ENDORSEMENT NO. 1
FINANCIAL SECURITY 350 Park Avenue
ASSURANCE INC. New York, New York 10022
OBLIGOR: CPS Auto Receivables Trust 1998-4
OBLIGATIONS: $32,500,000 Class A-1 5.473% Asset Backed Notes
$77,500,000 Class A-2 5.790% Asset Backed Notes
$81,375,000 Class A-3 5.740% Asset Backed Notes
$100,000,000 Class A-4 5.690% Asset Backed Notes
$18,625,000 Class A-5 5.890% Asset Backed Notes
Policy No.: 50749-N
Date of Issuance: December 4, 1998
1. Definitions. For all purposes of this Policy, the terms specified
below shall have the meanings or constructions provided below. Capitalized terms
used herein and not otherwise defined herein shall have the meanings provided in
the Indenture unless otherwise specified.
"Business Day" means any day other than a Saturday, Sunday, legal
holiday or other day on which commercial banking institutions in the City of New
York or Minneapolis, Minnesota, the State in which the principal corporate trust
office of the Indenture Trustee is located, or any other location of any
successor Servicer, successor Indenture Trustee, successor Owner Trustee or
successor Collateral Agent are authorized or obligated by law, executive order,
or governmental decree to remain closed.
"Holder" shall not include the Obligor, CPS or any affiliates or
successors thereof in the event the Obligor, or any such affiliate or successor,
is a registered or beneficial owner of the Obligation.
"Indenture" means the Indenture, dated as of December 1, 1998, between
the Obligor and Norwest Bank Minnesota, National Association, as Trustee.
"Indenture Trustee" means Norwest Bank Minnesota, National Association,
in its capacity as Trustee under the Indenture and any successor in such
capacity.
"Policy" means this Financial Guaranty Insurance Policy and includes
each endorsement thereto.
"Receipt" and "Received" mean actual delivery to Financial Security and
to the Fiscal Agent (as defined below), if any, prior to 12:00 noon, New York
City time, on a Business Day; delivery either on a day that is not a Business
Day, or after 12:00 noon, New York City time, shall be deemed to be receipt on
the next succeeding Business Day. If any notice or certificate given hereunder
by the Indenture Trustee is not in proper form or is not properly completed,
executed or delivered, it shall be deemed not to have been Received, and
Financial Security or its Fiscal Agent shall promptly so advise the Indenture
Trustee and the Indenture Trustee may submit an amended notice.
"Scheduled Payments" means, as to each Payment Date, the payment to be
made to Holders in accordance with the original terms of the Obligations when
issued and without regard to any subsequent amendment or modification of the
Obligations or of the Indenture except amendments or modifications to which
Financial Security has given its prior written consent, in an amount equal to
(i) the Noteholders' Interest Distributable Amount and (ii) the Noteholders'
Principal Distributable Amount. Scheduled Payments do not include payments which
become due on an accelerated basis as a result of (a) a default by the Obligor,
(b) an election by the Obligor to pay principal on an accelerated basis, (c) the
occurrence of an Event of Default under the Indenture or (d) any other cause,
unless Financial Security elects, in its sole discretion, to pay in whole or in
part such principal due upon acceleration, together with any accrued interest to
the date of acceleration. In the event Financial Security does not so elect,
this Policy will continue to guarantee payment on the Class A Notes in
accordance with their original terms. Scheduled Payments shall not include (x)
any portion of a Noteholders' Interest Distributable Amount due to Class A
Noteholders because a notice and certificate in proper form as required by
paragraph 2 hereof was not timely Received by Financial Security, or (y) any
portion of a Noteholders' Interest Distributable Amount due to Class A
Noteholders representing interest on any Noteholders' Interest Carryover
Shortfall accrued from and including the date of payment of the amount of such
Noteholders' Interest Carryover Shortfall pursuant hereto, unless Financial
Security elects, in its sole discretion, to pay such amount in whole or in part.
