or the Noteholders the right
to direct, appoint or consent to, approve of, or take any action under this
Agreement shall be inoperative and such right shall instead vest in the Trustee
acting at the direction of the holders of the Certificates evidencing more than
50% of the Certificate Balance, unless otherwise specified. The Note Insurer may
disclaim any of its rights and powers under this Agreement (but not its duties
and obligations under the Policy) upon delivery of a written notice to the
Trustee. The Note Insurer may give or withhold any consent hereunder in its sole
and absolute discretion.
-80-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the day and the year first above written.
CPS AUTO RECEIVABLES
TRUST 1998-3
by
BANKERS TRUST (DELAWARE),
not in its individual capacity, but solely as
Owner Trustee on behalf of the Trust
By: /s/ Patricia M.F. Russo
Title: Vice President
CPS RECEIVABLES CORP., as Seller
By /s/ Jeffrey P. Fritz
Title: Chief Financial Officer
CONSUMER PORTFOLIO SERVICES, INC., as
Servicer
By /s/ Jeffrey P. Fritz
Title: Chief Financial Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
not in its individual capacity, but solely as
Standby Servicer and Trustee
By /s/ Shana Stephens-Murray
Title: Corporate Trust Officer
-81-
SCHEDULE A
SCHEDULE OF RECEIVABLES
EXHIBIT A
SERVICER'S CERTIFICATE
EXHIBIT B
TRUST RECEIPT
PURSUANT TO SECTION 3.5 OF
THE SALE AND SERVICING AGREEMENT
Consumer Portfolio Services, Inc., as Servicer (the "Servicer") of the
CPS Auto Receivables Trust 1998-3 (the "Trust") under the Sale and Servicing
Agreement (the "Sale and Servicing Agreement"), dated as of July 15, 1998, among
CPS Auto Receivables Trust 1998-3, CPS Receivables Corp., as Seller, Consumer
Portfolio Services, Inc., as Servicer, and Norwest Bank Minnesota, National
Association, as Trustee and Standby Servicer, does hereby acknowledge receipt of
the documents relating to the Receivables, each of which documents and the
Receivables to which they are related are listed on the attached Schedule 1
hereto. The Servicer furthermore agrees to return such documents to the Trustee
in accordance with the terms of the Sale and Servicing Agreement.
IN WITNESS WHEREOF I have hereunto set my hand this __ day of ____,
19__.
CONSUMER PORTFOLIO SERVICES, INC.,
as Servicer
By:
Name:
Title:
Acknowledged By:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
Name:
Title:
-3-
EXHIBIT C
SERVICING OFFICER'S CERTIFICATE
PURSUANT TO SECTION 3.5
OF THE SALE AND SERVICING AGREEMENT
The undersigned, ______________, hereby certifies that (s)he is a duly
elected and qualified officer of the Servicer, and hereby further certifies as
follows:
The Receivable described below has been fully liquidated and all
amounts required to be deposited in the Collection Account with respect to the
Receivable and the Obligor described below have been so deposited.
Servicer
Loan No.:
Obligor's Name:
Capitalized terms used herein which are not defined herein shall have
the meanings ascribed to them in the Sale and Servicing Agreement dated as of
July 15, 1998 among CPS Auto Receivables Trust 1998-3, Consumer Portfolio
Services, Inc., as servicer, CPS Receivables Corp., as seller, and Norwest Bank
Minnesota, National Association, as trustee and Standby Servicer.
IN WITNESS WHEREOF, I have hereunto set my hand on and as of this ___
day of ______________, 19___.
-----------------------------
Name:
Title:
-4-
EXHIBIT D
FORM OF MONTHLY SECURITYHOLDER STATEMENT
-5-
EXHIBIT E-1
TRUSTEE'S CERTIFICATE
PURSUANT TO SECTIONS 3.2 OR 3.4 OF
THE SALE AND SERVICING AGREEMENT
Norwest Bank Minnesota, National Association, as trustee (the
"Trustee") of the CPS Auto Receivables Trust 1998-3 (the "Trust") under the Sale
and Servicing Agreement (the "Sale and Servicing Agreement"), dated as of July
15, 1998, among the Trust, CPS Receivables Corp., as Seller, Consumer Portfolio
Services, Inc., as Servicer, and Norwest Bank Minnesota, National Association,
as Trustee and Standby Servicer, does hereby sell, transfer, assign, and
otherwise convey to Consumer Portfolio Services, Inc., without recourse,
representation, or warranty, all of the Trustee's right, title, and interest in
and to all of the Receivables (as defined in the Sale and Servicing Agreement)
identified in the attached Servicer's Certificate as "Purchased Receivables,"
which are to be repurchased by Consumer Portfolio Services, Inc. pursuant to
Section 3.2 or Section 3.4 of the Sale and Servicing Agreement and all security
and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this __ day of ____,
19__.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
Name:
Title:
-6-
Exhibit E-2
TRUSTEE'S CERTIFICATE
PURSUANT TO SECTIONS 4.7 OR 11.1 OF
THE SALE AND SERVICING AGREEMENT
Norwest Bank Minnesota, National Association, as trustee (the
"Trustee") of the CPS Auto Receivables Trust 1998-3 (the "Trust") under the Sale
and Servicing Agreement (the "Sale and Servicing Agreement"), dated as of July
15, 1998, among the Trust, CPS Receivables Corp., as Seller, Consumer Portfolio
Services, Inc., as Servicer (the "Servicer"), and Norwest Bank Minnesota,
National Association, as Trustee and Standby Servicer, does hereby sell,
transfer, assign, and otherwise convey to the Servicer, without recourse,
representation, or warranty, all of the Trustee's right, title, and interest in
and to all of the Receivables (as defined in the Sale and Servicing Agreement)
identified in the attached Servicer's Certificate as "Purchased Receivables,"
which are to be repurchased by the Servicer pursuant to Section 4.7 or Section
11.1 of the Sale and Servicing Agreement and all security and documents relating
thereto.
IN WITNESS WHEREOF I have hereunto set my hand this __ day of ____,
19__.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
Name:
Title:
-7-
EXHIBIT 10.1
RECEIVABLES PURCHASE AGREEMENT
EXECUTION COPY
PURCHASE AGREEMENT dated as of this July 15, 1998, by and between
CONSUMER PORTFOLIO SERVICES, INC., a California corporation (the "Seller"),
having its principal executive office at 2 Ada, Irvine, California 92718, and
CPS RECEIVABLES CORP., a California corporation (the "Purchaser"), having its
principal executive office at 2 Ada, Irvine, California 92718.
WHEREAS, in the regular course of its business, the Seller purchases
and services through its auto loan programs certain motor vehicle retail
installment sale contracts secured by new and used automobiles, light trucks,
vans or minivans acquired from motor vehicle dealers.
WHEREAS, the Seller and the Purchaser wish to set forth the terms
pursuant to which the CPS Receivables (as hereinafter defined), are to be sold
by the Seller to the Purchaser, which CPS Receivables together with the Samco
Receivables and the Linc Receivables will be transferred by the Purchaser,
pursuant to the Sale and Servicing Agreement (as hereinafter defined), to CPS
Auto Receivables Trust 1998-3, which Trust will issue notes under the Indenture
(as hereinafter defined) representing indebtedness of the Trust (the "Notes")
and certificates under the Trust Agreement (as hereinafter defined) representing
beneficial interests in the Trust (the "Certificates" and, together with the
Notes, the "Securities").
NOW, THEREFORE, in consideration of the foregoing, other good and
valuable consideration, and the mutual terms and covenants contained herein, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Terms not defined in this Agreement shall have the meaning set forth in
the Sale and Servicing Agreement and if not defined therein, shall have the
meanings set forth in the Indenture. As used in this Agreement, the following
terms shall, unless the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms of the
terms defined):
"Agreement" means this Purchase Agreement and the CPS Assignment.
"Assignment" means the CPS Assignment, Linc Assignment and/or the Samco
Assignment.
"Base Prospectus" means the Prospectus dated October 16, 1997, with
respect to CPS Auto Receivables Trusts and any amendment or supplement thereto.
"Closing Date" means July 28, 1998.
"CPS" means Consumer Portfolio Services, Inc., a California corporation
and its successors and assigns.
"CPS Assignment" means the assignment dated July 28, 1998, by the
Seller to the Purchaser, relating to the purchase of the CPS Receivables and
certain other property related thereto by the Purchaser from the Seller pursuant
to this Agreement, which shall be in substantially the form attached hereto as
Exhibit A.
"CPS Receivables" means each retail installment sale contract for a
Financed Vehicle that appears on the Schedule of CPS Receivables and all rights
thereunder.
"Indenture" means the Indenture dated as of July 15, 1998, between CPS
Auto Receivables Trust 1998-3, as issuer, and Norwest Bank Minnesota, National
Association, as trustee.
"Linc" means Linc Acceptance Company, LLC, a Delaware limited liability
company, and its successors and assigns.
"Linc Assignment" means the assignment substantially in the form of
Exhibit A to the Linc Purchase Agreement.
"Linc Purchase Agreement" means the Purchase Agreement dated as of July
15, 1998 between Linc Acceptance Company, LLC, as Seller, and CPS Receivables
Corp., as purchaser, as such agreement may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"Linc Receivable" shall have the meaning specified in the Linc Purchase
Agreement.
"Obligor(s)" means the purchaser or co-purchasers of a Financed Vehicle
or any other Person who owes or may be liable for payments under a Receivable.
"Offering Documents" means the Prospectus Supplement and the Base
Prospectus.
"Prospectus Supplement" means the Prospectus Supplement dated July 27,
1998, relating to the public offering of the Notes and any amendment or
supplement thereto.
"Purchase Agreement" means this Purchase Agreement, as this agreement
may be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.
-2-
"Purchaser" means CPS Receivables Corp., a California corporation, and
its successors and assigns.
"Receivables" means, collectively, the CPS Receivables, the Linc
Receivables and the Samco Receivables.
"Receivables Purchase Price" means $223,202,978.10.
"Repurchase Event" shall have the meaning specified in Section 6.2
hereof.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
dated as of July 15, 1998, among CPS Auto Receivables Trust 1998-3, as issuer,
CPS Receivables Corp., as seller, Consumer Portfolio Services, Inc., as
servicer, and Norwest Bank Minnesota, National Association, as trustee and
standby servicer, as such agreement may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"Samco" means Samco Acceptance Corp., a Delaware corporation, and its
successors and assigns.
"Samco Assignment" means the assignment substantially in the form of
Exhibit A to the Samco Purchase Agreement.
"Samco Purchase Agreement" means the Purchase Agreement dated as of
July 15, 1998, between Samco Acceptance Corp., as seller, and CPS Receivables
Corp., as purchaser, as such agreement may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"Samco Receivable" shall have the meaning specified in the Samco
Purchase Agreement.
"Schedule of CPS Receivables" means the list of CPS Receivables annexed
hereto as Exhibit B.
"Schedule of Linc Receivables" means the list of Linc Receivables
annexed as Exhibit B to the Linc Purchase Agreement.
"Schedule of Receivables" means, collectively, the Schedule of CPS
Receivables, the Schedule of Linc Receivables and the Schedule of Samco
Receivables.
"Schedule of Samco Receivables" means the list of Samco Receivables
annexed as Exhibit B to the Samco Purchase Agreement.
-3-
"Seller" means Consumer Portfolio Services, Inc., a California
corporation, in its capacity as seller of the CPS Receivables and the other CPS
Transferred Property relating thereto, and its successors and assigns.
"Servicer" means Consumer Portfolio Services, Inc., a California
corporation, in its capacity as Servicer of the Receivables, and its successors
and assigns.
"Transferred CPS Property" shall have the meaning specified in Section
2.1(a) hereof.
"Transferred Linc Property" shall have the meaning specified in the
Linc Purchase Agreement.
"Transferred Property" means the Transferred CPS Property, the
Transferred Linc Property and the Transferred Samco Property.
"Transferred Samco Property" shall have the meaning specified in the
Samco Purchase Agreement.
"Trust" means the CPS Auto Receivables Trust 1998-3 created by the
Trust Agreement.
"Trust Agreement" means the Trust Agreement dated as of July 8, 1998,
between CPS Receivables Corp. and Bankers Trust (Delaware), as Owner Trustee, as
amended and restated as of July 15, 1998.
"UCC" means the Uniform Commercial Code, as in effect from time to time
in the relevant jurisdictions.
"Underwriter" means Nomura Securities International, Inc.
"Underwriting Agreement" means the Underwriting Agreement, dated July
27, 1998, among the Underwriter, CPS, Samco, Linc and the Purchaser relating to
the Notes.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1. Purchase and Sale of Receivables. On the Closing Date, subject to
the terms and conditions of this Purchase Agreement, the Seller agrees to sell
to the Purchaser, and the Purchaser agrees to purchase from the Seller, without
recourse (subject to the obligations in this Purchase Agreement and the Sale and
Servicing Agreement), all of the Seller's right, title and interest in, to and
under the CPS Receivables and the other Transferred CPS
-4-
Property relating thereto. The conveyance to the Purchaser of the CPS
Receivables and other Transferred CPS Property relating thereto is intended as a
sale free and clear of all liens and it is intended that the Transferred CPS
Property and other property of the Purchaser shall not be part of the Seller's
estate in the event of the filing of a bankruptcy petition by or against the
Seller under any bankruptcy law.
(a) Transfer of Receivables. On the Closing Date and simultaneously
with the transactions to be consummated pursuant to the Trust Agreement, the
Indenture and the Sale and Servicing Agreement, the Seller shall sell, transfer,
assign, grant, set over and otherwise convey to the Purchaser, without recourse
(subject to the obligations herein and in the Sale and Servicing Agreement), all
right, title and interest of the Seller in and to (i) the CPS Receivables listed
in the Schedule of CPS Receivables, all monies received thereon after the Cutoff
Date and all Net Liquidation Proceeds received with respect thereto after the
Cutoff Date; (ii) the security interests in the Financed Vehicles granted by
Obligors pursuant to the CPS Receivables and any other interest of the Seller in
such Financed Vehicles, including, without limitation, the certificates of title
or, with respect to Financed Vehicles in the State of Michigan, other evidence
of ownership with respect to such Financed Vehicles; (iii) any proceeds from
claims on any physical damage, credit life and credit accident and health
insurance policies or certificates relating to the Financed Vehicles securing
the CPS Receivables or the Obligors thereunder; (iv) refunds for the costs of
extended service contracts with respect to Financed Vehicles securing the CPS
Receivables, refunds of unearned premiums with respect to credit life and credit
accident and health insurance policies or certificates covering an Obligor under
a CPS Receivable or Financed Vehicle securing a CPS Receivable or his or her
obligations with respect to a Financed Vehicle and any recourse to Dealers for
any of the foregoing; (v) the Receivable File related to each CPS Receivable;
and (vi) the proceeds of any and all of the foregoing (collectively, the
"Transferred CPS Property" and together with the Transferred Samco Property and
the Transferred Linc Property, the "Transferred Property").
(b) Receivables Purchase Price. In consideration for the CPS
Receivables and other Transferred Property described in Section 2.1(a), the
Purchaser shall, on the Closing Date, pay to the Seller the Receivables Purchase
Price. An amount equal to $198,247,510.10 of the Receivables Purchase Price
shall be paid to the Seller in cash. The remaining $24,955,468.04 of the
Receivables Purchase Price shall be deemed paid and returned to the Purchaser
and be considered a contribution to Purchaser's capital. The portion of the
Receivables Purchase Price to be paid in cash shall be by federal wire transfer
(same day) funds.
2.2. The Closing. The sale and purchase of the CPS Receivables shall
take place at a closing (the "Closing") at the offices of Mayer, Brown & Platt,
1675 Broadway, New York, New York 10019-5820 on the Closing Date, simultaneously
with the closings under: (a) the Samco Purchase Agreement pursuant to which
Samco will sell the Samco Receivables to CPS Receivables Corp., (b) the Linc
Purchase Agreement pursuant to which Linc will sell the Linc Receivables to CPS
Receivables Corp., (c) the Sale and Servicing Agreement
-5-
pursuant to which the Purchaser will assign all of its right, title and interest
in and to the Receivables and the other Transferred Property to the Trust for
the benefit of the Securityholders, (d) the Trust Agreement pursuant to which
the Trust shall be formed and the Certificates issued, (e) the Indenture
pursuant to which the Trust will issue the Notes, and (f) the Underwriting
Agreement pursuant to which the Purchaser shall sell the Notes to the
Underwriter.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Seller as of the date hereof and as of the
Closing Date (which representations and warranties shall survive the Closing
Date):
(a) Organization and Good Standing. The Purchaser has been duly
organized and is validly existing as a corporation in good standing under the
laws of the State of California, with power and authority to own its properties
and to conduct its business as such properties shall be currently owned and such
business is presently conducted, and had at all relevant times, and shall have,
power, authority and legal right to acquire and own the Receivables.
(b) Due Qualification. The Purchaser is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business shall require such qualifications.
(c) Power and Authority. The Purchaser has the power and authority to
execute and deliver the Agreements and to carry out its terms and the execution,
delivery and performance of the Agreements have been duly authorized by the
Purchaser by all necessary corporate action.
(d) Binding Obligation. This Agreement shall constitute a legal, valid
and binding obligation of the Purchaser enforceable in accordance with its
terms.
(e) No Violation. The execution, delivery and performance by the
Purchaser of the Agreements and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not conflict
with, result in a breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time) a default under, the articles of
incorporation or by-laws of the Purchaser, or any indenture, agreement,
mortgage, deed of trust, or other instrument to which the Purchaser is a party
or by which it is bound or to which any of its properties are subject; nor
result in the creation or imposition of any lien upon any of its properties
pursuant to the terms of any indenture, agreement,
-6-
mortgage, deed of trust, or other instrument (other than the Basic Documents);
nor violate any law, order, rule or regulation applicable to the Purchaser of
any court or of any Federal or State regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Purchaser or its
properties.
(f) No Proceedings. There are no proceedings or investigations pending,
or to the Purchaser's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Purchaser or its properties: (A) asserting the invalidity
of the Agreements or the Securities; (B) seeking to prevent the issuance of the
Securities or the consummation of any of the transactions contemplated by the
Agreements; (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Purchaser of its obligations under, or
the validity or enforceability of, the Agreements or the Securities; or (D)
relating to the Purchaser and which might adversely affect the Federal or State
income, excise, franchise or similar tax attributes of the Securities.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required to be obtained
by the Purchaser for the issuance or sale of the Securities or the consummation
of the other transactions contemplated by the Agreements, the Trust Agreement,
the Indenture or the Sale and Servicing Agreement, except such as have been duly
made or obtained.
