Exhibit 4.3
Sale and Servicing Agreement
EXECUTION COPY
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SALE AND SERVICING
AGREEMENT
among
CPS AUTO RECEIVABLES TRUST 1998-3, as
Issuer,
CPS RECEIVABLES CORP., as
Seller,
CONSUMER PORTFOLIO SERVICES, INC., as
Servicer
and
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, as
Standby Servicer and Trustee
Dated as of July 15, 1998
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions......................................................1
SECTION 1.2. Other Definitional Provisions...................................23
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. Conveyance of Receivables.......................................24
SECTION 2.2. [RESERVED] .....................................................25
SECTION 2.3. Further Encumbrance of Trust Property...........................25
ARTICLE III
THE RECEIVABLES
SECTION 3.1. Representations and Warranties of Seller........................26
SECTION 3.2. Repurchase upon Breach..........................................32
SECTION 3.3. Custody of Receivables Files....................................33
SECTION 3.4. Acceptance of Receivable Files by Trustee.......................33
SECTION 3.5. Access to Receivable Files......................................34
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 4.1. Duties of the Servicer..........................................35
SECTION 4.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreements...............................36
SECTION 4.3. Realization Upon Receivables....................................37
SECTION 4.4. Insurance .....................................................38
SECTION 4.5. Maintenance of Security Interests in Vehicles...................39
SECTION 4.6. Additional Covenants of Servicer................................39
SECTION 4.7. Purchase of Receivables Upon Breach of Covenant.................40
SECTION 4.8. Servicing Fee...................................................40
SECTION 4.9. Servicer's Certificate..........................................40
SECTION 4.10. Annual Statement as to Compliance, Notice of Servicer
Termination Event.............................................41
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TABLE OF CONTENTS
(continued)
Page
SECTION 4.11. Annual Independent Accountants' Report..........................41
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables...................................................42
SECTION 4.13. Verification of Servicer's Certificate..........................42
SECTION 4.14. Retention and Termination of Servicer...........................43
SECTION 4.15. Fidelity Bond...................................................44
ARTICLE V
TRUST ACCOUNTS; DISTRIBUTIONS;
STATEMENTS TO SECURITYHOLDERS
SECTION 5.1. Establishment of Trust Accounts.................................44
SECTION 5.2. [RESERVED] .....................................................47
SECTION 5.3. Certain Reimbursements to the Servicer..........................47
SECTION 5.4. Application of Collections......................................47
SECTION 5.5. Withdrawals from Spread Account.................................47
SECTION 5.6. Additional Deposits.............................................48
SECTION 5.7. Distributions...................................................48
SECTION 5.8. Note Distribution Account.......................................50
SECTION 5.9. [RESERVED] .....................................................52
SECTION 5.10. [RESERVED] .....................................................52
SECTION 5.11. Statements to Securityholders...................................52
SECTION 5.12. Optional Deposits by the Note Insurer; Notice of Waivers........53
ARTICLE VI
THE NOTE POLICY
SECTION 6.1. Claims Under Note Policy........................................53
SECTION 6.2. Preference Claims...............................................55
SECTION 6.3. Surrender of Note Policy........................................56
ARTICLE VII
[RESERVED]
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TABLE OF CONTENTS
(continued)
Page
ARTICLE VIII
THE SELLER
SECTION 8.1. Representations of Seller.......................................56
(a) Organization and Good Standing.............................56
(b) Due Qualification..........................................56
(c) Power and Authority........................................56
(d) Valid Sale, Binding Obligations............................56
(e) No Violation...............................................57
(f) No Proceedings.............................................57
(g) No Consents................................................57
(h) Tax Returns................................................57
(i) Chief Executive Office.....................................57
SECTION 8.2. [RESERVED] .....................................................58
SECTION 8.3. Liability of Seller; Indemnities................................58
SECTION 8.4. Merger or Consolidation of, or Assumption of the Obligations
of Seller.....................................................58
SECTION 8.5. Limitation on Liability of Seller and Others....................59
SECTION 8.6. Seller May Own Certificates or Notes............................59
ARTICLE IX
THE SERVICER
SECTION 9.1. Representations of Servicer.....................................60
(a) Organization and Good Standing..............................60
(b) Due Qualification...........................................60
(c) Power and Authority.........................................60
(d) Binding Obligation..........................................60
(e) No Violation................................................60
(f) No Proceedings..............................................61
(g) No Consents.................................................61
(h) Taxes.......................................................61
(i) Chief Executive Office......................................61
SECTION 9.2. Liability of Servicer; Indemnities..............................62
SECTION 9.3. Merger or Consolidation of, or Assumption of the
Obligations of, the Servicer or Standby Servicer..............63
SECTION 9.4. Limitation on Liability of Servicer, Standby Servicer
and Others....................................................64
SECTION 9.5. Delegation of Duties............................................64
SECTION 9.6. Servicer and Standby Servicer Not to Resign.....................64
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TABLE OF CONTENTS
(continued)
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ARTICLE X
DEFAULT
SECTION 10.1. Servicer Termination Event.....................................65
SECTION 10.2. Consequences of a Servicer Termination Event...................67
SECTION 10.3. Appointment of Successor.......................................68
SECTION 10.4. Notification to Noteholders and Certificateholders.............69
SECTION 10.5. Waiver of Past Defaults........................................69
SECTION 10.6. Action Upon Certain Failures of the Servicer...................69
ARTICLE XI
TERMINATION
SECTION 11.1. Optional Purchase of All Receivables...........................70
ARTICLE XII
ADMINISTRATIVE DUTIES OF THE SERVICER
SECTION 12.1. Administrative Duties..........................................70
(a) Duties with Respect to the Indenture......................70
(b) Duties with Respect to the Issuer.........................71
(c) Tax Matters...............................................72
(d) Non-Ministerial Matters...................................72
(e) Exceptions................................................72
(f) Limitation of Standby Servicer's Obligations..............73
SECTION 12.2. Records........................................................73
SECTION 12.3. Additional Information to be Furnished to the Issuer...........73
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1. Amendment ....................................................73
SECTION 13.2. Protection of Title to Trust...................................74
SECTION 13.3. Notices ....................................................76
SECTION 13.4. Assignment ....................................................77
SECTION 13.5. Limitations on Rights of Others................................77
SECTION 13.6. Severability...................................................77
SECTION 13.7. Separate Counterparts..........................................77
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TABLE OF CONTENTS
(continued)
Page
SECTION 13.8. Headings ....................................................78
SECTION 13.9. Governing Law..................................................78
SECTION 13.10. Assignment to Trustee..........................................78
SECTION 13.11. Nonpetition Covenants..........................................78
SECTION 13.12. Limitation of Liability of Owner Trustee and Trustee...........78
SECTION 13.13. Independence of the Servicer...................................79
SECTION 13.14. No Joint Venture...............................................79
SECTION 13.15. Note Insurer as Controlling Party..............................79
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TABLE OF CONTENTS
(continued)
SCHEDULES
Schedule A - Schedule of Receivables
EXHIBITS
Exhibit A - Form of Servicer's Certificate
Exhibit B - Form of Trust Receipt
Exhibit C - Form of Servicing Officer's Certificate
Exhibit D - Form of Monthly Securityholder Statement
Exhibit E - Form of Trustee's Certificate
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SALE AND SERVICING AGREEMENT dated as of July 15, 1998, among CPS AUTO
RECEIVABLES TRUST 1998-3, a Delaware business trust (the "Issuer"), CPS
RECEIVABLES CORP., a California corporation (the "Seller"), CONSUMER PORTFOLIO
SERVICES, INC., a California corporation (the "Servicer"), and NORWEST BANK
MINNESOTA, NATIONAL ASSOCIATION, a national banking association, in its capacity
as Standby Servicer and Trustee.
WHEREAS the Issuer desires to purchase a portfolio of receivables arising
in connection with motor vehicle retail installment sale contracts acquired by
Consumer Portfolio Services, Inc., Samco Acceptance Corp. or Linc Acceptance
Company LLC through motor vehicle dealers and independent finance companies;
WHEREAS the Seller has purchased such receivables from Consumer Portfolio
Services, Inc., Samco Acceptance Corp. and Linc Acceptance Company LLC and is
willing to sell such receivables to the Issuer;
WHEREAS the Servicer is willing to service all such receivables;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. Whenever used in this Agreement, the following
words and phrases shall have the following meanings:
"Accountants' Report" means the report of a firm of nationally recognized
independent accountants described in Section 4.11.
"Administrative Receivable" means, with respect to any Collection Period, a
Receivable which the Servicer is required to purchase pursuant to Section 4.7
with respect to such Collection Period.
"Affiliate" of any Person means any Person who directly or indirectly
controls, is controlled by, or is under direct or indirect common control with
such Person. For purposes of this definition, the term "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling", "controlled
by" and "under common control with" have meanings correlative to the foregoing.
"Aggregate Principal Balance" means, with respect to any date of
determination, the sum of the Principal Balances for all Receivables (other than
(i) any Receivable that became a
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Liquidated Receivable prior to the end of the related Collection Period and (ii)
any Receivable that became a Purchased Receivable prior to the end of the
related Collection Period) as of the date of determination.
"Agreement" means this Sale and Servicing Agreement, as the same may be
amended and supplemented from time to time.
"Amount Financed" means, with respect to a Receivable, the aggregate amount
advanced under such Receivable toward the purchase price of the Financed Vehicle
and any related costs, including amounts advanced in respect of accessories,
insurance premiums, service and warranty contracts, other items customarily
financed as part of retail automobile installment sale contracts or promissory
notes, and related costs.
"Annual Percentage Rate" or "APR" of a Receivable means the annual
percentage rate of finance charges or service charges, as stated in the related
Contract.
"Assumption Date" shall have the meaning specified in Section 10.3(a).
"Bank of America" means Bank of America National Trust and Savings
Association and its successors.
"Basic Documents" means this Agreement, the Certificate of Trust, the Trust
Agreement, the Indenture, each Purchase Agreement, the Master Spread Account
Agreement, the Spread Account Supplement, the Insurance Agreement, the
Indemnification Agreement, the Lockbox Agreement and other documents and
certificates delivered in connection therewith.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions in the City of New York, the State in which the
Corporate Trust Office is located, the State in which the executive offices of
the Servicer are located and the State in which the principal place of business
of the Note Insurer is located shall be authorized or obligated by law,
executive order, or governmental decree to be closed.
"Casualty" means, with respect to a Financed Vehicle, the total loss or
destruction of such Financed Vehicle.
"Certificate" has the meaning assigned to such term in the Trust Agreement.
"Certificate Balance" has the meaning assigned to such term in the Trust
Agreement.
"Certificate Deficiency" shall have the meaning assigned to such term in
Section 5.5(c).
"Certificate Distribution Account" has the meaning assigned to such term in
the Trust Agreement.
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"Certificate Pool Factor" as of the close of business on any Payment Date
means a seven-digit decimal figure equal to the outstanding principal amount of
the Certificates divided by the original outstanding principal amount of the
Certificates.
"Certificateholder" has the meaning assigned to such term in the Trust
Agreement.
"Class" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes
or the Class A-4 Notes, as the context requires.
"Class A Noteholders' Interest Distributable Amount" means, with respect to
any Payment Date, the sum of (i) the Class A-1 Noteholders' Interest
Distributable Amount, (ii) the Class A-2 Noteholders' Interest Distributable
Amount, (iii) the Class A-3 Noteholders' Interest Distributable Amount and (iv)
the Class A-4 Noteholders' Interest Distributable Amount.
"Class A Noteholders' Percentage" will be 98% on the initial Payment Date
and on any Payment Date after the initial Payment Date will be the percentage
equivalent of a fraction, the numerator of which is the principal amount of the
Notes as of the close of the preceding Payment Date and the denominator of which
is the Pool Balance as of such Payment Date.
"Class A Noteholders' Principal Carryover Shortfall" means, with respect to
any Payment Date, the excess of the Class A Noteholders' Principal Distributable
Amount for the preceding Payment Date over the amount that was actually
deposited in the Note Distribution Account on such Payment Date on account of
the Class A Noteholders' Principal Distributable Amount.
"Class A Noteholders' Principal Distributable Amount" means, with respect
to any Payment Date (other than the Final Scheduled Payment Date for any Class
of Notes), the Class A Noteholders' Percentage of the Principal Distributable
Amount. The Class A Noteholders' Principal Distributable Amount on the Final
Scheduled Payment Date for any Class of Notes will equal the outstanding
principal amount of such Class of Notes.
"Class A Target Amount" means, with respect to any Payment Date, an amount
equal to 90% of the Pool Balance as of such Payment Date after giving effect to
all payments of principal on the Receivables received during the related
Collection Period.
"Class A-1 Interest Period" means, for each Payment Date, the actual number
of days elapsed from and including the most recent preceding Payment Date on
which interest has been paid (or, in the case of the first Payment Date, from
and including the Closing Date) to, but excluding, such current Payment Date.
"Class A-1 Interest Rate" means 5.6375% per annum.
"Class A-1 Final Scheduled Payment Date" means the August 1999 Payment
Date.
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"Class A-1 Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class A-1 Noteholders' Interest
Distributable Amount for the preceding Payment Date over the amount that was
actually deposited in the Note Distribution Account on such preceding Payment
Date on account of the Class A-1 Noteholders' Interest Distributable Amount.
"Class A-1 Noteholders' Interest Distributable Amount" means, with respect
to any Payment Date, the sum of the Class A-1 Noteholders' Monthly Interest
Distributable Amount for such Payment Date and the Class A-1 Noteholders'
Interest Carryover Shortfall for such Payment Date, plus interest on such Class
A-1 Noteholder's Interest Carryover Shortfall, to the extent permitted by law,
at the Class A-1 Interest Rate to, but excluding, the current Payment Date.
"Class A-1 Noteholders' Monthly Interest Distributable Amount" means an
amount equal to the product of (i) the Class A-1 Interest Rate, (ii) the
outstanding principal balance of the Class A-1 Notes as of the close of the
preceding Payment Date (or, in the case of the initial Payment Date, as of the
Closing Date) after giving effect to all distributions on account of principal
on such preceding Payment Date and (iii) a fraction, the numerator of which is
the actual number of days elapsed in the applicable Class A-1 Interest Period
and the denominator of which is 360.
"Class A-1 Notes" has the meaning assigned to such term in the Indenture.
"Class A-2 Interest Rate" means 5.8550% per annum.
"Class A-2 Final Scheduled Payment Date" means the October 2001 Payment
Date.
"Class A-2 Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class A-2 Noteholders' Interest
Distributable Amount for the preceding Payment Date over the amount that was
actually deposited in the Note Distribution Account on such preceding Payment
Date on account of the Class A-2 Noteholders' Interest Distributable Amount.
"Class A-2 Noteholders' Interest Distributable Amount" means, with respect
to any Payment Date, the sum of the Class A-2 Noteholders' Monthly Interest
Distributable Amount for such Payment Date and the Class A-2 Noteholders'
Interest Carryover Shortfall for such Payment Date, plus interest on such Class
A-2 Noteholder's Interest Carryover Shortfall, to the extent permitted by law,
at the Class A-2 Interest Rate to, but excluding, the current Payment Date.
"Class A-2 Noteholders' Monthly Interest Distributable Amount" means, (a)
for the first Payment Date, an amount equal to the product of (i) the Class A-2
Interest Rate, (ii) the initial principal balance of the Class A-2 Notes and
(iii) a fraction, the numerator of which is the number of days from and
including the Closing Date to and including August 14, 1998
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(assuming that there are 30 days in each month of the year) and the denominator
of which is 360 and (b) for any Payment Date after the first Payment Date, an
amount equal to the product of (i) one-twelfth of the Class A-2 Interest Rate
and (ii) the principal balance of the Class A-2 Notes as of the close of the
preceding Payment Date (after giving effect to all distributions on account of
principal on such preceding Payment Date).
"Class A-2 Notes" has the meaning assigned to such term in the Indenture.
"Class A-3 Final Scheduled Payment Date" means the June 2002 Payment Date.
"Class A-3 Interest Rate" means 5.9950% per annum.
"Class A-3 Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class A-3 Noteholders' Interest
Distributable Amount for the preceding Payment Date over the amount that was
actually deposited in the Note Distribution Account on such preceding Payment
Date on account of the Class A-3 Noteholders' Interest Distributable Amount.
"Class A-3 Noteholders' Interest Distributable Amount" means, with respect
to any Payment Date, the sum of the Class A-3 Noteholders' Monthly Interest
Distributable Amount for such Payment Date and the Class A-3 Noteholders'
Interest Carryover Shortfall for such Payment Date, plus interest on such Class
A-3 Noteholder's Interest Carryover Shortfall, to the extent permitted by law,
at the Class A-3 Interest Rate to, but excluding, the current Payment Date.
"Class A-3 Noteholders' Monthly Interest Distributable Amount" means, (a)
for the first Payment Date, an amount equal to the product of (i) the Class A-3
Interest Rate, (ii) the initial principal balance of the Class A-3 Notes and
(iii) a fraction, the numerator of which is the number of days from and
including the Closing Date to and including August 14, 1998 (assuming that there
are 30 days in each month of the year) and the denominator of which is 360 and
(b) for any Payment Date after the first Payment Date, an amount equal to the
product of (i) one-twelfth of the Class A-3 Interest Rate and (ii) the principal
balance of the Class A-3 Notes as of the close of the preceding Payment Date
(after giving effect to all distributions on account of principal on such
preceding Payment Date).
"Class A-3 Notes" has the meaning assigned to such term in the Indenture.
"Class A-4 Final Scheduled Payment Date" means the October 2003 Payment
Date.
"Class A-4 Interest Rate" means 6.0800% per annum.
"Class A-4 Noteholders' Interest Carryover Shortfall" means, with respect
to any Payment Date, the excess of the Class A-4 Noteholders' Interest
Distributable Amount for the preceding Payment Date over the amount that was
actually deposited in the Note Distribution
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Account on such preceding Payment Date on account of the Class A-4 Noteholders'
Interest Distributable Amount.
"Class A-4 Noteholders' Interest Distributable Amount" means, with respect
to any Payment Date, the sum of the Class A-4 Noteholders' Monthly Interest
Distributable Amount for such Payment Date and the Class A-4 Noteholders'
Interest Carryover Shortfall for such Payment Date, plus interest on such Class
A-4 Noteholder's Interest Carryover Shortfall, to the extent permitted by law,
at the Class A-4 Interest Rate to, but excluding, the current Payment Date.
"Class A-4 Noteholders' Monthly Interest Distributable Amount" means, (a)
for the first Payment Date, an amount equal to the product of (i) the Class A-4
Interest Rate, (ii) the initial principal balance of the Class A-4 Notes and
(iii) a fraction, the numerator of which is the number of days from and
including the Closing Date to and including August 14, 1998 (assuming that there
are 30 days in each month of the year) and the denominator of which is 360 and
(b) for any Payment Date after the first Payment Date, an amount equal to the
product of (i) one-twelfth of the Class A-4 Interest Rate and (ii) the principal
balance of the Class A-4 Notes as of the close of the preceding Payment Date
(after giving effect to all distributions on account of principal on such
preceding Payment Date).
"Class A-4 Notes" has the meaning assigned to such term in the Indenture.
"Closing Date" means July 28, 1998.
"Code" shall have the meaning specified in Section 3.2.
"Collateral" shall have the meaning assigned to such term in the Indenture.
"Collateral Agent" means Norwest Bank Minnesota, National Association, in
its capacity as Collateral Agent under the Master Spread Account Agreement.
"Collateral Agent Fee" means the fee payable to the Collateral Agent on
each Payment Date in an amount equal to one-twelfth of 0.0075% of the aggregate
outstanding principal amount of the Securities on the last day of the second
preceding Collection Period; provided, however, that on the first Payment Date
the Collateral Agent will be entitled to receive an amount equal to the product
of (i) the percentage equivalent of a fraction the numerator of which is the
number of days from the Closing Date to but excluding the first Payment Date and
the denominator of which is 360, (ii) 0.0075% and (iii) the aggregate
outstanding principal amount of the Securities as of the Closing Date.
"Collection Account" means the account designated as such, established and
maintained pursuant to Section 5.1.
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"Collection Period" means, with respect to the first Payment Date, the
period beginning on the close of business on the Cutoff Date and ending on the
close of business on July 31, 1998. With respect to each subsequent Payment
Date, the preceding calendar month. Any amount stated "as of the close of
business of the last day of a Collection Period" shall give effect to the
following calculations as determined as of the end of the day on such last day:
(i) all applications of collections, and (ii) all distributions.
"Contract" means a motor vehicle retail installment sale contract.
"Controlling Party" shall be determined in accordance with the provisions
of Section 13.15.
"Corporate Trust Office" means (i) with respect to the Owner Trustee, the
principal corporate trust office of the Owner Trustee, which at the time of
execution of this agreement is 1011 Centre Road, Suite 200, Wilmington, Delaware
19805-1266 with a copy to Bankers Trust Company, 4 Albany Street, 10th Floor,
New York, New York 10006, Attention: Corporate Trust and Agency Group, and (ii)
with respect to the Trustee and the Collateral Agent, the principal corporate
trust office of the Trustee, which at the time of execution of this agreement is
Sixth Street and Marquette Avenue, Minneapolis, Minnesota 55479-0070.
"CPS" means Consumer Portfolio Services, Inc., a California corporation and
its successors.
"CPS Purchase Agreement" means the Purchase Agreement dated as of July 15,
1998 by and between the Seller and CPS, as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, relating to the purchase of the CPS Receivables by the Seller
from CPS.
"CPS Receivables" shall have the meaning specified in the CPS Purchase
Agreement.
"Cram Down Loss" means, with respect to a Receivable, if a court of
appropriate jurisdiction in an insolvency proceeding shall have issued an order
reducing the amount owed on a Receivable or otherwise modifying or restructuring
Scheduled Receivable Payments to be made on a Receivable, an amount equal to
such reduction in Principal Balance of such Receivable or the reduction in the
net present value (using as the discount rate the lower of the contract rate or
the rate of interest specified by the court in such order) of the Scheduled
Receivable Payments as so modified or restructured. A "Cram Down Loss" shall be
deemed to have occurred on the date such order is entered.
"Cutoff Date" means July 1, 1998.
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"Dealer" means, with respect to a Receivable, the seller of the related
Financed Vehicle, who originated and assigned such Receivable to CPS, Samco or
Linc, who in turn sold such Receivable to the Seller.
"Deficiency Claim Amount" shall have the meaning set forth in Section
5.5(a).
"Deficiency Claim Date" means, with respect to any Payment Date, the fourth
Business Day immediately preceding such Payment Date.
"Deficiency Notice" shall have the meaning set forth in Section 5.5(a).
"Delegation Notice" shall have the meaning specified in Section 9.5.
"Delivery" means, when used with respect to Trust Account Property:
(i) the perfection and priority of a security interest in such Trust
Account Property which is governed by the law of a jurisdiction which has
adopted the 1978 Revision to Article 8 of the UCC:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105 (1) (i)
of the UCC and are susceptible of physical delivery, transfer thereof
to the Trustee or its nominee or custodian by physical delivery to the
Trustee or its nominee or custodian endorsed to, or registered in the
name of, the Trustee or its nominee or custodian or endorsed in blank,
and, with respect to a certificated security (as defined in Section
8-102 of the UCC), transfer thereof (1) by delivery of such
certificated security endorsed to, or registered in the name of, the
Trustee or its nominee or custodian or endorsed in blank to a
financial intermediary (as defined in Section 8-313 of the UCC) and
the making by such financial intermediary of entries on its books and
records identifying such certificated securities as belonging to the
Trustee or its nominee or custodian and the sending by such financial
intermediary of a confirmation of the purchase of such certificated
security by the Trustee or its nominee or custodian, or (2) by
delivery thereof to a "clearing corporation" (as defined in Section
8-102 (3) of the UCC) and the making by such clearing corporation of
appropriate entries on its books reducing the appropriate securities
account of the transferor and increasing the appropriate securities
account of a financial intermediary by the amount of such certificated
security, the identification by the clearing corporation of the
certificated securities for the sole and exclusive account of the
financial intermediary, the maintenance of such certificated
securities by such clearing corporation or a "custodian bank" (as
defined in Section 8-102(4) of the UCC) or the nominee of either
subject to the clearing corporation's exclusive control, the sending
of a confirmation by the financial intermediary of the purchase by the
Trustee or its nominee or custodian of such securities and the making
by such financial intermediary of entries on its books and records
identifying such certificated securities as belonging to the Trustee
or its nominee or
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custodian (all of the foregoing, "Physical Property"), and, in any
event, any such Physical Property in registered form shall be in the
name of the Trustee or its nominee or custodian; and such additional
or alternative procedures as may hereafter become appropriate to
effect the complete transfer of ownership of any such Trust Account
Property to the Trustee or its nominee or custodian, consistent with
changes in applicable law or regulations or the interpretation
thereof;
(b) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National
Mortgage Association that is a book-entry security held through the
Federal Reserve System pursuant to Federal book-entry regulations, the
following procedures, all in accordance with applicable law, including
applicable Federal regulations and Articles 8 and 9 of the UCC:
book-entry registration of such Trust Account Property to an
appropriate book-entry account maintained with a Federal Reserve Bank
by a financial intermediary which is also a "depository" pursuant to
applicable Federal regulations and issuance by such financial
intermediary of a deposit advice or other written confirmation of such
book-entry registration to the Trustee or its nominee or custodian of
the purchase by the Trustee or its nominee or custodian of such
book-entry securities; the making by such financial intermediary of
entries in its books and records identifying such book-entry security
held through the Federal Reserve System pursuant to Federal book-entry
regulations as belonging to the Trustee or its nominee or custodian
and indicating that such custodian holds such Trust Account Property
solely as agent for the Trustee or its nominee or custodian; and such
additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust
Account Property to the Trustee or its nominee or custodian,
consistent with changes in applicable law or regulations or the
interpretation thereof; and
(c) with respect to any item of Trust Account Property that is an
uncertificated security under Article 8 of the UCC and that is not
governed by clause (b) above, registration on the books and records of
the issuer thereof in the name of the financial intermediary, the
sending of a confirmation by the financial intermediary of the
purchase by the Trustee or its nominee or custodian of such
uncertificated security, the making by such financial intermediary of
entries on its books and records identifying such uncertificated
certificates as belonging to the Trustee or its nominee or custodian;
or
(ii) the perfection and priority of a security interest in such Trust
Account Property which is governed by the law of a jurisdiction which has
adopted the 1994 Revision to Article 8 of the UCC:
(a) with respect to bankers' acceptances, commercial paper,
negotiable certificates of deposit and other obligations that
constitute "instruments" within the meaning of Section 9-105(1)(i) of
the UCC (other than certificated securities) and are susceptible of
physical delivery, transfer thereof to the Trustee by physical
delivery to the Trustee, indorsed to, or registered in the name of,
the Trustee or its nominee or indorsed
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in blank and such additional or alternative procedures as may
hereafter become appropriate to effect the complete transfer of
ownership of any such Trust Property to the Trustee free and clear of
any adverse claims, consistent with changes in applicable law or
regulations or the interpretation thereof;
(b) with respect to a "certificated security" (as defined in
Section 8-102(a)(4) of the UCC), transfer thereof:
(1) by physical delivery of such certificated security to
the Trustee, provided that if the certificated security is in
registered form, it shall be indorsed to, or registered in the
name of, the Trustee or indorsed in blank;
(2) by physical delivery of such certificated security in
registered form to a "securities intermediary" (as defined in
Section 8-102(a)(14) of the UCC) acting on behalf of the Trustee
if the certificated security has been specially endorsed to the
Trustee by an effective endorsement.
