Exhibit 10.1
AMENDED AND RESTATED SALE AND SERVICING AGREEMENT (as amended,
supplemented or otherwise modified from time to time, this "AGREEMENT") dated as
of June 29, 2005, among PAGE FUNDING LLC, a Delaware limited liability company
(the "PURCHASER"), CONSUMER PORTFOLIO SERVICES, INC., a California corporation
(in its capacities as Seller, the "SELLER" and as Servicer, the "SERVICER,"
respectively), WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking
association (in its capacities as Backup Servicer, the "BACKUP SERVICER" and as
Trustee, the "TRUSTEE," respectively).
WHEREAS, the Purchaser, the Servicer, the Seller, the Backup Servicer
and the Trustee entered into that Sale and Servicing Agreement dated as of June
30, 2004 (the "ORIGINAL SALE AND SERVICING AGREEMENT"), pursuant to which the
Purchaser purchased, from time to time, receivables arising in connection with
motor vehicle retail installment sale contracts acquired by the Seller from
motor vehicle dealers and independent finance companies; and
WHEREAS, the Purchaser, the Servicer, the Seller, the Backup Servicer,
the Trustee and the Noteholder desire to amend and restate the Original Sale and
Servicing Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
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DEFINITIONS
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SECTION 1.1. DEFINITIONS.
Capitalized terms used in this Agreement and not otherwise defined in
this Agreement, shall have the meanings set forth in Annex A attached hereto.
SECTION 1.2. OTHER DEFINITIONAL PROVISIONS.
(a) 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.
(b) 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 U.S.
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 U.S.
generally accepted accounting principles, the definitions contained in
this Agreement or in any such instrument, certificate or other document
shall control.
(c) 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.
(d) 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."
(e) The definitions contained in this Agreement are applicable
to the singular as well as the plural forms of such terms and to the
masculine as well as to the feminine and neuter genders of such terms.
(f) 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.
SECTION 1.3. CALCULATIONS.
Other than as expressly set forth herein or in any of the other Basic
Documents, all calculations of the amount of the Servicing Fee, Backup Servicing
Fee and the Trustee Fee shall be made on the basis of a 360-day year consisting
of twelve 30-day months. All calculations of the Unused Facility Fee and the
Noteholder's Monthly Interest Distributable Amount shall be made on the basis of
the actual number of days in the Accrual Period and 360 days in the calendar
year. All references to the Principal Balance of a Receivable as of the last day
of an Accrual Period shall refer to the close of business on such day.
SECTION 1.4. MATERIAL ADVERSE EFFECT.
Whenever a determination is to be made under this Agreement whether a
breach of a representation, warranty or covenant has or could have a material
adverse effect on a Receivable or the interest therein of the Purchaser and the
Noteholder (or any similar or analogous determination), such determination shall
be made by the Noteholder in its sole and reasonable discretion.
ARTICLE II
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CONVEYANCE OF RECEIVABLES
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SECTION 2.1. CONVEYANCE OF RECEIVABLES.
(a) In consideration of the Purchaser's delivery to or upon
the order of the Seller on any Funding Date of the Purchase Price
therefor, the Seller does hereby sell, transfer, assign, set over and
otherwise convey to the Purchaser, without recourse (subject to the
obligations set forth herein) all right, title and interest of the
Seller, whether now existing or hereafter arising, in, to and under:
(i) the Receivables listed in the Schedule of
Receivables from time to time;
(ii) all monies received under the Receivables on and
after the related Cutoff Date and all Net Liquidation Proceeds
received with respect to the Receivables after the related
Cutoff Date;
(iii) the security interests in the Financed Vehicles
granted by Obligors pursuant to the related Contracts and any
other interest of the Seller in such Financed Vehicles,
including, without limitation, the certificates of title or,
with respect to such Receivables that finance a vehicle in the
States listed in Annex B, other evidence of title issued by
the applicable Department of Motor Vehicles or similar
authority in such States, with respect to such Financed
Vehicles;
(iv) any proceeds from claims on any Receivables
Insurance Policies or certificates relating to the Financed
Vehicles securing the Receivables or the Obligors thereunder;
(v) all proceeds from recourse against Dealers with
respect to the Receivables;
(vi) refunds for the costs of extended service
contracts with respect to Financed Vehicles securing the
Receivables, refunds of unearned premiums with respect to
credit life and credit accident and health insurance policies
or certificates covering an Obligor or Financed Vehicle under
a Receivable or his or her obligations with respect to a
Financed Vehicle and any recourse to Dealers for any of the
foregoing;
(vii) the Receivable File related to each Receivable
and all other documents that the Seller keeps on file in
accordance with its customary procedures relating to the
Receivables for Obligors of the Financed Vehicles;
(viii) all amounts and property from time to time
held in or credited to the Collection Account or the Lockbox
Accounts;
(ix) all property (including the right to receive
future Net Liquidation Proceeds) that secures a Receivable
that has been acquired by or on behalf of the Purchaser
pursuant to a liquidation of such Receivable;
(x) each TFC/MFN Assignment; and
(xi) all present and future claims, demands, causes
and choses in action in respect of any or all of the foregoing
and all payments on or under and all proceeds of every kind
and nature whatsoever in respect of any or all of the
foregoing, including all proceeds of the conversion, voluntary
or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts,
insurance proceeds, condemnation awards, rights to payment of
any and every kind and other forms of obligations and
receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of
any of the foregoing.
(b) The Seller shall transfer to the Purchaser the Receivables
and the other property and rights related thereto described in
PARAGRAPH (a) above only upon the satisfaction of each of the
conditions set forth below on or prior to the related Funding Date. In
addition to constituting conditions precedent to any purchase hereunder
and under each Assignment, the following shall also be conditions
precedent to any Advance on any Funding Date under the terms of the
Note Purchase Agreement:
(i) the Seller shall have provided the Purchaser,
Trustee and the Noteholder with an Addition Notice
substantially in the form of EXHIBIT G hereto (which shall
include supplements to the Schedule of Receivables) not later
than three Business Days prior to such Funding Date and shall
have provided any information reasonably requested by any of
the foregoing with respect to the Related Receivables;
(ii) the Seller shall, to the extent required by
SECTION 4.2 of this Agreement, have deposited in the
Collection Account all collections received after the Cutoff
Date in respect of the Related Receivables to be purchased on
such Funding Date;
(iii) as of each Funding Date, (A) the Seller shall
not be insolvent and shall not become insolvent as a result of
the transfer of Related Receivables on such Funding Date, (B)
the Seller shall not intend to incur or believe that it shall
incur debts that would be beyond its ability to pay as such
debts mature, (C) such transfer shall not have been made with
actual intent to hinder, delay or defraud any Person and (D)
the assets of the Seller shall not constitute unreasonably
small capital to carry out its business as then conducted;
(iv) the Facility Termination Date shall not have
occurred;
(v) the Servicer shall have established one or more
Lockbox Accounts acceptable to the Noteholder;
(vi) each of the representations and warranties made
by the Seller pursuant to SECTION 3.1 and the other Basic
Documents with respect to the Related Receivables to be
purchased on such Funding Date shall be true and correct as of
the related Funding Date and the Seller shall have performed
all obligations to be performed by it hereunder or in any
Assignment on or prior to such Funding Date;
(vii) the Seller shall, at its own expense, on or
prior to the Funding Date, indicate in its computer files that
the Related Receivables to be purchased on such Funding Date
have been sold to the Purchaser pursuant to this Agreement or
an Assignment, as applicable;
(viii) the Seller shall have taken any action
required to maintain (i) the first priority perfected
ownership interest of the Purchaser in the Related Receivables
and Other Conveyed Property and (ii) the first priority
perfected security interest of the Trustee in the Collateral;
(ix) no selection procedures adverse to the interests
of the Noteholder shall have been utilized in selecting the
Related Receivables to be sold on such Funding Date;
(x) the addition of any such Related Receivables to
be purchased on such Funding Date shall not result in a
material adverse tax consequence to the Noteholder or the
Purchaser;
(xi) the Seller shall have delivered to the
Noteholder and the Trustee an Officers' Certificate confirming
the satisfaction of each condition precedent specified in this
PARAGRAPH (B);
(xii) no Funding Termination Event, Servicer
Termination Event, or any event that, with the giving of
notice or the passage of time, would constitute a Funding
Termination Event or Servicer Termination Event, shall have
occurred and be continuing;
(xiii) the Trustee shall have confirmed receipt of
the related Receivable File for each Related Receivable
included in the Borrowing Base calculation and shall have
delivered a copy to the Noteholder of a Trust Receipt with
respect to the Receivable Files related to the Related
Receivables to be purchased on such Funding Date;
(xiv) the Seller shall have filed or caused to be
filed all necessary UCC-l financing statements (or amendments
thereto) necessary to maintain (in each case assuming for
purposes of this clause (xiv) that such perfection may be
achieved by making the appropriate filings), or taken any
other steps necessary to maintain, (1) the first, priority,
perfected ownership interest of Purchaser and (2) the first
priority, perfected security interest of the Trustee, with
respect to the Related Receivables and Other Conveyed Property
and the Collateral, respectively to be transferred on such
Funding Date;
(xv) the Seller shall have executed and delivered an
Assignment in the form of EXHIBIT F; and
(xvi) each of the conditions precedent to such
Advance set forth in the Indenture and the Note Purchase
Agreement shall have been satisfied.
Unless waived by the Noteholder in writing, the Seller covenants that
in the event any of the foregoing conditions precedent are not satisfied with
respect to any Related Receivable on the date required as specified above, the
Seller will immediately repurchase such Related Receivable from the Purchaser,
at a price equal to the Purchase Amount thereof, in the manner specified in
SECTION 3.2 and SECTION 4.7. Except with respect to ITEM (xiii) above, the
Trustee may rely on the accuracy of the Officers' Certificate delivered pursuant
to ITEM (xi) above without independent inquiry or verification.
(c) PAYMENT OF PURCHASE PRICE. In consideration for the sale
of the Related Receivables and Other Conveyed Property described in
SECTION 2.1(a) or the related Assignment, the Purchaser shall, on each
Funding Date on which Related Receivables are transferred hereunder,
pay to or upon the order of the Seller the applicable Purchase Price in
the following manner: (i) cash in an amount equal to the amount of the
Advance received by the Purchaser under the Note on such Funding Date
and (ii) to the extent the Purchase Price for the related Receivables
and Other Conveyed Property exceeds the amount of cash described in
(i), such excess shall be treated as a capital contribution by the
Seller to the Purchaser. On any Funding Date on which funds are on
deposit in the Principal Funding Account, the Purchaser may direct the
Trustee to withdraw therefrom an amount equal to the lesser of (i) the
Purchase Price to be paid to the Seller for Related Receivables and
Other Conveyed Property to be conveyed to the Purchaser and pledged to
the Trustee on such Funding Date (or a portion thereof) and (ii) the
amount on deposit in the Principal Funding Account, and, subject to the
satisfaction of the conditions set forth in SECTION 2.1(B) after giving
effect to such withdrawal, pay such amount to or upon the order of the
Seller in consideration for the sale of the Related Receivables and
Other Conveyed Property on such Funding Date.
SECTION 2.2. TRANSFERS INTENDED AS SALES.
It is the intention of the Seller that each transfer and assignment
contemplated by this Agreement and each Assignment shall constitute a sale of
the Related Receivables and Other Conveyed Property from the Seller to the
Purchaser free and clear of all liens and rights of others and it is intended
that the beneficial interest in and title to the Related Receivables and Other
Conveyed Property shall not be part of the Seller's estate in the event of the
filing of a bankruptcy petition by or against the Seller under any bankruptcy
law. In the event that, notwithstanding the intent of the Seller, the transfer
and assignment contemplated hereby or by any Assignment is held not to be a
sale, this Agreement and each Assignment shall constitute a grant of a security
interest in the property referred to in SECTION 2.1 and each Assignment to the
Purchaser which security interest has been assigned to the Trustee, acting on
behalf of the Noteholder.
SECTION 2.3. FURTHER ENCUMBRANCE OF RECEIVABLES AND OTHER CONVEYED
PROPERTY.
(a) Immediately upon the conveyance to the Purchaser by the
Seller of the Related Receivables and any item of the related Other
Conveyed Property pursuant to SECTION 2.1 and the related Assignment,
all right, title and interest of the Seller in and to such Related
Receivables and Other Conveyed Property shall terminate, and all such
right, title and interest shall vest in the Purchaser.
(b) Immediately upon the vesting of any Related Receivables
and the related Other Conveyed Property in the Purchaser, the Purchaser
shall have the sole right to pledge or otherwise encumber such Related
Receivables and the related Other Conveyed Property. Pursuant to the
Indenture, the Purchaser shall grant a security interest in the
Collateral to secure the repayment of the Note.
(c) The Trustee shall, at such time as (i) the Facility
Termination Date has occurred, (ii) there is no Note outstanding and
(iii) all sums due to the Trustee pursuant to the Basic Documents have
been paid, release any remaining portion of the Receivables and the
Other Conveyed Property to the Purchaser.
ARTICLE III
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THE RECEIVABLES
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SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF SELLER.
(a) The Seller makes the following representations and
warranties as to the Receivables to the Purchaser and to the Trustee
for the benefit of the Noteholder on which the Purchaser relies in
acquiring the Receivables and on which the Noteholder has relied in
purchasing the Note and will rely in paying the Advance Amount to the
Purchaser. Such representations and warranties speak as of the Closing
Date and as of each Funding Date; PROVIDED that to the extent such
representations and warranties relate to the Related Receivables
conveyed on any Funding Date, such representations and warranties shall
speak as of the related Funding Date, but shall survive the sale,
transfer and assignment of such Related Receivables to the Purchaser
and the pledge thereof by the Purchaser to the Trustee pursuant to the
Indenture.
(i) CHARACTERISTICS OF RECEIVABLES. 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 and without any
fraud or misrepresentation on the part of the Dealer, such
Dealer had all necessary licenses and permits to originate
such Receivables in the state where such Dealer was located,
has been fully and properly executed by the parties thereto,
has been purchased by the Seller, MFN or TFC directly from the
Dealer in connection with the sale of Financed Vehicles by the
Dealers and has been validly assigned by such Dealer to the
Seller, MFN or TFC in accordance with its terms, (2) has
created a valid, subsisting, and enforceable first priority
perfected security interest in favor of the Seller in the
Financed Vehicle, which security interest has been validly
assigned by the Seller to the Purchaser and by the Purchaser
to the Trustee, (3) contains customary and enforceable
provisions such that the rights and remedies of the holder or
assignee thereof shall be adequate for realization against the
collateral of the benefits of the security including without
limitation a right of repossession following a default, (4)
provides for level weekly, bi-weekly, semi-monthly or 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 but in no event shall exceed
three times such level payment) and yields interest at the
Annual Percentage Rate, (5) if such Receivable 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, (6) is a Rule of
78's Receivable or a Simple Interest Receivable, (7) was
originated by a Dealer to an Obligor and was sold by the
Dealer to the Seller, MFN or TFC without any fraud or
misrepresentation on the part of such Dealer or the Obligor,
(8) is denominated in U.S. dollars and (9) contains no future
funding obligation.
(ii) ADDITIONAL RECEIVABLES CHARACTERISTICS. As of
the related Funding Date, as applicable:
(A) each Related Receivable that is a CPS
Receivable has (1) an original term of 24 to 72
months; (2) an original Amount Financed of at least
$3,000 and not more than $35,000; and (3) had an APR
of at least 8% and not more than 30% (subject to
applicable laws);
(B) each Related Receivable that is a TFC
Receivable or Clean-up Call Receivable has (1) an
original term of 9 to 60 months; (2) an original
Amount Financed of at least $1,000 and not more than
$25,000; (3) had an APR of at least 9.90% and not
more than 30% (subject to applicable laws); (4) when
originated had an Obligor that was a member of the
U.S. armed forces; and (5) no Obligor that has been
the subject of a 341 Hearing.
(C) each Related Receivable is not more than
30 days past due with respect to more than 10% of any
Scheduled Receivable Payment as of the related Cutoff
Date and no funds have been advanced by the Seller,
any Dealer or anyone acting on their behalf in order
to cause any Related Receivable to satisfy such
requirement;
(D) no Related Receivable (other than the
Clean-up Call Receivables) has been extended beyond
its original term, except in accordance with the
applicable Contract Purchase Guidelines regarding
deferments or extensions; and
(E) each Related Receivable (other than the
Clean-up Call Receivables) satisfies in all material
respects the applicable Contract Purchase Guidelines
as in effect on the Closing Date or as otherwise
amended from time to time (other than the Clean-up
Call Receivables); provided, that such amendments do
not have a material adverse effect on the Noteholder.