3.2. Representations and Warranties of the Seller. (a) The Seller
hereby represents and warrants to the Purchaser as of the date hereof and as of
the Closing Date (which representations and warranties shall survive the Closing
Date):
(i) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of California, with power and authority to
own its properties and to conduct its business as such properties shall
be currently owned and such business is presently conducted and had at
all relevant times, and shall have, power, authority and legal right to
acquire, own and service the Receivables.
(ii) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business
(including the origination and the servicing of the Receivables as
required by the Sale and Servicing Agreement) shall require such
qualifications.
(iii) Power and Authority. The Seller has the power and
authority to execute and deliver the Agreements and to carry out their
terms; the Seller has full power and authority to sell and assign the
property sold and assigned to the Purchaser and has duly authorized
such sale and assignment to the Purchaser by all necessary
-7-
corporate action; and the execution, delivery and performance of the
Agreements have been duly authorized by the Seller by all necessary
corporate action.
(iv) Valid Sale; Binding Obligation. This Purchase Agreement
effects a valid sale, transfer and assignment of the CPS Receivables
and the other Transferred CPS Property conveyed to the Purchaser
pursuant to Section 2.1, enforceable against creditors of and
purchasers from the Seller; and this Agreement shall constitute a
legal, valid and binding obligation of the Seller enforceable in
accordance with its terms.
(v) No Violation. The execution, delivery and performance by
the Seller of the Agreements and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default
under, the articles of incorporation, as amended, or by-laws of the
Seller, or any indenture, agreement, mortgage, deed of trust, or other
instrument to which the Seller is a party or by which it is bound or to
which any of its properties are subject; nor result in the creation or
imposition of any lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust, or other
instrument (other than the Basic Documents); nor violate any law,
order, rule or regulation applicable to the Seller of any court or of
any Federal or State regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
properties.
(vi) No Proceedings. There are no proceedings or
investigations pending, or to the Seller's best knowledge, threatened,
before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Seller or its
properties: (A) asserting the invalidity of the Agreements or the
Securities; (B) seeking to prevent the issuance of the Securities or
the consummation of any of the transactions contemplated by the
Agreements; (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, the Agreements
or the Securities; or (D) relating to the Seller and which might
adversely affect the Federal or State income, excise, franchise or
similar tax attributes of the Securities.
(vii) No Consents. No consent, approval, authorization or
order of or declaration or filing with any governmental authority is
required for the issuance or sale of the Securities or the consummation
of the other transactions contemplated by the Agreements, the Trust
Agreement, the Indenture or the Sale and Servicing Agreement, except
such as have been duly made or obtained.
(viii) Financial Condition. The Seller has a positive net
worth and is able to and does pay its liabilities as they mature. The
Seller is not in default under any obligation to pay money to any
Person except for matters being disputed in good
-8-
faith which do not involve an obligation of the Seller on a promissory
note. The Seller will not use the proceeds from the transactions
contemplated by the Agreements to give any preference to any creditor
or class of creditors, and this transaction will not leave the Seller
with remaining assets which are unreasonably small compared to its
ongoing operations.
(ix) Fraudulent Conveyance. The Seller is not selling the CPS
Receivables to the Purchaser with any intent to hinder, delay or
defraud any of its creditors; the Seller will not be rendered insolvent
as a result of the sale of the CPS Receivables to the Purchaser.
(b) The Seller makes the following representations and warranties as to
the Receivables (including the Samco Receivables and the Linc Receivables) and
the other Transferred Property relating thereto on which the Purchaser relies in
accepting the Receivables and the other Transferred Property relating thereto.
Such representations and warranties speak with respect to each Receivable as of
the Closing Date and shall survive the sale, transfer, and assignment of the
Receivables and the other Transferred Property relating thereto to the Purchaser
and the subsequent assignments and transfers pursuant to the Sale and Servicing
Agreement and the Indenture:
(i) Origination Date. Each Receivable has an origination date
on or after May 2, 1997.
(ii) Principal Balance/Number of Contracts. As of the Cutoff
Date, the total aggregate principal balance of the Receivables was
$240,339,160.19. The Receivables are evidenced by 18,847 Contracts.
(iii) Maturity of Receivables. Each Receivable has an original
term to maturity of not more than 60 months; the weighted average
original term to maturity of the Receivables was 57.6 months as of the
Cutoff Date; the remaining term to maturity of each Receivable was 60
months or less as of the Cutoff Date; the weighted average remaining
term to maturity of the Receivables was 56.7 months as of the Cutoff
Date.
(iv) Characteristics of Receivables. (a) Each Receivable (1)
has been originated in the United States of America by a Dealer for the
retail sale of a Financed Vehicle in the ordinary course of such
Dealer's business, has been fully and properly executed by the parties
thereto and has been purchased by the Seller (or, with respect to the
Samco Receivables, Samco and, with respect to the Linc Receivables,
Linc) in connection with the sale of Financed Vehicles by the Dealers,
(2) has created a valid, subsisting, and enforceable first priority
security interest in favor of the Seller (or, with respect to the Samco
Receivables, Samco and, with respect to the Linc Receivables, Linc) in
the Financed Vehicle, which security interest has been assigned by the
Seller (or, with respect to the Samco Receivables, Samco
-9-
and, with respect to the Linc Receivables, Linc) to the Purchaser,
which in turn has assigned such security interest to the Trust pursuant
to the Sale and Servicing Agreement which will in turn assign such
security interest to the Trustee, (3) contains customary and
enforceable provisions such that the rights and remedies of the holder
or assignee thereof shall be adequate for realization against the
collateral of the benefits of the security, (4) provides for level
monthly payments that fully amortize the Amount Financed over the
original term (except for the last payment, which may be different from
the level payment) and yield interest at the Annual Percentage Rate,
(5) has an Annual Percentage Rate of not less than 15.95%, (6) that is
a Rule of 78's Receivable provides for, in the event that such
Receivable is prepaid, a prepayment that fully pays the Principal
Balance and includes a full month's interest, in the month of
prepayment, at the Annual Percentage Rate, (7) is a Rule of 78's
Receivable or a Simple Interest Receivable, and (8) was originated by a
Dealer and was sold by the Dealer without any fraud or
misrepresentation on the part of such Dealer.
(v) Approximately 90.86% of the aggregate Principal Balance of
the Receivables, constituting 92.73% of the number of Receivables, as
of the Cutoff Date, represents financing of used automobiles, light
trucks, vans or minivans; the remainder of the Receivables represent
financing of new automobiles, light trucks, vans or minivans;
approximately 8.81% of the aggregate Principal Balance of the
Receivables as of the Cutoff Date were originated under the Delta
program; approximately 49.96% of the aggregate Principal Balance of the
Receivables as of the Cutoff Date were originated under the Alpha
program; approximately 7.25% of the aggregate Principal Balance of the
Receivables as of the Cutoff Date were originated under the First Time
Buyer Program; approximately 31.14% of the aggregate Principal Balance
of the Receivables as of the Cutoff Date were originated under the
Standard program; approximately 1.78% of the aggregate Principal
Balance of the Receivables as of the Cutoff Date were originated under
the Linc program; and approximately 1.08% of the aggregate Principal
Balance of the Receivables as of the Cutoff Date were originated under
the Super Alpha program; approximately 1.78% of the aggregate Principal
Balance of the Receivables as of the Cutoff Date are Linc Receivables;
approximately 5.35% of the Receivables as of the Cutoff Date are Samco
Receivables; no Receivable shall have a payment that is more than 30
days overdue as of the Cutoff Date; 19.05% of the aggregate Principal
Balance of the Receivables as of the Cutoff Date are Rule of 78's
Receivables and 80.95% of the aggregate Principal Balance of the
Receivables as of the Cutoff Date are Simple Interest Receivables; each
Receivable shall have a final scheduled payment due no later than July
11, 2003; and each Receivable was originated on or before the Cutoff
Date.
(vi) Scheduled Payments. Each Receivable had an original
principal balance of not less than $2,597 nor more than $27,849 has an
outstanding principal balance as of the Cutoff Date of not less than
$1,045 and not more than $27,493.
-10-
(vii) Characteristics of Obligors. As of the date of each
Obligor's application for the loan from which the related Receivable
arises, each Obligor on any Receivable (a) did not have any material
past due credit obligations or any personal or real property
repossessed or wages garnished within one year prior to the date of
such application, unless such amounts have been repaid or discharged
through bankruptcy, (b) was not the subject of any Federal, State or
other bankruptcy, insolvency or similar proceeding pending on the date
of application that is not discharged, (c) had not been the subject of
more than one Federal, State or other bankruptcy, insolvency or similar
proceeding, and (d) was domiciled in the United States.
(viii) Origination of Receivables. Based on the billing
address of the Obligors and the Principal Balances as of the Cutoff
Date, approximately 19.0% of the Receivables were originated in
California.
(ix) Post-Office Box. On or prior to the next billing period
after the Cutoff Date, the Seller will notify each Obligor to make
payments with respect to its respective Receivables after the Cutoff
Date directly to the Post-Office Box, and will provide each Obligor
with a monthly statement in order to enable such Obligors to make
payments directly to the Post-Office Box.
(x) Location of Receivable Files; One Original. A complete
Receivable File with respect to each Receivable has been or prior to
the Closing Date will be delivered to the Trustee at the location
listed in Schedule B to the Sale and Servicing Agreement. There is only
one original executed copy of each Receivable.
(xi) Schedule of Receivables; Selection Procedures. The
information with respect to the Receivables set forth in the Schedule
of CPS Receivables, the Schedule of Linc Receivables and the Schedule
of Samco Receivables is true and correct in all material respects as of
the close of business on the Cutoff Date, and no selection procedures
adverse to the Securityholders have been utilized in selecting the
Receivables.
(xii) Compliance with Law. Each Receivable, the sale of the
Financed Vehicle and the sale of any physical damage, credit life and
credit accident and health insurance and any extended service contracts
complied at the time the related Receivable was originated or made and
at the execution of this Agreement complies in all material respects
with all requirements of applicable Federal, State and local laws, and
regulations thereunder including, without limitation, usury laws, the
Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the
Federal Reserve Board's Regulations B and Z, the Soldiers' and Sailors'
Civil Relief Act of 1940, the Texas Consumer Credit Code, the
California Automobile Sales Finance Act, and state adaptations of the
National
-11-
Consumer Act and of the Uniform Consumer Credit Code, and other
consumer credit laws and equal credit opportunity and disclosure laws.
(xiii) Binding Obligation. Each Receivable represents the
genuine, legal, valid and binding payment obligation in writing of the
Obligor, enforceable by the holder thereof in accordance with its
terms, except only as such enforcement may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally, and all parties to such contract had full legal
capacity to execute and deliver such contract and all other documents
related thereto and to grant the security interest purported to be
granted thereby.
(xiv) No Government Obligor. None of the Receivables are due
from the United States of America or any State or from any agency,
department, or instrumentality of the United States of America or any
State.
(xv) Security Interest in Financed Vehicle. Immediately prior
to the sale, assignment, and transfer thereof, each Receivable shall be
secured by a validly perfected first priority security interest in the
Financed Vehicle in favor of the Seller (or, with respect to the Samco
Receivables, Samco and, with respect to the Linc Receivables, Linc) as
secured party, and such security interest is prior to all other liens
upon and security interests in such Financed Vehicle which now exist or
may hereafter arise or be created (except, as to priority, for any tax
liens or mechanics' liens which may arise after the Closing Date).
(xvi) Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released
from the lien granted by the related Receivable in whole or in part.
(xvii) No Waiver. No provision of a Receivable has been
waived.
(xviii) No Amendments. No Receivable has been amended, except
as such Receivable may have been amended to grant extensions which
shall not have numbered more than (a) one extension of one calendar
month in any calendar year or (b) three such extensions in the
aggregate.
(xix) No Defenses. No right of rescission, setoff,
counterclaim or defense exists or has been asserted or threatened with
respect to any Receivable. The operation of the terms of any Receivable
or the exercise of any right thereunder will not render such Receivable
unenforceable in whole or in part or subject to any such right of
rescission, setoff, counterclaim, or defense.
(xx) No Liens. As of the Cutoff Date, there are no liens or
claims existing or which have been filed for work, labor, storage or
materials relating to a
-12-
Financed Vehicle that shall be liens prior to, or equal or coordinate
with, the security interest in the Financed Vehicle granted by the
Receivable.
(xxi) No Default; Repossession. Except for payment
delinquencies continuing for a period of not more than thirty days as
of the Cutoff Date, no default, breach, violation or event permitting
acceleration under the terms of any Receivable has occurred; and no
continuing condition that with notice or the lapse of time would
constitute a default, breach, violation, or event permitting
acceleration under the terms of any Receivable has arisen; and none of
the Seller, Samco or Linc shall waive and none of the three has waived
any of the foregoing; and no Financed Vehicle shall have been
repossessed as of the Cutoff Date.
(xxii) Insurance; Other. (A) Each Obligor has obtained
insurance covering the Financed Vehicle as of the execution of the
Receivable insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision coverage and each Receivable requires the
Obligor to obtain and maintain such insurance naming the Seller (or,
with respect to the Samco Receivables, Samco and, with respect to the
Linc Receivables, Linc) and its successors and assigns as an additional
insured, (B) each Receivable that finances the cost of premiums for
credit life and credit accident or health insurance is covered by an
insurance policy and certificate of insurance naming the Seller (or,
with respect to the Samco Receivables, Samco and, with respect to the
Linc Receivables, Linc) as policyholder (creditor) under each such
insurance policy and certificate of insurance and (C) as to each
Receivable that finances the cost of an extended service contract, the
respective Financed Vehicle which secures the Receivable is covered by
an extended service contract.
(xxiii) Title. It is the intention of the Seller that the
transfer and assignment herein contemplated constitute a sale of the
CPS Receivables and other Transferred CPS Property from the Seller to
the Purchaser and that the beneficial interest in and title to such CPS
Receivables and other Transferred CPS Property not be part of the
debtor's estate in the event of the filing of a bankruptcy petition by
or against the Seller under any bankruptcy law. No CPS Receivable or
other Transferred CPS Property has been sold, transferred, assigned, or
pledged by the Seller to any Person other than the Purchaser or any
such pledge has been released on or prior to the Closing Date.
Immediately prior to the transfer and assignment herein contemplated,
the Seller had good and marketable title to each CPS Receivable and
other Transferred CPS Property, and was the sole owner thereof, free
and clear of all liens, claims, encumbrances, security interests, and
rights of others and, immediately upon the transfer thereof, the
Purchaser shall have good and marketable title to each such CPS
Receivable and other Transferred CPS Property, and will be the sole
owner thereof, free and clear of all liens, encumbrances, security
interests, and rights of others, and the transfer has been perfected
under the UCC.
-13-
(xxiv) Lawful Assignment. No Receivable has been originated
in, or is subject to the laws of, any jurisdiction under which the
sale, transfer, and assignment of such Receivable under this Agreement,
the Linc Purchase Agreement or the Samco Purchase Agreement shall be
unlawful, void, or voidable. None of the Seller, Samco nor Linc has
entered into any agreement with any account debtor that prohibits,
restricts or conditions the assignment of any portion of the
Receivables.
(xxv) All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the
Purchaser a first priority perfected ownership interest in the
Receivables and the other Transferred CPS Property have been made,
taken or performed.
(xxvi) Chattel Paper. Each Receivable constitutes "chattel
paper" under the UCC.
(xxvii) Valid and Binding Obligation of Obligor. Each
Receivable is the legal, valid and binding obligation of the Obligor
thereunder and is enforceable in accordance with its terms, except only
as such enforcement may be limited by bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally, and all
parties to such contract had full legal capacity to execute and deliver
such contract and all other documents related thereto and to grant the
security interest purported to be granted thereby; the terms of such
Receivable have not been waived or modified in any respect.
(xxviii) Tax Liens. As of the Cutoff Date, there is no lien
against any Financed Vehicle for delinquent taxes.
(xxix) Title Documents. (A) If the Receivable was originated
in a State in which notation of a security interest on the title
document of the related Financed Vehicle is required or permitted to
perfect such security interest, the title document for such Receivable
shows, or if a new or replacement title document is being applied for
with respect to such Financed Vehicle the title document (or, with
respect to Receivables originated in the State of Michigan, all other
evidence of ownership with respect to such Financed Vehicle) will be
received within 180 days and will show, the Seller (or, with respect to
the Samco Receivables, Samco and, with respect to the Linc Receivables,
Linc) named as the original secured party under the related Receivable
as the holder of a first priority security interest in such Financed
Vehicle, and (B) if the Receivable was originated in a State in which
the filing of a financing statement under the UCC is required to
perfect a security interest in motor vehicles, such filings or
recordings have been duly made and show the Seller (or, with respect to
the Samco Receivables, Samco and, with respect to the Linc Receivables,
Linc) named as the original secured party under the related Receivable,
and in either case, the Trustee has the same rights as such secured
party has or would have (if such secured party were still the owner of
the Receivable) against all parties
-14-
claiming an interest in such Financed Vehicle. With respect to each
Receivable for which the title document of the related Financed Vehicle
has not yet been returned from the Registrar of Titles, the Seller has
received written evidence from the related Dealer that such title
document showing the Seller (or, with respect to the Samco Receivables,
Samco and, with respect to the Linc Receivables, Linc) and received
written evidence from the related Dealer that such title document
showing the Seller as first lienholder has been applied for.
(xxx) Casualty. No Financed Vehicle related to a Receivable
has suffered a Casualty.
(xxxi) Obligation to Dealers or Others. The Purchaser and its
assignees will assume no obligation to Dealers or other originators or
holders of the Receivables (including, but not limited to under dealer
reserves) as a result of the purchase of the Receivables.
(xxxii) Full Amount Advanced. The full amount of each
Receivable has been advanced to each Obligor, and there are no
requirements for future advances thereunder. No Obligor has any option
under a Receivable to borrow from any Person additional funds secured
by the related Financed Vehicle.