(c) with respect to any security issued by the U.S. Treasury, the
Federal Home Loan Mortgage Corporation or by the Federal National
Mortgage Association that is a book-entry security held through the
Federal Reserve System pursuant to Federal book entry regulations, the
following procedures, all in accordance with applicable law, including
applicable federal regulations and Articles 8 and 9 of the UCC:
book-entry registration of such property to an appropriate book-entry
account maintained with a Federal Reserve Bank by a securities
intermediary which is also a "depositary" pursuant to applicable
federal regulations and issuance by such securities intermediary of a
deposit advice or other written confirmation of such book-entry
registration to the Trustee of the purchase by the securities
intermediary on behalf of the Trustee of such book-entry security; the
making by such securities intermediary of entries in its books and
records identifying such book-entry security held through the Federal
Reserve System pursuant to Federal book-entry regulations as belonging
to the Trustee and indicating that such securities intermediary holds
such book-entry security solely as agent for the Trustee; and such
additional or alternative procedures as may hereafter become
appropriate to effect complete transfer of ownership of any such Trust
Property to the Trustee free of any adverse claims, consistent with
changes in applicable law or regulations or the interpretation
thereof;
(d) with respect to any item of Trust Property that is an
"uncertificated security" (as defined in Section 8-102(a)(18) of the
UCC) and that is not governed by clause (c) above, transfer thereof:
(1)(A) by registration to the Trustee as the registered
owner thereof, on the books and records of the issuer thereof.
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(B) by another Person (not a securities intermediary) who
either becomes the registered owner of the uncertificated
security on behalf of the Trustee, or having become the
registered owner acknowledges that it holds for the Trustee.
(2) the issuer thereof has agreed that it will comply with
instructions originated by the Trustee without further consent of
the registered owner thereof.
(e) with respect to a "security entitlement" (as defined in
Section 8-102(a)(17) of the UCC)
(1) if a securities intermediary (A) indicates by book entry
that a "financial asset" (as defined in Section 8-102(a)(9) of
the UCC) has been credited to the Trustee's "securities account"
(as defined in Section 8-501(a) of the UCC), (B) receives a
financial asset (as so defined) from the Trustee or acquires a
financial asset for the Trustee, and in either case, accepts it
for credit to the Trustee's securities account (as so defined),
(C) becomes obligated under other law, regulation or rule to
credit a financial asset to the Trustee's securities account, or
(D) has agreed that it will comply with "entitlement orders" (as
defined in Section 8-102(a)(8) of the UCC) originated by the
Trustee, without further consent by the "entitlement holder" (as
defined in Section 8-102(a)(7) of the UCC), of a confirmation of
the purchase and the making by such securities intermediary of
entries on its books and records identifying as belonging to the
Trustee of (I) a specific certificated security in the securities
intermediary's possession, (II) a quantity of securities that
constitute or are part of a fungible bulk of certificated
securities in the securities intermediary's possession, or (III)
a quantity of securities that constitute or are part of a
fungible bulk of securities shown on the account of the
securities intermediary on the books of another securities
intermediary.
(f) in each case of delivery contemplated pursuant to clause(a)
through (e) of subsection (ii) hereof, the Trustee shall make
appropriate notations on its records, and shall cause the same to be
made on the records of its nominees, indicating that such Trust
Property which constitutes a security is held in trust pursuant to and
as provided in this Agreement.
"Depositor" shall mean the Seller in its capacity as Depositor under the
Trust Agreement.
"Determination Date" means the earlier of (i) the seventh Business Day of
each calendar month and (ii) the fifth Business Day preceding the related
Payment Date.
"Draw Date" means with respect to any Payment Date, the third Business Day
immediately preceding such Payment Date.
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"Eligible Account" means (i) a segregated trust account that is maintained
with a depository institution acceptable to the Note Insurer (so long as an
Insurer Default shall not have occurred and be continuing), or (ii) a segregated
direct deposit account maintained with a depository institution or trust company
organized under the laws of the United States of America, or any of the States
thereof, or the District of Columbia, having a certificate of deposit,
short-term deposit or commercial paper rating of at least "A-1" by Standard &
Poor's and "P-1" by Moody's and (so long as an Insurer Default shall not have
occurred and be continuing) acceptable to the Note Insurer.
"Eligible Investments" mean book-entry securities, negotiable instruments
or securities represented by instruments in bearer or registered form which
evidence:
(a) direct obligations of, and obligations fully guaranteed as to the full
and timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of deposit of any
depository institution or trust company incorporated under the laws of the
United States of America or any State thereof (or any domestic branch of a
foreign bank) and subject to supervision and examination by Federal or State
banking or depository institution authorities; provided, however, that at the
time of the investment or contractual commitment to invest therein, the
commercial paper or other short-term unsecured debt obligations (other than such
obligations the rating of which is based on the credit of a Person other than
such depository institution or trust company) thereof shall be rated "A-1+" by
Standard & Poor's and "P-1" by Moody's;
(c) commercial paper that, at the time of the investment or contractual
commitment to invest therein, is rated "A-1+" by Standard & Poor's and "P-1" by
Moody's;
(d) bankers' acceptances issued by any depository institution or trust
company referred to in clause (b) above;
(e) repurchase obligations with respect to any security that is a direct
obligation of, or fully guaranteed as to the full and timely payment by, the
United States of America or any agency or instrumentality thereof the
obligations of which are backed by the full faith and credit of the United
States of America, in either case entered into with (i) a depository institution
or trust company (acting as principal) described in clause (b) or (ii) a
depository institution or trust company whose commercial paper or other short
term unsecured debt obligations are rated "A-1+" by Standard & Poor's and "P-1"
by Moody's and long term unsecured debt obligations are rated "AAA" by Standard
& Poor's and "Aaa" by Moody's;
(f) with the prior written consent of the Note Insurer, money market mutual
funds registered under the Investment Company Act of 1940, as amended, having a
rating, at the time of such investment, from each of the Rating Agencies in the
highest investment category granted thereby; and
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(g) any other investment as may be acceptable to the Note Insurer, as
evidenced by a writing to that effect, as may from time to time be confirmed in
writing to the Trustee by the Note Insurer.
Any of the foregoing Eligible Investments may be purchased by or through
the Owner Trustee or the Trustee or any of their respective Affiliates.
"ERISA" shall have the meaning specified in Section 3.2.
"FDIC" means the Federal Deposit Insurance Corporation.
"Final Scheduled Payment Date" means with respect to the Class A-1 Notes,
the Class A- 1 Final Scheduled Payment Date, with respect to the Class A-2
Notes, the Class A-2 Final Scheduled Payment Date, with respect to the Class A-3
Notes, the Class A-3 Final Scheduled Payment Date and with respect to the Class
A-4 Notes, the Class A-4 Final Scheduled Payment Date.
"Financed Vehicle" means a new or used automobile, light truck, van or
minivan, together with all accessions thereto, securing an Obligor's
indebtedness under a Receivable.
"First Target Date" means the first Payment Date on which the principal
balance of the Notes is equal to or less than the Class A Target Amount.
"Holder" shall have the meaning specified in the Indenture.
"Indemnification Agreement" means the Indemnification Agreement among the
Note Insurer, CPS, the Seller and the Underwriter, dated as of July 15, 1998, as
such agreement may be amended, supplemented or otherwise modified from time to
time in accordance with the terms thereof.
"Indenture" means the Indenture dated as of July 15, 1998, between the
Issuer and Norwest Bank Minnesota, National Association, as Trustee, as the same
may be amended and supplemented from time to time.
"Initial Spread Account Deposit" shall have the meaning specified in the
Spread Account Supplement.
"Insolvency Event" means, with respect to a specified Person, (a) the
filing of a petition against such Person or the entry of a decree or order for
relief by a court having jurisdiction in the premises in respect of such Person
or any substantial part of its property in an involuntary case under any
applicable federal or state bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official for such Person or for any substantial
part of its property, or ordering the winding-up or liquidation or such Person's
affairs, and such petition, decree or order shall
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remain unstayed and in effect for a period of 60 consecutive days; or (b) the
commencement by such Person of a voluntary case under any applicable federal or
state bankruptcy, insolvency or other similar law now or hereafter in effect, or
the consent by such Person to the entry of an order for relief in an involuntary
case under any such law, or the consent by such Person to the appointment of or
taking possession by, a receiver, liquidator, assignee, custodian, trustee,
sequestrator, or similar official for such Person or for any substantial part of
its property, or the making by such Person of any general assignment for the
benefit of creditors, or the failure by such Person generally to pay its debts
as such debts become due, or the taking of action by such Person in furtherance
of any of the foregoing.
"Insurance Agreement" means the Insurance and Indemnity Agreement among the
Trust, CPS, the Seller, and the Note Insurer, dated as of July 15, 1998, as such
agreement may be amended, supplemented or otherwise modified from time to time
in accordance with the terms thereof.
"Insurance Agreement Event of Default" means an "Event of Default" as
defined in the Insurance Agreement.
"Insurance Policy" means, with respect to a Receivable, any insurance
policy (including the insurance policies described in Section 4.4 hereof)
benefiting the holder of the Receivable providing loss or physical damage,
credit life, credit disability, theft, mechanical breakdown or similar coverage
with respect to the Financed Vehicle or the Obligor.
"Insurer Default" shall mean any one of the following events shall have
occurred and be continuing:
(i) the Note Insurer fails to make a payment required under the
Policy in accordance with its terms;
(ii) the Note Insurer (A) files any petition or commences any
case or proceeding under any provision or chapter of the United States
Bankruptcy Code, the New York Department of Insurance Code or similar
Federal or State law relating to insolvency, bankruptcy,
rehabilitation, liquidation or reorganization, (B) makes a general
assignment for the benefit of its creditors or (C) has an order for
relief entered against it under the United States Bankruptcy Code or
any other similar Federal or State law relating to insolvency,
bankruptcy, rehabilitation, liquidation or reorganization which is
final and nonappealable; or
(iii) a court of competent jurisdiction, the New York Department
of Insurance or other competent regulatory authority enters a final
and nonappealable order, judgment or decree (A) appointing a
custodian, trustee, agent or receiver for the Note Insurer or for all
or any material portion of its property or (B) authorizing the taking
of possession by a custodian, trustee, agent or receiver of the Note
Insurer (or the taking of possession of all or any material portion of
the property of the Note Insurer).
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"Interest Period" means, with respect to any Payment Date, the period from
and including the Closing Date (in the case of the first Payment Date) or from
and including the most recent Payment Date on which interest has been paid to
but excluding such Payment Date.
"Interest Rate" means the Class A-1 Interest Rate, the Class A-2 Interest
Rate, the Class A-3 Interest Rate or the Class A-4 Interest Rate, as applicable.
"Investment Earnings" means, with respect to any Payment Date and Trust
Account, the investment earnings on amounts on deposit in such Trust Account on
such Payment Date.
"Issuer" means CPS Auto Receivables Trust 1998-3.
"Lien" means a security interest, lien, charge, pledge, equity, or
encumbrance of any kind, other than tax liens, mechanics' liens and any liens
that attach to the respective Receivable by operation of law.
"Lien Certificate" means, with respect to a Financed Vehicle, an original
certificate of title, certificate of lien or other notification issued by the
Registrar of Titles of the applicable state to a secured party which indicates
that the lien of the secured party on the Financed Vehicle is recorded on the
original certificate of title. In any jurisdiction in which the original
certificate of title is required to be given to the obligor, the term "Lien
certificate" shall mean only a certificate or notification issued to a secured
party.
"Linc" means Linc Acceptance Company LLC and its successors.
"Linc Purchase Agreement" means the Purchase Agreement, dated as of July
15, 1998 by and between Linc and the Seller, as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, relating to the purchase of the Linc Receivables by the Seller
from Linc.
"Linc Receivables" shall have the meaning specified in the Linc Purchase
Agreement.
"Liquidated Receivable" means any Receivable (i) which has been liquidated
by the Servicer through the sale of the Financed Vehicle or (ii) for which the
related Financed Vehicle has been repossessed and 90 days have elapsed since the
date of such repossession or (iii) as to which an Obligor has failed to make
more than 90% of a Scheduled Receivable Payment of more than ten dollars for 120
(or, if the related Financed Vehicle has been repossessed, 210) or more days as
of the end of a Collection Period or (iv) with respect to which proceeds have
been received which, in the Servicer's judgment, constitute the final amounts
recoverable in respect of such Receivable.
"Lockbox Account" means an account maintained on behalf of the Trustee by
the Lockbox Bank pursuant to Section 4.2(c).
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"Lockbox Agreement" means the Three Party Agreement Relating to Lockbox
Services, dated as of July 16, 1998, by and among the Lockbox Processor, the
Servicer, the Seller and the Trustee, as such agreement may be amended or
supplemented from time to time, unless the Trustee shall cease to be a party
thereunder, or such agreement shall be terminated in accordance with its terms,
in which event "Lockbox Agreement" shall mean such other agreement, in form and
substance acceptable to the Controlling Party, among the Servicer, the Trustee
and the Lockbox Processor.
"Lockbox Bank" means as of any date a depository institution named by the
Servicer and acceptable to the Controlling Party at which the Lockbox Account is
established and maintained as of such date.
"Lockbox Processor" means Bank of America and its successors and assigns.
"Master Spread Account Agreement" means the Master Spread Account Agreement
amended and restated as of July 15, 1998 among the Note Insurer, the Seller and
the Collateral Agent, as the same may be modified, supplemented or otherwise
amended in accordance with the terms thereof.
"Moody's" means Moody's Investors Service, Inc., or its successor.
"Net Liquidation Proceeds" means, with respect to a Liquidated Receivable,
all amounts realized with respect to such Receivable (other than amounts
withdrawn from the Spread Account and drawings under the Note Policy) net of (i)
reasonable expenses incurred by the Servicer in connection with the collection
of such Receivable and the repossession and disposition of the Financed Vehicle
and (ii) amounts that are required to be refunded to the Obligor on such
Receivable; provided, however, that the Net Liquidation Proceeds with respect to
any Receivable shall in no event be less than zero.
"Note" shall have the meaning provided in Section 1.1 of the Indenture.
"Note Distribution Account" means the account designated as such,
established and maintained pursuant to Section 5.1.
"Note Insurer" means Financial Security Assurance Inc., a stock insurance
company organized and created under the laws of the State of New York, or its
successors in interest.
"Note Policy" means the Financial Guaranty Insurance Policy issued by the
Note Insurer for the benefit of the Holders of the Notes issued under the
Indenture, including any endorsements thereto.
"Note Policy Claim Amount" with respect to any Distribution Date, has the
meaning specified in Section 6.1.
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"Note Pool Factor" for each Class of Notes as of the close of business on
any Payment Date means a seven-digit decimal figure equal to the outstanding
principal amount of such Class of Notes divided by the original outstanding
principal amount of such Class of Notes.
"Noteholder" shall have the meaning specified in the Indenture.
"Notes" means the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes
and the Class A-4 Notes.
"Objection Date" shall have the meaning specified in Section 9.5.
"Objection Notice" shall have the meaning specified in Section 9.5.
"Obligor" on a Receivable means the purchaser or co-purchasers of the
Financed Vehicle and any other Person who owes payments under the Receivable.
"Officer's Certificate" means a certificate signed by the chairman of the
board, the president, any vice chairman of the board, any vice president, the
treasurer, the controller or assistant treasurer or any assistant controller,
secretary or assistant secretary of CPS, the Seller or the Servicer, as
appropriate.
"Opinion of Counsel" means a written opinion of counsel who may but need
not be counsel to the Seller or the Servicer, which counsel shall be reasonably
acceptable to the Trustee and the Note Insurer and which opinion shall be
acceptable in form and substance to the Trustee and, if such opinion or a copy
thereof is required by the provisions of this Agreement to be delivered to the
Note Insurer, to the Note Insurer.
"Original Pool Balance" means the Pool Balance as of the Cutoff Date.
"Other Conveyed Property" means all property conveyed by the Seller to the
Trust pursuant to Section 2.1(b) through (h) of this Agreement.
"Owner Trust Estate" has the meaning assigned to such term in the Trust
Agreement.
"Owner Trustee" means Bankers Trust (Delaware), not in its individual
capacity but solely as Owner Trustee under the Trust Agreement, its successors
in interest or any successor Owner Trustee under the Trust Agreement.
"Payment Date" means, with respect to each Collection Period, the 15th day
of the following calendar month, or if such day is not a Business Day, the
immediately following Business Day, commencing on August 15, 1998.
"Person" means any individual, corporation, estate, partnership, limited
liability company, joint venture, association, joint stock company, trust
(including any beneficiary
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thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Physical Property" has the meaning assigned to such term in the definition
of "Delivery" above.
"Pool Balance" means, as of any date of determination, the aggregate
Principal Balance of the Receivables (excluding Purchased Receivables and
Liquidated Receivables).
"Post-Office Box" means the separate post-office box in the name of the
Trustee for the benefit of the Securityholders and the Note Insurer, established
and maintained pursuant to Section 4.1.
"Preference Claim" shall have the meaning specified in Section 6.2(b).
"Principal Balance" of a Receivable, as of the close of business on the
last day of a Collection Period means the Amount Financed minus the sum of the
following amounts without duplication: (i) in the case of a Rule of 78's
Receivable, that portion of all Scheduled Receivable Payments actually received
on or prior to such day allocable to principal using the actuarial or constant
yield method; (ii) in the case of a Simple Interest Receivable, that portion of
all Scheduled Receivable Payments actually received on or prior to such day
allocable to principal using the Simple Interest Method; (iii) any payment of
the Purchase Amount with respect to the Receivable allocable to principal; (iv)
any Cram Down Loss in respect of such Receivable; and (v) any prepayment in full
or any partial prepayment applied to reduce the Principal Balance of the
Receivable.
"Principal Distributable Amount" means, with respect to any Payment Date,
the sum of (i) collections on Receivables (other than Liquidated Receivables)
allocable to principal including full and partial prepayments; (ii) the portion
of the Purchase Amount allocable to principal of each Receivable that became a
Purchased Receivable as of the last day of the preceding Collection Period and,
at the option of the Note Insurer the Principal Balance of each Receivable that
was required to be but was not so purchased or repurchased (without duplication
of amounts referred to in clause (i) above); (iii) the Principal Balance of each
Receivable that first became a Liquidated Receivable during the preceding
Collection Period (without duplication of the amounts included in clause (i)
above); (iv) the aggregate amount of Cram Down Losses with respect to the
Receivables that have occurred during the preceding Collection Period (without
duplication of amounts referred to in clauses (i) through (iii) above); and (v)
following the acceleration of the Notes pursuant to Section 5.2 of the
Indenture, the amount of money or property collected pursuant to Section 5.4 of
the Indenture since the preceding Determination Date by the Trustee or
Controlling Party for distribution pursuant to Section 5.7 hereof.
"Program" shall have the meaning specified in Section 4.11.
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"Purchase Agreement" means the CPS Purchase Agreement, the Samco Purchase
Agreement and/or the Linc Purchase Agreement.
"Purchase Amount" means, with respect to a Receivable, the Principal
Balance and all accrued and unpaid interest on the Receivable, after giving
effect to the receipt of any moneys collected (from whatever source) on such
Receivable, if any.
"Purchased Receivable" means a Receivable purchased as of the close of
business on the last day of a Collection Period by the Servicer pursuant to
Section 4.7 or repurchased by the Seller or CPS pursuant to Section 3.2 or
Section 11.1(a).
"Rating Agency" means each of Moody's and Standard & Poor's, and any
successors thereof. If no such organization or successor maintains a rating on
the Securities, "Rating Agency" shall be a nationally recognized statistical
rating organization or other comparable Person designated by the Note Insurer
(so long as an Insurer Default shall not have occurred and be continuing),
notice of which designation shall be given to the Trustee, the Owner Trustee and
the Servicer.
"Rating Agency Condition" means, with respect to any action, that each
Rating Agency shall have been given 3 days' (or such shorter period as shall be
acceptable to each Rating Agency) prior notice thereof and that each of the
Rating Agencies shall have notified the Seller, the Servicer, the Note Insurer,
the Owner Trustee and the Trustee in writing that such action will not result in
a reduction or withdrawal of the then current rating of any Class of Notes.
"Realized Losses" means, with respect to any Receivable that becomes a
Liquidated Receivable, the excess of the Principal Balance of such Liquidated
Receivable over Net Liquidation Proceeds to the extent allocable to principal.
"Receivable" means each retail installment sale contract for a Financed
Vehicle listed on Schedule A (which Schedule A may be in the form of microfiche)
and all rights and obligations thereunder except for Receivables that shall have
become Purchased Receivables.
"Receivable Files" means the documents specified in Section 3.3.
"Record Date" means, with respect to any Payment Date, the tenth day of the
calendar month in which such Payment Date occurs.
"Registrar of Titles" means, with respect to any state, the governmental
agency or body responsible for the registration of, and the issuance of
certificates of title relating to, motor vehicles and liens thereon.
"Responsible Officer" shall have the meaning specified in the Trust
Agreement.
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"Rule of 78's Receivable" means any Receivable under which the portion of a
payment allocable to earned interest (which may be referred to in the related
retail installment sale contract as an add-on finance charge) and the portion
allocable to the Amount Financed is determined according to the method commonly
referred to as the "Rule of 78's" method or the "sum of the months' digits"
method or any equivalent method.
"Samco" means Samco Acceptance Corp., a subsidiary of CPS.
"Samco Purchase Agreement" means the Purchase Agreement, dated as of July
15, 1998 by and between Samco and the Seller, as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof, relating to the purchase of the Samco Receivables by the Seller
from Samco.
"Samco Receivables" shall have the meaning specified in the Samco Purchase
Agreement.
"Schedule of Receivables" means the schedule of all retail installment
sales contracts and promissory notes originally held as part of the Trust which
is attached hereto as Schedule A, as amended from time to time.
"Scheduled Receivable Payment" means, with respect to any Collection Period
for any Receivable, the amount set forth in such Receivable as required to be
paid by the Obligor in such Collection Period (without giving effect to
deferments of payments pursuant to Section 4.2 or any rescheduling of payments
in any insolvency or similar proceedings).
"Securities" means the Notes and the Certificates.
"Security Majority" means a majority by principal amount of the Noteholders
so long as the Notes are outstanding and a majority by Certificate Balance of
the Certificateholders thereafter.
"Securityholders" means the Noteholders and the Certificateholders.
"Seller" means CPS Receivables Corp., a California corporation, and its
successors in interest to the extent permitted hereunder.
"Series 1998-3 Spread Account" means the account designated as such,
established and maintained pursuant to the Spread Account Supplement.
"Servicer" means Consumer Portfolio Services, Inc., as the servicer of the
Receivables, and each successor Servicer pursuant to Section 10.3.
"Servicer Termination Event" means an event specified in Section 10.1.
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"Servicer's Certificate" means a certificate completed and executed by a
Servicing Officer and delivered pursuant to Section 4.9, substantially in the
form of Exhibit B.
"Servicing and Lockbox Processing Assumption Agreement" means the Servicing
and Lockbox Processing Assumption Agreement, dated as of July 15, 1998 among
CPS, the Standby Servicer and the Trustee, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
terms thereof.
"Servicing Fee" has the meaning specified in Section 4.8.
"Servicing Officer" means any Person whose name appears on a list of
Servicing Officers delivered to the Trustee and the Note Insurer, as the same
may be amended from time to time.
"Simple Interest Method" means the method of allocating a fixed level
payment between principal and interest, pursuant to which the portion of such
payment that is allocated to interest is equal to the product of the APR
multiplied by the unpaid balance multiplied by the period of time (expressed as
a fraction of a year, based on the actual number of days in the calendar month
and the actual number of days in the calendar year) elapsed since the preceding
payment of interest was made and the remainder of such payment is allocable to
principal.
"Simple Interest Receivable" means a Receivable under which the portion of
the payment allocable to interest and the portion allocable to principal is
determined in accordance with the Simple Interest Method.
"Specified Spread Account Requisite Amount" has the meaning specified in
the Spread Account Supplement.
"Spread Account Supplement" means the Series 1998-3 Supplement to the
Master Spread Account Agreement dated as of July 15, 1998 among the Note
Insurer, the Seller and the Collateral Agent, as the same may be modified,
supplemented or otherwise amended in accordance with the terms thereof.
"Standard & Poor's" means Standard & Poor's Ratings Group, a division of
The McGraw-Hill Companies, or its successor.
"Standby Fee" means the fee payable to the Standby Servicer so long as CPS
is the Servicer, on each Payment Date in an amount equal to one-twelfth of
0.025% of the aggregate outstanding principal amount of the Securities on the
last day of the second preceding Collection Period; provided, however, that on
the first Payment Date the Standby Servicer will be entitled to receive an
amount equal to the product of (i) the percentage equivalent of a fraction the
numerator of which is the number days from the Closing Date to but excluding the
first Payment Date and the denominator of which is 360, (ii) 0.025% and (iii)
the aggregate outstanding principal amount of the Securities as of the Closing
Date.