(iii) SCHEDULE OF RECEIVABLES. The information with
respect to the Related Receivables set forth in Schedule A to
the related Assignment is true and correct in all material
respects as of the close of business on the related Cutoff
Date, and no selection procedures adverse to the Noteholder
have been utilized in selecting the Related Receivables to be
sold hereunder.
(iv) COMPLIANCE WITH LAW. Each Related 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 the applicable Assignment complies in all
material respects with all requirements of applicable Federal,
State, and local laws, including, without limitation, Consumer
Laws, and regulations thereunder.
(v) NO GOVERNMENT OBLIGOR. None of the Related
Receivables are due from the United States of America or any
State or from any agency, department, or instrumentality of
the United States of America or any State.
(vi) SECURITY INTEREST IN FINANCED VEHICLE.
Immediately subsequent to the sale, assignment and transfer
thereof to the Purchaser, each Related Receivable shall be
secured by a validly perfected first priority security
interest in the Financed Vehicle in favor of the Seller as
secured party which has been validly assigned to the
Purchaser, and such assigned security interest is prior to all
other liens upon and security interests in such Financed
Vehicle which now exist or may hereafter arise or be created
(except, as to priority, for any tax liens or mechanics' liens
which may arise after the related Funding Date as a result of
an Obligor's failure to pay its obligations, as applicable).
(vii) RECEIVABLES IN FORCE. No Related Receivable has
been satisfied, subordinated or rescinded, nor has any related
Financed Vehicle been released from the lien granted by the
related Receivable in whole or in part.
(viii) NO WAIVER. Except as permitted under SECTION
4.2 and CLAUSE (IX) below, no provision of a Related
Receivable has been waived, altered or modified in any respect
since its origination. No Related Receivable has been modified
as a result of application of the Servicemembers Civil Relief
Act, as amended.
(ix) NO AMENDMENTS. Except as permitted under SECTION
4.2, no Related Receivable has been amended, modified, waived
or refinanced (other than the Clean-up Call Receivables)
except as such Related 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 and in accordance
with the applicable Contract Purchase Guidelines.
(x) NO DEFENSES. No right of rescission, setoff,
counterclaim or defense exists or has been asserted or
threatened with respect to any Related Receivable. The
operation of the terms of any Related Receivable or the
exercise of any right thereunder will not render such Related
Receivable unenforceable in whole or in part and such
Receivable is not subject to any such right of rescission,
setoff, counterclaim, or defense.
(xi) NO LIENS. As of the related Cutoff Date, (a)
there are no liens or claims existing or which have been filed
for work, labor, storage or materials relating to a Financed
Vehicle financed under a Related Receivable that shall be
liens prior to, or equal or coordinate with, the security
interest in the Financed Vehicle granted by the Related
Receivable and (b) there is no lien against the Financed
Vehicle financed under a Related Receivable for delinquent
taxes.
(xii) NO DEFAULT; REPOSSESSION. Except for payment
delinquencies continuing for a period of not more than 30 days
as of the related Cutoff Date, no default, breach, violation
or event permitting acceleration under the terms of any
Related 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 Related Receivable has arisen; and none
of the Seller, Mercury, TFCRC IV, TFCRC VI, MFN or TFC shall
waive or has waived any of the foregoing (except in a manner
consistent with SECTION 4.2) and no Financed Vehicle financed
under a Related Receivable shall have been repossessed.
(xiii) INSURANCE; OTHER. (A) Each Obligor under the
Related Receivables has obtained an insurance policy covering
the Financed Vehicle as of the execution of such Receivable
insuring against loss and damage due to fire, theft,
transportation, collision and other risks generally covered by
comprehensive and collision coverage, and either the Seller,
MFN or TFC, as applicable, and its respective successors and
assigns are named as loss payee or an additional insured of
such insurance policy, such insurance policy is in an amount
at least equal to the lesser of (i) the Financed Vehicle's
actual cash value or (ii) the remaining Principal Balance of
the Related Receivable, and each Related Receivable requires
the Obligor to obtain and maintain such insurance naming the
Seller, MFN or TFC, as applicable, and its respective
successors and assigns as loss payee or an additional insured,
(B) each Related 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 the Seller, MFN or TFC, as applicable, as policyholder
(creditor) under each such insurance policy and certificate of
insurance and (C) as to each Related Receivable that finances
the cost of an extended service contract, the respective
Financed Vehicle which secures the Related Receivable is
covered by an extended service contract. As of the related
Cutoff Date, no Financed Vehicle is or had previously been
insured under a policy of forced-placed insurance.
(xiv) TITLE. It is the intention of the Seller that
each transfer and assignment herein contemplated constitutes a
sale of the Related Receivables and the related Other Conveyed
Property from the Seller to the Purchaser and that the
beneficial interest in and title to such Related Receivables
and related Other Conveyed Property not be part of the
Seller's estate in the event of the filing of a bankruptcy
petition by or against the Seller under any bankruptcy law. No
Related Receivable or related Other Conveyed Property has been
sold, transferred, assigned, or pledged by the Seller to any
Person other than the Purchaser and by the Purchaser to any
Person other than the Trustee. Immediately prior to each
transfer and assignment herein contemplated, the Seller had
good and marketable title to each Related Receivable and
related Other Conveyed Property and was the sole owner
thereof, free and clear of all liens, claims, encumbrances,
security interests, and rights of others, and, immediately
upon the transfer thereof to the Purchaser and the concurrent
pledge to the Trustee under the Indenture, the Trustee for the
benefit of the Noteholder shall have a valid and enforceable
security interest in the Collateral, free and clear of all
liens, encumbrances, security interests, and rights of others,
and such transfer has been perfected under the UCC. No Dealer
has a participation in, or other right to receive, proceeds of
any Receivable.
(xv) LAWFUL ASSIGNMENT. No Related Receivable has
been originated in, or is subject to the laws of, any
jurisdiction under which the sale, transfer, and assignment of
such Related Receivable under this Agreement or pursuant to
transfers of the Note shall be unlawful, void, or voidable.
None of the Seller, MFN, Mercury, TFC, TFCRC IV or TFCRC VI
has entered into any agreement with any account debtor that
prohibits, restricts or conditions the assignment of any
portion of the Related Receivables.
(xvi) ALL FILINGS MADE. All filings (including,
without limitation, UCC filings or other actions) necessary in
any jurisdiction to give: (a) the Purchaser a first priority
perfected ownership interest in the Receivables and the Other
Conveyed Property, including, without limitation, the proceeds
of the Receivables (to the extent that the Purchaser can
obtain such first priority perfected security interest
pursuant to one or more filings) and (b) the Trustee, for the
benefit of the Noteholder, a first priority perfected security
interest in the Collateral have been made, taken or performed.
(xvii) RECEIVABLE FILE; ONE ORIGINAL. The Seller has
delivered to the Trustee, at the location specified in
SCHEDULE B hereto, a complete Receivable File with respect to
each Related Receivable, and the Trustee has delivered to the
Purchaser and the Noteholder a copy of the Trust Receipt
therefor. There is only one original executed copy of each
Receivable.
(xviii) CHATTEL PAPER. Each Related Receivable
constitutes "TANGIBLE CHATTEL PAPER" under the UCC.
(xix) TITLE DOCUMENTS. (A) If the Related 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
Related 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 Related
Receivables that finance a vehicle in the States listed in
Annex B, other evidence of title issued by the applicable
Department of Motor Vehicles or similar authority in such
States) will be received within 180 days and will show, the
Seller (or, in the case of a TFC Receivable, TFC, and, in the
case of a Clean-up Call Receivable, MFN or TFC) 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 Related Receivable was originated in a
State in which the filing of a financing statement under the
UCC is required to perfect a security interest in motor
vehicles, such filings or recordings have been duly made and
show the Seller (or, in the case of a TFC Receivable, TFC,
and, in the case of a Clean-up Call Receivable, MFN or TFC)
named as the original secured party under the Related
Receivable, and in either case, the Trustee has the same
rights as such secured party has or would have (if such
secured party were still the owner of the Receivable) against
all parties claiming an interest in such Financed Vehicle.
With respect to each Related Receivable for which the title
document has not yet been returned from the Registrar of
Titles, the Seller has received written evidence from the
related Dealer that such title document showing the Seller
(or, in the case of a TFC Receivable, TFC, and, in the case of
a Clean-up Call Receivable, MFN or TFC) as first lienholder
has been applied for.
(xx) VALID AND BINDING OBLIGATION OF OBLIGOR. Each
Related Receivable is the legal, valid and binding obligation
in writing of the Obligor thereunder and is enforceable in
accordance with its terms, except only as such enforcement may
be limited by bankruptcy, insolvency or similar laws affecting
the enforcement of creditors' 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. Each Related Receivable is not subject to any
right of set-off by the Obligor.
(xxi) CHARACTERISTICS OF OBLIGORS. As of the date of
each Obligor's application for the loan from which each
Related Receivable that is a CPS 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 has not
completed a 341 Hearing, (c) had not been the subject of more
than one Federal, State or other bankruptcy, insolvency or
similar proceeding, (d) was domiciled in the United States and
(e) was not self-employed.
(xxii) POST-OFFICE BOX. On or prior to the next
billing period after the related Cutoff Date, the Servicer
will notify each Obligor to make payments with respect to its
respective Related Receivables after the related Cutoff Date
directly to the Post-Office Box, and will provide each Obligor
with a monthly statement in order to enable such Obligor to
make payments directly to the Post-Office Box.
(xxiii) CASUALTY. No Financed Vehicle financed under
a Related Receivable has suffered a Casualty.
(xxiv) NO AGREEMENT TO LEND. The Obligor with respect
to each Related Receivable does not have any option under the
Receivable to borrow from any person any funds secured by the
Financed Vehicle.
(xxv) OBLIGATION TO DEALERS OR OTHERS. The Purchaser
and its assignees will assume no obligation to Dealers or
other originators or holders of the Related Receivables
(including, but not limited to under dealer reserves) as a
result of its purchase of the Related Receivables.
(xxvi) NO IMPAIRMENT. Neither Seller nor the
Purchaser has done anything to convey any right to any Person
that would result in such Person having a right to payments
due under any Related Receivables or otherwise to impair the
rights of the Purchaser, the Trustee or the Noteholder in any
Related Receivable or the proceeds thereof.
(xxvii) RECEIVABLES NOT ASSUMABLE. No Related
Receivable is assumable by another Person in a manner which
would release the Obligor thereof from such Obligor's
obligations to the Purchaser or Seller with respect to such
Related Receivable.
(xxviii) SERVICING. The servicing of each Related
Receivable and the collection practices relating thereto have
been lawful and in accordance with the standards set forth in
this Agreement; and other than Seller, TFC and the Back-up
Servicer pursuant to the Basic Documents, no other person has
the right to service the Receivable.
(xxix) CREATION OF SECURITY INTEREST. This Agreement
creates a valid and continuing security interest (as defined
in the UCC) in the Receivables and the Other Conveyed Property
in favor of the Purchaser, which security interest is prior to
all other Liens and is enforceable as such as against
creditors of and purchasers from the Seller.
(xxx) PERFECTION OF SECURITY INTEREST IN THE
RECEIVABLES AND OTHER CONVEYED PROPERTY. The Seller has caused
the filing of all appropriate financing statements in the
proper filing office in the appropriate jurisdictions under
applicable law in order to perfect the security interest in
the Receivables and the Other Conveyed Property granted to the
Purchaser hereunder pursuant to SECTION 2.1 and the related
Assignment.
(xxxi) NO OTHER SECURITY INTERESTS. Other than the
security interest granted to the Purchaser pursuant to SECTION
2.1 and the related Assignment, the Seller has not pledged,
assigned, sold, granted a security interest in, or otherwise
conveyed any of the Receivables or the Other Conveyed
Property, other than such security interests as are released
at or before the conveyance thereof. The Seller has not
authorized the filing of and is not aware of any financing
statements filed against the Seller that include a description
of collateral covering any portion of the Receivables and the
Other Conveyed Property other than any financing statement
relating to the security interest granted to the Purchaser
hereunder or that has been terminated or released as to the
Receivables and the Other Conveyed Property. The Seller is not
aware of any judgment or tax lien filings against the Seller.
(xxxii) NOTATIONS ON CONTRACTS; FINANCING STATEMENT
DISCLOSURE. The Servicer has in its possession copies of all
Contracts that constitute or evidence the Receivables. The
Contracts that constitute or evidence the Receivables do not
have any marks or notations indicating that they have been
pledged, assigned or otherwise conveyed to any Person other
than the Purchaser and/or the Trustee for the benefit of the
Noteholder. All financing statements filed or to be filed
against the Seller in favor of the Purchaser in connection
herewith describing the Receivables and the Other Conveyed
Property contain a statement to the following effect: "A
purchase of or security interest in any collateral described
in this financing statement will violate the rights of the
secured party."
(xxxiii) RECORDS. On or prior to each Funding Date,
the Seller will have caused its records (including electronic
ledgers) relating to each Related Receivable to be conveyed by
it on such Funding Date to be clearly and unambiguously marked
to reflect that such Related Receivable was conveyed by it to
the Purchaser.
(xxxiv) COMPUTER INFORMATION. The computer diskette,
computer tape or other electronic transmission made available
by the Seller to the Purchaser on each Funding Date is, as of
the related Cutoff Date, complete and accurate and includes a
description of the same Receivables described in SCHEDULE A to
the related Assignment.
(xxxv) REMAINING PRINCIPAL BALANCE. As of the related
Cutoff Date, each Related Receivable has a remaining Principal
Balance of at least $3,000 and the Principal Balance of each
Receivable set forth in Schedule A to the related Assignment
is true and accurate in all respects.
SECTION 3.2. REPURCHASE UPON BREACH.
(a) The Seller, the Servicer, the Noteholder or the 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 next Accrual
Period following the discovery thereof by the Trustee or receipt by the
Trustee of notice from the Seller or the Servicer of such breach, the
Seller 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 next Accrual Period (or, at the Seller's option, the last day
of the first Accrual Period following the discovery). In consideration
of the purchase of any Receivable, the Seller shall remit the Purchase
Amount, in the manner specified in SECTION 5.6. The sole remedy of the
Purchaser, the Trustee or the Noteholder with respect to a breach of
representations and warranties pursuant to SECTION 3.1 shall be to
enforce the Seller's obligation to purchase such Receivables; PROVIDED,
HOWEVER, that the Seller shall indemnify the Trustee, the Backup
Servicer, the Purchaser and the Noteholder 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
in respect of any Defective Receivables and written instructions from
the Servicer, the Trustee shall release to the Seller 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 the Seller or such designee title to such Defective
Receivables.
(b) If the Insolvency Event related to a 341 Hearing has not
been discharged by the bankruptcy court or other similar court
presiding over such Insolvency Event within 90 days of the conveyance
of the related Receivable by the Seller to the Purchaser pursuant to
SECTION 2.1(a), the Seller shall repurchase such Receivable as of the
last day of such next Accrual Period.
SECTION 3.3. CUSTODY OF RECEIVABLES FILES.
(a) In connection with each sale, transfer and assignment of
Receivables and related Other Conveyed Property to the Purchaser
pursuant to this Agreement and each Assignment, and each pledge thereof
by the Purchaser to the Trustee pursuant to the Indenture, 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 or the related Funding Date in accordance with SECTION 3.4
(with respect to each Receivable):
(i) The fully executed original of the Receivable
(together with any agreements modifying or assigning the
Receivable, including without limitation any extension
agreements); and
(ii) The original certificate of title in the name of
the Obligor with a notation on such certificate of title
evidencing the Seller's, MFN's or TFC's security interest
therein, or such documents that the Seller shall keep on file,
in accordance with its customary procedures, evidencing the
security interest of the Seller, MFN or TFC, respectively, in
the Financed Vehicle or, if not yet received, a copy of the
application therefor showing the Seller or TFC, as applicable,
as secured party, or a dealer guarantee of title.
(b) Upon payment in full of any Receivable, the Servicer will
notify the Trustee pursuant to a certificate of a Servicing Officer in
the form of EXHIBIT C and shall request delivery of the Receivable and
Receivable File to the Servicer.
