SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
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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) June 27, 2007
CONSUMER PORTFOLIO SERVICES, INC.
---------------------------------
(Exact Name of Registrant as Specified in Charter)
CALIFORNIA 0-51027 33-0459135
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
16355 Laguna Canyon Road, Irvine, CA 92618
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (949) 753-6800
Not Applicable
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(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
The information contained in Item 2.03 of this report is hereby incorporated by
reference into this Item 1.01.
On June 27, 2007, the registrant ("CPS") and its wholly owned subsidiary CPS
Receivables Corp. ("Subsidiary") entered into a series of agreements under
which Subsidiary purchased from CPS, and sold to CPS Auto Receivables Trust
2007-B, a Delaware statutory trust (the "Trust") approximately $206 million of
subprime automotive receivables (the "Initial Receivables"). Subsidiary also
committed to purchase and to sell to the Trust, and CPS committed to sell to
Subsidiary, an additional $109 million of similar automotive receivables (the
"Subsequent Receivables").
CPS disclaims any implication that the agreements relating to such transactions
are other than agreements entered into in the ordinary course of CPS's business.
ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
CPS, Subsidiary, the Trust and others on June 27, 2007 entered into a series
of agreements that, among other things, created long-term obligations that are
material to CPS, Subsidiary and the Trust. Under these agreements (i) CPS sold
the Initial Receivables to Subsidiary, and committed to sell the Subsequent
Receivables to Subsidiary not later than July 31, 2007, (ii) Subsidiary sold
the Initial Receivables to the Trust, and committed to sell the Subsequent
Receivables to the Trust, (iii) the Trust pledged the Initial Receivables, and
committed to pledge the Subsequent Receivables, to Wells Fargo Bank, N.A.
("Wells"), as indenture trustee for benefit of the holders of the Notes (as
defined below), and for benefit of the Insurer (as defined below), (iv) the
Trust issued and sold $281.925 million of asset-backed Notes, in four classes
(such Notes collectively, the "Notes"), (v) a portion of the proceeds from the
sale of the Notes was pledged to Wells as trustee for benefit of the holders of
the Notes, to be used to fund the purchase price of the Subsequent Receivables,
(vi) an insurance company, Financial Security Assurance Inc.(the "Insurer"),
issued a policy (the "Policy") guaranteeing payment of principal and interest on
the Notes, and (vii) a cash deposit (the "Reserve Account") in the amount of
2.00% of the aggregate balance of the Initial Receivables was pledged for the
benefit of the Insurer.
Security for the repayment of the Notes consists of the Initial Receivables and,
when and if sold, the Subsequent Receivables (together, the "Receivables"), and
the rights to payments relating to such receivables. The Receivables were
originated or purchased by CPS and CPS will act as the servicer of the
Receivables. Credit enhancement for the Notes consists of
over-collateralization, the Reserve Account, and the Policy, which guarantees
the obligations of the Trust to pay interest on, and repay the principal balance
of, the Notes. Wells will act as collateral agent and trustee on behalf of the
secured parties, and is the backup servicer.
The Notes are obligations only of the Trust, and not of Subsidiary nor of CPS.
Nevertheless, the Notes are properly treated as long-term debt obligations of
CPS. The sale and issuance of the Notes, treated as secured financings for
accounting and tax purposes, are treated as sales for all other purposes,
including legal and bankruptcy purposes. None of the assets of the Trust or
Subsidiary are available to pay other creditors of CPS or its affiliates.
Upon completion of the anticipated July 2007 sale of the Subsequent
Receivables to the Trust, the Trust will hold a fixed pool of amortizing assets.
The Trust is obligated to pay principal and interest on the Notes on a monthly
basis. Interest is payable at fixed rates on the outstanding principal balance
of each of the four classes of the Notes, and principal is payable by reference
to the aggregate principal balance of the Receivables (adjusted for chargeoffs
and prepayments, among other things) and agreed required over-collateralization.
Principal is payable serially; that is, all payable principal is directed first
to the class A-1 Notes until such class is paid in full, then to the class A-2
Notes until such class is paid in full, and so on. The following table sets
forth the interest rates and initial principal amounts of the four classes of
Notes:
Interest
Note Class Amount Rate
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A-1 $43.700 million 5.3344%
A-2 $97.700 million 5.4600%
A-3 $45.200 million 5.4700%
A-4 $93.325 million 5.6000%
The 2007-B transaction has initial credit enhancement consisting of a cash
deposit and subordinated interests in the aggregate amount of 12.50% of the
original receivable pool balance. That enhancement level is to be supplemented
by accelerated payment of principal on the Notes to reach a combined level of
17.75% of the then-outstanding receivable pool balance.
At such time as the aggregate outstanding principal balance of the 2007-B
Receivables is less than 10% of the initial aggregate balance of $315 million,
CPS will have the option to purchase the Trust estate at fair market value,
provided that such purchase price is sufficient to cause the Notes to be
redeemed and paid in full, and to cause other obligations of the Trust to be
met.
If an event of default were to occur under the agreements, the Insurer would
have the right to accelerate the maturity of the Notes, and the required amount
of the Reserve Account would increase to an amount equal to the outstanding
aggregate principal balance of the Notes. Such increase would have the effect of
redirecting to the Reserve Account the cash proceeds of the Receivables that
otherwise would be released to Subsidiary, until such time, if any, as the
Reserve Account reached the increased required level. Events of default include
pool performance ratios, in addition to such events as failure to make required
payments on the Notes, breaches of warranties, representations or covenants
under any of the agreements or specified bankruptcy-related events. In addition,
if the Receivables (pledged as security for the Notes) were to experience net
loss ratios, delinquency ratios, or default rates that are higher than specified
levels, the existence of such a "trigger event" would also increase the Reserve
Account requirements, though to a lesser extent, which would also have the
effect of redirecting to the Reserve Account certain cash proceeds of the
Receivables that otherwise would be released to Subsidiary.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
Three exhibits are furnished:
EXHIBIT NUMBER DESCRIPTION
4.23 Indenture re Notes issued by CPS Auto Receivables Trust 2007-B.
4.24 Sale and Servicing Agreement dated as of June 1, 2007.
99.1 Consumer Portfolio Services, Inc. June 27, 2007 press
release.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
CONSUMER PORTFOLIO SERVICES, INC.
Dated: June 29, 2007 By: /s/ Jeffrey P. Fritz
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Jeffrey P. Fritz
Senior vice president and chief financial officer
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
4.23 Indenture re Notes issued by CPS Auto Receivables Trust 2007-B.
4.24 Sale and Servicing Agreement dated as of March 1, 2007
99.1 Consumer Portfolio Services, Inc. June 27, 2007 press
release.
EXHIBIT 4.23
INDENTURE
DATED AS OF JUNE 1, 2007
BETWEEN
CPS AUTO RECEIVABLES TRUST 2007-B, AS ISSUER
AND
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS TRUSTEE
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TABLE OF CONTENTS
PAGE
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ARTICLE I - Definitions and Incorporation by Reference...............................................3
SECTION 1.1 Definitions..................................................................3
SECTION 1.2 Reserved....................................................................11
SECTION 1.3 Other Definitional Provisions...............................................11
ARTICLE II - The Notes..............................................................................11
SECTION 2.1 Form........................................................................11
SECTION 2.2 Execution, Authentication and Delivery......................................12
SECTION 2.3 Temporary Notes.............................................................12
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........................................................16
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...........................................................18
SECTION 2.11 Notices to Clearing Agency.................................................19
SECTION 2.12 Definitive Notes...........................................................19
SECTION 2.13 Restrictions on Transfer of Notes..........................................19
ARTICLE III - Covenants..........................................................................21
SECTION 3.1 Payment of Principal and Interest...........................................21
SECTION 3.2 Maintenance of Office or Agency.............................................21
SECTION 3.3 Money for Payments to be Held in Trust......................................22
SECTION 3.4 Existence...................................................................23
SECTION 3.5 Protection of Trust Estate..................................................23
SECTION 3.6 Opinions as to Trust Estate.................................................24
SECTION 3.7 Performance of Obligations; Servicing of Receivables........................25
SECTION 3.8 Negative Covenants..........................................................26
SECTION 3.9 Annual Statement as to Compliance...........................................27
SECTION 3.10 Issuer May Consolidate, Etc. Only on Certain Terms.........................27
SECTION 3.11 Successor or Transferee....................................................29
SECTION 3.12 No Other Business..........................................................29
SECTION 3.13 No Borrowing...............................................................30
SECTION 3.14 Servicer's Obligations.....................................................30
SECTION 3.15 Guarantees, Loans, Advances and Other Liabilities..........................30
SECTION 3.16 Capital Expenditures.......................................................30
SECTION 3.17 Compliance with Laws.......................................................30
SECTION 3.18 Restricted Payments........................................................30
SECTION 3.19 Notice of Events of Default................................................31
SECTION 3.20 Further Instruments and Acts...............................................31
SECTION 3.21 Amendments of Sale and Servicing Agreement and Trust Agreement.............31
SECTION 3.22 Income Tax Characterization................................................31
SECTION 3.23 Separate Existence of the Issuer...........................................31
SECTION 3.24 Representations and Warranties of the Issuer...............................32
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ARTICLE IV - Satisfaction and Discharge.............................................................33
SECTION 4.1 Satisfaction and Discharge of Indenture.....................................33
SECTION 4.2 Application of Trust Money..................................................34
SECTION 4.3 Repayment of Moneys Held by Note Paying Agent...............................34
ARTICLE V - Remedies................................................................................34
SECTION 5.1 Events of Default...........................................................34
SECTION 5.2 Rights Upon Event of Default................................................35
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.............37
SECTION 5.4 Remedies....................................................................39
SECTION 5.5 Optional Preservation of the Receivables....................................40
SECTION 5.6 Priorities..................................................................40
SECTION 5.7 Limitation of Suits.........................................................42
SECTION 5.8 Unconditional Rights of Noteholders To Receive Principal and Interest.......43
SECTION 5.9 Restoration of Rights and Remedies..........................................43
SECTION 5.10 Rights and Remedies Cumulative.............................................43
SECTION 5.11 Delay or Omission Not a Waiver.............................................43
SECTION 5.12 Control by Noteholders.....................................................43
SECTION 5.13 Waiver of Past Defaults....................................................44
SECTION 5.14 Undertaking for Costs......................................................44
SECTION 5.15 Waiver of Stay or Extension Laws...........................................45
SECTION 5.16 Subrogation................................................................45
SECTION 5.17 Preference Claims; Direction of Proceedings................................45
ARTICLE VI - The Trustee............................................................................46
SECTION 6.1 Duties of Trustee...........................................................46
SECTION 6.2 Rights of Trustee...........................................................48
SECTION 6.3 Individual Rights of Trustee................................................49
SECTION 6.4 Trustee's Disclaimer........................................................49
SECTION 6.5 Notice of Defaults..........................................................49
SECTION 6.6 Reports by Trustee to Holders...............................................49
SECTION 6.7 Compensation and Indemnity..................................................50
SECTION 6.8 Replacement of Trustee......................................................51
SECTION 6.9 Successor Trustee by Merger.................................................51
SECTION 6.10 Appointment of Co-Trustee or Separate Trustee..............................52
SECTION 6.11 Eligibility: Disqualification..............................................53
SECTION 6.12 Reserved...................................................................53
SECTION 6.13 Appointment and Powers.....................................................53
SECTION 6.14 Performance of Duties......................................................54
SECTION 6.15 Limitation on Liability....................................................54
SECTION 6.16 Reserved...................................................................54
SECTION 6.17 Successor Trustee..........................................................54
SECTION 6.18 Reserved...................................................................56
SECTION 6.19 Representations and Warranties of the Trustee..............................56
SECTION 6.20 Waiver of Setoffs..........................................................56
SECTION 6.21 Control by the Controlling Party...........................................56
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ARTICLE VII - Noteholders' Lists and Reports........................................................57
SECTION 7.1 Issuer To Furnish To Trustee Names and Addresses of Noteholders.............57
SECTION 7.2 Preservation of Information; Communications to Noteholders..................57
ARTICLE VIII - Collection of Money and Releases of Trust Estate.....................................57
SECTION 8.1 Collection of Money.........................................................57
SECTION 8.2 Release of Trust Estate.....................................................57
SECTION 8.3 Opinion of Counsel..........................................................58
ARTICLE IX - Supplemental Indentures................................................................58
SECTION 9.1 Supplemental Indentures Without Consent of Noteholders......................58
SECTION 9.2 Supplemental Indentures with Consent of Noteholders.........................60
SECTION 9.3 Execution of Supplemental Indentures........................................61
SECTION 9.4 Effect of Supplemental Indenture............................................61
SECTION 9.5 Reserved....................................................................62
SECTION 9.6 Reference in Notes to Supplemental Indentures...............................62
ARTICLE X - Redemption of Notes.....................................................................62
SECTION 10.1 Redemption.................................................................62
SECTION 10.2 Form of Redemption Notice..................................................62
SECTION 10.3 Notes Payable on Redemption Date...........................................63
ARTICLE XI - Miscellaneous..........................................................................63
SECTION 11.1 Compliance Certificates and Opinions, etc..................................63
SECTION 11.2 Form of Documents Delivered to Trustee.....................................65
SECTION 11.3 Acts of Noteholders........................................................66
SECTION 11.4 Notices, etc., to Trustee, Issuer and Rating Agencies......................67
SECTION 11.5 Notices to Noteholders; Waiver.............................................68
SECTION 11.6 Alternate Payment and Notice Provisions....................................68
SECTION 11.7 Reserved...................................................................69
SECTION 11.8 Effect of Headings and Table of Contents...................................69
SECTION 11.9 Successors and Assigns.....................................................69
SECTION 11.10 Severability..............................................................69
SECTION 11.11 Benefits of Indenture.....................................................69
SECTION 11.12 Legal Holidays............................................................69
SECTION 11.13 Governing Law.............................................................69
SECTION 11.14 Counterparts..............................................................70
SECTION 11.15 Recording of Indenture....................................................70
SECTION 11.16 Trust Obligation..........................................................70
SECTION 11.17 No Petition...............................................................70
SECTION 11.18 Inspection................................................................71
SECTION 11.19 Action Upon Direction of Noteholders......................................71
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INDENTURE dated as of June 1, 2007, between CPS AUTO RECEIVABLES TRUST
2007-B, a Delaware statutory trust (the "Issuer"), and WELLS FARGO BANK,
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 5.3344%
Asset-Backed Notes (the "Class A-1 Notes"), Class A-2 5.46% Asset-Backed Notes
(the "Class A-2 Notes"), Class A-3 5.47% Asset-Backed Notes (the "Class A-3
Notes") and Class A-4 5.60% 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"):
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 June 27, 2007 (as amended from
time to time, in accordance with the terms thereof, the "Insurance Agreement")
among the Note Insurer, the Issuer, Consumer Portfolio Services, Inc., CPS
Receivables Funding Trust and CPS Receivables Corp. (the "Seller")
As an additional inducement to the Note Insurer to issue the Note
Policy, and as security for the performance by the Issuer of the Issuer Secured
Obligations (as defined below) 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 defined below), 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, all right, title and interest of the
Issuer, whether now existing or hereafter arising, in and to the following:
(i) the Initial Receivables listed in Schedule A to the Sale
and Servicing Agreement and all monies received thereunder (other than
the Additional Servicing Compensation) after the Initial Cutoff Date
and all Net Liquidation Proceeds and Recoveries received with respect
to such Initial Receivables after the Initial Cutoff Date;
(ii) the Subsequent Receivables listed in Schedule A to the
related Subsequent Transfer Agreement and all monies received
thereunder (other than the Additional Servicing Compensation) after the
related Subsequent Cutoff Date and all Net Liquidation Proceeds and
Recoveries received with respect to such Subsequent Receivables after
the related Subsequent Cutoff Date;
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(iii) the security interests in the Financed Vehicles granted
by the related Obligors pursuant to the Receivables and any other
interest of the Issuer in such Financed Vehicles, including the
certificates of title or, with respect to such Financed Vehicles in the
Non-Certificated Title States, all other evidence of ownership with
respect to such Financed Vehicles issued by the applicable Department
of Motor Vehicles or similar authority;
(iv) 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 Receivables or the
Obligors thereunder;
(v) all proceeds from recourse against Dealers or Consumer
Lenders with respect to the Receivables;
(vi) 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 a direct right to cause CPS to purchase
Receivables from the Issuer and to indemnify the Issuer pursuant to the
Purchase Agreements under the circumstances specified therein;
(vii) the Issuer's rights and benefits, but none of its
obligations or burdens, under the Sale and Servicing Agreement and each
Subsequent Transfer Agreement (including all rights of the Seller under
the Purchase Agreements);
(viii) 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 or Consumer Lenders for any of the
foregoing;
(ix) the Receivable File related to each Receivable;
(x) all amounts and property from time to time held in or
credited to the Collection Account, the Pre-Funding Account, the
Capitalized Interest Account, the Note Distribution Account and the
Lockbox Account;
(xi) all property (including the right to receive future Net
Liquidation Proceeds) that secures a Receivable that has been acquired
by or on behalf of CPS, the Seller or the Issuer pursuant to a
liquidation of such Receivable; and
(xii) 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 property described in this Granting Clause the
"Collateral").
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In addition, the Issuer shall cause the Note Policy to be issued for
the benefit of the Noteholders.
The foregoing Grant is made in trust to the Trustee, for the benefit of
the Issuer Secured Parties, as their interests may appear, to secure the payment
and performance of the Issuer Secured Obligations and to secure compliance with
this Indenture. 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 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
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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
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the Owner Trustee and the Servicer to the Trustee on the Closing Date (as such
list may be modified or supplemented from time to time thereafter).
"Basic Documents" means this Indenture, the Certificate of Trust, the
Trust Agreement, the Sale and Servicing Agreement, each Subsequent Transfer
Agreement, the Master Spread Account Agreement, the Spread Account Supplement,
the Insurance Agreement, the Indemnification Agreement, the Lockbox Agreement,
the Servicing Assumption Agreement, the Purchase Agreements, the Placement
Agency Agreement, the Notes, the Residual Pass-through Certificates, any trust
agreement, indenture or other agreement to which the Seller, CPS or the Trust or
any of their respective Affiliates is a party entered into in connection with a
transfer of any interest in the Residual Pass-through Certificates, any
securities representing direct or indirect interests in the Residual
Pass-through Certificates and other documents and certificates delivered in
connection with the foregoing.
"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 any day other than a Saturday, a Sunday or a day
on which banking institutions in Wilmington, Delaware, New York, New York,
Minneapolis, Minnesota, the State in which the executive offices of the Servicer
are located or 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.
"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 5.3344% per annum.
"Class A-1 Notes" means the Class A-1 5.3344% Asset-Backed Notes,
substantially in the form of Exhibit A-1.
"Class A-2 Interest Rate" means 5.46% per annum.
"Class A-2 Notes" means the Class A-2 5.46% Asset-Backed Notes,
substantially in the form of Exhibit A-2.
"Class A-3 Interest Rate" means 5.47% per annum.
"Class A-3 Notes" means the Class A-3 5.47% Asset-Backed Notes,
substantially in the form of Exhibit A-3.
"Class A-4 Interest Rate" means 5.60% per annum.
"Class A-4 Notes" means the Class A-4 5.60% Asset-Backed Notes,
substantially in the form of Exhibit A-4.
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"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act, or any successor provision
thereto. The initial Clearing Agency shall be The Depository Trust Company.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means June 27, 2007.
"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 States 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, MAC N9311-161, Minneapolis, Minnesota 55479,
Attention: Corporate Trust Services/Asset Backed Administration - CPS 2007-B, 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 Investment Officer, Chief
Financial Officer, President, Senior 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 claim for, collect, receive and give receipt for principal
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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 obligor 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 obligor, 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.
"Insolvency Event" means, with respect to a specified Person, (a) the
institution of a proceeding or the filing of a petition against such Person
seeking 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 the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or ordering the winding-up or liquidation or such Person's
affairs, and such petition, decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or (b) the commencement by such Person of a
voluntary case under any applicable Federal or State bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by such Person to
the entry of an order for relief in an involuntary case under any such law, or
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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 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 (i) the Class A-1 Notes, the
Class A-1 Interest Rate, (ii) the Class A-2 Notes, the Class A-2 Interest Rate,
(iii) the Class A-3 Notes, the Class A-3 Interest Rate and (iv) the 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, 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, the
Residual Certificate Secured Obligations and the Trustee Secured Obligations,
collectively.
"Issuer Secured Parties" means each of (i) the Trustee, in respect of
the Trustee Secured Obligations, (ii) the Residual Certificateholders, in
respect of the Residual Certificate Secured Obligations and (iii) the Note
Insurer, in respect of the Insurer Secured Obligations.
"Mandatory Redemption Date" means the first Payment Date occurring on
or after the last day of the Funding Period.
"Note" means a Class A-1 Note, a Class A-2 Note, a Class A-3 Note or a
Class A-4 Note.
"Note Insurer" has the meaning specified in the Preamble.
"Note Majority" means Holders of Notes collectively evidencing more
than 50% of the aggregate outstanding Note Balance of each Class of Notes.
"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).
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"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 financial guaranty insurance policy (No.
51851-N) 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.
"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
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
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waiver hereunder or under any Basic Document, Notes owned by
the Issuer, any other obligor upon the Notes, the Seller or
any Affiliate of any of the foregoing Persons shall be
disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes that a Responsible
Officer of the Trustee either actually knows to be so owned or
has received written notice thereof shall be so disregarded.
Notes so owned that have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Issuer,
any other obligor upon the Notes, the Seller or any Affiliate
of any of the foregoing Persons.
"Outstanding Amount" means, with respect to any date of determination,
the aggregate principal amount of all Notes, or class of Notes, as applicable,
Outstanding at such date of determination.
"Ownership Interest" means, as to any Note, any ownership or security
interest in such Note, including any interest in such Note as the Holder thereof
and any other interest therein, whether direct or indirect, legal or beneficial,
as owner or as pledgee.
"Owner Trustee" means Wilmington Trust Company, 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.
"Purchase Agreements" means the Receivables Purchase Agreement and each
Subsequent Receivables Purchase Agreement, collectively.
"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.
"Record Date" means, with respect to the first Payment Date, the
Closing Date, and with respect to any subsequent Payment Date or Redemption
Date, the last calendar day of the month preceding the 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(a), the Payment Date specified by the Servicer or the
Issuer pursuant to Section 10.1(a).
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"Redemption Price" means, in the case of a redemption of the Notes
pursuant to Section 10.1(a), an amount equal to the unpaid principal amount of
each class of Notes being redeemed plus accrued and unpaid interest thereon to
but excluding the Redemption Date.
"Residual Certificate Secured Obligations" means all amounts and
obligations that the Issuer may at any time owe to the Residual
Certificateholders under the Sale and Servicing Agreement or any other Basic
Document.
"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 June 1, 2007, among the Issuer, the Seller, the Servicer, and the
Trustee, as Backup Servicer and Trustee, as the same may be amended or
supplemented from time to time.
"Scheduled Payments" has the meaning specified in the Note Policy.
"Seller" means CPS Receivables Corp., a California corporation, and its
successors.
"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 and disbursed such payments in accordance with the Basic Documents.
"Trust Agreement" means the Trust Agreement dated as of March 15, 2007,
between the Seller, as depositor, and the Owner Trustee, as amended and restated
by the Amended and Restated Trust Agreement dated as of June 27, 2007, by and
between the Seller, as depositor, and the Owner Trustee, as the same may be
further amended or supplemented from time to time in accordance with the terms
thereof.
"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 Issuer Secured Parties (including the
Collateral Granted to the Trustee hereunder), including all proceeds thereof.
"Trustee" means Wells Fargo Bank, National Association, a national
banking association, not in its individual capacity but as trustee under this
Indenture, or any successor trustee under this Indenture.
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"Trustee Secured Obligations" means all amounts and obligations which
the Issuer may at any time owe to the Trustee for the benefit of the Noteholders
under this Indenture or the Notes or any other Basic Document.
"UCC" means, unless the context otherwise requires, the Uniform
Commercial Code, as in effect in the relevant jurisdiction, as amended from time
to time.
SECTION 1.2 RESERVED.
SECTION 1.3 OTHER DEFINITIONAL PROVISIONS. Unless the context otherwise
requires:
(a) 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.
(b) 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.
(c) 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;
(d) "or" is not exclusive; and
(e) "including" means including without limitation.
ARTICLE II
THE NOTES
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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.
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(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 $43,700,000, Class A-2 Notes
for original issue in an aggregate principal amount of $97,700,000,
Class A-3 Notes for original issue in an aggregate principal amount of
$45,200,000 and Class A-4 Notes for original issue in an aggregate
principal amount of $95,325,000. 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 2.4.
(d) Each Note shall be dated the date of its authentication.
The Notes shall be issuable as registered Notes in the minimum
denomination of $25,000 and in integral multiples of $1,000 in excess
thereof (except for one Note of each class which may be issued in a
lesser denomination and other than an integral multiple of $1,000).
(e) No Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there
appears on such Note a certificate of authentication substantially in
the form provided for herein, executed by the Trustee by the manual
signature of one of its authorized signatories, and such certificate
upon any Note shall be conclusive evidence, and the only evidence, that
such Note has been duly authenticated and delivered hereunder.
SECTION 2.3 TEMPORARY NOTES.
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(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(a) 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, 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.
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(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(a) 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 Owner Trustee, the 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 4975 of the Internal Revenue Code or (ii) the acquisition and
holding of the Notes will be covered by Prohibited Transaction Class
Exemption ("PTCE") 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60, PTCE 96-23
or a similar U.S. Department of Labor class exemption or other similar
exemption.
(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 Notes.
(j) Notwithstanding anything to the contrary in this Indenture
or any other Basic Document, (i) the transfer of a Note, including the
right to receive principal and any stated interest thereon, may be
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effected only by surrender of the old Note (or satisfactory evidence of
the destruction, loss or theft of such Note) to the Note Registrar, and
the issuance by the Issuer (through the Note Registrar) of a new Note
to the new Holder, and (ii) each Note must be registered in the name of
the Holder thereof as to both principal and any stated interest with
the Note Registrar.
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 each of the Issuer, the Trustee and the Note Insurer to
hold it 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 and 8-406 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.
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(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 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 attached hereto as 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 related 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, or by wire transfer in immediately
available funds to the account designated in writing to the Trustee by
such Person at least five Business Days prior to the related Record
Date, except that, unless Definitive Notes have been issued pursuant to
Section 2.12, with respect to Notes registered on the related 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 Note, the Class A-2 Note, the Class A-3 Note and the Class A-4 Note
attached hereto as 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
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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 amounts to the
Persons who are Noteholders on a subsequent special record date, which
date shall be at least five Business Days prior to the Payment Date.
The Issuer shall fix or cause to be fixed any such special record date
and Payment Date, and, at least 15 days before any such special record
date, the Issuer shall mail to each Noteholder and the Trustee a notice
that states the special record date, the Payment Date and the amount of
defaulted interest to be paid.
(d) Promptly following the date on which all principal of and
interest on the Notes has been paid in full and the Notes have been
surrendered to the Trustee, the Trustee shall, if the 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
later of (i) the Termination Date and (ii) the date upon which all Issuer
Secured Obligations have been satisfied, 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 and an Opinion of Counsel meeting the applicable
requirements of Section 11.1.
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SECTION 2.10 BOOK-ENTRY NOTES. The Notes, upon original issuance, will
be issued in the form of typewritten Notes representing the Book-Entry Notes, to
be delivered to DTC 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
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;
(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; and
(vii) Note Owners may only hold positions in the
Book-Entry Notes in minimum denominations of $25,000.
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SECTION 2.11 NOTICES TO CLEARING AGENCY. Whenever a notice or other
communication to the Noteholders is required under this Indenture, unless and
until Definitive Notes shall have been issued to Note Owners pursuant to Section
2.12, the Trustee shall give all such notices and communications specified
herein to be given to Holders of the Notes to the Clearing Agency and shall have
no obligation to deliver such notices or communications to the Note Owners.
SECTION 2.12 DEFINITIVE NOTES. If (i) the Servicer advises the Trustee
in writing that the Clearing Agency is no longer willing or able to properly
discharge its responsibilities with respect to the Notes, and the Servicer is
unable to locate a qualified successor, (ii) the Servicer at its option advises
the Trustee in writing that it elects to terminate the book-entry system through
the Clearing Agency or (iii) after the occurrence of an Event of Default, Note
Owners representing beneficial interests aggregating at least a majority of the
Outstanding Amount of the Notes advise the Trustee through the Clearing Agency
in writing that the continuation of a book entry system through the Clearing
Agency is no longer in the best interests of such Note Owners, then the Clearing
Agency shall notify all Note Owners and the Trustee of the occurrence of any
such event and of the availability of Definitive Notes to Note Owners requesting
the same. Upon surrender to the Trustee of the typewritten Note or Notes
representing the Book-Entry Notes by the Clearing Agency, accompanied by
registration instructions, the Issuer shall execute and the Trustee shall
authenticate the Definitive Notes in accordance with the instructions of the
Clearing Agency. None of the Issuer, the Note Registrar or the Trustee shall be
liable for any delay in delivery of such instructions and may conclusively rely
on, and shall be protected in relying on, such instructions. Upon the issuance
of Definitive Notes, the Trustee shall recognize the Holders of the Definitive
Notes as Noteholders.
SECTION 2.13 RESTRICTIONS ON TRANSFER OF NOTES
(a) The Notes have not been registered or qualified under the
Securities Act of 1933, as amended (the "1933 Act"), or any State
securities laws or "Blue Sky" laws, and the Notes are being offered and
sold in reliance upon exemptions from the registration requirements of
the 1933 Act and such Blue Sky or State securities laws. No transfer,
sale, pledge or other disposition of any Note shall be made unless such
disposition is made pursuant to an effective registration statement
under the 1933 Act and effective registration or qualification under
applicable State securities laws or "Blue Sky" laws, or is made in a
transaction which does not require such registration or qualification.
In the event that a transfer of an Ownership Interest in a Book-Entry
Note is to be made in reliance upon an exemption from the 1933 Act, the
transferee will be deemed to have made the same representations and
warranties as required of an initial purchaser of such Ownership
Interest, as set forth in Section 2.13(b) below. In the event that a
transfer of an Ownership Interest in a Note which is not a Book-Entry
Note is to be made in reliance upon an exemption from the 1933 Act, the
Trustee or the Note Registrar shall require, in order to assure
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compliance with the 1933 Act, that the Noteholder desiring to effect
such disposition and such Noteholder's prospective transferee each (A)
certify to the Trustee or the Note Registrar in writing the facts
surrounding such disposition pursuant to a letter, substantially in the
form of EXHIBIT B hereto, or (B) provide to the Trustee or the Note
Registrar such other evidence satisfactory to the Transferor, the
Trustee and the Note Registrar that the transfer is in compliance with
the 1933 Act. The Trustee may also, unless such transfer occurs more
than three years after the Closing Date or is made pursuant to Rule
144A promulgated under the 1933 Act, require an opinion of counsel
satisfactory to it that such transfer may be made pursuant to an
exemption from the 1933 Act, which opinion of counsel shall not be an
expense of the Trustee. None of the Seller, the Servicer, the Issuer,
the Owner Trustee or the Trustee is obligated under this Indenture to
register the Notes under the 1933 Act or any other securities law or to
take any action not otherwise required under this Indenture to permit
the transfer of such Notes without such registration or qualification.
Notwithstanding the foregoing, any transfer of a Note from a
Noteholder to the Seller or an Affiliate of the Seller shall be deemed
to have been made pursuant to an exemption from the registration
requirements of the 1933 Act, applicable State securities laws and
"Blue Sky" laws, and none of the conditions precedent set forth in this
Section 2.13(a) to the transfer of the Notes shall be applicable to
such transfer and such transferee shall not be deemed to have made the
representations and warranties in Section 2.13(b).
(b) Each Person (other than the Seller or an Affiliate of the
Seller) who has or who acquires an Ownership Interest in a Book-Entry
Note in reliance upon an exemption from the 1933 Act shall be deemed by
the acceptance or acquisition of such Ownership Interest to have
represented and agreed, as follows:
(i) Such Person is a qualified institutional buyer as
defined in Rule 144A under the 1933 Act, is aware that the
seller of the Note may be relying on the exemption from the
registration requirements of the 1933 Act provided by Rule
144A and is acquiring such Note for its own account, for the
account of one or more qualified institutional buyers for whom
it is authorized to act.
(ii) Such Person understands that the Notes have not
been and will not be registered under the 1933 Act and may be
offered, sold, pledged or otherwise transferred only to a
person whom the seller reasonably believes is a qualified
institutional buyer in a transaction meeting the requirements
of Rule 144A under the 1933 Act and in accordance with any
applicable securities laws of any State.
(iii) Such Person understands that a single
certificate in respect of each Class of Notes has been
registered in the name of the nominee of DTC, or in the case
of Definitive Notes, such Definitive Notes have been
registered in the name of such Person or its nominee, and
bears a legend to the following effect:
"THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES ("BLUE SKY LAWS"), AND THIS NOTE
MAY NOT BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
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TRANSFERRED EXCEPT (A) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
BUYER WITHIN THE MEANING OF RULE 144A UNDER THE 1933
ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (B) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE 1933 ACT, (C) PURSUANT TO AN
EXEMPTION FROM REGISTRATION PROVIDED UNDER THE 1933
ACT (IF AVAILABLE), OR (D) TO THE SELLER OR AN
AFFILIATE OF THE SELLER, IN EACH CASE IN ACCORDANCE
WITH THE INDENTURE AND ALL APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION. NO REPRESENTATION IS MADE AS
TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE
144A FOR RESALES OF THIS NOTE."
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 or any applicable State law 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.
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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.
(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.
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(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 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 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 statutory 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 Trustee for the
benefit 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:
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(i) Grant more effectively all or any portion of the
Trust Estate;
(ii) maintain or preserve the lien and security
interest (and the priority thereof) in favor of the Trustee
for the benefit of the Issuer Secured Parties created by this
Indenture or carry out more effectively the purposes hereof;
(iii) perfect, publish notice of or protect the
validity of any Grant made or to be made by this Indenture;
(iv) enforce any of the Collateral;
(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, and on the date of execution of each
indenture supplemental hereto, 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
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 in the Receivables, 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,
commencing in 2008, 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 re-filing of this Indenture, any
indentures supplemental hereto and any other requisite documents and
with respect to the filing of any financing statements and continuation
statements as are necessary to maintain the first priority lien and
security interest created by this Indenture in the Receivables 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
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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 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 preparing (or causing to be 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, if an Insurer Default has
occurred and is continuing, a Note Majority.