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"Standby Servicer" means Norwest Bank Minnesota, National Association, in
its capacity as Standby Servicer pursuant to the terms of the Servicing and
Lockbox Processing Assumption Agreement or such Person as shall have been
appointed Standby Servicer pursuant to Section 9.2(c).
"Total Distribution Amount" means, for each Payment Date, the sum of the
following amounts with respect to the preceding Collection Period: (i) all
collections on the Receivables, (ii) Net Liquidation Proceeds received during
the Collection Period with respect to Liquidated Receivables; (iii) all Purchase
Amounts deposited in the Collection Account during the related Collection
Period; (iv) Investment Earnings for the related Payment Date; (v) following the
acceleration of the Notes pursuant to Section 5.2 of the Indenture, the amount
of money or property collected pursuant to Section 5.7 of the Indenture since
the preceding Payment Date by the Trustee or Controlling Party for distribution
pursuant to Section 5.6 and Section 5.8 hereof; and (vi) the proceeds of any
purchase or sale of the assets of the Trust described in Section 11.1 hereof.
"Trigger Event" has the meaning assigned thereto in the Spread Account
Supplement.
"Trust" means the Issuer.
"Trust Account Property" means the Trust Accounts, all amounts and
investments held from time to time in any Trust Account (whether in the form of
deposit accounts, Physical Property, book-entry securities, uncertificated
securities or otherwise), and all proceeds of the foregoing.
"Trust Accounts" has the meaning assigned thereto in Section 5.1.
"Trust Agreement" means the Trust Agreement dated as of July 8, 1998, as
amended and restated as of July 15, 1998, between the Seller, as Depositor, and
the Owner Trustee, as the same may be further amended or supplemented from time
to time.
"Trust Officer" means, (i) in the case of the Trustee, any vice president,
any assistant vice president, any assistant secretary, any assistant treasurer,
any trust officer, or any other officer of the Trustee customarily performing
functions similar to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge of and
familiarity with the particular subject, and (ii) in the case of the Owner
Trustee, any officer in the corporate trust office of the Owner Trustee or any
agent of the Owner Trustee under a power of attorney with direct responsibility
for the administration of this Agreement or any of the Basic Documents on behalf
of the Owner Trustee.
"Trust Property" means the property and proceeds conveyed pursuant to
Section 2.1, together with certain monies received after the Cutoff Date, the
Insurance Policies, the Collection Account (including all Eligible Investments
therein and all proceeds therefrom), the
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Lockbox Account and certain other rights under this Agreement. Although the
Seller has pledged the Spread Account to the Trustee and the Note Insurer
pursuant to the Master Spread Account Agreement, the Spread Account shall not
under any circumstances be deemed to be a part of or otherwise includable in the
Trust or the Trust Property.
"Trust Receipt" has the meaning assigned thereto by Section 3.5.
"Trustee" means the Person acting as Trustee under the Indenture, its
successors in interest and any successor trustee under the Indenture.
"Trustee Fee" means (A) the fee payable to the Trustee on each Payment
Date in an amount equal to one-twelfth of 0.0075% of the aggregate outstanding
principal amount of the Securities on the last day of the second preceding
Collection Period; provided, however, that on the first Payment Date the Trustee
will be entitled to receive an amount equal to the product of (i) the percentage
equivalent of a fraction the numerator of which is the number days from the
Closing Date to but excluding the first Payment Date and the denominator of
which is 360, (ii) 0.0075% and (iii) the aggregate outstanding principal amount
of the Securities as of the Closing Date and/or (B) any amounts payable to the
Owner Trustee pursuant to Section 4.11 of the Trust Agreement, as applicable.
"UCC" means the Uniform Commercial Code as in effect in the relevant
jurisdiction on the date of the Agreement.
SECTION 1.2. Other Definitional Provisions.
(a) Capitalized terms used herein and not otherwise defined herein have the
meanings assigned to them in the Indenture or, if not defined therein, in the
Trust Agreement.
(b) All terms defined in this Agreement shall have the defined meanings
when used in any instrument governed hereby and in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein.
(c) Accounting terms used but not defined or partly defined in this
Agreement, in any instrument governed hereby or in any certificate or other
document made or delivered pursuant hereto, to the extent not defined, shall
have the respective meanings given to them under generally accepted accounting
principles as in effect on the date of this Agreement or any such instrument,
certificate or other document, as applicable. To the extent that the definitions
of accounting terms in this Agreement or in any such instrument, certificate or
other document are inconsistent with the meanings of such terms under generally
accepted accounting principles, the definitions contained in this Agreement or
in any such instrument, certificate or other document shall control.
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(d) The words "hereof," "herein," "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement.
(e) Section, Schedule and Exhibit references contained in this Agreement
are references to Sections, Schedules and Exhibits in or to this Agreement
unless otherwise specified; and the term "including" shall mean "including
without limitation."
(f) The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms and to the masculine as well
as to the feminine and neuter genders of such terms.
(g) Any agreement, instrument or statute defined or referred to herein or
in any instrument or certificate delivered in connection herewith means such
agreement, instrument or statute as the same may from time to time be amended,
modified or supplemented and includes (in the case of agreements or instruments)
references to all attachments and instruments associated therewith; all
references to a Person include its permitted successors and assigns.
ARTICLE II
CONVEYANCE OF RECEIVABLES
SECTION 2.1. Conveyance of Receivables. In consideration of the Issuer's
delivery to or upon the order of the Seller on the Closing Date of the net
proceeds from the sale of the Notes and the Certificates and the other amounts
to be distributed from time to time to the Seller in accordance with the terms
of this Agreement, the Seller does hereby sell, transfer, assign, set over and
otherwise convey to the Issuer, without recourse (subject to the obligations set
forth herein):
(a) all right, title and interest of the Seller in and to the
Receivables listed in Schedule A hereto, all monies received thereon after
the Cutoff Date and all Net Liquidation Proceeds received with respect
thereto after the Cutoff Date;
(b) all right, title and interest of the Seller in and to the security
interests in the Financed Vehicles granted by Obligors pursuant to the
Receivables and any other interest of the Seller in such Financed Vehicles,
including, without limitation, the certificates of title or, with respect
to such Financed Vehicles in the State of Michigan, all other evidence of
ownership with respect to such Financed Vehicles;
(c) all right, title and interest of the Seller in and to any proceeds
from claims on any physical damage, credit life and credit accident and
health insurance policies or certificates relating to the Financed Vehicles
or the Obligors;
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(d) all right, title and interest of the Seller in and to the Purchase
Agreements, including a direct right to cause CPS to purchase Receivables
from the Trust pursuant to the CPS Purchase Agreement under the
circumstances specified therein;
(e) all right, title and interest of the Seller in and to refunds for
the costs of extended service contracts with respect to Financed Vehicles
securing Receivables, refunds of unearned premiums with respect to credit
life and credit accident and health insurance policies or certificates
covering an Obligor or Financed Vehicle or his or her obligations with
respect to a Financed Vehicle and any recourse to Dealers for any of the
foregoing;
(f) the Receivable File related to each Receivable;
(g) all amounts and property from time to time held in or credited to
the Collection Account, the Lockbox Account or the Note Distribution
Account;
(h) the proceeds of any and all of the foregoing; and
(i) all present and future claims, demands, causes and choses in
action in respect of any or all of the foregoing and all payments on or
under and all proceeds of every kind and nature whatsoever in respect of
any or all of the foregoing, including all proceeds of the conversion,
voluntary or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts, acceptances,
chattel paper, checks, deposit accounts, insurance proceeds, condemnation
awards, rights to payment of any and every kind and other forms of
obligations and receivables, instruments and other property which at any
time constitute all or part of or are included in the proceeds of any of
the foregoing.
It is the intention of the Seller that the transfer and assignment
contemplated by this Agreement shall constitute a sale of the Receivables and
other Trust Property from the Seller to the Issuer and the beneficial interest
in and title to the Receivables and the other Trust Property shall not be part
of the Seller's estate in the event of the filing of a bankruptcy petition by or
against the Seller under any bankruptcy law. In the event that, notwithstanding
the intent of the Seller, the transfer and assignment contemplated hereby is
held not to be a sale, this Agreement shall constitute a grant of a security
interest in the property referred to in this Section 2.1 for the benefit of the
Securityholders and the Note Insurer.
SECTION 2.2. [RESERVED].
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SECTION 2.3. Further Encumbrance of Trust Property.
(a) Immediately upon the conveyance to the Trust by the Seller of any item
of the Trust Property pursuant to Section 2.1, all right, title and interest of
the Seller in and to such item of Trust Property shall terminate, and all such
right, title and interest shall vest in the Trust, in accordance with the Trust
Agreement and Sections 3802 and 3805 of the Business Trust Statute (as defined
in the Trust Agreement).
(b) Immediately upon the vesting of the Trust Property in the Trust, the
Trust shall have the sole right to pledge or otherwise encumber, such Trust
Property. Pursuant to the Indenture, the Trust shall grant a security interest
in the Trust Property to secure the repayment of the Notes. The Certificates
shall represent beneficial ownership interests in the Trust Property, and the
Certificateholders shall be entitled to receive distributions with respect
thereto as set forth herein.
(c) Following the payment in full of the Notes and the release and
discharge of the Indenture, all covenants of the Issuer under Article III of the
Indenture shall, until all amounts due in respect of the Certificates have been
paid in full, remain as covenants of the Issuer for the benefit of the
Certificateholders, enforceable by the Certificateholders to the same extent as
such covenants were enforceable by the Noteholders prior to the discharge of the
Indenture. Any rights of the Trustee under Article III of the Indenture,
following the discharge of the Indenture, shall vest in the Certificateholders.
(d) The Trustee shall, at such time as there are no Securities outstanding
and all sums due to the Trustee pursuant to the Indenture and this Agreement,
have been paid, release any remaining portion of the Trust Property to the
Certificateholders.
ARTICLE III
THE RECEIVABLES
SECTION 3.1. Representations and Warranties of Seller. The Seller makes the
following representations and warranties as to the Receivables to the Note
Insurer, the Issuer and to the Trustee for the benefit of the Noteholders on
which the Issuer relies in acquiring the Receivables and on which the Note
Insurer relies in issuing the Note Policy. Such representations and warranties
speak as of the execution and delivery of this Agreement and as of the Closing
Date, but shall survive the sale, transfer and assignment of the Receivables to
the Issuer and the pledge thereof to the Trustee pursuant to the Indenture.
(i) Characteristics of Receivables. (A) Each Receivable (1) has been
originated in the United States of America by a Dealer for the retail sale
of a Financed Vehicle in the ordinary course of such Dealer's business, has
been fully and properly executed by the parties thereto and has been
purchased by CPS (or, with respect to the Samco
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Receivables, Samco and, with respect to the Linc Receivables, Linc) in
connection with the sale of Financed Vehicles by the Dealers, (2) has
created a valid, subsisting, and enforceable first priority perfected
security interest in favor of CPS (or, with respect to the Samco
Receivables, Samco and, with respect to the Linc Receivables, Linc) in the
Financed Vehicle, which security interest has been assigned by CPS (or,
with respect to the Samco Receivables, Samco and, with respect to the Linc
Receivables, Linc) to the Seller, which in turn has assigned such security
interest to the Trust which has assigned such security interest to the
Trustee, (3) contains customary and enforceable provisions such that the
rights and remedies of the holder or assignee thereof shall be adequate for
realization against the collateral of the benefits of the security, (4)
provides for level monthly payments that fully amortize the Amount Financed
over the original term (except for the last payment, which may be different
from the level payment) and yield interest at the Annual Percentage Rate,
(5) has an Annual Percentage Rate of not less than 15.95%, (6) that is a
Rule of 78's Receivable provides for, in the event that such contract is
prepaid, a prepayment that fully pays the Principal Balance and includes a
full month's interest, in the month of prepayment, at the Annual Percentage
Rate, (7) is a Rule of 78's Receivable or a Simple Interest Receivable, and
(8) was originated by a Dealer and was sold by the Dealer without any fraud
or misrepresentation on the part of such Dealer.
(B) Approximately 90.86% of the aggregate Principal Balance of the
Receivables, constituting 92.73% of the number of contracts, as of the
Cutoff Date, represents financing of used automobiles, light trucks, vans
or minivans; the remainder of the Receivables represent financing of new
automobiles, light trucks, vans or minivans; approximately 49.96% of the
aggregate Principal Balance of the Receivables as of the Cutoff Date were
originated under the CPS Alpha Program; approximately 8.81% of the
aggregate Principal Balance of the Receivables as of the Cutoff Date were
originated under the CPS Delta Program; approximately 7.25% of the
aggregate Principal Balance of the Receivables as of the Cutoff Date were
originated under the CPS First Time Buyer Program; approximately 31.14% of
the aggregate Principal Balance of the Receivables as of the Cutoff Date
were originated under the CPS Standard Program; approximately 1.08% of the
aggregate Principal Balance of the Receivables as of the Cutoff Date were
originated under the CPS Super Alpha Program; approximately 1.78% of the
aggregate Principal Balance of the Receivables as of the Cutoff Date were
originated under the Linc Program; approximately 5.35% of the aggregate
Principal Balance of the Receivables as of the Cutoff Date are Samco
Receivables; approximately 1.78% of the Receivables as of the Cutoff Date
are Linc Receivables; no Receivable shall have a payment that is more than
30 days overdue as of the Cutoff Date; 19.05% of the aggregate Principal
Balance of the Receivables as of the Cutoff Date are Rule of 78's
Receivables and 80.95% of the aggregate Principal Balance of the
Receivables as of the Cutoff Date are Simple Interest Receivables; each
Receivable shall have a final scheduled payment due no later than July 11,
2003; and each Receivable was originated on or before the Cutoff Date.
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(ii) Schedule of Receivables. The information with respect to the
Receivables set forth in Schedule A to this Agreement is true and correct
in all material respects as of the close of business on the Cutoff Date,
and no selection procedures adverse to the Noteholders have been utilized
in selecting the Receivables.
(iii) Compliance with Law. Each Receivable, the sale of the Financed
Vehicle and the sale of any physical damage, credit life and credit
accident and health insurance and any extended warranties or service
contracts complied at the time the related Receivable was originated or
made and at the execution of this Agreement complies in all material
respects with all requirements of applicable Federal, State, and local
laws, and regulations thereunder including, without limitation, usury laws,
the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the
Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations B and Z, the Soldiers' and Sailors' Civil
Relief Act of 1940, the Texas Consumer Credit Code, the California
Automobile Sales Finance Act and State adaptations of the National Consumer
Act and of the Uniform Consumer Credit Code, and other consumer credit laws
and equal credit opportunity and disclosure laws.
(iv) No Government Obligor. None of the Receivables are due from the
United States of America or any State or from any agency, department, or
instrumentality of the United States of America or any State.
(v) Security Interest in Financed Vehicle. Immediately subsequent to
the sale, assignment and transfer thereof to the Trust, each Receivable
shall be secured by a validly perfected first priority security interest in
the Financed Vehicle in favor of the Trust as secured party, and such
security interest is prior to all other liens upon and security interests
in such Financed Vehicle which now exist or may hereafter arise or be
created (except, as to priority, for any tax liens or mechanics' liens
which may arise after the Closing Date).
(vi) Receivables in Force. No Receivable has been satisfied,
subordinated or rescinded, nor has any Financed Vehicle been released from
the lien granted by the related Receivable in whole or in part.
(vii) No Waiver. No provision of a Receivable has been waived.
(viii) No Amendments. No Receivable has been amended, except as such
Receivable may have been amended to grant extensions which shall not have
numbered more than (a) one extension of one calendar month in any calendar
year or (b) three such extensions in the aggregate.
(ix) No Defenses. No right of rescission, setoff, counterclaim or
defense exists or has been asserted or threatened with respect to any
Receivable. The operation of the
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terms of any Receivable or the exercise of any right thereunder will not
render such Receivable unenforceable in whole or in part or subject to any
such right of rescission, setoff, counterclaim, or defense.
(x) No Liens. As of the Cutoff Date there are no liens or claims
existing or which have been filed for work, labor, storage or materials
relating to a Financed Vehicle that shall be liens prior to, or equal or
coordinate with, the security interest in the Financed Vehicle granted by
the Receivable.
(xi) No Default; Repossession. Except for payment delinquencies
continuing for a period of not more than thirty days as of the Cutoff Date,
no default, breach, violation or event permitting acceleration under the
terms of any Receivable has occurred; and no continuing condition that with
notice or the lapse of time would constitute a default, breach, violation
or event permitting acceleration under the terms of any Receivable has
arisen; and the Seller shall not waive and has not waived any of the
foregoing; and no Financed Vehicle shall have been repossessed as of the
Cutoff Date.
(xii) Insurance; Other. (A) Each Obligor has obtained insurance
covering the Financed Vehicle as of the execution of the Receivable
insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage, and each Receivable requires the Obligor to obtain and maintain
such insurance naming CPS (or, with respect to the Samco Receivables,
Samco, and with respect to the Linc Receivables, Linc) and its successors
and assigns as an additional insured, (B) each Receivable that finances the
cost of premiums for credit life and credit accident and health insurance
is covered by an insurance policy or certificate of insurance naming CPS
(or with respect to the Samco Receivables, Samco and, with respect to the
Linc Receivables, Linc) as policyholder (creditor) under each such
insurance policy and certificate of insurance and (C) as to each Receivable
that finances the cost of an extended service contract, the respective
Financed Vehicle which secures the Receivable is covered by an extended
service contract.
(xiii) Title. It is the intention of the Seller that the transfer and
assignment herein contemplated constitute a sale of the Receivables from
the Seller to the Trust and that the beneficial interest in and title to
such Receivables not be part of the Seller's estate in the event of the
filing of a bankruptcy petition by or against the Seller under any
bankruptcy law. No Receivable has been sold, transferred, assigned, or
pledged by the Seller to any Person other than the Trust. Immediately prior
to the transfer and assignment herein contemplated, the Seller had good and
marketable title to each Receivable and was the sole owner thereof, free
and clear of all liens, claims, encumbrances, security interests, and
rights of others, and, immediately upon the transfer thereof, the Trust for
the benefit of the Noteholders and the Note Insurer shall have good and
marketable title to each such Receivable and will be the sole owner
thereof, free and clear of all liens, encumbrances, security interests, and
rights of others, and the transfer has been perfected under the UCC.
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(xiv) Lawful Assignment. No Receivable has been originated in, or is
subject to the laws of, any jurisdiction under which the sale, transfer,
and assignment of such Receivable under this Agreement or pursuant to
transfers of the Securities shall be unlawful, void, or voidable. The
Seller has not entered into any agreement with any account debtor that
prohibits, restricts or conditions the assignment of any portion of the
Receivables.
(xv) All Filings Made. All filings (including, without limitation, UCC
filings) necessary in any jurisdiction to give the Trust a first priority
perfected ownership interest in the Receivables and the proceeds thereof
and the Other Conveyed Property have been made, taken or performed.
(xvi) Receivable File; One Original. CPS has delivered to the Trustee
a complete Receivable File with respect to each Receivable. There is only
one original executed copy of each Receivable.
(xvii) Chattel Paper. Each Receivable constitutes "chattel paper"
under the UCC.
(xviii) Title Documents. (A) If the Receivable was originated in a
State in which notation of a security interest on the title document of the
related Financed Vehicle is required or permitted to perfect such security
interest, the title document of the related Financed Vehicle for such
Receivable shows, or if a new or replacement title document is being
applied for with respect to such Financed Vehicle the title document (or,
with respect to Receivables originated in the State of Michigan, a "Form
RD108" stamped by the Department of Motor Vehicles) will be received within
180 days and will show, CPS (or, with respect to the Samco Receivables,
Samco and, with respect to the Linc Receivables, Linc) named as the
original secured party under the related Receivable as the holder of a
first priority security interest in such Financed Vehicle, and (B) if the
Receivable was originated in a State in which the filing of a financing
statement under the UCC is required to perfect a security interest in motor
vehicles, such filings or recordings have been duly made and show CPS (or,
with respect to the Samco Receivables, Samco and, with respect to the Linc
Receivables, Linc) named as the original secured party under the related
Receivable, and in either case, the Trust has the same rights as such
secured party has or would have (if such secured party were still the owner
of the Receivable) against all parties claiming an interest in such
Financed Vehicle. With respect to each Receivable for which the title
document has not yet been returned from the Registrar of Titles, CPS (or,
with respect to the Samco Receivables, Samco and, with respect to the Linc
Receivables, Linc) has received written evidence from the related Dealer
that such title document showing CPS, Samco or Linc (as applicable) as
first lienholder has been applied for.
(xix) Valid and Binding Obligation of Obligor. Each Receivable is the
legal, valid and binding obligation in writing of the Obligor thereunder
and is enforceable in accordance with its terms, except only as such
enforcement may be limited by
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bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally, and all parties to such contract had full
legal capacity to execute and deliver such contract and all other documents
related thereto and to grant the security interest purported to be granted
thereby.
(xx) Tax Liens. As of the Cutoff Date, there is no lien against the
related Financed Vehicle for delinquent taxes.
(xxi) Characteristics of Obligors. As of the date of each Obligor's
application for the loan from which the related Receivable arises, such
Obligor (a) did not have any material past due credit obligations or any
personal or real property repossessed or wages garnished within one year
prior to the date of such application, unless such amounts have been repaid
or discharged through bankruptcy, (b) was not the subject of any Federal,
State or other bankruptcy, insolvency or similar proceeding pending on the
date of application that is not discharged, (c) had not been the subject of
more than one Federal, State or other bankruptcy, insolvency or similar
proceeding, and (d) was domiciled in the United States.
(xxii) Origination Date. Each Receivable has an origination date on or
after May 2, 1997.
(xxiii) Maturity of Receivables. Each Receivable has an original term
to maturity of not more than 60 months; the weighted average original term
to maturity of the Receivables was 57.6 months as of the Cutoff Date; the
remaining term to maturity of each Receivable was 60 months or less as of
the Cutoff Date; the weighted average remaining term to maturity of the
Receivables was 56.7 months as of the Cutoff Date.
(xxiv) Scheduled Receivable Payments. Each Receivable had an original
principal balance of not less than $2,597 nor more than $27,849 had an
outstanding principal balance as of the Cutoff Date of not less than $1,045
nor more than $27,493.
(xxv) Origination of Receivables. Based on the billing address of the
Obligors and the Principal Balances as of the Cutoff Date, approximately
19.0% of the aggregate Principal Balance of the Receivables represents
Receivables that were originated in California.
(xxvi) Post-Office Box. On or prior to the next billing period after
the Cutoff Date, CPS will notify each Obligor to make payments with respect
to its respective Receivables after the Cutoff Date directly to the
Post-Office Box, and will provide each Obligor with a monthly statement in
order to enable such Obligors to make payments directly to the Post-Office
Box.
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(xxvii) Location of Receivable Files. A complete Receivable File with
respect to each Receivable has been or prior to the Closing Date will be
delivered to the Trustee at the location listed in Schedule B.
(xxviii) Casualty. No Financed Vehicle has suffered a Casualty.
(xxix) Principal Balance/Number of Contracts. As of the Cutoff Date,
the total aggregate principal balance of the Receivables was
$240,339,160.19. The Receivables are evidenced by 18,847 Contracts.
(xxx) Full Amount Advanced. The full amount of each Receivable has
been advanced to each Obligor, and there are no requirements for future
advances thereunder. The Obligor with respect to the Receivable does not
have any option under the Receivable to borrow from any person additional
funds secured by the Financed Vehicle.
SECTION 3.2. Repurchase upon Breach.
(a) The Seller, the Servicer, the Note Insurer, the Trustee or (upon actual
knowledge of a Responsible Officer thereof) the Owner Trustee, as the case may
be, shall inform the other parties to this Agreement promptly, in writing, upon
the discovery of any breach of the Seller's representations and warranties made
pursuant to Section 3.1 (without regard to any limitations therein as to the
Seller's knowledge). Unless the breach shall have been cured by the last day of
the second Collection Period following the discovery thereof by the Trustee or
the Note Insurer or receipt by the Trustee, the Owner Trustee and the Note
Insurer of notice from the Seller or the Servicer of such breach, CPS (pursuant
to the CPS Purchase Agreement) shall repurchase any Receivable if the value of
such Receivable is materially and adversely affected by the breach as of the
last day of such second Collection Period (or, at CPS's option, the last day of
the first Collection Period following the discovery) and, in the event that the
breach relates to a characteristic of the Receivables in the aggregate, and if
the interests of the Trust, the Noteholders or the Certificateholders are
materially and adversely affected by such breach, unless the breach shall have
been cured by the last day of such second Collection Period, CPS (pursuant to
the CPS Purchase Agreement) shall purchase such aggregate Principal Balance of
Receivables, such that following such purchase such representation shall be true
and correct with respect to the remainder of the Receivables in the aggregate.
In consideration of the purchase of the Receivable, CPS shall remit the Purchase
Amount, in the manner specified in Section 5.6. For purposes of this Section,
the Purchase Amount of a Receivable which is not consistent with the warranty
pursuant to Section 3.1(i)(A)(4) or (A)(5) shall include such additional amount
as shall be necessary to provide the full amount of interest as contemplated
therein. The sole remedy of the Issuer, the Owner Trustee, the Trustee, the
Securityholders or the Note Insurer with respect to a breach of representations
and warranties pursuant to Section 3.1 shall be to enforce CPS's obligation to
purchase such Receivables pursuant to the CPS Purchase Agreement; provided,
however, that CPS shall indemnify the Trustee, the Owner Trustee, the Standby
Servicer, the Collateral Agent, the Note Insurer, the Trust and the
Securityholders against all costs, expenses, losses, damages, claims and
liabilities, including reasonable fees and
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expenses of counsel, which may be asserted against or incurred by any of them as
a result of third party claims arising out of the events or facts giving rise to
such breach. Upon receipt of the Purchase Amount and written instructions from
the Servicer, the Trustee shall release to CPS or its designee the related
Receivables File and shall execute and deliver all reasonable instruments of
transfer or assignment, without recourse, as are prepared by the Seller and
delivered to the Trustee and necessary to vest in CPS or such designee title to
the Receivable including a Trustee's Certificate in the form of Exhibit E-1. If
it is determined that consummation of the transactions contemplated by this
Agreement and the other transaction documents referenced in this Agreement, the
servicing and operation of the Trust pursuant to this Agreement and such other
documents, or the ownership of a Note or Certificate by a Holder constitutes a
violation of the prohibited transaction rules of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or the Internal Revenue Code of
1986, as amended (the "Code") or any successor statutes of similar impact,
together with the regulations thereunder, to which no statutory exception or
administrative exemption applies, such violation shall not be treated as a
breach of the Seller's representations and warranties made pursuant to Section
3.1 if not otherwise such a breach.