(c) The representations and warranties contained in this Agreement
shall not be construed as a warranty or guaranty by the Seller as to the future
payments by any Obligor. The sale of the CPS Receivables pursuant to this
Agreement shall be "without recourse" except for the representations, warranties
and covenants made by the Seller in this Agreement or the Sale and Servicing
Agreement.
ARTICLE IV
CONDITIONS
4.1. Conditions to Obligation of the Purchaser. On the Closing Date,
the obligation of the Purchaser to purchase the CPS Receivables is subject to
the satisfaction of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Seller hereunder shall be true and correct on the Closing Date
with the same effect as if then made, and the Seller shall have performed all
obligations to be performed by it hereunder on or prior to the Closing Date.
(b) Computer Files Marked. The Seller shall, at its own expense, on or
prior to the Closing Date, indicate in its computer files that the CPS
Receivables have been sold to the Purchaser pursuant to this Purchase Agreement
and shall deliver to the Purchaser
-15-
the Schedule of CPS Receivables certified by the Chairman, the President, the
Vice President or the Treasurer of the Seller to be true, correct and complete.
(c) Receivable Files Delivered. The Seller shall, at its own expense,
deliver the related Receivable Files to the Trustee at the offices specified in
Schedule B to the Sale and Servicing Agreement on or prior to the Closing Date.
(d) Documents to be delivered by the Seller at the Closing.
(i) The Assignment. On the Closing Date, the Seller will
execute and deliver the Assignment which shall be substantially in the
form of Exhibit A hereto.
(ii) Evidence of UCC-1 Filing. On or prior to the Closing
Date, the Seller shall record and file, at its own expense, a UCC-1
financing statement in each jurisdiction in which required by
applicable law, executed by the Seller, as seller or debtor, and naming
the Purchaser, as purchaser or secured party, naming the CPS
Receivables and the other Transferred CPS Property conveyed hereafter
as collateral, meeting the requirements of the laws of each such
jurisdiction and in such manner as is necessary to perfect the sale,
transfer, assignment and conveyance of such CPS Receivables to the
Purchaser. The Seller shall deliver a file-stamped copy, or other
evidence satisfactory to the Purchaser of such filing, to the Purchaser
on or prior to the Closing Date.
(iii) Evidence of UCC-2 Filing. On or prior to the Closing
Date, the Seller shall cause to be recorded and filed, at its own
expense, appropriate UCC-2 termination statements (or UCC-3 termination
statements, as applicable in the relevant UCC jurisdiction) executed by
General Electric Capital Corporation ("GECC") or First Union National
Bank ("First Union") in each jurisdiction in which required by
applicable law, meeting the requirements of the laws of each such
jurisdiction and in such manner as is necessary to release the interest
of GECC or First Union, as applicable interest in the Receivables,
including without limitation, the security interests in the Financed
Vehicles securing the Receivables and any proceeds of such security
interests or the Receivables. The Seller shall deliver a file-stamped
copy, or other evidence satisfactory to the Purchaser of such filing,
to the Purchaser on or prior to the Closing Date.
(iv) Other Documents. On or prior to the Closing Date, the
Seller shall deliver such other documents as the Purchaser may
reasonably request.
(e) Other Transactions. The transactions contemplated by the Trust
Agreement, the Indenture, the Sale and Servicing Agreement, the Samco Purchase
Agreement, the Linc Purchase Agreement, and the Underwriting Agreement shall be
consummated on the Closing Date.
-16-
4.2. Conditions to Obligation of the Seller. The obligation of the
Seller to sell the Receivables to the Purchaser is subject to the satisfaction
of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Purchaser hereunder shall be true and correct on the Closing
Date with the same effect as if then made, and the Seller shall have performed
all obligations to be performed by it hereunder on or prior to the Closing Date.
(b) Receivables Purchase Price. At the Closing Date, the Purchaser will
deliver to the Seller the CPS Receivables Purchase Price as provided in Section
2.1(b). The Seller hereby directs the Purchaser to wire such purchase price
pursuant to wire instructions to be delivered to the Purchaser on or prior to
the Closing Date.
ARTICLE V
COVENANTS OF THE SELLER
The Seller agrees with the Purchaser as follows; provided, however,
that to the extent that any provision of this ARTICLE V conflicts with any
provision of the Sale and Servicing Agreement, the Sale and Servicing Agreement
shall govern:
5.1. Protection of Right, Title and Interest.
(a) Filings. The Seller shall cause all financing statements and
continuation statements and any other necessary documents covering the right,
title and interest of the Purchaser in and to the Receivables and the other
Transferred Property to be promptly filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places as may be required
by law fully to preserve and protect the right, title and interest of the
Purchaser hereunder to the Receivables and the other Transferred Property. The
Seller shall deliver to the Purchaser file stamped copies of, or filing receipts
for, any document recorded, registered or filed as provided above, as soon as
available following such recordation, registration or filing. The Purchaser
shall cooperate fully with the Seller in connection with the obligations set
forth above and will execute any and all documents reasonably required to
fulfill the intent of this Section 5.1(a). In the event the Seller fails to
perform its obligations under this subsection, the Purchaser or the Trustee may
do so at the expense of the Seller.
(b) Name and Other Changes. At least 60 days prior to the date the
Seller makes any change in its name, identity or corporate structure which would
make any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the applicable provisions of the
UCC or any title statute, the Seller shall give the Trustee, the Insurer (so
long as an Insurer Default shall not have occurred and be continuing) and the
Purchaser written notice of any such change and no later
-17-
than five days after the effective date thereof, shall file appropriate
amendments to all previously filed financing statements or continuation
statements. At least 60 days prior to the date of any relocation of its
principal executive office, the Seller shall give the Trustee, the Insurer (so
long as an Insurer Default shall not have occurred and be continuing) and the
Purchaser written notice thereof if, as a result of such relocation, the
applicable provisions of the UCC would require the filing of any amendment of
any previously filed financing or continuation statement or of any new financing
statement and the Seller shall within five days after the effective date
thereof, file any such amendment or new financing statement. The Seller shall at
all times maintain each office from which it shall service Receivables, and its
principal executive office, within the United States of America.
(c) Accounts and Records. The Seller shall maintain accounts and
records as to each CPS Receivable accurately and in sufficient detail to permit
the reader thereof to know at any time the status of such CPS Receivable,
including payments and recoveries made and payments owing (and the nature of
each).
(d) Maintenance of Computer Systems. The Seller shall maintain its
computer systems so that, from and after the time of sale hereunder of the CPS
Receivables to the Purchaser, the Seller's master computer records (including
any back-up archives) that refer to a CPS Receivable shall indicate clearly the
interest of the Purchaser in such CPS Receivable and that such CPS Receivable is
owned by the Purchaser. Indication of the Purchaser's ownership of a CPS
Receivable shall be deleted from or modified on the Seller's computer systems
when, and only when, the CPS Receivable shall have been paid in full or
repurchased.
(e) Sale of Other Receivables. If at any time the Seller shall propose
to sell, grant a security interest in, or otherwise transfer any interest in any
automobile or light-duty truck receivables (other than the CPS Receivables) to
any prospective purchaser, lender, or other transferee, the Seller shall give to
such prospective purchaser, lender, or other transferee computer tapes, records,
or print-outs (including any restored from back-up archives) that, if they shall
refer in any manner whatsoever to any CPS Receivable, shall indicate clearly
that such CPS Receivable has been sold and is owned by the Purchaser unless such
CPS Receivable has been paid in full or repurchased.
(f) Access to Records. The Seller shall permit the Purchaser and its
agents at any time during normal business hours to inspect, audit, and make
copies of and abstracts from the Seller's records regarding any Receivable.
(g) List of Receivables. Upon request, the Seller shall furnish to the
Purchaser, within five Business Days, a list of all CPS Receivables (by contract
number and name of Obligor) then owned by the Purchaser, together with a
reconciliation of such list to the Schedule of CPS Receivables.
-18-
5.2. Other Liens or Interests. Except for the conveyances hereunder and
pursuant to the Sale and Servicing Agreement, the Seller will not sell, pledge,
assign or transfer to any other Person, or grant, create, incur, assume or
suffer to exist any lien on any interest therein, and the Seller shall defend
the right, title, and interest of the Purchaser in, to and under the Receivables
against all claims of third parties claiming through or under the Seller (or,
with respect to the Samco Receivables, Samco and, with respect to the Linc
Receivables, Linc).
5.3. Chief Executive Office. During the term of the Receivables, the
Seller will maintain its chief executive office in one of the United States,
except Louisiana or Vermont.
5.4. Costs and Expenses. The Seller agrees to pay all reasonable costs
and disbursements in connection with the perfection, as against all third
parties, of the Purchaser's right, title and interest in and to the CPS
Receivables.
5.5. Delivery of Receivable Files. On or prior to the Closing Date, the
Seller shall deliver the Receivable Files to the Trustee at the location
specified in Schedule B to the Sale and Servicing Agreement. The Seller shall
have until the last day of the second Collection Period following receipt from
the Trustee of notification, pursuant to Section 3.4 of the Sale and Servicing
Agreement, that there has been a failure to deliver a file with respect to a
Receivable (including a Samco Receivable or a Linc Receivable) or that a file is
unrelated to the Receivables identified in Schedule A to the Sale and Servicing
Agreement or that any of the documents referred to in Section 3.3 of the Sale
and Servicing Agreement are not contained in a Receivable File, to deliver such
file or any of the aforementioned documents required to be included in such
Receivable File to the Trustee. Unless such defect with respect to such
Receivable File shall have been cured by the last day of the second Collection
Period following discovery thereof by the Trustee, the Seller hereby agrees to
repurchase any such Receivable from the Trust as of such last day. In
consideration of the purchase of the Receivable, the Seller shall remit the
Purchase Amount in the manner specified in Section 4.5 of the Sale and Servicing
Agreement. The sole remedy hereunder of the Trustee, the Trust or the
Securityholders with respect to a breach of this Section 5.5, shall be to
require the Seller to repurchase the Receivable pursuant to this Section 5.5.
Upon receipt of the Purchase Amount, the Trustee shall release to the Seller or
its designee the related Receivable File and shall execute and deliver all
instruments of transfer or assignment, without recourse, as are prepared by the
Seller and delivered to the Trustee and are necessary to vest in the Seller or
such designee title to the Receivable.
5.6. Indemnification. (a) Subject to the limitation of remedies set
forth in Section 6.2 hereof with respect to a breach of any representations and
warranties contained in Section 3.2(b) hereof, the Seller shall indemnify the
Purchaser for any liability as a result of the failure of a Receivable to be
originated in compliance with all requirements of law and for any breach of any
of its representations and warranties contained herein.
-19-
(b) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all costs, expenses, losses, damages, claims, and
liabilities, arising out of or resulting from the use, ownership, or operation
by the Seller or any Affiliate thereof of a Financed Vehicle.
(c) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all taxes, except for taxes on the net income of the
Purchaser, that may at any time be asserted against the Purchaser with respect
to the transactions contemplated herein, including, without limitation, any
sales, gross receipts, general corporation, tangible personal property,
privilege, or license taxes and costs and expenses in defending against the
same.
(d) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all costs, expenses, losses, damages, claims and
liabilities to the extent that such cost, expense, loss, damage, claim or
liability arose out of, or was imposed upon the Purchaser through, the
negligence, willful misfeasance, or bad faith of the Seller in the performance
of its duties under the Agreement, or by reason of reckless disregard of the
Seller's obligations and duties under the Agreement.
(e) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against all costs, expenses, losses, damages, claims and liabilities
arising out of or incurred in connection with the acceptance or performance of
the Seller's trusts and duties as Servicer under the Sale and Servicing
Agreement, except to the extent that such cost, expense, loss, damage, claim or
liability shall be due to the willful misfeasance, bad faith, or negligence
(except for errors in judgment) of the Purchaser.
Indemnification under this Section 5.6 shall include reasonable fees
and expenses of litigation and shall survive payment of the Notes and
Certificates. These indemnity obligations shall be in addition to any obligation
that the Seller may otherwise have.
5.7. Sale. The Seller agrees to treat this conveyance for all purposes
(including without limitation tax and financial accounting purposes) as a sale
on all relevant books, records, tax returns, financial statements and other
applicable documents.
5.8. Non-Petition. In the event of any breach of a representation and
warranty made by the Purchaser hereunder, the Seller covenants and agrees that
it will not take any action to pursue any remedy that it may have hereunder, in
law, in equity or otherwise, until a year and a day have passed since the date
on which all securities issued by the Trust or a similar trust formed by the
Purchaser have been paid in full. The Purchaser and the Seller agree that
damages will not be an adequate remedy for such breach and that this covenant
may be specifically enforced by the Purchaser or by the Trust.
-20-
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1. Obligations of Seller. The obligations of the Seller under this
Agreement shall not be affected by reason of any invalidity, illegality or
irregularity of any Receivable.
6.2. Repurchase Events. The Seller hereby covenants and agrees with the
Purchaser for the benefit of the Purchaser, the Trustee, the Insurer and the
Securityholders, that (i) the occurrence of a breach of any of the Seller's
representations and warranties contained in Section 3.2(b) hereof (without
regard to any limitations regarding the Seller's knowledge) and (ii) the failure
of the Seller to timely comply with its obligations pursuant to Section 5.5
hereof, shall constitute events obligating the Seller to repurchase the affected
Receivables (including any affected Samco Receivables or Linc Receivables)
hereunder ("Repurchase Events"), at the Purchase Amount from the Trust. Unless
the breach of any of the Seller's representations and warranties shall have been
cured by the last day of the second Collection Period following the discovery
thereof by or notice to the Purchaser and the Seller of such breach, the Seller
shall repurchase any Receivable if such Receivable is materially and adversely
affected by the breach as of the last day of such second Collection Period (or,
at the Seller's option, the last day of the first Collection Period following
the discovery) and, in the event that the breach relates to a characteristic of
the Receivables in the aggregate, and if the Trust is materially and adversely
affected by such breach, unless the breach shall have been cured by such second
Collection Period, the Seller shall purchase such aggregate Principal Balance of
Receivables, such that following such purchase such representation shall be true
and correct with respect to the remainder of the Receivables in the aggregate.
The provisions of this Section 6.2 are intended to grant the Trustee a direct
right against the Seller to demand performance hereunder, and in connection
therewith the Seller waives any requirement of prior demand against the
Purchaser and waives any defaults it would have against the Purchaser with
respect to such repurchase obligation. Any such purchase shall take place in the
manner specified in Section 4.7 of the Sale and Servicing Agreement. For
purposes of this Section 6.2, the Purchase Amount of a Receivable which is not
consistent with the warranty pursuant to Section 3.2(b)(iv)(a)(5) or (iv)(a)(6)
shall include such additional amount as shall be necessary to provide the full
amount of interest as contemplated therein. The sole remedy hereunder of the
Securityholders, the Trust, the Insurer, the Trustee or the Purchaser against
the Seller with respect to any Repurchase Event shall be to enforce the Seller's
obligation to repurchase such Receivables pursuant to this Agreement; provided,
however, that the Seller shall indemnify the Trustee, the Insurer, the Trust and
the Securityholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and expenses of counsel, which may be
asserted against or incurred by any of them, as a result of third party claims
arising out of the events or facts giving rise to such breach. Upon receipt of
the Purchase Amount, the Purchaser shall cause the Trustee to release the
related Receivables File to the Seller and to execute and deliver all
instruments of transfer or assignment, without recourse, as are necessary to
vest in the Seller title to the Receivable. Notwithstanding the foregoing, if it
is determined that consummation of the
-21-
transactions contemplated by the Sale and Servicing Agreement, the Indentures
and the other transaction documents referenced in such Agreement, servicing and
operation of the Trust pursuant to Trust Agreement and such other documents, or
the ownership of a Security by a Holder constitutes a violation of the
prohibited transaction rules of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the Internal Revenue Code of 1986, as amended
("Code") for which no statutory exception or administrative exemption applies,
such violation shall not be treated as a Repurchase Event.
6.3. Seller's Assignment of Purchased Receivables. With respect to all
Receivables repurchased by the Seller pursuant to this Agreement, the Purchaser
shall assign, without recourse except as provided herein, representation or
warranty, to the Seller all the Purchaser's right, title and interest in and to
such Receivables, and all security and documents relating thereto.
6.4. Conveyance as Sale of Receivables Not Financing. The parties
hereto intend that the conveyance hereunder be a sale of the CPS Receivables and
the other Transferred CPS Property from the Seller to the Purchaser and not a
financing secured by such assets; and the beneficial interest in and title to
the CPS Receivables and the other Transferred CPS Property shall not be part of
the Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law. In the event that any conveyance
hereunder is for any reason not considered a sale, the parties intend that this
Agreement constitute a security agreement under the UCC (as defined in the UCC
as in effect in the State of California) and applicable law, and the Seller
hereby grants to the Purchaser a first priority perfected security interest in,
to and under the CPS Receivables and the other Transferred CPS Property being
delivered to the Purchaser on the Closing Date, and other property conveyed
hereunder and all proceeds of any of the foregoing for the purpose of securing
payment and performance of the Securities and the repayment of amounts owed to
the Purchaser from the Seller.
6.5. Trust. The Seller acknowledges that the Purchaser will, pursuant
to the Sale and Servicing Agreement, sell the Receivables to the Trust and
assign its rights under this Purchase Agreement, the Linc Purchase Agreement and
the Samco Purchase Agreement to the Trust, and that the representations and
warranties contained in this Agreement and the rights of the Purchaser under
this Purchase Agreement, including under Sections 6.2 and 6.4 hereof are
intended to benefit such Trust and the Securityholders. The Seller also
acknowledges that the Trustee on behalf of the Securityholders as assignee of
the Purchaser's rights hereunder may directly enforce, without making any prior
demand on the Purchaser, all the rights of the Purchaser hereunder including the
rights under Section 6.2 and 6.4 hereof. The Seller hereby consents to such sale
and assignment.
6.6. Amendment. This Purchase Agreement may be amended from time to
time by a written amendment duly executed and delivered by the Seller and the
Purchaser with the consent of the Insurer; provided, however, that (i) any such
amendment that materially adversely affects the rights of the Noteholders under
the Sale and Servicing Agreement must
-22-
be consented to by the holders of Notes representing more than 50% of the
outstanding principal amount of Notes and (ii) any such amendment that
materially adversely affects the rights of the Certificateholders under the Sale
and Servicing Agreement must be consented to by the holders of Certificates
representing more than 50% of the Certificate Balance.