Scheduled Payments shall not include any amounts due in respect of the
Obligations attributable to any increase in interest rate, penalty or other sum
payable by the Obligor by reason of any default or event of default in respect
of the Obligations, or by reason of any deterioration of the credit worthiness
of the Obligor, nor shall Scheduled Payments include, nor shall coverage be
provided under this Policy in respect of, any taxes, withholding or other charge
with respect to any Holder imposed by any governmental authority due in
connection with the payment of any Scheduled Payment to a Holder.
"Term Of This Policy" means the period from and including the Closing
Date to and including the latest of the date on which (i) all Scheduled Payments
have been paid or deemed to be paid within the meaning of Section 4.1 of the
Indenture; (ii) any period during which any Scheduled Payment could have been
avoided in whole or in part as a preference payment under applicable bankruptcy,
insolvency, receivership or similar law shall have expired and (iii) if any
proceedings requisite to avoidance as a preference payment have been commenced
prior to the occurrence of (i) and (ii), a final and nonappealable order in
resolution of each such proceeding has been entered.
2. Notices and Conditions to Payment in Respect of Scheduled Payments.
Following Receipt by Financial Security of a notice and certificate from the
Indenture Trustee in the form attached as Exhibit A to this Endorsement,
Financial Security will pay any amount payable hereunder in respect of Scheduled
Payments on the Obligations out of the funds of Financial Security on the later
to occur of (a) 12:00 noon, New York City time, on the third Business Day
following such Receipt; and (b) 12:00 noon, New York City time, on the date on
which such payment is due on the Obligations. Payments due hereunder in respect
of Scheduled Payments will be disbursed to the Indenture Trustee by wire
transfer of immediately available funds.
Financial Security shall be entitled to pay any amount hereunder in
respect of Scheduled Payments on the Obligations, including any amount due on
the Obligations on an accelerated basis, whether or not any notice and
certificate shall have been Received by Financial Security as provided above;
provided, however, that by acceptance of this Policy the Indenture Trustee
agrees to provide upon request to Financial Security a notice and certificate in
respect of any such payment by Financial Security. Financial Security shall be
entitled to pay hereunder any amount due on the Obligations on an accelerated
basis at any time or from time to time, in whole or in part, prior to the
scheduled date of payment thereof; Scheduled Payments insured hereunder shall
not include interest, in respect of principal paid hereunder on an accelerated
basis, accruing from after the date of such payment of principal. Financial
Security's obligations hereunder in respect of Scheduled Payments shall be
discharged to the extent funds are disbursed by Financial Security as provided
herein whether or not such funds are properly applied by the Indenture Trustee.
3. Notices and Conditions to Payment in Respect of Scheduled Payments
Avoided as Preference Payments. If any Scheduled Payment is avoided as a
preference payment under applicable bankruptcy, insolvency, receivership or
similar law, Financial Security will pay such amount out of the funds of
Financial Security on the later of (a) the date when due to be paid pursuant to
the Order referred to below or (b) the first to occur of (i) the fourth Business
Day following Receipt by Financial Security from the Indenture Trustee of (A) a
certified copy of the order of the court or other governmental body which
exercised jurisdiction to the effect that the Holder is required to return
principal of or interest paid on the Obligations during the Term Of This Policy
because such payments were avoidable as preference payments under applicable
bankruptcy law (the "Order"), (B) a certificate of the Holder that the Order has
been entered and is not subject to any stay and (C) an assignment duly executed
and delivered by the Holder, in such form as is reasonably required by Financial
Security, and provided to the Holder by Financial Security, irrevocably
assigning to Financial Security all rights and claims of the Holder relating to
or arising under the Obligations against the estate of the Obligor or otherwise
with respect to such preference payment or (ii) the date of Receipt by Financial
Security from the Indenture Trustee of the items referred to in clauses (A), (B)
and (C) above if, at least four Business Days prior to such date of Receipt,
Financial Security shall have Received written notice from the Indenture Trustee
that such items were to be delivered on such date and such date was specified in
such notice. Such payment shall be disbursed to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Order and not to the
Indenture Trustee or any Holder directly (unless a Holder has previously paid
such amount to the receiver, conservator, debtor-in-possession or trustee in
bankruptcy named in the Order, in which case such payment shall be disbursed to
the Indenture Trustee for distribution to such Holder upon proof of such payment
reasonably satisfactory to Financial Security). In connection with the
foregoing, Financial Security shall have the rights provided pursuant to Section
6.2 of the Sale and Servicing Agreement.