(b) Pursuant to Section 2.1 of this Agreement, the Seller has conveyed to
the Trust all of the Seller's right, title and interest in its rights and
benefits, but none of its obligations or burdens, under the Purchase Agreements
including the Seller's rights under the Purchase Agreements and the delivery
requirements, representations and warranties and the cure or repurchase
obligations of CPS under the CPS Purchase Agreement. The Seller hereby
represents and warrants to the Trust that such assignment is valid, enforceable
and effective to permit the Trust to enforce such obligations of CPS under the
CPS Purchase Agreement.
SECTION 3.3. Custody of Receivables Files.
(a) In connection with the sale, transfer and assignment of the Receivables
and the other Conveyed Property to the Trust pursuant to this Agreement the
Trustee shall act as custodian of the following documents or instruments in its
possession which shall be delivered to the Trustee on or before the Closing Date
(with respect to each Receivable):
(i) The fully executed original of the Receivable (together with any
agreements modifying the Receivable, including without limitation any
extension agreements);
(ii) The original certificate of title in the name of CPS (or, with
respect to the Samco Receivables, Samco and, with respect to the Linc
Receivables, Linc) or such documents that CPS shall keep on file, in
accordance with its customary procedures, evidencing the security interest
of CPS (or, with respect to the Samco Receivables, Samco and, with respect
to the Linc Receivables, Linc) in the Financed Vehicle or, if not yet
received, a copy of the application therefor showing CPS (or, with respect
to the Samco Receivables, Samco and, with respect to the Linc Receivables,
Linc) as secured party.
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(b) Upon payment in full of any Receivable, the Servicer will notify the
Trustee pursuant to a certificate of an officer of the Servicer (which
certificate shall include a statement to the effect that all amounts received in
connection with such payments which are required to be deposited in the
Collection Account pursuant to Section 4.2 have been so deposited) and shall
request delivery of the Receivable and Receivable File to the Servicer.
SECTION 3.4. Acceptance of Receivable Files by Trustee. The Trustee
acknowledges receipt of files which the Seller has represented are the
Receivable Files. The Trustee has reviewed the Receivable Files and has
determined that it has received a file for each Receivable identified in
Schedule A to this Agreement. The Trustee declares that it holds and will
continue to hold such files and any amendments, replacements or supplements
thereto and all other Trust Assets as Trustee in trust for the use and benefit
of all present and future Securityholders. The Trustee agrees to review each
file delivered to it no later than 45 days after the Closing Date to determine
whether such Receivable Files contain the documents referred to in Section
3.3(i) and (ii). If the Trustee has found or finds that a file for a Receivable
has not been received, or that a file is unrelated to the Receivables identified
in Schedule A to this Agreement or that any of the documents referred to in
Section 3.3(i) or (ii) are not contained in a Receivable File, the Trustee shall
inform CPS, the Seller, the Owner Trustee and the Note Insurer promptly, in
writing, of the failure to receive a file with respect to such Receivable (or of
the failure of any of the aforementioned documents to be included in the
Receivable File) or shall return to CPS as the Seller's designee any file
unrelated to a Receivable identified in Schedule A to this Agreement (it being
understood that the Trustee's obligation to review the contents of any
Receivable File shall be limited as set forth in the preceding sentence). Unless
such defect with respect to such Receivable File shall have been cured by the
last day of the second Collection Period following discovery thereof by the
Trustee, CPS shall repurchase any such Receivable as of such last day. In
consideration of the purchase of the Receivable, CPS shall remit the Purchase
Amount, in the manner specified in Section 5.6. The sole remedy of the Trustee,
the Trust, or the Securityholders with respect to a breach pursuant to this
Section 3.4 shall be to require CPS to purchase the applicable Receivables
pursuant to this Section 3.4; provided, however, that CPS shall indemnify the
Trustee, the Owner Trustee, the Standby Servicer, the Collateral Agent, the Note
Insurer, the Trust and the Securityholders against all costs, expenses, losses,
damages, claims and liabilities, including reasonable fees and expenses of
counsel, which may be asserted against or incurred by any of them as a result of
third party claims arising out of the events or facts giving rise to such
breach. Upon receipt of the Purchase Amount and written instructions from the
Servicer, the Trustee shall release to CPS or its designee the related
Receivable File and shall execute and deliver all reasonable instruments of
transfer or assignment, without recourse, as are prepared by CPS and delivered
to the Trustee and are necessary to vest in CPS or such designee title to the
Receivable including a Trustee's Certificate in the form of Exhibit E-1. The
Trustee shall make a list of Receivables for which an application for a
certificate of title but not an original certificate of title or, with respect
to Receivables originated in the State of Michigan, a "Form RD108" stamped by
the Department of Motor Vehicles, is included in the Receivable File as of the
date of its review of the Receivable Files and deliver a copy of such list to
the Servicer, the Owner Trustee and the Note Insurer. On the date which is 180
days following the Closing Date or the next succeeding Business Day, the Trustee
shall inform CPS and the other
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parties to this Agreement and the Note Insurer of any Receivable for which the
related Receivable File on such date does not include an original certificate of
title or, with respect to Financed Vehicles in the State of Michigan, for which
the related Receivable File on such date does not include a "Form RD108" stamped
by the Department of Motor Vehicles, and CPS shall repurchase any such
Receivable as of the last day of the current Collection Period.
SECTION 3.5. Access to Receivable Files. The Trustee shall permit the
Servicer and the Note Insurer access to the Receivable Files at all reasonable
times during the Trustee's normal business hours. The Trustee shall, within two
Business Days of the request of the Servicer, the Owner Trustee or the Note
Insurer, execute such documents and instruments as are prepared by the Servicer,
the Owner Trustee or the Note Insurer and delivered to the Trustee, as the
Servicer, the Owner Trustee or the Note Insurer deems necessary to permit the
Servicer, in accordance with its customary servicing procedures, to enforce the
Receivable on behalf of the Trust and any related insurance policies covering
the Obligor, the Receivable or Financed Vehicle so long as such execution in the
Trustee's sole discretion does not conflict with this Agreement and will not
cause it undue risk or liability. The Trustee shall not be obligated to release
any document from any Receivable File unless it receives a trust receipt signed
by a Servicing Officer in the form of Exhibit B hereto (the "Trust Receipt").
Such Trust Receipt shall obligate the Servicer to return such document(s) to the
Trustee when the need therefor no longer exists unless the Receivable shall be
liquidated, in which case, upon receipt of a certificate of a Servicing Officer
substantially in the form of Exhibit C hereto to the effect that all amounts
required to be deposited in the Collection Account with respect to such
Receivable have been so deposited, the Trust Receipt shall be released by the
Trustee to the Servicer.
ARTICLE IV
ADMINISTRATION AND SERVICING OF RECEIVABLES
SECTION 4.1. Duties of the Servicer. The Servicer, as agent for the Trust,
the Securityholders and the Note Insurer (to the extent provided herein) shall
manage, service, administer and make collections on the Receivables with
reasonable care, using that degree of skill and attention customary and usual
for institutions which service motor vehicle retail installment contracts
similar to the Receivables and, to the extent more exacting, that the Servicer
exercises with respect to all comparable automotive receivables that it services
for itself or others. The Servicer's duties shall include collection and posting
of all payments, responding to inquiries of Obligors on such Receivables,
investigating delinquencies, sending payment statements to Obligors, reporting
tax information to Obligors, accounting for collections, furnishing monthly and
annual statements to the Trustee, the Owner Trustee and the Note Insurer with
respect to distributions. Without limiting the generality of the foregoing, and
subject to the servicing standards set forth in this Agreement, the Servicer is
authorized and empowered by the Trust to execute and deliver, on behalf of
itself, the Trust or the Securityholders, any and all instruments of
satisfaction or cancellation, or partial or full release or discharge, and all
other comparable instruments, with respect to such Receivables or to the
Financed Vehicles securing
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such Receivables and/or the certificates of title or, with respect to Financed
Vehicles in the State of Michigan, other evidence of ownership with respect to
such Financed Vehicles. If the Servicer shall commence a legal proceeding to
enforce a Receivable, the Trust shall thereupon be deemed to have automatically
assigned, solely for the purpose of collection, such Receivable to the Servicer.
If in any enforcement suit or legal proceeding it shall be held that the
Servicer may not enforce a Receivable on the ground that it shall not be a real
party in interest or a holder entitled to enforce such Receivable, the Trust
shall, at the Servicer's expense and direction, take steps to enforce such
Receivable, including bringing suit in its name or the name of the
Securityholders. The Servicer shall prepare and furnish, and the Trustee and the
Owner Trustee shall execute, any powers of attorney and other documents
reasonably necessary or appropriate to enable the Servicer to carry out its
servicing and administrative duties hereunder.
SECTION 4.2. Collection of Receivable Payments; Modifications of
Receivables; Lockbox Agreements.
(a) Consistent with the standards, policies and procedures required by this
Agreement, the Servicer shall make reasonable efforts to collect all payments
called for under the terms and provisions of the Receivables as and when the
same shall become due and shall follow such collection procedures as it follows
with respect to all comparable automotive receivables that it services for
itself or others; provided, however, that promptly after the Closing Date the
Servicer shall notify each Obligor to make all payments with respect to the
Receivables to the Post-Office Box. The Servicer will provide each Obligor with
a monthly statement in order to notify such Obligors to make payments directly
to the Post-Office Box. The Servicer shall allocate collections between
principal and interest in accordance with the customary servicing procedures it
follows with respect to all comparable automotive receivables that it services
for itself or others and in accordance with the terms of this Agreement. Except
as provided below, the Servicer, for so long as CPS is the Servicer, may grant
extensions on a Receivable; provided, however, that the Servicer may not grant
more than one extension per calendar year with respect to a Receivable or grant
an extension with respect to a Receivable for more than one calendar month or
grant more than three extensions in the aggregate with respect to a Receivable
without the prior written consent of the Note Insurer and provided, further,
that if the Servicer extends the date for final payment by the Obligor of any
Receivable beyond the last day of the penultimate Collection Period preceding
the Class A-4 Final Scheduled Payment Date, it shall promptly purchase the
Receivable from the Trust in accordance with the terms of Section 4.7 hereof
(and for purposes thereof, the Receivable shall be deemed to be materially and
adversely affected by such breach). If the Servicer is not CPS, the Servicer may
not make any extension on a Receivable without the prior written consent of the
Note Insurer. The Servicer may in its discretion waive any late payment charge
or any other fees that may be collected in the ordinary course of servicing a
Receivable. Notwithstanding anything to the contrary contained herein, the
Servicer shall not agree to any alteration of the interest rate on any
Receivable or of the amount of any Scheduled Receivable Payment on Receivables.
(b) The Trustee shall establish the Lockbox Account in the name of the
Seller for the benefit of the Trustee for the further benefit of the
Securityholders and the Note Insurer.
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Pursuant to the Lockbox Agreement, the Trustee has authorized the Servicer to
direct dispositions of funds on deposit in the Lockbox Account to the Collection
Account (but not to any other account), and no other Person, save the Lockbox
Processor and the Trustee, has authority to direct disposition of funds on
deposit in the Lockbox Account. The Trustee shall have no liability or
responsibility with respect to the Lockbox Processor's directions or activities
as set forth in the preceding sentence. The Lockbox Account shall be established
pursuant to and maintained in accordance with the Lockbox Agreement and shall be
a demand deposit account initially established and maintained with Bank of
America, or at the request of the Note Insurer (unless an Insurer Default shall
have occurred and be continuing) an Eligible Account satisfying clause (i) of
the definition thereof; provided, however, that the Trustee shall give the
Servicer prior written notice of any change made at the request of the Note
Insurer in the location of the Lockbox Account. The Trustee shall establish and
maintain the Post-Office Box at a United States Post Office Branch in the name
of the Seller for the benefit of the Securityholders and the Note Insurer.
(c) Notwithstanding any Lockbox Agreement, or any of the provisions of this
Agreement relating to the Lockbox Agreement, the Servicer shall remain obligated
and liable to the Trust, the Trustee and Securityholders for servicing and
administering the Receivables and the Other Conveyed Property in accordance with
the provisions of this Agreement without diminution of such obligation or
liability by virtue thereof.
(d) In the event the Servicer shall for any reason no longer be acting as
such, the Standby Servicer or a successor Servicer shall thereupon assume all of
the rights and obligations of the outgoing Servicer under the Lockbox Agreement.
In such event, the successor Servicer shall be deemed to have assumed all of the
outgoing Servicer's interest therein and to have replaced the outgoing Servicer
as a party to the Lockbox Agreement to the same extent as if such Lockbox
Agreement had been assigned to the successor Servicer, except that the outgoing
Servicer shall not thereby be relieved of any liability or obligations on the
part of the outgoing Servicer to the Lockbox Bank under such Lockbox Agreement.
The outgoing Servicer shall, upon request of the Trustee, but at the expense of
the outgoing Servicer, deliver to the successor Servicer all documents and
records relating to the Lockbox Agreement and an accounting of amounts collected
and held by the Lockbox Bank and otherwise use its best efforts to effect the
orderly and efficient transfer of any Lockbox Agreement to the successor
Servicer. In the event that the Note Insurer (so long as an Insurer Default
shall not have occurred and be continuing) or Holders of Notes evidencing more
than 50% of the outstanding principal balance of the Notes (if an Insurer
Default shall have occurred and be continuing) shall elect to change the
identity of the Lockbox Bank, the Servicer, at its expense, shall cause the
Lockbox Bank to deliver, at the direction of the Note Insurer (so long as an
Insurer Default shall not have occurred and be continuing) or Holders of Notes
evidencing more than 50% of the outstanding principal balance of the Notes (if
an Insurer Default shall have occurred and be continuing) to the Trustee or a
successor Lockbox Bank, all documents and records relating to the Receivables
and all amounts held (or thereafter received) by the Lockbox Bank (together with
an accounting of such amounts) and shall otherwise use its best efforts to
effect the orderly and efficient transfer of the Lockbox arrangements.
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(e) On each Business Day, pursuant to the Lockbox Agreement, the Lockbox
Processor will transfer any payments from Obligors received in the Post-Office
Box to the Lockbox Account. Within two Business Days of receipt of funds into
the Lockbox Account, the Servicer shall cause the Lockbox Bank to transfer funds
from the Lockbox Account to the Collection Account. In addition, the Servicer
shall remit all payments by or on behalf of the Obligors received by the
Servicer with respect to the Receivables (other than Purchased Receivables), and
all Liquidation Proceeds no later than the Business Day following receipt
directly (without deposit into any intervening account) into the Lockbox Account
or the Collection Account.
SECTION 4.3. Realization Upon Receivables. On behalf of the Trust, the
Securityholders and the Note Insurer, the Servicer shall use its best efforts,
consistent with the servicing procedures set forth herein, to repossess or
otherwise convert the ownership of the Financed Vehicle securing any Receivable
as to which the Servicer shall have determined eventual payment in full is
unlikely. The Servicer shall commence efforts to repossess or otherwise convert
the ownership of a Financed Vehicle on or prior to the date that an Obligor has
failed to make more than 90% of a Scheduled Receivable Payment thereon in excess
of $10 for 120 days or more; provided, however, that the Servicer may elect not
to commence such efforts within such time period if in its good faith judgment
it determines either that it would be impracticable to do so or that the
proceeds ultimately recoverable with respect to such Receivable would be
increased by forbearance. The Servicer shall follow such customary and usual
practices and procedures as it shall deem necessary or advisable in its
servicing of automotive receivables, consistent with the standards of care set
forth in Section 4.2, which may include reasonable efforts to realize upon any
recourse to Dealers and selling the Financed Vehicle at public or private sale.
The foregoing shall be subject to the provision that, in any case in which the
Financed Vehicle shall have suffered damage, the Servicer shall not expend funds
in connection with the repair or the repossession of such Financed Vehicle
unless it shall determine in its discretion that such repair and/or repossession
will increase the proceeds ultimately recoverable with respect to such
Receivable by an amount greater than the amount of such expenses.
SECTION 4.4. Insurance.
(a) The Servicer, in accordance with the servicing procedures and standards
set forth herein, shall require that (i) each Obligor shall have obtained
insurance covering the Financed Vehicle, as of the date of the execution of the
Receivable, insuring against loss and damage due to fire, theft, transportation,
collision and other risks generally covered by comprehensive and collision
coverage and each Receivable requires the Obligor to maintain such physical loss
and damage insurance naming CPS (or, with respect to the Samco Receivables,
Samco and, with respect to the Linc Receivables, Linc) and its successors and
assigns as an additional insured, (ii) each Receivable that finances the cost of
premiums for credit life and credit accident and health insurance is covered by
an insurance policy or certificate naming CPS (or, with respect to the Samco
Receivables, Samco and, with respect to the Linc Receivables, Linc) as
policyholder (creditor) and (iii) as to each Receivable that finances the cost
of an extended service contract,
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the respective Financed Vehicle which secures the Receivable is covered by an
extended service contract.
(b) To the extent applicable, the Servicer shall not take any action which
would result in noncoverage under any of the insurance policies referred to in
Section 4.4(a) which, but for the actions of the Servicer, would have been
covered thereunder. The Servicer, on behalf of the Trust, shall take such
reasonable action as shall be necessary to permit recovery under any of the
foregoing insurance policies. Any amounts collected by the Servicer under any of
the foregoing insurance policies shall be deposited in the Collection Account
pursuant to Section 5.2.
SECTION 4.5. Maintenance of Security Interests in Vehicles.
(a) Consistent with the policies and procedures required by this Agreement,
the Servicer shall take such steps on behalf of the Trust as are necessary to
maintain perfection of the security interest created by each Receivable in the
related Financed Vehicle, including but not limited to obtaining the execution
by the Obligors and the recording, registering, filing, re-recording, refiling,
re-recording, re-registering and refiling of all security agreements, financing
statements and continuation statements or instruments as are necessary to
maintain the security interest granted by the Obligors under the respective
Receivables. The Trustee hereby authorizes the Servicer, and the Servicer
agrees, to take any and all steps necessary to re-perfect or continue the
perfection of such security interest on behalf of the Trust as necessary because
of the relocation of a Financed Vehicle or for any other reason. In the event
that the assignment of a Receivable to the Trust is insufficient, without a
notation on the related Financed Vehicle's certificate of title, or without
fulfilling any additional administrative requirements under the laws of the
state in which the Financed Vehicle is located, to perfect a security interest
in the related Financed Vehicle in favor of the Trust, the Servicer hereby
agrees that CPS's designation as the secured party on the certificate of title
is in its capacity as Servicer as agent of the Trust.
(b) Upon the occurrence of an Insurance Agreement Event of Default, the
Note Insurer may (so long as an Insurer Default shall not have occurred and be
continuing) instruct the Trustee and the Servicer to take or cause to be taken,
or, if an Insurer Default shall have occurred, upon the occurrence of a Servicer
Termination Event, the Trustee and the Servicer shall take or cause to be taken
such action as may, in the opinion of counsel to the Trustee, which opinion
shall not be an expense of the Trustee, be necessary to perfect or re-perfect
the security interests in the Financed Vehicles securing the Receivables in the
name of the Trust by amending the title documents of such Financed Vehicles or
by such other reasonable means as may, in the opinion of counsel to the Trustee,
which opinion shall not be an expense of the Trustee, be necessary or prudent.
CPS hereby agrees to pay all expenses related to such perfection or
re-perfection and to take all action necessary therefor. The Servicer hereby
agrees to pay all expenses related to such perfection or re-perfection and to
take all action necessary therefor. In addition, prior to the occurrence of an
Insurance Agreement Event of Default, the Controlling Party may instruct the
Trustee and the Servicer to take or cause to be taken such action as may, in the
opinion of counsel to the Controlling Party, be necessary to perfect or
re-perfect the security interest in the Financed Vehicles underlying the
Receivables in the name of
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the Trust, including by amending the title documents of such Financed Vehicles
or by such other reasonable means as may, in the opinion of counsel to the
Controlling Party, be necessary or prudent; provided, however, that if the
Controlling Party requests (unless an Insurer Default shall have occurred and be
continuing) that the title documents be amended prior to the occurrence of an
Insurance Agreement Event of Default, the out-of-pocket expenses of the Servicer
or the Trustee in connection with such action shall be reimbursed to the
Servicer or the Trustee, as applicable, by the Controlling Party.
SECTION 4.6. Additional Covenants of Servicer. The Servicer shall not
release the Financed Vehicle securing each Receivable from the security interest
granted by such Receivable in whole or in part except in the event of payment in
full by the Obligor thereunder or repossession, nor shall the Servicer impair
the rights of the Securityholders in such Receivables, nor shall the Servicer
amend a Receivable, except that extensions may be granted in accordance with
Section 4.2.
SECTION 4.7. Purchase of Receivables Upon Breach of Covenant. Upon
discovery by any of the Servicer, the Note Insurer, the Owner Trustee or the
Trustee of a breach of any of the covenants set forth in Section 4.2(a), 4.4,
4.5 or 4.6, the party discovering such breach shall give prompt written notice
to the others; provided, however, that the failure to give any such notice shall
not affect any obligation of the Servicer under this Section 4.7. Unless the
breach shall have been cured by the last day of the second Collection Period
following such discovery (or, at the Servicer's election, the last day of the
first following Collection Period), the Servicer shall purchase any Receivable
materially and adversely affected by such breach. In consideration of the
purchase of such Receivable, the Servicer shall remit the Purchase Amount in the
manner specified in Section 5.6. The sole remedy of the Trustee, the Trust, the
Owner Trustee, the Note Insurer or the Securityholders with respect to a breach
of Section 4.2(a), 4.4, 4.5 or 4.6 shall be to require the Servicer to
repurchase Receivables pursuant to this Section 4.7; provided, however, that the
Servicer shall indemnify the Trustee, the Standby Servicer, the Collateral
Agent, the Note Insurer, the Owner Trustee, the Trust and the Securityholders
against all costs, expenses, losses, damages, claims and liabilities, including
reasonable fees and expenses of counsel, which may be asserted against or
incurred by any of them as a result of third party claims arising out of the
events or facts giving rise to such breach. If it is determined that the
management, administration and servicing of the Receivables and operation of the
Trust pursuant to this Agreement constitutes a violation of the prohibited
transaction rules of ERISA or the Code to which no statutory exception or
administrative exemption applies, such violation shall not be treated as a
breach of Section 4.2(a), 4.4, 4.5 or 4.6 if not otherwise such a breach.
SECTION 4.8. Servicing Fee. The "Servicing Fee" for each Payment Date shall
be equal to the result of one twelfth times 2.00% of the Pool Balance as of the
close of business on the last day of the second preceding Collection Period;
provided, however, that with respect to the first Payment Date the Servicer will
be entitled to receive a Servicing Fee equal to the result of one-twelfth times
2.00% of the Original Pool Balance. The Servicing Fee shall also include all
late fees, prepayment charges including, in the case of a Rule of 78's
Receivable that is prepaid in full, to the extent not required by law to be
remitted to the related Obligor, the
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difference between the Principal Balance of such Rule of 78's Receivable (plus
accrued interest to the date of prepayment) and the principal balance of such
Receivable computed according to the "Rule of 78's", and other administrative
fees or similar charges allowed by applicable law with respect to Receivables,
collected (from whatever source) on the Receivables. If the Standby Servicer
becomes the successor Servicer, the "Servicing Fee" payable to the Standby
Servicer as successor Servicer shall be determined in accordance with the
Servicing and Lockbox Processing Assumption Agreement.
SECTION 4.9. Servicer's Certificate. By 10:00 a.m., Minneapolis time, on
each Determination Date, the Servicer shall deliver to the Trustee, the Owner
Trustee, the Note Insurer, the Rating Agencies and the Seller a Servicer's
Certificate containing all information necessary to make the distributions
pursuant to Section 5.7 (including, if required, withdrawals from the Spread
Account) for the Collection Period preceding the date of such Servicer's
Certificate and all information necessary for the Trustee to send statements to
the Noteholders and the Note Insurer pursuant to Sections 5.8(b) and for the
Owner Trustee to send statements to Certificateholders pursuant to Section
5.5(c) of the Trust Agreement. Receivables to be purchased by the Servicer or to
be purchased by CPS shall be identified by the Servicer by account number with
respect to such Receivable (as specified in Schedule A).
SECTION 4.10. Annual Statement as to Compliance, Notice of Servicer
Termination Event.
(a) The Servicer shall deliver to the Owner Trustee, the Trustee, the
Standby Servicer, the Note Insurer and each Rating Agency, on or before July 31
of each year beginning July 31, 1999, an Officer's Certificate, dated as of
March 31 of such year, stating that (i) a review of the activities of the
Servicer during the preceding 12-month period (or, in the case of the first such
certificate, the period from the Cutoff Date to March 31, 1999) and of its
performance under this Agreement has been made under such officer's supervision
and (ii) to the best of such officer's knowledge, based on such review, the
Servicer has fulfilled all its obligations under this Agreement throughout such
year (or, in the case of the first such certificate, such shorter period), or,
if there has been a default in the fulfillment of any such obligation,
specifying each such default known to such officer and the nature and status
thereof. The Trustee shall send a copy of such certificate and the report
referred to in Section 4.11 to the Rating Agencies. The Trustee shall forward a
copy of such certificate as well as the report referred to in Section 4.11 to
each Noteholder and the Owner Trustee shall forward a copy to each
Certificateholder.