6.7. Accountants' Letters. (a) KPMG Peat Marwick LLP will review the
characteristics of the Receivables and will compare those characteristics to the
information with respect to the Receivables contained in the Offering Documents;
(b) The Seller will cooperate with the Purchaser and KPMG Peat Marwick LLP in
making available all information and taking all steps reasonably necessary to
permit such accountants to complete the review set forth in Section 6.7(a) above
and to deliver the letters required of them under the Underwriting Agreement;
and (c) KPMG Peat Marwick LLP will deliver to the Purchaser a letter, dated the
Closing Date, in the form previously agreed to by the Seller and the Purchaser,
with respect to the financial and statistical information contained in the
Offering Documents under the captions "CPS's Automobile Contract Portfolio
- --Delinquency and Loss Experience" and "The Receivables Pool", certain
information relating to the Receivables on magnetic tape obtained from the
Seller and the Purchaser and with respect to such other information as may be
agreed in the form of letter.
6.8. Waivers. No failure or delay on the part of the Purchaser in
exercising any power, right or remedy under the Agreements shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other or further exercise thereof or the exercise
of any other power, right or remedy.
6.9. Notices. All communications and notices pursuant hereto to either
party shall be in writing or by telegraph or telex and addressed or delivered to
it at its address (or in case of telex, at its telex number at such address)
shown in the opening portion of this Purchase Agreement or at such other address
as may be designated by it by notice to the other party and, if mailed or sent
by telegraph or telex, shall be deemed given when mailed, communicated to the
telegraph office or transmitted by telex.
6.10. Costs and Expenses. The Seller will pay all expenses incident to
the performance of its obligations under this Purchase Agreement and the Seller
agrees to pay all reasonable out-of-pocket costs and expenses of the Purchaser,
excluding fees and expenses of counsel, in connection with the perfection as
against third parties of the Purchaser's right, title and interest in and to the
CPS Receivables and security interests in the Financed Vehicles and the
enforcement of any obligation of the Seller hereunder.
6.11. Representations of the Seller and the Purchaser. The respective
agreements, representations, warranties and other statements by the Seller and
the Purchaser set forth in or made pursuant to this Purchase Agreement shall
remain in full force and effect and will survive the closing under Section 2.2
hereof.
-23-
6.12. Confidential Information. The Purchaser agrees that it will
neither use nor disclose to any Person the names and addresses of the Obligors,
except in connection with the enforcement of the Purchaser's rights hereunder,
under the CPS Receivables, under the Sale and Servicing Agreement or as required
by law.
6.13. Headings and Cross-References. The various headings in this
Agreement are included for convenience only and shall not affect the meaning or
interpretation of any provision of this Purchase Agreement. References in this
Purchase Agreement to Section names or numbers are to such Sections of this
Purchase Agreement.
6.14. Third Party Beneficiaries. The parties hereto hereby expressly
agree that each of the Trustee for the benefit of the Securityholders and the
Note Insurer shall be third party beneficiaries with respect to this Purchase
Agreement, provided, however, that no third party other than the Trustee for the
benefit of the Securityholders and the Note Insurer shall be deemed a third
party beneficiary of this Purchase Agreement.
6.15. Governing Law. THIS PURCHASE AGREEMENT AND THE ASSIGNMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
6.16. Counterparts. This Purchase Agreement may be executed in two or
more counterparts and by different parties on separate counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
[Rest of page intentionally left blank.]
-24-
IN WITNESS WHEREOF, the parties hereby have caused this Purchase
Agreement to be executed by their respective officers thereunto duly authorized
as of the date and year first above written.
CPS RECEIVABLES CORP.
By /s/ Jeffrey P. Fritz
Title: Chief Financial Officer
CONSUMER PORTFOLIO SERVICES, INC.
By /s/ Jeffrey P. Fritz
Title: Chief Financial Officer
Exhibit A
ASSIGNMENT
For value received, on this 28th day of July, 1996, in accordance with
the Purchase Agreement dated as of July 15, 1998, between the undersigned (the
"Seller") and CPS Receivables Corp. (the "Purchaser") (the "CPS Purchase
Agreement"), the undersigned does hereby sell, transfer, assign and otherwise
convey unto the Purchaser, without recourse (subject to the obligations in the
CPS Purchase Agreement and the Sale and Servicing Agreement), all right, title
and interest of the Seller in and to (i) the CPS Receivables listed in the
Schedule of CPS Receivables, all monies received thereon after the Cutoff Date
and all Net Liquidation Proceeds received with respect thereto after the Cutoff
Date; (ii) the security interests in the Financed Vehicles granted by Obligors
pursuant to the CPS Receivables and any other interest of the Seller in such
Financed Vehicles, including, without limitation, the certificates of title or,
with respect to Financed Vehicles in the State of Michigan, other evidence of
ownership with respect to such Financed Vehicles; (iii) any proceeds from claims
on any physical damage, credit life and credit accident and health insurance
policies or certificates relating to the Financed Vehicles securing the CPS
Receivables; (iv) refunds for the costs of extended service contracts with
respect to Financed Vehicles securing the CPS Receivables, refunds of unearned
premiums with respect to credit life and credit accident and health insurance
policies or certificates covering an Obligor or Financed Vehicle or his or her
obligations with respect to a Financed Vehicle related to a CPS Receivable and
any recourse to Dealers for any of the foregoing; (v) the Receivable File
related to each CPS Receivable; and (vi) the proceeds of any and all of the
foregoing. The foregoing sale does not constitute and is not intended to result
in any assumption by the Purchaser of any obligation of the undersigned to the
Obligors, insurers or any other Person in connection with the CPS Receivables,
the related Receivable Files, any insurance policies or any agreement or
instrument relating to any of them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the CPS
Purchase Agreement and is to be governed by the CPS Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the CPS Purchase Agreement.
THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of the day and year first above written.
A-1
CONSUMER PORTFOLIO SERVICES, INC.
By:
Name:
Title:
Exhibit B
Schedule of CPS Receivables
See Following Page
A-1
EXHIBIT 10.2
RECEIVABLES PURCHASE AGREEMENT
EXECUTION COPY
PURCHASE AGREEMENT dated as of this July 15, 1998, by and between SAMCO
ACCEPTANCE CORP., a Delaware corporation (the "Seller"), having its principal
executive office at 8150 North Central Expressway, Dallas, Texas, 75206 and CPS
RECEIVABLES CORP., a California corporation (the "Purchaser"), having its
principal executive office at 2 Ada, Irvine, California 92718.
WHEREAS, in the regular course of its business, the Seller purchases
and services through its auto loan programs certain motor vehicle retail
installment sale contracts secured by new and used automobiles, light trucks,
vans or minivans acquired from motor vehicle dealers.
WHEREAS, the Seller and the Purchaser wish to set forth the terms
pursuant to which the Samco Receivables (as hereinafter defined), are to be sold
by the Seller to the Purchaser, which Samco Receivables together with the CPS
Receivables and Linc Receivables will be transferred by the Purchaser, pursuant
to the Sale and Servicing Agreement (as hereinafter defined), to CPS Auto
Receivables Trust 1998-3, which Trust will issue notes under the Indenture (as
hereinafter defined) representing indebtedness of the Trust (the "Notes") and
certificates under the Trust Agreement (as hereinafter defined) representing
beneficial interests in the Trust (the "Certificates" and, together with the
Notes, the "Securities").
NOW, THEREFORE, in consideration of the foregoing, other good and
valuable consideration, and the mutual terms and covenants contained herein, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Terms not defined in this Purchase Agreement shall have the meaning set
forth in the Sale and Servicing Agreement and, if not defined therein, shall
have the meaning set forth in the Indenture. As used in this Purchase Agreement,
the following terms shall, unless the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular and
plural forms of the terms defined):
"Agreement" means this Purchase Agreement and the Samco Assignment.
"Base Prospectus" means the Prospectus dated October 16, 1997, with
respect to CPS Auto Receivables Trusts and any amendment or supplement thereto.
"Closing Date" means July 28, 1998.
"CPS" means Consumer Portfolio Services, Inc., a California
corporation, and its successors and assigns.
"CPS Purchase Agreement" means the purchase agreement dated as of July
15, 1998, between Consumer Portfolio Services, Inc., as seller, and CPS
Receivables Corp., as purchaser, as such agreement may be amended, supplemented
or otherwise modified from time to time in accordance with the terms thereof.
"CPS Receivable" shall have the meaning specified in the CPS Purchase
Agreement.
"Indenture" means the Indenture dated as of July 15, 1998, between CPS
Auto Receivables Trust 1998-3, as issuer and Norwest Bank Minnesota, National
Association, as trustee.
"Linc" means Linc Acceptance Company LLC, a Delaware limited liability
company, and its successors and assigns.
"Linc Purchase Agreement" means the purchase agreement dated as of July
15, 1998, between Linc, as seller, and CPS Receivables Corp., as purchaser, as
such agreement may be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof.
"Linc Receivable" shall have the meaning specified in the Linc Purchase
Agreement.
"Obligor(s)" means the purchaser or co-purchasers of a Financed Vehicle
or any other Person who owes or may be liable for payments under a Receivable.
"Offering Documents" means the Prospectus Supplement and the Base
Prospectus.
"Prospectus Supplement" means the Prospectus Supplement dated July 27,
1998, relating to the public offering of the Notes and any amendment or
supplement thereto.
"Purchase Agreement" means this Purchase Agreement, as this agreement
may be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.
"Purchaser" means CPS Receivables Corp., a California corporation, and
its successors and assigns.
"Receivable" means, collectively, the CPS Receivables, the Linc
Receivables and the Samco Receivables.
"Receivables Purchase Price" means $12,858,145.07.
-2-
"Repurchase Event" shall have the meaning specified in Section 6.2
hereof.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
dated as of July 15, 1998, among CPS Auto Receivables Trust 1998-3, CPS
Receivables Corp., as seller, Consumer Portfolio Services, Inc., as servicer,
and Norwest Bank Minnesota, National Association, as Trustee and standby
servicer, as such agreement may be amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof.
"Samco" means Samco Acceptance Corp., a Delaware corporation, and its
successors and assigns.
"Samco Assignment" means the assignment dated July 28, 1998, by the
Seller to the Purchaser, relating to the purchase of the Samco Receivables and
certain other property related thereto by the Purchaser from the Seller pursuant
to this Purchase Agreement which shall be substantially in the form of Exhibit A
to this Purchase Agreement.
"Samco Purchase Agreement" means this Purchase Agreement, as this
agreement may be amended, supplemented or otherwise modified from time to time
in accordance with the terms hereof.
"Samco Receivable" means each retail installment sale contract for a
Financed Vehicle that appears on the Schedule of Samco Receivables and all
rights thereunder.
"Schedule of CPS Receivables" means the list of CPS Receivables annexed
as Exhibit B to the CPS Purchase Agreement.
"Schedule of Receivables" means the Schedule of Samco Receivables
and/or the CPS Schedule of Receivables.
"Schedule of Samco Receivables" means the list of Samco Receivables
annexed hereto as Exhibit B.
"Seller" means Samco Acceptance Corp., a Delaware corporation, in its
capacity as seller of the Samco Receivables and the other Transferred Samco
Property relating thereto, and its successors and assigns.
"Servicer" means Consumer Portfolio Services, Inc., a California
corporation, in its capacity as Servicer of the Receivables, and its successors
and assigns.
"Transferred CPS Property" shall have the meaning specified in the CPS
Purchase Agreement.
"Transferred Linc Property" shall have the meaning specified in the
Linc Purchase Agreement.
-3-
"Transferred Property" shall have the meaning specified in Section
2.1(a) hereof.
"Transferred Samco Property" shall have the meaning specified in
Section 2.1(a) hereof.
"Trust" means the CPS Auto Receivables Trust 1998-3 created by the
Trust Agreement.
"Trust Agreement" means the Trust Agreement between CPS Receivables
Corp. and Bankers Trust (Delaware), as Owner Trustee dated as of July 8, 1998,
as amended and restated as of July 15, 1998.
"UCC" means the Uniform Commercial Code, as in effect from time to time
in the relevant jurisdictions.
"Underwriter" means Nomura Securities International, Inc.
"Underwriting Agreement" means the Underwriting Agreement, dated July
27, 1998, among the Underwriter, CPS, Samco, Linc and the Purchaser relating to
the Notes.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1. Purchase and Sale of Receivables. On the Closing Date, subject to
the terms and conditions of this Purchase Agreement, the Seller agrees to sell
to the Purchaser, and the Purchaser agrees to purchase from the Seller, without
recourse (subject to the obligations in this Purchase Agreement and the Sale and
Servicing Agreement), all of the Seller's right, title and interest in, to and
under the Samco Receivables and the other Transferred Samco Property relating
thereto. The conveyance to the Purchaser of the Samco Receivables and other
Transferred Samco Property relating thereto is intended as a sale free and clear
of all liens and it is intended that the Transferred Samco Property and other
property of the Purchaser shall not be part of the Seller's estate in the event
of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law.
(a) Transfer of Receivables. On the Closing Date and
simultaneously with the transactions to be consummated pursuant to the Trust
Agreement, the Indenture and the Sale and Servicing Agreement, the Seller shall
sell, transfer, assign, grant, set over and otherwise convey to the Purchaser,
without recourse (subject to the obligations herein and in the Sale and
Servicing Agreement), all right, title and interest of the Seller in and to (i)
the Samco Receivables listed in the Schedule of Samco Receivables, all monies
received thereon after the Cutoff Date and all Net Liquidation Proceeds received
with respect thereto after the Cutoff Date; (ii) the security interests in the
Financed Vehicles granted by Obligors pursuant
-4-
to the Samco Receivables and any other interest of the Seller in such Financed
Vehicles, including, without limitation, the certificates of title or, with
respect to Financed Vehicles in the State of Michigan, other evidence of
ownership with respect to Financed Vehicles; (iii) any proceeds from claims on
any physical damage, credit life and credit accident and health insurance
policies or certificates relating to the Financed Vehicles securing the Samco
Receivables or the Obligors thereunder; (iv) refunds for the costs of extended
service contracts with respect to Financed Vehicles securing the Samco
Receivables, refunds of unearned premiums with respect to credit life and credit
accident and health insurance policies or certificates covering an Obligor or
Financed Vehicle securing the Samco Receivables or his or her obligations with
respect to such a Financed Vehicle and any recourse to Dealers for any of the
foregoing; (v) the Receivable File related to each Samco Receivable; and (vi)
the proceeds of any and all of the foregoing (collectively, the "Transferred
Samco Property" and together with the Transferred CPS Property and the
Transferred Linc Property, the "Transferred Property").
(b) Receivables Purchase Price. In consideration for the Samco
Receivables and other Transferred Samco Property described in Section 2.1(a),
the Purchaser shall, on the Closing Date, pay to the Seller the Receivables
Purchase Price by federal wire transfer (same day) funds.
2.2. The Closing. The sale and purchase of the Samco Receivables shall
take place at a closing (the "Closing") at the offices of Mayer, Brown & Platt,
1675 Broadway, New York, New York 10019-5820 on the Closing Date, simultaneously
with the closings under: (a) the CPS Purchase Agreement pursuant to which CPS
will sell the CPS Receivables to CPS Receivables Corp. (b) the Linc Purchase
Agreement pursuant to which Linc will sell the Linc Receivables to CPS
Receivables Corp., (c) the Sale and Servicing Agreement pursuant to which the
Purchaser will assign all of its right, title and interest in and to the
Receivables and the other Transferred Property to the Trust for the benefit of
the Securityholders, (d) the Trust Agreement pursuant to which the Trust shall
be formed and the Certificates issued, (e) the Indenture pursuant to which the
Trust will issue the Notes, and (f) the Underwriting Agreement pursuant to which
the Purchaser shall sell the Notes to the Underwriter.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Seller as of the date hereof and as of the
Closing Date (which representations and warranties shall survive the Closing
Date):
(a) Organization and Good Standing. The Purchaser has been duly
organized and is validly existing as a corporation in good standing under the
laws of the State of
-5-
California, with power and authority to own its properties and to conduct its
business as such properties shall be currently owned and such business is
presently conducted, and had at all relevant times, and shall have, power,
authority and legal right to acquire and own the Samco Receivables.
(b) Due Qualification. The Purchaser is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business shall require such qualifications.
(c) Power and Authority. The Purchaser has the power and authority to
execute and deliver the Agreements and to carry out its terms and the execution,
delivery and performance of the Agreements has been duly authorized by the
Purchaser by all necessary corporate action.
(d) Binding Obligation. This Agreement shall constitute a legal, valid
and binding obligation of the Purchaser enforceable in accordance with its
terms.
(e) No Violation. The execution, delivery and performance by the
Purchaser of the Agreements and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not conflict
with, result in a breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time) a default under, the articles of
incorporation or by-laws of the Purchaser, or any indenture, agreement,
mortgage, deed of trust, or other instrument to which the Purchaser is a party
or by which it is bound or to which any of its properties are subject; nor
result in the creation or imposition of any lien upon any of its properties
pursuant to the terms of any indenture, agreement, mortgage, deed of trust, or
other instrument (other than the Basic Documents); nor violate any law, order,
rule or regulation applicable to the Purchaser of any court or of any Federal or
State regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Purchaser or its properties.
(f) No Proceedings. There are no proceedings or investigations pending,
or to the Purchaser's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Purchaser or its properties: (A) asserting the invalidity
of the Agreements or the Securities; (B) seeking to prevent the issuance of the
Securities or the consummation of any of the transactions contemplated by the
Agreements; (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Purchaser of its obligations under, or
the validity or enforceability of, the Agreements or the Securities; or (D)
relating to the Purchaser and which might adversely affect the Federal or State
income, excise, franchise or similar tax attributes of the Securities.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required to be obtained
by the
-6-
Purchaser for the issuance or sale of the Securities or the consummation of the
other transactions contemplated by the Agreements, the Trust Agreement, the
Indenture or the Sale and Servicing Agreement, except such as have been duly
made or obtained.