(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.
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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, without the
satisfaction of the Rating Agency Condition and unless
directed to do so by the Controlling Party or unless the
Controlling Party has approved such disposition;
(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 or
any other Basic Document except as may be expressly permitted
hereby or thereby, (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, any
Collateral 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)
perfected security interest in the Trust Estate or any
Collateral; or (D) amend, modify or fail to comply with the
provisions of the Basic Documents without the prior written
consent of the Controlling Party, and if such amendments or
modifications would adversely affect the interests of any
Noteholder in any material respect, the consent of such
Noteholder or the satisfaction of the Rating Agency Condition;
or
(iv) engage in any business or activity other than as
permitted by the Trust Agreement; or
(v) incur or assume any indebtedness or guarantee any
indebtedness of any Person, except for such indebtedness
incurred pursuant to Section 3.15; or
(vi) dissolve or liquidate in whole or in part or
merge or consolidate with any other Person, other than in
compliance with Section 3.10; or
(vii) take any action that would result in the Issuer
becoming taxable as a corporation for federal income tax
purposes or for the purposes of any applicable State tax.
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SECTION 3.9 ANNUAL STATEMENT AS TO COMPLIANCE. The Issuer will deliver
to the Trustee and the Note Insurer, on or before March 31 of each year,
beginning March 31, 2008, an Officer's Certificate, dated as of December 31 of
the preceding calendar year, stating, as to the Authorized Officer signing such
Officer's Certificate, that
(i) a review of the activities of the Issuer during
such preceding year (or, in the case of the first such
Officer's Certificate, since the Closing Date) and of its
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, in the case of the first such Officer's
Certificate, since the Closing Date), 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
Statutory Trust or a similar trust organized and existing
under the laws of any other State and shall expressly assume,
by an indenture supplemental hereto, executed and delivered to
the Trustee, in form satisfactory to the 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;
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(v) any action as is necessary to maintain the lien
and security interest created by this Indenture shall have
been taken;
(vi) the Issuer shall have delivered to the Trustee
and the Note Insurer 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; 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 consolidation or merger 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.
(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 Statutory Trust or a similar trust organized and
existing under the laws of any other State, (B) expressly
assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the 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 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;
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(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
and the Note Insurer 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; 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.
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 2007-B 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
2007-B 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 end of the Funding Period, the
Issuer will not purchase any additional Receivables.
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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 Pre-Funding Account, the Capitalized Interest Account and (on behalf
of the Seller) the Series 2007-B 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 Basic Documents, the Issuer shall not make any loan or
advance or credit to, or guarantee (directly or indirectly or by an instrument
having the effect of assuring another's payment or performance on any obligation
or capability of so doing or otherwise), endorse or otherwise become
contingently liable, directly or indirectly, in connection with the obligations,
stocks or dividends of, or own, purchase, repurchase or acquire (or agree
contingently to do so) any stock, obligations, assets or securities of, or any
other interest in, or make any capital contribution to, any other Person.
SECTION 3.16 CAPITAL EXPENDITURES. The Issuer shall not make any
expenditure (by long-term or operating lease or otherwise) for capital assets
(either realty or personalty).
SECTION 3.17 COMPLIANCE WITH LAWS. The Issuer shall comply with the
requirements of all applicable laws, the non-compliance with which would,
individually or in the aggregate, materially and adversely affect the ability of
the Issuer to perform its obligations under the Notes, this Indenture or any
other 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, the Collateral Agent, the
Backup Servicer, the Note Insurer, the Noteholders and the Certificateholders as
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permitted by, and to the extent funds are available for such purpose under, the
Sale and Servicing Agreement, the Master Spread Account Agreement, the Trust
Agreement or any other Basic Document. 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 any of the Basic Documents.
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, the Note Insurer 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 and each Noteholder, by its acceptance of its Note or in the
case of a Note Owner, by its acceptance of a beneficial interest in a Note, 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.
SECTION 3.23 SEPARATE EXISTENCE OF THE ISSUER. During the term of this
Indenture, the Issuer shall observe the applicable legal requirements for the
recognition of the Issuer as a legal entity separate and apart from its
Affiliates, including as follows:
(a) The Issuer shall maintain business records and books of
account separate from those of its Affiliates;
(b) Except as otherwise provided in the Basic Documents, the
Issuer shall not commingle its assets and funds with those of its
Affiliates;
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(c) The Issuer shall at all times hold itself out to the
public under the Issuer's own name as a legal entity separate and
distinct from its Affiliates; and
(d) All transactions and dealings between the Issuer and its
Affiliates will be conducted on an arm's-length basis.
SECTION 3.24 REPRESENTATIONS AND WARRANTIES OF THE ISSUER.
The Issuer hereby makes the following representations and warranties as
to the Trust Estate to the Note Insurer and the Trustee for the benefit of the
Noteholders:
(i) CREATION OF SECURITY INTEREST. This Indenture
creates a valid and continuing security interest (as defined
in the UCC) in the Trust Estate in favor of the Trustee for
the benefit of the Issuer Secured Parties, which security
interest is prior to all other Liens (except, as to priority,
for any tax liens or mechanics' lien which may arise after the
Closing Date or as a result of an Obligor's failure to pay its
obligations, as applicable) and is enforceable as such as
against creditors of and purchasers from the Issuer.
(ii) PERFECTION OF SECURITY INTEREST IN TRUST
PROPERTY. The Issuer has caused, on or prior to the Closing
Date, the filing of all appropriate financing statements in
the proper filing office in the appropriate jurisdictions
under applicable law in order to perfect the security interest
in the Trust Estate Granted to the Trustee for the benefit of
the Issuer Secured Parties hereunder.
(iii) NO OTHER SECURITY INTERESTS. Other than the
security interest Granted to the Trustee for the benefit of
the Issuer Secured Parties hereunder, the Issuer has not
pledged, assigned, sold, granted a security interest in, or
otherwise conveyed any of the Trust Estate. The Issuer has not
authorized the filing of and is not aware of any financing
statements filed against the Issuer that include a description
of collateral covering the Trust Estate other than any
financing statement relating to the security interest Granted
to the Trustee for the benefit of the Issuer Secured Parties
hereunder or that has been terminated. The Issuer is not aware
of any judgment or tax lien filings against the Issuer.
(iv) NOTATIONS ON CONTRACTS; FINANCING STATEMENT
DISCLOSURE. The Servicer has in its possession copies of all
the original Contracts that constitute or evidence the Initial
Receivables and, from and after each Subsequent Transfer Date,
will have in its possession copies of all the original
Contracts that constitute or evidence the related Subsequent
Receivables. The Contracts that constitute or evidence the
Receivables do not and will not have any marks or notations
indicating that they have been pledged, assigned or otherwise
conveyed to any Person other than the Issuer and/or the
Trustee for the benefit of the Issuer Secured Parties. All
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financing statements filed or to be filed against the Issuer
in favor of the Trustee in connection herewith describing the
Trust Estate contain a statement to the following effect: "A
purchase of or security interest in any collateral described
in this financing statement will violate the rights of Wells
Fargo Bank, National Association, as Trustee and secured
party."
(v) TITLE. Immediately prior to the Grant herein
contemplated, the Issuer had good and marketable title to each
Receivable and the other property Granted hereunder 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 Trustee for the
benefit of the Issuer Secured Parties shall have good and
marketable title to each such Receivable and other 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.
The representations and warranties of the Issuer in this Section 3.24
may not be waived, modified or amended in any material respect without the prior
written consent of the Trustee, the Note Insurer and the Rating Agencies, and
shall survive the satisfaction and discharge of this Indenture.
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 2.9, 3.3, 3.4, 3.5,
3.8, 3.10, 3.12, 3.13, 3.20, 3.21, 3.22 and 11.17, (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
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(c) the Issuer has delivered to the Trustee and the Note
Insurer an Officer's Certificate and an Opinion of Counsel, 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.
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) so long as an Insurer Default shall have occurred
and be continuing, 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 from the Series 2007-B
Spread Account shall be deemed to be a payment made by the
Issuer); or
(ii) so long as an Insurer Default shall have
occurred and be continuing, 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 from the Series 2007-B Spread Account
shall be deemed to be a payment made by the Issuer); or
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(iii) so long as no Insurer Default shall 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 this Indenture; or
(iv) so long as an Insurer Default shall have
occurred and be continuing, a default in the observance or
performance of any covenant or agreement of the Issuer made in
this Indenture (other than a covenant or agreement, a default
in the observance or performance of which is elsewhere in this
Section specifically dealt with), or any representation or
warranty of the Issuer made in this Indenture or in any
certificate or other writing delivered pursuant hereto or in
connection herewith proving to have been incorrect in any
material respect as of the time when the same shall have been
made, and such default shall continue or not be cured, or the
circumstance or condition in respect of which such
misrepresentation or warranty was incorrect shall not have
been eliminated or otherwise cured, for a period of 30 days
(or for such longer period, not in excess of 90 days, as may
be reasonably necessary to remedy such default; provided that
such default is capable of remedy within 90 days or less and
the Servicer on behalf of the Owner Trustee delivers an
Officer's Certificate to the Trustee to the effect that the
Issuer has commenced, or will promptly commence and diligently
pursue, all reasonable efforts to remedy such default) after
there shall have been given, by registered or certified mail,
to the Issuer by the Trustee or to the Issuer and the Trustee
by the Holders of at least 25% of the Outstanding Amount of
each class of 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 occurrence of an Insolvency Event with
respect to the Issuer, the Servicer or the Seller (or, so long
as CPS is Servicer, any Specified Affiliate).
(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.
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(a) So long as no Insurer Default has occurred and is
continuing, if an Event of Default shall have occurred and be
continuing, then the Controlling Party shall have the right, but not
the obligation, upon prior written notice to each Rating Agency, to
declare by written notice to the Issuer and the Trustee that the Notes
become immediately due and payable, and upon any such declaration the
unpaid principal amount of the Notes, together with accrued and unpaid
interest thereon, shall become immediately due and payable. The Trustee
will have no discretion with respect to the acceleration of the Notes
under the foregoing circumstances. 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. In the event of any acceleration
of the Notes, the Trustee shall continue to make claims under the Note
Policy pursuant to the Sale and Servicing Agreement for Scheduled
Payments on the Notes. Subject to the terms of the Note Policy,
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 the Noteholders for
amounts due and unpaid on the Notes for
principal, ratably and without preference or
priority of any kind, according to the
amounts then due and payable on the 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 a Note Majority, shall 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) 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 provided in this Article V, the
Note Insurer in its sole discretion, or if an Insurer Default
has occurred and is continuing, a Note Majority, by written
notice to the Issuer and the Trustee, may rescind and annul
such declaration and its consequences if:
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(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 5.13.
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 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.
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(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, 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) 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, subject to the direction of the
Controlling Party, 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;
(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;
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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.
(e) 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.
(f) All rights of action and of asserting claims under this
Indenture, the Master Spread Account Agreement, any other Basic
Document 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.
(g) In any proceedings brought by the Trustee (and also any
proceedings involving the interpretation of any provision of this
Indenture, the Master Spread Account Agreement or any other Basic
Document), 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 any judgment obtained, and
collect from the Issuer and any other obligor upon such Notes
moneys adjudged due;
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(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 Issuer Secured Parties; 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 or private sales called and conducted in
any manner permitted by law; provided, however, that if the
Trustee (acting at the direction of Noteholders) 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
(acting at the direction of Noteholders) 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 amounts due to the Note Insurer, and
the Trustee shall take such desire into account when determining whether or not
to maintain possession of the Trust Estate. In determining whether to maintain
possession of the Trust Estate, the Trustee may, but need not, obtain and rely
upon an opinion of an Independent investment banking or accounting firm of
national reputation as to the feasibility of such proposed action and as to the
sufficiency of the Trust Estate for such purpose.
SECTION 5.6 PRIORITIES.
(a) Following (1) the acceleration of the Notes pursuant to
Section 5.2 or (2) if an Insurer Default shall have occurred and be
continuing, the occurrence of an Event of Default pursuant to Section
5.1(a)(i), 5.1(a)(ii) or 5.1(a)(v) 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:
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FIRST: amounts due and owing and
required to be distributed pursuant to
priorities (i) through (iv) of Section
5.7(a) of the Sale and Servicing Agreement
and not previously distributed to the
Persons set forth therein, in the order of
such priorities and without preference or
priority of any kind within such priorities,
and, if applicable, subject to the monetary
limitations set forth therein;
SECOND: to the 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 the Noteholders for
amounts due and unpaid on the Notes for
principal, ratably and without preference of
priority of any kind, to the Noteholders of
each Class of Notes, according to the
amounts due and payable on the Notes, until
the outstanding principal amount of the
Notes has been reduced to zero;
FOURTH: amounts due and owing and
required to be distributed to the Note
Insurer pursuant to priority (viii) of
Section 5.7(a) of the Sale and Servicing
Agreement and not previously distributed;
FIFTH: amounts due and owing and
required to be distributed to the Residual
Certificateholders, pro rata, pursuant to
priorities (vi) and (xiii) of Section 5.7(a)
of the Sale and Servicing Agreement and not
previously distributed;
SIXTH: in the event any Person other
than the Backup Servicer becomes the
successor Servicer, to such successor
Servicer, to the extent not previously paid
by the predecessor Servicer pursuant to the
Sale and Servicing Agreement, or pursuant to
priority FIRST hereof, reasonable transition
expenses (up to a maximum of $50,000 for all
such expenses during the term of this
Indenture) incurred in becoming the
successor Servicer and all other amounts due
and owing to the Backup Servicer pursuant to
Section 5.7(a)(xii) of the Sale and
Servicing Agreement;
SEVENTH: to the Residual
Certificateholders, pro rata, in reduction
of the Residual Certificate Notional Balance
until the Residual Certificate Notional
Balance equals zero; and
EIGHTH: to the Residual
Certificateholders, pro rata, any remaining
amount;
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provided that any amounts collected from the Pre-Funding Account or the
Capitalized Interest Account shall be applied solely to the payment of
amounts due and unpaid on the Notes FIRST, in accordance with Section
10.1(b) and SECOND, in accordance with Section 5.8(a)(ii) of the Sale
and Servicing Agreement and THIRD, in accordance with priorities FIRST
through EIGHTH above.
(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 Residual Certificateholder 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 while any Trustee Secured Obligations or Note Insurer
Secured Obligations remain outstanding. 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 each class of 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 a Note Majority; and
(vi) an Insurer Default shall have occurred and be
continuing;
it being understood and intended that no one or more Holders of Notes
shall have any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other Holders of Notes or to obtain or to seek to obtain priority or preference
over any other Holders or to enforce any right under this Indenture, except in
the manner herein provided.
In the event an Insurer Default has occurred and is continuing and 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 each class of Notes, the Trustee in its sole
discretion may determine what action, if any, shall be taken, notwithstanding
any other provisions of this Indenture.
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SECTION 5.8 UNCONDITIONAL RIGHTS OF NOTEHOLDERS TO RECEIVE PRINCIPAL
AND INTEREST. Notwithstanding any other provisions of this Indenture, the Holder
of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of and interest, if any, on such Note on or
after the respective due dates thereof expressed in such Note or in this
Indenture (or, in the case of redemption, on or after the Redemption Date) and
to institute suit for the enforcement of any such payment, and such right shall
not be impaired without the consent of such Holder.
SECTION 5.9 RESTORATION OF RIGHTS AND REMEDIES. If the Controlling
Party or any Noteholder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason or has been determined adversely to the Trustee or to
such Noteholder, then and in every such case the Issuer, the Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored
severally and respectively to their former positions hereunder, and thereafter
all rights and remedies of the Trustee and the Noteholders shall continue as
though no such proceeding had been instituted.
SECTION 5.10 RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Controlling Party or to the Noteholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11 DELAY OR OMISSION NOT A WAIVER. No delay or omission of
the Controlling Party or any Holder of any Note to exercise any right or remedy
accruing upon any Default or Event of Default shall impair any such right or
remedy or constitute a waiver of any such Default or Event of Default or an
acquiescence therein. Every right and remedy given by this Article V or by law
to the Trustee or to the Noteholders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Noteholders, as the
case may be.
SECTION 5.12 CONTROL BY NOTEHOLDERS. If the Trustee (acting at the
direction of Noteholders) is the Controlling Party, a Note Majority shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee with respect to the Notes or exercising any
trust or power conferred on the Trustee; provided that
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(i) such direction shall not be in conflict with any
rule of law or with this Indenture;
(ii) subject to the express terms of Section 5.4, any
direction to the Trustee to sell or liquidate the Trust Estate
shall be by the Holders of Notes representing not less than
100% of the Outstanding Amount of the Notes;
(iii) if the conditions set forth in Section 5.5 have
been satisfied and the Trustee elects to retain the Trust
Estate pursuant to such Section, then any direction to the
Trustee by Holders of Notes representing less than 100% of the
Outstanding Amount of each class of 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. Prior to the declaration of the
acceleration of the maturity of the Notes as provided in Section 5.4, the Note
Insurer or, if an Insurer Default has occurred and is continuing, a Note
Majority 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 faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to (a)
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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 each class of 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 granted to the Trustee herein and any
right of the Issuer to take such action shall be suspended.
SECTION 5.16 SUBROGATION. 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, each Noteholder shall be deemed, without further action to have
directed the Trustee to 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. Notwithstanding
the foregoing, the order of priority of payments to be made pursuant to Section
5.7(a) of the Sale and Servicing Agreement shall not be modified by this clause.
To evidence such subrogation, the Note Registrar 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 Scheduled Payment.
SECTION 5.17 PREFERENCE CLAIMS; DIRECTION OF PROCEEDINGS. (a) In the
event that the Trustee has received a certified copy of an order of the
appropriate court that any Scheduled Payment 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. 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 Final 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 named in the Final
Order, in which case the Note Insurer will make such payment to the Trustee for
payment, in accordance with the instructions to be provided by the Note Insurer,
to such Noteholder upon proof of such payment reasonably satisfactory to the
Note Insurer).
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(b) Each notice of claim (in substantially the form attached to the
Note Policy as Exhibit A) shall provide that the Trustee, on its behalf and on
behalf of the Noteholders, thereby appoints the Note Insurer as agent and
attorney in fact for the Trustee and each Noteholder in any legal proceeding
with respect to the Notes. The Trustee shall promptly notify the Note Insurer of
any proceeding or the institution of any action (of which a Responsible Officer
of 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 payment made with respect to the
Notes. Each Holder of the Notes, by its purchase of Notes, and the Trustee
hereby agree that so long as a Note 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 (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 the reimbursement as provided in the Insurance Agreement. In
addition, and without limitation of the foregoing, 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 all rights of any party to an adversary proceeding action with respect
to any court order issued in connection with any such Preference Claim.
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.
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(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer unless it
is proved that the Trustee was negligent in ascertaining the
pertinent facts; and
(iii) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section
5.12.
(d) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the
Issuer.
(e) Money held in trust by the Trustee need not be segregated
from other funds except to the extent required by law or the terms of
the Basic Documents.
(f) No provision of this Indenture shall require the Trustee
in any of its capacities 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.
(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 Basic
Documents.
(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 Wells Fargo Bank, National Association,
in any of its capacities hereunder, be deemed to have assumed any
duties of the Owner Trustee under the Delaware Statutory Trust Statute,
common law, or the Trust Agreement.
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(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 willful misconduct, negligence or bad
faith.
(e) The Trustee may consult with counsel, and the advice of
such counsel or any opinion of counsel with respect to legal matters
relating to the Basic Documents 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 or any of the Basic Documents, 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
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Notes or the Controlling Party shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities that may be incurred therein or thereby; provided, however,
that the Trustee shall, upon the occurrence of an Event of Default
(that has not been cured or waived), 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 of each class 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 Section 6.11.
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, any Basic Documents, 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 this
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
knowledge or notice occurs. Except in the case of a Default in payment of
principal of or interest on any Note (including payments pursuant to the
mandatory redemption provisions of such Note, 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.
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SECTION 6.7 COMPENSATION AND INDEMNITY.
(a) Pursuant to Section 5.7(a) of the Sale and Servicing
Agreement, the Issuer shall pay to the Trustee from time to time
compensation for its services, as separately agreed. 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(a) 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 the Trustee's 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 and
including any loss, liability or expense directly or indirectly
incurred (regardless of negligence on the part of the Trustee or the
Issuer) by the Trustee as a result of any penalty or other cost imposed
by the Internal Revenue Service or other taxing authority (except any
penalties arising out of fees paid to the Trustee or as a result of any
action taken contrary to the Indenture) related to the tax status of
the Issuer or the Notes. 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 willful 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(a)(v) 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
Seller, the Depositor, any Noteholder or any Residual
Certificateholder. In addition, the Trustee agrees that its recourse to
the Trust Estate and amounts held in the Series 2007-B Spread Account
shall be limited to the right to receive the distributions referred to
in Section 5.7(a) of the Sale and Servicing Agreement.
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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) an Insolvency Event with respect to the Trustee
occurs; or
(iii) the Trustee otherwise becomes incapable of
acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of the 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, the
Note Insurer or a Note Majority may petition any court of competent jurisdiction
for the appointment of a successor Trustee.
Any resignation or removal of the Trustee and appointment of a
successor Trustee pursuant to any of the provisions of this Section shall not
become effective until acceptance of appointment by the successor Trustee
pursuant to Section 6.8.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Issuer's and the Servicer's obligations under Section 6.7 shall
continue for the benefit of the retiring Trustee.
SECTION 6.9 SUCCESSOR TRUSTEE BY MERGER.
(a) If the Trustee consolidates with, merges or converts into,
or transfers all or substantially all its corporate trust business or
assets to, another corporation or banking association, the resulting,
surviving or transferee corporation without any further act shall be
the successor Trustee. The Trustee shall provide the Rating Agencies
and the Note Insurer with written notice of any such transaction.
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(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 Estate 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 Estate,
and to vest in such Person or Persons, in such capacity and for the
benefit of the Noteholders, such title to the Trust Estate, or any part
hereof, and, subject to the other provisions of this Section, such
powers, duties, obligations, rights and trusts as the Trustee may
consider necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 6.11 and no notice to Noteholders of
the appointment of any co-trustee or separate trustee shall be required
under Section 6.8 hereof.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or
imposed upon and exercised or performed by the Trustee and
such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in
such act), except to the extent that under any law of any
jurisdiction in which any particular act or acts are to be
performed the Trustee shall be incompetent or unqualified to
perform such act or acts, in which event such rights, powers,
duties and obligations (including the holding of title to the
Trust or any portion thereof in any such jurisdiction) shall
be exercised and performed singly by such separate trustee or
co-trustee, but solely at the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable
by reason of any act or omission of any other trustee
hereunder, including acts or omissions of predecessor or
successor trustees; and
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(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 vest 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, and any
successor thereto, shall at all times 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 satisfactory to the Note Insurer; 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.
SECTION 6.12 RESERVED.
SECTION 6.13 APPOINTMENT AND POWERS. Subject to the terms and
conditions hereof, each of the Issuer Secured Parties hereby appoints Wells
Fargo Bank, National Association as the Trustee with respect to the Collateral,
and Wells Fargo Bank, 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
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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 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
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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, discretions, 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 a Note
Majority) 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 an Issuer Secured Party
or the Issuer, execute and deliver an instrument transferring to such
successor all the estates, properties, rights and powers of such
predecessor hereunder. In the event that any instrument in writing from
the Issuer or an Issuer Secured Party is reasonably required by a
successor Trustee to more fully and certainly vest in such successor
the estates, properties, rights, powers, duties and obligations vested
or intended to be vested hereunder in the Trustee, any and all such
written instruments shall at the request of the temporary or permanent
successor Trustee, be forthwith executed, acknowledged and delivered by
the Trustee or the Issuer, as the case may be. The designation of any
successor Trustee and the instrument or instruments removing any
Trustee and appointing a successor hereunder, together with all other
instruments provided for herein, shall be maintained with the records
relating to the Collateral and, to the extent required by applicable
law, filed or recorded by the successor Trustee in each place where
such filing or recording is necessary to effect the transfer of the
Collateral to the successor Trustee or to protect or continue the
perfection of the security interests granted hereunder.
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SECTION 6.18 RESERVED.
SECTION 6.19 REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE. The Trustee
represents and warrants to the Issuer and to each Issuer Secured Party as
follows:
(a) DUE ORGANIZATION. The Trustee is a national banking
association, duly organized, validly existing and in good standing
under the laws of the United States and is duly authorized and licensed
under applicable law to conduct its business as presently conducted.
(b) CORPORATE POWER. The Trustee has all requisite right,
power and authority to execute and deliver this Indenture and to
perform all of its duties as Trustee hereunder.
(c) DUE AUTHORIZATION. The execution and delivery by the
Trustee of this Indenture and the other Basic Documents to which it is
a party, and the performance by the Trustee of its duties hereunder and
thereunder, have been duly authorized by all necessary corporate
proceedings and no further approvals or filings, including any
governmental approvals, are required for the valid execution and
delivery by the Trustee, or the performance by the Trustee, of this
Indenture and such other Basic Documents.
(d) VALID AND BINDING INDENTURE. The Trustee has duly executed
and delivered this Indenture and each other Basic Document to which it
is a party, and each of this Indenture and each such other Basic
Document constitutes the legal, valid and binding obligation of the
Trustee, enforceable against the Trustee in accordance with its terms,
except as (i) such enforceability may be limited by bankruptcy,
insolvency, reorganization and similar laws relating to or affecting
the enforcement of creditors' rights generally and (ii) the
availability of equitable remedies may be limited by equitable
principles of general applicability.
SECTION 6.20 WAIVER OF SETOFFS. The Trustee hereby expressly waives any
and all rights of setoff that the Trustee may otherwise at any time have under
applicable law with respect to any Trust Account and agrees that amounts in the
Trust Accounts shall at all times be held and applied solely in accordance with
the provisions hereof.
SECTION 6.21 CONTROL BY THE CONTROLLING PARTY. The Trustee shall comply
with notices and instructions given by the Issuer only if accompanied by the
written consent of the Controlling Party, except that if any Event of Default
shall have occurred and be continuing, the Trustee shall act upon and comply
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with notices and instructions given by the Controlling Party alone in the place
and stead of the Issuer.
ARTICLE VII
NOTEHOLDERS' LISTS AND REPORTS
------------------------------
SECTION 7.1 ISSUER TO FURNISH TO TRUSTEE NAMES AND ADDRESSES OF
NOTEHOLDERS. The Issuer will furnish or cause to be furnished to the Trustee (a)
not more than five days after the earlier of (i) each Record Date and (ii) three
months after the last Record Date, a list, in such form as the Trustee may
reasonably require, of the names and addresses of the Holders as of such Record
Date, (b) at such other times as the Trustee may request in writing, within 30
days after receipt by the Issuer of any such request, a list of similar form and
content as of a date not more than 10 days prior to the time such list is
furnished; provided, however, that so long as the Trustee is the Note Registrar,
no such list shall be required to be furnished. If the Notes are Definitive
Notes, 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.
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.
ARTICLE VIII
COLLECTION OF MONEY AND RELEASES OF TRUST ESTATE
------------------------------------------------
SECTION 8.1 COLLECTION OF MONEY. Except as otherwise expressly provided
herein, the Trustee may demand payment or delivery of, and shall receive and
collect, directly and without intervention or assistance of any fiscal agent or
other intermediary, all money and other property payable to or receivable by the
Trustee pursuant to this Indenture and the Sale and Servicing Agreement. The
Trustee shall apply all such money received by it as provided in this Indenture
and the Sale and Servicing Agreement. Except as otherwise expressly provided in
this Indenture or in the Sale and Servicing Agreement, if any default occurs in
the making of any payment or performance under any agreement or instrument that
is part of the Trust Estate, the Trustee may take such action as may be
appropriate to enforce such payment or performance, including the institution
and prosecution of appropriate proceedings. Any such action shall be 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.
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(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, all Issuer Secured Obligations have been paid in full 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 and an Opinion
of Counsel 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 Issuer Secured Parties 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 or
Residual Certificateholders 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 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
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force at the date of the execution thereof), in form satisfactory to
the Trustee, for any of the following purposes; provided, however, if
any party to this Indenture is unable to sign any supplemental
indenture due to its dissolution, winding up or comparable
circumstances, then the consent of the Note Insurer or a Note Majority
shall be sufficient to amend this Indenture without such party's
signature:
(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 or the rating of the Notes; or
(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.
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
or Residual Certificateholders but with prior notice to the Rating
Agencies by the Issuer and with the prior written consent of the Note
Insurer (unless an Insurer Default shall have occurred and be
continuing), enter into an indenture or indentures supplemental hereto
for the purpose of adding any provisions to, or changing in any manner
or eliminating any of the provisions of, this Indenture or of modifying
in any manner the rights of the Holders of the Notes under this
Indenture; provided, however, that such action shall not, as evidenced
by an Opinion of Counsel, adversely affect the interests of any
Noteholder in any material respect. Any such action shall be deemed to
not adversely affect in any material respect the interests of any
Noteholder if the Rating Agency Condition has been satisfied.
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SECTION 9.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF NOTEHOLDERS. The
Issuer and the Trustee, when authorized by an Issuer Order, also may, without
the consent of the Residual Certificateholders, but with prior notice to the
Rating Agencies and with the consent of the Note Insurer (unless an Insurer
Default shall have occurred and be continuing) or, if an Insurer Default shall
have occurred and be continuing, with the consent of a Note Majority, 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, if any party to this Indenture is unable to sign
any supplemental indenture due to its dissolution, winding up or comparable
circumstances, then the consent of the Note Insurer (unless an Insurer Default
shall have occurred and be continuing) or, if an Insurer Default shall have
occurred and be continuing, the consent of a Note Majority shall be sufficient
to amend this Indenture without such party's signature; provided, further
however, that, subject to the express rights of the Note Insurer under the Basic
Documents and notwithstanding SECTION 11.20, 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 Basic
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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.
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SECTION 9.5 RESERVED.
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
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SECTION 10.1 REDEMPTION.
(a) 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 at least equal to the
Redemption Price; provided, however, that the Issuer has available
funds sufficient to pay the Redemption Price and all amounts due to the
Note Insurer under the Basic Documents. 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(a), the Servicer or the Issuer shall furnish notice of such
election to the Trustee not later than 35 days prior to the Redemption
Date and the Servicer shall deposit with the Trustee in the Note
Distribution Account the Redemption Price of the Notes to be redeemed
at least one Business Day prior to the Redemption Date. If the Servicer
fails to so deposit the Redemption Price with the Trustee at least one
Business Day prior to the Redemption Date, such redemption shall be
deemed to be automatically rescinded and the Noteholders shall receive
the payments of interest and principal that would be due to the
Noteholders on such Payment Date as if such option to redeem the Notes
had never been exercised. For the avoidance of any doubt, no Event of
Default shall occur solely as a result of such rescission.
(b) If, on the Mandatory Redemption Date, the Pre-Funded
Amount is greater than zero after giving effect to the purchase of all
Subsequent Receivables during the Funding Period, including any such
purchase on the last day of the Funding Period, the Notes will be
redeemed in part pursuant to Section 5.8(a)(ii) of the Sale and
Servicing Agreement in an amount equal to the Note Prepayment Amount.
SECTION 10.2 FORM OF REDEMPTION NOTICE.
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(a) 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;
(iii) that the Record Date otherwise applicable to
such Redemption Date is not applicable and that payments shall
be made only upon presentation and surrender of such Notes and
the place where such Notes are to be surrendered for payment
of the Redemption Price (which shall be the office or agency
of the Issuer to be maintained as provided in Section 3.2);
and
(iv) that interest on the Notes shall cease to accrue
on the Redemption Date.
Notice of redemption of the Notes shall be given by the Trustee in the
name and at the expense of the Issuer. Failure to give notice of redemption, or
any defect therein, to any Holder of any Note shall not impair or affect the
validity of the redemption of any other Note.
(b) Prior notice of redemption under Section 10.1(b) is not
required to be given to Noteholders.
SECTION 10.3 NOTES PAYABLE ON REDEMPTION DATE. The Notes to be redeemed
shall, following notice of redemption as required by Section 10.2 (in the case
of redemption pursuant to Section 10.1), 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
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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, and (ii) an Opinion of Counsel stating that in the
opinion of such counsel all such conditions precedent, if any, have
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been complied with except that, in the case of any such application or
request as to which the furnishing of such documents is specifically
required by any provision of this Indenture, no additional certificate
or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(i) a statement that each signatory of such
certificate or opinion has read or has caused to be read such
covenant or condition and the definitions herein relating
thereto;
(ii) a brief statement as to the nature and scope of
the examination or investigation upon which the statements or
opinions contained in such certificate or opinion are based;
(iii) a statement that, in the opinion of each such
signatory, such signatory has made such examination or
investigation as is necessary to enable such signatory to
express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether, in the opinion of
each such signatory such condition or covenant has been
complied with.
(b) (i) Prior to the deposit of any Collateral or other
property or securities with the Trustee that is to be made the basis
for the release of any property or securities subject to the lien of
this Indenture, the Issuer shall, in addition to any obligation imposed
in Section 11.1(a) or elsewhere in this Indenture, furnish to the
Trustee and the 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% of the
Outstanding Amount of the Notes.
(iii) Other than with respect to the release of any
Purchased Receivables, Defaulted Texas 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
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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
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, Defaulted Texas Receivables
and Liquidated 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% 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
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officers of the Servicer, the Seller or the Issuer, stating that the
information with respect to such factual matters is in the possession
of the Servicer, the Seller or the Issuer, unless such counsel knows,
or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to such matters are
erroneous.
(c) Where any Person is required to make, give or execute two
or more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but need
not, be consolidated and form one instrument.
(d) Whenever in this Indenture, in connection with any
application or certificate or report to the Trustee, it is provided
that the Issuer shall deliver any document as a condition of the
granting of such application, or as evidence of the Issuer's compliance
with any term hereof, it is intended that the truth and accuracy, at
the time of the granting of such application or at the effective date
of such certificate or report (as the case may be), of the facts and
opinions stated in such document shall in such case be conditions
precedent to the right of the Issuer to have such application granted
or to the sufficiency of such certificate or report. The foregoing
shall not, however, be construed to affect the Trustee's right to rely
upon the truth and accuracy of any statement or opinion contained in
any such document as provided in Article VI.
SECTION 11.3 ACTS OF NOTEHOLDERS.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given
or taken by Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Noteholders
in person or by agents duly appointed in writing; and except as herein
otherwise expressly provided such action shall 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.