(b) The Servicer shall deliver to the Owner Trustee, the Trustee, the
Standby Servicer, the Note Insurer, the Collateral Agent, and each Rating
Agency, promptly after having obtained knowledge thereof, but in no event later
than two (2) Business Days thereafter, written notice in an Officer's
Certificate of any event which with the giving of notice or lapse of time, or
both, would become a Servicer Termination Event under Section 10.1.
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SECTION 4.11. Annual Independent Accountants' Report. The Servicer shall
cause a firm of nationally recognized independent certified public accountants
(the "Independent Accountants"), who may also render other services to the
Servicer or to the Seller, to deliver to the Trustee, the Owner Trustee, the
Standby Servicer, the Note Insurer and each Rating Agency, on or before July 31
of each year beginning July 31, 1999, a report dated as of March 31 of such year
(the "Accountants' Report") and reviewing the Servicer's activities during the
preceding 12-month period (or, in the case of the first such report, the period
from the Cutoff Date to March 31, 1999), addressed to the Board of Directors of
the Servicer, to the Owner Trustee, the Trustee, the Standby Servicer and to the
Note Insurer, to the effect that such firm has examined the financial statements
of the Servicer and issued its report therefor and that such examination (1) was
made in accordance with generally accepted auditing standards, and accordingly
included such tests of the accounting records and such other auditing procedures
as such firm considered necessary in the circumstances; (2) included tests
relating to auto loans serviced for others in accordance with the requirements
of the Uniform Single Audit Program for Mortgage Bankers (the "Program"), to the
extent the procedures in the Program are applicable to the servicing obligations
set forth in this Agreement; (3) included an examination of the delinquency and
loss statistics relating to the Servicer's portfolio of automobile and light
truck installment sales contracts; and (4) except as described in the report,
disclosed no exceptions or errors in the records relating to automobile and
light truck loans serviced for others that, in the firm's opinion, paragraph
four of the Program requires such firm to report. The accountant's report shall
further state that (1) a review in accordance with agreed upon procedures was
made of three randomly selected Servicer Certificates; (2) except as disclosed
in the report, no exceptions or errors in the Servicer Certificates were found;
and (3) the delinquency and loss information relating to the Receivables and the
stated amount of Liquidated Receivables, if any, contained in the Servicer
Certificates were found to be accurate. In the event such firm requires the
Trustee, the Owner Trustee and/or the Standby Servicer to agree to the
procedures performed by such firm, the Servicer shall direct the Trustee, the
Owner Trustee and/or the Standby Servicer, as applicable, in writing to so
agree; it being understood and agreed that the Trustee, the Owner Trustee and/or
the Standby Servicer will deliver such letter of agreement in conclusive
reliance upon the direction of the Servicer, and neither the Trustee, the Owner
Trustee nor the Standby Servicer makes any independent inquiry or investigation
as to, and shall have no obligation or liability in respect of, the sufficiency,
validity or correctness of such procedures.
The Report will also indicate that the firm is independent of the Servicer
within the meaning of the Code of Professional Ethics of the American Institute
of Certified Public Accountants.
SECTION 4.12. Access to Certain Documentation and Information Regarding
Receivables. The Servicer shall provide to representatives of the Trustee, the
Owner Trustee, the Standby Servicer and the Note Insurer reasonable access to
the documentation regarding the Receivables. In each case, such access shall be
afforded without charge but only upon reasonable request and during normal
business hours. Nothing in this Section shall derogate from the obligation of
the Servicer to observe any applicable law prohibiting disclosure of
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information regarding the Obligors, and the failure of the Servicer to provide
access as provided in this Section as a result of such obligation shall not
constitute a breach of this Section.
SECTION 4.13. Verification of Servicer's Certificate. (a) On or before the
fifth calendar day of each month, the Servicer will deliver to the Trustee and
the Standby Servicer a computer diskette (or other electronic transmission) in a
format acceptable to the Trustee and the Standby Servicer containing information
with respect to the Receivables as of the close of business on the last day of
the preceding Collection Period which information is necessary for preparation
of the Servicer's Certificate. The Standby Servicer shall use such computer
diskette (or other electronic transmission) to verify certain information
specified in Section 4.13(b) contained in the Servicer's Certificate delivered
by the Servicer, and the Standby Servicer shall notify the Servicer and the Note
Insurer of any discrepancies on or before the second Business Day following the
Determination Date. In the event that the Standby Servicer reports any
discrepancies, the Servicer and the Standby Servicer shall attempt to reconcile
such discrepancies prior to the second Business Day prior to the related Payment
Date, but in the absence of a reconciliation, the Servicer's Certificate shall
control for the purpose of calculations and distributions with respect to the
related Payment Date. In the event that the Standby Servicer and the Servicer
are unable to reconcile discrepancies with respect to a Servicer's Certificate
by the related Payment Date, the Servicer shall cause a firm of independent
certified public accountants, at the Servicer's expense, to audit the Servicer's
Certificate and, prior to the fifth calendar day of the following month,
reconcile the discrepancies. The effect, if any, of such reconciliation shall be
reflected in the Servicer's Certificate for such next succeeding Determination
Date. Other than the duties specifically set forth in this Agreement, the
Standby Servicer shall have no obligations hereunder, including, without
limitation, to supervise, verify, monitor or administer the performance of the
Servicer. The Standby Servicer shall have no liability for any actions taken or
omitted by the Servicer. The duties and obligations of the Standby Servicer
shall be determined solely by the express provisions of this Agreement and no
implied covenants or obligations shall be read into this Agreement against the
Standby Servicer.
(b) The Standby Servicer shall review each Servicer's Certificate delivered
pursuant to Section 4.13(a) and shall:
(i) confirm that such Servicer's Certificate is complete on its face;
(ii) load the computer diskette (which shall be in a format acceptable
to the Standby Servicer) received from the Servicer pursuant to Section
4.13(a) hereof, confirm that such computer diskette is in a readable form
and calculate and confirm the Principal Balance of each Receivable for the
most recent Payment Date;
(iii) confirm that the Total Distribution Amount, the Principal
Distributable Amount, the Class A Noteholders' Principal Distributable
Amount, the Class A-1 Noteholders' Interest Distributable Amount, the Class
A-2 Noteholders' Interest Distributable Amount, the Class A-3 Noteholders'
Interest Distributable Amount, the Class A-4 Noteholders' Interest
Distributable Amount, the Certificateholders' Principal
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Distributable Amount, the Standby Fee, the Servicing Fee, the Trustee Fee,
the Collateral Agent Fee, the amount on deposit in the Spread Account, and
the Premium in the Servicer's Certificate are accurate based solely on the
recalculation of the Servicer's Certificate; and
(iv) confirm the calculation of the performance tests set forth in the
Spread Account Agreement.
SECTION 4.14. Retention and Termination of Servicer. The Servicer hereby
covenants and agrees to act as such under this Agreement for an initial term
commencing on the Closing Date and ending on September 30 , 1998, which term
shall be extendible by the Note Insurer for successive quarterly terms ending on
each successive March 31, June 30, September 30 and December 31 (or, at the
discretion of the Note Insurer exercised pursuant to revocable written standing
instructions from time to time to the Servicer and the Trustee, for any
specified number of terms greater than one), until such time as the Notes have
been paid in full, all amounts due to the Certificateholders have been paid and
until the Termination of the Trust. Each such notice (including each notice
pursuant to standing instructions, which shall be deemed delivered at the end of
successive terms for so long as such instructions are in effect) (a "Servicer
Extension Notice") shall be delivered by the Note Insurer to the Trustee and the
Servicer. The Servicer hereby agrees that, upon its receipt of any such Servicer
Extension Notice, the Servicer shall become bound, for the duration of the term
covered by such Servicer Extension Notice, to continue as the Servicer subject
to and in accordance with the other provisions of this Agreement. If an Insurer
Default has occurred and is continuing, the term of the Servicer's appointment
hereunder shall be deemed to have been extended until such time, if any, as such
Insurer Default has been cured unless such appointment is terminated sooner in
accordance with the terms of this Agreement). Until such time as an Insurer
Default shall have occurred and be continuing, the Trustee agrees that if as of
the fifteenth day prior to the last day of any term of the Servicer, the Trustee
shall not have received any Servicer Extension Notice from the Note Insurer, the
Trustee shall, within five days thereafter, give written notice of such
non-receipt to the Note Insurer.
SECTION 4.15. Fidelity Bond. The Servicer shall maintain a fidelity bond in
such form and amount as is customary for entities acting as custodian of funds
and documents in respect of consumer contracts on behalf of institutional
investors.
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ARTICLE V
TRUST ACCOUNTS; DISTRIBUTIONS;
STATEMENTS TO SECURITYHOLDERS
SECTION 5.1. Establishment of Trust Accounts.
(a) (i) The Trustee, on behalf of the Securityholders and the Note Insurer,
shall establish and maintain in its own name an Eligible Account (the
"Collection Account"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Trustee on behalf of the
Securityholders and the Note Insurer.
(ii) The Trustee, on behalf of the Noteholders, shall establish
and maintain in its own name an Eligible Account (the "Note Distribution
Account"), bearing a designation clearly indicating that the funds deposited
therein are held for the benefit of the Trustee on behalf of the Noteholders and
the Note Insurer. The Note Distribution Account shall initially be established
with the Trustee.
(b) Funds on deposit in the Collection Account and the Note Distribution
Account (collectively, the "Trust Accounts") shall be invested by the Trustee
(or any custodian with respect to funds on deposit in any such account) in
Eligible Investments selected in writing by the Servicer (pursuant to standing
instructions or otherwise). All such Eligible Investments shall be held by or on
behalf of the Trustee for the benefit of the Noteholders and/or the
Certificateholders and the Note Insurer, as applicable. Other than as permitted
by the Rating Agencies and the Note Insurer, funds on deposit in any Trust
Account shall be invested in Eligible Investments that will mature so that such
funds will be available at the close of business on the Business Day immediately
preceding the following Payment Date. Funds deposited in a Trust Account on the
day immediately preceding a Payment Date upon the maturity of any Eligible
Investments are not required to be invested overnight. All Eligible Investments
will be held to maturity.
(c) All investment earnings of moneys deposited in the Trust Accounts shall
be deposited (or caused to be deposited) by the Trustee in the Collection
Account for distribution pursuant to Section 5.7(b), and any loss resulting from
such investments shall be charged to such account. The Servicer will not direct
the Trustee to make any investment of any funds held in any of the Trust
Accounts unless the security interest granted and perfected in such account will
continue to be perfected in such investment, in either case without any further
action by any Person, and, in connection with any direction to the Trustee to
make any such investment, if requested by the Trustee, the Servicer shall
deliver to the Trustee an Opinion of Counsel, acceptable to the Trustee, to such
effect.
(d) The Trustee shall not in any way be held liable by reason of any
insufficiency in any of the Trust Accounts resulting from any loss on any
Eligible Investment included therein except for losses attributable to the
Trustee's negligence or bad faith or its failure to make payments on
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such Eligible Investments issued by the Trustee, in its commercial capacity as
principal obligor and not as trustee, in accordance with their terms.
(e) If (i) the Servicer shall have failed to give investment directions for
any funds on deposit in the Trust Accounts to the Trustee by 2:00 p.m. Eastern
Time (or such other time as may be agreed by the Issuer and Trustee) on any
Business Day; or (ii) a Default or Event of Default shall have occurred and be
continuing with respect to the Notes but the Notes shall not have been declared
due and payable, or, if such Notes shall have been declared due and payable
following an Event of Default, amounts collected or receivable from the Trust
Property are being applied as if there had not been such a declaration; then the
Trustee shall, to the fullest extent practicable, invest and reinvest funds in
the Trust Accounts in one or more Eligible Investments.
(f) The Trustee shall possess all right, title and interest in all funds on
deposit from time to time in the Trust Accounts and in all proceeds thereof
(including all Investment Earnings on the Trust Accounts) and all such funds,
investments, proceeds and income shall be part of the Trust Property. Except as
otherwise provided herein, the Trust Accounts shall be under the sole dominion
and control of the Trustee for the benefit of the Noteholders and/or the
Certificateholders, as the case may be, and the Note Insurer. If at any time any
of the Trust Accounts ceases to be an Eligible Account, the Servicer with the
consent of the Note Insurer shall within five Business Days establish a new
Trust Account as an Eligible Account and shall transfer any cash and/or any
investments to such new Trust Account. The Servicer shall promptly notify the
Rating Agencies and the Owner Trustee of any change in the location of any of
the aforementioned accounts. In connection with the foregoing, the Servicer
agrees that, in the event that any of the Trust Accounts are not accounts with
the Trustee, the Servicer shall notify the Trustee in writing promptly upon any
of such Trust Accounts ceasing to be an Eligible Account.
(g) With respect to the Trust Account Property, the Trustee agrees that:
(A) any Trust Account Property that is held in deposit accounts
shall be held solely in Eligible Accounts; and, except as otherwise
provided herein, each such Eligible Account shall be subject to the
exclusive custody and control of the Trustee and the Trustee shall
have sole signature authority with respect thereto;
(B) any Trust Account Property that constitutes Physical Property
or "certificated securities" shall be delivered to the Trustee in
accordance with paragraph (i)(a) or (ii)(b), as applicable, of the
definition of "Delivery" and shall be held, pending maturity or
disposition, solely by the Trustee or a financial intermediary (as
such term is defined in Section 8-313(4) of the UCC) acting solely for
the Trustee;
(C) any Trust Account Property that is a book-entry security held
through the Federal Reserve System pursuant to Federal book-entry
regulations shall be delivered in accordance with paragraph (i)(b) or
(ii)(c), as applicable, of the definition of "Delivery" and shall be
maintained by the Trustee, pending maturity or disposition, through
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continued book-entry registration of such Trust Account Property as
described in such paragraph; and
(D) any Trust Account Property that is an "uncertificated
security" under Article 8 of the UCC and that is not governed by
clause (C) above shall be delivered to the Trustee in accordance with
paragraph (i)(c) or (ii)(d), as applicable, of the definition of
"Delivery" and shall be maintained by the Trustee, pending maturity or
disposition, through continued registration of the Trustee's (or its
nominee's) ownership of such security.
(E) The Servicer shall have the power, revocable by the Note
Insurer or, with the consent of the Note Insurer by the Trustee or by
the Owner Trustee with the consent of the Trustee, to instruct the
Trustee to make withdrawals and payments from the Trust Accounts for
the purpose of permitting the Servicer and the Trustee to carry out
its respective duties hereunder.
SECTION 5.2. [RESERVED].
SECTION 5.3. Certain Reimbursements to the Servicer. The Servicer will be
entitled to be reimbursed from amounts on deposit in the Collection Account with
respect to a Collection Period for amounts previously deposited in the
Collection Account but later determined by the Servicer to have resulted from
mistaken deposits or postings or checks returned for insufficient funds. The
amount to be reimbursed hereunder shall be paid to the Servicer on the related
Payment Date pursuant to Section 5.7(b)(i) upon certification by the Servicer of
such amounts and the provision of such information to the Trustee and the Note
Insurer as may be necessary in the opinion of the Note Insurer to verify the
accuracy of such certification. In the event that the Note Insurer has not
received evidence satisfactory to it of the Servicer's entitlement to
reimbursement pursuant to this Section, the Note Insurer shall (unless an
Insurer Default shall have occurred and be continuing) give the Trustee notice
to such effect, following receipt of which the Trustee shall not make a
distribution to the Servicer in respect of such amount pursuant to Section 5.7,
or if the Servicer prior thereto has been reimbursed pursuant to Section 5.7,
the Trustee shall withhold such amounts from amounts otherwise distributable to
the Servicer on the next succeeding Payment Date.
SECTION 5.4. Application of Collections. All collections for each
Collection Period shall be applied by the Servicer as follows:
With respect to each Receivable (other than a Purchased Receivable),
payments by or on behalf of the Obligor shall be applied, in the case of a Rule
of 78's Receivable, first, to the Scheduled Receivable Payment of such Rule of
78's Receivable and, second, to any late fees accrued with respect to such Rule
of 78's Receivable and, in the case of a Simple Interest Receivable, to interest
and principal in accordance with the Simple Interest Method.
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SECTION 5.5. Withdrawals from Spread Account. (a) In the event that the
Servicer's Certificate with respect to any Determination Date shall state that
the Total Distribution Amount with respect to such Determination Date is
insufficient to make the payments required to be made on the related Payment
Date pursuant to Section 5.7(b)(i) through (viii) (such deficiency being a
"Deficiency Claim Amount"), then on the fourth Business Day immediately
preceding the related Payment Date, the Trustee shall deliver to the Collateral
Agent, the Owner Trustee, the Note Insurer, and the Servicer, by hand delivery,
telex or facsimile transmission, a written notice (a "Deficiency Notice")
specifying the Deficiency Claim Amount for such Payment Date. Such Deficiency
Notice shall direct the Collateral Agent to remit such Deficiency Claim Amount
(to the extent of the funds available to be distributed pursuant to the Spread
Account Agreement) to the Trustee for deposit in the Collection Account and
distribution pursuant to Sections 5.7(b)(i) through (viii), as applicable.
(b) Any Deficiency Notice shall be delivered by 10:00 a.m., New York City
time, on the fourth Business Day preceding such Payment Date. The amounts
distributed by the Collateral Agent to the Trustee pursuant to a Deficiency
Notice shall be deposited by the Trustee into the Collection Account pursuant to
Section 5.6.
SECTION 5.6. Additional Deposits.
(a) The Servicer or CPS, as the case may be, shall deposit or cause to be
deposited in the Collection Account the aggregate Purchase Amount with respect
to Purchased Receivables and the Servicer shall deposit or cause to be deposited
therein all amounts to be paid under Section 4.8(b) or 11.1. All such deposits
shall be made, in immediately available funds, on the Business Day preceding the
Determination Date. On or before the third Business Day preceding each Payment
Date, the Trustee shall remit to the Collection Account any amounts delivered to
the Trustee by the Collateral Agent pursuant to Section 5.5.
SECTION 5.7. Distributions.
(a) RESERVED
(b) On each Payment Date, the Trustee (based on the information contained
in the Servicer's Certificate delivered on the related Determination Date) shall
make the following distributions in the following order of priority:
(i) to the Standby Servicer, from the Total Distribution Amount, any
amount deposited in the Collection Account pursuant to Section 5.5(a) and
any amount deposited in the Collection Amount pursuant to Section 5.12(a)
in respect of Standby Fees, so long as CPS is the Servicer and Norwest Bank
Minnesota, National Association is the Standby Servicer, the Standby Fee
and all unpaid Standby Fees from prior Collection Periods;
(ii) to the Servicer, from the Total Distribution Amount (as such
Total Distribution Amount has been reduced by payments pursuant to clause
(i) above), any
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amount deposited in the Collection Account pursuant to Section 5.5(a) and
any amount deposited in the Collection Amount pursuant to Section 5.12(a)
in respect of Servicing Fees, the Servicing Fee and all unpaid Servicing
Fees from prior Collection Periods;
(iii) in the event the Standby Servicer becomes the successor
Servicer, to the Standby Servicer from the Total Distribution Amount (as
such Total Distribution Amount has been reduced by payments pursuant to
clauses (i) and (ii) above), any amount deposited in the Collection Account
pursuant to Section 5.5(a) and any amount deposited in the Collection
Account pursuant to Section 5.12(a) in respect of Servicing Fees, to the
extent not previously paid by the predecessor Servicer pursuant to this
Agreement, reasonable transition expenses (up to a maximum of $50,000 for
all such expenses) incurred in becoming the successor Servicer;
(iv) to the Trustee and the Owner Trustee, pro rata, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced by
payments pursuant to clauses (i) through (iii) above), any amount deposited
in the Collection Account pursuant to Section 5.5(a) and any amount
deposited in the Collection Account pursuant to Section 5.12(a) in respect
of Trustee Fees, the Trustee Fees and reasonable out-of-pocket expenses
thereof (including counsel fees and expenses) and all unpaid Trustee Fees
and unpaid reasonable out-of-pocket expenses (including counsel fees and
expenses) from prior Collection Periods; provided, however, that unless an
Event of Default shall have occurred and be continuing, expenses payable to
the Trustee and the Owner Trustee pursuant to this clause (iv) and expenses
payable to the Collateral Agent pursuant to clause (v) below shall be
limited to a total of $50,000 per annum;
(v) to the Collateral Agent, from the Total Distribution Amount (as
such Total Distribution Amount has been reduced by payments pursuant to
clauses (i) through (iv) above), any amount deposited in the Collection
Account pursuant to Section 5.5(a) and any amount deposited in the
Collection Account pursuant to Section 5.12(a) in respect of fees and
expenses of the Collateral Agent, all fees and expenses payable to the
Collateral Agent with respect to such Payment Date;
(vi) to the Note Distribution Account, from the Total Distribution
Amount (as such Total Distribution Amount has been reduced by payments
pursuant to clauses (i) through (v) above) and any amount deposited in the
Collection Account pursuant to Section 5.5(a) and Section 5.12(a)(iii), the
Class A Noteholders' Interest Distributable Amount for such Payment Date;
(vii) to the Note Distribution Account from the Total Distribution
Amount (as such Total Distribution Amount has been reduced by payments
pursuant to clauses (i) through (vi) above) and any amount deposited in the
Collection Account pursuant to Section 5.5(a) and Section 5.12(a)(ii) and
(iii), the Class A Noteholders' Principal Distributable Amount plus the
Class A Noteholders' Principal Carryover Shortfall, if any;
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(viii) to the Note Insurer, from the Total Distribution Amount (as
such Total Distribution Amount has been reduced by payments made pursuant
to clauses (i) through (vii) above) and any amount deposited in the
Collection Account pursuant to Section 5.5(a), any amounts owing to the
Note Insurer under this Agreement and the Insurance Agreement and not paid;
(ix) on any Payment Date prior to the First Target Date, to the
Collateral Agent for deposit in the Spread Account, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced by
payments pursuant to clauses (i) through (viii) above) the amount by which
the Initial Spread Account Deposit exceeds the amount in the Spread Account
on such Payment Date;
(x) on any Payment Date on which the principal balance of the Notes
(after giving effect to the payment described in (vii) above) exceeds the
Class A Target Amount for such Payment Date, to the Noteholders, from the
Total Distribution Amount (as such Total Distribution Amount has been
reduced by payments pursuant to clauses (i) through (ix) above) and any
amount deposited in the Collection Account pursuant to Section 5.12(a)(ii),
an amount equal to the lesser of (a) the portion of the Total Distribution
Amount remaining after making the payments described in clauses (i) through
(ix) above and (b) the excess of the principal balance of the Notes (after
giving effect to the payment described in (vii) above) over the Class A
Target Amount;
(xi) in the event any Person other than the Standby Servicer becomes
the successor Servicer, to such successor Servicer, from the Total
Distribution Amount (as such Total Distribution Amount has been reduced by
payments pursuant to clauses (i) through (x) above) to the extent not
previously paid by the predecessor Servicer pursuant to this Agreement,
reasonable transition expenses (up to a maximum of $50,000 for all such
expenses) incurred in becoming the successor Servicer; and
(xii) to the Collateral Agent, for deposit into the Spread Account,
the remaining Total Distribution Amount, if any;
provided, however, that, (A) following an acceleration of the Notes or, (B) if
an Insurer Default shall have occurred and be continuing and an Event of Default
pursuant to Section 5.1(i), 5.1(ii), 5.1(iv), 5.1(v) or 5.1(vi) of the Indenture
shall have occurred and be continuing, the Total Distribution Amount shall be
paid pursuant to Section 5.6(a) of the Indenture.
(c) In the event that the Collection Account is maintained with an
institution other than the Trustee, the Servicer shall instruct and cause such
institution to make all deposits and distributions pursuant to Section 5.7(b) on
the related Payment Date.
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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 Noteholders in respect of the Notes
to the extent of amounts due and unpaid on the Notes for principal and interest
in the following amounts and in the following order of priority:
(i) to the Holders of the Notes (pro rata to each class of Notes on
the basis of the accrued and unpaid interest thereon) the Class A Interest
Distributable Amount; provided that if there are not sufficient funds in the
Note Distribution Account to pay the entire amount then due on each Class of
Notes, the amount in the Note Distribution Account shall be applied to the
payment of such interest on each Class of Notes pro rata on the basis of the
amount of accrued and unpaid interest due on each Class of Notes;
(ii) to the Holders of the Class A-1 Notes, the Class A Noteholders'
Principal Distributable Amount until the outstanding principal balance of the
Class A-1 Notes is reduced to zero;
(iii) to the Holders of the Class A-2 Notes, the Class A Noteholders'
Principal Distributable Amount (as reduced by any distribution on such Payment
Date pursuant to clause (ii) above) until the outstanding principal balance of
the Class A-2 Notes is reduced to zero;
(iv) to the Holders of the Class A-3 Notes, the Class A Noteholders'
Principal Distributable Amount (as reduced by any distribution pursuant to
clauses (ii) and (iii) above) until the outstanding principal balance of the
class A-3 Notes is reduced to zero; and
(v) to the Holders of the Class A-4 Notes, the Class A Noteholders'
Principal Distributable Amount (as reduced by any distribution on such Payment
Date pursuant to clause (ii) above) until the outstanding principal balance of
the Class A-4 Notes is reduced to zero.
(b) On each Payment Date, the Trustee shall send to each Noteholder the
statement provided to the Trustee by the Servicer pursuant to Section 5.11
hereof on such Payment Date.
(c) In the event that any withholding tax is imposed on the Trust's payment
(or allocations of income) to a Noteholder, such tax shall reduce the amount
otherwise distributable to the Noteholder in accordance with this Section 5.8.
The Trustee is hereby authorized and directed to retain from amounts otherwise
distributable to the Noteholders sufficient funds for the payment of any tax
that is legally owed by the Trust (but such authorization shall not prevent the
Trustee from contesting any such tax in appropriate proceedings, and withholding
payment of such tax, if permitted by law, pending the outcome of such
proceedings). The amount of any withholding tax imposed with respect to a
Noteholder shall be treated as cash distributed to such Noteholder at the time
it is withheld by the Trust and remitted to the appropriate taxing authority.