3.2. Representations and Warranties of the Seller. (a) The Seller
hereby represents and warrants to the Purchaser as of the date hereof and as of
the Closing Date (which representations and warranties shall survive the Closing
Date):
(i) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware, with power and authority to
own its properties and to conduct its business as such properties shall
be currently owned and such business is presently conducted and had at
all relevant times, and shall have, power, authority and legal right to
acquire, and own the Samco Receivables.
(ii) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business
(including the origination of the Samco Receivables as required by the
Sale and Servicing Agreement) shall require such qualifications.
(iii) Power and Authority. The Seller has the power and
authority to execute and deliver this Agreement and to carry out its
terms; the Seller has full power and authority to sell and assign the
property sold and assigned to the Purchaser and has duly authorized
such sale and assignment to the Purchaser by all necessary corporate
action; and the execution, delivery and performance of the Agreements
has been duly authorized by the Seller by all necessary corporate
action.
(iv) Valid Sale; Binding Obligation. This Agreement effects a
valid sale, transfer and assignment of the Samco Receivables and the
other Transferred Samco Property conveyed to the Purchaser pursuant to
Section 2.1, enforceable against creditors of and purchasers from the
Seller; and this Agreement shall constitute a legal, valid and binding
obligation of the Seller enforceable in accordance with its terms.
(v) No Violation. The execution, delivery and performance by
the Seller of the Agreements and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default
under, the articles of incorporation, as amended, or by-laws of the
Seller, or any indenture, agreement, mortgage, deed of trust, or other
instrument to which the Seller is a party or by which it is bound or to
which any of its properties are subject; nor result in the creation or
imposition of any lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage,
-7-
deed of trust, or other instrument (other than the Basic Documents);
nor violate any law, order, rule or regulation applicable to the Seller
of any court or of any Federal or State regulatory body, administrative
agency or other governmental instrumentality having jurisdiction over
the Seller or its properties.
(vi) No Proceedings. There are no proceedings or
investigations pending, or to the Seller's best knowledge, threatened,
before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Seller or its
properties: (A) asserting the invalidity of the Agreements or the
Securities; (B) seeking to prevent the issuance of the Securities or
the consummation of any of the transactions contemplated by the
Agreements; (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, the Agreements
or the Securities; or (D) relating to the Seller and which might
adversely affect the Federal or State income, excise, franchise or
similar tax attributes of the Securities.
(vii) No Consents. No consent, approval, authorization or
order of or declaration or filing with any governmental authority is
required for the issuance or sale of the Securities or the consummation
of the other transactions contemplated by the Agreements, the Trust
Agreement, the Indenture or the Sale and Servicing Agreement, except
such as have been duly made or obtained.
(viii) Financial Condition. The Seller has a positive net
worth and is able to and does pay its liabilities as they mature. The
Seller is not in default under any obligation to pay money to any
Person except for matters being disputed in good faith which do not
involve an obligation of the Seller on a promissory note. The Seller
will not use the proceeds from the transactions contemplated by this
Agreement to give any preference to any creditor or class of creditors,
and this transaction will not leave the Seller with remaining assets
which are unreasonably small compared to its ongoing operations.
(ix) Fraudulent Conveyance. The Seller is not selling the
Samco Receivables to the Purchaser with any intent to hinder, delay or
defraud any of its creditors; the Seller will not be rendered insolvent
as a result of the sale of the Samco Receivables to the Purchaser.
(b) The Seller makes the following representations and warranties as to
the Samco Receivables and the other Transferred Samco Property relating thereto
on which the Purchaser relies in accepting the Samco Receivables and the other
Transferred Samco Property relating thereto. Such representations and warranties
speak with respect to each Samco Receivable as of the Closing Date and shall
survive the sale, transfer, and assignment of the Samco Receivables and the
other Transferred Samco Property relating thereto to the Purchaser and the
subsequent assignments and transfers pursuant to the Sale and Servicing
Agreement and the Indenture:
-8-
(i) Location of Receivable Files; One Original. A complete
Receivable File with respect to each Samco Receivable has been or prior
to the Closing Date will be delivered to the Trustee at the location
listed in Schedule B to the Sale and Servicing Agreement. There is only
one original executed copy of each Samco Receivable.
(ii) Schedule of Receivables; Selection Procedures. The
information with respect to the Samco Receivables set forth in the
Schedule of Samco Receivables is true and correct in all material
respects as of the close of business on the related Cutoff Date, and no
selection procedures adverse to the Securityholders have been utilized
in selecting the Samco Receivables.
(iii) Security Interest in Financed Vehicle. Immediately prior
to the sale, assignment, and transfer thereof, each Samco Receivable
shall be secured by a validly perfected first priority security
interest in the related Financed Vehicle in favor of the Seller as
secured party, and such security interest is prior to all other liens
upon and security interests in such Financed Vehicle which now exist or
may hereafter arise or be created (except, as to priority, for any tax
liens or mechanics' liens which may arise after the Closing Date).
(iv) Samco Receivables in Force. No Samco Receivable has been
satisfied, subordinated or rescinded, nor has any Financed Vehicle been
released from the lien granted by the related Samco Receivable in whole
or in part.
(v) No Waiver. No provision of a Samco Receivable has been
waived.
(vi) No Amendments. No Samco Receivable has been amended,
except as such Samco Receivable may have been amended to grant
extensions which shall not have numbered more than (a) one extension of
one calendar month in any calendar year or (b) three such extensions in
the aggregate.
(vii) No Default; Repossession. Except for payment
delinquencies continuing for a period of not more than thirty days as
of the Cutoff Date, no default, breach, violation or event permitting
acceleration under the terms of any Samco Receivable has occurred; and
no continuing condition that with notice or the lapse of time would
constitute a default, breach, violation, or event permitting
acceleration under the terms of any Samco Receivable has arisen; and
the Seller shall not waive and has not waived any of the foregoing; and
no Financed Vehicle securing a Samco Receivable shall have been
repossessed as of the Cutoff Date.
(viii) Title. It is the intention of the Seller that the
transfer and assignment herein contemplated constitute a sale of the
Samco Receivables and other Transferred Samco Property from the Seller
to the Purchaser and that the beneficial
-9-
interest in and title to such Samco Receivables and other Transferred
Samco Property not be part of the debtor's estate in the event of the
filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. No Samco Receivable or other Transferred Samco Property
has been sold, transferred, assigned, or pledged by the Seller to any
Person other than the Purchaser or any such pledge has been released on
or prior to the Closing Date. Immediately prior to any transfer and
assignment herein contemplated, the Seller had good and marketable
title to each Samco Receivable and other Transferred Samco Property,
and was the sole owner thereof, free and clear of all liens, claims,
encumbrances, security interests, and rights of others and, immediately
upon the transfer thereof, the Purchaser shall have good and marketable
title to each such Samco Receivable and other Transferred Samco
Property, and will be the sole owner thereof, free and clear of all
liens, encumbrances, security interests, and rights of others, and the
transfer has been perfected under the UCC.
(ix) Lawful Assignment. No Samco Receivable has been
originated in, or is subject to the laws of, any jurisdiction under
which the sale, transfer, and assignment of such Samco Receivable under
the Agreements shall be unlawful, void, or voidable. The Seller has not
entered into any agreement with any account debtor that prohibits,
restricts or conditions the assignment of any portion of the Samco
Receivables.
(x) All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the
Purchaser a first priority perfected ownership interest in the Samco
Receivables and the other Transferred Samco Property have been made,
taken or performed.
(xi) Casualty. No Financed Vehicle related to a Samco
Receivable has suffered a Casualty.
(xii) Obligation to Dealers or Others. The Purchaser and its
assignees will assume no obligation to Dealers or other originators or
holders of the Samco Receivables (including, but not limited to under
dealer reserves) as a result of the purchase of the Samco Receivables.
(xiii) Full Amount Advanced. The full amount of each Samco
Receivable has been advanced to each Obligor, and there are no
requirements for future advances thereunder. No Obligor with respect to
a Samco Receivable has any option under the Samco Receivable to borrow
from any Person additional funds secured by the related Financed
Vehicle.
(c) The representations and warranties contained in this Agreement
shall not be construed as a warranty or guaranty by the Seller as to the future
payments by any Obligor. The sale of the Samco Receivables pursuant to this
Agreement shall be "without recourse" to
-10-
the Seller except for the representations, warranties and covenants made by the
Seller in this Purchase Agreement.
ARTICLE IV
CONDITIONS
4.1. Conditions to Obligation of the Purchaser. On the Closing Date,
the obligation of the Purchaser to purchase the Samco Receivables is subject to
the satisfaction of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Seller hereunder shall be true and correct on the Closing Date
with the same effect as if then made, and the Seller shall have performed all
obligations to be performed by it hereunder on or prior to the Closing Date.
(b) Computer Files Marked. The Seller shall, at its own expense, on or
prior to the Closing Date, indicate in its computer files that the Samco
Receivables have been sold to the Purchaser pursuant to the Agreements and shall
deliver to the Purchaser the Schedule of Samco Receivables certified by the
Chairman, the President, the Vice President or the Treasurer of the Seller to be
true, correct and complete.
(c) Receivable Files Delivered. The Seller shall, at its own expense,
deliver the related Receivable Files to the Trustee at the offices specified in
Schedule B to the Sale and Servicing Agreement on or prior to the Closing Date.
(d) Documents to be delivered by the Seller on the Closing Date.
(i) The Assignment. On the Closing Date, the Seller will
execute and deliver the applicable Assignment. The Assignment shall be
substantially in the form of Exhibit A hereto.
(ii) Evidence of UCC-1 Filing. On or prior to the Closing
Date, the Seller shall record and file, at its own expense, a UCC-1
financing statement in each jurisdiction in which required by
applicable law, executed by the Seller, as seller or debtor, and naming
the Purchaser, as purchaser or secured party, naming the Samco
Receivables and the other Transferred Samco Property conveyed hereafter
as collateral, meeting the requirements of the laws of each such
jurisdiction and in such manner as is necessary to perfect the sale,
transfer, assignment and conveyance of such Samco Receivables to the
Purchaser. The Seller shall deliver a file-stamped copy, or other
evidence satisfactory to the Purchaser of such filing, to the Purchaser
on or prior to the Closing Date.
-11-
(iii) Other Documents. On or prior to the Closing Date, the
Seller shall deliver such other documents as the Purchaser may
reasonably request.
(e) Other Transactions. The transactions contemplated by the Trust
Agreement, the Indenture, the Sale and Servicing Agreement, the CPS Purchase
Agreement, the Linc Purchase Agreement, the Underwriting Agreement and the
Certificate Purchase Agreement shall be consummated on the Closing Date.
4.2. Conditions to Obligation of the Seller. The obligation of the
Seller to sell the Samco Receivables to the Purchaser is subject to the
satisfaction of the following conditions on the Closing Date:
(a) Representations and Warranties True. The representations and
warranties of the Purchaser hereunder shall be true and correct on the Closing
Date with the same effect as if then made, and the Seller shall have performed
all obligations to be performed by it hereunder on or prior to the Closing Date.
(b) Receivables Purchase Price. The Purchaser will deliver to the
Seller the purchase price for the related Samco Receivables (on the Closing Date
as provided in Section 2.1(b)). The Seller hereby directs the Purchaser to wire
such purchase price pursuant to wire instructions to be delivered to the
Purchaser on or prior to the Closing Date.
ARTICLE V
COVENANTS OF THE SELLER
The Seller agrees with the Purchaser as follows:
5.1. Protection of Right, Title and Interest.
(a) Filings. The Seller shall cause all financing statements and
continuation statements and any other necessary documents covering the right,
title and interest of the Purchaser in and to the Samco Receivables and the
other Transferred Samco Property to be promptly filed, and at all times to be
kept recorded, registered and filed, all in such manner and in such places as
may be required by law fully to preserve and protect the right, title and
interest of the Purchaser hereunder to the Samco Receivables and the other
Transferred Samco Property. The Seller shall cause to be delivered to the
Purchaser file stamped copies of, or filing receipts for, any document recorded,
registered or filed as provided above, as soon as available following such
recordation, registration or filing. The Purchaser shall cooperate fully with
the Seller in connection with the obligations set forth above and will execute
any and all documents reasonably required to fulfill the intent of this Section
5.1(a). In the event the Seller fails to perform its obligations under this
subsection, the Purchaser or the Trustee may do so at the expense of the Seller.
-12-
(b) Name and Other Changes. At least 60 days prior to the date the
Seller makes any change in its name, identity or corporate structure which would
make any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the applicable provisions of the
UCC or any title statute, the Seller shall give the Trustee, the Insurer (so
long as an Insurer Default shall not have occurred and be continuing) and the
Purchaser written notice of any such change and no later than five days after
the effective date thereof, shall file appropriate amendments to all previously
filed financing statements or continuation statements. At least 60 days prior to
the date of any relocation of its principal executive office, the Seller shall
give the Trustee, the Insurer (so long as an Insurer Default shall not have
occurred and be continuing) and the Purchaser written notice thereof if, as a
result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and the Seller shall within five
days after the effective date thereof, file any such amendment or new financing
statement. The Seller shall at all times maintain each office from which it
shall service Receivables, and its principal executive office, within the United
States of America.
(c) Maintenance of Computer Systems. The Seller shall maintain its
computer systems so that, from and after the time of sale to the Purchaser of
the Samco Receivables hereunder, the Seller's master computer records (including
any back-up archives) that refer to a Samco Receivable shall indicate clearly
the interest of the Purchaser in such Samco Receivable and that such Samco
Receivable is owned by the Purchaser. Indication of the Purchaser's ownership of
a Samco Receivable shall be deleted from or modified on the Seller's computer
systems when, and only when, the Samco Receivable shall have been paid in full
or repurchased.
(d) Sale of Other Receivables. If at any time the Seller shall propose
to sell, grant a security interest in, or otherwise transfer any interest in any
automobile or light-duty truck receivables (other than the Samco Receivables) to
any prospective purchaser, lender, or other transferee, the Seller shall give to
such prospective purchaser, lender, or other transferee computer tapes, records,
or print-outs (including any restored from back-up archives) that, if they shall
refer in any manner whatsoever to any Samco Receivable, shall indicate clearly
that such Samco Receivable has been sold and is owned by the Purchaser unless
such Samco Receivable has been paid in full or repurchased.
(e) Access to Records. The Seller shall permit the Purchaser and its
agents at any time during normal business hours to inspect, audit, and make
copies of and abstracts from the Seller's records regarding any Samco
Receivable.
(f) List of Receivables. Upon request, the Seller shall furnish to the
Purchaser, within five Business Days, a list of all Samco Receivables (by
contract number and name of Obligor) then owned by the Purchaser, together with
a reconciliation of such list to the Schedule of Samco Receivables.
-13-
5.2. Other Liens or Interests. Except for the conveyances hereunder and
pursuant to the Sale and Servicing Agreement, the Seller will not sell, pledge,
assign or transfer to any other Person, or grant, create, incur, assume or
suffer to exist any lien on any interest therein, and the Seller shall defend
the right, title, and interest of the Purchaser in, to and under the Samco
Receivables against all claims of third parties claiming through or under the
Seller.
5.3. Chief Executive Office. During the term of the Samco Receivables,
the Seller will maintain its chief executive office in one of the United States,
except Louisiana or Vermont.
5.4. Costs and Expenses. The Seller agrees to pay all reasonable costs
and disbursements in connection with the perfection, as against all third
parties, of the Purchaser's right, title and interest in and to the Samco
Receivables.
5.5. Delivery of Receivable Files. On or prior to the Closing Date, the
Seller shall cause to be delivered to the Trustee at the location specified in
Schedule B to the Sale and Servicing Agreement the Receivables Files relating to
the Samco Receivables. The Seller shall have until the last day of the second
Collection Period following receipt of notification that there has been a
failure to deliver a file with respect to a Samco Receivable or that a file is
unrelated to the Receivables identified in Schedule A to the Sale and Servicing
Agreement or that any of the documents referred to in Section 3.3 of the Sale
and Servicing Agreement are not contained in a Receivable File, to deliver such
file or any of the aforementioned documents required to be included in such
Receivable File to the Trustee. Unless such defect with respect to such
Receivable File shall have been cured by the last day of the second Collection
Period following discovery thereof by the Trustee and notice thereof to Samco,
the Seller hereby agrees to repurchase any such Receivable from the Trust as of
such last day. In consideration of the purchase of the Receivable, the Seller
shall remit the Purchase Amount in the manner specified in Section 4.7 of the
Sale and Servicing Agreement. The sole remedy hereunder of the Trustee, the
Trust or the Securityholders with respect to a breach of this Section 5.5, shall
be to require the Seller to repurchase the Receivable pursuant to this Section
5.5. Upon receipt of the Purchase Amount, the Trustee shall release to the
Seller or its designee the related Receivable File and shall execute and deliver
all instruments of transfer or assignment, without recourse, as are prepared by
the Seller and delivered to the Trustee and are necessary to vest in the Seller
or such designee title to the Receivable.
5.6. Indemnification. (a) Subject to the limitation of remedies set
forth in Section 6.2 hereof with respect to a breach of any representations and
warranties contained in Section 3.2(b) hereof, the Seller shall indemnify the
Purchaser for any liability as a result of the failure of a Samco Receivable to
be originated in compliance with all requirements of law and for any breach of
any of its representations and warranties contained herein.
-14-
(b) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all costs, expenses, losses, damages, claims, and
liabilities, arising out of or resulting from the use, ownership, or operation
by the Seller or any Affiliate thereof of a Financed Vehicle related to a Samco
Receivable.
(c) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all taxes, except for taxes on the net income of the
Purchaser, that may at any time be asserted against the Purchaser with respect
to the transactions contemplated herein, including, without limitation, any
sales, gross receipts, general corporation, tangible personal property,
privilege, or license taxes and costs and expenses in defending against the
same.
(d) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all costs, expenses, losses, damages, claims and
liabilities to the extent that such cost, expense, loss, damage, claim or
liability arose out of, or was imposed upon the Purchaser through, the
negligence, willful misfeasance, or bad faith of the Seller in the performance
of its duties under the Agreements, or by reason of reckless disregard of the
Seller's obligations and duties under the Agreements.
Indemnification under this Section 5.6 shall include reasonable fees
and expenses of litigation and shall survive payment of the Notes and
Certificates. These indemnity obligations shall be in addition to any obligation
that the Seller may otherwise have.