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SECTION 11.4 NOTICES, ETC., TO TRUSTEE, ISSUER, NOTE INSURER 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;
(ii) the Issuer by the Trustee or by any Noteholder
shall be sufficient for every purpose hereunder if personally
delivered, delivered by overnight courier or mailed certified
mail, return receipt requested and shall deemed to have been
duly given upon receipt to the Issuer addressed to: CPS Auto
Receivables Trust 2007-B, in care of Wilmington Trust Company,
Rodney Square North, 1100 N. Market Street, Wilmington,
Delaware 19890-0001, 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; or
(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.
31 West 52nd Street
New York, New York 10019
Attention: Transaction Oversight Department
Re: Policy No. 51851-N
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" at the foregoing
address.)
(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, electronically delivered, delivered by overnight
courier or mailed certified mail, return receipt requested to (i) in
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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, via electronic delivery to Servicer_reports@sandp.com;
for any information not available in electronic format, send hard
copies to: Standard & Poor's Ratings Services, 55 Water Street, 41st
Floor, New York, New York 10041-0003, Attention: ABS Surveillance
Group; 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 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.
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SECTION 11.7 RESERVED.
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 third-party beneficiaries 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, AND THIS INDENTURE AND ALL MATTERS ARISING OUT OF OR RELATING
IN ANY WAY TO THIS INDENTURE SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
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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 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 Articles 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
institution 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.
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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.
SECTION 11.19 ACTION UPON DIRECTION OF NOTEHOLDERS. Except where this
Indenture specifically states otherwise, the Trustee, provided it has sent out
notices in accordance with this Indenture, may act as directed by a Note
Majority responding in writing to such request for amendment or written
direction, provided however, that a Note Majority as of the time such voting
response is due back to the Trustee must have responded in writing to the
Trustee's notice to amend or for written direction. In addition, the Trustee
shall not have any liability to any Noteholder or Note Owner with respect to any
action taken pursuant to such notice if the Noteholder or Note Owner does not
respond to such notice within the time period set forth in such notice. By
acceptance of a Note, each Noteholder and Note Owner agree to the foregoing
provisions.
SECTION 11.20 NOTE INSURER AS CONTROLLING PARTY
(a) 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 no Insurer Default has occurred and is
continuing, except as otherwise provided herein, whenever Noteholder or
Residual Certificateholder action, consent or approval is required
under this Indenture, such action, consent or approval shall be deemed
taken or given on behalf of, and shall be binding upon, all Noteholders
and Residual Certificateholders if the Note Insurer agrees to take such
action or give such consent or approval. 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 as Controlling Party under this Indenture shall be inoperative
during the period of such Insurer Default and such right shall instead
vest in the Trustee acting, unless otherwise specified, at the
direction of a Note Majority. The Note Insurer may disclaim any of its
rights and powers under this Indenture (but not its duties and
obligations under the Note 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. In exercising its rights
as Controlling Party, the Note Insurer (or the Trustee acting at the
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direction of Noteholders) shall have no duty to the Residual
Certificateholders or any other Issuer Secured Party, and the Trustee
shall be fully protected in acting upon the direction of the Note
Insurer as Controlling Party (or in acting as Controlling Party at the
direction of Noteholders without regard to the interests of the
Residual Certificateholders.
(b) Each Residual Certificateholder, by its acceptance of a
Residual Certificate, agrees that it shall not (and hereby waives any
right to) contest or support any other Person in contesting, in any
proceeding, the validity or enforceability of the Notes or this
Indenture.
(c) No right of the Note Insurer (or the Trustee acting at the
direction of Noteholders) as Controlling Party shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part
of the Issuer or by any act or failure to act, in good faith, by the
Controlling Party, or by any non-compliance by the Issuer with the
terms, provisions and covenants of this Agreement, regardless of any
knowledge thereof that the Note Insurer or the Trustee may have or be
otherwise charged with.
(d) So long as the Note Insurer (or the Trustee acting at the
direction of Noteholders) is the Controlling Party:
(i) no Residual Certificateholder shall have any
right to (A) ask, demand, sue for, take or receive, or retain,
from the Issuer or any other Person, by setoff or in any other
manner, payment or prepayment of all or any part of the
obligations due to the Residual Certificateholders, except in
strict accordance with Section 5.7 of the Sale and Servicing
Agreement or Section 5.6 of the Indenture, as applicable; (B)
ask, demand or receive any security (other than the
Collateral) for the Residual Certificate Secured Obligations;
(C) exercise or seek to exercise any rights or remedies
(including setoff) with respect to any Collateral or institute
any action or proceeding with respect to such rights or
remedies (including any action of foreclosure); (D) contest,
protest or object to any foreclosure proceeding or action
brought by the Trustee or any other exercise by the Trustee of
any rights and remedies relating to the Collateral; or (E)
object to the forbearance by the Trustee from bringing or
pursuing any foreclosure proceeding or action or any other
exercise of any rights or remedies relating to the Collateral;
(ii) the Controlling Party shall, except as otherwise
expressly provided herein, have the exclusive right to direct
the Trustee with respect to enforcing rights, exercising
remedies (including setoff and the right to credit bid their
debt) and making determinations regarding the release,
disposition, or restrictions with respect to the Collateral
without any consultation with or the consent of any Residual
Certificateholder.
(e) So long as the Note Insurer (or the Trustee acting at the
direction of Noteholders) is the Controlling Party, each Residual
Certificateholder hereby waives any and all rights it may have as a
-72-
junior lien creditor or otherwise to object to the manner in which the
Trustee seeks to enforce or collect the Insurer Secured Obligations or
the Trustee Secured Obligations or the Liens granted in any of the
Collateral, regardless of whether any action or failure to act by or on
behalf of the Trustee or the Controlling Party is adverse to the
interest of any Residual Certificateholder.
(f) So long as the Note Insurer (or the Trustee acting at the
direction of Noteholders) is the Controlling Party, to the extent that
the Residual Certificateholders shall be entitled to vote as a separate
class with respect to any plan of reorganization involving the Issuer,
each Residual Certificateholder agrees that (i) it will not take any
action or vote in any way which supports any plan of reorganization
that is inconsistent with the terms of this Agreement, (ii) it will
vote any claims or interest it holds to accept any such plan of
reorganization that is supported by the Controlling Party and (iii) it
will vote any claims or interests it holds to reject any such plan of
reorganization that is not supported by the Controlling Party. Each
Residual Certificateholder hereby grants to the Trustee (acting at the
direction of the Controlling Party) a power of attorney to vote such
Residual Certificateholder's claims and interests, if any, in any such
plan of reorganization in a manner consistent with the foregoing, so
long as the Note Insurer (or the Trustee acting at the direction of
Noteholders) is the Controlling Party.
(g) So long as the Note Insurer (or the Trustee acting at the
direction of Noteholders) is the Controlling Party, each Residual
Certificateholder agrees that it shall not assert or finance, or
support any other person in asserting or financing, in any bankruptcy
or insolvency proceeding, any surcharge, lien, recovery or claim
against any of the Collateral under Section 506(c) of the United States
Bankruptcy Code.
(h) So long as the Note Insurer (or the Trustee acting at the
direction of Noteholders) is the Controlling Party, each Residual
Certificateholder agrees that it shall not seek adequate protection on
account of any claim or interest it may have, or (to the extent it
would otherwise have a right to object) object to any financing
provided by or supported by the Controlling Party and that (to the
extent its consent is necessary or desired) it will consent to any sale
of Collateral that is supported by the Controlling Party.
(i) Each of the Trustee and the Controlling Party is each
hereby authorized to demand specific performance of the provisions of
this Section 11.20 at any time when any Residual Certificateholder
shall have failed to comply with any term or provision of this Section
11.20. Each Residual Certificateholder hereby irrevocably waives any
defense based on the adequacy of a remedy at law that might be asserted
as a bar to such remedy of specific performance.
-73-
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 2007-B,
By: WILMINGTON TRUST COMPANY,
not in its individual capacity,
but solely as Owner Trustee
By: /S/ Jennifer A. Luce
--------------------------------
Name: Jennifer A. Luce
--------------------------------
Title: Sr. Financial Services Officers
--------------------------------
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Trustee
By: /S/ Marianna C. Stershic
--------------------------------
Name: Marianna C. Stershic
--------------------------------
Title: Vice President
--------------------------------
INDENTURE - SIGNATURE PAGE
EXHIBIT A-1
FORM OF CLASS A-1 NOTE
REGISTERED $___________________
NO. R-A1 - [__]
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 12619M AA7
[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.]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES ("BLUE SKY LAWS"), AND THIS NOTE MAY NOT BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE 1933 ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT,
(C) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE 1933 ACT (IF
AVAILABLE) OR (D) TO THE SELLER OR AN AFFILIATE OF THE SELLER, IN EACH CASE IN
ACCORDANCE WITH THE INDENTURE AND ALL APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION. NO REPRESENTATION IS
MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144A FOR RESALES
OF THIS NOTE.
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 2007-B
CLASS A-1 5.3344% ASSET-BACKED NOTES
CPS Auto Receivables Trust 2007-B, a statutory 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
A-1-1
registered assigns, the principal sum of
__________________________________________ AND NO/100 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 5.7 of the Sale and
Servicing Agreement; provided, however, that the entire unpaid principal amount
of this Note shall be due and payable on the Payment Date occurring in July 2008
(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
immediately preceding Payment Date to but excluding such current Payment Date;
provided that for the July 2007 Payment Date interest will accrue for the number
of days from and including the Closing Date to and including July 15, 2007.
Interest will be computed on the basis of a 360-day year and the actual number
of days in the period commencing on the Payment Date in the month preceding the
month in which the related Payment Date occurs and ending on the day prior to
the day of the month on which the related Payment Date occurs. 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 "Policy") issued by Financial Security Assurance Inc. (the
"Note Insurer"), pursuant to which the Note Insurer has unconditionally
guaranteed payments of the Scheduled Payments (as defined in the Policy), 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 2007-B
By: WILMINGTON TRUST COMPANY,
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.
WELLS FARGO BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Trustee
By: _______________________________
Authorized Signatory
Date: ____________, 20__
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 5.3344% Asset-Backed Notes (herein called the "Class
A-1 Notes"), all issued under an Indenture dated as of June 1, 2007 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Wells Fargo Bank, 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 (collectively, 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 July 16, 2007.
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(a) of the
Indenture. In addition, a portion of the unpaid principal balance of this Note
shall be due and payable on the Mandatory Redemption Date, if any, pursuant to
Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable (i) on the date on
which an Event of Default shall have occurred and be continuing so long as an
Insurer Default shall not have occurred and be continuing and the Note Insurer
has declared the Notes to be immediately due and payable in the manner provided
in Section 5.2 of the Indenture, 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 a Note Majority has 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 or by wire
transfer of immediately available funds to the account designated in writing to
the Trustee by such Person at least five Business Days prior to the related
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
A-1-5
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Payment Date, then the
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Holder hereof as of the Record Date preceding such Payment Date by
notice mailed prior to such Payment Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Trustee's principal Corporate Trust Office.
The Issuer shall pay interest on overdue installments of interest at
the Class A-1 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed (a) pursuant to
Section 10.1(a) of the Indenture, in whole, but not in part, at the option of
the Servicer, on any Payment Date on or after the date on which the Collateral
Balance is less than or equal to 10% of the Original Collateral Balance; and (b)
pursuant to Section 10.1(b) of the Indenture, in part, on a pro rata basis, on
the Mandatory Redemption Date if any Pre-Funded Amount remains on deposit in the
Pre-Funding Account after giving effect to the purchase of all Subsequent
Receivables during the Funding Period.
The Seller or its designated affiliate has the option to purchase from
the Issuer on the last day of each Collection Period any Defaulted Texas
Receivables the Obligors of which reside in the State of Texas or the Financed
Vehicles of which are located in the State of Texas.
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. Notwithstanding anything to the contrary in the Indenture or any other
Basic Document, (i) the transfer of a Note, including the right to receive
principal and any stated interest thereon, may be effected only by surrender of
the old Note (or satisfactory evidence of the destruction, loss or theft of such
Note) to the Note Registrar, and the issuance by the Issuer (through the Note
Registrar) of a new Note to the new Holder, and (ii) each Note must be
registered in the name of the Holder thereof as to both principal and any stated
interest with the Note Registrar.
A-1-6
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note agrees to treat the Notes as
indebtedness of the Issuer for Federal and State income tax reporting purposes
and further 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 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.
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 Owner 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 4975 of the Internal Revenue Code or
(ii) the acquisition and holding of the Notes will be covered by Prohibited
Transaction Class Exemption ("PTCE") 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60,
PTCE 96-23 or a similar U.S. Department of Labor class exemption or other
similar exemption.
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, subject to certain limitations and 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 (unless
an Insurer Default has occurred and is continuing) but without the consent of
Noteholders. The Indenture also contains provisions permitting the Note Insurer
and/or the Holders of Notes representing specified percentages of the
A-1-7
Outstanding Amount of each class of Notes, on behalf of the Holders of all the
Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one of more
Predecessor Notes) shall be conclusive and binding upon such Holder and upon all
future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to 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 $_______________
NO. R-A2 - [__]
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 12619M AB5
[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.]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES ("BLUE SKY LAWS"), AND THIS NOTE MAY NOT BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE 1933 ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT,
(C) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE 1933 ACT (IF
AVAILABLE) OR (D) TO THE SELLER OR AN AFFILIATE OF THE SELLER, IN EACH CASE IN
ACCORDANCE WITH THE INDENTURE AND ALL APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION. NO REPRESENTATION IS
MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144A FOR RESALES
OF THIS NOTE.
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 2007-B
CLASS A-2 5.46% ASSET-BACKED NOTES
CPS Auto Receivables Trust 2007-B, a statutory 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
A-2-1
registered assigns, the principal sum of ___________________________________ AND
NO/100 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 5.7 of the Sale and Servicing Agreement provided, however, that the
entire unpaid principal amount of this Note shall be due and payable on the
Payment Date occurring in February 2011 (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 and including the fifteenth day of the month immediately preceding
such Payment Date to and including the fourteenth day of the month in which such
Payment Date occurs; provided that for the July 2007 Payment Date interest will
accrue for the number of days from and including the Closing Date to and
including July 14, 2007. 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 "Policy") issued by Financial Security Assurance Inc. (the
"Note Insurer"), pursuant to which the Note Insurer has unconditionally
guaranteed payments of the Scheduled Payments (as defined in the Policy), 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 2007-B
By: WILMINGTON TRUST COMPANY,
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.
WELLS FARGO BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Trustee
By: _______________________________
Authorized Signatory____________________
Date: ___________, 20__
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 5.46% Asset-Backed Notes (herein called the "Class
A-2 Notes"), all issued under an Indenture dated as of June 1, 2007 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Wells Fargo Bank, 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 (collectively, 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 July 16, 2007.
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(a) of the
Indenture. In addition, a portion of the unpaid principal balance of this Note
shall be due and payable on the Mandatory Redemption Date, if any, pursuant to
Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable (i) on the date on
which an Event of Default shall have occurred and be continuing so long as an
Insurer Default shall not have occurred and be continuing and the Note Insurer
has declared the Notes to be immediately due and payable in the manner provided
in Section 5.2 of the Indenture, 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 a Note Majority has 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 or by wire
transfer of immediately available funds to the account designated in writing to
the Trustee by such Person at least five Business Days prior to the related
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
A-2-5
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Payment Date, then the
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Holder hereof as of the Record Date preceding such Payment Date by
notice mailed prior to such Payment Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Trustee's principal Corporate Trust Office.
The Issuer shall pay interest on overdue installments of interest at
the Class A-2 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed (a) pursuant to
Section 10.1(a) of the Indenture, in whole, but not in part, at the option of
the Servicer, on any Payment Date on or after the date on which the Collateral
Balance is less than or equal to 10% of the Original Collateral Balance; and (b)
pursuant to Section 10.1(b) of the Indenture, in part, on a pro rata basis, on
the Mandatory Redemption Date if any Pre-Funded Amount remains on deposit in the
Pre-Funding Account after giving effect to the purchase of all Subsequent
Receivables during the Funding Period.
The Seller or its designated affiliate has the option to purchase from
the Issuer on the last day of each Collection Period any Defaulted Texas
Receivables the Obligors of which reside in the State of Texas or the Financed
Vehicles of which are located in the State of Texas.
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. Notwithstanding anything to the contrary in the Indenture or any other
Basic Document, (i) the transfer of a Note, including the right to receive
principal and any stated interest thereon, may be effected only by surrender of
the old Note (or satisfactory evidence of the destruction, loss or theft of such
Note) to the Note Registrar, and the issuance by the Issuer (through the Note
Registrar) of a new Note to the new Holder, and (ii) each Note must be
registered in the name of the Holder thereof as to both principal and any stated
interest with the Note Registrar.
A-2-6
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note agrees to treat the Notes as
indebtedness of the Issuer for federal and State income tax reporting purposes
and further 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 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.
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 Owner 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 4975 of the Internal Revenue Code or
(ii) the acquisition and holding of the Notes will be covered by Prohibited
Transaction Class Exemption ("PTCE") 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60,
PTCE 96-23 or a similar U.S. Department of Labor class exemption or other
similar exemption.
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, subject to certain limitations and 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 (unless
an Insurer Default has occurred and is continuing) but without the consent of
Noteholders. The Indenture also contains provisions permitting the Note Insurer
and/or the Holders of Notes representing specified percentages of the
Outstanding Amount of each class of Notes, on behalf of the Holders of all the
A-2-7
Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one of more
Predecessor Notes) shall be conclusive and binding upon such Holder and upon all
future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to 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 $_______________
NO. R-A3-[__]
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 12619M AC3
[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.]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES ("BLUE SKY LAWS"), AND THIS NOTE MAY NOT BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE 1933 ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT,
(C) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE 1933 ACT (IF
AVAILABLE) OR (D) TO THE SELLER OR AN AFFILIATE OF THE SELLER, IN EACH CASE IN
ACCORDANCE WITH THE INDENTURE AND ALL APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION. NO REPRESENTATION IS
MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144A FOR RESALES
OF THIS NOTE.
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 2007-B
CLASS A-3 5.47% ASSET-BACKED NOTES
CPS Auto Receivables Trust 2007-B, a statutory 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
A-3-1
registered assigns, the principal sum of ___________________________________ AND
NO/100 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 5.7 of the Sale and Servicing Agreement provided, however, that the
entire unpaid principal amount of this Note shall be due and payable on the
Payment Date occurring in November 2011 (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 and including the fifteenth day of the month immediately preceding
such Payment Date to and including the fourteenth day of the month in which such
Payment Date occurs; provided that for the July 2007 Payment Date interest will
accrue for the number of days from and including the Closing Date to and
including July 14, 2007. 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 "Policy") issued by Financial Security Assurance Inc. (the
"Note Insurer"), pursuant to which the Note Insurer has unconditionally
guaranteed payments of the Scheduled Payments (as defined in the Policy), 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 2007-B
By: WILMINGTON TRUST COMPANY,
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.
WELLS FARGO BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but
solely as Trustee
By: ______________________________
Authorized Signatory___________________
Date: ___________, 20__
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 5.47% Asset-Backed Notes (herein called the "Class
A-3 Notes"), all issued under an Indenture dated as of June 1, 2007 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Wells Fargo Bank, 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 (collectively, 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 July 16, 2007.
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(a) of the
Indenture. In addition, a portion of the unpaid principal balance of this Note
shall be due and payable on the Mandatory Redemption Date, if any, pursuant to
Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable (i) on the date on
which an Event of Default shall have occurred and be continuing so long as an
Insurer Default shall not have occurred and be continuing and the Note Insurer
has declared the Notes to be immediately due and payable in the manner provided
in Section 5.2 of the Indenture, 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 a Note Majority has 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 or by wire
transfer of immediately available funds to the account designated in writing to
the Trustee by such Person at least five Business Days prior to the related
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
A-3-5
funds to the account designated by such nominee. Such checks shall be mailed to
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Payment Date, then the
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Holder hereof as of the Record Date preceding such Payment Date by
notice mailed prior to such Payment Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Trustee's principal Corporate Trust Office.
The Issuer shall pay interest on overdue installments of interest at
the Class A-3 Interest Rate to the extent lawful.
As provided in the Indenture, the Notes may be redeemed (a) pursuant to
Section 10.1(a) of the Indenture, in whole, but not in part, at the option of
the Servicer, on any Payment Date on or after the date on which the Collateral
Balance is less than or equal to 10% of the Original Collateral Balance; and (b)
pursuant to Section 10.1(b) of the Indenture, in part, on a pro rata basis, on
the Mandatory Redemption Date if any Pre-Funded Amount remains on deposit in the
Pre-Funding Account after giving effect to the purchase of all Subsequent
Receivables during the Funding Period.
The Seller or its designated affiliate has the option to purchase from
the Issuer on the last day of each Collection Period any Defaulted Texas
Receivables the Obligors of which reside in the State of Texas or the Financed
Vehicles of which are located in the State of Texas.
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. Notwithstanding anything to the contrary in the Indenture or any other
Basic Document, (i) the transfer of a Note, including the right to receive
principal and any stated interest thereon, may be effected only by surrender of
the old Note (or satisfactory evidence of the destruction, loss or theft of such
Note) to the Note Registrar, and the issuance by the Issuer (through the Note
Registrar) of a new Note to the new Holder, and (ii) each Note must be
registered in the name of the Holder thereof as to both principal and any stated
interest with the Note Registrar.
A-3-6
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note agrees to treat the Notes as
indebtedness of the Issuer for federal and State income tax reporting purposes
and further 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 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.
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 Owner 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 4975 of the Internal Revenue Code or
(ii) the acquisition and holding of the Notes will be covered by Prohibited
Transaction Class Exemption ("PTCE") 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60,
PTCE 96-23 or a similar U.S. Department of Labor class exemption or other
similar exemption.
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, subject to certain limitations and 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 (unless
an Insurer Default has occurred and is continuing) but without the consent of
Noteholders. The Indenture also contains provisions permitting the Note Insurer
and/or the Holders of Notes representing specified percentages of the
A-3-7
Outstanding Amount of each class of Notes, on behalf of the Holders of all the
Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one of more
Predecessor Notes) shall be conclusive and binding upon such Holder and upon all
future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to 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 $_______________
NO. R-A4-[__]
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO. 12619M AD1
[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.]
THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES ("BLUE SKY LAWS"), AND THIS NOTE MAY NOT BE OFFERED, RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE 1933 ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT,
(C) PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE 1933 ACT (IF
AVAILABLE) OR (D) TO THE SELLER OR AN AFFILIATE OF THE SELLER, IN EACH CASE IN
ACCORDANCE WITH THE INDENTURE AND ALL APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION. NO REPRESENTATION IS
MADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144A FOR RESALES
OF THIS NOTE.
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 2007-B
CLASS A-4 5.60% ASSET-BACKED NOTES
CPS Auto Receivables Trust 2007-B, a statutory 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
A-4-1
registered assigns, the principal sum of ___________________________________ AND
NO/100 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 5.7 of the Sale and Servicing Agreement provided, however, that the
entire unpaid principal amount of this Note shall be due and payable on the
Payment Date occurring in January 2014 (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 and including the fifteenth day of the month immediately preceding
such Payment Date to and including the fourteenth day of the month in which such
Payment Date occurs; provided that for the July 2007 Payment Date interest will
accrue for the number of days from and including the Closing Date to and
including July 14, 2007. 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 "Policy") issued by Financial Security Assurance Inc. (the
"Note Insurer"), pursuant to which the Note Insurer has unconditionally
guaranteed payments of the Scheduled Payments (as defined in the Policy), 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 2007-B
By: WILMINGTON TRUST COMPANY,
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.
WELLS FARGO BANK, NATIONAL ASSOCIATION,
not in its individual capacity, but solely
as Trustee
By: _________________________________
Authorized Signatory______________________
Date: ___________, 20__
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 5.60% Asset-Backed Notes (herein called the "Class
A-4 Notes"), all issued under an Indenture dated as of June 1, 2007 (such
indenture, as supplemented or amended, is herein called the "Indenture"),
between the Issuer and Wells Fargo Bank, 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 (collectively, 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 July 16, 2007.
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(a) of the
Indenture. In addition, a portion of the unpaid principal balance of this Note
shall be due and payable on the Mandatory Redemption Date, if any, pursuant to
Section 10.1(b) of the Indenture. Notwithstanding the foregoing, the entire
unpaid principal amount of the Notes shall be due and payable (i) on the date on
which an Event of Default shall have occurred and be continuing so long as an
Insurer Default shall not have occurred and be continuing and the Note Insurer
has declared the Notes to be immediately due and payable in the manner provided
in Section 5.2 of the Indenture, 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 a Note Majority has 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 or by wire
transfer of immediately available funds to the account designated in writing to
the Trustee by such Person at least five Business Days prior to the related
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
A-4-5
the Person entitled thereto at the address of such Person as it appears on the
Note Register as of the applicable Record Date without requiring that this Note
be submitted for notation of payment. Any reduction in the principal amount of
this Note (or any one or more Predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Holders of this Note and of
any Note issued upon the registration of transfer hereof or in exchange hereof
or in lieu hereof, whether or not noted hereon. If funds are expected to be
available, as provided in the Indenture, for payment in full of the then
remaining unpaid principal amount of this Note on a Payment Date, then the
Trustee, in the name of and on behalf of the Issuer, will notify the Person who
was the Holder hereof as of the Record Date preceding such Payment Date by
notice mailed prior to such Payment Date and the amount then due and payable
shall be payable only upon presentation and surrender of this Note at the
Trustee's principal Corporate Trust Office.
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 (a) pursuant to
Section 10.1(a) of the Indenture, in whole, but not in part, at the option of
the Servicer, on any Payment Date on or after the date on which the Collateral
Balance is less than or equal to 10% of the Original Collateral Balance; and (b)
pursuant to Section 10.1(b) of the Indenture, in part, on a pro rata basis, on
the Mandatory Redemption Date if any Pre-Funded Amount remains on deposit in the
Pre-Funding Account after giving effect to the purchase of all Subsequent
Receivables during the Funding Period.
The Seller or its designated affiliate has the option to purchase from
the Issuer on the last day of each Collection Period any Defaulted Texas
Receivables the Obligors of which reside in the State of Texas or the Financed
Vehicles of which are located in the State of Texas.
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. Notwithstanding anything to the contrary in the Indenture or any other
Basic Document, (i) the transfer of a Note, including the right to receive
principal and any stated interest thereon, may be effected only by surrender of
the old Note (or satisfactory evidence of the destruction, loss or theft of such
Note) to the Note Registrar, and the issuance by the Issuer (through the Note
Registrar) of a new Note to the new Holder, and (ii) each Note must be
registered in the name of the Holder thereof as to both principal and any stated
interest with the Note Registrar.
A-4-6
Each Noteholder or Note Owner, by acceptance of a Note or, in the case
of a Note Owner, a beneficial interest in a Note agrees to treat the Notes as
indebtedness of the Issuer for federal and State income tax reporting purposes
and further 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 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.
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 Owner 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 4975 of the Internal Revenue Code or
(ii) the acquisition and holding of the Notes will be covered by Prohibited
Transaction Class Exemption ("PTCE") 84-14, PTCE 90-1, PTCE 91-38, PTCE 95-60,
PTCE 96-23 or a similar U.S. Department of Labor class exemption or other
similar exemption.
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, subject to certain limitations and 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 (unless
an Insurer Default has occurred and is continuing) but without the consent of
Noteholders. The Indenture also contains provisions permitting the Note Insurer
A-4-7
and/or the Holders of Notes representing specified percentages of the
Outstanding Amount of each class of Notes, on behalf of the Holders of all the
Notes, to waive compliance by the Issuer with certain provisions of the
Indenture and certain past defaults under the Indenture and their consequences.
Any such consent or waiver by the Holder of this Note (or any one of more
Predecessor Notes) shall be conclusive and binding upon such Holder and upon all
future Holders of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent or waiver is made upon this Note. The Indenture also permits the
Trustee to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Holders of the Notes issued thereunder.
The term "Issuer" as used in this Note includes any successor to the
Issuer under the Indenture.
The Issuer is permitted by the Indenture, under certain circumstances,
to merge or consolidate, subject to the rights of the Trustee and the Holders of
Notes under the Indenture.
The Notes are issuable only in registered form in denominations as
provided in the Indenture, subject to certain limitations therein set forth.
This Note and the Indenture shall be construed in accordance with the
laws of the State of New York, without reference to its conflict of law
provisions, and the obligations, rights and remedies of the parties hereunder
and thereunder shall be determined in accordance with such laws.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to 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 4.24
________________________________________________________________________________
SALE AND SERVICING
AGREEMENT
AMONG
CPS AUTO RECEIVABLES TRUST 2007-B, AS
ISSUER,
CPS RECEIVABLES CORP., AS
SELLER,
CONSUMER PORTFOLIO SERVICES, INC.,
INDIVIDUALLY AND AS SERVICER
AND
WELLS FARGO BANK, NATIONAL ASSOCIATION, AS
BACKUP SERVICER AND TRUSTEE
DATED AS OF JUNE 1, 2007
________________________________________________________________________________
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS................................................................................2
SECTION 1.1 Definitions..................................................................2
ARTICLE II CONVEYANCE OF RECEIVABLES................................................................29
SECTION 2.1 Conveyance of Receivables...................................................29
SECTION 2.2 Conveyance of Subsequent Receivables........................................30
SECTION 2.3 Transfers Intended as Sales.................................................34
SECTION 2.4 Further Encumbrance of Trust Property.......................................35
SECTION 2.5 Conveyance of Additional Servicing Compensation.............................35
ARTICLE III THE RECEIVABLES.........................................................................36
SECTION 3.1 Representations and Warranties of Seller....................................36
SECTION 3.2 Repurchase upon Breach......................................................44
SECTION 3.3 Custody of Receivables Files................................................45
SECTION 3.4 Acceptance of Receivable Files by Trustee...................................46
SECTION 3.5 Access to Receivable Files..................................................47
SECTION 3.6 Trustee to Deliver Monthly Receivable File Report...........................48
SECTION 3.7 Trustee to Maintain Secure Facilities.......................................48
ARTICLE IV ADMINISTRATION AND SERVICING OF RECEIVABLES..............................................48
SECTION 4.1 Duties of the Servicer......................................................48
SECTION 4.2 Collection of Receivable Payments; Modifications of Receivables;
Lockbox Agreements..........................................................49
SECTION 4.3 Realization Upon Receivables................................................51
SECTION 4.4 Insurance...................................................................52
SECTION 4.5 Maintenance of Security Interests in Vehicles...............................52
SECTION 4.6 Additional Covenants of Servicer............................................53
SECTION 4.7 Purchase of Receivables Upon Breach of Covenant.............................53
SECTION 4.8 Servicing Fee...............................................................54
SECTION 4.9 Servicer's Certificate......................................................54
SECTION 4.10 Annual Statement as to Compliance, Notice of Servicer Termination Event.....55
SECTION 4.11 Annual Independent Accountants' Report......................................55
SECTION 4.12 Access to Certain Documentation and Information Regarding Receivables.......56
SECTION 4.13 Verification of Servicer's Certificate......................................56
SECTION 4.14 Retention and Termination of Servicer.......................................58
SECTION 4.15 Fidelity Bond...............................................................59
SECTION 4.16 Optional Purchase of Certain Receivables....................................59
ARTICLE V TRUST ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO SECURITYHOLDERS..............................60
SECTION 5.1 Establishment of Trust Accounts.............................................60
SECTION 5.2 Capitalized Interest Account................................................62
SECTION 5.3 Certain Reimbursements to the Servicer......................................63
SECTION 5.4 Application of Collections..................................................63
SECTION 5.5 Withdrawals from Series 2007-B Spread Account...............................63
SECTION 5.6 Additional Deposits.........................................................64
SECTION 5.7 Distributions...............................................................64
SECTION 5.8 Note Distribution Account...................................................68
SECTION 5.9 Certain Rights of the Residual Certificateholders...........................70
SECTION 5.10 Pre-Funding Account.........................................................72
SECTION 5.11 Statements to Securityholders...............................................72
SECTION 5.12 Optional Deposits by the Note Insurer; Notice of Waivers....................75
ARTICLE VI THE NOTE POLICY..........................................................................75
SECTION 6.1 Claims Under Note Policy....................................................75
SECTION 6.2 Preference Claims...........................................................77
SECTION 6.3 Surrender of Note Policy....................................................78
ARTICLE VII [RESERVED]..............................................................................78
ARTICLE VIII THE SELLER.............................................................................78
SECTION 8.1 Representations of the Seller...............................................78
SECTION 8.2 Sale Treatment..............................................................80
SECTION 8.3 Changes to Seller's Contract Purchase Guidelines............................80
SECTION 8.4 Liability of Seller; Indemnities............................................81
SECTION 8.5 Merger or Consolidation of, or Assumption of the Obligations of, Seller.....82
SECTION 8.6 Limitation on Liability of Seller and Others................................82
SECTION 8.7 Seller May Own Residual Pass-through Certificates or Notes..................83
ARTICLE IX THE SERVICER.............................................................................83
SECTION 9.1 Representations of Servicer.................................................83
SECTION 9.2 Liability of Servicer; Indemnities..........................................85
SECTION 9.3 Merger or Consolidation of, or Assumption of the Obligations of,
the Servicer or Backup Servicer.............................................87
SECTION 9.4 Limitation on Liability of Servicer, Backup Servicer and Others.............88
SECTION 9.5 Delegation of Duties........................................................88
SECTION 9.6 Servicer and Backup Servicer Not to Resign..................................88
ARTICLE X DEFAULT...................................................................................89
SECTION 10.1 Servicer Termination Event..................................................89
SECTION 10.2 Consequences of a Servicer Termination Event................................91
SECTION 10.3 Appointment of Successor....................................................92
SECTION 10.4 Notification to Securityholders.............................................93
SECTION 10.5 Waiver of Past Defaults.....................................................93
SECTION 10.6 Action Upon Certain Failures of the Servicer................................94
ARTICLE XI TERMINATION..............................................................................94
SECTION 11.1 Optional Purchase of All Receivables........................................94
ARTICLE XII ADMINISTRATIVE DUTIES OF THE SERVICER...................................................95
SECTION 12.1 Administrative Duties.......................................................95
SECTION 12.2 Records.....................................................................97
SECTION 12.3 Additional Information to be Furnished to the Issuer........................98
ARTICLE XIII MISCELLANEOUS PROVISIONS...............................................................98
SECTION 13.1 Amendment...................................................................98
SECTION 13.2 Protection of Title to Trust................................................99
SECTION 13.3 Notices....................................................................101
SECTION 13.4 Assignment.................................................................102
SECTION 13.5 Limitations on Rights of Others............................................102
SECTION 13.6 Severability...............................................................103
SECTION 13.7 Separate Counterparts......................................................103
SECTION 13.8 Headings...................................................................103
SECTION 13.9 Governing Law..............................................................103
SECTION 13.10 Assignment to Trustee......................................................103
SECTION 13.11 Nonpetition Covenants......................................................103
SECTION 13.12 Limitation of Liability of Owner Trustee and Trustee.......................104
SECTION 13.13 Independence of the Servicer...............................................104
SECTION 13.14 No Joint Venture...........................................................105
SECTION 13.15 Note Insurer as Controlling Party..........................................105
SECTION 13.16 Acknowledgment of Roles....................................................107
SECTION 13.17 Intention of Parties Regarding Delaware Securitization Act.................108
SCHEDULES
Schedule A-Schedule of Receivables
Schedule B-Location for Delivery of Receivable Files
EXHIBITS
Exhibit A - Form of Subsequent Transfer Agreement
Exhibit B - Form of Servicer's Certificate
Exhibit C - Form of Release Request
Exhibit D - Form of Servicing Officer's Certificate
Exhibit E - Form of Monthly Securityholder Statement
Exhibit F-1 - Form of Trustee's Certificate Pursuant to
Section 3.2 or 3.4
Exhibit F-2 - Form of Trustee's Certificate Pursuant to
Section 4.7, 4.16 or 11.1
Exhibit G -Schedule of Successor Servicing Fees, Expenses and
Distributions
Exhibit H -1- Fee Schedule - CPS Auto Receivables Trust 2007-B
Exhibit H-2 - Fee Schedule - CPS Cayman Residual Trust 2007-B
SALE AND SERVICING AGREEMENT dated as of June 1, 2007, among CPS AUTO
RECEIVABLES TRUST 2007-B, a Delaware statutory trust, as Issuer, CPS RECEIVABLES
CORP., a California corporation, as Seller, CONSUMER PORTFOLIO SERVICES, INC., a
California corporation, individually and as Servicer, WELLS FARGO BANK, NATIONAL
ASSOCIATION, a national banking association, as Backup Servicer and Trustee.