If, after consultations with experienced counsel, the Trustee determines that
there is a reasonable likelihood that withholding tax is payable with respect to
a distribution (such as a
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distribution to a non-US Noteholder), the Trustee may in its sole discretion
withhold such amounts in accordance with this clause (c). In the event that a
Noteholder wishes to apply for a refund of any such withholding tax, the Trustee
shall reasonably cooperate with such Noteholder in making such claim so long as
such Noteholder agrees to reimburse the Trustee for any out-of-pocket expenses
incurred.
(d) Distributions required to be made to Noteholders on any Payment Date
shall be made to each Noteholder of record on the preceding Record Date either
by wire transfer, in immediately available funds, to the account of such Holder
at a bank or other entity having appropriate facilities therefor, if (i) such
Noteholder shall have provided to the Note Registrar appropriate written
instructions at least five Business Days prior to such Payment Date and such
Holder's Notes in the aggregate evidence a denomination of not less than
$1,000,000 or (ii) such Noteholder is the Seller, or an Affiliate thereof, or,
if not, by check mailed to such Noteholder at the address of such holder
appearing in the Note Register; provided, however, that, unless Definitive Notes
have been issued pursuant to Section 2.12 of the Indenture, with respect to
Notes registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such nominee to be Cede & Co.), distributions will be made by
wire transfer in immediately available funds to the account designated by such
nominee. Notwithstanding the foregoing, the final distribution in respect of any
Note (whether on the Final Scheduled Payment Date or otherwise) will be payable
only upon presentation and surrender of such Note at the office or agency
maintained for that purpose by the Note Registrar pursuant to Section 2.4 of the
Indenture.
SECTION 5.9. [RESERVED].
SECTION 5.10. [RESERVED].
SECTION 5.11. Statements to Securityholders. On or prior to each Payment
Date, the Servicer shall provide to the Trustee and the Owner Trustee (with a
copy to the Note Insurer and the Rating Agencies) for the Trustee and Owner
Trustee to forward to each Securityholder of record a statement setting forth at
least the following information as to the Notes and the Certificates to the
extent applicable:
(i) the amount of such distribution allocable to principal of each
Class of Notes and the Certificates;
(ii) the amount of such distribution allocable to interest on or with
respect to each Class of Notes;
(iii) the amount of such distribution payable out of amounts withdrawn
from the Spread Account or pursuant to a claim on the Note Policy;
(iv) the Pool Balance as of the close of business on the last day of
the preceding Collection Period;
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(v) the aggregate outstanding principal amount of each Class of Notes
and the Certificates, the Note Pool Factor for each such Class and the
Certificate Pool Factor after giving effect to payments allocated to principal
reported under clause (i) above;
(vi) the amount of the Servicing Fee paid to the Servicer with respect
to the related Collection Period, and the amount of any unpaid Servicing Fees
and the change in such amount from that of the prior Payment Date;
(vii) the amount of each of the Standby Fee, the Trustee Fee and the
Collateral Agent Fee paid to the Standby Servicer, the Trustee and the
Collateral Agent, as applicable, with respect to the related Collection Period,
and the amount of any unpaid Standby Fees, Trustee Fees and Collateral Agent
Fees and the change in such amount from the prior Payment Date;
(viii) the Class A-1 Noteholders' Interest Carryover Shortfall, the
Class A-2 Noteholders' Interest Carryover Shortfall, the Class A-3 Noteholders'
Interest Carryover Shortfall, the Class A-4 Noteholders' Interest Carryover
Shortfall, the Class A Noteholders' Principal Carryover Shortfall, and the
Certificateholders' Principal Carryover Shortfall;
(ix) the number of Receivables and the aggregate gross amount
scheduled to be paid thereon, including unearned finance and other charges, for
which the related Obligors are delinquent in making scheduled payments between
31 and 59 days and 60 days or more;
(x) the amount of the aggregate Realized Losses, if any, for the
second preceding Collection Period;
(xi) the amount of any payments made with respect to the related
Payment Date pursuant to Section 5.12(a)(i), (ii) and (iii), respectively;
(xii) the number and the aggregate Purchase Amounts for Receivables,
if any, that were repurchased in such period and summary information as to
losses and delinquencies with respect to the Receivables; and
(xiii) the cumulative amount of Realized Losses, since the Cutoff Date
to the last day of the related Collection Period.
Each amount set forth pursuant to paragraph (i), (ii), (iii), (vi), (vii),
(viii) and (xi) above shall be expressed as a dollar amount per $1,000 of the
initial principal balance of the Notes (or Class thereof) or Certificates, as
applicable.
SECTION 5.12. Optional Deposits by the Note Insurer; Notice of Waivers. (a)
The Note Insurer shall at any time, and from time to time, with respect to a
Payment Date, have the option (but shall not be required, except as provided in
Section 6.1(a)) to deliver amounts to the Trustee for deposit into the
Collection Account for any of the following purposes: (i) to provide funds in
respect of the payment of fees or expenses of any provider of services to the
Trust with
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respect to such Payment Date, (ii) to distribute as a component of the Class A
Noteholders' Principal Distributable Amount to the extent that the principal
balance of the Notes as of the Determination Date preceding such Payment Date
exceeds the Class A Noteholders' Percentage of the Pool Balance as of such
Determination Date, or (iii) to include such amount as part of the Total
Distribution Amount for such Payment Date to the extent that without such amount
a draw would be required to be made on the Policy.
(b) If the Note Insurer waives the satisfaction of any of the events that
might trigger an event of default under the Insurance Agreement and so notifies
the Trustee in writing pursuant to Section 5.02(d) of the Insurance Agreement,
the Trustee shall notify Moody's of such waiver.
ARTICLE VI
THE NOTE POLICY
SECTION 6.1. Claims Under Note Policy.
(a) In the event that the Trustee has delivered a Deficiency Notice with
respect to any Determination Date pursuant to Section 5.5 hereof, the Trustee
shall on the related Draw Date determine whether the application of funds in
accordance with Section 5.7(b), together with any Note Insurer Optional Deposit
pursuant to Section 5.12 and the application of any Deficiency Claim Amount
pursuant to Section 5.5 would result in a shortfall in amounts distributable
pursuant to Sections 5.7(b)(vi) and 5.7(b)(vii) on any Payment Date (any such
shortfall, a "Note Policy Claim Amount"). If the Note Policy Claim Amount for
such Payment Date is greater than zero, the Trustee shall furnish to the Note
Insurer no later than 12:00 noon New York City time on the related Draw Date a
completed Notice of Claim (as defined in clause (b) below) in the amount of the
Note Policy Claim Amount. Amounts paid by the Note Insurer pursuant to a claim
submitted under this Section 6.1. shall be deposited by the Trustee into the
Note Distribution Account for payment to Noteholders on the related Payment
Date.
(b) Any notice delivered by the Trustee to the Note Insurer pursuant to
Section 6.1(a) shall specify the Note Policy Claim Amount claimed under the Note
Policy and shall constitute a "Notice of Claim" (as defined in the Note Policy)
under the Note Policy. In accordance with the provisions of the Note Policy, the
Note Insurer is required to pay to the Trustee the Note Policy Claim Amount
properly claimed thereunder by 12:00 noon, New York City time, on the later of
(i) the third Business Day (as defined in the Note Policy) following receipt on
a Business Day of the Notice of Claim, and (ii) the applicable Payment Date. Any
payment made by the Note Insurer under the Note Policy shall be applied solely
to the payment of the Notes, and for no other purpose.
(c) The Trustee shall (i) receive as attorney-in-fact of each Noteholder
any Note Policy Claim Amount from the Note Insurer and (ii) deposit the same in
the Note Distribution Account for distribution to Noteholders. Any and all Note
Policy Claim Amounts disbursed by the
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Trustee from claims made under the Note Policy shall not be considered payment
by the Trust or from the Series 1998-3 Spread Account with respect to such
Notes, and shall not discharge the obligations of the Trust with respect
thereto. The Note Insurer shall, to the extent it makes any payment with respect
to the Notes, become subrogated to the rights of the recipients of such payments
to the extent of such payments. Subject to and conditioned upon any payment with
respect to the Notes by or on behalf of the Note Insurer, the Trustee and the
Noteholders shall assign to the Note Insurer all rights to the payment of
interest or principal with respect to the Notes which are then due for payment
to the extent of all payments made by the Note Insurer, and the Note Insurer may
exercise any option, vote, right, power or the like with respect to the Notes to
the extent that it has made payment pursuant to the Note Policy. To evidence
such subrogation, the Note Registrar (as defined in the Indenture) shall note
the Note Insurer's rights as subrogee upon the register of Noteholders upon
receipt from the Note Insurer of proof of payment by the Note Insurer of any
Noteholders' Interest Distributable Amount or Noteholders' Principal
Distributable Amount. The foregoing subrogation shall in all cases be subject to
the rights of the Noteholders to receive all Scheduled Payments (as defined in
the Note Policy) in respect of the Notes.
(d) The Trustee shall keep a complete and accurate record of all funds
deposited by the Note Insurer into the Note Distribution Account and the
allocation of such funds to payment of interest on and principal paid in respect
of any Note. The Note Insurer shall have the right to inspect such records at
reasonable times upon one Business Day's prior notice to the Trustee.
(e) The Trustee shall be entitled to enforce on behalf of the Noteholders
the obligations of the Note Insurer under the Note Policy. Notwithstanding any
other provision of this Agreement or any Basic Documents, the Noteholders are
not entitled to make any claims under the Note Policy or institute proceedings
directly against the Note Insurer.
SECTION 6.2. Preference Claims.
(a) In the event that the Trustee has received a certified copy of an order
of the appropriate court that any Scheduled Payment (as defined in the Note
Policy) paid on a Note has been avoided in whole or in part as a preference
payment under applicable bankruptcy law, the Trustee shall so notify the Note
Insurer, shall comply with the provisions of the Note Policy to obtain payment
by the Note Insurer of such avoided payment, and shall, at the time it provides
notice to the Note Insurer, notify Holders of the Notes by mail that, in the
event that any Noteholder's payment is so recoverable, such Noteholder will be
entitled to payment pursuant to the terms of the Note Policy. The Trustee shall
furnish to the Note Insurer its records evidencing the payments of principal of
and interest on Notes, if any, which have been made by the Trustee and
subsequently recovered from Noteholders, and the dates on which such payments
were made. Pursuant to the terms of the Note Policy, the Note Insurer will make
such payment on behalf of the Noteholder to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the order (as defined in
the Note Policy) and not to the Trustee or any Noteholder directly (unless a
Noteholder has previously paid such payment to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy, in which case the Note Insurer
will
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make such payment to the Trustee for distribution to such Noteholder upon proof
of such payment reasonably satisfactory to the Note Insurer).
(b) The Trustee shall promptly notify the Note Insurer of any proceeding or
the institution of any action (of which the Trustee has actual knowledge)
seeking the avoidance as a preferential transfer under applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (a "Preference Claim")
of any distribution made with respect to the Notes. Each Holder, by its purchase
of Notes, and the Trustee hereby agree that so long as an Insurer Default shall
not have occurred and be continuing, the Note Insurer may at any time during the
continuation of any proceeding relating to a Preference Claim direct all matters
relating to such Preference Claim including, without limitation, (i) the
direction of any appeal of any order relating to any Preference Claim and (ii)
the posting of any surety, supersedeas or performance bond pending any such
appeal at the expense of the Note Insurer, but subject to reimbursement as
provided in the Insurance Agreement. In addition, and without limitation of the
foregoing, as set forth in Section 6.1(c), the Note Insurer shall be subrogated
to, and each Noteholder and the Trustee hereby delegate and assign, to the
fullest extent permitted by law, the rights of the trustee and each Noteholder
in the conduct of any proceeding with respect to a Preference Claim, including,
without limitation, all rights of any party to an adversary proceeding action
with respect to any court order issued in connection with any such Preference
Claim.
SECTION 6.3. Surrender of Note Policy. The Trustee shall surrender the Note
Policy to the Note Insurer for cancellation upon the expiration of such policy
in accordance with the terms thereof.
ARTICLE VII
[RESERVED]
ARTICLE VIII
THE SELLER
SECTION 8.1. Representations of Seller. The Seller makes the following
representations on which the Note Insurer shall be deemed to have relied in
executing and delivering the Note Policy and on which the Issuer is deemed to
have relied in acquiring the Receivables. The representations speak as of the
execution and delivery of this Agreement and as of the Closing Date, and shall
survive the sale of the Receivables to the Issuer and the pledge thereof to the
Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Seller has been duly organized
and is validly existing as a corporation in good standing under the laws of
the State of California, with power and authority to own its properties and
to conduct its business as
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such properties are currently owned and such business is currently
conducted, and had at all relevant times, and now has, power, authority and
legal right to acquire, own and sell the Receivables and the Other Conveyed
Property transferred to the Trust.
(b) Due Qualification. The Seller is duly qualified to do business as
a foreign corporation in good standing, and has obtained all necessary
licenses and approvals in all jurisdictions in which the ownership or lease
of property or the conduct of its business shall require such
qualifications.
(c) Power and Authority. The Seller has the power and authority to
execute and deliver this Agreement and the Basic Documents to which it is a
party and to carry out its terms and their terms, respectively; the Seller
has full power and authority to sell and assign the Receivables and the
Other Conveyed Property to be sold and assigned to and deposited with the
Trust by it and has duly authorized such sale and assignment to the Trust
by all necessary corporate action; and the execution, delivery and
performance of this Agreement and the Basic Documents to which the Seller
is a party have been duly authorized by the Seller by all necessary
corporate action.
(d) Valid Sale, Binding Obligations. This Agreement effects a valid
sale, transfer and assignment of the Receivables and the Other Conveyed
Property, enforceable against the Seller and creditors of and purchasers
from the Seller; and this Agreement and the Basic Documents to which the
Seller is a party, when duly executed and delivered, shall constitute
legal, valid and binding obligations of the Seller enforceable in
accordance with their respective terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies, regardless of whether
such enforceability is considered in a proceeding in equity or at law.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the Basic Documents and the fulfillment of the terms of
this Agreement and the Basic Documents shall not conflict with, result in
any breach of any of the terms and provisions of or constitute (with or
without notice, lapse of time or both) a default under the certificate of
incorporation or by-laws of the Seller, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Seller is a party
or by which it is bound, or result in the creation or imposition of any
Lien upon any of its properties pursuant to the terms of any such
indenture, agreement, mortgage, deed of trust or other instrument, other
than the Basic Documents, or violate any law, order, rule or regulation
applicable to the Seller of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Seller or any of its properties.
(f) No Proceedings. There are no proceedings or investigations pending
or, to the Seller's knowledge, threatened against the Seller, before any
court, regulatory body,
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administrative agency or other tribunal or governmental instrumentality
having jurisdiction over the Seller or its properties (A) asserting the
invalidity of this Agreement, the Securities or any of the Basic Documents,
(B) seeking to prevent the issuance of the Securities or the consummation
of any of the transactions contemplated by this Agreement or any of the
Basic Documents, (C) seeking any determination or ruling that might
materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement or
any of the Basic Documents, or (D) relating to the Seller and which might
adversely affect the federal or state income, excise, franchise or similar
tax attributes of the Securities.
(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Securities or the consummation of the other
transactions contemplated by this Agreement, except such as have been duly
made or obtained.
(h) Tax Returns. The Seller has filed on a timely basis all tax
returns required to be filed by it and paid all taxes, to the extent that
such taxes have become due.
(i) Chief Executive Office. The chief executive office of the Seller
is at 2 Ada, Irvine, California 92718.
SECTION 8.2. [RESERVED].
SECTION 8.3. Liability of Seller; Indemnities. The Seller shall be liable
in accordance herewith only to the extent of the obligations specifically
undertaken by the Seller under this Agreement.
(a) The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Note Insurer, the Standby Servicer and the Trustee from and
against any taxes that may at any time be asserted against any such Person with
respect to the transactions contemplated in this Agreement and any of the Basic
Documents (except any income taxes arising out of fees paid to the Owner
Trustee, the Trustee, the Standby Servicer and the Note Insurer and except any
taxes to which the Owner Trustee, or the Trustee may otherwise be subject),
including any sales, gross receipts, general corporation, tangible personal
property, privilege or license taxes (but, in the case of the Issuer, not
including any taxes asserted with respect to federal or other income taxes
arising out of distributions on the Notes and the Certificates) and costs and
expenses in defending against the same.
(b) The Seller shall indemnify, defend and hold harmless the Issuer, the
Owner Trustee, the Trustee, the Note Insurer and the Securityholders from and
against any loss, liability or expense incurred by reason of (i) the Seller's
willful misfeasance, bad faith or negligence in the performance of its duties
under this Agreement, or by reason of reckless disregard of its obligations and
duties under this Agreement and (ii) the Seller's or the Issuer's violation of
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Federal or state securities laws in connection with the offering and sale of the
Notes and the Certificates.
(c) The Seller shall indemnify, defend and hold harmless the Owner Trustee,
the Trustee, and the Standby Servicer and its officers, directors, employees and
agents from and against any and all costs, expenses, losses, claims, damages and
liabilities arising out of, or incurred in connection with the acceptance or
performance of the trusts and duties set forth herein and in the Basic Documents
except to the extent that such cost, expense, loss, claim, damage or liability
shall be due to the willful misfeasance, bad faith or negligence (except for
errors in judgment) of the Owner Trustee.
Indemnification under this Section shall survive the resignation or removal
of the Owner Trustee or the Trustee and the termination of this Agreement or the
Indenture or the Trust Agreement, as applicable, and shall include reasonable
fees and expenses of counsel and other expenses of litigation. If the Seller
shall have made any indemnity payments pursuant to this Section and the Person
to or on behalf of whom such payments are made thereafter shall collect any of
such amounts from others, such Person shall promptly repay such amounts to the
Seller, without interest.
SECTION 8.4. Merger or Consolidation of, or Assumption of the Obligations
of, Seller. Any Person (a) into which the Seller may be merged or consolidated,
(b) which may result from any merger or consolidation to which the Seller shall
be a party or (c) which may succeed to the properties and assets of the Seller
substantially as a whole, which Person in any of the foregoing cases executes an
agreement of assumption to perform every obligation of the Seller under this
Agreement, shall be the successor to the Seller hereunder without the execution
or filing of any document or any further act by any of the parties to this
Agreement; provided, however, that (i) the Seller shall have received the
written consent of the Note Insurer prior to entering into any such transaction,
(ii) immediately after giving effect to such transaction, no representation or
warranty made pursuant to Section 3.1 shall have been breached and no Servicer
Termination Event, and no event which, after notice or lapse of time, or both,
would become a Servicer Termination Event shall have occurred and be continuing,
(iii) the Seller shall have delivered to the Owner Trustee, the Trustee and the
Note Insurer an Officers' Certificate and an Opinion of Counsel each stating
that such consolidation, merger or succession and such agreement of assumption
comply with this Section and that all conditions precedent, if any, provided for
in this Agreement relating to such transaction have been complied with, (iv) the
Rating Agency Condition shall have been satisfied with respect to such
transaction and (v) the Seller shall have delivered to the Owner Trustee, the
Trustee and the Note Insurer an Opinion of Counsel stating that, in the opinion
of such counsel, either (A) all financing statements and continuation statements
and amendments thereto have been executed and filed that are necessary fully to
preserve and protect the interest of the Owner Trustee and the Trustee,
respectively, in the Receivables and the Other Conveyed Property and reciting
the details of such filings or (B) no such action shall be necessary to preserve
and protect such interest. Notwithstanding anything herein to the contrary, the
execution of the foregoing agreement of assumption and compliance
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with clauses (i), (ii), (iii), (iv) and (v) above shall be conditions to the
consummation of the transactions referred to in clause (a), (b) or (c) above.
SECTION 8.5. Limitation on Liability of Seller and Others. The Seller and
any director or officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie
properly executed and submitted by any Person respecting any matters arising
under any Basic Document. The Seller shall not be under any obligation to appear
in, prosecute or defend any legal action that shall not be incidental to its
obligations under this Agreement, and that in its opinion may involve it in any
expense or liability.
SECTION 8.6. Seller May Own Certificates or Notes. The Seller and any
Affiliate thereof may in its individual or any other capacity become the owner
or pledgee of Certificates or Notes with the same rights as it would have if it
were not the Seller or an Affiliate thereof, except as expressly provided herein
or in any Basic Document. Notes or Certificates so owned by the Seller or such
Affiliate shall have an equal and proportionate benefit under the provisions of
the Basic Documents, without preference, priority or distinction as among all of
the Notes or Certificates; provided, however, that any Notes owned by the Seller
or any Affiliate thereof, during the time such Notes are so owned by them, shall
be without voting rights for any purpose set forth in the Basic Documents and
the Notes shall not be entitled to the benefits of the Note Policy. The Seller
shall notify the Owner Trustee, the Trustee and the Note Insurer promptly after
it or any of its Affiliates become the owner of a Certificate or a Note.
ARTICLE IX
THE SERVICER
SECTION 9.1. Representations of Servicer. The Servicer makes the following
representations on which the Note Insurer shall be deemed to have relied in
executing and delivering the Note Policy and on which the Issuer is deemed to
have relied in acquiring the Receivables. The representations speak as of the
execution and delivery of this Agreement and as of the Closing Date and shall
survive the sale of the Receivables to the Issuer and the pledge thereof to the
Trustee pursuant to the Indenture.
(a) Organization and Good Standing. The Servicer has been duly
organized and is validly existing as a corporation and in good standing
under the laws of the State of California, with power, authority and legal
right to own its properties and to conduct its business as such properties
are currently owned and such business is presently conducted, and had at
all relevant times, and shall have, power, authority and legal right to
acquire, own and service the Receivables;
(b) Due Qualification. The Servicer is duly qualified to do business
as a foreign corporation in good standing and has obtained all necessary
licenses and approvals, in all
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jurisdictions in which the ownership or lease of property or the conduct of
its business (including the servicing of the Receivables as required by
this Agreement) requires or shall require such qualification;
(c) Power and Authority. The Servicer has the power and authority to
execute and deliver this Agreement and the Basic Documents to which it is a
party and to carry out its terms and their terms, respectively, and the
execution, delivery and performance of this Agreement and the Basic
Documents to which it is a party have been duly authorized by the Servicer
by all necessary corporate action;
(d) Binding Obligation. This Agreement and the Basic Documents to
which the Servicer is a party shall constitute legal, valid and binding
obligations of the Servicer enforceable in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, or other similar laws affecting the enforcement of
creditors' rights generally and by equitable limitations on the
availability of specific remedies, regardless of whether such
enforceability is considered in a proceeding in equity or at law;
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the Basic Documents to which to the Servicer is a party,
and the fulfillment of the terms of this Agreement and the Basic Documents
to which the Servicer is a party, shall not conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Servicer, or any indenture, agreement,
mortgage, deed of trust or other instrument to which the Servicer is a
party or by which it is bound or any of its properties are subject, or
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement, mortgage, deed of
trust or other instrument, other than the Basic Documents, or violate any
law, order, rule or regulation applicable to the Servicer of any court or
of any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Servicer or any
of its properties;
(f) No Proceedings. There are no proceedings or investigations pending
or, to the Servicer's knowledge, threatened against the Servicer, before
any court, regulatory body, administrative agency or other tribunal or
governmental instrumentality having jurisdiction over the Servicer or its
properties (A) asserting the invalidity of this Agreement or any of the
Basic Documents, (B) seeking to prevent the issuance of the Securities or
the consummation of any of the transactions contemplated by this Agreement
or any of the Basic Documents, or (C) seeking any determination or ruling
that might materially and adversely affect the performance by the Servicer
of its obligations under, or the validity or enforceability of, this
Agreement, the Securities or any of the Basic Documents or (D) relating to
the Servicer and which might adversely affect the federal or state income,
excise, franchise or similar tax attributes of the Securities;
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(g) No Consents. No consent, approval, authorization or order of or
declaration or filing with any governmental authority is required for the
issuance or sale of the Securities or the consummation of the other
transactions contemplated by this Agreement, except such as have been duly
made or obtained.
(h) Taxes. The Servicer has filed on a timely basis all tax returns
required to be filed by it and paid all taxes, to the extent that such
taxes have become due.
(i) Chief Executive Office. The Servicer hereby represents and
warrants to the Trustee that the Servicer's principal place of business and
chief executive office is, and for the four months preceding the date of
this Agreement has been, located at: 2 Ada, Irvine, California 92718.
(j) Year 2000 Compliance. The Servicer covenants that its computer and
other systems used in servicing the Receivables will be modified to operate
in a manner such that on and after January 1, 2000 (i) the Servicer can
service the Receivables in accordance with the terms of this Agreement and
(ii) the Servicer can operate its business in substantially the same manner
as it is operating on the date hereof. The Servicer shall certify in
writing to the Standby Servicer no later than June 30, 1999 that it is in
compliance with this Section 9.1(j).
SECTION 9.2. Liability of Servicer; Indemnities.
(a) The Servicer (in its capacity as such) shall be liable hereunder only
to the extent of the obligations in this Agreement specifically undertaken by
the Servicer and the representations made by the Servicer.
(i) The Servicer shall defend, indemnify and hold harmless the Trust,
the Trustee, the Owner Trustee, the Standby Servicer, the Note Insurer, and
the Securityholders from and against any and all costs, expenses, losses,
damages, claims and liabilities, arising out of or resulting from the use,
ownership, repossession or operation by the Servicer or any Affiliate
thereof of any Financed Vehicle;
(ii) The Servicer shall indemnify, defend and hold harmless the Trust,
the Trustee, the Owner Trustee, the Standby Servicer, the Note Insurer, and
the Securityholders from and against any taxes that may at any time be
asserted against any of such parties with respect to the transactions
contemplated in this Agreement, including, without limitation, any sales,
gross receipts, general corporation, tangible personal property, privilege
or license taxes (but not including any federal or other income taxes,
including franchise taxes asserted with respect to, and as of the date of,
the sale of the Receivables and the Other Conveyed Property to the Trust or
the issuance and original sale of the Securities) and costs and expenses in
defending against the same;
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(iii) The Servicer shall indemnify, defend and hold harmless the
Trust, the Trustee, the Owner Trustee, the Standby Servicer, the Note
Insurer, their respective officers, directors, agents and employees and the
Securityholders from and against any and all costs, expenses, losses,
claims, damages, and liabilities to the extent that such cost, expense,
loss, claim, damage, or liability arose out of, or was imposed upon the
Trust, the Trustee, the Owner Trustee, the Standby Servicer, the Note
Insurer or the Securityholders through the negligence, willful misfeasance
or bad faith of the Servicer in the performance of its duties under this
Agreement or by reason of reckless disregard of its obligations and duties
under this Agreement.