SECTION 3.4. ACCEPTANCE OF RECEIVABLE FILES BY TRUSTEE.
In connection with any Funding Date, the Seller shall cause to be
delivered to the Trustee the Receivable Files for the Related Receivables to be
purchased not less than four Business Days prior to the related Funding Date.
The Trustee declares that it will hold and will continue to hold such files and
any amendments, replacements or supplements thereto and all Other Conveyed
Property as Trustee, custodian, agent and bailee in trust for the use and
benefit of the Noteholder. The Trustee shall within three Business Days after
receipt of such files, execute and deliver to the Noteholder, a receipt
substantially in the form of EXHIBIT B hereto (a "TRUST RECEIPT") for the
Receivable Files received by the Trustee. By its delivery of a Trust Receipt,
the Trustee shall be deemed to have (a) acknowledged receipt of the files (or
the Receivables) which the Seller has represented are and contain the Receivable
Files for the Related Receivables purchased by the Purchaser on the related
Funding Date, (b) reviewed such files or Receivables and (c) determined that it
has received the items referred to in SECTION 3.3(A)(I) and (II) for each
Related Receivable identified in SCHEDULE A to the related Assignment. If in its
examination of the files delivered to it by the Seller pursuant to this SECTION
3.4, the Trustee 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 the
related Assignment or that any of the documents referred to in SECTION 3.3(A)(I)
or (II) are not contained in a Receivable File, the Trustee shall inform the
Purchaser, the Seller and the Noteholder pursuant to an exception report
attached to the Trust Receipt as SCHEDULE I of the failure to receive a file
with respect to such Receivable (or the failure of any of the aforementioned
documents to be included in the Receivable File) or shall return to the
Purchaser, as the Seller's designee any file unrelated to a Receivable
identified in SCHEDULE A to the related Assignment (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 next
Accrual Period following discovery thereof by the Trustee, the Trustee shall
cause the Seller to repurchase any such Receivable as of such last day. In
consideration of the purchase of the Receivable, the Seller shall remit the
Purchase Amount for such Receivable, in the manner specified in SECTION 5.6. The
sole remedy of the Trustee, the Purchaser and the Noteholder with respect to a
breach pursuant to this SECTION 3.4 shall be to require the Seller to purchase
the applicable Receivables pursuant to this SECTION 3.4; PROVIDED, HOWEVER, that
the Seller shall indemnify the Trustee, the Backup Servicer, the Purchaser and
the Noteholder 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 for a Receivable and written instructions from the Servicer,
the Trustee shall release to the Seller 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 the Seller and delivered to the
Trustee and are necessary to vest in the Seller or such designee title to the
Receivable. 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 that finance a vehicle in the States listed in
Annex B, other evidence of title issued by the applicable Department of Motor
Vehicles or similar authority in such States, is included in the Receivable File
as of the date of its review of the Receivable Files and deliver a copy of such
list to the Servicer and the Noteholder. On the date which is 180 days following
the related Funding Date, and monthly thereafter, the Trustee shall inform the
Seller and the other parties to this Agreement and the Noteholder 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
States listed in Annex B, other evidence of title issued by the applicable
Department of Motor Vehicles or similar authority in such States, and the Seller
shall repurchase any such Receivable as of the last Business Day of the Accrual
Period in which the expiration of such 180 days occurs. In consideration of the
purchase of the Receivable, the Seller shall remit the Purchase Amount for such
Receivable, in the manner specified in SECTION 5.6.
SECTION 3.5. ACCESS TO RECEIVABLE FILES.
The Trustee shall permit the Servicer and Noteholder 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 or the Noteholder, execute such documents and instruments as are
prepared by the Servicer or the Noteholder and delivered to the Trustee, as the
Servicer or the Noteholder deems necessary to permit the Servicer, in accordance
with its customary servicing procedures, to enforce the Receivable on behalf of
the Purchaser 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 or the Indenture and will not
cause it undue risk or liability. The Trustee shall not be obligated to release
any document from any Receivable File unless it receives a release request
signed by a Servicing Officer in the form of EXHIBIT C hereto (the "RELEASE
REQUEST"). Such Release Request shall obligate the Servicer to return such
document(s) to the Trustee when the need therefor no longer exists unless the
Receivable shall be liquidated, in which case, the Servicer shall certify in the
Release Request that all amounts required to be deposited in the Collection
Account with respect to such Receivable have been so deposited.
SECTION 3.6. TRUSTEE TO OBTAIN FIDELITY INSURANCE.
The Trustee shall maintain a fidelity bond in the form and amount as is
customary for entities acting as a trustee of funds and documents in respect of
consumer contracts on behalf of institutional investors.
SECTION 3.7. TRUSTEE TO MAINTAIN SECURE FACILITIES.
The Trustee shall maintain or cause to be maintained continuous custody
of the Receivables Files in secure and fire resistant facilities in accordance
with customary standards for such custody.
ARTICLE IV
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ADMINISTRATION AND SERVICING OF RECEIVABLES
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SECTION 4.1. DUTIES OF THE SERVICER.
The Servicer, as agent for the Purchaser and the Noteholder 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 sale 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. In performing such duties, the Servicer shall comply with
its current servicing policies and procedures, as such servicing policies and
procedures may be amended from time to time, so long as such amendments will not
materially adversely affect the interests of the Noteholder, or otherwise with
the prior written consent of the Noteholder (which consent shall not be
unreasonably withheld), and notice of such amendments is given to the Noteholder
prior to the effectiveness thereof. 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 and the Noteholder with
respect to distributions. Without limiting the generality of the foregoing, and
subject to the servicing standards set forth in this Agreement including,
without limitation, the restrictions set forth in SECTION 4.6, the Servicer is
authorized and empowered by the Purchaser to execute and deliver, on behalf of
itself, the Purchaser or the Noteholder, any and all instruments of satisfaction
or cancellation, or partial or full release or discharge, and all other
comparable instruments, with respect to such Receivables or to the Financed
Vehicles securing such Receivables and/or the certificates of title or, with
respect to Financed Vehicles in the States listed in Annex B, other evidence of
title issued by the applicable Department of Motor Vehicles or similar authority
in such States with respect to such Financed Vehicles. If the Servicer shall
commence a legal proceeding to enforce a Receivable, the Purchaser 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 Purchaser 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 Noteholder. The Servicer shall prepare and furnish, and
the 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 (or the related Funding
Date, as applicable) the Servicer shall notify each Obligor to make all
payments with respect to the Receivables to the applicable 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
applicable 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 as long as the Seller is the Servicer, may grant
extensions on a Receivable in accordance with the applicable Contract
Purchase Guidelines, if any; PROVIDED, HOWEVER, that the Servicer may
not grant (x) more than one (1) extension per calendar year with
respect to a CPS Receivable or grant an extension with respect to a CPS
Receivable for more than one (1) calendar month or grant more than four
(4) extensions in the aggregate with respect to a CPS Receivable and
(y) more than two (2) extensions per calendar year with respect to a
TFC Receivable or Clean-up Call Receivable or grant an extension with
respect to a TFC Receivable or Clean-up Call Receivables for more than
one (1) calendar month or grant more than four (4) extensions in the
aggregate with respect to a TFC Receivable or Clean-up Call Receivable,
in each case without the prior written consent of the Noteholder. In no
event shall the principal balance of a Receivable be reduced, except in
connection with a settlement in the event the Receivable becomes a
Defaulted Receivable. If the Servicer is not the Seller or the Backup
Servicer, the Servicer may not make any extension on a Receivable
without the prior written consent of the Noteholder. The Servicer may
in its discretion waive any prepayment charge, late payment charge or
any other similar fees that may be collected in the ordinary course of
servicing a Receivable. Notwithstanding anything to the contrary
contained herein, the Servicer shall not agree to any alteration of the
interest rate on any Receivable or of the amount of any Scheduled
Receivable Payment on Receivables, other than to the extent that such
alteration is required by applicable law.
(b) The Servicer shall establish each Lockbox Account in the
name of the Purchaser for the benefit of the Trustee, acting on behalf
of the Noteholder. Pursuant to each Lockbox Agreement, the Trustee has
authorized the Servicer to direct dispositions of funds on deposit in
the related Lockbox Account to the Collection Account (but not to any
other account), and no other Person, except the Lockbox Processor and
the Trustee, has authority to direct disposition of funds on deposit in
such Lockbox Account. However, each Lockbox Agreement shall provide
that the Lockbox Bank will comply with instructions originated by the
Trustee relating to the disposition of the funds in the related Lockbox
Account without further consent by the Seller, the Servicer or the
Purchaser. 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. Each Lockbox Account shall be
established pursuant to and maintained in accordance with the related
Lockbox Agreement and shall be a demand deposit account initially
established and maintained with Bank One, N.A., or at the request of
the Noteholder 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
Noteholder in the location of a Lockbox Account. The Trustee shall
establish and maintain each Post-Office Box at a United States Post
Office Branch in the name of the Purchaser for the benefit of the
Noteholder
(c) Notwithstanding any Lockbox Agreement, or any of the
provisions of this Agreement relating to a Lockbox Agreement, the
Servicer shall remain obligated and liable to the Purchaser, the
Trustee and the Noteholder 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 Seller shall for any reason no longer be
acting as the Servicer hereunder, the Backup Servicer or a successor
Servicer shall thereupon assume all of the rights and obligations of
the outgoing Servicer under each Lockbox Agreement. In such event, the
Backup Servicer or a 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 a Lockbox Agreement to the same
extent as if such Lockbox Agreement had been assigned to the Backup
Servicer or a 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 Backup
Servicer or a successor Servicer all documents and records relating to
the Lockbox Agreements and an accounting of amounts collected and held
by the Lockbox Bank and otherwise use its best efforts to effect the
orderly and efficient assignment of the Lockbox Agreements to the
Backup Servicer or a successor Servicer. In the event that the
Noteholder 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 Noteholder, 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.
(e) On each Business Day, pursuant to the Lockbox Agreements,
the Lockbox Processor will transfer any payments from Obligors received
in the Post-Office Box to the applicable Lockbox Account. The Servicer
shall cause the Lockbox Bank to transfer cleared funds from the Lockbox
Accounts 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), all Net Liquidation Proceeds and any amounts remitted to
the Servicer by the Hedge Counterparty pursuant to the Hedge Agreement
no later than two Business Days following receipt directly (without
deposit into any intervening account) into the related Lockbox Account
or the Collection Account. The Servicer shall not commingle its assets
and funds with those on deposit in the Lockbox Accounts.
SECTION 4.3. REALIZATION UPON RECEIVABLES.
On behalf of the Purchaser and the Noteholder, 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 the Seller 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 the Seller as
policyholder (creditor) and (iii) as to each Receivable that finances
the cost of an extended service contract, the respective Financed
Vehicle which secures the Receivable is covered by an extended service
contract (each, a "RECEIVABLES INSURANCE POLICY").
(b) To the extent applicable, the Servicer shall not take any
action which would result in noncoverage under any Receivables
Insurance Policy which, but for the actions of the Servicer, would have
been covered thereunder. The Servicer, on behalf of the Purchaser,
shall take such reasonable action as shall be necessary to permit
recovery under each Receivables Insurance Policy. Any amounts collected
by the Servicer under any Receivables Insurance Policy, including,
without limitation, proceeds thereof, shall be deposited in the
Collection Account within two (2) Business Days of receipt.
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
Purchaser as are necessary to maintain perfection of the security
interest created by each Receivable in the related Financed Vehicle,
including but not limited to obtaining the authorization or execution
by the Obligors and the recording, registering, filing, re-recording,
re-registering and refiling of all security agreements, financing
statements and continuation statements or instruments as are necessary
to maintain the security interest granted by the Obligors under the
respective Receivables. The Trustee hereby authorizes the Servicer, and
the Servicer agrees, to take any and all steps necessary to re-perfect
or continue the perfection of such security interest on behalf of the
Purchaser and the Noteholder 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 Purchaser, and the pledge thereof by
the Purchaser to the Trustee 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 Trustee, each
of the Trustee and the Seller hereby agrees that the designation of the
Seller or TFC, as applicable, as the secured party on the certificate
of title is in respect of the Seller's capacity as Servicer and TFC's
capacity as subservicer, as applicable, as agent of the Trustee for the
benefit of the Noteholder.
(b) 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 Trustee on behalf of the Noteholder by
amending the title documents of such Financed Vehicles or by such other
reasonable means as may, in the opinion of counsel to the Trustee,
which opinion shall not be an expense of the Trustee, be necessary or
prudent. The Seller hereby agrees to pay all expenses related to such
perfection or re-perfection and to take all action necessary therefor.
In addition, the Noteholder 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 Noteholder, be necessary to perfect or re-perfect the
security interest in the Financed Vehicles underlying the Receivables
in the name of the Trustee on behalf of the Noteholder, 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 Noteholder,
be necessary or prudent; PROVIDED, HOWEVER, that if the Noteholder
requests that the title documents be amended prior to the occurrence of
a Servicer Termination Event, the Trustee or Servicer, as the case may
be, shall carry out such action only to the extent that the
out-of-pocket expenses of the Servicer or the Trustee, as the case may
be, shall be reimbursed by the Noteholder.
SECTION 4.6. ADDITIONAL COVENANTS OF SERVICER.
(a) 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 or other liquidation of the
Financed Vehicle, nor shall the Servicer impair the rights of the
Noteholder in such Receivables, nor shall the Servicer amend or
otherwise modify a Receivable, except as permitted in accordance with
SECTION 4.2.
(b) The Servicer shall obtain and/or maintain all necessary
licenses, approvals, authorizations, orders or other actions of any
person, corporation or other organization, or of any court,
governmental agency or body or official, required in connection with
the execution, delivery and performance of this Agreement and the other
Basic Documents.
(c) The Servicer shall not make any material changes to its
collection policies unless the Noteholder expressly consents in writing
prior to such changes (which consent shall not be unreasonably
withheld).
(d) The Servicer shall provide written notice to the
Noteholder of any default, event of default or servicer termination
event under any other warehouse financing facility or securitization
that has occurred and which default, event of default or servicer
termination shall not have been waived or otherwise cured within the
applicable cure period.
SECTION 4.7. PURCHASE OF RECEIVABLES UPON BREACH OF COVENANT.
Upon discovery by any of the Servicer, the Purchaser or the Trustee of
a breach of any of the covenants of the Servicer set forth in SECTIONS 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 next Accrual
Period following such discovery, 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 for
such Receivable in the manner specified in SECTION 5.6. The sole remedy of the
Trustee, the Purchaser or the Noteholder with respect to a breach of SECTIONS
4.2(a), 4.4, 4.5 or 4.6 shall be to require the Servicer to repurchase
Receivables pursuant to this SECTION 4.7; PROVIDED, HOWEVER, that the Servicer
shall indemnify the Trustee, the Backup Servicer, the Purchaser and the
Noteholder 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.
SECTION 4.8. SERVICING FEE.
The "SERVICING FEE" for each Settlement Date shall be equal to the
product of one twelfth times the Servicing Fee Percentage times the average of
the Aggregate Principal Balance of the Eligible Receivables on the first day of
the related Accrual Period and on the last day of such Accrual Period. 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 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 Backup Servicer becomes the
successor Servicer, the "Servicing Fee" payable to the Backup Servicer as
successor Servicer shall be determined in accordance with the Servicing and
Lockbox Processing Assumption Agreement.
SECTION 4.9. SERVICER'S CERTIFICATE.
No later than 12:00 noon New York City time on each Determination Date,
the Servicer shall deliver (facsimile delivery being acceptable) to the Trustee,
the Rating Agencies, the Noteholder and the Purchaser, a certificate
substantially in the form of EXHIBIT A hereto (a "SERVICER'S CERTIFICATE")
containing among other things, (i) all information necessary to enable the
Trustee to make any withdrawal and deposit required by SECTION 5.5 and to make
the distributions required by SECTION 5.7, (ii) all information necessary for
the Trustee to send statements to the Noteholder pursuant to SECTION 5.8(b) and
5.9, (iii) a listing of all Purchased Receivables purchased as of the related
Accounting Date, identifying the Receivables so purchased, (iv) the calculation
of the Borrowing Base, the CPS Borrowing Base, the Clean-up Call Borrowing Base
and the TFC Borrowing Base, and (v) all information necessary to enable the
Backup Servicer to verify the information specified in SECTION 4.14(b) and to
complete the accounting required by SECTION 5.9.