WHEREAS the Issuer desires to purchase a portfolio of receivables
arising in connection with motor vehicle retail installment sale contracts and
promissory notes and security agreements acquired by Consumer Portfolio
Services, Inc. through motor vehicle dealers and independent finance companies;
WHEREAS the Seller has purchased such receivables from Consumer
Portfolio Services, Inc. and is willing to sell such receivables to the Issuer;
WHEREAS the Issuer desires to purchase additional receivables arising
in connection with motor vehicle retail installment sale contracts and
promissory notes and security agreements to be acquired on or after the Closing
Date by Consumer Portfolio Services, Inc. through motor vehicle dealers and
independent finance companies;
WHEREAS the Seller has agreements to purchase such additional
receivables from Consumer Portfolio Services, Inc. and is willing to sell such
receivables to the Issuer; and
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
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DEFINITIONS
SECTION 1.1 DEFINITIONS. (a) 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.
"Addition Notice" means, with respect to any transfer of Subsequent
Receivables to the Trust pursuant to Section 2.2 of this Agreement, notice of
the Seller's election to transfer Subsequent Receivables to the Trust, such
notice to designate the related Subsequent Transfer Date and the approximate
principal amount of Subsequent Receivables to be transferred on such Subsequent
Transfer Date.
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"Additional Servicing Compensation" shall mean, with respect to a
Receivable, any late fees, prepayment charges and other administrative fees or
similar charges allowed by applicable law with respect to the Receivables
collected (from whatever source) on the Receivables.
"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 Extension Percentage Limitation" has the meaning assigned to
such term in Section 4.2.
"Aggregate Note Balance" means, as of any date of determination, the
sum of the Class A-1 Note Balance, the Class A-2 Note Balance, the Class A-3
Note Balance and the Class A-4 Note Balance.
"Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Receivables (other than
(i) any Receivable that became a Liquidated Receivable prior to the end of the
related Collection Period and (ii) any Receivable that became a Purchased
Receivable prior to the end of the related Collection Period) as of the date of
determination.
"Agreement" means this Sale and Servicing Agreement, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms hereof.
"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" has the meaning specified in Section 10.3(a).
"Backup Servicer" means Wells Fargo Bank, National Association, in its
capacity as Backup Servicer under this Agreement.
"Backup Servicing Fee" means the fee payable to the Backup Servicer so
long as CPS is the Servicer, on each Payment Date in an amount equal to the
greater of (a) $2,000 or (b) one-twelfth of 0.02% of the aggregate Collateral
Balance as of the first day of the related Collection Period; provided, however,
that on the first Payment Date the Backup Servicer will be entitled to receive
an amount equal to the greater of (a) $2,000 or (b) the product of (i) the
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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) 0.03% and (iii) the Original Aggregate Note
Balance.
"Basic Documents" means this Agreement, the Certificate of Trust, the
Trust Agreement, the Indenture, the Receivables Purchase Agreement, each
Subsequent Receivables Purchase Agreement, each Subsequent Transfer Agreement,
the Master Spread Account Agreement, the Spread Account Supplement, the
Insurance Agreement, the Indemnification Agreement, the Lockbox Agreement, the
Placement Agency Agreement, the Notes, the Residual Pass-through Certificates,
any trust agreement, indenture or other agreement to which the Seller, CPS or
the Trust or any of their respective Affiliates is a party entered into in
connection with a transfer of any interest in the Residual Pass-through
Certificates, any securities representing direct or indirect interests in the
Residual Pass-through Certificates and other documents and certificates
delivered in connection with the foregoing.
"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 of Minnesota,
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.
"Capitalized Interest Account" means the account designated as such,
established and maintained pursuant to Sections 5.1 and 5.2.
"Capitalized Interest Account Initial Deposit" means $468,282.02.
"Casualty" means, with respect to a Financed Vehicle, the total loss or
destruction of such Financed Vehicle.
"Cayman Indenture" means the Indenture dated June 27, 2007, between the
Cayman Trustee, in its capacity as trustee of the Cayman Trust, as issuer, and
Wells Fargo Bank, National Association, as trustee, as the same may be amended
or supplemented from time to time in accordance with the terms thereof.
"Cayman Indenture Trustee" means the Person acting as trustee under the
Cayman Indenture, its successors in interest and any successor trustee under the
Cayman Indenture.
"Cayman Trust" means Cayman Residual Trust 2007-B, a trust organized
under the laws of the Cayman Islands.
"Cayman Trust Agreement" means the trust agreement between the Seller
and Wilmington Trust (Cayman), Ltd. pursuant to which the Cayman Trust is
created, as the same may be amended, amended and restated or otherwise modified
in accordance with its terms from time to time.
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"Cayman Trustee" means the Person acting as trustee of the Cayman
Trust, its successors in interest and any successor trustee under the Cayman
Trust Agreement.
"Cayman Trustee Fees" means, for any Collection Period, the sum of (A)
one-twelfth of the fee set forth on EXHIBIT H-2 payable to Wells Fargo Bank,
National Association as Cayman Indenture Trustee and backup administrator; (B)
the fees payable to the Cayman Trust pursuant to Article VIII of the Cayman
Trust Agreement; (C) reasonable out-of-pocket expenses (including reasonable
counsel fees and expenses) of the Cayman Trustee and the Cayman Indenture
Trustee; and (D) any such unpaid fees and expenses for prior Collection Periods.
"Certificate Register" has the meaning assigned to such term in the
Trust Agreement.
"Certificate Registrar" 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-1 Final Scheduled Payment Date" means the Payment Date
occurring in July 15, 2008.
"Class A-1 Interest Rate" means 5.3344% per annum.
"Class A-1 Note Balance" on the Closing Date will equal the Original
Class A-1 Note Balance and on any date thereafter will equal the Original Class
A-1 Note Balance reduced by all distributions of principal previously made in
respect of the Class A-1 Notes.
"Class A-1 Notes" has the meaning assigned to such term in the
Indenture.
"Class A-2 Final Scheduled Payment Date" means the Payment Date
occurring in February 15, 2011.
"Class A-2 Interest Rate" means 5.46% per annum.
"Class A-2 Note Balance" on the Closing Date will equal the Original
Class A-2 Note Balance and on any date thereafter will equal the Original Class
A-2 Note Balance reduced by all distributions of principal previously made in
respect of the Class A-2 Notes.
"Class A-2 Notes" has the meaning assigned to such term in the
Indenture.
"Class A-3 Final Scheduled Payment Date" means the Payment Date
occurring in November 15, 2011.
"Class A-3 Interest Rate" means 5.47% per annum.
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"Class A-3 Note Balance" on the Closing Date will equal the Original
Class A-3 Note Balance and on any date thereafter will equal the Original Class
A-3 Note Balance reduced by all distributions of principal previously made in
respect of the Class A-3 Notes.
"Class A-3 Notes" has the meaning assigned to such term in the
Indenture.
"Class A-4 Final Scheduled Payment Date" means the Payment Date
occurring in January 15, 2014.
"Class A-4 Interest Rate" means 5.60% per annum.
"Class A-4 Note Balance" on the Closing Date will equal the Original
Class A-4 Note Balance and on any date thereafter will equal the Original Class
A-4 Note Balance reduced by all distributions of principal previously made in
respect of the Class A-4 Notes.
"Class A-4 Notes" has the meaning assigned to such term in the
Indenture.
"Closing Date" means June 27, 2007.
"Code" has the meaning specified in Section 3.2.
"Collateral" has the meaning assigned to such term in the Indenture.
"Collateral Agent" means Wells Fargo Bank, National Association, in its
capacity as Collateral Agent under the Master Spread Account Agreement.
"Collateral Balance" means, as of any date of determination, the sum of
(i) the Pool Balance as of such date, and (ii) the Pre-Funded Amount as of such
date.
"Collection Account" means the account designated as such, established
and maintained pursuant to Section 5.1.
"Collection Period" means, with respect to each Payment Date, the
calendar month preceding the calendar month in which such Payment Date occurs.
Any amount stated "as of the close of business on the last day of a Collection
Period" shall give effect to the following calculations as determined as of the
end of the day on such last day: (i) all applications of collections, and (ii)
all distributions.
"Consumer Lender" means a Person that is licensed under applicable law
to originate loans to natural persons resident in one or more of the United
States of America and authorized by CPS to participate in its direct lending
program, but shall not include CPS or any of its Affiliates.
"Contract" means a motor vehicle retail installment sale contract or an
installment promissory note and security agreement, in each case relating to the
sale or refinancing of new or used automobiles, light duty trucks, vans or
minivans, and any other documents related thereto from time to time .
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"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 Rodney Square North, 1100 N. Market Street,
Wilmington, Delaware 19890-0001, and (ii) with respect to the Trustee and
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,
MAC N9311-161, Minneapolis, Minnesota, 55479, Attention: Corporate Trust
Services/Asset Backed Administration - CPS 2007-B.
"CPS" means Consumer Portfolio Services, Inc., a California corporation
and its successors.
"CPS Receivables Funding Trust" means CPS Receivables Funding Trust, a
Delaware statutory trust, and its successors.
"Cram Down Loss" means, with respect to a Receivable (other than a
Liquidated Receivable), if a court of appropriate jurisdiction in an insolvency
proceeding issues a ruling that reduces the amount owed on a Receivable or
otherwise modifies or restructures the Scheduled Receivable Payments to be made
thereon, an amount equal to the sum of (a) the Principal Balance of the
Receivable immediately prior to such order minus the Principal Balance of such
Receivable as so reduced, modified or restructured, plus (b) if such court shall
have issued an order reducing the effective rate of interest on such Receivable,
an amount equal to the excess of (i) the net present value (using as a discount
rate a rate equal to the adjusted APR on such Receivable) of the Scheduled
Receivable Payments as so modified or restructured over (ii) the net present
value (using as a discount rate a rate equal to the original APR on such
Receivable) of the Scheduled Receivable Payments as so modified or restructured.
A Cram Down Loss will be deemed to have occurred on the date of issuance of such
order.
"Cumulative Net Loss Rate" has the meaning assigned thereto in the
Master Spread Account Agreement.
"Cutoff Date" means the Initial Cutoff Date (in the case of the Initial
Receivables) or the applicable Subsequent Cutoff Date (in the case of a
Subsequent Receivable), as applicable.
"Dealer" means, with respect to a Receivable, the seller of the related
Financed Vehicle, who originated and assigned such Receivable to CPS, who in
turn sold such Receivable to the Seller.
"Defaulted Texas Receivables" means Receivables as to which more than
10% of a Scheduled Receivable Payment of more than ten dollars shall have become
90 or more days delinquent as of the end of a Collection Period, and which are
subject to purchase pursuant to Section 4.16.
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"Deficiency Claim Amount" has 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" has the meaning set forth in Section 5.5(a).
"Delinquency Ratio" has the meaning assigned such term in the Master
Spread Account Agreement.
"Delivery" means, when used with respect to Trust Account Property:
(terms used in the following provisions that are not otherwise defined are used
as defined in Articles 8 and 9 of the UCC):
(i) in the case of such Trust Account Property consisting of
security entitlements not covered by the following paragraphs in this
definition of Delivery, by (1) causing the Trustee or related
securities intermediary to indicate by book entry that a financial
asset related to such securities entitlement has been credited to the
related Trust Account and (2) causing the Trustee or related securities
intermediary to indicate that the Trustee is the sole entitlement
holder of each such securities entitlement and causing the Trustee or
related securities intermediary to agree that it will comply with
entitlement orders originated by the Trustee with respect to each such
security entitlement without further consent by the Issuer;
(ii) in the case of each certificated security (other than a
clearing corporation security (as defined below)) or instrument by: (1)
the delivery of such certificated security or instrument to the Trustee
or related securities intermediary registered in the name of the
Trustee or related securities intermediary or its respective affiliated
nominee or endorsed to the Trustee or related securities intermediary
in blank; (2) causing the Trustee or related securities intermediary to
continuously indicate by book-entry that such certificated security or
instrument is credited to the related Trust Account; and (3) the
Trustee or related securities intermediary maintaining continuous
possession of such certificated security or instrument;
(iii) in the case of each uncertificated security (other than
a clearing corporation security (as defined below)), by causing: (1)
such uncertificated security to be continuously registered in the books
of the issuer thereof to the Trustee or related securities
intermediary; and (2) the Trustee or related securities intermediary to
continuously indicate by book-entry that such uncertificated security
is credited to the related Trust Account;
(iv) in the case of each security in the custody of or
maintained on the books of a clearing corporation (a "clearing
corporation security"), by causing: (1) the relevant clearing
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corporation to credit such clearing corporation security to the
securities account of the Trustee or related securities intermediary at
such clearing corporation; and (2) the Trustee or related securities
intermediary to continuously indicate by book-entry that such clearing
corporation security is credited to the related Trust Account;
(v) in the case of each security issued or guaranteed by the
United States of America or agency or instrumentality thereof (other
than a security issued by the Government National Mortgage Association)
representing a full faith and credit obligation of the United States of
America and that is maintained in book-entry records of the Federal
Reserve Bank of New York ("FRBNY") (each such security, a "government
security"), by causing: (1) the creation of a security entitlement to
such government security by the credit of such government security to
the securities account of the Trustee or related securities
intermediary at the FRBNY; and (2) the Trustee or related securities
intermediary to continuously indicate by book-entry that such
government security is credited to the related Trust Account.
(vi) in each case of delivery contemplated pursuant to clauses
(ii) through (v) 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.
"Determination Date" means the earlier of (i) the seventh Business Day
of each calendar month and (ii) the fifth Business Day preceding the related
Payment Date.
"Draw Date" means with respect to any Payment Date, the third Business
Day immediately preceding such Payment Date.
"Eligible Account" means (i) a segregated trust account that is
maintained with a depository institution acceptable to the 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 "Prime-1" by Moody's and (so long as an Insurer Default
shall not have occurred and be continuing) acceptable to the Note Insurer;
provided that the Note Insurer shall not be required to give its prior written
consent with respect to such an account maintained with Wells Fargo Bank,
National Association
"Eligible Investments" mean book-entry securities, negotiable
instruments or securities represented by instruments in registered form which
evidence:
(i) direct obligations of, and obligations fully
guaranteed as to the full and timely payment by, the United States of
America;
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(ii) 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 "Prime-1" by Moody's;
(iii) commercial paper that, at the time of the
investment or contractual commitment to invest therein, is rated "A-1+"
by Standard & Poor's and "Prime-1" by Moody's;
(iv) bankers' acceptances issued by any depository
institution or trust company referred to in clause (ii) above;
(v) 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 (a) a depository institution or trust company (acting
as principal) described in clause (ii) or (b) 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 "Prime-1" by
Moody's and long term unsecured debt obligations are rated "AAA" by
Standard & Poor's and "Aaa" by Moody's;
(vi) with the prior written consent of the Note
Insurer (so long as an Insurer Default shall not have occurred and be
continuing) 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; PROVIDED that the Note Insurer shall not be
required to give its prior written consent for Wells Fargo Money Market
Funds; and
(vii) 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
and as to which the Rating Agency Condition is satisfied;
provided that, in all cases the amounts paid with respect to such
instruments or securities not constituting principal must constitute either (i)
portfolio interest, as defined in Code Section 871(h)(2), (ii) interest on
deposits from a bank, within the meaning of Code Section 871(i)(2) or (iii)
payments of interest or dividends by a Person who is not a United States Person
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and which interest or dividends is described in Code Section 862(a)(1) or (2);
provided, further, that an Eligible Investment must have a fixed principal
amount due at maturity and, if rated by S&P, must not have an "r" suffix
attached to the rating.
Any of the foregoing Eligible Investments may be purchased by or
through the Owner Trustee or the Trustee or any of their respective Affiliates.
"Eligible Servicer" means a Person approved to act as "Servicer" under
this Agreement by a Note Majority.
"ERISA" has the meaning specified in Section 3.2.
"Event of Default" has the meaning specified in the Indenture.
"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.
"Funding Period" means the period beginning on and including the
Closing Date and ending on the first to occur of (a) the first date on which the
amount on deposit in the Pre-Funding Account (after giving effect to any
transfers therefrom in connection with the transfer of Subsequent Receivables to
the Issuer on such date) is less than $100,000, (b) the date on which an Event
of Default or a Servicer Termination Event occurs, (c) the date on which an
Insolvency Event occurs with respect to the Seller, and (d) July 31, 2007.
"Holder" means either a Noteholder or a Residual Certificateholder as
the context requires.
"Indemnification Agreement" means the Indemnification Agreement among
the Note Insurer, the Seller and the Placement Agents, dated as of June 27,
2007, 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 June 1, 2007, between the
Issuer and Wells Fargo Bank, National Association, as trustee, as the same may
be amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof.
"Initial Cutoff Date" means the close of business on May 31, 2007.
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"Initial Receivable" means each Contract related to a Financed Vehicle
transferred to the Issuer pursuant to Section 2.1, which, as of the Closing
Date, is listed on Schedule A (which Schedule A may be in the form of
microfiche), and all rights and obligations thereunder, except for Initial
Receivables that shall have become Purchased Receivables.
"Initial Spread Account Deposit" has the meaning specified in the
Spread Account Supplement.
"Initial Trust Property" means the property and proceeds conveyed
pursuant to Section 2.1, together with all monies received with respect to the
Initial Receivables after the Initial Cutoff Date, the Insurance Policies, the
Collection Account (including all Eligible Investments therein and all proceeds
therefrom), the Lockbox Account and certain other rights under this Agreement.
Although the Seller has pledged the Series 2007-B Spread Account to the
Collateral Agent pursuant to the Spread Account Supplement, the Series 2007-B
Spread Account shall not under any circumstances be deemed to be a part of or
otherwise includable in the Trust or the Initial Trust Property.
"Insolvency Event" means, with respect to a specified Person, (a) the
institution of a proceeding or the filing of a petition against such Person
seeking 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 the
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official for such Person or for any substantial part of
its property, or ordering the winding-up or liquidation or such Person's
affairs, and such petition, decree or order shall remain unstayed and in effect
for a period of 60 consecutive days; or (b) the commencement by such Person of a
voluntary case under any applicable Federal or State bankruptcy, insolvency or
other similar law now or hereafter in effect, or the consent by such Person to
the entry of an order for relief in an involuntary case under any such law, or
the consent by such Person to the appointment of or taking possession by, a
receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar
official for such Person or for any substantial part of its property, or the
making by such Person of any general assignment for the benefit of creditors, or
the failure by such Person generally to pay its debts as such debts become due,
or the taking of action by such Person in furtherance of any of the foregoing.
"Insurance Agreement" means the Insurance and Indemnity Agreement among
the Trust, CPS, the Seller, CPS Receivables Funding Trust and the Note Insurer,
June 27, 2007, 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,
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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 Note 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 or the New York
Department of Insurance or any 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).
"Interest Accrual Period" means, with respect to any Payment Date other
than the first Payment Date, the period commencing on the immediately preceding
Payment Date and ending on the day prior to the day of the month on which such
Payment Date occurs.
"Interest Rate" means the Class A-1 Interest Rate, the Class A-2
Interest Rate, the Class A-3 Interest Rate, the Class A-4 Interest Rate or the
Residual Certificate Interest Rate, as applicable.
"Investment Earnings" means, with respect to any Payment Date and any
Trust Account, the investment earnings on amounts on deposit in such Trust
Account during the related Collection Period and deposited into the Collection
Account on such Payment Date pursuant to Section 5.1(b).
"Issuer" means CPS Auto Receivables Trust 2007-B.
"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
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on the original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the obligor, the term "Lien
Certificate" shall mean only a certificate or notification issued to a secured
party.
"Liquidated Receivable" means any Receivable (i) which has been
liquidated by the Servicer through the sale of the Financed Vehicle or (ii) for
which the related Financed Vehicle has been repossessed and 90 days have elapsed
since the date of such repossession or (iii) as to which more than 10% of a
Scheduled Receivable Payment of more than ten dollars shall have become 120 (or,
if the related Financed Vehicle has been repossessed, 210) or more days
delinquent 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. For purposes of this
definition, a Receivable shall be deemed a "Liquidated Receivable" upon the
first to occur of the events specified in items (i) through (iv) of the previous
sentence.
"Lockbox Account" means an account maintained on behalf of the Trustee
by the Lockbox Bank pursuant to Section 4.2(b).
"Lockbox Agreement" means the Multiparty Agreement Relating to Lockbox
Services and Blocked Account, dated as of June 27, 2007, by and among the
Lockbox Processor, the Lockbox Bank, the Servicer, the Trust and the Trustee, as
such agreement may be amended, supplemented or otherwise modified 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, the Lockbox Bank and the
Lockbox Processor.
"Lockbox Bank" means, as of any date, Wells Fargo Bank, National
Association or another 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 Wells Fargo Bank, National Association and
its successors and assigns.
"Majority Certificateholders" has the meaning assigned to such term in
the Trust Agreement.
"Mandatory Redemption Date" means the first Payment Date occurring on
or after the last day of the Funding Period.
"Master Spread Account Agreement" means the Master Spread Account
Agreement amended and restated as of December 1, 1998 among the Note Insurer,
CPS Receivables Funding Trust, as assignee of the Seller and Wells Fargo Bank,
National Association, as amended as of September 1, 1999, as further amended as
of September 7, 2001, as further amended as of November 16, 2001, as further
amended as of March 1, 2002, as further amended as of June 30, 2003, as further
amended as of July 25, 2003, as further amended as of December 16, 2003, as
further amended as of September 30, 2004, as supplemented by the Spread Account
Supplement, and as the same may be further amended, supplemented or otherwise
modified in accordance with the terms thereof.
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"MFN" means MFN Financial Corporation, a Delaware Corporation.
"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 during the
Collection Period in which such Receivable became a Liquidated Receivable, 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.
"Non-Certificated Title States" means the States of Arizona, Kansas,
Kentucky, Maine, Maryland, Michigan, Minnesota, Montana, New York, Oklahoma,
Wisconsin and such other States in which the applicable Department of Motor
Vehicles or similar authority issues evidence of title to a Financed Vehicle in
a non-certificated form.
"Non-United States Investor" has the meaning assigned to such term in
the Trust Agreement.
"Note" has the meaning assigned to such term in the Indenture.
"Note Balance" means, with respect to the Class A-1 Notes, the Class
A-1 Note Balance, with respect to the Class A-2 Notes, the Class A-2 Note
Balance, with respect to the Class A-3 Notes, the Class A-3 Note Balance and
with respect to the Class A-4 Notes, the Class A-4 Note Balance.
"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 Majority" means the Holders collectively evidencing more than 50%
of the aggregate outstanding Note Balance for each Class of Notes.
"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 Payment Date, has the
meaning specified in Section 6.1.
15
"Note Prepayment Amount" means an amount equal to 89.5% of the
Pre-Funded Amount on the Mandatory Redemption Date (after giving effect to any
application thereof to acquire Subsequent Receivables on the last day of the
Funding Period).
"Note Register" has the meaning assigned to such term in the Indenture.
"Note Registrar" has the meaning assigned to such term in the
Indenture.
"Noteholder" has the meaning assigned to such term in the Indenture.
"Noteholders' Interest Carryover Shortfall" means, with respect to any
Payment Date, for each Class of Notes, the excess of the Noteholders' Interest
Distributable Amount for such Class of Notes 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 Noteholders' Interest Distributable
Amount for such Class of Notes.
"Noteholders' Interest Distributable Amount" means, with respect to any
Payment Date, the sum of (i) the aggregate Noteholders' Monthly Interest
Distributable Amount for all Classes of Notes for such Payment Date, (ii) the
aggregate Noteholders' Interest Carryover Shortfall for all Classes of Notes for
such Payment Date and (iii) interest on such aggregate Noteholders' Interest
Carryover Shortfall, to the extent permitted by law, at the applicable Interest
Rate from and including the preceding Payment Date to but excluding the current
Payment Date.
"Noteholders' Monthly Interest Distributable Amount" means:
(a) for the Class A-1 Notes (i) for the first Payment Date, an amount
equal to the product of (1) the Class A-1 Interest Rate, (2) the Original Class
A-1 Note Balance, and (3) a fraction, the numerator of which is the number of
days from and including the Closing Date to and including July 15, 2007, and the
denominator of which is 360; and (ii) for any Payment Date after the first
Payment Date, an amount equal to the product of (1) the Class A-1 Interest Rate,
(2) the Class A-1 Note Balance as of the close of the preceding Payment Date
(after giving effect to all distributions on account of principal on such
preceding Payment Date) and (3) a fraction, the numerator of which is the number
of days for the related Interest Accrual Period and the denominator of which is
360; and
(b) for all other Classes of Notes (i) for the first Payment Date, an
amount equal to the product of (1) the Interest Rate for such Class of Notes,
(2) the Original Class Note Balance for such Class of Notes, and (3) a fraction,
the numerator of which is the number of days from and including the Closing Date
to and including July 14, 2007, 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
(1) one-twelfth of the Interest Rate for such Class of Notes and (2) the Note
Balance for such Class of 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).
"Noteholders' Parity Deficit Amount" means, with respect to any Payment
Date, the excess, if any, of (x) the Aggregate Note Balance on such Payment
Date, after giving effect to the distribution of the Noteholders' Principal
16
Distributable Amount on such Payment Date, but excluding any amounts in respect
thereof withdrawn from the Series 2007-B Spread Account or paid under the Note
Policy over (y) the Collateral Balance at the end of the related Collection
Period.
"Noteholders' Principal Distributable Amount" means (i) with respect to
any Payment Date (other than the Final Scheduled Payment Date for any Class of
Notes), the lesser of (a) the Principal Distributable Amount and (b) the excess
of (I) the Aggregate Note Balance as of the close of business on the preceding
Payment Date over (II) the Requisite Percentage and (ii) on the Final Scheduled
Payment Date for any Class of Notes, the greater of (I) the Note Balance of such
Class of Notes or (II) the amount calculated pursuant to clause (i) above. On
any Payment Date after the acceleration of the Notes pursuant to Section 5.2 of
the Indenture, the Noteholders' Principal Distributable Amount shall be the Note
Balance of each Class of Notes.
"Notes" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3
Notes and the Class A-4 Notes, collectively.
"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 Aggregate Note Balance" means $281,925,000.
"Original Class A-1 Note Balance" means $43,700,000.
"Original Class A-2 Note Balance" means $97,700,000.
"Original Class A-3 Note Balance" means $45,200,000.
"Original Class A-4 Note Balance" means $95,325,000.
"Original Collateral Balance" means the sum of (i) the Original Pool
Balance and (ii) the initial Pre-Funded Amount.
"Original Pool Balance" means $205,984,873.91 which is the Pool Balance
as of the Initial Cutoff Date.
17
"Original Residual Certificate Notional Balance" means $33,075,000.
"Other Conveyed Property" means all property conveyed by the Seller to
the Trust pursuant to Sections 2.1(b) through (k) and Sections 2.2(a)(ii)
through (xi) of this Agreement.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means Wilmington Trust Company, 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 July 16, 2007.
"Pending Litigation" means the litigation matters that are described
under "CPS - Recent Developments" in the Confidential Private Placement
Memorandum dated as of June 26, 2007.
"Percentage Interests" has the meaning assigned to such term in the
Trust Agreement.
"Person" means any individual, corporation, estate, partnership,
limited liability company, joint venture, association, joint stock company,
trust (including any beneficiary 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.
"Placement Agency Agreement" means the Placement Agency Agreement
relating to the Notes dated June 25, 2007, among the Placement Agents, CPS and
the Seller.
"Placement Agent" means each of Bear, Stearns & Co. Inc. and UBS
Securities LLC.
"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
Trust established and maintained pursuant to Section 4.2.
"Preference Claim" has the meaning specified in Section 6.2(b).
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"Pre-Funded Amount" means, with respect to any Payment Date, the amount
on deposit in the Pre-Funding Account (exclusive of Pre-Funding Earnings), which
initially shall be $109,015,126.09.
"Pre-Funding Account" has the meaning specified in Section 5.1.
"Pre-Funding Earnings" means any Investment Earnings on amounts on
deposit in the Pre-Funding Account.
"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) that portion of all Scheduled
Receivable Payments actually received on or prior to such day allocable to
principal using the Simple Interest Method; (ii) any payment of the Purchase
Amount with respect to the Receivable allocable to principal; (iii) any Cram
Down Loss in respect of such Receivable; and (iv) any prepayment in full or any
partial prepayment applied to reduce the principal balance of the Receivable;
provided, however that the Principal Balance of a Receivable that has become a
Liquidated Receivable shall equal zero.
"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
received during the related Collection Period; (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 related 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 related
Collection Period (without duplication of the amounts included in clauses (i)
and (ii) above); and (iv) the aggregate amount of Cram Down Losses with respect
to the Receivables that have occurred during the related Collection Period
(without duplication of amounts referred to in clauses (i) through (iii) above).
"Program" has the meaning specified in Section 4.11.
"Purchase Amount" means, with respect to a Receivable, the amount, as
of the close of business on the last day of a Collection Period, required to
prepay in full such Receivable under the terms thereof, as reduced by the amount
of any Cram Down Loss, plus all accrued and unpaid interest thereon to the end
of the month of such purchase.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer or CPS pursuant
to Section 4.7 or Section 4.16 or repurchased by the Seller or CPS pursuant to
Section 3.2, Section 3.4 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 Notes, "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.
19
"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 Owner Trustee and the Trustee in writing that (a) such action will not
result in a reduction or withdrawal of the then current rating of the Notes
(including the ratings on the Notes without giving effect to the Note Policy) or
(b) if the Notes and all amounts owing to the Note Insurer under the Basic
Documents have been paid in full, such action will not result in a reduction or
withdrawal of the then current rating of the Residual Certificates, if the
Residual Certificates are then rated; or if the Residual Certificates are not
then rated, the Rating Agency Condition with respect to the Residual
Certificates will be satisfied if such action does not materially and adversely
affect the holders of the Residual Certificates.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Net Liquidation Proceeds allocable to principal.
"Receivable" means an Initial Receivable and/or a Subsequent
Receivable, as applicable.
"Receivable Files" means the documents specified in Section 3.3(a).
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement dated as of June 27, 2007, 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
Receivables by the Seller from CPS.
"Record Date" means, with respect to the first Payment Date, the
Closing Date and with respect to any subsequent Payment Date, the last day of
calendar month preceding the calendar month in which such Payment Date occurs.
"Recoveries" means with respect to a Liquidated Receivable, the monies
collected from whatever source, during any Collection Period following the
Collection Period in which such Receivable became a Liquidated Receivable, net
of the reasonable costs of liquidation plus any amounts required by law to be
remitted to the Obligor (without duplication of amounts netted against the
amounts realized in calculating the Net Liquidation Proceeds).
"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.
"Requisite Percentage" means (i) on any Payment Date prior to the June
2009 Payment Date, 84.75% of the Collateral Balance as of the end of the related
Collection Period, (ii) on any Payment Date from and including the June 2009
Payment Date to and including the November 2009 Payment Date, 85.75% of the
20
Collateral Balance as of the end of the related Collection Period, (iii) on any
Payment Date from and including the December 2009 Payment Date to and including
the May 2010 Payment Date, 86.75% of the Collateral Balance as of the end of the
related Collection Period and (iv) on any Payment Date after the May 2010
Payment Date, 87.75% of the Collateral Balance as of the end of the related
Collection Period; PROVIDED, THAT, in the case of clauses (ii), (iii) and (iv)
above, if, as of the Determination Date related to any such Payment Date, (A)
the Noteholders' Principal Distributable Amount (calculated without reference to
this proviso) is not equal to the Principal Distributable Amount, (B) after
making the distributions pursuant to Section 5.7(a) on such Payment Date, the
Specified Spread Account Requisite Amount is not then satisfied, (C) as of the
first Payment Date referenced in the applicable clause (ii), (iii) or (iv)
above, the Three Month Rolling Average Extension Ratio is greater than or equal
to 2.75%, 2.25% and 2.75%, respectively, (D) as of the first Payment Date
referenced in the applicable clause (ii), (iii) or (iv) above, the Cumulative
Net Loss Rate as of the end of the Collection Period related to such first
Payment Date is greater than or equal to 9.50%, 11.35% and 12.75%, respectively,
(E) as of the first Payment Date referenced in the applicable clause (ii), (iii)
or (iv) above, the Three-Month Rolling Average Delinquency Ratio as of the end
of the Collection Period related to such first Payment Date is greater than or
equal to 8.50%, 9.00% and 9.50%, respectively, or (F) any Trigger Event has
occurred and is continuing, then the Requisite Percentage shall not be increased
from the Requisite Percentage employed on the immediately preceding Payment
Date.