5.7. Sale. The Seller agrees to treat this conveyance for all purposes
(including without limitation tax and financial accounting purposes) as a sale
on all relevant books, records, tax returns, financial statements and other
applicable documents.
5.8. Non-Petition. In the event of any breach of a representation and
warranty made by the Purchaser hereunder, the Seller covenants and agrees that
it will not take any action to pursue any remedy that it may have hereunder, in
law, in equity or otherwise, until a year and a day have passed since the date
on which all securities issued by the Trust or a similar trust formed by the
Purchaser have been paid in full. The Purchaser and the Seller agree that
damages will not be an adequate remedy for such breach and that this covenant
may be specifically enforced by the Purchaser or by the Trust.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1. Obligations of Seller. The obligations of the Seller under the
Agreements shall not be affected by reason of any invalidity, illegality or
irregularity of any Samco Receivable.
-15-
6.2. Repurchase Events. The Seller hereby covenants and agrees with the
Purchaser for the benefit of the Purchaser, the Trustee, the Insurer and the
Securityholders, that (i) the occurrence of a breach of any of the Seller's
representations and warranties contained in Section 3.2(b) hereof (without
regard to any limitations regarding the Seller's knowledge) and (ii) the failure
of the Seller to timely comply with its obligations pursuant to Section 5.5
hereof, shall constitute events obligating the Seller to repurchase the affected
Samco Receivables hereunder ("Repurchase Events"), at the Purchase Amount from
the Trust. Unless the breach of any of the Seller's representations and
warranties shall have been cured by the last day of the second Collection Period
following the discovery thereof by or notice to the Purchaser and the Seller of
such breach, the Seller shall repurchase any Samco Receivable if such Samco
Receivable is materially and adversely affected by the breach as of the last day
of such second Collection Period (or, at the Seller's option, the last day of
the first Collection Period following the discovery) and, in the event that the
breach relates to a characteristic of the Samco Receivables in the aggregate,
and if the Trust is materially and adversely affected by such breach, unless the
breach shall have been cured by such second Collection Period, the Seller shall
purchase such aggregate Principal Balance of Samco Receivables, such that
following such purchase such representation shall be true and correct with
respect to the remainder of the Samco Receivables in the aggregate. The
provisions of this Section 6.2 are intended to grant the Trustee a direct right
against the Seller to demand performance hereunder, and in connection therewith
the Seller waives any requirement of prior demand against the Purchaser and
waives any defaults it would have against the Purchaser with respect to such
repurchase obligation. Any such purchase shall take place in the manner
specified with respect to CPS in Section 4.7 of the Sale and Servicing
Agreement. The sole remedy hereunder of the Securityholders, the Trust, the
Insurer, the Trustee or the Purchaser against the Seller with respect to any
Repurchase Event shall be to enforce the Seller's obligation to repurchase such
Samco Receivables pursuant to this Agreement; provided, however, that the Seller
shall indemnify the Trustee, the Insurer, the Trust and the Securityholders
against all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them, as a result of third party claims arising out of the
events or facts giving rise to such breach. Upon receipt of the Purchase Amount,
the Purchaser shall cause the Trustee to release the related Receivables File to
the Seller and to execute and deliver all instruments of transfer or assignment,
without recourse, as are necessary to vest in the Seller title to the Samco
Receivable. Notwithstanding the foregoing, if it is determined that consummation
of the transactions contemplated by the Sale and Servicing Agreement and the
other transaction documents referenced in such Agreement, servicing and
operation of the Trust pursuant to such Agreement and such other documents, or
the ownership of a Security by a Holder constitutes a violation of the
prohibited transaction rules of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the Internal Revenue Code of 1986, as amended
("Code") for which no statutory exception or administrative exemption applies,
such violation shall not be treated as a Repurchase Event.
6.3. Seller's Assignment of Purchased Receivables. With respect to all
Samco Receivables repurchased by the Seller pursuant to the Agreements, the
Purchaser shall
-16-
assign, without recourse except as provided herein, representation or warranty,
to the Seller all the Purchaser's right, title and interest in and to such Samco
Receivables, and all security and documents relating thereto.
6.4. Conveyance as Sale of Receivables Not Financing. The parties
hereto intend that the conveyance under this Agreement be a sale of the Samco
Receivables and the other Transferred Samco Property from the Seller to the
Purchaser and not a financing secured by such assets; and the beneficial
interest in and title to the Samco Receivables and the other Transferred Samco
Property shall not be part of the Seller's estate in the event of the filing of
a bankruptcy petition by or against the Seller under any bankruptcy law. In the
event that any conveyance hereunder is for any reason not considered a sale, the
parties intend that this Agreement constitute a security agreement under the UCC
(as defined in the UCC as in effect in the State of Texas) and applicable law,
and the Seller hereby grants to the Purchaser a first priority perfected
security interest in, to and under the Samco Receivables and the other
Transferred Samco Property being delivered to the Purchaser on the Closing Date,
and other property conveyed hereunder and all proceeds of any of the foregoing
for the purpose of securing payment and performance of the Securities and the
repayment of amounts owed to the Purchaser from the Seller. In the event that
the assignment of a Samco Receivable to the Purchaser is insufficient, without a
notation on the related Financed Vehicle's certificate of title, or without
fulfilling any additional administrative requirements under the laws of the
state in which the Financed Vehicle is located, to perfect a security interest
in the related Financed Vehicle in favor of the Purchaser, the Seller and
Purchaser hereby agree that the Seller's designation as the secured party on the
certificate of title is in its capacity as agent of the Purchaser and the
Purchaser's transferees.
6.5. Trust. The Seller acknowledges that the Purchaser will, pursuant
to the Sale and Servicing Agreement, sell the Receivables to the Trust and
assign its rights under this Purchase Agreement, the Linc Purchase Agreement and
the CPS Purchase Agreement to the Trustee for the benefit of the
Securityholders, and that the representations and warranties contained in this
Agreement and the rights of the Purchaser under this Purchase Agreement,
including under Sections 6.2 and 6.4 hereof are intended to benefit such Trust
and the Securityholders. The Seller also acknowledges that the Trustee on behalf
of the Securityholders as assignee of the Purchaser's rights hereunder may
directly enforce, without making any prior demand on the Purchaser, all the
rights of the Purchaser hereunder including the rights under Section 6.2 and 6.4
hereof. The Seller hereby consents to such sale and assignment.
6.6. Amendment. This Agreement may be amended from time to time by a
written amendment duly executed and delivered by the Seller and the Purchaser
with the consent of the Insurer; provided, however, that (i) any such amendment
that materially adversely affects the rights of the Noteholders under the Sale
and Servicing Agreement must be consented to by the holders of Notes
representing more than 50% of the outstanding principal amount of Notes and (ii)
any such amendment that materially adversely affects the rights of the
-17-
Certificateholders under the Sale and Servicing Agreement must be consented to
by the holders of Certificates representing more than 50% of the Certificate
Balance.
6.7. Waivers. No failure or delay on the part of the Purchaser in
exercising any power, right or remedy under the Agreements shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other or further exercise thereof or the exercise
of any other power, right or remedy.
6.8. Notices. All communications and notices pursuant hereto to either
party shall be in writing or by telegraph or telex and addressed or delivered to
it at its address (or in case of telex, at its telex number at such address)
shown in the opening portion of this Agreement or at such other address as may
be designated by it by notice to the other party and, if mailed or sent by
telegraph or telex, shall be deemed given when mailed, communicated to the
telegraph office or transmitted by telex.
6.9. Costs and Expenses. The Seller will pay all expenses incident to
the performance of its obligations under this Purchase Agreement.
6.10. Representations of the Seller and the Purchaser. The respective
agreements, representations, warranties and other statements by the Seller and
the Purchaser set forth in or made pursuant to this Purchase Agreement shall
remain in full force and effect and will survive each closing hereunder.
6.11. Confidential Information. The Purchaser agrees that it will
neither use nor disclose to any Person the names and addresses of the Obligors,
except in connection with the enforcement of the Purchaser's rights hereunder,
under the Samco Receivables, under the Sale and Servicing Agreement or as
required by law.
6.12. Headings and Cross-References. The various headings in this
Purchase Agreement are included for convenience only and shall not affect the
meaning or interpretation of any provision of this Purchase Agreement.
References in this Purchase Agreement to Section names or numbers are to such
Sections of this Purchase Agreement.
6.13. Third Party Beneficiaries. The parties hereto hereby expressly
agree that each of the Trustee for the benefit of the Securityholders and the
Note Insurer shall be third party beneficiaries with respect to this Purchase
Agreement, provided, however, that no third party other than the Trustee for the
benefit of the Securityholders and the Note Insurer shall be deemed a third
party beneficiary of this Purchase Agreement.
6.14. Governing Law. THIS PURCHASE AGREEMENT AND THE ASSIGNMENTS SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
-18-
6.15. Counterparts. This Agreement may be executed in two or more
counterparts and by different parties on separate counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
[Rest of page intentionally left blank.]
-19-
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
and year first above written.
CPS RECEIVABLES CORP.
By /s/ Jeffrey P. Fritz
Title: Chief Financial Officer
SAMCO ACCEPTANCE CORP.
By: /s/ Todd Kesteron
Title: Chief Financial Officer
-20-
Exhibit A
ASSIGNMENT
For value received, on this 28th day July, 1998, in accordance with the
Purchase Agreement dated as of July 18, 1998, between the undersigned (the
"Seller") and CPS Receivables Corp. (the "Purchaser") (the "Samco Purchase
Agreement"), the undersigned does hereby sell, transfer, assign and otherwise
convey unto the Purchaser, without recourse (subject to the obligations in the
Samco Purchase Agreement and the Sale and Servicing Agreement), all right, title
and interest of the Seller in and to (i) the Samco Receivables listed in the
Schedule of Samco Receivables, all monies received thereon after the Cutoff Date
and all Net Liquidation Proceeds received with respect thereto after the Cutoff
Date; (ii) the security interests in the Financed Vehicles granted by Obligors
pursuant to the Samco Receivables and any other interest of the Seller in such
Financed Vehicles, including, without limitation, the certificates of title or,
with respect to Financed Vehicles in the State of Michigan, other evidence of
ownership with respect to Financed Vehicles; (iii) any proceeds from claims on
any physical damage, credit life and credit accident and health insurance
policies or certificates relating to the Financed Vehicles securing the Samco
Receivables; (iv) refunds for the costs of extended service contracts with
respect to Financed Vehicles securing the Samco Receivables, refunds of unearned
premiums with respect to credit life and credit accident and health insurance
policies or certificates covering an Obligor or Financed Vehicle securing the
Samco Receivables or his or her obligations with respect to such a Financed
Vehicle and any recourse to Dealers for any of the foregoing; (v) the Receivable
File related to each Samco Receivable; and (vi) the proceeds of any and all of
the foregoing. The foregoing sale does not constitute and is not intended to
result in any assumption by the Purchaser of any obligation of the undersigned
to the Obligors, insurers or any other Person in connection with the Samco
Receivables, the Receivable Files, any insurance policies or any agreement or
instrument relating to any of them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Samco
Purchase Agreement and is to be governed by the Samco Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Samco Purchase Agreement.
THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of day and year first above written.
SAMCO ACCEPTANCE CORP.
By:
Todd Kesterson
Chief Financial Officer
-2-
Exhibit B
Schedule of Samco Receivables
See Following Page
EXHIBIT 10.3
RECEIVABLES PURCHASE AGREEMENT
EXECUTION COPY
PURCHASE AGREEMENT dated as of this July 15, 1998, by and between LINC
ACCEPTANCE COMPANY LLC, a Delaware limited liability company (the "Seller"),
having its principal executive office at One Selleck Street, Norwalk,
Connecticut 06855, and CPS RECEIVABLES CORP., a California corporation (the
"Purchaser"), having its principal executive office at 2 Ada, Irvine, California
92718.
WHEREAS, in the regular course of its business, the Seller purchases
and services through its auto loan programs certain motor vehicle retail
installment sale contracts secured by new and used automobiles, light trucks,
vans or minivans acquired from motor vehicle dealers.
WHEREAS, the Seller and the Purchaser wish to set forth the terms
pursuant to which the Linc Receivables (as hereinafter defined), are to be sold
by the Seller to the Purchaser, which Linc Receivables together with the CPS
Receivables and Samco Receivables will be transferred by the Purchaser, pursuant
to the Sale and Servicing Agreement (as hereinafter defined), to CPS Auto
Receivables Trust 1998-3, which Trust will issue notes under the Indenture (as
hereinafter defined) representing indebtedness of the Trust (the "Notes") and
certificates under the Trust Agreement (as hereinafter defined) representing
beneficial interests in the Trust (the "Certificates" and, together with the
Notes, the "Securities").
NOW, THEREFORE, in consideration of the foregoing, other good and
valuable consideration, and the mutual terms and covenants contained herein, the
parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Terms not defined in this Purchase Agreement shall have the meaning set
forth in the Sale and Servicing Agreement and, if not defined therein, shall
have the meaning set forth in the Indenture. As used in this Purchase Agreement,
the following terms shall, unless the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular and
plural forms of the terms defined):
"Agreement" means this Purchase Agreement and the Linc Assignment.
"Base Prospectus" means the Prospectus dated October 16, 1997, with
respect to CPS Auto Receivables Trusts and any amendment or supplement thereto.
"Closing Date" means July 28, 1998.
"CPS" means Consumer Portfolio Services, Inc., a California
corporation, and its successors and assigns.
"CPS Purchase Agreement" means the purchase agreement dated as of July
15, 1998, between Consumer Portfolio Services, Inc., as seller, and CPS
Receivables Corp., as purchaser, as such agreement may be amended, supplemented
or otherwise modified from time to time in accordance with the terms thereof.
"CPS Receivable" shall have the meaning specified in the CPS Purchase
Agreement.
"CPS Transferred Property" shall have the meaning specified in the CPS
Purchase Agreement
"Indenture" means the Indenture dated as of July 15, 1998, between CPS
Auto Receivables Trust 1998-3, as issuer and Norwest Bank Minnesota, National
Association, as trustee.
"Linc" means Linc Acceptance Company, LLC, a Delaware limited liability
company, and its successors and assigns.
"Linc Assignment" means the assignment dated July 28, 1998, by the
Seller to the Purchaser, relating to the purchase of the Linc Receivables and
certain other property related thereto by the Purchaser from the Seller pursuant
to this Purchase Agreement which shall be substantially in the form of Exhibit A
to this Purchase Agreement.
"Linc Purchase Agreement" means this Purchase Agreement, as this
agreement may be amended, supplemented or otherwise modified from time to time
in accordance with the terms hereof.
"Linc Receivable" means each retail installment sale contract for a
Financed Vehicle that appears on the Schedule of Linc Receivables and all rights
thereunder.
"Obligor(s)" means the purchaser or co-purchasers of a Financed Vehicle
or any other Person who owes or may be liable for payments under a Receivable.
"Offering Documents" means the Prospectus Supplement and the Base
Prospectus.
"Prospectus Supplement" means the Prospectus Supplement dated July 27,
1998, relating to the public offering of the Notes and any amendment or
supplement thereto.
"Purchase Agreement" means this Purchase Agreement, as this agreement
may be amended, supplemented or otherwise modified from time to time in
accordance with the
-2-
terms hereof.
"Purchaser" means CPS Receivables Corp., a California corporation, and
its successors and assigns.
"Receivable" means, collectively, the CPS Receivables, the Linc
Receivables and the Samco Receivables.
"Receivables Purchase Price" means $4,278,037.05.
"Repurchase Event" shall have the meaning specified in Section 6.2
hereof.
"Sale and Servicing Agreement" means the Sale and Servicing Agreement
dated as of July 15, 1998, among CPS Auto Receivables Trust 1998-3, CPS
Receivables Corp., as seller, Consumer Portfolio Services, Inc., as servicer,
and Norwest Bank Minnesota, National Association, as Trustee and standby
servicer, as such agreement may be amended, supplemented or otherwise modified
from time to time in accordance with the terms thereof.
"Samco Purchase Agreement" means the purchase agreement dated as of
July 15, 1998, between Samco Acceptance Corp., as seller, and CPS Receivables
Corp., as purchaser, as such agreement may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"Samco Receivable" shall have the meaning specified in the Samco
Purchase Agreement.
"Schedule of CPS Receivables" means the list of CPS Receivables annexed
as Exhibit B to the CPS Purchase Agreement.
"Schedule of Linc Receivables" means the list of Linc Receivables
annexed hereto as Exhibit B.
"Schedule of Receivables" means the Schedule of Linc Receivables and/or
the CPS Schedule of Receivables.
"Seller" means Linc Acceptance Corp., a Delaware corporation, in its
capacity as seller of the Linc Receivables and the other Transferred Linc
Property relating thereto, and its successors and assigns.
"Servicer" means Consumer Portfolio Services, Inc., a California
corporation, in its capacity as Servicer of the Receivables, and its successors
and assigns.
"Transferred CPS Property" shall have the meaning specified in the CPS
Purchase Agreement.
-3-
"Transferred Linc Property" shall have the meaning specified in Section
2.1(a) hereof.
"Transferred Property" shall have the meaning specified in Section
2.1(a) hereof.
"Transferred Samco Property" shall have the meaning specified in the
Samco Purchase Agreement.
"Trust" means the CPS Auto Receivables Trust 1998-3 created by the
Trust Agreement.
"Trust Agreement" means the Trust Agreement between CPS Receivables
Corp. and Bankers Trust (Delaware), as Owner Trustee dated as of July 8, 1998,
as amended and restated as of July 15, 1998.
"UCC" means the Uniform Commercial Code, as in effect from time to time
in the relevant jurisdictions.
"Underwriter" means Nomura Securities International, Inc.
"Underwriting Agreement" means the Underwriting Agreement, dated July
27, 1998, among the Underwriter, CPS, Linc, Samco and the Purchaser relating to
the Notes.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1. Purchase and Sale of Receivables. On the Closing Date, subject to
the terms and conditions of this Purchase Agreement, the Seller agrees to sell
to the Purchaser, and the Purchaser agrees to purchase from the Seller, without
recourse (subject to the obligations in this Purchase Agreement and the Sale and
Servicing Agreement), all of the Seller's right, title and interest in, to and
under the Linc Receivables and the other Transferred Linc Property relating
thereto. The conveyance to the Purchaser of the Linc Receivables and other
Transferred Linc Property relating thereto is intended as a sale free and clear
of all liens and it is intended that the Transferred Linc Property and other
property of the Purchaser shall not be part of the Seller's estate in the event
of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy law.