SECTION 4.10. ANNUAL STATEMENT AS TO COMPLIANCE, NOTICE OF SERVICER
TERMINATION EVENT.
(a) The Servicer shall deliver to the Purchaser, to the
Trustee for delivery to the Noteholder, the Backup Servicer and each
Rating Agency, on or before February 28 of each year beginning February
28, 2005, an Officer's Certificate, dated as of December 31 of the
preceding year, stating that (i) a review of the activities of the
Servicer during the preceding 12-month period (or, in the case of the
first such certificate, the period from the initial Cutoff Date to
December 31, 2004) 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.
(b) The Servicer shall deliver to the Trustee, the Noteholder,
the Backup Servicer and each Rating Agency, promptly after having
obtained knowledge thereof, but in no event later than two (2) Business
Days thereafter, written notice in an Officer's Certificate of any
event which with the giving of notice or lapse of time, or both, would
become a Servicer Termination Event under SECTION 10.1.
SECTION 4.11. INDEPENDENT ACCOUNTANTS' REPORTS.
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 Purchaser, to deliver to the
Trustee, the Backup Servicer, the Noteholder and each Rating Agency, on or
before March 31 of each year beginning March 31, 2005, a report dated as of
December 31 of the preceding year in form and substance reasonably acceptable to
the Noteholder (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 with respect to Receivables
transferred to the Purchaser on the initial Funding Date to December 31, 2004),
addressed to the Board of Directors of the Servicer, to the Trustee, the Backup
Servicer and to the Noteholder, to the effect that such firm has examined the
financial statements of the Servicer and issued its report therefor and that
such examination (1) was made in accordance with generally accepted auditing
standards, and accordingly included such tests of the accounting records and
such other auditing procedures as such firm considered necessary in the
circumstances; (2) included tests relating to auto loans serviced for others in
accordance with the requirements of the Uniform Single Attestation Program for
Mortgage Bankers (the "PROGRAM"), to the extent the procedures in the Program
are applicable to the servicing obligations set forth in this Agreement; (3)
included an examination of the delinquency and loss statistics relating to the
Servicer's portfolio of automobile and light truck installment sale 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 two randomly selected
Servicer's Certificates; (2) except as disclosed in the report, no exceptions or
errors in the Servicer's 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's Certificates were found to be
accurate. In the event such firm requires the Trustee and/or the Backup Servicer
to agree to the procedures performed by such firm, the Servicer shall direct the
Trustee and/or the Backup Servicer, as applicable, in writing to so agree; it
being understood and agreed that the Trustee and/or the Backup Servicer will
deliver such letter of agreement in conclusive reliance upon the direction of
the Servicer, and neither the Trustee nor the Backup Servicer makes any
independent inquiry or investigation as to, and shall have no obligation or
liability in respect of, the sufficiency, validity or correctness of such
procedures. The Report will also indicate that the firm is independent of the
Servicer within the meaning of the Code of Professional Ethics of the American
Institute of Certified Public Accountants.
SECTION 4.12. INDEPENDENT ACCOUNTANTS' REVIEW OF RECEIVABLES FILES.
Commencing on September 30, 2004 and, thereafter on each December 31,
March 31, June 30 and September 30 (or, with respect to each such date, upon the
date of the closing of Seller's next occurring "CPS Auto Receivables Trust" (or
similar) term securitization transaction, provided that such review is not made
more than 120 days after the immediately preceding review) prior to the Final
Scheduled Settlement Date, to the extent that the Invested Amount on any day in
the calendar quarter then ending was greater than $25 million (or such other
dates as the Noteholder may determine in its reasonable discretion from time to
time by prior written notice to the Seller, the Servicer and the Trustee), the
Seller at its own expense shall cause Independent Accountants reasonably
acceptable to the Noteholder to conduct a post-funding review of the Seller's
compliance with its stated underwriting policies and verify certain
characteristics of the Receivables as of each Funding Date. The Independent
Accountants shall within ten Business Days complete such physical inspection and
limited review and execute and deliver to Seller, the Servicer, the Trustee and
the Noteholder a report summarizing the findings, which report shall be
delivered in any case within 120 days of the previous report delivered in
accordance with this Section 4.12. If such review reveals, in the Noteholder's
reasonable opinion, an unsatisfactory number of exceptions, the Noteholder, in
its reasonable discretion, may require a full review of a larger sample of the
Receivables by the Independent Accounts at the expense of the Seller.
SECTION 4.13. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING
RECEIVABLES.
The Servicer shall provide to representatives of the Trustee, the
Backup Servicer and the Noteholder reasonable access to the documentation
regarding the Receivables. In each case, such access shall be afforded without
charge but only upon reasonable request and during normal business hours.
Nothing in this Section shall derogate from the obligation of the Servicer to
observe any applicable law prohibiting disclosure of information regarding the
Obligors, and the failure of the Servicer to provide access as provided in this
Section as a result of such obligation shall not constitute a breach of this
Section.
SECTION 4.14. VERIFICATION OF SERVICER'S CERTIFICATE.
(a) Concurrently with the delivery by the Servicer of the
Servicer's Certificate each month, the Servicer will deliver to the
Trustee and the Backup Servicer a computer diskette (or other
electronic transmission) in a format acceptable to the Trustee and the
Backup Servicer containing information with respect to the Receivables
as of the close of business on the last day of the preceding Interest
Period which information is necessary for preparation of the Servicer's
Certificate. The Backup Servicer shall use such computer diskette (or
other electronic transmission) to verify certain information specified
in SECTION 4.14(b) contained in the Servicer's Certificate delivered by
the Servicer, and the Backup Servicer shall notify the Servicer and the
Noteholder of any discrepancies on or before the second Business Day
following the Determination Date. In the event that the Backup Servicer
reports any discrepancies, the Servicer and the Backup Servicer shall
attempt to reconcile such discrepancies by the related Settlement 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 Settlement Date. In the event that the Backup
Servicer and the Servicer are unable to reconcile discrepancies with
respect to a Servicer's Certificate by the related Settlement Date, the
Backup Servicer shall notify the Noteholder thereof in writing and the
Servicer shall cause a firm of Independent Accountants, at the
Servicer's expense, to audit the Servicer's Certificate and, prior to
the fifth day of the following calendar month, reconcile the
discrepancies. The effect, if any, of such reconciliation shall be
reflected in the Servicer's Certificate for such next succeeding
Determination Date. Other than the duties specifically set forth in
this Agreement, the Backup Servicer shall have no obligations
hereunder, including, without limitation, to supervise, verify, monitor
or administer the performance of the Servicer. The Backup Servicer
shall have no liability for any actions taken or omitted by the
Servicer. The duties and obligations of the Backup Servicer shall be
determined solely by the express provisions of this Agreement and no
implied covenants or obligations shall be read into this Agreement
against the Backup Servicer.
(b) The Backup Servicer shall review each Servicer's
Certificate delivered pursuant to SECTION 4.14(a) and shall:
(i) confirm that such Servicer's Certificate is
complete on its face;
(ii) load the computer diskette (which shall be in a
format acceptable to the Backup Servicer) received from the
Servicer pursuant to SECTION 4.14(A) hereof, confirm that such
computer diskette is in a readable form and calculate and
confirm the Aggregate Principal Balance of the Receivables for
the most recent Settlement Date; and
(iii) confirm that Available Funds, the Noteholder's
Principal Distributable Amount, the Noteholder's Interest
Distributable Amount, the Servicing Fee, the Backup Servicing
Fee, the Trustee Fee, Loss Ratio and Servicer Delinquency
Ratio in the Servicer's Certificate are accurate based solely
on the recalculation of the Servicer's Certificate.
(c) Within 90 days of the Closing Date, the Backup Servicer
will cause an affiliate of the Backup Servicer to data map to its
servicing system all servicing/loan file information, including all
relevant borrower contact information such as address and phone numbers
as well as loan balance and payment information, including comment
histories and collection notes. On or before the fifth calendar day of
each month, the Servicer will provide to an affiliate of the Backup
Servicer an electronic transmission of all servicing/loan information,
including all relevant borrower contact information such as address and
phone numbers as well as loan balance and payment information,
including comment histories and collection notes, and the Backup
Servicer will cause such affiliate to review each file to ensure that
it is in readable form and verify that the data balances conform to the
trial balance reports received from the Servicer. Additionally, the
Backup Servicer shall cause such affiliate to store each such file.
SECTION 4.15. 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, 2004, which term may be extended by the Noteholder for successive
quarterly terms ending on each successive December 31, March 31, June 30 and
September 30 pursuant to written instructions delivered by the Noteholder to the
Servicer and the Trustee (or, at the discretion of the Noteholder 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 Note has been paid in full (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"). 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. 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 Noteholder, the Trustee shall, within five
days thereafter, give written notice of such non-receipt to the Noteholder and
the Servicer and the Servicer's term shall not be extended unless an Servicer
Extension Notice is received on or before the last day of such term.
SECTION 4.16. FIDELITY BOND.
The Servicer shall maintain a fidelity bond in such form and amount as
is customary for entities acting as custodian of funds and documents in respect
of consumer contracts on behalf of institutional investors.
SECTION 4.17. LIEN SEARCHES; OPINIONS AS TO TRANSFERS AND SECURITY
INTERESTS.
The Servicer shall, on the Closing Date and, thereafter annually on or
before each anniversary of the Closing Date, deliver (or cause to be delivered)
to the Trustee and the Noteholder an Opinion of Counsel, in form and substance
satisfactory to the Noteholder, with respect to (a) the "true sale" nature of
the transfers of Receivables and, to the extent applicable, related Other
Conveyed Property hereunder and under each related Assignment, (b) the "backup
security interest" with respect to the transfers of Receivables and, to the
extent applicable, related Other Conveyed Property hereunder and under each
related Assignment, (c) the validity of the security interest in connection with
the pledge of Collateral to the Trustee under the Indenture on each Funding Date
and (d) the perfection and first priority of the transfers and pledges referred
to in CLAUSES (a)-(c) above. To the extent each such Opinion of Counsel is in
any manner reliant on UCC lien searches, each such UCC lien search shall be
dated no earlier than ten Business Days prior to the date of each such related
Opinion of Counsel, and shall be accompanied by officer's certificates from the
appropriate parties certifying that no filings subsequent to the date of such
lien searches have been made. Such Opinion of Counsel shall state, among other
things, that, in the opinion of such counsel, either (A) all financing
statements and continuation statements have been authorized and filed that are
necessary to perfect the interest of the Purchaser 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. The Opinion of Counsel
referred to in this SECTION 4.17 shall specify any action necessary (as of the
date of such opinion) to be taken to preserve and protect such interest.
SECTION 4.18. SUBSERVICING ARRANGEMENTS.
The Servicer may arrange for the subservicing of all or any portion of
the Receivables by a subservicer; provided, however, that such subservicing
arrangement must provide for the servicing of such Receivables in a manner
consistent with the servicing arrangements contemplated hereunder; provided,
further, that any such subservicing arrangement with a Person that is not an
Affiliate of CPS shall require the prior written consent of the Noteholder.
Unless the context otherwise requires, references in this Agreement to actions
taken or to be taken by the Servicer in servicing the Receivables include
actions taken or to be taken by a subservicer on behalf of the Servicer.
Notwithstanding the provisions of any subservicing agreement, any of the
provisions of this Agreement relating to agreements or arrangements between the
Servicer and a subservicer or reference to actions taken through a subservicer
or otherwise, the Servicer shall remain obligated and liable to the Purchaser,
the Trustee, the Backup Servicer and the Noteholder for the servicing and
administration of the Receivables in accordance with the provisions of this
Agreement without diminution of such obligation or liability by virtue of such
subservicing agreements or arrangements or by virtue of indemnification from the
subservicer and to the same extent and under the same terms and conditions as if
the Servicer alone were servicing and administering the Receivables. All actions
of each subservicer performed pursuant to a subservicing arrangement shall be
performed as an agent of the Servicer with the same force and effect as if
performed directly by the Servicer. The subservicer under each subservicing
arrangement shall be engaged by the Servicer upon terms consistent with the
engagement of the Servicer hereunder. Each subservicer shall be simultaneously
terminated in the event that the Servicer is terminated hereunder. In addition,
if a subservicing arrangement relates to TFC Receivables, the related
subservicer may be terminated by the Noteholder upon the occurrence of a TFC
Funding Termination Event. The fees paid by the Servicer to the related
subservicer under each subservicing arrangement shall not exceed the Servicing
Fees paid to the Servicer hereunder
SECTION 4.19. STATE CONCENTRATION OPINIONS.
If Eligible Receivables originated in any one state exceed 10% of the
Aggregate Principal Balance of the Eligible Receivables, the Seller shall
deliver to each Rating Agency and the Noteholder an Opinion of Counsel with
respect to the security interest in the Financed Vehicles with respect to such
state on or prior to the related Funding Date.
ARTICLE V
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ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO THE NOTEHOLDER
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SECTION 5.1. ESTABLISHMENT OF PLEDGED ACCOUNTS.
(a) The Trustee, on behalf of the Noteholder, 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 Noteholder. The Collection Account shall initially be established
with the Trustee.
(b) The Trustee, on behalf of the Noteholder, 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 Noteholder. The Note Distribution Account shall initially
be established with the Trustee.
(c) The Trustee, on behalf of the Noteholder shall establish
and maintain in its own name an Eligible Account (the "PRINCIPAL
FUNDING ACCOUNT"), bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Trustee on
behalf of the Noteholder. The Principal Funding Account shall initially
be established with the Trustee.
(d) The Trustee, on behalf of the Noteholder shall establish
and maintain in its own name an Eligible Account (the "RESERVE
ACCOUNT"), bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Trustee on behalf of
the Noteholder. The Reserve Account shall initially be established with
the Trustee.
(e) Funds on deposit in the Collection Account, the Principal
Funding Account, the Reserve Account and the Note Distribution Account
(collectively, the "PLEDGED 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 or, after
the resignation or termination of CPS as Servicer, by the Noteholder
(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 Noteholder. Other than as permitted by the Rating
Agencies and the Noteholder, funds on deposit in any Pledged 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 Settlement Date. Funds deposited in
a Pledged Account on the day immediately preceding a Settlement Date
upon the maturity of any Eligible Investments are not required to be
invested overnight. All Eligible Investments will be held to maturity.
(f) All investment earnings of moneys deposited in the Pledged
Accounts shall be deposited (or caused to be deposited) by the Trustee
in the Collection Account for distribution pursuant to SECTION 5.7(a),
and any loss resulting from such investments shall be charged to such
account. The Servicer will not direct the Trustee to make any
investment of any funds held in any of the Pledged 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.
(g) The Trustee shall not in any way be held liable by reason
of any insufficiency in any of the Pledged Accounts resulting from any
loss on any Eligible Investment included therein except for losses
attributable to the Trustee's negligence or bad faith or its failure to
make payments on such Eligible Investments issued by the Trustee, in
its commercial capacity as principal obligor and not as trustee, in
accordance with their terms.
(h) If (i) the Servicer or the Noteholder, as applicable,
shall have failed to give investment directions for any funds on
deposit in the Pledged Accounts to the Trustee by 1:00 p.m. Eastern
Time (or such other time as may be agreed by the Purchaser and Trustee)
on any Business Day; or (ii) an Event of Default shall have occurred
and be continuing with respect to the Note but the Note shall not have
been declared due and payable, or, if the Note shall have been declared
due and payable following an Event of Default, amounts collected or
receivable from the Receivables and the Other Conveyed 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 Pledged Accounts in an Eligible Investment described in
PARAGRAPH (F) the definition thereof.
(i) The Trustee shall possess all right, title and interest in
all funds on deposit from time to time in the Pledged Accounts and in
all proceeds thereof (including all Investment Earnings on the Pledged
Accounts) and all such funds, investments, proceeds and income shall be
part of the Other Conveyed Property. Except as otherwise provided
herein, the Pledged Accounts shall be under the sole dominion and
control of the Trustee for the benefit of the Noteholder. If at any
time any of the Pledged Accounts ceases to be an Eligible Account, the
Servicer with the consent of the Noteholder shall within five Business
Days establish a new Pledged Account as an Eligible Account and shall
transfer any cash and/or any investments to such new Pledged Account.
The Servicer shall promptly notify the Rating Agencies, the Trustee and
the Noteholder 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 Pledged Accounts are not
accounts with the Trustee, the Servicer shall notify the Trustee and
the Noteholder in writing promptly upon any of such Pledged Accounts
ceasing to be an Eligible Account.