"Requisite Reserve Amount" as of any date will equal the product of:
(A) 1/360th of the difference between
(i) the sum of (a) the weighted average of the
Interest Rates for the Notes and the Residual Certificate
Interest Rate, weighted in accordance with the outstanding
principal amount of each class of Class A Notes and the
Residual Certificate Notional Balance, respectively, (c) the
Trustee fee rate, (d) the Backup Servicing fee rate, if
applicable, (e) the premium rate for the Policy and (f) the
Supplemental Residual Certificate Distribution, if any,
expressed as a percentage; and
(ii) 1.75% per annum;
(B) the Pre-Funded Amount on such date (after giving effect to
any application thereof to acquire Subsequent Receivables on such Payment Date);
and
(C) the number of days remaining until and including the last
day of the Collection Period for the Payment Date in August 2007;
provided that, upon the expiration of the Funding Period, after the
payment of all amounts required to be paid on the immediately following Payment
Date (or on the Payment Date on which the Funding Period ends, if applicable),
the Requisite Reserve Amount will be zero.
21
"Residual Certificate Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Residual Certificate Interest
Distributable Amount for the preceding Payment Date over the amount that was
actually distributed to the Residual Certificateholders on such preceding
Payment Date on account of the Residual Certificate Interest Distributable
Amount.
"Residual Certificate Interest Distributable Amount" means, with
respect to any Payment Date, the sum of (i) the Residual Certificate Monthly
Interest Distributable Amount for such Payment Date, (ii) the Residual
Certificate Interest Carryover Shortfall for such Payment Date and (iii)
interest on such Residual Certificate Interest Carryover Shortfall, to the
extent permitted by law, at the Residual Certificate Interest Rate from and
including the preceding Payment Date to but excluding the current Payment Date;
provided however, that the amount which may be distributed pursuant to Section
5.7(a)(vi) may not exceed the product of (a) one-twelfth of the Residual
Certificate Interest Rate and (b) the excess of (I) the Collateral Balance at
the beginning of the related Collection Period over (II) the Aggregate Note
Balance as of the close of business on the preceding Payment Date.
"Residual Certificate Interest Rate" means 10.00% per annum.
"Residual Certificate Monthly Interest Distributable Amount" means (a)
for the first Payment Date, an amount equal to the product of (i) the Residual
Certificate Interest Rate, (ii) the Original Residual Certificate Notional
Balance and (iii) a fraction, the numerator of which is the number of days from
and including the Closing Date to and including July 14, 2007, 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 Residual
Certificate Interest Rate and (ii) the Residual Certificate Notional Balance as
of the close of the preceding Payment Date after giving effect to all
distributions in reduction thereof on such preceding Payment Date.
"Residual Certificate Notional Balance" means, as of any Payment Date,
an amount equal to the Original Residual Certificate Notional Balance, less all
amounts distributed to the Residual Certificateholders pursuant to Section
5.7(a)(xiv) and Section 5.7(b) hereof.
"Residual Certificate Prepayment Amount" means an amount equal to 10.5%
of the Pre-Funded Amount on the Mandatory Redemption Date (after giving effect
to any application thereof to acquire Subsequent Receivables on the last day of
the Funding Period).
"Residual Certificate Principal Distributable Amount" means, as of any
Payment Date, the lesser of (i) the amount of the Total Distribution Amount
remaining after the distributions pursuant to clauses (i) through (xiii) of
Section 5.7(a) have been made and (ii) the excess of (a) the Residual
Certificate Notional Balance as of the close of business on the preceding
Payment Date over (b) 10.5% of the Collateral Balance at the end of the related
22
Collection Period. The Residual Certificate Principal Distributable Amount for
each Payment Date occurring on and after the Payment Date on which the Class A-4
Note Balance has been reduced to zero will equal the lesser of (i) the Residual
Certificate Notional Balance and (ii) the amount of the Total Distribution
Amount remaining after the distributions pursuant to clauses (i) through (xiii)
of Section 5.7(a) have been made.
"Residual Certificateholder" means each person in whose name a Residual
Pass-through Certificate is registered on the Certificate Register.
"Residual Pass-through Certificate" has the meaning assigned to such
term in the Trust Agreement.
"Responsible Officer" has the meaning specified in the Trust Agreement.
"Schedule of Receivables" means the schedule of Initial Receivables
attached hereto as Schedule A and the schedule of Subsequent Receivables
attached to each Subsequent Transfer Agreement, collectively, as such schedules
may be amended or supplemented from time to time in accordance with the terms
hereof.
"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. If after the Closing Date,
the Obligor's obligation under a Receivable with respect to a Collection Period
has been modified so as to differ from the amount specified in such Receivable
(i) as a result of the order of a court in an insolvency proceeding involving
the Obligor, (ii) pursuant to the Servicemembers Civil Relief Act, or (iii) as a
result of modifications or extensions of the Receivable permitted by Section
4.2(a), the Scheduled Receivable Payment with respect to such Collection Period
shall refer to the Obligor's payment obligation with respect to such Collection
Period as so modified.
"SeaWest" means SeaWest Financial Corporation, a California
corporation.
"Section 341 Meeting" means a meeting held pursuant to Section 341(a)
of the United States Bankruptcy Code (as the same may be amended from time to
time).
"Section 341 Receivable" means a Receivable, the Obligor of which has
completed a Section 341 Meeting as of the applicable Cutoff Date.
"Securities" means the Notes and the Residual Pass-through
Certificates, collectively.
"Securityholders" means the Noteholders and the Residual
Certificateholders, collectively.
"Seller" means CPS Receivables Corp., a California corporation, and its
successors in interest to the extent permitted hereunder.
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"Seller's Contract Purchase Guidelines" means the set of criteria that
the Seller has established for purchasing Contracts on a state-by-state basis as
reflected in rate cards and the approval authority summary, as the same may be
amended from time to time.
"Series 2007-B Spread Account" means the account designated as such,
established and maintained pursuant to the Master Spread Account Agreement.
"Servicer" means CPS, as the servicer of the Receivables, and each
successor Servicer pursuant to Section 10.3.
"Servicer Termination Event" means an event specified in Section 10.1.
"Servicer's Certificate" means a certificate completed and executed by
a Servicing Officer and delivered pursuant to Section 4.9, substantially in the
form of Exhibit B.
"Servicing Assumption Agreement" means the Servicing and Lockbox
Processing Assumption Agreement, dated as of June 27, 2007, among CPS, the
Backup 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.
"Skip Receivable" means a Receivable (i) which is delinquent as of the
Closing Date; and (ii) where CPS (a) has concluded that the address or telephone
number of the related Obligor maintained by CPS as of the Closing Date is
incorrect and CPS has not been able to obtain revised contact information for
such Obligor and (b) has designated the status of the Receivable as "A07" or
"F07" in accordance with its servicing procedures.
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"Specified Affiliates" means CPS Receivables Two Corp., CPS Receivables
Three Corp., CPS Receivables Funding Trust, Page Funding LLC, Page Three Funding
LLC and their respective successors and assigns.
"Specified Spread Account Requisite Amount" has the meaning specified
in the Spread Account Supplement.
"Spread Account Supplement" means the Series 2007-B Supplement to the
Master Spread Account Agreement dated as of June 27, 2007 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 Services, a
division of The McGraw-Hill Companies, Inc. or its successor.
"State" means any one of the 50 states of the United States of America
or the District of Columbia.
"Subsequent Cutoff Date" means (i) the close of business on the last
day of the month preceding the month in which particular Subsequent Receivables
are conveyed to the Trust pursuant to this Agreement or (ii) if any such
Subsequent Receivable is originated in the month of the related Subsequent
Transfer Date, the date of origination.
"Subsequent Receivables" means each Contract related to a Financed
Vehicle transferred to the Issuer pursuant to Section 2.2 (each of which shall
be listed on Schedule A to the related Subsequent Transfer Agreement), and all
rights and obligations thereunder, except for Subsequent Receivables that shall
have become Purchased Receivables.
"Subsequent Receivables Purchase Agreement" means an agreement by and
between the Seller and CPS pursuant to which the Seller will acquire Subsequent
Receivables from CPS during the Funding Period.
"Subsequent Spread Account Deposit" means, with respect to each
Subsequent Transfer Date, an amount equal to 2.00% of the aggregate Principal
Balance of related Subsequent Receivables as of the related Subsequent Cutoff
Date transferred to the Trust on such Subsequent Transfer Date.
"Subsequent Transfer Agreement" means an agreement among the Issuer,
the Seller and the Servicer, substantially in the form of Exhibit A.
"Subsequent Transfer Date" means, with respect to Subsequent
Receivables, any date, occurring not more frequently than once per month, during
the Funding Period on which Subsequent Receivables are transferred to the Trust
pursuant to this Agreement.
"Subsequent Trust Property" means the property and proceeds conveyed
pursuant to Section 2.2, together with all monies received with respect to the
related Subsequent Receivables after the related Subsequent Cutoff Date, the
Insurance Policies, the Collection Account (including all Eligible Investments
therein and all proceeds therefrom), the Lockbox Account and certain other
25
rights under this Agreement. Although the Seller has pledged the Series 2007-B
Spread Account to the Collateral Agent pursuant to the Spread Account
Supplement, the Series 2007-B Spread Account shall not under any circumstances
be deemed to be a part of or otherwise includable in the Trust or the Subsequent
Trust Property.
"Successor Servicing Fee Schedule" means that certain Schedule of
Successor Servicing Fees, Expenses and Distributions attached hereto as EXHIBIT
G.
"Successor Servicing Fee" has the meaning specified in Section 4.8.
"Supplemental Residual Certificate Distribution" means for any Payment
Date, the sum of (i) the Cayman Trustee Fees on such Payment Date, if any, and
(ii) the product of (a) the Cayman Trustee Fees, (b) 1.0000453535308 and (c)
0.00453514739%.
"Targeted Principal Distributable Amount" means, with respect to any
Payment Date, the lesser of (i) the amount of the Total Distribution Amount
remaining after the distributions pursuant to priorities (i) through (x) under
Section 5.7(a) have been made and (ii) the excess of (a) the Aggregate Note
Balance (after giving effect to the Noteholders' Principal Distributable Amount
and the Noteholders' Parity Deficit Amount paid on such Payment Date) over (b)
the Requisite Percentage.
"Texas Franchise Tax" means any tax imposed by the State of Texas
pursuant to Tex. Tax Code Ann. ss. 171.001 (Vernon 2005), as amended by Tex.
H.B. 3, 79th Leg., 3d C.S. (2006).
"TFC" means The Finance Company, a Virginia corporation.
"Three-Month Rolling Average Delinquency Ratio" means, for any date of
determination, the average of the Delinquency Ratios for each of the three
immediately preceding Collection Periods.
"Three-Month Rolling Average Extension Ratio" means, for any date of
determination, a rolling three month average of the ratio for each of the three
immediately preceding Collection Periods, expressed as a percentage, of (i) the
aggregate Principal Balance of the Receivables whose payments are extended
during the related Collection Period to (ii) the Pool Balance as of the first
day of the related Collection Period prior to giving effect to any payment
activity on such date.
"Total Distribution Amount" means, for each Payment Date, the sum of
the following amounts with respect to the related Collection Period: (i) all
collections on the Receivables; (ii) Net Liquidation Proceeds received during
the Collection Period with respect to Liquidated Receivables; (iii) all proceeds
from Recoveries with respect to Liquidated Receivables; (iv) all proceeds
received during the Collection Period from Insurance Policies (other than funds
used for the repair of the related Financed Vehicle or otherwise released by CPS
to the related Obligor in accordance with normal servicing procedures); (v)
Investment Earnings for the related Payment Date; (vi) all Purchase Amounts
26
deposited in the Collection Account during the related Collection Period, plus
the amount of any payments made by CPS to the Trust pursuant to its
indemnification obligations under the Basic Documents; (vii) following the
acceleration of the Notes pursuant to Section 5.2 of the Indenture, the amount
of money or property collected pursuant to Section 5.3 of the Indenture since
the preceding Payment Date by the Trustee or Controlling Party for distribution
pursuant to Section 5.7 hereof; (viii) any amounts released from the Series
2007-B Spread Account in accordance with the terms of the Master Spread Account
Agreement for payment pursuant to priorities (xi) through (xv) of Section 5.7(a)
hereof; (ix) any amounts withdrawn from the Capitalized Interest Account in
excess of the Requisite Reserve Amount on the July 2007 and August 2007 Payment
Dates; and (x) the proceeds of any purchase or sale of the assets of the Trust
described in Sections 4.16 or 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 March 15, 2007,
between the Seller, as depositor, and the Owner Trustee, as amended and restated
by the Amended and Restated Trust Agreement dated as of June 27, 2007, by and
between the Seller, as depositor, and the Owner Trustee, as the same may be
further amended or supplemented from time to time in accordance with the terms
thereof.
"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 Initial Trust Property and the Subsequent
Trust Property, collectively.
"Trustee" means the Person acting as trustee under the Indenture, its
successors in interest and any successor trustee under the Indenture.
27
"Trustee Fee Schedule" means the schedule attached hereto as EXHIBIT
H-1.
"Trustee Fees" means the sum of (A) the fee payable to the Trustee on
each Payment Date in an amount equal to the greater of (a) $2,500 and (b)
one-twelfth of 0.04% of the Aggregate Note Balance as of the close of the
preceding Payment Date; provided, however, that on the first Payment Date the
Trustee will be entitled to receive an amount equal to the greater of (a) $2,500
and (b) 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) 0.045% and (iii) the
Original Aggregate Note Balance; (B) any amounts payable to the Trustee in its
capacity as custodian of the Receivable Files pursuant to the Trustee Fee
Schedule; and (C) any amounts payable to the Owner Trustee pursuant to Article
VIII of the Trust Agreement or to the Trustee pursuant to this Agreement.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction on the date of the Agreement.
(b) 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.
(c) 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.
(d) 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.
(e) (i) 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 and (ii) the word
"or" is not exclusive.
(f) 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."
(g) 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.
28
(h) 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.
Whenever a determination is to be made under this Agreement as to
whether a given event action, course of conduct or set of facts or circumstances
could or would have a material adverse effect on the Issuer or Noteholders (or
any similar or analogous determination), such determination shall be made
without taking into account the insurance provided by the Note Policy. Whenever
a determination is to be made under this Agreement whether a breach of a
representation, warranty or covenant has or could have a material adverse effect
on a Receivable or the interest therein of the Issuer, the Noteholders or the
Note Insurer (or any similar or analogous determination), such determination
shall be made by the Controlling Party in its sole discretion.
ARTICLE II
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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
Securities, the Seller does hereby sell, transfer, assign, set over and
otherwise convey to the Issuer, without recourse (subject to the obligations set
forth herein) all right, title and interest of the Seller, whether now existing
or hereafter arising, in, to and under:
(a) the Initial Receivables listed in Schedule A hereto and
all monies received thereunder (other than the Additional Servicing
Compensation) after the Initial Cutoff Date and all Net Liquidation Proceeds and
Recoveries received with respect to such Initial Receivables after the Initial
Cutoff Date;
(b) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Initial 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
Non-Certificated Title States, all other evidence of ownership with respect to
such Financed Vehicles issued by the applicable Department of Motor Vehicles or
similar authority;
(c) any proceeds from claims on any physical damage, credit
life and credit accident and health insurance policies or certificates relating
to the Financed Vehicles securing the Initial Receivables or the Obligors
thereunder;
(d) all proceeds from recourse against Dealers or Consumer
Lenders with respect to the Initial Receivables;
29
(e) all of the Seller's rights, title and interest in its
rights and benefits, but none of its obligations or burdens under the
Receivables Purchase Agreement, including a direct right to cause CPS to
purchase Initial Receivables from the Issuer and to indemnify the Issuer
pursuant to the Receivables Purchase Agreement under the circumstances specified
therein;
(f) refunds for the costs of extended service contracts with
respect to Financed Vehicles securing the Initial 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 under
an Initial Receivable or his or her obligations with respect to a Financed
Vehicle and any recourse to Dealers or Consumer Lenders for any of the
foregoing;
(g) the Receivable File related to each Initial Receivable;
(h) all amounts and property from time to time held in or
credited to the Collection Account, the Pre-Funding Account, the Capitalized
Interest Account, the Lockbox Account and the Note Distribution Account;
(i) all property (including the right to receive future Net
Liquidation Proceeds) that secures an Initial Receivable that has been acquired
by or on behalf of CPS or the Seller, pursuant to a liquidation of such
Receivable;
(j) the proceeds of any and all of the foregoing; and
(k) 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.
SECTION 2.2 CONVEYANCE OF SUBSEQUENT RECEIVABLES.
(a) Subject to the conditions set forth in paragraph (b)
below, in consideration of the Issuer's delivery on each related Subsequent
Transfer Date to or upon the order of the Seller of the amount described in
Section 5.10(a) to be delivered to the Seller, the Seller will, on the related
Subsequent Transfer Date, sell, transfer, assign, set over and otherwise convey
to the Issuer without recourse (subject to the obligations set forth herein) all
right, title and interest of the Seller in and to:
(i) the Subsequent Receivables listed in Schedule A
to the related Subsequent Transfer Agreement and all monies received
thereunder (other than the Additional Servicing Compensation) after the
30
related Subsequent Cutoff Date and all Net Liquidation Proceeds and
Recoveries received with respect to such Subsequent Receivables after
the related Subsequent Cutoff Date;
(ii) the security interests in the Financed Vehicles
granted by Obligors pursuant to the Subsequent Receivables and any
other interest of the Seller in such Financed Vehicles, including,
without limitation, the certificates of title or, with respect to such
Financed Vehicles in the Non-Certificated Title States, all other
evidence of ownership with respect to such Financed Vehicles issued by
the applicable Department of Motor Vehicles or similar authority;
(iii) any proceeds from claims on any physical
damage, credit life and credit accident and health insurance policies
or certificates relating to the Financed Vehicles securing the
Subsequent Receivables or the Obligors thereunder;
(iv) all proceeds from recourse against Dealers or
Consumer Lenders with respect to the related Subsequent Receivables;
(v) all of the Seller's rights, title and interest in
its rights and benefits, but none of its obligations or burdens, under
the related Subsequent Receivables Purchase Agreement, including a
direct right to cause CPS to purchase Subsequent Receivables from the
Issuer under certain circumstances and to indemnify the Issuer pursuant
to the Subsequent Receivables Purchase Agreement;
(vi) refunds for the costs of extended service
contracts with respect to Financed Vehicles securing Subsequent
Receivables, refunds of unearned premiums with respect to credit life
and credit accident and health insurance policies or certificates
covering an Obligor or Financed Vehicle under a Subsequent Receivable
or his or her obligations with respect to a Financed Vehicle and any
recourse to Dealers or Consumer Lenders for any of the foregoing;
(vii) the Receivable File related to each Subsequent
Receivable;
(viii) all amounts and property from time to time
held in or credited to the Collection Account, the Pre-Funding Account,
the Capitalized Interest Account, the Lockbox Account and the Note
Distribution Account;
(ix) all property (including the right to receive
future Net Liquidation Proceeds) that secured a Subsequent Receivable
that has been acquired by or on behalf of CPS or the Seller pursuant to
a liquidation of such Receivable;
(x) the proceeds of any and all of the foregoing; and
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(xi) 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.
(b) The Seller shall transfer to the Issuer the Subsequent
Receivables and the other property and rights related thereto described in
paragraph (a) above only upon the satisfaction of each of the following
conditions on or prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Trustee, the
Owner Trustee, the Note Insurer and the Rating Agencies with an
Addition Notice not later than five Business Days prior to such
Subsequent Transfer Date and shall have provided any information
reasonably requested by any of the foregoing with respect to the
related Subsequent Receivables;
(ii) the Seller shall have delivered to the Owner
Trustee and the Trustee a duly executed Subsequent Transfer Agreement
which shall include supplements to Schedule A, listing the related
Subsequent Receivables;
(iii) the Seller shall, to the extent required by
Section 4.2 of this Agreement, have deposited in the Collection Account
all collections in respect of the related Subsequent Receivables;
(iv) as of each Subsequent Transfer Date, (A) the
Seller shall not be insolvent and shall not become insolvent as a
result of the transfer of Subsequent Receivables on such Subsequent
Transfer Date, (B) the Seller shall not intend to incur or believe that
it shall incur debts that would be beyond its ability to pay as such
debts mature, (C) such transfer shall not have been made with actual
intent to hinder, delay or defraud any Person and (D) the assets of the
Seller shall not constitute unreasonably small capital to carry out its
business as then conducted;
(v) the Funding Period shall not have terminated;
(vi) after giving effect to any transfer of
Subsequent Receivables on a Subsequent Transfer Date, the Receivables
then owned by the Trust shall meet the following criteria (based on the
characteristics of the Initial Receivables on the Initial Cutoff Date
and the Subsequent Receivables on the related Subsequent Cutoff Dates):
(A) the weighted average APR of such Receivables will be greater than
or equal to 18.07%, (B) the weighted average remaining term of such
32
Receivables will be within a range of 21 to 72 months, (C) not more
than 83.00% of the aggregate Principal Balance of such Receivables will
represent financing of used Financed Vehicles, (D) not more than 1.00%
of the aggregate Principal Balance of such Receivables will have an APR
in excess of 24.00% and not more than 21.00% of the aggregate Principal
Balance of such Receivables will have an APR of less than 16.00%, (E)
none of such Receivables will have an APR in excess of 27.00%, (F) each
Receivable will have a minimum APR of 7.50%; (G) each Receivable will
have an original term of no more than 72 months and no more than 53.00%
of the aggregate Principal Balance of such Receivables will have an
original term in excess of sixty (60) months; (H) no more than 10.75%
of the aggregate Principal Balance of the Receivables will be
originated in Texas; (I) not less than 76.25% of the aggregate
Principal Balance of the Receivables will have been purchased under the
Seller's "Alpha", "Super Alpha", "Alpha Plus" or "Preferred" programs;
(J) no more than 6.25% of the aggregate Principal Balance of the
Receivables will have been purchased under the Seller's "First-Time
Buyer" program; (K) none of the Receivables will have been originated
by MFN, TFC or SeaWest or any of their respective subsidiaries; (L) no
more than 3.00% of the Receivables will constitute Section 341
Receivables; and (M) the Trust, the Trustee, the Owner Trustee and the
Note Insurer shall have received written confirmation from a firm of
certified independent public accountants as to the satisfaction of the
criteria in clauses (A) through (L) above;
(vii) each of the representations and warranties made
by the Seller pursuant to Section 3.1 with respect to the related
Subsequent Receivables to be transferred on such Subsequent Transfer
Date shall be true and correct as of the related Subsequent Transfer
Date, and the Seller shall have performed all obligations to be
performed by it hereunder on or prior to such Subsequent Transfer Date;
(viii) the Seller shall, at its own expense, on or
prior to the Subsequent Transfer Date indicate in its computer files
that the Subsequent Receivables identified in the Subsequent Transfer
Agreement have been sold to the Trust pursuant to this Agreement;
(ix) the Seller shall have taken any action required
to maintain the first priority perfected ownership interest of the
Issuer in the Owner Trust Estate and the first priority perfected
security interest of the Trustee in the Collateral;
(x) no selection procedures adverse to the interests
of the Noteholders or the Note Insurer shall have been utilized in
selecting the Subsequent Receivables;
(xi) the addition of any such Subsequent Receivables
shall not result in a material adverse tax consequence to the Trust or
the Noteholders;
33
(xii) the Seller shall have delivered (A) to the
Rating Agencies, the Note Insurer and each Placement Agent an Opinion
of Counsel with respect to the characterization of the transfer of such
Subsequent Receivables as a "true sale", which Opinion of Counsel may
be in the form of a "bring down" letter to the Opinion of Counsel
delivered to the Rating Agencies, the Note Insurer and each Placement
Agent on the Closing Date, and (B) to the Trustee and each Placement
Agent the Opinion of Counsel required by Section 13.2(i)(i), which
Opinion of Counsel may be in the form of a "bring down" letter to the
Opinion of Counsel delivered to the Trustee and each Placement Agent on
the Closing Date;
(xiii) each of the Seller, the Issuer and the Note
Insurer shall have received verbal verification from the Rating
Agencies that the addition of all such Subsequent Receivables will not
result in a qualification, modification or withdrawal of the then
current rating of each Class of Notes without regard to the Policy;
(xiv) the Note Insurer (so long as no Insurer Default
shall have occurred and be continuing), in its absolute and sole
discretion, shall have approved in writing the transfer of such
Subsequent Receivables to the Issuer and the Note Insurer shall have
been reimbursed for any fees and expenses incurred by the Note Insurer
in connection with the granting of such approval;
(xv) the Servicer shall instruct the Trustee to
transfer the Subsequent Spread Account Deposit to the Collateral Agent
with respect to the related Subsequent Receivables transferred on such
Subsequent Transfer Date; and
(xvi) the Seller shall have delivered to the Note
Insurer and the Trustee an Officers' Certificate confirming the
satisfaction of each condition precedent specified in this paragraph
(b).
The Seller covenants that in the event any of the foregoing conditions
precedent are not satisfied with respect to any Subsequent Receivable on the
date required as specified above, the Seller will immediately repurchase such
Subsequent Receivable from the Issuer, at a price equal to the Purchase Amount
thereof, in the manner specified in Section 3.2.
SECTION 2.3 TRANSFERS INTENDED AS SALES. It is the intention of the
Seller that each transfer and assignment contemplated by Sections 2.1 and 2.2 of
this Agreement shall constitute a sale of the Trust Property from the Seller to
the Issuer and the beneficial interest in and title to the 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 as set forth in this Section 2.3 and in
Section 13.17, the transfer and assignment contemplated hereby is held not to be
a sale, this Agreement shall constitute a grant of (and the Seller does hereby
grant) a security interest in all of the Seller's right, title and interest in,
to and under the Trust Property to the Trust for the benefit of the
34
Securityholders and the Note Insurer and this Agreement shall constitute a
security agreement under New York law. The Seller shall take such actions as are
necessary from time to time in order to maintain the perfection and priority of
the Issuer's security interest in the Trust Property.
SECTION 2.4 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 Sections 2.1 or 2.2, all right,
title and interest of the Seller in and to such item of Trust Property shall
terminate, and all such right, title and interest shall vest in the Trust, in
accordance with the Trust Agreement and Sections 3802 and 3805 of the Statutory
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
Residual Pass-through Certificates shall represent beneficial ownership
interests in the Trust Property, and the Residual Certificateholders shall be
entitled to receive distributions with respect thereto as set forth herein and
in the Master Spread Account Agreement.
(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 Residual
Pass-through Certificates have been paid in full, remain as covenants of the
Issuer for the benefit of the Residual Certificateholders, enforceable by the
Residual 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 Residual Certificateholders.
(d) The Trustee shall, at such time as there are no Notes
outstanding and all sums due to the Trustee and the Note Insurer pursuant to the
Basic Documents, have been paid, release any remaining portion of the Trust
Property to the Residual Certificateholders.
SECTION 2.5 CONVEYANCE OF ADDITIONAL SERVICING COMPENSATION. As of the
Closing Date and as of each Subsequent Transfer Date, as applicable, the Seller
does hereby sell, transfer, assign, set over and otherwise convey to the
Servicer, without recourse (subject to the obligations set forth herein) all
right, title and interest of the Seller, whether now existing or hereafter
arising, in, to and under all Additional Servicing Compensation.
35
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 Securityholders on
which the Issuer relies in acquiring the Receivables, and on which the Trustee
is deemed to have relied in executing and performing pursuant to this Agreement,
the Indenture and the other Basic Documents to which it is a party 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 (in the case of the Initial Receivables) and as of the related
Subsequent Transfer Date (in the case of the Subsequent Receivables), 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 or Consumer Lender for the retail sale of a Financed Vehicle in
the ordinary course of such Dealer's or Consumer Lender's business, has
been fully and properly executed by the parties thereto, has been
purchased by CPS in connection with the related Obligor's purchase of
the related Financed Vehicle and has been validly assigned by such
Dealer or Consumer Lender to CPS and by CPS to the Seller, (2) has
created a valid, subsisting, and enforceable first priority perfected
security interest in favor of CPS in the Financed Vehicle, which
security interest has been assigned by CPS to the Seller, which in turn
has assigned such security interest to the Trust which in turn has
assigned such security interest to the Trustee, (3) contains customary
and enforceable provisions such that the rights and remedies of the
holder or assignee thereof shall be adequate for realization against
the collateral of the benefits of the security including, without
limitation, a right of repossession following a default, (4) provides
for level monthly scheduled payments that fully amortize the Amount
Financed over the original term (except for the last scheduled payment,
which may be different from the level monthly payment) and yield
interest at the Annual Percentage Rate, (5) has an Annual Percentage
Rate of not less than 7.50%, (6) is a Simple Interest Receivable, (7)
was originated by a Dealer or Consumer Lender and was sold by such
Dealer or Consumer Lender without any fraud or misrepresentation on the
part of such Dealer or Consumer Lender, (8) is denominated in U.S.
dollars and (9) provides, in the case of a prepayment, for the full
payment of the Principal Balance thereof plus accrued interest through
the date of prepayment based on the Annual Percentage Rate of the
Receivable. (B) Approximately 82.62% of the aggregate Principal Balance
of the Initial Receivables as of the Initial Cutoff Date represents
financing of used automobiles, light trucks, vans or minivans; the
remainder of the Initial Receivables represent financing of new
vehicles; approximately 3.34% of the aggregate Principal Balance of the
Initial Receivables as of the Initial Cutoff Date were originated under
36
the CPS Preferred Program; approximately 42.69% of the aggregate
Principal Balance of the Initial Receivables as of the Initial Cutoff
Date were originated under the CPS Alpha Program; approximately 7.60%
of the aggregate Principal Balance of the Initial Receivables as of the
Initial Cutoff Date were originated under the CPS Delta Program;
approximately 5.68% of the Initial Receivables as of the Initial Cutoff
Date were originated under the CPS First-Time Buyer Program;
approximately 9.22% of the aggregate Principal Balance of the Initial
Receivables as of the Initial Cutoff Date were originated under the CPS
Standard Program; approximately 13.31% of the aggregate Principal
Balance of the Initial Receivables as of the Initial Cutoff Date were
originated under the CPS Super Alpha Program; approximately 18.18% of
the aggregate Principal Balance of the Initial Receivables as of the
Initial Cutoff Date were originated under the CPS Alpha Plus Program;
approximately 1.62% of the aggregate Principal Balance of the Initial
Receivables, as of the related Cut-off Date, were Section 341
Receivables; all of the Initial Receivables were acquired by CPS; no
Receivable has a payment that is more than 30 days contractually
delinquent as of the applicable Cutoff Date; each Receivable has a
final scheduled payment due no later than July 31, 2013; and each
Receivable was originated on or before the applicable Cutoff Date.
(ii) ADDITIONAL RECEIVABLES CHARACTERISTICS. As of
the Closing Date (in the case of the Initial Receivables) or the
applicable Subsequent Transfer Date (in the case of the applicable
Subsequent Receivables):
(A) no Receivable is more than 60 days past
due with respect to more than 10% of any Scheduled Receivable
Payment; and
(B) no Receivable is a Skip Receivable.
(iii) SCHEDULE OF RECEIVABLES; SELECTION PROCEDURES.
The information with respect to the Initial 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 Initial Cutoff Date; the
information with respect to the Subsequent Receivables set forth in
Schedule A to the related Subsequent Transfer Agreement is true and
correct in all material respects as of the close of business on the
related Subsequent Cutoff Date; no selection procedures adverse to the
Securityholders or the Note Insurer have been utilized in selecting the
Receivables.
(iv) 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 (A) complied at the time the related
Receivable was originated or made and at the execution of this
Agreement (or the applicable Subsequent Transfer 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
37
Collection Practices Act, the Federal Trade Commission Act, the
Magnuson-Moss Warranty Act, the Federal Reserve Board's Regulations B
and Z, the Servicemembers Civil Relief Act, the Military Reservist
Relief Act, 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 all other applicable
consumer credit laws and equal credit opportunity and disclosure laws,
and (B) without limiting the generality of the foregoing, is not
subject to liabilities or is not rendered unenforceable based on
general theories of contract limitation or relief including, without
limitation, theories based on unconscionable, deceptive, unfair, or
predatory sales or financing practices.
(v) 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.
(vi) 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
CPS as secured party which security interest has been validly assigned
by CPS to the Seller, validly assigned by the Seller to the Trust, and
validly pledged by the Trust to the Trustee, and such assigned 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 (in the case of the Initial
Receivables) or the related Subsequent Transfer Date (in the case of
the Subsequent Receivables).
(vii) 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.
(viii) NO WAIVER. Except as permitted under Section
4.2 and clause (ix) below, no provision of a Receivable has been
waived.
(ix) NO AMENDMENTS. Except as permitted under Section
4.2, 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.
(x) 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 and such Receivable is not subject to
any such right of rescission, setoff, counterclaim, or defense.
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(xi) NO LIENS. As of the applicable Cutoff Date, (a)
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 and (b)
there is no lien against the related Financed Vehicle for delinquent
taxes.
(xii) NO DEFAULT; REPOSSESSION. Except for payment
delinquencies continuing for a period of not more than thirty days as
of the applicable 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, or
both, 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 (except
in a manner consistent with Section 4.2); and no Financed Vehicle shall
have been repossessed or assigned for repossession as of the Closing
Date (in the case of the Initial Receivables) or the related Subsequent
Transfer Date (in the case of the Subsequent Receivables).
(xiii) 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 and its
successors and assigns as loss payee or 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 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.
(xiv) TITLE. It is the intention of the Seller that
the transfer and assignment herein contemplated constitute a sale of
the Receivables and the Other Conveyed Property from the Seller to the
Trust and that the beneficial interest in and title to such Receivables
and the Other Conveyed Property 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 or Other Conveyed
Property 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 the Other Conveyed 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 Trust for the benefit of the Securityholders 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.
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(xv) 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.
(xvi) ALL FILINGS MADE. All filings (including,
without limitation, UCC filings) necessary in any jurisdiction to give
(i) the Issuer a first priority perfected security interest in the
Receivables and the Other Conveyed Property, and (ii) the Trustee a
first priority perfected security interest in the Trust Property have
been made, taken or performed.
(xvii) 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.
(xviii) CHATTEL PAPER. Each Contract constitutes
"tangible chattel paper" under the UCC.
(xix) 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 Non-Certificated Title States, other evidence of title issued by
the applicable Department of Motor Vehicles or similar authority) will
be received within 180 days and will show, CPS 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, 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, and such rights have been validly pledged to the Trustee
pursuant to the Indenture. With respect to each Receivable for which
the title document has not yet been returned from the Registrar of
Titles, CPS has received written evidence from the related Dealer or
Consumer Lender that such title document showing CPS, as first
lienholder has been applied for.