(iv) The Servicer shall indemnify, defend, and hold harmless the
Trustee, the Owner Trustee, the Standby Servicer and the Collateral Agent
from and against all costs, expenses, losses, claims, damages, and
liabilities arising out of or incurred in connection with the acceptance or
performance of the trusts and duties herein contained or in the Trust
Agreement, if any, except to the extent that such cost, expense, loss,
claim, damage or liability: (A) shall be due to the willful misfeasance,
bad faith, or negligence (except for errors in judgment) of the Trustee,
the Owner Trustee, the Standby Servicer or the Collateral Agent, as
applicable or (B) relates to any tax other than the taxes with respect to
which the Servicer shall be required to indemnify the Trustee, the Owner
Trustee, the Standby Servicer or the Collateral Agent.
(b) Notwithstanding the foregoing, the Servicer shall not be obligated to
defend, indemnify, and hold harmless any Securityholders for any losses, claims,
damages or liabilities incurred by any Securityholders arising out of claims,
complaints, actions and allegations relating to Section 406 of ERISA or Section
4975 of the Code as a result of the purchase or holding of a Security by such
Securityholder with the assets of a plan subject to such provisions of ERISA or
the Code or the servicing, management and operation of the Trust.
(c) For purposes of this Section 9.2, in the event of the termination of
the rights and obligations of the Servicer (or any successor thereto pursuant to
Section 9.3) as Servicer pursuant to Section 10.1, or a resignation by such
Servicer pursuant to this Agreement, such Servicer shall be deemed to be the
Servicer pending appointment of a successor Servicer pursuant to Section 10.2.
The provisions of this Section 9.2(c) shall in no way affect the survival
pursuant to Section 9.2(d) of the indemnification by the Servicer provided by
Section 9.2(a).
(d) Indemnification under this Section 9.2 shall survive the termination of
this Agreement and any resignation or removal of CPS as Servicer and shall
include reasonable fees and expenses of counsel and expenses of litigation. If
the Servicer shall have made any indemnity payments pursuant to this Section and
the recipient thereafter collects any of such amounts from others, the recipient
shall promptly repay such amounts to the Servicer, without interest.
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SECTION 9.3. Merger or Consolidation of, or Assumption of the Obligations
of, the Servicer or Standby Servicer.
(a) CPS shall not merge or consolidate with any other person, convey,
transfer or lease substantially all its assets as an entirety to another Person,
or permit any other Person to become the successor to CPS's business unless,
after the merger, consolidation, conveyance, transfer, lease or succession, the
successor or surviving entity shall be capable of fulfilling the duties of CPS
contained in this Agreement. Any corporation (i) into which CPS may be merged or
consolidated, (ii) resulting from any merger or consolidation to which CPS shall
be a party, (iii) which acquires by conveyance, transfer, or lease substantially
all of the assets of CPS, or (iv) succeeding to the business of CPS, in any of
the foregoing cases shall execute an agreement of assumption to perform every
obligation of CPS under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to CPS under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties to this Agreement, anything in this Agreement to the contrary
notwithstanding; provided, however, that nothing contained herein shall be
deemed to release CPS from any obligation. CPS shall provide notice of any
merger, consolidation or succession pursuant to this Section to the Owner
Trustee, the Trustee, the Securityholders, the Note Insurer and each Rating
Agency. Notwithstanding the foregoing, CPS shall not merge or consolidate with
any other Person or permit any other Person to become a successor to CPS's
business, unless (x) immediately after giving effect to such transaction, no
representation or warranty made pursuant to Section 9.1 shall have been breached
(for purposes hereof, such representations and warranties shall be deemed made
as of the date of the consummation of such transaction) and no event that, after
notice or lapse of time, or both, would become an Insurance Agreement Event of
Default shall have occurred and be continuing, (y) CPS shall have delivered to
the Owner Trustee, the Trustee, the Rating Agencies and the Note Insurer an
Officer's Certificate and an Opinion of Counsel each stating that such
consolidation, merger or succession and such agreement of assumption comply with
this Section and that all conditions precedent, if any, provided for in this
Agreement relating to such transaction have been complied with, and (z) CPS
shall have delivered to the Owner Trustee, the Trustee, the Rating Agencies and
the Note Insurer an Opinion of Counsel, stating in the opinion of such counsel,
either (A) all financing statements and continuation statements and amendments
thereto have been executed and filed that are necessary to preserve and protect
the interest of the Owner Trustee and the Trustee, respectively, in the
Receivables and the Other Conveyed Property and reciting the details of the
filings or (B) no such action shall be necessary to preserve and protect such
interest.
(b) Any corporation (i) into which the Standby Servicer may be merged or
consolidated, (ii) resulting from any merger or consolidation to which the
Standby Servicer shall be a party, (iii) which acquires by conveyance, transfer
or lease substantially all of the assets of the Standby Servicer, or (iv)
succeeding to the business of the Standby Servicer, in any of the foregoing
cases shall execute an agreement of assumption to perform every obligation of
the Standby Servicer under this Agreement and, whether or not such assumption
agreement is executed, shall be the successor to the Standby Servicer under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, anything in this
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Agreement to the contrary notwithstanding; provided, however, that nothing
contained herein shall be deemed to release the Standby Servicer from any
obligation.
SECTION 9.4. Limitation on Liability of Servicer, Standby Servicer and
Others.
Neither the Servicer, the Standby Servicer nor any of the directors or
officers or employees or agents of the Servicer or Standby Servicer shall be
under any liability to the Trust or the Securityholders, except as provided in
this Agreement, for any action taken or for refraining from the taking of any
action pursuant to this Agreement; provided, however, that this provision shall
not protect the Servicer, the Standby Servicer or any such person against any
liability that would otherwise be imposed by reason of a breach of this
Agreement or willful misfeasance, bad faith or negligence in the performance of
duties. CPS, the Standby Servicer and any director, officer, employee or agent
of CPS or the Standby Servicer may rely in good faith on the written advice of
counsel or on any document of any kind prima facie properly executed and
submitted by any Person respecting any matters arising under this Agreement.
SECTION 9.5. Delegation of Duties. The Servicer may at any time delegate
duties under this Agreement to sub-contractors who are in the business of
servicing automotive receivables with the prior written consent of the
Controlling Party as determined pursuant to Section 13.15; provided, however,
that no such delegation or sub-contracting of duties by the Servicer shall
relieve the Servicer of its responsibility with respect to such duties.
SECTION 9.6. Servicer and Standby Servicer Not to Resign. Subject to the
provisions of Section 9.3, neither the Servicer nor the Standby Servicer shall
resign from the obligations and duties imposed on it by this Agreement as
Servicer or Standby Servicer except upon a determination that by reason of a
change in legal requirements the performance of its duties under this Agreement
would cause it to be in violation of such legal requirements in a manner which
would have a material adverse effect on the Servicer or the Standby Servicer, as
the case may be, and the Note Insurer (so long as an Insurer Default shall not
have occurred and be continuing) or a Security Majority (if an Insurer Default
shall have occurred and be continuing) does not elect to waive the obligations
of the Servicer or the Standby Servicer, as the case may be, to perform the
duties which render it legally unable to act or to delegate those duties to
another Person. Any such determination permitting the resignation of the
Servicer or Standby Servicer shall be evidenced by an Opinion of Counsel to such
effect delivered and acceptable to the Trustee, the Owner Trustee and the Note
Insurer (unless an Insurer Default shall have occurred and be continuing). No
resignation of the Servicer shall become effective until, so long as no Insurer
Default shall have occurred and be continuing, the Standby Servicer or an entity
acceptable to the Note Insurer shall have assumed the responsibilities and
obligations of the Servicer or, if an Insurer Default shall have occurred and be
continuing, the Standby Servicer or a successor Servicer that is an Eligible
Servicer shall have assumed the responsibilities and obligations of the Standby
Servicer. No resignation of the Standby Servicer shall become effective until,
so long as no Insurer Default shall have occurred and be continuing, an entity
acceptable to the Note Insurer shall have assumed the responsibilities and
obligations of the Standby Servicer or, if an Insurer Default shall have
occurred and be continuing a Person that is
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an Eligible Servicer shall have assumed the responsibilities and obligations of
the Standby Servicer; provided, however, that in the event a successor Standby
Servicer is not appointed within 60 days after the Standby Servicer has given
notice of its resignation and has provided the Opinion of Counsel required by
this Section 9.6, the Standby Servicer may petition a court for its removal.
ARTICLE X
DEFAULT
SECTION 10.1. Servicer Termination Event. For purposes of this Agreement,
each of the following shall constitute a "Servicer Termination Event":
(a) Any failure by the Servicer to deliver to the Trustee for distribution
to Securityholders any proceeds or payment required to be so delivered under the
terms of this Agreement that continues unremedied for a period of two Business
Days (one Business Day with respect to payment of Purchase Amounts) after
written notice is received by the Servicer from the Trustee or the Note Insurer
(unless an Insurer Default shall have occurred and be continuing) or after
discovery of such failure by a Responsible officer of the Servicer;
(b) Failure by the Servicer to deliver to the Trustee and the Note Insurer
(so long as an Insurer Default shall not have occurred and be continuing), the
Servicer's Certificate within five days after the date on which such Servicer's
Certificate is required to be delivered, or failure on the part of the Servicer
to observe its covenants and agreements set forth in Section 9.3(a);
(c) Failure on the part of the Servicer duly to observe or perform any
other covenants or agreements of the Servicer set forth in this Agreement, which
failure (i) materially and adversely affects the rights of Securityholders
(determined without regard to the availability of funds under the Policy), or of
the Note Insurer (unless an Insurer Default shall have occurred and be
continuing), and (ii) continues unremedied for a period of 30 days after the
date on which written notice of such failure, requiring the same to be remedied,
shall have been given (1) to the Servicer by the Trustee or the Note Insurer or
(2) to the Servicer and to the Trustee and the Note Insurer by the Holders of
Class A Notes evidencing not less than 25% of the outstanding principal balance
of the Notes or, after the Class A Notes have been paid in full and all
outstanding Reimbursement Obligations and other amounts due to the Note Insurer
have been paid in full, by the Holders of Certificates evidencing not less than
25% of the outstanding principal balance of the Certificates;
(d) The entry of a decree or order by a court or agency or supervisory
authority having jurisdiction in the premises for the appointment of a
conservator, receiver, or liquidator for the Servicer or the Seller (or, so long
as CPS is Servicer, any of the Servicer's Affiliates) in any bankruptcy,
insolvency, readjustment of debt, marshaling of assets and liabilities, or
similar
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proceedings, or for the winding up or liquidation of its affairs, and the
continuance of any such decree or order unstayed and in effect for a period of
60 consecutive days; or
(e) The consent by the Servicer or the Seller (or, so long as CPS is
Servicer, any of the Servicer's Affiliates) to the appointment of a conservator,
trustee, receiver or liquidator in any bankruptcy, insolvency, readjustment of
debt, marshalling of assets and liabilities, or similar proceedings of or
relating to the Servicer or the Seller (or, so long as CPS is Servicer, any of
the Servicer's Affiliates) of or relating to substantially all of its property;
or the Servicer or the Seller (or, so long as CPS is Servicer, any of the
Servicer's Affiliates) or the Seller shall admit in writing its inability to pay
its debts generally as they become due, file a petition to take advantage of any
applicable insolvency or reorganization statute, make an assignment for the
benefit of its creditors, or voluntarily suspend payment of its obligations; or
(f) Any representation, warranty or statement of the Servicer made in this
Agreement or any certificate, report or other writing delivered pursuant hereto
shall prove to be incorrect in any material respect as of the time when the same
shall have been made, and the incorrectness of such representation, warranty or
statement has a material adverse effect on the Trust or the Securityholders and,
within 30 days after written notice thereof shall have been given (1) to the
Servicer by the Trustee or the Note Insurer or (2) to the Servicer and to the
Trustee and the Note Insurer by the Holders of Notes evidencing not less than
25% of the outstanding principal balance of the Notes or, after the Class A
Notes have been paid in full and all outstanding Reimbursement Obligations and
other amounts due to the Note Insurer have been paid in full, by the Holders of
Certificates evidencing not less than 25% of the outstanding principal balance
of the Certificates, the circumstances or condition in respect of which such
representation, warranty or statement was incorrect shall not have been
eliminated or otherwise cured; or
(g) So long as an Insurer Default shall not have occurred and be
continuing, the Note Insurer shall not have delivered a Servicer Extension
Notice pursuant to Section 4.14; or
(h) So long as an Insurer Default shall not have occurred and be
continuing, an Insurance Agreement Event of Default shall have occurred; or
(i) A claim is made under the Note Policy.
SECTION 10.2. Consequences of a Servicer Termination Event. If a Servicer
Termination Event shall occur and be continuing, the Note Insurer (or, if an
Insurer Default shall have occurred and be continuing either the Trustee (to the
extent it has knowledge thereof) or Holders of Notes evidencing not less than
25% of the outstanding principal amount of the Notes, by notice given in writing
to the Servicer (and to the Trustee if given by the Note Insurer or the
Securityholders) or by non-extension of the term of the Servicer as referred to
in Section 4.14 may terminate all of the rights and obligations of the Servicer
under this Agreement. The Servicer shall be entitled to its pro rata share of
the Servicing Fee for the number of days in the Collection Period prior to the
effective date of its termination. On or after the receipt by the Servicer of
such written notice or upon termination of the term of the Servicer, all
authority,
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power, obligations and responsibilities of the Servicer under this Agreement,
whether with respect to the Notes, the Certificates or the Other Conveyed
Property or otherwise, automatically shall pass to, be vested in and become
obligations and responsibilities of the Standby Servicer (or such other
successor Servicer appointed by the Controlling Party under Section 10.3);
provided, however, that the successor Servicer shall have no liability with
respect to any obligation which was required to be performed by the terminated
Servicer prior to the date that the successor Servicer becomes the Servicer or
any claim of a third party based on any alleged action or inaction of the
terminated Servicer. The successor Servicer is authorized and empowered by this
Agreement to execute and deliver, on behalf of the terminated Servicer, as
attorney-in-fact or otherwise, any and all documents and other instruments and
to do or accomplish all other acts or things necessary or appropriate to effect
the purposes of such notice of termination, whether to complete the transfer and
endorsement of the Receivables and the Other Conveyed Property and related
documents to show the Trust as lienholder or secured party on the related Lien
Certificates, or otherwise. The terminated Servicer agrees to cooperate with the
successor Servicer in effecting the termination of the responsibilities and
rights of the terminated Servicer under this Agreement, including, without
limitation, the transfer to the successor Servicer for administration by it of
all cash amounts that shall at the time be held by the terminated Servicer for
deposit, or have been deposited by the terminated Servicer, in the Collection
Account or thereafter received with respect to the Receivables and the delivery
to the successor Servicer of all Receivable Files and a computer tape in
readable form as of the most recent Business Day containing all information
necessary to enable the successor Servicer or a successor Servicer to service
the Receivables and the Other Conveyed Property. All reasonable costs and
expenses (including attorneys' fees) incurred in connection with transferring
the Receivable Files to the successor Servicer and amending this Agreement to
reflect such succession as Servicer pursuant to this Section 10.1 shall be paid
by the predecessor Servicer upon presentation of reasonable documentation of
such costs and expenses. In addition, any successor Servicer shall be entitled
to payment from the immediate predecessor Servicer for reasonable transition
expenses incurred in connection with acting as successor Servicer, and to the
extent not so paid, such payment shall be made pursuant to Section 5.7(b)
hereof. Upon receipt of notice of the occurrence of Servicer Termination Event,
the Trustee shall give notice thereof to the Rating Agencies. If requested by
the Controlling Party, the successor Servicer shall terminate the Lockbox
Agreement and direct the Obligors to make all payments under the Receivables
directly to the successor Servicer (in which event the successor Servicer shall
process such payments in accordance with Section 4.2(e)), or to a lockbox
established by the successor Servicer at the direction of the Controlling Party,
at the successor Servicer's expense. The terminated Servicer shall grant the
Trustee, the successor Servicer and the Controlling Party reasonable access to
the terminated Servicer's premises at the terminated Servicer's expense.
SECTION 10.3. Appointment of Successor.
(a) On and after the time the Servicer receives a notice of termination
pursuant to Section 10.2, upon non-extension of the servicing term as referred
to in Section 4.14, or upon the resignation of the Servicer pursuant to Section
9.6, the predecessor Servicer shall continue to perform its functions as
Servicer under this Agreement, in the case of termination, only until the
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date specified in such termination notice or, if no such date is specified in a
notice of termination, until receipt of such notice and, in the case of
expiration and non-renewal of the term of the Servicer upon the expiration of
such term, and, in the case of resignation, until the later of (x) the date 45
days from the delivery to the Trustee of written notice of such resignation (or
written confirmation of such notice) in accordance with the terms of this
Agreement and (y) the date upon which the predecessor Servicer shall become
unable to act as Servicer, as specified in the notice of resignation and
accompanying Opinion of Counsel. In the event of termination of the Servicer,
Norwest Bank Minnesota, National Association, as Standby Servicer, shall assume
the obligations of Servicer hereunder on the date specified in such written
notice (the "Assumption Date") pursuant to the Servicing Assumption Agreement
or, in the event that the Note Insurer shall have determined that a Person other
than the Standby Servicer shall be the successor Servicer in accordance with
Section 10.2, on the date of the execution of a written assumption agreement by
such Person to serve as successor Servicer. Notwithstanding the Standby
Servicer's assumption of, and its agreement to perform and observe, all duties,
responsibilities and obligations of CPS as Servicer under this Agreement arising
on and after the Assumption Date, the Standby Servicer shall not be deemed to
have assumed or to become liable for, or otherwise have any liability for, any
duties, responsibilities, obligations or liabilities of CPS or any predecessor
Servicer arising on or before the Assumption Date, whether provided for by the
terms of this Agreement, arising by operation of law or otherwise, including,
without limitation, any liability for, any duties, responsibilities, obligations
or liabilities of CPS or any predecessor Servicer arising on or before the
Assumption Date under Section 4.7 or 9.2 of this Agreement, regardless of when
the liability, duty, responsibility or obligation of CPS or any predecessor
Servicer therefore arose, whether provided by the terms of this Agreement,
arising by operation of law or otherwise. Notwithstanding the above, if the
Standby Servicer shall be legally unable or unwilling to act as Servicer, and an
Insurer Default shall have occurred and be continuing, the Standby Servicer, the
Trustee or a Security Majority may petition a court of competent jurisdiction to
appoint any Eligible Servicer as the successor to the Servicer. Pending
appointment pursuant to the preceding sentence, the Standby Servicer shall act
as successor Servicer unless it is legally unable to do so, in which event the
outgoing Servicer shall continue to act as Servicer until a successor has been
appointed and accepted such appointment. Subject to Section 9.6, no provision of
this Agreement shall be construed as relieving the Standby Servicer of its
obligation to succeed as successor Servicer upon the termination of the Servicer
pursuant to Section 10.2, the resignation of the Servicer pursuant to Section
9.6 or the non-extension of the servicing term of the Servicer, as referred to
in Section 4.14. If upon the termination of the Servicer pursuant to Section
10.2 or the resignation of the Servicer pursuant to Section 9.6, the Controlling
Party appoints a successor Servicer other than the Standby Servicer, the Standby
Servicer shall not be relieved of its duties as Standby Servicer hereunder.
(b) Any successor Servicer shall be entitled to such compensation (whether
payable out of the Collection Account or otherwise) as the Servicer would have
been entitled to under this Agreement if the Servicer had not resigned or been
terminated hereunder.
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SECTION 10.4. Notification to Noteholders and Certificateholders. Upon any
termination of, or appointment of a successor to, the Servicer, the Trustee
shall give prompt written notice thereof to each Securityholder, the Owner
Trustee and to the Rating Agencies.
SECTION 10.5. Waiver of Past Defaults. Subject to the approval of the Note
Insurer (unless an Insurer Default shall have occurred and be continuing), the
Holders of Notes evidencing more than 50% of the outstanding principal balance
of the Notes, may on behalf of all the Noteholders and Certificateholders, waive
any default be the Servicer in the performance of its obligations under this
Agreement and the consequences thereof (except a default in making any required
deposits to or payments from any of the Trust Accounts in accordance with the
terms of this Agreement. Upon any such waiver of a past default, such default
shall cease to exist, and any Servicer Termination Event arising therefrom shall
be deemed to have been remedied for every purpose of this Agreement. No such
waiver shall extend to any subsequent or other default or impair any right
consequent thereto.
SECTION 10.6. Action Upon Certain Failures of the Servicer. In the event
that the Trustee shall have knowledge of any failure of the Servicer specified
in Section 10.1 which would give rise to a right of termination under such
Section upon the Servicer's failure to remedy the same after notice, the Trustee
shall give notice thereof to the Servicer and the Note Insurer. For all purposes
of this Agreement (including, without limitation, Section 6.2(b) and this
Section 10.6), the Trustee shall not be deemed to have knowledge of any failure
of the Servicer as specified in Section 10.1(c) though (i) unless notified
thereof in writing by the Servicer, the Note Insurer or by a Securityholder. The
Trustee shall be under no duty or obligation to investigate or inquire as to any
potential failure of the Servicer specified in Section 10.1.
ARTICLE XI
TERMINATION
SECTION 11.1. Optional Purchase of All Receivables.
(a) (i) On the last day of any Collection Period as of which the Pool
Balance shall be less than or equal to 10% of the Original Pool Balance, the
Servicer shall have the option to purchase the Owner Trust Estate, other than
the Trust Accounts (with the consent of the Note Insurer if such purchase would
result in a claim on the Note Policy or would result in any amount owing to the
Note Insurer under the Insurance Agreement remaining unpaid). To exercise such
option, the Servicer or the Seller, as the case may be, shall (subject to the
proviso below deposit pursuant to Section 5.6 in the Collection Account an
amount equal to the aggregate Purchase Amount for the Receivables (including
Liquidated Receivables), plus the appraised value of any other property held by
the Trust, such value to be determined by an appraiser mutually agreed upon by
the Servicer, the Note Insurer and the Trustee, and shall succeed to all
interests in and to the Trust provided, however, that the amount to be paid for
such purchase (as set forth in the following
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sentence) shall be sufficient to pay the full amount of principal and interest,
if any, then due and payable on the Securities.
(b) Notice of any termination of the Trust shall be given by the Servicer,
which notice shall include, among other things, the items specified in Section
9.1(c) of the Trust Agreement, to the Owner Trustee, the Trustee, the Note
Insurer and the Rating Agencies as soon as practicable after the Servicer has
received notice thereof.
(c) Following the satisfaction and discharge of the Indenture and the
payment in full of the principal of and interest on the Notes, the
Certificateholders will succeed to the rights of the Noteholders hereunder and
the Owner Trustee will succeed to the rights of, and assume the obligations of,
the Trustee to this Agreement.
ARTICLE XII
ADMINISTRATIVE DUTIES OF THE SERVICER
SECTION 12.1. Administrative Duties.
(a) Duties with Respect to the Indenture. The Servicer shall perform all
its duties and the duties of the Issuer under the Indenture. In addition, the
Servicer shall consult with the Owner Trustee as the Servicer deems appropriate
regarding the duties of the Issuer under the Indenture. The Servicer shall
monitor the performance of the Issuer and shall advise the Owner Trustee when
action is necessary to comply with the Issuer's duties under the Indenture. The
Servicer shall prepare for execution by the Issuer or shall cause the
preparation by other appropriate Persons of all such documents, reports,
filings, instruments, certificates and opinions as it shall be the duty of the
Issuer to prepare, file or deliver pursuant to the Indenture. In furtherance of
the foregoing, the Servicer shall take all necessary action that is the duty of
the Issuer to take pursuant to the Indenture, including, without limitation,
pursuant to Sections 2.7, 3.5, 3.6, 3.7, 3.9, 3.10, 3.17, 5.1(b), 7.3, 8.3, 9.2,
9.3, 11.1 and 11.15 of the Indenture.
(b) Duties with Respect to the Issuer.
(i) In addition to the duties of the Servicer set forth in this
Agreement or any of the Basic Documents, the Servicer shall perform such
calculations and shall prepare for execution by the Issuer or the Owner
Trustee or shall cause the preparation by other appropriate Persons of all
such documents, reports, filings, instruments, certificates and opinions as
it shall be the duty of the Issuer or the Owner Trustee to prepare, file or
deliver pursuant to this Agreement or any of the Basic Documents or under
state and federal tax and securities laws, and at the request of the Owner
Trustee shall take all appropriate action that it is the duty of the Issuer
to take pursuant to this Agreement or any of the Basic Documents,
including, without limitation, pursuant to Sections 2.6 and 2.11 of the
Trust Agreement. In accordance with the directions of the Issuer or the
Owner Trustee, the Servicer shall administer, perform or supervise
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the performance of such other activities in connection with the Collateral
(including the Basic Documents) as are not covered by any of the foregoing
provisions and as are expressly requested by the Issuer or the Owner
Trustee and are reasonably within the capability of the Servicer.
(ii) Notwithstanding anything in this Agreement or any of the Basic
Documents to the contrary, the Servicer shall be responsible for promptly
notifying the Owner Trustee and the Trustee in the event that any
withholding tax is imposed on the Issuer's payments (or allocations of
income) to a Noteholder as contemplated this Agreement. Any such notice
shall be in writing and specify the amount of any withholding tax required
to be withheld by the Owner Trustee or the Trustee pursuant to such
provision.
(iii) Notwithstanding anything in this Agreement or the Basic
Documents to the contrary, the Servicer shall be responsible for
performance of the duties of the Issuer or the Seller set forth in Section
5.1 of the Trust Agreement with respect to, among other things, accounting
and reports to Certificateholders; provided, however, that once prepared by
the Servicer the Owner Trustee shall retain responsibility for the
distribution of the Schedule K-1s necessary to enable each
Certificateholder to prepare its federal and state income tax returns.