(j) Notwithstanding anything to the contrary herein or in any
other document relating to a Trust Account, the "securities
intermediary's jurisdiction" (within the meaning of Section 8-110 of
the UCC) or the "bank's jurisdiction" (with the meaning of 9-304 of the
UCC) as applicable, with respect to each Pledged Account shall be the
State of New York.
(k) With respect to the Pledged Account Property, the Trustee
agrees that:
(i) any Pledged Account Property that is held in
deposit accounts shall be held solely in an Eligible Account;
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;
(ii) any Pledged Account Property shall be delivered
to the Trustee in accordance with the definition of
"DELIVERY"; and
(iii) the Servicer shall have the power, revocable by
the Noteholder to instruct the Trustee to make withdrawals and
payments from the Pledged Accounts for the purpose of
permitting the Servicer and the Trustee to carry out their
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 an Accrual 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 Settlement Date pursuant to SECTION 5.7(a)(iv) upon
certification by the Servicer of such amounts and the provision of such
information to the Trustee and the Noteholder as may be necessary in the opinion
of the Noteholder to verify the accuracy of such certification; provided,
however, that the Servicer must provide such certification within three months
of it becoming aware of such mistaken deposit, posting or returned check. In the
event that the Noteholder has not received evidence satisfactory to it of the
Servicer's entitlement to reimbursement pursuant to this Section, the Noteholder
shall give the Trustee notice to such effect, following receipt of which the
Trustee shall not make a distribution to the Servicer in respect of such amount
pursuant to SECTION 5.7, or if prior thereto the Servicer 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 Settlement Date.
SECTION 5.4. APPLICATION OF COLLECTIONS.
All collections for each Accrual 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.
SECTION 5.5. RESERVE ACCOUNT.
(a) The Reserve Account will be held for the benefit of the
Noteholder. On or prior to the Closing Date, the Purchaser shall
deposit or cause to be deposited into the Reserve Account an amount
equal to the Required Reserve Account Amount. On each Funding Date, the
Purchaser shall deposit a portion of the related Advance into the
Reserve Account until the amount on deposit in the Reserve Account
equals the Required Reserve Account Amount.
(b) In the event that the Servicer's Certificate with respect
to any Determination Date shall state that the Available Funds with
respect to the related Settlement Date are insufficient to make the
payments required to be made on the related Settlement Date pursuant to
SECTIONS 5.7(a)(i) through (vi) (such deficiency being a "DEFICIENCY
CLAIM AMOUNT"), then on the Deficiency Claim Date, the Trustee shall
deliver to the Noteholder and the Servicer, by hand delivery, telex or
facsimile transmission, a written notice (a "DEFICIENCY NOTICE")
specifying the Deficiency Claim Amount for such Settlement Date. The
Trustee shall withdraw an amount equal to such Deficiency Claim Amount
from the Reserve Account (to the extent of the funds available on
deposit therein) for deposit in the Collection Account on the related
Settlement Date and distribution pursuant to SECTIONS 5.7(a)(i) through
(vi), as applicable.
(c) Any Deficiency Notice shall be delivered by 10:00 a.m.,
New York City time, on the Deficiency Claim Date. The amounts
distributed to the Trustee pursuant to a Deficiency Notice shall be
deposited by the Trustee into the Collection Account pursuant to
SECTION 5.6.
(d) Following the Facility Termination Date, all amounts, or
any portion thereof, on deposit in the Reserve Account will be
deposited into the Collection Account for distribution pursuant to
SECTION 5.7.
(e) On any Settlement Date prior to the Facility Termination
Date on which, after all distributions required to be made on such
Settlement Date pursuant to SECTION 5.7(a) have been made, the amount
on deposit in the Reserve Account exceeds the Required Reserve Account
Amount, the Trustee shall withdraw such excess and distribute the same
to the Purchaser or its designee in accordance with SECTION
5.7(a)(xiii).
SECTION 5.6. ADDITIONAL DEPOSITS.
The Servicer or the Seller, 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. All such deposits shall be made, in
immediately available funds, on the Business Day preceding the related
Determination Date. On the Deficiency Claim Date, the Trustee shall remit to the
Collection Account any amounts withdrawn from the Reserve Account pursuant to
SECTION 5.5.
SECTION 5.7. DISTRIBUTIONS.
(a) On each Settlement Date prior to the occurrence and
continuance of an Event of Default, 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 from amounts on deposit in the
Collection Account:
(i) to the Noteholder, any payments from the Hedge
Counterparty to the extent they are due and payable in an
amount equal to the excess, if any, of the Noteholder's
Monthly Interest Distributable Amount over Capped Monthly
Interest, in respect of the Noteholder's Interest
Distributable Amount;
(ii) to the Hedge Counterparty, from Available Funds
and any amounts deposited in the Collection Account pursuant
to SECTION 5.5(b) and SECTION 5.5(d) in respect of Hedge
Counterparty Scheduled Fees;
(iii) to the Backup Servicer and the Trustee, as
applicable, pro rata, from Available Funds and any amounts
deposited in the Collection Account pursuant to SECTION 5.5(b)
and SECTION 5.5(d), in respect of the Backup Servicing Fee (so
long as the Backup Servicer is not acting as successor
Servicer), the Trustee Fee, reasonable expenses incurred in
connection with transitioning the servicing to the Backup
Servicer and all other reasonable out-of-pocket expenses
thereof (including counsel fees and expenses) and all unpaid
Backup Servicing Fees (so long as the Backup Servicer is not
acting as successor Servicer), Trustee Fees, reasonable
expenses incurred in connection with transitioning the
servicing to the Backup Servicer and all other reasonable
out-of-pocket expenses (including counsel fees and expenses)
from prior Accrual Periods; PROVIDED, HOWEVER, that expenses
payable to each of the Backup Servicer and Trustee pursuant to
this CLAUSE (iii), excluding amounts paid to the Backup
Servicer in respect of transition expenses, shall be limited
to a total of $25,000 per annum; PROVIDED, FURTHER, that the
amount of transition expenses distributed to the Backup
Servicer during the term of this Agreement pursuant to this
CLAUSE (iii) shall in no case exceed $50,000 in the aggregate;
(iv) to the Servicer, from Available Funds and any
amounts deposited in the Collection Account pursuant to
SECTION 5.5(b) and SECTION 5.5(d), in respect of the Servicing
Fee and all unpaid Servicing Fees from prior Accrual Periods
and all reimbursements to which the Servicer is entitled
pursuant to SECTION 5.3;
(v) to the Note Distribution Account, from Available
Funds and any amounts deposited in the Collection Account
pursuant to SECTION 5.5(b) and SECTION 5.5(d), the remaining
Noteholder's Interest Distributable Amount after giving effect
to SECTION 5.7(a)(i) hereof;
(vi) to the Note Distribution Account, from Available
Funds and any amounts deposited in the Collection Account
pursuant to SECTION 5.5(b) and SECTION 5.5(d), the
Noteholder's Principal Distributable Amount for such Accrual
Period;
(vii) to the Trustee, for deposit in the Reserve
Account, from Available Funds, an amount equal to the excess
of (A) the Required Reserve Account Amount for such Settlement
Date over (B) the amount on deposit in the Reserve Account;
(viii) to the Note Distribution Account, from
Available Funds, to the Noteholder in respect of any amounts
owed to the Noteholder pursuant to Sections 3.03 and 3.04 of
the Note Purchase Agreement;
(ix) to the Noteholder, from Available Funds and any
amounts deposited in the Collection Account pursuant to
SECTION 5.5(d), the Unused Facility Fee for such Settlement
Date;
(x) to the Hedge Counterparty, from Available Funds
and any amounts deposited in the Collection Account pursuant
to SECTION 5.5(D), in respect of Hedge Counterparty
Termination Fees;
(xi) to any successor Servicer from Available Funds
and any amounts deposited in the Collection Account pursuant
to SECTION 5.5(d), its servicing fees in excess of the
Servicing Fee and, to the extent not previously paid by the
predecessor Servicer pursuant to this Agreement, reasonable
transition expenses (up to a maximum of $50,000 in the
aggregate over the term of this Agreement) incurred in
becoming the successor Servicer;
(xii) to the Backup Servicer and the Trustee, as
applicable, pro rata, from Available Funds and any amounts
deposited in the Collection Account pursuant to SECTION
5.5(d), in respect of reasonable out-of-pocket expenses
thereof (including counsel fees and expenses) and reasonable
out-of-pocket expenses (including counsel fees and expenses)
from prior Accrual Periods to the extent not paid thereto
pursuant to SECTION 5.7(a)(iii) above; and
(xiii) to the Purchaser, the remaining Available
Funds, if any, and any amounts deposited in the Collection
Account pursuant to SECTION 5.5(d) and any amounts released
from the Reserve Account pursuant to SECTION 5.5(e).
(b) In the event that the Collection Account is maintained
with an institution other than the Trustee, the Servicer shall instruct
and cause such institution to make all deposits and distributions
pursuant to SECTION 5.7(a) on the related Settlement Date.
SECTION 5.8. NOTE DISTRIBUTION ACCOUNT.
(a) On each Settlement Date (based solely on the information
contained in the Servicer's Certificate), the Trustee shall distribute
all amounts on deposit in the Note Distribution Account to the
Noteholder in respect of the Note to the extent of amounts due and
unpaid on the Note for principal and interest in the following amounts
and in the following order of priority:
(i) to the Noteholder, the Noteholder's Interest
Distributable Amount; PROVIDED that if there are not
sufficient funds in the Note Distribution Account to pay the
entire amount then due on the Note, the amount in the Note
Distribution Account shall be applied to the payment of such
interest pro rata among the Holders of the Note;
(ii) to the Noteholder, in reduction of the Invested
Amount, the Noteholder's Principal Distributable Amount to pay
principal on the Note until the outstanding principal amount
of the Note has been reduced to zero; PROVIDED that if there
are not sufficient funds in the Note Distribution Account to
pay the entire amount then due on the Note, the amount in the
Note Distribution Account shall be applied to the payment of
such principal pro rata among the Holders of the Note;
(iii) to the Noteholder, any other amounts due the
Noteholder pursuant to the Basic Documents.
(b) On each Settlement Date, the Trustee shall provide or make
available electronically (or, upon written request, by first class mail
or facsimile) send to the Noteholder the statement or statements
provided to the Trustee by the Servicer pursuant to SECTION 5.9 hereof
on such Settlement Date; PROVIDED HOWEVER, the Trustee shall have no
obligation to provide such information described in this SECTION 5.8(b)
until it has received the requisite information from the Servicer.
SECTION 5.9. STATEMENTS TO THE NOTEHOLDER.
(a) On the Determination Date (in accordance with SECTION
4.9), the Servicer shall provide to the Trustee, the Rating Agencies
and the Noteholder on the related Record Date a copy of the Servicer's
Certificate setting forth at least the following information as to the
Note to the extent applicable:
(i) the amount of such distribution allocable to
principal of the Note;
(ii) the amount of such distribution allocable to
interest on or with respect to the Note;
(iii) the amount, if any, of such distribution
payable out of amounts withdrawn from the Reserve Account;
(iv) the Aggregate Principal Balance as of the close
of business on the last day of the preceding Accrual Period;
(v) the aggregate outstanding principal amount of the
Note;
(vi) the amount of the Servicing Fee paid to the
Servicer with respect to the related Accrual Period, and the
amount of any unpaid Servicing Fees and the change in such
amount from the prior Settlement Date;
(vii) the amount of each of the Backup Servicing Fee
and the Trustee Fee paid to the Backup Servicer and the
Trustee as applicable, with respect to the related Accrual
Period, and the amount of any unpaid Backup Servicing Fees and
Trustee Fees and the change in such amounts from the prior
Settlement Date;
(viii) the Noteholder's Interest Carryover Shortfall
and the Noteholder's Principal Carryover Shortfall, if any;
(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 Receivable Payments for 31 to
60 days as of the last day of the related Accrual Period;
(x) the number of Receivables and the aggregate gross
amount scheduled to be paid thereon, including unearned
finance and other charges, for which the related Obligors are
delinquent in making Scheduled Receivable Payments for 31 to
45 days as of the last day of the related Accrual Period; and
(xi) the amount of aggregate Realized Losses, if any,
for the related Accrual Period;
(xii) the number of, and the aggregate Purchase
Amounts for, Receivables, if any, that were repurchased during
the related Interest Period and summary information as to
losses and delinquencies with respect to the Receivables as of
the end of the related Accrual Period; and
(xiii) the cumulative amount of Realized Losses from
the initial Cutoff Date to the last day of the related Accrual
Period.
(b) Within 60 days after the end of each calendar year,
commencing February 28, 2005, the Servicer shall deliver to the
Trustee, and the Trustee shall, provided it has received the necessary
information from the Servicer, promptly thereafter furnish to the
Noteholder (a) a report (prepared by the Servicer) as to the aggregate
of the amounts reported pursuant to subclauses (i), (ii), (vi) and
(vii) of SECTION 5.9(a) for such preceding calendar year, and (b) such
information as may be reasonably requested by the Noteholder or
required by the Code and regulations thereunder, to enable the
Noteholder to prepare its Federal and State income tax returns. The
obligation of the Trustee set forth in this paragraph shall be deemed
to have been satisfied to the extent that substantially comparable
information shall be provided by the Servicer to the Noteholder
pursuant to any requirements of the Code.
(c) The Trustee may make available to the Noteholder and the
Rating Agencies via the Trustee's Internet Website, all statements
described herein and, with the consent or at the direction of the
Seller, such other information regarding the Note and/or the
Receivables as the Trustee may have in its possession, but only with
the use of a password provided by the Trustee. The Trustee will make no
representation or warranties as to the accuracy or completeness of such
documents and will assume no responsibility therefore. The Trustee's
Internet Website shall be initially located at WWW.CTSLINK.COM or at
such other address as shall be specified by the Trustee from time to
time in writing to the Noteholder. In connection with providing access
to the Trustee's Internet Website, the Trustee may require registration
and the acceptance of a disclaimer. The Trustee shall not be liable for
the dissemination of information in accordance with this Agreement.
SECTION 5.10. DIVIDEND OF INELIGIBLE RECEIVABLES.
The Issuer may, on the last day of the month in which any Receivables
are sold into a securitization transaction, distribute any Ineligible
Receivables to the Seller as a dividend; PROVIDED THAT there is no Borrowing
Base Deficiency on such date.
ARTICLE VI
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[RESERVED]
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ARTICLE VII
-----------
THE PURCHASER
-------------
SECTION 7.1. REPRESENTATIONS OF PURCHASER.
The Purchaser makes the following representations on which the
Noteholder shall be deemed to have relied in purchasing the Note. The
representations speak as of the execution and delivery of this Agreement and as
of each Funding Date, and shall survive the sale of the Receivables to the
Purchaser and the pledge thereof to the Trustee pursuant to the Indenture.
(a) ORGANIZATION AND GOOD STANDING. The Purchaser has been
duly formed and is validly existing as a limited liability company
solely under the laws of the state of Delaware and is in good standing
under the laws of the State of Delaware, with power and authority to
own its properties and to conduct its business as such properties 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 pledge the Receivables and the Other Conveyed Property
pledged to the Trustee.
(b) DUE QUALIFICATION. The Purchaser is duly qualified to do
business as a foreign limited liability company in good standing, and
has obtained all necessary licenses and approvals in all jurisdictions
in which the ownership or lease of property or the conduct of its
business shall require such qualifications.
(c) POWER AND AUTHORITY. The Purchaser has the power
(corporate and other) and authority to execute and deliver this
Agreement and the other Basic Documents to which it is a party and to
carry out its terms and their terms, respectively; the Purchaser has
full power and authority to pledge the Collateral to be pledged to the
Trustee by it pursuant to the Indenture and has duly authorized such
pledge to the Trustee by all necessary corporate action; and the
execution, delivery and performance of this Agreement and the Basic
Documents to which the Purchaser is a party have been duly authorized
by the Purchaser by all necessary action.