(xx) 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 bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
40
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.
(xxi) CHARACTERISTICS OF OBLIGORS. As of the date of
each Obligor's application for financing of the vehicle purchase 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 (other than any Obligor that was the subject of a
Federal, State or other bankruptcy, insolvency or similar proceeding
pending on the date of application that has completed a Section 341
Meeting), (b) was not the subject of any Federal, State or other
bankruptcy, insolvency or similar proceeding pending on the date of
application that has not completed a Section 341 Meeting or been
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. During the period from the date of
each Obligor's application for financing of the vehicle purchase from
which the related Receivable arises to the Closing Date (in the case of
the Initial Receivables) or the related Subsequent Transfer Date (in
the case of the Subsequent Receivables), no Obligor is or has been the
subject of any Federal, State or other bankruptcy, insolvency or
similar proceeding other than an Obligor related to a Section 341
Receivable.
(xxii) ORIGINATION DATE. Each Receivable has an
origination date on or after October 1, 2006.
(xxiii) MATURITY OF RECEIVABLES. Each Receivable has
an original term to maturity of not more than 72 months; the weighted
average original term to maturity of the Initial Receivables was 65.06
months as of the Initial Cutoff Date; the remaining term to maturity of
each Receivable was 72 months or less as of the applicable Cutoff Date;
the weighted average remaining term to maturity of the Initial
Receivables was 63.59 months as of the Initial Cutoff Date.
(xxiv) SCHEDULED RECEIVABLE PAYMENTS. Each Receivable
has an original principal balance of not less than $4,000 nor more than
$36,000.
(xxv) ORIGINATION OF RECEIVABLES. Based on the
billing address of the Obligors and the Principal Balances as of the
Initial Cutoff Date, approximately 11.87%, 9.98%, 8.37%, 6.05%, 5.65%
and 5.20% of the Initial Receivables (by principal balance) had
Obligors residing in the States of California, Texas, Florida,
Pennsylvania, Ohio and North Carolina, respectively.
(xxvi) POST OFFICE BOX. On or prior to the next
billing period after the applicable Cutoff Date, CPS will notify each
Obligor to make payments with respect to its respective Receivables
after the applicable 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.
41
(xxvii) LOCATION OF RECEIVABLE FILES. A complete
Receivable File with respect to each Receivable has been or prior to
the Closing Date or the related Subsequent Transfer Date, as
applicable, will be delivered to the Trustee at the location listed in
Schedule B hereto.
(xxviii) CASUALTY AND IMPOUNDING. No Financed Vehicle
has suffered a Casualty and CPS has not received notice that any
Financed Vehicle has been impounded.
(xxix) PRINCIPAL BALANCE/NUMBER OF CONTRACTS. As of
the Initial Cutoff Date, the aggregate principal balance of the Initial
Receivables was $205,984,873.91. The Initial Receivables are evidenced
by 13,222 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 terms of the
related Contract to borrow from any person additional funds secured by
the Financed Vehicle.
(xxxi) NO IMPAIRMENT. Neither CPS nor the Seller has
done anything to convey any right to any Person that would result in
such Person having a right to payments due under any Receivables or
otherwise to impair the rights of the Purchaser, the Issuer, the
Securityholders or the Note Insurer in any Receivable or the proceeds
hereof.
(xxxii) RECEIVABLES NOT ASSUMABLE. No Receivable is
assumable by another Person in a manner in which would release the
Obligor thereof from such Obligor's obligations to CPS or the Seller
with respect to such Receivable.
(xxxiii) SERVICING. The servicing of each Receivable
and the collection practices relating thereto have been lawful and in
accordance with the standards set forth in this Agreement; other than
the Servicer and the Backup Servicer, no other Person has the right to
service the Receivables.
(xxxiv) ILLINOIS RECEIVABLES. (a) The Seller does not
own a substantial interest in the business of a Dealer within the
meaning of Illinois Sales Finance Agency Act Rules and Regulations,
Section 160.230(1) and (b) with respect to each Receivable originated
in the State of Illinois, (i) the printed or typed portion of the
related Form of Receivable complies with the requirements of 815 ILCS
375/3(b) and (ii) the Seller has not, and for so long as such
Receivable is outstanding shall not, place or cause to be placed on the
related Financed Vehicle any collateral protection insurance in
violation of 815 ILCS 180/10.
(xxxv) CALIFORNIA RECEIVABLES. Each Receivable
originated in the State of California has been, and at all times during
the term of the Sale and Servicing Agreement will be, serviced by the
Servicer in compliance with Cal. Civil Code ss. 2981, et seq.
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(xxxvi) CREATION OF SECURITY INTEREST. This Agreement
creates a valid and continuing security interest (as defined in the
UCC) in the Trust Property in favor of the Issuer for the benefit of
the Securityholders and the Note Insurer, which security interest is
prior to all other Liens and is enforceable as such as against
creditors of and purchasers from the Seller.
(xxxvii) PERFECTION OF SECURITY INTEREST IN FINANCED
VEHICLES. CPS has taken all steps necessary to perfect its security
interest against the Obligors in the Financed Vehicles securing the
Contracts.
(xxxviii) PERFECTION OF SECURITY INTEREST IN TRUST
PROPERTY. The Seller has caused, the filing of all appropriate
financing statements in the proper filing office in the appropriate
jurisdictions under applicable law in order to perfect the security
interest in the Trust Property granted to the Issuer for the benefit of
the Securityholders and the Note Insurer hereunder pursuant to Section
2.3.
(xxxix) NO OTHER SECURITY INTERESTS. Other than the
security interest granted to the Issuer for the benefit of the
Securityholders and the Note Insurer pursuant to Section 2.3, the
Seller has not pledged, assigned, sold, granted a security interest in,
or otherwise conveyed any of the Trust Property. The Seller has not
authorized the filing of and is not aware of any financing statements
filed against the Seller that include a description of collateral
covering the Trust Property other than any financing statement relating
to the security interest granted to the Issuer for the benefit of the
Securityholders and the Note Insurer hereunder or that has been
terminated. The Seller is not aware of any judgment or tax lien filings
against the Seller.
(xl) NOTATIONS ON CONTRACTS; FINANCING STATEMENT
DISCLOSURE. The Servicer has in its possession copies of all Contracts
that constitute or evidence the Receivables. The Contracts that
constitute or evidence the Receivables do not have any marks or
notations indicating that they have been pledged, assigned or otherwise
conveyed to any Person other than the Issuer and/or the Trustee for the
benefit of the Securityholders and the Note Insurer. All financing
statements filed or to be filed against the Seller in favor of the
Issuer in connection herewith describing the Trust Property contain a
statement to the following effect: "A purchase of or security interest
in any collateral described in this financing statement will violate
the rights of the secured party."
(xli) TFC, MFN, SEAWEST RECEIVABLES. None of the
Receivables were originated by TFC, MFN or SeaWest or any of their
respective subsidiaries.
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(xlii) CONSUMER LENDERS. Each Consumer Lender has
obtained all necessary licenses and approvals in all jurisdictions in
which the origination and purchase of installment promissory notes and
security agreements and the sale thereof requires or shall require such
licenses or approvals, except where the failure to obtain such licenses
or approvals would not result in a material adverse effect on the value
or marketability of any Receivable (including, without limitation, the
enforceability or collectibility of any Receivable).
The representations and warranties set forth above in paragraphs (xiv),
(xvi), (xviii) and paragraphs (xxxvi) through (xlii) shall survive the
termination of this Agreement and may not be waived in whole or in part.
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 CPS or receipt by CPS of notice of such breach, CPS (pursuant to the
Receivables 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 or the Securityholders are materially and adversely
affected by such breach, unless the breach shall have been cured by the last day
of such second Collection Period, CPS shall purchase such aggregate Principal
Balance of Receivables, such that following such purchase such representation
shall be true and correct with respect to the remainder of the Receivables in
the aggregate. In consideration of the purchase of any 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)(5) or (A)(6) 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 Receivables Purchase
Agreement; provided, however, that CPS shall indemnify the Trustee, the Owner
Trustee, the Backup 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
44
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 F-1.
(b) 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 a Residual
Pass-through 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.
(c) Pursuant to Sections 2.1 and 2.2 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
Receivables Purchase Agreement and each Subsequent Receivables Purchase
Agreement, including the Seller's rights under the Receivables Purchase
Agreement and each Subsequent Receivables Purchase Agreement and the delivery
requirements, representations and warranties and the cure, repurchase and
indemnity obligations of CPS under the Receivables Purchase Agreement and each
Subsequent Receivables Purchase Agreement. The Seller hereby represents and
warrants to the Trust, the Note Insurer and the Trustee for the benefit of the
Securityholders that such assignment is valid, enforceable and effective to
permit the Trust to enforce such obligations of CPS under the Receivables
Purchase Agreement and each Subsequent Receivables Purchase Agreement.
(d) If the Insolvency Event related to a Section 341 Meeting
has not been discharged pursuant to Section 727 of the United States Bankruptcy
Code by the bankruptcy court presiding over such Insolvency Event within 120
days of the conveyance of the related Receivable by the Seller to the Issuer
pursuant to Section 2.1(a) or Section 2.2(a), the Seller shall repurchase such
Receivable as of the last day of the next occurring Collection Period at the
Purchase Amount.
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 Initial Receivable) or the
applicable Subsequent Transfer Date (with respect to each Subsequent
Receivable):
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(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 such documents that CPS shall keep on file, in accordance with
its customary procedures, evidencing the security interest of CPS in
the Financed Vehicle or, if not yet received, a copy of the application
therefor showing CPS as secured party, or a dealer guarantee of title.
(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 for the Initial Receivables. The Trustee has reviewed such
Receivable Files and has determined that it has received a file for each Initial
Receivable identified in Schedule A to this Agreement. Not less than four (4)
Business Days prior to each Subsequent Transfer Date, the Seller will cause to
be delivered to the Trustee the Receivable Files for the Subsequent Receivables
to be transferred to the Trust on such Subsequent Transfer Date. 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 prior to the Closing Date (in
the case of the Initial Receivables) or the applicable Subsequent Transfer Date
(in the case of the Subsequent Receivables) to determine whether such Receivable
Files contain the documents referred to in Sections 3.3(a)(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(a)(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 (in the case of the Initial
Receivables) or Schedule A to the related Subsequent Transfer Agreement (in the
case of the Subsequent Receivables), 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, the Trustee (at the direction
of the Note Insurer, if no Insurer Default shall have occurred and be
continuing) shall cause CPS to repurchase any such Receivable as of such last
day pursuant to the Receivables Purchase Agreement. In consideration of the
purchase of the Receivable, CPS shall remit the Purchase Amount, in the manner
46
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 Backup 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 F-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
Non-Certificated Title States, another evidence of title issued by the
applicable Department of Motor Vehicles or similar authority in such States, 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 (in the
case of the Initial Receivables) or the applicable Subsequent Transfer Date (in
the case of the Subsequent Receivables) or, if such day is not a Business Day,
the next succeeding Business Day, the Trustee shall inform CPS and the other
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 Non-Certificated Title
States, for which the related Receivable File on such date does not include
evidence of title issued by the applicable Department of Motor Vehicles or
similar authority, 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 release request
signed by a Servicing Officer in the form of EXHIBIT C hereto (the "RELEASE
Request"). Such Release Request shall obligate the Servicer to return such
document(s) to the Trustee when the need therefor no longer exists unless the
47
Receivable shall be liquidated, in which case, the Servicer shall certify in the
Release Request that all amounts required to be deposited in the Collection
Account with respect to such Receivable have been so deposited.
SECTION 3.6 TRUSTEE TO DELIVER MONTHLY RECEIVABLE FILE REPORT. Within
three Business Days after the end of a month in which the Trustee releases any
Receivable Files to the Servicer or after any subsequent month in which such
Receivable Files remain outstanding pursuant to Section 3.5 hereof, the Trustee
shall deliver to the Note Insurer and the Servicer a monthly report which
identifies all Receivable Files released to the Servicer and not yet returned to
the Trustee.
SECTION 3.7 TRUSTEE TO MAINTAIN SECURE FACILITIES. The Trustee shall
maintain or cause to be maintained continuous custody of the Receivable Files in
secure and fire resistant facilities in accordance with customary standards for
such custody.
ARTICLE IV
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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 or
promissory notes and security agreements, in each case, 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 such Receivables and/or the certificates of title or,
with respect to Financed Vehicles in the Non-Certificated Title States, other
evidence of ownership with respect to such Financed Vehicles issued by the
applicable Department of Motor Vehicles or similar authority. 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
48
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 to the extent that the
Three-Month Rolling Average Extension Ratio does not exceed (i) 2.5%, if the
most recent Collection Period tested was in the period from March through
September (inclusive), or (ii) 3.0%, if the most recent Collection Period tested
was in the period from October through February (inclusive) (the "Aggregate
Extension Percentage Limitation"); 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 four extensions in the aggregate with respect to a Receivable
without the prior written consent of the Note Insurer; provided, further,
however, 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). In addition, if the Servicer grants
extensions with respect to any Receivables in excess of the Aggregate Extension
Percentage Limitation, the Servicer will promptly purchase such Receivables from
the Trust in accordance with the terms of Section 4.7 hereof (and for purposes
thereof, such Receivables 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
49
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,
other than to the extent that such alteration is required by applicable law.
(b) The Servicer shall establish the Lockbox Account in the
name of the Trust for the benefit of the Trustee for the further benefit of the
Securityholders and the Note Insurer. 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, except the Lockbox Processor and the Trustee, has authority
to direct the disposition of funds on deposit in the Lockbox Account. The
Lockbox Agreement shall provide that Lockbox Banks will comply with the
instructions originated by the Trustee relating to the 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 the Lockbox
Bank 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 Trust 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 CPS shall for any reason no longer be acting
as the Servicer hereunder, the Backup Servicer or a successor Servicer shall
thereupon assume all of the rights and obligations of the outgoing Servicer
under the Lockbox Agreement arising from and after such assumption. 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 assignment of any Lockbox Agreement to the successor
Servicer. In the event that the Note Insurer (so long as an Insurer Default
50
shall not have occurred and be continuing) or a Note Majority (if an Insurer
Default shall have occurred and be continuing) or the Majority
Certificateholders (if the Note Balance has been reduced to zero, all amounts
due and owing to the Note Insurer have been paid in full and the Policy has
expired in accordance with its terms) 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 a Note Majority (if an Insurer
Default shall have occurred and be continuing) or the Majority
Certificateholders (if the Note Balance has been reduced to zero, all amounts
due and owing to the Note Insurer have been paid in full and the Policy has
expired in accordance with its terms) 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. The outgoing Servicer shall
deliver prompt written notice to the Rating Agencies of any change or transfer
of the Lockbox arrangements.
(e) On each Business Day, pursuant to the Lockbox Agreement,
the Lockbox Processor will transfer any payments from Obligors received in the
Post Office Box to the Lockbox Account. Within two Business Days of receipt of
funds into the Lockbox Account, the Servicer shall cause the Lockbox Bank to
transfer funds from the Lockbox Account to the Collection Account. In addition,
the Servicer shall remit all payments by or on behalf of the Obligors received
by the Servicer with respect to the Receivables (other than Purchased
Receivables), and all Liquidation Proceeds no later than the Business Day
following receipt directly (without deposit into any intervening account) into
the Lockbox Account or the Collection Account. The Servicer shall not commingle
its assets and funds with those on deposit in the Lockbox 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 or sell the related Receivable to an
unaffiliated third-party 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 or Consumer Lenders 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
51
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 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 as policyholder
(creditor) and (iii) as to each Receivable that finances the cost of an extended
service contract, the respective Financed Vehicle which secures the Receivable
is covered by an extended service contract.
(b) To the extent applicable, the Servicer shall not take any
action which would result in noncoverage under any of the insurance policies
referred to in Section 4.4(a) which, but for the actions of the Servicer, would
have been covered thereunder. The Servicer, on behalf of the Trust, shall take
such reasonable action as shall be necessary to permit recovery under any of the
foregoing insurance policies. Any amounts collected by the Servicer under any of
the foregoing insurance policies shall be deposited in the Collection Account.
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 authorization of the Obligors and the recording, registering,
filing, re-recording, re-registering and refiling of all security agreements,
financing statements and continuation statements or instruments as are necessary
to maintain the security interest granted by 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
52
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 it is the Controlling Party) instruct
the Trustee and the Servicer to take or cause to be taken or, if the Note
Insurer is not the Controlling Party, 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.
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 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 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 and waivers may be granted in
accordance with Section 4.2. The Servicer shall not create, incur or suffer to
exist any Lien or restriction on transferability of the Receivables nor, except
as contemplated by the Basic Documents, sign or file under the UCC of any
jurisdiction any financing statement that names CPS or the Servicer as debtor,
nor sign any security agreement authorizing any secured party thereunder to file
such financing statement, with respect to the Receivables. The Servicer shall
take such actions as are necessary from time to time in order to maintain the
perfection and priority of the Issuer's security interest in the Trust Property.
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
with respect to which the Securityholders' or the Note Insurers' interest
53
therein or in the related Financed Vehicle is 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 Backup 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. 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 F-2.
SECTION 4.8 SERVICING FEE. The "Servicing Fee" for each Payment Date
shall be equal to the result of one twelfth times 2.50% of the Pool Balance as
of the first day of the related Collection Period; provided, however, that with
respect to the first Payment Date the Servicer will be entitled to receive a
Servicing Fee equal to the product of one-twelfth times 2.50% of the Original
Pool Balance. In addition the Servicing Fee shall also include the Additional
Servicing Compensation, which shall not be a part of the Owner Trust Estate. On
each Payment Date occurring after the date, if any, on which CPS resigns as
Servicer pursuant to Section 9.6 or is terminated as Servicer pursuant to
Section 10.2, the Person then acting as successor Servicer (including the Backup
Servicer, if acting in such capacity) shall be entitled to receive (i) the
Servicing Fee and (ii) a supplemental fee (the "Successor Servicing Fee") equal
to the positive difference, if any, between (A) the product of the number of
Receivables serviced by the successor Servicer during the related Collection
Period and $13 and (B) the Servicing Fee, each in accordance with the priorities
set forth in Section 5.7(a) hereof.
SECTION 4.9 SERVICER'S CERTIFICATE. By 9:00 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
54
pursuant to Sections 5.7 and 5.8 (including, if required, withdrawals from the
Series 2007-B Spread Account) for the Collection Period preceding the date of
such Servicer's Certificate and all information necessary for the Trustee to
send statements to the Securityholders and the Note Insurer pursuant to Section
5.8(b) and all information necessary to enable the Backup Servicer to verify the
information specified in Section 4.13(b) and to complete the accounting required
by Section 5.9. 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 Backup Servicer, the Note Insurer and each Rating Agency, on or
before March 31 of each year beginning March 31, 2008, an Officer's Certificate,
dated as of December 31 of the preceding 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 Officer's Certificate, from the Closing Date to December 31,
2007) 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 Officer's Certificate,
from the Closing Date to December 31, 2007), 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 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 Residual
Certificateholder.
(b) The Servicer shall deliver to the Owner Trustee, the
Trustee, the Backup 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.
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
Backup Servicer, the Note Insurer and each Rating Agency, on or before March 31
of each year beginning March 31, 2008, a report dated as of December 31 of the
previous year (the "Accountants' Report") and reviewing the Servicer's
activities during the preceding 12-month period, addressed to the Board of
Directors of the Servicer, to the Owner Trustee, the Trustee, the Backup
55
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 Attestation 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 (A) a review in
accordance with agreed upon procedures was made of two randomly selected
Servicer Certificates; (B) except as disclosed in the report, no exceptions or
errors in the Servicer Certificates were found; and (C) 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 Backup Servicer to agree to the procedures performed by such firm, the
Servicer shall direct the Trustee, the Owner Trustee and/or the Backup Servicer,
as applicable, in writing to so agree; it being understood and agreed that the
Trustee, the Owner Trustee and/or the Backup 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 Backup 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 Backup Servicer, the Note Insurer and the Rating Agencies
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 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.
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(a) On or before the fifth calendar day of each month, the
Servicer will deliver to the Trustee and the Backup Servicer a computer diskette
(or other electronic transmission) in a format acceptable to the Trustee and the
Backup Servicer containing information with respect to the Receivables as of the
close of business on the last day of the related Collection Period which
information is necessary for preparation of the Servicer's Certificate. The
Backup 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
Backup 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 Backup Servicer reports any discrepancies, the
Servicer and the Backup 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 Backup 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 Backup Servicer
shall have no obligations hereunder, including, without limitation, to
supervise, verify, monitor or administer the performance of the Servicer. The
Backup Servicer shall have no liability for any actions taken or omitted by the
Servicer. The duties and obligations of the Backup 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 Backup Servicer.
Notwithstanding the fact that the Backup Servicer shall receive the data
referenced in this Section 4.13(a) on a monthly basis, at the request of the
Note Insurer, the Backup Servicer agrees to receive and the Servicer agrees to
deliver any such data with respect to the Receivables from the Servicer on a
more frequent basis, up to and including daily or weekly transmissions.
(b) The Backup 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 Backup 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 Aggregate Principal
Balance for the most recent Payment Date;
(iii) confirm, based solely on the information shown
on the Servicer's Certificate, that the Total Distribution Amount, the
Principal Distributable Amount, the Noteholders' Principal
Distributable Amount, the Note Prepayment Amount, the Noteholders'
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Parity Deficit Amount, the Noteholders' Interest Distributable Amount
for each Class of Notes, the Residual Certificate Interest
Distributable Amount, the Residual Certificate Principal Distributable
Amount, the Residual Certificate Prepayment Amount, the Targeted
Principal Distributable Amount, the Backup Servicing Fee, the Servicing
Fee, the Trustee Fees, the Cayman Trustee Fees, the amount on deposit
in the Series 2007-B Spread Account, the amount on deposit in the
Pre-Funding Account, the amount on deposit in the Capitalized Interest
Account, the Three-Month Rolling Average Extension Ratio, the
Three-Month Rolling Average Delinquency Ratio, the Cumulative Net Loss
Rate and the Premium (as defined in the Insurance Agreement) in the
Servicer's Certificate are accurate based solely on the recalculation
of the Servicer's Certificate and without further investigation;
(iv) confirm the calculation of the Trigger Events
based solely upon the information contained on the applicable computer
diskette; and
(v) by the third Business Day following the Backup
Servicer's receipt of the Servicer's Certificate and following the
Backup Servicer's review of such Servicer's Certificate and the related
monthly tape, the Backup Servicer shall provide the Note Insurer with a
certificate (i) describing those activities it performed in its review
of the monthly tape and the Servicer's Certificate, (ii) listing those
parts of the Servicer's Certificate that it confirmed were correct,
(iii) listing those parts of the Servicer's Certificate that it found
to be incorrect, and (iv) describing any discrepancies,
inconsistencies, incorrect information or incorrect calculations that
were revealed by its review of the Servicer's Certificate and the
related monthly tape.
(c) On or prior to the Closing Date, the Backup Servicer will
cause an affiliate of the Back-up Servicer to data map to their servicing system
all servicing/loan file information, including all relevant borrower contact
information such as address and phone numbers as well as loan balance and
payment information, including comment histories and collection notes. On or
before the fifth calendar day of each month, the Servicer will provide to an
affiliate of the Backup Servicer an electronic transmission of all
servicing/loan information, including all relevant borrower contact information
such as address and phone numbers as well as loan balance and payment
information, including comment histories and collection notes, and the Backup
Servicer will cause such affiliate to review each file to ensure that it is in
readable form and verify that the data balances conform to the trial balance
reports received from the Servicer. Additionally, the Backup Servicer shall
cause such affiliate to store each such file.
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, 2007, which term may
be extended by the Note Insurer for successive quarterly terms ending on each
successive December 31, March 31, June 30 and September 30 (or, at the
discretion of the Note Insurer exercised pursuant to revocable written standing
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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 Residual Certificateholders and the
Note Insurer 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.
SECTION 4.16 OPTIONAL PURCHASE OF CERTAIN RECEIVABLES
(a) CPS shall have the right, but not the obligation, to
acquire Receivables on the last day of any Collection Period during the term of
the Trust at a price equal to at least the fair market value of such
Receivables, so long as the fair market value is not less than the related
aggregate Purchase Amount plus the costs and expenses of the Servicer, the Trust
and the Note Insurer (including any outstanding reimbursements) in connection
with such optional purchase. The aggregate Principal Balance of Receivables
repurchased under such option shall be limited to 1% of the Original Collateral
Balance. To exercise such option, CPS shall (subject to the proviso below)
deposit in the Collection Account pursuant to Section 5.6 (or remit to the
Servicer, if CPS is not then Servicer) an amount equal to the related aggregate
Purchase Amount for such Receivables and thereafter shall succeed to all
interests of the Trust in and to such Receivables. Upon notice of receipt of the
related aggregate Purchase Amount for such Receivables and written instructions
from the Servicer, the Trustee shall release to CPS or its designee the related
Receivables Files 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 necessary to vest in CPS or such designee title to such
Receivables including a Trustee's Certificate in the form of EXHIBIT F-2.
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(b) CPS shall have the right, which right may be assigned by
CPS to an Affiliate, but not the obligation, to repurchase on the last day of
any Collection Period any Defaulted Texas Receivables the related Obligors of
which reside in the State of Texas or the related Financed Vehicles of which are
located in the State of Texas at a price equal to at least the fair market value
of such Defaulted Texas Receivables, so long as the fair market value is not
less than the related aggregate Purchase Amount, plus the costs and expenses of
the Servicer, the Trust and the Note Insurer (including any outstanding
reimbursements) in connection with such optional purchase. To exercise such
option, CPS shall (subject to the proviso below) deposit in the Collection
Account pursuant to Section 5.6 (or remit to the Servicer, if CPS is not then
Servicer) an amount equal to the related aggregate Purchase Amount for such
Defaulted Texas Receivables and thereafter shall succeed to all interests of the
Trust in and to such Defaulted Texas Receivables. Upon notice of receipt of the
related aggregate Purchase Amount for such Defaulted Texas Receivables and
written instructions from the Servicer, the Trustee shall release to CPS or its
designee the related Receivables Files and shall execute and deliver all
reasonable instruments of transfer or assignment, without recourse, as are
prepared by the CPS and delivered to the Trustee and necessary to vest in CPS or
such designee title to such Defaulted Texas Receivables including a Trustee's
Certificate in the form of EXHIBIT F-2.
ARTICLE V
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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. On the Closing Date, the Servicer will
deposit, on behalf of the Seller, in the Collection Account, an amount equal to
$3,988,793.70, such amount representing collections on the Receivables received
from and including the day after the Initial Cutoff Date through June 26, 2007,
but not previously deposited into the Collection Account.
(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.
(iii) The Trustee, on behalf of the Noteholders, shall establish and
maintain in its own name an Eligible Account (the "Pre-Funding 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. The Pre-Funding Account shall initially be established with the
Trustee.
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(iv) The Servicer shall cause the Trustee to establish and maintain an
Eligible Account (the "Capitalized Interest Account") with the Trustee, bearing
a designation clearly indicating that the funds deposited therein are held in
trust for the benefit of the Securityholders and the Note Insurer.
(v) Funds on deposit in the Collection Account, the Note Distribution
Account, the Pre-Funding Account and the Capitalized Interest 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 Securityholders and the Note
Insurer. 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.
(b) 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(a) 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.
(c) The Trustee shall not in any way be held liable by reason
of any insufficiency in any of the Trust Accounts resulting from any loss on any
Eligible Investment included therein except for losses attributable to the
Trustee's negligence or bad faith or its failure to make payments on such
Eligible Investments issued by the Trustee, in its commercial capacity as
principal obligor and not as trustee, in accordance with their terms.
(d) If (i) the Servicer shall have failed to give investment
directions for any funds on deposit in the Trust Accounts to the Trustee by 1:00
p.m. Eastern Time (or such other time as may be agreed by the Issuer and
Trustee) on any Business Day; or (ii) an Event of Default shall have occurred
and be continuing 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
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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 described in clause (ii) of the definition
thereof.
(e) 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 Securityholders 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.
(f) Notwithstanding anything to the contrary herein or in any
other document relating to a Trust Account, the "securities intermediary's
jurisdiction" (within the meaning of Section 8-110 of the UCC) or the "bank's
jurisdiction" (with the meaning of 9-304 of the UCC), as applicable, with
respect to each Trust Account shall be the State of New York.
(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 an Eligible Account;
and, 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; and
(B) any other Trust Account Property shall be
delivered to the Trustee in accordance with the definition of
"Delivery".
SECTION 5.2 CAPITALIZED INTEREST ACCOUNT.
(a) On or prior to the Closing Date, the Seller shall deposit
an amount equal to the Capitalized Interest Account Initial Deposit into the
Capitalized Interest Account.
(b) On the Determination Date for each of the July and August
2007 Payment Dates, to the extent that the Servicer's Certificate indicates that
the funds on deposit in the Capitalized Interest Account are in excess of the
Requisite Reserve Amount for such Payment Date, the Trustee shall withdraw such
excess from the Capitalized Interest Account and deposit such amount in the
Collection Account for distribution pursuant to Section 5.7(a) on such Payment
Date.
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SECTION 5.3 CERTAIN REIMBURSEMENTS TO THE SERVICER. The Servicer will
be entitled to be reimbursed from amounts on deposit in the Collection Account
with respect to a Collection Period for amounts previously deposited in the
Collection Account but later determined by the Servicer to have resulted from
mistaken deposits or postings or checks returned for insufficient funds. The
amount to be reimbursed hereunder shall be paid to the Servicer on the related
Payment Date pursuant to Section 5.7(a)(ii) 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; provided, however, that the Servicer must
provide such certification within three months of its becoming aware of such
mistaken deposit, posting or returned check. 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 Controlling Party shall 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(a)(ii), or, if prior thereto the Servicer has been reimbursed
pursuant to Section 5.7(a)(ii), 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 to interest and
principal in accordance with the Simple Interest Method.
SECTION 5.5 WITHDRAWALS FROM SERIES 2007-B 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 Sections 5.7(a)(i) through
(v) and (vii) through (ix), provided however, that with respect to Section
5.7(a)(vii), the amount which may be withdrawn from the Series 2007-B Spread
Account shall equal the Noteholders' Parity Deficit Amount, or, if such Payment
Date is the Final Scheduled Payment for any Class of Notes, the greater of (i)
the Noteholders' Parity Deficit Amount and (ii) the unpaid Note Balance of such
Class of Notes (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
63
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 Master Spread Account Agreement) to the Trustee for
deposit in the Collection Account and distribution pursuant to Sections
5.7(a)(i) through (v) and (vii) through (ix), as applicable.
(b) Any Deficiency Notice shall be delivered by 3:00 p.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 5.7(a).
SECTION 5.6 ADDITIONAL DEPOSITS. The Servicer or CPS, as the case may
be, shall deposit or cause to be deposited in the Collection Account the
aggregate Purchase Amount with respect to Purchased Receivables and all amounts
to be paid by CPS pursuant to its indemnification obligations under the Basic
Documents and the Servicer shall deposit or cause to be deposited therein all
amounts to be paid under Sections 4.16 and 11.1. All such deposits made pursuant
to Section 4.16 shall be made, in immediately available funds, on the Business
Day preceding the Determination Date. All such deposits made pursuant to Section
11.1 shall be made, in immediately available funds, on the Business Day
preceding the related Payment 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) 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 Backup Servicer so long as the Backup
Servicer is not acting as the successor 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 Backup Servicing Fees,
the Backup Servicing Fee and all unpaid Backup Servicing 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 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, the Servicing Fee and all unpaid Servicing Fees from prior
Collection Periods and all reimbursements to which the Servicer is
entitled pursuant to Section 5.3 and an amount, not to exceed $35,000
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per annum, for payment to the taxing authority of the State of Texas on
behalf of the Issuer for any Texas franchise or similar tax due and
owing by the Issuer (or with respect to the Receivables) and not timely
paid by CPS in accordance with the Receivables Purchase Agreement;
(iii) if the Backup Servicer becomes the successor Servicer, to the
Backup 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), 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 over the term of this Agreement) incurred by the Backup
Servicer in becoming the successor Servicer;
(iv) concurrently on a pro rata basis, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (iii) above),
(A) to the Trustee and the Owner Trustee pro
rata, 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 reasonable counsel fees and expenses) and
all unpaid Trustee Fees and unpaid reasonable out-of-pocket
expenses (including reasonable counsel fees and expenses) from
prior Collection Periods;
(B) to the Residual Certificateholders pro
rata based on their respective Percentage Interests, the
Supplemental Residual Certificate Distribution;
provided, however, that expenses and other amounts payable to the
Trustee, the Owner Trustee and the Residual Certificateholders pursuant
to this clause (iv) shall be limited to a total of $50,000 per annum;
PROVIDED FURTHER, HOWEVER, (I) that if an Event of Default specified
under Section 5.1(a)(i) or (ii) of the Indenture has occurred and is
continuing or (II) if the Note Insurer (so long as an Insurer Default
shall not have occurred and be continuing) otherwise agrees in writing
to waive such $50,000 per annum limitation described in the first
proviso, in its sole discretion, then such expenses payable pursuant to
this priority (iv) shall not be so limited;
(v) 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 (iv) above), and any amount
deposited in the Collection Account pursuant to Sections 5.5(a) and
5.12(a), the Noteholders' Interest Distributable Amount for such
Payment Date;
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(vi) to the Residual Certificateholders pro rata
based on their respective Percentage Interests, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments pursuant to clauses (i) through (v) above), the Residual
Certificate Interest Distributable Amount for such Payment Date,
subject to the limitation thereon contained in the proviso to the
definition thereof;
(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 Sections 5.5(a) and
5.12(a), the sum of (A) the Noteholders' Principal Distributable Amount
and (B) the Noteholders' Parity Deficit Amount, if any;
(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) if any Person other than the Backup Servicer
becomes the successor Servicer, to such successor Servicer from the
Total Distribution Amount (as such Total Distribution Amount has been
reduced by payments pursuant to clauses (i) through (viii) above), 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), 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 over the term of this
Agreement) incurred by such successor Servicer in becoming the
successor Servicer;
(x) to the Collateral Agent, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments made pursuant to clauses (i) through (ix) above) for
deposit into the Series 2007-B Spread Account, the remaining Total
Distribution Amount until the amount in the Series 2007-B Spread
Account equals the Specified Spread Account Requisite Amount;
(xi) to the Note Distribution Account, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments made pursuant to clauses (i) through (x) above), the
Targeted Principal Distributable Amount, if any, for such Payment Date;
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(xii) (a) to the Backup Servicer and the Owner
Trustee, as applicable, from the Total Distribution Amount (as such
Total Distribution has been reduced by payments made pursuant to
clauses (i) through (xi) above), any amounts owing to the Backup
Servicer hereunder and any amounts to the Owner Trustee under the Trust
Agreement, to the extent not previously paid, (b) to any successor
Servicer (including the Backup Servicer, if the Backup Servicer is then
acting in such capacity), if any, from the Total Distribution Amount
(as such Total Distribution has been reduced by payments made pursuant
to clauses (i) through (xi) above), the Successor Servicing Fees due,
if any, and (c) to the Servicer from the Total Distribution Amount (as
such Total Distribution has been reduced by payments made pursuant to
clauses (i) through (xi) above) for payment to the taxing authority of
the State of Texas on behalf of the Issuer for any Texas franchise or
similar tax due and owing by the Issuer (or with respect to the
Receivables), the amount, if any, to be paid to such taxing authority
after giving effect to the distribution pursuant to clause (ii) above
and not timely paid by CPS in accordance with the Receivables Purchase
Agreement;
(xiii) to the Residual Certificateholders pro rata
based on their respective Percentage Interests, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments made pursuant to clauses (i) through (xii) above), the
Residual Certificate Interest Distributable Amount remaining to be paid
after giving effect to the distribution pursuant to clause (vi) above;
(xiv) to the Residual Certificateholders pro rata
based on their respective Percentage Interests, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced
by payments made pursuant to clauses (i) through (xiii) above), the
Residual Certificate Principal Distributable Amount, if any, for such
Payment Date; and
(xv) to the Residual Certificateholders pro rata
based on their respective Percentage Interests, any remaining Total
Distribution Amount;
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 Sections 5.1(a)(i), 5.1(a)(ii) or 5.1(a)(v) 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.