(a) Transfer of Receivables. On the Closing Date and simultaneously
with the transactions to be consummated pursuant to the Trust Agreement, the
Indenture and the Sale and Servicing Agreement, the Seller shall sell, transfer,
assign, grant, set over and otherwise convey to the Purchaser, without recourse
(subject to the obligations herein and in the Sale and Servicing Agreement), all
right, title and interest of the Seller in and to (i) the Linc
-4-
Receivables listed in the Schedule of Linc Receivables, all monies received
thereon after the Cutoff Date and all Net Liquidation Proceeds received with
respect thereto after the Cutoff Date; (ii) the security interests in the
Financed Vehicles granted by Obligors pursuant to the Linc Receivables and any
other interest of the Seller in such Financed Vehicles, including, without
limitation, the certificates of title or, with respect to Financed Vehicles in
the State of Michigan, other evidence of ownership with respect to Financed
Vehicles; (iii) any proceeds from claims on any physical damage, credit life and
credit accident and health insurance policies or certificates relating to the
Financed Vehicles securing the Linc Receivables or the Obligors thereunder; (iv)
refunds for the costs of extended service contracts with respect to Financed
Vehicles securing the Linc Receivables, refunds of unearned premiums with
respect to credit life and credit accident and health insurance policies or
certificates covering an Obligor or Financed Vehicle securing the Linc
Receivables or his or her obligations with respect to such a Financed Vehicle
and any recourse to Dealers for any of the foregoing; (v) the Receivable File
related to each Linc Receivable; and (vi) the proceeds of any and all of the
foregoing (collectively, the "Transferred Linc Property" and together with the
Transferred CPS Property and the Transferred Samco Property, the "Transferred
Property").
(b) Receivables Purchase Price. In consideration for the Linc
Receivables and other Transferred Linc Property described in Section 2.1(a), the
Purchaser shall, on the Closing Date, pay to the Seller the Receivables Purchase
Price by federal wire transfer (same day) funds.
2.2. The Closing. The sale and purchase of the Linc Receivables shall
take place at a closing (the "Closing") at the offices of Mayer, Brown & Platt,
1675 Broadway, New York, New York 10019-5820 on the Closing Date, simultaneously
with the closings under: (a) the CPS Purchase Agreement pursuant to which CPS
will sell the CPS Receivables to CPS Receivables Corp., (b) the Samco Purchase
Agreement pursuant to which Samco will sell the Samco Receivables to CPS
Receivables Corp., (c) the Sale and Servicing Agreement pursuant to which the
Purchaser will assign all of its right, title and interest in and to the
Receivables and the other Transferred Property to the Trust for the benefit of
the Securityholders, (d) the Trust Agreement pursuant to which the Trust shall
be formed and the Certificates issued, (e) the Indenture pursuant to which the
Trust will issue the Notes, and (f) the Underwriting Agreement pursuant to which
the Purchaser shall sell the Notes to the Underwriter.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Seller as of the date hereof and as of the
Closing Date (which representations and warranties shall survive the Closing
Date):
-5-
(a) Organization and Good Standing. The Purchaser has been duly
organized and is validly existing as a corporation in good standing under the
laws of the State of California, with power and authority to own its properties
and to conduct its business as such properties shall be currently owned and such
business is presently conducted, and had at all relevant times, and shall have,
power, authority and legal right to acquire and own the Linc Receivables.
(b) Due Qualification. The Purchaser is duly qualified to do business
as a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease of
property or the conduct of its business shall require such qualifications.
(c) Power and Authority. The Purchaser has the power and authority to
execute and deliver the Agreements and to carry out its terms and the execution,
delivery and performance of the Agreements has been duly authorized by the
Purchaser by all necessary corporate action.
(d) Binding Obligation. This Agreement shall constitute a legal, valid
and binding obligation of the Purchaser enforceable in accordance with its
terms.
(e) No Violation. The execution, delivery and performance by the
Purchaser of the Agreements and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not conflict
with, result in a breach of any of the terms and provisions of, nor constitute
(with or without notice or lapse of time) a default under, the articles of
incorporation or by-laws of the Purchaser, or any indenture, agreement,
mortgage, deed of trust, or other instrument to which the Purchaser is a party
or by which it is bound or to which any of its properties are subject; nor
result in the creation or imposition of any lien upon any of its properties
pursuant to the terms of any indenture, agreement, mortgage, deed of trust, or
other instrument (other than the Basic Documents); nor violate any law, order,
rule or regulation applicable to the Purchaser of any court or of any Federal or
State regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Purchaser or its properties.
(f) No Proceedings. There are no proceedings or investigations pending,
or to the Purchaser's best knowledge, threatened, before any court, regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Purchaser or its properties: (A) asserting the invalidity
of the Agreements or the Securities; (B) seeking to prevent the issuance of the
Securities or the consummation of any of the transactions contemplated by the
Agreements; (C) seeking any determination or ruling that might materially and
adversely affect the performance by the Purchaser of its obligations under, or
the validity or enforceability of, the Agreements or the Securities; or (D)
relating to the Purchaser and which might adversely affect the Federal or State
income, excise, franchise or similar tax attributes of the Securities.
-6-
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required to be obtained
by the Purchaser for the issuance or sale of the Securities or the consummation
of the other transactions contemplated by the Agreements, the Trust Agreement,
the Indenture or the Sale and Servicing Agreement, except such as have been duly
made or obtained.
3.2. Representations and Warranties of the Seller. (a) The Seller
hereby represents and warrants to the Purchaser as of the date hereof and as of
the Closing Date (which representations and warranties shall survive the Closing
Date):
(i) Organization and Good Standing. The Seller has been duly
organized and is validly existing as a corporation in good standing
under the laws of the State of Delaware, with power and authority to
own its properties and to conduct its business as such properties shall
be currently owned and such business is presently conducted and had at
all relevant times, and shall have, power, authority and legal right to
acquire, and own the Linc Receivables.
(ii) Due Qualification. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained
all necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business
(including the origination of the Linc Receivables as required by the
Sale and Servicing Agreement) shall require such qualifications.
(iii) Power and Authority. The Seller has the power and
authority to execute and deliver this Agreement and to carry out its
terms; the Seller has full power and authority to sell and assign the
property sold and assigned to the Purchaser and has duly authorized
such sale and assignment to the Purchaser by all necessary corporate
action; and the execution, delivery and performance of the Agreements
has been duly authorized by the Seller by all necessary corporate
action.
(iv) Valid Sale; Binding Obligation. This Agreement effects a
valid sale, transfer and assignment of the Linc Receivables and the
other Transferred Linc Property conveyed to the Purchaser pursuant to
Section 2.1, enforceable against creditors of and purchasers from the
Seller; and this Agreement shall constitute a legal, valid and binding
obligation of the Seller enforceable in accordance with its terms.
(v) No Violation. The execution, delivery and performance by
the Seller of the Agreements and the consummation of the transactions
contemplated hereby and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default
under, the articles of incorporation, as amended, or by-laws of the
Seller, or any indenture, agreement, mortgage, deed of trust, or other
-7-
instrument to which the Seller is a party or by which it is bound or to
which any of its properties are subject; nor result in the creation or
imposition of any lien upon any of its properties pursuant to the terms
of any such indenture, agreement, mortgage, deed of trust, or other
instrument (other than the Basic Documents); nor violate any law,
order, rule or regulation applicable to the Seller of any court or of
any Federal or State regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Seller or its
properties.
(vi) No Proceedings. There are no proceedings or
investigations pending, or to the Seller's best knowledge, threatened,
before any court, regulatory body, administrative agency, or other
governmental instrumentality having jurisdiction over the Seller or its
properties: (A) asserting the invalidity of the Agreements or the
Securities; (B) seeking to prevent the issuance of the Securities or
the consummation of any of the transactions contemplated by the
Agreements; (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, the Agreements
or the Securities; or (D) relating to the Seller and which might
adversely affect the Federal or State income, excise, franchise or
similar tax attributes of the Securities.
(vii) No Consents. No consent, approval, authorization or
order of or declaration or filing with any governmental authority is
required for the issuance or sale of the Securities or the consummation
of the other transactions contemplated by the Agreements, the Trust
Agreement, the Indenture or the Sale and Servicing Agreement, except
such as have been duly made or obtained.
(viii) Financial Condition. The Seller has a positive net
worth and is able to and does pay its liabilities as they mature. The
Seller is not in default under any obligation to pay money to any
Person except for matters being disputed in good faith which do not
involve an obligation of the Seller on a promissory note. The Seller
will not use the proceeds from the transactions contemplated by this
Agreement to give any preference to any creditor or class of creditors,
and this transaction will not leave the Seller with remaining assets
which are unreasonably small compared to its ongoing operations.
(ix) Fraudulent Conveyance. The Seller is not selling the Linc
Receivables to the Purchaser with any intent to hinder, delay or
defraud any of its creditors; the Seller will not be rendered insolvent
as a result of the sale of the Linc Receivables to the Purchaser.
(b) The Seller makes the following representations and warranties as to
the Linc Receivables and the other Transferred Linc Property relating thereto on
which the Purchaser relies in accepting the Linc Receivables and the other
Transferred Linc Property relating thereto. Such representations and warranties
speak with respect to each Linc Receivable as of the Closing Date and shall
survive the sale, transfer, and assignment of the
-8-
Linc Receivables and the other Transferred Linc Property relating thereto to the
Purchaser and the subsequent assignments and transfers pursuant to the Sale and
Servicing Agreement and the Indenture:
(i) Location of Receivable Files; One Original. A complete
Receivable File with respect to each Linc Receivable has been or prior
to the Closing Date will be delivered to the Trustee at the location
listed in Schedule B to the Sale and Servicing Agreement. There is only
one original executed copy of each Linc Receivable.
(ii) Schedule of Receivables; Selection Procedures. The
information with respect to the Linc Receivables set forth in the
Schedule of Linc Receivables is true and correct in all material
respects as of the close of business on the related Cutoff Date, and no
selection procedures adverse to the Securityholders have been utilized
in selecting the Linc Receivables.
(iii) Security Interest in Financed Vehicle. Immediately prior
to the sale, assignment, and transfer thereof, each Linc Receivable
shall be secured by a validly perfected first priority security
interest in the related Financed Vehicle in favor of the Seller as
secured party, and such security interest is prior to all other liens
upon and security interests in such Financed Vehicle which now exist or
may hereafter arise or be created (except, as to priority, for any tax
liens or mechanics' liens which may arise after the Closing Date).
(iv) Linc Receivables in Force. No Linc Receivable has been
satisfied, subordinated or rescinded, nor has any Financed Vehicle been
released from the lien granted by the related Linc Receivable in whole
or in part.
(v) No Waiver. No provision of a Linc Receivable has been
waived.
(vi) No Amendments. No Linc Receivable has been amended,
except as such Linc Receivable may have been amended to grant
extensions which shall not have numbered more than (a) one extension of
one calendar month in any calendar year or (b) three such extensions in
the aggregate.
(vii) No Default; Repossession. Except for payment
delinquencies continuing for a period of not more than thirty days as
of the Cutoff Date, no default, breach, violation or event permitting
acceleration under the terms of any Linc Receivable has occurred; and
no continuing condition that with notice or the lapse of time would
constitute a default, breach, violation, or event permitting
acceleration under the terms of any Linc Receivable has arisen; and the
Seller shall not waive and has not waived any of the foregoing; and no
Financed Vehicle securing a Linc Receivable shall have been repossessed
as of the Cutoff Date.
-9-
(viii) Title. It is the intention of the Seller that the
transfer and assignment herein contemplated constitute a sale of the
Linc Receivables and other Transferred Linc Property from the Seller to
the Purchaser and that the beneficial interest in and title to such
Linc Receivables and other Transferred Linc Property not be part of the
debtor's estate in the event of the filing of a bankruptcy petition by
or against the Seller under any bankruptcy law. No Linc Receivable or
other Transferred Linc Property has been sold, transferred, assigned,
or pledged by the Seller to any Person other than the Purchaser or any
such pledge has been released on or prior to the Closing Date.
Immediately prior to any transfer and assignment herein contemplated,
the Seller had good and marketable title to each Linc Receivable and
other Transferred Linc Property, and was the sole owner thereof, free
and clear of all liens, claims, encumbrances, security interests, and
rights of others and, immediately upon the transfer thereof, the
Purchaser shall have good and marketable title to each such Linc
Receivable and other Transferred Linc Property, and will be the sole
owner thereof, free and clear of all liens, encumbrances, security
interests, and rights of others, and the transfer has been perfected
under the UCC.
(ix) Lawful Assignment. No Linc Receivable has been originated
in, or is subject to the laws of, any jurisdiction under which the
sale, transfer, and assignment of such Linc Receivable under the
Agreements shall be unlawful, void, or voidable. The Seller has not
entered into any agreement with any account debtor that prohibits,
restricts or conditions the assignment of any portion of the Linc
Receivables.
(x) All Filings Made. All filings (including, without
limitation, UCC filings) necessary in any jurisdiction to give the
Purchaser a first priority perfected ownership interest in the Linc
Receivables and the other Transferred Linc Property have been made,
taken or performed.
(xi) Casualty. No Financed Vehicle related to a Receivable has
suffered a Casualty.
(xii) Obligation to Dealers or Others. The Purchaser and its
assignees will assume no obligation to Dealers or other originators or
holders of the Linc Receivables (including, but not limited to under
dealer reserves) as a result of the purchase of the Linc Receivables.
(xiii) Full Amount Advanced. The full amount of each Linc
Receivable has been advanced to each Obligor, and there are no
requirements for future advances thereunder. No Obligor with respect to
a Linc Receivable has any option under the Linc Receivable to borrow
from any Person additional funds secured by the related Financed
Vehicle.
(c) The representations and warranties contained in this Agreement
shall not be
-10-
construed as a warranty or guaranty by the Seller as to the future payments by
any Obligor. The sale of the Linc Receivables pursuant to this Agreement shall
be "without recourse" to the Seller except for the representations, warranties
and covenants made by the Seller in this Purchase Agreement.
ARTICLE IV
CONDITIONS
4.1. Conditions to Obligation of the Purchaser. On the Closing Date,
the obligation of the Purchaser to purchase the Linc Receivables is subject to
the satisfaction of the following conditions:
(a) Representations and Warranties True. The representations and
warranties of the Seller hereunder shall be true and correct on the Closing Date
with the same effect as if then made, and the Seller shall have performed all
obligations to be performed by it hereunder on or prior to the Closing Date.
(b) Computer Files Marked. The Seller shall, at its own expense, on or
prior to the Closing Date, indicate in its computer files that the Linc
Receivables have been sold to the Purchaser pursuant to the Agreements and shall
deliver to the Purchaser the Schedule of Linc Receivables certified by the
Chairman, the President, the Vice President or the Treasurer of the Seller to be
true, correct and complete.
(c) Receivable Files Delivered. The Seller shall, at its own expense,
deliver the related Receivable Files to the Trustee at the offices specified in
Schedule B to the Sale and Servicing Agreement on or prior to the Closing Date.
(d) Documents to be delivered by the Seller on the Closing Date.
(i) The Assignment. On the Closing Date, the Seller will
execute and deliver the applicable Assignment. The Assignment shall be
substantially in the form of Exhibit A hereto.
(ii) Evidence of UCC-1 Filing. On or prior to the Closing
Date, the Seller shall record and file, at its own expense, a UCC-1
financing statement in each jurisdiction in which required by
applicable law, executed by the Seller, as seller or debtor, and naming
the Purchaser, as purchaser or secured party, naming the Linc
Receivables and the other Transferred Linc Property conveyed hereafter
as collateral, meeting the requirements of the laws of each such
jurisdiction and in such manner as is necessary to perfect the sale,
transfer, assignment and conveyance of such Linc Receivables to the
Purchaser. The Seller shall deliver a file-stamped copy, or other
evidence satisfactory to the Purchaser of such filing, to the Purchaser
on or prior to
-11-
the Closing Date.
(iii) Other Documents. On or prior to the Closing Date, the
Seller shall deliver such other documents as the Purchaser may
reasonably request.
(e) Other Transactions. The transactions contemplated by the Trust
Agreement, the Indenture, the Sale and Servicing Agreement, the CPS Purchase
Agreement, the Samco Purchase Agreement, the Underwriting Agreement and the
Certificate Purchase Agreement shall be consummated on the Closing Date.
4.2. Conditions to Obligation of the Seller. The obligation of the
Seller to sell the Linc Receivables to the Purchaser is subject to the
satisfaction of the following conditions on the Closing Date:
(a) Representations and Warranties True. The representations and
warranties of the Purchaser hereunder shall be true and correct on the Closing
Date with the same effect as if then made, and the Seller shall have performed
all obligations to be performed by it hereunder on or prior to the Closing Date.
(b) Receivables Purchase Price. The Purchaser will deliver to the
Seller the purchase price for the related Linc Receivables (on the Closing Date
as provided in Section 2.1(b)). The Seller hereby directs the Purchaser to wire
such purchase price pursuant to wire instructions to be delivered to the
Purchaser on or prior to the Closing Date.
ARTICLE V
COVENANTS OF THE SELLER
The Seller agrees with the Purchaser as follows:
5.1. Protection of Right, Title and Interest.
(a) Filings. The Seller shall cause all financing statements and
continuation statements and any other necessary documents covering the right,
title and interest of the Purchaser in and to the Linc Receivables and the other
Transferred Linc Property to be promptly filed, and at all times to be kept
recorded, registered and filed, all in such manner and in such places as may be
required by law fully to preserve and protect the right, title and interest of
the Purchaser hereunder to the Linc Receivables and the other Transferred Linc
Property. The Seller shall cause to be delivered to the Purchaser file stamped
copies of, or filing receipts for, any document recorded, registered or filed as
provided above, as soon as available following such recordation, registration or
filing. The Purchaser shall cooperate fully with the Seller in connection with
the obligations set forth above and will execute any and all documents
reasonably required to fulfill the intent of this
-12-
Section 5.1(a). In the event the Seller fails to perform its obligations under
this subsection, the Purchaser or the Trustee may do so at the expense of the
Seller.