(d) VALID SALE; BINDING OBLIGATIONS. This Agreement effects a
valid sale 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 other Basic Documents to which the
Purchaser is a party, when duly executed and delivered, shall
constitute legal, valid and binding obligations of the Purchaser
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 other Basic Documents and the
fulfillment of the terms of this Agreement and the other 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 Limited Liability Company Agreement
of the Purchaser, or any indenture, agreement, mortgage, deed of trust
or other instrument to which the Purchaser is a party or by which it is
bound, or 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 Purchaser of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Purchaser or any of its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Purchaser's knowledge, threatened against the
Purchaser, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality having jurisdiction over
the Purchaser or its properties (A) asserting the invalidity of this
Agreement, the Note or any of the Basic Documents, (B) seeking to
prevent the issuance of the Note 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 Purchaser of its
obligations under, or the validity or enforceability of, this Agreement
or any of the Basic Documents, or (D) relating to the Purchaser and
which might adversely affect the federal or state income, excise,
franchise or similar tax attributes of the Note.
(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 Note or the consummation of the other
transactions contemplated by this Agreement, except such as have been
duly made or obtained or as may be required by the Basic Documents.
(h) TAX RETURNS. The Purchaser has filed all federal and state
tax returns which are required to be filed and paid all taxes,
including any assessments received by it, to the extent that such taxes
have become due. Any taxes, fees and other governmental charges payable
by the Purchaser in connection with consummation of the transactions
contemplated by this Agreement and the other Basic Documents to which
the Purchaser is a party and the fulfillment of the terms of this
Agreement and the other Basic Documents to which the Purchaser is a
party have been paid or shall have been paid at or prior to the Closing
Date and as of each Funding Date.
(i) CHIEF EXECUTIVE OFFICE. The chief executive office of the
Purchaser is at 16355 Laguna Canyon Road, Irvine, CA 92618.
ARTICLE VIII
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THE SELLER
----------
SECTION 8.1. REPRESENTATIONS OF SELLER.
The Seller makes the following representations on which the Purchaser
is deemed to have relied in acquiring the Receivables and a which the Noteholder
are deemed to have relied in purchasing the Note. The representations speak as
of the execution and delivery of this Agreement, as of the Closing Date and as
of each Funding Date, and shall survive the sale of the Receivables to the
Purchaser and the pledge thereof by the Purchaser 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 solely under the
laws of the State of California and is in good standing under the laws
of the State of California, with power and authority to own its
properties and to conduct its business as such properties are currently
owned and such business is currently conducted, and had at all relevant
times, and now has, power, authority and legal right to acquire, own
and sell the Receivables and the Other Conveyed Property transferred to
the Purchaser and to perform its other obligations under this Agreement
or any other Basic Documents to which it is a party.
(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
(including the origination, sale and servicing of the Receivables as
required by this Agreement) shall require such qualifications.
(c) POWER AND AUTHORITY. The Seller has the power (corporate
and other) and authority to execute and deliver this Agreement and the
other 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 Purchaser by it and has
duly authorized such sale and assignment to the Purchaser 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 to the Purchaser, 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 does
not conflict with, result in any breach of any of the terms and
provisions of or constitute (with or without notice, lapse of time or
both) a default under the certificate of incorporation or by-laws of
the Seller, or any indenture, agreement, mortgage, deed of trust or
other instrument to which the Seller is a party or by which it is
bound, or result in the creation or imposition of any Lien upon any of
its properties pursuant to the terms of any such indenture, agreement,
mortgage, deed of trust or other instrument, other than the Basic
Documents, or violate any law, order, rule or regulation applicable to
the Seller of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having
jurisdiction over the Seller or any of its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the Seller's knowledge, threatened against the Seller,
before any court, regulatory body, administrative agency or other
tribunal or governmental instrumentality having jurisdiction over the
Seller or its properties (A) asserting the invalidity of this
Agreement, the Note or any of the Basic Documents, (B) seeking to
prevent the issuance of the Note 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 Note.
(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 Note or the consummation of the other
transactions contemplated by this Agreement and the Basic Documents,
except such as have been duly made or obtained.
(h) FINANCIAL CONDITION. The Seller has a positive net worth
and is able to and does pay its liabilities as they mature. The Seller
is not in default under any obligation to pay money to any Person
except for matters being disputed in good faith which do not involve an
obligation of the Seller on a promissory note. The Seller will not use
the proceeds from the transactions contemplated by the Basic Documents
to give any preference to any creditor or class of creditors, and this
transaction will not leave the Seller with remaining assets which are
unreasonably small compared to its ongoing operations.
(i) FRAUDULENT CONVEYANCE. The Seller is not selling the
Receivables to the Purchaser with any intent to hinder, delay or
defraud any of its creditors; the Seller will not be rendered insolvent
as a result of the sale of the Receivables to the Purchaser.
(j) TAX RETURNS. The Seller has filed all material federal and
state tax returns which are required to be filed and paid all material
taxes, including any assessments received by it, to the extent that
such taxes have become due (other than taxes, the amount or validity of
which are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP
have been provided on the books of the Seller). Any taxes, fees and
other governmental charges payable by the Seller in connection with
consummation of the transactions contemplated by this Agreement and the
other Basic Documents to which the Seller is a party and the
fulfillment of the terms of this Agreement and the other Basic
Documents to which the Seller is a party have been paid or shall have
been paid as of each Funding Date.
(k) CHIEF EXECUTIVE OFFICE. The Seller has more than one place
of business, and the chief executive office of the Seller is at 16355
Laguna Canyon Road, Irvine, CA 92618, and its organizational number is
1682500.
(l) CERTIFICATE, STATEMENTS AND REPORTS. The officer's
certificates, statements, reports and other documents prepared by
Seller and furnished by Seller to the Purchaser, the Trustee or the
Noteholder pursuant to this Agreement or any other Basic Document to
which it is a party, and in connection with the transactions
contemplated hereby or thereby, when taken as a whole, do not contain
any untrue statement of a material fact or omit to state a material
fact necessary to make the statements contained herein or therein not
misleading.
(m) LEGAL COUNSEL, ETC. Seller consulted with its own legal
counsel and independent accountants to the extent it deems necessary
regarding the tax, accounting and regulatory consequences of the
transactions contemplated hereby, Seller is not participating in such
transactions in reliance on any representations of any other party,
their affiliates, or their counsel with respect to tax, accounting and
regulatory matters.
(n) NO MATERIAL ADVERSE CHANGE AS OF MARCH 31, 2005. No
Material Adverse Change has occurred with respect to the Seller since
the end of the quarter reported on in the Seller's Form 10-Q filed with
the Commission on May 16, 2005.
(o) NO DEFAULT. The Seller is not in default in the
performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in, and is not otherwise in default
under (i) any law or statute applicable to it, including, without
limitation, any Consumer Law, (ii) any judgment, decree, writ,
injunction, order, award or other action of any court or governmental
authority or arbitrator or any order, rule or regulation of any
federal, state, county, municipal or other governmental or public
authority or agency having or asserting jurisdiction over it or any of
its properties or (iii) (x) any indebtedness or any instrument or
agreement under or pursuant to which any such indebtedness has been, or
could be, issued or incurred or (y) any other instrument or agreement
to which it is a party or by which it is bound or any of its properties
is affected, including, without limitation, the Basic Documents, which
either individually or in the aggregate, (A) could reasonably be
expected to result in a Material Adverse Change with respect to the
Seller, or in any impairment of the right or ability of the Seller to
carry on its business substantially as now conducted or (B) could
reasonably be expected to materially and adversely affect the Seller's
performance of its obligations hereunder, or the validity or
enforceability of this Agreement or the Basic Documents.
SECTION 8.2. ADDITIONAL COVENANTS OF THE SELLER.
(a) SALE. The Seller agrees to treat the conveyances hereunder
for all purposes (including without limitation tax and financial
accounting purposes) as sales on all relevant books, records, tax
returns, financial statements and other applicable documents.
(b) NON-PETITION. In the event of any breach of a
representation and warranty made by the Purchaser hereunder, the Seller
covenants and agrees that it will not take any action to pursue any
remedy that it may have hereunder, in law, in equity or otherwise,
until a year and a day have passed since the date on which the Note
issued by the Purchaser has been paid in full. The Purchaser and the
Seller agree that damages will not be an adequate remedy for breach of
this covenant and that this covenant may be specifically enforced by
the Purchaser, by the Trustee on behalf of the Noteholder.
(c) CHANGES TO CONTRACT PURCHASE GUIDELINES. The Seller
covenants that it will not make, or permit to be made, any material
changes to the Contract Purchase Guidelines of CPS or TFC, or the
classification of Obligors within such programs unless (i) the
Noteholder expressly consents in writing prior to such changes (such
consent not to be unreasonably withheld) and (ii) after giving effect
to any such changes, the Rating Agency Condition is satisfied.
SECTION 8.3. LIABILITY OF SELLER; INDEMNITIES.
Subject to the limitation of remedies set forth in SECTION 3.2 hereof
with respect to a breach of any representations and warranties contained in
SECTION 3.1 hereof, the Seller shall indemnify the Purchaser, the Backup
Servicer, the Trustee, the Noteholder and their respective officers, directors,
agents and employees for any liability as a result of the failure of a
Receivable to be originated in compliance with all requirements of law and for
any breach of any of its representations, warranties or other agreements
contained herein.
(a) The Seller shall defend, indemnify, and hold harmless the
Purchaser, the Backup Servicer, the Trustee, the Noteholder and their
respective officers, directors, agents and employees from and against
any and all costs, expenses, losses, damages, claims, and liabilities,
arising out of or resulting from the use, ownership, or operation by
the Seller, any Affiliate thereof or any of their respective agents or
subcontractors, of a Financed Vehicle.
(b) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Backup Servicer, the Trustee, the Noteholder and their
respective officers, directors, agents and employees 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 Trustee and the Backup Servicer and except any taxes to which
the Trustee may otherwise be subject), including without limitation any
sales, gross receipts, general corporation, tangible personal property,
privilege or license taxes (but, in the case of the Purchaser, not
including any taxes asserted with respect to federal or other income
taxes arising out of distributions on the Note) and costs and expenses
in defending against the same.
(c) The Seller shall indemnify, defend and hold harmless the
Purchaser, the Backup Servicer, the Trustee, the Noteholder and their
respective officers, directors, agents and employees 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/or (ii) the Seller's or
the Purchaser's violation of Federal or state securities laws in
connection with the offering and sale of the Note.
(d) The Seller shall indemnify, defend and hold harmless the
Trustee and the Backup Servicer and its officers, directors, employees
and agents from and against any and all costs, expenses, losses,
claims, damages and liabilities arising out of, or incurred in
connection with the acceptance or performance of the trusts and duties
set forth herein and in the Basic Documents except to the extent that
such cost, expense, loss, claim, damage or liability shall be due to
the willful misfeasance, bad faith or negligence (except for errors in
judgment) of the Trustee or the Backup Servicer.
Indemnification under this Section shall survive the resignation or
removal of the Servicer or the Trustee and the termination of this Agreement or
the Indenture, 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.
Notwithstanding any provision of this SECTION 8.3 or any other
provision of this Agreement, nothing herein shall be construed as to require the
Seller to provide any indemnification hereunder or under any other Basic
Document for any costs, expenses, losses, claims, damages or liabilities arising
out of, or incurred in connection with, credit losses with respect to the
Receivables.
SECTION 8.4. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF, SELLER.
Seller 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 Seller'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
Seller contained in this Agreement. Any corporation (i) into which Seller may be
merged or consolidated, (ii) resulting from any merger or consolidation to which
Seller shall be a party, (iii) which acquires by conveyance, transfer, or lease
substantially all of the assets of Seller, or (iv) succeeding to the business of
Seller, in any of the foregoing cases shall execute an agreement of assumption
to perform every obligation of Seller under this Agreement and, whether or not
such assumption agreement is executed, shall be the successor to Seller 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 Seller from any obligation. Seller shall
provide notice of any merger, consolidation or succession pursuant to this
Section to the Trustee, the Noteholder and each Rating Agency. Notwithstanding
the foregoing, Seller shall not merge or consolidate with any other Person or
permit any other Person to become a successor to Seller's business, unless (x)
immediately after giving effect to such transaction, no representation or
warranty made pursuant to SECTION 8.1 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 Event of Default shall have occurred and
be continuing, (y) Seller shall have delivered to the Trustee, the Rating
Agencies and the Noteholder 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) Seller shall have delivered to the Trustee, the Rating Agencies
and the Noteholder an Opinion of Counsel, stating in the opinion of such
counsel, either (A) all financing statements and continuation statements and
amendments thereto have been authorized and filed that are necessary to preserve
and protect the interest of the Purchaser 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.
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.
ARTICLE IX
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THE SERVICER
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SECTION 9.1. REPRESENTATIONS OF SERVICER.
The Servicer makes the following representations on which the Purchaser
is deemed to have relied in acquiring the Receivables and on which the
Noteholder is deemed to have relied in purchasing the Note. The representations
speak as of the execution and delivery of this Agreement and as of the Closing
Date, in the case of Receivables conveyed by the Closing Date, and as of the
applicable Funding Date, in the case of Receivables conveyed by such Funding
Date, and shall survive the sale of the Receivables to the Purchaser 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 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 except where
the failure to so qualify or obtain such licenses or consents could not
reasonably be expected to result in a material adverse effect with
respect to it or to the Receivables.
(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 Note 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 validity or enforceability of this Agreement, the Note 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 Note.
(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 Note 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 all federal and state tax
returns which are required to be filed and paid all taxes, including
any assessments received by it, to the extent that such taxes have
become due (other than taxes, the amount or validity of which are
currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been
provided on the books of the Seller). Any taxes, fees and other
governmental charges payable by the Servicer in connection with
consummation of the transactions contemplated by this Agreement and the
other Basic Documents to which the Seller is a party and the
fulfillment of the terms of this Agreement and the other Basic
Documents to which the Seller is a party have been paid or shall have
been paid as of each Funding Date.
(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 Consumer Portfolio Services, 16355 Laguna
Canyon Road, Irvine, California 92618.
SECTION 9.2. LIABILITY OF SERVICER; INDEMNITIES.
(a) The Servicer (in its capacity as such) shall be liable
hereunder only to the extent of the obligations in this Agreement
specifically undertaken by the Servicer and the representations made by
the Servicer in the Basic Documents to which it is a party.
(i) The Servicer shall defend, indemnify and hold
harmless the Purchaser, the Trustee, the Backup Servicer, the
Noteholder and their respective officers, directors, agents
and employees from and against any and all costs, expenses,
losses, damages, claims and liabilities, arising out of or
resulting from the use, ownership, repossession or operation
by the Servicer or any Affiliate or agent or sub-contractor
thereof of any Financed Vehicle;
(ii) The Servicer, so long as CPS is the Servicer,
shall indemnify, defend and hold harmless the Purchaser, the
Trustee, the Backup Servicer, the Noteholder and their
respective officers, directors, agents and employees 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
Purchaser, the pledge thereof to the Trustee or the issuance
and original sale of the Note) and costs and expenses in
defending against the same;
(iii) The Servicer shall indemnify, defend and hold
harmless the Purchaser, the Trustee, the Backup Servicer, the
Noteholder and their respective officers, directors, agents
and employees 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 Purchaser, the Trustee, the
Backup Servicer or the Noteholder 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 or as a result of a breach of any representation,
warranty or other agreement made by the Servicer in this
Agreement; and
(iv) The Servicer shall indemnify, defend, and hold
harmless the Trustee and the Backup Servicer 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,
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 or the Backup Servicer, 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
or the Backup Servicer.
(b) Notwithstanding the foregoing, the Servicer shall not be
obligated to defend, indemnify, and hold harmless the Noteholder for
any losses, claims, damages or liabilities incurred by the Noteholder
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 Note by the Noteholder with the assets of a plan
subject to such provisions of ERISA or the Code.
(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 the
Seller or any successor Servicer 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.
SECTION 9.3. MERGER OR CONSOLIDATION OF, OR ASSUMPTION OF THE
OBLIGATIONS OF THE SERVICER OR BACKUP SERVICER.