(b) On the Payment Date immediately following the date upon
which the Funding Period terminates, the Trustee shall withdraw an amount equal
to the Residual Certificate Prepayment Amount from the Collection Account and
distribute such amount to the Residual Certificateholders pro rata based on
their respective Percentage Interests.
(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(a) on the related Payment Date.
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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 the 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, the Noteholders'
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) concurrently, to the Holders of each Class of
Notes on the Mandatory Redemption Date, pro rata, on the basis of each
Class' share of the Aggregate Note Balance, the Note Prepayment Amount;
(iii) to the Holders of the Class A-1 Notes, the sum
of (x) the Noteholders' Principal Distributable Amount and (y) the
Noteholders' Parity Deficit Amount, if any, until the Class A-1 Note
Balance is reduced to zero;
(iv) to the Holders of the Class A-1 Notes, the
Targeted Principal Distributable Amount, if any, for such Payment Date
until the Class A-1 Note Balance is reduced to zero;
(v) to the Holders of the Class A-2 Notes, the sum of
(x) the Noteholders' Principal Distributable Amount (as reduced by any
distributions made on such Payment Date pursuant to clause (iii) above)
and (y) the Noteholders' Parity Deficit Amount, if any, remaining after
distributions made on such Payment Date pursuant to clauses (iii) and
(iv) above, until the Class A-2 Note Balance is reduced to zero;
(vi) to the Holders of the Class A-2 Notes, the
Targeted Principal Distributable Amount, if any, for such Payment Date
until the Class A-2 Note Balance is reduced to zero;
(vii) to the Holders of the Class A-3 Notes, the sum
of (x) the Noteholders' Principal Distributable Amount (as reduced by
any distributions made on such Payment Date pursuant to clauses (iii)
and (v) above) and (y) the Noteholders' Parity Deficit Amount, if any,
remaining after distributions made on such Payment Date pursuant to
clauses (iii) through (vi) above, until the Class A-3 Note Balance is
reduced to zero;
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(viii) to the Holders of the Class A-3 Notes, the
Targeted Principal Distributable Amount, if any, for such Payment Date
until the Class A-3 Note Balance is reduced to zero;
(ix) to the Holders of the Class A-4 Notes, the sum
of (x) the Noteholders' Principal Distributable Amount (as reduced by
any distributions made on such Payment Date pursuant to clauses (iii),
(v) and (vii) above) and (y) the Noteholders' Parity Deficit Amount, if
any, remaining after distributions made on such Payment Date pursuant
to clauses (iii) through (viii) above, until the Class A-4 Note Balance
is reduced to zero; and then
(x) to the Holders of the Class A-4 Notes, the
Targeted Principal Distributable Amount, if any, for such Payment Date
until the Class A-4 Note Balance is reduced to zero.
(b) On each Payment Date, the Trustee shall provide or make
available electronically (or, upon written request, by first class mail or
facsimile) to each Noteholder the statement or statements provided to the
Trustee by the Servicer pursuant to Section 5.11 hereof on such Payment Date;
PROVIDED, HOWEVER, the Trustee shall have no obligation to provide such
information described in this Section 5.8(b) until it has received the requisite
information from the Servicer.
(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 distribution to a Non-United States
Investor), 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 Noteholder at a bank or other entity having appropriate facilities
therefor, if (i) such Holder 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
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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 related 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.
Each Noteholder, by its acceptance of its Note, will be deemed to have
consented to the provisions of Sections 5.7 and 5.8 relating to the priority of
payments, and will be further deemed to have acknowledged that no property
rights in any amount or the proceeds of any such amount shall vest in such
Noteholder until such amounts have been distributed to such Noteholder pursuant
to such provisions; PROVIDED, that the foregoing shall not restrict the right of
any Noteholder, upon compliance with the provisions hereof from seeking to
compel the performance of the provisions hereof by the parties hereto. Each
Noteholder, by its acceptance of its Note, will be deemed to have further agreed
that withdrawals of funds by the Collateral Agent from the Series 2007-B Spread
Account for application hereunder, shall be made in accordance with the
provisions of the Master Spread Account Agreement.
SECTION 5.9 CERTAIN RIGHTS OF THE RESIDUAL CERTIFICATEHOLDERS.
(a) On each Payment Date, the Trustee shall provide or make
available electronically (or, upon written request, send by first class mail or
facsimile) to each Residual Certificateholder the statement or statements
provided to the Trustee by the Servicer pursuant to Section 5.11 hereof on such
Payment Date; PROVIDED, HOWEVER, the Trustee shall have no obligation to provide
such information described in this Section 5.9(a) until it has received the
requisite information from the Servicer.
(b) In the event that any withholding tax is imposed on the
Trust's payment (or allocations of income) to a Residual Certificateholder, such
tax shall reduce the amount otherwise distributable to such Residual
Certificateholder in accordance with Section 5.7(a). The Trustee is hereby
authorized and directed to retain from amounts otherwise distributable to the
Residual Certificateholders sufficient funds for the payment of any tax that is
legally owed by the Trust (but such authorization shall not prevent the Trustee
from contesting any such tax in appropriate proceedings, and withholding payment
of such tax, if permitted by law, pending the outcome of such proceedings). The
amount of any withholding tax imposed with respect to a Residual
Certificateholder shall be treated as cash distributed to such Residual
Certificateholder 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 distribution to a
Non-United States Investor), the Trustee may in its sole discretion withhold
such amounts in accordance with this clause (c). In the event that a Residual
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Certificateholder wishes to apply for a refund of any such withholding tax, the
Trustee shall reasonably cooperate with such Residual Certificateholder in
making such claim so long as such Residual Certificateholder agrees to reimburse
the Trustee for any out-of-pocket expenses incurred.
(c) Distributions required to be made to Residual
Certificateholders on any Payment Date shall be made to each Residual
Certificateholder of record on the preceding Record Date either by wire
transfer, in immediately available funds, to the account of such Residual
Certificateholder at a bank or other entity having appropriate facilities
therefor, if (i) such Residual Certificateholder shall have provided to the
Certificate Registrar appropriate written instructions at least five Business
Days prior to such Payment Date and such Residual Certificateholder's Residual
Pass-through Certificates in the aggregate evidence a denomination of not less
than $1,000,000 or (ii) such Residual Certificateholder is the Seller, or an
Affiliate thereof, or, if not, by check mailed to such Residual
Certificateholder at the address of such holder appearing in the Certificate
Register. Notwithstanding the foregoing, the final distribution in respect of
any Residual Pass-through Certificate will be payable only upon presentation and
surrender of such Residual Pass-through Certificate at the office or agency
maintained for that purpose by the Certificate Registrar pursuant to Section 3.8
of the Trust Agreement.
Each Residual Certificateholder, by its acceptance of its Residual
Pass-through Certificate, will be deemed to have consented to the provisions of
Sections 5.7, 5.8 and 5.9 relating to the priority of payments, and will be
further deemed to have acknowledged that no property rights in any amount or the
proceeds of any such amount shall vest in such Residual Certificateholder until
such amounts have been distributed to such Residual Certificateholder pursuant
to such provisions; PROVIDED, that the foregoing shall not restrict the right of
any Residual Certificateholder, upon compliance with the provisions hereof from
seeking to compel the performance of the provisions hereof by the parties
hereto. Each Residual Certificateholder, by its acceptance of its Residual
Pass-through Certificate, will be deemed to have further agreed that withdrawals
of funds by the Collateral Agent from the Series 2007-B Spread Account for
application hereunder, shall be made in accordance with the provisions of the
Master Spread Account Agreement.
Each Residual Certificateholder, by its acceptance of a Residual
Pass-through Certificate, further specifically acknowledges that it has no right
to or interest in any moneys at any time held pursuant to the Master Spread
Account Agreement prior to the release of such moneys as aforesaid, such moneys
being held in trust for the benefit of the Securityholders and the Note Insurer
as their interests may appear prior to such release. Notwithstanding the
foregoing, in the event that it is ever determined that any property held in the
Series 2007-B Spread Account constitutes a pledge of collateral, then the
provisions of this Agreement and the Master Spread Account Agreement shall be
considered to constitute a security agreement and the Residual
Certificateholders hereby grant to the Collateral Agent a first priority
perfected security interest in such amounts, to be applied as set forth in
Section 3.03(b) of the Master Spread Account Agreement. In addition, each
Residual Certificateholder, by its acceptance of a Residual Pass-through
71
Certificate, hereby grants a first priority perfected security interest in its
interest in the Series 2007-B Spread Account, if any, and any property held
therein from time to time to the Collateral Agent for the benefit of the Note
Insurer pursuant to the Master Spread Account Agreement and agrees to execute
and deliver such instruments of conveyance, assignment, grant, confirmation,
etc., as well as any financing statements, in each case as the Note Insurer
shall consider reasonably necessary in order to perfect the Collateral Agent's
Security Interest in the Collateral (as such terms are defined in the Master
Spread Account Agreement).
SECTION 5.10 PRE-FUNDING ACCOUNT.
(a) On the Closing Date, the Trustee will deposit, on behalf
of the Seller, the Pre-Funded Amount into the Pre-Funding Account from the
proceeds of the sale of the Notes. On each Subsequent Transfer Date, the
Servicer shall instruct the Trustee to withdraw from the Pre-Funding Account (i)
an amount equal to the excess of (a) the Principal Balance of the Subsequent
Receivables transferred to the Issuer on such Subsequent Transfer Date over (b)
the Subsequent Spread Account Deposit for such Subsequent Transfer Date, and to
distribute such amount to or upon the order of the Seller upon satisfaction of
the conditions set forth in this Agreement with respect to such transfer; and
(ii) an amount equal to the Subsequent Spread Account Deposit on such Subsequent
Transfer Date and deposit such amount into the Series 2007-B Spread Account upon
satisfaction of the conditions set forth in this Agreement with respect to such
transfer.
(b) If the Pre-Funded Amount has not been reduced to zero on
the date on which the Funding Period ends, after giving effect to any reductions
in the Pre-Funded Amount on such date, the Servicer shall instruct the Trustee
to withdraw from the Pre-Funding Account on the Mandatory Redemption Date the
Pre-Funded Amount (exclusive of any Pre-Funding Earnings) and deposit an amount
equal to the Note Prepayment Amount into the Note Distribution Account and an
amount equal to the Residual Certificate Prepayment Amount into the Collection
Account.
(c) All Pre-Funding Earnings will be deposited in the
Collection Account on each Payment Date and deemed to be part of the Total
Distribution Amount.
SECTION 5.11 STATEMENTS TO SECURITYHOLDERS.
(a) 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 the Owner Trustee to forward to
each Securityholder of record (in the case of the Trustee, pursuant to Sections
5.8(b) and 5.9(a) hereof) the statement or statements provided by the Servicer
in substantially the form attached hereto as Exhibit E setting forth at least
the following information as to the Notes and the Residual Pass-through
Certificates to the extent applicable:
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(i) the amount of such distribution allocable to
principal of each Class of Notes and the Residual Certificate Principal
Distributable Amount;
(ii) the amount of such distribution allocable to
interest on or with respect to each Class of Notes and Residual
Certificate Interest Distributable Amount;
(iii) the Pool Balance as of the close of business on
the last day of the related Collection Period;
(iv) the Note Balance for each Class of Notes after
giving effect to payments allocated to principal reported under clause
(i) above and the Residual Certificate Notional Balance after giving
effect to the Residual Certificate Principal Distributable Amount
reported under clause (i) above;
(v) 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 the
prior Payment Date;
(vi) the amount of the Backup Servicing Fee, the
Trustee Fees and the Cayman Trustee Fees paid to the Backup Servicer,
the Trustee, the Owner Trustee and the Cayman Trust, as applicable, and
the Supplemental Residual Certificate Distribution, if any, in each
case with respect to the related Collection Period, and the amount of
any unpaid Backup Servicing Fees, Trustee Fees and Cayman Trustee Fees
and the amount of any unpaid Supplemental Residual Certificate
Distributions and the change in all such amounts from the prior Payment
Date;
(vii) the Noteholders' Interest Carryover Shortfall
for each Class of Notes and the Residual Certificate Interest Carryover
Shortfall for such Payment Date;
(viii) the amount, if any, paid to the Noteholders
under the Note Policy or from the Series 2007-B Spread Account for such
Payment Date;
(ix) the amount distributable to the Note Insurer on
such Payment Date;
(x) the aggregate amount in the Series 2007-B Spread
Account and the change in such amount from the previous Payment Date
and the Specified Spread Account Requisite Amount for such Payment
Date;
(xi) the number of Receivables and the aggregate
gross amount scheduled to be paid thereon, including unearned finance
and other charges, for which the related Obligors are delinquent in
making Scheduled Receivable Payments for (a) 31 to 60 days, (b) 61 to
90 days, and (c) 91 days or more;
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(xii) the aggregate amount in the Capitalized
Interest Account and the change in such amount from the previous
Payment Date and the Requisite Reserve Amount for such Payment Date;
(xiii) the number and the aggregate Purchase Amounts
for Receivables purchased by CPS or purchased by the Servicer during
the related Collection Period and summary information as to losses and
delinquencies with respect to such Receivables;
(xiv) the Principal Balance of all Receivables that
have become Liquidated Receivables, net of Recoveries, during the
related Collection Period;
(xv) the cumulative Principal Balance of all
Receivables that have become Liquidated Receivables, net of Recoveries,
during the period from the Cutoff Date to the last day of the related
Collection Period;
(xvi) for any Payment Date during the Funding Period,
the Pre-Funded Amount and the change in such amount from the previous
Payment Date;
(xvii) for the Mandatory Redemption Date, the amount
of any remaining Pre-Funded Amount that was not used to fund the
purchase of Subsequent Receivables;
(xviii) the amount, if any, paid by the Note Insurer
to the Trustee for deposit into the Collection Account pursuant to
Section 5.12;
(xix) the amount of any Texas Franchise Tax due and
owing by CPS under the Receivables Purchase Agreement to the taxing
authority of the State of Texas on or prior to the related Payment Date
or paid by CPS since the prior Payment Date; and
(xx) the Three-Month Rolling Average Extension Ratio,
the Cumulative Net Loss Rate, the Delinquency Ratio and the Three-Month
Rolling Average Delinquency Ratio.
(b) Within 60 days after the end of each calendar year, the
Servicer shall deliver to the Trustee a statement setting forth the amounts paid
during such preceding calendar year in respect of paragraphs (i), (ii), (v) and
(vi) above. The Trustee shall mail a copy of such statement to each person who
at any time during such preceding calendar year shall have been a Securityholder
of record and received any payment in respect of the Securities.
(c) The Trustee may make available to the Securityholders, via
the Trustee's Internet Website, all statements described herein and, with the
consent or at the direction of the Seller, such other information regarding the
Notes and/or the Receivables as the Trustee may have in its possession, but only
with the use of a password provided by the Trustee. The Trustee will make no
representation or warranties as to the accuracy or completeness of such
documents and will assume no responsibility therefor.
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The Trustee's Internet Website shall be initially located at
"www.CTSLink.com" or at such other address as shall be specified by the Trustee
from time to time in writing to the Securityholders. In connection with
providing access to the Trustee's Internet Website, the Trustee may require
registration and the acceptance of a disclaimer. The Trustee shall not be liable
for the dissemination of information in accordance with this Agreement.
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 respect to such Payment Date, or (ii) to include such
amount as part of the Total Distribution Amount for such Payment Date, in each
case only to the extent that without such amount a draw would be required to be
made on the Note Policy.
(b) If the Note Insurer waives the satisfaction of any of the
events that might trigger an Insurance Agreement Event of Default and so
notifies the Trustee in writing pursuant to Section 5.02(d) of the Insurance
Agreement, the Trustee shall notify Moody's and S&P of such waiver.
ARTICLE VI
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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, together with any amounts deposited by the
Note Insurer 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(a)(v) and 5.7(a)(vii) on any Payment
Date; provided, however, in calculating such shortfall, any portion of the
Noteholders' Interest Distributable Amount due to the Noteholders representing
interest on any Noteholders' Interest Carryover Shortfall accrued from and
including the date of payment of the amount of such Noteholders' Interest
Carryover Shortfall shall be excluded from such shortfall; provided, further, in
calculating such shortfall, the amount distributable pursuant to Section
5.7(a)(vii) shall equal the Noteholders' Parity Deficit Amount, or, if such
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Payment Date is the Final Scheduled Payment for any Class of Notes, the greater
of (i) the Noteholders' Parity Deficit Amount and (ii) the unpaid Note Balance
of such Class of Notes (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). 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 under the Note Policy by the Note Insurer 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 Trustee from claims made
under the Note Policy shall not be considered payment by the Trust or from the
Series 2007-B 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 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, Noteholders' Parity
Deficit 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).
(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.
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(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 Final 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 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 agrees 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.
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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
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[RESERVED]
ARTICLE VIII
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THE SELLER
SECTION 8.1 REPRESENTATIONS OF THE SELLER. The Seller makes the
following representations for the benefit of the Securityholders and on which
the Note Insurer shall be deemed to have relied in executing and delivering the
Note Policy, on which the Issuer is deemed to have relied in acquiring the
Receivables and on which the Trustee is deemed to have relied in executing and
performing pursuant to this Agreement, the Indenture and the other Basic
Documents to which it is a party. The representations speak as of the execution
and delivery of this Agreement, as of the Closing Date, and as of each
Subsequent Transfer Date, and shall survive each sale of the Receivables to the
Issuer and the pledge thereof to the Trustee pursuant to the Indenture and the
issuance of the Notes and the Residual Pass-through Certificates.
(a) ORGANIZATION AND GOOD STANDING. The Seller has been duly
incorporated and is validly existing as a corporation solely under the laws of
the State of California and is in good standing under the laws of the State of
California, with power and authority to own its properties and to conduct its
business as such properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power, authority and
legal right to acquire, own and sell the Receivables and the Other Conveyed
Property transferred to the Trust.
(b) DUE QUALIFICATION. The Seller is duly qualified to do
business as a foreign corporation in good standing, and has obtained all
necessary licenses and approvals in all jurisdictions in which the ownership or
lease of property or the conduct of its business or the consummation of the
transactions contemplated by the Basic Documents 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.
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(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, 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) 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
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contemplated by the Basic Documents to give any preference to any creditor or
class of creditors, and such transaction will not leave the Seller with
remaining assets which are unreasonably small compared to its ongoing
operations.
(i) FRAUDULENT CONVEYANCE. The Seller is not selling the
Receivables to the Trust 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 Receivables to the Trust.
(j) TAX RETURNS. The Seller has filed on a timely basis all
tax returns which are required to be filed by it and paid all taxes, including
any assessments received by it, to the extent that such taxes have become due
(other than taxes, the amount or validity of which are currently being contested
in good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided by the books of the Seller).
(k) CERTIFICATES, STATEMENTS AND REPORTS. The officer's
certificates, statements, reports and other documents prepared by Seller and
furnished by Seller to the Note Insurer or the Trustee pursuant to this
Agreement or any other Basic Document to which it is a party, and in connection
with the transactions contemplated hereby or thereby, when taken as a whole, do
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained herein or therein not
misleading.
(l) LEGAL COUNSEL, ETC. Seller consulted with its own legal
counsel and independent accountants to the extent it deems necessary regarding
the tax, accounting and regulatory consequences of the transactions contemplated
hereby, Seller is not participating in such transactions in reliance on any
representations of any other party, their affiliates, or their counsel with
respect to tax, accounting and regulatory matters.
(m) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Seller is at 16355 Laguna Canyon, Irvine, CA 92618 and its organizational number
is 3544934.
(n) SEPARATENESS COVENANTS. The Seller is in compliance in all
material respects with Article VIII of its Articles of Incorporation relating to
the separateness of the Seller from any other Person.
SECTION 8.2 SALE TREATMENT. The Seller agrees to treat the conveyances
hereunder as secured financings for tax and accounting purposes and as a sale
for all other purposes (including without limitation legal and bankruptcy
purposes), on all relevant books, records, tax returns, financial statements and
other applicable documents.
SECTION 8.3 CHANGES TO SELLER'S CONTRACT PURCHASE GUIDELINES. The
Seller covenants that it will not make any material changes to the Seller's
Contract Purchase Guidelines, or its classification of Obligors within such
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programs during the Funding Period unless (i) the Controlling Party expressly
consents in writing to such changes and (ii) after giving effect to any such
changes, the Rating Agency Condition is satisfied.
SECTION 8.4 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 Securityholders, the Backup
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 Backup Servicer
and the Note Insurer and except any taxes to which the Owner Trustee, or the
Trustee may otherwise be subject), including without limitation any sales, gross
receipts, general corporation, tangible personal property, privilege or license
taxes (but, in the case of the Issuer and the Securityholders, not including any
taxes asserted with respect to federal or other income taxes arising out of
distributions on the Notes and the Residual Pass-through 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 Federal or State securities laws in connection with the
offering and sale of the Notes or the Residual Pass-through Certificates.
(c) The Seller shall indemnify, defend and hold harmless the
Owner Trustee, the Trustee, and the Backup 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.
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SECTION 8.5 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 authorized 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 with clauses
(i), (ii), (iii), (iv) and (v) above shall be conditions to the consummation of
the transactions referred to in clauses (a), (b) or (c) above.
SECTION 8.6 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.
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SECTION 8.7 SELLER MAY OWN RESIDUAL PASS-THROUGH CERTIFICATES OR NOTES.
The Seller and any Affiliate thereof may in its individual or any other capacity
become the owner or pledgee of Securities 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. Securities 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 Securities; provided, however, that any Notes owned by the Seller or any
Affiliate thereof (other than the Cayman Trust), during the time such Securities
are so owned by them, shall be without voting rights for any purpose set forth
in the Basic Documents and such Securities 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 Security.
ARTICLE IX
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THE SERVICER
SECTION 9.1 REPRESENTATIONS OF SERVICER. The Servicer makes the
following representations for the benefit of the Securityholders and on which
the Note Insurer shall be deemed to have relied in executing and delivering the
Note Policy, on which the Issuer is deemed to have relied in acquiring the
Receivables and on which the Trustee is deemed to have relied in executing and
performing pursuant to this Agreement, the Indenture and the other Basic
Documents to which it is a party. The representations speak as of the execution
and delivery of this Agreement, as of the Closing Date, and as of each
Subsequent Transfer 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
incorporated and is validly existing as a corporation solely under the laws of
the State of California, in good standing thereunder, with power, authority and
legal right to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted, and had at all
relevant times, and shall have, power, authority and legal right to acquire, own
and service the Receivables.
(b) DUE QUALIFICATION. The Servicer is duly qualified to do
business as a foreign corporation in good standing and has obtained all
necessary licenses and approvals, in all jurisdictions in which the ownership or
lease of property or the conduct of its business (including the servicing of the
Receivables as required by this Agreement) or the consummation of the
transactions contemplated by the Basic Documents requires or shall require such
qualification.
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(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) except for the Pending Litigation, seeking any
determination or ruling that might materially and adversely affect the
performance by the Servicer of its obligations under, or the validity or
enforceability of, this Agreement, the Securities or any of the Basic Documents
or (D) relating to the Servicer and which might adversely affect the Federal or
State income, excise, franchise or similar tax attributes of the Securities.
(g) NO CONSENTS. No consent, approval, authorization or order
of or declaration or filing with any governmental authority is required for the
issuance or sale of the Securities or the consummation of the other transactions
contemplated by this Agreement, except such as have been duly made or obtained.
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(h) TAXES. The Servicer has filed on a timely basis all tax
returns which are required to be filed by it and paid all taxes, including any
assessments received by it, to the extent that such taxes have become due (other
than taxes, the amount or validity of which are currently being contested in
good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of the Servicer).
(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: 16355 Laguna Canyon, Irvine, CA 92618.
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 indemnify, defend and hold
harmless the Trust, the Trustee, the Owner Trustee, the Backup
Servicer, the Collateral Agent, 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 or agent or sub-contractor thereof of any Financed Vehicle;
(ii) The Servicer (unless the Backup Servicer is the
Servicer) shall indemnify, defend and hold harmless the Trust, the
Trustee, the Owner Trustee, the Backup Servicer, the Collateral Agent,
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 federal or other income taxes, including franchise taxes
(other than Texas Franchise Tax, if CPS is the Servicer) 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, in the case of the Issuer and the
Securityholders, not including any taxes asserted with respect to
federal or other income taxes arising out of distributions on the Notes
and Residual Pass-through Certificates) and costs and expenses in
defending against the same;
(iii) The Servicer shall indemnify, defend and hold
harmless the Trust, the Trustee, the Owner Trustee, the Backup
Servicer, the Collateral Agent, the Note Insurer, each Placement Agent,
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
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Trust, the Trustee, the Owner Trustee, the Backup Servicer, the Note
Insurer, each Placement Agent or the Securityholders or such officers,
directors, agents or employees through the negligence, willful
misfeasance or bad faith of the Servicer in the performance of its
duties under this Agreement, by reason of reckless disregard of its
obligations and duties under this Agreement or as a result of a breach
of any representation or warranty made by the Servicer in this
Agreement (without regard to any exception relating to the Pending
Litigation).
(iv) The Servicer shall indemnify, defend, and hold
harmless the Trustee, the Owner Trustee, the Backup 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 Backup 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 Backup Servicer or the
Collateral Agent.
(v) CPS shall indemnify, defend and hold harmless the
Trust, the Trustee, the Owner Trustee, the Backup Servicer, the
Collateral Agent, the Note Insurer and the Securityholders against any
and all costs, expenses, losses, damages, claims and liabilities
arising out of or resulting from CPS's involvement in, or the effect on
any Receivable as a result of, the Pending Litigation.
(b) Notwithstanding the foregoing, the Servicer shall not be
obligated to defend, indemnify, and hold harmless any Noteholders 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 Noteholder 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.
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SECTION 9.3 MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, THE SERVICER OR BACKUP 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
in which CPS shall be a constituent corporation, (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, warranty or covenant made
pursuant to Sections 9.1 or 4.6 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 authorized 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 Backup Servicer may be
merged or consolidated, (ii) resulting from any merger or consolidation in which
the Backup Servicer shall be a constituent corporation, (iii) which acquires by
conveyance, transfer or lease substantially all of the assets of the Backup
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Servicer, or (iv) succeeding to the business of the Backup Servicer, in any of
the foregoing cases shall execute an agreement of assumption to perform every
obligation of the Backup Servicer under this Agreement and, whether or not such
assumption agreement is executed, shall be the successor to the Backup Servicer
under this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties to this Agreement, anything in this
Agreement to the contrary notwithstanding; provided, however, that nothing
contained herein shall be deemed to release the Backup Servicer from any
obligation.
SECTION 9.4 LIMITATION ON LIABILITY OF SERVICER, BACKUP SERVICER AND
OTHERS. Neither the Servicer, the Backup Servicer nor any of the directors or
officers or employees or agents of the Servicer or Backup 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 Backup 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 Backup Servicer and any director, officer, employee or agent of
CPS or the Backup 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. In
addition, the Backup Servicer 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 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 BACKUP SERVICER NOT TO RESIGN. Subject to the
provisions of Section 9.3, neither the Servicer nor the Backup Servicer shall
resign from the obligations and duties imposed on it by this Agreement as
Servicer or Backup Servicer except (i) 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 Backup Servicer, as
the case may be, and the Note Insurer (so long as an Insurer Default shall not
88
have occurred and be continuing) or a Note Majority (if an Insurer Default shall
have occurred and be continuing) or, if the Notes are no longer outstanding, the
Majority Certificateholders, do not elect to waive the obligations of the
Servicer or the Backup 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
or, (ii) in the case of the Backup Servicer, upon the prior written consent of
the Note Insurer. Any such determination permitting the resignation of the
Servicer or Backup 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 Backup 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 Backup Servicer or a successor Servicer that is an Eligible
Servicer shall have assumed the responsibilities and obligations of the
Servicer. No resignation of the Backup 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 Backup Servicer or, if an Insurer Default shall have occurred
and be continuing a Person that is an Eligible Servicer shall have assumed the
responsibilities and obligations of the Backup Servicer; provided, however, that
in the event a successor Backup Servicer is not appointed within 60 days after
the Backup Servicer has given notice of its resignation and has provided the
Opinion of Counsel required by this Section 9.6, the Backup 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 the Securityholders and the Note Insurer or for deposit into the
Collection Account or the Series 2007-B Spread Account any payment required
under the terms of this Agreement, which failure continues unremedied for a
period of two Business Days (one Business Day with respect to the payment of
Purchase Amounts) after the earlier of knowledge thereof by the Servicer or
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, in
which case from a Note Majority) or, after the Notes have been paid in full and
all amounts due to the Note Insurer have been paid in full, from Majority
Certificateholders, or after discovery of such failure by a Responsible Officer
of the Servicer; or
(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 three days after the date on
which such Servicer's Certificate is required to be delivered under Section 4.9,
or failure on the part of the Servicer to observe or perform its covenants and
agreements set forth in Section 9.3(a); or
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(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 or, if the Servicer is CPS, failure of CPS to duly perform any other
covenants or agreements of CPS set forth in this Agreement, which failure (i)
materially and adversely affects the rights of Noteholders (determined without
regard to the availability of funds under the Note Policy), the Note Insurer
(unless an Insurer Default shall have occurred and be continuing) or the
Residual Certificateholders (after the Notes have been paid in full and all
other amounts owed to the Note Insurer have been paid in full and the Note
Policy has expired in accordance with its terms), and (ii) continues unremedied
for a period of 30 days after the earlier of knowledge thereof by the Servicer
or 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) or, if an Insurer Default shall have occurred and be
continuing, to the Servicer, the Trustee and the Note Insurer by each of the
Holders of Notes evidencing not less than 25% of the aggregate outstanding Note
Balance of each Class of Notes or, after the Notes have been paid in full and
all amounts due to the Note Insurer have been paid in full, by the Majority
Certificateholders; or
(d) The occurrence of an Insolvency Event with respect to the
Servicer or the Seller (or, for so long as CPS is Servicer, any of the Specified
Affiliates); or
(e) Failure on the part of the Servicer to observe its
covenants and agreements relating to (a) merger or consolidation or (b)
preservation of its ownership (or security interest) in repossessed Financed
Vehicles delivered for sale to dealers; 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 (excluding, however, any representation
or warranty set forth in this Agreement relating to the characteristics of the
Receivables), and the incorrectness of such representation, warranty or
statement has a material adverse effect on the Trust, the Note Insurer or the
Securityholders and, within 30 days after the earlier of knowledge thereof by
the Servicer or after written notice thereof shall have been given (1) to the
Servicer by the Collateral Agent, the Trustee or the Note Insurer or (2) if an
Insurer Default shall have occurred and be continuing, to the Servicer and to
the Trustee and the Note Insurer by each of the Holders of Notes evidencing not
less than 25% of the aggregate outstanding Note Balance of each Class of Notes
or, after the Notes have been paid in full and all amounts due to the Note
Insurer have been paid in full, by the Majority Certificateholders, the
circumstances or condition in respect of which such representation, warranty or
statement was incorrect shall not have been eliminated or otherwise cured; or
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(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 the Holders of Notes evidencing not
less than 25% of the aggregate outstanding Note Balance for each Class of Notes
or, after the Notes have been paid in full and all amounts due to the Note
Insurer have been paid in full, the Majority Certificateholders), by notice
given in writing to the Servicer (and to the Trustee if given by the Note
Insurer or the Noteholders) or by non-extension of the term of the Servicer as
referred to in Section 4.14 may terminate all of the rights and obligations of
the Servicer under this Agreement. The Servicer shall be entitled to its pro
rata share of the Servicing Fee for the number of days in the Collection Period
prior to the effective date of its termination. On or after the receipt by the
Servicer of such written notice or upon termination of the term of the Servicer,
all authority, power, obligations and responsibilities of the Servicer under
this Agreement, whether with respect to the Notes, the Residual Pass-through
Certificates, the Receivables or the Other Conveyed Property or otherwise,
automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup 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 that shall at the time be held by the terminated Servicer
and a computer tape in readable form as of the most recent Business Day
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containing all information necessary to enable the successor Servicer to service
the Receivables and the Other Conveyed Property. All reasonable costs and
expenses (including reasonable attorneys' fees and boarding fees) incurred in
connection with transferring any Receivable Files to the successor Servicer and
amending this Agreement to reflect such succession as Servicer pursuant to this
Section 10.2 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(a) 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
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,
Wells Fargo Bank, National Association, as Backup 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 Backup 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 Backup Servicer's
assumption of, and its agreement to perform and observe, all duties,
responsibilities and obligations of CPS as Servicer under this Agreement arising
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on and after the Assumption Date, the Backup Servicer shall not be deemed to
have assumed or to become liable for, or otherwise have any liability, whether
provided for by the terms of this Agreement, arising by operation of law or
otherwise, for any duties, responsibilities, obligations or liabilities of CPS
or any predecessor Servicer (i) arising under Sections 4.7 and 9.2 of this
Agreement, regardless of when the liability, duty, responsibility or obligation
of CPS or any predecessor Servicer therefor arose, (ii) required to be performed
by CPS or any predecessor Servicer prior to the Assumption Date or any claim of
any third party based on any alleged action or inaction of CPS or any
predecessor Servicer, or (iii) with respect to the payment of any taxes required
to be paid by CPS or any predecessor Servicer. The indemnification obligations
of the Backup Servicer, upon becoming a successor Servicer, are expressly
limited to those instances of gross negligence or willful misconduct of the
Backup Servicer in its role as successor Servicer that occur after the
Assumption Date. Notwithstanding the above, if the Backup Servicer shall be
legally unable or unwilling to act as Servicer, and an Insurer Default shall
have occurred and be continuing, the Backup Servicer, the Trustee or a Note
Majority or, if the Note Balance has been reduced to zero and all amounts due
and owing to the Note Insurer have been paid in full and the Policy has expired
in accordance with its terms, the Majority Certificateholders 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 Backup 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 Backup 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 Backup Servicer, the Backup
Servicer shall not be relieved of its duties as Backup Servicer hereunder.