(b) Name and Other Changes. At least 60 days prior to the date the
Seller makes any change in its name, identity or corporate structure which would
make any financing statement or continuation statement filed in accordance with
paragraph (a) above seriously misleading within the applicable provisions of the
UCC or any title statute, the Seller shall give the Trustee, the Insurer (so
long as an Insurer Default shall not have occurred and be continuing) and the
Purchaser written notice of any such change and no later than five days after
the effective date thereof, shall file appropriate amendments to all previously
filed financing statements or continuation statements. At least 60 days prior to
the date of any relocation of its principal executive office, the Seller shall
give the Trustee, the Insurer (so long as an Insurer Default shall not have
occurred and be continuing) and the Purchaser written notice thereof if, as a
result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and the Seller shall within five
days after the effective date thereof, file any such amendment or new financing
statement. The Seller shall at all times maintain each office from which it
shall service Receivables, and its principal executive office, within the United
States of America.
(c) Maintenance of Computer Systems. The Seller shall maintain its
computer systems so that, from and after the time of sale to the Purchaser of
the Linc Receivables hereunder, the Seller's master computer records (including
any back-up archives) that refer to a Linc Receivable shall indicate clearly the
interest of the Purchaser in such Linc Receivable and that such Linc Receivable
is owned by the Purchaser. Indication of the Purchaser's ownership of a Linc
Receivable shall be deleted from or modified on the Seller's computer systems
when, and only when, the Linc Receivable shall have been paid in full or
repurchased.
(d) Sale of Other Receivables. If at any time the Seller shall propose
to sell, grant a security interest in, or otherwise transfer any interest in any
automobile or light-duty truck receivables (other than the Linc Receivables) to
any prospective purchaser, lender, or other transferee, the Seller shall give to
such prospective purchaser, lender, or other transferee computer tapes, records,
or print-outs (including any restored from back-up archives) that, if they shall
refer in any manner whatsoever to any Linc Receivable, shall indicate clearly
that such Linc Receivable has been sold and is owned by the Purchaser unless
such Linc Receivable has been paid in full or repurchased.
(e) Access to Records. The Seller shall permit the Purchaser and its
agents at any time during normal business hours to inspect, audit, and make
copies of and abstracts from the Seller's records regarding any Linc Receivable.
(f) List of Receivables. Upon request, the Seller shall furnish to the
Purchaser, within five Business Days, a list of all Linc Receivables (by
contract number and
-13-
name of Obligor) then owned by the Purchaser, together with a reconciliation of
such list to the Schedule of Linc Receivables.
5.2. Other Liens or Interests. Except for the conveyances hereunder and
pursuant to the Sale and Servicing Agreement, the Seller will not sell, pledge,
assign or transfer to any other Person, or grant, create, incur, assume or
suffer to exist any lien on any interest therein, and the Seller shall defend
the right, title, and interest of the Purchaser in, to and under the Linc
Receivables against all claims of third parties claiming through or under the
Seller.
5.3. Chief Executive Office. During the term of the Linc Receivables,
the Seller will maintain its chief executive office in one of the United States,
except Louisiana or Vermont.
5.4. Costs and Expenses. The Seller agrees to pay all reasonable costs
and disbursements in connection with the perfection, as against all third
parties, of the Purchaser's right, title and interest in and to the Linc
Receivables.
5.5. Delivery of Receivable Files. On or prior to the Closing Date, the
Seller shall cause to be delivered to the Trustee at the location specified in
Schedule B to the Sale and Servicing Agreement the Receivables Files relating to
the Linc Receivables. The Seller shall have until the last day of the second
Collection Period following receipt of notification that there has been a
failure to deliver a file with respect to a Linc Receivable or that a file is
unrelated to the Receivables identified in Schedule A to the Sale and Servicing
Agreement or that any of the documents referred to in Section 3.3 of the Sale
and Servicing Agreement are not contained in a Receivable File, to deliver such
file or any of the aforementioned documents required to be included in such
Receivable File to the Trustee. Unless such defect with respect to such
Receivable File shall have been cured by the last day of the second Collection
Period following discovery thereof by the Trustee and notice thereof to Linc,
the Seller hereby agrees to repurchase any such Receivable from the Trust as of
such last day. In consideration of the purchase of the Receivable, the Seller
shall remit the Purchase Amount in the manner specified in Section 4.7 of the
Sale and Servicing Agreement. The sole remedy hereunder of the Trustee, the
Trust or the Securityholders with respect to a breach of this Section 5.5, shall
be to require the Seller to repurchase the Receivable pursuant to this Section
5.5. Upon receipt of the Purchase Amount, the Trustee shall release to the
Seller or its designee the related Receivable File and shall execute and deliver
all instruments of transfer or assignment, without recourse, as are prepared by
the Seller and delivered to the Trustee and are necessary to vest in the Seller
or such designee title to the Receivable.
5.6. Indemnification. (a) Subject to the limitation of remedies set
forth in Section 6.2 hereof with respect to a breach of any representations and
warranties contained in Section 3.2(b) hereof, the Seller shall indemnify the
Purchaser for any liability as a result of the failure of a Linc Receivable to
be originated in compliance with all requirements of law and for any breach of
any of its representations and warranties contained herein.
-14-
(b) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all costs, expenses, losses, damages, claims, and
liabilities, arising out of or resulting from the use, ownership, or operation
by the Seller or any Affiliate thereof of a Financed Vehicle related to a Linc
Receivable.
(c) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all taxes, except for taxes on the net income of the
Purchaser, that may at any time be asserted against the Purchaser with respect
to the transactions contemplated herein, including, without limitation, any
sales, gross receipts, general corporation, tangible personal property,
privilege, or license taxes and costs and expenses in defending against the
same.
(d) The Seller shall defend, indemnify, and hold harmless the Purchaser
from and against any and all costs, expenses, losses, damages, claims and
liabilities to the extent that such cost, expense, loss, damage, claim or
liability arose out of, or was imposed upon the Purchaser through, the
negligence, willful misfeasance, or bad faith of the Seller in the performance
of its duties under the Agreements, or by reason of reckless disregard of the
Seller's obligations and duties under the Agreements.
Indemnification under this Section 5.6 shall include reasonable fees
and expenses of litigation and shall survive payment of the Notes and
Certificates. These indemnity obligations shall be in addition to any obligation
that the Seller may otherwise have.
5.7. Sale. The Seller agrees to treat this conveyance for all purposes
(including without limitation tax and financial accounting purposes) as a sale
on all relevant books, records, tax returns, financial statements and other
applicable documents.
5.8. Non-Petition. In the event of any breach of a representation and
warranty made by the Purchaser hereunder, the Seller covenants and agrees that
it will not take any action to pursue any remedy that it may have hereunder, in
law, in equity or otherwise, until a year and a day have passed since the date
on which all securities issued by the Trust or a similar trust formed by the
Purchaser have been paid in full. The Purchaser and the Seller agree that
damages will not be an adequate remedy for such breach and that this covenant
may be specifically enforced by the Purchaser or by the Trust.
ARTICLE VI
MISCELLANEOUS PROVISIONS
6.1. Obligations of Seller. The obligations of the Seller under the
Agreements shall not be affected by reason of any invalidity, illegality or
irregularity of any Linc Receivable.
6.2. Repurchase Events. The Seller hereby covenants and agrees with the
-15-
Purchaser for the benefit of the Purchaser, the Trustee, the Insurer and the
Securityholders, that (i) the occurrence of a breach of any of the Seller's
representations and warranties contained in Section 3.2(b) hereof (without
regard to any limitations regarding the Seller's knowledge) and (ii) the failure
of the Seller to timely comply with its obligations pursuant to Section 5.5
hereof, shall constitute events obligating the Seller to repurchase the affected
Linc Receivables hereunder ("Repurchase Events"), at the Purchase Amount from
the Trust. Unless the breach of any of the Seller's representations and
warranties shall have been cured by the last day of the second Collection Period
following the discovery thereof by or notice to the Purchaser and the Seller of
such breach, the Seller shall repurchase any Linc Receivable if such Linc
Receivable is materially and adversely affected by the breach as of the last day
of such second Collection Period (or, at the Seller's option, the last day of
the first Collection Period following the discovery) and, in the event that the
breach relates to a characteristic of the Linc Receivables in the aggregate, and
if the Trust is materially and adversely affected by such breach, unless the
breach shall have been cured by such second Collection Period, the Seller shall
purchase such aggregate Principal Balance of Linc Receivables, such that
following such purchase such representation shall be true and correct with
respect to the remainder of the Linc Receivables in the aggregate. The
provisions of this Section 6.2 are intended to grant the Trustee a direct right
against the Seller to demand performance hereunder, and in connection therewith
the Seller waives any requirement of prior demand against the Purchaser and
waives any defaults it would have against the Purchaser with respect to such
repurchase obligation. Any such purchase shall take place in the manner
specified with respect to CPS in Section 4.7 of the Sale and Servicing
Agreement. The sole remedy hereunder of the Securityholders, the Trust, the
Insurer, the Trustee or the Purchaser against the Seller with respect to any
Repurchase Event shall be to enforce the Seller's obligation to repurchase such
Linc Receivables pursuant to this Agreement; provided, however, that the Seller
shall indemnify the Trustee, the Insurer, the Trust and the Securityholders
against all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them, as a result of third party claims arising out of the
events or facts giving rise to such breach. Upon receipt of the Purchase Amount,
the Purchaser shall cause the Trustee to release the related Receivables File to
the Seller and to execute and deliver all instruments of transfer or assignment,
without recourse, as are necessary to vest in the Seller title to the Linc
Receivable. Notwithstanding the foregoing, if it is determined that consummation
of the transactions contemplated by the Sale and Servicing Agreement and the
other transaction documents referenced in such Agreement, servicing and
operation of the Trust pursuant to such Agreement and such other documents, or
the ownership of a Security by a Holder constitutes a violation of the
prohibited transaction rules of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the Internal Revenue Code of 1986, as amended
("Code") for which no statutory exception or administrative exemption applies,
such violation shall not be treated as a Repurchase Event.
6.3. Seller's Assignment of Purchased Receivables. With respect to all
Linc Receivables repurchased by the Seller pursuant to the Agreements, the
Purchaser shall assign, without recourse except as provided herein,
representation or warranty, to the Seller
-16-
all the Purchaser's right, title and interest in and to such Linc Receivables,
and all security and documents relating thereto.
6.4. Conveyance as Sale of Receivables Not Financing. The parties
hereto intend that the conveyance under this Agreement be a sale of the Linc
Receivables and the other Transferred Linc Property from the Seller to the
Purchaser and not a financing secured by such assets; and the beneficial
interest in and title to the Linc Receivables and the other Transferred Linc
Property shall not be part of the Seller's estate in the event of the filing of
a bankruptcy petition by or against the Seller under any bankruptcy law. In the
event that any conveyance hereunder is for any reason not considered a sale, the
parties intend that this Agreement constitute a security agreement under the UCC
(as defined in the UCC as in effect in the State of Connecticut) and applicable
law, and the Seller hereby grants to the Purchaser a first priority perfected
security interest in, to and under the Linc Receivables and the other
Transferred Linc Property being delivered to the Purchaser on the Closing Date,
and other property conveyed hereunder and all proceeds of any of the foregoing
for the purpose of securing payment and performance of the Securities and the
repayment of amounts owed to the Purchaser from the Seller. In the event that
the assignment of a Linc Receivable to the Purchaser is insufficient, without a
notation on the related Financed Vehicle's certificate of title, or without
fulfilling any additional administrative requirements under the laws of the
state in which the Financed Vehicle is located, to perfect a security interest
in the related Financed Vehicle in favor of the Purchaser, the Seller and
Purchaser hereby agree that the Seller's designation as the secured party on the
certificate of title is in its capacity as agent of the Purchaser and the
Purchaser's transferees.
6.5. Trust. The Seller acknowledges that the Purchaser will, pursuant
to the Sale and Servicing Agreement, sell the Receivables to the Trust and
assign its rights under this Purchase Agreement, the Samco Purchase Agreement
and the CPS Purchase Agreement to the Trustee for the benefit of the
Securityholders, and that the representations and warranties contained in this
Agreement and the rights of the Purchaser under this Purchase Agreement,
including under Sections 6.2 and 6.4 hereof are intended to benefit such Trust
and the Securityholders. The Seller also acknowledges that the Trustee on behalf
of the Securityholders as assignee of the Purchaser's rights hereunder may
directly enforce, without making any prior demand on the Purchaser, all the
rights of the Purchaser hereunder including the rights under Section 6.2 and 6.4
hereof. The Seller hereby consents to such sale and assignment.
6.6. Amendment. This Agreement may be amended from time to time by a
written amendment duly executed and delivered by the Seller and the Purchaser
with the consent of the Insurer; provided, however, that (i) any such amendment
that materially adversely affects the rights of the Noteholders under the Sale
and Servicing Agreement must be consented to by the holders of Notes
representing more than 50% of the outstanding principal amount of Notes and (ii)
any such amendment that materially adversely affects the rights of the
Certificateholders under the Sale and Servicing Agreement must be consented to
by the holders of Certificates representing more than 50% of the Certificate
Balance.
-17-
6.7. Waivers. No failure or delay on the part of the Purchaser in
exercising any power, right or remedy under the Agreements shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other or further exercise thereof or the exercise
of any other power, right or remedy.
6.8. Notices. All communications and notices pursuant hereto to either
party shall be in writing or by telegraph or telex and addressed or delivered to
it at its address (or in case of telex, at its telex number at such address)
shown in the opening portion of this Agreement or at such other address as may
be designated by it by notice to the other party and, if mailed or sent by
telegraph or telex, shall be deemed given when mailed, communicated to the
telegraph office or transmitted by telex.
6.9. Costs and Expenses. The Seller will pay all expenses incident to
the performance of its obligations under this Purchase Agreement.
6.10. Representations of the Seller and the Purchaser. The respective
agreements, representations, warranties and other statements by the Seller and
the Purchaser set forth in or made pursuant to this Purchase Agreement shall
remain in full force and effect and will survive each closing hereunder.
6.11. Confidential Information. The Purchaser agrees that it will
neither use nor disclose to any Person the names and addresses of the Obligors,
except in connection with the enforcement of the Purchaser's rights hereunder,
under the Linc Receivables, under the Sale and Servicing Agreement or as
required by law.
6.12. Headings and Cross-References. The various headings in this
Purchase Agreement are included for convenience only and shall not affect the
meaning or interpretation of any provision of this Purchase Agreement.
References in this Purchase Agreement to Section names or numbers are to such
Sections of this Purchase Agreement.
6.13. Third Party Beneficiaries. The parties hereto hereby expressly
agree that each of the Trustee for the benefit of the Securityholders and the
Note Insurer shall be third party beneficiaries with respect to this Purchase
Agreement, provided, however, that no third party other than the Trustee for the
benefit of the Securityholders and the Note Insurer shall be deemed a third
party beneficiary of this Purchase Agreement.
6.14. Governing Law. THIS PURCHASE AGREEMENT AND THE ASSIGNMENTS SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
6.15. Counterparts. This Agreement may be executed in two or more
counterparts and by different parties on separate counterparts, each of which
shall be an original, but all of which together shall constitute one and the
same instrument.
-18-
[Rest of page intentionally left blank.]
-19-
IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
and year first above written.
CPS RECEIVABLES CORP.
By /s/ Jeffrey P. Fritz
Title: Chief Financial Officer
LINC ACCEPTANCE COMPANY LLC
By: /s/ W. Edward Burrell
Title: Executive Vice President
and Treasurer
-20-
Exhibit A
ASSIGNMENT
For value received, on this 28th day of July, 1998, in accordance with
the Purchase Agreement dated as of July 15, 1998, between the undersigned (the
"Seller") and CPS Receivables Corp. (the "Purchaser") (the "Linc Purchase
Agreement"), the undersigned does hereby sell, transfer, assign and otherwise
convey unto the Purchaser, without recourse (subject to the obligations in the
Linc Purchase Agreement and the Sale and Servicing Agreement), all right, title
and interest of the Seller in and to (i) the Linc Receivables listed in the
Schedule of Linc Receivables, all monies received thereon after the Cutoff Date
and all Net Liquidation Proceeds received with respect thereto after the Cutoff
Date; (ii) the security interests in the Financed Vehicles granted by Obligors
pursuant to the Linc Receivables and any other interest of the Seller in such
Financed Vehicles, including, without limitation, the certificates of title or,
with respect to Financed Vehicles in the State of Michigan, other evidence of
ownership with respect to Financed Vehicles; (iii) any proceeds from claims on
any physical damage, credit life and credit accident and health insurance
policies or certificates relating to the Financed Vehicles securing the Linc
Receivables; (iv) refunds for the costs of extended service contracts with
respect to Financed Vehicles securing the Linc Receivables, refunds of unearned
premiums with respect to credit life and credit accident and health insurance
policies or certificates covering an Obligor or Financed Vehicle securing the
Linc Receivables or his or her obligations with respect to such a Financed
Vehicle and any recourse to Dealers for any of the foregoing; (v) the Receivable
File related to each Linc Receivable; and (vi) the proceeds of any and all of
the foregoing. The foregoing sale does not constitute and is not intended to
result in any assumption by the Purchaser of any obligation of the undersigned
to the Obligors, insurers or any other Person in connection with the Linc
Receivables, the Receivable Files, any insurance policies or any agreement or
instrument relating to any of them.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the Linc
Purchase Agreement and is to be governed by the Linc Purchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the
meanings assigned to them in the Linc Purchase Agreement.
THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES.
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed as of the day and year first above written.
LINC ACCEPTANCE COMPANY LLC
By:
Name:
Title:
-2-
Exhibit B
Schedule of Linc Receivables
See Following Page
EXHIBIT 23.1
CONSENT OF ACCOUNTANTS
[LETTERHEAD OF PRICEWATERHOUSECOOPERS]
CONSENT
-----------
We consent to the incorporation by reference in the Prospectus Supplement of CPS
Receivables Corp. relating to the CPS Auto Receivables Trust 1998-3 of our
report dated January 26, 1998, on our audits of the consolidated financial
statements of Financial Security Assurance Inc. and Subsidiaries as of December
31, 1997 and 1996, and for each of the three years in the period ended December
31, 1997. We also consent to the reference to our Firm under the caption
"Experts".
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
New York, New York
July 28, 1998