(a) The Servicer shall not merge or consolidate with any other
Person, convey, transfer or lease all or substantially all of its
assets as an entirety to another Person, or permit any other Person to
become the successor to the Servicer'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 the Servicer contained in this Agreement. Any corporation (i) into
which the Servicer may be merged or consolidated, (ii) resulting from
any merger or consolidation to which the Servicer shall be a party,
(iii) which acquires by conveyance, transfer, or lease substantially
all of the assets of the Servicer, or (iv) succeeding to the business
of the Servicer, in any of the foregoing cases shall execute an
agreement of assumption to perform every obligation of the Servicer
under this Agreement and, whether or not such assumption agreement is
executed, shall be the successor to the Servicer under this Agreement
without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, anything in this
Agreement to the contrary notwithstanding; PROVIDED, HOWEVER, that
nothing contained herein shall be deemed to release the Servicer from
any obligation. The Servicer shall provide notice of any merger,
consolidation or succession pursuant to this Section to the Trustee,
the Noteholder and each Rating Agency. Notwithstanding the foregoing,
the Servicer shall not merge or consolidate with any other Person or
permit any other Person to become a successor to the Servicer'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 Event of Default shall have occurred and be
continuing, (y) the Servicer shall have delivered to the Trustee, the
Rating Agencies and the Noteholder 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)
the Servicer shall have delivered to the Trustee, the Rating Agencies
and the Noteholder 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 Purchaser 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 Person (i) into which the Backup Servicer (in its
capacity as Backup Servicer or successor Servicer) may be merged or
consolidated, (ii) resulting from any merger or consolidation to which
the Backup Servicer shall be a party, (iii) which acquires by
conveyance, transfer or lease substantially all of the assets of the
Backup Servicer, or (iv) succeeding to the business of the Backup
Servicer, in any of the foregoing cases shall execute an agreement of
assumption to perform every obligation of the Backup Servicer under
this Agreement and, whether or not such assumption agreement is
executed, shall be the successor to the Backup Servicer under this
Agreement without the execution or filing of any paper or any further
act on the part of any of the parties to this Agreement, anything in
this Agreement to the contrary notwithstanding; PROVIDED, HOWEVER, that
nothing contained herein shall be deemed to release the Backup Servicer
from any obligation.
SECTION 9.4. [RESERVED].
SECTION 9.5. [RESERVED].
SECTION 9.6. SERVICER AND BACKUP SERVICER NOT TO RESIGN.
Subject to the provisions of SECTION 9.3, neither the Servicer nor the
Backup Servicer shall resign from the obligations and duties imposed on it by
this Agreement as Servicer or Backup Servicer except (i) upon a determination
that by reason of a change in legal requirements the performance of its duties
under this Agreement would cause it to be in violation of such legal
requirements in a manner which would have a material adverse effect on the
Servicer or the Backup Servicer, as the case may be, and the Noteholder does not
elect to waive the obligations of the Servicer or the Backup Servicer, as the
case may be, to perform the duties which render it legally unable to act or to
delegate those duties to another Person or, (ii) in the case of the Backup
Servicer, upon the prior written consent of the Noteholder. Any such
determination permitting the resignation of the Servicer or Backup Servicer
shall be evidenced by an Opinion of Counsel to such effect delivered and
acceptable to the Trustee and the Noteholder. No resignation of the Servicer
shall become effective until the Backup Servicer or an entity acceptable to the
Noteholder shall have assumed the responsibilities and obligations of the
Servicer. No resignation of the Backup Servicer shall become effective until an
entity acceptable to the Noteholder shall have assumed the responsibilities and
obligations of the Backup Servicer; provided, however, that in the event a
successor Backup Servicer is not appointed within 60 days after the Backup
Servicer has given notice of its resignation and has provided the Opinion of
Counsel required by this SECTION 9.6, the Backup Servicer may petition a court
for its removal.
SECTION 9.7. REPORTING REQUIREMENTS.
(a) The Servicer shall furnish, or cause to be furnished to
the Noteholder:
(i) AUDIT REPORT. As soon as available and in any
event within 90 days after the end of each fiscal year of the
Servicer, a copy of the consolidated balance sheet of the
Servicer and its Affiliates as at the end of such fiscal year,
together with the related statements of earnings,
stockholders' equity and cash flows for such fiscal year,
prepared in reasonable detail and in accordance with GAAP
certified by Independent Accountants of recognized national
standing as shall be selected by the Servicer.
(ii) QUARTERLY STATEMENTS. As soon as available, but
in any event within 45 days after the end of each fiscal
quarter (except the fourth fiscal quarter) of the Servicer,
copies of the unaudited consolidated balance sheet of the
Servicer and its Affiliates as at the end of such fiscal
quarter and the related unaudited statements of earnings,
stockholders' equity and cash flows for the portion of the
fiscal year through such fiscal quarter (and as to the
statements of earnings for such fiscal quarter) in each case
setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, prepared in
reasonable detail and in accordance with GAAP applied
consistently throughout the periods reflected therein and
certified by the chief financial or accounting officer of the
Servicer as presenting fairly the financial condition and
results of operations of the Servicer and its Affiliates
(subject to normal year-end adjustments).
ARTICLE X
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DEFAULT
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SECTION 10.1. SERVICER TERMINATION EVENTS.
For purposes of this Agreement, each of the following shall constitute
a "SERVICER TERMINATION EVENT":
(a) Any failure by the Servicer or, for so long as the Seller
or an Affiliate of the Purchaser is the Servicer, the Purchaser, to
deliver any proceeds or payment required to be so delivered under this
Agreement or any other Basic Document that continues unremedied for a
period of two Business Days (or one Business Day with respect to
payment of Purchase Amounts) after written notice is received by the
Servicer from the Trustee or the Noteholder 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
Noteholder the Servicer's Certificate 12:00 noon New York City time on
the second Business Day after the date such Servicer's Certificate is
required to be delivered;
(c) Failure on the part of the Servicer or, for so long as the
Seller or an Affiliate of the Purchaser is the Servicer, the Purchaser
to duly observe or perform any other covenants or agreements of the
Servicer or the Purchaser, as applicable, set forth in this Agreement,
which failure (i) materially and adversely affects the rights of the
Noteholder and (ii) except for covenants relating to merger and
consolidation or preservation of ownership or security interests in the
Financed Vehicles, continues unremedied for a period of 30 days after
the earlier of knowledge thereof by the Servicer or after the date on
which written notice of such failure, requiring the same to be
remedied, shall have been given to the Servicer by the Noteholder;
(d) The occurrence of an Insolvency Event with respect to the
Servicer (or, for so long as the Seller or an Affiliate of the
Purchaser is the Servicer, the Purchaser);
(e) Any representation, warranty or statement of the Servicer
made in this Agreement or any other Basic Document to which it is a
party or any certificate, report or other writing delivered pursuant
hereto or thereto shall prove to be incorrect in any material respect
as of the time when the same shall have been made (excluding, however,
any representation or warranty set forth in this Agreement relating to
the characteristics of the Receivables), and the incorrectness of such
representation, warranty or statement has a material adverse effect on
the Purchaser or the Noteholder and, within 30 days after the earlier
of knowledge thereof by the Servicer or after written notice thereof
shall have been given to the Servicer by the Trustee or the Noteholder
the circumstances or condition in respect of which such representation,
warranty or statement was incorrect shall not have been eliminated or
otherwise cured;
(f) If (i) during any period hereafter commencing April 1and
ending the following September 30, the average of the Servicer
Delinquency Ratios for the last day of each of the preceding three
Accrual Periods exceeds 6.00%, or (ii) during any period hereafter
commencing October 1 and ending the following March 31, the average of
the Servicer Delinquency Ratios for the last day of each of the
preceding three Accrual Periods exceeds 6.50%;
(g) The Loss Ratio exceeds 8.00%;
(h) The Noteholder shall not have delivered a Servicer
Extension Notice pursuant to SECTION 4.15; or
(i) An Event of Default shall have occurred.
In the event that the Servicer, Purchaser or Trustee gains knowledge of
the occurrence of a Servicer Termination Event, the Servicer, Purchaser or
Trustee, as applicable, shall promptly notify the Noteholder in writing of such
occurrence; PROVIDED THAT, the Servicer shall be deemed to satisfy such
obligation upon its delivery of an Officer's Certificate in accordance with
SECTION 4.10 hereof.
SECTION 10.2. CONSEQUENCES OF A SERVICER TERMINATION EVENT.
If a Servicer Termination Event shall occur and be continuing, the
Noteholder by notice given in writing to the Servicer may terminate all of the
rights and obligations of the Servicer under this Agreement. The outgoing
Servicer shall be entitled to its pro rata share of the Servicing Fee for the
number of days in the Accrual Period prior to the effective date of its
termination. On or after the receipt by the Servicer of such written notice or
upon termination of the term of the Servicer, all authority, power, obligations
and responsibilities of the Servicer under this Agreement, whether with respect
to the Note or the Receivables and Other Conveyed Property or otherwise,
automatically shall pass to, be vested in and become obligations and
responsibilities of the Backup Servicer (or such other successor Servicer
appointed by the Noteholder 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 Purchaser as
lienholder or secured party on the related Lien Certificates, or otherwise. The
terminated Servicer agrees to cooperate with the successor Servicer in effecting
the termination of the responsibilities and rights of the terminated Servicer
under this Agreement, including, without limitation, the transfer to the
successor Servicer for administration by it of all cash amounts that shall at
the time be held by the terminated Servicer for deposit, or have been deposited
by the terminated Servicer, in the Collection Account or thereafter received
with respect to the Receivables and the delivery to the successor Servicer of
all Receivable Files that shall at the time be held by the terminated Servicer
and a computer tape in readable form as of the most recent Business Day
containing all information necessary to enable the successor Servicer to service
the Receivables and the Other Conveyed Property. All reasonable costs and
expenses (including reasonable attorneys' fees) incurred in connection with
transferring any Receivable Files to the successor Servicer and amending this
Agreement to reflect such succession as Servicer pursuant to this SECTION 10.2
shall be paid by the predecessor Servicer upon presentation of reasonable
documentation of such costs and expenses. In addition, any successor Servicer
shall be entitled to payment from the immediate predecessor Servicer for
reasonable transition expenses incurred in connection with acting as successor
Servicer, and to the extent not so paid, such payment shall be made pursuant to
SECTION 5.7 hereof. Upon receipt of notice of the occurrence of a Servicer
Termination Event, the Trustee shall give notice thereof to the Rating Agencies
and the Noteholder. If requested by the Noteholder, the successor Servicer shall
terminate the Lockbox Agreements 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 Noteholder, at the successor Servicer's expense. The terminated Servicer
shall grant the Trustee, the successor Servicer and the Noteholder 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 4.15, or upon the resignation
of the Servicer pursuant to SECTION 9.6, the predecessor Servicer shall
continue to perform its functions as Servicer under this Agreement, in
the case of termination, only until the date specified in such
termination notice or, if no such date is specified in a notice of
termination, until receipt of such notice and, in the case of
expiration and non-renewal of the term of the Servicer upon the
expiration of such term, and, in the case of resignation, until the
later of (x) the date 45 days from the delivery to the Trustee of
written notice of such resignation (or written confirmation of such
notice) in accordance with the terms of this Agreement and (y) the date
upon which the predecessor Servicer shall become unable to act as
Servicer, as specified in the notice of resignation and accompanying
Opinion of Counsel; PROVIDED, HOWEVER, that the Servicer shall not be
relieved of its duties, obligations and liabilities as Servicer until a
successor Servicer has assumed such duties, obligations and
liabilities. Notwithstanding the preceding sentence, if the Backup
Servicer or any other successor Servicer shall not have assumed the
duties, obligations and liabilities or Servicer within 45 days of the
termination, non-extension or resignation described in this SECTION
10.3, the Servicer may petition a court of competent jurisdiction to
appoint any Eligible Servicer as the successor to the Servicer. Pending
appointment as successor Servicer, Backup Servicer (or such other
Person as shall have been appointed by the Noteholder) 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. In the
event of termination of the Servicer, Wells Fargo Bank, National
Association, as the Backup Servicer shall assume the obligations of
Servicer hereunder on the date specified in such written notice (the
"ASSUMPTION DATE") pursuant to the Servicing and Lockbox Processing
Assumption Agreement or, in the event that the Noteholder shall have
determined that a Person other than the Backup Servicer shall be the
successor Servicer in accordance with SECTION 10.2, on the date of the
execution of a written assumption agreement by such Person to serve as
successor Servicer. Notwithstanding the Backup Servicer's assumption
of, and its agreement to perform and observe, all duties,
responsibilities and obligations of the Seller as Servicer, or any
successor Servicer, under this Agreement arising on and after the
Assumption Date, the Backup Servicer shall not be deemed to have
assumed or to become liable for, or otherwise have any liability for
any duties, responsibilities, obligations or liabilities of (i) the
Seller or any other 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 the Seller or any other 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 the Seller or any
other Servicer therefor arose, whether provided by the terms of this
Agreement, arising by operation of law or otherwise, or (ii) under
SECTION 9.2(a)(ii), (iv) or (v). Notwithstanding the above, if the
Backup Servicer shall be legally unable or unwilling to act as
Servicer, the Backup Servicer, the Trustee or the Noteholder may
petition a court of competent jurisdiction to appoint any Eligible
Servicer as the successor to the Servicer. Pending appointment pursuant
to the preceding sentence, the Backup Servicer shall act as successor
Servicer unless it is legally unable to do so, in which event the
outgoing Servicer shall continue to act as Servicer until a successor
has been appointed and accepted such appointment. Subject to SECTION
9.6, no provision of this Agreement shall be construed as relieving the
Backup Servicer of its obligation to succeed as successor Servicer upon
the termination of the Servicer pursuant to SECTION 10.2, the
non-extension of the servicing term as referred to in SECTION 4.15, or
the resignation of the Servicer pursuant to SECTION 9.6. If upon the
termination of the Servicer pursuant to SECTION 10.2, the non-extension
of the servicing term as referred to in SECTION 4.15 or the resignation
of the Servicer pursuant to SECTION 9.6, the Noteholder appoints a
successor Servicer other than the Backup Servicer, the Backup Servicer
shall not be relieved of its duties as Backup Servicer hereunder.
(b) Any successor Servicer shall be entitled to 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.
SECTION 10.4. NOTIFICATION OF TERMINATION AND APPOINTMENT.
Upon any termination of, or appointment of a successor to, the
Servicer, the Trustee shall give prompt written notice thereof to the Noteholder
and to the Rating Agencies.
SECTION 10.5. WAIVER OF PAST DEFAULTS.
The Noteholder may, waive in writing any default by the Servicer in the
performance of its obligations under this Agreement and the consequences
thereof. 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
Noteholder. For all purposes of this Agreement (including, without limitation,
SECTION 6.2(b) and this SECTION 10.6), the Trustee shall not be deemed to have
knowledge of any failure of the Servicer as specified in SECTIONS 10.1(c)
through (h) unless notified thereof in writing by the Servicer or the
Noteholder. 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.
SECTION 10.7. CONTINUED ERRORS.
Notwithstanding anything contained herein to the contrary, if the
Backup Servicer becomes successor Servicer it is authorized to accept and rely
on all of the accounting, records (including computer records) and work of the
prior Servicer relating to the Receivables (collectively, the "PREDECESSOR
SERVICER WORK Product") without any audit or other examination thereof, and the
Backup Servicer as successor Servicer shall have no duty, responsibility,
obligation or liability for the acts and omissions of the prior Servicer. If any
error, inaccuracy, omission or incorrect or non-standard practice or procedure
(collectively, "ERRORS") exist in any Predecessor Servicer Work Product and such
Errors make it materially more difficult to service or should cause or
materially contribute to the Backup Servicer as successor Servicer making or
continuing any Errors (collectively, "CONTINUED ERRORS"), the Backup Servicer as
successor Servicer shall have no duty or responsibility, for such Continued
Errors; PROVIDED, HOWEVER, that the Backup Servicer as successor Servicer agrees
to use its best efforts to prevent further Continued Errors. In the event that
the Backup Servicer as successor Servicer becomes aware of Errors or Continued
Errors, the Backup Servicer as successor Servicer shall, with the prior consent
of the Noteholder use its best efforts to reconstruct and reconcile such data as
is commercially reasonable to correct such Errors and Continued Errors and to
prevent future Continued Errors. The Backup Servicer as successor Servicer shall
be entitled to recover its costs thereby expended in accordance with SECTION
5.7(a)(xi) hereof.
ARTICLE XI
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MISCELLANEOUS PROVISIONS
------------------------
SECTION 11.1. AMENDMENT.
(a) This Agreement may not be waived, amended or otherwise
modified except in a writing signed by the parties hereto and the
Noteholder.
(b) Promptly after the execution of any such amendment, waiver
or consent, the Trustee shall furnish written notification of the
substance of such amendment or consent to Rating Agencies.