(iv) The Servicer shall perform the duties of the Servicer specified
in Section 10.2 of the Trust Agreement required to be performed in
connection with the resignation or removal of the Owner Trustee, and any
other duties expressly required to be performed by the Servicer under this
Agreement or any of the Basic Documents.
(v) In carrying out the foregoing duties or any of its other
obligations under this Agreement, the Servicer may enter into transactions
with or otherwise deal with any of its Affiliates; provided, however, that
the terms of any such transactions or dealings shall be in accordance with
any directions received from the Issuer and shall be, in the Servicer's
opinion, no less favorable to the Issuer in any material respect.
(c) Tax Matters. The Servicer shall prepare and file, on behalf of the
Seller, all tax returns, tax elections, financial statements and such annual or
other reports of the Issuer as are necessary for preparation of tax reports as
provided in Article V of the Trust Agreement, including without limitation forms
1099 and 1066. All tax returns will be signed by the Seller.
(d) Non-Ministerial Matters. With respect to matters that in the reasonable
judgment of the Servicer are non-ministerial, the Servicer shall not take any
action pursuant to this Article XII unless within a reasonable time before the
taking of such action, the Servicer shall have notified the Owner Trustee and
the Trustee of the proposed action and the Owner Trustee and, with respect to
items (i), (ii), (iii) and (iv) below, the Trustee shall not have withheld
consent or provided an alternative direction. For the purpose of the preceding
sentence, "non-ministerial matters" shall include:
(i) the amendment of or any supplement to the Indenture;
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(ii) the initiation of any claim or lawsuit by the Issuer and the
compromise of any action, claim or lawsuit brought by or against the Issuer
(other than in connection with the collection of the Receivables);
(iii) the amendment, change or modification of this Agreement or any
of the Basic Documents;
(iv) the appointment of successor Note Registrars, successor Paying
Agents and successor Trustees pursuant to the Indenture or the appointment
of Successor Servicers or the consent to the assignment by the Note
Registrar, Paying Agent or Trustee of its obligations under the Indenture;
and
(v) the removal of the Trustee.
(e) Exceptions. Notwithstanding anything to the contrary in this Agreement
except as expressly provided herein or in the other Basic Documents, the
Servicer, in its capacity hereunder, shall not be obligated to, and shall not,
(1) make any payments to the Noteholders or Certificateholders under the Basic
Documents, (2) sell the Indenture Trust Property pursuant to Section 5.5 of the
Indenture, (3) take any other action that the Issuer directs the Servicer not to
take on its behalf or (4) in connection with its duties hereunder assume any
indemnification obligation of any other Person.
(f) Limitation of Standby Servicer's Obligations. The Standby Servicer or
any successor Servicer shall not be responsible for any obligations or duties of
the Servicer under Section 12.1.
SECTION 12.2. Records. The Servicer shall maintain appropriate books of
account and records relating to services performed under this Agreement, which
books of account and records shall be accessible for inspection by the Issuer,
the Trustee and the Note Insurer at any time during normal business hours.
SECTION 12.3. Additional Information to be Furnished to the Issuer. The
Servicer shall furnish to the Issuer from time to time such additional
information regarding the Collateral as the Issuer shall reasonably request.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1. Amendment.
(a) This Agreement may be amended from time to time by the parties hereto,
with the consent of the Trustee (which consent may not be unreasonably
withheld), with the prior written consent of the Note Insurer (so long as no
Insurer Default has occurred and is continuing) but
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without the consent of any of the Noteholders or the Certificateholders, to cure
any ambiguity, to correct or supplement any provisions in this Agreement, to
comply with any changes in the Code, or to make any other provisions with
respect to matters or questions arising under this Agreement which shall not be
inconsistent with the provisions of this Agreement or the Insurance Agreement;
provided, however, that such action shall not, as evidenced by an Opinion of
Counsel delivered to the Owner Trustee and the Trustee, adversely affect in any
material respect the interests of any Noteholder or Certificateholder; provided
further that if an Insurer Default has occurred and is continuing, such action
shall not materially adversely affect the interests of the Note Insurer.
This Agreement may also be amended from time to time by the parties hereto,
with the consent of the Note Insurer, the consent of the Trustee, the consent of
the Holders of Notes evidencing not less than a majority of the outstanding
principal amount of the Notes and the consent of the Holders (as defined in the
Trust Agreement) of Certificates evidencing not less than a majority of the
Certificate Balance for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Agreement or of
modifying in any manner the rights of the Noteholders or the Certificateholders;
provided, however, that no such amendment shall (a) increase or reduce in any
manner the amount of, or accelerate or delay the timing of, collections of
payments on Receivables or distributions that shall be required to be made for
the benefit of the Noteholders or the Certificateholders or (b) reduce the
aforesaid percentage of the outstanding principal amount of each Class of Notes
or the Certificates, the Holders of which are required to consent to any such
amendment, without the consent of the Holders of all the outstanding Notes and
the Holders (as defined in the Trust Agreement) of all the outstanding
Certificates, of each Class affected thereby; provided further, that if an
Insurer Default has occurred and is continuing, such action shall not materially
adversely affect the interest of the Note Insurer.
Promptly after the execution of any such amendment or consent, the Trustee
shall furnish written notification of the substance of such amendment or consent
to each Securityholder and the Rating Agencies.
It shall not be necessary for the consent of Certificateholders or
Noteholders pursuant to this Section to approve the particular form of any
proposed amendment or consent, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents (and any
other consents of Noteholders or Certificateholders provided for in this
Agreement) and of evidencing the authorization of any action by Noteholders or
Certificateholders shall be subject to such reasonable requirements as the
Trustee or the Owner Trustee, as applicable, may prescribe.
Prior to the execution of any amendment to this Agreement, the Owner
Trustee and the Trustee shall be entitled to receive and rely upon an Opinion of
Counsel stating that the execution of such amendment is authorized or permitted
by this Agreement and the Opinion of Counsel referred to in Section 13.2(i)(1)
has been delivered. The Owner Trustee, the Standby Servicer and the Trustee may,
but shall not be obligated to, enter into any such amendment
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which affects the Issuer's, the Owner Trustee's, the Standby Servicer's or the
Trustee's, as applicable, own rights, duties or immunities under this Agreement
or otherwise.
(b) Notwithstanding anything to the contrary contained in Section 13.1(a)
above, the provisions of this Agreement relating to (i) the Spread Account
Supplement, the Spread Account, the Requisite Amount (as defined in the Master
Spread Account Agreement), a Trigger Event or any component definition of a
Trigger Event and (ii) any additional sources of funds which may be added to the
Spread Account or uses of funds on deposit in the Spread Account may be amended
in any respect by the Seller, the Servicer, the Note Insurer and the Collateral
Agent (the consent of which shall not be withheld or delayed with respect to any
amendment that does not adversely affect the Collateral Agent) without the
consent of, or notice to, the Noteholders or the Certificateholders.
SECTION 13.2. Protection of Title to Trust.
(a) The Seller or Servicer or both shall execute and file such financing
statements and cause to be executed and filed such continuation statements, all
in such manner and in such places as may be required by law fully to preserve,
maintain and protect the interest of the Issuer and the interests of the Trustee
in the Receivables and in the proceeds thereof. The Seller shall deliver (or
cause to be delivered) to the Note Insurer, the Owner Trustee and the Trustee
file-stamped copies of, or filing receipts for, any document filed as provided
above, as soon as available following such filing.
(b) Neither the Seller nor the Servicer shall change its name, identity or
corporate structure in any manner that would, could or might make any financing
statement or continuation statement filed in accordance with paragraph (a) above
seriously misleading within the meaning of section 9-402(7) of the UCC, unless
it shall have given the Note Insurer, the Owner Trustee and the Trustee at least
five days' prior written notice thereof and shall have promptly filed
appropriate amendments to all previously filed financing statements or
continuation statements. Promptly upon such filing, the Seller or the Servicer,
as the case may be, shall deliver an Opinion of Counsel to the Issuer, the Owner
Trustee, the Trustee and the Note Insurer, in form and substance reasonably
satisfactory to the Note Insurer, stating either (A) all financing statements
and continuation statements have been executed and filed that are necessary
fully to preserve and protect the interest of the Trust and the Trustee in the
Receivables, and reciting the details of such filings or referring to prior
Opinions of Counsel in which such details are given, or (B) no such action shall
be necessary to preserve and protect such interest.
(c) Each of the Seller and the Servicer shall have an obligation to give
the Note Insurer, the Owner Trustee and the Trustee at least 60 days' prior
written notice of any relocation of its principal executive office if, as a
result of such relocation, the applicable provisions of the UCC would require
the filing of any amendment of any previously filed financing or continuation
statement or of any new financing statement and shall promptly file any such
amendment. The Servicer shall at all times maintain each office from which it
shall service Receivables, and its principal executive office, within the United
States of America.
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(d) The Servicer shall maintain accounts and records as to each Receivable
accurately and in sufficient detail to permit (i) the reader thereof to know at
any time the status of such Receivable, including payments and recoveries made
and payments owing (and the nature of each) and (ii) reconciliation between
payments or recoveries on (or with respect to) each Receivable and the amounts
from time to time deposited in the Collection Account in respect of such
Receivable.
(e) The Servicer shall maintain its computer systems so that, from and
after the time of sale under this Agreement of the Receivables to the Issuer,
the Servicer's master computer records (including any backup archives) that
refer to a Receivable shall indicate clearly the interest of the Trust in such
Receivable and that such Receivable is owned by the Trust. Indication of the
Trust's interest in a Receivable shall be deleted from or modified on the
Servicer's computer systems when, and only when, the related Receivable shall
have been paid in full or repurchased.
(f) If at any time the Seller or the Servicer shall propose to sell, grant
a security interest in or otherwise transfer any interest in automotive
receivables to any prospective purchaser, lender or other transferee, the
Servicer shall give to such prospective purchaser, lender or other transferee
computer tapes, records or printouts (including any restored from backup
archives) that, if they shall refer in any manner whatsoever to any Receivable,
shall indicate clearly that such Receivable has been sold and is owned by the
Trust.
(g) The Servicer shall permit the Trustee, the Standby Servicer and the
Note Insurer and its agents at any time during normal business hours to inspect,
audit, and make copies of and abstracts from the Servicer's records regarding
any Receivable.
(h) Upon request, the Servicer shall furnish to the Note Insurer, the Owner
Trustee or to the Trustee, within five Business Days, a list of all Receivables
(by contract number and name of Obligor) then held as part of the Trust,
together with a reconciliation of such list to the Schedule of Receivables and
to each of the Servicer's Certificates furnished before such request indicating
removal of Receivables from the Trust.
(i) The Servicer shall deliver to the Note Insurer, the Owner Trustee and
the Trustee:
(i) promptly after the execution and delivery of the Agreement and, if
required pursuant to Section 13.1, of each amendment, an Opinion of Counsel
stating that, in the opinion of such counsel, in form and substance
reasonably satisfactory to the Note Insurer, either (A) all financing
statements and continuation statements have been executed and filed that
are necessary fully to preserve and protect the interest of the Trust and
the Trustee in the Receivables, and reciting the details of such filings or
referring to prior Opinions of Counsel in which such details are given, or
(B) no such action shall be necessary to preserve and protect such
interest; and
(ii) within 90 days after the beginning of each calendar year
beginning with the first calendar year beginning more than three months
after the Cutoff Date, an Opinion of
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Counsel, dated as of a date during such 90-day period, stating that, in the
opinion of such counsel, either (A) all financing statements and
continuation statements have been executed and filed that are necessary
fully to preserve and protect the interest of the Trust and the Trustee in
the Receivables, and reciting the details of such filings or referring to
prior Opinions of Counsel in which such details are given, or (B) no such
action shall be necessary to preserve and protect such interest.
Each Opinion of Counsel referred to in clause (i) or (ii) above shall
specify any action necessary (as of the date of such opinion) to be taken in the
following year to preserve and protect such interest.
SECTION 13.3. Notices. All demands, notices and communications upon or to
the Seller, the Servicer, the Owner Trustee, the Trustee or the Rating Agencies
under this Agreement shall be in writing, personally delivered, or mailed by
certified mail, return receipt requested, and shall be deemed to have been duly
given upon receipt (a) in the case of the Seller to CPS Receivables Funding
Corp., 2 Ada, Irvine, California 92718, (b) in the case of the Servicer to
Consumer Portfolio Services, Inc., 2 Ada, Irvine, California 92718, Attention:
Chief Financial officer, (c) in the case of the Issuer or the Owner Trustee, at
the Corporate Trust Office of the Owner Trustee, (d) in the case of the Trustee
or the Collateral Agent, at the Corporate Trust Office, (e) in the case of the
Note Insurer, to 350 Park Avenue, New York, New York 10022 Attention: Senior
Vice President, Surveillance (Telecopy: (212) 339-3547); (f) in the case of
Moody's, to Moody's Investors Service, Inc., ABS Monitoring Department, 99
Church Street, New York, New York 10007; and (g) in the case of Standard &
Poor's Ratings Group, to Standard & Poor's, a Division of The McGraw Hill
Companies, 25 Broadway, 15th Floor, New York, New York 10004, Attention: Asset
Backed Surveillance Department. Any notice required or permitted to be mailed to
a Noteholder or Certificateholder shall be given by first class mail, postage
prepaid, at the address of such Holder as shown in the Certificate Register or
Note Register, as applicable. Any notice so mailed within the time prescribed in
the Agreement shall be conclusively presumed to have been duly given, whether or
not the Certificateholder or Noteholder shall receive such notice.
SECTION 13.4. Assignment. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns. Notwithstanding anything to the contrary contained herein, except as
provided ln Sections 8.4 and 9.3 and as provided in the provisions of this
Agreement concerning the resignation of the Servicer, this Agreement may not be
assigned by the Seller or the Servicer without the prior written consent of the
Owner Trustee, the Trustee, the Standby Servicer, the Trustee and the Note
Insurer (or if an Insurer Default shall have occurred and be continuing the
Holders of Notes evidencing not less than 66% of the principal amount of the
outstanding Notes and the Holders of Certificates, the aggregate Certificate
Balance of which is not less than 66%.
SECTION 13.5. Limitations on Rights of Others. The provisions of this
Agreement are solely for the benefit of the parties hereto and for the benefit
of the Owner Trustee and the Certificateholders (including the Seller), the
Trustee and the Noteholders, as third-party
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beneficiaries. The Note Insurer and its successors and assigns shall be a
third-party beneficiary to the provisions of this Agreement, and shall be
entitled to rely upon and directly enforce such provisions of this Agreement so
long as no Insurer Default shall have occurred and be continuing. Except as
expressly stated otherwise, any right of the Note Insurer to direct, appoint,
consent to, approve of, or take any action under this Agreement, shall be a
right exercised by the Note Insurer in its sole and absolute discretion. The
Note Insurer may disclaim any of its rights and powers under this Agreement (but
not its duties and obligations under the Note Policy) upon delivery of a written
notice to the Owner Trustee and the Trustee. Nothing in this Agreement, whether
express or implied, shall be construed to give to any other Person any legal or
equitable right, remedy or claim in the Owner Trust Estate or under or in
respect of this Agreement or any covenants, conditions or provisions contained
herein.
SECTION 13.6. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
SECTION 13.7. Separate Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same instrument.
SECTION 13.8. Headings. The headings of the various Articles and Sections
herein are for convenience of reference only and shall not define or limit any
of the terms or provisions hereof.
SECTION 13.9. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS
CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 13.10. Assignment to Trustee. The Seller hereby acknowledges and
consents to any mortgage, pledge, assignment and grant of a security interest by
the Issuer to the Trustee pursuant to the Indenture for the benefit of the
Noteholders of all right, title and interest of the Issuer in, to and under the
Receivables and/or the assignment of any or all of the Issuer's rights and
obligations hereunder to the Trustee.
SECTION 13.11. Nonpetition Covenants.
(a) Notwithstanding any prior termination of this Agreement, the Servicer
and the Seller shall not, prior to the date which is one year and one day after
the termination of this Agreement with respect to the Issuer, acquiesce,
petition or otherwise invoke or cause the Issuer to invoke the process of any
court or government authority for the purpose of commencing or sustaining a
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case against the Issuer under any federal or state bankruptcy, insolvency or
similar law or appointing a receiver, liquidator, assignee, trustee, custodian,
sequestrator or other similar official of the Issuer or any substantial part of
its property, or ordering the winding up or liquidation of the affairs of the
Issuer.
(b) Notwithstanding any prior termination of this Agreement, the Servicer
shall not, prior to the date that is one year and one day after the termination
of this Agreement with respect to the Seller, acquiesce to, petition or
otherwise invoke or cause the Seller to invoke the process of any court or
government authority for the purpose of commencing or sustaining a case against
the Seller under any federal or state bankruptcy, insolvency or similar law,
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator,
or other similar official of the Seller or any substantial part of its property,
or ordering the winding up or liquidation of the affairs of the Seller.
SECTION 13.12. Limitation of Liability of Owner Trustee and Trustee.
(a) Notwithstanding anything contained herein to the contrary, this
Agreement has been countersigned by Bankers Trust (Delaware) not in its
individual capacity but solely in its capacity as Owner Trustee of the Issuer
and in no event shall Bankers Trust (Delaware) in its individual capacity or,
except as expressly provided in the Trust Agreement, as Owner Trustee have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Issuer hereunder or in any of the certificates, notices or
agreements delivered pursuant hereto, as to all of which recourse shall be had
solely to the assets of the Issuer. For all purposes of this Agreement, in the
performance of its duties or obligations hereunder or in the performance of any
duties or obligations of the Issuer hereunder, the Owner Trustee shall be
subject to, and entitled to the benefits of, the terms and provisions of
Articles VI, VII and VIII of the Trust Agreement.
(b) Notwithstanding anything contained herein to the contrary, this
Agreement has been executed and delivered by Norwest Bank Minnesota, National
Association, not in its individual capacity but solely as Trustee and Standby
Servicer and in no event shall Norwest Bank Minnesota, National Association,
have any liability for the representations, warranties, covenants, agreements or
other obligations of the Issuer hereunder or in any of the certificates, notices
or agreements delivered pursuant hereto, as to all of which recourse shall be
had solely to the assets of the Issuer.
(c) In no event shall Norwest Bank Minnesota, National Association, in any
of its capacities hereunder, be deemed to have assumed any duties of the Owner
Trustee under the Delaware Business Trust Statute, common law, or the Trust
Agreement.
SECTION 13.13. Independence of the Servicer. For all purposes of this
Agreement, the Servicer shall be an independent contractor and shall not be
subject to the supervision of the Issuer, the Trustee and Standby Servicer or
the Owner Trustee with respect to the manner in which it accomplishes the
performance of its obligations hereunder. Unless expressly authorized
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by this Agreement, the Servicer shall have no authority to act for or represent
the Issuer or the Owner Trustee in any way and shall not otherwise be deemed an
agent of the Issuer or the Owner Trustee.
SECTION 13.14. No Joint Venture. Nothing contained in this Agreement (i)
shall constitute the Servicer and either of the Issuer or the Owner Trustee as
members of any partnership, joint venture, association, syndicate,
unincorporated business or other separate entity, (ii) shall be construed to
impose any liability as such on any of them or (iii) shall be deemed to confer
on any of them any express, implied or apparent authority to incur any
obligation or liability on behalf of the others.
SECTION 13.15. Note Insurer as Controlling Party. Each Noteholder by
purchase of the Notes held by it acknowledges that the Trustee, as partial
consideration of the issuance of the Note Policy, has agreed that the Note
Insurer shall have certain rights hereunder for so long as no Insurer Default
shall have occurred and be continuing. So long as an Insurer Default has
occurred and is continuing, any provision giving the Note Insurer the right to
direct, appoint or consent to, approve of, or take any action under this
Agreement shall be inoperative during the period of such Insurer Default and
such right shall instead vest in the Trustee acting at the direction of the
holders of Notes evidencing, unless otherwise specified, more than 50% of the
principal balance of the Notes. From and after such time as the Notes have been
paid in full, any provision giving the Note Insurer or the Noteholders the right
to direct, appoint or consent to, approve of, or take any action under this
Agreement shall be inoperative and such right shall instead vest in the Trustee
acting at the direction of the holders of the Certificates evidencing more than
50% of the Certificate Balance, unless otherwise specified. The Note Insurer may
disclaim any of its rights and powers under this Agreement (but not its duties
and obligations under the Policy) upon delivery of a written notice to the
Trustee. The Note Insurer may give or withhold any consent hereunder in its sole
and absolute discretion.
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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 1998-3
by
BANKERS TRUST (DELAWARE),
not in its individual capacity, but solely as
Owner Trustee on behalf of the Trust
By: /s/ Patricia M.F. Russo
Title: Vice President
CPS RECEIVABLES CORP., as Seller
By /s/ Jeffrey P. Fritz
Title: Chief Financial Officer
CONSUMER PORTFOLIO SERVICES, INC., as
Servicer
By /s/ Jeffrey P. Fritz
Title: Chief Financial Officer
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION,
not in its individual capacity, but solely as
Standby Servicer and Trustee
By /s/ Shana Stephens-Murray
Title: Corporate Trust Officer
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SCHEDULE A
SCHEDULE OF RECEIVABLES
EXHIBIT A
SERVICER'S CERTIFICATE
EXHIBIT B
TRUST RECEIPT
PURSUANT TO SECTION 3.5 OF
THE SALE AND SERVICING AGREEMENT
Consumer Portfolio Services, Inc., as Servicer (the "Servicer") of the
CPS Auto Receivables Trust 1998-3 (the "Trust") under the Sale and Servicing
Agreement (the "Sale and Servicing Agreement"), dated as of July 15, 1998, among
CPS Auto Receivables Trust 1998-3, CPS Receivables Corp., as Seller, Consumer
Portfolio Services, Inc., as Servicer, and Norwest Bank Minnesota, National
Association, as Trustee and Standby Servicer, does hereby acknowledge receipt of
the documents relating to the Receivables, each of which documents and the
Receivables to which they are related are listed on the attached Schedule 1
hereto. The Servicer furthermore agrees to return such documents to the Trustee
in accordance with the terms of the Sale and Servicing Agreement.
IN WITNESS WHEREOF I have hereunto set my hand this __ day of ____,
19__.
CONSUMER PORTFOLIO SERVICES, INC.,
as Servicer
By:
Name:
Title:
Acknowledged By:
NORWEST BANK MINNESOTA,
NATIONAL ASSOCIATION,
as Trustee
By:
Name:
Title:
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EXHIBIT C
SERVICING OFFICER'S CERTIFICATE
PURSUANT TO SECTION 3.5
OF THE SALE AND SERVICING AGREEMENT
The undersigned, ______________, hereby certifies that (s)he is a duly
elected and qualified officer of the Servicer, and hereby further certifies as
follows:
The Receivable described below has been fully liquidated and all
amounts required to be deposited in the Collection Account with respect to the
Receivable and the Obligor described below have been so deposited.
Servicer
Loan No.:
Obligor's Name:
Capitalized terms used herein which are not defined herein shall have
the meanings ascribed to them in the Sale and Servicing Agreement dated as of
July 15, 1998 among CPS Auto Receivables Trust 1998-3, Consumer Portfolio
Services, Inc., as servicer, CPS Receivables Corp., as seller, and Norwest Bank
Minnesota, National Association, as trustee and Standby Servicer.
IN WITNESS WHEREOF, I have hereunto set my hand on and as of this ___
day of ______________, 19___.
-----------------------------
Name:
Title:
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EXHIBIT D
FORM OF MONTHLY SECURITYHOLDER STATEMENT
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EXHIBIT E-1
TRUSTEE'S CERTIFICATE
PURSUANT TO SECTIONS 3.2 OR 3.4 OF
THE SALE AND SERVICING AGREEMENT
Norwest Bank Minnesota, National Association, as trustee (the
"Trustee") of the CPS Auto Receivables Trust 1998-3 (the "Trust") under the Sale
and Servicing Agreement (the "Sale and Servicing Agreement"), dated as of July
15, 1998, among the Trust, CPS Receivables Corp., as Seller, Consumer Portfolio
Services, Inc., as Servicer, and Norwest Bank Minnesota, National Association,
as Trustee and Standby Servicer, does hereby sell, transfer, assign, and
otherwise convey to Consumer Portfolio Services, Inc., without recourse,
representation, or warranty, all of the Trustee's right, title, and interest in
and to all of the Receivables (as defined in the Sale and Servicing Agreement)
identified in the attached Servicer's Certificate as "Purchased Receivables,"
which are to be repurchased by Consumer Portfolio Services, Inc. pursuant to
Section 3.2 or Section 3.4 of the Sale and Servicing Agreement and all security
and documents relating thereto.
IN WITNESS WHEREOF I have hereunto set my hand this __ day of ____,
19__.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
Name:
Title:
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Exhibit E-2
TRUSTEE'S CERTIFICATE
PURSUANT TO SECTIONS 4.7 OR 11.1 OF
THE SALE AND SERVICING AGREEMENT
Norwest Bank Minnesota, National Association, as trustee (the
"Trustee") of the CPS Auto Receivables Trust 1998-3 (the "Trust") under the Sale
and Servicing Agreement (the "Sale and Servicing Agreement"), dated as of July
15, 1998, among the Trust, CPS Receivables Corp., as Seller, Consumer Portfolio
Services, Inc., as Servicer (the "Servicer"), and Norwest Bank Minnesota,
National Association, as Trustee and Standby Servicer, does hereby sell,
transfer, assign, and otherwise convey to the Servicer, without recourse,
representation, or warranty, all of the Trustee's right, title, and interest in
and to all of the Receivables (as defined in the Sale and Servicing Agreement)
identified in the attached Servicer's Certificate as "Purchased Receivables,"
which are to be repurchased by the Servicer pursuant to Section 4.7 or Section
11.1 of the Sale and Servicing Agreement and all security and documents relating
thereto.
IN WITNESS WHEREOF I have hereunto set my hand this __ day of ____,
19__.
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION, as Trustee
By:
Name:
Title:
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