4. Governing Law. This Policy shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
conflict of laws principles thereof.
5. Fiscal Agent. At any time during the Term Of This Policy, Financial
Security may appoint a fiscal agent (the "Fiscal Agent") for purposes of this
Policy by written notice to the Indenture Trustee at the notice address
specified in the Indenture specifying the name and notice address of the Fiscal
Agent. From and after the date of receipt of such notice by the Indenture
Trustee, (i) copies of all notices and documents required to be delivered to
Financial Security pursuant to this Policy shall be simultaneously delivered to
the Fiscal Agent and to Financial Security and shall not be deemed Received
until Received by both, and (ii) all payments required to be made by Financial
Security under this policy may be made directly by Financial Security or by the
Fiscal Agent on behalf of Financial Security. The Fiscal Agent is the agent of
Financial Security only and the Fiscal Agent shall in no event be liable to any
Holder for any acts of the Fiscal Agent or any failure of Financial Security to
deposit, or cause to be deposited, sufficient funds to make payments due under
the Policy.
6. Waiver of Defenses. To the fullest extent permitted by applicable
law, Financial Security agrees not to assert, and hereby waives, for the benefit
of each Holder, all rights (whether by counterclaim, setoff or otherwise) and
defenses (including, without limitation, the defenses of fraud), whether
acquired by subrogation, assignment or otherwise, to the extent that such rights
and defenses may be available to Financial Security to avoid payment of its
obligations under this Policy in accordance with the express provisions of this
Policy.
7. Notices. All notices to be given hereunder shall be in writing (except
as otherwise specifically provided herein) and shall be mailed by registered
mail or personally delivered or telecopied to Financial Security as follows:
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President - Transaction Oversight
Telecopy No.: (212) 339-3518
Confirmation: (212) 826-0100
Financial Security may specify a different address or addresses by
writing mailed or delivered to the Indenture Trustee.
8. Priorities. In the event that any term or provision of the face of
this Policy is inconsistent with the provisions of this Endorsement, the
provisions of this Endorsement shall take precedence and shall be binding.
9. Exclusions From Insurance Guaranty Funds. This Policy is not covered
by the Property/Casualty Insurance Security Fund specified in Article 76 of the
New York Insurance Law. This Policy is not covered by the Florida Insurance
Guaranty Association created under Part II of Chapter 631 of the Florida
Insurance Code. In the event that Financial Security were to become insolvent,
any claims arising under this Policy are excluded from coverage by the
California Insurance Guaranty Association, established pursuant to Article 14.2
of Chapter 1 of Part 2 of Division 1 of the California Insurance Code.
10. Surrender of Policy. The Indenture Trustee shall surrender this
Policy to Financial Security for cancellation upon expiration of the Term Of
This Policy.
IN WITNESS WHEREOF, FINANCIAL SECURITY ASSURANCE INC. has caused this
Endorsement No. 1 to be executed by its Authorized Officer.
FINANCIAL SECURITY ASSURANCE INC.
By: /s/ Russell B Brewer II
------------------------------
Authorized Officer
Policy No: 50749-N Date of Issuance: December 4, 1998
EXHIBIT A
To Endorsement No. 1
NOTICE OF CLAIM AND CERTIFICATE
(Letterhead of Indenture Trustee)
Financial Security Assurance Inc.
350 Park Avenue
New York, NY 10022
Attention: Senior Vice President
Re: CPS Auto Receivables Trust 1998-4
The undersigned, a duly authorized officer of Norwest Bank Minnesota,
National Association (the "Indenture Trustee"), hereby certifies to Financial
Security Assurance Inc. ("Financial Security"), with reference to Financial
Guaranty Insurance Policy No. 50749-N dated December 4, 1998 (the "Policy")
issued by Financial Security in respect of the $32,500,000 Class A-1 5.473%
Asset Backed Notes, $77,500,000 Class A-2 5.790% Asset Backed Notes, $81,375,000
Class A-3 5.740% Asset Backed Notes, $100,000,000 Class A-4 5.690% Asset Backed
Notes and $18,625,000 Class A-5 5.890% Asset Backed Notes of the
above-referenced Trust (the "Obligations"), that:
(i) The Indenture Trustee is the Trustee under the Indenture.