(c) Prior to the execution of any amendment, waiver or consent
to this Agreement the Trustee shall be entitled to receive and rely
upon (i) an Opinion of Counsel stating that the execution of such
amendment, waiver or consent is authorized or permitted by this
Agreement and (ii) if requested by the Noteholder, the Opinion of
Counsel referred to in Section 11.2(i).
(d) The Trustee may, but shall not be obligated to, enter into
any such amendment, waiver or consent which affects the Trustee's own
rights, duties or immunities under this Agreement or otherwise.
(e) Upon the termination of the Seller as Servicer and the
appointment of the Backup Servicer as Servicer hereunder, all
amendments to the terms of this Agreement specified in the Servicing
and Lockbox Processing Assumption Agreement shall become a part of this
Agreement, as if this Agreement was amended to reflect such changes in
accordance with this SECTION 11.1.
SECTION 11.2. PROTECTION OF TITLE TO PROPERTY.
(a) The Seller, the Purchaser or Servicer or each of them
shall authorize, execute (if necessary) and file such financing
statements and cause to be authorized, executed (if necessary) 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 Purchaser 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 Noteholder 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) None of the Seller, the Purchaser or the Servicer shall
change its name, identity, jurisdiction of organization, form of
organization or corporate structure in any manner that would, could or
might make any financing statement or continuation statement filed in
accordance with PARAGRAPH (A) above seriously misleading within the
meaning of Section 9-506(a) of the UCC, unless it shall have given the
Noteholder and the Trustee at least thirty 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 Purchaser, the Seller or the Servicer,
as the case may be, shall deliver an Opinion of Counsel to the Trustee
and the Noteholder, in a form and substance reasonably satisfactory to
the Noteholder, stating either (A) all financing statements and
continuation statements have been authorized, executed and filed that
are necessary fully to preserve and protect the interest of the
Purchaser 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, the Purchaser and the Servicer shall
have an obligation to give the Noteholder and the Trustee at least 60
days' prior written notice of any relocation of its chief executive
office or a change in its jurisdiction of organization if, as a result
of such relocation or change, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed
financing or continuation statement or of any new financing statement
and shall promptly file any such amendment or new financing statement.
The Servicer shall at all times be organized under the laws of the
United States (or any State thereof), maintain each office from which
it shall service Receivables, and its chief executive office and
jurisdiction of organization, within the United States of America.
(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 Purchaser, the Servicer's master computer records (including any
backup archives) that refer to a Receivable shall indicate clearly the
interest of the Purchaser in such Receivable and that such Receivable
is owned by the Purchaser and pledged to the Trustee. Indication of the
Purchaser's and the Trustee'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 Purchaser and pledged
to the Trustee.
(g) The Servicer shall permit the Trustee, the Backup Servicer
and the Noteholder and their respective agents upon reasonable notice
and 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 Noteholder
or to the Trustee, within five Business Days, a list of all Receivables
(by contract number and name of Obligor) then pledged to the Trustee,
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 lien of the
Indenture.
(i) The Servicer shall deliver to the Noteholder and the
Trustee:
(i) promptly after the execution and delivery of this
Agreement and, if required pursuant to SECTION 11.1, of each
amendment, waiver, or consent, an Opinion of Counsel, in form
and substance satisfactory to the Noteholder, stating that in
the opinion of such counsel, either (A) all financing
statements and continuation statements have been authorized,
executed and filed that are necessary fully to preserve and
protect the interest of the Purchaser and the Trustee in the
Receivables and the Opinion Collateral, and reciting the
details of such filings or referring to a prior Opinion 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 Closing Date, an Opinion of
Counsel, dated as of a date during such 90-day period, stating
that, the opinion of such counsel, either (a) all financing
statements and continuation statement have been authorized,
executed and filed that are necessary fully to preserve and
protect the interest of the Purchaser and the Trustee in the
Receivables and the Opinion Collateral, 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 11.3. NOTICES.
All demands, notices and communications upon or to the Seller, the
Backup Servicer, the Servicer, the Trustee or the Rating Agencies under this
Agreement shall be in writing, via facsimile (and confirmed by telephone in the
case of facsimiles to Seller, Servicer and Purchaser), 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 Consumer
Portfolio Services, Inc., 16355 Laguna Canyon Road, Irvine, CA 92618, Attention:
Chief Financial Officer, Telecopy: (888) 577-7923; Telephone: (949) 785-6691;
(b) in the case of the Servicer, to Consumer Portfolio Services, Inc., 16355
Laguna Canyon Road, Irvine, CA 92618, Attention: Chief Financial Officer,
Telecopy: (888) 577-7923; Telephone: (949) 785-6691; (c) in the case of the
Purchaser, to Page Funding LLC, 16355 Laguna Canyon Road, Irvine, CA 92618,
Attention: Chief Financial Officer, Telecopy: (888) 577-7923; Telephone: (949)
785-6691; (d) in the case of the Trustee or the Backup Servicer at the Corporate
Trust Office; Telecopy: (612) 667-3464; (e) in the case of the Noteholder, to
UBS Real Estate Securities Inc., 1285 Avenue of the Americas, 11th Floor, New
York, New York 10019, Attention: Reginald DeVilliers, Telecopy: (212)713-7999;
Telephone: (212)713-3055; (f) in the case of Moody's, to Moody's Investors
Service, Inc., ABS Monitoring Department, 99 Church Street, New York, New York
10007, Telecopy: (212) 533-3850; and (g) in the case of Standard & Poor's
Ratings Group, to Standard & Poor's, a Division of The McGraw Hill Companies, 55
Water Street, New York, New York 10041, Attention: Asset Backed Surveillance
Department, Telecopy: (212) 438-2649. Any notice so mailed within the time
prescribed in this Agreement shall be conclusively presumed to have been duly
given, whether or not the Noteholder shall receive such notice.
SECTION 11.4. ASSIGNMENT.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns.
Notwithstanding anything to the contrary contained herein, except as provided in
SECTIONS 8.4, 9.3 and this SECTION 11.4 and as provided in the provisions of
this Agreement concerning the resignation of the Servicer, this Agreement may
not be assigned by the Purchaser, the Seller or the Servicer without the prior
written consent of the Trustee, the Backup Servicer and the Noteholder; provided
that the Purchaser will grant all of its right, title and interest herein to the
Trustee for the benefit of the Noteholder.
SECTION 11.5. 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 Noteholder or its assignee, as a
third-party beneficiary. 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 Collateral or under or in respect of this Agreement or
any covenants, conditions or provisions contained herein.
SECTION 11.6. 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 11.7. 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 11.8. 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 11.9. GOVERNING LAW.
THIS AGREEMENT (OTHER THAN SECTIONS 2.1(A) AND 2.2 HEREOF) SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REFERENCE TO ITS CONFLICT OF LAW PROVISIONS (OTHER THAN SECTION 5-1401 OF THE
GENERAL OBLIGATIONS LAW), AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTIONS
2.1(A) AND 2.2 OF THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF DELAWARE AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
UNDER SUCH SECTION SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.10. ASSIGNMENT TO TRUSTEE.
The Seller hereby acknowledges and consents to any mortgage, pledge,
assignment and grant of a security interest by the Purchaser to the Trustee
pursuant to the Indenture for the benefit of the Noteholder of all right, title
and interest of the Purchaser in, to and under the Receivables and Other
Conveyed Property and/or the assignment of any or all of the Purchaser's rights
and obligations hereunder to the Trustee.
SECTION 11.11. NONPETITION COVENANTS.
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 Final Scheduled Settlement Date, acquiesce, petition or otherwise invoke or
cause the Purchaser to invoke the process of any court or government authority
for the purpose of commencing or sustaining a case against the Purchaser 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 Purchaser or any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Purchaser.
SECTION 11.12. LIMITATION OF LIABILITY OF TRUSTEE.
Notwithstanding anything contained herein to the contrary, this
Agreement has been executed and delivered by Wells Fargo Bank, National
Association, not in its individual capacity but solely as Trustee and Backup
Servicer and in no event shall Wells Fargo Bank, National Association, have any
liability for the representations, warranties, covenants, agreements or other
obligations of the Purchaser 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 Purchaser.
SECTION 11.13. 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
Purchaser, the Trustee and Backup Servicer with respect to the manner in which
it accomplishes the performance of its obligations hereunder. Unless expressly
authorized by this Agreement, the Servicer shall have no authority to act for or
represent the Purchaser in any way and shall not otherwise be deemed an agent of
the Purchaser.
SECTION 11.14. NO JOINT VENTURE.
Nothing contained in this Agreement (i) shall constitute the Servicer
and the Purchaser 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 11.15. INTENTION OF PARTIES REGARDING DELAWARE SECURITIZATION
ACT.
It is the intention of the Purchaser and the Seller that the transfer
and assignment of the property contemplated by SECTION 2.1(a) of this Agreement
shall constitute a sale of property from the Seller to the Purchaser, conveying
good title thereto free and clear of any liens, and the beneficial interest in
and title to such assets shall not be part of the Seller's estate in the event
of the filing of a bankruptcy petition by or against the Seller under any
bankruptcy or similar law. In addition, for purposes of complying with the
requirements of the Asset-Backed Securities Facilitation Act of the State of
Delaware, 6 Del. C. ss. 2701A, et seq. (the "SECURITIZATION ACT"), each of the
parties hereto hereby agrees that:
(a) any property, assets or rights purported to be
transferred, in whole or in part, by the Seller to the Purchaser
pursuant to this Agreement shall be deemed to no longer be the
property, assets or rights of the Seller;
(b) none of the Seller, its creditors or, in any insolvency
proceeding with respect to the Seller or the Seller's property, a
bankruptcy trustee, receiver, debtor, debtor in possession or similar
person, to the extent the issue is governed by Delaware law, shall have
any rights, legal or equitable, whatsoever to reacquire (except
pursuant to a provision of this Agreement), reclaim, recover,
repudiate, disaffirm, redeem or recharacterize as property of the
Seller any property, assets or rights purported to be transferred, in
whole or in part, by the Seller to the Purchaser pursuant to this
Agreement;
(c) in the event of a bankruptcy, receivership or other
insolvency proceeding with respect to the Seller or the Seller's
property, to the extent the issue is governed by Delaware law, such
property, assets and rights shall not be deemed to be part of the
Seller's property, assets, rights or estate; and
(d) the transaction contemplated by this Agreement shall
constitute a "securitization transaction" as such term is used in the
Securitization Act.
SECTION 11.16. SPECIAL SUPPLEMENTAL AGREEMENT.
If any party to this Agreement is unable to sign any amendment or
supplement due to its dissolution, winding up or comparable circumstances, then
the consent of the Noteholder shall be sufficient to amend this Agreement
without such party's signature.
SECTION 11.17. LIMITED RECOURSE.
Notwithstanding anything to the contrary contained in this Agreement,
the obligations of the Purchaser hereunder are solely the obligations of the
Purchaser, and shall be payable by the Purchaser, solely as provided herein. The
Purchaser shall only be required to pay (a) any fees, expenses, indemnities or
other liabilities that it may incur hereunder (i) from funds available pursuant
to, and in accordance with, the payment priorities set forth in SECTION 5.7(a)
and (ii) only to the extent the Purchaser receives additional funds for such
purposes or to the extent it has additional funds available (other than funds
described in the preceding clause (i)) that would be in excess of amounts that
would be necessary to pay the debt and other obligations of the Purchaser
incurred in accordance with the Purchaser's limited liability company agreement
and all financing documents to which the Purchaser is a party. In addition, no
amount owing by the Purchaser hereunder in excess of the liabilities that it is
required to pay in accordance with the preceding sentence shall constitute a
"claim" (as defined in Section 101(5) of the Bankruptcy Code) against it. No
recourse shall be had for the payment of any amount owing hereunder or for the
payment of any fee hereunder or any other obligation of, or claim against, the
Purchaser arising out of or based upon any provision herein, against any member,
employee, officer, agent, director or authorized person of the Purchaser or any
Affiliate thereof; PROVIDED, HOWEVER, that the foregoing shall not relieve any
such person or entity of any liability they might otherwise have as a result of
fraudulent actions or omissions taken by them.
SECTION 11.18. ACKNOWLEDGEMENT OF ROLES.
The parties expressly acknowledge and consent to Wells Fargo Bank,
National Association acting in the multiple capacities of Backup Servicer and
Trustee. The parties agree that Wells Fargo Bank, National Association in such
multiple capacities shall not be subject to any claim, defense or liability
arising from its performance in any such capacity based on conflict of interest
principles, duty of loyalty principles or other breach of fiduciary duties to
the extent that any such conflict or breach arises from the performance by Wells
Fargo Bank, National Association of any other such capacity or capacities in
accordance with this Agreement or any other Basic Documents to which it is a
party.
SECTION 11.19. TERMINATION.
The respective obligations and responsibilities of the Seller, the
Purchaser, the Servicer, the Backup Servicer, and the Trustee created hereby
shall terminate on the Termination Date; PROVIDED, HOWEVER, in any case there
shall be delivered to the Trustee and the Noteholder an Opinion of Counsel that
all applicable preference periods under federal, state and local bankruptcy,
insolvency and similar laws have expired with respect to the payments pursuant
to this SECTION 11.19. The Servicer shall promptly notify the Trustee, the
Seller, the Issuer, each Rating Agency and the Noteholder of any prospective
termination pursuant to this SECTION 11.19.
SECTION 11.20. SUBMISSION TO JURISDICTION.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
TO THE EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, OR ANY LEGAL PROCESS WITH
RESPECT TO ITSELF OR ANY OF ITS PROPERTY, WHICH IT MAY NOW OR HEREAFTER HAVE TO
THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE
BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
SECTION 11.21. WAIVER OF TRIAL BY JURY.
THE PARTIES HERETO EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY PARTY AGAINST THE
OTHER PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE.
THE PARTIES HERETO EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE
TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
SECTION 11.22. PROCESS AGENT.
Each of Purchaser, Seller, Servicer and Trustee agrees that the process
by which any proceedings in the State of New York are begun may be served on it
by being delivered by certified mail at the chief executive office or corporate
trust office, as applicable, or at its registered office for the time being. If
such person is not or ceases to be effectively appointed to accept service of
process on the Purchaser's, Seller's, Servicer's or Trustee's behalf, the
Purchaser, Seller, Servicer or Trustee, as applicable, shall, on the written
demand of the process agent, appoint a further person in the State of New York
to accept service of process on its behalf and, failing such appointment within
15 days, the process agent shall be entitled to appoint such a person by written
notice to the Purchaser, Seller, Servicer or Trustee, as applicable. Nothing in
this sub-clause shall affect the right of the process agent to serve process in
any other manner permitted by law.
SECTION 11.23. NO SET-OFF.
Each of the Seller and Servicer agrees that it shall have no right of
set-off or banker's lien against, and no right to otherwise deduct from, any
funds held in any account described herein or in the Basic Documents for any
amount owed to it by the Seller, Servicer or Noteholder.
SECTION 11.24. NO WAIVER; CUMULATIVE REMEDIES.
No failure to exercise and no delay in exercising any right, remedy,
power or privilege hereunder, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise hereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exhaustive of any rights, remedies,
powers and privileges provided by law.
SECTION 11.25. MERGER AND INTEGRATION.
Except as specifically stated otherwise herein, this Agreement sets
forth the entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded by this
Agreement. This Agreement may not be modified, amended, waived or supplemented
except as provided herein.
SECTION 11.26. NO NOVATION.
The amendment and restatement of this Agreement shall not be deemed to
be a novation or repayment of the outstanding Advances and the security interest
of the Trustee in the Collateral shall remain in full force and effect after
giving effect to the amendment and restatement of this Agreement.
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.
PAGE FUNDING LLC, as Purchaser
By: /s/
CONSUMER PORTFOLIO SERVICES, INC., as
Seller
By: /s/
CONSUMER PORTFOLIO SERVICES, INC.,
as Servicer
By: /s/
WELLS FARGO BANK, NATIONAL ASSOCIATION, not
in its individual capacity, but solely as
Backup Servicer and Trustee
By: /s/
CONSENTED TO BY:
UBS REAL ESTATE SECURITIES, INC.,
as Noteholder
By: /s/
By: /s/
ACKNOWLEDGEMENT
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TFC, in its capacity as a subservicer with respect to the TFC
Receivables hereby acknowledges and agrees to the provisions set forth in
Section 4.18 of the foregoing Agreement.
THE FINANCE COMPANY
By: /s/