(b) Any successor Servicer shall be entitled to receive the
compensation set forth in Section 5.7(a)(ii), (iii), (ix) and (xii).
SECTION 10.4 NOTIFICATION TO SECURITYHOLDERS. 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. The Controlling Party may waive
any default by 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.
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SECTION 10.6 ACTION UPON CERTAIN FAILURES OF THE SERVICER. In the event
that a Responsible Officer of the Trustee shall have actual 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 Sections
10.1(c) through (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
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TERMINATION
SECTION 11.1 OPTIONAL PURCHASE OF ALL RECEIVABLES.
(a) On any Payment Date on or after the last day of any
Collection Period as of which the Collateral Balance shall be less than or equal
to 10% of the Original Collateral 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 under the Insurance Agreement remaining
unpaid). To exercise such option, the Servicer shall (subject to the proviso
below) deposit in the Collection Account pursuant to Section 5.6 an amount equal
to the fair market value of the Receivables (including Liquidated Receivables)
as of such date, 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 shall be sufficient to pay the (i) the aggregate outstanding Note
Balance, (ii) the outstanding Residual Certificate Notional Balance, (iii)
accrued and unpaid interest on the Notes, (iv) any accrued and unpaid Residual
Certificate Interest Distributable Amount, (v) any unpaid Supplemental Residual
Certificate Distribution, and (vi) the unpaid expenses of the Trust and the Note
Insurer (and any expense reimbursements due to any Person under the Insurance
Agreement), including without limitation expenses incurred by the Trust and the
Note Insurer in connection with the exercise of such repurchase option. Upon
receipt of an amount equal to the fair market value of the Receivables and
written instructions from the Servicer, the Trustee shall release to CPS or its
designee the related Receivables Files 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 Receivables including a Trustee's Certificate in
the form of Exhibit F-2. To the extent such option to purchase the Owner Trust
Estate is rescinded pursuant to Section 10.1 of the Indenture, the
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Securityholders shall on the related Payment Date receive the payments of
interest and principal that would be due to the Securityholders on such Payment
Date as if such option to purchase the Owner Trust Estate had never been
exercised.
(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
Residual 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 under this Agreement.
ARTICLE XII
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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, 3.17, 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,
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without limitation, pursuant to Sections 2.6 and 2.10 of the Trust
Agreement. In accordance with the directions of the Issuer or the Owner
Trustee, the Servicer shall administer, perform or supervise the
performance of such other activities in connection with the Collateral
(including the Basic Documents) as are not covered by any of the
foregoing provisions and as are expressly requested by the Issuer or
the Owner Trustee and are reasonably within the capability of the
Servicer. The Servicer shall perform its administrative duties with
respect to the Issuer in accordance with the requirements enumerated in
Section 6.7 of the Trust Agreement. The Servicer shall monitor the
activities of the Issuer to assure compliance by the Issuer with the
requirements of Section 6.7 of the Trust Agreement. The Servicer shall
promptly take such action as may be required to correct any
noncompliance by the Issuer with the requirements of Section 6.7 of the
Trust Agreement.
(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 by 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 Residual Certificateholders; provided,
however, that, once prepared by the Servicer, the Owner Trustee shall
retain responsibility for the distribution of any such reports or
accounting actually provided to the Owner Trustee and necessary to
enable each Residual 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
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tax reports as provided in Article V of the Trust Agreement, including without
limitation, Internal Revenue Service Form 1099. All tax returns will be signed
by the person required or authorized to sign such returns under applicable law.
(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;
(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 as such hereunder, shall not be
obligated to, and shall not, (1) make any payments to the Securityholders under
the Basic Documents, (2) sell the Owner Trust Estate pursuant to Section 5.3 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 SUCCESSOR SERVICER'S OBLIGATIONS. The
successor Servicer shall not be responsible for any obligations or duties of the
Servicer under this 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.
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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
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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 without the
consent of any of the Securityholders, 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, the Note Insurer and the Trustee, adversely affect in any material
respect the interests of any Securityholder; provided further that if an Insurer
Default has occurred and is continuing, such action shall not materially and
adversely affect the interests of the Note Insurer. Any such amendment shall be
deemed to not adversely affect in any material respect the interests of any
Securityholder if the Rating Agency Condition is satisfied.
This Agreement may also be amended from time to time by the parties
hereto, with the consent of the Note Insurer (so long as no Insurer Default has
occurred and is continuing) and the Trustee, or, if an Insurer Default has
occurred and is continuing, with the consent of a Note Majority, the Majority
Certificateholders and the Trustee, 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 Securityholders; 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 Securityholders or (b) reduce the aforesaid percentage of the Note
Balance of any Class or the Percentage Interest, the Holders of which are
required to consent to any such amendment, without the consent of the Holders of
all the outstanding Notes affected thereby and the Holders of all of the
outstanding Residual Pass-through Certificates affected thereby; 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. Any
such amendment shall not be deemed to adversely affect in any material respect
the interests of any Securityholder if the Rating Agency Condition has been
satisfied.
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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 Securityholders 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
Securityholders provided for in this Agreement) and of evidencing the
authorization of any action by Securityholders 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)(i)
has been delivered. The Owner Trustee, the Backup Servicer and the Trustee may,
but shall not be obligated to, enter into any such amendment which affects the
Issuer's, the Owner Trustee's, the Backup 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
Master Spread Account Agreement, the Series 2007-B Spread Account, the Specified
Spread Account Requisite Amount, a Trigger Event or any component definition of
a Trigger Event and (ii) any additional sources of funds which may be added to
the Series 2007-B Spread Account or uses of funds on deposit in the Series
2007-B 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 Securityholders;
provided that any such amendment satisfies the Rating Agency Condition and the
Servicer shall provide copies of any such amendment to the Residual
Certificateholders.
(c) Notwithstanding the foregoing, no amendment shall be made
that would cause the Trust to fail to be classified as a Grantor Trust or a
United States Person (as such terms are defined under the Trust Agreement).
SECTION 13.2 PROTECTION OF TITLE TO TRUST.
(a) The Seller or Servicer or both shall authorize and file
such financing statements and cause to be authorized 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
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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, jurisdiction of organization, form of organization 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 9-506(a) 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 authorized 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 change in its jurisdiction of organization
if, as a result of such change, 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 or new financing statement. The Servicer shall at all times
maintain its jurisdiction of organization within the United States of America.
Each of the Seller and Servicer shall at all times be organized solely under the
laws of one State.
(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
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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 Backup 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 Owner Trust Estate, 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 Owner Trust
Estate.
(i) The Servicer shall deliver to the Note Insurer, the Owner
Trustee and the Trustee:
(i) promptly after the execution and delivery of this
Agreement and, if required pursuant to Section 13.1, of each amendment
waiver or consent, an Opinion of Counsel, in form and substance
satisfactory to the Note Insurer, stating that, in the opinion of such
counsel, either (A) all financing statements and continuation
statements have been authorized and filed that are necessary fully to
preserve and protect the interest of the Trust and the Trustee in the
Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) no
such action shall be necessary to preserve and protect such interest;
and
(ii) within 90 days after the beginning of each
calendar year beginning with the first calendar year beginning more
than three months after the Cutoff Date, an Opinion of Counsel, dated
as of a date during such 90-day period, stating that, in the opinion of
such counsel, either (A) all financing statements and continuation
statements have been authorized 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,
electronically delivered, or mailed by certified mail, return receipt requested,
101
and shall be deemed to have been duly given upon receipt (a) in the case of the
Seller to CPS Receivables Corp., 16355 Laguna Canyon, Irvine, CA 92618, (b) in
the case of the Servicer to Consumer Portfolio Services, Inc., 16355 Laguna
Canyon, Irvine, CA 92618, Attention: General Counsel, (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 Backup Servicer, at the Corporate Trust
Office, (e) in the case of the Note Insurer, to Financial Security Assurance
Inc., 31 West 52nd Street, New York, New York 10019-6118, Attention: Transaction
Oversight Department, Re: Policy No. 51851-N (Telecopy: (212) 339-3518 or (212)
339-3529, Confirmation: (212) 826-0100; (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, via electronic
delivery to Servicer_reports@sandp.com; for any information not available in
electronic format, send hard copies to: Standard & Poor's Ratings Services, 55
Water Street, 41st Floor, New York, New York 10041-0003, Attention: ABS
Surveillance Group. Any notice required or permitted to be mailed to a
Securityholder shall be given by first class mail, postage prepaid, at the
address of such Securityholder 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 Securityholder 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 in Sections 8.5 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 Backup 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 Aggregate Note Balance),
and prompt written notice to the Rating Agencies.
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, the Residual Certificateholders (including the Seller),
the Trustee, the Noteholders and the Cayman Indenture Trustee, as third-party
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
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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. EXCEPT AS PROVIDED OTHERWISE IN SECTION
13.17, THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND THIS AGREEMENT
AND ALL MATTERS ARISING OUT OF OR RELATING IN ANY WAY TO THIS AGREEMENT SHALL BE
GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF
LAWS PRINCIPLES.
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
Issuer Secured Parties of all right, title and interest of the Issuer in, to and
under the Receivables and Other Conveyed Property 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,
none of the Servicer, the Seller or the Backup Servicer shall, 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
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purpose of commencing or sustaining a case against the Issuer under any Federal
or State bankruptcy, insolvency or similar law or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar official
of the Issuer or any substantial part of its property, or ordering the winding
up or liquidation of the affairs of the Issuer.
(b) Notwithstanding any prior termination of this Agreement,
none of the Servicer or the Backup Servicer shall, prior to the date that is one
year and one day after the termination of this Agreement in accordance with
Article XI, 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 Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company 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 Wells Fargo Bank, National
Association, not in its individual capacity but solely as Trustee and Backup
Servicer and in no event shall Wells Fargo Bank, 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 Wells Fargo Bank, National Association,
in any of its capacities hereunder, be deemed to have assumed any duties of the
Owner Trustee under the Delaware Statutory 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 Backup Servicer or the
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Owner Trustee with respect to the manner in which it accomplishes the
performance of its obligations hereunder. Unless expressly authorized by this
Agreement, the Servicer shall have no authority to act for or represent the
Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee.
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.
(a) Each Noteholder and Residual Certificateholder by purchase
of the Notes or Residual Certificates 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 no Insurer Default has
occurred and is continuing whenever Noteholder or Residual Certificateholder
action, consent or approval is required under this Agreement, such action,
consent or approval shall be deemed taken or given on behalf of, and shall be
binding upon, all Noteholders and Residual Certificateholder if the Note Insurer
agrees to take such action or give such consent or approval. 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, unless
otherwise specified, at the direction of a Note Majority. From and after such
time as the Notes have been paid in full and no amounts are owing to the Note
Insurer under the Insurance Agreement, 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 Residual
Certificateholders, 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 Note 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. In exercising its rights as Controlling Party, the Note
Insurer (or the Trustee acting at the direction of Noteholders) shall have no
duty to the Residual Certificateholders or any other Issuer Secured Party, and
the Trustee shall be fully protected in acting upon the direction of the Note
Insurer as Controlling Party (or in acting as Controlling Party at the direction
of Noteholders) without regard to the interests of the Residual
Certificateholders.
105
(b) Each Residual Certificateholder, by its acceptance of a
Residual Certificate, agrees that it shall not (and hereby waives any right to)
contest or support any other Person in contesting, in any proceeding, the
validity or enforceability of the Notes or this Indenture.
(c) No right of the Note Insurer (or the Trustee acting at the
direction of Noteholders) as Controlling Party shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Issuer or
by any act or failure to act, in good faith, by the Controlling Party, or by any
non-compliance by the Issuer with the terms, provisions and covenants of this
Agreement, regardless of any knowledge thereof that the Note Insurer or the
Trustee may have or be otherwise charged with.
(d) So long as the Note Insurer (or the Trustee acting at the
direction of Noteholders) is the Controlling Party:
(i) no Residual Certificateholder shall have any
right to (A) ask, demand, sue for, take or receive, or retain, from the
Issuer or any other Person, by setoff or in any other manner, payment
or prepayment of all or any part of the obligations due to the Residual
Certificateholders, except in strict accordance with Section 5.7 of the
Sale and Servicing Agreement or Section 5.6 of the Indenture, as
applicable; (B) ask, demand or receive any security (other than the
Collateral) for the Residual Certificate Secured Obligations; (C)
exercise or seek to exercise any rights or remedies (including setoff)
with respect to any Collateral or institute any action or proceeding
with respect to such rights or remedies (including any action of
foreclosure); (D) contest, protest or object to any foreclosure
proceeding or action brought by the Trustee or any other exercise by
the Trustee of any rights and remedies relating to the Collateral; or
(E) object to the forbearance by the Trustee from bringing or pursuing
any foreclosure proceeding or action or any other exercise of any
rights or remedies relating to the Collateral;
(ii) the Controlling Party shall, except as otherwise
expressly provided herein, have the exclusive right to direct the
Trustee with respect to enforcing rights, exercising remedies
(including setoff and the right to credit bid their debt) and making
determinations regarding the release, disposition, or restrictions with
respect to the Collateral without any consultation with or the consent
of any Residual Certificateholder.
(e) So long as the Note Insurer (or the Trustee acting at the
direction of Noteholders) is the Controlling Party, each Residual
Certificateholder hereby waives any and all rights it may have as a junior lien
creditor or otherwise to object to the manner in which the Trustee seeks to
enforce or collect the Insurer Secured Obligations or the Trustee Secured
Obligations or the Liens granted in any of the Collateral, regardless of whether
any action or failure to act by or on behalf of the Trustee or the Controlling
Party is adverse to the interest of any Residual Certificateholder.
106
(f) So long as the Note Insurer (or the Trustee acting at the
direction of Noteholders) is the Controlling Party, to the extent that the
Residual Certificateholders shall be entitled to vote as a separate class with
respect to any plan of reorganization involving the Issuer, each Residual
Certificateholder agrees that (i) it will not take any action or vote in any way
which supports any plan of reorganization that is inconsistent with the terms of
this Agreement, (ii) it will vote any claims or interest it holds to accept any
such plan of reorganization that is supported by the Controlling Party and (iii)
it will vote any claims or interests it holds to reject any such plan of
reorganization that is not supported by the Controlling Party. Each Residual
Certificateholder hereby grants to the Trustee (acting at the direction of the
Controlling Party) a power of attorney to vote such Residual Certificateholder's
claims and interests, if any, in any such plan of reorganization in a manner
consistent with the foregoing so long as the Note Insurer (or the Trustee acting
at the direction of Noteholders) is the Controlling Party.
(g) So long as the Note Insurer (or the Trustee acting at the
direction of Noteholders) is the Controlling Party, each Residual
Certificateholder agrees that it shall not assert or finance, or support any
other person in asserting or financing, in any bankruptcy or insolvency
proceeding, any surcharge, lien, recovery or claim against any of the Collateral
under Section 506(c) of the United States Bankruptcy Code.
(h) So long as the Note Insurer (or the Trustee acting at the
direction of Noteholders) is the Controlling Party, each Residual
Certificateholder agrees that it shall not seek adequate protection on account
of any claim or interest it may have, or (to the extent it would otherwise have
a right to object) object to any financing provided by or supported by the
Controlling Party and that (to the extent its consent is necessary or desired)
it will consent to any sale of Collateral that is supported by the Controlling
Party.
(i) Each of the Trustee and the Controlling Party is each
hereby authorized to demand specific performance of the provisions of this
Section 13.15 at any time when any Residual Certificateholder shall have failed
to comply with any term or provision of this Section 13.15. Each Residual
Certificateholder hereby irrevocably waives any defense based on the adequacy of
a remedy at law that might be asserted as a bar to such remedy of specific
performance..
SECTION 13.16 ACKNOWLEDGMENT OF ROLES
The parties expressly acknowledge and consent to Wells Fargo Bank,
National Association acting in the multiple capacities of Backup Servicer,
Collateral Agent and Trustee and the Cayman Indenture Trustee under the Basic
Documents. The parties agree that Wells Fargo Bank, National Association in such
multiple capacities shall not be subject to any claim, defense or liability
arising from its performance in any such capacity based on conflict of interest
principles, duty of loyalty principles or other breach of fiduciary duties to
the extent that any such conflict or breach arises from the performance by Wells
107
Fargo Bank, National Association of any other such capacity or capacities in
accordance with this Agreement or any other Basic Documents to which it is a
party.
SECTION 13.17 INTENTION OF PARTIES REGARDING DELAWARE SECURITIZATION
ACT. It is the intention of the Seller and the Issuer that the transfer and
assignment of the Trust Property contemplated by Section 2.1 of this Agreement
shall constitute a sale of the Trust Property from the Seller to the Issuer,
conveying good title thereto free and clear of any liens, and the beneficial
interest in and title to the 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 or similar law. In addition, for purposes of
complying with the requirements of the Asset-Backed Securities Facilitation Act
of the State of Delaware, 6 Del. C. ss. 2701A, et seq. (the "Securitization
Act"), each of the parties hereto hereby agrees that:
(a) any property, assets or rights purported to be
transferred, in whole or in part, by the Seller to the Issuer pursuant to this
Agreement shall be deemed to no longer be the property, assets or rights of the
Seller;
(b) none of the Seller, its creditors or, in any insolvency
proceeding with respect to the Seller or the Seller's property, a bankruptcy
trustee, receiver, debtor, debtor in possession or similar person, to the extent
the issue is governed by Delaware law, shall have any rights, legal or
equitable, whatsoever to reacquire (except pursuant to a provision of this
Agreement), reclaim, recover, repudiate, disaffirm, redeem or recharacterize as
property of the Seller any property, assets or rights purported to be
transferred, in whole or in part, by the Seller to the Issuer pursuant to this
Agreement;
(c) in the event of a bankruptcy, receivership or other
insolvency proceeding with respect to the Seller or the Seller's property, to
the extent the issue is governed by Delaware law, such property, assets and
rights shall not be deemed to be part of the Seller's property, assets, rights
or estate; and
(d) the transaction contemplated by this Agreement shall
constitute a "securitization transaction" as such term is used in the
Securitization Act.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the day and the year first above written.
CPS AUTO RECEIVABLES TRUST 2007-B
By: WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as Owner
Trustee on behalf of the Trust
By: /S/ JENNIFER A. LUCE
-------------------------------------
Title: SR. FINANCIAL SERVICES OFFICER
-------------------------------------
CPS RECEIVABLES CORP., as Seller
By: /S/ MARK CREATURA
-------------------------------------
Title: VICE PRESIDENT
-------------------------------------
CONSUMER PORTFOLIO SERVICES, INC., in its
individual capacity and in its capacity as
Servicer
By: /S/ ROBERT E. RIEDL
-------------------------------------
Title: SR. VICE PRESIDENT & CIO
-------------------------------------
WELLS FARGO BANK, NATIONAL ASSOCIATION, not
in its individual capacity, but solely as
Backup Servicer and Trustee
By: /S/ MARIANNA C. STERSHIC
-------------------------------------
Title: VICE PRESIDENT
-------------------------------------
SCHEDULE A
SCHEDULE OF RECEIVABLES
[AVAILABLE UPON REQUEST TO THE TRUSTEE]
SCH. A-1
SCHEDULE B
LOCATION FOR DELIVERY OF RECEIVABLE FILES
[AVAILABLE UPON REQUEST TO THE TRUSTEE]
SCH. B-1
EXHIBIT A
SUBSEQUENT TRANSFER AGREEMENT
TRANSFER No. __ of Subsequent Receivables pursuant to the Sale and
Servicing Agreement, dated as of June 1, 2007, among CPS AUTO RECEIVABLES TRUST
2007-B, a Delaware statutory trust (the "Issuer"), CPS RECEIVABLES CORP., a
California corporation (the "Seller"), CONSUMER PORTFOLIO SERVICES, INC. a
California corporation (the "Servicer"), and WELLS FARGO BANK, NATIONAL
ASSOCIATION, a national banking association, in its capacity as Trustee (in such
capacity, the "Trustee") and Backup Servicer (in such capacity, the "Backup
Servicer").
W I T N E S S E T H:
WHEREAS pursuant to the Sale and Servicing Agreement, the Seller wishes
to convey to the Issuer the Subsequent Receivables listed on Schedule A hereto;
and
WHEREAS the Issuer is willing to accept such conveyance subject to the
terms and conditions hereof.
NOW, THEREFORE, the Issuer, the Seller, the Servicer, the Backup
Servicer and the Trustee hereby agree as follows:
SECTION 1. DEFINED TERMS. Capitalized terms used herein shall have the
meanings ascribed to them in the Sale and Servicing Agreement unless otherwise
defined herein.
"Subsequent Cutoff Date" shall mean, with respect to the Subsequent
Receivables conveyed hereby, _____________, 2007.
"Subsequent Transfer Date" shall mean, with respect to the Subsequent
Receivables conveyed hereby, _____________, 2007.
SECTION 2. SCHEDULE OF RECEIVABLES. Annexed hereto is a supplement to
Schedule A to the Sale and Servicing Agreement listing the Receivables that
constitute the Subsequent Receivables to be conveyed pursuant to this Subsequent
Transfer agreement on the Subsequent Transfer Date.
SECTION 3. CONVEYANCE OF SUBSEQUENT RECEIVABLES. In consideration of
the Issuer's delivery to or upon the order of the Seller of $____________, the
Seller does hereby sell, transfer, assign, set over and otherwise convey to the
Issuer, without recourse (except as expressly provided in the Sale and Servicing
Agreement), all right, title and interest of the Seller in and to:
(a) the Subsequent Receivables listed in Schedule A to this
Subsequent Transfer Agreement and all monies received thereunder (other than the
Additional Servicing Compensation) after the related Subsequent Cutoff Date and
all Net Liquidation Proceeds and Recoveries received with respect to such
Subsequent Receivables after the related Subsequent Cutoff Date;
A-1
(b) the security interests in the Financed Vehicles granted by
Obligors pursuant to the Subsequent Receivables and any other interest of the
Seller in such Financed Vehicles, including, without limitation, the
certificates of title or, with respect to such Financed Vehicles in the
Non-Certificated Title States, all other evidence of ownership with respect to
such Financed Vehicles issued by the applicable Department of Motor Vehicles or
similar authority;
(c) any proceeds from claims on any physical damage, credit
life and credit accident and health insurance policies or certificates relating
to the Financed Vehicles securing the Subsequent Receivables or the Obligors
thereunder;
(d) all proceeds from recourse against Dealers or Consumer
Lenders with respect to the related Subsequent Receivables;
(e) all of the Seller's right, title and interest in its
rights and benefits, but none of its obligations or burdens, under the related
Subsequent Receivables Purchase Agreement, including a direct right to cause CPS
to purchase Subsequent Receivables from the Issuer under certain circumstances
and to indemnify the Issuer pursuant to the Subsequent Receivables Purchase
Agreement;
(f) refunds for the costs of extended service contracts with
respect to Financed Vehicles securing Subsequent Receivables, refunds of
unearned premiums with respect to credit life and credit accident and health
insurance policies or certificates covering an Obligor or Financed Vehicle under
a Subsequent Receivable or his or her obligations with respect to a Financed
Vehicle and any recourse to Dealers or Consumer Lenders for any of the
foregoing;
(g) the Receivable File related to each Subsequent Receivable;
(h) all amounts and property from time to time held in or
credited to the Collection Account, the Pre-Funding Account, the Capitalized
Interest Account, the Lockbox Account and the Note Distribution Account;
(i) all property (including the right to receive future Net
Liquidation Proceeds) that secured a Subsequent Receivable that has been
acquired by or on behalf of CPS or the Seller pursuant to a liquidation of such
Receivable;
(j) the proceeds of any and all of the foregoing; and
(k) 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.
A-2
It is the intention of the Seller that the transfer and assignment
contemplated by this Subsequent Transfer Agreement shall constitute a sale of
the Subsequent Receivables and Other Conveyed Property from the Seller to the
Issuer and the beneficial interest in and title to the Subsequent Receivables
and the Other Conveyed 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
Subsequent Transfer Agreement shall constitute a grant of a security interest in
the property referred to in this Section 3 for the benefit of the
Securityholders and the Note Insurer.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE SELLER. In addition to
the representations and warranties set forth in Section 3.1 of the Sale and
Servicing Agreement, the Seller hereby represents and warrants to the Issuer and
for the benefit of the Securityholders and the Note Insurer, as of the date of
this Agreement and as of the Subsequent Transfer Date that:
(a) ORGANIZATION AND GOOD STANDING. The Seller has been duly
incorporated and is validly existing as a corporation solely under the laws of
the State of California, in good standing thereunder, with power and authority
to own its properties and to conduct its business as such properties are
currently owned and such business is currently conducted, and had at all
relevant times, and now has, power, authority and legal right to acquire, own
and sell the Subsequent Receivables and the related 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 or the consummation of the
transactions contemplated by the Basic Documents shall require such
qualifications.
(c) POWER AND AUTHORITY. The Seller has the power and
authority to execute and deliver this Subsequent Transfer 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 Subsequent Receivables and the related 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 Subsequent Transfer 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 Subsequent Transfer
Agreement effects a valid sale, transfer and assignment of the Subsequent
Receivables and the related Other Conveyed Property, enforceable against the
Seller and creditors of and purchasers from the Seller; and this Subsequent
Transfer 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
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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 Subsequent Transfer Agreement and the Basic Documents and
the fulfillment of the terms of this Subsequent Transfer 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, administrative agency or other tribunal or governmental
instrumentality having jurisdiction over the Seller or its properties (A)
asserting the invalidity of this Subsequent Transfer Agreement, the Securities
or any of the Basic Documents, (B) seeking to prevent the consummation of any of
the transactions contemplated by this Subsequent Transfer 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 Subsequent Transfer 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) FINANCIAL CONDITION. The Seller has a positive net worth
and is able to and does pay its liabilities as they mature. The Seller is not in
default under any obligation to pay money to any Person except for matters being
disputed in good faith which do not involve an obligation of the Seller on a
promissory note. The Seller will not use the proceeds from the transactions
contemplated by the Basic Documents to give any preference to any creditor or
class of creditors, and such transaction will not leave the Seller with
remaining assets which are unreasonably small compared to its ongoing
operations.
(i) TAX RETURNS. The Seller has filed on a timely basis all
tax returns which are required to be filed by it and paid all taxes, including
any assessments received by it, to the extent that such taxes have become due
(other than taxes, the amount or validity of which are currently being contested
in good faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided by the books of the Seller).
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(j) CERTIFICATES, STATEMENTS AND REPORTS. The officer's
certificates, statements, reports and other documents prepared by Seller and
furnished by Seller to the Note Insurer or the Trustee pursuant to this
Agreement or any other Basic Document to which it is a party, and in connection
with the transactions contemplated hereby or thereby, when taken as a whole, do
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained herein or therein not
misleading.
(k) LEGAL COUNSEL, ETC. Seller consulted with its own legal
counsel and independent accountants to the extent it deems necessary regarding
the tax, accounting and regulatory consequences of the transactions contemplated
hereby, Seller is not participating in such transactions in reliance on any
representations of any other party, their affiliates, or their counsel with
respect to tax, accounting and regulatory matters.
(l) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Seller is at 16355 Laguna Canyon, Irvine, CA 92618.
(m) SEPARATENESS COVENANTS. The Seller is in compliance in all
material respects with Article VIII of its Certificate of Incorporation relating
to the separateness of the Seller from any other Person.
(n) PRINCIPAL BALANCE. The aggregate Principal Balance of the
Subsequent Receivables listed on the supplement to Schedule A annexed hereto and
conveyed to the Issuer pursuant to this Subsequent Transfer Agreement as of the
Subsequent Cutoff Date is $____________.
SECTION 5. CONDITIONS PRECEDENT. The obligation of the Issuer to
acquire the Subsequent Receivables hereunder is subject to the satisfaction, on
or prior to the Subsequent Transfer Date, of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Seller in Section 4 of this
Subsequent Transfer Agreement and with respect to the Subsequent Receivables in
Section 3.1 of the Sale and Servicing Agreement shall be true and correct as of
the date of this Agreement and as of the Subsequent Transfer Date.
(b) SALE AND SERVICING AGREEMENT CONDITIONS. Each of the
conditions set forth in Section 2.2(b) of the Sale and Servicing Agreement shall
have been satisfied.
(c) ADDITIONAL INFORMATION. The Seller shall have delivered to
the Issuer such information as was reasonably requested by the Issuer to satisfy
itself as to (i) the accuracy of the representations and warranties set forth in
Section 4 of this Agreement and with respect to the Subsequent Receivables in
Section 3.1 of the Sale and Servicing Agreement and (ii) the satisfaction of the
conditions set forth in this Section 5.
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SECTION 6. ACCEPTANCE OF RECEIVABLE FILES BY TRUSTEE. The Trustee
acknowledges receipt of files which the Seller has represented are the
Receivable Files for the Subsequent Receivables. The Trustee has reviewed such
Receivable Files and has determined that it has received a file for each
Subsequent Receivable identified in Schedule A to this Subsequent Transfer
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.
SECTION 7. RATIFICATION OF AGREEMENT. As supplemented by this
Agreement, the Sale and Servicing Agreement is in all respects ratified and
confirmed and the Sale and Servicing Agreement as so supplemented by this
Agreement shall be read, taken and construed as one and the same instrument.
SECTION 8. COUNTERPARTS. This Agreement may be executed in two or more
counterparts (and by different parties in separate counterparts), each of which
shall be an original but all of which together shall constitute one and the same
instrument.
SECTION 9. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH, AND THIS AGREEMENT AND ALL MATTERS ARISING OUT OF OR RELATING
IN ANY WAY TO THIS AGREEMENT SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
SECTION 10. Limitation of Liability of Owner Trustee and Trustee
(a) Notwithstanding anything contained herein to the contrary,
this Agreement has been countersigned by Wilmington Trust Company not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Wilmington Trust Company 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 Wells Fargo Bank, National
Association, not in its individual capacity but solely as Trustee and Backup
Servicer and in no event shall Wells Fargo Bank, 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.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective duly authorized officers as of
the Subsequent Transfer Date.
CPS AUTO RECEIVABLES TRUST 2007-B
By: WILMINGTON TRUST COMPANY, not in its
individual capacity, but solely as Owner
Trustee on behalf of the Trust
By:
Name:
Title:
CPS RECEIVABLES CORP., Seller
By:
Name:
Title:
CONSUMER PORTFOLIO SERVICES, INC.,
Individually and in its capacity as Servicer
By:
Name:
Title:
WELLS FARGO BANK, NATIONAL ASSOCIATION, not
in its individual capacity, but solely as
Backup Servicer and Trustee
By:
Name:
Title:
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Exhibit 99.1
CPS Logo
NEWS RELEASE
- --------------------------------------------------------------------------------
CPS ANNOUNCES $315 MILLION SECURITIZATION WITH IMPROVED ENHANCEMENT LEVELS
IRVINE, Calif. - June 27, 2007 - Consumer Portfolio Services, Inc. (Nasdaq:
CPSS) ("CPS" or the "Company") announced that it closed a term securitization
transaction today, issuing $281.925 million of investment grade notes backed by
automotive receivables.
In the transaction, qualified institutional buyers purchased $281,925,000 of
notes backed by automotive receivables purchased by CPS. The notes, issued by
CPS Auto Receivables Trust 2007-B, consist of four classes. The ratings of the
notes were provided by Standard & Poor's and Moody's Investors Services and were
based on the structure of the transaction, CPS's experience as a servicer and a
financial guaranty insurance policy issued by Financial Security Assurance Inc.
Interest Average Standard &
Note Class Amount Rate Life Price Poor's Rating Moody's Rating
- ------------------ ------------------- ------------- -------------- --------------- ----------------- ----------------
A-1 $43.700 million 5.3344% 0.22 years 100.000 A-1+ P-1
A-2 $97.700 million 5.4600% 1.00 years 99.994 AAA Aaa
A-3 $45.200 million 5.4700% 2.00 years 99.983 AAA Aaa
A-4 $95.325 million 5.6000% 3.20 years 99.972 AAA Aaa
The weighted average effective coupon on the notes is approximately 5.55%.
The 2007-B transaction has initial credit enhancement of 12.50% consisting of a
cash deposit in the amount of 2.00% of the original receivable pool balance,
plus subordinated interests of 10.50%. That enhancement level is to be
supplemented by accelerated payment of principal on the notes to reach a
combined level of 17.75% of the then-outstanding receivable pool balance. These
improved levels represent a decrease of 50 and 100 basis points, respectively,
from the Company's last regular quarterly term securitization, CPS Auto
Receivables Trust 2007-A, in March 2007.
The transaction utilized a pre-funding structure, in which CPS sold
approximately $206 million of receivables today and plans to sell approximately
$109 million of additional receivables during July 2007. This further sale is
intended to provide CPS with financing for receivables originated primarily in
the month of June.
The transaction was a private offering of securities, not registered under the
Securities Act of 1933, or any state securities law. All of such securities
having been sold, this announcement of their sale appears as a matter of record
only.
ABOUT CONSUMER PORTFOLIO SERVICES, INC.
Consumer Portfolio Services, Inc. is a specialty finance company engaged in
purchasing and servicing new and used retail automobile contracts originated
primarily by franchised automobile dealerships and to a lesser extent by select
independent dealers of used automobiles in the United States. We serve as an
alternative source of financing for dealers, facilitating sales to sub-prime
customers, who have limited credit history, low income or past credit problems
and who otherwise might not be able to obtain financing from traditional
sources.
INVESTOR CONTACT
Robert E. Riedl
Consumer Portfolio Services
949-753-6800