(ii) The sum of all amounts on deposit (or scheduled to be on deposit)
in the Note Distribution Account and available for distribution to the Holders
pursuant to the Indenture will be $_________ (the "Shortfall") less than the
aggregate amount of Scheduled Payments due on ___________________.
(iii) The Indenture Trustee is making a claim under the Policy for the
Shortfall to be applied to the payment of Scheduled Payments.
(iv) The Indenture Trustee agrees that, following receipt of funds from
Financial Security, it shall (a) hold such amounts in trust and apply the same
directly to the payment of Scheduled Payments on the Obligations when due; (b)
not apply such funds for any other purpose; (c) not commingle such funds with
other funds held by the Indenture Trustee and (d) maintain an accurate record of
such payments with respect to each Obligation and the corresponding claim on the
Policy and proceeds thereof, and, if the Obligation is required to be
surrendered or presented for such payment, shall stamp on each such Obligation
the legend $"[insert applicable amount] paid by Financial Security and the
balance hereof has been cancelled and reissued" and then shall deliver such
Obligation to Financial Security.
(v) The Indenture Trustee, on behalf of the Holders, hereby assigns to
Financial Security the rights of the Holders with respect to the Obligations to
the extent of any payments under the Policy, including, without limitation, any
amounts due to the Holders in respect of securities law violations arising from
the offer and sale of the Obligations. The foregoing assignment is in addition
to, and not in limitation of, rights of subrogation otherwise available to
Financial Security in respect of such payments. Payments to Financial Security
in respect of the foregoing assignment shall in all cases be subject to and
subordinate to the rights of the Holders to receive all Scheduled Payments in
respect of the Obligations. The Indenture Trustee shall take such action and
deliver such instruments as may be reasonably requested or required by Financial
Security to effectuate the purpose or provisions of this clause (v).
(vi) The Indenture Trustee on its behalf and on behalf of the Holders,
hereby appoints Financial Security as agent and attorney-in-fact for the
Indenture Trustee and each such Holder in any legal proceeding with respect to
the Obligations. The Indenture Trustee hereby agrees that, so long as an Insurer
Default (as defined in the Indenture) shall not exist, Financial Security may at
any time during the continuation of any proceeding by or against the Obligor
under the United States Bankruptcy Code or any other applicable bankruptcy,
insolvency, receivership, rehabilitation or similar law (an "Insolvency
Proceeding") direct all matters relating to such Insolvency Proceeding,
including without limitation, (A) all matters relating to any claim in
connection with an Insolvency Proceeding seeking the avoidance as a preferential
transfer of any payment made with respect to the Obligations (a "Preference
Claim"), (B) the direction of any appeal of any order relating to any Preference
Claim at the expense of Financial Security but subject to reimbursement as
provided in the Insurance Agreement and (C) the posting of any surety,
supersedeas or performance bond pending any such appeal. In addition, the
Indenture Trustee hereby agrees that Financial Security shall be subrogated to,
and the Indenture Trustee on its behalf and on behalf of each Holder, hereby
delegates and assigns, to the fullest extent permitted by law, the rights of the
Indenture Trustee and each Holder in the conduct of any Insolvency Proceeding,
including, without limitation, all rights of any party to an adversary
proceeding or action with respect to any court order issued in connection with
any such Insolvency Proceeding.
(vii) Payment should be made by wire transfer directed to [SPECIFY
ACCOUNT].
Unless the context otherwise requires, capitalized terms used in this
Notice of Claim and Certificate and not defined herein shall have the meanings
provided in the Policy.
IN WITNESS WHEREOF, the Indenture Trustee has executed and delivered
this Notice of Claim and Certificate as of the ____ day of _____________, ____.
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
as Indenture Trustee
By_________________________________
Title______________________________
- -----------------------------------------------------------------
For Financial Security or
Fiscal Agent Use Only
Wire transfer sent on ____________ by ___________________________
Confirmation Number _____________________.